SEVERANCE AGREEMENT
Exhibit 10.1
THIS SEVERANCE AGREEMENT (this “Agreement”), dated as of
, is made and
entered by and between GenCorp Inc., an Ohio corporation (the “Company”), and (the “Executive”).
RECITALS:
A. 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;
B. The Company recognizes that, as is the case for most publicly held companies, the
possibility of a change in control exists;
C. 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 circumstances herein specified;
D. 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
E. 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 the 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 Sections 2(b) or 2(c), the
Executive shall have committed:
(i) 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
surviving, resulting or acquiring corporation or entity are beneficially owned (as
that term is defined in Rule 13-d3 under the Exchange Act) (such ownership,
“Beneficial Ownership”), by the shareholders of the Company immediately prior to the
completion of the transaction; or
(ii) 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
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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, as of the Effective Date constituted the Board (the
“Incumbent Directors”) cease for any reason, including without limitation as a
result of a tender offer, proxy contest, merger or similar transaction, to
constitute a majority thereof, provided that (1) any individual becoming a director
of the Company subsequent to the Effective Date shall be considered an Incumbent
Director if such person’s election or nomination for election was approved by a vote
of at least two-thirds of the other Incumbent Directors and (2) any individual whose
initial assumption of office is in connection with or as a result of an actual or
threatened election contest relating to the election of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a “person” (as
that term is used in Sections 13(d) and 14(d) of the Exchange Act) other than the
Board, including by reason of agreement intended to avoid or settle any such actual
or threatened contest or solicitation shall not be considered an Incumbent Director;
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, upon a majority vote, including a majority vote of all
then-continuing Incumbent Directors (such vote, a “Majority Vote”) 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
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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.
For the avoidance of doubt, the fact that a particular event may not constitute a “Change in
Control” under any subparagraph of this Section 1(d) will not affect whether a Change in
Control shall be determined to have occurred under any other subparagraph.
(e) “Committee” means the Organization & Compensation Committee of the Board.
(f) “Constructive Termination” means the Executive’s termination of employment if he has
determined in good faith that an event provided in Section 2(b) has occurred prior thereto.
(g) “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 (a “Competitor”) with the Company’s Aerojet business, or any
other business owned and operated by the Company and designated a “Competitor” for purposes of this
Section 1(g) by a Majority Vote; and in any such case such enterprise’s sales of any product or
service competitive with any product or service of the Company’s Aerojet business (or any such
other businesses so designated) 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.
(h)
“Effective Date” means January 1, 2006.
(i) “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
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successor policies, plans, programs or arrangements that may be adopted hereafter by the
Company or a Subsidiary.
(j) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(k) “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.
(l) “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, and (ii) the Executive’s death.
(m) “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.
(n) “Term” means the period commencing as of the date hereof and expiring on the close of
business on [add date that is end of full 3rd calendar year from date of Agreement];
provided, however, that (A) commencing on January 1st of each calendar
year subsequent to January 1, 2007, and each January 1st thereafter, the term of this Agreement
will automatically be extended for an additional year unless, not later than September 30th 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, (B) if a Change in Control
occurs during the Term, the Term will expire on the last day of the Severance Period, and (C)
subject to the last sentence of Section 8, if, prior to a Change in Control, the Executive ceases
for any reason to be an employee of the Company or 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.
(o) “Termination Date” means the date on which the Executive’s employment is terminated (the
effective date of which shall be the date of termination,
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or such other date that may be specified by the Executive if the termination is pursuant to
Section 2(b).
2. Termination Following a Change in Control. (a) If the Executive’s employment is
terminated by the Company or any Subsidiary during the Severance Period or upon Constructive
Termination, the Executive shall be entitled to the benefits provided by Section 3 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 3 if such
termination follows the occurrence of one or more of the following events (regardless of whether
any other reason, other than Cause as hereinabove provided, for such termination exists or has
occurred, including without limitation other employment):
(i) Failure to elect or reelect or otherwise to maintain the Executive in the
office or the position, or a substantially equivalent office or position, of or with
the Company and/or a Subsidiary, as the case may be, which the Executive held
immediately prior to a Change in Control, or the failure to reelect or the removal
of the Executive as a Director of the Company (or any successor thereto) if the
Executive shall have been a Director of the Company immediately prior to the Change
in Control;
(ii) (A) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to the position
with the Company and any Subsidiary which the Executive held immediately prior to
the Change in Control, (B) a reduction in the Executive’s Base Pay, (C) a reduction
in the Executive’s opportunities for Incentive Pay (including but not limited to a
reduction in target bonus percentage or target award opportunity (whether measured
by dollar amount or management objectives)) provided by the Company, or (D) the
termination or denial of the Executive’s rights to Employee Benefits or a reduction
in the scope or aggregate value thereof, any of which is not remedied by the Company
within ten calendar days after receipt by the Company of written notice from the
Executive of such change, reduction or termination, as the case may be;
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(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 11(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) If a Constructive Termination occurs, the Executive will be entitled to the benefits
provided by Section 3 (regardless of whether any other reason, other than Cause as hereinabove
provided, for such termination exists or has occurred, including without limitation other
employment).
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(d) A termination by the Company pursuant to Section 2(a) or by the Executive pursuant to
Sections 2(b) or 2(c) will not affect any rights that the Executive may have pursuant to any
agreement, policy, plan, program or arrangement of the Company providing Employee Benefits, which
rights shall be governed by the terms thereof.
3. Severance Compensation. (a) Severance benefits to which the Executive is entitled
pursuant to Section 2 are described on Annex A. The Company will pay to the Executive the amounts
described in Paragraphs (1), (2), (3), (5)(b) and (8) 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)(a), (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 New York 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 3 and under Sections 4 and 6 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.
(d) Notwithstanding anything to the contrary in this Section 3, if an amount payable hereunder
constitutes a “deferral of compensation,” that portion of the Severance Pay will be paid on the
latest of (i) the date specified in this Agreement, (ii) the Participant’s “separation from
service,” and (iii) if the Participant is a “specified employee,” six months after the
Participant’s separation from service. “Deferral of compensation,” “separation from service” and
“specified employee” have the meanings ascribed to such phrases in Code Section 409A.
4. 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
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or control” of the Company, within the meaning of Section 280G of the Code (or any successor
provision thereto) or to any similar tax imposed by state or local law, or any interest or
penalties with respect to such tax (such tax or taxes, together with any such interest and
penalties, being hereafter collectively referred to as the “Excise Tax”), then the Executive shall
be entitled to receive an additional payment or payments (collectively, a “Gross-Up Payment”);
provided, however, that no Gross-up Payment shall be made with respect to the
Excise Tax, if any, attributable to (i) any incentive stock option, as defined by Section 422 of
the Code (“ISO”) granted prior to the execution of this Agreement or (ii) any stock appreciation or
similar right, whether or not limited, granted in tandem with any ISO described in clause (i). The
Gross-Up Payment shall be in an amount such that, after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes), including any Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 4(f), all determinations required to be made under
this Section 4, 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. Subject to Section 3(d), if any Excise Tax is payable to the Executive, the Company
shall pay the required Gross-Up Payment to the Executive as promptly as possible. 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 4(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. Subject to Section 3(d), any such Underpayment shall be
paid as promptly as possible by the Company to, or for the benefit of, the Executive.
(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
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Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the
preparation and issuance of the determinations and calculations contemplated by Section 4(b). Any
determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon
the Company and the Executive.
(d) The federal, state and local income or other tax returns filed by the Executive shall be
prepared and filed on a consistent basis with the determination of the Accounting Firm with respect
to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount
of any Excise Payment, and at the request of the Company, provide to the Company true and correct
copies (with any amendments) of his federal income tax return as filed with the Internal Revenue
Service and corresponding state and local tax returns, if relevant, as filed with the applicable
taxing authority, and such other documents reasonably requested by the Company, evidencing such
payment. If prior to the filing of the Executive’s federal income tax return, or corresponding
state or local tax return, if relevant, the Accounting Firm determines that the amount of the
Gross-Up Payment should be reduced, the Executive shall within five business days pay to the
Company the amount of such reduction.
(e) The fees and expenses of the Accounting Firm for its services in connection with the
determinations and calculations contemplated by Section 4(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 therefore 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:
(A) provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the Company;
(B) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including
without limitation accepting legal representation with respect to such claim
by an attorney competent in respect of the subject matter and reasonably
selected by the Company;
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(C) cooperate with the Company in good faith in order effectively to
contest such claim; and
(D) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such contest and shall
indemnify and hold harmless the Executive, on an after-tax basis, for and against any Excise Tax or
income tax, including interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limiting the foregoing provisions of
this Section 4(f), the Company shall control all proceedings taken in connection with the contest
of any claim contemplated by this Section 4(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
xxx 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 xxx for a
refund, the Company shall advance, to the extent permitted by law, 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 4(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 4(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 4(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 4.
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5. 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 7 will
further limit the employment opportunities for the Executive. In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried employees do not
provide for mitigation, offset or reduction of any severance payment received thereunder.
Accordingly, the payment of the severance compensation by the Company to the Executive in
accordance with the terms of this Agreement is hereby acknowledged by the Company to be reasonable,
and the Executive will not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other
benefits from any source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise, except as expressly provided
Paragraphs (4) and (5) of Annex A.
6. 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
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Executive pursuant to Section 3, and the Gross-Up Payment to the Executive pursuant to Section
4, 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 6(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 6(b) shall not limit the rights of the Executive hereunder. Upon the earlier to occur of
(i) a Change of a Control and (ii) a declaration by the Board that a Change in Control is imminent,
the Company shall promptly to the extent it has not previously done so, and in any event within
five business days:
(A) transfer to trustees of such trust agreements to be added to the
principal of the trusts a sum equal to (I) the present value on the date of
the Change in Control (or on such fifth business day if the Board has
declared a Change in Control to be imminent) of the payments to be made to
the Executive under the provisions of Sections 3 and 4 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 $500,000, less any principal in such
trusts on such fifth business day dedicated to the payment of the Company’s
obligations under Section 6(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 6(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
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under Section 6(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 6(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.
(d) The Corporation shall pay, or reimburse the Participant for such fees, costs and expenses,
promptly upon presentment of appropriate documentation, but only if, to the extent and at the
earliest date(s) such reimbursements are permitted, in the opinion of Xxxxx Day or any other
nationally recognized law firm designated by the Committee and reasonably acceptable to the
Executive (Xxxxx Day or such other firm, “Nationally Recognized Counsel”), without violating Code
Section 409A.
7. Competitive Activity. During a period ending two years following the Termination
Date, if the Executive shall have received or shall be receiving benefits under Section 3, the
Executive shall not, without the prior written consent of the Company, which consent shall not be
unreasonably withheld, engage in any Competitive Activity.
8. 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 3.
9. Release. Payment of the severance compensation set forth in Section 3 hereto is
conditioned upon the Executive executing and delivering a release (the “Release”) substantially in
the form provided in Annex C.
10. 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.
11. 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
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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 11(a) and 11(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 11(c), the
Company shall have no liability to pay any amount so attempted to be assigned, transferred or
delegated.
(d) This Agreement supersedes the Agreement, if any, specified on the signature page as the
Prior Agreement.
(e) To the extent applicable, it is intended that the compensation arrangements under this
Agreement comply with Section 409A of the Code. To the extent any provision in this Agreement is
or will be in violation of Section 409A, the Agreement shall be amended in such manner as the
parties may agree such that the Agreement is or remains in compliance with Section 409A and the
intent of the parties is maintained to the maximum extent possible.
12. 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 three
business days after having been sent by a nationally recognized overnight courier service such as
Federal Express or UPS 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.
13. Governing Law. The validity, interpretation, construction and performance of this
Agreement will be governed by and construed in accordance with
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the substantive laws of the State of Ohio, without giving effect to the principles of conflict
of laws of such State.
14. 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.
15. 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.
16. 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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered
as of the date first above written.
| EXECUTIVE | ||||||||||
| [Executive’s Name] |
||||||||||
| GENCORP INC. | ||||||||||
| By: | ||||||||||
| [Title] | ||||||||||
| Signature Date: | ||||||||||
| Prior Agreement, If Any: | ||||||||||
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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 Company’s executive incentive compensation program.
2. Severance Pay. A lump sum payment in an amount equal to [two — for Vice
Presidents] [three — for President and for Senior Vice Presidents] 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(j).
3. Performance Awards. Upon an Executive’s termination of employment pursuant to
Sections 2(b) or 2(c), (1) all payments due under all equity and performance awards granted under
the GenCorp Inc. 1999 Equity and Performance Incentive Plan, if any, will be made in accordance
with the provisions of such plan and the awards agreements providing for the grant of such awards,
and (2) if, after application of clause (1), any award has not been fully paid because it remains
unvested or otherwise notwithstanding that a Change in Control as herein defined has occurred, all
such awards will be deemed, without further action, to be fully vested, earned, and paid or
exercisable, as the case may be.
4. Life Insurance. For a period of 24 months following the Termination Date (the
“Continuation Period”), the Company will arrange to provide the Executive with term life insurance
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 2(b)(ii)), except that the level of such benefit 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 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
benefits. Without otherwise limiting the purposes or effect of Section 5, benefits otherwise
receivable by the Executive pursuant to this Paragraph 4 will be reduced to the extent comparable
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.
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5. Health Benefits.
(a) For a period of eighteen (18) months following the Termination Date (the “COBRA Period”),
the Company will arrange to provide the Executive, at no cost to the Executive, with health
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 2(b)(ii)), except that the level of such benefit 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 benefits. The COBRA Period shall be
considered to be the period during which the Executive shall be eligible for continuation coverage
under Section 4980B of the Code, and the Company shall reimburse the Executive for the amount of
the premiums for such continuation coverage; provided, however, that without
otherwise limiting the purposes or effect of Section 5, the benefits otherwise receivable by the
Executive pursuant to this Paragraph 5 will be reduced to the extent comparable benefits are
actually received by the Executive from another employer during the COBRA 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. If and to the extent that any benefit described in this
Paragraph 5 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 benefits. Notwithstanding
the foregoing, if the Company determines that the provision of benefits under this Paragraph 5 is
likely to result in negative tax consequences to the Executive, the Company will use its reasonable
best efforts to make other arrangements to provide a substantially similar benefit to the Executive
that does not have such negative tax consequences, which may include, making a lump sum payment at
the earliest time permitted under Section 409A of the Code, in an amount equal to the Company’s
reasonable determination of the present value of any such benefits that, if provided, would result
in negative tax consequences to the Executive and/or providing such benefit through insurance
coverage on the Executive’s behalf.
(b) The Executive will also be entitled to a lump sum payment in an amount equal to the
present value of the cost of health coverage for an additional six (6) months, provided that if any
benefit or payment described in this Paragraph 5(b) is subject to tax, the Company will pay to the
Executive an additional amount such that after payment by the Executive of all taxes so imposed on
such benefits and on such payments, the Executive retains an amount equal to such taxes.
6. 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
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the Executive’s termination of employment will be vested in accordance with the provisions of
the Benefits Restoration Plan.
7. Outplacement Services. Outplacement services for a period of up to 12 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.
8. Payment for Financial Counseling. A lump sum payment in an amount equal to $15,000
in lieu of providing financial counseling benefits to the Executive during the Continuation Period.
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Annex B
Funding Assumptions
In calculating the present value of payments to be made to the Executive under Sections 3 and 4 of
the Agreement, as required by Section 6(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
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
Wall Street Journal, of the 26-week Treasury Xxxx most recently issued as of the date of the
Change in Control.
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Annex C
Form of Release
WHEREAS, the Executive’s employment has been terminated in accordance with Section 2 of the
Severance Agreement dated as of , by and between (the “Executive”) and
GenCorp Inc. (the “Agreement”) under circumstances in which the Executive is entitled to severance
compensation under Section 3 thereof.
WHEREAS, the Executive is required to sign this Release in order to receive the Severance
Compensation as described in Annex A of the Agreement and the other benefits described in the
Agreement.
NOW THEREFORE, in consideration of the promises and agreements contained herein and other good
and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and
intending to be legally bound, the Executive agrees as follows:
1. This Release is effective on the date hereof and will continue in effect as provided
herein.
2. In consideration of the payments to be made and the benefits to be received by the
Executive pursuant to the Agreement, which the Executive acknowledges are in addition to payments
and benefits which the Executive would be entitled to receive absent the Agreement, the Executive,
for himself and his dependents, successors, assigns, heirs, executors and administrators (and his
and their legal representatives of every kind), hereby releases, dismisses, remises and forever
discharges GenCorp Inc., its predecessors, parents, subsidiaries, divisions, related or affiliated
companies, officers, directors, stockholders, members, employees, heirs, successors, assigns,
representatives, agents and counsel (the “Company”) from any and all arbitrations, claims,
including claims for attorney’s fees, demands, damages, suits, proceedings, actions and/or causes
of action of any kind and every description, whether known or unknown, which Executive now has or
may have had for, upon, or by reason of any cause whatsoever (“claims”), against the Company,
including but not limited to:
(a) any and all claims arising out of or relating to Executive’s employment by or service with
the Company and his termination from the Company;
(b) any and all claims of discrimination, including but not limited to claims of
discrimination on the basis of sex, race, age, national origin, marital status, religion or
handicap, including, specifically, but without limiting the generality of the foregoing, any claims
under the Age Discrimination in Employment Act, as amended, Title VII of the Civil Rights Act of
1964, as amended, the Americans with Disabilities Act, Ohio Revised Code Section 4101.17 and Ohio
Revised Code Chapter 4112, including Sections 4112.02 and 4112.99 thereof; and
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(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 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
3, 4 and 6 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
[date of termination].
7. Notwithstanding any other provision hereof, this Release will not affect Executive’s rights
under the Agreement or under any employee retirement income, welfare, stock or option benefit plan
or his rights to indemnity, whether by contract, under the Company’s articles of incorporation,
regulations, structure or otherwise.
-22-
8. The validity, interpretation, construction and performance of this Release 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.
IN WITNESS WHEREOF, the Executive has executed and delivered this Release on the date set
forth below.
Dated: |
||||||||
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