Document:

ex10_4.htm

    

    Exhibit
10.4

    

    Form of
Amended and Restated Employment Agreement between Newport Bancorp, Inc. and
Executives

    

    NEWPORT
BANCORP, INC.

    AMENDED
AND RESTATED EMPLOYMENT AGREEMENT BETWEEN

    KEVIN
M MCCARTHY, NINO MOSCARDI, RAY GILMORE AND BRUCE WALSH

    

    On December 11, 2008, Newport Bancorp,
Inc. amended the employment agreements with Messrs. McCarthy, Moscardi, Gilmore
and Walsh to comply with Section 409A of the Internal Revenue Code. Messrs.
McCarthy, Moscardi and Gilmore have a three year agreements and Mr. Walsh has a
two year agreement.

    

    

    This Amended and Restated Three-Year
Employment Agreement (the “Agreement”), by and among Newport Bancorp, Inc., a
Maryland corporation (the “Company”), and ______________
(“Executive”), is hereby amended and restated effective as of __________ (the
“Effective Date”).  References to the “Bank” herein shall mean Newport
Federal Savings Bank.

    

    WHEREAS, the Executive is
currently employed as _____________________________ of the Company pursuant to
an employment agreement between the Company and the Executive entered into as of
July 18, 2006 (the “Prior Agreement”); and

    

    WHEREAS, the Company desires
to amend and restate the Prior Agreement in order to comply with the final
regulations issued under Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”) in April 2007; and

    

    WHEREAS, the Executive has
agreed to such changes.

    

    NOW, THEREFORE, in
consideration of the mutual covenants herein contained, and upon the other terms
and conditions hereinafter provided, the parties hereby agree as
follows:

    

    1.       
     Employment.  Executive is
employed as the _____________________________ of the
Company.  Executive shall perform all duties and shall have all powers
which are commonly incident to the offices of _____________________________ of
the Company or which, consistent with those offices, are delegated to him by the
Board of Directors of the Company. During the term of this Agreement, Executive
also agrees to serve, if elected, as an officer and/or director of any
subsidiary of the Company and in such capacity carry out such duties and
responsibilities reasonably appropriate to that office.

    

    2.          
  Location
and Facilities.  The Executive
will be furnished with the working facilities and staff customary for executive
officers with the title and duties set forth in Section 1 and as are necessary
for him to perform his duties.  The location of such facilities and
staff shall be at the principal administrative offices of the Company, or at
such other site or sites customary for such offices.

    

    3.            
Term.  The period of
Executive’s employment under this Agreement shall be deemed to have commenced as
of the date written above and shall continue for a period of thirty-six (36)
full calendar months (24 in the case of Mr. Walsh), provided, however, that all
changes intended to comply with Code Section 409A shall be effective
retroactively to July 18, 2006; and provided further, that no retroactive
changes shall affect the compensation or benefits previously provided to the
Executive.  The term of this Agreement shall be extended for one day
each day so that a constant thirty-six (36) calendar month term (24 in the case
of Mr. Walsh) shall remain in effect, until such time as the Board of Directors
of the Company (the “Board”) or Executive elects not to extend
the

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    term of
the Agreement by giving written notice to the other party in accordance with the
terms of this Agreement, in which case the term of this Agreement shall be fixed
and shall end on the third anniversary of the date of such written
notice

    

    4.           Base
Compensation.

    

    
      	
               
      

            	
              a.

            	
              The
      Company agrees to pay the Executive during the term of this Agreement a
      base salary at the rate of $______________ per year, payable
      in accordance with customary payroll
practices.

            

    

    

    
      	
               
      

            	
              b.

            	
              The
      Board shall review the rate of the Executive’s base salary based upon
      factors they deem relevant, and may maintain or increase his salary,
      provided that no such action shall reduce the rate of salary below the
      rate in effect on the Effective Date.  The Board review shall
      occur each December during the term of this
  Agreement.

            

    

    

    
      	
               
      

            	
              c.

            	
              In
      the absence of action by the Board, the Executive shall continue to
      receive his base salary at the annual rate specified on the Effective Date
      or, if another rate has been established under the provisions of this
      Section 4, the rate last properly established by action of the Board under
      the provisions of this Section 4.

            

    

    

    5.     
       Bonuses.  The Executive
shall be entitled to participate in discretionary bonuses or other incentive
compensation programs that the Company may award from time to time to senior
management employees pursuant to bonus plans or otherwise.  Any
bonuses or other payments made pursuant to this Section 5 shall be paid promptly
by the Company and in any event no later than March 15 of the year immediately
following the end of the calendar year for which such amounts were
payable.

    

    6.        
    Benefit
Plans.  The Executive
shall be entitled to participate in such life insurance, medical, dental,
pension, profit sharing, retirement and stock-based compensation plans and other
programs and arrangements as may be approved from time to time by the Company or
its affiliates for the benefit of its employees.

    

    7.           
 Vacation and
Leave.

    

    
      	
               
      

            	
              a.

            	
              The
      Executive shall be entitled to vacation and other leave in accordance with
      policy for senior executives, or otherwise as approved by the
      Board.

            

    

    

    
      	
               
      

            	
              b.

            	
              In
      addition to paid vacation and other leave, the Executive shall be
      entitled, without loss of pay, to absent himself voluntarily from the
      performance of his employment for such additional periods of time and for
      such valid and legitimate reasons as the Board may in its discretion
      determine.  Further, the Board may grant to the Executive a
      leave or leaves of absence, with or without pay, at such time or times and
      upon such terms and conditions as the Board in its discretion may
      determine.

            

    

    

    8.     
       Expense
Payments and Reimbursements.  The Executive
shall be reimbursed for all reasonable out-of-pocket business expenses that he
shall incur in connection with his services under this Agreement upon
substantiation of such expenses in accordance with applicable policies of the
Company.  Such reimbursements and payments shall be made promptly by
the Company and, in any event, not later than March 15 of the year immediately
following the year in which Executive incurred such expense.

    

    9.        
    Automobile
Allowance.  During the term
of this Agreement, Executive shall be entitled to use of an automobile provided
by the Company or the Bank, including insurance, maintenance and work-related
fuel expenses, or, in the alternative and the sole discretion of the Bank or the
Company, the Executive shall be entitled to

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    an
automobile allowance which would approximate the expense of a Bank-provided or
Company provided automobile and related insurance, maintenance and fuel
costs.  Executive shall comply with reasonable reporting and expense
limitations on the use of such automobile as may be established by the Bank or
the Company from time to time, and the Bank or the Company shall annually
include on Executive’s Form W-2 any amount of income attributable to Executive’s
personal use of such automobile.  Payments, if any, made under this
Section 9 shall be made promptly by the Company and, in any event, not later
than March 15 of the year immediately following the year the expense was
incurred.

    

    10.           Loyalty and
Confidentiality.

    

    
      	
               
      

            	
              a.

            	
              During
      the term of this Agreement Executive:  (i) shall devote all his
      time, attention, skill, and efforts to the faithful performance of his
      duties hereunder; provided, however, that from time to time, Executive may
      serve on the boards of directors of, and hold any other offices or
      positions in, companies or organizations which will not present any
      conflict of interest with the Company or any of its subsidiaries or
      affiliates, unfavorably affect the performance of Executive’s duties
      pursuant to this Agreement, or violate any applicable statute or
      regulation and (ii) shall not engage in any business or activity contrary
      to the business affairs or interests of the Company or any of its
      subsidiaries or affiliates.

            

    

    

    
      	
               
      

            	
              b.

            	
              Nothing
      contained in this Agreement shall prevent or limit Executive’s right to
      invest in the capital stock or other securities of any business dissimilar
      from that of the Company, or, solely as a passive, minority investor, in
      any business.

            

    

    

    
      	
               
      

            	
              c.

            	
              Executive
      agrees to maintain the confidentiality of any and all information
      concerning the operation or financial status of the Company and the Bank,
      the names or addresses of any of its borrowers, depositors and other
      customers; any information concerning or obtained from such customers; and
      any other information concerning the Company and its affiliates to which
      he may be exposed during the course of his employment.  The
      Executive further agrees that, unless required by law or specifically
      permitted by the Board in writing, he will not disclose to any person or
      entity, either during or subsequent to his employment, any of the
      above-mentioned information which is not generally known to the public,
      nor shall he employ such information in any way other than for the benefit
      of the Company and the Bank.

            

    

    

    
      	
               
      

            	
              11.

            	
              Termination
      and Termination Pay.  Subject to
      Section 12 of this Agreement, Executive’s employment under this Agreement
      may be terminated in the following
  circumstances:

            

    

    

    
      	
               
      

            	
              a.

            	
              Death.  Executive’s
      employment under this Agreement shall terminate upon his death during the
      term of this Agreement, in which event Executive’s estate shall be
      entitled to receive the compensation due to the Executive through the last
      day of the calendar month in which his death
  occurred.

            

    

    

    
      	
               
      

            	
              b.

            	
              Retirement.  This
      Agreement shall be terminated upon Executive’s retirement under the
      retirement benefit plan or plans in which he participates pursuant to
      Section 6 of this Agreement or otherwise.  Executive will
      receive the compensation due to him through his retirement
      date.

            

    

    

    
      	
               
      

            	
              c.

            	
              Disability.

            

    

    

    
      	
               
      

            	
              i.

            	
              The
      Board or Executive may terminate Executive’s employment after having
      determined Executive has a Disability. For these purposes, the Executive
      shall be deemed to have a “Disability” in any case in which it is
      determined the Executive (A) is unable to engage in any substantial
      gainful activity by reason of any medically determinable physical
      or

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    mental
impairment which can be expected to result in death, or last for a continuous
period of not less than twelve (12) months; (B) by reason of any medically
determinable physical or mental impairment which can be expected to result in
death, or last for a continuous period of not less than twelve (12) months, is
receiving income replacement benefits for a period of not less than three months
under an accident and health plan covering employees of the Company; or (C) is
totally disabled by the Social Security Administration. As a condition to any
benefits, the Board may require Executive to submit to such physical or mental
evaluations and tests as it deems reasonably appropriate.

    

    
      	
               
      

            	
              ii.

            	
              In
      the event of such Disability, Executive’s obligation to perform services
      under this Agreement will terminate.  The Company will pay
      Executive, as Disability pay, an amount equal to 75% of Executive’s
      bi-weekly rate of base salary in effect as of the date of his termination
      of employment due to Disability.  Disability payments will be
      made on a monthly basis and will commence on the first day of the month
      following the effective date of Executive’s termination of employment for
      Disability and end on the earlier of: (A) the date he returns to full-time
      employment at the Company in the same capacity as he was employed prior to
      his termination for Disability; (B) his death; (C) upon attainment of age
      65 or (D) the date this Agreement would have expired had Executive’s
      employment not terminated by reason of disability.  Such
      payments shall be reduced by the amount of any short- or long-term
      disability benefits payable to the Executive under any other disability
      programs sponsored by the Company or its affiliates.  In
      addition, during any period of Executive’s Disability, Executive and his
      dependents shall, to the greatest extent possible, continue to be covered
      under all non-taxable benefit plans (including life insurance and
      non-taxable medical and dental insurance plans) of the Company and its
      affiliates, in which Executive participated prior to his Disability on the
      same terms as if Executive were actively employed by the
      Company.

            

    

    

    
      	
               
      

            	
              d.

            	
              Termination for
      Cause.

            

    

    

    
      	
               
      

            	
              i.

            	
              The
      Board may, by written notice to the Executive in the form and manner
      specified in this paragraph, terminate his employment at any time, for
      “Cause”.  The Executive shall have no right to receive
      compensation or other benefits for any period after termination for
      Cause.  Termination for “Cause” shall mean termination because
      of, in the good faith determination of the Board,
    Executive’s:

            

    

    

    
      	
               
      

            	
              (1)

            	
              Personal
      dishonesty;

            

    

    

    
      	
               
      

            	
              (2)

            	
              Incompetence;

            

    

    

    
      	
               
      

            	
              (3)

            	
              Willful
      misconduct;

            

    

    

    
      	
               
      

            	
              (4)

            	
              Breach
      of fiduciary duty involving personal
profit;

            

    

    

    
      	
               
      

            	
              (5)

            	
              Intentional
      failure to perform stated duties;

            

    

    

    
      	
               
      

            	
              (6)

            	
              Willful
      violation of any law, rule or regulation (other than traffic violations or
      similar offenses) that reflects adversely on the reputation of the Company
      and the Bank, any felony conviction, any violation of law involving moral
      turpitude or any violation of a final cease-and-desist order;
      or

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (7)

            	
              Material
      breach by Executive of any provision of this
  Agreement.

            

    

    

    
      	
               
      

            	
              ii.

            	
              Notwithstanding
      the foregoing, Executive shall not be deemed to have been terminated for
      Cause by the Company unless there shall have been delivered to Executive a
      copy of a resolution duly adopted at a meeting of such Board where in the
      good faith opinion of the Board, Executive was guilty of the conduct
      described above and specifying the particulars
  thereof.

            

    

    

    
      	
               
      

            	
              e.

            	
              Voluntary Termination
      by Executive.  In addition to his other rights to
      terminate under this Agreement, Executive may voluntarily terminate
      employment during the term of this Agreement upon at least sixty (60) days
      prior written notice to the Board, in which case Executive shall receive
      only his compensation, vested rights and employee benefits up to the date
      of his termination.  Following a voluntary termination of
      employment under this Section 11(e), Executive will be subject to the
      restrictions set forth in Sections 11(g)(i) and 11(g)(ii) of this
      Agreement for a period of one (1) year from his termination
      date.

            

    

    

    
      	
               
      

            	
              f.

            	
              Without Cause or With
      Good Reason.

            

    

    

    
      	
               
      

            	
              i.

            	
              In
      addition to termination pursuant to Sections 11(a) through 11(e) the Board
      may, by written notice to Executive, immediately terminate his employment
      at any time for a reason other than Cause (a termination “Without Cause”)
      and Executive may, by written notice to the Board, immediately terminate
      this Agreement at any time for “Good Reason” (as defined
      below).

            

    

    

    
      	
               
      

            	
              ii.

            	
              Subject
      to Section 12 of this Agreement, in the event of termination under this
      Section 11(f), Executive shall be entitled to receive an amount equal to
      (i) his base salary in effect as of his termination date for the remaining
      term of the Agreement, and (ii) the value of the benefits he would have
      received during the remaining term of the Agreement under any retirement
      programs (whether tax-qualified or non-qualified) in which Executive
      participated prior to his termination (with the amount of the benefits
      determined by reference to the benefits received by the Executive or
      accrued on his behalf under such programs during the twelve (12) months
      preceding his termination), payable in a single cash lump sum distribution
      within ten (10) calendar days following such termination.  In
      addition, the Executive shall  continue to participate in any
      benefit plans of the Company or its affiliates that provide life insurance
      and non-taxable medical and dental insurance, or similar coverage upon
      terms no less favorable than the most favorable terms provided to senior
      executives of the Company or its affiliates during such
      period.  In the event that the Company or its affiliates are
      unable to provide such coverage by reason of Executive no longer being an
      employee, the Company shall pay the Executive the value of such benefits
      in a single cash lump sum distribution within ten (10) calendar days
      following his termination.

            

    

    

    
      	
               
      

            	
              iii.

            	
              “Good
      Reason” shall exist if, without Executive’s express written consent, the
      Company materially breach any of their respective obligations under this
      Agreement.  Without limitation, such a material breach shall be
      deemed to occur upon the occurrence of any of the
    following:

            

    

    

    
      	
               
      

            	
              (1)

            	
              A
      material reduction in Executive’s responsibilities or authority in
      connection with his employment with the Company, or a material diminution
      in the authority, duties or responsibilities of the officer to whom the
      Executive is required to
report;

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (2)

            	
              Assignment
      to Executive of duties of a non-executive nature or duties for which he is
      not reasonably equipped by his skills and
  experience;

            

    

    

    
      	
               
      

            	
              (3)

            	
              Failure
      of the Executive to be nominated or re-nominated to the Board to the
      extent Executive is a Board member prior to the Effective
      Date;

            

    

    

    
      	
               
      

            	
              (4)

            	
              A
      material reduction in Executive’s salary or benefits contrary to the terms
      of this Agreement, or, following a Change in Control as defined in Section
      12 of this Agreement, any reduction in salary or material reduction in
      benefits below the amounts to which he was entitled prior to the Change in
      Control;

            

    

    

    
      	
               
      

            	
              (5)

            	
              Termination
      of incentive and benefit plans (other than the Bank’s tax-qualified
      plans), programs or arrangements, or reduction of Executive’s
      participation to such an extent as to materially reduce their aggregate
      value below their aggregate value as of the Effective
  Date;

            

    

    

    
      	
               
      

            	
              (6)

            	
              A
      requirement that Executive relocate his principal business office or his
      principal place of residence outside of the area consisting of a
      twenty-five (25) mile radius from the current main office of the Company
      and any branch of the Bank, or the assignment to Executive of duties that
      would reasonably require such a relocation;
or

            

    

    

    
      	
               
      

            	
              (7)

            	
              Liquidation
      or dissolution of the Company, other than liquidations or dissolutions
      that are caused by reorganizations that do not negatively affect the
      status of  the Executive;

            

    

    

    provided,
however, that prior to any termination of employment for Good Reason (a
termination “With Good Reason”), the Executive must first provide written notice
to the Company within ninety (90) days following the initial existence of the
condition, describing the existence of such condition, and the Company shall
thereafter have the right to remedy the condition within thirty (30) days of the
date the Company received the written notice from the Executive.  If
the Company remedies the condition within such thirty (30) day cure period, then
no Good Reason shall be deemed to exist with respect to such
condition.  If the Company does not remedy the condition within such
thirty (30) day cure period, then the Executive may deliver a notice of
termination for Good Reason at any time within sixty (60) days following the
expiration of such cure period.

    

    
      	
               
      

            	
              iv.

            	
              Notwithstanding
      the foregoing, a reduction or elimination of the Executive’s benefits
      under one or more benefit plans maintained by the Company or an affiliate
      as part of a good faith, overall reduction or elimination of such plans or
      plans or benefits thereunder applicably to all participants in a manner
      that does not discriminate against Executive (except as such
      discrimination may be necessary to comply with law) shall not constitute
      an event of Good Reason or a material breach of this Agreement, provided
      that benefits of the type or to the general extent as those offered under
      such plans prior to such reduction or elimination are not available to
      other officers of the Company or any affiliate under a plan or plans in or
      under which Executive is not entitled to
  participate.

            

    

    

    
      	
               
      

            	
              v.

            	
              For
      purposes of this Agreement, any termination of Executive’s employment
      shall be construed to require a “Separation from Service” in accordance
      with Code Section 409A

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    and the
regulations promulgated thereunder, such that the Company and Executive
reasonably anticipate that the level of bona fide services Executive would
perform after termination would permanently decrease to a level that is less
than 50% of the average level of bona fide services performed (whether as an
employee or an independent contractor) over the immediately preceding thirty-six
(36)-month period.

    

    
      	
               
      

            	
              g.

            	
              Continuing Covenant
      Not to Compete or Interfere with
      Relationships.  Regardless of anything herein to the
      contrary, following a termination by the Company or Executive pursuant to
      Section 11(f):

            

    

    

    
      	
               
      

            	
              i.

            	
              Executive’s
      obligations under Section 10(c) of this Agreement will continue in effect;
      and

            

    

    

    
      	
               
      

            	
              ii.

            	
              During
      the period ending on the first anniversary of such termination, the
      Executive shall not serve as an officer, director or employee of any bank
      holding company, bank, savings bank, savings and loan holding company, or
      mortgage company (any of which, a “Financial Institution”) which Financial
      Institution offers products or services competing with those offered by
      the Company or its subsidiaries or affiliates from any office within fifty
      (50) miles from the main office of the Company or any branch of the Bank
      and, further, Executive shall not interfere with the relationship of the
      Company, its subsidiaries or affiliates and any of its employees, agents,
      or representatives.

            

    

    

    12.           Termination in Connection
with a Change in Control.

    

    
      	
               
      

            	
              a.

            	
              For
      purposes of this Agreement, a Change in Control means any of the following
      events:

            

    

    

    
      	
               
      

            	
              (i)

            	
              Merger:  The
      Company merges into or consolidates with another corporation, or merges
      another corporation into the Company, and as a result less than a majority
      of the combined voting power of the resulting corporation immediately
      after the merger or consolidation is held by persons who were stockholders
      of the Company immediately before the merger or
    consolidation.

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Acquisition of
      Significant Share Ownership:  There is filed or required
      to be filed a report on Schedule 13D or another form or schedule (other
      than Schedule 13G) required under Sections 13(d) or 14(d) of the
      Securities Exchange Act of 1934, if the schedule discloses that the filing
      person or persons acting in concert has or have become the beneficial
      owner of 25% or more of a class of the Company’s voting securities, but
      this clause (b) shall not apply to beneficial ownership of Company voting
      shares held in a fiduciary capacity by an entity of which the Company
      directly or indirectly beneficially owns 50% or more of its outstanding
      voting securities.

            

    

    

    
      	
               
      

            	
              (iii)

            	
              Change in Board
      Composition:  During any period of two consecutive years,
      individuals who constitute the Company’s Board of Directors at the
      beginning of the two-year period cease for any reason to constitute at
      least a majority of the Company’s Board of Directors; provided, however,
      that for purposes of this clause (iii), each director who is first elected
      by the board (or first nominated by the board for election by the
      stockholders) by a vote of at least two-thirds (2/3) of the directors who
      were directors at the beginning of the two-year period shall be deemed to
      have also been a director at the beginning of such period;
    or

            

    

    

    
      	
               
      

            	
              (iv)

            	
              Sale of
      Assets:  The Company sells to a third party all or
      substantially all of its
assets.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              b.

            	
              Termination.  If
      within the period ending two (2) years after a Change in Control, (i) the
      Company shall terminate the Executive’s employment Without Cause, or (ii)
      Executive voluntarily terminates his employment With Good Reason, the
      Company shall, within ten (10) calendar days following the termination of
      Executive’s employment, make a single lump sum cash payment to him equal
      to three (3) times the Executive’s average Annual Compensation (as defined
      in this Section 12(b)) over the five (5) most recently completed calendar
      years ending with the year immediately preceding the effective date of the
      Change in Control.  In determining Executive’s average Annual
      Compensation, Annual Compensation shall include base salary and any other
      taxable income, including but not limited to amounts related to the
      granting, vesting or exercise of restricted stock or stock option awards,
      commissions, bonuses (whether paid or accrued for the applicable period),
      as well as, retirement benefits, director or committee fees and fringe
      benefits paid or to be paid to Executive or paid for Executive’s benefit
      during any such year, profit sharing, employee stock ownership plan and
      other retirement contributions or benefits, including to any tax-qualified
      plan or arrangement (whether or not taxable) made or accrued on behalf of
      Executive of such year.  The cash payment made under this
      Section 12(a) shall be made in lieu of any payment also required under
      Section 11(f) of this Agreement because of a termination in such
      period.  Executive’s rights under Section 11(f) are not
      otherwise affected by this Section 12.  Also, in such event, the
      Executive shall, for a thirty-six (36) month period following his
      termination of employment, receive the value of the benefits he would have
      received over such period under any retirement programs (whether
      tax-qualified or nonqualified) in which the Executive participated prior
      to his termination (with the amount of the benefits determined by
      reference to the benefits received by the Executive or accrued on his
      behalf under such programs during the twelve (12) months preceding the
      Change in Control), payable as a single cash lump sum distribution within
      ten (10) calendar days following such termination.  In addition,
      the Executive shall and continue to participate in any benefit plans of
      the Company and/or the Bank that provide life insurance and non-taxable
      medical and dental insurance or similar coverage upon terms no less
      favorable than the most favorable terms provided to senior executives of
      the Company or its subsidiaries during such period.  In the
      event that the Company or its subsidiaries are unable to provide such
      coverage by reason of the Executive no longer being an employee, the
      Company shall pay the Executive the value of such benefits in a single
      cash lump sum distribution within ten (10) calendar days following his
      termination.

            

    

    

    
      	
               
      

            	
              c.

            	
              The
      provisions of Section 12 and Sections 14 through 27, including the defined
      terms used is such sections, shall continue in effect until the later of
      the expiration of this Agreement or two (2) years following a Change in
      Control.

            

    

    

    
      	
               
      

            	
              13.

            	
              Indemnification
      and Liability Insurance.  Subject to,
      and limited by Section 27(b) of this Agreement, the Company shall provide
      the following:

            

    

    

    
      	
               
      

            	
              a.

            	
              Indemnification.  The
      Company agrees to indemnify the Executive (and his heirs, executors, and
      administrators), and to advance expenses related thereto, to the fullest
      extent permitted under applicable law and regulations against any and all
      expenses and liabilities reasonably incurred by him in connection with or
      arising out of any action, suit, or proceeding in which he may be involved
      by reason of his having been a director or Executive of the Company or any
      affiliate or subsidiary of the Company (whether or not he continues to be
      a director or Executive at the time of incurring any such expenses or
      liabilities) such expenses and liabilities to include, but not be limited
      to, judgments, court costs, and attorney’s fees and the cost of reasonable
      settlements, such settlements to be approved by the Board, if such action
      is brought against the Executive in his capacity as an Executive or
      director of the Company or any affiliate or subsidiary of the
      Company.  Indemnification for expense shall not extend to
      matters for which the Executive has been terminated for
      Cause.  Nothing contained herein shall be deemed to provide
      indemnification prohibited by applicable law or
      regulation.  Notwithstanding anything herein to the contrary,
      the obligations of this Section 13 shall survive the term of this
      Agreement by a period of six (6)
years.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              b.

            	
              Insurance.  During
      the period in which indemnification of the Executive is required under
      this Section, the Company shall provide the Executive (and his heirs,
      executors, and administrators) with coverage under a directors’ and
      Executives’ liability policy at the expense of the Company, at least
      equivalent to such coverage provided to directors and senior Executives of
      the Company and subsidiaries.

            

    

    

    14.           Reimbursement
of Executive’s Expenses to Enforce this Agreement.  The Company shall
reimburse the Executive for all reasonable out-of-pocket expenses, including,
without limitation, reasonable attorney’s fees, incurred by the Executive in
connection with successful enforcement by the Executive of the obligations of
the Company to the Executive under this Agreement.  The Company shall
make such payments promptly and, in any event, not later than March 15 of the
year immediately following the year in which such expense was incurred by
Executive.  Successful enforcement shall mean the grant of an award of
money or the requirement that the Company take some action specified by this
Agreement:  (i) as a result of court order; or (ii) otherwise by the
Company following an initial failure of the Company to pay such money or take
such action promptly after written demand therefor from the Executive stating
the reason that such money or action was due under this Agreement at or prior to
the time of such demand.

    

    15.           Adjustment of Certain
Payments and Benefits.

    

    
      	
               
      

            	
              a.

            	
              Tax
      Indemnification.  Anything in this Agreement to the
      contrary notwithstanding and except as set forth below, in the event it
      shall be determined that any payment, benefit or distribution made or
      provided by the Company to or for the benefit of the Executive (whether
      made or provided pursuant to the terms of this Agreement or otherwise)
      (each referred to herein as 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 interest or penalties are incurred by the
      Executive with respect to such excise tax (the excise tax, together with
      any such interest and penalties, are hereinafter collectively referred to
      as the “Excise Tax”), the Executive shall be entitled to receive an
      additional payment (a “Gross-Up Payment”) 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, without limitation, any
      income taxes (and any interest and penalties imposed with respect thereto)
      and 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
      Payments.

            

    

    

    
      	
               
      

            	
              b.

            	
              Determination of
      Gross-Up Payment.  Subject to the provisions of Section
      15(c) of this Agreement, all determinations required to be made under this
      Section 15, including whether and when a Gross-Up Payment is required, the
      amount of such Gross-Up Payment and the assumptions to be utilized in
      arriving at such determination, shall be made by a certified public
      accounting firm or independent tax counsel reasonably acceptable to the
      Company as may be designated by the Executive (the “Consulting Firm”)
      which shall provide detailed supporting calculations to the Company and
      the Executive within fifteen (15) business days of the receipt of notice
      from the Executive that there has been a Payment, or such earlier time as
      is requested by the Company.  All fees and expenses of the
      Consulting Firm shall be borne solely by the Company.  Any
      Gross-Up Payment, as determined pursuant to this Section 15, shall be paid
      by the Company to the Executive within five (5) business days of the later
      of (i) the due date for the payment of any Excise Tax, and (ii) the
      receipt of the Consulting Firm’s determination, provided however that the
      Gross-Up Payment shall be made no later than December 31 of the calendar
      year immediately following the calendar year in which the Executive remits
      the Excise Tax to the applicable taxing authority.  Any
      determination by the Consulting Firm shall be binding upon the Company and
      the Executive.  As a result of the uncertainty in the
      application of Section 4999 of the Code, at the time of the initial
      determination by the Consulting Firm hereunder, it is possible that a
      Gross-Up Payment will not have been made by the Company which should have
      been made (an “Underpayment”), consistent with the calculations required
      to be made hereunder.  In the
event

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    that the
Company exhausts its remedies pursuant to Section 15(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Consulting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.

    

    
      	
               
      

            	
              c.

            	
              Treatment of
      Claims.  The Executive shall notify the Company in
      writing of any claim by the Internal Revenue Service that, if successful,
      would require a Gross-Up Payment to be made.  Such notification
      shall be given as soon as practicable, but no later than ten (10) business
      days, after the Executive is informed in writing of such claim and shall
      apprise the Company of the nature of such claim and the date on which such
      claim is requested to be paid.  The Executive shall not pay such
      claim prior to the expiration of the thirty (30) day period following the
      date on which it gives such notice to the Company (or any shorter period
      ending on the date that payment of taxes with respect to such claim is
      due).  If the Company notifies the Executive in writing prior to
      the expiration of this period that it desires to contest such claim, the
      Executive shall:

            

    

    

    
      	
               
      

            	
              i.

            	
              give
      the Company any information reasonably requested by the Company relating
      to such claim;

            

    

    

    
      	
               
      

            	
              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 reasonably selected by the
Company;

            

    

    

    
      	
               
      

            	
              iii.

            	
              cooperate
      with the Company in good faith in order to effectively 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 additional interest and penalties) incurred in
      connection with such contest and indemnity and hold the Executive
      harmless, on an after-tax basis, for any Excise Tax or related taxes,
      interest or penalties imposed as a result of such representation and
      payment of costs and expenses.  Without limitation on the
      foregoing provisions of this Section 15(c) of this Agreement, the Company
      shall control all proceedings taken in connection with such contest and,
      at their option, may pursue or forgo any and all administrative appeals,
      proceedings, hearings and conferences with the taxing authority with
      respect to such claim and may, at their option, either direct the
      Executive to pay the tax claimed and sue for a refund or contest the claim
      in any permissible manner.  Further, 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 such claim and sue for a refund, the
      Company shall advance the amount of such payment to the Executive, on an
      interest-free basis (including interest or penalties with respect
      thereto).  Furthermore, the Company’s control of the contest
      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 issues raised by the Internal
      Revenue Service or any other taxing
authority.

            

    

    

    
      	
               
      

            	
              d.

            	
              Adjustments to the
      Gross-Up Payment.  If, after the receipt by the Executive
      of an amount advanced by the Company pursuant to Section 15(c) of this
      Agreement, the Executive becomes entitled to receive any refund with
      respect to such claim, the Executive shall (subject to the Company’s
      compliance with the requirements of Section 15(c) of this Agreement)
      promptly pay to the Company the amount of such refund (together with any
      interest paid or credited thereon after applicable taxes).  If,
      after the receipt by the Executive of an amount advanced by the
      Company

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    pursuant
to Section 15(c) of this Agreement, a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and such denial
of refund occurs prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of the Gross-Up Payment required to be paid.

    

    16.           Injunctive
Relief.  If there is a
breach or threatened breach of Section 11(g) of this Agreement or the
prohibitions upon disclosure contained in Section 10(c) of this Agreement, the
parties agree that there is no adequate remedy at law for such breach, and that
the Company shall be entitled to injunctive relief restraining the Executive
from such breach or threatened breach, but such relief shall not be the
exclusive remedy hereunder for such breach.  The parties hereto
likewise agree that the Executive, without limitation, shall be entitled to
injunctive relief to enforce the obligations of the Company under this
Agreement.

    

    17.           Successors and
Assigns.

    

    
      	
               
      

            	
              a.

            	
              This
      Agreement shall inure to the benefit of and be binding upon any corporate
      or other successor of the Company which shall acquire, directly or
      indirectly, by merger, consolidation, purchase or otherwise, all or
      substantially all of the assets or stock of the
  Company.

            

    

    

    
      	
               
      

            	
              b.

            	
              Since
      the Company is contracting for the unique and personal skills of
      Executive, Executive shall be precluded from assigning or delegating his
      rights or duties hereunder without first obtaining the written consent of
      the Company.

            

    

    

    18.           No
Mitigation.  Executive shall
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise and no such payment shall be
offset or reduced by the amount of any compensation or benefits provided to
Executive in any subsequent employment.

    

    19.           Notices.  All notices,
requests, demands and other communications in connection with this Agreement
shall be made in writing and shall be deemed to have been given when delivered
by hand or 48 hours after mailing at any general or branch United States Post
Office, by registered or certified mail, postage prepaid, addressed to the
Company at their principal business offices and to Executive at his home address
as maintained in the records of the Company.

    

    20.           No Plan
Created by this Agreement.  Executive and the
Company expressly declare and agree that this Agreement was negotiated among
them and that no provision or provisions of this Agreement are intended to, or
shall be deemed to, create any plan for purposes of the Employee Retirement
Income Security Act or any other law or regulation, and each party expressly
waives any right to assert the contrary.  Any assertion in any
judicial or administrative filing, hearing, or process that such a plan was so
created by this Agreement shall be deemed a material breach of this Agreement by
the party making such an assertion.

    

    21.           Amendments.  No amendments or
additions to this Agreement shall be binding unless made in writing and signed
by all of the parties, except as herein otherwise specifically
provided.

    

    22.           Applicable
Law.  Except to the
extent preempted by Federal law, the laws of the State of Maryland shall govern
this Agreement in all respects, whether as to its validity, construction,
capacity, performance or otherwise.

    

    23.           Severability.  The provisions of
this Agreement shall be deemed severable and the invalidity or unenforceability
of any provision shall not affect the validity or enforceability of the other
provisions hereof.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    24.           Headings.  Headings
contained herein are for convenience of reference only.

    

    25.           Entire
Agreement.  This Agreement,
together with any understanding or modifications thereof as agreed to in writing
by the parties, shall constitute the entire agreement among the parties hereto
with respect to the subject matter hereof, other than written agreements with
respect to specific plans, programs or arrangements described in Sections 5 and
6.

    

    26.           Source of
Payments.  Notwithstanding
any provision in this Agreement to the contrary, to the extent payments and
benefits, as provided for under this Agreement, are paid or received by
Executive under the Employment Agreement in effect between Executive and the
Bank, the payments and benefits paid by the Bank will be subtracted from any
amount or benefit due simultaneously to Executive under similar provisions of
this Agreement.  Payments will be allocated in proportion to the level
of activity and the time expended by Executive on activities related to the
Company and the Bank, respectively, as determined by the Company and the
Bank.

    

    27.           Miscellaneous.  In
the event any of the foregoing provisions of this Section 27 are in conflict
with the terms of this Agreement, this Section 27 shall prevail.

    

    
      	
               
      

            	
              a.

            	
              The
      Board may terminate Executive’s employment at any time, but any
      termination by the Company, other than Termination for Cause, shall not
      prejudice Executive’s right to compensation or other benefits under this
      Agreement.  Executive shall not have the right to receive
      compensation or other benefits for any period after Termination for Cause
      as defined in Section 11(d)
hereinabove.

            

    

    

    
      	
               
      

            	
              b.

            	
              Any
      payments made to employees pursuant to this Agreement, or otherwise, are
      subject to and conditioned upon their compliance with 12 U.S.C. §1828(k)
      and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and
      Indemnification Payments.

            

    

    

    
      	
               
      

            	
              c.

            	
              Notwithstanding
      the foregoing, in the event the Executive is a Specified Employee (as
      defined herein), then, solely, to the extent required to avoid penalties
      under Code Section 409A, the Executive’s payments shall be paid on the
      first day of the seventh month following the Executive’s Separation from
      Service (together with interest thereon at the prevailing prime
      rate).  A “Specified Employee” shall be interpreted to comply
      with Code Section 409A and shall mean a key employee within the meaning of
      Code Section 416(i) (without regard to paragraph 5 thereof), but an
      individual shall be a “Specified Employee” only if the Company or the Bank
      is or becomes a publicly traded
company.

            

    

    

    [signature
page follows]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    IN WITNESS WHEREOF, the
parties hereto have executed this Agreement on the date first set forth
below.

     

    

    
      	 
      	 
      	
              NEWPORT
      FEDERAL SAVINGS BANK

            	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	
              By:

            	 
      	 
	
              Date

            	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	
              EXECUTIVE

            	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	
              By:

            	 
      	 
	
              Dateex101to8k07319_03242010.htm

Exhibit 10.1

 

GenCorp Inc.

Amended and Restated 2009 Equity and Performance Incentive Plan

ARTICLE 1.

Establishment, Purpose, and Duration

1.1  Establishment.  GenCorp Inc., an Ohio corporation (hereinafter referred to as the “Company”), establishes an incentive compensation plan to be known as the 2009 Equity and Performance Incentive Plan (hereinafter referred to as the “Plan”), as set forth in this document.

The Plan permits the grant of Cash-Based Awards, Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Other Stock-Based Awards.

The Plan shall become effective upon shareholder approval (the “Effective Date”) and shall remain in effect as provided in Section 1.3 hereof.

1.2  Purpose of the Plan.  The purpose of the Plan is to promote the interests of the Company and its shareholders by strengthening the Company’s ability to attract, motivate, and retain Employees and Directors upon whose judgment, initiative, and efforts the financial success and growth of the business of the Company largely depend, and to provide an additional incentive for such individuals through stock ownership and other rights that promote and recognize the financial success and growth of the Company and create value for shareholders.

1.3  Duration of the Plan.  Unless sooner terminated as provided herein, the Plan shall terminate ten years from the Effective Date. After the Plan is terminated, no Awards may be granted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan’s terms and conditions.

ARTICLE 2.

Definitions

Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.

2.1  “Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 promulgated under the General Rules and Regulations of the Exchange Act.

2.2  “Annual Award Limit” or “Annual Award Limits” have the meaning set forth in Section 4.3.

2.3  “Award” means, individually or collectively, a grant under this Plan of Cash-Based Awards, Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units or Other Stock-Based Awards, in each case subject to the terms of this Plan.  Awards shall also include, if approved by the Committee, any Nonqualified Stock Options, Incentive Stock Options, or Performance Shares that could not be fully awarded under the 1999 GenCorp Inc. Equity and Performance Incentive Plan because of any numerical limit on Awards set forth thereunder.

2.4  “Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 promulgated under the General Rules and Regulations under the Exchange Act.

2.5  “Board” or “Board of Directors” means the Board of Directors of the Company.

2.6  “Cash-Based Award” means an Award granted to a Participant as described in Article 10.

 

  

1

  

 

2.7  “Change in Control” means a Change in Control as defined in Article 15.

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

2.9.  “Committee” means the Organization and Compensation Committee of the Board, or any other committee designated by the Board to administer this Plan. The members of the Committee shall be appointed from time to time by and shall serve at the discretion of the Board. The Committee shall consist of two or more directors who are Nonemployee Directors and “Outside Directors” (as such term is defined in Section 162(m) of the Code).

2.10  “Company” means GenCorp Inc., an Ohio corporation, and any successor thereto as provided in Article 18 herein.

2.11  “Consolidated Operating Earnings” means the consolidated earnings before income taxes of the Company, computed in accordance with generally accepted accounting principles, but shall exclude the effects of Extraordinary Items.

2.12  “Covered Employee” means a Participant who is a “covered employee,” as defined in Section 162(m) of the Code and the regulations promulgated under Section 162(m) of the Code, or any successor statute.

2.13  “Director” means a member of the Board of Directors of the Company and/or any of its Affiliates and/or Subsidiaries.

2.14  “Effective Date” has the meaning set forth in Section 1.1.

2.15  “Employee” means any employee of the Company, its Affiliates and/or Subsidiaries.

2.16  “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.

2.17  “Extraordinary Items” means (i) extraordinary, unusual and/or nonrecurring items of gain or loss; (ii) gains or losses on the disposition of a business; (iii) changes in tax or accounting regulations or laws; or (iv) the effect of a merger or acquisition, all of which must be identified in the audited financial statements, including footnotes, or Management Discussion and Analysis section of the Company’s annual report.

2.18  “Evidence of Award” means an agreement, certificate, resolution or other type or form of writing or other evidence approved by the Committee which sets forth the terms and conditions of an Award. An Evidence of Award may be in any electronic medium, may be limited to a notation on the books and records of the Company and, with the approval of the Committee, need not be signed by a representative of the Company or a Participant.

2.19  “Fair Market Value” or “FMV” means the last sales price reported for the Shares on the applicable date as reported on the principal national securities exchange in the United States on which it is then traded or The NASDAQ Stock Market (if the Shares are so listed), or, if not so listed, the mean between the closing bid and asked prices of publicly traded Shares in the over-the-counter market, or, if such bid and asked prices shall not be available, as reported by any nationally recognized quotation service selected by the Company, or as determined by the Committee in a manner consistent with the provisions of the Code. If, however, the required accounting standards used to account for equity Awards granted to Participants are substantially modified subsequent to the Effective Date of the Plan such that fair value accounting for such Awards becomes required, the Committee shall have the ability to determine an Award’s FMV based on the relevant facts and circumstances.

2.20  “Full Value Award” means an Award other than in the form of an Option or SAR, and which is settled by the issuance of Shares.

 

  

2

  

 

2.21  “Freestanding SAR” means an SAR that is granted independently of any Options, as described in Article 7.

2.22  “Grant Price” means the price established at the time of grant of a SAR pursuant to Article 7, used to determine whether there is any payment due upon exercise of the SAR.

2.23  “Incentive Stock Option” means an Option that is intended to qualify as an “incentive stock option” under Section 422 of the Code or any successor provision.

2.24  “Insider” shall mean an individual who is, on the relevant date, an officer, Director, or more than ten percent (10%) Beneficial Owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act.

2.25  “Net Income” means the consolidated net income before taxes for the Plan Year, as reported in the Company’s annual report to shareholders or as otherwise reported to shareholders.

2.26  “Nonemployee Director” has the same meaning set forth in Rule 16b-3 promulgated under the Exchange Act, or any successor definition adopted by the United States Securities and Exchange Commission.

2.27  “Nonqualified Stock Option” means an Option that is not intended to meet the requirements of Section 422 of the Code, or that otherwise does not meet such requirements.

2.28  “Operating Cash Flow” means cash flow from operating activities as defined in Statement of Financial Accounting Standards Number 95, Statement of Cash Flows.

2.29  “Option” means the right to purchase Shares granted to a Participant in accordance with Article 6. Options granted under this Plan may be Nonqualified Stock Options, Incentive Stock Option or a combination thereof.

2.30  “Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.

2.31  “Other Stock-Based Award” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Article 10.

2.32  “Participant” means any eligible person as set forth in Article 5 to whom an Award is granted.

2.33  “Performance-Based Compensation” means compensation under an Award that satisfies the requirements of Section 162(m) of the Code for deductibility of remuneration paid to Covered Employees.

2.34  “Performance Measures” means measures as described in Article 11 on which the performance goals are based and which are approved by the Company’s shareholders pursuant to this Plan in order to qualify Awards as Performance-Based Compensation.

2.35  “Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.

2.36  “Performance Share” means an Award granted to a Participant, as described in Article 9.

2.37  “Performance Unit” means an Award granted to a Participant, as described in Article 9.

 

  

3

  

2.38  “Period of Restriction” means the period when Restricted Stock or Restricted Stock Units are subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Article 8.

2.39  “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.

2.40  “Plan” means the GenCorp Inc. 2009 Equity and Performance Incentive Plan.

2.41  “Plan Year” means the Company’s fiscal year that begins December 1 and ends November 30.

2.42  “Restricted Stock” means Shares granted or sold to a Participant pursuant to Article 8 as to which the Period of Restriction has not lapsed.

2.43  “Restricted Stock Unit” means a unit granted or sold to a Participant pursuant to Article 8 as to which the Period of Restriction has not lapsed.

2.44  “Section 409A Rules” means the provisions of Section 409A of the Code and Treasury Regulations and other Internal Revenue Service guidance promulgated thereunder.

2.45  “Share” means a share of common stock of the Company, $.10 par value per share.

2.46  “Stock Appreciation Right” or “SAR” means an Award, designated as a SAR and granted pursuant to the terms of Article 7 herein.

2.47  “Subsidiary” means a corporation, company or other entity (i) more than 50 percent (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 percent (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 percent (50%) of the total combined voting power represented by all classes of stock issued by such corporation.

ARTICLE 3.

Administration

3.1  General.  The Committee shall be responsible for administering the Plan, subject to this Article 3 and the other provisions of the Plan. The act or determination of a majority of the Committee shall be the act or determination of the Committee and any decision reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority at a meeting duly held. The Committee may employ attorneys, consultants, accountants, agents, and other persons, any of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested persons.

3.2  Authority of the Committee.  The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of the Plan and any Evidence of Award or other agreement or document ancillary to or in connection with the Plan, to determine eligibility for Awards and to adopt such rules, regulations, forms, instruments, and guidelines for administering the Plan as the Committee may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions, including the terms and conditions set forth in an Evidence of Award, and, subject to Article 16, adopting modifications and amendments to the Plan or any Evidence of Award, including without limitation, any that are necessary to comply with the laws of the countries and other jurisdictions in which the Company, its Affiliates, and/or its Subsidiaries operate. In the event that for any reason the Committee is unable to act or if the Committee at the time of any grant, Award or other acquisition under the Plan does not consist of two or more Nonemployee Directors, or if there shall be no such Committee, then the Plan shall be administered by the Board, and references herein to the Committee (except in the proviso to this sentence) shall be deemed to be references to the Board.

 

  

4

  

ARTICLE 4.

Shares Subject to the Plan and Maximum Awards

4.1  Number of Shares Available for Awards.

(a) Subject to adjustment as provided in Section 4.4 herein, the maximum number of Shares available for issuance to Participants under the Plan (the “Share Authorization”) shall be two million (2,000,000) Shares, all of which may be Incentive Stock Options;

(b) Of the Shares reserved for issuance under Section 4.1(a) of the Plan, no more than one million (1,000,000) of the reserved Shares may be issued pursuant to Full Value Awards.

(c) Subject to the limit set forth in Section 4.1(a) on the number of Shares that may be issued in the aggregate under the Plan, the maximum number of Shares that may be issued to Nonemployee Directors shall be two hundred thousand (200,000) Shares, and no Nonemployee Director may receive more than one hundred fifty thousand (150,000) Shares in any Plan Year.

4.2  Share Usage.  Shares covered by an Award shall only be counted as used to the extent they are actually issued. Any Shares related to Awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, are settled in cash in lieu of Shares, or are exchanged with the Committee’s permission, prior to the issuance of Shares, for Awards not involving Shares, shall be available again for grant under the Plan. Moreover, if the Option Price of any Option granted under the Plan or the tax withholding requirements with respect to any Award granted under the Plan are satisfied by tendering Shares to the Company (by either actual delivery or by attestation), or if an SAR is exercised, only the number of Shares issued, net of the Shares tendered, if any, will be deemed delivered for purposes of determining the maximum number of Shares available for delivery under the Plan and any Shares so tendered shall again be available for issuance under the Plan. The maximum number of Shares available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional Shares or credited as additional Restricted Stock, Restricted Stock Units, Performance Shares, or Stock-Based Awards. The Shares available for issuance under the Plan may be authorized and unissued Shares, treasury Shares or a combination thereof.

4.3  Annual Award Limits.  Subject to the terms of Section 4.1 hereof and unless and until the Committee determines that an Award to a Covered Employee shall not be designed to qualify as Performance-Based Compensation, the following limits (each an “Annual Award Limit,” and, collectively, “Annual Award Limits”) shall apply to grants of such Awards under the Plan:

(a) Options:  The maximum aggregate number of Shares subject to Options granted in any one Plan Year to any one Participant shall be two hundred thousand (200,000).

 

  

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(b) Incentive Stock Options:  The maximum aggregate number of Shares subject to Incentive Stock Options granted under the Plan to any one Participant shall be two hundred thousand (200,000).

(c) SARs:  The maximum number of Shares subject to Stock Appreciation Rights granted in any one Plan Year to any one Participant shall be two hundred thousand (200,000).

(d) Restricted Stock or Restricted Stock Units:  The maximum aggregate grant with respect to Awards of Restricted Stock or Restricted Stock Units in any one Plan Year to any one Participant shall be two hundred thousand (200,000).

(e) Performance Units or Performance Shares:  The maximum aggregate Award of Performance Units or Performance Shares that any one Participant may receive in any one Plan Year shall be two hundred thousand (200,000) Shares, or equal to the value of two hundred thousand (200,000) Shares determined as of the date of vesting or payout, as applicable.

(f) Cash-Based Awards:  The maximum aggregate amount awarded or credited with respect to Cash-Based Awards to any one Participant in any one Plan Year may not exceed the value of one hundred thousand dollars ($100,000) determined as of the date of vesting or payout, as applicable.

(g) Other Stock-Based Awards.  The maximum aggregate grant with respect to other Stock-Based Awards pursuant to Section 10.2 in any one Plan Year to any one Participant shall be one hundred thousand (100,000) Shares.

4.4  Adjustments in Authorized Shares.  In the event of any corporate event or transaction (including, but not limited to, a change in the shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of Shares, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee, in its sole discretion, in order to prevent dilution or enlargement of Participants’ rights under the Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued under the Plan or under particular forms of Awards, the number and kind of Shares subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the Annual Award Limits, and other value determinations applicable to outstanding Awards.

Except as otherwise provided by Section 162(m) of the Code, the Committee, in its sole discretion, may also make appropriate adjustments in the terms of any Awards under the Plan to reflect or related to such changes or distributions and to modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan.

Subject to the provisions of Article 16, without affecting the number of Shares reserved or available hereunder, the Committee may authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with the rules under Section 422 of the Code and the Section 409A Rules, where applicable.

To the extent that any Award hereunder is one that is made solely because of a limitation on awards under the 1999 GenCorp Inc. Equity and Performance Incentive Plan such Award shall reduce on a Share for Share basis, as applicable, any limit on Shares set forth in this Section 4.

 

  

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ARTICLE 5.

Eligibility and Participation

5.1  Eligibility.  Individuals eligible to participate in this Plan include all Employees and Nonemployee Directors.

5.2  Actual Participation.  Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible individuals, those to whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible by law, and the amount of each Award. In making this determination, the Committee may consider any factors it deems relevant, including without limitation, the office or position held by a Participant or the Participant’s relationship to the Company, the Participant’s degree of responsibility for and contribution to the growth and success of the Company or any Subsidiary or Affiliate, the Participant’s length of service, promotions and potential.

ARTICLE 6.

Options

6.1  Grant of Options.  Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion.

6.2  Evidence of Award.  Each Option grant shall be evidenced by an Evidence of Award that shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other provisions as the Committee shall determine which are not inconsistent with the terms of the Plan.

6.3  Option Price.  The Option Price for each grant of an Option under this Plan shall be as determined by the Committee and shall be specified in the Evidence of Award. The Option Price may not be less than 100% of the Fair Market Value of the Shares on the date of grant; provided, however, that an Option granted outside the United States to a person who is a non-U.S. taxpayer may be granted with a Option Price less than the Fair Market Value of the underlying Shares on the date of grant if necessary to utilize a locally available tax advantage.

6.4  Duration of Options.  Except as otherwise provided in Section 422 of the Code, each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant and specify in the Evidence of Award; provided, however, that no Option shall be exercisable later than the seventh (7th) anniversary date of its grant. Notwithstanding the foregoing, for Options granted to Participants outside the United States who are non-U.S. taxpayers, the Committee has the authority to grant Options that have a term greater than seven (7) years.

6.5  Exercise of Options.  Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve and specify in the Evidence of Award, which terms and restrictions need not be the same for each grant or for each Participant. The Committee may provide in the Evidence of Award for the acceleration of the vesting and exercisability of outstanding Options, in whole or in part, as determined by the Committee in its sole discretion, in the event of a Change in Control.

6.6  Payment.  Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.

A condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of the Option Price. The Option Price of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Option Price (provided that except as otherwise determined by the Committee, the Shares that are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price or have been purchased on the open market); (c) by a combination of (a) and (b); or (d) any other method approved or accepted by the Committee in its sole discretion, including, without limitation, if the Committee so determines, (i) a cashless (broker-assisted) exercise, or (ii) a reduction in the number of Shares that would otherwise be issued by such number of Shares having in the aggregate a Fair Market Value at the time of exercise equal to the portion of the Option Price being so paid.

 

  

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Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry Shares, or upon the Participant’s request, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).

Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars.

6.7  Restrictions on Share Transferability.  The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable and specify in the Evidence of Award, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares.

6.8  Termination of Employment.  Each Participant’s Evidence of Award shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s employment or provision of services to the Company, its Affiliates, its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Evidence of Award entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination.

6.9  Transferability of Options.  Except as otherwise provided in a Participant’s Evidence of Award or otherwise at any time by the Committee, no Option granted under this Article 6 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or as otherwise required by law; provided that the Board or Committee may permit further transferability, on a general or a specific basis, and may impose conditions and limitations on any permitted transferability. Further, except as otherwise provided in a Participant’s Evidence of Award or otherwise at any time by the Committee, or unless the Board or Committee decides to permit further transferability, all Options granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant. With respect to those Options, if any, that are permitted to be transferred to another person, references in the Plan to exercise or payment of the Option Price by the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee.

ARTICLE 7.

Stock Appreciation Rights

7.1  Grant of SARs.  Subject to the terms and conditions of the Plan, SARs, including Freestanding SARs, may be granted to Participants at any time and from time to time as shall be determined by the Committee.

Subject to the terms and conditions of the Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs.

The Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and shall be specified in the Evidence of Award. The Grant Price may include (but not be limited to) a Grant Price based on one hundred percent (100%) of the FMV of the Shares on the date of grant, a Grant Price that is set at a premium to the FMV of the Shares on the date of grant, or is indexed to the FMV of the Shares on the date of grant, with the index determined by the Committee, in its discretion to the extent consistent with the Section 409A Rules.

 

  

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7.2  SAR Agreement.  Each SAR Award shall be evidenced by an Evidence of Award that shall specify the Grant Price, the term of the SAR, and such other provisions as the Committee shall determine.

7.3  Term of SAR.  The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Evidence of Award, no SAR shall be exercisable later than the seventh (7th) anniversary date of its grant. Notwithstanding the foregoing, for SARs granted to Participants who are non-U.S. taxpayers, the Committee has the authority to grant SARs that have a term greater than seven (7) years.

7.4  Exercise of Freestanding SARs.  Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes and specifies in the Evidence of Award. The Committee may provide in the Evidence of Award for the earlier exercise of Freestanding SARS in the event of a Change in Control.

7.5.  Payment of SAR Amount.  Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:

(a) The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price; by

(b) The number of Shares with respect to which the SAR is exercised.

At the discretion of the Committee, the payment upon SAR exercise may be in cash, Shares, or any combination thereof, or in any other manner approved by the Committee in its sole discretion. The Committee’s determination regarding the form of SAR payout shall be set forth in the Evidence of Award pertaining to the grant of the SAR.

7.6  Termination of Employment.  Each Evidence of Award shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Evidence of Award entered into with Participants, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

7.7  Nontransferability of SARs.  Except as otherwise provided in a Participant’s Evidence of Award or otherwise at any time by the Committee, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or as otherwise required by law. Further, except as otherwise provided in a Participant’s Evidence of Award or otherwise at any time by the Committee, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. With respect to those SARs, if any, that are permitted to be transferred to another person, references in the Plan to exercise of the SAR by the Participant or payment of any amount to the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee.

7.8  Other Restrictions.  The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise of a SAR granted pursuant to the Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received upon exercise of a SAR for a specified period of time.

 

  

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ARTICLE 8.

Restricted Stock and Restricted Stock Units

8.1  Grant of Restricted Stock or Restricted Stock Units.  Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee shall determine. Restricted Stock Units shall represent the right of a Participant to receive payment upon the lapse of the Period of Restriction.

8.2  Restricted Stock or Restricted Stock Unit Agreement.  Each Restricted Stock and/or Restricted Stock Unit grant shall be evidenced by an Evidence of Award that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, and such other provisions as the Committee shall determine.

8.3  Transferability.  Except as provided in this Plan or an Evidence of Award, the Shares of Restricted Stock and/or Restricted Stock Units granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Evidence of Award (and in the case of Restricted Stock Units until the date of delivery or other payment), or upon earlier satisfaction of any other conditions, as specified by the Committee, in its sole discretion, and set forth in the Evidence of Award or otherwise at any time by the Committee. All rights with respect to the Restricted Stock and/or Restricted Stock Units granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant, except as otherwise provided in an Evidence of Award or at any time by the Committee.

8.4  Other Restrictions.  The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock or Restricted Stock Units.

Except with respect to a maximum of five percent (5%) of the Shares authorized in Section 4.1(a), or as otherwise provided in Section 8.7 hereto, any Awards of Restricted Stock or Restricted Stock Units which vest on the basis of the Participant’s continued employment with or provision of service to the Company shall not provide for vesting which is any more rapid than annual pro rata vesting over a three (3) year period and any Awards of Restricted Stock or Restricted Stock Units which vest upon the attainment of performance goals shall provide for a performance period of at least twelve (12) months. The Committee may provide in the Evidence of Award for immediate vesting of Restricted Stock or Restricted Stock Units, in whole or in part, in the event of a Change in Control.

To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.

Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations), and Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion shall determine.

 

  

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8.5  Certificate Legend.  In addition to any legends placed on certificates pursuant to Section 8.4, each certificate representing Shares of Restricted Stock granted pursuant to the Plan may bear a legend as determined by the Committee in its sole discretion.

8.6  Voting Rights.  Unless otherwise determined by the Committee and set forth in a Participant’s Evidence of Award, to the extent permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock granted hereunder may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.

8.7  Termination of Employment.  To the extent consistent with the Section 409A Rules, each Evidence of Award shall set forth the extent to which the Participant shall have the right to retain Restricted Stock and/or Restricted Stock Units following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Evidence of Award entered into with each Participant, need not be uniform among all Shares of Restricted Stock or Restricted Stock Units issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

ARTICLE 9.

Performance Units/Performance Shares

9.1  Grant of Performance Units/Performance Shares.  Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the Committee shall determine.

9.2  Value of Performance Units/Performance Shares.  Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set performance goals in its discretion as described in Section 11.4 which, depending on the extent to which they are met, will determine the value and/or number of Performance Units/Performance Shares that will be paid out to the Participant.

9.3  Earning of Performance Units/Performance Shares.  Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Performance Shares shall be entitled to receive payout on the value and number of Performance Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.

9.4  Form and Timing of Payment of Performance Units/Performance Shares.  Payment of earned Performance Units/Performance Shares shall be as determined by the Committee and as evidenced in the Evidence of Award. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Units/Performance Shares in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Performance Shares at the close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Evidence of Award pertaining to the grant of the Award.

9.5  Termination of Employment.  To the extent consistent with the Section 409A Rules and Section 162(m) of the Code, each Evidence of Award shall set forth the extent to which the Participant shall have the right to retain Performance Units and/or Performance Shares following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Evidence of Award entered into with each Participant, need not be uniform among all Awards of Performance Units or Performance Shares issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

 

  

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9.6  Nontransferability.  Except as otherwise provided in a Participant’s Evidence of Award or otherwise at any time by the Committee, Performance Units/Performance Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or as otherwise required by law. Further, except as otherwise provided in a Participant’s Evidence of Award or otherwise at any time by the Committee, a Participant’s rights under the Plan shall be exercisable during his or her lifetime only by such Participant.

ARTICLE 10.

Cash-Based Awards and Other Stock-Based Awards

10.1  Grant of Cash-Based Awards.  Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms as the Committee may determine.

10.2  Other Stock-Based Awards.  The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

10.3  Value of Cash-Based and Other Stock-Based Awards.  Each Cash-Based Award shall specify a payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Committee. The Committee may design Cash-Based Awards and Other Stock-Based Awards to qualify as Performance-Based Compensation and may design Cash-Based Awards and Other Stock-Based Awards to not qualify as Performance-Based Compensation. If the Committee exercises its discretion to establish Cash-Based Awards and Other Stock-Based Awards as Performance-Based Compensation, the number and/or value of Cash-Based Awards or Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the Performance Measures are met.

10.4  Payment of Cash-Based Awards and Other Stock-Based Awards.  Payment, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash, Shares or a combination thereof, as the Committee determines.

10.5  Termination of Employment.  The Committee shall determine the extent to which the Participant shall have the right to receive Cash-Based Awards following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, such provisions may be included in an agreement entered into with each Participant, but need not be uniform among all Awards of Cash-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

10.6  Nontransferability.  Except as otherwise determined by the Committee, neither Cash-Based Awards nor Other Stock-Based Awards may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided by the Committee, a Participant’s rights under the Plan, if exercisable, shall be exercisable during his or her lifetime only by such Participant. With respect to those Cash-Based Awards or Other Stock-Based Awards, if any, that are permitted to be transferred to another person, references in the Plan to exercise or payment of such Awards by or to the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee.

 

  

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ARTICLE 11.

Performance Measures

11.1  Performance Measures.  Unless and until the Committee proposes for shareholder vote and the shareholders approve a change in the general Performance Measures set forth in this Article 11, the performance goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to one or more of the following Performance Measures:

(a) Net earnings or net income (before or after taxes and interest/investments);

(b) Earnings per share;

(c) Earnings per share growth;

(d) Net sales growth;

(e) Net earnings or net income growth (before or after taxes and interest/investment);

(f) Net operating profit;

(g) Return measures (including return on assets, capital, equity, or sales);

(h) Cash flow (including operating cash flow , free cash flow, and cash flow return on capital);

(i) Earnings before or after taxes, interest, depreciation, and/or amortization;

(j) Gross or operating margins or growth thereof;

(k) Productivity ratios;

(l) Share price (including growth measures and total shareholder return);

(m) Expense targets;

(n) Operating efficiency;

(o) Customer satisfaction;

(p) Revenue or Revenue growth;

(q) Operating profit growth;

(r) Working capital targets;

(s) Economic value added;

(t) Real estate management objectives;

(u) Sale or disposition of assets; and

 

  

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(v) Acquisition of key assets.

Any Performance Measure(s) may be used to measure the performance of the Company, Subsidiary, and/or Affiliate as a whole or any business unit of the Company, Subsidiary, and/or Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparable companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure (l) above as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 11.

To the extent that any Award hereunder is one that is made solely because of a limitation on awards under the 1999 GenCorp Inc. Equity and Performance Incentive Plan, the Performance Measurement shall be the same as under the 1999 GenCorp Inc. Equity and Performance Incentive Plan.

11.2  Evaluation of Performance.  The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year, (f) acquisitions or divestitures and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of Section 162(m) of the Code for deductibility.

11.3  Adjustment of Performance-Based Compensation.  The terms of Awards that are designed to qualify as Performance-Based Compensation, and that are held by Covered Employees, may not be modified, except to the extent that after such modification the Award would continue to constitute Performance-Based Compensation. The Committee shall retain the discretion to reduce the amount of any payment under an Award that is designed to qualify as Performance-Based Compensation that would otherwise be payable to a Covered Employee, either on a formula or discretionary basis or any combination, as the Committee determines.

11.4  Committee Discretion.  In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Section 162(m) of the Code and may base vesting on Performance Measures other than those set forth in Section 11.1.

ARTICLE 12.

Beneficiary Designation

Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.

 

  

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ARTICLE 13.

Deferrals

To the extent permitted by the Section 409A Rules, the Committee may permit or require a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted Stock or Restricted Stock Units, or the satisfaction of any requirements or performance goals with respect to Performance Shares, Performance Units, Cash-Based Awards or Other Stock-Based Awards. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals, consistent with the Section 409A Rules.

ARTICLE 14.

Rights of Participants

14.1  Employment.  Nothing in the Plan or an Evidence of Award shall interfere with or limit in any way the right of the Company, its Affiliates, and/or its Subsidiaries, to terminate any Participant’s employment or service on the Board at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his or her employment or service for any specified period of time.

Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company, its Affiliates, and/or its Subsidiaries and, accordingly, subject to Articles 3 and 16, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company, its Affiliates, and/or its Subsidiaries.

14.2  Participation.  No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.

14.3  Rights as a Shareholder.  Except as otherwise provided herein, a Participant shall have none of the rights of a shareholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.

ARTICLE 15.

Change in Control

15.1  Change in Control.  For purposes of this Plan, a “Change in Control” shall mean the occurrence during the term of any of the following events:

(a) All or substantially all (meaning having a total gross fair market value at least equal to 50.1% of the total gross fair market value of all of the Company’s assets immediately before such acquisition or acquisitions) of the assets of the Company are acquired by a Person (during a twelve month period ending on the date of the most recent acquisition by such Person); or

(b) The Company is merged, consolidated, or reorganized into or with another corporation or entity during a twelve-month period with the result that upon the conclusion of the transaction less than 50.1% of the outstanding securities entitled to vote generally in the election of directors or other capital interests of the surviving, resulting or acquiring corporation are beneficially owned (as that term is defined in Rule 13-d 3 under the Exchange Act) by the shareholders of the Company immediately prior to the completion of the transaction.

 

  

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ARTICLE 16.

Amendment, Modification, Suspension, and Termination

16.1  Amendment, Modification, Suspension, and Termination.  Subject to Section 16.3 and 16.4, the Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Plan and any Evidence of Award in whole or in part; provided, however, that, without the prior approval of the Company’s shareholders, Options issued under the Plan will not be repriced, replaced, or regranted through cancellation, and no amendment of the Plan shall be made without shareholder approval if shareholder approval is required by law, regulation, or stock exchange rule.

16.2  Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.  The Committee may make adjustments, consistent with Section 162(m) of the Code and the Section 409A Rules, in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.4 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan.

16.3  Awards Previously Granted.  Notwithstanding any other provision of the Plan to the contrary, no termination, amendment, suspension, or modification of the Plan or an Evidence of Award shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award except as required under the tax laws.

16.4  Compliance with the Section 409A Rules.  It is the intention of the Board that the Plan comply strictly with the Section 409A Rules and the Committee shall exercise its discretion in granting Awards hereunder (and the terms of such grants), accordingly. The Plan and any grant of an Award hereunder may be amended from time to time as may be necessary or appropriate to comply with the Section 409A Rules.

ARTICLE 17.

Withholding

17.1  Tax Withholding.  The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.

17.2  Share Withholding.  With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock and Restricted Stock Units, or upon the achievement of performance goals related to Performance Shares, or any other taxable event arising as a result of an Award granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction. All such elections shall be irrevocable, made in writing, and signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

 

  

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ARTICLE 18.

Successors

All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

ARTICLE 19.

General Provisions

19.1  Forfeiture Events.

(a) The Committee may specify in an Evidence of Award that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of employment for cause, termination of the Participant’s provision of services to the Company, Affiliate, and/or Subsidiary, violation of material Company, Affiliate, and/or Subsidiary policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company, its Affiliates, and/or its Subsidiaries.

(b) If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, if the Participant knowingly or grossly negligently engaged in the misconduct, or knowingly or grossly negligently failed to prevent the misconduct, or if the Participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever just occurred) of the financial document embodying such financial reporting requirement.

19.2  Legend.  The certificates for Shares may include any legend, which the Committee deems appropriate in its sole discretion to reflect any restrictions on transfer of such Shares.

19.3  Gender and Number.  Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

19.4  Severability.  In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. To the extent that any provision of this Plan would prevent any Option 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. Such provision, however, shall remain in effect for other Options and there shall be no further effect on any provision of this Plan.

19.5  Requirements of Law.  The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

19.6  Delivery of Title.  The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the Plan prior to:

(a) Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and

 

  

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(b) Completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.

19.7  Inability to Obtain Authority.  The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

19.8  Investment Representations.  The Committee may require any person receiving Shares pursuant to an Award under this Plan to represent and warrant in writing that the person is acquiring the securities for his own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof.

19.9  Employees Based Outside of the United States.  Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have Employees or Directors, the Committee, in its sole discretion, shall have the power and authority to:

(a) Determine which Affiliates and Subsidiaries shall be covered by the Plan;

(b) Determine which Employees and/or Nonemployee Directors outside the United States are eligible to participate in the Plan;

(c) Modify the terms and conditions of any Award granted to Employees and/or Nonemployee Directors outside the United States to comply with applicable foreign laws;

(d) Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under this Section 19.9 by the Committee shall be attached to this Plan document as appendices; and

(e) Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals.

Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate applicable law.

19.10  Uncertificated Shares.  To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.

19.11  Unfunded Plan.  Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, and/or its Subsidiaries, and/or Affiliates may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other person. To the extent that any person acquires a right to receive payments from the Company, and/or its Subsidiaries, and/or Affiliates under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as the case may be. All payments to be made hereunder shall be paid from the general funds of the Company, a Subsidiary, or an Affiliate, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. The Plan is not subject to ERISA.

 

  

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19.12  No Fractional Shares.  No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.

19.13  Retirement and Welfare Plans.  Neither Awards made under the Plan nor Shares or cash paid pursuant to such Awards will be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s or Affiliate’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a participant’s benefit.

19.14  Nonexclusivity of the Plan.  The adoption of this Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.

19.15  No Constraint on Corporate Action.  Nothing in this Plan shall be construed to: (i) limit, impair, or otherwise affect the Company’s or a Subsidiary’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or, (ii) limit the right or power of the Company or a Subsidiary or an Affiliate to take any action which such entity deems to be necessary or appropriate.

19.16  Governing Law.  The Plan and each Evidence of Award shall be governed by the laws of the State of Ohio, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Evidence of Award, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Ohio, to resolve any and all issues that may arise out of or relate to the Plan or any related Evidence of Award.

 

  

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