-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GWwfqbkezpJZ/LOjilpb9WCKb5NgPqyB34b3sn8MRWvHuFXANn0MCf3g+Tg1n3a8 +pB2UNvnKdZGS/GoChsBaw== 0000950152-00-001213.txt : 20000221 0000950152-00-001213.hdr.sgml : 20000221 ACCESSION NUMBER: 0000950152-00-001213 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19991130 FILED AS OF DATE: 20000218 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENCORP INC CENTRAL INDEX KEY: 0000040888 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 340244000 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-01520 FILM NUMBER: 549104 BUSINESS ADDRESS: STREET 1: HIGHWAY 50 & AEROJET ROAD CITY: ANCHO CORDOVA STATE: CA ZIP: 95670 BUSINESS PHONE: 9163554000 MAIL ADDRESS: STREET 1: HIGHWAY 50 & AEROJET ROAD CITY: ANCHO CORDOVA STATE: CA ZIP: 95670 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL TIRE & RUBBER CO DATE OF NAME CHANGE: 19840330 10-K405 1 GENCORP, INC. ANNUAL REPORT ON FORM 10-K 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) OHIO 34-0244000 (State of Incorporation) (I.R.S. Employer Identification No.)
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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (916) 355-4000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Common Stock, par value 10c per share New York and Chicago
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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 GENCORP INC. ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999 TABLE OF CONTENTS
ITEM NUMBER PAGE ------ ---- 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
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. 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 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 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 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
4 7 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
- --------------- * 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 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 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 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 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
FOR AGAINST ABSTAIN ---------- ---------- ------- 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
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 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 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 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 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 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 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 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 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 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 21 GENCORP INC. CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED NOVEMBER 30 ------------------------- 1999 1998 1997 ------ ------ ----- (DOLLARS IN MILLIONS, EXCEPT PER-SHARE DATA) 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 ====== ====== =====
See notes to consolidated financial statements. 19 22 GENCORP INC. CONSOLIDATED BALANCE SHEETS
NOVEMBER 30 ---------------------- 1999 1998 -------- -------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) 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 ====== ======
See notes to consolidated financial statements. 20 23 GENCORP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
1999 1998 1997 ----- ----- ----- (DOLLARS IN MILLIONS) 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 ===== ===== =====
See notes to consolidated financial statements. 21 24 GENCORP INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
ACCUMULATED COMMON STOCK ISSUED OTHER TOTAL ------------------- OTHER RETAINED COMPREHENSIVE SHAREHOLDERS' SHARES AMOUNT CAPITAL EARNINGS INCOME (LOSS) EQUITY ---------- ------ ------- -------- ----------------- ------------- (DOLLARS IN MILLIONS) 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 ========== ===== ==== ===== ==== ====
See notes to consolidated financial statements. 22 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 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:
YEARS ENDED NOVEMBER 30 ----------------------- 1999 1998 1997 ----- ----- ----- (DOLLARS IN MILLIONS) 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 ---- ---- ----
24 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 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:
YEARS ENDED NOVEMBER 30 --------------------------- 1999 1998 1997 ------ ------ ------- (DOLLARS IN MILLIONS) 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 ====== ====== =======
(SHARES IN THOUSANDS) 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
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 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE H -- INCOME TAXES
YEARS ENDED NOVEMBER 30 -------------------------- 1999 1998 1997 ----- ------- ------ (DOLLARS IN MILLIONS) 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)% ===== ======= ======
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.
NOVEMBER 30 ---------------------------------------------- 1999 1998 --------------------- --------------------- ASSETS LIABILITIES ASSETS LIABILITIES ------ ----------- ------ ----------- (DOLLARS IN MILLIONS) 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 ==== === ==== ===
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 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
NOVEMBER 30 ---------------------- 1999 1998 -------- -------- (DOLLARS IN MILLIONS) 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 ===== =====
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 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.
1999 1998(1) 1997(1) ----- ------- ------- (DOLLARS IN MILLIONS) 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) ===== ===== =====
- --------------- (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 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1999 1998 -------- -------- (DOLLARS IN MILLIONS) 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 ====== ======
- --------------- (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.
1999 1998 1997 ---- ---- ---- 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%
The net prepaid pension was included in:
1999 1998 -------- -------- (DOLLARS IN MILLIONS) 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 ==== ====
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 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:
1999 1998(1) 1997(1) ------ ------- ------- (DOLLARS IN MILLIONS) 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 ====== ====== ======
- --------------- (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.
1999 1998 1997 -------- -------- -------- (DOLLARS IN MILLIONS) 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% -------- -------- --------
- --------------- (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:
NOVEMBER 30 --------------------- 1999 1998(1) ------ --------- (DOLLARS IN MILLIONS) 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 ==== ====
31 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOVEMBER 30 ---------------------- 1999 1998 -------- -------- (DOLLARS IN MILLIONS) 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) ===== =====
- --------------- (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:
NOVEMBER 30 ---------------------- 1999 1998 -------- -------- (DOLLARS IN MILLIONS) Amounts recognized in the consolidated balance sheet: Other current liabilities................................... $ 28 $ 54 Long term liability......................................... 251 295 ----- ----- Net Amount Recognized............................. $ 279 $ 349 ----- -----
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
NOVEMBER 30 ---------------------- 1999 1998 -------- -------- (DOLLARS IN MILLIONS) 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 ==== ====
32 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE M -- ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES
NOVEMBER 30 ---------------------- 1999 1998 -------- -------- (DOLLARS IN MILLIONS) 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 ==== ====
NOTE N -- LONG-TERM DEBT AND CREDIT LINES
NOVEMBER 30 ---------------------- 1999 1998 -------- -------- (DOLLARS IN MILLIONS) 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 ==== ====
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 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 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:
1999 1998 1997 -------------------------- -------------------------- -------------------------- OPTIONS WEIGHTED AVERAGE OPTIONS WEIGHTED AVERAGE OPTIONS WEIGHTED AVERAGE (000) EXERCISE PRICE (000) EXERCISE PRICE (000) EXERCISE PRICE ------- ---------------- ------- ---------------- ------- ---------------- 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
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:
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 - --------------------- -------------- ----------- ---------------- ---------------- ----------- ---------------- 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 ===== =====
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 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 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 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 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 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.
1999 1998 1997 ------ ------ ------ (DOLLARS IN MILLIONS) 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 ====== ====== ======
40 43 GENCORP INC. BUSINESS SEGMENT INFORMATION
1999 1998 1997 ------ --------- ------ (DOLLARS IN MILLIONS) 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 ====== ====== ======
41 44 GENCORP INC. QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED ------------------------------------------------------------- FEBRUARY 28(3) MAY 31(3) AUGUST 31 NOVEMBER 30 -------------- --------- --------- ----------- (DOLLARS IN MILLIONS, EXCEPT PER-SHARE AMOUNTS) 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 - ------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED ------------------------------------------------------------------- FEBRUARY 28(3) MAY 31(3) AUGUST 31(3) NOVEMBER 30(3) -------------- --------- ------------ -------------- (DOLLARS IN MILLIONS, EXCEPT PER-SHARE AMOUNTS) 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 - ------------------------------------------------------------------------------------------------------------
42 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 46 GENCORP INC. SUMMARY OF SELECTED FINANCIAL DATA
1999 1998 1997 1996 1995 ------- ------- ------- ------ ------- (DOLLARS IN MILLIONS, EXCEPT PER-SHARE AMOUNTS) 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
44 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 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.
SIGNATURE TITLE DATE --------- ----- ---- /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
46 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 50 GENCORP INC. ITEM 14(a)(1) AND (2) INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
PAGE NUMBER ------ (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
(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 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 52 EXHIBIT INDEX
TABLE EXHIBIT EXHIBIT ITEM NO. DESCRIPTION LETTER - -------- ----------- ------- 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)
i 53
TABLE EXHIBIT EXHIBIT ITEM NO. DESCRIPTION LETTER - -------- ----------- ------- 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)
ii 54
TABLE EXHIBIT EXHIBIT ITEM NO. DESCRIPTION LETTER - -------- ----------- ------- 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)
iii 55
TABLE EXHIBIT EXHIBIT ITEM NO. DESCRIPTION LETTER - -------- ----------- ------- 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.
iv EX-99.A 2 EXHIBIT A 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 ============================================================================== 2
TABLE OF CONTENTS Page ARTICLE I Definitions and Terms 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
i 3
ARTICLE V Security 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
ii 4 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
iii 5 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
iv 6
ARTICLE XIII Miscellaneous 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
v 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: 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 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:
APPLICABLE MARGIN ----------------- TIER CONSOLIDATED LEVERAGE RATIO BASE RATE EURODOLLAR RATE ---- --------------------------- --------- --------------- 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%
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 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:
Applicable Tier Consolidated Leverage Ratio Unused Fee ---- --------------------------- ---------- 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%
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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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:
Four-Quarter Period Ending Fixed Charge Coverage Ratio Must Exceed - -------------------------- --------------------------------------- 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
- -------- (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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 93 100 (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. 94 101 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 95 102 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 96 103 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 97 104 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 98 105 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 99 106 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 100 107 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 101 108 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] 102 109 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 12 110 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 12 111 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 12 112 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 12 113 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 12 114 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 12 115 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 12 116 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 12 117 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 12 118 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 12 119 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 12 120 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 EX-99.B 3 EXHIBIT B 1 Exhibit B Execution Copy DISTRIBUTION AGREEMENT DATED SEPTEMBER 30, 1999 BETWEEN GENCORP INC. AND OMNOVA SOLUTIONS INC. 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 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 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 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 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). 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 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 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 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 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; 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. 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 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 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. 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) 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 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 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 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 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 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 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 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; 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. 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 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 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 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. 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. 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 ------------------------- ------------------------------ EX-99.C 4 EXHIBIT C 1 Exhibit C Execution Copy TAX MATTERS AGREEMENT BY AND BETWEEN GENCORP INC. AND OMNOVA SOLUTIONS INC. 2 TAX MATTERS AGREEMENT BY AND BETWEEN GENCORP INC. AND OMNOVA SOLUTIONS INC. TABLE OF CONTENTS
PAGE 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
3 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
ii 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 EX-99.D 5 EXHIBIT D 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. 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 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 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. 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 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 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 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, 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. 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 -------------------------------- EX-99.E 6 EXHIBIT E 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: 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 EX-99.F 7 EXHIBIT F 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 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 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 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 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 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 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 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 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 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 EX-99.G 8 EXHIBIT G 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: 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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 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 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 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 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 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 EX-99.H 9 EXHIBIT H 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. 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 EX-99.I 10 EXHIBIT I 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. 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. 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: -------------------------- EX-99.J 11 EXHIBIT J 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. 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 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 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 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 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 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 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 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 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 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 EX-99.K 12 EXHIBIT K 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. 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, EX-99.L 13 EXHIBIT L 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 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- 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- 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- 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- 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- 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- 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- 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- 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__. 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. 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__. EX-99.M 14 EXHIBIT M 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, 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- 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- 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- 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- 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- 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- 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 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__ . 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. 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__. EX-99.N 15 EXHIBIT N 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- 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- 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- 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- 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- 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- 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- 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- 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__. 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. 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__. EX-99.O 16 EXHIBIT O 1 EXHIBIT O LISTING OF GENCORP INC. SUBSIDIARIES(1)
STATE OR PERCENTAGE JURISDICTION OF OF VOTING INCORPORATION OWNERSHIP --------------- ---------- 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.
- --------------- (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. EX-99.P 17 EXHIBIT P 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 -------------------------------------- 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 -------------------------------------- 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 -------------------------------------- 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 -------------------------------------- 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 -------------------------------------- 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 -------------------------------------- EX-27 18 EXHIBIT 27
5 1,000,000 YEAR NOV-30-1999 NOV-30-1999 23 6 139 0 144 363 878 543 1,230 371 0 0 0 4 76 1,230 1,071 1,071 945 1,008 (19) 0 6 76 30 46 26 0 0 72 1.74 1.72
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