Document:

exv10w53

Exhibit 10.53

MODIFICATION NO. 1 TO THE

29 NOVEMBER 1992 SETTLEMENT AGREEMENT BETWEEN

THE UNITED STATES AND AEROJET-GENERAL CORPORATION

          The United States of America (the “United States”) and Aerojet-General Corporation
(“Aerojet”) hereby enter into this agreement (“the Modification”) to modify the 1992 Settlement
Agreement. This modification shall become effective as provided in Section 2.15 of this
Modification. The United States and Aerojet may be individually referred to as a “Party” or
collectively referred to as “the Parties”.

          WHEREAS, the Parties entered into the 1992 Settlement Agreement to avoid litigation and
to compromise and settle claims respecting Site Restoration Costs (as defined in Section 2.10
of the 1992 Settlement Agreement);

          WHEREAS, certain remedial action costs which Aerojet has or will incur in connection with
perchlorate at the Aerojet Sacramento Site were specifically excluded from the definition of Site
Restoration Costs under the 1992 Settlement Agreement;

          WHEREAS, remedial action and other costs which Aerojet has or will incur in connection with
contaminants at the Aerojet Azusa Site were not covered by the 1992 Settlement Agreement;

          WHEREAS, the United States has asserted that its obligation, if any, to allow the costs in the
pricing of Aerojet’s government contracts is secondary to the obligation of Aerojet’s insurers to
pay and indemnify Aerojet under its general liability policies. In entering into this Modification,
the 1992 Settlement Agreement and the Stage A Settlement Agreement, the Parties recognize that: (1)
Aerojet’s insurers have failed to pay all the costs in issue and are disputing their obligation to
defend and indemnify Aerojet under the policies; and (2) Aerojet is entitled to include the costs
in its indirect rates only to the extent that such costs are not paid by Aerojet’s insurers; and

          WHEREAS, the Parties desire to execute a Modification to the 1992 Settlement Agreement to
resolve open issues and avoid potential disputes and litigation between them related to
perchlorate remediation costs at the Aerojet Sacramento Site and Site Restoration Costs at the
Aerojet Azusa Site

          NOW THEREFORE, the United States and Aerojet, seeking to avoid protracted litigation, do
hereby compromise and settle claims and disputes between them respecting Site Restoration Costs,
as defined in Section 2.11, all in accordance with the terms of this Modification and all Exhibits
thereto.

 

 

1. RELATIONSHIP OF THIS DOCUMENT TO THE 1992 SETTLEMENT AGREEMENT

     1.1. This Modification modifies the 1992 Settlement Agreement for all Site
Restoration Costs (as defined by Section 2.11 below) incurred on or after 29 November 1998.
The 1992 Settlement Agreement as it exists prior to this Modification remains in effect for
all Site Restoration Costs (as defined in Section 2.10 of the 1992 Settlement Agreement)
incurred before 29 November 1998.

2. DEFINITIONS

     2.1. Aerojet Insurer means each liability insurer, whether providing primary or
excess insurance, and the California Insurance Guarantee Association, against which
Aerojet has made claim for recovery of Site Restoration Costs and which is or was a party
to the suit now captioned Aerojet-General Corporation et al. vs. Transport
Indemnity Insurance Company et al. (San Mateo Superior Court No. 26245) or which is or was
a party to the suit now captioned Aerojet-General Corp vs. Fidelity & Casualty Co. of New
York, et al., Sacramento Superior Court No. 527932.

     2.2. Aerojet Sacramento Site means that land for which Aerojet has responsibilities
under subsection 5(A)(1) of the Partial Consent Decree.

     2.3. Aerojet Azusa Site means Azusa Irwindale Study Area as that term is described
at Plate 2 of the Revised Workplan Azusa/Irwindale Study Area Site Assessment dated
September 17, 1991.

     2.4. Allowable Site Restoration Costs means that percentage of Site Restoration
Costs (as defined in Section 2.11) incurred on or after 29 November 1998, which,
pursuant to Section 3.2, the United States recognizes as allowable costs within Aerojet’s
indirect cost pool(s) allocable to Aerojet’s Government Contracts.

     2.5. Date of Execution of this Modification means the date of the last required
signature of this Modification by an authorized representative of Aerojet or the United
States as provided in Section 11.14 below.

     2.6. Government Contract or Contract with the United States means any contract, or
any modification to any contract between Aerojet and any contracting department, agency
or entity of the United States, including any contract or subcontract, or any
modification
to any subcontract between Aerojet and any entity which is a party to a prime contract,
or
to a subcontract under a prime contract with any contracting department, agency, or
entity
of the United States.

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     2.7. Partial Consent Decree means that decree entered on June 23, 1989, including
all modifications thereof, whether entered before or after this Modification, in the
consolidated actions United States et al. vs. Aerojet General Corp. et al., (E.D. Cal.
CIVS-86-0063-EJG, CIVS-86-0064-EJG).

     2.8. Recovery from a Third Party means payment to Aerojet after the effective date
of this Modification by an Aerojet Insurer or any person or entity other than the United
States, its agencies, departments, officers and employees, pursuant to a judgment,
settlement, or otherwise for:

               (a) Site Restoration Costs incurred on or after 29 November 1998;

               (b) interest in respect of or attributable to such Site Restoration Costs; or

               (c) punitive damages in any action for the recovery of such Site Restoration Costs;

irrespective of whether such payment is made subject to a condition or a purported
reservation of rights.

     2.9. Remedial Action means any removal or remedial action under CERCLA or any
like requirement under any federal or state statute or regulation, including all associated
investigation and operation and maintenance, undertaken at either the Aerojet Sacramento
Site or the Aerojet Azusa Site.

     2.10. Settlement Credit Account means the account that Aerojet established pursuant
to Section I.B.2 of the Stage A Settlement Agreement, which Aerojet maintains on its books.

     2.11. Site Restoration Costs

          (a) means such of the following described costs and any other costs which Aerojet has
incurred or will incur on or after 29 November 1998 in addressing demands, claims and actions
brought by private parties and state and federal regulatory agencies relative to actual or alleged
releases or threatened releases of chemicals to soils or groundwater at either the Aerojet
Sacramento Site or the Aerojet Azusa Site as a result of actual or alleged discharge or disposal
activities prior to 1980:

               (i) costs of Remedial Action;

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               (ii) costs of compliance with the Partial Consent Decree for the Sacramento Site;

               (iii) costs of defense of the consolidated actions captioned United States
et al. vs. Aerojet General Corp. et al. (E.D. Cal. CIVS-86-0063-EJG, CIVS-86-0064-EJG), and
of the consolidated actions captioned People ex rel. Van de Camp et al. vs. Aerojet General
Corp. et al. (Sacramento Superior Court No. 286073), including costs of prosecution of the
mandate proceedings consolidated therewith;

               (iv) costs of defending and responding to demands, claims and actions
brought by local, state and federal regulatory agencies as to the Sacramento Site which, though
reserved from or otherwise outside the coverage of the Partial Consent Decree, are within the
subject matter of the actions identified in Section 2.11(a)(iii) above;

               (v) costs of defending and responding to demands, claims and actions
brought by local, state and federal regulatory agencies as to the Azusa Site; and

               (vi) costs of defending and responding to demands, claims and actions
brought by private parties.

     (b) Site Restoration Costs do not include the following:

               (i) charges questioned by the United States pursuant to Section 11.1 which are finally
disallowed;

               (ii) expenses that are considered Allowable Contemporary Costs as that term is used in
Aerojet’s CAS disclosure statement in effect at the time such costs are incurred;

               (iii) legal expenses which Aerojet has incurred or will incur respecting claims and
litigation with Aerojet Insurers, which expenses are recognized by the United States as a fully
allowable element of Aerojet’s G&A pool, pursuant to separate agreement between the Parties;

               (iv) those costs of defending and resolving, by judgment or settlement, an action brought
by a private (non-governmental) party for alleged personal injury or property damage, that are
directly attributable to a final, unappealable determination by a court that Aerojet “managerial
personnel” (as defined in FAR 52.245-5 [Jan. 1986]) engaged in willful misconduct or lack of good
faith in connection with actual or alleged discharge or disposal activities at the Aerojet
Sacramento or Azusa Sites prior to 1980; and

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               (v) fines, penalties and punitive damages imposed upon Aerojet by a court or
administrative agency in a final, unappealable determination relating to actual or alleged
discharge or disposal activities at the Aerojet Azusa or Sacramento Sites prior to 1980.

     2.12. Stage A Expenditures means all Site Restoration Costs which Aerojet incurred
through June 1989 and were the subject of the Stage A Settlement Agreement.

     2.13. Stage A Settlement Agreement means the Parties’ settlement agreement in
ASBCA No. 34033, executed on November 30, 1989 and amended on February 26, 1990.

     2.14. 1992 Settlement Agreement means that certain Settlement Agreement effective
29 November, 1992 by and between the United States of America and Aerojet-General
Corporation and incorporated as part of the decision of the Armed Services Board of
Contract Appeals on 6 October 1993 (ASBCA No. 40309).

     2.15. Effective Date of this Modification means the date upon which this
Modification shall become effective, which shall occur upon close of escrow in
accordance with all conditions of the certain Escrow Instructions agreed upon by the
Parties respecting the Offer to Purchase Real Estate and Acceptance — Air Force Plant 70
or 29 November 1998, whichever is later. However, should close of escrow occur after
29 November 1998, this Modification shall apply to costs incurred after 29 November
1998 as otherwise provided for in this Modification.

3. SETTLEMENT OF SITE RESTORATION COSTS

     3.1. The Parties recognize that: (1) Aerojet Insurers have failed to pay all Site
Restoration Costs and are disputing their obligation to defend and indemnify Aerojet under its
general liability policies; and (2) Aerojet is entitled to recognition of Site Restoration Costs in
the pricing of its Government Contracts only to the extent that such costs are not paid by Aerojet
Insurers. Accordingly, in order to assure that there is no double recovery of costs by Aerojet, and
to effectuate the intent of this Modification, the Parties agree that:

          (a) the agreement of the United States to allow and pay costs is in advance of potential
recovery from Aerojet’s insurers; and

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          (b) implementing FAR 31.201-5 (“Credits”), the United States is entitled to a credit from
any insurance recovery for such costs, in accordance with the terms of this Modification.

     3.2. Subject to Section 11.1 below, the United States will recognize (as Allowable
Site Restoration Costs) 88% of all Site Restoration Costs incurred and to be incurred on
or after 29 November 1998 as allowable and recoverable costs within Aerojet’s indirect
cost pool(s) allocable to Government Contracts.

     3.3. In order to implement Section 3.2 above:

          (a) Aerojet will include and the United States will accept Allowable Site
Restoration Costs in forward pricing rates for all Government Contracts entered into on or
after 29 November 1998;

          (b) Aerojet will bill such costs in accordance with the terms and conditions of
each such Government Contract;

          (c) Allowable Site Restoration Costs will be excluded in establishing the
negotiated profit percentage or amount on all Government Contracts. In all cost -
disclosure pricing proposals, Aerojet will demonstrate that no profit is being proposed on
Allowable Site Restoration Costs.

4. CREDITS FOR RECOVERIES FROM INSURERS AND OTHER THIRD PARTIES

     4.1. (a) If the expenses incurred by Aerojet in pursuing a Recovery from a Third
Party have been allowed for allocation to Aerojet’s Government Contracts, Aerojet will record 88%
of any such Recovery from a Third Party on its books as a credit to reduce Allowable Site
Restoration Costs in the Aerojet fiscal year when such recovery is received, as provided in this
Section 4.1, and Sections 4.2 and 4.3 below. Aerojet will apply this credit to its indirect cost
pool(s) before allocation of Site Restoration Costs to Government Contracts. (see Example 1,
Exhibit A)

             (b) To the extent the credit described in Section 4.1(a) exceeds Allowable Site
Restoration Costs allocated to Government Contracts in a single Aerojet fiscal year, Aerojet will
carry forward the remaining balance of the credit, together with interest as provided in Section
(c) below, as a reduction of Allowable Site Restoration Costs in subsequent year(s) until the
credit is fully depleted. (see Example 2, Exhibit A)

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               (c) Aerojet will include in the credits made pursuant to this Section simple
interest at the applicable interest rate(s) specified by the Contract Disputes Act (42 U.S.C. §
611) from the date on which any Recovery from a Third Party is received by Aerojet until the credit
is fully depleted.

     4.2. If Aerojet Insurers obtain an offset or a reduction of their obligations to Aerojet
on the basis or by virtue of this Modification, or any provision herein, Aerojet’s credit
obligations pursuant to Section 4.1 above for payments made by an Aerojet Insurer shall
be reduced by 12% of the amount of any such offset or reduction. (see Example, 3 Exhibit A)

     4.3. If Aerojet is required to repay any funds that were (1) paid to Aerojet subject to
a condition or a purported reservation of rights and (2) credited to the Settlement Credit
Account or credited as a Recovery from a Third Party pursuant to Section 4.1(a), then the
amount of any such repayment will be added to and considered as Allowable Site
Restoration Costs in the Aerojet fiscal year in which such repayment is made. (see
Example 4, Exhibit A)

5. CREDITS TO FIXED-PRICE CONTRACTS

     As set forth in paragraphs (a) through (d) below, each sole-source fixed-price Government
Contract priced in excess of $10 million entered into on or after 29 November 1998 will be subject
to a price reduction if a Recovery from a Third Party in excess of $5 million is received during
the period of performance of such a Government Contract.

          (a) At the conclusion of contract performance, the total of Allowable Site
Restoration Costs allocated to the contract in excess of credits allocated to the contract as
determined pursuant to Sections 4.1 through 4.3 above (“Total Allocated Cost”), will be
compared to the total Site Restoration Costs included within the contract price (“Total
Negotiated Cost”).

          (b) The contract price will be reduced by the amount by which the Total
Negotiated Cost is greater than the Total Allocated Cost, provided that the price reduction
shall not exceed the total credit to Allowable Site Restoration Costs on the contract
attributable to such Recovery from a Third Party, as determined pursuant to Sections 4.1
through 4.3 above.

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          (c) In no event shall there be an increase to the contract price under this
Section 5.

          (d) As to each sole-source fixed-price Aerojet subcontract priced in excess of
$10 million entered into on or after 29 November 1998, Aerojet agrees to use its best
efforts to include a clause requiring the prime contractor to provide the Government the
full benefit of the price reduction to be made by Aerojet on each such subcontract
pursuant to this Section 5, plus all applicable prime contractor mark-ups. If such a clause
is not included in any such Aerojet subcontract, the United States may require Aerojet to
pay directly to the United States the price reduction made on each such subcontract
pursuant to this Section 5.

6. OPTION TO TERMINATE

     (a) Each Party reserves the option to terminate application of this
Modification as to any Site Restoration Costs incurred following the certification or other
formal determination by the cognizant environmental enforcement agency(ies) that all
Remedial Action has been completed and no further Remedial Action is required. Either Party
may exercise this option by issuing written notice to the other Party no earlier than 60
days following such certification or formal determination. The effective date of such
exercise of option shall be the ninetieth day following issuance of the written notice.

     (b) As to Site Restoration Costs incurred at the Aerojet Azusa Site on or
after 29 November 1998, each Party reserves the option to terminate the application of this
Modification to any such costs in excess of $40,000,000 (exclusive of any Recovery from a
Third Party). Either Party may exercise this option by issuing written notice to the other
Party no earlier than 60 days following the attainment of the $40,000,000. The effective
date of such exercise of option shall be the ninetieth day following issuance of the
written notice.

     (c) An exercise of either, or both, option(s) under this Section 6 shall not
affect the application of this Modification as to any Site Restoration Costs incurred
before the effective date of the exercise of the option.

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7.
COVENANTS, RELEASES, RESERVATIONS OF RIGHTS AND DISMISSAL OF APPEAL RELATIVE TO SITE
RESTORATION COSTS AS TO THE AEROJET SACRAMENTO SITE

     7.1. Subject to the provisions of Section 3 above and paragraphs 7.2 through 7.8 of
this Section 7, as to Site Restoration Costs which Aerojet has incurred or will incur at the
Aerojet Sacramento Site on or after 29 November 1998 until the effective date of exercise
of the option under Section 6:

          (a) Aerojet agrees for itself, its successors, assigns, subrogees, representatives,
and any other person or entity claiming through or under it, to remise, release and forever
discharge the United States, its agencies, officers, employees, instrumentalities,
administrators and all representatives thereof from any claim, counterclaim or cross-claim
that Aerojet asserted or could have asserted in the appeal in ASBCA No. 40309 and in the
consolidated actions captioned United States et al. vs. Aerojet General Corp. et al.,
(E.D. Cal. CIVS-86-0063-EJG, CIVS-86-0064-EJG), or on any other basis; and

          (b) Aerojet agrees for itself, its successors, assigns, subrogees, representatives,
and any other person or entity claiming through or under it, to remise, release and forever
discharge
 Aerojet’s prime contractors on Contracts with the United States from any and
all claims, causes of action and demands of any kind whatsoever under or on the basis of
Aerojet’s subcontracts with such prime contractors.

          (c) Nothing in this Section 7.1 shall impair any Aerojet right or defense in
response to any demand or action of the United States pursuant to any environmental law
or regulation. All such rights and defenses are hereby reserved, including but not limited
to any right or defense based upon Section 106(b)(2) of CERCLA (42 U.S.C.A.
§ 9606(b)(2)) or under any other provision of law.

     7.2. The United States, its agencies, officers, employees, instrumentalities,
administrators and all representatives thereof agree to remise, release and forever
discharge Aerojet, its parent corporations, subsidiaries, affiliates, past or present
officers,
directors, employees, and all representatives thereof, including without limitation its
successors, assigns, subrogees, representatives, and anyone claiming through or under it,
from any and all claims, causes of action and demands of any kind whatsoever to recover:

          (a) Site Restoration Costs as to the Aerojet Sacramento Site;

          (b) Recovery from a Third Party as to the Aerojet Sacramento Site, except in
accordance with the provisions of Sections 4 and 5; and

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          (c) the amount of any claim which any Aerojet Insurer or other third party
asserts against the United States in respect of Site Restoration Costs as to the Aerojet
Sacramento Site.

     7.3. Nothing in this Modification shall be construed to release claims or otherwise
settle any costs other than Site Restoration Costs as to the Aerojet Sacramento Site
incurred prior to the effective date of exercise of the option under Section 6. The Parties
expressly reserve all rights, claims and defenses as to any costs other than such Site
Restoration Costs. Without limitation of the foregoing, nothing in this Modification shall
restrict the right of either Aerojet or the United States to lift the stay of proceedings
relative to Aerojet’s counterclaim in the consolidated actions captioned United States et
al. vs. Aerojet General Corp. et al., (E.D. Cal. CIVS-86-0063-EJG, CIVS-86-0064-EJG),
in accordance with the Stipulation and Order specified in Exhibit B to this Modification.

     7.4. The releases provided by Aerojet in Section 7.1 above are conditioned upon the
United States fulfilling its obligations under Section 3 of this Modification. If a court or
board of contract appeals decides (the “Court or Board Decision”) that the United States
need not fulfill, or is precluded from, fulfilling its obligations under Section 3 to
recognize what are determined to be Allowable Site Restoration Costs under this
Modification, then:

          (a) other provisions hereof notwithstanding, the releases provided by Aerojet
herein will no longer be applicable;

          (b) Aerojet shall be entitled to pursue all claims of whatever kind against the
United States for recovery or recognition of Site Restoration Costs governed (directly or
by reason of res judicata or collateral estoppel) by the Court or Board Decision; as
follows:

               (i) before filing any such claim and pending issuance of the Court or Board Decision,
Aerojet will request that the United States enter into an agreement tolling all statutes of
limitation applicable to Aerojet’s claims for a period of not to exceed two years.

               (ii) Aerojet may bring an action in any forum to seek recovery or recognition of such
Site Restoration Costs if the United States fails to enter into such an agreement within 90 days of
the Aerojet request or, if such an agreement is obtained, any time after the agreement expires.

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          (c) Aerojet’s releases shall remain in effect with respect to those Site
Restoration Costs as to which the United States has recognized Allowable Site
Restoration Costs in accordance with Section 3 of this Modification.

     7.5. Except as provided in Sections 7.1 and 7.2, nothing in this Modification shall
constitute or be construed as a release or a covenant not to sue as to any claim or cause of
action against any person or entity not a signatory to this Modification.

     7.6. Nothing in this Modification shall constitute or be construed as a release or a
covenant not to sue as to any matter not expressly addressed by Sections 7.1 and 7.2 of
this Modification.

     7.7. Except to the extent the reservations of claims and assertions set forth in
paragraph 22 of the Partial Consent Decree are superseded by the terms of this Section 7,
nothing in this Modification shall in any way limit the rights and obligations of the
Parties with respect to the Partial Consent Decree. In the event of any inconsistency
between the terms and conditions of this Modification and the terms of the Partial
Consent Decree, the terms of the Partial Consent Decree shall prevail over the terms of
this Modification.

     7.8. As to rights not released by this Modification, the transfer (whether by sale or
abandonment) of property pursuant to the Offer to Purchase Real Estate and Acceptance — Air
Force Plant 70 and pursuant to abandonment under the Navy Facilities Contract
N00030-98-E-0037 shall not alter or modify the Parties’ respective rights, liabilities and
responsibilities regarding environmental actions, claims, and costs associated with
environmental contamination conditions with respect to discharges that occurred prior to
the effective date of the property transfer. In this regard, without limitation, the transfer
(whether by sale or abandonment) of such property shall not be deemed to alter or affect,
and may not be used by either Party as a basis for asserting or denying, a Party’s liability
under CERCLA or any other federal law or any state law or common law as to any such
discharges.

8. COVENANTS, RELEASES, RESERVATIONS OF RIGHTS AND DISMISSAL OF APPEAL RELATIVE TO SITE
RESTORATION COSTS AS TO THE AEROJET AZUSA SITE

     8.1. Subject to the provisions of Section 3 above and paragraphs 8.2 through 8.6 of this
Section 8, as to Site Restoration Costs which Aerojet has incurred or will incur at the Aerojet
Azusa Site on or after 29 November 1998 until the effective date of exercise of the option under
Section 6 above:

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          (a) Aerojet agrees for itself, its successors, assigns, subrogees, representatives,
and any other person or entity claiming through or under it, to remise, release and forever
discharge the United States, its agencies, officers, employees, instrumentalities,
administrators and all representatives thereof from any claim that the United States
recognize as allowable such costs within Aerojet’s indirect cost pools allocable to
Aerojet’s Government Contracts; and

          (b) Aerojet agrees for itself, its successors, assigns, subrogees, representatives,
and any other person or entity claiming through or under it, to remise, release and forever
discharge Aerojet’s prime contractors on Contracts with the United States from any and
all claims, causes of action and demands to recognize as allowable such costs within
Aerojet’s indirect cost pools allocable to Aerojet’s Government Contracts on the basis of
Aerojet’s subcontracts with such prime contractors.

          (c) Nothing in this Section 8.1 shall impair any Aerojet right or defense in
response to any demand or action of the United States pursuant to any environmental law
or regulation. All such rights and defenses are hereby reserved, including but not limited
to any right or defense based upon Section 106(b)(2) of CERCLA (42 U.S.C.A.
§ 9606(b)(2)) or under any other provision of law.

     8.2. The United States, its agencies, officers, employees, instrumentalities,
administrators and all representatives thereof agree to remise, release and forever
discharge Aerojet, its parent corporations, subsidiaries, affiliates, past or present
officers,
directors, employees, and all representatives thereof, including without limitation its
successors, assigns, subrogees, representatives, and anyone claiming through or under it,
from any and all claims, causes of action and demands of any kind whatsoever to recover:

          (a) any Allowable Site Restoration Costs as to the Aerojet Azusa Site; and

          (b) recovery from a Third Party as to the Aerojet Azusa Site, except in
accordance with the provisions of Sections 4 and 5; and

          (c) the amount of any claim which any Aerojet Insurer or other third party
asserts against the United States in respect of Site Restoration Costs as to the Azusa Site.

     8.3. Nothing in this Modification shall be construed to release claims or otherwise
settle any matter other than the allowability in the pricing of Aerojet’s government
contracts of Site Restoration Costs incurred at the Aerojet Azusa Site prior to the

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effective date of exercise of the option under Section 6. The Parties expressly reserve all rights,
claims and defenses as to any costs other than such Site Restoration Costs. Without limitation of
the foregoing, nothing in this Modification shall release or otherwise be deemed to impair the
right of Aerojet to seek recovery from the United States or any agency or instrumentality of the
United States under CERCLA or any other theory of direct liability for Site Restoration Costs as to
the Aerojet Azusa Site.

     8.4. The releases provided by Aerojet in Section 8.1 above are conditioned upon the United
States fulfilling its obligations under Section 3 of this Modification. If a court or board of
contract appeals decides (the “Court or Board Decision”) that the United States need not fulfill,
or is precluded from, fulfilling its obligations under Section 3 to recognize what are determined
to be Allowable Site Restoration Costs under this Modification, then:

     (a) other provisions hereof notwithstanding, the releases provided by Aerojet
herein will no longer be applicable;

     (b) Aerojet shall be entitled to pursue all claims of whatever kind against the
United States for recovery or recognition of Site Restoration Costs governed (directly or
by reason of res judicata or collateral estoppel) by the Court or Board Decision; as
follows:

          (i) before filing any such claim and pending issuance of the Court or Board Decision,
Aerojet will request that the United States enter into an agreement tolling all statutes of
limitation applicable to Aerojet’s claims for a period of not to exceed two years.

          (ii) Aerojet may bring an action in any forum to seek recovery or recognition of such
Site Restoration Costs if the United States fails to enter into such an agreement within 90 days of
the Aerojet request or, if such an agreement is obtained, any time after the agreement expires.

     (c) Aerojet’s releases shall remain in effect with respect to those Site Restoration
Costs as to which the United States has recognized Allowable Site Restoration Costs in
accordance with Section 3 of this Modification.

     (d) Notwithstanding
the provisions of Subparagraphs 8.4(b)(i) to (ii) above,
nothing in this Paragraph applies to claims by Aerojet for recovery of Site Restoration
Costs for the Azusa Site that have not been released by Aerojet, including, without
limitation, such claims as are described in 8.3 above.

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     8.5. Except as provided in Sections 8.1 and 8.2, nothing in this Modification shall
constitute or be construed as a release or a covenant not to sue as to any claim or cause of
action against any person or entity not a signatory to this Modification.

     8.6. Nothing in this Modification shall constitute or be construed as a release or a
covenant not to sue as to any matter not expressly addressed by Sections 8.1 and 8.2 of
this Modification.

9. REPORTS

     9.1. Until the first fiscal year following the effective date of an exercise of the
option under Section 6 (a), Aerojet will include the following information in its Forward
Pricing Rate Proposal submitted annually to the United States:

          (a) the total Site Restoration Costs incurred in all preceding fiscal years;

          (b) an accounting of the Site Restoration Costs incurred during the preceding
fiscal year, including: (i) the amount of any Recovery from a Third Party obtained during
the fiscal year; (ii) the pro ration of amounts applied as credits under the Stage A
Settlement Modification and under Section 4 of this Modification; (iii) the amount of
credits applied pursuant to Section 4, if any; (iv) the net amount of Site Restoration Costs
included in Aerojet’s indirect cost pool(s) during the fiscal year; and (v) the amount of
Aerojet’s applicable base for allocation of Site Restoration
Costs in the fiscal year;

          (c) the amount of any price reductions made pursuant to Section 5;

          (d) a projection and description of the Site Restoration Costs estimated to be
incurred during the current fiscal year, separately identified so as to permit a separate
agreement on Site Restoration Costs, if appropriate; and

          (e) a separate projection and description of contemporary costs (as defined in
Aerojet’s CAS Disclosure Statement) to be incurred during the current fiscal year.

     9.2. Aerojet will provide to the CACO two copies of each quarterly progress report
prepared by Aerojet pursuant to the Partial Consent Decree. At the request of the
Administrative Contracting Officer, Aerojet will provide briefings at reasonable intervals
on the progress of the work undertaken to implement the Partial Consent Decree and a
final consent decree, if one is entered by the court.

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10. DISPUTES

     Either Party may enforce this Modification under any available remedy, including without
limitation remedies under the Contracts Disputes Act of 1978, 41
U.S.C. §§ 601 et seq, and the
“Tucker Act”. 28 U.S.C. § 1491, through action before the Armed Services Board of Contract Appeals
or the courts, in the event of a failure by the other Party to fulfill its obligations. This
Section 10 shall apply to any dispute between Aerojet and the United States involving the
interpretation of this Modification, including without limitation, whether specific costs incurred
by Aerojet constitute Site Restoration Costs under Section 2.11 above.

11. OTHER PROVISIONS

     11.1. The United States reserves the right to question on the following grounds any particular
charge or portion of a charge to costs made allowable by this Modification:

          (a) the charge is unallowable for reasons unrelated to its character as an environmental
cost (e.g., a charge for unallowable entertainment expense under FAR 31.205-14); or

          (b) the charge is unallowable because it is believed to be unreasonable in amount for the
services or supplies provided.

     11.2. Except as otherwise specifically provided in this Modification, this Modification shall
take precedence over any contracts or other agreements between Aerojet and the United States
regarding the United States’ obligations to Aerojet relative to Site Restoration Costs incurred on
or after 29 November 1998.

     11.3. The Parties have entered into this Modification for the purpose of compromising and
settling claims and disputes between them with respect to Site Restoration Costs, and intend that
this Modification will apply to Site Restoration Costs allocated to existing and future Government
Contracts.

          (a) Aerojet and the United States agree that nothing in this Modification is inconsistent with
the current provisions of FAR Part 31. Except to the extent that it is beyond the authority of the
United States to commit itself under this Modification, this

15

 

Modification is intended to be implemented and enforced irrespective of any future changes in
statute or regulation. In this regard. Aerojet and the United States each recognize and expressly
assume the risk that a change in the statutes or regulations could support a treatment of Site
Restoration Costs that is different from that required by this Modification.

          (b) In an action to enforce this Modification, the following issues shall be deemed to
have been resolved, irrespective of any change in statute or regulation:

               (i) the reasonableness of past conduct giving rise to Site Restoration Costs, including
whether such conduct complied with applicable laws, regulations, permits, orders and any other
legal requirements or whether such conduct was without fault, negligent, reckless, intentional,
willful, or otherwise culpable;

               (ii) the extent to which performance of Government Contracts contributed to the conditions
giving rise to Site Restoration Costs; and

               (iii) Aerojet’s diligence in responding to the environmental conditions
and pursuing available sources for the recovery of Site Restoration Costs.

Provided, that nothing in this Section 11.3(b) shall be construed as resolving such issues in any
action other than an action to enforce the provisions of this Modification.

     11.4. Aerojet will expense Site Restoration Costs and will not be required to capitalize and
depreciate such costs for government contract accounting purposes, as long as such treatment is
consistent with generally accepted accounting principles (“GAAP”) and applicable Cost Accounting
Standards in effect at the time the costs are incurred.

     11.5. Future Operations

          (a) In the event that design, manufacturing or test operations at Aerojet’s Sacramento or
Azusa Sites are performed by Aerojet at another Aerojet location, Allowable Site Restoration Costs
shall be allocated to the most appropriate indirect cost pool covering the site where the work is
transferred.

          (b) In the event that design, manufacturing or test operations are substantially discontinued
by Aerojet at either site, for any reason other than those addressed in subparagraph (c)
immediately below, Allowable Site Restoration Costs for that discontinued site shall be treated as
residual corporate home office costs allocable throughout Aerojet to all corporate segments.

16

 

          (c) In the event that design, manufacturing or test work is transferred by Aerojet to another
entity by means of a Reorganization or Restructure, Aerojet will attempt to obtain from such entity
the projected full reimbursement for all Site Restoration Costs that would have otherwise been
allocable to Aerojet for such transferred work had the Reorganization or Restructure not occurred
based upon the facts known at the time of the Reorganization or Restructure (“Full Reimbursement”).
To the extent that Aerojet receives any reimbursement from such entity of the Site Restoration
Costs that would have otherwise been allocable to Aerojet for such transferred work (“Transferred
Site Restoration Costs”), the United States will, subject to all other terms of the Modification
(including without limitation the 88% recoverable percentage contained in Section 3.2) recognize
such Transferred Site Restoration Costs actually paid or reimbursed by such entity as allowable and
recoverable costs within such entity’s most appropriate indirect costs pools allocable to its
contracts and subcontracts. If and to the extent that the United States determines that Aerojet has
received less than Full Reimbursement from such entity, the United States may disallow on Aerojet’s
Government Contracts the difference between the amount of Full Reimbursement and the amount of
Transferred Site Restoration Costs paid by such entity, provided, that Aerojet shall be entitled to
request a contracting officer’s final decision regarding whether the amount of Site Restoration
Costs disallowed was calculated correctly, which decision shall be subject to Section 10, titled
“Disputes,” of this Modification. For the purposes of this Section 11.5, “Reorganization” or
“Restructure” means any transfer of ownership of any Aerojet business to another entity through
sale, formation of a partnership or joint venture, or creation of a new corporate structure.

          (d) In any dispute regarding the determination of what dollar amount constitutes Full
Reimbursement, the following factors shall be taken into account: (i) the amount of Site
Restoration Costs allocated through Aerojet’s overhead to the transferred work immediately prior to
any Reorganization or Restructure; (ii) reasonable projections of the size and expected time-line
(current contract performance period) of the transferred work if no Reorganization or Restructure
occurs; (iii) reasonable projections, based on the best technical and legal information available
of the total amount of future Site Restoration Costs at both the Sacramento and Azusa sites; (iv)
the benefits to the United States arising from the Reorganization or Restructure (e.g., a larger
base for allocating Site Restoration Costs); (v) the impact on the future competitiveness of
Aerojet if the Reorganization or Restructure is not accomplished; and (vi) the potential cost
impact to Government Contracts at Sacramento and Azusa. For example, if as the result of a
Reorganization or Restructure, Aerojet receives $15 million from another entity (based upon 88%
allocable Site Restoration Costs) as reimbursement for Transferred Site Restoration Costs and the
Government determines that Full Reimbursement for those

17

 

Transferred Site Restoration Costs should have been $20 million (based upon 88% allocable Site
Restoration Costs): (i) the Government shall recognize $15 million as allowable and recoverable
costs within such entity’s most appropriate indirect cost pools allocable to its contracts and
subcontracts; (ii) the Government may disallow $5 million of Site Restoration Costs at Aerojet; and
(iii) Aerojet may dispute pursuant to Section 10, (Disputes), of this Modification whether Full
Reimbursement was $15 million or some other amount. The factors listed in this paragraph shall be
considered in resolving any such dispute.

          (e) Aerojet shall notify the CACO of any change in allocation described in this Section 11.5
prior to making such change. Any disagreement as to (i) whether the change comes within the terms
of this Section 11.5 or (ii) whether Aerojet has negotiated Full Reimbursement for Site Restoration
Costs, shall be resolved under Section 10, Disputes. Nothing in this Section 11.5 shall preclude
Aerojet from proposing a different accounting treatment for allowable Site Restoration Costs
consistent with Aerojet’s accounting practices in effect at the time of any such proposal.

     11.6. Allowable Site Restoration Costs shall be allocated across the combined Aerojet Azusa
and Sacramento G&A business base. The Parties agree this accounting change is one for mutual
benefit for the purposes of the Cost Accounting Standards and Aerojet will not have to pay any
increased costs (i.e., cost impact) of the accounting change to the
United States.

     11.7. Aerojet will not intentionally relocate commercial businesses from either Sacramento or
Azusa primarily for the purpose of increasing the Government’s share of Site Restoration Costs.
However, the Parties recognize that during the term of this Modification, Aerojet could decide to
relocate commercial businesses for its business purposes and that this relocation may serve to
increase the Government’s share of Site Restoration Costs.

     11.8. This Modification resolves disputed claims. Neither this Modification nor its terms
constitutes any admission of liability, an admission of fact or evidence of such, or an admission
of violation of any law or regulation.

18

 

     11.9.
The Parties designate the following persons to whom all reports and notices provided
pursuant to this Modification will be sent:

	 	 	 
	For Aerojet:

	 	For the United States:
	 
	 	 
	Robert C. Anderson

	 	Vivian Lee
	Vice-President, Law

	 	Corporate Administrative
	Aerojet-General Corporation

	 	Contracting Officer (CACO)
	PO Box 13222

	 	DCMAO — San Francisco
	Sacramento, CA 95813-6000

	 	Borregas
	 

	 	Sunnyvale, CA 94089
	 
	 	 
	 

	 	David Manion
	 

	 	Administrative
	 

	 	Contracting Officer (ACO)
	 

	 	DCMO Sacramento
	 

	 	P. O. Box 15846
	 

	 	Sacramento, CA 95852-1846

Each Party
may substitute another individual for its representative(s) designated above by providing
written notice to the other Party.

     11.10. This Modification, and each of its terms and conditions, shall apply to and be binding
upon (a) Aerojet-General Corporation, its successors, assigns, subrogees, representatives, and any
other person or entity claiming through or under it; and (b) the United States, its agencies,
officers, employees, instrumentalities, administrators and all representatives thereof.

     11.11. This Modification, or any portion of this Modification, may be amended, deleted or
terminated only by a written agreement executed by both of the undersigned representatives of
Aerojet and the United States, or his or her successors, respectively.

19

 

     11.12. This Modification constitutes the entire agreement between Aerojet and the United
States and supersedes any prior or contemporaneous agreement concerning the subject matter of this
Modification. The Parties anticipate the creation of summary documents and administrative guides to
assist the Parties in implementing the Modification. Such summaries and guides do not constitute
part of this Modification.

     11.13. The headings used in this Modification are intended solely for convenience and shall
not determine or alter the rights and obligations of the Parties to this Modification.

     11.14. Each undersigned representative certifies that he or she is fully authorized to enter
into and execute this Modification, and to legally bind the Party represented.

	 	 	 	 	 	 	 
	For the United States of America:

	 	 	 	For Aerojet-General Corporation:	 	 
	 
	 	 	 	 	 	 
	/s/ Vivian L. Lee
	 	 	 	/s/ R. A. Wolfe	 	 
	 

	 	 
	 	 

	 	 
	Name: Vivian L. Lee

	 	 	 	Name: R. A. Wolfe	 	 
	 
	 	 	 	 	 	 
	Title: Corporate Administrative

	 	 	 	Title: President	 	 
	     Contracting Officer
	 	 	 	 	 	 
	     DCMC-SF, Sacramento
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Date: October 27, 1998

	 	 	 	Date: October 27, 1998	 	 
	 
	 	 	 	 	 	 
	Approved as to Form:

	 	 	 	Approved as to Form:	 	 
	 
	 	 	 	 	 	 
	/s/ Danice E. Rogers

	 	 	 	/s/ R.C. Anderson	 	 
	 

DANICE E. ROGERS Lt. Col. USAF

	 	 
	 	 

R.C. ANDERSON
	 	 
	 
	 	 	 	 	 	 
	Counsel for the United States:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Date: 1 Oct 98

	 	 	 	Date: October 1, 1998	 	 

20

 

CREDIT RECOVERY EXAMPLES

EXHIBIT A

The purpose of this exhibit is to provide examples to clarify the process negotiated
between the Parties for credits for recoveries from third parties in accordance with section
4 of the Modification as 10 Site Restoration Costs (Site Costs) incurred after the
effective date of the Modification. It includes four separate examples which were chosen to
illustrate four distinct situations. Example 1 displays a recovery without offset or
repayment which is small enough to be credited within a single fiscal year. Example 2 shows
a similar recovery which is too large to be credited within a single fiscal year. Example 3
is a recovery with a partial offset consistent with Section 4.2. Finally, Example 4
illustrates a recovery with a repayment in accordance with Section 4.3. For the sake of
illustration and consistency, the examples utilize the same figures for total Site
Restoration Costs and the Government percentage of the Aerojet business base in each of the
three fictional fiscal years used in this exhibit. Accordingly, assume the following set of
basic data for all four examples:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	SITE RESTORATION COSTS	 	AFY 2000	 	AFY 2001	 	AFY 2002
	Total Site Costs
	 	$	10.0	 	 	$	10.0	 	 	$	10.0	 
	Total allowable Site Costs
	 	$	8.80	 	 	$	8.80	 	 	$	8.80	 
	%Govt Business Base
	 	 	70	%	 	 	70	%	 	 	70	%
	Site Costs Allocated to Govt contracts
	 	$	6.16	 	 	$	6.16	 	 	$	6.16	 

Example 1: Assume that the third party recovery received in AFY 2000 is
$1,000,000 with no offset or repayment. The total credit available is
$880,000 (1.0 x .88) which would be distributed as follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	SITE RESTORATION COSTS	 	AFY 2000	 	AFY 2001	 	AFY 2002
	Total Site Costs
	 	$	10.00	 	 	$	10.00	 	 	$	10.00	 
	Total allowable Site Costs
	 	$	8.80	 	 	$	8.80	 	 	$	8.80	 
	Adjustment for recovery 
	 	$	(0.88	)	 	 	0	 	 	 	0	 
	Total allowable Site Costs less adjustment
	 	$	7.92	 	 	$	8.80	 	 	$	8.80	 
	%Govt Business Base
	 	 	70	%	 	 	70	%	 	 	70	%
	Site Costs Allocated to Govt contracts
	 	$	5.544	 	 	$	6.16	 	 	$	6.16	 
	Credit balance carried forward
	 	 	0	 	 	 	N/A	 	 	 	N/A	 

Example 2: Assume that the third party recovery received in AFY 2000 is $15,000,000
with no offset or repayment. The total credit available is $13,200,000 (15.0 x .88) which
would be distributed as follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	SITE RESTORATION COSTS	 	AFY 2000	 	AFY 2001	 	AFY 2002
	Total Site Costs
	 	$	10.00	 	 	$	10.00	 	 	$	10.00	 
	Total allowable Site Costs
	 	$	8.80	 	 	$	8.80	 	 	$	8.80	 
	Adjustment for recovery 
	 	$	(8.80	)	 	$	(4.40	)	 	 	0	 
	Total allowable Site Costs less adjustment
	 	 	0	 	 	$	4.40	 	 	$	8.80	 
	%Govt Business Base
	 	 	70	%	 	 	70	%	 	 	70	%
	Site Costs Allocated to Govt contracts
	 	 	0	 	 	$	3.08	 	 	$	6.16	 
	Credit
balance carried forward (13.2 - 8.8)
	 	$	4.40	 	 	 	N/A	 	 	 	N/A	 

21

 

Example
3: Assume that the third party recovery that would have been received in AFY
2000 is $20,000,000 less an offset of $5,000,000 (see Section 4.2) for a net recovery of
$15,000,000. The total credit available to the Government from the recovery is ((15.0 x .88) -
(5.0 x .12)) = $12.6 Mil. This credit would then be applied to Total Allowable Site Costs (see
base example) and would eliminate the AFY 2000 costs of $8.8 Mil. The
remaining $3.8 Mil would
be carried forward as a credit against Total Allowable Site Costs in AFY 2001 and would reduce
them to $5.0 Mil. The total Site Costs would be distributed/allocated as follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	SITE RESTORATION COSTS	 	AFY 2000	 	AFY 2001	 	AFY
2002
	Total Site Costs
	 	$	10.00	 	 	$	10.00	 	 	$	10.00	 
	Total allowable Site Costs
	 	$	8.80	 	 	$	8.80	 	 	$	8.80	 
	Adjustment for recovery
	 	$	(8.80	)	 	$	(3.80	)	 	 	0	 
	Total allowable Site Costs less credit
	 	 	0	 	 	$	5.00	 	 	$	8.80	 
	%Govt Business Base
	 	 	70	%	 	 	70	%	 	 	70	%
	Site Costs allocated to Govt contracts
	 	 	0	 	 	$	3.50	 	 	$	6.16	 
	Credit balance carried forward
	 	$	3.80	 	 	 	0	 	 	 	N/A	 

Example 4: Assume that the third party recovery received in AFY 2000 is $20,000,000
and the insurer gains a repayment (see Section 4.3 of the Modification) of $5,000,000 in AFY
2002. The total credit available to the Government from the recovery is $17.6 Mil) (20 x .88).
This credit would then be applied to Total Allowable Site Costs (see base example) and would
eliminate Allowable Site Costs of $8.8 Mil in both AFY 2000 and 2001. However, when the
insurer wins a repayment of $5.0 Mil in 2002, the amount allocated to the Government is
increased by $3.5 Mil (5.0 x .7). Note that the total Site Costs allocated to Government
contracts is $9.66 Mil in both examples 3 and 4 and, thus, all other factors being equal, the
net effect of an offset (IAW 4.2) or a repayment (IAW 4.3) is the same.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	SITE RESTORATION COSTS	 	AFY 2000	 	AFY 2001	 	AFY 2002
	Total Site Costs less gross credit
	 	$	10.0	 	 	$	10.0	 	 	$	10.0	 
	Total allowable Site Costs
	 	$	8.80	 	 	$	8.80	 	 	$	8.80	 
	Adjustment for recovery
	 	$	(8.80	)	 	$	(8.80	)	 	 	0	 
	Repayment
	 	 	0	 	 	 	0	 	 	$	5.0	 
	Total allowable Site Costs with adjustments
	 	 	0	 	 	 	0	 	 	$	13.80	 
	% Govt Business Base
	 	 	70	%	 	 	70	%	 	 	70	%
	Site Costs allocated to Govt contracts
	 	 	0	 	 	 	0	 	 	$	9.66	 
	Credit balance carried forward
	 	$	8.80	 	 	 	0	 	 	 	N/A	 

22

 

			
	LAWRENCE A. HOBEL (Bar No. 73364)

HELLER, EHRMAN, WHITE & HCAULIFFE

333 Bush Street

San Francisco, California 94104-2878

Telephone: (415) 772-6000

Attorneys for Defendants and Counterclaimants

AEROJET-GENERAL CORPORATION AND

CORDOVA CHEMICAL COMPANY
	 	

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

	 	 	 	 	 	 	 
	UNITED STATES OF AMERICA,

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	Plaintiff,

	 	 	)	 	 	No. CIV-S-86-0063-EJG
	 

	 	 	)	 	 	No. CIV-S-86-0064-EJG
	     v.

	 	 	)	 	 	 
	 

	 	 	)	 	 	CONSOLIDATED
	AEROJET-GENERAL CORPORATION

	 	 	)	 	 	 
	and CORDOVA CHEMICAL COMPANY,

	 	 	)	 	 	STIPULATION AND ORDER RE
	 

	 	 	)	 	 	PROSECUTION OF COUNTERCLAIM OF
	Defendants,

	 	 	)	 	 	AEROJET-GENERAL CORPORATION
	 

	 	 	)	 	 	AND CORDOVA CHEMICAL COMPANY
	 

	 	 	)	 	 	AGAINST
THE UNITED STATES OF
	PEOPLE OF THE STATE OF CALIFORNIA,

	 	 	)	 	 	AMERICA
	 

	 	 	)	 	 	 
	Plaintiff,

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	     v.

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	AEROJET-GENERAL CORPORATION

	 	 	)	 	 	 
	and CORDOVA CHEMICAL COMPANY,

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	 
	 	 	)	 	 	 
	AEROJET-GENERAL CORPORATION,

	 	 	)	 	 	 
	and
CORDOVA CHEMICAL COMPANY,

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	Counterclaimants,

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	     v.

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	UNITED STATES OF AMERICA,
	 	 	 	 	 	 
	 

	 	 	)	 	 	 
	Counter-Defendant.

	 	 	)	 	 	 
	 

	 	 	)	 	 	 
	 
	 	 	)	 	 	 

STIPULATION AND ORDER RE

PROSECUTION OF COUNTERCLAIM

EXHIBIT B

 

 

          Whereas, on September 25, 1990, Defendants Aerojet-General Corporation (“Aerojet”) and Cordova
Chemical Company (collectively, the “Defendants”) filed the Counterclaim of Aerojet General
Corporation and Cordova Chemical Company Against the United States of America and Demand For Jury
Trial (the “Counterclaim”) against Plaintiff United States of American (“United States”) in these
consolidated actions.

          Whereas, by Stipulation and Order dated September 25, 1990, the prosecution of the
Counterclaim was stayed, subject to certain exceptions, during the pendency of settlement
discussions between the United States Air Force and Aerojet in the matter entitled Appeal of
Aerojet-General Corporation Under Contract No. F04704-88-C-0025, Armed Services Board of
Contract Appeals Case No. 40309 (ASBCA No. 40309”).

          Whereas, the United States Air Force and Aerojet have entered into a settlement agreement in
ASBCA No. 40309 (the “ASBCA Settlement Agreement”), which releases certain rights of the
parties that might otherwise be asserted in this action, but also reserves to the parties certain
rights that are the subject of this action.

          Whereas,
as a condition of the ASBCA Settlement Agreement, the parties must seek an order of
the Court in these consolidated actions, in accordance with terms and conditions of this
stipulation, as to the prosecution of claims that are not resolved by the ASBCA Settlement
Agreement; and

          Whereas, to effectuate the terms and conditions of the ASBCA Settlement Agreement and for good
cause shown, the parties

					
	 	 	 	 	 
	STIPULATION AND ORDER RE	 	 	 	 
	PROSECUTION OF COUNTERCLAIM	 	 	 	 

- 2 -

 

hereby stipulate to entry by the Court of the following order:

          1.
All further proceedings with respect to the Counterclaim as to matters not released by the
parties in the ASBCA Settlement Agreement and within the subject matter of the Counterclaim shall
be stayed, but the stay shall be lifted upon written notice by the United States or by one of the
Defendants to the Court and to all parties that actions or claims have been undertaken against
Defendants, or either of them, with respect to such matters.

          2. Defendants’ Counterclaim and Counterdefendants’ defenses to such Counterclaim shall not be
subject to involuntary dismissal based on any alleged failure to prosecute during the pendency of
this stay, and no party shall assert that the failure to give notice when the right to give notice
first arises shall be deemed a failure to prosecute, regardless how long after the event giving
rise to the right to give notice under Paragraph 1 a party actually gives said notice.

					
	 	 	 	 	 
	STIPULATION AND ORDER RE	 	 	 	 
	PROSECUTION OF COUNTERCLAIM
	 	 
	 	 

- 3 -

 

          3. If and when the stay is lifted, the United States shall have sixty (60) days to file the
Answer or other responsive pleading to the Counterclaim.

FOR PLAINTIFF UNITED STATES OF AMERICA

	 	 	 	 	 	 	 
	DATED: October 19, 1993	 	Lois J. Schiffer	 	 
	 	 	Acting Assistant Attorney General	 	 
	 
	 	 	 	 	 	 
	 	 	Alice Mattice	 	 
	 	 	United States Department of Justice	 	 
	 	 	Environmental Defense Section	 	 
	 	 	Environmental and Natural Resources Division	 	 
	 	 	Room 7201, Main Justice Building	 	 
	 	 	10th & Pennsylvania Avenue	 	 
	 	 	P.O. Box 23986	 	 
	 	 	Washington, D.C. 20026-3986	 	 
	 
	 	 	 	 	 	 
	 	 	Robert M. Twiss, United States	 	 
	 	 	Attorney for the Eastern District of California	 	 
	 	 	3305 Federal Building	 	 
	 	 	650 Capitol Mall	 	 
	 	 	Sacramento, California 95814	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Alice Mattice
 

	 	 
	 	 	United States Department of Justice	 	 
	 	 	Environmental Defense Section	 	 
	 	 	Environmental and Natural Resources Division	 	 
	 	 	P.O. BOX 23986	 	 
	 	 	Washington, D.C. 20026-3986	 	 

					
	 	 	 	 	 
	STIPULATION AND ORDER RE	 	 	 	 
	PROSECUTION OF COUNTERCLAIM
	 	 
	 	 

- 4 -

 

FOR PLAINTIFF THE STATE OF CALIFORNIA

	 	 	 	 	 	 	 
	DATED: November 12, 1993	 	DANIEL E. LUNGREN	 	 
	 	 	Attorney General of the State of
California	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Edna Walz
 

	 	 
	 	 	EDNA WALZ	 	 
	 	 	Deputy Attorney General	 	 
	 	 	Department of Justice of the State of California	 	 
	 	 	1515 “K” Street	 	 
	 	 	Sacramento, CA 95314	 	 

FOR
DEFENDANTS AND COUNTERCLAIMANTS AEROJET-GENERAL CORPORATION AND CORDOVA CHEMICAL
COMPANY

	 	 	 	 	 	 	 
	DATED: November 22, 1993

	 	By:
	 	/s/ Lawrence A. Hobel	 	 
	 

	 	 	 	 

LAWRENCE A. HOBEL
	 	 
	 

	 	 	 	HELLER, EHRMAN, WHITE & McAULIFFE	 	 
	 

	 	 	 	333 Bush Street 	 	 
	 

	 	 	 	San Francisco, CA 94104-2878

EJG
	 	 

The clerk is directed to administratively close the file.

IT IS SO ORDERED:

	 	 	 	 	 
	DATED: Nov 24, 1993

	 	/s/ [ILLEGIBLE]	 	 
	 

	 	 

JUDGE OF THE UNITED STATES DISTRICT COURT
	 	 

					
	 	 	 	 	 
	STIPULATION AND ORDER RE	 	 	 	 
	PROSECUTION OF COUNTERCLAIM
	 	 
	 	 

- 5 -

 

United States District Court

for the

Eastern District of California

December 3, 1993

* * CERTIFICATE OF SERVICE * *

2:86-cv-00063

     USA

          v.

     Aerojet General Corp

I, the undersigned, hereby certify that I am an employee in the Office of the Clerk, U.S. District
Court, Eastern District of California.

That on December 3, 1993, I SERVED a true and correct copy(ies) of the attached, by
placing said copy(ies) in a postage paid envelope addressed to the
person(s) hereinafter listed,
by depositing said envelope in the U.S. Mail, or by placing said copy(ies) into an inter-office
delivery receptacle located in the Clerk’s office.

	 	 	 
	Lawrence A Hobel

	 	
	Heller Ehrman White and McAuliffe

	 	CL/EJG
	333 Bush Street 
	 	AUSA
	Suite 3100
	 	 
	San Francisco, CA 94104-2878
	 	 
	 
	 	 
	Suzanne Q Maltin
	 	 
	US Dept of Justice
	 	 
	Environmental Defense Section
	 	 
	Environmental and Natural Resources
	 	 
	P O
Box 23986
	 	 
	Washington, DC 20026-3986
	 	 

	 	 	 	 	 	 	 
	 	 	Jack L. Wagner, Clerk	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:	 	/s/ V Carrizales
	 	 
	 	 	V Carrizales, Deputy Clerkexv10w1

Exhibit 10.1

EXECUTION VERSION

[Home Diagnostics, Inc. Letterhead]

February 2, 2010

Joseph H. Capper

5139 Jasmine Way

Palm Harbor, Florida 34685

			
	     Re:	 	Amendments to Employment Agreement.

Dear Mr. Capper:

     We are parties to an Employment Agreement dated as of February 23, 2009 (the “Employment
Agreement”) relating to your employment as the President and Chief Executive Officer of Home
Diagnostics, Inc. (the “Company”). All capitalized terms used without definition in this
letter agreement will have the respective meanings provided in the Employment Agreement.

     As of the date of this letter agreement, the Company has entered into an Agreement and Plan of
Merger (the “Merger Agreement”) between the Company, Nipro Corporation (“Nipro”)
and Nippon Product Acquisition Corporation (the “Acquisition Corporation”). In connection
with the transactions contemplated by the Merger Agreement, we have agreed upon the amendments to
the Employment Agreement provided in this letter agreement, as follows:

     1. The amendments to the Employment Agreement provided in this letter agreement will become
effective immediately prior to the acceptance for payment by the Acquisition Corporation of shares
of the Company’s common stock pursuant to the tender offer contemplated by the Merger Agreement.
The date as of which such amendments become effective is referred to in this letter agreement as
the “Effective Date.” If the Merger Agreement is terminated in accordance with its terms
for any reason prior to such acceptance, this letter agreement will be deemed to terminate
simultaneously.

     2. The Term of your employment pursuant to the Employment Agreement will terminate on the
first anniversary of the Effective Date, unless earlier terminated as provided in the Employment
Agreement.

     3. During the Term of your employment, you will be entitled to receive payment of your Base
Salary from the Company at an annual rate of $500,000, payable in bi-weekly installments or in such
other installments as may be agreed upon.

     4. You will be entitled to receive a payment from the Company of $250,000 in cash within five
business days after the Effective Date.

     5. Provided that you continue to serve as an active full-time employee of the Company until
the first anniversary of the Effective Date, you will be entitled to receive a payment from the
Company of $250,000 in cash within five business days after such first

 

anniversary date. You will also be entitled to receive the foregoing payment if either (a) the
Company terminates your employment without Cause prior to the first anniversary of the Effective
Date or (b) you terminate your employment for Good Reason prior to the first anniversary of the
Effective Date.

     6. You will be designated as President of the Company (rather than President and CEO), will
not serve as a director of the Company and will report to a group of senior officers of Nipro and
its affiliates, rather than to the Company’s board of directors. You agree that those changes in
your duties, responsibilities and status shall not constitute “Good Reason” for the
purposes of Section 4(d)(i) of the Employment Agreement.

     7. You will not be entitled to any bonus compensation under the Employment Agreement, whether
relating to periods prior to or after the Effective Date, other than the payments provided in
paragraphs 4 and 5 of this letter agreement. Specifically, you will not be entitled to any bonus
payments pursuant to Section 3(b), 3(e), 3(k), 5(b)(ii), 5(d)(iii) or 5(e)(iii) of the Employment
Agreement.

     8. You will not be entitled to any additional equity compensation awards by the Company or
Nipro or any of its affiliates. Specifically, you will not be entitled to any additional stock
option or stock appreciation right awards pursuant to Section 3(i) or 3(j) of the Employment
Agreement.

     9. You will not be entitled to any severance or other compensation or continuation employment
benefits in connection with the termination of your employment with the Company for any reason,
other than your right to receive (i) payment of your Base Salary through the date of the
termination of your employment, (ii) payment for any accrued but unused vacation time in accordance
with the Company’s regular vacation policies and (ii) the payment provided in paragraph 5 of this
letter agreement under the circumstances set forth therein. Specifically, you will not be entitled
to any payments pursuant to Section 5(d)(ii) or 5(e)(ii) of the Employment Agreement.

     10. Sections 19 (POST-EMPLOYMENT NON-COMPETITION AGREEMENT) and 20 (ADDITIONAL POST-EMPLOYMENT
NON-COMPETITION TERMS) of the Employment Agreement shall terminate and be of no further force or
effect.

     11. The severance benefits to which you are or may become entitled pursuant to the Employment
Agreement, as amended by this letter agreement, are hereinafter referred to as the “Severance
Benefit payments.”

          (a) In the event that any or all of the Severance Benefit payments are treated as excess
parachute payments under Internal Revenue Code Section 280G, then your Unreduced and Reduced Net
Benefit (each defined below) shall be determined and the Severance Benefit payments shall be
adjusted in accordance with subparagraph (d) below.

          (b) For purposes of subparagraph (d) below, the Unreduced Net Benefit shall equal the
Severance Benefit payments (plus the amount of any other payment to you classified as a parachute
payment under the provisions of Code Section 280G), less the amount of federal, state and local
income and other taxes (including the excise tax under Code Section 4999) payable with respect to
such benefits. For these purposes, the federal, state, local and any other taxes shall be
calculated at the maximum marginal income tax rates applicable to you for each year in which the
foregoing amounts shall be paid.

2

 

          (c) For purposes of subparagraph (d) below, the Reduced Net Benefit shall equal the amount
determined under the principles of subparagraph (b) above, but with the Severance Benefit payments
first reduced by an amount such that the present value of all payments and benefits that you
receive or are entitled to receive from the Company that would constitute “parachute payments”
within the meaning of Code Section 280G does not exceed 2.99 times your “base amount,” as defined
under Code Section 280G. For purposes of calculating the aggregate present value of such parachute
payments, the requirements of Code Section 280G shall be followed.

          (d) If your Reduced Net Benefit is greater than the Unreduced Net Benefit, then the
amount of the Severance Benefit payments shall be reduced to an aggregate present value amount that
does not subject any of the payments to the excise tax under Code Section 4999.

          (e) An independent accounting firm shall perform any and all calculations required under Code
Section 280G, and shall determine your Reduced and Unreduced Net Benefit. Such determination shall
be made within 10 business days of the date severance benefits become due pursuant to the
Employment Agreement, as amended by this letter agreement. In the event a reduction of the
Severance Benefit payments is to be made pursuant to subparagraph (d) above, you shall have
discretion (in conjunction with the Company) to determine which and how much of the Severance
Benefit payments shall be eliminated or reduced consistent with the requirements of this letter
agreement and the Employment Agreement. Such decision shall be made no later than 5 business days
following the determination by the independent accounting firm of your Reduced and Unreduced Net
Benefit.

All compensation payable pursuant to this letter agreement and the Employment Agreement will be
subject to withholding and other applicable taxes. Except as otherwise expressly modified pursuant
to this letter agreement, the Employment Agreement will continue in full force and effect in
accordance with its terms.

     The provisions included in Sections 23 and 24 of the Employment Agreement are incorporated by
reference and made a part of in this letter agreement.

     If the foregoing correctly sets forth our agreement and understanding, please execute the
enclosed counterpart of this letter agreement and return the executed counterpart to the Company.

	 	 	 	 	 
	 

	 	HOME DIAGNOSTICS, INC.	 	 
	 
	 	 	 	 
	 
	 

	 	/s/ Peter Ferola 

	 	 
	 

	 	 

By: Peter Ferola
	 	 
	 
	 	 	 	 
	 

	 	Its: General Counsel	 	 

Agreed and accepted this

February 2, 2010:

/s/ Joseph H. Capper

                                                            

Joseph H. Capper

3

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