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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-28942
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PRIMEX TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 06-1458069
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10101 NINTH STREET NORTH
ST. PETERSBURG, FLORIDA 33716-3807
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (813) 578-8100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NAME OF EACH
EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $1.00 Par Value The NASDAQ National Market System
Series A Participating Cumulative The NASDAQ National Market System
Preferred Stock Purchase Rights
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [_] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based on the closing price of such stock as of February 28, 1997, as
reported by The NASDAQ National Market System, was $96,617,582.
The number of common shares, par value $1.00 per share, outstanding as of
February 28, 1997 was 5,222,572.
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TABLE OF CONTENTS
FORM 10-K
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PART I
Item 1 Business ........................................................................ 1
Item 2 Properties....................................................................... 13
Item 3 Legal Proceedings ............................................................... 14
Item 4 Submission of Matters to a Vote of Security Holders.............................. 15
PART II
Item 5 Market for Registrant's Common Stock and Related Stockholder Matters............. 15
Item 6 Selected Financial Data.......................................................... 16
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations .................................................................... 17
Item 8 Financial Statements and Supplementary Data...................................... 21
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure....................................................................... 36
PART III
Item 10 Directors and Executive Officers of the Registrant............................... 36
Item 11 Executive Compensation .......................................................... 39
Item 12 Security Ownership of Certain Beneficial Owners and Management .................. 44
Item 13 Certain Relationships and Related Transactions .................................. 45
PART IV
Item 14 Exhibits, Financial Statements, Schedules, and Reports on Form 8-K............... 46
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PART I
ITEM 1. BUSINESS
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GENERAL
Primex Technologies, Inc. ("the Company") is an ordnance and aerospace
contractor with strong systems management and manufacturing capability.
The Company was organized under the laws of the Commonwealth of Virginia on
May 10, 1996 and has been publicly owned since December 31, 1996, when Olin
Corporation ("Olin") made a distribution (the "Distribution") to its
shareholders consisting of all of the outstanding shares of the Company's common
stock (the "Common Stock"). Regular way trading in the Common Stock commenced
on The Nasdaq National Market System on January 7, 1997.
Prior to December 31, 1996, the Company was a wholly-owned subsidiary of Olin.
In connection with the Distribution, the assets and business entities of Olin's
ordnance and aerospace businesses were transferred to the Company.
The Company provides a variety of products and services, and it draws upon a
common set of capabilities in bringing these products and services to market.
The Company's systems management and manufacturing capabilities, combined with
its technology base, represent the common skills on which the Company relies in
serving its markets and customers.
SYSTEMS MANAGEMENT. Systems management in the defense/aerospace industry means
total management responsibility for the completion of a system which can vary
from a large weapons platform to the smaller systems and subsystems managed by
the Company, such as complete rounds of sophisticated tank ammunition and small
space subsystems incorporated in commercial satellites. Systems management
incorporates the management of materials acquisition, configuration data
management, selection and auditing of subcontractors, manufacturing, quality
assurance, testing, and product delivery, as well as administrative support to
ensure that all documentation reflects compliance with contract terms.
MANUFACTURING. The Company's success in servicing its customers and markets is
largely the result of strict product quality and reliability standards. The
nature of the products offered by the Company require strict compliance with
detailed specifications. Deviations from specifications in the
manufacture of tank or medium caliber ammunition could be the basis for
the customer to reject the final product. The Company's space and
electronics products, intended for use in satellites and aircraft, must be of
the highest reliability. Ball Powder(R) propellant must meet strict quality
standards to assure that the ammunition in which it is incorporated is safe and
effective.
TECHNOLOGY. The Company's technology base positions it as a leader in a number
of product offerings and provides the key to its future success. The Company's
composite materials technology has helped forge its leadership position in tank
ammunition. The Company is applying its composite expertise and its knowledge of
propellants and physics in developing the next generation of tank ammunition
which will provide improved performance.
The Company's propellant research and development laboratory is equipped to
perform a wide range of chemical and thermal analyses and propellant syntheses
which enable the Company to tailor its Ball Powder(R) propellant to a wide
variety of ammunition applications.
In its space products business, the Company's research and development
capabilities enable it to improve existing products by lowering product weight
and cost. These capabilities also have led to the development of new propulsion
products, including those incorporating electric propulsion to reduce the fuel
requirements for performing a given mission.
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PRODUCTS AND SERVICES
The following table sets forth the principal products and services offered by
the Company and identifies the percentage of sales represented by each category
for the years shown.
PERCENTAGE OF SALES
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PRODUCTS AND SERVICES 1996 1995 1994
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Tank and other Large Caliber Ammunition (1)......... 35% 28% 37%
Medium Caliber Ammunition........................... 18% 14% 14%
Ball Powder(R) Propellant........................... 10% 11% 13%
Electronic Products................................. 7% 8% 5%
Space Products...................................... 12% 4% 6%
Other Products and Services (2)..................... 18% 35% 25%
(1) The Company currently has two multi-year contracts for the supply of 120mm
tactical and training ammunition that represent approximately 25% and 10%,
respectively, of 1996 sales and approximately 15% and 10%, respectively, of
1995 sales. These multi-year contracts provide for deliveries through mid-
1999. The Company currently has numerous other contracts, none of which
individually accounted for more than 9% and 6% of 1996 and 1995 sales,
respectively.
(2) Approximately 4% of 1996 sales, 15% of 1995 sales and 2% of 1994 sales
resulted from a U.S. Government contract for combined effects munitions.
Sales under this contract were completed in 1996 and this contract was not
renewed.
TANK AND OTHER LARGE CALIBER AMMUNITION. The Company develops and produces a
family of tactical and training ammunition used primarily in the M1A1 and M1A2
Abrams class tanks of the U.S. Army and Marine Corps and U.S. allies. The
Company is currently the sole source producer of the 120mm M829A-2 round, which
is an armor piercing, fin stabilized, discarding sabot round with a depleted
uranium penetrator that utilizes kinetic energy to penetrate heavily armored
targets and is used primarily in tank-to-tank warfare. This round is the
successor round to the 120mm M829A-1 round that was used successfully during
Operation Desert Storm. The Company is also one of two suppliers of 120mm M865
and M831A-1 training rounds to the U.S. Government. The M865 is the training
round for the M829A-2 round and the M831A-1 is the training round for the
M830A-1 tactical multipurpose round which is produced by the Company's U.S. tank
ammunition competitor.
During 1995, the Company entered into two contracts with four-year terms to
produce training and kinetic energy tactical ammunition for the U.S. Government.
The Company is currently performing under the second year of these contracts.
A number of foreign countries will not buy ammunition containing depleted
uranium and the U.S. Government limits the export of depleted uranium ammunition
to NATO and certain other friendly foreign governments. To improve its
opportunities to sell tank ammunition to foreign buyers, the Company, in
association with the foreign company that is the original developer of 120mm
tank ammunition, has developed an advanced 120mm kinetic energy round with a
tungsten alloy penetrator. During 1995, the Company signed a $20 million
contract with the U.S. Army for the sale of 120mm tungsten penetrator ammunition
to a foreign customer. Delivery is expected in 1997. The Company is actively
pursuing additional international tank ammunition sales involving both training
ammunition and the advanced kinetic energy tungsten round.
Because the Company believes that a key element of its long-term profitability
is its continued participation as a major producer of tank ammunition for the
U.S. Government, the Company continually invests in research and development in
this area, focusing on improving the effectiveness of kinetic energy tactical
ammunition and reducing the cost of training ammunition.
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The majority of the Company's large caliber ammunition production contracts
are for tank ammunition. However, the Company believes that artillery ammunition
presents an opportunity for growth because of an extended past period of minimal
investment by the United States in this arena. This problem was highlighted
during Operation Desert Storm, when United States artillery systems were
outranged by enemy guns. The Company believes that the U.S. Government has
recognized the need to match and surpass the capability of other countries and
is investing in the development of new artillery platforms and ammunition.
MEDIUM CALIBER AMMUNITION. The Company develops and produces medium caliber
ammunition. The medium caliber product line includes 20mm, 25mm, and 30mm
ammunition, and is utilized on a variety of platforms, including ships,
airplanes, helicopters, and fighting vehicles. The family of medium caliber
ammunition includes armor piercing, high explosive-incendiary and training
rounds. In addition, through a license with Raufoss A/S, the Company is a
leading developer of multi-purpose medium caliber ammunition that combines
armor-piercing, high explosive and incendiary features in one round.
During 1996, the Company commenced production of the 25mm M919 round, a U.S.
produced medium caliber armor-piercing, fin stabilized, discarding sabot round,
utilizing a depleted-uranium penetrator that offers increased range and
lethality. This round will be the primary anti-armor round of the Bushmaster
cannon used on the Bradley Fighting Vehicle. In addition, the Company has
several contracts with the U.S. Government for the production of multi-purpose
rounds. The Company believes that the U.S. Government will continue to buy both
the M919 and multi-purpose rounds for the next several years, but does not know
whether the Government will purchase material quantities of any other medium
caliber ammunition. During 1995 and 1996, the Company experienced difficulties
in producing the M919 round within its specifications for accuracy and gun
pressure. These difficulties increased the Company's costs and lowered its
margins on this round and delayed recognition of revenue from this contract to
1997. The Company has performed extensive testing and made improvements to its
production processes in an effort to correct these issues. Medium caliber
ammunition historically has been used in aircraft as well as in land vehicles
and ships. However, because of the development of other aircraft weapon
platforms that do not require close strikes to be effective, the Company
believes that medium caliber ammunition will be used to a lesser extent in
future aircraft.
NEW WEAPONS AND AMMUNITION. The U.S. Army is developing a series of small-arms
weapons to increase the firepower of 21st century soldiers. The Company has been
selected as the systems developer of the objective crew served weapon ("OCSW").
This two-person weapon system is slated to replace the machine gun for use
against lightly-armored vehicles, fortified positions, infantry and low-flying
aircraft. As systems developer, the Company is responsible for the development
of the entire OCSW including both the gun and ammunition. Complementing the OCSW
is the objective individual combat weapon ("OICW"), the future individual weapon
for the dismounted soldier. Two teams of companies are developing the OICW. The
Company is the ammunition developer on one of the teams. The OCSW and OICW are
both expected to be introduced to the field in approximately ten years.
BALL POWDER(R) PROPELLANT. The Company manufactures and sells Ball Powder(R)
propellant, a smokeless gun powder with a spherical grain shape. The Company
manufactures more than one hundred different varieties of propellant in the Ball
Powder(R) product line. Significant amounts of all U.S. military small caliber
ammunition are loaded with the Company's Ball Powder(R) propellant. In response
to the decline in military procurements over recent years, the Company has
focused on increasing its sales to the commercial ammunition market. In 1995 and
1996, approximately 65% and 55%, respectively, of Ball Powder(R) propellant
sales were to manufacturers of commercial ammunition and to the "reloader"
market ("reloaders" are individuals who buy ammunition components and load their
own rounds).
Olin's Winchester division, a leading manufacturer of sporting ammunition, was
the Company's largest Ball Powder(R) propellant customer in 1995 and 1996,
accounting for approximately 42% and 32% respectively, of the Company's Ball
Powder(R) Propellant sales. In conjunction with the Distribution, a long term
supply contract was entered into between the Company and Olin with respect to
future Ball Powder(R) Propellant sales to Winchester. See "Item 1. Business -
Relationship Between Olin and the Company".
Over the years, the Company has attempted to increase the use of Ball
Powder(R) propellant in medium and large caliber military ammunition. Virtually
all of the medium caliber ammunition manufactured by the Company except the 25mm
M919 round is now loaded with Ball Powder(R) propellant. Ball Powder(R)
propellant has achieved only limited use in U.S. Government large caliber
ammunition. The Company continues to pursue the use of Ball Powder(R) propellant
in additional types of large caliber ammunition.
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ELECTRONIC PRODUCTS. The Company manufactures a variety of electronic products
for aerospace applications. The Company in recent years has entered the field of
in-flight communications and entertainment ("IFE") through design and production
of a variety of IFE components and products. In 1995, the Company's most
significant IFE contract was for the production of in-flight telephone devices.
In 1996, the Company introduced its first EmPowerTM product, an in-seat power
supply system for airplane passengers' laptop computers. A universal power
socket is provided in the passenger's seat, to which the passenger's laptop may
be connected in order to operate and recharge the computer. The Company has
contracted to provide EmPowerTM products to three major airline companies, and
is negotiating with several prospective domestic and international customers.
The Company's line of airborne electronic products also includes controls for
lighting, temperature, audio, power and flight systems.
The Company produces ground support equipment for military purposes, including
stores management and weapons systems test sets for F-16 and other aircraft. The
Company also produces a variety of power conditioning units ("PCUs") for
military, commercial and space applications. PCUs convert one form of electric
power into another. The Company's space electronics capability includes
spacecraft PCUs, which convert a satellite's electric power for use to power
used in electric propulsion systems.
SPACE PRODUCTS. The Company is the world's leading supplier of monopropellant
hydrazine products and electric propulsion ("EP") products. The Company's
hydrazine propulsion products include individual rocket engines or thrusters,
rocket engine modules, gas generators, propellant pressurization systems and
complete integrated propulsion systems. Ranging in size from 0.1 to several
hundred pounds of thrust, these products are integral to the growing commercial
launch vehicle and satellite markets. The Company has delivered over 10,000
rocket engines for spacecraft applications including orbit insertion,
maneuvering, and attitude control as well as launch vehicle and upper-stage
attitude and velocity control.
EP devices represent an advance over standard chemical rocket engines. The
current generation of these products uses satellite electrical power to heat
propellant gases to provide additional energy and velocity in the process of
producing thrust. There are significant gains in fuel efficiency using the
Company's EP products over conventional hydrazine thrusters. This fuel
efficiency translates into economic benefit for satellite manufacturers and
service providers by reducing spacecraft weight, increasing in-orbit life and/or
allowing for the use of lower cost launch vehicles.
The Company is the only U.S. source of EP products which are currently
operating on orbiting satellites within product life expectancies. The Company
currently has four models in production. The first EP product, a resistojet, was
launched in 1983 and is now flying on a number of satellites. The latest EP
device, the arcjet, was first flown in 1993 on the Telstar-4 satellite.
The Company is developing advanced EP products which it anticipates will
provide greatly improved performance compared to conventional hydrazine
thrusters with commensurate economic benefits to users. These advanced EP
products are expected to be flight-tested on experimental flights in 1997-98.
A number of domestic and foreign companies are developing EP products and the
Company expects increased competition in this area.
OTHER PRODUCTS AND SERVICES. The Company manufactures a range of solid
propellant products. The Company's products are primarily used in military
applications, although the Company is continuously examining potential
commercial applications. Although the products are diverse, they are based on a
common technology, namely, controlled burning of a solid propellant whose
exhaust products are used for a variety of functions.
The Company provides small gas generators and devices incorporating gas
generators used in a variety of military and commercial applications, including
tactical missiles, jet engine starter cartridges, inflatables, including
buoyance devices
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and specialized structures, and ammunition initiating devices. The Company also
is developing a family of fire suppression systems offering a low-cost, low-
volume, alternative to halon compounds in situations, such as fighter aircraft
"dry bay" areas, where size and weight are significant considerations.
The Company is a supplier of extremely high-power pulsed energy devices
("pulsed power"). Such devices are used in a wide variety of defense
applications including test and evaluation of electronics, materials testing,
nuclear weapons effects simulation, advanced electric weapon technology (such as
electric guns envisioned for 21st century warfare), high-power microwaves, and
electromagnetic pulse simulation.
The Company is also a developer of precision anti-tank warheads and ordnance
systems for smart weapons for United States, Swiss and other Governmental
agencies. This development activity includes applied research, advanced
development, engineering and development manufacturing and low-rate initial
production programs.
The U.S. Government has decided that it needs to demilitarize or disassemble
large stocks of obsolete conventional ammunition. The Company has bid on a
number of these contracts, and in 1995 was awarded two small contracts for
demilitarization services and a follow-on contract in 1996. The Company's
success in this product area is dependent upon the overall level of funding for
ammunition demilitarization, the extent to which these appropriations are
directed to U.S. Government arsenals, and the level of competition.
In addition, during 1995 and 1996, the Company made commercial sales of forged
petroleum pipeline components and other heavy industrial cylindrical steel
products. These sales were generated by the Company's Red Lion, Pennsylvania
operation, which principally produces components for large caliber ammunition
and successfully utilized its manufacturing expertise for this commercial
application.
CUSTOMERS
The Company's largest customer is the U.S. Government which includes sales to
the U.S. Department of Defense, NASA, the U.S. Department of Energy, and other
U.S. Government agencies/laboratories. Other customers of the Company include
friendly foreign governments, major ordnance and aerospace contractors and
a variety of commercial customers. The Company is highly dependent on Government
sales, which during 1996, accounted for approximately 78% of the Company's
sales. See "Item 1. Business--U.S. Government Contracts and Regulations." With
the exception of the U.S. Government and its agencies, no other single customer
accounted for more than 9% of the Company's total annual sales during any of the
Company's last three fiscal years.
RAW MATERIALS AND SUPPLIES
The raw materials used in the manufacturing of ammunition and ammunition
components include metals, composite materials, chemicals and nitrocellulose. In
addition, the manufacture of ammunition requires components, including
propellants, cartridge cases and primers, all of which may be provided by
subcontractors or supplied directly by the Government. Various electronic piece
parts, printed wire boards, hydrazine liquid propellants, solid propellant
ingredients and subcontracted components, including capacitors, various metals
and explosives, are also used by the Company. The Company has not experienced
difficulty in recent years in obtaining an adequate supply of any raw materials,
components or other supplies needed in its manufacturing processes, although
continued downsizing in the defense industry may create difficulties in
procuring certain medium caliber ammunition components in the future.
Additionally, availability and cost of certain unique components will reflect
market conditions and the increasing technical complexity of product
requirements. Government contractors such as the Company are frequently
directed to procure materials, components or services from sources of supply
approved or designated by the U.S. Department of Defense.
U.S. GOVERNMENT CONTRACTS AND REGULATIONS
The Company's U.S. Government business is performed under fixed-price
contracts (firm fixed-price and fixed-price incentive) and, to a lesser extent,
under cost-reimbursable contracts (cost-plus-fixed-fee or cost-plus-incentive-
fee).
Under firm fixed-price contracts, the Company agrees to perform certain work
for a fixed price and, accordingly, realizes all the benefit or detriment
resulting from decreases or increases in the costs of performing the contract.
From time to time, the Company has experienced cost overruns on fixed-price
contracts. Fixed-price incentive contracts are fixed-
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price contracts providing for adjustment of profit and establishment of final
contract prices by a formula based on the relationship which final total costs
bear to total target cost. In 1996, approximately 78% of the Government sales of
the Company derived from firm fixed-price contracts and approximately 3% from
fixed-price incentive contracts.
Cost-plus-fixed-fee contracts provide for reimbursement of costs, to the
extent that such costs are allowable, and the payment of a fixed fee. Cost-
plus-incentive-fee contracts provide for increases or decreases in the
contract fee, within specific limits, based upon actual results as compared to
contractual targets for cost. In 1996, approximately 19% of the Government sales
of the Company derived from cost-plus-fixed-fee and cost-plus-incentive-fee
contracts.
Under U.S. Government regulations, certain costs, including certain
organization and financing costs, portions of research and development costs,
and certain marketing expenses related to the preparation of competitive bids
and proposals, lobbying costs, and international and commercial sales, are not
reimbursable. In addition, the accuracy and appropriateness of certain direct
and indirect costs of the Company under both fixed-price and cost-plus contracts
are subject to extensive regulation, and are audited by the Defense Contract
Audit Agency ("DCAA"), an arm of the United States Department of Defense. The
DCAA has the right to challenge the Company's cost estimates or allocations with
respect to any such contract. If a DCAA audit establishes overcharges or other
discrepancies in costs or accounting, it can seek the repayment of such
overcharges or seek other reconciliations.
U.S. Government contracts are, by their terms, subject to termination by the
U.S. Government either for its convenience or for due to default by the
contractor. Cost-reimbursable contracts provide that, upon termination, the
contractor is entitled to reimbursement of its allowable costs; and if the
termination is for convenience, a total fee proportionate to the percentage of
the work completed under the contract. Fixed-priced contracts provide for
payment upon termination for items delivered to and accepted by the Government,
and, if the termination is for convenience, for payment of cost incurred, plus
profit, for work performed, plus the costs of settling and paying claims by
terminated subcontractors and other settlement expenses. If a contract
termination is for default, however, (i) the contractor is paid an amount agreed
upon for completed and partially completed products and services accepted by the
Government, (ii) the Government is not liable for the contractor's costs with
respect to unaccepted items, and is entitled to repayment of advance payments
and progress payments, if any, related to the terminated portions of the
contracts, and (iii) the contractor may be liable for excess costs incurred by
the Government in procuring undelivered items from another source.
Because the Company engages in Government contracting activities and sells to
the U.S. Government and prime Government contractors, it is subject to extensive
and complex U.S. Government procurement laws and regulations. These laws and
regulations provide for Government audits and reviews of contractor quality,
procurement, performance and administration. Failure to comply, even
inadvertently, with these laws and regulations and with laws governing the
export of munitions and other controlled products and commodities, could subject
the Company or one or more of its businesses to price adjustments, including
adjustments of fixed prices, and to civil and criminal penalties, and under
certain circumstances, suspension or and debarment from bidding on future
Government contracts for a specified period of time. See "Item 3. Legal
Proceedings". In connection with the resolution of the investigation of certain
testing irregularities at the Company's Marion, Illinois facility, which was
owned by Olin at the time of the alleged irregularities and the investigation,
Olin entered into an Administrative Agreement (the "Agreement") with the United
States Department of the Air Force (the "Air Force"). In addition, the Company
has entered into a similar agreement with the Air Force which obligates the
Company to implement and maintain an ethics actions plan. The plan is designed
to ensure that the Company and its employees maintain their present
responsibilities as the present responsibility of the Company and its employees
that is required of all U.S. Government contractors. The Agreement requires,
among other things, a communication and training program for all employees, the
operation of a toll-free, dedicated telephone number for confidential calls to
report suspected misconduct and a self-governance program that includes the
periodic submission of written reports to the Air Force describing the measures
taken by the Company to implement the Agreement.
In addition to the right of the U.S. Government to terminate, Government
contracts are dependent upon the levels and continuing availability of
Congressional appropriations. Congress usually appropriates program funds for a
given program on a fiscal-year basis even though contract performance may
require more than one year. Consequently, for multi-year programs, the contract
is usually partially funded, and additional monies are normally committed to the
contract by the procuring agency only as appropriations are made by Congress for
future fiscal years.
U.S. Government contract awards may also be subject to protest or challenge by
unsuccessful bidders.
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Licenses are required from U.S. Government agencies for export of many of the
Company's products, including munitions and spacecraft and military aircraft
components and subsystems. These licenses are administered by the U.S.
Department of State under the Arms Export Control Act, which restricts exports
of certain products and technologies. Failure to comply with these laws and
regulations could subject the Company or one or more of its businesses to
penalties, including, under certain circumstances, the suspension or debarment
from future export licenses for a specified period of time. In addition, the
U.S. Bureau of Alcohol, Tobacco and Firearms ("BATF") licenses the Company for
the handling of explosives and certain other devices. Failure to comply with
BATF regulations could subject the Company to the revocation of these required
licenses. The Company believes that to the best of its knowledge it is currently
in compliance in all material respects with all such material licenses and
regulations.
In common with other companies which derive a substantial portion of their
revenues from contracts with the U.S. Government for defense-related products,
the Company is subject to business risks, including changes in Governmental
appropriations and changes in national defense policies. Future reductions in
the level of defense procurement or changes in the strategic direction of
defense spending could adversely affect the Company's financial performance in
future years, including its income, liquidity, capital resources and financial
condition. The impact of any of these changes will depend on the timing and
magnitude thereof and the Company's ability to mitigate their impact with new
business, business consolidations or cost reductions. In view of the uncertainty
regarding the priorities of the Department of Defense, the historical financial
information of the Company's businesses may not be indicative of future
performance.
Since the U.S. Government usually awards and funds ordnance contracts on a
year-by-year basis and the Company's business is dependent upon periodic awards
of new contracts and the exercise of options contained in existing contracts,
there can be no assurance that the U.S. Government will continue to purchase the
Company's products or services over the long-term. The termination of any of the
Company's significant contracts or the failure to obtain either renewals of
certain existing contracts or additional contracts with the U.S. Government
could have a material adverse effect on its results of future operations and
financial condition.
COMPETITION
The Company encounters strong competition in each of its product lines. The
degree to which the Company participates in future U.S. Government business will
depend to a large extent on its ability to offer better program performance than
its competitors at a lower price to the Government.
The Company competes with Alliant Techsystems Inc. ("Alliant") for the supply
of large and medium caliber ammunition to the U.S. Government and foreign
Governments. The Company also faces competition for international sales of tank
and medium caliber ammunition from foreign suppliers.
The Company's St. Marks, Florida facility is currently the only supplier of
Ball Powder(R) propellant to the U.S. Government for use in small caliber
ammunition. The Company competes with Alliant and Expro Chemical Products
("Expro"), a Canadian company in North America, for the supply of gunpowder for
medium caliber ammunition and other military applications. In many cases, the
gunpowder available varies from one supplier to another and, as a result,
competition is based on both price and performance characteristics. In the
commercial gunpowder market, the Company competes with Alliant, Expro and a
variety of foreign suppliers.
In other product lines, the Company's principal competitors are: Kaiser
Marquardt Company in the area of monopropellant hydrazine propulsion, Hughes
Aircraft Company and International Space Technology, Inc. with regard to
electric propulsion, and Talley Industries in specialty solid propellant
products. The Company's electronic products compete with a variety of other
companies' technology and hardware. Other than work done by the Government's
National Laboratory System, competition in the field of high-voltage pulsed
power systems is provided principally by Maxwell Laboratories, Inc., and in the
case of high-performance, precision warheads, the competition is comprised of
Alliant, Aerojet-General Corporation and CMS Defense Systems.
RESEARCH AND DEVELOPMENT; PATENTS
The Company's research activities are conducted at a number of facilities.
Company-sponsored research expenditures were approximately $6 million, $5
million and $5 million for 1996, 1995, and 1994, respectively.
Customer-sponsored
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research expenditures of the Company (primarily U.S. Government) were
approximately $32 million, $48 million, and $81 million, respectively, for such
years. Customer-sponsored research declined in 1996 due to the completion of an
international contract for Electromagnetic Systems in 1995. Customer sponsored
research declines between 1994 and 1995 were primarily a result of the reduction
in Government-funded ammunition programs and the advancement of a major
ammunition development program into the production stage.
The Company owns, or is the licensee under, a number of technologies and/or
patents relating to various products and processes. The Company believes that,
in the aggregate, the rights under its technological assets and licenses are
important to the Company but, except as discussed herein, the Company does not
consider any one technology, patent or license or group thereof related to a
specific process or product to be of material importance to the Company as a
whole. The Ball Powder(R) propellant technology is material to the Company's St.
Marks, Florida operation. This is proprietary manufacturing know-how and trade
secret information which is critical in the manufacture of propellants. A patent
covers an important aspect of that know-how, namely, a process for the
production of spherical, single-base, low-density propellant grains. The patent
was issued in 1987 and will expire on September 22, 2004.
BACKLOG
The aggregate amount of contracted backlog orders for the Company on December
31, 1996 and 1995 was $297 million and $328 million, respectively. It is
expected that approximately $276 million of sales during 1997 will fill orders
that were in backlog as of December 31, 1996. The backlog represents the value
of contracts for which goods and services are yet to be provided. Under
multiyear contracts, a portion of the backlog is subject to approval of
Government appropriations. The backlog consists of firm contracts, and although
they can be and sometimes are changed or cancelled, the amount of changes and
cancellations historically has been insignificant.
EXPORT SALES
The Company's export sales from the United States to unaffiliated customers
were $29 million, $24 million and $16 million in 1996, 1995 and 1994,
respectively.
SEASONALITY
Although the business of the Company is not seasonal in nature, sales to the
Department of Defense are historically stronger in the latter part of the year
reflecting the procurement cycle utilized by the U.S. Army. Certain commercial
sales, such as Ball Powder(R) propellant volumes, tend to be stronger in the
first half of the year.
EMPLOYEES
As of December 31, 1996, the Company had approximately 2,550 employees,
approximately six of whom were working in foreign countries. Approximately 450
of the hourly paid employees of the Company located at its St. Marks, Florida
and Marion, Illinois facilities are represented, for purposes of collective
bargaining, by local unions affiliated with the United Steelworkers of America.
The Company is party to labor contracts expiring in October 1997 and December
2001 relating to such employees at its St. Marks, Florida and Marion, Illinois
facilities, respectively. No major work stoppages have occurred in the last
three years. While relations between the Company and its employees and their
various representatives are generally considered satisfactory, there can be no
assurance that new labor contracts can be concluded without stoppages.
ENVIRONMENTAL MATTERS
The establishment and implementation of Federal, state and local standards to
regulate air, water and land quality has affected, and will continue to affect,
substantially all of the Company's plants. Federal legislation providing for
regulation of the manufacture, transportation, use and disposal of hazardous and
toxic substances has imposed additional regulatory requirements on the industry.
In addition, implementation of environmental laws, such as the Resource
Conservation and Recovery Act and the Clean Air Act, has required and will
continue to require new capital expenditures and will increase operating costs.
In order to help finance the cleanup of waste disposal sites, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986
8
<PAGE>
("Superfund"), imposes a tax on the disposal of certain hazardous wastes. The
Company employs waste minimization programs at most of its manufacturing sites.
See the discussion of environmental matters contained in "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Environmental".
In connection with the Distribution, the Company and Olin have agreed pursuant
to the Assumption of Liabilities and Indemnity Agreement that the Company will
assume, and indemnify and hold Olin harmless against, all liabilities associated
with the removal, remediation and control of environmental conditions at several
of the Company's existing and former plant sites. Such liabilities are not
expected to have a material adverse effect upon the Company's financial
condition or results of operations. See "Item 1. Business - Relationship Between
Olin and the Company - Assumption of Liabilities and Indemnity Agreement".
RELATIONSHIP BETWEEN OLIN AND THE COMPANY
The Company and Olin entered into certain agreements, described below,
governing their relationship subsequent to the Distribution and providing for
the allocation of tax and certain other liabilities and obligations arising from
periods prior to the Distribution. While the agreements contain terms which
generally are comparable to those which would have been reached in arms-length
negotiations with unaffiliated parties, these agreements were reached while the
Company was wholly owned by Olin and therefore are not the result of arm's-
length negotiations between independent parties.
Distribution Agreement
The Company and Olin entered into a Distribution Agreement which provided for,
among other things, certain corporate transactions required to effect the
Distribution and other arrangements between Olin and the Company subsequent to
the Distribution.
The Distribution Agreement provided for the transfer by Olin to the Company of
the assets and business entities comprising the Ordnance/Aerospace Business. The
assets of the Ordnance/Aerospace Business were transferred to the Company on an
"as is, where is" basis and no representations were made by Olin with respect
thereto. The Distribution Agreement also provided for the Company's assumption
of $145 million of indebtedness incurred by Olin. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources". The Distribution Agreement also provides for
the allocation between the Company and Olin of employee obligations, benefit
plans of certain employees and benefits under existing insurance policies after
the Distribution and sets forth procedures for the administration of insured
claims.
The Distribution Agreement provides that each of Olin and the Company will be
granted access to certain records and information in the possession of the other
and requires each of Olin and the Company to provide to the other copies of all
documents filed with the Securities and Exchange Commission pursuant to the
periodic and interim reporting requirements of the Exchange Act.
Assumption of Liabilities and Indemnity Agreement
The Company and Olin have entered into an assumption of liabilities and
indemnity agreement (the "Assumption of Liabilities and Indemnity Agreement")
which generally provides for the assumption of liabilities and cross indemnities
designed to place with the Company responsibility for liabilities of the
Ordnance/Aerospace Business and with Olin responsibility for liabilities of the
businesses retained by Olin after the Distribution. Specifically, the Company
has agreed, subject to certain exceptions, to assume, and indemnify and hold
Olin harmless from and against, all damages, losses, liabilities, fines,
penalties, costs and expenses arising out of or associated with the business,
conduct, operations, assets, properties or status of the Company prior to, on or
after the Distribution.
The Assumption of Liabilities and Indemnity Agreement also provides that the
Company will assume, and indemnify and hold Olin harmless from, all liabilities
in connection with the removal, remediation or control of environmental
conditions at certain of the Company's facilities (see "Item 1. Business -
Environmental Matters") and that the Company will indemnify Olin for any
liabilities arising out of Olin's existing guarantee of certain lease
obligations of the Company. The Assumption of Liabilities and Indemnity
Agreement also provides for cross indemnities relating to certain employee
benefit claims.
9
<PAGE>
Technology Transfer and License Agreement
The Company and Olin have entered into a technology transfer and license
agreement (the "Technology Transfer and License Agreement"), which provides for
the transfer by Olin to the Company of certain intellectual property and
proprietary technology relating to the Company's businesses. The Technology
Transfer and License Agreement provides for the grant of licenses by the Company
to Olin to use such transferred intellectual property and technology in certain
of Olin's retained businesses following the Distribution and for the granting of
licenses between Olin and the Company relating to the use of certain jointly-
developed intellectual property and technology.
Tax Sharing Agreement
The Company and Olin have entered into a Tax Sharing Agreement effectively
providing that Olin will be responsible for the tax liability of the Company for
the years that the Company was included in Olin's consolidated Federal income
tax return. The Tax Sharing Agreement also provides that state, local and
foreign taxes attributable to periods prior to the Distribution will be the
responsibility of Olin and that if the Distribution fails to qualify as a tax-
free spin-off as a result of action taken after the Distribution by Olin or the
Company, the party that took such action will be responsible for the full amount
of any resulting corporate tax liability. Neither Olin nor the Company will
indemnify any shareholder for any tax liability.
Powder Supply Requirements Agreement; Component Supply Agreement
The Company and Olin have entered into a powder supply requirements agreement
(the "Powder Supply Requirements Agreement") and a component supply agreement
(the "Component Supply Agreement") which set forth the terms on which Olin will
purchase propellant powder from the Company and the Company will purchase
certain ammunition components from Olin following the Distribution.
The Powder Supply Requirements Agreement generally provides that Olin will
purchase, at prices to be agreed upon from time to time, a certain percentage of
the propellant powder required in any calendar year by its Winchester Division
from the Company, starting at 100% of such requirements for 1997 for Ball
Powder(R) propellant and decreasing annually to 70% for 2002. The prices are
expected to be at a range of discounts from competitive prices depending on
requirements purchased. In 1996 and 1995, Olin's purchases of propellant powder
accounted for approximately 32% and 42%, respectively, of the Company's annual
production. The Powder Supply Requirements Agreement provides for reductions in
the amounts of propellant powder that Olin is required to purchase to the extent
that the Company is unable or unwilling to meet a request by Olin to produce a
type of propellant powder or to match pricing and other terms offered by third
parties. The arrangement provides that Olin will reimburse the Company for any
lost profits resulting from Olin's failure to purchase the required amount of
propellant powder from the Company in any year. The Powder Supply Requirements
Agreement also provides for the purchase by Olin from the Company of certain
powders manufactured by Synthesia A.S., a Czech manufacturer for whom the
Company acts as North American distributor. Any purchases by Olin of such
Synthesia powders are in addition to Olin's required purchase obligations
described above. The term of the Powder Supply Requirements Agreement expires on
December 31, 2002, unless earlier terminated in accordance with its terms.
Pursuant to the Powder Supply Requirements Agreement, the Company shall
indemnify Olin against all losses arising from actual or alleged manufacturing
or design defects in the products delivered pursuant thereto and Olin shall
indemnify the Company against all losses arising from Olin's negligent misuse or
improper handling thereof or defects in the ammunition (other than powder
defects).
The Component Supply Agreement provides that the Company will purchase certain
ammunition components (the "Components") from Olin at agreed-upon prices until
December 31, 1999, unless the Component Supply Agreement is earlier terminated
in accordance with its terms. Pursuant to the Component Supply Agreement, Olin
will indemnify the Company against all losses arising in connection with actual
or alleged manufacturing and design defects in the Components delivered pursuant
thereto and the Company will indemnify Olin against all losses arising in
connection with the Company's negligent misuse or improper handling of the
Components delivered pursuant thereto.
Ball Powder(R) Assignment Agreement
The Company and Olin have entered into an assignment agreement (the "Ball
Powder(R) Assignment Agreement") providing for the assignment by Olin to the
Company of Olin's Ball Powder(R) trademarks. Pursuant to the Ball Powder(R)
10
<PAGE>
Assignment Agreement, the Company has granted to Olin such rights and licenses
as may be necessary for Olin to fulfill certain existing contractual obligations
to Browning S.A. relating to the manufacture and sale of certain products in
Europe.
Browning Distribution Agreement
The Company and Olin have entered into a powder distribution agreement (the
"Browning Distribution Agreement") pursuant to which the Company has appointed
Olin its exclusive distributor of canister powder to Browning, S.A., and certain
of its subsidiaries throughout Europe.
Transition Services Agreement
The Company and Olin have entered into a transition services agreement (the
"Transition Services Agreement") pursuant to which Olin and the Company will
provide each other with certain services which have been provided by Olin and
the Company prior to the Distribution. The length of time for which any such
service shall be provided, and the compensation therefore, vary based upon the
mutual agreement of the Company and Olin. Pursuant to Olin's management of the
receipts and disbursements of the Company for an interim period which is not
expected to exceed six months, periodic intercompany indebtedness may arise in
an amount which will not exceed $5 million.
Covenant Not To Compete Agreement
The Company and Olin have entered into a covenant not to compete agreement
(the "Covenant Not To Compete Agreement") which generally provides that, for a
period of five years, Olin shall not, subject to certain exceptions, directly or
indirectly manufacture, sell or distribute medium or large caliber ammunition or
components and that the Company shall not, subject to certain exceptions,
directly or indirectly manufacture, sell or distribute small caliber ammunition
or components, ejection cartridges or shotshells.
Raufoss Technology Agreement
The Company and Olin have entered into an assignment agreement (the "Raufoss
Technology Agreement") pursuant to which Olin has assigned to the Company all of
Olin's rights under and interests in a license agreement with Raufoss A/S
("Raufoss") relating to the use of certain proprietary technology of Raufoss in
the manufacture and sale of ammunition. Pursuant to the Raufoss Technology
Agreement, Olin has also assigned to the Company all of Olin's rights under and
interests in a teaming agreement with Raufoss providing for cooperation in the
manufacture and sale of multipurpose ammunition. The Raufoss Technology
Agreement also provides for the grant by the Company to Olin of an exclusive
sublicense to utilize the Company's rights and licenses with respect to
proprietary technology of Raufoss in the manufacture and sale of small caliber
ammunition.
Australia Agency Agreement
The Company and Olin Australia Ltd., a subsidiary of Olin ("Olin Australia"),
have entered into an agency agreement (the "Australia Agency Agreement")
pursuant to which the Company has appointed Olin Australia as its non-exclusive
agent for the sale of certain medium and large caliber ammunition to government
agencies in Australia, New Zealand, Papua New Guinea and Oceania. Under the
Australia Agency Agreement, Olin Australia will be paid individually agreed-upon
commissions by the Company at the time of order acceptance by the Company. The
Australia Agency Agreement will continue in effect until such time as either
party thereto provides the other with 30-days' notice of termination.
Trade Name License Agreement
Olin and the Company have entered into an agreement to permit the Company and
its subsidiaries to use the "Olin" name and its derivatives in certain limited
circumstances for a certain limited period of time.
Novation of U.S. Government Contracts
11
<PAGE>
In connection with the Distribution, the Company became successor in interest
to Olin on certain contracts between Olin and the U.S. Government. As required
by Federal procurement regulations providing for the U.S. Government to
recognize the Company as the successor in interest to Olin on such contracts,
Olin has entered into novation agreements with the Company and the U.S.
Government which provide, among other things, for Olin to directly or indirectly
guarantee or otherwise become liable for the performance of the Company's
obligations under such contracts which were transferred to the Company in
connection with the Distribution (the "Guaranteed Contracts"), including post-
novation modifications to the Guaranteed Contracts. Such novation agreements
also provide that the Company assumes all obligations under the Guaranteed
Contracts and that the U.S. Government recognizes the transfer of such
Guaranteed Contracts and related assets. While these Guaranteed Contracts are
scheduled to be performed over a period of time, it is not expected that they
will be fully and finally discharged for a number of years.
The Company has agreed in the Assumption of Liabilities and Indemnity
Agreement to perform all of its obligations under each Guaranteed Contract and
to indemnify Olin against any liability Olin may incur under the novation
agreements by reason of any failure by the Company to perform such obligations.
12
<PAGE>
ITEM 2. PROPERTIES
- -------------------
The table below sets forth the locations where the Company conducts its
business and a brief description of the activities conducted at each identified
location. The Company believes that its facilities are sufficiently maintained
and suitable and adequate for its immediate needs and that additional space is
available to accommodate expansion. Unless otherwise noted below, the identified
location is owned by the Company.
<TABLE>
<CAPTION>
LOCATION PRIMARY ACTIVITIES
-------- ------------------
<S> <C>
St. Petersburg, Florida(1).......... Corporate headquarters
Systems management operation for large
caliber ammunition
Red Lion, Pennsylvania.............. Manufacturing and research and
development facility for large caliber
ammunition metal and composite parts
Redmond, Washington................. Design, manufacturing and test facility
for space, solid propellant and
electronic products
Office facilities
Research and development laboratory
St. Marks, Florida................... Manufacturing facility for Ball
Powder(R) Propellant
Research and development laboratory
Marion, Illinois(1).................. Loading, assembly and packing of medium
caliber ammunition
Manufacturing and test facility for
solid propellant products
Demilitarization services
Research and development laboratory
Marion, Illinois .................... Test range
San Leandro, California(1)........... Pulsed power research and development
laboratory and test facilities; pulsed
power and advanced warhead engineering
and management
Downey, California(1)................ Manufacturing facility for medium caliber
ammunition components and air dispensed
munitions components
System management and research and
development
Moses Lake, Washington(1)............ Manufacturing and test facility for solid
propellant products
Camden, Arkansas(2).................. Test range
Support for the ammunition business
Tracy, California.................... Manufacturing and test facility for
advanced anti-armor warhead systems
Lucerne, Switzerland(1).............. Design, development and testing of anti-
armor warhead systems for the Swiss
Government
</TABLE>
(1) Leased.
(2) Leased in part and occupied in part under a subcontract.
13
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
The Company is primarily engaged in providing products and services under
contracts with the U.S. Government and, to a lesser degree, under foreign
Government contracts, some of which are funded by the U.S. Government. All such
contracts are subject to extensive legal and regulatory requirements and, from
time to time, agencies of the U.S. Government investigate whether the Company's
operations are being conducted in accordance with these requirements. Such
investigations could result in administrative, civil or criminal liabilities
including repayments, fines or penalties being imposed upon the Company or
could lead to suspension or debarment from future Government contracting by the
Company.
The Company has strict policies requiring its employees to comply with all
applicable legal standards relating to contract procurement and administration.
In addition, the Company requires adherence to high ethical standards by its
employees. The Company also has an Ethics and Compliance Program in which each
major location has an ethics officer who acts as a resource for encouraging and
monitoring compliance with these standards. It is the policy of the Company and
its subsidiaries to cooperate fully with all Governmental investigations of
their affairs.
The Company is a party to a number of pending or threatened investigations,
claims and proceedings.
One such investigation concluded in 1996. In May 1994, the Company discovered
that an employee may have modified inspection and testing software used on
certain medium caliber ammunition production lines at its Marion, Illinois
testing facility to permit inspections to be performed at tolerances which may
not have been fully compliant with applicable contract specifications. Upon
discovering the issue, the Company promptly notified U.S. Government contract
representatives, voluntarily disclosed the circumstances then known to the
Department of Defense's Office of the Inspector General and expressed its intent
to investigate fully the matter and take all necessary corrective actions. In
September 1994, a Federal grand jury in the United States District Court for the
Southern District of Illinois issued two subpoenas to the Company requesting
production of documents relating generally to certain medium caliber ammunition
programs and specifically to the software modification described above.
Subsequently, the Company received additional subpoenas and several Marion
employees have received subpoenas to testify before the grand jury. The Company
complied with the subpoenas and cooperated with Government officials to resolve
the matter. After discussion with the U.S. Attorney's Office regarding the
investigation of the performance of the contracts in question, Olin and the U.S.
Attorney entered into an agreement to settle this matter on September 11, 1996.
Under the agreement, the U.S. Government agreed not to pursue any criminal or
civil claims against Olin or its subsidiaries in connection with these
government contracts. Olin has paid to the U.S. Government $8.0 million in
connection with the settlement and without admitting to any wrongdoing or
liability. The Company's financial statements reflect the expenses associated
with this matter, including the $8.0 million settlement, of which $6.0 million
and $2.0 million was charged to operations during 1996 and 1995, respectively.
The Company is a party to a contract dispute with the Belgium Ministry of
Defense related to a 1985 sale of artillery ammunition. The Belgium Ministry of
Defense has alleged improprieties committed by the Belgium national who
represented the Company in the transaction. Based on these allegations, the
Belgium Ministry of Defense withheld final payment on the contract. On July 2,
1990, the Company's wholly-owned subsidiary G.D. International ("GDI")
instituted an action in the Court of First Instance of Brussels (the "Court")
seeking that the Court declare that because the Ministry of Defense withheld the
final payment, the contract had been terminated and GDI's obligations thereunder
extinguished. The Company agreed to extend a letter of credit related to the
contract guarantee pending resolution of the underlying contract dispute. In
March 1996, the trial court ruled against the Company. The decision has been
appealed. In the event that the trial court's decision is sustained, the
resultant liability is estimated at approximately $4.5 million, net of a $1.1
million receivable, at current exchange rates. The Company's financial
statements reflect this estimate as a charge to operations in 1996. Olin has
agreed, in conjunction with the Distribution, to assume responsibility for legal
fees and costs, monetary judgments and civil settlements associated with this
contract dispute in Belgium.
While the Company cannot predict the ultimate outcome of the Belgian contract
dispute summarized above, as well as other pending or threatened proceedings,
including matters arising under provisions relating to the protection of the
environment, it does not believe that the consequences will be materially
adverse to its results of operation or financial position or that the Company's
liability with respect thereto will exceed the amounts which have previously
been charged to operations.
14
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter ended December 31, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK HOLDER MATTERS
- -------------------------------------------------------------------------------
MARKET INFORMATION
The shares of the Company's Common Stock commenced regular way trading on
The NASDAQ National Market System under the symbol PRMX on January 7, 1997.
HOLDERS
As of February 28, 1997, there were approximately 9,800 record holders
of the Company's common stock.
DIVIDENDS
The Company declared a quarterly cash dividend of $0.15 per share,
payable on March 20, 1997 to shareholders of record as of February 20, 1997. The
Company anticipates it will pay quarterly cash dividends which, on an annual
basis, will aggregate $0.60 per share in 1997. The payment of cash dividends in
the future will be dependent upon the Company's results of operations, earnings,
capital requirements, contractual restrictions and other factors considered
relevant by the Board of Directors.
The Company's credit facility limits the payment or declaration of
dividends by the Company on any class of its stock, as well as any other
distribution, liquidation, purchase or other acquisition of the Company's stock
by it or any subsidiary. At January 1, 1997, the credit agreement permitted
approximately $17 million to be paid in dividends.
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
The following table summarizes certain selected historical
financial and operating information with respect to the Company. This
historical data should be read in conjunction with the Consolidated Financial
Statements of the Company and the related notes thereto in Item 8 and
"Management's Discussion and analysis of Financial Condition and Results of
Operations" in Item 7.
YEAR ENDED DECEMBER 31,
-------------------------------------------------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATIONS
Sales........................................... $ 471,488 $ 508,113 $ 416,148 $ 376,332 $ 430,120
Cost of Goods Sold.............................. 399,187 428,707 335,303 304,717 350,942
Selling and Administration...................... 53,336 51,297 46,758 43,643 47,991
Research and Development........................ 6,241 5,016 5,364 6,055 6,308
Other Charges (1) .............................. 10,500 2,000 - 12,600 -
---------- ---------- ---------- ---------- ----------
Operating Income ............................... 2,224 21,093 28,723 9,317 24,879
Interest Expense................................ 9,256 9,276 8,638 7,880 8,490
Interest and Other Income....................... 663 807 1,743 2,307 2,075
---------- ---------- ---------- ---------- ----------
Income (Loss) Before Taxes...................... (6,369) 12,624 21,828 3,744 18,464
Income Tax Provision............................ 1,533 6,963 9,805 2,722 8,001
---------- ---------- ---------- ---------- ----------
Income (Loss) Before Cumulative Effect of
Accounting Change.............................. (7,902) 5,661 12,023 1,022 10,463
Accounting Changes.............................. - - - - (6,159)
---------- ---------- ---------- ---------- ----------
Net Income (Loss) .............................. $ (7,902) $ 5,661 $ 12,023 $ 1,022 $ 4,304
Pro Forma Income (Loss) Per Share (2)........... $ (1.51) $1.08 $2.30 $0.20 $ 0.82
Number of Common Shares ........................ 5,220,276 5,220,276 5,220,276 5,220,276 5,220,276
Outstanding (2)
</TABLE>
YEAR ENDED DECEMBER 31,
--------------------------------------
($ IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Cash..................................... $ 20,000 $ - $ - $ - $ -
Property Plant and Equipment, Net........ 105,023 114,473 114,113 98,771 107,836
Total Assets............................. 373,743 380,979 364,175 294,077 330,551
Capitalization:
Long-Term Debt......................... 145,000 125,000 125,000 125,000 125,000
Shareholders' Equity................... 145,134 158,535 131,113 91,287 114,775
---------- ---------- ---------- ---------- ----------
Total Capitalization..................... 290,134 283,535 256,113 216,287 239,775
OTHER
Capital Expenditures..................... 13,273 19,191 17,821 12,682 14,082
Depreciation............................. 17,211 16,633 16,955 14,323 14,220
Total Debt to Total Capitalization....... 50.0% 44.1% 48.8% 57.8% 52.1%
</TABLE>
(1) Other charges include a charge for the settlement of claims relating to a
government investigation of certain testing irregularities at the Company's
Marion, Illinois facility ($6 million in 1996 and $2 million in 1995) and a
$4.5 million charge in 1996 related to a trial court ruling involving a
contract dispute with the Belgium Ministry of Defense related to a 1985 sale
of artillery ammunition. Also, 1993 other charges include a charge for a
strategic action plan of $12.6 million.
(2) The calculation of net income per share on a pro forma basis assumed that
all 5,220,276 common shares outstanding immediately after the Distribution
were outstanding for all periods prior to the Distribution.
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS
- -------------
This Management's Discussion and Analysis of Financial Condition and Results
of Operations covers periods when the Company operated as the Ordnance and
Aerospace Divisions of Olin. However, this discussion and analysis of financial
condition and results of operations has been prepared as if the Company were a
separate entity for all periods discussed.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
-----------------------------
($ IN THOUSANDS)
1996 1995 1994
-------- ------- --------
Sales........................... $471,488 $508,113 $416,148
Gross Margin.................... 72,301 79,406 80,845
Selling and Administration...... 53,366 51,297 46,758
Other Charges................... 10,500 2,000 -
Net Income (Loss) .............. (7,902) 5,661 12,023
YEAR ENDED DECEMBER 31, 1996 COMPARED TO 1995
Sales declined 7% principally attributable to lower shipments of combined
effects munitions, Ball Powder(R) propellant, and electromagnetic systems, which
more than offset higher tank ammunition sales. The lower sales levels of
combined effects munitions and electromagnetic systems reflect the completion of
major programs during 1996. The U.S. Government contract for combined effects
munitions is not expected to be renewed. Sales of commercial Ball Powder(R)
propellant declined 16% in the 1996 period as sporting ammunition customers
drastically reduced their purchases. In 1995, heavy consumer buying patterns for
sporting ammunition were driven by a concern over the threat of restrictive
legislation and taxation, which increased the demand for Ball Powder(R)
propellant. Restrictive legislation in the form of the Brady bill and the
assault weapons ban was passed in 1993 and 1994, respectively, while a proposed
prohibitive tax on ammunition was not adopted.
Gross margin percentage decreased to 15% from 16% due primarily to the
decline in sales of Ball Powder(R) propellant.
Selling and administration expenses as a percentage of sales increased to 11%
from 10% due to lower sales and a higher level of expenses primarily associated
with the Distribution.
Other charges in 1996 represents the provision for the settlement of claims
relating to a government investigation of certain testing irregularities at the
Company's Marion, Illinois facility ($6.0 million) and the charge for the
contract dispute with the Belgian Ministry of Defense related to a 1985 sale of
artillery ammunition ($4.5 million).
Customer-sponsored research of $31.9 million decreased $15.8 million due to
the completion of an international contract for electromagnetic systems in 1995.
Income tax expense of $1.5 million and $7.0 million was recorded in
1996 and 1995 on pretax losses of $(6.4) million and pretax income of $12.6
million in 1996 and 1995, respectively. The impact of the Marion legal
settlement which is non-deductible and other higher non-deductible expenses on a
lower level of profits in 1996 were the main contributors to the higher
effective tax rate for 1996.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO 1994
Sales increased 22% primarily due to additional shipments of medium caliber
ammunition, strong demand for electronic and solid propellant products and sales
under a combined effects munition contract. The inclusion of a full year of
sales from the Company's acquisition of certain assets of the medium caliber
ammunition business of GenCorp's Aerojet Ordnance Division in April 1994, and
sales under a combined effects munition contract awarded in 1994 accounted for a
17
<PAGE>
15% increase in sales. Sales of large caliber ammunition declined due to the
completion of a contract to supply tank ammunition components to the U.S. Army
during 1994. Tank ammunition cartridge sales and profits in 1995 were consistent
with 1994 levels. Ball Powder(R) propellant sales increased slightly as higher
selling prices due to a more favorable product mix more than offset a decline in
volumes. Increased volumes in the electronics business, specifically the in-
flight entertainment product line, and strong demand for the solid propellant
systems product lines contributed 6% to the sales increase.
The gross margin percentage decreased to 16% from 19%. Cost overruns on
certain production and development programs and additional costs associated with
certain discontinued programs more than offset the increased margins from large
caliber ammunition due to a favorable contract settlement and the profit impact
from the additional medium caliber ammunition volumes.
Selling and administration expenses as a percentage of sales decreased to 10%
from 11% due primarily to the additional sales from the medium caliber
ammunition acquisition. Selling and administration expenses increased in amount
due to the inclusion of the operating expenses of the medium caliber ammunition
acquisition for a full year and its related relocation and consolidation costs,
and additional legal and consulting fees. Legal and consulting fees associated
with the government investigation of certain testing irregularities at the
Company's Marion, Illinois facility increased to $3.5 million in 1995 from
$0.5 million in 1994.
Other charges in 1995 of $2.0 million represents a provision for the
settlement of claims relating to a government investigation of certain testing
irregularities at the Company's Marion, Illinois facility.
Customer-sponsored research of $47.7 million, decreased $33.3 million, due to
the overall reduction in government-funded ammunition programs and the
advancement of a major ammunition development program into the production stage.
The effective tax rate was 55% in 1995, compared to 45% in 1994. The impact of
the charge related to the Marion legal settlement which is non-deductible and
other non-deductible expenses on a lower level of profits in 1995 were the main
contributors to the effective tax rate increase.
U.S. GOVERNMENT SALES
U.S. Government sales amounted to $368.3 million in 1996, $391.1 million in
1995 and $318.9 million in 1994. See "Item 1. Business - U.S. Government
Contracts and Regulations". Sales in 1996 reflect the decline in combined
effects munitions resulting from the completion of that contract. Sales under
the combined effects munition contract and a full year of medium caliber
ammunition sales acquired with the Aerojet business were the main contributors
to the increase in 1995 government sales. Approximately 75% and 80%,
respectively, of total 1996 and 1995 U.S. Government sales were to the
Department of Defense ("DoD") or agencies thereof. Changes in the strategic
direction of defense spending, the timing of defense procurements and specific
defense program appropriation decisions may adversely affect the performance of
the Company in future years, including its income, liquidity, capital resources,
and financial condition. The precise impact of these decisions will depend upon
their timing and the size of changes and the Company's ability to mitigate their
impact with new business, business consolidations or cost reductions. In view of
the continuing uncertainty regarding the size, content and priorities of the
annual DoD budget, the historical financial information of the Company may not
be indicative of future performance and the viability of certain facilities and
equipment may also be impacted. DoD sales activities are historically stronger
in the latter part of the year because the timing of the recognition of the DoD
ammunition sales tends to reflect the procurement cycle utilized by the U.S.
Army. Certain commercial sales, such as Ball Powder(R) propellant volumes, tend
to be stronger in the first half of the year because the buying patterns of
sporting ammunition manufacturers are primarily driven by the fall hunting
season.
Since the U.S. Government usually awards and funds ordnance contracts on a
year-by-year basis and the Company's business is dependent upon periodic awards
of new contracts and the exercise of options contained in existing contracts,
there can be no assurance that the U.S. Government will continue to purchase the
Company's products and services over the long-term. The termination of any of
the Company's significant contracts or the failure to obtain either renewals of
certain existing contracts or additional contracts with the U.S. Government
would have a material adverse effect on its results of future operations and
financial condition.
18
<PAGE>
ENVIRONMENTAL
The Company is party to various governmental and private environmental actions
associated with former manufacturing and test facilities. Associated costs of
investigatory and remedial activities are provided for in accordance with
generally accepted accounting principles governing probability and the ability
to reasonably estimate future costs. Charges to income for investigatory and
remedial efforts were not material to operating results in 1996, 1995 and 1994
and are not expected to be material to net income in future years. The Company's
estimated environmental liability at the end of 1996 was attributable to five
sites.
Cash outlays for remedial and investigatory activities associated with former
manufacturing and test facilities and past operations were not charged to income
but instead were charged to reserves established for such costs identified and
expensed to income in prior years; such charges to income were none in 1996 and
$0.8 million and $0.1 million in 1995 and 1994, respectively. Cash
outlays for normal plant operations for the disposal of waste and the operation
and maintenance of pollution control equipment and facilities to ensure
compliance with mandated and voluntarily imposed environmental quality standards
were charged to income. Historically, the Company has funded its environmental
capital expenditures through cash flow from operations and expects to do so in
the future.
The Company's consolidated balance sheets included liabilities for future
environmental expenditures to investigate and remediate known sites amounting to
$1.9 million at December 31, 1996 and $2.6 million at December 31, 1995, of
which $1.9 million and $1.8 million, respectively, were classified as other
noncurrent liabilities. Those amounts did not take into account any discounting
of future expenditures or any consideration of insurance recoveries or advances
in technology. Those liabilities are reassessed periodically to determine if
environmental circumstances have changed and/or remediation efforts and their
costs can be better estimated. As a result of these reassessments, future
charges to income may be made for additional liabilities.
Total environmental-related cash outlays for 1996 were $3.6 million, of which
$0.7 million was spent on investigatory and remedial efforts, $0.3 million on
capital projects and $2.6 million on normal plant operations.
Environmental-related cash outlays for site investigation and remediation,
capital projects and normal plant operations are expected to range between $2
million and $5 million annually over the next several years. While the Company
does not anticipate a material increase in the projected annual level of its
environmental-related costs, there is always the possibility that such increases
may occur in the future in view of the uncertainties associated with
environmental exposures. Environmental exposures are difficult to assess for
numerous reasons, including the identification of new sites, developments at
sites resulting from investigatory studies, advances in technology, changes in
environmental laws and regulations and their application, the scarcity of
reliable data pertaining to identified sites, the difficulty in assessing the
involvement and financial capability of other potentially responsible parties
and the Company's ability to obtain contributions from other parties and the
time periods (sometimes lengthy) over which site remediation occurs. It is
possible that some of these matters (the outcomes of which are subject to
various uncertainties) may be resolved unfavorably against the Company.
FUTURE SERVICE COSTS
From the time of the Distribution to December 31, 1997, the Company and Olin
will share certain services, such as payroll and benefits administration,
mainframe computing services, and telecommunications support. Olin will be
reimbursed by the Company at rates comparable to the pre-Distribution inter-
company charges. By December 31, 1997, the Company will develop and establish
these services on its own, at costs that may be more or less than the rates
charged by Olin. It is anticipated that as a separate public company, costs of
other types of services, in addition to those mentioned, will increase by
approximately $4 million per year as a result of additional financial reporting
requirements, stock transfer fees, director's fees, insurance, and executive
compensation and benefits. Pro forma net loss for 1996, would have been $10.5
million compared to the reported net loss of $7.9 million, and pro forma net
income for 1995, would have been $3.1 million compared to the reported net
income of $5.7 million after giving effect to the additional $4 million of
annual pretax costs expected to be incurred in the future as a separate public
company.
NEW ACCOUNTING STANDARDS
19
<PAGE>
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of". The adoption of this
standard did not have a material impact on the Company's financial position and
its operating results.
Effective January 1, 1996, The Company adopted Statement of Finance
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation."
As allowable by SFAS No. 123, the Company will not adopt the recognition and
measurement provisions of the statement, but rather will disclose in the notes
to the financial statements the impact on net income and earnings per share as
if the fair value based compensation cost had been recognized.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations supplemented by credit provided by Olin and proceeds
from sales of property, plant and equipment were used to finance the Company's
funding needs of capital spending and the 1994 acquisition of the medium caliber
ammunition business of GenCorp's Aerojet Ordnance Division. In the past and
until the Distribution, the Company's financing requirements were provided by
Olin. In connection with the Distribution, the Company assumed a $160 million
floating rate financing agreement (the "Revolving Credit Agreement") with
participating banks to provide financing for the Company's working capital
requirements, capital expenditures and general corporate purposes. Olin borrowed
$145 million under the Revolving Credit Agreement based on the Company's
estimated working capital at the date of Distribution. A final determination of
the appropriate debt level by Olin resulted in targeted debt of $125 million.
Accordingly, the Company was provided with $20 million in cash by Olin. The
Revolving Credit Agreement permits borrowings on a revolving basis over a five-
year term. It contains restrictive covenants limiting the ratio which earnings
before interest and taxes bears to interest expense, the ratio which total debt
bears to earnings before interest, taxes, depreciation and amortization, and
contains minimum tangible net worth requirements. No principal repayments are
required until the end of the five-year term. During February 1997, the Company
entered into a series of interest rate swaps that fixed the interest rate on a
substantial portion of its borrowings projected over the next four years.
For the year ended December 31, 1996, net cash provided by operations totaled
$14.3 million. During 1996, cash was provided by the reduction in accounts
receivable resulting from completion of the combined effects munition contract
and a cash settlement resulting from an in-flight entertainment contract
cancellation that occurred in 1995, offset in part by lower current liabilities,
primarily accounts payable, and increased inventory associated with medium
caliber ammunition production delays. During the fourth quarter of 1996, the
Company entered into a contract modification under one of its multi-year
contracts which allows for the acceleration of contract payments, in exchange
for a reduction in selling price. To qualify for such payments, the Company must
achieve certain performance milestones. Through February 1997, the Company had
received approximately $61 million of such payments.
For the year ended December 31, 1995, net cash used for operations totaled
$7.8 million. The utilization of cash by operating activities for the year ended
1995 was due to an increase in working capital required to support the higher
sales from the combined effects munition contract and because of shipment delays
on certain medium caliber and tank ammunition contracts, offset in part by cash
provided by loans taken against the cash surrender value of key employees life
insurance policies. Operating cash flow in 1994 decreased significantly from the
prior year as additional funds were spent for working capital. Increase in
inventories was due to shipment delays on certain medium caliber ammunition and
additional funds to support both the combined effects munition contract and the
commercial in-flight entertainment product line, and was offset in part by
higher current liabilities. Also, funds were spent for the expansion of the
Company's complete line of medium caliber ammunition products.
Capital spending for the year ended December 31, 1996 decreased 31% from 1995
due to a planned reduction to control capital costs and the completion of the
medium caliber ammunition consolidation and the facilities to demilitarize
obsolete ammunition stocks (ammunition de-mil). Capital spending in 1995
increased 8% from the prior year, mainly to complete the consolidation of some
medium caliber ammunition assembly operations into the Company's Marion
operations and the ammunition de-mil facility. Capital spending in 1994
increased 40% from the prior year mainly to consolidate the acquired medium
caliber ammunition operations with the Company's existing medium caliber
ammunition facilities and to construct a facility to perform ammunition de-mil.
During 1994, the Company purchased certain medium caliber ammunition and air
dispensed munitions assets of GenCorp's Aerojet Ordnance Division for
approximately $25.4 million. This acquisition provided the Company with a
complete line of medium caliber ammunition as well as air dispensed munitions
products.
20
<PAGE>
The Company believes that, based on its working capital and fixed capital
requirements, amounts available under the Revolving Credit Agreement are
adequate to meet its cash requirements.
EFFECT OF INFLATION
Because of the relatively low level of inflation experienced in the U.S.,
inflation did not have a material adverse effect on the revenue or operating
results of the Company during the three most recent fiscal years.
RISK FACTORS
All forecasts and projections in this Form 10-K are "forwarded-looking
statements" as defined in the Private Securities Litigation Reform Act of 1995,
and are based on management's current expectations of the Company's near term
results, based on current information available and pertaining to the Company.
Actual results may differ materially from those projected in the forward-looking
statements. These forward-looking statements involve risks and uncertainties,
including, but not limited to the following: demand for commercial powder;
international business opportunities; ammunition lot acceptance; timing of
contract funding and continued receipt of accelerated payments under the multi-
year tank ammunition contract; changing economic and political conditions in the
United States and in other countries; changes in governmental laws and
regulations surrounding various matters, such as environmental remediation,
contract pricing, and international trading restrictions; changes in
governmental spending and budgetary policies, such as reductions in the level of
defense spending or redirection of Department of Defense program funding;
production and pricing levels of important raw materials, lower than anticipated
levels of plant utilization resulting in production inefficiencies and higher
costs, whether related to the delay of new product introductions, improved
production processes or equipment, or labor relation issues; difficulties or
delays in the development, production, testing and marketing of products;
product margins and customer product acceptance; and costs and effects of legal
and administrative cases, proceedings, settlements and investigations involving
the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................................................ 22
Consolidated Balance Sheets as of December 31, 1996 and December 31, 1995................... 23
Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994.. 24
Consolidated Statements of Cash Flow for the Years Ended December 31, 1996, 1995 and 1994... 25
Notes to Consolidated Financial Statements.................................................. 26
</TABLE>
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Primex Technologies, Inc.:
We have audited the consolidated balance sheets of Primex Technologies, Inc.
and subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations and cash flows for each of the years in the three-year
period ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Primex Technologies, Inc. and subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Tampa, Florida
February 13, 1997
22
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
--------------------
1996 1995
---- ----
ASSETS ($ IN THOUSANDS)
Current Assets:
Cash............................................ $ 20,000 $ -
Receivables..................................... 123,658 153,076
Inventories, Net................................ 57,241 49,763
Other Current Assets............................ 5,843 6,587
-------- --------
Total Current Assets.......................... 206,742 209,426
Property, Plant and Equipment, Net................ 105,023 114,473
Goodwill.......................................... 47,385 49,831
Other Assets...................................... 14,593 7,249
-------- --------
Total Assets.................................. $373,743 $380,979
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
- --------------------
Accounts Payable................................ $ 30,147 $ 42,781
Income Taxes Payable............................ - 625
Accrued Liabilities............................. 28,873 23,087
-------- --------
Total Current Liabilities..................... 59,020 66,493
Long Term Debt.................................... 145,000 125,000
Other Liabilities................................. 24,589 30,951
-------- --------
Total Liabilities............................. 228,609 222,444
Commitments and Contingencies
Stockholders' Equity:
Common Stock, $1.00 par value, 60,000,000 shares
authorized, issued and outstanding
5,220,276 shares................................. 5,220 -
Additional Paid-in Capital........................ 139,914 -
Equity ........................................... - 158,535
-------- --------
Total Stockholders' Equity.................... 145,134 158,535
-------- --------
Total Liabilities and Stockholders' Equity.... $373,743 $380,979
======== ========
See accompanying notes to consolidated financial statements.
23
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
---- ---- -----
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Sales ...................................... $ 471,488 $ 508,113 $ 416,148
Operating Expenses:
Cost of Goods Sold .................... 399,187 428,707 335,303
Selling and Administration ............ 53,336 51,297 46,758
Research and Development .............. 6,241 5,016 5,364
Other Charges ......................... 10,500 2,000 -
---------- ---------- ----------
Operating Income .......................... 2,224 21,093 28,723
Interest Expense .......................... 9,256 9,276 8,638
Interest and Other Income ................. 663 807 1,743
---------- ---------- ----------
Income (Loss) Before Taxes ................ (6,369) 12,624 21,828
Income Tax Provision ...................... 1,533 6,963 9,805
---------- ---------- ----------
Net Income (Loss) ......................... $ (7,902) $ 5,661 $ 12,023
========== ========== ==========
(Unaudited Proforma Information)
Proforma Net Income Per Share.............. $(1.51) $1.08 $2.30
========== ========== ==========
Common Shares Outstanding................... 5,220,276 5,220,276 5,220,276
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1995 1994
-------- -------- --------
($ IN THOUSANDS)
OPERATING ACTIVITIES
- --------------------
<S> <C> <C> <C>
Net Income (Loss)............................................ $ (7,902) $ 5,661 $ 12,023
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided (Used) by Operating Activities:
Depreciation................................................. 17,211 16,633 16,955
Amortization of Intangibles.................................. 2,954 3,042 2,669
Deferred Taxes............................................... (3,805) 2,502 (2,007)
Changes in Assets and Liabilities
Net of Purchase of Business:
Receivables............................................... 29,418 (48,182) (93)
Inventories............................................... (7,478) 16,038 (31,149)
Other Current Assets...................................... 659 481 (213)
Current Liabilities....................................... (7,473) (16,899) 23,624
Other Liabilities......................................... (2,472) 2,217 (2,945)
Other Assets.............................................. (7,737) 10,482 (3,280)
Other Operating Activities................................... 947 201 136
-------- -------- --------
Net Operating Activities.................................... 14,322 (7,824) 15,720
-------- -------- --------
INVESTING ACTIVITIES
- --------------------
Capital Expenditures......................................... (13,273) (19,191) (17,821)
Acquisition.................................................. - - (25,400)
Disposition of Property Plant and Equipment.................. 4,565 3,859 -
Other Investing Activities................................... (195) - (302)
-------- -------- --------
Net Investing Activities.................................... (8,903) (15,332) (43,523)
-------- -------- --------
FINANCING ACTIVITIES
- --------------------
Net Borrowing (Repayment) ................................... 20,000 - -
Net Transfers from (to) Olin................................. (5,419) 23,156 27,803
-------- -------- --------
Net Financial Activities.................................... 14,581 23,156 27,803
-------- -------- --------
Net Increase in Cash......................................... 20,000 - -
Cash, Beginning of Year...................................... - - -
-------- -------- --------
Cash, End of Year............................................ $ 20,000 $ - $ -
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
FORMATION OF PRIMEX TECHNOLOGIES, INC. AND DESCRIPTION OF BUSINESS
Primex Technologies, Inc. (the "Company") was organized in May 1996 and has
been publicly owned since December 31, 1996, when Olin Corporation ("Olin") made
a distribution (the "Distribution") to its shareholders consisting of all of the
outstanding shares of the Company's common stock. Regular way trading in the
common stock commenced on The Nasdaq National Market System on January 7, 1997.
Prior to December 31, 1996, the Company was a wholly-owned subsidiary of Olin.
In connection with the Distribution, the assets and liabilities of Olin's former
Ordnance Division ("Ordnance") and Aerospace Division ("Aerospace") were
transferred to the Company.
Ordnance produces large and medium caliber ammunition for aircraft, artillery,
tanks, warships; air dispensed munitions; Ball Powder(R) propellant for
sporting, military and commercial applications; and propulsion systems for large
caliber gun systems. Ordnance's primary customers are the U.S. Department of
Defense and other government R&D agencies/laboratories, allied governments and
sporting ammunition manufacturers.
Aerospace products include rocket engines, advanced electric propulsion
systems, aerospace electronic products, pulsed power systems and solid
propellant products, including munitions dispensing systems. Aerospace's primary
customers are satellite, aircraft and missile contractors; other
defense/aerospace subsystems and systems contractors; NASA and other government
R&D agencies/laboratories.
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the former combined
operations of the Ordnance and Aerospace Divisions. The consolidated financial
statements have been prepared as if the Company had operated as a separate
stand-alone entity for all periods presented and include only those assets and
liabilities transferred to the Company, and revenues and expenses attributable
to the Company's operations. The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries which were transferred
to the Company prior to the Distribution. Inter-company balances and
transactions between entities included in these financial statements have been
eliminated. These financial statements include the assets, liabilities, revenues
and expenses of the following subsidiaries:
Primex Aerospace Company
Primex Physics International Company
U.S. Ordnance Company
General Defense Corporation (GDC)
GD International, LTD, a wholly-owned subsidiary of GDC
Olin Services, Inc., a wholly-owned subsidiary of GDC
PI Physics International (Schweiz) A.G., a wholly-owned subsidiary of Primex
Physics International Company
The consolidated financial statements include an allocation of Olin's
consolidated debt prior to December 31, 1996 and interest expense related to the
assigned portion of Olin's debt. The amount of debt allocated was based on
providing a debt to equity ratio similar to that of Olin as well as a level of
debt the Company could maintain on an independent basis in the future.
Management believes the method used to allocate the debt is reasonable. An
assessment of corporate overhead is included in selling and administration
expenses with the allocation based on either effort committed or number of
employees. Management believes that the allocation method used to allocate the
costs and expenses is reasonable. However, such allocated amounts may or may not
necessarily be indicative of what selling and
26
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
administration expenses would have been if the Company operated independently of
Olin. It is anticipated that as a separate public company administration
expenses will increase by approximately $4,000 per year as a result of
additional financial reporting requirements, stock transfer fees, directors'
fees, insurance, and executive compensation and benefits.
The preparation of the consolidated financial statements requires estimates
and assumptions that affect amounts reported and disclosed in the financial
statements and related notes. Actual results could differ from those estimates.
Long-Term Contracts
Sales and cost of sales related to government contracts that extend beyond one
year are primarily recognized under the percentage-of-completion method of
accounting as costs are incurred. Profits expected to be realized on contracts
are based on the Company's estimates of costs at completion compared to total
contract sales value; profits for interim reporting periods are based on costs
incurred relative to total estimated costs at completion. When the Company
believes the cost of completing a contract will exceed contract-related
revenues, the full amount of the anticipated contract loss is recognized. For
contracts or commercial orders with performance periods of under one year, sales
are recognized on the units shipped method of accounting.
Sales directly to the U.S. government and its agencies amounted to $368,257 in
1996, $391,099 in 1995, and $318,898 in 1994. No other single customer accounted
for more than 9% of the Company's total annual sales during the three-year
period ended December 31, 1996. Export sales from the United States to
unaffiliated customers were $28,875, $24,285 and $16,428 in 1996, 1995 and 1994,
respectively.
Inventories
Inventories are stated at the lower of cost or net realizable value. Prior to
the Distribution, certain inventories were included in a larger pool of Olin
inventories valued by the dollar value last-in, first-out (LIFO) method of
inventory accounting. The Company was allocated a percentage share of the LIFO
reserve related to this inventory pool (based on first-in, first-out) by Olin as
part of the Distribution.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is computed
on a straight-line basis over the following estimated useful lives:
Improvements to land............. 10 to 20 years
Building and building equipment.. 5 to 45 years
Machinery and equipment.......... 3 to 12 years
Leasehold improvements are amortized over the term of the lease or the estimated
useful life of the improvement, whichever is less. Start-up costs are expensed
as incurred.
27
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSAND, EXCEPT PER SHARE DATA)
Goodwill
Goodwill, the excess of the purchase price of the acquired businesses over the
fair value of the respective net assets, is amortized principally over 30 years
on a straight-line basis. Accumulated amortization was $20,430 and $17,869 at
December 31, 1996 and 1995, respectively. The Company periodically reviews the
value of its goodwill to determine if an impairment has occurred. The Company
assesses the potential impairment of recorded goodwill by the undiscounted value
of expected future operating cash flows in relation to its net capital
investment in the subsidiary. An impairment would be recorded based on the
estimated fair value.
Environmental Liabilities and Expenditures
Accruals for environmental matters are recorded when it is probable that a
liability has been incurred and the amount of the liability can be reasonably
estimated, based upon current law and existing technologies. These amounts,
which are not discounted and exclusive of claims against third parties, are
adjusted periodically as assessment and remediation efforts progress or
additional technical or legal information becomes available. Environmental
remediation costs are charged to expense. Environmental costs are capitalized if
the costs increase the value of the property and /or mitigate or prevent
contamination from future operations.
Income Taxes
Prior to the Distribution, the Company's operations were included in the U.S.
federal consolidated tax returns of Olin. The provision for income taxes
includes the Company's allocated share of Olin's consolidated income tax
provision and is calculated on a separate Company basis pursuant to the
requirements of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". Allocated income taxes are settled with Olin on a current
basis. Deferred taxes are provided for differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
Net Income (Loss) Per Share
The calculation of net income per share on a pro forma basis assumes that all
5,220,276 common shares outstanding immediately after the Distribution were
outstanding for all periods prior to the Distribution.
Accounting Standards
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of". The adoption of this
standard did not have a material impact on the Company's financial position and
its operating results.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation". As
allowable by SFAS No. 123, the Company will not adopt the recognition and
measurement provisions of the statement, but rather will disclose in the notes
to the financial statements the impact on net income and earnings per share as
if the fair value based compensation cost had been recognized.
28
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
RECEIVABLES
Receivables, including amounts due under long-term contracts (contract
receivables), consist of the following:
1996 1995
-------- --------
Contract receivables:
Billed receivables............................... $ 18,490 $ 18,851
Unbilled receivables............................. 85,898 92,113
Trade receivables................................ 18,440 40,621
-------- --------
Total accounts receivable trade................ 122,828 151,585
Other receivables.................................. 830 1,491
-------- --------
Total $123,658 $153,076
======== ========
Unbilled receivables represent the balance of recoverable costs and accrued
profit comprised principally of revenue recognized on contracts for which
billings have not been presented to the customer because the amounts were earned
but not billable as of the balance sheet date under the contractual terms.
Billed and unbilled contract receivables include amounts related to Government
contracts of $12,478 and $72,278 in 1996, and $12,061 and $79,473 in 1995. Also
included in contract receivables are claims in the amount of $266 and $445 at
December 31, 1996 and 1995, respectively.
INVENTORIES
Inventories consist of the following:
1996 1995
---- ----
Raw materials and work-in-progress.............. $58,355 $50,690
Finished goods.................................. 7,927 7,749
------- -------
66,282 58,439
Less revaluation to LIFO........................ 9,041 8,676
------- -------
Total inventories............................... $57,241 $49,763
======= =======
Inventory valued at LIFO represented approximately 21% of total inventory at
December 31, 1996 and 22% of total inventory at December 31, 1995.
PROPERTY, PLANT AND EQUIPMENT
1996 1995
---- ----
Land and improvements to land................... $ 14,399 $ 17,497
Building and building equipment................. 39,869 37,942
Machinery and equipment......................... 162,419 158,771
Leasehold improvements.......................... 20,161 17,961
Construction-in-progress........................ 17,502 23,927
-------- --------
Property, plant and equipment................... 254,350 256,098
Less accumulated depreciation................... 149,327 141,625
-------- --------
$105,023 $114,473
======== ========
Leased assets capitalized and included above are not significant. Maintenance
and repairs charged to operations amounted to $9,824, $ 9,846 and $8,568 in
1996, 1995 and 1994, respectively.
29
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
LONG-TERM BORROWINGS
As a result of the Distribution the Company has assumed all obligations for a
financing agreement entered into on December 23, 1996 by Olin (the "Revolving
Credit Agreement"), under the terms of which participating banks have committed
a maximum of $160,000 to the Company for cash borrowings and letters of credit.
Borrowings under the Revolving Credit Agreement are unsecured. The Company pays
interest, under the Revolving Credit Agreement, on outstanding borrowings at the
Company's choice of various floating rate options. The Revolving Credit
Agreement expires on December 31, 2001 and contains a number of financial
covenants including requirements of minimum interest coverage, maximum leverage,
and minimum tangible net worth. It also contains limitations on amounts
available to pay dividends or repurchase Company stock ("Restricted Payments").
At December 31, 1996 the amounts available for Restricted Payments were $17
million. Outstanding borrowings under this facility at December 31, 1996 were
$145,000 with a weighted average interest rate of 6.3%.
The financial statements include $125,000 of debt for all periods prior to
establishment of the Revolving Credit Agreement which has been reclassified as
long-term debt as a result of the Distribution and assumption of the Revolving
Credit Agreement. Interest expense of $9,256, $9,276 and $8,638 in 1996, 1995,
and 1994, respectively, was determined using Olin's annual average borrowing
rates for those periods.
OTHER CHARGES
Other charges include a provision for the settlement of claims relating to a
government investigation of certain testing irregularities at the Company's
Marion, Illinois facility of $6,000 in the year ended December 31, 1996 and
$2,000 in the year ended December 31, 1995. Also included in other charges in
the year ended December 31, 1996 is a $4,500 provision relating to the Belgian
contract dispute. See footnote titled "Legal Proceedings" included herein.
ACCRUED LIABILITIES
Accrued liabilities consist of the following:
1996 1995
---- ----
Accrued payroll and employee benefits........... $12,506 $10,802
Contract Liabilities............................ 11,776 6,495
Other........................................... 4,591 5,790
------- -------
Total accrued liabilities....................... $28,873 $23,087
======= =======
Contract liabilities represent principally reserves for anticipated losses on
certain incomplete contracts as well as estimated costs to perform contractual
activities associated with completed contracts.
30
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME TAXES
Components of Income Tax Expense:
1996 1995 1994
---- ---- ----
Currently payable:
Federal ........................... $4,509 $3,774 $9,976
State ............................. 829 687 1,836
Deferred............................. (3,805) 2,502 (2,007)
------ ------ ------
Income Tax Expense................... $1,533 $6,963 $9,805
====== ====== ======
The following table accounts for the difference between the income tax
expenses provision and the amounts obtained by applying the statutory U.S.
federal income tax to the income before taxes.
Effective Tax Rate Reconciliation (percent):
1996 1995 1994
---- ---- ----
Statutory Federal Tax Rate......... (35.0) 35.0 35.0
State Income Taxes, Net............. 2.4 5.5 4.5
Goodwill............................ 14.1 7.0 4.1
Fines and Penalties................. 33.0 5.5 -
Supplemental Pension................ - 0.8 1.0
Other, Net.......................... 9.6 1.4 0.3
----- ---- ----
Effective Tax Rate.................. 24.1 55.2 44.9
===== ==== ====
Components of Deferred Tax Assets and Liabilities:
1996 1995
---- ----
Deferred Tax Assets:
Postretirement Benefits........................... $ 4,889 $ 3,653
Non-deductible Reserves........................... 10,941 9,900
Other Miscellaneous Items......................... 1,300 3,390
------- -------
Total Deferred Tax Assets....................... $17,130 $16,943
======= =======
Deferred Tax Liabilities:
Property, Plant and Equipment..................... $11,396 $13,895
Deferred Contract Income.......................... 4,942 6,061
------- -------
Total Deferred Tax Liabilities.................. $16,338 $19,956
======= =======
Income from foreign subsidiaries is not significant and represented less than
$70 in each of the years presented. Included in other current assets at December
31, 1996 and 1995, respectively, are $4,717 and $4,802 of net current deferred
assets.
ACQUISITIONS
In 1994, the Company acquired certain assets of the medium caliber ammunition
business of GenCorp's Aerojet Ordnance Division for approximately $25,400. The
fair value of assets acquired included working capital of $11,170 and property,
plant and equipment of $14,230. This acquisition was accounted for as a purchase
and accordingly, its results of operations, which were not material, are
included in the combined financial statements from the date of acquisition.
31
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
EMPLOYEE BENEFIT PLANS
Prior to the Distribution, virtually all U.S. employees of the Company
participated in one of several Olin pension benefit plans covering employees of
other Olin businesses. The pension liability for active and retired employees
participating in the Olin plans prior to the Distribution will remain with Olin.
Costs and expenses include accruals for pensions at rates determined by Olin
corporate personnel and which amounted to $5,295, $4,622 and $4,427 in 1996,
1995 and 1994, respectively. Effective January 1, 1997, pension benefits for
substantially all domestic employees are provided through the Company's
sponsorship of a defined contribution plan (the "Plan"). The Plan is intended to
meet the requirements of Section 401 (k) of the Internal Revenue code. The Plan
allows the Company to match participant contributions up to certain limits and
to make age weighted profit sharing contributions for eligible participants.
Certain Company employees prior to the Distribution participated in
supplemental non-qualified pension plans. Costs and expenses associated with the
non-qualified plans were $1,036, $566, and $688 in 1996, 1995, 1994,
respectively. Included in other assets in 1996 and 1995 is the cash surrender
value of the related life insurance policies of $11,727 and $1,991,
respectively, which is net of loans against those policies of $9,200 in 1995.
The loans were repaid in 1996. Olin will remain liable for payment of benefits
accrued for employees of the Company under any Olin non-qualified benefit plan
at the time of the Distribution. The Company will establish a non-qualified plan
after the Distribution.
Prior to the Distribution, the Company employees participated in the Olin
Corporation Contributing Employee Ownership Plan, which is a defined
contribution plan available to essentially all domestic Olin employees and
provides a match of employee contributions. The matching contribution allocable
to the Company employees has been included in cost and expenses in the
accompanying financial statements and was $2,577, $2,274, and $1,958 in 1996,
1995, 1994, respectively.
The Company's employees also participate in Olin-provided postretirement
health care and life insurance benefits for eligible active and retired domestic
employees. Costs and expenses include accruals for post retirement benefits for
both active and retired employees at rates determined by Olin corporate
personnel and which amounted to $1,176, $1,100 and $550 in 1996, 1995, and 1994,
respectively. The liability for retired employees prior to the Distribution will
remain with Olin. The Company has adopted a plan similar to the Olin plan to
provide postretirement benefits for its active employees.
The following table reflects the components of post retirement liability for
active employees of the Company.
1996 1995
---- ----
Accumulated postretirement benefit obligation:
Fully eligible active plan participants......................... $3,318 $3,473
Other active participants....................................... 5,251 5,666
------ ------
Cumulative accumulated postretirement benefit obligation........ 8,569 9,139
Unrecognized loss............................................... - (912)
Unrecognized prior service cost................................. - 1,165
------ ------
Net postretirement benefit liability............................ $8,569 $9,392
====== ======
The accumulated postretirement benefit obligation was determined using the
projected unit credit method and an assumed discount rate of 8.0% in 1996, 7.5%
in 1995 and 8.5% in 1994. The assumed health care cost trend rate used for pre-
65 retirees was 11.2% in 1996 and 12.5% in 1995 and 13% in 1994, declining
one-half percent per annum to 5.5%. A one percent increase each year in the
health care cost trend rate used would have resulted in a 10.1% increase in
aggregate service and interest components of expense for the year 1996, and a
$865 increase in the accumulated postretirement benefit obligation at December
31, 1996.
32
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
LONG-TERM INCENTIVE PLAN
The Company adopted a long-term incentive plan to encourage selected salaried
employees to acquire a proprietary interest in the Company's growth and
performance and to attract and retain qualified individuals. The plan provides
the ability to issue stock options, stock appreciation rights, restricted stock
and restricted stock units, performance awards, and other stock-based awards.
Subsequent to the Distribution the Company issued restricted stock units to
certain officers of the Company. The value of the restricted stock units is
$5,642 and will be charged to income over the vesting period of 5 years.
SHAREHOLDER RIGHTS PLAN
The Company has adopted a Shareholder Rights Plan which is designed to prevent
an acquiror from gaining control of the Company without offering a fair price to
all shareholders. Each right entitles a shareholder (other than the acquiror) to
buy one-thousandth of a share of Series A Participating Cumulative Preferred
Stock at an exercise price of $55. The rights are exercisable only if a person
acquires more than 15% of the Company's common stock or if the Board of
Directors so determines following the commencement of a tender or exchange offer
to acquire more than 15% of the Company's common stock. If any person acquires
more than 15% of the Company's common stock and in the event of a subsequent
merger or combination, each right will entitle the holder (other than the
acquiror) to purchase stock or other property of the acquiror having a value of
twice the exercise price. The Company can redeem the rights at $.01 for a
certain period of time. The rights will expire on December 19, 2006, unless
earlier redeemed by the Company.
STOCKHOLDERS' EQUITY
Equity represents Olin's ownership interest in the recorded net assets of the
Company prior to the Distribution. All cash and inter-company transactions flow
through the equity account.
Common stock and additional paid-in capital at December 31, 1996
represents the pro forma effect of shares issued as a result of the
Distribution.
Changes in Stockholders' Equity are Summarized below:
<TABLE>
<CAPTION>
EQUITY IN
COMMON STOCK ADDITIONAL EARNINGS TOTAL
---------------------- PAID-IN PRIOR TO STOCKHOLDERS'
SHARES AMOUNT CAPITAL DISTRIBUTION EQUITY
------------ -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993.................... - $ - $ - $ 91,287 $ 91,287
Net Intercompany Activity with Olin............. - - - 27,803 27,803
Net Income...................................... - - - 12,023 12,023
--------- --------
Balance at December 31, 1994.................... - - - 131,113 131,113
Net Intercompany Activity with Olin............. - - - 21,761 21,761
Net Income...................................... - - - 5,661 5,661
----------- ------ -------- --------- --------
Balance at December 31, 1995.................... - - - 158,535 158,535
Net Intercompany Activity with Olin............. - - - (5,499) (5,499)
Net Loss........................................ - - - (7,902) (7,902)
Capitalization of Divisional Equity............. 5,220,276 5,220 139,914 (145,134) -
----------- ------ -------- --------- --------
Balance at December 31, 1996.................... 5,220,276 $5,220 $139,914 $ - $145,134
=========== ====== ======== ========= ========
</TABLE>
33
<PAGE>
PRIMEX TECHNOLOGIES, INC.
-------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
COMMITMENTS AND CONTINGENCIES
The Company leases certain properties, such as manufacturing, warehousing and
office space, data processing and office equipment. Leases covering these
properties generally contain escalation clauses based on increased costs of the
lessor, primarily property taxes, maintenance and insurance and have renewal or
purchase options. Total rent expense charged to operations amounted to $5,222 in
1996, $4,684 in 1995 and $4,876 in 1994 (sublease income is not significant).
Future minimum rent payments under operating leases having initial or remaining
noncancelable lease terms in excess of one year at December 31, 1996 are as
follows: $4,092 in 1997; $3,419 in 1998; $2,917 in 1999; $2,549 in 2000; $1,870
in 2001.
ENVIRONMENTAL
The Company is party to various governmental and private environmental actions
associated with waste disposal sites and manufacturing facilities. Environmental
provisions charged to income amounted to none in 1996, $795, in 1995 and $120 in
1994. The consolidated balance sheets include reserves for future environmental
expenditures to investigate and remediate known sites amounting to $1,865 in
1996 and $2,574 in 1995 and are classified as other noncurrent liabilities,
respectively.
Environmental exposures are difficult to assess for numerous reasons,
including the identification of new sites, developments at sites resulting from
investigator studies, advances in technology, changes in environmental laws and
regulations and their application, the scarcity of reliable data pertaining to
identified sites, the difficulty in assessing the involvement and financial
capability of other potentially responsible parties and the time periods
(sometimes lengthy) over which site remediation occurs. It is possible that some
of these matters (the outcomes of which are subject to various uncertainties)
may be resolved unfavorably against the Company.
LEGAL PROCEEDINGS
In May 1994, the Company discovered that an employee may have modified
inspection and testing software used on certain medium caliber ammunition
production lines at its Marion, Illinois testing facility to permit inspections
to be performed at tolerances which may not have been fully compliant with
applicable contract specifications. Upon discovering the issue, the Company
promptly notified U.S. Government contracting representatives, voluntarily
disclosed the circumstances then known to the Department of Defense's Office of
the Inspector General and expressed its intent to fully investigate the matter
and take all necessary corrective actions. In September of 1996 this matter was
settled with the U.S. Government for $8,000. The settlement charges of which
$6,000 and $2,000 was charged to operations during 1996 and 1995, respectively,
are included in "Other charges" in the accompanying consolidated statements of
operations.
The Company is involved in a contract dispute with the Belgium Ministry of
Defense related to the 1985 sale of artillery ammunition. The Belgium Ministry
of Defense has alleged improprieties committed by the Belgium national who
represented the Company in the transaction. Based on these allegations, the
Belgium Ministry of Defense withheld final payment on the contract and the
Company agreed to extend the letter of credit related to the contract guarantee
pending a decision by the Belgium courts on the underlying contract dispute. The
trial court ruled against the Company. The decision has been appealed. In the
event that the trial court's decision is sustained, the resultant liability is
estimated at approximately $4,500, net of a $1,100 receivable, at current
exchange rates. The provision for the estimated settlement is included in "Other
Charges" in the accompanying consolidated statements of operations. However,
since the net liability for this matter including legal fees and costs, monetary
judgements, and cost settlements has been assumed by Olin in conjunction with
the Distribution the balance sheet does not include any reserves related to this
matter.
34
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
RELATED PARTY TRANSACTIONS
The Company sells propellant to Olin's Winchester Division which is used in
the manufacturing of sporting ammunition. These product sales aggregated $15,813
in 1996, $23,272 in 1995 and $25,706 in 1994 and are reflected in sales on the
statement of income for the respective periods. Payment of these inter-company
sales occurred at the time of shipments by way of the inter-company account.
The Company was charged by Olin for the Company's share of expenses of certain
centralized activities using various allocation bases. These activities include,
but are not limited to, administration of employee benefit programs, tax
compliance, management information systems, treasury, legal and general
corporate functions. Charges to the Company for centralized corporate services
were $4,273 in 1996, $2,170 in 1995, and $2,528 in 1994. In 1996, the charges
for centralized corporate services included a number of one time costs
associated with the Distribution.
QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly operating results for 1996 and
1995:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1996 1995
---------------------------------------- --------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
--------- -------- --------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $102,081 $125,622 $101,072 $142,713 $109,095 $131,631 $118,856 $148,531
Gross Profit 16,120 18,631 17,008 20,542 21,596 20,557 17,513 19,740
Operating Income (Loss) (4,672) 4,273 (156) 2,779 7,895 5,941 3,566 3,691
Net Income (Loss) (5,671) 959 (3,037) (153) 2,585 1,758 704 614
Pro Forma Net Income (Loss)
Per Share $(1.08) $0.18 $(0.58) $(0.03) $0.49 $0.34 $0.13 $0.12
</TABLE>
35
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On February 4, 1997, the Company, based on the recommendation of the
Audit Committee of the Company's Board of Directors, retained Ernst & Young LLP
("Ernst & Young") to serve as independent accountants for the Company and its
subsidiaries for periods ending after December 31, 1996. KPMG Peat Marwick LLP
("Peat Marwick"), the Company's former independant accountants, were
terminated for future periods. No Peat Marwick report on the financial
statements of the Company for the past two years contained an adverse opinion or
a disclaimer of opinion or was qualified or modified as to uncertainty, audit
scope, or accounting principles. During the two most recent fiscal years and the
subsequent interim period, there has been no disagreement between the Company
and Peat Marwick on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
BOARD OF DIRECTORS
The following table sets forth information as to persons who serve as
Directors of the Company.
NAME AND AGE YEAR TERM EXPIRES
- ------------ -----------------
Angelo A. Catani, 64........................... 1998
Edwin M. Glasscock, 68(2)...................... 1997
James G. Hascall, 58........................... 1999
David Lasky, 64(2)............................. 1999
Bob Martinez, 62(2)............................ 1998
William B. Mitchell, 61(2)... ................. 1999
Robert H. Rau, 60(1)...... .................... 1997
Anthony W. Ruggiero, 55(1)..................... 1998
Leon E. Salomon, 60(1)......................... 1997
(1) Member Audit Committee
(2) Member Compensation and Nominating Committee
Mr. Catani has served as Vice Chairman of the Company since the Distribution.
Prior thereto, Mr. Catani served with Olin as a Corporate Vice President since
April 1993 and served as President of Olin's Ordnance Division since 1988. Mr.
Catani also served as Vice President and General Manager of Defense Products for
Olin from 1985 to 1987.
Mr. Glasscock has served as a Director of the Company since the Distribution.
He is President of Edwin M. Glasscock Associates, Inc., a management consulting
firm founded by him in 1966.
Mr. Hascall has served as Chairman and Chief Executive Officer of the Company
since the Distribution. Prior thereto, Mr. Hascall served as Executive Vice
President of Olin since January 1, 1996, having operating responsibility for
Olin's Brass, Winchester, Ordnance and Aerospace Divisions. From October 1985
through December 1995, Mr. Hascall served as President of Olin's Brass Division
and as a Corporate Senior Vice President of Olin.
Mr. Lasky has served as a Director of the Company since the Distribution. He
has served as Chairman of the Board of Directors of Curtiss-Wright Corporation
since May 1995 and as Director, President and Chief Executive Officer of
Curtiss-Wright since May 1993. Mr. Lasky previously served as Senior Vice
President and General Counsel of Curtiss-Wright.
Governor Martinez has served as a Director of the Company since the
Distribution. He is a principal of Bob Martinez & Company, a domestic and
international business development consulting firm, founded by him in 1993. From
1991-1993, Governor Martinez served as the nation's Drug Czar and from 1987 to
1991 as the Governor of the State of Florida. Prior to that time, he served in a
variety of governmental positions, including Mayor of the City of Tampa,
Florida.
36
<PAGE>
Mr. Mitchell has served as a Director of the Company since the Distribution.
He served as Vice Chairman of Texas Instruments Incorporated from 1993 to his
retirement in December, 1996. Mr. Mitchell previously served as Executive Vice
President of Texas Instruments. He is a director of Curtiss-Wright Corporation.
Mr. Rau has served as a Director of the Company since the Distribution. He
has served as President and Chief Executive Officer of Rohr, Inc. since April
1993. Mr. Rau previously served as Executive Vice President of Parker Hannifin
Corporation and as President of the Parker Bertea Aerospace Group of Parker
Hannifin. He is also a member of the Board of Directors of Rohr.
Mr. Ruggiero has served as a Director of the Company since the Distribution.
He has served as Senior Vice President and Chief Financial Officer of Olin since
September 1995. Prior to joining Olin, Mr. Ruggiero was Senior Vice President
and Chief Financial Officer of Reader's Digest Association.
General Salomon has served as a Director of the Company since the
Distribution. He is is presently the Corporate Vice President of Purchasing and
Logistics for Rubbermaid Incorporated. General Salomon retired from active duty
in the U.S. Army in April 1996. Prior to his retirement, General Salomon
commanded the U.S. Army Material Command from February 11, 1994. From 1992-1994,
General Salomon was the Deputy Chief of Staff for Logistics, Department of the
Army. Prior to that assignment, he was the Deputy Commanding General for
Combined Arms Support, U.S. Army Training and Doctrine Command, and Commanding
General, U.S. Army Combined Arms Support Command and at Fort Lee, Virginia from
1989 to 1992.
EXECUTIVE OFFICERS
Set forth below is certain information as to the Company's executive officers.
<TABLE>
<CAPTION>
NAME AND AGE POSITION
- ------------ --------
<S> <C>
James G. Hascall, 58........ Chairman and Chief Executive Officer
Angelo A. Catani, 64........ Vice Chairman
J. Douglas DeMaire, 50...... Executive Vice President
William W. Smith, 62........ Executive Vice President and President,
Aerospace and Electronics Division
John E. Fischer, 41......... Vice President and Chief Financial Officer
George H. Pain, 46.......... Vice President, General Counsel and Secretary
Stephen C. Curley, 44....... Vice President and Treasurer
Jackson C. Picker, 47....... Vice President, Human Resources and
Administration
Michael S. Wilson, 50....... Vice President and President, Ordnance and
Tactical Systems Division
</TABLE>
Mr. Hascall has served as Chairman and Chief Executive Officer of the Company
since the Distribution. Prior thereto, he served with Olin as Executive Vice
President since January 1, 1996, having operating responsibility for Olin's
Brass, Winchester, Ordnance and Aerospace Divisions. From October 1985 through
December 1995, Mr. Hascall served as President of Olin's Brass Division and as a
Corporate Senior Vice President of Olin.
Mr. Catani has served as Vice Chairman of the Company since the Distribution.
Prior thereto, he served with Olin as Corporate Vice President since April 1993
and served as President of Olin's Ordnance Division since 1988. Mr. Catani also
served as Vice President and General Manager of Defense Products for Olin from
1985 to 1987.
Mr. DeMaire has served as Executive Vice President of the Company since the
Distribution. Prior thereto, he served with Olin as Corporate Vice President,
Corporate Planning since January 1996. Previously, Mr. DeMaire served as Vice
President, Planning for Olin's Brass and Winchester Divisions from 1986 and
1991, respectively.
Mr. Smith has served as Executive Vice President of the Company and President,
Aerospace and Electronics Division since the Distribution. Prior thereto, he
served with Olin as a Corporate Vice President since April 1993, having served
as President of Olin's Aerospace Division since 1988.
37
<PAGE>
Mr. Fischer has served as Vice President and Chief Financial Officer of the
Company since the Distribution. Prior thereto, he served as Vice President and
Financial Officer of Olin's Ordnance Division since January 1995. Mr. Fischer
previously served in a number of financial and contract management positions
with Olin's subsidiary General Defense Corporation ("GDC"), and was corporate
controller of GDC when it was acquired by Olin in 1988.
Mr. Pain has served as Vice President, General Counsel and Secretary of the
Company since the Distribution. Prior thereto, he served as Vice President,
Legal of Olin's Brass and Winchester Divisions, and as Deputy General Counsel of
Olin, since 1995. Mr. Pain has served in Olin's legal department since at least
1986.
Mr. Curley has served as Vice President and Treasurer of the Company since the
Distribution. Prior thereto, he served as Assistant Treasurer of Olin since
September 1990. Previously, Mr. Curley served as the Senior Tax Counsel in
Olin's Tax Department.
Mr. Picker has served as Vice President, Human Resources and Administration of
the Company since the Distribution. Prior thereto, he served as Vice President,
Human Resources of Olin's Ordnance Division since 1989, and has served in
various other human resource positions with Olin since 1975.
Mr. Wilson has served as Vice President of the Company, and President,
Ordnance and Tactical Systems Division since the Distribution. Prior thereto,
he served as Vice President of Tank Ammunition for Olin since 1991. Mr. Wilson
served from 1990 to 1991 as Vice President of Marketing, and from 1988 to 1991
as Vice President of Programs, for Olin's Ordnance Division. Mr. Wilson joined
Olin's Ordnance Division in 1985 as Director of Business Development and
Planning.
38
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------
COMPENSATION OF EXECUTIVE OFFICERS
The Company was formed on May 10, 1996. The following table discloses
compensation received by the Company's Chief Executive Officer and the four
other most highly compensated executive officers of the Company (the "Named
Executive Officers") for services rendered to Olin for the year ended December
31, 1996 (prior to the Distribution). The positions of the officers set forth
below are those currently held in the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
-------------------------- LONG TERM
COMPENSATION
-----------------------
1996 ANNUAL COMPENSATION AWARDS(a) PAYOUTS
------------------------------------- ---------- ----------
SECURITIES
NAMES AND PRINCIPAL POSITION OTHER ANNUAL UNDERLYING LTIP ALL OTHER
AS OF DECEMBER 31, 1996 SALARY BONUS COMPENSATION(b) OPTIONS(c) PAYOUTS(d) COMPENSATION(e)
----------------------- ------ ----- -------------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
James G. Hascall
Chairman and Chief Executive
Officer................................ $350,000 $401,553 $25,861 60,000 $233,764 $19,075
William W. Smith
Executive Vice President &
President Aerospace &
Electronics Division................... 250,000 113,746 11,210 30,000 95,150 14,875
J. Douglas DeMaire
Executive Vice President............ 200,004 140,544 4,589 20,000 58,100 12,463
Angelo A. Catani
Vice Chairman...................... 250,000 - 11,446 30,000 105,600 15,173
Stephen C. Curley
Vice President & Treasurer......... 134,480 70,272 1,781 6,000 30,116 8,285
</TABLE>
(a) All awards shown reflect an equitable adjustment made pursuant to the anti-
dilution provision of the plan for a 2-for-1 split of Olin Common stock but
do not reflect an equitable adjustment made pursuant to such provisions as a
result of the Distribution of the Company.
(b) Includes dividend equivalents on outstanding performance share units paid at
the same rate as dividends paid on Olin Common Stock. Also includes tax
gross-ups paid for imputed income on use of company-provided automobiles.
(c) The stock options reported are for Olin Common Stock and do not represent
options to acquire Common Stock of the Company.
(d) Payouts represent amounts earned under the Olin 1991 Long Term Incentive
Plan.
(e) Amounts reported in this column for 1996 are comprised of the following
items:
CEOP(1) SUPPLEMENTAL TERM LIFE
COMPANY MATCH CEOP (1)(2) INSURANCE (3)
------------- ------------ -------------
J.G. Hascall........... $6,393 $8,050 $4,632
W.W. Smith............. 6,393 3,850 4,632
J.D. DeMaire........... 6,393 2,210 3,860
A.A. Catani............ 6,179 4,362 4,632
S.C. Curley............ 5,738 - 2,547
- ---------------
(1) The Olin Contributing Employee Ownership Plan "CEOP".
(2) The Supplemental CEOP permits participants in the CEOP to make
contributions, and Olin to match the same in amounts permitted by the CEOP
but which would otherwise be in excess of those permitted by certain
Internal Revenue Service limitations
(3) Under Olin's key executive insurance program, additional life insurance is
provided and monthly payments are made to the spouse and dependent children
of deceased participants.
39
<PAGE>
OPTION GRANTS OF OLIN COMMON STOCK TO COMPANY EXECUTIVES IN LAST FISCAL YEAR
The following table sets forth as to the Named Executive Officers information
relating to options granted by Olin from January 1, 1996 through December 31,
1996. In connection with the Distribution, options to purchase Olin Common Stock
granted on January 25, 1996 to persons who became Company employees, and which
were not exercised (other than those options vesting on January 24, 1997, which
were accelerated and vested immediately prior to the termination of employment
with Olin) were surrendered and cancelled. In their stead, the affected
optionees received grants of restricted stock units pursuant to the Primex 1996
Long Term Incentive Plan described elsewhere herein. In addition, options to
purchase Olin Common Stock outstanding under the 1980 Stock Option Plan of Olin
for such persons were extended to terminate upon the earlier of (i) the end of
their term or (ii) two years following the Distribution. Options to purchase
Olin Common Stock granted under Olin's 1988 Stock Option Plan did not terminate
for such persons when the optionee ceased to be employed by Olin but were
extended to their original terms. No options to acquire Company Common Stock
were granted during the period from January 1, 1996 through December 31, 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(a)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS POTENTIAL REALIZABLE VALUE AT
UNDERLYING GRANTED ASSUMED RATES OF STOCK PRICE
OPTIONS TO ALL APPRECIATION FOR OPTION TERM (c)
GRANTED EMPLOYEES EXERCISE EXPIRATION ---------------------------------------
NAME (a,b) IN FISCAL YEAR PRICE (a) DATE 0% 5% 10%
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. G. Hascall 60,000 4.3% $40.00 1/24/06 0 $ 503,116 $ 1,274,994
W.W. Smith 30,000 2.2% $40.00 1/24/06 0 $ 251,558 $ 637,497
J.D. DeMaire 20,000 1.4% $40.00 1/24/06 0 $ 167,705 $ 424,998
A.A. Catani 30,000 2.2% $40.00 1/24/06 0 $ 251,558 $ 637,497
S.C. Curley 6,000 0.4% $40.00 1/24/06 0 $ 50,312 $ 127,499
All Olin Shareholders N/A N/A N/A N/A 0 $1,313,201,121 $3,327,909,703
All Olin Optionees 1,387,400 100.0% $40.00 1/24/06 0 $ 29,062,425 $ 73,649,889
- ---------
</TABLE>
(a) Number of options and the exercise price reflect an equitable adjustment to
the original grant made pursuant to anti-dilution provisions of the plan as
a result of the 2-for-1 stock split but do not reflect an anti-dilution
adjustment that was made for the Distribution of the Company.
(b) Options were awarded on January 25, 1996. One third of the options granted
to employees who became employees of the Company on January 1, 1997 vested
on December 31, 1996 and the balance of the grant to these employees was
canceled. As a result, Mr. Hascall's grant was reduced to 20,000 shares; Mr.
Smith's to 10,000; Mr. DeMaire's to 6,667; Mr. Catani's to 10,000 and Mr.
Curley's to 2,000 shares.
(c) No gain to the optionees is possible without appreciation in the stock price
which will benefit all Olin shareholders commensurately. The dollar amounts
under these columns are the result of calculations at the 5% and 10%
assumption rates set by the SEC and therefore are not intended to forecast
possible future appreciation of Olin's stock price or to establish any
present value of the options. Note the reduction in grants disclosed in note
(b) above.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth as to the Named Executive Officers information
regarding options to purchase Olin Common Stock exercised during 1996 and the
value of in-the-money outstanding options to purchase Olin Common Stock at the
end of 1996.
<TABLE>
<CAPTION>
Number of Aggregate
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money
Shares at 12/31/96 (a) Options at 12/31/96 (b)
Acquired Value ----------------------------- ---------------------------
on Exercise (a) Realized Exercisable Unexercisable Exercisable Unexercisable
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J. G. Hascall 0 $ 0 91,996 0 $880,261 $0
W. W. Smith 1,400 24,724 42,148 0 393,336 0
J. D. DeMaire 3,180 49,807 12,683 0 65,240 0
A. A. Catani 6,856 87,227 26,812 0 184,094 0
S.C. Curley 1,200 19,833 6,112 0 49,087 0
</TABLE>
(a) Number of options and shares reflect adjustment for the 2-for-1 stock split
but do not reflect an anti-dilution adjustment made to outstanding options
as a result of the Distribution of the Company.
(b) Value was computed as the difference between the exercise price and the
$37.625 per share closing price of Olin Common Stock on December 31, 1996,
as reported on the consolidated transaction reporting system relating to New
York Stock Exchange issues.
40
<PAGE>
PRIMEX 1996 LONG TERM INCENTIVE PLAN
The Company has adopted the Primex 1996 Long Term Incentive Plan (the
"Incentive Plan"), which is designed to help the Company attract and retain key
employees by providing an incentive to increase their proprietary interest in
the Company. Awards under the Incentive Plan may be in the form of stock
options (including incentive stock options meeting the requirements of Section
422 of the Code ("ISOs"), stock appreciation rights ("SARs"), restricted stock
and restricted stock units, performance awards, dividend equivalents and in any
other form (including convertible securities) that the committee administering
the Incentive Plan (the "Committee") approves valued in whole or in part by
reference to, or otherwise based on or related to, shares of Company Common
Stock. Three hundred fifty thousand shares of Company Common Stock (subject to
adjustment as provided below and for dividends, stock splits, mergers, spin-
offs, split-ups, recapitalizations and the like) are available for awards under
the Incentive Plan.
Awards may be granted under the Incentive Plan to salaried employees,
including officers of the Company and any of its controlled subsidiaries who
are not members of the Committee. Awards may also be granted to salaried
employees of any other entity in which the Company has a significant equity
interest as determined by the Committee. Awards will be granted for no cash
consideration or for such minimal cash consideration as may be required by
applicable law. However, the exercise price per share of stock purchasable under
any stock option, the exercise price of any SAR and the purchase price of stock
which may be purchased under any other award providing rights to purchase
Company Common Stock will not be less than the fair market value of such stock
on the date of grant of the option, SAR or other right.
Administration of the Incentive Plan is the responsibility of the Committee
consisting of at least two non employee Directors. The Committee will
have the authority to designate participants, determine the nature and size of,
and terms and conditions applicable to, awards, permit deferral of award
payments; permit the settlement or exercise of awards, and make all other
determinations and interpretations relating to the Plan. Committee
determinations and interpretations will be binding on all interested parties.
Under the Incentive Plan, the Company's Board of Directors may act at any time
in lieu of the Committee.
STOCK OPTIONS. The term of options granted under the Incentive Plan will be
fixed by the Committee; however, such term may not exceed ten years from the
date of grant. The purchase price per share of stock purchasable under any
option will be determined by the Committee but will not be less than the fair
market value of the stock on the date of grant of the option. The Committee will
determine the time or times at which an option may be exercised in whole or in
part, provided that no option may be exercised before the expiration of at least
six months from its date of grant, subject to the provisions of the Incentive
Plan relating to changes in control of the Company. Options may be exercised by
payment in full of the purchase price, either in cash or, at the discretion of
the Committee, in whole or in part in Company Common Stock or other
consideration having a fair market value on the date the option is exercised
equal to the option price.
STOCK APPRECIATION RIGHTS. Upon exercise of a SAR, the holder will be entitled
to receive the excess of the fair market value (calculated as of the exercise
date) of a specified number of Shares over the exercise price of the SAR. The
exercise price (which may not be less than the fair market value of the shares
on the date of grant), method of payment by the Company upon exercise and other
terms of the SAR will be determined by the Committee. However, the term of a SAR
may not exceed ten years from the date of its grant. Any related stock option
will no longer be exercisable to the extent that a SAR has been exercised, and
the exercise or termination of an option will cancel the related SAR (in the
case of exercise, to the extent thereof).
RESTRICTED STOCK. Restricted stock or restricted stock units may not be
disposed of by the recipient until certain restrictions established by the
Committee lapse. These restrictions will require recipients to remain in the
employ of the Company (or an affiliate participating in the Incentive Plan) for
at least six months in order to vest, except in the event of a Change in Control
(as defined in the Incentive Plan) or for such specified reasons as the
Committee may approve. Recipients will have with respect to restricted stock all
of the rights of a shareholder of the Company, including the right to vote the
shares and the right to receive any cash dividends, unless the Committee
otherwise determines. Upon termination of employment during the restriction
period, the restricted stock and/or restricted stock units will be forfeited,
subject to such exceptions, if any, as may be authorized by the Committee.
PERFORMANCE AWARDS. From time to time, the Committee may select a period
during which performance criteria approved by the Committee will be measured for
the purpose of determining the extent to which a performance award has
41
<PAGE>
been earned. Such period will not be less than six months, subject to the Change
in Control provisions of the Incentive Plan. Performance awards may be
denominated or payable in cash, shares of Common Stock, others securities, other
awards or other property.
AWARDS FOLLOWING THE DISTRIBUTION. Following the Distribution, the
Company granted restricted stock units valued in the aggregate at $5,642,000 to
an aggregate of 25 employees of the Company. Each restricted stock unit
represents one phantom share of Company Common Stock and generally vests and is
payable in one share of Company Common Stock to the employee upon the fifth
anniversary of the grant provided the employee remains employed by the Company
during the five-year period; however, if certain performance targets are met,
the units may vest after three years. Each restricted stock unit will accrue
amounts equivalent to the cash dividends payable on the Company's Common Stock
("dividend equivalents"). Such dividend equivalents will be deferred in the form
of cash and will be payable only when and if the restricted stock unit on which
such dividend equivalents were accrued become vested. Dividend equivalents will
accrue interest at an annual rate equal to the Company's before tax cost of
borrowing compounded quarterly. To the extent a restricted stock unit does not
vest or is otherwise forfeited, the accrued and unpaid dividend equivalents
thereon and any interest thereon shall not vest and be forfeited. In the event
an employee's employment is terminated for cause or without the Company's
written consent, the restricted stock units are forfeited. If employment is
terminated without cause and with written consent or by virtue of death or total
disability or retirement under a Company benefit plan, the Compensation
Committee shall decide in its sole discretion which outstanding restricted stock
units not yet vested shall not be forfeited, provided that in the case of
employees who are not officers or employees of the Company when their employment
terminates and have not been such during the preceding six month period, the
Chief Executive Officer of the Company is authorized to make such determination.
Upon a "Change in Control" of the Company, restricted stock units not yet vested
will automatically vest and be paid out in the form of cash. There is mandatory
tax withholding on all payouts of restricted stock units. The value of such
awards to the Named Executive Officers of the Company are as follows: J.G.
Hascall $1,046,400; W.W. Smith $401,120; J.D. DeMaire $401,120; A.A. Catani
$697,600 and S.C. Curley $209,280. All executive officers as a group received
units aggregating $3,976,320 in value.
SUPPLEMENTAL PLANS
Following the Distribution, Olin will remain liable for payment of benefits
accrued for employees of the Company under any Olin non-qualified benefit plans
as of the Distribution. Such benefits will not be paid until the participant
retires from the Company. The Company will establish a non-qualified, unfunded
Supplemental Savings and Retirement Plan (the "Supplemental Plan") that is
intended to restore any benefit under the Primex Savings Plan that would
otherwise be reduced as a consequence of certain restrictions required by the
Code. In addition, employees who are covered by the Supplemental Plan may be
able to defer before-tax contributions above the annual limitations imposed on
qualified contribution plans sponsored by the Company.
COMPENSATION OF DIRECTORS
Each Director who is not an employee of the Company receives a fixed annual
retainer of $20,000 and a fee of $1,000 for each meeting of the Board and for
each meeting of a committee of the Board attended, together with expenses
incurred in the performance of their duties as director. Each Director who
serves as the chair of a Board committee also receives an additional annual
meeting fee of $3,000. Half of the $20,000 annual retainer will be paid in
Company Common Stock, and each director may elect to receive the balance thereof
in cash or Company Common Stock. All meeting fees may be payable in cash or
Company Common Stock, at the election of the Director. Directors may defer the
cash portions of their annual retainer and meetings fees into cash accounts,
which will bear interest and/or into stock accounts which will be credited with
dividend equivalents. The Company's Stock Plan for Non-employee Directors
provides that each non-employee director serving in such capacity on January 1
of each year will be credited with a number of shares of Company Common Stock
having a fair market value equal to $5,000. Fifty thousand shares of Company
Common Stock are available for award under the Stock Plan for Non-employee
Directors.
42
<PAGE>
EXECUTIVE AGREEMENTS
Each of the Nameds Executive Officers and four other employees have agreements
with the Company which provide, among other things, that in the event of a
covered termination of employment (which could include, among other things,
termination of employment other than for cause and termination at the election
of the individual under certain circumstances), the individual will receive a
lump sum severance payment from the Company equal to 12 months' salary plus the
greater of (a) the average incentive compensation award from the Company during
the three years preceding the termination or (b) the then standard annual
incentive compensation award, less any amounts payable under existing severance
or disability plans of the Company. In the event that a "Change in Control" of
the Company occurs, and there is a covered termination, the individual will
receive twice the severance payment or in the case of the Chairman of the Board
and Chief Executive Officer and Vice Chairman three times. Insurance coverage
would be afforded for either a one or two-year period. The agreements also
provide for certain outplacement services. In addition, employees will receive
a payment representing an amount equal to one or two years of the Company's
contributions to the retirement feature of the Company's defined contribution
plan, in the case of employees who have an accrued benefit under Olin pension
plans and are under age 55, an amount equal to the difference between (x) the
amount that the employee would have received at age 55 upon early retirement
under the Olin pension plan had the employee remained employed with the Company
and (y) the pension amount actually received from such Olin pension plans. The
agreements will expire on January 31, 2002 (except in the case of Mr. Hascall
on December 31, 2002, and in the case of Mr. Catani on December 31, 1999) or
three years following the date of the "Change in Control". For purposes of the
agreements, "Change in Control" would occur if the Company ceases creases to be
publicly owned; 15% or more of its voting stock is acquired by others (other
than an employee benefit plan of the Company); the incumbent Directors and their
designated successors cease over a two-year period to constitute a majority of
the Board; or all or substantially all of the Company's business is disposed of
in a transaction in which the Company is not the surviving corporation or the
Company combines with another company and is the surviving corporation (unless
shareholders of the Company following the transaction own more than 50% of the
voting stock or other ownership interest of the surviving entity or combined
company). Each agreement provides that the individual agrees to remain in the
Company's employ for six months after a "Potential Change in Control" of the
Company has occurred. The agreements provide that payments made thereunder or
under any change in control provision of a compensation or benefit plan of the
Company which are subject to "excess parachute payment" tax will be increased so
that the individual will receive a net payment equal to that which would have
been received if such tax did not apply. Certain of the Company's benefit and
compensation plans also contain "Change in Control" provisions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no Compensation Committee interlocks.
43
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------
The following table shows as of December 31, 1996 (except as noted in footnote
(b) below) the beneficial ownership of each person or entity known by the
Company to own more than five percent of Company Common Stock.
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- -------------------------------------- --------------------- --------
FRANKLIN RESOURCES, INC. 356,660 (a) (c) 6.8
777 MARINERS ISLAND BLVD.
SAN MATEO, CA 94404
SCUDDER, STEVENS & CLARK, INC. 320,036 (a) (d) 6.1
345 PARK AVENUE
NEW YORK, NY 10154
TRAVELERS GROUP INC. 299,378 (a) (e) 5.7
388 GREENWICH STREET
NEW YORK, NY 10013
FMR CORPORATION 274,270 (a) (f) 5.3
82 DEVONSHIRE STREET
BOSTON, MA 02109
JEFFREY J. HALLIS 478,714 (b) (g) 9.2
500 PARK AVENUE, 5TH FLOOR
NEW YORK, NY 10022
(a) The amount of Company Common Stock beneficially owned is derived on the
basis of a Schedule 13G provided to Olin disclosing beneficial ownership of
Olin Common Stock as of December 31, 1996. 10% of this disclosed amount of
Olin Common Stock is reported as beneficial ownership of Company Common
Stock, reflecting the terms of the Distribution whereby each holder of Olin
Common Stock received a dividend of one share of Company Common Stock for
every ten shares of Olin Common Stock held at the close of business on
December 19, 1996 (the "Record Date"). The number of shares of Company
Common Stock beneficially owned as of December 31, 1996 cannot be derived
with certainty because beneficial ownership of Olin Common Stock as of the
Record Date is unavailable.
(b) The amount of Company Common Stock beneficially owned by Jeffrey J. Hallis
is as of February 26, 1997 and is reported on the basis of a Schedule 13D
provided to the Company.
(c) Franklin Resources, Inc. ("FRI") shares are owned by one or more open or
closed-end investment companies or other managed accounts which are advised
by direct or indirect investment subsidiaries ("Adviser Subsidiaries") of
FRI and such advisory contracts grant to such Adviser Subsidiaries all
voting and investment power over such shares. Franklin Mutual Advisers,
Inc., has sole power to vote and sole dispositive power with respect to such
shares. Note the basis for deriving beneficial ownership disclosed in
Footnote (a) above.
(d) Scudder, Stevens & Clark, Inc., a registered investment adviser, has sole
dispositive power with respect to the shares, has sole power to vote with
respect to 64,075 shares, and shared power to vote with respect to 237,090
shares. Note the basis for deriving beneficial ownership disclosed in
Footnote (a) above.
(e) Travelers Group Inc. and its wholly owned subsidiary, Smith Barney Holdings
Inc., have shared voting and shared dispositive power with respect to
299,378 shares. They disclaim beneficial ownership of all such shares. Note
the basis for deriving beneficial ownership disclosed in Footnote (a) above.
(f) Fidelity Management & Research Company ("Fidelity") and Fidelity Management
Trust Company ("FMTC") beneficially own 270,890 and 3,380 shares,
respectively. Both are subsidiaries of FMR Corp. ("FMR"). Edward C.
Johnson, 3rd ("Johnson"), who is the Chairman of FMR, FMR, through its
control of Fidelity, and its Funds each has sole dispositive power with
respect to the 270,890 shares owned by the Funds. Neither Johnson nor FMR
has sole voting power with respect to the shares owned by the Funds, which
power rests with the Funds' Board of Trustees. Johnson and FMR, through its
control of FMTC, each has sole dispositive power over 3,380 shares, sole
voting power
44
<PAGE>
over 1,620 shares and no voting power with respect to 1,760 of the shares.
Note the basis for deriving beneficial ownership disclosed in Footnote (a)
above.
(g) Jeffrey J. Hallis has sole power to vote and sole dispositive power with
respect to such shares owned by each of Tyndall Partners, L.P., Tyndall
Institutional Partners, L.P., Madison Avenue Partners, L.P. and Halo
International, Ltd. Tyndall Partners, L.P. owns 342,204 shares, Tyndall
Institutional Partners, L.P. owns 68,080 shares, Madison Avenue Partners,
L.P. owns 41,770 shares and Halo International, Ltd. owns 26,660 shares.
The following table sets forth information as of February 28, 1997,
concerning shares of Company Common Stock beneficially owned by (i) each
Director of the Company (ii) each of the Named Executive Officers of the
Company and (iii) all Directors and executive officers of the Company as a
group. Unless otherwise indicated in the footnotes below, each person or entity
has sole voting and investment power with respect to the shares set forth
opposite such person's or entity's name. Also included in the figures are shares
of Company Common Stock which may be acquired within 60 days through the
exercise of options, if any.
NO. OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY PERCENT OF
- ------------------------ OWNED (a) CLASS(b)
------------ ----------
A.A. Catani............................... 1,411 -
S.C. Curley............................... 371 -
J.D. DeMaire.............................. 1,060 -
E.M. Glasscock............................ - -
J.G. Hascall.............................. 2,324 -
D. Lasky.................................. 861 -
B. Martinez............................... - -
W.B. Mitchell............................. 1,435 -
R.H. Rau.................................. - -
A.W. Ruggiero............................. 1,075 -
L.E. Salomon.............................. - -
W.W. Smith................................ 1,132 -
Directors and executive officers as a group,
including those named above (16 persons) 20,137 -
- -----------------------
(a) Excluded from this table are shares credited to deferred accounts pursuant
to the arrangements described above under "Compensation of Directors" in the
amounts of 1,435 shares for Mr. Glasscock, 1,148 shares for Governor
Martinez, 1,148 shares for Mr. Rau, 1,435 shares for Mr. Ruggiero and 861
shares for Mr. Salomon. Such shares have no voting power.
(b) Unless otherwise indicated, beneficial ownership of any named
individual does not exceed 1% of the outstanding shares of Company
Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
Board member Anthony W. Ruggiero serves as Olin's Senior Vice President
and Chief Financial Officer. For a discussion of the relationship between Olin
and the Company, see "Item 1. Business - Relationship Between Olin and the
Company".
45
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
PAGE
----
(a) Documents Filed as Part of this Report:
(1) Financial Statements.
The following is a list of all the Consolidated Financial
Statements included in Item 8 of Part II.
Independent Auditors' Report............................... 22
Consolidated Balance Sheets as of December 31, 1996 and
1995..................................................... 23
Consolidated Income Statements, Years Ended
December 31, 1996, 1995 and 1994......................... 24
Consolidated Statements of Cash Flow for the Years Ended
December 31, 1996, 1995 and 1994......................... 25
Notes to the Consolidated Financial Statements............. 26
(2) Financial Statement Schedules
All schedules are omitted because they are not applicable or not
required, or because the required information is included in the
Consolidated Financial Statements or notes thereto.
(3) Exhibits
Exhibit Number Description
- -------------- -----------
2 Distribution Agreement dated December 30, 1996 between Primex
Technologies, Inc. and Olin Corporation. Incorporated by
reference to Exhibit 2 to the Company's Amendment No. 1 to the
Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).
3.1 Amended and Restated Articles of Incorporation. Incorporated
by reference to Exhibit 3.1 to the Company's Amendment No. 1 to
the Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).
3.2 Amended and Restated By-laws. Incorporated by reference to
Exhibit 3.2 to the Company's Amendment No. 1 to the Form 8-K/A
filed January 24, 1997 (SEC File No. 0-28942).
4.1 Specimen Common Share Certificate. Incorporated by reference
to Exhibit 4.1 to the Company's Amendment No. 2 to the Form 10
filed December 6, 1996 (SEC File No. 0-28942).
4.2 Amended and Restated Articles of Incorporation. Incorporated
by reference to Exhibit 3.1 to the Company's Amendment No. 1 to
the Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).
4.3 Amended and Restated By-laws. Incorporated by reference to
Exhibit 3.2 to the Company's Amendment No. 1 to the Form 8-K/A
filed January 24, 1997 (SEC File No. 0-28942).
4.4 Rights Agreement dated December 19, 1996 between Primex
Technologies, Inc. and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent.
4.5 Right Certificate (attached as Exhibit B to the Rights
Agreement filed as Exhibit 4.4 hereto).
4.6 Primex Retirement Investment Management Experience Plan.
Incorporated by reference to Exhibit 4(d) to the Company's Form
S-8 filed December 17, 1996 (SEC File No. 333-18043).*
46
<PAGE>
Exhibit Number Description
- -------------- -----------
4.7 1996 Long Term Incentive Plan of Primex. Incorporated by
reference to Exhibit 4(d) to the Company's Form S-8 filed
December 19, 1996 (SEC File No. 333-18299).*
4.8 Primex Stock Plan for Non-employee Directors. Incorporated by
reference to Exhibit 4(d) to the Company's Form S-8 filed
December 19, 1996 (SEC File No. 333-18297).*
10.1 Distribution Agreement dated as of December 30, 1996 between
Primex Technologies, Inc. and Olin Corporation. Incorporated by
reference to Exhibit 2 to the Company's Amendment No. 1 to the
Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).
10.2 Technology Transfer and License Agreement dated December 30,
1996 between Primex Technologies, Inc. and Olin Corporation.
Incorporated by reference to Exhibit 10.2 to the Company's
Amendment No. 1 to the Form 8-K/A filed January 24, 1997 (SEC
File No. 0-28942).
10.3 Tax Sharing Agreement dated December 31, 1996 between Primex
Technologies, Inc. and Olin Corporation. Incorporated by
reference to Exhibit 10.3 to the Company's Amendment No. 1 to
the Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).
10.4 Powder Supply Requirements Agreement dated December 31, 1996
between Primex Technologies, Inc. and Olin Corporation.
Incorporated by reference to Exhibit 10.4 to the Company's
Amendment No. 1 to the Form 8-K/A filed January 24, 1997 (SEC
File No. 0-28942).
10.5 Assignment of Ball Powder (R) Trademark to Primex and Limited
License to Olin dated December 30, 1996 between Primex
Technologies, Inc. and Olin Corporation. Incorporated by
reference to Exhibit 10.5 to the Company's Amendment No. 1 to
the Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).
10.6 Assumption of Liabilities and Indemnity Agreement dated
December 31, 1996 between Primex Technologies, Inc. and Olin
Corporation. Incorporated by reference to Exhibit 10.6 to the
Company's Amendment No. 1 to the Form 8-K/A filed January 24,
1997 (SEC File No. 0-28942).
10.7 Covenant Not To Compete Agreement dated December 31, 1996
between Primex Technologies, Inc. and Olin Corporation.
Incorporated by reference to Exhibit 10.7 to the Company's
Amendment No. 1 to the Form 8-K/A filed January 24, 1997 (SEC
File No. 0-28942).
10.8 Assignment of Raufoss Agreements to Primex and Sublicense to
Olin for Small Caliber Ammunition dated December 30, 1996
between Primex Technologies, Inc. and Olin Corporation.
Incorporated by reference to Exhibit 10.8 to the Company's
Amendment No. 1 to the Form 8-K/A filed January 24, 1997 (SEC
File No. 0-28942).
10.9 Credit Agreement dated as of December 23, 1996 among Primex
Technologies, Inc., Olin Corporation, Morgan Guaranty Trust Co.
of New York, as Agent, and various financial institutions.
Incorporated by reference to Exhibit 10.10 to the Company's
Amendment No. 1 to the Form 8-K/A filed January 24, 1997 (SEC
File No. 0-28942).
10.10 Trade Name License Agreement dated December 31, 1996 between
Primex Technologies, Inc. and Olin Corporation. Incorporated by
reference to Exhibit 10.11 to the Company's Amendment No. 1 to
the Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).
47
<PAGE>
Exhibit Number Description
- -------------- -----------
10.11 Transition Services Agreement dated December 31, 1996 between
Primex Technologies, Inc. and Olin Corporation. Incorporated by
reference to Exhibit 10.12 to the Company's Amendment No. 1 to
the Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).
10.12 Executive Agreement between Primex Technologies and J. G.
Hascall dated January 1, 1997.*
10.13 Executive Agreement between Primex Technologies and J. D.
DeMaire dated January 1, 1997.*
10.14 Executive Agreement between Primex Technologies and A. A.
Catani dated January 1, 1997.*
10.15 Executive Agreement between Primex Technologies and S. C.
Curley dated January 1, 1997.*
10.16 Executive Agreement between Primex Technologies, Inc., and W.W.
Smith dated January 1, 1997.
10.17 Primex Retirement Investment Management Experience Plan.
Incorporated by reference to Exhibit 4(d) to the Company's Form
S-8 filed December 17, 1996 (SEC File No. 333-18043).*
10.18 1996 Long Term Incentive Plan of Primex. Incorporated by
reference to Exhibit 4(d) to the Company's Form S-8 filed
December 19, 1996 (SEC File No. 333-18299).*
10.19 Primex Stock Plan for Non-employee Directors. Incorporated by
reference to Exhibit 4(d) to the Company's Form S-8 filed
December 19, 1996 (SEC File No. 333-18297).*
16 Letter of consent from KPMG Peat Marwick regarding change in
certifying accountant. Incorporated by reference to Exhibit 16
to the Company's Amendment No. 1 to the Form 8-K/A filed
February 19,1997. (SEC File No. 0-28942).
21 List of Subsidiaries of Primex Technologies, Inc.
23 Consent of KPMG Peat Marwick.
27 Financial Data Schedule.
*Denotes a management contract or compensatory plan or arrangement required to
be filed as an exhibit pursuant to Item 14(c) of this Form 10-K.
(b) Reports on Form 8-K:
No reports were filed by the Company during the fiscal quarter ended
December 31, 1996.
48
<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 be signed on
its behalf by the undersigned, thereunto duly authorized.
PRIMEX TECHNOLOGIES, INC.
(REGISTRANT)
BY: /S/GEORGE H. PAIN
--------------------------------------------
MARCH 26, 1997 GEORGE H. PAIN
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/S/ JAMES G. HASCALL CHAIRMAN OF THE BOARD AND MARCH 4, 1997
- -------------------------------- CHIEF EXECUTIVE OFFICER AND DIRECTOR
/S/ ANGELO A. CATANI VICE CHAIRMAN OF THE BOARD AND DIRECTOR MARCH 4, 1997
- --------------------------------
/S/ JOHN E. FISCHER VICE PRESIDENT AND CHIEF FINANCIAL
- -------------------------------- AND ACCOUNTING OFFICER MARCH 4, 1997
/S/ EDWIN M. GLASSCOCK DIRECTOR MARCH 4, 1997
- --------------------------------
/S/ DAVID LASKY DIRECTOR MARCH 4, 1997
- --------------------------------
/S/ BOB MARTINEZ DIRECTOR MARCH 4, 1997
- --------------------------------
/S/ WILLIAM B. MITCHELL DIRECTOR MARCH 4, 1997
- --------------------------------
/S/ ROBERT H. RAU DIRECTOR MARCH 4, 1997
- --------------------------------
/S/ ANTHONY W. RUGGIERO DIRECTOR MARCH 4, 1997
- --------------------------------
/S/ LEON E. SALOMON DIRECTOR MARCH 4, 1997
- --------------------------------
</TABLE>
49
<PAGE>
Exhibit 4.4
RIGHTS AGREEMENT dated as of December 19, 1996,
between PRIMEX TECHNOLOGIES, INC., a Virginia
corporation (the "Company"), and CHASEMELLON
SHAREHOLDER SERVICES, L.L.C., a New Jersey limited
liability company, as Rights Agent (the "Rights
Agent").
The Board of Directors of the Company has authorized and declared a dividend
of one Right (as hereinafter defined) for each share of Common Stock, par value
$1 per share, of the Company (the "Common Stock") outstanding at the Close of
Business (as hereinafter defined) on December 31, 1996 (the "Record Date"), and
has authorized the issuance of one Right (as such number may hereafter be
adjusted pursuant to the provisions of this Rights Agreement) with respect to
each share of Common Stock that shall become outstanding between the Record
Date and the earliest of the Distribution Date, the Redemption Date or the
Expiration Date (as such terms are hereinafter defined); provided,
--------
however, that Rights may be issued with respect to shares of Common Stock
- -------
that shall become outstanding after the Distribution Date and prior to the
earlier of the Redemption Date or the Expiration Date in accordance with the
provisions of Section 23. Each Right shall initially represent the right to
purchase one-thousandth (1/1,000) of a share of Series A Participating
Cumulative Preferred Stock, par value $1 per share, of the Company (the
"Preferred Shares"), having the powers, rights and preferences set forth in the
Articles of Amendment attached as Exhibit A.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. Certain Definitions. For purposes of this Rights Agreement,
--------------------
the following terms have the meanings indicated:
<PAGE>
2
"Acquiring Person" shall mean any Person who or which, alone or together
----------------
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of more than 15% of the Common Shares then outstanding but shall not
include (a) the Company, any Subsidiary of the Company, Olin Corporation (prior
to January 15, 1997), any employee benefit plan of the Company or of any of its
Subsidiaries or of Olin Corporation, or any Person holding Common Shares for or
pursuant to the terms of any such employee benefit plan or (b) any such Person
who has become and is such a Beneficial Owner solely because (i) of a change in
the aggregate number of Common Shares outstanding since the last date on which
such Person acquired Beneficial Ownership of any Common Shares or (ii) it
acquired such Beneficial Ownership in the good faith belief that such
acquisition would not (A) cause such Beneficial Ownership to exceed 15% of the
Common Shares then outstanding and such Person relied in good faith in
computing the percentage of its Beneficial Ownership on publicly filed reports
or documents of the Company which are inaccurate or out-of-date or (B)
otherwise cause a Distribution Date or the adjustment provided for in Section
11(a) to occur. Notwithstanding clause (b)(ii) of the prior sentence, if any
Person that is not an Acquiring Person due to such clause (b)(ii) does not
reduce its percentage of Beneficial Ownership of Common Shares to 15% or less
by the Close of Business on the fifth Business Day after notice from the
Company (the date of notice being the first day) that such Person's Beneficial
Ownership of Common Shares so exceeds 15%, such Person shall, at the end of
such five Business Day period, become an Acquiring Person (and such clause
(b)(ii) shall no longer apply to such Person). For purposes of this
definition, the determination whether any Person acted in "good faith" shall be
conclusively determined by the Board of Directors of the Company, acting by a
vote of those directors of the Company whose approval would be required to
redeem the Rights under Section 24.
"Affiliate" and "Associate", when used with reference to any Person,
--------- ---------
shall have the respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the date
of this Rights Agreement.
A Person shall be deemed the "Beneficial Owner" of, and shall be deemed
----------------
to "beneficially own", and shall be deemed to have "Beneficial
-----------
Ownership" of, any securities:
- ---------
(a) which such Person or any of such Person's Affiliates or
Associates is deemed to "beneficially own" within the meaning of Rule 13d-3 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date of this Rights Agreement;
(b) which such Person or any of such Person's Affiliates or
Associates has (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (written or oral), or upon the exercise of
conversion rights, exchange rights, rights (other than the Rights), warrants or
options, or otherwise; provided, however, that a Person shall not be deemed the
-------- -------
Beneficial Owner of, or to beneficially own, or to have Beneficial Ownership of,
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange thereunder, or (ii)
the right to vote pursuant to any agreement, arrangement or
<PAGE>
3
understanding (written or oral); provided, however, that a Person shall not
-------- -------
be deemed the Beneficial Owner of, or to beneficially own, any security if (A)
the agreement, arrangement or understanding (written or oral) to vote such
security arises solely from a revocable proxy or consent given to such Person in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations under the Exchange Act and
(B) the beneficial ownership of such security is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
(c) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (written or oral)
for the purpose of acquiring, holding, voting (except pursuant to a revocable
proxy as described in clause (b)(ii) of this definition) or disposing of any
securities of the Company.
Notwithstanding the foregoing, nothing contained in this definition
shall cause a Person ordinarily engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "beneficially own", any
securities acquired in a bona fide firm commitment underwriting pursuant to an
underwriting agreement with the Company.
"Articles of Amendment" shall mean the Articles of Amendment of the
---------------------
Articles of Incorporation of the Company designating and establishing the
Series A Participating Cumulative Preferred Stock and setting forth the
preferences, limitations and relative rights of such series of Preferred Stock
of the Company, a copy of which is attached as Exhibit A.
"Book Value", when used with reference to Common Shares issued
----------
by any Person, shall mean the amount of equity of such Person applicable to
each Common Share, determined (a) in accordance with generally accepted
accounting principles in effect on the date as of which such Book Value is to
be determined, (b) using all the consolidated assets and all the consolidated
liabilities of such Person on the date as of which such Book Value is to be
determined, except that no value shall be included in such assets for goodwill
arising from consummation of a business combination, and (c) after giving
effect to (i) the exercise of all rights, options and warrants to purchase such
Common Shares (other than the Rights), and the conversion of all securities
convertible into such Common Shares, at an exercise or conversion price, per
Common Share, which is less than such Book Value before giving effect to such
exercise or conversion (whether or not exercisability or convertibility is
conditioned upon occurrence of a future event), (ii) all dividends and other
distributions on the capital stock of such Person declared prior to the date as
of which such Book Value is to be determined and to be paid or made
after such date, and (iii) any other agreement, arrangement or understanding
(written or oral), or transaction or other action prior to the date as of which
such Book Value is to be determined which would have the effect of thereafter
reducing such Book Value.
"Business Combination" shall have the meaning set forth in
--------------------
Section 11(c)(i).
<PAGE>
4
"Business Day" shall mean each Monday, Tuesday, Wednesday,
------------
Thursday and Friday which is not a day on which banking institutions in the
Borough of Manhattan, the City of New York, are authorized or obligated by law
or executive order to close.
"Close of Business" on any given date shall mean 5:00 p.m., New
-----------------
York City time, on such date; provided, however, that, if such date is
-------- -------
not a Business Day, "Close of Business" shall mean 5:00 p.m., New York City
time, on the next succeeding Business Day.
"Common Shares", when used with reference to the Company prior
-------------
to a Business Combination, shall mean the shares of Common Stock of the Company
or any other shares of capital stock of the Company into which the Common Stock
shall be reclassified or changed. "Common Shares", when used with reference to
any Person (other than the Company prior to a Business Combination), shall mean
shares of capital stock of such Person (if such Person is a corporation) of any
class or series, or units of equity interests in such Person (if such Person is
not a corporation) of any class or series, the terms of which do not limit (as
a maximum amount and not merely in proportional terms) the amount of dividends
or income payable or distributable on such class or series or the amount of
assets distributable on such class or series upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person and do not provide that
such class or series is subject to redemption at the option of such Person, or
any shares of capital stock or units of equity interests into which the
foregoing shall be reclassified or changed; provided, however, that, if
-------- -------
at any time there shall be more than one such class or series of capital stock
or equity interests of such Person, "Common Shares" of such Person shall
include all such classes and series substantially in the proportion of the
total number of shares or other units of each such class or series outstanding
at such time.
"Common Stock" shall have the meaning set forth in the
------------
introductory paragraph of this Rights Agreement.
"Company" shall have the meaning set forth in the heading of
-------
this Rights Agreement; provided, however, that if there is a Business
-------- -------
Combination, "Company" shall have the meaning set forth in Section 11(c)(iii).
The term "control" with respect to any Person shall mean the
-------
power to direct the management and policies of such Person, directly or
indirectly, by or through stock ownership, agency or otherwise, or pursuant to
or in connection with an agreement, arrangement or understanding (written or
oral) with one or more other Persons by or through stock ownership, agency or
otherwise; and the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
"Distribution Date" shall have the meaning set forth in Section
-----------------
3(b).
"Exchange Act" shall mean the Securities Exchange Act of 1934,
------------
as in effect on the date in question, unless otherwise specifically provided.
"Exchange Consideration" shall have the meaning set forth in
----------------------
Section 11(b)(i).
<PAGE>
5
"Expiration Date" shall have the meaning set forth in Section
---------------
7(a).
"Major Part", when used with reference to the assets of the
----------
Company and its Subsidiaries as of any date, shall mean assets (a) having a
fair market value aggregating 50% or more of the total fair market value of all
the assets of the Company and its Subsidiaries (taken as a whole) as of the
date in question, (b) accounting for 50% or more of the total value (net of
depreciation and amortization) of all the assets of the Company and its
Subsidiaries (taken as a whole) as would be shown on a consolidated or combined
balance sheet of the Company and its Subsidiaries as of the date in question,
prepared in accordance with generally accepted accounting principles then in
effect, or (c) accounting for 50% or more of the total amount of earnings
before interest, taxes, depreciation and amortization or of the revenues of the
Company and its Subsidiaries (taken as a whole) as would be shown on, or
derived from, a consolidated or combined statement of income or operations of
the Company and its Subsidiaries for the period of 12 months ending on the last
day of the Company's monthly accounting period next preceding the date in
question, prepared in accordance with generally accepted accounting principles
then in effect.
"Market Value", when used with reference to Common Shares on
------------
any date, shall be deemed to be the average of the daily closing prices, per
share, of such Common Shares for the period which is the shorter of (a) 30
consecutive Trading Days immediately prior to the date in question or (b) the
number of consecutive Trading Days beginning on the Trading Day immediately
after the date of the first public announcement of the event requiring a
determination of the Market Value and ending on the Trading Day immediately
prior to the record date of such event; provided, however, that, in the
-------- -------
event that the Market Value of such Common Shares is to be determined in whole
or in part during a period following the announcement by the issuer of such
Common Shares of any action of the type described in Section 12(a) that would
require an adjustment thereunder, then, and in each such case, the Market Value
of such Common Shares shall be appropriately adjusted to reflect the effect of
such action on the market price of such Common Shares. The closing price for
each Trading Day shall be the closing price quoted on the principal United
States securities exchange registered under the Exchange Act (or any recognized
foreign stock exchange) on which such securities are listed, or, if such
securities are not listed on any such exchange, the average of the closing bid
and asked quotations with respect to a share of such securities on any
National Association of Securities Dealers, Inc. quotations system, or if no
such quotations are available, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in such securities
selected by the Board of Directors of the Company. If on any such Trading Day
no market maker is making a market in such securities, the closing price of
such securities on such Trading Day shall be deemed to be the fair value of
such securities as determined in good faith by the Board of Directors of the
Company (whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent, the holders of Rights
and all other Persons); provided, however, that for the purpose of
-------- -------
determining the closing price of the Preferred Shares for any Trading Day on
which there is no such market maker for the Preferred Shares the closing price
on such Trading Day shall be deemed to be the Formula Number (as defined in
<PAGE>
6
the Articles of Incorporation) times the closing price of the Common Shares of
the Company on such Trading Day.
"Person" shall mean an individual, corporation, partnership,
------
joint venture, association, trust, unincorporated organization or other entity.
"Preferred Shares" shall have the meaning set forth in the
----------------
introductory paragraph of this Rights Agreement. Any reference in this Rights
Agreement to Preferred Shares shall be deemed to include any authorized
fraction of a Preferred Share, unless the context otherwise requires.
"Principal Party" shall mean the Surviving Person in a Business
---------------
Combination; provided, however, that, if such Surviving Person is a
-------- -------
direct or indirect Subsidiary of any other Person, "Principal Party" shall mean
the Person which is the ultimate parent of such Surviving Person and which is
not itself a Subsidiary of another Person. In the event ultimate control of
such Surviving Person is shared by two or more Persons, "Principal Party" shall
mean that Person that is immediately controlled by such two or more Persons.
"Purchase Price" with respect to each Right shall mean $55, as
--------------
such amount may from time to time be adjusted as provided herein. All
references herein to the Purchase Price shall mean the Purchase Price as in
effect at the time in question.
"Record Date" shall have the meaning set forth in the
-----------
introductory paragraph of this Rights Agreement.
"Redemption Date" shall have the meaning set forth in Section
---------------
24(a).
"Redemption Price" with respect to each Right shall mean $.01,
----------------
as such amount may from time to time be adjusted in accordance with Section 12.
All references herein to the Redemption Price shall mean the Redemption Price as
in effect at the time in question.
"Registered Common Shares" shall mean Common Shares which are,
------------------------
as of the date of consummation of a Business Combination, and have continuously
been for the 12 months immediately preceding such date, registered under Section
12 of the Exchange Act.
"Right Certificate" shall mean a certificate evidencing a Right
-----------------
in substantially the form attached as Exhibit B.
"Rights" shall mean the rights to purchase Preferred Shares (or
------
other securities) as provided in this Rights Agreement.
"Securities Act" shall mean the Securities Act of 1933, as in
--------------
effect on the date in question, unless otherwise specifically provided.
"Subsidiary" shall mean a Person, at least a majority of the
----------
total outstanding voting power (being the power under ordinary circumstances
(and not merely upon the happening of a contingency) to vote in the election of
directors of such Person (if such Person is a corporation) or to participate in
the management and control of such Person (if such Person is not a
corporation)) of which is owned,
<PAGE>
7
directly or indirectly, by another Person or by one or more other Subsidiaries
of such other Person or by such other Person and one or more other Subsidiaries
of such other Person.
"Surviving Person" shall mean (a) the Person which is the
----------------
continuing or surviving Person in a consolidation or merger specified in
Section 11(c)(i)(A) or 11(c)(i)(B) or (b) the Person to which the Major Part of
the assets of the Company and its Subsidiaries is sold, leased, exchanged or
otherwise transferred or disposed of in a transaction specified in Section
11(c)(i)(C); provided, however, that, if the Major Part of the assets
-------- -------
of the Company and its Subsidiaries is sold, leased, exchanged or otherwise
transferred or disposed of in one or more related transactions specified in
Section 11(c)(i)(C) to more than one Person, the "Surviving Person" in such
case shall mean the Person that acquired assets of the Company and/or its
Subsidiaries with the greatest fair market value in such transaction or
transactions.
"Trading Day" shall mean a day on which the principal
-----------
securities trading facility (or principal recognized foreign stock exchange, as
the case may be) on which any securities or Rights, as the case may be, are
listed or admitted to trading is open for the transaction of business or, if
the securities or Rights in question are not listed or admitted to trading on
any national securities exchange (or recognized foreign stock exchange, as the
case may be), a Business Day.
SECTION 2. Appointment of Rights Agent. The Company hereby
----------------------------
appoints the Rights Agent to act as agent for the Company in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint one or more co-Rights
Agents as it may deem necessary or desirable upon notice to the Rights Agent
(the term "Rights Agent" being used herein to refer, collectively, to the
Rights Agent together with any such co-Rights Agents). In the event the
Company appoints one or more co-Rights Agents, the respective duties of the
Rights Agent and any co-Rights Agents shall be as the Company shall determine.
SECTION 3. Issue of Rights and Right Certificates. (a) One
---------------------------------------
Right shall be associated with each Common Share outstanding on the Record
Date, each additional Common Share that shall become outstanding between the
Record Date and the earliest of the Distribution Date, the Redemption Date or
the Expiration Date and each additional Common Share with which Rights are
issued after the Distribution Date but prior to the earlier of the Redemption
Date or the Expiration Date as provided in Section 23; provided,
---------
however, that, if the number of outstanding Rights are combined into a
- -------
smaller number of outstanding Rights pursuant to Section 12(a), the appropriate
fractional Right determined pursuant to such Section shall thereafter be
associated with each such Common Share.
(b) Until the earlier of (i) such time as the Company learns that
a Person has become an Acquiring Person or (ii) the Close of Business on such
date, if any, as may be designated by the Board of Directors of the Company
following the commencement of, or first public disclosure of an intent to
commence, a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
of its Subsidiaries, or any Person holding Common Shares for or pursuant to the
terms of any such employee benefit plan) for outstanding Common Shares, if upon
<PAGE>
8
consummation of such tender or exchange offer such Person could be the
Beneficial Owner of more than 15% of the outstanding Common Shares (the Close
of Business on the earlier of such dates being the "Distribution Date"), (x)
the Rights will be evidenced by the certificates for Common Shares registered
in the names of the holders thereof and not by separate Right Certificates and
(y) the Rights, including the right to receive Right Certificates, will be
transferable only in connection with the transfer of Common Shares. As soon as
practicable after the Distribution Date, the Rights Agent will send, by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the Distribution Date, at the address of such holder shown on the records of
the Company, a Right Certificate evidencing one whole Right for each Common
Share (or for the number of Common Shares with which one whole Right is then
associated if the number of Rights per Common Share held by such record holder
has been adjusted in accordance with the proviso in Section 3(a)). If the
number of Rights associated with each Common Share has been adjusted in
accordance with the proviso in Section 3(a), at the time of distribution of the
Right Certificates the Company may make any necessary and appropriate rounding
adjustments so that Right Certificates representing only whole numbers of
Rights are distributed and cash is paid in lieu of any fractional Right in
accordance with Section 15(a). As of and after the Distribution Date, the
Rights will be evidenced solely by such Right Certificates.
(c) With respect to any certificate for Common Shares, until the
earliest of the Distribution Date, the Redemption Date or the Expiration Date,
the Rights associated with the Common Shares represented by any such
certificate shall be evidenced by such certificate alone, the registered
holders of the Common Shares shall also be the registered holders of the
associated Rights and the surrender for transfer of any such certificate shall
also constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(d) Certificates issued for Common Shares after the Record Date
(including, without limitation, upon transfer or exchange of outstanding Common
Shares), but prior to the earliest of the Distribution Date, the Redemption
Date or the Expiration Date, shall have printed on, written on or otherwise
affixed to them the following legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in a Rights Agreement dated as of
December 19, 1996, as it may be amended from time to time (the "Rights
Agreement"), between Primex Technologies, Inc. (the "Company") and Chase Mellon
Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent"), the terms
of which are hereby incorporated herein by reference and a copy of which is on
file at the principal executive offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. The Rights Agent will mail to the holder of this certificate a
copy of the Rights Agreement without charge after receipt of a written request
therefor. Rights beneficially owned by Acquiring Persons or their Affiliates
or Associates (as such terms are defined in the Rights Agreement) and by any
subsequent holder of such Rights are null and void and nontransferable.
<PAGE>
9
Notwithstanding this paragraph (d), the omission of a legend shall
not affect the enforceability of any part of this Rights Agreement or the
rights of any holder of Rights.
SECTION 4. Form of Right Certificates. The Right Certificates
---------------------------
(and the form of election to purchase and form of assignment to be printed on
the reverse side thereof) shall be in substantially the form set forth as
Exhibit B and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Rights
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Sections 7, 11 and 23, the
Right Certificates, whenever issued, shall be dated as of the Distribution
Date, and on their face shall entitle the holders thereof to purchase such
number of Preferred Shares as shall be set forth therein for the Purchase Price
set forth therein, subject to adjustment from time to time as herein provided.
SECTION 5. Execution, Countersignature and Registration. (a)
---------------------------------------------
The Right Certificates shall be executed on behalf of the Company by the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Operating Officer, the Treasurer or a Vice President (whether preceded by any
additional title) of the Company, either manually or by facsimile signature, and
have affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Secretary, an Assistant Secretary or a Vice President (whether
preceded by any additional title, provided that such Vice President shall not
have also executed the Right Certificates) of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid or obligatory for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Right Certificates shall cease to be such an officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates may nevertheless be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such an
officer of the Company; and any Right Certificate may be signed on behalf of the
Company by any person who, at the actual date of execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of execution of this Rights Agreement any such
person was not such an officer of the Company.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office in New York, New York, books for
registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced by each of the Right Certificates,
the certificate number of each of the Right Certificates and the date of each
of the Right Certificates.
SECTION 6. Transfer, Split-Up, Combination and Exchange of Right
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates;
- -----------------------------------------------------------------------
Uncertificated Rights. (a) Subject to the provisions of
- ---------------------
<PAGE>
10
Sections 7(e) and 15, at any time after the Distribution Date, and at or prior
to the Close of Business on the earlier of the Redemption Date or the Expiration
Date, any Right Certificate or Right Certificates may be transferred, split-up,
combined or exchanged for another Right Certificate or Right Certificates
representing, in the aggregate, the same number of Rights as the Right
Certificate or Right Certificates surrendered then represented. Any registered
holder desiring to transfer, split-up, combine or exchange any Right Certificate
shall make such request in writing delivered to the Rights Agent and shall
surrender the Right Certificate or Right Certificates to be transferred, split-
up, combined or exchanged at the principal office of the Rights Agent; provided,
--------
however, that neither the Rights Agent nor the Company shall be obligated
- -------
to take any action whatsoever with respect to the transfer of any Right
Certificate surrendered for transfer until the registered holder shall have
completed and signed the certification contained in the form of assignment on
the reverse side of such Right Certificate and shall have provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request. Thereupon the Rights Agent shall, subject to Sections 7(e)
and 15, countersign and deliver to the Person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer,
split-up, combination or exchange of Right Certificates.
(b) Upon receipt by the Company or the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a valid Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancelation of the Right Certificate if mutilated, the Company will make a new
Right Certificate of like tenor and deliver such new Right Certificate to the
Rights Agent for delivery to the registered owner in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
(c) Notwithstanding any other provision hereof, the Company and
the Rights Agent may amend this Rights Agreement to provide for uncertificated
Rights in addition to or in place of Rights evidenced by Right Certificates.
SECTION 7. Exercise of Rights; Expiration Date of Rights. (a)
----------------------------------------------
Subject to Section 7(e) and except as otherwise provided herein (including
Section 11), each Right shall entitle the registered holder thereof, upon
exercise thereof as provided herein, to purchase for the Purchase Price, at any
time after the Distribution Date and at or prior to the earlier of (i) the
Close of Business on the 10th anniversary of the date of this Rights Agreement
(the Close of Business on such date being the "Expiration Date") or (ii) the
Redemption Date, one-thousandth (1/1,000) of a Preferred Share, subject to
adjustment from time to time as provided in Sections 11 and 12.
(b) The registered holder of any Right Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein) in whole or
in part at any time after the Distribution Date, upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent
<PAGE>
11
at the principal office of the Rights Agent in Richfield Park, New Jersey,
together with payment of the Purchase Price for each one-thousandth (1/1,000) of
a Preferred Share as to which the Rights are exercised, at or prior to the
earlier of (i) the Expiration Date or (ii) the Redemption Date.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the Preferred Shares to be purchased together
with an amount equal to any applicable transfer tax, in lawful money of the
United States of America, in cash or by certified check or money order payable
to the order of the Company, the Rights Agent shall thereupon (i) either (A)
promptly requisition from any transfer agent of the Preferred Shares (or make
available, if the Rights Agent is the transfer agent) certificates for the
number of Preferred Shares to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests or (B) if the
Company shall have elected to deposit the Preferred Shares with a depositary
agent under a depositary arrangement, promptly requisition from the depositary
agent depositary receipts representing the number of thousandths (1/1,000s) of
a Preferred Share to be purchased (in which case certificates for the Preferred
Shares to be represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company will direct the depositary
agent to comply with all such requests, (ii) when appropriate, promptly
requisition from the Company the amount of cash to be paid in lieu of issuance
of fractional shares in accordance with Section 15, (iii) promptly after receipt
of such certificates or depositary receipts, cause the same to be delivered to
or upon the order of the registered holder of such Right Certificate, registered
in such name or names as may be designated by such holder and (iv) when
appropriate, after receipt promptly deliver such cash to or upon the order of
the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise fewer than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 15.
(e) Notwithstanding anything in this Rights Agreement to the
contrary, any Rights that are at any time beneficially owned by (i) an
Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e),
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Rights Agreement or otherwise. The Company shall
use all reasonable efforts to ensure that
<PAGE>
12
the provisions of this Section 7(e) are complied with, but shall have no
liability to any holder of any Right Certificate or any other Person as a result
of its failure to make any determinations with respect to an Acquiring Person or
its Affiliate or Associate, or any transferee thereof, hereunder.
(f) Notwithstanding anything in this Rights Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder of any Right
Certificates upon the occurrence of any purported exercise as set forth in this
Section 7 unless such registered holder shall have (i) completed and signed the
certificate contained in the form of election to purchase set forth on the
reverse side of the Right Certificate surrendered for such exercise and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
(g) The Company may temporarily suspend, for a period of time not
to exceed 90 calendar days after the Distribution Date, the exercisability of
the Rights in order to prepare and file a registration statement under the
Securities Act, on an appropriate form, with respect to the Preferred Shares
purchasable upon exercise of the Rights and permit such registration statement
to become effective; provided, however, that no such suspension shall remain
-------- -------
effective after, and the Rights shall without any further action by the Company
or any other Person become exercisable immediately upon, the effectiveness of
such registration statement. Upon any such suspension, the Company shall issue
a public announcement stating that the exercisability of the Rights has been
temporarily suspended and shall issue a further public announcement at such
time as the suspension is no longer in effect. Notwithstanding any provision
herein to the contrary, the Rights shall not be exercisable in any jurisdiction
if the requisite qualification under the blue sky or securities laws of such
jurisdiction shall not have been obtained or the exercise of the Rights shall
not be permitted under applicable law.
SECTION 8. Cancelation and Destruction of Right Certificates.
--------------------------------------------------
All Right Certificates surrendered or presented for the purpose of exercise,
transfer, split-up, combination or exchange shall, and any Right Certificate
representing Rights that have become null and void and nontransferable pursuant
to Section 7(e) surrendered or presented for any purpose shall, if surrendered
or presented to the Company or to any of its agents, be delivered to the Rights
Agent for cancelation or in canceled form, or, if surrendered or presented to
the Rights Agent, shall be canceled by it, and no Right Certificates shall be
issued in lieu thereof except as expressly permitted by this Rights Agreement.
The Company shall deliver to the Rights Agent for cancelation and retirement,
and the Rights Agent shall so cancel and retire, any Right Certificate
purchased or acquired by the Company. The Rights Agent shall deliver all
canceled Right Certificates to the Company pursuant to a written agreement that
the Company maintain such certificates for such period of time as required by
law, or shall, at the written request of the Company, destroy such canceled
Right Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
SECTION 9. Reservation and Availability of Preferred Shares.
-------------------------------------------------
(a) The Company covenants and agrees that it will cause to be
<PAGE>
13
reserved and kept available out of its authorized and unissued Preferred Shares
or any authorized and issued Preferred Shares held in its treasury, free from
preemptive rights or any right of first refusal, a number of Preferred Shares
sufficient to permit the exercise in full of all outstanding Rights.
(b) In the event that there shall not be sufficient Preferred
Shares issued but not outstanding or authorized but unissued to permit the
exercise or exchange of Rights in accordance with Section 11, the Company
covenants and agrees that it will take all such action as may be necessary to
authorize additional Preferred Shares for issuance upon the exercise or
exchange of Rights pursuant to Section 11; provided, however, that if
-------- -------
the Company is unable to cause the authorization of additional Preferred
Shares, then the Company shall, or in lieu of seeking any such authorization,
the Company may, to the extent necessary and permitted by applicable law and
any agreements or instruments in effect prior to the Distribution Date to which
it is a party, (i) upon surrender of a Right, pay cash equal to the Purchase
Price in lieu of issuing Preferred Shares and requiring payment therefor, (ii)
upon due exercise of a Right and payment of the Purchase Price for each
Preferred Share as to which such Right is exercised, issue equity
securities having a value equal to the value of the Preferred Shares which
otherwise would have been issuable pursuant to Section 11, which value shall be
determined by a nationally recognized investment banking firm selected by the
Board of Directors of the Company or (iii) upon due exercise of a Right and
payment of the Purchase Price for each Preferred Share as to which such Right
is exercised, distribute a combination of Preferred Shares, cash and/or other
equity and/or debt securities having an aggregate value equal to the value of
the Preferred Shares which otherwise would have been issuable pursuant to
Section 11, which value shall be determined by a nationally recognized
investment banking firm selected by the Board of Directors of the Company. To
the extent that any legal or contractual restrictions (pursuant to agreements
or instruments in effect prior to the Distribution Date to which it is party)
prevent the Company from paying the full amount payable in accordance with the
foregoing sentence, the Company shall pay to holders of the Rights as to which
such payments are being made all amounts which are not then restricted on a pro
rata basis as such payments become permissible under such legal or contractual
restrictions until such payments have been paid in full.
(c) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares delivered upon
exercise or exchange of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(d) So long as the Preferred Shares issuable upon the exercise or
exchange of Rights are to be listed on any national securities exchange, the
Company covenants and agrees to use its best efforts to cause, from and after
such time as the Rights become exercisable or exchangeable, all Preferred
Shares reserved for such issuance to be listed on such securities exchange upon
official notice of issuance upon such exercise or exchange.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all Federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery
<PAGE>
14
of Right Certificates or of any Preferred Shares or Common Shares or other
securities upon the exercise or exchange of the Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a Person other than, or in
respect of the issuance or delivery of certificates for the Preferred Shares or
Common Shares or other securities, as the case may be, in a name other than that
of, the registered holder of the Right Certificate evidencing Rights surrendered
for exercise or exchange or to issue or deliver any certificates for Preferred
Shares or Common Shares or other securities, as the case may be, upon the
exercise or exchange of any Rights until any such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
SECTION 10. Preferred Shares Record Date. Each Person in
-----------------------------
whose name any certificate for Preferred Shares or Common Shares or other
securities is issued upon the exercise or exchange of Rights shall for all
purposes be deemed to have become the holder of record of the Preferred Shares
or Common Shares or other securities, as the case may be, represented thereby
on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of any
Purchase Price (and any applicable transfer taxes) was made; provided,
--------
however, that, if the date of such surrender and payment is a date upon
- -------
which the transfer books of the Company for the Preferred Shares or Common
Shares or other securities, as the case may be, are closed, such Person shall
be deemed to have become the record holder of such Preferred Shares or Common
Shares or other securities, as the case may be, on, and such certificate shall
be dated as of, the next succeeding Business Day on which the transfer books of
the Company for the Preferred Shares or Common Shares or other securities, as
the case may be, are open.
SECTION 11. Adjustments in Rights After There Is an Acquiring
--------------------------------------------------
Person; Exchange of Rights for Shares; Business Combinations. (a) Upon a
- -------------------------------------------------------------
Person becoming an Acquiring Person, proper provision shall be made so that
each holder of a Right, except as provided in Section 7(e), shall thereafter
have a right to receive, upon exercise thereof for the Purchase Price in
accordance with the terms of this Rights Agreement, such number of thousandths
(1/1,000s) of a Preferred Share as shall equal the result obtained by
multiplying the Purchase Price by a fraction, the numerator of which is the
number of thousandths (1/1,000s) of a Preferred Share for which a Right is then
exercisable and the denominator of which is 50% of the Market Value of the
Common Shares on the date on which a Person becomes an Acquiring Person. As
soon as practicable after a Person becomes an Acquiring Person (provided the
Company shall not have elected to make the exchange permitted by Section
11(b)(i) for all outstanding Rights), the Company covenants and agrees to use
its best efforts to:
(i) prepare and file a registration statement under the
Securities Act, on an appropriate form, with respect to the Preferred Shares
purchasable upon exercise of the Rights;
(ii) cause such registration statement to become effective as
soon as practicable after such filing;
<PAGE>
15
(iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date; and
(iv) qualify or register the Preferred Shares purchasable
upon exercise of the Rights under the blue sky or securities laws of such
jurisdictions as may be necessary or appropriate.
(b)(i) The Board of Directors of the Company may, at its option,
at any time after a Person becomes an Acquiring Person, mandatorily exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that shall have become null and void and nontransferable
pursuant to the provisions of Section 7(e)) for consideration per Right
consisting of either one-half of the securities that would be issuable at
such time upon the exercise of one Right in accordance with Section 11(a) or,
if applicable, Section 9(b)(ii) or (iii) or, if applicable the cash
consideration specified in Section 9(b)(i) (the consideration issuable per
Right pursuant to this Section 11(b)(i) being the "Exchange Consideration").
The Board of Directors of the Company may, at its option, issue, in
substitution for Preferred Shares, Common Shares in an amount per Preferred
Share equal to the Formula Number (as defined in the Articles of Amendment) if
there are sufficient Common Shares issued but not outstanding or authorized but
unissued. If the Board of Directors of the Company elects to exchange all the
Rights for Exchange Consideration pursuant to this Section 11(b)(i) prior to
the physical distribution of the Rights Certificates, the Corporation may
distribute the Exchange Consideration in lieu of distributing Right
Certificates, in which case for purposes of this Rights Agreement holders of
Rights shall be deemed to have simultaneously received and surrendered for
exchange Right Certificates on the date of such distribution.
(ii) Any action of the Board of Directors of the Company ordering
the exchange of any Rights pursuant to Section 11(b)(i) shall be irrevocable
and, immediately upon the taking of such action and without any further action
and without any notice, the right to exercise any such Right pursuant to
Section 11(a) shall terminate and the only right thereafter of a holder of such
Right shall be to receive the Exchange Consideration in exchange for each such
Right held by such holder or, if the Exchange Consideration shall not have been
paid or issued, to exercise any such Right pursuant to Section 11(c)(i). The
Company shall promptly give public notice of any such exchange; provided,
--------
however, that the failure to give, or any defect in, such notice shall not
- -------
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all holders of such Rights at their last addresses as
they appear upon the registry books of the Rights Agent. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of exchange will state the method
by which the exchange of the Rights for the Exchange Consideration will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on
the number of Rights (other than Rights which shall have become null and void
and nontransferable pursuant to the provisions of Section 7(e)) held by each
holder of Rights.
<PAGE>
16
(c)(i) In the event that, following a Distribution Date, directly
or indirectly, any transactions specified in the following clause (A), (B) or
(C) of this Section 11(c) (each such transaction being a "Business
Combination") shall be consummated:
(A) the Company shall consolidate with, or merge with and
into, any Acquiring Person or any Affiliate or Associate of an Acquiring
Person;
(B) any Acquiring Person or any Affiliate or Associate of an
Acquiring Person shall merge with and into the Company and, in connection with
such merger, all or part of the Common Shares shall be changed into or
exchanged for capital stock or other securities of the Company or of any
Acquiring Person or Affiliate or Associate of an Acquiring Person or cash or any
other property; or
(C) the Company shall sell, lease, exchange or otherwise
transfer or dispose of (or one or more of its Subsidiaries shall sell, lease,
exchange or otherwise transfer or dispose of), in one or more transactions, the
Major Part of the assets of the Company and its Subsidiaries (taken as a whole)
to any Acquiring Person or any Affiliate or Associate of an Acquiring Person;
then, in each such case, proper provision shall be made so that each holder of
a Right, except as provided in Section 7(e), shall thereafter have the right to
receive, upon the exercise thereof for the Purchase Price in accordance with
the terms of this Rights Agreement, the securities specified below (or, at such
holder's option, the securities specified in Section 11(a)):
(x) if the Principal Party in such Business Combination has Registered Common
Shares outstanding, each Right shall thereafter represent the right to receive,
upon the exercise thereof for the Purchase Price in accordance with the terms
of this Rights Agreement, such number of Registered Common Shares of such
Principal Party, free and clear of all liens, encumbrances or other adverse
claims, as shall have an aggregate Market Value equal to the result obtained by
multiplying the Purchase Price by two; or
(y) if the Principal Party involved in such Business Combination does not have
Registered Common Shares outstanding, each Right shall thereafter represent the
right to receive, upon the exercise thereof for the Purchase Price in
accordance with the terms of this Rights Agreement, at the election of the
holder of such Right at the time of the exercise thereof, any of:
(1) such number of Common Shares of the Surviving Person in such
Business Combination as shall have an aggregate Book Value immediately after
giving effect to such Business Combination equal to the result obtained by
multiplying the Purchase Price by two;
(2) such number of Common Shares of the Principal Party in such
Business Combination (if the Principal Party is not also the Surviving Person
in such Business Combination) as shall have an aggregate Book Value immediately
after giving effect to such Business Combination equal to the result obtained
by multiplying the Purchase Price by two; or
<PAGE>
17
(3) if the Principal Party in such Business Combination is an
Affiliate of one or more Persons which has Registered Common Shares outstanding,
such number of Registered Common Shares of whichever of such Affiliates of the
Principal Party has Registered Common Shares with the greatest aggregate Market
Value on the date of consummation of such Business Combination as shall have an
aggregate Market Value on the date of such Business Combination equal to the
result obtained by multiplying the Purchase Price by two.
(ii) The Company shall not consummate any Business Combination
unless each issuer of Common Shares for which Rights may be exercised, as set
forth in this Section 11(c), shall have sufficient authorized Common Shares
that have not been issued or reserved for issuance (and which shall, when
issued upon exercise thereof in accordance with this Rights Agreement, be
validly issued, fully paid and nonassessable and free of preemptive rights,
rights of first refusal or any other restrictions or limitations on the
transfer or ownership thereof) to permit the exercise in full of the Rights in
accordance with this Section 11(c) and unless prior thereto:
(A) a registration statement under the Securities Act on an
appropriate form, with respect to the Rights and the Common Shares of such
issuer purchasable upon exercise of the Rights, shall be effective under the
Securities Act; and
(B) the Company and each such issuer shall have:
(1) executed and delivered to the Rights Agent a supplemental
agreement providing for the assumption by such issuer of the obligations set
forth in this Section 11(c) (including the obligation of such issuer to issue
Common Shares upon the exercise of Rights in accordance with the terms set
forth in Sections 11(c)(i) and 11(c)(iii)) and further providing that such
issuer, at its own expense, will use its best efforts to:
(x) cause a registration statement under the
Securities Act on an appropriate form, with respect to the Rights and the Common
Shares of such issuer purchasable upon exercise of the Rights, to remain
effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date;
(y) qualify or register the Rights and the Common
Shares of such issuer purchasable upon exercise of the Rights under the blue
sky or securities laws of such jurisdictions as may be necessary or
appropriate; and
(z) list the Rights and the Common Shares of such
issuer purchasable upon exercise of the Rights on each national securities
exchange on which the Common Shares were listed prior to the
<PAGE>
18
consummation of the Business Combination or, if the Common Shares were not
listed on a national securities exchange prior to the consummation of the
Business Combination, on a national securities exchange;
(2) furnished to the Rights Agent a written opinion of
independent counsel stating that such supplemental agreement is a valid,
binding and enforceable agreement of such issuer; and
(3) filed with the Rights Agent a certificate of a
nationally recognized firm of independent accountants setting forth the number
of Common Shares of such issuer which may be purchased upon the exercise of
each Right after the consummation of such Business Combination.
(iii) After consummation of any Business Combination and
subject to the provisions of Section 11(c)(ii), (A) each issuer of Common
Shares for which Rights may be exercised as set forth in this Section 11(c)
shall be liable for, and shall assume, by virtue of such Business Combination,
all the obligations and duties of the Company pursuant to this Rights
Agreement, (B) the term "Company" shall thereafter be deemed to refer to such
issuer, (C) each such issuer shall take such steps in connection with such
consummation as may be necessary to assure that the provisions hereof
(including the provisions of Sections 11(a) and 11(c)) shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights and (D) the number of
Common Shares of each such issuer thereafter receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions of Sections 11 and 12 and
the provisions of Section 7, 9 and 10 with respect to the Preferred Shares
shall apply, as nearly as reasonably may be, on like terms to any such Common
Shares.
SECTION 12. Certain Adjustments. (a) To preserve the
--------------------
actual or potential economic value of the Rights, if at any time after the date
of this Rights Agreement there shall be any change in the Common Shares or the
Preferred Shares, whether by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of
securities, split-ups, split-offs, spin-offs, liquidations, other similar
changes in capitalization, any distribution or issuance of cash, assets,
evidences of indebtedness or subscription rights, options or warrants to
holders of Common Shares or Preferred Shares, as the case may be (other than
distribution of the Rights or regular quarterly cash dividends) or otherwise,
then, in each such event the Board of Directors of the Company shall make such
appropriate adjustments in the number of Preferred Shares (or the number and
kind of other securities) issuable upon exercise of each Right, the Purchase
Price and Redemption Price in effect at such time and the number of Rights
outstanding at such time (including the number of Rights or fractional Rights
associated with each Common Share) such that following such adjustment such
event shall not have had the effect of reducing or limiting the benefits the
holders of the Rights would have had absent such event.
(b) If, as a result of an adjustment made pursuant to
Section 12(a), the holder of any Right thereafter exercised shall become
entitled to receive any securities other than Preferred Shares, thereafter the
number of such securities so receivable upon exercise of any Right shall be
subject to adjustment from time to time in a manner
<PAGE>
19
and on terms as nearly equivalent as practicable to the provisions of
Sections 11 and 12 and the provisions of Sections 7, 9 and 10 with respect to
the Preferred Shares shall apply, as nearly as reasonably may be, on like terms
to any such other securities.
(c) All Rights originally issued by the Company subsequent
to any adjustment made to the amount of Preferred Shares or other securities
relating to a Right shall evidence the right to purchase, for the Purchase
Price, the adjusted number and kind of securities purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(d) Irrespective of any adjustment or change in the Purchase
Price or the number of Preferred Shares or number or kind of other securities
issuable upon the exercise of the Rights, the Right Certificates theretofore
and thereafter issued may continue to express the terms which were expressed in
the initial Right Certificates issued hereunder.
(e) In any case in which action taken pursuant to Section
12(a) requires that an adjustment be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the Preferred Shares and/or other securities, if any, issuable upon such
exercise over and above the Preferred Shares and/or other securities, if any,
issuable before giving effect to such adjustment; provided, however,
-------- -------
that the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional securities
upon the occurrence of the event requiring such adjustment.
SECTION 13. Certificate of Adjustment. Whenever an
--------------------------
adjustment is made as provided in Section 11 or 12, the Company shall (a)
promptly prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment, (b) promptly file with
the Rights Agent and with each transfer agent for the Preferred Shares a copy
of such certificate and (c) mail a brief summary thereof to each holder of a
Right Certificate (or, prior to the Distribution Date, of the Common Shares) in
accordance with Section 25. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained.
SECTION 14. Additional Covenants. (a) Notwithstanding
---------------------
any other provision of this Rights Agreement, no adjustment to the number of
Preferred Shares (or fractions of a share) or other securities for which a
Right is exercisable or the number of Rights outstanding or associated with
each Common Share or any similar or other adjustment shall be made or be
effective if such adjustment would have the effect of reducing or limiting the
benefits the holders of the Rights would have had absent such adjustment,
including, without limitation, the benefits under Sections 11 and 12, unless the
terms of this Rights Agreement are amended so as to preserve such benefits.
(b) The Company covenants and agrees that, after the
Distribution Date, except as permitted by Section 26, it will not take (or
permit any Subsidiary of the Company to take) any action if at the time such
action is taken it is intended or reasonably foreseeable that such action will
reduce or otherwise limit the benefits the holders of the Rights would have had
absent such action, including, without limitation, the benefits under Sections
11 and 12. Any action taken by
<PAGE>
20
the Company during any period after any Person becomes an Acquiring Person but
prior to the Distribution Date shall be null and void unless such action could
be taken under this Section 14(b) from and after the Distribution Date. The
Company shall not consummate any Business Combination if any issuer of Common
Shares for which Rights may be exercised after such Business Combination in
accordance with Section 11(c) shall have taken any action that reduces or
otherwise limits the benefits the holders of the Rights would have had absent
such action, including, without limitation, the benefits under Sections 11 and
12.
SECTION 15. Fractional Rights and Fractional Shares.
----------------------------------------
(a) The Company may, but shall not be required to, issue fractions of Rights
or distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, the Company may pay to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 15(a), the current market
value of a whole Right shall be the closing price of the Rights (as determined
pursuant to the second and third sentences of the definition of Market Value
contained in Section 1) for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable.
(b) The Company may, but shall not be required to, issue
fractions of Preferred Shares upon exercise of the Rights or distribute
certificates which evidence fractional Preferred Shares. In lieu of fractional
Preferred Shares, the Company may elect to (i) utilize a depository arrangement
as provided by the terms of the Preferred Shares or (ii) in the case of a
fraction of a Preferred Share (other than one-thousandth (1/1,000) of a
Preferred Share or any integral multiple thereof), pay to the registered
holders of Right Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one Preferred Share, if any are outstanding and publicly traded (or
the Formula Number times the current market value of one Common Share if the
Preferred Shares are not outstanding and publicly traded). For purposes of
this Section 15(b), the current market value of a Preferred Share (or Common
Share) shall be the closing price of a Preferred Share (or Common Share) (as
determined pursuant to the second and third sentences of the definition of
Market Value contained in Section 1) for the Trading Day immediately prior to
the date of such exercise. If, as a result of an adjustment made pursuant to
Section 12(a), the holder of any Right thereafter exercised shall become
entitled to receive any securities other than Preferred Shares, the provisions
of this Section 15(b) shall apply, as nearly as reasonably may be, on like terms
to such other securities.
(c) The Company may, but shall not be required to, issue
fractions of Common Shares upon exchange of Rights pursuant to Section 11(b),
or to distribute certificates which evidence fractional Common Shares. In lieu
of such fractional Common Shares, the Company may pay to the registered holders
of the Right Certificates with regard to which such fractional Common Shares
would otherwise be issuable an amount in cash equal to the same fraction of the
current Market Value of one Common Share as of the date on which a Person
became an Acquiring Person.
<PAGE>
21
(d) The holder of Rights by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right except as provided in this Section 15.
SECTION 16. Rights of Action. (a) All rights of action
-----------------
in respect of this Rights Agreement are vested in the respective registered
holders of the Right Certificates (and, prior to the Distribution Date, the
registered holders of the Common Shares); and any registered holder of any
Right Certificate (or, prior to the Distribution Date, of the Common Shares),
without the consent of the Rights Agent or of the holder of any other Right
Certificate (or, prior to the Distribution Date, of the Common Shares) may, in
his own behalf and for his own benefit, enforce, and may institute and maintain
any suit, action or proceeding against the Company to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this Rights
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Rights
Agreement and shall be entitled to specific performance of the obligations of
any Person under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to, this Rights Agreement.
(b) Any holder of Rights who prevails in an action to
enforce the provisions of this Rights Agreement shall be entitled to recover
the reasonable costs and expenses, including attorneys' fees, incurred in such
action.
SECTION 17. Transfer and Ownership of Rights and Right
-------------------------------------------
Certificates. (a) Prior to the Distribution Date, the Rights will be
- -------------
transferable only in connection with the transfer of the Common Shares and the
Rights associated with the Common Shares shall be automatically transferred upon
the transfer of the Common Shares.
(b) After the Distribution Date, the Right Certificates will
be transferable, subject to Section 7(e), only on the registry books of the
Rights Agent if surrendered at the principal office of the Rights Agent, duly
endorsed or accompanied by a proper instrument of transfer.
(c) The Company and the Rights Agent may deem and treat the
Person in whose name a Right Certificate (or, prior to the Distribution Date,
the associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated certificate
for Common Shares made by anyone other than the Company or the Rights Agent)
for all purposes whatsoever, and neither the Company nor the Rights Agent shall
be affected by any notice to the contrary.
SECTION 18. Right Certificate Holder Not Deemed a
--------------------------------------
Shareholder. No holder, as such, of any Right Certificate shall be entitled
- ------------
to vote or receive dividends or be deemed, for any purpose, the holder of the
Preferred Shares or of any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Right Certificate be construed to confer
upon the holder of any Right Certificate, as such, any of the rights of a
shareholder of the Company,
<PAGE>
22
including, without limitation, any right to vote for the election of directors
or upon any matter submitted to shareholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders, or to receive dividends or other
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by such Right Certificate shall have been exercised in accordance with
the provisions hereof.
SECTION 19. Concerning the Rights Agent. (a) The
----------------------------
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder from time to time and its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Rights Agreement and the exercise and performance of its
duties hereunder.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Rights Agreement in reliance upon
any Right Certificate or certificate for the Common Shares or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons.
SECTION 20. Merger or Consolidation or Change of Rights
--------------------------------------------
Agent. (a) Any corporation into which the Rights Agent or any successor
- ------
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the stock transfer or corporate trust business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights Agent
under this Rights Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided that such
--------
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 22. In case, at the time such successor Rights Agent
shall succeed to the agency created by this Rights Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so countersigned; and, in case at
that time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall
be changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and, in case at that time any of the Right Certificates shall
not have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Rights Agreement.
<PAGE>
23
SECTION 21. Duties of Rights Agent. The Rights Agent
-----------------------
undertakes the duties and obligations imposed by this Rights Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates (or, prior to the Distribution Date, of the Common Shares),
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel
satisfactory to it (who may be legal counsel for the Company), and the opinion
of such counsel shall be full and complete authorization and protection to the
Rights Agent as to any action taken, suffered or omitted by it in good faith
and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Rights Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any Acquiring
Person) be proved or established by the Company prior to taking, refraining from
taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by a certificate signed by any one of the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief Financial Officer, a Vice President (whether
preceded by any additional title), the Treasurer or the Secretary of the Company
and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Rights Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or wilful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Rights Agreement or
in the Right Certificates (except as to its countersignature thereof) or be
required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility
in respect of the validity of this Rights Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Rights Agreement or in
any Right Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or 12 or responsible for the manner, method
or amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise of
Rights evidenced by Right Certificates after actual notice of any such
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares or Common Shares to be issued pursuant to this Rights
Agreement or any Right Certificate or as to whether any Preferred Shares or
Common Shares will, when so issued, be validly authorized and issued, fully
paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged
<PAGE>
24
and delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, a Vice President (whether preceded by
any additional title), the Secretary or the Treasurer of the Company, and to
apply to such officers for advice and instructions in connection with its
duties and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer,
employee or affiliate of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not the Rights Agent under this Rights Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the Company or
for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct provided reasonable care was exercised in
the selection and continued employment thereof.
(j) The Company agrees to indemnify and to hold the Rights
Agent harmless against any loss, liability, damage or expense (including
reasonable fees and expenses of legal counsel) which the Rights Agent may incur
resulting from its actions as Rights Agent pursuant to this Rights Agreement;
provided, however, that the Rights Agent shall not be indemnified or
- -------- -------
held harmless with respect to any such loss, liability, damage or expense
incurred by the Rights Agent as a result of, or arising out of, its own
negligence, bad faith or wilful misconduct. In no case shall the Company be
liable with respect to any action, proceeding, suit or claim against the Rights
Agent unless the Rights Agent shall have notified the Company, by letter or by
facsimile confirmed by letter, of the assertion of any action, proceeding, suit
or claim against the Rights Agent, promptly after the Rights Agent shall have
notice of any such assertion of an action, proceeding, suit or claim or have
been served with the summons or other first legal process giving information as
to the nature and basis of the action, proceeding, suit or claim. The Company
shall at its own expense assume the defense of any such action, proceeding,
suit or claim. In the event that the Company assumes such defense, the Company
shall not thereafter be liable for the fees and expenses of any additional
counsel retained by the Rights Agent, so long as the Company shall retain
counsel satisfactory to the Rights Agent, in the exercise of its reasonable
judgment, to defend such action, proceeding, suit or claim. In the event the
Company fails so to defend, the Rights Agent agrees not to settle any litigation
in connection with any action, proceeding, suit or claim with respect to
<PAGE>
25
which it may seek indemnification from the Company without the prior written
consent of the Company.
(k) The Rights Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more registered holders
of Right Certificates shall furnish the Rights Agent with security and
indemnity to its satisfaction for any costs and expenses which may be incurred.
(l) The Rights Agent shall not be liable for failure to
perform any duties except as specifically set forth herein and no implied
covenants or obligations shall be read into this Agreement against the Rights
Agent, whose duties and obligations are ministerial and shall be determined
solely by the express provisions hereof.
SECTION 22. Change of Rights Agent. The Rights Agent or
-----------------------
any successor Rights Agent may resign and be discharged from its duties under
this Rights Agreement upon 30 days' notice in writing mailed to the Company and
to each transfer agent of the Common Shares and the Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates (or,
prior to the Distribution Date, of the Common Shares) by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon 30 days'
notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Shares and the Preferred
Shares by registered or certified mail, and to the holders of the Right
Certificates (or, prior to the Distribution Date, of the Common Shares) by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (or, prior
to the Distribution Date, of the Common Shares) who shall, with such notice,
submit his Right Certificate (or, prior to the Distribution Date, the
certificate representing his Common Shares) for inspection by the Company, then
the registered holder of any Right Certificate (or, prior to the Distribution
Date, of the Common Shares) may apply to any court of competent jurisdiction
for the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation organized
and doing business under the laws of the United States or of any state of the
United States, in good standing, having a principal office in the United
States, which is authorized under such laws to exercise stock, transfer or
corporate trust powers and is subject to supervision or examination by Federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $25,000,000; provided that the
--------
principal transfer agent for the Common Shares shall in any event be qualified
to be the Rights Agent. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each
<PAGE>
26
transfer agent of the Common Shares and the Preferred Shares, and mail a notice
thereof in writing to the registered holders of the Right Certificates (or,
prior to the Distribution Date, of the Common Shares). Failure to give any
notice provided for in this Section 22, however, or any defect therein shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
SECTION 23. Issuance of Additional Rights and Right
----------------------------------------
Certificates. Notwithstanding any of the provisions of this Rights Agreement
- -------------
or of the Rights to the contrary, the Company may, at its option, issue new
Right Certificates evidencing Rights in such form as may be approved by its
Board of Directors to reflect any adjustment or change made in accordance with
the provisions of this Rights Agreement. In addition, in connection with the
issuance or sale of Common Shares following the Distribution Date and prior to
the earlier of the Redemption Date and the Expiration Date, the Company (a)
shall, with respect to Common Shares so issued or sold pursuant to the exercise
of stock options or under any employee plan or arrangement, or upon the
exercise, conversion or exchange of securities, notes or debentures issued by
the Company, and (b) may, in any other case, if deemed necessary or appropriate
by the Board of Directors of the Company, issue Right Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided, however, that (x) no such Right Certificate shall be issued
- -------- -------
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences
to the Company or the Person to whom such Right Certificate would be issued,
and (y) no such Right Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
SECTION 24. Redemption and Termination. (a) The Board
---------------------------
of Directors of the Company may, at its option, at any time prior to the
earlier of (i) such time as a Person becomes an Acquiring Person and (ii) the
Expiration Date, order the redemption of all, but not fewer than all, the then
outstanding Rights at the Redemption Price (the date of such redemption being
the "Redemption Date"), and the Company, at its option, may pay the Redemption
Price either in cash or Common Shares or other securities of the Company deemed
by the Board of Directors of the Company, in the exercise of its sole
discretion, to be at least equivalent in value to the Redemption Price.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights, and without any further
action and without any notice, the right to exercise the Rights will terminate
and the only right thereafter of the holders of Rights shall be to receive the
Redemption Price. Within 10 Business Days after the action of the Board of
Directors of the Company ordering the redemption of the Rights, the Company
shall give notice of such redemption to the holders of the then outstanding
Rights by mailing such notice to all such holders at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Shares. Each such notice of redemption will state the method by which payment
of the Redemption Price will be made. The notice, if mailed in the manner
herein provided, shall be conclusively presumed to have been duly given,
whether or not the holder of Rights receives such notice. In any case, failure
to give such notice by mail, or any defect in the notice, to any
<PAGE>
27
particular holder of Rights shall not affect the sufficiency of the notice to
other holders of Rights.
SECTION 25. Notices. Notices or demands authorized by
--------
this Agreement to be given or made by the Rights Agent or by the holder of a
Right Certificate (or, prior to the Distribution Date, of the Common Shares) to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:
Primex Technologies, Inc.
10101 9th Street
St. Petersburg, FL 33716-3807
Attention of General Counsel
Subject to the provisions of Section 22, any notice or demand authorized by
this Rights Agreement to be given or made by the Company or by the holder of a
Right Certificate (or, prior to the Distribution Date, of the Common Shares) to
or on the Rights Agent shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
450 West 33rd Street
New York, NY 10001
Attention: Vice President of Administration
Notices or demands authorized by this Rights Agreement to be given
or made by the Company or the Rights Agent to any holder of a Right Certificate
(or, prior to the Distribution Date, of the Common Shares) shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Shares.
SECTION 26. Supplements and Amendments. At any time prior to the
--------------------------
Distribution Date and subject to the last sentence of this Section 26, the
Company may, and the Rights Agent shall if the Company so directs, supplement
or amend any provision of this Rights Agreement (including, without limitation,
the date on which the Distribution Date shall occur, the time during which the
Rights may be redeemed pursuant to Section 24 or any provision of the Articles
of Amendment) without the approval of any holder of the Rights. From and after
the Distribution Date and subject to applicable law, the Company may, and the
Rights Agent shall if the Company so directs, amend this Rights Agreement
without the approval of any holders of Right Certificates (a) to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision of this Rights Agreement
or (b) to make any other provisions in regard to matters or questions arising
hereunder which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Right Certificates (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring Person). Any
supplement or amendment adopted during any period after any Person has become
an Acquiring Person but prior to the Distribution Date shall be null and void
unless such supplement or amendment could have been adopted under the prior
sentence from and after the Distribution Date. Any supplement or amendment to
this Rights Agreement duly approved by
<PAGE>
28
the Company that does not amend Sections 19, 20, 21 or 22 in a manner adverse to
the Rights Agent shall become effective immediately upon execution by the
Company, whether or not also executed by the Rights Agent. In addition,
notwithstanding anything to the contrary contained in this Rights Agreement, no
supplement or amendment to this Rights Agreement shall be made which (x) reduces
the Redemption Price (except as required by Section 12(a)) or (y) provides for
an earlier Expiration Date.
SECTION 27. Successors. All the covenants and provisions of
-----------
this Rights Agreement by or for the benefit of the Company or the Rights Agent
shall bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 28. Benefits of Rights Agreement; Determinations and
-------------------------------------------------
Actions by the Board of Directors, etc. (a) Nothing in this Rights
- ---------------------------------------
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, of the Common Shares) any legal or equitable right,
remedy or claim under this Rights Agreement; but this Rights Agreement shall be
for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, of the Common Shares).
(b) Except as explicitly otherwise provided in this Rights
Agreement, the Board of Directors of the Company shall have the exclusive power
and authority to administer this Rights Agreement and to exercise all rights
and powers specifically granted to the Board of Directors of the Company or to
the Company, or as may be necessary or advisable in the administration of this
Rights Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Rights Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Rights Agreement (including, without limitation, a determination to redeem or
not redeem the Rights or to amend this Rights Agreement and whether there is an
Acquiring Person).
(c) Nothing contained in this Rights Agreement shall be deemed to
be in derogation of the obligation of the Board of Directors of the Company to
exercise its fiduciary duty. Without limiting the foregoing, nothing contained
herein shall be construed to suggest or imply that the Board of Directors shall
not be entitled to reject any tender offer, or to recommend that holders of
Common Shares reject any tender offer, or to take any other action (including,
without limitation, the commencement, prosecution, defense or settlement of any
litigation and the submission of additional or alternative offers or other
proposals) with respect to any tender offer that the Board of Directors
believes is necessary or appropriate in the exercise of such fiduciary duty.
SECTION 29. Severability. If any term, provision, covenant or
-------------
restriction of this Rights Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Rights
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
<PAGE>
29
SECTION 30. Governing Law. This Rights Agreement and each
--------------
Right Certificate issued hereunder shall be deemed to be a contract made under
the law of the Commonwealth of Virginia and for all purposes shall be governed
by and construed in accordance with the law of such Commonwealth applicable to
contracts to be made and performed entirely within such Commonwealth except
that the duties and rights of the Rights Agent shall be governed by the law of
the State of New York without reference to the choice of law doctrine of such
State.
SECTION 31. Counterparts; Effectiveness. This Rights
----------------------------
Agreement may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument. This
Rights Agreement shall be effective as of the Close of Business on the date
hereof.
SECTION 32. Descriptive Headings. Descriptive headings of the
---------------------
several Sections of this Rights Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions of this Rights Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed as of the day and year first above written.
PRIMEX TECHNOLOGIES, INC.,
by
/s/ Johnnie M. Jackson, Jr.
-----------------------------
Name: Johnnie M. Jackson, Jr.
Title: Vice President and Secretary
CHASEMELLON SHAREHOLDER SERVICES,
L.L.C., as Rights Agent,
by
/s/ Patricia A. Hoffman
--------------------------
Name: Patricia A. Hoffman
Title: Vice President
<PAGE>
EXHIBIT 4.4A
ARTICLES OF AMENDMENT
OF
THE ARTICLES OF INCORPORATION
OF
PRIMEX TECHNOLOGIES, INC.
under Section 13.1-639 of the Virginia Stock Corporation Act
FIRST: The name of the Corporation is Primex Technologies, Inc.
SECOND: The amendment adopted is to add a new Paragraph 9 to Article III,
to read as follows:
"9: Series A Participating Cumulative Preferred Stock. There is hereby
established a series of the Corporation's authorized Preferred Stock, to be
designated as the "Series A Participating Cumulative Preferred Stock, par value
$1 per share." The designation and number, and relative rights, preferences
and limitations of the Series A Participating Cumulative Preferred Stock,
insofar as not already fixed by any other provision of these Articles of
Incorporation, shall be as follows:
SECTION 1. Designation and Number of Shares. The shares of such series
---------------------------------
shall be designated as "Series A Participating Cumulative Preferred Stock" (the
"Series A Preferred Stock"), par value $1 per share. The number of shares
initially constituting the Series A Preferred Stock shall be 250,000;
provided, however, that, if more than a total of 250,000 shares of
-------
Series A Preferred Stock shall be issuable upon the exercise of Rights (the
"Rights") issued pursuant to the Rights Agreement dated as of December 19,
1996, between the Corporation and Chase Mellon Shareholder Services, L.L.C., as
Rights Agent (the "Rights Agreement"), the Board of Directors of the
Corporation, pursuant to Section 13.1-639 of the Virginia Stock Corporation
Act, shall direct by resolution or resolutions that articles of amendment of
the Articles of Incorporation of the Corporation be properly executed and filed
with the State Corporation Commission of Virginia providing for the total number
of shares of Series A Preferred Stock authorized to be issued to be increased
(to the extent that the Articles of Incorporation then permit) to the largest
number of whole shares (rounded up to the nearest whole number) issuable upon
exercise of such Rights.
SECTION 2. Dividends or Distributions. (a) Subject to the prior and
---------------------------
superior rights of the holders of shares of any other series of Preferred Stock
or other class of capital stock of the Corporation
<PAGE>
ranking prior and superior to the shares of Series A Preferred Stock with
respect to dividends, the holders of shares of the Series A Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors, out of the assets of the Corporation legally available therefor, (i)
quarterly dividends payable in cash on the last day of each fiscal quarter in
each year, or such other dates as the Board of Directors of the Corporation
shall approve (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or a fraction of a share of Series A Preferred
Stock, in the amount of $.01 per whole share (rounded to the nearest cent), less
the amount of all cash dividends declared on the Series A Preferred Stock
pursuant to the following clause (ii) since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Preferred Stock (the total of which shall not, in any event, be less than zero)
and (ii) dividends payable in cash on the payment date for each cash dividend
declared on the Common Stock in an amount per whole share (rounded to the
nearest cent) equal to the Formula Number (as hereinafter defined) then in
effect times the cash dividends then to be paid on each share of Common Stock.
In addition, if the Corporation shall pay any dividend or make any distribution
on the Common Stock payable in assets, securities or other forms of non-cash
consideration (other than dividends or distributions solely in shares of Common
Stock), then, in each such case, the Corporation shall simultaneously pay or
make on each outstanding whole share of Series A Preferred Stock a dividend or
distribution in like kind equal to the Formula Number then in effect times such
dividend or distribution on each share of the Common Stock. As used herein,
the "Formula Number" shall be 1,000; provided, however, that, if at any
-------- -------
time after December 31, 1996, the Corporation shall (x) declare or pay any
dividend on the Common Stock payable in shares of Common Stock or make any
distribution on the Common Stock in shares of Common Stock, (y) subdivide (by a
stock split or otherwise) the outstanding shares of Common Stock into a larger
number of shares of Common Stock or (z) combine (by a reverse stock split or
otherwise) the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then, in each such event, the Formula Number shall be
adjusted to a number determined by multiplying the Formula Number in effect
immediately prior to such event by a fraction, the numerator of which is the
number of shares of Common Stock that are outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
are outstanding immediately prior to such event (and rounding the result to the
nearest whole number); and provided further, that, if at any time after
----------------
December 31, 1996, the Corporation shall issue any shares of its capital stock
in a merger, reclassification, or change of the outstanding shares of Common
Stock, then, in each such event, the Formula Number shall be appropriately
adjusted to reflect such merger, reclassification or change so that each share
of Preferred Stock continues to be the economic equivalent of a Formula Number
of shares of Common Stock prior to such merger, reclassification or change.
(b) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in Section 2(a)
<PAGE>
immediately prior to or at the same time it declares a dividend or distribution
on the Common Stock (other than a dividend or distribution solely in shares of
Common Stock);provided, however, that, in the event no dividend or distribution
-------- -------
(other than a dividend or distribution in shares of Common Stock) shall have
been declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date,
a dividend of $.01 per share on the Series A Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a dividend or distribution
declared thereon, which record date shall be the same as the record date for
any corresponding dividend or distribution on the Common Stock.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from and after the Quarterly Dividend Payment Date
next preceding the date of original issue of such shares of Series A Preferred
Stock; provided, however, that dividends on such shares that are
-------
originally issued after the record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive a quarterly dividend and
on or prior to the next succeeding Quarterly Dividend Payment Date shall begin
to accrue and be cumulative from and after such Quarterly Dividend Payment Date.
Notwithstanding the foregoing, dividends on shares of Series A Preferred Stock
that are originally issued prior to the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a quarterly
dividend on the first Quarterly Dividend Payment Date shall be calculated as if
cumulative from and after the last day of the fiscal quarter next preceding the
date of original issuance of such shares. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
(d) So long as any shares of the Series A Preferred Stock are outstanding,
no dividends or other distributions shall be declared, paid or distributed, or
set aside for payment or distribution, on the Common Stock, unless, in each
case, the dividend required by this Section 2 to be declared on the Series A
Preferred Stock shall have been declared.
(e) The holders of the shares of Series A Preferred Stock shall not be
entitled to receive any dividends or other distributions, except as provided
herein.
<PAGE>
SECTION 3. Voting Rights. The holders of shares of Series A Preferred
--------------
Stock shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a number
of votes equal to the Formula Number then in effect, for each share of Series A
Preferred Stock held of record on each matter on which holders of the Common
Stock or shareholders generally are entitled to vote, multiplied by the maximum
number of votes per share which any holder of the Common Stock or shareholders
generally then have with respect to such matter (assuming any holding period or
other requirement to vote a greater number of shares is satisfied).
(b) Except as otherwise provided herein or by applicable law, the holders
of shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as one class for the election of directors of the
Corporation and on all other matters submitted to a vote of shareholders of the
Corporation.
(c) If, at the time of any annual meeting of shareholders for the election
of directors, the equivalent of six quarterly dividends (whether or not
consecutive) payable on any share or shares of Series A Preferred Stock are in
default, the number of directors constituting the Board of Directors of the
Corporation shall be increased by two. In addition to voting together with the
holders of Common Stock for the election of other directors of the Corporation,
the holders of record of the Series A Preferred Stock, voting separately as a
class to the exclusion of the holders of Common Stock, shall be entitled at
said meeting of shareholders (and at each subsequent annual meeting of
shareholders), unless all dividends in arrears have been paid or declared and
set apart for payment prior thereto, to vote for the election of two directors
of the Corporation, the holders of any Series A Preferred Stock being entitled
to cast a number of votes per share of Series A Preferred Stock equal to the
Formula Number. Until the default in payments of all dividends that permitted
the election of said directors shall cease to exist, any director who shall have
been so elected pursuant to the next preceding sentence may be removed at any
time, either with or without cause, only by the affirmative vote of the holders
of the shares of Series A Preferred Stock at the time entitled to cast a
majority of the votes entitled to be cast for the election of any such director
at a special meeting of such holders called for that purpose, and any vacancy
thereby created may be filled by the vote of such holders. If and when such
default shall cease to exist, the holders of the Series A Preferred Stock shall
be divested of the foregoing special voting rights, subject to revesting in the
event of each and every subsequent like default in payments of dividends. Upon
the termination of the foregoing special voting rights, the terms of office of
all persons who may have been elected directors pursuant to said special voting
rights shall forthwith terminate, and the number of directors constituting the
Board of Directors shall be reduced by two. The voting rights granted by this
Section 3(c) shall be in addition to any other voting rights granted to the
holders of the Series A Preferred Stock in this Section 3.
<PAGE>
(d) Except as provided herein, in Section 11 or by applicable law, holders
of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for authorizing or taking any
corporate action.
SECTION 4. Certain Restrictions. (a) Whenever quarterly dividends or
---------------------
other dividends or distributions payable on the Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are
then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Preferred
Stock; provided that the Corporation may at any time redeem, purchase or
---------
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series
or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
<PAGE>
SECTION 5. Liquidation Rights. Upon the liquidation,
-------------------
dissolution or winding up of the Corporation, whether voluntary or involuntary,
no distribution shall be made (a) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock, unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received an amount equal to the accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment, plus an amount equal to the greater of (i) $.01 per whole share
or (ii) an aggregate amount per share equal to the Formula Number then in effect
times the aggregate amount to be distributed per share to holders of Common
Stock or (b) to the holders of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except distributions made ratably on the Series A Preferred Stock and all
other such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up.
SECTION 6. Consolidation, Merger, etc. In case the
---------------------------
Corporation shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or changed
into other stock or securities, cash or any other property, then, in any such
case, the then outstanding shares of Series A Preferred Stock shall at the same
time be similarly exchanged or changed into an amount per share equal to the
Formula Number then in effect times the aggregate amount of stock, securities,
cash or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is exchanged or changed. In the event
both this Section 6 and Section 2 appear to apply to a transaction, this
Section 6 will control.
SECTION 7. No Redemption; No Sinking Fund. (a) The shares of
-------------------------------
Series A Preferred Stock shall not be subject to redemption by the Corporation
or at the option of any holder of Series A Preferred Stock; provided,
--------
however, that the Corporation may purchase or otherwise acquire outstanding
- -------
shares of Series A Preferred Stock in the open market or by offer to any holder
or holders of shares of Series A Preferred Stock.
(b) The shares of Series A Preferred Stock shall not be subject to
or entitled to the operation of a retirement or sinking fund.
SECTION 8. Ranking. The Series A Preferred Stock shall rank
--------
junior to all other series of Preferred Stock of the Corporation, unless the
Board of Directors shall specifically determine otherwise in fixing the powers,
preferences and relative, participating, optional and other special rights of
the shares of such series and the qualifications, limitations and restrictions
thereof.
SECTION 9. Fractional Shares. The Series A Preferred Stock
------------------
shall be issuable upon exercise of the Rights issued pursuant to the Rights
Agreement in whole shares or in any fraction of a share that is one-thousandth
(1/1,000) of a share or any integral multiple of such fraction which shall
entitle the holder, in proportion to such holder's fractional shares, to
receive dividends, exercise voting rights,
<PAGE>
participate in distributions and have the benefit of all other rights of holders
of Series A Preferred Stock. In lieu of fractional shares, the Corporation,
prior to the first issuance of a share or a fraction of a share of Series A
Preferred Stock, may elect (a) to make a cash payment as provided in the Rights
Agreement for fractions of a share other than one-thousandth (1/1,000) of a
share or any integral multiple thereof or (b) to issue depository receipts
evidencing such authorized fraction of a share of Series A Preferred Stock
pursuant to an appropriate agreement between the Corporation and a depository
selected by the Corporation; provided that such agreement shall provide
--------
that the holders of such depository receipts shall have all the rights,
privileges and preferences to which they are entitled as holders of the Series
A Preferred Stock.
SECTION 10. Reacquired Shares. Any shares of Series A
------------------
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock, par value $1 per share, of the Corporation,
undesignated as to series, and may thereafter be reissued as part of a new
series of such Preferred Shares as permitted by law.
SECTION 11. Amendment. None of the powers, preferences and
----------
relative, participating, optional and other special rights of the Series A
Preferred Stock as provided herein or in the Articles of Incorporation shall be
amended in any manner that would alter or change the powers, preferences,
rights or privileges of the holders of Series A Preferred Stock so as to affect
such holders adversely without the affirmative vote of the holders of at least
66-2/3% of the outstanding shares of Series A Preferred Stock, voting as a
separate class; provided, however, that no such amendment approved by
-------
the holders of at least 66-2/3% of the outstanding shares of Series A Preferred
Stock shall be deemed to apply to the powers, preferences, rights or privileges
of any holder of shares of Series A Preferred Stock originally issued upon
exercise of a Right after the time of such approval without the approval of
such holder.
THIRD: This amendment of the Articles of Incorporation was duly
adopted by the Board of Directors of the Corporation on December 9, 1996,
without shareholder action, which shareholder action was not required.
FOURTH: This amendment of the Articles of Incorporation shall
become effective on December 31, 1996.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Amendment as of this day of December, 1996.
PRIMEX TECHNOLOGIES, INC.
by
--------------------------
Name:
Title:
<PAGE>
EXHIBIT 4.4B
[Form of Right Certificate]
Certificate No. [R]-
___________ Rights
NOT EXERCISABLE AFTER DECEMBER 19, 2006, OR EARLIER, IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
AT $.01 PER RIGHT, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND BY ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL AND VOID AND NONTRANSFERABLE.
Right Certificate
PRIMEX TECHNOLOGIES, INC.
This certifies that , or registered assigns, is the
registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of December 19, 1996 (the "Rights Agreement"),
between Primex Technologies, Inc., a Virginia corporation (the "Company"), and
Chase Mellon Shareholder Services, L.L.C., a New Jersey limited liability
company, as Rights Agent (the "Rights Agent"), unless the Rights evidenced
hereby shall have been previously redeemed by the Company, to purchase from the
Company at any time after the Distribution Date (as defined in the Rights
Agreement) and prior to 5:00 p.m., New York City time, on the 10th anniversary
of the date of the Rights Agreement (the "Expiration Date"), at the principal
office of the Rights Agent, or its successors as Rights Agent, in New York, New
York, one-thousandth (1/1,000) of a fully paid, nonassessable share of Series A
Participating Cumulative Preferred Stock, without par value, of the Company
(the "Preferred Shares"), at a purchase price per one-thousandth (1/1,000) of a
share equal to $55 (the "Purchase Price"), payable in cash, upon presentation
and surrender of this Right Certificate with the Form of Election to Purchase
duly executed.
The Purchase Price and the number and kind of shares which may be purchased
upon exercise of each Right evidenced by this Right Certificate, as set forth
above, are the Purchase Price and the number and kind of shares which may be so
purchased as of January 1, 1997. As provided in the Rights Agreement, the
Purchase Price and the number and
<PAGE>
2
kind of shares which may be purchased upon the exercise of each Right evidenced
by this Right Certificate are subject to modification and adjustment upon the
happening of certain events.
If the Rights evidenced by this Right Certificate are at any time
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder of any such
Right (including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
This Right Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof, and reference
to the Rights Agreement is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the above-mentioned office of the Rights
Agent and are also available from the Company upon written request.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal stock transfer or corporate trust office of the
Rights Agent, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number and kind of shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled
such holder to purchase. If this Right Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Right Certificate may be redeemed by the Company at its option at a
redemption price (in cash or shares of Common Stock or other securities of the
Company deemed by the Board of Directors to be at least equivalent in value) of
$.01 per Right (which amount shall be subject to adjustment as provided in the
Rights Agreement) at any time prior to the earlier of (a) such time as a Person
becomes an Acquiring Person and (b) the Expiration Date.
The Company may, but shall not be required to, issue fractions of Preferred
Shares or distribute certificates which evidence fractions of Preferred Shares
upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing
fractional shares, the Company may elect to make a cash payment as provided in
the Rights Agreement for fractions of a share other than one-thousandth
(1/1,000) of a share or any integral multiple thereof or to issue certificates
or to utilize a depositary arrangement as provided in the terms of the Rights
Agreement and the Preferred Shares.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in
<PAGE>
3
the Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a shareholder of the Company, including, without
limitation, any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meetings or other actions
affecting shareholders (except as provided in the Rights Agreement), or to
receive dividends or other distributions or subscription rights, or otherwise,
until the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in accordance with the provisions of the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of: , ____
PRIMEX TECHNOLOGIES, INC.,
by
-------------------------
Name:
Title:
Attest:
_________________________
Name:
Title:
Countersigned:
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C, as Rights Agent,
by
_____________________
Authorized Officer
[On Reverse Side of Right Certificate]
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed by the registered holder if
such holder desires to exercise the Rights
represented by this Right Certificate.)
<PAGE>
4
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise Rights
----------
represented by this Right Certificate to purchase the Preferred Shares (or
other shares) issuable upon the exercise of such Rights and requests that
certificates for such shares be issued in the name of:
Please insert social security
or other identifying number
------------------------------------------------------------
(Please print name and address)
------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
------------------------------------------------------------
(Please print name and address)
------------------------------------------------------------
Dated: ,
----
------------------------------
Signature
Signature Guaranteed:
<PAGE>
5
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _______________________________ hereby sells, assigns and
transfers unto ___________________ ____________________________________________
________________
(Please print name and address of transferee)
____________________________________________________________
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ______________ Attorney, to
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: ____________, ____
______________________________
Signature
Signature Guaranteed:
The undersigned hereby certifies that (a) the Rights evidenced by this Right
Certificate are not being sold, assigned or transferred by or on behalf of a
Person who is or was an Acquiring Person or an Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement), (b) this Rights
Certificate is not being sold, assigned or transferred to or on behalf of any
such Acquiring Person, Affiliate or Associate, and (c) after inquiry and to the
best knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Right Certificate from any Person who is or was an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
______________________________
Signature
<PAGE>
6
NOTICE
------
The signature on the foregoing Form of Election to Purchase or Form of
Assignment must correspond to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
<PAGE>
EXHIBIT 10.12
-------------
EXECUTIVE AGREEMENT
-------------------
Agreement between Primex Technologies, Inc., a Virginia corporation
("Primex"), and James G. Hascall (the "Executive"), dated as of January 1,
1997.
Primex and the Executive agree as follows:
1. Definitions
As used in this Agreement:
(a) "Cause" means the willful and continued failure of the
Executive to substantially perform his or her duties; the willful engaging by
the Executive in gross misconduct significantly and demonstrably injurious to
Primex; or conduct by the Executive in the course of his or her employment
which is a felony or fraud. No act or failure to act on the part of the
Executive will be considered "willful" unless done or omitted not in good faith
and without reasonable belief that the action or omission was in the interests
of Primex or not opposed to the interests of Primex.
(b) "Change in Control" means:
(i) Primex ceases to be, directly or indirectly, owned by
at least 1,000 stockholders;
(ii) A person, partnership, joint venture, corporation or
other entity, or two or more of any of the foregoing acting as a "person"
within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Act"), other than Primex, a majority-owned subsidiary of
Primex or an employee benefit plan (or related trust) of Primex, such
subsidiary or Olin Corporation, a Virginia corporation ("Olin"), become(s) the
"beneficial owner" (as defined in Rule 13d-3 under such Act) of 15% or more of
the then outstanding voting stock of Primex;
(iii) During any period of two consecutive years, individuals
who at the beginning of such period constitute Primex's Board of Directors
(together with any new Director whose election by Primex's Board of Directors
or whose nomination for election by Primex's stockholders was approved by a vote
of at least two-thirds of the Directors then still in office who either were
directors at the beginning
<PAGE>
2
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the directors then in
office; or
(iv) All or substantially all of the business of Primex is
disposed of pursuant to a merger, consolidation or other transaction in which
Primex is not the surviving corporation or Primex combines with another
company and is the surviving corporation (unless the shareholders of Primex
immediately following such merger, consolidation, combination, or other
transaction beneficially own, directly or indirectly, more than 50% of the
voting stock or other ownership interests of (x) the entity or entities, if
any, that succeed to the business of Primex or (y) the combined company).
(c) "Disability" means that the Executive has suffered an
incapacity due to physical or mental illness which meets the criteria for
disability established at the time under Primex's short-term disability plan.
(d) "Executive Severance" means:
(i) twelve months of the Executive's then current monthly
salary (without taking into account any reductions which may have occurred at
or after the date of a Change in Control); plus
(ii) an amount equal to the greater of the Executive's
average annual award actually paid under Primex's short-term annual incentive
compensation plans or programs ("ICP") for the three years (or for such fewer
years as the ICP may have been in effect) immediately preceding the date of
Termination or the Executive's then current ICP standard annual award.
(iii) The Executive will not be entitled to receive any other
severance otherwise payable to the Executive under any other severance plan of
Primex.
(iv) If on the Termination date the Executive is eligible
and is receiving payments under any then existing Primex disability plan, then
the Executive agrees that all such payments may, and will be, suspended and
offset for 12 months following the Termination date. If after such period the
Executive remains eligible to receive disability payments, then such payments
shall resume in the amounts and in accordance with the provisions of the
applicable Primex disability plan.
(e) "Potential Change in Control" means:
(i) Primex has entered into an agreement the consummation
of which would result in a Change in Control;
<PAGE>
3
(ii) any person (including Primex ) publicly announces
------
an intention to take or to consider taking actions which if consummated would
constitute a Change in Control;
(iii) Primex learns that any person (other than an employee
benefit plan (or related trust) of Primex, a subsidiary of Primex or Olin) has
become the beneficial owner directly or indirectly of securities of Primex
representing 9.5% or more of the combined voting power of Primex's then
outstanding securities ordinarily entitled to vote in elections of directors;
or
(iv) the Board of Directors of Primex adopts a resolution to
the effect that, for purposes of this Agreement, a Potential Change in Control
of Primex has occurred.
(f) "Termination" means:
(i) The Executive is discharged by Primex other than for
Cause;
(ii) The Executive terminates his or her employment in the
event that:
(1) Primex requires the Executive to relocate the
Executive's then office to an area which is not within reasonable commuting
distance, on a daily basis, from the Executive's then residence, except that a
requirement to relocate the Executive's office to Primex's corporate
headquarters is not a basis for Termination;
(2) Primex reduces the Executive's base salary or
fails to increase the Executive's base salary on a basis consistent (as to
frequency and amount) with Primex's exempt salary system as then in effect or,
in the event of a Change in Control, as in effect immediately prior to the
Change in Control;
(3) Primex fails to continue the Executive's
participation in its benefit plans (including incentive compensation and
stock-based incentives) on substantially the same basis, both in terms of the
amount of the benefits provided (other than due to Primex's or a relevant
operation's earnings performance) and the level of the Executive's
participation relative to other participants as exists on the date hereof;
provided that, with respect to annual and long term incentive compensation
plans, the basis with which the amount of benefits and level of participation
of the Executive shall be compared shall be the average benefit awarded to the
Executive under the relevant plan during the three years (or such fewer years as
such plans may have been in effect) immediately preceding the date of
Termination;
(4) The Executive suffers a Disability which prevents
the Executive from performing the Executive's duties with Primex for a period
of at least 180 consecutive days;
<PAGE>
4
(5) Following a Change in Control, Primex fails to
substantially maintain its benefit plans as in effect at the time of the Change
in Control, unless reasonably equivalent arrangements (embodied in an on-going
substitute or alternative plan) have been made with respect to such plans; or
(6) The Executive's duties, position or reporting
responsibilities are diminished.
2. Term/Executive's Duties.
(a) This Agreement expires at the close of business on December
31, 2000, unless prior to that date there is a Change in Control, in which case
this Agreement will expire on the later of the close of business on December 31,
2000 or three years following the date of the Change in Control; provided that
the expiration of this Agreement will not affect any of the Executive's rights
resulting from a Termination prior to such expiration. In the event of the
Executive's death while employed by Primex, this Agreement shall terminate and
be of no further force or effect on the date of his or her death; provided that
the Executive's death will not affect any of the Executive's rights resulting
from a Termination prior to death.
(b) During the period of the Executive's employment by Primex,
the Executive shall devote his or her full time efforts during normal business
hours to Primex's business and affairs, except during reasonable vacation
periods and periods of illness or incapacity. Nothing in this Agreement will
preclude the Executive from devoting reasonable periods required for service as
a director or a member of any organization involving no conflict of interest
with Primex's interest, provided that no additional position as director or
member shall be accepted by the Executive during the period of his employment
with Primex without its prior consent. The initial 1997 annual base salary of
the Executive shall be $425,000 and his initial 1997 EVA bonus standard shall
be $275,000.
(c) The Executive agrees that in the event of a Potential Change
in Control of Primex occurring after the date hereof, the Executive will remain
in the employ of Primex for a period of six months from the occurrence of such
Potential Change in Control, during which period the Executive will have an
office, title, duties and responsibilities substantially consistent with those
applicable immediately prior to the Potential Change in Control.
3. Executive Severance Payment
(a) In the event of a Termination occurring before the expiration
of this Agreement, Primex will pay the Executive a lump sum in an amount equal
to the Executive Severance. The payment will be made within 30 days of the
Termination.
<PAGE>
5
(b) In the event of a Termination after a Change in Control has
occurred, in addition to the Executive Severance paid under Paragraph 3(a)
above, Primex will pay a Change in Control severance premium to the Executive
in an amount equal to two times the Executive Severance. The Change in Control
severance premium, if it becomes due, will be made within 30 days of the
Termination.
(c) The amount due under paragraph 3(a) or 3(b) will be reduced
to the extent that, if the amounts were paid in monthly installments, no
installment would be paid after the Executive's seventieth birthday.
(d) The Executive will not be required to mitigate the amount of
any payment provided for in paragraph 3(a) or 3(b) by seeking other employment
or otherwise, nor shall any compensation received by the Executive from a third
party reduce such payment. Except as may otherwise be expressly provided
herein, nothing in this Agreement will be deemed to reduce or limit the rights
which the Executive may have under any employee benefit plan, policy or
arrangement of Primex.
4. Other Benefits and Payments
(a) (1) If the Executive becomes entitled to payment under
Paragraph 3(a), then the Executive shall be entitled to receive a lump sum
payment from Primex at the same time as the payment under Paragraph 3(a) is made
equal to the amount contributed or credited by Primex to the Executive's
accounts in all defined contribution plans of Primex (whether or not "qualified"
plans) during the 12 months preceding the Executive's Termination provided that
in the event there are fewer than 12 months in such period the payment required
shall be increased proportionately to make it equivalent to a 12 month period.
The "amount contributed or credited by Primex" as defined in this Paragraph 4
shall not include any employee contributions, employer matching contributions,
dividends or investment gains or losses credited to the Executive's accounts,
but only the Primex contributions made or, in the case of supplementary plans,
credited, to the accounts. Such payment shall be in lieu of any such
contributions or credits by Primex to its defined contribution plans with
respect to the period after the Executive's Termination. If Primex is required
by law to contribute to such plans with respect to the period after the
Executive's Termination, any such contribution shall reduce the payout otherwise
due Executive under this Paragraph 4(a)(1). In the event the Executive receives
a payment under Paragraph 3(b), the amount required to be paid under the
preceding sentences of this Paragraph 4(a)(1) shall be tripled. Notwithstanding
the foregoing, in the event at the date of Termination the Executive is more
than 69 years old (or more than 67 years old in the case the Executive receives
a payment under Paragraph 3(b)) the lump sum payment required to be made under
this Paragraph 4(a)(1) shall be reduced such that if it were expressed as equal
monthly payments made over a 12-month period (a 36-month period in the case of
the Executive receiving a payment under Paragraph 3(b)) and paid in monthly
installments on the first of every month following Termination no such monthly
payments would be received by the Executive beyond his or her seventieth
birthday.
<PAGE>
6
(2) If the Executive becomes entitled to payment under Paragraph
3(a), for the 12 months from the date of the Termination the Executive will
continue to enjoy coverage under all Primex medical, dental, and life insurance
plans to the extent the Executive was enjoying such coverage immediately prior
to the Termination. The Executive shall accrue no vacation during the 12 months
following the date of Termination but shall be entitled to payment for accrued
and unused vacation for the then current year. If the Executive receives the
Executive Severance (including the amount referred to in Paragraph 1(d)(ii)),
the Executive shall not be entitled to an ICP award for the calendar year of
Termination if Termination occurs during the first calendar quarter. Even if the
Executive receives the Executive Severance (including the amount referred to in
Paragraph 1(d)(ii)), if Termination occurs during or after the second calendar
quarter, the Executive shall also be entitled to a prorated ICP award for the
calendar year of Termination which shall be determined by multiplying his or her
then current ICP standard by a fraction the numerator of which is the number of
weeks in the calendar year prior to the Termination and the denominator of which
is 52. The Executive shall accrue no ICP award during the 12 months following
the date of Termination.
(b) If the Executive receives payment under Paragraph 3(b), the
insurance coverage provided for in Paragraph 4(a) (2) will be for an additional
24-month period.
(c) Notwithstanding the foregoing Paragraphs 4(a)(2), and (b), no
such insurance coverage will be afforded by this Agreement with respect to any
period after the Executive's seventieth birthday.
(d) In the event of a Termination, the Executive will be entitled
at Primex's expense to outplacement counseling and associated services in
accordance with Primex's customary practice at the time (or, if a Change in
Control shall have occurred, in accordance with such practice immediately prior
thereto) with respect to its senior executives who have been terminated other
than for cause. It is understood that the counseling and services contemplated
by this Paragraph 4(d) are intended to facilitate the obtaining by the Executive
of other employment following a Termination, and payments or benefits by Primex
in lieu thereof will not be available to the Executive.
(e) If the Executive (i) receives the payment under Paragraph 3(b),
(ii) has an accrued vested benefit under Olin's qualified pension plan as of
the date of Termination and (iii) at age 55, would not qualify for
---
subsidized early retirement from Olin under the provisions of Olin's pension
plans, then, concurrent with the payment made to the Executive under Paragraph
3(b), the Executive will receive a lump sum payment from Primex to make up for
the lost subsidy calculated as follows:
FIRST, by calculating the annual benefit which would otherwise be
-----
payable to the Executive at age 65 under all Olin pension plans assuming the
Executive had terminated his or her employment with Primex on the date of the
Change in Control, SECOND, by multiplying such annual benefit by the
------
percentage then applicable in the calculation of benefits paid to employees
retiring from active service
<PAGE>
7
with Olin at age 55 under the early retirement provisions of the Olin Employees
Pension Plan (72% at the date hereof), THIRD, by determining the lump sum
-----
actuarial value (as of the date of Termination) of annual payments beginning at
age 55 as calculated in the second step and FOURTH, by deducting from such lump
------
sum actuarial value the lump sum actuarial value (as of the date of Termination)
of the Executive's accrued annual benefits under all Olin pension plans. Lump
sum actuarial value shall be determined in accordance with Olin's actuarial
assumptions for its nonqualified defined benefit plans.
(f) During the term of the Executive's employment with Primex,
Primex will provide the Executive (1) with an automobile or car payment
equivalent at the Executive's option, (2) with a club membership and (3) with
financial counseling services, in each case on the same terms and conditions as
Olin most recently provided to the Executive while the Executive was an
employee of Olin.
<PAGE>
8
5. Participation in Change in Control/Section 4999 of Internal Revenue
Code
(a) In the event that the Executive participates or agrees to
participate by loan or equity investment (other than through ownership of less
than 1% of publicly traded securities of another company) in a transaction
("acquisition") which would result in an event described in paragraph 1(b)(i)
or (ii), the Executive must promptly disclose such participation or agreement
to Primex. If the Executive so participates or agrees to participate, no
payments due under this Agreement or by virtue of any Change in Control
provisions contained in any compensation or benefit plan of Primex will be paid
to the Executive until the acquiring group in which the Executive participates
or agrees to participate has completed the acquisition. In the event the
Executive so participates or agrees to participate and fails to disclose his or
her participation or agreement, the Executive will not be entitled to any
payments under this Agreement or by virtue of Change in Control provisions in
any Primex compensation or benefit plan, notwithstanding any of the terms
hereof or thereof.
(b) Any payments made pursuant to this Agreement or by virtue of
Change in Control provisions in any Primex compensation or benefit plan which
are subject to tax under Section 4999 of the Internal Revenue Code or a
successor provision ("4999") will be increased so that after paying the tax
imposed by 4999 and the income tax on the amount of the increase provided by
this paragraph (b), the Executive will have received a net payment equal to that
which he or she would have received if 4999 did not apply.
6. Successors; Binding Agreement
(a) Primex will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of Primex, by agreement, in form
and substance satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that Primex
would be required to perform if no such succession had taken place. Failure of
Primex to obtain such assumption and agreement prior to the effectiveness of
any such succession will be a breach of this Agreement and entitle the
Executive to compensation from Primex in the same amount and on the same terms
as the Executive would be entitled to hereunder had a Termination occurred on
the succession date. As used in this Agreement, "Primex" means Primex as
defined in the preamble to this Agreement and any successor to its business or
assets which executes and delivers the agreement provided for in this Paragraph
6 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law or otherwise.
(b) This Agreement shall be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees.
<PAGE>
9
7. Notices. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
If to the Company: Primex Technologies, Inc.
10101 9th Street North
St. Petersburg, FL 33716-3807
Attention: Corporate Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida.
9. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in writing signed by the Executive and Primex. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same Agreement.
11. Withholding of Taxes. Primex may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
12. Non-assignability. This Agreement is personal in nature and
neither of the parties hereto shall, without the consent of the other, assign
or transfer this Agreement or any rights or obligations hereunder, except as
provided in paragraph 6 above. Without limiting the foregoing, the Executive's
right to receive payments hereunder shall not be assignable or transferable,
whether by pledge, creation of a security interest or otherwise, other than a
transfer by his or her will or by the laws of descent or distribution, and, in
the event of any attempted assignment or transfer by the Executive contrary to
this Paragraph, Primex shall have no liability to pay any amount so attempted
to be assigned or transferred.
<PAGE>
10
13. No Employment Right. This Agreement shall not be deemed to confer
on the Executive a right to continued employment with Primex.
14. Disputes/Arbitration.
(a) Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration at Primex's
corporate headquarters in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction; provided, however, that the Executive shall
be entitled to seek specific performance of the Executive's right to be paid
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
(b) Primex shall pay all reasonable legal fees and expenses which
the Executive may incur to enforce this Agreement unless the Executive had no
reasonable basis for his or her claim. Should Primex dispute the entitlement
of the Executive to such fees and expenses, the burden of proof shall be on
Olin to establish that the Executive had no reasonable basis for his or her
claim.
<PAGE>
11
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above set forth.
PRIMEX TECHNOLOGIES, INC.
By: /s/ George H. Pain
------------------
Title: Vice President
/s/ James G. Hascall
- --------------------
Executive
<PAGE>
Exhibit 10.13
EXECUTIVE AGREEMENT
-------------------
Agreement between Primex Technologies, Inc., a Virginia corporation
("Primex"), and J. Douglas DeMaire (the "Executive"), dated as of January 1,
1997.
Primex and the Executive agree as follows:
1. Definitions
As used in this Agreement:
(a) "Cause" means the willful and continued failure of the
Executive to substantially perform his or her duties; the willful engaging by
the Executive in gross misconduct significantly and demonstrably injurious to
Primex; or conduct by the Executive in the course of his or her employment which
is a felony or fraud. No act or failure to act on the part of the Executive will
be considered "willful" unless done or omitted not in good faith and without
reasonable belief that the action or omission was in the interests of Primex or
not opposed to the interests of Primex.
(b) "Change in Control" means:
(i) Primex ceases to be, directly or indirectly,
owned by at least 1,000 stockholders;
(ii) A person, partnership, joint venture, corporation
or other entity, or two or more of any of the foregoing acting as a "person"
within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Act"), other than Primex, a majority-owned subsidiary of
Primex or an employee benefit plan (or related trust) of Primex, such
subsidiary or Olin Corporation, a Virginia corporation ("Olin"), become(s) the
"beneficial owner" (as defined in Rule 13d-3 under such Act) of 15% or more of
the then outstanding voting stock of Primex;
(iii) During any period of two consecutive years,
individuals who at the beginning of such period constitute Primex's Board of
Directors (together with any new Director whose election by Primex's Board of
Directors or whose nomination for election by Primex's stockholders was
approved by a vote of at least two-thirds of the Directors then still in office
who either were directors at the beginning of
<PAGE>
2
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the directors then in
office; or
(iv) All or substantially all of the business of
Primex is disposed of pursuant to a merger, consolidation or other transaction
in which Primex is not the surviving corporation or Primex combines with
another company and is the surviving corporation (unless the shareholders of
Primex immediately following such merger, consolidation, combination, or other
transaction beneficially own, directly or indirectly, more than 50% of the
voting stock or other ownership interests of (x) the entity or entities, if
any, that succeed to the business of Primex or (y) the combined company).
(c) "Disability" means that the Executive has suffered an
incapacity due to physical or mental illness which meets the criteria
for disability established at the time under Primex's short-term disability
plan.
(d) "Executive Severance" means:
(i) twelve months of the Executive's then current
monthly salary (without taking into account any reductions which may have
occurred at or after the date of a Change in Control); plus
(ii) an amount equal to the greater of the Executive's
average annual award actually paid under Primex's short-term annual incentive
compensation plans or programs ("ICP") for the three years (or for such fewer
years as the ICP may have been in effect) immediately preceding the date of
Termination or the Executive's then current ICP standard annual award.
(iii) The Executive will not be entitled to receive any
other severance otherwise payable to the Executive under any other severance
plan of Primex.
(iv) If on the Termination date the Executive is
eligible and is receiving payments under any then existing Primex disability
plan, then the Executive agrees that all such payments may, and will be,
suspended and offset for 12 months following the Termination date. If after
such period the Executive remains eligible to receive disability payments, then
such payments shall resume in the amounts and in accordance with the provisions
of the applicable Primex disability plan.
(e) "Potential Change in Control" means:
(i) Primex has entered into an agreement the
consummation of which would result in a Change in Control;
<PAGE>
3
(ii) any person (including Primex ) publicly announces
an intention to take or to consider taking actions which if consummated would
constitute a Change in Control;
(iii) Primex learns that any person (other than an
employee benefit plan (or related trust) of Primex, a subsidiary of Primex or
Olin) has become the beneficial owner directly or indirectly of securities of
Primex representing 9.5% or more of the combined voting power of Primex's then
outstanding securities ordinarily entitled to vote in elections of directors; or
(iv) the Board of Directors of Primex adopts a
resolution to the effect that, for purposes of this Agreement, a Potential
Change in Control of Primex has occurred.
(f) "Termination" means:
(i) The Executive is discharged by Primex other than
for Cause;
(ii) The Executive terminates his or her employment in
the event that:
(1) Primex requires the Executive to relocate the
Executive's then office to an area which is not within reasonable commuting
distance, on a daily basis, from the Executive's then residence, except that a
requirement to relocate the Executive's office to Primex's corporate
headquarters is not a basis for Termination;
(2) Primex reduces the Executive's base salary or
fails to increase the Executive's base salary on a basis consistent (as to
frequency and amount) with Primex's exempt salary system as then in effect or,
in the event of a Change in Control, as in effect immediately prior to the
Change in Control;
(3) Primex fails to continue the Executive's
participation in its benefit plans (including incentive compensation and stock
based incentives) on substantially the same basis, both in terms of the amount
of the benefits provided (other than due to Primex's or a relevant operation's
earnings performance) and the level of the Executive's participation relative
to other participants as exists on the date hereof; provided that, with respect
to annual and long term incentive compensation plans, the basis with which the
amount of benefits and level of participation of the Executive shall be
compared shall be the average benefit awarded to the Executive under the
relevant plan during the three years (or such fewer years as such plans may
have been in effect) immediately preceding the date of Termination;
(4) The Executive suffers a Disability which prevents
the Executive from performing the Executive's duties with Primex for a period
of at least 180 consecutive days;
<PAGE>
4
(5) Following a Change in Control, Primex fails to
substantially maintain its benefit plans as in effect at the time of the Change
in Control, unless reasonably equivalent arrangements (embodied in an on-going
substitute or alternative plan) have been made with respect to such plans; or
(6) The Executive's duties, position or reporting
responsibilities are diminished.
2. Term/Executive's Duties.
(a) This Agreement expires at the close of business on December
31, 2001, unless prior to that date there is a Change in Control, in which case
this Agreement will expire on the later of the close of business on December
31, 2001 or three years following the date of the Change in Control; provided
that the expiration of this Agreement will not affect any of the Executive's
rights resulting from a Termination prior to such expiration. In the event of
the Executive's death while employed by Primex, this Agreement shall terminate
and be of no further force or effect on the date of his or her death; provided
that the Executive's death will not affect any of the Executive's rights
resulting from a Termination prior to death.
(b) During the period of the Executive's employment by Primex,
the Executive shall devote his or her full time efforts during normal business
hours to Primex's business and affairs, except during reasonable vacation
periods and periods of illness or incapacity. Nothing in this Agreement will
preclude the Executive from devoting reasonable periods required for service as
a director or a member of any organization involving no conflict of interest
with Primex's interest, provided that no additional position as director or
member shall be accepted by the Executive during the period of his employment
with Primex without its prior consent.
(c) The Executive agrees that in the event of a Potential Change
in Control of Primex occurring after the date hereof, the Executive will remain
in the employ of Primex for a period of six months from the occurrence of such
Potential Change in Control, during which period the Executive will have an
office, title, duties and responsibilities substantially consistent with those
applicable immediately prior to the Potential Change in Control.
3. Executive Severance Payment
(a) In the event of a Termination occurring before the expiration
of this Agreement, Primex will pay the Executive a lump sum in an amount equal
to the Executive Severance. The payment will be made within 30 days of the
Termination.
(b) In the event of a Termination after a Change in Control has
occurred, in addition to the Executive Severance paid under Paragraph 3(a)
above, Primex will pay a Change in Control severance
<PAGE>
5
premium to the Executive in an amount equal to one times the Executive
Severance. The Change in Control severance premium, if it becomes due, will be
made within 30 days of the Termination.
(c) The amount due under paragraph 3(a) or 3(b) will be reduced
to the extent that, if the amounts were paid in monthly installments, no
installment would be paid after the Executive's seventieth birthday.
(d) The Executive will not be required to mitigate the amount of
any payment provided for in paragraph 3(a) or 3(b) by seeking other employment
or otherwise, nor shall any compensation received by the Executive from a third
party reduce such payment. Except as may otherwise be expressly provided
herein, nothing in this Agreement will be deemed to reduce or limit the rights
which the Executive may have under any employee benefit plan, policy or
arrangement of Primex.
4. Other Benefits and Payments
(a) (1) If the Executive becomes entitled to payment under
Paragraph 3(a), then the Executive shall be entitled to receive a lump sum
payment from Primex at the same time as the payment under Paragraph 3(a) is
made equal to the amount contributed or credited by Primex to the Executive's
accounts in all defined contribution plans of Primex (whether or not
"qualified" plans) during the 12 months preceding the Executive's Termination
provided that in the event there are fewer than 12 months in such period the
payment required shall be increased proportionately to make it equivalent to a
12 month period. The "amount contributed or credited by Primex" as defined in
this Paragraph 4 shall not include any employee contributions, employer
matching contributions, dividends or investment gains or losses credited to the
Executive's accounts, but only the Primex contributions made or, in the case of
supplementary plans, credited, to the accounts. Such payment shall be in lieu
of any such contributions or credits by Primex to its defined contribution
plans with respect to the period after the Executive's Termination. If Primex
is required by law to contribute to such plans with respect to the period after
the Executive's Termination, any such contribution shall reduce the payout
otherwise due Executive under this Paragraph 4(a)(1). In the event the
Executive receives a payment under Paragraph 3(b), the amount required to be
paid under the preceding sentences of this Paragraph 4(a)(1) shall be doubled.
Notwithstanding the foregoing, in the event at the date of Termination the
Executive is more than 69 years old (or more than 68 years old in the case the
Executive receives a payment under Paragraph 3(b)) the lump sum payment required
to be made under this Paragraph 4(a)(1) shall be reduced such that if it were
expressed as equal monthly payments made over a 12-month period (a 24-month
period in the case of the Executive receiving a payment under Paragraph 3(b))
and paid in monthly installments on the first of every month following
Termination no such monthly payments would be received by the Executive beyond
his or her seventieth birthday.
(2) If the Executive becomes entitled to payment under Paragraph
3(a), for the 12 months from the date of the Termination the Executive will
continue to enjoy coverage under all Primex medical,
<PAGE>
6
dental, and life insurance plans to the extent the Executive was enjoying such
coverage immediately prior to the Termination. The Executive shall accrue no
vacation during the 12 months following the date of Termination but shall be
entitled to payment for accrued and unused vacation for the then current year.
If the Executive receives the Executive Severance (including the amount referred
to in Paragraph 1(d)(ii)), the Executive shall not be entitled to an ICP award
for the calendar year of Termination if Termination occurs during the first
calendar quarter. Even if the Executive receives the Executive Severance
(including the amount referred to in Paragraph 1(d)(ii)), if Termination occurs
during or after the second calendar quarter, the Executive shall also be
entitled to a prorated ICP award for the calendar year of Termination which
shall be determined by multiplying his or her then current ICP standard by a
fraction the numerator of which is the number of weeks in the calendar year
prior to the Termination and the denominator of which is 52. The Executive shall
accrue no ICP award during the 12 months following the date of Termination.
(b) If the Executive receives payment under Paragraph 3(b), the
insurance coverage provided for in Paragraph 4(a) (2) will be for an additional
12-month period.
(c) Notwithstanding the foregoing Paragraphs 4(a)(2), and (b), no
such insurance coverage will be afforded by this Agreement with respect to any
period after the Executive's seventieth birthday.
(d) In the event of a Termination, the Executive will be entitled
at Primex's expense to outplacement counseling and associated services in
accordance with Primex's customary practice at the time (or, if a Change in
Control shall have occurred, in accordance with such practice immediately prior
thereto) with respect to its senior executives who have been terminated other
than for cause. It is understood that the counseling and services contemplated
by this Paragraph 4(d) are intended to facilitate the obtaining by the
Executive of other employment following a Termination, and payments or benefits
by Primex in lieu thereof will not be available to the Executive.
(e) If the Executive (i) receives the payment under Paragraph 3(b),
(ii) has an accrued vested benefit under Olin's qualified pension plan as of
the date of Termination and (iii) at age 55, would not qualify for
---
subsidized early retirement from Olin under the provisions of Olin's pension
plans, then, concurrent with the payment made to the Executive under Paragraph
3(b), the Executive will receive a lump sum payment from Primex to make up for
the lost subsidy calculated as follows:
FIRST, by calculating the annual benefit which would otherwise be
-----
payable to the Executive at age 65 under all Olin pension plans assuming the
Executive had terminated his or her employment with Primex on the date of the
Change in Control, SECOND, by multiplying such annual benefit by the
------
percentage then applicable in the calculation of benefits paid to employees
retiring from active service with Olin at age 55 under the early retirement
provisions of the Olin Employees Pension Plan (72% at the date hereof),
THIRD, by determining the lump sum actuarial value (as of the date of
- ------
Termination) of annual
<PAGE>
7
payments beginning at age 55 as calculated in the second step and FOURTH, by
------
deducting from such lump sum actuarial value the lump sum actuarial value (as of
the date of Termination) of the Executive's accrued annual benefits under all
Olin pension plans. Lump sum actuarial value shall be determined in accordance
with Olin's actuarial assumptions for its nonqualified defined benefit plans.
(f) During the term of the Executive's employment with Primex, Primex
will provide the Executive (1) with an automobile or car payment equivalent at
the Executive's option and (2) with financial counseling services, in each case
on the same terms and conditions as Olin most recently provided to the
Executive while the Executive was an employee of Olin.
<PAGE>
8
5. Participation in Change in Control/Section 4999 of Internal Revenue
Code
(a) In the event that the Executive participates or agrees to
participate by loan or equity investment (other than through ownership of less
than 1% of publicly traded securities of another company) in a transaction
("acquisition") which would result in an event described in paragraph 1(b)(i)
or (ii), the Executive must promptly disclose such participation or agreement
to Primex. If the Executive so participates or agrees to participate, no
payments due under this Agreement or by virtue of any Change in Control
provisions contained in any compensation or benefit plan of Primex will be paid
to the Executive until the acquiring group in which the Executive participates
or agrees to participate has completed the acquisition. In the event the
Executive so participates or agrees to participate and fails to disclose his or
her participation or agreement, the Executive will not be entitled to any
payments under this Agreement or by virtue of Change in Control provisions in
any Primex compensation or benefit plan, notwithstanding any of the terms
hereof or thereof.
(b) Any payments made pursuant to this Agreement or by virtue of
Change in Control provisions in any Primex compensation or benefit plan which
are subject to tax under Section 4999 of the Internal Revenue Code or a
successor provision ("4999") will be increased so that after paying the tax
imposed by 4999 and the income tax on the amount of the increase provided by
this paragraph (b), the Executive will have received a net payment equal to that
which he or she would have received if 4999 did not apply.
6. Successors; Binding Agreement
(a) Primex will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of Primex, by agreement, in form
and substance satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that Primex
would be required to perform if no such succession had taken place. Failure of
Primex to obtain such assumption and agreement prior to the effectiveness of
any such succession will be a breach of this Agreement and entitle the
Executive to compensation from Primex in the same amount and on the same terms
as the Executive would be entitled to hereunder had a Termination occurred on
the succession date. As used in this Agreement, "Primex" means Primex as
defined in the preamble to this Agreement and any successor to its business or
assets which executes and delivers the agreement provided for in this Paragraph
6 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law or otherwise.
(b) This Agreement shall be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees.
<PAGE>
9
7. Notices. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: J. Douglas De Maire
6019 Kipps Colony Drive East
St. Petersburg, FL 33707
If to the Company: Primex Technologies, Inc.
10101 9th Street North
St. Petersburg, FL 33716-3807
Attention: Corporate Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida.
9. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in writing signed by the Executive and Primex. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same Agreement.
11. Withholding of Taxes. Primex may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
12. Non-assignability. This Agreement is personal in nature and
neither of the parties hereto shall, without the consent of the other, assign
or transfer this Agreement or any rights or obligations hereunder, except as
provided in paragraph 6 above. Without limiting the foregoing, the Executive's
right to receive payments hereunder shall not be assignable or transferable,
whether by pledge, creation of a security interest or otherwise, other than a
transfer by his or her will or by the laws of descent or distribution, and, in
the
<PAGE>
10
event of any attempted assignment or transfer by the Executive contrary to
this Paragraph, Primex shall have no liability to pay any amount so attempted to
be assigned or transferred.
13. No Employment Right. This Agreement shall not be deemed to confer
on the Executive a right to continued employment with Primex.
14. Disputes/Arbitration.
(a) Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration at Primex's
corporate headquarters in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction; provided, however, that the Executive shall
be entitled to seek specific performance of the Executive's right to be paid
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
(b) Primex shall pay all reasonable legal fees and expenses which
the Executive may incur to enforce this Agreement unless the Executive had no
reasonable basis for his or her claim. Should Primex dispute the entitlement of
the Executive to such fees and expenses, the burden of proof shall be on Olin to
establish that the Executive had no reasonable basis for his or her claim.
<PAGE>
11
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above set forth.
PRIMEX TECHNOLOGIES, INC.
By: /s/ James G. Hascall
--------------------
Title: Chairman and CEO
/s/ J. Douglas DeMaire
- -----------------------
Executive
<PAGE>
Exhibit 10.14
-------------
EXECUTIVE AGREEMENT
-------------------
Agreement between Primex Technologies, Inc., a Virginia corporation
("Primex"), and A. A. Catani (the "Executive"), dated as of January 1, 1997.
Primex and the Executive agree as follows:
1. Definitions
As used in this Agreement:
(a) "Cause" means the willful and continued failure of the
Executive to substantially perform his duties; the willful engaging by the
Executive in gross misconduct significantly and demonstrably injurious to
Primex; or conduct by the Executive in the course of his employment which is a
felony or fraud. No act or failure to act on the part of the Executive will be
considered "willful" unless done or omitted not in good faith and without
reasonable belief that the action or omission was in the interests of Primex or
not opposed to the interests of Primex.
(b) "Change in Control" means:
(i) Primex ceases to be, directly or indirectly,
owned by at least 1,000 stockholders;
(ii) A person, partnership, joint venture, corporation
or other entity, or two or more of any of the foregoing acting as a "person"
within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Act"), other than Primex, a majority-owned subsidiary of
Primex or an employee benefit plan (or related trust) of Primex, such
subsidiary or Olin Corporation, a Virginia corporation ("Olin"), become(s) the
"beneficial owner" (as defined in Rule 13d-3 under such Act) of 15% or more of
the then outstanding voting stock of Primex;
(iii) During any period of two consecutive years,
individuals who at the beginning of such period constitute Primex's Board of
Directors (together with any new Director whose election by Primex's Board of
Directors or whose nomination for election by Primex's stockholders was
approved by a vote of at least two-thirds of the Directors then still in office
who either were directors at the beginning of
<PAGE>
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the directors then in
office; or
(iv) All or substantially all of the business of
Primex is disposed of pursuant to a merger, consolidation or other transaction
in which Primex is not the surviving corporation or Primex combines with
another company and is the surviving corporation (unless the shareholders of
Primex immediately following such merger, consolidation, combination, or other
transaction beneficially own, directly or indirectly, more than 50% of the
voting stock or other ownership interests of (x) the entity or entities, if
any, that succeed to the business of Primex or (y) the combined company).
(c) "Disability" means that the Executive has suffered an
incapacity due to physical or mental illness which meets the criteria for
disability established at the time under Primex's short-term disability plan.
(d) "Executive Severance" means:
(i) twelve months of the Executive's then current
monthly salary (without taking into account any reductions which may have
occurred at or after the date of a Change in Control); plus
(ii) an amount equal to the greater of the Executive's
average annual award actually paid under Primex's short-term annual incentive
compensation plans or programs ("ICP") for the three years (or for such fewer
years as the ICP may have been in effect) immediately preceding the date of
Termination or the Executive's then current ICP standard annual award.
(iii) The Executive will not be entitled to receive any
other severance otherwise payable to the Executive under any other severance
plan of Primex.
(iv) If on the Termination date the Executive is
eligible and is receiving payments under any then existing Primex disability
plan, then the Executive agrees that all such payments may, and will be,
suspended and offset for 12 months following the Termination date. If after
such period the Executive remains eligible to receive disability payments, then
such payments shall resume in the amounts and in accordance with the provisions
of the applicable Primex disability plan.
(e) "Potential Change in Control" means:
(i) Primex has entered into an agreement the
consummation of which would result in a Change in Control;
<PAGE>
(ii) any person (including Primex) publicly announces
an intention to take or to consider taking actions which if consummated would
constitute a Change in Control;
(iii) Primex learns that any person (other than an
employee benefit plan (or related trust) of Primex, a subsidiary of Primex or
Olin) has become the beneficial owner directly or indirectly of securities of
Primex representing 9.5% or more of the combined voting power of Primex's then
outstanding securities ordinarily entitled to vote in elections of directors; or
(iv) the Board of Directors of Primex adopts a
resolution to the effect that, for purposes of this Agreement, a Potential
Change in Control of Primex has occurred.
(f) "Termination" means:
(i) The Executive is discharged by Primex other than
for Cause;
(ii) The Executive terminates his employment in the
event that:
(1) Primex requires the Executive to relocate the
Executive's then office to an area which is not within reasonable commuting
distance, on a daily basis, from the Executive's then residence, except that a
requirement to relocate the Executive's office to Primex's corporate
headquarters is not a basis for Termination;
(2) Primex reduces the Executive's base salary;
(3) (A) Primex fails to continue the Executive's
participation in its benefit plans (including stock-based incentives but
excluding cash-based incentive compensation plans) on substantially the same
basis, both in terms of the amount of the benefits provided (other than due to
Primex's or a relevant operation's earnings performance) and the level of the
Executive's participation relative to other participants as exists on the date
hereof;
(B) Primex fails to continue the Executive's
eligibility to participate in its annual cash incentive compensation plan or
reduces his target award (not actual award paid) under such cash incentive plan
from that in effect for 1997;
(4) The Executive suffers a Disability which prevents
the Executive from performing the Executive's duties with Primex for a period
of at least 180 consecutive days;
<PAGE>
(5) Following a Change in Control, Primex fails to
substantially maintain its benefit plans as in effect at the time of the Change
in Control, unless reasonably equivalent arrangements (embodied in an on-going
substitute or alternative plan) have been made with respect to such plans; or
(6) The Executive's duties, position or reporting
responsibilities are diminished.
2. Term/Executive's Duties.
(a) This Agreement expires at the close of business on December
31, 1999, unless prior to that date there is a Change in Control, in which case
this Agreement will expire on the later of the close of business on December
31, 1999 or three years following the date of the Change in Control; provided
that the expiration of this Agreement will not affect any of the Executive's
rights resulting from a Termination prior to such expiration. In the event of
the Executive's death while employed by Primex, this Agreement shall terminate
and be of no further force or effect on the date of his death; provided that
the Executive's death will not affect any of the Executive's rights resulting
from a Termination prior to death.
(b) During the period of the Executive's employment by Primex,
the Executive shall devote his full time efforts during normal business hours
to Primex's business and affairs, except during reasonable vacation periods and
periods of illness or incapacity. Nothing in this Agreement will preclude the
Executive from devoting reasonable periods required for service as a director
or a member of any organization involving no conflict of interest with Primex's
interest, provided that no additional position as director or member shall be
accepted by the Executive during the period of his employment with Primex
without its prior consent. The initial 1997 annual base salary of the
Executive shall be $350,000 and his initial 1997 EVA bonus standard shall be
$200,000.
(c) The Executive agrees that in the event of a Potential Change
in Control of Primex occurring after the date hereof, the Executive will remain
in the employ of Primex for a period of six months from the occurrence of such
Potential Change in Control, during which period the Executive will have an
office, title, duties and responsibilities substantially consistent with those
applicable immediately prior to the Potential Change in Control.
(d) Nothing in this Agreement shall be construed as requiring
Primex to increase the Executive's compensation, including base salary,
annual incentive target or standard and long term incentive grants, during the
term of his employment and such compensation shall be determined in the sole
discretion of Primex's Board of Directors or committee thereof. The Executive
expressly understands and agrees that during the term of his employment with
Primex his base salary and annual short-term incentive target or standard will
not be increased.
<PAGE>
3. Executive Severance Payment
(a) In the event of a Termination occurring before the expiration
of this Agreement, Primex will pay the Executive a lump sum in an amount equal
to the Executive Severance. The payment will be made within 30 days of the
Termination.
(b) In the event of a Termination after a Change in Control has
occurred, in addition to the Executive Severance paid under Paragraph 3(a)
above, Primex will pay a Change in Control severance premium to the Executive
in an amount equal to two times the Executive Severance. The Change in Control
severance premium, if it becomes due, will be made within 30 days of the
Termination.
(c) The amount due under paragraph 3(a) or 3(b) will be reduced
to the extent that, if the amounts were paid in monthly installments, no
installment would be paid after the Executive's seventieth birthday.
(d) The Executive will not be required to mitigate the amount of
any payment provided for in paragraph 3(a) or 3(b) by seeking other employment
or otherwise, nor shall any compensation received by the Executive from a third
party reduce such payment. Except as may otherwise be expressly provided
herein, nothing in this Agreement will be deemed to reduce or limit the rights
which the Executive may have under any employee benefit plan, policy or
arrangement of Primex.
4. Other Benefits and Payments
(a) (1) If the Executive becomes entitled to payment under
Paragraph 3(a), then the Executive shall be entitled to receive a lump sum
payment from Primex at the same time as the payment under Paragraph 3(a) is
made equal to the amount contributed or credited by Primex to the Executive's
accounts in all defined contribution plans of Primex (whether or not
"qualified" plans) during the 12 months preceding the Executive's Termination
provided that in the event there are fewer than 12 months in such period the
payment required shall be increased proportionately to make it equivalent to a
12 month period. The "amount contributed or credited by Primex" as defined in
this Paragraph 4 shall not include any employee contributions, employer matching
contributions, dividends or investment gains or losses credited to the
Executive's accounts, but only the Primex contributions made or, in the case of
supplementary plans, credited, to the accounts. Such payment shall be in lieu of
any such contributions or credits by Primex to its defined contribution plans
with respect to the period after the Executive's Termination. If Primex is
required by law to contribute to such plans with respect to the period after the
Executive's Termination, any such contribution shall reduce the payout otherwise
due Executive under this Paragraph 4(a)(1). In the event the Executive receives
a payment under Paragraph 3(b), the amount required to be paid under the
preceding sentences of this Paragraph 4(a)(1) shall be tripled. Notwithstanding
the foregoing, in the event at the date of
<PAGE>
Termination the Executive is more than 69 years old (or more than 67 years old
in the case the Executive receives a payment under Paragraph 3(b)) the lump sum
payment required to be made under this Paragraph 4(a)(1) shall be reduced such
that if it were expressed as equal monthly payments made over a 12-month period
(a 36-month period in the case of the Executive receiving a payment under
Paragraph 3(b)) and paid in monthly installments on the first of every month
following Termination no such monthly payments would be received by the
Executive beyond his seventieth birthday.
(2) If the Executive becomes entitled to payment under Paragraph
3(a), for the 12 months from the date of the Termination the Executive will
continue to enjoy coverage under all Primex medical, dental, and life insurance
plans to the extent the Executive was enjoying such coverage immediately prior
to the Termination. The Executive shall accrue no vacation during the 12
months following the date of Termination but shall be entitled to payment for
accrued and unused vacation for the then current year. If the Executive
receives the Executive Severance (including the amount referred to in Paragraph
1(d)(ii)), the Executive shall not be entitled to an ICP award for the calendar
year of Termination if Termination occurs during the first calendar quarter.
Even if the Executive receives the Executive Severance (including the amount
referred to in Paragraph 1(d)(ii)), if Termination occurs during or after the
second calendar quarter, the Executive shall also be entitled to a prorated ICP
award for the calendar year of Termination which shall be determined by
multiplying his then current ICP standard by a fraction the numerator of which
is the number of weeks in the calendar year prior to the Termination and the
denominator of which is 52. The Executive shall accrue no ICP award during the
12 months following the date of Termination.
(b) If the Executive receives payment under Paragraph 3(b), the
insurance coverage provided for in Paragraph 4(a) (2) will be for an additional
24-month period.
(c) Notwithstanding the foregoing Paragraphs 4(a)(2), and (b), no
such insurance coverage will be afforded by this Agreement with respect to any
period after the Executive's seventieth birthday.
(d) In the event of a Termination, the Executive will be entitled
at Primex's expense to outplacement counseling and associated services in
accordance with Primex's customary practice at the time (or, if a Change in
Control shall have occurred, in accordance with such practice immediately prior
thereto) with respect to its senior executives who have been terminated other
than for cause. It is understood that the counseling and services contemplated
by this Paragraph 4(d) are intended to facilitate the obtaining by the
Executive of other employment following a Termination, and payments or benefits
by Primex in lieu thereof will not be available to the Executive.
(e) If the Executive (i) receives the payment under Paragraph 3(b),
(ii) has an accrued vested benefit under Olin's qualified pension plan as of
the date of Termination and (iii) at age 55, would not qualify for
---
subsidized early retirement from Olin under the provisions of Olin's pension
plans, then,
<PAGE>
concurrent with the payment made to the Executive under Paragraph 3(b), the
Executive will receive a lump sum payment from Primex to make up for the lost
subsidy calculated as follows:
FIRST, by calculating the annual benefit which would otherwise be
-----
payable to the Executive at age 65 under all Olin pension plans assuming the
Executive had terminated his employment with Primex on the date of the Change
in Control, SECOND, by multiplying such annual benefit by the
------
percentage then applicable in the calculation of benefits paid to employees
retiring from active service with Olin at age 55 under the early retirement
provisions of the Olin Employees Pension Plan (72% at the date hereof),
THIRD, by determining the lump sum actuarial value (as of the date of
- ------
Termination) of annual payments beginning at age 55 as calculated in the
second step and FOURTH, by deducting from such lump sum actuarial
------
value the lump sum actuarial value (as of the date of Termination) of the
Executive's accrued annual benefits under all Olin pension plans. Lump sum
actuarial value shall be determined in accordance with Olin's actuarial
assumptions for its nonqualified defined benefit plans.
(f) During the term of the Executive's employment with Primex,
Primex will provide the Executive (1) with an automobile or car payment
equivalent at the Executive's option, (2) with a club membership and (3) with
financial counseling services, in each case on the same terms and conditions as
Olin most recently provided to the Executive while the Executive was an
employee of Olin.
5. Participation in Change in Control/Section 4999 of Internal Revenue
Code
(a) In the event that the Executive participates or agrees to
participate by loan or equity investment (other than through ownership of less
than 1% of publicly traded securities of another company) in a transaction
("acquisition") which would result in an event described in paragraph 1(b)(i)
or (ii), the Executive must promptly disclose such participation or agreement
to Primex. If the Executive so participates or agrees to participate, no
payments due under this Agreement or by virtue of any Change in Control
provisions contained in any compensation or benefit plan of Primex will be paid
to the Executive until the acquiring group in which the Executive participates
or agrees to participate has completed the acquisition. In the event the
Executive so participates or agrees to participate and fails to disclose his
participation or agreement, the Executive will not be entitled to any payments
under this Agreement or by virtue of Change in Control provisions in any Primex
compensation or benefit plan, notwithstanding any of the terms hereof or
thereof.
(b) Any payments made pursuant to this Agreement or by virtue of
Change in Control provisions in any Primex compensation or benefit plan which
are subject to tax under Section 4999 of the Internal Revenue Code or a
successor provision ("4999") will be increased so that after paying the tax
imposed by 4999 and the income tax on the amount of the increase provided by
this paragraph (b), the Executive will have received a net payment equal to that
which he or she would have received if 4999 did not apply.
<PAGE>
6. Successors; Binding Agreement
(a) Primex will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of Primex, by agreement, in form
and substance satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that Primex
would be required to perform if no such succession had taken place. Failure of
Primex to obtain such assumption and agreement prior to the effectiveness of
any such succession will be a breach of this Agreement and entitle the
Executive to compensation from Primex in the same amount and on the same terms
as the Executive would be entitled to hereunder had a Termination occurred on
the succession date. As used in this Agreement, "Primex" means Primex as
defined in the preamble to this Agreement and any successor to its business or
assets which executes and delivers the agreement provided for in this
Paragraph 6 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law or otherwise.
(b) This Agreement shall be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees.
7. Notices. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
<PAGE>
If to the Executive: Angelo A. Catani
5928 Seabird Drive
Gulfport, FL 33707
If to the Company: Primex Technologies, Inc.
10101 9th Street North
St. Petersburg, FL 33716-3807
Attention: Corporate Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida.
9. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in writing signed by the Executive and Primex. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same Agreement.
11. Withholding of Taxes. Primex may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
12. Non-assignability. This Agreement is personal in nature and
neither of the parties hereto shall, without the consent of the other, assign
or transfer this Agreement or any rights or obligations hereunder, except as
provided in paragraph 6 above. Without limiting the foregoing, the Executive's
right to receive payments hereunder shall not be assignable or transferable,
whether by pledge, creation of a security interest or otherwise, other than a
transfer by his will or by the laws of descent or distribution, and, in the
event of any attempted assignment or transfer by the Executive contrary to this
Paragraph, Primex shall have no liability to pay any amount so attempted to be
assigned or transferred.
<PAGE>
13. No Employment Right. This Agreement shall not be deemed to confer
on the Executive a right to continued employment with Primex.
14. Disputes/Arbitration.
(a) Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration at Primex's
corporate headquarters in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that the Executive shall be
entitled to seek specific performance of the Executive's right to be paid during
the pendency of any dispute or controversy arising under or in connection with
this Agreement.
(b) Primex shall pay all reasonable legal fees and expenses which
the Executive may incur to enforce this Agreement unless the Executive had no
reasonable basis for his claim. Should Primex dispute the entitlement of the
Executive to such fees and expenses, the burden of proof shall be on Olin to
establish that the Executive had no reasonable basis for his claim.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above set forth.
PRIMEX TECHNOLOGIES, INC.
By: /s/ James G. Hascall
--------------------
Title: Chairman and CEO
/s/ Angelo A. Catani
- --------------------
Executive
<PAGE>
Exhibit 10.15
EXECUTIVE AGREEMENT
-------------------
Agreement between Primex Technologies, Inc., a Virginia corporation
("Primex"), and Stephen C. Curley (the "Executive"), dated as of January 1,
1997.
Primex and the Executive agree as follows:
1. Definitions
As used in this Agreement:
(a) "Cause" means the willful and continued failure of the
Executive to substantially perform his or her duties; the willful engaging by
the Executive in gross misconduct significantly and demonstrably injurious to
Primex; or conduct by the Executive in the course of his or her employment which
is a felony or fraud. No act or failure to act on the part of the Executive will
be considered "willful" unless done or omitted not in good faith and without
reasonable belief that the action or omission was in the interests of Primex or
not opposed to the interests of Primex.
(b) "Change in Control" means:
(i) Primex ceases to be, directly or indirectly,
owned by at least 1,000 stockholders;
(ii) A person, partnership, joint venture, corporation
or other entity, or two or more of any of the foregoing acting as a "person"
within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Act"), other than Primex, a majority-owned subsidiary of
Primex or an employee benefit plan (or related trust) of Primex, such subsidiary
or Olin Corporation, a Virginia corporation ("Olin"), become(s) the "beneficial
owner" (as defined in Rule 13d-3 under such Act) of 15% or more of the then
outstanding voting stock of Primex;
(iii) During any period of two consecutive years,
individuals who at the beginning of such period constitute Primex's Board of
Directors (together with any new Director whose election by Primex's Board of
Directors or whose nomination for election by Primex's stockholders was
approved by a
<PAGE>
vote of at least two-thirds of the Directors then still in office who either
were directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the directors then in office; or
(iv) All or substantially all of the business of
Primex is disposed of pursuant to a merger, consolidation or other transaction
in which Primex is not the surviving corporation or Primex combines with another
company and is the surviving corporation (unless the shareholders of Primex
immediately following such merger, consolidation, combination, or other
transaction beneficially own, directly or indirectly, more than 50% of the
voting stock or other ownership interests of (x) the entity or entities, if any,
that succeed to the business of Primex or (y) the combined company).
(c) "Disability" means that the Executive has suffered an
incapacity due to physical or mental illness which meets the criteria for
disability established at the time under Primex's short-term disability plan.
(d) "Executive Severance" means:
(i) twelve months of the Executive's then current
monthly salary (without taking into account any reductions which may have
occurred at or after the date of a Change in Control); plus
(ii) an amount equal to the greater of the Executive's
average annual award actually paid under Primex's short-term annual incentive
compensation plans or programs ("ICP") for the three years (or for such fewer
years as the ICP may have been in effect) immediately preceding the date of
Termination or the Executive's then current ICP standard annual award.
(iii) The Executive will not be entitled to receive any
other severance otherwise payable to the Executive under any other severance
plan of Primex.
(iv) If on the Termination date the Executive is
eligible and is receiving payments under any then existing Primex disability
plan, then the Executive agrees that all such payments may, and will be,
suspended and offset for 12 months following the Termination date. If after
such period the Executive remains eligible to receive disability payments, then
such payments shall resume in the amounts and in accordance with the provisions
of the applicable Primex disability plan.
(e) "Potential Change in Control" means:
(i) Primex has entered into an agreement the
consummation of which would result in a Change in Control;
<PAGE>
(ii) any person (including Primex) publicly announces
an intention to take or to consider taking actions which if consummated would
constitute a Change in Control;
(iii) Primex learns that any person (other than an
employee benefit plan (or related trust) of Primex, a subsidiary of Primex or
Olin) has become the beneficial owner directly or indirectly of securities of
Primex representing 9.5% or more of the combined voting power of Primex's then
outstanding securities ordinarily entitled to vote in elections of directors;
or
(iv) the Board of Directors of Primex adopts a
resolution to the effect that, for purposes of this Agreement, a Potential
Change in Control of Primex has occurred.
(f) "Termination" means:
(i) The Executive is discharged by Primex other than
for Cause;
(ii) The Executive terminates his or her employment in
the event that:
(1) Primex requires the Executive to relocate the
Executive's then office to an area which is not within reasonable commuting
distance, on a daily basis, from the Executive's then residence, except that a
requirement to relocate the Executive's office to Primex's corporate
headquarters is not a basis for Termination;
(2) Primex reduces the Executive's base salary or
fails to increase the Executive's base salary on a basis consistent (as to
frequency and amount) with Primex's exempt salary system as then in effect or,
in the event of a Change in Control, as in effect immediately prior to the
Change in Control;
(3) Primex fails to continue the Executive's
participation in its benefit plans (including incentive compensation and stock
based incentives) on substantially the same basis, both in terms of the amount
of the benefits provided (other than due to Primex's or a relevant operation's
earnings performance) and the level of the Executive's participation relative to
other participants as exists on the date hereof; provided that, with respect to
annual and long term incentive compensation plans, the basis with which the
amount of benefits and level of participation of the Executive shall be compared
shall be the average benefit awarded to the Executive under the relevant plan
during the three years (or such fewer years as such plans may have been in
effect) immediately preceding the date of Termination;
(4) The Executive suffers a Disability which prevents
the Executive from performing the Executive's duties with Primex for a period
of at least 180 consecutive days;
<PAGE>
(5) Following a Change in Control, Primex fails to
substantially maintain its benefit plans as in effect at the time of the Change
in Control, unless reasonably equivalent arrangements (embodied in an on-going
substitute or alternative plan) have been made with respect to such plans; or
(6) The Executive's duties, position or reporting
responsibilities are diminished.
<PAGE>
2. Term/Executive's Duties.
(a) This Agreement expires at the close of business on December
31, 2001, unless prior to that date there is a Change in Control, in which case
this Agreement will expire on the later of the close of business on December
31, 2001 or three years following the date of the Change in Control; provided
that the expiration of this Agreement will not affect any of the Executive's
rights resulting from a Termination prior to such expiration. In the event of
the Executive's death while employed by Primex, this Agreement shall terminate
and be of no further force or effect on the date of his or her death; provided
that the Executive's death will not affect any of the Executive's rights
resulting from a Termination prior to death.
(b) During the period of the Executive's employment by Primex,
the Executive shall devote his or her full time efforts during normal business
hours to Primex's business and affairs, except during reasonable vacation
periods and periods of illness or incapacity. Nothing in this Agreement will
preclude the Executive from devoting reasonable periods required for service as
a director or a member of any organization involving no conflict of interest
with Primex's interest, provided that no additional position as director or
member shall be accepted by the Executive during the period of his employment
with Primex without its prior consent.
(c) The Executive agrees that in the event of a Potential Change
in Control of Primex occurring after the date hereof, the Executive will remain
in the employ of Primex for a period of six months from the occurrence of such
Potential Change in Control, during which period the Executive will have an
office, title, duties and responsibilities substantially consistent with those
applicable immediately prior to the Potential Change in Control.
3. Executive Severance Payment
(a) In the event of a Termination occurring before the expiration
of this Agreement, Primex will pay the Executive a lump sum in an amount equal
to the Executive Severance. The payment will be made within 30 days of the
Termination.
(b) In the event of a Termination after a Change in Control has
occurred, in addition to the Executive Severance paid under Paragraph 3(a)
above, Primex will pay a Change in Control severance premium to the Executive
in an amount equal to one times the Executive Severance. The Change in Control
severance premium, if it becomes due, will be made within 30 days of the
Termination.
(c) The amount due under paragraph 3(a) or 3(b) will be reduced
to the extent that, if the amounts were paid in monthly installments, no
installment would be paid after the Executive's seventieth birthday.
<PAGE>
(d) The Executive will not be required to mitigate the amount of
any payment provided for in paragraph 3(a) or 3(b) by seeking other employment
or otherwise, nor shall any compensation received by the Executive from a third
party reduce such payment. Except as may otherwise be expressly provided
herein, nothing in this Agreement will be deemed to reduce or limit the rights
which the Executive may have under any employee benefit plan, policy or
arrangement of Primex.
<PAGE>
4. Other Benefits and Payments
(a) (1) If the Executive becomes entitled to payment under
Paragraph 3(a), then the Executive shall be entitled to receive a lump sum
payment from Primex at the same time as the payment under Paragraph 3(a) is
made equal to the amount contributed or credited by Primex to the Executive's
accounts in all defined contribution plans of Primex (whether or not
"qualified" plans) during the 12 months preceding the Executive's Termination
provided that in the event there are fewer than 12 months in such period the
payment required shall be increased proportionately to make it equivalent to a
12 month period. The "amount contributed or credited by Primex" as defined in
this Paragraph 4 shall not include any employee contributions, employer
matching contributions, dividends or investment gains or losses credited to the
Executive's accounts, but only the Primex contributions made or, in the case of
supplementary plans, credited, to the accounts. Such payment shall be in lieu
of any such contributions or credits by Primex to its defined contribution plans
with respect to the period after the Executive's Termination. If Primex is
required by law to contribute to such plans with respect to the period after the
Executive's Termination, any such contribution shall reduce the payout otherwise
due Executive under this Paragraph 4(a)(1). In the event the Executive receives
a payment under Paragraph 3(b), the amount required to be paid under the
preceding sentences of this Paragraph 4(a)(1) shall be doubled. Notwithstanding
the foregoing, in the event at the date of Termination the Executive is more
than 69 years old (or more than 68 years old in the case the Executive receives
a payment under Paragraph 3(b)) the lump sum payment required to be made under
this Paragraph 4(a)(1) shall be reduced such that if it were expressed as equal
monthly payments made over a 12-month period (a 24-month period in the case of
the Executive receiving a payment under Paragraph 3(b)) and paid in monthly
installments on the first of every month following Termination no such monthly
payments would be received by the Executive beyond his or her seventieth
birthday.
(2) If the Executive becomes entitled to payment under Paragraph
3(a), for the 12 months from the date of the Termination the Executive will
continue to enjoy coverage under all Primex medical, dental, and life insurance
plans to the extent the Executive was enjoying such coverage immediately prior
to the Termination. The Executive shall accrue no vacation during the 12 months
following the date of Termination but shall be entitled to payment for accrued
and unused vacation for the then current year. If the Executive receives the
Executive Severance (including the amount referred to in Paragraph 1(d)(ii)),
the Executive shall not be entitled to an ICP award for the calendar year of
Termination if Termination occurs during the first calendar quarter. Even if the
Executive receives the Executive Severance (including the amount referred to in
Paragraph 1(d)(ii)), if Termination occurs during or after the second calendar
quarter, the Executive shall also be entitled to a prorated ICP award for the
calendar year of Termination which shall be determined by multiplying his or her
then current ICP standard by a fraction the numerator of which is the number of
weeks in the calendar year prior to the Termination and the denominator of which
is 52. The Executive shall accrue no ICP award during the 12 months following
the date of Termination.
<PAGE>
(b) If the Executive receives payment under Paragraph 3(b), the
insurance coverage provided for in Paragraph 4(a) (2) will be for an additional
12-month period.
(c) Notwithstanding the foregoing Paragraphs 4(a)(2), and (b), no
such insurance coverage will be afforded by this Agreement with respect to any
period after the Executive's seventieth birthday.
(d) In the event of a Termination, the Executive will be entitled
at Primex's expense to outplacement counseling and associated services in
accordance with Primex's customary practice at the time (or, if a Change in
Control shall have occurred, in accordance with such practice immediately prior
thereto) with respect to its senior executives who have been terminated other
than for cause. It is understood that the counseling and services contemplated
by this Paragraph 4(d) are intended to facilitate the obtaining by the
Executive of other employment following a Termination, and payments or benefits
by Primex in lieu thereof will not be available to the Executive.
(e) If the Executive (i) receives the payment under Paragraph 3(b),
(ii) has an accrued vested benefit under Olin's qualified pension plan as of the
date of Termination and (iii) at age 55, would not qualify for subsidized
---
early retirement from Olin under the provisions of Olin's pension plans, then,
concurrent with the payment made to the Executive under Paragraph 3(b), the
Executive will receive a lump sum payment from Primex to make up for the lost
subsidy calculated as follows:
FIRST, by calculating the annual benefit which would otherwise be
-----
payable to the Executive at age 65 under all Olin pension plans assuming the
Executive had terminated his or her employment with Primex on the date of the
Change in Control, SECOND, by multiplying such annual benefit by the percentage
------
then applicable in the calculation of benefits paid to employees retiring from
active service with Olin at age 55 under the early retirement provisions of the
Olin Employees Pension Plan (72%at the date hereof), THIRD, by determining the
-----
lump sum actuarial value (as of the date of Termination) of annual payments
beginning at age 55 as calculated in the second step and FOURTH, by deducting
------
from such lump sum actuarial value the lump sum actuarial value (as of the date
of Termination) of the Executive's accrued annual benefits under all Olin
pension plans. Lump sum actuarial value shall be determined in accordance with
Olin's actuarial assumptions for its nonqualified defined benefit plans.
5. Participation in Change in Control/Section 4999 of Internal Revenue
Code
(a) In the event that the Executive participates or agrees to
participate by loan or equity investment (other than through ownership of less
than 1% of publicly traded securities of another company) in a transaction
("acquisition") which would result in an event described in paragraph 1(b)(i) or
(ii), the Executive must promptly disclose such participation or agreement to
Primex. If the Executive so participates or agrees to participate, no payments
due under this Agreement or by virtue of any Change in Control
<PAGE>
provisions contained in any compensation or benefit plan of Primex will be paid
to the Executive until the acquiring group in which the Executive participates
or agrees to participate has completed the acquisition. In the event the
Executive so participates or agrees to participate and fails to disclose his or
her participation or agreement, the Executive will not be entitled to any
payments under this Agreement or by virtue of Change in Control provisions in
any Primex compensation or benefit plan, notwithstanding any of the terms hereof
or thereof.
(b) Any payments made pursuant to this Agreement or by virtue of
Change in Control provisions in any Primex compensation or benefit plan which
are subject to tax under Section 4999 of the Internal Revenue Code or a
successor provision ("4999") will be increased so that after paying the tax
imposed by 4999 and the income tax on the amount of the increase provided by
this paragraph (b), the Executive will have received a net payment equal to
that which he or she would have received if 4999 did not apply.
6. Successors; Binding Agreement
(a) Primex will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of Primex, by agreement, in form
and substance satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that Primex
would be required to perform if no such succession had taken place. Failure of
Primex to obtain such assumption and agreement prior to the effectiveness of
any such succession will be a breach of this Agreement and entitle the
Executive to compensation from Primex in the same amount and on the same terms
as the Executive would be entitled to hereunder had a Termination occurred on
the succession date. As used in this Agreement, "Primex" means Primex as
defined in the preamble to this Agreement and any successor to its business or
assets which executes and delivers the agreement provided for in this Paragraph
6 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law or otherwise.
(b) This Agreement shall be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees.
7. Notices. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: Stephen C. Curley
28 Bryan Hill Road
Milford, CT 06460
<PAGE>
If to the Company: Primex Technologies, Inc.
10101 9th Street North
St. Petersburg, FL 33716-3807
Attention: Corporate Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida.
9. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in writing signed by the Executive and Primex. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same Agreement.
11. Withholding of Taxes. Primex may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
12. Non-assignability. This Agreement is personal in nature and
neither of the parties hereto shall, without the consent of the other, assign
or transfer this Agreement or any rights or obligations hereunder, except as
provided in paragraph 6 above. Without limiting the foregoing, the Executive's
right to receive payments hereunder shall not be assignable or transferable,
whether by pledge, creation of a security interest or otherwise, other than a
transfer by his or her will or by the laws of descent or distribution, and, in
the event of any attempted assignment or transfer by the Executive contrary to
this Paragraph, Primex shall have no liability to pay any amount so attempted to
be assigned or transferred.
13. No Employment Right. This Agreement shall not be deemed to confer
on the Executive a right to continued employment with Primex.
14. Disputes/Arbitration.
<PAGE>
(a) Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration at Primex's
corporate headquarters in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction; provided, however, that the Executive shall
be entitled to seek specific performance of the Executive's right to be paid
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
<PAGE>
(b) Primex shall pay all reasonable legal fees and expenses which
the Executive may incur to enforce this Agreement unless the Executive had no
reasonable basis for his or her claim. Should Primex dispute the entitlement
of the Executive to such fees and expenses, the burden of proof shall be on
Olin to establish that the Executive had no reasonable basis for his or her
claim.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above set forth.
PRIMEX TECHNOLOGIES, INC.
By: /s/ James G. Hascall
--------------------
Title: Chairman and CEO
/s/ Stephen C. Curley
- ---------------------
Executive
<PAGE>
Exhibit 10.16
EXECUTIVE AGREEMENT
-------------------
Agreement between Primex Technologies, Inc., a Virginia corporation
("Primex"), and William W. Smith (the "Executive"), dated as of January 1,
1997.
Primex and the Executive agree as follows:
1. Definitions
As used in this Agreement:
(a) "Cause" means the willful and continued failure of the
Executive to substantially perform his or her duties; the willful engaging by
the Executive in gross misconduct significantly and demonstrably injurious to
Primex; or conduct by the Executive in the course of his or her employment which
is a felony or fraud. No act or failure to act on the part of the Executive will
be considered "willful" unless done or omitted not in good faith and without
reasonable belief that the action or omission was in the interests of Primex or
not opposed to the interests of Primex.
(b) "Change in Control" means:
(i) Primex ceases to be, directly or indirectly,
owned by at least 1,000 stockholders;
(ii) A person, partnership, joint venture, corporation
or other entity, or two or more of any of the foregoing acting as a "person"
within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Act"), other than Primex, a majority-owned subsidiary of
Primex or an employee benefit plan (or related trust) of Primex, such
subsidiary or Olin Corporation, a Virginia corporation ("Olin"), become(s) the
"beneficial owner" (as defined in Rule 13d-3 under such Act) of 15% or more of
the then outstanding voting stock of Primex;
(iii) During any period of two consecutive years,
individuals who at the beginning of such period constitute Primex's Board of
Directors (together with any new Director whose election by Primex's Board of
Directors or whose nomination for election by Primex's stockholders was
approved by a vote of at least two-thirds of the Directors then still in office
who either were directors at the beginning of
<PAGE>
2
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the directors then in
office; or
(iv) All or substantially all of the business of
Primex is disposed of pursuant to a merger, consolidation or other transaction
in which Primex is not the surviving corporation or Primex combines with
another company and is the surviving corporation (unless the shareholders of
Primex immediately following such merger, consolidation, combination, or other
transaction beneficially own, directly or indirectly, more than 50% of the
voting stock or other ownership interests of (x) the entity or entities, if any,
that succeed to the business of Primex or (y) the combined company).
(c) "Disability" means that the Executive has suffered an
incapacity due to physical or mental illness which meets the criteria for
disability established at the time under Primex's short-term disability plan.
(d) "Executive Severance" means:
(i) twelve months of the Executive's then current
monthly salary (without taking into account any reductions which may have
occurred at or after the date of a Change in Control); plus
(ii) an amount equal to the greater of the Executive's
average annual award actually paid under Primex's short-term annual incentive
compensation plans or programs ("ICP") for the three years (or for such fewer
years as the ICP may have been in effect) immediately preceding the date of
Termination or the Executive's then current ICP standard annual award.
(iii) The Executive will not be entitled to receive any
other severance otherwise payable to the Executive under any other severance
plan of Primex.
(iv) If on the Termination date the Executive is
eligible and is receiving payments under any then existing Primex disability
plan, then the Executive agrees that all such payments may, and will be,
suspended and offset for 12 months following the Termination date. If after
such period the Executive remains eligible to receive disability payments, then
such payments shall resume in the amounts and in accordance with the provisions
of the applicable Primex disability plan.
(e) "Potential Change in Control" means:
(i) Primex has entered into an agreement the
consummation of which would result in a Change in Control;
<PAGE>
3
(ii) any person (including Primex) publicly announces
an intention to take or to consider taking actions which if consummated would
constitute a Change in Control;
(iii) Primex learns that any person (other than an
employee benefit plan (or related trust) of Primex, a subsidiary of Primex or
Olin) has become the beneficial owner directly or indirectly of securities of
Primex representing 9.5% or more of the combined voting power of Primex's then
outstanding securities ordinarily entitled to vote in elections of directors;
or
(iv) the Board of Directors of Primex adopts a
resolution to the effect that, for purposes of this Agreement, a Potential
Change in Control of Primex has occurred.
(f) "Termination" means:
(i) The Executive is discharged by Primex other than
for Cause;
(ii) The Executive terminates his or her employment in
the event that:
(1) Primex requires the Executive to relocate the
Executive's then office to an area which is not within reasonable commuting
distance, on a daily basis, from the Executive's then residence, except that a
requirement to relocate the Executive's office to Primex's corporate
headquarters is not a basis for Termination;
(2) Primex reduces the Executive's base salary or
fails to increase the Executive's base salary on a basis consistent (as to
frequency and amount) with Primex's exempt salary system as then in effect or,
in the event of a Change in Control, as in effect immediately prior to the
Change in Control;
(3) Primex fails to continue the Executive's
participation in its benefit plans (including incentive compensation and stock
based incentives) on substantially the same basis, both in terms of the amount
of the benefits provided (other than due to Primex's or a relevant operation's
earnings performance) and the level of the Executive's participation relative to
other participants as exists on the date hereof; provided that, with respect to
annual and long term incentive compensation plans, the basis with which the
amount of benefits and level of participation of the Executive shall be compared
shall be the average benefit awarded to the Executive under the relevant plan
during the three years (or such fewer years as such plans may have been in
effect) immediately preceding the date of Termination;
(4) The Executive suffers a Disability which prevents
the Executive from performing the Executive's duties with Primex for a period
of at least 180 consecutive days;
<PAGE>
4
(5) Following a Change in Control, Primex fails to
substantially maintain its benefit plans as in effect at the time of the Change
in Control, unless reasonably equivalent arrangements (embodied in an on-going
substitute or alternative plan) have been made with respect to such plans; or
(6) The Executive's duties, position or reporting
responsibilities are diminished.
2. Term/Executive's Duties.
(a) This Agreement expires at the close of business on December
31, 2001, unless prior to that date there is a Change in Control, in which case
this Agreement will expire on the later of the close of business on December
31, 2001 or three years following the date of the Change in Control; provided
that the expiration of this Agreement will not affect any of the Executive's
rights resulting from a Termination prior to such expiration. In the event of
the Executive's death while employed by Primex, this Agreement shall terminate
and be of no further force or effect on the date of his or her death; provided
that the Executive's death will not affect any of the Executive's rights
resulting from a Termination prior to death.
(b) During the period of the Executive's employment by Primex,
the Executive shall devote his or her full time efforts during normal business
hours to Primex's business and affairs, except during reasonable vacation
periods and periods of illness or incapacity. Nothing in this Agreement will
preclude the Executive from devoting reasonable periods required for service as
a director or a member of any organization involving no conflict of interest
with Primex's interest, provided that no additional position as director or
member shall be accepted by the Executive during the period of his employment
with Primex without its prior consent.
(c) The Executive agrees that in the event of a Potential Change
in Control of Primex occurring after the date hereof, the Executive will remain
in the employ of Primex for a period of six months from the occurrence of such
Potential Change in Control, during which period the Executive will have an
office, title, duties and responsibilities substantially consistent with those
applicable immediately prior to the Potential Change in Control.
3. Executive Severance Payment
(a) In the event of a Termination occurring before the expiration
of this Agreement, Primex will pay the Executive a lump sum in an amount equal
to the Executive Severance. The payment will be made within 30 days of the
Termination.
(b) In the event of a Termination after a Change in Control has
occurred, in addition to the Executive Severance paid under Paragraph 3(a)
above, Primex will pay a Change in Control severance
<PAGE>
5
premium to the Executive in an amount equal to one times the Executive
Severance. The Change in Control severance premium, if it becomes due, will be
made within 30 days of the Termination.
(c) The amount due under paragraph 3(a) or 3(b) will be reduced
to the extent that, if the amounts were paid in monthly installments, no
installment would be paid after the Executive's seventieth birthday.
(d) The Executive will not be required to mitigate the amount of
any payment provided for in paragraph 3(a) or 3(b) by seeking other employment
or otherwise, nor shall any compensation received by the Executive from a third
party reduce such payment. Except as may otherwise be expressly provided
herein, nothing in this Agreement will be deemed to reduce or limit the rights
which the Executive may have under any employee benefit plan, policy or
arrangement of Primex.
4. Other Benefits and Payments
(a) (1) If the Executive becomes entitled to payment under
Paragraph 3(a), then the Executive shall be entitled to receive a lump sum
payment from Primex at the same time as the payment under Paragraph 3(a) is
made equal to the amount contributed or credited by Primex to the Executive's
accounts in all defined contribution plans of Primex (whether or not
"qualified" plans) during the 12 months preceding the Executive's Termination
provided that in the event there are fewer than 12 months in such period the
payment required shall be increased proportionately to make it equivalent to a
12 month period. The "amount contributed or credited by Primex" as defined in
this Paragraph 4 shall not include any employee contributions, employer
matching contributions, dividends or investment gains or losses credited to the
Executive's accounts, but only the Primex contributions made or, in the case of
supplementary plans, credited, to the accounts. Such payment shall be in lieu
of any such contributions or credits by Primex to its defined contribution
plans with respect to the period after the Executive's Termination. If Primex
is required by law to contribute to such plans with respect to the period after
the Executive's Termination, any such contribution shall reduce the payout
otherwise due Executive under this Paragraph 4(a)(1). In the event the Executive
receives a payment under Paragraph 3(b), the amount required to be paid under
the preceding sentences of this Paragraph 4(a)(1) shall be doubled.
Notwithstanding the foregoing, in the event at the date of Termination the
Executive is more than 69 years old (or more than 68 years old in the case the
Executive receives a payment under Paragraph 3(b)) the lump sum payment required
to be made under this Paragraph 4(a)(1) shall be reduced such that if it were
expressed as equal monthly payments made over a 12-month period (a 24-month
period in the case of the Executive receiving a payment under Paragraph 3(b))
and paid in monthly installments on the first of every month following
Termination no such monthly payments would be received by the Executive beyond
his or her seventieth birthday.
(2) If the Executive becomes entitled to payment under Paragraph
3(a), for the 12 months from the date of the Termination the Executive will
continue to enjoy coverage under all Primex medical,
<PAGE>
6
dental, and life insurance plans to the extent the Executive was enjoying such
coverage immediately prior to the Termination. The Executive shall accrue no
vacation during the 12 months following the date of Termination but shall be
entitled to payment for accrued and unused vacation for the then current year.
If the Executive receives the Executive Severance (including the amount referred
to in Paragraph 1(d)(ii)), the Executive shall not be entitled to an ICP award
for the calendar year of Termination if Termination occurs during the first
calendar quarter. Even if the Executive receives the Executive Severance
(including the amount referred to in Paragraph 1(d)(ii)), if Termination occurs
during or after the second calendar quarter, the Executive shall also be
entitled to a prorated ICP award for the calendar year of Termination which
shall be determined by multiplying his or her then current ICP standard by a
fraction the numerator of which is the number of weeks in the calendar year
prior to the Termination and the denominator of which is 52. The Executive shall
accrue no ICP award during the 12 months following the date of Termination.
(b) If the Executive receives payment under Paragraph 3(b), the
insurance coverage provided for in Paragraph 4(a) (2) will be for an additional
12-month period.
(c) Notwithstanding the foregoing Paragraphs 4(a)(2), and (b), no
such insurance coverage will be afforded by this Agreement with respect to any
period after the Executive's seventieth birthday.
(d) In the event of a Termination, the Executive will be entitled
at Primex's expense to outplacement counseling and associated services in
accordance with Primex's customary practice at the time (or, if a Change in
Control shall have occurred, in accordance with such practice immediately prior
thereto) with respect to its senior executives who have been terminated other
than for cause. It is understood that the counseling and services contemplated
by this Paragraph 4(d) are intended to facilitate the obtaining by the
Executive of other employment following a Termination, and payments or benefits
by Primex in lieu thereof will not be available to the Executive.
(e) If the Executive (i) receives the payment under Paragraph 3(b),
(ii) has an accrued vested benefit under Olin's qualified pension plan as of
the date of Termination and (iii) at age 55, would not qualify for
---
subsidized early retirement from Olin under the provisions of Olin's pension
plans, then, concurrent with the payment made to the Executive under Paragraph
3(b), the Executive will receive a lump sum payment from Primex to make up for
the lost subsidy calculated as follows:
FIRST, by calculating the annual benefit which would otherwise be
-----
payable to the Executive at age 65 under all Olin pension plans assuming the
Executive had terminated his or her employment with Primex on the date of the
Change in Control, SECOND, by multiplying such annual benefit by the percentage
------
then applicable in the calculation of benefits paid to employees retiring from
active service with Olin at age 55 under the early retirement provisions of the
Olin Employees Pension Plan (72% at the date hereof), THIRD, by determining the
-----
lump sum actuarial value (as of the date of Termination) of annual
<PAGE>
7
payments beginning at age 55 as calculated in the second step and FOURTH, by
------
deducting from such lump sum actuarial value the lump sum actuarial value (as of
the date of Termination) of the Executive's accrued annual benefits under all
Olin pension plans. Lump sum actuarial value shall be determined in accordance
with Olin's actuarial assumptions for its nonqualified defined benefit plans.
5. Participation in Change in Control/Section 4999 of Internal Revenue
Code
(a) In the event that the Executive participates or agrees to
participate by loan or equity investment (other than through ownership of less
than 1% of publicly traded securities of another company) in a transaction
("acquisition") which would result in an event described in paragraph 1(b)(i) or
(ii), the Executive must promptly disclose such participation or agreement to
Primex. If the Executive so participates or agrees to participate, no payments
due under this Agreement or by virtue of any Change in Control provisions
contained in any compensation or benefit plan of Primex will be paid to the
Executive until the acquiring group in which the Executive participates or
agrees to participate has completed the acquisition. In the event the Executive
so participates or agrees to participate and fails to disclose his or her
participation or agreement, the Executive will not be entitled to any payments
under this Agreement or by virtue of Change in Control provisions in any Primex
compensation or benefit plan, notwithstanding any of the terms hereof or
thereof.
(b) Any payments made pursuant to this Agreement or by virtue of
Change in Control provisions in any Primex compensation or benefit plan which
are subject to tax under Section 4999 of the Internal Revenue Code or a
successor provision ("4999") will be increased so that after paying the tax
imposed by 4999 and the income tax on the amount of the increase provided by
this paragraph (b), the Executive will have received a net payment equal to
that which he or she would have received if 4999 did not apply.
6. Successors; Binding Agreement
(a) Primex will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of Primex, by agreement, in form
and substance satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that Primex
would be required to perform if no such succession had taken place. Failure of
Primex to obtain such assumption and agreement prior to the effectiveness of
any such succession will be a breach of this Agreement and entitle the
Executive to compensation from Primex in the same amount and on the same terms
as the Executive would be entitled to hereunder had a Termination occurred on
the succession date. As used in this Agreement, "Primex" means Primex as
defined in the preamble to this Agreement and any successor to its business or
assets which executes and delivers the agreement provided for in this Paragraph
6 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law or otherwise.
<PAGE>
8
(b) This Agreement shall be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees.
7. Notices. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: William W. Smith
1635 73rd Avenue North East
Medina, WA 98039
<PAGE>
9
If to the Company: Primex Technologies, Inc.
10101 9th Street North
St. Petersburg, FL 33716-3807
Attention: Corporate Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida.
9. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in writing signed by the Executive and Primex. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement.
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same Agreement.
11. Withholding of Taxes. Primex may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
12. Non-assignability. This Agreement is personal in nature and
neither of the parties hereto shall, without the consent of the other, assign
or transfer this Agreement or any rights or obligations hereunder, except as
provided in paragraph 6 above. Without limiting the foregoing, the Executive's
right to receive payments hereunder shall not be assignable or transferable,
whether by pledge, creation of a security interest or otherwise, other than a
transfer by his or her will or by the laws of descent or distribution, and, in
the event of any attempted assignment or transfer by the Executive contrary to
this Paragraph, Primex shall have no liability to pay any amount so attempted to
be assigned or transferred.
13. No Employment Right. This Agreement shall not be deemed to confer
on the Executive a right to continued employment with Primex.
14. Disputes/Arbitration.
<PAGE>
10
(a) Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration at Primex's
corporate headquarters in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction; provided, however, that the Executive shall
be entitled to seek specific performance of the Executive's right to be paid
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
<PAGE>
11
(b) Primex shall pay all reasonable legal fees and expenses which
the Executive may incur to enforce this Agreement unless the Executive had no
reasonable basis for his or her claim. Should Primex dispute the entitlement
of the Executive to such fees and expenses, the burden of proof shall be on
Olin to establish that the Executive had no reasonable basis for his or her
claim.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above set forth.
PRIMEX TECHNOLOGIES, INC.
By: /s/ James G. Hascall
--------------------
Title: Chairman and CEO
/s/ William W. Smith
- --------------------
Executive
<PAGE>
Exhibit 21
SUBSIDIARIES OF PRIMEX TECHNOLOGIES, INC.
(as of December 31, 1996)
<TABLE>
<CAPTION>
JURISDICTION PERCENTAGE OF DIRECT/
WHERE INDIRECT OWNERSHIP BY
SUBSIDIARY ORGANIZED PRIMEX OF VOTING SECURITIES
<S> <C> <C>
General Defense Corporation/1/ Pennsylvania 100%
Olin Aerospace Company/2/ Washington 100%
Physics International Company/3/ California 100%
U.S. Ordnance Company/4/ Delaware 100%
</TABLE>
There are omitted from the foregoing list the names of certain
subsidiaries which, if considered in the aggregate as a single subsidiary,
would not constitute a significant subsidiary.
/1/ Now doing business as "Primex Technologies, Ordnance and Tactical Systems
Division" in Florida, Pennsylvania, New Jersey and Arkansas.
/2/ Renamed Primex Aerospace Company on January 2, 1997. Now doing business as
"Primex Technologies, Aerospace and Electronics Division," "Olin Aerospace
Company," "OAC," "PAC,"and "Primex Aerospace" in Washington.
/3/ Renamed Primex Physics International Company on January 2, 1997. Now doing
business as "Primex Technologies, Ordnance and Tactical Systems Division"
in California and qualified as "Physics International Company," now doing
business as "Primex Physics International Company" in Tennessee.
/4/ Now doing business as "Primex Technologies, Ordnance and Tactical Systems
Division" in Los Angeles, California.
<PAGE>
Exhibit 23
Consent of Independent Auditors
The Board of Directors
Primex Technologies, Inc.:
Re: Registration Statement on Form S-8 (No. 333-18043)
Registration Statement on Form S-8 (No. 333-18297)
Registration Statement on Form S-8 (No. 333-18299)
We consent to incorporation by reference in the registration statements
referenced above of Primex Technologies, Inc. of our report dated February 13,
1997 relating to the consolidated balance sheets of Primex Technologies, Inc.
and subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations and cash flows for each of the years in the three-year
period ended December 31, 1996, which report appears in the December 31, 1996
annual report on Form 10-K of Primex Technologies, Inc.
KPMG PEAT MARWICK LLP
Tampa, Florida
March 19, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROMT HE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1996 AND THE CONSOLIDATED STATEEMENT
OF OPERATIONS FOR THE YEAR ENDING DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 20,000
<SECURITIES> 0
<RECEIVABLES> 123,658
<ALLOWANCES> 0
<INVENTORY> 57,241
<CURRENT-ASSETS> 206,743
<PP&E> 254,350
<DEPRECIATION> 149,327
<TOTAL-ASSETS> 373,743
<CURRENT-LIABILITIES> 59,020
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 145,134
<TOTAL-LIABILITY-AND-EQUITY> 373,743
<SALES> 471,488
<TOTAL-REVENUES> 471,488
<CGS> 399,187
<TOTAL-COSTS> 399,187
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,256
<INCOME-PRETAX> (6,369)
<INCOME-TAX> 1,533
<INCOME-CONTINUING> (7,902)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,902)
<EPS-PRIMARY> (1.51)
<EPS-DILUTED> (1.51)
</TABLE>
