UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.)

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GenCorp Inc.

(Name of Registrant as Specified In Its Charter)

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February   , 2008

 

To our Shareholders:

 

You are cordially invited to attend our Annual Meeting to be held at The Ritz-Carlton located at 1150 22nd Street, N.W., Washington, D.C. 20037 on March 26, 2008 at 9:00 a.m. local time.

 

The enclosed notice and proxy statement contain details concerning our Annual Meeting.

 

An investment fund managed by Steel Partners II, L.P. (Steel Partners) has indicated that it intends to nominate and solicit proxies in favor of six nominees in opposition to the Board’s recommendations. We do not believe this is in your best interest. You may receive proxy solicitation materials from Steel Partners or its affiliates. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE BOARD’S NOMINEES ON THE ENCLOSED WHITE PROXY CARD. THE BOARD OF DIRECTORS URGES YOU TO NOT SIGN OR RETURN ANY GOLD OR OTHER PROXY CARD SENT TO YOU BY STEEL PARTNERS. Even if you have previously signed a proxy card sent by Steel Partners, you have every right to change your vote by using the enclosed WHITE proxy card to vote by telephone, by Internet or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided. Only the latest dated proxy card you vote will be counted. We urge you to disregard any proxy card sent to you by Steel Partners or its affiliates.

 

Your vote is extremely important regardless of the number of shares you own. Whether or not you plan to attend the Annual Meeting, we urge you to vote your shares at your earliest convenience. Please complete, date, sign, and promptly return the accompanying WHITE proxy card in the enclosed envelope, or vote via the Internet or telephone, to be sure that your shares will be represented and voted at the Annual Meeting. Please refer to the enclosed WHITE proxy card for instructions on voting via the Internet or telephone or, if your shares are registered in the name of a broker or bank, please refer to the information forwarded by the broker or bank to determine if Internet or telephone voting is available to you.

 

If you have any questions or require any assistance with voting your shares, please contact:

 

INNISFREE M&A INCORPORATED
SHAREHOLDERS CALL TOLL FREE: 877-456-3427
BANKS AND BROKERS CALL COLLECT: 212-750-5833

 

Thank you very much for your continued interest in GenCorp Inc.

 

Very truly yours,

 

	1.	To elect nine Directors to serve until the 2009 Annual Meeting;
	2.	To ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as independent auditors of the Company for fiscal year 2008; and
	3.	To consider and act on such other business as may properly be brought before the Annual Meeting or any adjournments or postponements thereof.

 

PROXY STATEMENT
FOR THE 2008 ANNUAL MEETING OF SHAREHOLDERS

 

FREQUENTLY ASKED QUESTIONS

 

The Board of Directors of GenCorp Inc., an Ohio corporation (GenCorp or the Company) solicits the enclosed proxy for use at the Annual Meeting of the Company’s shareholders to be held at The Ritz-Carlton located at 1150 22nd Street, N.W., Washington, D.C. 20037 on March 26, 2008 at 9:00 a.m. local time. This proxy statement contains information about the matters to be voted on at the meeting and the voting process, as well as information about the Company’s Directors and executive officers.

 

WHY DID I RECEIVE THIS PROXY STATEMENT?

 

The Board of Directors is soliciting your proxy to vote at the Annual Meeting because you were a shareholder at the close of business on February 1, 2008, the record date, and therefore you are entitled to vote at the Annual Meeting. This proxy statement, the accompanying WHITE proxy card and Annual Report to shareholders for the fiscal year ended November 30, 2007 are being made available to shareholders beginning on or about February   , 2008. This proxy statement summarizes the information you need to know to vote at the Annual Meeting. You do not need to attend the Annual Meeting to vote your shares.

 

WHAT AM I VOTING ON?

 

You are voting on the following items of business at the Annual Meeting:

 

 

WHO IS ENTITLED TO VOTE?

 

Shareholders of record as of the close of business on February 1, 2008 are entitled to vote at the Annual Meeting. Each share of GenCorp common stock is entitled to one vote.

WHAT ARE THE VOTING RECOMMENDATIONS OF THE BOARD OF DIRECTORS?

 

The Company’s Board of Directors recommends that you vote your shares “FOR” each of the Board’s nine nominees standing for election to the Board, and “FOR” the ratification of PricewaterhouseCoopers LLP as the Company’s independent accountants.

 

HOW DO I VOTE?

 

It is important that your shares are represented at the Annual Meeting whether or not you attend the meeting in person. To make sure that your shares are represented, we urge you to vote as soon as possible by either (i) signing, dating and returning the WHITE proxy card in the postage-paid envelope provided, (ii) Internet, or (iii) telephone. Voting Instructions are provided on the WHITE proxy card.

 

If you are a registered shareholder, there are four ways to vote:

 

 

Your shares will be voted as you indicate. If you return your WHITE proxy card and do not indicate your voting preferences, the appointed proxies (Yasmin R. Seyal and Mark A. Whitney) will vote your shares FOR items 1 and 2. If your shares are owned in joint tenancy, all joint owners must vote by the same method. If joint owners vote by mail, all of the joint owners must sign the WHITE proxy card. If you are a registered shareholder and you vote by telephone or via the Internet, you do not need to return your WHITE proxy card. Votes submitted by shareholders of record via the Internet or by telephone must be received by 11:59 p.m. Eastern time on March 25, 2008.

 

If your shares are held in a brokerage account in your broker’s name, please follow the voting directions provided by your broker or nominee. You may sign, date and return a voting instruction card to your broker or nominee or, in most cases, submit voting instructions by telephone or the Internet to your broker or nominee. If you provide specific voting instructions by mail, telephone, or the Internet, your broker or nominee should vote your shares as you have directed.

 

At the Annual Meeting, written ballots will be available to anyone who wishes to vote in person. If you hold your shares in a brokerage account, you must request a legal proxy from your broker or other nominee to vote at the Annual Meeting.

 

If your shares are held through the GenCorp Retirement Savings Plan, please follow the voting directions provided by Fidelity Management Trust Company, the Plan’s Trustee. You may sign, date and return a voting instruction card to the Trustee or submit voting instructions by telephone or the Internet. If you provide voting instructions by mail, telephone, or the Internet, the

Trustee will vote your shares as you have directed (or not vote your shares, if that is your direction). If you do not provide voting instructions, the Trustee will vote your shares in the same proportion as shares for which the Trustee has received voting instructions. You must submit voting instructions to the Plan Trustee by no later than March 21, 2008 at 11:59 pm Eastern time in order for your shares to be voted as you have directed by the Trustee at the Annual Meeting. Plan participants may not vote their Plan shares in person at the Annual Meeting.

 

WHAT SHOULD I DO IF I RECEIVE A PROXY CARD FROM STEEL PARTNERS?

 

Steel Partners has indicated that it intends to nominate, and solicit proxies for, its own slate of nominees for election as Directors at the Annual Meeting. You may receive an opposition proxy statement and proxy card as well as follow-up solicitation materials from Steel Partners or its affiliates. THE BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN ANY GOLD PROXY CARD OR ANY OTHER PROXY CARD SENT TO YOU BY STEEL PARTNERS. For additional information on the factors considered by the Board in reaching this determination, see the section entitled Steel Partners Notice of Nominees below.

 

Even if you have previously signed a proxy card sent by Steel Partners, you have every right to change your vote. You may do so by signing, dating and mailing the enclosed WHITE proxy card in the postage-paid envelope provided, or by following the instructions on the WHITE proxy card to vote by telephone or by Internet. Only the latest dated proxy card you vote will be counted. We urge you to disregard any proxy card sent to you by Steel Partners or its affiliates.

 

MAY I ATTEND THE MEETING?

 

All shareholders and properly appointed proxy holders may attend the Annual Meeting. Shareholders who plan to attend the meeting must present valid photo identification. If you hold your shares in a brokerage account, please also bring proof of your share ownership, such as a broker’s statement showing that you owned shares of the Company on the record date of February 1, 2008, or a legal proxy from your broker or nominee. A legal proxy is required if you hold your shares in a brokerage account and you plan to vote in person at the Annual Meeting. Shareholders of record will be verified against an official list available at the Annual Meeting. The Company reserves the right to deny admittance to anyone who cannot adequately show proof of share ownership as of the record date.

 

WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF RECORD AND AS A BENEFICIAL OWNER?

 

If your shares are registered directly in your name with the Company’s transfer agent, the Bank of New York, you are considered, with respect to those shares, the “shareholder of record.” The proxy statement, Annual Report and WHITE proxy card have been made available directly to shareholders of record by the Company. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial owner” of shares held in that brokerage account. The proxy materials will be forwarded to you by your broker, bank or nominee who is considered, with respect to those shares, the shareholder of record. As the beneficial holder, you have the right to direct your broker, bank or nominee how to vote and you are also invited to attend

the Annual Meeting. However, since you are not a shareholder of record, you may only vote your shares at the Annual Meeting if you bring a legal proxy from your broker, bank or nominee. Your broker, bank or nominee will enclose a voting instruction card to use in directing the broker, bank or other nominee on how to vote your shares.

 

WHAT ARE BROKER NON-VOTES AND HOW ARE THEY COUNTED?

 

Broker non-votes occur when nominees, such as brokers and banks holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions at least ten days before the Annual Meeting date. If no instructions are given within that time frame, the nominees may vote those shares on matters deemed “routine” by the New York Stock Exchange. On non-routine matters, nominees cannot vote without instructions from the beneficial owner, resulting in so-called “broker non-votes.” Broker non-votes are not counted for the purposes of determining the number of shares present in person or represented by proxy on a voting matter. In the event of a solicitation of proxies by Steel Partners, all proposals on the agenda for which there is a counter-soliciation by Steel Partners will be considered non-routine matters for any brokerage accounts solicited by Steel Partners. As a result, if Steel Partners or its affiliates provide you with proxy solicitation materials through your broker, your broker will be unable to vote your shares at the Annual Meeting on any proposal unless they receive your specific voting instructions. For these reasons, please promptly vote by telephone, by Internet, or sign, date and return the voting instruction card your broker or nominee has enclosed, in accordance with the instructions on the card.

 

MAY I CHANGE MY VOTE?

 

If you are a shareholder of record, you may revoke your proxy at any time before it is voted at the Annual Meeting by:

 

 

If you are a beneficial owner of shares, you may submit new voting instructions by contacting your broker, bank or other nominee. You may also vote in person at the Annual Meeting if you obtain a legal proxy as described above. The Board strongly urges you to revoke any gold or other proxy card you may have returned which you received from Steel Partners or its affiliates. Even if you have previously signed a proxy card sent by Steel Partners, you have every right to change your vote by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided, or by following the instructions on the WHITE proxy card to vote by telephone or by Internet. Only the latest dated proxy card you vote will be counted.

WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?

 

Directors are elected by a plurality of the votes cast at the Annual Meeting. Votes cast for a nominee will be counted in favor of election. Abstentions and broker non-votes will not count either in favor of, or against, election of a nominee. Proxies cannot be voted for a greater number of persons than the number of Directors set by the Board for election. The affirmative vote of the holders of at least a majority of the votes cast at the Annual Meeting is necessary to approve Proposal 2, the ratification of the appointment of the Company’s independent auditors. Abstentions and broker non- votes will have no effect on the outcome of the vote on Proposal 2.

 

DO SHAREHOLDERS HAVE CUMULATIVE VOTING RIGHTS WITH RESPECT TO THE ELECTION OF DIRECTORS?

 

No. Shareholders do not have cumulative voting rights with respect to the election of Directors.

 

WHAT CONSTITUTES A QUORUM?

 

As of the record date, 56,942,450 shares of the Company’s common stock were issued and outstanding. A majority of the outstanding shares entitled to vote at the Annual Meeting, represented in person or by proxy, will constitute a quorum. Shares represented by a proxy that directs that the shares abstain from voting or that a vote be withheld on a matter will be included at the Annual Meeting for quorum purposes. Shares represented by proxy as to which no voting instructions are given as to matters to be voted upon will be included at the Annual Meeting for quorum purposes.

 

WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?

 

If you hold your shares in more than one account, you will receive a WHITE proxy card for each account. To ensure that all of your shares are voted, please complete, sign, date and return a WHITE proxy card for each account or use the WHITE proxy card to vote by telephone or Internet. As previously noted, Steel Partners has provided notice that it intends to nominate, and solicit proxies for, its own slate of nominees for election as Directors at the Annual Meeting. As a result, you may receive proxy cards from both Steel Partners and GenCorp. To ensure shareholders have the Company’s latest proxy information and materials to vote, the Board may conduct multiple mailings prior to the date of the Annual Meeting, each of which will include a WHITE proxy card regardless of whether or not you have previously voted. Only the latest proxy card you vote will be counted.

 

WHO WILL SOLICIT PROXIES ON BEHALF OF THE BOARD?

 

Appendix A sets forth certain information relating to the Company’s Directors and certain officers and employees of the Company who may be deemed to be “participants” in the Board’s solicitation of proxies in connection with the Annual Meeting under the applicable rules of the SEC.

WHAT IS THE COMPANY’S INTERNET ADDRESS?

 

The Company’s Internet address is www.gencorp.com. You can access this proxy statement and the Company’s 2007 Annual Report at this Internet address. The Company’s filings with the Securities and Exchange Commission are available free of charge via a link from this address.

 

WILL ANY OTHER MATTERS BE VOTED ON?

 

As of the date of this proxy statement, our management knows of no other matter that will be presented for consideration at the meeting other than those matters discussed in this proxy statement. If any other matters properly come before the meeting and call for a vote of the shareholders, validly executed proxies in the enclosed form will be voted in accordance with the recommendation of the Board of Directors.

 

WHO PAYS THE SOLICITATION EXPENSES FOR THIS PROXY STATEMENT AND RELATED COMPANY MATERIALS?

 

The Company does. In addition to sending you these materials, some of the Company’s Directors and officers, including management and non-management employees, may contact you by telephone, mail, e-mail or in person. You may also be solicited by means of press releases issued by GenCorp and postings on our web site, www.gencorp.com. None of the Company’s officers or employees will receive any extra compensation for soliciting you. The Company has retained Innisfree M&A Incorporated (Innisfree), to assist us in soliciting your proxy for an estimated fee of $      plus reasonable out-of-pocket expenses. Innisfree expects that approximately           of its employees will assist in the solicitation. The Company will reimburse banks, nominees, fiduciaries, brokers and other custodians for their costs of sending the proxy materials to the beneficial owners of GenCorp common stock. The Company estimates that its total expenses related to the solicitation in excess of those normally spent for an Annual Meeting as a result of the potential proxy contest and excluding salaries and wages of our regular employees and officers are expected to be approximately $     , which includes both the Innisfree fee of $      as well as expenses for printing, postage, legal services and other related items. The Company estimates that our total expenditures to date for the proxy solicitation are approximately $     .

 

ARE THERE DISSENTER’S OR APPRAISAL RIGHTS?

 

The Company’s shareholders are not entitled to dissenter’s or appraisal rights under Ohio law in connection with any of the proposals.

 

WHO SHOULD I CALL IF I HAVE ANY QUESTIONS?

 

If you have any questions, or need assistance voting, please contact the Company’s proxy solicitor:

 

Innisfree M&A Incorporated
Shareholders Call Toll Free: 877-456-3427
Banks and Brokers Call Collect: 212-750-5833

 

A copy of the Company’s 2007 Annual Report, including financial statements, accompanies this proxy statement. Shareholders who wish to receive a separate written copy of the proxy statement, Annual Report on Form 10-K, now or in the future, should submit their written request to Secretary, GenCorp Inc., P.O. Box 537012, Sacramento, California 95853-7012 (if by overnight courier, then Highway 50 & Aerojet Road, Rancho Cordova, California 95742).

 

PROPOSAL 1
ELECTION OF DIRECTORS

 

The Company’s Code of Regulations provides for a Board of not less than seven or more than seventeen Directors, and authorizes the Board to determine from time to time the number of Directors within that range that will constitute the Board by the affirmative vote of a majority of the members then in office. The Board has set the number of Directors constituting the Board at nine.

 

The Board of Directors has proposed the following nominees for election as Directors with terms expiring at the Annual Meeting in March 2009: James J. Didion; Terry L. Hall; David A. Lorber; James M. Osterhoff; Todd R. Snyder; William L. Trubeck; Timothy A. Wicks; Sheila E. Widnall; and Robert C. Woods.

 

Eight of these nominees are current Directors who are being nominated for re-election. A current Director (Charles F. Bolden Jr.) has previously announced that he would not stand for re-election at the 2008 Annual Meeting, and in his place, the Board has determined to nominate Mr. Trubeck, who is not currently a Director. Mr. Trubeck has been selected in part to continue to implement the Board’s succession planning, as Mr. Osterhoff has tentatively indicated that he may resign at or prior to the 2009 Annual Meeting and the Board believes Mr. Trubeck would be a qualified Chairman of the Audit Committee upon the resignation of Mr. Osterhoff.

 

Each nominee elected as a Director will continue in office until the next Annual Meeting of shareholders at which his or her successor has been elected, or until his or her resignation, removal from office, or death, whichever is earlier.

 

The Board of Directors unanimously recommends a vote FOR the election of these nominees as Directors.

 

The information concerning the nominees set forth below is given as of December 31, 2007. Each nominee has had the same principal occupation or employment during the past five years unless otherwise indicated.

 

Current Directors Nominated for Re-Election

 

JAMES J. DIDION

Director since 2002

 

Mr. Didion is an independent real estate investor and consultant since 2001. Mr. Didion has significant real estate experience having served as Chairman of the Board of CB Richard Ellis, Inc. (formerly known as Coldwell Banker & Company), the largest commercial real estate services company in the world, until his retirement in 2001. At the time of his retirement, CB Richard Ellis had revenues in excess of $1.2 billion. Mr. Didion also served as Chief Executive Officer of Coldwell Banker from 1987 to 1999 and held various other management positions within the firm (1962 — 1987). Mr. Didion serves as an Executive Advisor of Real Estate to the University of California, Berkeley. From 1993 - 1996, Mr. Didion served as the Chairman of the Real Estate Roundtable, a non-profit public policy organization that engages in policy research, analysis and

presentation of positions on national real estate issues before the U.S. Congress, the White House and administrative agencies. Mr. Didion was a trustee and honorary member of the Urban Land Institute, a nonprofit organization that engages in research, education and advocacy promoting sound land use policy. He has also served on the Advisory Board of the Haas Business School at the University of California, Berkeley. Mr. Didion graduated from the University of California, Berkeley. Mr. Didion currently serves as Chairman of the Corporate Governance & Nominating Committee and as a member of the Finance Committee. Age 68.

 

TERRY L. HALL

Director since 2002

 

Mr. Hall serves as President and Chief Executive Officer of the Company, positions he has held since 2002. Formerly, Mr. Hall also held the title of Chairman of the Board of the Company from 2003 to 2007. Mr. Hall has also served in other capacities at the Company including: Senior Vice President and Chief Operating Officer (2001 — 2002); Senior Vice President and Chief Financial Officer (2000 — 2001); Senior Vice President — Chief Financial Officer and Treasurer (1999 — 2000). Mr. Hall also served as the Chief Financial Officer of Aerojet-General Corporation, a subsidiary of GenCorp (1999). Prior to joining GenCorp, Mr. Hall worked at U.S. Airways Group, Inc., an $8 billion airline holding company, where he was Senior Vice President, Finance and Chief Financial Officer (1997 — 1999), responsible for all aspects of corporate finance as well as mergers and acquisitions. Previously, Mr. Hall served as Chief Financial Officer of Apogee Enterprise Inc. (1995 — 1997), Chief Financial Officer of Tyco International Ltd. (1994 — 1995), and Vice President and Treasurer of UAL Corp. (1990 — 1993), Consultant to UAL Employees Acquisition Corp. (1990) and President/General Manager of Northwest Aircraft, Inc. (1986 — 1990). Mr. Hall graduated from Bemidji State University and earned his juris doctor from the University of Minnesota. Age 53.

 

DAVID A. LORBER

Director since 2006

 

Mr. Lorber is a Principal and Portfolio Manager at FrontFour Capital Group LLC, New York, NY, a hedge fund that he helped start in 2007. Previously, Mr. Lorber served as Director and Senior Investment Analyst at Pirate Capital LLC, a hedge fund (2003 — 2006). Prior to joining Pirate Capital, Mr. Lorber was an Analyst at Vantis Capital Management LLC, a money management firm and hedge fund (2001 — 2003) and an Associate at Cushman & Wakefield, Inc. (2000 — 2001). Mr. Lorber graduated from Skidmore College. Mr. Lorber currently serves as a member of the Organization & Compensation Committee and as a member of the Audit Committee. Age 29.

 

JAMES M. OSTERHOFF
Director since 1990

 

Mr. Osterhoff served as Executive Vice President and Chief Financial Officer of US WEST, Inc., a telecommunications company, from 1991 until retirement in 1995. Prior to joining US West, Mr. Osterhoff served as Vice President and Chief Financial Officer of Digital Equipment Corporation and of the Ford Motor Credit Company and its subsidiaries. Previously, Mr. Osterhoff

was a Director of Financial Security Assurance Holdings, Ltd. (FSA) and Arkwright Mutual Insurance Company, was Vice Chairman of the Private Sector Council/Research Center for Government Financial Management, and was a member of the School of Mechanical Engineering Advisory Council at Purdue University and the Financial Executives Council of the Conference Board. He was twice named in Institutional Investor as one of America’s “Top CFO’s.” Mr. Osterhoff graduated from Purdue University and earned a master’s degree in business administration from the Graduate School of Business at Stanford University. Mr. Osterhoff currently serves as Chairman of the Audit Committee and as a member of the Finance Committee. Age 71.

 

TODD R. SNYDER
Director since 2006

 

Mr. Snyder is a Managing Director of Rothschild Inc., an international investment banking and financial advisory firm. Before joining Rothschild in 2000, Mr. Snyder was a Managing Director and earlier held other positions at Peter J. Solomon Company (1997 — 2000) Prior to joining Peter J. Solomon Company, Mr. Snyder was a Managing Director at KPMG Peat Marwick (1995 — 1997). Prior to his move to investment banking, Mr. Snyder practiced law in the Business Reorganization department of Weil, Gotshal & Manges (1988 — 1994). Mr. Snyder graduated from Wesleyan University and received a juris doctor from the University of Pennsylvania Law School. Mr. Snyder is an adjunct faculty member of the New York University Law School. Mr. Snyder currently serves as Chairman of the Finance Committee and as a member of the Organization & Compensation Committee. Age 45.

 

TIMOTHY A. WICKS
Director since 2005

 

Mr. Wicks is a Senior Vice President, Strategic Growth for UnitedHealthcare, the largest operating division of UnitedHealth Group Inc., a diversified health care company, a position he has held since 2006. Other positions he has held at UnitedHealth include Senior Vice President, Product Development and Management for UnitedHealth (2004 — 2006), Vice President, Platinum Broker Service (2003 — 2004), and Vice President, Consumer Solutions (2002 — 2003). Prior to joining UnitedHealth, Mr. Wicks served as General Manager, Small Business Services, and Director of Global Business Strategy of Dell Computer Corporation (2001 — 2002). Prior to joining Dell Computer, Mr. Wicks was the President and Co-Founder of Great Northern Capital, a private investment and merchant banking firm (1994 — 2000). Mr. Wicks graduated from The University of Chicago and received a master’s degree in business administration from Harvard University’s Graduate School of Business. Mr. Wicks currently serves as the non-executive Chairman of the Board, as a member of the Finance Committee and as a member of the Audit Committee. Age 42.

 

DR. SHEILA E. WIDNALL
Director since 1999

 

Dr. Widnall has been an Institute Professor at the Massachusetts Institute of Technology (MIT) since 1998. Previously, Dr. Widnall served as the Secretary of the United States Air Force from 1993 to 1997. She is the only woman to ever head a military service. As Secretary of the Air Force,

Dr. Widnall was responsible for all affairs of the Department of the Air Force including recruiting, organizing, training, administration, logistical support, maintenance and welfare of personnel. Dr. Widnall was also responsible for research and development and other activities prescribed by the President or the Secretary of Defense. Prior to being appointed Secretary of the Air Force, Dr. Widnall was an Associate Provost (1992-1993) and Professor of Aeronautics and Astronautics (1986 — 1992) at MIT. Dr. Widnall was a member of the Columbia accident investigation board and was inducted into the Women’s Hall of Fame in 2003. Dr. Widnall is a member of the National Academy of Engineering, the American Institute of Aeronautics and Astronautics and the American Association for the Advancement of Science. Dr. Widnall earned her bachelor of science degree in 1960, her master of science degree in 1961, and her doctor of science degree in aeronautics and astronautics in 1964 at MIT. Dr. Widnall currently serves as Chairwoman of the Organization & Compensation Committee and as a member of the Corporate Governance & Nominating Committee. Age 69.

 

ROBERT C. WOODS
Director since 2006

 

Mr. Woods has been an Investment Banker at Cornerstone Capital Advisors, a real estate investment bank, since 1987. From 1983 to the present, Mr. Woods has also been a real estate developer for Palladian Partners, a real estate development company. At both Cornerstone and Palladian, Mr. Woods’ experience includes developing and financing master planned communities. Previously, he was a Project Manager and Vice President of Development for Hines Interests LLC, a real estate development company (1980 — 1983), and a Project Manager for Trammell Crow, a real estate development company (1979 — 1980). Mr. Woods was also a consulting professor of real estate finance at Stanford University from 2000 to 2005. Mr. Woods is also a Chartered Financial Analyst. Mr. Woods was a consulting professor of real estate finance at Stanford University from 2000 to 2005. Mr. Woods received a master’s degree in business administration from the College of William and Mary. Mr. Woods currently serves as a member of the Audit Committee and as a member of the Finance Committee. Age 55.

 

New Director Nominated for Election

 

WILLIAM L. TRUBECK

 

Mr. Trubeck served as Executive Vice President and Chief Financial Officer of H&R Block, Inc., a financial services company, from 2004 to 2007. Prior to joining H&R Block, he served Waste Management Inc., a waste disposal and environmental services company, as Executive Vice President of its Western Group (2003 — 2004), Executive Vice President, Operations Support, and Chief Administrative Officer (2002 — 2003) and Executive Vice President and Chief Financial Officer (2001 — 2002). Prior to joining Waste Management, Mr. Trubeck was Senior Vice President — Finance and Chief Financial Officer of International Multifoods, Inc., a food manufacturing company (1997 — 2000), and President, Latin American Operations of International Multifoods (1998 — 2000). Mr. Trubeck is a director of YRC Worldwide Inc., a transportation service provider, and of Dynegy Inc., a power generation company. Mr. Trubeck serves as chairman of the audit committees of both YRC Worldwide and of Dynegy. Mr. Trubeck is also vice chairman

of the board of trustees of Monmouth College. Mr. Trubeck graduated from Monmouth College and received a master’s degree in business administration from the University of Connecticut. If elected, Mr. Trubeck is expected to serve on the Audit Committee. Age 61.

 

The Company’s Board of Directors recommends that shareholders vote FOR these nominees as Directors by executing and returning the WHITE proxy card or voting by one of the other ways indicated thereon. Proxies solicited by the Board of Directors will be so voted unless shareholders specify otherwise.

 

STEEL PARTNERS NOTICE OF NOMINEES

 

Steel Partners, which has reported that it and other affiliated entities were the beneficial owner of 8,034,059 shares as of January 30, 2008, has notified the Company of its intention to nominate for election six individuals to the Board. According to information provided by Steel Partners, for which the Company disclaims any responsibility, these individuals are Warren G. Lichtenstein, James R. Henderson, Gerald R. Dinkel, Martin Turchin, James H. Perry and Thomas A. Corcoran.

 

At the date of this proxy statement, Steel Partners has indicated it intends to solicit proxies from shareholders for the election of its proposed nominees. If Steel Partners proceeds to solicit proxies, the Board recommends that you do NOT return Steel Partners’ gold proxy card or any other proxy card provided by Steel Partners or otherwise vote as recommended by Steel Partners.

 

The Board has determined that the election of the Steel Partners nominees would not be in the best interests of the Company and its shareholders. In making this determination, our Board considered, among other factors:

 

Significant Change Not Necessary

 

 

 

Adverse Effects on the Company Upon Election of Steel Partners’ Nominees

 

 

 

In making the foregoing determinations, the Board also considered the potential negative effects of opposing the Steel Partners nominees, particularly the substantial costs that may be involved and the fact that election contests typically consume a substantial amount of management time and result in the expenditure of significant expenses. However, the Board determined that, on balance, these factors were substantially outweighed by the other factors referenced above.

 

In making the foregoing determinations, the Board did not attempt to assign relative weights to any particular factor or to rank them in order of importance, and individual Directors may have considered other factors in their decision-making. The Directors may have considered the fact that they are standing for reelection as well (other than Mr. Bolden), although continued service on the GenCorp Board is not material to any of them from a financial point of view.

 

Accordingly, if Steel Partners nominates one or more individuals for election to the Board, the Company recommends that you vote AGAINST Steel Partners’ nominees and FOR the Company’s

nominees. If Steel Partners in fact proceeds with these actions, the Board expects to communicate further with shareholders prior to the Annual Meeting.

 

Voting for Directors

 

The Company has no provision for cumulative voting in the election of Directors. Holders of Common Stock are, therefore, entitled to cast one vote for each share held on the February 1, 2008 record date for each of the candidates for election. Directors are elected by a plurality of the votes cast at the Annual Meeting; however, the Board has adopted a majority vote policy. Pursuant to such policy, in an uncontested election, any nominee for Director who receives a greater number of votes “withheld” for his or her election than votes “for” such election (a Majority Withheld Vote) shall promptly tender his or her resignation after such election for consideration by the Corporate Governance & Nominating Committee. Within 90 days thereafter, the Board of Directors, taking into account the recommendation of the Corporate Governance & Nominating Committee, must determine whether to accept or reject the resignation. The Director that tendered the resignation shall not participate in the consideration or determination of whether to accept such resignation. The Board of Directors shall disclose by press release its decision to accept or reject the resignation and, if applicable, the reasons for rejecting the resignation. If a majority of the Corporate Governance & Nominating Committee members receive a Majority Withheld Vote at the same election, then the independent Directors who did not receive a Majority Withheld Vote will appoint a committee of independent Directors to consider the resignation offers and recommend to the Board whether to accept or reject them.

 

Votes cast for a nominee will be counted in favor of election. Abstentions and broker non-votes will not count either in favor of, or against, election of a nominee. It is the intention of the persons named in the accompanying form of proxy to vote for the election of the Board of Directors’ nominees, unless authorization to do so is withheld. Proxies cannot be voted for a greater number of persons than the number of Directors set by the Board for election. If, prior to the Annual Meeting, a nominee becomes unable to serve as a Director for any reason, the proxy holders reserve the right to substitute another person of their choice in such nominee’s place and stead. It is not anticipated that any nominee will be unavailable for election at the Annual Meeting.

 

 

Retirement Policy

 

Under the Board’s retirement policy, a Director’s term of office normally expires at the Annual Meeting following his or her 70^th birthday. The Board’s retirement policy also provides that the Board may waive immediate compliance with the policy and request that a Director postpone his or her retirement until a subsequent date. The Board has asked James M. Osterhoff, Chairman of the Audit Committee, who turned 70 in 2006, to remain a Director until the 2009 Annual Meeting, subject to re-election at the 2008 Annual Meeting.

 

Meetings of the Board

 

The Board of Directors held sixteen meetings during fiscal year 2007. Other than Mr. Bolden who is not standing for re-election at the 2008 Annual Meeting, all of our Directors attended at least 75% of the regularly scheduled and special meetings of the Board to which they were not otherwise excluded

(i.e. executive sessions) and Board committees on which they served in fiscal year 2007. All of the Board’s nominees for election at the 2008 Annual Meeting are expected to attend such Annual Meeting. All but one of the Directors then in office were present at the Company’s 2007 Annual Meeting.

 

Non-Executive Chairman of the Board

 

In February 2007, as part of its ongoing commitment to good corporate governance, the Board of Directors made a decision to separate the positions of Chairman of the Board and Chief Executive Officer. Historically, the positions of Chairman of the Board and Chief Executive Officer have been held by the same person. In February 2007, the Board appointed Timothy A. Wicks as non-executive Chairman of the Board.

 

Meetings of Non-Employee Directors

 

Non-employee Directors (consisting of all Directors other than Mr. Hall) meet in executive session as part of each regularly scheduled Board meeting. In 2007, Mr. Wicks, Chairman of the Board, presided at all such executive sessions. In the event of his absence, a non-employee Director would have been chosen on a rotating basis.

 

Determination of Independence of Directors

 

The Board has determined that to be considered independent, a Director may not have a direct or indirect material relationship with the Company. A material relationship is one which impairs or inhibits, or has the potential to impair or inhibit, a Director’s exercise of critical and disinterested judgment on behalf of the Company and its shareholders. In making its assessment of independence, the Board considers any and all material relationships not merely from the standpoint of the Director, but also from that of persons or organizations with which the Director has or has had an affiliation or those relationships which may be material, including commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others. The Board also considers whether a Director was an employee of the Company within the last five years. The Board consults with the Company’s counsel to ensure that the Board’s determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent Director,” including those set forth in pertinent listing standards of the New York Stock Exchange (NYSE) as in effect from time to time. The NYSE’s listing standards require that all listed companies have a majority of independent directors. For a director to be “independent” under the NYSE listing standards, the board of directors of a listed company must affirmatively determine that the director has no material relationship with the company, or its subsidiaries or affiliates, either directly or as a partner, shareholder or officer of an organization that has a relationship with the company or its subsidiaries or affiliates. In accordance with the NYSE listing standards, the Board of Directors has affirmatively determined that each Director other than Mr. Hall has no material relationship with the Company, either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company.

Additionally, each Director other than Mr. Hall has been determined to be “independent” under the following NYSE listing standards, which provide that a Director is not independent if:

 

 

Board Committees

 

The Board maintains four standing committees: Audit; Corporate Governance & Nominating; Organization & Compensation; and Finance. Assignments to, and chairs of, the committees are recommended by the Corporate Governance & Nominating Committee and approved by the Board. All committees report on their activities to the Board. Each standing committee operates under a charter approved by the Board. The charters for each of the standing committees are posted on the Company’s web site at www.GenCorp.com (and in print to any shareholder or interested party who requests them by writing to Secretary, GenCorp Inc., P.O. Box 537012, Sacramento, California 95853-7012 (if by overnight courier, then Highway 50 & Aerojet Road, Rancho Cordova, California 95742)).

The table below provides current membership and fiscal year 2007 meeting information for each of the standing committees. Committee membership is reviewed by the full Board at its first meeting following the Annual Meeting.

 

 

 

The Audit Committee is a separately designated standing committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Board has determined that each member of the Audit Committee meets all applicable independence and financial literacy requirements under the NYSE listing standards. The Board has also determined that Mr. Osterhoff is an “audit committee financial expert” as defined in the regulations adopted by the Securities and Exchange Commission (SEC). The Audit Committee reviews and evaluates the scope of the audits to be performed by, the adequacy of services performed by, and the fees and compensation of, the independent auditors. The Audit Committee also reviews the Company’s audited financial statements with management and with the Company’s independent auditors and recommends to the Board of Directors to include the audited financial statements in the Annual Report on Form 10-K; approves in advance all audit and permitted non-audit services to be provided by the independent auditors; reviews and considers matters that may have a bearing upon continuing auditor independence; prepares the report of the Audit Committee to be included in the Company’s proxy statement; appoints the independent auditors to examine the consolidated financial statements of the Company; reviews and evaluates the scope and appropriateness of the Company’s internal audit function, plans and system of internal controls; reviews and evaluates the appropriateness of the Company’s selection or application of accounting principles and practices and financial reporting; receives periodic reports from the internal audit and law departments; and reviews and oversees the Company’s compliance with legal and regulatory requirements.

 

The Corporate Governance & Nominating Committee (the Corporate Governance Committee) periodically reviews and makes recommendations to the Board concerning the criteria for selection and retention of Directors, the composition of the Board (including the non-executive Chairman of

the Board), the structure and function of Board committees, and the retirement policy and compensation and benefits of Directors. The Corporate Governance Committee also assists in identifying, and recommends to the Board, qualified candidates to serve as Directors of the Company and considers and makes recommendations to the Board concerning Director nominations submitted by shareholders. The Corporate Governance Committee also periodically reviews and advises the Board regarding significant matters of public policy, including proposed actions by foreign and domestic governments that may significantly affect the Company; reviews and advises the Board regarding adoption or amendment of major Company policies and programs relating to matters of public policy; monitors the proposed adoption or amendment of significant environmental legislation and regulations and advises the Board regarding the impact such proposals may have upon the Company and, where appropriate, the nature of the Company’s response thereto; periodically reviews and advises the Board regarding the status of the Company’s environmental policies and performance under its environmental compliance programs; and periodically reviews and reports to the Board regarding the status of, and estimated liabilities for, environmental remediation. The Board has determined that each member of the Corporate Governance Committee meets all applicable independence requirements under the NYSE listing standards.

 

The Organization & Compensation Committee (the Compensation Committee) advises and recommends to the independent Directors the total compensation of the President and Chief Executive Officer. In addition, the Compensation Committee, with the counsel of the Chief Executive Officer, considers and establishes base pay and incentive bonuses for the other executive officers of the Company. The Compensation Committee also administers the Company’s deferred compensation plan and the GenCorp 1999 Equity and Performance Incentive Plan. The Compensation Committee periodically reviews the organization of the Company and its management, including major changes in the organization of the Company and the responsibility of management as proposed by the Chief Executive Officer; monitors executive development and succession planning; reviews the effectiveness and performance of senior management and makes recommendations to the Board concerning the appointment and removal of officers; periodically reviews the compensation philosophy, policies and practices of the Company and makes recommendations to the Board concerning major changes, as appropriate; annually reviews changes in the Company’s employee benefit, savings and retirement plans and reports thereon to the Board; and approves, and in some cases recommends to the Board of Directors for approval, the compensation of employee-Directors, officers, and executives of the Company.

 

The Finance Committee makes recommendations to the Board with regard to the Company’s capital structure and the raising of long-term capital. The Finance Committee also reviews the performance and management of the Company’s employee benefit funds, and makes recommendations to the Board in regard to contributions to any Company pension, profit sharing, retirement or savings plan, or any proposed changes in the funding method, interest assumptions or in amortization of liabilities in connection with the funding of any such plan.

 

From time to time, the Board also forms special committees when specific matters need to be addressed.

Director Nominations

 

The Corporate Governance & Nominating Committee identifies potential director candidates through a variety of means, including recommendations from members of the Corporate Governance & Nominating Committee, the Board, management, and shareholders. The Corporate Governance & Nominating Committee also may retain the services of a consultant to assist in identifying candidates. The Corporate Governance & Nominating Committee will consider nominations submitted by shareholders. To recommend a nominee, a shareholder should write to the Chairman of the Corporate Governance & Nominating Committee, c/o Secretary, GenCorp Inc., P.O. Box 537012, Sacramento, California 95853-7012 (if by overnight courier, then Highway 50 & Aerojet Road, Rancho Cordova, California 95742). Any such recommendation must include (i) the name and address of the candidate; (ii) a brief biographical description, including his or her occupation for at least the last five years, and a statement of the qualifications of the candidate; and (iii) the candidate’s signed consent to serve as a Director if elected and to be named in the proxy statement.

 

Such nominations must be received by the Chairman of the Corporate Governance & Nominating Committee no later than the December 1 immediately preceding the date of the Annual Meeting at which the nominee is to be considered for election. Since the date of the Company’s 2007 proxy statement, there have been no material changes to the procedures by which shareholders of the Company may recommend nominees to the Board of Directors.

 

The Corporate Governance & Nominating Committee seeks to create a Board that is, as a whole, strong in its collective knowledge and diversity of skills and experience and background with respect to accounting and finance, management and leadership, business judgment, industry knowledge and corporate governance. When the Corporate Governance & Nominating Committee reviews a potential new candidate, it looks specifically at the candidate’s qualifications in light of the needs of the Board and the Company at that time, given the then-current mix of Director attributes.

 

Communications with Directors

 

Shareholders and other interested parties may communicate with the Board or individual Directors by mail addressed to: Chairman of the Corporate Governance & Nominating Committee, c/o Secretary, GenCorp Inc., P.O. Box 537012, Sacramento, California 95853-7012 (if by overnight courier, then Highway 50 & Aerojet Road, Rancho Cordova, California 95742). The Secretary may initially review communications to the Board or individual Directors and transmit a summary to the Board or individual Directors, but has discretion to exclude from transmittal any communications that are, in the reasonable judgment of the Secretary, inappropriate for submission to the intended recipient(s). Examples of communications that would be considered inappropriate for submission to the Board or a Director include, without limitation, customer complaints, solicitations, commercial advertisements, communications that do not relate directly or indirectly to the Company’s business or communications that relate to improper or irrelevant topics.

Compensation Committee Interlocks and Insider Participation

 

The Organization & Compensation Committee is composed entirely of non-employee independent Directors. As of November 30, 2007, the members of the Organization & Compensation Committee included Sheila E. Widnall (Chairwoman), Charles F. Bolden, David A. Lorber and Todd R. Snyder. All non-employee independent Directors participate in decisions regarding the compensation of Terry L. Hall, the President and Chief Executive Officer. None of the Company’s executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of the Company’s Organization & Compensation Committee. In addition, none of the Company’s executive officers serves as a member of the compensation committee of any entity that has one or more of its executive officers serving as a member of the Company’s Board of Directors.

 

Director Compensation

 

The compensation of the Company’s non-employee Directors is determined by the Board upon the recommendations made by the Corporate Governance & Nominating Committee (the Corporate Governance Committee).

 

Annual Cash Compensation

 

Under our Director compensation program in effect in fiscal year 2007, each non-employee Director received an annual retainer fee of $44,000. In addition, in fiscal year 2007 each non-employee Director received $4,000 for each Committee membership. Non-employee Directors who served as Chairperson of a Committee also received an additional annual fee of $8,000. In fiscal year 2007, the Board formed a steering committee consisting of Mr. Snyder (Chairman), and Messrs. Wicks and Osterhoff, with respect to a special project. Following Board approval, Mr. Snyder received $8,000 for his service as Chairman of the steering committee and Messrs. Osterhoff and Wicks each received $4,000 for their service on the steering committee.

 

In February 2007, the Board of Directors elected to separate the office of Chairman of the Board and Chief Executive Officer and appointed Mr. Wicks as the non-executive Chairman of the Board. As non-executive Chairman of the Board, Mr. Wicks received the pro-rated fee totaling $85,230 in fiscal year 2007 in lieu of the annual retainer fee paid to other non-employee Directors.

 

The Corporate Governance Committee’s charter authorizes the Committee to employ independent compensation and other consultants to assist in fulfilling its duties. After reviewing a study regarding director compensation prepared by Hewitt & Associates, an independent compensation consultant, the Board of Directors approved the following changes effective as of April 2008: (i) the annual retainer fee for non-employee Directors (other than the non-executive Chairman of the Board) will be $50,000, and (ii) the annual Committee fee for the Chairman of the Audit Committee will be $15,000. The annual retainer fee for the non-executive Chairman of the Board will be $104,000.

Equity Grants

 

All non-employee Directors receive an annual grant of restricted shares of the Company’s Common Stock under the GenCorp 1999 Equity and Performance Incentive Plan, typically in March. In March 2007, each non-employee Director (other than the non-executive Chairman of the Board) received a grant of 500 restricted shares. The non-executive Chairman of the Board received 1,000 restricted shares at that time. Provided that the grantee remains in continuous service as a Director of the Company, the restricted shares vest and become non-forfeitable on the third anniversary of the grant. Non-employee Directors also receive a one-time award of 500 restricted shares of the Company’s Common Stock as part of their initial election to the Board. All shares may be voted, but ownership may not be transferred until such shares are vested. Unless otherwise approved by the Board, unvested shares will be forfeited in the event of a voluntary resignation or refusal to stand for re-election.

 

All non-employee Directors receive an annual grant of stock options or stock appreciation rights (SARs) at the Board’s discretion, typically in January. In January 2007, each non-employee Director received a grant of 5,000 SARs. Fifty percent of such SARs vest six months from the date of grant with the remaining stock options or SARs vesting one year from the date of grant. All such stock options and SARs have a 10-year term.

 

Upon recommendation by the Corporate Governance Committee after reviewing a study by Hewitt & Associates regarding director compensation, effective in 2008, the Board of Directors approved the following changes: (i) the annual grant of restricted shares of the Company’s Common Stock to non-employee Directors (other than the non-executive Chairman of the Board) will be 1,750 shares, (ii) the annual grant of stock options or SARs to non-employee Directors (other than the non-executive Chairman of the Board) will be 6,000 options or SARs, and (iii) the non-executive Chairman of the Board will receive annual grants of 3,500 restricted shares and 12,000 of stock options or SARs.

 

Equity Ownership Guidelines for Non-employee Directors

 

In October 2007, upon the recommendation of the Corporate Governance Committee, the Board adopted equity ownership guidelines under which non-employee Directors are required to own equity in the Company in an amount equal to $150,000. In calculating the amount of equity owned by a non-employee Director, the Board looks at the value of Company common stock owned by such non-employee Director (restricted stock and stock owned outright), the value of any phantom stock owned by such non-employee Director as part of the Director Deferred Compensation Plan, and the value of any vested “in the money” options or SARs (i.e. market value of Company stock in excess of the strike price for the stock option or SAR). Non-employee Directors have five years to meet the thresholds set forth in these equity ownership guidelines.

 

Director Deferred Compensation Plan

 

Directors annually may elect to defer all or a percentage of their cash compensation pursuant to the Director Deferred Compensation Plan. The plan is unfunded, and deferred amounts are deemed to be invested in, at the election of the Director, phantom shares in a GenCorp Stock Fund, a

Standard & Poor’s 500 index fund, or a cash deposit program. Deferred amounts and earnings thereon are payable at or commencing at a future date, in either a lump sum or installments as elected by the Director at the time of deferral.

 

Director Retirement Plan

 

Each non-employee Director elected to the Board prior to January 1, 2002 participated in the Company’s Retirement Plan for Non-Employee Directors (the Retirement Plan). Under the Retirement Plan, each of such Directors will receive a monthly retirement benefit in the amount of $2,000 until the number of monthly payments made equals the Director’s months of benefit accrual under the Retirement Plan (maximum of 120 months). In the event of death prior to payment of the applicable number of installments, the aggregate amount of unpaid monthly installments will be paid, in a lump sum, to the retired Director’s surviving spouse or other designated beneficiary, if any, or to the retired Director’s estate. Non-employee Directors serving on the Board prior to January 1, 2002 were given the opportunity to either (a) continue participating in the Retirement Plan, or (b) freeze the retirement benefit already accrued under the Retirement Plan and receive the annual stock option or SARs grant in respect of future service on the Board. The non-employee Directors who were eligible to participate in such Plan (Mr. Osterhoff and Dr. Widnall) elected to freeze accrued retirement benefits and to receive the annual stock option or SARs grant. Under the terms of the Retirement Plan, in the event a Director’s service on the Board terminates for any reason on the date of a change in control or during the two year period following a change in control, such Director shall be entitled to the immediate payment of the aggregate amount of unpaid monthly installments in a lump sum.

 

Other

 

The GenCorp Foundation matches employee and Director gifts to accredited, non-profit colleges, universities, secondary, and elementary public or private schools located in the United States. Gifts made are matched dollar for dollar, up to $7,500 for each year.

 

Each non-employee Director elected to the Board prior to January 1, 2002 is eligible to participate in the Healthcare Plan for Nonemployee Directors.

 

The Company also reimburses the Directors for travel and other expenses incurred in attending Board and Committee meetings.

 

2007 DIRECTOR COMPENSATION TABLE

 

The following table sets forth information regarding compensation for each of the Company’s non-employee Directors for fiscal year 2007.

 

 

The following table shows the shares of restricted stock and SARs granted to each Director during fiscal year 2007, and the aggregate grant date fair value for each award under SFAS 123(R). The grant date fair values of SARs awards are estimated using a Black-Scholes Model.

 

 

 

 

Security Ownership of Officers and Directors

 

The following table lists share ownership of the Company’s Common Stock as of February 1, 2008, by the Directors, Mr. Trubeck and the Named Executive Officers, as well as the number of shares beneficially owned by all of the Directors and executive officers as a group. Unless otherwise indicated, share ownership is direct.

 

 

 

Code of Ethics and Corporate Governance Guidelines

 

The Company has adopted a code of ethics known as the Code of Business Conduct that applies to the Company’s employees including the principal executive officer, principal financial officer, principal accounting officer and controller. Copies of the Code of Business Conduct and the Company’s Corporate Governance Guidelines are available on the Company’s web site at www.GenCorp.com (copies are available in print to any shareholder or other interested person who requests them by writing to Secretary, GenCorp Inc., P.O. Box 537012, Sacramento, California 95853-7012 (if by overnight courier, then Highway 50 & Aerojet Road, Rancho Cordova, California 95742)).

 

Shareholder Agreement

 

On February 15, 2005, the Company and Steel Partners II, L.P. (Steel Partners) entered into a shareholder agreement. Pursuant to that agreement, a representative of Steel Partners was permitted to attend all of the Board of Directors’ meetings as a non-voting observer until February 15, 2007. On February 16, 2007, the Company and Steel Partners amended and restated the shareholder agreement to allow Steel Partners’ board observer status to be extended until February 16, 2008, at which point the agreement terminates.

 

REPORT OF THE AUDIT COMMITTEE

 

The Audit Committee assists the Board of Directors in fulfilling its responsibilities for general oversight of (i) the quality and integrity of the Company’s financial statements, (ii) the independent auditors’ qualifications and independence, (iii) the performance of the Company’s financial reporting process, internal control system, internal audit function and independent auditors, and (iv) the Company’s compliance with legal and regulatory requirements. The Audit Committee manages the Company’s relationship with its independent auditors, who report directly to the Audit Committee. The Audit Committee has the authority to obtain advice and assistance from outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties, with funding from the Company for such advice and assistance. Management is primarily responsible for establishing and maintaining the Company’s system of internal controls and preparing financial statements in accordance with accounting principles generally accepted in the United States.

 

In fulfilling its responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements in the Annual Report, including a discussion of the reasonableness of significant judgments and the clarity of disclosures in the financial statements.

 

The Audit Committee reviewed and discussed the Company’s financial statements with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, and discussed such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. In addition, the Audit Committee discussed with the independent auditors matters required to be discussed by Statement on Auditing Standards No. 61, as amended, and the auditors’ independence from management and the Company, including the written disclosures and letter received from the independent auditors as required by the Independence Standards Board Standard No. 1 and the compatibility of their non-audit services with maintaining their independence.

 

The Audit Committee also reviewed with management and the independent auditors the preparation of the financial statements and related disclosures contained in the Company’s earnings announcements and quarterly reports.

 

The Audit Committee discussed with the Company’s internal and independent auditors the overall scope and plans for their respective audits. The Audit Committee met with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. The Audit Committee also received PricewaterhouseCoopers LLP’s report on the Company’s internal controls over financial reporting. The Company outlined these reports in its Annual Report on Form 10-K for the fiscal year ended November 30, 2007.

The Audit Committee met eight times during fiscal year 2007.

 

In reliance on the reviews and discussions referred to in the foregoing paragraphs, the Audit Committee recommended to the Board of Directors (and the Board approved) that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2007 for filing with the SEC. The Audit Committee appointed PricewaterhouseCoopers LLP as the Company’s independent auditors for fiscal year 2008.

 

Submitted by the Audit Committee,

 

James M. Osterhoff, Chairman
David A. Lorber
Timothy A. Wicks
Robert C. Woods

 

January 22, 2008

COMPENSATION COMMITTEE REPORT

 

The Organization & Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the Organization & Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement. The Board has approved that recommendation.

 

 

Submitted by the Organization & Compensation Committee,

 

 

Sheila E. Widnall, Chairwoman
Charles F. Bolden Jr.
David A. Lorber
Todd R. Snyder

 

 

January 22, 2008

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Overview; Compensation Objectives

 

Our compensation program is designed to support our business goals and promote both short-term and long-term growth. In this section of the proxy statement, we explain how our compensation program is designed and operates with respect to our Named Executive Officers, which include our CEO, CFO, and three most highly compensated executive officers in fiscal year 2007.

 

We have designed our executive compensation program, under the direction of the Compensation Committee of the Board, to attract and retain high quality executive officers and directly link pay to our performance. The Company’s strategic goals include improving the Company’s financial performance, obtaining entitlements on the Company’s excess real estate, and managing the Company’s legacy liabilities. Accordingly, as discussed in more detail below, the Compensation Committee set performance targets for annual cash bonuses for 2007 relating to earnings per share, cash flow and various real estate objectives tied to the entitlement of our excess real estate.

 

The Compensation Committee determines all matters of executive compensation and benefits, although the Chief Executive Officer (CEO) provides input and initial recommendations to the Compensation Committee with respect to the Named Executive Officers other than the CEO. The Compensation Committee advises and makes compensation recommendations to the independent members of the Board of Directors with respect compensation for the President and CEO.

The objectives of our executive compensation program are as follows:

 

 

Compensation Benchmarking

 

The Compensation Committee sets base salaries, target annual cash incentive levels and target annual long-term incentive award values at the 50th percentile of competitive market levels. In assessing competitive overall compensation, the Compensation Committee reviewed a combination of relevant data acquired from outside sources including Towers Perrin (executive compensation database for annual revenue scope of $500 million to $1 billion), Hewitt & Associates (executive survey for annual revenue scope of $500 million to $1 billion), and Mercer Human Resource Consulting (executive survey for annual revenue scope of $500 million to $1 billion). The Compensation Committee did not retain a compensation consultant to assist in creating the compensation package for the Company’s executives for fiscal year 2007. The Compensation Committee has retained two consultants — Watson Wyatt Worldwide and FPL Associates LLP — to assist in designing compensation packages for the executives for fiscal year 2008.

 

Compensation Elements

 

The compensation program for executive officers consists of the following principal elements:

 

 

The Committee believes that these elements of compensation create a flexible package that reflects the long-term nature of the Company’s businesses and rewards both short and long-term performance of the Company and individual in accordance with the objectives of the compensation program.

Short-term Compensation

 

Base Salaries

 

Base salaries are used to provide a fixed amount of compensation for the executive’s regular work. Each year, the Compensation Committee holds a meeting (typically in January), where it reviews and, in some cases, makes adjustments to base salaries. Typically, the effective date of merit increases in base salaries is in April of each year. Base salary increases can also occur upon an executive’s promotion. Any base salary increase for the Company’s executive officers must be approved by the Compensation Committee. In determining the amount of any increases in salaries, the Compensation Committee (i) compares current cash compensation with compensation for comparable executive positions in industry studies and data described under Compensation Benchmarking, (ii) assesses the individual performance of each of the executives, and (iii) takes into account the timing and amount of the last salary increase for each of the executives.

 

Annual Cash Incentive Program

 

The primary objective of our annual cash incentive awards is to reward fiscal year performance and achievement of designated business strategic goals to provide competitive compensation to assist in retaining our senior management team. To those ends, the Compensation Committee sets performance targets such that total cash compensation (base salary plus annual cash bonus) will be within a competitive range of total cash compensation (generally at the 50th percentile level for comparable executives) if performance targets are met. The annual cash incentive program follows our “pay for performance” philosophy. If targets are met, cash bonuses are paid; if minimum targets are not met, we will pay less or nothing at all. If targets are exceeded, the Compensation Committee has discretion to increase payments to the executives.

 

In order to promote the Company’s strategic goals of improving financial performance and obtaining entitlements on the Company’s excess real estate, the Compensation Committee set performance targets for annual cash bonuses for our Named Executive Officers for fiscal year 2007, consisting of earnings per share, cash flow and various real estate objectives tied to the entitlement of our excess real estate.

 

In the first quarter of each fiscal year, typically in January, the Compensation Committee approves the annual cash incentive program for the Executive Officers of the Company. The target annual cash bonus is established through an analysis of compensation for comparable positions as noted in the studies described under Compensation Benchmarking and is intended to provide a competitive level of compensation when the executives achieve their performance objectives. Combined salaries and target bonus levels, on an aggregate basis, are intended to approximate the 50^th percentile level. In the first quarter of each fiscal year, the Compensation Committee:

 

 

 

Annual cash incentive bonuses are paid at the beginning of each fiscal year for the prior fiscal year’s performance. Bonuses paid are based upon the Compensation Committee’s (with input from the CEO) assessment of actual performance (individually and Company-wide) against pre-established Company and business segment performance objectives to determine the appropriate amount payable with respect to the applicable target bonus opportunity. The Compensation Committee has discretion to increase, reduce or eliminate payments and, in the past, has exercised its discretion to increase and decrease payments.

 

The Compensation Committee tailors both performance measures and targets in order to most accurately approximate success criteria for both of our business segments and the Company’s performance overall. For fiscal year 2007, our Named Executive Officers had the opportunity to earn up to the following percentages of their base salaries if all of their performance measures were met at the maximum (100%) target levels:

 

 

* The position of Business Unit President for the Real Estate segment was vacant at the end of fiscal year 2007

 

The criteria used in fiscal year 2007 were the following:

 

Corporate Executives — applicable to our corporate officers, which included all of the Named Executive Officers except for Mr. Neish who is part of our Aerospace and Defense Segment.

 

 

 

 

Aerospace and Defense Segment — applicable to Mr. Neish as the business unit president of our Aerospace and Defense Segment.

 

 

 

 

The fiscal year 2007 cash incentive awards paid to each of the Named Executive Officers are shown in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table, which follows this Compensation Discussion and Analysis.

 

Long-Term Incentives (Equity-Based Compensation)

 

We believe that the use of long-term incentive compensation for executives reinforces four strategic objectives:

 

 

Accordingly, we strive to set a sizeable portion of our Named Executive Officer’s compensation in an equity-based form. This type of compensation, coupled with our share ownership guidelines, will result in our executives becoming shareholders with considerable personal financial interest in the fiscal health and performance of the Company.

We determine the amount of equity-based awards by subtracting the executive’s annual cash compensation opportunity from the total targeted annual compensation that is competitive with the market (generally in the 50th percentile range). The ultimate value of these equity-based awards is driven in part by the executive’s performance in the past fiscal year and in part by their ability to increase the value of the Company going forward.

 

Our equity-based compensation in fiscal year 2007 included awards of restricted stock and cash-settled SARs. These types of equity are described as follows:

 

 

Upon a change in control of the Company, any unvested equity awards become immediately vested.

 

A review is conducted each year by the Compensation Committee to determine the appropriate mix of restricted stock, SARs, and stock options.

 

Because of limited availability of awardable shares under the 1999 Equity and Performance Incentive Plan, equity awards over the last two fiscal years have been more heavily weighted to cash-settled SARs. The split has been approximately two-thirds SARs and one-third restricted stock. We believe that this allocation is conducive to creating a balanced risk and reward profile for our Named Executive Officers. SARs, like stock options, are more sensitive to changing perceptions in the stock market as well as the Company’s performance during the life of the SARs. We believe the risk inherent in SARs and the relative level of stability implicit in restricted stock appropriately motivates our Named Executive Officers to achieve financial and operating goals that are aggressive, but achievable.

Annual restricted stock and SARs grants are typically made by the Compensation Committee to executives at the Committee’s first meeting of the fiscal year — usually in January or February. The timing of the grants follows the Company’s historical practice. All such grants of SARS are made with an exercise price equal to the fair market value of a share of stock on the date of grant, which is defined as the closing price on the New York Stock Exchange on the date of grant.

 

In order to promote improvement in the Company’s financial performance, and subject to accelerated vesting upon a change in control, the restricted stock grants made by the Compensation Committee to executives in fiscal year 2007 vest only upon the achievement of financial performance goals set by the Compensation Committee. The performance targets for the restricted stock vesting were economic earnings per share of $0.38 (50% weighting) and positive cash flow (50% weighting) with vesting over two years from the date of grant. These performance targets were met for fiscal year 2007. The SARs awards were granted under the terms (three year vesting) described above.

 

In addition, in order to promote improvement in the Company’s financial performance and achievement of certain strategic goals, portions of the restricted stock grants in fiscal year 2005 vested only upon the achievement in fiscal year 2007 of certain financial goals (35% weighting — half of which was tied to economic earnings per share of $0.38 and half to positive cash flow) and the completion of certain real estate entitlement related milestones (65% weighting). The targets for economic earnings per share and cash flow were met, while the entitlement related milestones were not; consequently, only 35% of the 2005 shares that were awarded actually vested for fiscal year 2007.

 

In order to strengthen the alignment between the interests of shareholders and the interests of executives of the Company, the Compensation Committee approved share ownership guidelines that apply to the Company’s executive officers. Under these guidelines, each executive officer is expected to have equity in the Company equal in aggregate market value to a designated multiple of such officer’s annual salary (CEO — five times base salary; Senior Vice Presidents and Business Unit Presidents — three times base salary; and Vice Presidents — one times base salary). In calculating the amount of equity owned by an executive, the Committee looks at the value of Company stock owned by the executive (regardless of whether it is restricted stock or vested), and the value of any vested “in the money” options or SARs (i.e. market value of stock in excess of the strike price for the stock option or SAR). Newly appointed executives are expected to be in compliance with the ownership guidelines within five years of their appointments. As of January 31, 2008, all of the Named Executive Officers have met, or are in the transition period set forth in, these guidelines. The Compensation Committee reviews these guidelines periodically, and considers adjustments when appropriate.

 

Pension, 401K Savings and Other Plans

 

Pension Plan

 

The Named Executive Officers participate in the same tax-qualified pension and savings plans as other employees. These plans include the GenCorp Consolidated Pension Plan — a tax-qualified

defined benefit plan, and the Benefits Restoration Plan — a non-qualified defined benefit plan. There are no employee contributions required in order to participate in these defined benefit plans.

 

The GenCorp Consolidated Pension Plan includes several formulas for the determination of benefits. The Plan provides that participants will receive the larger of the “five-year average compensation formula” and the “career average formula.” Both formulae define compensation to recognize base salary and annual incentive (cash bonus) compensation.

 

 

The purpose of the Benefits Restoration Plan is to restore the pension plan benefits which executives and their beneficiaries would otherwise lose as a result of Internal Revenue Code limitations upon accrual and/or payment of benefits from a tax-qualified pension plan. By restoring such benefits, Benefits Restoration Plan permits the total benefits to be provided on the same basis as applicable to all other employees under the qualified pension plan.

 

The GenCorp Consolidated Pension Plan and the Benefits Restoration Plan provide an incentive for a long-term career, which supports our goal of retaining valued employees, including our top executives. The pension benefit formulae deliver higher returns to participants the longer they are with the Company and as their compensation levels increase.

 

If a change in control of the Company occurs, the Company is required to fund into a grantor trust an amount equal to the present value of the accrued pension benefits under Benefits Restoration Plan for all participants in such plan.

 

Further details regarding these programs, including the estimated value of retirement benefits for each Named Executive Officer, are found in the section entitled 2007 Pension Benefits beginning on page xx. The change in the actuarial pension value from fiscal year 2006 to fiscal year 2007 is presented in the “Change in Pension Value” column of the Summary Compensation Table on page xx.

 

401K Savings Plan

 

The Named Executive Officers are also eligible to participate in the GenCorp Retirement Savings Plan, a 401(k) plan generally available to all Company employees. The GenCorp Retirement Savings Plan is a tax-qualified defined contribution savings plan in which participating employees receive a Company match.

The Named Executive Officers participate in the related non-qualified Benefits Restoration Savings Plan. The Benefits Restoration Plan Saving Plan permits personal savings and Company matches on amounts above those permitted under the 401(k) plan due to certain limits imposed by the Internal Revenue Code. Details about the Benefits Restoration Plan Savings Plan are presented in the section entitled 2007 Non-qualified Deferred Compensation beginning on page xx.

 

Change in Control Agreements and Plan Provisions

 

The Company has change in control severance agreements with each of the Named Executive Officers. We consider these agreements to be in the best interest of our shareholders to foster the continuous employment and dedication of key executives without potential distraction or personal concern in the event of a change in control. These agreements help to ensure that our executives continue to perform in their roles when a potential change in control is impending, and are protected against the loss of their positions following a change in the ownership or control of the Company. These agreements also provide a sense of security to our executives that they will be treated fairly in the event of a termination not for cause following a change in control of the Company. If a change in control of the Company occurs, the Company is required to fund into a grantor trust an amount to cover potential severance payments to the Company’s executives. A description of these agreements can be found on page xx under the section entitled Change in Control Severance Agreements.

 

Other

 

The GenCorp Foundation matches employee and Director gifts to accredited, non-profit colleges, universities, secondary and elementary public or private schools located in the United States. Gifts made are matched dollar for dollar up to $7,500 per year per donor.

 

Indebtedness of Management

 

During fiscal year 2007, Mr. Hall had the principal sum of $77,170 indebtedness outstanding under the GenCorp Key Employee Loan Program (the Loan Program), which was approved by the Board to enable employees whose restricted stock had vested to pay taxes on the stock and retain it for as long as they remain in the employ of the Company. Repayment provisions under the Loan Program begin upon termination of employment. Interest, which is calculated and payable annually, is charged at the Company’s marginal borrowing rate which for 2007 was 5.45%. Interest accrued for fiscal year 2007 totaled $4,201 for Mr. Hall and such amount has been paid. The largest principal amount of indebtedness under the program during fiscal year 2007 for Mr. Hall was $77,170. Following the enactment of the Sarbanes-Oxley Act of 2002, the Loan Program was terminated effective July 30, 2002, but outstanding loans remain in effect in accordance with their existing terms.

 

Tax Deductibility under Section 162(m)

 

Section 162(m) of the Internal Revenue Code imposes limits on the deductibility of certain compensation in excess of $1,000,000 paid to the CEO and other executive officers of public companies. Management and the Compensation Committee have reviewed the regulations and feel that the current compensation program and policies are appropriate. Depending upon a variety of

factors (including Company performance), it is possible for one or more executive officers to surpass the $1,000,000 threshold under the executive officer compensation program. At this time, the Compensation Committee believes that accommodating the Internal Revenue Service regulations will not produce material benefits or increases in shareholder value. However, the Compensation Committee intends to review this issue regularly and may change its position in future years.

 

SUMMARY COMPENSATION TABLE

 

The following table sets forth information regarding compensation for each of the Company’s Named Executive Officers for fiscal year 2007.

 

 

 

 

All Other Compensation

 

 

* Represents matching contribution made by the GenCorp Foundation for gift made by Ms. Seyal in fiscal year 2007.

 

 

2007 GRANTS OF PLAN-BASED AWARDS

 

The following table provides information for each of the Company’s Named Executive Officers regarding fiscal year 2007 annual and long-term incentive award opportunities, including the range of potential compensation under non-equity incentive plans.