<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 1999 Commission File Number l-1520
GENCORP INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
OHIO 34-0244000
(State of Incorporation) (I.R.S. Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
HIGHWAY 50 AND AEROJET ROAD
RANCHO CORDOVA, CALIFORNIA 95670
(Address of principal executive offices) (Zip Code)
P.O. BOX 537012
SACRAMENTO, CALIFORNIA 95853-7012
(Mailing Address) (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (916) 355-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock, par value 10c per share New York and Chicago
</TABLE>
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 January 31, 2000, was $352,119,310.
As of January 31, 2000, there were 41,865,301 outstanding shares of the
Company's Common Stock, 10c par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 2000 Proxy Statement of GenCorp Inc. are incorporated into
Part III of this Report.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
GENCORP INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM
NUMBER PAGE
------ ----
<C> <S> <C>
PART I
1 Business.................................................... 1
2 Properties.................................................. 4
3 Legal Proceedings........................................... 6
4 Submission of Matters to a Vote of Security Holders......... 9
Executive Officers of the Registrant........................ 9
PART II
5 Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 12
6 Selected Financial Data..................................... 12
7 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 12
7A Quantitative and Qualitative Disclosures About Market
Risk...................................................... 17
8 Consolidated Financial Statements and Supplementary Data.... 17
9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 17
PART III
10 Directors and Executive Officers of the Registrant.......... 45
11 Executive Compensation...................................... 45
12 Security Ownership of Certain Beneficial Owners and
Management................................................ 45
13 Certain Relationships and Related Transactions.............. 45
PART IV
14 Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 45
Signatures.................................................. 46
Index to Financial Statements and Financial Statement
Schedules................................................. GC-1
Exhibit Index............................................... i
</TABLE>
<PAGE> 3
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 continuing
operations are grouped into two business segments: its aerospace, defense and
fine chemicals businesses, and its automotive vehicle sealing business.
Aerojet-General Corporation ("Aerojet") plays a leading role in the development
and production of space electronics and smart munitions, as well as solid and
liquid rocket propulsion systems and related defense products and services.
Aerojet Fine Chemicals LLC ("Fine Chemicals" or "AFC") supplies special
intermediates and active pharmaceutical ingredients (APIs) primarily to
commercial customers. The vehicle sealing business ("Vehicle Sealing") is a
major automotive supplier, engaged in the development, manufacture and sale of
highly engineered extruded and molded rubber sealing systems for vehicle bodies
and windows for the automotive original equipment manufacturers.
Earlier in the year, the Company completed a spin-off of its decorative &
building products and performance chemicals businesses as a separate publicly
traded company named OMNOVA Solutions Inc. The spin-off was approved by GenCorp
shareholders at a special meeting on September 8, 1999 and by GenCorp's Board of
Directors on September 17, 1999. The Board declared a dividend of one share of
OMNOVA Solutions Inc. common stock for each share of GenCorp common stock held
on the September 27, 1999 record date. The dividend distribution was made on
October 1, 1999.
The OMNOVA businesses and the Penn Racquet Sports division, which was sold
in the second quarter of 1999, are now reflected as discontinued operations in
GenCorp's historical financial statements.
GenCorp's largest business, Aerojet, was founded in 1942 by Dr. Theodore
Von Karman and initially produced Jet Assisted Take Off (JATO) rockets for
military aircraft. General Tire & Rubber, GenCorp's predecessor, became
Aerojet's major investor. In the 1950's and 1960's, Aerojet expanded its product
line to include launch vehicle and spacecraft propulsion. Since the 1960's,
Aerojet has broadened its product line significantly to include satellite
payloads, ground systems and weapon systems. Aerojet also expanded its product
line to include pharmaceutical fine chemicals, which are now produced by the
Fine Chemicals business. The Vehicle Sealing business traces its origins to the
manufacture of automotive window channels by General Tire & Rubber in the
1940's. In 1993, Vehicle Sealing acquired a minority interest in Henniges, a
German vehicle sealing manufacturer, and in 1994, increased its ownership
interest to 100%. This acquisition bolstered Vehicle Sealing's product line and
technological capabilities, and provided a geographic diversification into the
European markets.
As of November 30, 1999, the Company employed approximately 7,480 persons.
GenCorp's principal executive offices are now located at Highway 50 and Aerojet
Road, Rancho Cordova, California 95670. The Company's mailing address is P.O.
Box 537012, Sacramento, California 95853-7012. Its telephone number is (916)
355-4000. (Financial information relating to the Company's business segments
appears on pages 39 through 41 of this report.)
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 G on page 26 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, defense and fine chemicals 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. Vehicle
Sealing 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.
<PAGE> 4
Nearly 60% of the Company's employees are covered by collective bargaining
agreements. Of the covered employees, approximately 2% are covered by collective
bargaining agreements that are due to expire within one year. A protracted work
stoppage in either the Company's facilities or those of a major automotive
customer could adversely affect the Company's results of operations.
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 1999 and forecasted for 2000
and 2001 for environmental compliance is included under the heading
Environmental Matters on page 15 of this report. Environmental matters discussed
on page 15 and in Note S beginning on page 36 of this report are incorporated
herein by reference.
AEROSPACE, DEFENSE AND FINE CHEMICALS
Satellite Payloads and Electronics
Aerojet is a leading provider of advanced satellite payloads and
instruments used in remote sensing applications. In addition, Aerojet provides
ground system hardware as well as sophisticated data fusion/ processing
algorithms, which support the overall satellite "system of systems." Specific
technical expertise involves systems integration, infrared and millimeter wave
sensors, space flight qualified hardware, sensor signal processing, ground
processing, data fusion, algorithm development and background signature
analysis. Management believes that Aerojet's detailed understanding of and
responsiveness to customer requirements and its ability to support both the
ground and space sides of a complex "system of systems" provides important
competitive advantages in the remote sensing marketplace.
Aerojet's major products/contracts include the Space-Based Infrared Systems
(SBIRS) High and Low programs, Defense Support Program (DSP), Joint Tactical
Ground Station (JTAGS), Special Sensor Microwave Imager/Sounder (SSMIS),
Advanced Microwave Sounding Unit (AMSU) and Advanced Technology Microwave
Sounder (ATMS), as well as various classified programs. Although the business
has traditionally focused on customers in the government sector, future growth
in electronics is also expected in the commercial segment.
Space and Strategic Rocket Propulsion
Aerojet is a leading producer of both liquid and solid rocket propulsion
systems, serving launch vehicle manufacturing customers across a wide range of
applications. Aerojet's product portfolio includes large liquid rocket booster
engines for both expendable and reusable launch vehicles, upper-stage engines as
well as complete upper-stages, thrusters for satellite applications, large solid
rocket motors and integrated propulsion subsystems.
Major programs include the Atlas V Solid Rocket Motor (SRM), Titan first
and second stage liquid engines, Delta II upper stage, X-33/VentureStar orbital
maneuvering system, all propulsion systems on the Kistler Reusable Launch
Vehicle (RLV) and the Mark VI Attitude Control system.
Future growth is forecasted primarily in the commercial launch segment. New
launch vehicle programs utilize various technologies including solid rocket
motors and liquid rocket engines. Aerojet has capabilities spanning the breadth
of these technologies and has current programs for both reusable and expendable
launch vehicles.
Tactical Weapons
Aerojet's tactical weapons business focuses on offering advanced, high
value-added, sub-system solutions, rather than more commodity-like missile
components. This leverages Aerojet's strength in technology and engineering
excellence, and also is consistent with the major trends in weapon system
requirements toward precision, reduced collateral damage, and "smart"
technologies. Sensor technologies, including advanced software technologies
derived from remote sensing, have enabled Aerojet to compete in the "smart
weapons" market through its Sense and Destroy Armor (SADARM) product offering.
In addition, significant experience in solid rocket motors and related energetic
materials chemistry supports Aerojet's position in missile propulsion and
advanced missile warheads.
2
<PAGE> 5
In addition to SADARM, Aerojet's tactical weapons programs include the
Homing All the Way to Kill (HAWK) solid rocket motor, Tube Launched Optically
Tracked Wire Guided (TOW) missile warheads, Conventional Air Launched Cruise
Missile (CALCM) warheads, Joint Stand Off Weapon (JSOW) sub-munitions payload,
Multi-Purpose Infantry Munitions/Short Range Assault Weapon (MPIM/SRAW),
Predator warheads and the Standard Missile II Block IV dome cooling.
In 1999, Aerojet was awarded contracts by Raytheon for the Divert and
Control System (DACS) for the Exo-atmospheric Kill Vehicle and by Boeing for the
National Missile Defense Program.
Fine Chemicals
Aerojet Fine Chemicals produces difficult-to-manufacture regulated
chemicals for major pharmaceutical manufacturers with a special emphasis on
chemicals directed to therapeutic areas such as oncological, anti-viral and
anti-inflammatory (COX-2) applications. Fine Chemicals leverages key
technologies developed and refined by Aerojet through years of defense
contracting. Management believes that Fine Chemicals' success in this high
growth market is derived from its distinctive competencies in handling high
energy and toxic chemicals, implementing commercial standards and practices and
operating under current Good Manufacturing Practices (cGMP).
Aerojet Fine Chemicals' markets are experiencing high growth due in part to
the trend in the pharmaceuticals industry toward greater outsourcing of the
development and manufacture of pharmaceutical chemicals. Further, major
pharmaceutical companies are increasingly relying upon suppliers, like Fine
Chemicals, that possess more integrated capabilities and are able to scale-up
and rapidly respond to delivery requirements.
Aerojet Fine Chemicals participated as a key supplier on approximately 20%
of all new compounds (molecular entities) requiring chemical synthesis that were
approved by the U.S. Food and Drug Administration (FDA) in 1999. Aerojet Fine
Chemicals is now involved as a supplier for anti-viral, arthritis, cancer, AIDS
and epilepsy new drug applications.
Most of Aerojet's sales 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. Fine Chemicals' sales are
derived primarily from commercial customers in the pharmaceutical industry.
Aerojet's direct and indirect sales to the United States government and its
agencies (principally the Department of Defense) were approximately $519 million
in 1999, $596 million in 1998 and $516 million in 1997. Competition based upon
price, technology, quality and service is intense for all products and services
in Aerojet's business 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 Aerojet's businesses is commonplace and significant. Aerojet's
contract backlog was approximately $1.6 billion at November 30, 1999, compared
to $1.7 billion at November 30, 1998. 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, 1999, compared with
approximately $0.6 billion at November 30, 1998. Raw materials required by this
segment are generally in adequate supply.
VEHICLE SEALING
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. These products are
designed to prevent air, moisture and noise from penetrating vehicle windows,
doors and other openings.
North American operations primarily produce extruded rubber profiles
consisting of a roll-formed steel wire or steel frame surrounded by extruded
rubber which is cured, cut and molded to meet customer specifications.
3
<PAGE> 6
This business supplies products to the North American automotive assemblers for
use in a wide variety of vehicles including Ford F-150, Explorer and Ranger; the
General Motors C/K truck, Grand Am, Saturn Z and LS, the Honda Accord and the
DaimlerChrysler All-Activity Vehicle. The European-based Henniges operations
design and produce vehicle sealing systems, encapsulated glass and molded rubber
parts, specializing in products which dampen and isolate vibrations, reduce
noise and generally seal automotive components. This business unit supplies
components to major European automotive original equipment manufacturers,
including Volkswagen/ Audi, Opel, BMW and DaimlerChrysler.
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 and Ford in
1999 were approximately 23 and 11 percent, respectively, 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.
ITEM 2. PROPERTIES
Significant operating, manufacturing, research, design and/or marketing
facilities of the Company are set forth below.
FACILITIES
<TABLE>
<S> <C> <C>
CORPORATE HEADQUARTERS
GenCorp Inc.
Highway 50 and Aerojet Road
Rancho Cordova, California 95670
Mailing address:
P.O. Box 537012
Sacramento, California 95853-7012
MANUFACTURING/RESEARCH/DESIGN/MARKETING LOCATIONS
AEROSPACE, DEFENSE AND FINE CHEMICALS
Aerojet-General Corporation Design/Manufacturing Marketing/Sales Offices:
P.O. Box 13222 Facilities: *Colorado Springs, CO
Sacramento, CA 95813-6000 Azusa, CA *Geneva, Switzerland
916/355-1000 *Boulder, CO *Huntsville, AL
Jonesborough, TN *Mt. Arlington, NJ
Sacramento, CA *Tokyo, Japan
*Socorro, NM *Tucson, AZ
*Washington, DC
Aerojet Fine Chemicals LLC Design/Manufacturing Marketing/Sales Offices:
P.O. Box 1718 Facilities:
Rancho Cordova, CA 95741 *Sacramento, CA *Sacramento, CA
916/355-1000
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C> <C>
VEHICLE SEALING
Vehicle Sealing Manufacturing Facilities: Sales/Marketing/Design
P.O. Box 9067 Batesville, AR and Engineering Facilities:
Farmington Hills, MI 48333-9067 *Berger, MO Farmington Hills, MI
248/553-5300 HENNIGES, Rehburg HENNIGES, Rehburg, Germany
Germany and Ballina, Wabash, IN
Ireland
Marion, IN
Wabash, IN
Welland, Ontario, Canada
</TABLE>
- ---------------
* 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 R
on page 35 of this report with respect to leased properties is incorporated
herein by reference.
During 1999 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.
5
<PAGE> 8
ITEM 3. LEGAL PROCEEDINGS
Information concerning legal proceedings, including proceedings relating to
environmental matters, which appears in Note S beginning on page 36 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. On February 24, 1998, the
plaintiffs served Aerojet and the other manufacturing defendants. On March 30,
1998, the Court granted a motion for change of venue and transferred the case to
Ventura County which is immediately northwest of Los Angeles. 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. In June 1998, three recently filed, related
matters containing similar allegations (Adler, Docket No. BC169892; Boswell,
Docket No. KC027318; and Celi, Docket No. GC020622) were stayed for at least one
year by their respective judges pending a California Public Utilities Commission
(PUC) investigation of the plaintiffs' allegations. The Santamaria matter has
now also been similarly stayed pending Aerojet's pursuit of a writ to the Court
of Appeal. This writ will be consolidated with writs filed by the plaintiffs in
Adler, Boswell, Celi, and Demciuc, Dominguez, and Criner (discussed below). The
Court of Appeal in Southern California accepted review of plaintiffs' appeal
from one of the stays. In the summer of 1999, that Court of Appeal issued a
decision dismissing the regulated water companies from the litigation but did
not affect Aerojet or the other manufacturing defendants and the nonregulated
water companies. The California Supreme Court has granted review of that
decision and a ruling is not expected until late 2000. Aerojet has notified its
insurers and will vigorously defend these actions.
Demciuc, et al. v. Suburban Water Co., et al.
Dominguez, et al. v. Southern California Water Co., et al.
Criner, et al. v. San Gabriel Valley Water Co., et al.
Anderson, et al. v. Suburban Water Co., et al.
Four related "toxic tort" suits containing allegations similar to the
Santamaria matter were filed on July 30, 1998 and served on Aerojet on September
16, 1998, as follows: (i) Demciuc, et al. v. Suburban Water Co., et al. Case No.
KC028732, Superior Court of Los Angeles County, CA; (ii) Dominguez, et al. v.
Southern California Water Co., et al. Case No. GC 021657, Superior Court of Los
Angeles County, CA; (iii) Criner, et al. v. San Gabriel Valley Water Co., et al.
Case No. GC 021658, Superior Court of Los Angeles County, CA; and (iv) Anderson,
et al. v. Suburban Water Co., et al. Case No. KCO2854, Superior Court of Los
Angeles. Aerojet has notified its insurers and will vigorously defend these
actions.
Alexander, et al. v. Suburban Water Systems, et al.
This action was filed on August 4, 1999 in Los Angeles County Superior
Court, Case No. KC031130, by the same plaintiff's counsel as in Santamaria and
Anderson. It alleges the same causes of action. No summons has been issued for
this action and no defendants have been served.
Allen, et al. v. Aerojet, MDC, Southern California Water Company, et al.
Adams, et al. v. Aerojet, MDC, Southern California Water Company, et al.
6
<PAGE> 9
On December 8, 1997 and March 2, 1998, two similar but unrelated "toxic
tort" complaints were 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 in Allen and on April 30,
1998 in Adams. Aerojet will vigorously defend these matters. In addition to
Aerojet, McDonnell-Douglas Corporation (now Boeing) and two Sacramento water
purveyors are defendants. Aerojet has also notified its insurers of these
actions. Aerojet's motions for stays in these matters were granted pending the
PUC investigation discussed below.
Because of these (and other similar recent) "toxic tort" lawsuits which
named California water purveyors as defendants, on March 12, 1998, the PUC
announced a wide ranging investigation of drinking water quality in California.
The PUC's General Counsel has publicly stated that he believes that under the
California Constitution, the PUC's jurisdiction overrides that of the Courts in
this area. Accordingly, Aerojet is also defending its interests before the PUC.
Aerojet has filed an intervention petition with the PUC to allow Aerojet to
participate in the PUC's proceedings. The PUC's investigation is expected to be
completed by fall 2000, at which point the stays in the toxic tort cases
discussed above may be lifted, unless the California Supreme Court so orders
earlier.
Austin, et al. v. J.B. Stringfellow, Jr. et al.
On May 13, 1998, a toxic tort complaint, Austin, et al. v. J. B.
Stringfellow, Jr. et al., Case No. 312339 was filed in Superior Court of
Riverside County. The plaintiffs are all neighbors of the Stringfellow superfund
site and seek compensation for damages for alleged personal injuries and
property damages related to exposure to groundwater contamination allegedly
emanating from the site. Aerojet is one of hundreds of defendants served which
were allegedly generators of waste to the site. Aerojet has joined a common
defense group comprised of 30 de minimis generators. Aerojet has notified its
insurers and will vigorously defend this action.
In re: Proposition 65 Notices
Aerojet was served in November and December 1997 with notices from a
private group alleging that it had released chemicals into air and groundwater
near its Sacramento facility above state limits in violation of California's
Proposition 65 and/or without filing sufficiently detailed public notifications
as required by 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. On June 4, 1998, Aerojet was served with a
Proposition 65 lawsuit filed by the Communities For A Better Environment (CBE)
in Sacramento Superior Court. The complaint alleges past and present violations
of Proposition 65. Aerojet's insurance carriers have been notified of these
claims. Aerojet plans a vigorous defense. On July 6, 1998, the case was removed
to U.S. District Court based on that court's jurisdiction over the CERCLA
Partial Consent Decree for the Sacramento site. Plaintiffs then moved to remand
the case to the Sacramento Superior Court. The remand motion was denied by U.S.
District Court in November 1998. The federal court in early 1999 transferred the
case to Sacramento Superior Court due to its finding of lack of jurisdiction and
discovery in the case began. Aerojet and CBE reached a settlement agreement in
principal in late December 1999, which if ultimately agreed to and approved by
the State and court, will lead to dismissal of the action with prejudice.
American States Water Company, et al. v. Aerojet, et al.
On October 25, 1999, plaintiffs sued Aerojet in Sacramento Superior Court,
Case No. 99AS05949, alleging, among other things, that historical releases of
chemicals at the Aerojet Sacramento plant damaged the goundwater in its service
area and caused plaintiffs to sustain various economic damages. On December 27,
1999, Aerojet demurred to the first three causes of action of the complaint.
Aerojet will defend this action vigorously.
Kiefer-Sunrise Associates v. Aerojet, et al.
In October 1999, this action was filed against Aerojet in Sacramento
Superior Court, Case No. 99AS05937, but no defendants have been served.
Plaintiffs allege that groundwater contamination from the Aerojet
7
<PAGE> 10
Sacramento facility and the former Boeing site has adversely affected their real
estate development. An unspecified amount of economic damages is sought. In
November, 1999, Aerojet entered into a tolling agreement with plaintiffs until
April 2001.
McKinley, et al. v. GenCorp Inc., et al.
Following an "investigative" report published in the Houston Chronicle on
November 29, 1998 (which was reprinted by other newspapers and may well generate
further media coverage), a "toxic tort" lawsuit was filed against 40 chemical
companies and trade association co-defendants in Common Pleas Court for
Ashtabula County, Ohio, Case No. 98CV00797. The complaint was filed by the heirs
of a former production employee at GenCorp's former polyvinyl chloride ("PVC")
resin facility in Ashtabula, Ohio and GenCorp was served on December 21, 1998.
GenCorp, as the former employer, is alleged to have intentionally exposed the
decedent to vinyl chloride ("VC"), a building block compound for PVC that is
listed as a carcinogen by certain government agencies. The alleged exposure is
claimed to have resulted in fatal liver damage. Plaintiffs also allege that all
of the co-defendants engaged in a conspiracy to suppress information regarding
the carcinogenic risk of VC to industry workers, despite the fact that OSHA has
strictly regulated workplace exposure to VC since 1974. GenCorp has notified its
insurers and will vigorously defend this and any future actions which may be
generated.
This lawsuit is apparently an outgrowth of three similar but unrelated
"toxic tort" civil conspiracy cases brought in 14th Judicial District Court,
Calcasieu Parish, Louisiana by the heirs of deceased former employees of two
chemical plants in Lake Charles, Louisiana: (Ross, et ux. v. Conoco, Inc., et
al. (Case No. 90-4837); Landon, et ux. v. Conoco, Inc., et al. (Case No.
97-7949); Tousaint, et ux. v. Insurance Co. of North America, et al. (Case No.
92-6172). GenCorp was named as a "conspiring" co-defendant in all three cases,
along with most of the same co-defendants in the McKinley case. All cases
pending in Louisiana have been tentatively settled on a basis favorable to the
Company.
On March 22, 1999, GenCorp was served with a similar conspiracy suit
alleging VC exposure from various aerosol products, including hairspray. Bland,
et al. v. Air Products & Chemicals, Inc., et al., Jefferson County (Beaumont),
Texas, (Case No. D-160,599). VC was used as an aerosol propellant in the 1960's.
Again, the same co-defendants are named, with the addition of various consumer
products and personal care manufacturers.
On or about August 25, 1999, GenCorp was served with a suit alleging
conspiracy, manufacturers' liability, and related claims by a railyard worker
for CSX Transportation in Cincinnati, Ohio. Wiefering, et al. v. Allied Chemical
Corp., et al., Cuyahoga County C.P.CT., (Cleveland) Ohio, (Case No. 389385).
Plaintiff alleges that he contracted "vinyl chloride disease" as a result of
exposure to VC and PVC products shipped by GenCorp and other manufacturers
through the CSX Cincinnati railyards.
However, unlike McKinley, GenCorp was not alleged to be an employer,
manufacturer or VC supplier in the Ross, Tousaint, Landon or Bland cases. In the
Weifering case, GenCorp is erroneously alleged to be the successor to the Great
American Chemical Corp., and GenCorp has moved to dismiss those false
allegations. GenCorp has notified its insurers of all of these claims and is
vigorously defending its actions.
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 United States 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 United States 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
8
<PAGE> 11
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
At a special meeting on September 8, 1999, GenCorp shareholders approved a
spin-off of the Company's decorative & building products and performance
chemicals businesses as a separate publicly traded company named OMNOVA
Solutions Inc. The spin-off was approved by GenCorp's Board of Directors on
September 17, 1999.
At the special meeting, the shareholders voted on the following proposals
as set forth below:
PROPOSAL 1 -- to approve the following actions (the "Distribution"):
- a transfer to GenCorp by Aerojet-General Corporation, a wholly-owned
subsidiary of GenCorp, of 100% of the ownership interest of Aerojet
Fine Chemicals LLC;
- the transfer by GenCorp to OMNOVA Solutions Inc. ("Omnova") of the
performance chemicals and decorative and building products businesses
of GenCorp and some other corporate assets, in exchange for shares of
Omnova common stock and assumption of liabilities related to these
businesses and assets; and
- a special dividend to the holders of the outstanding shares of GenCorp
common stock of all outstanding shares of capital stock of Omnova on
the basis of one share of Omnova common stock for each share of common
stock of GenCorp.
PROPOSAL 2 -- To approve a proposal to amend in certain respects GenCorp's
articles of incorporation and code of regulations.
PROPOSAL 3 -- To approve a proposal to adopt the GenCorp Inc. 1999 Equity
and Performance Incentive Plan.
PROPOSAL 4 -- To approve a proposal to adopt the OMNOVA Solutions Inc. 1999
Equity and Performance Incentive Plan.
SUMMARY OF SHAREHOLDERS VOTE
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- ---------- -------
<S> <C> <C> <C>
PROPOSAL 1 --
Approve the Distribution............ 34,406,778 1,044,077 111,200
PROPOSAL 2 --
Amend Articles...................... 14,817,303 21,587,470 157,283
PROPOSAL 3 --
Adopt GenCorp Incentive Plan........ 26,121,608 10,251,489 188,958
PROPOSAL 4 --
Adopt OMNOVA Incentive Plan......... 25,595,671 10,734,059 232,326
</TABLE>
Additional information regarding the transactions described above is
contained in GenCorp's definitive proxy statement dated July 2, 1999 and in
Omnova's Form 10, as amended.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is given as of February 18, 2000, and except as
otherwise indicated, each individual has held the same office during the
preceding five-year period.
Robert A. Wolfe, age 61: Chairman, Chief Executive Officer and President of
the Company (since October 1999); formerly Vice President of the Company and
President of Aerojet (from September 1997 to October 1999); previously Executive
Vice President of the Pratt & Whitney Group, a division of United
9
<PAGE> 12
Technologies (during 1997), President, Pratt & Whitney Aircraft's Large
Commercial Engines business (from 1994 to 1997), and Senior Vice President,
Pratt & Whitney's Commercial Engine Management for Latin and North America (from
1992 to 1994).
Robert C. Anderson, age 50; Vice President and Deputy General Counsel;
Assistant Secretary (since October 1999); formerly Vice President, Law of
Aerojet (from September 1996 to October 1999); previously, Counsel, General
Electric Aircraft Engines (from June 1986 to September 1996).
Chris W. Conley, age 41; Vice President, Environmental, Health & Safety
(since October 1999); formerly Director Environmental, Health & Safety (from
March 1996 to October 1999); previously Environmental Consultant (from 1994 to
1996) and Manager, Environmental for GenCorp Automotive (from 1990 to 1994).
Carl B. Fischer, age 58: Vice President of the Company and President of
Aerojet (since October 1999); formerly Senior Vice President, Electronic and
Weapon Systems Sector of Aerojet (from October 1997 to October 1999); previously
Vice President of Space Surveillance Programs for Aerojet (from July 1993 to
October 1997), Vice President and General Manager of Aerojet Tactical Programs
(from 1982 to 1993) and Director of Engineering for Aerojet (from 1980 to 1982).
Joseph M. Gray, age 50:, Vice President of the Company and President,
Vehicle Sealing (since February 2000); formerly Chief Operating Officer of
Peregrine Incorporated (from April to December 1998) and President, Exterior
Systems Group (from January 1997 to April 1998); previously Executive Vice
President of Bosch Braking Systems Corporation and President of its ABS and
Wheel End Products business (from April 1996 to January 1997) and President of
Allied Signal Inc.'s AntiLock Braking Systems business (from February 1995 to
April 1996).
Terry L. Hall, age 45: Senior Vice President and Chief Financial Officer of
the Company (since October 1999); formerly on special assignment as Chief
Financial Officer of Aerojet (from May 1999 to October 1999); previously Senior
Vice President and Chief Financial Officer of US Airways Group, Inc. (during
1998), Chief Financial Officer of Apogee Enterprise (from 1995 to 1997), Chief
Financial Officer of Tyco International Ltd. (from 1994 to 1995), Vice President
and Treasurer of UAL Corp. (from 1990 to 1993) and President/General Manager of
Northwest Aircraft Inc. (from 1986 to 1990).
Samuel W. Harmon, age 49: Senior Vice President, Administration (since
October 1999); formerly Senior Vice President, Human Resources (from February
1996 to October 1999) and Vice President, Human Resources (from October 1995
until February 1996); previously Vice President, Human Resources, AlliedSignal,
Inc., for its European operations (from 1995 to February 1996) and for its
Automotive Sector (from 1993 to 1995).
Michael F. Martin, age 53; Vice President and Controller (since October
1999); formerly Vice President and Controller of Aerojet (from September 1993 to
October 1999); previously Controller of Aerojet's ElectroSystems Division (from
1991 to 1993).
Robert G. Miotke, age 47: Vice President of the Company (since October
1999) and President of Aerojet Fine Chemicals (since February 1999); formerly
Vice President, Custom Chemicals for Aerojet (from October 1996 to February
1999); previously Vice President, Specialty Fine Chemicals, for Hickson
International (from 1992 to 1996), and Vice President, Fine Chemicals for ANGUS
Chemical Company (from 1985 to 1992).
Thomas E. Peoples, age 51: Senior Vice President, International and
Washington Operations (since October 1999); formerly Vice President,
International and Washington Operations for Aerojet (from August 1996 to October
1999); previously Vice President, Strategic Business Development for Aerojet
(from July 1994 to August 1996), Vice President of Business Development for
Aerojet's Electronics Division (from February 1994 to July 1994), Director of
Business Development for Aerojet's Tactical Systems and Advanced Programs (from
May 1992 to July 1994) and Manager of Business Development for Raytheon's Smart
Munitions Programs (from March 1987 to April 1992).
William R. Phillips, age 57: Senior Vice President, Law; General Counsel
(since September 1996) and Secretary (since October 1999); formerly Vice
President, Law of Aerojet (from 1990 to 1996); previously General Counsel, Group
Counsel and Manager Legal Operations, General Electric Aircraft Engines (from
1986 to 1989).
10
<PAGE> 13
Dr. Suzanne L. Phinney, age 48; Vice President, Environmental and
Regulatory Affairs (since October 1999); formerly Vice President, Environmental,
Health & Safety for Aerojet (from 1990 to October 1999).
Rosemary Younts, age 44: Senior Vice President, Communications (since
February 1996); formerly Vice President, Communications (from January 1995 to
February 1996); previously Director of Communications (from 1993 to 1995) and
held various communications positions with Aerojet (from 1984 to 1993).
The Company's executive officers generally hold terms of office of one year
and/or until their successors are elected.
11
<PAGE> 14
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, 1999, there were approximately 11,900 holders of
record of the Company's common stock. During the first three quarters of 1999,
and for all of 1998 and 1997, the Company paid quarterly cash dividends on
common stock of $.15 per share. During the fourth quarter of 1999, following the
spin-off of OMNOVA Solutions Inc., the Company paid a quarterly cash dividend on
common stock of $.03 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 begins on page 42 of this report and
is incorporated herein by reference.
Information concerning long-term debt, including material restrictions and
provisions relating to distributions and cash dividends on the Company's common
stock (if any), appears in Note N on page 33 of this report and is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Financial data required under this section appears on page 44 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 particular, this
pertains to management's comments on financial resources, capital spending and
the outlook for each of the Company's business segments. In addition to certain
contingency matters and their respective cautionary statements discussed in this
annual report, the forward-looking statements section of this Management's
Discussion and Analysis indicates some important factors that could cause actual
results or outcomes to differ materially from those addressed in forward-looking
statements.
On September 8, 1999, Shareholders voted to approve the spin-off of the
Company's performance chemicals and decorative & building products businesses
(OMNOVA Solutions Inc.) to GenCorp shareholders as a separate, publicly traded
company. The spin-off became effective October 1, 1999 and results of
discontinued operations are shown separately in the Company's financial
statements. The discussion following focuses on the continuing operations of the
Company including the aerospace, defense and fine chemicals segment, and its
Vehicle Sealing segment.
1999 FINANCIAL HIGHLIGHTS -- CONTINUING OPERATIONS
- SALES -- Increased to $1.07 billion in 1999 versus $1.05 billion in 1998,
a 2 percent increase.
- SEGMENT OPERATING PROFIT (EXCLUDING UNUSUAL ITEMS) -- Increased 13
percent to $80 million in 1999 as compared to $71 million in 1998.
- INCOME -- Improved to $46 million in 1999 as compared to $38 million in
1998. Excluding unusual items, income increased to $39 million in 1999
from $32 million in 1998.
- DILUTED EARNINGS PER SHARE -- Increased 21 percent to $1.09 in 1999 as
compared to $0.90 in 1998. Before unusual items, diluted earnings per
share were $0.92 in 1999 versus $0.77 in 1998.
FINANCIAL RESOURCES AND CAPITAL SPENDING -- CONTINUING OPERATIONS
Net cash provided by operating activities of continuing operations for
fiscal 1999 was $100 million compared to $76 million in 1998 and $102 million in
1997. Improved cash flow reflects the settlement of certain
12
<PAGE> 15
environmental insurance claims offset by an inventory build-up on Aerojet's
production contracts. Excluding 1997 tax settlements in (see Note H -- Income
Taxes), cash flow for 1998 improved from 1997, due to better operating
performance and lower working capital requirements.
In fiscal 1999, capital expenditures increased to $97 million as compared
to $68 million in 1998 and $45 million in 1997. Increased expenditures reflect
significant investments in Aerojet's Space Based Infrared System (SBIRS)
Satellite Payload Facility and the Aerojet Fine Chemicals business. Capital
expenditures were primarily made for capacity expansion and asset replacement,
cost reduction initiatives, safety and productivity improvements and
environmental protection. Capital expenditures in 2000 are expected to be less
than the prior year due to the completion of these major investments and
increased management scrutiny on capital asset acquisitions. Fiscal 2000 capital
expenditures are currently projected to be approximately $60 million.
Cash flow provided by financing activities in fiscal 1999 primarily
included a net $210 million decrease in long-term debt and $20 million in
dividends offset by a spin-off dividend payment received from OMNOVA Solutions
Inc. of $200 million. In total, net cash used in financing activities reflects
the Company's dividend payments as the OMNOVA Solutions Inc. dividend and the
debt decrease are nearly equal. 1998 financing activities included three
acquisitions that were primarily responsible for a net increase in long-term
debt of $261 million. Net cash provided by 1997 financing activities was $94
million and included proceeds from a tax settlement.
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 1999, the Company incurred unusual items resulting in income before
taxes of $12 million. Unusual items included a gain of $59 million on
settlements covering certain environmental claims with certain of the Company's
insurance carriers (see Note S -- Contingencies); a provision of $33 million for
environmental remediation costs associated principally with the Company's
initial estimate of its probable share, as a Potentially Responsible Party
(PRP), in the portion of the San Gabriel Valley Basin Superfund Site known as
the Baldwin Park Operable Unit (BPOU) (see Note S -- Contingencies); a provision
for environmental remediation costs at the Company's Lawrence, Massachusetts
site of $6 million (see Note S -- Contingencies); a provision for environmental
remediation costs associated with other Company sites of $2 million (see Note
S -- Contingencies); a charge of $4 million related to a pricing dispute with a
major Vehicle Sealing customer; a charge of $1 million for write-down of certain
Vehicle Sealing assets to net realizable value; and a charge of $1 million
related to relocation/retention costs associated with the spin-off.
During 1998, the Company incurred unusual items resulting in income of $9
million. Unusual items included charges of $4 million primarily related to
exiting the Plastic Extrusions appliance gasket business, offset by a gain of
$13 million from the sale of surplus land in Nevada by Aerojet.
AEROSPACE, DEFENSE AND FINE CHEMICALS
Sales for the aerospace, defense and fine chemicals segment in 1999 were
$615 million versus 1998 sales of $673 million, down 9 percent. The sales
decrease primarily occurred because production deliveries under the Air Force's
Defense Support Program (DSP) were completed in 1998. Deliveries of the Special
Sensor Microwave Imager/Sounder (SSMIS) program were also completed in the first
half of 1999. Volume was lower in some other programs (Integrated AMSU, F-22,
and Minuteman) and higher in others (SADARM, Tactical programs and the Fine
Chemicals business).
Aerospace, defense and fine chemicals 1999 segment operating profit of $62
million compares to $68 million in 1998, directly reflecting lower sales. The
return on sales was unchanged (10.1 percent in both 1999 and 1998). Even though
the return on sales was unchanged, the mix of business was a factor. Improved
government contract performance was offset by disappointing performance in the
Fine Chemicals business.
13
<PAGE> 16
Aerojet's contract backlog was $1.6 billion at the end of fiscal 1999,
compared to $1.7 billion at the end of fiscal 1998 and $1.9 billion at the end
of fiscal 1997. 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 fiscal 1999, compared to $0.6 billion at the end of fiscal
1998 and $0.7 billion at the end of fiscal 1997.
Outlook
The contract base for the aerospace, defense and fine chemicals segment is
fairly stable with a healthy contract backlog. Significant long-term contract
awards have been won over the last four years, which help major product areas in
2000 and beyond. Actions to improve future performance in Fine Chemicals have
been implemented.
1998 Results
Aerojet's 1998 sales of $673 million were up 15 percent from 1997 sales of
$584 million. Sales were up because of significantly higher volume on the SBIRS
program and in the Fine Chemicals business. There were modest increases in sales
for Titan, Delta, F-22, Special Sensor Microwave Imager/Sounder (SSMIS) programs
and the Tactical defense programs. Somewhat offsetting this was lower volume in
the SADARM, Defense Support Program (DSP), Joint Tactical Ground Station (JTAGS)
and Strategic & Space technology programs.
Aerojet's 1998 segment operating profit was $68 million compared to $55
million in 1997. Operating profit margins improved to 10.1 percent in 1998 from
9.4 percent in 1997. The increase was due to the higher sales volume and
improved contract performance.
VEHICLE SEALING
Vehicle Sealing's 1999 sales of $456 million were up 22 percent from $375
million in 1998 for two major reasons. The first is because there was no impact
of the General Motors strike and work stoppage at the Company's Batesville,
Arkansas facility like in 1998. The second is the continuing extremely strong
demand in the light truck and sport utility vehicle market. Higher shipments
were recorded in 1999 on General Motors' full size pickups (GMT 400/800) and
S10/Blazer (GMT 325/330) models, Ford's F-Series full size pickup (PN96) and the
Ford Explorer program, and the Mercedes All Terrain Vehicle program. Car
platform sales also improved on the General Motors' Grand AM (GMX-130) and
Saturn (Z/LS) programs.
Vehicle Sealing's 1999 segment operating profit was $18 million compared to
$3 million in 1998. 1998 results were low because of the General Motors strike,
work stoppage at the Company's Batesville, Arkansas facility, and higher than
anticipated launch costs and operating losses from the divested Plastic
Extrusions division.
Outlook
Vehicle Sealing is currently well positioned in the marketplace with a
strong mix of the best selling and most popular pickup trucks, sport utility
vehicles, and cars. The market outlook for 2000 is positive, especially for the
light truck and sport utility vehicle segment. Margins are expected to continue
to improve to more historical levels as launch and development costs subside.
The Company is committed to improving and modernizing this business's operating
processes.
1998 Results
Vehicle Sealing's 1998 sales of $375 million compared to $369 million in
1997. Sales were up because of higher volumes on General Motors' Blazer/Jimmy,
Ford Explorer and Mercedes All Terrain Vehicle programs as well as several new
program launches, net of the impact of the General Motors strike. New program
launches in 1998 included production on the General Motors Grand AM (GMX-130),
Ford Ranger (PN-63), Ford F-Series full size pickup (PN-96) and General Motors
Sierra pickup (GMT-800).
14
<PAGE> 17
Vehicle Sealing's 1998 operating profit was $3 million compared to $29
million in 1997. Operating results were down because of the General Motors
strike, a work stoppage at the Company's Batesville, Arkansas facility, higher
than anticipated launch costs and operating losses from the divested plastic
extrusions division.
DISCONTINUED OPERATIONS
In 1999, the Company disposed of its polymer products segment through the
spin-off of OMNOVA Solutions, Inc. and the sale of its Penn Racquet Sports
Division. Earnings from discontinued operations totaled $26 million for 1999
compared to $46 million in 1998 and $38 million in 1997. 1999 results included
pretax costs related to the spin-off of approximately $25 million.
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 that resulted from generally accepted manufacturing
and disposal practices in the 1950's and 1960's. In addition, the Company has
been designated a potentially responsible party (PRP), with other companies, at
sites undergoing investigation and remediation.
In 1999, capital expenditures for projects related to the environment were
approximately $5 million, compared to $6 million in 1998 and $6 million in 1997.
The Company currently forecasts that capital expenditures for environmental
projects will approximate $2 million and $3 million in 2000 and 2001,
respectively. During 1999, noncapital expenditures for environmental compliance
and protection totaled $40 million, of which $15 million was for recurring costs
associated with managing hazardous substances and pollution abatement in ongoing
operations and $25 million was for investigation and remediation efforts at
other sites. Similar noncapital expenditures were $44 million and $40 million in
1998 and 1997, respectively.
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, 1999 reflects accruals of $368 million and amounts recoverable
of $223 million from the United States 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 - S Contingencies.
INFORMATION SYSTEMS AND THE YEAR 2000
GenCorp was engaged in a comprehensive project to upgrade its information,
technology and manufacturing and facilities' computer hardware and software
programs to address the Year 2000 issue. The project consisted of an iterative
process of remediating, testing and implementing new software as required.
GenCorp spent approximately $2 million on the project and funded it through
operating cash flows. GenCorp was also in contact with each of its major
customers and vendors to ensure that they were also Year 2000 compliant. Based
upon currently available information and considering GenCorp's diversified
business base, decentralized systems and Year 2000 efforts, management believes
that the most reasonably likely worst case scenario from a Year 2000 failure
would result in a minor short-term business interruption. Since January 1, 2000
GenCorp has not experienced any material Year 2000 problems; however, the
ultimate impacts are still unknown.
15
<PAGE> 18
ADOPTION OF THE EURO
Based upon a preliminary evaluation, management believes that the adoption
of the Euro by the European Economic Community will not have a material impact
on the Company's international businesses. The Company's foreign operations
currently are small and each operation conducts the majority of its business in
a single currency with minimal price variations between countries.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on
long-term debt obligations. The Company's policy is to manage interest rates
through the use of a combination of fixed and variable rate debt. Currently, the
Company does not use derivative financial instruments to manage its interest
rate risk. Substantially all of the Company's long-term debt of $149 million,
which matures in the year 2001, is variable and had an average variable interest
rate of 7.1 percent at November 30, 1999. A one point change of the interest
rate on the Company's long-term debt would have affected interest expense in
1999 by $1 million. The Company's long-term debt bears interest at market rates
and therefore, the carrying value approximates fair value.
Although the Company conducts business in foreign countries, international
operations were not material to the Company's consolidated financial position,
results of operations or cash flows as of November 30, 1999. Additionally,
foreign currency transaction gains and losses were not material to the Company's
results of operations for the year ended November 30, 1999. Accordingly, the
Company should not be subject to material foreign currency exchange rate risk
with respect to future costs or cash flows from its foreign subsidiaries. To
date, the Company has not entered into any significant foreign currency forward
exchange contracts or other derivative financial instruments to hedge the
effects of adverse fluctuations in foreign currency exchange rates. The Company
is evaluating the future use of such financial instruments.
CHANGE IN ACCOUNTING PRINCIPLE
In the first quarter of fiscal year 2000, the Company intends to implement
a change in accounting principle to more appropriately reflect investment
returns and actuarial assumptions related to pension assets and postretirement
heath care and life insurance liabilities. The changes to pension assets
include: adjusting to a three-year smoothing period from a five-year smoothing
period; amending the amortization period to a maximum of five years from 11
years; and eliminating the use of a ten percent corridor for gain/loss
recognition. The changes to postretirement health care and life insurance
liabilities include amending the amortization period to a maximum of five years
from 11 years and eliminating the use of a ten percent corridor for gain/loss
recognition. The changes are effective December 1, 1999 and will result in a
one-time after tax gain of approximately $72 million in the first quarter of
fiscal year 2000. The changes will have no effect on the Company's cash flow or
on the funded status of the pension and other postretirement benefit plans, and
the employee and retiree benefit plans will remain unchanged.
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 outcomes 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.
Some important factors that could cause the Company's actual results or
outcomes to differ from those expressed in its 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 joint venture activities
- Vehicle sales and production rates of major automotive programs,
including Ford and General Motors' light trucks and sport utility
vehicles
16
<PAGE> 19
- Department of Defense, NASA and other funding for critical aerospace
programs, including SBIRS, SADARM and Titan
- The market for the Company's real estate in Sacramento, California
- Fluctuations in exchange rates of foreign currencies and other risks
associated with foreign operations
- The ability of the Company to satisfy contract performance criteria,
including due dates
- An adverse decision in any patent infringement suit, or settlement
of a patent infringement suit impacting Aerojet Fine Chemicals'
right to utilize new technology
- Intense competition from competitors
- Potential liabilities which could arise from any release or
explosion of dangerous materials
- Work stoppages at a Company facility or in the facility of one of
the Company's significant customers
- Future funding for commercial launch vehicles including Kistler
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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information called for by this item is set forth on page 16 of this report.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information called for by this item is set forth beginning on the next page
(page 18) 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 consolidated financial
statements.
17
<PAGE> 20
REPORT OF ERNST & YOUNG LLP, 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, 1999 and 1998, and the related consolidated statements
of income, shareholders' equity and cash flows for each of the three years in
the period ended November 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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, 1999 and 1998, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended November 30,
1999, in conformity with accounting principles generally accepted in the United
States.
Ernst & Young LLP
Sacramento, California
January 12, 2000
18
<PAGE> 21
GENCORP INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30
-------------------------
1999 1998 1997
------ ------ -----
(DOLLARS IN MILLIONS,
EXCEPT PER-SHARE DATA)
<S> <C> <C> <C>
NET SALES................................................... $1,071 $1,048 $ 953
COSTS AND EXPENSES
Cost of products sold....................................... 945 930 829
Selling, general and administrative......................... 19 17 26
Depreciation and amortization............................... 44 43 40
Interest expense............................................ 6 6 12
Other (income) expense, net................................. (7) 1 (8)
Unusual items, net.......................................... (12) (9) --
------ ------ -----
995 988 899
------ ------ -----
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES....... 76 60 54
Income tax provision (benefit).............................. 30 22 (45)
------ ------ -----
INCOME FROM CONTINUING OPERATIONS........................... 46 38 99
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAXES........... 26 46 38
------ ------ -----
NET INCOME................................................ $ 72 $ 84 $ 137
====== ====== =====
EARNINGS PER SHARE OF COMMON STOCK
Basic:
Continuing operations..................................... $ 1.11 $ 0.91 $2.68
Discontinued operations................................... 0.63 1.11 1.03
------ ------ -----
Total................................................ $ 1.74 $ 2.02 $3.71
====== ====== =====
Diluted:
Continuing operations..................................... $ 1.09 $ 0.90 $2.48
Discontinued operations................................... 0.63 1.09 0.92
------ ------ -----
Total................................................ $ 1.72 $ 1.99 $3.40
====== ====== =====
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 22
GENCORP INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30
----------------------
1999 1998
-------- --------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................... $ 23 $ 24
Accounts receivable......................................... 139 164
Inventories................................................. 144 101
Prepaid expenses and other.................................. 57 48
Discontinued operations..................................... -- 192
------ ------
Total Current Assets.............................. 363 529
Other assets, net........................................... 532 494
Property, plant and equipment, at cost
Land...................................................... 30 33
Buildings and improvements................................ 243 233
Machinery and equipment................................... 555 545
Construction in progress.................................. 50 22
------ ------
878 833
Accumulated depreciation.................................. (543) (536)
------ ------
Net property, plant and equipment...................... 335 297
Non-current assets -- discontinued operations............... -- 423
------ ------
Total Assets...................................... $1,230 $1,743
====== ======
CURRENT LIABILITIES
Notes payable and current portion of long-term debt......... $ 9 $ 14
Accounts payable............................................ 44 41
Income taxes payable........................................ 44 33
Accrued expenses............................................ 274 243
Discontinued operations..................................... -- 99
------ ------
Total Current Liabilities......................... 371 430
Long-term debt.............................................. 149 356
Postretirement benefits other than pensions................. 251 318
Other long-term liabilities................................. 379 283
Long-term liabilities -- discontinued operations............ -- 12
SHAREHOLDERS' EQUITY
Preference stock -- $1.00 par value; 15 million shares
authorized; none outstanding.............................. -- --
Common stock -- $.10 par value; 90 million shares
authorized; 41.9 million shares outstanding (41.5 million
in 1998).................................................. 4 4
Other capital............................................... -- 151
Retained earnings........................................... 93 198
Accumulated other comprehensive loss........................ (17) (9)
------ ------
Total Shareholders' Equity........................ 80 344
------ ------
Total Liabilities and Shareholders' Equity........ $1,230 $1,743
====== ======
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 23
GENCORP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations........................... $ 46 $ 38 $ 99
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:
Provision for unusual items............................ -- 2 --
Loss (gain) on sale of businesses...................... -- 3 (3)
Depreciation, amortization and loss/gain on disposal of
fixed assets.......................................... 44 32 42
Deferred income taxes.................................. (12) 12 13
Changes in operating assets and liabilities net of
effects of acquisitions and dispositions of
businesses:
Accounts receivable.................................. 25 (1) (46)
Inventories.......................................... (43) 13 (2)
Other current assets................................. 7 4 --
Current liabilities.................................. 41 30 30
Other non-current assets............................. (88) (5) (66)
Other long-term liabilities.......................... 80 (52) 35
----- ----- -----
Net Cash Provided by Continuing Operations.................. 100 76 102
Net Cash Provided by Discontinued Operations................ 54 54 66
----- ----- -----
Net Cash Provided by Operating Activities......... 154 130 168
----- ----- -----
INVESTING ACTIVITIES
Capital expenditures........................................ (97) (68) (45)
Proceeds from business and asset dispositions............... 1 19 26
Discontinued operations..................................... (30) (314) (60)
----- ----- -----
Net Cash Used in Investing Activities............. (126) (363) (79)
----- ----- -----
FINANCING ACTIVITIES
Long-term debt incurred..................................... 149 415 180
Long-term debt paid......................................... (359) (143) (244)
Short-term debt paid, net................................... (2) (11) (18)
Dividends................................................... (20) (25) (22)
Other equity transactions................................... 3 4 10
Cash dividend from OMNOVA Solutions Inc..................... 200 -- --
----- ----- -----
Net Cash (Used in) Provided by Financing
Activities...................................... (29) 240 (94)
----- ----- -----
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (1) 7 (5)
Cash and cash equivalents at beginning of year.............. 24 17 22
----- ----- -----
Cash and Cash Equivalents at End of Year.......... $ 23 $ 24 $ 17
===== ===== =====
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 24
GENCORP INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ISSUED OTHER TOTAL
------------------- OTHER RETAINED COMPREHENSIVE SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS INCOME (LOSS) EQUITY
---------- ------ ------- -------- ----------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
NOVEMBER 30, 1996................. 33,479,647 $ 3 $ 22 $ 24 $ 7 $ 56
Net income........................ 137 137
Currency translation adjustments
and other....................... (15) (15)
Cash dividends -- $.60 per
share........................... (22) (22)
Conversion of subordinated
debentures...................... 7,151,686 1 114 115
Shares issued under stock option
and incentive plans, net........ 694,126 -- 10 10
---------- ----- ---- ----- ---- ----
NOVEMBER 30, 1997................. 41,325,459 4 146 139 (8) 281
Net income........................ 84 84
Currency translation adjustments
and other....................... (1) (1)
Cash dividends -- $.60 per
share........................... (25) (25)
Shares issued under stock option
and incentive plans, net........ 210,065 -- 5 5
---------- ----- ---- ----- ---- ----
NOVEMBER 30, 1998................. 41,535,524 4 151 198 (9) 344
Net income........................ 72 72
Currency translation adjustments
and other....................... (9) (9)
Cash dividends -- $.48 per
share........................... (20) (20)
Shares issued under stock option
and incentive plans, net........ 326,777 -- 4 4
Dividend transfer from OMNOVA
Solutions, Inc.................. 200 200
Net asset transfer to OMNOVA
Solutions, Inc.................. (355) (157) 1 (511)
---------- ----- ---- ----- ---- ----
NOVEMBER 30, 1999................. 41,862,301 $ 4 $ -- $ 93 $(17) $ 80
========== ===== ==== ===== ==== ====
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 25
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 -- T Business
Segment Information.
CONSOLIDATION -- The consolidated financial statements of the Company
include the accounts of the parent company and its wholly-owned subsidiaries.
Significant 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. Provisions for estimated losses on contracts
are recorded when such losses become evident.
USE OF ESTIMATES -- The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated 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 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 United
States Government or other third parties, when the collection of such amounts is
probable. Pursuant to United States Government agreements or regulations, the
Company can recover a substantial portion of its environmental costs for its
aerospace and defense business through the establishment of prices of the
Company's products and services sold to the United States Government. With the
exception of applicable amounts representing current assets and liabilities,
recoverable amounts and accrued costs are included in other long-term assets and
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
Vehicle Sealing segment uses the last-in, first-out method. The aerospace,
defense and fine chemicals 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 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 aerospace and defense, and by the
straight-line method for the remainder of the Company. Depreciable lives on
buildings and improvements, and machinery and equipment, range from 10 years to
40 years, and 3 years to 12 years, respectively. Goodwill represents the excess
23
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
of purchase price over the estimated fair value of net assets acquired and is
amortized on a straight-line basis over periods ranging from 15 to 20 years.
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. Identifiable intangible assets are amortized over their estimated
useful life using the straight-line method over periods ranging from 3 to 15
years. Accumulated amortization of goodwill and identifiable intangible assets
at both November 30, 1999 and 1998 was $4 million.
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 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.
RECLASSIFICATIONS -- Certain reclassifications have been made to conform
prior year's data to the current presentation.
NOTE B -- DISCONTINUED OPERATIONS
On December 17, 1998, the Company announced a plan to spin-off its
performance chemicals and decorative & building products businesses (OMNOVA
Solutions Inc.) to GenCorp shareholders as a separate, publicly traded company.
During the third fiscal quarter of 1999, the Internal Revenue Service issued a
favorable ruling that GenCorp's planned spin-off would be a tax-free
transaction. Shareholders voted to approve the transaction at a special
shareholders meeting on September 8, 1999. GenCorp's Board of Directors gave
final approval of the plan on September 17, 1999 and declared a dividend of one
share of OMNOVA Solutions Inc. common stock for each share of GenCorp common
stock held on the September 27, 1999 record date for the dividend. The dividend
distribution was made on October 1, 1999. GenCorp continues to operate Aerojet,
its existing aerospace, defense and fine chemicals segment, and its Vehicle
Sealing segment.
On April 30, 1999, the Company sold its Penn Racquet Sports division (Penn)
to HTM Sports-und Freizeitgerate AG, an Austrian company and HTM USA Holdings
Inc., for aggregate consideration of approximately $42 million. The Company
recognized a pre-tax gain of $16 million on this transaction.
GenCorp has effectively disposed of its polymer products segment as a
result of the spin-off and sale of Penn, and the Company's financial statements
now reflect OMNOVA Solutions Inc. and Penn as discontinued operations.
Discontinued operations also include certain other operations of the Company's
polymer products segment which were previously sold and expenses related to the
spin-off totaling approximately $25 million. Interest expense allocated to the
business segments by GenCorp management, based on the use of the borrowings,
amounted to $14 million, $8 million, and $4 million in 1999, 1998 and 1997,
respectively. Results for these discontinued operations were:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30
-----------------------
1999 1998 1997
----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net Sales................................................... $666 $689 $615
---- ---- ----
Income before income taxes.................................. $ 50 $ 76 $ 64
Income tax provision........................................ (24) (30) (26)
---- ---- ----
Income from discontinued operations, net of taxes........... $ 26 $ 46 $ 38
---- ---- ----
</TABLE>
24
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE C -- UNUSUAL ITEMS
During 1999, the Company incurred unusual items resulting in income before
taxes of $12 million. Unusual items included a gain of $59 million on
settlements covering certain environmental claims with certain of the Company's
insurance carriers (see Note S -- Contingencies); a provision of $33 million for
environmental remediation costs associated principally with the Company's
initial estimate of its probable share, as a potentially responsible party
(PRP), in the portion of the San Gabriel Valley Basin Superfund Site known as
the Baldwin Park Operable Unit (BPOU) (see Note S - Contingencies); a provision
for environmental remediation costs at the Company's Lawrence, Massachusetts
site of $6 million (see Note S - Contingencies); a provision for environmental
remediation costs associated with other Company sites of $2 million (see Note
S -- Contingencies); a charge of $4 million related to a pricing dispute with a
major Vehicle Sealing customer; a charge of $1 million for write-down of certain
Vehicle Sealing assets to net realizable value; and a charge of $1 million
related to relocation/retention costs associated with the spin-off.
During 1998, the Company incurred unusual items resulting in income of $9
million. Unusual items included charges of $4 million primarily related to
exiting the plastic extrusions appliance gasket business offset by a gain of $13
million from the sale of surplus land in Nevada by Aerojet.
NOTE D -- NEW ACCOUNTING PRONOUNCEMENTS
The Emerging Issues Task Force reached consensus in September 1999 on Issue
99-5 (EITF 99-5) which deals with pre-production costs incurred by original
equipment manufacturer (OEM) suppliers to perform certain services related to
the design and development of the parts they will supply to OEMs and to design
and build molds, dies, and other tools that will be used in producing the parts.
Companies must determine whether pre-production costs meet the criteria in EITF
99-5 to be capitalized, subject to FASB Statement 121, or should be expensed as
incurred. The EITF is effective immediately.
The Company believes that it is in compliance with EITF 99-5 and as such,
it will not impact the Company's future earnings or financial position.
NOTE E -- OTHER DIVESTITURES
On June 30, 1998, the Company sold its plastic extrusions appliance gasket
business to ILPEA, Inc. for an aggregate consideration of approximately $3
million.
25
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE F -- EARNINGS PER SHARE
A reconciliation of the numerator and denominator used in the basic and
diluted earnings per share from continuing operations computations is as
follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30
---------------------------
1999 1998 1997
------ ------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
NUMERATOR
Numerator for basic earnings per share -- income from
continuing operations available to common shareholders.... $ 46 $ 38 $ 99
Effect of dilutive securities:
8% convertible subordinated debentures.................... -- -- 3
------ ------ -------
Numerator for diluted earnings per share -- income from
continuing operations available to common shareholders
after assumed conversions................................. $ 46 $ 38 $ 102
====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS)
<S> <C> <C> <C>
DENOMINATOR
Denominator for basic earnings per share -- weighted average
shares outstanding........................................ 41,741 41,468 37,023
Effect of dilutive securities:
8% convertible subordinated debentures.................... -- -- 3,855
Employee stock options.................................... 394 549 468
Other..................................................... 13 16 16
------ ------ -------
Dilutive potential common shares............................ 407 565 4,339
------ ------ -------
Denominator for diluted earnings per share -- adjusted
weighted average shares and assumed conversions........... 42,148 42,033 41,362
====== ====== =======
EARNINGS FROM CONTINUING OPERATIONS PER SHARE OF COMMON
STOCK
Basic earnings per share.................................... $ 1.11 $ 0.91 $ 2.68
Diluted earnings per share.................................. $ 1.09 $ 0.90 $ 2.48
</TABLE>
NOTE G -- RESEARCH AND DEVELOPMENT EXPENSE
Company-sponsored Research and Development (R&D) expense was $26 million in
1999 and $20 million in both 1998 and 1997. 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 for
technical activities that may significantly improve existing products or
processes.
Customer-sponsored R&D expenditures, which are funded under government
contracts, totaled $230 million in 1999, $207 million in 1998 and $175 million
in 1997.
26
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE H -- INCOME TAXES
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30
--------------------------
1999 1998 1997
----- ------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
INCOME TAX PROVISION (BENEFIT) FROM CONTINUING OPERATIONS
CURRENT
U.S. federal................................................ $ 30 $ 6 $ (67)
State and local............................................. 10 -- 2
Foreign..................................................... 2 4 7
----- ------- ------
42 10 (58)
DEFERRED
U.S. federal................................................ (12) 11 12
State and local............................................. (4) 3 1
Foreign..................................................... 4 (2) --
----- ------- ------
(12) 12 13
----- ------- ------
Income Tax Provision (Benefit).................... $ 30 $ 22 $ (45)
===== ======= ======
EFFECTIVE INCOME TAX RATE
Statutory federal income tax rate........................... 35.0% 35.0% 35.0%
State and local income taxes, net of federal income tax
benefit................................................... 3.4 3.7 3.8
Tax settlements, including interest......................... -- (3.0) (126.1)
Earnings of subsidiaries taxed at other than U.S. statutory
rate...................................................... 0.2 -- 0.6
Adjustment to estimated income tax accruals................. -- -- 2.3
Others, net................................................. 0.7 1.5 1.1
----- ------- ------
Effective Income Tax Rate......................... 39.3% 37.2% (83.3)%
===== ======= ======
</TABLE>
The Company reduced its 1998 and 1997 income tax expense by $2 million and
$67 million, respectively, due to the receipt of federal income tax settlements
for tax credits and related interest.
<TABLE>
<CAPTION>
NOVEMBER 30
----------------------------------------------
1999 1998
--------------------- ---------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
DEFERRED TAXES
Accrued estimated costs................................ $116 $-- $ 83 $--
Long-term contract method.............................. 8 -- 7 --
Depreciation........................................... -- 9 -- 11
Pensions............................................... -- 36 -- 46
NOLs and tax credit carryforwards...................... 5 -- 10 --
Other postretirement/employee benefits................. 117 -- 146 --
---- --- ---- ---
Deferred Taxes............................... $246 $45 $246 $57
==== === ==== ===
</TABLE>
The consolidated balance sheets reflect net deferred income taxes of $52
million and $36 million in prepaid expenses and other at November 30, 1999 and
1998, respectively. Included in other long-term assets for 1999 and 1998 are net
deferred income taxes of $149 million and $153 million, respectively. The
majority of net operating loss (NOLs) and tax credit carryforwards have an
indefinite carryforward period with the remaining portion expiring in years
through 2007. Pretax income from continuing operations of foreign subsidiaries
was $17 million in 1999, $8 million in 1998 and $19 million in 1997. Cash paid
during the year for income taxes of the continuing and discontinued operations
was $58 million in 1999, $33 million in 1998 and $70 million in 1997.
27
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE I -- ACCOUNTS RECEIVABLE
At November 30, the amount of commercial receivables was $79 million and
$90 million for 1999 and 1998, respectively. Receivables for the Vehicle Sealing
segment of $63 million and $52 million in 1999 and 1998, respectively, are due
primarily from General Motors and Ford. The amount of United States Government
receivables was $60 million and $74 million for 1999 and 1998, respectively.
Included in the 1999 and 1998 United States Government receivables is $12
million and $16 million, respectively, for environmental remediation recovery
(see Note S -- Contingencies). The Company's receivables are generally unsecured
and are not backed by collateral from its customers.
Also included in accounts receivable from the United States Government are
unbilled receivables of $10 million and $11 million at November 30, 1999 and
1998, respectively, relating to long-term government contracts. Such amounts are
billed either upon delivery of completed units or settlements of contracts. The
unbilled receivables amount at November 30, 1999 includes $5 million expected to
be collected in fiscal year 2000, and $5 million expected to be collected in
subsequent years.
NOTE J -- INVENTORIES
<TABLE>
<CAPTION>
NOVEMBER 30
----------------------
1999 1998
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Raw materials and supplies.................................. $ 23 $ 20
Work-in-process............................................. 4 3
Finished products........................................... 10 9
----- -----
Approximate replacement cost of inventories................. 37 32
Reserves, primarily LIFO.................................... (6) (5)
Long-term contracts at average cost......................... 293 276
Progress payments........................................... (180) (202)
----- -----
Inventories....................................... $ 144 $ 101
===== =====
</TABLE>
Aerojet's inventories applicable to government contracts include general
and administrative costs. The total of such costs incurred in 1999 and 1998 was
$59 million and $79 million, respectively, and the amount in inventory at the
end of those years is estimated at $24 million and $29 million, respectively.
The Company currently has $28 million of inventory that has multiple
applications due to its commercial nature. A customer is currently seeking
additional capital to incorporate this commercial inventory into their product.
The Company believes that either the customer will be successful in obtaining
such capital or that the commercial nature of the inventory will allow it to be
sold to alternative customers.
Inventories using the LIFO method represented 70 percent and 81 percent of
inventories at replacement cost at November 30, 1999 and 1998, respectively.
NOTE K -- EMPLOYEE BENEFIT PLANS
In February 1998, the FASB issued Statement No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" (SFAS 132). SFAS
132 supersedes the disclosure requirements in Statements No. 87, "Employers'
Accounting for Pensions", No. 88, "Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits", and No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." SFAS
132 addresses disclosure issues only and did not change the measurement or
recognition provisions specified in those Statements.
Effective August 31, 1999, the Company changed its measurement date for all
United States pension and postretirement health care and life insurance plans
from November 30 to August 31. The effect of the measurement date change was not
material.
28
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
PENSION PLANS -- The Company has a number of defined benefit pension plans
which cover substantially all salaried and hourly employees. Normal retirement
age is generally 62 or 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 pension plans'
assets are invested in short-term investments, listed stocks and bonds.
<TABLE>
<CAPTION>
1999 1998(1) 1997(1)
----- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
PENSION COST
Service cost for benefits earned during the year............ $ 20 $ 19 $ 16
Interest cost on benefit obligation......................... 139 137 132
Assumed return on plan assets(2)............................ (182) (171) (159)
Amortization of unrecognized amounts........................ -- (1) --
Special Events.............................................. 4 -- --
----- ----- -----
Total............................................. $ (19) $ (16) $ (11)
===== ===== =====
Continuing operations....................................... (3) N/A N/A
Discontinued operations..................................... (16) N/A N/A
----- ----- -----
Total............................................. $ (19) $ (16) $ (11)
===== ===== =====
</TABLE>
- ---------------
(1) In connection with the spin-off, OMNOVA Solutions Inc. assumed the pension
liabilities and received related assets for its active employees and for
certain former employees. The components of pension cost for 1998 and 1997
have not been restated for amounts related to continuing and discontinued
operations as no detailed information was available.
(2) Actual returns on plan assets were $224 million in 1999, $289 million in
1998, and $301 million in 1997.
29
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
1999 1998
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year..................... $1,944 $1,894
Service cost.............................................. 19 19
Interest cost............................................. 139 137
Amendments................................................ 3 2
Effect of spin-off of OMNOVA Solutions Inc................ (141) --
Actuarial (gain) loss..................................... (2) 22
Benefits paid............................................. (137) (130)
------ ------
Benefit Obligation at End of Year(1).............. $1,825 $1,944
====== ======
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year.............. $2,417 $2,256
Actual return on assets................................... 224 289
Employer contributions.................................... 5 2
Benefits paid............................................. (137) (130)
Effect of spin-off of OMNOVA Solutions Inc................ (265) --
------ ------
Fair Value of Plan Assets at End of Year.......... $2,244 $2,417
====== ======
Funded status............................................... $ 419 $ 473
Unrecognized actuarial gain............................... (311) (349)
Unrecognized prior service cost........................... 20 29
Unrecognized transition amount............................ (12) (20)
Minimum funding liability................................. (3) (6)
------ ------
Net Amount Recognized(2).......................... $ 113 $ 127
====== ======
</TABLE>
- ---------------
(1) Included $16 million and $30 million in 1999 and 1998, respectively for
unfunded plans.
(2) Included $15 million and $18 million in 1999 and 1998, respectively for
unfunded plans.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
WEIGHTED AVERAGE ASSUMPTIONS
Discount rate............................................. 7% 7% 7%
Assumed long-term rate of return on plan assets........... 9% 9% 9%
Annual rates of salary increase (for plans that base
benefits on final compensation level).................. 5% 5% 5%
</TABLE>
The net prepaid pension was included in:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Amounts recognized in the consolidated balance sheet:
Prepaid benefit cost........................................ $113 $127
Intangible assets........................................... 2 3
Other shareholders' equity.................................. 1 3
Minimum funding liability................................... (3) (6)
---- ----
Net Amount Recognized............................. $113 $127
==== ====
</TABLE>
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,
30
<PAGE> 33
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. These postretirement benefits are unfunded and are generally
based on the employee's years of service and/or compensation level. The costs of
postretirement benefits are accrued by the date the employees become eligible
for the benefits.
The components of the cost of these postretirement benefits, principally
health care and life insurance, were:
<TABLE>
<CAPTION>
1999 1998(1) 1997(1)
------ ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Service cost for benefits earned during the year............ $ 2 $ 2 $ 2
Interest cost on benefit obligation......................... 19 21 22
Amortization of unrecognized prior service cost............. (6) (6) (6)
Curtailment................................................. (1) -- --
Special Retirement Program.................................. 1 -- --
------ ------ ------
Total............................................. $ 15 $ 17 $ 18
====== ====== ======
Continuing operations....................................... 3 N/A N/A
Discontinued operations..................................... 12 N/A N/A
------ ------ ------
Total............................................. $ 15 $ 17 $ 18
====== ====== ======
</TABLE>
- ---------------
(1) In connection with the spin-off, OMNOVA Solutions Inc. assumed the
postretirement benefit liabilities for its active employees and for former
employees. The components of the cost of postretirement benefits for 1998
and 1997 have not been restated for amounts related to continuing and
discontinued operations as no detailed information was available.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
WEIGHTED AVERAGE ASSUMPTIONS
Discount rate.............................................. 7% 7% 7%
Initial trend rate for health care costs(1)................ 9% 9% 9%
Ultimate trend rate for health care costs.................. 6% 6% 6%
-------- -------- --------
</TABLE>
- ---------------
(1) The initial trend rate for health care costs declines by one percent per
year, to six percent for years after the year 2000.
A one percent increase in the assumed trend rate for health care costs
would have increased the cost of 1999 postretirement health care benefits by
$0.3 million and the accumulated benefit obligation by $2.6 million as of
November 30, 1999.
As of November 30, 1999 and 1998 the status of GenCorp's postretirement
health care and life insurance benefit plans was:
<TABLE>
<CAPTION>
NOVEMBER 30
---------------------
1999 1998(1)
------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year..................... $309 $314
Service cost.............................................. 2 2
Interest cost............................................. 19 21
Amendments................................................ 1 --
Effect of spin-off of OMNOVA Solutions Inc................ (51) --
Curtailments.............................................. (1) --
Actuarial (gain) loss..................................... (16) 3
Benefits paid............................................. (25) (31)
---- ----
Benefit Obligation at End of Year................. $238 $309
==== ====
</TABLE>
31
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
NOVEMBER 30
----------------------
1999 1998
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year.............. $ -- $ --
Actual return on assets................................... -- --
Employer contributions.................................... 25 31
Benefits paid............................................. (25) (31)
----- -----
Fair Value of Plan Assets at End of Year.......... $ -- $ --
===== =====
Funded status............................................... $(238) $(309)
Unrecognized actuarial (gain)/loss........................ (8) 10
Unrecognized prior service cost........................... (41) (50)
----- -----
Net Amount Recognized....................................... $(287) $(349)
----- -----
Benefit payments 8/31 - 11/30............................... 8 N/A
----- -----
Accrued Benefit Cost at End of Year............... $(279) $(349)
===== =====
</TABLE>
- ---------------
(1) In connection with the spin-off, OMNOVA Solutions Inc. assumed the
postretirement benefit liabilities for its active employees and for former
employees. The accumulated benefit obligation and the components of the
accrued liability for 1998 have not been restated for amounts related to
continuing and discontinued operations as no detailed information was
available.
The accrued net accrued liability was included in:
<TABLE>
<CAPTION>
NOVEMBER 30
----------------------
1999 1998
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Amounts recognized in the consolidated balance sheet:
Other current liabilities................................... $ 28 $ 54
Long term liability......................................... 251 295
----- -----
Net Amount Recognized............................. $ 279 $ 349
----- -----
</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 $9 million in 1999, $9 million in 1998, and $8 million in 1997.
The Company funds its contribution to the salaried plan with either GenCorp
common stock or cash.
NOTE L -- OTHER ASSETS
<TABLE>
<CAPTION>
NOVEMBER 30
----------------------
1999 1998
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Expected recoveries from U.S. Government and third parties
for environmental remediation (excluding $12 million and
$16 million classified as current)........................ $211 $149
Deferred taxes.............................................. 149 153
Prepaid pension............................................. 113 127
Goodwill.................................................... 8 11
Other....................................................... 51 54
---- ----
Other Assets...................................... $532 $494
==== ====
</TABLE>
32
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE M -- ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES
<TABLE>
<CAPTION>
NOVEMBER 30
----------------------
1999 1998
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
ACCRUED EXPENSES
Payable for goods and services.............................. $177 $157
Accrued compensation and employee benefits.................. 32 33
Environmental reserves...................................... 22 33
Other....................................................... 43 20
---- ----
Accrued Expenses.................................. $274 $243
==== ====
OTHER LONG-TERM LIABILITIES
Environmental reserves...................................... $346 $246
Other....................................................... 33 36
---- ----
Other Long-Term Liabilities....................... $379 $282
==== ====
</TABLE>
NOTE N -- LONG-TERM DEBT AND CREDIT LINES
<TABLE>
<CAPTION>
NOVEMBER 30
----------------------
1999 1998
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
LONG-TERM DEBT
Revolving loans............................................. $149 $355
Other....................................................... -- 4
---- ----
Total debt.................................................. 149 359
Less amounts due within one year............................ -- (3)
---- ----
Long-Term Debt.................................... $149 $356
==== ====
</TABLE>
On September 30, 1998, the Company entered into a new $75 million revolving
credit facility for the purchase of certain assets of Sequa Chemicals, the
specialty chemicals unit of Sequa Corporation. On May 10, 1999, the Company paid
down and cancelled the $75 million revolving credit facility.
In connection with the spin-off, the Company executed a new five year, $250
million Revolving Credit Facility Agreement (New Facility) which expires in 2004
and is secured by stock of certain subsidiaries of the Company. Under the terms
of the New Facility, the Company pays a commitment fee for unused available
funds. Interest rates are variable, primarily based on LIBOR, and the New
Facility includes various covenants. As of November 30, 1999, $149 million was
outstanding under the New Facility. The Company must comply with certain
restrictive covenants which require the Company to meet specified financial
ratios and restrict dividend payments, capital expenditures, incurrence of
additional debt and other transactions. The Company was in compliance with such
covenants as of November 30, 1999.
At November 30, 1999, outstanding letters of credit totaled $20 million.
Prior to GenCorp's distribution of OMNOVA Solutions Inc. shares, OMNOVA
Solutions Inc. paid a cash dividend of $200 million to GenCorp, which was used
to repay debt under the previous revolver.
Cash paid during the year for interest was $20 million in 1999, $13 million
in 1998 and $17 million in 1997.
NOTE O -- 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
33
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
record on February 27, 1987. Rights outstanding at November 30, 1999 and 1998
were 41,862,301 and 41,535,524, 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 are 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 is 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 30 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 expire on February 18, 2007. Until a Right is exercised,
the holder has no rights as a stockholder of the Company including, without
limitation, the right to vote as a stockholder or to receive dividends.
At November 30, 1999, 575,000 shares of $1 par value Series A Cumulative
Preference Stock were reserved for issuance upon exercise of Preferred Share
Purchase Rights.
NOTE P -- 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, options are exercisable in 25 percent increments at six
months, one year, two years and three years from the date of grant. No stock
appreciation rights have been granted.
Under the terms of the spin-off, stock options granted prior to the
spin-off of OMNOVA Solutions Inc. were adjusted effective October 1, 1999 to
reflect the fair value of the options at the time of the spin-off. In addition,
holders of vested options were generally granted one option for the purchase of
OMNOVA Solutions Inc. shares for each option vested as of October 1, 1999.
Non-vested options held by employees of OMNOVA Solutions Inc. were generally
cancelled and options for the purchase of OMNOVA Solutions Inc. stock were
granted. Continuing GenCorp employees holding non-vested options were generally
granted additional options for the purchase of GenCorp shares, such that the
aggregate intrinsic value of the options on October 1, 1999 equaled the
aggregate intrinsic value of the options immediately prior to the spin-off.
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 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 1999, 1998 and 1997
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 diluted earnings per share would have been reduced by $3 million ($.06 per
share), $3 million ($.06 per share) and $2 million ($.05 per share) for the
years ended November 30, 1999, 1998 and 1997, respectively. 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: risk free interest rates of 5.0
percent for 1999, 4.25 percent for 1998 and 6.0 percent for 1997; dividend yield
of 1.9 percent for 1999, 2.4 percent for 1998 and 3.1 percent for 1997;
volatility factor of the expected market price of the Company's common stock of
34 percent for 1999, 32 percent for 1998 and 31 percent for 1997; and a
weighted-average expected life of the option of 5 years for 1999, 1998 and 1997.
34
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
A summary of the Company's stock option activity, and related information
for the years ended November 30 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- -------------------------- --------------------------
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................ 3,226 $10.05 2,752 $ 8.39 2,440 $ 6.97
Granted.................. 965 $ 9.70 752 $15.72 1,068 $10.59
Exercised................ (371) $ 6.69 (179) $ 8.24 (684) $ 6.86
Forfeited/cancelled...... (520) $12.81 (99) $10.72 (72) $ 6.79
----- ----- -----
Outstanding at end of
year................... 3,300 $10.13 3,226 $10.05 2,752 $ 8.39
----- ----- -----
Exercisable at end of
year................... 2,185 $ 9.44 2,067 $ 8.53 1,530 $ 7.49
----- ----- -----
Weighted-average
grant-date fair value
of options granted
during the year........ $3.12 $4.37 $2.84
</TABLE>
The following table summarizes the range of exercise prices and
weighted-average exercise prices for options outstanding and exercisable at
November 30, 1999 under the Company's stock option plans:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
FISCAL YEAR IN OPTIONS REMAINING OPTIONS
WHICH GRANTS RANGE OF OUTSTANDING WEIGHTED AVERAGE CONTRACTUAL LIFE EXERCISABLE WEIGHTED AVERAGE
WERE ISSUED EXERCISE PRICE (000) EXERCISE PRICE (YRS) (000) EXERCISE PRICE
- --------------------- -------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
1993................. $ 8.44-$8.77 205 $ 8.66 3.9 205 $ 8.66
1994................. $ 6.66-$7.26 275 $ 6.82 4.7 275 $ 6.82
1995................. $ 5.67-$5.94 353 $ 5.91 5.8 353 $ 5.91
1996................. $ 6.53-$8.91 313 $ 7.97 6.8 313 $ 7.97
1997................. $ 9.24-$15.64 750 $10.84 7.4 563 $10.84
1998................. $ 9.76-$16.06 547 $15.80 8.4 273 $15.80
1999................. $ 9.40-$13.59 857 $ 9.84 9.3 203 $ 9.67
----- -----
Total........... 3,300 $10.13 7.4 2,185 $ 9.44
===== =====
</TABLE>
NOTE Q -- COMMON STOCK
At November 30, 1999, 10,500,262 shares of $.10 par value common stock were
reserved for future issuance for discretionary payments of the Company's portion
of Retirement Savings Plan contributions, exercise of options and payments of
awards under stock-based compensation plans.
NOTE R -- LEASE COMMITMENTS
The Company and its subsidiaries lease certain facilities, machinery and
equipment and office buildings under long-term, noncancelable operating 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 $4 million in 1999, $5 million in 1998, and $6 million in 1997.
Future minimum commitments at November 30, 1999 for existing operating leases
were $3 million, with annual amounts declining to $2 million in 2001, to $1
million in 2002 and 2003. The Company's obligations for leases after 2003 are
not material.
35
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE S -- CONTINGENCIES
ENVIRONMENTAL MATTERS
Sacramento, California -- In 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 Decree compliance. The State of California expanded
surveillance of perchlorate and nitrosodimethylamine (NDMA) under the RI/FS
because these chemicals were detected in public water supply wells near
Aerojet's property at previously undetectable levels using new testing
protocols.
Aerojet has substantially completed its efforts under the Decree to
determine the nature and extent of contamination at the facility. Preliminarily,
Aerojet has identified the technologies that will likely be used to remediate
the site and estimated costs using generic remedial costs from databases of
Superfund remediation costs. Over the next several years, Aerojet will conduct
feasibility studies to refine technical approaches and costs to remediate the
site. The remediation costs are principally for design, construction,
enhancement and operation of groundwater and soil treatment facilities, ongoing
project management and regulatory oversight, and are expected to be incurred
over a period of approximately 15 years. Aerojet is also addressing groundwater
contamination off of its facility through the development of an Operable Unit
Feasibility Study. This Study was completed and submitted as a draft to the
governmental oversight agencies in December 1999. The Study enumerates various
remedial alternatives by which offsite groundwater can be addressed. It will be
subject to both governmental agency and public review and comment before being
approved for implementation.
San Gabriel Valley Basin, California -- Aerojet, through its Azusa
facility, has been named by the United States 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 requiring site specific investigation, possible cleanup,
issuance of a Record of Decision (ROD) regarding regional groundwater
remediation and issuance to Aerojet and 18 other PRPs Special Notice letters
requiring groundwater remediation.
All of the Special Notice PRPs are alleged to have contributed volatile
organic compounds (VOCs). Aerojet's investigation demonstrated that the
groundwater contamination by VOCs is principally upgradient of Aerojet's
property and that lower 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 VOC groundwater contamination
at the BPOU of the 19 PRPs identified by the EPA. Aerojet contests the EPA's
position regarding the source of contamination and the number of responsible
PRPs. Aerojet is participating in a Steering Committee comprised of 14 of the
PRPs.
Soon after the EPA issued Special Notice letters in May 1997, as a result
of the development of more sensitive measuring methods, perchlorate was detected
in wells in the BPOU. More recently, NDMA was also detected using newly
developed measuring methods. Suspected sources of perchlorate include Aerojet's
solid rocket development and manufacturing activities in the 1940s and 1950s,
and military ordnance produced by a facility adjacent to the Aerojet facilities
in the 1940s. NDMA is a suspected byproduct of liquid rocket fuel activities by
Aerojet in the same time period. In addition, new regulatory standards for a
chemical known as 1.4 dioxane requires additional treatment. Aerojet may be a
minor contributor of this chemical. Aerojet is in the process of developing new,
low cost technologies for the treatment of perchlorate, NDMA and 1.4 dioxane.
On September 10, 1999, eleven of the nineteen Special Notice PRP's,
including Aerojet (the Offering Parties), submitted a Good Faith Offer to the
EPA to implement an EPA-approved remedy, which was accepted by the agency as a
basis for negotiating an Administrative Consent Order. The remedy, as currently
proposed, would employ low cost treatment technologies being developed by
Aerojet to treat perchlorate, NDMA, and 1.4 dioxane, as well as traditional
treatment for VOCs.
36
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Since submitting the Good Faith Offer, Aerojet has continued negotiations
with the other Offering Parties regarding final cost allocations, and the
Offering Parties have continued negotiations with the court-appointed
Watermaster and local water purveyors regarding an agreement that would provide
for use of the remediation project's treated water. A discussion of Aerojet's
efforts to estimate these costs is contained under the heading Aerojet's Reserve
and Recovery Balances.
On November 23, 1999, the Regional Board issued an order to Aerojet and
other PRPs to conduct additional environmental investigations at their
facilities. Aerojet is seeking review of this order while proceeding to comply.
Muskegon, Michigan -- In a lawsuit filed by the 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 of an earlier chemical plant
at the site, who is the other potentially responsible party (PRP). 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 were filed on behalf of the State
of Michigan and the EPA and were granted in December 1997. On June 8, 1998, the
United States Supreme Court issued its opinion. The Court held that a parent
corporation could be directly liable as an operator under CERCLA if it can be
shown that the parent corporation operated the facility. The Supreme Court
vacated the Sixth Circuit's 1997 ruling and remanded the case back to the United
States District Court in Michigan for retrial. Aerojet does not expect that it
will be found liable on remand. Aerojet has been involved in settlement
discussions with the EPA and a proposed consent decree was filed with the
District Court in July 1999. If approved by the District Court, Aerojet and
Cordova will be dismissed.
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. Further, the Michigan
Supreme Court also 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. A settlement agreement with the State of Michigan,
related to the proposed consent decree discussed above, has been finalized and
will be implemented contingent on the EPA consent decree being approved. In
addition, Aerojet settled with one of its two insurers in August 1999 for $4
million.
Aerojet's Reserve and Recovery Balances -- On January 12, 1999, having
finally received all necessary Government approvals, Aerojet and the United
States Government implemented, with effect retroactive to December 1, 1998, the
October 1997 Agreement in Principle resolving certain prior environmental and
facility disagreements between the parties. Under this Agreement, a "global"
settlement covering all environmental contamination (including perchlorate) at
the Sacramento and Azusa sites was achieved; the Government/Aerojet
environmental cost sharing ratio was raised to 88 percent/12 percent from the
previous 65 percent/35 percent (with both Aerojet and the Government retaining
the right to opt out of this sharing ratio for Azusa only, after at least $40
million in allowable environmental remediation costs at Azusa have been
recognized); the cost allocation base for these costs was expanded to include
all of Aerojet (in lieu of the prior limitation to the Sacramento business
base); and Aerojet obtained title to all of the remaining Government facilities
on its Sacramento property, together with an advance agreement recognizing the
allowability of certain facility demolition costs.
During the year ended November 30, 1999, Aerojet entered into a settlement
agreement covering certain environmental claims with certain of its insurance
carriers and received settlement proceeds of approximately $92 million. Under
the terms of its agreements with the United States Government, Aerojet is
obliged to credit the Government a portion of the insurance recoveries for past
costs paid by the Government. Pending finalization of an agreement with the
Government, Aerojet has estimated the amount of the credit and recorded a
liability of $33 million for the Government portion of insurance recoveries,
including applicable interest.
37
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
In the fourth quarter of 1999, Aerojet obtained sufficient information to
provide a reasonable basis for estimating the costs to address groundwater
contamination off its Sacramento facility and its probable share of the San
Gabriel Valley BPOU, and recorded those estimates in its reserve and recovery
balances. Estimates regarding the Sacramento Western Groundwater Remediation
were based on the Operable Unit Feasibility Study previous references and
Aerojet's opinion as to which remediation alternative proposed by the study will
be approved by the EPA and the State. Estimates regarding the San Gabriel Valley
BPOU remediation were based on the Good Faith Offer/Administrative Consent Order
and Watermaster/purveyor negotiations referenced previously. Not resolved at
this time are whether Aerojet will have any additional liability for its
possible share of water purveyor past cost claims, as well as the EPA's past and
future costs. In regard to the matter discussed above, management believes, on
the basis of presently available information, that resolution of this matter
would not materially affect liquidity, capital resources, or the consolidated
financial condition of the Company.
As of November 30, 1999, Aerojet had total reserves of $330 million for
costs to remediate the above sites and has recognized $223 million for probable
future recoveries. These estimates are subject to change as work progresses,
additional experience is gained and environmental standards are revised. In
addition, 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 $20 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 $37 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 five
to ten years.
Other Sites -- The Company is also currently involved, together with other
companies, in 27 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, and in many
instances, has been less than one percent. The Company has reserves of
approximately $18 million as of November 30, 1999, 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 consolidated financial
condition. 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
Olin Corporation -- In August 1991, Olin Corporation (Olin) advised GenCorp
that it 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. 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. At its request, in 1998, the Court received an additional briefing
regarding the impact of the recent Best Foods Supreme Court decision which the
Company believes definitively addresses many issues in this case
38
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
in its favor. Another hearing relative to liability and allocation was held on
January 11, 1999. The Court rendered its interim decision on liability on August
16, 1999, finding GenCorp 30 percent liable for remediation costs at "Big D
Campground" landfill and 40 percent liable for remediation costs attributable to
the Olin TDI facility with regard to the Fieldsbrook site. Subsequent trial
phases will address damages, likely to be scheduled for late 2000. GenCorp has
filed a motion for reconsideration on issues of liability, or alternatively,
permission to seek an interim appeal to the Sixth Circuit.
The Company continues to vigorously litigate 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, 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.
Other Matters -- 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.
COLLECTIVE BARGAINING UNIT AGREEMENTS
Nearly 60 percent of the Company's employees are covered by a variety of
collective bargaining unit agreements. One agreement representing approximately
2 percent of the total workforce expires in fiscal year 2000.
NOTE T -- BUSINESS SEGMENT INFORMATION
The aerospace, defense, and fine chemicals business segment designs,
develops and manufactures propulsion systems and electronic sensor systems for
the Department of Defense and National Aeronautics and Space Administration
(NASA). Its primary businesses are Propulsion, Electronic Systems and Fine
Chemicals (formerly Custom Chemicals).
The Vehicle Sealing business segment, designs and produces extruded rubber
components for vehicle body and window sealing systems for the domestic,
transplant and foreign automotive manufacturers.
Sales in 1999, 1998 and 1997 to the United States Government and its
agencies (principally the Department of Defense) totaled $519 million, $596
million and $516 million, respectively, and were generated almost entirely by
the aerospace, defense and fine chemicals business segment. Sales to General
Motors, primarily by the Vehicle Sealing business segment, were $250 million in
1999, $172 million in 1998 and $174 million in 1997. Sales to Ford Motor
Company, primarily by the Vehicle Sealing business segment, were $120 million in
1999, $111 million in 1998 and $103 million in 1997. Intersegment sales were not
material.
Segment operating profit represents net sales from continuing operations
less applicable costs, expenses and provisions for restructuring and unusual
items relating to operations. Segment operating profit excludes corporate income
and expenses, provisions for nonoperating unusual items, interest expense and
income taxes.
In 1999, the Company recognized unusual income of $21 million related to
the Company's reportable segments. The unusual income included a gain of $59
million on settlements covering certain environmental claims with certain of the
Company's insurance carriers, offset by a provision of $33 million for
environmental remediation costs associated with the Company's initial estimate
of its probable share, as a Potentially Responsible Party, in the Baldwin Park
Operable Unit; a charge of $4 million related to a pricing dispute with a major
Vehicle Sealing customer; and a charge of $1 million for write-down of certain
Vehicle Sealing assets to net realizable value.
39
<PAGE> 42
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 only to
United States operations.
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
NET SALES -- CONTINUING OPERATIONS
Canada...................................................... $ 103 $ 82 $ 95
Europe...................................................... 90 88 87
United States............................................... 871 869 761
United States export sales.................................. 7 9 10
------ ------ ------
$1,071 $1,048 $ 953
====== ====== ======
OPERATING PROFIT FROM CONTINUING OPERATIONS
Canada...................................................... $ 10 $ 10 $ 19
Europe...................................................... 4 1 (2)
United States............................................... 66 60 67
Unusual items............................................... 21 9 --
------ ------ ------
$ 101 $ 80 $ 84
====== ====== ======
IDENTIFIABLE ASSETS
Canada...................................................... $ 47 $ 40 $ 40
Europe...................................................... 72 245 87
United States............................................... 948 1,160 1,005
------ ------ ------
1,067 1,445 1,132
Corporate assets............................................ 163 298 287
------ ------ ------
Total Assets...................................... $1,230 $1,743 $1,419
====== ====== ======
</TABLE>
40
<PAGE> 43
GENCORP INC.
BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
1999 1998 1997
------ --------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
NET SALES
Aerospace, defense and fine chemicals....................... $ 615 $ 673 $ 584
Vehicle Sealing............................................. 456 375 369
------ ------ ------
$1,071 $1,048 $ 953
====== ====== ======
INCOME
Aerospace, defense and fine chemicals....................... $ 62 $ 68 $ 55
Vehicle Sealing............................................. 18 3 29
Unusual items............................................... 21 9 --
------ ------ ------
Segment Operating Profit.......................... 101 80 84
Interest expense............................................ (6) (6) (12)
Corporate other income (expense)............................ (5) (6) (8)
Corporate expenses.......................................... (5) (8) (10)
Unusual items............................................... (9) -- --
------ ------ ------
Income Before Income Taxes........................ $ 76 $ 60 $ 54
====== ====== ======
ASSETS
Aerospace, defense and fine chemicals....................... $ 817 $ 647 $ 664
Vehicle Sealing............................................. 250 214 202
Discontinued Operations..................................... -- 584 266
------ ------ ------
Identifiable Assets............................... 1,067 1,445 1,132
Corporate assets............................................ 163 298 287
------ ------ ------
Total Assets...................................... $1,230 $1,743 $1,419
====== ====== ======
CAPITAL EXPENDITURES
Aerospace, defense and fine chemicals....................... $ 79 $ 41 $ 23
Vehicle Sealing............................................. 17 23 19
Corporate................................................... 1 4 3
------ ------ ------
$ 97 $ 68 $ 45
====== ====== ======
DEPRECIATION AND AMORTIZATION
Aerospace, defense and fine chemicals....................... $ 24 $ 24 $ 23
Vehicle Sealing............................................. 19 17 15
Corporate................................................... 1 2 2
------ ------ ------
$ 44 $ 43 $ 40
====== ====== ======
EMPLOYEES
Aerospace, defense and fine chemicals....................... 2,820 3,320 3,390
Vehicle Sealing............................................. 4,600 4,130 3,480
Corporate................................................... 60 190 180
------ ------ ------
7,480 7,640 7,050
====== ====== ======
</TABLE>
41
<PAGE> 44
GENCORP INC.
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------
FEBRUARY 28(3) MAY 31(3) AUGUST 31 NOVEMBER 30
-------------- --------- --------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1999
Net sales.................................... $ 255 $ 305 $ 256 $ 255
----- ----- ----- ------
Segment operating profit..................... $ 22 $ 26 $ 22 $ 31
----- ----- ----- ------
Income before income taxes................... $ 17 $ 26 $ 19 $ 17
----- ----- ----- ------
Income from continuing operations............ $ 9 $ 15 $ 11 $ 11
Income from discontinued operations, net of
tax........................................ 8 18 9 (9)
----- ----- ----- ------
Net Income................................... $ 17 $ 33 $ 20 $ 2
----- ----- ----- ------
- ------------------------------------------------------------------------------------------------------------
Basic earnings per share of common stock(1)
Continuing Operations...................... $0.22 $0.35 $0.27 $ 0.27
Discontinued Operations.................... 0.19 0.43 0.22 (0.21)
----- ----- ----- ------
Total.............................. $0.41 $0.78 $0.49 $ 0.06
----- ----- ----- ------
Diluted earnings per share of common stock(1)
Continuing Operations...................... $0.22 $0.34 $0.27 $ 0.26
Discontinued Operations.................... 0.19 0.43 0.21 (0.20)
----- ----- ----- ------
Total.............................. $0.41 $0.77 $0.48 $ 0.06
----- ----- ----- ------
Common stock price range per share(2)
-- high... $ 14 11/16 $ 13 11/16 $ 14 $ 12 3/8
-- low... $ 10 1/8 $ 9 1/16 $ 10 3/4 $ 9 1/2
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------
FEBRUARY 28(3) MAY 31(3) AUGUST 31(3) NOVEMBER 30(3)
-------------- --------- ------------ --------------
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1998
Net sales................................. $ 218 $ 256 $ 284 $ 290
----- ----- ----- ------
Segment operating profit.................. $ 15 $ 29 $ 13 $ 23
----- ----- ----- ------
Income before income taxes................ $ 9 $ 23 $ 8 $ 20
----- ----- ----- ------
Income from continuing operations......... $ 4 $ 15 $ 5 $ 14
Income from discontinued operations, net
of tax.................................. 9 7 12 18
----- ----- ----- ------
Net Income................................ $ 13 $ 22 $ 17 $ 32
----- ----- ----- ------
- ------------------------------------------------------------------------------------------------------------
Basic earnings per share of common
stock(1)
Continuing Operations................... $0.10 $0.35 $0.12 $ 0.34
Discontinued Operations................. 0.21 0.16 0.30 0.44
----- ----- ----- ------
Total........................... $0.31 $0.51 $0.42 $ 0.78
----- ----- ----- ------
Diluted earnings per share of common
stock(1)
Continuing Operations................... $0.10 $0.35 $0.11 $ 0.34
Discontinued Operations................. 0.21 0.16 0.30 0.43
----- ----- ----- ------
Total........................... $0.31 $0.51 $0.41 $ 0.77
----- ----- ----- ------
Common stock price range per share(2)
-- high... $ 14 7/16 $ 16 7/16 $ 15 15/16 $ 13 1/4
-- low... $ 11 13/16 $ 14 1/4 $ 10 5/16 $ 8 11/16
- ------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE> 45
(1) The sum of the quarterly earnings per share amounts may not equal the annual
amount due to changes in the number of shares outstanding during the year.
(2) Common stock prices were adjusted to reflect the spin-off of OMNOVA
Solutions Inc. which resulted in a 52.8 percent adjustment to the stock
price on October 1, 1999.
(3) Amounts will not agree to amounts formerly reported on Form 10-Q due to
restatement which reflects discontinued operations.
CAPITAL STOCK
The Company's common stock is listed on the New York and Chicago Stock
Exchanges. At November 30, 1999, there were approximately 11,900 holders of
record of the Company's common stock. During the first three quarters of 1999,
the Company paid quarterly cash dividends on its common stock of $0.15 per
share. During the fourth quarter of 1999, following the spin-off of Omnova
Solutions, Inc., the Company paid cash dividends on its common stock of $0.03
per share. During 1998 and 1997, the Company paid quarterly cash dividends on
its common stock of $0.15 per share.
43
<PAGE> 46
GENCORP INC.
SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------- ------- ------- ------ -------
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
NET SALES
Aerospace, defense and fine chemicals.......... $ 615 $ 673 $ 584 $ 494 $ 520
Vehicle Sealing................................ 456 375 369 448 662
------ ------ ------ ----- ------
$1,071 $1,048 $ 953 $ 942 $1,182
====== ====== ====== ===== ======
SEGMENT OPERATING PROFIT
Aerospace, defense and fine chemicals.......... $ 62 $ 68 $ 55 $ 42 $ 30
Vehicle Sealing................................ 18 3 29 19 25
Unusual items.................................. 21 9 -- (9) 4
------ ------ ------ ----- ------
$ 101 $ 80 $ 84 $ 52 $ 59
====== ====== ====== ===== ======
OPERATIONS
Income from continuing operations.............. $ 46 $ 38 $ 99 $ 1 $ 11
Income from discontinued operations............ 26 46 38 41 27
------ ------ ------ ----- ------
Net Income........................... $ 72 $ 84 $ 137 $ 42 $ 38
====== ====== ====== ===== ======
BASIC EARNINGS PER SHARE OF COMMON STOCK
Income from operations......................... $ 1.11 $ 0.91 $ 2.68 $0.02 $ 0.38
Income from discontinued operations............ 0.63 1.11 1.03 1.23 0.79
------ ------ ------ ----- ------
Total................................ $ 1.74 $ 2.02 $ 3.71 $1.25 $ 1.17
DILUTED EARNINGS PER SHARE OF COMMON STOCK
Income from operations......................... $ 1.09 $ 0.90 $ 2.48 $0.15 $ 0.32
Income from discontinued operations............ 0.63 1.09 0.92 1.01 0.78
------ ------ ------ ----- ------
Total................................ $ 1.72 $ 1.99 $ 3.40 $1.16 $ 1.10
Cash dividends paid............................ $ .48 $ .60 $ .60 $ .60 $ .60
GENERAL
Capital expenditures........................... $ 97 $ 68 $ 45 $ 31 $ 50
Depreciation and amortization.................. 44 43 40 44 56
Total assets................................... 1,230 1,743 1,419 1,330 1,458
Long-term debt................................. 149 356 84 263 383
</TABLE>
44
<PAGE> 47
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 29, 2000 Annual Meeting of Shareholders is
set forth on pages 2 and 3 of the Company's 2000 Proxy Statement and is
incorporated herein by reference. Information with respect to directors of the
Company whose terms extend beyond the March 29, 2000 Annual Meeting of
Shareholders is set forth on pages 3 and 4 of the Company's 2000 Proxy Statement
and is incorporated herein by reference.
Also, see Executive Officers of the Registrant on pages 9 through 11 of
this report.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is set forth on pages 8
through 22 of the Company's 2000 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 4 and 5 of the Company's 2000 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 16 and 17 of the Company's 2000 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
The Company filed a Report on Form 8-K on October 14, 1999 incorporating
its press release dated October 4, 1999 regarding the completion of the spin-off
of its performance chemicals and decorative & building products businesses.
Incorporated by reference into the Form 8-K from the Company's special proxy
statement dated July 2, 1999 and Form 10-Q for the quarter ended August 31, 1999
were all pro forma financial statements of GenCorp required pursuant to Article
11 of Regulation S-X.
(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.
45
<PAGE> 48
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, 2000
By /s/ W. R. PHILLIPS
---------------------------------------------
W. R. Phillips
Senior Vice President, Law; General
Counsel and Secretary
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/ R. A. WOLFE Chairman, Chief Executive Officer February 18, 2000
- ------------------------------------------------ and President
R. A. Wolfe
/s/ T. L. HALL Senior Vice President and Chief February 18, 2000
- ------------------------------------------------ Financial Officer; Treasurer
T. L. Hall (principal financial officer and
principal accounting officer)
* Director February 18, 2000
- ------------------------------------------------
J. G. Cooper
* Director February 18, 2000
- ------------------------------------------------
I. Gutin
* Director February 18, 2000
- ------------------------------------------------
W. K. Hall
* Director February 18, 2000
- ------------------------------------------------
R. K. Jaedicke
* Director February 18, 2000
- ------------------------------------------------
J. M. Osterhoff
* Director February 18, 2000
- ------------------------------------------------
S. E. Widnall
*Signed by the undersigned as attorney-in-fact
and agent for the Directors indicated.
/s/ W. R. PHILLIPS February 18, 2000
- ------------------------------------------------
W. R. Phillips
</TABLE>
46
<PAGE> 49
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, 1999
GENCORP INC.
SACRAMENTO, CALIFORNIA 95853-7012
<PAGE> 50
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:
Report of Ernst & Young LLP, Independent Auditors......... 18
Consolidated Statements of Income for the years ended
November 30, 1999, 1998 and 1997....................... 19
Consolidated Balance Sheets as of November 30, 1999 and
1998................................................... 20
Consolidated Statements of Cash Flows for the years ended
November 30, 1999, 1998 and 1997....................... 21
Consolidated Statements of Shareholders' Equity for the
years ended November 30, 1999, 1998 and 1997........... 22
Notes to Consolidated Financial Statements.................. 23-41
</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> 51
CONSENT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
GenCorp Inc.
We consent to the incorporation by reference in GenCorp Inc.'s Registration
Statements No. 333-91783, 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 12, 2000, with
respect to the consolidated financial statements of GenCorp Inc. included in the
Annual Report (Form 10-K) for the year ended November 30, 1999.
Ernst & Young LLP
Sacramento, California
February 15, 2000
GC-2
<PAGE> 52
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)
Credit Agreement dated September 30, 1999 by and among A
GenCorp Inc. as Borrower, Bank of America, N.A., as Agent
and as Lender, and certain other Lenders. (123 pages)
10. MATERIAL CONTRACTS
Distribution Agreement dated September 30, 1999 between B
GenCorp Inc. and OMNOVA Solutions Inc. ("OMNOVA"). (30
pages)
Tax Matters Agreement dated September 30, 1999 between C
GenCorp Inc. and OMNOVA. (23 pages)
Alternative Dispute Resolution Agreement dated September 30, D
1999 between GenCorp Inc. and OMNOVA. (10 pages)
Agreement on Employee Matters dated September 30, 1999 E
between GenCorp Inc. and OMNOVA. (31 pages)
Services and Support Agreement between GenCorp Inc. and F
OMNOVA. (11 pages)
10.(iii)(A) MANAGEMENT CONTRACTS, COMPENSATORY PLANS OR
ARRANGEMENTS
An Employment Agreement dated July 28, 1997 between the
Company and Robert A. Wolfe was filed as Exhibit A to the
Company's Annual Report on Form 10-K for the fiscal year
ended November 30, 1997 (File No. 1-1520), and is
incorporated herein by reference. (4 pages)
</TABLE>
i
<PAGE> 53
<TABLE>
<CAPTION>
TABLE EXHIBIT EXHIBIT
ITEM NO. DESCRIPTION LETTER
- -------- ----------- -------
<C> <S> <C>
Employment Agreement dated May 6, 1999 between the Company
and Terry L. Hall was filed as Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended August
31, 1999 (File No. 1-1520) and is incorporated herein by
reference. (4 pages)
Severance Agreement dated as of October 1, 1999 between the G
Company and Robert A. Wolfe. (22 pages)
Form of Severance Agreement granted to certain executive
officers of the Company to provide for payment of an amount
equal to annual base salary and highest average annual
incentive compensation awarded during three most recent
previous fiscal years or, if greater, target award for the
fiscal year in question, multiplied by a factor of two or
three, as the case may be, if their employment should
terminate for any reason other than death, disability,
willful misconduct or retirement within three years after a
change in control, as such term is defined in such agreement
was filed as Exhibit D to the Company's Annual Report on
Form 10-K for the fiscal year ended November 30, 1997 (File
No. 1-1520), and is incorporated herein by reference. (22
pages)
GenCorp Inc. 1999 Equity and Performance Incentive Plan. (16 H
pages)
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, 1997 (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, 1997 (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. Deferred Compensation Plan for Nonemployee
Directors effective January 1, 1992 was filed as Exhibit A
to the Company's Annual Report on Form 10-K for the fiscal
year ended November 30, 1991 (File No. 1-1520), and is
incorporated herein by reference. (18 pages)
</TABLE>
ii
<PAGE> 54
<TABLE>
<CAPTION>
TABLE EXHIBIT EXHIBIT
ITEM NO. DESCRIPTION LETTER
- -------- ----------- -------
<C> <S> <C>
GenCorp Inc. Long-Term Incentive Program effective January
27, 1993 and as amended March 31, 1993 and May 20, 1996 was
filed as Exhibit D to the Company's Annual Report on Form
10-K for the fiscal year ended November 30, 1997 (File No.
1-1520), and is incorporated herein by reference. (22 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)
1999 GenCorp Key Employee Retention Plan providing for
payment of up to two annual cash retention payments to
Eligible Employees who satisfactorily continue their
employment with GenCorp, attain specified performance
objectives (including the spin-off of the GenCorp
Performance Chemicals and Decorative and Building Products
Divisions), and meet all plan provisions was filed as
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended February 28, 1999 (File No. 1-1520),
and is incorporated herein by reference. (11 pages)
Form of Key Employee Retention Letter Agreement. (3 pages) I
1999 GenCorp Key Employee Retention Plan. (18 pages) J
Form of Relocation Agreement between the Company and certain K
employees. (2 pages)
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 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended February 28, 1998 (File No. 1-1520), and is
incorporated herein by reference. (4 pages)
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 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended February 28, 1999 (File No. 1-1520), and is
incorporated herein by reference. (4 pages)
Form of Director and Officer Indemnification Agreement. (12 L
pages)
Form of Director Indemnification Agreement. (11 pages) M
Form of Officer Indemnification Agreement. (11 pages) N
GenCorp Inc. Executive Incentive Compensation Program,
amended September 8, 1995 to be effective for the 1996
fiscal year was filed as Exhibit E to the Company's Annual
Report on Form 10-K for the fiscal year ended November 30,
1997 (File No. 1-1520), and is incorporated herein by
reference. (21 pages)
11. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
Information relating to the computation of per share
earnings is set forth in Note F of this report, which
information is incorporated herein by reference.
21. SUBSIDIARIES OF THE REGISTRANT O
Listing of Subsidiaries (1 page)
</TABLE>
iii
<PAGE> 55
<TABLE>
<CAPTION>
TABLE EXHIBIT EXHIBIT
ITEM NO. DESCRIPTION LETTER
- -------- ----------- -------
<C> <S> <C>
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 P
Powers of Attorney executed by J. G. Cooper, I. Gutin, W. K.
Hall, R. K. Jaedicke, J. M. Osterhoff, and S. E. Widnall,
Directors of the Company. (6 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., P.O. Box 537012,
Sacramento, California 95853-7012-- Attention: Secretary,
and payment of $1 per page to help defray the costs of
handling, copying and return postage.
</TABLE>
iv
<PAGE> 1
EXHIBIT A
===============================================================================
CREDIT AGREEMENT
by and among
GENCORP INC.
as Borrower,
BANK OF AMERICA, N.A.,
as Agent and as Lender
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
September 30, 1999
BANC OF AMERICA SECURITIES LLC,
as Sole Lead Arranger and Sole Book Manager
THE BANK OF NEW YORK
and
THE BANK OF NOVA SCOTIA,
as Co-Documentation Agents
and
ABN AMRO BANK, N.V.,
BANK ONE, N.A.
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
and
UNION BANK OF CALIFORNIA
as Co-Agents
==============================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Terms
<S> <C>
1.1. Definitions.......................................................................2
1.2. Rules of Interpretation..........................................................28
ARTICLE II
The Credit Facilities
2.1. Revolving Loans..................................................................30
2.2. Use of Proceeds..................................................................32
2.3. Notes............................................................................32
2.4. Swing Line.......................................................................32
ARTICLE III
Letters of Credit
3.1. Letters of Credit................................................................34
3.2. Reimbursement and Participations.................................................34
ARTICLE IV
Eurodollar Funding, Fees, and Payment Conventions
4.1 Interest Rate Options............................................................38
4.2 Conversions and Elections of Subsequent Interest Periods.........................38
4.3 Payment of Interest..............................................................39
4.4 Prepayments of Eurodollar Rate Loans.............................................39
4.5 Manner of Payment................................................................39
4.6 Fees.............................................................................40
4.7 Pro Rata Payments................................................................40
4.8 Computation of Rates and Fees....................................................41
4.9 Deficiency Advances; Failure to Purchase Participations..........................41
4.10 Intraday Funding.................................................................41
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE V
Security
<S> <C>
5.1. Security.........................................................................43
5.2. Further Assurances...............................................................43
5.3. Information Regarding Collateral.................................................44
ARTICLE VI
Change in Circumstances
6.1. Increased Cost and Reduced Return................................................45
6.2. Limitation on Types of Loans.....................................................46
6.3. Illegality.......................................................................46
6.4. Treatment of Affected Loans......................................................47
6.5. Compensation.....................................................................47
6.6. Taxes............................................................................48
ARTICLE VII
Conditions to Making Loans and Issuing Letters of Credit
7.1. Conditions of Initial Advance....................................................50
7.2. Conditions of Revolving Loans and Letter of Credit...............................53
ARTICLE VIII
Representations and Warranties
8.1. Organization and Authority.......................................................55
8.2. Transaction Documents. .........................................................55
8.3. Solvency.........................................................................56
8.4. Subsidiaries and Stockholders....................................................56
8.5. Ownership Interests..............................................................56
8.6. Financial Condition..............................................................56
8.7. Title to Properties..............................................................57
8.8. Taxes............................................................................57
8.9. Other Agreements.................................................................57
8.10. Litigation.......................................................................57
8.11. Margin Stock.....................................................................58
8.12. Investment Company...............................................................58
8.13. Patents, Etc.....................................................................58
8.14. No Untrue Statement..............................................................58
8.15. No Consents, Etc.................................................................58
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
8.16. Employee Benefit Plans...........................................................59
8.17. No Default.......................................................................60
8.18. Environmental Matters............................................................60
8.19. Employment Matters...............................................................61
8.20. RICO.............................................................................61
8.21. Fine Chemicals Patent............................................................61
8.22. Aerojet Settlement Agreement.....................................................61
8.23. Tax Treatment of Spinoff.........................................................61
8.24. Year 2000 Compliance. ..........................................................61
ARTICLE IX
Affirmative Covenants
9.1. Financial Reports, Etc...........................................................62
9.2. Maintain Properties..............................................................64
9.3. Existence, Qualification, Etc....................................................64
9.4. Regulations and Taxes............................................................64
9.5. Insurance........................................................................64
9.6. True Books.......................................................................64
9.7. Year 2000 Compliance.............................................................65
9.8. Right of Inspection..............................................................65
9.9. Observe all Laws.................................................................65
9.10. Governmental Licenses............................................................65
9.11. Covenants Extending to Other Persons.............................................65
9.12. Officer's Knowledge of Default...................................................65
9.13. Suits or Other Proceedings.......................................................65
9.14. Notice of Environmental Complaint or Condition...................................65
9.15. Environmental Compliance.........................................................66
9.16. Indemnification..................................................................66
9.17. Further Assurances...............................................................66
9.18. Employee Benefit Plans...........................................................67
9.19. Continued Operations.............................................................68
9.20. New Subsidiaries.................................................................68
ARTICLE X
Negative Covenants
10.1. Financial Covenants..............................................................71
(a) Consolidated Net Worth......................................................71
(b) Consolidated Leverage Ratio.................................................71
(c) Consolidated Fixed Charge Coverage Ratio....................................71
10.2. Acquisitions.....................................................................72
10.3. Liens............................................................................72
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
10.4. Indebtedness.....................................................................73
10.5. Transfer of Assets...............................................................74
10.6. Investments......................................................................75
10.7. Merger or Consolidation..........................................................75
10.8. Restricted Payments..............................................................75
10.9. Transactions with Affiliates.....................................................76
10.10. Compliance with ERISA, the Code and Foreign Benefit Laws.........................76
10.11. Fiscal Year......................................................................77
10.12. Dissolution, etc.................................................................77
10.13. Limitations on Sales and Leasebacks..............................................77
10.14. Change in Control................................................................77
10.15. Rate Hedging Obligations.........................................................77
10.16. Negative Pledge Clauses..........................................................77
10.17. Prepayments, Etc. of Indebtedness................................................77
10.18. Aerojet Government Contracting Authority.........................................78
10.19. Amendments to Line of Business Transfer Documents and Spinoff
Documents........................................................................78
ARTICLE XI
Events of Default and Acceleration
11.1. Events of Default................................................................79
11.2. Agent to Act.....................................................................82
11.3. Cumulative Rights................................................................82
11.4. No Waiver........................................................................82
11.5. Allocation of Proceeds...........................................................83
ARTICLE XII
The Agent
12.1. Appointment, Powers, and Immunities..............................................84
12.2. Reliance by Agent................................................................84
12.3. Defaults.........................................................................85
12.4. Rights as Lender.................................................................85
12.5. Indemnification..................................................................85
12.6. Non-Reliance on Agent and Other Lenders..........................................86
12.7. Resignation of Agent.............................................................86
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
ARTICLE XIII
Miscellaneous
<S> <C>
13.1. Assignments and Participations...................................................87
13.2. Notices..........................................................................88
13.3. Right of Set-off; Adjustments....................................................90
13.4. Survival.........................................................................90
13.5. Expenses.........................................................................91
13.6. Amendments and Waivers...........................................................91
13.7. Counterparts.....................................................................91
13.8. Termination......................................................................91
13.9. Indemnification; Limitation of Liability.........................................92
13.10. Severability.....................................................................93
13.11. Entire Agreement.................................................................93
13.12. Agreement Controls...............................................................93
13.13. Usury Savings Clause.............................................................93
13.14. Payments.........................................................................94
13.15. Confidentiality..................................................................94
13.16. Special Funding Option...........................................................94
13.17. Governing Law; Waiver of Jury Trial..............................................96
EXHIBIT A Applicable Commitment Percentages.................................A-1
EXHIBIT B Form of Assignment and Acceptance.................................B-1
EXHIBIT C Notice of Appointment (or Revocation) of Authorized
Representative....................................................C-1
EXHIBIT D-1 Form of Borrowing Notice..........................................D-1
EXHIBIT D-2 Form of Borrowing Notice--Swing Line Loans......................D-2-1
EXHIBIT E Form of Interest Rate Selection Notice............................E-1
EXHIBIT F-1 Form of Revolving Note..........................................F-1-1
EXHIBIT F-2 Form of Swing Line Note.........................................F-2-1
EXHIBIT G Form of Opinion of Borrower's Counsel.............................G-1
EXHIBIT H Compliance Certificate............................................H-1
EXHIBIT I Form of Facility Guaranty.........................................I-1
EXHIBIT J Form of Pledge Agreement..........................................J-1
EXHIBIT K Form of LC Account Agreement......................................K-1
Schedule 1.1 Existing Letters of Credit........................................S-1
Schedule 5.3 Information Regarding Collateral..................................S-2
Schedule 8.4 Subsidiaries and Investments in Other Persons.....................S-3
Schedule 8.6 Indebtedness......................................................S-4
Schedule 8.7 Liens.............................................................S-5
Schedule 8.8 Tax Matters.......................................................S-6
Schedule 8.10 Litigation........................................................S-7
Schedule 8.18 Environmental Matters.............................................S-8
Schedule 8.19 Employment Matters................................................S-9
</TABLE>
v
<PAGE> 7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of September 30, 1999 (the
"Agreement"), is made by and among GENCORP INC., an Ohio corporation having its
principal place of business in Rancho Cordova, California ("GenCorp" or the
"Borrower"), BANK OF AMERICA, N.A., a national banking association organized and
existing under the laws of the United States, in its capacity as a Lender ("Bank
of America"), and each other financial institution executing and delivering a
signature page hereto and each other financial institution which may hereafter
execute and deliver an instrument of assignment with respect to this Agreement
pursuant to SECTION 13.1 (hereinafter such financial institutions may be
referred to individually as a "Lender" or collectively as the "Lenders"), and
BANK OF AMERICA, N.A., a national banking association organized and existing
under the laws of the United States, in its capacity as agent for the Lenders
(in such capacity, and together with any successor agent appointed in accordance
with the terms of SECTION 12.7, the "Agent");
W I T N E S S E T H:
--------------------
WHEREAS, the Borrower has requested that the Lenders make available to
the Borrower a revolving credit facility of up to $250,000,000, the proceeds of
which are to be used to pay off certain existing Indebtedness and for working
capital, capital expenditures, permitted acquisitions and other lawful corporate
purposes and which shall include a letter of credit facility of up to
$25,000,000 for the issuance of standby and commercial letters of credit and a
swing line facility of up to $10,000,000; and
WHEREAS, the Lenders are willing to make such revolving credit and
letter of credit facilities available to the Borrower upon the terms and
conditions set forth herein;
NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as
follows:
<PAGE> 8
ARTICLE I
DEFINITIONS AND TERMS
1.1. DEFINITIONS. For the purposes of this Agreement, in addition to
the definitions set forth above, the following terms shall have the respective
meanings set forth below:
"Acquisition" means the acquisition of (i) a controlling
equity interest in another Person (including the purchase of an option,
warrant or convertible or similar type security to acquire such a
controlling interest at the time it becomes exercisable by the holder
thereof), whether by purchase of such equity interest or upon exercise
of an option or warrant for, or conversion of securities into, such
equity interest, or (ii) assets of another Person which constitute all
or any material part of the assets of such Person or of a line or lines
of business conducted by such Person.
"Advance" means a borrowing under the Revolving Credit
Facility consisting of a Base Rate Loan or a Eurodollar Rate Loan.
"Aerojet" means Aerojet-General Corporation, an Ohio
corporation.
"Aerojet Settlement Agreement" means that certain settlement
agreement by and between Aerojet and the federal government of the
United States, titled Modification No. 1 to the 29 November 1992
Settlement Agreement Between the United States and Aerojet- General
Corporation and effective as of November 30, 1998, pursuant to which
the federal government of the United States has agreed to recognize, as
allowable government contract costs, up to 88% of the environmental
site restoration costs (as defined therein) incurred by Aerojet.
"Affected Loans" and "Affected Type" have the meanings
therefor provided in SECTION 6.4.
"Affiliate" means any Person (other than a Subsidiary or
Employee Benefit Plan) (i) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common
control with the Borrower, (ii) which beneficially owns or holds 10% or
more of any class of the outstanding voting stock (calculated after
giving pro forma effect to the conversion of all issued and outstanding
capital stock convertible into voting stock of the Borrower) of the
Borrower, or (iii) 10% or more of any class of the outstanding voting
stock (or in the case of a Person which is not a corporation, 10% or
more of the equity interest) of which is beneficially owned or held by
the Borrower. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of
voting stock, by contract or otherwise.
"Applicable Commitment Percentage" means, for each Lender at
any time, a fraction, with respect to the Revolving Credit Facility and
the Letter of Credit Facility the numerator
2
<PAGE> 9
of which shall be such Lender's Revolving Credit Commitment and the
denominator of which shall be the Total Revolving Credit Commitment,
which Applicable Commitment Percentage for each Lender as of the
Closing Date is as set forth in EXHIBIT A; PROVIDED that the Applicable
Commitment Percentage of each Lender shall be increased or decreased to
reflect any assignments to or by such Lender effected in accordance
with SECTION 13.1.
"Applicable Lending Office" means, for each Lender and for
each Type of Loan, the "Lending Office" of such Lender (or of an
affiliate of such Lender) designated for such Type of Loan on the
signature pages hereof or such other office of such Lender (or an
affiliate of such Lender) as such Lender may from time to time specify
to the Agent and the Borrower by written notice in accordance with the
terms hereof as the office by which its Loans of such Type are to be
made and maintained.
"Applicable Margin" means that percent per annum set forth
below, which shall be based upon the Consolidated Leverage Ratio for
the Four-Quarter Period most recently ended as specified below:
<TABLE>
<CAPTION>
APPLICABLE MARGIN
-----------------
TIER CONSOLIDATED LEVERAGE RATIO BASE RATE EURODOLLAR RATE
---- --------------------------- --------- ---------------
<S> <C> <C>
I Greater than 1.75 to 1.00 0.125% 1.625%
II Less than or equal to 1.75 to 1.00, 0% 1.375%
but greater than 1.00 to 1.00
III Less than or equal to 1.00 to 1.00, 0% 1.125%
but greater than 0.50 to 1.00
IV Less than or equal to 0.50 to 1.00 0% 0.875%
</TABLE>
The Applicable Margin shall be established as of the last day of each
fiscal quarter of the Borrower (each, a "Determination Date"). Any
change in the Applicable Margin following each Determination Date shall
be determined based upon the computations set forth in the certificate
furnished to the Agent pursuant to SECTION 9.1(a)(ii) and SECTION
9.1(b)(ii), subject to review and approval of such computations by the
Agent, and shall be effective commencing on the fifth Business Day
following the date such certificate is received until the fifth
Business Day following the date on which a new certificate is delivered
or is required to be delivered, whichever shall first occur; PROVIDED
HOWEVER, if the Borrower shall fail to deliver any such certificate
within the time period required by SECTION 9.1, then the Applicable
Margin shall be Tier I for Base Rate Loans and Tier I for Eurodollar
Rate Loans from the date such certificate was due until the appropriate
certificate is so delivered. Subject to the proviso in the preceding
sentence, from the Closing Date to the Determination Date as to which
the Borrower has delivered the certificate described above
demonstrating the Borrower's Consolidated Leverage Ratio for two
Complete Fiscal Quarters after the Spinoff (the "Fixed Margin Period"),
the Applicable Margin shall be either Tier I or Tier II for Base Rate
Loans and either Tier I or Tier II for Eurodollar Rate Loans, in each
case
3
<PAGE> 10
determined in accordance with the compliance certificate most recently
delivered to the Agent pursuant to SECTION 7.1(a)(x), SECTION
9.1(a)(ii) or SECTION 9.1(b)(ii).
"Applicable Unused Fee" means that percent per annum set forth
below, which shall be based upon the Consolidated Leverage Ratio for
the Four-Quarter Period most recently ended as specified below:
<TABLE>
<CAPTION>
Applicable
Tier Consolidated Leverage Ratio Unused Fee
---- --------------------------- ----------
<S> <C>
I Greater than 1.75 to 1.00 0.40%
II Less than or equal to 1.75 to 1.00, 0.35%
but greater than 1.00 to 1.00
III Less than or equal to 1.00 to 1.00, 0.30%
but greater than 0.50 to 1.00
IV Less than or equal to 0.50 to 1.00 0.25%
</TABLE>
The Applicable Unused Fee shall be established at each Determination
Date. Any change in the Applicable Unused Fee following each
Determination Date shall be determined based upon the computations set
forth in the certificate furnished to the Agent pursuant to SECTION
9.1(a)(ii) and SECTION 9.1(b)(ii), subject to review and approval of
such computations by the Agent and shall be effective commencing on the
fifth Business Day following the date such certificate is received
until the fifth Business Day following the date on which a new
certificate is delivered or is required to be delivered, whichever
shall first occur; PROVIDED HOWEVER, if the Borrower shall fail to
deliver any such certificate within the time period required by SECTION
9.1, then the Applicable Unused Fee shall be Tier I from the date such
certificate was due until the appropriate certificate is so delivered.
Subject to the proviso in the preceding sentence, during the Fixed
Margin Period the Applicable Unused Fee shall be either Tier I or Tier
II, in each case determined in accordance with the compliance
certificate most recently delivered to the Agent pursuant to SECTION
7.1(a)(x), SECTION 9.1(a)(ii) or SECTION 9.1(b)(ii).
"Applications and Agreements for Letters of Credit" means,
collectively, the Applications and Agreements for Letters of Credit, or
similar documentation, executed by the Borrower from time to time and
delivered to the Issuing Bank in connection with the issuance of
Letters of Credit.
"Assignment and Acceptance" shall mean an Assignment and
Acceptance in the form of EXHIBIT B (with blanks appropriately filled
in) delivered to the Agent in connection with an assignment of a
Lender's interest under this Agreement pursuant to SECTION 13.1.
"Authorized Representative" means the Chief Financial Officer
of the Borrower, any Responsible Officer, or any other Person expressly
designated by a Responsible Officer or
4
<PAGE> 11
the Board of Directors of the Borrower (or the appropriate committee
thereof) as an Authorized Representative of the Borrower, as set forth
from time to time in a certificate in the form of EXHIBIT C.
"Bank of America" means Bank of America, N.A.
"BAS" means Banc of America Securities LLC and its successors.
"Base Rate" means, for any day, the rate per annum equal to
the sum of (a) the higher of (i) the Federal Funds Rate for such day
plus one-half of one percent (0.5%) and (ii) the Prime Rate for such
day plus (b) the Applicable Margin. Any change in the Base Rate due to
a change in the Prime Rate or the Federal Funds Rate shall be effective
on the effective date of such change in the Prime Rate or Federal Funds
Rate.
"Base Rate Loan" means a Loan for which the rate of interest
is determined by reference to the Base Rate.
"Base Rate Refunding Loan" means a Base Rate Loan or Swing
Line Loan made either to (i) satisfy Reimbursement Obligations arising
from a drawing under a Letter of Credit or (ii) pay Bank of America in
respect of Swing Line Outstandings.
"Board" means the Board of Governors of the Federal Reserve
System (or any successor body).
"Borrower's Account" means a demand deposit account number
3750330690 or any successor account with the Agent, which may be
maintained at one or more offices of the Agent or an agent of the
Agent.
"Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance under the Revolving Credit
Facility or a Swing Line Loan, in the forms of EXHIBITS D-1 AND D-2,
respectively.
"Business Day" means, (i) except as expressly provided in
clause (ii), any day which is not a Saturday, Sunday or a day on which
banks in the States of New York, North Carolina or California are
authorized or obligated by law, executive order or governmental decree
to be closed and, (ii) with respect to the selection, funding, interest
rate, payment, and Interest Period of any Eurodollar Rate Loan, any day
which is a Business Day, as described above, and on which the relevant
international financial markets are open for the transaction of
business contemplated by this Agreement in London, England, New York,
New York, Charlotte, North Carolina and Los Angeles, California.
"Capital Expenditures" means, with respect to the Borrower and
its Subsidiaries, for any period the SUM of (without duplication) (i)
all expenditures (whether paid in cash or accrued as liabilities) by
the Borrower or any Subsidiary during such period for items that would
be classified as "property, plant or equipment" or comparable items on
the
5
<PAGE> 12
consolidated balance sheet of the Borrower and its Subsidiaries,
including without limitation all transactional costs incurred in
connection with such expenditures provided the same have been
capitalized, excluding, however, the amount of any Capital Expenditures
paid for with proceeds of casualty insurance as evidenced in writing
and submitted to the Agent together with any compliance certificate
delivered pursuant to SECTION 9.1(a) or (b), (ii) all Environmental
Liabilities, and all additions to reserves for Environmental
Liabilities, for such period that are required to be capitalized on the
consolidated financial statements of the Borrower, and (iii) with
respect to any Capital Lease entered into by the Borrower or its
Subsidiaries during such period, the present value of the lease
payments due under such Capital Lease over the term of such Capital
Lease applying a discount rate equal to the interest rate provided in
such lease (or in the absence of a stated interest rate, that rate used
in the preparation of the financial statements described in SECTION
9.1(a)), all the foregoing in accordance with GAAP applied on a
Consistent Basis.
"Capital Leases" means all leases which have been or should be
capitalized in accordance with GAAP as in effect from time to time
including Statement No. 13 of the Financial Accounting Standards Board
and any successor thereof.
"Change of Control" means, at any time:
(i) any "person" or "group" (each as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act) either (A) becomes
the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act ), directly or indirectly, of Voting Securities
of the Borrower (or securities convertible into or
exchangeable for such Voting Securities) representing thirty
percent (30%) or more of the combined voting power of all
Voting Securities of the Borrower (on a fully diluted basis)
or (B) otherwise has the ability, directly or indirectly, to
elect a majority of the board of directors of the Borrower; or
(ii) during any period of up to 24 consecutive
months, commencing on the Closing Date, individuals who at the
beginning of such 24-month period were directors of the
Borrower shall cease for any reason to constitute a majority
of the board of directors of the Borrower, unless the
nomination for election by the Borrower's stockholders of each
new director of the Borrower was approved by a vote of at
least two-thirds of the directors of the Borrower still in
office who were directors of the Borrower at the beginning of
any such period.
"Closing Date" means the date as of which this Agreement is
executed by the Borrower, the Lenders and the Agent and on which the
conditions set forth in SECTION 7.1 have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
6
<PAGE> 13
"Collateral" means, collectively, all property of the
Borrower, any Subsidiary or any other Person in which the Agent or any
Lender is granted a Lien as security for all or any portion of the
Obligations under any Security Instrument.
"Common Stock" means the common stock, par value $0.10 per
share, of the Borrower.
"Complete Fiscal Quarter" means a full fiscal quarter of the
Borrower including the first and last days of such fiscal quarter.
"Consistent Basis" in reference to the application of GAAP
means the accounting principles observed in the period referred to are
comparable in all material respects to those applied in the preparation
of the audited financial statements of the Borrower (as of the Closing
Date) referred to in SECTION 8.6(a).
"Consolidated Cash Interest Expense" means, with respect to
any period of computation thereof, the gross interest expense of the
Borrower and its Subsidiaries paid in cash, including without
limitation (i) all fees paid during such period and (ii) the portion of
any payments made in connection with Capital Leases allocable to
interest expense, all determined on a consolidated basis in accordance
with GAAP applied on a Consistent Basis.
"Consolidated EBITDA" means, with respect to the Borrower and
its Subsidiaries for any Four-Quarter Period ending on the date of
computation thereof, the SUM of, without duplication, (i) Consolidated
Net Income, (ii) Consolidated Interest Expense, (iii) taxes on income,
(iv) amortization, and (v) depreciation, all determined on a
consolidated basis in accordance with GAAP applied on a Consistent
Basis.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to the Borrower and its Subsidiaries for any Four-Quarter Period ending
on the date of computation thereof, the ratio of (i) Consolidated
EBITDA for such period less (without duplication) Capital Expenditures
for such period, to (ii) Consolidated Fixed Charges for such period.
"Consolidated Fixed Charges" means, with respect to the
Borrower and its Subsidiaries for any Four-Quarter Period ending on the
date of computation thereof, the SUM of, without duplication, (i)
Consolidated Cash Interest Expense and (ii) all dividends and other
distributions (other than distributions in the form of capital stock of
the Borrower) paid during such period (regardless of when declared) on
any shares of capital stock of the Borrower then outstanding, all
determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis.
"Consolidated Interest Expense" means, with respect to any
period of computation thereof, the gross interest expense of the
Borrower and its Subsidiaries, including without limitation (i) the
current amortized portion of debt discounts to the extent included in
gross interest expense, (ii) the current amortized portion of all fees
(including fees payable in respect of any Swap Agreement) payable in
connection with the incurrence of Indebtedness
7
<PAGE> 14
to the extent included in gross interest expense and (iii) the portion
of any payments made in connection with Capital Leases allocable to
interest expense, all determined on a consolidated basis in accordance
with GAAP applied on a Consistent Basis.
"Consolidated Leverage Ratio"means, as of the date of
computation thereof, the ratio of (i) Consolidated Total Funded Debt
(determined as at such date) to (ii) Consolidated EBITDA (for the
Four-Quarter Period ending on (or most recently ended prior to) such
date).
"Consolidated Net Income" means, for any period of computation
thereof, the gross revenues from operations of the Borrower and its
Subsidiaries (including payments received by the Borrower and its
Subsidiaries of (i) interest income, and (ii) dividends and
distributions made in the ordinary course of their businesses by
Persons in which investment is permitted pursuant to this Agreement and
not related to an extraordinary event), less all operating and
non-operating expenses of the Borrower and its Subsidiaries including
taxes on income and all Environmental Liabilities and all additions to
reserves for Environmental Liabilities for such period that are
required to be expensed, all determined on a consolidated basis in
accordance with GAAP applied on a Consistent Basis; but excluding (for
all purposes other than compliance with SECTION 10.1(a) hereof) as
income: (i) net gains on the sale, conversion or other disposition of
capital assets, (ii) net gains on the acquisition, retirement, sale or
other disposition of capital stock and other securities of the Borrower
or its Subsidiaries, (iii) net gains on the collection of proceeds of
life insurance policies, (iv) any write-up of any asset, and (v) any
other net gain or credit of an extraordinary nature as determined in
accordance with GAAP applied on a Consistent Basis; provided, however,
that Consolidated Net Income shall be determined without giving effect
to FASB 133 Adjustments as may be required by GAAP.
"Consolidated Net Worth" means, as of any date on which the
amount thereof is to be determined, Consolidated Shareholders' Equity
minus (without duplication of deductions in respect of items already
deducted in arriving at surplus and retained earnings) all reserves
(other than contingency reserves not allocated to any particular
purpose), including without limitation reserves for depreciation,
depletion, amortization, obsolescence, environmental liabilities,
deferred income taxes, insurance and inventory valuation all as
determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis.
"Consolidated Shareholders' Equity"means, as of any date on
which the amount thereof is to be determined, the sum of the following
in respect of the Borrower and its Subsidiaries (determined on a
consolidated basis and excluding any upward adjustment after the
Closing Date due to revaluation of assets): (i) the amount of issued
and outstanding share capital, plus (ii) the amount of additional
paid-in capital and retained earnings (or, in the case of a deficit,
minus the amount of such deficit), plus (iii) the amount of any foreign
currency translation adjustment (if positive, or, if negative, minus
the amount of such translation adjustment), minus (iv) the amount of
any treasury stock, all as determined in accordance with GAAP applied
on a Consistent Basis.
8
<PAGE> 15
"Consolidated Total Assets" means, as of any date on which the
amount thereof is to be determined, the net book value of all assets of
the Borrower and its Subsidiaries as determined on a consolidated basis
in accordance with GAAP applied on a Consistent Basis.
"Consolidated Total Funded Debt" means all Indebtedness for
Money Borrowed of the Borrower and its Subsidiaries, all determined on
a consolidated basis.
"Contingent Obligation" of any Person means all contingent
liabilities required to be included in the financial statements, or
disclosed in the footnotes thereto, of such Person in accordance with
GAAP applied on a Consistent Basis, including Statement No. 5 of the
Financial Accounting Standards Board, all Rate Hedging Obligations and
any obligation of such Person guaranteeing or in effect guaranteeing
any Indebtedness, dividend or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly,
including obligations of such Person however incurred:
(1) to purchase such Indebtedness or other obligation
or any property or assets constituting security therefor;
(2) to advance or supply funds in any manner (i) for
the purchase or payment of such Indebtedness or other
obligation, or (ii) to maintain a minimum working capital, net
worth or other balance sheet condition or any income statement
condition of the primary obligor;
(3) to grant or convey any Lien on any property or
assets of such Person to secure payment of such Indebtedness
or other obligation;
(4) to lease property or to purchase securities or
other property or services primarily for the purpose of
assuring the owner or holder of such Indebtedness or
obligation of the ability of the primary obligor to make
payment of such Indebtedness or other obligation; or
(5) otherwise to assure the owner of such
Indebtedness or such obligation of the primary obligor against
loss in respect thereof.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to SECTION 4.2 hereof of a Eurodollar Rate Loan
of one Type as a Eurodollar Rate Loan of the same Type from one
Interest Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a
conversion pursuant to SECTION 4.2 of one Type of Loan into another
Type of Loan.
"Cost of Acquisition" means, with respect to any Acquisition,
as at the date of entering into any agreement therefor, the SUM of the
following (without duplication): (i) the value of the capital stock,
warrants or options to acquire capital stock of Borrower or any
Subsidiary to be transferred in connection therewith, (ii) the amount
of any cash and fair
9
<PAGE> 16
market value of other property (excluding property described in clause
(i) and the unpaid principal amount of any debt instrument) given as
consideration, (iii) the amount (determined by using the face amount or
the amount payable at maturity, whichever is greater) of any
Indebtedness incurred, assumed or acquired by the Borrower or any
Subsidiary in connection with such Acquisition, (iv) all additional
purchase price amounts in the form of earnouts and other contingent
obligations that should be recorded on the financial statements of the
Borrower and its Subsidiaries in accordance with GAAP, (v) all amounts
paid in respect of covenants not to compete, consulting agreements that
should be recorded on financial statements of the Borrower and its
Subsidiaries in accordance with GAAP, and other affiliated contracts in
connection with such Acquisition, (vi) the aggregate fair market value
of all other consideration given by the Borrower or any Subsidiary in
connection with such Acquisition, and (vii) out of pocket transaction
costs for the services and expenses of attorneys, accountants and other
consultants incurred in effecting such transaction, and other similar
transaction costs so incurred. For purposes of determining the Cost of
Acquisition for any transaction, (A) the capital stock of the Borrower
shall be valued (I) in the case of capital stock that is then
designated as a national market system security by the National
Association of Securities Dealers, Inc. ("NASDAQ") or is listed on a
national securities exchange, the average of the last reported bid and
ask quotations or the last prices reported thereon, and (II) with
respect to any other shares of capital stock, as determined by the
Board of Directors of the Borrower and, if requested by the Agent,
determined to be a reasonable valuation by the independent public
accountants referred to in SECTION 9.1(a), (B) the capital stock of any
Subsidiary shall be valued as determined by the Board of Directors of
such Subsidiary and, if requested by the Agent, determined to be a
reasonable valuation by the independent public accountants referred to
in SECTION 9.1(a), and (C) with respect to any Acquisition accomplished
pursuant to the exercise of options or warrants or the conversion of
securities, the Cost of Acquisition shall include both the cost of
acquiring such option, warrant or convertible security as well as the
cost of exercise or conversion.
"Credit Parties" means, collectively, the Borrower, each
Guarantor and each other Person providing Collateral pursuant to any
Security Instrument.
"Default" means any event or condition which, with the giving
or receipt of notice or lapse of time or both, would constitute an
Event of Default hereunder.
"Default Rate" means (i) with respect to each Eurodollar Rate
Loan, until the end of the Interest Period applicable thereto, a rate
of two percent (2%) above the Eurodollar Rate applicable to such Loan,
and thereafter at a rate of interest per annum which shall be two
percent (2%) above the Base Rate, (ii) with respect to Base Rate Loans,
Swing Line Loans, Reimbursement Obligations, fees, and other amounts
payable in respect of Obligations or (except as otherwise expressly
provided therein) the obligations of any other Credit Party under any
of the other Loan Documents, a rate of interest per annum which shall
be two percent (2%) above the Base Rate and (iii) in any case, the
maximum rate permitted by applicable law, if lower.
10
<PAGE> 17
"Determination Date" has the meaning therefor provided in the
definition of "Applicable Margin".
"Direct Foreign Subsidiary" means a Subsidiary other than a
Domestic Subsidiary a majority of whose Voting Securities, or a
majority of whose Subsidiary Securities, are owned by the Borrower or a
Domestic Subsidiary.
"Distribution Agreement" means the Distribution Agreement
dated as of September 30, 1999 between the Borrower and OMNOVA
providing for the Line of Business Transfer and other related matters.
"Dollars" and the symbol "$" means dollars constituting legal
tender for the payment of public and private debts in the United States
of America.
"Domestic Subsidiary" means any Subsidiary of the Borrower
organized under the laws of the United States of America, any state or
territory thereof or the District of Columbia.
"Eligible Assignee" means (i) a Lender, (ii) an affiliate of a
Lender, and (iii) any other Person approved by the Agent and, unless an
Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with SECTION 13.1, the Borrower,
in each case such approval not to be unreasonably withheld (provided
that the incurrence by the Borrower of additional costs pursuant to
SECTION 6.6 as a result of such assignment shall constitute a
reasonable basis for withholding such consent) or delayed by the
Borrower and such approval to be deemed given by the Borrower (in the
absence of notice to the contrary, effective upon receipt) within two
Business Days after notice of such proposed assignment has been
provided by the assigning Lender to the Borrower; PROVIDED, HOWEVER,
that neither the Borrower nor an affiliate of the Borrower shall
qualify as an Eligible Assignee.
"Eligible Securities" means the following obligations and any
other obligations previously approved in writing by the Agent:
(a) Government Securities;
(b) obligations of any corporation organized under
the laws of any state of the United States of America or under
the laws of any other nation, payable in Dollars in the United
States of America, expressed to mature not later than 92 days
following the date of issuance thereof and rated in an
investment grade rating category by S&P and Moody's;
(c) interest bearing demand or time deposits issued
by any Lender or certificates of deposit maturing within one
year from the date of issuance thereof and issued by a bank or
trust company organized under the laws of the United States or
11
<PAGE> 18
of any state thereof having capital surplus and undivided
profits aggregating at least $400,000,000 and being rated "A-"
or better by S&P or "A" or better by Moody's;
(d) Repurchase Agreements;
(e) Municipal Obligations;
(f) Pre-Refunded Municipal Obligations;
(g) shares of mutual funds which invest in
obligations described in paragraphs (a) through (f) above, the
shares of which mutual funds are at all times rated "AAA" by
S&P;
(h) tax-exempt or taxable adjustable rate preferred
stock issued by a Person having a rating of its long term
unsecured debt of "A" or better by S&P or "A- 2" or better by
Moody's; and
(i) asset-backed remarketable certificates of
participation representing a fractional undivided interest in
the assets of a trust, which certificates are rated at least
"A-1" by S&P and "P-1" by Moody's.
"Employee Benefit Plan" means (i) any employee benefit plan,
including any Pension Plan, within the meaning of Section 3(3) of ERISA
which (A) is maintained for employees of the Borrower or any of its
ERISA Affiliates, or any Subsidiary or is assumed by the Borrower or
any of its ERISA Affiliates, or any Subsidiary in connection with any
Acquisition or (B) has at any time within the previous six (6) years
been maintained by the Borrower for the employees of the Borrower, any
current or former ERISA Affiliate, or any Subsidiary and (ii) any plan,
arrangement, understanding or scheme maintained by the Borrower or any
Subsidiary that provides retirement, deferred compensation, employee or
retiree medical or life insurance, severance benefits or any other
benefit covering any employee or former employee and which is
administered under any Foreign Benefit Law or regulated by any
Governmental Authority other than the United States of America.
"Employee Matters Agreement" means the Agreement on Employee
Matters dated as of September 30, 1999 between the Borrower and OMNOVA
providing for the treatment of employee benefit matters and other
compensation arrangements for former and current employees of the
Borrower and its Subsidiaries.
"Environmental Laws" means, collectively, any (i) federal,
state, local or foreign laws, regulations, rules or ordinances, or (ii)
orders or decrees that have been issued against the Borrower or any
Subsidiary, in either case, regulating or concerning the handling,
generation, transportation, release, disposal and discharge of
materials into the environment and the protection or cleanup of the
environment, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended; the Superfund Amendments and Reauthorization Act of 1986, as
amended; the
12
<PAGE> 19
Resource Conservation and Recovery Act, as amended; the Toxic
Substances Control Act, as amended; the Clean Air Act, as amended; and
the Clean Water Act, as amended; together with all regulations
promulgated thereto.
"Environmental Liabilities" means those expenses and
capitalized costs incurred by the Borrower and its Subsidiaries in
connection with environmental remediation or comparable obligations,
including without limitation all expenses and capitalized costs
incurred by the Borrower or any Subsidiary as a "potentially
responsible party" with respect to any environmental liabilities, all
determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis.
"Environmental Reserves" means, at any time of computation
thereof, the reserves for Environmental Liabilities which have been, or
(if greater) are required to be, recorded on the consolidated balance
sheet of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP applied on a Consistent
Basis.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute and all
rules and regulations promulgated thereunder.
"ERISA Affiliate", as applied to the Borrower, means any
Person or trade or business which is a member of a group which is under
common control with the Borrower, who together with the Borrower, is
treated as a single employer within the meaning of Section 414(b) and
(c) of the Code.
"Eurodollar Rate Loan" means a Loan for which the rate of
interest is determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means the interest rate per annum calculated
according to the following formula:
Eurodollar = Interbank Offered Rate + Applicable
-----------------------------
Rate 1- Reserve Requirement Margin
"Event of Default" means any of the occurrences set forth as
such in SECTION 11.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder.
"Existing Letters of Credit" means those letters of credit set
forth on SCHEDULE 1.1 hereto, each of which letters of credit shall
have, as of the Closing Date, Bank of America or another Lender as the
Issuing Bank and shall become Letters of Credit hereunder.
"Existing Syndicated Credit Agreement" means that certain
Credit Agreement dated as of May 17, 1996, as amended, modified,
restated or amended and restated to the Closing
13
<PAGE> 20
Date, by and among the Borrower, NationsBank, N.A. (predecessor in
interest to Bank of America), as agent and a lender, and the other
lenders from time to time party thereto.
"Existing Syndicated Indebtedness" means the Indebtedness for
Money Borrowed of the Borrower in the aggregate principal amount of
approximately $188,000,000 and in no event to exceed $225,000,000
outstanding as of the Closing Date under the Existing Syndicated Credit
Agreement.
"Facility Guaranty" means each Guaranty Agreement
substantially in the form of EXHIBIT I between one or more Guarantors
and the Agent for the benefit of the Agent and the Lenders, delivered
as of the Closing Date and otherwise pursuant to SECTION 9.20, as the
same may be amended, modified or supplemented.
"Facility Termination Date" means such date as all of the
following shall have occurred: (a) the Borrower shall have permanently
terminated the Revolving Credit Facility and the Swing Line by payment
in full of all Revolving Credit Outstandings and Letter of Credit
Outstandings and Swing Line Outstandings, together with all accrued and
unpaid interest thereon, except for the undrawn portion of Letters of
Credit as have been fully cash collateralized in a manner consistent
with the terms of SECTION 11.1(B), (b) all Swap Agreements shall have
been terminated, expired or cash collateralized, (c) all Revolving
Credit Commitments and Letter of Credit Commitments shall have
terminated or expired, and (d) the Borrower shall have fully, finally
and irrevocably paid and satisfied in full all Obligations (other than
Obligations consisting of continuing indemnities and other Contingent
Obligations of the Borrower or any Guarantor that may be owing to the
Lenders pursuant to the Loan Documents and expressly survive
termination of this Agreement).
"FASB 133 Adjustments" means entries on or adjustments to any
balance sheet or statement of income in respect of derivatives or
hedging instruments as required or permitted by Statement of Financial
Accounting Standards No. 133.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day; PROVIDED
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and
(b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate
charged to the Agent (in its individual capacity) on such day on such
transactions as determined by the Agent.
"Fine Chemicals" means Aerojet Fine Chemicals, L.L.C.
14
<PAGE> 21
"Fiscal Year" means the twelve month fiscal period of the
Borrower and its Subsidiaries commencing on December 1 of each calendar
year and ending on November 30 of the subsequent calendar year.
"Fixed Margin Period" shall have the meaning given to such
term in the definition of "Applicable Margin".
"Foreign Benefit Law" means any applicable statute, law,
ordinance, code, rule, regulation, order or decree of any foreign
nation or any province, state, territory, protectorate or other
political subdivision thereof regulating, relating to, or imposing
liability or standards of conduct concerning, any Employee Benefit
Plan.
"Four-Quarter Period" means a period of four full consecutive
fiscal quarters of the Borrower and its Subsidiaries on a consolidated
basis, taken together as one accounting period; PROVIDED, HOWEVER, (i)
for each of the first three fiscal quarters ending after the Closing
Date, the Four-Quarter Period ending on such date shall include so many
of the most recent fiscal quarterly periods of the Borrower reflected
in the Historical Unaudited Quarterly Statements as shall be necessary
to result in a period of four full consecutive fiscal quarters, (ii) to
the extent the first fiscal quarter ending after the Closing Date is
included in any Four- Quarter Period for the purposes of determining
financial or accounting matters hereunder, all calculations with
respect to such fiscal quarter shall be made on a pro forma basis
giving effect to the Line of Business Transfer, the Spinoff and the
Penn Racquet Sports Asset Disposition as of the first day of such
fiscal quarter, (iii) the assets, liabilities and results of operations
reflected in such Historical Unaudited Quarterly Statements shall be
deemed to be the sole assets, liabilities and results of operations of
the Borrower and its Subsidiaries for the purpose of making any
determination or computation as to financial or accounting matters
hereunder that includes any period of operations covered by the
Historical Unaudited Quarterly Statements, and (iv) for purposes of
computing the calculations required in the certificate to be delivered
in accordance with SECTION 7.1(a)(x) only, "Four-Quarter Period" shall
mean the three quarters of the Borrower reflected in the Historical
Unaudited Quarterly Statements, annualized to constitute four quarters
of the Borrower.
"GAAP" or "Generally Accepted Accounting Principles" means
generally accepted accounting principles at such time applicable in the
United States of America, being those principles of accounting set
forth in pronouncements of the Accounting Principles Board, the
Financial Accounting Standards Board, the American Institute of
Certified Public Accountants, or which have other substantial
authoritative support; PROVIDED, HOWEVER, with respect to the financial
statements of any Borrower or any Subsidiary organized under the laws
of Canada or a province thereof, GAAP shall mean the accounting
principles generally accepted in Canada as recommended in the Canadian
Institute of Chartered Accountants Handbook and applied on a consistent
basis.
"Government Securities" means direct obligations of, or
obligations the timely payment of principal and interest on which are
fully and unconditionally guaranteed by, the United States of America.
15
<PAGE> 22
"Governmental Authority" shall mean any Federal, state,
municipal, national or other governmental department, commission,
board, bureau, court, agency or instrumentality or political
subdivision thereof or any entity or officer exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to any government or any court, in each case whether
associated with a state of the United States, the United States, or a
foreign entity or government.
"Guarantors" means, at any date, the Domestic Subsidiaries in
existence at the Closing Date together with each additional Domestic
Subsidiary required to execute and deliver a Facility Guaranty by such
date pursuant to SECTION 9.20.
"Hazardous Material" means and includes any pollutant,
contaminant, or hazardous, toxic or dangerous waste, substance or
material (including without limitation petroleum products,
asbestos-containing materials and lead), the generation, handling,
storage, transportation, disposal, treatment, release, discharge or
emission of which is subject to any Environmental Law.
"Historical Unaudited Quarterly Statements" means the
historical unaudited pro forma condensed consolidated balance sheet of
the Borrower and its Subsidiaries as at February 28, 1999 and the
related unaudited pro forma condensed consolidated statements of income
for the three months ended February 28, 1999, the unaudited pro forma
condensed statements of income for the years ended November 30, 1998,
November 30, 1997 and November 30, 1996 (all as found on pages 41
through 50 of the Borrower's proxy statement dated July 2, 1999), and
the historical unaudited pro forma condensed consolidated balance
sheets for the fiscal quarter August 31, 1999 and statements of income
for the fiscal quarters ended May 31, 1999 and August 31, 1999, in each
case prepared by the Borrower and previously furnished to the Agent
reflecting the assets, liabilities and results of operations of the
Retained Business.
"Indebtedness" means as to any Person, without duplication,
(a) all Indebtedness for Money Borrowed of such Person, (b) all Rate
Hedging Obligations of such Person, (c) all indebtedness secured by any
Lien on any property or asset owned or held by such Person regardless
or whether the indebtedness secured thereby shall have been assumed by
such Person or is non-recourse to the credit of such Person, and (d)
all Contingent Obligations of such Person.
"Indebtedness for Money Borrowed" means with respect to any
Person, without duplication, all indebtedness in respect of money
borrowed, including without limitation, all obligations under Capital
Leases, the deferred purchase price of any property or services, and
payment and reimbursement obligations in respect of surety bonds,
letters of credit, and bankers' acceptances, whether or not matured,
evidenced by a promissory note, bond, debenture or similar written
obligation for the payment of money (including reimbursement agreements
and conditional sales or similar title retention agreements), other
than trade payables and accrued expenses incurred in the ordinary
course of business.
16
<PAGE> 23
"Initial Pledged Interests" means, collectively as of the
Closing Date, (i) 65% of the Voting Securities of each Material Foreign
Subsidiary, (ii) 100% of the other Subsidiary Securities of each
Material Foreign Subsidiary, and (iii) all of the Subsidiary Securities
of all Material Domestic Subsidiaries.
"Interbank Offered Rate" means, with respect to any Eurodollar
Rate Loan for the Interest Period applicable thereto, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00
A.M. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period. If for
any reason such rate is not available, the term "Interbank Offered
Rate" shall mean, with respect to any Eurodollar Rate Loan for the
Interest Period applicable thereto, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 A.M. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to
such Interest Period, PROVIDED, HOWEVER; if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates (rounded upwards, if necessary, to
the nearest 1/100 of 1%).
"Interest Period" means, for each Eurodollar Rate Loan, a
period commencing on the date such Eurodollar Rate Loan is made or
Converted or Continued and ending, at the Borrower's option, on the
date one, two, three or six months thereafter as notified to the Agent
by the Authorized Representative in accordance with the terms hereof;
PROVIDED that,
(i) if an Interest Period for a Eurodollar Rate Loan
would end on a day which is not a Business Day, such Interest
Period shall be extended to the next Business Day (unless such
extension would cause the applicable Interest Period to end in
the succeeding calendar month, in which case such Interest
Period shall end on the next preceding Business Day); and
(ii) any Interest Period which begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of a calendar month.
"Interest Rate Selection Notice" means the written notice
delivered by an Authorized Representative in connection with the
election of a subsequent Interest Period for any Eurodollar Rate Loan
or the Conversion of any Eurodollar Rate Loan into a Base Rate Loan or
the Conversion of any Base Rate Loan into a Eurodollar Rate Loan, in
the form of EXHIBIT E.
"IRS Ruling Letter" has the meaning therefor provided in
SECTION 7.1(a)(xxi).
17
<PAGE> 24
"Issuing Bank" means initially Bank of America and each other
Lender issuing any of the Existing Letters of Credit, and thereafter
any Lender which is successor as issuer of Letters of Credit under
ARTICLE III.
"LC Account Agreement" means the LC Account Agreement dated as
of the Closing Date between the Borrower and the Agent, as amended,
modified or supplemented from time to time, in the form of EXHIBIT K.
"Lending Party" means, collectively, the Agent and each
Lender.
"Letter of Credit" means the Existing Letters of Credit and
each standby or commercial letter of credit issued by the Issuing Bank
pursuant to ARTICLE III hereof for the account of the Borrower in favor
of a Person advancing credit or securing an obligation on behalf of the
Borrower.
"Letter of Credit Commitment" means, with respect to each
Lender, the obligation of such Lender to acquire Participations in
respect of Letters of Credit and Reimbursement Obligations up to an
aggregate amount at any one time outstanding equal to such Lender's
Applicable Commitment Percentage of the Total Letter of Credit
Commitment as the same may be increased or decreased from time to time
pursuant to this Agreement.
"Letter of Credit Facility" means the facility described in
ARTICLE III hereof providing for the issuance by the Issuing Bank for
the account of the Borrower of Letters of Credit in an aggregate stated
amount at any time outstanding not exceeding the Total Letter of Credit
Commitment minus outstanding Reimbursement Obligations.
"Letter of Credit Outstandings" means, as of any date of
determination, the aggregate amount available to be drawn under all
Letters of Credit plus Reimbursement Obligations then outstanding.
"Lien" means any interest in property securing any obligation
owed to, or a claim by, a Person other than the owner of the property,
whether such interest is based on the common law, statute or contract,
and including but not limited to the lien or security interest arising
from a mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for security
purposes. For the purposes of this Agreement, the Borrower and any
Subsidiary shall be deemed to be the owner of any property which it has
acquired or holds subject to a conditional sale agreement, financing
lease, or other arrangement pursuant to which title to the property has
been retained by or vested in some other Person for security purposes.
"Line of Business Transfer" means the transfer of the
Transferred Business to OMNOVA by the Borrower on the Closing Date
immediately prior to the closing of the Revolving Credit Facility.
18
<PAGE> 25
"Line of Business Transfer Documents" means all documentation
(including all schedules and exhibits thereto) relating to the Line of
Business Transfer, including without limitation the Distribution
Agreement.
"Loans" means, collectively, the Swing Line Loan and the
Revolving Loans.
"Loan Documents" means this Agreement, the Notes, the Security
Instruments, the Facility Guaranties, the LC Account Agreement, the
Applications and Agreements for Letter of Credit, and all other
instruments and documents heretofore or hereafter executed or delivered
to or in favor of any Lender or the Agent in connection with the Loans
made and transactions contemplated under this Agreement, as the same
may be amended, supplemented or replaced from the time to time.
"Material Adverse Effect" means a material adverse effect on
(i) the business, properties, operations, or condition, financial or
otherwise, of Borrower and its Subsidiaries, taken as a whole, (ii) the
ability of any Credit Party to pay or perform its respective
obligations, liabilities and indebtedness under the Loan Documents as
such payment or performance becomes due in accordance with the terms
thereof, or (iii) the rights, powers and remedies of the Agent or any
Lender under any Loan Document or the validity, legality or
enforceability thereof.
"Material Domestic Subsidiary" means any Domestic Subsidiary
that is a Material Subsidiary.
"Material Foreign Subsidiary" means any Direct Foreign
Subsidiary that is a Material Subsidiary.
"Material Subsidiary" means any direct or indirect Subsidiary
of the Borrower which (i) has total assets equal to or greater than
7.5% of Consolidated Total Assets (calculated as of the most recent
fiscal period with respect to which the Agent shall have received
financial statements required to be delivered pursuant to SECTIONS
9.1(a) or (b) (or if prior to delivery of any financial statements
pursuant to such Sections, then calculated with respect to the Fiscal
Year end financial statements referenced in SECTION 8.6) (the "Required
Financial Information")) or (ii) has income equal to or greater than
7.5% of Consolidated Net Income (calculated for the most recent period
for which the Agent has received the Required Financial Information);
PROVIDED, HOWEVER, that notwithstanding the foregoing, the term
"Material Subsidiary" shall mean each of those Subsidiaries that
together with the Borrower and each other Material Subsidiary have
assets equal to not less than 90% of Consolidated Total Assets
(calculated as described above) and net income of not less than 90% of
Consolidated Net Income (calculated as described above); PROVIDED
FURTHER that if more than one combination of Subsidiaries satisfies
such threshold, then those Subsidiaries so determined to be "Material
Subsidiaries" shall be specified by the Borrower.
"Moody's" means Moody's Investors Service, Inc.
19
<PAGE> 26
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate is making, or is accruing an obligation to make,
contributions or has made, or been obligated to make, contributions
within the preceding six (6) Fiscal Years.
"Municipal Obligations" means general obligations issued by,
and supported by the full taxing authority of, any state of the United
States of America or of any municipal corporation or other public body
organized under the laws of any such state which are rated in the
highest investment rating category by both S&P and Moody's.
"New Subsidiary"shall have the meaning given to such term in
SECTION 9.20 hereof.
"Notes" means, collectively, the Swing Line Note and the
Revolving Notes.
"Obligations" means the obligations, liabilities and
Indebtedness of the Borrower with respect to (i) the payment of
principal and interest on the Loans as evidenced by the Notes, (ii) the
payment of Reimbursement Obligations and otherwise in respect of the
Letters of Credit, (iii) the payment and performance of all liabilities
of Borrower to any Lender (or any affiliate of any Lender) which arise
under a Swap Agreement, and (iv) the payment and performance of all
other obligations, liabilities and Indebtedness of the Borrower to the
Lenders, the Agent or BAS hereunder, under any one or more of the other
Loan Documents or with respect to the Loans.
"OMNOVA" means OMNOVA Solutions, Inc.
"Operating Documents" means with respect to any corporation,
limited liability company, partnership, limited partnership, limited
liability partnership or other legally authorized incorporated or
unincorporated entity, the bylaws, operating agreement, partnership
agreement, limited partnership agreement or other applicable documents
relating to the operation, governance or management of such entity.
"Organizational Action" means with respect to any corporation,
limited liability company, partnership, limited partnership, limited
liability partnership or other legally authorized incorporated or
unincorporated entity, any corporate, organizational or partnership
action (including any required shareholder, member or partner action),
or other similar official action, as applicable, taken by such entity.
"Organizational Documents" means with respect to any
corporation, limited liability company, partnership, limited
partnership, limited liability partnership or other legally authorized
incorporated or unincorporated entity, the articles of incorporation,
certificate of incorporation, articles of organization, certificate of
limited partnership or other applicable organizational or charter
documents relating to the creation of such entity.
"Outstandings" means, collectively, at any date, the Letter of
Credit Outstandings, Swing Line Outstandings and Revolving Credit
Outstandings on such date.
20
<PAGE> 27
"Participation" means, (i) with respect to any Lender (other
than the Issuing Bank) and a Letter of Credit, the extension of credit
represented by the participation of such Lender hereunder in the
liability of the Issuing Bank in respect of a Letter of Credit issued
by the Issuing Bank in accordance with the terms hereof, and (ii) with
respect to any Lender (other than Bank of America) and a Swing Line
Loan, the extension of credit represented by the participation of such
Lender hereunder in the liability of Bank of America in respect of a
Swing Line Loan made by Bank of America in accordance with the terms
hereof.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor thereto.
"Penn Racquet Sports Asset Disposition" means the disposition
by the Borrower on April 30, 1999 of the assets constituting the Penn
Racquet Sports division of the Borrower.
"Pension Plan" means any employee pension benefit plan within
the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan,
which is subject to the provisions of Title IV of ERISA or Section 412
of the Code and which (i) is maintained for employees of the Borrower
or any of its ERISA Affiliates or is assumed by the Borrower or any of
its ERISA Affiliates in connection with any Acquisition or (ii) has at
any time within the previous six (6) years been maintained by the
Borrower for the employees of the Borrower or any current or former
ERISA Affiliate.
"Permitted Liens" shall have the meaning given to such term in
SECTION 10.3 hereof.
"Permitted Acquisition" means an Acquisition with respect to
which (i) the Person to be (or whose assets are to be) acquired does
not oppose such Acquisition and the line or lines of business of the
Person to be acquired are substantially the same as one or more line or
lines of business conducted by the Borrower and its Subsidiaries, (ii)
no Default or Event of Default shall have occurred and be continuing
either immediately prior to or immediately after giving effect to such
Acquisition, (iii) the Borrower shall have furnished to the Agent (A)
pro forma historical financial statements as of the end of the most
recently completed Fiscal Year of the Borrower and most recent interim
fiscal quarter, if applicable, giving effect to such Acquisition and
(B) a certificate in the form of EXHIBIT H prepared on a historical pro
forma basis as of the most recent date for which financial statements
have been furnished pursuant to SECTION 8.6(a) or SECTION 9.1(a) OR (b)
giving effect to such Acquisition, which certificate shall demonstrate
that no Default or Event of Default would exist immediately after
giving effect thereto, (iv) the Person acquired shall be a wholly-owned
Subsidiary, or be merged into the Borrower or a wholly-owned
Subsidiary, immediately upon consummation of the Acquisition (or if
assets are being acquired, the acquiror shall be the Borrower or a
wholly-owned Subsidiary), and (v) if the Consolidated Leverage Ratio of
the Borrower and its Subsidiaries after giving pro forma effect to such
Acquisition shall be greater than 1.00 to 1.00, then the Cost of
Acquisition with respect to such Acquisition shall not exceed
$50,000,000.
21
<PAGE> 28
"Person" means an individual, partnership, corporation,
limited liability company, limited liability partnership, trust,
unincorporated organization, association, joint venture or a government
or agency or political subdivision thereof.
"Pledge Agreement" means, collectively (or individually as the
context may indicate), (i) that certain Securities Pledge Agreement
dated as of the date hereof between the Borrower and the Agent for the
benefit of the Agent and the Lenders, (ii) that certain Securities
Pledge Agreement dated as of the date hereof among certain Subsidiaries
and the Agent for the benefit of the Agent and the Lenders, (iii) any
additional Securities Pledge Agreement delivered to the Agent pursuant
to SECTIONS 5.1 or 9.20, and (iv) with respect to any Subsidiary
Securities issued by a Direct Foreign Subsidiary, any additional or
substitute charge, agreement, document, instrument or conveyance, in
form and substance acceptable to the Agent, conferring under applicable
foreign law upon the Agent for the benefit of the Agent and the Lenders
a Lien upon such Subsidiary Securities as are owned by the borrower or
any Domestic Subsidiary, in each case as hereafter amended,
supplemented (including by Pledge Agreement Supplement) or amended and
restated from time to time.
"Pledge Agreement Supplement" means, with respect to each
Pledge Agreement, the Pledge Agreement Supplement in the form affixed
as an Exhibit to such Pledge Agreement.
"Pledged Interests" means, collectively, the Initial Pledged
Interests and all other Subsidiary Securities of a Material Subsidiary
that are from time to time required to be pledged as Collateral
pursuant to ARTICLE V, SECTION 9.20 or the terms of any Pledge
Agreement (which shall include (i) 65% of the Voting Securities of each
Material Foreign Subsidiary, (ii) 100% of the other Subsidiary
Securities of each Material Foreign Subsidiary, and (iii) all of the
Subsidiary Securities of all Material Domestic Subsidiaries).
"Pre-Refunded Municipal Obligations" means obligations of any
state of the United States of America or of any municipal corporation
or other public body organized under the laws of any such state which
are rated, based on the escrow, in the highest investment rating
category by both S&P and Moody's and which have been irrevocably called
for redemption and advance refunded through the deposit in escrow of
Government Securities or other debt securities which are (i) not
callable at the option of the issuer thereof prior to maturity, (ii)
irrevocably pledged solely to the payment of all principal and interest
on such obligations as the same becomes due, and (iii) in a principal
amount and bear such rate or rates of interest as shall be sufficient
to pay in full all principal of, interest, and premium, if any, on such
obligations as the same becomes due as verified by a nationally
recognized firm of certified public accountants.
"Prime Rate" means the per annum rate of interest established
from time to time by Bank of America as its prime rate, which rate may
not be the lowest rate of interest charged by Bank of America to its
customers.
"Principal Office" means the principal office of Bank of
America, presently located at 101 North Tryon Street, 15th Floor, NC1
001-15-04, Charlotte, North Carolina 28255,
22
<PAGE> 29
Attention: Agency Services, or such other office and address as the
Agent may from time to time designate.
"Proxy Statement" means the definitive proxy statement first
mailed by the Borrower to its shareholders on or about July 7, 1999
describing the Spinoff and soliciting such shareholder vote to proceed
therewith.
"Rate Hedging Obligations" means, without duplication, any and
all obligations of the Borrower or any Subsidiary, whether absolute or
contingent and howsoever and whensoever created, arising, evidenced or
acquired (including all renewals, extensions and modifications thereof
and substitutions therefor), under (i) any and all agreements, devices
or arrangements designed to protect at least one of the parties thereto
from the fluctuations of interest rates, exchange rates or forward
rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, Dollar-denominated or
cross-currency interest rate exchange agreements, forward currency
exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts, warrants and
those commonly known as interest rate "swap" agreements; (ii) all other
"derivative instruments" as defined in FASB 133 and which are subject
to the reporting requirements of FASB 133; and (iii) any and all
cancellations, buybacks, reversals, terminations or assignments of any
of the foregoing.
"Registrar" means, with respect to any Subsidiary Securities,
any Person authorized or obligated to maintain records of the
registration of ownership or transfer of ownership of interests in such
Subsidiary Securities, and in the event no such Person shall have been
expressly designated by the related Subsidiary, shall mean (i) as to
any corporation or limited liability company, its Secretary (or
comparable official), and (ii) as to any partnership, its general
partner (or managing general partner if one shall have been appointed).
"Regulation D" means Regulation D of the Board as the same may
be amended or supplemented from time to time.
"Reimbursement Obligation" shall mean at any time, the
obligation of the Borrower with respect to any Letter of Credit to
reimburse the Issuing Bank and the Lenders to the extent of their
respective Participations (including by the receipt by the Issuing Bank
of proceeds of Loans pursuant to SECTION 2.1(c)(iii)) for amounts
theretofore paid by the Issuing Bank pursuant to a drawing under such
Letter of Credit.
"Related LC Documents" has the meaning therefor provided in
SECTION 3.2(i)(i).
"Repurchase Agreement" means a repurchase agreement entered
into with any financial institution whose unsecured and unsubordinated
debt obligations or commercial paper are rated "A" by either of S&P or
Moody's or "A-1" by S&P or "P-1" by Moody's.
"Required Financial Information" shall have the meaning given
to such term in the definition of "Material Subsidiary".
23
<PAGE> 30
"Required Lenders" means, as of any date, Lenders on such date
having Credit Exposures (as defined below) aggregating more than 50% of
the aggregate Credit Exposures of all the Lenders on such date. For
purposes of the preceding sentence, the amount of the "CREDIT EXPOSURE"
of each Lender shall be equal at all times (a) other than following the
occurrence and during the continuance of an Event of Default, to its
Revolving Credit Commitment, and (b) following the occurrence and
during the continuance of an Event of Default, to the sum of (i) the
aggregate principal amount of such Lender's Applicable Commitment
Percentage of Revolving Credit Outstandings plus (ii) the amount of
such Lender's Applicable Commitment Percentage of Letter of Credit
Outstandings and Swing Line Outstandings; PROVIDED that, for the
purpose of this definition only, (A) if any Lender shall have failed to
fund its Applicable Commitment Percentage of any Advance, then the
Revolving Credit Commitment of such Lender shall be deemed reduced by
the amount it so failed to fund for so long as such failure shall
continue and such Lender's Credit Exposure attributable to such failure
shall be deemed held by any Lender making more than its Applicable
Commitment Percentage of such Advance to the extent it covers such
failure, (B) if any Lender shall have failed to pay to the Issuing Bank
upon demand its Applicable Commitment Percentage of any drawing under
any Letter of Credit resulting in an outstanding Reimbursement
Obligation (whether by funding its Participation therein or otherwise),
such Lender's Credit Exposure attributable to all Letter of Credit
Outstandings shall be deemed to be held by the Issuing Bank until such
Lender shall pay such deficiency amount to the Issuing Bank together
with interest thereon as provided in SECTION 4.9, and (C) if any Lender
shall have failed to pay to Bank of America on demand its Applicable
Commitment Percentage of any Swing Line Loan (whether by funding its
Participation therein or otherwise), such Lender's Credit Exposure
attributable to all Swing Line Outstandings shall be deemed to be held
by Bank of America until such Lender shall pay such deficiency amount
to Bank of America together with interest thereon as provided in
SECTION 4.9.
"Reserve Requirement" means, at any time, the maximum rate at
which reserves (including, without limitation, any marginal, special,
supplemental, or emergency reserves) are required to be maintained
under regulations issued from time to time by the Board of Governors of
the Federal Reserve System (or any successor) by member banks of the
Federal Reserve System against "Eurocurrency liabilities" (as such term
is used in Regulation D). Without limiting the effect of the foregoing,
the Reserve Requirement shall reflect any other reserves required to be
maintained by such member banks with respect to (i) any category of
liabilities which includes deposits by reference to which the
Eurodollar Rate is to be determined, or (ii) any category of extensions
of credit or other assets which include Eurodollar Rate Loans. The
Eurodollar Rate shall be adjusted automatically on and as of the
effective date of any change in the Reserve Requirement.
"Responsible Officer" means the Chief Executive Officer, the
Chief Financial Officer, any Senior Vice President, or the Treasurer of
the Borrower.
"Restricted Payment" means (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of stock of Borrower or any Subsidiary Securities of
24
<PAGE> 31
its Subsidiaries (other than those payable or distributable solely to
the Borrower) now or hereafter outstanding, except a dividend payable
solely in shares of a class of stock to the holders of that class; (b)
any redemption, conversion, exchange, retirement or similar payment,
purchase or other acquisition for value, direct or indirect, of any
shares of any class of stock of Borrower or any of its Subsidiaries
(other than those payable or distributable solely to the Borrower) now
or hereafter outstanding; (c) any payment made to retire, or to obtain
the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of stock of Borrower or any Subsidiary
Securities of its Subsidiaries now or hereafter outstanding; (d) any
issuance and sale of Subsidiary Securities of any Subsidiary of the
Borrower (or any option, warrant or right to acquire such stock) other
than to the Borrower; and (e) any prepayment of principal, premium,
interest or fees on any Subordinated Debt.
"Retained Business" means the line or lines of business of the
Borrower and its Subsidiaries retained by the Borrower and its
remaining Subsidiaries following the Line of Business Transfer,
including all business of the Borrower other than the Transferred
Business.
"Revolving Credit Commitment" means, with respect to each
Lender, the obligation of such Lender to make Revolving Loans to the
Borrower up to an aggregate principal amount at any one time
outstanding equal to such Lender's Applicable Commitment Percentage of
the Total Revolving Credit Commitment.
"Revolving Credit Facility" means the facility described in
SECTION 2.1 hereof providing for Loans to the Borrower by the Lenders
in the aggregate principal amount of the Total Revolving Credit
Commitment.
"Revolving Credit Outstandings" means, as of any date of
determination, the aggregate principal amount of all Revolving Loans
then outstanding.
"Revolving Credit Termination Date" means (i) the Stated
Termination Date or (ii) such earlier date of termination of Lenders'
obligations pursuant to SECTION 11.1 upon the occurrence of an Event of
Default, or (iii) such date as the Borrower may voluntarily and
permanently terminate the Revolving Credit Facility by payment in full
of all Revolving Credit Outstandings, Swing Line Outstandings and
Letter of Credit Outstandings and cancellation of all Letters of
Credit, together with all accrued and unpaid interest thereon.
"Revolving Loan" means any borrowing pursuant to an Advance
under the Revolving Credit Facility in accordance with SECTION 2.1.
"Revolving Notes" means, collectively, the promissory notes of
the Borrower evidencing Revolving Loans executed and delivered to the
Lenders as provided in SECTION 2.3 substantially in the form of EXHIBIT
F-1, with appropriate insertions as to amounts, dates and names of
Lenders.
25
<PAGE> 32
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill.
"Security Instruments" means, collectively, the Pledge
Agreement and all other agreements (including control agreements),
instruments and other documents, whether now existing or hereafter in
effect, pursuant to which the Borrower or any Subsidiary shall grant or
convey to the Agent or the Lenders a Lien in, or any other Person shall
acknowledge any such Lien in, property as security for all or any
portion of the Obligations, as any of them may be amended, modified or
supplemented from time to time.
"Solvent" means, when used with respect to any Person, that at
the time of determination:
(i) the fair value of its assets (both at fair
valuation and at present fair saleable value on an orderly
basis) is in excess of the total amount of its liabilities,
including Contingent Obligations; and
(ii) it is then able and expects to be able to pay
its debts as they mature (other than debts owed directly to
the Borrower or another Subsidiary); and
(iii) it has capital sufficient to carry on its
business as conducted and as proposed to be conducted.
"Special Distribution" means the dividend of approximately
$188,000,000 and in no event to exceed $225,000,000 paid on the Closing
Date, immediately following the Line of Business Transfer and the
effectiveness of this Agreement and immediately preceding the Spinoff,
by OMNOVA to the Borrower, the proceeds of which are to be used by the
Borrower to repay the Existing Syndicated Indebtedness substantially
simultaneously with the receipt thereof by the Borrower.
"Spinoff" means the special dividend of all outstanding shares
of capital stock of OMNOVA to the holders of the outstanding shares of
the Common Stock on a pro rata basis and on the basis of one share of
common stock of OMNOVA for each share of Common Stock, all as described
in the Proxy Statement.
"Spinoff Documents" means (i) the Proxy Statement, (ii) the
Registration Statement of OMNOVA on Form 10, including all amendments
thereto, initially filed on July 9, 1999 with the Securities and
Exchange Commission, and (iii) all other documentation (including all
schedules and exhibits thereto) relating to the Spinoff, including
without limitation the Employee Matters Agreement, the Transition
Services Agreement and the Tax Matters Agreement.
"Stated Termination Date" means September 30, 2004.
"Subordinated Debt" has the meaning therefor provided in
SECTION 10.4(f).
26
<PAGE> 33
"Subsidiary" means any corporation or other entity in which
more than 50% of its outstanding Voting Securities or more than 50% of
all equity interests is owned directly or indirectly by the Borrower
and/or by one or more of the Borrower's Subsidiaries.
"Subsidiary Securities" means the shares of capital stock or
the other equity interests issued by or equity participations in any
Subsidiary, whether or not constituting a "security" under Article 8 of
the Uniform Commercial Code as in effect in any jurisdiction.
"Swap Agreement" means one or more agreements between the
Borrower and any Lender or any affiliate of any Lender with respect to
Indebtedness evidenced by any or all of the Notes, on terms mutually
acceptable to Borrower and such Person, which agreements create Rate
Hedging Obligations.
"Swing Line" means the revolving line of credit established by
Bank of America in favor of the Borrower pursuant to SECTION 2.4.
"Swing Line Loans" means loans made by Bank of America to the
Borrower pursuant to SECTION 2.4.
"Swing Line Note" means the promissory note of the Borrower
evidencing the Swing Line Loans executed and delivered to Bank of
America as provided in SECTION 2.3 substantially in the form of EXHIBIT
F-2.
"Swing Line Outstandings" means, as of any date of
determination, the aggregate principal amount of all Swing Line Loans
then outstanding.
"Tax Matters Agreement" means the Tax Sharing Agreement dated
as of September 30, 1999 between the Borrower and OMNOVA providing for
matters regarding Federal, state, local and foreign tax liabilities for
periods prior to and including the effective date of the Spinoff.
"Taxes" has the meaning therefor provided in SECTION 6.6(a).
"Termination Event" means, other than the reorganization of
any Employee Benefit Plan in connection with the Spinoff or Line of
Business Transfer, (i) a "Reportable Event" described in Section 4043
of ERISA and the regulations issued thereunder (unless the notice
requirement has been waived by applicable regulation); or (ii) the
withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan
during a plan year in which it was a "substantial employer" as defined
in Section 4001(a)(2) of ERISA or was deemed such under Section 4062(e)
of ERISA; or (iii) the termination of a Pension Plan, the filing of a
notice of intent to terminate a Pension Plan or the treatment of a
Pension Plan amendment as a termination under Section 4041 of ERISA; or
(iv) the institution of proceedings to terminate a Pension Plan by the
PBGC; or (v) any other event or condition which would constitute
grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; or (vi) the
partial or complete withdrawal of the
27
<PAGE> 34
Borrower or any ERISA Affiliate from a Multiemployer Plan; or (vii) the
imposition of a Lien pursuant to Section 412 of the Code or Section 302
of ERISA; or (viii) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under Section 4241
or Section 4245 of ERISA, respectively; or (ix) any event or condition
which results in the termination of a Multiemployer Plan under Section
4041A of ERISA or the institution by the PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA; or (x) any
event or condition with respect to any Employee Benefit Plan which is
regulated by any Foreign Benefit Law that results in the termination of
such Employee Benefit Plan or the revocation of such Employee Benefit
Plan's authority to operate under the applicable Foreign Benefit Law.
"Total Letter of Credit Commitment" means an amount not to
exceed $25,000,000.
"Total Revolving Credit Commitment" means a principal amount
equal to $250,000,000 from the Closing Date to the third anniversary
thereof, $225,000,000 from and including the third anniversary of the
Closing Date to the fourth anniversary thereof, and $200,000,000 from
and including the fourth anniversary of the Closing Date and
thereafter, in each case as reduced from time to time in accordance
with SECTION 2.1(e).
"Transaction Documents" means, collectively or individually as
the context may indicate, the Loan Documents, the Spinoff Documents and
the Line of Business Transfer Documents.
"Transferred Business" means the assets, liabilities and
operations of the Performance Chemicals and Decorative & Building
Products businesses of the Borrower and includes the GenCorp Technology
Center, corporate flight operations of the Borrower, the Borrower's
corporate headquarters building in Fairlawn, Ohio and the tangible and
intangible assets owned and leased for such businesses.
"Transition Services Agreement" means the Services and Support
Agreement dated as of September 30, 1999 between the Borrower and
OMNOVA providing for certain transitional administrative services and
for reimbursement of all direct and indirect costs of providing such
services.
"Type" shall mean any type of Loan (i.e., a Base Rate Loan or
a Eurodollar Rate Loan).
"Vehicle Sealing Sale" means the sale by the Borrower of all
or substantially all of the assets or the capital stock of Vehicle
Sealing, Inc. on terms and conditions satisfactory to the Agent.
"Voting Securities" means shares of capital stock issued by a
corporation, or equivalent interests in any other Person, the holders
of which are ordinarily, in the absence of contingencies, entitled to
vote for the election of directors (or persons performing similar
28
<PAGE> 35
functions) of such Person, even if the right so to vote has been
suspended by the happening of such a contingency.
"Year 2000 Compliant" means all computer applications of the
Borrower and all of its Subsidiaries that are material to the
Borrower's or any of its Subsidiaries' business and operations will on
a timely basis be able to perform properly date-sensitive functions
involving all dates on and after January 1, 2000;
"Year 2000 Problem" means the risk that computer applications
used by the Borrower or any of its Subsidiaries, suppliers, vendors or
customers may be unable to recognize and perform properly
date-sensitive functions involving certain dates on and after January
1, 2000.
1.2. RULES OF INTERPRETATION.
(a) All accounting terms not specifically defined herein shall
have the meanings assigned to such terms and shall be interpreted in
accordance with GAAP applied on a Consistent Basis.
(b) Each term defined in Articles 1, 8 or 9 of the New York
Uniform Commercial Code shall have the meaning given therein unless
otherwise defined herein, except to the extent that the Uniform
Commercial Code of another jurisdiction is controlling, in which case
such terms shall have the meaning given in the Uniform Commercial Code
of the applicable jurisdiction.
(c) The headings, subheadings and table of contents used
herein or in any other Loan Document are solely for convenience of
reference and shall not constitute a part of any such document or
affect the meaning, construction or effect of any provision thereof.
(d) Except as otherwise expressly provided, references herein
to articles, sections, paragraphs, clauses, annexes, appendices,
exhibits and schedules are references to articles, sections,
paragraphs, clauses, annexes, appendices, exhibits and schedules in or
to this Agreement.
(e) All definitions set forth herein or in any other Loan
Document shall apply to the singular as well as the plural form of such
defined term, and all references to the masculine gender shall include
reference to the feminine or neuter gender, and vice versa, as the
context may require.
(f) When used herein or in any other Loan Document, words such
as "hereunder", "hereto", "hereof" and "herein" and other words of like
import shall, unless the context clearly indicates to the contrary,
refer to the whole of the applicable document and not to any particular
article, section, subsection, paragraph or clause thereof.
29
<PAGE> 36
(g) References to "including" means including without limiting
the generality of any description preceding such term, and for purposes
hereof the rule of ejusdem generis shall not be applicable to limit a
general statement, followed by or referable to an enumeration of
specific matters, to matters similar to those specifically mentioned.
(h) Except as otherwise expressly provided, all dates and
times of day specified herein shall refer to such dates and times at
Los Angeles, California.
(i) Whenever interest rates or fees are established in whole
or in part by reference to a numerical percentage expressed as "___%",
such arithmetic expression shall be interpreted in accordance with the
convention that 1% = 100 basis points.
(j) Any reference to an officer of the Borrower or any other
Person by reference to the title of such officer shall be deemed to
refer to each other officer of such Person, however titled, exercising
the same or substantially similar functions.
(k) All references to any agreement or document as amended,
modified or supplemented, or words of similar effect, shall mean such
document or agreement, as the case may be, as amended, modified or
supplemented from time to time only as and to the extent permitted
therein and in the Loan Documents.
30
<PAGE> 37
ARTICLE II
THE CREDIT FACILITIES
2.1. REVOLVING LOANS.
(a) COMMITMENT. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make Advances to the Borrower under
the Revolving Credit Facility from time to time from the Closing Date until the
Revolving Credit Termination Date on a pro rata basis as to the total borrowing
requested by the Borrower on any day determined by such Lender's Applicable
Commitment Percentage up to but not exceeding the Revolving Credit Commitment of
such Lender, PROVIDED, however, that the Lenders will not be required and shall
have no obligation to make any such Advance (i) so long as a Default or an Event
of Default has occurred and is continuing or (ii) if the Agent has accelerated
the maturity of any of the Notes as a result of an Event of Default; PROVIDED
further, however, that immediately after giving effect to each such Advance, the
amount of Revolving Credit Outstandings plus Letter of Credit Outstandings plus
Swing Line Outstandings shall not exceed the Total Revolving Credit Commitment.
Within such limits and subject to the other terms and conditions of this
Agreement, the Borrower may borrow, repay and reborrow under the Revolving
Credit Facility on a Business Day from the Closing Date until, but (as to
borrowings and reborrowings) not including, the Revolving Credit Termination
Date.
(b) AMOUNTS. Except as otherwise permitted by the Lenders from
time to time, the amount of Revolving Credit Outstandings plus Letter of Credit
Outstandings plus Swing Line Outstandings shall not exceed at any time the Total
Revolving Credit Commitment, and, in the event there shall be outstanding any
such excess, the Borrower shall immediately make such payments and prepayments
as shall be necessary to comply with this restriction. Each Advance under the
Revolving Credit Facility, other than Base Rate Refunding Loans, shall be in an
amount of at least $5,000,000, and, if greater than $5,000,000, an integral
multiple of $1,000,000.
(c) ADVANCES. (i) An Authorized Representative shall give the
Agent (1) at least three (3) Business Days' irrevocable telephonic notice of
each Eurodollar Rate Loan (whether representing an additional borrowing or the
Continuation of a borrowing hereunder or the Conversion of a borrowing hereunder
from a Base Rate Loan to a Eurodollar Rate Loan) prior to 10:00 A.M. and (2)
irrevocable telephonic notice of each Base Rate Loan (other than Base Rate
Refunding Loans to the extent the same are effected without notice pursuant to
SECTION 2.1(c)(iii) and whether representing an additional borrowing hereunder
or the Conversion of borrowing hereunder from Eurodollar Rate Loans to Base Rate
Loans) prior to 10:30 A.M. on the day of such proposed Revolving Loan. Each such
notice shall be effective upon receipt by the Agent, shall specify the amount of
the borrowing, the type of Revolving Loan (Base Rate or Eurodollar Rate), the
date of borrowing and, if a Eurodollar Rate Loan, the Interest Period to be used
in the computation of interest. The Authorized Representative shall provide the
Agent written confirmation of each such telephonic notice in the form of a
Borrowing Notice or Interest Rate Selection Notice (as applicable) with
appropriate insertions but failure to provide such confirmation shall not affect
the validity of such telephonic notice. Notice of receipt of such Borrowing
Notice or Interest Rate Selection Notice, as the case may be, together with the
amount of each Lender's portion of an
31
<PAGE> 38
Advance requested thereunder, shall be provided by the Agent to each Lender by
telefacsimile transmission with reasonable promptness, but (provided the Agent
shall have received such notice by 10:00 A.M.) not later than 11:00 A.M. on the
same day as the Agent's receipt of such notice.
(ii) Not later than 12:00 noon on the date specified for each borrowing
under this SECTION 2.1, each Lender shall, pursuant to the terms and subject to
the conditions of this Agreement, make the amount of the Advance or Advances to
be made by it on such day available by wire transfer to the Agent in the amount
of its pro rata share, determined according to such Lender's Applicable
Commitment Percentage of the Revolving Loan or Revolving Loans to be made on
such day. Such wire transfer shall be directed to the Agent at the Principal
Office and shall be in the form of Dollars constituting immediately available
funds. The amount so received by the Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Borrower by delivery of
the proceeds thereof to the Borrower's Account or otherwise as shall be directed
in the applicable Borrowing Notice by the Authorized Representative and
reasonably acceptable to the Agent.
(iii) Notwithstanding the foregoing, if a drawing is made under any
Letter of Credit, such drawing is honored by the Issuing Bank, and the Borrower
shall not immediately fully reimburse the Issuing Bank in respect of such
drawing from other funds available to the Borrower, (A) provided that the
conditions to making a Revolving Loan as herein provided shall then be
satisfied, the Reimbursement Obligation arising from such drawing shall be paid
to the Issuing Bank by the Agent without the requirement of notice to or from
the Borrower from immediately available funds which shall be advanced as a Base
Rate Refunding Loan to the Agent at its Principal Office by each Lender under
the Revolving Credit Facility in an amount equal to such Lender's Applicable
Commitment Percentage of such Reimbursement Obligation, and (B) if the
conditions to making a Revolving Loan as herein provided shall not then be
satisfied, each of the Lenders shall fund by payment to the Agent (for the
benefit of the Issuing Bank) at its Principal Office in immediately available
funds the purchase from the Issuing Bank of their respective Participations in
the related Reimbursement Obligation based on their respective Applicable
Commitment Percentages of the Total Letter of Credit Commitment. If a drawing is
presented under any Letter of Credit in accordance with the terms thereof and
the Borrower shall not immediately reimburse the Issuing Bank in respect
thereof, then notice of such drawing or payment shall be provided promptly by
the Issuing Bank to the Agent and the Agent shall provide notice to each Lender
by telephone or telefacsimile transmission. If notice to the Lenders of a
drawing under any Letter of Credit is given by the Agent at or before 10:00 A.M.
on any Business Day, each Lender shall either make a Base Rate Refunding Loan or
fund the purchase of its Participation as specified above in the amount of such
Lender's Applicable Commitment Percentage of such drawing or payment and shall
pay such amount to the Agent for the account of the Issuing Bank at the
Principal Office in Dollars and in immediately available funds before 12:00 noon
on the same Business Day. If such notice to the Lenders is given by the Agent
after 10:00 A.M. on any Business Day, each Lender shall either make such Base
Rate Refunding Loan or fund such purchase before 12:00 noon on the next
following Business Day.
(d) REPAYMENT OF REVOLVING LOANS The principal amount of each
Revolving Loan shall be due and payable to the Agent for the benefit of each
Lender in full on the Revolving Credit Termination Date, or earlier as
specifically provided herein. The principal amount of any Revolving Loan may be
prepaid in whole or in part on any Business Day, upon (A) at least three (3)
Business
32
<PAGE> 39
Days' irrevocable telephonic notice in the case of each Revolving Loan
that is a Eurodollar Rate Loan from an Authorized Representative (effective upon
receipt) to the Agent prior to 12:00 noon and (B) irrevocable telephonic notice
in the case of each Revolving Loan that is a Base Rate Loan from an Authorized
Representative (effective upon receipt) to the Agent prior to 12:00 noon on the
day of such proposed repayment. The Authorized Representative shall provide the
Agent written confirmation of each such telephonic notice but failure to provide
such confirmation shall not effect the validity of such telephonic notice. All
prepayments of Revolving Loans made by the Borrower shall be in the amount of
$10,000,000 or such greater amount which is an integral multiple of $5,000,000,
or the amount equal to all Revolving Credit Outstandings, or such other amount
as necessary to comply with SECTION 2.1(b).
(e) REDUCTIONS. The Borrower shall, by notice from an Authorized
Representative, have the right from time to time but not more frequently than
once each calendar month, upon not less than three (3) Business Days' written
notice to the Agent, effective upon receipt, to reduce the Total Revolving
Credit Commitment. The Agent shall give each Lender, within one (1) Business Day
of receipt of such notice, telefacsimile notice, or telephonic notice (confirmed
in writing), of such reduction. Each such reduction shall be in the aggregate
amount of $10,000,000 or such greater amount which is in an integral multiple of
$5,000,000, or the entire remaining Total Revolving Credit Commitment, and shall
permanently reduce the Total Revolving Credit Commitment. Each reduction of the
Total Revolving Credit Commitment shall be accompanied by payment of the
Revolving Loans to the extent that the principal amount of Revolving Credit
Outstandings plus Letter of Credit Outstandings plus Swing Line Outstandings
exceeds the Total Revolving Credit Commitment after giving effect to such
reduction, together with accrued and unpaid interest on the amounts prepaid.
2.2. USE OF PROCEEDS. The proceeds of the Loans made pursuant to the
Revolving Credit Facility hereunder shall be used by the Borrower to repay the
Existing Syndicated Indebtedness and to terminate the Existing Syndicated Credit
Agreement, for general working capital needs and other lawful corporate
purposes, including the making of Acquisitions and Capital Expenditures
permitted hereunder.
2.3. NOTES.
(a) REVOLVING NOTES. Revolving Loans made by each Lender shall be
evidenced by the Revolving Note payable to the order of such Lender in the
respective amount of its Applicable Commitment Percentage of the Total Revolving
Credit Commitment, which Revolving Note shall be dated the Closing Date or a
later date pursuant to an Assignment and Acceptance and shall be duly completed,
executed and delivered by the Borrower.
(b) SWING LINE NOTE. The Swing Line Outstandings shall be evidenced by
a separate Swing Line Note payable to the order of the Bank of America in the
amount of the Swing Line, which Note shall be dated the Closing Date and shall
be duly completed, executed and delivered by the Borrower.
33
<PAGE> 40
2.4. SWING LINE. (a) Notwithstanding any other provision of this
Agreement to the contrary, in order to administer the Revolving Credit Facility
in an efficient manner and to minimize the transfer of funds between the Agent
and the Lenders, Bank of America shall make available Swing Line Loans to the
Borrower prior to the Revolving Credit Termination Date. Bank of
America shall not be obligated to make any Swing Line Loan pursuant hereto (i)
if to the actual knowledge of Bank of America the Borrower is not in compliance
with all the conditions to the making of Revolving Loans set forth in this
Agreement, (ii) if after giving effect to such Swing Line Loan, the Swing Line
Outstandings exceed $10,000,000, or (iii) if after giving effect to such Swing
Line Loan, the sum of the Swing Line Outstandings, Revolving Credit Outstandings
and Letter of Credit Outstandings exceeds the Total Revolving Credit Commitment.
The Borrower may, subject to the conditions set forth in the preceding sentence,
borrow, repay and reborrow under this SECTION 2.4. Unless notified to the
contrary by Bank of America, borrowings under the Swing Line shall be made in
the minimum amount of $1,000,000 or, if greater, in amounts which are integral
multiples of $100,000, or in the amount necessary to effect a Base Rate
Refunding Loan, upon written request by telefacsimile transmission, effective
upon receipt, by an Authorized Representative of the Borrower made to Bank of
America not later than 12:00 noon on the Business Day of the requested
borrowing. Each such Borrowing Notice shall specify the amount of the borrowing
and the date of borrowing, and shall be in the form of EXHIBIT D-2, with
appropriate insertions. Unless notified to the contrary by Bank of America, each
repayment of a Swing Line Loan shall be in an amount which is an integral
multiple of $100,000 or the aggregate amount of all Swing Line Outstandings.
(b) The interest payable on Swing Line Loans is solely for the account
of Bank of America. Swing Line Loans shall bear interest solely at the Base Rate
or, if applicable, the Default Rate. All accrued and unpaid interest on Swing
Line Loans shall be payable, on the dates and in the manner provided in SECTION
4.3 with respect to interest on Base Rate Loans.
(c) Upon the making of a Swing Line Loan, each Lender shall be deemed
to have purchased from Bank of America a Participation therein in an amount
equal to that Lender's Applicable Commitment Percentage of such Swing Line Loan.
Upon demand made by Bank of America, each Lender shall, according to its
Applicable Commitment Percentage of such Swing Line Loan, promptly provide to
Bank of America its purchase price therefor in an amount equal to its
Participation therein. Any Advance made by a Lender pursuant to demand of Bank
of America of the purchase price of its Participation shall when made be deemed
to be (i) provided that the conditions to making Revolving Loans shall be
satisfied, a Base Rate Refunding Loan under SECTION 2.1, and (ii) in all other
cases, the funding by each Lender of the purchase price of its Participation in
such Swing Line Loan. The obligation of each Lender to so provide its purchase
price to Bank of America shall be absolute and unconditional and shall not be
affected by the occurrence of an Event of Default or any other occurrence or
event.
The Borrower, at its option and subject to the terms hereof, may
request an Advance pursuant to SECTION 2.1 in an amount sufficient to repay
Swing Line Outstandings on any date and the Agent shall provide from the
proceeds of such Advance to Bank of America the amount necessary to repay such
Swing Line Outstandings (which Bank of America shall then apply to such
repayment) and credit any balance of the Advance in immediately available funds
in the manner directed by the Borrower pursuant to SECTION 2.1(c)(ii). The
proceeds of such Advances shall be paid to Bank of
34
<PAGE> 41
America for application to the Swing Line Outstandings and the Lenders shall
then be deemed to have made Loans in the amount of such Advances. The Swing Line
shall continue in effect until the Revolving Credit Termination Date, at which
time all Swing Line Outstandings and accrued interest thereon shall be due and
payable in full.
35
<PAGE> 42
ARTICLE III
LETTERS OF CREDIT
3.1. LETTERS OF CREDIT. The Issuing Bank agrees, subject to the terms
and conditions of this Agreement, upon request of the Borrower to issue from
time to time for the account of the Borrower Letters of Credit upon delivery to
the Issuing Bank of an Application and Agreement for Letter of Credit relating
thereto in form and content acceptable to the Issuing Bank; PROVIDED, that (i)
the Issuing Bank shall not be obligated to issue any Letter of Credit if it has
been notified by the Agent or has actual knowledge that a Default or Event of
Default has occurred and is continuing, (ii) the Letter of Credit Outstandings
shall not exceed the Total Letter of Credit Commitment and (iii) no Letter of
Credit shall be issued if, after giving effect thereto, Letter of Credit
Outstandings plus Revolving Credit Outstandings plus Swing Line Outstandings
shall exceed the Total Revolving Credit Commitment. No Letter of Credit shall
have an expiry date (including all rights of the Borrower or any beneficiary
named in such Letter of Credit to require renewal) or payment date occurring
later than the seventh Business Day prior to the Stated Termination Date.
3.2. REIMBURSEMENT AND PARTICIPATIONS.
(a) The Borrower hereby unconditionally agrees to pay to the
Issuing Bank immediately on demand at the Principal Office all amounts required
to pay all drafts drawn or purporting to be drawn under the Letters of Credit
and all reasonable expenses incurred by the Issuing Bank in connection with the
Letters of Credit, and in any event and without demand to place in possession of
the Issuing Bank (which shall include Advances under the Revolving Credit
Facility if permitted by SECTION 2.1 and Swing Line Loans if permitted by
SECTION 2.4) sufficient funds to pay all debts and liabilities arising under any
Letter of Credit. The Issuing Bank agrees to give the Borrower prompt notice of
any request for a draw under a Letter of Credit. The Issuing Bank may charge any
account the Borrower may have with it for any and all amounts the Issuing Bank
pays under a Letter of Credit, plus charges and reasonable expenses as from time
to time agreed to by the Issuing Bank and the Borrower; provided that to the
extent permitted by SECTION 2.1(c)(iii) and SECTION 2.4, amounts shall be paid
pursuant to Advances under the Revolving Credit Facility or, if the Borrower
shall elect, by Swing Line Loans. The Borrower agrees to pay the Issuing Bank
interest on any Reimbursement Obligations not paid when due hereunder at the
Default Rate.
(b) In accordance with the provisions of SECTION 2.1(c), the
Issuing Bank shall notify the Agent of any drawing under any Letter of Credit
promptly following the receipt by the Issuing Bank of such drawing.
(c) Each Lender (other than the Issuing Bank) shall
automatically acquire on the date of issuance thereof, or on the Closing Date in
the case of the Existing Letters of Credit, a Participation in the liability of
the Issuing Bank in respect of each Letter of Credit in an amount equal to such
Lender's Applicable Commitment Percentage of such liability, and to the extent
that the Borrower is obligated to pay the Issuing Bank under SECTION 3.2(a),
each Lender (other than the Issuing Bank) thereby shall absolutely,
unconditionally and irrevocably assume, and shall be unconditionally obligated
to pay to the Issuing Bank, its Applicable Commitment Percentage of the
36
<PAGE> 43
liability of the Issuing Bank under such Letter of Credit in the manner and with
the effect provided in SECTION 2.1(c)(iii).
(d) Simultaneously with the making of each payment by a Lender
to the Issuing Bank pursuant to SECTION 2.1(c)(iii)(B), such Lender shall,
automatically and without any further action on the part of the Issuing Bank or
such Lender, acquire a Participation in an amount equal to such payment
(excluding the portion thereof constituting interest accrued prior to the date
the Lender made its payment) in the related Reimbursement Obligation of the
Borrower. Each Lender's obligation to make payment to the Agent for the account
of the Issuing Bank pursuant to SECTION 2.1(c)(iii) and SECTION 3.2(c), and the
right of the Issuing Bank to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever and shall be
made without any offset, abatement, withholding or reduction
whatsoever. In the event the Lenders have purchased Participations in any
Reimbursement Obligation as set forth above, then at any time payment (in fully
collected, immediately available funds) of such Reimbursement Obligation, in
whole or in part, is received by the Issuing Bank from the Borrower, the Issuing
Bank shall promptly pay to each Lender an amount equal to its Applicable
Commitment Percentage of such payment from the Borrower.
(e) Promptly following the end of each calendar quarter, the
Issuing Bank shall deliver to the Agent a notice describing the aggregate
undrawn amount of all Letters of Credit at the end of such quarter. Upon the
request of any Lender from time to time, the Issuing Bank shall deliver to the
Agent, and the Agent shall deliver to such Lender, any other information
reasonably requested by such Lender with respect to each Letter of Credit
outstanding.
(f) The issuance by the Issuing Bank of each Letter of Credit
shall, in addition to the conditions precedent set forth in ARTICLE VII, be
subject to the conditions that such Letter of Credit be in such form and contain
such terms as shall be reasonably satisfactory to the Issuing Bank consistent
with the then current practices and procedures of the Issuing Bank with respect
to similar letters of credit, and the Borrower shall have executed and delivered
such other instruments and agreements relating to such Letters of Credit as the
Issuing Bank shall have reasonably requested consistent with such practices and
procedures. All Letters of Credit shall be issued pursuant to and subject to the
Uniform Customs and Practice for Documentary Credits, 1993 revision,
International Chamber of Commerce Publication No. 500 or, if the Issuing Bank
shall elect by express reference in an affected Letter of Credit, the
International Chamber of Commerce International Standby Practices commonly
referred to as "ISP98", or any subsequent amendment or revision of either
thereof.
(g) The Borrower agrees that the Issuing Bank may, in its sole
discretion, accept or pay, as complying with the terms of any Letter of Credit,
any drafts or other documents otherwise in order which may be signed or issued
by an administrator, executor, trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, liquidator, receiver, attorney in fact or
other legal representative of a party who is authorized under such Letter of
Credit to draw or issue any drafts or other documents.
37
<PAGE> 44
(h) Without limiting the generality of the provisions of
SECTION 13.9, the Borrower hereby agrees to indemnify and hold harmless the
Issuing Bank, each other Lender and the Agent from and against any and all
claims and damages, losses, liabilities, reasonable costs and expenses which the
Issuing Bank, such other Lender or the Agent may incur (or which may be claimed
against the Issuing Bank, such other Lender or the Agent) by any Person by
reason of or in connection with the issuance or transfer of or payment or
failure to pay under any Letter of Credit; provided that the Borrower shall not
be required to indemnify the Issuing Bank, any other Lender or the Agent for any
claims, damages, losses, liabilities, costs or expenses to the extent, but only
to the extent, (i) caused by the willful misconduct or gross negligence of the
party to be indemnified or (ii) caused by the failure of the Issuing Bank to pay
under any Letter of Credit after the presentation to it of a request for payment
strictly complying with the terms and conditions of such Letter of Credit,
unless such payment is prohibited by any law, regulation, court order or decree.
The indemnification and hold harmless provisions of this SECTION 3.2(h) shall
survive repayment of the Obligations, occurrence of the Revolving Credit
Termination Date, the Facility Termination Date and expiration or termination of
this Agreement.
(i) Without limiting Borrower's rights as set forth in SECTION
3.2(h), the obligation of the Borrower to immediately reimburse the Issuing Bank
for drawings made under Letters of Credit and the Issuing Bank's right to
receive such payment shall be absolute, unconditional and irrevocable, and such
obligations of the Borrower shall be performed strictly in accordance with the
terms of this Agreement and such Letters of Credit and the related Application
and Agreement for any Letter of Credit, under all circumstances whatsoever,
including the following circumstances:
(i) any lack of validity or enforceability of the
Letter of Credit, the obligation supported by the Letter of
Credit or any other agreement or instrument relating thereto
(collectively, the "Related LC Documents");
(ii) any amendment or waiver of or any consent to or
departure from all or any of the Related LC Documents;
(iii) the existence of any claim, setoff, defense
(other than the defense of payment in accordance with the
terms of this Agreement) or other rights which the Borrower
may have at any time against any beneficiary or any transferee
of a Letter of Credit (or any persons or entities for whom any
such beneficiary or any such transferee may be acting), the
Agent, the Lenders or any other Person, whether in connection
with the Loan Documents, the Related LC Documents or any
unrelated transaction;
(iv) any breach of contract or other dispute between
the Borrower and any beneficiary or any transferee of a Letter
of Credit (or any persons or entities for whom such
beneficiary or any such transferee may be acting), the Agent,
the Lenders or any other Person;
38
<PAGE> 45
(v) any draft, statement or any other document
presented under the Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect
whatsoever;
(vi) any delay, extension of time, renewal,
compromise or other indulgence or modification granted or
agreed to by the Agent, with or without notice to or approval
by the Borrower in respect of any of Borrower's Obligations
under this Agreement; or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
39
<PAGE> 46
ARTICLE IV
EURODOLLAR FUNDING, FEES, AND PAYMENT CONVENTIONS
4.1 INTEREST RATE OPTIONS. Eurodollar Rate Loans and Base Rate Loans
may be outstanding at the same time and, so long as no Default or Event of
Default shall have occurred and be continuing, the Borrower shall have the
option to elect the Type of Loan and the duration of the initial and any
subsequent Interest Periods and to Convert Revolving Loans in accordance with
SECTIONS 2.1(c)(i) AND 4.2, as applicable; PROVIDED, HOWEVER, (a) there shall
not be outstanding at any one time Eurodollar Rate Loans having more than eight
(8) different Interest Periods, (b) each Eurodollar Rate Loan (including each
Conversion into and each Continuation as a Eurodollar Rate Loan) shall be in an
amount of $5,000,000 or, if greater than $5,000,000, an integral multiple of
$1,000,000, and (c) no Eurodollar Rate Loan shall have an Interest Period that
extends beyond the Stated Termination Date. If the Agent does not receive a
Borrowing Notice or an Interest Rate Selection Notice giving notice of election
of the duration of an Interest Period or of Conversion of any Loan to or
Continuation of a Loan as a Eurodollar Rate Loan by the time prescribed by
SECTIONS 2.1(c)(i) AND 4.2, as applicable, the Borrower shall be deemed to have
elected to obtain or Convert such Loan to (or Continue such Loan as) a Base Rate
Loan until the Borrower notifies the Agent in accordance with SECTION 4.2. The
Borrower shall not be entitled to elect to Continue any Loan as or Convert any
Loan into a Eurodollar Rate Loan if a Default or Event of Default shall have
occurred and be continuing.
4.2 CONVERSIONS AND ELECTIONS OF SUBSEQUENT INTEREST PERIODS. Subject
to the limitations set forth in the definition of "Interest Period" and in
SECTION 4.1 and ARTICLE VI, the Borrower may:
(a) upon delivery of telephonic notice to the Agent (which shall be
irrevocable) on or before 10:00 A.M. on any Business Day, Convert any Eurodollar
Rate Loan to a Base Rate Loan on the last day of the Interest Period for such
Eurodollar Rate Loan; and
(b) provided that no Default or Event of Default shall have occurred
and be continuing, upon delivery of telephonic notice to the Agent (which shall
be irrevocable) on or before 10:00 A.M. three (3) Business Days' prior to the
date of such Conversion or Continuation:
(i) elect a subsequent Interest Period for any Eurodollar Rate
Loan to begin on the last day of the then current Interest Period for
such Eurodollar Rate Loan; or
(ii) Convert any Base Rate Loan to a Eurodollar Rate Loan on
any Business Day.
Each such notice shall be effective upon receipt by the Agent, shall specify the
amount of the Eurodollar Rate Loan affected, and, if a Continuation as or
Conversion into a Eurodollar Rate Loan, the Interest Period to be used in the
computation of interest. The Authorized Representative shall provide the Agent
written confirmation of each such telephonic notice in the form of a Borrowing
Notice or Interest Rate Selection Notice (as applicable) with appropriate
insertions but failure to provide such confirmation shall not affect the
validity of such telephonic notice. Notice of receipt of such Borrowing Notice
or Interest Rate Selection Notice, as the case may be, shall be provided
40
<PAGE> 47
by the Agent to each Lender by telefacsimile transmission with reasonable
promptness, but (provided the Agent shall have received such notice by 10:00
A.M.) not later than 12:00 noon on the same day as the Agent's receipt of such
notice. All such Continuations or Conversions of Loans shall be effected pro
rata based on the Applicable Commitment Percentages of the Lenders.
4.3 PAYMENT OF INTEREST. The Borrower shall pay interest on the
outstanding and unpaid principal amount of each Revolving Loan, commencing on
the first date of such Revolving Loan until such Revolving Loan shall be repaid,
at the applicable Base Rate or Eurodollar Rate as designated by the Borrower in
the related Borrowing Notice or Interest Rate Selection Notice or as otherwise
provided hereunder. Interest on each Revolving Loan shall be paid on the earlier
of (a) in the case of any Base Rate Loan, quarterly in arrears of the last
Business Day of each February, May, August and November, commencing on November
30, 1999, until the Revolving Credit Termination Date, at which date the entire
principal amount of and all accrued interest on the Revolving Loans shall be
paid in full, (b) in the case of any Eurodollar Rate Loan, on last day of the
applicable Interest Period for such Eurodollar Rate Loan and if such Interest
Period extends for more than three (3) months, at intervals of three (3) months
after the first day of such Interest Period, and (c) upon payment in full of the
related Revolving Loan; PROVIDED, HOWEVER, that if any Event of Default shall
occur and be continuing, all amounts outstanding hereunder shall bear interest
thereafter until paid in full at the Default Rate.
4.4 PREPAYMENTS OF EURODOLLAR RATE LOANS. Whenever any payment of
principal shall be made in respect of any Loan hereunder, whether at maturity,
on acceleration, by optional or mandatory prepayment or as otherwise required or
permitted hereunder, with the effect that any Eurodollar Rate Loan shall be
prepaid in whole or in part prior to the last day of the Interest Period
applicable to such Eurodollar Rate Loan, such payment of principal shall be
accompanied by the additional payment, if any, required by SECTION 6.5.
4.5 MANNER OF PAYMENT. (a) Each payment of principal (including any
prepayment) and payment of interest and fees, and any other amount required to
be paid by or on behalf of the Borrower to the Lenders, the Issuing Bank, the
Agent, or Bank of America with respect to any Loan, Letter of Credit,
Reimbursement Obligation, or Swing Line Loan, shall be made to the Agent at the
Principal Office in Dollars in immediately available funds without condition or
deduction or for any setoff, recoupment, deduction or counterclaim on or before
12:00 noon on the date such payment is due. The Agent may, but shall not be
obligated to, debit the amount of such payment from any one or more ordinary
deposit accounts of the Borrower with the Agent.
(b) Any payment made by or on behalf of the Borrower that is not made
both in Dollars in immediately available funds and prior to 12:00 noon on the
date such payment is to be made shall constitute a non-conforming payment. Any
such non-conforming payment shall not be deemed to be received until the later
of (i) the time such funds become available funds or (ii) the next Business Day.
Any non-conforming payment may constitute or become a Default or Event of
Default as otherwise provided herein. Interest shall continue to accrue at the
Default Rate on any principal or fees as to which no payment or a non-conforming
payment is made from the date such amount was due and payable until the later of
(i) the date such funds become available funds or (ii) the next Business Day.
41
<PAGE> 48
(c) In the event that any payment hereunder or under any of the Notes
becomes due and payable on a day other than a Business Day, then such due date
shall be extended to the next succeeding Business Day unless provided otherwise
under the definition of "Interest Period"; PROVIDED, however, that interest
shall continue to accrue during the period of any such extension; and PROVIDED
further, however, that in no event shall any such due date be extended beyond
the Revolving Credit Termination Date.
4.6 FEES. (a) UNUSED FEE. For the period beginning on the Closing Date
and ending on the Revolving Credit Termination Date, the Borrower agrees to pay
to the Agent, for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, a commitment fee equal to the Applicable Unused Fee
multiplied by the average daily amount by which the Total Revolving Credit
Commitment exceeds the sum of (i) Revolving Credit Outstandings without giving
effect to Swing Line Outstandings plus (ii) Letter of Credit Outstandings. Such
fees shall be due in arrears on the last Business Day of each February, May,
August and November commencing November 30, 1999 to and on the Revolving Credit
Termination Date. Notwithstanding the foregoing, so long as any Lender fails to
make available any portion of its Revolving Credit Commitment when requested,
such Lender shall not be entitled to receive payment of its pro rata share of
such fee until such Lender shall make available such portion.
(b) LETTER OF CREDIT FACILITY FEES. The Borrower shall pay to the
Agent, for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, a fee on the aggregate amount available to be drawn on
each outstanding Letter of Credit at a rate equal to the Applicable Margin for
Eurodollar Rate Loans. Such fees shall be due with respect to each Letter
of Credit quarterly in arrears on the last day of each February, May, August and
November, the first such payment to be made on the first such date occurring
after the date of issuance of a Letter of Credit.
(c) LETTER OF CREDIT FRONTING AND ADMINISTRATIVE FEES. From and after
the date on which there is more than one Lender, the Borrower shall pay to the
Issuing Bank a fronting fee of one-eighth of one percent per annum (0.125%) on
the aggregate amount available to be drawn on each outstanding Letter of Credit,
such fee to be payable quarterly in arrears with respect to each Letter of
Credit on the dates established in SECTION 4.6(b) for the payment of Letter of
Credit facility fees with respect to such Letter of Credit. The Borrower shall
also pay to the Issuing Bank such administrative fee and other fees, if any, in
connection with the Letters of Credit in such amounts and at such times as the
Issuing Bank and the Borrower shall agree from time to time.
(d) ADMINISTRATIVE FEES. The Borrower agrees to pay to the Agent, for
the Agent's individual account, an annual administrative fee, such fee to be
payable in such amounts and at such dates as from time to time agreed to by the
Borrower and Agent in writing.
4.7 PRO RATA PAYMENTS. Except as otherwise specified herein, (a) each
payment on account of the principal of and interest on Loans, the fees described
in SECTION 4.6(a) AND (b), and Swing Line Loans and Reimbursement Obligations as
to which the Lenders have funded their respective Participations which remain
outstanding, shall be made to the Agent for the account of the Lenders pro rata
based on their Applicable Commitment Percentages, and (b) the Agent will
42
<PAGE> 49
promptly distribute to the Lenders in immediately available funds payments
received in fully collected, immediately available funds from the Borrower.
4.8 COMPUTATION OF RATES AND FEES. Except as may be otherwise expressly
provided, (i) the Base Rate shall be computed on the basis of a 365/366 day year
and calculated for actual days elapsed, and (ii) all other interest rates
(including each Eurodollar Rate and the Default Rate) and fees shall be computed
on the basis of a year of 360 days and calculated for actual days elapsed.
4.9 DEFICIENCY ADVANCES; FAILURE TO PURCHASE PARTICIPATIONS. No Lender
shall be responsible for any default of any other Lender in respect to such
other Lender's obligation to make any Loan or Advance hereunder or to fund its
purchase of any Participation hereunder nor shall the Revolving Credit
Commitment or Letter of Credit Commitment of any Lender hereunder be increased
as a result of such default of any other Lender. Without limiting the generality
of the foregoing or the provisions of SECTION 4.10, in the event any Lender
shall fail to advance funds to the Borrower as herein provided, the Agent may in
its discretion, but shall not be obligated to, advance under the applicable Note
in its favor as a Lender all or any portion of such amount or amounts (each, a
"deficiency advance") and shall thereafter be entitled to payments of principal
of and interest on such deficiency advance in the same manner and at the same
interest rate or rates to which such other Lender would have been entitled had
it made such Advance under its Note; provided that, (i) such defaulting Lender
shall not be entitled to receive payments of principal, interest or fees with
respect to such deficiency advance until such deficiency advance (together with
interest thereon as provided in clause (ii)) shall be paid by such Lender and
(ii) upon payment to the Agent from such other Lender of the entire outstanding
amount of each such deficiency advance, together with accrued and unpaid
interest thereon, from the most recent date or dates interest was paid to the
Agent by a Borrower on each Loan comprising the deficiency advance at the
Federal Funds Rate, then such payment shall be credited against the applicable
Note of the Agent in full payment of such deficiency advance and such Borrower
shall be deemed to have borrowed the amount of such deficiency advance from such
other Lender as of the most recent date or dates, as the case may be, upon which
any payments of interest were made by such Borrower thereon. In the event any
Lender shall fail to fund its purchase of a Participation after notice from the
Issuing Bank or Bank of America as the Swing Line lender, as applicable, such
Lender shall pay to the Issuing Bank or Bank of America as the Swing Line
lender, as applicable, such amount on demand, together with interest on the
amount so due from the date of such notice at the Federal Funds Rate to the date
such purchase price is received by the Issuing Bank or Bank of America as the
Swing Line lender, as applicable.
4.10 INTRADAY FUNDING. Without limiting the provisions of SECTION 4.9,
unless the Borrower or any Lender has notified the Agent not later than 12:00
Noon of the Business Day before the date any payment (including in the case of
Lenders any Advance) to be made by it is due, that it does not intend to remit
such payment, the Agent may, in its discretion, assume that Borrower or each
Lender, as the case may be, has timely remitted such payment in the manner
required hereunder and may, in its discretion and in reliance thereon, make
available such payment (or portion thereof) to the Person entitled thereto as
otherwise provided herein. If such payment was not in fact remitted to the Agent
in the manner required hereunder, then:
43
<PAGE> 50
(i) if Borrower failed to make such payment, each Lender shall
forthwith on demand repay to the Agent the amount of such assumed
payment made available to such Lender, together with interest thereon
in respect of each day from and including the date such
amount was made available by the Agent to such Lender to the date such
amount is repaid to the Agent at the Federal Funds Rate; and
(ii) if any Lender failed to make such payment, the Agent
shall be entitled to recover such corresponding amount forthwith upon
the Agent's demand therefor, the Agent promptly shall notify the
Borrower, and the Borrower shall promptly pay such corresponding amount
to the Agent in immediately available funds upon receipt of such
demand. The Agent also shall be entitled to recover interest on such
corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrower to
the date such corresponding amount is recovered by the Agent, (A) from
such Lender at a rate per annum equal to the daily Federal Funds Rate
or (B) from the Borrower, at a rate per annum equal to the interest
rate applicable to the Loan which includes such corresponding amount.
Until the Agent shall recover such corresponding amount together with
interest thereon, such corresponding amount shall constitute a
deficiency advance within the meaning of SECTION 4.9. Nothing herein
shall be deemed to relieve any Lender from its obligation to fulfill
its commitments hereunder or to prejudice any rights which the Agent or
the Borrower may have against any Lender as a result of any default by
such Lender hereunder.
44
<PAGE> 51
ARTICLE V
SECURITY
5.1. SECURITY. As security for the full and timely payment and
performance of all Obligations, the Borrower shall, and shall cause all other
Credit Parties to, on or before the Closing Date, do or cause to be done all
things necessary in the opinion of the Agent and its counsel to grant to the
Agent for the benefit of the Lenders a duly perfected first priority security
interest in all Collateral subject to no prior Lien or other encumbrance or
restriction on transfer (other than restrictions on transfer imposed by
applicable securities laws. In accordance with the foregoing, the Borrower and
each Domestic Subsidiary having rights in any Subsidiary Securities of a
Material Subsidiary shall on the Closing Date deliver to the Agent, in form and
substance reasonably acceptable to the Agent, (A) a Pledge Agreement which shall
pledge to the Agent for the benefit of the Agent and the Lenders the Initial
Pledged Interests owned by the Borrower or such Domestic Subsidiary, (B) if such
Initial Pledged Interests are in the form of certificated securities, such
certificated securities, together with undated stock powers or other appropriate
transfer documents endorsed in blank pertaining thereto, (C) if such Initial
Pledged Interests do not constitute securities and the issuer thereof has not
elected to have such interests treated as securities under Article 8 of the
Uniform Commercial Code, a control agreement (containing the provisions
described in SECTION 9.20(f)) from the Registrar of such Initial Pledged
Interests, and (D) Uniform Commercial Code financing statements reflecting the
Lien in favor of the Agent on such Initial Pledged Interests, each in form and
substance acceptable to the Agent, and shall take such further action and
deliver or cause to be delivered such further documents as required by the
Security Instruments or otherwise as the Agent may request to effect the
transactions contemplated by this ARTICLE V. The Borrower shall, and shall cause
each Domestic Subsidiary, to pledge to the Agent for the benefit of the Agent
and the Lenders (and as appropriate to reaffirm its prior pledge of) all of the
Pledged Interests of (x) each Material Domestic Subsidiary and each Material
Foreign Subsidiary acquired or created after the Closing Date, and (y) each
Subsidiary that becomes a Material Domestic Subsidiary or a Material Foreign
Subsidiary after the Closing Date, and to deliver to the Agent all of the
documents and instruments in connection therewith as are required pursuant to
the terms of SECTION 9.20 and of the Security Instruments.
5.2. FURTHER ASSURANCES. At the request of the Agent, the Borrower will
or will cause all other Credit Parties, as the case may be, to execute, by its
duly authorized officers, alone or with the Agent, any certificate, instrument,
financing statement, control agreement, statement or document, or to procure any
such certificate, instrument, statement or document, or to take such other
action (and pay all connected costs) which the Agent reasonably deems necessary
from time to time to create, continue or preserve the liens and security
interests in Collateral (and the perfection and priority thereof) of the Agent
contemplated hereby and by the other Loan Documents and specifically including
all Collateral acquired by the Borrower or any other Credit Party after the
Closing Date. The Agent is hereby irrevocably authorized to execute and file or
cause to be filed, with or if permitted by applicable law without the signature
of the Borrower or any Credit Party appearing thereon, all Uniform Commercial
Code financing statements reflecting the Borrower or any other Credit Party as
"debtor" and the Agent as "secured party", and continuations thereof and
amendments
45
<PAGE> 52
thereto, as the Agent reasonably deems necessary or advisable to give effect to
the transactions contemplated hereby and by the other Loan Documents.
5.3. INFORMATION REGARDING COLLATERAL. The Borrower represents,
warrants and covenants that (i) the chief executive office of the Borrower and
each other Person providing Collateral pursuant to a Security Instrument (each,
a "Grantor") at the Closing Date is located at the address or addresses
specified on SCHEDULE 5.3, and (ii) SCHEDULE 5.3 contains a true and complete
list of (a) the exact legal name, jurisdiction of formation, and address of each
Grantor and of each other Person that has effected any merger or consolidation
with a Grantor or contributed or transferred to a Grantor any property
constituting Collateral at any time since January 1, 1995 (excluding Persons
making sales in the ordinary course of their businesses to a Grantor of property
constituting inventory in the hands of such seller), and (b) the exact legal
name, jurisdiction of formation, and each location of the chief executive office
of each Grantor at any time since January 1, 1995. The Borrower shall not
change, and shall not permit any other Grantor to change, its name, jurisdiction
of formation (whether by reincorporation, merger or otherwise) or the location
of its chief executive office, except upon giving not less than thirty
(30) days' prior written notice to the Agent and taking or causing to be taken
all such action at the Borrower's or such other Grantor's expense as may be
reasonably requested by the Agent to perfect or maintain the perfection of the
Lien of the Agent in Collateral.
46
<PAGE> 53
ARTICLE VI
CHANGE IN CIRCUMSTANCES
6.1. INCREASED COST AND REDUCED RETURN.
(a) If, after the date hereof, the adoption of any applicable law,
rule, or regulation, or any change in any applicable law, rule, or regulation,
or any change in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such governmental authority, central bank, or
comparable agency:
(i) shall subject such Lender (or its Applicable
Lending Office) to any tax, duty, or other charge with respect to any
Eurodollar Rate Loans, its Note, or its obligation to make Eurodollar
Rate Loans, or change the basis of taxation of any amounts payable to
such Lender (or its Applicable Lending Office) under this Agreement or
its Note in respect of any Eurodollar Rate Loans (other than taxes
imposed on the overall net income of such Lender by the jurisdiction in
which such Lender has its principal office or such Applicable Lending
Office);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement (other
than the Reserve Requirement utilized in the determination of the
Eurodollar Rate) relating to any extensions of credit or other assets
of, or any deposits with or other liabilities or commitments of, such
Lender (or its Applicable Lending Office), including the Revolving
Credit Commitment of such Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable
Lending Office) or on the London interbank market any other condition
affecting this Agreement or its Note or any of such extensions of
credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Loans or to reduce any sum received or receivable by such Lender
(or its Applicable Lending Office) under this Agreement or its Note with respect
to any Eurodollar Rate Loans, then the Borrower shall pay to such Lender on
demand such amount or amounts as will compensate such Lender for such increased
cost or reduction. If any Lender requests compensation by the Borrower under
this SECTION 6.1(a), the Borrower may, by notice to such Lender (with a copy to
the Agent), suspend the obligation of such Lender to make or Continue Loans of
the Type with respect to which such compensation is requested, or to Convert
Loans of any other Type into Loans of such Type, until the event or condition
giving rise to such request ceases to be in effect (in which case the provisions
of SECTION 6.4 shall be applicable); PROVIDED that such suspension shall not
affect the right of such Lender to receive the compensation so requested.
47
<PAGE> 54
(b) If, after the date hereof, any Lender shall have determined that
the adoption of any applicable law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of such
Lender's obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to capital
adequacy), then from time to time upon demand the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction.
(c) Each Lender shall promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this SECTION 6.1 and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming
compensation under this SECTION 6.1 shall furnish to the Borrower and the Agent
a statement setting forth the additional amount or amounts to be paid to it
hereunder which shall be conclusive in the absence of manifest error. In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.
6.2. LIMITATION ON TYPES OF LOANS. If on or prior to the first day of
any Interest Period for any Eurodollar Rate Loan:
(a) the Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period; or
(b) the Required Lenders determine (which determination shall
be conclusive) and notify the Agent that the Eurodollar Rate will not
adequately and fairly reflect the cost to the Lenders of funding
Eurodollar Rate Loans for such Interest Period;
then the Agent shall give the Borrower prompt notice thereof specifying the
relevant Type of Loans and the relevant amounts or periods, and so long as such
condition remains in effect, the Lenders shall be under no obligation to make
additional Loans of such Type, Continue Loans of such Type, or to Convert Loans
of any other Type into Loans of such Type and the Borrower shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Loans of the
affected Type, either prepay such Loans or Convert such Loans into another Type
of Loan in accordance with the terms of this Agreement.
6.3. ILLEGALITY. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for any Lender or its Applicable Lending
Office to make, maintain, or fund Eurodollar Rate Loans hereunder, then such
Lender shall promptly notify the Borrower thereof and such Lender's obligation
to make or Continue Eurodollar Rate Loans and to Convert other Types of
48
<PAGE> 55
Loans into Eurodollar Rate Loans shall be suspended until such time as such
Lender may again make, maintain, and fund Eurodollar Rate Loans (in which case
the provisions of SECTION 6.4 shall be applicable).
6.4. TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to
make a Eurodollar Rate Loan or to Continue, or to Convert Loans of any other
Type into, Loans of a particular Type shall be suspended pursuant to SECTION 6.1
OR 6.3 hereof (Loans of such Type being herein called "Affected Loans" and such
Type being herein called the "Affected Type"), such Lender's Affected Loans
shall be automatically Converted into Base Rate Loans on the last day(s) of the
then current Interest Period(s) for Affected Loans (or, in the case of a
Conversion required by SECTION 6.3 hereof, on such earlier date as such Lender
may specify to the Borrower with a copy to the Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
SECTION 6.1 OR 6.3 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Affected Loans have been
so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Affected Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by
such Lender as Loans of the Affected Type shall be made or Continued
instead as Base Rate Loans, and all Loans of such Lender that would
otherwise be Converted into Loans of the Affected Type shall be
Converted instead into (or shall remain as) Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in SECTION 6.1 OR 6.3 hereof that gave rise to the
Conversion of such Lender's Affected Loans pursuant to this SECTION 6.4 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Loans of the Affected Type made by
other Lenders are outstanding, such Lender's Base Rate Loans shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Loans of the Affected Type, to the extent
necessary so that, after giving effect thereto, all Loans held by the Lenders
holding Loans of the Affected Type and by such Lender are held pro rata (as to
principal amounts, Types, and Interest Periods) in accordance with their
respective Revolving Credit Commitments.
6.5. COMPENSATION. Upon the request of any Lender, the Borrower shall
pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost, or
expense (including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar
Rate Loan for any reason (including, without limitation, the
acceleration of the Loans pursuant to SECTION 11.1) on a date other
than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any condition precedent specified in
ARTICLE VII to be satisfied) to borrow, Convert, Continue, or prepay a
Eurodollar Rate Loan on the date for such borrowing,
49
<PAGE> 56
Conversion, Continuation, or prepayment specified in the relevant
notice of borrowing, prepayment, Continuation, or Conversion under this
Agreement.
6.6. TAXES. (a) Any and all payments by the Borrower to or for the
account of any Lender or the Agent hereunder or under any other Loan Document
shall be made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto, EXCLUDING, in the case of each Lender and
the Agent, taxes imposed on its income, and franchise taxes imposed on it, by
the jurisdiction under the laws of which such Lender (or its Applicable Lending
Office) or the Agent (as the case may be) is organized or any political
subdivision thereof (all such non-excluded taxes, duties, levies, imposts,
deductions, charges, withholdings, and liabilities being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable under this Agreement or any other Loan Document
to any Lender or the Agent, (i) the sum payable shall be increased as necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this SECTION 6.6) such Lender or the Agent
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law, and (iv) the Borrower
shall furnish to the Agent, at its address referred to in SECTION 13.2, the
original or a certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under this Agreement
or any other Loan Document or from the execution or delivery of, or otherwise
with respect to, this Agreement or any other Loan Document (hereinafter referred
to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the Agent for the
full amount of Taxes and Other Taxes (including, without limitation, any Taxes
or Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this SECTION 6.6) paid by such Lender or the Agent (as the case may be) and any
liability (including penalties, interest, and expenses) arising therefrom or
with respect thereto.
(d) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the Borrower
or the Agent (but only so long as such Lender remains lawfully able to do so),
shall provide the Borrower and the Agent with (i) Internal Revenue Service Form
1001 or 4224, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Lender is entitled to benefits under an
income tax treaty to which the United States is a party which reduces the rate
of withholding tax on payments of interest or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States, (ii) Internal Revenue Service Form
W-8 or W-9, as appropriate, or any successor form prescribed by the Internal
Revenue Service, and (iii) any other form or certificate required by any taxing
authority
50
<PAGE> 57
(including any certificate required by Sections 871(h) and 881(c) of the
Internal Revenue Code), certifying that such Lender is entitled to an exemption
from or a reduced rate of tax on payments pursuant to this Agreement or any of
the other Loan Documents.
(e) For any period with respect to which a Lender has failed to provide
the Borrower and the Agent with the appropriate form pursuant to SECTION 6.6(d)
(unless such failure is due to a change in treaty, law, or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Lender shall not be entitled to indemnification under SECTION 6.6(a) OR
6.6(b) with respect to Taxes imposed by the United States; PROVIDED, HOWEVER,
that should a Lender, which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as such
Lender shall reasonably request to assist such Lender to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this SECTION 6.6, then such Lender will agree
to use reasonable efforts to change the jurisdiction of its Applicable Lending
Office so as to eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Lender, is not
otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent the original or a certified copy of a
receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this SECTION 6.6 shall survive the termination of the Revolving Credit
Commitments, the payment in full of the Notes and the Facility Termination Date.
51
<PAGE> 58
ARTICLE VII
CONDITIONS TO MAKING LOANS AND ISSUING LETTERS OF CREDIT
7.1. CONDITIONS OF INITIAL ADVANCE. The obligation of the Lenders to
make the initial Advance under the Revolving Credit Facility, and of the Issuing
Bank to issue any Letter of Credit, and of Bank of America to make any Swing
Line Loan, is subject to the conditions precedent that:
(a) the Agent shall have received on the Closing Date, in form
and substance satisfactory to the Agent and Lenders, the following:
(i) executed originals of each of this Agreement,
the Notes, the initial Facility Guaranties, the Security
Instruments, the LC Account Agreement and the other Loan
Documents, together with all schedules and exhibits thereto;
(ii) the favorable written opinion or opinions with
respect to the Loan Documents and the transactions
contemplated thereby of counsel to the Credit Parties dated
the Closing Date, addressed to the Agent and the Lenders and
reasonably satisfactory to special counsel to the Agent,
substantially in the form of EXHIBIT G;
(iii) resolutions of the boards of directors or other
appropriate governing body (or of the appropriate committee
thereof) of each Credit Party certified by its secretary or
assistant secretary as of the Closing Date, (x) approving and
adopting the Loan Documents to be executed by such Person, and
authorizing the execution and delivery thereof, (y)
authorizing the Line of Business Transfer and the Spinoff, and
(z) approving and adopting the Line of Business Transfer
Documents and the Spinoff Documents, and authorizing the
execution and delivery thereof;
(iv) specimen signatures of officers or other
appropriate representatives executing the Loan Documents on
behalf of each of the Credit Parties, certified by the
secretary or assistant secretary of such Credit Party;
(v) the Organizational Documents of each of the
Credit Parties certified as of a recent date by the Secretary
of State of its state of organization;
(vi) Operating Documents of each of the Credit
Parties certified as of the Closing Date as true and correct
by its secretary or assistant secretary;
(vii) certificates issued as of a recent date by the
Secretaries of State of the respective jurisdictions of
formation of each of the Credit Parties as to the due
existence and good standing of such Person;
(viii) appropriate certificates of qualification to
do business, good standing and, where appropriate, authority
to conduct business under assumed name, issued in respect of
each of the Credit Parties as of a recent date by the
Secretary of State or
52
<PAGE> 59
comparable official of each of Ohio and California,
constituting all of the jurisdictions in which the failure to
be qualified to do business or authorized so to conduct
business could have a Material Adverse Effect;
(ix) notice of appointment of the initial Authorized
Representative(s);
(x) certificate of an Authorized Representative
dated the Closing Date demonstrating compliance with the
financial covenants contained in SECTIONS 10.1(a) through
10.1(c) as of the end of the fiscal quarter most recently
ended prior to the Closing Date and based on the Historical
Unaudited Quarterly Statements, substantially in the form of
EXHIBIT H;
(xi) the Historical Unaudited Quarterly Statements
and all other financial statements and projections referred to
in SECTION 8.6(a);
(xii) evidence that all notices required to be given
to effect on the Closing Date the repayment of the Existing
Syndicated Indebtedness and termination of the Existing
Syndicated Credit Agreement substantially simultaneously with
the receipt of the Special Distribution shall have been given;
(xiii) a certificate of an officer of the Borrower
reasonably satisfactory to the Agent and the Lenders as to the
matters set forth in SECTION 7.1(b) and, with respect to the
operations, assets and affairs of the Borrower and its
Subsidiaries only, SECTION 7.1(c);
(xiv) a certificate of an officer of OMNOVA
reasonably satisfactory to the Agent and the Lender as to the
matters set forth in SECTION 7.1(c), with respect to the
operations, assets and affairs of OMNOVA and its subsidiaries
only;
(xv) evidence that the proceeds of the Special
Distribution have been received and are used substantially
simultaneously with the delivery thereof to repay the
obligations of the Borrower and its Subsidiaries arising under
the Existing Syndicated Indebtedness and to terminate the
Existing Syndicated Credit Agreement;
(xvi) evidence of all insurance required by the Loan
Documents;
(xvii) an initial Borrowing Notice, if any, and, if
elected by the Borrower, Interest Rate Selection Notice;
(xviii) evidence of the filing of Uniform Commercial
Code financing statements reflecting the filing in all places
required by applicable law to perfect the Liens of the Agent
under the Security Instruments as a first priority Lien as to
items of Collateral in which a security interest may be
perfected by the filing of financing statements, and such
other documents and/or evidence of other actions as may be
necessary under applicable law to perfect the Liens of the
Agent under the Security
53
<PAGE> 60
Instruments as a first priority Lien in and to such other
Collateral as the Agent may require, including without
limitation:
(i) the delivery by the Borrower of all
certificates evidencing Pledged Interests,
accompanied in each case by duly executed stock
powers (or other appropriate transfer documents) in
blank affixed thereto; and
(ii) the delivery by the Borrower of
certificates of the Registrar of each partnership
Subsidiary evidencing the due registration on the
registration books of such partnership of the Lien in
favor of the Agent conferred under the Security
Instruments;
(xix) copies of the executed Line of Business
Transfer Documents and the Spinoff Documents certified by the
secretary or an assistant secretary of the Borrower, which
shall be in form and substance satisfactory to the Agent;
(xx) copies certified by an Authorized Representative
of executed employment contracts by the Borrower with key
executives of the Retained Business, including Messrs. Robert
Wolfe and Terry Hall;
(xxi) a copy, certified by an Authorized
Representative of the Borrower, of the ruling letter dated as
of June 30, 1999 from the Internal Revenue Service ("IRS") to
the effect that Section 355 of the Code would apply to the
Spinoff such that the Spinoff will constitute a tax-free
distribution for U.S. Federal income tax purposes (the "IRS
Ruling Letter");
(xxii) evidence that all fees payable by the Borrower
on the Closing Date to the Agent, BAS and the Lenders have
been paid in full; and
(xxiii) such other documents, instruments,
certificates and opinions as the Agent or any Lender may
reasonably request on or prior to the Closing Date in
connection with the consummation of the Spinoff, the Line of
Business Transfer or the transactions contemplated hereby; and
(b) Each of the following shall have occurred or be true:
(i) substantially simultaneously with the making of
the initial Advance hereunder (x) the Borrower shall have
received the Special Distribution, (y) the Borrower shall have
paid in full all amounts owing under each of the Existing
Syndicated Indebtedness and terminated the Existing Syndicated
Credit Agreement and all documents and obligations relating
thereto, and (z) the Spinoff and the Line of Business Transfer
shall have been approved by the shareholders of the Borrower,
as necessary, and shall have been effected in accordance with,
and upon satisfaction of each of the conditions to
effectiveness thereof without any waiver thereof, as set forth
in the Spinoff Documents and the Line of Business Transfer
Documents, respectively; and
54
<PAGE> 61
(ii) there shall not have been any material
amendment, revision, alteration or supplement to any of the
Spinoff Documents or any of the Line of Business Transfer
Documents from the forms thereof from time to time delivered
to and reviewed by the Lenders without the written consent of
the Agent; and
(c) In the good faith judgment of the Agent and the
Lenders:
(i) there shall not have occurred or become known to
the Agent or the Lenders any event, condition, situation or
status since the date of the information contained in the
financial and business projections, budgets, pro forma data
and forecasts concerning the Borrower and its Subsidiaries
delivered to the Agent prior to the Closing Date that has had
or could reasonably be expected to result in a Material
Adverse Effect or adversely affect the consummation of the
Spinoff or the Line of Business Transfer in accordance with
the terms of the Spinoff Documents or the Line of Business
Transfer Documents, respectively;
(ii) no order, decree, judgment, ruling, injunction,
litigation, action, suit, investigation or other arbitral,
administrative or judicial proceeding shall be pending or
threatened, and there shall exist no order, decree, judgment,
injunction or arbitral award or ruling, which could reasonably
be likely to result in a Material Adverse Effect, or restrain
or otherwise adversely affect the consummation of the Spinoff
or the Line of Business Transfer in accordance with the terms
of the Spinoff Documents or the Line of Business Transfer
Documents, respectively; and
(iii) in connection with the Line of Business
Transfer, the Spinoff and the transactions contemplated
thereby, (A) each of OMNOVA (or its applicable subsidiaries)
and each of the Credit Parties shall have received all
approvals, consents and waivers, and shall have made or given
all necessary filings and notices as shall be required to
consummate the transactions contemplated hereby (including the
Spinoff and the Line of Business Transfer) without the
occurrence of any default under, conflict with or violation of
(I) any applicable law, rule, regulation, order or decree of
any Governmental Authority or arbitral authority or (II) any
agreement, document or instrument to which OMNOVA, any of its
subsidiaries, or any of the Credit Parties is a party or by
which any of them or their properties is bound, (B) such
approvals, consents and waivers shall be in force and effect,
(C) all waiting periods shall have expired without any action
being taken to restrain or prevent or impose any adverse
material conditions on the Line of Business Transfer, the
Spinoff and the transactions contemplated thereby, and (D) no
law or regulation shall be applicable which, in the sole
judgment of the Agent, could restrain or prevent or impose any
adverse material conditions on the Line of Business Transfer,
the Spinoff and the transactions contemplated thereby or be
violated by the consummation of any thereof.
7.2. CONDITIONS OF REVOLVING LOANS AND LETTER OF CREDIT. The
obligations of the Lenders to make any Revolving Loans, and the Issuing Bank to
issue Letters of Credit and Bank of America
55
<PAGE> 62
to make Swing Line Loans, hereunder on or subsequent to the Closing Date are
subject to the satisfaction of the following conditions:
(a) the Agent or, in the case of Swing Line Loans, Bank of
America shall have received a Borrowing Notice if required by ARTICLE
II;
(b) the representations and warranties of the Credit Parties
set forth in ARTICLE VIII and in each of the other Loan Documents shall
be true and correct in all material respects on and as of the date of
such Advance, Swing Line Loan or Letter of Credit issuance or renewal,
with the same effect as though such representations and warranties had
been made on and as of such date, except to the extent that such
representations and warranties expressly relate to an earlier date and
except that the financial statements referred to in SECTION 8.6(a)
shall be deemed (solely for the purpose of the representation and
warranty contained in such SECTION 8.6(a) but not for the purpose of
any cross-reference to such SECTION 8.6(a) or to the financial
statements described therein contained in any other provision of
SECTION 8.6 or elsewhere in ARTICLE 8) to be those financial statements
most recently delivered to the Agent and the Lenders pursuant to
SECTION 9.1 from the date financial statements are delivered to the
Agent and the Lenders in accordance with such Section;
(c) in the case of the issuance of a Letter of Credit, the
Borrower shall have executed and delivered to the Issuing Bank an
Application and Agreement for Letter of Credit in form and content
acceptable to the Issuing Bank together with such other instruments and
documents as it shall request;
(d) at the time of (and after giving effect to) each Advance,
Swing Line Loan or the issuance of a Letter of Credit, no Default or
Event of Default specified in ARTICLE XI shall have occurred and be
continuing; and
(e) immediately after giving effect to:
(i) a Revolving Loan, the aggregate principal balance
of all outstanding Revolving Loans for each Lender shall not
exceed such Lender's Revolving Credit Commitment;
(ii) a Letter of Credit or renewal thereof, the
aggregate principal balance of all outstanding Participations
in Letters of Credit and Reimbursement Obligations (or in the
case of the Issuing Bank, its remaining interest after
deduction of all Participations in Letters of Credit and
Reimbursement Obligations of other Lenders) for each Lender
and in the aggregate shall not exceed, respectively, (X) such
Lender's Letter of Credit Commitment or (Y) the Total Letter
of Credit Commitment;
(iii) a Swing Line Loan, the Swing Line Outstandings
shall not exceed $10,000,000; and
56
<PAGE> 63
(iv) a Revolving Loan, Swing Line Loan or a Letter of
Credit or renewal thereof, the sum of Letter of Credit
Outstandings plus Revolving Credit Outstandings plus Swing
Line Outstandings shall not exceed the Total Revolving Credit
Commitment.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants with respect to itself and to its
Subsidiaries (which representations and warranties shall survive the delivery of
the documents mentioned herein and the making of Loans), that:
8.1. ORGANIZATION AND AUTHORITY.
(a) The Borrower and each Subsidiary is a corporation,
partnership or other legal entity duly organized and validly existing
under the laws of the jurisdiction of its formation;
(b) The Borrower and each Subsidiary (i) has the requisite
power and authority to own its properties and assets and to carry on
its business as now being conducted and as contemplated in the
Transaction Documents, and (ii) is qualified to do business in every
jurisdiction in which failure so to qualify would have a Material
Adverse Effect;
(c) The Borrower has the power and authority to execute,
deliver and perform this Agreement and the Notes, and to borrow
hereunder, and to execute, deliver and perform each of the other
Transaction Documents to which it is a party;
(d) Each Guarantor has the power and authority to execute,
deliver and perform the Facility Guaranty and each of the other
Transaction Documents to which it is a party; and
(e) When executed and delivered, each of the Transaction
Documents to which any Credit Party is a party will be the legal, valid
and binding obligation or agreement, as the case may be, of such Credit
Party, enforceable against such Credit Party in accordance with its
respective terms, subject to the effect of any applicable bankruptcy,
moratorium, insolvency, reorganization or other similar law affecting
the enforceability of creditors' rights generally and to the effect of
general principles of equity which may limit the availability of
remedies (whether considered in a proceeding at law or in equity).
8.2. TRANSACTION DOCUMENTS. The execution, delivery and performance by
each Credit Party of each of the Transaction Documents to which it is a party:
(a) have been duly authorized by all requisite Organizational
Action of such Credit Party required for the lawful execution, delivery
and performance thereof;
(b) do not violate any provisions of (i) any applicable law,
rule or regulation, (ii) any judgment, writ, order, determination,
decree or arbitral award of any Governmental
57
<PAGE> 64
Authority or arbitral authority binding on such Credit Party or its
properties, or (iii) the Organizational Documents or Operating
Documents of such Credit Party;
(c) does not and will not be in conflict with, result in a
breach of or constitute an event of default, or an event which, with
notice or lapse of time or both, would constitute an event of default,
under any contract, indenture, agreement or other instrument or
document to which such Credit Party or OMNOVA or any of its
subsidiaries is a party, or by which the properties or assets of such
Credit Party or OMNOVA or any of its subsidiaries are bound; and
(d) does not and will not result in the creation or imposition
of any Lien upon any of the properties or assets of such Credit Party
except any Liens in favor of the Agent and the Lenders created by the
Security Instruments.
8.3. SOLVENCY. Each Credit Party is Solvent after giving effect to the
transactions contemplated by the Transaction Documents.
8.4. SUBSIDIARIES AND STOCKHOLDERS. The Borrower has no Subsidiaries
other than those Persons listed as Subsidiaries in SCHEDULE 8.4 and additional
Subsidiaries created or acquired after the Closing Date in compliance with
SECTION 9.20; SCHEDULE 8.4 states as of the date hereof the organizational form
of each entity, the authorized and issued capitalization of each Subsidiary
listed thereon, the number of shares or other equity interests of each class of
capital stock or interest issued and outstanding of each such Subsidiary and the
number and/or percentage of outstanding shares or other equity interest
(including options, warrants and other rights to acquire any interest) of each
such class of capital stock or other equity interest owned by Borrower or by any
such Subsidiary; the outstanding shares or other equity interests of each such
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable; and Borrower and each such Subsidiary owns beneficially and of
record all the shares and other interests it is listed as owning in SCHEDULE
8.4, free and clear of any Lien.
8.5. OWNERSHIP INTERESTS. Borrower owns no interest in any Person other
than the Persons listed in SCHEDULE 8.4, equity investments in Persons not
constituting Subsidiaries permitted under SECTION 10.6 and additional
Subsidiaries created or acquired after the Closing Date in compliance with
SECTION 9.20.
8.6. FINANCIAL CONDITION.
(a) The Borrower has heretofore furnished to the Agent and
each Lender (i) an unaudited pro forma condensed consolidated balance
sheet of the Borrower and its Subsidiaries as at February 28, 1999 and
the notes thereto and the related unaudited pro forma condensed
consolidated statements of income for the three months ended February
28, 1999, (ii) unaudited pro forma condensed statements of income for
the years ended November 30, 1998, November 30, 1997 and November 30,
1996, and the notes thereto (information listed at (i) and (ii) is
found on pages 41 through 50 of the Borrower's proxy statement dated
July 2, 1999), and (iii) pro forma five-year projections, beginning
with the
58
<PAGE> 65
Fiscal Year ending November 30, 1999, including pro forma balance
sheets and statements of income and cash flows. Except as set forth
therein, the financial statements described in (i) and (ii) above
(including the notes thereto) present fairly on a pro forma basis
giving effect to the Line of Business Transfer and the Spinoff, the
financial condition of the Borrower and its Subsidiaries as of such
periods and results of their operations for the periods then ended, all
in conformity with GAAP applied on a Consistent Basis;
(b) since the later of (i) the date of the audited financial
statements delivered pursuant to SECTION 8.6(a)(i) hereof or (ii) the
date of the audited financial statements most recently delivered
pursuant to SECTION 9.1(a) hereof, there has been no material adverse
change in the condition, financial or otherwise, or in the businesses,
properties, performance, prospects or operations, of the Borrower, its
Subsidiaries or, in respect of clause (i), the Retained Business, nor
have such businesses or properties been materially adversely affected
as a result of any fire, explosion, earthquake, accident, strike,
lockout, combination of workers, flood, embargo or act of God; and
(c) except as set forth in the financial statements referred
to in SECTION 8.6(a) or in SCHEDULE 8.6 or permitted by SECTION 10.4,
neither the Borrower nor any Subsidiary has incurred any material
Indebtedness which remains outstanding or unsatisfied.
8.7. TITLE TO PROPERTIES. The Borrower and each of its Subsidiaries has
good and marketable title to all its real and personal properties, subject to no
transfer restrictions or Liens of any kind, except for (i) the transfer
restrictions and Liens described in SCHEDULE 8.7, (ii) Permitted Liens, (iii)
with respect to any personal property that constitutes a security, transfer
restrictions imposed under Federal and state securities laws and regulations,
and (iv) the lack of title or the presence of such transfer restrictions that
could not reasonably be expected to have a Material Adverse Effect.
8.8. TAXES. Except as set forth in SCHEDULE 8.8, the Borrower and each
of its Subsidiaries has filed or caused to be filed all federal, state and local
tax returns which are required to be filed by it and, except for taxes and
assessments being contested in good faith by appropriate proceedings diligently
conducted and against which reserves reflected in the financial statements
described in SECTION 8.6(a) or SECTIONS 9.1(a) or (b) and satisfactory to the
Borrower's independent certified public accountants have been established, have
paid or caused to be paid all taxes as shown on said returns or on any
assessment received by it, to the extent that such taxes have become due, unless
the failure to pay the same could not reasonably be expected to have a Material
Adverse Effect.
8.9. OTHER AGREEMENTS. Neither the Borrower nor any Subsidiary is
(a) a party to or subject to any judgment, order, decree,
agreement, lease or instrument, or subject to other restrictions, which
individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect; or
(b) in default in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any
agreement or instrument to which the
59
<PAGE> 66
Borrower or any Subsidiary is a party, which default has, or if not
remedied within any applicable grace period could reasonably be likely
to have, a Material Adverse Effect.
8.10. LITIGATION. Except as set forth in SCHEDULE 8.10, there is no
action, suit, investigation or proceeding at law or in equity or by or before
any governmental instrumentality or agency or arbitral body pending, or, to the
knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary or other Credit Party or affecting the Borrower or any Subsidiary or
other Credit Party or any properties or rights of the Borrower or any Subsidiary
or other Credit Party, which in the opinion of management could reasonably be
expected to have a Material Adverse Effect.
8.11. MARGIN STOCK. The proceeds of the borrowings made hereunder will
be used by the Borrower only for the purposes expressly authorized herein. None
of such proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin stock or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
margin stock or for any other purpose which might constitute any of the Loans
under this Agreement a "purpose credit" within the meaning of said Regulation U
or Regulation X (12 C.F.R. Part 221) of the Board. Neither the Borrower nor any
agent acting in its behalf has taken or will take any action which might cause
this Agreement or any of the documents or instruments delivered pursuant hereto
to violate any regulation of the Board or to violate the Securities Exchange Act
of 1934, as amended, or the Securities Act of 1933, as amended, or any state
securities laws, in each case as in effect on the date hereof.
8.12. INVESTMENT COMPANY. No Credit Party is an "investment company,"
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company", as such terms are defined in the Investment Company Act of
1940, as amended (15 U.S.C. Section 80a-1, et seq.). The application of the
proceeds of the Loans and repayment thereof by the Borrower and the performance
by the Borrower and the other Credit Parties of the transactions contemplated
by the Loan Documents will not violate any provision of said Act, or any rule,
regulation or order issued by the Securities and Exchange Commission
thereunder, in each case as in effect on the date hereof.
8.13. PATENTS, ETC. The Borrower and each other Credit Party owns or
has the right to use, under valid license agreements or otherwise, all material
patents, licenses, franchises, trademarks, trademark rights, trade names, trade
name rights, trade secrets and copyrights necessary to or used in the conduct of
its businesses as now conducted and as contemplated by the Loan Documents,
without known conflict with any patent, license, franchise, trademark, trade
secret, trade name, copyright, other proprietary right of any other Person.
8.14. NO UNTRUE STATEMENT. Neither (a) this Agreement nor any other
Loan Document or certificate or document executed and delivered by or on behalf
of the Borrower or any other Credit Party in accordance with or pursuant to any
Loan Document nor (b) any statement, representation, or warranty provided to the
Agent in connection with the negotiation or preparation of the Loan Documents
contains any misrepresentation or untrue statement of material fact or omits to
state a material fact necessary, in light of the circumstance under which it was
made, in order to make any such warranty, representation or statement contained
therein not misleading.
60
<PAGE> 67
8.15. NO CONSENTS, ETC. Neither the respective businesses or properties
of the Credit Parties or any Subsidiary, nor any relationship among the Credit
Parties or any Subsidiary and any other Person, nor any circumstance in
connection with the execution, delivery and performance of the Transaction
Documents and the transactions contemplated thereby, is such as to require a
consent, approval or authorization of, or filing, registration or qualification
with, any Governmental Authority or any other Person on the part of any Credit
Party as a condition to the execution, delivery and performance of, or
consummation of the transactions contemplated by the Transaction Documents,
which, if not obtained or effected, would be reasonably likely to have a
Material Adverse Effect, or if so, such consent, approval, authorization,
filing, registration or qualification has been duly obtained or effected, as the
case may be.
8.16. EMPLOYEE BENEFIT PLANS.
(a) The Borrower and each ERISA Affiliate is in compliance
with all applicable provisions of ERISA and the regulations and
published interpretations thereunder and in compliance with all Foreign
Benefit Laws with respect to all Employee Benefit Plans except for any
required amendments for which the remedial amendment period as defined
in Section 401(b) of the Code has not yet expired. Each Employee
Benefit Plan that is intended to be qualified under Section 401(a) of
the Code has been determined or the Borrower or its Subsidiaries is in
the process of obtaining a determination by the Internal Revenue
Service to be so qualified, each trust related to such plan has been
determined to be exempt under Section 501(a) of the Code, and each
Employee Benefit Plan subject to any Foreign Benefit Law has received
the required approvals by any Governmental Authority regulating such
Employee Benefit Plan. No material liability has been incurred by the
Borrower or any ERISA Affiliate which remains unsatisfied for any taxes
or penalties with respect to any Employee Benefit Plan or any
Multiemployer Plan;
(b) Neither the Borrower nor any ERISA Affiliate has (i)
engaged in a nonexempt prohibited transaction described in Section 4975
of the Code or Section 406 of ERISA affecting any of the Employee
Benefit Plans or the trusts created thereunder which could subject any
such Employee Benefit Plan or trust to a material tax or penalty on
prohibited transactions imposed under Internal Revenue Code Section
4975 or ERISA, (ii) incurred any accumulated funding deficiency with
respect to any Employee Benefit Plan, whether or not waived, or any
other liability to the PBGC which remains outstanding other than the
payment of premiums and there are no premium payments which are due and
unpaid, (iii) failed to make a required contribution or payment to a
Multiemployer Plan, (iv) failed to make a required installment or other
required payment under Section 412 of the Code, Section 302 of ERISA or
the terms of such Employee Benefit Plan, or (v) failed to make a
required contribution or payment, or otherwise failed to operate in
compliance with any Foreign Benefit Law regulating any Employee Benefit
Plan;
(c) No Termination Event has occurred or is reasonably
expected to occur with respect to any Pension Plan or Multiemployer
Plan, and neither the Borrower nor any ERISA Affiliate has incurred any
unpaid withdrawal liability with respect to any Multiemployer Plan;
61
<PAGE> 68
(d) The present value of all vested accrued benefits under
each Employee Benefit Plan which is subject to Title IV of ERISA, or
the funding of which is regulated by any Foreign Benefit Law did not,
as of the most recent valuation date for each such plan, exceed the
then current value of the assets of such Employee Benefit Plan
allocable to such benefits;
(e) To the best of the Borrower's knowledge, each Employee
Benefit Plan which is subject to Title IV of ERISA or the funding of
which is regulated by any Foreign Benefit Law, maintained by the
Borrower or any ERISA Affiliate, has been administered in accordance
with its terms in all material respects and is in compliance in all
material respects with all applicable requirements of ERISA, applicable
Foreign Benefit Law and other applicable laws, regulations and rules;
(f) The consummation of the Loans and the issuance of the
Letters of Credit provided for herein will not involve any prohibited
transaction under ERISA which is not subject to a statutory or
administrative exemption; and
(g) No material proceeding, claim, lawsuit and/or
investigation exists or, to the best knowledge of the Borrower after
due inquiry, is threatened concerning or involving any Employee Benefit
Plan.
8.17. NO DEFAULT. As of the date hereof, there does not exist any
Default or Event of Default hereunder.
8.18. ENVIRONMENTAL MATTERS. Based upon currently available information
and reasonable investigation and inquiry, to the best of management's knowledge,
except as set forth in SCHEDULE 8.18 hereto:
(a) The Borrower and its Subsidiaries are in compliance with
all Environmental Laws, except to the extent that any non-compliance
would not reasonably be expected to have a Material Adverse Effect.
(b) Neither the Borrower nor any of its Subsidiaries has
received any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws that would reasonably be expected to
have a Material Adverse Effect, nor does the Borrower have knowledge or
reason to believe that any such notice will be received or is being
threatened.
(c) No judicial, governmental or administrative proceedings
are pending or are threatened against the Borrower or any of its
Subsidiaries under any Environmental Law, nor are there any consent
decrees or court decrees, consent orders, or administrative orders
outstanding under any Environmental Law with respect to the Borrower or
any of its Subsidiaries that would reasonably be expected to have a
Material Adverse Effect.
(d) There has been no release of Hazardous Materials arising
from, generated by or related to the operations of the Borrower or any
of its Subsidiaries, or for which the
62
<PAGE> 69
Borrower or any of its Subsidiaries has retained or assumed liability
in amounts or in a manner that would reasonably be expected to result
in a Material Adverse Effect.
(e) Environmental liabilities with respect to continued and
discontinued operations of the Borrower that are part of the
Transferred Business have not been assumed or retained by the Borrower,
will become obligations of OMNOVA after the Spinoff, and OMNOVA has
agreed to indemnify the Borrower for any such environmental liabilities
pursuant to the terms of the Distribution Agreement.
8.19. EMPLOYMENT MATTERS. Except as disclosed on SCHEDULE 8.19 hereto,
the Borrower and all Subsidiaries are in compliance with all applicable laws,
rules and regulations pertaining to labor or employment matters, including
without limitation those pertaining to wages, hours, occupational safety and
taxation, the noncompliance with which could reasonably be expected to have a
Material Adverse Effect, and there is neither pending nor, to the knowledge of
the Borrower, any threatened litigation, administrative proceeding or
investigation in respect of such matters an adverse ruling or determination in
which could reasonably be expected to have a Material Adverse Effect. Except as
disclosed on SCHEDULE 8.19 hereto, neither the Borrower nor any of its
Subsidiaries is party to any collective bargaining agreement with any labor
union or similar organization.
8.20. RICO. Neither the Borrower nor any Subsidiary is engaged in or
has engaged in any course of conduct that could subject any of their respective
properties to any Lien, seizure or other forfeiture under any criminal law,
racketeer influenced and corrupt organizations law, civil or criminal, or other
similar laws.
8.21. FINE CHEMICALS PATENT. No litigation, action, suit, investigation
or other arbitral, administrative or judicial proceeding is pending or has been
threatened by any Person against the Borrower or any Subsidiary (or any licensor
of any patent or other intellectual property or property right) with respect to
any patent or other intellectual property or property right that could adversely
affect Fine Chemicals' right to utilize any material technology in its
production operations.
8.22. AEROJET SETTLEMENT AGREEMENT. The Aerojet Settlement Agreement is
in full force and effect pursuant to its terms as in effect on the Closing Date,
no Person party thereto has opted out of the Aerojet Settlement Agreement, and
no Governmental Authority party thereto has any defense to its obligations
thereunder or to the terms thereof.
8.23. TAX TREATMENT OF SPINOFF. The Spinoff has been accomplished
substantially simultaneously with the making of the initial advance hereunder
consistent with the factual representations and assumptions presented to the IRS
by the Borrower in its request for the IRS Ruling Letter.
8.24. YEAR 2000 COMPLIANCE. The Borrower and its Subsidiaries have (i)
initiated a review and assessment of all areas within its and each of its
Subsidiaries' business and operations (including those affected by information
received from suppliers and vendors) that could reasonably be expected to be
adversely affected by the Year 2000 Problem, (ii) developed a plan and timeline
for addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan
63
<PAGE> 70
substantially in accordance with that timetable. The Borrower reasonably
believes that all computer applications (including those affected by
information received from its suppliers and vendors) that are material to its
or any of its Subsidiaries' business and operations will on a timely basis be
Year 2000 Compliant, except to the extent that a failure to do so could not
reasonably be expected to have Material Adverse Effect.
64
<PAGE> 71
ARTICLE IX
AFFIRMATIVE COVENANTS
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Borrower will, and where applicable will cause
each Subsidiary to:
9.1. FINANCIAL REPORTS, ETC. (a) As soon as practical and in any event
within 90 days after the end of each Fiscal Year of the Borrower, deliver or
cause to be delivered to the Agent and each Lender (i) consolidated and, if
there are any Material Subsidiaries, consolidating balance sheets of the
Borrower and its Subsidiaries as of the end of such Fiscal Year, and the notes
thereto, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows, and the respective notes thereto, for such
Fiscal Year, setting forth (other than for consolidating statements) comparative
financial statements for the preceding Fiscal Year, all prepared in accordance
with GAAP applied on a Consistent Basis and containing, with respect to the
consolidated financial statements, opinions of Ernst & Young, LLP or other such
independent certified public accountants selected by the Borrower and approved
by the Agent, which are unqualified as to the scope of the audit performed and
as to the "going concern" status of the Borrower and without any exception not
acceptable to the Lenders, and (ii) a certificate of an Authorized
Representative demonstrating compliance with SECTIONS 10.1(a) through 10.1(c)
and 10.3, which certificate shall be in the form of EXHIBIT H;
(b) as soon as practical and in any event within 45 days after the end
of each fiscal quarter (except the last fiscal quarter of the Fiscal Year),
deliver to the Agent and each Lender (i) consolidated and consolidating balance
sheets of the Borrower and its Subsidiaries as at the end of such fiscal
quarter, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows for such fiscal quarter and for the period
from the beginning of the then current Fiscal Year through the end of such
reporting period, and accompanied by a certificate of a Responsible Officer to
the effect that such financial statements present fairly the financial position
of the Borrower and its Subsidiaries as of the end of such fiscal period and the
results of their operations and the changes in their financial position for such
fiscal period, in conformity with the standards set forth in SECTION 8.6(a) with
respect to interim financial statements, and (ii) a certificate of an Authorized
Representative containing computations for such quarter comparable to that
required pursuant to SECTION 9.1(a)(ii);
(c) together with each delivery of the financial statements required by
SECTION 9.1(a)(i), deliver to the Agent and each Lender a letter from the
Borrower's accountants specified in SECTION 9.1(a)(i) stating that in performing
the audit necessary to render an opinion on the financial statements delivered
under SECTION 9.1(a)(i), they obtained no knowledge of any Default or Event of
Default by the Borrower in the fulfillment of the terms and provisions of
SECTION 10.1 hereof (which at the date of such statement remains uncured); or if
the accountants have obtained knowledge of such Default or Event of Default, a
statement specifying the nature and period of existence thereof;
65
<PAGE> 72
(d) promptly upon their becoming available to the Borrower, the
Borrower shall deliver to the Agent and each Lender a copy of (i) all regular or
special reports or effective registration statements which Borrower or any
Subsidiary shall file with the Securities and Exchange Commission (or any
successor thereto) or any securities exchange, (ii) any proxy statement
distributed by the Borrower or any Subsidiary to its shareholders, bondholders
or the financial community in general, and (iii) any management letter or other
report submitted to the Borrower or any Subsidiary by independent accountants in
connection with any annual, interim or special audit of the Borrower or any
Subsidiary;
(e) concurrently with the delivery of the financial statements referred
to in SECTION 9.1(a) and the delivery of the financial statements required to be
delivered under SECTION 9.1(b), deliver or cause to be delivered to the Agent
and each Lender a report of the Borrower with respect to the environmental
matters affecting the Borrower and the Subsidiaries in the same level of detail
and of the same scope as that furnished to the lenders under the Existing
Syndicated Credit Agreement;
(f) concurrently with the delivery of the financial statements required
to be delivered under SECTION 9.1(a) OR (b), deliver or cause to be delivered to
the Agent and each Lender notice of any request for indemnity under the terms of
the Spinoff Documents and the Line of Business Transfer Documents either
delivered to, or received from, OMNOVA which, when aggregated with all other
such requests would exceed $10,000,000 and, with respect to such requests from
OMNOVA, the position of the Borrower in response to such request;
(g) promptly upon receipt thereof by the Borrower or any Subsidiary,
and in no event later than thirty (30) Business Days thereafter, deliver to the
Agent and the Lenders any notice received with respect to any pending or
threatened litigation, action, suit, investigation or other arbitral,
administrative or judicial proceeding with respect to any patent or other
intellectual property or property right that could adversely affect Fine
Chemicals' right to utilize any material technology in its production
operations;
(h) promptly upon receipt thereof by the Borrower or any Subsidiary,
and in no event later than thirty (30) Business Days thereafter, deliver to the
Agent and the Lenders any notice received with respect to any pending or
threatened litigation, action, suit, investigation or other arbitral,
administrative or judicial proceeding with respect to, or that could result in
the suspension or prohibition of, or could otherwise reasonably be expected to
have a material adverse effect on, the ability of Aerojet to enter into
contracts or otherwise conduct business with any Governmental Authority;
(i) promptly upon receipt thereof by the Borrower or any Subsidiary,
and in no event later than five (5) Business Days thereafter, deliver to the
Agent and the Lenders any notice received with respect to or pursuant to the
Aerojet Settlement Agreement concerning any party's election to opt out thereof
or otherwise not to comply with the terms thereof or to propose any material
modification thereof;
66
<PAGE> 73
(j) promptly, from time to time, deliver or cause to be delivered to
the Agent and each Lender such other information regarding Borrower's and any
Subsidiary's operations, business affairs and financial condition as the Agent
or such Lender may reasonably request;
Subject to the provisions of SECTION 13.1(h), the Agent and the Lenders
are hereby authorized to deliver a copy of any such financial or other
information delivered hereunder to the Lenders (or any affiliate of any Lender)
or to the Agent, to any Governmental Authority having jurisdiction over the
Agent or any of the Lenders pursuant to any written request therefor or in the
ordinary course of examination of loan files, or to any other Person who shall
acquire or consider the assignment of, or acquisition of any participation
interest in, any Obligation permitted by this Agreement.
9.2. MAINTAIN PROPERTIES. Maintain all properties necessary to its
operations in good working order and condition, make all needed repairs,
replacements and renewals to such properties, and maintain free from Liens all
trademarks, trade names, patents, copyrights, trade secrets, know- how, and
other intellectual property and proprietary information (or adequate licenses
thereto), in each case as are in the opinion of management reasonably necessary
to conduct its business as currently conducted or as contemplated hereby, all in
accordance with customary and prudent business practices.
9.3. EXISTENCE, QUALIFICATION, ETC. Except as otherwise expressly
permitted under SECTION 10.7, do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and all material rights
and franchises, and maintain its license or qualification to do business as a
foreign corporation and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its business makes such license
or qualification necessary except where the failure to so qualify would not have
a Material Adverse Effect.
9.4. REGULATIONS AND TAXES. Comply in all material respects with or
contest in good faith all statutes and governmental regulations and pay all
taxes, assessments, governmental charges, claims for labor, supplies, rent and
any other obligation which, if unpaid, would become a Lien against any of its
properties except liabilities being contested in good faith by appropriate
proceedings diligently conducted and against which adequate reserves acceptable
to the Borrower's independent certified public accountants have been established
unless and until any Lien resulting therefrom attaches to any of its property
and becomes enforceable against its creditors.
9.5. INSURANCE. (a) Keep all of its insurable properties adequately
insured at all times with responsible insurance carriers against loss or damage
by fire and other hazards to the extent and in the manner as are currently
maintained and are prudent when considered in light of the Borrower's properties
and businesses, (b) maintain general public liability insurance at all times
with responsible insurance carriers against liability on account of damage to
persons and property having such limits, deductibles, exclusions, co-insurance
and other provisions providing coverages that are currently maintained and are
prudent when considered in light of the Borrower's properties and businesses,
and (c) maintain existing insurance under all applicable workers' compensation
laws (or in the alternative, maintain required reserves if self-insured for
workers' compensation purposes). Each of the policies of insurance described in
clauses (a) and (b) of this SECTION 9.5 shall provide that the
67
<PAGE> 74
insurer shall give the Agent not less than thirty (30) days prior written notice
before any such policy shall lapse or be terminated or canceled.
9.6. TRUE BOOKS. Keep true books of record and account in which full,
true and correct entries will be made of all of its dealings and transactions,
and set up on its books such reserves as may be required by GAAP with respect to
doubtful accounts and all taxes, assessments, charges, levies and claims and
with respect to its business in general, and include such reserves in interim as
well as year-end financial statements.
9.7. YEAR 2000 COMPLIANCE. The Borrower will promptly notify the Agent
and the Lenders in the event the Borrower discovers or determines that any
computer application (including those affected by information received from its
suppliers and vendors) that is material to its or any of its Subsidiaries'
business and operations will not be Year 2000 Compliant on a timely basis,
except to the extent that such failure could not reasonably be expected to have
a Material Adverse Effect.
9.8. RIGHT OF INSPECTION. Permit any Person designated by any Lender or
the Agent to visit and inspect any of the properties, corporate books and
financial reports of the Borrower or any Subsidiary and to discuss its affairs,
finances and accounts with its principal officers and independent certified
public accountants, all at reasonable times, at reasonable intervals and with
reasonable prior notice.
9.9. OBSERVE ALL LAWS. Conform to and duly observe in all material
respects all laws, rules and regulations and all other valid requirements of any
Governmental Authority with respect to the conduct of its business, except where
the failure to do so could not reasonably be expected to have a Material Adverse
Effect.
9.10. GOVERNMENTAL LICENSES. Obtain and maintain all licenses, permits,
certifications and approvals of all applicable Governmental Authorities as are
required for the conduct of its business as currently conducted and as
contemplated by the Loan Documents, except where the failure to do so could not
reasonably be expect to have a Material Adverse Effect.
9.11. COVENANTS EXTENDING TO OTHER PERSONS. Cause each of its
Subsidiaries to do with respect to itself, its business and its assets, each of
the things required of the Borrower in SECTIONS 9.2 through 9.10, and 9.20
inclusive.
9.12. OFFICER'S KNOWLEDGE OF DEFAULT. Upon any senior executive officer
of the Borrower obtaining knowledge of any Default or Event of Default hereunder
or under any other obligation of the Borrower or any Subsidiary to any Lender,
cause such officer or an Authorized Representative to promptly notify the Agent
of the nature thereof, the period of existence thereof, and what action the
Borrower or such Subsidiary proposes to take with respect thereto.
9.13. SUITS OR OTHER PROCEEDINGS. Upon any Responsible Officer of the
Borrower obtaining knowledge of any litigation or other proceedings being
instituted against the Borrower or any Subsidiary, or any attachment, levy,
execution or other process being instituted against any assets
68
<PAGE> 75
of the Borrower or any Subsidiary, making a claim or claims in an aggregate
amount greater than $10,000,000 not otherwise covered by insurance, promptly
deliver to the Agent written notice thereof stating the nature and status of
such litigation, dispute, proceeding, levy, execution or other process.
9.14. NOTICE OF ENVIRONMENTAL COMPLAINT OR CONDITION. Without limiting
the provisions of SECTION 9.1(e), and except to the extent such matters could
not reasonably be expected to have a Material Adverse Effect, promptly (i) give
notice to the Agent if the Borrower or any Subsidiary is in violation of or is
not in compliance with or has incurred any liability or potential liability
under any Environmental Law, and (ii) provide to the Agent true, accurate and
complete copies of any and all letters, notices, complaints, orders, directives,
claims or citations received by the Borrower or any Subsidiary relating to any
(a) violation or alleged violation by the Borrower or any Subsidiary of any
applicable Environmental Law; (b) release or threatened release by the Borrower
or any Subsidiary, or by any Person handling, transporting or disposing of any
Hazardous Material on behalf of the Borrower or any Subsidiary, or at any
facility or property owned or leased or operated by the Borrower or any
Subsidiary, of any Hazardous Material, except where occurring legally pursuant
to a permit or license; or (c) liability or alleged liability of the Borrower or
any Subsidiary for the costs of cleaning up, removing, remediating or responding
to a release of Hazardous Materials.
9.15. ENVIRONMENTAL COMPLIANCE. Comply with all Environmental Laws, or
contest in good faith the applicability of any Environmental Law or any
liability thereunder. If the Borrower or any Subsidiary shall receive any
letter, notice, complaint, order, directive, claim or citation alleging that the
Borrower or any Subsidiary has violated any Environmental Law, has released any
Hazardous Material, or is liable for the costs of cleaning up, removing,
remediating or responding to a release of Hazardous Materials, the Borrower and
any Subsidiary shall, within the time period permitted and to the extent
required by the applicable Environmental Law or the Governmental Authority
responsible for enforcing such Environmental Law, remove or remedy, or cause the
applicable Subsidiary to remove or remedy, such violation or release or satisfy
such liability, unless and only during the period that the applicability of the
Environmental Law, the fact of such violation or liability or the action
required to remove, remedy or respond to such violation or liability is being
contested by the Borrower or its Subsidiary by appropriate proceedings
diligently conducted.
9.16. INDEMNIFICATION. Without limiting the generality of SECTION 13.9,
the Borrower hereby agrees to indemnify and hold the Agent and the Lenders and
any affiliate of any Lender party to a Swap Agreement, and their respective
officers, directors, employees and agents, harmless from and against any and all
claims, losses, penalties, liabilities, damages and expenses (including
assessment and cleanup costs and reasonable attorneys', consultants' or other
expert fees, expenses and disbursements) arising directly or indirectly from,
out of or by reason of (a) the violation of, noncompliance with or any liability
under any Environmental Law by the Borrower or any Subsidiary or with respect to
any property owned, operated or leased by the Borrower or any Subsidiary, or any
orders, requirements or demands of any Governmental Authority related thereto,
or (b) the handling, storage, transportation, treatment, emission, release,
discharge or disposal of any Hazardous Materials by or on behalf of the Borrower
or any Subsidiary, or on or with respect to property owned or leased or operated
by the Borrower or any Subsidiary, except to the extent that any of the
foregoing arise out of the gross negligence or willful misconduct of the party
seeking
69
<PAGE> 76
indemnification therefor. The provisions of this SECTION 9.16 shall
survive repayment of the Obligations and the Facility Termination Date and
expiration or termination of this Agreement.
9.17. FURTHER ASSURANCES. At the Borrower's cost and expense, upon
request of the Agent, duly execute and deliver or cause to be duly executed and
delivered, to the Agent such further instruments, documents, certificates,
financing and continuation statements, and do and cause to be done such further
acts that may be reasonably necessary or advisable in the reasonable opinion of
the Agent to carry out more effectively the provisions and purposes of this
Agreement, the Security Instruments and the other Loan Documents.
9.18. EMPLOYEE BENEFIT PLANS.
(a) With reasonable promptness, and in any event within thirty
(30) days thereof, give notice to the Agent of (a) the establishment of
any new Employee Benefit Plan (which notice shall include a copy of
such plan), (b) the commencement of contributions to any Employee
Benefit Plan to which the Borrower or any of its ERISA Affiliates was
not previously contributing, (c) any material increase in the benefits
of any existing Employee Benefit Plan, (d) each funding waiver request
filed with respect to any Employee Benefit Plan and all communications
received or sent by the Borrower or any ERISA Affiliate with respect to
such request and (e) the failure of the Borrower or any ERISA Affiliate
to make a required installment or payment under Section 302 of ERISA or
Section 412 of the Code (in the case of Employee Benefit Plans
regulated by the Code or ERISA) or under any Foreign Benefit Law (in
the case of Employee Benefit Plans regulated by any Foreign Benefit
Law) by the due date;
(b) Promptly and in any event within thirty (30) days of
becoming aware of the occurrence or forthcoming occurrence of (a) any
Termination Event or (b) except to the extent it could not reasonably
be expected to have a Material Adverse Effect, any nonexempt
"prohibited transaction," as such term is defined in Section 406 of
ERISA or Section 4975 of the Code, in connection with any Employee
Benefit Plan or any trust created thereunder, deliver to the Agent a
notice specifying the nature thereof, what action the Borrower or any
ERISA Affiliate has taken, is taking or proposes to take with respect
thereto and, when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with respect
thereto; and
(c) With reasonable promptness but in any event within fifteen
(15) days for purposes of clauses (a), (b) and (c), deliver to the
Agent copies of (a) any unfavorable determination letter from the
Internal Revenue Service regarding the qualification of an Employee
Benefit Plan under Section 401(a) of the Code, (b) all notices received
by the Borrower or any ERISA Affiliate of the PBGC's or any
Governmental Authority's intent to terminate any Pension Plan or to
have a trustee appointed to administer any Pension Plan, (c) each
Schedule B (Actuarial Information) to the annual report (Form 5500
Series) filed by the Borrower or any ERISA Affiliate with the Internal
Revenue Service with respect to each Employee Benefit Plan and (d) all
notices received by the Borrower or any ERISA Affiliate from a
Multiemployer Plan sponsor concerning the imposition or amount of
withdrawal
70
<PAGE> 77
liability on a Pension Plan pursuant to Section 4202 of ERISA unless
any such notice relates to an event or condition that could not
reasonably be expected to have a Material Adverse Effect. The Borrower
will notify the Agent in writing within five (5) Business Days of the
Borrower or any ERISA Affiliate obtaining knowledge or reason to know
that the Borrower or any ERISA Affiliate has filed or intends to file a
notice of intent to terminate any Pension Plan under a distress
termination within the meaning of Section 4041(c) of ERISA.
9.19. CONTINUED OPERATIONS. Continue at all times to conduct its
business and engage principally in the same line or lines of business
substantially as heretofore conducted.
9.20. NEW SUBSIDIARIES. Within thirty (30) days after (i) the
acquisition or creation of any Subsidiary, or (ii) an existing Subsidiary
becoming a Material Subsidiary (in either case, such Subsidiary to be known as
the "New Subsidiary"), cause to be delivered to the Agent for the benefit of the
Lenders each of the following as applicable:
(a) if the New Subsidiary is a Domestic Subsidiary and has not
previously delivered a Facility Guaranty, a Facility Guaranty executed
by such New Subsidiary substantially in the form of EXHIBIT I;
(b) if the New Subsidiary is a Material Domestic Subsidiary or
a Material Foreign Subsidiary and the Subsidiary Securities issued by
the New Subsidiary that constitute Pledged Interests shall be owned by
a Subsidiary who has not then executed and delivered to the Agent a
Pledge Agreement granting a Lien to the Agent, for the benefit of the
Agent and the Lenders, in such equity interests, a Pledge Agreement
executed by the Subsidiary that directly owns such Pledged Interests
substantially in the form attached hereto as EXHIBIT J (or, as to
Pledged Interests issued by any Direct Foreign Subsidiary, in a form
acceptable to the Agent);
(c) if the New Subsidiary is a Material Domestic Subsidiary or
a Material Foreign Subsidiary and the Subsidiary Securities issued by
such New Subsidiary that constitute Pledged Interests shall be owned by
the Borrower or a Subsidiary who has previously executed a Pledge
Agreement, a Pledge Agreement Supplement in the form required by such
Pledge Agreement pertaining to such Pledged Interests;
(d) if the New Subsidiary is the owner of Subsidiary
Securities of one or more Material Domestic Subsidiaries or Material
Foreign Subsidiaries that constitute Pledged Interests, a Pledge
Agreement by the New Subsidiary granting a Lien to the Agent, for the
benefit of the Agent and the Lenders, in such Pledged Interests,
substantially in the form attached hereto as EXHIBIT J (or, as to
Pledged Interests issued by any Direct Foreign Subsidiary, in a form
acceptable to the Agent);
(e) if the Pledged Interests issued by the New Subsidiary, or
by a Material Subsidiary owned by the New Subsidiary, constitute
securities under Article 8 of the Uniform Commercial Code (i) the
certificates representing 100% of such Pledged Interests
71
<PAGE> 78
and (ii) duly executed, undated stock powers or other appropriate
powers of assignment in blank affixed thereto;
(f) (i) Uniform Commercial Code financing statements on form
UCC-1 or otherwise duly executed by the pledgor as "Debtor" and naming
the Agent for the benefit of the Agent and the Lenders as "Secured
Party," in form, substance and number sufficient in the reasonable
opinion of the Agent and its special counsel to be filed in all Uniform
Commercial Code filing offices and in all jurisdictions in which filing
is necessary or advisable to perfect in favor of the Agent for the
benefit of the Agent and the Lenders the Lien on such Subsidiary
Securities, and (ii) if the Pledged Interests issued by the New
Subsidiary, or by a Material Subsidiary owned by the New Subsidiary, do
not constitute securities and the issuer thereof has not elected to
have such interests treated as securities under Article 8 of the
applicable Uniform Commercial Code, a control agreement from the
Registrar of the issuer, in form and substance acceptable to the Agent
and in which the Registrar (1) acknowledges that the pledgor is at the
date of such acknowledgment the sole record, and to its knowledge,
beneficial owner of such Subsidiary Securities, (2) acknowledges the
Lien in favor of the Agent conferred under the Pledge Agreement and
that such Lien will be reflected on the registry for such Subsidiary
Securities, (3) agrees that it will not register any transfer of such
Subsidiary Securities nor acknowledge any Lien in favor of any other
Person on such Subsidiary Securities, without the prior written consent
of the Agent, in each instance, until it receives notice from the Agent
that all Liens on such Collateral in favor of the Agent for the benefit
of the Agent and the Lenders have been released or terminated, and (4)
agrees that upon receipt of notice from the Agent that an Event of
Default has occurred and is continuing and that the Subsidiary
Securities identified in such notice have been transferred to a
transferee identified in such notice, it will duly record such transfer
of Subsidiary Securities on the appropriate registry without requiring
further consent from the pledgor and shall thereafter treat the
transferee as the sole record and beneficial owner of such Subsidiary
Securities pending further transfer, notwithstanding any contrary
instruction received from the pledgor;
(g) an opinion or opinions of counsel to the New Subsidiary
and to any party pledging any Subsidiary Securities of the New
Subsidiary, if any, dated as of the date of delivery of the Facility
Guaranty and other Loan Documents provided for in this SECTION 9.20 (as
applicable) and addressed to the Agent and the Lenders, in form and
substance reasonably acceptable to the Agent (which opinion may include
assumptions and qualifications of similar effect to those contained in
the opinions of counsel delivered pursuant to SECTION 7.1(a)), to the
effect (as applicable) that:
(i) the New Subsidiary and, if applicable, such
pledgor is duly organized, validly existing and in good
standing in the jurisdiction of its formation, has the
requisite power and authority to own its properties and
conduct its business as then owned and then conducted and
proposed to be conducted and to execute, deliver and perform
the Facility Guaranty and the other Loan Documents described
in this SECTION 9.20 to which the New Subsidiary or pledgor is
a signatory, and is duly qualified to transact business and is
in good standing as a foreign corporation or
72
<PAGE> 79
partnership in each other jurisdiction in which the character
of the properties owned or leased, or the business carried on
by it, requires such qualification and the failure to be so
qualified would reasonably be likely to result in a Material
Adverse Effect;
(ii) the execution, delivery and performance of the
Facility Guaranty and the other Loan Documents described in
this SECTION 9.20 to which either or both of the New
Subsidiary and the pledgor is a signatory have been duly
authorized by all requisite corporate or partnership action
(including any required shareholder or partner approval), each
of such agreements has been duly executed and delivered and
constitutes the valid and binding agreement of each of the New
Subsidiary and the pledgor, enforceable against the New
Subsidiary and the pledgor, as the case may be, in accordance
with its terms, subject to the effect of any applicable
bankruptcy, moratorium, insolvency, reorganization or other
similar law affecting the enforceability of creditors' rights
generally and to the effect of general principles of equity
(whether considered in a proceeding at law or in equity);
(iii) the Subsidiary Securities being pledged are
duly authorized, validly issued, fully paid and nonassessable,
and free of any preemptive rights, and the applicable Security
Instrument (including foreign collateral documents) is
effective to create a valid security interest in favor of the
Agent for the benefit of the Agent and the Lenders in such
Subsidiary Securities as constitute Pledged Interests;
(iv) the Uniform Commercial Code financing statements
on Form UCC-1 delivered to the Agent by the New Subsidiary
and/or the pledgor in connection with the delivery of the
Security Instruments of the New Subsidiary and/or the pledgor
have been duly executed by the New Subsidiary and/or the
pledgor and are in form, substance and number sufficient for
filing in all Uniform Commercial Code filing offices in all
jurisdictions in which filing is necessary to perfect in favor
of the Agent for the benefit of the Agent and the Lenders the
Lien on Collateral conferred under such Security Instruments
to the extent such Lien may be perfected by Uniform Commercial
Code filing;
(v) if the Pledged Interests owned by the New
Subsidiary, or the Pledged Interests issued by the New
Subsidiary, constitute securities under Article 8 of the
Uniform Commercial Code, and such Pledged Interests are
represented by certificates, possession of such certificated
Pledged Interests by the Agent is sufficient to perfect in
favor of the Agent and the Lenders a security interest in such
Pledged Interests; and
(vi) in the event the New Subsidiary is a Material
Foreign Subsidiary, that under the laws of the applicable
foreign jurisdiction, all agreements, notices and other
documents that are required to be executed, delivered, filed
or recorded and all other action required to be taken, within
or pursuant to the laws of such jurisdiction to perfect the
Lien conferred in favor of the Agent under the applicable
Security Instrument as against creditors of and purchasers for
value from the holder of the
73
<PAGE> 80
Pledged Interests has been duly executed, delivered, filed,
recorded or taken, as the case may be; and
(h) current copies of the Organizational Documents and
Operating Documents of the New Subsidiary and the pledgor, if any,
certified resolutions (or duly effected consent actions) of the Board
of Directors, partners, or appropriate committees thereof (and, if
required by such Organizational Documents, Operating Documents or
applicable law, of the shareholders, members or partners) of the New
Subsidiary and the pledgor, if any, authorizing the actions and the
execution and delivery of documents described in this SECTION 9.20.
74
<PAGE> 81
ARTICLE X
NEGATIVE COVENANTS
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Borrower will not, nor will it permit any
Subsidiary to:
10.1. FINANCIAL COVENANTS.
(a) CONSOLIDATED NET WORTH. Permit Consolidated Net Worth to be less
than (i) from the Closing Date until (but excluding) the last day of the fiscal
quarter of the Borrower in which the Closing Date occurs, $38,450,000(1), and
(ii) as at the last day of each fiscal quarter of the Borrower following the
Closing Date and until (but excluding) the last day of the next following fiscal
quarter of the Borrower, the sum of (A) the amount of Consolidated Net Worth
required to be maintained pursuant to this SECTION 10.1(a) as at the end of the
immediately preceding fiscal quarter, plus (B) 70% of Consolidated Net Income
(with no reduction for net losses during any period) for the fiscal quarter of
the Borrower ending on such day (including within "Consolidated Net Income"
certain items otherwise excluded, as provided for in the definition of
"Consolidated Net Income"), plus (C) 70% of the aggregate amount of all
increases in the stated capital and additional paid-in capital accounts of the
Borrower resulting from the issuance of equity securities or other capital
investments.
(b) CONSOLIDATED LEVERAGE RATIO. Permit the Consolidated Leverage Ratio
as of the end of any Four-Quarter Period to be greater than 2.50 to 1.00.
(c) CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Permit the Consolidated
Fixed Charge Coverage Ratio as of the end of the respective Four-Quarter Periods
set forth below to be less than that set forth opposite each such Four-Quarter
Period:
<TABLE>
<CAPTION>
Four-Quarter Period Ending Fixed Charge Coverage Ratio Must Exceed
- -------------------------- ---------------------------------------
<S> <C>
1.50 to 1.00
August 31, 1999,
November 30, 1999,
February 29, 2000,
May 31, 2000, and
August 1, 2000
November 30, 2000 and thereafter 1.75 to 1.00
</TABLE>
- --------
(1) This number will be the GREATER of (A) $35,000,000 and (B) 50%
of the pro forma historical Consolidated Net Worth of the
Borrower and its Subsidiaries, giving effect to the Line of
Business Transfer, the Spinoff and the Penn Racquet Sports
Asset Disposition, as of August 31, 1999, as agreed by the
parties.
75
<PAGE> 82
10.2. ACQUISITIONS. Enter into any agreement, contract, binding
commitment or other arrangement providing for any Acquisition, or take any
action to solicit the tender of securities or proxies in respect thereof in
order to effect any Acquisition, except a Permitted Acquisition.
10.3. LIENS. Incur, create or permit to exist any Lien, charge or other
encumbrance of any nature whatsoever with respect to any property or assets now
owned or hereafter acquired by the Borrower or any Subsidiary, other than the
following (all of which shall be collectively referred to as "Permitted Liens");
(a) Liens created under the Security Instruments in favor of
the Agent and the Lenders, and otherwise existing as of the date hereof
and as set forth in SCHEDULE 8.7;
(b) Liens imposed by law for taxes, assessments or charges of
any Governmental Authority for claims not yet due or which are being
contested in good faith by appropriate proceedings diligently
conducted, which, except as expressly so specified on SCHEDULE 8.7, are
inferior in respect of the Collateral to the Liens conferred under the
Security Instruments, and with respect to which adequate reserves or
other appropriate provisions are being maintained as required by GAAP
and which Liens are not yet enforceable against other creditors;
(c) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law or
created in the ordinary course of business and in existence less than
90 days from the date of creation thereof for amounts not yet due or
which are being contested in good faith by appropriate proceedings
diligently conducted, which, except as expressly so specified on
SCHEDULE 8.7, are inferior in respect of the Collateral to the Liens
conferred under the Security Instruments, and with respect to which
adequate reserves or other appropriate provisions are being maintained
as required by GAAP and which Liens are not yet enforceable against
other creditors;
(d) Liens incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal bonds)
in connection with workers' compensation, unemployment insurance and
other types of social security benefits or to secure the performance of
tenders, bids, leases, contracts (other than for the repayment of
Indebtedness), statutory obligations and other similar obligations or
arising as a result of progress payments under government contracts;
(e) easements (including reciprocal easement agreements and
utility agreements), rights-of-way, covenants, consents, reservations,
encroachments, variations and zoning and other restrictions, charges or
encumbrances (whether or not recorded), which do not interfere
materially with the ordinary conduct of the business of the Borrower or
any Subsidiary and which do not materially detract from the value of
the property to which they attach or materially impair the use thereof
to the Borrower or any Subsidiary;
(f) purchase money Liens to secure Indebtedness permitted
under SECTION 10.4(d) and incurred to purchase fixed assets, provided
such Indebtedness represents not less than
76
<PAGE> 83
75% of the purchase price of such assets as of the date of purchase
thereof and no property other than the assets so purchased secures such
Indebtedness;
(g) Liens arising in connection with Capital Leases otherwise
permitted hereunder; provided that no such Lien shall extend to any
Collateral or to any other property other than the assets subject to
such Capital Leases;
(h) Liens on assets acquired in an Acquisition permitted under
SECTION 10.2 hereof so long as such Liens (i) are not incurred in
contemplation of such Acquisition and (ii) do not extend to any assets
other than the assets being acquired in such Acquisition; and
(i) other Liens securing Indebtedness in de minimis amounts,
but in no event securing Indebtedness in an aggregate amount in excess
of $5,000,000.
10.4. INDEBTEDNESS. Incur, create, assume or permit to exist any
Indebtedness of the Borrower, howsoever evidenced, except:
(a) Indebtedness existing as of the Closing Date as set forth
in SCHEDULE 8.6; PROVIDED, none of the instruments and agreements
evidencing or governing such Indebtedness shall be amended, modified or
supplemented after the Closing Date to change any terms of
subordination, repayment or rights of enforcement, conversion, put,
exchange or other rights from such terms and rights as in effect on the
Closing Date;
(b) Indebtedness owing to the Agent or any Lender in
connection with this Agreement, any Note or other Loan Document;
(c) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(d) purchase money Indebtedness described in SECTION 10.3(f)
not to exceed an aggregate outstanding principal amount at any time of
$15,000,000;
(e) Indebtedness arising from Rate Hedging Obligations
permitted under SECTION 10.15;
(f) Indebtedness subordinated to the Obligations on such terms
and conditions as shall be acceptable to the Required Lenders, but in
no event shall the aggregate principal amount of such Indebtedness
exceed 7.5% of Consolidated Total Assets on any date of incurrence
thereof (the "Subordinated Debt"); PROVIDED, none of the instruments
and agreements evidencing or governing any Subordinated Debt shall be
amended, modified or supplemented after the date of their execution and
delivery to change any terms of subordination, repayment or rights of
enforcement, conversion, put, exchange or other rights from such terms
and rights are in effect on such date without the consent of the
Required Lenders;
77
<PAGE> 84
(g) unsecured intercompany Indebtedness for loans and advances
made by the Borrower or any Guarantor to the Borrower or any Guarantor,
provided that such intercompany Indebtedness is evidenced by a
promissory note or similar written instrument acceptable to the Agent
which provides that such Indebtedness is subordinated to obligations,
liabilities and undertakings of the holder or owner thereof under the
Loan Documents on terms acceptable to the Agent;
(h) additional unsecured Indebtedness for Money Borrowed not
otherwise covered by clauses (a) through (g) above, provided that the
aggregate outstanding principal amount of all such other Indebtedness
permitted under this clause (h) shall in no event exceed $20,000,000 at
any time;
(i) Indebtedness extending the maturity of, or renewing,
refunding or refinancing, in whole or in part, Indebtedness incurred
under clauses (a), (d), (e), (f) and (h) of this SECTION 10.4, provided
that the terms of any such extension, renewal, refunding or refinancing
Indebtedness (and of any agreement or instrument entered into in
connection therewith) are no less favorable to the Agent and the
Lenders than the terms of the Indebtedness as in effect prior to such
action, and provided further that (1) the aggregate principal amount of
or interest rate or rates and fees payable on such extended, renewed,
refunded or refinanced Indebtedness shall not be increased by such
action, (2) the group of direct or contingent obligors on such
Indebtedness shall not be expanded as a result of any such action, and
(3) immediately before and immediately after giving effect to any such
extension, renewal, refunding or refinancing, no Default or Event of
Default shall have occurred and be continuing.
10.5. TRANSFER OF ASSETS. Sell, lease, transfer or otherwise dispose of
any assets of the Borrower or any Subsidiary other than (a) dispositions of
inventory in the ordinary course of business, (b) dispositions of assets of the
Borrower or any Subsidiary to the Borrower, any Guarantor or any Material
Subsidiary whose Pledged Interests have been pledged pursuant to ARTICLE V,
SECTION 9.20 or the terms of any Pledge Agreement, (c) dispositions of equipment
which, in the aggregate during any Fiscal Year, have a fair market value or book
value, whichever is less, of $20,000,000 or less and is not replaced by
equipment having at least equivalent value, (d) dispositions of property that is
substantially worn, damaged, obsolete or, in the judgment of the Borrower, no
longer best used or useful in its business or that of any Subsidiary, (e)
transfers of assets necessary to give effect to merger or consolidation
transactions permitted by SECTION 10.7, (f) the disposition of Eligible
Securities in the ordinary course of management of the investment portfolio of
the Borrower and its Subsidiaries, (g) transfer of assets or capital stock in
connection with the Vehicle Sealing Sale, (h) the Line of Business Transfer and
the Spinoff, and (i) the sale, lease or transfer of real property of the
Borrower or any Subsidiary so long as (i) with respect to such real property,
the representation and warranty set forth in SECTION 8.15 hereof is true and
correct at the time of such sale, lease or transfer, and (ii) such real property
is not, in the reasonable business judgment of the Borrower, necessary for the
conduct of the business of the Borrower or any of its Subsidiaries, and (iii)
the aggregate fair market value of the real property subject to all such sales,
leases and transfers during the existence of this Agreement does not exceed
$100,000,000.
78
<PAGE> 85
10.6. INVESTMENTS. Purchase, own, invest in or otherwise acquire,
directly or indirectly, any stock or other securities, or make or permit to
exist any interest whatsoever in any other Person or permit to exist any loans
or advances to any Person, except that Borrower may maintain investments or
invest in:
(a) securities of any Person acquired in an Acquisition
permitted hereunder;
(b) Eligible Securities;
(c) investments existing as of the date hereof and as set
forth in SCHEDULE 8.4;
(d) accounts receivable arising and trade credit granted in
the ordinary course of business and any securities received in
satisfaction or partial satisfaction thereof in connection with
accounts of financially troubled Persons to the extent reasonably
necessary in order to prevent or limit loss;
(e) loans and advances to and investments in Subsidiaries
which are Guarantors;
(f) loans between the Borrower and the Guarantors described in
SECTION 10.4(g);
(g) loans and advances to employees of the Borrower for
travel, entertainment and relocation expenses in the ordinary course of
business;
(h) required investments in or contributions to (i) Employee
Benefit Plans, (ii) executive compensation plans, and (iii) stock or
option purchase or bonus plans or as required under ERISA or the Code
or the fiduciary standards thereunder; and
(i) other loans, advances and investments in an aggregate
principal amount at any time outstanding not to exceed $15,000,000.
10.7. MERGER OR CONSOLIDATION. (a) Consolidate with or merge into any
other Person, or (b) permit any other Person to merge into it, or (c) sell,
transfer or lease or otherwise dispose of all or a substantial part of its
assets (other than the Line of Business Transfer, the Spinoff and sales
permitted under SECTION 10.5; PROVIDED, HOWEVER, (i) any Subsidiary of the
Borrower may merge or transfer all or substantially all of its assets into or
consolidate with the Borrower or any wholly- owned Subsidiary of the Borrower,
and (ii) any other Person may merge into or consolidate with the Borrower
(provided that the Borrower is the surviving corporation) or any wholly-owned
Subsidiary and any Subsidiary may merge into or consolidate with any other
Person in order to consummate an Acquisition permitted by SECTION 10.2, PROVIDED
FURTHER, that any resulting or surviving entity shall execute and deliver such
agreements and other documents, including a Facility Guaranty, and take such
other action as the Agent may require to evidence or confirm its express
assumption of the obligations and liabilities of its predecessor entities under
the Loan Documents.
10.8. RESTRICTED PAYMENTS. Make any Restricted Payment or apply or set
apart any of their assets therefor or agree to do any of the foregoing;
PROVIDED, HOWEVER, the Borrower may make the
79
<PAGE> 86
following Restricted Payments in any Fiscal Year (on a non-cumulative basis,
with the effect that amounts not paid in any Fiscal Year may not be carried over
for payment in a subsequent period) if immediately prior to and after giving
effect thereto no Default or Event of Default shall exist or occur and be
continuing: (a) cash dividends as determined by the board of directors of the
Borrower in the exercise of its reasonable business judgement, and (b) other
Restricted Payments not to exceed $15,000,000 in the aggregate.
10.9. TRANSACTIONS WITH AFFILIATES. Other than transactions permitted
under SECTIONS 10.7 and 10.8 and the transactions contemplated by the
Transaction Documents, enter into any transaction after the Closing Date,
including, without limitation, the purchase, sale, lease or exchange of
property, real or personal, or the rendering of any service, with any Affiliate
of the Borrower, except (a) that such Persons may render services to the
Borrower or its Subsidiaries for compensation at the same rates generally paid
by Persons engaged in the same or similar businesses for the same or similar
services, (b) that the Borrower or any Subsidiary may render services to such
Persons for compensation at the same rates generally charged by the Borrower or
such Subsidiary and (c) in either case in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower's (or any Subsidiary's)
business consistent with past practice of the Borrower and its Subsidiaries and
upon terms no less favorable to the Borrower (or any Subsidiary) than would be
obtained in a comparable arm's-length transaction with a Person not an Affiliate
of the Borrower.
10.10. COMPLIANCE WITH ERISA, THE CODE AND FOREIGN BENEFIT LAWS. With
respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan:
(a) permit the occurrence of any Termination Event which would
result in a liability on the part of the Borrower or any ERISA
Affiliate to the PBGC or to any Governmental Authority; or
(b) permit for a period of thirty (30) or more consecutive
days the aggregate present value of all benefit liabilities under all
Pension Plans to exceed the current value of the assets of such Pension
Plans allocable to such benefit liabilities; or
(c) permit any accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code) to exist with respect
to any Pension Plan, whether or not waived, for a period in excess of
ninety (90) consecutive days; or
(d) fail to make any contribution or payment to any
Multiemployer Plan which the Borrower or any ERISA Affiliate may be
required to make under any agreement relating to such Multiemployer
Plan, or any law pertaining thereto; or
(e) engage, or permit any Borrower or any ERISA Affiliate to
engage, in any prohibited transaction under Section 406 of ERISA or
Sections 4975 of the Code for which a civil penalty pursuant to Section
502(I) of ERISA or a tax pursuant to Section 4975 of the Code may be
imposed, unless such occurrence could not reasonably be expected to
have a Material Adverse Effect; or
80
<PAGE> 87
(f) permit the establishment of any Employee Benefit Plan
providing post- retirement welfare benefits or establish or amend any
Employee Benefit Plan which establishment or amendment could result in
liability to the Borrower or any ERISA Affiliate or increase the
obligation of the Borrower or any ERISA Affiliate to a Multiemployer
Plan; or
(g) fail, or permit the Borrower or any ERISA Affiliate to
fail, to establish, maintain and operate each Employee Benefit Plan in
compliance in all material respects with the provisions of ERISA, the
Code, all applicable Foreign Benefit Laws and all other applicable laws
and the regulations and interpretations thereof.
10.11. FISCAL YEAR. Change its Fiscal Year.
10.12. DISSOLUTION, ETC. Wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except in connection with (a) the dissolution or
liquidation of a Subsidiary in which all proceeds thereof are paid to the
Borrower, or (b) a merger or consolidation permitted pursuant to SECTION 10.7.
10.13. LIMITATIONS ON SALES AND LEASEBACKS. Enter into any arrangement
or arrangements with any Person providing for the leasing by the Borrower or any
Subsidiary of real or personal property, whether now owned or hereafter acquired
in a single transaction or series of transactions, which has been or is to be
sold or transferred by the Borrower or any Subsidiary to such Person or to any
other Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Borrower or any
Subsidiary, except to the extent the fair market value of all real or personal
property subject to any such arrangement or arrangements (measured at the time
of the transfer giving rise to such arrangement), in the aggregate, does not
exceed $20,000,000 at any time.
10.14. CHANGE IN CONTROL. Cause, suffer or permit to exist or occur any
Change of Control.
10.15. RATE HEDGING OBLIGATIONS. Incur any Rate Hedging Obligations or
enter into any agreements, arrangements, devices or instruments relating to Rate
Hedging Obligations, except (a) pursuant to Swap Agreements in an aggregate
notional amount not to exceed at any time $125,000,000, and (b) forward currency
exchange agreements; PROVIDED, HOWEVER, that no Rate Hedging Obligations shall
be incurred for speculative purposes.
10.16. NEGATIVE PLEDGE CLAUSES. Enter into or cause, suffer or permit
to exist any agreement with any Person other than the Agent and the Lenders
pursuant to this Agreement or any other Loan Documents which prohibits or limits
the ability of any of the Borrower or any Subsidiary to create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, PROVIDED that the Borrower and any Subsidiary
may enter into such an agreement in connection with, and that applies only to,
property acquired with the proceeds of purchase money Indebtedness permitted
hereunder.
81
<PAGE> 88
10.17. PREPAYMENTS, ETC. OF INDEBTEDNESS. (a) Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in any
manner, or make any payment in violation of any subordination terms of, any
Indebtedness; or
(b) amend, modify or change in any manner any term or condition of any
Indebtedness described in SECTION 10.4(a), (d), (e), (f) OR (h) or any lease so
that the terms and conditions thereof are less favorable to the Agent and the
Lenders than the terms of such Indebtedness or leases as of the Closing Date.
10.18. AEROJET GOVERNMENT CONTRACTING AUTHORITY. Become suspended or
debarred from contracting or otherwise engaging in business with any
Governmental Authority or from exporting products in any material amount for any
material amount of time, which such suspension or debarment has not been stayed
or removed within sixty (60) days of its imposition.
10.19. AMENDMENTS TO LINE OF BUSINESS TRANSFER DOCUMENTS AND SPINOFF
DOCUMENTS. Amend, modify or change in any manner any term or condition of any of
the Line of Business Transfer Documents or any of the Spinoff Documents (i) so
that the terms and conditions thereof are less favorable to the Agent and the
Lenders than the terms and conditions of such documents as of the Closing Date,
or (ii) that would be reasonably likely to result in a Material Adverse Effect.
82
<PAGE> 89
ARTICLE XI
EVENTS OF DEFAULT AND ACCELERATION
11.1. EVENTS OF DEFAULT. If any one or more of the following events
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
Governmental Authority), that is to say:
(a) if default shall be made in the due and punctual payment
of the principal of any Loan, Reimbursement Obligation or other
Obligation, when and as the same shall be due and payable whether
pursuant to any provision of ARTICLE II or ARTICLE III or ARTICLE IV,
at maturity, by acceleration or otherwise; or
(b) if default shall be made, and shall continue for a period
of three (3) or more days, in the due and punctual payment of any
amount of interest on any Loan, Reimbursement Obligation or other
Obligation or of any fees or other amounts payable to any of the
Lenders or the Agent on the date on which the same shall be due and
payable; or
(c) if default shall be made in the performance or observance
of any covenant set forth in SECTION 9.8, 9.12, 9.13, 9.20 or ARTICLE
X;
(d) if a default shall be made in the performance or
observance of, or shall occur under, any covenant, agreement or
provision contained in this Agreement or the Notes (other than as
described in clauses (a), (b) or (c) above) and such default shall
continue for thirty (30) or more days after the earlier of receipt of
notice of such default by the Authorized Representative from the Agent
or a senior executive officer of the Borrower becomes aware of such
default, or if a default shall be made in the performance or observance
of, or shall occur under, any covenant, agreement or provision
contained in any of the other Loan Documents (beyond any applicable
grace period, if any, contained therein) or in any instrument or
document evidencing or creating any obligation, guaranty, or Lien in
favor of the Agent or any of the Lenders or delivered to the Agent or
any of the Lenders in connection with or pursuant to this Agreement or
any of the Obligations, or if any Loan Document ceases to be in full
force and effect (other than as expressly provided for hereunder or
thereunder or with the express written consent of the Agent), or if
without the written consent of the Lenders, this Agreement or any other
Loan Document shall be disaffirmed or shall ter minate, be terminable
or be terminated or become void or unenforceable for any reason
whatsoever (other than as expressly provided for hereunder or
thereunder or by reason of any action by the Lenders or the Agent); or
(e) if there shall occur (i) a default, which is not waived,
in the payment of any principal, interest, premium or other amount with
respect to any Indebtedness or Rate Hedging Obligation (other than the
Loans and other Obligations) of the Borrower or any Subsidiary in an
amount not less than (A) $5,000,000 with respect to any individual
83
<PAGE> 90
Indebtedness, or (B) $10,000,000 with respect to all Indebtedness in
the aggregate outstanding, or (ii) a default, which is not waived, in
the performance, observance or fulfillment of any term or covenant
contained in any agreement or instrument under or pursuant to which any
such Indebtedness or Rate Hedging Obligation may have been issued,
created, assumed, guaranteed or secured by the Borrower or any
Subsidiary, or (iii) any other event of default as specified in any
agreement or instrument under or pursuant to which any such
Indebtedness or Rate Hedging Obligation may have been issued, created,
assumed, guaranteed or secured by the Borrower or any Subsidiary, and
such default or event of default shall continue for more than the
period of grace, if any, therein specified, or such default or event of
default shall permit the holder of any such Indebtedness (or any agent
or trustee acting on behalf of one or more holders) to accelerate the
maturity thereof or to require the mandatory redemption, repurchase or
call thereof; or
(f) if any representation, warranty or other statement of fact
contained in any Loan Document or in any writing, certificate, report
or statement at any time furnished to the Agent or any Lender by or on
behalf of the Borrower or any other Credit Party pursuant to or in
connection with any Loan Document, or otherwise, shall be false or
misleading in any material respect when given; or
(g) if the Borrower or any Subsidiary or other Credit Party
shall be unable to pay its debts (other than debts owed directly to the
Borrower or another Subsidiary) generally as they become due; file a
petition to take advantage of any insolvency statute; make an
assignment for the benefit of its creditors; commence a proceeding for
the appointment of a receiver, trustee, liquidator or conservator of
itself or of the whole or any substantial part of its property; file a
petition or answer seeking liquidation, reorganization or arrangement
or similar relief under the federal bankruptcy laws or any other
applicable law or statute; or
(h) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee,
liquidator or conservator of the Borrower or any Subsidiary or other
Credit Party or of the whole or any substantial part of its properties
and such order, judgment or decree continues unstayed and in effect for
a period of sixty (60) days, or approve a petition filed against the
Borrower or any Subsidiary seeking liquidation, reorganization or
arrangement or similar relief under the federal bankruptcy laws or any
other applicable law or statute of the United States of America or any
state, which petition is not dismissed within sixty (60) days; or if,
under the provisions of any other law for the relief or aid of debtors,
a court of competent jurisdiction shall assume custody or control of
the Borrower or any Subsidiary or of the whole or any substantial part
of its properties, which control is not relinquished within sixty (60)
days; or if there is commenced against the Borrower or any Subsidiary
any proceeding or petition seeking reorganization, arrangement or
similar relief under the Federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state
which proceeding or petition remains undismissed for a period of sixty
(60) days; or if the Borrower or any Subsidiary takes any action to
indicate its consent to or approval of any such proceeding or petition;
or
84
<PAGE> 91
(i) if (i) one or more judgments or orders where the amount
not covered by insurance (or the amount as to which the insurer denies
liability) is in excess of $10,000,000 is rendered against the Borrower
or any Subsidiary, or (ii) there is any attachment, injunction
or execution against any of the Borrower's or Subsidiaries' properties
for any amount in excess of $10,000,000 (individually or in the
aggregate); and such judgment, attachment, injunction or execution
remains unpaid, unstayed, undischarged, unbonded or undismissed for a
period of sixty (60) days; or
(j) if the Borrower or any Material Subsidiary shall, other
than in the ordinary course of business (as determined by past
practices), suspend all or any part of its operations material to the
conduct of the business of the Borrower or such Material Subsidiary for
a period of more than 60 days; or
(k) if the Borrower or any Subsidiary shall breach any of the
material terms or conditions of any Swap Agreement and such breach
shall continue beyond any grace period, if any, relating thereto
pursuant to the terms of such Swap Agreement, or if the Borrower or any
Subsidiary shall disaffirm or seek to disaffirm any such agreement or
any of its obligations thereunder; or
(l) if there shall occur and not be waived an Event of Default
as defined in any of the other Loan Documents; or
(m) if the Borrower or any of its Subsidiaries receives notice
of any violation, non-compliance, or liability or potential liability
under Environmental Laws, or the Borrower or any of its Subsidiaries is
in violation of or is not in compliance with or has incurred liability
or potential liability under Environmental Laws, which would reasonably
be expected to result in a Material Adverse Effect and which, with
respect to any violation or non-compliance, has not been cured in all
material respects during any applicable cure period, PROVIDED that the
Required Lenders have given the Borrower notice that the same
constitutes an Event of Default;
(n) any determination, whether judicial, consensual or
otherwise, is made with respect to any patent, intellectual property or
other property right that results in the inability of Fine Chemicals to
utilize any material technology in its production operations, except to
the extent such determination will not, in the opinion of the Agent, be
reasonably likely to have a Material Adverse Effect; or
(o) the Aerojet Settlement Agreement shall at any time cease
to be in full force and effect pursuant to its terms as in effect on
the Closing Date, or any party thereto shall opt out of such Aerojet
Settlement Agreement, or any Governmental Authority party thereto shall
raise any defense to its obligations thereunder, except to the extent
such occurrence will not, in the opinion of the Agent, be reasonably
likely to have a Material Adverse Effect;
then, and in any such event and at any time thereafter, if such Event of Default
or any other Event of Default shall have not been waived,
85
<PAGE> 92
(A) either or both of the following actions may be
taken: (i) the Agent may, and at the direction of the Required
Lenders shall, declare any obligation of the Lenders and the
Issuing Bank to make further Revolving Loans and Swing Line
Loans or to issue additional Letters of Credit terminated,
whereupon the obligation of each Lender to make further
Revolving Loans, of Bank of America to make further Swing Line
Loans, and of the Issuing Bank to issue additional Letters of
Credit, hereunder shall terminate immediately, and (ii) the
Agent shall at the direction of the Required Lenders, at their
option, declare by notice to the Borrower any or all of the
Obligations to be immediately due and payable, and the same,
including all interest accrued thereon and all other
obligations of the Borrower to the Agent and the Lenders,
shall forthwith become immediately due and payable without
presentment, demand, protest, notice or other formality of any
kind, all of which are hereby expressly waived, anything
contained herein or in any instrument evidencing the
Obligations to the contrary notwithstanding; PROVIDED,
however, that notwithstanding the above, if there shall occur
an Event of Default under clause (g) or (h) above, then the
obligation of the Lenders to make Revolving Loans, of Bank of
America to make Swing Line Loans, and of the Issuing Bank to
issue Letters of Credit hereunder shall automatically
terminate and any and all of the Obligations shall be
immediately due and payable without the necessity of any
action by the Agent or the Required Lenders or notice to the
Agent or the Lenders;
(B) The Borrower shall, upon demand of the Agent or
the Required Lenders, deposit cash with the Agent in an amount
equal to the amount of any Letter of Credit Outstandings, as
collateral security for the repayment of any future drawings
or payments under such Letters of Credit, and such amounts
shall be held by the Agent pursuant to the terms of the LC
Account Agreement; and
(C) the Agent and each of the Lenders shall have all
of the rights and remedies available under the Loan Documents
or under any applicable law.
11.2. AGENT TO ACT. In case any one or more Events of Default shall
occur and not have been waived, the Agent may, and at the direction of the
Required Lenders shall, proceed to protect and enforce their rights or remedies
either by suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision contained herein or in
any other Loan Document, or to enforce the payment of the Obligations or any
other legal or equitable right or remedy.
11.3. CUMULATIVE RIGHTS. No right or remedy herein conferred upon the
Lenders or the Agent is intended to be exclusive of any other rights or remedies
contained herein or in any other Loan Document, and every such right or remedy
shall be cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
11.4. NO WAIVER. No course of dealing between the Borrower and any
Lender or the Agent or any failure or delay on the part of any Lender or the
Agent in exercising any rights or remedies
86
<PAGE> 93
under any Loan Document or otherwise available to it shall operate as a waiver
of any rights or remedies and no single or partial exercise of any rights or
remedies shall operate as a waiver or preclude the exercise of any other rights
or remedies hereunder or of the same right or remedy on a future occasion.
11.5. ALLOCATION OF PROCEEDS. If an Event of Default has occurred and
not been waived, and the maturity of the Notes has been accelerated pursuant to
ARTICLE XI hereof, all payments received by the Agent hereunder, in respect of
any principal of or interest on the Obligations or any other amounts payable by
the Borrower hereunder, shall be applied by the Agent in the following order:
(a) the reasonable expenses incurred in connection with
retaking, holding, preserving, processing, maintaining or preparing for
sale or other disposition of, any Collateral, including reasonable
attorney's fees and legal expenses pertaining thereto;
(b) amounts due to the Lenders and the Issuing Bank pursuant
to SECTIONS 4.6(a), 4.6(b), 4.6(c), AND 13.5;
(c) amounts due to the Agent pursuant to SECTION 4.6(d);
(d) payments of interest on Loans, Swing Line Loans and
Reimbursement Obligations, to be applied for the ratable benefit of the
Lenders (with amounts payable in respect of Swing Line Outstandings
being included in such calculation and paid to Bank of America);
(e) payments of principal of Loans, Swing Line Loans and
Reimbursement Obligations, to be applied for the ratable benefit of the
Lenders (with amounts payable in respect of Swing Line Outstandings
being included in such calculation and paid to Bank of America);
(f) payments of cash amounts to the Agent in respect of
outstanding Letters of Credit pursuant to SECTION 11.1(B);
(g) amounts due to the Issuing Bank, the Agent and the Lenders
pursuant to SECTIONS 3.2(h), 9.16 and 13.9;
(h) payments of all other amounts due under any of the Loan
Documents, if any, to be applied for the ratable benefit of the
Lenders;
(i) amounts due to any of the Lenders or their affiliates in
respect of Obligations consisting of liabilities under any Swap
Agreement with any of the Lenders or their affiliates on a pro rata
basis according to the amounts owed; and
(j) any surplus remaining after application as provided for
herein, to the Borrower or otherwise as may be required by applicable
law.
87
<PAGE> 94
ARTICLE XII
THE AGENT
12.1. APPOINTMENT, POWERS, AND IMMUNITIES. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent under this
Agreement and the other Loan Documents with such powers and discretion as are
specifically delegated to the Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. The Agent (which term as used in this sentence and in SECTION 12.5 and
the first sentence of SECTION 12.6 hereof shall include its affiliates and its
own and its affiliates' officers, directors, employees, and agents):
(a) shall not have any duties or responsibilities except those
expressly set forth in this Agreement and shall not be a trustee or
fiduciary for any Lender;
(b) shall not be responsible to the Lenders for any recital,
statement, representation, or warranty (whether written or oral) made
in or in connection with any Loan Document or any certificate or other
document referred to or provided for in, or received by any of them
under, any Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability, or sufficiency of any Loan Document, or
any other document referred to or provided for therein or for any
failure by any Credit Party or any other Person to perform any of its
obligations thereunder;
(c) shall not be responsible for or have any duty to
ascertain, inquire into, or verify the performance or observance of any
covenants or agreements by any Credit Party or the satisfaction of any
condition or to inspect the property (including the books and records)
of any Credit Party or any of its Subsidiaries or affiliates;
(d) shall not be required to initiate or conduct any
litigation or collection proceedings under any Loan Document; and
(e) shall not be responsible for any action taken or omitted
to be taken by it under or in connection with any Loan Document, except
for its own gross negligence or willful misconduct.
The Agent may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.
12.2. RELIANCE BY AGENT. The Agent shall be entitled to rely upon any
certification, notice, instrument, writing, or other communication (including,
without limitation, any thereof by telephone or telefacsimile) believed by it to
be genuine and correct and to have been signed, sent or made by or on behalf of
the proper Person or Persons, and upon advice and statements of legal counsel
(including counsel for any Credit Party), independent accountants, and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the holder thereof for all purposes hereof unless and until the Agent
receives and accepts an Assignment and Acceptance executed in
88
<PAGE> 95
accordance with SECTION 13.1 hereof. As to any matters not expressly provided
for by this Agreement, the Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding on all of the Lenders; PROVIDED, HOWEVER, that the Agent shall not be
required to take any action that exposes the Agent to personal liability or that
is contrary to any Loan Document or applicable law or unless it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking any such action.
12.3. DEFAULTS. The Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default or Event of Default unless the Agent has
received written notice from a Lender or the Borrower specifying such Default or
Event of Default and stating that such notice is a "Notice of Default". In the
event that the Agent receives such a notice of the occurrence of a Default or
Event of Default, the Agent shall give prompt notice thereof to the Lenders. The
Agent shall (subject to SECTION 12.2 hereof) take such action with respect to
such Default or Event of Default as shall reasonably be directed by the Required
Lenders, PROVIDED THAT, unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders.
12.4. RIGHTS AS LENDER. With respect to its Revolving Credit Commitment
and the Loans made by it and Letters of Credit issued by it, Bank of America
(and any successor acting as Agent) in its capacity as a Lender hereunder shall
have the same rights and powers hereunder as any other Lender and may exercise
the same as though it were not acting as the Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the Agent in
its individual capacity. Bank of America (and any successor acting as Agent) and
its affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in, provide services to, and
generally engage in any kind of lending, trust, or other business with any
Credit Party or any of its Subsidiaries or affiliates as if it were not acting
as Agent, and Bank of America (and any successor acting as Agent) and its
affiliates may accept fees and other consideration from any Credit Party or any
of its Subsidiaries or affiliates for services in connection with this Agreement
or otherwise without having to account for the same to the Lenders.
12.5. INDEMNIFICATION. The Lenders agree to indemnify the Agent (to the
extent not reimbursed under SECTION 13.9 hereof, but without limiting the
obligations of the Borrower under such Section) ratably in accordance with their
respective Revolving Credit Commitments, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including attorneys' fees), or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the Agent
(including by any Lender) in any way relating to or arising out of any Loan
Document or the transactions contemplated thereby or any action taken or omitted
by the Agent under any Loan Document; PROVIDED that no Lender shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the Person to be indemnified. Without limitation of the
foregoing, each Lender agrees to reimburse the Agent promptly upon demand for
its ratable share of any costs or expenses payable by the Borrower under SECTION
13.5, to the extent that the Agent is not promptly reimbursed for such costs and
expenses by
89
<PAGE> 96
the Borrower. The agreements contained in this SECTION 12.5 shall survive
payment in full of the Loans and all other amounts payable under this Agreement.
12.6. NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that
it has, independently and without reliance on the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Credit Parties and their Subsidiaries and decision to
enter into this Agreement and that it will, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under the Loan Documents. Except for
notices, reports, and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition, or business of any
Credit Party or any of its Subsidiaries or affiliates that may come into the
possession of the Agent or any of its affiliates.
12.7. RESIGNATION OF AGENT. The Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent which shall be a commercial bank
organized under the laws of the United States of America having combined capital
and surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor, such successor shall thereupon succeed to and
become vested with all the rights, powers, discretion, privileges, and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this ARTICLE XII shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
90
<PAGE> 97
ARTICLE XIII
MISCELLANEOUS
13.1. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may assign to one
or more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its Loans,
its Revolving Note, and its Revolving Credit Commitment); PROVIDED, HOWEVER,
that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or
an assignment of all of a Lender's rights and obligations under this Agreement,
any such partial assignment shall be in an amount at least equal to $5,000,000
or an integral multiple of $5,000,000 in excess thereof;
(iii) each such assignment by a Lender shall be of a constant,
and not varying, percentage of all of its rights and obligations under this
Agreement and its Revolving Note (except that any assignment by Bank of America
shall not include its rights, benefits or duties as the Issuing Bank or as the
provider of Swing Line Loans); and
(iv) the parties to such assignment shall execute and deliver
to the Agent for its acceptance an Assignment and Acceptance in the form of
EXHIBIT B hereto, together with any Revolving Note subject to such assignment
and a processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender hereunder and
the assigning Lender shall, to the extent of such assignment, relinquish its
rights and be released from its obligations under this Agreement. Upon the
consummation of any assignment pursuant to this Section, the assignor, the Agent
and the Borrower shall make appropriate arrangements so that, if required, new
Revolving Notes are issued to the assignor and the assignee. If the assignee is
not incorporated under the laws of the United States of America or a state
thereof, it shall deliver to the Borrower and the Agent certification as to
exemption from deduction or withholding of Taxes in accordance with SECTION 6.6.
(b) The Agent shall maintain at its address referred to in SECTION 13.2
a copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Revolving Credit Commitment of, and principal amount of the Revolving Loans
owing to, each Lender from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, the Agent
91
<PAGE> 98
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of EXHIBIT B hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the parties thereto.
(d) Each Lender may sell participations to one or more Persons in all
or a portion of its rights, obligations or rights and obligations under this
Agreement (including all or a portion of its Revolving Credit Commitment or its
Loans); PROVIDED, HOWEVER, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the participant shall be entitled to the benefit of the yield protection
provisions contained in ARTICLE VI and the right of set-off contained in SECTION
13.3, and (iv) the Borrower shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement, and such Lender shall retain the sole right to enforce the
obligations of the Borrower relating to its Loans and its Note and to approve
any amendment, modification, or waiver of any provision of this Agreement (other
than amendments, modifications, or waivers decreasing the amount of principal of
or the rate at which interest is payable on such Loans or Note, extending any
scheduled principal payment date or date fixed for the payment of interest on
such Loans or Note, or extending its Revolving Credit Commitment).
(e) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time assign and pledge all or any portion of its Loans and
its Note to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank. No
such assignment shall release the assigning Lender from its obligations
hereunder.
(f) Any Lender may furnish any information concerning the Borrower or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants).
(g) Whenever in this Agreement any of the parties hereto is referred
to, such reference shall be deemed to include the successors and permitted
assigns of such party and all covenants, provisions and agreements by or on
behalf of the Borrower which are contained in the Loan Documents shall inure to
the benefit of the successors and permitted assigns of the Agent, the Lenders,
or any of them. The Borrower may not assign or otherwise transfer to any other
Person any right, power, benefit, or privilege (or any interest therein)
conferred hereunder or under any of the other Loan Documents, or delegate (by
assumption or otherwise) to any other Person any duty, obligation, or liability
arising hereunder or under any of the other Loan Documents, and any such
purported assignment, delegation or other transfer shall be void.
13.2. NOTICES. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective (i) on the day on which delivered
(including hand delivery by commercial courier service) to such party (against
receipt therefor), (ii) on the date of transmission to such party, in the case
of notice by telefacsimile (where the proper transmission of such notice is
either acknowledged by the recipient or electronically confirmed by the
transmitting device), or (iii) on the fifth Business Day after the day on which
mailed to such party, if sent prepaid by certified or
92
<PAGE> 99
registered mail, return receipt requested, in each case delivered, transmitted
or mailed, as the case may be, to the address or telefacsimile number, as
appropriate, set forth below or such other address or number as such party shall
specify by notice hereunder:
(a) if to the Borrower:
GenCorp Inc.
Highway 50 at Aerojet Road
Rancho Cordova, California 95670
Attention: Mr. Terry L. Hall, Senior Vice President
and Chief Financial Officer
Telephone: (916) 355-8606
Telefacsimile: (916) 351-8668
with a copy to:
GenCorp Inc.
Highway 50 at Aerojet Road
Rancho Cordova, California 95670
Attention: Robert C. Anderson, Esq.
Telephone: (916) 351-8604
Telefacsimile: (916) 351-8665
(b) if to the Agent:
Bank of America, N.A.
555 S. Flower Street, 11th Floor
CA9-706-11-03
Los Angeles, California 90071
Attention: Agency Services
Telephone: (213) 228-5245
Telefacsimile: (213) 228-2299
with a copy to:
Bank of America, N.A.
555 S. Flower Street
Los Angeles California 90071-2385
Attention: Mr. Dan Farren
Telephone: (213) 228-2820
Telefacsimile: (213) 623-1959
93
<PAGE> 100
(c) if to the Lenders:
At the addresses set forth on the signature pages
hereof and on the signature page of each Assignment
and Acceptance;
(d) if to any other Credit Party, at the address set
forth on the signature page of the Facility Guaranty
or Security Instrument executed by such Credit Party,
as the case may be.
13.3. RIGHT OF SET-OFF; ADJUSTMENTS. (a) Upon the occurrence and during
the continuance of any Event of Default, each Lender (and each of its
affiliates) is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender (or any of its affiliates)
to or for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
the Note held by such Lender, irrespective of whether such Lender shall have
made any demand under this Agreement or such Note and although such obligations
may be unmatured. Each Lender agrees promptly to notify the Borrower after any
such set-off and application made by such Lender; PROVIDED, HOWEVER, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this SECTION 13.3 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
(b) If any Lender (a "benefitted Lender") shall at any time receive any
payment of all or part of the Loans owing to it, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Loans owing to it, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loans owing to it, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Lenders; PROVIDED, HOWEVER, that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest. The Borrower agrees that any Lender so
purchasing a participation from a Lender pursuant to this SECTION 13.3 may, to
the fullest extent permitted by law, exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Person were the direct creditor of the Borrower in the amount of such
participation.
13.4. SURVIVAL. All covenants, agreements, representations and
warranties made herein shall survive the making by the Lenders of the Loans and
the issuance of the Letters of Credit and the execution and delivery to the
Lenders of this Agreement and the Notes and shall continue in full force and
effect so long as any of Obligations remain outstanding or any Lender has any
Revolving Credit Commitment hereunder or the Borrower has continuing obligations
hereunder unless otherwise provided herein.
94
<PAGE> 101
13.5. EXPENSES. The Borrower agrees to pay on demand all costs and
expenses of the Agent in connection with the syndication, preparation,
execution, delivery, administration, modification, and amendment of this
Agreement, the other Loan Documents, and the other documents to be delivered
hereunder, including, without limitation, the reasonable fees and expenses of
counsel for the Agent (including the cost of internal counsel) with respect
thereto and with respect to advising the Agent as to its rights and
responsibilities under the Loan Documents. The Borrower further agrees to pay on
demand all costs and expenses of the Agent and the Lenders, if any (including,
without limitation, reasonable attorneys' fees and expenses and the cost of
internal counsel), in connection with the enforcement (whether through
negotiations, legal proceedings, or otherwise) of the Loan Documents and the
other documents to be delivered hereunder.
13.6. AMENDMENTS AND WAIVERS. Any provision of this Agreement or any
other Loan Document may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower or other applicable Credit
Party party to such Loan Document and either the Required Lenders or (as to Loan
Documents other than this Agreement) the Agent on behalf of the Required Lenders
(and, if ARTICLE XII or the rights or duties of the Agent are affected thereby,
by the Agent); PROVIDED that no such amendment or waiver shall, unless signed by
all the Lenders, (i) increase the Revolving Credit Commitments of the Lenders or
the Total Revolving Credit Commitment, (ii) reduce the principal of or rate of
interest on any Revolving Loan or any fees or other amounts payable hereunder,
(iii) postpone any date fixed for the payment of any scheduled installment of
principal of or interest on any Loan or any fees or other amounts payable
hereunder or for termination of any Revolving Credit Commitment, (iv) change the
percentage of the Revolving Credit Commitment or of the unpaid principal amount
of the Notes, or the number of Lenders, which shall be required for the Lenders
or any of them to take any action under this SECTION 13.6 or any other provision
of this Agreement or (v) release any Guarantor or all or substantially all of
the Collateral except as expressly contemplated in the Loan Documents; and
PROVIDED, FURTHER, that no such amendment or waiver that affects the rights,
privileges or obligations of Bank of America as provider of Swing Line Loans,
shall be effective unless signed in writing by Bank of America or that affects
the rights, privileges or obligations of the Issuing Bank as issuer of Letters
of Credit, shall be effective unless signed in writing by the Issuing Bank. At
any time, with respect to real property on which there has been any known or
suspected release or existence of Hazardous Materials and on which a Lien has
been granted pursuant to a Security Instrument to secure the Obligations
hereunder, the commencement of foreclosure proceedings or other remedial action
by the Agent or the Lenders under the applicable Security Instrument that would
result in the transfer of any fee interest in such real property from the
Borrower or any of its Subsidiaries to the Agent or any Lender shall require the
consent of all of the Lenders.
No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances, except as otherwise expressly provided herein. No delay or
omission on any Lender's or the Agent's part in exercising any right, remedy or
option shall operate as a waiver of such or any other right, remedy or option or
of any Default or Event of Default.
13.7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary
95
<PAGE> 102
in making proof of this Agreement to produce or account for more than one such
fully-executed counterpart.
13.8. TERMINATION. The termination of this Agreement shall not affect
any rights of the Borrower, the Lenders or the Agent or any obligation of the
Borrower, the Lenders or the Agent, arising prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into or rights created or obligations incurred
prior to such termination have been fully disposed of, concluded or liquidated
and the Obligations arising prior to or after such termination have been
irrevocably paid in full. The rights granted to the Agent for the benefit of the
Lenders under the Loan Documents shall continue in full force and effect,
notwithstanding the termination of this Agreement, until all of the Obligations
have been paid in full after the termination hereof (other than Obligations in
the nature of continuing indemnities or expense reimbursement obligations not
yet due and payable, which shall continue) or the Borrower has furnished the
Lenders and the Agent with an indemnification satisfactory to the Agent and each
Lender with respect thereto. Notwithstanding the foregoing, if after receipt of
any payment of all or any part of the Obligations, any Lender is for any reason
compelled to surrender such payment to any Person because such payment is
determined to be void or voidable as a preference, impermissible setoff, a
diversion of trust funds or for any other reason, this Agreement shall continue
in full force and the Borrower shall be liable to, and shall indemnify and hold
the Agent or such Lender harmless for, the amount of such payment surrendered
until the Agent or such Lender shall have been finally and irrevocably paid in
full. The provisions of the foregoing sentence shall be and remain effective
notwithstanding any contrary action which may have been taken by the Agent or
the Lenders in reliance upon such payment, and any such contrary action so taken
shall be without prejudice to the Agent or the Lenders' rights under this
Agreement and shall be deemed to have been conditioned upon such payment having
become final and irrevocable.
13.9. INDEMNIFICATION; LIMITATION OF LIABILITY. (a) The Borrower agrees
to indemnify and hold harmless the Agent, BAS and each Lender and each of their
affiliates and their respective officers, directors, employees and counsel
(each, an "Indemnified Party") from and against any and all claims, damages,
losses, liabilities, costs, and expenses (including, without limitation,
reasonable attorneys' fees) that may be incurred by or asserted or awarded
against any Indemnified Party, in each case arising out of or in connection with
or by reason of (including, without limitation, in connection with any
investigation, litigation, or proceeding or preparation of defense in connection
therewith) the Spinoff, the Line of Business Transfer, the Revolving Credit
Facility, the Transaction Documents, any of the transactions contemplated
therein or herein or the actual or proposed use of the proceeds of the Loans,
except to the extent such claim, damage, loss, liability, cost, or expense is
found in a final, non-appealable judgment by a court of competent jurisdiction
to have resulted from such Indemnified Party's gross negligence or willful
misconduct. In the case of an investigation, litigation or other proceeding to
which the indemnity in this SECTION 13.9 applies, such indemnity shall be
effective whether or not such investigation, litigation or proceeding is brought
by an Indemnified Party or any other Person or any Indemnified Party is
otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated. The Borrower agrees that no Indemnified Party shall have
any liability (whether direct or indirect, in contract or tort or otherwise) to
it, any of its Subsidiaries, any Guarantor, or any security holders or creditors
thereof arising out of, related to or in connection with the transactions
contemplated herein or in any of the
96
<PAGE> 103
Transaction Documents, except to the extent that such liability is found in a
final non-appealable judgment by a court of competent jurisdiction to have
directly resulted from such Indemnified Party's gross negligence or willful
misconduct. The Borrower agrees not to assert any claim against the Agent, any
Lender, any of their affiliates, or any of their respective directors, officers,
employees, attorneys, agents, and advisers, on any theory of liability, for
special, indirect, consequential, or punitive damages arising out of or
otherwise relating to the Transaction Documents, any of the transactions
contemplated therein or herein or the actual or proposed use of the proceeds of
the Loans.
(b) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this SECTION 13.9 shall survive the payment in full of the Loans and all other
amounts payable under this Agreement.
13.10. SEVERABILITY. If any provision of this Agreement or the other
Loan Documents shall be determined to be illegal or invalid as to one or more of
the parties hereto, then such provision shall remain in effect with respect to
all parties, if any, as to whom such provision is neither illegal nor invalid,
and in any event all other provisions hereof shall remain effective and binding
on the parties hereto.
13.11. ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents, constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all previous proposals, negotiations,
representations, commitments and other communications between or among the
parties, both oral and written, with respect thereto (except that those
provisions (if any) which by the express terms of the commitment letter dated as
of July 1, 1999, executed by Bank of America and BAS and accepted by the
Borrower, survive the closing of the Revolving Credit Facility and Letter of
Credit Facility, shall survive and continue in effect).
13.12. AGREEMENT CONTROLS. In the event that any term of any of the
Loan Documents other than this Agreement conflicts with any express term of this
Agreement, the terms and provisions of this Agreement shall control to the
extent of such conflict.
13.13. USURY SAVINGS CLAUSE. Notwithstanding any other provision
herein, the aggregate interest rate charged under any of the Notes, including
all charges or fees in connection therewith deemed in the nature of interest
under applicable law shall not exceed the Highest Lawful Rate (as such term is
defined below). If the rate of interest (determined without regard to the
preceding sentence) under this Agreement at any time exceeds the Highest Lawful
Rate (as defined below), the outstanding amount of the Loans made hereunder
shall bear interest at the Highest Lawful Rate until the total amount of
interest due hereunder equals the amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Agreement had at all
times been in effect. In addition, if when the Loans made hereunder are repaid
in full the total interest due hereunder (taking into account the increase
provided for above) is less than the total amount of interest which would have
been due hereunder if the stated rates of interest set forth in this Agreement
had at all times been in effect, then to the extent permitted by law, the
Borrower shall pay to the Agent an amount equal to the difference between the
amount of interest paid and the amount of interest which would have been paid if
the Highest Lawful Rate had at all times been in effect. Notwithstanding the
97
<PAGE> 104
foregoing, it is the intention of the Lenders and the Borrower to conform
strictly to any applicable usury laws. Accordingly, if any Lender contracts for,
charges, or receives any consideration which constitutes interest in excess of
the Highest Lawful Rate, then any such excess shall be cancelled automatically
and, if previously paid, shall at such Lender's option be applied to the
outstanding amount of the Loans made hereunder or be refunded to the Borrower.
As used in this paragraph, the term "Highest Lawful Rate" means the maximum
lawful interest rate, if any, that at any time or from time to time may be
contracted for, charged, or received under the laws applicable to such Lender
which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
13.14. PAYMENTS. All principal, interest, and other amounts to be paid
by the Borrower under this Agreement and the other Loan Documents shall be paid
to the Agent at the Principal Office in Dollars and in immediately available
funds, without setoff, deduction or counterclaim. Subject to the definition of
"Interest Period" herein, whenever any payment under this Agreement or any other
Loan Document shall be stated to be due on a day that is not a Business Day,
such payment may be made on the next succeeding Business Day, and such extension
of time in such case shall be included in the computation of interest and fees,
as applicable, and as the case may be.
13.15. CONFIDENTIALITY. Each Lending Party agrees to keep confidential
any information furnished or made available to it by the Borrower pursuant to
this Agreement that is marked confidential; PROVIDED that nothing herein shall
prevent any Lending Party from disclosing such information (a) to any other
Lending Party or any affiliate of any Lending Party, or any officer, director,
employee, agent, or advisor of any Lending Party or affiliate of any Lending
Party, (b) to any other Person if reasonably incidental to the administration of
the credit facility provided herein, (c) as required by any law, rule, or
regulation, (d) upon the order of any court or administrative agency, (e) upon
the request or demand of any regulatory agency or authority, (f) that is or
becomes available to the public or that is or becomes available to any Lending
Party other than as a result of a disclosure by any Lending Party prohibited by
this Agreement, (g) in connection with any litigation to which such Lending
Party or any of its affiliates may be a party, (h) to the extent necessary in
connection with the exercise of any remedy under this Agreement or any other
Loan Document, and (i) subject to provisions substantially similar to those
contained in this Section, to any actual or proposed participant or assignee.
13.16. SPECIAL FUNDING OPTION.
(a) Notwithstanding anything to the contrary contained herein,
but subject to subparagraph (b) below, any Lender (a "Granting Lender")
may grant to a special purpose funding vehicle (a "SPC"), identified as
such in writing from time to time by the Granting Lender to the Agent
and the Borrower, the option to provide to the Borrower all or part of
any advance of a Loan that such Granting Lender would otherwise be
obligated to make to the Borrower (a "Funding Obligation") pursuant to
this Agreement; PROVIDED THAT (A) nothing herein shall constitute a
commitment by any SPC to make any advance of a Loan; (B) if an SPC
elects not to exercise such option or otherwise fails to provide all or
any part of such advance of a Loan, the Granting Lender shall be
obligated to make such advance
98
<PAGE> 105
pursuant to the terms hereof; and (C) the SPC shall have debt
obligations which have been assigned a rating by one or more rating
agencies which rating is at least equal to the rating assigned to
similar debt obligations of the Granting Lender. The making of an
advance of a Loan by an SPC hereunder shall utilize the Commitment of
the Granting Lender to the same extent, and as if, such advance were
made by such Granting Lender. Each party hereto hereby agrees that no
SPC shall be liable for any indemnity or similar payment obligation
under this Agreement (all liability for which shall remain with the
Granting Lender). In furtherance of the foregoing, each party hereto
hereby agrees (which agreement shall survive the termination of this
Agreement) that, prior to the date that is one year and one day after
the payment in full of all outstanding commercial paper or other senior
indebtedness of any SPC, it will not institute against, or join any
other person in instituting against, such SPC any bankruptcy,
reorganization, arrangement, insolvency, or liquidation proceedings
under the laws of the United States or any State thereof, with respect
to any claims arising or related to this Agreement. In addition,
notwithstanding anything to the contrary contained in this Section
13.16, any SPC may (I) with notice to, but without the prior written
consent of, the Borrower and the Agent and without paying any
processing fee therefor, assign all or a portion of its interests in
any advances of Loans to the Granting Lender and (II) disclose on a
confidential basis in compliance with the terms of Section 13.15 hereof
any non-public information relating to its advances of Loans to any
rating agency, commercial paper dealer or provider of any surety,
guaranty or credit or liquidity enhancement to such SPC. This Section
13.16 may not be amended without the written consent of the SPC.
(b) The granting to, and exercise by any SPC of, the option to satisfy
a Funding Obligation of a Granting Bank as set forth in subparagraph
(a) above is subject to the following:
(i) such Granting Lender's obligations under this
Agreement and the Loan Documents shall remain unchanged,
including without limitation the indemnification obligations
of the Granting Lender pursuant to SECTION 12.5 hereof;
(ii) such Granting Lender shall remain solely
responsible to the other parties hereto for the performance of
all Funding Obligations;
(iii) the Borrower, the Guarantors and the Lenders
(other than the Granting Lender) shall continue to deal solely
and directly with such Granting Lender in connection with such
Granting Lender's rights and obligations under this Agreement,
and the Agent shall continue to deal directly with the
Granting Lender as agent for the SPC with respect to
distribution of payment of principal, interest and fees,
notices of Conversion and Continuation and all other matters;
(iv) such Granting Lender shall retain the sole right
(x) to enforce the obligations of the Borrower relating to its
Loans, its Notes and its Participations, and (y) to approve
any amendment, modification or waiver of any provision of this
Agreement, each of which may, if so agreed in writing between
the Granting Lender and the SPC, require the prior consent of
any such SPC which has exercised the
99
<PAGE> 106
option to undertake the Funding Obligation in connection with
such Granting Lender's Commitments and Participations and
Obligations owing thereto before the Granting Lender approves
any such amendment, modification or waiver;
(v) the granting of such option shall not constitute
an assignment to or participation of such SPC of or in the
Granting Lender's Commitments and Participations and
Obligations owing thereto;
(vi) such SPC shall not become a Lender nor acquire
any rights hereunder as a result of the granting of such
option;
(vii) such SPC shall not become obligated or
committed to make Advances as a result of the granting of such
option; and
(viii) if such SPC elects not to exercise such option
or otherwise fails to make all or any part of an Advance, the
Granting Lender shall retain its Funding Obligation and be
obligated to make the entire Advance or any portion of such
Advance not made by such SPC.
(b) Advances made by an SPC hereunder shall be deemed to
satisfy the Funding Obligation and utilize the Revolving Credit
Commitment and Letter of Credit Commitment, as applicable, of the
Granting Lender as if, and to the same extent, such Advances were made
by such Granting Lender.
(c) Each party hereto agrees that no SPC shall be liable for
any indemnity or payment under this Agreement for which a Granting
Lender would otherwise be liable so long as, and to the extent that,
the Granting Lender provides such indemnity or makes such payment.
(d) Notwithstanding anything to the contrary contained in this
Agreement, an SPC may disclose on a confidential basis any nonpublic
information relating to Advances made by such SPC hereunder to any
rating agency, commercial paper dealer or provider of any surety or
guarantee to such SPC.
(e) This SECTION 13.16 may not be amended without the prior
written consent of the Granting Lender on behalf of which such SPC has
made all or any part of its Advances which remain outstanding at the
time of such amendment.
13.17. GOVERNING LAW; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN
THOSE SECURITY INSTRUMENTS WHICH EXPRESSLY PROVIDE THAT THEY SHALL BE
GOVERNED BY THE LAWS OF ANOTHER JURISDICTION) SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
100
<PAGE> 107
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH
STATE.
(b) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND
CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT
SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF
AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
BORROWER EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER
IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR
PROCEEDING, AND THE BORROWER HEREBY IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(c) THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR
CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER
PROVIDED IN SECTION 13.2, OR BY ANY OTHER METHOD OF SERVICE PROVIDED
FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL
PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE
COURTS OF ANY JURISDICTION WHERE THE BORROWER OR ANY OF THE BORROWER'S
PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY
THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY
WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO
THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER
COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER
APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN
THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, THE BORROWER, THE
AGENT AND THE LENDERS HEREBY AGREE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO
THE EXTENT PERMITTED BY APPLICABLE
101
<PAGE> 108
LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH
ACTION, SUIT OR PROCEEDING.
(f) THE BORROWER HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY
HAVE THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO
THE TERMS HEREOF IS AN INCONVENIENT FORUM.
[Signatures on following pages]
102
<PAGE> 109
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be made, executed and delivered by their duly authorized officers as of the day
and year first above written.
GENCORP INC.
By: /s/ M. E. Hicks
-----------------------------------------------
Name: M. E. Hicks
--------------------------------------------
Title: Sr. Vice President, Chief Executive Officer
-------------------------------------------
BANK OF AMERICA, N.A.,
AS AGENT FOR THE LENDERS
By: /s/ Valerie C. Mills
-----------------------------------------------
Name: Valerie C. Mills
----------------------------------------------
Title: Managing Director
---------------------------------------------
CREDIT AGREEMENT
SIGNATURE PAGE 1 OF 12
<PAGE> 110
BANK OF AMERICA, N.A.
By: /s/ Valerie C. Mills
-------------------------------
Name: Valerie C. Mills
-----------------------------
Title: Managing Director
----------------------------
Lending Office for Base Rate and Eurodollar
Rate Loans:
Bank of America, N.A.
101 North Tryon Street,
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Corporate Credit Services
Telephone: (704) 388-3917
Telefacsimile: (704) 409-0019
Wire Transfer Instructions:
Bank of America, N.A.
ABA# 053000196
Account No.: 1366212250600
Reference: GenCorp Inc.
Attention:Corporate Credit Services
CREDIT AGREEMENT
SIGNATURE PAGE 2 OF 12
<PAGE> 111
THE BANK OF NOVA SCOTIA
By: /s/ R. P. Reynolds
-------------------------------
Name: R. P. Reynolds
-----------------------------
Title: Relationship Manager
----------------------------
Lending Office for Base Rate Loans:
The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: Ms. Kathy Clark,
Loan Operations Officer
Telephone: (404) 877-1542
Telefacsimile: (404) 888-8998
Wire Transfer Instructions:
The Bank of Nova Scotia
ABA# 026002532
Account No.: 0610135
Reference: BNS San Francisco Loan
Services
Attention: Kathy Clark
Lending Office for Eurodollar Rate Loans:
The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: Ms. Kathy Clark,
Loan Operations Officer
Telephone: (404) 877-1542
Telefacsimile: (404) 888-8998
Wire Transfer Instructions:
The Bank of Nova Scotia
ABA# 026002532
Account No.: 0610135
Reference: BNS San Francisco Loan
Services
Attention: Kathy Clark
CREDIT AGREEMENT
SIGNATURE PAGE 3 OF 12
<PAGE> 112
THE BANK OF NEW YORK
By: /s/ Elizabeth T. Ying
-------------------------------
Name: Elizabeth T. Ying
-----------------------------
Title: Vice President
----------------------------
Lending Office for Base Rate Loans:
The Bank of New York
Corporate Banking Administration
One Wall Street
22d Floor, BN OWS 22
New York, New York 10286
Attention: Ms. Dawn Hertling
Telephone: (212) 635-6742
Telefacsimile: (212) 635-6877/6399
Wire Transfer Instructions:
The Bank of New York
ABA# 021000018
Account No.: GenCorp Inc.
Reference: IOC 556
Attention: Lorna Alleyne
Lending Office for Eurodollar Rate Loans:
The Bank of New York
Corporate Banking Administration
One Wall Street
22d Floor, BN OWS 22
New York, New York 10286
Attention: Ms. Dawn Hertling
Telephone: (212) 635-6742
Telefacsimile: (212) 635-6877/6399
Wire Transfer Instructions:
The Bank of New York
ABA# 021000018
Account No.: GenCorp Inc.
Reference: IOC 556
Attention: Lorna Alleyne
CREDIT AGREEMENT
SIGNATURE PAGE 4 OF 12
<PAGE> 113
WELLS FARGO BANK, N.A.
By: /s/ Dan Adams
-------------------------------
Name: Dan Adams
-----------------------------
Title: President
----------------------------
Lending Office for Base Rate Loans:
Wells Fargo Bank
201 3rd Street
San Francisco, California 94103
Attention: Ms. Judy Chan,
Loan Accounting
Specialist
Telephone: (415) 477-5433
Telefacsimile: (415) 979-0675
Wire Transfer Instructions:
Wells Fargo Bank, N.A.
ABA# 121-000-248
Account No.: 2712-507201
Reference: GenCorp Inc.
Lending Office for Eurodollar Rate Loans:
Wells Fargo Bank
201 3rd Street
San Francisco, California 94103
Attention: Ms. Judy Chan,
Loan Accounting
Specialist
Telephone: (415) 477-5433
Telefacsimile: (415) 979-0675
Wire Transfer Instructions:
Wells Fargo Bank, N.A.
ABA# 121-000-248
Account No.: 2712-507201
Reference: GenCorp Inc.
CREDIT AGREEMENT
SIGNATURE PAGE 5 OF 12
<PAGE> 114
NATIONAL CITY BANK
By: /s/ Joshua R. Sosland
---------------------------------
Name: Joshua R. Sosland
-------------------------------
Title: Account Officer
-------------------------------
Lending Office for Base Rate Loans:
National City Bank
23000 Mill Creek Boulevard
Highland Hills, Ohio 44122
Attention: Revette Vickerstaff
Telephone: (216) 488-7080
Telefacsimile: (216) 488-7110
Wire Transfer Instructions:
National City Bank
ABA# 041000124
Account No.: 151804
Account Name: Commercial Loan Operations
Reference: GenCorp
Lending Office for Eurodollar Rate Loans:
National City Bank
23000 Mill Creek Boulevard
Highland Hills, Ohio 44122
Attention: Revette Vickerstaff
Telephone: (216) 488-7080
Telefacsimile: (216) 488-7110
Wire Transfer Instructions:
National City Bank
ABA# 041000124
Account No.: 151804
Account Name: Commercial Loan Operations
Reference: GenCorp
CREDIT AGREEMENT
SIGNATURE PAGE 6 OF 12
<PAGE> 115
THE NORTHERN TRUST COMPANY
By: /s/ David J. Mitchell
-------------------------------
Name: David J. Mitchell
-----------------------------
Title: Vice President
----------------------------
Lending Office for Base Rate Loans:
The Northern Trust Company
50 S. LaSalle Street
Chicago, Illinois 60675
Attention: Ms. Linda Honda
Telephone: (312) 444-3532
Telefacsimile: (312) 630-1566
Wire Transfer Instructions:
The Northern Trust Company
ABA# 071000152
Account No.: 5186401000
Reference: GenCorp
Credit to: Commercial Loan Department
Lending Office for Eurodollar Rate Loans:
The Northern Trust Company
50 S. LaSalle Street
Chicago, Illinois 60675
Attention: Ms. Linda Honda
Telephone: (312) 444-3532
Telefacsimile: (312) 630-1566
Wire Transfer Instructions:
The Northern Trust Company
ABA# 071000152
Account No.: 5186401000
Reference: GenCorp
Credit to: Commercial Loan Department
CREDIT AGREEMENT
SIGNATURE PAGE 7 OF 12
<PAGE> 116
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Kazutoshi Kuwahara
-------------------------------
Name: Kazutoshi Kuwahara
-----------------------------
Title: General Manager
----------------------------
Lending Office for Base Rate Loans:
The Industrial Bank of Japan, Limited
1251 Avenue of the Americas
New York, New York 10020
Attention: Ms. Bindu Menon
Telephone: (212) 282-4074
Telefacsimile: (212) 282-4480
Wire Transfer Instructions:
The Industrial Bank of Japan, Limited
ABA# 026-008-345
Account No.: GenCorp Inc.
Attention: Credit Administration
Dept.
Lending Office for Eurodollar Rate Loans:
The Industrial Bank of Japan, Limited
1251 Avenue of the Americas
New York, New York 10020
Attention: Ms. Bindu Menon
Telephone: (212) 282-4074
Telefacsimile: (212) 282-4480
Wire Transfer Instructions:
The Industrial Bank of Japan, Limited
ABA# 026-008-345
Account No.: GenCorp Inc.
Attention: Credit Administration
Dept.
CREDIT AGREEMENT
SIGNATURE PAGE 8 OF 12
<PAGE> 117
ABN AMRO BANK N.V.
By: /s/ Jeffrey A. French
-------------------------------
Name: Jeffrey A. French
-----------------------------
Title: Group Vice President
----------------------------
By: /s/ Gina M. Brusatori
-------------------------------
Name: Gina M. Brusatori
-----------------------------
Title: Group Vice President
----------------------------
Lending Office for Base Rate Loans:
ABN AMRO Bank N.V.
208 S. LaSalle Street
Suite 1500
Chicago, Illinois 60604
Attention: Ms. Suzanne Smith,
Team Captain for West
Coast
Telephone: (312) 992-5095
Telefacsimile: (312) 992-5158
Wire Transfer Instructions:
ABN AMRO Bank N.V.--New York
ABA# 026 009580
Account No.: 650-001-1789-41
Account Name: ABN AMRO Bank N.V.--CPU
Reference: GenCorp Inc.
Lending Office for Eurodollar Rate Loans:
ABN AMRO Bank N.V.
208 S. LaSalle Street
Suite 1500
Chicago, Illinois 60604
Attention: Ms. Suzanne Smith,
Team Captain for West
Coast
Telephone: (312) 992-5095
Telefacsimile: (312) 992-5158
Wire Transfer Instructions:
ABN AMRO Bank N.V.--New York
ABA# 026 009580
Account No.: 650-001-1789-41
Account Name: ABN AMRO Bank N.V.--CPU
Reference: GenCorp Inc.
CREDIT AGREEMENT
SIGNATURE PAGE 9 OF 12
<PAGE> 118
BANK ONE, N.A.
By: /s/ Mark A. Isley
-------------------------------
Name: Mark A. Isley
-----------------------------
Title: First Vice President
----------------------------
Lending Office for Base Rate and Eurodollar Rate
Loans:
Bank One, N.A.
Bank One Plaza
Chicago, Illinois 60670
Attention: Mr. Robert F. Simon,
Client Services Associate
Telephone: (312) 732-8543
Telefacsimile: (312) 732-4840
Wire Transfer Instructions:
Bank One, N.A.
ABA# 071000013
Account No.: 4811 5286 0000
Account Name: Money Transfer Incoming Account
Attention: Robert F. Simon
CREDIT AGREEMENT
SIGNATURE PAGE 10 OF 12
<PAGE> 119
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Michael E. Cooper
-------------------------------
Name: Michael E. Cooper
-----------------------------
Title: Vice President
----------------------------
Lending Office for Base Rate Loans:
Union Bank of California
1980 Saturn Street, 3rd Floor
Monterey, California 91755
Attention: Ms. Ruby Gonzales
Telephone: (323) 720-7055
Telefacsimile: (323) 724-6198
Wire Transfer Instructions:
Union Bank of California, N.A.
ABA# 122-000-496
Account No.: Wire Transfer Clearing--
Credit GL 070-196431
Reference: GenCorp Inc.
Attention: Commercial Loan
Operations
Lending Office for Eurodollar Rate Loans:
Union Bank of California
1980 Saturn Street, 3rd Floor
Monterey, California 91755
Attention: Ms. Ruby Gonzales
Telephone: (323) 720-7055
Telefacsimile: (323) 724-6198
Wire Transfer Instructions:
Union Bank of California, N.A.
ABA# 122-000-496
Account No.: Wire Transfer Clearing--
Credit GL 070-196431
Reference: GenCorp Inc.
Attention: Commercial Loan
Operations
CREDIT AGREEMENT
SIGNATURE PAGE 11 OF 12
<PAGE> 120
CREDIT SUISSE FIRST BOSTON
By: /s/ Bill O'Daly
-------------------------------
Name: Bill O'Daly
-----------------------------
Title: Vice President
----------------------------
By: /s/ Kristin Lepri
-------------------------------
Name: Kristin Lepri
-----------------------------
Title: Associate
----------------------------
Lending Office for Base Rate Loans:
Credit Suisse First Boston
5 World Trade Center, 8th Floor
New York, New York 10048
Attention: Mr. Ron Davis--Loan
Administrator
Telephone: (212) 322-1865
Telefacsimile: (212) 335-0593/0576
Wire Transfer Instructions:
Bank of New York
ABA #: 021000018
Account No.: 8900329262
Account Name: CSFB Loan Clearing
Reference: GenCorp Inc.
Lending Office for Eurodollar Rate Loans:
Credit Suisse First Boston
5 World Trade Center, 8th Floor
New York, New York 10048
Attention: Mr. Ron Davis--Loan
Administrator
Telephone: (212) 322-1865
Telefacsimile: (212) 335-0593/0576
Wire Transfer Instructions:
CITIGB2L Citibank, N.A.
London
Swift BIC: CRESU33 CREDIT SUISSE FIRST
BOSTON NEW YORK BRANCH
Account No.: 8545000
Account Name: CSFB NY Loan Clearing
Reference: GenCorp Inc.
Currency: EUR
CREDIT AGREEMENT
SIGNATURE PAGE 12 OF 12
<PAGE> 1
Exhibit B
Execution Copy
DISTRIBUTION AGREEMENT
DATED SEPTEMBER 30, 1999
BETWEEN
GENCORP INC.
AND
OMNOVA SOLUTIONS INC.
<PAGE> 2
CONTENTS
--------
Page
----
I. Definitions....................................................... 1
II. Contribution...................................................... 2
2.01. Assets Contibuted........................................ 10
2.02. Retained Assets.......................................... 10
2.03. Assumed Liabilities...................................... 11
2.04. Retained Liabilities .................................... 12
2.05. Issuance of Shares....................................... 12
2.06. Closing.................................................. 12
2.07. Assignment of Assets .................................... 12
2.08. Termination of Certain Contracts ........................ 13
2.09. Disclaimer............................................... 13
III. Distribution
3.01. Distribution............................................. 14
3.02. Delivery................................................. 14
IV. Certain Covenants ................................................ 14
4.01. Interim Use of GenCorp's Corporate Name.................. 14
4.02. Transition and Further Assurances........................ 15
4.03. Assets Administration.................................... 15
4.04. Correspondence........................................... 16
4.05. Interim Permit Operations................................ 16
4.06. Agreement for Exchange of Information.................... 16
4.07. Witness Services......................................... 17
4.08. Confidentiality.......................................... 17
4.09. Certain Tax Matters...................................... 18
4.10. Insurance Matters........................................ 19
V. Indemnification ................................................ 21
5.01. Indemnification by GenCorp Inc........................... 21
5.02. Indemnification by OMNOVA................................ 21
5.03. Third Party Claim Procedures............................. 22
5.04 Insurance Recovery....................................... 24
<PAGE> 3
VI. Miscellaneous Provisions.......................................... 24
6.01. Notices ................................................ 24
6.02. Entire Agreement......................................... 25
6.03. Assignment............................................... 25
6.04. Captions ................................................ 25
6.05. Waiver; Consent.......................................... 25
6.06. No Third Party Beneficiaries............................. 25
6.07. Survival of Agreements................................... 26
6.08. Expenses ................................................ 26
6.09. Group Performance........................................ 26
6.10. Counterparts............................................. 26
6.11. Gender................................................... 26
6.12. Governing Law............................................ 26
6.13. Interpretation........................................... 26
6.14. Blue Pencil.............................................. 26
6.15 Conflicts................................................ 27
Schedules
1.01(a) Corporate Real Property
1.01(b) Certain Discontinued Operations
1.01(c) OMNOVA Real Property
1.01(d) OMNOVA Entities
1.01(e) OMNOVA Discontinued Operations
1.01(f) OMNOVA Intellectual Property
1.01(g) OMNOVA Balance Sheet
<PAGE> 4
Execution Copy
DISTRIBUTION AGREEMENT
----------------------
THIS DISTRIBUTION AGREEMENT (the "Agreement") dated September 30, 1999,
is by and between OMNOVA SOLUTIONS INC., an Ohio corporation ("OMNOVA"), and
GENCORP INC., an Ohio corporation ("GenCorp").
WHEREAS, the Board of Directors of GenCorp (the "GenCorp Board") has
determined that it is in the best interests of GenCorp and its shareholders to
transfer the Contributed Assets to OMNOVA in exchange for OMNOVA Common Stock
and OMNOVA's assumption of the Assumed Liabilities, all as more fully described
in this Agreement and the Ancillary Agreements (the "Separation");
WHEREAS, the GenCorp Board has further determined that it is
appropriate and desirable, on the terms and conditions contemplated hereby, for
GenCorp to distribute (the "Distribution") to the holders of GenCorp Common
Shares, as a dividend, all of the outstanding common shares, $0.10 par value, of
OMNOVA (the "OMNOVA Common Stock"); and
WHEREAS, it is appropriate and desirable to set forth the principal
transactions required to effect the Separation and the Distribution and certain
other agreements that will govern certain matters relating to the Separation and
the Distribution and the relationship between the GenCorp Group and the OMNOVA
Group following the Distribution.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, OMNOVA and GenCorp hereby agree as follows:
ARTICLE I: DEFINITIONS
---------- -----------
Section 1.01. Terms used in this Agreement shall have the meanings
ascribed to them by definition in this Agreement.
"ACTION" means any demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority or any arbitration or mediation
tribunal.
"ADDITIONAL ASSETS" means the following assets, properties and rights
of GenCorp and all rights and interests therein:
(a) the real property described in Schedule 1.01(a), including
all rights, easements and privileges appertaining or relating thereto and all
buildings, fixtures and improvements located thereon and therein and all such
items under construction;
(b) all plant, equipment, apparatus, computers and other
electronic data processing equipment, fixtures, machinery, furniture, office
equipment, automobiles, trucks, dies, molds, patterns, aircraft, vessels, motor
vehicles and other transportation equipment, special and general tools, test
devices, prototypes and models and other tangible personal property (excluding
<PAGE> 5
2
Information and Records), wherever located, whether, owned or leased, licensed
or otherwise which is used, held for use or being developed for use primarily
for the GenCorp Corporate Headquarters, the GenCorp Corporate Technology Center
or the GenCorp Flight Operations;
(c) all inventories of materials, parts, raw materials, finished
goods, products and supplies, wherever located, used, held for use or being
developed for use primarily for the GenCorp Corporate Headquarters, the GenCorp
Corporate Technology Center or the GenCorp Flight Operations;
(d) all computer applications, programs and other software, user
and system documentation and instructions, source code, functional and design
specifications, network software, design software, design tools and all
protocol/internet addresses, wherever located, used, held for use or developed
for use primarily for the GenCorp Corporate Headquarters, the GenCorp Technology
Center or the GenCorp Flight Operations, but excluding the PC based software for
the Treasury and Shareholder Services function, and excluding one copy of any
software code written by GenCorp for the Lawson human resource software package
and all data pertaining to employee and employee benefit matters in respect of
any employees who will not become employees of OMNOVA or an OMNOVA entity;
(e) the Additional Technology; and
(f) all Contracts, Leases, Intellectual Property, Records,
Information and Claims which (i) pertain primarily to the items described in
(a), (b), (c), (d) or (e) above, or (ii) pertain primarily to any Discontinued
OMNOVA Operations.
"ADDITIONAL TECHNOLOGY" means any Intellectual Property of GenCorp
which is not included in the OMNOVA Business Assets and which pertains to
coatings, adhesives, polymers (including, without limitation, polymer processing
and surface modification and oxetane monomer and polymer compositions,
structures, formulations, systems procedures and processing), blends or alloys
of polymers and other materials, non-polymer substrates, or processing methods,
but excluding any such Intellectual Property (other than Polyfox Intellectual
Property) to the extent of vehicle sealing applications and to the extent it has
been licensed by GenCorp to other Persons.
"AFFILIATE" is defined in the Tax Matters Agreement.
"AGREEMENT" means this Distribution Agreement, including all of the
Schedules hereto.
"ANCILLARY AGREEMENTS" mean (i) the Agreement on Employee Matters, the
Tax Matters Agreement, the Services and Support Agreement, and the Alternative
Dispute Resolution Agreement by and between the parties and dated as of the
<PAGE> 6
3
date hereof and (ii) such deeds, stock powers, bills of sale, certificates of
title, assignments, assumptions and other agreements, instruments and
conveyances (including, without limitation, the License Agreement and the
Non-Fluorinated Oxetane License Agreement, dated the date hereof, among OMNOVA
and Aerojet-General Corporation and/or Aerojet Fine Chemicals LLC) as are
executed and delivered by or on behalf of a party pursuant to this Agreement or
any Ancillary Agreement described in (i).
"ASSUMED LIABILITY" is defined in Section 2.03.
"BUSINESS DAY" means any day on which commercial banks are not required
or authorized by law to close in the City of New York, State of New York, U.S.A.
"CAA" means the United States Clean Air Act.
"CERCLA" means the United States Comprehensive Environmental Response,
Compensation and Liability Act.
"CWA" means the United States Clean Water Act.
"CLAIM" means any cause of action, judgment, right of recovery, right
of action, right of payment, set-off, credit, rebate, indemnity or other claim
against other Persons, of whatever kind or nature, known or unknown, accrued or
to accrue, including, without limitation, all rights of rescission, replevin and
reclamation, all rights and claims in respect of past infringement, all credits
or rebates due in respect of charges incurred, goods received or services
rendered and all rights under any express or implied warranties, representations
or guarantees made by suppliers, contractors or others.
"CLOSING" is defined in Section 2.06.
"CLOSING TIME" is defined in Section 2.06.
"CODE" is defined in the Tax Matters Agreement.
"CONSENT" is defined in Section 2.07.
"CONTRACTS" means any agreements, contract rights, license agreements,
leases of personal property, open purchase orders for raw materials, supplies,
parts or services, unfilled orders for the manufacture and sale of products and
other contracts, agreements, commitments or undertakings.
"CONTRIBUTED ASSETS" is defined in Section 2.01.
"DISCONTINUED OMNOVA OPERATIONS" means any terminated, divested or
discontinued business or operation of GenCorp or any OMNOVA Entity which is
described on Schedule 1.01(e).
<PAGE> 7
4
"DISTRIBUTION AGENT" means Bank of New York, or such other trust
company or bank designated by GenCorp, to act as the agent responsible for the
distribution of the OMNOVA Common Stock in the Distribution.
"DISTRIBUTION DATE" is defined in Section 3.01.
"DISTRIBUTION " is defined in Section 3.01.
"DISTRIBUTION RECORD DATE" is defined in Section 3.01.
"DOLLARS" or "$" means United States dollars.
"ENVIRONMENTAL LAW" means any federal, state, local, foreign or
international statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, common law doctrine (including tort,
contribution, strict liability, negligence, trespass and nuisance), order,
judgment, decree, injunction, requirement or agreement with any Governmental
Authority, now or hereafter in effect relating to health, safety, pollution or
the environment (including ambient air, surface water, groundwater, land
surface, subsurface strata and natural resources) or to emissions, discharges,
releases or threatened releases of any substance currently or at any time
hereafter listed, defined, designated or classified as hazardous, toxic, waste,
radioactive or dangerous, or otherwise regulated, under any of the foregoing, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of any such substances, including,
without limitation, CERCLA, RCRA, CWA, CAA, TSCA and comparable provisions in
state, local, foreign or international law.
"ENVIRONMENTAL LIABILITIES" means all liabilities and obligations
relating to, arising out of or resulting from any Environmental Law or contract
or agreement relating to environmental, health or safety matters (including all
removal, remediation or cleanup costs, investigatory costs, governmental
response costs, natural resources damages, property damages, personal injury
damages, costs of compliance with any settlement, judgment or other
determination of liability and indemnity, contribution or similar obligations)
and all costs and expenses (including allocated costs of in-house counsel and
other personnel), interest, fines, penalties or other monetary sanctions in
connection therewith.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, in effect
from time to time.
"FORM 10" means the registration statement on Form 10 filed by OMNOVA
with the SEC to effect the registration of the OMNOVA Common Stock under the
Exchange Act.
"GENCORP ENTITY" means any corporation, partnership, joint venture,
limited liability company, alliance, association or legal entity in which
GenCorp, directly
<PAGE> 8
5
or indirectly, has or had any equity, ownership, investment, profit, management
or other interest, but excluding the OMNOVA Entities.
"GENCORP GROUP" means GenCorp and the GenCorp Entities.
"GENCORP COMMON STOCK" means the Common Shares, $.10 par value per
share, of GenCorp.
"GENCORP INSURANCE" is defined in Section 4.10.
"GENCORP OVERSEAS" means GenCorp Overseas Inc., an Ohio corporation.
"GOVERNMENTAL AUTHORITY" means (i) the United States of America, any
State thereof, or any court, department, commission, board, bureau, agency or
instrumentality of the United States of America, any State thereof, or political
subdivision of any of them, (ii) any other body, authority or agency exercising
any form of administrative or regulatory authority under any applicable Legal
Requirement, (iii) any quasi-governmental court, body, agency or authority, (iv)
any corporation established by or at the direction of any of the foregoing and
authorized by statute to exercise regulatory authority, and (v) any foreign
government or governmental authority comparable to any of the foregoing.
"GROUP" means the OMNOVA Group or the GenCorp Group.
"INDEMNIFIED PARTY" is defined in Section 5.03(a).
"INDEMNIFYING PARTY" is defined in Section 5.03(a).
"INDEMNITY NOTICE" is defined in Section 5.03(a).
"INFORMATION" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how, trade
secrets, techniques, designs, specifications, drawings, blueprints, diagrams,
models, prototypes, samples, flow charts, data, computer data, disks, diskettes,
tapes, computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
"INSURANCE PROCEEDS" means those monies (i) received by an insured from
an insurance carrier on an insurance claim or (ii) paid by an insurance carrier
on behalf of an insured on an insurance claim, in either case net of any
applicable deductibles, retentions, or costs paid by such insured, but such term
does not
<PAGE> 9
6
refer to proceeds received from an insurer on an employee benefits group
insurance policy.
"INTELLECTUAL PROPERTY" means any and all United States and foreign:
(a) patents (including, without limitation, utility patents, design patents,
reissued and reexamined patents industrial designs and utility models),
inventors' certificates and patent applications (including docketed patent
disclosures awaiting filing determination or preparation, reissues, revisions,
reexaminations, divisions, continuations, continuations-in-part and extensions),
all extensions, the right to claim priority, and any improvements to any of the
foregoing; (b) trademarks, trade names, service marks, service names, fictitious
names, telephone numbers, trade dress, symbols, marks, logos, business and
product names, slogans and rights to obtain renewals and extensions thereof and
registrations and applications for registration thereof together with all
translations, adaptations, derivations, and combinations thereof; (c) works of
authorship (whether or not copyrightable and/or registerable and whether or not
registered), including, without limitation, work of art and computer software,
patterns and designs and copyright registrations, registration applications and
right to obtain renewals and extensions thereof; (d) inventions (whether
patentable or unpatentable and whether or not reduced to practice), processes,
designs, formulae, trade secrets, proprietary knowledge, know-how, industrial
models, technical information, manufacturing, engineering and technical
drawings, product specifications, compositions, research and development,
manufacturing and production processes and techniques; (e) mask work and other
semiconductor chip rights and registrations thereof; (f) computer applications,
programs and other software and all related data, user and system documentation
and instructions, source code, functional and design specifications, network
software, design software, design tools and, web sites and addresses; (g)
intellectual property rights similar to any of the foregoing; (h) all books,
records, documents, drawings, tapes, disks or other media or tangible
embodiments of any of the foregoing (in whatever form or media, including
electronic and magnetic media) and (i) all goodwill pertaining to any of the
foregoing.
"IRS" means the United States Internal Revenue Service and any
successor department, agency or organization of the United States.
"KNOWN" means the knowledge of any director or officer of the GenCorp
Group or the OMNOVA Group and the knowledge of the manager of any GenCorp Group
or OMNOVA Group location and the knowledge of any direct report to any such
director, officer or manager and the knowledge which any of such persons would
have after conducting a reasonable investigation within the scope of his or her
job responsibility.
"KNOWN LIABILITIES" means any actual or alleged liability or obligation
of the GenCorp Group or the OMNOVA Group which is Known to any member of the
GenCorp Group or the OMNOVA Group (which shall be deemed to include, without
limitation, any matter as to which any person included in the definition
<PAGE> 10
7
of "Known" has received a notice claiming or alleging such liability or
obligation, any matter as to which any member of either Group has paid any
amounts or entered into or became subject to any settlements, agreements,
decrees, orders, judgments, or other obligations, and the matters and locations
included on Section 1.01(b)), but the term "Known Liability" excludes any actual
or alleged liability or obligation which: (i) is provided for on the OMNOVA
Balance Sheet, (ii) arises from the condition of any facility listed on Schedule
1.01(c) (including, without limitation, Environmental Liabilities resulting from
any such condition), or (iii) is an ordinary course liability or obligation
arising from the OMNOVA Business (e.g. performance of contracts and payment of
trade payables).
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign
or international, constitution, law, ordinance, principle of common law,
regulation, statute, treaty or order, including, without limitation the
Environmental Laws.
"LOSSES" means all Actions and threatened Actions, and all damages,
costs, expenses, losses, liabilities, judgments, awards, fines, sanctions,
orders, consent decrees, diminution in value, penalties, charges and settlement
payments, whether absolute or contingent, foreseen, unforeseen, accrued or
unaccrued, known or unknown, liquidated or unliquidated, matured or unmatured,
now existing or which may arise in the future (including, without limitation,
all reasonable costs, fees and expenses of attorneys, experts, accountants,
appraisers, consultants, witnesses, and investigators in connection with
defending or settling an Action or threatened Action) and interest on cash
disbursements in respect of any of the foregoing at the Reference Rate from the
date each such cash disbursement is made until the party incurring the same
shall have been indemnified in respect thereof.
"NON-PROPOSING PARTY" is defined in Section 4.09.
"NYSE" means the New York Stock Exchange.
"OMNOVA BALANCE SHEET" means the OMNOVA balance sheet consisting of the
column labeled "Adjusted OMNOVA Balance Sheet" on Schedule 1.01(g).
"OMNOVA BUSINESS" means the business and operations of: (a) the
Performance Chemicals Division of GenCorp as such business and operations are
currently being conducted, (b) the Decorative & Building Products Division of
GenCorp as such business and operations are currently being conducted, and (c)
the OMNOVA Entities.
"OMNOVA BUSINESS ASSETS" means any and all assets, properties and
rights of GenCorp, Penn International and GenCorp Overseas that are used, held
for use or being developed for use primarily for the OMNOVA Business and all
rights and interests therein, wherever located (including in the possession of
vendors or other third parties or elsewhere), whether real, personal or mixed,
tangible, intangible or contingent, in each case whether or not recorded or
reflected or required to be
<PAGE> 11
8
recorded or reflected on the books and records or financial statements of
GenCorp, GenCorp International, or GenCorp Overseas, including, without
limitation, the following:
(a) All real property of whatever nature, whether owned, leased,
licensed or otherwise, including all rights, easements and privileges
appertaining or relating thereto and all buildings, fixtures and improvements
located thereon and therein and all such items under construction including,
without limitation, the real property listed on Schedule 1.01(c);
(b) All tangible personal property, plant, machinery and
equipment, apparatus, computers and other electronic data processing equipment,
fixtures, machinery, equipment, furniture, office equipment, automobiles,
trucks, dies, molds, patterns, vessels, motor vehicles and other transportation
equipment, special and general tools, test devices, prototypes and models and
other tangible personal property, whether owned, leased, licensed or otherwise;
(c) All inventories of materials, parts, raw materials, supplies,
work-in-process and finished goods and products including items purchased for
distribution or resale;
(d) All capital stock, minute books, stock records, corporate
records, corporate seals and treasury shares of the OMNOVA Entities;
(e) All rights, benefits and interests under any Contracts;
(f) All rights under any deposits, letters of credit and
performance and surety bonds;
(g) All accounts, accounts receivable and any payments with
respect thereto after the Closing Time, unpaid interest on accounts receivable
and any security or collateral relating thereto, notes receivable, security and
other deposits, advance payments, prepayments and credits, whether recorded or
unrecorded;
(h) All Intellectual Property including, without limitation, the
items on Schedule 1.01(f);
(i) All Information and Records;
(j) All rights under any Claim to the extent pertaining to the
OMNOVA Business, any OMNOVA Business Asset or any Assumed Liability;
(k) All rights under insurance policies and all rights in the
nature of insurance, indemnification or contribution which pertain exclusively
to the OMNOVA Business;
<PAGE> 12
9
(l) all bank accounts, lock boxes and other deposit arrangements;
and
(m) all goodwill.
"OMNOVA DIVIDEND" is defined in Section 4.12.
"OMNOVA ENTITIES" means the entities listed on Schedule 1.01(d).
"OMNOVA GROUP" means OMNOVA and the OMNOVA Entities.
"PARTIES" means OMNOVA and GenCorp.
"PENN INTERNATIONAL" means Penn International Inc., an Ohio
corporation.
"PERMITS" means any authorization, approval, franchise, orders,
consent, license, permit, registration, waiver or certificate issued, granted,
given, or otherwise made available by or under the authority of any Governmental
Authority or pursuant to any Legal Requirement.
"PERSON" means any individual, partnership, trust, incorporated or
unincorporated association, joint venture, joint stock company, estate, trust,
organization, labor union, Governmental Authority or other legal entity of any
kind, other than the parties or member of a Group.
"POLYFOX" means fluorinated oxetane monomers having at least one
fluorinated alkoxymethylene side chain; methods and materials for producing said
fluorinated oxetane monomers; fluorinated polymers and prepolymers derived from
said fluorinated oxetane monomers, and polymers derived from prepolymers of said
fluorinated oxetane monomers including methods of producing said polymers and
prepolymers and methods of using, and products formed from, said fluorinated
oxetane monomers, polymers and prepolymers.
"PROPOSING PARTY" is defined in Section 4.09.
"RCRA" means the United States Resource Conservation and Recovery Act.
"RECORDS" means books, records, files, plans, surveys, studies,
reports, manuals, drawings, handbooks, catalogs, brochures, correspondence,
documents, forms, accounts, lists, catalogs, promotional or marketing materials
and other materials, whether in hard copy, electronic or any other form or
media, including, without limitation, any of the same pertaining to accounting,
sales, costs, pricing, marketing, advertising, promotions, suppliers, customers,
personnel, human resources, dealers, distributors, inventory, engineering,
equipment, manufacturing, business plans and strategies and product development.
<PAGE> 13
10
"REFERENCE RATE" means the interest rate equal to the prime rate as
publicly announced by Citibank, N.A., New York, New York, from time to time.
"RETAINED ASSETS" is defined in Section 2.02.
"RETURN" is defined in the Tax Matters Agreement.
"RULING" is defined in the Tax Matters Agreement.
"RULING REQUEST" is defined in the Tax Matters Agreement.
"SEC" means the Securities and Exchange Commission.
"SPIN-OFF" is defined in the Tax Matters Agreement.
"SPIN-OFF TAXES" is defined in the Tax Matters Agreement.
"TSCA" means the United States Toxic Substances Control Act.
"TAX MATTERS AGREEMENT" means the Tax Matters Agreement dated the date
hereof between GenCorp and OMNOVA.
"TAXES" is defined in the Tax Matters Agreement.
"TERMINATE" is defined in Section 4.10.
"THIRD PARTY CLAIM" means with respect to any party, the assertion of a
claim or demand or commencement of any Action against such party by any Person.
"TRANSACTION DOCUMENTS" means this Agreement and the Ancillary
Agreements.
"TRANSFER" is defined in Section 2.07.
ARTICLE II: CONTRIBUTION
----------- ------------
Section 2.01. ASSETS CONTRIBUTED. Upon the terms and subject to the
conditions of this Agreement, GenCorp does hereby, and shall cause GenCorp
Overseas and Penn International to hereby, contribute, assign, convey, transfer
and deliver to OMNOVA, and OMNOVA or its designee does hereby accept and acquire
from GenCorp, GenCorp Overseas, and Penn International all right, title and
interest of GenCorp, GenCorp Overseas and Penn International in and to the
following (collectively, the "Contributed Assets"):
(a) the OMNOVA Business Assets; and
<PAGE> 14
11
(b) the Additional Assets.
Section 2.02. RETAINED ASSETS. Upon the terms and subject to the
conditions of this Agreement, notwithstanding Section 2.01, the following
rights, properties, assets of GenCorp and the GenCorp Entities are not included
in and are excluded from the Contributed Assets (the "Retained Assets"):
(a) All cash, other than petty cash held at any of the facilities
listed on Schedule 1.01(c);
(b) All minute books, stock records, corporation records,
corporate seals, treasury shares and tax returns and supporting schedules of
GenCorp and any GenCorp Entity;
(c) Subject to Section 4.01 and to the trademarks included in the
Contributed Assets, the name "GenCorp";
(d) Subject to Section 4.10 and item (k) in the definition of
OMNOVA Business Assets, all rights of GenCorp under any GenCorp Insurance and
Property Insurance;
(e) Subject to the Agreement on Employee Matters, all employee
benefit plans;
(f) All of the capital stock of the GenCorp Entities; and
(g) Any other right, property or asset not described in Section
2.01.
Section 2.03. ASSUMED LIABILITIES. Upon the terms and subject to the
conditions of this Agreement (including, without limitation, Section 2.04)
OMNOVA does hereby absolutely and irrevocably assume and shall thereafter pay,
perform and discharge, without any recourse to GenCorp or any GenCorp entity,
the following liabilities and obligations to the extent not covered by GenCorp
Insurance or Property Insurance (the "Assumed Liabilities"):
(a) all liabilities and obligations, of any nature, of GenCorp,
Penn International and GenCorp Overseas to the extent arising out of (i) the
OMNOVA Business, (ii) the Discontinued OMNOVA Operations, or (iii) the locations
listed on Schedule 1.01(c), whether arising under contract, tort or any other
legal theory and whether absolute or contingent, foreseen or unforeseen, accrued
or unaccrued, known or unknown, liquidated or unliquidated, matured or
unmatured, now existing or which may arise in the future (including, without
limitation, Environmental Liabilities so arising); and
(b) all liabilities and obligations, of any nature, of GenCorp
to the extent arising out of the assets, properties and rights included in the
Additional Assets, whether arising under contract, tort or any other legal
theory and whether
<PAGE> 15
12
absolute or contingent, foreseen or unforeseen, accrued or unaccrued, known or
unknown, liquidated or unliquidated, matured or unmatured, now existing or which
may arise in the future;
provided, however, that notwithstanding the foregoing Sections 2.03(a) and (b)
the Known Liabilities shall be excluded from such assumed liabilities and
obligations and the Known Liabilities shall be Retained Liabilities.
Section 2.04. RETAINED LIABILITIES. Except for the Assumed Liabilities
and notwithstanding anything to the contrary, OMNOVA and the OMNOVA Entities do
not assume and GenCorp and the GenCorp Entities shall absolutely and irrevocably
retain and be solely responsible for, without any recourse to OMNOVA or any
OMNOVA Entity, any and all liabilities or obligations of any nature of GenCorp
or any GenCorp Entity or claims of such liability or obligation, whether arising
under contract, tort or any other legal theory and whether absolute or
contingent, foreseen or unforeseen, accrued or unaccrued, known or unknown,
liquidated or unliquidated, matured or unmatured, now existing or which may
arise in the future including, without limitation, any and all liabilities or
obligations arising out of or related to the Retained Assets, any Known
Liabilities, any Environmental Liabilities (excluding Environmental Liabilities
which are Assumed Liabilities) and the liabilities and obligations of GenCorp
and any member of the GenCorp Group under this Agreement or under any Ancillary
Agreements (collectively, the "Retained Liabilities"). For purposes of this
Agreement, the Retained Liabilities shall be deemed to include all liabilities
and obligations described in the previous sentence (other than the Assumed
Liabilities) and for purposes of this Agreement no such liability or obligation
shall be deemed a liability or obligation of OMNOVA or an OMNOVA Entity even if
by operation of law any such liability or obligation is or becomes a liability
or obligation of OMNOVA or an OMNOVA Entity.
Section 2.05. ISSUANCE OF SHARES. In exchange for the contribution of
the Contributed Assets and the assumption of the Assumed Liabilities, at the
closing OMNOVA shall issue to GenCorp that number of shares of OMNOVA Common
Stock, $0.10 par value per share, of OMNOVA (the "OMNOVA Common Stock") as is
necessary to effect the Distribution in accordance with Section 3.02. The shares
of OMNOVA Common Stock shall initially be represented by one stock certificate.
Section 2.06. CLOSING. The closing of the transactions contemplated by
this Article II shall take place simultaneously with the execution and delivery
of this Agreement. The "Closing" shall mean the making of the deliveries to be
made by OMNOVA and GenCorp respectively pursuant to this Section 2.06 and shall
be deemed to have occurred at 12:00 p.m. on the date hereof (the "Closing
Time"). At or prior to the Closing Time the parties will executive and deliver
such deeds, stock powers, bills of sale, certificates of title, assignments,
transfers, assumptions and other agreements, instruments and conveyances as are
necessary to carry out this Agreement and the transactions contemplated hereby.
<PAGE> 16
13
Section 2.07. ASSIGNMENT OF ASSETS. Anything in this Agreement to the
contrary notwithstanding, unless OMNOVA shall otherwise determine, this
Agreement shall not constitute a sale, assignment, transfer or conveyance (a
"Transfer") or an agreement to Transfer any Contributed Asset, or any claim,
right or benefit arising thereunder or resulting therefrom (collectively, the
"Interests") if an attempted Transfer thereof, without the consent, waiver,
confirmation, novation or approval (a "Consent") of a third party, would
constitute a breach or other contravention thereof, be ineffective or in any way
adversely affect any rights thereunder, unless and until such Interest can be
effectively Transferred without such breach, contravention or adverse effect, at
which time each such Interest shall be deemed to be so Transferred. Until such
Transfer, all such Interests shall be held in trust by GenCorp for the sole
benefit of OMNOVA. GenCorp shall use all reasonable efforts to promptly obtain
all necessary Consents to Transfer all such Interests and GenCorp shall pay and
discharge all costs of obtaining any such Consent whether before or after the
Closing Time. To the extent any Consents necessary to Transfer any Interest have
not been obtained or are not in effect as of the Closing Time, GenCorp and
OMNOVA shall, during the remaining term of such Interest, use all reasonable
efforts to (i) cooperate in any reasonable and lawful arrangements designed to
provide the benefits of such Interest to OMNOVA, in which case OMNOVA shall pay
or satisfy the corresponding obligations for the enjoyment of such benefits to
the extent OMNOVA would have been responsible therefor if such Consent had been
obtained and such Interest had been transferred to OMNOVA; and (ii) enforce, at
the request of OMNOVA, any rights of GenCorp arising from such Interest against
the issuer thereof or the other party or parties thereto (including the right to
elect to terminate any such Interest in accordance with the terms thereof with
the consent of OMNOVA). Nothing in this Section 2.07 shall be deemed a waiver by
OMNOVA of its right to receive at the Closing Time an effective Transfer of all
of the Contributed Assets nor shall this Section 2.07 be deemed to constitute an
agreement to exclude any asset, property or right from the Contributed Assets.
Section 2.08. TERMINATION OF CERTAIN CONTRACTS. Except with respect to
this Agreement and the Ancillary Agreements (and agreements expressly
contemplated herein or therein to survive the Distribution by their terms or
which are included in the Contributed Assets), GenCorp and OMNOVA (on their own
behalf and on behalf of the members of the GenCorp Group and OMNOVA Group,
respectively) hereby terminate, any and all written or oral agreements,
arrangements, commitments or understandings, between members of the GenCorp
Group, on the one hand, and members of the OMNOVA Group, on the other, effective
as of the Distribution Date. Each party shall, at the reasonable request of any
other party, take, or cause to be taken, such other actions as may be necessary
to effect such termination.
Section 2.09. DISCLAIMER. (a) Each of the parties understands and agree
that no party hereto nor any member of a Group is (whether in this Agreement, in
any Ancillary Agreement or otherwise) making any representation or warranty,
express, implied or otherwise, including any representation or warranty as to
(i)
<PAGE> 17
14
the assets, businesses or liabilities retained, transferred or assumed, (ii) any
consents, authorizations or approvals of third parties (including Governmental
Authorities) required for the transfer or assumption by such party of any asset
or liability, (iii) the value of any asset or freedom of any asset from any
lien, claim, equity, encumbrance or other security interest or adverse claim,
(iv) the absence of any defenses or right of set-off or freedom from
counterclaim with respect to any claim or asset, or (v) the legal sufficiency to
convey title to any asset.
(b) Each party hereto understands and agrees that there are no
representations or warranties, express, implied or otherwise whatsoever,
including, without limitation, no warranty, as to the merchantability or fitness
of any of the Contributed Assets transferred to OMNOVA pursuant to this
Agreement or any Ancillary Agreement, and all such Contributed Assets so
transferred shall be transferred on an "AS IS, WHERE IS" basis.
(c) Nothing contained in Section 2.09(a) or (b) shall alter,
diminish or impair the obligations of the parties under any other provision of
this Agreement or any Ancillary Agreement including, without limitation, under
Article V hereof.
ARTICLE III: DISTRIBUTION
------------ ------------
Section 3.01. DISTRIBUTION. On the date (the "Distribution Date") that
has been established by the GenCorp Board for the distribution (the
"Distribution") of the OMNOVA Common Stock, GenCorp shall distribute to each
holder of record of shares of GenCorp Common Stock on the record date
established by the GenCorp Board for the Distribution (the "Distribution Record
Date") one share of OMNOVA Common Stock for every one share of GenCorp Common
Stock so held.
Section 3.02. DELIVERY. On the Distribution Date, GenCorp shall deliver
to the Distribution Agent one or more stock certificates representing all the
outstanding shares of OMNOVA Common Stock and shall instruct the Distribution
Agreement to effect the Distribution. OMNOVA shall provide all stock
certificates that the Distribution Agent may require in order to effect the
Distribution. The Distribution shall be effective at 12:01 a.m. on the
Distribution Date.
ARTICLE IV: CERTAIN COVENANTS
----------- -----------------
Section 4.01. INTERIM USE OF GENCORP'S CORPORATE NAME. OMNOVA may,
after the Closing Time, utilize without further obligation to compensate
GenCorp, the trademarks or trade names "GenCorp" in connection with the items
described below:
(a) All stationery, forms, labels, product literature, invoices,
purchase orders and other similar documents and supplies included in the
<PAGE> 18
15
Contributed Assets may be used by OMNOVA for a reasonable period after the
Distribution Date not to exceed 12 months.
(b) All inventory included in the Contributed Assets may be sold
or otherwise disposed of by OMNOVA without remarking.
(c) All molds, dies and similar items included in the Contributed
Assets which produce products displaying GenCorp's trademark, trade name or
corporate name, and all products produced using such molds or dies, may be used
and produced until such time as such molds, dies and similar items are exhausted
and replaced.
(d) All sample goods (tip cards, swatch books, loose swatches,
binders and similar goods) both in stock and at distributors, specifiers, or
others may be used until discontinuation of all product lines to which such
sample goods pertain.
(e) As the corporate name for any OMNOVA Entity for a reasonable
period after the Distribution Date until a name change can be registered and
approved by the applicable Governmental Authority but not to exceed 12 months.
(f) As signage, e-mail addresses and similar uses for a reasonable
period after the Distribution Date but not to exceed 12 months.
Section 4.02. TRANSITION AND FURTHER ASSURANCES.
(a) GenCorp shall, at any time and from time to time after the
Closing Time, upon the reasonable request of OMNOVA and at GenCorp's expense,
execute, acknowledge and deliver or cause to be executed, acknowledged and
delivered all such further deeds, stock powers, bills of sale, certificates of
title, assignments, transfers, conveyances, powers of attorney, notices of
commencement and assurances and take such other action as may be reasonably
requested by OMNOVA for the more effective assigning, transferring, granting,
conveying, assuring and confirming to OMNOVA, or to its successors and assigns,
of any of the Contributed Assets or aiding and assisting in collecting and
reducing to possession by OMNOVA any or all of the Contributed Assets, and to
protect the right, title and interest of OMNOVA therein and the enjoyment by
OMNOVA thereof, and otherwise to carry out the purpose and intent of this
Agreement.
(b) Without limiting any provision hereof, GenCorp agrees that as
of the Closing Time, OMNOVA shall be constituted and appointed the true and
lawful attorney of GenCorp with respect to the Contributed Assets, with full
power of substitution, in the name of OMNOVA or in the name of GenCorp or
otherwise and for the sole benefit and at the sole expense of OMNOVA, to
institute and prosecute all proceedings which OMNOVA may deem proper in order to
collect, assert or enforce any claim, right or title of any kind in and to the
Contributed Assets, to defend or compromise any and all suits and proceedings in
respect of
<PAGE> 19
16
any of the Contributed Assets, and to do all such acts and things in relation
thereto as OMNOVA in its sole discretion as may deem advisable. GenCorp
acknowledges that the foregoing powers are coupled with an interest and shall
not be revocable by GenCorp. OMNOVA shall be entitled to retain for its own
account any amounts collected pursuant to the foregoing powers.
Section 4.03. ASSETS ADMINISTRATION. If at any time or from time to
time any party or member of such party's Group, shall receive or otherwise
possess a right, property or asset that is owned by the other party or a member
of the other party's Group, such party or member shall promptly notify the other
party and transfer or cause to be transferred, such right, property or asset to
such other party so entitled thereto without any hold back or set-off. Prior to
such transfer, such party or Group member receiving or possessing such right,
property or asset shall hold such right, property or asset in trust for such
other party.
Section 4.04. CORRESPONDENCE. GenCorp hereby authorizes OMNOVA, on and
after the Distribution Date, to receive and open mail addressed to GenCorp and
to deal with the contents thereof in a responsible manner. OMNOVA shall promptly
deliver to GenCorp any mail addressed to GenCorp that relates (or reasonably
appears to relate) to the Retained Assets or Retained Liabilities.
Section 4.05. INTERIM PERMIT OPERATIONS. Each party hereto shall
prepare and file with the appropriate licensing and permitting authorities for
the transfer or issuance, as may be necessary or advisable in connection with
the transactions contemplated hereby, of all Permits required in order for
OMNOVA to operate the Contributed Assets following the Closing Time. To the
extent permitted by Legal Requirements, OMNOVA shall have the right to operate
the Contributed Assets after the Closing Time under any Permits held by GenCorp
which were not transferred to OMNOVA at the Closing Time and with respect to
which notice has been given to the issuing Governmental Authority.
Section 4.06. AGREEMENT FOR EXCHANGE OF INFORMATION.
(a) Each of GenCorp and OMNOVA agrees to provide to the other,
and to cause the members of its Group to provide, as soon as reasonably
practicable after written request therefor, any Information in its possession or
under its control which the requesting party reasonably needs (i) to comply with
reporting, disclosure, filing or other requirements imposed on the requesting
party (including under applicable securities or tax laws) by a Governmental
Authority having jurisdiction over the requesting party, (ii) for use in any
other judicial, regulatory, administrative, tax or other proceeding or in order
to satisfy audit, accounting, claims, regulatory, litigation, tax or other
similar requirements, or (iii) to comply with its obligations under this
Agreement or any Ancillary Agreement; provided, however, that in the event that
any party determines that any such provision of Information could be
commercially detrimental, violate any law or agreement, or waive any
attorney-client privilege, the parties shall take all reasonable measures to
permit the compliance with such obligations in a manner
<PAGE> 20
17
that avoids any such harm or consequence.
(b) Any Information owned by GenCorp or OMNOVA that is provided to
a requesting party pursuant to this Section 4.06 shall be deemed to remain the
property of the providing party. Unless specifically set forth herein, nothing
contained in this Agreement shall be construed as granting or conferring rights
of license or otherwise in any such Information.
(c) If the party requested to provide such Information reasonably
incurs more then nominal out-of-pocket costs to create, gather or copy such
Information for the other party, then the providing party may request the other
party to reimburse it for all reasonable out-of-pocket costs incurred to create,
gather or copy such Information, which request shall not be unreasonably denied.
(d) The parties agree to use their reasonable efforts to retain
all Information in their respective possession or control on the Distribution
Date for a period of six years or such longer period as required by any
applicable legal requirement and, with respect to the Information pertaining to
Taxes, until the expiration of the applicable statute of limitations or as
otherwise required by a Legal Requirement. No party will destroy or dispose of,
or permit any member of its Group to destroy or disposal of, any Information
which the other party may have the right to obtain pursuant to this Agreement
prior to the sixth anniversary of the date hereof or the expiration of any such
statute of limitations without first using its reasonable efforts to notify the
other party of the proposed destruction or disposal and giving the other party
the opportunity to take possession of such Information in lieu of such
destruction.
(e) The rights and obligations granted under this Section 4.06
are subject to any specific rights, obligations, limitations, qualifications or
additional provisions regarding the sharing, exchange or confidential treatment
of Information set forth in any Ancillary Agreement.
Section 4.07. WITNESS SERVICES. At all times from and after the
Distribution Date, each of GenCorp and OMNOVA shall use its reasonable efforts
to make available to the other party's Group, upon reasonable written request,
the officers, directors, employees and agents of the members of its Group for
the fact finding, consultation or interviews and as witnesses to the extent that
such persons may reasonably be required in connection with the prosecution or
defense of any action in which the requesting party or any member of its Group
may from time to time be involved. If the party providing such services to the
other party under this Section 4.07 reasonably incurs more than nominal
out-of-pocket costs in providing such services, the providing party may request,
which request shall not be unreasonably denied, the other party to shall
reimburse it for all reasonable out-of-pocket costs incurred in providing such
services.
Section 4.08. CONFIDENTIALITY. Each of GenCorp and OMNOVA, on behalf of
itself and each member of its Group, agrees to hold, and to cause its respective
<PAGE> 21
18
directors, officers, employees and agents to hold, in strict confidence, all
Information owned by the other Group which is of a confidential or proprietary
nature and which may be in its possession or which may hereafter be furnished by
any member of such other Group or its respective directors, officers, employees
or agents, and shall not use any such Information other than for such purposes
as shall be expressly permitted hereunder, under an Ancillary Agreement or as
otherwise agreed, except, in each case, to the extent that such Information (a)
is in or later enters the public domain through no fault of such party or any
member of its Group or any of their respective directors, officers, employees or
agents, (b) later lawfully acquired from other sources by such party (or any
member of such party's Group) which sources are not themselves bound by a
confidentiality obligation, or (c) independently generated without reference to
any proprietary or confidential Information of the other party. Each party
agrees not to release or disclose, or permit to be released or disclosed, any
such Information to any other Person, except its directors, officers, employees
and agents who need to know such Information (who shall be advised of their
obligations hereunder with respect to such Information). When any such
Information is no longer needed for the purposes contemplated by this Agreement,
any Ancillary Agreement or other agreement entered into by the parties, the
party in possession thereof will promptly after request of the other party
either return to the other party all Information in a tangible or electronic
form (including all copies thereof and all notes, extracts or summaries based
thereon) or certify to the other party that it has destroyed such Information
(and such copies thereof and such notes, extracts or summaries based thereon).
Notwithstanding the immediately three preceding sentences, in the event that a
member of a Group either determines on the advice of its counsel that it is
required to disclose any Information pursuant to applicable law or receives any
demand under lawful process or from any Governmental Authority to disclose or
provide Information of the other party (or any Group member of the other party)
that is subject to the confidentiality provisions hereof, such party shall
notify the other party prior to disclosing or providing such Information and
shall cooperate at the expense of the requesting party in seeking any reasonable
protective arrangements requested by such other party. Subject to the foregoing,
the Person that received such request may thereafter disclose or provide
Information to the extent required by such law (as so advised by counsel) or by
lawful process or such Governmental Authority.
Section 4.09. CERTAIN TAX MATTERS. (a) Neither the GenCorp Group nor
the OMNOVA Group shall take any action inconsistent with, nor fail to take any
action described in the Ruling Request or the Ruling, unless such Party (the
"Proposing Party") has obtained the prior written consent of the other Party
(the "Non-Proposing Party") which consent shall not be unreasonably withheld.
The Non-Proposing Party shall grant its consent to an action proposed by the
Proposing Party if the Proposing Party either (i) obtains a ruling with respect
to the proposed action from the IRS or other applicable Tax Authority that is
reasonably satisfactory, in form and substance, to the Non-Proposing Party and
its tax counsel (except that the Proposing Party shall not submit any ruling
request for the purpose of complying with this Section 4.09 if the Non-Proposing
Party
<PAGE> 22
19
reasonably determines that filing such request might adversely affect the
Non-Proposing Party), or (ii) obtains an opinion from tax counsel reasonably
satisfactory to the Non-Proposing Party (both as to choice of counsel and the
opinion given). Each of the parties covenants that it will cooperate in
connection with any future submissions to the IRS in connection with the Ruling
Request and the Ruling, and will certify to the extent it can do so, upon
reasonable request, that the factual statements, representations and other
similar conditions contained therein are true, correct and complete in all
material respects. Each of the parties represents that neither it nor any of its
Affiliates has any plan or intention to take any action which is inconsistent
with any factual statements, representations or other similar conditions
contained in the Ruling Request or in the Ruling.
(b) ACTIVE BUSINESS; CONTINUITY OF BUSINESS ENTERPRISE. GenCorp
and OMNOVA each represents that it has no plan or intent to reduce, eliminate or
otherwise discontinue the businesses relied upon in the Ruling Request. Each of
GenCorp and OMNOVA covenant that it will not take any action which might violate
the "active trade or business" requirement under Section 355(b) of the Code or
the "continuing of business enterprise" requirement for tax-free distributions
under Section 355 of the Code within the two year period beginning on the
Distribution Date, without the prior written consent of the other party, which
consent shall not be unreasonably withheld.
(c) CHANGE IN CONTROL. GenCorp and OMNOVA each represents that,
apart from the Spin-off, it has no plan or intention to engage in any
transaction or transactions having the effect of a change in the ownership of
50% or more of its outstanding stock (by vote or value), within the meaning of
Section 355(e) of the Code.
Section 4.10. INSURANCE MATTERS.
(a) With respect to any Losses suffered by OMNOVA or the OMNOVA
Business relating to, resulting from or arising out of any events or occurrences
prior to the Distribution Date (including, without limitation, in respect of the
conduct of the OMNOVA Business or the ownership or operation of the Contributed
Assets) for which GenCorp, any GenCorp Entity or any OMNOVA Entity would be
entitled to assert, or cause any other Person to assert, a claim for recovery
under any policy of insurance maintained by or for the benefit of GenCorp, any
GenCorp Entity or any OMNOVA Entity (excluding insurance included in the
Contributed Assets, first party property damage insurance, and any insurance
which provides coverage exclusively to Aerojet-General and its subsidiaries and
to no other member of the GenCorp Group or the OMNOVA Group) (collectively,
"GenCorp Insurance"), at the request of OMNOVA, GenCorp will, in good faith,
promptly assert and diligently prosecute one or more claims (an "Insurance
Claim") under the GenCorp Insurance; provided that all of GenCorp's and any
GenCorp Entities reasonable out-of-pocket costs and expenses incurred in
connection with asserting and prosecuting such claim shall be promptly
<PAGE> 23
20
reimbursed by OMNOVA (including, without limitation, costs and expenses
resulting from any deductible, policy limit, self-insurance retention, or
retroactive or retrospective premium). Upon written request to GenCorp, OMNOVA
shall have the right, at its expense, to take exclusive control of the
prosecution and settlement of any Insurance Claim. GenCorp shall not settle any
Insurance Claim without the consent of OMNOVA, which consent shall not be
unreasonably withheld. GenCorp shall promptly pay to OMNOVA any amount received
by GenCorp in respect of any Insurance Claim. The party not controlling the
prosecution and settlement of an Insurance Claim shall reasonably cooperate with
the other party and shall have the right, at its expense, to participate in, but
not control the prosecution and settlement of any such Insurance Claim.. The
party controlling the prosecution and settlement of an Insurance Claim shall
keep the other party reasonably informed at all stages of the prosecution and/or
settlement of such Insurance Claim. GenCorp shall not release, disseminate,
commute or otherwise terminate (collectively,"Terminate") any policy of GenCorp
Insurance unless: (i) GenCorp gives OMNOVA reasonable advance written notice of
its intent to do so (which notice shall describe in reasonable detail the policy
to be Terminated and the terms of the Termination sought to be entered into by
GenCorp or any GenCorp Entity), (ii) GenCorp agrees in writing with OMNOVA to
assume any and all liability that the insurer would have had in respect of any
Loss which has or may be suffered by OMNOVA which but for such Termination would
have been covered by the Terminated policy, and (iii) GenCorp provides OMNOVA
with reasonable assurances of its ability to satisfy its obligations under (ii)
above.
(b) With respect to any Losses suffered by OMNOVA or the OMNOVA
Business relating to, resulting from or arising out of any events or occurrences
prior to the Distribution Date (including, without limitation, in respect of the
conduct of the OMNOVA Business or the ownership or operation of the Contributed
Assets) for which GenCorp, any GenCorp Entity or any OMNOVA Entity would be
entitled to assert, or cause any other Person to assert, a claim for recovery
under any first party property damage policy of insurance maintained by or for
the benefit of GenCorp, any GenCorp Entity or any OMNOVA Entity ("Property
Insurance") at the request of OMNOVA, GenCorp will, in good faith, promptly
assert and diligently prosecute one or more claims (a "Property Insurance
Claim") under the Property Insurance; provided that all of GenCorp's and any
GenCorp Entities reasonable out-of-pocket costs and expenses incurred in
connection with asserting and prosecuting such claim shall be promptly
reimbursed by OMNOVA (including, without limitation, costs and expenses
resulting from any deductible, policy limit, self-insurance retention, or
retroactive or retrospective premium). Upon written request to GenCorp, OMNOVA
shall have the right, at its expense, to take exclusive control of the
prosecution and settlement of any Property Insurance Claim. GenCorp shall not
settle any Property Insurance Claim without the consent of OMNOVA, which consent
shall not be unreasonably withheld. GenCorp shall promptly pay to OMNOVA any
amount received by GenCorp in respect of any Property Insurance Claim. The party
not controlling the prosecution and settlement of a Property Insurance
<PAGE> 24
21
Claim shall reasonably cooperate with the other party shall have the right, at
its expense to participate in, but not control the prosecution or settlement of
any such Property Insurance Claim. The party controlling the prosecution and
settlement of a Property Insurance Claim shall keep the other party reasonably
informed at all stages of the prosecution and/or settlement of such Property
Insurance Claim. GenCorp shall not release, disseminate, commute or otherwise
terminate any Property Insurance without the consent of OMNOVA, which consent
shall not be unreasonably withheld.
(c) Each of GenCorp and OMNOVA shall acquire and maintain in force
for a period of three years (the "Initial Period") after the Distribution Date
directors and officers insurance coverage equivalent to the directors and
officers insurance coverage in force for GenCorp on the Distribution Date. If at
any time and for any reason during the six years following the Initial Period a
member of the GenCorp Group or OMNOVA Group decides to materially change,
terminate or chooses not to renew such directors and officers insurance coverage
in force at the end of the Initial Period, then the member deciding to
materially change, terminate or choosing not to renew such coverage shall, at
its expense, convert any such policy to a run-off policy that shall remain in
force for not less than six years after the conversion date. Each of GenCorp and
OMNOVA shall, upon the request of the other, from time to time, provide the
other with a certificate of insurance evidencing such insurance coverage.
(d) With respect to aircraft products produced by GenCorp prior to
the date hereof, GenCorp and the members of its Group will include and maintain
OMNOVA as a named insured under any Aircraft Products Liability Policy of
GenCorp or of any member of its Group which is in force as of the date hereof or
which is hereafter obtained by GenCorp or any member of its Group. Upon OMNOVA's
re quest, from time to time, GenCorp will provide OMNOVA with a certificate of
insurance evidencing such insurance coverage. GenCorp will give OMNOVA
reasonable advance written notice if GenCorp or a member of its Group ceases to
maintain Aircraft Product Liability insurance which is substantially similar to
the Aircraft Products Liability insurance in force as of the date hereof.
ARTICLE V: INDEMNIFICATION
---------- ---------------
Section 5.01. INDEMNIFICATION BY GENCORP. Subject to Sections 5.03 and
5.04 GenCorp shall indemnify, defend and hold harmless OMNOVA, each OMNOVA
Entity and each of their respective directors, officers, employees and agents,
and each of the heirs, successors and assigns of any of the foregoing from and
against all Losses arising out of, associated with, or resulting from:
(a) any failure to perform or breach of any covenant or agreement
made by GenCorp in this Agreement or in any Ancillary Agreement;
(b) any failure to pay, perform or otherwise promptly discharge
any Retained Liability;
<PAGE> 25
22
(c) any Spin-Off Taxes excluding any Spin-Off Taxes described in
Section 5.02(c); or
(d) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact required to be
stated in GenCorp's proxy statement dated July 2, 1999 (as the same was amended
or modified, the "Proxy Statement") or necessary to make the statements made in
the Proxy Statement not misleading.
Section 5.02. INDEMNIFICATION BY OMNOVA. Subject to Sections 5.03 and
5.04, OMNOVA shall indemnify, defend and hold harmless GenCorp, each GenCorp
Entity and each of their respective directors, officers, employees and agents,
and each of the heirs, successors and assigns of any of the foregoing from and
against all Losses arising out of, associated with, or resulting from:
(a) any failure to perform or breach of any covenant or agreement
made by OMNOVA in this Agreement or in any Ancillary Agreement;
(b) any failure to pay, perform or otherwise promptly discharge
any Assumed Liability;
(c) any Spin-Off Taxes resulting from any member of the OMNOVA
Group or any employee, officer or director of such member acting in his or her
capacity as such, taking or failing to take any action following the Spin-Off
(including any actions specified in Section 4.09) or any change in ownership of
OMNOVA stock whether or not OMNOVA has acted or failed to act in connection with
such change, if such action or failure to act or such change in ownership causes
the Spin-Off to fail to qualify as fully tax-free under Sections 368(a)(1)(D),
355, and 361, or any other provisions of the Code; or
(d) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact required to be
stated in the Form 10 (or any amendment thereof) or necessary to make the
statements made in the Form 10 (or any amendment thereof) not misleading.
Section 5.03. THIRD PARTY CLAIM PROCEDURES. If a party receives notice
of the assertion of any Third Party Claim in respect of which such party may
have a claim under Section 5.01 or 5.02 then the following shall apply:
(a) The party against whom any such Third Party Claim is made (the
"Indemnified Party"), shall promptly provide written notice (an "Indemnity
Notice") of such Third Party Claim to the other party (the "Indemnifying
Party"). Such Indemnity Notice shall describe in reasonable detail the nature of
the Third Party Claim and the basis for its claim under Section 5.01 or 5.02;
provided that the failure to provide such notice shall not affect a party's
rights under Section 5.01 or 5.02 except to the extent the other party is
actually prejudiced by the failure to give such notice and then only to the
extent of such actual prejudice.
<PAGE> 26
23
An Indemnity Notice by a party shall not preclude such party from giving
subsequent Indemnity Notices with respect to other claims, whether arising
before or after the claims for which prior notice is given.
(b) Upon receipt of an Indemnity Notice, the Indemnifying Party
shall have the right to promptly assume, at its sole cost and expense, the
defense or settlement of such Third Party Claim with counsel reasonably
acceptable to the Indemnified Party, provided that the Indemnifying Party has
irrevocably agreed in writing to defend, indemnify and hold harmless the
Indemnified Party in respect of all Losses arising or resulting from such Third
Party Claim. The Indemnifying Party shall give prompt written notice to the
Indemnified Party of its intent to enter into such agreement and assume the
defense of any such Third Party Claim and shall conduct the defense and/or
settlement of such Third Party Claim diligently and in good faith. If the
Indemnifying Party enters into such agreement and assumes such defense then for
so long as the Indemnifying Party is defending such Third Party Claim in
accordance with its obligations hereunder then the Indemnified Party shall not
admit any liability with respect to, or settle, any said Third Party Claim
without the Indemnifying Party's prior written consent; provided, however, that
the Indemnified Party shall have the right to settle, compromise or discharge
such Third Party Claim without the consent of the Indemnifying Party if the
Indemnified Party releases the Indemnifying Party from its indemnification
obligation hereunder with respect to such Third Party Claim. If requested by the
Indemnifying Party, the Indemnified Party shall cooperate fully in the defense
or prosecution of any Third Party Claim the defense of which has been assumed by
the Indemnifying Party, and the Indemnified Party shall furnish such records,
information and testimony and attend all such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in
connection therewith, but if the Indemnified Party reasonably incurs more than
nominal out-of-pocket costs in so cooperating or acting at the request of the
Indemnifying Party then the Indemnified Party may request, which request shall
not be unreasonably denied, reimbursement from the Indemnifying Party for all
reasonable out-of-pocket costs incurred by the Indemnified Party in so
cooperating or acting.
(c) Notwithstanding Section 5.03(b), if (i) an Indemnified Party
is obligated to permit an insurer or other Person having liability therefore to
assume the defense of a Third Party Claim, or (ii) an Indemnified Party
determines in good faith that there is a reasonable possibility that a Third
Party Claim may materially and adversely affect it or its assets or business
other than as a result of the payment of monetary damages, or (iii) the
Indemnifying Party and Indemnified Party are both named parties in a Third Party
Claim and in the reasonable judgment of the Indemnified Party a conflict of
interest (other than a dispute regarding the scope of the Indemnified Party's
right to indemnification under this Agreement) between the Indemnified Party and
the Indemnifying Party exists or (iv) if the Indemnifying Party fails, after
reasonable notice from the Indemnified Party, to diligently and in good faith
defend such Third Party Claim, then, at the option of the Indemnified Party, the
Indemnifying Party shall not have the right to
<PAGE> 27
24
assume the defense of such Third Party Claim and the Indemnified Party may, by
notice to the Indemnifying Party, reassume the defense of any such Third Party
Claim previously assumed by the Indemnifying Party. No retention or reassumption
of any such defense by the Indemnified Party shall prejudice any rights of the
Indemnified Party under Section 5.01 or 5.02.
(d) If the Indemnifying Party does not give notice and assume the
defense of such Third Party Claim in accordance with Section 5.03(b) or is not
entitled to assume or retain the defense thereof, the Indemnified Party shall
have full authority to defend and/or settle any such Third Party Claim for the
account of and at the sole risk, cost and expense of the Indemnifying Party. If
the Indemnified Party undertakes the defense and/or settlement of any such Third
Party Claim it shall do so diligently and in good faith and the Indemnifying
Party shall from time to time upon the request of the Indemnified Party
reimburse the Indemnified Party for the costs incurred by the Indemnified Party
in defending and/or settling such Third Party Claim. The Indemnifying Party
shall be bound by any settlement entered into by the Indemnified Party to the
extent that such settlement is commercially reasonable measured in the context
of the matter settled and by any judgment resulting from such Third Party Claim.
If the Indemnifying Party had the right to assume the defense and settlement of
such Third Party Claim and did not do so then, in any dispute between the
Indemnifying Party and Indemnified Party regarding the defense or settlement of
such Third Party Claim the Indemnifying Party shall have the burden to prove
that the Indemnified Party did not defend such Third Party Claim diligently and
in good faith and/or settle such claim in a commercially reasonable manner.
(e) The Indemnifying Party shall not admit any liability, settle,
compromise, pay or discharge, without the consent of the Indemnified Party, any
Third Party Claim being defended by it, unless with respect to any settlement:
(i) the Indemnified Party is not obligated to perform or to refrain from
performing any act under such settlement and there is no encumbrance on any
assets of the Indemnified Party; (ii) there is no finding or admission of any
violation of any Legal Requirement, violation of the rights of any Person by the
Indemnified Party or any other liability or obligation of the Indemnified Party
to any Person; and (iii) the Indemnified Party receives, as a part of such
settlement, a complete release, in form and substance reasonably satisfactory to
the Indemnified Party.
(f) The party controlling the defense of a Third Party Claim shall
keep the other party reasonably informed at all stages of the defense and/or
settlement of such Third Party Claim. The party not controlling the defense of
any such Third Party Claim shall have the right, at its sole cost and expense,
to participate in, but not control, the defense of any such Third Party Claim.
Section 5.04. INSURANCE RECOVERY. The amount that an Indemnifying Party
is or may be required to pay to an Indemnified Party pursuant to Section 5.01 or
5.02 shall be reduced by any Insurance Proceeds or other amounts actually
recovered by or on behalf of such Indemnified Party, in reduction of the
<PAGE> 28
25
related Loss. If an Indemnified Party shall have received the payment required
by this Agreement from an Indemnifying Party in respect of any Loss and shall
subsequently actually receive Insurance Proceeds or other amounts in respect of
such Loss, then such Indemnified Party shall pay to such Indemnifying Party a
sum equal to the amount of such Insurance Proceeds or other amounts actually
received (up to but not in excess of the amount of any indemnity payment made
hereunder) less any costs reasonably incurred by the Indemnified Party to
collect such Insurance Proceeds. No insurer or other Person shall: (a) be
relieved of the responsibility to pay any claims which it would otherwise be
obligated to pay in the absence of the foregoing indemnification provisions; (b)
solely by virtue of the indemnification provisions hereof, have any subrogation
rights with respect to any claims which it would otherwise be obligated to pay
or (c) be entitled to a benefit it would not be entitled to receive in the
absence of the foregoing indemnification provisions.
ARTICLE VI. MISCELLANEOUS PROVISIONS
Section 6.01. NOTICES. All notices, demands and other communications
which may or are required to be given to or made by either party to the other in
connection with this Agreement shall be in writing (including telex, fax or
other similar writing) and shall be deemed to have been duly given or made: (a)
if sent by registered or certified mail, five days after the posting thereof
with first class postage attached, (b) if sent by hand or overnight delivery,
upon the delivery thereof and (c) if sent by telex or fax, upon confirmation of
receipt of such telex or fax, in each case addressed to the respective parties
as follows:
GenCorp: GenCorp Inc.
Highway 50 & Aerojet Road
Rancho Cordova, CA 95670
Attn: Secretary
OMNOVA: OMNOVA Solutions Inc.
175 Ghent Road
Fairlawn, Ohio 44333
Attn: Secretary
or to such other address and to the attention of such other persons as either
party hereto may specify from time to time by notice to the other party.
Section 6.02. ENTIRE AGREEMENT. This Agreement, the Schedules hereto
and the Ancillary Agreements embody the entire agreement of the parties hereto
with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements, oral or written, relative to said subject matter.
Section 6.03. ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns; provided, however, that neither this
Agreement nor any
<PAGE> 29
26
of the rights, interests or obligations hereunder shall be assigned (other than
by merger or pursuant to a sale of all or substantially all of a party's assets
to one Person) by either of the parties hereto without the prior written consent
of the other party, which consent shall not be unreasonably withheld; provided,
however, that no such assignment shall relieve the assigning party of any
liabilities or obligations hereunder. Any transfer or assignment of any of the
rights, interests or obligations hereunder in violation of the terms hereof
shall be void and of no force or effect.
Section 6.04. CAPTIONS. The Table of Contents and Article and Section
headings of this Agreement are inserted for convenience only and shall not
constitute a part of this Agreement in construing or interpreting any provision
hereof.
Section 6.05. WAIVER; CONSENT. This Agreement may not be changed,
amended, terminated, augmented, rescinded or discharged (other than by
performance), in whole or in part, except by a writing executed by the parties
hereto, and no waiver of any of the provisions or conditions of this Agreement
or any of the rights of a party hereto shall be effective or binding unless such
waiver shall be in writing and signed by the party claimed to have given such
waiver or consented thereto. Except to the extent that a party hereto may have
otherwise agreed in writing, no waiver by that party of any breach by the other
party of any of its obligations hereunder shall be deemed to be a waiver of any
other subsequent or prior breach of the same or any other obligation by the
other party, nor shall any forbearance by the first party to seek a remedy for
any noncompliance or breach by the other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.
Section 6.06. NO THIRD PARTY BENEFICIARIES. Except as expressly
provided in this Agreement, nothing herein, expressed or implied, is intended or
shall be construed to confer upon or give to any Person any legal or equitable
right, remedy, claim or other benefit under or by reason of this Agreement.
Section 6.07. SURVIVAL OF AGREEMENTS. All covenants and agreements of
the parties contained in this Agreement shall survive the Closing Time and the
Distribution Date.
Section 6.08. EXPENSES. Except as otherwise set forth in this Agreement
or any Ancillary Agreement, all costs and expenses incurred on or prior to the
Distribution Date (whether or not paid on or prior to the Distribution Date) in
connection with the preparation, execution, delivery and implementation of this
Agreement and any Ancillary Agreement, the Separation, the Distribution and the
consummation of the transactions contemplated hereby and thereby shall be
charged to and paid by GenCorp. Except as otherwise set forth in this Agreement
or any Ancillary Agreement, each party shall bear its own costs and expenses
incurred after the Distribution Date.
<PAGE> 30
27
Section 6.09. GROUP PERFORMANCE. Each of the parties hereto shall cause
to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein or in the Ancillary Agreements to be
performed by a member of its Group.
Section 6.10. COUNTERPARTS. This Agreement may be executed
simultaneously in multiple counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
Section 6.11. GENDER. Whenever the context requires, words used in the
singular shall be construed to mean or include the plural and vice versa, and
pronouns of any gender shall be deemed to include and designate the masculine,
feminine or neuter gender.
Section 6.12. GOVERNING LAW. This Agreement shall in all respects be
construed in accordance with and governed by the laws of the State of Ohio
exclusive of laws relating to conflicts of law.
Section 6.13. INTERPRETATION. It is acknowledged by OMNOVA and GenCorp
that this Agreement has undergone several drafts with the negotiated suggestions
of each and, therefore, no presumptions shall arise favoring either party by
virtue of the authorship of any provision of this Agreement.
Section 6.14. BLUE PENCIL. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the court making the determination of invalidity or
unenforceability shall have the power to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
Section 6.15. CONFLICTS. Notwithstanding any other provision of this
Agreement, in the event of any conflict between this Agreement and the
Employment Matters Agreement or this Agreement and the Tax Matters Agreement,
the Employment Matters Agreement or the Tax Matters Agreement, as the case may
be, shall control. Any Dispute under this Agreement shall be resolved as
provided for in the Alternative Dispute Resolution Agreement, of even date,
between GenCorp and OMNOVA.
<PAGE> 31
28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
OMNOVA SOLUTIONS INC. GENCORP INC.
By: /s/ James C. LeMay By: /s/ William R. Phillips
------------------------------ ---------------------------------
Name: James C. LeMay Name: William R. Phillips
--------------------------- -------------------------------
WILLIAM R. PHILLIPS
- ---------------------------------
Title: Senior Vice President Title: Senior Vice President
------------------------- ------------------------------
<PAGE> 1
Exhibit C
Execution Copy
TAX MATTERS AGREEMENT
BY AND BETWEEN
GENCORP INC.
AND
OMNOVA SOLUTIONS INC.
<PAGE> 2
TAX MATTERS AGREEMENT
BY AND BETWEEN
GENCORP INC.
AND
OMNOVA SOLUTIONS INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
RECITALS .........................................................................................1
ARTICLE I DEFINITIONS..............................................................................2
ARTICLE II ALLOCATION OF TAX LIABILITIES............................................................6
2.01 Liability for United States Federal Taxes................................................6
2.02 Liability for State Taxes................................................................6
2.03 Liability for Foreign Taxes..............................................................7
2.04 Spin-off Taxes...........................................................................7
2.05 Method of Allocating Taxes for Straddle Periods..........................................7
2.06 Tax Accounting Practices.................................................................8
ARTICLE III PREPARATION AND FILING OF TAX RETURNS....................................................8
3.01 General..................................................................................8
3.02 Consolidated, Combined and Joint Returns.................................................8
3.05 Right to Review Returns..................................................................9
ARTICLE IV TAX REFUNDS AND CARRYOVERS..............................................................10
4.01 Refunds.................................................................................10
4.02 Carrybacks or Claims for Refund.........................................................10
4.03 Carryovers from Pre-Distribution Periods to Post-Distribution Periods...................11
4.04 State Tax Credits.......................................................................11
ARTICLE V TAX PAYMENTS............................................................................11
5.01 Payment of Consolidated United States Federal Taxes
for Pre-Distribution Periods............................................................11
5.02 Payment of State and Foreign Taxes for Which
GenCorp has Filing Responsibility.......................................................11
5.03 Indemnification Payments................................................................11
5.04 Tax Treatment of Tax and Indemnification Payments.......................................12
ARTICLE VI TAX AUDITS AND APPEALS....................................................................
6.01 Notice..................................................................................12
6.02 Control of Audits and Appeals...........................................................12
6.03 Consent to Settlements..................................................................13
6.04 Information.............................................................................14
6.05 Expenses................................................................................14
6.06 Adverse Effect Issues...................................................................14
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII SPECIAL RULES PERTAINING TO GENCORP SERVICES, INC.......................................16
7.01 Liability for State Taxes...............................................................16
7.02 GSI Tax Returns.........................................................................16
ARTICLE VIII MISCELLANEOUS MATTERS.....................................................................
8.01 Amendment and Waiver....................................................................16
8.02 Tax Allocation Agreements, Etc..........................................................16
8.03 Entire Agreement; Inconsistent Provisions...............................................17
8.04 Affiliate Obligations...................................................................17
8.05 Further Action..........................................................................17
8.06 Time for Notice.........................................................................17
8.07 Notices.................................................................................17
8.08 Remedies................................................................................17
8.09 Successors and Assigns..................................................................18
8.10 Severability............................................................................18
8.11 Counterparts............................................................................18
8.12 Descriptive Headings....................................................................18
8.13 No Third-Party Beneficiaries............................................................18
8.14 Construction............................................................................18
8.15 Form of Payments and Late Payments......................................................18
8.16 Governing Law...........................................................................19
</TABLE>
ii
<PAGE> 4
Execution Copy
TAX MATTERS AGREEMENT
BY AND BETWEEN
GENCORP INC.
AND
OMNOVA SOLUTIONS INC.
THIS TAX MATTERS AGREEMENT (the "Agreement") is made and entered into
September 30, 1999, by and between GenCorp Inc. ("GenCorp"), an Ohio
corporation, and OMNOVA Solutions Inc. ("OMNOVA"), an Ohio corporation, on
behalf of themselves and their respective Affiliates.
RECITALS:
---------
WHEREAS, the Board of Directors of GenCorp has determined that it is
appropriate and desirable to separate GenCorp's Decorative & Building Products
and Performance Chemicals businesses from its other businesses by means of a
series of transactions, including (1) a transfer to OMNOVA of the assets of such
businesses in exchange for all the issued and outstanding stock of OMNOVA and
other consideration (the "Separation") and (2) a dividend consisting of all the
issued and outstanding stock of OMNOVA, on a pro rata basis, to the holders of
GenCorp common stock (the "Distribution"), in transactions that will qualify for
tax-free treatment for purposes of United States Federal Taxes under Sections
368(a)(1)(D) and 355 of the Code (the Separation, the Distribution and related
transactions described in the Ruling Request and in the Ruling being,
collectively, the "Spin-off"); and
WHEREAS, GenCorp and OMNOVA have set forth the principal corporate
transactions required to effect the Spin-off, together with the terms of such
transactions and related matters, in a Distribution Agreement between GenCorp
and OMNOVA, dated September 30, 1999 (the Distribution Agreement"); and
WHEREAS, after the Spin-off. OMNOVA and its Affiliates will cease to be
members of the affiliated group (within the meaning of Section 1504(a) of the
Code) of which GenCorp is the common parent, effective as of the Distribution
Date; and
WHEREAS, GenCorp and OMNOVA desire to provide for and agree upon (1)
the allocation of liabilities for Taxes with respect to the Parties prior to,
arising out of, and subsequent to the Spin-off, (2) the preparation and filing
of Tax Returns along with the payment of Taxes shown due and payable thereon,
(3) the retention and maintenance of records necessary to prepare and file
appropriate Tax Returns and to handle any Tax Contests, as well as the provision
for appropriate access to those records by the Parties, (4) the conduct of
audits, examinations and proceedings by governmental entities which could result
in a redetermination of Taxes of the Parties, (5) the responsibility for any Tax
deficiencies and the treatment of refunds of Taxes and Carryovers and Carrybacks
of the Parties, (6) the cooperation of the Parties
<PAGE> 5
with one another in order to fulfill their duties and responsibilities under
this Agreement and under the Code and other applicable Law, and (7) other
matters related to Taxes;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
promises, covenants and conditions hereinafter contained, the Parties agree as
follows:
ARTICLE I
---------
DEFINITIONS
-----------
"Affiliate" means any Person that directly or indirectly controls, is
under the control of, or is under common control with, the Person in question.
"Control" of a Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through ownership or voting securities, by contract or otherwise. Except
as otherwise provided herein, the term "Affiliate" shall refer to Affiliates of
a Person determined immediately after the Distribution Date, provided, however,
that, after the Spin-off, GenCorp and OMNOVA (in each case together with the
members of their respective Groups) shall not be Affiliates of each another.
"Adverse Effect Issue" has the meaning set forth in Section 6.06(b).
"Affected Party" has the meaning set forth in Section 6.06(b).
"Agreement" has the meaning set forth in the introduction.
"Carryover" and "Carryback" mean any net operating loss, net capital
loss, excess tax credit, or other similar Tax item which may or must be carried
forward or back, respectively, from one Tax Period to another under the Code or
other applicable Law.
"Code" means the United States Internal Revenue Code of 1986, as
amended, or any successor law.
"Distribution" has the meaning set forth in the Recitals.
"Distribution Agreement" has the meaning set forth in the Recitals.
"Distribution Date" means the effective date of the Distribution as set
forth in the Distribution Agreement.
"Examined Party" has the meaning set forth in Section 6.06(a).
"Foreign Taxes" means any Taxes imposed or collected by any foreign
government, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, and "Foreign Tax" means any one of the
foregoing Foreign Taxes.
"GenCorp" has the meaning set forth in the introduction.
2
<PAGE> 6
"GenCorp Group" means GenCorp and its Affiliates.
"Granting Party" has the meaning set forth in Section 6.06(b).
"Group" means each of the GenCorp Group and the OMNOVA Group whenever
no distinction is otherwise required between them.
"GSI" has the meaning set forth in Section 7.01.
"Including" has the meaning set forth in Section 8.14.
"Indemnification Payment" means a payment subject to Section 5.03.
"Indemnified Party" and "Indemnifying Party" have the meanings set
forth in Section 5.03(b).
"IRS" means the United States Internal Revenue Service and any
successor department, agency or organization of the United States.
"Joint Contest" means any Tax Contest seeking a redetermination of
Taxes which involves or could involve one or more members of the GenCorp Group
and the OMNOVA Group.
"Law" means the law of any governmental entity or political subdivision
thereof, other than the Code, relating to any Tax.
"OMNOVA" has the meaning set forth in the introduction.
"OMNOVA Group" means OMNOVA and its Affiliates.
"OMNOVA Group Carryback" has the meaning set forth in Section 4.02(a).
"Participating Party" has the meaning set forth in Section 6.02(b).
"Parties" means GenCorp and OMNOVA.
"Party" means either GenCorp or OMNOVA.
"Person" means any individual and any partnership, joint venture,
corporation, limited liability company, trust, unincorporated organization or
other business entity formed or operating under United States or foreign law.
3
<PAGE> 7
"Post-Distribution Period" means any Tax Period beginning after the
Distribution Date and, in the case of any Straddle Period, the portion of such
Tax Period ending after the Distribution Date.
"Pre-Distribution Period" means any Tax Period ending on or before the
Distribution Date and, in the case of any Straddle Period, the portion of such
Tax Period ending on the Distribution Date.
"Prime Rate" means the prime interest rate published in the Wall Street
Journal from time to time.
"Return" means any return or report of Taxes due, any information
return or statement with respect to Taxes, or any other similar report,
statement, declaration, or document required to be filed under the Code or other
Laws, any claims for refund of Taxes paid, and any amendments or supplements to
any of the foregoing.
"Ruling" means the private letter ruling, dated June 30, 1999, issued
by the IRS in reply to the Ruling Request (including any amendment or supplement
thereto).
"Ruling Request" means the private letter ruling request filed by
GenCorp with the IRS on February 24, 1999, (as modified or supplemented by any
materials submitted to the IRS), seeking rulings that, inter alia, the Spin-off
will qualify for Federal income tax purposes for tax-free treatment under
Sections 368(a)(1)(D) and 355 of the Code.
"Separate Contest" means a Tax Contest which involves (i) only GenCorp
and members of the GenCorp Group, or (ii) only OMNOVA and members of the OMNOVA
Group.
"Separation" has the meaning set forth in the Recitals.
"Short Period" means any Tax Period which is based on an accounting
period which is shorter than the normal accounting period used for determining
such Tax (e.g., in the case of the United States Federal income Tax, any Tax
Period of less than one year).
"Spin-off" has the meaning set forth in the Recitals.
"Spin-off Taxes" means any Taxes incurred by or imposed on GenCorp or
OMNOVA (or their respective Affiliates) resulting from the Spin-off and any
disposition of stock or assets undertaken to separate the OMNOVA Group from the
GenCorp Group, in accordance with the terms of the Distribution Agreement.
"State Property Taxes" means State Taxes that are imposed on or with
respect to the ownership or use of property or based on the value of property,
including ad valorem, real property, personal property (tangible or intangible)
and similar Taxes.
4
<PAGE> 8
"State Taxes" means all Taxes imposed or collected by any state or
local government in the United States (including possessions and territories of
the United States), and "State Tax" means any one of the foregoing State Taxes.
"Straddle Period" means (i) any Tax Period that begins before and ends
after the Distribution Date, (ii) any Short Period that ends on the Distribution
Date and (iii) any Short Period that begins on the first day following the
Distribution Date.
"Tax Authority" means, with respect to any Tax, the governmental entity
or political subdivision thereof that imposes such Tax and any governmental
department, office or agency (if any) charged with the determination or
collection of such Tax for such entity or subdivision.
"Tax Benefit" means any refund, credit, Carryover, Carryback or other
reduction in otherwise required Tax payments. Such term does not include a
decrease in any Tax in one Tax Period that results from a Tax Adjustment in
another Tax Period, such as an increase in a deduction for depreciation that
results from a determination that, in a previous Tax Period, an expenditure is
capitalized and not deducted, or an item of gain is recognized.
"Tax Contest" means an audit, review, examination or any other
administrative or judicial proceeding with the purpose or effect of
redetermining Taxes of any member of any of the GenCorp Group or the OMNOVA
Group for (1) any Pre-Distribution Period, (2) any Straddle Period or (3) any
Post-Distribution Period, if such proceeding could result in any Tax Adjustment
or Tax Benefit for any Pre-Distribution Period or Straddle Period (without
regard to whether such matter was initiated by an appropriate Tax Authority or
in response to a claim for a refund of Taxes).
"Taxes" means all Federal, state, territorial, local, foreign and other
net income, gross income, gross receipts, sales, use, value added, ad valorem,
transfer, franchise, profits, license, lease, service, service use, withholding,
payroll, employment, unemployment insurance, workers compensation, social
security, excise, severance, stamp, business license, occupation, premium,
property, environmental, windfall profits, customs, duties, alternative minimum,
estimated or other taxes, fees, premiums, assessments or charges of any kind
whatever imposed or collected by any governmental entity or political
subdivision thereof, which any member of the GenCorp Group or of the OMNOVA
Group is required to pay, collect or withhold, together with any interest and
any penalties, additions to Tax or additional amounts with respect thereto, and
"Tax" means any one of the foregoing Taxes.
"Tax Period" means, with respect to any Tax, the period for which the
Tax is reported as provided under the Code or other applicable Laws...
"United States Federal Taxes" means all Taxes imposed or collected by
the United States Federal Government, and "United States Federal Tax" means any
one of the foregoing United States Federal Taxes.
"1999 Fiscal Year" has the meaning set forth in Section 3.02(b).
5
<PAGE> 9
ARTICLE II
ALLOCATION OF TAX LIABILITIES
2.01 LIABILITY FOR UNITED STATES FEDERAL TAXES.
(a) Subject to Sections 2.04, 2.05, 4.01, and 4.02, GenCorp shall be
liable for, and shall indemnify and hold the OMNOVA Group harmless from:
(1) any United States Federal Taxes imposed on GenCorp,
OMNOVA and all members of their respective Groups for any Pre-Distribution
Period and
(2) any United States Federal Taxes imposed on any members of
the GenCorp Group for any Post-Distribution Period.
(b) Subject to Sections 2.04, 2.05, 4.01, and 4.02, OMNOVA shall be
liable for, and shall indemnify and hold the GenCorp Group harmless from all
United States Federal Taxes imposed on any members of the OMNOVA Group for any
Post-Distribution Period.
2.02 LIABILITY FOR STATE TAXES.
(a) Subject to Sections 2.04, 2.05, 4.01, 4.02, and 7.01, GenCorp shall
be liable for, and shall indemnify and hold the OMNOVA Group harmless from:
(1) any State Taxes imposed on GenCorp or OMNOVA and all
members of their respective Groups for any Pre-Distribution Period (except as
provided in Section 2.02(b)(1)) and
(2) any State Taxes imposed on any members of the GenCorp
Group for any Post-Distribution Period.
(b) Subject to Sections 2.04, 2.05, 4.01, and 4.02, OMNOVA shall be
liable for, and shall indemnify and hold the GenCorp Group harmless from:
(1) any State Property Taxes imposed on GenCorp
or OMNOVA and all members of their respective groups for any Pre-Distribution
Period, to the extent such State Property Taxes are imposed on or with respect
to the ownership or use, or are based on the value, of property principally used
by any member of the OMNOVA Group before the Spin-off or immediately thereafter
(including all property transferred, directly or indirectly, to any member of
the OMNOVA Group in the Spin-off).
(2) any State Taxes imposed on any members of the OMNOVA
Group for any Post-Distribution Period.
6
<PAGE> 10
2.03 LIABILITY FOR FOREIGN TAXES.
(a) Subject to Sections 2.04, 2.05, 4.01, and 4.02, GenCorp
shall be liable for, and shall indemnify and hold the OMNOVA Group harmless
from:
(1) any Foreign Taxes imposed on GenCorp, OMNOVA or
their respective Groups for any Pre-Distribution Period and
(2) any Foreign Taxes imposed on the GenCorp Group for
any Post-Distribution Period.
(b) Subject to Sections 2.04, 2.05, 4.01, and 4.02, OMNOVA
shall be liable for, and shall indemnify and hold the GenCorp Group harmless
from all Foreign Taxes imposed on the OMNOVA Group for any Post-Distribution
Period.
2.04 SPIN-OFF TAXES. Except as otherwise provided in Section
5.02 of the Distribution Agreement, GenCorp shall be liable for, and shall
indemnify and hold the OMNOVA Group harmless from all Spin-off Taxes.
2.05 METHOD OF ALLOCATING TAXES FOR STRADDLE PERIODS.
(a) To the extent required or allowed by applicable law, the
Parties shall apportion their respective liabilities for Taxes relating to a
Straddle Period that begins before and ends after the Distribution Date in
accordance with an actual or hypothetical closing of the books on the
Distribution Date in the case of income Taxes or other Taxes based on actual
events and activities of such Party.
(b) Except as provided in Section 2.05(a) Taxes for any
Straddle Period, with respect to any member of the GenCorp Group and the OMNOVA
Group shall be apportioned between Pre-Distribution and Post-Distribution
Periods as follows: First, Taxes for Tax Periods or portions thereof ending on
the last day of the calendar month preceding the Distribution Date (such date is
hereinafter referred to as the "Cutoff Date") shall be based on actual events
and activities through the Cutoff Date and in accordance with past accounting
practices. Second, Taxes for the period from the Cutoff Date through the
Distribution Date shall be computed by prorating the activities of the calendar
month which includes the Distribution Date on a daily pro rata basis.
Notwithstanding the foregoing provisions of this Section 2.05(b), (i)
depreciation, amortization and depletion for any Straddle Period shall be
apportioned on a daily pro rata basis and (ii) extraordinary items not arising
in the ordinary course of business shall be apportioned to the Tax Period in
which the event giving rise to such item occurs.
(c) For purposes of this Agreement, franchise Taxes shall be
allocated to the Periods in which the items with respect to which the Tax is
imposed occur, regardless of whether the Tax is imposed with respect to one or
more other Periods.
7
<PAGE> 11
(d) For purposes of this Agreement, any taxes computed on
a unitary method shall be allocated between the members of the GenCorp Group and
the OMNOVA Group consistent with past accounting practice and consistent with
applicable law.
2.06 TAX ACCOUNTING PRACTICES. Any Straddle Period Returns prepared by
any member of the GenCorp Group or the OMNOVA Group shall be filed in accordance
with past Tax accounting practices used with respect to the Tax Returns in
question, and to the extent any items are not covered by past practices, in
accordance with reasonable Tax accounting practices selected by GenCorp or
OMNOVA, as the case may be (except that accounting elections and determinations
shall be made by each Party, where reasonably possible, in a manner that
minimizes the net Tax incurred by the other Party and its Affiliates). In the
event any member of the GenCorp Group or the OMNOVA Group files Tax Returns for
Straddle Periods that are inconsistent with such past Tax accounting practices,
then, notwithstanding any provision of this Agreement to the contrary, in
addition to any other remedies available, the other Party shall only be
responsible for the amount of Taxes it would owe if such Tax Returns had been
consistent with such past Tax accounting practices. The Parties shall consult
regarding any such proposed changes in accounting methods and attempt in good
faith to agree as to procedures to be followed and the amount of any indemnity
hereunder.
ARTICLE III
-----------
PREPARATION AND FILING OF TAX RETURNS
-------------------------------------
3.01 GENERAL. Except as otherwise provided in this Article III, Tax
Returns shall be prepared and filed by the Person liable for the Tax reported on
such Tax Return, or otherwise obligated to file such Return, under the Code or
other applicable Law. Schedule 3.01 sets forth the United States Federal and
State Tax Returns relating to income Taxes to be filed under this provision and
the Person responsible for filing each such Return. Without limiting the
foregoing, in accordance with Article VI, the Person responsible for filing such
a Return shall also be responsible for responding to any revenue agent request
or any other formal or informal request for information or otherwise relating to
such Return by the IRS or any other applicable Tax Authority. The Parties shall
render assistance and cooperate with one another in accordance with the terms of
the Distribution Agreement.
3.02 CONSOLIDATED, COMBINED AND JOINT RETURNS.
(a) Any Tax Returns for United States Federal Taxes
imposed for any Pre-Distribution Period which reflect Taxes for which any member
of the GenCorp Group has liability under Article II (including, without
limitation, GenCorp's consolidated Federal income Tax Return for the Tax Period
in which the Distribution occurs) shall be prepared by and filed by GenCorp. In
furtherance of, and not by limitation of, the cooperation and assistance
required by the terms of the Distribution Agreement, OMNOVA shall, in connection
with any Tax Return for United States Federal income Taxes for any
Pre-Distribution Period filed after the Distribution Date for which GenCorp has
filing responsibility under this Agreement and which reflects income or
transactions attributable to the OMNOVA Group, provide GenCorp with (i) true and
correct separate Federal income Tax Returns for the OMNOVA Group, together with
all
8
<PAGE> 12
accompanying work papers and other computations of separate Federal income
Tax liability for the OMNOVA Group; (ii) a true and correct reconciliation of
book income to Federal taxable income for the OMNOVA Group, and (iii) any other
information or documentation reasonably requested by GenCorp in connection with
such Tax Return; provided, however, that the Parties shall consult regarding the
type and extent of the information required by GenCorp hereunder.
(b) With respect to the Period ending on November 30,
1999, or, where applicable to any Group member, the corresponding 52-53 week
Period (the "1999 Fiscal Year"), OMNOVA hereby agrees to provide GenCorp with
all such Returns, work papers and computations relating to Federal Taxes on or
before May 15, 2000, and with all such Returns, work papers and computations
relating to State Taxes on or before on or before June 15, 2000.
(c) If, without reasonable cause, OMNOVA fails to provide
any information required by this Section 3.02 within the time frame specified
herein, GenCorp may file the applicable Returns based on the information
available at the time such Returns are due and OMNOVA shall be liable for, and
shall indemnify GenCorp from, any interest or penalties relating to Taxes,
additions to Tax or other costs imposed on GenCorp as a result of OMNOVA's
failure to provide such information; provided, however, that in no event will
OMNOVA be liable to reimburse GenCorp for or indemnify GenCorp against any
increase in tax liability (excluding interest, penalties, additions to tax and
the like) resulting from such information. The Parties shall attempt in good
faith to reach agreement regarding the information to be provided by OMNOVA to
GenCorp and the time such information is needed.
(d) Any Tax Returns for State Taxes for any
Pre-Distribution Period which reflect Taxes for which the GenCorp Group has
liability under Article II, shall be prepared and filed by GenCorp. Sections
3.02(a) and 3.02(c) shall apply mutatis mutandis to all State Tax Returns for
any Pre-Distribution Period that GenCorp must prepare and/or file under this
Agreement that is measured by income and that includes any income or
transactions attributable to OMNOVA or any member of the OMNOVA Group.
(e) Any Tax Returns for Foreign Taxes for any
Pre-Distribution Period which reflect Taxes for which the GenCorp Group has
liability under Article II, shall be prepared and filed by GenCorp. Any Tax
Returns for Foreign Taxes for any Post-Distribution Period (including any such
Straddle Period) which reflect Taxes for which the OMNOVA Group has liability
under Article II, shall be prepared and filed by OMNOVA. For any Straddle Period
Tax Returns prepared and filed by OMNOVA, the liability for Taxes reflected on
such Tax Return will be divided between the Pre-Distribution Period and the
Post-Distribution Period in accordance with Section 2.05.
3.03 RIGHT TO REVIEW RETURNS. Upon the request of either Party, the
other Party shall make available for inspection and copying all Tax Returns (and
related work papers) with respect to Taxes to the extent that (i) such Return
relates to Taxes for which the requesting Party may be liable under this
Agreement, (ii) such Return relates to Taxes for which the requesting Party may
have a claim for Tax Benefits hereunder, or (iii) the requesting Party
reasonably determines that it must inspect such Return to confirm any Person's
compliance with the terms of this
9
<PAGE> 13
Agreement. The Parties shall attempt in good faith to resolve any issues arising
out of the review of such Returns.
ARTICLE IV
----------
TAX REFUNDS AND CARRYOVERS
--------------------------
4.01 REFUNDS. Except as provided in Section 4.02, any refund of any
Taxes for any Pre-Distribution Period shall belong to GenCorp. In the event
OMNOVA or any of its Affiliates receives a refund for any Pre-Distribution
Period, the Person receiving such refund shall immediately remit such refund to
GenCorp. A refund includes the application of an amount otherwise refundable as
a reduction of amounts owed or to be owed notwithstanding that no cash is
transferred.
4.02 CARRYBACKS OR CLAIMS FOR REFUND.
(a) At the request of OMNOVA and at OMNOVA's expense,
GenCorp or one of its Affiliates will file one or more claims for refund
(including any tentative carryback or refund adjustment under Section 6411 of
the Code) of Taxes with respect to any Pre-Distribution Period resulting from
any Carryback generated by any member of the OMNOVA Group from a
Post-Distribution Period ("OMNOVA Group Carryback"), provided (subject to
Section 4.02(b)) that such refund does not result in any increase in the
liability of any member of GenCorp's Group for Taxes for any Tax Period. In the
event GenCorp or one of its Affiliates receives a refund for any
Pre-Distribution Period resulting from any OMNOVA Group Carryback from a
Post-Distribution Period, GenCorp shall immediately remit such refund to OMNOVA.
(b) In the event GenCorp or one of its Affiliates files
one or more claims for refund (including any tentative carryback or refund
adjustment under Section 6411 of the Code) of Taxes with respect to any
Pre-Distribution Period resulting from any OMNOVA Group Carryback from a
Post-Distribution Period that results in any increase in the liability of any
member of GenCorp's Group for Taxes for any Tax Period, GenCorp or any of its
Affiliates shall be entitled to retain that portion of the refund that exactly
offsets the additional Taxes for which it becomes liable as a result of filing
the refund claim, and the balance of such refund shall be refunded immediately
to OMNOVA. To the extent the increased liability for Taxes of GenCorp or any of
its Affiliates with respect to any Pre-Distribution Period resulting from any
OMNOVA Group Carryback from a Post-Distribution Period is reversed for any Tax
Period, the amount of any Tax Benefit resulting from such reversal shall be paid
immediately to OMNOVA on the date when the Return is filed for the year in which
the Tax Benefit arises or, if such return has already been filed, then
immediately after GenCorp or any of its Affiliates receives a payment reflecting
the Tax Benefit in question. Similarly, to the extent the increased liability
for Taxes of GenCorp or any of its Affiliates with respect to any
Pre-Distribution Period resulting from any OMNOVA Group Carryback from a
Post-Distribution Period for any Period arises after the refund has been paid to
OMNOVA, GenCorp shall inform OMNOVA of the amount of such increase, and OMNOVA
shall pay the amount of such increase to GenCorp promptly. Procedures similar to
those in Section 5.03 shall apply. All computations under this Section 4.02
10
<PAGE> 14
shall be adjusted to take into account interest payable by or to GenCorp, and
any Tax Benefit resulting therefrom.
4.03 CARRYOVERS FROM PRE-DISTRIBUTION PERIODS TO POST-DISTRIBUTION
PERIODS.
(a) If GenCorp or any of its Affiliates (determined for this
purpose as of immediately before the Distribution Date) is entitled to carry
over any Tax Benefit from a Pre-Distribution Period to a Post-Distribution
Period, and if the proper person to claim such Tax Benefit is a member of the
OMNOVA Group, OMNOVA or such member shall, upon request of GenCorp and at
GenCorp's expense, file any return or report reasonably requested by GenCorp in
a manner that claims such Tax Benefit and shall pay the full amount of such Tax
Benefit to GenCorp promptly upon receipt, provided (subject to Section 4.02(b)
)) that such Tax Benefit does not result in any increase in the liability of any
member of the OMNOVA Group for Taxes for any Tax Period.
(b) If OMNOVA or any of its Affiliates claims a carryover
of a Tax Benefit described in Section 4.03(a) that results in any increase in
the liability of any member of the OMNOVA Group for Taxes for any Tax Period,
the provisions of Section 4.02(b) shall apply, mutatis mutandis, to OMNOVA's
obligation to refund such Tax Benefit to GenCorp.
4.04 STATE TAX CREDITS. Notwithstanding any other provision of this
Agreement, the Parties shall consult and shall attempt in good faith to agree
concerning the allocation between them of credits for State Taxes.
ARTICLE V
---------
TAX PAYMENTS
------------
5.01 PAYMENT OF CONSOLIDATED UNITED STATES FEDERAL TAXES FOR
PRE-DISTRIBUTION PERIODS. GenCorp shall pay all Taxes due, be entitled to the
benefit of all overpayments of estimated income tax, and, except as provided in
Section 4.02, shall receive all refunds in connection with, the filing of
GenCorp's Tax Returns relating to U.S. Federal Taxes for all Pre-Distribution
Periods, including GenCorp's consolidated Federal income Tax Return for the 1999
Fiscal Year.
5.02 PAYMENT OF STATE AND FOREIGN TAXES FOR WHICH GENCORP HAS FILING
RESPONSIBILITY. GenCorp shall pay to the appropriate Tax Authority all State and
Foreign Taxes for Tax Returns with respect to which GenCorp (or another member
of the GenCorp Group) has filing responsibility pursuant to Article III.
5.03 INDEMNIFICATION PAYMENTS.
(a) The Parties shall attempt to agree upon procedures
for the payment of indemnities under this Agreement. In the absence of any such
Agreement, the procedures set forth in paragraph (b) shall be followed.
11
<PAGE> 15
(b) Upon payment of any Taxes with respect to which
either Party is entitled to receive indemnification hereunder, such member (the
"Indemnified Party") shall send to the other Party (the "Indemnifying Party") an
invoice accompanied by evidence of payment and a statement detailing the Taxes
paid and describing in reasonable detail the particulars relating thereto. The
Indemnifying Party (or such one or more members of the Indemnifying Party's
Group as it shall nominate) shall remit payment for Taxes for which the
Indemnifying Party is liable for indemnification hereunder to the Indemnified
Party (or such one or more members of the Indemnified Party's Group as it shall
nominate) within 30 days of receipt of such invoice, evidence of payment and
statement, or at any earlier time identified by the Indemnifying Party.
Notwithstanding any provision in this Agreement to the contrary, to the extent
the Indemnified Party receives a refund of Taxes for which it has been
indemnified, it shall remit the refund to the Indemnifying Party (or such one or
more members of the Indemnifying Party's Group as it shall nominate)
immediately. The amount of any payment under this Section 5.03 that is
attributable to interest paid to a Tax Authority shall be adjusted to take into
account the Tax Benefit resulting therefrom.
5.04 TAX TREATMENT OF TAX AND INDEMNIFICATION PAYMENTS. The Parties
agree that, in the absence of any change in law, any Tax or indemnification
payments made under this Agreement or the Distribution Agreement (including
payments made under Sections 2.04, 4.01, 4.02, 4,03, and 5.03 shall be reported
for Tax purposes by the payor and the recipient as capital contributions or
dividends, as appropriate, relating back to the period beginning before the
Distribution Date. The Parties will file their respective Tax Returns on this
basis, unless agreed otherwise in writing by the Indemnified Party and the
Indemnifying Party.
ARTICLE VI
----------
TAX AUDITS AND APPEALS
----------------------
6.01 NOTICE Each Party shall provide prompt notice to the other
Party of any pending or threatened Tax Contest of which it becomes aware
relating to Taxes for Tax Periods for which it is indemnified by the other
Party. Such notice shall contain factual information (to the extent known)
describing any asserted Tax liability in reasonable detail and shall be
accompanied by copies of any notice or other document received from any Tax
Authority in respect of any such matter. If either Party has knowledge of an
asserted Tax liability with respect to a matter for which it is to be
indemnified hereunder and such Party fails to give the Indemnifying Party notice
of such asserted Tax liability within 30 days after it has received written
notice thereof, then, unless such failure has no material adverse effect upon
the Indemnifying Party's ability to participate in the Tax Contest, the
Indemnifying Party shall have no obligation to indemnify the Indemnified Party
for any Taxes arising out of such asserted Tax liability.
6.02 CONTROL OF AUDITS AND APPEALS.
(a) SEPARATE CONTESTS. Any Separate Contest shall be
controlled solely by the Party involved in the Tax Contest.
12
<PAGE> 16
(b) JOINT CONTESTS. With respect to any Joint Contest,
the Party that filed the Return shall control the proceeding. The personnel and
outside advisers (including counsel) of the Party not controlling the proceeding
may participate, at the expense of such Party, in the proceeding to the extent
such proceeding relates to items or adjustments for which such Party may incur
indemnity liability under this Agreement. Such participation shall be reflected
by the grant of appropriate powers of attorney. The Party granting such power of
attorney (the "Granting Party") shall have the right to revoke the power of
attorney if the Granting Party reasonably determines that the actions or failure
to act on the part of the other Person (the "Participating Party") in the
proceeding has resulted, or can be reasonably expected to result, in the
hindrance or delay of any resolution or settlement of the proceeding. In the
event the Participating Party fails to participate timely and fully in any
proceeding to the extent to which such proceeding relates to items or
adjustments for which the Participating Party has indemnity liability under this
Agreement, the Participating Party shall be liable for, in addition to all Taxes
for which the Participating Party shall be liable under this Agreement, any and
all costs imposed on, or incurred by, the Granting Party as a result of the
Participating Party's failure to participate. The revocation of any power of
attorney under this Section 6.02 shall in no way limit the Participating Party's
indemnity liability under this Agreement.
6.03 CONSENT TO SETTLEMENTS.
(a) Subject to Sections 6.03(b) and (c) neither Party
shall agree to any Tax liability or compromise any Tax claim in a Joint Contest
for the account of any member of the other Group without the consent of such
other Party, which consent shall not be withheld unreasonably. Decisions
regarding settlement of a Joint Contest shall be made jointly by the Parties and
their respective representatives.
(b) If GenCorp refuses to accept a settlement proposal in
a Joint Contest that OMNOVA wishes to accept, then the contest shall continue,
and (i) OMNOVA's liability to GenCorp with respect to such adjustment shall be
determined as if the settlement proposal had been accepted; (ii) GenCorp shall
indemnify OMNOVA from and against any Taxes resulting from an outcome of the
contest less favorable than the settlement and any other costs resulting from
the continuation of the contest, and (iii) GenCorp shall be entitled to all
benefits resulting from any outcome of the contest that is more favorable than
the settlement (less any costs to OMNOVA, against which GenCorp shall indemnify
OMNOVA).
(c) If OMNOVA refuses to accept a settlement proposal in
a Joint Contest that GenCorp wishes to accept, then the contest shall continue
and (i) GenCorp's liability to OMNOVA with respect to such adjustment shall be
determined as if the settlement proposal had been accepted, (ii) OMNOVA shall
indemnify GenCorp from and against any Taxes resulting from an outcome of the
contest less favorable than the settlement and any other costs resulting from
the continuation of the contest, and (iii) OMNOVA shall be entitled to all
benefits resulting from any outcome of the contest that is more favorable than
the settlement (less any costs to GenCorp, against which OMNOVA shall indemnify
GenCorp).
13
<PAGE> 17
6.04 INFORMATION .Each Party shall provide the other Party with
information pertaining to any increase or decrease in its Taxes that might
affect the liability for Taxes of the other Party for any Period. In addition,
upon reasonable request, each Party shall provide information to the other Party
regarding the Tax treatment of any item.
6.05 EXPENSES. Each Party shall bear its own Group's expenses incurred
in connection with any Tax Contest.
6.06 ADVERSE EFFECT ISSUES
(a) The procedures set forth in Sections 6.03(c) through
6.06(f) shall apply if -
(i) in an examination of a Federal income Tax
Return of one of the Parties or any member of its Group (the "Examined Party"),
the IRS raises one or more Adverse Effect Issues, or
(ii) the Examined Party (whether or not in the
course of any audit, examination or other proceeding relating to the
determination of its liability for Federal income Taxes) files an amended
Federal income Tax Return or claim for refund of Federal income Taxes or
otherwise takes a position with the IRS inconsistent with a Federal income Tax
Return already filed, if such amended Federal income Tax Return, claim or
position is likely, itself or in combination with other issues, to be an Adverse
Effect Issue.
(b) One or more issues are "Adverse Effect Issues" if, in
the reasonable judgment of the Examined Party, the aggregate effect of all such
issues with respect to the Periods within an examination cycle or similar
proceeding of the Examined Party is significantly likely to increase the
liability for Federal income Taxes (less interest) of the Party that is not the
Examined Party and the members of its Group (the "Affected Party") by at least
$250,000. Only for purposes of determining whether an issue is an Adverse Effect
Issue, the amount of such increase in liability for Federal income Taxes shall
be measured under the following principles:
(i) All increases (less any offsetting decreases
resulting from the same or a related item) in the Affected Party's liability for
Federal income Tax likely to result from such Adverse Effect Issue for all
Periods shall be taken into account, provided, however, that any decrease in
liability for Federal income Tax that may result from the sale or disposition of
property not expected to be sold or disposed of (for example, stock of an
operating subsidiary), or similar items, shall not be taken into account.
(ii) Computations of liability for Federal income
Tax shall be based on the highest marginal rate of Federal income Tax applicable
to the Affected Party for each of the Periods involved.
(iii) There shall be taken into account only increases
in liability for Federal income Tax as compared with the return position taken
by the Affected Party.
14
<PAGE> 18
(c) In each case, the Parties shall use their reasonable
best efforts to identify issues that are, or in combination with other issues
could become, Adverse Effect Issues.
(i) Promptly upon becoming aware that any
Adverse Effect Issue has been raised as described in Section 6.06(a)(i), the
Examined Party shall provide notice of such event to the Affected Party. Such
notice shall include a description of the Adverse Effect Issue, a computation
(as described in Section 6.06(b)(ii) showing the expected increase in the
Affected Party's liability for Federal income Tax resulting therefrom, and
copies of all correspondence between the Examined Party and the IRS (including
information document requests, responses thereto and notices of proposed
adjustment).
(ii) No less than 30 days before filing any
amended return or claim for refund or taking any action described in Section
6.06(a)(ii), the Examined Party shall (x) provide notice to the Affected Party
(such Notice to include the information and material listed with respect to the
notice provided in Section 6.06(c)(i) and copies of all amended returns, claims
for refund or other documents proposed to be filed with the IRS with respect to
such Adverse Effect Issue) and (y) consult with the Affected Party regarding
such action.
(d) Within 30 days after the notice provided in Section
6.06(c)(i) or Section 6.06(c)(ii), the Affected Party may notify the Examined
Party that the Affected Party wishes to participate in proceedings relating to
the disposition of any or all of the Adverse Effect Issues. If the Affected
Party provides such notice, the procedures for Joint Contest set forth in
Section 6.06(b) shall apply, with the Examined Party being in control of the
proceeding. Provided, however, that (i) if the Affected Party does not provide
such notice within such time period, the proceeding shall continue without
participation of the Affected Party and without regard to Sections 6.06(e) and
6.06(f) and (ii) the Affected Party's right to participate in the proceedings
shall terminate if the Examined Party makes a reasonable determination, after
consultation with the Affected Party, that, notwithstanding the Adverse Effect
Items, the total net increase in the Affected Party's liability for Taxes
(determined as set forth in Section 6.06(b)) from all adjustments relating to
the Period or Periods in the examination cycle or similar proceeding is less
than the amount set forth in Section 6.06(b).
(e) Subject to Section 6.06(f), the Examined Party shall
settle any Adverse Effect Issue with the IRS only with the prior consent of the
Affected Party. The Parties shall attempt in good faith to agree as to the terms
of a proposed settlement. If the Parties are unable to agree, the procedures set
forth in Section 6.03(b) or Section 6.03(c) as the case may be, shall apply to
such Adverse Effect Issue.
(f) Notwithstanding Section 6.06(e), the Examined Party
may settle with the IRS any Adverse Effect Issue without consent of the Affected
Party, if, after consultation with the Affected Party, the Examined Party
reasonably determines that (i) a settlement of such Adverse Effect Issue is
desirable to the Examined Party; (ii) in light of all the circumstances
(including the likelihood of various positions of the Parties being sustained in
further proceedings, the cost of such proceedings and the impact of settlement
on other issues), the overall terms of the settlement do not discriminate
against the Affected Party; and (iii) other
15
<PAGE> 19
issues (which may or may not be Adverse Effect Issues) will be settled, and it
is not practical to settle such other issues on the proposed terms without a
settlement of the Adverse Effect Issue. Before determining that a proposed
settlement of other issues is not practical without a settlement of the Adverse
Effect Issue, the Examined Party will use its reasonable best efforts to secure
a settlement of the other issues while leaving the Adverse Effect Issue open for
further proceedings (for example, by entering into an agreement on IRS Form
870AD or similar form to close proceedings relating to one or more Periods but
reserving the Adverse Effect Issue for further proceedings).
ARTICLE VII
-----------
SPECIAL RULES PERTAINING TO GENCORP SERVICES, INC.
--------------------------------------------------
7.01 LIABILITY FOR STATE TAXES. Notwithstanding Section 6.02(b), OMNOVA
shall be responsible for, and shall indemnify GenCorp against, (a) all
liabilities for State Taxes of GenCorp Services, Inc., a Ohio corporation
("GSI"), and (b) any liability to GSI or to any member of the GenCorp Group for
adjustments to State Taxes resulting from transactions or arrangements between
GSI and any other member of the GenCorp Group or the OMNOVA Group. Such
liabilities for any Straddle Year in jurisdictions using the unitary method
shall be determined in accordance with Section 2.05(d).
7.02 GSI TAX RETURNS.Notwithstanding Sections 3.01 and 3.02, OMNOVA
shall file all State Tax Returns for GSI, with the exception of unitary returns
set forth on Schedule 3.01, and any tax audit or other proceeding pertaining to
any State Tax of GSI shall be a Separate Contest of the OMNOVA Group. GenCorp
shall provide notice to OMNOVA of any issue raised by a Tax Authority that could
reasonably result in the application of this Article VIII.
ARTICLE VIII
------------
MISCELLANEOUS MATTERS
---------------------
8.01 AMENDMENT AND WAIVER. This Agreement shall not be amended or
modified in any manner whatsoever except by a writing executed by each of the
Parties. No failure by either Party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
8.02 TAX ALLOCATION AGREEMENTS, ETC. Immediately prior to the
Distribution, GenCorp shall cause any and all tax allocation, tax sharing and
similar agreements or arrangements existing between GenCorp and all members of
the OMNOVA Group to be terminated as of the Distribution Date, and shall cause
any amounts due under such agreements or arrangements to be settled in the
manner agreed to by the Parties prior to the Distribution Date. Upon such
termination and settlement, no further payments made by one Party to the other
with respect to such agreements or arrangements shall be made, and all other
rights and obligations resulting from such agreements or arrangements between
the Parties shall cease as of such time. This Agreement shall supercede any such
agreements or arrangements.
16
<PAGE> 20
8.03 ENTIRE AGREEMENT; INCONSISTENT PROVISIONS; OTHER AGREEMENTS. The
Parties agree that the Distribution Agreement, this Agreement and the other
Ancillary Agreements (as that term is defined in the Distribution Agreement)
constitutes the entire agreement between them in respect of the subject matter
of this Agreement, and that, in the event of a conflict or other inconsistency
between any provision or term of this Agreement and any other agreement,
including any provision or term of the Distribution Agreement, then insofar as
such matter relates to Taxes, this Agreement shall prevail.
8.04 AFFILIATE OBLIGATIONS. To the extent that the provisions of this
Agreement pertain to an Affiliate of GenCorp or OMNOVA, GenCorp and OMNOVA
hereby respectively agree that they shall cause such Affiliate to carry out the
terms of this Agreement.
8.05 FURTHER ACTION. The Parties shall execute and deliver all
documents, provide all information, and take or refrain from taking any action
as may be necessary or appropriate to achieve the purposes of this Agreement.
Without limiting the preceding sentence, the members of each Group shall provide
the members of the other Group with such powers of attorney or other authorizing
documentation as is reasonably necessary to empower then to execute and file Tax
Returns they are responsible for hereunder, file claims for refunds and
equivalent claims for Taxes for which they are responsible, and contest, settle
and resolve any Tax Contests that they control under Article VII.
8.06 TIME FOR NOTICE. Notice of any indemnification claim under this
Agreement must be received by the Party against which such claim is made no
later than 30 days from the date on which the Taxes to which such claim relates
have been paid.
8.07 NOTICES. All notices, demands and other communications
which may or are required to be given to or made by either party to the other in
connection with this Agreement shall be in writing (including telex, fax or
other similar writing) and shall be deemed to have been duly given or made: (a)
if sent by registered or certified mail, five days after the posting thereof
with first class postage attached, (b) if sent by hand or overnight delivery,
upon the delivery thereof and (c) if sent by telex or fax, upon confirmation of
receipt of such telex or fax, in each case addressed to the respective parties
as follows:
GenCorp: GenCorp Inc.
Highway 50 & Aerojet Road
Rancho Cordova, CA 95670
Attn: Secretary
OMNOVA: OMNOVA Solutions Inc.
175 Ghent Road
Fairlawn, Ohio 44333
Attn: Secretary
or to such other address and to the attention of such other persons as either
party hereto may specify from time to time by notice to the other party.
17
<PAGE> 21
8.08 SUCCESSORS AND ASSIGNS. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns; provided, however, that neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned (other than by merger or pursuant to a sale of all or substantially all
of a party's assets to one Person) by either of the parties hereto without the
prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that no such assignment shall relieve
the assigning party of any liabilities or obligations hereunder. Any transfer or
assignment of any of the rights, interests or obligations hereunder in violation
of the terms hereof shall be void and of no force or effect.
8.09 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the court making the determination of invalidity or
unenforceability shall have the power to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
8.10 COUNTERPARTS. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all such
counterparts taken together shall constitute one and the same Agreement.
8.11 DESCRIPTIVE HEADINGS. The Table of Contents and Article and
Section headings of this Agreement are inserted for convenience only and shall
not constitute a part of this Agreement in construing or interpreting any
provision hereof.
8.12 NO THIRD-PARTY BENEFICIARIES. Except as provided in Article V
hereto nothing herein, expressed or implied, is intended or shall be construed
to confer upon or give to any Person any legal or equitable right, remedy, claim
or other benefit under or by reason of this Agreement.
8.13 CONSTRUCTION. It is acknowledged by OMNOVA and GenCorp that this
Agreement has undergone several drafts with the negotiated suggestions of each
and, therefore, no presumptions shall arise favoring either party by virtue of
the authorship of any provision of this Agreement.
8.14 FORM OF PAYMENTS AND LATE PAYMENTS. Any payments owed by any
member of either Group to any member of the other Group under this Agreement
shall be made in the currency in which the Tax to which such payment relates is
assessed by the Tax Authority, and shall be paid in immediately available funds
and in such other manner as the Person to whom such payment is owed may
reasonably request. Any payments required by this Agreement that
18
<PAGE> 22
are not made when due shall bear interest at the Prime Rate from the due date of
the payment to the date paid.
8.15 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY
AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAW, AND
NOT THE LAW OF CONFLICTS, OF THE STATE OF OHIO.
IN WITNESS WHEREOF, the Agreement has been duly executed as of the day
and year first above written.
GENCORP INC.
By /s/ William R. Phillips
-------------------------------------
Name: William R. Phillips
---------------------------------
Title: Senior Vice President
-------------------------------
OMNOVA SOLUTIONS INC.
By /s/ James C. LeMay
-------------------------------------
Name: James C. LeMay
---------------------------------
Title: Senior Vice President
-------------------------------
19
<PAGE> 1
Exhibit D
Execution Copy
ALTERNATIVE DISPUTE RESOLUTION AGREEMENT
----------------------------------------
ALTERNATIVE DISPUTE RESOLUTION AGREEMENT (the "Agreement") dated
September 30, 1999 by and between GENCORP INC., an Ohio corporation ("GenCorp")
and OMNOVA Solutions Inc., an Ohio corporation ("OMNOVA").
This Agreement is made pursuant to the Distribution Agreement dated as
of the date hereof between GenCorp and OMNOVA ("Distribution Agreement"). Each
term used herein that is defined in the Distribution Agreement shall have the
same meaning when used herein as it is given in the Distribution Agreement.
WHEREAS, GenCorp and OMNOVA have determined that it is necessary and
desirable to agree on the procedures described in this Agreement as the sole and
exclusive method or remedy for them to resolve every dispute, controversy or
claim whether sounding in contract, tort or otherwise (hereinafter "Dispute")
which may from time to time arise under or out of, or is in any way related to,
the Transaction Documents or the Distribution (as herein defined); and,
WHEREAS, this Agreement shall apply whether such Dispute is based on a
breach of one party or its obligations under the Transaction Documents or
disagreement between the parties as to the meaning or application of the
Transaction Documents or in any manner related to or arising under or out of the
Distribution or the transactions contemplated by the Transaction Documents
(including all actions taken in furtherance of said Distribution).
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
AMOUNT IN CONTROVERSY: the monetary value of any Dispute plus the
monetary value of any related Dispute or series of related Disputes
then existing or likely to occur in the future.
APPLICABLE DEADLINE: one year and 45 days after the later of the
occurrence of the act or event giving rise to the claim underlying the
Dispute or the date on which such act or event was, or should have
been, in the exercise of reasonable due diligence, discovered by the
party asserting the claim; provided, however, that with respect to
Disputes involving Third Party Claims the applicable act or event
shall be the making of such Third Party Claim.
CPR: the Center for Public Resources, Inc., New York, NY.
<PAGE> 2
-2-
DEMAND: a written demand for arbitration under Article IV of this
Agreement which shall contain a statement setting forth the nature of
the Dispute and the Amount in Controversy.
DISPUTE: is defined in the recitals to this Agreement.
ESCALATION NOTICE: a written notice demanding a meeting of the
respective Chief Executive Officers of the parties for the purpose of
resolving a Dispute.
REQUEST: a written request for mediation under Article III of this
Agreement which shall set forth the nature of the Dispute and the
Amount in Controversy.
TRANSACTION DOCUMENTS: the Distribution Agreement together with the
Ancillary Agreements and other documents referenced in the
Distribution Agreement.
ARTICLE II
RESOLUTION OF DISPUTES
Section 2.01. INTENT. It is the intent of the parties to use their
respective reasonable efforts to resolve expeditiously and on a mutually
acceptable negotiated basis any Dispute between them that may arise from time to
time.
Section 2.02. WAIVER OF RIGHTS. The procedures in this Agreement shall
be the sole and exclusive remedy in connection with any Dispute. Each party to
this Agreement hereby irrevocably waives any rights it may have to trial by jury
or to commence any action in any court of law or equity or before any other
governmental authority with respect to any Dispute, except as expressly
otherwise provided in Sections 4.05(b) and 4.06 of Article IV of this Agreement.
Section 2.03. PROCEDURE. All Disputes between the parties should be
resolved promptly through consultation and good faith negotiation at the working
levels of GenCorp and OMNOVA. All Disputes which cannot be resolved by the
parties at the working level shall first be subjected to escalation as provided
in Section 2.04 of this Article. If escalation does not resolve the Dispute, the
Dispute shall next be submitted to mediation pursuant to Article III of this
Agreement. Subject to Sections 4.05(b) and 4.06 of Article IV of this Agreement,
if a Dispute cannot be resolved through mediation, then such Dispute shall be
submitted to binding Arbitration pursuant to Article IV of this Agreement.
Section 2.04. ESCALATION. If the parties are unable to resolve a
Dispute at working levels within GenCorp and OMNOVA, either party may deliver an
Escalation Notice to the other party demanding an in-person meeting for the
purpose of resolving the Dispute between the Chief Executive Officers ("CEOs")
of both parties in Denver, Colorado, within thirty days of receipt of the
Escalation Notice. The Escalation Notice shall be delivered in accordance with
Section 5.04 of Article V of this Agreement. The CEO's of the parties shall have
fifteen days following their meeting to resolve the Dispute. If the Dispute is
not resolved within the foregoing period, and in
<PAGE> 3
-3-
any event after forty-five days following receipt of an Escalation Notice,
either party may initiate mediation of the Dispute in accordance with Article
III of this Agreement.
ARTICLE III
MEDIATION
Section 3.01. REQUEST FOR MEDIATION. Following completion of the
escalation procedure described in Section 2.04 of Article II of this Agreement,
either party may initiate mediation by delivering a Request to the other party
in accordance with Section 5.04 of Article V of this Agreement.
Section 3.02. APPOINTMENT OF MEDIATOR. Unless the parties otherwise
agree in writing, a single mediator will be appointed by the two parties from
among the former directors of GenCorp who ceased to be members of the GenCorp
Board of Directors at least six months before the Distribution. In the event the
parties are unable to agree upon a mediator or no such former director is
available, the parties shall apply to CPR to appoint a single mediator from the
CPR Panel of Neutrals, which appointment shall be made by CPR within 15 days
after such application.
Section 3.03. DATE, TIME AND PLACE. The date, time and place of each
mediation session shall be determined by agreement of the parties or, if the
parties cannot agree within a reasonable period of time, by the mediator;
provided that the first mediation session shall be held within fifteen (15) days
of the date on which the mediator is appointed. Unless the parties otherwise
agree in writing, all mediation proceedings shall take place in Denver,
Colorado.
Section 3.04. ROLE OF THE MEDIATOR. The mediator shall aid the parties
in their discussions and negotiations by informally advising the parties. Any
opinion expressed by the mediator shall be strictly advisory and shall not be
binding on the parties; provided, however, any final, written opinion expressed
by the mediator shall be admissible in any arbitration proceedings.
Section 3.05. COSTS OF MEDIATION. Costs of the mediation shall be borne
equally by the parties, except that each party shall be responsible for its own
attorney's fees and expenses.
Section 3.06. TERMINATION. The mediation proceedings shall be
terminated upon the happening of any of the following: (i) execution of a
settlement agreement by the parties; (ii) receipt of a written declaration of
the mediator that further efforts at mediation are no longer worthwhile; or,
(iii) receipt of a written declaration of one or both parties that the mediation
proceedings are terminated, which is delivered (in accordance with Section 5.04
of Article V of this Agreement) not earlier than completion of the first
mediation session.
ARTICLE IV
ARBITRATION
Section 4.01. DEMAND FOR ARBITRATION. (a) At any time after the
termination of mediation as described in Section 3.06 of Article III of this
Agreement, any party may, unless the
<PAGE> 4
-4-
Applicable Deadline has occurred, make a Demand that the Dispute be resolved by
binding arbitration, which Demand shall be delivered in the manner set forth in
Section 5.04 of Article V of this Agreement. In the event that any party shall
deliver a Demand, the other party may itself deliver a Demand to such first
party with respect to any related Dispute (with respect to which the Applicable
Deadline has not passed) without the requirement of delivering an Escalation
Notice or a Request. In the event that any party delivers a Demand with respect
to any Dispute that is the subject of any then pending arbitration proceeding or
of a previously delivered Demand, all such Disputes shall be resolved in the
arbitration proceeding for which a Demand was first delivered unless the
arbitrator in his or her sole discretion determines that it is impracticable or
otherwise inadvisable to do so.
(b) Except as may be expressly provided in any Transaction
Document, any Demand must be given prior to the Applicable Deadline. The parties
may specifically agree in writing to extend or waive the Applicable Deadline
with respect to any Dispute; however, no discussions, negotiations or mediations
between the parties pursuant to this Agreement, or otherwise, will toll the
Applicable Deadline unless expressly agreed in writing by the parties. Each of
the parties agrees that if a Demand is not given prior to the expiration of the
Applicable Deadline, as between or among the parties, such Dispute will be
barred; provided, however, that if there is a Dispute regarding whether the
Applicable Deadline has expired such Dispute shall be resolved by the
Arbitrator. Subject to Sections 4.05(c) and 4.06 of Article IV of this Agreement
and the preceding sentence, upon delivery of a Demand prior to the Applicable
Deadline, the Dispute shall be decided by a sole arbitrator in accordance with
the rules set forth in this Article IV.
Section 4.02. ARBITRATORS. (a) Within 15 days after a valid Demand is
received, the parties shall attempt to select a sole arbitrator satisfactory to
both parties.
(b) In the event that the parties are not able jointly to
select a sole arbitrator within such 15-day period, the parties shall each
appoint an arbitrator (who need not be disinterested as to the parties or the
matter) within 30 days after delivery of the Demand. If one party appoints an
arbitrator within such time period and the other party fails to appoint an
arbitrator within such time period, the arbitrator appointed by the one party
shall be the sole arbitrator of the matter.
(c) In the event that a sole arbitrator is not selected
pursuant to paragraph (a) or (b) above and, instead, two arbitrators are
selected pursuant to paragraph (b) above, the two arbitrators will, within 30
days after the appointment of the later of them to be appointed, select an
additional arbitrator who shall act as the sole arbitrator of the dispute. After
selection of such sole arbitrator, the initial arbitrators shall have no further
role with respect to the dispute. In the event that the arbitrators so appointed
do not, within 30 days after the appointment of the later of them to be
appointed, agree on the selection of the sole arbitrator, any party involved in
such dispute may apply to CPR to select the sole arbitrator, which selection
shall be made by CPR within 30 days after such application. Any arbitrator
selected pursuant to this paragraph (c) shall be disinterested with respect to
any of the parties and the matter and shall be reasonably competent in the
applicable subject matter of the Dispute.
<PAGE> 5
-5-
(d) The sole arbitrator selected pursuant to paragraph (a),
(b) or (c) above will set a time for the hearing of the matter which will
commence no later than 90 days after the date of appointment of the sole
arbitrator pursuant to paragraph (a), (b) or (c) above and which hearing will be
no longer than 30 days (unless in the judgment of the arbitrator the matter is
unusually complex and sophisticated and thereby requires a longer time, in which
event such hearing shall be no longer than 90 days). The final decision of such
arbitrator will be rendered in writing to the parties not later than 60 days
after the last hearing date, unless otherwise agreed by the parties in writing.
(e) The place of any arbitration hereunder will be Denver,
Colorado, unless otherwise agreed by the parties.
Section 4.03. HEARINGS. Within the time period specified in Section
4.02(d) of Article IV of this Agreement, the matter shall be presented to the
arbitrator at a hearing by means of written submissions of memoranda and
verified witness statements, filed simultaneously, and responses, if necessary
in the judgment of the arbitrator or both parties. If the arbitrator deems it to
be essential to a fair resolution of the dispute, live cross-examination or
direct examination may be permitted, but is not generally contemplated to be
necessary. The arbitrator shall actively manage the arbitration with a view to
achieving a just, speedy and cost-effective resolution of the Dispute. The
arbitrator may, in his or her discretion, set time and other limits on the
presentation of each party's case, its memoranda or other submissions, and
refuse to receive any proffered evidence, which the arbitrator, in his or her
discretion, finds to be cumulative, unnecessary, irrelevant or of low probative
nature. Except as otherwise set forth herein, any arbitration hereunder will be
conducted in accordance with the CPR Rules for Non-Administered Arbitration of
Business Disputes then prevailing (except that the fee schedule of CPR will not
apply). Except as expressly set forth in Section 4.06 of Article IV of this
Agreement, the decision of the arbitrator will be final and binding on the
parties, and judgment thereon may be had and will be enforceable in any court
having jurisdiction over the parties. Arbitration awards will bear interest at
an annual rate of the Prime Rate per annum from the date of the award. To the
extent that the provisions of this Agreement and the prevailing rules of the CPR
conflict, the provisions of this Agreement shall govern.
Section 4.04. DISCOVERY AND CERTAIN OTHER MATTERS. (a) Any party may
request limited document production from the other party of specific and
expressly relevant documents, with the reasonable expenses of the producing
party incurred in such production paid by the requesting party. Any such
discovery (under which rights to documents shall be substantially less than
document discovery rights prevailing under the Federal Rules of Civil Procedure)
shall be conducted expeditiously and shall not cause the hearing provided for in
Section 4.03 of Article IV of this Agreement to be adjourned except upon consent
of both parties or upon an extraordinary showing of cause demonstrating that
such adjournment is necessary to permit discovery essential to a party to the
proceeding. Depositions, interrogatories or other forms of discovery (other than
the document production set forth above) shall be permitted only upon an
extraordinary showing that such discovery is essential to a party to the
proceeding or upon consent of the parties involved in the applicable Dispute.
Disputes concerning the scope of discovery (including document production and
enforcement of the document production requests) will be determined by written
agreement of the parties or, failing such agreement, will
<PAGE> 6
-6-
be referred to the arbitrator for resolution. All discovery requests will be
subject to the parties' rights to claim any applicable privilege. The arbitrator
will adopt procedures to protect the proprietary rights of the parties and to
maintain the confidential treatment of the arbitration proceedings (except as
may be required by law). Subject to the foregoing, the arbitrator shall have the
power to issue subpoenas to compel discovery.
(b) The arbitrator shall have full power and authority to
determine issues of arbitrability but shall otherwise be limited to interpreting
or construing the applicable provisions of the Transaction Documents, including
this Agreement, and will have no authority or power to limit, expand, alter,
amend, modify, revoke or suspend any condition or provision of any of the
Transaction Documents, including this Agreement; it being understood, however,
that the arbitrator will have full authority to implement the provisions of, and
to fashion appropriate remedies for breaches of, the Transaction Documents
including this Agreement (including interim or permanent injunctive relief);
provided that the arbitrator shall not have: (i) any authority in excess of the
authority a court having jurisdiction over the parties and the Dispute would
have absent these arbitration provisions; or, (ii) any right or power to award
punitive, treble or consequential damages except to the extent that any of such
damages are actually paid by a party or a member of a party's Group to a Person.
It is the intention of the parties that in rendering a decision the arbitrator
give effect to the applicable provisions of the Transaction Documents including
this Agreement, and the laws of the State of Ohio without regard to the
principles of conflicts of law thereof (it being understood and agreed that this
sentence shall not give rise to a right of judicial review of the arbitrator's
award).
(c) If a party fails or refuses to appear at and participate
in an arbitration hearing after due notice, the arbitrator may hear and
determine the controversy upon evidence produced by the appearing party.
(d) Arbitration costs will be borne equally by each party,
except that each party will be responsible for its own attorney's fees and its
other costs and expenses, including the costs of witnesses selected by such
party and all internal costs.
Section 4.05. CERTAIN ADDITIONAL MATTERS. (a) Any arbitration award
shall be a bare award limited to a holding for or against a party and shall be
without findings as to facts, issues or conclusions of law (including awards
with respect to any matters relating to the validity or infringement of patents
or patent applications) and shall be without a statement of the reasoning on
which the award rests, but must be in adequate form so that a judgment of a
court may be entered thereupon. Judgment upon any arbitration award hereunder
may be entered in any court having jurisdiction thereof.
(b) Prior to the time at which an arbitrator is appointed
pursuant to Section 4.02 of Section IV of this Agreement, any party may seek one
or more temporary restraining orders in a court of competent jurisdiction if
necessary in order to preserve and protect the status quo. Neither the request
for, or grant or denial of, any such temporary restraining order shall be deemed
a waiver of the obligation to arbitrate as set forth herein and the arbitrator
may dissolve, continue or modify any such order. Any such temporary restraining
order shall remain in effect
<PAGE> 7
-7-
until the first to occur of the expiration of the order in accordance with its
terms or the dissolution thereof by the arbitrator.
(c) In the event that at any time the sole arbitrator shall
fail to serve as an arbitrator for any reason, the parties shall select a new
arbitrator who shall be disinterested as to the parties and the matter in
accordance with the procedures set forth herein for the selection of the initial
arbitrator. The extent, if any, to which testimony previously given shall be
repeated or as to which the replacement arbitrator elects to rely on the
stenographic record (if there is one) of such testimony shall be determined by
the replacement arbitrator.
Section 4.06. LIMITED COURT ACTIONS. (a) Notwithstanding anything
herein to the contrary, in the event that any party reasonably determines the
amount in controversy in any Dispute (or series of related Disputes) is, or is
reasonably likely to be, in excess of $100 million and if such party desires to
commence a lawsuit in lieu of complying with the arbitration provisions of this
Article IV, such party shall so state in its Demand or by notice given to the
other parties within 20 days after receipt of a Demand with respect thereto. If
the other party to the arbitration does not agree that the amount in controversy
in such Dispute (or series of related Disputes) is, or is reasonably likely to
be, in excess of $100 million, the arbitrator selected pursuant to Section 4.02
hereof shall decide whether the amount in controversy in such Dispute (or series
of related Disputes) is, or is reasonably likely to be, in excess of $100
million. The arbitrator shall set a date that is no later than ten days after
the date of his or her appointment for submissions by the parties with respect
to such issue. There shall not be any discovery in connection with such issue.
The arbitrator shall render his or her decision on such issue within five days
of such date so set to the arbitrator. In the event that the arbitrator
determines that the amount in controversy in such Dispute (or such series of
related Disputes) is, or is reasonably likely to be, in excess of $100 million,
the provisions of Sections 4.01, 4.02, 4.03, 4.04, and 4.05 of Article IV of
this Agreement shall not apply, and on or before (but, except as expressly set
forth in Section 4.06(b), not after) the tenth business day after the date of
such decision, either party to the arbitration may elect, in lieu of
arbitration, to commence a lawsuit with respect to such Dispute in any court of
competent jurisdiction. If the arbitrator does not so determine, the provisions
of this Article IV (including with respect to time periods) shall apply as if no
determinations were sought or made pursuant to this Section 4.06(a).
(b) In the event that an arbitration award in excess of $100
million is issued in any arbitration proceeding commenced hereunder, any party
may, within 60 days after the date of such award, submit the Dispute giving rise
thereto to a court of competent jurisdiction, regardless of whether such party
or any other party sought to commence lawsuit in lieu of proceeding with
arbitration in accordance with Section 4.06(a) of Article IV of this Agreement.
In such event, the applicable court may elect to rely on the record developed in
the arbitration or, if it determines that it would be advisable in connection
with the matter, allow the parties to seek additional discovery or to present
additional evidence. Each party shall be entitled to present arguments to the
court with respect to whether any such additional discovery or evidence shall be
permitted and with respect to all other matters relating to the Dispute.
(c) No party shall raise as a defense the statute of limitations
if the applicable Demand was delivered on or prior to the Applicable Deadline
and, if applicable, if the matter is
<PAGE> 8
-8-
submitted to a court of competent jurisdiction within the 60-day period
specified in Section 4.06(b) of Article IV of this Agreement.
Section 4.07. CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise
agreed in writing, the parties will continue to provide service and honor all
other commitments under the Transaction Documents during the course of
arbitration pursuant to the provisions of this Article IV with respect to all
matters not subject to such Dispute.
ARTICLE V
MISCELLANEOUS
Section 5.01. COMPLETE AGREEMENT; CONSTRUCTION. This Agreement and the
Transaction Documents and other agreements and documents referred to therein,
shall constitute the entire agreement between the parties with respect to the
subject matter hereof and shall supersede all previous negotiations, commitments
and writings with respect to such subject matter.
Section 5.02. SURVIVAL OF AGREEMENTS. All covenants and agreements of
the parties contained in this Agreement shall survive the Distribution Date.
Section 5.03. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio without regard to the
principles of conflicts of law thereof.
Section 5.04. NOTICE. All notices and other communications required or
permitted to be given or made under this Agreement shall, unless otherwise
provided herein, be in writing and shall be deemed to have been given: (i) on
the date of personal delivery; or, (ii) provided such notice or communication is
actually received by the party to which it is addressed in the ordinary course
of delivery, on the date of (A) deposit in the United States mail, postage
prepaid, by registered or certified mail, return receipt requested, (B)
transmission by telegram, cable, telex or facsimile transmission, or (C)
delivery to a nationally-recognized overnight courier service, in each case
addressed as set forth below, or to such other person, entity or address as
either party shall designate by notice to the other in accordance herewith:
To GenCorp: GenCorp Inc.
Highway 50 & Aerojet Road
Rancho Cordova, CA 95670
Attention: General Counsel
To OMNOVA: Omnova Solutions Inc.
175 Ghent Road
Fairlawn, Ohio 44333-3300
Attention: General Counsel
Section 5.05. WAIVER. No waiver by any party of any of the provisions
of this Agreement will be deemed, or will constitute, a waiver of any other
provision, whether similar,
<PAGE> 9
-9-
not will any waiver constitute a continuing waiver. No waiver will be binding
unless executed in writing by the party making the waiver.
Section 5.06. ASSIGNMENT. Neither party may assign, by operation of
law, merger or otherwise, license, sublicense or otherwise transfer any or all
of its rights or obligations under this Agreement to any other person or entity
without obtaining the prior written consent of the other party.
Section 5.07. AMENDMENTS. This Agreement may not be modified or amended
except by an agreement in writing signed by the parties.
Section 5.08. SUCCESSORS AND ASSIGNS. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns.
Section 5.09. SUBSIDIARIES. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements,
and obligations set forth herein or arising hereunder to be performed by any
member of such parties' Group on and after the Distribution Date.
Section 5.10. NO THIRD PARTY BENEFICIARIES. This Agreement is solely
for the benefit of the parties hereto and their respective Group members and
shall not be deemed to confer upon third parties any remedy, claim, right or
reimbursement or other right.
Section 5.11. TITLES AND HEADINGS. Titles and headings to articles and
sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
Section 5.12. CONFIDENTIALITY. Except as required by law, the parties
shall hold, and shall cause their respective officers, directors, employees,
agents and other representatives to hold, the existence, content and result of
any escalation, mediation or arbitration in confidence in accordance with the
requirements of the Transaction Documents, except as may be required in order to
enforce any award. Each of the parties shall request that any mediator or
arbitrator comply with such confidentiality requirement.
Section 5.13. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to any
rights or remedies otherwise available to any party hereto, each party
acknowledges that damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
<PAGE> 10
-10-
GENCORP INC.
By: /s/ William R. Phillips
-----------------------------------
Name: William R. Phillips
---------------------------------
Title: Senior Vice President
--------------------------------
OMNOVA SOLUTIONS INC.
By: /s/ James C. LeMay
-----------------------------------
Name: James C. LeMay
---------------------------------
Title: Senior Vice President
--------------------------------
<PAGE> 1
Exhibit E
Execution Copy
AGREEMENT ON EMPLOYEE MATTERS
This Agreement on Employee Matters ("Agreement") dated September 30,
1999, is made and entered into by and between GENCORP INC., an Ohio corporation
("GenCorp"), and OMNOVA SOLUTIONS INC., an Ohio corporation ("OMNOVA") and a
wholly owned subsidiary of GenCorp.
WITNESSETH:
WHEREAS, the Board of Directors of GenCorp has determined that it is
advisable to distribute substantially all of the stock of OMNOVA to its
shareholders in a transaction intended to qualify under Section 355 of the
Internal Revenue Code (variously, the "Distribution" or the "Spin-Off");
WHEREAS, GenCorp and OMNOVA are entering into a Distribution Agreement
which, among other things, sets forth the principal transactions required to
effect the Distribution and sets forth other agreements that will govern certain
other matters following the Distribution; and
WHEREAS, in connection with the Distribution, GenCorp and OMNOVA desire
to provide for the allocation of certain assets and liabilities and for certain
other matters all relating to employment, employee benefit plans and
compensation arrangements.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1 Terms used but not defined herein shall have the meanings set
forth in the Distribution Agreement. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
(a) CODE. The Internal Revenue Code of 1986, as amended.
(b) DISTRIBUTION DATE. The date on which the shares of OMNOVA
are distributed to the shareholders of GenCorp.
(c) ERISA. The Employee Retirement Income Security Act of 1974,
as amended.
(d) GENCORP CONTROLLED GROUP. Collectively, GenCorp and any
GenCorp Group member whose employees are required by Section 414 of the Code to
be treated as if they were employed by a single employer.
(e) GENCORP MEDICAL PLAN. The GenCorp Medical and Dental Plans.
(f) GENCORP HOURLY PENSION PLAN. The Non-Contributory Pension
Plan of GenCorp Inc., as in effect immediately before the Closing Time.
(g) GENCORP PENSION PLAN TRUSTEE. The trustee or trustees
appointed pursuant to the GenCorp Salaried Pension Plan.
(h) GENCORP SALARIED PENSION PLAN. The Pension Plan for
Salaried Employees of GenCorp Inc. and Certain Participating Subsidiaries, as in
effect immediately before the Closing Time.
2
<PAGE> 3
(i) GENCORP STOCK FUND. The GenCorp Stock Fund under the Joint
Savings Plan.
(j) JOINT SAVINGS PLAN. The GenCorp Retirement Savings Plan and
the Profit Sharing Retirement and Savings Plan of GenCorp Inc. and Certain
Participating Subsidiaries, as amended to be jointly sponsored by GenCorp and
OMNOVA.
(k) OMNOVA CONTROLLED GROUP. Collectively, OMNOVA and any OMNOVA
Group member whose employees are required by Section 414 of the Code to be
treated as if they were employed by a single employer.
(l) OMNOVA EMPLOYEES. Any person who is employed by OMNOVA
pursuant to Section 2.1(a) hereof. OMNOVA Employees shall include OMNOVA
Salaried Employees and OMNOVA Hourly Employees.
(m) OMNOVA HOURLY EMPLOYEES. OMNOVA Employees other than OMNOVA
Salaried Employees.
(n) OMNOVA HOURLY PENSION PLAN. The Non-Contributory Pension
Plan of OMNOVA Solutions Inc.
(o) OMNOVA HOURLY PENSION PLAN PARTICIPANT. OMNOVA Hourly
Employees and former hourly employees of GenCorp who terminated employment, with
accrued benefits under the GenCorp Hourly Pension Plan, from (i) business
locations of OMNOVA which are active immediately after the Closing Time and (ii)
the former GenCorp business location in Newcomerstown, Ohio
(p) OMNOVA MEDICAL PLAN. The medical and dental benefit plans
adopted by OMNOVA for the benefit of its salaried employees after the
Distribution and the separate
3
<PAGE> 4
medical and dental benefit programs maintained by OMNOVA pursuant to collective
bargaining agreements.
(q) OMNOVA PENSION PLAN TRUSTEE. The trustee or trustees
appointed pursuant to the trust agreement under the OMNOVA Pension Plan.
(r) OMNOVA SALARIED EMPLOYEES. OMNOVA Employees who are
compensated on a salaried basis.
(s) OMNOVA SALARIED PENSION PLAN. The Pension Plan for Salaried
Employees of OMNOVA Solutions Inc.
(t) OMNOVA SALARIED PENSION PLAN PARTICIPANTS. OMNOVA Salaried
Employees and former salaried employees of GenCorp who terminated employment,
with accrued benefits under the GenCorp Salaried Pension Plan, from (i) business
locations of OMNOVA which are active immediately after the Closing Time and (ii)
the former GenCorp business location in Newcomerstown, Ohio.
(u) OMNOVA STOCK FUND. The OMNOVA Stock Fund under the Joint
Savings Plan.
(v) UNFUNDED DEFERRED COMPENSATION. Unfunded obligations of
GenCorp as of the Closing Time to pay deferred compensation and retirement
income under its Benefits Restoration Plan, Deferred Bonus Plan, Non-Employee
Directors Retirement and Deferred Compensation Plans, 1996 Supplemental
Retirement Plan for Management Employees, individual employment agreements, and
other miscellaneous plans related to discontinued operations, including such
additional amounts as may be attributable to earnings growth after the Closing
Time in accordance with the terms of the specific plan or agreement.
4
<PAGE> 5
(w) UNION EMPLOYEES. Any OMNOVA Employee who is included in a
collective bargaining unit.
ARTICLE II
EMPLOYMENT AND BENEFIT PLANS
2.1 EMPLOYMENT OF OMNOVA EMPLOYEES AND UNION EMPLOYEES.
(a) Prior to the Distribution, while OMNOVA is still a
wholly-owned subsidiary of GenCorp, GenCorp shall transfer to OMNOVA the
employment of all (i) GenCorp employees who are employed primarily in the OMNOVA
Business, including any such employee on an approved leave of absence (including
disability) at the time of such transfer, and (ii) all GenCorp employees who are
employed at Corporate Headquarters, Corporate Technology Center and Flight
Operations, including any such employee on an approved leave of absence
(including disability) at the time of such transfer, but shall exclude (A)
employees named on Schedule A who shall remain GenCorp employees; (B) employees
designated for termination under the GenCorp Enhanced Involuntary Separation Pay
Plan and named on Schedule B; and (C) employees who have elected to retire under
the GenCorp 1999 Voluntary Enhanced Retirement Program, except the employees
named on Schedule C who shall become OMNOVA Employees until their retirement.
(b) OMNOVA shall employ all OMNOVA Employees transferred to
OMNOVA pursuant to Section 2.1(a). Subject to the terms and conditions of, and
except as otherwise provided in this Agreement, effective as of the Closing
Time, OMNOVA shall provide the OMNOVA Employees with terms and conditions of
employment, including, without limitation, employee benefits and other
perquisites, that are substantially similar to those provided to such persons
immediately prior to the Closing Time. However, nothing contained in
5
<PAGE> 6
this Agreement shall impair OMNOVA's ability to make such changes in such terms
and conditions of employment following the Distribution as OMNOVA may deem to be
necessary or appropriate for the operation of OMNOVA.
(c) Subject to Section 2.15, OMNOVA shall, at its own cost and
expense, (a) defend GenCorp from any and all claims, damages, actions or causes
of action ("Claims") which result from OMNOVA's employment and/or termination of
employment of any of the employees named on Schedule C hereto, and (b) indemnify
and hold GenCorp harmless from all damages, liabilities, losses, costs,
judgments, orders, assessments, interest, penalties, fines, settlement payments,
costs and expenses (including, without limitation, attorneys fees and other
investigation and defense costs and expenses) imposed upon or incurred by
GenCorp as a result of any such Claim. GenCorp shall promptly notify OMNOVA of
any Claim and OMNOVA shall be entitled to assume and maintain control over the
defense of any Claim and any negotiations and settlement thereof with counsel
reasonably acceptable to GenCorp provided that OMNOVA will not settle any such
Claim without the consent of GenCorp which consent shall not be unreasonably
withheld. In the event that OMNOVA fails to promptly assume and diligently
investigate and defend or settle any Claim then GenCorp shall have the right, at
OMNOVA's cost, expense and risk, from that time forward to have sole control of
the defense of the Claim and all negotiations for its settlement or compromise.
The party not controlling the defense of any such Claim shall have the right to
participate, at its sole expense, in the defense or settlement thereof.
(d) Subject to entering into mutually acceptable novation
agreements with the applicable Unions, OMNOVA shall assume all collective
bargaining agreements which are in effect as of the Closing Time at active
OMNOVA locations, and following the Distribution it
6
<PAGE> 7
will continue to employ all Union Employees pursuant to the terms and conditions
of such collective bargaining agreements.
2.2 JOINT SAVINGS PLAN. (a) Effective on the Distribution Date, the
GenCorp Retirement Savings Plan and the Profit Sharing Retirement and Savings
Plan of GenCorp Inc. and Certain Participating Subsidiaries will become multiple
employer plans (collectively, "Joint Savings Plan") in which both GenCorp and
OMNOVA will be unrelated participating employers. Day-to-day administration of
the Joint Savings Plan will be performed by GenCorp with cooperation and
assistance of OMNOVA pursuant to the separate Services and Support Agreement
between GenCorp and OMNOVA.
(b) GenCorp will continue to be both the administrator and
sponsor of the Joint Savings Plan, as defined in ERISA sections 3(16)(A) and
(B), for purposes of complying with the reporting and disclosure requirements
imposed by ERISA and the Code in administering the Joint Savings Plan.
Notwithstanding the preceding sentence, GenCorp and OMNOVA agree that no changes
will be made to the Joint Savings Plan, except as hereinafter described unless
(i) such changes are determined, with the advice of legal counsel, to be
required for compliance with applicable laws, or (ii) GenCorp and OMNOVA
mutually agree to such changes. In addition,
(1) The Administrative Committee for the Joint Savings
Plan, which will have general responsibility for interpreting and assuring
uniform administration of the provisions of the Joint Savings Plan, will be
composed of three (3) members of the GenCorp Administrative Committee and
two (2) members of the OMNOVA Administrative Committee; and
7
<PAGE> 8
(2) The Benefits Management Committee for the Joint Savings
Plan, which will have the responsibilities related to maintaining
relationships with the trustee and investment managers and investment of
the trust fund, will be composed of two (2) members of the GenCorp Benefits
Management Committee and two (2) members of the OMNOVA Benefits Management
Committee.
(c) On and after the Distribution Date, employer matching
contributions on behalf of GenCorp employees will be made solely by GenCorp and
solely to the GenCorp Stock Fund and employer matching contributions on behalf
of OMNOVA Employees will be made solely by OMNOVA and solely to the OMNOVA Stock
Fund. Not later than the later of October 31, 2001 or two years after the
Distribution Date, the accounts of OMNOVA Employees and former OMNOVA Employees
will be transferred to a new separate savings plan to be established by OMNOVA.
Thereafter, neither OMNOVA nor its employees will participate in the GenCorp
Retirement Savings Plan.
(d) Following the Distribution, OMNOVA common stock held in the
accounts of GenCorp employees that is attributable to contributions made before
the Distribution may be retained in the OMNOVA Stock Fund, transferred to the
GenCorp Stock Fund or transferred to any other investment funds in the Joint
Savings Plan at the participant's election in accordance with the terms of the
Joint Savings Plan. Except as provided in the preceding sentence, contributions
made to or held under the Joint Savings Plan on behalf of GenCorp employees may
not be invested in the OMNOVA Stock Fund. OMNOVA common stock held in the
accounts of GenCorp employees that is attributable to employer matching
contributions that have been in the plan for at least two full plan years may be
withdrawn, in cash or in kind. Any dividends on
8
<PAGE> 9
OMNOVA common stock in accounts of GenCorp employees will be reinvested in the
OMNOVA Stock Fund.
(e) Following the Distribution, GenCorp common stock held in the
accounts of OMNOVA Employees that is attributable to contributions made before
the Distribution may be retained in the GenCorp Stock Fund, transferred to the
OMNOVA Stock Fund or transferred to any other investment fund in the Joint
Savings Plan at the Participant's election in accordance with the terms of the
Joint Savings Plan. Except as provided in the preceding sentence, contributions
made to or held under the Joint Savings Plan on behalf of OMNOVA Employees may
not be invested in the GenCorp Stock Fund. GenCorp common stock held in the
accounts of OMNOVA Employees that is attributable to employer matching
contributions that have been in the plan at least two full plan years may be
withdrawn, in cash or in kind. Any dividends after the Distribution Date on
GenCorp common stock in accounts of OMNOVA Employees will be reinvested in the
GenCorp Stock Fund.
2.3 OMNOVA SALARIED PENSION PLAN. (a) OMNOVA shall implement, before
the Closing Time, the OMNOVA Salaried Pension Plan, a qualified defined benefit
plan substantially similar to the GenCorp Salaried Pension Plan for the benefit
of OMNOVA Pension Plan Participants. OMNOVA Salaried Employees shall be eligible
for immediate participation in the OMNOVA Salaried Pension Plan as of the date
their employment is transferred to OMNOVA pursuant to Section 2.1(a). OMNOVA
Salaried Employees shall be credited under the OMNOVA Salaried Pension Plan, for
eligibility and vesting purposes, with the service credited to them under the
GenCorp Salaried Pension Plan. An OMNOVA Salaried Employee shall be credited
under the OMNOVA Salaried Pension Plan, for benefit accrual purposes, with the
service credited to him or her under the GenCorp Salaried Pension Plan only if a
transfer
9
<PAGE> 10
described in subsection (b) of this Section is made with respect to such OMNOVA
Salaried Employee.
(b) OMNOVA Salaried Employees shall cease to accrue benefits
under the GenCorp Salaried Pension Plan as of the date their employment is
transferred to OMNOVA pursuant to Section 2.1(a). Such transfer shall not be an
event requiring a distribution of benefits under the GenCorp Salaried Pension
Plan.
(c) As soon as practicable after the Distribution Date, GenCorp
shall cause the GenCorp Pension Plan Trustee to segregate within the GenCorp
Pension Plan Trust the Segregated Salaried Pension Assets (as defined in the
following sentence) determined to be allocable with respect to accrued benefits
of OMNOVA Salaried Pension Plan Participants as of the Closing Time. For
purposes of the preceding sentence, the Segregated Salaried Pension Assets shall
mean assets with a value equal to the present value as of the Closing Time of
the accrued benefits of the OMNOVA Salaried Pension Plan Participants under the
GenCorp Salaried Pension Plan, determined by the plan's actuary using interest
assumptions prescribed by the PBGC for valuing annuities in plan termination
situations, plus an amount of surplus assets allocated in proportion to the
allocation of liabilities in accordance with ERISA section 4044.
(d) GenCorp and OMNOVA shall make or cause to be made all
required filings and submissions to appropriate governmental and regulatory
authorities and all necessary or appropriate amendments to the GenCorp Salaried
Pension Plan and the OMNOVA Salaried Pension Plan, and shall take all other
steps necessary and appropriate, to permit the transfer of the Segregated
Salaried Pension Assets from the GenCorp Pension Plan Trustee to the OMNOVA
Pension Plan Trustee. As soon as practicable after the filings, submissions,
amendments and other steps described in this subsection are completed, and after
the expiration
10
<PAGE> 11
of any waiting periods imposed under applicable law, GenCorp shall direct the
GenCorp Pension Plan Trustee to transfer to the OMNOVA Pension Plan Trustee, and
OMNOVA shall direct the OMNOVA Pension Plan Trustee to accept assets of the
GenCorp Salaried Pension Plan equal to the Segregated Salaried Pension Assets,
as adjusted for contributions, benefit payments, expenses and investment
experience through the date of such transfer. Such transfer shall be in cash,
securities or other property or a combination thereof, as mutually determined by
GenCorp and OMNOVA and acceptable to both the GenCorp Pension Plan Trustee and
the OMNOVA Pension Plan Trustee. After such transfer, each OMNOVA Salaried
Pension Plan Participant for whom such transfer was made shall be credited with
benefits under the OMNOVA Salaried Pension Plan attributable to service prior to
the Closing Time at least equal to his or her accrued benefit under the GenCorp
Salaried Pension Plan, and the GenCorp Salaried Pension Plan shall have no
further obligations with respect to such accrued benefit. GenCorp and OMNOVA
shall prepare a list, certified by a duly authorized officer of each, of all
OMNOVA Salaried Pension Plan Participants with respect to which a transfer
pursuant to this subsection has been made.
(e) GenCorp shall have no obligation to direct the transfer
described in subsection (d) of this Section unless and until GenCorp receives
either a favorable determination letter issued by the IRS as to the qualified
status of the OMNOVA Salaried Pension Plan under Section 401(a) of the code or
an opinion of counsel to OMNOVA that the OMNOVA Salaried Pension Plan meets the
requirements of Section 401(a) of the Code as to form. The OMNOVA Pension Plan
Trustee shall have no obligation to accept any transfer from the GenCorp
Salaried Pension Plan unless and until OMNOVA and the OMNOVA Pension Plan
Trustee receives either a favorable determination letter issued by the IRS as to
the qualified status of the GenCorp Salaried Pension Plan under Section 401(a)
of the Code or an opinion of counsel to GenCorp that
11
<PAGE> 12
the GenCorp Salaried Pension Plan meets the requirements of Section 401(a) of
the Code as to form. GenCorp and OMNOVA will cooperate as necessary to
facilitate obtaining such favorable determination letters.
(f) The OMNOVA Salaried Pension Plan shall be a continuation
of the GenCorp Salaried Pension Plan as to the OMNOVA Salaried Pension Plan
Participants for whom the transfer described in subsection (d) of this Section
was made and the transfer of assets and liabilities from the GenCorp Salaried
Pension Plan to the OMNOVA Pension Plan Trustee pursuant to this Agreement shall
not be deemed a termination or partial termination of the GenCorp Salaried
Pension Plan.
(g) In the event a former employee of GenCorp who participated
in the GenCorp Salaried Pension Plan prior to the Distribution Date becomes an
OMNOVA Employee eligible to participate in the OMNOVA Salaried Pension Plan
after the Distribution Date, GenCorp and OMNOVA agree that the liabilities to
pay pension benefits to such individual and the assets attributable to such
liabilities, in an amount which (based on the certification of the actuary for
the Plans) meets the requirements of Section 414(1) of the Code and the
regulations thereunder, will be transferred by the GenCorp Pension Plan Trustee
from the GenCorp Salaried Pension Plan to the OMNOVA Salaried Pension Plan and
the OMNOVA Pension Plan Trustee in the manner described in, and in compliance
with, Section 414(1) of the Code and the regulations thereunder. In the event of
any such transfer, such employee shall be credited under the OMNOVA Salaried
Pension Plan, for eligibility, vesting and benefit accrual purposes, with the
service credited to him under the GenCorp Salaried Pension Plan.
(h) The GenCorp Salaried Pension Plan shall provide that an
individual who is an employee of OMNOVA on the Distribution Date shall not be
eligible to commence
12
<PAGE> 13
receiving benefits from the GenCorp Salaried Pension Plan until he terminates
employment with OMNOVA after the Distribution Date. Until the completion of the
transfer of assets and liabilities from the GenCorp Salaried Pension Plan to the
OMNOVA Salaried Pension Plan and the OMNOVA Pension Plan Trustee described in
subsection (c) of this Section, benefits under the OMNOVA Salaried Pension Plan
payable to a OMNOVA Salaried Employee thereunder shall be computed on the basis
of his or her total service with GenCorp and OMNOVA, but shall be reduced by any
benefits accrued by such OMNOVA Salaried Employee under the GenCorp Salaried
Pension Plan.
(i) In the event that an OMNOVA Salaried Pension Plan
Participant files a claim for payment of pension benefits under the GenCorp
Salaried Pension Plan after the transfer of assets and liabilities from the
GenCorp Salaried Pension Plan to the OMNOVA Salaried Pension Plan and the OMNOVA
Pension Plan Trustee described in subsection (c) of this Section, OMNOVA agrees
to (i) reimburse GenCorp for all costs and expenses incurred to defend such
claim other than through its normal appeal process involving the GenCorp
Administrative Committee; and (ii) cause the OMNOVA Pension Plan Trustee to
transfer, to the GenCorp Salaried Pension Plan and the GenCorp Pension Plan
Trustee, assets from the OMNOVA Salaried Pension Plan equal to the liabilities,
if any, which the GenCorp Salaried Pension Plan is determined by a court of
competent jurisdiction to owe to such OMNOVA Salaried Pension Plan Participant.
In the event of any such transfer, the service upon which the OMNOVA Salaried
Pension Plan Participant's accrued benefit under the GenCorp Salaried Pension
Plan is based shall be excluded from the service counted for eligibility,
vesting and benefit accrual purposes under the OMNOVA Salaried Pension Plan.
13
<PAGE> 14
2.4 OMNOVA HOURLY PENSION PLAN. (a) OMNOVA shall implement, before
the Closing Time, the OMNOVA Hourly Pension Plan, a qualified defined benefit
plan substantially similar to the GenCorp Hourly Pension Plan for the benefit of
OMNOVA Hourly Pension Plan Participants. OMNOVA Hourly Employees who participate
in the GenCorp Hourly Pension Plan immediately before the Closing Time shall be
eligible for immediate participation in the OMNOVA Hourly Pension Plan as of the
Closing Time. OMNOVA Hourly Employees shall be credited under the OMNOVA Hourly
Pension Plan, for eligibility and vesting purposes, with the service credited to
them under the GenCorp Hourly Pension Plan. An OMNOVA Hourly Employee shall be
credited under the OMNOVA Hourly Pension Plan, for benefit accrual purposes,
with the service credited to him or her under the GenCorp Hourly Pension Plan
only if a transfer described in subsection (b) of this Section is made with
respect to such OMNOVA Hourly Employee.
(b) OMNOVA Hourly Employees shall cease to accrue benefits
under the GenCorp Hourly Pension Plan as of the time their employment is
transferred to OMNOVA. Such transfer shall not be an event requiring
distribution of benefits under the GenCorp Hourly Pension Plan.
(c) As soon as practicable after the Distribution Date,
GenCorp shall cause the GenCorp Pension Plan Trustee to segregate within the
GenCorp Pension Plan Trust the Segregated Hourly Pension Assets (as defined in
the following sentence) determined to be allocable with respect to accrued
benefits of OMNOVA Hourly Pension Plan Participants as of the Closing Time. For
purposes of the preceding sentence, the Segregated Hourly Pension Assets shall
mean assets with a value equal to the present value as of the Closing Time of
the accrued benefits of the OMNOVA Hourly Pension Plan Participants under the
GenCorp Hourly
14
<PAGE> 15
Pension Plan, determined by the plan's actuary using interest assumptions
prescribed by the PBGC for valuing annuities in plan termination situations,
plus an amount of surplus assets allocated in proportion to the allocation of
liabilities in accordance with ERISA section 4044.
(d) GenCorp and OMNOVA shall make or cause to be made all
required filings and submissions to appropriate governmental and regulatory
authorities and all necessary or appropriate amendments to the GenCorp Hourly
Pension Plan and the OMNOVA Hourly Pension Plan, and shall take all other steps
necessary and appropriate, to permit the transfer of the Segregated Hourly
Pension Assets from the GenCorp Pension Plan Trustee to the OMNOVA Pension Plan
Trustee. As soon as practicable after the filings, submissions, amendments and
other steps described in this subsection are completed, and after the expiration
of any waiting periods imposed under applicable law, GenCorp shall direct the
GenCorp Pension Plan Trustee to transfer to the OMNOVA Pension Plan Trustee, and
OMNOVA shall direct the OMNOVA Pension Plan Trustee to accept assets of the
GenCorp Hourly Pension Plan equal to the Segregated Hourly Pension Assets, as
adjusted for contributions, benefit payments, expenses and investment experience
through the date of such transfer. Such transfer shall be in cash, securities or
other property or a combination thereof, as mutually determined by GenCorp and
OMNOVA and acceptable to both the GenCorp Pension Plan Trustee and the OMNOVA
Pension Plan Trustee. After such transfer, each OMNOVA Hourly Pension Plan
Participant for whom such transfer was made shall be credited with benefits
under the OMNOVA Hourly Pension Plan attributable to service prior to the
Closing Time at least equal to his or her accrued benefit under the GenCorp
Hourly Pension Plan, and the GenCorp Hourly Pension Plan shall have no further
obligations with respect to such accrued benefit. GenCorp and OMNOVA shall
prepare a list,
15
<PAGE> 16
certified by a duly authorized officer of each, of all OMNOVA Hourly Pension
Plan Participants with respect to which a transfer pursuant to this Subsection
has been made.
(e) GenCorp shall have no obligation to direct the transfer
described in subsection (d) of this Section unless and until GenCorp receives
either a favorable determination letter issued by the IRS as to the qualified
status of the OMNOVA Hourly Pension Plan under Section 401 (a) of the code or an
opinion of counsel to OMNOVA that the OMNOVA Hourly Pension Plan meets the
requirements of Section 401(a) of the Code as to form. The OMNOVA Pension Plan
Trustee shall have no obligation to accept any transfer from the GenCorp Hourly
Pension Plan unless and until OMNOVA and the OMNOVA Pension Plan Trustee
receives either a favorable determination letter issued by the IRS as to the
qualified status of the GenCorp Hourly Pension Plan under Section 401(a) of the
Code or an opinion of counsel to GenCorp that the GenCorp Hourly Pension Plan
meets the requirements of Section 401(a) of the Code as to form. GenCorp and
OMNOVA will cooperate as necessary to facilitate obtaining such favorable
determination letters.
(f) The OMNOVA Hourly Pension Plan shall be a continuation of
the GenCorp Hourly Pension Plan as to the OMNOVA Hourly Pension Plan
Participants for whom the transfer described in subsection (d) of this Section
was made and the transfer of assets and liabilities from the GenCorp Hourly
Pension Plan to the OMNOVA Pension Plan Trustee pursuant to this Agreement shall
not be deemed a termination or partial termination of the GenCorp Hourly Pension
Plan.
(g) The GenCorp Hourly Pension Plan shall provide that an
individual who is an employee of OMNOVA on the Distribution Date shall not be
eligible to commence receiving benefits from the GenCorp Hourly Pension Plan
until he terminates employment with OMNOVA
16
<PAGE> 17
after the Distribution Date. Until the completion of the transfer of assets and
liabilities from the GenCorp Hourly Pension Plan to the OMNOVA Hourly Pension
Plan and the OMNOVA Pension Plan Trustee described in subsection (c) of this
Section, benefits under the OMNOVA Hourly Pension Plan payable to an OMNOVA
Hourly Employee thereunder shall be computed on the basis of his or her total
service with GenCorp and OMNOVA, but shall be reduced by any benefits accrued by
such OMNOVA Hourly Employee under the GenCorp Hourly Pension Plan.
(h) In the event that an OMNOVA Hourly Pension Plan
Participant files a claim for payment of pension benefits under the GenCorp
Hourly Pension Plan after the transfer of assets and liabilities from the
GenCorp Hourly Pension Plan to the OMNOVA Hourly Pension Plan and the OMNOVA
Pension Plan Trustee described in subsection (c) of this Section, OMNOVA agrees
to (i) reimburse GenCorp for all costs and expenses incurred to defend such
claim other than through its normal appeal process involving the GenCorp
Administrative Committee; and (ii) cause the OMNOVA Pension Plan Trustee to
transfer, to the GenCorp Hourly Pension Plan and the GenCorp Pension Plan
Trustee, assets from the OMNOVA Hourly Pension Plan equal to the liabilities, if
any, which the GenCorp Hourly Pension Plan is determined by a court of competent
jurisdiction to owe to such OMNOVA Hourly Pension Plan Participant. In the event
of any such transfer, the service upon which the OMNOVA Hourly Pension Plan
Participant's accrued benefit under the GenCorp Hourly Pension Plan is based
shall be excluded from the service counted for eligibility, vesting and benefit
accrual purposes under the OMNOVA Hourly Pension Plan.
2.5 RENEER PLANS. Both the (i) GenCorp Retirement Income Plan for
Employees of Reneer Films Operations ("Reneer Pension Plan") and (ii) GenCorp
Savings and Investment Plan
17
<PAGE> 18
for Employees of Reneer Films Operations ("Reneer Savings Plan") cover only
employees in the Auburn, PA. manufacturing facility which will be an active
business location of OMNOVA after the Distribution Date. As soon as practicable
after the Distribution Date, GenCorp shall (a) cause the GenCorp Pension Plan
Trustee to transfer the assets attributable to the Reneer Pension Plan to the
OMNOVA Pension Plan Trustee, and (b) cause Mellon Trust, trustee for the Reneer
Savings Plan, to transfer the assets of that plan to a new trust established by
OMNOVA.
2.6 OMNOVA WELFARE BENEFIT PLANS. (a) OMNOVA MEDICAL PLAN. As of the
Closing Time, OMNOVA Employees (and their eligible dependent(s)) shall be
covered by the OMNOVA Medical Plan, which shall be substantially identical to
the medical plan coverage provided to OMNOVA Employees immediately prior to the
Closing Time. The OMNOVA Medical Plan made available to OMNOVA Employees and
their dependent(s) as of the Closing Time shall waive any applicable waiting
periods for coverage of OMNOVA Employees and their dependent(s) which did not
exist with respect to such OMNOVA Employee or dependent(s) immediately prior to
the Closing Time. The OMNOVA Medical Plan shall not contain any exclusion or
limitation with respect to any pre-existing condition of any OMNOVA Employee or
dependent(s) which did not apply with respect to such OMNOVA Employee or
dependent immediately prior to the Closing Time. For purposes of the two
preceding sentences, service with GenCorp and OMNOVA prior to the Closing Time
shall be taken into account for purposes of meeting any such waiting period or
pre-existing condition, exclusion or limitation.
(b) OMNOVA EMPLOYEE MEDICAL CLAIMS. As of the Closing Time,
the OMNOVA Medical Plan shall have sole responsibility for all obligations,
financial and otherwise, with respect to medical expense claims submitted by
OMNOVA Employees and their
18
<PAGE> 19
dependent(s) from and after the Closing Time, and such claims will be processed
and paid by OMNOVA's third party administrator.
(c) CLAIM APPEALS. As of the Closing Time, OMNOVA shall have
sole responsibility for the determination of claim appeals filed by OMNOVA
Employees under the OMNOVA Medical Plan. Claim appeals filed by employees of
OMNOVA under the GenCorp Medical Plan will be determined by GenCorp under the
GenCorp Medical Plan.
(d) FLEXIBLE BENEFIT PLANS. (i) OMNOVA shall implement, as of
the Closing Time, a flexible spending account plan, a dependent care
reimbursement plan, a health care reimbursement plan and a pre-tax premium plan
(collectively referred to as the "OMNOVA Flexible Benefit Plan") with provisions
substantially similar to similar plans provided to OMNOVA Employees by GenCorp
prior to the Closing Time; and (ii) Plan Year 1999 deferrals and reimbursements
by or to OMNOVA Employees under the GenCorp Flexible Benefit Plan, shall be
carried over and applied to their accounts under the OMNOVA Flexible Benefit
Plan. Within a reasonable time after the Closing Time, GenCorp will pay to
OMNOVA the net aggregate dependent day care reimbursement and health care
reimbursement account balances of OMNOVA Employees held by GenCorp as of the
Closing Time.
2.7 POSTRETIREMENT BENEFITS. GenCorp 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 retiree contributions, deductibles and
coinsurance between the company and its retirees. A portion of the unfunded
benefit obligation reported in GenCorp's financial statements for such
postretirement benefits attributable to OMNOVA Hourly Employees and former
employees of GenCorp who terminated employment from (i) business locations of
OMNOVA active as of the
19
<PAGE> 20
Closing Time, and (ii) the former GenCorp business location in Newcomerstown,
Ohio, will be assumed by OMNOVA.
2.8 GENCORP 1993 AND 1997 STOCK OPTION PLANS. (a) Prior to the
Distribution Date, exercisable options under the GenCorp 1993 and 1997 Stock
Option Plans for (1) active employees, (2) retirees, and (3) other former
employees whose options remain exercisable, will be split into options to
acquire GenCorp common stock and OMNOVA common stock. Except with respect to
options held by the chief executive officers of GenCorp and OMNOVA, the number
of exercisable options in each company will each equal the number of exercisable
options under the GenCorp Stock Option Plans. With respect to exercisable
options held by the chief executive officers, (1) Mr. Wolfe's options will be
converted into 66 2/3% GenCorp options and 33 1/3% OMNOVA options, and (2) Mr.
Yasinsky's options will be converted into 66 2/3% OMNOVA options and 33 1/3%
GenCorp options. The exercise price of each resulting option will bear the same
ratio to the market price, as of the Distribution Date, of the respective
company's stock, as the exercise price of the original GenCorp option bore to
the market price of GenCorp shares immediately before the Distribution Date.
GenCorp and OMNOVA agree that each will issue the appropriate shares of their
common stock to non-employees who exercise the options described in this
subsection (a) subject, in the case of OMNOVA, to OMNOVA having an effective
Registration Statement under the Securities Act of 1933 in respect of the shares
of stock to be issued by OMNOVA to non-employees.
(b) Unexercisable options under the GenCorp 1997 Stock Option
Plan for GenCorp employees will be replaced with a number of unexercisable
GenCorp options under that plan which will, based upon (1) the market price of
GenCorp shares immediately after the
20
<PAGE> 21
Distribution Date and (2) the exercise prices for those options, have an
aggregate intrinsic value equal to that of the unexercisable GenCorp options
immediately before the Distribution Date.
(c) Unexercisable options under the GenCorp 1997 Stock Option
Plan for OMNOVA Employees will be replaced with a number of unexercisable
OMNOVA options which will, based upon (1) the market price of OMNOVA shares
immediately after the Distribution Date and (2) the exercise price for such
options, have an aggregate intrinsic value equal to that of the unexercisable
GenCorp options immediately before the Distribution.
(d) In converting the stock option plans for the Distribution,
the exercisable and unexercisable aggregate intrinsic value of the options
immediately after the conversion will be equal to the aggregate intrinsic value
immediately before the conversion. The ratio of the exercise price per option to
the market value per share will not be reduced and the vesting provisions and
option period of the OMNOVA and GenCorp options will be the same as for the
original GenCorp options. Accordingly, no compensation expense will be
recognized by OMNOVA or GenCorp.
2.9 UNFUNDED DEFERRED COMPENSATION.
(a) Subject to legal requirements for employee acquiescence,
GenCorp's legal obligation to pay Unfunded Deferred Compensation for: (1) all
active employees transferred to OMNOVA, (2) all retired employees who terminated
employment from business locations of OMNOVA which are active as of the Closing
Time, and (3) all GenCorp directors resigning to become members of the OMNOVA
Board will be assumed by OMNOVA.
(b) The legal obligation to pay Unfunded Deferred Compensation
for: (1) all active employees remaining GenCorp employees, (2) all GenCorp
directors remaining on the
21
<PAGE> 22
GenCorp Board, (3) all other retired employees, and (4) all retired directors,
will be retained by GenCorp.
(c) Former employees and directors of GenCorp or OMNOVA will
be able to elect a lump-sum payment of their Unfunded Deferred Compensation,
subject to (1) a 10% reduction in order to avoid adverse tax consequences, and
(2) all applicable tax withholding. Active employees and directors may receive
lump-sum payments of their Unfunded Deferred Compensation upon termination of
employment or board service with GenCorp or OMNOVA based upon appropriate
advance elections or discretionary approval by the company's benefit management
committee.
(d) GenCorp hereby indemnifies OMNOVA for the obligations to
pay Unfunded Deferred Compensation assumed by OMNOVA pursuant to subsection (a),
and will pay only those amounts of such Unfunded Deferred Compensation that
OMNOVA proves it is unable to pay.
(e) OMNOVA hereby indemnifies GenCorp for the obligation to
pay Unfunded Deferred Compensation retained by GenCorp pursuant to subsection
(b), and will pay only those amounts of Unfunded Deferred Compensation that
GenCorp proves it is unable to pay.
2.10 ANNUAL BONUSES. Bonus amounts under GenCorp's Executive Incentive
Compensation Plan for the period ending November 30, 1999 will be determined
based upon (1) actual performance up to the Distribution Date, and (2) budgeted
performance, for the remainder of the period, according to GenCorp's annual
operating plan. Subject to all legal requirements for employee acquiescence,
bonus obligations will be assumed by OMNOVA for all OMNOVA Employees, and paid
in cash on January 17, 2000. Bonus obligations will be paid in cash on
22
<PAGE> 23
January 17, 2000 by GenCorp for all GenCorp employees and for terminated GenCorp
employees who are not employed by OMNOVA.
2.11 LONG TERM INCENTIVE COMPENSATION. Performance awards under
GenCorp's Long-Term Incentive Program for the three-year performance period
ending November 30, 1999 will be determined based upon (1) actual performance up
to the Distribution Date, and (2) budgeted performance, for the remainder of the
period, according to GenCorp's annual operating plan. Pro rata performance
awards will be paid under the GenCorp plan for the performance periods ending
November 30, 2000 and November 30, 2001. Pro rata performance awards for each
partial performance period will be determined based upon (1) actual performance
up to the Distribution Date, and (2) budgeted performance, for the remainder of
the fiscal year ending November 30, 1999, according to GenCorp's annual
operating plan. Subject to legal requirements for employee acquiescence,
performance award obligations for the three-year performance period ending
November 30, 1999 will be assumed by OMNOVA for all OMNOVA Employees and paid in
cash on January 17, 2000. Performance award obligations for the three-year
performance period ending November 30, 1999 will be paid in cash on January 17,
2000 by GenCorp for all GenCorp employees and for terminated GenCorp employees
who are not employed by OMNOVA. All pro rata performance awards will be paid in
cash to all eligible employees of GenCorp and OMNOVA by GenCorp before October
31, 1999.
2.12 DIRECTOR COMPENSATION. Subject to legal requirements for director
acquiescence, benefit obligations under the Retirement Plan for Nonemployee
Directors of GenCorp Inc. and the Deferred Compensation Plan for Nonemployee
Directors of GenCorp Inc. (hereafter the "GenCorp Director Plans") for GenCorp
directors resigning to become members of the OMNOVA Board will be assumed by
OMNOVA. Benefit obligations under the GenCorp
23
<PAGE> 24
Director Plans for GenCorp directors remaining on the GenCorp Board and retired
directors will be retained by GenCorp.
2.13 ENHANCED RETIREMENT AND SEPARATION PAY PLANS. GenCorp adopted a
Voluntary Enhanced Retirement Program (VERP) and Enhanced Involuntary Separation
Pay Plan (EISP) which are associated with and contingent upon the Distribution.
Pension and Separation Pay obligations under the VERP and EISP for GenCorp
employees who become OMNOVA Employees in connection with the Spin-Off will be
assumed and paid by OMNOVA. Pension and Separation Pay obligations under the
VERP and EISP for GenCorp employees who do not become employed by OMNOVA in
connection with the Spin-Off will be retained and paid by GenCorp. The total
number and identity of participants and the timing of their departure are not
yet known.
2.14 TRANSITION ADMINISTRATIVE SERVICES. For a transition period
extending up to October 31, 2001, the Joint Savings Plan and other benefit
programs currently applicable to GenCorp active employees and retirees will be
administered under a Services and Support Agreement between GenCorp and OMNOVA.
The purpose of the transition services arrangement will be to allow for an
orderly transition of administrative responsibility for ongoing GenCorp benefit
programs to administrative staffs of GenCorp, and for the implementation and
administration of new employee benefit plans for OMNOVA. In accordance with the
Services and Support Agreement, (i) GenCorp will reimburse OMNOVA specified
allocated costs plus all direct expenses incurred by OMNOVA on behalf of
GenCorp, and (ii) OMNOVA will reimburse GenCorp specified allocated costs plus
all direct expenses incurred by GenCorp on behalf of OMNOVA.
24
<PAGE> 25
2.15 LIABILITIES TO OMNOVA EMPLOYEES ARISING PRIOR TO DISTRIBUTION
DATE. GenCorp shall retain sole responsibility for (a) payments of any and all
wages, vacation pay, bereavement pay, jury duty pay, disability income,
supplemental unemployment benefits, fringe benefits (excluding medical/dental
claims described in Section 2.5(b)) or other perquisites of employment, or
similar benefits, payroll taxes and other payroll related expenses, (b) workers'
compensation claims or related litigation claims, (c) claims filed with the
equal Employment Opportunity Commission or related litigation claims and (d)
other similar employment-related claims, in any such case arising out of or
relating to (i) the employment of the OMNOVA Employees by GenCorp prior to the
Closing Time or (ii) the employment of former employees whose employment with
OMNOVA or GenCorp or the Controlled Group of either terminated on or before the
Closing Time.
2.16 AT WILL EMPLOYMENT. Nothing in this Agreement shall limit the at
will nature of the employment of any of the OMNOVA Employees who do not have any
other contractual rights with respect to employment by OMNOVA or the right of
GenCorp or OMNOVA to alter or terminate any employee benefit plan.
2.17 SEPARATION PAY. GenCorp and OMNOVA agree that with respect to
individuals who, in connection with the Distribution, cease to be employees of
GenCorp and become employees of OMNOVA at any time, such cessation shall not be
deemed a severance of employment from GenCorp for purposes of the GenCorp
Involuntary Separation Pay Plan. GenCorp shall retain and be solely responsible
for, and shall indemnify OMNOVA against, all liabilities and obligations
whatsoever in connection with claims made by or on behalf of former employees of
GenCorp in respect of separation pay and similar obligations relating to the
25
<PAGE> 26
termination or alleged termination of any such person's employment from GenCorp
on or before the Distribution Date.
2.18 INTERNAL REVENUE SERVICE FORMS. GenCorp and OMNOVA agree that,
pursuant to the "Alternative Procedure" provided in Section 5 of Revenue
Procedure 96-60, 1996-2 C.B. 399, with respect to filing and furnishing Internal
Revenue Service Forms W-2, W-3 and 941, respectively: (a) GenCorp and OMNOVA
shall report on a "predecessor-successor" basis as set forth therein; (b)
GenCorp shall be relieved from furnishing Forms W-2 to GenCorp's employees whose
employment is transferred to OMNOVA in connection with the Spin-Off and to whom
GenCorp would have been obligated to furnish such Forms; and (c) OMNOVA shall
assume GenCorp's obligation to furnish such Forms to all such employees for the
full 1999 calendar year. Upon OMNOVA's request, GenCorp will promptly provide
OMNOVA with the information relating to periods ending on the Closing Time
necessary for OMNOVA to prepare and distribute Forms W-2 to such employees for
the year ending December 31, 1999, which Forms W-2 will include all remuneration
earned by such employees from both GenCorp and OMNOVA during the year ending
December 31, 1999.
ARTICLE III
ACCESS AND SHARING OF INFORMATION
3.1 SHARING OF INFORMATION. Each of GenCorp and OMNOVA agrees to
provide the other, as soon as practicable after the Distribution Date, with such
information regarding employee benefit plan participants prior to the
Distribution Date (including term of service for eligibility, vesting and
benefit accrual purposes under such Plans and a listing of accrued
26
<PAGE> 27
benefits) as may be reasonably requested by a party to establish and administer
effectively its employee benefit plans.
3.2 ACCESS TO INFORMATION. (a) From and after the Closing Time each
party hereto shall afford the other party and its accountants, counsel and other
designated representative reasonable access (including using reasonable efforts
to give duplicating rights during normal business hours) to all records, books,
contracts, instruments, computer data and other data and information in such
party's possession relating to the business and affairs of such other party
(other than data and information subject to an attorney/client or other
privilege), insofar as such access is reasonably required by such other party
including, without limitation, for audit, accounting and litigation purposes and
administration of employee benefit plans, as well as for purposes of fulfilling
disclosure and reporting obligations.
(b) For a period of up to 24 months from and after the
Distribution Date, (or longer as required in connection with the Joint Savings
Plan) each party shall make available to the other during normal business hours
and in a manner which will not unreasonably interfere with such party's
business, its financial, tax, accounting, legal, employee benefits and such
other staff and services to the extent that the same may be reasonably required
in connection with the preparation of tax returns, audits, claims,
administration of employee benefit plans and otherwise to assist in effecting an
orderly transition following the Distribution.
ARTICLE IV
MISCELLANEOUS
4.1 COMPLETE AGREEMENT. This Agreement, together with the
Distribution Agreement, and the exhibits thereto, shall constitute the entire
agreement between the parties
27
<PAGE> 28
hereto with respect to the subject matter hereof and shall supersede all
previous negotiations, commitments and writings with respect to such subject
matter.
4.2. GOVERNING LAW. This Agreement and (unless otherwise provided)
all amendments hereof shall be governed by the internal laws of the State of
Ohio, without regard to the conflicts of law principles thereof. 4.3 ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns;
provided, however, that neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned (other than by merger or pursuant to
a sale of all or substantially all of a party's assets to one person) by either
of the parties hereto without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that no
such assignment shall relieve the assigning party of any liabilities or
obligations hereunder. Any transfer or assignment of any of the rights,
interests or obligations hereunder in violation of the terms hereof shall be
void and of no force or effect.
4.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, mailed by
registered or certified mail (return receipt requested) or sent by telecopy or
by a recognized overnight courier service, addressed as follows:
To OMNOVA at: OMNOVA Solutions Inc.
175 Ghent Road
Fairlawn, Ohio 44333-3300
Attention: General Counsel
Fax Number: 330-869-4272
To GenCorp at: GenCorp Inc.
Highway 50 & Aerojet Road
Rancho Cordova, CA 95670
Attention: General Counsel
28
<PAGE> 29
Fax Number: 916-351-8665
or to such other address as any party hereto may have furnished to the other
parties by a notice in writing in accordance with this Section.
4.5 AMENDMENT. This Agreement may be amended, modified or
supplemented only by a written agreement signed by all the parties hereto.
4.6 WAIVER. No waiver by any party of any of the provisions of this
Agreement will be deemed, or will constitute, a waiver of any other provision,
whether similar, nor will any waiver constitute a continuing waiver. No waiver
will be binding unless executed in writing by the party making the waiver.
4.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original instrument and all of
which together shall constitute one and the same instrument.
4.8 INTERPRETATION. The Section headings contained in this Agreement
are solely for the purpose of reference, are not part of the agreement of the
parties hereto and shall not in any way affect the meaning or interpretation of
this Agreement.
4.9 NO THIRD PARTY BENEFICIARY. Nothing in this Agreement, express or
implied, shall confer on any person other than the parties any rights or
remedies under or by virtue of this Agreement.
4.10 DISPUTE RESOLUTION. Any dispute between the parties concerning
the performance of this Agreement which cannot be resolved by good faith
negotiation of the parties shall be determined in accordance with the
provisions of the Alternative Dispute Resolution Agreement.
29
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
GENCORP INC.
By: /s/ William R. Phillips
----------------------------------
Name: William R. Phillips
--------------------------------
Title: Senior Vice President
-------------------------------
OMNOVA SOLUTIONS INC.
By: /s/ James C. LeMay
---------------------------------
Name: James C. LeMay
--------------------------------
Title: Senior Vice President
------------------------------
30
<PAGE> 1
Exhibit F
Execution Copy
SERVICES AND SUPPORT AGREEMENT
This Services and Support Agreement ("Agreement"), dated September 30,
1999, is made and entered into by and between GENCORP INC., an Ohio corporation
("GenCorp"), and OMNOVA SOLUTIONS INC., an Ohio corporation ("OMNOVA") and a
wholly-owned subsidiary of GenCorp.
WITNESSETH:
WHEREAS, the Board of Directors of GenCorp has determined that it is
advisable to distribute substantially all of the stock of OMNOVA to its
shareholders in a transaction intended to qualify under Section 355 of the
Internal Revenue Code (the "Distribution");
WHEREAS, GenCorp and OMNOVA are entering into a Distribution Agreement
(the "Distribution Agreement") which, among other things, sets forth the
principal transactions required to effect the Distribution and sets forth other
agreements that will govern certain other matters following the Distribution;
and
WHEREAS, in connection with the Distribution, GenCorp and OMNOVA have
agreed to enter into this Agreement in order for OMNOVA and GenCorp each to
assist the other by providing to the other certain services and support not
otherwise specified in any of the Ancillary Agreements (as defined in the
Distribution Agreement) other than this Agreement (the "Other Agreements");
NOW THEREFORE, in consideration of these premises and the mutual
promises and conditions contained herein, GenCorp and OMNOVA hereby agree as
follows:
B-1
<PAGE> 2
ARTICLE I
TERM
1.1 TERM OF THE AGREEMENT. The term of this Agreement shall be from
the date hereof to and including October 31, 2001 (the "Term"), although the
actual duration of specific services may be for a shorter period as provided
herein. The Term, or the duration of specific services, may be extended by the
mutual agreement of GenCorp and OMNOVA.
ARTICLE II
SERVICES
2.1 SERVICES PROVIDED BY OMNOVA. OMNOVA shall provide, or cause its
relevant affiliates to provide, to GenCorp during the Term the services listed
on Schedule A attached hereto. The services listed on Schedule A are based on
the understanding of the parties hereto of the support and administrative
services reasonably expected to be required by GenCorp following the
Distribution. If, following the Distribution, GenCorp reasonably determines that
additional services consistent with recent historical practices should be
provided by OMNOVA, the parties agree to negotiate in good faith to modify this
Agreement appropriately with respect to such additional services. In the event
the parties agree that OMNOVA shall provide such additional services, the
parties hereto further agree that such agreement to provide such additional
services shall also amend Schedule A hereto to reflect such agreement of the
parties. GenCorp may reduce or terminate any specific services at any time upon
30 days written notice.
2.2 PAYMENT FOR SERVICES PROVIDED BY OMNOVA. (a) GenCorp shall pay
OMNOVA on a monthly basis, in consideration of the services provided to GenCorp
by
B-2
<PAGE> 3
OMNOVA hereunder, (i) the amounts specified as "Costs Allocated to GenCorp" on
Schedule A, (ii) reasonable out-of-pocket expenses incurred by OMNOVA in
connection with providing to GenCorp the services listed on Schedule A, and
(iii) charges by third party service providers to the extent that they are
attributable to services provided to or for GenCorp. To the extent that GenCorp
has provided notice to reduce services in accordance with Section 2.1, the
"Costs Allocated to GenCorp" shall be appropriately reduced.
(b) Charges for the services shall be invoiced on or about the
tenth (10th) day of the calendar month next following the calendar month in
which the services have been performed. Each invoice shall describe in
reasonable detail, as appropriate, the services upon which the amount to be
charged is based, and such invoice shall be paid within thirty (30) days
following receipt thereof.
2.3 SERVICES PROVIDED BY GENCORP. GenCorp shall provide, or cause its
relevant affiliates to provide, to OMNOVA during the Term the services listed on
Schedule B attached hereto. The services listed on Schedule B are based on the
understanding of the parties hereto of the support and administrative services
reasonably expected to be required by OMNOVA following the Distribution. If,
following the Distribution, OMNOVA reasonably determines that additional
services consistent with recent historical practices should be provided by
GenCorp, the parties agree to negotiate in good faith to modify this Agreement
appropriately with respect to such additional services. In the event the parties
agree that OMNOVA shall provide such additional services, the parties hereto
further agree that such agreement to provide such additional services shall also
amend Schedule B hereto to reflect such agreement of the parties. OMNOVA may
reduce or terminate any specific services at any time upon 30 days written
notice.
B-3
<PAGE> 4
2.4 PAYMENT FOR SERVICES PROVIDED BY GENCORP.
(a) OMNOVA shall pay GenCorp on a monthly basis, in
consideration of the services provided to OMNOVA by GenCorp hereunder, (i) the
amounts specified as "Costs Allocated to OMNOVA" on Schedule B, (ii) reasonable
out-of-pocket expenses incurred by GenCorp in connection with providing
services, and (iii) charges by third party service providers to the extent that
they are attributable to services provided to or for OMNOVA. To the extent that
OMNOVA has provided notice to reduce services in accordance with Section 2.3,
the "Costs Allocated to OMNOVA" shall be appropriately reduced.
(b) Charges for the services shall be invoiced on or about the
tenth (10th) day of the calendar month next following the calendar month in
which the services have been performed. Each invoice shall describe in
reasonable detail, as appropriate, the services upon which the amount to be
charged is based, and such invoice shall be paid within thirty (30) days
following receipt thereof.
ARTICLE III
TERMINATION
3.1 AUTOMATIC TERMINATION. This Agreement automatically shall
terminate at the conclusion of the Term unless such Term is extended in
accordance with Section 1.1 hereto.
3.2 TERMINATION WITH NOTICE. If either GenCorp or OMNOVA (the
"Defaulting Party") shall fail to perform in any material respect any of its
material obligations under this Agreement, whether voluntarily or involuntarily,
the other may terminate this Agreement upon one hundred twenty (120) days'
written notice to the Defaulting Party that it has so failed to
B-4
<PAGE> 5
perform its obligations under this Agreement, unless during such period the
Defaulting Party shall have remedied such failure.
3.3 MUTUAL COOPERATION AND ADDITIONAL ASSUMPTIONS. Prior to the
termination of this Agreement, the parties shall reasonably cooperate in good
faith to facilitate an orderly transition of responsibility for the services
provided pursuant to this Agreement, and each party shall deliver to the other
party copies of such documents, records and information as are reasonably
necessary to achieve such transition. Upon the termination of this Agreement,
each party promptly shall deliver to the other party copies of all remaining
documents, records and information in such party's possession and owned by the
other party that may be reasonably necessary for the other party to assume
complete internal responsibility for all of the services provided pursuant to
this Agreement.
ARTICLE IV
TERMS RELATED TO SPECIFIC SERVICES
4.1 EMPLOYEE BENEFITS ADMINISTRATION. (a) GenCorp will continue to
employ a Benefits Transition Team ("Team") to be based at OMNOVA's corporate
headquarters in Fairlawn, Ohio. The responsibilities of the Team will include
(i) administration of GenCorp's employee benefit plans, (ii) transfer of
administrative responsibility for GenCorp's employee benefit plans to GenCorp's
new corporate headquarters in California and/or to GenCorp Vehicle Sealing
headquarters, and (iii) implementation and administration of new employee
benefit plans for OMNOVA as described on Schedule B. The Team will report to
OMNOVA's Director, Compensation and Benefits, regarding its responsibilities to
administer employee benefit plans
B-5
<PAGE> 6
for OMNOVA. GenCorp and OMNOVA hereby agree to cooperate to establish and manage
priorities for the Team in connection with fulfilling its responsibilities for
both parties.
(b) In connection with the Team's administration of GenCorp's
employee benefit plans, OMNOVA will process and pay certain welfare benefits to
or for GenCorp plan participants with OMNOVA funds. Notwithstanding Section 2.2,
GenCorp agrees to reimburse OMNOVA for any and all such payments, by wire
transfer, on the business day next following each payment by OMNOVA.
(c) GenCorp shall, at its own cost and expense, (a) defend
OMNOVA from any and all claims, damages, actions or causes of action ("Claims")
which result from GenCorp's employment and/or termination of employment of any
of the employees included in its Benefits Transition Team on or after the
Distribution Date, and (b) indemnify and hold OMNOVA harmless from all damages,
liabilities, losses, costs, judgments, orders, assessments, interest, penalties,
fines, settlement payments, costs and expenses (including, without limitation,
attorneys fees and other investigation and defense costs and expenses) imposed
upon or incurred by OMNOVA as a result of any such Claim. OMNOVA shall promptly
notify GenCorp of any Claim and GenCorp shall be entitled to assume and maintain
control over the defense of any Claim and any negotiations and settlement
thereof with counsel reasonably acceptable to OMNOVA, provided that GenCorp will
not settle any such Claim without the consent of OMNOVA which consent shall not
be unreasonably withheld. In the event that GenCorp fails to promptly assume and
diligently investigate and defend or settle any Claim then OMNOVA shall have the
right, at GenCorp's cost, expense and risk, from that time forward to have sole
control of the defense of the Claim and all negotiations for its settlement or
compromise. The party not
B-6
<PAGE> 7
controlling the defense of any such Claim shall have the right to participate,
at its sole expense, in the defense or settlement thereof.
4.2 PAYROLL SERVICES. In connection with payroll services described
on Schedule A, OMNOVA will process and pay certain salaries and wages and
related payroll taxes with OMNOVA funds. Notwithstanding Section 2.2, GenCorp
agrees to reimburse OMNOVA for any and all such payments, by wire transfer, on
the business day next following GenCorp's receipt of notice of each payment by
OMNOVA.
4.3 CUSTOMER FINANCIAL SERVICES. In connection with customer
financial services described on Schedule A, OMNOVA will process and pay certain
accounts payable for GenCorp Vehicle Sealing with OMNOVA funds. Notwithstanding
Section 2.2, GenCorp agrees to reimburse OMNOVA for any and all such payments,
by wire transfer, on the business day next following GenCorp's receipt of notice
of each payment by OMNOVA.
4.4 LEASED EMPLOYEES. (a) GenCorp will continue to employ the
individuals named as Leased Employees on Schedule B, until their respective
retirement dates determined under GenCorp's 1999 Voluntary Enhanced Retirement
Program. The Leased Employees will provide services to OMNOVA as directed by
OMNOVA. GenCorp shall be exclusively responsible for all wages, benefits,
withholdings and other employment-related matters in respect of Leased
Employees.
(b) GenCorp shall, at its own cost and expense, (i) defend
OMNOVA from any and all claims, damages, actions or causes of action ("Claims")
which result from GenCorp's employment and/or termination of employment of any
of the Leased Employees prior to, on or after the Distribution Date, and (ii)
indemnify and hold OMNOVA harmless from all damages, liabilities, losses, costs,
judgments, orders, assessments, interest, penalties, fines, settlement
B-7
<PAGE> 8
payments, costs and expenses (including, without limitation, attorneys fees and
other investigation and defense costs and expenses) imposed upon or incurred by
OMNOVA as a result of any such Claim. OMNOVA shall promptly notify GenCorp of
any Claim and GenCorp shall be entitled to assume and maintain control over the
defense of any Claim and any negotiations and settlement thereof with counsel
reasonably acceptable to OMNOVA provided that GenCorp will not settle any such
Claim without the consent of OMNOVA which consent shall not be unreasonably
withheld. In the event that GenCorp fails to promptly assume and diligently
investigate and defend or settle any Claim then OMNOVA shall have the right, at
GenCorp's cost, expense and risk, from that time forward to have sole control of
the defense of the Claim and all negotiations for its settlement or compromise.
The party not controlling the defense of any such Claim shall have the right to
participate, at its sole expense, in the defense or settlement thereof.
4.5 ACCESS TO WAREHOUSE. GenCorp shall grant OMNOVA reasonable access
to the Jacoby Road Warehouse for storing, maintaining or retrieving Records and
other OMNOVA assets and shall give OMNOVA reasonable advance written notice of
any termination or non-renewal of the lease of such Warehouse.
ARTICLE V
GENERAL
5.1 NON-WAIVER. The failure of either party to enforce at any time or
for any of the provisions hereof shall not be construed to be a waiver of such
provisions or of the right of such party thereafter to enforce each and every
such provision.
B-8
<PAGE> 9
5.2 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be delivered by hand,
mailed by registered or certified mail (return receipt requested), or sent by
telecopy or by a nationally recognized overnight courier service, to the parties
at the following addresses (or such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which such
notice is received:
To OMNOVA at: OMNOVA Solutions Inc.
175 Ghent Road
Fairlawn, Ohio 44333-3300
Attention: General Counsel
Fax Number: 330-869-4272
To GenCorp at: GenCorp Inc.
Highway 50 & Aerojet Road
Rancho Cordova, CA 95670
Attention: General Counsel
Fax Number: 916-351-8665
5.3 GOVERNING LAW. This Agreement shall be governed by and enforced
in accordance with the internal laws of the State of Ohio, without regard to the
conflicts of law principles thereof.
5.4 LEVEL OF SERVICE. OMNOVA and GenCorp each severally undertake to
provide the same quality of services and use the same degree of care in
rendering services under this Agreement as it respectively utilizes in
rendering such services for its own operations and shall not be liable for any
failure to provide services.
5.5 SEVERABILITY. In the event any provision of this Agreement or
portion thereof is found to be wholly or partially invalid, illegal or
unenforceable in any judicial proceeding, then such provision shall be deemed to
be modified or restricted to the extent and in the manner necessary to render
the same valid and enforceable or shall be deemed excised from this
B-9
<PAGE> 10
Agreement, as the case may require, and this Agreement shall be construed and
enforced to the maximum extent permitted by law as if such provision had been
originally incorporated herein as so modified or restricted, or as if such
provision had not been originally incorporated herein, as the case may be.
5.6 ENTIRE AGREEMENT. This Agreement supersedes and cancels any and
all previous agreements, written or oral, between the parties relating to the
subject matter hereof. This Agreement and the Other Agreements expresses the
complete and final understanding of the parties with respect to the subject
matter thereto and may not be changed in any way, except by an instrument in
writing signed by both parties.
5.7 ASSIGNMENT. Neither of the parties shall assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party, which consent shall not unreasonably be withheld.
IN WITNESS WHEREOF, the parties have hereunto caused their authorized
representative to execute this Agreement as of the day and year first above
written.
GENCORP INC.
By: /s/ William R. Phillips
--------------------------------
Name: William R. Phillips
------------------------------
Title: Senior Vice President
-----------------------------
OMNOVA SOLUTIONS INC.
By: /s/ James C. LeMay
--------------------------------
Name: James C. LeMay
------------------------------
Title: Senior Vice President
-----------------------------
B-10
<PAGE> 1
Exhibit G
SEVERANCE AGREEMENT
-------------------
THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of
October 1, 1999, 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 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, 2002, or (ii) the expiration of the Severance Period; PROVIDED,
HOWEVER, that (A) commencing on January 1, 2001 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) 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.
(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) 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.
-7-
<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, after payment by the Executive of all taxes
(including any interest or penalties imposed
-8-
<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 the
Company, provide to the Company true and correct copies (with any
amendments) of
-9-
<PAGE> 10
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 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
-10-
<PAGE> 11
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 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,
-11-
<PAGE> 12
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 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)
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 November 12, 1997 (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.
/s/ Robert A. Wolfe
-------------------------------------
Robert A. Wolfe
GENCORP INC.
By: /s/ Samuel W. Harmon
-----------------------------------
Samuel W. Harmon
Senior Vice President, Administration
By: /s/ William R. Phillips
-----------------------------------
William R. Phillips
Senior Vice President, Law;
General Counsel and 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) 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 July 28,
1997, 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 and/or the GenCorp Inc. 1999 Equity and
Performance Incentive Plan, 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.
A-1
<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.
B-1
<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__________, 1999, 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;
C-1
<PAGE> 21
(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.
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
C-2
<PAGE> 22
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.
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 H
GENCORP INC.
1999 EQUITY AND PERFORMANCE INCENTIVE PLAN
1. PURPOSE. The purpose of the 1999 Equity and Performance Incentive
Plan is to attract and retain directors, officers and other key employees for
GenCorp Inc., an Ohio corporation and its Subsidiaries and to provide to such
persons incentives and rewards for superior performance.
2. DEFINITIONS. As used in this Plan,
"Appreciation Right" means a right granted pursuant to Section 5 of
this Plan, and shall include both Tandem Appreciation Rights and Free-Standing
Appreciation Rights.
"Base Price" means the price to be used as the basis for
determining the Spread upon the exercise of a Free-Standing Appreciation Right
and a Tandem Appreciation Right.
"Board" means the Board of Directors of the Company and, to
the extent of any delegation by the Board to a committee (or subcommittee
thereof) pursuant to Section 16 of this Plan, such committee (or subcommittee).
"Change in Control" shall have the meaning provided in Section
12 of this Plan.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Common Shares" means the Common Shares, par value $0.10 per share,
of the Company or any security into which such Common Shares may be changed by
reason of any transaction or event of the type referred to in Section 11 of this
Plan.
"Company" means GenCorp Inc., an Ohio corporation.
"Covered Employee" means a Participant who is, or is determined by
the Board to be likely to become, a "covered employee" within the meaning of
Section 162(m) of the Code (or any successor provision).
"Date of Grant" means the date specified by the Board on which a
grant of Option Rights, Appreciation Rights, Performance Shares or Performance
Units or a grant or sale of Restricted Shares or Deferred Shares shall become
effective which date shall not be earlier than the date on which the Board
takes action with respect thereto.
"Deferral Period" means the period of time during which Deferred
Shares are subject to deferral limitations under Section 7 of this Plan.
"Deferred Shares" means an award made pursuant to Section 7 of this
Plan of the right to receive Common Shares at the end of a specified Deferral
Period.
"Director" means a member of the Board of Directors of the Company.
<PAGE> 2
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, as such law, rules and regulations may
be amended from time to time.
"Free-Standing Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is not granted in tandem with an Option
Right.
"Immediate Family" has the meaning ascribed thereto in Rule 16a-1(e)
under the Exchange Act (or any successor rule to the same effect) as in effect
from time to time.
"Incentive Stock Options" means Option Rights that are intended to
qualify as "incentive stock options" under Section 422 of the Code or any
successor provision.
"Management Objectives" means the measurable performance objective or
objectives established pursuant to this Plan for Participants who have received
grants of Performance Shares or Performance Units or, when so determined by the
Board, Option Rights, Appreciation Rights, Restricted Shares and dividend
credits pursuant to this Plan. Management Objectives may be described in terms
of Company-wide objectives or objectives that are related to the performance of
the individual Participant or of the Subsidiary, division, department, region or
function within the Company or Subsidiary in which the Participant is employed.
The Management Objectives may be made relative to the performance of other
corporations. The Management Objectives applicable to any award to a Covered
Employee shall be based on specified levels of or growth in one or more of the
following criteria:
1. cash flow;
2. earnings per share;
3. earnings before interest and taxes;
4. earnings per share growth;
5. net income;
6. return on assets;
7. return on assets employed;
8. return on equity;
9. return on invested capital;
10. return on total capital;
11. revenue growth;
12. stock price;
13. total return to stockholders;
14. economic value added; and
15. operating profit growth; or
any combination of the foregoing.
If the Committee determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which
it conducts its business, or other events or circumstances render the Management
Objectives unsuitable, the Committee may in its discretion modify such
Management Objectives or the related minimum acceptable level of achievement, in
whole or in part, as the Committee deems appropriate and equitable, except in
the case of a Covered Employee where such action would result in the loss of the
otherwise
2
<PAGE> 3
available exemption of the award under Section 162(m) of the Code. In such case,
the Committee shall not make any modification of the Management Objectives or
minimum acceptable level of achievement.
"Market Value" means (i) the closing price for Common Shares as
reported in the New York Stock Exchange Composite Transactions in the WALL
STREET JOURNAL or similar publication selected by the Board for the relevant
date if Common Shares were traded on such day or, if none were then traded, the
last prior day on which Common Shares were so traded, or (ii), if clause (i)
does not apply, the fair market value of the Common Stock as determined by the
Board.
"Nonemployee Director" means a Director who is not an employee of the
Company or any Subsidiary.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable on exercise of an
Option Right.
"Option Right" means the right to purchase Common Shares upon exercise
of an option granted pursuant to Section 4 or Section 9 of this Plan.
"Participant" means a person who is selected by the Board to receive
benefits under this Plan and who is at the time an officer or other key employee
of the Company or any one or more of its Subsidiaries, or who has agreed to
commence serving in any of such capacities within 30 days of the Date of Grant,
and shall also include each Nonemployee Director who receives an award of Option
Rights or Restricted Shares.
"Performance Period" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 8 of this
Plan within which the Management Objectives relating to such Performance Share
or Performance Unit are to be achieved.
"Performance Share" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 8 of this Plan.
"Performance Unit" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 8 of this Plan.
"Plan" means this GenCorp Inc. 1999 Equity and Performance Incentive
Plan.
"Restricted Shares" means Common Shares granted or sold pursuant to
Section 6 or Section 9 of this Plan as to which neither the substantial risk of
forfeiture nor the prohibition on transfers referred to in such Section 6 has
expired.
"Rule 16b-3" means Rule 16b-3 under the Exchange Act (or any successor
rule to the same effect) as in effect from time to time.
3
<PAGE> 4
"Spread" means the excess of the Market Value per Share on the date
when an Appreciation Right is exercised, or on the date when Option Rights are
surrendered in payment of the Option Price of other Option Rights, over the
Option Price or Base Price provided for in the related Option Right or
Free-Standing Appreciation Right, respectively.
"Subsidiary" means a corporation, company or other entity (i) more than
50 percent 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
percent 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 percent of the
total combined voting power represented by all classes of stock issued by such
corporation.
"Tandem Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is granted in tandem with an Option
Right.
"Voting Power" means at any time, the total votes relating to the
then-outstanding securities entitled to vote generally in the election of
Directors.
3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as
provided in Section 3(b) and Section 11 of this Plan, the number of Common
Shares that may be issued or transferred (i) upon the exercise of Option Rights
or Appreciation Rights, (ii) as Restricted Shares and released from substantial
risks of forfeiture thereof, (iii) as Deferred Shares, (iv) in payment of
Performance Shares or Performance Units that have been earned, (v) as awards to
Nonemployee Directors or (vi) in payment of dividend equivalents paid with
respect to awards made under the Plan shall not exceed in the aggregate
2,700,000 (Two Million Seven Hundred Thousand) Common Shares, plus any shares
described in Section 3(b). Such shares may be shares of original issuance or
treasury shares or a combination of the foregoing.
(b) The number of shares available in Section 3(a) above shall be
adjusted to account for shares relating to awards that expire, are forfeited or
are transferred, surrendered or relinquished upon the payment of any Option
Price by the transfer to the Company of Common Shares or upon satisfaction of
any withholding amount. Upon payment in cash of the benefit provided by any
award granted under this Plan, any shares that were covered by that award shall
again be available for issue or transfer hereunder.
(c) Notwithstanding anything in this Section 3, or elsewhere in this
Plan, to the contrary and subject to adjustment as provided in Section 11 of
this Plan, (i) the aggregate number of Common Shares actually issued or
transferred by the Company upon the exercise of Incentive Stock Options shall
not exceed 1,000,000 Common Shares; (ii) no Participant shall be granted Option
Rights and Appreciation Rights, in the aggregate, for more than 1,000,000 Common
Shares during any period of 3 consecutive years; (iii) the number of shares
issued as Restricted Shares, Deferred Shares or Performance Shares shall not in
the aggregate exceed 900,000 Common Shares; (iv) during any period of three
consecutive fiscal years, the maximum number of Common Shares covered by awards
of Restricted Shares, Deferred Shares or
4
<PAGE> 5
Performance Shares granted to any one Participant shall not exceed 900,000
Common Shares; and (v) no Nonemployee Director shall be granted Option Rights,
Appreciation Rights and Restricted Shares, in the aggregate, for more than
100,000 Common Shares during any fiscal year of the Company.
(d) Notwithstanding any other provision of this Plan to the contrary,
in no event shall any Participant in any one calendar year receive an award of
Performance Shares of Performance Units having an aggregate maximum value as of
their respective Dates of Grant in excess of $2,000,000.
4. OPTION RIGHTS. The Board may, from time to time and upon such terms
and conditions as it may determine, authorize the granting to Participants of
options to purchase Common Shares. Each such grant may utilize any or all of the
authorizations, and shall be subject to all of the requirements contained in the
following provisions:
(a) Each grant shall specify the number of Common Shares to which it
pertains subject to the limitations set forth in Section 3 of this Plan.
(b) Each grant shall specify an Option Price per share, which may not
be less than the Market Value per Share on the Date of Grant. (c) Each grant
shall specify whether the Option Price shall be payable (i) in cash or by check
acceptable to the Company, (ii) by the actual or constructive transfer to the
Company of Common Shares owned by the Optionee for at least 6 months (or other
consideration authorized pursuant to Section 4(d)) having a value at the time of
exercise equal to the total Option Price, or (iii) by a combination of such
methods of payment.
(d) The Board may determine, at or after the Date of Grant, that
payment of the Option Price of any Option Right (other than an Incentive Stock
Option) may also be made in whole or in part in the form of Restricted Shares or
other Common Shares that are forfeitable or subject to restrictions on transfer,
Deferred Shares, Performance Shares (based, in each case, on the Market Value
per Share on the date of exercise), other Option Rights (based on the Spread on
the date of exercise) or Performance Units. Unless otherwise determined by the
Board at or after the Date of Grant, whenever any Option Price is paid in whole
or in part by means of any of the forms of consideration specified in this
Section 4(d), the Common Shares received upon the exercise of the Option Rights
shall be subject to such risks of forfeiture or restrictions on transfer as may
correspond to any that apply to the consideration surrendered, but only to the
extent, determined with respect to the consideration surrendered, of (i) the
number of shares or Performance Shares, (ii) the Spread of any unexercisable
portion of Option Rights, or (iii) the stated value of Performance Units.
(e) Any grant may provide for deferred payment of the Option Price from
the proceeds of sale through a bank or broker on a date satisfactory to the
Company of some or all of the shares to which such exercise relates.
(f) Any grant may provide for payment of the Option Price, at the
election of the Optionee, in installments, with or without interest, upon terms
determined by the Board.
5
<PAGE> 6
(g) Successive grants may be made to the same Participant whether or
not any Option Rights previously granted to such Participant remain unexercised.
(h) Each grant shall specify the period or periods of continuous
service by the Optionee with the Company or any Subsidiary that is necessary
before the Option Rights or installments thereof will become exercisable and may
provide for the earlier exercise of such Option Rights in the event of a Change
in Control.
(i) Any grant of Option Rights may specify Management Objectives that
must be achieved as a condition to the exercise of such rights.
(j) Option Rights granted under this Plan may be (i) options,
including, without limitation, Incentive Stock Options, that are intended to
qualify under particular provisions of the Code, (ii) options that are not
intended so to qualify, or (iii) combinations of the foregoing.
(k) The Board may, at or after the Date of Grant of any Option Rights
(other than Incentive Stock Options), provide for the payment of dividend
equivalents to the Optionee on either a current or deferred or contingent basis
or may provide that such equivalents shall be credited against the Option Price.
(l) The exercise of an Option Right shall result in the cancellation on
a share- for-share basis of any Tandem Appreciation Right authorized under
Section 5 of this Plan.
(m) No Option Right shall be exercisable more than 10 years from the
Date of Grant.
(n) Each grant of Option Rights shall be evidenced by an agreement
executed on behalf of the Company by an officer and delivered to the Optionee
and containing such terms and provisions, consistent with this Plan, as the
Board may approve.
5. APPRECIATION RIGHTS.(a) The Board may authorize the granting (i) to
any Optionee, of Tandem Appreciation Rights in respect of Option Rights granted
hereunder, and (ii) to any Participant, of Free-Standing Appreciation Rights. A
Tandem Appreciation Right shall be a right of the Optionee, exercisable by
surrender of the related Option Right, to receive from the Company an amount
determined by the Board, which shall be expressed as a percentage of the Spread
(not exceeding 100 percent) at the time of exercise. Tandem Appreciation Rights
may be granted at any time prior to the exercise or termination of the related
Option Rights; provided, however, that a Tandem Appreciation Right awarded in
relation to an Incentive Stock Option must be granted concurrently with such
Incentive Stock Option. A Free-Standing Appreciation Right shall be a right of
the Participant to receive from the Company an amount determined by the Board,
which shall be expressed as a percentage of the Spread (not exceeding 100
percent) at the time of exercise.
(b) Each grant of Appreciation Rights may utilize any or all of the
authorizations, and shall be subject to all of the requirements, contained in
the following provisions:
6
<PAGE> 7
(i) Any grant may specify that the amount payable on exercise of an
Appreciation Right may be paid by the Company in cash, in Common Shares or
in any combination thereof and may either grant to the Participant or
retain in the Board the right to elect among those alternatives.
(ii) Any grant may specify that the amount payable on exercise of an
Appreciation Right may not exceed a maximum specified by the Board at the
Date of Grant.
(iii) Any grant may specify waiting periods before exercise and
permissible exercise dates or periods.
(iv) Any grant may specify that such Appreciation Right may be
exercised only in the event of, or earlier in the event of, a Change in
Control.
(v) Any grant may provide for the payment to the Participant of
dividend equivalents thereon in cash or Common Shares on a current,
deferred or contingent basis.
(vi) Any grant of Appreciation Rights may specify Management
Objectives that must be achieved as a condition of the exercise of such
Rights.
(vii) Each grant of Appreciation Rights shall be evidenced by an
agreement executed on behalf of the Company by an officer and delivered to
and accepted by the Participant, which agreement shall describe such
Appreciation Rights, identify the related Option Rights (if applicable),
state that such Appreciation Rights are subject to all the terms and
conditions of this Plan, and contain such other terms and provisions,
consistent with this Plan, as the Board may approve.
(c) Any grant of Tandem Appreciation Rights shall provide that such
Rights may be exercised only at a time when the related Option Right is also
exercisable and at a time when the Spread is positive, and by surrender of the
related Option Right for cancellation.
(d) Regarding Free-standing Appreciation Rights only:
(i) Each grant shall specify in respect of each Free-standing
Appreciation Right a Base Price, which shall be equal to or greater or less
than the Market Value per Share on the Date of Grant;
(ii) Successive grants may be made to the same Participant
regardless of whether any Free-standing Appreciation Rights previously
granted to the Participant remain unexercised; and
(iii) No Free-standing Appreciation Right granted under this Plan
may be exercised more than 10 years from the Date of Grant.
6. RESTRICTED SHARES. The Board may also authorize the grant or sale of
Restricted Shares to Participants. Each grant or sale of Restricted Stock may
utilize any or all of the
7
<PAGE> 8
authorizations, and shall be subject to all of the requirements, contained in
the following provisions:
(a) Each such grant or sale shall constitute an immediate transfer of
the ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to voting, dividend and
other ownership rights, but subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall provide that the Restricted Shares
covered by such grant or sale shall be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period of not
less than 3 years to be determined by the Board at the Date of Grant and may
provide for the earlier lapse of such substantial risk of forfeiture in the
event of a Change in Control. If the Board conditions the noforfeitability of
shares of Restricted Stock upon service alone, such vesting may not occur before
three years from the Date of Grant of such shares of Restricted Stock, and if
the Board conditions the nonforfeitability of shares of Restricted Stock on
Management Objectives, such nonforfeitability may not occur before one year from
the Date of Grant of such shares of Restricted Stock.
(d) Each such grant or sale shall provide that during the period for
which such substantial risk of forfeiture is to continue, the transferability of
the Restricted Shares shall be prohibited or restricted in the manner and to the
extent prescribed by the Board at the Date of Grant (which restrictions may
include, without limitation, rights of repurchase or first refusal in the
Company or provisions subjecting the Restricted Shares to a continuing
substantial risk of forfeiture in the hands of any transferee).
(e) Any grant of Restricted Shares may specify Management Objectives
that, if achieved, will result in termination or early termination of the
restrictions applicable to such shares. Each grant may specify in respect of
such Management Objectives a minimum acceptable level of achievement and may set
forth a formula for determining the number of Restricted Shares on which
restrictions will terminate if performance is at or above the minimum level, but
falls short of full achievement of the specified Management Objectives.
(f) Any such grant or sale of Restricted Shares may require that any or
all dividends or other distributions paid thereon during the period of such
restrictions be automatically deferred and reinvested in additional Restricted
Shares, which may be Subject to the same restrictions as the underlying award.
(g) Each grant or sale of Restricted Shares shall be evidenced by an
agreement executed on behalf of the Company by any officer and delivered to and
accepted by the Participant and shall contain such terms and provisions,
consistent with this Plan, as the Board may approve. Unless otherwise directed
by the Board, all certificates representing Restricted Shares shall be held in
custody by the Company until all restrictions thereon shall have lapsed,
together with a stock power or powers executed by the Participant in whose name
such certificates are registered, endorsed in blank and covering such Shares.
8
<PAGE> 9
7. DEFERRED SHARES. The Board may also authorize the granting or sale
of Deferred Shares to Participants. Each grant or sale of Deferred Shares may
utilize any or all of the authorizations, and shall be subject to all of the
requirements contained in the following provisions:
(a) Each such grant or sale shall constitute the agreement by the
Company to deliver Common Shares to the Participant in the future in
consideration of the performance of services, but subject to the fulfillment of
such conditions during the Deferral Period as the Board may specify.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than the Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall be subject to a Deferral Period of
not less than one year, as determined by the Board at the Date of Grant, and may
provide for the earlier lapse or other modification of such Deferral Period in
the event of a Change in Control. If the Board conditions the nonforfeitability
of shares of Deferred Stock upon service alone, such vesting may not occur
before three years from the Date of Grant of such shares of Deferred Stock, and
if the Board conditions the nonforfeitability of shares of Deferred Stock on
Management Objectives, such nonforfeitability may not occur before one year from
the Date of Grant of such shares of Deferred Stock.
(d) During the Deferral Period, the Participant shall have no right to
transfer any rights under his or her award and shall have no rights of ownership
in the Deferred Shares and shall have no right to vote them, but the Board may,
at or after the Date of Grant, authorize the payment of dividend equivalents on
such Shares on either a current or deferred or contingent basis, either in cash
or in additional Common Shares.
(e) Each grant or sale of Deferred Shares shall be evidenced by an
agreement executed on behalf of the Company by any officer and delivered to and
accepted by the Participant and shall contain such terms and provisions,
consistent with this Plan, as the Board may approve.
8. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Board may also authorize
the granting of Performance Shares and Performance Units that will become
payable to a Participant upon achievement of specified Management Objectives.
Each such grant may utilize any or all of the authorizations, and shall be
subject to all of the requirements, contained in the following provisions:
(a) Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, which number may be subject to
adjustment to reflect changes in compensation or other factors; provided,
however, that no such adjustment shall be made in the case of a Covered Employee
where such action would result in the loss of the otherwise available exemption
of the award under Section 162(m) of the Code.
(b) The Performance Period with respect to each Performance Share or
Performance Unit shall be such period of time not less than 1 year, commencing
with the Date of
9
<PAGE> 10
Grant as shall be determined by the Board at the time of grant which may be
subject to earlier lapse or other modification in the event of a Change in
Control as set forth in the agreement specified in Section 8(g).
(c) Any grant of Performance Shares or Performance Units shall specify
Management Objectives which, if achieved, will result in payment or early
payment of the award, and each grant may specify in respect of such specified
Management Objectives a minimum acceptable level of achievement and shall set
forth a formula for determining the number of Performance Shares or Performance
Units that will be earned if performance is at or above the minimum level, but
falls short of full achievement of the specified Management Objectives. The
grant of Performance Shares or Performance Units shall specify that, before the
Performance Shares or Performance Units shall be earned and paid, the Board must
certify that the Management Objectives have been satisfied.
(d) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that have been earned. Any grant may
specify that the amount payable with respect thereto may be paid by the Company
in cash, in Common Shares or in any combination thereof and may either grant to
the Participant or retain in the Board the right to elect among those
alternatives.
(e) Any grant of Performance Shares may specify that the amount payable
with respect thereto may not exceed a maximum specified by the Board at the Date
of Grant. Any grant of Performance Units may specify that the amount payable or
the number of Common Shares issued with respect thereto may not exceed maximums
specified by the Board at the Date of Grant.
(f) The Board may, at or after the Date of Grant of Performance Shares,
provide for the payment of dividend equivalents to the holder thereof on either
a current or deferred or contingent basis, either in cash or in additional
Common Shares.
(g) Each grant of Performance Shares or Performance Units shall be
evidenced by an agreement executed on behalf of the Company by any officer and
delivered to and accepted by the Participant, which agreement shall state that
such Performance Shares or Performance Units are subject to all the terms and
conditions of this Plan, and contain such other terms and provisions, consistent
with this Plan, as the Board may approve.
9. AWARDS TO NONEMPLOYEE DIRECTORS. The Board may, from time to time and
upon such terms and conditions as it may determine, authorize the granting to
Nonemployee Directors of Option Rights and may also authorize the grant or sale
of Restricted Shares to Nonemployee Directors.
(a) Each grant of Option Rights awarded pursuant to this Section 9
shall be upon terms and conditions consistent with Section 4 of this Plan and
shall be evidenced by an agreement in such form as shall be approved by the
Board. Each grant shall specify an Option Price per share, which shall not be
less than the Market Value per Share on the Date of Grant. Each such Option
Right granted under the Plan shall expire not more than 10 years from the Date
of Grant and shall be subject to earlier termination as hereinafter provided.
Unless otherwise
10
<PAGE> 11
determined by the Board, such Option Rights shall be subject to the following
additional terms and conditions:
(i) Each grant shall specify the number of Common Shares to which
it pertains subject to the limitations set forth in Section 3 of this Plan.
(ii) Each such Option Right shall become exercisable six (6)
months after the Date of Grant. Such Option Rights shall become exercisable
in full immediately in the event of a Change in Control or other similar
transaction or event.
(iii) In the event of the termination of service on the Board by
the holder of any such Option Rights, other than by reason of disability,
death or retirement, the then outstanding Option Rights of such holder may
be exercised to the extent that they would be exercisable on the date of
such termination until the date that is one year after the date of such
termination, but in no event after the expiration date of such Option
Rights.
(iv) In the event of the death, disability or retirement of the
holder of any such Option Rights, each of the then outstanding Option
Rights of such holder may be exercised at any time within one (1) year
after such death, disability or retirement, but in no event after the
expiration date of the term of such Option Rights.
(v) If a Nonemployee Director subsequently becomes an employee of
the Company or a Subsidiary while remaining a member of the Board, any
Option Rights held under the Plan by such individual at the time of such
commencement of employment shall not be affected thereby.
(vi) Option Rights may be exercised by a Nonemployee Director only
upon payment to the Company in full of the Option Price of the Common
Shares to be delivered. Such payment shall be made in cash or in Common
Shares then owned by the optionee for at least six months, or in a
combination of cash and such Common Shares.
(b) Each grant or sale of Restricted Shares pursuant to this Section 9
shall be upon terms and conditions consistent with Section 6 of this Plan.
10. TRANSFERABILITY. Except as otherwise determined by the Board, no
Option Right, Appreciation Right or other derivative security granted under the
Plan shall be transferable by a Participant other than by will or the laws of
descent and distribution. Except as otherwise determined by the Board, Option
Rights and Appreciation Rights shall be exercisable during the Optionee's
lifetime only by him or her or by his or her guardian or legal representative.
(b) The Board may specify at the Date of Grant that part or all of the
Common Shares that are (i) to be issued or transferred by the Company upon the
exercise of Option Rights or Appreciation Rights, upon the termination of the
Deferral Period applicable to Deferred Shares or upon payment under any grant of
Performance Shares or Performance Units or (ii) no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 6 of this Plan, shall be subject to further restrictions on transfer.
11
<PAGE> 12
(c) Notwithstanding the provisions of Section 10(a), Option Rights
(other than Incentive Stock Options) shall be transferable by a Participant,
without payment of consideration therefor by the transferee, to any one or more
members of the Participant's Immediate Family (or to one or more trusts
established solely for the benefit of one or more members of the Participant's
Immediate Family or to one or more partnerships in which the only partners are
members of the Participant's Immediate Family); provided, however, that (i) no
such transfer shall be effective unless reasonable prior notice thereof is
delivered to the Company and such transfer is thereafter effected in accordance
with any terms and conditions that shall have been made applicable thereto by
the Company or the Board and (ii) any such transferee shall be subject to the
same terms and conditions hereunder as the Participant.
11. ADJUSTMENTS. The Board may make or provide for such adjustments in the
numbers of Common Shares covered by outstanding Option Rights, Appreciation
Rights, Deferred Shares, and Performance Shares granted hereunder, in the Option
Price and Base Price provided in outstanding Appreciation Rights, and in the
kind of shares covered thereby, as the Board, in its sole discretion, exercised
in good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of Participants or Optionees that otherwise would
result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, or (b)
any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event, the Board, in its
discretion, may provide in substitution for any or all outstanding awards under
this Plan such alternative consideration as it, in good faith, may determine to
be equitable in the circumstances and may require in connection therewith the
surrender of all awards so replaced. The Board may also make or provide for such
adjustments in the numbers of shares specified in Section 3 of this Plan as the
Board in its sole discretion, exercised in good faith, may determine is
appropriate to reflect any transaction or event described in this Section 11;
provided, however, that any such adjustment to the number specified in Section
3(c)(i) shall be made only if and to the extent that such adjustment would not
cause any Option intended to qualify as an Incentive Stock Option to fail so to
qualify.
12. CHANGE IN CONTROL. For purposes of this Plan, except as may be
otherwise prescribed by the Board in an agreement evidencing a grant or award
made under the Plan, a "Change in Control" shall mean the occurrence during the
term of any of the following events, subject to the provisions of Section 12(f)
hereof:
(a) 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
(b) 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
12
<PAGE> 13
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
(c) 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
(d) There shall be an announcement of the intent of any Person (other
than the Company, any wholly-owned Subsidiary of the Company, or any employee
stock ownership or other employee benefit plan of the Company or any
wholly-owned Subsidiary of the Company) to commence a tender offer or exchange
offer to acquire (when added to any shares as to which such Person is the
Beneficial Owner immediately prior to such tender or exchange offer) beneficial
ownership of 30% or more of the combined voting power of the then-outstanding
voting securities of the Company; or
(e) 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 Subsections (a), (b), (c) or (d)
and (B) it is in the best interests of the Company and its shareholders, and
will serve the intended purposes of this Section 12, if the provisions of awards
which provide for earlier exercise or earlier lapse of restrictions or
conditions upon a Change in Control shall thereupon become immediately
operative.
(f) Notwithstanding the foregoing provisions of this Section (12):
(i) 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 (12)(e) shall be abandoned,
or any such accumulations of shares shall be dispersed or otherwise
resolved, the Board may, by notice to the Employee, nullify the effect
thereof and reinstate the award as previously in effect, but without
prejudice to any action that may have been taken prior to such
nullification.
(ii) 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 (12)(b) or 12(d) 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 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.
13
<PAGE> 14
13. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Board may provide for the
elimination of fractions or for the settlement of fractions in cash.
14. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld,
which arrangements (in the discretion of the Board) may include relinquishment
of a portion of such benefit. Common Shares or benefits shall not be withheld in
excess of the minimum number required for such tax withholding. The Company and
a Participant or such other person may also make arrangements with respect to
the payment in cash of any taxes with respect to which withholding is not
required.
15. FOREIGN EMPLOYEES. In order to facilitate the making of any grant or
combination of grants under this Plan, the Board may provide for such special
terms for awards to Participants who are foreign nationals or who are employed
by the Company or any Subsidiary outside of the United States of America as the
Board may consider necessary or appropriate to accommodate differences in local
law, tax policy or custom. Moreover, the Board may approve such supplements to
or amendments, restatements or alternative versions of this Plan as it may
consider necessary or appropriate for such purposes, without thereby affecting
the terms of this Plan as in effect for any other purpose, and the Secretary or
other appropriate officer of the Company may certify any such document as having
been approved and adopted in the same manner as this Plan. No such special
terms, supplements, amendments or restatements, however, shall include any
provisions that are inconsistent with the terms of this Plan as then in effect
unless this Plan could have been amended to eliminate such inconsistency without
further approval by the shareholders of the Company.
16. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by the
Board, which may from time to time delegate all or any part of its authority
under this Plan to a committee of the Board (or subcommittee thereof) consisting
entirely of three Nonemployee Directors appointed by the Board. A majority of
the committee (or subcommittee) shall constitute a quorum, and the action of the
members of the committee (or subcommittee) present at any meeting at which a
quorum is present, or acts unanimously approved in writing, shall be the acts of
the committee (or subcommittee). To the extent of any such delegation,
references in this Plan to the Board shall be deemed to be references to any
such committee or subcommittee.
(b) The interpretation and construction by the Board of any provision
of this Plan or of any agreement, notification or document evidencing the grant
of Option Rights, Appreciation Rights, Restricted Shares, Deferred Shares,
Performance Shares or Performance Units and any determination by the Board
pursuant to any provision of this Plan or of any such agreement, notification or
document shall be final and conclusive. No member of the Board shall be liable
for any such action or determination made in good faith.
17. AMENDMENTS, ETC. (a) The Board may at any time and from time to time
amend the Plan in whole or in part; provided, however, that any amendment which
must be approved by the
14
<PAGE> 15
shareholders of the Company in order to comply with applicable law or the rules
of the New York Stock Exchange] or, if the Common Shares are not traded on the
New York Stock Exchange, the principal national securities exchange upon which
the Common Shares are traded or quoted, shall not be effective unless and until
such approval has been obtained. Presentation of this Plan or any amendment
hereof for shareholder approval shall not be construed to limit the Company's
authority to offer similar or dissimilar benefits under other plans without
shareholder approval.
(b) The Board shall not, without the further approval of the
shareholders of the Company, authorize the amendment of any outstanding Option
Right to reduce the Option Price. Furthermore, no Option Right shall be
cancelled and replaced with awards having a lower Option Price without further
approval of the shareholders of the Company. This Section 17(b) is intended to
prohibit the repricing of "underwater" Option Rights and shall not be construed
to prohibit the adjustments provided for in Section 11 of this Plan.
(c) The Board also may permit Participants to elect to defer the
issuance of Common Shares or the settlement of awards in cash under the Plan
pursuant to such rules, procedures or programs as it may establish for purposes
of this Plan. The Board also may provide that deferred issuances and settlements
include the payment or crediting of dividend equivalents or interest on the
deferral amounts.
(d) The Board may condition the grant of any award or combination of
awards authorized under this Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other compensation
otherwise payable by the Company or a Subsidiary to the Participant.
(e) In case of termination of employment by reason of death, disability
or normal or early retirement, or in the case of hardship or other special
circumstances, of a Participant who holds an Option Right or Appreciation Right
not immediately exercisable in full, or any Restricted Shares as to which the
substantial risk of forfeiture or the prohibition or restriction on transfer has
not lapsed, or any Deferred Shares as to which the Deferral Period has not been
completed, or any Performance Shares or Performance Units which have not been
fully earned, or who holds Common Shares subject to any transfer restriction
imposed pursuant to Section 10(b) of this Plan, the Board may, in its sole
discretion, accelerate the time at which such Option Right or Appreciation Right
may be exercised or the time at which such substantial risk of forfeiture or
prohibition or restriction on transfer will lapse or the time when such Deferral
Period will end or the time at which such Performance Shares or Performance
Units will be deemed to have been fully earned or the time when such transfer
restriction will terminate or may waive any other limitation or requirement
under any such award.
(f) This Plan shall not confer upon any Participant any right with
respect to continuance of employment or other service with the Company or any
Subsidiary, nor shall it interfere in any way with any right the Company or any
Subsidiary would otherwise have to terminate such Participant's employment or
other service at any time.
(g) To the extent that any provision of this Plan would prevent any
Option Right that was intended to qualify as an Incentive Stock Option from
qualifying as such, that provision shall be null and void with respect to such
Option Right. Such provision, however,
15
<PAGE> 16
shall remain in effect for other Option Rights and there shall be no further
effect on any provision of this Plan.
18. TERMINATION. No grant shall be made under this Plan more than 10 years
after the date on which this Plan is first approved by the shareholders of the
Company, but all grants made on or prior to such date shall continue in effect
thereafter subject to the terms thereof and of this Plan.
19. EXCLUSION FROM CERTAIN RESTRICTIONS. Notwithstanding anything in this
Plan to the contrary, not more than eighty-one thousand (81,000) Common Shares
in the aggregate available under this Plan may be subject to awards as follows:
(a) in the case of grants of Restricted Stock, which do not meet the
requirements of the last sentence of Section 6(c);
(b) in the case of grants of Restricted Stock as to which the Board
may accelerate or waive any restrictions imposed under Section 6(d)
(c) in the case of grants of Deferred Stock, which do not meet the
requirements of the last sentence of Section 7(c); or
(d) in the case of Performance Shares and Performance Units, which do
not meet the requirements of Section 8(b).
16
<PAGE> 1
EXHIBIT I
[GENCORP LOGO] 175 Ghent Road
Fairlawn, Ohio 44333-3300
SAMUEL W. HARMON Tel: 330-869-4320
Senior Vice President Fax: 330-869-4410
Human Resources
February 23, 1999
[Employee Name
and
Address]
RE: Key Employee Retention Letter Agreement
Dear _____:
As you are aware, GenCorp Inc. ("GenCorp") has announced a plan to
"spin-off" its Performance Chemicals and Decorative & Building Products
Divisions during the current 1999 fiscal year. For this spinoff plan to succeed,
GenCorp, including its operating business units (the "Company"), must continue
to meet established performance expectations. Your leadership is an important
part of achieving these expectations.
At the same time, GenCorp recognizes that the spinoff plan may create
some uncertainty for you about your future, while the need for your continuing
commitment and undivided attention to management of the Company is more
essential than ever.
Accordingly, GenCorp has adopted, and designated you as one of a select
number of leaders eligible for benefits under, the 1999 GenCorp Key Employee
Retention Plan (the "Plan"), a copy of which accompanies this Letter Agreement
and is incorporated herein by reference. The purpose of this Plan is to provide
key designated GenCorp employees with certain Retention Benefits in order to
assure their continued employment and dedication to the Company.
As set forth in the attached Plan, there are several conditions you
must fulfill in order to be eligible for Retention Benefits. First and foremost,
you must continue to satisfactorily perform the duties of your current position,
or those of any comparable position to which you may be assigned by the Company.
This performance commitment includes the flawless execution of the spinoff plan,
in accordance with the established timetable. Additional eligibility
requirements are set forth in Article 2 of the Plan.
<PAGE> 2
February 23, 1999
[Employee Name]
Page 2
If the proposed spinoff is cancelled, or does not occur before February
1, 2000, you will still be eligible for a benefit payment equal to a pro-rata
share of the amount due on February 1, 2000. This pro-rata payment will be made
within thirty (30) days after the proposed spinoff is formally cancelled.
If your employment with the Company is involuntarily terminated for
other than cause, all unpaid Retention Benefits will be paid within thirty (30)
days of employment termination.
Once accepted and signed by you, this Letter Agreement will constitute
the agreement of GenCorp to provide you Retention Benefits under the Plan, as
described below.
I. RETENTION BENEFITS
------------------
(a) Retention Benefit Amounts:
-------------------------
Subject to the terms of the Plan, you are eligible
for the following Retention Benefits:
AMOUNT PAYMENT DATE
------ ------------
$______ Feb. 1, 2000
$______ Feb. 1, 2001
$[Total]
(b) ACTIVE EMPLOYMENT ON PAYMENT DATE:
Pursuant to the Plan, you must be actively employed
by the Company on the designated Payment Date in order to
receive Retention Benefits (subject to the relief provisions
if involuntary employment termination for other than cause
occurs). Benefits will be paid, in cash, on or about the
designated Payment Date, subject to normal tax withholding.
<PAGE> 3
[Employee Name] February 23, 1999
Page 3
II. PERFORMANCE EXPECTATIONS
------------------------
As stated, the Plan also requires that you continue to satisfactorily
perform your assigned responsibilities and work diligently to implement the
proposed spinoff, which includes meeting the following Performance Expectations:
(a) You must provide your full cooperation and support to the
entire spinoff process; and
(b) The spinoff must occur before December 1, 1999.
I am confident that you can meet these Performance Expectations and
successfully conclude the spinoff of the Performance Chemical and Decorative &
Building Products Divisions.
In order to be eligible for the Retention Benefits described above,
please indicate your acceptance of all terms and conditions of the Plan and this
Letter Agreement by signing below and returning this Letter Agreement to me
within ten (10) business days of the date of this Letter Agreement.
Sincerely,
GenCorp, Inc.
By:
------------------------
Samuel W. Harmon
Senior Vice President
Human Resources
Accepted and Agreed:
- -------------------------------
[Employee Name]
Date:
--------------------------
<PAGE> 1
Exhibit J
1999 GENCORP KEY EMPLOYEE RETENTION PLAN
ARTICLE 1
INTRODUCTION
1.1 GenCorp Inc. ("GenCorp") hereby adopts this 1999 GenCorp Key
Employee Retention Plan ("Plan"), effective as of February 1, 1999, to provide
periodic cash payments ("Retention Benefits") to Eligible Employees who
satisfactorily continue their employment with GenCorp, attain specified
performance objectives (including the "spin-off" of the GenCorp Performance
Chemicals and Decorative & Building Products Divisions), AND meet all Plan
provisions.
1.2 The term of the Plan is expected to extend beyond the proposed
"spin-off" of GenCorp's Performance Chemicals and Decorative & Building Products
Divisions to a new entity (currently unnamed, but designated herein as "NewCo").
After the "spin-off" occurs, all references herein to GenCorp should be
construed as reference to GenCorp and/or NewCo, as applicable to the Eligible
Employee.
1.3 GenCorp intends to pay the Retention Benefits provided hereunder
from the general assets of GenCorp; however, GenCorp reserves the right to fund
and provide all or part of the Retention Benefits hereunder through one or more
welfare trusts.
1.4 This plan document contains all information required by law to be
provided to employees. Information regarding the Plan, its claims procedures and
employees' rights under the Employee Retirement Income Security Act of 1974
("ERISA") are included as Section 5.7 and Articles 6 and 8.
1.5 This Plan shall be administered, in all respects, by the
Organization and Compensation Committee of the GenCorp Board of Directors or its
adopted designee (the "Committee"), including sole responsibility for
determining eligibility for benefits under the Plan, interpreting Plan terms,
and resolving disputes under the Plan, all of which is set forth herein.
<PAGE> 2
ARTICLE 2
ELIGIBILITY FOR RETENTION BENEFITS
2.1 ELIGIBILITY: Subject to the exclusions contained in Section 2.2, an
employee must satisfy all of the following conditions, during the term of this
Plan as defined in Section 5.5, or such shorter term as designated by the
Committee, to be eligible for Retention Benefits under this Plan:
(a) GenCorp must offer such employee a Letter Agreement
incorporating the terms and conditions of this Plan and setting forth
the Retention Benefits, if any, available to the employee under Article
3 hereof. The identity of employees to be offered a Letter Agreement
will be decided by GenCorp, in its sole and complete discretion;
(b) The employee must execute and deliver to GenCorp the
Letter Agreement within the time period set forth in the Letter
Agreement;
(c) The employee must work diligently in the best interests of
GenCorp throughout the period that (i) GenCorp prepares to "spin-off"
its Performance Chemicals and Decorative & Building Products Divisions;
(ii) the "spinoff" occurs; and (iii) GenCorp and NewCo complete all
post-spinoff transactions and filings; and
(d) Upon payment of the final installment of Retention
Benefits for which the Employee is eligible under the Plan or in the
event of involuntary employment termination for other than cause during
the term of the Plan and/or Letter Agreement, the employee must execute
and deliver a Settlement Agreement and Release in substantially the
form attached hereto as Exhibit "A".
An employee who satisfies the foregoing conditions shall be deemed to be an
"Eligible Employee."
2.2 EXCLUSION: Notwithstanding the satisfaction by an employee of all
of the conditions in Section 2.1, the following employees are not Eligible
Employees:
(a) Any employee who refuses Comparable Employment with
GenCorp or Newco. As used herein, "Comparable Employment" means
employment in any capacity, whether as an employee, consultant,
independent contractor, leased employee or otherwise, which is broadly
within the career scope indicated by the employee's present and
previous training and positions, and for which his annualized cash
compensation (salary and any incentive bonus) is at least equal to his
annual cash compensation at the time of offer.
2
<PAGE> 3
(b) Any employee who voluntarily retires or resigns from
employment.
(c) Any employee whose employment is terminated "for cause" as
defined in Article 4, below.
2.3 FAILURE OF PURPOSE:
(a) In the event that the spinoff does not occur before
February 1, 2000, for whatever reason, only a pro-rata share of those
retention benefits payable as of February 1, 2000 shall be paid (based
on the number of months between February 1, 1999 and the date that the
proposed spin-off is formally cancelled), and there shall be no
obligation to pay ANY FUTURE retention benefits, contemplated,
anticipated or accrued. Pro-rata retention benefits shall be paid
within thirty (30) days of formal spinoff cancellation
(b) In the event that a "Change in Control" of GenCorp occurs
(as defined in applicable severance agreements) prior to completion of
the spinoff, this Plan and related Letter Agreements shall be
cancelled, and any obligation to pay ANY retention benefits,
contemplated, anticipated or accrued, shall be deemed null and void.
ARTICLE 3
RETENTION BENEFITS
3.1 RETENTION BENEFITS: Subject to the terms of the Plan, up to two (2)
annual cash retention payments ("Retention Benefits") will be designated in the
Letter Agreement for each potentially Eligible Employee. All Retention Benefits
are taxable compensation subject to normal tax withholding.
3.2 PAYMENT DATE: As a condition of payment of any Retention Benefit,
an Eligible Employee must be actively employed by GenCorp or NewCo on the
designated Payment Date, and no pro-rata payments shall be made, except for the
reason set forth in Section 2.3(a) above.
3.3 INVOLUNTARY EMPLOYMENT TERMINATION: In the event of involuntary
employment termination for any reason other than "for cause" (as defined in
Article 4 below), and subject to Section 2.3 above, an Eligible Employee shall
be paid all unpaid Retention Benefits in the amount(s) set forth in his Letter
Agreement within thirty (30) days of employment termination, and conditioned
upon execution of the Settlement Agreement and Release attached hereto as
Exhibit "A".
3
<PAGE> 4
3.4 PENSION ENHANCEMENTS: In the event that an age and service pension
enhancement is offered and elected by an Eligible Employee, a pro-rata portion
of those retention benefits payable as of February 1, 2000 will be paid to the
Eligible Employee based on the number of months between February 1, 1999 and the
date that the proposed spinoff becomes effective. The pro-rata retention
benefits payable under this provision shall be paid on or about February 1,
2000.
ARTICLE 4
TERMINATION FOR CAUSE
4.1 Other provisions of this Plan notwithstanding, GenCorp will have no
obligation to pay Retention Benefits to any employee whose employment is
terminated "For Cause."
4.2 Termination "For Cause" means circumstances where the employment
termination results from any activity of the employee deemed contrary to the
best interests of GenCorp, its subsidiaries or its operating business units, as
determined in the sole discretion of the Committee. Such determination is to be
approved by the GenCorp Senior Vice President of Human Resources, or his
designee. For the purposes of this Plan, Termination For Cause shall be defined
as:
(a) Violation of any of GenCorp's published Company Policies.
(b) Disqualification for a required security clearance, or
violation of any government secrecy regulations applicable to GenCorp
and/or its employees.
(c) Serious violation of facility rules adopted to promote the
safety of employees, protect GenCorp's property or reputation, or
maintain general working conditions and employee discipline.
(d) Insubordinate conduct toward a superior.
(e) The commission of any crime against GenCorp, such as
embezzlement or theft.
(f) Falsification or theft of documents or records.
(g) Any act deliberately committed to provoke dismissal in
order to obtain termination pay.
(h) Unsatisfactory work performance.
4
<PAGE> 5
ARTICLE 5
GENERAL PROVISIONS
5.1 OTHER PLANS:
(a) Benefits received under this Plan will not be included in
compensation or earnings for purposes of determining benefits,
including pension benefits, under any other employee benefit plan of
GenCorp.
(b) Except as otherwise provided in this Plan, payment of
benefits under this Plan will not adversely affect an Eligible
Employee's rights under any other employee benefit plan of GenCorp,
including any other plan, program or agreement that provides other
severance benefits. An Eligible Employee's rights under such other
plans shall be governed by the terms of the plans in effect at the time
of the Eligible Employee's termination from GenCorp.
5.2 REDUCTIONS: GenCorp may setoff and reduce the amount of Retention
Benefits to recover any amounts which an Eligible Employee owes to GenCorp.
5.3 NO RIGHTS TO EMPLOYMENT: Nothing herein, or in any Letter Agreement
offered or executed hereunder, or in oral discussions regarding this Plan shall
constitute a commitment for employment for any specified duration, or be deemed
to limit GenCorp's right or power to terminate the employment of any employee.
5.4 NO RIGHT TO TRANSFER OR ASSIGN BENEFITS: Benefits under this Plan
are intended for the exclusive benefit of Eligible Employees. Present and future
benefits cannot be subjected to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge (except as required by law), and any
attempt to do so is null and void.
5.5 DURATION/AMENDMENT/TERMINATION OF THE PLAN:
(a) This Plan will be effective as of February 1, 1999 and,
unless modified or terminated in accordance with Section 5.5(b), will
terminate on February 1, 2001, or, if earlier, upon the announcement by
GenCorp's Chief Executive Officer that GenCorp has ceased further
consideration of the spinoff of its Performance Chemicals and
Decorative & Building Products Divisions.
(b) The Committee retains the right to modify or terminate the
Plan, at any time, in its entirety or in part, with or without prior
notice to employees. However, any such amendment or termination shall
not adversely affect an Eligible Employee's right to Retention Benefits
if all conditions set forth in Section 2.1 as currently written are
thereafter satisfied.
5
<PAGE> 6
5.6 PLAN ADMINISTRATION:
(a) The Plan constitutes an employee welfare benefit plan as
defined by the Employee Retirement Income Security Act of 1974. The
Plan Administrator for the Plan is the Organization and Compensation
Committee of the Board of Directors of GenCorp Inc., 175 Ghent Road,
Fairlawn, OH 44333-3300, (330) 869-4220.
(b) Legal matters, including service of process, relating to
the Plan should be addressed to the GenCorp Senior Vice President, Law;
General Counsel, at the address shown above.
(c) Records for the Plan are kept on a plan year basis,
beginning December 1 and ending the following November 30.
(d) For government reporting purposes, the Employer
Identification Number for GenCorp is 34-02244000. In addition, the Plan
is identified by the following official name and plan number:
1999 GenCorp Key Employee Retention Plan
Plan Number: ___
This plan name and number should be used in any formal correspondence
relating to the Plan.
ARTICLE 6
CLAIMS PROCEDURE
6.1 CLAIM:
------
(a) An Eligible Employee need not present a formal claim in
order to qualify for rights or benefits under this Plan. However, if
GenCorp fails to provide any benefit to which an Eligible Employee is
entitled hereunder or if any Eligible Employee believes (i) that the
Plan is not being administered or operated in accordance with its
terms, (ii) that fiduciaries of the Plan have breached their duties, or
(iii) that his or her own legal rights are being violated with respect
to the Plan (a "claimant"), the claimant must file a formal claim under
the procedures set forth in this Article 6. The procedures in this
Article 6 shall apply to all claims that any person has with respect to
the Plan, including claims against fiduciaries and former fiduciaries,
except to the extent the Plan Administrator determines, in its sole
discretion, that it does not have the power to grant, in substance, all
relief reasonably being sought by the claimant.
6
<PAGE> 7
(b) A claim by any person shall be presented to GenCorp's
Senior Vice President of Human Resources ("Claims Official") in writing
within ninety (90) days of the date upon which the claimant (or his or
her predecessor in interest) first knew (or should have known) of the
facts upon which the claim is based, unless the Plan Administrator in
writing consents otherwise. The Claims Official shall, within ninety
(90) days of receiving the claim, consider the claim and issue his or
her determination thereon in writing. The Claims Official may extend
the determination period for up to an additional ninety days by giving
the claimant written notice. If the claim is granted, the benefits or
relief the claimant seeks will be provided.
6.2 DENIAL: If the claim is wholly or partially denied, the Claims
Official shall, within ninety (90) days (or such longer period as described
above), provide the claimant with written notice of the denial, setting forth,
in a manner calculated to be understood by the claimant,
(a) the specific reason or reasons for the denial,
(b) specific references to pertinent Plan provisions on which
the denial is based,
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of
why the material or information is necessary, and
(d) an explanation of the Plan's claim review procedure.
With the consent of the claimant, this determination period can be extended
further. If the Claims Official fails to respond to the claim in a timely
manner, the claimant may treat the claim as having been denied by the claims
official.
6.3 APPEAL: Each claimant may appeal in writing the Claims Official's
denial of a claim to the Committee within sixty (60) days after receipt by the
claimant of written notice of the claim denial, or within sixty (60) days after
such written notice was due, if the written notice was not sent. In connection
with the review proceeding, the claimant or his or her duly authorized
representative may review pertinent documents and may submit issues and comments
in writing. The claimant may only present evidence and theories during the
review which the claimant presented during the claims procedure, except for
information which the Claims Official requested the claimant to provide to
perfect the claim (see Section 6.2(c). Any claims which the claimant does not in
good faith pursue through the review stage of the procedure shall be treated as
having been irrevocably waived.
6.4 REVIEW PROCEDURES: The Committee shall adopt procedures pursuant to
which claims shall be reviewed and may adopt different procedures for different
claims
7
<PAGE> 8
without being bound by past actions. Any procedures adopted, however,
shall be designed to afford a claimant a full and fair review of his or her
claim.
6.5 FINAL DECISION: The decision by the review official upon review of
a claim shall be made not later than sixty (60) days after the written request
for review is received by the Committee, unless special circumstances require an
extension of time for processing, in which case a decision shall be rendered as
soon as possible, but not later than one hundred twenty (120) days after receipt
of the request for review, unless the claimant agrees to a greater extension of
that deadline.
6.6 FORM: The decision on review shall be in writing and shall include
specific reasons for the decision written in a manner calculated to be
understood by the claimant, with specific references to the pertinent Plan
provisions on which the decision is based.
6.7 LEGAL EFFECT: To the extent permitted by law, the decision of the
Claims Official (if no review thereof is requested as herein provided) or the
decision of the Committee, as the case may be, shall be final and binding on all
parties. Any claims which the claimant does not pursue through the review and
appeal stages of the procedures herein provided shall be deemed waived, finally
and irrevocably. No legal action for benefits under the Plan shall be brought
unless and until the claimant has exhausted his or her remedies under this
Article 6. If, after exhausting the claims and appeal procedures, a claimant
institutes any legal action against the Plan and/or GenCorp, the claimant may
present only the evidence and theories which the claimant presented during the
claims and appeal procedures. Judicial review of the claimant's denied claim
shall be limited to a determination of whether the denial was an abuse of
discretion based on the evidence and theories which were presented to and
considered by the Committee during the claims and appeal procedure.
ARTICLE 7
EFFECT OF FIDUCIARY ACTION
7.1 PLAN INTERPRETATION: The Plan Administrator shall administer the
Plan in accordance with its terms and the intended meanings of the Plan and any
other welfare or pension benefit plan of GenCorp. The Plan Administrator shall
have the discretion to make any findings of fact needed in the administration of
the Plan.
7.2 AUTHORITY OF COMMITTEE: The Committee shall have the discretion to
interpret or construe the terms of the Plan, whether express or implied, and
resolve any ambiguities, including but not limited to terms governing the
eligibility of employees and the administration of the Plan, and fashion any
remedy which the Committee, in its sole judgment, deems appropriate. The
validity of any such finding of fact, interpretation, construction or decision
shall not be given DE NOVO review if challenged
8
<PAGE> 9
in court, by arbitration or in any other forum, and shall be upheld unless
clearly arbitrary or capricious.
7.3 EXERCISE OF DISCRETION: To the extent the Plan Administrator or the
Committee has been granted discretionary authority under the Plan, such
fiduciary's prior exercise of such authority shall not obligate it to exercise
its authority in a like fashion thereafter.
7.4 INTENT: If, due to errors in drafting, any Plan provision does not
accurately reflect its intended meaning, as demonstrated by consistent
interpretations or other evidence of intent, or as determined by the Committee
in its sole and exclusive judgment, the provision shall be considered ambiguous
and shall be interpreted by the Plan Administrator in a fashion consistent with
its intent, as determined by the Committee in its sole discretion. The
Committee, without the need for Board of Directors' approval, may amend the Plan
retroactively to cure any such ambiguity.
7.5 CONSISTENCY: This Article 7 may not be invoked by any person to
require the Plan to be administered in a manner which is inconsistent with its
interpretation by the Committee.
7.6 FINAL AND BINDING: All actions taken and all determinations made in
good faith by the Plan Administrator or by the Committee shall be final and
binding upon all persons claiming any interest in or under the Plan.
ARTICLE 8
THE PLAN AND ERISA
8.1 ERISA REQUIREMENTS: "ERISA" -- the Employee Retirement Income
Security Act of 1974 -- is a comprehensive law that sets standards and
procedures for employee benefit plans.
You have the right under ERISA to get further information about the
Plan. Specifically, you are entitled to:
- Examine without charge, at the Plan Administrator's office or
upon request at your local Human Resources Department, all
documents related to the Plan and copies of all documents
filed by the Plan with the U.S. Department of Labor, such as
Annual Reports and Plan Descriptions.
- Obtain copies of all documents related to the Plan and other
Plan information upon written request to the Plan
Administrator. The Plan Administrator may make a reasonable
charge for the copies.
9
<PAGE> 10
8.2 DISCRIMINATION: In addition to creating rights for participants,
ERISA imposes duties upon the persons who are responsible for the operation of
the Plan. The persons who operate the Plan, called "fiduciaries" of the Plan,
have a duty to do so prudently in your interest and that of other participants
and beneficiaries. No one may fire you or otherwise discriminate against you in
any way to prevent you from obtaining benefits or exercising your rights under
ERISA. If your claim for a benefit is denied in whole or in part, you must
receive a written explanation of the reason for the denial. You have the right
to have your claim reviewed and reconsidered. (See Article 7, above).
8.3 ERISA CLAIMS: Under ERISA, there are steps you can take to enforce
the above rights. For instance, if you request materials from the Plan
Administrator and do not receive them within thirty days, you may file suit in a
federal court. In such a case, the court may require the Plan Administrator to
provide the materials and pay you up to one hundred dollars a day until you
receive the materials, unless the materials were not sent because of reasons
beyond the Plan Administrator's control. If you have a claim for benefits which
is denied or ignored, in whole or in part, you may file suit in a state or
federal court. If you are discriminated against for asserting your rights, you
may seek assistance from the U.S. Department of Labor, or you may file suit in a
federal court. The court will decide who should pay court costs and legal fees.
If you are successful, the court may order the person you have sued to pay these
costs and fees. If you lose and the court finds that your claim is frivolous,
the court may order you to pay these costs and fees.
8.4 INFORMATION REQUESTS: If you have any questions about the Plan, you
should contact the Plan Administrator. If you have any questions about your
rights under ERISA, you should contact the nearest area office of the U.S.
Labor-Management Services Administration, Department of Labor. GenCorp supports
both the spirit and letter of ERISA and is committed to assuring proper
treatment and full disclosure of all pertinent information to plan participants.
It is the policy of GenCorp that no employee will be fired or discriminated
against, either to prevent him from obtaining benefits or for exercising his
rights under ERISA.
10
<PAGE> 11
This Plan is hereby adopted and approved this 15th day of March,
1999.
GenCorp Inc.
By: /s/ Samuel W. Harmon
-------------------------------------
Samuel W. Harmon,
Senior Vice President,
Human Resources
APPROVED AS TO FORM:
/s/ William Gorenc, Jr.
- ------------------------
William Gorenc, Jr., Esq.
GenCorp key employee retention
11
<PAGE> 1
Exhibit K
May __, 1999
[Employee Name
and
Address]
Dear ____:
As you are aware, GenCorp is planning to spin-off its Decorative and Building
Products and its Performance Chemicals businesses into a separately held public
company. As a result of the spin-off, the new GenCorp headquarters will be in
Sacramento, CA, thus requiring you relocation to the Sacramento area.
This letter will confirm our agreement regarding your transfer to Sacramento, CA
after the proposed spin-off. The following is contingent upon the planned
spin-off;
1. CURRENT BASE SALARY "Grandfathered" at your current level of $___K per
year.
2. ANNUAL BONUS PLAN (ICP) "Grandfathered" at the current ___% maximum
opportunity level.
3. LTIP
You will be eligible to participate in the Long Term Incentive Plan, based
upon the Plan requirements.
4. RELOCATION
You will be provided relocation assistance according to GenCorp's
relocation policy for transferring employees and will be guaranteed no loss
of equity on the sale of your current home. In addition to the normal
benefits under the Relocation Assistance Program, and recognition of higher
cost of living in the Sacramento area, you will be given a relocation
allowance equivalent to two months' salary, which will be grossed up for
tax purposes.
<PAGE> 2
[Employee Name] -2- May __, 1999
5. SEVERANCE
If your employment with GenCorp terminates involuntarily, within two years
from date of spin off, you will be eligible for salary continuation for a
period of two years, including incentive compensation [if applicable] at
50% of your base salary.
There are no planned major changes to the other benefit programs, which you will
continue to be eligible to participate.
Again, should the planned spin-off be cancelled for any reason, this letter will
become null and void.
Sincerely,
<PAGE> 1
Exhibit L
DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENT
----------------------------------------------
This Director and Officer Indemnification Agreement, dated as
of ______________ (this "Agreement"), is made by and between GenCorp Inc., an
Ohio corporation (the "Company"), and ___________ (the "Indemnitee"), a director
and an officer of the Company.
RECITALS
--------
A. The Indemnitee is presently serving as a director and an
officer of the Company, and the Company desires that the Indemnitee continue
serving in such capacities. The Indemnitee is willing, subject to certain
conditions including the execution and performance of this Agreement by the
Company, to continue serving in such capacities.
B. In addition to the indemnification to which the Indemnitee
is entitled under the Code of Regulations of the Company (the "Regulations"),
the Company has obtained, at its sole expense, insurance protecting the Company
and its officers and directors, including the Indemnitee, against certain losses
arising out of any threatened, pending or completed action, suit, or proceeding
to which such persons may be made or are threatened to be made parties.
NOW, THEREFORE, in order to induce the Indemnitee to continue
to serve in his present capacity, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and
the Indemnitee agree as follows:
1. CONTINUED SERVICE
-----------------
The Indemnitee shall continue to serve, at the will of the
Company or in accordance with a separate contract, to the extent that such a
contract is in effect at the time in question, as a director and an officer of
the Company so long as he is duly elected in accordance with the Regulations or
until he resigns in writing in accordance with applicable law.
2. INITIAL INDEMNITY
-----------------
(a) The Company shall indemnify the Indemnitee if or when he
is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the Company), by
reason of the fact that he is or was
<PAGE> 2
a director or an officer of the Company or is or was serving at the request of
the Company as a director, trustee, officer, employee, member, manager or agent
of another corporation, domestic or foreign, nonprofit or for profit, a limited
liability company, or a partnership, joint venture, trust, or other enterprise,
or by reason of any action alleged to have been taken or omitted in any such
capacity, against any and all costs, charges, expenses (including fees and
expenses of attorneys or others; all such costs, charges and expenses being
herein jointly referred to as "Expenses"), judgments, fines, and amounts paid in
settlement, actually and reasonably incurred by the Indemnitee in connection
therewith, including any appeal of or from any judgment or decision, unless it
is proved by clear and convincing evidence in a court of competent jurisdiction
that the Indemnitee's action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the Company or undertaken
with reckless disregard for the best interests of the Company. In addition, with
respect to any criminal action or proceeding, indemnification hereunder shall be
made only if the Indemnitee had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Indemnitee did not satisfy
the foregoing standard of conduct to the extent applicable thereto.
(b) The Company shall indemnify the Indemnitee if or when he
is a party, or is threatened to be made a party, to any threatened, pending, or
completed action, suit, or proceeding by or in the right of the Company to
procure a judgment in its favor, by reason of the fact that the Indemnitee is or
was a director or an officer of the Company or is or was serving at the request
of the Company as a director, trustee, officer, employee, member, manager or
agent of another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or other
enterprise, against any and all Expenses actually and reasonably incurred by the
Indemnitee in connection with the defense or settlement thereof or any appeal of
or from any judgment or decision, unless it is proved by clear and convincing
evidence in a court of competent jurisdiction that the Indemnitee's action or
failure to act involved an act or omission undertaken with deliberate intent to
cause injury to the Company or undertaken with reckless disregard for the best
interests of the Company, except that no indemnification pursuant to this
Section 2(b) shall be made in respect of any action or suit in which the only
liability asserted against the Indemnitee is pursuant to Section 1701.95 of the
Ohio Revised Code (the "ORC").
(c) Any indemnification under Section 2(a) or 2(b) (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Indemnitee is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 2(a) or 2(b). Such authorization shall be made (i)
by the Board of Directors of the Company (the "Board") by a majority vote of a
quorum consisting of directors who were not and are not parties to or threatened
with such action, suit, or proceeding, or (ii) if such a quorum of disinterested
directors is not available or if a majority of such quorum so directs, in a
written opinion by independent legal counsel (designated for such purpose by the
Board) which shall not be an attorney, or a firm having associated with it an
attorney, who has been retained by or who has performed services for the
Company, or any person to be indemnified, within the five years preceding such
determination, or (iii) by
-2-
<PAGE> 3
the shareholders of the Company (the "Shareholders"), or (iv) by the court of
common pleas or other court in which such action, suit, or proceeding was
brought.
(d) To the extent that the Indemnitee has been successful on
the merits or otherwise, including the dismissal of an action without prejudice,
in defense of any action, suit, or proceeding referred to in Section 2(a) or
2(b), or in defense of any claim, issue, or matter therein, he shall be
indemnified against Expenses actually and reasonably incurred by him in
connection therewith.
(e) Expenses actually and reasonably incurred by the
Indemnitee in defending any such action, suit, or proceeding referred to in
Section 2(a) or 2(b), or in defense of any claim, issue or matter therein, shall
be paid by the Company as they are incurred in advance of the final disposition
of action, suit, or proceeding under the procedure set forth in Section 4(b)
hereof.
(f) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on the Indemnitee with respect to any employee
benefit plan; references to "serving at the request of the Company" shall
include any service as a director, officer, employee, or agent of the Company
which imposes duties on, or involves services by, the Indemnitee with respect to
an employee benefit plan, its participants or beneficiaries; references to the
masculine shall include the feminine; references to the singular shall include
the plural and vice versa; the word including is used by way of illustration
only and not by way of limitation; and with respect to conduct by Indemnitee in
his capacity as a trustee, administrator or other fiduciary of any employee
benefit plan of the Company, if the Indemnitee acted in good faith and in a
manner he reasonably believed to be in the interest of the participants or
beneficiaries of such employee benefit plan, he shall be deemed to have acted in
a manner "not opposed to the best interests of the Company" as referred to
herein.
(g) No amendment to the Amended Articles of Incorporation of
the Company (the "Articles") or the Regulations shall deny, diminish, or
encumber the Indemnitee's rights to indemnity pursuant to the Regulations, the
ORC, or any other applicable law as applied to any act or failure to act
occurring in whole or in part prior to the date (the "Effective Date") upon
which the amendment was approved by the Shareholders. In the event that the
Company shall purport to adopt any amendment to its Articles or Regulations or
take any other action the effect of which is to deny, diminish, or encumber the
Indemnitee's rights to indemnity pursuant to the Articles, the Regulations, the
ORC, or any such other law, such amendment shall apply only to acts or failures
to act occurring entirely after the Effective Date thereof.
-3-
<PAGE> 4
3. ADDITIONAL INDEMNIFICATION
--------------------------
(a) Pursuant to Section 1701.13(E)(6) of the ORC, without
limiting any right which the Indemnitee may have pursuant to Section 2 hereof or
any other provision of this Agreement or the Articles, the Regulations, the ORC,
any policy of insurance, or otherwise, but subject to any limitation on the
maximum permissible indemnity which may exist under applicable law at the time
of any request for indemnity hereunder and subject to the following provisions
of this Section 3, the Company shall indemnify the Indemnitee against any amount
which he is or becomes obligated to pay relating to or arising out of any claim
made against him because of any act, failure to act, or neglect or breach of
duty, including any actual or alleged error, misstatement, or misleading
statement, that he commits, suffers, permits, or acquiesces in while acting in
his capacity as a director or an officer of the Company. The payments which the
Company is obligated to make pursuant to this Section 3 shall include any and
all Expenses, judgments, fines, and amounts paid in settlement, actually and
reasonably incurred by the Indemnitee in connection therewith including any
appeal of or from any judgment or decision; PROVIDED, HOWEVER, that the Company
shall not be obligated under this Section 3 to make any payment in connection
with any claim against the Indemnitee:
(i) to the extent of any fine or similar governmental
imposition which the Company is prohibited by
applicable law from paying which results from a
final, nonappealable order; or
(ii) to the extent based upon or attributable to the
Indemnitee having actually realized a personal gain
or profit to which he was not legally entitled,
including profit from the purchase and sale by the
Indemnitee of equity securities of the Company which
are recoverable by the Company pursuant to Section
16(b) of the Securities Exchange Act of 1934, or
profit arising from transactions in publicly traded
securities of the Company which were effected by the
Indemnitee in violation of Section 10(b) of the
Securities Exchange Act of 1934, or Rule 10b-5
promulgated thereunder.
(b) A determination as to whether the Indemnitee shall be
entitled to indemnification under this Section 3 shall be made in accordance
with Section 4(a) hereof. Expenses incurred by the Indemnitee in defending any
claim to which this Section 3 applies shall be paid by the Company as they are
actually and reasonably incurred in advance of the final disposition of such
claim under the procedure set forth in Section 4(b) hereof.
-4-
<PAGE> 5
4. CERTAIN PROCEDURES RELATING TO INDEMNIFICATION
----------------------------------------------
(a) For purposes of pursuing his rights to indemnification
under Section 3 hereof, the Indemnitee shall (i) submit to the Board a sworn
statement of request for indemnification substantially in the form of Exhibit l
attached hereto and made a part hereof (the "Indemnification Statement")
averring that he is entitled to indemnification hereunder; and (ii) present to
the Company reasonable evidence of all amounts for which indemnification is
requested. Submission of an Indemnification Statement to the Board shall create
a presumption that the Indemnitee is entitled to indemnification hereunder, and
the Company shall, within 60 calendar days after submission of the
Indemnification Statement, make the payments requested in the Indemnification
Statement to or for the benefit of the Indemnitee, unless (A) within such
60-calendar-day period the Board shall resolve by vote of a majority of the
directors at a meeting at which a quorum is present that the Indemnitee is not
entitled to indemnification under Section 3 hereof, (B) such vote shall be based
upon clear and convincing evidence (sufficient to rebut the foregoing
presumption), and (C) the Board shall notify Indemnitee within such period of
such vote, which notice shall disclose with particularity the evidence upon
which the vote is based. The foregoing notice shall be sworn to by all persons
who participated in the vote and voted to deny indemnification. The provisions
of this Section 4(a) are intended to be procedural only and shall not affect the
right of Indemnitee to indemnification under Section 3 of this Agreement so long
as Indemnitee follows the prescribed procedure, and any determination by the
Board that Indemnitee is not entitled to indemnification and any failure to make
the payments requested in the Indemnification Statement shall be subject to
judicial review by any court of competent jurisdiction.
(b) For purposes of obtaining payments of Expenses in advance
of final disposition pursuant to the last sentence of Section 2(d) or the last
sentence of Section 3(b) hereof, the Indemnitee shall submit to the Company a
sworn request for advancement of Expenses substantially in the form of Exhibit 2
attached hereto and made a part hereof (the "Undertaking"), averring that he has
reasonably incurred or will reasonably incur actual Expenses in defending an
action, suit or proceeding referred to in Section 2(a) or 2(b) or any claim
referred to in Section 3, or pursuant to Section 8 hereof. Unless at the time of
the Indemnitee's act or omission at issue, the Articles or the Regulations
prohibit such advances by specific reference to ORC Section l70l.l3(E)(5)(a) or
unless the only liability asserted against the Indemnitee in the subject action,
suit or proceeding is pursuant to ORC Section 1701.95, the Indemnitee shall be
eligible to execute Part A of the Undertaking by which he undertakes to: (i)
repay such amount if it is proved by clear and convincing evidence in a court of
competent jurisdiction that the Indemnitee's action or failure to act involved
an act or omission undertaken with deliberate intent to cause injury to the
Company or undertaken with reckless disregard for the best interests of the
Company; and (ii) reasonably cooperate with the Company concerning the action,
suit, proceeding or claim. In all cases, the Indemnitee shall be eligible to
execute Part B of the Undertaking by which he undertakes to repay such amount if
it ultimately is determined that he is not entitled to be indemnified by the
Company under this Agreement or otherwise. In the event that the Indemnitee is
eligible to and does execute both Part A and Part B of the Undertaking, the
Expenses which are paid by the Company pursuant thereto shall be
-5-
<PAGE> 6
required to be repaid by the Indemnitee only if he is required to do so under
the terms of both Part A and Part B of the Undertaking. Upon receipt of the
Undertaking, the Company shall thereafter promptly pay such Expenses of the
Indemnitee as are noticed to the Company in reasonable detail arising out of the
matter described in the Undertaking. No security shall be required in connection
with any Undertaking.
5. LIMITATION ON INDEMNITY
-----------------------
Notwithstanding anything contained herein to the contrary, the
Company shall not be required hereby to indemnify the Indemnitee with respect to
any action, suit, or proceeding that was initiated by the Indemnitee unless (a)
such action, suit, or proceeding was initiated by the Indemnitee to enforce any
rights to indemnification arising hereunder and such person shall have been
formally adjudged to be entitled to indemnity by reason hereof, (b) authorized
by another agreement to which the Company is a party whether heretofore or
hereafter entered, or (c) otherwise ordered by the court in which the suit was
brought.
6. SUBROGATION; DUPLICATION OF PAYMENTS
------------------------------------
(a) In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
(b) The Company shall not be liable under this Agreement to
make any payment in connection with any claim made against Indemnitee to the
extent Indemnitee has actually received payment (under any insurance policy, the
Regulations or otherwise) of the amounts otherwise payable hereunder.
7. SHAREHOLDER RATIFICATION
------------------------
The Company may, at its option, propose at any future meeting
of Shareholders that this Agreement be ratified by the Shareholders; PROVIDED,
HOWEVER, that the Indemnitee's rights hereunder shall be fully enforceable in
accordance with the terms hereof whether or not such ratification is sought or
obtained.
-6-
<PAGE> 7
8. FEES AND EXPENSES OF ENFORCEMENT
--------------------------------
It is the intent of the Company that the Indemnitee not be
required to incur the expenses associated with the enforcement of his rights
under this Agreement by litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Indemnitee hereunder. Accordingly, if it should appear to the
Indemnitee 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
any action to declare this Agreement void or unenforceable, or institutes any
action, suit or proceeding to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of his
choice, at the expense of the Company as hereafter provided, to represent the
Indemnitee in connection with the initiation or defense of any litigation or
other legal action, whether by or against the Company or any director, officer,
shareholder, or other person affiliated with the Company, in any jurisdiction.
Regardless of the outcome thereof, the Company shall pay and be solely
responsible for any and all costs, charges, and expenses, including fees and
expenses of attorneys and others, reasonably incurred by the Indemnitee pursuant
to this Section 8.
9. MERGER OR CONSOLIDATION
-----------------------
In the event that the Company shall be a constituent
corporation in a consolidation, merger, or other reorganization, the Company, if
it shall not be the surviving, resulting, or acquiring corporation therein,
shall require as a condition thereto that the surviving, resulting, or acquiring
corporation agree to assume all of the obligations of the Company hereunder and
to indemnify the Indemnitee to the full extent provided herein. Whether or not
the Company is the resulting, surviving, or acquiring corporation in any such
transaction, the Indemnitee shall stand in the same position under this
Agreement with respect to the resulting, surviving, or acquiring corporation as
he would have with respect to the Company if its separate existence had
continued.
10. NONEXCLUSIVITY; NO THIRD PARTY BENEFICIARIES; SEVERABILITY
----------------------------------------------------------
(a) The rights to indemnification provided by this Agreement
shall not be exclusive of any other rights of indemnification to which the
Indemnitee may be entitled under the Articles, the Regulations, the ORC or any
other statute, any insurance policy, agreement, or vote of shareholders or
directors or otherwise, as to any actions or failures to act by the Indemnitee,
and shall continue after he has ceased to be a director, officer, employee, or
agent of the Company or other entity for which his service gives rise to a right
hereunder, and shall inure to the benefit of his heirs, executors and
administrators.
(b) Except as provided in Section 10(a), the rights to
indemnification provided by this Agreement are personal to Indemnitee and are
non-transferable by
-7-
<PAGE> 8
Indemnitee, and no party other than the Indemnitee is entitled to
indemnification under this Agreement.
(c) 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 other persons or circumstances shall not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid and legal.
11. SECURITY
--------
To ensure that the Company's obligations pursuant to this
Agreement can be enforced by Indemnitee, the Company may, at its option,
establish a trust pursuant to which the Company's obligations pursuant to this
Agreement and other similar agreements can be funded.
12. NOTICES
-------
All notices and other communications hereunder shall be in
writing and shall be personally delivered or sent by recognized overnight
courier service (a) if to the Company, to the then-current principal executive
offices of the Company (Attention: General Counsel) or (b) if to the Indemnitee,
to the last known address of Indemnitee as reflected in the Company's records.
Either party may change its address or the delivery of notices or other
communications hereunder by providing notice to the other party as provided in
this Section 12. All notices shall be effective upon actual delivery by the
methods specified in this Section 12.
13. GOVERNING LAW
-------------
This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without giving effect to the
principles of conflict of laws thereof.
14. MODIFICATION
------------
This Agreement and the rights and duties of the Indemnitee and
the Company hereunder may be modified only by an instrument in writing signed by
both parties hereto.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
GENCORP INC.
By:________________________________
Name:
Title:
-----------------------------------
-9-
<PAGE> 10
Exhibit 1
---------
INDEMNIFICATION STATEMENT
-------------------------
STATE OF _______________)
) SS
COUNTY OF ______________)
I, ________________ , being first duly sworn, do depose and say as
follows:
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated __________ __ 19__, between GenCorp, Inc., an
Ohio corporation (the "Company"), and the undersigned.
2. I am requesting indemnification against costs, charges, expenses
(which may include fees and expenses of attorneys and/or others), judgments,
fines, and amounts paid in settlement (collectively, "Liabilities"), which have
been actually and reasonably incurred by me in connection with a claim referred
to in Section 3 of the aforesaid Indemnification Agreement.
3. With respect to all matters related to any such claim, I am entitled
to be indemnified as herein contemplated pursuant to the aforesaid
Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I am
requesting indemnification against Liabilities which have or may arise out of
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
_________________________
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this ____ day of ____________, 19__.
_________________________
[Seal]
My commission expires the ____ day of _____________, 19__.
<PAGE> 11
Exhibit 2
---------
UNDERTAKING
-----------
STATE OF ________________
SS
COUNTY OF ______________
I, _____________________ , being first duly sworn, do depose and say as
follows:
l. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated __________ __ , 19__, between GenCorp, Inc., an Ohio
corporation (the "Company") and the undersigned.
2. I am requesting payment of costs, charges, and expenses which I have
reasonably incurred or will reasonably incur in defending an action, suit or
proceeding, referred to in Section 2(a) or 2(b) or any claim referred to in
Section 3, or pursuant to Section 8, of the aforesaid Indemnification Agreement.
3. The costs, charges, and expenses for which payment is requested are,
in general, all expenses related to _________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
4. PART A(1)
I hereby undertake to (a) repay all amounts paid pursuant hereto if it
is proved by clear and convincing evidence in a court of competent jurisdiction
that my action or failure to act which is the subject of the matter described
herein involved an act or omission undertaken with deliberate intent to cause
injury to the Company or undertaken with reckless disregard for the best
interests of the Company and (b)
- --------
(1) The Indemnitee shall not be eligible to execute Part A of this Undertaking
if, at the time of the Indemnitee's act or omission at issue, the Amended
Articles of Incorporation or Amended Code of Regulations of the Company prohibit
such advances by specific reference to the Ohio Revised Code (the "ORC") Section
l70l.l3(E)(5)(a) or if the only liability asserted against the Indemnitee is in
an action, suit or proceeding on the Company's behalf pursuant to ORC Section
1701.95. In the event that the Indemnitee is eligible to and does execute both
Part A and Part B hereof, the costs, charges and expenses which are paid by the
Company pursuant hereto shall be required to be repaid by the Indemnitee only if
he is required to do so under the terms of both Part A and Part B hereof.
<PAGE> 12
reasonably cooperate with the Company concerning the action, suit, proceeding or
claim.
--------------------------
[Signature of Indemnitee]
4. PART B
I hereby undertake to repay all amounts paid pursuant hereto if it
ultimately is determined that I am not entitled to be indemnified by the Company
under the aforesaid Indemnification Agreement or otherwise.
-------------------------
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this ____ day of ___________, 19__.
[Seal] -------------------------
My commission expires the _____ day of _______________, 19__.
<PAGE> 1
Exhibit M
DIRECTOR INDEMNIFICATION AGREEMENT
----------------------------------
This Director Indemnification Agreement, dated as of _______________
(this "Agreement"), is made by and between GenCorp Inc., an Ohio corporation
(the "Company"), and _________________ (the "Indemnitee"), a director of the
Company.
RECITALS
--------
A. The Indemnitee is presently serving as a director of the Company,
and the Company desires that the Indemnitee continue serving in such capacity.
The Indemnitee is willing, subject to certain conditions including the execution
and performance of this Agreement by the Company, to continue serving in such
capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under the Code of Regulations of the Company (the "Regulations"), the
Company has obtained, at its sole expense, insurance protecting the Company and
its officers and directors, including the Indemnitee, against certain losses
arising out of any threatened, pending or completed action, suit, or proceeding
to which such persons may be made or are threatened to be made parties.
NOW, THEREFORE, in order to induce the Indemnitee to continue to serve
in his present capacity, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Indemnitee agree as follows:
1. CONTINUED SERVICE
-----------------
The Indemnitee shall continue to serve at the will of the Company as a
director of the Company so long as he is duly elected in accordance with the
Regulations or until he resigns in writing in accordance with applicable law.
2. INITIAL INDEMNITY
-----------------
(a) The Company shall indemnify the Indemnitee if or when he is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the Company), by reason of the fact
that he is or was a director of the Company or is or was serving at the request
of the Company as a director, trustee, officer, employee, member, manager or
agent of another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture,
<PAGE> 2
trust, or other enterprise, or by reason of any action alleged to have been
taken or omitted in any such capacity, against any and all costs, charges,
expenses (including fees and expenses of attorneys or others; all such costs,
charges and expenses being herein jointly referred to as "Expenses"), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by the
Indemnitee in connection therewith, including any appeal of or from any judgment
or decision, unless it is proved by clear and convincing evidence in a court of
competent jurisdiction that the Indemnitee's action or failure to act involved
an act or omission undertaken with deliberate intent to cause injury to the
Company or undertaken with reckless disregard for the best interests of the
Company. In addition, with respect to any criminal action or proceeding,
indemnification hereunder shall be made only if the Indemnitee had no reasonable
cause to believe his conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the Indemnitee did not satisfy the foregoing standard of conduct to the
extent applicable thereto.
(b) The Company shall indemnify the Indemnitee if or when he is a party
or is threatened to be made a party, to any threatened, pending, or completed
action, suit, or proceeding by or in the right of the Company to procure a
judgment in its favor, by reason of the fact that the Indemnitee is or was a
director of the Company or is or was serving at the request of the Company as a
director, trustee, officer, employee, member, manager or agent of another
corporation, domestic or foreign, nonprofit or for profit, a limited liability
company, or a partnership, joint venture, trust, or other enterprise, against
any and all Expenses actually and reasonably incurred by the Indemnitee in
connection with the defense or settlement thereof or any appeal of or from any
judgment or decision, unless it is proved by clear and convincing evidence in a
court of competent jurisdiction that the Indemnitee's action or failure to act
involved an act or omission undertaken with deliberate intent to cause injury to
the Company or undertaken with reckless disregard for the best interests of the
Company, except that no indemnification pursuant to this Section 2(b) shall be
made in respect of any action or suit in which the only liability asserted
against the Indemnitee is pursuant to Section 1701.95 of the Ohio Revised Code
(the "ORC").
(c) Any indemnification under Section 2(a) or 2(b) (unless ordered by a
court) shall be made by the Company only as authorized in the specific case upon
a determination that indemnification of the Indemnitee is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 2(a) or 2(b). Such authorization shall be made (i) by the Board of
Directors of the Company (the "Board") by a majority vote of a quorum consisting
of directors who were not and are not parties to or threatened with such action,
suit, or proceeding, or (ii) if such a quorum of disinterested directors is not
available or if a majority of such quorum so directs, in a written opinion by
independent legal counsel (designated for such purpose by the Board) which shall
not be an attorney, or a firm having associated with it an attorney, who has
been retained by or who has performed services for the Company, or any person to
be indemnified, within the five years preceding such determination, or (iii) by
the shareholders of the Company (the "Shareholders"), or (iv) by the court of
common pleas or other court in which such action, suit, or proceeding was
brought.
-2-
<PAGE> 3
(d) To the extent that the Indemnitee has been successful on the merits
or otherwise, including the dismissal of an action without prejudice, in defense
of any action, suit, or proceeding referred to in Section 2(a) or 2(b), or in
defense of any claim, issue, or matter therein, he shall be indemnified against
Expenses actually and reasonably incurred by him in connection therewith.
(e) Expenses actually and reasonably incurred by the Indemnitee in
defending any action, suit, or proceeding referred to in Section 2(a) or 2(b),
or in defense of any claim, issue or matter therein, shall be paid by the
Company as they are incurred in advance of the final disposition of such action,
suit, or proceeding under the procedure set forth in Section 4(b) hereof.
(f) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on the Indemnitee with respect to any employee benefit
plan; references to "serving at the request of the Company" shall include any
service as a director, officer, employee, member, manager or agent of the
Company which imposes duties on, or involves services by, the Indemnitee with
respect to an employee benefit plan, its participants or beneficiaries;
references to the masculine shall include the feminine; references to the
singular shall include the plural and vice versa; the word including is used by
way of illustration only and not by way of limitation.
(g) No amendment to the Amended Articles of Incorporation of the
Company (the "Articles") or the Regulations shall deny, diminish, or encumber
the Indemnitee's rights to indemnity pursuant to the Regulations, the ORC, or
any other applicable law as applied to any act or failure to act occurring in
whole or in part prior to the date (the "Effective Date") upon which the
amendment was approved by the Shareholders. In the event that the Company shall
purport to adopt any amendment to its Articles or Regulations or take any other
action the effect of which is to deny, diminish, or encumber the Indemnitee's
rights to indemnity pursuant to the Articles, the Regulations, the ORC, or any
such other law, such amendment shall apply only to acts or failures to act
occurring entirely after the Effective Date thereof.
3. ADDITIONAL INDEMNIFICATION
--------------------------
(a) Pursuant to Section 1701.13(E)(6) of the ORC, without limiting any
right which the Indemnitee may have pursuant to Section 2 hereof or any other
provision of this Agreement or the Articles, the Regulations, the ORC, any
policy of insurance, or otherwise, but subject to any limitation on the maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder and subject to the following provisions of this
Section 3, the Company shall indemnify the Indemnitee against any amount which
he is or becomes obligated to pay relating to or arising out of any claim made
against him because of any act, failure to act, or neglect or breach of duty,
including any actual or alleged error, misstatement, or misleading statement,
that he commits, suffers, permits, or acquiesces in while acting in his capacity
as a director of the Company. The payments which the Company is obligated to
make pursuant to this Section 3 shall include any and all Expenses, judgments,
fines, and amounts paid in settlement, actually and reasonably incurred by
-3-
<PAGE> 4
the Indemnitee in connection therewith including any appeal of or from any
judgment or decision; PROVIDED, HOWEVER, that the Company shall not be obligated
under this Section 3 to make any payment in connection with any claim against
the Indemnitee:
(i) to the extent of any fine or similar governmental
imposition which the Company is prohibited by
applicable law from paying which results from a
final, nonappealable order; or
(ii) to the extent based upon or attributable to the
Indemnitee having actually realized a personal gain
or profit to which he was not legally entitled,
including profit from the purchase and sale by the
Indemnitee of equity securities of the Company which
are recoverable by the Company pursuant to Section
16(b) of the Securities Exchange Act of 1934, or
profit arising from transactions in publicly traded
securities of the Company which were effected by the
Indemnitee in violation of Section 10(b) of the
Securities Exchange Act of 1934, or Rule 10b-5
promulgated thereunder.
(b) A determination as to whether the Indemnitee shall be entitled to
indemnification under this Section 3 shall be made in accordance with Section
4(a) hereof. Expenses incurred by the Indemnitee in defending any claim to which
this Section 3 applies shall be paid by the Company as they are actually and
reasonably incurred in advance of the final disposition of such claim under the
procedure set forth in Section 4(b) hereof.
4. CERTAIN PROCEDURES RELATING TO INDEMNIFICATION
----------------------------------------------
(a) For purposes of pursuing his rights to indemnification under
Section 3 hereof, the Indemnitee shall (i) submit to the Board a sworn statement
of request for indemnification substantially in the form of Exhibit l attached
hereto and made a part hereof (the "Indemnification Statement") averring that he
is entitled to indemnification hereunder; and (ii) present to the Company
reasonable evidence of all amounts for which indemnification is requested.
Submission of an Indemnification Statement to the Board shall create a
presumption that the Indemnitee is entitled to indemnification hereunder, and
the Company shall, within 60 calendar days after submission of the
Indemnification Statement, make the payments requested in the Indemnification
Statement to or for the benefit of the Indemnitee, unless (A) within such
60-calendar-day period the Board shall resolve by vote of a majority of the
directors at a meeting at which a quorum is present that the Indemnitee is not
entitled to indemnification under Section 3 hereof, (B) such vote shall be based
upon clear and convincing evidence (sufficient to rebut the foregoing
presumption), and (C) the Board shall notify Indemnitee within such period of
such vote, which notice shall disclose with particularity the evidence upon
which the vote is based. The foregoing notice shall be sworn to by all persons
who participated in the vote and voted to deny indemnification. The provisions
of this Section 4(a) are intended to be procedural only and shall not affect the
right of Indemnitee to indemnification under Section 3 of this Agreement so long
as Indemnitee follows the prescribed procedure, and any determination by the
-4-
<PAGE> 5
Board that Indemnitee is not entitled to indemnification and any failure to make
the payments requested in the Indemnification Statement shall be subject to
judicial review by any court of competent jurisdiction.
(b) For purposes of obtaining payments of Expenses in advance of final
disposition pursuant to the last sentence of Section 2(d) or the last sentence
of Section 3(b) hereof, the Indemnitee shall submit to the Company a sworn
request for advancement of Expenses substantially in the form of Exhibit 2
attached hereto and made a part hereof (the "Undertaking"), averring that he has
reasonably incurred or will reasonably incur actual Expenses in defending an
action, suit or proceeding referred to in Section 2(a) or 2(b) or any claim
referred to in Section 3, or pursuant to Section 8 hereof. Unless at the time of
the Indemnitee's act or omission at issue, the Articles or the Regulations
prohibit such advances by specific reference to ORC Section l701.13(E)(5)(a) or
unless the only liability asserted against the Indemnitee in the subject action,
suit or proceeding is pursuant to ORC Section 1701.95, the Indemnitee shall be
eligible to execute Part A of the Undertaking by which he undertakes to: (i)
repay such amount if it is proved by clear and convincing evidence in a court of
competent jurisdiction that the Indemnitee's action or failure to act involved
an act or omission undertaken with deliberate intent to cause injury to the
Company or undertaken with reckless disregard for the best interests of the
Company; and (ii) reasonably cooperate with the Company concerning the action,
suit, proceeding or claim. In all cases, the Indemnitee shall be eligible to
execute Part B of the Undertaking by which he undertakes to repay such amount if
it ultimately is determined that he is not entitled to be indemnified by the
Company under this Agreement or otherwise. In the event that the Indemnitee is
eligible to and does execute both Part A and Part B of the Undertaking, the
Expenses which are paid by the Company pursuant thereto shall be required to be
repaid by the Indemnitee only if he is required to do so under the terms of both
Part A and Part B of the Undertaking. Upon receipt of the Undertaking, the
Company shall thereafter promptly pay such Expenses of the Indemnitee as are
noticed to the Company in reasonable detail arising out of the matter described
in the Undertaking. No security shall be required in connection with any
Undertaking.
5. LIMITATION ON INDEMNITY
-----------------------
Notwithstanding anything contained herein to the contrary, the Company
shall not be required hereby to indemnify the Indemnitee with respect to any
action, suit, or proceeding that was initiated by the Indemnitee unless (a) such
action, suit, or proceeding was initiated by the Indemnitee to enforce any
rights to indemnification arising hereunder and such person shall have been
formally adjudged to be entitled to indemnity by reason hereof, (b) authorized
by another agreement to which the Company is a party whether heretofore or
hereafter entered, or (c) otherwise ordered by the court in which the suit was
brought.
-5-
<PAGE> 6
6. SUBROGATION; DUPLICATION OF PAYMENTS
------------------------------------
(a) In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
(b) The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has actually received payment (under any insurance policy, the
Regulations or otherwise) of the amounts otherwise payable hereunder.
7. SHAREHOLDER RATIFICATION
------------------------
The Company may, at its option, propose at any future meeting of
Shareholders that this Agreement be ratified by the Shareholders; PROVIDED,
HOWEVER, that the Indemnitee's rights hereunder shall be fully enforceable in
accordance with the terms hereof whether or not such ratification is sought or
obtained.
8. FEES AND EXPENSES OF ENFORCEMENT
--------------------------------
It is the intent of the Company that the Indemnitee not be required to
incur the expenses associated with the enforcement of his rights under this
Agreement by litigation or other legal action because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Indemnitee hereunder. Accordingly, if it should appear to the Indemnitee
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 any action
to declare this Agreement void or unenforceable, or institutes any action, suit
or proceeding to deny, or to recover from, the Indemnitee the benefits intended
to be provided to the Indemnitee hereunder, the Company irrevocably authorizes
the Indemnitee from time to time to retain counsel of his choice, at the expense
of the Company as hereafter provided, to represent the Indemnitee in connection
with the initiation or defense of any litigation or other legal action, whether
by or against the Company or any director, officer, shareholder, or other person
affiliated with the Company, in any jurisdiction. Regardless of the outcome
thereof, the Company shall pay and be solely responsible for any and all costs,
charges, and expenses, including fees and expenses of attorneys and others,
reasonably incurred by the Indemnitee pursuant to this Section 8.
-6-
<PAGE> 7
9. MERGER OR CONSOLIDATION
-----------------------
In the event that the Company shall be a constituent corporation in a
consolidation, merger, or other reorganization, the Company, if it shall not be
the surviving, resulting, or acquiring corporation therein, shall require as a
condition thereto that the surviving, resulting, or acquiring corporation agree
to assume all of the obligations of the Company hereunder and to indemnify the
Indemnitee to the full extent provided herein. Whether or not the Company is the
resulting, surviving, or acquiring corporation in any such transaction, the
Indemnitee shall stand in the same position under this Agreement with respect to
the resulting, surviving, or acquiring corporation as he would have with respect
to the Company if its separate existence had continued.
10. NONEXCLUSIVITY; NO THIRD PARTY BENEFICIARIES; SEVERABILITY
----------------------------------------------------------
(a) The rights to indemnification provided by this Agreement shall not
be exclusive of any other rights of indemnification to which the Indemnitee may
be entitled under the Articles, the Regulations, the ORC or any other statute,
any insurance policy, agreement, or vote of shareholders or directors or
otherwise, as to any actions or failures to act by the Indemnitee, and shall
continue after he has ceased to be a director, officer, employee, or agent of
the Company or other entity for which his service gives rise to a right
hereunder, and shall inure to the benefit of his heirs, executors and
administrators.
(b) Except as provided in Section 10(a), the rights to indemnification
provided by this Agreement are personal to Indemnitee and are non-transferable
by Indemnitee, and no party other than the Indemnitee is entitled to
indemnification under this Agreement.
(c) 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 other persons or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid and legal.
11. SECURITY
--------
To ensure that the Company's obligations pursuant to this Agreement can
be enforced by Indemnitee, the Company may, at its option, establish a trust
pursuant to which the Company's obligations pursuant to this Agreement and other
similar agreements can be funded.
-7-
<PAGE> 8
12. NOTICES
-------
All notices and other communications hereunder shall be in writing and
shall be personally delivered or sent by recognized overnight courier service
(a) if to the Company, to the then-current principal executive offices of the
Company (Attention: General Counsel) or (b) if to the Indemnitee, to the last
known address of Indemnitee as reflected in the Company's records. Either party
may change its address for the delivery of notices or other communications
hereunder by providing notice to the other party as provided in this Section 12.
All notices shall be effective upon actual delivery by the methods specified in
this Section 12.
13. GOVERNING LAW
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, without giving effect to the principles of
conflict of laws thereof.
14. MODIFICATION
------------
This Agreement and the rights and duties of the Indemnitee and the
Company hereunder may be modified only by an instrument in writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
GENCORP INC.
By:________________________________
Name:
Title:
-----------------------------------
8
<PAGE> 9
EXHIBIT 1
INDEMNIFICATION STATEMENT
-------------------------
STATE OF ________________)
) SS
COUNTY OF ______________)
I, _______________ , being first duly sworn, do depose and say as
follows:
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated _________ __, 1999, between GenCorp, Inc., an
Ohio corporation (the "Company"), and the undersigned.
2. I am requesting indemnification against costs, charges, expenses
(which may include fees and expenses of attorneys and/or others), judgments,
fines, and amounts paid in settlement (collectively, "Liabilities"), which have
been actually and reasonably incurred by me in connection with a claim referred
to in Section 3 of the aforesaid Indemnification Agreement.
3. With respect to all matters related to any such claim, I am entitled
to be indemnified as herein contemplated pursuant to the aforesaid
Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I am
requesting indemnification against Liabilities which have or may arise out of
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-------------------------------------
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this _____ day of _________, 199__.
-----------------------------------
[Seal]
My commission expires the _____ day of __________, 19__ .
<PAGE> 10
EXHIBIT 2
UNDERTAKING
-----------
STATE OF )
---------------------------
) SS
COUNTY OF )
--------------------------
I, _________________________________, being first duly sworn, do depose
and say as follows:
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated ____________ , 1999, between GenCorp, Inc., an Ohio corporation
(the "Company") and the undersigned.
2. I am requesting payment of costs, charges, and expenses which I have
reasonably incurred or will reasonably incur in defending an action, suit or
proceeding, referred to in Section 2(a) or 2(b) or any claim referred to in
Section 3, or pursuant to Section 8, of the aforesaid Indemnification Agreement.
3. The costs, charges, and expenses for which payment is requested are,
in general, all expenses related to
4. PART A(1)
I hereby undertake to (a) repay all amounts paid pursuant hereto if it
is proved by clear and convincing evidence in a court of competent jurisdiction
that my action or failure to act which is the subject of the matter described
herein involved an act or omission undertaken with deliberate intent to cause
injury to the Company or undertaken with reckless disregard for the best
interests of the Company and (b)
reasonably cooperate with the Company concerning the action, suit, proceeding or
claim.
- ----------------
(1) The Indemnitee shall not be eligible to execute Part A of this Undertaking
if, at the time of the Indemnitee's act or omission at issue, the Amended
Articles of Incorporation or the Amended Code of Regulations of the Company
prohibit such advances by specific reference to the Ohio Revised Code (the
"ORC") Section 1701.13(E)(5)(a), or if the only liability asserted against the
Indemnitee is in an action, suit or proceeding on the Company's behalf pursuant
to ORC Section 1701.95. In the event that the Indemnitee is eligible to and does
execute both Part A and Part B hereof, the costs, charges and expenses which are
paid by the Company pursuant hereto shall be required to be repaid by the
Indemnitee only if he is required to do so under the terms of both Part A and
Part B hereof.
<PAGE> 11
-----------------------------------
[Signature of Indemnitee]
4. PART B
I hereby undertake to repay all amounts paid pursuant hereto if it
ultimately is determined that I am not entitled to be indemnified by the Company
under the aforesaid Indemnification Agreement or otherwise.
-----------------------------------
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for
said County and State, this _____ day of _________ , 199__.
-----------------------------------
[Seal]
My commission expires the ____ day of ___________ , 19__.
<PAGE> 1
Exhibit N
OFFICER INDEMNIFICATION AGREEMENT
---------------------------------
This Officer Indemnification Agreement, dated as of
_____________ (this "Agreement"), is made by and between GenCorp Inc., an Ohio
corporation (the "Company"), and _________ (the "Indemnitee"), an officer of the
Company.
RECITALS
--------
A. The Indemnitee is presently serving as an officer of the
Company, and the Company desires that the Indemnitee continue serving in such
capacity. The Indemnitee is willing, subject to certain conditions including the
execution and performance of this Agreement by the Company, to continue serving
in such capacity.
B. In addition to the indemnification to which the Indemnitee
is entitled under the Code of Regulations of the Company (the "Regulations"),
the Company has obtained, at its sole expense, insurance protecting the Company
and its officers and directors, including the Indemnitee, against certain losses
arising out of any threatened, pending or completed action, suit, or proceeding
to which such persons may be made or are threatened to be made parties.
NOW, THEREFORE, in order to induce the Indemnitee to continue
to serve in his present capacity, and for other good and valuable consideration
the receipt and sufficiency of which are hereby acknowledged, the Company and
the Indemnitee agree as follows:
1. CONTINUED SERVICE
-----------------
The Indemnitee shall continue to serve, at the will of the Company or
in accordance with a separate contract, to the extent that such a contract is in
effect at the time in question, as an officer of the Company so long as he is
duly elected and qualified in accordance with the Regulations or until he
resigns in writing in accordance with applicable law.
2. INITIAL INDEMNITY
-----------------
(a) The Company shall indemnify the Indemnitee if or when he is a party
or is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the Company), by
reason of the fact that he is or was an officer of the Company or is or was
serving at the request of the Company as a director, trustee, officer, employee,
member, manager or agent of another corporation, domestic or foreign, nonprofit
or for profit, a limited liability company, or a partnership, joint venture,
trust, or other enterprise, or by reason of any action alleged to have been
taken or omitted in any such capacity, against any and all costs, charges,
expenses
-1-
<PAGE> 2
(including fees and expenses of attorneys or others; all such costs, charges and
expenses being herein jointly referred to as "Expenses"), judgments, fines, and
amounts paid in settlement, actually and reasonably incurred by the Indemnitee
in connection therewith, including any appeal of or from any judgment or
decision, if the Indemnitee acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, he had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the Indemnitee did not satisfy the foregoing standard of
conduct to the extent applicable thereto.
(b) The Company shall indemnify the Indemnitee if or when he is a
party, or is threatened to be made a party, to any threatened, pending, or
completed action, suit, or proceeding by or in the right of the Company to
procure a judgment in its favor, by reason of the fact that the Indemnitee is or
was an officer of the Company or is or was serving at the request of the Company
as a director, trustee, officer, employee, member, manager or agent of another
corporation, domestic or foreign, nonprofit or for profit, a limited liability
company, or a partnership, joint venture, trust, or other enterprise, against
any and all Expenses actually and reasonably incurred by the Indemnitee in
connection with the defense or settlement thereof or any appeal of or from any
judgment or decision, if the Indemnitee acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification pursuant to this Section 2(b) shall be
made in respect of (i) any claim, issue, or matter as to which the Indemnitee is
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Company unless, and only to the extent that, the court of common
pleas or other court in which such action, suit, or proceeding was brought
determines, notwithstanding any adjudication of liability, that in view of all
the circumstances of the case the Indemnitee is fairly and reasonably entitled
to indemnity for such expenses as such court of common pleas or other court
shall deem proper, or (ii) any action or suit in which the only liability
asserted against the Indemnitee is pursuant to Section 1701.95 of the Ohio
Revised Code.
(c) Any indemnification under Section 2(a) or 2(b) (unless ordered by a
court) shall be made by the Company only as authorized in the specific case upon
a determination that indemnification of the Indemnitee is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 2(a) or 2(b). Such authorization shall be made (i) by the Board of
Directors of the Company (the "Board") by a majority vote of a quorum consisting
of directors who were not and are not parties to or threatened with such action,
suit, or proceeding, or (ii) if such a quorum of disinterested directors is not
available or if a majority of such quorum so directs, in a written opinion by
independent legal counsel (designated for such purpose by the Board) which shall
not be an attorney, or a firm having associated with it an attorney, who has
been retained by or who has performed services for the Company, or any person to
be indemnified, within the five years preceding such determination, or (iii) by
the shareholders of the Company (the "Shareholders"), or (iv) by the court of
common pleas or other court in which such action, suit, or proceeding was
brought.
-2-
<PAGE> 3
(d) To the extent that the Indemnitee has been successful on the merits
or otherwise, including the dismissal of an action without prejudice, in defense
of any action, suit, or proceeding referred to in Section 2(a) or 2(b), or in
defense of any claim, issue, or matter therein, he shall be indemnified against
Expenses actually and reasonably incurred by him in connection therewith.
(e) Expenses actually and reasonably incurred by the Indemnitee in
defending any such action, suit, or proceeding referred to in Section 2(a) or
2(b), or in defense of any claim, issue, or matter therein, shall be paid by the
Company as they are incurred in advance of the final disposition of such action,
suit, or proceeding under the procedure set forth in Section 4(b) hereof.
(f) For purposes of this Agreement, references to "other enterprises
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on the Indemnitee with respect to any employee benefit
plan; references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, the Indemnitee with respect to an employee
benefit plan, its participants or beneficiaries; references to the masculine
shall include the feminine; references to the singular shall include the plural
and vice versa; the word including is used by way of illustration only and not
by way of limitation; and with respect to conduct by Indemnitee in his capacity
as a trustee, administrator or other fiduciary of any employee benefit plan of
the Company, if the Indemnitee acted in good faith and in a manner he reasonably
believed to be in the interest of the participants or beneficiaries of such
employee benefit plan, he shall be deemed to have acted in a manner "not opposed
to the best interests of the Company" as referred to herein.
(g) No amendment to the Amended Articles of Incorporation of the
Company (the "Articles") or the Regulations shall deny, diminish, or encumber
the Indemnitee's rights to indemnity pursuant to the Regulations, the Ohio
Revised Code (the "ORC"), or any other applicable law as applied to any act or
failure to act occurring in whole or in part prior to the date (the "Effective
Date") upon which the amendment was approved by the Shareholders. In the event
that the Company shall purport to adopt any amendment to its Articles or
Regulations or take any other action the effect of which is to deny, diminish,
or encumber the Indemnitee's rights to indemnity pursuant to the Articles, the
Regulations, the ORC, or any such other law, such amendment shall apply only to
acts or failures to act occurring entirely after the Effective Date thereof.
3. ADDITIONAL INDEMNIFICATION
--------------------------
(a) Pursuant to Section 1701.13(E)(6) of the ORC, without limiting any
right which the Indemnitee may have pursuant to Section 2 hereof or any other
provision of this Agreement or the Articles, the Regulations, the ORC, any
policy of insurance, or otherwise, but subject to any limitation on the maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder and subject to the following provisions of this
Section 3, the Company shall indemnify the Indemnitee against any amount which
he is or becomes obligated to pay relating to or arising out of any claim made
against him because of any act, failure to act, or neglect or breach of duty,
including any actual or alleged error, misstatement, or
-3-
<PAGE> 4
misleading statement, that he commits, suffers, permits, or acquiesces in while
acting in his capacity as an officer of the Company. The payments which the
Company is obligated to make pursuant to this Section 3 shall include any and
all Expenses, judgments, fines, and amounts paid in settlement, actually and
reasonably incurred by the Indemnitee in connection therewith including any
appeal of or from any judgment or decision; PROVIDED, HOWEVER, that the Company
shall not be obligated under this Section 3 to make any payment in connection
with any claim against the Indemnitee:
(i) to the extent of any fine or similar governmental imposition
which the Company is prohibited by applicable law from paying
which results from a final, nonappealable order; or
(ii) to the extent based upon or attributable to the Indemnitee
having actually realized a personal gain or profit to which he
was not legally entitled, including profit from the purchase
and sale by the Indemnitee of equity securities of the Company
which are recoverable by the Company pursuant to Section 16(b)
of the Securities Exchange Act of 1934, or profit arising from
transactions in publicly traded securities of the Company
which were effected by the Indemnitee in violation of Section
10(b) of the Securities Exchange Act of 1934, or Rule 10b-5
promulgated thereunder.
(b) A determination as to whether the Indemnitee shall be entitled to
indemnification under this Section 3 shall be made in accordance with Section
4(a) hereof. Expenses incurred by the Indemnitee in defending any claim to which
this Section 3 applies shall be paid by the Company as they are actually and
reasonably incurred in advance of the final disposition of such claim under the
procedure set forth in Section 4(b) hereof.
4. CERTAIN PROCEDURES RELATING TO INDEMNIFICATION
----------------------------------------------
(a) For purposes of pursuing his rights to indemnification under
Section 3 hereof, the Indemnitee shall (i) submit to the Board a sworn statement
of request for indemnification substantially in the form of Exhibit 1 attached
hereto and made a part hereof (the "Indemnification Statement") averring that he
is entitled to indemnification hereunder; and (ii) present to the Company
reasonable evidence of all amounts for which indemnification is requested.
Submission of an Indemnification Statement to the Board shall create a
presumption that the Indemnitee is entitled to indemnification hereunder, and
the Company shall, within 60 calendar days after submission of the
Indemnification Statement, make the payments requested in the Indemnification
Statement to or for the benefit of the Indemnitee, unless (A) within such
60-calendar-day period the Board shall resolve by vote of a majority of the
directors at a meeting at which a quorum is present that the Indemnitee is not
entitled to indemnification under Section 3 hereof, (B) such vote shall be based
upon clear and convincing evidence (sufficient to rebut the foregoing
presumption), and (C) the Board shall notify Indemnitee within such period of
such vote, which notice shall disclose with
-4-
<PAGE> 5
particularity the evidence upon which the vote is based. The foregoing notice
shall be sworn to by all persons who participated in the vote and voted to deny
indemnification. The provisions of this Section 4(a) are intended to be
procedural only and shall not affect the right of Indemnitee to indemnification
under Section 3 of this Agreement so long as Indemnitee follows the prescribed
procedure, and any determination by the Board that Indemnitee is not entitled to
indemnification and any failure to make the payments requested in the
Indemnification Statement shall be subject to judicial review by any court of
competent jurisdiction.
(b) For purposes of obtaining payments of Expenses in advance of final
disposition pursuant to the last sentence of Section 2(d) or the last sentence
of Section 3(b) hereof, the Indemnitee shall submit to the Company a sworn
request for advancement of Expenses substantially in the form of Exhibit 2
attached hereto and made a part hereof (the "Undertaking"), averring that he has
reasonably incurred or will reasonably incur actual Expenses in defending an
action, suit or proceeding referred to in Section 2(a) or 2(b) or any claim
referred to in Section 3, or pursuant to Section 8 hereof. Unless at the time of
the Indemnitee's act or omission at issue, (i) the Articles or the Regulations
prohibit such advances by specific reference to ORC Section 1701.13(E)(5)(a) or
(ii) unless the only liability asserted against the Indemnitee in the subject
action, suit or proceeding is pursuant to ORC Section 1701.95, the Indemnitee
shall be eligible to execute Part A of the Undertaking by which he undertakes
to: (A) repay such amount if (1) with respect to any action, suit, proceeding or
claim (other than an action by or in the right of the Company) brought against
the Indemnitee by reason of the fact that the Indemnitee is or was an officer of
the Company for which the Indemnitee has received advancement of Expenses, it is
determined that the Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Company or (2) with respect to any action, suit, proceeding or claim brought
against the Indemnitee by or in the right of the Company for which the
Indemnitee has received advancement of Expenses, the Indemnitee is adjudged to
be liable for negligence or for misconduct in the performance of his duty to the
Company and the court has not determined that Indemnitee is entitled to
indemnification; and (B) reasonably cooperate with the Company concerning the
action, suit, proceeding or claim. In all cases, the Indemnitee shall be
eligible to execute Part B of the Undertaking by which he undertakes to repay
such amount if it ultimately is determined that he is not entitled to be
indemnified by the Company under this Agreement or otherwise. In the event that
the Indemnitee is eligible to and does execute both Part A and Part B of the
Undertaking, the Expenses which are paid by the Company pursuant thereto shall
be required to be repaid by the Indemnitee only if he is required to do so under
the terms of both Part A and Part B of the Undertaking. Upon receipt of the
Undertaking, the Company shall thereafter promptly pay such Expenses of the
Indemnitee as are noticed to the Company in reasonable detail arising out of the
matter described in the Undertaking. No security shall be required in connection
with any Undertaking.
5. LIMITATION ON INDEMNITY
-----------------------
Notwithstanding anything contained herein to the contrary, the Company
shall not be required hereby to indemnify the Indemnitee with respect to any
action,
-5-
<PAGE> 6
suit, or proceeding that was initiated by the Indemnitee unless (a) such action,
suit, or proceeding was initiated by the Indemnitee to enforce any rights to
indemnification arising hereunder and such person shall have been formally
adjudged to be entitled to indemnity by reason hereof, (b) authorized by another
agreement to which the Company is a party whether heretofore or hereafter
entered, or (c) otherwise ordered by the court in which the suit was brought.
6. SUBROGATION; DUPLICATION OF PAYMENTS
------------------------------------
(a) In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
(b) The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has actually received payment (under any insurance policy, the
Regulations or otherwise) of the amounts otherwise payable hereunder.
7. SHAREHOLDER RATIFICATION
------------------------
The Company may, at its option, propose at any future meeting of
Shareholders that this Agreement be ratified by the Shareholders; PROVIDED,
HOWEVER, that the Indemnitee's rights hereunder shall be fully enforceable in
accordance with the terms hereof whether or not such ratification is sought or
obtained.
8. FEES AND EXPENSES OF ENFORCEMENT
--------------------------------
It is the intent of the Company that the Indemnitee not be required to
incur the expenses associated with the enforcement of his rights under this
Agreement by litigation or other legal action because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Indemnitee hereunder. Accordingly, if it should appear to the Indemnitee
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 any action
to declare this Agreement void or unenforceable, or institutes any action, suit
or proceeding to deny or to recover from, the Indemnitee the benefits intended
to be provided to the Indemnitee hereunder, the Company irrevocably authorizes
the Indemnitee from time to time to retain counsel of his choice, at the expense
of the Company as hereafter provided, to represent the Indemnitee in connection
with the initiation or defense of any litigation or other legal action, whether
by or against the Company or any director, officer, shareholder, or other person
affiliated with the Company, in any jurisdiction. Regardless of the outcome
thereof, the Company shall pay and be solely responsible for any and all costs,
charges, and expenses, including fees and expenses of attorneys and others,
reasonably incurred by the Indemnitee pursuant to this Section 8.
-6-
<PAGE> 7
9. MERGER OR CONSOLIDATION
-----------------------
In the event that the Company shall be a constituent corporation in a
consolidation, merger, or other reorganization, the Company, if it shall not be
the surviving, resulting, or acquiring corporation therein, shall require as a
condition thereto that the surviving, resulting, or acquiring corporation agree
to assume all of the obligations of the Company hereunder and to indemnify the
Indemnitee to the full extent provided herein. Whether or not the Company is the
resulting, surviving, or acquiring corporation in any such transaction, the
Indemnitee shall stand in the same position under this Agreement with respect to
the resulting, surviving, or acquiring corporation as he would have with respect
to the Company if its separate existence had continued.
10. NONEXCLUSIVITY; NO THIRD PARTY BENEFICIARIES; SEVERABILITY
----------------------------------------------------------
(a) The rights to indemnification provided by this Agreement shall not
be exclusive of any other rights of indemnification to which the Indemnitee may
be entitled under the Articles, the Regulations, the ORC or any other statute,
any insurance policy, agreement, or vote of shareholders or directors or
otherwise, as to any actions or failures to act by the Indemnitee, and shall
continue after he has ceased to be a director, officer, employee, or agent of
the Company or other entity for which his service gives rise to a right
hereunder, and shall inure to the benefit of his heirs, executors and
administrators.
(b) Except as provided in Section 10 (a), the rights to indemnification
provided by this Agreement are personal to Indemnitee and are non-transferable
by Indemnitee, and no party other than the Indemnitee is entitled to
indemnification under this Agreement.
(c) 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 other persons or circumstances shall not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid and legal.
11. SECURITY
--------
To ensure that the Company's obligations pursuant to this Agreement can
be enforced by Indemnitee, the Company may, at its option, establish a trust
pursuant to which the Company's obligations pursuant to this Agreement and other
similar agreements can be funded.
-7-
<PAGE> 8
12. NOTICES
-------
All notices and other communications hereunder shall be in writing and
shall be personally delivered or sent by recognized overnight courier service
(a) if to the Company, to the then-current principal executive offices of the
Company (Attention: General Counsel) or (b) if to the Indemnitee, to the last
known address of Indemnitee as reflected in the Company's records. Either party
may change its address for the delivery of notices or other communications
hereunder by providing notice to the other party as provided in this Section 12.
All notices shall be effective upon actual delivery by the methods specified in
this Section 12.
13. GOVERNING LAW
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, without giving effect to the principles of
conflict of laws thereof.
14. MODIFICATION
------------
This Agreement and the rights and duties of the Indemnitee and the
Company hereunder may be modified only by an instrument in writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
GENCORP INC.
By:
----------------------------------
Name:
Title:
-------------------------------------
-8-
<PAGE> 9
Exhibit 1
---------
INDEMNIFICATION STATEMENT
-------------------------
STATE OF ___________________)
) SS
COUNTY OF __________________)
I, ________________, being first duly sworn, do depose and say as
follows:
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated __________ 1999, between _____________________
an Ohio corporation (the "Company"), and the undersigned.
2. I am requesting indemnification against costs, charges, expenses
(which may include fees and expenses of attorneys and/or others), judgments,
fines, and amounts paid in settlement (collectively, "Liabilities"), which have
been actually and reasonably incurred by me in connection with a claim referred
to in Section 3 of the aforesaid Indemnification Agreement.
3. With respect to all matters related to any such claim, I am entitled
to be indemnified as herein contemplated pursuant to the aforesaid
Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I am
requesting indemnification against Liabilities which have or may arise out of
______________________________________________________________________________
______________________________________________________________________________.
_____________________________________
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this _____ day of ________, 19__.
_____________________________________
[Seal]
My commission expires the _____ day of __________, 19__.
<PAGE> 10
Exhibit 2
---------
UNDERTAKING
-----------
STATE OF _________________)
) SS
COUNTY OF ________________)
I, ___________________, being first duly sworn do depose and say as
follows:
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated _________________, 19__ between _________________________, an
Ohio corporation (the "Company") and the undersigned.
2. I am requesting payment of costs, charges, and expenses which I have
reasonably incurred or will reasonably incur in defending an action, suit or
proceeding, referred to in Section 2(a) or 2(b) or any claim referred to in
Section 3, or pursuant to Section 8, of the aforesaid Indemnification Agreement.
3. The costs, charges, and expenses for which payment is requested are,
in general, all expenses related to____________________________________________
_______________________________________________________________________________
______________________________________________________________________________.
4. PART A(1)
I hereby undertake to: (a) repay all amounts paid pursuant hereto if
(i) with respect to any action, suit, proceeding or claim (other than an action
by or in the right of the Company) brought against me by reason of the fact that
I am or was an officer of the Company for which I have received advancement of
Expenses, it is determined that I did not act in good faith or in a manner which
I reasonably believed to be in or not opposed to the best interests of the
Company or (ii) with respect to any action, suit, proceeding or claim brought
against me by or in the right of the Company for which I have received
advancement of Expenses, I am adjudged to be liable for negligence or misconduct
in the performance of my duty to the Company and the court has not
- --------
(1) The Indemnitee shall not be eligible to execute Part A of this Undertaking
if, at the time of the Indemnitee's act or omission at issue, the [Articles of
Incorporation] or [Code of Regulations] of the Company prohibit such advances by
specific reference to the Ohio Revised Code (the "ORC") Section
1701.13(E)(5)(a), or if the only liability asserted against the Indemnitee is in
an action, suit or proceeding on the Company's behalf pursuant to ORC Section
1701.95. In the event that the Indemnitee is eligible to and does execute both
Part A and Part B hereof, the costs, charges and expenses which are paid by the
Company pursuant hereto shall be required to be repaid by the Indemnitee only if
he is required to do so under the terms of both Part A and Part B hereof.
<PAGE> 11
determined that I am entitled to indemnification; and (b) reasonably cooperate
with the Company concerning the action, suit, proceeding or claim.
______________________________
[Signature of Indemnitee]
4. PART B
I hereby undertake to repay all amounts paid pursuant hereto if it
ultimately is determined that I am not entitled to be indemnified by the Company
under the aforesaid Indemnification Agreement or otherwise.
______________________________
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this _____ day of __________, 19__.
______________________________
[Seal]
My commission expires the ____ day of __________, 19__.
<PAGE> 1
EXHIBIT O
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 Fine Chemicals LLC.................................. Delaware 100.
Aerojet Ordnance Tennessee, Inc. ........................... Tennessee 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.
General Applied Science Laboratories, Inc. ................. New York 100.
HENNIGES Elastomer- und Kuntstofftechnik GmbH & Co. KG...... Germany 100.
Penn International Inc. .................................... Ohio 100.
Penn Nominal Holdings Inc. ................................. Ohio 100.
RKO General, Inc. .......................................... Delaware 100.
</TABLE>
- ---------------
(1) GenCorp Inc. conducts business using the names GenCorp and GenCorp
Automotive.
(2) Aerojet-General Corporation conducts business using the names Aerojet ASRM
Division, Aerojet Electronics Division and Aerojet Propulsion Division.
<PAGE> 1
EXHIBIT P
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of GenCorp
Inc. hereby constitutes and appoints W. R. Phillips and R.C. Anderson, 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, 1999 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, 2000.
/s/ J. G. COOPER
--------------------------------------
J. G. Cooper, Director
Dated: February 1, 2000
--------------------------------------
<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 R. C. Anderson, 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, 1999 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, 2000.
/s/ I. GUTIN
--------------------------------------
I. Gutin, Director
Dated: February 1, 2000
--------------------------------------
<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 R. C. Anderson, 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, 1999 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, 2000.
/s/ W. K. HALL
--------------------------------------
W. K. Hall, Director
Dated: February 1, 2000
--------------------------------------
<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 R. C. Anderson, 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, 1999 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, 2000.
/s/ R. K. JAEDICKE
--------------------------------------
R. K. Jaedicke, Director
Dated: February 1, 2000
--------------------------------------
<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 R. C. Anderson, 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, 1999 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, 2000.
/s/ J. M. OSTERHOFF
--------------------------------------
J. M. Osterhoff, Director
Dated: February 1, 2000
--------------------------------------
<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 R. C. Anderson, 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, 1999 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, 2000.
/s/ S. E. WIDNALL
--------------------------------------
S. E. Widnall, Director
Dated: February 1, 2000
--------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> NOV-30-1999
<CASH> 23
<SECURITIES> 6
<RECEIVABLES> 139
<ALLOWANCES> 0
<INVENTORY> 144
<CURRENT-ASSETS> 363
<PP&E> 878
<DEPRECIATION> 543
<TOTAL-ASSETS> 1,230
<CURRENT-LIABILITIES> 371
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 76
<TOTAL-LIABILITY-AND-EQUITY> 1,230
<SALES> 1,071
<TOTAL-REVENUES> 1,071
<CGS> 945
<TOTAL-COSTS> 1,008
<OTHER-EXPENSES> (19)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 76
<INCOME-TAX> 30
<INCOME-CONTINUING> 46
<DISCONTINUED> 26
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72
<EPS-BASIC> 1.74
<EPS-DILUTED> 1.72
</TABLE>
