<PAGE>
 
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended November 30, 2001        Commission File Number 1-1520
 
                                  GENCORP INC.
             (Exact name of registrant as specified in its charter)
 

<Table>
<S>                                            <C>
                     OHIO                                        34-0244000
           (State of Incorporation)                 (I.R.S. Employer Identification No.)
</Table>

 

<Table>
<S>                                                   <C>
             HIGHWAY 50 AND AEROJET ROAD
             RANCHO CORDOVA, CALIFORNIA                                   95670
(Address of registrant's principal executive offices)                   (Zip Code)
                   P.O. BOX 537012
               SACRAMENTO, CALIFORNIA                                   95853-7012
                  (Mailing Address)                                     (Zip Code)
</Table>

 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (916) 355-4000
 
     SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 

<Table>
<Caption>
                                                           NAME OF EACH EXCHANGE
TITLE OF EACH CLASS                                         ON WHICH REGISTERED
-------------------                                        ---------------------
<S>                                            <C>
  Common stock, par value of $0.10 per share                New York and Chicago
</Table>

 
     SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months, (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]  No [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K section 229.405 is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
 
     The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 11, 2002 was $475,872,320.
 
     As of February 11, 2002, there were 43,108,412 outstanding shares of the
Company's Common Stock, $0.10 par value.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of the 2002 Proxy Statement of GenCorp Inc. are incorporated into

Part III of this Report.
 
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<PAGE>
 
                                  GENCORP INC.
 
                           ANNUAL REPORT ON FORM 10-K
                  FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2001
 
                               TABLE OF CONTENTS
 

<Table>
<Caption>
   ITEM
  NUMBER                                                                 PAGE
  ------                                                                 ----
  <C>      <S>                                                           <C>
                                      PART I
     1     Business....................................................     1
     2     Properties..................................................     9
     3     Legal Proceedings...........................................    10
     4     Submission of Matters to a Vote of Security Holders.........    18
           Executive Officers of the Registrant........................    18
 
                                     PART II
     5     Market for Registrant's Common Equity and Related
             Stockholders' Matters.....................................    21
     6     Selected Financial Data.....................................    22
     7     Management's Discussion and Analysis of Financial Condition
             and Results of Operations.................................    23
    7A     Quantitative and Qualitative Disclosures About Market
             Risk......................................................    36
     8     Consolidated Financial Statements and Supplementary Data....    37
     9     Changes in and Disagreements with Accountants on Accounting
             and Financial Disclosure..................................    37
 
                                     PART III
    10     Directors and Executive Officers of the Registrant..........    80
    11     Executive Compensation......................................    80
    12     Security Ownership of Certain Beneficial Owners and
             Management................................................    80
    13     Certain Relationships and Related Transactions..............    80
 
                                     PART IV
    14     Exhibits, Financial Statement Schedules and Reports on Form
             8-K.......................................................    80
           Signatures..................................................    82
           Index to Consolidated Financial Statements and Financial
             Statement Schedules.......................................  GC-1
           Exhibit Index...............................................     i
</Table>


<PAGE>
 

                                     PART I
 

ITEM 1.  BUSINESS
 
     GenCorp Inc. (hereinafter the Company or GenCorp) was incorporated in Ohio
in 1915 as The General Tire & Rubber Company (General Tire & Rubber). The
Company's continuing operations are organized into three segments: GDX
Automotive, Aerospace and Defense, and Fine Chemicals. The GDX Automotive
segment is a major automotive supplier, engaged in the development, manufacture
and sale of highly-engineered, extruded and molded rubber and plastic sealing
systems for vehicle bodies and windows for automotive original equipment
manufacturers. The Aerospace and Defense segment includes the Company's
wholly-owned subsidiary, Aerojet-General Corporation (Aerojet), which plays a
leading role in the development and production of solid and liquid rocket
propulsion systems and related defense products and services. This segment also
includes the Company's real estate business. The Fine Chemicals segment consists
of the operations of Aerojet Fine Chemicals LLC (Fine Chemicals or AFC), which
supplies special intermediates and active pharmaceutical ingredients primarily
to commercial customers in the pharmaceuticals industry.
 
     In January 2002, the Company became aware of certain potential accounting
issues at two of its GDX Automotive manufacturing plants in North America. The
Company promptly notified both its Audit Committee and its independent
accountants. Under the direction and oversight of the Audit Committee and with
the assistance of outside legal advisors and accounting consultants, the Company
conducted an inquiry into these and related accounting issues as well as a more
complete evaluation of accounting practices and internal control processes
throughout the Company. As a result of this process, due primarily to activities
at one GDX Automotive manufacturing plant, the Company is, by means of this
filing, restating its previously issued financial statements for the years ended
November 30, 2000 and November 30, 1999. See also Note 2 in Notes to
Consolidated Financial Statements in Part II, Item 8 of this report. Unaudited
quarterly financial information for the year ended November 30, 2000 and the
first three quarters of the year ended November 30, 2001, as shown in Note 12 in
the Notes to Consolidated Financial Statements in Part II, Item 8 of this
report, is also being restated by means of this filing.
 
     The effect of the Company's revisions will be to reduce the Company's
income from continuing operations and diluted earnings per share from continuing
operations, respectively, from $55 million and $1.31 to $52 million and $1.23
for the year ended November 30, 2000 and from $46 million and $1.09 to $45
million and $1.07 for the year ended November 30, 1999. The effect of the
revisions on the net income for the nine months ended August 31, 2001 was to
reduce net income from $25 million to $22 million and decrease basic and diluted
EPS from $0.59 to $0.52. The effect of the revisions on the Company's
Consolidated Balance Sheets as of November 30, 2000 resulted in an increase in
assets of $1 million and an increase in liabilities of $10 million and, as of
November 30, 1999, assets were increased $2 million and liabilities increased $6
million. The balance of retained earnings as of December 1, 1998 decreased $5
million. The revisions primarily arise from the correction of (i) certain
balance sheet and income statement items, which among other things, relate to
the accounting for customer-owned tooling, inventories and recognition of
liabilities at one of the Company's GDX Automotive manufacturing plants that the
Company has determined were not properly recorded in the Company's books and
records; and (ii) an oversight in collecting data for the calculation for
certain postretirement benefit liabilities at one of GDX Automotive's non-U.S.
facilities in the year ended November 30, 1996, with no material impact on
fiscal years 1998 and 1997. At the direction of the Audit Committee of the
GenCorp Board of Directors, the Company is in the process of implementing
certain enhancements to its financial organization, systems and controls
primarily at its GDX Automotive segment in response to issues raised by the
restatement and identified by the Company's independent accountants as material
weaknesses.
 
     Unless otherwise expressly stated, all financial information in this Annual
Report on Form 10-K is presented inclusive of these revisions.
 
     In December 2001, the Company completed the reacquisition of a 40 percent
ownership position in AFC from NextPharma Technologies USA Inc. (NextPharma) for
approximately $25 million, including $13 million in cash and the return of
GenCorp's interest in NextPharma's parent company. The acquisition agreement
also contains a provision for a contingent payment of up to $12 million in the
event of a disposition of AFC within

<PAGE>
 
two years of the reacquisition. NextPharma acquired its 40 percent ownership
position in AFC in June 2000. AFC is now once again a wholly-owned subsidiary of
GenCorp and has reassumed responsibility for sales, marketing and customer
interface activities previously performed by NextPharma. See "Results of
Operations -- Fine Chemicals Segment" under Management's Discussion and Analysis
of Financial Condition and Results of Operations (MD&A) in Part II, Item 7 of
this report, for additional information related to a personal investment by
GenCorp's Chairman and Chief Executive Officer, Robert A. Wolfe, in NextPharma's
parent company, NextPharma Technologies S.A. See also Notes 1(a), 1(o), and 16
under Notes to Consolidated Financial Statements in Part II, Item 8 of this
report for additional information related to this transaction.
 
     In November 2001, Aerojet completed the sale of approximately 1,100 acres
of property in Eastern Sacramento County, California, for $28 million. The
property lies outside of the Aerojet federal Superfund site boundaries and is
not a part of the approximately 2,600 acres of land that are expected to be
carved out of the Superfund site designation under an agreement with federal and
state government regulators (see discussion below). A $23 million pre-tax gain
resulted from the land sale transaction. See also Note 11 in Notes to
Consolidated Financial Statements in Part II, Item 8 of this report.
 
     In October 2001, Aerojet completed the sale of its Electronic and
Information Systems (EIS) business to Northrop Grumman Corporation (Northrop
Grumman) for $315 million in cash, subject to certain working capital
adjustments as defined in the agreement. In December 2001, Northrop Grumman
proposed significant adjustments which would require that Aerojet make a
purchase price reduction of approximately $42 million. Aerojet disagrees with
Northrop Grumman's proposed balance sheet adjustments on the basis that they are
inconsistent with the Asset Purchase Agreement (APA). The proposed adjustments
are subject to arbitration. Included in the sale were EIS operations in Azusa,
California and in Boulder and Colorado Springs, Colorado. The EIS business
employed 1,234 people at these locations. Following the sale, Aerojet retained
pre-closing environmental liabilities for the EIS business, but continues to
recover a portion of these environmental costs in accordance with its agreement
with the U.S. Government. These recoveries will be made for a substantial number
of years as provided in the APA and an advance agreement with the government.
 
     In addition, Aerojet has provided $49 million in cash ($8 million of which
was paid in fiscal 2002) and GenCorp has guaranteed another $25 million toward
remediation of the United States Environmental Protection Agency's (EPA) Baldwin
Park Operable Unit in the San Gabriel Valley where the EIS Azusa facility is
located. The EIS business had revenues of approximately $398 million and pre-tax
income of approximately $30 million for the period December 1, 2000 through
October 19, 2001.
 
     On September 25, 2001, the EPA filed with the United States District Court
in Sacramento an agreement with Aerojet to modify a Partial Consent Decree (PCD)
to carve out a significant quantity of land from the Aerojet Sacramento
Superfund site designation. A public comment period has been completed. On March
1, 2002, the agencies filed the motion to approve the modification to the PCD
carving out approximately 2,600 acres of land, and management expects the United
States District Court to approve the modification in due course. See also Note
9(c) in Notes to Consolidated Financial Statements in Part II, Item 8 of this
report.
 
     In September 2001, in an effort to reduce annual corporate expenses, the
Company announced a restructuring of its corporate headquarters. The
restructuring was accomplished through a Voluntary Enhanced Retirement Program
(VERP) and resulted in a pre-tax charge to expense of $10 million in the fourth
quarter of fiscal year 2001. For additional information see "Executive Officers
of the Registrant" at the end of Part I of this report.
 
     During 2001, as part of a restructuring of its operations, GDX Automotive
opened a new manufacturing facility in New Haven, Missouri and expanded its
facility in St. Nicholas, France. During the same period it closed three of its
manufacturing facilities in Marion, Indiana, Ballina, Ireland, and Gruchet,
France, and consolidated portions of its manufacturing facilities in Chartres,
France, and Viersen, Germany. A fourth facility in Berger, Missouri is scheduled
to be closed in 2002. This restructuring has achieved headcount reductions of
approximately 1,300 people, including temporary employees. During the fourth
quarter of fiscal year 2001, the President of the GDX Automotive business unit
left the Company, and the Company's Chief Operating Officer, Terry L. Hall,
assumed that role on an interim basis.
 
                                        2

<PAGE>
 
     In December 2000, the Company completed the acquisition of various
companies comprising the Draftex International Car Body Seals Division of The
Laird Group Public Limited Company (The Laird Group) in the United Kingdom
(Draftex). Draftex recognized revenues of $437 million for the year ended
December 29, 2000. The sales added by the Draftex acquisition are primarily
outside the U.S. At the time of the acquisition, the Draftex business added
5,484 employees for total GDX Automotive employment in December 2000 of 10,584.
The purchase price of the Draftex business was $215 million, including cash of
$209 million and direct acquisition costs of $6 million. Certain adjustments to
the purchase price were in dispute and were decided by an independent arbitrator
in February 2002. However, there are further issues impacting the purchase price
including the effect of the arbitrator's decision, which have yet to be resolved
between the parties. Management believes that resolution of these issues will
not have a material impact on the Company's results of operations, liquidity or
financial condition. The acquisition included Draftex's Germany-based worldwide
headquarters and International European Technical Center, and 11 manufacturing
plants in Germany, France, Czech Republic, Spain, China and the U.S.
 
     In October 1999, the Company completed a spin-off of its decorative &
building products and performance chemicals businesses as a separate,
publicly-traded company named OMNOVA Solutions Inc. (OMNOVA). The spin-off was
approved by GenCorp shareholders at a special meeting on September 8, 1999 and
by GenCorp's Board of Directors on September 17, 1999. The Board of Directors
declared a dividend of one share of OMNOVA common stock for each share of
GenCorp common stock held on the September 27, 1999 record date. The dividend
distribution was made on October 1, 1999. As a result of the spin-off, the
Company moved its corporate headquarters from Fairlawn, Ohio to Sacramento,
California.
 
     The GDX Automotive business traces its origins to the manufacture of
automotive window channels by General Tire & Rubber in the 1940's. In 1993, GDX
Automotive acquired a minority interest in "Henniges," a German vehicle sealing
manufacturer, and in 1994, increased its ownership interest to 100 percent. This
acquisition bolstered GDX Automotive's product line and technological
capabilities, and provided a geographic diversification into the European
markets. The Draftex acquisition, completed in December 2000, further
complements the Company's GDX Automotive vehicle sealing business.
 
     Aerojet was founded in 1942 by Dr. Theodore von Karman and initially
produced Jet Assist Take Off (JATO) rockets for military aircraft. General Tire
& Rubber, GenCorp's predecessor, became Aerojet's major investor. In the 1950's
and 1960's, Aerojet expanded its product line to include small launch vehicles
and spacecraft propulsion. Ground systems, ordnance and certain weapons systems
were also added to Aerojet's portfolio during this time period, but those
products were sold to the Olin Corporation (ordnance) in 1994 and as part of the
recent sale of the EIS business to Northrop Grumman in October 2001. Aerojet
also expanded its product line to include pharmaceutical fine chemicals, which
are now produced by AFC.
 
     A number of design and development centers at GenCorp's businesses focus on
specific areas and each plant has dedicated engineering services. Information
relating to research and development expense is set forth in Note 1(j) in Notes
to Consolidated Financial Statements and incorporated herein by reference.
 
     The Company licenses technology and owns patents, which expire at various
times, relating to its businesses. The loss or expiration of any one or more of
them would not materially affect the business of the Company or any of its
segments. Important trademarks of the Company are registered in its major
marketing areas.
 
     Although GenCorp's business is not seasonal in the traditional sense,
Aerospace and Defense and Fine Chemicals revenues and earnings have tended to
concentrate to some degree in the fourth quarter of each year reflecting
delivery schedules associated with the mix of contracts in those businesses. The
timing of production and certain contract deadlines can affect the reported
results for a quarter. GDX Automotive revenues and earnings have tended to
concentrate to some degree in the second and fourth quarters of the Company's
fiscal year, generally as a consequence of seasonality in the automotive
industry's build schedules and in response to customers' preparation for annual
model changes.
 
     Compliance with laws and regulations relating to the discharge of materials
into the environment or the protection of the environment continues to affect
many of the Company's operating facilities. A discussion of capital and
non-capital environmental expenditures incurred in 2001 and forecasted for 2002
for environmental
 
                                        3

<PAGE>
 
compliance is included under the heading Environmental Matters in Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
included in Part II, Item 7 of this report. Environmental and related legal
matters are discussed in MD&A, which is included in Part II, Item 7 of this
report, and in Notes 9(b) and 9(c) in Notes to Consolidated Financial
Statements, incorporated herein by reference.
 
     As of November 30, 2001, the Company employed 10,877 persons. GenCorp's
principal executive offices are located at Highway 50 and Aerojet Road, Rancho
Cordova, California 95670. The Company's mailing address is P.O. Box 537012,
Sacramento, California 95853-7012. Its telephone number is (916) 355-4000.
Financial information relating to the Company's business segments appears in
MD&A included in Part II, Item 7 of this report and incorporated herein by
reference.
 
     Approximately 60 percent of the Company's employees are covered by
collective bargaining or similar agreements. Of the covered employees,
approximately seven percent are covered by collective bargaining agreements that
are due to expire within one year. A protracted work stoppage in the Company's
facilities or those of a major automotive customer could adversely affect the
Company's results of operation, liquidity or financial condition.
 
GDX AUTOMOTIVE
 
     Revenues from the Company's GDX Automotive segment are derived principally
from the development, manufacture and sale of highly-engineered, extruded and
molded rubber and plastic products for vehicle bodies and window sealing for the
original equipment automotive market. These products are designed to prevent
air, moisture and noise from penetrating vehicle windows, doors and other
openings. GDX Automotive's North American operations primarily produce extruded
rubber profiles consisting of a roll-formed steel wire or steel frame surrounded
by extruded rubber which is cured, cut and molded to meet customer
specifications, with a focus on light trucks and sport utility vehicles (SUVs).
GDX Automotive's European operations produce similar products for European
automotive assemblers with a focus on the passenger car segment. In addition to
vehicle sealing systems, GDX Automotive Europe designs and produces encapsulated
glass and molded rubber parts, specializing in products that dampen and isolate
vibrations, reduce noise and seal various automotive components.
 
     As previously described, the Company completed in December 2000, the
acquisition of the Draftex business from The Laird Group. The addition of the
Draftex business has provided GDX Automotive with a substantially broadened and
more diversified customer base and the global manufacturing presence necessary
to serve customers around the world. The Company believes that GDX Automotive is
now the largest producer of vehicle sealing systems in North America and the
second largest producer worldwide.
 
     In North America, the business is focused primarily on the production of
components for light trucks such as General Motors' (GM) Silverado and S-10
pick-ups, Ford's F-Series and Ranger pick-ups; sports utility vehicles such as
General Motors' Tahoe, Yukon and Blazer models and Ford's Explorer and
Expedition models; and crossover vehicles such as Ford's Escape and Mazda's
Tribute models as well as the BMW X-5. In Europe, the business focus is on the
production of components for luxury vehicles such as Mercedes' C, E and S
Classes, the BMW 3 and 5 Series, the Audi A4 and A6 models, the Ford
Thunderbird, the Peugeot 206CC, and on higher volume smaller cars such as the
Audi A2 and A3 models, the Volkswagen Golf and Passat models, the SEAT Polo, the
Ford Focus, the Peugeot T-16 and the Skoda A-4. By focusing attention on these
different vehicle segments in North America and Europe, GDX Automotive has
become a primary sealing systems provider on 15 of the top 30 best-selling
passenger, sports utility, crossover and light truck vehicles in the world.
 
     During 2001, as part of a restructuring of its operations, GDX Automotive
opened a new manufacturing facility in New Haven, Missouri and expanded its
facility in St. Nicholas, France. During the same period it closed three of its
manufacturing facilities in Marion, Indiana; Ballina, Ireland and Gruchet,
France, and consolidated portions of its manufacturing facilities in Chartres,
France, and Viersen, Germany. A fourth facility in Berger, Missouri is scheduled
to be closed in 2002. This restructuring has achieved headcount reductions of
approximately 1,300 people, including temporary employees. During the fourth
quarter of fiscal year 2001, the President of the GDX Automotive business unit
left the Company, and the Company's Chief Operating Officer, Terry L. Hall,
assumed that role on an interim basis.
                                        4

<PAGE>
 
     Automotive products are sold directly to original equipment manufacturer
customers or their suppliers. Customers include the major domestic automobile
manufacturers, the loss of one or more of which would have a material adverse
effect on the Company's results of operations or financial condition. On a
global basis, sales to GM and Ford in 2001 were approximately 17 percent and 13
percent, respectively, of the Company's net sales. GDX Automotive sales in 2001
were $259 million to GM and $188 million to Ford.
 
     Competition in the vehicle sealing industry is based upon total customer
value, a combination of technology, customer service, quality and price. Based
on estimated sales, the worldwide vehicle sealing market was approximately $3.8
billion in 2001. Four companies, Cooper-Standard, GDX Automotive, BTR/Metzler,
and Hutchinson, account for approximately three-quarters of the total market.
Raw materials required by this segment are generally in good supply.
 
     For additional information related to the Company's operating segments and
geographic areas of operation see Note 11 in Notes to Consolidated Financial
Statements included in Part II, Item 8 of this report.
 
AEROSPACE AND DEFENSE
 
     Revenues for the Company's Aerospace and Defense segment are derived
principally from the development, manufacture and sale by Aerojet of propulsion
systems for space and defense systems applications, and armament systems for
precision tactical weapons systems and munitions for the government and
commercial markets.
 
     Most of Aerojet's sales are made directly or indirectly to agencies of the
U.S. Government pursuant to contracts or subcontracts which are subject to
termination for convenience (with compensation) by the U.S. Government in
accordance with federal acquisition regulations. Raw materials required by this
segment are generally in adequate supply.
 
     Aerojet's direct and indirect sales to the U.S. Government and its agencies
(principally the Department of Defense) were approximately $574 million in 2001,
$481 million in 2000, and $519 million in 1999, including sales attributable to
Aerojet's former EIS business. Comparable amounts excluding the EIS business
were $176 million in 2001, $154 million in 2000 and $193 million in 1999.
 
     As of November 30, 2001, Aerojet's contract and funded backlogs were
approximately $603 million and $366 million, respectively. As of November 30,
2000, excluding programs that were part of the EIS business, contract and funded
backlogs were $746 million and $383 million, respectively. The inability of a
commercial customer to raise additional required funding accounted for a
decrease of $146 million in contract backlog from 2000 to 2001.
 
     The Aerospace and Defense segment also includes the activities of the
Company's real estate business. See discussion below.
 
  Electronic and Information Systems
 
     As previously described, Aerojet completed in October 2001 the sale of its
EIS business to Northrop Grumman. Included in the sale were EIS operations in
Azusa, California and in Boulder and Colorado Springs, Colorado. With the sale,
Aerojet has exited the ground systems and smart weapons businesses. The EIS
business had revenues of approximately $398 million and pre-tax income of
approximately $30 million for the period December 1, 2000 through October 19,
2001.
 
  Space and Strategic Rocket Propulsion
 
     Aerojet is a leading producer of both liquid and solid propulsion systems
for launch vehicles and strategic systems. Customer applications include liquid
engines for expendable and reusable launch vehicles, upper-stage engines,
satellite propulsion, large solid boosters and integrated propulsion subsystems.
During 2001, Aerojet was awarded research and development contracts for
next-generation propulsion systems and technologies by the National Aeronautics
and Space Administration (NASA), the U.S. Air Force and several prime
contractors.
 
     Significant programs include the Atlas V Solid Rocket Motor (SRM), Delta II
upper stage and post-production support of Titan IV first and second stage
liquid engines. NASA's Space Launch Initiative
                                        5

<PAGE>
 
(SLI) program may provide new opportunities for growth in this business area.
During 2001, Aerojet, in a joint venture with the Pratt & Whitney Space
Propulsion division of United Technology Corporation's Pratt & Whitney Space
Propulsion business unit, was awarded a NASA contract worth $115 million,
including options, for next generation liquid-hydrogen booster engine technology
development. Other new Aerojet SLI contracts include work on advanced nozzle
technology and a peroxide Reaction Control Engine.
 
  Defense Propulsion and Armaments
 
     Aerojet's defense propulsion and armaments business continues to focus on
"smart" propulsion technology and value-added subsystem solutions. This strategy
leverages Aerojet's strength in propulsive controls technology and engineering
excellence and has direct application to the military's post-Cold War and
Anti-Terrorism doctrine. A recent example is Aerojet's key role on the
Ground-Based Midcourse Interceptor program where it is providing critical
control systems for multiple stages of the interceptor missile. Other examples
include the application of Aerojet's explosively-formed penetrator technology on
the U.S. Marine Corps' new shoulder-fired weapon system (Predator) now entering
production and development of precision strike weapons to support the U.S Army's
Future Combat System (FCS).
 
     Aerojet provides the titanium forward boom for the F-22 fighter aircraft.
This program, which is expected to remain in production for several years,
utilizes Aerojet's capability to electron beam weld complex large-scale
structures. In addition, Aerojet is a key contractor on the Joint Standoff
Weapon (JSOW), Tubular Launched Optically Tracked Wire Guided (TOW) program and
the Conventional Air Launched Cruise Missile (CALCM) where it provides the
warhead section for these state of the art weapon systems now in production.
Aerojet's significant expertise in solid rocket motors and related energetic
material chemistry continues to improve its competitive position in the advanced
missile propulsion and warhead markets.
 
  Aerospace and Defense Competition
 
     Competition, based upon price, technology, quality and service, is intense
for all products and services in Aerojet's business and has increased with the
continuing consolidation of the industry. There are several other major
companies with the technology and capacity to produce most of the products
manufactured and sold by Aerojet, and in some areas, the government has its own
manufacturing capabilities. As discussed below, Aerojet believes it remains
competitive in its markets. Raw materials required by this segment are generally
in adequate supply.
 
     Aerojet has concentrated its efforts over the past several years on
obtaining contracts that provide a balance between technology development and
long-term production, as well as between space and strategic rocket propulsion
and defense propulsion and armament programs. Aerojet competes in both the space
and strategic rocket propulsion and the defense propulsion and armaments
business areas. In space and strategic rocket propulsion, cost and technical
strength are the primary discriminators in the marketplace. Many products in the
defense propulsion and armaments market areas tend to be commodities where cost
is the primary discriminator; for this reason, Aerojet has focused on the
high-value portion of these market areas where technology content and technical
performance are predominant.
 
     Major competitors in liquid propulsion include the Rocketdyne Propulsion
and Power unit (Rocketdyne) of the Boeing Space and Communications business, the
liquid propulsion operations of the Pratt & Whitney Space Propulsion business
unit of United Technologies, and the TRW Propulsion Systems business unit of
TRW's Aerospace and Information Systems sector. Major competitors in solid
propulsion include Alliant TechSystems, Chemical Systems Division of Pratt &
Whitney Space Propulsion and Sequa Corporation's Atlantic Research Corporation.
There is a small number of other competitors in both the liquid and solid
propulsion product areas.
 
     Rocketdyne and Alliant TechSystems hold the largest shares of the liquid
and solid propulsion markets, respectively, in part by virtue of their incumbent
roles on NASA's Space Transportation System (Shuttle) program. Alliant
TechSystems acquired this and other programs through the acquisition of the
former Thiokol Propulsion business from Alcoa Corporation in 2001.
 
                                        6

<PAGE>
 
     Aerojet believes it remains competitive in the propulsion market. Aerojet
is successfully developing the world's largest monolithic, solid rocket booster
for Lockheed's Atlas V launch vehicle. Aerojet has roles on various missile
defense programs including both the Navy Theater Wide and Ground-Based Midcourse
Interceptor systems. Also in 2001, through a competitive bidding process,
Aerojet was successful in capturing a significant liquid engine development
contract from NASA as a part of the Space Launch Initiative. In addition,
Aerojet maintains a development role on the Integrated System Test of
Air-breathing Rocket (ISTAR) Hypersonic Propulsion Consortium along with Pratt &
Whitney Space Propulsion and Rocketdyne. Aerojet also continues its sole source
position on the mature Titan IV, Delta II and HAWK programs.
 
     Aerojet's competitive position is enhanced by the diversity of its
technologies and product lines. It is the only company in the propulsion
industry capable of designing, developing and manufacturing both large and small
liquid and solid rocket propulsion systems and components at a single operating
site. These propulsion capabilities are augmented by highly energetic warhead
technologies tested at a remote off-site location. Aerojet is regarded as an
industry leader in the development and manufacture of explosively-formed
projectiles and penetrators.
 
     Aerojet is also competing in a variety of new development and advanced
programs related to defense and space applications, including spacecraft, launch
and armament systems. Aerojet believes that its experience in these areas will
enable it to continue to participate in the future funding of these or similar
programs.
 
  Real Estate
 
     In addition to providing centralized oversight of the Company's worldwide
real estate portfolio, the Company's real estate business is also responsible
for strategic repositioning, development and sale of lands and facilities which
are not needed for continuing core business operations. The primary focus of the
lease and sale activities is the Aerojet Sacramento site which occupies more
than 12,000 acres, approximately 5,000 of which are available for future
development including approximately 2,600 acres that are expected to be carved
out of the Aerojet Sacramento Superfund designation (see discussion above and in
Note 9(c) under Notes to Consolidated Financial Statements included in Part II,

I
tem 8 of this report). Much of this property is located along a major highway
corridor and is zoned for multiple uses, including office, commercial and light
industrial. Additional lands are being rezoned for residential uses.
 
     As previously discussed, Aerojet completed the sale of approximately 1,100
acres of property in Eastern Sacramento County, California, for $28 million in
November 2001. A $23 million pre-tax gain resulted from the land sale
transaction. For fiscal year 2001, revenues attributable to the Company's real
estate business were $36 million and pre-tax profits were $26 million compared
to revenues of $6 million and pre-tax profits of $2 million in fiscal year 2000.
 
     For additional information related to the Company's operating segments and
geographic areas of operation see Note 11 in Notes to Consolidated Financial
Statements included in Part II, Item 8 of this report.
 
FINE CHEMICALS
 
     AFC's revenues are derived from the production of difficult to manufacture
chemicals that are sold to pharmaceutical manufacturers for use in therapeutic
products with applications in areas such as oncology, anti-viral, arthritis,
AIDS, neurology and anti-inflammatory treatments. AFC leverages key technologies
developed and refined by Aerojet through years of defense contracting.
Management believes that AFC's position in this market is derived from its
distinctive competencies in handling high energy and toxic chemicals,
implementing commercial standards and practices and operating under current Good
Manufacturing Practices (cGMP).
 
     The markets addressed by AFC reflect a trend in the pharmaceuticals
industry toward greater outsourcing of the development and manufacture of
pharmaceutical chemicals. Further, major pharmaceutical companies are
increasingly relying upon suppliers, such as AFC, that possess more integrated
capabilities and are able to scale-up and rapidly respond to delivery
requirements. AFC's sales are derived primarily from commercial customers in the
pharmaceuticals industry and biotechnology firms.
 
                                        7

<PAGE>
 
     AFC competes in a very fragmented business area. The total market for the
custom manufacture of bulk chemicals for the pharmaceutical industry is
estimated at approximately $10 billion. The largest manufacturer has an eight
percent market share, 12 companies have a two percent market share and over 53
percent of the revenues are shared by companies, such as AFC, with less than a
one percent market share. The business area has a service component as well as a
manufacturing component. Once validated on a particular product line, the work
tends to be very stable. Approvals and applications to the U.S. Food and Drug
Administration often require the chemical contractor to be named. Therefore, the
costs of switching contractors can be high. The key performance measurement is
on-time delivery. Quality is paramount and is mandated by strict regulatory
requirements. AFC competes in several market niche areas, which are all
technology driven. AFC has a particular strength in the hazardous chemistry
area, an area in which AFC has a limited number of competitors. AFC is the sole
supplier at the present time on a number of oncology products that involve
handling highly toxic compounds. A majority of AFC's revenues are derived from
contracts with a small number of customers, the loss of any one of which could
have a material adverse effect on the segment's results of operations.
 
     In December 2001, the Company completed the reacquisition of a 40 percent
ownership position in AFC from NextPharma for approximately $13 million in cash
and the return of GenCorp's interest in NextPharma's parent company. The
acquisition agreement also contains a provision for a contingent payment of up
to $12 million in the event of a disposition of AFC within two years of the
reacquisition. NextPharma acquired its 40 percent ownership position in AFC in
June 2000. AFC is now once again a wholly-owned subsidiary of GenCorp and has
reassumed responsibility for sales, marketing and customer interface activities
previously performed by NextPharma. See "Results of Operations -- Fine Chemicals
Segment" under MD&A in Part II, Item 7 of this report, for additional
information related to a personal investment by GenCorp's Chairman and Chief
Executive Officer, Robert A. Wolfe, in NextPharma's parent company, NextPharma
Technologies S.A. See also Notes 1(a), 1(o) and 16 under Notes to Consolidated
Financial Statements in Part II, Item 8 of this report for additional
information related to this transaction. Another significant event was the
completion in November 2001 of a restructuring and "right-sizing" of the AFC
workforce to increase operational efficiency and reduce its overhead costs to a
level commensurate with its current volume levels. During 2001, AFC reduced its
workforce by almost 100 positions or approximately 40 percent of its total
workforce.
 
     For additional information related to the Company's operating segments and
geographic areas of operation see Note 11 in Notes to Consolidated Financial
Statements included in Part II, Item 8 of this report.
 
                                        8

<PAGE>
 

ITEM 2.  PROPERTIES
 
     Significant operating, manufacturing, research, design and/or marketing
facilities of the Company are set forth below.
 
FACILITIES
 

<Table>
<S>                                <C>                        <C>
CORPORATE HEADQUARTERS
GenCorp Inc.
Highway 50 and Aerojet Road
Rancho Cordova, California 95670
Mailing address:
P.O. Box 537012
Sacramento, California 95853-7012
 
MANUFACTURING/RESEARCH/DESIGN/MARKETING LOCATIONS
GDX AUTOMOTIVE
World Headquarters:                Manufacturing Facilities:  Sales/Marketing/Design and
34975 West 12 Mile Road            Batesville, AR             Engineering Facilities:
Farmington Hills, MI 48331         Beijing, China*            Farmington Hills, MI*
                                   New Haven, MO*             Moenchengladbach,
                                   Chartres, France           Germany*
                                   Corvol, France             Rehburg, Germany
                                   Grefrath, Germany          Wabash, IN
European Headquarters:             St. Nicholas, France
Erkelenzer Strasse 50              Odry, Czech Republic*
41179 Moenchengladbach             Palau, Spain
Germany                            Pribor, Czech Republic*
                                   Rehburg, Germany
                                   Salisbury, NC
                                   Valls, Spain
                                   Viersen, Germany
                                   Wabash, IN
                                   Welland, Ontario, Canada
AEROSPACE AND DEFENSE
Aerojet-General Corporation        Design/Manufacturing       Marketing/Sales Offices:
P.O. Box 13222                     Facilities:                Huntsville, AL*
Sacramento, CA 95813-6000          Jonesborough, TN           Tokyo, Japan*
916/355-1000                       Sacramento, CA             Washington, DC*
                                   Socorro, NM*
FINE CHEMICALS
Aerojet Fine Chemicals LLC         Process Development/       Marketing/Sales
P.O. Box 1718                      Manufacturing Facilities:  Offices:
Rancho Cordova, CA 95741           Sacramento, CA             Sacramento, CA
916/355-1000
</Table>

 
---------------
 
* An asterisk next to a facility listed above indicates that it is a leased
  property.
 
     In addition, the Company and its businesses own and lease properties
(primarily machinery, warehouse and office facilities) in various locations for
use in the ordinary course of its business. Information appearing in Note 9(a)
in Notes to Consolidated Financial Statements is incorporated herein by
reference.
 
     During 2001, the Company undertook various restructuring actions that
included closing several manufacturing facilities. See MD&A in Part II, Item 7
of this report for additional information.
 
                                        9

<PAGE>
 

ITEM 3.  LEGAL PROCEEDINGS
 
     Information concerning legal proceedings, including proceedings relating to
environmental matters, which appears in Notes 9(b) and 9(c) in Notes to
Consolidated Financial Statements, is incorporated herein by reference.
 
                    A. TABLE OF TOXIC TORT LEGAL PROCEEDINGS
                  (*footnotes are listed following the table)
 

<Table>
<Caption>
------------------------------------------------------------------------------------
                                                                 RELIEF     CURRENT
   NAME OF COURT/DATE INSTITUTED/PLAINTIFFS/FACTUAL BASES       SOUGHT*     STATUS*
------------------------------------------------------------------------------------
<S>                                                             <C>         <C>
  Adams, Daphne et al. v. Aerojet-General Corporation (AGC),      1           2
  et al., Case No. 98AS01025, Sacramento County Superior
  Court, served 4/30/98
  Plaintiffs are residents (approximately 77) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by the two
  defendant water purveyors as drinking water which
  plaintiffs ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
  +Adams, Robert G., et al. v. AGC, et al., Case No.              1           2
  BC230185, Los Angeles County Superior Court, served
  7/26/00
  Plaintiffs are residents (approximately 45) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by the local
  water purveyors as drinking water which plaintiffs
  ingested and that such ingestion has caused illness,
  death, and economic injury.
------------------------------------------------------------------------------------
  +Adler, et al. v. Southern California Water Company, et         1           2
  al., Case No. BC169892, Los Angeles County Superior Court,
  served 4/27/98
  Plaintiffs are residents (approximately 155) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by one
  defendant water purveyor as drinking water which
  plaintiffs ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
  Allen, et al. v. AGC, et al., Case No. 97AS06295,               1           2
  Sacramento County Superior Court, served 1/14/98
  Plaintiffs are residents (approximately 423) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by the two
  defendant water purveyors as drinking water which
  plaintiffs ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
  +Alexander, et al. v. Suburban Water Systems, et al., Case      1           2
  No. KC031130, Los Angeles County Superior Court, served
  6/22/00
  Plaintiffs are residents (approximately 225) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by the eight
  defendant water purveyors as drinking water which
  plaintiffs ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
</Table>

 
                      (table continued on following page)
                                        10

<PAGE>
              A. TABLE OF TOXIC TORT LEGAL PROCEEDINGS (CONTINUED)
                  (*footnotes are listed following the table)
 

<Table>
<Caption>
------------------------------------------------------------------------------------
                                                                 RELIEF     CURRENT
   NAME OF COURT/DATE INSTITUTED/PLAINTIFFS/FACTUAL BASES       SOUGHT*     STATUS*
------------------------------------------------------------------------------------
<S>                                                             <C>         <C>
  +Alvarado, et al. v. Suburban Water Systems, et al., Case       1           2
  No. KC034953, Los Angeles County Superior Court, served
  5/7/01
  Plaintiffs are residents (approximately four) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by the three
  defendant water purveyors as drinking water which
  plaintiffs ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
  American States Water Company, et al. v. AGC, et al., Case      5           6
  No. 99AS05949, Sacramento County Superior Court, served
  10/27/99
  Plaintiffs are water purveyors operating in the vicinity
  of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege they extract and serve
  groundwater that defendants contaminated requiring
  replacement wells, higher operating costs, and defense of
  toxic tort suits.
------------------------------------------------------------------------------------
  +Anderson, Anthony et al. v. Suburban Water Systems, et         1           2
  al., Case No. KC02854, Los Angeles County Superior Court,
  served 11/23/98
  Plaintiffs are residents (approximately 183) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by the seven
  defendant water purveyors as drinking water which
  plaintiffs ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
  Austin, et al. v. Stringfellow, et al., Case No. 312339,        1           2
  Riverside County Superior Court, served 10/6/98
  Plaintiffs are residents (approximately 140) residing in
  the vicinity of a former hazardous waste disposal
  facility.
  Factual Bases: Plaintiffs allege that 85 industrial
  defendants shipped wastes to the facility, which
  contaminated the groundwater which plaintiffs ingested and
  that such ingestion has caused illness, death, and
  economic injury.
------------------------------------------------------------------------------------
  Baier, et al. v. AGC, et al., Case No. EDCV 00 618 VAP          3           4
  (RNBx), U. S. District Court, Central District, CA, served
  6/29/00
  Plaintiffs are private homeowners (approximately 58)
  residing in the vicinity of defendants' manufacturing
  facilities.
  Factual Bases: Plaintiffs allege that the four defendants
  dumped, deposited, and released chemicals and other toxic
  waste materials that have affected the surrounding
  community.
------------------------------------------------------------------------------------
  +Boswell, et al. v. Suburban Water Systems, et al., Case        1           2
  No. KC027318, Los Angeles County Superior Court, served
  4/28/98
  Plaintiffs are residents (approximately 14) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by one
  defendant water purveyor as drinking water which
  plaintiffs ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
</Table>

 
                      (table continued on following page)
                                        11

<PAGE>
              A. TABLE OF TOXIC TORT LEGAL PROCEEDINGS (CONTINUED)
                  (*footnotes are listed following the table)
 

<Table>
<Caption>
------------------------------------------------------------------------------------
                                                                 RELIEF     CURRENT
   NAME OF COURT/DATE INSTITUTED/PLAINTIFFS/FACTUAL BASES       SOUGHT*     STATUS*
------------------------------------------------------------------------------------
<S>                                                             <C>         <C>
  +Bowers, et al. v. Aerojet-General Corporation, et al.,         1           2
  Case No. BC250817, Los Angeles County Superior Court,
  served 7/17/01
  Plaintiffs are residents (approximately 26) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by the local
  water purveyors as drinking water which plaintiffs
  ingested and that such ingestion has caused illness,
  death, and economic injury.
------------------------------------------------------------------------------------
  +Brooks, et al. v. Suburban Water Systems et al., Case No.      1           2
  KC032915, Los Angeles County Superior Court, served
  10/17/00
  Plaintiffs are residents (approximately ten) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by the eight
  defendant water purveyors as drinking water which
  plaintiffs ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
  +California Domestic Water Co. v. Aerojet-General, et al.,      5           6
  Case Nos. 01-18449 and 01-8871, U. S. District Court,
  Central District, CA, filed 9/28/01 but not yet served
  Plaintiffs are water purveyors operating in the vicinity
  of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege they extract and serve
  groundwater that defendants contaminated requiring
  replacement wells, higher operating costs, and defense of
  toxic tort suits.
------------------------------------------------------------------------------------
  +Celi, et al. v. San Gabriel Valley Water Company, et al.,      1           2
  Case No. GC020622, Los Angeles County Superior Court,
  served 4/28/98
  Plaintiffs are residents (approximately 40) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by one
  defendant water purveyor as drinking water which
  plaintiffs ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
  +Criner, et al. v. San Gabriel Valley Water Company, et         1           2
  al., Case No. GC021658, Los Angeles County Superior Court,
  served 9/16/98
  Plaintiffs are residents (approximately three) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by one
  defendant water purveyor as drinking water which
  plaintiffs ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
</Table>

 
                      (table continued on following page)
                                        12

<PAGE>
              A. TABLE OF TOXIC TORT LEGAL PROCEEDINGS (CONTINUED)
                  (*footnotes are listed following the table)
 

<Table>
<Caption>
------------------------------------------------------------------------------------
                                                                 RELIEF     CURRENT
   NAME OF COURT/DATE INSTITUTED/PLAINTIFFS/FACTUAL BASES       SOUGHT*     STATUS*
------------------------------------------------------------------------------------
<S>                                                             <C>         <C>
  +Demciuc, et al. v. Suburban Water Systems, et al., Case        1           2
  No. KC028732, Los Angeles County Superior Court, served
  9/16/98
  Plaintiffs are residents (approximately 11) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by the four
  defendant water purveyors as drinking water which
  plaintiffs ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
  +Dominguez, et al. v. Southern California Water Company,        1           2
  et al., Case No. GC021657, Los Angeles County Superior
  Court, served 9/16/98
  Plaintiffs are residents (approximately 12) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by the two
  defendant water purveyors as drinking water which
  plaintiffs ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
  Kerr, et al. v. Aerojet, Case No. EDCV 01-19 VAP (SGLx),        3           4
  U. S. District Court, Central District, CA, served
  12/14/00
  Plaintiffs are private homeowners (approximately four)
  residing in the vicinity of defendant's manufacturing
  facilities.
  Factual Bases: Plaintiffs allege that Aerojet dumped,
  deposited, and released chemicals and other toxic waste
  materials that have affected the surrounding community.
------------------------------------------------------------------------------------
  Pennington v. AGC, et al., Case No. OOAS02622, Sacramento       1           2
  County Superior Court, served 6/19/00
  Plaintiff is a resident residing in the vicinity of
  defendants' manufacturing facilities.
  Factual Bases: Plaintiff alleges that industrial
  defendants contaminated groundwater provided by the two
  defendant water purveyors as drinking water which
  plaintiff ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
  +San Gabriel Basin Water Quality Authority v. AGC, et al.,      5           6
  (La Puente), Case No. 00-03579 ABC (RCx), U. S. District
  Court, Central District, CA, served 4/18/00
  Plaintiffs are water purveyors operating in the vicinity
  of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege they extract and serve
  groundwater that defendants contaminated requiring
  replacement wells, higher operating costs, and defense of
  toxic tort suits.
------------------------------------------------------------------------------------
</Table>

 
                      (table continued on following page)
                                        13

<PAGE>
              A. TABLE OF TOXIC TORT LEGAL PROCEEDINGS (CONTINUED)
                  (*footnotes are listed following the table)
 

<Table>
<Caption>
------------------------------------------------------------------------------------
                                                                 RELIEF     CURRENT
   NAME OF COURT/DATE INSTITUTED/PLAINTIFFS/FACTUAL BASES       SOUGHT*     STATUS*
------------------------------------------------------------------------------------
<S>                                                             <C>         <C>
  +San Gabriel Basin Water Quality Authority v. AGC, et al.,      5           6
  (Big Dalton), Case No. 00-07042, U. S. District Court,
  Central District, CA, served 9/21/00
  Plaintiffs are water purveyors operating in the vicinity
  of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege they extract and serve
  groundwater that defendants contaminated requiring
  replacement wells, higher operating costs, and defense of
  toxic tort suits.
------------------------------------------------------------------------------------
  +Santamaria, et al. v. Suburban Water Systems, et al.,          1           2
  Case No. KC025995, Los Angeles County Superior Court,
  served 2/24/98
  Plaintiffs are residents (approximately 300) residing in
  the vicinity of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege that industrial
  defendants contaminated groundwater provided by the seven
  defendant water purveyors as drinking water which
  plaintiffs ingested and that such ingestion has caused
  illness, death, and economic injury.
------------------------------------------------------------------------------------
  Taylor, et al. v. AGC, et al., Case No. EDCV 01-106 VAP         3           4
  (RNBx), U. S. District Court, Central District, CA, served
  1/31/01
  Plaintiffs are private homeowners (approximately 18)
  residing in the vicinity of defendants' manufacturing
  facilities.
  Factual Bases: Plaintiffs allege that the four defendants
  dumped, deposited, and released chemicals and other toxic
  waste materials that have affected the surrounding
  community.
------------------------------------------------------------------------------------
  +Upper San Gabriel Valley Municipal Water District v. AGC,      5           6
  Case No. 00-05284, NM (BQRx), U. S. District Court,
  Central District, CA, served 5/19/00
  Plaintiffs are water purveyors operating in the vicinity
  of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege they extract and serve
  groundwater that defendants contaminated requiring
  replacement wells, higher operating costs, and defense of
  toxic tort suits.
------------------------------------------------------------------------------------
  +Valley County Water District v. AGC, Case No. 00-10803,        5           6
  NM (RZx), U. S. District Court, Central District, CA,
  served 10/12/00
  Plaintiffs are water purveyors operating in the vicinity
  of defendants' manufacturing facilities.
  Factual Bases: Plaintiffs allege they extract and serve
  groundwater that defendants contaminated requiring
  replacement wells, higher operating costs, and defense of
  toxic tort suits.
------------------------------------------------------------------------------------
</Table>

 
                      (table continued on following page)
                                        14

<PAGE>
 
                  B. TABLE OF VINYL CHLORIDE LEGAL PROCEEDINGS
                  (*footnotes are listed following the table)
 

<Table>
<Caption>
------------------------------------------------------------------------------------
                                                                 RELIEF     CURRENT
   NAME OF COURT/DATE INSTITUTED/PLAINTIFFS/FACTUAL BASES       SOUGHT*     STATUS*
------------------------------------------------------------------------------------
<S>                                                             <C>         <C>
  Bland, et al. v. Air Products & Chemical, Inc., et al.,         9          10
  Case No. D-0160599, Jefferson County District Court, TX,
  served 3/22/99
  Plaintiffs' decedent contracted a rare form of liver
  cancer which has been linked to exposure to Vinyl Chloride
  (VC), a building block chemical for the plastic polyvinyl
  chloride (PVC).
  Factual Bases: Plaintiffs claim that their decedent
  contracted liver cancer through exposure to aerosol spray
  products when VC was allegedly used as a propellant in the
  1960's. The claims against GenCorp relate to an alleged
  civil conspiracy among the manufacturers or users of VC to
  suppress information about its carcinogenic risks.
------------------------------------------------------------------------------------
  Bogner, et al. v. Airco, et al., Case No. 01L1343, Madison      9          10
  County Circuit Court, Peoria, IL, served 9/6/01
  Plaintiff is a former worker at a PVC manufacturing
  facility.
  Factual Bases: Plaintiff alleges exposure to VC caused
  cancer. The claims against GenCorp relate to an alleged
  civil conspiracy among the manufacturers and users of VC
  to suppress information about its carcinogenic risks.
------------------------------------------------------------------------------------
  Taylor, et ux. v. Airco, et al., Case No. CA-02-30014-KPN,      9          10
  U.S. District Court, D. Mass., served 2/8/02
  Plaintiff is a former worker at a Monsanto PVC
  manufacturing facility.
  Factual Bases: Plaintiff alleges exposure to VC caused
  cancer. The claims against GenCorp relate to an alleged
  civil conspiracy among the manufacturers and users of VC
  to suppress information about its carcinogenic risks.
------------------------------------------------------------------------------------
  Valentine, et al., v. PPG of Ohio, Inc., et al., Case No.       9          10
  2001 CI 121, Pickaway County C.P. Court, OH, served
  5/31/01
  Plaintiff is a former worker at a PVC manufacturing
  facility.
  Factual Bases: Plaintiff alleges exposure to VC caused
  cancer. The claims against GenCorp relate to an alleged
  civil conspiracy among the manufacturers and users of VC
  to suppress information about its carcinogenic risks.
------------------------------------------------------------------------------------
  Zerby v. Allied Signal Inc., et al., Case No.                   9          10
  00C-07-68FSS, Newcastle County Superior Court, Delaware,
  served 7/20/00
  Plaintiff is a former worker at a PVC manufacturing
  facility.
  Factual Bases: Plaintiff alleges exposure to VC caused
  cancer. The claims against GenCorp relate to an alleged
  civil conspiracy among the manufacturers and users of VC
  to suppress information about its carcinogenic risks.
------------------------------------------------------------------------------------
</Table>

 
                      (table continued on following page)
                                        15

<PAGE>
 
                      C. TABLE OF OTHER LEGAL PROCEEDINGS
                  (*footnotes are listed following the table)
 

<Table>
<Caption>
------------------------------------------------------------------------------------
                                                                 RELIEF     CURRENT
   NAME OF COURT/DATE INSTITUTED/PLAINTIFFS/FACTUAL BASES       SOUGHT*     STATUS*
------------------------------------------------------------------------------------
<S>                                                             <C>         <C>
  McDonnell Douglas Corp. v. AGC, Case No. CIV-01-2245, U.S.     13          14
  District Court, E.D. CA, served 12/17/01
  Plaintiff is a co-respondent with Aerojet to state
  environmental orders relating to a former rocket motor
  test facility Plaintiff operated. The orders also apply to
  offsite groundwater contamination.
  Factual Bases: Plaintiff alleges Aerojet refuses to pay 50
  percent of the costs required to comply with the state
  orders in breach of a 1999 settlement agreement between
  the parties. The costs relate to groundwater remediation
  expenses at a site downgradient of the test facility.
------------------------------------------------------------------------------------
  Olin, Inc. v. GenCorp, Inc., Case No. 5:93CV2269, U.S.         15          16
  District Court, N.D. Ohio, filed 10/25/93
  Plaintiff was the operator of a former chemical
  manufacturing facility which has required substantial
  Superfund remediation.
  Factual Bases: Plaintiff alleges GenCorp is jointly and
  severally liable for remediation costs estimated at $70
  million due to contractual and operational activities and
  land ownership by GenCorp.
------------------------------------------------------------------------------------
  TNS, Inc. v. NLRB, et al., Case Nos. 99-6397 and 00-5433,      11          12
  U.S. Court of Appeals, 6th Circuit, filed 10/13/99
  Plaintiff: The NLRB has filed an action on behalf of
  strikers represented by the former Oil, Chemical and
  Atomic Workers Union (now PACE) at the Aerojet Ordnance
  Tennessee, Inc. (AOT) facility which manufactured ordnance
  containing depleted uranium.
  Factual Bases: The National Labor Relations Board (NLRB)
  alleges that AOT committed various unfair labor practices
  by permanently replacing strikers who ostensibly struck in
  1981 over unsafe working conditions.
------------------------------------------------------------------------------------
  Wotus, et al. v. GenCorp Inc., et al., Case No.                 7           8
  5:00-CV-2604, U.S. District Court, N.D. Ohio, served
  10/12/00
  Plaintiffs are four hourly retirees who seek class-wide
  rescission of GenCorp Retiree Medical Plan and
  reinstatement of prior plan.
  Factual Bases: Plaintiffs allege GenCorp's adoption of new
  plan constitutes a breach of contract, breach of fiduciary
  duty, violation of the Employee Retirement Income Security
  Act (ERISA) and promissory estoppel.
------------------------------------------------------------------------------------
</Table>

 
                         (footnotes on following page)
 
                                        16

<PAGE>
 
                 (footnotes relate to table on preceding page)
---------------
 
 1. Relief Sought: Plaintiffs seek judgment against defendants for unspecified
    general, special and punitive damages, diminution in value of plaintiffs'
    real property, medical monitoring, a constructive trust against defendants'
    properties to pay for plaintiffs' injuries, an order compelling defendants
    to disgorge profits acquired through unlawful business practices, and
    injunctive relief.
 
 2. Current Status: These cases are stayed pending California Public Utilities
    Commission (PUC) investigation. The California Supreme Court allowed an
    appeal and issued its ruling on February 4, 2002, which found the stays
    should be rescinded as to non-PUC regulated defendants. PUC regulated
    defendants could be sued if the supplied drinking water violated state or
    federal standards. Assuming the Court does not reconsider its ruling, the
    stays in these cases will be rescinded and discovery will commence in March
    or April, 2002. The Austin case has not been stayed and is in discovery.
 
 3. Relief Sought: Plaintiffs seek judgment against defendants for unspecified
    general, special and punitive damages, and diminution in value of
    plaintiffs' property.
 
 4. Current Status: These cases are beginning discovery in early 2002.
 
 5. Relief Sought: Plaintiffs seek judgment against defendants for unspecified
    general, special damages, and injunctive relief.
 
 6. Current Status: The Los Angeles area cases are expected to be resolved if a
    Definitive Agreement is reached in the Baldwin Park Operable Unit matter.
    The Sacramento case is proceeding with trial expected in the fall of 2002.
 
 7. Relief Sought: Plaintiffs seek to reinstate benefits of prior GenCorp Hourly
    Retiree Medical Plan.
 
 8. Current Status: The Court has ordered the parties to mediate, which is
    ongoing.
 
 9. Relief Sought: Plaintiff seeks monetary damages and punitive damages for
    personal injury based on negligence, fraud, strict liability and conspiracy
    grounds.
 
10. Current Status: Discovery pending; comprehensive motion to dismiss to be
    filed, or is pending.
 
11. Relief Sought: Plaintiff seeks reinstatement of all strikers and back pay
    with interest (since 1981).
 
12. Current Status: The NLRB, in a split decision, held that unsafe working
    conditions existed, and therefore, the strike constituted an unfair labor
    practice, entitling the strikers to reinstatement with back pay and
    interest. TNS appealed the ruling to the U.S. Court of Appeals, 6th Circuit,
    and oral argument was held in September 2001. A ruling is expected in the
    near future.
 
13. Relief Sought: Plaintiff seeks declaratory relief and specific performance
    requiring Aerojet to pay 50 percent of the remediation expenses.
 
14. Current Status: Aerojet disputes plaintiff's allegations and believes
    plaintiff is itself in breach of the 1999 settlement agreement which
    resolved litigation brought by Aerojet against plaintiff. Aerojet plans a
    vigorous defense.
 
15. Relief Sought: Plaintiff seeks a declaratory judgment from the Court and an
    award of damages plus interest.
 
16. Current Status: Court has found GenCorp 30 -- 40 percent liable for total
    remediation costs. A decision on allowability of submitted costs is expected
    in 2002. GenCorp expects to appeal finding of liability when a final
    judgment is rendered.
 
 + Designates Baldwin Park Operable Unit (BPOU) related litigation.
---------------
 
     Additional information related to certain of the proceedings listed above
is contained in Notes 9(b) and 9(c) in Notes to Consolidated Financial
Statements contained in Part II, Item 8 of this report and incorporated herein
by reference.
 
     In connection with the restatement of the Company's Consolidated Financial
Statements discussed in Item 1 above, the Company contacted the Securities and
Exchange Commission and intends to cooperate in any inquiry relating to the
restatement.
 
     While there can be no certainty regarding the outcome of any litigation, in
the opinion of management, after reviewing the information currently available
with respect to the matters discussed above and consulting with the Company's
counsel, the Company believes that any liability that may ultimately be incurred
will not materially
 
                                        17

<PAGE>
 
affect the consolidated financial condition of the Company. The effect of
resolution of these matters on the Company's financial condition and results of
operations cannot be predicted because any such effect depends on future results
of operations, the Company's liquidity position and available financial
resources, and the amount and timing of the resolution of any such matter. In
addition, it is possible that amounts incurred could be significant in any
particular reporting period.
 
     The U.S. Government frequently conducts investigations into allegedly
illegal or unethical activity in the performance of defense contracts.
Investigations of this nature are common to the aerospace and defense industries
in which Aerojet participates and lawsuits may result; possible consequences may
include civil and criminal fines and penalties, and in some cases, double or
treble damages, and suspension or debarment from future government contracting.
Aerojet currently is not aware that it is the subject of any U.S. government
investigations. If such an investigation were to occur, legal or administrative
proceedings could result.
 
     The Company and its subsidiaries are presently engaged in other litigation,
and additional litigation has been threatened. However, based upon information
presently available, none of such other litigation is believed to constitute a
"material pending legal proceeding" within the meaning of Item 103 of Regulation
S-K (17 CFR Reg. 229.103) and the Instructions thereto.
 

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended November 30,
2001.
 
EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The following information is given as of February 11, 2002, and except as
otherwise indicated, each individual has held the same office during the
preceding five-year period.
 
     Robert A. Wolfe, age 63: Chairman, Chief Executive Officer and President of
the Company (since October 1999); formerly Vice President of the Company and
President of Aerojet (from September 1997 to October 1999); previously Executive
Vice President of the Pratt & Whitney Group, a division of United Technologies
(during 1997), President, Pratt & Whitney Aircraft's Large Commercial Engines
business (from 1994 to 1997), and Senior Vice President, Pratt & Whitney's
Commercial Engine Management for Latin and North America (from 1992 to 1994).
Mr. Wolfe has executed an Employment Retention Agreement dated November 30,
2001, a copy of which is attached as Exhibit 10.9 to this report.
 
     Robert C. Anderson, age 52: Vice President and Deputy General Counsel;
Assistant Secretary (since October 1999); formerly Vice President, Law of
Aerojet (from September 1996 to October 1999); previously, Counsel, General
Electric Aircraft Engines (from June 1986 to September 1996), and Senior Counsel
(from 1985 to 1986) and Counsel (from 1978 to 1985) for TRW Inc. Mr. Anderson
has elected to retire under the 2001 GenCorp Voluntary Enhanced Retirement
Program (VERP) and will be placed on salary continuation status effective April
1, 2002 (at which time he will no longer be an officer of the Company) with a
designated retirement date of September 30, 2003.
 
     Joseph Carleone, age 56: Vice President of the Company and President of
Aerojet Fine Chemicals LLC (since September 2000); formerly Vice President and
General Manager, Remote Sensing Systems and Vice President, Operations at
Aerojet (from 1999 to 2000); previously Vice President, Operations (from 1997 to
2000), Vice President, Tactical Product Sector (from 1994 to 1997), and Vice
President, Armament Systems; Director, Warhead Systems and Chief Scientist,
Warheads (from 1982 to 1994).
 
     Chris W. Conley, age 43: Vice President, Environmental, Health & Safety
(since October 1999); formerly Director Environmental, Health & Safety (from
March 1996 to October 1999); previously Environmental Consultant (from 1994 to
1996), Manager, Environmental for GenCorp Automotive (from 1990 to 1994), and
various environmental management positions at Aerojet Ordnance Tennessee (from
1982 to 1990).
 
     Linda B. Cutler, age 48: Vice President, Communications (as of March 11,
2002); formerly, Strategic Market Manager, Telecommunications and Video Services
of Output Technology Solutions (from September 2000 to March 2002), and Vice
President, Marketing and Corporate Communications of Output Technology Solutions
(from January 2000 to September 2000); previously Vice President, Investor
Relations and Corporate Communications of USCS International (from April 1996 to
December 1999).
 
                                        18

<PAGE>
 
     Terry L. Hall, age 48: Senior Vice President and Chief Operating Officer of
the Company (since September 2001); formerly Senior Vice President and Chief
Financial Officer of the Company (from March 2001 to September 2001); previously
Senior Vice President and Chief Financial Officer and Treasurer of the Company
(from October 1999 to March 2001); on special assignment as Chief Financial
Officer of Aerojet (from May 1999 to October 1999), Senior Vice President and
Chief Financial Officer of US Airways Group, Inc. (during 1998), Chief Financial
Officer of Apogee Enterprise Inc. (from 1995 to 1997), Chief Financial Officer
of Tyco International Ltd. (from 1994 to 1995), Vice President and Treasurer of
UAL Corp. (from 1990 to 1993) and President/General Manager of Northwest
Aircraft Inc. (from 1986 to 1990).
 
     Samuel W. Harmon, age 51: Senior Vice President, Administration (from
October 1999 until December 2001); formerly Senior Vice President, Human
Resources (from February 1996 to October 1999) and Vice President, Human
Resources (from October 1995 until February 1996); previously Vice President,
Human Resources, AlliedSignal, Inc., for its European operations (from 1995 to
February 1996) and for its Automotive Sector (from 1993 to 1995). Mr. Harmon has
elected to retire under the VERP effective December 1, 2001 and has been placed
on salary continuation status with a designated retirement date of November 30,
2003. He is no longer an officer of the Company.
 
     Michael F. Martin, age 55: Vice President of the Company and President of
Aerojet (since October 2001); formerly Acting President of Aerojet (from April
2001 to October 2001) and Vice President and Controller of GenCorp (from October
1999 to April 2001); previously Vice President and Controller of Aerojet (from
September 1993 to October 1999), and Controller of Aerojet's ElectroSystems
Division (from 1991 to 1993).
 
     Thomas E. Peoples, age 53: Senior Vice President, International and
Washington Operations (from October 1999 until December 2001); formerly Vice
President, International and Washington Operations for Aerojet (from August 1996
to October 1999); Vice President, Strategic Business Development for Aerojet
(from July 1994 to August 1996). Vice President of Business Development for
Aerojet's Electronics Division (from February 1994 to July 1994), Director of
Business Development for Aerojet's Tactical Systems and Advanced Programs (from
May 1992 to July 1994) and Manager of Business Development for Raytheon's Smart
Munitions Programs (from March 1987 to April 1992). Mr. Peoples has elected to
retire under the VERP effective December 1, 2001 and has been placed on salary
continuation status with a designated retirement date of May 31, 2003. He is no
longer an officer of the Company.
 
     William R. Phillips, age 59: Senior Vice President, Law; General Counsel
(since September 1996) and Secretary (since October 1999); formerly Vice
President, Law of Aerojet (from 1990 to 1996); previously General Counsel, Group
Counsel and Manager Legal Operations, General Electric Aircraft Engines (from
1986 to 1989). Mr. Phillips has elected to retire under the VERP and will be
placed on salary continuation status effective December 1, 2002 (at which time
he will no longer be an officer of the Company) with a designated retirement
date of November 30, 2004.
 
     William J. Purdy, Jr. age 57: Vice President of the Company and President,
Real Estate (as of March 15, 2002); formerly, Managing Director, Development of
Transwestern Development Company (from January 1997 to March 2002); previously
Chief Financial Officer of American Health Care Providers Inc. (from April 1996
to January 1997) and President and Chief Executive Officer of Metropolitan
Structures (from December 1992 to December 1995).
 
     Charles G. Salter, age 52: Vice President of Compensation and Benefits of
the Company (from April 2000 until December 2001); formerly Corporate Vice
President, Benefits for AutoNation (from 1998 to 2000); previously
Director/Employee Benefits of Allied Signal Aerospace (from 1995 to 1998),
corporate Director, Human Resource Policies & Practices and Director, Employee
Benefits, as well as other management positions within GenCorp (from 1978 to
1995). Mr. Salter has elected to retire under the VERP effective January 1, 2002
and has been placed on salary continuation status with a designated retirement
date of June 30, 2003. He is no longer an officer of the Company.
 
     Yasmin R. Seyal, age 44: Senior Vice President, Finance; Acting Chief
Financial Officer of the Company and Treasurer of the Company (since September
2001); formerly Treasurer of the Company (from July 2000 to September 2001);
previously Assistant Treasurer and Director of Tax of the Company (from April
2000 to July 2000), Director of Treasury and Taxes of the Company (from October
1999 to April 2000), Director of Taxes
 
                                        19

<PAGE>
 
as well as other management positions within Aerojet (from 1989 to April 1999),
Manager with Price Waterhouse LLP (from 1982 to 1989).
 
     Rosemary Younts, age 46: Senior Vice President, Communications (since
February 1996); formerly Vice President, Communications (from January 1995 to
February 1996); previously Director of Communications (from 1993 to 1995) and
held various communications positions with Aerojet (from 1984 to 1993). Ms.
Younts has elected to retire under the VERP and will be placed on salary
continuation status effective April 1, 2002 (at which time she will no longer be
an officer of the Company) with a designated retirement date of March 31, 2004.
 
     The Company's executive officers generally hold terms of office of one year
and/or until their successors are elected.
 
     Of the 25 GenCorp headquarters employees eligible to retire under the VERP,
18 employees accepted the offer, including six of the executive officers of the
Company listed in Part I of this report. The Company has hired a replacement for
Ms. Younts and is actively recruiting a replacement for Mr. Phillips. The
Company does not anticipate replacing the other executive officers that accepted
the VERP offer. Enhanced retirement benefits for the officers and former
officers referenced above will be paid under the non-qualified 2001 Supplemental
Retirement Plan For GenCorp Executives which incorporates the items and
conditions of the VERP and is filed as Exhibit 10.29 to this report.
 
                                        20

<PAGE>
 

                                    PART II
 

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS' MATTERS
 
     The Company's common stock, $0.10 par value (Common Stock) is listed on the
New York and Chicago Stock Exchanges. As of February 11, 2002, there were 11,759
holders of record of the Company's Common Stock. During the first three quarters
of 1999, the Company paid quarterly cash dividends of $0.15 per share. During
each quarter in 2001 and 2000 and the fourth quarter of 1999, following the
spin-off of OMNOVA, the Company paid a quarterly cash dividend on its Common
Stock of $0.03 per share. Information concerning long-term debt, including
material restrictions relating to payment of dividends on the Company's Common
Stock appears in Part II, Item 7 under the caption "Liquidity and Capital
Resources" and at Note 7 in Notes to Consolidated Financial Statements and is
incorporated herein by reference.
 
     The high and low sales prices of the Company's Common Stock as reported on
the New York Stock Exchange Composite Tape were:
 

<Table>
<Caption>
            PERIOD                                              HIGH     LOW
            ------                                             ------   ------
<S>    <C>                                                     <C>      <C>
2001   Fourth quarter.......................................   $13.10   $10.95
       Third quarter........................................   $14.20   $11.65
       Second quarter.......................................   $12.45   $10.06
       First quarter........................................   $12.50   $ 7.81
2000   Fourth quarter.......................................   $ 9.56   $ 7.31
       Third quarter........................................   $ 9.94   $ 6.88
       Second quarter.......................................   $10.56   $ 6.94
       First quarter........................................   $11.00   $ 6.75
</Table>

 
                                        21

<PAGE>
 

ITEM 6.  SELECTED FINANCIAL DATA
 
     As described in Item 1, the Company has restated its previously issued
financial statements for the years ended November 30, 2000 and November 30,
1999. See Note 2 in Notes to Consolidated Financial Statements for further
information regarding the restatement (dollars in millions, except per share
amounts).
 

<Table>
<Caption>
                                                                       2000       1999
                                                             2001    RESTATED   RESTATED    1998     1997
                                                            ------   --------   --------   ------   ------
<S>                                                         <C>      <C>        <C>        <C>      <C>
Net sales
    GDX Automotive (1)....................................  $  808    $  485     $  456    $  375   $  369
    Aerospace and Defense (1).............................     640       534        570       673      584
    Fine Chemicals (1)....................................      38        28         45         -        -
                                                            ------    ------     ------    ------   ------
                                                            $1,486    $1,047     $1,071    $1,048   $  953
                                                            ======    ======     ======    ======   ======
Income (loss) from continuing operations before income
  taxes
    GDX Automotive........................................  $   (4)   $   29     $   16    $    3   $   29
    Aerospace and Defense.................................     131       104         67        68       55
    Fine Chemicals........................................     (14)      (14)        (5)        -        -
    Segment restructuring (2).............................     (30)        -          -         -        -
    Segment unusual items (2).............................     149         -         21         9        -
                                                            ------    ------     ------    ------   ------
         Segment operating profit.........................     232       119         99        80       84
    Interest expense......................................     (33)      (18)        (6)       (6)     (12)
    Corporate and other expenses..........................     (15)      (10)       (10)      (14)     (18)
    Foreign exchange gain (loss)..........................      11        (8)         -         -        -
    Other restructuring (2)...............................     (10)        -          -         -        -
    Other unusual items (2)...............................       2         4         (9)        -        -
                                                            ------    ------     ------    ------   ------
         Income from continuing operations before income
           taxes..........................................  $  187    $   87     $   74    $   60   $   54
                                                            ======    ======     ======    ======   ======
    Income from continuing operations, net of income
      taxes...............................................  $  128    $   52     $   45    $   38   $   99
    Income from discontinued operations, net of income
      taxes (1)...........................................       -         -         26        46       38
    Cumulative effect of change in accounting principle,
      net of income taxes (3).............................       -        74          -         -        -
                                                            ------    ------     ------    ------   ------
         Net income.......................................  $  128    $  126     $   71    $   84   $  137
                                                            ======    ======     ======    ======   ======
Basic earnings per share of Common Stock
    Income from continuing operations.....................  $ 3.03    $ 1.24     $ 1.09    $ 0.91   $ 2.68
    Income from discontinued operations (1)...............       -         -       0.63      1.11     1.03
    Cumulative effect of change in accounting principle
      (3).................................................       -      1.76          -         -        -
                                                            ------    ------     ------    ------   ------
         Total............................................  $ 3.03    $ 3.00     $ 1.72    $ 2.02   $ 3.71
                                                            ======    ======     ======    ======   ======
Diluted earnings per share of Common Stock
    Income from continuing operations.....................  $ 3.00    $ 1.23     $ 1.07    $ 0.90   $ 2.48
    Income from discontinued operations (1)...............       -         -       0.63      1.09     0.92
    Cumulative effect of change in accounting principle
      (3).................................................       -      1.76          -         -        -
                                                            ------    ------     ------    ------   ------
         Total............................................  $ 3.00    $ 2.99     $ 1.70    $ 1.99   $ 3.40
                                                            ======    ======     ======    ======   ======
Cash dividends paid per share of Common Stock.............  $ 0.12    $ 0.12     $ 0.48    $ 0.60   $ 0.60
Other financial data
    Capital expenditures..................................  $   49    $   82     $   97    $   68   $   45
    Depreciation and amortization.........................  $   77    $   50     $   44    $   43   $   40
    Total assets..........................................  $1,464    $1,325     $1,232    $1,743   $1,419
    Long-term debt, including current maturities..........  $  214    $  190     $  149    $  356   $   84
</Table>

 
---------------
 
(1) See Note 1(a) in Notes to Consolidated Financial Statements for additional
    information related to discontinued operations and business acquisition and
    disposition activities.
 
(2) See Notes 13 and 14 in Notes to Consolidated Financial Statements for
    information on restructuring and unusual items included in the Company's
    financial results.
 
(3) See Note 8(a) in Notes to Consolidated Financial Statements.
 
Note: Comparable, discrete financial information is not available for the Fine
      Chemicals segment for 1998 or 1997. Results for the Fine Chemicals segment
      are included in the results for the Aerospace and Defense segment for
      those years.
 
                                        22

<PAGE>
 

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
FORWARD-LOOKING STATEMENTS
 
     Certain information contained in this report should be considered
"forward-looking statements" as defined by the Private Securities Litigation
Reform Act of 1995. These statements present (without limitation) the
expectations, beliefs, plans and objectives of management and future financial
performance and/or assumptions underlying or judgments concerning matters
discussed in this document. The words "believe," "estimate," "anticipate,"
"project," and "expect," and similar expressions are intended to identify
forward-looking statements. All forward-looking statements involve certain
risks, estimates, assumptions and uncertainties with respect to future revenues
and activity levels, cash flows, contract performance, the outcome of
contingencies including environmental remediation, and anticipated costs of
capital. In particular, this pertains to management's comments on financial
resources, capital spending and the outlook for each of the Company's business
segments.
 
     Some important risk factors that could cause the Company's actual results
or outcomes to differ from those expressed in its forward-looking statements
include, but are not limited to, the following:
 
          - The reaction of the Company's employees, shareholders, customers and
            lenders to the restatement of certain of the Company's financial
            statements as described below (see "Results of Operations"),
            including any litigation arising out of such restatement;
 
          - The ability of the Company to secure additional financing (see
            "Liquidity and Capital Resources");
 
          - General economic conditions and trends affecting the Company's
            markets and product offerings;
 
          - Changes in the short-term and long-term plans of major customers and
            potential customers;
 
          - Governmental and regulatory policies, including environmental
            regulations, and increases in the amount or timing of environmental
            remediation and compliance costs (see "Other Information -
            Environmental Matters");
 
          - An unexpected adverse result in the toxic tort or other litigation,
            proceeding or investigation pending against the Company (see Notes
            9(b) and 9(c), "Legal Proceedings" and "Environmental Matters");
 
          - The Company's acquisition, disposition and joint venture activities;
 
          - Vehicle sales and production rates of major automotive programs in
            the U.S. and abroad, particularly vehicles for which the Company
            supplies components;
 
          - Department of Defense, NASA and other funding for certain aerospace
            programs;
 
          - Future funding for commercial launch vehicles;
 
          - The ability of the Company to achieve the anticipated savings from
            restructuring and other financial management programs;
 
          - The ability of the Company to successfully complete the entitlement
            process and related pre-development activities for its real estate
            in Northern California;
 
          - The market for the Company's real estate in Northern California;
 
          - Fluctuations in exchange rates of foreign currencies and other risks
            associated with foreign operations;
 
          - The ability of the Company to satisfy contract performance criteria,
            including due dates;
 
          - The ability of the Company to maintain a high level of product
            performance, particularly related to the continued success of the
            Company's launch vehicle platforms;
 
          - An adverse decision in any patent infringement suit, or settlement
            of a patent infringement suit impacting Aerojet Fine Chemicals'
            right to utilize new technology;
 
          - Intensified competition from the Company's competitors;
 
          - Pricing pressures from the Company's major customers, particularly
            in the GDX Automotive segment;
 
                                        23

<PAGE>
 
          - The ability of the Company to successfully defend its position that
            there are no purchase price adjustments for Aerojet's EIS business,
            a business which was sold to Northrop Grumman in 2001;
 
          - Potential liabilities which could arise from any release or
            explosion of dangerous materials;
 
          - Work stoppages at a Company facility or in the facility of one of
            the Company's significant customers; and,
 
          - Cost escalation and availability of power in Northern California.
 
     Additional risk factors may be described from time to time in the Company's
filings with the U.S. Securities and Exchange Commission. All such risk factors
are difficult to predict, contain material uncertainties that may affect actual
results, and may be beyond the Company's control.
 
RESULTS OF OPERATIONS
 
     The following section pertains to activity included in the Company's
Consolidated Statements of Operations, which are contained in Part II, Item 8 of
this report, and focuses on the Company's continuing operations. This section
also includes information related to unusual items included in the Company's
financial results as well as information related to discontinued operations.
 
Restatement of Previously Issued Financial Statements
 
     In January 2002, the Company became aware of certain potential accounting
issues at two of its GDX Automotive manufacturing plants in North America. The
Company promptly notified both its Audit Committee and its independent
accountants. Under the direction and oversight of the Audit Committee and with
the assistance of outside legal advisors and accounting consultants, the Company
conducted an inquiry into these and related accounting issues as well as a more
complete evaluation of accounting practices and internal control processes
throughout the Company. As a result of this process, due primarily to activities
at one GDX Automotive manufacturing plant, the Company is, by means of this
filing, restating its previously issued financial statements for the years ended
November 30, 2000 and November 30, 1999. See also Note 2 in Notes to
Consolidated Financial Statements in Part II, Item 8 of this report. Unaudited
quarterly financial information for the year ended November 30, 2000 and the
first three quarters of the year ended November 30, 2001, as shown in Note 12 in
the Notes to Consolidated Financial Statements in Part II, Item 8 of this
report, is also being restated by means of this filing.
 
     The effect of the Company's revisions will be to reduce the Company's
income from continuing operations and diluted earnings per share from continuing
operations, respectively, from $55 million and $1.31 to $52 million and $1.23
for the year ended November 30, 2000 and from $46 million and $1.09 to $45
million and $1.07 for the year ended November 30, 1999. The effect of the
revisions on the net income for the nine months ended August 31, 2001 was to
reduce net income from $25 million to $22 million and decrease basic and diluted
EPS from $0.59 to $0.52. The effect of the revisions on the Company's
Consolidated Balance Sheets as of November 30, 2000 resulted in an increase in
assets of $1 million and an increase in liabilities of $10 million and, as of
November 30, 1999, assets were increased $2 million and liabilities increased $6
million. The balance of retained earnings as of December 1, 1998 decreased $5
million. The revisions primarily arise from the correction of (i) certain
balance sheet and income statement items, which among other things, relate to
the accounting for customer-owned tooling, inventories and recognition of
liabilities at one of the Company's GDX Automotive manufacturing plants that the
Company has determined were not properly recorded in the Company's books and
records; and (ii) an oversight in collecting data for the calculation for
certain postretirement benefit liabilities at one of GDX Automotive's non-U.S.
facilities in the year ended November 30, 1996 with no material impact on fiscal
years 1998 and 1997. At the direction of the Audit Committee of the GenCorp
Board of Directors, the Company is in the process of implementing certain
enhancements to its financial organization, systems and controls primarily at
its GDX Automotive segment in response to issues raised by the restatement and
identified by the Company's independent accountants as material weaknesses.
 
     Unless otherwise expressly stated, all financial information in this Annual
Report on Form 10-K is presented inclusive of these revisions.
 
                                        24

<PAGE>
 
GDX Automotive Segment
 
     In December 2000, the Company completed the acquisition of the Draftex
business of The Laird Group. Draftex recognized revenues of $437 million for the
year ended December 29, 2000. The sales added by the Draftex acquisition are
primarily outside the U.S. At the time of the acquisition, the Draftex business
added 5,484 employees for total GDX Automotive employment of 10,584. The
purchase price of the Draftex business was $215 million, including cash of $209
million and direct acquisition costs of $6 million. Certain adjustments to the
purchase price were in dispute and were decided by an independent arbitrator in
February 2002. However, there are further issues impacting the purchase price
including the effect of the arbitrator's decision, which have yet to be resolved
between the parties. Management believes that resolution of these issues will
not have a material impact on the Company's results of operations, liquidity or
financial condition. The acquisition included Draftex's Germany-based worldwide
headquarters and International European Technical Center, and 11 manufacturing
plants in Germany, France, Czech Republic, Spain, China and the U.S.
 
     Net sales for the Company's GDX Automotive segment totaled $808 million for
fiscal year 2001, an increase of 67 percent compared with 2000 net sales of $485
million. The increase is due primarily to the acquisition of the Draftex
business from The Laird Group in December 2000. Revenues attributable to the
Draftex business for fiscal year 2001 were $357 million for the eleven months in
fiscal 2001 that the Company owned this business. The decrease in revenues from
the $437 million recorded by Draftex as an independent entity for its fiscal
year 2000 (prior to being acquired by the Company), reflects activity for one
less month and the loss of several contracts with Ford, Renault and Volkswagen.
The remainder of the GDX Automotive segment experienced decreased revenues
year-over-year of $34 million from $485 million in fiscal year 2000 to $451
million in fiscal year 2001 primarily related to the loss of contracts to supply
components for the General Motors (GM) Grand Am and S-10 truck platforms. The
decrease in revenues from the loss of those contracts was partially offset by an
increase in revenues principally related to the GM full-size pick-up and sport
utility vehicles and the Ford full-size pick-up and redesigned Explorer.
 
     Excluding unusual items (see discussion below), operating loss for the GDX
Automotive segment was $4 million for 2001 compared with operating profit of $29
million in 2000. Operating profit margin decreased to negative one percent in
2001 from six percent in 2000. Operating profit margin in 2001 was negatively
affected by initial production start-up costs (launch costs), particularly with
the redesigned Ford Explorer and GM SUVs. The loss of business not otherwise
replaced, as discussed above, and an increase in health care costs and certain
period costs associated with restructuring activities also contributed to the
segment's decreased financial performance in 2001 as compared to 2000. Although
the Company has not yet achieved the synergies and other costs savings
originally anticipated from the Draftex acquisition, the addition of the Draftex
business has provided GDX Automotive with a substantially broadened and more
diversified customer base and the global manufacturing presence necessary to
serve customers around the world. The Company expects to achieve the anticipated
synergies longer-term following final integration of the Draftex business and
certain restructuring activities that have been undertaken (see below). During
the fourth quarter of fiscal year 2001, the President of the GDX Automotive
business unit left the Company, and the Company's Chief Operating Officer, Terry
L. Hall, assumed that role on an interim basis.
 
     The Company believes the GDX Automotive segment is well positioned in the
marketplace with a strong mix of popular passenger car, SUV and light truck
platforms. With the acquisition of the Draftex business, the Company's GDX
Automotive segment strengthens its sales position to number one in North America
and number two world-wide. The acquisition of Draftex has also helped broaden
and diversify the segment's customer and platform base and has created
opportunities to rationalize production capacity in both North America and
Europe to achieve better resource utilization and operational profitability.
 
     Net sales for the segment for fiscal year 2000 totaled $485 million, which
represented a six percent increase compared with sales of $456 million for 1999.
The sales increase was due primarily to higher production volumes on the GM and
Ford full-size pickup truck platforms. Initial shipments to Ford began during
the third quarter of fiscal year 2000 on the Excursion, a vehicle platform
previously supplied by one of the Company's competitors. Operating profit for
the segment improved to $29 million for 2000 compared with $16 million for 1999.
Operating profit margin improved to six percent for 2000 from four percent for
1999. Operating profit margins steadily improved throughout 2000 as anticipated
model run rates were achieved and launch support efforts
 
                                        25

<PAGE>
 
subsided on product launches initiated in 1999. Fiscal year 2000 operating
results were also favorably impacted by increased pension income partially
offset by launch support and coordination costs for the Explorer Sport Trac,
Escape and the newly redesigned Explorer.
 
Aerospace and Defense Segment
 
     In fiscal year 2001, net sales for the Company's Aerospace and Defense
segment reached $640 million, an increase of $106 million over net sales in 2000
of $534 million. The increase is primarily the result of an increase in revenues
from the Space Based Infrared System (SBIRS) program, the Advanced Technology
Microwave Sounder (ATMS) program, and subcontract work performed on the F-22
fighter aircraft. Programs with decreased revenues year-over-year included the
Titan IV launch vehicle and the Seek-And-Destroy-Armor (SADARM) program. The
Titan IV program is nearing conclusion and the SADARM weapon was rejected by the
U.S. Army in 2001. The SBIRS, ATMS and SADARM programs were part of the
Company's EIS business, which was sold to Northrop Grumman in October 2001 (see
discussion below). Excluding the results of the EIS business, revenues for the
segment increased marginally year-over-year.
 
     Operating profit for the Aerospace and Defense segment was $131 million for
fiscal year 2001, excluding unusual items. The comparable amount for 2000 was
$104 million. Profitability in 2001 was favorably impacted by the results of the
Company's real estate business, higher pension income and the SBIRS program.
These favorable impacts were partially offset by a lower contribution from the
Titan IV program and a $9 million reserve recorded during fiscal 2001 related to
the Atlas V launch vehicle program. Excluding the results of the EIS business,
operating profit for the segment increased $19 million year-over-year,
reflecting the results for the real estate business (see below).
 
     In November 2001, Aerojet completed the sale of approximately 1,100 acres
of property in Eastern Sacramento County, California, for $28 million. The
property lies outside of the Aerojet Superfund site boundaries and is not a part
of the approximately 2,600 acres of land expected to be carved out of the
Superfund site designation under an agreement with federal and state government
regulators (see also Note 9(c) under Notes to Consolidated Financial
Statements). A $23 million pre-tax gain resulted from the land sale transaction.
For fiscal year 2001, revenues attributable to the Company's real estate
business unit were $36 million and pre-tax profits were $26 million compared to
revenues of $6 million and pre-tax profits of $2 million in fiscal year 2000.
 
     Aerojet finalized the sale of its EIS business to Northrop Grumman for $315
million in cash on October 19, 2001, subject to certain working capital
adjustments as defined in the agreement. In December 2001, Northrop Grumman
proposed significant adjustments which would require that Aerojet make a
purchase price reduction of approximately $42 million. Aerojet disagrees with
Northrop Grumman's proposed balance sheet adjustments on the basis that they are
inconsistent with the Asset Purchase Agreement (APA). The proposed adjustments
are subject to arbitration. The pre-tax gain on the transaction was $206
million. The EIS business had revenues of approximately $398 million and pre-tax
income of approximately $30 million for the period December 1, 2000 through
October 19, 2001. The results of operations for this business are included in
the discussion of the results of operations for the Company's Aerospace and
Defense segment for all periods presented in this report through the sale date.
See Note 1(a) in Notes to Consolidated Financial Statements for additional
information related to this transaction.
 
     As of November 30, 2001, Aerojet's contract backlog was $603 million. The
comparable amount as of November 30, 2000 (excluding those programs that were
part of the former EIS business) was approximately $746 million. The inability
of a commercial customer to raise additional required funding accounted for a
decrease of $146 million in contract backlog from 2000 to 2001. Funded backlog,
which includes only the amount of those contracts for which money has been
directly authorized by the U.S. Congress, or for which a firm purchase order has
been received by a commercial customer, was approximately $366 million as of
November 30, 2001. As of November 30, 2000, the comparable amount (excluding
those programs that were part of the EIS business) was $383 million.
 
     Net sales for the Company's Aerospace and Defense segment in fiscal year
2000 were $534 million versus 1999 sales of $570 million, down six percent. The
majority of the decline is the result of the completion and sale of the final
Special Sensor Microwave Imager/Sounder (SSMIS) unit in 1999. Lower revenues on
a mix of propulsion programs and the Integrated Advanced Microwave Sounding Unit
(AMSU) program contributed to the
 
                                        26

<PAGE>
 
decline in sales, partially offset by higher volume on the SBIRS, SADARM, and
the Japanese Hope X programs. Segment operating profit for 2000 of $104 million
represented a substantial improvement over the 1999 level of $67 million.
Operating profit margins were 19 percent in 2000 compared with 12 percent for
1999. Operating profit margins in 2000 were favorably impacted by the segment's
performance on the Delta II launch vehicle and Titan IV contracts, award fees on
the Atlas V and SADARM programs, 100 percent award fees recognized on the AMSU
program and the Defense Support Program Consolidation and increased pension
income.
 
Fine Chemicals Segment
 
     The Fine Chemicals segment consists of the operations of AFC, which
supplies special intermediates and active pharmaceutical ingredients primarily
to commercial customers in the pharmaceuticals industry.
 
     In June 2000, the Company sold a 20 percent equity interest in AFC to
NextPharma for approximately $25 million in cash and exchanged an additional 20
percent equity interest in AFC for an approximate 35 percent equity interest in
NextPharma's parent company. GenCorp continued to manage, operate, and
consolidate AFC as majority owner after the transaction. In connection with the
transaction, the Company recorded a pre-tax gain on the sale of a minority
interest in its subsidiary of approximately $5 million. In addition, the Company
initially recorded minority interest of approximately $26 million, included in
other long-term liabilities, and an investment in NextPharma's parent company of
approximately $6 million.
 
     In December 2001, the Company reacquired the 40 percent minority interest
in AFC held by NextPharma. As part of the transaction, other agreements between
the two companies were terminated, including a comprehensive sales and marketing
agreement. With the termination of these agreements, AFC has reassumed
responsibility for sales, marketing and customer interface. As noted above, the
Company sold an equity interest in AFC to NextPharma in June 2000. Following
review and approval by the Audit Committee of the GenCorp Board of Directors,
GenCorp Chairman and Chief Executive Officer, Robert A. Wolfe, subscribed for
25,000 Ordinary Shares of NextPharma's parent company, NextPharma Technologies
S.A., in August 2000 at an aggregate purchase price of $250,000. Mr. Wolfe did
not receive record title to the Ordinary Shares until December 18, 2000. Because
of his personal NextPharma Technologies S.A. investment, with prior notice to
the Audit Committee of the Board of Directors, Mr. Wolfe was recused from all
negotiations and all discussions and approvals of the reacquisition of
NextPharma's minority ownership interest in AFC with senior GenCorp management,
with the GenCorp Board of Directors and with NextPharma and its affiliates. Mr.
Wolfe still holds the Ordinary Shares he purchased in NextPharma Technologies
S.A. as a personal investment.
 
     The segment operating results for the Fine Chemicals segment include the
results of AFC before considering NextPharma's 40 percent minority interest. The
minority ownership is reflected in the consolidated results for GenCorp
beginning in June 2000 as part of Corporate and other expenses.
 
     Before considering the minority ownership interest, AFC recognized revenues
of $38 million in fiscal year 2001, compared with $28 million for 2000. AFC
began producing several new products in 2001, building on a major investment in
new facilities and equipment in 2000 and 1999. A majority of AFC's revenues for
2001 were recognized in the fourth quarter and stemmed from products
manufactured in prior quarters. Before considering the minority interest,
operating loss for fiscal year 2001 and 2000 was $14 million. Before considering
the minority ownership interest, AFC's operating margin for fiscal year 2001
decreased as compared to the 2000 performance reflecting an increase in the
number of new products in 2001. The launch of new products includes various
start-up activities and typically a period of production inefficiency before
certain efficiencies are realized. AFC is expected to realize benefits resulting
from a restructuring program completed in November 2001 (see discussion of
restructuring charges below).
 
     Before considering minority interest, AFC recognized net sales of $28
million and an operating loss of $14 million in fiscal year 2000, compared with
net sales of $45 million and an operating loss of $5 million in 1999. The
decrease in revenues and profitability in fiscal year 2000 as compared with
fiscal year 1999 reflects the absence of one contract that represented
approximately 70 percent of AFC's revenues in fiscal year 1999.
 
Interest and Other Expenses
 
     Interest expense increased to $33 million in 2001 from $18 million in 2000
and $6 million in 1999. The increase in 2001 is due to higher average debt
levels due to debt obtained to finance the Draftex acquisition in December 2000.
Interest expense in 1999 is not comparable to 2001 and 2000 due to allocation
criteria used to
                                        27

<PAGE>
 
allocate interest expense between OMNOVA and GenCorp at the time of the
spin-off. Corporate and other expenses increased in 2001 to $15 million compared
to $10 million in 2000 and 1999. The 2001 increase is attributable to higher
amortization expense as a result of acquired goodwill and other intangible
assets. The foreign exchange gain in 2001 and loss in 2000 were both the result
of foreign currency contracts entered into to hedge against market fluctuation
in anticipation of the Draftex acquisition.
 
Restructuring Charges and Unusual Items, Net
 
     During 2001, the Company incurred certain restructuring charges (in
millions):
 

<Table>
<Caption>
                                                               PRE-TAX
I
TEM                                                           EXPENSE
----                                                           -------
<S>                                                            <C>
GDX Automotive restructuring program........................     $29
Voluntary Enhanced Retirement Program.......................      10
AFC restructuring program...................................       1
                                                                 ---
  Restructuring charges.....................................     $40
                                                                 ===
</Table>

 
     In the second quarter of fiscal year 2001, the Company recorded a pre-tax
charge of $19 million related to a restructuring and consolidation of its GDX
Automotive segment. The restructuring program included the closure of the
Marion, Indiana and Ballina, Ireland manufacturing facilities and resulted in
the elimination of approximately 760 employee positions. The decision to close
these facilities was precipitated by excess capacity and deterioration of
performance and losses at these sites. The decision to close the Ballina,
Ireland plant was also due to difficulty in retaining plant personnel in light
of record employment levels in the region. Remaining programs from these
facilities were transferred to other facilities. In the fourth quarter of 2001,
the Company recorded an additional pre-tax charge of $10 million related to this
program primarily to reflect a change in estimate for the anticipated
disposition values of the idled facilities and assets and benefits costs. This
restructuring program was substantially complete by the end of the Company's
fiscal year 2001. There was an additional restructuring program directed at the
Draftex business, which resulted in the elimination of more than 500 employee
positions and an adjustment of the goodwill recorded as part of the Draftex
acquisition.
 
     In the fourth quarter of 2001, the Company implemented a restructuring of
its corporate headquarters. The program included a Voluntary Enhanced Retirement
Program (VERP) which was offered to certain eligible employees. The program
resulted in a $10 million pre-tax charge to expense.
 
     A restructuring plan implemented at AFC during the fourth quarter of fiscal
year 2001 included the elimination of 50 employee positions and resulted in a
pre-tax charge to expense of $1 million. This program was designed to
"right-size" AFC's workforce.
 
     In addition to the restructuring charges discussed above, the Company
recognized certain unusual items in its financial results for fiscal year 2001
(in millions):
 

<Table>
<Caption>
                                                               PRE-TAX INCOME
                            ITEM                                 (EXPENSE)
                            ----                               --------------
<S>                                                            <C>
Gain on sale of Aerojet's EIS business......................        $206
Write-down of inventory related to a commercial reusable
  launch vehicle program....................................         (48)
Tax-related (customer reimbursements of tax recoveries).....          (9)
Environmental remediation insurance cost recovery...........           2
                                                                    ----
  Unusual items, net........................................        $151
                                                                    ====
</Table>

 
     The gain on the sale of the EIS business relates to the Company's sale of
this business to Northrop Grumman in October 2001. The transaction is discussed
above under the discussion of results of operations for the Aerospace and
Defense segment.
 
     In the fourth quarter of 2001, Aerojet recorded an inventory write-down of
$46 million related to its participation as a propulsion supplier to a
commercial launch vehicle program and also recorded a $2 million accrual for
outstanding obligations connected with this effort. Aerojet's inventory consists
of program-unique rocket engines and propulsion systems primarily intended for
use in commercial reusable launch vehicles. The
 
                                        28

<PAGE>
 
inventory write-down reflects the following: inability of a commercial customer
to secure additional funding, no alternative purchasers willing to acquire
inventory held by Aerojet and no market value.
 
     During the first quarter of 2001, the Company reached a settlement with the
State of California on an outstanding tax claim. The benefit of the tax refund,
$9 million on an after tax basis, was recorded in the income tax provision in
the first quarter. The portion of the tax refund that will be repaid to the
Company's defense customers is reflected as an unusual expense item of $7
million in segment income ($4 million after tax). Accordingly, after repayment
to the Company's defense customers, the Company will retain $5 million of the
claims settled in the first quarter.
 
     Similarly, during the second quarter of 2001, the Company settled
additional outstanding claims with the Internal Revenue Service and the State of
California. The benefit of the tax refunds, $4 million on an after tax basis,
was recorded in the income tax provision in the second quarter. The portion of
the tax refunds that will be repaid to the Company's defense customers is
reflected as an unusual expense item of $2 million in segment income ($1 million
after tax). Accordingly, after repayment to the Company's defense customers, the
Company will retain $3 million of the claims settled in the second quarter.
 
     In the first quarter of 2001, the Company received a $2 million insurance
settlement for an environmental claim related to discontinued operations.
 
     During fiscal year 2000, the Company incurred unusual items resulting in a
net pre-tax gain of $4 million. Unusual items included a gain of $5 million from
the sale of an equity interest in AFC to NextPharma; a $3 million gain from an
environmental settlement related to a discontinued operation, offset by a $3
million charge related to the pension settlement of a discontinued Canadian
operation; and a $1 million loss on the disposition of property related to a
discontinued operation.
 
     During fiscal year 1999, the Company incurred unusual items resulting in
net pre-tax income before taxes of $12 million. Unusual items included a gain of
$59 million on settlements covering certain environmental claims with certain of
the Company's insurance carriers; a provision of $33 million for environmental
remediation costs associated principally with the Company's initial estimate of
its probable share as a Potentially Responsible Party (PRP) in the portion of
the San Gabriel Valley Basin Superfund Site known as the Baldwin Park Operable
Unit (BPOU); a provision for environmental remediation costs at the Company's
Lawrence, Massachusetts site of $6 million; a provision for environmental
remediation costs associated with other Company sites of $2 million; a charge of
$4 million related to a pricing dispute with a major vehicle sealing customer; a
charge of $1 million for the write-down of certain GDX Automotive assets to net
realizable value; and a charge of $1 million related to relocation/retention
costs associated with the spin-off of OMNOVA (see below). See discussion below
for additional information related to environmental matters.
 
Spin-Off of OMNOVA and Discontinued Operations
 
     In 1999, the Company disposed of its Polymer Products segment through the
spin-off of OMNOVA and the sale of its Penn Racquet Sports Division. Earnings
from discontinued operations totaled $26 million for 1999. Results in 1999
included pre-tax costs related to the spin-off of approximately $25 million.
 
Change in Accounting Principle
 
     In the first quarter of fiscal year 2000, the Company implemented a change
in accounting principle to reflect more appropriately investment returns and
actuarial assumptions related to pension assets and postretirement health care
and life insurance liabilities. The changes to pension assets include: adjusting
to a three year smoothing period from a five year smoothing period; changing the
amortization period to a maximum of five years from 11 years; and eliminating
the use of a ten percent corridor for gain/loss recognition. The changes to
post-retirement health care and life insurance liabilities include changing the
amortization period to a maximum of five years from 11 years and eliminating the
use of a ten percent corridor for gain/loss recognition. The changes were
effective December 1, 1999 and resulted in a one-time after-tax gain of
approximately $74 million in the first quarter of fiscal year 2000. The changes
have no effect on the funded status of the pension or other postretirement
benefit plans, and the employee and retiree benefit plans remain unchanged.
 
                                        29

<PAGE>
 
Outlook for Fiscal Year 2002
 
     As discussed under "Forward-Looking Statements" at the beginning of this
section, the forward-looking statements contained herein involve certain risks,
estimates, assumptions and uncertainties with respect to future revenues and
activity levels, cash flows, contract performance, the outcome of contingencies
including environmental remediation and anticipated costs of capital. Some of
the important factors that could cause the Company's actual results or outcomes
to differ from those discussed herein are listed above under "Forward-Looking
Statements."
 
     The year 2001 was a year of transition for the Company. The year was
highlighted by the completion of a number of important strategic initiatives
including: the sale of Aerojet's EIS business; the acquisition of Draftex;
restructuring of GDX Automotive, Aerojet Fine Chemicals and the Company's
corporate headquarters; and, federal and state agreements to carve out land from
the Aerojet Superfund site designation, returning this land to beneficial use,
pending approval by the United States District Court. In addition, in December
2001, the Company repurchased the minority interest in AFC from NextPharma. The
Company expects that its results of operations for fiscal year 2002 will be
impacted by the direction of economic and market conditions in the United States
and in Europe. The Company's financial performance will also be affected by the
success of the various restructuring activities undertaken in fiscal year 2001,
which included personnel reductions and closing certain manufacturing facilities
at GDX Automotive, personnel reductions at AFC and an early retirement program
directed at reducing corporate staff.
 
     The GDX Automotive segment expects to begin realizing production
efficiencies from its continuing consolidation and integration efforts in fiscal
year 2002, and resolution of the Ford Explorer launch issues. However, results
for the segment are largely dependent on vehicle sales and production rates
associated with platforms for which the segment provides parts. Many in the
automobile industry are predicting a decrease in vehicle sales and production
rates in 2002 as compared with 2001, which may have a negative effect on the
segment's revenues. The Company believes that its restructuring and other
cost-savings efforts, including personnel reduction and closing of several
manufacturing facilities, will have a favorable effect on the profitability of
GDX Automotive. The addition of the Draftex business has provided GDX Automotive
with a substantially broadened and more diversified customer base and the global
manufacturing presence necessary to serve customers around the world.
 
     The Company's Aerospace and Defense segment has been relatively unaffected
by recent economic events and the repercussions of the September 2001 terrorist
attacks in the United States. Continuing technical innovation and successful new
product design and development - core Aerojet strengths - led to the receipt of
an unprecedented number of new contract awards in 2001, including key positions
on important space launch and missile defense programs that provide significant
momentum for growth in the future. The financial results for the segment for
fiscal year 2002 will be materially affected by the sale of the EIS business on
October 19, 2001. As mentioned above, the EIS business had revenues of
approximately $398 million and pre-tax income of approximately $30 million for
the period December 1, 2000 through October 19, 2001. In December 2001, federal
and state agencies agreed to carve out approximately 2,600 acres of land from
the Superfund site designation. Management expects the United States District
Court to approve the Partial Consent Decree modifications in due course. This is
a major step forward in the Company's strategy to maximize the value of its real
estate holdings.
 
     The financial performance of the Company's Fine Chemicals segment is
expected to improve in fiscal year 2002. During fiscal year 2001, AFC's
workforce was reduced by almost 100 positions, or by 40 percent, and management
continued its focus on improving operational and manufacturing efficiencies. In
December 2001, the Company reacquired the minority interest held by NextPharma
and reassumed responsibility for the sales, marketing and customer interface.
AFC's focus on operational efficiency, improving relationships with its current
customers and increasing marketing efforts are expected to provide substantial
benefits in the future.
 
OTHER INFORMATION
 
Environmental matters
 
     GenCorp's policy is to conduct its businesses with due regard for the
preservation and protection of the environment. The Company devotes a
significant amount of resources and management attention to environmen-
 
                                        30

<PAGE>
 
tal matters and actively manages its ongoing processes to comply with extensive
environmental laws and regulations. The Company is involved in the remediation
of environmental conditions that resulted from generally accepted manufacturing
and disposal practices in the 1950's and 1960's followed at certain GenCorp
plants. In addition, the Company has been designated a PRP with other companies
at third party sites undergoing investigation and remediation.
 
     In 2001, capital expenditures for projects related to the environment were
approximately $1 million, compared to $1 million in 2000 and $5 million in 1999.
The Company currently forecasts that capital expenditures for environmental
projects will approximate $2 million in 2002 and $1 million in 2003.
 
     During 2001, noncapital expenditures for environmental compliance and
protection totaled $75 million, of which $11 million was for recurring costs
associated with managing hazardous substances and pollution abatement in ongoing
operations and $64 million was for investigation and remediation efforts at
other sites. Of the $64 million, $40 million was for an irrevocable escrow for
the BPOU project to implement an EPA Unilateral Administrative Order. The
majority of GenCorp's environmental liabilities relate to its Aerojet business
and Aerojet has executed agreements for substantial cost recovery from the U. S.
Government. In addition, Aerojet will be reimbursed for allowable site
restoration costs via a pass through recovery agreement with Northrop Grumman.
The company currently estimates that noncapital expenditures for environmental
compliance and protection will range between $48 million and $74 million in
2002. Actual expenditures will depend upon the 1) timing of signing of the BPOU
agreement in the San Gabriel Valley 2) issuance of a Western Groundwater
Operable Unit Consent Decree in Sacramento and 3) finalization of the Partial
Consent Decree modifications in Sacramento. The range of expenditures will also
depend upon the timing of government approvals for remediation projects,
contractor mobilization ability and the receipt of anticipated government
funding for the San Gabriel Valley BPOU.
 
     Similar noncapital expenditures were $30 million and $40 million in 2000
and 1999, respectively.
 
     The nature of environmental investigation and cleanup activities often
makes it difficult to determine the timing and amount of any estimated future
costs that may be required for remedial measures. The Company reviews these
matters and accrues for costs associated with the remediation of environmental
pollution when it becomes probable that a liability has been incurred and the
amount of the liability (usually based upon proportionate sharing) can be
reasonably estimated. The Company's Consolidated Balance Sheet (included in Part
II, Item 8 of this report) as of November 30, 2001 reflects accruals of $279
million and amounts recoverable of $158 million from the U.S. Government and
other third parties for such costs. Pursuant to U.S. Government procurement
regulations and a "global" settlement agreement covering environmental
contamination at the Company's Sacramento and Azusa, California sites, the
Company can recover a substantial portion of its environmental costs for its
Aerospace and Defense segment through the establishment of prices for the
Company's products and services sold to the U.S. Government. The ability of the
Company to continue recovering these costs from the U.S. Government depends on
Aerojet's sustained business volume under U.S. Government contracts and
programs. The Company is in the process of negotiating a settlement of certain
claims related to the BPOU in San Gabriel Valley Basin, California. The
Company's forecast of capital and noncapital expenses in 2002 related to
environmental matters provided above includes provisions for the settlement of
the BPOU claims discussed in Note 9(c) in Notes to Consolidated Financial
Statements.
 
     The effect of the resolution of environmental matters and the Company's
obligations for environmental remediation and compliance cannot be predicted due
to the uncertainty concerning both the amount and timing of future expenditures
and future results of operations. Based on information available to management
at issuance of this Form 10-K and assuming final judicial and/or PRP allocation
approvals, GenCorp believes its approximate allocated share of liability for the
following sites is or will be as follows; Azusa, CA Site (100%), Baldwin Park
Operable Unit, Los Angeles, CA (50%-60%), Lawrence, MA (100%), McDonnell Douglas
Site, Rancho Cordova, CA (10-20%), Olin Site, Ashtabula, OH (0% to 35%) and
Sacramento, CA Site (100%). However, management believes, on the basis of
presently available information, that the resolution of environmental matters
and the Company's obligations for environmental remediation and compliance will
not have a material adverse effect on the Company's competitive position,
results of operations, liquidity or financial condition. The Company will
continue its efforts to mitigate past and future costs through pursuit of claims
for insurance
 
                                        31

<PAGE>
 
coverage and continued investigation of new and more cost effective remediation
alternatives and associated technologies.
 
     For additional discussion of environmental and related legal matters, see
Notes 9(b) and 9(c) in Notes to Consolidated Financial Statements incorporated

herein by reference.
 
Critical Accounting Policies
 
     There are certain accounting policies that the Company believes are
critical to its business and the understanding of its financial statements.
These policies are discussed below. In addition, the preparation of financial
statements in conformity with accounting principles generally accepted in the
United States requires the Company's management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements. The amounts recorded in the Company's consolidated financial
statements for pension and postretirement benefit plans, environmental matters
and other contingencies, for example, depend substantially on estimates and
assumptions. For a discussion of other significant accounting policies used by
the Company in the preparation of its financial statements see Note 1 in
Consolidated Financial Statements contained in Part II, Item 8 of this report.
 
     Revenue recognition -- Generally, sales are recorded when products are
shipped or customer acceptance has occurred, all other significant customer
obligations have been met and collection is reasonably assured. Sales and income
under most government fixed-price and fixed-price-incentive production type
contracts are recorded as deliveries are made. For contracts where relatively
few deliverable units are produced over a period of more than two years, revenue
and income are recognized at the completion of measurable tasks, rather than
upon delivery of the individual units. Sales under cost reimbursement contracts
are recorded as costs are incurred, and include estimated earned fees in the
proportion that costs incurred to date bear to total estimated costs.
 
     Certain government contracts contain cost or performance incentive
provisions that provide for increased or decreased fees or profits based upon
actual performance against established targets or other criteria. Penalties and
cost incentives are considered in estimated sales and profit rates. Performance
incentives are recorded when earned or measurable. Provisions for estimated
losses on contracts are recorded when such losses become evident. The Company
uses the full absorption costing method for government contracts which includes
direct costs, allocated overhead and general and administrative expense.
Work-in-process on fixed-price contracts includes full cost absorption, less the
average estimated cost of units or items delivered. Changes in estimates and
assumptions related to the status of certain long-term contracts may have a
material effect on the amounts reported by the Company for revenues and
profitability.
 
     For additional discussion of Company policies relating to revenue
recognition, see Note 1(i) in Notes to Consolidated Financial Statements
incorporated herein by reference.
 
     Environmental costs - The Company accounts for identified or potential
environmental remediation liabilities in accordance with the American Institute
of Certified Public Accountants' Statement of Position 96-1, "Environmental
Remediation Liabilities" (SOP 96-1) and Staff Accounting Bulletin No. 92.
"Accounting and Disclosures Relating to Loss Contingencies". Under this
guidance, the Company expenses, on a current basis, recurring costs associated
with managing hazardous substances and pollution in ongoing operations. The
Company accrues for costs associated with the remediation of environmental
pollution when it becomes probable that a liability has been incurred, and its
proportionate share of the amount can be reasonably estimated. See the
discussion above under "Environmental matters" for additional information
regarding significant estimates and other factors involving the Company's
obligations for environmental remediation costs.
 
     Business combinations -- The Company acquired the Draftex business in
December 2000. As part of the acquisition, which was accounted for under the
"purchase method," the Company was required to record acquired tangible and
intangible assets and assumed liabilities at fair value. Although the Company
obtained the services of appraisers to assist with the valuation process, the
valuation of acquired assets and the resulting goodwill required certain
estimates and assumptions that affect amounts reported in the Company's
financial statements. Amounts recorded for tangible and intangible assets affect
future results of operations through depreciation and amortization expense. In
addition, all acquired assets, including goodwill, are subject to tests for
impairment. Under SFAS No. 142 "Goodwill and Other Intangible Assets", goodwill
must be tested for impairment at least annually, or more frequently if
indications of possible impairment exist, by comparing the net
                                        32

<PAGE>
 
assets of each "reporting unit" (an organizational grouping) with the current
fair value of the reporting unit. If the current fair value of the reporting
unit is less than its carrying amount, then a second test must be performed.
Under the second test, the current fair value of the reporting unit is allocated
to the assets and liabilities of the reporting unit, including an amount for any
"implied" goodwill. If implied goodwill exceeds the net carrying amount of
goodwill, no impairment loss is recorded. Otherwise, an impairment loss is
recognized for the difference.
 
Recently Issued Accounting Standards
 
     Effective July 1, 2001, the Company adopted the provisions of SFAS No. 141,
"Business Combinations" (SFAS 141), which is effective for all business
combinations initiated after June 30, 2001. SFAS 141 prohibits the use of the
pooling-of-interest method for business combinations and establishes the
accounting and financial reporting requirements for business combinations
accounted for by the purchase method. SFAS 141 also changes the criteria to
recognize intangible assets apart from goodwill. The Company adopted the
provisions of SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS 142)
effective December 1, 2001. Under SFAS 142, goodwill and indefinite lived
intangible assets are no longer amortized but are reviewed annually, or more
frequently if indications of possible impairment exist, for impairment. The
Company has performed the requisite transitional impairment tests for goodwill
and other intangible assets as of December 1, 2001 and has determined that these
assets are not impaired as of that date. The adoption of SFAS 142 results in a
reduction of annual amortization expenses of approximately $4 million related to
goodwill and other indefinite lived intangible assets. The adoption of these
standards will not have a material impact on the Company's results of
operations, liquidity or financial condition.
 
     In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 143, "Accounting for Asset Retirement Obligations" (SFAS 143) that provides
accounting guidance for the costs of retiring long-lived assets. SFAS 143 is
effective for fiscal years beginning after June 15, 2002. The Company is
currently assessing the impact adoption of this standard will have on its
financial statements, but a preliminary review indicates that it will not have a
material effect on the Company's results of operations, liquidity or financial
condition.
 
     In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS 144) that provides accounting
guidance for financial accounting and reporting for the impairment or disposal
of long-lived assets. The statement supercedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for the Long-Lived Assets to be Disposed
Of." SFAS 144 also supersedes the accounting and reporting provisions of
Accounting Principal Board's Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
related to the disposal of a segment of a business. SFAS 144 is effective for
fiscal years beginning after December 15, 2001, with early adoption encouraged.
The Company has adopted the provisions of SFAS 144 as of December 1, 2001. The
adoption of SFAS 144 is not expected to have a material effect on the Company's
results of operations, liquidity or financial condition.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company broadly defines liquidity as its ability to generate sufficient
operating cash flows to meet its obligations and commitments. Liquidity also
includes the Company's ability to obtain appropriate debt and equity financing
and to convert into cash those assets that are no longer required to meet its
strategic and financial objectives. Accordingly, liquidity cannot be considered
separately from capital resources consisting of current or potentially available
funds for use in meeting capital expenditure and debt service requirements and
long-range business objectives.
 
     As of November 30, 2001, the Company's cash and cash equivalents totaled
$44 million and the ratio of current assets to current liabilities (current
ratio) was 0.90. As of November 30, 2000, the Company's cash and cash
equivalents were $17 million and the current ratio was 1.04. The primary reasons
for the decrease in the current ratio are: an increase in cash used in operating
activities, the effects of the Draftex acquisition and the underperformance of
the Company's GDX Automotive and Fine Chemicals segments. The Draftex
acquisition resulted in the Company purchasing primarily long-term assets and
assuming short-term obligations. Gross proceeds in the amount of $315 million
from the sale of Aerojet's EIS business were used to pay down $264 million of
long-term debt, fund the $40 million irrevocable escrow for the BPOU project and
remit
                                        33

<PAGE>
 
$9 million to the EPA for past costs ($8 million of which was remitted in
December 2001). A substantial portion of the payment for the BPOU project is
reimbursable by the U.S. Government (see related information above under "Other
Information-Environmental matters").
 
     The Company currently believes that its existing cash and cash equivalents
($31 million as of January 31, 2002), forecasted operating cash flows for fiscal
year 2002, available bank lines, including the $25 million Term Loan C discussed
below, and its ability to raise debt or equity financing or, if such financing
cannot be arranged, to generate additional funds from the sources described
below, will provide the Company with sufficient funds to meet its operating plan
for fiscal year 2002. This operating plan provides for full operations of the
Company's three business segments, capital expenditures of approximately $47
million, interest and principal payments on the Company's debt and anticipated
dividend payments.
 
     The Company is currently considering accessing the capital markets to raise
debt or equity financing, and would anticipate using the proceeds of any such
financing to help fund its 2002 liquidity requirements and to repay debt. The
timing, terms, size and pricing of any such financing will depend on investor
interest and market conditions, and there can be no assurance that the Company
will be able to obtain any such financing. As discussed below, under its Credit
Facility, if the Company raises at least $35 million in equity or subordinated
debt prior to March 28, 2002, the Company will have access to an additional $25
million of Term Loan C borrowings.
 
     If the Company is not able to raise debt or equity financing in the capital
markets or to obtain additional bank borrowings, the Company believes that it
can generate additional funds to help fund its 2002 liquidity requirements by
reducing working capital requirements, deferring capital expenditures, cost
reduction initiatives in addition to those already included in the Company's
operating plan and asset sales, or through a combination of these means.
 
     Major factors that could adversely impact the Company's forecasted
operating cash flows for fiscal year 2002 and its financial condition are
described in "Forward-Looking Statements" and "Outlook for fiscal year 2002"
above. In addition, the Company's liquidity and financial condition will
continue to be affected by changes in prevailing interest rates because
substantially all of its debt bears interest at variable interest rates.
 
     Net cash used in continuing operations for fiscal year 2001 was $69
million. Cash provided by continuing operations was $23 million in 2000 and $100
million in 1999. The decrease in cash provided by continuing operations reflects
the payment of certain current liabilities assumed as part of the Draftex
acquisition, the cash flow impact of the Company's restructuring activities
(e.g., severance payments), increased environmental expenditures (net of
reimbursements) and decreased financial performance of the GDX Automotive and
Fine Chemicals segments. The decrease in operating cash in fiscal year 2000
compared with fiscal year 1999 primarily reflects the absence of certain
environmental insurance settlements received in 1999, offset by other expected
working capital changes and the timing of income tax payments.
 
     In fiscal year 2001, capital expenditures totaled $49 million, compared to
$82 million and $97 million in fiscal years 2000 and 1999, respectively. Capital
expenditures in 2001 were favorably affected by management initiatives to reduce
capital outlays where practical. The Company's capital expenditures directly
support the Company's contract and customer requirements and are primarily made
for asset replacement and capacity expansion, cost reduction initiatives, safety
and productivity improvements and environmental remediation and compliance.
Capital expenditures in fiscal 2000 and 1999 included significant investments in
support of the SBIRS program and new manufacturing facilities at AFC. Capital
expenditures for fiscal year 2002 are currently projected to be approximately
$47 million. Investing activities in fiscal year 2001 also included proceeds
from the sale of the EIS business and amounts paid for the purchase of Draftex.
Both of these transactions are discussed above.
 
     Net cash provided by financing activities for fiscal year 2001 was $2
million compared with $28 million in fiscal year 2000. Net cash used in
financing activities was $29 million in fiscal year 1999. Net cash provided by
financing activities for fiscal year 2001 reflects the debt incurred as part of
the Draftex acquisition, partially offset by the use of gross proceeds from the
sale of the EIS business to reduce debt. The Company paid dividends of $5
million in both 2001 and 2000. Cash provided by financing activities in 2000
included a net increase in long-term debt of $37 million primarily used to fund
capital expenditures, offset by payments of short-term debt and
 
                                        34

<PAGE>
 
dividends. Cash flows used in financing activities in fiscal year 1999 included
a net $210 million decrease in long-term debt and $20 million in dividends
offset by a $200 million dividend payment received from OMNOVA related to the
spin-off of the Company's Polymer Products segment.
 
     As of November 30, 2000, the Company had a five year, $250 million
Revolving Credit Facility Agreement (Former Credit Facility) that was scheduled
to expire in 2004. The Former Credit Facility was paid-off on December 28, 2000.
 
     On December 28, 2000, the Company entered into a new, five year, $500
million senior credit facility (Credit Facility). The Credit Facility was used
to finance the acquisition of the Draftex business (see Note 1(a)) and replaced
the Former Credit Facility. The Credit Facility consisted of a $150 million
revolving loan (Revolver) and a $150 million term loan (Term Loan A), expiring
December 28, 2005, and a $200 million term loan (Term Loan B), expiring December
28, 2006. Effective August 31, 2001 the Company executed Amendment Number 2 to
the Credit Facility providing for transfer of $13 million of the Revolver and
$52 million of the Term Loan A to Term Loan B. The outstanding balance of Term
Loan B on October 19, 2001 of $264 million (balance of $265 million after
transfer of $13 million of the Revolver and $52 million of Term Loan A, less
repayment of approximately $1 million in September 2001) was repaid with the
proceeds from the sale of Aerojet's EIS business (see Note 1(a)). The Company
obtained waivers in October 2001, November 2001, December 2001 and February 2002
waiving reduction of the Revolver from $150 million to $137 million until March
8, 2002. On February 28, 2002 the Company executed Amendment Number 4 to the
Credit Facility, which provides an additional $25 million term loan (Term Loan
C) with the ability to request an additional $25 million under Term Loan C,
subject to the satisfaction of certain conditions and the Company issuing $35
million of equity or subordinated debt prior to March 28, 2002. Amendment Number
4 also extended the reduction of the Revolver from March 8, 2002 to March 28,
2002. The initial $25 million Term Loan C has a term which matures on December
28, 2002, but in the event the Company obtains $35 million of equity or
subordinated debt prior to March 28, 2002, the term for the total Term Loan C
matures December 28, 2004. As of February 28, 2002 the Company did draw-down $25
million of Term Loan C, which the Company intends to use to fund working capital
requirements or to pay down debt.
 
     As of November 30, 2001 and February 28, 2002 the outstanding Term Loan A
balances were approximately $88 million and $86 million, respectively. Pursuant
to Amendment Number 2, the Term Loan A scheduled repayments remaining as of
February 28, 2002 are: twelve equal quarterly principal payments of
approximately $5 million through December 2004, and four equal quarterly
payments of approximately $7 million through December 2005. Term Loan C
scheduled repayments for the initial $25 million Term Loan C are quarterly
principal payments of $625,000, commencing June 2002, with a balloon payment of
approximately $24 million, if the maturity is December 28, 2002 and $19 million
if the maturity is December 28, 2004. In the event the additional $25 million
Term Loan C is funded, the repayment schedule on the total Term Loan C of $50
million commences June 2002, with ten equal quarterly principal payments of
$1.25 million and a balloon payment of $38 million on December 28, 2004. The
quarterly principal repayment dates for Term Loans A and C are: March 28, June
28, September 28, and December 28 along with associated interest payments.
 
     The Company pays a commitment fee between 0.375 percent and 0.50 percent
(based on the most recent leverage ratio) on the unused balance. Borrowings
under the Credit Facility bear interest at the borrower's option, at various
rates of interest, based on an adjusted base rate (prime lending rate or federal
funds rate plus 0.50 percent) or Eurodollar rate, plus, in each case, an
incremental margin. For the Revolver and Term Loan A borrowings the incremental
margin is based on the most recent leverage ratio, for base rate loans the
margin ranges between 0.75 percent and 2.0 percent and for Eurodollar rate
borrowings the margin ranges between 1.75 percent and 3.00 percent. For Term
Loan C borrowings the initial margins for base rate loans and Eurodollar rate
based loans are 3.50 percent and 4.50 percent, respectively. The margins for
Term Loan C borrowings increase quarterly by 0.50 percent each quarter beginning
after June 28, 2002. Increases to the margins are cumulative, but shall not
exceed, in the aggregate, 4.00 percent. Cash paid for interest was $34 million,
$17 million and $20 million in 2001, 2000 and 1999, respectively.
 
     The Credit Facility, as executed on December 28, 2000, was secured by stock
of certain subsidiaries of the Company and certain real property of the GDX
Automotive segment of the Company. Execution of Amendment Number 4 to the Credit
Facility and the provision of Term Loan C required the Company to pledge
additional
 
                                        35

<PAGE>
 
collateral consisting of: the assets of, and the Company's interest in, AFC,
non-Superfund property located in California, real estate in Nevada and a $21
million note receivable.
 
     As of November 30, 2001, the available borrowing limit under the Credit
Facility was $241 million, of which the Company had drawn-down $208 million
(excluding letters of credit), and the average interest rate on the outstanding
balance of the Credit Facility was 5.4 percent. At November 30, 2001,
outstanding letters of credit totaled $9 million. As of February 28, 2002 the
available borrowing limit under the Revolver was $150 million, of which the
Company had drawn-down $125 million (excluding outstanding letters of credit in
the amount of $8 million).
 
     The Credit Facility contains certain restrictive covenants that require the
Company to meet specific financial ratios and restrict capital expenditures, the
ability to incur additional debt and certain other transactions. The Credit
Facility permits dividend payments as long as there is no event of default. The
Credit Facility's four financial covenants are: an interest coverage ratio, a
leverage ratio, a fixed charge coverage ratio and a consolidated net worth test,
all as defined in the amended Credit Facility. Effective August 31, 2001 the
interest coverage and the leverage ratios for the quarter ended August 31, 2001
and the interest coverage ratio for the quarter ended November 30, 2001 were
amended as a result of the decreased financial performance of the GDX Automotive
and Fine Chemicals segments. As presented in the table below, the Company was in
compliance with all financial ratios as of November 30, 2001:
 

<Table>
<Caption>
                                                                ACTUAL RATIO OR
                                                                 AMOUNT AS OF
AS OF NOVEMBER 30, 2001                                        NOVEMBER 30, 2001
-----------------------                                        -----------------
<S>                                                            <C>
Interest coverage ratio, not less than: 3.50 to 1.00........        3.65 to 1.00
Leverage ratio, not greater than: 2.75 to 1.00..............        2.08 to 1.00
Fixed charges coverage ratio, not less than: 1.05 to 1.00...        1.21 to 1.00
Consolidated net worth, not less than: $234 million.........        $310 million
</Table>

 
     Giving effect to Amendment Number 4 to the Credit Facility, the required
financial covenants for fiscal 2002 are summarized in the table below:
 

<Table>
<Caption>
                                                             FISCAL QUARTER ENDED
                                       ----------------------------------------------------------------
                                       FEBRUARY 28,     MAY 31,       AUGUST 31,       NOVEMBER 30,
                                           2002           2002           2002       2002 AND THEREAFTER
                                       ------------   ------------   ------------   -------------------
<S>                                    <C>            <C>            <C>            <C>
Interest coverage ratio, not less
  than:..............................  3.50 to 1.00   3.75 to 1.00   3.75 to 1.00      4.00 to 1.00
Leverage ratio, not greater than:....  3.10 to 1.00   3.10 to 1.00   2.75 to 1.00      2.50 to 1.00
Fixed charges coverage ratio, not
  less than:.........................  1.00 to 1.00   1.00 to 1.00   1.05 to 1.00      1.05 to 1.00
</Table>

 
     On the last day of any fiscal quarter, minimum consolidated net worth is
required to be equal to the sum of $170 million, plus an amount equal to 50
percent of the aggregate consolidated net income of the Company for all fiscal
quarters ended on or after February 28, 2001.
 
     Based on current forecasted financial results, the Company expects to be in
compliance with all of the above financial covenants for fiscal year 2002,
although no assurance can be given in this regard.
 
     As of November 30, 2001, the Company's debt maturities (Revolver of $120
million, Term Loan A of $88 million and other debt of $6 million) are summarized
as follows (in millions):
 

<Table>
<Caption>
2002    2003    2004    2005    2006
----    ----    ----    ----    ----
<S>     <C>     <C>     <C>     <C>
$17     $22     $20     $27     $128
</Table>

 
     Term Loan C in the amount of $25 million, drawn as of February 28, 2002,
currently matures on December 28, 2002 (see discussion above).
 

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Interest Rate Risk
 
     The Company is exposed to market risk from changes in interest rates on
long-term debt obligations. The Company's policy is to manage interest rates
through the use of a combination of fixed and variable rate debt. The Company is
currently evaluating the use of derivative financial instruments to manage its
interest rate risk.
 
                                        36

<PAGE>
 
The interest rates on substantially all of the Company's outstanding long-term
debt are variable. The interest rates are based on the London InterBank Offering
Rate (LIBOR). As of November 30, 2001, the Company's long-term debt totaled $197
million and had an average variable interest rate of 5.4 percent. A one point
change of the interest rate on the Company's long-term debt would have affected
interest expense in 2001 by approximately $4 million. The interest rates on the
Company's long-term debt reflect market rates and therefore, the carrying value
of long-term debt approximates its fair value.
 
Foreign Currency Exchange Rate Risk
 
     The Company has foreign currency exchange rate risk resulting from
operations in foreign countries, including Canada, four countries in Europe and
in China. The Company currently does not comprehensively hedge its exposure to
foreign currency rate changes, although it may choose to selectively hedge
exposure to foreign currency rate change risk. In the fourth quarter of fiscal
year 2000, the Company entered into a foreign currency option contract to
purchase a specified number of Euros at a specified exchange rate, in order to
hedge against market fluctuations during negotiations to acquire Draftex. In
connection with the option contract that expired on November 30, 2000, the
Company expensed approximately $8 million. The Company entered into several
foreign currency exchange contracts related to the Draftex acquisition in
December 2000. Settlement of the contracts, which occurred in the first quarter
of 2001, resulted in a gain of $11 million. Besides these transactions, the
Company has not entered into any significant foreign currency forward exchange
contracts or other derivative financial instruments to hedge the effects of
adverse fluctuations in foreign currency exchange rates.
 
Commodity Price Risk
 
     The operations of the Company's GDX Automotive segment are dependent on the
availability of rubber and related raw materials. Because of this dependence,
significant increases in the price of these raw materials could have a material
adverse impact on the Company's results of operations and financial condition.
The Company employs a diversified supplier base as part of its efforts to
mitigate the risk of a supply interruption. For 2001 and 2000, rubber and
rubber-related raw materials accounted for 11 percent and 9 percent,
respectively, of the GDX Automotive segment's cost of goods sold (as adjusted to
exclude unusual items). Based on 2001 activity levels, a 10 percent increase in
the average annual cost of these raw materials would increase the GDX Automotive
segment's cost of goods sold by approximately $8 million.
 

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     Information called for by this item is set forth beginning on the next page
of this report.
 

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
 
     Not applicable.
 
                                        37

<PAGE>
 

              REPORT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Shareholders of GenCorp Inc.:
 
     We have audited the accompanying consolidated balance sheets of GenCorp
Inc. as of November 30, 2001 and 2000, and the related consolidated statements
of income, shareholders' equity and cash flows for each of the three years in
the period ended November 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
 
     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of GenCorp Inc. at
November 30, 2001 and 2000, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended November 30,
2001, in conformity with accounting principles generally accepted in the United
States.
 
     The accompanying consolidated financial statements for the years ended
November 30, 2000 and 1999 have been restated as discussed in Note 2.
 
                                                               Ernst & Young LLP
 
Sacramento, California
February 28, 2002

 
                                        38

<PAGE>
 
                                  GENCORP INC.
 
                       CONSOLIDATED STATEMENTS OF INCOME
 

<Table>
<Caption>
                                                                       YEAR ENDED NOVEMBER 30,
                                                                --------------------------------------
                                                                   2001          2000          1999
                                                                   ----          ----          ----
                                                                               RESTATED      RESTATED
                                                                (DOLLARS IN MILLIONS, EXCEPT PER SHARE
                                                                               AMOUNTS)
<S>                                                             <C>           <C>           <C>
NET SALES...................................................      $1,486        $1,047        $1,071
COSTS AND EXPENSES
Cost of products sold.......................................       1,280           860           925
Selling, general and administrative.........................          42            40            41
Depreciation and amortization...............................          77            50            44
Interest expense............................................          33            18             6
Other income, net...........................................         (11)          (12)           (7)
Foreign exchange (gain) loss................................         (11)            8            --
Restructuring charges.......................................          40            --            --
Unusual items, net..........................................        (151)           (4)          (12)
                                                                  ------        ------        ------
                                                                   1,299           960           997
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES.......         187            87            74
Provision for income taxes..................................          59            35            29
                                                                  ------        ------        ------
INCOME FROM CONTINUING OPERATIONS...........................         128            52            45
INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES....          --            --            26
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE, NET
  OF INCOME TAXES...........................................          --            74            --
                                                                  ------        ------        ------
  NET INCOME................................................      $  128        $  126        $   71
                                                                  ======        ======        ======
EARNINGS PER SHARE OF COMMON STOCK
Basic:
  Continuing operations.....................................      $ 3.03        $ 1.24        $ 1.09
  Discontinued operations...................................          --            --          0.63
  Cumulative effect of a change in accounting principle.....          --          1.76            --
                                                                  ------        ------        ------
       Total................................................      $ 3.03        $ 3.00        $ 1.72
                                                                  ======        ======        ======
Diluted:
  Continuing operations.....................................      $ 3.00        $ 1.23        $ 1.07
  Discontinued operations...................................          --            --          0.63
  Cumulative effect of a change in accounting principle.....          --          1.76            --
                                                                  ------        ------        ------
       Total................................................      $ 3.00        $ 2.99        $ 1.70
                                                                  ======        ======        ======
</Table>

 
                See notes to consolidated financial statements.
                                        39

<PAGE>
 
                                  GENCORP INC.
 
                          CONSOLIDATED BALANCE SHEETS
 

<Table>
<Caption>
                                                                AS OF NOVEMBER 30
                                                              ----------------------
                                                                2001          2000
                                                                ----          ----
                                                                            RESTATED
                                                              (DOLLARS IN MILLIONS,
                                                                 EXCEPT PER SHARE
                                                                     AMOUNTS)
<S>                                                           <C>           <C>
CURRENT ASSETS
Cash and cash equivalents...................................   $   44        $   17
Accounts receivable.........................................      189           135
Inventories, net............................................      167           182
Current deferred income taxes...............................       14            11
Prepaid expenses and other..................................        4             1
                                                               ------        ------
          Total Current Assets..............................      418           346
NONCURRENT ASSETS
Property, plant and equipment, net..........................      454           366
Recoverable from the U.S. Government and other third parties
  for environmental remediation costs.......................      138           203
Deferred income taxes.......................................        6            78
Prepaid pension asset.......................................      287           281
Goodwill, net...............................................       65             8
Other noncurrent assets, net................................       96            43
                                                               ------        ------
          Total Noncurrent Assets...........................    1,046           979
                                                               ------        ------
          Total Assets......................................   $1,464        $1,325
                                                               ======        ======
CURRENT LIABILITIES
Short-term borrowings and current portion of long-term
  debt......................................................   $   17        $   --
Accounts payable............................................       83            54
Income taxes payable........................................       29             5
Other current liabilities...................................      336           272
                                                               ------        ------
          Total Current Liabilities.........................      465           331
NONCURRENT LIABILITIES
Long-term debt, net of current portion......................      197           190
Postretirement benefits other than pensions.................      194           236
Reserves for environmental remediation......................      244           328
Other noncurrent liabilities................................       54            54
                                                               ------        ------
          Total Noncurrent Liabilities......................      689           808
                                                               ------        ------
          Total Liabilities.................................    1,154         1,139
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Preference stock, par value of $1.00; 15 million shares
  authorized; none issued or outstanding....................       --            --
Common stock, par value of $0.10; 150 million shares
  authorized; 42.9 million shares issued, 42.6 million
  outstanding in 2001 (42.2 million shares issued, 42.0
  million shares outstanding in 2000)                               4             4
Other capital...............................................        9             2
Retained earnings...........................................      331           208
Accumulated other comprehensive loss, net of income taxes...      (34)          (28)
                                                               ------        ------
          Total Shareholders' Equity........................      310           186
                                                               ------        ------
          Total Liabilities and Shareholders' Equity........   $1,464        $1,325
                                                               ======        ======
</Table>

 
                See notes to consolidated financial statements.
                                        40

<PAGE>
 
                                  GENCORP INC.
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 

<Table>
<Caption>
                                                                                ACCUMULATED
                                       COMMON STOCK                                OTHER           TOTAL
                                    -------------------    OTHER    RETAINED   COMPREHENSIVE   SHAREHOLDERS'
                                      SHARES     AMOUNT   CAPITAL   EARNINGS       LOSS            EQUITY
                                    ----------   ------   -------   --------   -------------   --------------
                                            (DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S>                                 <C>          <C>      <C>       <C>        <C>             <C>
NOVEMBER 30, 1998 -- AS
  REPORTED........................  41,535,524     $4      $ 151     $ 198         $ (9)           $ 344
Adjustment, see Note 2............          --     --         --        (5)          --               (5)
                                    ----------     --      -----     -----         ----            -----
NOVEMBER 30, 1998  -- RESTATED....  41,535,524      4        151       193           (9)             339
Net income -- As restated.........          --     --         --        71           --               71
Currency translation adjustments
  and other.......................          --     --         --        --           (9)              (9)
Cash dividends of $0.48 per
  share...........................          --     --         --       (20)          --              (20)
Shares issued under stock option
  and stock incentive plans.......     326,777     --          4        --           --                4
Dividend transfer from OMNOVA
  Solutions, Inc. ................          --     --        200        --           --              200
Net asset transfer to OMNOVA
  Solutions, Inc. ................          --     --       (355)     (157)           1             (511)
                                    ----------     --      -----     -----         ----            -----
NOVEMBER 30, 1999 -- RESTATED.....  41,862,301      4         --        87          (17)              74
Net income -- As restated.........          --     --         --       126           --              126
Currency translation adjustments
  and other.......................          --     --         --        --          (11)             (11)
Cash dividends of $0.12 per
  share...........................          --     --         --        (5)          --               (5)
Shares issued under stock option
  and stock incentive plans.......     104,679     --          2        --           --                2
                                    ----------     --      -----     -----         ----            -----
NOVEMBER 30, 2000 -- RESTATED.....  41,966,980      4          2       208          (28)             186
Net income........................          --     --         --       128           --              128
Currency translation adjustments
  and other.......................          --     --         --        --           (6)              (6)
Cash dividends of $0.12 per
  share...........................          --     --         --        (5)          --               (5)
Shares issued under stock option
  and stock incentive plans.......     661,187     --          7        --           --                7
                                    ----------     --      -----     -----         ----            -----
NOVEMBER 30, 2001.................  42,628,167     $4      $   9     $ 331         $(34)           $ 310
                                    ==========     ==      =====     =====         ====            =====
</Table>

 
                See notes to consolidated financial statements.
                                        41

<PAGE>
 
                                  GENCORP INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 

<Table>
<Caption>
                                                                  YEAR ENDED NOVEMBER 30,
                                                              --------------------------------
                                                                2001        2000        1999
                                                                ----        ----        ----
                                                                          RESTATED    RESTATED
                                                                   (DOLLARS IN MILLIONS)
<S>                                                           <C>         <C>         <C>
OPERATING ACTIVITIES
Income from continuing operations...........................   $ 128      $     52    $     45
Adjustments to reconcile income from continuing operations
  to net cash used in operating activities:
     Gain on sale of businesses.............................    (206)           (5)         --
     Gain on sale of property, plant and equipment..........     (23)           --          --
     Foreign currency gain..................................     (11)           --          --
     Depreciation and amortization..........................      77            50          44
     Deferred income taxes..................................      66            14         (12)
       Changes in operating assets and liabilities net of
          effects of acquisitions and dispositions of
          businesses:
            Accounts receivable.............................     (34)            4          25
            Inventories.....................................      33           (38)        (43)
            Other current assets............................      (3)            4           7
            Other noncurrent assets.........................      23            17         (88)
            Current liabilities.............................     (18)          (31)         42
            Other noncurrent liabilities....................    (101)          (44)         80
                                                               -----      --------    --------
Net Cash (Used in) Provided by Continuing Operations........     (69)           23         100
Net Cash Provided by Discontinued Operations................      --            --          54
                                                               -----      --------    --------
               Net Cash (Used in) Provided by Operating
                 Activities.................................     (69)           23         154
INVESTING ACTIVITIES
Capital expenditures........................................     (49)          (82)        (97)
Proceeds from disposition of EIS business...................     315            --          --
Proceeds from the sale of minority interest in subsidiary...      --            25          --
Proceeds from disposition of property, plant and
  equipment.................................................      12            --           1
Acquisition of Draftex business, net of cash acquired.......    (184)           --          --
Discontinued operations.....................................      --            --         (30)
                                                               -----      --------    --------
               Net Cash Provided by (Used in) Investing
                 Activities.................................      94           (57)       (126)
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt................     350            --         149
Repayments on long-term debt................................    (262)           --        (359)
Borrowings (repayments) on revolving credit facility, net...     (84)           37          --
Repayments on short-term debt, net..........................      (4)           (5)         (2)
Dividends paid..............................................      (5)           (5)        (20)
Other equity transactions...................................       7             1           3
Cash dividend from OMNOVA Solutions, Inc. ..................      --            --         200
                                                               -----      --------    --------
               Net Cash Provided by (Used in) Financing
                 Activities.................................       2            28         (29)
                                                               -----      --------    --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........      27            (6)         (1)
Cash and Cash Equivalents at Beginning of Year..............      17            23          24
                                                               -----      --------    --------
               Cash and Cash Equivalents at End of Year.....   $  44      $     17    $     23
                                                               =====      ========    ========
</Table>

 
                See notes to consolidated financial statements.
                                        42

<PAGE>
 
                                  GENCORP INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
a.  BASIS OF PRESENTATION AND NATURE OF OPERATIONS
 
     The consolidated financial statements of GenCorp Inc. (GenCorp or the
Company) include the accounts of the parent company and its wholly-owned and
majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain reclassifications
have been made to financial information for prior years to conform to the
current year's presentation.
 
     The Company is a multinational manufacturing company operating primarily in
the United States and Europe. The Company's continuing operations are organized
into three segments: GDX Automotive, Aerospace and Defense and Fine Chemicals.
The Company's GDX Automotive segment is a major automotive supplier, engaged in
the development, manufacture and sale of highly engineered extruded and molded
rubber and plastic sealing systems for vehicle bodies and windows for automotive
original equipment manufacturers. The Aerospace and Defense segment includes the
operations of Aerojet-General Corporation (Aerojet). Aerojet's business
primarily serves high technology markets that include Space and Strategic Rocket
Propulsion and Tactical Weapons. Primary customers served include major prime
contractors to the U.S. Government, the Department of Defense (DoD) and the
National Aeronautics and Space Administration (NASA). In addition, the Company
also has significant undeveloped real estate holdings in Sacramento, California.
The Company's real estate business is a component of its Aerospace and Defense
segment. The Company's Fine Chemicals segment consists of the operations of
Aerojet Fine Chemicals LLC (AFC). AFC supplies special intermediates and active
pharmaceutical ingredients primarily to commercial customers in the
pharmaceutical industry. Information on the Company's operations by segment and
geographic area is provided in Note 11. Also, see Notes 9(c) and 11 for
additional information related to the Company's real estate holdings.
 
     Management currently believes that its existing cash, forecasted operating
cash flows for fiscal year 2002, available bank lines, including $25 million
available from Term Loan C as of February 28, 2002, and its ability to generate
additional funds from the sources described below will provide the Company with
sufficient funds to meet its operating plan for fiscal year 2002. The operating
plan provides for full operations of the Company's three business segments,
anticipated capital expenditures of approximately $47 million, interest and
principal payments on the Company's debt and anticipated dividend payments.
 
     The Company is currently considering accessing the capital markets to raise
debt or equity financing, and would anticipate using the proceeds of any such
financing to help fund its 2002 liquidity requirements and to repay debt. The
timing, terms, size and pricing of any such financing will depend on investor
interest and market conditions, and there can be no assurance that the Company
will be able to obtain any such financing. As discussed in Note 7, if the
Company raises at least $35 million in equity or subordinated debt prior to
March 28, 2002, the Company will have access to an additional $25 million of
Term Loan C borrowings.
 
     If the Company is not able to raise debt or equity financing in the capital
markets or to obtain additional bank borrowings, the Company believes that it
can generate additional funds to help fund its 2002 liquidity requirements by
reducing working capital requirements, deferring capital expenditures, cost
reduction initiatives in addition to those already included in the Company's
operating plan and asset sales, or through a combination of these means. The
Company's liquidity and financial condition will continue to be affected by
changes in prevailing interest rates because substantially all of its debt bears
interest at variable interest rates.
 
     Aerojet finalized the sale of its Electronics and Information Systems (EIS)
business to Northrop Grumman Corporation (Northrop Grumman) for $315 million in
cash on October 19, 2001, subject to certain working capital adjustments as
defined in the agreement. In December 2001, Northrop Grumman proposed
significant adjustments which would require that Aerojet make a purchase price
reduction of approximately $42 million. Aerojet disagrees with Northrop
Grumman's proposed balance sheet adjustments on the basis that they are
inconsistent with the Asset Purchase Agreement (APA). The proposed adjustments
are subject to arbitration. The pre-tax gain on the transaction was $206
million. The EIS business had revenues of approximately $398 million
 
                                        43

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
and pre-tax income of approximately $30 million for the period December 1, 2000
through October 19, 2001. The results of operations for EIS are included in the
Company's Aerospace and Defense segment for all periods presented in the
Consolidated Statements of Income through the sale date.
 
     On December 29, 2000, the Company acquired The Laird Group Public Limited
Company's (The Laird Group) Draftex International Car Body Seals Division (the
Draftex business or Draftex) at an estimated purchase price of $215 million,
including cash of $209 million and direct acquisition costs of $6 million.
Certain adjustments to the purchase price were in dispute and were decided by an
independent arbitrator in February 2002. However, there are further issues
impacting the purchase price which have yet to be resolved between the parties.
Management believes that resolution of these issues will not have a material
impact on the Company's results of operations, liquidity or financial condition.
Draftex is now included as part of the Company's GDX Automotive segment. As part
of the transaction, 11 manufacturing plants in Spain, France, Germany, Czech
Republic, China, and the U.S. were acquired. The acquisition was accounted for
under the purchase method of accounting and the excess of costs over the fair
value of the net assets acquired is being amortized over a 20-year period. The
allocation of purchase price includes a reserve for certain anticipated exit
costs, including involuntary employee terminations and associated benefits and
facility closure costs of approximately $17 million (see Note 13).
 
     In connection with the acquisition of Draftex, the Company entered into a
new, $500 million credit facility (see Note 7).
 
     The pro forma unaudited results of operations assuming the acquisition of
Draftex occurred as of December 1, 1999, are as follows (in millions, except per
share amounts):
 

<Table>
<Caption>
                                                                 YEAR ENDED
                                                                NOVEMBER 30
                                                              ----------------
                                                               2001      2000
                                                              ------    ------
<S>                                                           <C>       <C>
Net Sales...................................................  $1,522    $1,484
Income before cumulative effect of accounting change........  $  120    $   27
Net income..................................................  $  120    $  101
Basic earnings per share of Common Stock:
  Before cumulative effect of accounting change.............  $ 2.84    $ 0.64
  Net income................................................  $ 2.84    $ 2.41
Diluted earnings per share of Common Stock:
  Before cumulative effect of accounting change.............  $ 2.82    $ 0.63
  Net income................................................  $ 2.82    $ 2.40
</Table>

 
     These pro forma results are not necessarily indicative of the actual
results of operations had the acquisition taken place as of December 1, 1999 or
the results of future operations of the Company. Furthermore, the pro forma
results do not give effect to the disposition of the EIS business or incremental
costs or savings that may occur as a result of restructuring, integration and
consolidation of the Draftex business.
 
     On June 5, 2000, the Company sold a 20 percent equity interest in AFC to
NextPharma Technologies USA Inc. (NextPharma) for approximately $25 million in
cash and exchanged an additional 20 percent equity interest in AFC for an
approximate 35 percent equity interest in NextPharma's parent company. As part
of the agreement, GenCorp continued to manage, operate, and consolidate AFC as
the majority owner. In connection with the transaction, the Company recorded a
pre-tax gain on the sale of the minority interest of approximately $5 million.
In addition, the Company initially recorded a minority interest of approximately
$26 million, included in other long-term liabilities, and an investment in
NextPharma's parent of approximately $6 million. In December 2001, as discussed
in Note 16, the Company reacquired the minority interest from NextPharma and
certain agreements between the two companies were terminated.
 
     On October 1, 1999, in a tax-free transaction, the Company spun-off its
Performance Chemicals and Decorative & Building Products businesses (OMNOVA
Solutions Inc. or OMNOVA) to GenCorp shareholders as a separate, publicly traded
company. The spin-off was effected by the Company's issuance of a dividend of
one
 
                                        44

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
share of OMNOVA common stock for each share of GenCorp common stock held by
GenCorp's shareholders on the September 27, 1999, record date for the dividend.
 
     On April 30, 1999, the Company sold its Penn Racquet Sports division (Penn)
to HTM Sports-und Freizeitgeraete AG, an Austrian company and HTM USA Holdings
Inc., for aggregate consideration of approximately $42 million. The Company
recognized a pre-tax gain of $16 million on this transaction.
 
     GenCorp has disposed of its Polymer Products segment as a result of the
spin-off and sale of Penn, and the Company's financial statements now reflect
OMNOVA and Penn as discontinued operations. Discontinued operations also include
certain other operations of the Company's Polymer Products segment, which were
previously sold and expenses related to the spin-off totaling approximately $25
million. Interest expense allocated to the business segments by GenCorp
management, based on the use of the borrowings, amounted to $14 million in 1999.
 
     The Company has also completed or undertaken several restructuring actions
as discussed in Note 13. These actions included the involuntary severance of
certain employees at two of the Company's operating segments, the closing of
several manufacturing facilities and a Voluntary Enhanced Retirement Program
(VERP) aimed at reducing corporate overhead expenses.
 
     The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
 
b.  OPERATING ENVIRONMENT
 
     As of November 30, 2001, approximately 60 percent of the Company's
employees are covered by collective bargaining or similar agreements. Of the
covered employees, approximately seven percent are covered by collective
bargaining agreements that are due to expire within one year.
 
     The operations of the Company's GDX Automotive segment are dependent on the
availability of rubber and related raw materials. Because of this dependence,
significant increases in the price of these raw materials could have a material
adverse impact on the Company's results of operations and financial condition.
The Company employs a diversified supplier base as part of its efforts to
mitigate the risk of a supply interruption.
 
c.  CASH EQUIVALENTS
 
     All highly liquid debt instruments purchased with an original maturity of
three months or less are considered to be cash equivalents. The Company
classifies securities underlying its cash equivalents as "available-for-sale" in
accordance with the Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115). Cash equivalents are
stated at cost, which approximates fair value due to the highly liquid nature
and short maturities of the underlying securities.
 
d.  INVENTORIES
 
     The GDX Automotive segment uses the first-in, first-out (FIFO) method for
accounting for inventory costs for facilities acquired as part of the Draftex
acquisition and all other non-U.S. facilities and the last-in, first-out (LIFO)
method for all other GDX Automotive locations. The Aerospace and Defense segment
and AFC use the average cost method. Inventories are stated at the lower of cost
or market value. See also Note 3.
 
e.  EQUITY-METHOD INVESTMENT
 
     As of November 30, 2001, the Company effectively held a 31 percent
ownership interest in common stock of NextPharma's, parent company, NextPharma
Technologies, S.A. (NextPharma Technologies). The interest was originally
acquired in June 2000 and recorded at $6 million. The Company records its share
of NextPharma Technologies' net earnings on a periodic basis in other income.
Such amounts were not material in 2001 or 2000. As discussed in Note 16, the
Company relinquished its interest in NextPharma Technologies in December 2001.
See also Note 1(o) related to transactions with NextPharma and its parent
company.
 
                                        45

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
f.  PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment are recorded at cost. Refurbishment costs are
capitalized in the property accounts, whereas ordinary maintenance and repair
costs are expensed as incurred. Depreciation is computed principally by the
straight-line method for the GDX Automotive and Fine Chemicals segments, and by
accelerated methods for the Aerospace and Defense segment. Depreciable lives on
buildings and improvements, and machinery and equipment, range from 5 years to
45 years, and 3 years to 15 years, respectively.
 
     Impairment of long-lived assets is recognized when events or changes in
circumstances indicate that the carrying amount of the asset, or related groups
of assets, may not be recoverable. Under the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" (SFAS 121), the Company recognizes an "impairment charge" when
the expected net undiscounted future cash flows from an asset's use and eventual
disposition are less than the asset's carrying value and the asset's carrying
value exceeds its fair value. Measurement of fair value for an asset or group of
assets may be based on appraisal, market values of similar assets or estimated
discounted future cash flows resulting from the use and ultimate disposition of
the asset or assets. See also Note 5.
 
g.  GOODWILL AND OTHER INTANGIBLE ASSETS
 
     Goodwill represents the excess of purchase price over the estimated fair
value of net assets acquired and is amortized on a straight-line basis over 20
years. Identifiable intangible assets, such as "assembled workforce," patents,
trademarks and licenses, are recorded at cost or when acquired as part of a
business combination at estimated fair value. Identifiable intangible assets are
amortized over their estimated useful life using the straight-line method over
periods ranging from 3 to 20 years. As of November 30, 2001, goodwill, net of
related amortization totaled approximately $65 million, primarily from the
Company's December 2000 acquisition of Draftex. The goodwill resulting from the
Draftex acquisition is subject to certain purchase price adjustments (see Note
1(a)). As of November 30, 2001, other intangible assets totaled $24 million,
including $20 million for assembled workforce primarily from the Draftex
acquisition. Accumulated amortization of goodwill and other intangible assets
was $8 million and $4 million as of November 30, 2001 and 2000, respectively.
 
     The Company periodically evaluates the period of amortization of its
goodwill and other intangible assets and determines if such assets are impaired
by comparing the carrying values with estimated future undiscounted cash flows.
This analysis is performed separately for the goodwill that resulted from each
acquisition and for the other intangibles. Based on the most recent analyses,
the Company believes that goodwill and other intangible assets were not impaired
as of November 30, 2001.
 
     See also Note 15 related to the Company's adoption of new accounting
standards related to goodwill and other intangible assets.
 
h.  PRE-PRODUCTION COSTS
 
     The Company accounts for certain pre-production costs in accordance with
EITF Issue No. 99-5, "Accounting for Pre-Production Costs Related to Long-term
Supply Arrangements". This issue addresses the accounting treatment and
disclosure requirements for pre-production costs incurred by original equipment
manufacturers (OEM) suppliers to perform certain services related to the design
and development of the parts they will supply to the OEM as well as the design
and development costs to build molds dies and other tools that will be used in
producing parts. At November 30, 2001, the Company has recorded as a noncurrent
asset approximately $4 million of costs for tooling for which the customer
reimbursement is assured.
 
i.  REVENUE RECOGNITION
 
     The Company adopted the U.S. Securities and Exchange Commission's (SEC)
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements," (SAB 101) as of December 1, 2000. In SAB 101, the SEC expressed its
view that revenue was realizable and earned when the following four criteria
were met: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred or the service have been rendered; (3) the seller's price to the buyer
is fixed or determinable; and (4) collectibility is reasonably assured. SAB 101
 
                                        46

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
also provides guidance for revenue recognition under circumstances when delivery
of a finished product occurs after the finished product has been invoiced. The
adoption of SAB 101 did not have a material affect on the Company's results of
operations, liquidity or financial condition.
 
     Generally, sales are recorded when products are shipped or customer
acceptance has occurred, all other significant customer obligations have been
met and collection is reasonably assured. In certain limited circumstances, the
Company's Fine Chemicals segment records sales when products are shipped, before
customer acceptance has occurred, when adequate controls are in place to ensure
compliance with contractual product specifications and a substantial history of
performance has been established. In addition, the Fine Chemicals segment
recognizes revenue under two contracts before the finished product is delivered
to the customers. These customers have specifically requested that AFC invoice
for the finished product and hold the finished product in inventory until a
later date.
 
     Sales and income under most government fixed-price and
fixed-price-incentive production type contracts are recorded as deliveries are
made. For contracts where relatively few deliverable units are produced over a
period of more than two years, revenue and income are recognized at the
completion of measurable tasks, rather than upon delivery of the individual
units. Sales under cost reimbursement contracts are recorded as costs are
incurred, and include estimated earned fees in the proportion that costs
incurred to date bear to total estimated costs.
 
     Certain government contracts contain cost or performance incentive
provisions that provide for increased or decreased fees or profits based upon
actual performance against established targets or other criteria. Penalties and
cost incentives are considered in estimated sales and profit rates. Performance
incentives are recorded when earned or measurable. Provisions for estimated
losses on contracts are recorded when such losses become evident. The Company
uses the full absorption costing method for government contracts which includes
direct costs, allocated overhead and general and administrative expense.
Work-in-process on fixed-price contracts includes full cost absorption, less the
average estimated cost of units or items delivered.
 
j.  RESEARCH AND DEVELOPMENT EXPENSES
 
     Company-sponsored research and development (R&D) expenses were $24 million
in 2001 and $26 million in both 2000 and 1999. Company-sponsored R&D expenses
include the costs of technical activities that are useful in developing new
products, services, processes or techniques, as well as those expenses for
technical activities that may significantly improve existing products or
processes.
 
     Customer-sponsored R&D expenditures, which are funded under government
contracts, totaled $215 million in 2001, $162 million in 2000 and $230 million
in 1999.
 
k.  ENVIRONMENTAL COSTS
 
     The Company accounts for identified or potential environmental remediation
liabilities in accordance with the American Institute of Certified Public
Accountants' Statement of Position 96-1, "Environmental Remediation Liabilities"
(SOP 96-1) and Staff Accounting Bulletin No. 92 "Accounting and Disclosures
Relating to Loss Contingencies". Under this guidance, the Company expenses, on a
current basis, recurring costs associated with managing hazardous substances and
pollution in ongoing operations. The Company accrues for costs associated with
the remediation of environmental pollution when it becomes probable that a
liability has been incurred, and its proportionate share of the amount can be
reasonably estimated. The Company recognizes amounts recoverable from insurance
carriers, the U.S. Government or other third parties, when the collection of
such amounts is probable. Pursuant to U.S. Government agreements or regulations,
the Company can recover a substantial portion of its environmental costs for its
Aerospace and Defense segment through the establishment of prices of the
Company's products and services sold to the U.S. Government. The ability of the
Company to continue recovering these costs from the U.S. Government depends on
Aerojet's sustained business volume under U.S. Government contracts and
programs. With the exception of applicable amounts representing current assets
and liabilities, recoverable amounts and accrued costs are included in other
long-term assets and liabilities. See also Notes 9(b) and 9(c).
 
                                        47

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
l.  STOCK-BASED COMPENSATION
 
     The Company applies the provisions of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," (APB 25) and related
interpretations to account for awards of stock-based compensation granted to
employees. See also Note 10(c).
 
m.  DERIVATIVE FINANCIAL INSTRUMENTS
 
     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133), which, for the Company, was
effective December 1, 2000. This statement established accounting and reporting
standards that require every derivative financial instrument, including certain
derivative financial instruments embedded in other contracts, to be recorded in
the balance sheet as either an asset or liability measured at fair value. This
statement also requires that changes in a derivative financial instrument's fair
value be recognized in results of operations unless specific hedge accounting
criteria are met. The adoption of SFAS 133 did not have a material effect on the
Company's results of operations, liquidity or financial condition, since the
Company does not generally enter into transactions involving derivative
financial instruments or routinely engage in hedging activities.
 
     In 2000, the Company entered into a foreign currency option contract to
purchase a specified number of Euros at a specified exchange rate, in order to
hedge against market fluctuations during negotiations to acquire the Draftex
business. The Company recognized an expense of approximately $8 million in
connection with this contract, which expired on November 30, 2000. The Company
entered into several forward exchange contracts related to the Draftex
acquisition in December 2000. Settlement of these contracts, in December 2000,
resulted in a gain of $11 million. Besides these two transactions, the Company
has not entered into any significant foreign currency forward exchange contracts
or any other derivative financial instruments.
 
n.  EARNINGS PER SHARE
 
     A reconciliation of the numerator and denominator used in the basic and
diluted earnings per share of common stock (EPS) from continuing operations
computations is presented in the following table (dollars in millions, except
per share amounts; shares in thousands):
 

<Table>
<Caption>
                                                                YEAR ENDED NOVEMBER 30
                                                              ---------------------------
                                                               2001      2000      1999
                                                              -------   -------   -------
<S>                                                           <C>       <C>       <C>
NUMERATOR FOR BASIC AND DILUTED EPS
  Income from continuing operations available to common
     shareholders...........................................  $   128   $    52   $    45
                                                              =======   =======   =======
DENOMINATOR FOR BASIC EPS
  Weighted average shares of common stock outstanding.......   42,228    41,933    41,741
                                                              =======   =======   =======
DENOMINATOR FOR DILUTED EPS
  Weighted average shares of common stock outstanding.......   42,228    41,933    41,741
  Employee stock options....................................      332       103       394
  Other.....................................................       23        16        13
                                                              -------   -------   -------
                                                               42,583    42,052    42,148
                                                              =======   =======   =======
EPS -- Basic................................................  $  3.03   $  1.24   $  1.09
                                                              =======   =======   =======
EPS -- Diluted..............................................  $  3.00   $  1.23   $  1.07
                                                              =======   =======   =======
</Table>

 
o.  RELATED-PARTY TRANSACTIONS
 
     In fiscal year 2001 and 2000, AFC incurred expenses totaling $5 million and
$2 million, respectively, for services performed by NextPharma on behalf of AFC.
These services included sales and marketing efforts, customer interface and
other related activities. From June 2000 through November 30, 2001, NextPharma
held a minority ownership interest in AFC and GenCorp held a minority ownership
interest in NextPharma's parent company. See Note 1(a) for additional
information. As discussed in Note 16, the Company relinquished its interest in
NextPharma Technologies in December 2001.
                                        48

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
     Following review and approval by the Audit Committee of the GenCorp Board
of Directors, GenCorp Chairman and Chief Executive Officer, Robert A. Wolfe,
subscribed for 25,000 Ordinary Shares of NextPharma's parent company, NextPharma
Technologies S.A., in August 2000 at an aggregate purchase price of $250,000.
 
2.  RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
 
     In January 2002, the Company became aware of certain potential accounting
issues at two of its GDX Automotive manufacturing plants in North America. The
Company promptly notified both its Audit Committee and its independent
accountants. Under the direction and oversight of the Audit Committee and with
the assistance of outside legal advisors and accounting consultants, the Company
conducted an inquiry into these and related accounting issues as well as a more
complete evaluation of accounting practices and internal control processes
throughout the Company. As a result of this process, due primarily to activities
at one GDX Automotive manufacturing plant, the Company is, by means of this
filing, restating its previously issued financial statements for the years ended
November 30, 2000 and November 30, 1999. Unaudited quarterly financial
information for the year ended November 30, 2000 and the first three quarters of
the year ended November 30, 2001 is also being restated by means of this filing.
 
     Set forth below is a comparison of the previously reported and restated
Consolidated Statements of Income for the years ended November 30, 2000 and
November 30, 1999. See Note 12 for a comparison of the previously reported and
restated Condensed Consolidated Statements of Income for each quarter in the
year ended November 30, 2000 and the first three quarters of the year ended
November 30, 2001 and for the restated Consolidated Balance Sheets for each of
the first three quarters of 2001 and 2000 (dollars in millions, except per share
amounts).
 

<Table>
<Caption>
                                                            YEAR ENDED NOVEMBER 30
                                                 ---------------------------------------------
                                                         2000                    1999
                                                 ---------------------   ---------------------
                                                 PREVIOUSLY              PREVIOUSLY
                                                  REPORTED    RESTATED    REPORTED    RESTATED
                                                 ----------   --------   ----------   --------
<S>                                              <C>          <C>        <C>          <C>
NET SALES......................................    $1,047      $1,047      $1,071      $1,071
COSTS AND EXPENSES.............................       955         960         995         997
                                                   ------      ------      ------      ------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
  TAXES........................................        92          87          76          74
Provision for income taxes.....................        37          35          30          29
                                                   ------      ------      ------      ------
INCOME FROM CONTINUING OPERATIONS..............        55          52          46          45
DISCONTINUED OPERATIONS........................        --          --          26          26
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
  PRINCIPLE, NET OF INCOME TAXES...............        74          74          --          --
                                                   ------      ------      ------      ------
  NET INCOME...................................    $  129      $  126      $   72      $   71
                                                   ======      ======      ======      ======
EARNINGS PER SHARE OF COMMON STOCK
Basic:
  Continuing operations........................    $ 1.31      $ 1.24      $ 1.11      $ 1.09
  Discontinued operations......................        --          --        0.63        0.63
  Cumulative effect of a change in accounting
     principle.................................      1.76        1.76          --          --
                                                   ------      ------      ------      ------
          Total................................    $ 3.07      $ 3.00      $ 1.74      $ 1.72
                                                   ======      ======      ======      ======
Diluted:
  Continuing operations........................    $ 1.31      $ 1.23      $ 1.09      $ 1.07
  Discontinued operations......................        --          --        0.63        0.63
  Cumulative effect of a change in accounting
     principle.................................      1.76        1.76          --          --
                                                   ------      ------      ------      ------
          Total................................    $ 3.07      $ 2.99      $ 1.72      $ 1.70
                                                   ======      ======      ======      ======
</Table>

 
                                        49

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
     The restatement of the Company's Consolidated Balance Sheets as of November
30, 2000 resulted in an increase in assets of $1 million and an increase in
liabilities of $10 million and, as of November 30, 1999, assets were increased
$2 million and liabilities increased $6 million.
 
     The revisions primarily arise from the correction of certain balance sheet
and income statement items, which among other things, relate to the accounting
for customer-owned tooling and recognition of liabilities at one of the
Company's GDX Automotive manufacturing plants that the Company has determined
were not properly recorded in the Company's accounting records.
 
     The Company also restated the balance of retained earnings as of December
1, 1998. The revision, a decrease of $5 million, related to an oversight in
collecting data for the calculation of certain postretirement benefit
obligations at one of GDX Automotive's non-U.S. facilities in the year ended
November 30, 1996 with no material impact on fiscal years 1998 and 1997.
 
     Unless otherwise expressly stated, all financial information in this Annual
Report on Form 10-K is presented inclusive of these revisions.
 
3.  INVENTORIES
 

<Table>
<Caption>
                                                                  AS OF
                                                               NOVEMBER 30
                                                              --------------
                                                              2001     2000
                                                              -----    -----
                                                                (MILLIONS)
<S>                                                           <C>      <C>
Raw materials and supplies..................................  $  31    $  27
Work-in-process.............................................     20       12
Finished goods..............................................     17        9
                                                              -----    -----
Approximate replacement cost of inventories.................     68       48
  LIFO reserves.............................................     (5)      (6)
  Long-term contracts at average cost.......................    245      310
  Progress payments.........................................   (141)    (170)
                                                              -----    -----
          Inventories.......................................  $ 167    $ 182
                                                              =====    =====
</Table>

 
     Inventories applicable to government contracts, primarily related to the
Company's Aerospace and Defense segment, include general and administrative
costs. The total of such costs incurred in 2001 and 2000 was $76 million and $48
million, respectively, and the amount in inventory at the end of those years is
estimated to be $36 million and $24 million at November 30, 2001 and 2000,
respectively.
 
     In 2001, Aerojet recorded an inventory write-down of $46 million related to
its participation as a propulsion supplier to a commercial launch vehicle
program and also recorded a $2 million accrual for outstanding obligations
connected with this effort. Aerojet's inventory consists of program unique
rocket engines and propulsion systems primarily intended for use in a commercial
reusable launch vehicle. The inventory write-down reflects the following:
inability of a commercial customer to secure additional funding, no alternative
purchasers willing to acquire inventory held by Aerojet and no market value.
 
     Inventories using the LIFO method represented 13 percent and 56 percent of
inventories at replacement cost as of November 30, 2001 and 2000, respectively.
 
4.  INCOME TAXES
 
     The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The Company files a consolidated federal income tax return with its
wholly-owned subsidiaries.
 
                                        50

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
     The components of the Company's provision for income taxes are as follows
(in millions):
 

<Table>
<Caption>
                                                                     AS OF
                                                                  NOVEMBER 30
                                                              --------------------
                                                              2001    2000    1999
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
CURRENT
  United States federal.....................................  $  7    $(30)   $ 29
  State and local...........................................   (19)     (8)     10
  Foreign...................................................     5       8       2
                                                              ----    ----    ----
                                                                (7)    (30)     41
DEFERRED
  United States federal.....................................  $ 47    $ 51    $(12)
  State and local...........................................    19      13      (4)
  Foreign...................................................     -       1       4
                                                              ----    ----    ----
                                                                66      65     (12)
                                                              ----    ----    ----
Provision for income taxes..................................  $ 59    $ 35    $ 29
                                                              ====    ====    ====
</Table>

 
     A reconciliation of the federal statutory income tax rate to the Company's
effective income tax rate is included in the following table:
 

<Table>
<Caption>
                                                                   YEAR ENDED
                                                                  NOVEMBER 30
                                                              --------------------
                                                              2001    2000    1999
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
Statutory federal income tax rate...........................  35.0%   35.0%   35.0%
State and local income taxes, net of federal income tax
  benefit...................................................   2.7     4.1     3.4
Tax settlements, including interest.........................  (7.2)      -       -
Earnings of subsidiaries taxed at other than the U.S.
  statutory rate............................................   0.4     0.7     0.2
Other, net..................................................   0.7     0.3     0.6
                                                              ----    ----    ----
     Effective income tax rate..............................  31.6%   40.1%   39.2%
                                                              ====    ====    ====
</Table>

 
     The Company reduced its 2001 income tax expense by approximately $13
million due to the receipt of state income tax settlements.
 
     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities (in millions):
 

<Table>
<Caption>
                                                                  AS OF
                                                               NOVEMBER 30
                                                              --------------
                                                              2001      2000
                                                              ----      ----
<S>                                                           <C>       <C>
DEFERRED TAX ASSETS
Accrued estimated costs.....................................  $80       $91
Long-term contract method...................................    -         6
Net operating loss and tax credit carryforwards.............   13         3
Other postretirement and employee benefits..................   87       110
                                                              ---       ---
     Total deferred tax assets..............................  180       210
DEFERRED TAX LIABILITIES
Depreciation................................................   32        12
Pensions....................................................  128       109
                                                              ---       ---
     Total deferred tax liabilities.........................  160       121
                                                              ---       ---
       Total net deferred tax assets........................   20        89
       Less: current deferred tax assets....................  (14)      (11)
                                                              ---       ---
          Noncurrent deferred tax assets....................  $ 6       $78
                                                              ===       ===
</Table>

 
                                        51

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
     The majority of the net operating losses and tax credit carryforwards,
which are primarily related to foreign operations, have an indefinite
carryforward period with the remaining portion expiring beginning in 2005.
Pre-tax income from continuing operations of foreign subsidiaries was $14
million in fiscal year 2001, $24 million in 2000 and $17 million in 1999. Cash
paid during the year for income taxes of continuing and discontinued operations
was $15 million in 2001, $10 million in 2000 and $58 million in 1999.
 
5.  PROPERTY, PLANT AND EQUIPMENT
 

<Table>
<Caption>
                                                                  AS OF
                                                               NOVEMBER 30
                                                              --------------
                                                              2001     2000
                                                              -----    -----
                                                                (MILLIONS)
<S>                                                           <C>      <C>
Land........................................................  $  37    $  30
Buildings and improvements..................................    257      261
Machinery and equipment.....................................    611      599
Construction-in-progress....................................     26       49
                                                              -----    -----
                                                                931      939
Less: accumulated depreciation..............................   (477)    (573)
                                                              -----    -----
     Total property and equipment, net......................  $ 454    $ 366
                                                              =====    =====
</Table>

 
     Depreciation expense for fiscal years 2001, 2000 and 1999 was $65 million,
$46 million and $42 million, respectively.
 
6.  OTHER CURRENT LIABILITIES
 

<Table>
<Caption>
                                                                 AS OF
                                                              NOVEMBER 30
                                                              ------------
                                                              2001    2000
                                                              ----    ----
                                                               (MILLIONS)
<S>                                                           <C>     <C>
Accrued goods and services..................................  $185    $150
Advanced payments on contracts..............................    41      28
Accrued compensation and employee benefits..................    24      29
Other postretirement benefits...............................    28      28
Environmental reserves......................................    35      25
Other.......................................................    23      12
                                                              ----    ----
     Total other current liabilities........................  $336    $272
                                                              ====    ====
</Table>

 
7.  LONG-TERM DEBT AND CREDIT FACILITY
 

<Table>
<Caption>
                                                                 AS OF
                                                              NOVEMBER 30
                                                              ------------
                                                              2001    2000
                                                              ----    ----
                                                               (MILLIONS)
<S>                                                           <C>     <C>
Revolving loans.............................................  $120    $190
Term loans..................................................    88       -
Other.......................................................     6       -
                                                              ----    ----
     Total debt.............................................   214     190
Less: amounts due within one year...........................   (17)      -
                                                              ----    ----
     Long-term debt.........................................  $197    $190
                                                              ====    ====
</Table>

 
     As of November 30, 2000, the Company had a five year, $250 million
Revolving Credit Facility Agreement (Former Credit Facility) that was scheduled
to expire in 2004. The Former Credit Facility was paid-off on December 28, 2000.
 
     On December 28, 2000, the Company entered into a new, five year, $500
million senior credit facility (Credit Facility). The Credit Facility was used
to finance the acquisition of the Draftex business (see Note 1(a)) and replaced
the Former Credit Facility. The Credit Facility consisted of a $150 million
revolving loan (Revolver)
 
                                        52

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
and a $150 million term loan (Term Loan A), expiring December 28, 2005, and a
$200 million term loan (Term Loan B), expiring December 28, 2006. Effective
August 31, 2001 the Company executed Amendment Number 2 to the Credit Facility
providing for transfer of $13 million of the Revolver and $52 million of the
Term Loan A to Term Loan B. The outstanding balance of Term Loan B on October
19, 2001 of $264 million (balance of $265 million after transfer of $13 million
of the Revolver and $52 million of Term Loan A, less repayment of approximately
$1 million in September 2001) was repaid with the proceeds from the sale of
Aerojet's EIS business (see Note 1(a)). The Company obtained waivers in October
2001, November 2001, December 2001 and February 2002 waiving reduction of the
Revolver from $150 million to $137 million until March 8, 2002. On February 28,
2002 the Company executed Amendment Number 4 to the Credit Facility, which
provides an additional $25 million term loan (Term Loan C) with the ability to
request an additional $25 million under Term Loan C, subject to the satisfaction
of certain conditions and the Company issuing $35 million of equity or
subordinated debt prior to March 28, 2002. Amendment Number 4 also extended the
reduction of the Revolver from March 8, 2002 to March 28, 2002. The initial $25
million Term Loan C has a term which matures on December 28, 2002, but in the
event the Company obtains $35 million of equity or subordinated debt prior to
March 28, 2002, the term for the total Term Loan C matures December 28, 2004. As
of February 28, 2002 the Company did draw-down $25 million of Term Loan C, which
the Company intends to use to fund working capital requirements or to pay down
debt.
 
     As of November 30, 2001 and February 28, 2002 the outstanding Term Loan A
balances were approximately $88 million and $86 million, respectively. Pursuant
to Amendment Number 2, the Term Loan A scheduled repayments remaining as of
February 28, 2002 are: twelve equal quarterly principal payments of
approximately $5 million through December 2004, and four equal quarterly
payments of approximately $7 million through December 2005. Term Loan C
scheduled repayments for the initial $25 million Term Loan C are quarterly
principal payments of $625,000, commencing June 2002, with a balloon payment of
approximately $24 million, if the maturity is December 28, 2002 and $19 million
if the maturity is December 28, 2004. In the event the additional $25 million
Term Loan C is funded, the repayment schedule on the total Term Loan C of $50
million commences June 2002, with ten equal quarterly principal payments of
$1.25 million and a balloon payment of $38 million on December 28, 2004. The
quarterly principal repayment dates for Term Loans A and C are: March 28, June
28, September 28, and December 28 along with associated interest payments.
 
     The Company pays a commitment fee between 0.375 percent and 0.50 percent
(based on the most recent leverage ratio) on the unused balance. Borrowings
under the Credit Facility bear interest at the borrower's option, at various
rates of interest, based on an adjusted base rate (prime lending rate or federal
funds rate plus 0.50 percent) or Eurodollar rate, plus, in each case, an
incremental margin. For the Revolver and Term Loan A borrowings the incremental
margin is based on the most recent leverage ratio, for base rate loans the
margin ranges between 0.75 percent to 2.0 percent and for Eurodollar rate
borrowings the margin ranges between 1.75 percent to 3.00 percent. For Term Loan
C borrowings the initial margins for base rate loans and Eurodollar rate based
loans are 3.50 percent and 4.50 percent, respectively. The margins for Term Loan
C borrowings increase quarterly by 0.50 percent each quarter beginning after
June 28, 2002. Increases to the margins are cumulative, but shall not exceed, in
the aggregate, 4.00 percent. Cash paid for interest was $34 million in 2001, $17
million in 2000 and $20 million in 1999.
 
     The Credit Facility, as executed on December 28, 2000, was secured by stock
of certain subsidiaries of the Company and certain real property of the GDX
Automotive segment of the Company. Execution of Amendment Number 4 to the Credit
Facility and the provision of Term Loan C required the Company to pledge
additional collateral consisting of: the assets of, and the Company's interest
in, AFC, non-Superfund property located in California, real estate in Nevada and
a $21 million note receivable.
 
     As of November 30, 2001, the available borrowing limit under the Credit
Facility was $241 million, of which the Company had drawn-down $208 million
(excluding letters of credit), and the average interest rate on the outstanding
balance of the Credit Facility was 5.4 percent. The interest rates on the
Company's long-term debt reflect market rates and, therefore, the carrying value
of long-term debt approximates its fair value. At November 30, 2001, outstanding
letters of credit totaled $9 million.
 
                                        53

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
     The Credit Facility contains certain restrictive covenants that require the
Company to meet specific financial ratios and restrict capital expenditures, the
ability to incur additional debt and certain other transactions. The Credit
Facility permits dividend payments as long as there is no event of default.
 
     As of November 30, 2001, the Company's debt maturities (Revolver of $120
million, Term Loan A of $88 million and other debt of $6 million) are summarized
as follows (in millions):
 

<Table>
<Caption>
2002             2003             2004             2005             2006
----             ----             ----             ----             ----
<S>              <C>              <C>              <C>              <C>
$17              $22              $20              $27              $128
</Table>

 
     Term Loan C in the amount of $25 million drawn as of February 28, 2002
currently matures on December 28, 2002 (see discussion above).
 
8.  EMPLOYEE PENSION AND BENEFIT PLANS
 
a. DEFINED BENEFIT AND OTHER POSTRETIREMENT BENEFIT PLANS
 
     The Company has a number of defined benefit pension plans that cover
substantially all salaried and hourly employees. Normal retirement age is 65,
but certain plan provisions allow for earlier retirement. The Company's funding
policy is consistent with the funding requirements of federal law. The pension
plans provide for pension benefits, the amounts of which are calculated under
formulas principally based on average earnings and length of service for
salaried employees and under negotiated non-wage based formulas for hourly
employees. The majority of the pension plans' assets are invested in short-term
investments, listed stocks and bonds.
 
     Effective August 31, 1999, the Company changed its measurement date for all
U.S. pension and postretirement health care and life insurance plans from
November 30 to August 31. The effect of the measurement date change was not
material.
 
     In addition to providing pension benefits, the Company currently provides
certain health care and life insurance benefits to most retired employees in
North America with varied coverage by employee groups. The health care plans
generally provide for cost sharing in the form of employee contributions,
deductibles and coinsurance between the Company and its retirees. Retirees in
certain other countries are provided similar benefits by plans sponsored by
their governments. These postretirement benefits are unfunded. The costs of
postretirement benefits are accrued based on the date the employees become
eligible for the benefits.
 
     The Company implemented a restructuring of its corporate headquarters in
late 2001. The program included a Voluntary Enhanced Retirement Program (VERP)
offered to eligible employees. The program resulted in a $10 million pre-tax
charge to expense.
 
     The status of the Company's defined benefit pension plan and other
postretirement benefit plans is as follows:
 
                                        54

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 

<Table>
<Caption>
                                                DEFINED BENEFIT      OTHER POSTRETIREMENT
                                                 PENSION PLANS             BENEFITS
                                               -----------------     ---------------------
                                                         YEAR ENDED NOVEMBER 30
                                               -------------------------------------------
                                                2001       2000        2001         2000
                                               ------     ------     --------     --------
                                                              (MILLIONS)
<S>                                            <C>        <C>        <C>          <C>
Fair value of plan assets at beginning of
  year.......................................  $2,358     $2,244          --           --
  Actual return on plan assets...............    (164)       255          --           --
  Effect of EIS sale(1)......................    (175)        --          --           --
  Employer contributions.....................     (15)         3       $  29        $  30
  Benefits paid..............................    (142)      (144)        (29)         (30)
                                               ------     ------       -----        -----
     Fair Value of Plan Assets at End of
       Year..................................  $1,862     $2,358       $  --        $  --
                                               ======     ======       =====        =====
Benefit obligation at beginning of year......  $1,826     $1,825       $ 222        $ 244
  Service cost...............................      15         16           1            1
  Interest cost..............................     136        132          15           16
  Amendments.................................       3          3          --           --
  Settlement(1)..............................    (128)        --          --           --
  Curtailment(2).............................     (10)        --         (14)          --
  Special termination benefits(3)............      10         --           2           --
  Actuarial (gain) loss......................     (95)        (6)          5          (12)
  Benefits paid..............................    (142)      (144)        (29)         (30)
                                               ------     ------       -----        -----
     Benefit Obligation at End of Year(4)....  $1,615     $1,826       $ 202        $ 219
                                               ======     ======       =====        =====
Funded status of the plans...................  $  247     $  532       $(202)       $(219)
  Unrecognized actuarial (gain)/loss.........      52       (241)         (8)         (17)
  Unrecognized prior service cost............      15         22         (21)         (35)
  Unrecognized transition amount.............      (6)        (9)         --           --
  Minimum funding liability..................      (2)        (4)         --           --
  Transfer of assets from pension to
     health care plan........................     (19)       (19)         --           --
  Benefit payments August 31 through
     November 30.............................      --         --           9            7
                                               ------     ------       -----        -----
     Net Asset (Liability) Recognized in the
       Company's Consolidated Balance
       Sheets(5).............................  $  287     $  281       $(222)       $(264)
                                               ======     ======       =====        =====
</Table>

 
     Components of the amounts recognized in the Company's Consolidated Balance
Sheets (in millions):
 

<Table>
<Caption>
                                                DEFINED BENEFIT      OTHER POSTRETIREMENT
                                                 PENSION PLANS             BENEFITS
                                               -----------------     ---------------------
                                                            AS OF NOVEMBER 30
                                               -------------------------------------------
                                                2001       2000        2001         2000
                                               ------     ------     --------     --------
<S>                                            <C>        <C>        <C>          <C>
Prepaid benefit cost.........................   $287       $281        $  --        $  --
Other current liabilities....................     --         --          (28)         (28)
Long-term liabilities........................     --         --         (194)        (236)
Intangible assets............................     --          2           --           --
Other shareholders' equity...................      2          2           --           --
Minimum funding liability....................     (2)        (4)          --           --
                                                ----       ----        -----        -----
  Net Asset (Liability) Recognized in the
     Consolidated Balance Sheets(5)..........   $287       $281        $(222)       $(264)
                                                ====       ====        =====        =====
</Table>

 
---------------
 
 (1) As discussed in Note 1(a), the Company sold its EIS business in fiscal year
     2001.
 
 (2) Relate to certain restructuring activities undertaken by GDX Automotive, as
     discussed in Note 13.
 
 (3) Relate to the restructuring programs discussed above.
 
 (4) Pension amounts included $19 million and $16 million in 2001 and 2000,
     respectively, for unfunded plans.
 
 (5) Pension amounts included $19 million and $15 million in 2001 and 2000,
     respectively, for unfunded plans.
 
                                        55

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
     The following table presents the weighted average assumptions used to
determine the actuarial present value of pension benefits and other
postretirement benefits:
 

<Table>
<Caption>
                                                DEFINED BENEFIT      OTHER POSTRETIREMENT
                                                 PENSION PLANS             BENEFITS
                                               -----------------     ---------------------
                                                2001       2000        2001         2000
                                               ------     ------     --------     --------
<S>                                            <C>        <C>        <C>          <C>
Discount Rate................................   7.25%      7.50%        7.25%       7.50%
Expected return on plan assets...............   8.75%      9.00%           *           *
Rate of compensation increase................   4.50%      4.50%           *           *
Initial trend rate for health care
  costs(1)...................................      *          *        12.00%       8.00%
Ultimate trend rate for health care costs....      *          *         6.00%       6.00%
</Table>

 
---------------
 
 (1) The initial trend rate for health care costs declines by one percent per
     year, to six percent for years after the year 2007.
 
  *  Not applicable.
 
     A one percent increase in the assumed trend rate for health care costs
would have increased the accumulated benefit obligation by $2 million as of
November 30, 2001. A one percent increase in the assumed trend rate for health
care costs would not have significantly increased the cost of 2001
postretirement health care benefits.
 
     Total periodic cost for pension benefits and other postretirement benefits
(in millions):
 

<Table>
<Caption>
                                                DEFINED BENEFIT      OTHER POSTRETIREMENT
                                                 PENSION PLANS             BENEFITS
                                             ---------------------   ---------------------
                                                        YEAR ENDED NOVEMBER 30
                                             ---------------------------------------------
                                             2001    2000    1999    2001    2000    1999
                                             -----   -----   -----   -----   -----   -----
<S>                                          <C>     <C>     <C>     <C>     <C>     <C>
Service cost for benefits earned during the
  year.....................................  $  15   $  16   $  20   $  1     $ 1     $ 2
Interest cost on benefit obligation........    136     132     139     15      16      19
Assumed return on plan assets(1)...........   (188)   (180)   (182)     -       -       -
Amortization of unrecognized
  amounts..................................    (41)    (31)      -     (9)     (7)     (6)
Special events(2)..........................     62       2       4      2       -       1
Curtailment effects........................     (5)      -       -    (23)      -      (1)
                                             -----   -----   -----   ----     ---     ---
  Net periodic benefit (income) cost.......  $ (21)  $ (61)  $ (19)  $(14)    $10     $15
                                             =====   =====   =====   ====     ===     ===
Continuing operations......................  $ (21)  $ (61)  $  (3)  $(14)    $10     $ 3
Discontinued operations....................      -       -     (16)     -       -      12
                                             -----   -----   -----   ----     ---     ---
  Net periodic benefit (income) cost.......  $ (21)  $ (61)  $ (19)  $(14)    $10     $15
                                             =====   =====   =====   ====     ===     ===
</Table>

 
---------------
 
 (1) Actual returns on plan assets were a loss of $164 million in 2001 and gains
     of $266 million in 2000 and $224 million in 1999.
 
 (2) Includes special termination benefits totaling $10 million in 2001 related
     to the restructuring programs discussed above.
 
     Effective December 1, 1999, the Company changed its methods for determining
the market-related value of plan assets used in determining the expected
return-on-assets component of annual net pension costs and the amortization of
gains and losses for both pension and postretirement benefit costs. Under the
previous accounting method, the market-related value of assets was determined by
smoothing assets over a five-year period. The new method shortens the smoothing
period for determining the market-related value of plan assets from a five-year
period to a three-year period. The changes result in a calculated market-related
value of plan assets that is closer to current value, while still mitigating the
effects of short-term market fluctuation. The new method also reduces the
substantial accumulation of unrecognized gains and losses created under the
previous method due to the disparity between fair value and market-related value
of plan assets. Under the previous accounting method all gains and losses were
subject to a ten percent corridor and amortized over the expected working
lifetime of active employees (approximately 11 years). The new method eliminates
the ten percent corridor and reduces the amortization period to five years.
 
     The cumulative effect of this accounting change related to periods prior to
fiscal year 2000 of $123 million ($74 million after-tax, or $1.76 per share for
both basic and diluted EPS) is a one-time, non-cash credit to fiscal 2000
earnings. This accounting change also resulted in a reduction in benefit costs
for the year ended
 
                                        56

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
November 30, 2000 that increased income allocable to continuing business
segments by $30 million and pre-tax income from continuing operations by $37
million ($22 million after-tax, or $0.52 per share for both basic and diluted
EPS).
 
     Presented below is pro forma income from continuing operations and EPS for
the year ended November 30, 1999, showing the estimated effects as if the
accounting change were applied retroactively (dollars in millions except for per
share amounts):
 

<Table>
<Caption>
                                                                 YEAR ENDED
                                                              NOVEMBER 30 1999
                                                              -----------------
<S>                                                           <C>
Income from continuing operations...........................        $  65
Basic EPS - continuing operations...........................        $1.56
Diluted EPS - continuing operations.........................        $1.55
</Table>

 
b.  DEFINED CONTRIBUTION PENSION PLANS
 
     The Company also sponsors a number of defined contribution pension plans.
Participation in these plans is available to substantially all salaried
employees and to certain groups of hourly employees. Company contributions to
these plans generally are based on a percentage of employee contributions. The
cost of these plans was approximately $9 million in 2001, 2000 and 1999. The
Company funds its contribution to the salaried plan with GenCorp common stock.
 
c.  POSTEMPLOYMENT BENEFITS
 
     The Company provides certain postemployment benefits to its employees. Such
benefits include disability-related and workers' compensation benefits and
severance payments for certain employees. The Company accrues for the cost of
such benefit expenses once an appropriate triggering event has occurred.
 
9.  COMMITMENTS AND CONTINGENCIES
 
a.  LEASE COMMITMENTS
 
     The Company and its subsidiaries lease certain facilities, machinery and
equipment and office buildings under long-term, noncancelable operating leases.
The leases generally provide for renewal options ranging from five to fifteen
years and require the Company to pay for utilities, insurance, taxes and
maintenance. Rent expense was $8 million in fiscal 2001, $6 million in fiscal
2000, and $4 million in fiscal 1999. The aggregate future minimum rental
commitments under all non-cancelable operating leases in effect as of November
30, 2001 was $63 million with annual amounts declining from $7 million in 2002,
to $5 million in 2006. The Company's obligations for leases after 2006 aggregate
approximately $35 million.
 
     The Company also leases certain surplus facilities to third parties. The
Company recorded lease revenues of $6 million, in fiscal years 2001, 2000 and
1999, related to these arrangements. Future minimum lease payments to be
received in the next five fiscal years increase from $5 million in 2002 to $7
million in 2006.
 
b.  LEGAL PROCEEDINGS
 
  Groundwater Toxic Tort Cases
 
     Aerojet, along with other industrial Potentially Responsible Parties (PRPs)
and area water purveyors, have been sued in 17 cases by approximately 1,700
private plaintiffs residing in the vicinity of the defendants' manufacturing
facilities in Sacramento, California, and the Company's former facility in
Azusa, California. Plaintiffs in most cases seek damage for illness, death, and
economic injury allegedly caused by their ingestion of groundwater contaminated
or served by defendants. Fourteen of the cases are in the Los Angeles area and
three are in the Sacramento area. The Company's facilities that are involved in
these suits are the subject of certain investigations under The Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA) and the
Resource Conservation and Recovery Act (RCRA), as described in Note 9(c). The
other manufacturing defendants' facilities are also subject to these
investigations. All of these cases have been stayed for three years pending the
completion of a California Public Utilities Commission (PUC) investigation of
the
 
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            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
safety of the water served by regulated water purveyors. In December 2001, the
California Supreme Court heard argument in an appeal of the stays by plaintiffs.
A decision by the Court was issued on February 4, 2002. The Court found that PUC
regulated water purveyors may not be sued by the toxic tort plaintiffs if the
water they served complied with state and federal drinking water standards. The
Court further ruled that the claims against the PUC regulated defendants where
the federal and state standards had been exceeded, and the claims against all
defendants not subject to PUC regulation, were not preempted. Assuming the Court
does not reconsider its ruling, the stays in these cases will be rescinded and
discovery should begin in March or April, 2002. Aerojet and the other individual
defendants are evaluating their alternatives. Aerojet has notified its insurers
and plans a vigorous defense should the stays be rescinded.
 
  Air Pollution Toxic Tort Cases
 
     Aerojet and several other defendants have been sued by private homeowners
residing in the vicinity of Chino and Chino Hills, California. The three cases
were filed in State court but were removed at defendants' request to the United
States District Court where they were consolidated. Plaintiffs generally allege
that defendants released hazardous chemicals into the air at their manufacturing
facilities, which allegedly caused illness, death, and economic injury.
Discovery is proceeding in the cases. Aerojet has notified its insurers and is
vigorously defending the actions.
 
  Water Entity Toxic Tort Cases
 
     Between April 2000 and October 2001, Aerojet was sued by six local water
agencies and water purveyors to recover damages relating to alleged
contamination of drinking water wells in the Baldwin Park Operable Unit (BPOU)
of the San Gabriel Basin Superfund site by Aerojet. The initial suits were filed
by the San Gabriel Basin Water Quality Authority (WQA) and the Upper San Gabriel
Valley Municipal Water District (Upper District) for the funding of a treatment
plant at the La Puente Valley County Water District (La Puente) well field. In
January 2001, Aerojet and certain cooperating PRPs reimbursed these plaintiffs
and one other funding agency $4.13 million for the cost of the treatment plant.
Since that time, Aerojet and these PRPs have continued to pay all operating and
related costs for treatment at the La Puente site. In June 2001, La Puente
joined the WQA case as a plaintiff seeking certain past costs.
 
     In June 2000, the WQA also sued for its past costs in placing treatment at
the Big Dalton well site in the San Gabriel Basin. Starting in October 2000 and
continuing through October 2001, Aerojet was sued by Valley County Water
District (Valley) and Aerojet and other PRPs were sued by Cal Domestic Water
Company and San Gabriel Valley Water Company for contamination of their drinking
water wells. The Valley case was served but has been inactive and the other two
have not been served. The primary claim in each of these cases is for the
recovery of past and future CERCLA response costs for treatment plants at their
well sites. In the WQA and Upper District cases, Aerojet has filed third party
claims against other PRPs, which claims have been severed by the trial court.
Aerojet will file similar claims in the Valley County case if it is activated.
 
     If the Definitive Agreement for the remediation of the BPOU Project (see
Note 9(c) below) is executed, all of these actions will be dismissed without
prejudice and all the past cost claims in those actions will be settled and
released.
 
     In October 1999, Aerojet was sued by American States Water Company, a local
water purveyor, and certain of its affiliates, to recover $50 million in
unspecified past costs and replacement water damages relating to contamination
of drinking water wells near Aerojet's Sacramento, California, manufacturing
facility. The plaintiffs also sued the State of California for inverse
condemnation and both cases were consolidated in July 2001. Discovery has been
ongoing and trial is scheduled in the fall of 2002. Aerojet, the State and the
plaintiffs have agreed to explore mediation that is planned for April 2002.
Aerojet has notified its insurers and is conducting a vigorous defense.
 
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            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
  Vinyl Chloride Cases
 
     Between the early 1950's and 1985, GenCorp produced PVC resin at its former
Ashtabula, Ohio facility. A building block compound of PVC is vinyl chloride
(VC), now listed as a known carcinogen by several governmental agencies. OSHA
has strictly regulated workplace exposure to VC since 1974.
 
     Since 1996, GenCorp has been named in 11 toxic tort cases involving alleged
exposure to VC. With the exception of one case, brought by the family of a
former Ashtabula employee, GenCorp was alleged to be a civil co-conspirator with
other VC and PVC manufacturers, whereby the industry allegedly suppressed
information about the carcinogenic risk of VC to industry workers. Of these 11
cases, six have been settled on terms favorable to the Company during 2000 and
2001, including the case where GenCorp was the employer.
 
     One case alleges VC exposure from various aerosol consumer products,
including hairspray. VC was allegedly used as an aerosol propellant during the
1960's, and the suit names numerous consumer product manufacturers, in addition
to more than 40 chemical manufacturers. GenCorp only used VC internally and
never sold VC for aerosol or any other use. The other four cases involve
employees at VC or PVC facilities which had no connection to GenCorp. GenCorp's
involvement in the alleged conspiracy in these cases stems from GenCorp's
participation in various trade associations. GenCorp is vigorously defending its
position in each of these cases.
 
  TNS, Inc. v. NLRB et al.
 
     TNS, Inc., now known as Aerojet Ordnance Tennessee, Inc., (AOT) has long
manufactured armor piercing projectiles and ordnance from depleted uranium (DU)
under contracts with the U.S. military. AOT is a wholly-owned subsidiary of
Aerojet-General Corporation.
 
     In 1981, a labor strike occurred at the facility in Jonesborough,
Tennessee, during which the Oil, Chemical and Atomic Workers Union, now "PACE,"
claimed that the employees had the legal right to strike due to "abnormally
dangerous" working conditions under Section 502 of the National Labor Relations
Act. The "abnormally dangerous" conditions allegedly stemmed from the
radioactive nature of DU. The Union claimed this made the strike an "unfair
labor practice strike," which prevented permanent replacement of the 200
strikers. Nonetheless, the strikers were replaced, and unfair labor practice
charges were filed by the Union.
 
     In 1992, the NLRB, in a consolidated unfair labor practice case (Case Nos.
10-CA-17709 and 18785), overruled the Administrative Law Judge and found that
TNS had not violated Section 502, and thus dismissed the complaint. The union
appealed the dismissal to the D.C. Circuit Court of Appeals (Case No. 93-1299),
which remanded the case to the NLRB in 1995 for reconsideration of the standards
to be applied in determining "abnormally dangerous" working conditions.
 
     On September 30, 1999, the NLRB issued its Second Supplemental Decision and
Order, finding that TNS had committed an unfair labor practice when it refused
to reinstate those strikers who made an unconditional offer to return to work in
1982.
 
     TNS has appealed the most recent ruling of the NLRB to the Sixth Circuit
Court of Appeals (Case No. 99-6379), where it has been consolidated with the
cross-appeal of the NLRB (Case No. 00-5433). The case presents significant
issues of first impression under Section 502 of the National Labor Relations
Act, as well as primary jurisdiction issues because the safe handling and use of
radioactive materials are comprehensively regulated by the Nuclear Regulatory
Commission and the Tennessee Department of Conservation and Environment, Bureau
of Environment, Division of Radiological Health.
 
     The matter has been fully briefed, with numerous amicus briefs filed in
support of TNS' position, and oral argument was held in September 2001. A
decision is expected in early 2002.
 
     A ruling adverse to TNS would likely result in a substantial backpay award
to the eligible strikers, all of whom have been offered reinstatement over the
past 18 years. The actual total backpay amount, however, would be subject to
various interest and off-set adjustments to be determined through compliance
proceedings before the NLRB.
 
                                        59

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            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
  Wotus, et al. v. GenCorp Inc. and OMNOVA Solutions Inc.
 
     On October 12, 2000, a group of hourly retirees filed a class action
seeking recission of the current Hourly Retiree Medical Plan established in
spring, 1994 and reinstatement of pre-1994 benefit plan terms. Wotus, et al. v.
GenCorp Inc., et al., U.S.D.C., N.D. Ohio, (Case No. CV-2604). The crux of the
dispute relates to the payment of benefit contributions by retirees as a result
of the cost caps implemented in the fall, 1993. The caps were instituted to
alleviate the impact of Financial Accounting Standard Board Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106). Benefit contributions
had been delayed until January 1, 2000 pursuant to a moratorium negotiated with
the United Rubber Workers of America (URW) and its successor, the United
Steelworkers of America (USWA), as well as from savings generated by Plan
sponsored networks. A failure to pay contributions results in a termination of
benefits.
 
     The class representatives consist of three hourly retirees from the
Jeannette, Pennsylvania facility of OMNOVA, the company spun-off from GenCorp on
October 1, 1999, and one hourly retiree from GenCorp's former Akron tire plant.
The putative class encompasses all eligible hourly retirees formerly represented
by the URW or USWA. The Unions, however, are not party to the suit and have
agreed not to support such litigation pursuant to Memoranda of Agreement
negotiated with GenCorp.
 
     The retirees also challenge the creation of the OMNOVA Plan, which has
terms identical to the prior GenCorp Plan, without retiree approval.
 
     GenCorp prevailed in a similar class action filed in 1995, arising at its
Wabash, Indiana location. Divine, et al. v. GenCorp Inc., U.S.D.C., N.D. Ind.,
(Case No. 96-CV-0394-AS). The GenCorp and OMNOVA insurance carriers have been
advised of this litigation.
 
     OMNOVA has requested indemnification from GenCorp should plaintiffs prevail
in this matter. GenCorp has denied this request; however, this claim could
ultimately be decided by binding arbitration pursuant to the OMNOVA spin-off
agreement.
 
  Other Legal Matters
 
     The Company and its subsidiaries are subject to various other legal
actions, governmental investigations, and proceedings relating to a wide range
of matters in addition to those discussed above. In the opinion of management,
after reviewing the information which is currently available with respect to
such matters and consulting with the Company's counsel, any liability which may
ultimately be incurred with respect to these additional matters will not
materially affect the consolidated financial condition of the Company. The
effect of resolution of these matters on results of operations cannot be
predicted because any such effect depends on both future results of operations
and the amount and timing of the resolution of such matters.
 
c.  ENVIRONMENTAL MATTERS
 
  Sacramento, California
 
     In 1989, the United States District Court approved a Partial Consent Decree
(Decree) requiring Aerojet to conduct a Remedial Investigation/Feasibility Study
(RI/FS) of Aerojet's Sacramento, California site and to prepare a RI/FS report
on specific environmental conditions present at the site and alternatives
available to remedy such conditions. Aerojet also is required to pay for certain
governmental oversight costs associated with Decree compliance. The State of
California expanded surveillance of perchlorate and nitrosodimethylamine (NDMA)
under the RI/FS because these chemicals were detected in public water supply
wells near Aerojet's property at previously undetectable levels using new
testing protocols.
 
     Aerojet has substantially completed its efforts under the Decree to
determine the nature and extent of contamination at the facility. Preliminarily,
Aerojet has identified the technologies that will likely be used to remediate
the site and estimated costs using generic remedial costs from databases of
Superfund remediation costs. Over the next several years, Aerojet will conduct
feasibility studies to refine technical approaches and costs to remediate the
site. The remediation costs are principally for design, construction,
enhancement and operation
 
                                        60

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
of groundwater and soil treatment facilities, ongoing project management and
regulatory oversight, and are expected to be incurred over a period of
approximately 15 years. Aerojet is also addressing groundwater contamination off
of its facility through the development of an Operable Unit Feasibility Study.
This Study was completed and submitted as a draft to the governmental oversight
agencies in November 1999. In response to governmental agency comments, Aerojet
revised the draft report and it was resubmitted in May 2000. The agencies have
now accepted the report as complete. The Study enumerates various remedial
alternatives by which offsite groundwater can be addressed. The governmental
agencies selected the remedial action alternative to be implemented and issued a
Record of Decision (ROD) for the site on July 24, 2001. EPA will issue a
proposed consent agreement to Aerojet for the implementation of the ROD. A
discussion of Aerojet's efforts to estimate these costs is contained under the
heading "Aerojet's Reserve and Recovery Balances."
 
     In September 2000, Aerojet filed a motion with the U.S. District Court
seeking court approval of a modification to the Decree carving out from the site
lands estimated (on the basis of AutoCad drawings) to total approximately 3,100
acres. The agencies opposed the motion. In November 2000, the court denied
Aerojet's motion on the basis that Aerojet knew that the carve-out property was
not contaminated at the time it was included in the Decree. Aerojet appealed
this decision but the appeal was stayed while Aerojet and the agencies met in an
effort to reach a negotiated agreement removing the carve-out property from the
Decree and from the National Priorities List. On September 14, 2001, Aerojet
reached agreement with the relevant agencies on a Stipulation to modify the
Decree. During the carve-out negotiations, the agencies required that some of
the original candidate lands be removed from carve-out consideration. After the
stipulation was signed, an official survey of the land indicated that the agreed
carve-out property totals approximately 2,600 acres. On September 25, 2001, the
Stipulation was lodged with the United States District Court and was followed by
a 30-day public comment period. Due to the anthrax attacks in Washington, DC and
subsequent delays in the federal mail system, the United States Department of
Justice continued to receive comments after the 30 day period. In addition,
three water purveyors and a public interest group have attempted to delay
carve-out until the agreed water replacement plan is revised. On February 13,
2002, two water purveyors filed a Writ of Mandamus in Sacramento Superior Court
seeking to enjoin the Regional Board's joinder in the Motion to Enter the Decree
Modification. The State of California, on February 14, 2002, removed the suits
to United States District Court. Assuming the matters are not remanded to state
court, the water purveyors' claims will be heard by the same court expected to
approve the Decree modification.
 
     On March 1, 2002, the agencies filed the motion to approve the Decree
modification and management expects the United States District Court to approve
the modification in due course. Among other things, the Stipulation provides
that: (i) certain clean property will be removed from the Superfund site
designation; (ii) GenCorp will provide a $75 million guarantee to assure that
remediation activities at the Sacramento site are fully funded; (iii) Aerojet
will provide a short-term and long-term replacement plan for lost water
supplies; and (iv) the Superfund site will be divided into "Operable Units" to
allow Aerojet and the regulatory agencies to more quickly address and restore
priority areas.
 
     On the basis of information presently available, management believes that
established environmental reserves for Sacramento groundwater remediation
efforts are adequate.
 
  San Gabriel Valley Basin, California
 
     Aerojet, through its former Azusa facility, has been named by the U.S.
Environmental Protection Agency (EPA) as a PRP in the portion of the San Gabriel
Valley Superfund Site known as the Baldwin Park Operable Unit (BPOU). A ROD
regarding regional groundwater remediation was issued and Aerojet and 18 other
PRPs received Special Notice Letters requiring groundwater remediation. All of
the Special Notice PRPs are alleged to have contributed volatile organic
compounds (VOCs). Aerojet's investigation demonstrated that the groundwater
contamination by VOCs is principally upgradient of Aerojet's property and that
lower concentrations of VOC contaminants are present in the soils of Aerojet's
presently and historically owned properties. The EPA contends that of the 19
PRPs identified by the EPA, Aerojet is one of the four largest sources of VOC
groundwater contamination at the BPOU. Aerojet contests the EPA's position
regarding the source of contamination and the number of responsible PRPs.
Aerojet has participated in a Steering Committee comprised of 14 of the PRPs.
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            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
     In May 1997, as a result of the development of more sensitive measuring
methods, perchlorate was detected in wells in the BPOU. More recently, NDMA was
also detected using newly developed measuring methods. Suspected sources of
perchlorate include Aerojet's solid rocket development and manufacturing
activities in the 1940s and 1950s, military ordnance produced by a facility
adjacent to the Aerojet facilities in the 1940s, the burning of confiscated
fireworks by local fire departments, and fertilizer used in agriculture. NDMA is
a suspected byproduct of liquid rocket fuel activities by Aerojet in the same
time period. It is also a contaminant in cutting oils used by many businesses
and is found in many foods. In addition, new regulatory standards for a chemical
known as 1,4 dioxane require additional treatment. Aerojet may be a minor
contributor of this chemical. Aerojet is in the process of developing new, low
cost technologies for the treatment of perchlorate, NDMA and 1,4 dioxane.
 
     On September 10, 1999, 11 of the 19 Special Notice PRPs, including Aerojet
(the Offering Parties), submitted a Good Faith Offer to the EPA to implement an
EPA-approved remedy, which was accepted by the agency as a basis for negotiating
a Consent Decree. The remedy, as proposed, would employ low cost treatment
technologies being developed by Aerojet to treat perchlorate, NDMA, and 1,4
dioxane, as well as traditional treatment for VOCs. The Offering Parties
continued negotiations with the court-appointed Watermaster and local water
purveyors regarding an agreement that would provide for use of the remediation
project's treated water. Due to lack of progress in the negotiations, on June
30, 2000, the EPA issued a Unilateral Administrative Order (UAO) ordering the
PRPs to implement a remedy consistent with the ROD, but still encouraging the
PRPs to attempt to negotiate an agreement with the local purveyors. The PRPs
agreed to comply. A discussion of Aerojet's efforts to estimate these costs is
contained under the heading "Aerojet's Reserve and Recovery Balances".
 
     On November 23, 1999, the Regional Board issued an order to Aerojet and
other PRPs to conduct certain additional soil and groundwater sampling with
respect to new chemicals found in the groundwater since completion of an earlier
site investigation. That study, completed in 1994, concluded that no site
remediation was required. At this time, the State Regional Water Quality Control
Board (Regional Board) has ordered site remediation involving certain limited
soil gas extraction, which Aerojet is in the process of implementing. It is too
early to know whether any further remediation will be required. The Regional
Board Order also indicated that at some future time it may attempt to order
Aerojet to pay certain past and future costs of private and public purveyors who
have been affected by contamination. There is a substantial legal question as to
the Regional Board's legal authority to consider such action.
 
     In January 2001, a Memorandum of Understanding (MOU) was executed by nine
of the Special Notice PRPs, including Aerojet, and the Watermaster and certain
local purveyors. The MOU provided that the nine PRPs would finance the
implementation by the Watermaster and local purveyors of an EPA approved remedy
for the BPOU. The MOU provided for an interim allocation agreement among the
nine PRPs pending completion of a final allocation procedure in 2002. The PRPs
will initially seek to mediate the allocation to be followed by litigation if
unsuccessful. Under the interim allocation agreement, Aerojet is responsible for
approximately two-thirds of all project costs pending completion of the
allocation proceeding. After the final allocation, all prior and future payments
will be re-allocated.
 
     The basic structure of the proposed agreement with the Watermaster and
local purveyors is for the nine PRPs to put up financial assurance (in the form
of cash or letters of credit) for the cost of the three remaining treatment
plants and associated extraction facilities. Actual funding would be provided by
funds placed in escrow at the start of each three month period to cover
anticipated costs for the succeeding quarter with the financial assurance being
reduced accordingly until each project is completed. A fourth treatment plant
has already been completed at La Puente Valley Water District and went into
service in March 2001.
 
     Once each of the plants is completed, the nine PRPs would be responsible to
fund operation and maintenance (O&M) of the treatment facilities, reduced by the
local purveyors normal operating expenses in the absence of any contamination.
The nine PRPs would maintain sufficient financial assurance to cover the
estimated O&M for two years. Actual O&M payments would be made at the start of
each three-month period to cover anticipated costs for the succeeding quarter.
 
                                        62

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            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
     The Definitive Agreement will settle the past environmental claims of the
Water Quality Authority, Watermaster, Valley County Water District, La Puente
Valley Water District, San Gabriel Valley Water Company, Suburban Water Systems
and California Domestic Water Company. These payments would amount to
approximately $12 million with approximately $5 million due 60 days after the
effective date of the Definitive Agreement and the remainder in four equal
annual payments, with the addition of 4 percent simple interest. Aerojet's share
of the total payments would be approximately $8 million.
 
     The Water Entities currently estimate the total capital cost of all the
projects, including La Puente, Suburban and Cal Domestic, at about $89 million.
It is anticipated that 25 percent reimbursement will be available from the
United States Bureau of Reclamation under existing law of approximately $10
million under current appropriations. In addition, legislation was recently
passed, and funds appropriated, for an additional $30 million of federal funds
to be contributed to the San Gabriel Basin Superfund sites as a whole, including
four other operable units. The Company believes that once certain issues have
been worked out on distribution, the WQA will provide a significant share of
this amount for the BPOU projects. To date, the PRPs have paid approximately $21
million in costs as they have been incurred on the BPOU Project. Aerojet has
paid approximately $15 million of this amount. Aerojet currently estimates that
required financial assurances will be in the neighborhood of approximately $73
million if a Definitive Agreement is reached during March 2002, of which
Aerojet's share would be approximately $50 million.
 
     As part of the EIS sale to Northrop Grumman on September 25, 2001, EPA
approved a Prospective Purchaser Agreement with Northrop Grumman to absolve it
of pre-closing liability for contamination caused by the Azusa facility, which
liability will remain with Aerojet. As part of that agreement, Aerojet agreed to
put $40 million into an irrevocable escrow for the BPOU project to implement the
EPA UAO, and GenCorp agreed to provide a $25 million guarantee for Aerojet's
share of remediation costs in the BPOU. The $40 million escrow will satisfy the
major share of Aerojet's required financial assurance under the Definitive
Agreement, if executed. A separate $9 million payment was made by Aerojet to EPA
for its past costs (see discussion below). EPA will maintain these funds for
possible use on the BPOU project. These recoveries will be made for a
substantial number of years as provided in the APA and an advance agreement with
the U.S. Government.
 
     Aerojet estimates that O&M will be approximately $7 million in 2002, about
$12 million for several years thereafter, but should reduce to approximately
$7.3 million by 2005 or 2006. The Definitive Agreement would also require the
nine PRPs to pay up to $7 million for existing facilities to be used in the
project, up to $3 million for certain contingency well and pipeline facilities,
and approximately $3 million for a $100 million environmental insurance policy
which the PRPs will provide under the terms of the Definitive Agreement. The
term of the Definitive Agreement would be 15 years.
 
     A tentative agreement has been reached on the final draft of the Definitive
Agreement with the Water Entities and the parties are now engaged in completing
the many attachments to the Agreement. The nine PRPs are also completing the
agreement among themselves on the interim allocation of costs and on a process
by which to reach a final allocation. When the attachments are completed, each
of the parties will have to obtain authority to execute the Definitive Agreement
and the Main San Gabriel Basin Watermaster will have to obtain the approval of
the state court which oversees its activities. This process could take from 30
to 60 days. A condition to the Agreement becoming effective is the receipt of an
acceptable environmental insurance policy covering the operation of the Project,
the final terms of which are currently being negotiated with the insurer.
 
     Aerojet has been conducting investigations for the identification of
additional PRPs related to perchlorate and NDMA. One such company was Day &
Night Manufacturing Company (Day & Night) which, during World War II,
manufactured photoflash bombs and flares which used perchlorate at a site
adjacent to Aerojet and whose property was later acquired by Aerojet. Day &
Night was acquired by Dresser Industries (Dresser) in April 1945 while it was
still using perchlorate at its Azusa site. Thereafter, the assets were sold to
Carrier Corporation and the corporate entity of Day & Night dissolved into
Dresser. Carrier was ultimately acquired by United Technologies Corporation. It
also appears that disposal practices at Day & Night for perchlorate were
directed and controlled by the U.S. War Department during World War II. There
may be other contributors to the new
 
                                        63

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
contaminants of perchlorate, NDMA and 1,4 dioxane whom Aerojet will pursue for
recovery of project and other costs.
 
     As part of the agreement to sell the EIS business to Northrop Grumman,
Aerojet has paid the EPA $9 million to be offset against Aerojet's share of
EPA's past costs of approximately $22 million. A very substantial share of EPA's
past costs related to the period prior to 1997 when the sole contamination being
considered involved VOCs. Aerojet believes that it is responsible for less than
10 percent of these costs. As a result, in the allocation with the other PRPs,
Aerojet will seek to recover a significant portion of the $9 million paid to EPA
from the other PRPs. Unresolved at this time is the issue of California's past
costs which were last estimated at approximately $4 million.
 
     Aerojet intends to defend itself vigorously to assure that it is
appropriately treated with other PRPs and that costs of any remediation are
properly spread over all users of the San Gabriel Valley aquifer. In addition,
Aerojet is also pursuing its insurance remedies. On the basis of information
presently available, management believes that established environmental reserves
for San Gabriel Valley groundwater remediation efforts are adequate.
 
     On November 9, 2001, more than ten years after the General Notice given to
its subsidiary (Aerojet-General Corporation), GenCorp received a General Notice
Letter from the U.S. EPA asserting that GenCorp is a PRP for the BPOU. EPA
alleged that in the 1940s and early 1950s GenCorp's predecessor, General Tire &
Rubber Company, participated in a joint venture with Aerojet Engineering
Corporation, a predecessor to Aerojet-General Corporation, sharing 50 percent of
the profits on certain U.S. Navy contracts for JATO rockets and that it had some
role in managing the joint venture at the Azusa facility. GenCorp strongly
disagrees with the EPA designation. EPA is factually incorrect; at all times,
Aerojet was the sole party that owned or operated the Azusa facility during the
early production of the JATO rockets. GenCorp strongly disagrees with the EPA's
PRP designation and plans to resist the designation at every level possible.
 
     On February 28, 2002, EPA issued a unilateral First Amended Administrative
Order For Remedial Design and Remedial Action (Amended Order) for the BPOU. The
Amended Order does not materially alter the obligations of Aerojet under the
earlier UAO; however, the Amended Order names GenCorp as a Respondent on the
basis of the allegations made in the General Notice Letter. The Amended Order
does not require GenCorp to undertake any action unless Aerojet fails to perform
its obligations under the UAO. It states that GenCorp is being added to the
Amended Order "as a backup" to Aerojet's performance; and it provides that
GenCorp is deemed to be in compliance with the Amended Order on the effective
date of the Amended Order. Because GenCorp does not believe it was properly
designated a PRP at the site, the Company is evaluating an appropriate response
to the Amended Order.
 
  El Monte, California
 
     On December 21, 2000, Aerojet received an order from the Los Angeles Region
office of the California Regional Water Quality Control Board requiring a work
plan for investigation of Aerojet's former El Monte facility. On January 22,
2001, Aerojet filed an appeal of the order with the Board asserting selective
enforcement. The appeal is in abeyance pending negotiations with the Board. In
March 2001, Aerojet submitted a limited work plan to the Board in light of the
Board's failure to adequately seek similar investigations by lessees and owners
of the facility following Aerojet's ownership. On February 21, 2001, Aerojet
received a General Notice Letter from U.S. EPA Region IX naming Aerojet as a PRP
to the South El Monte Operable Unit of the San Gabriel Valley Superfund site.
Aerojet continues to negotiate with the Regional Board for a limited
investigation of this former facility. Aerojet has begun the process of
obtaining access agreements should the Regional Board approve Aerojet's work
plan.
 
  Muskegon, Michigan
 
     In a lawsuit filed by the EPA, the United States District Court ruled in
1992 that Aerojet and its two inactive Cordova Chemical subsidiaries (Cordova)
are liable for remediation of Cordova's Muskegon, Michigan site, along with a
former owner/operator of an earlier chemical plant at the site, who is the other
potentially responsible party (PRP). That decision was appealed to the United
States Court of Appeals.
 
                                        64

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
     In May 1997, the United States Court of Appeals for the Sixth Circuit
issued an en banc decision reversing Aerojet's and the other PRP's liability
under the CERCLA statute. Petitions for certiorari to the United States Supreme
Court for its review of the appellate decision were filed on behalf of the State
of Michigan and the EPA and were granted in December 1997. On June 8, 1998, the
United States Supreme Court issued its opinion. The Court held that a parent
corporation could be directly liable as an operator under CERCLA if it can be
shown that the parent corporation operated the facility. The Supreme Court
vacated the Sixth Circuit's 1997 ruling and remanded the case back to the United
States District Court in Michigan for retrial. Aerojet did not expect that it
would be found liable on remand. Aerojet entered into settlement discussions
with the EPA and a proposed consent decree was filed with the District Court in
July 1999. After a May 8, 2000 hearing, the court requested additional briefing
by all parties to occur by July 2000. On August 24, 2000 the court approved the
consent decree effectively dismissing the action as against Aerojet and Cordova.
In November 2001, the United States District Court ruled that the other PRP was
not liable under CERCLA. The EPA and the state have not appealed the ruling thus
making Aerojet's and Cordova's dismissal final.
 
     In a separate action, Aerojet and Cordova won indemnification for the
Muskegon site investigation and remediation costs from the State of Michigan in
the state Court of Claims. The Michigan Court of Appeals affirmed on appeal, and
the Michigan Supreme Court refused to hear the case. Further, the Michigan
Supreme Court also denied the State's motion for reconsideration. As a result,
the Company believes that most of the $50 million to $100 million in anticipated
remediation costs will be paid by the State of Michigan and the former PRP
owner/operator of the site. A settlement agreement with the State of Michigan,
related to the proposed consent decree discussed above, was finalized effective
upon the August 24, 2000 approval of the EPA consent decree. In September 2000,
Cordova received a settlement payment of $1.5 million from the State of
Michigan. In addition, Aerojet settled with one of its two insurers in August
1999 for $4 million.
 
  Aerojet's Reserve and Recovery Balances
 
     On January 12, 1999, having finally received all necessary U.S. Government
approvals, Aerojet and the U.S. Government implemented, with effect retroactive
to December 1, 1998, the October 1997 Agreement in Principle resolving certain
prior environmental and facility disagreements between the parties. Under this
agreement, a "global" settlement covering all environmental contamination
(including perchlorate) at the Sacramento and Azusa, California, sites was
achieved; the U.S. Government/Aerojet environmental cost sharing ratio was
raised to 88 percent/12 percent from the previous 65 percent/35 percent; the
cost allocation base for these costs was expanded to include all of Aerojet (in
lieu of the prior limitation to the Sacramento business base); and Aerojet
obtained title to all of the remaining U.S. Government facilities on its
Sacramento property, together with an advance agreement recognizing the
allowability of certain facility demolition costs. These recoveries will be made
for a substantial number of years as provided in the APA and an advance
agreement with the government.
 
     During the year ended November 30, 1999, Aerojet entered into a settlement
agreement covering certain environmental claims with certain of its insurance
carriers and received settlement proceeds of approximately $92 million. Under
the terms of its agreements with the U.S. Government, Aerojet was obliged to
credit the U.S. Government a portion of the insurance recoveries for past costs
paid by the U.S. Government. On March 8, 2001, Aerojet entered into a settlement
agreement with the U.S. Government that resolved Aerojet's obligation to
allocate a portion of the insurance recoveries to the U.S. Government.
 
     In the fourth quarter of 1999, Aerojet obtained sufficient information to
provide a reasonable basis for estimating the costs to address groundwater
contamination off its Sacramento facility and its probable share of the San
Gabriel Valley BPOU, and recorded those estimates in its reserve and recovery
balances. Estimates regarding the Sacramento Western Groundwater Remediation
were based on the Operable Unit Feasibility Study, previous references and
Aerojet's opinion as to which remediation alternative proposed by the study will
be approved by the EPA and the State. Estimates regarding the San Gabriel Valley
BPOU remediation were based on the Good Faith Offer/Administrative Consent Order
and Watermaster/purveyor negotiations referenced previously. Not resolved at
this time are whether Aerojet will have any additional liability for its
possible share of water purveyor past cost claims, as well as the EPA's past and
future oversight costs. In regard to the matter discussed above, management
believes, on the basis of presently available information, that resolution of
this
                                        65

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
matter would not materially affect liquidity, capital resources, or the
consolidated financial condition of the Company.
 
     As of November 30, 2001, Aerojet had total reserves of $252 million for
costs to remediate the Sacramento and San Gabriel Valley Basin sites and has
recognized $158 million for probable future recoveries. These estimates are
subject to change as work progresses, additional experience is gained and
environmental standards are revised. In addition, legal proceedings to obtain
reimbursements of environmental costs from insurers are continuing.
 
  Lawrence, Massachusetts
 
     The Company has studied remediation alternatives for its closed Lawrence,
Massachusetts facility, which was contaminated with PCBs, and has begun site
remediation and off-site disposal of debris. The Company has a remaining reserve
of $13 million as of November 30, 2001 for estimated decontamination and
long-term operating and maintenance costs of this site. The reserve represents
the Company's best estimate for the remaining remediation costs. Estimates of
future remediation costs could range as high as $37 million depending on the
results of future testing and the ultimate remediation alternatives undertaken
at the site. The time frame for remediation is currently estimated to range from
three to five years.
 
  Olin Corporation
 
     In August 1991, Olin Corporation (Olin) advised GenCorp that it believed
GenCorp to be jointly and severally liable for certain Superfund remediation
costs, estimated by Olin to be $70 million, associated with a former Olin
manufacturing facility and waste disposal sites in Ashtabula County, Ohio. In
1993, GenCorp sought declaratory judgment in the United States District Court
for the Northern District of Ohio that the Company is not responsible for
environmental remediation costs. Olin counterclaimed seeking a judgment that
GenCorp is jointly and severally liable for a share of remediation costs. In
late 1995, the Court hearing on the issue of joint and several liability was
completed, and in August 1996 the Court held hearings relative to allocation. At
its request, in 1998, the Court received an additional briefing regarding the
impact of the United States Supreme Court's decision in the Best Foods case
which the Company believes definitively addresses many issues in this case in
its favor. Another hearing relative to liability and allocation was held on
January 11, 1999. The Court rendered its interim decision on liability on August
16, 1999, finding GenCorp 30 percent liable for remediation costs at "Big D
Campground" landfill and 40 percent liable for remediation costs attributable to
the Olin TDI facility with regard to the Fields Brook site. Phase III
proceedings on the allowability of those remediation costs were completed in
July 2001, and a final order is expected in early to mid 2002. Upon issuance of
the final order, the matter will be ripe for appeal.
 
     The Company continues to vigorously litigate this matter and believes that
it has meritorious defenses to Olin's claims. While there can be no certainty
regarding the outcome of any litigation, in the opinion of management, after
reviewing the information currently available with respect to this matter and
consulting with the Company's counsel, any liability which may ultimately be
incurred will not materially affect the consolidated financial condition of the
Company.
 
  Other Sites
 
     The Company is also currently involved, together with other companies, in
approximately 23 other Superfund and non-Superfund remediation sites. In many
instances, the Company's liability and proportionate share of costs have not
been determined largely due to uncertainties as to the nature and extent of site
conditions and the Company's involvement. While government agencies frequently
claim PRPs are jointly and severally liable at such sites, in the Company's
experience, interim and final allocations of liability costs are generally made
based on relative contributions of waste. Based on the Company's previous
experience, its allocated share has frequently been minimal, and in many
instances, has been less than one percent. The Company has reserves of
approximately $14 million as of November 30, 2001 which it believes are
sufficient to cover its best estimate of its share of the environmental
remediation costs at these other sites. Also, the Company is seeking recovery of
its costs from its insurers.
 
                                        66

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
  Environmental Summary
 
     A summary of the Company's environmental reserve activity is shown below
(in millions):
 

<Table>
<Caption>
                 NOV. 30       2000       NOV. 30       2001       NOV. 30
                  1999     EXPENDITURES    2000     EXPENDITURES    2001
                 -------   ------------   -------   ------------   -------
<S>              <C>       <C>            <C>       <C>            <C>
Aerojet........   $330         $(10)       $320         $(68)       $252
Lawrence, MA...     20           (3)         17           (4)         13
Other Sites....     18           (2)         16           (2)         14
                  ----         ----        ----         ----        ----
Total..........   $368         $(15)       $353         $(74)       $279
                  ====         ====        ====         ====        ====
</Table>

 
     In regard to the sites discussed above, management believes, on the basis
of presently available information, that resolution of these matters will not
materially affect liquidity, capital resources or consolidated financial
condition. The effect of resolution of these matters on results of operations
cannot be predicted due to the uncertainty concerning both the amount and timing
of future expenditures and future results of operations.
 
d.  GUARANTEES
 
     As detailed in Note 9(c), the Company has guaranteed certain environmental
remediation obligations of Aerojet. At Aerojet's Sacramento facility, the
Company has agreed to provide a $75 million guarantee that remediation
activities are fully funded. Related to Aerojet's former Azusa, California,
facility, the Company has agreed to provide a $25 million guarantee for
Aerojet's share of the remediation costs at that site.
 
e.  CONCENTRATION OF CREDIT RISK
 
     The Company invests available cash in money market securities of various
banks, commercial paper and asset-backed securities of various financial
institutions, other companies with high credit ratings and securities backed by
the U.S. Government.
 
     As of November 30, 2001 and 2000, the amount of commercial receivables was
$141 million and $82 million, respectively. Receivables for the GDX Automotive
segment of $117 million as of November 30, 2001 and $63 million as of November
30, 2000, are due primarily from General Motors and the Ford Motor Company. As
of November 30, 2001 and 2000, the amount of U.S. Government receivables was $48
million and $53 million, respectively. As of November 30, 2001 and 2000, the
U.S. Government receivables includes $18 million and $10 million, respectively,
for environmental remediation recovery (see Note 9(c)). The Company's accounts
receivables are generally unsecured and are not backed by collateral from its
customers.
 
     As of November 30, 2001 and 2000, the U.S. Government receivables include
unbilled amounts of $5 million and $3 million, respectively, relating to
long-term contracts. Such amounts are billed either upon delivery of completed
units or settlements of contracts. The unbilled receivables amount as of
November 30, 2001 is expected to be collected in years subsequent to 2002.
 
10.  SHAREHOLDERS' EQUITY
 
a.  PREFERENCE STOCK AND PREFERRED SHARE PURCHASE RIGHTS
 
     In January 1997, the Board of Directors extended for ten additional years
GenCorp's Shareholder Rights Plan (Plan), as amended. When the Plan was
originally adopted in 1987, the Directors declared a dividend of one Preferred
Share Purchase Right (Right) on each outstanding share of common stock, payable
to shareholders of record on February 27, 1987. Rights outstanding as of
November 30, 2001 and 2000 totaled 43.1 million and 42.4 million, respectively.
The Plan provides that under certain circumstances each Right will entitle
shareholders to buy one one-hundredth of a share of a new Series A Cumulative
Preference Stock at an exercise price of $100. The Rights are exercisable only
if a person or group acquires 20 percent or more of GenCorp's common stock or
announces a tender or exchange offer that will result in such person or group
acquiring 30 percent or more of the common stock. GenCorp is entitled to redeem
the Rights at two cents per Right at any time until ten days after a 20 percent
position has been acquired (unless the Board elects to extend such time period,
which in no event may exceed 30 days). If the Company is involved in certain
transactions after the Rights become exercisable, a holder
 
                                        67

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
of Rights (other than Rights beneficially owned by a shareholder who has
acquired 20 percent or more of GenCorp's common stock, which Rights become void)
is entitled to buy a number of the acquiring company's common shares, or
GenCorp's common stock, as the case may be, having a market value of twice the
exercise price of each Right. A potential dilutive effect may exist upon the
exercise of the Rights. The Rights under the extended Plan expire on February
18, 2007. Until a Right is exercised, the holder has no rights as a stockholder
of the Company including, without limitation, the right to vote as a stockholder
or to receive dividends.
 
     As of November 30, 2001, 575,000 shares of $1.00 par value Series A
Cumulative Preference Stock were reserved for issuance upon exercise of
Preferred Share Purchase Rights.
 
b.  COMMON STOCK
 
     As of November 30, 2001, the Company had 150.0 million authorized shares of
common stock, par value $0.10 per share (Common Stock), of which 42.9 million
shares were issued and 9.3 million shares were reserved for future issuance for
discretionary payments of the Company's portion of Retirement Savings Plan
contributions, exercise of stock options and payment of awards under stock-based
compensation plans.
 
     During the years ended November 30, 2001 and 2000, the Company paid
quarterly dividends on its Common Stock of $0.03 per share (or $0.12 on an
annual basis).
 
c.  STOCK-BASED COMPENSATION
 
     The Company accounts for stock-based compensation under APB 25 and related
interpretations. Under APB 25, stock options granted to employees by the Company
generate no expense as the exercise price of the stock options at the date of
grant equal the market value of the underlying common stock.
 
     The 1999 Equity and Performance Incentive Plan (1999 Plan), which was
adopted in 2000, provides key employees stock options and restricted stock
generally based on the attainment of specified performance targets. Stock
options issued under the 1999 Plan are, in general, exercisable in one-third
increments at one year, two years, and three years from the date of grant. Under
this plan, key employees of the Company were granted a total of 728,000
restricted shares. Designated shares vest annually over a five-year period if
the Company meets EPS growth targets as specified in the Plan. Unvested
restricted shares are canceled upon the employee's termination of employment or
if earnings targets are not achieved. During fiscal 2001, 111,750 shares were
canceled due to terminations, and management estimates that no shares will vest
based on fiscal 2001 EPS. The Organization and Compensation Committee of the
Board has negative discretion over increasing or decreasing the actual number of
shares to vest in any period.
 
     The Company's 1997 Stock Option Plan and 1993 Stock Option Plan each
provide for an aggregate of 2.5 million shares of the Company's Common Stock to
be purchased pursuant to stock options or to be subject to stock appreciation
rights (SARs) which may be granted to selected officers and key employees at
prices equal to the fair market value of a share of common stock on the date of
grant. Stock options issued under the 1997 and 1993 Stock Option Plans are, in
general, exercisable in 25 percent increments at six months, one year, two years
and three years from the date of grant. No stock appreciation rights have been
granted.
 
                                        68

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
     A summary of the Company's stock option activity, and related information
for the years ended November 30 are as follows:
 

<Table>
<Caption>
                                         2001                 2000                 1999
                                  ------------------   ------------------   ------------------
                                            WEIGHTED             WEIGHTED             WEIGHTED
                                   STOCK    AVERAGE     STOCK    AVERAGE     STOCK    AVERAGE
                                  OPTIONS   EXERCISE   OPTIONS   EXERCISE   OPTIONS   EXERCISE
                                  (000S)     PRICE     (000S)     PRICE     (000S)     PRICE
                                  -------   --------   -------   --------   -------   --------
<S>                               <C>       <C>        <C>       <C>        <C>       <C>
Outstanding at the beginning of
  the year......................   3,545     $ 9.96     3,300     $10.13     3,226     $10.05
Granted.........................     769     $11.10       702     $ 9.39       965     $ 9.70
Exercised.......................    (522)    $ 7.85      (101)    $ 7.70      (371)    $ 6.69
Forfeited/cancelled.............    (280)    $11.49      (356)    $11.08      (520)    $12.81
                                   -----                -----                -----
Outstanding at the end of the
  year..........................   3,512     $10.38     3,545     $ 9.96     3,300     $10.13
                                   =====                =====                =====
Exercisable at the end of the
  year..........................   2,287     $10.37     2,481     $ 9.89     2,185     $ 9.44
                                   =====                =====                =====
</Table>

 
     The weighted average grant-date fair value of stock options granted in 2001
was $4.01, $3.64 for stock options granted in 2000 and $3.12 for stock options
granted in 1999.
 
     The following table summarizes the range of exercise prices and
weighted-average exercise prices for options outstanding and exercisable as of
November 30, 2001 under the Company's stock option plans:
 

<Table>
<Caption>
 FISCAL YEAR                                               WEIGHTED
      IN                                                    AVERAGE
 WHICH STOCK                        STOCK      WEIGHTED    REMAINING       STOCK      WEIGHTED
   OPTIONS         RANGE OF        OPTIONS     AVERAGE    CONTRACTUAL     OPTIONS     AVERAGE
     WERE          EXERCISE      OUTSTANDING   EXERCISE      LIFE       EXERCISABLE   EXERCISE
    ISSUED          PRICES         (000S)       PRICE       (YEARS)       (000S)       PRICE
 -----------     -------------   -----------   --------   -----------   -----------   --------
<S>              <C>             <C>           <C>        <C>           <C>           <C>
     1993        $  8.44-$8.77        109       $ 8.77        1.8            109       $ 8.77
     1994        $  6.66-$7.26        206       $ 6.83        2.7            206       $ 6.83
     1995        $  5.67-$5.94        201       $ 5.89        3.8            201       $ 5.89
     1996        $  6.53-$8.91        147       $ 8.34        4.9            147       $ 8.34
     1997        $ 9.24-$15.64        545       $11.01        5.4            545       $11.01
     1998        $ 9.76-$16.06        403       $15.90        6.3            403       $15.90
     1999        $ 9.40-$13.59        578       $ 9.84        7.3            444       $ 9.84
     2000        $ 7.06-$10.13        607       $ 9.31        8.3            232       $ 9.39
     2001        $10.44-$13.10        716       $11.11        9.3              -       $    -
                                    -----                                  -----
                                    3,512                                  2,287
                                    =====                                  =====
</Table>

 
     SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123),
requires the use of fair value techniques to determine compensation expense
associated with stock-based compensation. Although the Company has opted to
continue to apply the provisions of APB 25 to determine compensation expense, as
permitted under SFAS 123, the Company is obligated to disclose certain
information including pro forma net income and earnings per share as if SFAS 123
had been adopted by the Company to measure compensation expense. Had
compensation cost been measured in accordance with SFAS 123, the Company's net
income, basic EPS and diluted EPS would have been reduced by $1.2 million, $0.03
per share, and $0.03 per share, respectively, for 2001; $1 million, $0.02 per
share, and $0.02 per share, respectively, for 2000, and; $3 million, $0.07 per
share, and $0.06 per share, respectively, for 1999. The fair value of stock
options was estimated at the date of grant using a Black-Scholes stock option
pricing model with the following weighted-average assumptions: risk free
interest rates of 3.5 percent for 2001, 6.0 percent for 2000, and 5.0 percent
for 1999; dividend yield of 1.0 percent for 2001, 1.4 percent for 2000, and 1.9
percent for 1999; volatility factor of the expected market price of the
Company's Common Stock of 0.39 for 2001, 0.40 for 2000, and 0.34 for 1999; and a
weighted-average expected life of the option of five years for 2001, 2000 and
1999.
 
                                        69

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
d.  ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF INCOME TAXES
 
     Comprehensive income encompasses net income and other comprehensive income
items, which includes all other non-owner transactions and events that change
shareholders' equity. The Company's other comprehensive loss includes the
effects of foreign currency translation adjustments.
 
     The components of other comprehensive income and the related income tax
effects are presented in the following table (the Company did not recognize any
items of other comprehensive income in 1999):
 

<Table>
<Caption>
                                                                  YEAR ENDED
                                                                 NOVEMBER 30
                                                              ------------------
                                                                 2001       2000
                                                              ----------    ----
                                                                  (MILLIONS)
<S>                                                           <C>           <C>
Income before cumulative effect of change in accounting
  principle.................................................     $128       $52
Other comprehensive income, net of income taxes: Effects of
  foreign currency translation adjustments..................       (6)      (11)
                                                                 ----       ---
       Total comprehensive income...........................     $122       $41
                                                                 ====       ===
</Table>

 
11.  OPERATING SEGMENTS AND RELATED DISCLOSURES
 
     The Company's continuing operations are organized into three segments based
on different products and customer bases: GDX Automotive, Aerospace and Defense,
and Fine Chemicals. The accounting policies of the segments are the same as
those described in the summary of significant accounting policies (see Note 1).
Beginning with fiscal year 2001 reporting, the Fine Chemicals business is
presented as a distinct operating segment apart from the Company's Aerospace and
Defense segment. Prior period information has been restated to reflect this
change.
 
     The Company evaluates segment performance based on several factors, of
which the primary financial measure is segment operating profit. Segment
operating profit represents net sales from continuing operations less applicable
costs, expenses and provisions for restructuring and unusual items relating to
operations. Segment operating profit excludes corporate income and expenses,
provisions for unusual items, interest expense, income taxes and the minority
interest in AFC. See Note 14 related to unusual items reflected in the Company's
financial results.
 
     In November 2001, the Company's real estate business completed the sale of
approximately 1,100 acres of property in Eastern Sacramento County (California)
for $28 million. The consideration included cash of approximately $7 million and
a promissory note for the remainder of the sales price. The five-year promissory
note bears interest that is payable quarterly and includes annual minimum
principle payments of $550,000. The property lies outside of the Aerojet
Superfund site boundaries and is not a part of the approximate 2,600 acres of
land that have been carved out of the Superfund site designation under an
agreement with federal and state government regulators (see also Note 9(c)). The
$23 million pre-tax gain resulting from the sale of the land is included in the
activity for the Aerospace and Defense segment. The transaction was accounted
for under SFAS No. 66, "Accounting for Sales of Real Estate." The promissory
note portion of the consideration represents a material noncash investing
activity.
 
     Sales in 2001, 2000 and 1999 to the U.S. Government and its agencies
(principally the DoD) totaled $574 million, $481 million and $519 million,
respectively, and were generated almost entirely by the Aerospace and Defense
segment. Sales to General Motors, by the GDX Automotive segment were $259
million in 2001, $267 million in 2000 and $250 million in 1999. Sales to Ford by
the GDX Automotive segment were $188 million in 2001, $125 million in 2000 and
$120 million in 1999. Intersegment sales were not material.
 
                                        70

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 

<Table>
<Caption>
                                                             YEAR ENDED NOVEMBER 30
                                                           --------------------------
                                                            2001      2000      1999
                                                           ------    ------    ------
                                                             (DOLLARS IN MILLIONS)
<S>                                                        <C>       <C>       <C>
NET SALES FROM CONTINUING OPERATIONS
  GDX Automotive.........................................  $  808    $  485    $  456
  Aerospace and Defense..................................     640       534       570
  Fine Chemicals.........................................      38        28        45
                                                           ------    ------    ------
                                                           $1,486    $1,047    $1,071
                                                           ======    ======    ======
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
  TAXES
  GDX Automotive.........................................  $   (4)   $   29    $   16
  Aerospace and Defense..................................     131       104        67
  Fine Chemicals.........................................     (14)      (14)       (5)
  Segment restructuring..................................     (30)       --        --
  Segment unusual items..................................     149        --        21
                                                           ------    ------    ------
     Segment operating profit............................     232       119        99
  Interest expense.......................................     (33)      (18)       (6)
  Corporate and other expenses...........................     (15)      (10)      (10)
  Foreign exchange gain (loss)...........................      11        (8)       --
  Other restructuring....................................     (10)       --        --
  Other unusual items....................................       2         4        (9)
                                                           ------    ------    ------
                                                           $  187    $   87    $   74
                                                           ======    ======    ======
ASSETS
  GDX Automotive.........................................  $  543    $  250    $  252
  Aerospace and Defense..................................     600       753       742
  Fine Chemicals.........................................     114       102        75
                                                           ------    ------    ------
     Identifiable assets.................................   1,257     1,105     1,069
  Corporate..............................................     207       220       163
                                                           ------    ------    ------
     Total assets........................................  $1,464    $1,325    $1,232
                                                           ======    ======    ======
CAPITAL EXPENDITURES
  GDX Automotive.........................................  $   21    $   29    $   17
  Aerospace and Defense..................................      20        33        36
  Fine Chemicals.........................................       8        20        43
  Corporate..............................................      --        --         1
                                                           ------    ------    ------
                                                           $   49    $   82    $   97
                                                           ======    ======    ======
DEPRECIATION AND AMORTIZATION
  GDX Automotive.........................................  $   39    $   22    $   19
  Aerospace and Defense..................................      26        23        21
  Fine Chemicals.........................................       6         5         3
  Corporate..............................................       6        --         1
                                                           ------    ------    ------
                                                           $   77    $   50    $   44
                                                           ======    ======    ======
EMPLOYEES (UNAUDITED)
  GDX Automotive.........................................   9,212     5,100     4,600
  Aerospace and Defense..................................   1,464     2,500     2,634
  Fine Chemicals.........................................     152       250       186
  Corporate..............................................      49        45        60
                                                           ------    ------    ------
                                                           10,877     7,895     7,480
                                                           ======    ======    ======
</Table>

 
                                        71

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
     The Company's operations are located primarily in the U.S., Europe and
Canada. Inter-area sales are not significant to the total sales of any
geographic area. Unusual items included in operating profit pertained only to
U.S. operations. Geographic segment information is presented in the table below
(in millions):
 

<Table>
<Caption>
                                                                   YEAR ENDED
                                                                  NOVEMBER 30
                                                           --------------------------
                                                            2001      2000      1999
                                                           ------    ------    ------
<S>                                                        <C>       <C>       <C>
NET SALES FROM CONTINUING OPERATIONS
  United States..........................................  $1,003    $  828    $  825
  Germany................................................     210        84        90
  Canada.................................................     110       119       103
  Spain..................................................      57        --        --
  France.................................................      62        --        --
  U.S. export sales......................................      34        16        53
  Other..................................................      10        --        --
                                                           ------    ------    ------
                                                           $1,486    $1,047    $1,071
                                                           ======    ======    ======
</Table>

 

<Table>
<Caption>
                                                               AS OF NOVEMBER 30
                                                              --------------------
                                                              2001    2000    1999
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
LONG-LIVED ASSETS
  United States.............................................  $263    $284    $251
  Germany...................................................    82      38      45
  Canada....................................................    43      43      38
  Spain.....................................................    23      --      --
  France....................................................    20      --      --
  Other.....................................................    22      --      --
                                                              ----    ----    ----
                                                               453     365     334
  Corporate.................................................     1       1       1
                                                              ----    ----    ----
       Total long-lived assets..............................  $454    $366    $335
                                                              ====    ====    ====
</Table>

 
12.  RESTATED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
     The following quarterly financial information for the Company's fiscal
years 2001 and 2000 is, by means of this filing, being restated, except for the
fourth quarter of fiscal year 2001, to reflect certain adjustments discussed in
Note 2. The sum of earnings per share for the four quarters may not equal the
totals for the year due to changes in the weighted average number of shares
outstanding.
 
                                        72

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
                       CONSOLIDATED STATEMENTS OF INCOME
 

<Table>
<Caption>
                                                                     2001
                            --------------------------------------------------------------------------------------
                                FIRST QUARTER          SECOND QUARTER           THIRD QUARTER       FOURTH QUARTER
                            ---------------------   ---------------------   ---------------------   --------------
                            PREVIOUSLY              PREVIOUSLY              PREVIOUSLY
                             REPORTED    RESTATED    REPORTED    RESTATED    REPORTED    RESTATED
                            ----------   --------   ----------   --------   ----------   --------
                                               (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S>                         <C>          <C>        <C>          <C>        <C>          <C>        <C>
NET SALES.................    $ 353       $ 353       $ 410       $ 410       $ 356       $ 356         $ 367
COSTS AND EXPENSES
  Cost of products sold...      309         314         354         352         309         313           301
  Selling, general and
    administrative........       11          11          10           9          13          12            10
  Depreciation and
    amortization..........       18          17          20          20          21          21            19
  Interest expense........        9           9           9           9          10          10             5
  Other income, net.......       (1)         (1)         (3)         (3)         (5)         (5)           (2)
  Foreign exchange gain...      (11)        (11)         --          --          --          --            --
  Restructuring charge....       --          --          19          19          --          --            21
  Unusual items, net......        6           6           2           2          --          --          (159)
                              -----       -----       -----       -----       -----       -----         -----
                                341         345         411         408         348         351           195
INCOME (LOSS) FROM
  CONTINUING OPERATIONS
  BEFORE INCOME TAXES.....       12           8          (1)          2           8           5           172
PROVISION (CREDIT) FOR
  INCOME TAXES............       (5)         (6)         (4)         (3)          3           2            66
                              -----       -----       -----       -----       -----       -----         -----
    NET INCOME............    $  17       $  14       $   3       $   5       $   5       $   3         $ 106
                              =====       =====       =====       =====       =====       =====         =====
EARNINGS PER SHARE OF
  COMMON STOCK
  Basic...................    $0.39       $0.33       $0.08       $0.12       $0.12       $0.07         $2.49
                              =====       =====       =====       =====       =====       =====         =====
  Diluted.................    $0.39       $0.33       $0.08       $0.12       $0.12       $0.07         $2.47
                              =====       =====       =====       =====       =====       =====         =====
</Table>

 
---------------
 
Note:  See Note 1(a) for information related to business acquisition and
       disposition activities, Note 13 related to restructuring activities and
       Note 14 related to certain unusual items included in the Company
       financial results for the periods presented.
 
                                        73

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
                       CONSOLIDATED STATEMENTS OF INCOME
 

<Table>
<Caption>
                                                                           2000
                               ---------------------------------------------------------------------------------------------
                                   FIRST QUARTER          SECOND QUARTER           THIRD QUARTER          FOURTH QUARTER
                               ---------------------   ---------------------   ---------------------   ---------------------
                               PREVIOUSLY              PREVIOUSLY              PREVIOUSLY              PREVIOUSLY
                                REPORTED    RESTATED    REPORTED    RESTATED    REPORTED    RESTATED    REPORTED    RESTATED
                               ----------   --------   ----------   --------   ----------   --------   ----------   --------
                                                      (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S>                            <C>          <C>        <C>          <C>        <C>          <C>        <C>          <C>
NET SALES....................    $ 239       $ 239       $ 271       $ 271       $ 260       $ 260       $ 277       $ 277
COSTS AND EXPENSES
  Cost of products sold......      196         196         215         218         212         213         232         233
  Selling, general and
    administrative...........        8           8          10          10          10          10          12          12
  Depreciation and
    amortization.............       13          13          13          13          13          13          11          11
  Interest expense...........        3           3           4           4           5           5           6           6
  Other (income) expense,
    net......................        1           1          (3)         (3)         (5)         (5)         (5)         (5)
  Foreign exchange loss......       --          --          --          --          --          --           8           8
  Restructuring charge.......       --          --          --          --          --          --          --          --
  Unusual items, net.........        1           1          --          --          (6)         (6)          1           1
                                 -----       -----       -----       -----       -----       -----       -----       -----
                                   222         222         239         242         229         230         265         266
INCOME FROM CONTINUING
  OPERATIONS BEFORE INCOME
  TAXES......................       17          17          32          29          31          30          12          11
PROVISION FOR INCOME TAXES...        7           7          13          12          12          12           5           4
                                 -----       -----       -----       -----       -----       -----       -----       -----
INCOME FROM CONTINUING
  OPERATIONS.................       10          10          19          17          19          18           7           7
CUMULATIVE EFFECT OF A CHANGE
  IN ACCOUNTING PRINCIPLE,
  NET OF INCOME TAXES........       74          74          --          --          --          --          --          --
                                 -----       -----       -----       -----       -----       -----       -----       -----
    NET INCOME...............    $  84       $  84       $  19       $  17       $  19       $  18       $   7       $   7
                                 =====       =====       =====       =====       =====       =====       =====       =====
EARNINGS PER SHARE OF COMMON
  STOCK
  Basic
    Continuing operations....    $0.25       $0.25       $0.45       $0.41       $0.46       $0.43       $0.16       $0.14
    Cumulative effect of a
      change in accounting
      principle..............     1.76        1.76          --          --          --          --          --          --
                                 -----       -----       -----       -----       -----       -----       -----       -----
         Total...............    $2.01       $2.01       $0.45       $0.41       $0.46       $0.43       $0.16       $0.14
                                 =====       =====       =====       =====       =====       =====       =====       =====
  Diluted
    Continuing operations....    $0.25       $0.25       $0.45       $0.41       $0.46       $0.43       $0.16       $0.14
    Cumulative effect of a
      change in accounting
      principle..............     1.76        1.76          --          --          --          --          --          --
                                 -----       -----       -----       -----       -----       -----       -----       -----
         Total...............    $2.01       $2.01       $0.45       $0.41       $0.46       $0.43       $0.16       $0.14
                                 =====       =====       =====       =====       =====       =====       =====       =====
</Table>

 
Note:  See Note 1(a) for information related to business acquisition and
       disposition activities, Note 13 related to restructuring activities, Note
       14 related to certain unusual items included in the Company financial
       results for the periods presented and Note 8(a) related to the cumulative
       effect of a change in accounting principle.
 
                                        74

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
                          CONSOLIDATED BALANCE SHEETS
 

<Table>
<Caption>
                                                                      2001 -- RESTATED
                                                              --------------------------------
                                                              FEBRUARY 28   MAY 31   AUGUST 31
                                                              -----------   ------   ---------
<S>                                                           <C>           <C>      <C>
CURRENT ASSETS
  Cash and cash equivalents.................................    $   42      $   33    $   36
  Accounts receivable, net..................................       239         236       215
  Inventories, net..........................................       213         202       194
  Current deferred income taxes.............................         5          30        51
  Prepaid expenses and other................................        10          14        14
                                                                ------      ------    ------
     Total current assets...................................       509         515       510
NONCURRENT ASSETS
  Property, plant and equipment, net........................       533         511       512
  Recoverable from the U.S. Government and other third
     parties for environmental remediation costs............       199         195       188
  Deferred income taxes.....................................        64          54        19
  Prepaid pension asset.....................................       298         318       339
  Investments and other assets..............................       144         156       155
                                                                ------      ------    ------
     Total assets...........................................    $1,747      $1,749    $1,723
                                                                ======      ======    ======
CURRENT LIABILITIES
  Short-term borrowings and current portion of long-term
     debt...................................................    $   30      $   30    $   25
  Accounts payable..........................................       102          93        77
  Income taxes payable......................................         7          19        --
  Other current liabilities.................................       364         372       360
                                                                ------      ------    ------
     Total current liabilities..............................       503         514       462
NONCURRENT LIABILITIES
  Long-term debt, net of current portion....................       416         431       456
  Postretirement benefits other than pensions...............       237         235       229
  Reserves for environmental remediation....................       327         321       311
  Other noncurrent liabilities..............................        64          58        58
                                                                ------      ------    ------
     Total liabilities......................................     1,547       1,559     1,516
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
  Preference stock, par value of $1.00
  Common stock..............................................         4           4         4
  Other capital.............................................         3           4         7
  Retained earnings.........................................       221         224       226
  Accumulated other comprehensive loss, net of income
     taxes..................................................       (28)        (42)      (30)
                                                                ------      ------    ------
     Total shareholders' equity.............................       200         190       207
                                                                ------      ------    ------
       Total liabilities and shareholders' equity...........    $1,747      $1,749    $1,723
                                                                ======      ======    ======
</Table>

 
     As a result of the restatement, total assets decreased $2 million, $1
million and $2 million as of February 28, May 31 and August 31, respectively.
Total liabilities increased $10 million, $9 million and $10 million as of the
end of the first, second and third quarters, respectively.
 
                                        75

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
                          CONSOLIDATED BALANCE SHEETS
 

<Table>
<Caption>
                                                                      2000 -- RESTATED
                                                              --------------------------------
                                                              FEBRUARY 28   MAY 31   AUGUST 31
                                                              -----------   ------   ---------
<S>                                                           <C>           <C>      <C>
CURRENT ASSETS
  Cash and cash equivalents.................................    $   16      $   27    $   23
  Accounts receivable, net..................................       128         120       127
  Inventories, net..........................................       167         154       156
  Current deferred income taxes.............................        45          46        41
  Prepaid expenses and other................................         8          10        11
                                                                ------      ------    ------
     Total current assets...................................       364         357       358
NONCURRENT ASSETS
  Property, plant and equipment, net........................       342         349       357
  Recoverable from the U.S. Government and other third
     parties for environmental remediation costs............       210         211       208
  Deferred income taxes.....................................        96          90        83
  Prepaid pension asset.....................................       253         269       287
  Investments and other assets..............................        58          55        57
                                                                ------      ------    ------
     Total assets...........................................    $1,323      $1,331    $1,350
                                                                ======      ======    ======
CURRENT LIABILITIES
  Short-term borrowings and current portion of long-term
     debt...................................................    $    3      $   --    $    4
  Accounts payable..........................................        43          37        37
  Income taxes payable......................................        32          36        37
  Other current liabilities.................................       255         282       258
                                                                ------      ------    ------
     Total current liabilities..............................       333         355       336
NONCURRENT LIABILITIES
  Long-term debt, net of current portion....................       208         190       195
  Postretirement benefits other than pensions...............       251         247       243
  Reserves for environmental remediation....................       344         340       336
  Other noncurrent liabilities..............................        30          31        55
                                                                ------      ------    ------
     Total liabilities......................................     1,166       1,163     1,165
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
  Preference stock, par value of $1.00
  Common stock..............................................         4           4         4
  Other capital.............................................         1           2         2
  Retained earnings.........................................       171         184       204
  Accumulated other comprehensive loss, net of income
     taxes..................................................       (19)        (22)      (25)
                                                                ------      ------    ------
     Total shareholders' equity.............................       157         168       185
                                                                ------      ------    ------
       Total liabilities and shareholders' equity...........    $1,323      $1,331    $1,350
                                                                ======      ======    ======
</Table>

 
     As a result of the restatement total assets increased by $2 million as of
February 28, May 31 and August 31. Total liabilities increased $7 million, $8
million and $9 million as of the end of the first, second, and third quarters of
2000, respectively.
 
                                        76

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
13.  RESTRUCTURING CHARGES
 
     During 2001, the Company incurred certain restructuring charges (in
millions):
 

<Table>
<Caption>
                                                               PRE-TAX
ITEM                                                           EXPENSE
----                                                           -------
<S>                                                            <C>
GDX Automotive restructuring program........................     $29
Voluntary Enhanced Retirement Program.......................      10
AFC restructuring program...................................       1
                                                                 ---
  Restructuring charges.....................................     $40
                                                                 ===
</Table>

 
     In 2001, the Company recorded an initial charge of $19 million related to a
restructuring and consolidation of its GDX Automotive segment. The restructuring
program included the closure of the Marion, Indiana and Ballina, Ireland
manufacturing facilities and resulted in the elimination of approximately 760
employee positions. The decision to close these facilities was precipitated by
excess capacity and deterioration of performance and losses at these sites. The
decision to close the Ballina, Ireland plant was also due to difficulty in
retaining plant personnel in light of record employment levels in the region.
Remaining programs from these facilities were transferred to other facilities.
Later in 2001, the Company recorded an additional charge of $10 million related
to this program primarily to reflect a change in estimate for the anticipated
disposition values of the idled facilities and assets and benefits costs. The
restructuring charge includes approximately $14 million in cash charges
primarily related to severance and employee benefit costs. The balance of the
charge related to non-cash employee benefit costs and asset write-downs. This
restructuring program was substantially complete by the end of the Company's
fiscal year 2001.
 
     An additional restructuring program directed at the recently acquired
Draftex business was implemented in 2001. The restructuring program included the
closure of a manufacturing facility in Gruchet, France and the consolidation of
portions of manufacturing facilities in Chartres, France and Viersen, Germany.
The restructuring resulted in the elimination of more than 500 employee
positions. Restructuring costs totaling $17 million were recorded as an increase
to the goodwill recorded as part of the Draftex acquisition. The restructuring
charge includes approximately $15 million in cash charges primarily related to
severance and employee benefit costs. The balance of the restructuring charge
relates primarily to non-cash charges for the disposition of plant assets. As of
November 30, 2001, the remaining accrual was approximately $4 million,
substantially all of which related to severance costs paid in December 2001.
 
     The Company implemented a restructuring of its corporate headquarters in
late 2001. The program included a Voluntary Enhanced Retirement Program (VERP)
which was offered to certain eligible employees. The program resulted in a $10
million pre-tax charge to expense, of which $8 million will be a cash charge to
the Company.
 
     A restructuring plan implemented at AFC included the elimination of 50
employee positions and resulted in a charge to expense of $1 million. This
program was designed to "right-size" AFC's workforce.
 
14.  UNUSUAL ITEMS
 
a.  FISCAL YEAR 2001
 
     Unusual items reflected in the Company's results for fiscal year 2001
include a pre-tax gain on the sale of the Company's EIS business of $206 million
(see Note 1(a)), and a pre-tax inventory write-down and accrual totaling $48
million related to Aerojet's participation in a commercial launch vehicle
program (see Note 3) and a gain of $2 million related to an insurance settlement
for an environmental claim related to a discontinued operation. Additionally,
during 2001, the Company settled outstanding claims with the Internal Revenue
Service and the State of California. The benefit of the tax refunds, $13 million
on an after tax basis, was recorded in the income tax provision. The portion of
the tax refunds that will be repaid to the Company's defense customers is
reflected as an unusual expense item of $9 million in segment income ($5 million
after tax). Accordingly, after repayment to the Company's defense customers, the
Company will retain $8 million of the claims settled.
 
                                        77

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
b.  FISCAL YEAR 2000
 
     During fiscal year 2000, the Company incurred unusual items resulting in a
net pre-tax gain of $4 million. Unusual items included a gain of $5 million from
the sale of an equity interest in Aerojet Fine Chemicals to NextPharma (see also
Note 1(a)) above; a $3 million gain from an environmental settlement related to
a discontinued operation; a $3 million charge related to the pension settlement
of a discontinued Canadian operation, and; a $1 million loss on the disposition
of property related to a discontinued operation.
 
c.  FISCAL YEAR 1999
 
     During fiscal year 1999, the Company incurred unusual items resulting in
net pre-tax income before taxes of $12 million. Unusual items included a gain of
$59 million on settlements covering certain environmental claims with certain of
the Company's insurance carriers; a provision of $33 million for environmental
remediation costs associated principally with the Company's initial estimate of
its probable share as a Potentially Responsible Party (PRP) in the portion of
the San Gabriel Valley Basin Superfund Site known as the Baldwin Park Operable
Unit (BPOU); a provision for environmental remediation costs at the Company's
Lawrence, Massachusetts site of $6 million; a provision for environmental
remediation costs associated with other Company sites of $2 million; a charge of
$4 million related to a pricing dispute with a major vehicle sealing customer; a
charge of $1 million for the write-down of certain GDX Automotive assets to net
realizable value; and a charge of $1 million related to relocation/retention
costs associated with the spin-off of OMNOVA.
 
15.  NEW ACCOUNTING PRONOUNCEMENTS
 
     Effective July 1, 2001, the Company adopted the provisions of SFAS No. 141,
"Business Combinations" (SFAS 141), which is effective for all business
combinations initiated after June 30, 2001. SFAS 141 prohibits the use of the
pooling-of-interest method for business combinations and establishes the
accounting and financial reporting requirements for business combinations
accounted for by the purchase method. SFAS 141 also changes the criteria to
recognize intangible assets apart from goodwill. The Company adopted the
provisions of SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS 142)
effective December 1, 2001. Under SFAS 142, goodwill and indefinite lived
intangible assets are no longer amortized but are reviewed annually, or more
frequently if indications of possible impairment exist, for impairment. The
Company has performed the requisite transitional impairment tests for goodwill
and other intangible assets as of December 1, 2001 and has determined that these
assets are not impaired as of that date. The adoption of SFAS 142 results in a
reduction of annual amortization expenses of approximately $4 million related to
goodwill and other indefinite lived intangible assets. The adoption of these
standards will not have a material impact on the Company's results of
operations, liquidity or financial condition.
 
     In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 143, "Accounting for Asset Retirement Obligations" (SFAS 143) that provides
accounting guidance for the costs of retiring long-lived assets. SFAS 143 is
effective for fiscal years beginning after June 15, 2002. The Company is
currently assessing the impact adoption of this standard will have on its
financial statements, but a preliminary review indicates that it will not have a
material effect on the Company's results of operations, liquidity or financial
condition.
 
     In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS 144) that provides accounting
guidance for financial accounting and reporting for the impairment or disposal
of long-lived assets. The statement supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for the Long-Lived Assets to be Disposed
Of." SFAS 144 also supersedes the accounting and reporting provisions of
Accounting Principal Board's Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
related to the disposal of a segment of a business. SFAS 144 is effective for
fiscal years beginning after December 15, 2001, with early adoption encouraged.
The Company has adopted the provisions of SFAS 144 as of December 1, 2001. The
adoption of SFAS 144 is not expected to have a material effect on the Company's
results of operations, liquidity or financial condition.
 
                                        78

<PAGE>
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
16.  SUBSEQUENT EVENTS
 
     On September 14, 2001, Aerojet reached agreement with the relevant agencies
on a Stipulation to modify the Partial Consent Decree (Decree) to carve out
approximately 2,600 acres from the Sacramento Superfund site designation. On
September 25, 2001, the Stipulation was lodged with the United States District
Court and was followed by a 30-day public comment period. Due to the anthrax
attacks in Washington DC and subsequent delays in the federal mail system, the
United States Department of Justice continued to receive comments after the 30
day period. In addition, three water purveyors and a public interest group have
attempted to delay carve-out until the Stipulation's water replacement plan is
revised. On February 14, 2002, the claims of two of the water purveyors were
removed to the same Unites States District Court where the Stipulation is
pending. On March 1, 2002, the agencies filed the motion to approve the Decree
modification and management expects the United Stated District Court to approve
the modification in due course. See also Note 9(c) for additional details.
 
     On December 27, 2001, the Company reacquired NextPharma's 40 percent
ownership interest in AFC from NextPharma for approximately $25 million. The
consideration included cash of $13 million and the return of the common stock in
NextPharma's parent company held by GenCorp, which represented approximately 31
percent of the common stock interest in that entity. The cash component is due
in installments: $7 million paid on December 27, 2001; $2.0 million paid on
February 15, 2002; $2.0 million to be paid in May 2002, and; $2.0 million to be
paid in August 2002. As part of the transaction, other agreements between the
two companies were terminated, including a comprehensive sales and marketing
agreement. With the termination of these agreements, AFC reassumed
responsibility for sales, marketing and customer interface. The acquisition
agreement also contains a provision for a contingent payment of up to $12
million in the event of a disposition of AFC by GenCorp within the next two
years. As discussed in Note 1(a), NextPharma acquired the minority interest in
AFC in June 2000.
 
     In February 2002 an independent arbitrator rendered a decision on the
dispute between The Laird Group and the Company involving certain adjustments to
the purchase price. However, there are further issues impacting the purchase
price including the effect of the arbitrator's decision, which have yet to be
resolved between the parties. Management believes that resolution of these
issues will not have a material effect on the Company's results of operations,
liquidity or financial condition.
 
     On February 28, 2002 the Company executed an amendment to the Credit
Facility, which provides an additional $25 million term loan. See Note 7.
 
                                        79

<PAGE>
 

 
                                   PART III
 

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     Information with respect to nominees who will stand for election as a
director of the Company at the March 27, 2002 Annual Meeting of Shareholders is
set forth on Pages 2 and 3 of the Company's 2002 Proxy Statement and is
incorporated herein by reference. Information with respect to directors of the
Company whose terms extend beyond the March 27, 2002 Annual Meeting of
Shareholders is set forth on pages 3 and 4 of the Company's 2002 Proxy Statement
and is incorporated herein by reference.
 
     Based solely upon review of reports of ownership, reports of changes of
ownership and written representations under Section 16(a) of the Securities
Exchange Act of 1934 which were furnished to the Company during or with respect
to 2001 by persons who were, at any time during 2001, directors or officers of
the Company or beneficial owners of more than 10 percent of the outstanding
shares of Common Stock, no such person failed to file on a timely basis any
report required by such section during 2001, except J. Robert Anderson who had a
late filing of Form 3 due to international travel.
 

ITEM 11.  EXECUTIVE COMPENSATION
 
     Information regarding executive compensation is set forth on Pages 9
through 23 of the Company's 2002 Proxy Statement and is incorporated herein by
reference.
 

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     Information regarding the security ownership of certain beneficial owners
and management is set forth on Pages 5 and 6 of the Company's 2002 Proxy
Statement and is incorporated herein by reference.
 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     Information regarding certain transactions and employment agreements with
management is set forth on Pages 16 through 19 of the Company's 2002 Proxy
Statement and is incorporated herein by reference.
 

                                    PART IV
 

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
     The following documents are filed as part of this report:
 
(a)(1) and (2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
 
     A listing of financial statements and financial statement schedules is set
forth in a separate section of this report beginning on GC-1.
 
(a)(3) EXHIBITS
 
     An index of exhibits begins on page -i- of this report.
 
(b) REPORTS ON FORM 8-K
 
     The Company filed a Report on Form 8-K on October 22, 2001 incorporating
its press release dated October 22, 2001 announcing that Aerojet had completed
the sale of EIS business to Northrop Grumman for $315 million in cash.
 
     The Company filed a Report on Form 8-K on November 5, 2001 announcing
Aerojet had completed its October 19, 2001 sale of its EIS business to Northrop
Grumman for $315 million in cash, subject to certain working capital adjustments
as defined in the agreement. The Report on Form 8-K included copies of the Asset
Purchase Agreement and related agreements between Aerojet and Northrop Grumman,
as well the unaudited pro forma combined consolidated financial statements of
GenCorp.
 
     The Company filed a Report on Form 8-K on November 26, 2001 incorporating
its press release dated November 23, 2001 announcing a definitive agreement to
reacquire a 40 percent ownership position in AFC from NextPharma for
approximately $13 million in cash, the return of GenCorp's interest in
NextPharma's parent and a provision for a contingent payment of up to $12
million in the event of a disposition of AFC within the next two years.
                                        80

<PAGE>
 
     The Company filed a Report on Form 8-K on December 3, 2001 incorporating
its press release dated November 30, 2001 announcing the sale of approximately
1,100 acres of property in East Sacramento County to Elliott Homes Inc., for
approximately $28 million. The land lies outside of the Aerojet Superfund site
boundaries and is not a part of the approximate 2,600 acres of land that have
been declared clean and are proposed to be carved out of the Superfund site
designation under an agreement with federal and state regulators.
 
(c) EXHIBITS
 
     The response to this portion of Item 14 is set forth in a separate section
of this report immediately following the exhibit index.
 
(d) FINANCIAL STATEMENT SCHEDULES
 
     All financial statement schedules have been omitted because they are
inapplicable, not required by the instructions or because the required
information is either incorporated herein by reference or included in the
financial statements or notes thereto included in this report.
 
                                        81

<PAGE>
 

                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
March 6, 2002                             GENCORP INC.
 
                                          By: /s/ WILLIAM R. PHILLIPS
                                            ------------------------------------
                                                 William R. Phillips
                                                 Senior Vice President, Law;
                                                 General Counsel and Secretary
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 

<Table>
<Caption>
                       SIGNATURE                                   TITLE                      DATE
                       ---------                                   -----                      ----
<S>  <C>                                            <C>                                   <C>
 
By:               /s/ ROBERT A. WOLFE               Chairman, Chief Executive Officer     March 6, 2002
     ---------------------------------------------
                    Robert A. Wolfe
 
By:                /s/ TERRY L. HALL                Senior Vice President and Chief       March 6, 2002
     ---------------------------------------------  Operating Officer
                     Terry L. Hall
 
By:               /s/ YASMIN R. SEYAL               Senior Vice President, Finance;       March 6, 2002
     ---------------------------------------------  Acting Chief Financial Officer
                    Yasmin R. Seyal                 (Principal Financial and Accounting
                                                    Officer)
 
By:                        *                        Director                              March 6, 2002
     ---------------------------------------------
                  J. Robert Anderson
 
By:                        *                        Director                              March 6, 2002
     ---------------------------------------------
                    J. Gary Cooper
 
By:                        *                        Director                              March 6, 2002
     ---------------------------------------------
                     Irving Gutin
 
By:                        *                        Director                              March 6, 2002
     ---------------------------------------------
                    William K. Hall
 
By:                        *                        Director                              March 6, 2002
     ---------------------------------------------
                  James M. Osterhoff
 
By:                        *                        Director                              March 6, 2002
     ---------------------------------------------
                  Steven G. Rothmeier
 
By:                        *                        Director                              March 6, 2002
     ---------------------------------------------
                   Sheila E. Widnall
 
  *Signed by the undersigned as attorney-in-fact
      and agent for the Directors indicated
 
By:             /s/ WILLIAM R. PHILLIPS                                                   March 6, 2002
     ---------------------------------------------
                  William R. Phillips
</Table>

 
                                        82

<PAGE>
 
                           ANNUAL REPORT ON FORM 10-K

                     ITEM 14(a)(1)(2) AND (3), (c) AND (d)
                        LIST OF FINANCIAL STATEMENTS AND
                         FINANCIAL STATEMENT SCHEDULES

                                 EXHIBIT INDEX
                                CERTAIN EXHIBITS
                      FISCAL YEAR ENDED NOVEMBER 30, 2001
                                  GENCORP INC.
                       SACRAMENTO, CALIFORNIA 95853-7012

<PAGE>
 
                                  GENCORP INC
 

                             ITEM 14(a)(1) AND (2)
 
        INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
 

<Table>
<Caption>
                                                               PAGE
                                                              NUMBER
                                                              ------
<S>                                                           <C>
(1) FINANCIAL STATEMENTS
The following consolidated financial statements of GenCorp
  Inc. are included in Part II, Item 8 of this report:
  Report of Ernst & Young LLP, Independent Accountants......     38
  Consolidated Statements of Income for each of the three
     years ended November 30, 2001..........................     39
  Consolidated Balance Sheets as of November 30, 2001 and
     2000...................................................     40
  Consolidated Statements of Shareholders' Equity for each
     of the three years ended November 30, 2001.............     41
  Consolidated Statements of Cash Flows for each of the
     three years ended November 30, 2001....................     42
Notes to Consolidated Financial Statements..................     43
</Table>

 
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
 
All financial statement schedules have been omitted because they are
inapplicable, not required by the instructions or because the required
information is either incorporated herein by reference or included in the
financial statements or notes thereto included in this report.
 
                                       GC-1

<PAGE>
 
             CONSENT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
 
     We consent to the incorporation by reference in GenCorp Inc.'s Registration
Statement Nos. 333-91783, 333-35621, 33-61928, 33-28056 and 2-98730 on Form S-8,
Post Effective Amendment No. 1 to Registration Statement Nos. 2-80440 and
2-83133 on Form S-8, and Post Effective Amendment No. 4 to Registration
Statement No. 2-66840 on Form S-8 of our report dated February 28, 2002, with
respect to the consolidated financial statements of GenCorp Inc. included in the
Annual Report (Form 10-K) for the year ended November 30, 2001.
 
                                                               Ernst & Young LLP
 
Sacramento, California
February 28, 2002
 
                                       GC-2

<PAGE>
 

                                 EXHIBIT INDEX
 

<Table>
<Caption>
   TABLE       EXHIBIT                                                       EXHIBIT
  ITEM NO.     DESCRIPTION                                                   LETTER
  --------     -----------                                                   -------
<C>            <S>                                                           <C>
    2          PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT,
               LIQUIDATION, OR SUCCESSION
    2.1        Asset Purchase Agreement By and Between Aerojet-General
               Corporation (Aerojet) and Northrop Grumman Systems
               Corporation (Northrop Grumman) dated April 19, 2001 was
               filed as Exhibit 2.1 to the Company's Current Report on Form
               8-K dated November 5, 2001 (File No. 1-1520), and is
               incorporated herein by reference.
    2.2        Amendment No. 1 to Asset Purchase Agreement By and Between
               Aerojet and Northrop Grumman, dated September 19, 2001 was
               filed as Exhibit 2.2 to the Company's Current Report on Form
               8-K dated November 5, 2001 (File No. 1-1520), and is
               incorporated herein by reference.
    2.3        Amendment No. 2 to Asset Purchase Agreement By and Between
               Aerojet and Northrop Grumman, dated October 19, 2001 was
               filed as Exhibit 2.3 to the Company's Current Report on Form
               8-K dated November 5, 2001 (File No. 1-1520), and is
               incorporated herein by reference.
    2.4        Amended and Restated Environmental Agreement By and Among
               Aerojet and Northrop Grumman, dated October 19, 2001
               (Exhibit F to Asset Purchase Agreement By and Between
               Aerojet and Northrop Grumman dated April 19, 2001 was filed
               as Exhibit 2.4 to the Company's Current Report on Form 8-K
               dated November 5, 2001 (File No. 1-1520), and is
               incorporated herein by reference.
    2.5        Guaranty Agreement By GenCorp Inc. (GenCorp or the Company)
               for the Benefit of Northrop Grumman (Exhibit H to Asset
               Purchase Agreement By and Between Aerojet and Northrop
               Grumman dated April 19, 2001) was filed as Exhibit 2.5 to
               the Company's Current Report on Form 8-K dated November 5,
               2001 (File No. 1-1520), and is incorporated herein by
               reference.
    2.6        Agreement between The Laird Group Public Limited Company and
               GenCorp for the sale and purchase of all of the issued
               shares of various companies comprising the Draftex
               International Car Body Seals Division was filed as Exhibit
               10.1 to the Current Report on Form 8-K dated December 29,
               2000 (File No. 1-1520), and is incorporated herein by
               reference.
    3          ARTICLES OF INCORPORATION AND BY-LAWS
    3.1        The Amended Articles of Incorporation of GenCorp, as amended
               on March 29, 2000 (as filed with the Secretary of State of
               Ohio on June 19, 2000), were filed as Exhibit 3.1 to the
               Company's Quarterly Report on Form 10-Q for the fiscal
               quarter ended August 31, 2000 (File No. 1-1520), and are
               incorporated herein by reference.
    3.2        The Amended Code of Regulations of GenCorp, as amended on
               March 29, 2000, were filed as Exhibit 3.2 to the Company's
               Quarterly Report on Form 10-Q for the fiscal quarter ended
               August 31, 2000 (File No. 1-1520), and are incorporated
               herein by reference.
    4          INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
               INCLUDING INDENTURES
    4.1        Amended and Restated Rights Agreement (with exhibits) dated
               as of December 7, 1987 between GenCorp and Morgan
               Shareholder Services Trust Company as Rights Agent was filed
               as Exhibit D to the Company's Annual Report on Form 10-K for
               the fiscal year ended November 30, 1987 (File No. 1-1520),
               and is incorporated herein by reference.
</Table>

 
                                        i

<PAGE>
 

<Table>
<Caption>
   TABLE       EXHIBIT                                                       EXHIBIT
  ITEM NO.     DESCRIPTION                                                   LETTER
  --------     -----------                                                   -------
<C>            <S>                                                           <C>
    4.2        Amendment to Rights Agreement among GenCorp, The First
               Chicago Trust Company of New York, as resigning Rights Agent
               and The Bank of New York, as successor Rights Agent, dated
               August 21, 1995 was filed as Exhibit A to the Company's
               Annual Report on Form 10-K for the fiscal year ended
               November 30, 1995 (File No. 1-1520), and is incorporated
               herein by reference.
    4.3        Amendment to Rights Agreement between GenCorp and The Bank
               of New York as successor Rights Agent, dated as of January
               20, 1997 was filed as Exhibit 4.1 to the Company's Current
               Report on Form 8-K Date of Report January 20, 1997 (File No.
               1-1520), and is incorporated herein by reference.
    4.4        Credit Agreement among GenCorp, as the Borrower, Bankers
               Trust Company, as Administrative Agent, Bank One, NA, as
               Syndication Agent, Deutsche Bank Securities Inc. and Banc
               One Capital Markets, Inc., as Joint Lead Arrangers and Joint
               Book Manager and Various Lending Institutions was filed as
               Exhibit 10.2 to the Current Report on Form 8-K dated
               December 29, 2000 (File No. 1-1520), and is incorporated
               herein by reference.
    4.5        Amendment No. 1 to Credit Agreement and Amendment No. 1 to       A
               Post Closing Agreement dated January 26, 2001, Amendment No.
               2 to Credit Agreement, Amendment No. 2 to Post Closing
               Agreement, Amendment No. 1 to Collateral Agreements, and
               Limited Waiver dated August 31, 2001, Limited Waiver dated
               October 15, 2001, Limited Waiver and Temporary Commitment
               Increase Agreement dated November 20, 2001, Limited Waiver
               and Amendment dated December 31, 2001, Limited Waiver dated
               February 15, 2002, Amendment No. 4 to Credit Agreement and
               Waiver dated February 28, 2002, between the Company and
               Bankers Trust Company as a Lender and as Administrative
               Agent for the Lenders ("Administrative Agent"), and the
               other Lenders signatory to the Credit Agreement.
   10          MATERIAL CONTRACTS
   10.1        Distribution Agreement dated September 30, 1999 between
               GenCorp Inc. and OMNOVA Solutions Inc. ("OMNOVA") was filed
               as Exhibit B to the Company's Annual Report on Form 10-K for
               the fiscal year ended November 30, 1999 (File No. 1-1520),
               and is incorporated herein by reference.
   10.2        Tax Matters Agreement dated September 30, 1999 between
               GenCorp and OMNOVA was filed as Exhibit C to the Company's
               Annual Report on Form 10-K for the fiscal year ended
               November 30, 1999 (File No. 1-1520), and is incorporated
               herein by reference.
   10.3        Alternative Dispute Resolution Agreement dated September 30,
               1999 between GenCorp and OMNOVA was filed as Exhibit D to
               the Company's Annual Report on Form 10-K for the fiscal year
               ended November 30, 1999 (File No. 1-1520), and is
               incorporated herein by reference.
   10.4        Agreement on Employee Matters dated September 30, 1999
               between GenCorp Inc. and OMNOVA was filed as Exhibit E to
               the Company's Annual Report on Form 10-K for the fiscal year
               ended November 30, 1999 (File No. 1-1520), and is
               incorporated herein by reference.
   10.5        Services and Support Agreement between GenCorp Inc. and
               OMNOVA was filed as Exhibit F to the Company's Annual Report
               on Form 10-K for the fiscal year ended November 30, 1999
               (File No. 1-1520), and is incorporated herein by reference.
</Table>

 
                                        ii

<PAGE>
 

<Table>
<Caption>
   TABLE       EXHIBIT                                                       EXHIBIT
  ITEM NO.     DESCRIPTION                                                   LETTER
  --------     -----------                                                   -------
<C>            <S>                                                           <C>
10(iii)(A)     MANAGEMENT CONTRACTS, COMPENSATORY PLANS OR ARRANGEMENTS
   10.6        An Employment Agreement dated July 28, 1997 between the
               Company and Robert A. Wolfe was filed as Exhibit A to the
               Company's Annual Report on Form 10-K for the fiscal year
               ended November 30, 1997 (File No. 1-1520), and is
               incorporated herein by reference.
   10.7        Employment Agreement dated May 6, 1999 between the Company
               and Terry L. Hall was filed as Exhibit 10.1 to the Company's
               Quarterly Report on Form 10-Q for the quarter ended August
               31, 1999 (File No. 1-1520) and is incorporated herein by
               reference.
   10.8        Severance Agreement dated as of October 1, 1999 between the
               Company and Robert A. Wolfe was filed as Exhibit G to the
               Company's Annual Report on Form 10-K for the fiscal year
               ended November 30, 1999 (File No. 1-1520), and is
               incorporated herein by reference.
   10.9        Employment Retention Agreement dated November 30, 2001           B
               between the Company and Robert A. Wolfe providing
               supplemental retirement benefits and other matters.
   10.10       Form of Severance Agreement granted to certain executive
               officers of the Company to provide for payment of an amount
               equal to annual base salary and highest average annual
               incentive compensation awarded during three most recent
               previous fiscal years or, if greater, target award for the
               fiscal year in question, multiplied by a factor of two or
               three, as the case may be, if their employment should
               terminate for any reason other than death, disability,
               willful misconduct or retirement within three years after a
               change in control, as such term is defined in such agreement
               was filed as Exhibit D to the Company's Annual Report on
               Form 10-K for the fiscal year ended November 30, 1997 (File
               No. 1-1520), and is incorporated herein by reference.
   10.11       GenCorp Inc. 1999 Equity and Performance Incentive Plan was
               filed as Exhibit H to the Company's Annual Report on Form
               10-K for the fiscal year ended November 30, 1999 (File
               No.1-1520), and is incorporated herein by reference.
   10.12       GenCorp 1996 Supplemental Retirement Plan for Management
               Employees effective March 1, 1996 was filed as Exhibit B to
               the Company's Annual Report on Form 10-K for the fiscal year
               ended November 30, 1996 (File No. 1-1520), and is
               incorporated herein by reference.
   10.13       Benefits Restoration Plan for Salaried Employees of GenCorp
               Inc. and Certain Subsidiary Companies as amended and
               restated effective December 1, 1986, was filed as Exhibit G
               to the Company's Annual Report on Form 10-K for the fiscal
               year ended November 30, 1987 (File No. 1-1520), and is
               incorporated herein by reference.
   10.14       Information relating to the Deferred Bonus Plan of GenCorp
               Inc. is contained in Post-Effective Amendment No. 1 to Form
               S-8 Registration Statement No. 2-83133 dated April 18, 1986
               and is incorporated herein by reference.
   10.15       Amendment to the Deferred Bonus Plan of GenCorp Inc.
               effective as of April 5, 1987, was filed as Exhibit I to the
               Company's Annual Report on Form 10-K for the fiscal year
               ended November 30, 1987 (File No. 1-1520), and is
               incorporated herein by reference.
   10.16       GenCorp Inc. Deferred Compensation Plan for Nonemployee
               Directors effective January 1, 1992 was filed as Exhibit A
               to the Company's Annual Report on Form 10-K for the fiscal
               year ended November 30, 1991 (File No. 1-1520), and is
               incorporated herein by reference.
   10.17       GenCorp Inc. 1993 Stock Option Plan effective March 31, 1993
               was filed as Exhibit 4.1 to Form S-8 Registration Statement
               No. 33-61928 dated April 30, 1993 and is incorporated herein
               by reference.
</Table>

 
                                       iii

<PAGE>
 

<Table>
<Caption>
   TABLE       EXHIBIT                                                       EXHIBIT
  ITEM NO.     DESCRIPTION                                                   LETTER
  --------     -----------                                                   -------
<C>            <S>                                                           <C>
   10.18       GenCorp Inc. 1997 Stock Option Plan effective March 26, 1997
               was filed as Exhibit 4.1 to Form S-8 Registration Statement
               No. 333-35621 dated September 15, 1997 and is incorporated
               herein by reference.
   10.19       1999 GenCorp Key Employee Retention Plan providing for
               payment of up to two annual cash retention payments to
               Eligible Employees who satisfactorily continue their
               employment with GenCorp, attain specified performance
               objectives (including the spin-off of the GenCorp
               Performance Chemicals and Decorative and Building Products
               Divisions), and meet all plan provisions was filed as
               Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
               for the quarter ended February 28, 1999 (File No. 1-1520),
               and is incorporated herein by reference.
   10.20       Form of Key Employee Retention Letter Agreement was filed as
               Exhibit I to the Company's Annual Report on Form 10-K for
               the fiscal year ended November 30, 1999 (File No. 1-1520),
               and is incorporated herein by reference.
   10.21       1999 GenCorp Key Employee Retention Plan was filed as
               Exhibit J to the Company's Annual Report on Form 10-K for
               the fiscal year ended November 30, 1999 (File No. 1-1520),
               and is incorporated herein by reference.
   10.22       Form of Relocation Agreement between the Company and certain
               Employees was filed as Exhibit K to the Company's Annual
               Report on Form 10-K for the fiscal year ended November 30,
               1999 (File No. 1-1520), and is incorporated herein by
               reference.
   10.23       Form of Restricted Stock Agreement between the Company and
               Nonemployee Directors providing for payment of part of
               Directors' compensation for service on the Board of
               Directors in Company stock was filed as Exhibit 10.1 to the
               Company's Quarterly Report on Form 10-Q for the quarter
               ended February 28, 1998 (File No. 1-1520), and is
               incorporated herein by reference.
   10.24       Form of Restricted Stock Agreement between the Company and
               Nonemployee Directors providing for payment of part of
               Directors' compensation for service on the Board of
               Directors in Company stock was filed as Exhibit 10.1 to the
               Company's Quarterly Report on Form 10-Q for the quarter
               ended February 28, 1999 (File No. 1-1520), and is
               incorporated herein by reference.
   10.25       Form of Director and Officer Indemnification Agreement was
               filed as Exhibit L to the Company's Annual Report on
               Form10-K for the fiscal year ended November 30, 1999 (File
               No.1-1520), and is incorporated herein by reference.
   10.26       Form of Director Indemnification Agreement was filed as
               Exhibit M to the Company's Annual Report on Form 10-K for
               the fiscal year ended November 30, 1999 (File No. 1-1520),
               and is incorporated herein by reference.
   10.27       Form of Officer Indemnification Agreement was filed as
               Exhibit N to the Company's Annual Report on Form 10-K for
               the fiscal year ended November 30, 1999 (File No. 1-1520),
               and is incorporated herein by reference.
   10.28       GenCorp Inc. Executive Incentive Compensation Program,
               amended September 8, 1995 to be effective for the 1996
               fiscal year was filed as Exhibit E to the Company's Annual
               Report on Form 10-K for the fiscal year ended November 30,
               1997 (File No. 1-1520), and is incorporated herein by
               reference.
   10.29       2001 Supplemental Retirement Plan For GenCorp Executives         C
               effective December 1, 2001, incorporating the Company's
               Voluntary Enhanced Retirement Program.
   21          SUBSIDIARIES OF THE REGISTRANT
               Listing of subsidiaries of the Company.                          D
</Table>

 
                                        iv

<PAGE>
 

<Table>
<Caption>
   TABLE       EXHIBIT                                                       EXHIBIT
  ITEM NO.     DESCRIPTION                                                   LETTER
  --------     -----------                                                   -------
<C>            <S>                                                           <C>
   23          CONSENT OF EXPERTS
               Consent of Ernst & Young LLP, Independent Accountants, is
               contained on page GC-2 of this Form 10-K and is incorporated
               herein by reference.
   24          POWER OF ATTORNEY
               Powers of Attorney executed by J. R. Anderson, J. G. Cooper,     E
               I. Gutin, W.K. Hall, J.M. Osterhoff, S.G. Rothmeier, and
               S.E. Widnall, Directors of the Company.
</Table>

 
                                        v




<PAGE>


                                                                    Item No. 4.5
                                                                       Exhibit A



                                                                  Execution Copy

                                 AMENDMENT NO. 1
                             TO CREDIT AGREEMENT AND
                    AMENDMENT NO. 1 TO POST CLOSING AGREEMENT

         This AMENDMENT NO. 1 TO CREDIT AGREEMENT AND AMENDMENT NO. 1 TO POST
CLOSING AGREEMENT (this "Amendment"), dated as of January 26, 2001 (the
"Effective Date") is made among GENCORP INC., an Ohio corporation ("Borrower"),
BANKERS TRUST COMPANY, for itself, as a Lender and as Administrative Agent for
the Lenders ("Administrative Agent"), and the other Lenders signatory to the
hereinafter defined Credit Agreement.

                                    RECITALS

         A. The Administrative Agent, the Lenders and the Borrower are party to
that certain Credit Agreement dated as of December 28, 2000 (as amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement").

         B. On and subject to the terms and conditions hereof, the
Administrative Agent, the Lenders and the Borrower wish to amend certain
provisions of the Credit Agreement.

         C. Pursuant to that certain Post Closing Agreement dated December 28,
2000 among the Borrower and the Administrative Agent (the "Post Closing
Agreement"), the Borrower has agreed to take or cause to be taken on its behalf
certain actions with respect to Collateral to be provided to the Administrative

Agent on behalf of the Secured Creditors.

         D. The Borrower has requested that the Lenders provide additional time
for the Borrower to take such actions under the Post Closing Agreement by
amending the Post Closing Agreement as set forth herein.

         E. On and subject to the terms and conditions hereof, the
Administrative Agent, the Lenders and the Borrower wish to amend certain
provisions of the Post Closing Agreement.

         F. This Amendment shall constitute a Loan Document and these Recitals
shall be construed as part of this Amendment; capitalized terms used herein
without definition are so used as defined in the Credit Agreement.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree as follows:

         1. Amendments to Credit Agreement. Subject to the conditions set forth
in Section 4 hereof, the Credit Agreement is hereby amended as follows:

                  (a) The definition of "Standby Letters of Credit" contained in
         Article I of the Credit Agreement is hereby deleted in its entirety and
         the following is substituted therefor:

<PAGE>
                           ""Standby Letters of Credit" means any of the
                  irrevocable standby letters of credit issued for the account
                  of the Borrower or any of its Subsidiaries pursuant to this
                  Agreement, in form acceptable to the Facing Bank, together
                  with any increases or decreases in the Stated Amount thereof
                  and any renewals, amendments and/or extensions thereof."

                  (b) Subsection (a)(i) of Section 2.10 of the Credit Agreement
         is hereby amended by inserting the words "or any of its Subsidiaries"
         immediately following the words "for the account of the Borrower".

                  (c) Subsection (b)(C) of Section 2.10 of the Credit Agreement
         is hereby amended by inserting the words "or any of its Subsidiaries"
         immediately following the words "the Borrower".

         2. Amendments to Post Closing Agreement. Subject to the conditions set
forth in Section 4 hereof, the Post Closing Agreement is amended as follows:

                  (a) Paragraph 2 of the Post Closing Agreement is amended by
         deleting the words "sixty (60)" where they appear in the first line of
         paragraph 2 and replacing such words with the words "ninety (90)".

                  (b) Paragraph 3 of the Post Closing Agreement is amended by
         deleting the words "sixty (60)" where they appear in the first line of
         paragraph 3 and replacing such words with the words "ninety (90)".

                  (c) Paragraph 4 of the Post Closing Agreement is amended by
         deleting the words "thirty (30)" where they appear in the first line of
         paragraph 4 and replacing such words with the words "sixty (60)".

                  (d) Subparagraphs (a), (b) and (c) of Paragraph 7 of the Post
         Closing Agreement are deleted in their entirety and the following are
         substituted therefor:

                           "(a) amend Annex B to the Subsidiary Pledge Agreement
                  to reflect the pledge by Penn International Inc. of its pro
                  rata share of 65% of the total stock of GDX Automotive BV;

                           (b) amend Annex B to the Borrower Pledge Agreement to
                  reflect the pledge by the Borrower of its pro rata share of
                  65% of the total stock of GDX Automotive BV;

                           (c) execute documentation, make filings and
                  otherwise take such actions and deliver such documents as the
                  Administrative Agent may require to (i) cause Penn
                  International Inc. to grant a lien and security interest to
                  the Collateral Agent for the benefit of the Lenders of its pro
                  rata share of 65% of the total stock of GDX Automotive BV and
                  to perfect such security interest and (ii) cause the Borrower
                  to grant a lien and security interest to the Collateral Agent
                  for the benefit of the Lenders of its pro rata share of 65% of
                  the total stock of GDX 


                                       2

<PAGE>
                  Automotive BV and to perfect such security interest, all under
                  the laws of the Netherlands;"

                  (e) Subparagraphs (a) and (g) of Paragraph 12 of the Post
         Closing Agreement are deleted in their entirety and the following are
         substituted therefor in the appropriate alphabetical order:

                           "(a) (i) grant mortgages on its real estate located
                  in (A) Batesville, Arkansas, (B) Marion, Indiana, and (C)
                  Wabash, Indiana and (ii) use its best efforts to grant a
                  leasehold mortgage on its real estate located in Berger,
                  Missouri;"

                           "(g) execute documentation, make filings and
                  otherwise take such actions and deliver or cause to be
                  delivered such documents, including, without limitation,
                  landlord's consents and estoppel letters as the Administrative
                  Agent may require in order to create, perfect and preserve the
                  Collateral Agent's security interest and mortgage or leasehold
                  mortgage, as applicable, in the real estate-related Collateral
                  and to carry into effect the purposes of this paragraph 12."

         3. Representations and Warranties. As of the date hereof, the Borrower
hereby represents and warrants to the Administrative Agent and the Lenders as
follows:

                  (a) After giving effect to this Amendment (i) no Unmatured
         Event of Default or Event of Default shall have occurred or be
         continuing and (ii) the representations and warranties of the Borrower
         contained in the Loan Documents shall each be true and correct in all
         material respects at and as of the date hereof to the same extent as
         though made on and as of such date, except to the extent such
         representations and warranties expressly relate to an earlier date in
         which event such representation and warranties shall be true and
         correct as of such specified date.

                  (b) The execution, delivery and performance, as the case may
         be, by the Borrower of this Amendment and the other documents and
         transactions contemplated hereby are within the Borrower's corporate
         powers, have been duly authorized by all necessary corporate action
         (including, without limitation, all necessary shareholder approvals) of
         the Borrower, shall have received all necessary governmental approvals,
         and do not and will not contravene or conflict with any provision of
         law applicable to the Borrower, the certificate or articles of
         incorporation or bylaws of the Borrower, or any order, judgment or
         decree of any court or other agency of government or any contractual
         obligation binding upon the Borrower.

                  (c) Each of this Amendment, the Credit Agreement, the Post
         Closing Agreement and any other Loan Document is the legal, valid and
         binding obligation of the Borrower enforceable against the Borrower in
         accordance with its respective terms, except to the extent
         enforceability is limited by bankruptcy, insolvency or similar laws
         affecting the rights of creditors generally or by application of
         general principles of equity.

                                       3

<PAGE>
         4. Conditions. This Amendment shall become effective as of the
Effective Date, provided that as of the Effective Date (except as otherwise
noted), this Amendment, duly executed by the Borrower, the Subsidiary
Guarantors, the Administrative Agent and the Required Lenders, shall have been
received by the Administrative Agent.

         5. Affirmation of Subsidiary Guarantors. By its signature set forth
below, each Subsidiary Guarantor hereby confirms to the Administrative Agent and
the Lenders that, after giving effect to this Amendment and the transactions
contemplated hereby, the Subsidiary Guaranty of such Subsidiary Guarantor and
each other Loan Document to which such Subsidiary Guarantor is a party continues
in full force and effect and is the legal, valid and binding obligation of such
Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.

         6. Successors and Assigns. This Amendment shall be binding on and shall
inure to the benefit of the Borrower, the Administrative Agent, the Lenders and
their respective successors and assigns; provided that the Borrower may not
assign its rights, obligations, duties or other interests hereunder without the
prior written consent of the Administrative Agent and the Lenders. The terms and
provisions of this Amendment are for the purpose of defining the relative rights
and obligations of the Borrower, the Administrative Agent and the Lenders with
respect to the transactions contemplated hereby and there shall be no third
party beneficiaries of any of the terms and provisions of this Amendment.

         7. Entire Agreement. This Amendment, the Credit Agreement (as amended
hereby), the Post Closing Agreement (as amended hereby) and the other Loan
Documents constitute the entire agreement of the parties with respect to the
subject matter hereof.

         8. Incorporation of Credit Agreement. The provisions contained in
Sections 12.9 and 12.10 of the Credit Agreement are incorporated herein by
reference to the same extent as if reproduced herein in their entirety with
respect to this Amendment.

         9. Amendment; Waiver. The parties hereto agree and acknowledge that
nothing contained in this Amendment in any manner or respect limits or
terminates any of the provisions of the Credit Agreement, the Post Closing
Agreement or any of the other Loan Documents other than as amended as expressly
set forth herein and further agree and acknowledge that the Credit Agreement (as
amended hereby), the Post Closing Agreement (as amended hereby) and each of the
other Loan Documents remain and continue in full force and effect and are hereby
ratified and confirmed. Except to the extent expressly set forth herein, the
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any rights, power or remedy of the Lenders or the Administrative Agent
under the Credit Agreement, the Post Closing Agreement or any other Loan
Document, nor constitute a waiver of any provision of the Credit Agreement, the
Post Closing Agreement or any other Loan Document. No delay on the part of any
Lender or the Administrative Agent in exercising any of their respective rights,
remedies, powers and privileges under the Credit Agreement, the Post Closing
Agreement or any of the Loan Documents or partial or single exercise thereof,
shall constitute a waiver thereof. On and


                                       4

<PAGE>
after the Effective Date each reference in the Credit Agreement or the Post
Closing Agreement to "this Agreement," "hereunder," "hereof," "herein" or words
of like import, and each reference to the Credit Agreement or to the Post
Closing Agreement in the Loan Documents and all other documents delivered in
connection with the Credit Agreement shall mean and be a reference to the Credit
Agreement or the Post Closing Agreement, as applicable, as amended hereby.

         10. Captions. Section captions used in this Amendment are for
convenience only, and shall not affect the construction of this Amendment.

         11. Severability. Whenever possible each provision of this Amendment
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Amendment.

         12. Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument. Delivery of an
executed counterpart of a signature page to this Amendment by telecopy shall be
effective as delivery of a manually executed counterpart of this Amendment.

                            [signature pages follow]




                                       5

<PAGE>
         IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first written above.

                                            GENCORP INC.




                                            By: /s/ TERRY L. HALL
                                                --------------------------------
                                            Name:  Terry L. Hall
                                            Title: Senior Vice President and
                                                    Chief Financial Officer






                       Signature Page to Amendment No. 1
                              to Credit Agreement
                 and Amendment No. 1 to Post Closing Agreement

<PAGE>
                                            AEROJET-GENERAL CORPORATION,
                                            as Subsidiary Guarantor

                                            By: /s/ TERRY L. HALL
                                                --------------------------------
                                            Name:  Terry L. Hall
                                            Title: Vice President






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                 and Amendment No. 1 to Post Closing Agreement

<PAGE>
                                            AEROJET ORDNANCE TENNESSEE, INC.,
                                            as Subsidiary

                                            By: /s/ TERRY L. HALL
                                                --------------------------------
                                            Name:  Terry L. Hall
                                            Title: Vice President





                        Signature Page to Amendment No. 1
                               to Credit Agreement
                 and Amendment No. 1 to Post Closing Agreement

<PAGE>
                                            GENCORP PROPERTY INC., as Subsidiary
                                            Guarantor

                                            By: /s/ TERRY L. HALL
                                                --------------------------------
                                            Name:  Terry L. Hall
                                            Title: President





                        Signature Page to Amendment No. 1
                               to Credit Agreement
                 and Amendment No. 1 to Post Closing Agreement

<PAGE>
                                           PENN INTERNATIONAL INC, as Subsidiary
                                           Guarantor

                                           By: /s/ TERRY L. HALL
                                               ---------------------------------
                                           Name:  Terry L. Hall
                                           Title: President





                        Signature Page to Amendment No. 1
                               to Credit Agreement
                 and Amendment No. 1 to Post Closing Agreement

<PAGE>
                                            GDX LLC, as Subsidiary Guarantor

                                            By: /S/ TERRY L. HALL
                                                --------------------------------
                                            Name:  Terry L. Hall
                                            Title: President





                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            GDX AUTOMOTIVE INC.,
                                            as Subsidiary Guarantor

                                            By: /s/ Yasmin R. Seyal
                                                --------------------------------
                                                Name:  Yasmin R. Seyal
                                                Title: Treasurer






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                           BANKERS TRUST COMPANY
                                           as Lender and as Administrative Agent

                                           By: /s/ Marguerite Sutton
                                               --------------------------------
                                               Name:  Marguerite Sutton
                                               Title: Vice President






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                           BANKERS ONE, NA.
                                           as Lender

                                           By: /s/ Stephanie A. Mack
                                               ---------------------------------
                                               Name:  Stephanie A. Mack
                                               Title: Commercial Banking Officer







                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            ABN AMRO Bank N.V.,
                                            as Lender

                                            By: /s/ R. Clay Jackson
                                                --------------------------------
                                                Name:  R. Clay Jackson
                                                Title: Senior Vice President




                                            By: /s/ Gina M. Brusatori
                                                --------------------------------
                                                Name:  Gina M. Brusatori
                                                Title: Senior Vice President






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            THE BANK OF NEW YORK
                                            as Lender

                                            By: /s/ Mehrasa Raygani
                                                -------------------------------
                                                Name:  Mehrasa Raygani
                                                Title: Assistant Vice President






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            THE BANK OF NOVA SCOTIA
                                            as Lender

                                            By: /s/ Mark Sparrow
                                                --------------------------------
                                                Name:  Mark Sparrow
                                                Title: Director






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            NATIONAL CITY BANK
                                            as Lender

                                            By: /s/ Tom Gurbach
                                                --------------------------------
                                                Name:  Tom Gurbach
                                                Title: Vice President






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            THE NORTHERN TRUST COMPANY,
                                            as Lender

                                            By: /S/ David J. Mitchell
                                                --------------------------------
                                                Name:  David J. Mitchell
                                                Title: Vice President






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            WELLS FARGO BANK, N.A.,
                                            as Lender

                                            By: /s/ Daniel G. Adams
                                                --------------------------------
                                                Name:  Daniel G. Adams
                                                Title: Vice President






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            CONTINENTAL ASSURANCE CORPORATION
                                            as Lender

                                            By: TCW Asset Management Company
                                                As Attorney-in-Fact

                                            By: /s/ Richard F. Kurth
                                                --------------------------------
                                                Name:  Richard F. Kurth
                                                Title: Vice President





                                            By: /s/ Mark L. Gold
                                                --------------------------------
                                                Name:  Mark L. Gold
                                                Title: Managing Director






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            KATONAH II, LTD
                                            as Lender

                                            By: Katonah Capital LLC, as Manager

                                            By: /s/ Joyce C. DeLucca
                                                --------------------------------
                                                Name:  Joyce C. De Lucca
                                                Title: Managing Principal






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            KZH CRESENT LLC
                                            as Lender

                                            By: /s/ Kimberly Rowe
                                                --------------------------------
                                                Name:  Kimberly Rowe
                                                Title: Authorized Agent






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            KZH CRESENT-2 LLC
                                            as Lender

                                            By: /s/ Kimberly Rowe
                                                --------------------------------
                                                Name:  Kimberly Rowe
                                                Title: Authorized Agent






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            KZH CRESENT-3 LLC
                                            as Lender

                                            By: /s/ Kimberly Rowe
                                                --------------------------------
                                                Name:  Kimberly Rowe
                                                Title: Authorized Agent






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            SEQUILS I, LTD.,
                                            as Lender

                                            By: TWC Advisers, Inc.
                                                 as its Collateral Manager




                                            By: /s/ Richard F. Kurth
                                                --------------------------------
                                                Name:  Richard F. Kurth
                                                Title: Vice President





                                            By: /s/ Mark L. Gold
                                                --------------------------------
                                                Name:  Mark L. Gold
                                                Title: Managing Director






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            SEQUILS IV, LTD.
                                            as Lender

                                            By: /s/ Richard F. Kurth
                                                --------------------------------
                                                Name:  Richard F. Kurth
                                                Title: Vice President





                                            By: /s/ Mark L. Gold
                                                --------------------------------
                                                Name:  Mark L. Gold
                                                Title: Managing Director






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                 TCW LEVERAGED INCOME TRUST IV, LP.,
                                 as Lender

                                 By:  TWC (LINC IV), L.L.C.
                                      as General Partner

                                      By:  TWC Asset Management Company,
                                      As managing member of the General Partner




                                 By: /s/ Richard F. Kurth
                                     -------------------------------------------
                                     Name:  Richard F. Kurth
                                     Title: Vice President





                                 By: /s/ Mark L. Gold
                                     -------------------------------------------
                                     Name:  Mark L. Gold
                                     Title: Managing Director






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            TORONTO DOMINION (NEW YORK), INC.,
                                            as Lender

                                            By: Stacey Malek
                                                --------------------------------
                                                Name:  Stacey Malek
                                                Title: Vice President






                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                            UNITED OF OMAHA
                                            LIFE INSURANCE
                                            COMPANY, as Lender

                                            By: TCW Asset Management
                                                Company,
                                                its Investment Advisor

                                            By: /s/ Richard F. Kurth
                                                --------------------------------
                                                Name:  Richard F. Kurth
                                                Title: Vice President

                                            By: /s/ Mark L. Gold
                                                --------------------------------
                                                Name:  Mark L. Gold
                                                Title: Managing Director




                        Signature Page to Amendment No. 1
                               to Credit Agreement
                   and Amendment No. 1 Post Closing Agreement

<PAGE>
                                                                  Execution Copy


                                 AMENDMENT NO. 2
                      TO CREDIT AGREEMENT, AMENDMENT NO. 2
                   TO POST CLOSING AGREEMENT, AMENDMENT NO. 1
                   TO COLLATERAL AGREEMENTS AND LIMITED WAIVER

         This AMENDMENT NO. 2 TO CREDIT AGREEMENT, AMENDMENT NO. 2 TO POST
CLOSING AGREEMENT, AMENDMENT NO. 1 TO COLLATERAL AGREEMENTS AND LIMITED WAIVER
(this "Amendment No. 2"), dated as of August 31, 2001 (the "Effective Date") is
made among GENCORP INC., an Ohio corporation ("Borrower"), BANKERS TRUST
COMPANY, for itself, as a Lender and as Administrative Agent for the Lenders
("Administrative Agent"), and the other Lenders signatory to the hereinafter
defined Credit Agreement.

                                    RECITALS

         A.       The Administrative Agent, the Lenders and the Borrower are
party to that certain Credit Agreement dated as of December 28, 2000 (as amended
by that certain Amendment No. 1 to Credit Agreement and Amendment No. 1 to Post
Closing Agreement dated as of January 26, 2001 ("Amendment No. 1") and as
further amended, restated, supplemented or otherwise modified from time to time,
the "Credit Agreement").

         B.       On and subject to the terms and conditions hereof, the
Administrative Agent, the Lenders and the Borrower wish to amend certain
provisions of the Credit Agreement.

         C.       Pursuant to that certain Post Closing Agreement dated December
28, 2000 among the Borrower and the Administrative Agent (as amended by
Amendment No. 1 and as further amended, restated, supplemented or otherwise
modified from time to time, the "Post Closing Agreement"), the Borrower has
agreed to take or cause to be taken on its behalf certain actions with respect
to Collateral to be provided to the Administrative Agent on behalf of the
Secured Creditors.

         D.       The Borrower has requested that the Lenders provide additional
time for the Borrower to take such actions under the Post Closing Agreement by
amending, and on a limited basis waiving, certain provisions of the Post Closing
Agreement as set forth herein.

         E.       On and subject to the terms and conditions hereof, the
Administrative Agent, the Lenders and the Borrower wish to amend and waive, on a
limited basis, certain provisions of the Post Closing Agreement.

         F.       The Administrative Agent and the Borrower are party to that
certain Borrower Security Agreement dated as of December 28, 2000 (as amended,
restated, supplemented or otherwise modified from time to time, the "Borrower
Security Agreement"), the Administrative Agent and the Borrower are party to
that certain Borrower Pledge Agreement dated as of December 28, 2000 (as
amended, restated, supplemented or otherwise modified from time to 

                                       2

<PAGE>
time, the "Borrower Pledge Agreement"), the Administrative Agent and certain
Subsidiaries of the Borrower (the "Assignors") are party to that certain
Subsidiary Security Agreement dated as of December 28, 2000 (as amended,
restated, supplemented or otherwise modified from time to time, the "Subsidiary
Security Agreement") and the Administrative Agent and certain Subsidiaries of
the Borrower (the "Pledgors") are party to that certain Subsidiary Pledge
Agreement dated as of December 28, 2000 (as amended, restated, supplemented or
otherwise modified from time to time, the "Subsidiary Pledge Agreement").

         G.       On and subject to the terms and conditions hereof, to reflect
changes in the Uniform Commercial Code applicable thereto, the Administrative
Agent (with the consent of the Required Lenders) and the Borrower wish to amend
certain provisions of the Borrower Security Agreement and the Borrower Pledge
Agreement, the Administrative Agent (with the consent of the Required Lenders)
and the Assignors wish to amend certain provisions of the Subsidiary Security
Agreement and the Administrative Agent (with the consent of the Required
Lenders) and the Pledgors wish to amend certain provisions of the Subsidiary
Pledge Agreement.

         H.       This Amendment No. 2 shall constitute a Loan Document and
these Recitals shall be construed as part of this Amendment; capitalized terms
used herein without definition are so used as defined in the Credit Agreement.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree as follows:

         1.       Amendments to Credit Agreement. Subject to the conditions set
forth in Section 10 hereof, the Credit Agreement is hereby amended as follows:

                  (a)      Section 1.1 of the Credit Agreement is amended by
         deleting the definitions of "Scheduled Term A Repayments", "Scheduled
         Term B Repayments", "Subordination Agreement" and "Subsidiary
         Guarantor" in their entirety and by inserting the following definitions
         of "Scheduled Term A Repayments", "Scheduled Term B Repayments", and
         "Subsidiary Guarantor" in lieu thereof in the appropriate alphabetical
         order:

                           "Scheduled Term A Repayments" means, with respect to
                  the principal payments on the Term A Loans for each date set
                  forth below, the Dollar amount set forth opposite thereto, as
                  reduced from time to time pursuant to Sections 4.3 and 4.4:


<TABLE>
<CAPTION>
                           Term A Loan Scheduled
                           Repayment Date                    Repayment Amount
                           ---------------------             ----------------
<S>                                                          <C>
                           March 28, 2001                    $3,750,000.00
                           June 28, 2001                     $3,750,000.00
                           September 28, 2001                $2,373,903.51
                           December 28, 2001                 $2,373,903.51
</TABLE>


                                       3

<PAGE>

<TABLE>
<CAPTION>
                               Term A Loan Scheduled        Repayment
                               Repayment Date               Amount
                               ---------------------        ---------
<S>                                                         <C>
                               March 28, 2002               $4,747,807.02
                               June 28, 2002                $4,747,807.02
                               September 28, 2002           $4,747,807.02
                               December 28, 2002            $4,747,807.02
                               March  28, 2003              $4,747,807.02
                               June 28, 2003                $4,747,807.02
                               September 28, 2003           $4,747,807.02
                               December 28, 2003            $4,747,807.02
                               March 28, 2004               $4,747,807.02
                               June 28, 2004                $4,747,807.02
                               September 28, 2004           $4,747,807.02
                               December 28, 2004            $4,747,807.02
                               March 28, 2005               $7,121,710.52
                               June 28, 2005                $7,121,710.52
                               September 28, 2005           $7,121,710.52
                               December 28, 2005            $7,121,710.49
</TABLE>


                           "Scheduled Term B Repayments" means, with respect to
                  the principal payments on the Term B Loans for each date set
                  forth below, the Dollar amount set forth opposite thereto, as
                  reduced from time to time pursuant to Sections 4.3 and 4.4:


<TABLE>
<CAPTION>
                               Term B Loan Scheduled        Repayment
                               Repayment Date               Amount
                               ---------------------        ---------
<S>                                                         <C>
                               March 28, 2001               $500,000.00
                               June 28, 2001                $500,000.00
                               September 28, 2001           $664,886.93
                               December 28, 2001            $664,886.93
                               March 28, 2002               $664,886.93
                               June 28, 2002                $664,886.93
                               September 28, 2002           $664,886.93
                               December 28, 2002            $664,886.93
                               March 28, 2003               $664,886.93
                               June 28, 2003                $664,886.93
                               September 28, 2003           $664,886.93
                               December 28, 2003            $664,886.93
                               March 28, 2004               $664,886.93
                               June 28, 2004                $664,886.93
                               September 28, 2004           $664,886.93
</TABLE>



                                       3

<PAGE>

<TABLE>
<S>                                                         <C>
                               December 28, 2004            $    664,886.93
                               March 28, 2005               $    664,886.93
                               June 28, 2005                $    664,886.93
                               September 28, 2005           $    664,886.93
                               December 28, 2005            $    664,886.93
                               March 28, 2006               $    664,886.93
                               June 28, 2006                $    664,886.93
                               September 28, 2006           $    664,886.93
                               December 28, 2006            $250,662,000.03
</TABLE>


                           ""Subsidiary Guarantor" means each Material Domestic
                  Subsidiary of the Borrower, any Domestic Subsidiary of the
                  Borrower which is a party to the Subsidiary Guaranty and any
                  Subsidiary of the Borrower that becomes a party to the
                  Subsidiary Guaranty or delivers a guaranty pursuant to Section
                  7.12 or 7.14."

                  (b)      Section 7.1 of the Credit Agreement is amended by
         inserting the following new subsection (d) immediately after subsection
         (c) therein:

                           "(d)     Interim Financial Statements. Within thirty
                  (30) days after the end of the Fiscal Year of the Borrower
                  ended as of November 30, 2001, unaudited financial statements
                  consisting of a consolidated and consolidating balance sheet
                  and statement of stockholders' equity of the Borrower and its
                  Subsidiaries as at the end of such Fiscal Year and a
                  consolidated and consolidating statement of income of the
                  Borrower and its Subsidiaries for such Fiscal Year, all in
                  reasonable detail and certified on behalf of the Borrower by a
                  Responsible Officer of the Borrower as having been prepared,
                  to the best knowledge of such Responsible Officer, in
                  accordance with generally accepted accounting principles
                  consistently applied (other than for normal year-end
                  adjustments and, unless then required by the Borrower's
                  reporting obligations to the Securities and Exchange
                  Commission or by generally accepted accounting principles,
                  footnote disclosure); provided, however, if as of November 30,
                  2001, the EIS Business Sale has occurred, this Section 7.1(d)
                  shall not apply to the Borrower."

                  (c)      Subsection (b) of Section 7.2 of the Credit Agreement
         is deleted in its entirety and the following is substituted in lieu
         thereof:

                           "(b)     Officer's Certificates. Concurrently with
                  the delivery of the financial statements referred to in
                  Sections 7.1(a), 7.1(b) and 7.1(d) (if such statements are
                  required to be delivered by the terms of said Section 7.1(d)),
                  a certificate of a Responsible Financial Officer substantially
                  in the form of Exhibit 7.2(b) stating that, to the best of
                  such officer's knowledge, (i) such financial statements
                  present fairly, in accordance with GAAP, the financial
                  condition and results of operations of the Borrower and its
                  Subsidiaries for the period referred to therein (subject, in
                  the case of interim statements, to normal recurring
                  adjustments), (ii) no Event of Default or Unmatured Event of
                  Default has occurred, except as specified in such certificate
                  and, if so specified, the action


                                       4

<PAGE>
                  which the Borrower proposes to take with respect thereto,
                  which certificate shall set forth detailed computations to the
                  extent necessary to establish the Borrower's compliance with
                  the covenants set forth in Article IX of this Agreement and
                  (iii) setting forth the then current outstanding amount of
                  each Intercompany Loan;"

                  (d)      The last sentence of Section 8.1 of the Credit
         Agreement is deleted in its entirety and the following is substituted
         in lieu thereof:

                           "Notwithstanding the foregoing clauses (a) through
                  (g) of this Section 8.1, the Borrower agrees that it will not,
                  nor will it permit any of its Subsidiaries to pledge, encumber
                  or otherwise suffer to exist thereon any Lien (other than
                  Customary Permitted Liens), on (w) any real property owned by
                  the Borrower or any of its Subsidiaries which is located in
                  the State of California or the State of Nevada, (x) the
                  Borrower's membership interest in AFC or the Borrower's rights
                  as lender under the AFC Credit Agreement, (y) the Borrower's
                  interest in the capital stock of Next Pharma or (z) (A) the
                  Borrower's interest in the capital stock of GDX Automotive
                  (Pribor) s.r.o. and of LNR Capital s.r.o. or (B) any real or
                  personal property of either GDX Automotive (Pribor) s.r.o. or
                  LNR Capital s.r.o."

                  (e)      Subsections (g) and (h) of Section 8.2 of the Credit
         Agreement are deleted in their entirety and the following are
         substituted in lieu thereof:

                           "(g)     unsecured Indebtedness of the Borrower and
                  its Subsidiaries to the Borrower or any of its Subsidiaries;
                  provided, however, that (x) in the case of such intercompany
                  Indebtedness consisting of a loan or advance by a Credit
                  Party, each such loan or advance made on or after the Closing
                  Date shall be evidenced by an Intercompany Note payable to the
                  Credit Party, in form and substance satisfactory to
                  Administrative Agent, which Intercompany Notes shall be
                  delivered and pledged to the Collateral Agent as part of the
                  Collateral, and (y) in the case of such intercompany
                  Indebtedness consisting of a loan or advance to a Subsidiary
                  of the Borrower which is not a Credit Party, each such loan or
                  advance, together with all other outstanding Indebtedness
                  permitted by this clause (g)(y), plus the amount of all
                  outstanding Indebtedness referred to in clause (h)(y) below
                  that is incurred by Subsidiaries that are not Credit Parties,
                  shall not exceed in the aggregate at any time $60,000,000
                  (without giving effect to Indebtedness issued as consideration
                  in, or to provide all or any portion of the funds utilized to
                  consummate the Draftex Acquisition);

                           (h)      Indebtedness incurred by a Foreign
                  Subsidiary to the Borrower or any of its Subsidiaries;
                  provided, however, that (x) in the case of such Indebtedness
                  consisting of a loan or advance by a Credit Party, each such
                  loan or advance made on or after the Closing Date shall be
                  evidenced by an Intercompany Note payable to the Credit Party,
                  in form and substance satisfactory to Administrative Agent,
                  which Intercompany Notes shall be delivered and pledged to the
                  Collateral Agent as part of the Collateral and (y) in the case
                  of such Indebtedness consisting of a loan or advance to a
                  Foreign Subsidiary of the


                                       5

<PAGE>
                  Borrower which is not a Credit Party, each such loan or
                  advance, together with all other outstanding Indebtedness
                  permitted by this clause (h)(y), plus the amount of all
                  outstanding Indebtedness referred to in clause (g)(y) above
                  that is incurred by Foreign Subsidiaries that are not Credit
                  Parties, shall not exceed in the aggregate at any time
                  $60,000,000 (without giving effect to Indebtedness issued as
                  consideration in, or to provide all or any portion of the
                  funds utilized to consummate the Draftex Acquisition);"

                  (f)      Subsection (k) of Section 8.2 of the Credit Agreement
         is amended by deleting the word "and" immediately before the phrase
         "(y) to support obligations of Subsidiaries" in the first sentence and
         inserting the word "or" in lieu thereof.

                  (g)      Subsection (n) of Section 8.2 of the Credit Agreement
         is amended by deleting the phrase "; and" and inserting in lieu thereof
         ";".

                  (h)      Subsection (o) of Section 8.2 of the Credit Agreement
         is amended by (i) deleting the phrase "; and" immediately before the
         phrase "(4) GenCorp's and AFC's obligations under the Indemnity
         Agreement" and inserting ";" in lieu thereof, and (ii) inserting the
         following immediately after clause (4) therein:

                           "and (5) GenCorp's obligation to make advances to AFC
                  in accordance with the AFC Credit Facility and AFC's
                  obligation to repay such advances; and"

                  (i)      Section 8.2 of the Credit Agreement is amended by
         inserting the following new subsection (p) immediately after subsection
         (o) therein:

                           "(p)     Indebtedness of the Borrower consisting of
                  unsecured Guarantee Obligations in favor of the United States
                  Environmental Protection Agency which are incurred on behalf
                  of Aerojet in connection with the EIS Business Sale or in
                  connection with future carve-outs of restricted real property;
                  provided, that such Guarantee Obligations permitted under this
                  clause (p) shall not at any time exceed $100,000,000."

                  (j)      Subsection (g) of Section 8.7 of the Credit Agreement
         is deleted in its entirety and the following is substituted in lieu
         thereof:

                           "(g)     the Borrower may make intercompany loans and
                  advances (x) to any of its Wholly-Owned Subsidiaries, any
                  Subsidiary of the Borrower may make intercompany loans and
                  advances to the Borrower, and any Subsidiary of the Borrower
                  may make intercompany loans and advances to any other
                  Wholly-Owned Subsidiary of the Borrower (collectively,
                  "Intercompany Loans"), in accordance with and to the extent
                  permitted by Section 8.2(g) and (h) and (y) to AFC in
                  accordance with the terms and conditions of the AFC Credit
                  Facility;"

                  (k)      Section 9.3 of the Credit Agreement is deleted in its
         entirety and the following is substituted in lieu thereof:


                                       6

<PAGE>
                           "Section 9.3     Interest Coverage Ratio.

                           The Borrower will not permit the Interest Coverage
                  Ratio for any Test Period ending on the last day of each
                  Fiscal Quarter set forth below to be less than the ratio set
                  forth opposite such date:


<TABLE>
<CAPTION>
                                 Fiscal Quarter                      Ratio
                                 ---------------                     -----
<S>                                                                <C>
                               February 28, 2001                   3.50 to 1.00
                               May 31, 2001                        3.50 to 1.00
                               August 31, 2001                     2.75 to 1.00
                               November 30, 2001                   3.50 to 1.00
                               February 28, 2002                   3.75 to 1.00
                               May 31, 2002                        3.75 to 1.00
                               August 31, 2002                     3.75 to 1.00
                               November 30, 2002 and thereafter    4.00 to 1.00"
</TABLE>


                  (l)      Section 9.4 of the Credit Agreement is amended by
         deleting the ratio "3.25 to 1.00" directly across from the Fiscal
         Quarter ended August 31, 2001 and by inserting the ratio "4.25 to 1.00"
         in lieu thereof.

         2. Reallocation of Certain Commitments and Loans. In order to provide
financial flexibility and additional liquidity to the Borrower prior to the
completion of the EIS Business Sale, the Borrower hereby requests approval by
the Lenders of the following actions:

                           (a)      that the Term B Commitment be increased by
                  an aggregate principal amount of $65,625,000.03 (the "Term B
                  Commitment Increase Amount"), subject to the terms and
                  conditions of this Amendment No. 2, such that the aggregate
                  principal amount of the Term B Commitment shall equal
                  $264,625,000.03 as of the date of this Amendment No. 2; and
                  Bank One, NA, BT and ABN Amro Bank, B.V. each hereby agree to
                  advance, severally, the entire amount of the Term B Commitment
                  Increase Amount on the terms and conditions set forth in this
                  Amendment No. 2, namely that: (i) $6,666,666.67 principal
                  amount of Revolving Loans outstanding as of the date hereof
                  and owing to BT and $6,666,666.67 principal amount of
                  Revolving Loans outstanding as of the date hereof and owing to
                  Bank One, NA, shall be reallocated from the Revolving Facility
                  to the Term B Facility in satisfaction (together with the
                  reallocation described in (ii) below) of the funding of the
                  Term B Commitment Increase Amount, provided, that such
                  reallocation of Loans from the Revolving Facility shall not
                  cause a reduction in the Revolving Commitments of either BT or
                  Bank One, NA (other than in accordance with (b) below); and
                  (ii) $20,083,333.35 principal amount of Term A Loans
                  outstanding as of the date hereof and owing to BT,
                  $20,083,333.35 principal amount of Term A Loans outstanding as
                  of the date hereof and owing to Bank One, NA, and
                  $12,124,999.99 principal amount of Term A Loans outstanding as
                  of the date hereof and owing to ABN Amro Bank, B.V., shall be
                  reallocated from the Term A Facility to the Term B Facility in
                  satisfaction (together with the reallocation described in (i)
                  above) of the funding of the


                                       7

<PAGE>
                  Term B Commitment Increase Amount, thereby reducing the
                  aggregate principal amount of the Term A Facility to
                  $90,208,333.31 as of the date of this Amendment No. 2;

                           (b)      that, on or prior to the earlier of 5:00
                  p.m. (New York City time) (a) on October 15, 2001 or (b) on
                  the date of closing of the EIS Business Sale, the Borrower
                  shall cause the Revolving Commitment to be permanently
                  reduced, in part, in the aggregate principal amount of
                  $13,333,333.34, and shall cause any Revolving Loans relating
                  thereto to be paid in full, provided, that such reduction of
                  Revolving Commitment and repayment of Revolving Loans, if any,
                  shall be applied solely to the Revolving Commitments and/or
                  related Revolving Loans, as the case may be, of BT and Bank
                  One, NA, on a pro rata basis, and shall not apply to the
                  Revolving Commitments or Revolving Loans of any other
                  Revolving Lender;

                           (c)      that, upon the effectiveness of this
                  Amendment No. 2, (i) Schedule 1.1(a) to the Credit Agreement
                  shall be deemed modified to reflect the revised Term A
                  Commitment and the revised Term B Commitment and (ii) in all
                  necessary respects, the Credit Agreement, including, without
                  limitation, Sections 4.1, 4.3, 4.4(k) and 4.5 of the Credit
                  Agreement, shall be deemed amended without further action by
                  any Lender to reflect such revised Term A Commitment and
                  revised Term B Commitment and the terms of this Section 2 of
                  this Amendment No. 2; and

                           (d)      Bank One, NA, BT and ABN Amro Bank, B.V.
                  each hereby agree to waive any compensation which they are
                  otherwise entitled to pursuant to Section 3.5 of the Credit
                  Agreement for funding losses resulting from the reallocation
                  of Loans described in the preceding clauses.

         3. Amendments to Post Closing Agreement. Subject to the conditions set
forth in Section 10 hereof, the Post Closing Agreement is hereby amended as
follows:

                           (a)      Paragraph 2 (including the subsections
                  therein) of the Post Closing Agreement is deleted in its
                  entirety and the words "Intentionally Omitted" are substituted
                  in lieu thereof.

                           (b)      Paragraph 3 (including the subsections
                  therein) of the Post Closing Agreement is deleted in its
                  entirety and the words "Intentionally Omitted" are substituted
                  in lieu thereof.

                           (c)      Subparagraph (a) of Paragraph 4 of the Post
                  Closing Agreement is amended by deleting the phrase "GDX LLC"
                  where it appears and by inserting the phrase "HENNIGES
                  Elastomer-und Kunststofftechnik GmbH & Co. KG" in lieu
                  thereof.

                           (d)      Paragraph 8 of the Post Closing Agreement is
                  amended by deleting the first line thereof and clauses (a),
                  (b) and (c) in their entirety and by inserting the phrase
                  "Intentionally Omitted" in lieu thereof.


                                       8

<PAGE>
                           (e)      Subparagraph (b) of Paragraph 9 of the Post
                  Closing Agreement is deleted in its entirety and the following
                  is substituted in lieu thereof:

                                    "(b)     execute documentation, make filings
                           and otherwise take such actions and deliver such
                           documents as the Administrative Agent may require to
                           cause the Borrower to grant a lien and security
                           interest to the Collateral Agent for the benefit of
                           the Lenders in 65% of the stock of GDX Automotive SAS
                           and to perfect such security interest, all under the
                           laws of France;"

                           (f)      Paragraph 10 (including the subsections
                  therein) of the Post Closing Agreement is deleted in its
                  entirety and the words "Intentionally Omitted" are substituted
                  in lieu thereof.

                           (g)      Subparagraph (a) of Paragraph 11 of the Post
                  Closing Agreement is deleted in its entirety and the following
                  is substituted in lieu thereof:

                                    "(a)     execute documentation, make filings
                           and otherwise take such actions and deliver such
                           documents as the Administrative Agent may require to
                           cause Penn International Inc. to grant a lien and
                           security interest to the Collateral Agent for the
                           benefit of the Lenders in 65% of the stock of GenCorp
                           GmbH and to perfect such security interest, all under
                           the laws of Germany;"

                  (h)      (i) Subparagraph (c) of Paragraph 11 of the Post
         Closing Agreement is amended by deleting the phrase "; and" and by
         inserting "." in lieu thereof, and (ii) subparagraph (d) of Paragraph
         11 of the Post Closing Agreement is deleted in its entirety.

                  (i)      Subparagraph (a) of Paragraph 12 of the Post Closing
         Agreement is amended by deleting the phrase "Berger, Missouri" where it
         appears in clause (ii) and by inserting the phrase "New Haven,
         Missouri" in lieu thereof.

         4. Amendments to Borrower Security Agreement. Subject to the conditions
set forth in Section 10 hereof, the Borrower Security Agreement is amended as
follows:

                  (a)      Article I of the Borrower Security Agreement is
         amended by deleting the definition of "Investment Property" in its
         entirety and inserting in lieu thereof the following:

                           ""Investment Property" shall have the meaning
                  ascribed thereto in Section 9-102 of the New York UCC and
                  shall include, without limitation (i) all securities, whether
                  certificated or uncertificated, including, without limitation,
                  stocks, bonds, interests in limited liability companies,
                  partnership interests, treasury securities, certificates of
                  deposit, and mutual fund shares; (ii) all securities
                  entitlements of the Borrower, including without limitation,
                  the rights of the Borrower to any securities account and the
                  financial assets held by a securities intermediary in such
                  securities account and any free credit balance or other money
                  owing by any securities intermediary with respect to that
                  account; (iii) all


                                       9

<PAGE>
                  securities accounts held by the Borrower; (iv) all commodity
                  contracts held by the Borrower; and (v) all commodity accounts
                  held by the Borrower."

                  (b)      Article I of the Borrower Security Agreement is
         amended by inserting the following definitions in the appropriate
         alphabetical order:

                           "Deposit Accounts" shall have the meaning provided in
                  the New York UCC.

                           "Letter-of-Credit Rights" shall have the meaning
                  provided in the New York UCC".

                           "Software" shall have the meaning provided in the New
                  York UCC.

                           "Supporting Obligations" shall have the meaning
                  provided in the New York UCC.

                  (c)      Subsection (a) of Section 2.1 of the Borrower
         Security Agreement is deleted in its entirety and the following is
         substituted in lieu thereof:

                           "(a) As security for the prompt and complete payment
                  and performance when due of all of the Obligations, the
                  Borrower does hereby collaterally assign and transfer unto the
                  Collateral Agent, for the benefit of the Secured Creditors,
                  and does hereby pledge and grant to the Collateral Agent for
                  the benefit of the Secured Creditors, a continuing security
                  interest of first priority (subject to Liens evidenced by
                  Permitted Filings and other Permitted Liens) in, all of the
                  right, title and interest of the Borrower in, to and under all
                  of the personal property of the Borrower, wherever located,
                  whether now existing or hereafter from time to time acquired,
                  including the following: (i) each and every Receivable, (ii)
                  all Contracts, together with all Contract Rights, (iii) all
                  Inventory, (iv) all Equipment, (v) all Marks, together with
                  the registrations and right to all renewals thereof, and the
                  goodwill of the business of the Borrower symbolized by the
                  Marks, (vi) all Patents and Copyrights, and all reissues,
                  renewals or extensions thereof, (vii) all Software of the
                  Borrower and all intellectual property rights therein and all
                  other proprietary information of the Borrower, including, but
                  not limited to, Trade Secrets, (viii) all other Goods, General
                  Intangibles, Chattel Paper, Documents, Investment Property and
                  Instruments, (ix) all Supporting Obligations and
                  Letter-of-Credit Rights, (x) all cash, accounts, deposits,
                  Deposit Accounts, securities and insurance policies now or at
                  any time hereafter in the possession or under control of the
                  Borrower or its respective bailees and any interest thereon,
                  (xi) all other personal property of the Borrower, whether now
                  owned or hereafter acquired, (xii) all documents of title
                  evidencing or issued with respect to any of the foregoing, and
                  (xiii) all Proceeds and products of any and all of the
                  foregoing (including, without limitation, all insurance and
                  claims for insurance effected or held for the benefit of the
                  Borrower in respect thereof) (all of the above, collectively,
                  the "Collateral")."


                                       10

<PAGE>
                  (d)      Section 3.7 of the Borrower Security Agreement is
         deleted in its entirety and the following is substituted in lieu
         thereof:

                           "3.7. Trade Names; Change of Name. The Borrower has
                  not operated nor does operate in any jurisdiction under, or in
                  the preceding 12 months has had nor has operated in any
                  jurisdiction under, any trade names, fictitious names or other
                  names (including, without limitation, any names of divisions
                  or operations) except its legal name (which is as set forth in
                  the preamble of this Agreement) and such other trade,
                  fictitious or other names as are listed on Annex D hereto. The
                  Borrower shall not change its legal name nor assume or operate
                  in any jurisdiction under any trade, fictitious or other name
                  in any manner which might make any financing statement or
                  continuation statement filed in connection therewith seriously
                  misleading within the meaning of Section 9-506 of the UCC
                  unless and until (i) it shall have given to the Collateral
                  Agent not less than 30 days' prior written notice of its
                  intention so to do, clearly describing such new name and the
                  jurisdictions in which such new name shall be used and
                  providing such other information in connection therewith as
                  the Collateral Agent may reasonably request, (ii) with respect
                  to such new name, it shall have taken all action to maintain
                  the security interest of the Collateral Agent in the
                  Collateral intended to be granted hereby at all times fully
                  perfected and in full force and effect, (iii) at the request
                  of the Collateral Agent, it shall have furnished an opinion of
                  counsel reasonably acceptable to the Collateral Agent to the
                  effect that all financing or continuation statements and
                  amendments or supplements thereto have been filed in the
                  appropriate filing office or offices, and (iv) upon its
                  reasonable request, the Collateral Agent shall have received
                  evidence that all other actions (including, without
                  limitation, the payment of all filing fees and taxes, if any,
                  payable in connection with such filings) have been taken, in
                  order to perfect (and maintain the perfection and priority of)
                  the security interest granted hereby."

                  (e)      Article III of the Borrower Security Agreement is
         amended by inserting the following immediately after Section 3.7
         therein:

                           "3.8. State of Incorporation. The state of
                  incorporation of the Borrower is Ohio. The Borrower shall not
                  change the state in which it is incorporated. The Borrower
                  shall preserve its corporate existence and not, in one
                  transaction or a series of related transactions, merge into or
                  consolidate with any other entity, or sell all or
                  substantially all of its assets."

                  (f)      Article IV of the Borrower Security Agreement is
         amended by (i) inserting the words "OTHER COLLATERAL" to the title of
         said Article immediately after the words "RIGHTS; INSTRUMENTS;" and
         (ii) inserting the following immediately after Section 4.6 therein:

                           "4.7. Other Collateral. If the Borrower owns or
                  acquires any Deposit Accounts, Investment Property,
                  Letter-of-Credit Rights or electronic chattel paper
                  constituting Collateral, the Borrower will within 15 days
                  notify the Collateral


                                       11

<PAGE>
                  Agent thereof, and upon request by the Collateral Agent will
                  cooperate with the Collateral Agent in obtaining control with
                  respect to such Collateral. The Borrower will not create any
                  Chattel Paper without placing a legend on the Chattel Paper
                  acceptable to the Collateral Agent indicating that the
                  Collateral Agent has a security interest in the Chattel
                  Paper."

                  (g)      Section 7.4 of the Borrower Security Agreement is
         deleted in its entirety and the following is substituted in lieu
         thereof:

                           "7.4. Financing Statements. The Borrower authorizes
                  the Collateral Agent to file such financing statements, in
                  form acceptable to the Collateral Agent, as the Collateral
                  Agent may from time to time request or as are necessary or
                  desirable in the opinion of the Collateral Agent to establish
                  and maintain a valid, enforceable, first priority perfected
                  security interest (subject only to Permitted Liens) in the
                  Collateral as provided herein and the other rights and
                  security contemplated hereby all in accordance with the UCC or
                  other relevant law as enacted from time to time in any
                  relevant jurisdiction. The Borrower will pay any applicable
                  filing fees, recordation taxes and related expenses relating
                  to its Collateral."

         5. Amendments to Subsidiary Security Agreement. Subject to the
conditions set forth in Section 10 hereof, the Subsidiary Security Agreement is
hereby amended as follows:

                  (a)      Article I of the Subsidiary Security Agreement is
         amended by deleting the definition of "Investment Property" in its
         entirety and substituting in lieu thereof the following:

                           ""Investment Property" shall have the meaning
                  ascribed thereto in Section 9-102 of the New York UCC and
                  shall include, without limitation (i) all securities, whether
                  certificated or uncertificated, including, without limitation,
                  stocks, bonds, interests in limited liability companies,
                  partnership interests, treasury securities, certificates of
                  deposit, and mutual fund shares; (ii) all securities
                  entitlements of any Assignor, including without limitation,
                  the rights of any Assignor to any securities account and the
                  financial assets held by a securities intermediary in such
                  securities account and any free credit balance or other money
                  owing by any securities intermediary with respect to that
                  account; (iii) all securities accounts held by any Assignor;
                  (iv) all commodity contracts held by any Assignor; and (v) all
                  commodity accounts held by any Assignor."

                  (b)      Article I of the Subsidiary Security Agreement is
         amended by inserting the following definitions in the appropriate
         alphabetical order:

                           ""Deposit Accounts" shall have the meaning provided
                  in the New York UCC.

                           "Letter-of-Credit Rights" shall have the meaning
                  provided in the New York UCC.


                                       12

<PAGE>
                           "Software" shall have the meaning provided in the New
                  York UCC.

                           "Supporting Obligations" shall have the meaning
                  provided in the New York UCC."

                  (c)      Subsection (a) of Section 2.1 of the Subsidiary
         Security Agreement is deleted in its entirety and the following is
         substituted in lieu thereof:

                           "(a)     As security for the prompt and complete
                  payment and performance when due of all of the Obligations,
                  each Assignor does hereby collaterally assign and transfer
                  unto the Collateral Agent, for the benefit of the Secured
                  Creditors, and does hereby pledge and grant to the Collateral
                  Agent for the benefit of the Secured Creditors, a continuing
                  security interest of first priority (subject to Liens
                  evidenced by Permitted Filings and other Permitted Liens) in,
                  all of the right, title and interest of such Assignor in, to
                  and under all of the personal property of such Assignor,
                  wherever located, whether now existing or hereafter from time
                  to time acquired, including the following: (i) each and every
                  Receivable, (ii) all Contracts, together with all Contract
                  Rights, (iii) all Inventory, (iv) all Equipment, (v) all
                  Marks, together with the registrations and right to all
                  renewals thereof, and the goodwill of the business of such
                  Assignor symbolized by the Marks, (vi) all Patents and
                  Copyrights, and all reissues, renewals or extensions thereof,
                  (vii) all Software of the Borrower and all intellectual
                  property rights therein and all other proprietary information
                  of such Assignor, including, but not limited to, Trade
                  Secrets, (viii) all other Goods, General Intangibles, Chattel
                  Paper, Documents, Investment Property and Instruments, (ix)
                  all Supporting Obligations and Letter-of-Credit Rights, (x)
                  all cash, accounts, deposits, Deposit Accounts, securities and
                  insurance policies now or at any time hereafter in the
                  possession or under control of such Assignor or its respective
                  bailees and any interest thereon, (xi) all other personal
                  property of such Assignor, whether now owned or hereafter
                  acquired, (xii) all documents of title evidencing or issued
                  with respect to any of the foregoing, and (xiii) all Proceeds
                  and products of any and all of the foregoing (including,
                  without limitation, all insurance and claims for insurance
                  effected or held for the benefit of such Assignor in respect
                  thereof) (all of the above, collectively, the "Collateral").

                  (d)      Section 3.7 of the Subsidiary Security Agreement is
         deleted in its entirety and the following is substituted in lieu
         thereof:

                           "3.7.    Trade Names; Change of Name. Each Assignor
                  has not operated nor does operate in any jurisdiction under,
                  or in the preceding 12 months has had nor has operated in any
                  jurisdiction under, any trade names, fictitious names or other
                  names (including, without limitation, any names of divisions
                  or operations) except its legal name (which is as set forth in
                  Annex B to this Agreement) and such other trade, fictitious or
                  other names as are listed on Annex D hereto. Each Assignor
                  shall not change its legal name nor assume or operate in any
                  jurisdiction under any trade, fictitious or other name in any
                  manner which might make any financing statement or
                  continuation statement filed in connection therewith


                                       13

<PAGE>
                  seriously misleading within the meaning of Section 9-506 of
                  the UCC unless and until (i) it shall have given to the
                  Collateral Agent not less than 30 days' prior written notice
                  of its intention so to do, clearly describing such new name
                  and the jurisdictions in which such new name shall be used and
                  providing such other information in connection therewith as
                  the Collateral Agent may reasonably request, (ii) with respect
                  to such new name, it shall have taken all action to maintain
                  the security interest of the Collateral Agent in the
                  Collateral intended to be granted hereby at all times fully
                  perfected and in full force and effect, (iii) at the request
                  of the Collateral Agent, it shall have furnished an opinion of
                  counsel reasonably acceptable to the Collateral Agent to the
                  effect that all financing or continuation statements and
                  amendments or supplements thereto have been filed in the
                  appropriate filing office or offices, and (iv) upon its
                  reasonable request, the Collateral Agent shall have received
                  evidence that all other actions (including, without
                  limitation, the payment of all filing fees and taxes, if any,
                  payable in connection with such filings) have been taken, in
                  order to perfect (and maintain the perfection and priority of)
                  the security interest granted hereby."

                  (e)      Article III of the Subsidiary Security Agreement is
         amended by inserting the following immediately after Section 3.7
         therein:

                           "3.8.    State of Incorporation. The state of
                  incorporation of each Assignor is set forth on Annex B hereto.
                  Each Assignor shall not change the state in which it is
                  incorporated. Each Assignor shall preserve its corporate
                  existence and not, in one transaction or a series of related
                  transactions, merge into or consolidate with any other entity,
                  or sell all or substantially all of its assets."

                  (f)      Article IV of the Subsidiary Security Agreement is
         amended by (i) inserting the words "OTHER COLLATERAL" to the title of
         said Article immediately after the words "RIGHTS; INSTRUMENTS;" and
         (ii) inserting the following immediately after Section 4.6 therein:

                           "4.7.    Other Collateral. If any Assignor owns or
                  acquires any Deposit Accounts, Investment Property,
                  Letter-of-Credit Rights or electronic chattel paper
                  constituting Collateral, such Assignor will within 15 days
                  notify the Collateral Agent thereof, and upon request by the
                  Collateral Agent will cooperate with the Collateral Agent in
                  obtaining control with respect to such Collateral. Each
                  Assignor will not create any Chattel Paper without placing a
                  legend on the Chattel Paper acceptable to the Collateral Agent
                  indicating that the Collateral Agent has a security interest
                  in the Chattel Paper."

                  (g)      Section 7.4 of the Subsidiary Security Agreement is
         deleted in its entirety and the following is substituted in lieu
         thereof:

                           "7.4.    Financing Statements. Each Assignor
                  authorizes the Collateral Agent to file such financing
                  statements, in form acceptable to the Collateral Agent, as the
                  Collateral Agent may from time to time request or as are
                  necessary


                                       14

<PAGE>
                  or desirable in the opinion of the Collateral Agent to
                  establish and maintain a valid, enforceable, first priority
                  perfected security interest (subject only to Permitted Liens)
                  in the Collateral as provided herein and the other rights and
                  security contemplated hereby all in accordance with the UCC or
                  other relevant law as enacted from time to time in any
                  relevant jurisdiction. Each Assignor will pay any applicable
                  filing fees, recordation taxes and related expenses relating
                  to its Collateral."

                  (h)      Annex B of the Subsidiary Security Agreement is
         deleted in its entirety and Annex B attached to this Amendment No. 2 is
         substituted in lieu thereof.

         6. Amendments to Borrower Pledge Agreement. Subject to the conditions
set forth in Section 10 hereof, the Borrower Pledge Agreement is hereby amended
as follows:

                  (a)      Section 2.2 of Borrower Pledge Agreement is amended
         by inserting the word "Pledged" immediately preceding the word "Notes"
         in the first sentence thereof.

                  (b)      Section 2.3 of Borrower Pledge Agreement is deleted
         in its entirety and the following is substituted in lieu thereof:

                           "2.3.    Uncertificated Securities. Notwithstanding
                  anything to the contrary contained in Sections 2.1 and 2.2
                  hereof, if any Securities (whether now owned or hereafter
                  acquired) are uncertificated securities, the Pledgor shall
                  promptly notify the Pledgee thereof, and shall promptly take
                  all actions required to perfect the security interest of the
                  Pledgee under applicable law (including cooperating with the
                  Collateral Agent in obtaining control with respect to such
                  Securities). The Pledgor further agrees to take such actions
                  as the Pledgee deems reasonably necessary or desirable to
                  effect the foregoing and to permit the Pledgee to exercise any
                  of its rights and remedies hereunder, and agrees to provide an
                  opinion of counsel reasonably satisfactory to the Pledgee with
                  respect to any such pledge of uncertificated Securities
                  promptly upon request of the Pledgee."

         7. Amendments to Subsidiary Pledge Agreement. Subject to the conditions
set forth in Section 10 hereof, the Subsidiary Pledge Agreement is hereby
amended as follows:

                  (a)      Section 2.2 of Subsidiary Pledge Agreement is amended
         by inserting the word "Pledged" immediately preceding the word "Notes"
         in the first sentence thereof.

                  (b)      Section 2.3 of Subsidiary Pledge Agreement is deleted
         in its entirety and the following is substituted in lieu thereof:

                           "2.3.    Uncertificated Securities. Notwithstanding
                  anything to the contrary contained in Sections 2.1 and 2.2
                  hereof, if any Securities (whether now owned or hereafter
                  acquired) are uncertificated securities, the respective
                  Pledgor shall promptly notify the Pledgee thereof, and shall
                  promptly take all actions required to perfect the security
                  interest of the Pledgee under applicable law


                                       15

<PAGE>
                  (including cooperating with the Collateral Agent in obtaining
                  control with respect to such Securities). Each Pledgor further
                  agrees to take such actions as the Pledgee deems reasonably
                  necessary or desirable to effect the foregoing and to permit
                  the Pledgee to exercise any of its rights and remedies
                  hereunder, and agrees to provide an opinion of counsel
                  reasonably satisfactory to the Pledgee with respect to any
                  such pledge of uncertificated Securities promptly upon request
                  of the Pledgee."

         8. Limited Waiver. The Lenders hereby waive (a) for the period
commencing April 1, 2001 and ending on September 15, 2001, any Event of Default
or Unmatured Event of Default arising solely as a result of the Borrower's
failure to meet, in the time frames provided therein, the requirements of
Paragraphs 4, 9 and 12 of the Post Closing Agreement (as amended by Amendment
No. 1) and (b) for the period commencing May 31, 2001 and ending on October 31,
2001, any Event of Default or Unmatured Event of Default arising solely as a
result of the Borrower's failure to meet, in the time frame provided therein,
the requirements of Section 7.11 of the Credit Agreement (as amended by
Amendment No. 1). Upon expiration of the waiver set forth in clause (a) of the
preceding sentence without compliance by the Borrower with the requirements
specified therein, such waiver shall be automatically revoked and the
requirements of the Post Closing Agreement (as amended by Amendment No. 1)
waived thereby shall again be in full force with retroactive effect to the dates
specified in the Post Closing Agreement (as amended by Amendment No. 1). Upon
expiration of the waiver set forth in clause (b) of the second preceding
sentence without compliance by the Borrower with the requirements specified
therein, such waiver shall be automatically revoked and the requirements of the
Credit Agreement (as amended by Amendment No. 1) waived thereby shall again be
in full force with retroactive effect to the date specified in the Credit
Agreement (as amended by Amendment No. 1). In each case, following such
expiration and noncompliance as described in the respective preceding sentences,
the Administrative Agent and the Lenders shall have all rights and remedies
under the Post Closing Agreement, the Credit Agreement and any other Loan
Document or otherwise that the Administrative Agent and the Lenders would have
had if any such waiver had never been granted.

         9. Representations and Warranties. As of the date hereof, the Borrower
hereby represents and warrants to the Administrative Agent and the Lenders as
follows:

                  (a)      After giving effect to this Amendment No. 2 (i) no
         Unmatured Event of Default or Event of Default shall have occurred or
         be continuing and (ii) the representations and warranties of the
         Borrower contained in the Loan Documents shall each be true and correct
         in all material respects at and as of the date hereof to the same
         extent as though made on and as of such date, except to the extent such
         representations and warranties expressly relate to an earlier date in
         which event such representation and warranties shall be true and
         correct as of such specified date.

                  (b)      The execution, delivery and performance, as the case
         may be, by the Borrower of this Amendment No. 2 and the other documents
         and transactions contemplated hereby are within the Borrower's
         corporate powers, have been duly authorized by all necessary corporate
         action (including, without limitation, all necessary shareholder
         approvals) of the Borrower, shall have received all necessary
         governmental


                                       16

<PAGE>
         approvals, and do not and will not contravene or conflict with any
         provision of law applicable to the Borrower, the certificate or
         articles of incorporation or bylaws of the Borrower, or any order,
         judgment or decree of any court or other agency of government or any
         contractual obligation binding upon the Borrower.

                  (c)      Each of this Amendment No. 2, the Credit Agreement,
         the Post Closing Agreement and any other Loan Document is the legal,
         valid and binding obligation of the Borrower enforceable against the
         Borrower in accordance with its respective terms, except to the extent
         enforceability is limited by bankruptcy, insolvency or similar laws
         affecting the rights of creditors generally or by application of
         general principles of equity.

         10.      Conditions. This Amendment No. 2 shall become effective as of
the date first above written; provided, that the Administrative Agent shall have
received:

                  (a)      counterparts of this Amendment No. 2 duly executed by
         the Borrower, the Subsidiary Guarantors, the Assignors (solely with
         respect to Section 5 above), the Pledgors (solely with respect to
         Section 7 above), the Administrative Agent and the percentage of
         Lenders required by the Credit Agreement; and

                  (b)      from the Borrower all fees and expenses of legal
         counsel due and payable pursuant to Section 12.4 of the Credit
         Agreement (to the extent then invoiced).

         11.      Affirmation of Subsidiary Guarantors. By its signature set
forth below, each Subsidiary Guarantor hereby confirms to the Administrative
Agent and the Lenders that, after giving effect to this Amendment No. 2 and the
transactions contemplated hereby, the Subsidiary Guaranty of such Subsidiary
Guarantor and each other Loan Document to which such Subsidiary Guarantor is a
party continues in full force and effect and is the legal, valid and binding
obligation of such Subsidiary Guarantor, enforceable against such Subsidiary
Guarantor in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability.

         12.      Amendment Fee. The Borrower hereby agrees to pay, without
setoff, deduction or counterclaim, a non-refundable amendment fee for the
account of each Lender, other than the Agents or ABN Amro Bank, N.V., that has
executed and delivered (including delivery of way of telecopy) a copy of this
Amendment No. 2 to the attention of Kay McNab at Winston & Strawn, 35 West
Wacker Drive, Chicago, Illinois 60601, telecopy number 312-558-5700, at or prior
to noon, New York City time, on Friday, August 31, 2001, in an amount equal to
0.10% of such Lender's Commitment. The aggregate amount of such amendment fee
shall be paid at or prior to noon, New York City time, on Tuesday, September 4,
2001 to the Administrative Agent for the pro rata account of the Lenders
entitled to receive such amendment fee.

         13.      Successors and Assigns. This Amendment No. 2 shall be binding
on and shall inure to the benefit of the Borrower, the Administrative Agent, the
Lenders and their respective successors and assigns; provided that the Borrower
may not assign its rights, obligations, duties or other interests hereunder
without the prior written consent of the Administrative Agent and the Lenders.
The terms and provisions of this Amendment No. 2 are for the purpose of defining
the


                                       17

<PAGE>
relative rights and obligations of the Borrower, the Administrative Agent and
the Lenders with respect to the transactions contemplated hereby and there shall
be no third party beneficiaries of any of the terms and provisions of this
Amendment No. 2.

         14.      Entire Agreement. This Amendment No. 2, the Credit Agreement
(as amended hereby), the Post Closing Agreement (as amended hereby) and the
other Loan Documents (as amended hereby, if applicable) constitute the entire
agreement of the parties with respect to the subject matter hereof.

         15.      Incorporation of Credit Agreement. The provisions contained in
Sections 12.4, 12.9 and 12.10 of the Credit Agreement are incorporated herein by
reference to the same extent as if reproduced herein in their entirety with
respect to this Amendment No. 2.

         16.      Amendment; Waiver. The parties hereto agree and acknowledge
that nothing contained in this Amendment No. 2 in any manner or respect limits
or terminates any of the provisions of the Credit Agreement, the Post Closing
Agreement or any of the other Loan Documents other than as amended as expressly
set forth herein and further agree and acknowledge that the Credit Agreement (as
amended hereby), the Post Closing Agreement (as amended hereby) and each of the
other Loan Documents (as amended hereby, if applicable) remain and continue in
full force and effect and are hereby ratified and confirmed. Except to the
extent expressly set forth herein, the execution, delivery and effectiveness of
this Amendment No. 2 shall not operate as a waiver of any rights, power or
remedy of the Lenders or the Administrative Agent under the Credit Agreement,
the Post Closing Agreement or any other Loan Document, nor constitute a waiver
of any provision of the Credit Agreement, the Post Closing Agreement or any
other Loan Document. No delay on the part of any Lender or the Administrative
Agent in exercising any of their respective rights, remedies, powers and
privileges under the Credit Agreement, the Post Closing Agreement or any of the
Loan Documents or partial or single exercise thereof, shall constitute a waiver
thereof. On and after the Effective Date each reference in the Credit Agreement
or the Post Closing Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import, and each reference to the Credit Agreement,
the Post Closing Agreement in the Loan Documents and all other documents
delivered in connection with the Credit Agreement shall mean and be a reference
to the Credit Agreement, the Post Closing Agreement, the Borrower Security
Agreement, the Subsidiary Security Agreement, the Borrower Pledge Agreement or
the Subsidiary Pledge Agreement, as applicable, as amended hereby.

         17.      Captions. Section captions used in this Amendment No. 2 are
for convenience only, and shall not affect the construction of this Amendment
No. 2.

         18.      Severability. Whenever possible each provision of this
Amendment No. 2 shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Amendment No. 2 shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Amendment.


                                       18

<PAGE>
         19.      Counterparts. This Amendment No. 2 may be executed in any
number of counterparts and by the different parties on separate counterparts,
and each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument. Delivery
of an executed counterpart of a signature page to this Amendment No. 2 by
telecopy shall be effective as delivery of a manually executed counterpart of
this Amendment No. 2.

                            [signature pages follow]








                                       19

<PAGE>
         IN WITNESS WHEREOF, this Amendment No. 2 has been duly executed as of
the date first written above.

                                    GENCORP INC.



                                    By:   /s/ Yasmin R. Seyal
                                       -----------------------------------
                                          YASMIN R. SEYAL
                                          Treasurer

























                        Signature Page to Amendment No. 2

<PAGE>
                                    AEROJET-GENERAL CORPORATION, as
                                    Subsidiary Guarantor, Assignor and Pledgor



                                    By:   /s/ Yasmin R. Seyal
                                       -----------------------------------
                                          YASMIN R. SEYAL
                                          Treasurer












                        Signature Page to Amendment No. 2

<PAGE>
                                    AEROJET ORDNANCE TENNESSEE, INC., as
                                    Subsidiary Guarantor, Assignor and Pledgor




                                    By:   /s/ Brian E. Sweeney
                                       -----------------------------------
                                          BRIAN E. SWEENEY
                                          Vice President and Secretary










                        Signature Page to Amendment No. 2

<PAGE>
                                    GENCORP PROPERTY INC., as Subsidiary
                                    Guarantor, Assignor and Pledgor



                                    By:  /s/ Yasmin R. Seyal
                                       -----------------------------------
                                         YASMIN R. SEYAL
                                         Treasurer















                        Signature Page to Amendment No. 2

<PAGE>
                                    PENN INTERNATIONAL INC., as Subsidiary
                                    Guarantor, Assignor and Pledgor



                                    By:  /s/ Robert C. Anderson
                                       -----------------------------------
                                         ROBERT C. ANDERSON
                                         Secretary












                        Signature Page to Amendment No. 2

<PAGE>
                                    GDX LLC, as Subsidiary Guarantor, Assignor
                                    and Pledgor



                                    By:  /s/ Yasmin R. Seyal
                                       ------------------------------------
                                         YASMIN R. SEYAL
                                         Treasurer

















                        Signature Page to Amendment No. 2

<PAGE>
                                    GDX AUTOMOTIVE INC., as
                                    Subsidiary Guarantor, Assignor and Pledgor



                                    By:  /s/  Yasmin R. Seyal
                                       -------------------------------------
                                         YASMIN R. SEYAL
                                         Treasurer














                        Signature Page to Amendment No. 2

<PAGE>
                                    BANKERS TRUST COMPANY,
                                    as Lender, Administrative Agent and
                                    Collateral Agent



                                    By:  /s/  Marguerite Sutton
                                       ------------------------------------
                                            Name:    Marguerite Sutton
                                            Title:   Vice President














                        Signature Page to Amendment No. 2

<PAGE>
                                    BANK ONE, NA,
                                    as Lender



                                    By:  /s/   Karen C. Ryan
                                       ------------------------------------
                                            Name:    Karen C. Ryan
                                            Title:   Vice President

















                        Signature Page to Amendment No. 2

<PAGE>
                                    ABN AMRO Bank N.V.,
                                    as Lender


                                    By:  /s/  Peter Hsu
                                       -----------------------------------
                                            Name:    PETER HSU
                                            Title:   Vice President



                                    By:  /s/  Edward John Hill III
                                       ------------------------------------
                                            Name:  EDWARD JOHN HILL III
                                            Title:   Assistant Vice President

















                        Signature Page to Amendment No. 2

<PAGE>
                                    THE BANK OF NEW YORK,
                                    as Lender


                               By:  /s/   Lisa Y. Brown
                                  ------------------------------------
                                       Name:    Lisa Y. Brown
                                       Title    Vice President














                        Signature Page to Amendment No. 2

<PAGE>
                                    BANK OF NOVA SCOTIA,
                                    as Lender



                                    By:  /s/Mark Sparrow
                                       ---------------------------------
                                            Name:    Mark Sparrow
                                            Title:   Director
















                        Signature Page to Amendment No. 2

<PAGE>
                                    THE NORTHERN TRUST COMPANY,
                                    as Lender


                                    By:  /s/Melissa A. Whitson
                                       -------------------------------------
                                            Name:    Melissa A. Whitson
                                            Title:   Vice President

















                        Signature Page to Amendment No. 2

<PAGE>
                                    WELLS FARGO BANK, N.A.,
                                    as Lender


                                    By:  /s/  Rick A. Souza
                                       -------------------------------------
                                            Name:    Rick A. Souza
                                            Title:   Vice President




















                        Signature Page to Amendment No. 2

<PAGE>
                                    CONTINENTAL ASSURANCE COMPANY,
                                    as Lender

                                    By: TCW Asset Management Company,



                                    By:   /s/ Richard F. Kurth
                                       ------------------------------------
                                             Name:    RICHARD F. KURTH
                                             Title:   Vice President



                                    By:   /s/ Mark L. Gold
                                       ------------------------------------
                                             Name:    MARK l. GOLD
                                             Title:   Managing Director















                        Signature Page to Amendment No. 2

<PAGE>
                                    KATONAH II, LTD ,
                                    as Lender

                                    By:  Katonah Capital LLC, as Manager


                                    By:  /s/  Ralph Della Rocca
                                       -----------------------------------
                                    Name:    Ralph Della Rocca
                                    Title:   Authorized Officer Katonah Capital,
                                             LLC As Manager



















                        Signature Page to Amendment No. 2

<PAGE>
                                    KZH CRESCENT LLC,
                                    as Lender



                                    By:  /s/  Brian Turkfeld
                                       ------------------------------------
                                            Name:    BRIAN TURKFELD
                                            Title:   Authorized Agent



















                        Signature Page to Amendment No. 2

<PAGE>
                                    KZH CRESCENT-2 LLC,
                                    as Lender



                                    By:  /s/    Brian Turkfeld
                                       -----------------------------------
                                    Name:    BRIAN TURKFELD
                                    Title:   Authorized Agent
















                        Signature Page to Amendment No. 2

<PAGE>
                                    KZH CRESCENT-3 LLC,
                                    as Lender



                                     y:  /s/    Brian Turkfeld
                                       ----------------------------------
                                    Name:    BRIAN TURKFELD
                                    Title:   Authorized Agent



















                        Signature Page to Amendment No. 2

<PAGE>
                                    SEQUILS I, LTD.,
                                    as Lender

                                    By: TCW Advisers, Inc.
                                        as its Collateral Manager



                                    By:    /s/  Richard F. Kurth
                                       -----------------------------------
                                    Name:    Richard F. Kurth
                                    Title:   Vice President



                                    By:  /s/ Mark L. Gold
                                       -----------------------------------
                                    Name:    Mark L. Gold
                                    Title:   Managing Director



















                        Signature Page to Amendment No. 2

<PAGE>
                                    SEQUILS IV, LTD.,
                                    as Lender

                                    By: TCW Advisers, Inc.
                                        as its Collateral Manager

                                    By:    /s/  Richard F. Kurth
                                       ------------------------------------
                                    Name:    Richard F. Kurth
                                    Title:   Vice President



                                    By:  /s/ Mark L. Gold
                                       ------------------------------------
                                    Name:    Mark L. Gold
                                    Title:   Managing Director



















                        Signature Page to Amendment No. 2

<PAGE>
                                    TCW LEVERAGED INCOME TRUST IV, L.P.,
                                    as Lender

                                    By: TCW (LINC IV), L.L.C.,
                                       as General Partner

                                       By: TCW Asset Management Company,
                                       as managing member of the General Partner



                                    By:    /s/  Richard F. Kurth
                                       ------------------------------------
                                    Name:    Richard F. Kurth
                                    Title:   Vice President



                                    By:  /s/ Mark L. Gold
                                       ------------------------------------
                                    Name:    Mark L. Gold
                                    Title:   Managing Director



















                        Signature Page to Amendment No. 2

<PAGE>
                                    TORONTO DOMINION (NEW YORK), INC.,
                                    as Lender



                                    By:     /s/ Stacey Malek
                                       ------------------------------------
                                    Name:  STACEY MALEK
                                    Title:   Vice President




















                        Signature Page to Amendment No. 2

<PAGE>
                                    UNITED OF OMAHA LIFE INSURANCE
                                    COMPANY, as Lender

                                    By: TCW Asset Management Company,
                                        its Investment Advisor



                                    By:  /s/ Richard F. Kurth
                                      -----------------------------------
                                    Name:    RICHARD F. KURTH
                                    Title:   Vice President




                                    By:   /s/ Mark L. Gold
                                      -------------------------------
                                    Name:    MARK L. GOLD
                                    Title:   Managing Director


















                        Signature Page to Amendment No. 2

<PAGE>
                                    FIRST UNION NATIONAL BANK,
                                    as Lender



                                    By: /s/ Frederick E. Blumer
                                        ---------------------------
                                            Name:  FREDERICK E. BLUMER
                                            Title:   Vice President

















                        Signature Page to Amendment No. 2

<PAGE>
                                    CIGNA COLLATERALIZED HOLDINGS 1999-1
                                    CDO, LIMITED, as Lender


                                    By:  /s/ John P. Connor
                                       ---------------------------
                                    Name:    John P. Connor
                                    Title:   Vice President




















                        Signature Page to Amendment No. 2

<PAGE>
                                    CAPTIVA II FINANCE LTD.,
                                    as Lender



                                    By: /s/ David Dyer
                                        -------------------
                                            Name:  DAVID DYER
                                            Title:   Director























                        Signature Page to Amendment No. 2

<PAGE>
                                                                  Execution Copy

                                 LIMITED WAIVER

         This LIMITED WAIVER (this "Waiver"), dated as of October 15, 2001, is
made among GENCORP INC., an Ohio corporation (the "Borrower"), BANKERS TRUST
COMPANY, for itself, as Lender and as Administrative Agent for the Lenders (the
"Administrative Agent"), and the other Lenders signatory to the hereinafter
defined Credit Agreement.

                                    RECITALS

         A.       The Administrative Agent, the Lenders and the Borrower are
party to that certain Credit Agreement dated as of December 28, 2000 (as amended
by that certain Amendment No. 1 to Credit Agreement and Amendment No. 1 to Post
Closing Agreement dated as of January 26, 2001 (the "Amendment No. 1") and by
that certain Amendment No. 2 to Credit Agreement, Amendment No. 2 to Post
Closing Agreement, Amendment No. 1 to Collateral Agreements and Limited Waiver
dated as of August 31, 2001 (the "Amendment No. 2")) (collectively, the "Credit
Agreement"). Unless otherwise specified herein, capitalized terms used in this
Waiver shall have the meanings ascribed to them by the Facility Agreement.

         B.       Pursuant to Amendment No. 2, the Borrower agreed to cause the
Revolving Commitment to be permanently reduced in part, and Revolving Loans
relating thereto to be repaid, on the earlier of 5:00 p.m. (New York City time)
(a) on October 15, 2001 or (b) the date of closing of the EIS Business Sale

         C.       The Borrower has requested a waiver of, and the Lenders wish
to waive, on a limited basis the provision of Amendment No. 2 described in B.
above on the terms and conditions set forth below.


         NOW, THEREFORE, in consideration of the premises and the mutual
execution hereof and other good and valuable consideration, the parties hereto
agree as follows:

                  1.       Limited Waiver. The Lenders hereby waive, for the
period commencing October 15, 2001 and ending on October 31, 2001, any Event of
Default or Unmatured Event of Default arising solely out of the Borrower's
breach of Section 2(b) of Amendment No. 2 as result of the Borrower's failure to
permanently reduce the Revolving Commitment and repay Revolving Loans as
required by the terms of said Section. Upon expiration of the waiver set forth
in the preceding sentence without compliance by the Borrower with the
requirements specified therein, such waiver shall be automatically revoked and
the requirements of the Credit Agreement (as amended by Amendment No. 1 and
Amendment No. 2) waived thereby shall again be in full force with retroactive
effect to the dates specified in the Credit Agreement (as amended by Amendment
No. 1 and Amendment No. 2). In such case, following such expiration and
noncompliance as described in the preceding sentences, the Administrative Agent
and the Lenders shall have all rights and remedies under the Credit Agreement
(as amended by Amendment No. 1 and Amendment No. 2) and any other Loan Document
or otherwise that the

<PAGE>
Administrative Agent and the Lenders would have had if any such waiver had never
been granted.

                  2.       Representation and Warranty. As an inducement to the
Lenders to grant the foregoing waiver, the Borrower represents and warrants
that, after giving effect to this Waiver, as of the date hereof (a) there exists
no Event of Default or Unmatured Event of Default and (b) the representations
and warranties contained in the Credit Agreement are true and correct except to
the extent any such representation or warranty is stated to relate solely to an
earlier date, in which case such representation or warranty shall have been true
and correct on and as of such earlier date.

                  3.       Effective Time. This Waiver shall become effective
upon the execution and delivery hereof by the Borrower, the Administrative Agent
and the Required Lenders.

                  4.       Miscellaneous.

                           (a)      The execution, delivery and effectiveness of
         this Waiver shall not operate as a waiver of any right, power or remedy
         of the Administrative Agent or any Lender under the Credit Agreement or
         any Loan Document, nor constitute a waiver of any Event of Default,
         Unmatured Event of Default, condition or provision of the Credit
         Agreement or any Loan Document, except as specifically set forth
         herein. Except as specifically waived above, the Credit Agreement and
         the other Loan Documents shall remain in full force and effect and are
         hereby ratified and confirmed. The Borrower hereby reaffirms its
         obligations under the Credit Agreement and all of the other Loan
         Documents to which it is a party.

                           (b)      Section headings in this Waiver are included
         herein for convenience of reference only and shall not constitute a
         part of this Waiver for any other purposes.

                           (c)      This Waiver may be executed in any number of
         counterparts, each of which when so executed shall be deemed an
         original but all such counterparts shall constitute one and the same
         instrument

                  5.       Affirmation of Subsidiary Guarantors. By its
signature set forth below, each Subsidiary Guarantor hereby confirms to the
Administrative Agent and the Lenders that, after giving effect to this Waiver
and the transactions contemplated hereby, the Subsidiary Guaranty of such
Subsidiary Guarantor and each other Loan Document to which such Subsidiary
Guarantor is a party continues in full force and effect and is the legal, valid
and binding obligation of such Subsidiary Guarantor, enforceable against such
Subsidiary Guarantor in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally or by equitable principles relating
to enforceability.

                  6.       Successors and Assigns. This Waiver shall be binding
on and shall inure to the benefit of the Borrower, the Administrative Agent, the
Lenders and their respective successors and assigns; provided that the Borrower
may not assign its rights, obligations, duties or other interests hereunder
without the prior written consent of the Administrative Agent and the


                                       2

<PAGE>
Lenders. The terms and provisions of this Waiver are for the purpose of defining
the relative rights and obligations of the Borrower, the Administrative Agent
and the Lenders with respect to the transactions contemplated hereby and there
shall be no third party beneficiaries of any of the terms and provisions of this
Waiver.

                  7.       Incorporation of Credit Agreement. The provisions
contained in Sections 12.4, 12.9 and 12.10 of the Credit Agreement are
incorporated herein by reference to the same extent as if reproduced herein in
their entirety with respect to this Amendment No. 2.

                  8.       Counterparts. This Waiver may be executed in any
number of counterparts and by the different parties on separate counterparts,
and each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument. Delivery
of an executed counterpart of a signature page to this Waiver by telecopy shall
be effective as delivery of a manually executed counterpart of this Waiver.

                            [signature pages follow]


                                       3

<PAGE>
IN WITNESS WHEREOF, this Waiver. has been duly executed as of the date first
written above.

                                       GENCORP INC.



                                       By: /s/ Yasmin R. Seyal
                                           -------------------------------------
                                           YASMIN R. SEYAL


                        Signature Page to Limited Waiver

<PAGE>
                                       AEROJET-GENERAL CORPORATION,
                                       as Subsidiary Guarantor



                                       By: /s/ Yasmin R. Seyal
                                           -------------------------------------
                                           Name:  YASMIN R. SEYAL


                        Signature Page to Limited Waiver

<PAGE>
                                      AEROJET ORDANCE TENNESSEE, INC., as
                                      Subsidiary Guarantor, Assignor and Pledgor

                                      By:  /s/ Brian E. Sweeney
                                           -------------------------------------
                                           BRIAN E. SWEENEY
                                           Vice President and Secretary


                        Signature Page to Limited Waiver

<PAGE>
                                       GENCORP PROPERTY INC., as Subsidiary
                                       Guarantor, Assignor and Pledgor



                                       By: /s/ Yasmin R. Seyal
                                           -------------------------------------
                                           YASMIN R. SEYAL


                        Signature Page to Limited Waiver

<PAGE>
                                       PENN INTERNATIONAL INC., as Subsidiary
                                       Guarantor, Assignor and Pledgor



                                       By: /s/ Terry L. Hall
                                           -------------------------------------
                                           TERRY L. HALL


                        Signature Page to Limited Waiver

<PAGE>
                                       GDX LLC, as Subsidiary Guarantor,
                                       Assignor and Pledgor



                                       By: /s/ Yasmin R. Seyal
                                           -------------------------------------
                                           YASMIN R. SEYAL


                        Signature Page to Limited Waiver

<PAGE>
                                       GDX AUTOMOTIVE INC., as Subsidiary
                                       Guarantor, Assignor and Pledgor



                                       By: /s/ Yasmin R. Seyal
                                           -------------------------------------
                                           YASMIN R. SEYAL


                        Signature Page to Limited Waiver


<PAGE>
                                       BANKERS TRUST COMPANY,
                                       as Lender, Administrative Agent and
                                       Collateral Agent



                                       By: /s/ Marguerite Sutton
                                           -------------------------------------
                                           Name:  Marguerite Sutton
                                           Title: Vice President


                        Signature Page to Limited Waiver

<PAGE>
                                       BANK ONE, NA,
                                       as Lender



                                       By: /s/ Stephen C. Price
                                           -------------------------------------
                                           Name:  Stephen C. Price
                                           Title: First Vice President


                        Signature Page to Limited Waiver

<PAGE>
                                       ABN AMRO Bank, N.V.,
                                       as Lender



                                       By: /s/ Mary L. Honda
                                           -------------------------------------
                                           Name:  MARY L. HONDA
                                           Title: Group Vice President



                                       By: /s/ Edward John Hill III
                                           -------------------------------------
                                           Name:  EDWARD JOHN HILL III
                                           Title: Assistant Vice President


                        Signature Page to Limited Waiver

<PAGE>
                                       THE BANK OF NEW YORK,
                                       as Lender



                                       By: /s/ Elizabeth Ying
                                           -------------------------------------
                                           Name: Elizabeth Ying
                                           Title Vice President


                        Signature Page to Limited Waiver

<PAGE>
                                       BANK OF NOVA SCOTIA,
                                       as Lender



                                       By: /s/ Mark Sparrow
                                           -------------------------------------
                                           Name:  Mark Sparrow
                                           Title: Director


                        Signature Page to Limited Waiver

<PAGE>
                                       NATIONAL CITY BANK,
                                       as Lender



                                       By: /s/ Tom Gurbach
                                           -------------------------------------
                                           Name:  Tom Gurbach
                                           Title: Vice President


                        Signature Page to Limited Waiver

<PAGE>
                                       THE NORTHERN TRUST COMPANY,
                                       as Lender



                                       By: /s/ Patrick J. Connelly
                                           -------------------------------------
                                           Name:  Patrick J. Connelly
                                           Title: Vice President


                        Signature Page to Limited Waiver

<PAGE>
                                       WELLS FARGO BANK, N.A.,
                                       as Lender



                                       By: /s/ Rick A. Souza
                                           -------------------------------------
                                           Name:  Rick A. Souza
                                           Title: Vice President


                        Signature Page to Limited Waiver

<PAGE>
                                       KATONAH II, LTD.,
                                       as Lender



                                       By: Katonah Capital LLC, as Manager



                                       By: /s/ Ralph Della Rocca
                                           -------------------------------------
                                           Name:  Ralph Della Rocca
                                           Title: Authorized Officer Katonah
                                                  Capital, LLC As Manager


                        Signature Page to Limited Waiver

<PAGE>
                                       TORONTO DOMINION (NEW YORK), INC.,
                                       as Lender



                                       By: /s/ Stacey Malek
                                           -------------------------------------
                                           Name:  STACEY MALEK
                                           Title: Vice President


                        Signature Page to Limited Waiver

<PAGE>
                                       FIRST UNION NATIONAL BANK,
                                       as Lender



                                       By: /s/ Frederick E. Blumer
                                           -------------------------------------
                                           Name:  Frederick E. Blumer
                                           Title: Vice President


                        Signature Page to Limited Waiver

<PAGE>


           LIMITED WAIVER AND TEMPORARY COMMITMENT INCREASE AGREEMENT

         This LIMITED WAIVER AND TEMPORARY COMMITMENT INCREASE AGREEMENT (this
"Waiver and Agreement"), dated as of November 20, 2001, is made among GENCORP
INC., an Ohio corporation (the "Borrower"), BANKERS TRUST COMPANY, for itself,
as Lender and as Administrative Agent for the Lenders (the "Administrative
Agent"), and the other Lenders signatory to the hereinafter defined Credit
Agreement.

                                    RECITALS

         A. The Administrative Agent, the Lenders and the Borrower are party to
that certain Credit Agreement dated as of December 28, 2000 (as amended by that
certain Amendment No. 1 to Credit Agreement and Amendment No. 1 to Post Closing
Agreement dated as of January 26, 2001 ("Amendment No. 1") and by that certain
Amendment No. 2 to Credit Agreement, Amendment No. 2 to Post Closing Agreement,
Amendment No. 1 to Collateral Agreements and Limited Waiver dated as of August
31, 2001 ("Amendment No. 2")) (collectively, the "Credit Agreement"). Unless
otherwise specified herein, capitalized terms used in this Waiver shall have the
meanings ascribed to them by the Credit Agreement.

         B. Pursuant to Amendment No. 2, the Borrower agreed to cause the
Revolving Commitment to be permanently reduced in part, and Revolving Loans
relating thereto to be repaid, on the earlier of 5:00 p.m. (New York City time)
(a) on October 15, 2001 or (b) the date of closing of the EIS Business Sale.

         C. The Borrower, the Lenders and the Administrative Agent are party to
that certain Limited Waiver dated as of October 15, 2001, pursuant to which the
Lenders agreed to waive, for the period commencing October 15, 2001 and ending
on October 31, 2001, any Event of Default or Unmatured Event of Default arising
solely out of the Borrower's breach of Section 2(b) of Amendment No. 2 (the
"Waived Section") as result of the Borrower's failure to permanently reduce the
Revolving Commitment and repay Revolving Loans, in part, as required by the
terms of said Section.

         D. Acting pursuant to Section 2.8 of the Credit Agreement, the Borrower
has elected to increase the aggregate Revolving Commitment by $2,833,333.33 (the
"Revolving Commitment Increase") to $152,833,333.33, on a temporary basis, and
has notified the Administrative Agent of such election.

         E. The Borrower has requested an extension of the limited waiver of the
Waived Section, and has requested certain additional waivers relating to the
Revolving Commitment Increase, and the Lenders are willing, on and subject to
the terms and conditions set forth below, to consent to such extension of the
limited waiver of the Waived Section and to consent to such other waivers, all
as provided below.

         NOW, THEREFORE, in consideration of the premises and the mutual
execution hereof and other good and valuable consideration, the parties hereto
agree as follows:



                     Signature Page to Waiver and Agreement

<PAGE>
         1. Limited Waiver. The Lenders hereby waive, for the period commencing
October 31, 2001 and ending on December 31, 2001, any Event of Default or
Unmatured Event of Default arising solely out of the Borrower's breach of
Section 2(b) of Amendment No. 2 as result of the Borrower's failure to
permanently reduce the Revolving Commitment and repay Revolving Loans, in part,
as required by the terms of said Section. Upon expiration of the waiver set
forth in the preceding sentence without compliance by the Borrower with the
requirements specified therein, such waiver shall be automatically revoked and
the requirements of the Credit Agreement (as amended by Amendment No. 1 and
Amendment No. 2) waived thereby shall again be in full force with retroactive
effect to the dates specified in the Credit Agreement (as amended by Amendment
No. 1 and Amendment No. 2). In such case, following such expiration and
noncompliance as described in the preceding sentences, the Administrative Agent
and the Lenders shall have all rights and remedies under the Credit Agreement
(as amended by Amendment No. 1 and Amendment No. 2) and any other Loan Document
or otherwise that the Administrative Agent and the Lenders would have had if any
such waiver had never been granted.

         2. Temporary Revolving Commitment Increase and related Waivers. In
accordance with Section 2.8 of the Credit Agreement, Bank One, NA hereby agrees
to increase its Revolving Commitment by the amount of $2,833,333.33 (the
"Revolving Commitment Increase"), effective for the period commencing October
31, 2001 and ending on December 31, 2001, for a total Revolving Commitment under
the Credit Agreement of $34,500,000 with respect to such Lender, and each of the
Administrative Agent and the Borrower consents to the foregoing additional,
temporary Revolving Commitment. The Borrower, the Administrative Agent and the
Lenders hereby acknowledge that, pursuant to Section 2.8 of the Credit
Agreement, the Credit Agreement is deemed amended without further action by any
party to reflect the revised Revolving Commitment of Bank One, NA. In connection
with the foregoing Revolving Commitment Increase, the Lenders hereby waive any
terms or conditions precedent provided for in said Section 2.8 of the Credit
Agreement with regard to the implementation of the Revolving Commitment
Increase, including, without limitation, the prescribed minimum amount of such
increase, advance notice of such increase, delivery of financial projections,
and the solicitation of the existing Lenders in connection with such increase,
and the Borrower, the Administrative Agent and the Lenders agree that the
Revolving Commitment Increase shall become effective on the effective date of
this Waiver and Amendment without further action on the part of the Borrower,
the Administrative Agent, Bank One, NA, or the Lenders. On or prior to 5:00 p.m.
(New York City time) on December 31, 2001, the Borrower shall cause the
Revolving Commitment to be permanently reduced, in part, in the aggregate
principal amount of the Revolving Commitment Increase, and shall cause any
Revolving Loans relating thereto to be paid in full.

         3. Limitation on Borrowings. Notwithstanding the foregoing paragraphs
1. and 2., the Borrower hereby agrees that at such time as the Borrower shall
request Revolving Loans which, together with the Assigned Dollar Value of all
outstanding Revolving Loans, would cause the then outstanding Revolving Loans
(including the proposed Revolving Loans) to exceed an Assigned Dollar Value of
$146,833,333.33, such proposed Revolving Loans shall be applied by the Borrower
solely to repay in full the Bank One, NA loan facility currently outstanding to
Henniges (as further identified on Schedule 8.2(b) to the Credit Agreement) (the
"Henniges Line of Credit") and, simultaneously with such repayment, the Borrower
shall cause the Henniges


                     Signature Page to Waiver and Agreement

<PAGE>
Line of Credit to be cancelled, with such repayment and cancellation occurring
not later than the second (2nd) Business Day following the distribution of
proceeds of such Revolving Loans to the Borrower from the Administrative Agent;
provided that in no event shall the Henniges Line of Credit be repaid and
cancelled later than November 30, 2001. Upon repayment and cancellation of the
Henniges Line of Credit, the limitation on the Borrower set forth in this
paragraph 3. shall expire and shall no longer apply to the Borrower or to the
aggregate Revolving Commitments.

         4. Representation and Warranty. As an inducement to the Lenders to
grant the foregoing waivers, the Borrower represents and warrants that, after
giving effect to this Waiver and Agreement, as of the date hereof (a) there
exists no Event of Default or Unmatured Event of Default and (b) the
representations and warranties contained in the Credit Agreement are true and
correct except to the extent any such representation or warranty is stated to
relate solely to an earlier date, in which case such representation or warranty
shall have been true and correct on and as of such earlier date.

         5. Effective Time. This Waiver and Agreement shall become effective
upon the execution and delivery hereof by the Borrower, the Administrative Agent
and the Required Lenders.

         6. Miscellaneous.

                 (a) The execution, delivery and effectiveness of this
         Waiver and Agreement shall not operate as a waiver of any right, power
         or remedy of the Administrative Agent or any Lender under the Credit
         Agreement or any Loan Document, nor constitute a waiver of any Event of
         Default, Unmatured Event of Default, condition or provision of the
         Credit Agreement or any Loan Document, except as specifically set forth
         herein. Except as specifically waived above, the Credit Agreement and
         the other Loan Documents shall remain in full force and effect and are
         hereby ratified and confirmed. The Borrower hereby reaffirms its
         obligations under the Credit Agreement and all of the other Loan
         Documents to which it is a party.

                  (b) Section headings in this Waiver and Agreement are included
         herein for convenience of reference only and shall not constitute a
         part of this Waiver and Agreement for any other purposes.

                  (c) This Waiver and Agreement may be executed in any number of
         counterparts, each of which when so executed shall be deemed an
         original but all such counterparts shall constitute one and the same
         instrument

         7. Affirmation of Subsidiary Guarantors. By its signature set forth
below, each Subsidiary Guarantor hereby confirms to the Administrative Agent and
the Lenders that, after giving effect to this Waiver and Agreement and the
transactions contemplated hereby, including, the Revolving Commitment Increase,
the Subsidiary Guaranty of such Subsidiary Guarantor and each other Loan
Document to which such Subsidiary Guarantor is a party continues in full force
and effect and is the legal, valid and binding obligation of such Subsidiary
Guarantor, enforceable against such Subsidiary Guarantor in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the


                     Signature Page to Waiver and Agreement

<PAGE>
enforcement of creditors' rights generally or by equitable principles relating
to enforceability.

         8. Successors and Assigns. This Waiver and Agreement shall be binding
on and shall inure to the benefit of the Borrower, the Administrative Agent, the
Lenders and their respective successors and assigns; provided that the Borrower
may not assign its rights, obligations, duties or other interests hereunder
without the prior written consent of the Administrative Agent and the Lenders.
The terms and provisions of this Waiver and Agreement are for the purpose of
defining the relative rights and obligations of the Borrower, the Administrative
Agent and the Lenders with respect to the transactions contemplated hereby and
there shall be no third party beneficiaries of any of the terms and provisions
of this Waiver and Agreement.

         9. Incorporation of Credit Agreement. The provisions contained in
Sections 12.4, 12.9 and 12.10 of the Credit Agreement are incorporated herein by
reference to the same extent as if reproduced herein in their entirety with
respect to this Waiver and Agreement.

         10. Counterparts. This Waiver and Agreement may be executed in any
number of counterparts and by the different parties on separate counterparts,
and each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument. Delivery
of an executed counterpart of a signature page to this Waiver and Agreement by
telecopy shall be effective as delivery of a manually executed counterpart of
this Waiver and Agreement.

                      [signature pages immediately follow]


                     Signature Page to Waiver and Agreement

<PAGE>
IN WITNESS WHEREOF, this Waiver. has been duly executed as of the date first
written above.

                                            GENCORP INC.




                                            By: /s/ Yasmin R. Seyal
                                                --------------------------------
                                                YASMIN R. SEYAL
                                                Senior Vice President, Finance






                     Signature Page to Waiver and Agreement

<PAGE>
                                            AEROJET-GENERAL CORPORATION,
                                            as Subsidiary Guarantor

                                            By: /s/ Yasmin R. Seyal
                                                --------------------------------
                                                YASMIN R. SEYAL
                                                Treasurer





                     Signature Page to Waiver and Agreement

<PAGE>
                                      AEROJET ORDANCE TENNESSEE, INC., as
                                      Subsidiary Guarantor, Assignor and Pledgor

                                      By: /s/ Brian E. Sweeney
                                          --------------------------------------
                                          BRIAN E. SWEENEY
                                          Vice President and Secretary









                     Signature Page to Waiver and Agreement

<PAGE>
                                            GENCORP PROPERTY INC., as Subsidiary
                                            Guarantor, Assignor and Pledgor

                                            By: /s/ Yasmin R. Seyal
                                                --------------------------------
                                                YASMIN R. SEYAL
                                                Treasurer






                     Signature Page to Waiver and Agreement

<PAGE>
                                         PENN INTERNATIONAL INC., as Subsidiary
                                         Guarantor, Assignor and Pledgor

                                         By: /s/ Terry L. Hall
                                             -----------------------------------
                                             TERRY L. HALL
                                             President






                     Signature Page to Waiver and Agreement

<PAGE>
                                  GDX LLC, as Subsidiary Guarantor, Assignor and
                                  Pledgor




                                  By: /s/ Yasmin R. Seyal
                                      ------------------------------------------
                                      YASMIN R. SEYAL
                                      Treasurer






                     Signature Page to Waiver and Agreement

<PAGE>
                                  GDX AUTOMOTIVE INC.,
                                  as Subsidiary Guarantor, Assignor and Pledgor

                                  By: /s/ Yasmin R. Seyal
                                      ------------------------------------------
                                      YASMIN R. SEYAL
                                      Treasurer






                     Signature Page to Waiver and Agreement

<PAGE>
                                 BANKERS TRUST COMPANY,
                                 as Lender, Administrative Agent and Collateral
                                 Agent

                                 By: /s/ Marguerite Sutton
                                     -------------------------------------------
                                     Name:  Marguerite Sutton
                                     Title: Vice President






                     Signature Page to Waiver and Agreement

<PAGE>
                                            BANK ONE, NA,
                                            as Lender

                                            By: /s/ Karen C. Ryan
                                                --------------------------------
                                                Name:  Karen C. Ryan
                                                Title: Director






                     Signature Page to Waiver and Agreement

<PAGE>
                                            ABN AMRO Bank, N.V.,
                                            as Lender

                                            By: /s/ Mary L. Honda
                                                --------------------------------
                                                Name:  MARY L. HONDA
                                                Title: Group Vice President

                                            By: /s/ Edward John Hill III
                                                --------------------------------
                                                Name:  EDWARD JOHN HILL III
                                                Title: Assistant Vice President






                     Signature Page to Waiver and Agreement

<PAGE>
                                            THE BANK OF NEW YORK,
                                            as Lender

                                            By: /s/ Elizabeth Ying
                                                --------------------------------
                                            Name:  Elizabeth Ying
                                            Title: Vice President






                     Signature Page to Waiver and Agreement

<PAGE>
                                            BANK OF NOVA SCOTIA,
                                            as Lender

                                            By: /s/ Mark Sparrow
                                                --------------------------------
                                                Name:   Mark Sparrow
                                                Title:  Director






                     Signature Page to Waiver and Agreement

<PAGE>
                                            WELLS FARGO BANK, N.A.,
                                            as Lender

                                            By: /s/ Rick A. Souza
                                                --------------------------------
                                                Name:  Rick A. Souza
                                                Title: Vice President






                     Signature Page to Waiver and Agreement

<PAGE>
                                            FIRST UNION NATIONAL BANK,
                                            as Lender

                                            By: /s/ Frederick E. Blumer
                                                --------------------------------
                                                Name:  Frederick E. Blumer
                                                Title: Vice President




                     Signature Page to Waiver and Agreement

<PAGE>

                          LIMITED WAIVER AND AMENDMENT

         This LIMITED WAIVER AND AMENDMENT (this "Waiver and Amendment"), dated
as of December 31, 2001, is made among GENCORP INC., an Ohio corporation (the
"Borrower"), BANKERS TRUST COMPANY, for itself, as Lender and as Administrative
Agent for the Lenders (the "Administrative Agent"), and the other Lenders
signatory to the hereinafter defined Credit Agreement.

                                    RECITALS

         A. The Administrative Agent, the Lenders and the Borrower are party to
that certain Credit Agreement dated as of December 28, 2000 (as amended by that
certain Amendment No. 1 to Credit Agreement and Amendment No. 1 to Post Closing
Agreement dated as of January 26, 2001 ("Amendment No. 1") and by that certain
Amendment No. 2 to Credit Agreement, Amendment No. 2 to Post Closing Agreement,
Amendment No. 1 to Collateral Agreements and Limited Waiver dated as of August
31, 2001 ("Amendment No. 2")) (collectively, the "Credit Agreement"). Unless
otherwise specified herein, capitalized terms used in this Waiver and Amendment
shall have the meanings ascribed to them by the Credit Agreement.

         B. Pursuant to Amendment No. 2, the Borrower agreed to cause the
Revolving Commitment to be permanently reduced in part, and Revolving Loans
relating thereto to be repaid, on the earlier of 5:00 p.m. (New York City time)
(a) on October 15, 2001 or (b) the date of closing of the EIS Business Sale.

         C. The Borrower, the Lenders and the Administrative Agent are party to
that certain Limited Waiver dated as of October 15, 2001, pursuant to which the
Lenders agreed to waive, for the period commencing October 15, 2001 and ending
on October 31, 2001, any Event of Default or Unmatured Event of Default arising
solely out of the Borrower's breach of Section 2(b) of Amendment No. 2 (the
"Waived Section") as result of the Borrower's failure to permanently reduce the
Revolving Commitment and repay Revolving Loans, in part, as required by the
terms of said Section.

         D. The Borrower, the Lenders and the Administrative Agent are party to
that certain Limited Waiver and Temporary Increase Agreement dated as of
November 20, 2001, pursuant to which (i) the Lenders agreed to waive, for the
period commencing October 31, 2001 and ending on December 31, 2001, any Event of
Default or Unmatured Event of Default arising solely out of the Borrower's
breach of the Waived Section as result of the Borrower's failure to permanently
reduce the Revolving Commitment and repay Revolving Loans, in part, as required
by the terms of said Section and (ii) acting pursuant to Section 2.8 of the
Credit Agreement, the Borrower elected to increase the aggregate Revolving
Commitment by $2,833,333.33 (the "Revolving Commitment Increase") to
$152,833,333.33, on a temporary basis, and Bank One, NA agreed to increase its
Revolving Commitment by the Revolving Commitment Increase for the period
commencing October 31, 2001 and ending on December 31, 2001.

<PAGE>
         E. By its terms, the Revolving Commitment Increase will terminate on
December 31, 2001 and the aggregate Revolving Commitment of the Lenders after
such date shall be equal to $150,000,000.

         F. The Borrower has requested an extension of the limited waiver of the
Waived Section and an amendment of the Credit Agreement to permit its
subsidiary, GenCorp Canada, Inc. to enter into a certain credit arrangement with
The Bank of Nova Scotia, and the Lenders are willing, on and subject to the
terms and conditions set forth below, (i) to consent to such extension of the
limited waiver of the Waived Section and (ii) to amend the Credit Agreement to
provide for the extension of credit to GenCorp Canada, Inc., all as provided
below.

         NOW, THEREFORE, in consideration of the premises and the mutual
execution hereof and other good and valuable consideration, the parties hereto
agree as follows:

         1. Limited Waiver. The Lenders hereby waive, for the period commencing
December 31, 2001 and ending on February 15, 2002, any Event of Default or
Unmatured Event of Default arising solely out of the Borrower's breach of
Section 2(b) of Amendment No. 2 as result of the Borrower's failure to
permanently reduce the Revolving Commitment and repay Revolving Loans, in part,
as required by the terms of said Section. Upon expiration of the waiver set
forth in the preceding sentence without compliance by the Borrower with the
requirements specified therein, such waiver shall be automatically revoked and
the requirements of the Credit Agreement (as amended by Amendment No. 1 and
Amendment No. 2) waived thereby shall again be in full force with retroactive
effect to the dates specified in the Credit Agreement (as amended by Amendment
No. 1 and Amendment No. 2). In such case, following such expiration and
noncompliance as described in the preceding sentences, the Administrative Agent
and the Lenders shall have all rights and remedies under the Credit Agreement
(as amended by Amendment No. 1 and Amendment No. 2) and any other Loan Document
or otherwise that the Administrative Agent and the Lenders would have had if any
such waiver had never been granted.

         2. Amendment of Credit Agreement. Section 8.2 of the Credit Agreement
is hereby amended by (i) in subsection (o) thereof, deleting the word "and"
immediately following the phrase "AFC's obligation to repay such advances" and
inserting in lieu thereof the following ";", (ii) in subsection (p) thereof,
deleting the period immediately following the phrase "any any time exceed
$100,000,000" and inserting in lieu thereof the phrase "; and", and (iii)
inserting the following new subsection (q) immediately after subsection (p)
therein:

                  "(q) Indebtedness of GenCorp Canada, Inc. under a credit
         facility made available by The Bank of Nova Scotia or such other
         lender; provided, that the amount of such Indebtedness shall not exceed
         $5,000,000 in the aggregate at any one time outstanding."

         3. Representation and Warranty. As an inducement to the Lenders to
grant the foregoing waiver and to consent to the foregoing amendment, the
Borrower represents and warrants that, after giving effect to this Waiver and
Amendment, as of the date hereof (a) there exists no Event of Default or
Unmatured Event of Default and (b) the representations and warranties contained
in the Credit Agreement are true and correct except to the extent any such



                                       2

<PAGE>
representation or warranty is stated to relate solely to an earlier date, in
which case such representation or warranty shall have been true and correct on
and as of such earlier date.

         4. Effective Time. This Waiver and Amendment shall become effective
upon the execution and delivery hereof by the Borrower, the Administrative Agent
and the Required Lenders.

         5. Miscellaneous.

                           (a) The execution, delivery and effectiveness of this
         Waiver and Amendment shall not operate as a waiver of any right, power
         or remedy of the Administrative Agent or any Lender under the Credit
         Agreement or any Loan Document, nor constitute a waiver of any Event of
         Default, Unmatured Event of Default, condition or provision of the
         Credit Agreement or any Loan Document, except as specifically set forth
         herein. Except as specifically waived or amended above, the Credit
         Agreement and the other Loan Documents shall remain in full force and
         effect and are hereby ratified and confirmed. The Borrower hereby
         reaffirms its obligations under the Credit Agreement and all of the
         other Loan Documents to which it is a party.

                  (b) Section headings in this Waiver and Amendment are included
         herein for convenience of reference only and shall not constitute a
         part of this Waiver and Amendment for any other purposes.

                  (c) This Waiver and Amendment may be executed in any number of
         counterparts, each of which when so executed shall be deemed an
         original but all such counterparts shall constitute one and the same
         instrument

         6. Affirmation of Subsidiary Guarantors. By its signature set forth
below, each Subsidiary Guarantor hereby confirms to the Administrative Agent and
the Lenders that, after giving effect to this Waiver and Amendment and the
transactions contemplated hereby, the Subsidiary Guaranty of such Subsidiary
Guarantor and each other Loan Document to which such Subsidiary Guarantor is a
party continues in full force and effect and is the legal, valid and binding
obligation of such Subsidiary Guarantor, enforceable against such Subsidiary
Guarantor in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability.

         7. Successors and Assigns. This Waiver and Amendment shall be binding
on and shall inure to the benefit of the Borrower, the Administrative Agent, the
Lenders and their respective successors and assigns; provided that the Borrower
may not assign its rights, obligations, duties or other interests hereunder
without the prior written consent of the Administrative Agent and the Lenders.
The terms and provisions of this Waiver and Amendment are for the purpose of
defining the relative rights and obligations of the Borrower, the Administrative
Agent and the Lenders with respect to the transactions contemplated hereby and
there shall be no third party beneficiaries of any of the terms and provisions
of this Waiver and Amendment.


                                       3

<PAGE>
         8. Incorporation of Credit Agreement. The provisions contained in
Sections 12.4, 12.9 and 12.10 of the Credit Agreement are incorporated herein by
reference to the same extent as if reproduced herein in their entirety with
respect to this Waiver and Amendment.

         9. Counterparts. This Waiver and Amendment may be executed in any
number of counterparts and by the different parties on separate counterparts,
and each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument. Delivery
of an executed counterpart of a signature page to this Waiver and Amendment by
telecopy shall be effective as delivery of a manually executed counterpart of
this Waiver and Amendment.

                      [signature pages immediately follow]


                                       4

<PAGE>
IN WITNESS WHEREOF, this Waiver. has been duly executed as of the date first
written above.

                                        GENCORP INC.




                                        By: /s/ Yasmin R. Seyal
                                                --------------------------------
                                                YASMIN R. SEYAL
                                                Senior Vice President, Finance






                     Signature Page to Waiver and Amendment

<PAGE>
                                        AEROJET-GENERAL CORPORATION,
                                        as Subsidiary Guarantor

                                        By: /s/ Yasmin R. Seyal
                                            ------------------------------------
                                            Name:  YASMIN R. SEYAL
                                            Title:   Treasurer





                     Signature Page to Waiver and Amendment

<PAGE>
                                      AEROJET ORDANCE TENNESSEE, INC., as
                                      Subsidiary Guarantor, Assignor and Pledgor

                                      By: /s/ Brian E. Sweeney
                                          --------------------------------------
                                          BRIAN E. SWEENEY
                                          Vice President and Secretary






                     Signature Page to Waiver and Amendment

<PAGE>
                                        GENCORP PROPERTY INC., as Subsidiary
                                        Guarantor, Assignor and Pledgor

                                        By: /s/ Yasmin R. Seyal
                                            ------------------------------------
                                            YASMIN R. SEYAL
                                            Treasurer






                     Signature Page to Waiver and Amendment

<PAGE>
                                        PENN INTERNATIONAL INC., as Subsidiary
                                        Guarantor, Assignor and Pledgor

                                        By: /s/ Terry L. Hall
                                            ------------------------------------
                                            TERRY L. HALL
                                            President





                     Signature Page to Waiver and Amendment

<PAGE>
                                  GDX LLC, as Subsidiary Guarantor, Assignor and
                                  Pledgor




                                  By: /s/ Yasmin R. Seyal
                                      ------------------------------------------
                                      YASMIN R. SEYAL
                                      Treasurer






                     Signature Page to Waiver and Amendment

<PAGE>
                                   GDX AUTOMOTIVE INC.,
                                   as Subsidiary Guarantor, Assignor and Pledgor

                                  By: /s/ Yasmin R. Seyal
                                      ------------------------------------------
                                      YASMIN R. SEYAL
                                      Treasurer






                     Signature Page to Waiver and Amendment

<PAGE>
                                  BANKERS TRUST COMPANY,
                                  as Lender, Administrative Agent and Collateral
                                  Agent

                                  By: /s/ Marguerite Sutton
                                      ------------------------------------------
                                      Name:  Marguerite Sutton
                                      Title: Vice President






                     Signature Page to Waiver and Amendment

<PAGE>
                                        BANK ONE, NA,
                                        as Lender

                                        By: /s/ Karen C. Ryan
                                            ------------------------------------
                                            Name:   Karen C. Ryan
                                            Title:  Director






                     Signature Page to Waiver and Amendment

<PAGE>
                                        ABN AMRO Bank, N.V.,
                                        as Lender

                                        By: /s/ Terrence J. Ward
                                            ------------------------------------
                                            Name:  TERRENCE J. WARD
                                            Title: Group Vice President

                                        By: /s/ Wendy E. Pace
                                            ------------------------------------
                                            Name:  WENDY E. PACE
                                            Title: Assistant Vice President





                     Signature Page to Waiver and Amendment

<PAGE>
                                        THE BANK OF NEW YORK,
                                        as Lender

                                        By: /s/ Lisa Y. Brown
                                            ------------------------------------
                                        Name:  LISA Y. BROWN
                                        Title: Vice President & Division Head






                     Signature Page to Waiver and Amendment

<PAGE>
                                        NATIONAL CITY BANK,
                                        as Lender

                                        By: /s/ Tom Gurbach
                                            ------------------------------------
                                            Name:  Tom Gurbach
                                            Title: Vice President






                     Signature Page to Waiver and Amendment

<PAGE>
                                        THE NORTHERN TRUST COMPANY,
                                        as Lender

                                        By: /s/ Joseph A. Wemhoff
                                            ------------------------------------
                                            Name:  JOSEPH A. WEMHOFF
                                            Title: Vice President






                     Signature Page to Waiver and Amendment

<PAGE>
                                        WELLS FARGO BANK, N.A.,
                                        as Lender

                                        By: /s/ Rick A. Souza
                                            ------------------------------------
                                            Name:  Rick A. Souza
                                            Title: Vice President





                     Signature Page to Waiver and Amendment

<PAGE>
                                        BANK OF NOVA SCOTIA, as Lender



                                        By: /s/ Mark Sparrow
                                            ------------------------------------
                                            Name:  MARK SPARROW
                                            Title: Director






                     Signature Page to Waiver and Amendment

<PAGE>
                                        FIRST UNION NATIONAL BANK,
                                        as Lender

                                        By: /s/ Frederick E. Blumer
                                            ------------------------------------
                                            Name:  FREDERICK E. BLUMER
                                            Title: Vice President






                     Signature Page to Waiver and Amendment

<PAGE>
                                 LIMITED WAIVER

         This LIMITED WAIVER (this "Waiver"), dated as of February 15, 2002, is
made among GENCORP INC., an Ohio corporation (the "Borrower"), BANKERS TRUST
COMPANY, for itself, as Lender and as Administrative Agent for the Lenders (the
"Administrative Agent"), and the other Lenders signatory to the hereinafter
defined Credit Agreement.

                                    RECITALS

         A.       The Administrative Agent, the Lenders and the Borrower are
party to that certain Credit Agreement dated as of December 28, 2000 (as amended
by that certain Amendment No. 1 to Credit Agreement and Amendment No. 1 to Post
Closing Agreement dated as of January 26, 2001 ("Amendment No. 1"), by that
certain Amendment No. 2 to Credit Agreement, Amendment No. 2 to Post Closing
Agreement, Amendment No. 1 to Collateral Agreements and Limited Waiver dated as
of August 31, 2001 ("Amendment No. 2") and by that certain Limited Waiver and
Amendment dated as of December 31, 2001 (the "Limited Waiver and Amendment"))
(collectively, the "Credit Agreement"). Unless otherwise specified herein,
capitalized terms used in this Waiver shall have the meanings ascribed to them
by the Credit Agreement.

         B.       Pursuant to Amendment No. 2, the Borrower agreed to cause the
Revolving Commitment to be permanently reduced in part, and Revolving Loans
relating thereto to be repaid, on the earlier of 5:00 p.m. (New York City time)
(a) on October 15, 2001 or (b) the date of closing of the EIS Business Sale.

         C.       The Borrower, the Lenders and the Administrative Agent are
party to that certain Limited Waiver dated as of October 15, 2001, pursuant to
which the Lenders agreed to waive, for the period commencing October 15, 2001
and ending on October 31, 2001, any Event of Default or Unmatured Event of
Default arising solely out of the Borrower's breach of Section 2(b) of Amendment
No. 2 (the "Waived Section") as result of the Borrower's failure to permanently
reduce the Revolving Commitment and repay Revolving Loans, in part, as required
by the terms of said Section.

         D.       The Borrower, the Lenders and the Administrative Agent are
party to that certain Limited Waiver and Temporary Commitment Increase Agreement
dated as of November 20, 2001, pursuant to which (i) the Lenders agreed to
waive, for the period commencing October 31, 2001 and ending on December 31,
2001, any Event of Default or Unmatured Event of Default arising solely out of
the Borrower's breach of the Waived Section as result of the Borrower's failure
to permanently reduce the Revolving Commitment and repay Revolving Loans, in
part, as required by the terms of said Section and (ii) acting pursuant to
Section 2.8 of the Credit Agreement, the Borrower elected to increase the
aggregate Revolving Commitment by $2,833,333.33 (the "Revolving Commitment
Increase") to $152,833,333.33, on a temporary basis, and Bank One, NA agreed to
increase its Revolving Commitment by the Revolving Commitment Increase for the
period commencing October 31, 2001 and ending on December 31, 2001.

<PAGE>
         E.       The Borrower, the Lenders and the Administrative Agent are
party to the Limited Waiver and Amendment, pursuant to which the Lenders agreed
to waive, for the period commencing December 31, 2001 and ending on February 15,
2002, any Event of Default or Unmatured Event of Default arising solely out of
the Borrower's breach of the Waived Section as result of the Borrower's failure
to permanently reduce the Revolving Commitment and repay Revolving Loans, in
part, as required by the terms of said Section.

         F.       By its terms, the Revolving Commitment Increase will terminate
on February 15, 2002 and the aggregate Revolving Commitment of the Lenders after
such date shall be equal to $150,000,000.

         G.       The Borrower has requested an extension of the limited waiver
of the Waived Section, and the Lenders are willing, on and subject to the terms
and conditions set forth below, to consent to such extension of the limited
waiver of the Waived Section, as provided below.

         NOW, THEREFORE, in consideration of the premises and the mutual
execution hereof and other good and valuable consideration, the parties hereto
agree as follows:

         1.       Limited Waiver. The Lenders hereby waive, for the period
commencing February 15, 2002 and ending on the earlier of (i) the date on which
the Borrower has completed an unsecured subordinated debt or equity financing of
not less than $35,000,000 or (ii) March 8, 2002, any Event of Default or
Unmatured Event of Default arising solely out of the Borrower's breach of
Section 2(b) of Amendment No. 2 as result of the Borrower's failure to
permanently reduce the Revolving Commitment and repay Revolving Loans, in part,
as required by the terms of said Section. Upon expiration of the waiver set
forth in the preceding sentence without compliance by the Borrower with the
requirements specified therein, such waiver shall be automatically revoked and
the requirements of the Credit Agreement (as amended by Amendment No. 1,
Amendment No. 2 and the Limited Waiver and Amendment) waived thereby shall again
be in full force with retroactive effect to the dates specified in the Credit
Agreement (as amended by Amendment No. 1, Amendment No. 2 and the Limited Waiver
and Amendment). In such case, following such expiration and noncompliance as
described in the preceding sentences, the Administrative Agent and the Lenders
shall have all rights and remedies under the Credit Agreement (as amended by
Amendment No. 1, Amendment No. 2 and the Limited Waiver and Amendment) and any
other Loan Document or otherwise that the Administrative Agent and the Lenders
would have had if any such waiver had never been granted.

         2.       Representation and Warranty. As an inducement to the Lenders
to grant the foregoing waiver, the Borrower represents and warrants that, after
giving effect to this Waiver, as of the date hereof (a) there exists no Event of
Default or Unmatured Event of Default and (b) the representations and warranties
contained in the Credit Agreement and the other Loan Documents are true and
correct except to the extent any such representation or warranty is stated to
relate solely to an earlier date, in which case such representation or warranty
shall have been true and correct on and as of such earlier date.

         3.       Effective Time. This Waiver shall become effective upon the
execution and delivery hereof by the Borrower, the Administrative Agent and the
Required Lenders.


                                       2

<PAGE>
         4.       Miscellaneous.

                           (a)      The execution, delivery and effectiveness of
         this Waiver shall not operate as a waiver of any right, power or remedy
         of the Administrative Agent or any Lender under the Credit Agreement or
         any other Loan Document, or constitute a waiver of any Event of
         Default, Unmatured Event of Default, condition or provision of the
         Credit Agreement or any other Loan Document, except as specifically set
         forth herein. Except as specifically waived above, the Credit Agreement
         and the other Loan Documents shall remain in full force and effect and
         are hereby ratified and confirmed. The Borrower hereby reaffirms its
         obligations under the Credit Agreement and all of the other Loan
         Documents to which it is a party.

                           (b)      Section headings in this Waiver are included
         herein for convenience of reference only and shall not constitute a
         part of this Waiver for any other purposes.

                           (c)      This Waiver may be executed in any number of
         counterparts, each of which when so executed shall be deemed an
         original but all such counterparts shall constitute one and the same
         instrument

         6.       Affirmation of Subsidiary Guarantors. By its signature set
forth below, each Subsidiary Guarantor hereby confirms to the Administrative
Agent and the Lenders that, after giving effect to this Waiver and the
transactions contemplated hereby, the Subsidiary Guaranty of such Subsidiary
Guarantor and each other Loan Document to which such Subsidiary Guarantor is a
party continues in full force and effect and is the legal, valid and binding
obligation of such Subsidiary Guarantor, enforceable against such Subsidiary
Guarantor in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability.

         7.       Successors and Assigns. This Waiver shall be binding on and
shall inure to the benefit of the Borrower, the Administrative Agent, the
Lenders and their respective successors and assigns; provided that the Borrower
may not assign its rights, obligations, duties or other interests hereunder
without the prior written consent of the Administrative Agent and the Lenders.
The terms and provisions of this Waiver are for the purpose of defining the
relative rights and obligations of the Borrower, the Administrative Agent and
the Lenders with respect to the transactions contemplated hereby and there shall
be no third party beneficiaries of any of the terms and provisions of this
Waiver.

         8.       Incorporation of Credit Agreement. The provisions contained in
Sections 12.4, 12.9 and 12.10 of the Credit Agreement are incorporated herein by
reference to the same extent as if reproduced herein in their entirety with
respect to this Waiver.


                                       3

<PAGE>
         9.       Counterparts. This Waiver may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument. Delivery of an
executed counterpart of a signature page to this Waiver by telecopy shall be
effective as delivery of a manually executed counterpart of this Waiver.


                      [signature pages immediately follow]


                                       4

<PAGE>
         IN WITNESS WHEREOF, this Waiver has been duly executed as of the date
first written above.

                                       GENCORP INC.



                                       By: /s/ Yasmin R. Seyal
                                           -------------------------------------
                                           Name:  YASMIN R. SEYAL
                                           Title: Senior Vice President, Finance


                        Signature Page to GenCorp Waiver

<PAGE>
                                       AEROJET-GENERAL CORPORATION,
                                       as Subsidiary Guarantor



                                       By: /s/ Yasmin R. Seyal            
                                           -------------------------------------
                                           Name:  YASMIN R. SEYAL
                                           Title: Treasurer


                        Signature Page to GenCorp Waiver

<PAGE>
                                       AEROJET ORDNANCE TENNESSEE, INC.,
                                       as Subsidiary



                                       By: /s/ Brian E. Sweeney                 
                                           -------------------------------------
                                           Name:  Brian E. Sweeney
                                           Title: Vice President and Secretary


                        Signature Page to GenCorp Waiver

<PAGE>
                                       PENN INTERNATIONAL INC, as Subsidiary
                                       Guarantor



                                       By: /s/ Yasmin R. Seyal
                                           -------------------------------------
                                           Name:  YASMIN R. SEYAL
                                           Title: Treasurer


                        Signature Page to GenCorp Waiver

<PAGE>
                                       GDX LLC, as Subsidiary Guarantor



                                       By: /s/ Yasmin R. Seyal               
                                           -------------------------------------
                                           Name:  YASMIN R. SEYAL
                                           Title: TREASURER


                        Signature Page to GenCorp Waiver

<PAGE>
                                       GDX AUTOMOTIVE INC.,
                                       as Subsidiary Guarantor



                                       By: /s/ Yasmin R. Seyal         
                                           -------------------------------------
                                           Name:  Yasmin R. Seyal
                                           Title: Treasurer


                        Signature Page to GenCorp Waiver

<PAGE>

                                       GENCORP PROPERTY INC.,
                                       as Subsidiary Guarantor



                                       By: /s/ Yasmin R. Seyal            
                                           -------------------------------------
                                           Name:  Yasmin R. Seyal
                                           Title: Treasurer


                        Signature Page to GenCorp Waiver


<PAGE>
                                       BANKERS TRUST COMPANY,
                                       as Lender and Administrative Agent



                                       By: /s/ Gregory Shefrin
                                           -------------------------------------
                                           Name:  GREGORY SHEFRIN
                                           Title: Director


                        Signature Page to GenCorp Waiver




<PAGE>
                                       BANK ONE, NA, as Lender



                                       By: /s/ Karen C. Ryan
                                           -------------------------------------
                                           Name:  KAREN C. RYAN
                                           Title: Director


                        Signature Page to GenCorp Waiver

<PAGE>
                                       THE BANK OF NEW YORK, as Lender



                                       By: /s/ Lisa Y. Brown
                                           -------------------------------------
                                           Name:  LISA Y. BROWN
                                           Title: Vice President & Division
                                                  Manager 
                                           Title:


                        Signature Page to GenCorp Waiver

<PAGE>
                                       NATIONAL CITY BANK, as Lender



                                       By: /s/ Tom Gurbach
                                           -------------------------------------
                                           Name:  TOM GURBACH
                                           Title: Vice President


                        Signature Page to GenCorp Waiver

<PAGE>
                                       THE NORTHERN TRUST COMPANY,
                                       as Lender



                                       By: /s/ Melissa A. Whitson
                                           -------------------------------------
                                           Name:  MELISSA A. WHITSON
                                           Title: Vice President


                        Signature Page to GenCorp Waiver

<PAGE>
                                       WELLS FARGO BANK, N.A.,
                                       as Lender



                                       By: /s/ Rick A. Souza            
                                           -------------------------------------
                                           Name:  RICK A. SOUZA
                                           Title: Vice President


                        Signature Page to GenCorp Waiver

<PAGE>
                                       ABN AMRO Bank N.V.,
                                       as Lender



                                       By: /s/ Terrence J. Ward                
                                           -------------------------------------
                                           Name:  TERRENCE J. WARD
                                           Title: Group Vice President



                                       By: /s/ Edward John Hill III            
                                           -------------------------------------
                                           Name:  EDWARD JOHN HILL III
                                           Title: Assistant Vice President


                        Signature Page to GenCorp Waiver

<PAGE>
                                                                  Execution Copy

                 AMENDMENT NO. 4 TO CREDIT AGREEMENT AND WAIVER

         This AMENDMENT NO. 4 TO CREDIT AGREEMENT AND WAIVER (this "Amendment
No. 4"), dated as of February 28, 2002 (the "Effective Date") is made among
GENCORP INC., an Ohio corporation ("Borrower"), BANKERS TRUST COMPANY, for
itself, as a Lender and as Administrative Agent for the Lenders ("Administrative
Agent"), and the other Lenders signatory to the hereinafter defined Credit
Agreement.

                                    RECITALS

         A.       The Administrative Agent, the Lenders and the Borrower are
party to that certain Credit Agreement dated as of December 28, 2000 (as amended
by that certain Amendment No. 1 to Credit Agreement and Amendment No. 1 to Post
Closing Agreement dated as of January 26, 2001 ("Amendment No. 1"), that certain
Amendment No. 2 to Credit Agreement, Amendment No. 2 to Post Closing Agreement,
Amendment No. 1 to Collateral Agreements and Limited Waiver dated as of August
31, 2001 ("Amendment No. 2") and that certain Limited Waiver and Amendment dated
as of December 31, 2001 (the "Limited Waiver and Amendment")) (collectively with
Amendment No. 1, Amendment No. 2 and the Limited Waiver and Amendment, and as
further amended, restated, supplemented or otherwise modified from time to time,
the "Credit Agreement").

         B.       On and subject to the terms and conditions hereof, the
Administrative Agent, the Lenders and the Borrower wish to amend certain
provisions of the Credit Agreement (i) to add a Term C Facility under the Credit
Agreement and (ii) to reflect certain modifications to the Credit Agreement as
set forth herein, all subject to the express terms and conditions specified in
this Amendment No. 4 and, in connection with the actions contemplated by such
amendments, waive certain provisions of the Credit Agreement.

         C.       On and subject to the terms and conditions hereof, and in
order to cause the Term C Lenders to extend additional credit to the Borrower
through the addition of the Term C Facility, the Borrower wishes to grant to the
Administrative Agent, on behalf of the Initial Term C Lenders, on a first
priority basis, a collateral interest in certain real estate located in
California and Nevada and in certain additional collateral, all subject to the
terms and conditions specified in this Amendment No. 4.

         D.       On and subject to the terms and conditions hereof, and in
order to cause the Lenders to (i) forbear from enforcement of an Event of
Default resulting from the Borrower's failure to a maintain a certain maximum
leverage ratio or a certain minimum interest coverage, each as of the Borrower's
fiscal quarter ended November 30, 2001, and (ii) amend certain provisions of the
Credit Agreement, including, without limitation, the maximum leverage ratio, the
minimum interest coverage ratio and the fixed charge coverage ratio applicable
to the Borrower under the Credit Agreement as described herein, the Borrower
wishes to grant to the Administrative Agent certain collateral interests, which
shall be held on behalf of the Initial Term C Lenders, on a first priority
basis, and on behalf of certain additional Lenders, on a second or third
priority basis, as the case may be, all subject to the terms and conditions
specified in this Amendment No. 4.

<PAGE>
         E.       This Amendment No. 4 shall constitute a Loan Document and
these Recitals shall be construed as part of this Amendment No. 4; capitalized
terms used herein without definition are so used as defined in the Credit
Agreement.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree as follows:

         1. Amendments to Credit Agreement. Subject to the conditions set forth
in Section 6 hereof, the Credit Agreement is hereby amended as follows:

                  (a)      Section 1.1 of the Credit Agreement shall be amended
         by deleting the lead-in paragraph to the definition of "Applicable Base
         Rate Margin" and by inserting in lieu thereof the following:

                  ""Applicable Base Rate Margin" means at any date, (i) with
                  respect to Revolving Loans and Term A Loans, the applicable
                  percentage set forth in the following table under the column
                  Applicable Base Rate Margin opposite the Most Recent Leverage
                  Ratio as of such date, (ii) with respect to Term B Loans,
                  2.25%, and (ii) with respect to Term C Loans, (A) 3.50% with
                  respect to Term C Loans with Interest Periods commencing on or
                  prior to June 28, 2002, (B) 4.00% with respect to Term C Loans
                  with Interest Periods commencing after June 28, 2002 but on or
                  prior to September 28, 2002, (C) 4.50% with respect to Term C
                  Loans with Interest Periods commencing after September 28,
                  2002 but on or prior to December 28, 2002, (D) 5.00% with
                  respect to Term C Loans with Interest Periods commencing after
                  December 28, 2002 but on or prior to March 28, 2003, (E) 5.50%
                  with respect to Term C Loans with Interest Periods commencing
                  after March 28, 2003 but on or prior to June 28, 2003, (F)
                  6.00% with respect to Term C Loans with Interest Periods
                  commencing after June 28, 2003 but on or prior to September
                  28, 2003, (G) 6.50% with respect to Term C Loans with respect
                  to Interest Periods commencing after September 28, 2003 but on
                  or prior to December 28, 2003, (H) 7.00% with respect to Term
                  C Loans with respect to Interest Periods commencing after
                  December 28, 2003 but on or prior to March 28, 2004 and (I)
                  7.50% with respect to Term C Loans with respect to Interest
                  Periods commencing after March 28, 2004:"

                  (b)      Section 1.1 of the Credit Agreement shall be amended
         by deleting the lead-in paragraph to the definition of "Applicable
         Eurocurrency Margin" and by inserting in lieu thereof the following:

                  ""Applicable Eurocurrency Margin" means at any date, (i) with
                  respect to Revolving Loans and Term A Loans, the applicable
                  percentage set forth in the following table under the column
                  Applicable Eurocurrency Margin opposite the Most Recent
                  Leverage Ratio on such date, (ii) with respect to Term B
                  Loans, 3.25%, and (iii) with respect to Term C Loans, (A)
                  4.50% with respect to Term C Loans with Interest Periods
                  commencing on or prior to June 28, 2002, (B) 5.00% with
                  respect to Term C Loans with Interest Periods commencing after
                  June 28, 2002 but on or prior to September 28, 2002, (C) 5.50%
                  with respect to Term C


                                       2

<PAGE>
                  Loans with Interest Periods commencing after September 28,
                  2002 but on or prior to December 28, 2002, (D) 6.00% with
                  respect to Term C Loans with Interest Periods commencing after
                  December 28, 2002 but on or prior to March 28, 2003, (E) 6.50%
                  with respect to Term C Loans with Interest Periods commencing
                  after March 28, 2003 but on or prior to June 28, 2003, (F)
                  7.00% with respect to Term C Loans with Interest Periods
                  commencing after June 28, 2003 but on or prior to September
                  28, 2003, (G) 7.50% with respect to Term C Loans with respect
                  to Interest Periods commencing after September 28, 2003 but on
                  or prior to December 28, 2003, (H) 8.00% with respect to Term
                  C Loans with respect to Interest Periods commencing after
                  December 28, 2003 but on or prior to March 28, 2004 and (I)
                  8.50% with respect to Term C Loans with respect to Interest
                  Periods commencing after March 28, 2004:"

                  (c)      Section 1.1 of the Credit Agreement shall be amended
         by deleting clause (ii) of the definition of "Asset Disposition" and by
         inserting in lieu thereof the following:

                  "(ii) a sale, transfer or other disposition of real property
                  by the Borrower or any of its Subsidiaries as part of its
                  trade or business shall not constitute an "Asset Disposition"
                  for purposes of this Agreement (provided that such real estate
                  sales, transfers or other dispositions subject to this clause
                  (ii), individually or in the aggregate, shall not exceed
                  $40,000,000 in any Fiscal Year, and provided, further, that
                  for so long as the Term C Loans shall be outstanding, this
                  clause (ii) shall not apply)."

                  (d)      Section 1.1 of the Credit Agreement shall be amended
         by deleting the definitions of "Commitment", "Facility", "Interest
         Payment Date", "Loan", "Maximum Commitment", "Scheduled Repayments",
         "Term C Facility", "Term Loans" and "Total Commitment" in their
         entirety and by inserting the following definitions of "Commitment",
         "Facility", "Interest Payment Date", "Loan", "Maximum Commitment",
         "Scheduled Repayments", "Term C Facility", "Term Loans" and "Total
         Commitment" in lieu thereof in the appropriate alphabetical order:

                  "Commitment" means, with respect to each Lender, the aggregate
                  of the Revolving Commitment, the Term A Commitment, the Term B
                  Commitment and the Term C Commitment of such Lender and
                  "Commitments" means such commitments of all of the Lenders
                  collectively."

                  "Facility" means any of the credit facilities established
                  under this Agreement, i.e., the Term A Facility, the Term B
                  Facility, the Term C Facility or the Revolving Facility."

                  "Interest Payment Date" means (i) as to any Base Rate Loan,
                  each Quarterly Payment Date to occur while such Loan is
                  outstanding, (ii) as to any Eurocurrency Loan, the last day of
                  the Interest Period applicable thereto and (iii) as to any
                  Eurocurrency Loan having an Interest Period longer than three
                  months, each three (3) month anniversary of the first day of
                  the Interest Period applicable thereto and the last day of the
                  Interest Period applicable thereto; provided,


                                       3

<PAGE>
                  however, that, in addition to the foregoing, each of (A) the
                  date upon which both the Revolving Commitments have been
                  terminated and the Revolving Loans have been paid in full and
                  (B) the Term A Loan Maturity Date, the Term B Loan Maturity
                  Date and the Term C Loan Maturity Date shall be deemed to be
                  an "Interest Payment Date" with respect to any interest which
                  is then accrued hereunder for such Loan."

                  "Loan" means any Term A Loan, Term B Loan, Term C Loan,
                  Revolving Loan or Swing Line Loan and "Loans" means all such
                  Loans collectively."

                  "Maximum Commitment" means, when used with reference to any
                  Lender, the aggregate of such Lender's Term A Commitment, its
                  Term B Commitment, its Term C Commitment, and its Revolving
                  Commitment in the amounts not to exceed those set forth
                  opposite the name of such Lender on Schedule 1.1(a) hereto,
                  subject to reduction from time to time in accordance with the
                  terms of this Agreement."

                  "Scheduled Repayments" means a Scheduled Term A Repayment, a
                  Scheduled Term B Repayment or a Scheduled Term C Repayment."

                  "Term C Facility" means the credit facility under this
                  Agreement evidenced by the Term C Commitments and the Term C
                  Loans."

                  "Term Loans" means the Term A Loans, the Term B Loans and the
                  Term C Loans collectively."

                  "Total Commitment" means, at the time any determination
                  thereof is made, the sum of the Term A Commitments, Term B
                  Commitments, Term C Commitments and the Revolving Commitments
                  at such time."

                  (e)      Section 1.1 of the Credit Agreement is amended by
         inserting the definitions of "1900 Lease", "AFC Assets", "AFC
         Collateral", "Amendment No. 4", "Assignment and Pledge Collateral",
         "California Collateral Valuation", "California Collateral Valuation
         Date", "Equity Capital", "Elliott Note", "Elliott Note Assignment and
         Pledge", "Fourth Amendment Effective Date", "Initial Term C Lenders",
         "Mortgaged California Real Estate", "Mortgaged Nevada/California Real
         Estate", "Nevada/California Collateral Valuation", "Nevada/California
         Collateral Valuation Date", "Scheduled Term C Repayments", "Second
         Drawing Amount," "Second Term C Lenders", "Subordinated Notes",
         "Subordinated Notes Issue Date", "Term C Commitment", "Term C
         Commitment Increase Amount", "Term C Lender", "Term C Lenders", "Term C
         Loan", "Term C Loan Maturity Date", "Term C Note", "Term C Percentage"
         and "Term C Pro Rata Share" in the appropriate alphabetical order:

                  "1900 Lease" means that certain Lease dated March 1, 1995, by
                  and between Aerojet and the State of California, acting by and
                  through the Director of the Department of General Services, as
                  such agreement may be modified or amended in accordance with
                  the terms thereof and hereof."


                                       4

<PAGE>
                  "AFC Assets" means all right, title and interest of AFC in, to
                  and under all of the following, whether now existing or
                  hereafter from time to time acquired, (i) each and every
                  receivable, (ii) all contracts, together with all contract
                  rights, (iii) all inventory, (iv) all equipment, (v) all
                  trademarks, together with the registrations and right to all
                  renewals thereof, and the goodwill of the business of AFC
                  symbolized by the trademarks, (vi) all patents and copyrights,
                  and all reissues, renewals or extensions thereof, (vii) all
                  software of AFC and all intellectual property rights therein
                  and all other proprietary information of AFC, including, but
                  not limited to, trade secrets, (viii) all other goods, general
                  intangibles, chattel paper, documents, investment property and
                  instruments, (ix) all supporting obligations and
                  letters-of-credit rights, (x) all cash, accounts, deposits,
                  deposit accounts, securities and insurance policies now or at
                  any time hereafter in the possession or under control of AFC
                  or its respective bailees and any interest thereon, (xi) all
                  other personal property of AFC, whether now owned or hereafter
                  acquired, (xii) all documents of title evidencing or issued
                  with respect to any of the foregoing, and (xiii) all proceeds
                  and products of any and all of the foregoing (including,
                  without limitation, all insurance and claims for insurance
                  effected or held for the benefit of AFC in respect thereof)."

                  "AFC Collateral" has the meaning assigned to that term in
                  Section 7.19(a)(i)."

                  "Amendment No. 4" means that certain Amendment No. 4 to Credit
                  Agreement and Waiver dated as of February 28, 2002, by and
                  among the Borrower, the Administrative Agent for the Lenders,
                  and the other Lenders signatory to the Credit Agreement."

                  "Assignment and Pledge Collateral" has the meaning assigned to
                  that term in Section 7.19(a)(ii)."

                  "California Collateral Valuation" means, as of the California
                  Collateral Valuation Date, the fair market value of the
                  Mortgaged California Real Estate as reflected in the appraisal
                  delivered to the Administrative Agent and the Term C Lenders
                  pursuant to Section 7.19(c)."

                  "California Collateral Valuation Date" has the meaning
                  assigned to that term in Section 7.19(c)."

                  "Equity Capital" means an equity contribution to the Borrower
                  by a third party which shall be evidenced through an issuance
                  of Capital Stock by the Borrower and/or any of its
                  Subsidiaries, the proceeds of which shall be applied in
                  accordance with Section 4.4(o)."

                  "Elliott Note" means that certain Promissory Note dated
                  November 28, 2001 from Elliott Whiterock, LLC in favor of
                  Aerojet Investments Ltd. in the principal amount of
                  $20,900,625.00, as secured by that certain Deed of Trust with


                                       5

<PAGE>
                  Assignment of Rents dated November 29, 2001, as such
                  Promissory Note or Deed may be amended or modified in
                  accordance with the term thereof and hereof."

                  "Elliott Note Assignment and Pledge" means, collectively, (i)
                  that certain endorsement of the Elliot Note dated as of the
                  Fourth Amendment Effective Date from Aerojet Investments Ltd.
                  in favor of the Collateral Agent on behalf of the Secured
                  Creditors, and (ii) that certain Assignment of Deed of Trust
                  and Secured Indebtedness dated as of the Fourth Amendment
                  Effective Date from Aerojet Investments Ltd. in favor of the
                  Collateral Agent on behalf of the Secured Creditors, as such
                  endorsement or assignment may be amended or modified in
                  accordance with the term thereof and hereof."

                  "Fourth Amendment Effective Date" means February 28, 2002."

                  "Initial Term C Lenders" has the meaning assigned to that term
                  in Section 2.1(e)(i)."

                  "Mortgaged California Real Estate" has the meaning assigned to
                  that term in Section 7.19(a)(iv)."

                  "Mortgaged Nevada/California Real Estate" has the meaning
                  assigned to that term in Section 7.19(a)(iii)."

                  "Nevada/California Collateral Valuation" means, as of the
                  Nevada/California Collateral Valuation Date, the fair market
                  value of the Mortgaged Nevada/California Real Estate, the
                  Elliot Note and the 1900 Lease, all as reflected in the
                  appraisal (or appraisals) delivered to the Administrative
                  Agent and the Initial Term C Lenders pursuant to Section
                  7.19(b)."

                  "Nevada/California Collateral Valuation Date" has the meaning
                  assigned to that term in Section 7.19(b)."

                  "Scheduled Term C Repayments" means, with respect to principal
                  payments on the Term C Loans, the Dollar amount payable on
                  each Quarterly Payment Date, commencing on June 28, 2002 (as
                  such amount may be reduced from time to time pursuant to
                  Sections 4.3 and 4.4), equal to 2.5% of the principal amount
                  of the Term C Loans; provided, that the last of such principal
                  payments shall be in an amount equal to the aggregate
                  principal amount of the Term C Loans outstanding on the Term C
                  Loan Maturity Date."

                  "Second Drawing Amount" has the meaning assigned to that term
                  in Section 2.1(e)(ii)."

                  "Second Term C Lenders" has the meaning assigned to that term
                  in Section 2.1(e)(ii)."


                                       6

<PAGE>
                  "Subordinated Notes" means, collectively, those certain
                  unsecured subordinated notes to be issued by the Borrower in a
                  maximum principal amount which shall not exceed $70,000,000 at
                  any one time outstanding, as the same may be amended,
                  restated, supplemented or otherwise modified from time to time
                  as permitted hereunder; provided, that warrants, if any,
                  issued by the Borrower, directly or indirectly, to the holders
                  of such unsecured subordinated notes shall not constitute
                  "Subordinated Notes" for purposes of this definition and shall
                  not be considered in the calculation of the dollar limitation
                  described herein."

                  "Subordinated Notes Issue Date" means the date of issuance of
                  the Subordinated Notes by the Borrower."

                  "Term C Commitment" means, with respect to any Term C Lender,
                  the principal amount set forth opposite such Lender's name on
                  Schedule 1.1(a) hereto or in any Assignment and Assumption
                  Agreement under the caption "Amount of Term C Commitment", as
                  such commitment may be adjusted from time to time pursuant to
                  this Agreement, and "Term C Commitments" means such
                  commitments collectively, which commitments equal $25,000,000
                  in the aggregate as of the date hereof."

                  "Term C Commitment Increase Amount" has the meaning assigned
                  to that term in Section 2.1(e)."

                  "Term C Lender" means any Lender (which for all purposes shall
                  include the Second Term C Lenders) which has a Term C
                  Commitment or is owed a Term C Loan (or a portion thereof)."

                  "Term C Lenders" means, collectively, all of the Term C
                  Lenders (which for all purposes shall include the Second Term
                  C Lenders)."

                  "Term C Loan" and "Term C Loans" have the meanings assigned to
                  those terms in Section 2.1(e)."

                  "Term C Loan Maturity Date" means December 28, 2002; provided,
                  however, that in the event the Borrower has completed an
                  unsecured subordinated debt or equity financing of not less
                  than $35,000,000 on or prior to December 28, 2002 in
                  accordance with the terms of this Agreement, the Term C Loan
                  Maturity Date shall be amended, on the date of completion of
                  such financing, to be December 28, 2004 without any further
                  action on the part of the Term C Lenders or any other Lender
                  party to this Agreement."

                  "Term C Note" and "Term C Notes" have the meanings assigned to
                  those terms in Section 2.2(a)."

                  "Term C Percentage" means, at any time, a fraction (expressed
                  as a percentage) the numerator of which is equal to the
                  aggregate principal amount of all Term C Loans outstanding at
                  such time and the denominator of which is equal to the


                                       7

<PAGE>
                  aggregate principal amount of all Term Loans outstanding at
                  such time."

                  "Term C Pro Rata Share" means, when used with reference to any
                  Term C Lender and any described aggregate or total amount, an
                  amount equal to the result obtained by multiplying such
                  described aggregate or total amount by a fraction the
                  numerator of which shall be such Term C Lender's then
                  outstanding Term C Loan and the denominator of which shall be
                  all then outstanding Term C Loans."

                  (f)      Section 2.1 of the Credit Agreement shall be amended
         by inserting the following new subsection (e) immediately after
         subsection (d) thereof:

                           "(e) Term C Loans. (i) Each Term C Lender, severally
                  and for itself alone, hereby agrees, on the terms and subject
                  to the conditions hereinafter set forth and in reliance upon
                  the representations and warranties set forth herein and in the
                  other Loan Documents, to make a loan (each such loan, a "Term
                  C Loan" and collectively, the "Term C Loans") to the Borrower
                  on the Fourth Amendment Effective Date in an aggregate
                  principal amount equal to the Term C Commitment of such Term C
                  Lender (the Term C Lenders making loans on the Fourth
                  Amendment Effective Date shall be collectively referred to
                  herein as the "Initial Term C Lenders"). The Term C Loans (1)
                  shall be incurred by the Borrower pursuant to a single
                  drawing, which shall be on the Fourth Amendment Effective Date
                  (and the Borrower is hereby deemed to have requested the Term
                  C Loans be advanced on the Fourth Amendment Effective Date and
                  the Term C Lenders hereby waive the delivery of a written
                  Notice of Borrowing from the Borrower in connection with the
                  initial funding of Term C Loans on the Fourth Amendment
                  Effective Date), (2) shall be denominated in Dollars, (3)
                  shall be made as Base Rate Loans and, except as hereinafter
                  provided, may, at the option of the Borrower, be maintained as
                  and/or converted into Base Rate Loans or Eurocurrency Loans,
                  provided, that all Term C Loans made by the Term C Lenders
                  pursuant to the same Borrowing shall, unless otherwise
                  specifically provided herein, consist entirely of Term C Loans
                  of the same Type and (4) shall not exceed for any Lender at
                  the time of incurrence thereof, such Term C Lender's Term C
                  Commitment. Each Term C Lender's Term C Commitment shall
                  expire immediately and without further action on the Fourth
                  Amendment Effective Date if the Term C Loans are not made on
                  such date. No amount of a Term C Loan which is repaid or
                  prepaid by the Borrower may be reborrowed hereunder.
                  Notwithstanding anything to the contrary herein, the Borrower
                  may elect only Base Rate Loans or Eurocurrency Loans with a
                  one month Interest Period until the earlier of (x) ninety (90)
                  days after the Fourth Amendment Effective Date or (y) the date
                  upon which the Administrative Agent determines (and notifies
                  the Borrower) that the primary syndication (and the resultant
                  addition of Persons as Lenders pursuant to Section 12.8) has
                  been completed.

                           (ii) On or prior to March 28, 2002 and so long as no
                  Event of Default or Unmatured Event of Default has occurred
                  and is continuing, the Borrower may, upon 10 Business Days'
                  prior written notice to the Administrative Agent, request on
                  one occasion that the Term C Commitment be increased by any or
                  all of the


                                       8

<PAGE>
                  Lenders party to this Agreement as of the date of such
                  request; provided that (i) no Lender shall be under any
                  obligation to increase its Term C Commitment or to participate
                  in the Term C Facility, and (ii) the aggregate amount of any
                  increase in the Term C Commitment (the "Term C Commitment
                  Increase Amount") shall not exceed $25,000,000 (the "Second
                  Drawing Amount"). Such notice shall (A) specify the requested
                  Term C Commitment Increase Amount; and (B) specify the
                  effective date of such Term C Commitment increase, which date
                  shall not be less than 10 Business Days following the date of
                  such written notice. Any increase in the Term C Commitment
                  hereunder is subject to the conditions precedent that the
                  Borrower and the Lenders participating in the Term C
                  Commitment Increase Amount (collectively, the "Second Term C
                  Lenders") shall have executed and delivered any documentation
                  reasonably required by the Administrative Agent to evidence
                  such increase of the Term C Commitment hereunder. The
                  documentation of the Term C Commitment Increase Amount shall
                  reflect such terms and conditions as agreed to by the Borrower
                  and the Second Term C Lenders, including, without limitation,
                  the pro rata sharing with the Second Term C Lenders of the
                  first priority security interest of the Initial Term C Lenders
                  in the AFC Collateral, the Assignment and Pledge Collateral,
                  the Mortgaged Nevada/California Real Estate and the Mortgaged
                  California Real Estate. On the date that the event described
                  in this Section 2.1(e) become effective, Schedule 1.1(a) shall
                  be deemed modified to reflect the revised Term C Commitment.
                  Notwithstanding any other provision of this Agreement, until
                  such time as the increase in the Term C Commitment described
                  herein shall have been requested by the Borrower or otherwise
                  terminated in accordance with the terms of this subclause
                  (ii), the Borrower shall be prohibited from requesting any
                  increase in the Revolving Commitment or the Term A Commitment
                  pursuant to Section 2.8 of the Credit Agreement.

                           (iii) To the extent the Term C Commitment Increase
                  Amount is provided to the Borrower pursuant to subclause (ii)
                  above, the Term C Loans made pursuant to the aggregate Term C
                  Commitment Increase Amount (i) shall be incurred by the
                  Borrower pursuant to a single drawing subject to the
                  conditions set forth in this Section 2.1(e), (ii) shall be
                  denominated in Dollars, (iii) shall be made as Base Rate Loans
                  and, except as hereinafter provided, may, at the option of the
                  Borrower, be maintained as and/or converted into Base Rate
                  Loans or Eurocurrency Loans, provided, that all Term C Loans
                  made by the Term C Lenders pursuant to the same Borrowing
                  shall, unless otherwise specifically provided herein, consist
                  entirely of Term C Loans of the same Type and (iv) shall not
                  exceed for any Second Term C Lender at the time of incurrence
                  thereof such Second Term C Lender's portion of the Term C
                  Commitment Increase Amount. To the extent made available
                  pursuant to subclause (ii) above, each Second Term C Lender's
                  portion of the Term C Commitment Increase Amount shall expire
                  immediately and without further action on March 28, 2002 if
                  the Term C Loans with respect to the Term C Commitment
                  Increase Amount are not made on or before such date.
                  Notwithstanding anything in this Agreement to the contrary, in
                  no event shall the Second Term C Lenders make a loan to the
                  Borrower under the Term C Commitment Increase Amount until
                  such time as (i) the Borrower has


                                        9

<PAGE>
                  completed an unsecured subordinated debt or equity financing
                  of not less than the principal amount of $35,000,000 on or
                  prior to the date of funding of the Second Drawing Amount, on
                  terms and conditions satisfactory to the Administrative Agent,
                  (ii) no Unmatured Event of Default or Event of Default has
                  occurred and is continuing, (iii) the Borrower's final report
                  on Form 10-K for Fiscal Year ending November 30, 2001 (the
                  "2001 Form 10-K") has been filed with the SEC, and (iv) Ernst
                  & Young LLP, the Borrower's independent public accountants,
                  have not qualified their audit report in any material respect
                  as to the reliability of the financial statements set forth in
                  the 2001 Form 10-K."

                  (g)      Subsection (a) of Section 2.2 of the Credit Agreement
         shall be amended by (i) deleting the word "and" immediately before the
         phrase "(4) if Swing Line Loans," and inserting "," in lieu thereof,
         and (ii) inserting immediately prior to the period at the end of such
         sentence, the phrase "and (5) if Term C Loans, by a promissory note
         (each, a "Term C Note" and, collectively, the "Term C Notes") duly
         executed and delivered by the Borrower substantially in the form of
         Exhibit 2.2(a)(5) hereto, with blanks appropriately completed in
         conformity herewith."

                  (h)      Section 2.6 of the Credit Agreement shall be amended
         by inserting immediately after the fourth sentence thereof, the
         following sentence:

                  "Each conversion or continuation of Term C Loans shall be
                  allocated among the Term C Loans of the Term C Lenders in
                  accordance with their respective Term C Pro Rata Shares."

                  (i)      Section 2.7 of the Credit Agreement shall be amended
         by deleting the first sentence thereof in its entirety and inserting
         the following in lieu thereof:

                  "No later than 1:00 p.m. (local time at the place of funding)
                  on the date specified in each Notice of Borrowing, each Lender
                  will make available its Term A Pro Rata Share of Term A Loans,
                  Term B Pro Rata Share of Term B Loans, Term C Pro Rata Share
                  of Term C Loans and Revolver Pro Rata Share of Revolving
                  Loans, as the case may be, of the Borrowing requested to be
                  made on such date in Dollars or Euro, as the case may be, and
                  in immediately available funds, at the Payment Office (for the
                  account of such non-U.S. office of the Administrative Agent as
                  the Administrative Agent may direct in the case of
                  Eurocurrency Loans) and the Administrative Agent will make
                  available to the Borrower at its Payment Office the aggregate
                  of the amounts so made available by the Lenders not later than
                  2:00 p.m. (local time in the place of payment)."

                  (j)      Section 2.7 of the Credit Agreement shall be amended
         by deleting the third to last sentence thereof in its entirety and
         inserting the following in lieu thereof:

                  "Further, such Lender shall be deemed to have assigned any and
                  all payments made of principal and interest on its Loans,
                  amounts due with respect to its Letters of Credit (or its
                  participations therein) and any other amounts due to it
                  hereunder first to the Administrative Agent to fund any
                  outstanding Loans made


                                       10

<PAGE>
                  available on behalf of such Lender by the Administrative Agent
                  pursuant to this Section 2.7 until such Loans have been funded
                  (as a result of such assignment or otherwise) and then to fund
                  Loans of all Lenders other than such Lender until each Lender
                  has outstanding Loans equal to its Term A Pro Rata Share of
                  all Term A Loans, its Term B Pro Rata Share of all Term B
                  Loans, its Term C Pro Rata Share of all Term C Loans, and its
                  Revolver Pro Rata Share of all Revolving Loans (as a result of
                  such assignment or otherwise)."

                  (k)      Section 2.9 of the Credit Agreement shall be amended
         by deleting the first sentence thereof in its entirety and inserting
         the following in lieu thereof:

                  "All Borrowings of Term A Loans, Term B Loans, Term C Loans
                  and Revolving Loans under this Agreement shall be loaned by
                  the Lenders pro rata on the basis of their Term A Commitments,
                  Term B Commitments, Term C Commitments and Revolving
                  Commitments, as the case may be."

                  (l)      Subsection (vi) of Section 3.4 of the Credit
         Agreement shall be deleted in its entirety and the following is
         substituted in lieu thereof:

                           "(vi) no Interest Period shall extend beyond the Term
                  A Loan Maturity Date for any Term A Loan, the Term B Loan
                  Maturity Date for any Term B Loan, the Term C Loan Maturity
                  Date for any Term C Loan, or the Revolver Termination Date for
                  any Revolving Loan; and"

                  (m)      Subsection (vii) of Section 3.4 of the Credit
         Agreement shall be deleted in its entirety and the following is
         substituted in lieu thereof:

                           "(vii) no Interest Period in respect to any Borrowing
                  of Term A Loans, Term B Loans or Term C Loans, as the case may
                  be, shall be selected which extends beyond any date upon which
                  a mandatory repayment of such Term Loans will be required to
                  be made under Section 4.4(b), (c) or (l), as the case may be,
                  if the aggregate principal amount of Term A Loans, Term B
                  Loans or Term C Loans, as the case may be, which have Interest
                  Periods which will expire after such date will be in excess of
                  the aggregate principal amount of Term A Loans, Term B Loans
                  or Term C Loans, as the case may be, then outstanding less the
                  aggregate amount of such required prepayment."

                  (n)      Subsection (b) of Section 4.2 of the Credit Agreement
         shall be deleted in its entirety and the following is substituted in
         lieu thereof:

                           "(b) Reduction of Term A Commitments, Term B
                  Commitments and Term C Commitments. The Term A Commitments and
                  Term B Commitments shall terminate on the Initial Borrowing
                  Date, after giving effect to the Borrowing of the Term A Loans
                  and Term B Loans on such date. The Term C Commitments shall
                  terminate on the Fourth Amendment Effective Date after giving
                  effect to the Borrowing of the Term C Loans on such date;
                  provided, however, that in the event of an increase in the
                  Term C Commitments pursuant to Section 2.1(e), the


                                       11

<PAGE>
                  Term C Commitment Increase Amount shall terminate on the
                  earlier of (i) the date of the initial funding of Term C Loans
                  made under the Term C Commitment Increase Amount or (ii) March
                  28, 2002, in either case, after giving effect to the Borrowing
                  of Term C Loans on such date."

                  (o)      Subsection (c) of Section 4.2 of the Credit Agreement
         shall be deleted in its entirety and the following is substituted in
         lieu thereof:

                           "(c) Proportionate Reductions. Each reduction or
                  adjustment to the Term Commitments or the Revolving
                  Commitments pursuant to this Section 4.2 shall apply
                  proportionately to the Term A Commitment, the Term B
                  Commitment, the Term C Commitment or the Revolving Commitment,
                  as the case may be, of each Lender."

                  (p)      Subsection (d) of Section 4.2 of the Credit Agreement
         shall be deleted in its entirety and the following is substituted in
         lieu thereof:

                           "(d) Reduction of Commitments. The Commitments (other
                  than the Term C Commitment) will terminate in their entirety
                  on January 31, 2001 unless the Initial Borrowing Date has
                  occurred on or before such date. The Term C Commitment will
                  terminate in its entirety on the Fourth Amendment Effective
                  Date after giving effect to the initial Borrowing of the Term
                  C Loans on such date; provided, however, that in the event of
                  an increase in the Term C Commitments pursuant to Section
                  2.1(e), the Term C Commitment Increase Amount shall terminate
                  on the earlier of (i) the date of the initial funding of Term
                  C Loans made under the Term C Commitment Increase Amount or
                  (ii) March 28, 2002, in either case, after giving effect to
                  the Borrowing of Term C Loans on such date."

                  (q)      Subclause (v) of Section 4.3(a) of the Credit
         Agreement shall be deleted in its entirety and the following is
         substituted in lieu thereof:

                  "(v) each voluntary prepayment of Term Loans shall be applied
                  first to the Scheduled Term C Repayments due within the 12
                  month period following the date of such prepayment in direct
                  order of maturity and, thereafter, shall be applied (in each
                  case, after giving effect to the prepayments made to the
                  Scheduled Term C Repayments due within such twelve month
                  period as specified above) to reduce the remaining Scheduled
                  Term C Repayments on a pro rata basis (based upon the then
                  remaining principal amount of such Scheduled Term C
                  Repayments) and, second to the Scheduled Term A Repayments and
                  Scheduled Term B Repayments due within the 12 month period
                  following the date of such prepayment in direct order of
                  maturity and, thereafter, subject to Section 4.5(c) shall be
                  applied in proportional amounts equal to the Term A Percentage
                  and the Term B Percentage (in each case, after giving effect
                  to the prepayments made to the Scheduled Term A Repayments and
                  the Scheduled Term B Repayments due within such twelve month
                  period as specified above), as the case may be, of such
                  remaining prepayment, if any, and within each Term Loan, shall
                  be applied to


                                       12

<PAGE>
                  reduce the remaining Scheduled Term A Repayments and Scheduled
                  Term B Repayments on a pro rata basis (based upon the then
                  remaining principal amount of such Scheduled Term A Repayments
                  and Scheduled Term B Repayments, respectively)."

                  (r)      The last sentence of Section 4.4(d) of the Credit
         Agreement shall be deleted in its entirety and the following is
         substituted in lieu thereof:

                  "Notwithstanding the foregoing or the terms of Section 4.5(a),
                  if, as of the date of any prepayment from Net Sale Proceeds
                  required pursuant to this Section 4.4(d), (A) the Borrower has
                  repaid in full all principal and interest on the Term B Loans
                  and on the Term C Loans and no amounts remain outstanding to
                  any Term B Lender with respect to the Term B Loans or to any
                  Term C Lender with respect to the Term C Loans and (B) the
                  Leverage Ratio of the Borrower, calculated for the Test Period
                  ending on the last day of the most recently ended Fiscal
                  Quarter, is less than 2.50 to 1.00, the Borrower may elect, in
                  its sole discretion, to apply 100% of such Net Sale Proceeds
                  (x) to purchase assets used or to be used in the businesses
                  referred to in Section 8.9, (y) to repay, pro rata, Term A
                  Loans or (z) to repay, pro rata, Revolving Loans (without a
                  permanent reduction of the Revolving Commitments)."

                  (s)      Subsection (f) of Section 4.4 of the Credit Agreement
         shall be deleted in its entirety and the following is substituted in
         lieu thereof:

                  "(f) Mandatory Payment With Proceeds of Capital Stock. On the
                  first Business Day after receipt thereof by the Borrower
                  and/or any of their Subsidiaries, an amount equal to 100% of
                  the Net Offering Proceeds of the sale or issuance of Capital
                  Stock of (or cash capital contributions to) the Borrower or
                  any of their Subsidiaries shall be applied as a mandatory
                  repayment of principal of the Term Loans pursuant to the terms
                  of Section 4.5(a) (in each case subject to modification of
                  such application as set forth in Section 4.5(c)); provided,
                  however, that notwithstanding the foregoing, Net Offering
                  Proceeds derived from the issuance of Capital Stock in
                  accordance with the Equity Capital shall first be applied in
                  accordance with Section 4.4(o). Notwithstanding the foregoing
                  or the terms of Section 4.5(a), if, as of the date of any
                  prepayment from Net Offering Proceeds required pursuant to
                  this Section 4.4(f), (A) the Borrower has repaid in full all
                  principal and interest on the Term B Loans and on the Term C
                  Loans and no amounts remain outstanding to any Term B Lender
                  with respect to the Term B Loans or to any Term C Lender with
                  respect to the Term C Loans and (B) the Leverage Ratio of the
                  Borrower, calculated for the Test Period ending on the last
                  day of the most recently ended Fiscal Quarter, is less than
                  2.50 to 1.00, the Borrower may elect, in its sole discretion,
                  to apply 100% of such Net Offering Proceeds (x) to purchase
                  assets used or to be used in the businesses referred to in
                  Section 8.9, (y) to repay, pro rata, Term A Loans or (z) to
                  repay, pro rata, Revolving Loans (without a permanent
                  reduction of the Revolving Commitments)."


                                       13

<PAGE>
                  (t)      The last sentence of Section 4.4(g) of the Credit
         Agreement shall be deleted in its entirety and the following is
         substituted in lieu thereof:

                  "Notwithstanding the foregoing or the terms of Section 4.5(a),
                  if, as of the date of any prepayment from net cash proceeds of
                  a Sale and Leaseback Transaction required pursuant to this
                  Section 4.4(g), (A) the Borrower has repaid in full all
                  principal and interest on the Term B Loans and on the Term C
                  Loans and no amounts remain outstanding to any Term B Lender
                  with respect to the Term B Loans or to any Term C Lender with
                  respect to the Term C Loans and (B) the Leverage Ratio of the
                  Borrower, calculated for the Test Period ending on the last
                  day of the most recently ended Fiscal Quarter, is less than
                  2.50 to 1.00, the Borrower may elect, in its sole discretion,
                  to apply 100% of such net cash proceeds (x) to purchase assets
                  used or to be used in the businesses referred to in Section
                  8.9, (y) to repay, pro rata, Term A Loans or (z) to repay, pro
                  rata, Revolving Loans (without a permanent reduction of the
                  Revolving Commitments)."

                  (u)      The last sentence of Section 4.4(h) of the Credit
         Agreement shall be deleted in its entirety and the following is
         substituted in lieu thereof:

                  "Notwithstanding the foregoing or the terms of Section 4.5(a),
                  if, as of the date of any prepayment from Net Offering
                  Proceeds required pursuant to this Section 4.4(h), (A) the
                  Borrower has repaid in full all principal and interest on the
                  Term B Loans and on the Term C Loans and no amounts remain
                  outstanding to any Term B Lender with respect to the Term B
                  Loans or to any Term C Lender with respect to the Term C Loans
                  and (B) the Leverage Ratio of the Borrower, calculated for the
                  Test Period ending on the last day of the most recently ended
                  Fiscal Quarter, is less than 2.50 to 1.00, the Borrower may
                  elect, in its sole discretion, to apply 100% of such Net
                  Offering Proceeds (x) to purchase assets used or to be used in
                  the businesses referred to in Section 8.9, (y) to repay, pro
                  rata, Term A Loans or (z) to repay, pro rata, Revolving Loans
                  (without a permanent reduction of the Revolving Commitments)."

                  (v)      Section 4.4(i) of the Credit Agreement shall be
         amended by deleting the amount of "10,000,000" in the proviso thereto
         and inserting in lieu thereof the amount of "15,000,000".

                  (w)      The last sentence of Section 4.4(j) of the Credit
         Agreement shall be deleted in its entirety and the following is
         substituted in lieu thereof:

                  "Notwithstanding the foregoing or the terms of Section 4.5(a),
                  if, as of the date of any prepayment from net proceeds of any
                  Recovery Event required pursuant to this Section 4.4(j), (A)
                  the Borrower has repaid in full all principal and interest on
                  the Term B Loans and on the Term C Loans and no amounts remain
                  outstanding to any Term B Lender with respect to the Term B
                  Loans or to any Term C Lender


                                       14

<PAGE>
                  with respect to the Term C Loans and (B) the Leverage Ratio of
                  the Borrower, calculated for the Test Period ending on the
                  last day of the most recently ended Fiscal Quarter, is less
                  than 2.50 to 1.00, the Borrower may elect, in its sole
                  discretion, to apply 100% of such net proceeds (x) to purchase
                  assets used or to be used in the businesses referred to in
                  Section 8.9, (y) to repay, pro rata, Term A Loans or (z) to
                  repay, pro rata, Revolving Loans (without a permanent
                  reduction of the Revolving Commitments)."

                  (x)      Section 4.4 of the Credit Agreement shall be amended
         by inserting the following new subsections (l), (m) and (n) immediately
         after subsection (k) thereof:

                           "(l) Scheduled Term C Repayments. The Borrower shall
                  cause to be paid Scheduled Term C Repayments on the Term C
                  Loans until the Term C Loans are paid in full in the amounts
                  and at the times specified in the definition of Scheduled Term
                  C Repayments to the extent that prepayments have not
                  previously been applied to such Scheduled Term C Repayments
                  (and such Scheduled Term C Repayments have not otherwise been
                  reduced) pursuant to the terms hereof. To the extent not
                  previously paid, all Term C Loans shall be due and payable on
                  the Term C Maturity Date.

                           (m) Mandatory Prepayment Upon Nevada/California
                  Collateral Valuation. To the extent that the Nevada/California
                  Collateral Valuation reflects an aggregate fair market value
                  of less than $50,000,000, on the Business Day following the
                  Nevada/California Collateral Valuation Date, the Borrower
                  shall cause to be paid all outstanding Term C Loans and shall
                  cause the Term C Commitments (to the extent not otherwise
                  terminated) to be permanently reduced in whole as provided in
                  Section 4.5(a).

                           (n) Mandatory Prepayment Upon California Collateral
                  Valuation. To the extent that the California Collateral
                  Valuation reflects an aggregate fair market value of less than
                  $100,000,000, on the Business Day following the California
                  Collateral Valuation Date, the Borrower shall cause to be paid
                  all outstanding Term C Loans and shall cause the Term C
                  Commitments (to the extent not otherwise terminated) to be
                  permanently reduced in whole as provided in Section 4.5(a).

                           (o) Mandatory Prepayment Upon Issuance of
                  Subordinated Notes or Equity Capital. On the Business Day of
                  receipt thereof by the Borrower, an amount equal to 100% of
                  the sum of the Net Offering Proceeds of (x) the Subordinated
                  Notes and (y) the Equity Capital (provided, however, that in
                  no amount shall the Net Offering Proceeds applied under this
                  Section 4.4(o) exceed $70,000,000) shall be applied as a
                  mandatory prepayment to repay outstanding Revolving Loans pro
                  rata (without a permanent reduction of the Revolving
                  Commitments). Amounts, if any, remaining after the prepayment
                  described in the preceding sentence (including, without
                  limitation, Net Offering Proceeds in excess of the $70,000,000
                  limitation applicable to this Section 4.4(o) as described


                                       15

<PAGE>
                  above) shall be applied in accordance with the terms of this
                  Agreement, including, without limitation, the other mandatory
                  prepayment provisions of this Section 4.4, as applicable."

                  (y)      Section 4.5(a) of the Credit Agreement shall be
         deleted in its entirety and the following is substituted in lieu
         thereof:

                           "(a) Prepayments. Subject in all events to the final
                  proviso set forth in Section 4.4(d), (f), (g), (h) and (j) and
                  except as otherwise expressly provided in Section 4.4(d), (j),
                  (k), (m), (n) and (o), all prepayments of principal made by
                  the Borrower pursuant to Section 4.4 (other than with respect
                  to 4.4(b), (c) and (l)) shall be applied to repay, first, the
                  Term C Loans, and second, the Term A Loans and the Term B
                  Loans (with the Term A Percentage of such repayment to be
                  applied as a repayment of Term A Loans and the Term B
                  Percentage of such repayment to be applied as a repayment of
                  Term B Loans). Any prepayment of Loans pursuant to Section
                  4.4(d) and (j) shall be applied (i) first, to the payment of
                  the unpaid principal amount of the Term C Loans, second, to
                  the payment of the unpaid principal amount of the Term A Loans
                  and the Term B Loans (with the Term A Percentage of such
                  repayment to be applied as a repayment of Term A Loans and the
                  Term B Percentage of such repayment to be applied as a
                  repayment of Term B Loans), third, to the prepayment of the
                  then outstanding balance of Swing Line Loans, fourth, to the
                  payment, pro rata, of the then outstanding balance of the
                  Revolving Loans, and fifth, to the cash collateralization of
                  LC Obligations; (ii) within each of the foregoing Loans, first
                  to the payment of Base Rate Loans and second to the payment of
                  Eurocurrency Loans; and (iii) with respect to Eurocurrency
                  Loans, in such order as the Borrower shall request (and in the
                  absence of such request, as the Administrative Agent shall
                  determine). Each prepayment of Term Loans made pursuant to
                  Section 4.4(d), (e), (f), (g), (h) and (j) shall be allocated
                  first to the Term C Loans and applied on a pro rata basis
                  against all Scheduled Term C Repayments until all such amounts
                  are paid in full, second to the Term A Loans and the Term B
                  Loans based on the aggregate principal amount of the Scheduled
                  Term A Repayments and the Scheduled Term B Repayments due
                  within the twelve month period following the date of such
                  prepayment in direct order of maturity, and, thereafter, shall
                  be allocated third to the Term A Loans and the Term B Loans in
                  proportional amounts equal to the Term A Percentage and the
                  Term B Percentage (in each case, after giving effect to the
                  prepayments made to the Scheduled Term A Repayments and
                  Scheduled Term B Repayments due within such twelve month
                  period as specified above), as the case may be, of such
                  remaining prepayment, if any, and, within each Term A Loan or
                  Term B Loan, shall be applied to reduce the remaining
                  Scheduled Term A Repayments and Scheduled Term B Repayments on
                  a pro rata basis (based upon the then remaining principal
                  amount of such Scheduled Term A Repayments and Scheduled Term
                  B Repayments, respectively). Any prepayment of Term Loans
                  pursuant to Section 4.4(i) shall be applied, first, pro rata
                  to each of the Scheduled Term C Repayments until all such
                  amounts are paid in full and second, pro rata to each of the
                  Scheduled Term A Repayments and Term B Repayments. Any
                  prepayment of Loans pursuant to Section 4.4(k) shall be
                  applied first to a


                                       16

<PAGE>
                  repayment of Term B Loans, applied to the Scheduled Term B
                  Repayments on a pro rata basis, and second, to repay
                  outstanding Revolving Loans (without a permanent reduction of
                  the Revolving Commitment) (and within such Facility, first, to
                  the prepayment of the then outstanding balance of Swing Line
                  Loans, second, to the payment, pro rata, of the then
                  outstanding balance of the Revolving Loans, and third, to the
                  cash collateralization of LC Obligations), and third, to the
                  Term A Loans, applied to reduce the Scheduled Term A
                  Repayments on a pro rata basis. Any repayment of Loans
                  pursuant to Section 4.4(m) and (n) shall be applied to a
                  repayment of Term C Loans (allocated to the Scheduled Term C
                  Repayments on a pro rata basis) and, concurrently therewith,
                  the Term C Commitments, if any, in effect shall be permanently
                  reduced to zero. Any prepayment of Loans pursuant to Section
                  4.4(o) shall be applied to repay outstanding Revolving Loans
                  (without a permanent reduction of the Revolving Commitment)
                  (and within such Facility, first, to the prepayment of the
                  then outstanding balance of Swing Line Loans, second, to the
                  payment, pro rata, of the then outstanding balance of the
                  Revolving Loans, and third, to the cash collateralization of
                  LC Obligations). If any prepayment of Eurocurrency Loans made
                  pursuant to a single Borrowing shall reduce the outstanding
                  Loans made pursuant to such Borrowing to an amount less than
                  the Minimum Borrowing Amount, such Borrowing shall immediately
                  be converted into Base Rate Loans, in the case of Loans
                  denominated in Dollars, or into Loans with a 30 day Interest
                  Period, in the case of Loans denominated in Euro. All
                  prepayments shall include payment of accrued interest on the
                  principal amount so prepaid, shall be applied to the payment
                  of interest before application to principal and shall include
                  amounts payable, if any, under Section 3.5."

                  (z)      Subsection (a) of Section 6.8 the Credit Agreement
         shall be amended by inserting the following sentence immediately
         following the only sentence thereof as follows:

                  "All proceeds of the Term C Loans incurred in accordance with
                  Section 2.1 hereof shall be used by the Borrower (i) to pay
                  fees and expenses incurred in connection with the addition of
                  the Term C Facility (or the increase thereof, if applicable)
                  and the transactions contemplated in accordance therewith and
                  (ii) for ongoing working capital needs and general corporate
                  purposes (other than to voluntarily prepay any Term Loan)."

                  (aa)     Article VII of the Credit Agreement shall be amended
         to insert the following new section immediately following Section 7.18
         thereof:

                  "Section 7.19. Addition of Collateral Concurrent with Addition
                  of Term C Facility and Forbearance of Lenders.

                           (a) In order to cause the Initial Term C Lenders to
                  extend additional credit to the Borrower in the form of the
                  Term C Facility on the Fourth


                                       17

<PAGE>
                  Amendment Effective Date and in order to cause the Lenders to
                  forbear from certain actions as described in Amendment No. 4,
                  the Borrower hereby agrees:

                           (i) to deliver or cause to be delivered to the
                           Administrative Agent, all in accordance with the
                           terms of Section 7.12 of this Agreement, on the
                           Fourth Amendment Effective Date, a pledge by the
                           Borrower of the Common Stock of AFC and a pledge and
                           grant of a security interest by AFC of all of the AFC
                           Assets (collectively, the pledges and the security
                           interest described herein are referred to as the "AFC
                           Collateral"), each in favor of the Administrative
                           Agent (A) on behalf of the Initial Term C Lenders to
                           secure payment of their respective Term C Loans, a
                           continuing security interest of first priority in all
                           the right, title and interest of the Borrower and
                           AFC, as the case may be, in the AFC Collateral and
                           (B) on behalf of the Lenders to secure payment of
                           their respective Obligations, a continuing security
                           interest of second priority in all the right, title
                           and interest of the Borrower and AFC, as the case may
                           be, in the AFC Collateral; and

                           (ii) to deliver or cause to be delivered to the
                           Administrative Agent, all on terms and conditions
                           satisfactory to the Administrative Agent, on the
                           Fourth Amendment Effective Date, (A) a pledge by
                           Aerojet Investments Ltd. of the Elliott Note,
                           together with a pledge by Aerojet Investments Ltd. of
                           its rights to the Deed of Trust securing the Elliot
                           Note, all pursuant to the Elliott Note Assignment and
                           Pledge and (B) an assignment by Aerojet of the 1900
                           Lease pursuant to a collateral assignment of leases
                           and rents ((collectively, the pledges and the
                           assignment described herein are referred to as the
                           "Assignment and Pledge Collateral"), each of favor of
                           the Administrative Agent (A) on behalf of the Initial
                           Term C Lenders to secure payment of their respective
                           Term C Loans, a continuing security interest of first
                           priority in all the right, title and interest of
                           Aerojet Investments Ltd. and Aerojet, as the case may
                           be, in the Assignment and Pledge Collateral, (B) on
                           behalf of the Initial Term C Lenders to secure
                           payment of their respective Revolving Loans and Term
                           A Loans, a continuing security interest of second
                           priority in all the right, title and interest of
                           Aerojet Investments Ltd. and Aerojet, as the case may
                           be, in the Assignment and Pledge Collateral and (C)
                           on behalf of the Lenders to secure payment of their
                           respective Obligations, a continuing security
                           interest of third priority in all the right, title
                           and interest of Aerojet Investments Ltd. and Aerojet,
                           as the case may be, in the Assignment and Pledge
                           Collateral; and

                           (iii) to grant a mortgage (or cause its applicable
                           Subsidiary to grant a mortgage) to the Administrative
                           Agent, all in accordance with the terms of Section
                           7.12 of this Agreement, as soon as possible but in no
                           event later than 30 days after the Fourth Amendment
                           Effective Date, on the following real property: (A)
                           two parcels of approximately 800 acres and


                                       18

<PAGE>
                           approximately 400 acres of land located near the
                           Company's facilities in Rancho Cordova, California,
                           (B) approximately 400 acres of land located in or
                           near Chino Hills, California, (C) approximately 10
                           acres located in Hollywood, California and (D)
                           approximately 10,000 acres located near Hawthorne,
                           Nevada, owned by the Borrower or any of its
                           Subsidiaries holding title of such real property and
                           as further identified to the Administrative Agent
                           ((A) through (D) are referred to herein collectively
                           as the "Mortgaged Nevada/California Real Estate"), in
                           favor of the Administrative Agent (x) on behalf of
                           the Initial Term C Lenders to secure payment of their
                           respective Term C Loans, a continuing security
                           interest of first priority in all the right, title
                           and interest of the Borrower and such applicable
                           Subsidiaries, as the case may be, in the Mortgaged
                           Nevada/California Real Estate, (y) on behalf of the
                           Initial Term C Lenders to secure payment of their
                           respective Revolving Loans and Term A Loans, a
                           continuing security interest of second priority in
                           all the right, title and interest of the Borrower and
                           such applicable Subsidiaries, as the case may be, in
                           the Mortgaged Nevada/California Real Estate, and (z)
                           on behalf of the Lenders to secure payment of their
                           respective Obligations, a continuing security
                           interest of third priority in all the right, title
                           and interest of the Borrower and such applicable
                           Subsidiaries, as the case may be, in the Mortgaged
                           Nevada/California Real Estate; and

                           (iv) to grant a mortgage (or cause its applicable
                           Subsidiary to grant a mortgage) to the Administrative
                           Agent, all in accordance with the terms of Section
                           7.12 of this Agreement, as soon as possible but in no
                           event later than 120 days after the Fourth Amendment
                           Effective Date, on the real property of the Borrower
                           or any of its Subsidiaries holding such title located
                           in or near Sacramento, California and as further
                           identified to the Administrative Agent (the
                           "Mortgaged California Real Estate"), in favor of the
                           Administrative Agent (A) on behalf of the Initial
                           Term C Lenders to secure payment of their respective
                           Term C Loans, a continuing security interest of first
                           priority in all the right, title and interest of the
                           Borrower and such applicable Subsidiaries, as the
                           case may be, in the Mortgaged California Real Estate,
                           (B) on behalf of the Initial Term C Lenders to secure
                           payment of their respective Revolving Loans and Term
                           A Loans, a continuing security interest of second
                           priority in all the right, title and interest of the
                           Borrower and such applicable Subsidiaries, as the
                           case may be, in the Mortgaged California Real Estate,
                           and (C) on behalf of the Lenders to secure payment of
                           their respective Obligations, a continuing security
                           interest of third priority in all the right, title
                           and interest of the Borrower and Aerojet, as the case
                           may be, in the Mortgaged California Real Estate.

                           (b) Within 60 days after the Fourth Amendment
                  Effective Date (the "Nevada/California Collateral Valuation
                  Date"), the Borrower will deliver to the Administrative Agent
                  and the Initial Term C Lenders, an appraisal (or appraisals)


                                       19

<PAGE>
                  setting forth the fair market value of the Mortgaged
                  Nevada/California Real Estate, the Elliot Note and the 1900
                  Lease, in each case as prepared by a nationally recognized
                  real estate appraisal firm acceptable to the Administrative
                  Agent and the Initial Term C Lenders. Such appraisal (or
                  appraisals) shall expressly provide that it (or they) may be
                  relied upon by the Administrative Agent and the Initial Term C
                  Lenders.

                           (c) Within 90 days after the Fourth Amendment
                  Effective Date (the "California Collateral Valuation Date"),
                  the Borrower will deliver to the Administrative Agent and the
                  Term C Lenders, an appraisal setting forth the fair market
                  value of the Mortgaged California Real Estate prepared by a
                  nationally recognized real estate appraisal firm acceptable to
                  the Administrative Agent and the Term C Lenders. Such
                  appraisal shall expressly provide that it may be relied upon
                  by the Administrative Agent and the Term C Lenders.

                           (d) Notwithstanding the foregoing, in the event the
                  Borrower has repaid in full all principal and interest on the
                  Term C Loans and no amounts remain outstanding to any Term C
                  Lender with respect to the Term C Loans and the Term C
                  Commitments have been permanently reduced in whole, the
                  Administrative Agent shall release, and is hereby authorized
                  to release without further action of the Term C Lenders, the
                  first priority security interest of the Initial Term C Lenders
                  in the AFC Collateral, the Assignment and Pledge Collateral,
                  the Mortgaged California Real Estate and the Mortgaged
                  Nevada/California Real Estate; provided, that in no event
                  shall the Administrative Agent release or in any way modify
                  the second priority security interest in the AFC Collateral,
                  or the second or third priority security interests in the
                  Assignment and Pledge Collateral, the Mortgaged California
                  Real Estate and the Mortgaged Nevada/California Real Estate
                  except in accordance with the terms of this Agreement."

                  (bb)     The last sentence of Section 8.1 of the Credit
         Agreement shall be deleted in its entirety and the following sentence
         shall be inserted in lieu thereof:

                  "Notwithstanding the foregoing clauses (a) through (g) of this
                  Section 8.1, the Borrower agrees that it will not, nor will it
                  permit any of its Subsidiaries to pledge, encumber or
                  otherwise suffer to exist thereon any Lien (other than
                  Customary Permitted Liens or the mortgages provided for in
                  Section 7.19(a)(iii) and (iv)), on any real property owned by
                  the Borrower or any of its Subsidiaries which is located in
                  the State of California or the State of Nevada."

                  (cc)     Section 8.2 of the Credit Agreement is hereby amended
         by (i) in subsection (q) thereof, deleting the "." and inserting in
         lieu thereof the following phrase "; and" and (ii) inserting the
         following new subsection (r) immediately after subsection (q) therein:


                                       20

<PAGE>
                  "(r) Indebtedness of the Borrower arising under the
                  Subordinated Notes; provided, that the principal amount of
                  such Indebtedness shall not exceed $70,000,000 in the
                  aggregate at any one time outstanding."

                  (dd)     Section 8.11 of the Credit Agreement is hereby
         amended (i) in subsection (iii) thereof, deleting the word "or", (ii)
         in subsection (iv) thereof, deleting the "." and inserting in lieu
         thereof the following phrase "; or" and (iii) inserting the following
         new subsection (v) immediately after subsection (iv) therein:

                           "(v) amend, modify or permit the amendment,
                  termination or modification of any term or provision of the
                  Elliot Note or the 1900 Lease without the prior written
                  consent of 66 2/3% of the Initial Term C Lenders."

                  (ee)     Article VIII of the Credit Agreement is hereby
         amended by inserting the following new Section 8.14 immediately after
         Section 8.13 therein:

                  "Section 8.14  Sale of Mortgaged Nevada/California Property or
                                 Mortgaged California Property.

                  Notwithstanding any other provision in this Agreement to the
                  contrary, including, without limitation, Section 8.3(l), the
                  Borrower will not, nor will it permit any of its Subsidiaries
                  to, sell all or any portion of the Mortgaged Nevada/California
                  Real Estate or the Mortgaged California Real Estate on or
                  after the Fourth Amendment Effective Date to the extent that
                  the sum of the estimated fair market value (as determined by
                  the Borrower in good faith and as agreed to by the
                  Administrative Agent) of the remaining Mortgaged
                  Nevada/California Real Estate and the Mortgaged California
                  Real Estate, together with the appraised fair market value of
                  the Elliot Note and the 1900 Lease, (assuming the consummation
                  of such sale) shall be less than an amount equal to (x) the
                  sum of the total Revolving Commitments, Term A Commitments and
                  Term C Commitments then outstanding, as adjusted to reflect
                  any mandatory repayments required from the net proceeds from
                  such sale of Mortgaged Nevada/California Real Estate or
                  Mortgaged California Real Estate, multiplied by (y) the number
                  2.0; provided, however, that this Section 8.14 shall not apply
                  to sales of Mortgaged Nevada/California Real Estate or
                  Mortgaged California Real Estate which in the aggregate do not
                  exceed $25,000,000 in any Fiscal Year, and provided, further,
                  however, that if as of any date of sale of all or any portion
                  of the Mortgaged Nevada/California Real Estate or the
                  Mortgaged California Real Estate, (A) the Borrower has repaid
                  in full all principal and interest on the Term C Loans and no
                  amounts remain outstanding to any Term C Lender with respect
                  to the Term C Loans and (B) the Leverage Ratio of the
                  Borrower, calculated for the Test Period ending on the last
                  day of the most recently ended Fiscal Quarter, is less than
                  2.50 to 1.00, this Section 8.14 shall not apply to the
                  Borrower or its Subsidiaries."

                  (ff)     Section 9.3 of the Credit Agreement shall be amended
         by deleting the ratio set forth opposite the Fiscal Quarter ending
         February 28, 2002, and inserting in lieu thereof the ratio of "3.50 to
         1.00".


                                       21

<PAGE>
                  (gg)     Section 9.4 of the Credit Agreement shall be amended
         by deleting the Fiscal Quarters ending February 28, 2002 and May 31,
         2002 and the ratios immediately set forth opposite such Fiscal
         Quarters, and inserting the following in lieu thereof:


<TABLE>
<CAPTION>
                                     Fiscal Quarter                  Ratio
                                     --------------                  -----
<S>                                                              <C> 
                           February 28, 2002                     3.10 to 1.00
                           May 31, 2002                          3.10 to 1.00
                           August 31, 2002                       2.75 to 1.00
                           November 30, 2002 and thereafter      2.50 to 1.00"
</TABLE>


                  (hh)     Section 9.5 of the Credit Agreement shall be deleted
         in its entirety and the following shall be inserted in lieu thereof:

                  "Section 9.5 Fixed Charge Coverage Ratio.

                  The Borrower will not permit the Fixed Charge Coverage Ratio
                  for any Test Period ending on the last day of each Fiscal
                  Quarter set forth below to be less than the ratio set forth
                  opposite such date:


<TABLE>
<CAPTION>
                                     Fiscal Quarter                  Ratio
                                     --------------                  -----
<S>                                                              <C> 
                           February 28, 2002                     1.00 to 1.00
                           May 31, 2002                          1.00 to 1.00
                           August 31, 2002 and thereafter        1.05 to 1.00"
</TABLE>


                  (ii)     Section 10.1(l) of the Credit Agreement shall be
         amended by (i) deleting the word "Parties" and inserting the word
         "Creditors" in lieu thereof and (ii) inserting the phrase "in the order
         of priority of interest set forth in such Security Document"
         immediately following the phrase "Collateral Agent, for the benefit of
         the Secured Creditors".

                  (jj)     Section 10.1 of the Credit Agreement shall be amended
         by (i) deleting the "." immediately following the phrase "self-help or
         otherwise" in subsection (o) thereof and inserting the phrase "; or" in
         lieu thereof, and (ii) inserting the following new subsections
         immediately following subsection (o) thereof:

                           "(p) Failure of Deliveries Benefiting Initial Term C
                  Lenders. The Borrower or any of its Subsidiaries shall default
                  (i) in the due performance or observance of any term,
                  covenant, condition or agreement on its part to be performed
                  or observed under Sections 7.19(a)(iii) or 7.19(b) or (ii) in
                  the payment of principal or interest on any of the Term C
                  Loans when due; or

                           (q) Failure of Deliveries Benefiting Term C Lenders.
                  The Borrower or any of its Subsidiaries shall default (i) in
                  the due performance or observance of any term, covenant,
                  condition or agreement on its part to be performed or observed
                  under Sections 7.19(a)(iv) or 7.19(c) or (ii) in the payment
                  of principal or interest on any of the Term C Loans when due."


                                       22

<PAGE>
                  (kk)     The first sentence of the second to last paragraph of
         Section 10.1 of the Credit Agreement shall be amended by inserting
         immediately following the phrase "all of the Liens and security
         interests created pursuant to the Security Documents" the following
         phrase "; provided, however, that notwithstanding the foregoing or
         anything else in this Agreement to the contrary, in the event of any
         Event of Default described in Section 10.1(p) with respect to the
         Borrower or any of its Subsidiaries, until such time as the Borrower
         has repaid in full all principal and interest on the Term C Loans and
         no amounts remain outstanding to any Initial Term C Lender with respect
         to the Term C Loans, the Administrative Agent, at the written direction
         of 66 2/3% of the Initial Term C Lenders (and without any action or
         consent of the Lenders other than the Initial Term C Lenders) shall
         take one or more of the actions described in (i) through (v) of this
         paragraph, and provided, further, however, that notwithstanding the
         foregoing or anything else in this Agreement to the contrary, in the
         event of any Event of Default described in Section 10.1(q) with respect
         to the Borrower or any of its Subsidiaries, until such time as the
         Borrower has repaid in full all principal and interest on the Term C
         Loans and no amounts remain outstanding to any Term C Lender with
         respect to the Term C Loans, the Administrative Agent, at the written
         direction of 66 2/3% of the Term C Lenders (and without any action or
         consent of the Lenders other than the Term C Lenders) shall take one or
         more of the actions described in (i) through (v) of this paragraph".

                  (ll) The second paragraph of Section 11.5 of the Credit
         Agreement shall be amended by (i) deleting the word "and" immediately
         before the phrase "Term B Lender" and inserting "," in lieu thereof,
         and (ii) inserting the phrase "and Term C Loan" immediately before the
         phrase "and the denominator of which".

                  (mm)     The first sentence of Section 11.6 of the Credit
         Agreement shall be amended by (i) deleting the word "and" immediately
         before the phrase "Term B Pro Rata Share" and inserting "," in lieu
         thereof, and (ii) inserting the phrase "and Term C Pro Rata Share"
         immediately before the phrase ", as applicable thereof),".

                  (nn)     Subclause (7) of the second to last sentence of
         Section 12.1(a) of the Credit Agreement shall be amended by inserting
         immediately before the phrase "without the consent of the Majority
         Lenders of the Revolving Facility", the phrase "without the consent of
         the Majority Lenders of the Term C Facility, amend the definition of
         Term C Pro Rata Share;".

                  (oo)     Subclause (8) of the second to last sentence of
         Section 12.1(a) of the Credit Agreement shall be amended by inserting
         immediately following the phrase "amend the definition of Scheduled
         Term B Repayments,", the phrase "and without the consent of the
         Majority Lenders of the Term C Facility, amend the definition of
         Scheduled Term C Repayments,".

                  (pp)     The second to last sentence of Section 12.1(a) of the
         Credit Agreement shall be amended by (i) deleting the word "or"
         immediately prior to subclause (9) and inserting "," in lieu thereof,
         and (ii) inserting the phrase ", (10) without the consent of the
         Majority Lenders of the Term C Facility, amend, modify or waive the
         conditions to funding of the Term C Commitment Increase Amount, (11)
         without the consent of each


                                       23

<PAGE>
         Term C Lender, release the Mortgaged Nevada/California Real Estate, the
         Mortgaged California Real Estate, the AFC Collateral or the Assignment
         and Pledge Collateral (except, in each case, as expressly provided in
         this Agreement), or (12) without the consent of 66 2/3% of the Initial
         Term C Lenders, amend, modify or waive the terms of the Mortgaged
         Nevada/California Real Estate, the Mortgaged California Real Estate,
         the AFC Collateral or the Assignment and Pledge Collateral (other than
         with respect to a release as provided in (11) above), including,
         without limitation, any repayments required by the terms of this
         Agreement as a result of or in connection with such collateral,
         including, without limitation, any mandatory prepayments as provided in
         Sections 4.4(m) and (n)", immediately after the phrase "amend, modify
         or waive any provision of Section 9.4".

                  (qq)     Section 12.1(a) of the Credit Agreement shall be
         amended by inserting the following sentence immediately following the
         last sentence thereof as follows:

                  "Notwithstanding the foregoing, prior to the date upon which
                  the Administrative Agent determines (and notifies the
                  Borrower) that the primary syndication (and the resultant
                  addition of Persons as Lenders pursuant to Section 12.8) of
                  the Term C Facility has been completed, the Borrower and the
                  Administrative Agent may, without the consent of any Lender,
                  agree to increase the interest rate pricing of the Term C
                  Facility."

                  (rr)     Subclause (i) of the last sentence of Section 12.8(b)
         of the Credit Agreement shall be amended by (i) by deleting the word
         "and" immediately before the phrase "Scheduled Term B Repayments" and
         inserting "," in lieu thereof, and (ii) inserting the phrase ", and
         Scheduled Term C Repayments (other than the Term C Loan Maturity Date)"
         immediately following the phrase "(other than the Term B Loan Maturity
         Date)".

                  (ss)     Subclause (i)(B) of the first sentence of Section
         12.8(c) of the Credit Agreement shall be amended by inserting the
         phrase "or of the Term C Facility" immediately following the phrase "of
         the Term B Facility".

                  (tt)     The last sentence of Section 12.8(c) of the Credit
         Agreement shall be amended by inserting the phrase "Term C Pro Rata
         Share," immediately following the phrase "Term B Pro Rata Share,".

                  (uu)     Section 12.15(b)(i) is shall be amended by inserting
         the following paragraph immediately following subclause (E) thereof:

                  "Notwithstanding anything in this clause (i) to the contrary,
                  in no event shall the Administrative Agent or the Collateral
                  Agent, as the case may be, release the Mortgaged
                  Nevada/California Real Estate, the Mortgaged California Real
                  Estate, the AFC Collateral or the Assignment and Pledge
                  Collateral (except, in each case, as expressly provided in
                  this Agreement), without the consent of each Term C Lender."


                                       24

<PAGE>
                  (vv)     Exhibit 12.8(c) to the Credit Agreement shall be
         deleted in its entirety and the Exhibit 12.8(c) attached to this
         Amendment No. 4 is substituted in lieu thereof

                  (ww)     Schedule 1.1(a) to the Credit Agreement shall be
         amended by inserting a fifth column immediately following the column
         titled "Multicurrency Commitment (as a subcomponent of the Revolving
         Commitment)" and inserting in such fifth column, the Term C Commitment
         amounts in effect as of the Effective Date across from the name of each
         Lender which is a Term C Lender as follows:


<TABLE>
<CAPTION>
                                  Lender                 Term C Commitment
                                  ------                 -----------------
<S>                                                      <C>           
                           Bankers Trust Company          $21,344,416.53
                             ABN AMRO Bank N.V.            $3,655,583.47
</TABLE>


                  (xx)     The Credit Agreement shall be amended to insert the
         form of "Exhibit 2.2(a)(5) - Form of Term C Note" immediately following
         Exhibit 2.2(a)(4) attached thereto.

         2. Waivers and Acknowledgement. Subject to the conditions and
effectiveness of this Amendment No. 4 and otherwise notwithstanding the
provisions of any Loan Document:

         (a) the Lenders hereby waive, solely with respect to the Term C
Facility, compliance by the Borrower with Section 2.8 of the Credit Agreement
regarding the addition of the Term C Facility and any increase thereof in
accordance with the Credit Agreement, as amended by this Amendment No. 4, and
hereby acknowledge that the Term C Facility added to the Credit Agreement in
accordance with the terms and provisions of this Amendment No. 4 shall
constitute the Term C Facility described in said Section 2.8.(b);

         (b) notwithstanding any other provision of the Credit Agreement or the
other Loan Documents to the contrary, the Lenders hereby acknowledge and agree
that the Mortgaged Nevada/California Real Estate, the Mortgaged California Real
Estate, the AFC Collateral or the Assignment and Pledge Collateral shall
constitute collateral on a first priority security interest basis for the
Initial Term C Lenders with respect to all of the Obligations relating to the
Term C Loans due and owing to the Initial Term C Lenders, and with respect to
the Mortgaged Nevada/California Real Estate, the Mortgaged California Real
Estate and the Assignment and Pledge Collateral shall constitute collateral on a
second priority security interest basis for the Initial Term C Lenders with
respect to all of the Obligations relating to the Term A Loans and Revolving
Loans due and owing to the Initial Term C Lenders. In furtherance of the
foregoing, the Lenders, including the Term A Lenders and the Revolving Lenders,
hereby authorize and consent to the execution by the Administrative Agent or the
Collateral Agent, as the case may be (without any further action of such
Lenders) of such amendments and other modifications to the Security Documents
which the Administrative Agent or the Collateral Agent, as the case may be,
reasonably determines are necessary to reflect the above-described Liens in
favor of the Initial Term C Lenders with respect to the collateral described
above and the priority of payments in favor of the Initial Term C Lenders made
with the proceeds thereof and, in connection with such collateral, the voting
percentages of Initial Term C Lenders required to amend, modify or release such
collateral as further described in Section 12.1(a) of the Credit Agreement (as
amended by this Amendment No. 4) . In addition, the Administrative Agent or the
Collateral Agent, as the case may be, is authorized to execute any amendments or
other modifications to the Security


                                       25

<PAGE>
Documents as may be necessary to evidence to reflect the pro rata sharing with
the Second Term C Lenders of the first priority security interest of the Initial
Term C Lenders in the AFC Collateral, the Assignment and Pledge Collateral, the
Mortgaged Nevada/California Real Estate and the Mortgaged California Real
Estate;

         (c) the Lenders hereby waive any Event of Default arising under Section
10.1(c)(i) of the Credit Agreement resulting solely from the Borrower's failure
to comply with the ratio applicable to the Fiscal Quarter ended November 30,
2001 as set forth in, and required by, each of Section 9.3 and Section 9.4 of
the Credit Agreement;

         (d) the Lenders hereby waive, for the period commencing the Effective
Date and ending on the earlier of (i) the date on which the Borrower has
completed an unsecured subordinated debt or equity financing of not less than
$35,000,000 or (ii) March 28, 2002, any Event of Default or Unmatured Event of
Default arising solely out of the Borrower's breach of Section 2(b) of Amendment
No. 2 as a result of the Borrower's failure to permanently reduce the Revolving
Commitment and repay Revolving Loans, in part, as required by the terms of said
Section. Upon expiration of the waiver set forth in the preceding sentence
without compliance by the Borrower with the requirements specified in said
Section, such waiver shall be automatically revoked and the requirements of the
Credit Agreement waived thereby shall again be in full force with retroactive
effect to the dates specified in the Credit Agreement. In such case, following
such expiration and noncompliance as described in the preceding sentences, the
Administrative Agent and the Lenders shall have all rights and remedies under
the Credit Agreement and any other Loan Document or otherwise that the
Administrative Agent and the Lenders would have had if any such waiver had never
been granted; and

         (e) the Lenders hereby waive, for the period commencing the Effective
Date and ending on the date which is ten (10) Business Days following the
Effective Date, any Event of Default or Unmatured Event of Default arising
solely out of the Borrower's breach of Section 7.1(b) of the Credit Agreement as
a result of the Borrower's failure to deliver its audited annual financial
statements for the Fiscal Year ending November 30, 2001 within ninety (90) days
after the end of such Fiscal Year, as required by the terms of said Section.
Upon expiration of the waiver set forth in the preceding sentence without
compliance by the Borrower with the requirements specified in said Section, such
waiver shall be automatically revoked and the requirements of the Credit
Agreement waived thereby shall again be in full force with retroactive effect to
the date specified in the Credit Agreement. In such case, following such
expiration and noncompliance as described in the preceding sentence, the
Administrative Agent and the Lenders shall have all rights and remedies under
the Credit Agreement and any other Loan Document or otherwise that the
Administrative Agent and the Lenders would have had if any such waiver had never
been granted.


                                       26

<PAGE>
         3. Consent of Lenders to Equity. The Administrative Agent and the
Lenders hereby consent (i) to the issuance by the Borrower of Capital Stock in
connection with the Equity Capital and (ii) to the issuance of warrants of the
Borrower in connection with the Subordinated Notes. The Administrative Agent and
the Lenders further agree that such consents described in the preceding sentence
shall be in satisfaction of the consents required pursuant to Section 8.6(b) of
the Credit Agreement with respect to the actions described in clauses (i) and
(ii), provided that such issuance shall in all other respects be subject to said
Section 8.6(b).

         4. Subordination and Intercreditor Acknowledgements by Parties. (a)
Each of the Borrower and the Subsidiary Guarantor covenants and agrees, and the
Term A Lenders and the Revolving Lenders acknowledge and agree that the payment
of any and all of the Term A Loans and the Revolving Loans (i) from the proceeds
of the Mortgaged Nevada/California Real Estate, the Mortgaged California Real
Estate, the AFC Collateral or the Assignment and Pledge Collateral shall be
subordinate and subject in right and time of payment, to the extent and in the
manner set forth in this Amendment No. 4, to the prior indefeasible payment in
full in cash of all Term C Loans of the Initial Term C Lenders (collectively,
the "First Priority Loans") and (ii) from the proceeds of the Mortgaged
Nevada/California Real Estate, the Mortgaged California Real Estate and/or the
Assignment and Pledge Collateral shall be subordinate and subject in right and
time of payment, to the extent and in the manner set forth in this Amendment No.
4, to the prior indefeasible payment in full in cash of all Term A Loans and
Revolving Loans of the Initial Term C Lenders (the "Second Priority Loans").
Each Initial Term C Lender, whether now outstanding or hereafter created,
incurred, assumed or guaranteed, shall be deemed to have acquired Term C Loans
in reliance upon the provisions contained in this Amendment No. 4.

         (b)      With respect to the Mortgaged Nevada/California Real Estate,
the Mortgaged California Real Estate, the AFC Collateral and/or the Assignment
and Pledge Collateral, the First Priority Loans and, with respect to the
Mortgaged Nevada/California Real Estate, the Mortgaged California Real Estate
and/or the Assignment and Pledge Collateral, the Second Priority Loans shall, in
each case, continue to be treated as senior in priority to the Term A Loans and
Revolving Loans of the Lenders (other than the Initial Term C Lenders which
shall for any purposes constitute Second Priority Loans), and the provisions of
this Amendment No. 4 shall continue to govern the relative rights and priorities
of the Lenders even if all or part of the First Priority Loans or, with respect
to the Mortgaged Nevada/California Real Estate, the Mortgaged California Real
Estate and/or the Assignment and Pledge Collateral, the Second Priority Loans or
the security interests securing the First Priority Loans or, with respect to the
Mortgaged Nevada/California Real Estate, the Mortgaged California Real Estate
and/or the Assignment and Pledge Collateral, the Second Priority Loans are
subordinated (other than the Second Priority Loans being subordinated to the
First Priority Loans), set aside, avoided, invalidated or disallowed in
connection with any dissolution, insolvency or other bankruptcy or winding up
proceeding, or if for any reason the documentation regarding the creation of
such security interests is not executed or delivered by the Borrower or any of
its Subsidiaries, as applicable, or such documentation is not recorded, and this
Amendment No. 4 shall be reinstated if at any time any payment of any of the
First Priority Loans or, with respect to the Mortgaged Nevada/California Real
Estate, the Mortgaged California Real Estate and/or the Assignment and Pledge
Collateral, the Second Priority Loans is rescinded or must otherwise be returned
by any holder of the First Priority Loans or, with respect to the Mortgaged
Nevada/California Real 


                                       27

<PAGE>
Estate, the Mortgaged California Real Estate and/or the Assignment and Pledge
Collateral, the Second Priority Loans or any representative of such holder.

         (c)      The Term A Lenders and the Revolving Lenders hereby waive any
rights any Lender may have under applicable law to assert the doctrine of
marshaling or to otherwise require the Administrative Agent, the Collateral
Agent or the Initial Term C Lenders to marshal any property of the Borrower or
any of the guarantors of the First Priority Loans or, with respect to the
Mortgaged Nevada/California Real Estate, the Mortgaged California Real Estate
and/or the Assignment and Pledge Collateral, the Second Priority Loans, for the
benefit of the Term A Lenders and the Revolving Lenders.

         (d)      THE LENDERS AGREE THAT NO LENDER WILL, NOR WILL ANY LENDER
ENCOURAGE ANY OTHER PERSON TO, AT ANY TIME, CONTEST THE VALIDITY, PERFECTION,
PRIORITY OR ENFORCEABILITY OF THE FIRST PRIORITY LOANS OR THE SECOND PRIORITY
LOANS, THE LOAN DOCUMENTS OR THE LIENS OR SECURITY INTERESTS (INCLUDING WITHOUT
LIMITATION THE PRIORITY OF SUCH LIENS AND SECURITY INTERESTS) OF THE
ADMINISTRATIVE AGENT OR THE COLLATERAL AGENT, AS THE CASE MAY BE, IN FAVOR OF
THE INITIAL TERM C LENDERS IN THE COLLATERAL SECURING THE FIRST PRIORITY LOANS
OR THE SECOND PRIORITY LOANS, AS THE CASE MAY BE, OR THE ORDER OF PAYMENT OF
PROCEEDS, ALL AS DESCRIBED IN SECTION 1(BB) OF THIS AMENDMENT NO. 4 AND AS SET
FORTH IN THE LOAN DOCUMENTS.

         5. Representations and Warranties. As of the date hereof, the Borrower
hereby represents and warrants to the Administrative Agent and the Lenders as
follows:

                  (a)      After giving effect to this Amendment No. 4 (i) no
         Unmatured Event of Default or Event of Default shall have occurred or
         be continuing and (ii) the representations and warranties of the
         Borrower contained in the Loan Documents shall each be true and correct
         in all material respects at and as of the date hereof to the same
         extent as though made on and as of such date, except to the extent such
         representations and warranties expressly relate to an earlier date in
         which event such representation and warranties shall be true and
         correct as of such specified date.

                  (b)      The execution, delivery and performance, as the case
         may be, by the Borrower of this Amendment No. 4 and the other documents
         and transactions contemplated hereby are within the Borrower's
         corporate powers, have been duly authorized by all necessary corporate
         action (including, without limitation, all necessary shareholder
         approvals) of the Borrower, shall have received all necessary
         governmental approvals, and do not and will not contravene or conflict
         with any provision of law applicable to the Borrower, the certificate
         or articles of incorporation or bylaws of the Borrower, or any order,
         judgment or decree of any court or other agency of government or any
         contractual obligation binding upon the Borrower.

                  (c)      Each of this Amendment No. 4, the Credit Agreement
         and any other Loan Document is the legal, valid and binding obligation
         of the Borrower enforceable against


                                       28

<PAGE>
         the Borrower in accordance with its respective terms, except to the
         extent enforceability is limited by bankruptcy, insolvency or similar
         laws affecting the rights of creditors generally or by application of
         general principles of equity.

         6.       Conditions. This Amendment No. 4 shall become effective as of
the date first above written; provided, that the Administrative Agent shall have
received:

                  (a)      counterparts of this Amendment No. 4 duly executed by
                           the Borrower, the Subsidiary Guarantors, the
                           Administrative Agent and the percentage of Lenders
                           required by the Credit Agreement;

                  (b)      duly executed originals of the Term C Notes executed
                           by the Borrower;

                  (c)      duly executed originals of a certificate of the Chief
                           Executive Officer or Chief Financial Officer of the
                           Borrower and each other Credit Party, dated as of the
                           date hereof, stating that (A) since November 30, 2000
                           (i) no event or condition has occurred or is existing
                           which could reasonably be expected to have a Material
                           Adverse Effect; (ii) there has been no material
                           adverse change in the industry in which the Borrower
                           or such Credit Party operates; (iii) no litigation
                           has been commenced which, if successful, would have a
                           Material Adverse Effect or could challenge any of the
                           transactions contemplated by the Credit Agreement and
                           the other Loan Documents; (iv) there have been no
                           Restricted Payments made by the Borrower or any of
                           its Subsidiaries other than in accordance with the
                           Credit Agreement; and (v) there has been no material
                           increase in liabilities, liquidated or contingent,
                           and no material decrease in assets of any Borrower or
                           any of its Subsidiaries, and (B) all necessary
                           governmental (domestic and foreign) and third party
                           approvals in connection with the Credit Agreement and
                           the transactions contemplated by this Amendment No. 4
                           have been obtained and remain in effect;

                  (d)      copies of schedules to the Credit Agreement, updated
                           from the schedules delivered as of December 28, 2000,
                           in form and substance satisfactory to the
                           Administrative Agent and the Required Lenders;

                  (e)      pro forma (after giving effect to this Amendment No.
                           4, including the initial funding of the Term C
                           Facility) financial statements in form and substance
                           satisfactory to the Administrative Agent and the
                           Required Lenders;

                  (f)      duly executed original of a legal opinion of (i)
                           Vedder Price Kaufman & Kammholz, special counsel to
                           the Borrower, (ii) William R. Phillips, General
                           Counsel of the Borrower, and (iii) Hunter Richey Di
                           Benedetto & Eisenbeis, LLP, special California
                           counsel to the Borrower, each dated as of the
                           Effective Date and in form and substance satisfactory
                           to the Administrative Agent and the Required Lenders;


                                       29

<PAGE>
                  (g)      from the Borrower, without setoff, deduction or
                           counterclaim, a non-refundable commitment fee for the
                           account of each Initial Term C Lender that has
                           executed and delivered (including delivery of way of
                           facsimile) a copy of this Amendment No. 4 to the
                           attention of Kay McNab at Winston & Strawn, 35 West
                           Wacker Drive, Chicago, Illinois 60601, telecopy
                           number 312-558-5700, at or prior to 2:00 p.m. (New
                           York City time), on the Effective Date, in an amount
                           equal to 2.00% of such Lender's Term C Commitment as
                           of the Effective Date of this Amendment No. 4;

                  (h)      from the Borrower, without setoff, deduction or
                           counterclaim, a non-refundable amendment fee for the
                           account of each Lender that has executed and
                           delivered (including delivery of way of facsimile) a
                           copy of this Amendment No. 4 to the attention of Kay
                           McNab at Winston & Strawn, 35 West Wacker Drive,
                           Chicago, Illinois 60601, telecopy number
                           312-558-5700, at or prior to 2:00 p.m. (New York City
                           time), on the Effective Date, in an amount equal to
                           0.25% of the sum of such Lender's Revolving
                           Commitment and Term A Loans as of the Effective Date
                           of this Amendment No. 4; and

                  (i)      from the Borrower all fees and expenses of legal
                           counsel to the Administrative Agent to the extent
                           then invoiced.

         7. Affirmation of Subsidiary Guarantors. By its signature set forth
below, each Subsidiary Guarantor hereby confirms to the Administrative Agent and
the Lenders that, after giving effect to this Amendment No. 4 and the
transactions contemplated hereby, the Subsidiary Guaranty of such Subsidiary
Guarantor and each other Loan Document to which such Subsidiary Guarantor is a
party continues in full force and effect and is the legal, valid and binding
obligation of such Subsidiary Guarantor, enforceable against such Subsidiary
Guarantor in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability.

         8. Successors and Assigns. This Amendment No. 4 shall be binding on and
shall inure to the benefit of the Borrower, the Administrative Agent, the
Lenders and their respective successors and assigns; provided that the Borrower
may not assign its rights, obligations, duties or other interests hereunder
without the prior written consent of the Administrative Agent and the Lenders.
The terms and provisions of this Amendment No. 4 are for the purpose of defining
the relative rights and obligations of the Borrower, the Administrative Agent
and the Lenders with respect to the transactions contemplated hereby and there
shall be no third party beneficiaries of any of the terms and provisions of this
Amendment No. 4.

         9. Entire Agreement. This Amendment No. 4, the Credit Agreement (as
amended hereby) and the other Loan Documents constitute the entire agreement of
the parties with respect to the subject matter hereof.

         10. Incorporation of Credit Agreement. The provisions contained in
Sections 12.4, 12.9 and 12.10 of the Credit Agreement are incorporated herein by
reference to the same extent as if


                                       30

<PAGE>
reproduced herein in their entirety with respect to this Amendment No. 4.

         11. Amendment; Waiver. The parties hereto agree and acknowledge that
nothing contained in this Amendment No. 4 in any manner or respect limits or
terminates any of the provisions of the Credit Agreement or any of the other
Loan Documents other than as amended as expressly set forth herein and further
agree and acknowledge that the Credit Agreement (as amended hereby) and each of
the other Loan Documents remain and continue in full force and effect and are
hereby ratified and confirmed. Except to the extent expressly set forth herein,
the execution, delivery and effectiveness of this Amendment No. 4 shall not
operate as a waiver of any rights, power or remedy of the Lenders or the
Administrative Agent under the Credit Agreement or any other Loan Document, nor
constitute a waiver of any provision of the Credit Agreement or any other Loan
Document. No delay on the part of any Lender or the Administrative Agent in
exercising any of their respective rights, remedies, powers and privileges under
the Credit Agreement or any of the Loan Documents or partial or single exercise
thereof, shall constitute a waiver thereof. On and after the Effective Date,
each reference in the Credit Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import, and each reference to the Credit
Agreement in the Loan Documents and all other documents delivered in connection
with the Credit Agreement shall mean and be a reference to the Credit Agreement,
as amended hereby.

         12. Captions. Section captions used in this Amendment No. 4 are for
convenience only, and shall not affect the construction of this Amendment No. 4.

         13. Severability. Whenever possible each provision of this Amendment
No. 4 shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment No. 4 shall be prohibited
by or invalid under such law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Amendment No. 4.

         14. Counterparts. This Amendment No. 4 may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument. Delivery of an
executed counterpart of a signature page to this Amendment No. 4 by telecopy
shall be effective as delivery of a manually executed counterpart of this
Amendment No. 4.

                      [signature pages immediately follow]


                                       31

<PAGE>
         IN WITNESS WHEREOF, this Amendment No. 4 has been duly executed as of
the date first written above.

                                       GENCORP INC.



                                       By: /s/ Yasmin Seyal
                                           -------------------------------------
                                           Name:  Yasmin Seyal
                                           Title: Senior Vice President, Finance


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       AEROJET-GENERAL CORPORATION,
                                       as Subsidiary Guarantor



                                       By: /s/ Yasmin R. Seyal
                                           -------------------------------------
                                           Name:  Yasmin R. Seyal
                                           Title: Treasurer


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       AEROJET ORDNANCE TENNESSEE, INC., as
                                       Subsidiary Guarantor



                                       By: /s/ Brian E. Sweeney
                                           -------------------------------------
                                           Name:  Brian E. Sweeney
                                           Title: Vice President and Secretary


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       GENCORP PROPERTY INC.,
                                       as Subsidiary Guarantor



                                       By: /s/ Yasmin R. Seyal
                                           -------------------------------------
                                           Name:  Yasmin R. Seyal
                                           Title: Treasurer


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       PENN INTERNATIONAL INC.,
                                       as Subsidiary Guarantor



                                       By: /s/ Yasmin R. Seyal
                                           -------------------------------------
                                           Name:  Yasmin R. Seyal
                                           Title: Treasuer


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       GDX LLC, as Subsidiary Guarantor



                                       By: /s/ Yasmin R. Seyal
                                           -------------------------------------
                                           Name:  Yasmin R. Seyal
                                           Title: Treasurer


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       GDX AUTOMOTIVE INC.,
                                       as Subsidiary Guarantor



                                       By: /s/ Yasmin R. Seyal
                                           -------------------------------------
                                           Name:  Yasmin R. Seyal
                                           Title: Treasurer


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       BANKERS TRUST COMPANY,
                                       as Lender and Administrative Agent



                                       By: /s/ Marguerite Sutton
                                           -------------------------------------
                                           Name:  Marguerite Sutton
                                           Title: Vice President


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       BANK ONE, NA,
                                       as Lender



                                       By: /s/ Karen C. Ryan
                                           -------------------------------------
                                           Name:  Karen C. Ryan
                                           Title: Director


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       ABN AMRO Bank N.V.,
                                       as Lender



                                       By: /s/ Terrence J. Ward
                                           -------------------------------------
                                           Name:  Terrence J. Ward
                                           Title: Group Vice President



                                       By: /s/ Mary L. Honda
                                           -------------------------------------
                                           Name:  Mary L. Honda
                                           Title: Group Vice President


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       THE BANK OF NEW YORK,
                                       as Lender



                                       By: /s/ Elizabeth T. Ying
                                           -------------------------------------
                                           Name:  Elizabeth T. Ying
                                           Title: Vice President


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       THE BANK OF NOVA SCOTIA,
                                       as Lender



                                       By: /s/ Mark Sparrow
                                           -------------------------------------
                                           Name:  Mark Sparrow
                                           Title: Director


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       NATIONAL CITY BANK,
                                       as Lender


                                       By: /s/ Brian J. Cullina
                                           -------------------------------------
                                           Name:  Brian J. Cullina
                                           Title: Senior Vice President


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       THE NORTHERN TRUST COMPANY,
                                       as Lender



                                       By: /s/ Melissa A. Whitson
                                           -------------------------------------
                                           Name:  Melissa A. Whitson
                                           Title: Vice President


                       Signature Page to Amendment No. 4
                                   and Waiver

<PAGE>
                                       WELLS FARGO BANK, N.A.,
                                       as Lender



                                       By: /s/ Scott D. Moldoff
                                           -------------------------------------
                                           Name:  Scott D. Moldoff
                                           Title: Vice President


                       Signature Page to Amendment No. 4
                                   and Waiver


<PAGE>

                                                                   Item No. 10.9
                                                                       Exhibit B

                                                    P.O. Box 537012
                                                    Sacramento, CA 95853-7012
[GENCORP LOGO]
WILLIAM R. PHILLIPS                                 Tel:  (916) 351-8510
Senior Vice President, Law                          Fax: (916) 351-8665
General Counsel and Secretary                       William.Phillips@GenCorp.com


                                November 30, 2001

Mr. Robert A. Wolfe
Chairman, Chief Executive Officer & President
GenCorp Inc.
P.O. Box 537012
Sacramento, CA 95853-7012

Re: Employment Retention Agreement

Dear Mr. Wolfe:

As you are aware, you have discussed the possibility of your early retirement
with the Board of Directors of GenCorp Inc. ("Board"). The Board has expressed a
strong desire that you continue to serve in your present capacity for at least
another two years, through November 30, 2003. As a consequence, I have been
authorized by the Board to offer you this Employment Retention Agreement
("Agreement") upon the terms approved by the Board at its meeting of September
7, 2001, and subject only to the approval of this Agreement by the Chairman of
the Organization and Compensation Committee (the "Committee") (which approval
shall be evidenced by his signature on this Agreement).

From the date hereof until November 30, 2003, you will continue to serve as
Chairman of the Board of Directors ("Chairman"), Chief Executive Officer
("CEO"), and President,
 as well as a Director, of GenCorp Inc. ("GenCorp"). You
will continue full-time performance of all duties that you heretofore have
performed in these capacities and have the same authority as you previously had.
Your employment shall be subject to termination at will by notice from you or
GenCorp, subject to the severance provisions of this Agreement.

For performance of these services, GenCorp will continue to pay your annual
compensation consisting of a base salary of not less than your current
$540,000.00 per year and year-end Management Incentive Compensation pursuant to
the plan currently in place, or any new plan that may in the future be adopted
in the sole discretion of the Board. For so long as you remain employed by
GenCorp in your present capacity: (i) both your base salary and your year-end
Management Incentive Compensation opportunity and target shall be adjustable
(upwards but not downwards), in the sole discretion of the Board, on an annual
basis; and, (ii) you will continue to be eligible for your present benefits
under GenCorp's employee benefit plans and executive perquisite programs (as
those plans may, in the sole discretion of GenCorp, be modified in the future),
including without limitation, the following: (a) GenCorp Consolidated Pension
Plan, (b) Aerojet-General Corporation Consolidated Pension Plan, (c) GenCorp
Retirement Savings Plan, (d) GenCorp Benefits Restoration Plan, (e) GenCorp
Medical Plan, (f) GenCorp Dental Plan, (g) GenCorp Flexible Benefits Plan, (h)
Employee Assistance Program, (i) Sick-Pay Program, (j) Short-Term Disability
Plan, (k) Long-Term Disability Plan, (l) Accidental Death and Dismemberment
Insurance, (m) Life Insurance, (n) Group Universal Life Insurance, (o) Vacation
Program, (p) Holiday Pay, (q) Deferred Bonus Plan, (r) Country Club Membership,
(s) Executive Physical, and (t) Financial Planning Assistance (AYCO); and, (iii)
you shall continue to be eligible, in the good faith discretion of the Board,
for new grants

<PAGE>
Robert A. Wolfe
Employment Retention Agreement
November 30, 2001
Page 2



of GenCorp stock options and GenCorp restricted stock in accordance with the
1999 Equity and Performance Incentive Plan, and any subsequently adopted GenCorp
equity participation plan.

This Agreement shall not modify your other employment related agreements
presently in force, to-wit: Severance Agreement, dated October 1, 1999
("Severance Agreement"); Indemnification Agreement, dated October 1, 1999; Stock
Option Agreements, dated September 1, 1997, March 25, 1998, March 30, 1999,
December 16, 1999, and January 16, 2001; and Restricted Stock Agreements dated
February 1, 2000 and January 16, 2001 (in the aggregate, "Prior Contracts").
Should your employment by GenCorp in your present capacity terminate prior to
November 30, 2003 for any reason other than death, disability, a Change of
Control (as defined in Paragraph 1.(d) of your Severance Agreement) or at the
will of GenCorp, all compensation and benefits (including without limitation,
pension and vesting of stock options and restricted stock) to which you are
entitled on or after the date your employment terminates shall be determined by
the Prior Contracts and by the Company's employee benefit plans described above,
in accordance with their terms.

If you continue to serve in your present capacity to November 30, 2003, or if
GenCorp elects to terminate your employment prior to that date for any reason
other than Cause, you shall:

a.    Be eligible to receive an annual pension payment (the "Pension Benefit")
      equal to the greater of $248,860.26 and the amount calculated as set forth
      below commencing upon your termination of employment. This pension payment
      shall consist of pension payments made from the appropriate combination of
      the Aerojet-General Corporation Consolidated Pension Plan and the GenCorp
      Consolidated Pension Plan (collectively "Pension Plan"); the GenCorp
      Benefit Restoration Plan (the "Restoration Plan"); and, an Enhanced
      Pension Benefit paid to you as an unsecured creditor from the cash assets
      of GenCorp. Your Pension Benefit will be calculated based upon: (a) the
      formulas in the Pension Plan; (b) your actual age; (c) your actual service
      credits plus ten whole years of service credit; and, (d) your actual final
      five year average annual plan compensation for you, but not less than
      $764,224.80. Pension Benefits will be paid as provided under the
      applicable Pension Plan and Restoration Plan (generally as an annuity over
      your lifetime) and the Enhanced Pension Benefit will be paid in an
      actuarially equivalent five equal annual installments commencing promptly
      following the date of your retirement. The amount of the Enhanced Pension
      Benefit shall consist of the difference between (i) your pension benefit
      calculated as described above, and (ii) your normal pension benefit to be
      paid as calculated under the normal terms of the Pension Plan and the
      Restoration Plan. The actuarial equivalent value of this difference shall
      be calculated using the same discount factors and mortality table as
      utilized in connection with the 2001 GenCorp Voluntary Enhanced Retirement
      Program under the 2001 Supplemental Retirement Plan for GenCorp
      Executives, and the resulting value will be paid to you (and in the event
      of your death, to your estate, except to the extent, if any, legally
      required to be paid to your spouse) in five equal installments, provided
      that you may designate another beneficiary at any time prior to
      commencement of payment by written notice to GenCorp (with such consent,
      if any, as shall be legally required of your spouse). Additionally, you
      may elect payment of the pension offered in this Agreement in the form of
      a life annuity or a 100% or 50% joint and survivor annuity, with your wife
      as the joint annuitant. Any of these optional annuity forms of payment
      shall be the actuarial equivalent of the pension amount calculated in
      accordance with the terms and procedures applicable under the Pension
      Plan, and this Agreement. Any alternative form must be elected or revoked
      at least one (1) year prior to your retirement date.

b.    Receive immediate vesting of all unexercised GenCorp stock options granted
      to you prior to November 30, 2003, which shall remain exercisable for the
      periods specified in the original grants (i.e., the remainder of the term
      of the grant);

c.    Receive immediate vesting of all GenCorp restricted stock granted to you
      prior to November 30, 2003;

<PAGE>
Robert A. Wolfe
Employment Retention Agreement
November 30, 2001
Page 3


d.    Receive in a lump-sum an amount equal to the Base Salary, if any, that
      would have been paid to you through November 30, 2003;

e.    Receive any accrued amounts including any earned but unpaid Base Salary,
      accrued but unused vacation, unreimbursed business expenses and earned
      bonus for any completed fiscal year and any amount or benefit due under
      any benefit plan (the "Accrued Amounts");

f.    Receive a pro rata bonus for the fiscal year of termination based on
      actual results and the period of the year during which you were employed
      by GenCorp (the "Pro Rata Bonus").

As used herein, "Cause" shall have the same meaning as defined in Paragraph 1(c)
of your Severance Agreement except that subpart (c)(i) shall only be Cause if
such violation is a felony and you are convicted or plead guilty or nolo
contendre to it (and it is not as a result of your vicarious liability), (ii),
(iii) and (iv) shall only be Cause if the violation is injurious to GenCorp. A
material breach of this Agreement by GenCorp, including but not limited to the
first two sentences of the second paragraph of this Agreement, that remains
uncured for ten (10) days after written notice thereof is given by you, or the
relocation of your office by more than fifty (50) miles from its present
location at the Aerojet facility in Sacramento, California shall be deemed a
termination at the will of and by GenCorp without Cause.

If you die prior to November 30, 2003 while employed by GenCorp, or while you
are totally disabled (with the onset of your disability having occurred while
you were employed by GenCorp), GenCorp will: (i) pay the Enhanced Pension
Benefit offered in this Agreement to your estate, unless otherwise required by
law, calculated as if you had retired on November 30, 2003, unless prior to your
death, with the concurrence of GenCorp, you have elected a different one of the
alternative payout options offered in this Agreement to take effect in the case
of your death, in which case the pension shall be paid in accordance with your
election and provided that you may designate another beneficiary at any time
prior to your death by written notice to GenCorp (with such consent, if any, as
shall be legally required of your spouse); (ii) vest all unvested GenCorp stock
options held by you upon your death which shall remain exercisable by your
beneficiary for the periods specified in the original grants (i.e., the
remainder of the term of the grant); (iii) vest all unvested GenCorp restricted
stock held by you upon your death and transfer that stock to your estate; and
(iv) pay to your estate, unless otherwise required by law, any Accrued Amounts,
and Pro Rata Bonus.

If you become totally disabled and unable to perform your duties as Chairman,
CEO and President, and such disability is expected to continue for at least 6
consecutive months, GenCorp shall pay you a monthly disability benefit equal to
one-twelfth of the sum of your base salary rate and target bonus plus your
benefits until the first to occur of the following events: (i) you are able to
resume performance of your duties; or (ii) November 30, 2003, at which time you
shall be eligible to retire and receive the pension and vesting of GenCorp stock
options and GenCorp restricted stock described in this Agreement. However, such
disability benefit shall be reduced by the amount of any disability benefit
payments which you are entitled to receive under the GenCorp Long-Term
Disability Plan or pursuant to federal law until such time as you retire. You
shall also receive Accrued Amounts and a Pro Rata Bonus to the extent these
amounts are not duplicative of amounts previously paid to you.

In the event a Change in Control of GenCorp occurs prior to November 30, 2003,
while you are serving in your present capacity or while you are totally disabled
(with the onset of your disability having occurred while you were employed by
GenCorp), you shall be entitled to the full benefit of your Severance Agreement
and the full benefit of this Agreement. In addition, this Employment Retention
Agreement shall take precedence over those provisions of the Pension Plan which
address Change in Control.

You will hold in confidence and will not disclose to any third person or use for
your personal benefit any confidential information or trade secret GenCorp has
disclosed to you except in compliance with legal process or, while you are an
executive of the Company, as you deem appropriate in your good faith

<PAGE>

Robert A. Wolfe
Employment Retention Agreement
November 30, 2001
Page 4


judgment. As used herein, "confidential information" and "trade secrets" mean
any and all information of GenCorp and/or any of its subsidiaries, which is not
generally available to third persons and relates to the products, customers,
pricing, terms of sale, manufacturing processes, research and development,
financial performance or any other aspects of the business of GenCorp and/or any
of its subsidiaries.

For a period of three years following the termination of your employment with
GenCorp, you will not perform, directly or indirectly, any consulting or other
services for or on behalf of any company or person in respect of any business
operations which are in material competition with GenCorp's material businesses,
provided that the foregoing shall not prevent you from providing consulting or
other services in respect of noncompetitive business operations of a person or
entity that also has competitive business operations.

This Agreement will be deemed to require you to perform personal services.
Accordingly, you may not assign any right, delegate any duty, or otherwise
transfer any interest hereunder, whether by operation of law or otherwise,
without GenCorp's prior written consent.

As a condition of receiving the benefits hereunder upon termination, you further
agree to provide GenCorp a release, generally in the form attached hereto as
Exhibit A, upon termination of your employment under circumstances that will
result in payment of the benefits offered in this Agreement.

On any termination, except a termination for Cause or a termination initiated by
you prior to November 30, 2003 (which is not deemed a termination without Cause
by GenCorp), you will also receive the items on Exhibit B hereto. This Agreement
constitutes the entire understanding between you and GenCorp regarding the
incentives the Board is offering you to continue your employment in your present
capacity through November 30, 2003. Except as expressly provided in this
Agreement, this Agreement may not be changed, amended or terminated, in whole or
in part, except by a writing executed by you and an authorized representative of
GenCorp. This Agreement shall in all respects be construed in accordance with
the laws of the State of Ohio. This Agreement shall be binding upon and shall
inure to the benefit of successors and assigns of GenCorp, including any
successor resulting from a change in control, provided the Agreement may only be
assigned by GenCorp only to a successor to all or substantially all of its
business and then only upon such successor promptly delivering to you a written
assumption of this Agreement. Any dispute under this Agreement shall be resolved
by arbitration in Sacramento, California before one arbitrator under the
jurisdiction of the American Arbitration Association (the "AAA") pursuant to the
applicable AAA rules. The judgment of the arbitrator shall be final and binding
on the parties and judgment upon it may be entered in any court of competent
jurisdiction. Each party shall bear its own costs and legal fees and shall
equally divide those of the AAA and the arbitrator, provided that the arbitrator
may award the prevailing party (as determined by the arbitrator) his or its
costs and his or its reasonable legal fees and disbursements, provided that no
award shall be made against you unless the arbitrator shall determine that you
took the material portion of your position in bad faith or that your claim was
frivolous.

                                   GENCORP INC.

                                   /s/ William R. Phillips
                                   -------------------------------------------
                                   William R. Phillips
                                   Senior Vice President, Law, General Counsel
                                   and Secretary

                                   DATE: November 30, 2001

<PAGE>

Robert A. Wolfe
Employment Retention Agreement
November 30, 2001
Page 5


ACCEPTED AND AGREED

/s/ Robert A. Wolfe
---------------------------------------
Robert A. Wolfe
Chairman, Chief Executive Officer and President

DATE: November 30, 2001


APPROVED:

/s/ William K. Hall
---------------------------------------
William K. Hall
Chairman Organization & Compensation Committee
GenCorp Board of Directors

<PAGE>
                                                                       EXHIBIT A


                                RELEASE OF CLAIMS

         In consideration for the amounts to be paid to me under the Employment
Retention Agreement with GenCorp Inc. dated November 30, 2001, ("Agreement"), I
hereby irrevocably and unconditionally release any and all claims described in
subsection (i) hereafter that I may now have against the following persons or
entities (the "Releasees"): GenCorp Inc., all related, affiliated or subsidiary
companies of GenCorp, and their predecessors, successors and assigns; and, with
respect to each such entity, all of its past and present employees, officers,
directors, stockholders, owners, representatives, assigns, attorneys, agents,
insurers, employee benefit programs (and the trustees, administrators,
fiduciaries and insurers of such programs) and any other persons acting by,
through, under or in concert with any of the persons or entities listed in this
subsection in such capacities.

                  (i) CLAIMS RELEASED: Except as provided in subsection (iii),
         the claims released include all claims, promises, debts, causes of
         action or similar rights of any type or nature that I have or had which
         in any way relate to: (a) my employment with GenCorp, or the
         termination of that employment through voluntary retirement, such as
         claims for compensation, bonuses, commissions, or lost wages, (b) the
         design or administration of any employee benefit plan or program, other
         than my rights as a participant in the employee benefit programs and
         the Prior Agreements described in the Agreement, (c) any rights to
         severance or similar benefits under any employment agreement, any
         termination Agreement, or any related program, policy or procedure of
         GenCorp, except my Severance Agreement which shall remain in effect,
         (d) any other claims or demands I may have against the Releasees. The
         claims released, for example, may have arisen under any of the
         following statutes or common law doctrines:

                           ANTI-DISCRIMINATION STATUTES including, without
                  limitation, the Age Discrimination in Employment Act and
                  Executive Order 11141, which prohibit age discrimination in
                  employment, Title VII of the Civil Rights Act of 1964, Section
                  1981 of the Civil Rights Act of 1866 and Executive Order
                  11246, which prohibit discrimination based on race, color,
                  national origin, religion or sex, the Equal Pay Act, which
                  prohibits paying men and women unequal pay for equal work; the
                  Americans With Disabilities Act and Sections 503 and 504 of
                  the Rehabilitation Act of 1973, which prohibit discrimination
                  against the disabled; the California Fair Employment and
                  Housing Act, which prohibits discrimination in employment
                  based on race, color, national origin, ancestry, physical or
                  mental disability, medical condition, marital status, sex or
                  age; and any other federal, state or local laws or regulations
                  prohibiting employment discrimination.




<PAGE>

                           FEDERAL EMPLOYMENT STATUTES including, without
                  limitation, the WARN Act, which requires that advance notice
                  be given of certain work force reductions; the employee
                  Retirement Income Security Act of 1974, which, among other
                  things, protects pension or welfare benefits; and the Fair
                  Labor Standards Act of 1938, which regulates wage and hour
                  matters.

                           OTHER LAWS including, without limitation, any
                  federal, state or local laws providing workers compensation
                  benefits, restricting an employer's right to terminate
                  employees or otherwise regulating employment, any federal,
                  state or local law enforcing express or implied employment
                  contracts or requiring an employer to deal with employees
                  fairly or in good faith; California Labor Code ss.ss. 200 ET
                  SEQ., relating to salary, commission, compensation, benefits
                  and other matters, the California Workers' Compensation Act,
                  the California Unemployment Insurance Code; any applicable
                  California Industrial Welfare Commission Order; and any other
                  federal, state or local laws, whether based on statute,
                  regulation or common law, providing recourse for alleged
                  retaliation or wrongful discharge, physical or personal
                  injury, emotional distress, fraud, negligent
                  misrepresentation, libel, slander, defamation, whistleblower
                  and similar or related claims.


                  (ii) RELEASE EXTENDS TO BOTH KNOWN AND UNKNOWN CLAIMS: This
         Release covers both claims that I know about and those that I may not
         know about. I hereby expressly waive all rights afforded by any statute
         (including Section 1542 of the Civil Code of the State of California)
         which limits the effect of a release with respect to unknown claims.
         Section 1542 of the Civil Code of the State of California states as
         follows:

                  A general release does not extend to claims which the creditor
                  does not know or suspect to exist in his favor at the time of
                  executing the release, which if known by him must have
                  materially affected his settlement with the debtor.

I understand the significance of this Release of unknown claims and my waiver of
statutory protection against a release of unknown claims (such as under Section
1542).

                  (iii) CLAIMS NOT RELEASED: This Release does not release: (a)
         my right to enforce any provision of the Agreement; (b) my rights as a
         participant, if any, to unpaid salary, pension, welfare and/or COBRA
         benefits under any GenCorp employee benefit plan or program, except to
         the extent that any claim was rejected or denied, either as to me or as
         to other similarly situated employees, before the Agreement and this
         Release of Claims become effective; or (d) any right to indemnity
         relating to third-party claims against me arising out of the course or
         scope of my employment, and granted under the Articles of




<PAGE>

         Incorporation, the Corporate Code of Regulations, my Indemnification
         Agreement and/or by operation of law or (e) any rights to directors and
         officers liability insurance.

                  (iv) Ownership of Claims: I hereby represent that I have not
         assigned or transferred, or purported to assign or transfer, all or any
         part of any claim released herein.



Date ______________________                _____________________________________
                                                       Robert A. Wolfe




<PAGE>


                                    EXHIBIT B



1.       Office and secretarial support for 3 years.

2.       Charitable matching contributions for 3 years.

3.       Financial planning and tax preparation for 3 years.

4.       Existing home security equipment, home computer, laptop and similar
         equipment.

5.       Transfer of current country club membership to Executive.





<PAGE>
                                                                       Exhibit C



                          2001 SUPPLEMENTAL RETIREMENT
                           PLAN FOR GENCORP EXECUTIVES





<PAGE>


                          2001 SUPPLEMENTAL RETIREMENT
                           PLAN FOR GENCORP EXECUTIVES

                                TABLE OF CONTENTS

Article 1         Introduction................................................1

Article 2         Definitions.................................................2

Article 3         Eligibility.................................................3

Article 4         Supplemental Retirement Benefits............................4

       4.1        Enhanced Pension Benefit....................................4
       4.2        Salary Continuation.........................................4
       4.3        Retiree Medical Benefits....................................6
       4.4        Pre-Retirement Financial Counseling & Outplacement
                   Support....................................................7

Article 5         Vesting.....................................................7

Article 6         Payment of Benefits.........................................7

       6.1        Payment of Enhanced Pension Benefit.........................7
       6.2        Payment of Salary Continuation..............................8
       6.3        Payment of Benefits in the Event of Death...................9

Article 7         Claims Procedure...........................................10

       7.1        Claim......................................................10
       7.2        Denial.....................................................10
       7.3        Appeal.....................................................11
       7.4        Final Decision.............................................11
       7.5        Form.......................................................11
       7.6        Legal Effect...............................................11

Article 8         Effect of Fiduciary Action.................................12

Article 9         Miscellaneous..............................................13

       9.1        Amendment..................................................13
       9.2        Source of Payments.........................................13
       9.3        Non-Alienation Of Benefits.................................13
       9.4        No Effect on Employment Rights.............................14
       9.5        Other Plans................................................14


                                      -i-

<PAGE>


       9.6        No Severance Benefits......................................15
       9.7        Applicable Law.............................................15

Article 10        Information Required by ERISA..............................15

       10.1       Name of Plan...............................................15
       10.2       Type of Plan...............................................15
       10.3       Plan Administrator.........................................15
       10.4       Agent for Service of Legal Process.........................16
       10.5       Statement of ERISA Rights..................................16


Appendix A        Summary Description - 2001 GenCorp Voluntary Enhanced

                  Retirement Program (Non-Qualified), September 27, 2001


Appendix B        Supplemental Q & A's - 2001 GenCorp Voluntary Enhanced
                  Retirement Program (Non-Qualified), November 5, 2001






                                      -ii-

<PAGE>


                          2001 SUPPLEMENTAL RETIREMENT
                           PLAN FOR GENCORP EXECUTIVES


                             ARTICLE 1: INTRODUCTION

       1.1 GenCorp Inc. hereby adopts this 2001 Supplemental Retirement Plan for
GenCorp Executives ("Plan") to provide supplemental retirement benefits to
certain salaried employees on its corporate payroll who elect to retire as
herein provided. In so doing, GenCorp's intention is that the Plan will be a
pension plan within the meaning of Section 3(2) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), but not a tax-qualified plan, and the
benefit herein provided will supplement the pension benefits for which such
employees are eligible under the GenCorp Consolidated Pension Plan (Program B)
("Pension Plan").
       The provisions of this Plan are intended to reflect and incorporate the
terms of the 2001 GenCorp Voluntary Enhanced Retirement Program (Non-Qualified
Plan) as set forth in the attached Appendix A (Summary Description, dated
September 27, 2001) and Appendix B (Supplemental Q & A's, dated November 5,
2001). If there is any unintended substantive difference between the Appendices
and this document, the terms of the Appendices will control.

       1.2 For purposes of the Plan, "retire," "to retire, " and "retirement"
mean the final and complete severance of employment with GenCorp for all
purposes, including all benefit plans sponsored by GenCorp for active and former
employees, on the applicable Retirement Date.

       1.3 This plan document contains all information required by law to be
provided to employees and will be filed with the U.S. Department of Labor as the
summary plan description for the Plan.

       1.4        The Plan is effective as of December 1, 2001.


                                      -1-

<PAGE>


                             ARTICLE 2: DEFINITIONS

       2.1 "Beneficiary" means a named beneficiary, joint annuitant, or
surviving spouse of a deceased Participant. Notwithstanding the foregoing
sentence, the Beneficiary for benefits accrued under Article 4 shall be the
beneficiary as determined under the Pension Plan for death benefits payable
thereunder.

       2.2 "Benefits Restoration Plan" means the Benefits Restoration Plan for
Salaried Employees of GenCorp Inc. and Certain Subsidiary Companies.

       2.3 "Code" means the Internal Revenue Code of 1986, as presently in
effect or hereafter amended.

       2.4 "Company" means GenCorp Inc.

       2.5 "Committee" means the Administrative Committee designated under the
Pension Plan.

       2.6 "Effective Date" means December 1, 2001.

       2.7 "ERISA" means the Employee Retirement Income Security Act of 1974, as
presently in effect or as hereafter amended.

       2.8 "Normal Pension Benefit" means the combined monthly pension benefit
under the Pension Plan and, if applicable, the Benefits Restoration Plan.

       2.9 "Participant" means an employee of the Company who meets the
eligibility requirements for participation in the Plan as set forth in Section
3.



                                      -2-

<PAGE>


       2.10 "Pension Plan" means the GenCorp Consolidated Pension Plan (Program
`B').

       2.11 "Plan" means the plan set forth in this instrument and known as the
"2001 Supplemental Retirement Plan for GenCorp Executives." The Plan
incorporates the terms of the 2001 GenCorp Voluntary Enhanced Retirement Program
as set forth in Appendix A and Appendix B attached hereto.

       2.12 "Plan Administrator" means the Company.

       2.13 "Retirement Date" means the date designated by the Company, in its
sole discretion, upon which a Participant's employment with the Company will
terminate. A Participant's Retirement Date will be at the completion of the
Participant's Salary Continuation period determined in accordance with Section
4.2 .

       2.14 "Vesting Service" means Vesting Service as determined under the
Pension Plan.

                             ARTICLE 3: ELIGIBILITY

       In order to participate in this Plan and accrue benefits as described in
Article 4, an individual must (i) be a salaried employee on the Company's
corporate payroll who, as of September 12, 2001, had either (A) attained the age
of 50 and completed at least 5 years of Vesting Service; (B) completed 25 years
of Vesting Service, regardless of age; or (C) completed at least 5 years of
Vesting Service and attained sufficient age and service in order to qualify for
an Early Retirement Pension once the additional age and service credits afforded
under this Plan are considered; (ii) be a participant under the Pension Plan;
(iii) retire pursuant to the GenCorp 2001 Voluntary Enhanced Retirement Program
(effective September 27, 2001), but be ineligible to receive the benefit


                                      -3-

<PAGE>


enhancements provided thereunder through the Pension Plan; and (iv) be among a
select group of management or highly compensated employees within the meaning of
Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. Once an eligible individual
becomes a Participant, such individual shall continue to be a Participant until
the complete distribution to the Participant (or Beneficiary, if applicable) of
all benefits accrued under the Plan.

                   ARTICLE 4: SUPPLEMENTAL RETIREMENT BENEFITS

       4.1        ENHANCED PENSION BENEFIT.

                  (a) A Participant's Enhanced Pension Benefit will be
         calculated by (i) adding a combination of ten (10) additional whole
         years of age and service credits to the Participant's Vesting and
         Benefit Service and age under the Pension Plan in accordance with
         subsection (b), as of the Participant's designated Retirement Date
         hereunder; and (ii) subtracting the Participant's Normal Pension
         Benefit.

                  (b) The allocation of whole years between age and service that
         yields the highest benefit will be used to compute the Participant's
         Enhanced Pension Benefit, provided such allocation would make the
         Participant eligible for an Early Retirement Pension (age 55 with 10
         years of service) under the Pension Plan as of December 1, 2001.

         4.2      SALARY CONTINUATION.

                  (a) Participants will be eligible for Salary Continuation
         according to the following schedule:


                                      -4-

<PAGE>


                  Level                                    Amount
                  -----                                    ------

         Corporate Officers under                    24 mos. Base Salary
         Spinoff-related Contracts               & Bonus @ 50% of Eligibility

         Other Corporate Officers                    18 mos. Base Salary

         Senior Management                            6 mos. Base Salary


                  (b) Salary Continuation will commence on a date designated by
         the Company, which date shall not be earlier than December 1, 2001 and
         not later than December 1, 2002. Upon completion of Salary
         Continuation, eligible GenCorp Executives will be deemed to have
         reached their designated Retirement Date.

                  (c) Salary Continuation, including any bonus, will be paid on
         a bi-weekly basis, and will be considered compensation under the
         Pension Plan and the Benefits Restoration Plan, with age and service
         credit afforded through the duration of Salary Continuation. Taxes will
         be withheld as required from Salary Continuation payments.

                  (d) While on Salary Continuation, Participants will be
         employed on "Special Assignment" and will be eligible to participate in
         all GenCorp pension and welfare benefit plans, programs and
         perquisites, according to their terms, with the exception of:

                           (i) Previously granted stock options will NOT
                  continue to vest while on Salary Continuation, nor will
                  additional stock options be granted. However, those stock
                  options previously granted and vested will be exercisable in
                  accordance with the terms of their grant by Participants
                  during Salary Continuation, and thereafter as retirees.


                                      -5-

<PAGE>


                           (ii) Except for bonus amounts to be paid during
                  Salary Continuation to certain Corporate Officers under
                  Spinoff-related Contracts, Participants will NOT be eligible
                  for, and will not earn, annual bonuses under the GenCorp
                  Executive Incentive Compensation Plan while on Salary
                  Continuation. However, such Participants will be eligible for
                  any bonus, including any pro-rata bonus, attributable to
                  service prior to commencement of Salary Continuation, and
                  specifically, any bonus earned for service in the 2001 and
                  2002 fiscal years.

                           (iii) Additional restricted shares under the 1999
                  Equity and Incentive Compensation Plan will NOT be granted to
                  Participants on Salary Continuation. However, Participants
                  will be eligible to retain previously granted restricted
                  shares that have vested, including (A) those restricted shares
                  that vest in February 2002 as the result of achieving
                  performance objectives in fiscal year 2001, and (B) for
                  Participants who work throughout the entire fiscal year 2002,
                  those restricted shares that vest in February 2003 as a result
                  of achieving performance objectives in fiscal year 2002.

                           (iv) Participants will not be eligible to participate
                  in any plans, programs or perquisites not listed in the
                  response to Question No. 46 in the Summary Description
                  (Non-Qualified Plan) for the 2001 GenCorp Voluntary Enhanced
                  Retirement Program.

         4.3 RETIREE MEDICAL BENEFITS. Participants will be eligible to
participate in the GenCorp Retiree Medical Plan, according to the terms of that
plan as it may be amended, modified or terminated. Employees initially hired at
GenCorp on or after January 1, 1995, or initially hired at Aerojet on or after
January 1, 1997, are not eligible for retiree medical benefits under the GenCorp
Retiree Medical Plan, or under this Plan.


                                      -6-

<PAGE>


If the Participant should die before his Retirement Date, his surviving spouse
(if any) will be eligible to participate in the GenCorp Retiree Medical Plan (if
the Participant was otherwise eligible to participate) as if the Participant had
already retired.

         4.4 PRE-RETIREMENT FINANCIAL COUNSELING & OUTPLACEMENT SUPPORT.
Pre-retirement financial counseling and outplacement support will be provided to
Participants in a form and duration to be determined by the Company, at its
discretion.

                               ARTICLE 5: VESTING

         Benefits accrued under Article 4 shall be immediately vested and
non-forfeitable.

                         ARTICLE 6: PAYMENT OF BENEFITS

         6.1 PAYMENT OF ENHANCED PENSION BENEFIT. The Enhanced Pension Benefit
will be paid, commencing at the end of Salary Continuation, in only one of two
ways, with no further lump-sum payment eligibility: (1) as a - monthly benefit,
or (2) in five equal annual installments.

                  (i) MONTHLY BENEFIT. If a monthly benefit is elected, a
         Participant can receive his entire pension benefit (Normal Pension
         Benefit and Enhanced Pension Benefit) in the form of level monthly
         payments over his lifetime. The same optional forms of benefit (I.E.,
         single life or joint & survivor annuities) available under the Pension
         Plan can be elected for the entire pension benefit.

                           (A) If the eligible employee is under 55 (the
                  earliest date payments can begin under the Pension Plan and
                  Benefits Restoration Plan) when Salary Continuation ends, then
                  more of the total monthly benefit will come from the Enhanced
                  Pension Benefit until age 55. At


                                      -7-

<PAGE>


                  age 55, the Enhanced Pension Benefit will be reduced by the
                  amount payable from the Pension Plan and Benefits Restoration
                  Plan, and the eligible employee will be permitted to elect the
                  timing and form of his payments from the Pension Plan and the
                  Benefits Restoration Plan.

                  (ii) FIVE ANNUAL INSTALLMENTS. If a Participant elects to have
         his Enhanced Pension Benefit paid in the form of five (5) annual
         installments, the amount of the installments will be calculated and
         paid as follows:

                           (A) First, the lump-sum present value of the monthly
                  payments under the Enhanced Pension Benefit (I.E., the
                  difference between the total monthly payments and the portion
                  payable from the Pension Plan and the Benefits Restoration
                  Plan, assuming that those payments would start at the earliest
                  possible date) will be determined. The lump sum present value
                  will be determined using a 7.5% discount factor and the
                  standard mortality table used by the Company for pension
                  accounting purposes; and

                           (B) Second, the lump-sum present value will be
                  amortized (using the same 7.5% interest rate) into five equal
                  annual installments.

                           (C) The first installment will be paid at the end of
                  Salary Continuation, with subsequent installments paid on or
                  about the same date in each of the four succeeding years.

The Enhanced Pension Benefit will be subject to all applicable taxes.

         6.2 PAYMENT OF SALARY CONTINUATION. Salary Continuation, including any
bonus, will be paid on a bi-weekly basis, and will be considered compensation
under


                                      -8-

<PAGE>


the Pension Plan and the Benefits Restoration Plan, with age and service credit
afforded through the duration of Salary Continuation. Taxes will be withheld as
required from Salary Continuation payments.

         6.3 PAYMENT OF BENEFITS IN THE EVENT OF DEATH.

                 (a) ENHANCED PENSION BENEFIT.

                           (i) If a Participant should die before his Retirement
                  Date, his unpaid Enhanced Pension Benefit will be paid to his
                  surviving spouse. If the Participant has no surviving spouse,
                  his unpaid Enhanced Pension Benefit will be paid (A) to the
                  beneficiary designated by the Participant on the form provided
                  for this purpose, or (B) if no beneficiary has been
                  designated, to his estate.

                           (ii) If a Participant should die after his Retirement
                  Date (and after payment of his Enhanced Pension Benefit has
                  commenced), his unpaid Enhanced Pension Benefit shall be
                  distributed as follows:

                                    (A) If the Participant has elected to
                           receive his Enhanced Pension Benefit in monthly
                           payments, survivor benefits will be paid in
                           accordance with the distribution option selected by
                           the Participant in accordance with the applicable
                           spousal consent rules.

                                    (B) If the Participant has elected to
                           receive his Enhanced Pension Benefit in 5 annual
                           installments, survivor benefits will be paid to the
                           beneficiary designated by the Participant on the form
                           provided for this purpose. The beneficiary
                           designation will be


                                      -9-

<PAGE>

                           subject to the same spousal consent rules that apply
                           to the payment of benefits under the qualified plan.

                           (b) SALARY CONTINUATION. If a Participant should die
                  before his Retirement Date, his remaining Salary Continuation
                  will be provided to his surviving spouse. If the Participant
                  has no Surviving Spouse, his remaining Salary Continuation
                  will be paid (i) to the beneficiary designated by the
                  Participant on the form provided for this purpose, or (ii) if
                  no beneficiary has been designated, to his estate.

                           ARTICLE 7: CLAIMS PROCEDURE

         7.1 CLAIM. If the Company fails to pay any supplemental retirement
benefit to which a Participant is entitled hereunder or if any Participant
believes that the Plan is not being administered or operated as to him or her in
accordance with its terms, such Participant may file a written claim in
accordance with this Article 7. The Participant shall present the claim to the
Plan Administrator in writing. The Director, Retirement Benefits, for
Aerojet-General Corporation ("Claims Official") shall, within a reasonable time,
consider the claim and shall issue a determination thereof in writing. If the
claim is granted, the appropriate payment shall be made.

         7.2 DENIAL. If the claim is wholly or partially denied, the Claims
Official shall, within thirty days (or such longer period as may be reasonably
necessary), provide the claimant with written notice of the denial, setting
forth, in a manner calculated to be understood by the claimant,

         (a)      the specific reason or reasons for the denial,

         (b)      specific references to pertinent Plan provisions on which the
                  denial is based,

         (c)      a description of any additional material or information
                  necessary for the


                                      -10-

<PAGE>


                  claimant to perfect the claim and an explanation of why the
                  material or information is necessary, and

         (d)      an explanation of the Plan's claim review procedure.

If the Claims Official fails to respond to the claim within the period of time
specified in Section 7.2, the claim will be deemed denied.

         7.3 APPEAL. Each claimant may appeal the denial of his or her claim to
the Committee within sixty days after receipt of written notice of the claim
denial by filing with the Committee a written application for review. The
claimant may submit therewith pertinent documents, and a statement of facts and
issues.

         7.4 FINAL DECISION. The decision by the Committee upon review of a
claim shall be made not later than sixty (60) days after the written request for
review is received by the Committee, unless special circumstances require an
extension of time for processing, in which case a decision shall be rendered as
soon as possible, but not later than one hundred twenty (120) days after receipt
of the request for review.

         7.5 FORM. The decision on review shall be in writing and shall include
specific reasons for the decision written in a manner calculated to be
understood by the claimant, with specific references to the pertinent Plan
provisions on which the decision is based.

         7.6 LEGAL EFFECT. To the extent permitted by law, the decision of the
Claims Official (if no review thereof is requested as herein provided) or the
decision of the Committee, as the case may be, shall be final and binding on all
parties. Any claims which the claimant does not pursue through the review and
appeal stages of the procedures herein provided shall be deemed waived, finally
and irrevocably. No legal


                                      -11-

<PAGE>


action for benefits under the Plan shall be brought unless and until the
claimant has exhausted his or her remedies under this Article 7. If, after
exhausting the claims and appeal procedures, a claimant institutes any legal
action against the Plan and/or the Company, the claimant may present only the
evidence and theories which the claimant presented during the claims and appeal
procedures. Judicial review of the claimant's denied claim shall be limited to a
determination of whether the denial was an abuse of discretion based on the
evidence and theories which were presented to and considered by the Committee
during the claims and appeal procedure.

                      ARTICLE 8: EFFECT OF FIDUCIARY ACTION

                  (a) The Plan Administrator shall administer the Plan in
         accordance with its terms. The Plan Administrator shall have the
         discretion to make any findings of fact needed in the administration of
         the Plan.
                  (b) The Committee shall have the discretion to interpret or
         construe the terms of the Plan, whether express or implied, and resolve
         any ambiguities, including but not limited to terms governing the
         eligibility of employees and the administration of the Plan, and
         fashion any remedy which the Committee, in its sole judgment, deems
         appropriate. The validity of any such finding of fact, interpretation,
         construction or decision shall not be given DE NOVO review if
         challenged in court, by arbitration or in any other forum, and shall be
         upheld unless clearly arbitrary or capricious.
                  (c) To the extent the Plan Administrator or the Committee has
         been granted discretionary authority under the Plan, such fiduciary's
         prior exercise of such authority shall not obligate it to exercise its
         authority in a like fashion thereafter.
                  (d) If, due to errors in drafting, any Plan provision does not
         accurately reflect its intended meaning, as demonstrated by consistent
         interpretations or other evidence of intent, or as determined by the
         Committee in its sole and


                                      -12-

<PAGE>


         exclusive judgment, the provision shall be considered ambiguous and
         shall be interpreted by the Plan Administrator in a fashion consistent
         with its intent, as determined by the Committee in its sole discretion.
         The Committee, without the need for Board of Directors' approval, may
         amend the Plan retroactively to cure any such ambiguity.

                  (e) This Article 8 may not be invoked by any person to require
         the Plan to be administered in a manner which is inconsistent with its
         interpretation by the Committee.
                  (f) All actions taken and all determinations made in good
         faith by the Plan Administrator or by the Committee shall be final and
         binding upon all persons claiming any interest in or under the Plan.

                            ARTICLE 9: MISCELLANEOUS

         9.1 AMENDMENT . The Plan may be amended, as to any Participant, only
with the mutual consent, documented in writing, of (i) the Participant and (ii)
the Company, appropriately authorized by the Directors. No representative of the
Company or any other person has the authority to orally expand or otherwise
change the written terms of the Plan.

         9.2 SOURCE OF PAYMENTS. Payments under this Plan shall be made by the
Company. The Plan shall be unfunded and the Company shall not be required to
establish any special or separate fund nor to make any other segregation of
assets in order to assure the payment of any amounts under the Plan. However,
the Company may, at anytime, in its sole discretion, elect to establish and fund
a "rabbi trust" intended to ensure payments under the Plan.

         9.3 NON-ALIENATION OF BENEFITS. No benefit payable at any time under
the


                                      -13-

<PAGE>


Plan shall be subject in any manner to alienation, sale, transfer, assignment,
pledge, attachment or encumbrance of any kind. Any attempt to alienate, sell,
transfer, assign, pledge or otherwise encumber any such benefit, whether
presently or thereafter payable, shall be void. No benefit under this Plan shall
in any manner be liable for or subject to the debts or liabilities of any
Participant or former Participant or Beneficiary. If a Participant or former
Participant or Beneficiary shall attempt to or shall alienate, sell, transfer,
assign, pledge or otherwise encumber benefits under the Plan or any part
thereof, or if by reason of bankruptcy or other event happening at any time such
benefits would devolve upon anyone else or would not be enjoyed by such
individual, then the Administrative Committee in its discretion may terminate
such interest in any such benefit and hold or apply it to or for his benefit or
the benefit of the Participant's spouse, children or other dependents, or any of
them, in such a manner as the Administrative Committee may deem proper.

         9.4 NO EFFECT ON EMPLOYMENT RIGHTS. Employment rights with the Company
shall not be enlarged, increased, or otherwise affected hereby.

         9.5 OTHER PLANS.

                  (a) Except as provided in this Plan, payment of any
         supplemental retirement benefit under the Plan will not adversely
         affect a Participant's rights under any other welfare or pension
         benefit plan of the Company, and a Participant's rights under such
         other plans shall be governed by the terms thereof.
                  (b) Except for Salary Continuation determined under Section
         4.2 and paid under Section 6.2, no supplemental retirement benefit paid
         hereunder will be deemed to be, or included in, compensation for
         purposes of determining benefits under any other welfare or pension
         benefit plan of the Company.


                                      -14-

<PAGE>


         9.6 NO SEVERANCE BENEFITS. Due to a Participant's voluntary election to
retire under the 2001 GenCorp Voluntary Enhanced Retirement Program, he or she
will not be eligible to receive any severance pay or benefit payable under any
plan, policy or practice of the Company to employees who are laid off or
discharged involuntarily due to lack of work or other reason specified in such
plan, policy or practice, including but not limited to the GenCorp Involuntary
Separation Pay Plan.

         9.7 APPLICABLE LAW. Except to the extent governed by ERISA, this Plan
shall be governed by the laws of the State of Ohio.

                    ARTICLE 10: INFORMATION REQUIRED BY ERISA

         10.1 NAME OF PLAN. The name of the Plan is the 2001 Supplemental
Retirement Plan for GenCorp Executives.

         10.2 TYPE OF PLAN.  This is a pension plan.

         10.3 PLAN ADMINISTRATOR. The Plan Administrator's name, address,
telephone number, employer identification number and plan number are as follows:

         Name:                      GenCorp Inc.

         Address:                   P. O. Box 537012
                                    Sacramento, CA 95853-7012

         Telephone Number:          916-355-6550

         EIN:                       34-0244000

         Plan Number:               ___

         Plan Year:                 The twelve month period ending on November
                                    30.

         Contact:                   Samuel S. Gallardo
                                    Director, Retirement Benefits


                                      -15-

<PAGE>


         10.4 AGENT FOR SERVICE OF LEGAL PROCESS. The name and address of the
person designated as agent for service of legal process is the Plan
Administrator.

         10.5 STATEMENT OF ERISA RIGHTS.

                  (a) As a Participant in this Plan, you are entitled to certain
         rights and protections under ERISA. ERISA provides that all Plan
         Participants shall be entitled to:

         --       Examine, without charge, at the Administrator's office all
                  Plan documents, including the Plan instrument (which is this
                  pamphlet), and the Plan's annual report. Copies of these
                  documents and other Plan information may also be obtained upon
                  written request to the Plan Administrator; provided that a
                  reasonable charge may be made for copies.

         --       Receive a summary of the Plan's annual financial report. The
                  Plan Administrator is required by law to furnish such
                  Participant with a copy of this summary annual report.

                  (b) In addition to creating rights for Plan Participants,
         ERISA imposes duties upon the people who are responsible for the
         operation of this Plan. The people who operate your Plan, called
         "fiduciaries" of the Plan, have a duty to do so prudently and in the
         interests of you and other Plan Participants and beneficiaries. No one,
         including your employer, or any other person may fire you or otherwise
         discriminate against you in any way to prevent you from obtaining
         benefits or exercising your rights under ERISA. If your claim for
         benefits is denied in whole or in part, you must receive a written
         explanation of the reason for this denial. You have the right to have
         the Plan Administrator review and reconsider your claim, as described
         elsewhere in this pamphlet.


                                      -16-

<PAGE>


                  (c) Under ERISA, there are two steps you can take to enforce
         the above rights. For instance, if you request certain materials
         required to be furnished by the Plan and do not receive them within 30
         days, you may file suit in federal court. In such a case, the court may
         require that you be provided with the materials and paid up to $100.00
         a day until you receive them, unless the materials were not sent
         because of reasons beyond the Plan Administrator's control. If you have
         a claim for benefits which is denied or ignored in whole or in part,
         you may file suit in a state or federal court. If it should happen that
         the Plan's fiduciaries misused the Plan's money, if any, or if you are
         discriminated against for asserting your rights, you may seek
         assistance from the U.S. Department of Labor or you may file suit in a
         federal court. The Court will decide who should pay the court costs and
         legal fees. If you are successful, the court may order the person you
         have sued to pay these costs and fees. If you lose, the court may order
         you to pay these costs and fees if, for example, it finds your claim is
         frivolous.

                  (d) While this Plan is a "pension plan" within the meaning of
         Section 3(2) of ERISA, it is a profit-sharing plan with individual
         accounts to which shall be credited the benefits each Participant
         becomes entitled to under this Plan. Since the amount credited to each
         Participant's account shall be immediately distributed, no interest
         shall be credited on accounts and the Plan will not have any assets to
         be held in trust. All benefits accrued under the Plan shall be vested
         and cannot be assigned or alienated. While the Plan technically covers
         all salaried employees on the Company's corporate payroll, only those
         persons who meet the requirements of Article 3 shall accrue any
         benefits.


                                      -17-

<PAGE>


                  (e) If you have any questions about this Plan, you should
         contact the Plan Administrator. If you have any questions about this
         statement or about your rights under ERISA, you should contact the
         nearest area office of the U.S. Labor-Management Services
         Administration, Department of Labor.

         This Plan is hereby adopted and approved effective December 1, 2001.


                               GENCORP INC.


                               By: /s/ Charles G. Salter
                                   -----------------------------------
                                       Charles G. Salter
                                       Vice President, Compensation and Benefits



                                      -18-


<PAGE>

                                                                      APPENDIX A


                         2001 GENCORP VOLUNTARY ENHANCED

                               RETIREMENT PROGRAM






                               SUMMARY DESCRIPTION

                              [NON-QUALIFIED PLAN]

                               September 27, 2001




<PAGE>


                         2001 GENCORP VOLUNTARY ENHANCED
                               RETIREMENT PROGRAM


                               SUMMARY DESCRIPTION
                              [NON-QUALIFIED PLAN]

                               September 27, 2001


                                    OVERVIEW


This Voluntary Enhanced Retirement Program ("VERP") is designed to provide an
opportunity for eligible employees to elect retirement with enhanced benefits.
The benefit improvements under the VERP, as applicable to GenCorp Executives,
include:

         (i)      An Enhanced Pension Benefit;

         (ii)     Salary Continuation until a designated Retirement Date;

         (iii)    Eligibility to participate in the retiree medical and life
                  insurance plans, according to the terms of those plans [which
                  exclude employees initially hired at GenCorp on or after
                  January 1, 1995; or initially hired at Aerojet on or after
                  January 1, 1997], and as those plans may be amended, modified
                  or terminated; and

         (iv)     Pre-retirement financial planning and outplacement support
                  services.

THESE ENHANCED BENEFITS ("ENHANCED BENEFITS") ARE CONTINGENT UPON:

         (i)      THE SUCCESSFUL COMPLETION OF THE DIVESTITURE OF AEROJET
                  ELECTRONIC INFORMATION SYSTEMS ("EIS") TO NORTHROP GRUMMAN
                  BEFORE DECEMBER 1, 2001; and

         (ii)     Receipt of a signed Application for Enhanced Retirement
                  Benefits ("Application"), which contains a Release of Claims,
                  by Jennifer Goolis, Director of Human Resources, NO LATER THAN
                  4:30 P.M. PST, ON MONDAY, NOVEMBER 12, 2001.

         The VERP is described generally below, and more details about the VERP
and its affect on retirement under other GenCorp benefit plans are provided in
the separate "Questions and Answers" section enclosed with this Summary
Description.


                                       2

<PAGE>


VERP ELIGIBILITY

         Subject to the limitations and exclusions herein, in order to retire
under the VERP, an eligible employee must be:

         (i)      Actively employed as of September 12, 2001, as a salaried
                  employee on the GenCorp Corporate Payroll; AND

         (ii)     As of December 1, 2001, have EITHER

                  (A)      Attained age 50 and completed at least 5 years of
                           Vesting Service, as determined under the GenCorp
                           Consolidated Pension Plan ("Pension Plan"); OR

                  (B)      Completed 25 years of Vesting Service, as determined
                           under the Pension Plan, regardless of age; OR

                  (C)      Have at least 5 years of Vesting Service AND attained
                           sufficient age and service in order to qualify for an
                           Early Retirement Benefit under the Pension Plan [at
                           least age 55, with 10 or more years of Vesting
                           Service] once the additional age and service credits
                           afforded under the VERP are included.

         AS STATED, THE VERP IS CONTINGENT UPON THE SUCCESSFUL DIVESTITURE OF
AEROJET EIS TO NORTHROP GRUMMAN; AND SHOULD THE DIVESTITURE NOT BE COMPLETED
BEFORE DECEMBER 1, 2001, THE VERP MAY BE CANCELLED AT THE COMPANY'S DISCRETION
AND, IN THAT EVENT, ANY APPLICATION, EVEN IF SIGNED AND RECEIVED, WILL BE VOID.
As a further condition for benefits under the VERP, an eligible employee must
agree to terminate employment on a date designated by GenCorp, at its discretion
("Retirement Date"). The designated Retirement Date will be set immediately at
the conclusion of the Salary Continuation period described herein, which Salary
Continuation period will commence no later than December 1, 2002.

         The following employees are NOT eligible to participate in the VERP:

         -        Employees who are NOT on the GenCorp Corporate Payroll as of
                  September 12, 2001, or who DO NOT REMAIN on the active
                  Corporate Payroll through December 1, 2001;

         -        Employees who have tendered their resignation to the Company;

         -        Employees who are on a leave of absence from active employment
                  pursuant to an employment termination agreement;

         -        Employees who transfer to or from the GenCorp Corporate
                  Payroll after September 12, 2001; and/or


                                       3

<PAGE>


         -        Full - time Presidents of GenCorp Business Units.

VERP BENEFITS

         Eligible GenCorp Executives who elect the VERP will receive two types
of pension benefit enhancements under a non-qualified plan called the "2001
Supplemental Retirement Plan for GenCorp Executives ("Supplemental Retirement
Plan"). Such GenCorp Executives will receive two types of pension benefit
enhancements - (i) an Enhanced Pension Benefit, payable either as monthly
benefits or in five (5) annual installments; and (ii) Salary Continuation for a
duration based on the eligible employee's position within the corporation, as
set forth herein.

1.       ENHANCED PENSION BENEFIT

         GenCorp Executives who elect the VERP will be paid a total pension
benefit from two sources:

         (i)      The current pension benefit under the tax-qualified Pension
                  Plan and, if applicable, the non-qualified Benefits
                  Restoration Plan (together, the "Normal Pension Benefit"),
                  payable on a monthly basis, at a time elected by the retiree,
                  consistent with the terms, limitations and reduction factors
                  set forth in the Pension Plan; and

         (ii)     An "enhanced" VERP pension benefit paid from the non-qualified
                  Supplemental Retirement Plan ("Enhanced Pension Benefit"),
                  payable either (A) as a life annuity commencing at the end of
                  Salary Continuation, as described herein, or (B) in five (5)
                  annual installments, with the first installment paid at the
                  end of Salary Continuation, with subsequent installments paid
                  on or about the same date in each of the four succeeding
                  years.

         A. AMOUNT OF ENHANCED PENSION BENEFIT.The Enhanced Pension Benefit will
be calculated by (1) adding a COMBINATION OF TEN (10) ADDITIONAL WHOLE YEARS OF
AGE AND SERVICE CREDITS [E.G., 5+5, 7+3, 9+1] to Vesting and Benefit Service and
Age under the Pension Plan, as of the designated Retirement Date, and (2)
subtracting the Normal Pension Benefit. Even though the Enhanced Pension Benefit
for GenCorp Executives will be paid from the non-qualified Supplemental
Retirement Plan, the Enhanced Pension Benefit WILL BE COMPUTED under the terms,
limitations, formulas, reduction factors and administrative practices of the
qualified Pension Plan.

         All combinations of whole years of age and service will be compared in
calculating the Enhanced Pension Benefit, and the combination that yields the
highest benefit will be used for the final Enhanced Pension Benefit computation.
THIS COMPUTATION, HOWEVER, WILL AT LEAST ALLOCATE THE COMBINATION OF WHOLE YEARS
OF AGE AND SERVICE WHICH MAKES THE EMPLOYEE ELIGIBLE FOR AN EARLY RETIREMENT
PENSION, AS DECEMBER 1, 2001. In order to


                                       4

<PAGE>


qualify for an Early Retirement Pension, the employee must have attained at
least age 55, with 10 or more years of service.

-        For example, an employee age 52 1/2, with 10 years of service, will
         have at least 3 years of age allocatEd in order to meet the age 55
         criteria, with the remaining 7 years allocated to age or service credit
         in a manner that maximizes the resulting benefit.

-        In other words, depending upon the employee's current age and service,
         not all combinations of age and service [E.G., 2+8, 1+9, 0+10] will be
         available.

         An Estimated Normal Pension Benefit, based on current age and service,
and an Estimated Enhanced Pension Benefit, based on the additional age and
service available under the VERP, are provided with the eligible employees'
Applications. The assumptions, interest rates, reduction factors and benefit
formulas used in these Estimates are incorporated into this Summary Description
by reference, and are considered plan provisions under the VERP. THESE ESTIMATES
ARE FOR COMPARISON PURPOSES ONLY, AND THE ACTUAL NORMAL PENSION BENEFIT AND
ENHANCED PENSION BENEFIT MAY BE DIFFERENT, BASED ON THE EMPLOYEE'S AGE, FINAL
EARNINGS AND ACCRUED SERVICE AS OF THE DESIGNATED RETIREMENT DATE.

                  An eligible employee can request Sam Gallardo in the Pension
Department to prepare an additional estimate of pension benefits that might
accrue (without any enhancement) if the employee were to remain employed with
the Company until a specified date in the future. ANY SUCH ADDITIONAL ESTIMATE
ALSO WOULD BE FOR COMPARISON PURPOSES ONLY, AND WOULD NOT IMPLY OR GUARANTEE
THAT THE ELIGIBLE EMPLOYEE WOULD REMAIN EMPLOYED WITH THE COMPANY FOR ANY
PERIOD.

         B. PAYMENT OF ENHANCED PENSION BENEFIT. The Enhanced Pension Benefit
may be paid in a different manner than the Normal Pension Benefit:

-        The Normal Pension Benefit will be paid on a monthly basis commencing
         on a date selected by the retiree, subject to the limitations of the
         Pension Plan. For example, payment of the Normal Pension Benefit cannot
         commence prior to age 55.

-        The Enhanced Pension Benefit will be paid, COMMENCING AT THE END OF
         SALARY CONTINUATION, in only one of two ways, with no further lump-sum
         payment eligibility: (1) as a monthly benefit, or (2) in five equal
         annual installments.

         1.       MONTHLY BENEFIT. If a monthly benefit is elected, an eligible
                  employee can receive his entire pension benefit (Pension Plan,
                  Benefits Restoration Plan and VERP) in the form of level
                  monthly payments over his lifetime. The same optional forms of
                  benefit (I.E., single life or joint & survivor annuities)
                  available under the Pension Plan can be elected for the entire
                  pension benefit.


                                       5

<PAGE>


                      If the eligible employee is under 55 (the earliest date
                  payments can begin under the Pension Plan and Benefits
                  Restoration Plan) when Salary Continuation ends, then more of
                  the total monthly benefit will come from the VERP until age
                  55. At age 55, the VERP portion would be reduced by the amount
                  payable from the Pension Plan and Benefits Restoration Plan,
                  and the eligible employee could decide the timing and form of
                  his payments from those plans.

                      For example, if the total benefit for someone age 52 is
                  $1,000 per month, the full amount would be payable from the
                  VERP until age 55. At that point, if $600 could begin to be
                  paid from the Pension Plan and Benefits Restoration Plan, the
                  VERP payment would drop to $400. The participant could then
                  elect to start (or defer) the payments from the other plans,
                  subject to the terms of those plans.

         2.       FIVE ANNUAL INSTALLMENTS. If an eligible employee elects to
                  have his Enhanced Pension Benefit paid in the form of five (5)
                  annual installments, the amount of the installments are
                  calculated as follows:

                  -        First, the lump-sum present value of the monthly
                           payments that would be payable from the VERP (I.E.,
                           the difference between the total monthly payments and
                           the portion payable from the Pension Plan and the
                           Benefits Restoration Plan, ASSUMING THAT THOSE
                           PAYMENTS WOULD START AT THE EARLIEST POSSIBLE DATE)
                           is determined. The lump sum present value is
                           determined using a 7.5% discount factor and the
                           standard mortality table used by the Company for
                           pension accounting purposes; and

                  -        Second, the lump-sum present value is amortized
                           (using the same 7.5% interest rate) into five equal
                           annual installments.

                  The first installment will be paid at the end of Salary
                  Continuation, with subsequent installments paid on or about
                  the same date in each of the four succeeding years.

                           Since the installment payments would only represent
                  the Enhanced Pension Benefit under the VERP, the eligible
                  employee would still have an independent decision about when
                  to actually start (or defer) his benefit payments from the
                  Pension Plan and Benefits Restoration Plan, subject to the
                  terms of those plans.

         The Enhanced Pension Benefit will be paid under the non-qualified
Supplemental Retirement Plan. Since it is a non-qualified plan, there is no
funded trust, and benefits paid thereunder are considered unsecured liabilities,
payable only from corporate assets. Unlike benefits paid from the qualified
Pension Plan, payment of the Enhanced Pension Benefit is not protected by the
federal Pension Benefit Guaranty Corporation.


                                       6

<PAGE>


         The Enhanced Pension Benefit will be subject to all applicable taxes,
and you may wish to consult a tax or financial advisor regarding the tax
implications and risk factors related to lump-sum benefits paid from
non-qualified plans.


2.       SALARY CONTINUATION

         In addition to the Enhanced Pension Benefit, GenCorp Executives who
elect to voluntarily retire under the VERP will be eligible for Salary
Continuation, according to the following schedule:

                   LEVEL                                 AMOUNT

         Corporate Officers under                   24 mos. Base Salary
         Spinoff-related Contracts             & Bonus @ 50% of Eligibility

         Other Corporate Officers                   18 mos. Base Salary

         Senior Management                          6 mos. Base Salary

         Salary Continuation, including any bonus, will be paid on a bi-weekly
basis, and will be considered compensation under the Pension Plan and the
GenCorp Benefits Restoration Plan, with age and service credit afforded through
the duration of Salary Continuation. Taxes will be withheld as required from
Salary Continuation payments.

         As with the Enhanced Pension Benefit, the entire amount of Salary
Continuation for each eligible GenCorp Executive will be paid under the
non-qualified Supplemental Retirement Plan. Upon completion of Salary
Continuation, eligible GenCorp Executives will be deemed to have reached their
designated Retirement Date. While on Salary Continuation, GenCorp Executives
will be employed on "Special Assignment". As employees, GenCorp Executives on
Special Assignment will be eligible to participate in all GenCorp pension and
welfare benefit plans, programs and perquisites, according to their terms, with
the exception of:

         (i)      Previously granted stock options will NOT continue to vest
                  while on Salary Continuation, nor will additional stock
                  options be granted. However, those stock options previously
                  granted and vested will be exercisable by the eligible
                  employees during Salary Continuation, and thereafter as
                  retirees.

         (ii)     Except for Corporate Officers under Spinoff-related Contracts,
                  eligible GenCorp Executives will NOT be eligible for annual
                  bonuses under the GenCorp Executive Incentive Compensation
                  Plan while on Salary Continuation. However, such employees
                  will be eligible for any bonus, including any pro-rata bonus,
                  attributable to service prior to commencement of Salary
                  Continuation, and specifically, any bonus for the 2001 and
                  2002 fiscal years, if earned. [An employee will not be deemed
                  to "earn" any additional bonus while on Special Assignment.]


                                       7

<PAGE>


         (iii)    Additional restricted shares under the 1999 Equity and
                  Incentive Compensation Plan will NOT be granted to eligible
                  GenCorp Executives on Salary Continuation. However, such
                  employees will be eligible to retain previously granted
                  restricted shares that have vested, including (A) those
                  restricted shares that vest in February 2002 as the result of
                  achieving performance objectives in 2001, and (B) for eligible
                  employees who work throughout the entire 2002 fiscal year,
                  those restricted shares that vest in February 2003 as a result
                  of achieving performance objectives in 2002.

         (iv)     VERP participants will not be eligible to participate in any
                  plans, programs or perquisites not listed in the response to
                  Question No. 46, herein, E.G., Sick Pay Plan.

3.       RETIREE MEDICAL

         Employees who elect to retire under the VERP will be eligible to
participate in the GenCorp Retiree Medical Plan, according to the terms of that
plan as it may be amended, modified or terminated. [Employees initially hired at
GenCorp on or after January 1, 1995, or initially hired at Aerojet on or after
January 1, 1997, are not eligible for retiree medical benefits under the Retiree
Medical Plan, or the VERP].

4.       PRE-RETIREMENT FINANCIAL COUNSELING & OUTPLACEMENT SUPPORT

         Pre-retirement financial counseling and outplacement support will be
provided to those employees who elect to retire under the VERP in a form and
duration to be determined by GenCorp, at its discretion.

APPLICATION

         In order to retire under the VERP, an eligible employee must sign an
Application, and return it - NO LATER THAN 4:30 P.M. PST ON MONDAY, NOVEMBER 12,
2001, TO:


                           Jennifer Goolis
                           Director, Human Resources
                           P.O. Box 537012
                           Sacramento, CA   95835-7012

                           Phone:   (916) 355-2167

         Enclosed with the Application will be Estimates of Normal Pension
Benefits and Enhanced Pension Benefits and a "Notice of Decision to Decline".


                                       8

<PAGE>


         Explanatory meetings will also be scheduled the week of September 24,
2001, to discuss the VERP with eligible employees, and answer any questions.

         If an employee is eligible, but chooses not to participate in the VERP,
the employee must complete the "Notice of Decision to Decline" and return it to
Jennifer Goolis by November 12, 2001.




                                       9

<PAGE>


                         2001 GENCORP VOLUNTARY ENHANCED
                               RETIREMENT PROGRAM

                              QUESTIONS AND ANSWERS
                              [NON-QUALIFIED PLAN]
                               September 27, 2001


ELIGIBILITY


1.       Who is eligible to retire under the VERP?

         Any active salaried employee on the GenCorp Corporate Payroll as of
         September 12, 2001, WHO HAS, AS OF DECEMBER 1, 2001, EITHER:

                  (A)      Attained age 50 and completed at least 5 years of
                           Vesting Service (as determined under the Pension
                           Plan); OR

                  (B)      Completed 25 years of Vesting Service (as determined
                           under the Pension Plan), regardless of age; OR --

                  (C)      Has at least 5 years of Vesting Service AND attained
                           sufficient age and service in order to qualify for an
                           Early Retirement Benefit under the Pension Plan [at
                           least age 55, with 10 or more years of Vesting
                           Service], once the additional age and service credits
                           afforded under the VERP are included.

         An employee who otherwise meets these criteria, but who has tendered
         his resignation to the Company, or who is on a leave of absence from
         active employment pursuant to an employment termination agreement, or
         who transfers onto the Corporate payroll after September 12, 2001 or
         transfers from the Corporate payroll before November 12, 2001, or who
         is a full-time President of a GenCorp Business Unit, is not eligible to
         retire under the VERP.


2.       If I am an employee of Aerojet, AFC or GDX, may I retire under the
         VERP?

         No. The VERP is only available to active salaried employees on the
         GenCorp Corporate Payroll. The purpose of the VERP is to reduce costs
         at the Corporate Headquarters, in order to facilitate a restructuring.
         The current business plans are to grow Aerojet, AFC and GDX, and make
         them more autonomous, not reduce their size.


                                       10

<PAGE>


3.       If I will not satisfy the eligibility requirements until after December
         1, 2001, may I retire under the VERP?

         No. You must satisfy the eligibility requirements as of December 1,
         2001.

4.       If I decide to retire under the VERP, what do I have to do?

         You must sign an Application and return it to Jennifer Goolis, Director
         of Human Resources, SO THAT IT IS RECEIVED NO LATER THAN 4:30 P.M. PST
         ON MONDAY, NOVEMBER 12, 2001. FAXED OR E-MAIL COPIES, OR APPLICATIONS
         POST-MARKED BY NOVEMBER 12, 2001, BUT NOT RECEIVED UNTIL THEREAFTER,
         WILL NOT BE ACCEPTED.

5.       Can I sign and deliver the Application to the Company prior to November
         12, 2001?

         Yes.

6.       Can I withdraw my decision to retire under the VERP after I have
         already elected to participate?

         Yes. Your decision will not be considered final until November 12,
         2001, at 4:31 p.m. PST. Thereafter, you still have seven (7) days under
         the law (until November 19, 2001, at 4:30 p.m. PST) to revoke your
         Application. You may not, however, resubmit your Application after 4:30
         p.m. PST, on November 12, 2001.

7.       Do I have to sign the Release of Claims in order to retire under the
         VERP and receive the Enhanced Pension Benefits?

         Yes. A Release of Claims is included within the Application, and is a
         condition to VERP Benefits. You also must execute the Contract
         Modifications described in Paragraph 8(b) of the Application.


8.       If I decide to retire under the VERP, will I be eligible to receive
         severance or separation pay?

         No. If you decide to retire under the VERP, the termination of your
         employment will be voluntary, and you will NOT be eligible to receive
         separation pay under any other plan, employment agreement or
         separation/severance agreement, including the GenCorp Involuntary
         Separation Pay Plan. However, if you are party to a Severance Agreement
         related to a change-in-control, and that Severance Agreement is
         triggered prior to your commencement of Salary Continuation, the
         benefits under the Severance Agreement will be COORDINATED with
         benefits under


                                       11

<PAGE>


         the VERP to provide the highest benefit to the employee, without
         providing any duplicate benefit. For example, if the Severance
         Agreement offers two years of Salary Continuation upon a
         change-in-control, AND THE CHANGE-IN-CONTROL IS TRIGGERED BEFORE THE
         START OF SALARY CONTINUATION UNDER THE VERP, but the VERP provides 18
         months of Salary Continuation, the employee will be eligible for the
         two years of Salary Continuation, plus the other VERP benefits.

9.       If I decide to retire under the VERP, but the divestiture of Aerojet
         Electronic Information Systems to Northrop Grumman does not occur
         before December 1, 2001, will I still be eligible for VERP benefits?

         No. The VERP is contingent upon the successful and timely completion of
         the Aerojet EIS divestiture to Northrop Grumman. If the divestiture
         does not occur prior to December 1, 2001, the VERP may be cancelled at
         the Company's discretion and, in that event, any Application, even if
         signed and received by GenCorp, will be void.

10.      If I decide to retire under the VERP, but the Divestiture of Aerojet
         EIS does not occur, will submitting my Application for VERP benefits
         affect my future employment with GenCorp?

         No. Any future employment decisions, including those related to
         promotion, merit increases or termination, will not be influenced, in
         any way, by your decision to apply for VERP benefits.

11.      If I decide NOT to retire under the VERP now, but I later decide to
         retire, will I then be able to receive the Enhanced Pension Benefits
         under the VERP?

         No.

12.      If I decide NOT to retire under the VERP, and I later lose my job due
         to a restructuring, will I then be able to elect the Enhanced Benefits
         under the VERP?

         No. Anyone who wishes to retire under the VERP must deliver the signed
         Application to Jennifer Goolis no later than 4:30 p.m. PST on Monday,
         November 12, 2001.

13.      If I decide NOT to retire under the VERP and I later lose my job as a
         result of a restructuring, what amount of separation pay will I be
         eligible to receive?


                                       12

<PAGE>


         If you are an eligible employee whose position is eliminated as a
         result of restructuring, you may be eligible for separation pay and
         benefits under the GenCorp Involuntary Separation Pay ("ISP") Plan. You
         may also be eligible for separation benefits under an employment
         agreement. The separation pay under the ISP Plan equals one week of
         base salary for each year or partial year of service, plus four weeks
         base salary, and up to six (6) months medical and life insurance
         continuation in exchange for a release of claims. Any separation pay
         under any employment or severance agreement will be governed by the
         terms of the agreement, and you should consult the agreement for
         details. Benefits under any employment or severance agreement (other
         than a Severance Agreement relating to change-in-control WHICH IS
         TRIGGERED PRIOR TO SALARY CONTINUATION) are forfeited if you elect VERP
         Benefits.

RETIREMENT

14.      If I decide to retire under the VERP, when will my employment end?

         GenCorp will designate your Retirement Date, which will be at the
         conclusion of Salary Continuation. GenCorp will also designate the date
         you are placed on Special Assignment, at which point Salary
         Continuation commences. You will not be placed on Special Assignment
         earlier than December 1, 2001, or later than December 1, 2002.

15.      What happens to my VERP benefits if I elect to participate, but die
         before my Retirement Date?

         If you should die before your Retirement Date, your unpaid Enhanced
         Pension Benefit and remaining Salary Continuation will be provided to
         your surviving spouse, who will also receive the spousal benefit under
         your Normal Pension Benefit, and be eligible participate in the GenCorp
         Retiree Medical Plan [if you were otherwise eligible to participate],
         as if you had already retired.

16.      Why am I not receiving all other retirement application forms, such as
         pension benefit application forms, at this time?

         When your Retirement Date is designated, and you actually leave the
         Company, you will receive several forms, such as the Pension and
         Savings Plan election forms, and COBRA notices under the medical and
         dental plans. Those forms are not being provided at this time because
         you do not really need them until you leave. If you would like to see
         these forms, you may request copies from Jennifer Goolis (916)
         355-2167, or Sam Gallardo (916) 355-6550.


                                       13

<PAGE>


17.      If I elect to retire under the VERP, can I later apply for
         re-employment with GenCorp, Aerojet, AFC or GDX?

         No. If you elect to retire under the VERP, you must waive any claim to
         re-employment with GenCorp, or any affiliated company. GenCorp or any
         affiliate may, however, offer you re-employment, at their sole
         discretion.

18.      If I elect to retire under the VERP, and I become employed as a
         consultant or with a firm that can provide services to GenCorp, am I
         prohibited from contacting GenCorp about a potential business
         relationship?

         No. Under these circumstances, any services you would perform for
         GenCorp, or any affiliate, would not be as an employee. You are
         prohibited, however, from recruiting or hiring any employee away from
         GenCorp for one (1) year after your designated Retirement Date.

19.      If I retire under the VERP, will I be eligible to receive unemployment
         compensation benefits?

         You may be eligible for such benefits if you satisfy the normal
         requirements imposed by law, although your unemployment benefits, if
         any, may be offset and reduced by amounts you receive under the VERP.
         GenCorp is not in a position to give you advice regarding your rights
         to unemployment compensation benefits. For detailed and reliable
         information, you should contact your local unemployment compensation
         office. The toll-free number for the California Employment Development
         Department is: 1-800-300-5616.

ENHANCED PENSION BENEFIT

20.      If I elect to retire under the VERP, how is my pension benefit
         affected?

         GenCorp Executives who elect the VERP will be paid a total pension
         benefit from two sources:

                  (i)      The current pension benefit under the tax-qualified
                           Pension Plan and, if applicable, the non-qualified
                           Benefits Restoration Plan (together, the "Normal
                           Pension Benefit"), payable on a monthly basis, at a
                           time elected by the retiree, consistent with the
                           terms, limitations and reduction factors set forth in
                           the Pension Plan; and


                                       14

<PAGE>


                  (ii)     An "enhanced" VERP pension benefit paid from the
                           non-qualified Supplemental Retirement Plan for
                           GenCorp Executives ("Enhanced Pension Benefit"),
                           payable either (A) as a life annuity commencing at
                           the end of Salary Continuation, as described herein,
                           or (B) in five (5) annual installments, with the
                           first installment paid at the end of Salary
                           Continuation, and subsequent installments paid on or
                           about the same date in each of the four succeeding
                           years.

21.      How is my Enhanced Pension Benefit calculated?

         The Enhanced Pension Benefit will be calculated by (1) adding a
         COMBINATION OF TEN (10) ADDITIONAL WHOLE YEARS OF AGE AND SERVICE
         CREDITS [E.G., 5+5, 7+3, 9+1] to Vesting and Benefit Service and Age
         under the Pension Plan, as of the designated Retirement Date, and (2)
         subtracting the Normal Pension Benefit. Even though the Enhanced
         Pension Benefit for GenCorp Executives will be paid from the
         non-qualified Supplemental Retirement Plan, the Enhanced Pension
         Benefit WILL BE COMPUTED under the terms, limitations, formulas,
         reduction factors and administrative practices of the qualified Pension
         Plan.

                  All combinations of whole years of age and service will be
         compared in calculating the Enhanced Pension Benefit, and the
         combination that yields the highest benefit will be used for the final
         Enhanced Pension Benefit computation. THIS COMPUTATION, HOWEVER, WILL
         AT LEAST ALLOCATE THE COMBINATION OF WHOLE YEARS OF AGE AND SERVICE
         WHICH MAKES THE EMPLOYEE ELIGIBLE FOR AN EARLY RETIREMENT PENSION, AS
         DECEMBER 1, 2001. In order to qualify for an Early Retirement Pension,
         the employee must have attained at least age 55, with 10 or more years
         of service.

         -        For example, an employee age 52 1/2, with 10 years of service,
                  will have at least 3 years of age allocated in order to meet
                  the age 55 criteria, with the remaining 7 years allocated to
                  age or service credit in a manner that maximizes the resulting
                  benefit.

         -        In other words, depending upon the employee's current age and
                  service, not all combinations of age and service [E.G., 2+8,
                  1+9, 0+10] will be available.

                  An Estimated Normal Pension Benefit, based on current age and
         service, and an Estimated Enhanced Pension Benefit, based on the
         additional age and service available under the VERP, are provided with
         the eligible employees' Applications. The assumptions, interest rates,
         reduction factors and benefit formulas used in these Estimates are
         incorporated into this Summary Description by reference, and are
         considered plan provisions under the VERP. THESE ESTIMATES ARE FOR
         COMPARISON PURPOSES ONLY, AND THE ACTUAL NORMAL PENSION BENEFIT AND
         ENHANCED PENSION BENEFIT MAY BE SLIGHTLY DIFFERENT, BASED ON THE
         EMPLOYEE'S AGE, FINAL EARNINGS AND ACCRUED SERVICE AS OF THE DESIGNATED
         RETIREMENT DATE.


                                       15

<PAGE>


                  An eligible employee can request Sam Gallardo in the Pension
         Department to prepare an additional estimate of pension benefits that
         might accrue (without any enhancement) if the employee were to remain
         employed with the Company until a specified date in the future. ANY
         SUCH ADDITIONAL ESTIMATE ALSO WOULD BE FOR COMPARISON PURPOSES ONLY,
         AND WOULD NOT IMPLY OR GUARANTEE THAT THE ELIGIBLE EMPLOYEE WOULD
         REMAIN EMPLOYED WITH THE COMPANY FOR ANY PERIOD.

22.      How is my Enhanced Pension Benefit paid?

         The Enhanced Pension Benefit may be paid in a different manner than the
         Normal Pension Benefit:

         -        The Normal Pension Benefit will be paid on a monthly basis
                  commencing on a date selected by the retiree, subject to the
                  limitations of the Pension Plan. For example, payment of the
                  Normal Pension Benefit cannot commence prior to age 55.

         -        The Enhanced Pension Benefit will be paid, COMMENCING AT THE
                  END OF SALARY CONTINUATION, in only one of two ways, with no
                  further lump-sum payment eligibility: (1) as a monthly
                  benefit, or (2) in five equal annual installments.

                  1. MONTHLY BENEFIT. If a monthly benefit is elected, an
                  eligible employee can receive his entire pension benefit
                  (Pension Plan, Benefits Restoration Plan and VERP) in the form
                  of level monthly payments over his lifetime. The same optional
                  forms of benefit (I.E., single life or joint & survivor
                  annuities) available under the Pension Plan can be elected for
                  the entire pension benefit.

                       If the eligible employee is under 55 (the earliest date
                  payments can begin under the Pension Plan and Benefits
                  Restoration Plan) when Salary Continuation ends, then more of
                  the total monthly benefit will come from the VERP until age
                  55. At age 55, the VERP portion would be reduced by the amount
                  payable from the Pension Plan and Benefits Restoration Plan,
                  and the eligible employee could decide the timing and form of
                  his payments from those plans.

                  For example, if the total benefit for someone age 52 is $1,000
                  per month, the full amount would be payable from the VERP
                  until age 55. At that point, if $600 could begin to be paid
                  from the Pension Plan and Benefits Restoration Plan, the VERP
                  payment would drop to $400. The participant could then elect
                  to start (or defer) the payments from the other plans, subject
                  to the terms of those plans.


                                       16

<PAGE>


                  2. FIVE ANNUAL INSTALLMENTS. If an eligible employee elects to
                  have his Enhanced Pension Benefit paid in the form of five (5)
                  annual installments, the amount of the installments are
                  calculated as follows:

                  -        First, the lump-sum present value of the monthly
                           payments that would be payable from the VERP (I.E.,
                           the difference between the total monthly payments and
                           the portion payable from the Pension Plan and the
                           Benefits Restoration Plan, ASSUMING THAT THOSE
                           PAYMENTS WOULD START AT THE EARLIEST POSSIBLE DATE)
                           is determined. The lump sum present value is
                           determined using a 7.5% discount factor and the
                           standard mortality table used by the Company for
                           pension accounting purposes; and

                  -        Second, the lump-sum present value is amortized,
                           using the same 7.5% interest rate) into five equal
                           annual installments

                  The first installment will be paid at the end of Salary
                  Continuation, with subsequent installments paid on or about
                  the same date in each of the four succeeding years.

                           Since the installment payments would only represent
                  the Enhanced Pension Benefit under the VERP, the eligible
                  employee would still have an independent decision about when
                  to actually start (or defer) his benefit payments from the
                  Pension Plan and Benefits Restoration Plan, subject to the
                  terms of those plans.

         The Enhanced Pension Benefit will be paid under the non-qualified
         Supplemental Retirement Plan. Since it is a non-qualified plan, there
         is no funded trust, and benefits paid thereunder are considered
         unsecured liabilities, payable only from corporate assets. Unlike
         benefits paid from the qualified Pension Plan, payment of the Enhanced
         Pension Benefit is not protected by the federal Pension Benefit
         Guaranty Corporation.

         The Enhanced Pension Benefit will be subject to all applicable taxes,
         and you may wish to consult a tax or financial advisor regarding the
         tax implications and risk factors related to lump-sum benefits paid
         from non-qualified plans.

23.      Are partial years of age and service allocated in the calculation of my
         Enhanced Pension Benefit under the VERP? For example, if I am age 52
         1/2, can 2 1/2 years be allocated to my age to reach the age 55 Early
         Retirement level, with the remaining 7 1/2 years allocated to my
         service?

         No. Only whole years are allocated under the VERP. Under the example, 3
         whole years are allocated to reach the age 55 level. Of course, you
         will still receive credit for all 3 years in the computation of the
         Enhanced Pension Benefit because you will


                                       17

<PAGE>


         be CONSIDERED age 55 1/2 under the Pension Plan, which does recognize
         months of age and service in the benefit formulas.

24.      What are the "lump-sum present values" used to calculate my Enhanced
         Pension Benefit?

         The lump-sum present value, sometimes referred to as the "net present
         value", is the amount of money, appropriately invested on December 1,
         2001, which will provide the expected stream of monthly VERP benefit
         payments as described in Q&A 22.

25.      How is my "expected stream of monthly payments" determined?

         Pension benefits are normally payable over your lifetime. For purposes
         of computing a lump-sum present value, your expected lifetime is
         determined according to the standard mortality table used by the
         Company for pension accounting purposes.

                  Also, if you are not yet age 55 (the earliest age that benefit
         payments can commence under the Pension Plan and Benefits Restoration
         Plan), the higher payments you receive under the VERP prior to age 55
         are taken into account.

26.      What interest rate is used to compute the lump-sum present value?

         The interest rate used in these Estimates was 7.5%, same rate currently
         used by the Company for pension accounting purposes. You are encouraged
         to consult a financial planner or tax advisor regarding the best way to
         achieve your retirement goals.

27.      How will the Enhanced Pension Benefit be taxed.

         Like any pension benefit, it will be taxed as ordinary income.

28.      May I defer commencement of payment of the Enhanced Pension Benefit to
         a later date for tax considerations?

         No. Regardless of which payment option you select, payments will
         commence at the end of Salary Continuation.


                                       18

<PAGE>


29.      It is stated that my actual Enhanced Pension Benefit may be different
         than the Estimate. How different?

         We do not know who will voluntarily elect the VERP at this time;
         therefore, all Estimates are calculated as of December 1, 2001.
         Assuming an individual elects the VERP, and is retained until March 1,
         2002, in order to transition his or her duties, the Estimates do not
         include accrued age and service credits for this 3-month period. Thus,
         a recalculation of the Enhanced Pension Benefit will be conducted once
         the individual starts Salary Continuation.

30.      Are the additional age and service credits under the VERP added to my
         Normal Pension Benefit?

         No. The additional age and service credits are used in the calculation
         of the Enhanced Pension Benefit only.

31.      What Normal Pension Benefit will I receive, and what are my benefit
         options?

         If you are age 62 or over on your designated Retirement Date (at the
         conclusion of Salary Continuation), you are eligible for an unreduced
         Normal Pension Benefit, based on your ACTUAL years of service,
         including the period of Salary Continuation. As a result, you may begin
         an unreduced monthly Normal Pension Benefit at that time.

                  If you are over age 55, but not yet 62, with at least 10 years
         of service on your designated Retirement Date, you are eligible for an
         Early Retirement Pension Benefit, based on your ACTUAL years of
         service. As a result, you may begin to receive a REDUCED Early
         Retirement Pension at that time, or defer payment to a later date and
         be subject to a smaller reduction factor, or no reduction at age 62.

                  If you are not age 55, or do not have at least 30 years of
         service on your designated Retirement Date, you are eligible for a
         "deferred vested pension benefit", based on your ACTUAL years of
         service. Under a "deferred vested pension", you are not eligible for a
         monthly benefit until you reach age 55, and the monthly benefit
         reduction is greater than that under an Early Retirement Pension.
         Again, you may defer payment to a later date, and be subject to less of
         a reduction, or no reduction at age 65.

32.      What is the difference between an Early Retirement Pension Benefit and
         a Deferred Vested Pension Benefit?

         As noted, the reduction factor for a Deferred Vested Pension Benefit is
         larger than the reduction factor for an Early Retirement Pension
         Benefit. In other words, an


                                       19

<PAGE>

         Early Retirement Pension taken at age 55 is larger than a Deferred
         Vested Pension Benefit taken at age 55.

                  For example, assume that you are eligible for a $1000 monthly
         pension benefit commencing AT AGE 65. If you terminate employment prior
         to age 55, you will be eligible for a "deferred vested pension benefit"
         when you reach age 55. If you decide to commence your pension at age
         55, the $1000 monthly pension benefit will be "actuarially reduced" to
         a monthly pension benefit of approximately $390. [This reduction
         accounts for the fact that your pension will be paid over a much longer
         period, starting at age 55, rather than age 65.] However, if you are
         age 55 with at least 10 years of Vesting Service when you terminate
         employment, you would qualify for an Early Retirement Pension, and
         instead of the actuarial reduction, the $1000 monthly pension benefit
         would be reduced at a rate of only 4/10 of 1 percent for each month you
         receive benefits prior to age 62. Thus, if you decide to start
         receiving your Early Retirement Pension at age 55, your monthly benefit
         would be $666, rather than $390. In addition, you would receive the
         full $1000 at age 62 under an Early Retirement Pension, rather than
         having to wait until age 65 to receive the $1000 benefit as a Deferred
         Vested Benefit.

33.      Are these reduction factors applicable only to VERP participants?

         No. That is the way the Pension Plan has always been written. In fact,
         for purposes of the VERP program, since the value of your Normal
         Pension Benefit is deducted from your Enhanced Pension Benefit, the
         smaller the deduction, the greater the Enhanced Pension Benefit. So, if
         your are eligible for only a Deferred Vested Pension, rather than an
         Early Retirement Pension, under the Pension Plan, the difference will
         be reflected as an increase in your Enhanced Pension Benefit.

34.      If I elect to retire under the VERP, must I start my monthly Normal
         Pension Benefit immediately?

         No. Your decision to commence your Normal Pension Benefit may be
         delayed under the terms of the Pension Plan, and based upon your own
         financial considerations.

35.      What are the advantages of starting my monthly Normal Pension Benefit
         immediately at my designated Retirement Date, compared to delaying the
         start of my pension until some later date?

         As noted in Q & A 34 & 35, you may not begin a monthly Normal Pension
         Benefit until age 55 unless you have 30 years of service.. At age 55,
         any deferral of either a Deferred Vested Pension or an Early Retirement
         Pension (at least until age 62)


                                       20

<PAGE>


         will result in a greater monthly benefit. However, you are encouraged
         to consult a financial planner or tax advisor regarding the best way to
         achieve your retirement goals.

36.      If I elect to retire under the VERP, and defer my Normal Pension
         Benefit to a later date, will I still be eligible for retiree medical?

         Yes. You will still be immediately eligible to enroll in the Retiree
         Medical Plan [if you otherwise meet the eligibility criteria], on your
         designated Retirement Date.

37.      Are employees eligible for a Deferred Vested Pension still eligible for
         retiree medical?

         Yes. The Retiree Medical Plan has been amended to allow employees
         currently eligible for a Deferred Vested Pension Benefit under the
         Pension Plan but who elect to participate in the VERP to be eligible
         for retiree medical benefits, if they otherwise meet the Plan
         eligibility criteria, and subject to all terms, conditions and
         limitations in the Retiree Medical Plan.

38.      Must I complete a separate Pension Application in order to begin
         receiving my monthly Normal Pension Benefit?

         Yes. At the time you choose to commence your monthly Normal Pension
         Benefit, you must submit a separate application to the Pension
         Department. You must only complete the VERP Application to receive the
         Enhanced Pension Benefit and Salary Continuation.

39.      What portions of Enhanced Pension Benefit will be paid from the
         non-qualified Supplemental Retirement Plan and what does that mean?

         The ENTIRE Enhanced Pension Benefit available under the VERP will be
         paid from the non-qualified Supplemental Retirement Plan. That amount
         is stated in the Estimate of Enhanced Pension Benefit attached to your
         Application. AS STATED, THIS ESTIMATE IS FOR COMPARISON PURPOSES ONLY.

                  What it means to have a benefit paid from a non-qualified plan
         is that the benefits are not guaranteed by a funded trust, or the
         federal Pension Benefit Guaranty Corporation. They are paid from
         general assets of the corporation, and are unsecured liabilities of the
         corporation.


                                       21

<PAGE>


40.      How is pension service under the Aerojet Pension Plan, if any, handled
         under the VERP?

         GenCorp employees who formerly participated in the Aerojet-General
         Corporation Consolidated Pension Plan have their age and service
         thereunder recognized under the GenCorp Pension Plan and also for the
         purposes of the VERP. However, part of their monthly Normal Pension
         Benefit will be paid from the Aerojet Pension Plan.

41.      Will I be able to "rollover" my Enhanced Pension Benefit into a
         qualified plan or IRA in order to gain more favorable tax treatment?

         No. Your Enhanced Pension Benefit is being paid from the non-qualified,
         Supplemental Retirement Plan, and accordingly, is not eligible for
         rollover treatment.

SALARY CONTINUATION

42.      What is the amount of my Salary Continuation?

         The amount of your Salary Continuation is dependent on your position
         within the corporation:

                    LEVEL                                   AMOUNT
         Corporate Officers under                      24 mos. Base Salary
         Spinoff-related Contracts                 & Bonus @ 50% of Eligibility

         Other Corporate Officers                      18 mos. Base Salary

         Senior Management                              6 mos. Base Salary

         The Salary Continuation will be paid on a bi-weekly basis, subject to
         normal taxes, contributions and deductions. These amounts will be
         considered compensation under the Pension Plan and the Benefits
         Restoration Plan, with age and service credit afforded for the duration
         of Salary Continuation.

43.      May I postpone the payment of my Salary Continuation?

         No. Salary Continuation commences immediately upon being placed on
         Special Assignment.


                                       22

<PAGE>

44.      Will taxes be withheld from Salary Continuation?

         Yes. Salary Continuation is ordinary income, subject to applicable
         federal, state or local taxes. Normal tax withholding rules will be
         followed.

45.      While I am on Salary Continuation, as an employee on "Special
         Assignment," may I work for another firm, or work as an independent
         consultant?

         While on Special Assignment, you will not be prohibited from working
         elsewhere, either as an employee, or as an independent consultant.
         However, any benefits provided with another employer may be coordinated
         with the GenCorp plans, according to the plan terms.

46.      While I am on Salary Continuation, as an employee on "Special
         Assignment," what are the GenCorp employee benefits still available to
         me?

         As an employee on Special Assignment, you will still be eligible to
         participate in all GenCorp pension and welfare benefit plans, programs
         and perquisites, according to their terms, except for the following:

                  -        The GenCorp Involuntary Separation Pay Program

                  -        The GenCorp Executive Incentive Compensation Plan
                           [Annual Bonus]. However, Corporate Officers under
                           Spinoff -related Contracts [who will be paid a bonus
                           at 50% of their eligibility level while on Salary
                           Continuation] and bonus eligible employees who elect
                           the VERP will remain bonus eligible until the
                           commencement of Special Assignment, particularly for
                           the 2001and 2002 fiscal years, if earned, all of
                           which will be payable at the time all other annual
                           bonuses are paid.

                  -        Additional stock option grants, or additional vesting
                           of prior stock option grants. However, stock options
                           will continue to vest until the commencement of
                           Special Assignment, and vested options will remain
                           exercisable for the duration of the option, since the
                           employee will reach retiree status according to the
                           terms of the Option Plans.

                  -        Additional restricted share grants under the 1999
                           Equity and Incentive Compensation Plan. However,
                           eligible employees will retain previously granted
                           restricted shares that have vested, including (A)
                           those restricted shares that vest in February 2002 as
                           the result of achieving performance objectives in
                           2001, and (B) for eligible employees who work
                           throughout the entire 2002 fiscal year, those


                                       23

<PAGE>


                           restricted shares that vest in February 2003 as a
                           result of achieving performance objectives in 2002.

         In other words, as an employee on Special Assignment, you will remain
         eligible to participate in the same pension and welfare benefit plans,
         programs and perquisites, according to their terms, and as those terms
         may be amended, modified or terminated, including the following:

                  -        GenCorp Consolidated Pension Plan

                  -        Aerojet-General Corporation Consolidated Pension Plan
                           (applicable to GenCorp employees who previously were
                           Aerojet employees)

                  -        GenCorp Retirement Savings Plan

                  -        GenCorp Benefits Restoration Plan

                  -        GenCorp Medical Plan

                  -        GenCorp Dental Plan

                  -        GenCorp Flexible Benefits Plan

                  -        Employee Assistance Program

                  -        Long-Term Disability Plan

                  -        Accidental Death and Dismemberment Insurance

                  -        Group Universal Life Insurance

                  -        Vacation Program

                  -        Holiday Pay

                  -        Deferred Bonus Plan

                  -        Company Automobile Reimbursement

                  -        Financial Planning Assistance (AYCO)

                  -        Annual Executive Physical Program


                                       24

<PAGE>


MEDICAL BENEFITS


47.      How will my medical coverage be handled under the VERP?

         If you were hired by GenCorp prior to January 1, 1995, or hired by
         Aerojet prior to January 1, 1997, you may be eligible to participate in
         the GenCorp Retiree Medical Plan, as described herein. If eligible,
         your participation will begin upon termination of your active medical
         coverage.

         AGE 65 AND OVER

         Retirees age 65 and over will not be eligible for coverage under the
         Retiree Medical Plan IF THEY LIVE IN AN AREA SERVED BY MEDICARE RISK
         HMO'S. This includes the Sacramento area. Spouses and dependents of
         these retirees will remain eligible for coverage under the Retiree
         Medical Plan until they reach age 65, or otherwise become ineligible
         under the Plan terms. All other eligible retirees age 65 and over may
         elect coverage under the Retiree Medical Plan. If a retiree relocates
         to an area not served by Medicare Risk HMO's, he or she will then
         become eligible for coverage under the Retiree Medical Plan, according
         to its terms.

         UNDER AGE 65

         If you are eligible and live in California, you may select benefits
         under the Retiree Medical Plan, or one of the HMO's offered to retirees
         in the geographical area. The HMO's currently offered are Kaiser and
         PacifiCare. If you live outside of California, you are not eligible to
         enroll in an HMO, but may elect benefits under the Retiree Medial Plan.

                  Benefits under the Retiree Medical Plan are similar to the
         medical benefits offered to active employees of GenCorp, but they are
         different in some ways. For example, the deductibles and co-payments
         are different, there are currently no contributions for retirees who
         are under age 65, and there is a different third-party claims
         processor.

         COBRA

         Lastly, VERP eligible retirees may elect to continue to participate,
         under COBRA for up to 18 months, in the active medical coverage in
         which they are enrolled at the time of employment termination. The
         current COBRA rates for medical coverage are:


                                       25

<PAGE>


          COVERAGE          EMPLOYEE ONLY     EMPLOYEE + 1        FAMILY
          --------          -------------     ------------        ------
         GenCorp Low            $218.44          $425.93          $567.80
         GenCorp Middle         $262.30          $511.36          $681.87
         GenCorp High           $319.26          $622.46          $830.03
         Kaiser Northern        $173.10          $346.21          $489.89
         PacifiCare             $185.06          $433.09          $619.87
         Healthnet              $254.36          $451.67          $649.69

         Benefit levels and COBRA rates may be different for VERP eligible
         employees at the Lawrence, Massachusetts facility.


48.      Does the Company have the right to amend, modify or terminate the
         Retiree Medical Plan, and therefore impose contributions, or change
         benefit levels?

         Yes. Your participation in the GenCorp Retiree Medical Plan will be
         subject to all of its terms, including the Company's right to amend,
         modify or terminate the Plan. Retiree contributions are based on the
         cost caps in the Plan, and the aggregate expense of medical benefits
         provided. If medical expenses under the Plan continue to rise, pre-65
         retiree contributions may be required for 2002. Eligible retirees over
         age 65 are already paying contributions.


49.      Does the GenCorp Retiree Medical Plan include any dental benefits?

         If you enroll in the GenCorp Retiree Medical Plan, coverage is provided
         only for the following:

                  -        Charges made necessary by an injury to natural teeth
                           as the result of an accident occurring while the
                           participant is covered by the Plan, but only to the
                           extent such charges are not considered an eligible
                           expense under any other plan sponsored by GenCorp;

                  -        Charges made for the surgical correction of
                           temporomandibular joint dysfunction pain syndrome;

         If you enroll in an HMO, you must check the benefit descriptions to
         determine whether any dental coverage is provided.

         At the time of employment termination on your designated Retirement
         Date, eligible retirees will also be offered the opportunity to enroll
         in the dental plan for Aerojet retirees. It is a scheduled benefit
         plan, paid entirely by retiree contributions. Current monthly
         contribution rates are:


                                       26

<PAGE>


                             COVERAGE                     MONTHLY RATE
                             --------                     ------------
                             Retiree                         $27.92
                             Retiree + 1                     $50.22
                             Family                          $71.20

         Lastly, eligible retirees will have the option to continue to
         participate, under COBRA or up to 18 months, in the dental coverage in
         which they are enrolled at the time of employment termination. If COBRA
         coverage is elected, any other retiree dental coverage would begin
         after COBRA coverage ends. The current monthly COBRA rates for dental
         coverage are:

             COVERAGE        EMPLOYEE ONLY      EMPLOYEE + 1       FAMILY
             --------        -------------      ------------       ------
           Delta Dental         $38.52            $65.48          $100.09
           Dental PMI           $24.49            $42.45          $63.65

         Benefit levels and COBRA rates may be different for VERP eligible
         employees at the Lawrence, Massachusetts facility.

50.      Are spouses and dependents eligible for coverage under the GenCorp
         Retiree Medical Plan and the Aerojet Retiree Dental Plan?

         To be eligible for coverage under the retiree plans, a spouse or
         dependent must be an eligible dependents at the time of termination of
         employment on the designated Retirement Date. These dependents will
         remain eligible under the same terms as the active plans. In the event
         of the retiree's death, any surviving spouse or other eligible
         dependent will remain eligible in accordance with the terms of the
         Plans. In order for a surviving spouse to be eligible, the retiree and
         spouse must have been married for at least one year, and married prior
         to the retiree's 65th birthday.

OTHER BENEFITS

51.      What happens to my other employee benefits when I reach my designated
         Retirement Date?

         The following is a brief summary of how active employee benefits are
         affected by employment termination under the VERP. [Benefit levels and
         the effects of employment termination may be different for eligible
         employees at the Lawrence, Massachusetts facility].


                                       27

<PAGE>



<TABLE>
<S>                                     <C>
         LIFE INSURANCE                 Your life insurance benefit continues after retirement at no cost to you,
                                        but the amount is reduced to $3,000, unless you were an Aerojet employee on
                                        December 1, 1975.  In that case, your life insurance will be 25% of the
                                        amount of insurance in force on December 1, 1975, or $3,000, whichever is
                                        greater.  You also have the option to convert all or part of the life
                                        insurance provided to you as an active employee to an individual insurance
                                        policy.  Information on life insurance conversion can be obtained from the
                                        Benefits Department.  Conversion must be made within 31 days of loss of
                                        coverage.

         SAVINGS PLAN                   While your right to make additional contributions will cease upon your
                                        retirement, you will be entitled to receive your account balances upon your
                                        election delivered to Fidelity, in accordance with Plan terms.  You can
                                        also leave your account balances in the Savings Plan for as long as you
                                        wish, until you reach age 70 1/2.  If you have an outstanding loan from the
                                        Savings Plan, that amount will be treated as having been distributed to you
                                        unless you repay it within 90 days after your designated Retirement Date.

         SPENDING                       Your eligibility to make pre-tax contributions to a healthcare or dependent
         ACCOUNTS                       day care spending account will end upon employment termination on your
                                        designated Retirement Date.  You may continue to make after-tax
                                        contributions to your spending accounts under COBRA.

         LONG-TERM                      Your participation in the long-term disability plan ends upon employment
                                        DISABILITY termination on your designated Retirement Date.

         AD&D                           Coverage for you and your dependents under Accidental Death and
         INSURANCE                      Dismemberment Insurance ends upon employment termination on your designated
                                        Retirement Date.

         GUL                            You can continue your coverage under Group Universal Life Insurance by
         INSURANCE                      paying premiums directly to the insurance company.  You must contact the
                                        insurance company within 31 days after your employment terminates on your
                                        designated Retirement Date.
</TABLE>



                                       28

<PAGE>

52.      Can I continue to participate in the Employee Assistance Program?

         Yes, the EAP continues to be available to all employees and their
         families. As an additional benefit, access to the EAP will be extended
         for 6 months beyond your designated Retirement Date.

53.      What vacation pay will I be entitled to receive upon my retirement
         under the VERP?

         On your designated Retirement Date, you will receive a lump-sum payment
         of any unused, accrued vacation in accordance with Company policy.

         Regardless of how much vacation pay you receive, your employment with
         GenCorp will terminate on your designated Retirement Date, and there is
         no "bridging" of service based on vacation benefits.

54.      How will my retirement affect my benefits under any incentive or
         deferred compensation plan in which I may participate?

         Upon termination of employment at your designated Retirement Date, your
         benefits (if any) under such plans are governed by the terms of those
         plans. Here is a brief summary of the relevant provisions:

                  GENCORP EXECUTIVE INCENTIVE COMPENSATION (ANNUAL BONUS)
                  PROGRAM: With the exception of Corporate Officers under
                  Contract, eligible GenCorp Executives will be entitled to
                  receive, at such times as normally payable, any bonus due for
                  a fiscal year already completed and a prorated amount of any
                  bonus that would be payable for a fiscal year that was not
                  completed, until commencement of Special Assignment status and
                  Salary Continuation. Upon commencement of Salary Continuation,
                  bonus eligibility ceases.

                  STOCK OPTION PLAN: To the extent an outstanding Option has
                  become vested, and therefore exercisable, on or before
                  commencement of Salary Continuation, such Option would remain
                  in effect for the term specified in the Option. To the extent
                  an outstanding Option has not become exercisable on or before
                  Salary Continuation, such Option would lapse automatically.

                  RESTRICTED STOCK: Additional restricted shares under the 1999
                  Equity and Incentive Compensation Plan will NOT be granted to
                  eligible GenCorp Executives on Salary Continuation. However,
                  such employees will be eligible to retain previously granted
                  restricted shares that have vested, including (A) those
                  restricted shares that vest in February 2002 as the result of
                  achieving performance objectives in 2001, and (B) for eligible
                  employees who work


                                       29

<PAGE>


                  throughout the entire 2002 fiscal year, those restricted
                  shares that vest in February 2003 as a result of achieving
                  performance objectives in 2002.

                  DEFERRED BONUS PLAN: Distribution of your interest in the
                  Deferred Bonus Plan would occur in accordance with the terms
                  of that plan. There are no special provisions in the Plan
                  which address termination of employment by reason of
                  retirement.

55.      When and in what form will the Pre-Retirement Financial Counseling and
         Outplacement Support Services be provided?

         These programs, which are generally group programs by nature, will be
         scheduled after November 19, 2001,for those who elect the VERP. The
         nature and duration of these programs will be at the Company's
         discretion.

56.      Why are Outplacement Support Services being provided?

         Some employees may use the VERP as an opportunity to pursue a second
         career, while supplementing their income through the benefits provided
         under the VERP.

57.      Can I consult a lawyer or tax advisor about the VERP?

         Yes. IN FACT, GENCORP ENCOURAGES YOU TO DO THAT. You may also ask the
         Human Resources Department about the details of the VERP.

                  However, the decision to elect the VERP is strictly voluntary
         and up to you. You should not feel coerced or forced to make any
         decision based on someone else's counsel or opinion.


                                       30


<PAGE>

                                                                      APPENDIX B

                                                                November 5, 2001

                 2001 GENCORP VOLUNTARY EARLY RETIREMENT PROGRAM

                              SUPPLEMENTAL Q & A'S

                                 [NON-QUALIFIED]

1.       Under the VERP, unless in its discretion the Company chooses to hold me
         over in my present position for any period up to December 1, 2002, I
         will be placed on Salary Continuation on December 1, 2001, and my
         estimated enhanced pension benefits have been computed assuming that I
         begin Salary Continuation on December 1, 2001. Will I be penalized if
         the compensation I earn during any hold over period prior to initiation
         of Salary Continuation adversely affects the final calculation of my
         pension benefits?

         No. You will not be penalized if the Company elects to hold you over.
         Upon your retirement, your final pension benefits will be calculated
         based on actual compensation received during any hold over period, and
         they will also be calculated as though you began Salary Continuation on
         December 1, 2001. You will be given whichever of these benefits is
         higher, or if use of any other appropriate period of service
         permissible under the pension plan yields an even higher benefit, you
         will be given that higher benefit.

2.       I understand that my Enhanced Pension Benefit will be ordinary income,
         and will be subject to normal federal, state and (if applicable) local
         income taxes when it is paid to me. Will my Enhanced Pension Benefit
         also be subject to FICA taxes?

         The Enhanced Pension Benefit IS subject to FICA tax, which will be
         withheld from each payment. The normal annual maximum ($5,263.80 for
         2002) on the 6.2% "old-age" part of FICA tax will apply and, if you are
         working elsewhere, may already be satisfied by other earnings.

         The company has explored methods to treat the entire lump sum value of
         your Enhanced Pension Benefit as being paid at once. This could save
         money for both you and the company. However, some very recent tax
         regulations appear to have blocked this approach.



<PAGE>


3.       Once GenCorp designates the date on which my regular employment ends
         and my Special Assignment/Salary Continuation begins, can the Company
         later change its decision and designate a new date through which I must
         work?

         Only with your agreement. You are entitled to make plans based upon the
         Company's designation of the date on which you start your Special
         Assignment.. If, for example, you are initially given a date of June 1,
         2002, the Company can't require you to actively work until a later date
         as a condition for receiving the benefits of the VERP. Of course, if
         you agree, your commencement of Special Assignment status can be
         delayed, but not beyond December 1, 2002.

4.       If I have an attractive employment opportunity, can I leave the Company
         prior to the date designated by the Company for commencement of my
         Special Assignment and still receive the benefits of the VERP?

         No. The Company will designate when your Special Assignment will begin
         based upon its business needs, and remaining actively employed with the
         Company until that date is an express condition of receiving VERP
         benefits. However, in its absolute discretion the Company can
         accelerate the start of your Special Assignment upon your request to do
         so.

5.       If I elect to receive my Enhanced Pension Benefit in monthly payments,
         can I elect the form of payment like under the qualified plan?

         Yes, the same benefit options available in your regular qualified
         pension plan are available under the VERP. However, you do not have to
         elect the same form of payment under both the qualified plan and the
         VERP.

         The different benefit forms are as follows:

                 Form of Payment                           Percent of
                 ---------------                      Single Life Annuity*
                                                      ------------------- 

                 Single Life Annuity                          100%
                 100% Joint & Survivor Annuity                 94%
                 50% Joint & Survivor Annuity                  90%
                 5-Year Certain Life Annuity                   99%
                 10-Year Certain Life Annuity                  96%
                 15-Year Certain Life Annuity                  92%
                 20-Year Certain Life Annuity                  89%

         *Percentages given are approximations. Actual annuity amounts can only
         be determined based upon the ages of both the participant and the
         spouse.


                                      -2-

<PAGE>


6.       If I was relocated by GenCorp within the last year, and I elect to
         retire under the VERP, will I be required to repay the Company's
         relocation costs?

         No. GenCorp's Relocation Assistance program allows the Company to ask
         for repayment of its relocation expenses if the relocated employee
         terminates for any reason within that employee's control within 12
         months of relocation. If you elect to retire under the VERP, the
         Company will designate your retirement date, anytime between December
         1, 2001 and December 1, 2002, in its complete discretion. Since the
         Company has control over when you actually terminate your employment
         with GenCorp, you will not be asked to repay any relocation expenses.

7.       I understand that if I elect to receive my Enhanced Pension Benefit in
         monthly payments, I can elect the same distribution options that are
         available under the qualified pension plan. However, if I elect to
         receive my Enhanced Pension Benefit in 5 annual installments, can I
         designate a beneficiary to receive my benefits upon my death?

         Yes. A beneficiary designation form will be provided to participants
         who select the 5-installment payment option. The beneficiary
         designation will be subject to the same spousal consent rules that
         apply to the payment of benefits under the qualified plan.

8.       I understand that my Enhanced Pension Benefit would be an unsecured
         liability of the Company. In the event that the Company might someday
         declare bankruptcy, how will my claim for payment of this benefit
         compare to claims of the Company's other creditors?

         You would be considered a general creditor of the company and generally
         would have the same status as other general creditors of the company.
         There is some limited priority given to wages earned within 90 days of
         the filing of a bankruptcy petition.

9.       I participate in the Kaiser HMO as an active employee. If I continue to
         participate in the Kaiser HMO as a retiree, will my coverage be any
         different because I am a retiree? [California Only]

         No. Active employees and retirees who participate in the Kaiser HMO
         receive the same services from Kaiser. Likewise, active employees and
         retirees who participate in the PacifiCare HMO receive the same
         services from PacifiCare.


                                      -3-

<PAGE>


10.      If I currently participate in the Kaiser HMO as an active employee, can
         I switch to PacifiCare or to the non-HMO plan as a retiree? [California
         Only]

         Yes. In fact, there is an open enrollment period each year (just like
         in the plan for active employees) when you can reconsider your choice.

11.      I understand that there may be contributions required in order to have
         retiree medical benefits. Will my contributions be different if I pick
         HMO or non-HMO coverage, or depending on which HMO I pick?

No.      When contributions are required, the cost will be the same for each and
         every retiree in the same age category (under 65, or 65 and over).

12.      If I don't participate in an HMO, how does the retiree medical plan
         compare to the medical plan for active employees?

         Here are some of the key differences:


<TABLE>
<CAPTION>
         ---------------------- ---------------------------------------------------------- ------------------------
                                                  Active Employee Plan                          Retiree Plan
                                                  --------------------                          ------------
                                         In-network                  Out-of-network
                                         ----------                  --------------
         ---------------------- ------------ ----------------- ------------ -------------- ------------------------
<S>                             <C>            <C>             <C>            <C>            <C>             
         ANNUAL                 Low                 0          Low            3% of pay        $ 500 per person
         DEDUCTIBLE (1)         Middle              0          Middle         2% of pay      $1,000 per family
                                High                0          High           1% of pay
         ---------------------- ------------ ----------------- ------------ -------------- ------------------------
         ANNUAL                 Low             7% of pay      Low            7% of pay      $2,000 per family
         OUT-OF-POCKET          Middle          6% of pay      Middle         6% of pay
         MAXIMUM (2)            High            5% of pay      High           5% of pay
         ---------------------- ------------ ----------------- ------------ -------------- ------------------------
         PLAN COPAYMENT         Low                  80%       Low               60%                 80%
                                Middle               90%       Middle            80%
                                High                100%       High             100%
         ---------------------- ------------ ----------------- ------------ -------------- ------------------------
</TABLE>


         (1)      For active plan, maximum deductibles are: High - $1,200,
                  Middle - $1,000, Low- $800.
         (2)      Out-of-Pocket Maximum does not include annual deductible,
                  copayment for prescription drugs, treatment of mental, nervous
                  or substance abuse conditions, or $25 emergency room fee.

13.      I am considered to be a "16b officer" under the federal securities
         laws, and this impacts my ability to trade GenCorp shares, even through
         the Retirement Savings Plan. Will I still be considered a "16b" officer
         while I am on Special Assignment and receiving Salary Continuation?

         When your Special Assignment begins, you will be asked to resign as an
         officer of the company, and you will be subject to Rule 16b reporting
         requirements for


                                      -4-

<PAGE>


         six months after you cease to be an officer. However, as long as you
         still have inside information, you will be prohibited from trading
         GenCorp shares based upon that information.

         If you also hold restricted shares, there are limitations that apply to
         your trading of those shares. GenCorp's law department will be able to
         provide you with appropriate guidance.

14.      As an officer, I am covered by an Indemnification Agreement. Will I
         still be covered by the Indemnification Agreement when I am on Special
         Assignment and receiving Salary Continuation?

         Yes. Just like any former officer, the Indemnification Agreement will
         cover you for any events that occur while you are an officer, even if a
         claim or legal action is brought later. While you are on Special
         Assignment, you will no longer be serving as an officer or be involved
         in or responsible for actions of the company. Nevertheless, the
         Indemnification Agreement will cover you for any events that occur
         while you are on Special Assignment, should you be named in a claim or
         legal action.

15.      The Stock Option plan provides for accelerated vesting of Options upon
         a "change in control" of GenCorp. If a change in control occurs while I
         am on Special Assignment and receiving Salary Continuation, will my
         unvested Options become vested?

         No. Your Options that are unvested when you begin your Special
         Assignment will lapse at that time. Therefore, you would no longer have
         any unvested Options that could be affected by a subsequent change in
         control.


                                      -5-


<PAGE>
 
                                                                       EXHIBIT D
 
                   LISTING OF GENCORP INC. SUBSIDIARIES(1)(3)
 

<Table>
<Caption>
                                                                STATE OR
                                                             JURISDICTION OF   PERCENTAGE OF VOTING
                                                              INCORPORATION        OWNERSHIP(2)
                                                             ---------------   --------------------
<S>                                                          <C>               <C>
Aerojet Fine Chemicals LLC(2)..............................  Delaware          100.
Aerojet-General Corporation(2)(4)..........................  Ohio              100.
Aerojet Australia (SA) Pty, Ltd............................  Australia         100.
Aerojet International Inc..................................  California        100.
Aerojet Investments Ltd....................................  California        100.
Aerojet Ordnance Tennessee, Inc............................  Tennessee         100.
Chemical Construction Corporation -- Inactive..............  Delaware          100.
Cordova Chemical Company -- Inactive.......................  California        100.
Cordova Chemical Company of Michigan -- Inactive...........  Michigan          100.
GT & MC, Inc. -- Inactive..................................  Delaware          100.
General Applied Science Laboratories, Inc. -- Inactive.....  New York          100.
PJD, Inc. -- Inactive......................................  Delaware          100.
TKD, Inc. -- Inactive......................................  California        100
GDX Automotive Inc.(2).....................................  Delaware          100.
GDX Automotive (Pribor) s.r.o..............................  Czech Republic    100.
GDX Automotive BV..........................................  Netherlands       100
GDX Automotive SL..........................................  Spain             100
GDX Automotive Iberica SA..................................  Spain             100.
GDX Automotive SAS(2)......................................  France            100.
Slic Corvol SAS(5).........................................  France            100.
Slic Gruchet SA(5).........................................  France            100.
Snappon SA(5)..............................................  France            100.
GDX LLC(2).................................................  Delaware          100.
Genco Insurance Limited(2).................................  Bermuda           100.
Gen II Services, Inc.(2)...................................  Ohio              100.
Gen III Services, Inc.(2)..................................  Ohio              100.
GenCorp Argentina S.A. -- Inactive(2)......................  Argentina          80.
GenCorp Canada,
 Inc.(2)....................................  Canada            100.
GenCorp Beteiligungs GmbH..................................  Germany           100.
Henniges Elastomer-und Kunstofftechnick Verwaltungs GmbH...  Germany           100.
Henniges Elastomer-und Kunstofftechnik GmbH & Co. KG.......  Germany           100.
Henniges Elastomer Ireland GmbH............................  Germany           100.
GDX Automotive Verwaltungs GmbH............................  Germany           100.
GDX Automotive Technical Center GmbH.......................  Germany           100.
GDX Automotive Beteiligungs GmbH...........................  Germany           100.
GDX Automotive GmbH & Co KG................................  Germany           100
GDX Automotive Mtech GmbH..................................  Germany           100.
GDX Automotive Technical Center GmbH & Co. KG..............  Germany           100.
GDX Automotive International GmbH..........................  Germany           100.
Beijing Wanyuan GDX Automotive Sealing Products Co. Ltd....  China              60.
GenCorp Export Corporation(2)..............................  Virgin Islands    100.
GenCorp Investment Management, Inc.(2).....................  Ohio              100.
GenCorp Overseas Inc.(2)...................................  Ohio              100.
</Table>

 
                                        1

<PAGE>
 

<Table>
<Caption>
                                                                STATE OR
                                                             JURISDICTION OF   PERCENTAGE OF VOTING
                                                              INCORPORATION        OWNERSHIP(2)
                                                             ---------------   --------------------
<S>                                                          <C>               <C>
GenCorp Property Inc.(2)...................................  California        100.
LNR Capital s.r.o.(2)......................................  Czech Republic    100.
Penn Athletic Products Company -- Inactive(2)..............  Ohio              100.
Penn International Inc.(2).................................  Ohio              100.
GenCorp GmbH...............................................  Germany           100.
Penn Nominal Holdings Inc.(2)..............................  Ohio              100.
RKO General, Inc.(2).......................................  Delaware          100.
RKO Hotel Group, Inc. -- Inactive(2).......................  Delaware          100.
</Table>

 
---------------
 
(1) Listing of GenCorp Inc. subsidiaries is as of November 30, 2001 and includes
    all significant and insignificant subsidiaries.
 
(2) Subsidiary is a direct subsidiary of GenCorp Inc. All other listed
    subsidiaries are indirect subsidiaries of GenCorp Inc.
 
(3) GenCorp Inc. conducts business using the names GenCorp and GDX Automotive.
 
(4) Aerojet -- General Corporation conducts business using the names Aerojet
    Propulsion Division and GenCorp Aerojet.
 
(5) Slic Corvol SAS, Slic Gruchet SA and Snappon SA conduct business using the
    name GDX Automotive.
 
                                        2


<PAGE>
 
                                                                       EXHIBIT E
 
                               POWER OF ATTORNEY
 
     KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of GenCorp
Inc. hereby constitutes and appoints William R. Phillips and Robert C. Anderson,
and each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 2001 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 15, 2002.
 
                                          /s/ J. ROBERT ANDERSON
                                          --------------------------------------
                                          J. Robert Anderson
 
                                          Dated: March 4, 2002

<PAGE>
 
                               POWER OF ATTORNEY
 
     KNOW ALL MEN BY THESE PRESENTS,
 that the undersigned Director of GenCorp
Inc. hereby constitutes and appoints William R. Phillips and Robert C. Anderson,
and each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 2001 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 15, 2002.
 
                                          /s/ J. GARY COOPER
                                          --------------------------------------
                                          J. Gary Cooper
 
                                          Dated: March 4, 2002

<PAGE>
 
                               POWER OF ATTORNEY
 
     KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of GenCorp
Inc. hereby constitutes and appoints William R. Phillips and Robert C. Anderson,
and each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 2001 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 15, 2002.
 
                                          /s/ IRVING GUTIN
                                          --------------------------------------
                                          Irving Gutin
 
                                          Dated: March 4, 2002

<PAGE>
 
                               POWER OF ATTORNEY
 
     KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of GenCorp
Inc. hereby constitutes and appoints William R. Phillips and Robert C. Anderson,
and each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 2001 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 15, 2002.
 
                                          /s/ WILLIAM K. HALL
                                          --------------------------------------
                                          William K. Hall
 
                                          Dated: March 4, 2002

<PAGE>
 
                               POWER OF ATTORNEY
 
     KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of GenCorp
Inc. hereby constitutes and appoints William R. Phillips and Robert C. Anderson,
and each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 2001 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 15, 2002.
 
                                          /s/ JAMES M. OSTERHOFF
                                          --------------------------------------
                                          James M. Osterhoff
 
                                          Dated: March 4, 2002

<PAGE>
 
                               POWER OF ATTORNEY
 
     KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of GenCorp
Inc. hereby constitutes and appoints William R. Phillips and Robert C. Anderson,
and each of them (each with full power to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 2001 on his behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 15, 2002.
 
                                          /s/ STEVEN G. ROTHMEIER
                                          --------------------------------------
                                          Steven G. Rothmeier
 
                                          Dated: March 4, 2002

<PAGE>
 
                               POWER OF ATTORNEY
 
     KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of GenCorp
Inc. hereby constitutes and appoints William R. Phillips and Robert C. Anderson,
and each of them (each with full power to act alone), her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for her and in her name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K of GenCorp Inc. for the
fiscal year ended November 30, 2001 on her behalf, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact or agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney expires March 15, 2002.
 
                                          /s/ SHEILA E. WIDNALL
                                          --------------------------------------
                                          Sheila E. Widnall
 
                                          Dated: March 4, 2002