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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, 1997
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-28942
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 33716-3807
ST. PETERSBURG, FLORIDA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
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:
TITLE OF EACH CLASS
COMMON STOCK, PAR VALUE $1.00 PER SHARE
SERIES A PARTICIPATING CUMULATIVE
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 [X] No [_]
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. [_]
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 27, 1998,
as reported on The Nasdaq Stock Market SM, was $218,103,825.
The number of common shares, par value $1.00 per share, outstanding as of
February 27, 1998 was 5,138,376.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive Proxy Statement for the 1998 Annual Meeting of Shareholders
is incorporated by reference into Part III of this Form 10-K.
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TABLE OF CONTENTS
FORM 10-K
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PAGE NO.
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PART I
Item 1 Business................................................. 1
Item 2 Properties............................................... 12
Item 3 Legal Proceedings........................................ 13
Item 4 Submission of Matters to a Vote of Security Holders...... 13
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters..................................... 14
Item 6 Selected Financial Data.................................. 15
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations .................... 16
Item 7A Quantitative and Qualitative Disclosure About Market
Risk.................................................... 21
Item 8 Financial Statements and Supplementary Data.............. 21
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 38
PART III
Item 10 Directors and Executive Officers of the Registrant....... 38
Item 11 Executive Compensation................................... 38
Item 12 Security Ownership of Certain Beneficial Owners and
Management ............................................. 38
Item 13 Certain Relationships and Related Transactions .......... 38
PART IV
Item 14 Exhibits, Financial Statements, Schedules, and Reports on
Form 8-K................................................ 39
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PART I
ITEM 1. BUSINESS
GENERAL
Primex Technologies, Inc. ("PRIMEX") is an ordnance and aerospace contractor
with strong systems management and manufacturing capability. PRIMEX was
organized under the laws of the Commonwealth of Virginia in May 1996 and has
been publicly owned since December 31, 1996, when Olin Corporation ("Olin")
made a distribution (the "Distribution") to its shareholders of all of the
outstanding shares of PRIMEX common stock (the "Common Stock"). Prior to the
Distribution, the assets and business of Olin's ordnance and aerospace
businesses were transferred to PRIMEX. PRIMEX provides a variety of ordnance
and aerospace products and services to the U.S. Government, friendly foreign
governments, and domestic and international commercial and industrial
customers. As used in this Form 10-K the term "PRIMEX" or the "Company" shall
refer to Primex Technologies, Inc. and, with respect to periods prior to the
Distribution, the assets and business entities of Olin's ordnance and
aerospace businesses.
PRIMEX's business operations are organized into two divisions that
correspond to its primary products and services. Through its Ordnance and
Tactical Systems Division, the Company designs and manufactures tank and other
large caliber ammunition and medium caliber ammunition for U.S. and friendly
foreign government customers. These products are used in ships, aircraft,
tanks, and fighting vehicle based weapons and other applications. The Ordnance
and Tactical Systems Division also designs and produces shaped charged
warheads that are used in various weapons. Ball Powder(R) propellant, which is
sold to U.S. and friendly foreign militaries, commercial ammunition
manufacturers, and sporting and recreational customers, is also manufactured
by the Division.
The Aerospace and Electronics Division designs and manufactures electronic
products utilized primarily in aeronautic applications, as well as rocket
engines and electronic products used in space applications. This Division also
produces solid propellant products used in munitions dispensing and inflation
devices and is a supplier of high energy devices used to simulate the
electromagnetic effect of nuclear explosions.
As a result of Olin's prior ownership of the Company and the Distribution,
the Company continues to have various relationships and agreements with Olin.
As part of the Distribution, Olin and PRIMEX entered into agreements providing
for the allocation of tax and certain other liabilities and obligations
arising from the period prior to the Distribution and agreements governing the
ownership and use of certain intellectual property and technology developed
both before and after the Distribution. Olin and PRIMEX are also parties to
agreements pursuant to which Olin and the Company will purchase products from
each other and agreements pursuant to which Olin will act, in certain limited
situations, as an agent or distributor for the sale of certain of the
Company's products. Olin and the Company have also agreed that for a period of
five years from the Distribution, subject to certain exceptions, Olin will not
compete with the Company for the sale of medium and large caliber ammunition
and the Company will not compete with Olin for the sale of small caliber
ammunition.
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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.
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PRODUCTS AND SERVICES 1997 1996 1995
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Tank and other Large Caliber Ammunition (1)..................... 29% 35% 28%
Medium Caliber Ammunition....................................... 19% 18% 14%
Ball Powder(R) propellant....................................... 10% 10% 11%
Electronic Products............................................. 10% 7% 8%
Space Products.................................................. 9% 7% 4%
Other Products and Services (2)(3).............................. 23% 23% 35%
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(1) The Company currently has two multi-year contracts with the U.S.
Government for the supply of 120mm tactical and training ammunition that
represented approximately 16% and 12%, respectively, of 1997 sales; 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.
(2) Approximately 5% of 1997 sales resulted from a contract for artillery
propelling charges.
(3) Approximately 4% of 1996 sales and 15% of 1995 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 certain 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. 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
these training and kinetic energy tactical rounds for the U.S. Government. The
Company is currently performing under the third 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 was 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, for which delivery was made 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 and friendly foreign governments 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.
The majority of the Company's large caliber ammunition production contracts
have, to date, related only to tank ammunition. However, the Company believes
that artillery ammunition presents an opportunity for future sales by the
Company because of an extended period of minimal investment by the U.S.
Government in this arena. This 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. During 1997 and early 1998, the Company
was awarded subcontracts by a major systems prime contractor to
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supply projectile structure and payload under an engineering and manufacturing
development contract for advanced guided artillery rounds to be used by both
the U.S. Army and U.S. Navy. The Company anticipates these development
contracts will result in future production contracts.
MEDIUM CALIBER AMMUNITION. The Company develops and produces medium caliber
ammunition. The Company's medium caliber product line includes 20mm, 25mm, and
30mm ammunition, which is utilized on a variety of platforms, including ships,
airplanes, helicopters, and fighting vehicles. The Company's 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.
The Company produces the 25mm M919 round, a 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 the M919 multi-purpose rounds
and training rounds for the next several years, but does not know whether the
U.S. 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 contract 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 1995 and 1996
until 1997. 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 for one of
the teams. It is expected that during 1998, the U.S. Army will select one of
these teams to complete the development of the OICW. 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 of Ball Powder(R) propellant to
the commercial ammunition market. In 1997, 1996 and 1995, approximately 63%,
55% and 65%, 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 1997, 1996 and
1995, accounting for approximately 34%, 32% and 42% 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 rounds, 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's line of airborne electronic
products includes controls for lighting, temperature, audio, power and flight
systems, as well as in-flight communications and entertainment components and
products. The Company also produces military ground support equipment,
including stores management and weapons system test sets for the F-16 and
other aircraft. The Company also manufactures a variety of power conditioning
units (which convert one form of electronic power into another) for military,
commercial and space applications.
In 1996, the Company introduced its first EmPower(TM) product, an in-seat
power supply system for airplane passengers' laptop computers and other
personal electronic devices. The Company has contracted to provide EmPower(TM)
products to fifteen domestic and international airline companies, and is
negotiating with several additional prospective domestic and international
customers. During 1997, the Company made its first significant deliveries of
this product.
SPACE PRODUCTS. The Company is the world's leading supplier of
monopropellant hydrazine 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 applications.
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 commercially available U.S. source of qualified and flight proven
electric propulsion products. The Company currently has five 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 currently 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 being flight-tested on experimental flights in 1998-
99. During 1997, to further advance its propulsion technology, the company
entered into a licensing agreement for an advanced thruster technology with
fuel efficiency capabilities approaching ten times that of first generation
hydrazine thrusters. 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 and the
use of the resulting exhaust products 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 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.
During 1997, the Company entered into production of artillery propelling
charges under a contract that was awarded early in the year. Artillery
propelling charges are bags or modules loaded into the breech of an artillery
gun which propel the artillery projectile out of the gun and towards the
target.
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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. During 1996 and
1997, the Company experienced cost overruns on the performance of these
contracts. Success in this area is dependent upon the Company's ability to
develop cost-effective demilitarization operations, 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.
Since 1995, the Company has been a supplier of forged steel petroleum
pipeline components and other heavy industrial cylindrical steel products.
Sales of these products have grown annually, and the Company believes they
could represent a significant commercial product line for the future. These
products are produced at the Company's Red Lion, Pennsylvania facility, which
principally produces components for large caliber ammunition and successfully
utilized its existing manufacturing capability and expertise for this
commercial application.
CUSTOMERS
The Company's largest customer is the U.S. Government. PRIMEX sells products
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 U.S.
Government sales, which accounted for approximately 66%, 78% and 77% in 1997,
1996 and 1995, respectively, 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
10% 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 manufacture 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 customer. The Company also
purchases various electronic piece parts, printed wire boards, hydrazine
liquid propellants, solid propellant ingredients and subcontracted components,
including capacitors, various metals and explosives, for use in its products.
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. U.S. 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).
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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-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 1997, 1996 and 1995, approximately 88%, 78% and 75%, respectively, of
the Company's sales to the U.S. Government were derived from firm fixed-price
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 1997, 1996 and 1995, approximately 12%, 19%
and 13%, respectively, of the Company's sales to the U.S. Government were
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.
Because the Company engages in U.S. Government contracting activities and
sells to the U.S. Government and prime U.S. Government contractors, it is
subject to extensive and complex U.S. Government procurement laws and
regulations. These laws and regulations provide for U.S. 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, and to civil and criminal penalties, and under certain
circumstances, suspension or debarment from bidding on future U.S. 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 action plan. This plan is designed
to ensure that the Company and its employees maintain their present
responsibilities as 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 and maintain
the Agreement.
U.S. Government contracts are, by their terms, subject to termination by the
U.S. Government either for its convenience or for 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 U.S. 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 U.S. Government, (ii) the U.S. Government is not liable for
the contractor's costs with
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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 U.S. Government in procuring undelivered items from another source.
In addition to U.S. Government termination rights, Government contracts are
dependent upon the levels and continuing availability of Congressional
appropriations. Congress usually appropriates program funds 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. Accordingly, the Company, like other U.S. Government contractors, is
continually subject to the business risks associated with changes in
Congressional appropriations and the failure of programs which have been
awarded to the Company to be funded for future years.
Because a large percentage of the Company's business is related, directly or
indirectly, to national defense, the Company is subject to the business risks
associated with 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.
U.S. Government contract awards may also be subject to protest or challenge
by unsuccessful bidders.
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 and the U.S. Department of Commerce which restrict
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.
There can be no assurance that the U.S. Government will not terminate
existing contracts, exercise options to extend existing contracts, or continue
to purchase products from the Company over the long term. The termination of
any of the Company's significant contracts or the failure to obtain either
renewals of existing contracts or additional contracts with the U.S.
Government could have a material adverse effect on the Company's results of
future operations and financial condition.
COMPETITION
The Company encounters strong competition in the sale of each of its
products and services. 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
U.S. Government.
The Company competes principally 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.
Ball Powder(R) propellant is the primary propellant used by the U.S.
Government in small caliber ammunition. The Company competes with Alliant and
Expro Chemical Products ("Expro"), a Canadian company, 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.
7
<PAGE>
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, $6
million and $5 million for 1997, 1996, and 1995, respectively. Customer-
sponsored research expenditures by the Company (primarily sponsored by the
U.S. Government) were approximately $54 million, $32 million, and $48 million,
respectively, for such years. Customer-sponsored research increases in 1997
were in the areas of large caliber and medium caliber ammunition and space
products. Customer-sponsored research declined in 1996 due to the completion
of an international contract for electromagnetic systems in 1995.
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 technology includes 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, 1997, and 1996 was approximately $399 million and $297 million,
respectively. 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 canceled, the amount of changes and cancellations historically has been
insignificant.
EXPORT SALES
The Company's export sales from the United States were approximately $68
million, $29 million and $24 million in 1997, 1996, and 1995, respectively.
The increase in export sales during 1997 was primarily a result of a contract
for artillery propelling charges.
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.
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 manufacturing facilities. 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
8
<PAGE>
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
("Superfund"), imposes a tax on the disposal of certain hazardous wastes. The
Company employs waste minimization programs at most of its manufacturing
sites.
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 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 these 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. Certain of these agreements are
described below.
Powder Supply Requirements Agreement; Component Supply Agreement
The Company and Olin have 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. 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 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.
9
<PAGE>
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.
Covenant Not To Compete Agreement
The Company and Olin have entered into a covenant not to compete agreement
which generally provides that, for a period of five years, Olin will not,
subject to certain exceptions, directly or indirectly manufacture, sell or
distribute medium or large caliber ammunition or components and that the
Company will not, subject to certain exceptions, directly or indirectly
manufacture, sell or distribute small caliber ammunition or components,
ejection cartridges or shotshells.
Novation of U.S. Government Contracts
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.
EMPLOYEES
As of December 31, 1997, the Company had approximately 2,680 employees, six
of whom were working in foreign countries. Approximately 490 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 a party to labor contracts expiring in October 2000 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.
10
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information regarding the Company's executive
officers.
<TABLE>
<CAPTION>
NAME AND AGE POSITION
------------ --------
<S> <C>
James G. Hascall, 59.... Chairman of the Board and Chief Executive Officer
Angelo A. Catani, 65.... Vice Chairman of the Board
J. Douglas DeMaire, 51.. Executive Vice President
William W. Smith, 63.... Executive Vice President and President, Aerospace and Electronics Division
John E. Fischer, 42..... Vice President and Chief Financial Officer
George H. Pain, 47...... Vice President, General Counsel and Secretary
Stephen C. Curley, 45... Vice President and Treasurer
Jackson C. Picker, 48... Vice President, Human Resources and Administration
Michael S. Wilson, 51... Vice President and President, Ordnance and Tactical Systems Division
</TABLE>
Mr. Hascall has served as Chairman and Chief Executive Officer of the
Company since January 1997. From January 1, 1996 through December 1996, Mr.
Hascall served as Executive Vice President of Olin Corporation, having
operating responsibility for Olin's Brass, Winchester, Ordnance and Aerospace
Divisions. From 1985 through 1995, Mr. Hascall served as President of Olin's
Brass Division. He was an Olin Corporate Vice President from 1985 to 1990 and
a Senior Vice President from 1990 to December 1995.
Mr. Catani has served as Vice Chairman of the Board of the Company since
January 1997. From 1988 through December 1996, Mr. Catani was President of
Olin Corporation's Ordnance Division and served as Vice President and General
Manager of Olin's Defense Products Group from 1985 to 1987. Mr. Catani was an
Olin Vice President from April 1993 until December 1996.
Mr. DeMaire has served as Executive Vice President of the Company since
January 1997. From January 1996 to December 1996, he served as Corporate Vice
President, Corporate Planning for Olin. From 1991 to December 1995, Mr.
DeMaire served as Vice President, Planning for Olin's Winchester Division and
from 1985 to 1995 served as Vice President, Planning for Olin's Brass
Division.
Mr. Smith has served as Executive Vice President of the Company and
President of the Company's Aerospace and Electronics Division since January
1997. From April 1993 until December 1996 he served as Corporate Vice
President for Olin where he also served as President of Olin's Aerospace
Division from 1988 through January 1997.
Mr. Fischer has served as Vice President and Chief Financial Officer of the
Company since January 1997. From January 1995 to December 1996, he served as
Vice President and Chief Financial Officer of Olin's Ordnance Division. Prior
to January 1995, Mr. Fischer served in a number of financial and contract
management positions with Olin's subsidiary, General Defense Corporation
("GDC"). Mr. Fischer 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 January 1997. From January 1995 until December 1996, Mr. Pain
served as Vice President, Legal of Olin's Brass and Winchester Divisions, and
as Deputy General Counsel of Olin. Prior to that time, Mr. Pain had served in
Olin's legal department since 1986.
Mr. Curley has served as Vice President and Treasurer of the Company since
January 1997. From September 1990 to December 1996, Mr. Curley served as
Assistant Treasurer of Olin. Prior to that date, Mr. Curley served as Senior
Tax Counsel in Olin's Tax Department.
Mr. Picker has served as Vice President, Human Resources and administration
of the Company since January 1997. From 1989 to December 1996, Mr. Picker
served as Vice President, Human Resources for Olin's Ordnance Division. Prior
to that time, Mr. Picker had served in various human resources positions with
Olin since 1975.
11
<PAGE>
Mr. Wilson has served as Vice President of the Company and President of the
Company's Ordnance and Tactical Systems Division since January 1997. From 1991
to December 1996, Mr. Wilson served as Vice President of Tank ammunition for
Olin. From 1990 to 1991, Mr. Wilson served as Vice President of Marketing for
Olin's Ordnance Division where he served as Vice President of Programs from
1988 to 1990. Prior to that time, Mr. Wilson served as Director of Business
Planning for Olin's Ordnance Division since 1985.
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 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
-------- ------------------
<C> <S>
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 parts 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 and artillery propelling changes
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.
12
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to a number of pending or threatened investigations,
claims and proceedings. Except for the investigations, claims and proceedings
described below, the Company believes that all such investigations, claims and
proceedings are immaterial to the Company or routine and incidental to the
Company's business.
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, the Company 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
the Company or its subsidiaries in connection with these government contracts.
The Company 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.
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, 1997.
13
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The shares of the Company's common stock commenced regular way trading on The
Nasdaq Stock Market SM under the symbol PRMX on January 7, 1997. As of February
27, 1998, there were approximately 6,569 holders of record of the Company's
common stock. The following table sets forth the quarterly high and low closing
sale prices and dividends paid for 1997:
<TABLE>
<CAPTION>
SALES PRICE
--------------- CASH DIVIDEND
QUARTER ENDED HIGH LOW DECLARED
------------- ------- ------- -------------
<S> <C> <C> <C>
March 31....................................... $21 1/8 $16 $0.15
June 30........................................ $24 $17 3/4 $0.15
September 30................................... $35 $22 $0.15
December 31.................................... $37 3/4 $30 3/4 $0.15
</TABLE>
The Company anticipates it will continue its policy of paying regular
quarterly cash dividends which, on an annual basis, will aggregate $0.60 per
share. 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 imposes limits ("Restricted Payments") on the
payment or declaration of dividends as well as any other distribution,
liquidation, purchase or other acquisition of the Company's stock by it or any
subsidiary. At December 31, 1997, the amount available for Restricted Payments
was approximately $17.5 million.
14
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected historical financial and
operating data of the Company for the five most recently completed fiscal
years. This historical data should be read in conjunction with the
Consolidated Financial Statements of the Company and the related notes thereto
in Item 8 and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Item 7.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATIONS FOR THE YEAR:
Sales........................ $490,824 $471,488 $508,113 $416,148 $376,332
Cost of Goods Sold........... 401,590 399,187 428,707 335,303 304,717
Selling and Administration... 62,751 53,336 51,297 46,758 43,643
Research and Development..... 5,568 6,241 5,016 5,364 6,055
Other Charges (1)............ -- 10,500 2,000 -- 12,600
-------- -------- -------- -------- --------
Operating Income............. 20,915 2,224 21,093 28,723 9,317
Interest Expense............. 3,735 9,256 9,276 8,638 7,880
Interest and Other Income.... 1,776 663 807 1,743 2,307
-------- -------- -------- -------- --------
Income (Loss) Before Taxes... 18,956 (6,369) 12,624 21,828 3,744
Income Tax Provision......... 8,331 1,533 6,963 9,805 2,722
-------- -------- -------- -------- --------
Net Income (Loss)............ $ 10,625 $ (7,902) $ 5,661 $ 12,023 $ 1,022
======== ======== ======== ======== ========
FINANCIAL POSITION AT YEAR-
END:
Property Plant and Equipment,
Net......................... $ 98,660 $105,023 $114,473 $114,113 $ 98,771
Total Assets................. 296,291 373,743 380,979 364,175 294,077
Capitalization:
Short-Term Borrowing....... 24,100 -- -- -- --
Long-Term Debt............. -- 145,000 125,000 125,000 125,000
Shareholders' Equity....... 152,801 145,134 158,535 131,113 91,287
-------- -------- -------- -------- --------
Total Capitalization......... 176,901 290,134 283,535 256,113 216,287
Total Debt to Total
Capitalization.............. 13.6% 50.0% 44.1% 48.8% 57.8%
OTHER OPERATING DATA:
Depreciation................. $ 16,731 $ 17,211 $ 16,633 $ 16,955 $ 14,323
Capital Expenditures......... 10,641 13,273 19,191 17,821 12,682
PER SHARE DATA:
Net Income (Loss) Per Share
(2)(3):
Basic...................... $ 2.05 $ (1.51) $ 1.08 $ 2.30 $ 0.20
Diluted.................... $ 2.01 $ (1.51) $ 1.08 $ 2.30 $ 0.20
Cash Dividends Per Share... $ 0.60 $ -- $ -- $ -- $ --
</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 ($6.0 million in 1996 and $2.0 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 $12.6 million.
(2) The calculation of net income per share for all periods prior to 1997 is
presented on a pro forma basis assuming that all 5,220,276 shares of
Common Stock outstanding immediately after the Distribution were
outstanding for all periods prior to the Distribution.
(3) The earnings per share amounts have been restated as required to comply
with Statement of Financial Accounting Standards No. 128, Earnings Per
Share.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations covers the Company's year ended December 31, 1997 as well as
periods prior to 1997 when the Company operated as the Ordnance and Aerospace
Divisions of Olin, but has been prepared as if the Company were a separate
entity for all periods discussed.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1996 1995
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
Sales.............................................. $490,824 $471,488 $508,113
Gross Margin....................................... 89,234 72,301 79,406
Selling and Administration......................... 62,751 53,336 51,297
Other Charges...................................... -- 10,500 2,000
Net Income (Loss).................................. 10,625 (7,902) 5,661
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO 1996
Sales increased 4% in 1997 compared to 1996 sales primarily due to higher
shipments of medium caliber ammunition, artillery propelling charges, Ball
Powder(R) propellant, steel pipe joints, and space and electronics products.
These increases offset lower sales of international tank ammunition, solid
propellant products, and electromagnetic systems. Increases in medium caliber
ammunition sales reflect the correction of production problems that delayed
shipments in 1996. The increases in artillery propelling charge sales reflect
activity on a contract received in early 1997, for which there was no
comparable activity in 1996. Ball Powder(R) propellant sales increased 8% over
the 1996 depressed levels, principally due to improved commercial sales. Space
products sales increases reflect higher shipments associated with the
commercial satellite market. Electronics sales increases resulted from the
introduction of the Company's EmPower(TM) airline passenger seat power supply.
Gross margin as a percentage of sales increased to 18% in 1997 from 15% in
1996. The gross margin percentage on medium caliber ammunition increased by
approximately 181% and reflects the improved delivery and cost performance for
those products. Margin improvements also benefited from a product mix which
included sales of artillery propelling charges and higher space, electronics,
and Ball Powder(R) propellant sales. These higher margin sales offset
unfavorable performance that resulted in cost overruns during 1997 on
ammunition de-militarization and high-pulsed energy contracts.
Selling and administration expenses as a percentage of sales increased to
13% in 1997 from 11% in 1996. The increase reflects the combination of higher
bid and proposal costs, which increased 19% over the 1996 level, additional
costs associated with the Company's start-up and status as a new independent
public company and management incentive expense associated with improvements
in the Company's operating performance.
Interest expense decreased 60% from the 1996 level. This reduction reflects
the application of the Company's cash flow to debt reduction and lower
interest rates on outstanding debt. The 1996 financial statements reflected
$125 million of debt outstanding for the entire year with an average interest
rate of 7.4%. The average debt outstanding during 1997 was $54 million with an
average interest rate of 6.2%.
Income tax expense of $8.3 million and $1.5 million was recorded in 1997 and
1996, respectively, on pre-tax income of $19.0 million in 1997 and a pre-tax
loss of $6.4 million in 1996. The Company's 1997 effective tax rate of 43.9%
is higher than statutory rates due principally to goodwill amortization, which
is non-deductible.
16
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO 1995
Sales declined 7% in 1996 compared to 1995 sales attributable principally 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 as a percentage of sales decreased to 15% in 1996 from 16% in
1995 due primarily to the decline in sales of Ball Powder(R) propellant.
Selling and administration expenses as a percentage of sales increased to
11% in 1996 from 10% in 1995 due to lower sales and a higher level of expenses
primarily associated with the Distribution.
Other charges in 1996 represented the provision for the settlement of claims
related 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).
Income tax expense of $1.5 million and $7.0 million was recorded in 1996 and
1995, respectively, on pre-tax losses of $6.4 million in 1996 and pre-tax
income of $12.6 million in 1995. 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.
U.S. GOVERNMENT SALES
U.S. Government sales amounted to $322.6 million in 1997, $368.3 million in
1996 and $391.1 million in 1995. See "Item 1. Business--U.S. Government
Contracts and Regulations." Approximately 88%, 75% and 80%, respectively, of
total 1997, 1996, and 1995 U.S. Government sales were to the United States
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.
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.
17
<PAGE>
ENVIRONMENTAL
The Company is a party to various governmental and private environmental
actions associated with waste disposal, manufacturing and test sites.
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.
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. 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 $1.2 million and $1.9 million at December 31, 1997 and, 1996 respectively,
which are 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.
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.
SERVICE COSTS
From the time of the Distribution to December 31, 1997, the Company obtained
certain services from Olin, such as payroll and benefits administration,
mainframe computing services, and telecommunications support. Olin was
reimbursed by the Company at rates comparable to the pre-Distribution inter-
company charges. The cost of these services for 1997 was approximately $1.4
million. During 1997, the Company has developed or obtained these services on
its own, at costs which approximate the rates charged by Olin.
NEW ACCOUNTING STANDARDS
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 128, "Earnings per Share." Statement 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. The Company adopted the provisions of
Statement 128 effective December 31, 1997. All earnings per share amounts for
all periods presented have been restated to conform to the Statement 128
requirements.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 130, "Reporting Comprehensive Income."
Statement 130 establishes standards for reporting and display of comprehensive
income and its components in financial statements. Comprehensive income, as
defined, is the
18
<PAGE>
change in equity of a business enterprise during a period from transactions
and other events and circumstances from non-owner sources. The provisions of
Statement 130 are effective for periods beginning after December 15, 1997.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 131, "Disclosures about Segments of an
Enterprise and Related Information." Statement 131 establishes standards for
segment reporting and disclosure of additional information on products and
services, geographic areas and major customers. The Company is assessing
implementation of the disclosure requirements of this standard which is
effective for periods beginning after December 15, 1997. The adoption of
Statement 131 will result in additional financial statement disclosure.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the Distribution, the Company assumed a $160 million
floating-rate Revolving Credit Agreement (the "RCA") with participating banks
to provide financing for the Company's working capital requirements, capital
expenditures, and general corporate purposes. Prior to the Distribution, Olin
borrowed $145 million under the RCA based on the Company's estimated working
capital on the date of the Distribution, however, a final determination of the
appropriate debt level by Olin resulted in targeted debt of $125 million.
Accordingly, the Company was provided $20 million in cash by Olin, which was
reflected in the Company's balance sheet as of the Distribution.
The RCA permits unsecured borrowings on a revolving basis over a five-year
term which expires on December 31, 2001. Principal repayments are not required
until the end of the five-year term. The Company pays interest under the RCA
on outstanding borrowings at the Company's choice of various floating rate
options and is required to pay a facility fee of 0.125% of the borrowing
commitment. The RCA contains a number of financial covenants including
requirements to maintain ratios of (i) minimum earnings before interest and
taxes to interest expense, and (ii) maximum total debt to earnings before
interest, taxes, depreciation and amortization and contains certain minimum
tangible net worth requirements. The RCA also contains limitations on amounts
available to pay dividends or repurchase shares of Common Stock ("Restricted
Payments"). At December 31, 1997, the amount available for Restricted Payments
was $17.5 million. To facilitate short-term borrowing flexibility, certain RCA
participating banks have agreed to provide the Company uncommitted and
unsecured short-term lines of credit at interest rates similar to those under
the RCA. Aggregate borrowings under the RCA and short-term lines are limited
to the committed maximum of $160 million. At December 31, 1997, the Company
had unused availability of $135.9 million under the RCA and short-term lines
of credit. There were no outstanding borrowings under the RCA at December 31,
1997. Outstanding borrowings under short-term lines of credit at December 31,
1997 were $24.1 million with a weighted average interest rate of 6.1%.
For the year ended December 31, 1997, net cash provided by operations
totaled $116.3 million which was the result of working capital reductions
associated with the receipt of contract advances, improved operating
performance, and the correction of shipment delays experienced in 1996. During
the fourth quarter of 1996, the Company entered into a contract modification
under one of its multi-year contracts which allowed for the acceleration of
contract payments in exchange for reduced selling prices. During 1997, the
Company entered into similar contract modifications on two additional
contracts. To qualify for such payments, the Company must achieve certain
performance milestones. During 1997, a total of approximately $155 million of
such contract advances were received.
Capital spending for the year ended December 31, 1997 decreased 20% from
1996 due to a planned program to control capital costs.
During the year, the Company announced a program to purchase lots of less
than 100 shares of its stock held by any single shareholder ("odd-lot
shares"). During the term of the program, the Company purchased and retired
85,446 odd-lot shares of Common Stock at a cost of approximately $1.7 million
in cash.
19
<PAGE>
Cash dividends paid during 1997 totaled approximately $3.1 million.
Cash flow from net operating activities, after capital spending, odd-lot
stock repurchases, and dividends, plus the $20 million of cash provided by
Olin were used to reduce debt from $145 million at December 31, 1996 to $24.1
million at December 31, 1997.
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 a combined effects munition
contract and a cash settlement resulting from an in-flight entertainment
contract cancellation that occurred in 1995. These were offset in part by
lower current liabilities, increased inventory associated with medium caliber
ammunition shipment delays and unfavorable operating results.
Subject to the forward-looking statements set forth below and based upon the
availability under the RCA and the Company's projected cash flow from
operations, management believes that the Company's capital resources are
adequate to meet its foreseeable business needs.
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 sales or operating
results of the Company during the three most recent fiscal years.
IMPACT OF YEAR 2000
The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. Software failures due to
processing errors potentially arising from calculations using the Year 2000
date are a known risk. The Company is addressing this risk relating to the
availability and integrity of financial systems and the reliability of
operational systems. The Company has established processes for evaluating and
managing the risks and costs associated with this potential problem. The
computing portfolio was identified and an initial assessment has been
completed. Based on this assessment, the Company believes that with
modifications to existing software and conversions to new software, the Year
2000 issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are
not completed timely, the Year 2000 issue could have an adverse impact on
operations of the Company.
The Company is in the process of evaluating whether its vendors, customers
(including the U.S. Government) and other third party service providers are
making adequate efforts to achieve Year 2000 compliance. The Company cannot
presently conclude whether Year 2000 non-compliance by such third parties is
likely to have a material adverse effect on the Company's operations.
The Company has not made a final determination of what the cost of achieving
Year 2000 compliance will be over the cost of normal software upgrades and
replacements. However, the Company believes, based on the preliminary
assessment, that the costs of the project, which will be incurred through
fiscal 1999, will not be material.
FORWARD LOOKING STATEMENTS
All statements other than statements of historical facts in this Form 10-K
are "forward-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 contracts; changing
20
<PAGE>
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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report--Ernst & Young LLP........................... 22
Independent Auditors' Report--KPMG Peat Marwick LLP....................... 23
Consolidated Balance Sheets as of December 31, 1997 and December 31, 1996. 24
Consolidated Statements of Operations, Years Ended December 31, 1997, 1996
and 1995................................................................. 25
Consolidated Statements of Shareholders' Equity, Years Ended December 31,
1997, 1996 and 1995...................................................... 26
Consolidated Statements of Cash Flow, Years Ended December 31, 1997, 1996
and 1995................................................................. 27
Notes to Consolidated Financial Statements................................ 28
</TABLE>
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Primex Technologies, Inc.
We have audited the accompanying consolidated balance sheet of Primex
Technologies, Inc. as of December 31, 1997, and the related consolidated
statement of operations, shareholders' equity, and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides 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. at December 31, 1997, and the consolidated
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Tampa, Florida
January 26, 1998
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Primex Technologies, Inc.
We have audited the accompanying consolidated balance sheet of Primex
Technologies, Inc. and subsidiaries as of December 31, 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows of
each of the years in the two-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 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 the
results of their operations and their cash flows of each of the years in the
two-year period ended December 31, 1996 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Tampa, Florida
February 13, 1997
23
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... $ -- $ 20,000
Receivables............................................... 94,657 123,658
Inventories, Net.......................................... 35,157 57,241
Other Current Assets...................................... 7,263 5,843
-------- --------
Total Current Assets.................................... 137,077 206,742
Property, Plant and Equipment, Net.......................... 98,660 105,023
Goodwill, Net............................................... 44,821 47,385
Other Assets................................................ 15,733 14,593
-------- --------
Total Assets............................................ $296,291 $373,743
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-Term Borrowing...................................... $ 24,100 $ --
Accounts Payable.......................................... 28,894 30,147
Contract Advances......................................... 35,070 --
Accrued Liabilities....................................... 32,522 28,873
-------- --------
Total Current Liabilities............................... 120,586 59,020
Long-Term Debt.............................................. -- 145,000
Other Liabilities........................................... 22,904 24,589
-------- --------
Total Liabilities....................................... 143,490 228,609
Commitments and Contingencies
Shareholders' Equity:
Common Stock, $1.00 par value; 60,000,000 shares authorized;
5,137,637 and 5,220,276 shares issued and outstanding in
1997 and 1996, respectively................................ 5,138 5,220
Additional Paid-in Capital.................................. 144,510 139,914
Retained Earnings........................................... 7,322 --
Unamortized Value of Restricted Stock Grants................ (4,145) --
Cumulative Translation Adjustment........................... (24) --
-------- --------
Total Shareholders' Equity.............................. 152,801 145,134
-------- --------
Total Liabilities and Shareholders' Equity.............. $296,291 $373,743
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Sales............................................. $490,824 $471,488 $508,113
Operating Expenses:
Cost of Goods Sold.............................. 401,590 399,187 428,707
Selling and Administration...................... 62,751 53,336 51,297
Research and Development........................ 5,568 6,241 5,016
Other Charges................................... -- 10,500 2,000
-------- -------- --------
Operating Income.................................. 20,915 2,224 21,093
Interest Expense.................................. 3,735 9,256 9,276
Interest and Other Income......................... 1,776 663 807
-------- -------- --------
Income (Loss) Before Taxes........................ 18,956 (6,369) 12,624
Income Tax Provision.............................. 8,331 1,533 6,963
-------- -------- --------
Net Income (Loss)................................. $ 10,625 $ (7,902) $ 5,661
======== ======== ========
Net Income (Loss) Per Share (1996 and 1995
Unaudited Proforma Information):
Basic........................................... $ 2.05 $ (1.51) $ 1.08
======== ======== ========
Diluted......................................... $ 2.01 $ (1.51) $ 1.08
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
($ IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------
UNAMORTIZED EQUITY IN
ADDITIONAL VALUE OF CUMULATIVE EARNINGS TOTAL
PAID-IN RETAINED RESTRICTED TRANSLATION PRIOR TO SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK GRANTS ADJUSTMENT DISTRIBUTION EQUITY
--------- ------ ---------- -------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31,
1994................... $ 131,113 $131,113
Net Intercompany Activ-
ity with Olin.......... 21,761 21,761
Net Income.............. 5,661 5,661
--------- --------
BALANCE 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 DECEMBER 31,
1996................... 5,220,276 5,220 139,914 -- -- -- -- 145,134
Grant of 344,000
Restricted Stock Units. -- -- 6,128 -- (6,128) -- -- --
Amortization of
Restricted Stock Grant. -- -- -- -- 1,983 -- -- 1,983
Dividends Paid.......... -- -- -- (3,098) -- -- -- (3,098)
Dividends on Stock
Compensation........... -- -- -- (205) -- -- -- (205)
Issuance of Stock Under
Directors Stock Plan... 2,807 3 49 -- -- -- -- 52
Purchase of Common
Stock.................. (85,446) (85) (1,581) -- -- -- -- (1,666)
Translation Adjustments. -- -- -- -- -- (24) -- (24)
Net Income.............. -- -- -- 10,625 -- -- -- 10,625
--------- ------ -------- ------- ------- ---- --------- --------
BALANCE DECEMBER 31,
1997................... 5,137,637 $5,138 $144,510 $ 7,322 $(4,145) $(24) $ -- $152,801
========= ====== ======== ======= ======= ==== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
($ IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss).............................. $ 10,625 $ (7,902) $ 5,661
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided (Used) by Operating
Activities:
Depreciation................................... 16,731 17,211 16,633
Amortization of Intangibles.................... 2,977 2,954 3,042
Deferred Taxes................................. (2,863) (3,805) 2,502
Stock Compensation............................. 2,035 -- --
Changes in Assets and Liabilities:
Receivables.................................. 29,001 29,418 (48,182)
Inventories.................................. 22,084 (7,478) 16,038
Other Current Assets......................... (431) 659 481
Other Assets................................. (1,552) (7,737) 10,482
Accounts Payable............................. (1,253) (12,634) (8,925)
Contract Advances............................ 35,070 -- --
Accrued Liabilities.......................... 3,649 5,161 (7,974)
Other Liabilities............................ 189 (2,472) 2,217
Other Operating Activities..................... 43 947 201
--------- -------- --------
Net Operating Activities..................... 116,305 14,322 (7,824)
--------- -------- --------
INVESTING ACTIVITIES
Capital Expenditures........................... (10,641) (13,273) (19,191)
Disposition of Property Plant and Equipment.... -- 4,565 3,859
Other Investing Activities..................... -- (195) --
--------- -------- --------
Net Investing Activities..................... (10,641) (8,903) (15,332)
--------- -------- --------
FINANCING ACTIVITIES
Net Short-Term Borrowing....................... 24,100 -- --
Net Long-Term Borrowing (Repayment)............ (145,000) 20,000 --
Net Transfers from (to) Olin................... -- (5,419) 23,156
Repurchase of Common Shares.................... (1,666) -- --
Dividends Paid................................. (3,098) -- --
--------- -------- --------
Net Financing Activities..................... (125,664) 14,581 23,156
--------- -------- --------
Net Increase (Decrease) in Cash................ (20,000) 20,000 --
Cash, Beginning of Year........................ 20,000 -- --
--------- -------- --------
Cash, End of Year.............................. $ -- $ 20,000 $ --
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<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 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 and warships; 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 U.S. Government research and development agencies/laboratories,
allied U.S. 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 U.S.
Government research and development agencies/laboratories.
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying 1997 consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries, which were transferred to
the Company prior to the Distribution. Intercompany 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 accompanying consolidated financial statements, for periods prior to
1997, include the combined operations of Olin's former Ordnance and Aerospace
Divisions and have been prepared as if the Company had operated as a separate
stand-alone entity for the periods presented. The consolidated financial
statements, for periods prior to 1997, include only those assets and
liabilities transferred to the Company, and revenues and expenses attributable
to the Company's operations. 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 was reasonable.
However, such allocated amounts may not be indicative of what selling and
administration expenses would have been if the Company operated independently
of Olin.
28
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 these
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.
Contract advances represent payments received by the Company for costs which
have not yet been incurred and are liquidated as costs on the related
contracts are recognized.
Sales from contracts with the U.S. Government or U.S. Government prime
contractors were approximately 66%, 78%, and 77% of total 1997, 1996 and 1995
sales, respectively. Export sales from the United States were $67,867, $28,875
and $24,285 in 1997, 1996 and 1995, respectively.
Inventories
Inventories are stated at the lower of cost or net realizable value. Work-
in-process inventories related to long-term contracts and programs are stated
at the accumulated cost of material, labor and manufacturing overhead, less
the estimated cost of units delivered. To the extent total costs relating to
long-term contracts and programs are estimated to exceed the total sales
price, charges are made to current operations to reduce inventoried costs to
net realizable value.
Approximately 38% and 21% of 1997 and 1996 consolidated inventories,
respectively, are valued by the dollar value last-in, first-out (LIFO) method
of inventory accounting. Prior to 1997, LIFO inventory was included in a
larger Olin pool of which the Company was allocated a percentage share as part
of the Distribution.
Pursuant to contract provisions, agencies of the U.S. Government and other
customers have title to, or a security in, certain inventories as a result of
progress payments and advances.
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:
<TABLE>
<S> <C>
Improvements to land........................................ 10 to 20 years
Building and building equipment............................. 5 to 45 years
Machinery and equipment..................................... 3 to 12 years
</TABLE>
Leasehold improvements are amortized over the term of the lease or the
estimated useful life of the improvement, whichever is less.
Goodwill
Goodwill, the excess of the purchase price of the acquired businesses over
the fair value of the respective net assets, is amortized over 30 years on a
straight-line basis. Accumulated amortization was $22,994 and
29
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$20,430 at December 31, 1997 and 1996 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
comparing the undiscounted value of expected future operating cash flows to
its carrying cost. An impairment, if necessary, would be recorded based on the
estimated fair value or a cash flow measure.
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.
Stock-Based Compensation
The Company accounts for stock-based employee compensation using the
intrinsic value method of accounting.
Income Taxes
The Company accounts for income taxes under the liability method. 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. 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.
Net Income (Loss) Per Share
In 1997, the Financial Accounting Standards Board Issued Statement 128,
"Earnings per Share." Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
All earnings per share amounts for all periods presented have been restated to
conform to the Statement 128 requirements.
The weighted average number of shares outstanding and shares vested in 1997
used to calculated basic earnings per share was 5,173,669. The weighted
average number of shares adjusted for 113,239 incremental shares of non-vested
restricted stock grants in 1997 used to calculate diluted earnings per share
was 5,286,908. The calculation of net income (loss) per share for all periods
prior to 1997 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.
Fair Value of Financial Instruments
The fair value of financial instruments, consisting primarily of cash,
receivables, and accounts payable, approximates carrying value due to the
liquid nature of the instruments. The fair value of life insurance policies,
included in other assets, approximates cash surrender value, which is carrying
value. The fair value of the short-term borrowing and long-term debt
approximately carrying value based on borrowing rates available to the Company
for borrowings with similar terms and maturities.
Foreign Currency Translation
Adjustments resulting from translating foreign functional currency financial
statements into U.S. dollars are included in the currency translation
adjustment in shareholders' equity.
30
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Derivatives
The Company enters into foreign currency contracts in order to reduce the
impact of certain foreign currency fluctuations. Firmly committed transactions
and the related receivables and payables may be hedged with forward exchange
contracts or purchased options. Premiums paid on purchased options and any
gains or losses are included in other assets or accrued liabilities and are
recognized in earnings when the transaction being hedged is recognized.
RECEIVABLES
Receivables, including amounts due under long-term contracts (contract
receivables), consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Contract receivables:
Billed receivables....................................... $46,359 $ 18,490
Unbilled receivables..................................... 46,823 85,898
Trade and other receivables................................ 1,475 19,270
------- --------
Total receivables.......................................... $94,657 $123,658
======= ========
</TABLE>
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 $18,664 and $25,678 in 1997, and $12,478 and $72,278
in 1996.
INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Raw materials and work-in-progress.......................... $34,832 $58,355
Finished goods.............................................. 8,232 7,927
------- -------
43,064 66,282
Less revaluation to LIFO.................................... 7,907 9,041
------- -------
Total inventories........................................... $35,157 $57,241
======= =======
</TABLE>
Inventory balances at December 31, 1997 and 1996 are net of reductions for
progress payments in the amount of $9,657 and $6,039, respectively.
During 1997, contract inventory quantities valued at LIFO were reduced
resulting in a LIFO liquidation, the effect of which decreased cost of sales
by approximately $1,616.
31
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land and improvements to land............................. $ 14,913 $ 14,399
Building and building equipment........................... 41,526 39,869
Machinery and equipment................................... 170,601 162,419
Leasehold improvements.................................... 20,238 20,161
Construction-in-progress.................................. 12,911 17,502
-------- --------
260,189 254,350
Less accumulated depreciation............................. 161,529 149,327
-------- --------
$ 98,660 $105,023
======== ========
</TABLE>
LONG-TERM BORROWINGS
As a result of the Distribution, the Company assumed all obligations for a
revolving credit agreement ("RCA") entered into on December 23, 1996, by Olin,
under the terms of which participating banks have committed a maximum of
$160,000 to the Company for cash borrowings and letters of credit. The RCA
expires on December 31, 2001 and contains a number of financial covenants
including requirements to maintain ratios of (i) minimum earnings before
interest and taxes to interest expense, and (ii) maximum total debt to
earnings before interest, taxes, depreciation and amortization and contains
certain minimum tangible net worth requirements. The RCA also contains
limitations on amounts available to pay dividends or repurchase Company stock
("Restricted Payments"). At December 31, 1997, the amounts available for
Restricted Payments were $17,549. The Company pays interest under the RCA on
outstanding borrowings at the Company's choice of various floating rate
options and is required to pay a facility fee of 0.125% of the borrowing
commitment. To facilitate short-term borrowing flexibility, certain RCA
participating banks have agreed to provide the Company uncommitted and
unsecured short-term lines of credit at interest rates similar to those under
the RCA. Aggregate borrowings under the RCA and short-term lines are limited
to the committed maximum of $160,000. At December 31, 1997, the Company had
unused availability of $135,900 under the RCA and short-term lines of credit.
There were no outstanding borrowings under the RCA at December 31, 1997.
Outstanding borrowings under short-term lines of credit at December 31, 1997
were $24,100 with a weighted average interest rate of 6.1%. Interest paid in
1997 was $3,585.
The financial statements include $125,000 of debt for all periods prior to
establishment of the RCA which has been classified as long-term debt as a
result of the Distribution and assumption of the Revolving Credit Agreement.
Interest expense of $9,256 and $9,276 in 1996 and 1995, 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 note titled "Legal Proceedings" included herein.
32
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accrued payroll and employee benefits....................... $17,266 $12,506
Contract Liabilities........................................ 13,982 11,776
Other....................................................... 1,274 4,591
------- -------
Total accrued liabilities................................... $32,522 $28,873
======= =======
</TABLE>
Contract liabilities are principally reserves for anticipated losses on
certain incomplete contracts as well as estimated costs to perform contractual
activities associated with completed contracts.
INCOME TAXES
Components of Income Tax Expense (Benefit):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Currently payable:
Federal............................................. $9,528 $4,509 $3,774
State............................................... 1,666 829 687
Deferred.............................................. (2,863) (3,805) 2,502
------ ------ ------
Income Tax Expense.................................... $8,331 $1,533 $6,963
====== ====== ======
</TABLE>
The following table accounts for the difference between the income tax
provision and the amounts obtained by applying the statutory U.S. federal
income tax rate to income before taxes.
Effective Tax Rate Reconciliation (percent):
<TABLE>
<CAPTION>
1997 1996 1995
---- ----- ----
<S> <C> <C> <C>
Statutory Federal Tax Rate................................. 35.0 (35.0) 35.0
State Income Taxes, Net.................................... 4.4 2.4 5.5
Goodwill................................................... 4.7 14.1 7.0
Fines and Penalties........................................ -- 33.0 5.5
Supplemental Pension....................................... (2.6) -- 0.8
Other, Net................................................. 2.4 9.6 1.4
---- ----- ----
Effective Tax Rate......................................... 43.9 24.1 55.2
==== ===== ====
</TABLE>
Components of Deferred Tax Assets and Liabilities:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Deferred Tax Assets:
Post-retirement Benefits.................................. $ 5,084 $ 4,889
Accruals and Reserves..................................... 12,622 10,941
Other Miscellaneous Items................................. 1,632 1,300
------- -------
Total Deferred Tax Assets................................... $19,338 $17,130
======= =======
Deferred Tax Liabilities:
Property, Plant and Equipment............................. $ 9,725 $11,396
Deferred Contract Income.................................. 5,958 4,942
------- -------
Total Deferred Tax Liabilities.............................. $15,683 $16,338
======= =======
</TABLE>
33
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income from a foreign subsidiary is not significant. Included in other
current assets at December 31, 1997 and 1996, respectively, are $5,706 and
$4,717 of net current deferred assets.
Income taxes paid in 1997 were $12,117. Income taxes allocated for periods
prior to 1997 were settled with Olin on a current basis.
EMPLOYEE BENEFIT PLANS
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. Total expense for Plan
contributions in 1997 was $6,244.
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 remained
with Olin. Additionally, prior to the Distribution, Company employees
participated in a defined contribution plan available to essentially all
domestic Olin employees which provided a match of employee contributions. The
total pension plan expense and matching contribution allocable to the Company
employees and included in the accompanying financial statements and was $7,872
and $6,896 in 1996 and 1995, respectively.
Certain Company employees participate in a supplemental non-qualified
pension plan (the "MSP Plan"). The Company's benefit obligation under the MSP
Plan is secured by life insurance agreements on the lives of the participants.
The Company owns the policies and pays the premiums. At December 31, 1997 the
discounted value of benefits payable under the MSP Plan, included in other
liabilities, was $8,093 and the cash value of the life insurance policies,
included in other assets, was $13,453. MSP Plan expenses during 1997 were
$1,280 which were offset by increases in insurance cash values and policy
proceeds of $1,490.
Prior to the Distribution, certain Company employees participated in
supplemental non-qualified executive benefit plans for which the expenses were
$1,036 in 1996 and $566 in 1995. The liability for payment of benefits accrued
under these plans prior to the Distribution remained with Olin.
The Company provides certain post-retirement health care and life insurance
benefits for eligible active and retired domestic employees. Post-retirement
benefit expense amounted to $1,260, $1,176 and $1,100 in 1997, 1996 and 1995,
respectively. The liability for employees retired prior to the Distribution
remained with Olin. The Company's post-retirement health care and life
insurance benefit plans are unfunded.
The following table reflects the components of post-retirement liability for
active and retired employees of the Company.
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Fully eligible active plan participants........................ $3,636 $3,312
Other active participants...................................... 6,006 4,501
------ ------
Cumulative accumulated post-retirement benefit obligation...... 9,642 7,813
Unrecognized loss.............................................. 573 --
------ ------
Net post-retirement benefit liability.......................... $9,069 $7,813
====== ======
</TABLE>
34
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The accumulated post-retirement benefit obligation was determined using the
projected unit credit method and an assumed discount rate of 7.25% in 1997,
8.0% in 1996 and 7.5% in 1995. The assumed health care cost trend rate used
for pre-65 retirees was 9.7% in 1997, 11.2% in 1996 and 12.5% in 1995,
declining one-half percent per annum to 5.5%. A one percent increase in the
health care cost trend rate used would have resulted in a $64 increase in
aggregate service and interest components of expense for the year 1997, and a
$514 increase in the accumulated post-retirement benefit obligation at
December 31, 1997.
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 grant stock options, stock appreciation rights,
restricted stock and restricted stock units, performance awards, and other
stock-based awards. At December 31, 1997, a total of 350,000 shares of common
stock were reserved for issuance under this plan.
During 1997, the Company granted 344,000 restricted stock units to certain
officers and employees of the Company. The average per share and total value
of the restricted stock units granted was $17.81 and $6,128, respectively,
which is being amortized over the anticipated vesting period of 3 years.
Compensation expense recognized on restricted stock units in 1997 was $1,983.
SHAREHOLDER RIGHTS PLAN
The Company has adopted a Shareholder Rights Plan which is designed to
prevent a potential acquirer from gaining control of the Company without
offering a fair price to all shareholders. Each right entitles a shareholder
(other than the acquirer) 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 acquirer) to purchase stock or
other property of the acquirer having a value of twice the exercise price. The
rights will expire on December 19, 2006, unless earlier redeemed at $0.01 per
right by the Company.
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 $5,515 in 1997, $5,222 in 1996 and $4,684 in 1995 (sublease income is not
significant). Future minimum rent payments under operating leases having
initial or remaining non-cancelable lease terms in excess of one year at
December 31, 1997 are as follows: $4,931 in 1998; $4,759 in 1999; $3,761 in
2000; $2,393 in 2001; $2,161 in 2002.
In the ordinary course of business, the Company is contingently liable for
performance under letters of credit totaling approximately $22,416 at December
31, 1997. The Company does not believe that exposure to loss is likely and is
of the opinion that the fair value of these instruments is zero.
ENVIRONMENTAL
The Company is party to various governmental and private environmental
actions associated with waste disposal, manufacturing and test sites. There
were no environmental provisions charged to operations in 1997 or
35
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1996, and $795 in 1995. The consolidated balance sheets include reserves for
future environmental expenditures to investigate and remediate known sites
amounting to $1,186 in 1997, and $1,865 in 1996, which are classified as other
non-current liabilities.
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
The Company and its subsidiaries are involved in legal proceedings, claims
and litigation arising in the ordinary course of business. In the opinion of
management, none of these matters will materially affect the Company's
consolidated financial position or results of operations.
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 judgments, and cost settlements was
assumed by Olin in conjunction with the Distribution the balance sheet does
not include any reserves related to this matter.
RELATED PARTY TRANSACTIONS
The Company and Olin have entered into an agreement which generally provides
that Olin will purchase from the Company, 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, starting at 100% of such
requirements for 1997 for Ball Powder 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. Propellant sales to
Olin's Winchester Division were $16,547 in 1997, $15,813 in 1996, and $23,272
in 1995.
During 1997, the Company obtained various transition related services from
Olin. These services include, but are not limited to, administration of
employee benefit programs, tax compliance, internal audit, management
36
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
information systems, and treasury. The cost of these services, which the
Company has developed or obtained on its own, was approximately $1,389 during
1997.
Prior to 1997, the Company was charged by Olin for the Company's share of
expenses of certain centralized activities using various allocation bases.
These services were similar to the transition services and included legal and
general corporate functions. Charges to the Company for centralized corporate
services were $4,273 in 1996, and $2,170 in 1995. 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
years ending December 31, 1997 and 1996:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1997:
Sales............................... $114,799 $112,921 $118,861 $144,243
Gross Profit........................ 19,086 23,166 22,173 24,809
Operating Income.................... 3,387 6,079 5,734 5,715
Net Income.......................... 871 2,864 3,027 3,863
Net Income Per Share:
Basic............................. $0.17 $0.55 $0.58 $0.75
Diluted........................... $0.17 $0.55 $0.57 $0.72
1996:
Sales............................... $102,081 $125,622 $101,072 $142,713
Gross Profit........................ 16,120 18,631 17,008 20,542
Operating Income (Loss)............. (4,672) 4,273 (156) 2,779
Net Income (Loss)................... (5,671) 959 (3,037) (153)
Net Income (Loss) Per Share (Pro
Forma):
Basic............................. $(1.08) $0.18 $(0.58) $(0.03)
Diluted........................... $(1.08) $0.18 $(0.58) $(0.03)
</TABLE>
The first three quarters of 1997 earnings per share amounts have been
restated to comply with Statement of Financial Accounting Standards 128,
"Earnings per Share." 1997 primary and fully diluted per share earnings as
previously reported for the first, second and third quarters was $0.16, $0.52
and $0.55, respectively.
37
<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 independent 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
Information relating to executive officers is included in this report at the
end of Part I under the caption "Executive Officers of the Company."
The information relating to directors appearing under the caption "Proposal
No. 1--Election of Directors" in the definitive Proxy Statement for the 1998
Annual Meeting of Shareholders and filed with the Securities and Exchange
Commission is incorporated herein by reference.
The information concerning compliance with Section 16(a) of the Securities
Exchange Act of 1934, as amended, appearing under the caption "Section 16(a)
Beneficial Ownership Reporting Compliance" in the definitive Proxy Statement
for the 1998 Annual Meeting of Shareholders and filed with the Commission is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "Executive Compensation"
contained in the definitive Proxy Statement for the 1998 Annual Meeting of
Shareholders and filed with the Commission is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the captions "Security Ownership of
Directors and Officers" and "Certain Beneficial Owners" contained in the
definitive Proxy Statement for the 1998 Annual Meeting of Shareholders and
filed with the Commission is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the caption "Certain Relationships and
Related Transactions" contained in the definitive Proxy Statement for the 1998
Annual Meeting of Shareholders and filed with the Commission is incorporated
herein by reference.
38
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(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.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report--Ernst & Young LLP........................ 22
Independent Auditors' Report--KPMG Peat Marwick LLP.................... 23
Consolidated Balance Sheets as of December 31, 1997 and 1996........... 24
Consolidated Statements of Operations , Years Ended December 31, 1997,
1996 and 1995......................................................... 25
Consolidated Statements of Shareholders' Equity, Years Ended December
31, 1997, 1996 and 1995............................................... 26
Consolidated Statements of Cash Flow, Years Ended December 31, 1997,
1996 and 1995......................................................... 27
Notes to the Consolidated Financial Statements......................... 28
</TABLE>
(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
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2 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).
3.1 Amended and Restated Articles of Incorporation. Incorporated by
referenced 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 Amended and Restated Articles of Incorporation. Incorporated by
referenced 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).
4.2 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).
4.3 Rights Agreement. Incorporated by reference to Exhibit 4.4 to the
Company's Form 10-K filed March 27, 1997 (SEC File No. 333-18043).
4.4 Rights Certificate. Incorporated by reference as Exhibit B to Exhibit
4.4 to the Company's Form 10-K filed March 27, 1997 (SEC File No. 333-
18043).
4.5 Primex Retirement Investment Management Experience Plan. Incorporated
by reference to Exhibit 4 to the Company's S-8 filed May 23, 1997 (SEC
file No. 333-27793).
4.6 1996 Long Term Incentive Plan of Primex Technologies, Inc., as
amended.*
4.7 Primex Stock Plan for Nonemployee Directors, as amended.*
10.1 Executive Agreement between Primex Technologies, Inc. and J. G.
Hascall dated January 1, 1998.*
10.2 Executive Agreement between Primex Technologies, Inc. and J. D.
DeMaire dated January 1, 1998.*
10.3 Executive Agreement between Primex Technologies, Inc. and A. A. Catani
dated January 1, 1998.*
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.4 Executive Agreement between Primex Technologies, Inc. and M. S. Wilson
dated January 1, 1998.*
10.5 Executive Agreement between Primex Technologies, Inc. and W. W. Smith
dated January 1, 1998.*
10.6 Form of Executive Agreement for Company executives other than the
Named Executive Officers.
10.7 Primex Retirement Investment Management Experience Plan. Incorporated
by reference to Exhibit 4 to the Company's S-8 filed May 23, 1997 (SEC
file No. 333-27793).
10.8 Primex Stock Plan for Nonemployee Directors (filed as Exhibit 4.7
hereto).
10.9 1996 Long Term Incentive Plan of Primex Technologies, Inc. (filed as
Exhibit 4.6 hereto).*
10.10 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).
10.11 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).
10.12 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).
10.13 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).
10.14 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).
10.15 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).
10.16 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).
10.17 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).
10.18 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).
10.19 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).
10.20 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).
10.21 Description of the Incentive Compensation Plan of Primex Technologies,
Inc.
10.22 Transition Bonus Program of Primex Technologies, Inc.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.23 Building and Igloo Lease between U.S. Fish and Wildlife Service and
Primex Technologies, Inc. dated January 1, 1997.
10.24 Land Lease Agreement between D. Hebden Porteus, David M. Haig, Fred C.
Weyand and Paul M. Ganley, The Connecticut National Bank and Merced
Associates (includes Primex Technologies, Inc. through assignment)
dated December 29, 1986.
10.25 Lease Agreement between Zaser and Longston, Inc. and Rocket Research
Company (now Primex Aerospace Company) dated July 14, 1982.
10.26 Lease Agreement between The Northwestern Mutual Life Insurance Company
and Rheem Manufacturing Company (now U.S. Ordnance Company) dated July
1, 1956.
10.27 Facility Lease between The Connecticut National Bank, Merced
Associates and Physics International Company (now Primex Physics
International Company) dated December 29, 1986.
10.28 Lease Agreement between Heger Realty Corporation and Aerojet Ordnance
Company (now U.S. Ordnance Company) dated October 15, 1985.
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. Incorporated by
reference to Exhibit 21 to the Company's 10-K filed March 27, 1997
(SEC File No. 333-18043).
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
</TABLE>
- --------
* Denotes a management contract or compensatory plan or arrangement required
to be filed as an exhibit to Item 14(c) of Form 10-K.
(b)Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the fiscal quarter
ended December 31, 1997.
41
<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)
March 18, 1998
/s/ George H. Pain
By: _________________________________
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:
SIGNATURE CAPACITY DATE
/s/ James G. Hascall Chairman of the March 18, 1998
- ------------------------------------- Board and Chief
JAMES G. HASCALL Executive Officer
and Director
/s/ Angelo A. Catani Vice Chairman of the March 18, 1998
- ------------------------------------- Board and Director
ANGELO A. CATANI
/s/ John E. Fischer Vice President and March 18, 1998
- ------------------------------------- Chief Financial and
JOHN E. FISCHER Accounting Officer
/s/ Edwin M. Glasscock Director March 18, 1998
- -------------------------------------
EDWIN M. GLASSCOCK
/s/ David Lasky Director March 18, 1998
- -------------------------------------
DAVID LASKY
/s/ Bob Martinez Director March 18, 1998
- -------------------------------------
BOB MARTINEZ
/s/ William B. Mitchell Director March 18, 1998
- -------------------------------------
WILLIAM B. MITCHELL
/s/ Robert H. Rau Director March 18, 1998
- -------------------------------------
ROBERT H. RAU
/s/ Anthony W. Ruggiero Director March 18, 1998
- -------------------------------------
ANTHONY W. RUGGIERO
/s/ Leon E. Salomon Director March 18, 1998
- -------------------------------------
LEON E. SALOMON
42
<PAGE>
EXHIBIT 4.6
1996 LONG TERM INCENTIVE PLAN OF PRIMEX TECHNOLOGIES, INC.
Section 1. Purpose
-------
The purposes of the 1996 Long Term Incentive Plan of Primex Technologies, Inc.
(the "Plan") are to encourage selected salaried employees of Primex
Technologies, Inc. (together with any successor thereto, "Primex") and its
Affiliates (as defined below) to acquire a proprietary interest in Primex's
growth and performance, to generate an increased incentive to contribute to
Primex's future success and to enhance the ability of Primex and its Affiliates
to attract and retain qualified individuals.
Section 2. Definitions
-----------
As used in the Plan:
(a) "Affiliate" means (i) any entity that, directly or through one or more
intermediaries, is controlled by Primex and (ii) any entity in which Primex
has a significant equity interest as determined by the Committee.
(b) "Award" means any Option, Stock Appreciation Right, Restricted Stock,
Restricted Stock Unit, Performance Award, Dividend Equivalent or Other
Stock-Based Award granted under the Plan.
(c) "Award Agreement" means any written agreement or other instrument or
document evidencing an Award granted under the Plan. The terms of any plan
or guideline adopted by the Board or the Committee and applicable to an
Award shall be deemed incorporated in and a part of the related Award
Agreement.
(d) "Board" means the Board of Directors of Primex.
(e) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(f) "Committee" means a committee of the Board designated by the Board to
administer the Plan and composed of not fewer than two directors each of
whom shall be a Non-Employee Director as defined by Rule 16b-3 .
(g) "Dividend Equivalent" means any right granted under Section 6(f)(iv) of the
Plan.
<PAGE>
(h) "Fair Market Value" means, with respect to any property (including, without
limitation, Shares or other securities), the fair market value of such
property determined by such methods or procedures as shall be established
from time to time by the Committee.
(i) "Incentive Stock Option" means an option to purchase Shares granted under
Section 6(a) of the Plan that is intended to meet the requirements of
Section 422 of the Code or a successor provision thereto.
(j) "Non-Qualified Stock Option" means an option to purchase Shares granted
under Section 6(a) of the Plan that is not intended to be an Incentive
Stock Option.
(k) "Olin" means Olin Corporation, a Virginia corporation, and its successors.
(l) "Option" means an Incentive Stock Option or a Non-Qualified Stock Option.
(m) "Other Stock-Based Award" means any right granted under Section 6(e) of the
Plan.
(n) "Participant" means a Salaried Employee granted an Award under the Plan.
(o) "Performance Award" means any right granted under Section 6(d) of the Plan.
(p) "Person" means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, or government or
political subdivision thereof.
(q) "Released Securities" means securities that were Restricted Securities with
respect to which all applicable restrictions imposed under the terms of the
relevant Award have expired, lapsed or been waived or satisfied.
(r) "Restricted Securities" means Awards of Restricted Stock or other Awards
under which outstanding Shares are held subject to certain restrictions.
(s) "Restricted Stock" means any Share granted under Section 6(c) of the Plan.
(t) "Restricted Stock Unit" means any right granted under Section 6(c) of the
Plan that is denominated in Shares.
(u) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, or any
successor rule.
(v) "Salaried Employee" means any salaried employee of Primex or of an
Affiliate.
<PAGE>
(w) "Shares" means the Common Stock of Primex and such other securities or
property as may become the subject of Awards pursuant to an adjustment made
under Section 4(b) of the Plan.
(x) "Stock Appreciation Right" means any right granted under Section 6(b) of
the Plan.
Section 3. Administration
--------------
The Plan shall be administered by the Committee which shall have full power and
authority to: (i) designate Participants; (ii) determine the Awards to be
granted to Participants; (iii) determine the number of Shares (or securities
convertible into Shares) to be covered by Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards, or other property, or canceled, substituted, forfeited
or suspended, and the method or methods by which Awards may be settled,
exercised, canceled, substituted, forfeited or suspended; (vi) determine
whether, to what extent, and under what circumstances cash, Shares, other
securities, other Awards, other property and other amounts payable with respect
to an Award under the Plan shall be deferred either automatically or at the
election of the Participant or of the Committee; (vii) interpret and administer
the Plan and any instrument or agreement relating to, or Award made under, the
Plan; (viii) establish, amend, suspend or waive such rules and guidelines and
appoint such agents as it shall deem appropriate for the administration of the
Plan; and (ix) make any other determination and take any other action that it
deems necessary or desirable for such administration. All designations,
determinations, interpretations and other decisions with respect to the Plan or
any Award shall be within the sole discretion of the Committee and shall be
final, conclusive and binding upon all Persons, including Primex, any Affiliate,
any Participants, any holder or beneficiary of any Award, any shareholder and
any employee of Primex or of any Affiliate. All powers and responsibilities of
the Committee provided in the Plan may also be exercised by the Board at any
time.
Section 4. Shares Available for Awards
---------------------------
(a) Shares Available. Subject to adjustment as provided in Section 4(b) of the
----------------
Plan:
(i) The aggregate number of Shares available for granting Awards under the
Plan shall be 350,000 If an Award is denominated in or relates to a
security of Primex convertible into its Common Stock, the number of
shares of Common Stock into which such security shall be convertible
(calculated as of the date of grant of the Award, subject to
adjustment as provided in Section 4(b) hereof or under the terms of
such security) shall be deemed denominated in Shares and counted
against the aggregate number of Shares available for the granting of
Awards under the Plan. If, after the effective date of the Plan,
Shares subject to an Award granted under the Plan (other than
Restricted Securities) are forfeited, or the Award otherwise
terminates without the delivery of Shares or
<PAGE>
of other consideration, then the Shares subject to such Award or the
number of Shares otherwise counted against the aggregate number of
Shares available under the Plan with respect to such Award, to the
extent of such forfeiture or termination, shall again be available for
granting Awards under the Plan." Any Award (other than a Dividend
Equivalent) denominated in Shares shall be counted against the
aggregate number of Shares available for granting Awards under the
Plan even though the Award is ultimately paid in cash, provided that,
notwithstanding the foregoing, an Award shall not be deemed
denominated in Shares if the dollar amount of the Award is fixed at
the time of grant by reference to the market value of Shares or
otherwise.
(ii) For purposes of this Section 4:
(A) If an Award (other than a Dividend Equivalent) is denominated
in Shares, the number of Shares covered by such Award, or to
which such Award relates, shall be counted on the date of grant
of such Award against the aggregate number of Shares available
for granting Awards under the Plan; and
(B) Dividend Equivalents paid in Shares and Awards not denominated
in Shares but paid in Shares shall be counted against the
aggregate number of Shares available for granting Awards under
the Plan in such amount and at such time as the Committee shall
determine under procedures adopted by the Committee consistent
with the purposes of the Plan;
provided, however, that Awards that operate in tandem with, or that are
-------- -------
substituted for, other Awards may be counted or not counted under
procedures adopted by the Committee in order to avoid double counting. Any
Shares that are delivered by Primex, and any Awards that are granted by, or
become obligations of, Primex, through the assumption by Primex or an
Affiliate of, or in substitution for, outstanding awards previously granted
by an acquired company shall not, except in the case of Awards granted to
Salaried Employees who are officers or directors of Primex for purposes of
Section 16 of the Securities Exchange Act of 1934, as amended, be counted
against the Shares available for granting Awards under the Plan.
(b) Adjustments. In the event that the Committee determines that any dividend
-----------
or other distribution, recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of Primex, issuance of
warrants or other rights to purchase Shares or other securities of Primex,
or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits intended to be
made available
<PAGE>
under the Plan, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (i) the number and type of Shares (or other
securities or property) which thereafter may be made the subject of Awards,
including the limitation contained in Section 4(c), (ii) the number and
type of Shares (or other securities or property) subject to outstanding
Awards, and (iii) the grant, purchase or exercise price with respect to any
Award, or, if the Committee deems it appropriate, make provision for a cash
payment to the holder of an outstanding Award; provided, however, that with
-------- -------
respect to Awards of Incentive Stock Options, no such adjustment shall be
authorized to the extent that such authority would cause the Plan to
violate Section 422 of the Code or any successor provision thereto.
Notwithstanding the foregoing, a Participant to whom Dividend Equivalents
or dividend units have been awarded shall not be entitled to receive a
special or extraordinary dividend or distribution unless the Committee
shall have expressly authorized such receipt.
(c) Notwithstanding anything contained in this Plan to the contrary, grants to
any one Participant of Awards which represent or are designated in Shares
shall not exceed 70,000 Shares in any calendar year.
Section 5. Eligibility
-----------
Any Salaried Employee, including any officer or employee-director of Primex or
an Affiliate, who is not a member of the Committee shall be eligible to be
designated a Participant.
Section 6. Awards
------
(a) Options. The Committee is authorized to grant Options to Participants with
-------
the following terms and conditions and with such additional terms and
conditions, not inconsistent with the provisions of the Plan, as the
Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable under an
Option shall be determined by the Committee; provided, however,
-------- -------
that such purchase price shall not be less than the Fair Market
Value of a Share on the date of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by the
Committee, provided that in no event shall the term of an Option
exceed a period of ten years from the date of its grant.
(iii) Exercise. The Committee shall determine the time or times at
which an Option may be exercised in whole or in part (but in no
event shall an Option be exercisable before the expiration of six
months from the date of its grant, subject to Section 9 thereof,
or after the expiration of ten years from the date of its grant),
and the method or methods by which, and the form or forms
(including, without limitation, cash, Shares, other Awards or
other property, or
<PAGE>
any combination thereof, having a Fair Market Value on the
exercise date equal to the relevant exercise price) in which,
payment of the exercise price with respect thereto may be made.
(iv) Incentive Stock Options. The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code, or any successor provision
thereto, and any regulations promulgated thereunder. Without
limiting the preceding sentence, the aggregate Fair Market Value
(determined at the time an option is granted) of Shares with
respect to which Incentive Stock Options are exercisable for the
first time by a Participant during any calendar year (under the
Plan and any other plan of the Participant's employer corporation
and its parent and subsidiary corporations providing for Options)
shall not exceed such dollar limitation as shall be applicable to
Incentive Stock Options under Section 422 of the Code or a
successor provision.
(b) Stock Appreciation Rights. The Committee is authorized to grant Stock
-------------------------
Appreciation Rights to Participants which may but need not relate to a
specific Option granted under Section 6(a). Subject to the terms of the
Plan and any applicable Award Agreement, each Stock Appreciation Right
granted under the Plan shall confer on the holder thereof a right to
receive, upon exercise thereof, up to the excess of (i) the Fair Market
Value of one Share on the date of exercise over (ii) the exercise price of
the right as specified by the Committee, which shall not be less than the
Fair Market Value of one Share on the date of grant of the Stock
Appreciation Right. Subject to the terms of the Plan and any applicable
Award Agreement, the exercise price, term, methods of exercise, methods of
payment or settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee, except that
Stock Appreciation Rights related to Incentive Stock Options shall have the
same terms and conditions as such Options, and in no event shall the term
of a Stock Appreciation Right exceed a period of ten years from the date of
its grant. In the case of any Stock Appreciation Right related to an
Option, the Stock Appreciation Right or applicable portion thereof shall
terminate and no longer be exercisable upon the termination or exercise of
the related Option, except that a Stock Appreciation Right granted with
respect to less than the full number of Shares covered by a related Option
shall not be reduced until the exercise or termination of the related
Option exceeds the number of shares not covered by the Stock Appreciation
Right and then only to the extent of the excess. Any Option related to a
Stock Appreciation Right shall no longer be exercisable to the extent the
related Stock Appreciation Right has been exercised.
<PAGE>
(c) Restricted Stock and Restricted Stock Units.
-------------------------------------------
(i) Issuance. The Committee is authorized to grant Awards of
Restricted Stock and Restricted Stock Units to Participants.
(ii) Restrictions. Shares of Restricted Stock and Restricted Stock
Units shall be subject to such restrictions as the Committee may
impose (including, without limitation, any limitation on the
right to vote a Share of Restricted Stock or the right to receive
any dividend or other right or property), which restrictions may
lapse separately or in combination at such time or times, in such
installments or otherwise, as the Committee may deem appropriate,
provided that in order for a participant to vest in Awards of
Restricted Stock or Restricted Stock Units, the participant must
remain in the employ of Primex or an Affiliate for a period of
not less than six months commencing on the date of grant of the
Award, subject to Section 9 hereof and subject to relief for
specified reasons as may be approved by the Committee.
(iii) Registration. Any Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee may deem appropriate,
including, without limitation, book-entry registration or
issuance of a stock certificate or certificates. In the event any
stock certificate is issued in respect of Shares of Restricted
Stock granted under the Plan, such certificate shall be
registered in the name of the Participant and when delivered to
the Participant shall bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Restricted
Stock.
(iv) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment for any reason during the applicable
restriction period, all Shares of Restricted Stock and all
Restricted Stock Units still subject to restriction shall be
forfeited and reacquired by Primex; provided, however, that the
Committee may, in its sole discretion, waive in whole or in part
any or all remaining restrictions with respect to Shares of
Restricted Stock or Restricted Stock Units. Unrestricted Shares,
evidenced in such manner as the Committee shall deem appropriate,
shall be delivered to the holder of Restricted Stock promptly
after such Restricted Stock shall become Released Securities.
(d) Performance Awards. The Committee is authorized to grant Performance
------------------
Awards to Participants. Subject to the terms of the Plan and any
applicable Award Agreement, a Performance Award granted under the Plan (i)
may be denominated or payable in cash, Shares (including, without
limitation, Restricted Stock), other securities, other Awards or other
property and (ii) shall confer on the holder thereof rights valued as
determined by the Committee and payable to, or exercisable by, the holder
of the
<PAGE>
Performance Award, in whole or in part, upon the achievement of such
performance goals during such performance periods as the Committee shall
establish. Subject to the terms of the Plan and any applicable Award
Agreement, the performance goals to be achieved during any performance
period, the length of any performance period, the amount of any Performance
Award granted, and the amount of any payment or transfer to be made
pursuant to any Performance Award shall be determined by the Committee,
provided that a performance period shall be at least six months, subject to
Section 9 thereof.
(e) Other Stock-Based Awards. The Committee is authorized to grant to
------------------------
Participants such other awards denominated or payable in, valued in whole
or in part by reference to, or otherwise based on or related to, Shares
(including, without limitation, phantom Shares, securities convertible into
Shares and dividend units), as are deemed by the Committee to be consistent
with the purposes of the Plan, provided that such grants shall comply with
Rule 16b-3 to the extent applicable and applicable law. Subject to the
terms of the Plan and any applicable Award Agreement, the Committee shall
determine the terms and conditions of such Awards. Shares or other
securities delivered pursuant to a purchase, exchange or conversion right
granted under this Section 6(e) shall be issued for such consideration,
which may be paid by such method or methods and in such form or forms,
including, without limitation, cash, Shares, other securities, other
Awards, or other property, or any combination thereof, as the Committee
shall determine, the value of which consideration, as established by the
Committee, shall not be less than the Fair Market Value of such Shares or
other securities as of the date such purchase, exchange or conversion right
is granted.
Other Stock-based Award Agreements shall contain provisions dealing with
the disposition of such Award in the event of termination of the
Participant's employment prior to exercise, realization or payment of the
Award.
(f) General.
-------
(i) No Cash Consideration for Awards. Participants shall not be
required to make any cash payment for the granting of an Award
except for such minimum consideration as may be required by
applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may be
granted either alone or in addition to, in tandem with, or in
substitution for any other Award or any award or benefit granted
under any other plan or arrangement of Primex or any Affiliate,
or as payment for or to assure payment of an award or benefit
granted under any such other such plan or arrangement, provided
that the purchase or exercise price under an Award encompassing
the right to purchase Shares shall not be reduced by the
cancellation of such Award and the substitution of another Award.
Awards so granted may be granted either at
<PAGE>
the same time as or at a different time from the grant of such
other Awards or awards or benefits.
(iii) Forms of Payment Under Awards. Subject to the terms of the Plan
and of any applicable Award Agreement, payments to be made by
Primex or an Affiliate upon the grant, exercise, or payment of an
Award may be made in such form or forms as the Committee shall
determine, including, without limitation, cash, Shares, other
securities, other Awards, or other property or any combination
thereof, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case in accordance
with rules and procedures established by the Committee.
(iv) Dividend Equivalents or Interest. Subject to the terms of the
Plan and any applicable Award Agreement, a Participant, including
the recipient of a deferred Award, shall, if so determined by the
Committee, be entitled to receive, currently or on a deferred
basis, interest or dividends or interest or dividend equivalents,
with respect to the Shares covered by the Award. The Committee
may provide that any such amounts shall be deemed to have been
reinvested in additional Shares or otherwise reinvested.
Notwithstanding the award of Dividend Equivalents or dividend
units, a Participant shall not be entitled to receive a special
or extraordinary dividend or distribution unless the Committee
shall have expressly authorized such receipt.
(v) Limits on Transfer of Awards. No Award (other than Released
Securities) or right thereunder shall be assignable or
transferable by a Participant, other than (unless limited in the
Award Agreement) by will or the laws of descent and distribution
(or, in the case of an Award of Restricted Securities, to
Primex), except that an Option may be transferred by gift to any
member of the holder's immediate family or to a trust for the
benefit of one or more of such immediate family members, if
expressly permitted in the applicable Award Agreement; provided,
however, that, if so determined by the Committee, a Participant
may, in the manner established by the Committee, designate a
beneficiary or beneficiaries with respect to any Award to
exercise the rights of the Participant, and to receive any
property distributable, upon the death of the Participant. Each
Award, and each right under any Award, shall be exercisable,
during the Participant's lifetime, only by the Participant or, if
permissible under applicable law by the Participant's guardian or
legal representative unless it is an Option and has been
transferred as permitted hereby to a member of the Participant's
immediate family or to a trust for the benefit of one or more of
such immediate family members, in which case it shall be
exercisable only by such transferee. For the purposes of this
provision, a Participant's "immediate family" shall mean the
Participant's spouse, children and grandchildren. No Award (other
than Released
<PAGE>
Securities), and no right under any such Award, may be pledged,
attached or otherwise encumbered other than in favor of Primex,
and any purported pledge, attachment, or encumbrance thereof
other than in favor of Primex shall be void and unenforceable
against Primex or any Affiliate.
(vi) Term of Awards. Except as otherwise expressly provided in the
Plan, the term of each Award shall be for such period as may be
determined by the Committee.
(vii) No Rights to Awards. No Salaried Employee, Participant or other
Person shall have any claim to be granted an Award, and there is
no obligation for uniformity of treatment of Salaried Employees,
Participants or holders or beneficiaries of Awards under the
Plan. The terms and conditions of Awards need not be the same
with respect to each recipient. The prospective recipient of any
Award under the Plan shall not, with respect to such Award, be
deemed to have become a Participant, or to have any rights with
respect to such Award, until and unless such recipient shall have
executed an agreement or other instrument accepting the Award and
delivered a fully executed copy thereof to the Company, and
otherwise complied with the then applicable terms and conditions.
(viii) Delegation. Notwithstanding any provision of the Plan to the
contrary, the Committee may delegate to one or more officers or
managers of Primex or any Affiliate, or a committee of such
officers or managers, the authority, subject to such terms and
limitations as the Committee shall determine, to grant Awards to,
or to cancel, modify, waive rights or conditions with respect to,
alter, discontinue, suspend, or terminate Awards held by,
Salaried Employees who are not officers or directors of Primex
for purposes of Section 16 of the Securities Exchange Act of
1934, as amended.
(ix) Withholding. Primex or any Affiliate may withhold from any Award
granted or any payment due or transfer made under any Award or
under the Plan the amount (in cash, Shares, other securities,
other Awards, or other property) of withholding taxes due in
respect of an Award, its exercise or any payment under such Award
or under the Plan, and take such other action as may be necessary
in the opinion of Primex or Affiliate to satisfy all obligations
for the payment of such taxes.
(x) Other Compensation Arrangements. Nothing contained in the Plan
shall prevent Primex or any Affiliate from adopting or continuing
in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable
only in specific cases.
<PAGE>
(xi) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the
employ of Primex or any Affiliate. Nothing in the Plan or any
Award Agreement shall limit the right of Primex or an Affiliate
at any time to dismiss a Participant from employment, free from
any liability or any claim under the Plan or the Award Agreement.
(xii) Governing Law. The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Florida
and applicable Federal law.
(xiii) Severability. If any provision of the Plan or any Award is
determined to be invalid, illegal or unenforceable in any
jurisdiction, or as to any Person or Award, or would disqualify
the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to
conform to applicable laws, or, if it cannot be so construed or
deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, Person or
Award, and the remainder of the Plan and any such Award shall
remain in full force and effect.
(xiv) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between Primex or any Affiliate
and a Participant or any other Person. To the extent that any
Person acquires a right to receive payments from Primex or any
Affiliate pursuant to an Award, such right shall be no greater
than the right of any unsecured general creditor of Primex or any
Affiliate.
(xv) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee
shall determine whether cash, other securities or other property
shall be paid or transferred in lieu of any fractional Shares, or
whether such fractional Shares or any rights thereto shall be
canceled, terminated or otherwise eliminated.
(xvi) Share Certificates. All certificates for Shares or other
securities delivered under the Plan pursuant to any Award or the
exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under
the Plan or the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange upon which
such Shares or other securities are then listed, and any
applicable Federal or state securities laws, and the Committee
may cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions.
<PAGE>
(xvii) Conflict with Plan. In the event of any inconsistency or conflict
between the terms of the Plan and an Award Agreement, the terms
of the Plan shall govern.
(xviii) Notwithstanding any provision in this Plan to the contrary,
Awards granted under Sections 6(c), 6(d) or 6(e) and designated
by the Committee as being performance-based shall have as
performance measures any one of or any combination of any of the
following measures: Economic Value Added, Return on Equity and
Total Return to Shareholders. For purposes of the Plan, "Economic
Value Added" shall mean Primex's consolidated sales less its
operating costs (including tax) less a capital charge based on
Primex's cost of capital assets employed in its business, "Return
on Equity" shall mean consolidated income of Primex after taxes
and before the after-tax effect of any special charge or gain and
any cumulative effect of any change in accounting, divided by
average shareholders equity and "Total Return to Shareholders"
shall mean for the performance period total return to
shareholders of $100 worth of Shares for such period assuming
reinvestment of dividends on a quarterly basis. The Committee
shall determine the performance goals for each such performance
measure with respect to each such Award.
(xix) Death or Disability. In the event of the death or disability of
the holder of an Award while the holder is employed by Primex or
an Affiliate, [or, if holder is retired (at or after attainment
of age 55 with 10 years of service with the Corporation or an
Affiliate, including prior service with Olin Corporation),] any
outstanding Award will continue to be vested and exercisable
under the terms of the Plan. For purposes of this Plan, a holder
of an Award shall be considered disabled if he is qualified under
the Long-Term Disability Plan of Primex Technologies, Inc.
Section 7. Amendment and Termination
-------------------------
(a) Amendments to the Plan. The Board may amend, suspend, discontinue or
----------------------
terminate the Plan, including, without limitation, any amendment,
suspension, discontinuation or termination that would impair the rights of
any Participant, or any other holder or beneficiary of any Award
theretofore granted, without the consent of any shareholder, Participant,
other holder or beneficiary of an Award, or other Person; provided,
--------
however, that, notwithstanding any other provision of the Plan or any Award
-------
Agreement, without the approval of the shareholders of Primex, no such
amendment, suspension, discontinuation or termination shall be made that
would permit any Award encompassing rights to purchase Shares to be granted
with per Share purchase or exercise prices of less than the Fair Market
Value of a Share on the date of grant thereof (except for any adjustment
permitted by Section 4(b)); provided further that no amendment, suspension,
-------- -------
discontinuation or termination (i) that would impair the
<PAGE>
rights of such Participant, holder or beneficiary shall be made with
respect to Section 9 of the Plan after a Change in Control, as defined
therein and (ii) may increase the amount of payment of any Award to any
Participant.
(b) Amendments to Awards. The Committee may waive any conditions or rights
--------------------
with respect to, or amend, alter, suspend, discontinue, or terminate, any
unexercised Award theretofore granted, prospectively or retroactively,
without the consent of any relevant Participant or holder or beneficiary of
an Award, provided that no amendment, alteration, suspension,
--------
discontinuation or termination of an Award that would impair the rights of
such Participant, holder or beneficiary shall be made after a Change in
Control, as defined in Section 9; provided further that the Committee may
not increase the payment of any Award granted any Participant.
(c) Adjustments of Awards Upon Certain Acquisitions. In the event Primex or
-----------------------------------------------
any Affiliate shall assume outstanding employee awards or the right or
obligation to make future such awards in connection with the acquisition of
another business or another company, the Committee may make such
adjustments, not inconsistent with the terms of the Plan, in the terms of
Awards as it shall deem appropriate.
d) Adjustments of Awards Upon the Occurrence of Certain Unusual or
---------------------------------------------------------------
Nonrecurring Events. The Committee may make adjustments in the terms and
-------------------
conditions of Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 4(b)
hereof) affecting Primex, any Affiliate, or the financial statements of
Primex or any Affiliate, or of changes in applicable laws, regulations, or
accounting principles, whenever the Committee determines that statements of
Primex or any Affiliate, or of changes in applicable laws, regulations, or
accounting principles, whenever the Committee determines that such
adjustments are appropriate in order to prevent dilution or enlargement of
the benefits to be made available under the Plan.
Section 8. Additional Conditions to Enjoyment of Awards.
--------------------------------------------
(a) The Committee may cancel any unexpired, unpaid or deferred Awards if at any
time the Participant is not in compliance with all applicable provisions of
the Award Agreement, the Plan and the following conditions:
(i) A Participant shall not render services for any organization or
engage, directly or indirectly, in any business which, in the
judgment of the Committee or, if delegated by the Committee to
the Chief Executive Officer, in the judgment of such Officer, is
or becomes competitive with Primex or any Affiliate, or which is
or becomes otherwise prejudicial to or in conflict with the
interests of Primex or any Affiliate. Such judgment shall be
based on the Participant's positions and responsibilities while
employed by Primex or an Affiliate, the Participant's post-
employment responsibilities and position with the other
<PAGE>
organization or business, the extent of past, current and
potential competition or conflict between Primex or an Affiliate
and the other organization or business, the effect on customers,
suppliers and competitors of the Participant's assuming the post-
employment position, the guidelines established in the then
current edition of Primex's Code of Business Conduct, and such
other considerations as are deemed relevant given the applicable
facts and circumstances. The Participant shall be free, however,
to purchase as an investment or otherwise, stock or other
securities of such organization or business so long as they are
listed upon a recognized securities exchange or traded over the
counter, and such investment does not represent a substantial
investment to the Participant or a greater than 1% equity
interest in the organization or business.
(ii) Participant shall not, without prior written authorization from
Primex, disclose to anyone outside Primex, or use in other than
Primex's business, any secret or confidential information,
knowledge or data, relating to the business of Primex or an
Affiliate in violation of his or her agreement with Primex or the
Affiliate.
(iii) A Participant, pursuant to his or her agreement with Primex or an
Affiliate, shall disclose promptly and assign to Primex or the
Affiliate all right, title and interest in any invention or idea,
patentable or not, made or conceived by the Participant during
employment by Primex or the Affiliate, relating in any manner to
the actual or anticipated business, research or development work
of Primex or the Affiliate and shall do anything reasonably
necessary to enable Primex or the Affiliate to secure a patent
where appropriate in the United States and in foreign countries.
(b) Notwithstanding any other provision of the Plan, the Committee in its sole
discretion may cancel any Award at any time prior to the exercise thereof,
if the employment of the Participant shall be terminated, other than by
reason of death, unless the conditions in this Section 8 are met.
(c) Failure to comply with the conditions of this Section 8 prior to, or during
the six months after, any exercise, payment or delivery pursuant to an Award
shall cause the exercise, payment or delivery to be rescinded. Primex shall
notify the Participant in writing of any such rescission within two years
after such exercise payment or delivery and within 10 days after receiving
such notice, the Participant shall pay to Primex the amount of any gain
realized or payment received as a result of the exercise, payment or
delivery rescinded. Such payment shall be made either in cash or by
returning to Primex the number of Shares that the Participant received in
connection with the rescinded exercise, payment or delivery.
<PAGE>
(d) Upon exercise, payment or delivery pursuant to an Award, the Committee may
require the Participant to certify on a form acceptable to the Committee,
that he or she is in compliance with the terms and conditions of the Plan.
(e) Nothing herein shall be interpreted to limit the obligations of a
Participant under his or her employee agreement or any other agreement with
Primex.
Section 9. Change in Control
-----------------
(a) Except as the Board or the Committee may expressly provide otherwise prior
to a Change in Control of Primex (as defined below) and subject to the
provisions of Section 6(f)(vii) hereof, in the event of a Change in Control
of Primex:
(i) all Options and Stock Appreciation Rights then outstanding shall
become immediately and fully exercisable, notwithstanding any
provision therein for the exercise in installments;
(ii) unless a Stock Appreciation Right shall have already been granted
with respect to an outstanding Option, the Participant holding
such Option shall be deemed also to hold a Stock Appreciation
Right related to such Option, exercisable in accordance with and
subject to the terms and conditions of Section 6(b) for the
number of Shares exercisable under such Option after giving
effect to such acceleration, which Stock Appreciation Right may,
but need not be, evidenced by separate written agreement;
(iii) all restrictions and conditions of all Restricted Stock and
Restricted Stock Units then outstanding shall be deemed satisfied
as of the date of the Change in Control; and
(iv) all Performance Awards shall become vested, deemed earned in full
and promptly paid to the Participants, cash units in cash and
phantom stock units in the Shares represented thereby or such
other securities, property or cash as may be deliverable in
respect of Shares as a result of a Change in Control, without
regard to payment schedules and notwithstanding that the
applicable performance cycle or retention cycle shall not have
been completed.
(b) A Change in Control of Primex shall have occurred in the event that:
(i) Primex ceases to be directly or indirectly owned by at least
1,000 stockholders after December 31, 1996;
(ii) a person, partnership, joint venture, corporation or other
entity, or two or more of any of the foregoing acting as "person"
within the meaning of Sections 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Act"),
<PAGE>
other than Primex, Olin, a majority-owned subsidiary of Primex,
or an employee benefit plan (or related trust) of Primex, Olin or
such subsidiary, become(s) the "beneficial owner" (as defined in
Rule 13d-3 under the Act) of 15% or more of the then outstanding
voting stock of Primex;
(iii) during any period of two consecutive years after 1996,
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 shareholders, 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 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) Primex's Board of Directors determines that a tender offer for
Primex's shares indicates a serious intention by the offeror to
acquire control of Primex.
Section 10. Effective Date of the Plan
--------------------------
The Plan shall be effective as of the date of its approval by the shareholder of
Primex.
Section 11. Term of the Plan
----------------
No Award shall be granted under the Plan after December 1, 2006, but unless
otherwise expressly provided in the Plan or in an applicable Award Agreement,
any Award theretofore granted may extend beyond such date.
<PAGE>
APPENDIX I
RESTRICTED STOCK UNITS
The following terms will apply to restricted stock units granted
January 7, 1997:
"Fair Market Value" means, with respect to a date, on a per share basis,
the average of the high and the low price of a share of Common Stock
reported on the consolidated transaction reporting system for NASDAQ issues
on such date or if Common Stock is not traded on such day, such average
price on the next preceding date on which it is traded."
"Measurement Time" means with respect to a Vesting Period, the close of
business on the last day of the fifth calendar year of such Vesting Period;
provided, however, that if the Committee determines that Total Return to
-------- -------
Shareholders of Primex using the Fair Market Value of Primex Common Stock
on January 7, 1997, as a base of $100 is equal to or greater than $160 at
the close of business on the last day of the third calendar year of such
Vesting Period, then such day shall be the Measurement Time for such
Vesting Period.
"Restricted Stock Unit" means one phantom share of Primex Common Stock
granted pursuant to the Plan.
"Vesting Period" means with respect to a Restricted Stock Unit, a period of
five calendar years (beginning with the calendar year in which such
Restricted Stock Unit is granted) at the end of which such Restricted Stock
Unit is to vest; provided that if the Committee determines that Total
Return to Shareholders of Primex using the Fair Market Value of Primex
Common Stock on January 7, 1997, as a base of $100 is equal to or greater
than $160 at the close of business on the last day of the third calendar
year of such Vesting Period, then the Vesting Period shall end at the close
of business on the last day of such third calendar year.
Except as otherwise provided in the Plan, a Participant's interest in
a restricted Stock Unit will vest only at the Measurement Time applicable to the
Vesting Period for such Restricted Stock Unit. Each Restricted Stock Unit not
vested by the Measurement Time relating to such unit will be forfeited.
Each vested Restricted Stock Unit will be payable to a Participant by
delivery of one share of Primex Common Stock following the Measurement Time.
Each outstanding Restricted Stock Unit shall accrue amounts equivalent
to the cash dividends payable on a share of Primex Common Stock ("dividend
equivalents"). Such
<PAGE>
dividend equivalents will be paid to a Participant only if the Restricted Stock
Unit on which such dividend equivalents were accrued vests. Dividend equivalents
accrue interest at an annual rate equal to Primex's before-tax cost of borrowing
as determined from time to time by Primex's Chief Financial Officer or Treasurer
or the Committee, compounded quarterly. Accrued dividend equivalents on
restricted stock units that do not vest will not vest and will be forfeited.
The total amount of Restricted Stock Units (and dividend equivalents
and related interest) vested in a Participant at each Measurement Time of an
applicable Vesting Period will be paid on or before March 15 of the year
following such Measurement Time.
If Restricted Stock Units are to be paid in cash, the Primex Common
Stock will be valued at the average of the high and low sales prices thereof as
reported on the NASDAQ National Market System on the fifth business day before
such cash payment is due (or if Primex Common Stock is not traded on such day,
the first preceding day on which such stock is traded).
Restricted Stock Units will carry no voting rights nor, except as
provided herein, be entitled to receive any dividends or other rights enjoyed by
shareholders.
Upon a Change in Control, an amount equal to the then fair market
value of shares of Primex Common Stock equal to the number of Restricted Stock
Units otherwise not vested will be paid in cash rather than in Primex Common
Stock.
With certain exceptions as the Committee may determine, a
Participant's unvested Restricted Stock Units will be forfeited if his or her
employment terminates before the applicable Measurement Time.
Taxes will be withheld from payouts of Restricted Stock Units and
related cash.
This description of Restricted Stock Units is qualified in its
entirety by reference to the applicable Award Agreement and the Plan.
<PAGE>
APPENDIX II
-----------
STOCK OPTIONS AND
STOCK APPRECIATION RIGHTS
-------------------------
The following terms will apply to Stock Options and Stock Appreciation
Rights granted pursuant to this Appendix II:
I. Definitions
-----------
A. "Cause" means the commission of an act of dishonesty, gross
incompetency or intentional or willful misconduct, which act occurs in the
course of an optionee's performance of his duties as an employee.
B. "Exercise Price" means the Fair Market Value of a Share on the
date of grant.
C. "Fair Market Value" means, with respect to a date, on a per share
basis, the average of the high and the low sale price of a Share reported on the
consolidated transaction reporting system for Nasdaq issues on such date or if
Shares are not traded on such day, such average price on the next preceding date
on which it is traded.
D. "Incapacity" means any material physical, mental or other
disability rendering the optionee incapable of substantially performing his or
her services for his employer that is not cured within 180 days of the first
occurrence of such incapacity.
E. "Option Term" means ten years from the date of grant.
II. Option Exercise
---------------
The optionee may purchase from Primex the following aggregate number
of shares covered by the Option on and after each of the following dates during
the term of the Option:
Date Number of Shares
---- ----------------
1st anniversary of the grant date 33-1/3% of original grant of Options
2nd anniversary of the grant date 66-2/3% of original grant of Options
3rd anniversary of the grant date 100% of original grant of Options
The Option, to the extent vested, shall be exercisable in whole at any
time or in part from time to time during the term of the Option, but not as to
less than 25 shares (or the shares then purchasable under the Option if less
than 25 shares) at any one time.
<PAGE>
The exercise price shall either be tendered in cash (or check) or
Shares or a combination of cash (or check) or Shares. Shares surrendered as
payment for the exercise price shall be valued at Fair Market Value on the date
on which the certificates for such Shares are surrendered to Primex.
If at any time the optionee's employment with Primex or any Affiliate
shall be terminated (a) voluntarily by the optionee for any reason other than
death or Incapacity or (b) by Primex or any Affiliate for any reason other than
for Cause, the optionee shall have the right to exercise his or her Option to
the extent of the Shares with respect to which the Option could have been
exercised by the optionee as of the date of his or her termination of employment
in accordance with its terms but in no event beyond the earlier of (i) one year
after the date of termination of employment or (ii) the scheduled expiration of
such Option.
If an optionee's employment with Primex or any of its Affiliates is
terminated due to retirement (at or after attaining age 55 with 10 years of
service with Primex or any Affiliate (including prior service with Olin
Corporation)), the optionee shall have the right to exercise his or her Option
to the extent of the Shares with respect to which the Option could have been
exercised by the optionee as of the date of his or her retirement in accordance
with its terms but in no event beyond the scheduled expiration of such Option.
If the optionee's employment with the Company shall be terminated for
Cause, his or her Option (whether or not vested) shall terminate and expire
concurrently with such termination of employment and shall not thereafter be
exercisable to any extent.
If an optionee's employment with Primex or any of its Affiliates is
terminated due to death or Incapacity, the Option shall (a) become fully vested
and (b) be exercisable by the optionee (or in the event of the optionee's death,
by his or her estate or by the person who acquired the right to exercise the
Option by bequest or inheritance) provided that the Option is exercised prior to
the scheduled expiration of such Option.
If an optionee dies after his or her termination of employment during
the period in which his or her Option remains exercisable, the Option may be
exercised, to the extent the Option could have been exercised by the decedent
immediately prior to his death, by the Optionee's estate or by the person who
acquired the right to exercise the Option by bequest or inheritance at any time
within one year after the date of death, but in no event beyond the scheduled
expiration of such Option.
III. Transferability of Options
--------------------------
All Options granted in accordance with this Appendix II shall be
transferable to the extent permitted in Section 6(f)(v) of the Plan.
<PAGE>
IV. Delegation
----------
The Committee hereby authorizes the Chairman, Chief Financial Officer
and Vice President of Human Resources ("Management") to determine if the Awards
granted pursuant to this Appendix will be incentive Stock Options or
nonqualified Options for all recipients. With respect to any individual who is
not an officer or director of Primex subject to Section 16 of the Securities
Exchange Act of 1934, as amended, the Committee authorizes Management to
determine if a Stock Appreciation Right shall be granted in connection with any
Option or as a separate Award. Any Stock Appreciation Right shall be exercisable
in accordance with the terms included in Section II of this Appendix unless the
Committee (or Management, in the case of an individual who is not subject to
Section 16 of the Securities Exchange Act of 1934, as amended) decides
otherwise.
V. Shares Available for Awards; Plan Terms
---------------------------------------
In addition to the 350,000 shares which were available for awards
under the Plan prior to the effective date hereof, an additional 500,000 shares
shall be available for the grant of stock options pursuant to this Appendix II.
Except as expressly provided in this Appendix II, all terms of the
Plan shall continue to be in full force and effect.
<PAGE>
EXHIBIT 4.7
PRIMEX TECHNOLOGIES, INC.
STOCK PLAN FOR NONEMPLOYEE DIRECTORS
1. PURPOSE. The purpose of the Primex Technologies, Inc. Stock Plan for
Nonemployee Directors is to promote the long-term growth and financial success
of Primex Technologies, Inc. by attracting and retaining Nonemployee Directors
of outstanding ability and by promoting a greater identity of interest between
its Nonemployee Directors and its shareholders.
2. DEFINITIONS. The following capitalized terms utilized herein have the
following meanings:
"Annual Retainer" means the annual retainer as determined by the Board
from time to time to be paid to Nonemployee Directors for services as a
member thereof.
"Board" means the Board of Directors of the Company.
"Cash Account" means an account established under the Plan for a
Nonemployee Director to which cash meeting fees and retainers have been or
are to be credited in the form of cash.
"Change in Control" means any of the following: (i) the Company ceases
to be, directly or indirectly, owned by at least 1,000 shareholders after
December 31, 1996; (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 1934 Act, other than
the Company, Olin, a majority-owned subsidiary of the Company, or an
employee benefit plan (or related trust) of the Company, Olin or such
subsidiary, become(s) the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act) of 15% or more of the then outstanding voting stock of
the Company;
<PAGE>
or (iii) during any period of two consecutive years after 1996, individuals
who at the beginning of such period constitute the Board (together with any
new director whose election by the Board or whose nomination for election
by the Company's shareholders 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 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.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" means Compensation and Nominating Committee (or its
successor) of the Board.
"Common Stock" means the Company's Common Stock, $1.00 par value per
share.
"Company" means Primex Technologies, Inc., a Virginia corporation, and
any successor.
"Credit Date" means the first day of each calendar quarter, beginning
with January 1, 1997.
"Excess Retainer" means fifty percent (50%) of the Annual Retainer;
provided that in the event the Annual Retainer is prorated to reflect that
such Nonemployee Director did not serve as such for the full calendar year,
the Excess Retainer shall be similarly prorated.
"Fair Market Value" means, with respect to a date, on a per share
basis, the average closing bid and asked "regular way" prices of a share of
Common Stock reported on the NASDAQ National Market System on such date or
if the NASDAQ National Market System is closed on such date, the next
preceding date on which it is
<PAGE>
open; provided if in 1997 the Common Stock is not trading "regular way," on
the next day following that it does trade "regular way."
"l934 Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Nonemployee Director" means a member of the Board who is not an
employee of the Company or any subsidiary thereof.
"Olin" means Olin Corporation, a Virginia corporation, and its
successors.
"Plan" means the Primex Technologies, Inc. Stock Plan for Nonemployee
Directors.
"Retirement Date" means the date the Nonemployee Director ceases to be
a member of the Board.
"Stock Account" means an account established under the Plan for a
Nonemployee Director to which shares of Common Stock have been or are to be
credited in the form of stock.
3. TERM. The Plan shall become effective January 1, 1997 provided the
shareholder of the Company approves the Plan prior to such date. Once
effective, the Plan shall operate and shall remain in effect until terminated by
action of the Board as provided in Section 9 hereof.
4. ADMINISTRATION. Full power and authority to construe, interpret and
administer the Plan shall be vested in the Committee. Decisions of the
Committee shall be final, conclusive and binding upon all parties. The Board
has all the power and authority of the Committee and may act in lieu of the
Committee at any time.
5. PARTICIPATION. All Nonemployee Directors shall participate in the
Plan.
<PAGE>
6. GRANTS AND DEFERRALS.
(a) Annual Stock Grant. Subject to the terms and conditions of the
------------------
Plan, on each January 1 of each year beginning with 1997, each Nonemployee
Director who is such on such date shall receive that number of shares (rounded
up to the next whole share in the event of a fractional share) of Common Stock
having an aggregate Fair Market Value on such date of the sum of (1) $15,000 and
(2) 50% of the Annual Retainer. (Such $15,000 plus 50% of the Annual Retainer
being the "Annual Stock Amount".) In the event a person becomes a Nonemployee
Director subsequent to January 1 of a calendar year and has not received the
Annual Stock Amount for such calendar year, such Nonemployee Director, on the
first day of the calendar month following his or her becoming such, shall
receive that number of shares (rounded up to the next whole share in the event
of a fractional share) of Common Stock having an aggregate Fair Market Value on
such first day of an amount equal to one-twelfth of the Annual Stock Amount for
such year times the number of whole calendar months remaining in such calendar
year following the date he or she becomes a Nonemployee Director. The portion
of the Annual Stock Amount that represents one-half of the Annual Retainer shall
be in lieu of the cash payment of one-half of the Annual Retainer and not in
addition to the Annual Retainer (or in the case of a Nonemployee Director who
become such during a calendar year such similar proportion). A Nonemployee
Director may elect to defer receipt of all or any portion of such shares in
accordance with Section 6(d). Except with respect to any shares the director
has so elected to defer, certificates representing such shares shall be
delivered to such Nonemployee Director as soon as practicable.
(b) Election to Receive Meeting Fees and Excess Retainer in Stock in
----------------------------------------------------------------
Lieu of Cash. Subject to the terms and conditions of the Plan, a Nonemployee
- ------------
Director may elect to receive all or a portion of the director meeting fees
established by the Board and the Excess Retainer his or her service as a
director for the calendar year in the form of shares of Common Stock. Such
election shall be made in accordance with Section 6(d). The number of shares
(rounded up to the next whole share in the event of a fractional share) payable
to a Nonemployee Director who so elects to receive all or a portion of the
Excess Retainer in the
<PAGE>
form of shares for such year shall be based upon the aggregate Fair Market Value
of the Common Stock on January 1 of such calendar year (or in the case of a
Nonemployee Director who becomes such after January 1, on the first day of the
calendar month following the day such new Nonemployee Director became such) of
the amount of Excess Retainer which has been elected to be paid in shares. The
number of shares (rounded up to the next whole share in the event of a
fractional share) payable to a Nonemployee Director who so elects to receive
meeting fees for a calendar quarter in the form of shares shall be based upon
the aggregate Fair Market Value of the Common Stock on the Credit Date following
such quarter of the director meeting fees which have been earned in such quarter
and which are elected to be paid in shares. Except with respect to any shares
the director has elected to defer, certificates representing such shares shall
be delivered to the Nonemployee Director as soon as practicable.
(c) Deferrals of Meeting Fees and Cash Retainer. Subject to the
-------------------------------------------
terms and conditions of the Plan, a Nonemployee Director may elect to defer all
or a portion of the shares payable under Section 6(b) and all or a portion of
the director meeting fees and Excess Retainer payable in cash by the Company for
his or her service as a director for the calendar year. Such election shall be
made in accordance with Section 6(d). A Nonemployee Director who elects to so
defer shall have any deferred shares deferred in the form of shares of Common
Stock and any deferred cash fees and retainer deferred in the form of cash.
(d) Elections.
---------
(1) Deferrals. All elections under Sections 6(a), 6(b) and 6(c)
shall (A) be made in writing and delivered to the Secretary of the Company
and (B) be irrevocable. All elections for payments or deferrals shall be
made on or before December 31 of the year prior to the year in which the
director's fees or Annual Retainer, as the case may be, are to be earned
(or, in the case of an individual who becomes a Nonemployee Director during
a calendar year, no later than 30 days after the individual becomes a
Nonemployee Director). Deferral elections shall also (A)
<PAGE>
specify the portions (in 25% increments) to be deferred and (B) specify the
future date or dates on which deferred amounts are to be paid or the future
event or events upon the occurrence of which the deferred amounts are to be
paid and the method of payment (lump sum or annual installments of
approximately equal amounts (up to 10)). In the event of an election under
Section 6(b) for director meeting fees or Excess Retainer to be paid in
shares of Common Stock, the election shall specify the portion (in 25%
increments) to be so paid. Any change with respect to the terms of his or
her election for (A) the payment or investment of director meeting fees or
Excess Retainer under Section 6(b) from shares to cash or vice versa and
(B) the amount of any deferral in the form of Common Stock shall be
effective upon receipt by the Secretary of the Company. Any such change
shall be effective only with respect to future earnings.
(2) Stock Account. On the Credit Date, a Nonemployee Director
who has elected to defer shares under Sections 6(a) or 6(c) shall receive a
credit to his or her Stock Account. The amount of such credit shall be the
number of shares so deferred (rounded to the next whole share in the event
of a fractional share).
(3) Cash Account. On the Credit Date or in the case of the
Excess Retainer, on the day on which the Nonemployee Director is entitled
to receive such Excess Retainer, a Nonemployee Director who has elected to
defer cash fees and/or the Excess Retainer under Section 6(c) in the form
of cash shall receive a credit to his or her Cash Account. The amount of
the credit shall be the dollar amount of such Director's meeting fees
earned during the immediately preceding quarterly period or the amount of
the Excess Retainer to be paid for the calendar year, as the case may be,
and in each case, specified for deferral in cash.
(4) Dividends and Interest. Each time a cash dividend is paid
on the Common Stock, a Nonemployee Director who has shares credited to his
or her Stock Account shall receive a credit for such dividends on the
dividend payment date to his
<PAGE>
or her Stock Account. The amount of the dividend credit shall be the number
of shares (rounded to the nearest one-hundredth of a share) determined by
multiplying the dividend amount per share by the number of shares credited
to such director's Stock Account as of the record date for the dividend and
dividing the product by the Fair Market Value per share on the dividend
payment date. The Cash Account of a Nonemployee Director shall be credited
on each Credit Date with interest on such account's balance at the end of
the preceding quarter, payable at a rate equal to the pre-tax cost of
borrowing of the Company on such date as determined from time to time by
the Chief Financial Officer, Controller or Treasurer of the Company.
(5) Payouts. Cash Accounts will be paid out in cash and Stock
Accounts shall be paid out in shares of Common Stock. Cash amounts
credited to a Cash Account and certificates representing shares credited to
a Stock Account shall be delivered to the Nonemployee Director as soon as
practicable following the termination of the deferral and consistent
therewith.
(e) No Stock Rights. The deferral of shares of Common Stock into a
---------------
Stock Account shall confer no rights upon such Nonemployee Director, as a
shareholder of the Company or otherwise, with respect to the shares held in such
Stock Account, but shall confer only the right to receive such shares credited
as and when provided herein.
(f) Change in Control. Notwithstanding anything to the contrary in
-----------------
this Plan or any election, in the event a Change in Control occurs, amounts and
shares credited to Cash Accounts and Stock Accounts shall be promptly
distributed to Nonemployee Directors.
(g) Beneficiaries. A Nonemployee Director may designate at any time
-------------
and from time to time a beneficiary for his or her Stock and Cash Accounts in
the event his or her Stock or Cash Account may be paid out following his or her
death. Such designation shall be in writing and received by the Company prior
to the death to be effective.
<PAGE>
(7) LIMITATIONS AND CONDITIONS.
(a) Total Number of Shares. The total number of shares of Common
----------------------
Stock that may be issued to Nonemployee Directors under the Plan is 50,000.
Such total number of shares may consist, in whole or in part, of authorized but
unissued shares. The foregoing number may be increased or decreased by the
events set forth in Section 8 below. No fractional shares shall be issued
hereunder. In the event a Nonemployee Director is entitled to a fractional
share, such share amount shall be rounded upward to the next whole share amount.
(b) No Additional Rights. Nothing contained herein shall be deemed
--------------------
to create a right in any Nonemployee Director to remain a member of the Board,
to be nominated for reelection or to be reelected as such or, after ceasing to
be such a member, to receive any cash or shares of Common Stock under the Plan
which are not already credited to his or her accounts.
8. STOCK ADJUSTMENTS. In the event of any merger, consolidation, stock or
other non-cash dividend, extraordinary cash dividend, split-up, spin-off,
combination or exchange of shares or recapitalization or change in
capitalization, or any other similar corporate event, the Committee may make
such adjustments in (i) the aggregate number of shares of Common Stock that may
be issued under the Plan as set forth in Section 7(a) and the number of shares
that may be issued to a Nonemployee Director with respect to any year as set
forth in Section 6(a), (ii) the class of shares that may be issued under the
Plan, (iii) the number of shares credited to a Stock Account and (iv) the amount
and type of payment that may be made in respect of unpaid dividends on shares of
Common Stock whose receipt has been deferred pursuant to Section 6(d), as the
Committee shall deem appropriate in the circumstances. The determination by the
Committee as to the terms of any of the foregoing adjustments shall be final,
conclusive and binding for all purposes of the Plan.
<PAGE>
9. AMENDMENT AND TERMINATION. This Plan may be amended, suspended or
terminated by action of the Board; provided, however, no termination or
modification of the Plan shall adversely affect the rights of any Nonemployee
Director with respect to any amounts otherwise payable or credited to his or her
Cash Account or Stock Account.
10. NONASSIGNABILITY. No right to receive any payments under the Plan or
any amounts credited to a Nonemployee Director's Cash or Stock Account shall be
assignable or transferable by such Nonemployee Director other than by will or
the laws of descent and distribution or pursuant to a domestic relations order.
The designation of a beneficiary under Section 6(h) by a Nonemployee Director
does not constitute a transfer.
11. UNSECURED OBLIGATION. Benefits payable under this Plan shall be an
unsecured obligation of the Company.
<PAGE>
EXHIBIT 10.1
[PRIMEX TIER I AGREEMENT]
EXECUTIVE AGREEMENT
-------------------
Agreement between Primex Technologies, Inc., a Virginia corporation
("Primex"), and James G. Hascall (the "Executive"), dated as of January 1, 1998.
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 financially
injurious to Primex; or willful misconduct by the Executive during 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 beneficial owners of Primex stock;
(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 the plan's 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 were members of Primex's Board of Directors at the beginning of such period
(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 such period or
<PAGE>
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 or assets 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
aggregate 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 (a) 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 (b) 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 the plan's 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
prior to a Change in Control 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
financial or stock price performance provided such performance is a relevant
criterion under such plan) 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;
<PAGE>
(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;
(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. Previous Change in Control Agreement. This Agreement supersedes
and replaces the Executive Agreement dated as of January 1, 1997 between Primex
and the Executive.
3. Term/Executive's Duties
(a) This Agreement expires at the close of business on December
31, 2002, 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,
2002 or three years following the date of a 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 best 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 any Potential
Change in Control of Primex occurring after the date hereof, the Executive will
remain in the employ of Primex until the earlier of (i) the end of the six-month
period following the occurrence of such Potential Change in Control and (ii) a
Change in Control, during which time the Executive will have an office, title,
duties and responsibilities substantially consistent with those applicable
immediately prior to the Potential Change in Control.
<PAGE>
4. 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 10 days of the
effective date 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 4(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 10 days of the
effective date of the Termination.
(c) The Executive will not be required to mitigate the amount of
any payment provided for in paragraph 4(a) or 4(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.
5. Other Benefits and Payments
(a) (1) If the Executive becomes entitled to payment under
Paragraph 4(a), then the Executive shall be entitled to receive a lump sum
payment from Primex at the same time as the payment under Paragraph 4(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 5
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 5(a)(1). In the event the Executive receives
a payment under Paragraph 4(b), the amount required to be paid under the
preceding sentences of this Paragraph 5(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 68 years old in the case the Executive receives
a payment under Paragraph 4(b)) the lump sum payment required to be made under
this Paragraph 5(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
<PAGE>
in the case of the Executive receiving a payment under Paragraph 4(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
4(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 4(b), the
insurance coverage provided for in Paragraph 5(a) (2) will be for an additional
24-month period.
(c) Notwithstanding the foregoing Paragraphs 5(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 5(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
4(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 4(b), the
Executive will receive a lump sum payment from Primex to make up for the lost
subsidy calculated as follows:
<PAGE>
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.
(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.
6. 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 and employment 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.
7. Successors; Binding Agreement
<PAGE>
(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 7 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.
8. 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: James G. Hascall
3087 Heron Place
Clearwater, FL 34622
If to the Company: Primex Technologies, Inc.
10101 Ninth 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.
9. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida without reference to choice of law principles thereunder.
10. 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
<PAGE>
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.
11. 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.
12. 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.
13. 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 7 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.
14. No Employment Right. This Agreement shall not be deemed to
confer on the Executive a right to continued employment with Primex.
15. Disputes/Arbitration.
(a) Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by binding arbitration at Primex's
corporate
<PAGE>
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, as
they become due, which the Executive may incur to enforce this Agreement through
arbitration or otherwise unless the arbitration determines that 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 Primex
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/ William B. Mitchell
-----------------------
William B. Mitchell
Title: Director and
Chairman, Compensation and
Nominating Committee
/s/ James G. Hascall
- --------------------
James G. Hascall
<PAGE>
EXHIBIT 10.2
[PRIMEX TIER I AGREEMENT]
EXECUTIVE AGREEMENT
-------------------
Agreement between Primex Technologies, Inc., a Virginia corporation
("Primex"), and J. Douglas DeMaire (the "Executive"), dated as of January 1,
1998.
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 financially
injurious to Primex; or willful misconduct by the Executive during 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 beneficial owners of Primex stock;
(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 the plan's 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 were members of Primex's Board of Directors at the beginning of such period
(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 such period or
<PAGE>
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 or assets 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
aggregate 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 (a) 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 (b) 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 the plan's 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
prior to a Change in Control 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
financial or stock price performance provided such performance is a relevant
criterion under such plan) 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;
<PAGE>
(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;
(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. Previous Change in Control Agreement. This Agreement supersedes
and replaces the Executive Agreement dated as of January 1, 1997 between Primex
and the Executive.
3. Term/Executive's Duties
(a) This Agreement expires at the close of business on December
31, 2002, 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,
2002 or three years following the date of a 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 best 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 any Potential
Change in Control of Primex occurring after the date hereof, the Executive will
remain in the employ of Primex until the earlier of (i) the end of the six-month
period following the occurrence of such Potential Change in Control and (ii) a
Change in Control, during which time the Executive will have an office, title,
duties and responsibilities substantially consistent with those applicable
immediately prior to the Potential Change in Control.
<PAGE>
4. 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 10 days of the
effective date 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 4(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 10 days of the
effective date of the Termination.
(c) The Executive will not be required to mitigate the amount of
any payment provided for in paragraph 4(a) or 4(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.
5. Other Benefits and Payments
(a) (1) If the Executive becomes entitled to payment under
Paragraph 4(a), then the Executive shall be entitled to receive a lump sum
payment from Primex at the same time as the payment under Paragraph 4(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 5
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 5(a)(1). In the event the Executive receives
a payment under Paragraph 4(b), the amount required to be paid under the
preceding sentences of this Paragraph 5(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 68 years old in the case the Executive receives
a payment under Paragraph 4(b)) the lump sum payment required to be made under
this Paragraph 5(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
<PAGE>
in the case of the Executive receiving a payment under Paragraph 4(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
4(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 4(b), the
insurance coverage provided for in Paragraph 5(a) (2) will be for an additional
24-month period.
(c) Notwithstanding the foregoing Paragraphs 5(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 5(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
4(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 4(b), the
Executive will receive a lump sum payment from Primex to make up for the lost
subsidy calculated as follows:
<PAGE>
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.
(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.
6. 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 and employment 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.
7. Successors; Binding Agreement
<PAGE>
(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 7 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.
8. 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 DeMaire
6019 Kipps Colony Drive East
Gulfport, FL 33707
If to the Company: Primex Technologies, Inc.
10101 Ninth 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.
9. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida without reference to choice of law principles thereunder.
10. 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
<PAGE>
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.
11. 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.
12. 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.
13. 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 7 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.
14. No Employment Right. This Agreement shall not be deemed to
confer on the Executive a right to continued employment with Primex.
15. Disputes/Arbitration.
(a) Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by binding arbitration at Primex's
corporate
<PAGE>
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, as
they become due, which the Executive may incur to enforce this Agreement through
arbitration or otherwise unless the arbitration determines that 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 Primex
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
--------------------
James G. Hascall
Title: Chairman and CEO
/s/ J. Douglas DeMaire
- -----------------------
J. Douglas DeMaire
<PAGE>
EXHIBIT 10.3
[PRIMEX TIER I AGREEMENT]
EXECUTIVE AGREEMENT
-------------------
Agreement between Primex Technologies, Inc., a Virginia corporation
("Primex"), and Angelo A. Catani (the "Executive"), dated as of January 1, 1998.
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 financially
injurious to Primex; or willful misconduct by the Executive during 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 beneficial owners of Primex stock;
(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 the plan's 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 were members of Primex's Board of Directors at the beginning of such period
(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 such period or
<PAGE>
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 or assets 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
aggregate 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 (a) 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 (b) 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 the plan's 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
prior to a Change in Control 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
financial or stock price performance provided such performance is a relevant
criterion under such plan) 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;
<PAGE>
(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;
(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. Previous Change in Control Agreement. This Agreement supersedes
and replaces the Executive Agreement dated as of January 1, 1997 between Primex
and the Executive, as amended by letter dated November 4, 1997.
3. Term/Executive's Duties
(a) This Agreement expires at the close of business on December
31, 1998, 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,
1998 or three years following the date of a 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 best 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 any Potential
Change in Control of Primex occurring after the date hereof, the Executive will
remain in the employ of Primex until the earlier of (i) the end of the six-month
period following the occurrence of such Potential Change in Control and (ii) a
Change in Control, during which time the Executive will have an office, title,
duties and responsibilities substantially consistent with those applicable
immediately prior to the Potential Change in Control.
<PAGE>
4. 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 10 days of the
effective date 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 4(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 10 days of the
effective date of the Termination.
(c) The Executive will not be required to mitigate the amount of
any payment provided for in paragraph 4(a) or 4(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.
5. Other Benefits and Payments
(a) (1) If the Executive becomes entitled to payment under
Paragraph 4(a), then the Executive shall be entitled to receive a lump sum
payment from Primex at the same time as the payment under Paragraph 4(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 5
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 5(a)(1). In the event the Executive receives
a payment under Paragraph 4(b), the amount required to be paid under the
preceding sentences of this Paragraph 5(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 68 years old in the case the Executive receives
a payment under Paragraph 4(b)) the lump sum payment required to be made under
this Paragraph 5(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
<PAGE>
in the case of the Executive receiving a payment under Paragraph 4(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
4(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 4(b), the
insurance coverage provided for in Paragraph 5(a) (2) will be for an additional
24-month period.
(c) Notwithstanding the foregoing Paragraphs 5(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 5(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
4(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 4(b), the
Executive will receive a lump sum payment from Primex to make up for the lost
subsidy calculated as follows:
<PAGE>
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.
(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.
6. 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 and employment 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.
7. Notwithstanding any provision herein to the contrary:
<PAGE>
(a) The Executive's base salary and short-term incentive (STI)
standard shall each remain the same in 1998 as in 1997.
(b) The Executive's Restricted Stock Grant will payout at vesting
as described in the plan pursuant to which it was granted.
(c) In the event that a 1998 Stock Option Plan is adopted by
Primex and approved by the shareholders of Primex, the Executive will vest in a
one-year grant of, and be able to exercise, an option to purchase 10,000 shares
of Primex's common stock as described in such plan.
(d) The Executive will receive a lump sum payment of $200,000,
payable within 15 days of the Executive's retirement on December 31, 1998, which
amount represents the present value "Difference" between the two pension options
set forth in the Supplemental Pension Agreement between Primex and the
Executive. Calculation of such amount is reflected below:
Retire 12/31/99 - Annual Pension $200,000
Retire 12/31/98 - Annual Pension 175,000
--------
"Difference" $ 25,000
========
(e) The Executive will receive a two-year consulting agreement
containing reasonable terms and conditions mutually agreeable to the Executive
and Primex. Such consulting agreement will commence on January 2, 1999, will
provide for a $100,000 per year retainer payable on or before January 15 of each
year during the term of the agreement, and will contain customary noncompetition
provisions.
(f) Any and all monies paid to the Executive after December 31,
1998 shall not be subject to Prime Plan contributions by either the Executive or
the Company.
(g) The Executive will vest in, and be paid in accordance with,
the Primex Transition Bonus Plan upon the terms and conditions set forth in such
plan.
(h) The Executive's automobile allowance will cease as of December
31, 1998. However, Primex will pay the Executive the sum of $17,400 per year,
payable on or before January 15 of each year during the term of the two-year
consulting agreement.
(i) The Executive's membership at Pasadena Yacht and Country Club
will cease as of December 31, 1998.
(j) Upon the death of the Executive, the Executive's spouse, Paige
Catani, may continue in the Primex Medical and Dental Insurance plans until she
reaches the age of
<PAGE>
65 by paying premiums equivalent to the premiums Primex assesses active
employees. When Paige Catani reaches age 65, she may participate in Primex Med
65 Plan, or its successor plan, if offered at the time.
(k) Although both Primex and the Executive acknowledge and agree
that the payment of the Supplemental CEOP by Olin Corporation ("Olin") is solely
Olin's responsibility, Primex understands that the Executive is entitled to the
payment of Supplemental CEOP by Olin. Olin's failure to pay the Supplemental
CEOP to the Executive for any reason whatsoever shall not affect, modify or
invalidate this Agreement in any way whatsoever.
8. 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 7 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.
9. 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: Angelo A. Catani
5928 Seabird Drive
Gulfport, FL 33707
If to the Company: Primex Technologies, Inc.
10101 Ninth Street North
St. Petersburg, FL 33716-3807
<PAGE>
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.
10. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida without reference to choice of law principles thereunder.
11. 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.
12. 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.
13. 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.
14. 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 8 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
<PAGE>
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.
15. No Employment Right. This Agreement shall not be deemed to
confer on the Executive a right to continued employment with Primex.
16. Disputes/Arbitration.
(a) Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by binding 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, as
they become due, which the Executive may incur to enforce this Agreement through
arbitration or otherwise unless the arbitration determines that 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 Primex
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
--------------------
James G. Hascall
Title: Chairman and CEO
/s/ Angelo A. Catani
- --------------------
Angelo A. Catani
<PAGE>
EXHIBIT 10.4
[PRIMEX TIER I AGREEMENT]
EXECUTIVE AGREEMENT
-------------------
Agreement between Primex Technologies, Inc., a Virginia corporation
("Primex"), and Michael S. Wilson (the "Executive"), dated as of January 1,
1998.
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 financially
injurious to Primex; or willful misconduct by the Executive during 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 beneficial owners of Primex stock;
(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 the plan's 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 were members of Primex's Board of Directors at the beginning of such period
(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 such period or
<PAGE>
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 or assets 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
aggregate 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 (a) 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 (b) 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 the plan's 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
prior to a Change in Control 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
financial or stock price performance provided such performance is a relevant
criterion under such plan) 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;
<PAGE>
(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;
(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. Previous Change in Control Agreement. This Agreement supersedes
and replaces the Executive Agreement dated as of January 1, 1997 between Primex
and the Executive.
3. Term/Executive's Duties
(a) This Agreement expires at the close of business on December
31, 2002, 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,
2002 or three years following the date of a 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 best 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 any Potential
Change in Control of Primex occurring after the date hereof, the Executive will
remain in the employ of Primex until the earlier of (i) the end of the six-month
period following the occurrence of such Potential Change in Control and (ii) a
Change in Control, during which time the Executive will have an office, title,
duties and responsibilities substantially consistent with those applicable
immediately prior to the Potential Change in Control.
<PAGE>
4. 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 10 days of the
effective date 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 4(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 10 days of the
effective date of the Termination.
(c) The Executive will not be required to mitigate the amount of
any payment provided for in paragraph 4(a) or 4(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.
5. Other Benefits and Payments
(a) (1) If the Executive becomes entitled to payment under
Paragraph 4(a), then the Executive shall be entitled to receive a lump sum
payment from Primex at the same time as the payment under Paragraph 4(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 5
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 5(a)(1). In the event the Executive receives
a payment under Paragraph 4(b), the amount required to be paid under the
preceding sentences of this Paragraph 5(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 68 years old in the case the Executive receives
a payment under Paragraph 4(b)) the lump sum payment required to be made under
this Paragraph 5(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
<PAGE>
in the case of the Executive receiving a payment under Paragraph 4(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
4(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 4(b), the
insurance coverage provided for in Paragraph 5(a) (2) will be for an additional
24-month period.
(c) Notwithstanding the foregoing Paragraphs 5(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 5(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
4(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 4(b), the
Executive will receive a lump sum payment from Primex to make up for the lost
subsidy calculated as follows:
<PAGE>
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.
6. 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 and employment 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.
7. 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
<PAGE>
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 7 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.
8. 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: Michael S. Wilson
2492 Stag Run Boulevard
Clearwater, FL 34625
If to the Company: Primex Technologies, Inc.
10101 Ninth 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.
9. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida without reference to choice of law principles thereunder.
10. 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,
<PAGE>
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.
11. 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.
12. 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.
13. 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 7 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.
14. No Employment Right. This Agreement shall not be deemed to
confer on the Executive a right to continued employment with Primex.
15. Disputes/Arbitration.
(a) Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by binding 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, as
they become due, which the Executive may incur to enforce this Agreement through
arbitration or otherwise unless the arbitration determines that 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 Primex
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.
<PAGE>
PRIMEX TECHNOLOGIES, INC.
By: /s/ James G. Hascall
---------------------
James G. Hascall
Title: Chairman and CEO
/s/ Michael S. Wilson
- ---------------------
Michael S. Wilson
<PAGE>
EXHIBIT 10.5
[PRIMEX TIER I AGREEMENT]
EXECUTIVE AGREEMENT
-------------------
Agreement between Primex Technologies, Inc., a Virginia corporation
("Primex"), and William W. Smith (the "Executive"), dated as of January 1, 1998.
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 financially
injurious to Primex; or willful misconduct by the Executive during 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 beneficial owners of Primex stock;
(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 the plan's 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 were members of Primex's Board of Directors at the beginning of such period
(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 such period or
<PAGE>
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 or assets 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
aggregate 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 (a) 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 (b) 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 the plan's 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
prior to a Change in Control 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
financial or stock price performance provided such performance is a relevant
criterion under such plan) 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;
<PAGE>
(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;
(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. Previous Change in Control Agreement. This Agreement supersedes
and replaces the Executive Agreement dated as of January 1, 1997 between Primex
and the Executive.
3. Term/Executive's Duties
(a) This Agreement expires at the close of business on December
31, 2002, 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,
2002 or three years following the date of a 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 best 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 any Potential
Change in Control of Primex occurring after the date hereof, the Executive will
remain in the employ of Primex until the earlier of (i) the end of the six-month
period following the occurrence of such Potential Change in Control and (ii) a
Change in Control, during which time the Executive will have an office, title,
duties and responsibilities substantially consistent with those applicable
immediately prior to the Potential Change in Control.
<PAGE>
4. 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 10 days of the
effective date 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 4(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 10 days of the
effective date of the Termination.
(c) The Executive will not be required to mitigate the amount of
any payment provided for in paragraph 4(a) or 4(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.
5. Other Benefits and Payments
(a) (1) If the Executive becomes entitled to payment under
Paragraph 4(a), then the Executive shall be entitled to receive a lump sum
payment from Primex at the same time as the payment under Paragraph 4(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 5
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 5(a)(1). In the event the Executive receives
a payment under Paragraph 4(b), the amount required to be paid under the
preceding sentences of this Paragraph 5(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 68 years old in the case the Executive receives
a payment under Paragraph 4(b)) the lump sum payment required to be made under
this Paragraph 5(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
<PAGE>
in the case of the Executive receiving a payment under Paragraph 4(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
4(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 4(b), the
insurance coverage provided for in Paragraph 5(a) (2) will be for an additional
24-month period.
(c) Notwithstanding the foregoing Paragraphs 5(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 5(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
4(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 4(b), the
Executive will receive a lump sum payment from Primex to make up for the lost
subsidy calculated as follows:
<PAGE>
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.
6. 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 and employment 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.
7. 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
<PAGE>
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 7 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.
8. 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, N. E.
Medina, WA 98039
If to the Company: Primex Technologies, Inc.
10101 Ninth 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.
9. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida without reference to choice of law principles thereunder.
10. 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,
<PAGE>
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.
11. 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.
12. 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.
13. 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 7 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.
14. No Employment Right. This Agreement shall not be deemed to
confer on the Executive a right to continued employment with Primex.
15. Disputes/Arbitration.
(a) Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by binding 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, as
they become due, which the Executive may incur to enforce this Agreement through
arbitration or otherwise unless the arbitration determines that 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 Primex
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.
<PAGE>
PRIMEX TECHNOLOGIES, INC.
By: /s/ James G. Hascall
--------------------
James G. Hascall
Title: Chairman and CEO
/s/ William W. Smith
- --------------------
William W. Smith
<PAGE>
EXHIBIT 10.6
[PRIMEX TIER I AGREEMENT]
EXECUTIVE AGREEMENT
-------------------
Agreement between Primex Technologies, Inc., a Virginia corporation
("Primex"), and ____________________ (the "Executive"), dated as of January 1,
1998.
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 financially
injurious to Primex; or willful misconduct by the Executive during 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 beneficial owners of Primex stock;
(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 the plan's 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 were members of Primex's Board of Directors at the beginning of such period
(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 such period or
<PAGE>
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 or assets 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
aggregate 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 (a) 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 (b) 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 the plan's 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
prior to a Change in Control 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
financial or stock price performance provided such performance is a relevant
criterion under such plan) 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;
<PAGE>
(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;
(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. Previous Change in Control Agreement. This Agreement supersedes
and replaces the Executive Agreement dated as of January 1, 1997 between Primex
and the Executive.
3. Term/Executive's Duties
(a) This Agreement expires at the close of business on December
31, 2002, 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,
2002 or three years following the date of a 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 best 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 any Potential Change
in Control of Primex occurring after the date hereof, the Executive will remain
in the employ of Primex until the earlier of (i) the end of the six-month period
following the occurrence of such Potential Change in Control and (ii) a Change
in Control, during which time the Executive will have an office, title, duties
and responsibilities substantially consistent with those applicable immediately
prior to the Potential Change in Control.
<PAGE>
4. 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 10 days of the
effective date 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 4(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 10 days of the
effective date of the Termination.
(c) The Executive will not be required to mitigate the amount of
any payment provided for in paragraph 4(a) or 4(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.
5. Other Benefits and Payments
(a) (1) If the Executive becomes entitled to payment under
Paragraph 4(a), then the Executive shall be entitled to receive a lump sum
payment from Primex at the same time as the payment under Paragraph 4(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 5
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 5(a)(1). In the event the Executive receives
a payment under Paragraph 4(b), the amount required to be paid under the
preceding sentences of this Paragraph 5(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 68 years old in the case the Executive receives
a payment under Paragraph 4(b)) the lump sum payment required to be made under
this Paragraph 5(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
<PAGE>
in the case of the Executive receiving a payment under Paragraph 4(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
4(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 4(b), the
insurance coverage provided for in Paragraph 5(a) (2) will be for an additional
24-month period.
(c) Notwithstanding the foregoing Paragraphs 5(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 5(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
4(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 4(b), the
Executive will receive a lump sum payment from Primex to make up for the lost
subsidy calculated as follows:
<PAGE>
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.
6. 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 and employment 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.
7. 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
<PAGE>
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 7 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.
8. 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: Name
Street Address
Building/Apartment No.
City, State Zip Code
If to the Company: Primex Technologies, Inc.
10101 Ninth 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.
9. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida without reference to choice of law principles thereunder.
10. 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,
<PAGE>
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.
11. 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.
12. 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.
13. 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 7 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.
14. No Employment Right. This Agreement shall not be deemed to
confer on the Executive a right to continued employment with Primex.
15. Disputes/Arbitration.
(a) Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by binding 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, as
they become due, which the Executive may incur to enforce this Agreement through
arbitration or otherwise unless the arbitration determines that 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 Primex
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.
<PAGE>
PRIMEX TECHNOLOGIES, INC.
By: ____________________________
James G. Hascall
Title: Chairman and CEO
_________________________
Executive
<PAGE>
EXHIBIT 10.21
DESCRIPTION OF THE INCENTIVE COMPENSATION PLAN
In January 1997, the Company adopted the Primex Technologies, Inc. Incentive
Compensation Plan (the "Incentive Compensation Plan") as the vehicle for
awarding executive officers annual incentive bonus compensation. For all
executive officers other than the Division Presidents, the Incentive
Compensation Plan awards annual cash bonuses determined solely on the basis of
the Economic Value Added ("EVA") performance of the Company for the year versus
a previously agreed-upon target. Seventy-five percent of the cash bonus to each
Division President is based on the EVA performance of his respective Division;
the remaining 25% is based on the EVA performance of the Company. This EVA
system, which has been successfully adopted and implemented by a wide range of
public and private companies around the world, uses as its principal measure an
estimate of the net operating profit after subtracting taxes and the cost of
capital employed (both debt and equity). The Committee believes that the EVA
system closely aligns the interest of management and shareholders.
The EVA-based annual incentive award is calculated solely by
reference to the Company's financial results and without reference to any
individual's non-financial performance. Under the EVA bonus formula, a bonus
multiple is generated that is then applied to the target bonus set at the
beginning of a bonus year, resulting in a "declared bonus" award. Under the
bonus plan, the declared bonus award is then placed into an individual's "bonus
bank" from which only a predetermined portion of the bank balance is actually
paid out as the bonus award in a given year (for 1997, the predetermined payout
was 50% of the declared bonus). The remaining bank balance is deferred, to be
paid out over subsequent years if performance is sustained. The predetermined
bonus payout for 1998 will be 40% of the declared bonus.
The CEO's incentive compensation award is determined by the EVA
performance of the Company for the year. For 1997, the Company's actual EVA
performance versus the target approved by the Board substantially exceeded the
goal. For 1997, the CEO received a bonus payout of $452,403. His remaining bank
balance is $452,403, which, along with his 1998 target incentive bonus of
$300,000, will be taken into account under the EVA formula in computing his 1998
Incentive Compensation Award.
<PAGE>
EXHIBIT 10.22
TRANSITION BONUS PROGRAM OF
PRIMEX TECHNOLOGIES, INC.
SECTION 1. Purpose. The purpose of the Transition Bonus Program of Primex
Technologies, Inc. is to ensure that executives of Primex Technologies, Inc. who
were previously employed by Olin Corporation are not penalized due to the
forfeiture of unvested portions of awards made to such executives under employee
benefit plans of Olin Corporation resulting from the spin-off of Primex
Technologies, Inc. to shareholders of Olin Corporation.
SECTION 2. Definitions. As used in the Plan:
"Affiliate" means (i) any entity that, directly or through one or more
intermediaries, is controlled by the Company and (ii) any entity in which the
Company has a significant equity interest as determined by the Committee.
"Board" means the Board of Directors of the Company.
"Change in Control" means:
(i) the Company ceases to be directly or indirectly owned by at least 1,000
stockholders at any time after December 31, 1996;
(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 the Company, Olin Corporation, a majority-owned subsidiary of the
Company, or an employee benefit plan (or related trust) of the Company, Olin
Corporation or such subsidiary, become(s) the "beneficial owner" (as defined in
Rule 13d-3 under the Act) of 15% or more of the then outstanding voting stock of
the Company;
(iii) during any period of two consecutive years after 1996, individuals who
at the beginning of such period constitute the Board (together with any new
director whose election by the Board or whose nomination for election by the
Company's shareholders, 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
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;
<PAGE>
(iv) all or substantially all of the business or assets of the Company are
disposed of pursuant to a merger, consolidation or other transaction in which
the Company is not the surviving corporation or the Company combines with
another company and is the surviving corporation (unless the shareholders of the
Company immediately following such merger, consolidation, combination, or other
transaction beneficially own, directly or indirectly, more than 50% of the
aggregate voting stock or other ownership interest of (x) the entity or
entities, if any, that succeed to the business of the Company or (y) the
combined company); or
(v) the Board determines that a tender offer for the Company's shares
indicates a serious intention by the offeror to acquire control of the Company.
"Committee" means the Compensation and Nominating Committee (or its
successor) of the Board.
"Common Stock" means the Company's common stock, par value $1.00 per share.
"Company" means Primex Technologies, Inc., a Virginia corporation and any
successor.
"Fair Market Value" means, with respect to a date, on a per share basis, the
average of the high and the low price of a share of Common Stock reported on the
consolidated transaction reporting system for Nasdaq issues on such date or, if
Common Stock is not traded on such date, such average price on the next
preceding date on which it is traded.
"Plan" means this Transition Bonus Program of Primex Technologies, Inc. as it
now exists or as it may hereafter be amended.
"Primex Units" means the units awarded to participating employees pursuant to
the Plan. Primex Units will carry no voting rights or other rights enjoyed by
shareholders of the Company nor will any dividends be paid with respect to such
units.
SECTION 3. Administration. Full power and authority to construe, interpret
and administer the Plan shall be vested in the Committee. Decisions of the
Committee shall be final, conclusive and binding upon all parties. The Board has
all the power and authority of the Committee and may act in lieu of the
Committee at any time.
<PAGE>
SECTION 4. Participation. The employees of the Company listed in Appendix A
shall be participants in the Plan.
SECTION 5. Benefits. Each employee listed on Appendix A shall be granted the
number of Primex Units listed next to his or her name on Appendix A. Each such
employee shall be entitled to receive a cash payment as soon as practicable
after January 6, 1999, equal to the product of (i) the number of Primex Units
granted to him or her, multiplied by (ii) the Fair Market Value of a share of
Common Stock on January 6, 1999, provided that he or she is (A) still employed
by the Company (or any Affiliate) on January 6, 1999, or (B) died on or prior to
January 6, 1999 while still an employee of the Company (or an Affiliate.)
Subject to any prior vesting which may occur with respect to any Change of
Control, and subject to any exceptions which the Committee may determine, an
employee's Primex Units will be forfeited if his employment terminates before
January 6, 1999 unless such termination results from his or her death while
employed with the Company (or an Affiliate).
A participating employee may designate at any time and from time to time a
beneficiary in the event of his or her death prior to receiving the payment due
him or her pursuant to the Plan. Such designation shall be in writing and must
be received by the Company prior to the participating employee's death to be
effective.
SECTION 6. Chance in Control. Notwithstanding anything to the contrary in
this Plan, in the event a Change in Control occurs, all Primex Units granted to
an employee pursuant to the Plan shall be immediately vested and a cash payment
shall be distributed to each participating employee within five (5) calendar
days of the date of such Change in Control equal to the product of (i) the
number of Primex Units granted to such employee hereunder, multiplied by (ii)
(A) with respect to a Change of Control not involving a tender offer, the
highest Fair Market Value of a share of Common Stock on any date within the
period commencing 30 days prior to the Change in Control and ending on the date
of the Change in Control or (B) with respect to a Change of Control as a result
of a tender offer, the greater of (x) the highest price paid for any share of
Common Stock pursuant to the tender offer or (y) the highest Fair Market Value
of a share of Common Stock on any date within the period commencing 30 days
prior to the Change of Control and ending on the date of the Change of Control.
SECTION 7. Stock Adjustments. In the event of any merger, consolidation,
stock or other noncash dividend, extraordinary cash dividend, split-up,
spin-off, combination or exchange of shares or recapitalization or change in
capitalization, or any other similar corporate event, the Committee may make
such adjustments in the number of Primex Units credited to each participating
employee, as the Committee shall deem appropriate in the circumstances. The
determination by the
<PAGE>
Committee as to the terms of such adjustment shall be final, conclusive and
binding for all purposes of the Plan.
SECTION 8. Amendment and Termination. This Plan may be amended, suspended or
terminated by action of the Board; provided, however, no termination or
modification of the Plan shall adversely affect the rights of any participating
employee with respect to any Primex Units otherwise credited to him or her.
SECTION 9. Nonassignability. No right to receive any payments under the Plan
shall be assignable or transferable by a participating employee other than by
will or the laws of descent and distribution or pursuant to a domestic relations
order. The designation of a beneficiary does not constitute a transfer.
SECTION 10. Unsecured Obligation. The Plan shall not create a trust or
separate fund of any kind or a fiduciary relationship between the Company or any
Affiliate an a participating employee. To the extent that any person has a right
to receive payments from the Company or any Affiliate under the Plan, such right
shall be no greater than the right of any unsecured general creditor of the
Company or an Affiliate.
SECTION 11. Withholding. The Company or any Affiliate may withhold from any
payment due under the Plan the amount of withholding taxes due in respect of
such payment and take such other action as may be necessary in the opinion of
the Company or an Affiliate to satisfy all obligations for the payment of such
taxes.
SECTION 12. Other Compensation Arrangements. Nothing contained in the Plan
shall prevent the Company or any Affiliate from adopting or continuing in effect
other or additional compensation arrangements and such arrangements may be
either generally applicable or applicable only in specific cases.
SECTION 13. No Right to Employment. Nothing in the Plan shall limit the right
of the Company or an Affiliate to dismiss a participating employee from
employment at any time, free from any liability or any claim under the Plan.
SECTION 14. Governing Law. The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Florida and applicable Federal law.
SECTION 15. Severability. If any provision of the Plan is determined to be
invalid, illegal or unenforceable in any jurisdiction, or as to any person or
would disqualify the Plan under any law deemed applicable by the Committee, such
provisions shall be construed or deemed amended to conform to applicable laws,
or if it cannot be so
<PAGE>
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan, such provision shall be stricken as
to such jurisdiction or person, and the remainder of the Plan shall remain in
full force and effect.
<PAGE>
PRIMEX UNITS
Name Primex Units
1. James G. Hascall 8,800
2. Angelo A. Catani 5,200
3. J. Douglas DeMaire 2,200
4. William W. Smith 5,100
5. Michael S. Wilson 1,700
6. George H. Pain 800
7. David E. Findley 1,500
8. Robert J. Mueller 600
9. Steven C. Curley 800
10. Charles H. Stallings 1,400
11. Albert J. Calabrese 600
Total 28,700
BUILDING AND IGLOO LEASE
CONTRACT NO. 14-16-0003-96-579
by and between
U.S. Fish and Wildlife Service
and
PRIMEX TECHNOLOGIES, INC.
8820 ROUTE 148
MARION, ILLINOIS 62959
<PAGE>
EXHIBIT 10.23
LEASE CONTRACT
THIS LEASE CONTRACT, made and entered into as of January 1, 1997, by and
between the UNITED STATES OF AMERICA, acting by and through the U.S. Fish and
Wildlife Service, of the United States Department of the Interior, hereinafter
referred to as the LESSOR, under and pursuant to the authority contained in 61
Stat. 770 (1947), 16 U.S.C. 666f, g, and - PRIMEX TECHNOLOGIES, INC. - a
corporation organized and existing under the laws of Virginia. Authorized to do
business in Illinois, occupying rental space in the Crab Orchard National
Wildlife Refuge industrial area with business address as 8820 ROUTE 148, MARION,
ILLINOIS 62959, hereinafter referred to as the LESSEE.
WITNESSETH, that said Lessor does by these presents lease unto the said
Lessee the following described real estate and premises, situated in the County
of Williamson and State of Illinois; to-wit:
Building(s) and Igloo(s) situated within the boundaries of
Lessor's facility known as Crab Orchard National Wildlife
Refuge, Marion, Illinois, and designed as Building(s) and
Igloo(s) SEE PAGES 2-10 on Lessor's Illinois ordinance
Plant Layout Plans No. SEE PAGES 2-10, copies which are on
file at the Refuge Headquarters for reference. And
Incorporated in this lease by reference.
for use in manufacturing, cold storage, and explosive storage as specified by
and under terms authorized by Lessor, together with all tenements,
appurtenances, and improvements thereon or "hereunto belonging, and together
with any and all additions, improvements, betterments or replacements to said
land, the buildings, and igloo(s) situated thereon made during the term of this
lease, for use as business proper and also subject to terms or conditions
hereinafter referred to in this lease contract, for a term beginning on the 1ST
DAY OF JANUARY, 1997, and ending on the 31ST DAY OF DECEMBER, 2005, both dates
inclusive on the following terms and conditions, to-wit;
ONE: Lessee shall pay to the Lessor rental to begin JANUARY 1, 1997, as
computed in the rental rate schedule attached hereto as pages 2 and 3 which
become a part and condition of this lease contact. Such rental to be paid in
equal monthly installments payable in advance on the first day of each and every
month during the term of this lease, commencing JANUARY 1, 1997. Such payment
shall be made by check, postal money order or bank draft, payable to the U.S.
FISH AND WILDLIFE SERVICE, AND FORWARDED TO REFUGE MANAGER, CRAB ORCHARD
NATIONAL WILDLIFE REFUGE, 8588 ROUTE 148, MARION, ILLINOIS 62959, or to such
other address as Lessor may hereafter from time to time specify in writing for
such purposes.
*This lease is subject to a periodic rental rate adjustment after JANUARY 1,
2001 to reflect the fair market rate in the local area for like facilities. This
rental rate will be based upon the basic building or igloo without any
improvement made or maintenance performed by the current Lessee. Rental rate
adjustments will be made no more frequently than annually and will be based upon
rental rate surveys of similar properties in similar locations conducted by the
Government at least every five years. As periodic rental rate adjustments occur,
the Lessor will be required to furnish a 3-month prior written notification to
Lessee prior to effecting the new rental rate adjustment.
<PAGE>
Lessee: PRIMEX TECHNOLOGIES, INC.
Lease Contract No. 14-16-0003-96-579
BUILDING RENTAL RATE SCHEDULE:
Building Building Rental Type of Full Insurable
Designation Sq. Ft. Pick-up Use** Replacement Value
(MO/YR)
"B" AREA: (SEE NOTE#1 BELOW)
B-2-1 13,062 CS $55,000
B-2-2 9,122 CS 40,000
B-2-3 351# -- 2,000
B-2-9 221 CS 1,000
B-2-10 7,072 CS 31,000
B-2-12 600# -- 3,000
B-2-13 8,757 M 38,000
B-2-14 873# -- 4,000
B-2-15 291 M 1,000
B-2-16 1,200 M 5,000
B-2-17 84# -- 1,000
B-2-18 53 CS 1,000
B-2-19 1,344 CS 6,000
B-2-20 182 M 1,000
B-2-21 96 M 1,000
B-2-22 400# -- 2,000
B-2-23 504# -- 2,000
B-2-27 4,480 1/04 CS 20,000
"D" AREA: (SEE NOTE#1 BELOW)
D-1-2 268 CS 1,000
D-1-3 179 CS 1,000
D-1-4 2,088 M 10,000
D-1-5 47 CS 1,000
D-1-6 11,808 M 50,000
D-1-7 8,670 M 38,000
D-1-8 8,453 M 37,000
D-1-9 565 CS 3,000
D-1-10 186 CS 1,000
D-1-11 2,001 M 9,000
D-1-12 196 M 1,000
D-1-13 1,801 M 8,000
D-1-14 132 CS 1,000
D-1-15 134 M 1,000
D-1-16 172 CS 1,000
D-1-17 1,440# __ 7,000
D-1-25 1,993 M 9,000
D-1-26 123 CS 1,000
D-1-27 1,134 M 5,000
D-1-29 221 CS 1,000
D-1-33 120 CS 1,000
2.
<PAGE>
Lessee: PRIMEX TECHNOLOGIES, INC.
Lease Contract No. 14-16-0003-96-579
BUILDING RENTAL RATE SCHEDULE:
Building Building Rental Type of Full Insurable
Designation Sq. Ft. Pick-up Use** Replacement Value
"D" AREA: (CONT'D)
D-1-34 192 CS $1,000
D-1-35 12,998 CS 55,000
D-1-36 10,192 CS 43,000
D-1-37 2,021 CS 9,000
D-1-42 144 CS 1,000
D-1-43 180 M 1,000
D-1-44 316 M 1,000
D-1-45 196 CS 1,000
D-1-46 267 M 1,000
D-1-47 150 M 1,000
D-1-48 195 CS 1,000
D-1-49 196 M 1,000
D-1-50 297 CS 1,000
D-1-51 345# -- 2,000
D-1-52 203 M 1,000
D-1-53 289 CS 1,000
D-1-54 29 CS 1,000
D-1-55 111# -- 1,000
D-1-56 240 CS 1,000
D-1-57 168 M 1,000
D-1-58 199 M 1,000
D-1-60 590 CS 3,000
D-1-61 47 CS 1,000
D-1-62 65 CS 1,000
D-1-63 81 CS 1,000
D-1-64 33# -- 1,000
D-1-65 49 CS 1,000
D-1-66 52 CS 1,000
D-1-67 66 CS 1,000
D-1-68 51 M 1,000
D-1-69 49 CS 1,000
D-1-70 67 CS 1,000
D-1-71 49 CS 1,000
D-1-72 223 M 1,000
D-1-74 69 CS 1,000
D-1-75 125 CS 1,000
D-1-76 123 CS 1,000
D-1-77 49 CS 1,000
D-1-78 33 CS 1,000
D-1-82 55# __ 1,000
D-1-83 49 CS 1,000
D-1-84 99 CS 1,000
3.
<PAGE>
Lessee: PRIMEX TECHNOLOGIES, INC.
Lease Contract No. 14-16-0003-96-579
BUILDING RENTAL RATE SCHEDULE:
Building Building Rental Type of Full Insurable
Designation Sq. Ft. Pick-up Use** Replacement Value
"D" AREA: (CONT'D)
D-1-87 47 CS $1,000
D-1-88 47 CS 1,000
D-1-89 47 CS 1,000
D-1-90 2,686 M 12,000
D-1-90A 3,000 01/04 M 14,000
D-1-91 432 M 2,000
D-1-92 342# __ 2,000
D-1-93 361# __ 2,000
"F" AREA: (SEE NOTE#1 BELOW)
F-2-15 84 CS 1,000
F-2-20 600 CS 3,000
F-645 10,880 CS 46,000
"F" AREA:
F-2-1 19,168 CS 74,000
F-2-2 20,193 CS 78,000
F-2-2A 1,005 CS 5,000
F-2-2B 812 CS 4,000
F-2-3 208 CS 1,000
F-2-4 208 CS 1,000
F-2-5 1,056 M 5,000
F-2-8 336 CS 2,000
F-2-9 6,840 CS 30,000
F-2-10 4,959 M 23,000
F-2-11 7,072 CS 31,000
F-2-12 4,556 CS 21,000
Ramp 3 275# __ 1,000
Ramp 5 525# __ 2,000
Ramp 6 525# __ 2,000
Ramp 7 525# __ 2,000
Ramp 8 132# __ 1,000
Ramp 9 294# __ 1,000
"FAM" AREA:
FAM-1-1 10,250 CS 43,000
FAM-1-2 10,250 CS 43,000
FAM-1-3 (PAD) 10,250 03/97 CS 22,000
FAM-1-4 10,250 CS 43,000
FAM-1-5 10,250 CS 43,000
FAM-1-6 10,250 CS 43,000
FAM-1-7 10,250 CS 43,000
4.
<PAGE>
Lessee: PRIMEX TECHNOLOGIES, INC.
Lease Contract No. 14-16-0003-96-579
BUILDING RENTAL RATE SCHEDULE:
Building Building Rental Type of Full Insurable
Designation Sq. Ft. Pick-up Use** Replacement Value
FAM-2-1 (PAD) 10,250 03/97 CS 22,000
FAM-2-4 10,250 CS 43,000
FAM-2-5 10,250 CS 43,000
FAM-2-6 10,250 CS 43,000
FAM-2-7 10,250 CS 43,000
FAM-4-1 10,250 CS 43,000
FAM-4-2 10,250 CS 43,000
FAM-4-3 10,250 CS 43,000
"I" AREA: (SEE NOTE#1 BELOW)
I-1-11 860# __ $4,000
I-1-12 27,619 M 95,000
I-12A (Annex No. 1) 30,131 06/04 M 104,000
I-1-19 1,985 M 9,000
I-1-20 35,320 CS 122,000
R-11 5,550# __ 25,000
I-1-21 720 CS 3,000
I-1-22 600 CS 3,000
I-1-33 285 CS 1,000
I-1-34 480 M 2,000
I-1-35A 59 CS 1,000
I-1-35B 59 CS 1,000
I-1-41 1,333 CS 6,000
I-1-42 227 CS 1,000
I-1-43 229 CS 1,000
I-1-44 72 CS 1,000
I-1-45 77 CS 1,000
I-1-46 79 CS 1,000
I-1-47 77 CS 1,000
I-1-48 77 CS 1,000
I-1-49 224 CS 1,000
I-1-52 67 CS 1,000
I-1-53 45 CS 1,000
I-1-54 67 CS 1,000
I-1-55 39# __ 1,000
I-1-56 121 CS 1,000
I-157 280 CS 1,000
I-1-62 167 CS 1,000
I-1-73 35 CS 1,000
I-1-74 67 CS 1,000
I-1-75 40# __ 1,000
I-1-76 77# __ 1,000
I-1-77 225 CS 1,000
5.
<PAGE>
Lessee: PRIMEX TECHNOLOGIES, INC.
Lease Contract No. 14-16-0003-96-579
BUILDING RENTAL RATE SCHEDULE:
Building Building Rental Type of Full Insurable
Designation Sq. Ft. Pick-up Use** Replacement Value
I-1-78 800# __ 4,000
I-1-79 20 CS 1,000
I-1-84 84 CS 1,000
I-1-86 66 CS 1,000
I-1-88 13,227 CS 56,000
I-1-89 2,268 CS 10,000
I-1-91 290# __ 1,000
I-1-92 193 M 1,000
I-1-93 3,990 CS 18,000
I-1-101 676 CS 3,000
I-1-102 64 CS 1,000
I-1-103 64 CS 1,000
I-1-104 64 CS 1,000
I-1-105 64 CS 1,000
I-1-106 64 CS 1,000
I-1-107 64 CS 1,000
I-1-108 64 CS 1,000
I-1-1 10,250 CS 43,000
I-1-2 13,900 CS 59,000
Annex #3 5,500 CS 25,000
Ramp #2 1,500 CS 7,000
I-1-3 26,013 CS 95,000
I-1-3A 10,250 CS 43,000
Ramp #3 2,016# __ 9,000
Ramp #18 2,016# __ 9,000
"IN" AREA:
IN-1-2 10,250 CS 43,000
IN-3-3 10,250 CS 43,000
IN-4-5 10,250 CS 43,000
IN-5-1 10,250 CS 43,000
IN-6-5 10,250 CS 43,000
"P" AREA: (SEE NOTE#1 BELOW)
P-1-1 13,998 M 59,000
P-1-3 12,437 M 52,000
P-1-7 221 CS 1,000
P-1-8 821 CS 4,000
P-1-9 821 CS 4,000
P-1-10 3,105 M 14,000
P-1-11 7,072 CS $32,000
6.
<PAGE>
Lessee: PRIMEX TECHNOLOGIES, INC.
Lease Contract No. 14-16-0003-96-579
BUILDING RENTAL RATE SCHEDULE:
Building Building Rental Type of Full Insurable
Designation Sq. Ft. Pick-up Use** Replacement Value
P-1-12 1,230 CS 6,000
P-1-15 192 CS 1,000
P-1-42 143 CS 1,000
P-1-43 288 CS 1,000
P-1-49 600 CS 3,000
P-1-50 298 CS 1,000
P-1-51 802 CS 4,000
P-1-52 291 CS 1,000
P-1-53 298 CS 1,000
P-1-54 1,049# __ 5,000
P-1-55 194# __ 1,000
P-1-59 68# __ 1,000
P-1-60 337 CS 2,000
P-1-61 42# __ 1,000
P-1-62 47 CS 1,000
P-1-63 180 CS 1,000
P-1-64 80 CS 1,000
P-1-65 80 CS 1,000
P-1-66 80 CS 1.000
P-1-67 80 CS 1,000
P-1-68 80 CS 1,000
P-1-69 80 CS 1,000
P-1-70 80 CS 1,000
P-1-71 80 CS 1,000
P-1-72 80 CS 1,000
P-1-73 80 CS 1,000
P-1-74 80 CS 1,000
P-1-75 80 CS 1,000
P-1-76 80 CS 1,000
P-1-83 625 CS 3,000
P-1-85 3,000 CS 14,000
"S" AREA:
S-3-1 10,250 CS 43,000
FAM-3-2 5,100 CS 22,000
S-3-2 10,250 CS 43,000
S-3-3 12,944 CS 54,000
S-4-5 & ANNEX #1 7,750 CS 34,000
7.
<PAGE>
Lessee: PRIMEX TECHNOLOGIES, INC.
Lease Contract No. 14-16-0003-96-579
IGLOO RENTAL RATE SCHEDULE:
Building Building Type of
Designation Sq. Ft. Use**
AREA 6 IGLOOS:
HE-1-2 1,070 IG
HE-1-4 1,070 IG
HE-1-5 1,070 IG
HE-1-6 1,070 IG
HE-1-7 1,070 IG
HE-1-8 1,070 IG
HE-1-9 1,070 IG
HE-1-10 1,070 IG
HE-1-11 1,070 IG
HE-2-3 1,070 IG
HE-2-4 1,070 IG
HE-2-6 1,070 IG
HE-2-11 1,070 IG
HE-3-3 1,070 IG
HE-3-4 1,070 IG
HE-3-5 1,070 IG
HE-3-6 1,070 IG
HE-3-8 1,070 IG
HE-3-9 1,070 IG
HE-4-3 1,070 IG
HE-4-4 1,070 IG
HE-4-5 1,070 IG
HE-4-6 1,070 IG
HE-4-8 1,070 IG
HE-4-10 1,070 IG
HE-4-11 1,070 IG
HE-5-4 1,070 IG
HE-6-3 1,600 IG
HE-6-5 1,600 IG
HE-6-4 1,600 IG
HE-6-6 1,600 IG
HE-6-7 1,600 IG
HE-7-1 1,600 IG
HE-7-6 1,600 IG
HE-7-7 1,600 IG
HE-7-8 1,600 IG
HE-7-9 1,600 IG
AREA 13 IGLOOS: (SEE NOTE#1 BELOW)
FAI-1-11 1,600 IG
FAI-1-12 1,600 IG
8.
<PAGE>
Lessee: PRIMEX TECHNOLOGIES, INC.
Contract No. 14-16-0003-96-579
IGLOO RENTAL RATE SCHEDULE:
Building Building Type of
Designation Sq. Ft. Use**
FAI-1-13 1,600 IG
FAI-1-14 1,600 IG
FAI-2-8 1,600 IG
FAI-2-9 1,600 IG
FAI-2-10 1,600 IG
FAI-2-11 1,600 IG
FAI-2-12 1,600 IG
FAI-2-13 1,600 IG
FAI-2-14 1,600 IG
FAI-3-9 1,600 IG
FAI-3-10 1,600 IG
FAI-3-11 1,600 IG
FAI-3-13 1,600 IG
FAI-3-14 1,600 IG
FAI-3-15 1,600 IG
FAI4-8 1,600 IG
FAI-4-9 1,600 IG
FAI-4-10 1,600 IG
FAI-4-11 1,600 IG
FAI-4-12 1,600 IG
FAI-4-13 1,600 IG
FAI-4-14 1,600 IG
FAI-4-15 1,600 IG
FAI-4-16 1,600 IG
FAI-5-12 1,600 IG
FAI-5-13 1,600 IG
FAI-5-14 1,600 IG
FAI-5-15 1,600 IG
FAI-6-8 1,600 IG
FAI-6-9 1,600 IG
FAI-6-10 1,600 IG
FAI-6-11 1,600 IG
FAI-6-12 1,600 IG
FAI-6-13 1,600 IG
FAI-6-14 1,600 IG
FAI-7-9 1,600 IG
FAI-7-12 1,600 IG
9.
<PAGE>
Lessee: PRIMEX TECHNOLOGIES, INC.
Lease Contract No. 14-16-0003-96-579
BUILDING RENTAL RATE SCHEDULE:
Building Building Rental Type of Full Insurable
Designation Sq. Ft. Pick-up Use** Replacement Value
10.
(MO/YR)
"AREA ACREAGES":
Acreage (Fenced) 550 AC (Inside Fenced B,D,F and P Area)
(See NOTE #1 Below)
Acreage (Fenced) 79.33 AC (Inside Fenced I Area)
(See NOTE #1 Below) Acreage
(A-11 Trailer Storage) 1 AC
Acreage (Rail Yard - Fenced Storage Are)1AC see NOTE #2 Below.
NOTE #1: Represents "B", "D", "F", "I", and "P" Area
Buildings, Area Igloos, and Acreages subject to
rental adjustment.
NOTE #2: New Construction completed and occupied effective
6/1/95. Only acreage assessment until 5/31/98 then
current "Cold Storage" Square Footage Rental Rate will
be assessed concrete pad storage area.
Illinois Ordinance Plant Layout Plan(s) No.(s) Reference(s):
6544-101.06, 6544-101.07, 6544-101.10, 6544-101.11, 6544-10-1.12,
6544-101.13, 6544-101.14A, 6544-101.14B, 6544-101.24, 6544-101.34,
and 6544-101.40
*See Section ONE of Lease Contract for explanation.
**"M"Designates rental space utilized for
"Manufacturing" and rental rates assessed
accordingly.
"CS" Designates rental space utilized for "Cold
Storage" and rental rates accordingly.
"IG" Designates rental space (Igloos) utilized for
explosive storage.
"AC" Designates Acreages set aside inside fenced areas
and Buffer areas outside fenced areas.
# Designates No rental rates assessed Ramps, Hall-ways,
Utility Systems, or Boiler Rooms, not used as part of
Manufacturing or Cold Storage operations.
10.
<PAGE>
Lessee: PRIMEX TECHNOLOGIES, INC.
Lease Contract No. 14-16-0003-96-579
RENTAL RATE SCHEDULE:
(Continuation)
ANNUAL RENTAL COMPUTATION
<TABLE>
<CAPTION>
Dates Type of Total Rate/Sq.Ft/ Annual Monthly
From To Use** Sq.Ft. Year* Installment Installment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
01/01/97 02/28/97 M 113,692 $0.31 $35,244.52 $2,937.04
CS 152,452 .26 39,637.52 3,303.13
IG 62,400 .14 8,736.00 728.00
AC 629.33 14.00 8,810.62 734.22
M 6,015 .65 3,909.75 325.81
CS 358,605 .45 161,372.25 13,447.69
IG 44,890 .25 11,222.50 935.21
AC 2 50.00 100.00 8.33
TOTALS $269,033.16 $22,419.43
03/01/97 12/31/97 M 113,692 $0.31 $35,244.52 $2,937.04
CS 152,452 .26 39,637.52 3,303.13
IG 62,400 .14 8,736.00 728.00
AC 629.33 14.00 8,810.62 734.22
M 6,015 .65 3,909.75 325.81
CS 379,105 .45 170,597.25 14,216.44
IG 44,890 .25 11,222.50 935.21
AC 2 50.00 100.00 8.33
TOTALS $278,258.16 $23,188.18
Effective
01/01/98 M 119,707 $0.65 $77,809.55 $6,484.13
CS 531,557 .45 239,200.65 19,933.39
IG 107,293 .25 26,823.25 2,235.28
AC 631.33 50.00 31,566.50 2,630.54
TOTALS $375,399.95 $31,283.34
</TABLE>
* See Section ONE of Lease Contract for explanation.
**"M" Designates rental space utilized for "Manufacturing" and
rental rates assessed accordingly.
"CS" Designates rental space utilized for "Cold Storage" and
rental rates accordingly.
"IG" Designates rental space (Igloos) utilized for explosive
storage.
"AC" Designates Acreages set aside inside fenced areas and
Buffer areas outside fenced areas.
11.
<PAGE>
On December 31, 2005, or extension thereof, all new construction and
improvements made to the leased premises by the Lessee shall become property of
the Lessor. After that date (assuming the lease is renewed, extended or
reissued), a new rental rate will be established. This new rate will be based
upon the condition of the leased premises at the time, including all new
construction and improvements.
TWO: Lessor, by a ten (10) day notice in writing, may terminate this
lease in the event (a) a receiver or trustee is appointed for Lessee or its
Property, or Lessee makes an assignment for the benefit of creditors, or Lessee
becomes insolvent, or a petition is filed by or against Lessee pursuant to any
of the provisions of the United States Bankruptcy Act, as amended, for the
purpose of adjudicating Lessee as bankrupt, or for the reorganization of Lessee,
or for the purpose of effecting a composition or arrangement with Lessee's
creditors, and such petition filed against Lessee is not dismissed within sixty
(60) days; or (b) of any violation of any of the terms, conditions or covenants
of this lease and the failure of Lessee to cure such violation within ten (10)
days from the giving of a written notice thereof by Lessor to Lessee. Upon
expiration or termination of this lease, Lessor shall have the right to invoke
any remedy permitted by law or equity for the protection of its interests
hereunder, and Lessee hereby expressly waives all rights which it may have to
redeem or to be served with any further notice of Lessor's intention to cancel
or terminate this lease other than as herein provided. In the event that this
lease is terminated by reason of the violation by Lessee of any of its terms,
conditions or covenants, Lessor shall have the right to sue for and recover all
unpaid rents and damages accrued or accruing under this lease or arising out of
any violation thereof. If default be made in the payment of the above rent, or
any part thereof, or in any of the covenants herein contained to be kept by the
Lessee, Lessor may at any time, at its election, upon ten (10) days written
notice to Lessee, demand possession of and reenter said premises, or any part
thereof, with or without process of laws, and remove Lessee or any persons
occupying the same. Provided such ten (10) days notice shall have been given as
provided in the immediately preceding sentence, nothing, contained in this
paragraph shall limit the rights of Lessor to any of the remedies that would
otherwise be available to Lessor under the Landlord and Tenant Act of the State
of Illinois.
THREE: Lessee shall have the option to terminate this lease for any
or no reason upon three (3) months written notice to the Lessor of such
termination. Lessor shall have the option to terminate this lease for cause upon
30 days notice to Lessee after Lessee's failure to cure or commence to cure any
default or violation of this lease within the ten day time period set forth in
Section Two of this lease. Grounds for termination for cause include, but are
not limited to, any violation by the Lessee of any of the terms, conditions, or
covenants of this lease which have not been cured in the time allowed, or
declaration of a national emergency that requires use of the leased premises to
respond to such national emergency.
FOUR: Lessee has inspected and knows the condition of the leased
premises and it is understood that the leased premises are hereby leased to
Lessee without any obligation on the part of Lessor to make any alterations,
repairs, or additions thereto except as hereinunder in this agreement provided.
FIVE: New Construction and improvements.
"New construction" is defined as (1) additions and/or modifications
which increase the square footage of the leased buildings), or (2) construction
of a new building or facility on the leased premises. "Improvements" is defined
as modifications, alteration, or replacements made by the Lessee to the leased
premises such as floor coverings, insulation, paneling, or other wall or ceiling
finishing, installed lighting or plumbing fixtures, or partitions attached to
the walls, ceilings, or floor, and all other similar additions.
Lessee shall not undertake new construction or improvements to the
leased premises without prior written approval of the Lessor when such new
construction or improvements will increase building square footage, require
additional water or sewer services, or will change the exterior design.
Improvements to buildings which do not increase square footage or increase water
and sewer services, can be performed by Lessee with prior written notification
to Lessor. Any new construction or improvements made by the Lessee to the leased
premises shall not be removed from the leased premises by the Lessee, either
during the life of the lease or thereafter without prior written approval of the
Lessor. Lessee shall have the right to install machinery, equipment, or
furniture upon the leased premises as may, in the Lessee's opinion, be necessary
for the proper use thereof, and upon the expiration, termination, or
cancellation of the Lease, or within such reasonable time thereafter as may be
allowed by the Lessor, Lessee will remove such machinery, equipment, or
furniture; provided, however, that all expenses in connection
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with such installations or such removals shall be paid by the Lessee; and
provided further, that the Lessee shall, at its own expense, promptly repair any
damage to the leased premises caused by such installations or removals. For the
time which may be accorded by Lessor within which Lessee may remove its property
from the demised premises after a lawful termination of this lease, or in the
event Lessee holds over after the expiration, termination, or cancellation of
the term of this lease, Lessee shall pay Lessor double rental per day, computed
from the date of expiration, termination or cancellation of the term of this
lease, to and including the date of Lessee's vacation, removal of Lessee's
property from the demised premises, or to and including the date of completion
of repairs necessitated by such removal, whichever is later, provided, however,
Lessee shall during the said period continue to be bound by its covenants and
agreements (except as to rental provided in paragraph ONE hereof) as herein
contained with respect to the demised premises, and to Lessor, notwithstanding
the expiration, termination or cancellation of the term of this lease. In the
event Lessee shall hold over after the expiration of the term above demised for
a sufficient period of time to create a renewal of this lease by operation of
law, then any renewal or future right of possession not evidenced by a written
mutually executed instrument, shall be a tenancy from calendar month to calendar
month.
SIX: Lessee shall use reasonable care in the occupation and use of
the leased premises and shall at all times, during the term of this lease, keep
and maintain the same in good state of repair; Lessee shall, at his own expense,
make all repairs and perform all maintenance necessary to keep the premises at
all times in as good condition as at the beginning of the term of this lease,
reasonable wear and tear and casualty damage excepted, and upon the expiration
or termination of this lease, except as provided in paragraph FIVE hereof Lessee
shall yield and place Lessor in peaceful possession of the leased premises free
and clear of any liens, claims or encumbrances and in as good condition as the
premises existed at the commencing of this lease, ordinary wear and tear and
casual damage excepted. The attached "Operational Policies, Performance and
Building Maintenance Standards", and "Igloo Maintenance Standards" listed in
Exhibit No. A will apply during the term of this lease incorporated herein by
reference.
SEVEN: If Lessee shall fail or neglect to remove its property or
restore the leased premises within the time above provided, then Lessor may
cause such property to be removed and the leased promises to be so restored, and
the cost of such removal and restorations shall be paid by Lessee to Lessor on
demand, and no claims for damages against Lessor or its officers, agents,
contractors, or employees shall be created or made on account of such removal
and restoration. If property remains beyond 60 day termination period, it will
become the property of the United States.
EIGHT: Lessor or its designated representative shall have the right
to inspect the leased premises at all reasonable times during the term of this
lease.
NINE: Lessee shall, at all times during the term of this lease,
exercise due diligence in the protection of the leased premises against damage
or destruction by fire, windstorm, or other hazards, and shall, at its own cost,
procure and maintain insurance against such loss or damage equal to the full
insurable replacement value of said premises as reasonably established by the U.
S. Fish and Wildlife service, in such companies as Lessor shall reasonably
approve. If said premises are damaged or destroyed thereby, Lessor may elect
whether to require that Lessee immediately, at its own cost, repair or rebuild
said premises to place them in as good and tenantable condition as prior to said
damage or destruction, in which case Lessee shall then be entitled to all moneys
received under the insurance policies for application against the cost of
repairing or rebuilding said premises but Lessee's obligation to rebuild or
repair shall not exceed insurance proceeds received by Lessee in connection with
said damage or destruction. If, in the alternative, Lessor elects not to require
repair of damage, Lessor shall be entitled to all monies received under the
insurance policies as compensation.
Lessee agrees that in the event any property of the United States
within the Crab Orchard National Wildlife Refuge, of which the leased premises
constitute a part, is damaged or destroyed as a result of Lessee's use and
occupancy of the leased premises, if so required by Lessor it shall be promptly
repaired or replaced by Lessee to the satisfaction of Lessor, or in lieu of such
repair or replacement, Lessee shall pay the Lessor money in an amount sufficient
to compensate for the loss sustained by the United States by reason of damage to
or destruction of
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property within the said Crab Orchard National Wildlife Refuge, but Lessor's
obligation to repair or replace shall not exceed insurance proceeds received by
Lessee in connection with said damage or destruction.
Lessee agrees to save Lessor harmless from any liability whatsoever
because of accident or injury to persons occurring due to the occupancy, use, or
operation of said premises, and those resulting from the acts or omissions of
the Lessee, its agents, servants or contractors; however, Lessee does not save
Lessor harmless from any liability whatsoever because of accident or injury to
persons or property resulting from the acts or omissions of the Lessor, in
agents, servants, or contractors.
Lessee agrees to procure and maintain, at its own cost, public
liability, personal injury and property damage insurance with coverage of at
least $300,000 and $100,000 respectfully.
The policies evidencing all types of insurance coverage required by
Lessor shall name Lessor as an additional named insured. Lessee shall furnish to
the Lessor such evidence as is necessary to show compliance with said
requirement within 60 days from the effective date of this contract.
In event Lessee fails to maintain any such insurance or fails to pay
any of the premiums when due, Lessor may at its option procure such insurance
and pay any delinquent premiums, and Lessee hereby agrees to reimburse Lessor
immediately thereafter for any such reasonable cost, which amount is hereby
declared to be additional rental becoming immediately due and payable.
TEN: Lessee agrees that if the premises shall be destroyed or damaged
by causes relating to the use of the building for the Lessee's official business
or any other cause (including fire), as to be untenantable and unfit for
occupancy, such fact shall not affect the provisions of this lease; and the
Lessee hereby waives all rights to quit and surrender possession of the premises
in such event and thereby to relieve itself of the payment of rent subsequent to
the date of such surrender, and expressly agrees that its obligations hereunder,
including the payment of rent, shall continue the same as though said building
had not been destroyed or injured. When said premises have been entirely
repaired or rebuilt or compensation has been paid as required by this lease, the
Lessee shall then have the cancellation option under the terms herein provided.
ELEVEN: Lessee shall have all necessary and reasonable privileges of
the use of established roads and highways as required in the use and occupation
of the leased premises.
TWELVE: (a) Lessor is now providing and maintaining fire protection
services for certain areas of the Crab orchard National Wildlife Refuge,
including the area in which the leased premises are located. However, it is
understood and agreed between the parties hereto that Lessor at its option and
upon not less than thirty (30) days notice in writing to Lessee, may discontinue
or suspend such services in any or an of the Crab Orchard National Wildlife
Refuge, including the area in which the leased premises are located. The
discontinuance or suspension of any or all of such services shall not constitute
a reason or basis for adjustment or change in the amount of rental to be paid by
Lessee as provided herein, or for adjustment or change in any of the other terms
hereof.
(b) Lessor has the facilities for furnishing one or more of the
following services, to-wit: (1) water, and (2) sewage disposal to certain
buildings and areas in the Crab Orchard National Wildlife Refuge. Lessor's
ability to furnish such services is dependent upon and limited to the present
existing facilities for the production, processing and distribution of such
services, and it is understood and agreed by the parties hereto that Lessor will
not enlarge or extend such facilities to permit a different production,
processing and distribution than is possible as the facilities now exist, but
that Lessee with the prior written approval of Lessor and at Lessee's expense,
may enlarge, extend or alter such facilities to permit different or additional
services. Within the limits of its authority and funds available therefor,
Lessor agrees to furnish any one or more of such services, if requested by
Lessee to do so, to the leased premises if the present facilities are sufficient
to furnish the service requested. In the event Lessor does furnish any of the
above named services to the leased premises, Lessee hereby agrees to pay Lessor
for such services, for the period furnished, on the bases of rates and charges
fixed therefor by Lessor. Water and sewer rates are to be comparable with the
rates charged by neighboring cities. The water and sewer rates are to be
reevaluated every three years thereafter. It is agreed between the parties
hereto, however, that in the event Lessor shall sell, lease, or
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otherwise dispose of the facilities for the production, processing and
distribution or otherwise furnishing of water and sewage disposal services, or
any of them, Lessor shall require the purchaser or grantee of the facility
transferred to agree to furnish, or continue furnishing, service if requested by
Lessee to do so, at the same cost to Lessee as set forth in this lease and
thereupon Lessor's liability in relation to the furnishing of such services
shall cease, and Lessor shall in no way be liable thereafter for the furnishing
of such services. Lessee further agrees to pay Lessor a reasonable rate for any
other service rendered to Lessee including rehabilitation, alteration, or repair
of the leased premises, as may be agreed upon between the parties hereto.
(c) if the term of this lease contract extends beyond the current
Government fiscal year, the Lessor's liability for furnishing services and
facilities herein provided for is contingent upon the availability of
appropriations for expenditures beyond such fiscal year.
THIRTEEN: In the occupation, use and operation of the leased premises
or any part thereof, Lessee agrees to comply with all applicable Federal, State,
municipal and local laws and the rules, regulations and requirements of any
departments and Bureaus and all local ordinances and regulations, including
rules, regulations, and requirements issued by Lessor, its officers and
employees pertaining to the protection, safety and maintenance of the Crab
Orchard National Wildlife Refuge, of which the leased premises constitute a
portion. Lessee further agrees to indemnify and hold Lessor harmless from any
liability or penalty which may be imposed by local or State authority or any
department or Bureau thereof by reason of any asserted violation by Lessee of
such laws, rules, orders, ordinances or regulations; provided, however, that
nothing herein contained shall prohibit Lessee from contesting in good faith the
validity of such laws, rules, orders, ordinances or regulations.
Lessee agrees to abide by all present and future state and Federal
regulations pertaining to environmental protection. Any violation of such
regulations not corrected within sixty (60) days after written notice is
received or if correction is not commenced within such 60-day period for any
Correction that cannot reasonably be completed within said 60-day period, shall
constitute grounds for the Lessor to terminate this lease agreement for cause
unless within that time the Lessee demonstrates to the Lessor's satisfaction
that the Lessee is contesting the violation and has reasonable grounds for the
contest. In the event the Lessor determines that a condition created by action
or inaction of the Lessee is seriously endangering plant, animal, or human
populations, the Lessor may require the Lessee to stop operations causing such
conditions immediately. Upon a determination of the Lessor that such emergency
conditions have been corrected, Lessor shall promptly allow the Lessee to resume
such operations.
The Lessee affirms its agreement to cooperate with Lessor in
investigation of environmental history and conditions as outlined in the request
for Lessor's approval of assignment from Olin Corporation - Marion Operations,
to Primex Technologies, Inc. from Olin Corporation dated December 30, 1996,
(photo-copy attached) and the commitments made therein, which commitments
continue as conditions to approval of the lease assignment and are hereby
incorporated by reference as conditions of this lease.
FOURTEEN: During the term of this contract, Lessee must abide by the
applicable laws and Executive Orders concerning the nondiscrimination
requirements relating to employment and service to the public; employment of the
handicapped; and disabled veterans and veterans of the Viet Nam era.
FIFTEEN: Except with the prior written consent of Lessor, Lessee
shall not sublet any part of the premises or assign this lease or any of its
rights hereunder, or transfer, assign, mortgage or otherwise encumber any of the
leased premises; provided however, that this paragraph shall not prohibit
Lessee, for its own account or under such arrangements as it may deem desirable
without any expense to Lessor, from dispensing and selling food, soft drinks,
tobacco products, confectionery and similar articles to employees of Lessee on
the premises.
SIXTEEN: Subject to the provisions of paragraph FIFTEEN hereof, this
lease shall be binding upon and inure to the benefit of the successors and
assigns of the parties hereto.
SEVENTEEN: Lessee warrants that it has not employed any person to
solicit or secure this lease upon any agreement for a commission, percentage,
brokerage or contingent fee.
15.
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EIGHTEEN: The failure of Lessor or Lessee to insist, in any one or
more instances, upon performances of any of the terms, covenants or conditions
of this lease shall not be construed as a waiver or relinquishment of the future
performance of any such term, covenant, or condition; but breaching party's
obligation with respect to such future performance shall continue in full force
and effect.
NINETEEN: No member of, or delegate to, Congress or resident
commissioner shall be admitted to any share or part of this lease or to any
benefit that may arise therefrom; but this provision shall not be construed to
apply to this lease if made with a corporation for its general benefit.
TWENTY: Any notice or advice to or demand upon the Lessee shall be in
writing and shall be deemed to have been given or made on the day it is received
by certified mail (return receipt requested) or otherwise delivered in a manner
which will objectively establish the date of receipt, to the Lessee, addressed
to PRIMEX TECHNOLOGIES, INC., 8820 ROUTE 148, MARION, ILLINOIS 62959 or at such
other address as Lessee may hereafter from time to time specify in writing for
such purpose. Any notice or advice to or demand upon the Lessor shall be in
writing and shall be deemed to have been given or made on the day it is received
by certified mail (return receipt requested) or otherwise delivered in a manner
which will objectively establish the date of receipt, to Lessor, addressed to
REFUGE MANAGER, UNITED STATES FISH AND WILDLIFE SERVICE, CRAB ORCHARD NATIONAL
WILDLIFE REFUGE, 8588 ROUTE 148, MARION, ILLINOIS 62959 or to such other address
as Lessor may hereafter from time to time specify in writing for such purposes.
TWENTY-ONE: It is agreed between the parties hereto that water,
sewer, gas, and electric lines and other utility or service installations or
equipment, which are part of a general distribution system and which enter upon
or cross the leased premises, either under, on, or above surface, are
specifically exempted from and not included as a part of the leased premises.
Lessee agrees that Lessor or its representatives may at any time enter upon the
leased premises for the purpose of performing repairs, maintenance, or
replacement work on said utility installations, equipment and systems.
TWENTY-TWO: Renewal Option. Lessee is granted the option to renew
this lease under terms and conditions specified at the time of renewal by the
Lessor, subject to conditions that: 1) the water, sewer, and access facilities
at the refuge are adequate and will remain serviceable for the term of the
renewal period without necessitating major rehabilitation, maintenance, or
repair, and 2) the Lessee is in compliance with the existing lease and
applicable Federal and State laws, including any permits thereunder, and 3) that
sufficient funds are available to the Lessor to continue operating the
industrial program.
This renewal option is for an additional period of twenty-five (25)
years and may be exercised by written notice to the Lessor given no later than
180 days prior to the expiration of this lease. Lessor, within 90 days after
receipt of the Lessee's written notice to renew the lease, will provide the
Lessee with the terms and conditions of the renewed lease.
TWENTY-THREE: Except as otherwise provided in this contract, any
dispute concerning a question of fact arising under this Lease which is not
disposed of by agreement shall be decided by the Regional Director, who shall
reduce his decision to writing and mail or otherwise furnish a copy thereof to
the Lessee. The decision of the Regional Director shall be final and conclusive
unless, within 30 days from the date of receipt of such copy, the Lessee mails
or otherwise furnishes to the Regional Director a written appeal addressed to
the head of the agency involved. The head of the agency shall refer such written
appeal through the approved Board of Contract Appeals for resolution.
TWENTY-FOUR: It is understood and agreed by and between the parties
hereto that the within instrument constitutes the full and complete record of
this transaction and that no statements, representations, commitments, or
agreements, whether oral or written, unless incorporated herein, or added hereto
by properly executed amendment, shall be of any force and effect nor shall in
any way operate to vary the terms hereof.
IN WITNESS WHEREOF,the parties hereto have subscribed their names as
of the date above written.
16.
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UNITED STATES OF AMERICA
Acting by and through the
Secretary of the Interior
By: /s/ Daniel W. Doshier
---------------------------
Daniel W. Doshier
Refuge Manager
In presence of:
/s/ John W. Hudkins PRIMEX TECHNOLOGIES, INC.
- ------------------------------------
/s/ John W. Hudkins By: /s/ Jim Hascall
- ------------------------------------ ---------------------------
(If Lessee is a corporation complete the following certification.)
I, John W. Hudkins, certify that I am the Assistant Secretary of the
corporation named as Lessee in this lease, that J.G. Hascall, who signed said
lease in behalf of the Lessee was then Chairman and Chief Executive Officer of
said corporation and has authority to sign for said corporation; that said lease
was duly signed for and in behalf of said corporation by authority of its
governing body, and is within the scope of its corporate powers.
John W. Hudkins (Corporate Seal)
17.
<PAGE>
EXHIBIT 10.24
THIS INDENTURE, made this 29th day of December, 1986, by and between D. HEBDEN
PORTEUS, DAVID M. HAIG, FRED C. WEYAND and PAUL MULLIN GANLEY, Trustees under
the Will and of the Estate of Samuel Mills Damon, deceased, hereinafter called
Lessors, and THE CONNECTICUT NATIONAL BANK, not individually but solely as
Trustees under that certain Trust Agreement dated as of December 29, 1986, among
the Trustee and MERCED ASSOCIATES, a Maryland general partnership hereinafter
called "Lessee",
WITNESSETH
That the Lessors, in consideration of the rent hereinafter reserved
and of the covenants herein contained and on the part of the Lessee to be
observed and performed, hereby demise and lease unto said Lessee, and the Lessee
hereby accepts and rents:
All of the property described in Schedule "A" and attached
hereto.
TO HAVE AND TO HOLD the same, together with rights, easements,
privileges and appurtenances thereunto belonging or appertaining, unto the said
Lessee for the term beginning on the 31st day of December, 1986, and ending on
the 31st day of December, 2036, notwithstanding the earlier termination of the
trust created under the Will of Samuel M. Damon, deceased, Lessee yielding and
paying therefor unto the Lessors quarterly in four (4) equal payments in advance
on the 1st day of January, April, July and October in each and every year during
said term, (plus the additional payments for any partial calendar quarter in
which the term begins, as hereinafter provided) without any deduction, all
accrued payments to be made on execution hereof, net rent as follows:
1. For any partial calendar quarter at the beginning of the term, at
the rate of $23,000.00 per month, paid prorated for any partial month on the
basis of a 30 day month. Payment for any partial calendar quarter at the
beginning of the term shall be made in advance upon delivery of the Indenture.
2. $69,000.00 for each full calendar quarter in 1987.
3. $75,166.67 on the first day of January, 1988, comprising rent for
the first calendar quarter of 1988.
4. $87,500.00 on the first day of April 1988 and on the first day of
each thereafter succeeding calendar quarter to and including the 10th
anniversary of the last day of the month in which the term of the lease begins.
5. Reasonable rent for the second 10 years of the term of the Lease,
and for each thereafter succeeding 10 year period of the term of the lease will
be determined by agreement of Lessors and Lessee; or, failing agreement, by
appraisal as provided in Paragraph (B) hereof.
<PAGE>
AND THE LESSORS hereby covenant with the Lessee that upon payment by
the Lessee of the rent as aforesaid and upon observance and performance of the
covenants by the Lessee hereinafter contained, the Lessee shall peaceably hold
and enjoy said premises for the term hereby demised without hindrance or
interruption by the Lessors or any other person or person lawfully or equitably
claiming by, through or under them except as herein expressly provided;
AND LESSEE hereby covenants with the Lessors as follows:
1. PAYMENT OF RENT. Lessee will pay said rent in lawful currency of
the United States at the office of the Lessors, or such other place in Honolulu,
Hawaii as shall be designated in writing by the Lessors, at the times and in the
manner aforesaid, without any deduction and without any notice or demand.
2. TAXES AND OTHER CHARGES. Lessee will pay to Lessors as additional
rent before the same become delinquent all real property taxes and assessments
and will pay directly all impositions, conveyance taxes, duties, water rates,
charges and other outgoings of every description to which said premises or any
part thereof or improvement thereon, or the Lessors or Lessee in respect
thereof, are now or may during said term by assessed or become liable, whether
assessed to or payable by the Lessors or Lessee including all assessments or
other charges for any permanent benefit or improvement of any of the premises
hereby demised or any part thereof made under any betterment law or otherwise,
or any assessment or charges for sewage or street or sidewalk improvement, or
municipal or other charges for any utilities or other services or any
connections or meters therefor which may be legally imposed upon said premises
or any part thereof or to which said premises or any part thereof, or the
Lessors of Lessee in respect thereof, are now or may during said term become
liable, and with each payment of rent, real property taxes and other charges
hereunder payable by the Lessee, whether the same be actual or constructive
receipts of the Lessors, the amount of all Hawaii general excise or other
similar taxes payable by the Lessors on account of such receipt, and also on
demand, interest at the rate of one (1) percent per month or higher as may then
be permitted by law on all delinquent rent, taxes and other charges hereunder
payable by Lessee from the respective due dates thereof until fully paid;
provided, however, that with respect to any assessment made under any betterment
or improvement law which may be payable in installments, the Lessee shall be
required to pay only such installments of principal together with the interest
on unpaid balances hereof as shall become due and payable during said term, and
that real property taxes and assessments shall be prorated between the Lessors
and Lessee as of the dates of commencement and expiration respectively of said
term.
<PAGE>
3. IMPROVEMENTS REQUIRED BY LAW. Lessee will at its own expense
during the whole of said term make, build, maintain and repair all fences,
sewers, drains, roads, curbs, sidewalks, and parking areas which may be required
by law to be made, built, maintained and repaired upon adjoining and in
connection with or for the use of said premises or any part thereof, and whether
same were erected by the Lessors or in existence at the inception of this lease;
and in case any such improvements required by the law shall be made, built,
maintained or repaired by the Lessors, the Lessee shall forthwith reimburse the
Lessors for the cost thereof.
4. REPAIR AND MAINTENANCE. Lessee will at its own expense, from time
to time and at all times during said term, well and substantially repair,
maintain, amend and keep all buildings, drainage ditches, culverts, tunnels and
other improvements now or hereafter built on the land hereby demised with all
necessary reparations and amendments whatsoever in good order and condition.
5. INSPECTION. Lessee will permit the Lessors and their agents, at
all reasonable times during said term, to enter said premises and examine the
state of repair and condition thereof, and will repair and make good all defects
of which notice shall be given by the Lessors within thirty (30) days after
giving of such notice or such further time as may be reasonably necessary to
complete the same in the exercise of due diligence.
6. LAWS AND ORDINANCES. Lessee will, during the whole of said term,
keep said premises in a strictly clean and sanitary condition and observe and
perform all laws, ordinances, rules and regulations for the time being
applicable to said premises or any buildings and improvements now or hereafter
erected thereon or the use thereof; and will indemnify the Lessors and the
Estate and effects of Samuel M. Damon, deceased, against all actions, suits,
damages and claims by whomsoever brought or made by reason of the nonobservance
or nonperformance of said laws, ordinances, rules and regulations or of this
covenant.
7. CONSTRUCTION AND BOND. Lessee will not construct or make on the
demised land by building or other structure, or any additions, alterations or
remodeling at a cost exceeding $5,000.00 to such building or structure, except
in accordance with plans and specifications therefor first approved in writing
by the Lessors; when such approval is requested by the Lessee, the review of
building plans and specifications by the Lessors will be at the expense of the
Lessee; and if so required by the Lessors in their discretion, Lessee will
before commencement of any such construction deposit with the Lessors a bond in
the penal sum of at least the cost of such construction, in form and with surety
satisfactory to the Lessors, guaranteeing the completion thereof free from any
mechanics' of materialmen's liens.
<PAGE>
8. INDUSTRIAL OR MERCANTILE USE. Lessee will use or allow to be used
the premises hereby demised solely for industrial or mercantile purposes; and
will at no time during said term permit the same to be occupied as a dwelling
place without the consent of the Lessors in writing. Lessee will not, without
the written consent of the Lessors, use said premises or any part thereof for
the storage of or dealing in junk, scrap, salvaged or other offensive materials
of which the Lessors shall be the sole judge; and will not make or suffer any
strip or waste or unlawful, improper or offensive use of said premises, nor
overload the floors or walls of any building thereof, nor use said premises for
any purpose or in any manner which will invalidate the insurance herein required
on such buildings; and will not, without the written consent of the Lessors,
take or remove therefrom any soil or limestone; and will not, without such
consent, dig, drill, or cause to be dug or drilled any well, whether artesian or
surface, or use or permit to be used any well on said premises; and will not,
without such consent, use said premises or any part thereof or permit the same
to be used for the manufacture or sale of any alcoholic liquor or the raising or
pigs, fowl or livestock; and will not, without such consent, assign or mortgage
this lease except as herein provided or sublease or subdivide said premises or
any part thereof; and will not place or construct any billboard or sign on said
premises without first receiving the written approval of the Lessors as to size,
wording, style and location.
9. BOUNDARY SETBACK. Lessee will not at any time during said term
erect, place or maintain on said premises any fence, wall or other improvement
within twenty (20) feet of the front or street boundaries other than a boundary
fence or wall not more than six (6) feet high.
10. INSURANCE. Lessee will at all times during said term keep all
buildings now or hereafter erected on said premises insured against loss or
damage by fire with extended coverage, and during war time against war damage to
the extent the same is reasonably obtainable, in the joint names of the Lessors
and the Lessee in any insurance company authorized to do business in Hawaii in
an amount equal to the maximum insurable value thereof, payable to the Lessors
in case of loss or damage, and will pay all premiums thereon at the time and
place the same are payable, and will from time to time forthwith after receiving
the same deposit with the Lessors such policies of insurance or current
certificates thereof and the receipt for every premium so paid; and all
compensation, indemnity or other moneys paid on account of any loss or damage,
other than rental value insurance, shall with all convenient speed be laid out
by the Lessee in rebuilding, repairing or otherwise reinstating the same
buildings in a good and substantial manner according to the plan and elevation
of the building so destroyed or damaged, or according to such modified plan as
shall be previously approved by the Lessors and the Lessee in writing, and in
the event such
<PAGE>
proceeds are inadequate, the Lessee shall make up such deficiency from its own
funds; provided, however, that if the main building on said premises shall be
destroyed at any time during the last ten (10) years of the term hereof, the
Lessee may at its option within sixty (60) days after such casualty either (a)
surrender this lease, forfeiting all interest in the proceeds of insurance and
in any remaining improvement, or (b) pay to the Lessors a sum of money equal to
the then present worth of the quarterly installments of rent payable during the
remainder of said term, calculated at compound discount at the rate of five
percent (5%) per annum, and at its own expense remove from said premises the
remains of said damaged building if so required by the Lessors, and thereupon
all proceeds of such insurance shall be payable to and be the sole property of
the Lessee, and this lease shall terminate. Lessee will procure at its own
expense and keep in force during the entire period of this lease a policy of
comprehensive general liability insurance with respect to said premises and
appurtenant sidewalks in any insurance company authorized to do business in
Hawaii, naming the Lessors as additional assureds, with minimum limits of not
less than $300,000.00 for injury to one person and not less than $1,000,000.00
for injury to more than one person in any one accident or occurrence and
insurance in the sum of not less than $100,000.00 against claims for property
damage, or such higher limits as the Lessors may from time to time reasonably
establish as prudent for their protection in the circumstances then existing,
and will from time to time forthwith upon receiving the same deposit with
Lessors such policies of insurance or current certificates thereof.
11. LESSOR'S EXPENSES. Lessee will pay to the Lessors on demand all
costs and expenses including reasonable attorney's fees incurred by the Lessors
in enforcing any of the covenants herein contained, in remedying any breach by
the Lessee thereof, in recovering possession of said premises, in collecting any
delinquent rent, taxes or other charges hereunder payable by the Lessee, or in
connection with any litigation commenced by or against the Lessee (other than
condemnation proceedings) to which the Lessors without any fault on their part
shall be made parties.
12. INDEMNITY. Lessee will indemnify and hold the Lessors harmless
from and against all claims and demands for loss or damage, including property
damage, personal injury and wrongful death, arising out of or in connection with
the use or occupancy of said premises by the Lessee or any other person claiming
by, through or under the Lessee, or any accident or fire on said premises or any
adjacent sidewalk or any nuisance made or suffered thereon, or any failure by
the Lessee to keep said premises or sidewalk in a safe condition, and will
reimburse the Lessors for all their costs and expenses including reasonable
attorney's fees incurred in connection with the defense
<PAGE>
of any such claims, and will hold all goods, materials, furniture, fixtures,
equipment, machinery and other property on said premises at the sole risk of the
Lessee and hold the Lessors harmless from liability for loss or damage thereto
by any cause whatsoever, and will indemnify and hold the Lessors harmless from
and against all loss, costs and expenses, including reasonable attorney's fees
with respect to any attachment, judgment, lien, charge or encumbrance whatsoever
against said premises made or suffered by the Lessee.
13. SURRENDER. At the end of said term of other sooner determination
of this lease, the Lessee will peaceably deliver up to the Lessors possession of
the premises hereby demised; provided, however, that if the Lessee shall have
observed and performed all covenants and conditions herein contained and on its
part to be observed and performed, the Lessee shall have the privilege of
removing any building or buildings which shall have been placed on the demised
premised at its own expense or of selling such to a new in-coming tenant, but if
the Lessee shall remove such building the Lessee shall clear the premises of all
rubbish and debrise and restore the surface to a condition satisfactory to the
Lessors, all at Lessee's own expense.
AND IT IS HEREBY MUTUALLY AGREED by and between the parties as
follows:
(A) CONDEMNATION. If at any time or times during said term any
authority having the power of eminent domain shall take or condemn said premised
or any part thereof for public use, then and in every such case the estate and
interest of the Lessee in said premises or such part so taken or condemned shall
thereupon cease and determine, and the Lessee shall not by reason of such
condemnation be entitled to claim or receive any portion of the compensation or
damages payable or to be paid by reason of such condemnation, but the entire
amount thereof shall be the sole property of the Lessors, provided however, that
out of the proceeds of such condemnation the Lessors shall pay to the Lessee the
amount of all compensation and damages awarded for or on account of any
buildings placed on said premises at its own cost as specifically determined in
the condemnation proceedings, but deducting therefrom a reasonable portion of
the expense incurred by the Lessors in connection with such proceedings. In case
only part of said premises shall be so taken or condemned, the rent herein
reserved shall be reduced in the proportion that the area of the land taken or
condemned bears to the total area of land demised, and all compensation and
damages paid for or on account of any improvements placed on said premises by
Lessee at his own cost as specifically determined in the condemnation
proceedings shall be used promptly by the Lessee as may be necessary to restore
or replace such improvements on the remaining premises according to plans first
approved in writing by the parties; provided, further, that if more than one
fourth of the demised land shall be so taken or condemned
<PAGE>
thereby rendering the remaining premises unsuitable for the Lessee's business
purposes, the Lessee may within ninety (90) days thereafter surrender to the
Lessors this lease, subject to the Lessee's prior removal at its own expense of
all buildings on the remaining demised land if so required by the Lessors and
its restoration of said remaining land to good condition and even grade, and the
Lessee shall thereby be relieved of all further obligations hereunder.
(B) APPRAISAL. In case the parties hereto shall fail to agree on the
net annual rent hereunder payable for any rental period of said term as herein
provided at least ninety (90) days before the commencement of such period, said
rent shall be such fair and reasonable annual rent for the demised land
(exclusive of buildings) as shall be determined by three impartial real estate
appraisers, one to be appointed by each of the parties hereto, and the Lessors
and Lessee shall each promptly name one such appraiser and give written notice
thereof to the other party, and in case either party shall fail so to do within
ten (10) days after appointment of the first appraiser, the appraiser already
appointed shall name a second appraiser, and the two appraisers thus appointed
in either manner shall appoint a third appraiser, and in case of their failure
so to do within ten (10) days after appointment of the second appraiser, either
party may have such third appraiser (who shall in this case be a member of the
Honolulu Chapter of the American Institute of Real Estate Appraisers or other
similar organization) appointed by any person then sitting as Judge of the
Circuit Court of the First Circuit of the State of Hawaii, and the three
appraisers so appointed will thereupon proceed to determine the matter in
question, and the decision of said appraisers or a majority of them shall be
final, conclusive and binding upon both parties. The cost of such appraisal
other than attorneys' fees shall be shared equally by the parties hereto. Until
determination of such rent by agreement or appraisal as herein provided,
quarterly installments at the same rate payable for the preceding year shall be
paid on account thereof.
(C) FORFEITURE. This demise is upon the condition that if the Lessee
shall fail to pay said rent or any part thereof within twenty (20) days after
the same becomes due, whether the same shall or shall not have been legally
demanded, or shall fail to observe and perform faithfully any of the covenants
herein contained and on the part of the Lessee to be observed and performed and
such default shall continue for thirty (30) days after written notice thereof
given to the Lessee, or if the Lessee shall abandon said premises, or if the
Lessee then owning this lease shall be adjudicated bankrupt or take any
proceedings under the Federal Bankruptcy Act seeking the readjustment,
rearrangement, postponement, composition or reduction of its debts, liabilities
or obligations or make
<PAGE>
any assignment for the benefit of creditors, or if this lease or any estate or
interest of the Lessee hereunder shall be taken or sold under any process of
law, then and in any such case the Lessors may at once re-enter said premises or
any part thereof in the name of the whole and, upon or without such entry, at
their option, terminate this lease, and may expel and remove from said premises
the Lessee and any persons claiming under the Lessee and their effects without
being deemed guilty of any trespass or becoming liable for any loss or damage
occasioned thereby, all without service of notice or legal process and without
prejudice to any other remedy or right of action including summary possession
which the Lessors may have for arrears of rent or for any preceding or other
breach of contract.
(D) MORTGAGES. Lessee may from time to time without further consent
of the Lessors assign this lease by way of mortgage to any bank, insurance
company or other established lending institution as mortgagee, and the mortgagee
may enforce such mortgage and acquire title to the leasehold estate in any
lawful way, and pending foreclosure of such mortgage may take possession of and
rent said premises, and upon foreclosure thereof may without further consent of
the Lessors sell and assign the leasehold estate by assignment in which the
assignee shall expressly assume and agree to observe and perform all covenants
of the Lessee herein contained, and such assignee may make a purchase money
mortgage of this lease to the assignor, provided that upon the execution of any
such assignment or mortgage a true copy thereof shall be delivered promptly to
the Lessors, and that no other or further assignment of this lease for which any
provision hereof requires the written consent of the Lessors shall be made
without such consent. The mortgagee shall be liable to perform the obligations
of the Lessee hereunder only during such period as it had possession or
ownership of the leasehold estate, and the terms, covenants and conditions of
this lease shall control in case of any conflict with the provisions of such
mortgage. During the continuance in effect of any authorized mortgage of this
lease the Lessors will not terminate this lease because of any default on the
part of the Lessee to observe or perform any of the covenants or conditions
herein contained if the mortgagee, within sixty (60) days after the Lessors have
mailed to the mortgagee at its last known address a written notice of intention
to terminate this lease for such cause, shall cure such default, if the same can
be cured by the payment of money, or if such is not the case, shall undertake in
writing to perform all the covenants of this lease capable of performance by the
mortgagee until such time as this lease shall be sold upon foreclosure of such
mortgage. In case of such undertaking the Lessors will not terminate this lease
within such further time as may be required by the mortgagee to complete
foreclosure of such mortgage or other remedy thereunder, provided (a) that such
remedy is pursued promptly and completed with due diligence, and (b) that all
rent and other charges accruing hereunder are paid as the
<PAGE>
same become due and all other covenants of this lease capable of performance by
the Lessee are duly performed; and upon foreclosure sale of this lease the time
for performance of any obligations of this Lessee then in default hereunder,
other than the payment of money, shall be extended by the time reasonably
necessary to complete such performance by due diligence. Any default consisting
of the Lessee's failure to discharge promptly any lien, charge or encumbrance
against said premises junior in priority to such mortgage shall be deemed to be
duly cured if such mortgage shall be foreclosed by appropriate action instituted
within said sixty (60) day period and thereafter prosecuted in diligent and
timely manner.
(E) NOTICES. Any notices or demand to either party hereto provided
for or permitted by this lease may be given sufficiently for all purposes in
writing delivered personally to such party or any corporate officer thereof, if
such party is a corporation, or mailed as registered or certified mail addressed
to such party at its address herein specified or its last address given in
writing to the other.
(F) NONWAIVER AND DEFINITIONS. Acceptance of rent by the Lessors
shall not be deemed to be a waiver by them of any breach by the Lessee of any
covenant herein contained, nor of the Lessors' right to terminate this lease for
breach of covenant. The term "premises" whenever it appears herein includes and
shall be deemed or taken to include (except where such meaning would be clearly
repugnant to the context) all buildings and improvements now or any time
hereafter built on said land hereby demised; the term "Lessors" herein shall
include the Lessors, their successors in trust and assigns; and the term
"Lessee" or any pronoun used in place thereof shall indicate and include the
masculine or feminine, the singular or plural, and jointly and severally
individuals, firms or corporations, and their and each of their respective
successors, executors, administrators and permitted assigns, according to the
context hereof. No approval or consent of the Lessors herein required for any
action of the Lessee shall be unreasonably withheld.
(G) PRIOR LEASE. Physics International Company, by execution hereof,
hereby assigns and surrenders to the Lessors as of the commencement of said term
hereby demised that certain unrecorded prior lease of the said premises and of
the improvements thereon dated October 23, 1979, and all the leasehold estate
and interest of the Lessee thereunder, and the Lessors hereby accept the
foregoing surrender and release the Lessee from all further obligations under
the said prior lease, subject, however, to all rights under any subsisting
mortgage of said prior lease or sublease of all or any part of said premises,
made with the written consent of the Lessors, which shall continue in full force
and effect in accordance with their respective provisions. Lessee hereby assigns
this lease as
<PAGE>
security under every such mortgage hereinbefore specified in substitution for
said prior lease, subject to the written consent of the mortgagee thereof, with
the same lien and effect as though specifically assigned and mortgaged by the
same such mortgage.
IN WITNESS WHEREOF, the parties have executed these presents as of
the day and year first above written.
THE CONNECTICUT
NATIONAL BANK, Trustee
By_________________________ ____________________________
D. Hebden Porteus, Trustee
-----------------------------
David M. Haig, Trustee
------------------------------
Fred C. Weyand, Trustee
------------------------------
Paul Mullin Ganley, Trustee
"Lessee" "Lessors"
PHYSICS INTERNATIONAL COMPANY executes this lease as of the day and
year first above written for the limited purpose of assigning and surrendering
to Lessors the prior lease, pursuant to Paragraph (G) hereof.
PHYSICS INTERNATIONAL COMPANY
By________________________________
James H. Banister, Jr.
Senior Vice President
Corporate Director of Administration
"Prior Lessee"
These Clarifications and Interpretations are made as of this 29th day
of December, 1986 by and between D. Hebden Porteus, David M. Haig, Fred C.
Weyand and Paul Mullin Ganley, Trustees under the Will of Samuel Mills Damon,
deceased (Lessors); The Connecticut National Bank, not individually but solely
as Trustee under that certain Trust Agreement dated as of December 29, 1986,
among the Trustee and Merced Associates, A Maryland general partnership
(Lessee); and Physics International Company, a California corporation ("PI") to
clarify and interpret the provisions of the Indenture executed concurrently
herewith by Lessors, Lessee and PI.
<PAGE>
The references to paragraph numbers and letters which follow are to
the designated paragraphs of the Indenture. PARAGRAPH 2 - TAX AND OTHER CHARGES:
1. Notwithstanding the provisions of paragraph 2, Lessee, at its sole
expense may contest taxes, assessments, governmental impositions and the like
against the premises, but as a condition of such contest, Lessors shall be
provided with copies of all documents filed with any public agency in such
contest.
PARAGRAPH 3 - IMPROVEMENTS REQUIRED BY LAW:
1. Notwithstanding the provisions of paragraph 3, Lessors shall not
make for the account of Lessee any improvements to the premises required by law
until after written notice from Lessors advising Lessee that the latter has
defaulted in making such improvements, and that the Lessors intend to make the
improvements for the account of Lessee.
2. Further, notwithstanding the provisions of paragraph 3, Lessee may
at its sole expense contest the action of any public authority in requiring
improvements to be made to the premises but as a condition of such contest,
Lessors shall be provided copies of all documents filed with any public agency
in such contest.
PARAGRAPH 7 - CONSTRUCTION AND BOND:
1. Notwithstanding the provisions of paragraph 7, it is the intention
of the parties that Lessee may construct structures and make additions,
alterations and remodeling at a cost up to $50,000.00 without the prior approval
of Lessors. Further, Lessors shall respond to a request by Lessee for approval
of plans and specifications within ten (10) working days after receipt of plans
and specifications.
PARAGRAPH 8 - INDUSTRIAL OR MERCANTILE USE:
1. Notwithstanding the provisions of paragraph 8, the premises may be
used for any lawful use, other than for a dwelling place.
PARAGRAPH 9 - BOUNDARY SETBACK:
1. Notwithstanding the provisions of paragraph 9, Lessee need observe
only the setback requirements of the City of San Leandro, and of any other
public agency having jurisdiction over the premises.
PARAGRAPH 10 - INSURANCE:
<PAGE>
1. Notwithstanding the provisions of paragraph 10, any institutional
leasehold mortgagee shall be named as an additional insured in policies of fire
and casualty insurance. Further, the references to "Hawaii" in the last line of
Page 9 and the fifth line of page 10 shall be to "California".
PARAGRAPH 11 -LESSORS' EXPENSES:
1. Notwithstanding the provisions of paragraph 11, the prevailing
party, whether Lessors or Lessee, in any proceeding for enforcement of the
Lease, or for a declaration of rights and duties under the Lease, shall be
entitled to recover its costs and expenses, including reasonable attorney's
fees.
PARAGRAPH 12 - INDEMNITY:
1. Notwithstanding the provisions in paragraph 12, the obligations of
the Lessee to indemnify and hold Lessors harmless, and to assume the risk of
damage to and loss of property, shall not extend to liability, damage, or losses
resulting from the negligence or willful misconduct of Lessors.
PARAGRAPH 13 -SURRENDER:
1. Notwithstanding the provisions of paragraph 13, if (i) Lessee
shall have observed and performed all covenants and conditions herein contained
and on its part to be observed and performed or (ii) shall have within sixty
(60) days after written notice from Lessors cured any default in the observation
and performance of such covenants and conditions, then in either such event, the
Lessees at the end of the term of this lease shall have the privilege of
removing any improvements which have been placed on the premises by Lessee or
which have been purchased from Lessors by Lessee except for plant materials in
the ground, irrigation systems, and storm or sanitary sewers; provided, however,
that if requested by Lessors, Lessee shall remove any plant materials.
2. It is contemplated and agreed between the parties hereto that the
Lessee will issue a ground sublease to PI, that the Lessor will sell the
improvements to the Property to Lessee, and that the Lessee will issue a lease
of the improvements to PI. Lessor shall give written notice to PI of any default
hereunder; PI shall have sixty (60) days after such notice to undertake in
writing to assume the Lease, and to cure any defaults thereunder. Failing such
assumption and cure by PI, the improvements shall revert to and become the
property of Lessor, upon the expiration of sixty (60) days after such notice.
PARAGRAPH (A) - CONDEMNATION:
1. Notwithstanding the provisions of paragraph (A) Lessors shall pay
to Lessee the amount of all compensation and damages awarded for or on account
of any improvements placed on the premises by Lessee or any
<PAGE>
sublessee, and any improvements which have been purchased from Lessors by Lessee
or any sublessee; provided, however, that the amount of any payment to Lessee
shall be reduced by the amount required to cure any default of Lessees under the
lease.
2. Further, notwithstanding the provision of paragraph (A) if any
portion of the demised land shall be taken or condemned thereby rendering the
remaining premises impossible of use for the business purposes of Lessee or any
sublessee, the Lessee within ninety days thereafter may surrender to the Lessors
this Lease, subject to the Lessee's prior removal, at its own expense of all
buildings on the remaining demised land, if so required by the Lessors and its
restoration of said remaining land to good condition and even grade, and the
Lessee, its sublessees and guarantors shall thereby be relieved of all further
obligations. If there is a dispute as to whether a partial taking or
condemnation renders the remaining premises impossible for use for the business
purposes of Lessee or sublessee, the matter shall be submitted promptly to
arbitration before and under the rules of the American Arbitration Association
at San Francisco, California. The decision in arbitration shall not be binding,
but the fact of the arbitration, and the testimony, findings and decision in
arbitration shall be fully admissible at the instance of any party to any
subsequent litigation, or binding arbitration, on the issue of the impossibility
of use of the premises.
PARAGRAPH (B) - APPRAISAL:
1. Notwithstanding the provisions of paragraaph (B) the appointment
of a third appraiser after failure of the two appraisers appointed by the
parties to select the third shall be by any person then sitting as a Judge of
the Superior Court of the State of California in and for the County of Alameda,
and the person so appointed shall be a member of the American Institute of Real
Estate Appraisers who maintains an office in the County of Alameda, Contra
Costa, Santa Clara or in the City and County of San Francisco.
PARAGRAPH (C) -FORFEITURE:
1. Paragraph (c) of the Lease shal be interpreted as if the phrase
"in the payment of rent, or the observance and faithful performance of any other
covenant of the "Lease" were inserted after the word "default" in the fifth line
of Paragraph (c).
2. Further, notwithstanding the provisions of paragraph (c), Lessee
shall not be in default for any non-monetary breach of the Indenture, or of
these Clarifications and Modifications to the Indenture if the breach is not
susceptible of the cure within thirty (30) days, unless Lessee fails to commence
the cure within thirty (30) days of
<PAGE>
receipt of Lessors' written notice, and thereafter fails to diligently proceed
to cure said breach; provided, however, that the time for cure shall not to
exceed six (6) months after receipt of Lessor's written notice.
PARAGRAPH (E) -NOTICES:
1. Notwithstanding the provisions of paragraph (E) a copy of any
notice to Lessee shall also be sent to:
Maryland National Leasing Corporation
502 Washington Avenue
Towson, MD 21204
ATTN: Vice President, Operations
Olin Financial Services, Inc.
120 Long Ridge Road
P.O. Box 1355
Stamford, CT 06904
ATTN: Corporate Secretary
Physics International Company
2700 Merced Street
P.O. Box 1538
San Leandro, CA 94577
ATTN: J.H. Banister
SUPPLEMENTAL PROVISIONS:
1. Notwithstanding the absence of an express provision in the
Indenture, Lessors agree to provide Lessee and any leasehold mortgagee, upon
reasonable request, estoppel certificates in the form customarily provided by
Lessors. Further, Lessors confirm that the rights of Lessee under the Lease will
be superior to the rights of any mortgagee of Lessor's reversionary interest
which is later in time than the Lease.
2. Upon the written demand of the City of San Leandro for the
dedication to it for street-widening purposes of a ten foot wide strip of the
property running along Merced Street, and totaling approximately 7,187 square
feet (the "Property to be Dedicated") Lessee or its subtenant shall have the
right to purchase from Lessor, and Lessor shall sell to Lessee or its subtenant,
the Property to be Dedicated, on the following terms and conditions:
a. Lessee, or its subtenant, shall pay Lessor the purchase
price of thirty thousand and no/100 dollars ($30,000.00) payable in cash at
close of escrow.
<PAGE>
b. Lessor shall convey title to the Property to be
Dedicated by quit claim deed.
c. The written demand of the City of San Leandro shall be
delivered to Lessor on close of escrow.
d. Payment of the purchase price, delivery of the city's
demand and the quit claim deed shall be consummated by
means of an escrow established at a title company chosen by Lessee or its
subtenant to pay any and all closing costs.
3. Notwithstanding the absence of an express provision in the
Indenture, Lessee may assign the Indenture or sublet the Property without the
prior written consent of Lessors, only (a) for a period not extending beyond the
initial term of the Ground Sublease by Physics International Company.; (b) if
the guaranty of the Ground Sublease by Olin Corporation remains in effect, and
(c) the Lessee is not released. Except as expressly provided in the preceding
provisions of this paragraph 3, Lessee shall not assign the Indenture or sublet
the Property without the prior written consent of Lessors, which shall not be
unreasonably withheld, and which shall be given to such assignment or subletting
to any financially responsible party.
Lessors hereby grant their consent to the exercise of any renewal
term of the sublease of Physics International Company, a California corporation.
4. The foregoing clarifications and interpretations are solely for
the sole benefit of Lessee, Olin Corporation, a Virginia corporation, and for
the benefit of any bank, insurance company or other established lending
institution, as mortgagee of the Indenture and for the assignee of such
mortgagee expressly assuming and agreeing to observe and perform all of the
covenants of Lessee.
IN WITNESS WHEREOF the parties hereto have executed these presents as
of the day and year first above written.
THE CONNECTICUT NATIONAL BANK, TRUSTEES UNDER THE WILL AND
Trustee OF THE ESTATE OF SAMUEL MILLS
DAMON
By _________________________________ ____________________________
D. Hebden Porteus
By _________________________________ _____________________________
David M. Haig
"Lessee"
--------------------------
Fred C. Weyand
<PAGE>
--------------------------
Paul Mullin Ganley
"Lessors"
PHYSICS INTERNATIONAL COMPANY
By ______________________________
E.T. Moore, Jr.
Executive Vice President
<PAGE>
EXHIBIT 10.25
LEASE AGREEMENT
THIS LEASE, made thin 14th day of July, 1982, by and between Zaser and
Longston, Inc., hereinafter called "Lessor," And Rocket Research Company, a
division of ROCKCOR, Inc., hereinafter called "Lessee."
W I T N E S S E T H :
For and in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto agree as follows:
1. LEASED PREMISES
Lessor does hereby lease to Lessee and Lessee does hereby lease from
Lessor certain real property commonly referred to as the Special Weapons Storage
Area near Grant County Airport, Moses Lake in Grant County, Washington, which is
described on Exhibit A attached hereto which is outlined in red on said exhibit
(herein "Premises"), together with the right to occupy and use all buildings
located on said Premises. Lessee intends to use the site for research and
manufacture of a variety of aerospace and defense related products, including
but not limited to propellants, with the associated testing, engineering and
management activities. Lessee shall not use or permit use of Premises for any
purpose in violation of any local, state, or Federal government ordinance, rule
or regulation.
2. LEASE TERM
The term of this Lease shall commence effective July 1, 1982, and
shall end June 30, 1984, unless terminated or extended pursuant to this Lease.
3. OPTION TO EXTEND
Lessee is hereby granted four options to lease the Premises for four
Successive one (1) year periods after the expiration of the initial term until
June 30, l998. Lessee is further granted a fifth option to lease the Premises
for an additional ten (10) year period commencing July 1, 1988, through June 30,
1998, The options to extend the term of this Lease shall be automatically
exercised by Lessee without notice unless Lessee gives written notice to Lessor
at least sixty (60) days prior to the expiration of the Lease term or any option
hereunder of its intent not to exercise its option. If
<PAGE>
this Lease is terminated for any reason prior to the expiration of the term of
the Lease, the option granted hereunder and any automatic exercise thereof shall
automatically be void and of no further effect.
4. RENT
Lessee shall pay Lessor as rent for the Premises during the initial
two-year term of the Lease on or before the first day of every month equal
monthly installments of Two Thousand Eight Hundred ($2,800) Dollars (herein
referred to as "base rent"),
The monthly rent during the first option period from July 1, 1984,
to June 30, l985, shall be increased above the base rent by eight percent (8%).
Each annual option period thereafter commencing July 1 , 1985, the monthly rent
shall be increased by four and one-half percent (4.5%) through the fourth option
period ending June 30, 1988.
The base monthly rent for the fifth option period, July 1, 1988, to
June 30. 1998, shall be computed according to the following formula:
[June 1, 1998 CPI - June 1, l982 CPI +1] X $2800=BMR-5
- ------------------------------------------
June 1, 1982 CPI
where: CPI is the National Consumer Price Index for all Urban Consumers as
compiled by the Bureau of Labor Statistics, U. S. Labor Department, 1967
equals 100.
BMR-5 means base monthly rent for fifth Option period.
Each year thereafter commencing July 1, 1989, the monthly rent shall
be increased by six and one-ha1f percent (6.5%) through the fifth year, June 30,
l992, of the fifth Option period. As of July 1, l992, the then current monthly
rent shall be adjusted upward or downward to reflect the average annual change
in the CPI over the previous five year period commencing July 1, 1988. according
to the following formula:
[June 1, 1993 CPI - June 1, 1998 CPI +1] X BMR-5A
- ------------------------------------
June 1, 1988 CPI
where: BMR-5A is the base monthly rent for the sixth year of the fifth option
period, July 1, 1993, to June 30, 1994.
<PAGE>
Each year commencing after June 30, l994, the monthly rent shall be
increased by six and one-half percent (6.5%) through the tenth year of the fifth
option term.
Should said price index be discontinued by the Government, the then
most comparable cost-of-living index sha11 be substituted.
<PAGE>
5. ADDITIONAL BUILDING SPACE
Lessee shall have the right to construct or move additional
structures or buildings on the Premises subject to thirty (30) day written
notice and approval by the Lessor. Said buildings or structures shall be in
accordance with the Moses Lake Building Code. Lessor's approval is not to be
unreasonably withheld in light of the present use and type of buildings on the
Premises. Lessee shall bear all costs and expenses associated with the
construction of said additional structures or buildings. Ownership of any
buildings built and permanently attached to the Premises shall revert to Lessor
and Lessee agrees to execute any documents necessary to convey title to said
buildings. Ownership of structures moved to or constructed on the Premises which
may be readily relocated shall remain with Lessee. Lessee shall have the right
to remove said movable structures at any time upon thirty (30) day written
notice to Lessor. Lessee shall not be charged any additional rent for the newly
constructed or moved structures.
6. TAXES, ASSESSMENTS AND UTILITY CHARGES
a. Lessee shall pay, during the term and any renewal term
hereof, all real estate taxes, assessments, license fees and other governmental
charges levied or payable upon the leased Premises, including all building
improvements belonging to Lessee. Partial years shall be prorated.
b. Nothing herein contained shall be construed to require the
Lessee to pay any transfer, estate, inheritance, succession or gift tax or taxes
imposed in respect of any devise or gift of any interest of the Lessor or its
successors or assigns in the leased Premises, nor any income tax imposed in
respect of the Lessor's income from such Premises.
c. Lessee shall pay all utility charges with respect to the
leased Premises, including without limitation charges for water, sewer,
telephone, garbage, light, heat, gas and power and any other utilities,
including any fire protection charge furnished to the Premises. Lessee shall pay
any fees payable to governmental authorities on account of any inspection made
on the Premises by proper officers of such authorities. Lessor shall not be
responsible for the failure of utility services except for intentional or
negligent acts of Lessor or Lessors agent.
7. ALTERATIONS
Lessee may make alterations, additions or improvements in or
to the Premises upon first obtaining the written consent
<PAGE>
of Lessor. Any such alterations, additions and improvements consented to by
Lessor shall be made at Lessee's expense. Lessee shall secure any and all
governmental permits required in connection with any such work and shall hold
Lessor harmless from any and all liability and any and all liens resulting
therefrom.
All alterations, additions and improvements, except trade fixtures and
appliances and equipment which do not become a part of the Premises, shall
immediately become the property of Lessor without obligation to pay therefor.
Upon removal of the trade fixtures and appliances and equipment which do not
become a part of the Premises, Lessee shall restore the Premises excepting
reasonable wear and tear to the same condition that they were in prior to the
installation of said items.
8. MAINTENANCE AND REPAIRS
At the expiration or sooner termination of this Lease and its
options, Lessee shall return the Premises to Lessor in the same condition in
which initially received by Lessee in 1979 (or, if altered by Lessee with
Lessor's consent, then the Premises shall be returned in such altered
condition), reasonable wear and tear excepted. Lessee shall, at its own expense,
at all times keep the Premises neat, clean and in a safe and sanitary condition,
keep the glass of all windows and doors thereof clean, repaired, and
presentable, Lessee shall not commit or suffer any waste or damage to the
Premises. Lessee shall maintain and keep the leased Premises in a good state of
repair; shall keep the electrical system and the sprinkler system, if any, and
all pipes and drains clean and in a good state of repairs shall protect the
sprinkler system and all pipes and drains so that they will not freeze or become
clogged; shall maintain, operate and repair the utility systems within the
Premises including the cost of connections to the utility distribution systems;
shall also maintain the driveways, exits, entrances, parking area, and outside
lighting.
Notwithstanding the foregoing, Lessor shall maintain outer
fence and gate, exterior walls and foundations of the building in good repair
and shall be responsible for the repair of all latent structural defects in the
Premises, except for damage caused by act of Lessee or its agents.
9. QUIET ENJOYMENT
Lessee upon fully complying with and promptly performing all
of the terms, covenants and conditions of this Lease on its part to be
performed, shall have the right and
<PAGE>
quietly enjoy and exclude others from the Premises for the term set forth herein
and any extensions thereof. Lessor represents and warrants that it has full
right, power, and authority to enter into this Lease for the term and any
options to extend herein granted and that the leased property may be used by the
Lessee during the entire term and any options.
<PAGE>
10. ASSIGNMENT OR SUBLEASE
Lessee may assign or transfer this Lease or any interest
therein subject to first obtaining the written consent of Lessor, which consent
shall not be withheld unreasonably, except that
Lessee may, without Lessor's consent, assign said Lease without Lessor's consent
to any parent, subsidiary or affiliate of Leases. Any assignment of this Lease
by Lessee shall not relieve Lessee of any of its obligations or duties
hereunder.
11. INDEMNIFICATION
Lessor shall not be liable to Lessee or to any person, firm
or corporation whatsoever for any injury to, or death of, any persons or for any
loss of, or damage to, property (including property of Lessee) occurring in or
about the leased Premises from any cause whatsoever unless caused by Lessor's
negligence. Lessee agrees to indemnify and save Lessor harmless from all loss,
damage, liability or expense (including expense of litigation) arising out of or
resulting from any actual or alleged injury to, or death of, any person, or from
any actual or alleged loss of, or damage to, property caused by, or resulting
from, any occurrence on or about the Premises, unless caused by Lessor's
negligence, or caused by, or resulting from, any act or omission, whether
negligent or otherwise, of Lessor, or any officer, agent, employee, contractor,
guest, invitee, customer or visitor of Lessor (other than Lessee) in or about
the leased Premises. Lessee shall, at its own expense, maintain at all times
during the lease term proper liability insurance with a reputable insurance
company or companies satisfactory to Lessor and designating the Lessor as an
additional insured in the minimum limit of Five Hundred Thousand ($500,000)
Dollars (per accident) for property damage, and in the minimum limits of Five
Hundred Thousand ($500,000) Dollars (per person) and One Million ($1,000,000)
Dollars (per accident or occurrence) for bodily injuries and death. Such policy
or policies shall be non-cancellable as to Lessor except upon at least ten (10)
days' prior written notice given to Lessor.
12. SIGNS
At the termination of this Lease, any signs, lights, symbols,
or matter attached to or painted by Lessee upon the Premises, whether on the
exterior or interior thereof, shall be removed by Lessee at its own expense, and
Lessee shall repair any damage or injury to the Premises, and correct any
unsightly condition caused by the maintenance and removal of said signs.
<PAGE>
13. INSPECTION
Lessor and its agents shall have the right to inspect the
limited access area of the Premises at all reasonable times and intervals and to
enter the same whenever it is reasonably necessary for the exercise of any right
or privilege of Lessor under this Lease, provided that Lessor shall provide
written notice to Lessee at least twenty-four (24) hours in advance and not
unreasonably interfere with the conduct of Lessee's business in the Premises.
14. EMINENT DOMAIN
If the whole or substantial part of the Premises shall be
taken by any public or governmental authority under the power of eminent domain,
then, at Lessee's election, made in writing within 90 days after Lessee shall
have received written notice of the commencement of such eminent domain
proceeding from Lessor, the term of this Lease shal1 cease as of the date
possession is taken by such authority and the rent shall be paid up to that
date. Any unearned rental shall be returned by Lessor. If only a part of the
leased Premises shall be taken and Lessee elects not to terminate this Lease,
then this Lease shall continue in full force and effect as to the remainder of
said Premises and all of the terms herein provided shall continue in effect;
except that the rental shall be reduced in proportion to the respective amounts
of interior and exterior areas in terms of square feet, of the Premises taken,
and Lessor, at its own Cost and expense, shall make all necessary repairs and
alterations to the leased Premises required by such taking unless Lessor, at its
election, made in writing within 30 days after the date for Lessee's election
provided above, shall terminate this Lease as of the date possession is taken by
such authority. In consideration of such right of termination, Lessee retain`s
the right to receive and retain damages from the condemning authority for the
value of its leasehold interest or leasehold improvement in the Premises so long
as such terms are separately identified and compensated by the authority and to
the extent that award does not have the result of reducing the fair market value
of the Premises. The term "eminent domain" as used in this paragraph shall
include the exercise of any similar governmental power and any purchase or
acquisition in lieu thereof.
15. FIRE OR OTHER CASUALTY
Should the Premises be damaged by fire or other casualty,
insured or uninsured, as a result of the activities of Lessee, the Lessee may at
its election repair, replace, or
<PAGE>
reimburse the Lessor at fair market value the damaged portion of the Premises
with no abatement of rent. Should the Premises be damaged by fire or other
casualty for any other cause, the monthly rental shall be abated or reduced in
the proportion that the untenantable portion of the floor area bears to the
whole floor area thereof for the period from the occurrence of the damage to the
completion of repairs, if any. In such case, it shall be optional with the
Lessor to repair or rebuild damaged and destroyed areas. Lessor shall have not
more than 20 days after notification of the damage to notify the Lessee in
writing of Lessor's intentions to repair or rebuild, and if Lessor elects to
repair or rebuild, Lessor shall conduct the work without unnecessary delay. If
Lessor shal1 fail to give the notice aforesaid Lessee shall have the right to
declare this Lease terminated by written notice to Lessor.
16. WAIVER OF SUBROGATION
Lessee and Lessor hereby mutually release each other from
liability and waive all right of recovery against each other for any loss from
perils insured against under their respective fire Insurance policies, including
any extended coverage and endorsements thereto; provided, however, that this
paragraph shall be inapplicable if it would have the effect, but only to the
extent that it would have the effect, of invalidating any insurance coverage of
Lessor or Lessee.
17. DEFAULTS
Time is the essence hereof, and in the event that Lessee or
Lessor shall fail to perform or observe any other covenant, agreement, or
condition to be performed or kept by the Lessee under the terms and provisions
of this Lease, and such failure continues for fifteen (15) days after receipt of
written notice thereof by the Lessee from the Lessor, or if the default is of a
nature that the same cannot practicably be cured within said fifteen (15) day
period and the Lessee shall not within said fifteen (15) day period commence and
be proceeding with due diligence and dispatch to cure and perform such default,
covenants, agreement or condition; then, and in any such event, the Lessor shall
have the right, at its option, then or at any time thereafter and while such
default shall continue, to reenter and take complete and peaceful possession of
the leased Premises and declare this Lease forfeited and the term thereof ended,
and with or without process of law remove all persons and property therefrom.
The Lessee in such event shall peacefully and quietly yield up and surrender the
leased Premises to the Lessor and execute and deliver to the Lessor such
instrument or instruments as will properly evidence termination of the Lessee's
rights and interest under this
<PAGE>
Lease, and as may be requested by the Lessor. At the option of the Lessor and in
lieu of forfeiting thin Lease as above provided, the Lessor may reenter the
demised Premises and as the agent of the Lessee remove therefrom any property of
the Lessee, and may sublet and relet said Premises or any part thereof from time
to time for any unexpired part of the term, and the Lessor may collect the rents
therefor, applying the same first to the payment of expenses of such reentry and
reletting and then to the payment of rent due or to become due under this Lease,
and the Lessee hereby agrees to pay any deficiency therefor. No such reentry
shall release the Lessee from its covenants to pay rentals and other charges
provided for herein, and it is agreed that, except insofar as this is
inconsistent with or contrary to any provision of this Lease, no right, or
remedy herein conferred upon or reserved to the Lessor is intended to be
exclusive of any other right or remedy, and each and every right and remedy
shall be cumulative and in addition to any other right or remedy given
hereunder, or now or hereafter existing in law or in equity or by statute.
18. LIENS AND ENCUMBRANCES
Lessee shall keep the Premises free and clear of any liens
and encumbrances arising or growing out of the use and occupancy of the Premises
by Lessee hereunder. At Lessor's request, Lessee shall furnish Lessor with
written proof of payment of any item which would or night constitute the basis
for a lien on the Premises if not paid.
19. ADVANCES BY LESSOR POR LESSEE
If Lessee shall fail to do anything required to be done by it
under the terms of this Lease, except to pay rent, Lessor may, at its Sole
option and after prior notice in writing to Lessee, do such act or thing on
behalf of Lessee, and upon notification to Lessee of the actual and direct cost
thereof to the Lessor, Lessee shall promptly pay the Lessor the amount of that
cost, plus interest, at the rate of twelve percent (12%) per annum from the date
that the cost was incurred by Lessor to the date of Lessee' s payment.
2O. WAIVER
Neither the acceptance of rental nor any other act or
omission of Lessor at any time or times after the happening of any event
authorizing the cancellation of forfeiture of this Lease, shall operate as a
waiver of any past or future violation, breach or failure to keep or perform any
covenant, agreement, term or condition hereof or to deprive Lessor of its right
to cancel or forfeit this Lease, upon the written notice
<PAGE>
provided for herein at any time that cause for cancellation or forfeiture may
exist, or be construed so as to any future time stop Lessor from promptly
exercising any other option, right or remedy that it may have under any term or
provision of this Lease.
<PAGE>
21. NOTICES
All notices hereunder may be delivered or mailed, If mailed,
they shall be sent by certified or registered mail, return receipt requested, to
the following respective addresses:
To Lessor: 11005 N. E. 12th
Bellevue, WA 98004
Attention: Jessica Longston
To Lessee: 11441 Willows Road N. E.
Redmond, WA 98052
Attention: John A. Shuba
or to such other respective addresses as either party hereto may hereafter from
time to time designate in writing. Notices sent by mail shall be deemed to have
been given when received by the addressee.
22. SUCCESSORS OR ASSIGNS
All the terms, conditions, covenants and agreements of thin
Lease shall extend to and be binding upon Lessor, Lessee and their respective
successors and assigns, and upon any person, firm or corporation coming into
ownership or possession of any interests in the Premises by operation of law or
otherwise, and shall be construed as covenants running with the land.
23. FIRE INSURANCE
Lessee may at its election keep the existing buildings on the
Premises insured against loss or damage by fire.
24. SUBORDINATION
Lessee shall not be obligated to subordinate its interest in
the Premises to the lien of any Mortgage or Deed of Trust now or hereafter
placed upon the Premises.
25. HOLDING OVER
In the event Lessee remains in possession of the Premises
after the expiration of this Lease, without a written lease, it shall be deemed
to be occupying the Premises as a tenant from month-to-month, subject to all of
the conditions, provisions, and obligations of this Lease insofar as they may be
applicable to such month-to-month tenance.
<PAGE>
26. MEMORANDUM OF LEASE
Lessee agrees that it will not record this Lease. At the
request of either Lessor or Lessee, the parties shall execute a memorandum lease
for recording purposes in lieu of recording this Lease, in such form as may be
satisfactory to their respective attorneys.
27. COSTS AND ATTORNEYS' FEES
If either party shall commence suit to enforce any term or
condition or covenants herein, or in any other action for relief against the
other, declaratory or otherwise, arising out of this Lease, the nonprevailing
party in such action shall pay the prevailing party, in addition to any
judgment, a reasonable sum as attorneys' fees, together with costs of suit at
both trial and appellate levels.
ROCKET RESEARCH COMPANY, a ZASER & LONSTON, INC.
division of Rockcor, Inc.
/s/ William W. Smith /s/ Jessica L. Lonston
----------------------
William W. Smith, President Lessor
LESSEE
WITNESS:
/s/ Kevin P. Teismann /s/ Jessica L. Longston, for
- --------------------- -----------------------
Kevin P. Teismann Zaser & Longston, Inc.
Secretary, Rockcor, Inc.
<PAGE>
EXHIBIT 10.26
INDENTURE OF LEASE
THE NORTHWESTERN MUTUAL
LIFE INSURANCE COMPANY,
LESSOR
RHEEM MANUFACTURING COMPANY,
LESSEE
DOWNEY, CALIFORNIA
July 1, 1956
- --------------------------------------------------------------------------------
<PAGE>
PRORATA: The execution copies of this lease contained the following two
errors, which have been corrected in this printed copy:
The word "California' has been substituted for "Pennsylvania"
in Article XI, Sec. 3; and
"$52,000" has been substituted for $53,000" in Article XVI-A,
Sec. 2.
<PAGE>
INDENTURE OF LEASE
This Indenture of Lease, made and executed in duplicate as of the
first day of July, 1956, by and between The Northwestern Mutual Life Insurance
Company, a Wisconsin corporation, hereinafter called "Lessor", and Rheem
Manufacturing Company, a California corporation, hereinafter called "Lessee";
Witnesseth That:
The Lessor, for and in consideration of the rents hereinafter
reserved and of the covenants and agreements hereinafter mentioned to be kept
and performed by the Lessee, does by these presents lease and let unto the
Lessee, and the Lessee does hereby hire and take from the Lessor, that certain
parcel of real estate, together with improvements thereon and appurtenances
thereto, including easements for ingress and egress, all of which is situated in
the County of Los Angeles, State of California, is more particularly described
as follows:
Lot 3, Tract No. 6796, in the County of Los Angeles, State of
California, as per map recorded in Book 80, Page 17 of Maps, in
the office of the County Recorder of said County.
and is hereinafter sometimes collectively called the "Leased Premises".
It is hereby mutually covenanted and agreed that this lease is made
upon the foregoing and upon the following agreements, conditions, covenants and
terms, viz.:
ARTICLE I
Term of Lease
This Lease shall be and continue for a term of 25 years (hereinafter
called the "basic term") commencing on July 1 1956, and ending on June 30, 1981.
ARTICLE III
Renewal Options
The Lessee shall have the right, at its option, to extend the term of
this Lease for not more than five successive periods of ten years each, the
first of which periods shall commence with the expiration of the basic term.
Such ten-year periods are hereinafter referred to collectively as the "renewal
term" and individually as the first, second, third, fourth and fifth ten-year
renewals, respectively. Such option of the Lessee shall be exercisable by giving
notice to the Lessor, not less than twelve months prior to the expiration of the
basic term or the immediately preceding ten-year renewal term, as the case may
be, of its intention to extend for such a ten-year renewal term.
ARTICLE III
Rental
1. The Lessee agrees to pay, and the Lessor agrees to accept, as rent
for the Leased Premises, the following:
(a) during the basic period the sum of $73,380 per
annum, payable in equal monthly installments of
$6,115;
<PAGE>
(b) during the first ten-year renewal, the sum of
$31,356 per annum, payable in equal monthly
installments of $2,613;
(c) during the second ten-year renewal, the sum of
$28,740 per annum, payable in equal monthly
installments of $2,395; and
(d) during the third, fourth and fifth ten-year
renewals, the sum of $26,136 per annum, payable
in equal monthly installments of $2,178.
2. All monthly rental payments hereunder shall be paid in advance on
the first day of the calendar month, in lawful money of the United States of
America, at 720 East Wisconsin Avenue, Milwaukee 2, Wisconsin, or at such other
place in the United States of America as the Lessor shall designate from time to
time by written notice delivered to the Lessee. Any due and unpaid installments
of rent hereunder shall bear interest from the due date thereof at the rate of
6% per annum.
ARTICLE IV
Construction of Annex
1. The Lessee, the Lessor and Rheem Manufacturing Company Employees'
Pension Plan Trust Fund (hereinafter called the "Pension Trust") have heretofore
entered into an agreement dated as of June 30, 1956. The agreement recognizes
among other things that a new addition (hereinafter called the "annex") to the
previously existing office and laboratory building now a part of the Leased
Premises has been substantially completed by the Pension Trust, at a total
construction cost of approximately $445,220.
2. The annex shall be a part of the Leased Premises. Except as
hereinafter provided, the Lessee shall not remove any building or other
improvement from the Leased Premises during the term of this lease; and upon the
termination of this lease for any reason whatsoever the Lessee shall surrender
the Leased Premises to the Lessor, and thereupon the Lessee shall have no
further right or interest therein.
ARTICLE V
Additions, Changes and Alterations
At any time and from time to time the Lessee at its sole expense may
make additions to and structural changes and alterations in and upon any or all
of the improvements now or hereafter located on the leased land, and may make
additional improvements on the leased land, provided that:
(a) Such additions, changes or alterations shall not materially
impair the strength or value of the improvements at the
time located on the leased land and shall be in conformity
with all applicable laws, building ordinances and
regulations; and
(b) Whenever the contemplated cost of such additions, changes
or alterations exceeds $50,000, the Lessee shall first
obtain the written consent of the Lessor, which consent
shall not be unreasonably withheld.
<PAGE>
ARTICLE VI
Demolition and Removal of Improvements
At any time and from time to time, the Lessee at its sole expense may
demolish or remove from the leased land any or all improvements at the time
located thereon; but prior to the commencement of any such demolition or
removal, the Lessee shall notify the Lessor and deposit with it such sum of
money (not in excess of the then depreciated value of the improvements to be
demolished or removed) or such other security as the Lessor may reasonably
require as surety for the performance by the Lessee of its obligation set forth
in paragraph 1 of Article VII. Any sum so deposited with the Lessor shall be
made available to the Lessee in connection with such replacement in the same
manner and to the same extent as provided for in the case of insurance proceeds
under Article XIII.
ARTICLE VII
Reconstruction of Damaged, Destroyed or Removed
Improvements: Repair and Maintenance
1. The Lessee at its sole expense will repair, replace or reconstruct
any building or other improvement located on the leased land which is (a)
damaged or destroyed by fire or other casualty; (b) demolished or removed by the
Lessee as permitted by the provisions of Article VI; or (c) required to be
removed or reconstructed by any governmental or military authority. Such repair,
replacement or reconstruction shall be accomplished within such time as may be
reasonable under the circumstances after allowing for delays occasioned by
strike or other cause beyond the reasonable control of the Lessee. The design
and specifications of such repair, replacement or reconstruction shall be as
determined by the Lessee; but such work shall restore the Leased Premises to not
less than their depreciated value immediately prior to the damage, destruction,
demolition or removal.
2. The Lessee at its sole expense will keep and maintain the Leased
Premises, and the sidewalks, passageways and trackage rights (to the extent the
same are subject to the Lessee's control) on, adjacent and appurtenant thereto,
in good repair and in safe and sanitary condition, ordinary wear and tear and
depreciation excepted. The Lessee will conform with every valid law, regulation,
order and requirement of any governmental, military or political authority
relating to the Leased Premises, and will hold and save the Lessor free and
harmless of all expenses, claims or liabilities for the breach thereof.
ARTICLE VIII
Use of Salvaged Material: New Improvements
The Lessee may convert to its own use all old materials removed or
salvaged by it in making alterations, changes, improvements or additions to the
Leased Premises, or in demolishing or removing any improvements at the time
located thereon. All such alterations, changes, improvements and additions and
any replacements thereof shall belong to the Lessor and shall become part of the
Leased Premises.
ARTICLE IX
Use of Premises
1. The Leased Premises shall be used only for proper and legitimate
purposes, and Lessee shall not use, nor suffer nor permit any person to use, the
same or any part thereof for any purpose or use in violation of the laws of the
United States or of the State of California, or of the ordinances of any
political subdivision of said state, nor for any immoral or unlawful purpose
whatsoever.
<PAGE>
2. The Lessor shall not be liable for any encroachment of any present
or future building either on the Leased Premises or on any property adjacent to
or in the vicinity of the Leased Premises, and the Lessee agrees to indemnify
and save harmless the Lessor from and against any and all liabilities,
penalties, damages, expenses and judgments on account of the location of any
building, wall or other structure on or partly on the Leased Premises. The
lessee will, on termination of this Lease for any reason whatsoever, at its own
expense, at its option, either enclose any and all improvements located on the
Leased Premises within four walls which shall be located solely on the Leased
Premises, or furnish to the Lessor such party wall agreement or agreements as
will entitle the Lessor to the use and maintenance of the walls enclosing such
improvements as of the date of such termination.
3. The Lessee may, with the consent of all interested parties other
than the Lessor, remove all or any part of any wall standing between the Leased
Premises and adjoining premises; provided that, on termination of this Lease for
any reason whatsoever, the Lessee shall on request of the Lessor restore any
such wall so removed to its former condition in so far as practicable.
ARTICLE X
Construction Liens: Easements
1. The Lessee will keep the Leased Premises free and clear of
mechanics', laborers' or materialmen's liens, and other liens of a similar
nature, which may arise in connection with any work performed on said premises
by or at the direction or sufferance of the Lessee; provided, however, that the
Lessee shall have the right to contest the validity or the amount of any such
lien or claimed lien, if the Lessee shall give to the Lessor such reasonable
security as may be demanded by the Lessor to insure payment of such lien and
prevent any sale, foreclosure or forfeiture of the premises by reason of such
nonpayment. On final determination of the lien or claimed lien, the Lessee shall
immediately pay any judgment rendered, with all proper costs and charges, and
shall have the lien released or judgment satisfied at the Lessee's own expense.
Should any such lien be placed on said premises and the same ripen into a
judgment which has become final, the Lessor at its option may pay any such final
judgment and clear said premises therefrom, and any monies so paid out by the
Lessor on account of any such judgment shall be repaid by the Lessee to the
Lessor at the next ensuing rent day and shall draw interest at the rate of 6%
per annum from the time of payment by the Lessor until repaid by the Lessee.
2. In the event any lien is filed against the Leased Premises or any
action is commenced affecting the title thereto, the Lessee shall give to the
Lessor prompt written notice thereof.
3. The Lessor upon request of the Lessee will grant to third persons
such utility easements, rights and rights of way as shall facilitate the
Lessee's use of the Leased Premises without substantially lessening the value of
the Lessor's interest therein.
ARTICLE XI
Taxes, Assessments and Utility Charges
1. The Lessee will pay, in addition to all other sums required to be
paid by it under the provisions of this Lease, all taxes, assessments and
levies, whether general or special, ordinary, or extraordinary, of every nature
or kind whatsoever, including water, gas and electric rates, which may be taxes,
charged, assessed, levied or imposed at any time or from time to time during the
term of this Lease, (including taxes for the year 1956) by the State of
California or any political subdivision thereof upon or against (a) this Lease;
(b) the Leased Premises or the occupancy,use or possession thereof; or (c) any
estate, right, title or interest of the Lessor and of the Lessee or of either of
them in or to the Leased Premises. It is agreed, however, that (i) taxes
assessed during the term of this Lease but payable in whole or in installments
after the termination thereof shall be prorated, and the Lessee shall be
required to pay only the prorated share for the length of time which shall have
elapsed at the time of such
<PAGE>
termination; and (ii) the Lessee shall not be obligated to pay any installment
of any special assessment which may be levied, assessed or confirmed during the
terms of this Lease, but which does not fall due and is not required to be paid
until after its termination.
2. Nothing herein contained shall be construed to require the Lessee
to pay any transfer, estate, inheritance, succession, or gift tax or taxes
imposed in respect of any devise or gift of any interest of the Lessor or its
successors or assigns in the Leased Premises, nor any income tax imposed in
respect of the Lessor's income from such premises, except as stated in paragraph
3 of this Article.
3. If an income tax shall be levied, assessed or imposed by the State
of California or any political subdivision thereof upon the income arising from
the rents payable hereunder, in lieu of or as a substitute for a property tax
upon the Leased Premises, the Lessee and not the Lessor shall pay the same; but
in no event shall the Lessee be obligated to pay for any year any greater amount
by way of such substituted income tax than would have been payable by the Lessor
by way of such substituted income tax had the rental upon which such tax was
imposed been the sole taxable income of the Lessor for the year in question.
4. Except as permitted by paragraph 5 of this Article, the taxes,
assessments and other impositions above provided to be paid by the Lessee shall
be paid, before any delinquency can occur therein or in any part or installment
thereof, in the name of the owner of the fee, and certificates of payment shall
be delivered promptly to the Lessor.
5. The Lessee shall have the right to contest the legality or
validity of any of the taxes, assessments or other impositions herein provided
to be paid by it, but no such contest shall be carried on or maintained by it
after the time limited for the payment of any such taxes, assessments or other
impositions unless the Lessee, at its option, (a) shall pay the amount involved
under protest; or (b) shall procure and maintain a stay of all proceedings to
enforce any collection of such taxes, assessments or other impositions together
with all penalties, interest, costs and expenses, by a deposit of a sufficient
sum of money or by such undertaking as may be required or permitted by law to
accomplish such stay; or (c) shall deposit with the Lessor, as security for the
performance by the Lessee of its obligations hereunder with respect to such
taxes, assessments or other impositions, such reasonable security as may be
demanded by the Lessor to ensure payment of such contested taxes, assessments or
other impositions and all penalties, interest, costs and expenses which may
accrue during the period of the contest. In the event any such contest is made
by the Lessee, then within thirty days after any adverse final determination
thereof, it shall fully pay and discharge the amount involved in or affected by
any such contest, together with all penalties, fines, interest, costs or
expenses that may have accrued thereon or that may result from any such action
by the Lessee, whereupon the Lessor shall return to the Lessee all amounts, if
any, deposited by the Lessee in accordance with the provisions hereof.
6. The land, buildings and improvements covered and affected by this
Lease shall always be assessed for the purpose of taxation in the name of the
owner of the fee if permitted under the laws or regulations relating thereto.
Should the Lessee fail, within the time provided above, to pay any of the taxes
or assessments provided to be paid by the Lessee, including all penalties,
fines, interest, costs and expenses, or should the Lessee attempt any such
contest without complying with the conditions of paragraph 5 of this Article,
the Lessor may, but shall not be obligated to, pay, discharge, compromise or
adjust the payment of the obligation involved or any part thereof. In the event
of any sale or sales to enforce or collect the same, the Lessor may seek and
effect any redemption therefrom as it may deem satisfactory, and the Lessee
shall repay to the Lessor the full amount so paid by the Lessor, including any
costs, expenses and reasonable attorneys' fees incurred by the Lessor, on or
before the first day of the next ensuing calendar month, together with interest
thereon at the rate of 6% per annum from the date of payment by the Lessor. In
any such event, the legality and validity of all proceedings had in respect
thereof or toward the enforcement thereof shall be conclusively deemed to exist,
for the purposes of this Article.
7. As between the parties hereto, the Lessee alone shall have the
duty of attending to the making and filing of any statement or report which may
be provided or required by law as a basis of or in connection with the
determination, equalization, reduction, payment or abatement of each obligation
which is to be borne or paid by the Lessee in accordance with this Article. The
Lessor shall not be or become responsible therefor, nor for the contents
<PAGE>
of any such statement or report. The Lessor shall not be obligated to make, join
in or be a party to any protest or objection to any law, order, proceeding or
determination which might impose any obligation or liability upon the Lessor
hereunder, or increase the same; but the Lessee shall have, and the Lessor
hereby irrevocably grants to it the necessary power and authority to act therein
in the name of the Lessor whereever the same is required by law, but without any
cost, expense or liability upon the Lessor.
8. The Lessor will promptly deliver to the Lessee any and all tax
notices, assessments or other official correspondence which it may receive
relating to the Leased Premises.
ARTICLE XII
Public Liability and Property Damage
1. The Lessee will indemnify and save harmless the Lessor and the
Leased Premises from and against any and all loss, damage, expense, liabilities,
demands and causes of action, and any expense incidental to the License thereof
by the Lessor, resulting from injury or death of persons, or damage to property;
occurring on the Leased Premises or on the adjoining sidewalks, streets, alleys
or ways, or in any manner directly or indirectly growing out of or in connection
with the use and occupancy or disuse of the Leased Premises or any part thereof
by the Lessee or any tenant holding under the Lessee; provided, however, that
the Lessee shall not so indemnify and save harmless the Lessor from the
consequences of any tortious or negligent act of the Lessor or its agents or
employees.
2. The Lessee will keep in effect at its sole expense a satisfactory
comprehensive general liability policy covering the Leased Premises and
providing coverage with maximum limits of liability of $100,000 for bodily
injury to one person, $200,000 for bodily injury to any group of persons as a
result of one accident, and $50,000 for proper damage. Such policy shall name
the Lessor as an additional assured, and a certificate of insurance showing such
coverage shall be delivered to the Lessor.
ARTICLE XIII
Fire Insurance
1. The Lessee at its sole expense will keep the buildings and
improvements now or hereafter located on the Leased Premises insured against
loss by fire (with extended coverage) with an insurance company acceptable to
the Lessor, in an amount equal to not less than 80% of the full insurable value
thereof exclusive of foundations. Such insurance shall be so issued as to cover
the several interests of the Lessor and the Lessee, and shall provide that in
case of loss or damage the proceeds thereof shall be payable to the Lessor, to
be held by it (except as hereinafter specified) as security for the performance
by the Lessee of its obligation to repair, rebuild or reconstruct as provided
herein.
2. If after any loss insured against pursuant to paragraph 1 of this
Article, the Lessee shall proceed with repair or rebuilding as required hereby,
the insurance proceeds collected by the Lessor shall be paid by it to the Lessee
in four equal instalments as each one-quarter in value of such repair or
rebuilding is accomplished, the last such payment to be made when such repair or
rebuilding shall have been completed free of liens. All costs of such repair or
rebuilding in excess of the insurance proceeds shall be paid by the Lessee, and
any surplus proceeds shall be paid to the Lessee.
3. All of such repairs and rebuilding shall be done under the
supervision of an engineer designated by the Lessee and satisfactory to the
Lessor. No instalment of said insurance proceeds shall be paid to the Lessee
until there has been filed with the Lessor a statement of the engineer to the
effect that the required proportion of such repair or rebuilding as above
provided has been actually made, and as to all payments after the first payment,
<PAGE>
that an amount equal to all insurance proceeds previously paid to the Lessee by
the Lessor has been actually expended by the Lessee toward the cost of such
repairs or rebuilding.
4. The policy or policies evidencing all insurance which the Lessee
is required to provide and maintain in effect hereunder shall be delivered to
the Lessor from time to time as issued, except that certificates of insurance
may be substituted for such policy or policies. Should the Lessee fail to
provide, maintain or pay for any of the insurance hereinbefore provided for, the
Lessor at its option may procure such insurance. Any sums paid out by the Lessor
for any such insurance shall be repaid by the Lessee to the Lessor on the first
day of the calendar month next following payment thereof by the Lessor, together
with interest thereon at the rate of 6% per annum from the date of payment by
the Lessor until repaid by the Lessee.
5. Except as otherwise provided in paragraph 2 of this Article, all
insurance proceeds in the hands of the Lessor at the time of termination of this
Lease, or of the rights of the Lessee hereunder, and all insurance proceeds
thereafter received by the Lessor under any policy of fire insurance shall be
the sole and exclusive property of the Lessor, unless such termination shall be
effected by the purchase by the Lessee of the Leased Premises in accordance with
the provisions of this Lease, in which event all insurance proceeds in the hands
of the Lessor at the time of termination, as well as all insurance proceeds
thereafter payable under any policy or policies of fire insurance, shall be the
sole and exclusive property of the Lessee.
ARTICLE XIV
Destruction of Premises
Damage to or destruction of any portion or all of the buildings,
structures or fixtures upon the Leased Premises by fire, the elements or any
other cause whatsoever, whether or not without fault on the part of the Lessee,
shall not terminate this Lease or entitle the Lessee to surrender the Leased
Premises or entitle the Lessee to any abatement of or reduction in rent payable
by the Lessee hereunder, or otherwise affect the respective obligations of the
parties hereto, any law to the contrary notwithstanding. If the use of the
Leased Premises for any purpose be prohibited by law or ordinance or other
governmental authority, or be prevented by injunction or other local
interference by any private person, firm or corporation, this Lease shall not be
thereby terminated nor shall the Lessee be entitled by reason thereof to
surrender the Leased Premises or to any abatement or reduction in rent, nor
shall the respective obligations of the parties hereto be affected.
ARTICLE XV
Condemnation
1. In the event the Leased Premises, or any part thereof or interest
therein, is taken or condemned for a public or a quasi public use (herein
sometimes referred to as a "condemnation"), then the entire condemnation
allowance or award, whether allowed or awarded to the Lessor or the Lessee,
including any interest received thereon (sometimes herein referred to as the
"condemnation proceeds"), shall upon receipt thereof be paid over to the Lessor,
to be held and dealt with by it in the following manner:
(a) The condemnation proceeds shall be applied first in
satisfaction and discharge of all assessments, if any, both
principal and interest, levied on the Leased Premises or
any part thereof for benefits resulting from the
improvements for which or in conjunction with which the
condemnation was effected;
(b) The condemnation proceeds remaining after payment of the
assessments as provided in (a), to the extent necessary to
pay the cost of restoration of injury to and destruction of
the buildings or improvements located on the Leased
Premises resulting from the condemnation which the Lessee
is required to effect under the provisions of this Lease,
shall be paid to the Lessee or on its order
<PAGE>
in the same manner and amounts and under the same
conditions as are provided with respect to and as though
such remaining condemnation proceeds constituted insurance
proceeds, as set forth in Article XIII; provided, however,
that in the case of the fourth and final instalment the
payment by the Lessor to the Lessee or on its order shall
be either the unused portion of such remaining condemnation
proceeds or the unpaid balance of the cost of such
restoration, whichever is the lesser amount, it being
understood that all costs of any such repair and
restoration in excess of the amount of condemnation
proceeds, remaining after payment of the assessments, as
above provided, shall be borne and paid by the Lessee; and
(c) The balance of the condemnation proceeds remaining after
disbursement of the payments provided in subparagraphs (a)
and (b) above, shall be and become the sole and exclusive
property of and shall be released to the Lessor to its own
use.
2. In the event any condemnation proceeds shall be released to the
Lessor pursuant to subparagraph 1(c) during the basic term or any renewal term
(except the fifth ten-year renewal) of this lease, the monthly rentals
thereafter payable by the Lessee shall be reduced. The monthly rentals as so
reduced shall bear the same proportion to the rentals set forth in Article III
hereof as (i) the applicable Exhibit A purchase price less the balance released
to the Lessor pursuant to 1 (c) above bears to (ii) the applicable Exhibit A
purchase price. For this purpose, the "applicable Exhibit A purchase price"
shall be the price which would apply pursuant to Article XVII if the date on
which the balance so released to the Lessor were the "date of cancellation" as
defined in Article XVII. In no event, however, shall such reduced rentals be
less than 50% of the rentals set forth in Article III hereof.
ARTICLE XVI
Assignments and Mortgages
1. The Lessee may assign this Lease or sublet any part of the Leased
Premises, but the Lessee shall remain liable under this Lease for the duration
thereof unless the Lessor shall grant written release of such liability.
2. This Lease shall not be construed as restricting the right of the
Lessee to mortgage its interest in the Leased Premises, and the Lessee is hereby
given the right to mortgage from time to time its interest in the Leased
Premises, or any part thereof. Neither the mortgagee under any such mortgage nor
the holder or holders of the indebtedness secured thereby shall become
personally liable upon the covenants of this Lease until such time as it or they
shall become the absolute owners of the leasehold estate created by this Lease.
3. In the event the Lessee shall mortgage the leasehold estate hereby
created, then the Lessor upon notification of such mortgage, the name of the
mortgagee and his address for purposes of notice, will furnish the mortgagee
with duplicates of all notices of default required by this Lease to be furnished
to the Lessee by the Lessor. Such mortgagee, if authorized by the Lessee, shall
have the right (without being required so to do and without thereby assuming any
of the burdens of this Lease) to make good such default, within the same time
and in the same manner as the Lessee might make good the same. The word
"mortgage" as used herein shall include a trust deed in the nature of a
mortgage, and the word "mortgagee" shall include a trustee under such a trust
deed.
ARTICLE XVI-A
Right of Lessee to Cancel
1. Notwithstanding anything in this Lease contained to the contrary,
the Lessee shall have the right and option to cancel and terminate this Lease in
the event that:
(a) it elects to cancel as of the end of the twentieth year of the
basic term;
<PAGE>
(b) the efficiency of the Lessee's then current operation of
the Leased Premises is substantially impaired by a final
partial or total condemnation thereof;
(c) all or a substantial portion of the improvements included
in the Leased Premises are finally required by any
governmental authority to be removed or reconstructed;
(d) the use of all or a substantial portion of the Leased
Premises is prohibited by law, ordinance or other
governmental authority; or
(e) substantially all of the improvements are destroyed by fire or
other casualty.
2. If the event of cancellation is as set forth in 1 (a) above, the
Lessee's option shall be exercisable by notice to the Lessor on or before the
end of the nineteenth year of the basic term, accompanied by an irrevocable
written offer to purchase all of the Lessor's then right, title and interest in
and to the Leased Premises as of the end of the twentieth year of the basic term
at a price of $520,000.
3. If the event of cancellation is as set forth in 1 (b), (c), (d) or
(e) above, the Lessee's option shall be exercisable by notice to the Lessor,
within 30 days, after notification of such taking, requirement, prohibition or
casualty, that it elects to cancel as of the last day of the second calendar
month following the mailing of its notice of election (which day is hereinafter
called the "date of cancellation"). If the date of cancellation falls within the
basic term, the Lessee's notice of election shall be accompanied by an
irrevocable written offer to purchase all of the Lessor's then right, title and
interest in and to the Leased Premises as of the date of cancellation at the
purchase price set forth in Exhibit A hereto.
4. If the Lessor fails to accept the Lessee's offer to purchase on or
before the date of cancellation (or, in the case of an offer to purchase as of
the end of the twentieth year, the final day of such year), or if the date of
cancellation is not within the basic term, all rights and obligations of the
parties hereto shall cease as of the date of cancellation (or the final day of
the twentieth year); each party hereto shall have the right to receive and
retain for its own account all compensation theretofore or thereafter awarded
for its own right, title and interest so condemned; and any proceeds of
insurance arising from such destruction or damage which are not in excess of
purchase price contained in any offer to purchase required of the Lessee by
paragraph 3 above shall be retained by the Lessor for its own account, and any
portion of such proceeds which is in excess of said purchase price shall be
divided equally between the Lessor and the Lessee.
5. In the event the Lessor accepts the Lessee's offer to purchase,
then and in such event the Lessee shall pay to the Lessor on or before the date
of cancellation (or the final day of the twentieth year) the purchase price
herein specified. Upon receipt of such purchase price, the Lessor covenants and
agrees to execute and deliver to the Lessee such documents as may be necessary
to convey to it the Lessor's then right, title and interest in and to the Leased
Premises, including the Lessor's interest in and to all compensations
theretofore and thereafter awarded for the right, title and interest so
condemned or taken, and in and to all proceeds of insurance which have arisen or
may arise as a result of such destruction.
ARTICLE XVII
Defaults
1. If one or more of the following events (herein called "defaults")
shall happen and be continuing, namely:
(a) The Lessee fails to make punctual payment of any rent
herein agreed to be paid, and such failure continues for a
period of ten days after notice thereof by the Lessor to
the Lessee;
(b) The Lessee makes an assignment for the benefit of
creditors;
<PAGE>
(c) The Lessee files a petition in bankruptcy or a petition or
answer seeking reorganization under the Federal Bankruptcy
Law or any other applicable statute;
(d) An attachment or execution is levied upon the Lessee's
property in or interest under this lease which is not
satisfied or released or stayed within thirty days
thereafter;
(e) An order is entered adjudicating the Lessee a bankrupt or
approving an involuntary petition seeking a reorganization
of the Lessee under the Federal Bankruptcy Law or any other
applicable statute or appointing a receiver or trustee for
all or any substantial part of the property of the Lessee,
and such order is not vacated or stayed within sixty days
after the entry thereof;
(f) The Lessee fails to perform or observe any other covenant,
agreement or condition to be performed or kept by the
Lessee under the terms and provisions of this Lease, and
such failure continues for sixty days after receipt of
written notice thereof by the Lessee from the Lessor;
then and in any such event the Lessor shall have the right, at its option, then
or at any time thereafter and while such default shall continue, to re-enter and
take complete and peaceful possession of the Leased Premises and declare this
Lease forfeited and the term thereof ended, and with or without process of law
remove all persons therefrom. The Lessee in such event shall peacefully and
quietly yield up and surrender the Leased Premises to the Lessor and execute and
deliver to the Lessor such instrument or instruments as will properly evidence
termination of the Lessee's rights and interest under this Lease, and as may be
required by the Lessor. In the event of any such default and the forfeiture and
termination of this Lease by the Lessor, the Lessor shall be entitled to recover
from the Lessee the worth, at the time of termination of this Lease, of an
amount equal to the then value of the excess, if any, of the aggregate of rent
and charges equivalent to the rent reserved in this Lease for the balance of the
basic term over the then reasonable rental value of the Leased Premises for the
balance of the basic term. Such recovery shall completely discharge the Lessee
of all obligations hereunder, notwithstanding any other provisions of this
Lease. At the option of the Lessor and in lieu of forfeiting this Lease as above
provided, the Lessor may re-enter the demised premises as aforesaid and as the
agent of the Lessee remove therefrom any property of the Lessee, and may sublet
and relet said premises or any part thereof from time to time for any unexpired
part of the basic term, and the Lessor may collect the rents therefor, applying
the same first to the payment of expenses of such re-entry and reletting and
then to the payment of the rent due to become due under this Lease, and the
Lessee hereby agrees to pay any deficiency therefor. No such re-entry shall
release the Lessee from its covenants to pay rentals and other charges provided
for herein, and it is agreed that, except in so far as this is inconsistent with
or contrary to any provision of this Lease, no right or remedy herein conferred
upon or reserved to the Lessor is intended to be exclusive of any other right or
remedy, and each and every right and remedy shall be cumulative and in addition
to any other right or remedy given hereunder, or now or hereafter existing in
law or in equity or by statute.
2. In the event of termination of this Lease and the reentry of the
Lessor as aforesaid, the Lessee waives any and all rights to redeem the Leased
Premises either given by any statute now in effect or hereafter effected, but
the Lessor shall not be deemed to have terminated this Lease or the liability of
the Lessee to pay rent hereunder or its liability for damages by any such entry
or by any action in unlawful detainer or otherwise, unless the Lessor shall have
notified the Lessee in writing that it has elected to terminate this Lease.
ARTICLE XVIII
Ownership and Possession Warranty
If the Lessee shall perform all of its covenants, agreements and
obligations hereunder, the Lessor covenants and agrees that the Lessee shall
have the peaceful and quiet enjoyment of the Leased Premises throughout the term
of this Lease, so long as the Lessee is not in default hereunder, without let or
hindrance on the part of the Lessor. The Lessor does hereby warrant to defend
the Lessee in the peaceful and quiet enjoyment of the Leased Premises against
the lawful claim of all persons claiming by, through, or under the Lessor.
<PAGE>
ARTICLE XIX
Holding Over by Lessee
If the Lessee holds over or remains in the possession or the
occupancy of the Leased Premises after the expiration of the basic or any
renewal term or after any sooner termination of the Lease by the Lessor, without
any written lease of said premises being actually made and entered into by the
Lessor and Lessee, such holding over or continued possession or occupancy, if
rent is paid by the Lessee and accepted by the Lessor for or during any period
of time it so holds over or remains in possession or occupancy, shall create
only a tenancy from month to month at the last monthly rental and upon the terms
(other than length of term) herein specified, which may at any time be
terminated by either Lessor or Lessee giving to the other thirty days' prior
notice of its intention to terminate the same.
ARTICLE XX
Waivers
Except to the extent that the Lessor may have otherwise agreed in
writing, no waiver by the Lessor of any breach by the Lessee of any of its
obligations, agreements or covenants hereunder shall be deemed to be a waiver of
any subsequent breach of the same or any other covenants, agreements or
obligations, nor shall any forbearance by the Lessor to seek a remedy for any
breach by the Lessee be deemed a waiver by the Lessor of its rights or remedies
with respect to such breach.
ARTICLE XXI
Termination
1. At the termination of this Lease for any reason (other then as
provided in Article XVI-A) the Lessee and the tenants and subtenants under the
Lessee, and any and all persons holding or claiming under the Lessee, shall
surrender possession of the Leased Premises to the Lessor, maintained as herein
provided for (ordinary wear and tear and depreciation excepted) and free of any
and all claims thereto by the Lessee or any party holding under the Lessee.
2. At the termination of this Lease for any cause, the Lessee and the
tenants and subtenants under the Lessee, and any and all persons holding or
claiming under the Lessee, shall have the right to remove from said Leased
Premises all personal property, tools, machinery and trade fixtures and
equipment installed by the Lessee or any of said persons at its or their own
expense, irrespective of how any of such property may be attached to said Leased
Premises; provided, however, that the Lessee shall repair any damage to the
Leased Premises caused by the removal of such property.
ARTICLE XXII
Covenants Run with Land
All covenants, agreements and engagements in this Lease contained
shall be construed as covenants running with the land, and all rights given to
and obligations imposed upon the respective parties shall be construed as
inuring to and binding upon the successors in interest and assigns of the
parties hereto, respectively.
<PAGE>
ARTICLE XXIII
Short Form of Lease
Simultaneously herewith the parties hereto have executed a Short Form
of Lease for recording purposes, and the terms thereof constitute a part hereof
as though recited at length herein.
ARTICLE XXIV
Notices
Any notice provided for herein shall be given by registered or
certified United States mail, postage prepaid, addressed to the Lessor as
follows:
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin
Attention: Mortgage Loan Department,
if to the Lessee as follows:
Rheem Manufacturing Company
801 Chesley Avenue
Richmond 4, California
Each party shall have the right to specify any other address in the
United States by giving to the other party at least fifteen days' prior notice
thereof.
IN WITNESS WHEREOF, the Lessor has caused these presents to be signed
by its Vice President and attested by its Assistant Secretary, and the Lessee
has caused these presents to be signed by its Vice President and attested by its
Assistant Secretary, and the respective corporate locals to be hereto affixed,
the day and year first above written.
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By /s/ Howard J. Tobin
-------------------
Vice President
Attest: /s/ C. A. Westring
------------------
Assistant Secretary
Signed, sealed and
delivered in the
presence of:
A. W. Scherr
Patricia Boyle
As to Lessor
Corporate Seal
<PAGE>
RHEEM MANUFACTURING COMPANY
By /s/ G. M. Greenwood
-------------------
Vice President
Attest: /s/ F. F. Lind
--------------
Assistant Secretary
Signed, sealed and
delivered in the
presence of:
C. T. Nichols
Walter S. Lewis
As to Lessee
Corporate Seal
<PAGE>
State of Wisconsin )
) SS.
County of Milwaukee )
On this 26th day of June, 1956, before me, A. W. Scherr, a notary
public in and for said county, personally appeared Howard J. Tobin, known to me
to be the Vice President and C. A. Westring, known to me to be the Assistant
Secretary of The Northwestern Mutual Life Insurance Company, the corporation
that executed the within instrument, and known to me to be the persons who
executed the within instrument on behalf of the corporation therein named, and
acknowledged to me that such corporation executed the same.
WITNESS my hand and official seal.
A. W. Scherr
Notary Public in and for
said County and State
My commission expires: February 17, 1957.
Notarial Seal
State of California )
) SS.
County of Contra Costa )
On this 29th day of June, 1956, before me, C. T. Nichols, a notary
public in and for said county, personally appeared G. M. Greenwood, known to me
to be the Vice President and F. F. Lind, known to me to be the Assistant
Secretary of Rheem Manufacturing Company, the corporation that executed the
within instrument, and known to me to be the persons who executed the within
instrument on behalf of the corporation therein named, and acknowledged to me
that such corporation executed the same.
WITNESS my hand and official seal.
C. T. Nichols
Notary Public in and for
said County and State
My commission expires: January 13, 1957.
Notarial Seal
<PAGE>
EXHIBIT A
The purchase price referred to in Article XVI-A shall be the sum set
forth in the following Table opposite the year of the basic term in which falls
the "date of cancellation" as defined in said Article:
Date Purchase Price
Within 1st year $1,045,200
" 2nd " 1,025,000
" 3rd " 1,005,000
" 4th " 985,000
" 5th " 965,000
" 6th " 945,000
" 7th " 920,000
" 8th " 895,000
" 9th " 865,000
" 10th " 835,000
" 11th " 805,000
" 12th " 775,000
" 13th " 745,000
" 14th " 715,000
" 15th " 685,000
" 16th " 655,000
" 17th " 625,000
" 18th " 590,000
" 19th " 555,000
" 20th " 520,000
" 21st " 485,000
" 22nd " 450,000
" 23rd " 415,000
" 24th " 380,000
" 25th " 345,000
<PAGE>
EXHIBIT 10.27
FACILITY LEASE
THIS FACILITY LEASE is made as of the 29th day of December, 1986, by
and between THE CONNECTICUT NATIONAL BANK, not individually but solely in its
capacity as Trustee ( the "Landlord"), under that certain Trust Agreement dated
as of December 29, 1986 (the "Trust Agreement"), between Merced Associates, a
Maryland general partnership (the "Partnership"), and Connecticut National Bank
(the "Trustee"), and PHYSICS INTERNATIONAL COMPANY, a California corporation
(the "Tenant").
RECITALS
A. Landlord is the owner of certain real property as hereafter set
forth constituting the Premises as hereafter defined.
B. Tenant desires to lease the Premises from the Landlord in
accordance with the terms and conditions hereinafter set forth.
WITNESSETH
NOW, THEREFORE in consideration of the rental hereinafter agreed upon
and the performance of all the conditions and covenants hereinafter set forth on
the part of Tenant to be performed, Landlord does hereby lease unto Tenant, and
the latter does lease from the former the existing structure containing
approximately two hundred forty thousand 240,000 square feet known as 2700
Merced Street in San Leandro, California, together with improvements to the
structure to be constructed in accordance with the provisions of Paragraph 20
below (the existing structure together with the contemplated improvements are
referred to herein as the "Premises"). The lease of the Premises is subject to
the state of Landlord's title existing as of the date of the commencement of the
term hereof, including but not limited to, (i) those matters referred to in the
preliminary title report dated September 30, 1986, Order No. 106576 by Western
Title Insurance Company; (ii) any state of facts which an accurate survey or
physical inspection of the Premises might show; (iii) the Indenture (the "Ground
Lease") of even date herewith by and between Landlord and the Trustees under the
Will and of the Estate of Samuel H. Damon (the "Damon Estate"); and (iv) the
Ground Sublease (the "Ground Sublease") dated of even date herewith between
Landlord and Tenant. This Lease specifically excludes the ground beneath and
around the Premises.
1. TERM. The term of this Lease shall be as follows:
1.1. ORIGINAL TERM. The original term of this Lease shall be for a
period of twenty (20) years commencing on December 30, 1986 and ending on
December 31, 2006.
1.2 RENEWAL TERM. Tenant shall have the option to extend the
original term of this Lease for two (2) consecutive renewal terms of ten (10)
years each on the same terms and conditions contained herein, except that the
Annual Net Rent (define below) will be as described in Paragraph 3 below. Tenant
shall exercise each such option by providing written notice of its exercise of
such option to Landlord not less than one hundred eighty (180) days prior to the
expiration of the original term or the renewal term then in effect; provided,
however, that the exercise of each such option shall be subject to the
conditions that: (i) Tenant is not in Default under any provisions of this Lease
(including the cross default provision contained in Paragraph 17.9 below) on the
date of exercise of such option or on the date of commencement of the renewal
term; (ii) Tenant shall be and shall have been in possession and occupancy of
the Premises at all times since he effective date of this Lease; and (iii)
Tenant simultaneously exercises its option to renew the Ground Sublease.
2. ANNUAL NET RENT - ORIGINAL TERM. Tenant covenants and agrees to
pay Landlord during each year of the original term of this Lease net rental (the
"Annual Net Rent") in the amounts and on the dates as set forth on Exhibit A
attached hereto. Unless otherwise provided on Exhibit A, Annual Net Rental shall
be due and payable in arrears on the last day of each June and December in equal
semi-annual installments.
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3. ANNUAL NET RENT - RENEWAL TERM. Annual Net Rent for each renewal
term will be the annual fair market rental value of the Premises during each
renewal term. In the event the Landlord and the Tenant cannot agree upon the
annual fair market rental value of the Premises within ninety (90) days prior to
the expiration of the original term or of any renewal term, as the case may be,
then the Annual Net Rent for such renewal term shall be determined by three
impartial real estate appraisers, one to be appointed by each of the parties
hereto, and Landlord and Tenant shall each promptly name one such appraiser and
give written notice thereof to the other party, and in case either party shall
fail so to do within ten (10) days after appointment of the first appraiser, the
appraiser already appointed shall name a second appraiser, and the two
appraisers thus appointed in either manner shall appoint a third appraiser, and
in case of their failure so to do within ten (10) days after appointment of the
second appraiser, either party may have such third appraiser (who shall in this
case be a member of the American Institute of Real Estate Appraisers of other
similar organization, who maintains an office in the County of Alameada, Contra
Costa, Santa Clara or the city or county of San Francisco) appointed by any
person then sitting as Judge of the Superior Court of the State of California in
and for the County of Alameda and the three appraisers so appointed shall
thereupon proceed to determine the matter in question, and the decision of said
appraisers or a majority of them shall be final, conclusive and binding upon
both parties. The cost of such appraisal other than attorneys' fees shall be
shared equally by the parties hereto. Until determination of such rent by
agreement or appraisal as herein provided, semi-annual installments at the same
rate payable for the preceding year shall be paid on account thereof.
4. NET LEASE; ADDITIONAL RENT. It is intended by Landlord and Tenant
that this Lease be a net, net, net lease and the Annual Net Rent payable by
Tenant shall be absolutely net to the Landlord. The Tenant agrees to pay
directly any and all costs and expenses in connection with the ownership or
leasing of the Premises. Tenant covenants and agrees to pay to Landlord as
additional rent (the "Additional Rent"), promptly after Landlord's demand, any
such costs and expenses which cannot be paid directly by Tenant, but which are
paid by Landlord. The costs and expenses for which Tenant is responsible shall
include, but not be limited to, the following:
4.1. UTILITIES. All costs of water rent and sewer service
charges assessed against the Premises and all costs of electricity, gas,
telephone and other utilities used or consumed in the Premises, together with
all taxes, levies or other charges with respect to any such utilities.
4.2. REAL ESTATE TAXES. All real property taxes, water
rents, footage assessments, excise taxes, general and special assessments,
supplemental taxes and other governmental charges and impositions of every kind
to whomsoever assessed and whether now in being or not which may be assessed
upon, or payable for, or in respect of, the Premises or any part thereof for any
period wholly or partly within the term of this Lease, or with respect to the
use, occupancy or possession of the Premises at any time during the term hereof;
provided that any imposition relating to the fiscal period of the imposing
authority falling partly within and partly without the term hereof shall be
apportioned from the beginning or to the end of the term, as the case may be.
4.3. PERSONAL PROPERTY TAXES. All taxes or assessments
levied or assessed during the term of this Lease against any leasehold interest
of Tenant or any personal property or trade fixtures of Tenant of any kind owned
by Tenant or placed in, upon or about the Premises by Tenant.
4.4. FEES, CHARGES AND EXPENSES. Any and all fees, charges
and expenses of every kind and nature which Tenant shall incur or Landlord shall
pay or become obligated to pay because of or in connection with owning,
operating, leasing, managing and maintaining of the Premises including, without
limitation, the following: (i) all supplies and materials used, and labor
charges incurred, in the operation, maintenance, decoration, repairing and
cleaning of the Premises; (ii) the cost of all equipment purchased or rented
which is utilized in the performance of Landlord's obligations hereunder, and
the cost to maintenance and operation of any such equipment; (iii) the cost of
all management, maintenance and service agreements for the Premises and the
equipment therein, including, without limitation, alarm service, security
service, window cleaning, and elevator maintenance; (iv) accounting costs,
including the cost of audits by certified public accountants, and legal and
engineering fees and expenses incurred in connection with the operation and
management of the Premises; (v) wages, salaries, commissions, and related
expenses of all on-site and off-site agents of employees engaged in the
operation, maintenance and security in the Premises; (vi) the cost of all
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reasonable and necessary insurance coverage for the Premises; (vii) the cost of
repairs, replacements and general maintenance to the Premises, structural or
non-structural, including without limitation the mechanical, electrical and
heating ventilating and air-conditioning equipment and/or systems; (vii) any and
all exterior landscaping; (ix) cost of removal of trash, rubbish, garbage and
other refuse from the Premises as well as removal of ice and snow from the
sidewalks on or adjacent to the Premises; and (x) every other expense which
would be considered as an expense of maintaining, operating, leasing, insuring,
managing or repairing the Premises.
4.5. FEES AND EXPENSES OF THE TRUSTEE. All fees and
expenses paid or payable to the Trustee by the Partnership (including, without
limitation, all costs and expenses relating to indemnification of the Trustee)
which are related to any of the transactions or matters referred to in any of
the Operative Documents (defined below), but excluding, however, any such fees
or expenses incurred as a result of the wrong doing or gross negligence of the
Partnership.
4.6 INTERPRETATION. Nothing contained in this Paragraph 4
shall be construed to impose any duty or obligation upon Landlord to provide any
service or benefit referred to this Paragraph. Landlord is under no duty or
obligation to provide any service or benefit other than as expressly required by
the terms of this Lease.
5. PAYMENT OF RENTAL. Tenant covenants and agrees to pay the rental
herein reserved and each installment thereof promptly when and as due. All
rentals shall be paid to Landlord at the address specified in Paragraph 30
hereof, or at such other place or to such appointee of Landlord, as Landlord may
from time to time designate in writing. All monies to be paid by Tenant to
Landlord hereunder, whether or not designated as rent shall be deemed to be
Additional Rent and shall be collectible as rent upon Landlord's demand.
6. DEFAULT CHARGES. In the event Tenant fails to pay Landlord when
due any rental payment or other charge or sum due hereunder, Landlord may at its
option charge Tenant a late charge equal to eighteen percent (18%) per annum (or
such lesser amount as may be permitted by law) of the payment or other charge or
sum for the period the payment or other charge or sum is overdue, which late
charge shall be collectible and shall be payable by Tenant to Landlord upon
demand.
7. ADVANCEMENTS. If Tenant should fail to perform any of the
obligations imposed upon it under this Lease, Landlord may, but shall not be
obligated to, make advances to perform the same on behalf of Tenant and all sums
so advanced shall immediately upon demand become due and payable under this
Lease. Tenant will repay on demand all sums so advanced on Tenant's behalf, plus
any expenses or costs incurred by Landlord, including reasonable attorneys'
fees, with interest thereon at the rate of eighteen percent (18%) per annum (or
such lesser amount as may be permitted by law), accruing from the date of
demand.
8. USE. Tenant covenants and agrees to use and occupy the Premises
solely for industrial and mercantile purposes. Tenant agrees to comply with all
applicable zoning, use and other laws and regulations, and provide and install
at its own expense any additional equipment or alterations required to comply
with all such laws and regulations as required from time to time.
9. COMPLIANCE WITH LAWS. Tenant covenants and agrees that it will, at
its own expense, observe, comply with and execute all laws, orders, rules,
directions, requirements and regulations of any and all governmental
departments, bodies, bureaus, agencies and officers, and all rules, directions,
requirements and recommendations of the local board of fire underwriters and the
fire insurance rating organizations having jurisdiction over the area in which
the Premises are situated, or other bodies or agencies now or hereafter
exercising similar functions in the area in which the Premises are situated, in
any way pertaining to the Premises or the use and occupancy thereof. In the
event Tenant shall fail or neglect to comply with any of the aforesaid laws,
orders, rules, directions, requirements or recommendations, Landlord or its
agents may enter the Premises and take all such action and do all such work in
or to the Premises as may be necessary in order to cause compliance with such
laws, orders, rules, directions, requirements or recommendations.
10. REPRESENTATIONS AND WARRANTIES OF TENANT. Tenant represents and
warrants that: (a) Tenant is a corporation duly organized and validly existing
in good standing under the laws of the state of its incorporation. (b) The
execution, delivery and performance of this Lease and all related instruments
and
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documents: (i) have been duly authorized by all necessary corporate action
on the part of Tenant; (ii) do not require the approval of any stockholder,
trustee or holder of any obligations of Tenant except such as have been duly
obtained; and (iii) do not and will not contravene any law, governmental rule,
regulation or order now binding on Tenant, or the charter or by-laws of Tenant,
or contravene the provisions of, or constitute a default under, or result in the
creation of any lien or encumbrance upon the property of Tenant under any
indenture, mortgage, contract or other agreement to which Tenant is a party or
by which it or its property is bound; provided, however, Tenant makes no such
warranty or representation as to any state or federal securities laws. (c) This
Lease and all related instruments and documents, when entered into, will
constitute legal, valid and binding obligations of Tenant enforceable against
Tenant in accordance with the terms thereof, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other laws
or equitable principals relating to or limiting creditors rights generally, and
except that the remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought. (d)
Tenant is not in default under any material obligation for the payment of
borrowed money, for the deferred purchase price of property or for the payment
of any rent under any lease agreement which, either individually or in the
aggregate, would materially adversely affect the financial condition of Tenant
or the ability of Tenant to perform its obligations hereunder. (e) All of the
information contained in schedules now or hereafter attached hereto as Exhibit B
is true and correct. (f) All of the representations and warranties made by
Tenant in the Purchase and Assignment Agreement of even date herewith (the
"Purchase and Assignment Agreement") between Landlord and Tenant were true and
correct when made.
11. ASSIGNMENT AND SUBLETTING. Tenant shall have the right, upon
sixty (60) days prior written notice to Landlord, to assign this Lease and to
sublet the Premises, for a period not to exceed the original term of this Lease,
provided, however, at the time of any such assignment or subletting (1) Tenant
is not in Default hereof; and (2) Tenant simultaneously assigns the Ground
Sublease or subleases the property let thereunder, as the case may be, to the
same person or entity as is assigned this Lease or sublet these Premises.
Notwithstanding any such assignment or subletting Tenant shall not be relieved
of any liability under this Lease. Additionally, no party other than Tenant may
exercise the renewal options set forth in Paragraph 1.2 above unless Olin
Corporation ("Guarantor") provides Landlord with a Guaranty Agreement
satisfactory to Landlord, guarantying payment and performance of such parties'
obligations to Landlord during any renewal term.
12. INSURANCE. Tenant shall during the entire term of this Lease, and
any extensions and renewals thereof, obtain and maintain at its sole cost and
expense, and keep in full force and effect, with Tenant, Landlord and all
mortgagees, holders of deeds of trust or assignees of Landlord named as insureds
thereon, as their respective interests may appear, the following insurance
coverages:
12.1 CASUALTY INSURANCE. Tenant will insure the Premises
against loss by earthquake (if such insurance is commercially available at
reasonably economical premiums determined by Tenant in good faith) theft,
fire,casualty and extended coverage under insurance policies which shall be
written in forms, amounts and by companies satisfactory to the Landlord,
provided, however, that the amount of such insurance shall not be les than the
full insurable value of the Premises (and in all events not less than the amount
necessary to avoid co-insurance restrictions) as the same may increase but not
decrease from time to time. All insurance proceeds shall be payable to Landlord
or Landord's designee.
12.2 LIABILITY INSURANCE. Tenant shall obtain and maintain
in full force and effect public liability and property damage insurance in such
amounts, with such insurance companies, and upon policy forms acceptable to and
approved by Landlord, but in any event in an amount of not less than Ten Million
Dollars ($10,000,000.00) per occurance; provided however, that Tenant may self-
insure not more that Eight Million Dollars ($8,000,000.00) of such required
coverage for so long as Guarantor's tangible net worth is not less than Three
Hundred Million Dollars ($300,000,000.00). As used herein, "tangible net worth"
shall mean the sum of the par or stated value of all outstanding capital stock,
additional paid in capital, surplus and undivided profits, less any amounts
attributable to good will, patents, copyrights, mailing lists, catalogs,
trademarks, bond discount and underwriting expenses, organizational expenses and
other intangibles, all as determined in accordance with generally accepted
accounting principles consistently applied.
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13. INDEMNIFICATION. Landlord shall not be liable to Tenant for any
loss or damage to Tenant or to any other person or the property of Tenant or of
any other person unless such loss or damage shall be caused by or result from
the willful misconduct or gross negligence of Landlord. Tenant shall defend and
does hereby agree to indemnify and save harmless Landlord and the Partnership,
and their successors or assigns, from all expenses, claims and demands of every
kind, that may be brought against it, them or any of them for or no account of
any damage, loss or injury to persons or property in or about the Premises or
the land on which the Premises are situated, or on account of any damage, loss
or injury resulting from or claimed to result from the presence on the Premises
of any hazardous chemical, toxic waste or radioactive material, or arising from
or out of Tenant's use or occupancy thereof, or occasioned wholly or in part by
any act or omission of Tenant, its agents, servants, contractors, employees or
invitees, and from any and all costs and expenses, counsel fees, and other
charges which may be imposed upon Landlord and/or the Partnership, and their
successors and assigns, or which it or they may be obligated to incur in
consequence thereof (including, without limitation, indemnification of the
Trustee pursuant to Sections 5.03 and 7.01 of the Trust Agreement).
14. ALTERATIONS. Tenant shall not make any alterations to the
Premises, the total cost of which for any one project exceeds Fifty Thousand
Dollars ($50,000.00), without the prior written consent of Landlord, which shall
not be unreasonably withheld. If Tenant shall desire to make such alterations,
plans for the same shall first be submitted to and approved by Landlord, and all
work and installations shall be performed by Tenant at its own expense in
accordance with approved plans. Tenant agrees that all such work shall be done
in a good and workmanlike manner, the structural integrity of the Premises shall
not be impaired, and that no liens shall attach to the Premises by reason
thereof. Tenant agrees to obtain at Tenant's expense, all permits required for
such alterations. If requested by Landlord, Tenant shall, prior to commencing
construction, deposit with Landlord a completion bond in at least the estimated
cost of the proposed alteration in such form and with such surety as is
satisfactory to Landlord. Landlord may also make approval contingent upon
compliance with such other reasonable conditions as Landlord may stipulate.
15. OWNERSHIP OF ALTERATIONS. Unless Landlord shall elect that all or
part or any alteration made by Tenant to the Premises shall remain on the
Premises after the termination of this Lease, the Premises shall be restored to
their original condition by Tenant before the expiration of this Lease at
Tenant's sole expense. Upon such election by Landlord, any such alterations,
improvements, betterments or mechanical equipment, including but not limited to,
heating and air conditioning systems, shall become the property of Landlord as
soon as they are affixed to the Premises, and all right, title and interest
thereof of Tenant shall immediately cease, unless otherwise agreed to in writing
by Landlord. Landlord shall have the sole right to collect any insurance for any
damage of any kind to any of the improvements placed upon the Premises by
Tenant. Tenant shall promptly pay any franchise, minor privilege or other tax or
assessment resulting directly or indirectly from any alterations or improvements
made by Tenant to the Premises. Tenant shall repair promptly, at its own
expense, any damage to the Premises caused by bringing into the Premises any
property for Tenant's use, or by the installation or removal of such property,
regardless of fault or by whom such damage shall be caused.
16. REPAIRS AND MAINTENANCE. The Premises hereby leased are leased to
Tenant "AS IS." Landlord shall be under no liability, nor (except as provided in
Paragraph 20 below) have any obligation to do any work or make any repairs in or
to the Premises, and any work which may be necessary to outfit the Premises for
Tenant's occupancy or for the operation of Tenant's business therein is the sole
responsibility of Tenant and shall be performed by Tenant at its own cost and
expense. Tenant acknowledges that it has fully inspected the Premises prior to
the execution of this Lease, and Tenant further acknowledges that Landlord has
made no warranties or representations with respect to the condition or state of
repairs of the Premises. Tenant will, during the term of this Lease, keep the
Premises and appurtenances (including window, doors, plumbing, heating and
electrical facilities and installations) in good order and repair and will make
all necessary repairs to the exterior walls and roof of the Premises. Tenant
shall also maintain any driveways and parking areas designated for its exclusive
use. Tenant will, at the expiration of the term of this Lease, or at the sooner
termination thereof by forfeiture or otherwise, deliver the Premises in good
order and condition, reasonable wear and tear excepted. In the event Tenant
shall not proceed promptly and diligently to make any repairs or perform any
obligation imposed upon it within forty-eight (48) hours after receiving written
notice from Landlord to make such repairs of perform such obligation, then and
in such event, Landlord may, at its option, enter the Premises and do and
<PAGE>
perform the things specified in said notice, without liability on the part of
Landlord for any loss or damage resulting from any such action by Landlord and
Tenant agrees to pay promptly upon demand any cost or expense incurred by
Landlord in taking such action.
17. DEFAULT. Any of the following events shall constitute a default
(a "Default") by Tenant:
17.1. PAYMENT. If the rent (Annual Net Rent, or Additional
Rent) shall not be paid when and as due and shall be in arrears, in whole or in
part for a period of five (5) days after written notice from Landlord; or
17.2 PERFORMANCE If Tenant shall have failed to perform any
other term, condition, or covenant of this Lease on its part to be performed for
a period of thirty (30) days after written notice of such failure from Landlord
provided, however, if such failure cannot reasonably be remedied within thirty
(30) days then Tenant shall not be in default hereunder if Tenant commences cure
within thirty (30) days after notice and thereafter diligently and continuously
pursues cure; or
17.3. ABANDONMENT. If the Premises are vacant, unoccupied
or deserted for a continuous period of sixty (60) days or more at any time
during the term of this Lease; or
17.4. INVOLUNTARY BANKRUPTCY. The entry of a decree or
order for relief by a court having jurisdiction against or with respect to
Tenant in an involuntary case under the federal bankruptcy laws or any state
insolvency or similar laws ordering the liquidation of Tenant or reorganization
of Tenant or of Tenant's business and affairs, or the appointment of a receiver,
liquidator, assignee, custodian, trustee, or similar official for Tenant or any
of Tenant's property, including but not limited to the Premises, and the failure
to have such decree, order or appointment discharged or dismissed within a
period of ninety (90) days from the date of entry; or
17.5. VOLUNTARY BANKRUPTCY. The commencement by Tenant of a
voluntary case under the Federal bankruptcy laws or any state insolvency or
similar laws or the consent by Tenant to the appointment or taking possession by
a receiver, liquidator, assignee, trustee, custodian or similar official for
Tenant or any of Tenant's property, including but not limited to the Premises,
or the making by Tenant of an assignment for the benefit of, creditors, or the
failure by Tenant generally to pay Tenant's debts as and when they become due;
17.6. SALE OR ENCUMBRANCE. If Tenant's leasehold interest
under this Lease is sold under execution, attachment or decree of court to
satisfy any debt of Tenant, or if any lien (including a mechanic's lien) is
filed against Tenant's leasehold interest and is not discharged within ten (10)
days thereafter.
17.7. FAILURE TO MAINTAIN INSURANCE. If the Tenant fails to
maintain continuously in force the insurance coverage required by Paragraph 12
above, in strict conformity with the requirements of that Paragraph.
17.8. BREACH OF WARRANTY OR REPRESENTATION. If any warranty
or representation made by Tenant herein shall have been materially false or
misleading when made provided; however, that in the event that any of the
warranties or representations contained in Paragraph 10(e) shall have been
materially false or misleading when made, Landlord's sole remedy shall be
pursuant to Paragraph 38 below.
17.9. CROSS DEFAULT. If the Tenant or Guarantor is in
default under the terms of any document, paper or agreement with Landlord or to
which Landlord is a party, including but not limited to the following documents
executed of even date herewith: the Purchase and Ground Lease Agreement among
the Damon Estate, Landlord and Tenant; the Purchase and Assignment Agreement;
the Agreement of Guaranty Nos. 1 and 2 between Guarantor and Landlord; and the
Ground Sublease (together with the Ground Lease collectively referred to as the
"Operative Documents:).
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18. REMEDIES UPON DEFAULT. In the event of the occurrence of any
Default as defined in Paragraph 17 hereof, Landlord, in addition to any and all
legal and equitable remedies it may have, shall have the following remedies:
18.1. DISTRAIN. To distrain for any rent or additional rent
in default.
18.2. TERMINATION; POSSESSION OF PREMISES. At any time
after Default, without notice, to declare this Lease terminated and enter the
Premises with or without legal process; and in such event Landlord shall have
the benefit of all provisions of law now or hereafter in force respecting the
speedy recovery of possession from Tenant's holding over or proceedings in
forciable entry and detainer, and Tenant waives any and all provisions for
notice under such laws.
18.3. DAMAGES. Notwithstanding such reentry and/or
termination, Tenant shall immediately be liable to Landlord for the sum of the
following: (i) all rent (whether Annual Net Rent or Additional Rent) then in
arrears; (ii) all other liabilities of Tenant and damages sustained by Landlord
as a result of Tenant's Default, including but not limited to, the reasonable
costs of reletting the Premises and any broker's commissions payable as a result
thereof; (iii) all of Landlord's costs and expenses (including reasonable
counsel fees) in connection with such Default and recovery of possession; (iv)
the difference between the rent reserved under this Lease (Net Annual Rent and
Additional Rent) for the balance of the term and the fair rental value of the
Premises for the balance of the term to be determined as of the date of reentry;
or at Landlord's option in lieu thereof, Tenant shall pay the amount of the rent
(Net Annual Rent or Additional Rent) reserved under this Lease at the times
herein stipulated for payment of such rent for the balance of the term, less any
amount received by Landlord during such period from others to whom the Premises
may be rented on such terms and conditions and at such rentals as Landlord, in
its sole discretion, shall deem proper; and (v) any other damages recoverable by
law. In the event Landlord brings any action against Tenant to enforce
compliance by Tenant with any covenant or condition of this Lease, including the
covenant to pay rent (Net Annual Rent and Additional Rent), and it is judicially
determined that Tenant has defaulted in performing or complying with any such
covenant or condition, then and in such event, Tenant shall pay to Landlord all
costs and expenses incurred by Landlord in bringing and prosecuting such action
against Tenant, including a reasonable attorney's fee.
18.4. LIQUIDATED DAMAGES. In the event Landlord elects to
sell the Premises then, in lieu of Landlord's damages as set forth in Paragraph
18.3 above, Landlord shall be entitled to liquidated damages as follows:
Landlord may require Tenant to pay the Stipulated Loss Value determined as
specified below (the "Stipulated Loss Value") plus an amount equal to all rent
(whether Annual Net Rent or Additional Rent) apportioned through the date upon
which the Stipulated Loss Value is paid and all of Landlord's costs and expenses
(including reasonable attorney's fees) incurred by reason of Tenant's default.
The Stipulated Loss Value shall be calculated as the product of (a) the Total
Project Costs (defined to be the sum of all unreimbursed expenditures or
obligations made or obligations or incurred by Landlord, the Partnership or
Maryland National Leasing Corporation ("MNLC") in connection with the
acquisition, financing, improvement, ownership or leasing of the Premises, all
personal property or fixtures therein or thereon and the real property subject
to the Ground Lease) and (b) the applicable percentage factor set forth on the
Schedule of Stipulated Loss Values on Exhibit "C" attached hereto. The
Stipulated Loss Value shall be payable on and determined as of the next
scheduled rent payment date after the date upon which Landlord gives written
notice of its election to require payment thereof. Upon payment of the
liquidated damages this Lease shall terminate.
At such time as Landlord closes on a sale of the Premises,
Landlord shall repay to Tenant so much of the amount Landlord received from
Tenant on account of the Stipulated Loss Value, pursuant to this Paragraph 18.4
, as is equal to the net proceeds of sale of the Premises less any costs or
expenses (including reasonable attorneys fees) Landlord incurred in connection
with reacquiring possession of, holding and selling the Premises. Landlord shall
use good faith efforts to maximize the net profit upon the sale to the Premises.
19. DAMAGE OR DESTRUCTION. If during the Lease term the Premises are
damaged or destroyed by fire or other casualty, Tenant shall promptly cause such
damage to be repaired or the Premises to be rebuilt. The Premises shall be
repaired or rebuilt to its condition immediately prior to the casualty. To the
extent insurance proceeds on account of such damage are made available to
Landlord and are free from the superior
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claim of any mortgagee or holder of any deed of trust, Landlord shall, provided
the tenant is not in Default hereof, make such insurance proceeds available to
Tenant, as reimbursement for Tenant';s expenses in connection with the repair or
rebuilding. To the extent such proceeds are insufficient to pay for the repairs
or rebuilding required of Tenant pursuant to this Paragraph 19, Tenant shall
supply any and all additional funds necessary to complete the required work.
There shall be no abatement of rent whether or not such fire or other casualty
makes any portion or all of the Premises untenantable. In the event such fire or
other casualty damages or destroys any of Tenant's leasehold improvements,
alterations, betterments, fixtures or equipment, Tenant shall cause the same to
be repaired or restored at Tenant's sole cost and expense.
20. IMPROVEMENTS TO PREMISES. Landlord shall improve the Premises by
the construction of an approximately fifteen thousand (15,000) square foot
building. Tenant shall cause the construction of the building, as construction
manager for Landlord, in strict conformity with the terms and provisions of the
Purchase and Assignment Agreement. The building to be constructed shall at all
times be deemed to be part of the Premises and shall be subject to all terms and
conditions of this Lease. The building shall at all times be the property of
Landlord subject to the Tenant's rights under this Lease.
21. RIGHT OF ENTRY. Landlord and its agents, servants, employees,
including any builder or contractor employed by Landlord, shall have the
absolute and unconditional right, license and permission, at any and all
reasonable times, to enter and inspect the Premises or any part thereof, and at
the option of Landlord, to make such reasonable repairs and/or changes in the
Premises as Landlord may deem necessary or proper and/or to enforce and carry
out any provision of this Lease.
22. EXPIRATION OF TERM. It is agreed that the term of this Lease
shall expire and terminate at the end of the original term hereof or at the end
of any renewal term, as the case may be, without the necessity of any notice by
or to any of the parties hereto, unless otherwise provided herein. If Tenant
fails to vacate the Premises when required, Tenant shall hold the Premises as a
tenant from month to month, subject to all the other terms and conditions of
this Lease, but shall pay rent at an amount equal to double the Annual Net Rent
in effect just prior to such expiration or termination. Landlord shall, upon
such expiration or termination of this Lease, be entitled to the benefit of all
laws relating to the speedy recovery of possession of lands and tenements held
over by tenants that may be now in force or may hereafter be enacted.
23. CONDEMNATION.
23.1 TAKING OF A MATERIAL PART. If during the term of this
Lease all or any material part or the Premises shall be taken by or under power
of eminent domain then, at Landlord's option, either (1) this Lease shall
terminate as of, and the rent (Annual Net Rent and Additional Rent) shall be
apportioned to and abate from and after, the next rent payment date following
the date of taking and the Tenant shall pay to the Landlord, on such date the
Stipulated Loss Value together with rent (Annual Net Rent and Additional Rent)
accrued until and including such date plus any other monies due Landlord and any
monies paid by Landlord on account of pursuing the condemnation proceeding
(including reasonable attorney's fees). After payment of the Stipulated Loss
Value and the other monies referred to in this Paragraph 23, Tenant shall be
entitled to receive any award from the condemning authority up to the amount of
the Stipulated Loss Value payment, and Landlord shall use reasonable efforts to
maximize any condemnation award; or (2) this Lease shall terminate and the rent
(Annual Net Rent and Additional Rent) shall be apportioned to and abate from and
after the date title vests in the condemning authority, and Tenant shall have no
right to participate in any award of damages for such taking and hereby assigns
all of its right, title and interest therein to Landlord.
23.2 TAKING OF LESS THAN MATERIAL PART. In the event less
than a material part of the Premises is taken, Landlord shall receive any
condemnation award and Tenant shall, at its expense, promptly make such repairs
and improvements as shall be necessary to make the remainder of the Premises
adequate to permit Tenant to carry on its business to substantially the same
extent and with substantially the same efficiency as before the taking. Landlord
shall make available to Tenent such condemnation proceeds as are available to
Landlord and free from the superior claim of any mortgagee or holder of any deed
of trust, to defray the cost of reconstruction or repair actually incurred by
Tenant. In no event shall Landlord be required to expend
<PAGE>
an amount in excess of the award received by Landlord for such taking. In no
event shall there be any abatement of the rent hereunder (Annual Net Rent and
Additional Rent).
23.3 DEFINITIONS. For purposes of this Paragraph "taking"
shall include a negotiated sale or lease or transfer of possession of the
Premises to a condemning authority under bona fide threat of condemnation for
public use. For purposes of this Paragraph, "a material part of the Premises"
shall mean such part that the remainder thereof is, in Landlord's sole
discretion, rendered inadequate to be attractive to prospective tenants and
support a rental stream sufficient to provide Landlord with its required after
tax return.
23.4 TENANT'S PARTICIPATION IN AWARD. Nothing herein shall
be deemed to prevent Tenant from claiming and receiving from the condemning
authority if legally payable, compensation for the taking of Tenant's own
tangible property and such amount as may be payable by statute or ordinance
toward Tenant's damages for Tenant's loss of business and relocation expenses.
24. SUBORDINATION. This Lease shall be subject and subordinate to the
lien of any ground leases, mortgages and/or deeds of trust now or hereafter
placed or imposed upon the Premises,unless the ground lessor, the mortgagee of
such mortgage or the holder of such deed of trust elects to have Tenant's
interest hereunder superior to he interest of the ground lessor, mortgagee of
such mortgage or the holder of such deed of trust. This subordination provision
shall be self-operative and no further instrument of subordination shall be
required. Tenant agrees to execute any documents which are required to effect
such subordination. Tenant further hereby constitutes and appoints Landlord as
tenant's attorney-in-fact to execute any such instrument for and on behalf of
Tenant. Upon Tenant's written request, Landlord will use reasonable efforts to
obtain from the holders of any mortgage or deed of Trust a non-disturbance
agreement, which would provide that in the event of any foreclosure sale
Tenant's possession of the Premises shall not be disturbed provided Tenant is
not in Default of this Lease.
25. CERTIFICATIONS. Tenant shall, without charge and from time to
time, within Ten (10) days following the written request of the Landlord,
execute, acknowledge and deliver a written certificate affirming, that to the
best knowledge, information and belief of the Tenant:
(a) This Lease is unmodified and in full force and effect,
or if there have been any modifications, that the Lease is in full force and
effect as modified and stating the modifications.
(b) Whether or not there then exists any set-offs or
defenses against the enforcement of any of the agreements, terms, covenants or
conditions of this Lease and any modifications thereto upon the part of the
Landlord (as applicable) to be performed or complied with, and if so specifying
the same.
(c) The date, if any, to which the Annual Net Rent,
Additional Rent and any other charges payable hereunder has been paid in
advance.
(d) The amount of the Total Project Costs through a certain
date are as set forth on Landlord's certificate.
(e) Any such other matters and facts as are reasonably
requested by Landlord.
26. ADVERTISE FOR RENT OR SALE. During the last one hundred eighty
(180) days of the final term of this Lease (being that term following which no
renewal term exists or has been exercised by the Tenant), the Landlord may
maintain "to rent" or "for sale" signs at reasonable locations upon the exterior
of the Premises and may exhibit the Premises to any prospective tenants and
purchasers following reasonable advance notice to tenant.
27. ATTORNMENT. If Landlord assigns this Lease or the rents hereunder
to a creditor as security for a debt, Tenant shall, after notice of such
assignment and upon demand by Landlord or the assignee, pay all sums thereafter
becoming due Landlord hereunder to such assignee. Tenant shall also, upon
receipt of such notice, have all policies of insurance required hereunder
endorsed so as to protect the assignee's interest as it may
<PAGE>
appear and shall deliver such policies, or certificates thereof to the assignee.
In the event the Premises are sold at any foreclosure sale or sales, by virtue
of any judicial proceedings or otherwise, this Lease shall continue in full
force and effect and Tenant agrees, upon request, to attorn to and acknowledge
the foreclosure purchaser or purchasers as such sale as the Landlord hereunder.
28. NON-WAIVER OF FUTURE ENFORCEMENT. The receipt of rent by Landlord
with knowledge of any breach of this Lease by Tenant, or of any default on the
part of Tenant in the observance or performance of any of the conditions or
covenants of this Lease, shall not be deemed to be waiver of any provisions of
this Lease. No failure on the part of Landlord to enforce any covenant or
provision herein contained nor any waiver of any right hereunder by Landlord,
shall discharge or invalidate such covenant or provision or affect the right of
Landlord to enforce the same in the event of any subsequent default. The receipt
by Landlord of any rent or any sum of money or any other consideration hereunder
paid by Tenant after the termination, in any manner, of the term herein demised,
will not destroy, or in any manner impair the efficacy of any such notice to
termination as may have been given hereunder by Landlord to Tenant prior the the
receipt of any such sum of money or other consideration, unless so agreed to in
writing and signed by Landlord. Neither acceptance of the keys nor any other act
or thing done by Landlord or any agent or employee during the term herein
demised shall be deemed to be and acceptance of surrender of said Premises,
excepting only an agreement in writing signed by Landlord accepting or agreeing
to accept such surrender.
29. RECORDATION OF LEASE. Tenant agrees that it will, upon Landlord's
request, execute a memorandum of this Lease in a form suitable for recording
under applicable law. The parties shall divide equal all costs of recordation.
30. NOTICE. Any notice required or permitted by or in connection with
this Lease shall be in writing and made by hand delivery or by over night
delivery service or by certified mail, return receipt requested, postage
prepaid, addressed to the respective parties at the appropriate address set
forth below or to such other address as may be hereafter specified by written
notice by any party, and shall be considered given as of the date of hand
delivery or as of one (1) day after sending overnight delivery service or three
(3) days after the date of mailing, independent of the date of delivery, as the
case may be:
If to Tenant: Physics International Company
2700 Merced Street
P.O. Box 1538
San Leandro, CA 94577
Attn: J.H. Banister, Jr.
Copy to:
Olin Corporation
120 Long Ridge Road
Stamford, Connecticut 06904
Attn: Corporate Secretary
If to Landlord: The Connecticut National Bank
777 Main Street
Hartford, Connecticut 06115
Attn: Bond and Trustee Administration
Copy to:
Maryland National Leasing Corporation
<PAGE>
502 Washington Avenue
Townson, Maryland 21204
Attn: Vice President-Operations
Copy to:
Olin Financial Services, Inc.
120 Long Ridge Road
P.O. Box 1355
Stamford, Connecticut 06904
Attn: Corporate Secretary
Copy to:
Alan J. Mogol, Esquire
Ober, Kaler, Grimes & Shriver
1600 Maryland National Bank Building
10 Light Street
Baltimore, Maryland 21202
31. SEVERABILITY. It is agreed that, for the purpose of any suit
brought or based on this Lease, this Lease shall be construed to be a divisible
contract, to the end that successive actions may be maintained thereon as
successive periodic sums shall mature or be due hereunder, and it is further
agreed that failure to include in any suit or action any sum or sums then
matured or due shall not be a bar to the maintenance of any suit or action for
the recovery of said sum of sums so omitted; and Tenant agrees that it will not
in any suit or suits brought or arising under this Lease for a matured sum for
which judgement has not previously been obtained or entered, plead, rely on or
interpose the defenses of RES JUDICATA, former recovery, extinguishment, merger,
election or remedies or other similar defense as a defense to said suit or
suits. If any term, clause or provision of this Lease is declared invalid by a
court of competent jurisdiction, the validity of the remainder of this Lease
shall not be affected thereby but shall remain in full force and effect.
32. NON-WAIVER. It is understood and agreed that nothing herein shall
be construed to be a waiver of any of the terms, covenants or conditions herein
contained, unless the same shall be in writing, signed by the party to be
charged with such waiver and no waiver of the breach of any covenant herein
shall be construed as a waiver of such covenant or any subsequent breach
thereof. No mention in this Lease of any specific right or remedy shall preclude
Landlord from exercising any other right or from having any other remedy or from
maintaining any action to which it may be otherwise entitled either at law or in
equity.
33. SUCCESSORS AND ASSIGNS. Except as otherwise herein provided, this
Lease and the covenants and conditions herein contained shall inure to the
benefit of and be binding upon landlord and Tenant and their respective,
successors and assigns. In the event Landlord's interest under this Lease is
transferred or assigned and written notice thereof is given to Tenant, Landlord,
or any subsequent assignee or transferee of Landlord's interest under this Lease
who gives such notice to Tenant shall automatically be relieved and released
from and after the date of such transfer or conveyance from all liability
hereunder. The liability of Landlord, its successors and assigns, under this
Lease shall at all times be limited solely to Landlord's interest in the land
and improvements comprising the Premises and in the event the owner of
Landlord's interest in this Lease is at any time an individual, partnership,
joint venture or unincorporated association, Tenant agrees that such individual
or the members or partners of such partnership, joint venture or unincorporated
association shall not be personally or individual liable or responsible for the
performance of any of Landlord's obligation hereunder.
<PAGE>
34. CAPTIONS. The captions of the various sections of this Lease are
for convenience only and are not part of the Lease. Such captions shall not be
construed to define or limit any of the provisions of this lease.
35. FINAL AND ENTIRE AGREEMENT. This Lease contains the final and
entire agreement between the parties hereto, and neither they nor their agents
shall be bound by any terms, conditions or representations not herein written.
36. PURCHASE AND ASSIGNMENT AGREEMENT AND GROUND SUBLEASE. The
covenants, duties and obligations of Tenant hereunder shall be supplemental to
the covenants, duties and obligations of the Tenant under the Purchase and
Assignment Agreement and Ground Sublease. No provision of this Lease shall ever
be construed to restrict, limit or modify any covenant, duty or obligation of
the Tenant under the Purchase and Assignment Agreement and Ground Sublease. All
of Landlord's rights and remedies hereunder shall be cumulative and supplemental
to Landlord's rights and remedies under the Ground Sublease and the Purchase and
Assignment Agreement. In the event the Landlord's rights under the Ground Lease
are terminated for any reason, then Landlord may elect to terminate this Lease
simultaneously with the termination of Landlord's rights under the Ground Lease.
37. GOVERNING LAW. The laws of the State of California shall govern
the rights and obligations of the parties to this Lease and the interpretation,
construction and enforceability thereof and any and all issues relating to the
transactions contemplated in this Lease. Tenant consents to the jurisdiction of
the courts of State of Maryland, including the jurisdiction of the United States
District Court for the District of Maryland to the extent a jurisdictional basis
exists, and agrees that venue shall be proper in any county in the State of
Maryland, in the City of Baltimore or in the United States District Court for
the District of Maryland if suit is filed to enforce, interpret or construe this
Lease.
38. TAX INDEMNIFICATION.
38.1 GENERAL. Tenant's indemnification obligations
hereunder shall not extend to changes in applicable corporate income tax rates.
If by reason of the misrepresentation of or breach by Tenant, of the warranty
and representation set forth in Section 10 (e) hereof, Landlord in computing its
taxable income or liability for tax, shall either lose, or shall not have, or
shall lose the right to claim, or there shall be disallowed or recaptured, for
Federal and/or state income tax purposes, in whole or in part, the benefit of
ACRS Deductions; hereinafter referred to as a "Loss"; then Tenant shall pay
Landlord the Tax Indemnification Payment as additional rent. As used herein,
"ACRS Deductions" shall mean the deductions under the Accelerated Cost Recovery
System with respect to the acquisition cost of any item of the Premises in
accordance with the accelerated method set for the in Section 168 (as in effect
on the date such item of the Premises is first placed in service) of the
Internal Revenue Code of 1986, as now or hereafter amended, for property
assigned to the depreciation categories specified in Exhibit B attached hereto;
and "Tax Indemnification Payment" shall mean such amount as, after consideration
of (i) all taxes required to be paid by Landlord in respect of the receipt
thereof under the laws of any governmental or taxing authority in the United
States, and (ii) the amount of any interest of penalties which may be payable by
Landlord in connection with the Loss or contesting the Loss pursuant to
Paragraph 38.2 hereof, shall be required to cause Landlord's after-tax net
return (the "Net Return") to be equal to, but no greater than, the Net Return
contemplated consistently with current tax laws as of the date of this Lease.
Landlord promptly shall notify Tenant in writing of such
Loss and Tenant shall pay to Landlord the Tax Indemnification Payment within
thirty (30) days of such notice unless such loss is contested pursuant to
Paragraph 38.2 hereof. For these purposes, a Loss shall occur upon the earliest
of (i) the happening of any event (such as disposition or change in use of the
Premises, which will cause such Loss; (ii) the payment by Landlord to the
Internal Revenue Service or State taxing authority of the tax increase resulting
from such Loss; (iii) the date on which the Loss is realized by Landlord; or
(iv) the adjustment of the tax return of Landlord to reflect such Loss.
The tax indemnification provided in this Section 38 is for
the benefit of the Trustee, the Partnership, Olin Financial Services, Inc.
("OFC") and MNLC. As used in this Section 38, the term "Landlord"
<PAGE>
shall mean and include the Trustee, the Partnership, OFS and MNLC, and the
consolidated Federal taxpayer group of which each is a member (as applicable).
38.2 CONTEST. If the Internal Revenue Services makes a
claim against Landlord which, if successful, would require Tenant to make a Tax
Indemnification Payment, Landlord agrees to contest the claim on request of
Tenant subject to the following conditions:
(a) Landlord agrees promptly after becoming aware
thereof to notify Tenant of any such claim. Tenant agrees that, in the event it
desires the claim to be contested, it shall request Landlord to contest the
claim within thirty (30) days after such notice from Landlord. Landlord agrees
not to make any payment of any tax which is the subject of the claim before it
gives the notice and during the thirty (30) day period after it gives the
notice.
(b) Landlord shall consult with Tenant regarding
the commencement and prosecution of any and all administrative proceedings with
the Internal Revenue Service in contesting the claim. Landlord reserves the
right to decline to pursue administrative proceedings. If administrative
proceedings are not pursued or are not successful, Landlord shall, at the
request of Tenant, contest the claim by either paying the tax claimed and suing
for a refund in the appropriate court or contesting the claim in the United
States Tax Court and, if necessary, bring the appropriate appeals.
(c) Prior to taking any such action and prior to
each appeal from any adverse determination, Landlord shall have received from
Tenant an opinion of outside tax counsel of recognized standing, which counsel
is reasonably acceptable to Landlord, to the effect that on the basis of law and
fact a meritorious defense exists to such claim or that there is a meritorious
basis for such refund claim, identifying such defense or basis, as the case may
be. Subject to the foregoing, in no event will Landlord compromise or settle the
claim or cease to contest the claim without the written consent of Tenant
(provided, however, that Landlord may so compromise, settle or cease to contest
if it waives in writing its right to an indemnity for any Loss resulting from
such claim). Tenant agrees to reimburse Landlord for all reasonable costs
incurred by Landlord as a result of contesting the claim and to pay all
reasonable costs and expenses which Landlord may incur in contesting the claim.
These costs and expenses shall include, without limitation, reasonable
attorneys' and accountants' fees and disbursements. If Tenant elects to pay the
tax claimed and sue for a refund, Tenant shall provide Landlord with sufficient
funds (as an interest free loan to pay the tax).
(d) If any such claim referred to above shall be
made by the Internal Revenue Service and Tenant shall have requested Landlord to
contest such claim and otherwise has complied with its obligations under this
sub-part, Tenant's liability for indemnification hereunder shall become fixed
upon final determination of the liability of Landlord. At such time, Tenant
shall become obligated for the payment of any indemnification hereunder
resulting from the outcome of such contest. If Tenant has provided funds to
Landlord (as an interest free loan) to pay the tax (pursuant tho the foregoing
paragraph) and Landlord subsequently receives a refund of tax in connection with
such final determination (or would have received a refund had any payment made
from funds provided by Tenant not been applied in payment of a tax liability
determined to be owing by Landlord for which Tenant is not required to make a
Tax Indemnification Payment), such refund or an amount equal to such amount so
applied, together with any interest also received (or which would have been
received ) by Landlord and fairly attributable to such refund of tax or amount
so applied, will be paid over to Tenant, to the extent of Tenant's payment to
Landlord.
39. TENANT'S OPTION TO TERMINATE.
39.1 EXERCISE. So long as tenant is not in default hereof,
then in the event Tenant in good faith determines that it is uneconomic for
Tenant to continue leasing the Premises, Tenant may terminate this Lease
effective upon any date on which the next installment of Annual Net Rent is due
after December 31, 1988 (the "Tenant's Termination Date"), provided (i) Tenant
gives Landlord and least one hundred eighty (180) days' prior written notice,
and (ii) Tenant pays Landlord the Stipulated Loss Value calculated as of the
Termination Date (or the alternative amount required pursuant to Paragraph 39.2
hereof), plus all rent (Annual Net Rent and Additional Rent) due as of that date
and any other monies then owed Landlord by Tenant. Landlord may (at its
<PAGE>
sole discretion) elect to sell the Premises to a third party or to determine
the fair market value of the Premises and notify Tenant thereof in writing.
39.2 ADJUSTMENT FOR FAIR MARKET VALUE. If Landlord elects
to determine the fair market value of the Premises and notify Tenant thereof in
writing and (a) if Tenant accepts Landlord's determination of fair market value,
on the Tenant's Termination Date, Tenant shall pay Landlord the amount (if any)
by which the Stipulated Loss Value exceeds the agreed fair market value, or (b)
if Tenant does not accept Landlord's determination of fair market value, on the
Tenant's Termination Date, Landlord shall convey to Tenant all right, title and
interest of Landlord in and to the Premises by grant deed upon receipt by
Landlord from Tenant of all sums due pursuant to Paragraph 39.1 hereof.
39.3 SUBSEQUENT SALE. If Landlord does not elect to
determine the fair market value and Landlord sells the Premises within two (2)
years after the Tenant's Termination Date, then at such time as Landlord closes
on a sale of the Premises, Landlord shall apply the net proceeds of sale of the
Premises (less any costs or expenses, including reasonable attorneys' fees,
incurred by Landlord in connection with reacquiring possession, holding and
selling the Premises) to reimburse Tenant for the amount paid by Tenant to
Landlord as Stipulated Loss Value under Paragraph 39.1, solely to the extent of
such Stipulated Loss Value actually received by Landlord from Tenant. Landlord
shall use its good faith efforts to maximize the net proceeds upon any sale of
the Premises.
40. LANDLORD'S OPTION TO TERMINATE.
40.1 EXERCISE. In the event there shall be any change in
the ownership of the capital stock or voting power of Guarantor and as a result
thereof any one or more of Guarantor's senior lenders shall call any senior loan
indebtedness, then Landlord may, upon thirty (30) days' prior written notice,
terminate this Lease and cause Tenant to pay to Landlord the Stipulated Loss
Value (or the alternative amount required pursuant to Paragraph 40.2 hereof),
determined and payable as of the date upon which the next installment of Annual
Net Rent is due, plus all rent (Annual Net Rent and Additional Rent) prorated
through the date of termination (the "Landlord's Termination Date") and any
other monies then due Landlord from Tenant. Notwithstanding the payment of the
Stipulated Loss Value, Tenant shall be permitted to remain in possession of the
Premises for up to one hundred fifty (150) days from Landlord's notice, subject
to all the terms and conditions of this Lease but Tenant shall continue to pay
Annual Net Rent in the amount last due prior to Landlord's notice. Landlord may
(at its sole discretion) elect to sell the Premises to a third party or to
determine the fair market value of the Premises and notify Tenant thereof in
writing.
40.2 ADJUSTMENT FOR FAIR MARKET VALUE. If Landlord elects
to determine the fair market value of the Premises and notify Tenant thereof in
writing and (a) if Tenant accepts Landlord's determination of fair market value,
on the Landlord's Termination Date, Tenant shall pay Landlord the amount (if
any) by which the Stipulated Loss Value exceeds the agreed fair market value, or
(b) if tenant does not accept Landlord's determination of fair market value, on
the Landlord's Termination Date, Landlord shall convey to Tenant all right,
title and interest of Landlord in and to the Premises by grant deed upon receipt
by Landlord from Tenant of all sums due pursuant to Paragraph 40.1 hereof.
40.3 SUBSEQUENT SALE. If Landlord does not elect to
determine the fair market value and Landlord sells the Premises within two (2)
years after the Landlord's Termination Date, then at such time as Landlord
closes on a sale of the Premises, landlord shall apply the net proceeds of sale
of the Premises (less any costs or expenses, including reasonable attorneys'
fees, incurred by Landlord in connection with reacquiring possession, holding
and selling the Premises) to reimburse Tenant for the amount paid by Tenant to
Landlord as Stipulated Loss Value under Paragraph 40.1, solely to the extent of
such Stipulated Loss Value actually received by landlord from Tenant. Landlord
shall use its good faith efforts to maximize the net proceeds upon any sale of
the Premises.
41. QUIET ENJOYMENT. Landlord covenants that, upon the payment of the
rent (Annual Net Rent and Additional Rent) herein, Tenant shall have and hold
the Premises, free from any interference from the
<PAGE>
Landlord, but subject to the terms of this Lease, of any mortgage, deed of
trust, or other security instrument now existing or hereafter placed on the
Premises or any portion thereof.
42. SURVIVAL OF OBLIGATIONS. All of Tenant's duties and obligations
which accrue during the term of this Lease shall survive the expiration of
earlier termination of this Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Lease under
seal as of the day and year above written with the specific intention that this
Lease constitute and instrument under seal.
WITNESS/ATTEST LANDLORD:
THE CONNECTICUT NATIONAL BANK, not
individually but solely in its capacity
as Trustee
By: (SEAL)
TENANT:
PHYSICS INTERNATIONAL COMPANY
By: (SEAL)
<PAGE>
EXHIBIT 10.28
STANDARD INDUSTRIAL LEASE - GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. PARTIES. This Lease, dated, for reference purposes only, October 15,
1985, is made by and between Heger Realty Corporation, dba Downey Industrial
Center, representing all owners of the below Premises (herein called "Lessor")
and Aerojet Ordnance Company, a division of Aerojet General Corporation (herein
called "Lessee").
2. PREMISES. Lessor hereby leases to Lessee and Lessee leases from
Lessor for the term, at the rental, and upon all of the conditions set forth
herein, that certain real property situated in the County of Los Angeles, State
of California, commonly known as 9300 East Hall Road, Downey, California 90241
and described as: see Exhibit A hereto, which is hereby incorporated by
reference. Said real property including the land and all improvements therein,
is herein called "the Premises".
3. TERM.
3.1 TERM. The term of this Lease shall be for sixty-eight (68) months
commencing on November 1, 1985 and ending on June 30, 1991 unless sooner
terminated pursuant to any provision hereof.
3.2 DELAY IN POSSESSION. Notwithstanding said commencement date, if
for any reason Lessor cannot deliver possession of the Premises to Lessee on
said date, Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease or the obligations of Lessee
hereunder, or extend the term hereof, but in such case, Lessee shall not be
obligated to pay rent until possession of the Premises is tendered to Lessee,
provided, however, that if Lessor shall not have delivered possession of the
Premises within sixty (60) days from said commencement date, Lessee may, at
Lessee's option, by notice in writing to Lessor within ten (10) days thereafter,
cancel this Lease, in which event the parties shall be discharged from all
obligations hereunder, provided further, however, that if such written notice of
Lessee is not received by lessor within said ten (10) day period, Lessee's right
to cancel this Lease hereunder shall terminate and be of no further force or
effect.
3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date, and Lessee shall pay rent
for such period at the initial monthly rate set forth below.
4. RENT. Lessee shall pay to Lessor as rent for the Premises, monthly
payments of $23,600.00, in advance, on the first day of each month of the term
hereof, Lessee shall pay Lessor upon the execution hereof $ * as rent for
January, 1986, *$21,100.00 net, applying the rent reduction set forth in
Paragraph 51 hereof. No rent is due or payable for the months of November and
December 1985. Rent for any period during the term hereof which is for less than
one month shall be a pro rata portion of the monthly installment. Rent shall be
payable in lawful money of the United States to Lessor at the address stated
herein or to such other persons or at such other places as Lessor may designate
in writing.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof $ -0- as security for Lessee's faithful performance of Lessee's
obligations hereunder. If Lessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this Lease,
Lessor may use, apply or retain all or any portion of said deposit for the
payment of any rent or other charge in default or for the payment of any other
sum to which Lessor may become obligated by reason of Lessee's default, or to
compensate Lessor for any loss or damage which Lessor may suffer thereby. If
Lessor so uses or applies all or any portion of said deposit, Lessee shall
within ten (10) days after written demand therefor deposit cash with Lessor in
an amount sufficient to restore said deposit to the full amount hereinabove
stated and Lessee's failure to do so shall be a material breach of this Lease.
If the monthly rent shall, from time to time, increase during the term of this
Lease, Lessee shall thereupon deposit with Lessor additional security deposit so
that the amount of security deposit held by Lessor shall at all times bear the
same proportion to current rent as the original security deposit bears to the
original
<PAGE>
monthly rent set forth in Paragraph 4 hereof. Lessor shall not be required to
keep said deposit separate from its general accounts. If Lessee performs all of
Lessee's obligations hereunder, said deposit, or so much thereof as has not
theretofore been applied by Lessor, shall be returned, without payment of
interest or other increment for its use, to Lessee (or, at Lessor's option, to
the last assignee, if any, of Lessee's interest hereunder) at the expiration of
the term hereof, and after Lessee has vacated the Premises. No trust
relationship is created herein between Lessor and Lessee with respect to said
Security Deposit.
6. USE.
6.1 USE. The Premises shall be used and occupied only for test,
manufacturing, warehousing, office, engineering purposes, and all other lawful
uses, or any other use which is reasonably comparable and for no other purpose.
6.2 COMPLIANCE WITH LAW.
(a) Lessor warrants to Lessee that the Premises, in its
state existing on the date that the Lease term commences, but without regard to
the use for which Lessee will use the Premises, does not violate any covenants
or restrictions of record, or any applicable building code, regulation or
ordinance in effect on such Lease term commencement date. In the event it is
determined that this warranty has been violated, then it shall be the obligation
of the Lessor, after written notice from Lessee, to promptly, at Lessor's sole
cost and expense, rectify any such violation. In the event Lessee does not give
to Lessor written notice of the violation of this warranty within six months
from the date that the Lease term commences, the correction of same shall be the
obligation of the Lessee at Lessee's sole cost. The warranty contained in this
Paragraph 6.2(a) shall be of no force or effect if, prior to the date of this
Lease, Lessee was the owner or occupant of the Premises, and, in such event,
Lessee shall correct any such violation at Lessee's sole cost.
(b) Except as provided in Paragraph 6.2(a), Lessee shall,
at Lessee's expense, comply promptly with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements in effect during the term or any part of the term hereof,
regulating the use by Lessee of the Premises. Lessee shall not use or permit the
use of the Premises in any manner that will tend to create waste or a nuisance
or, if there shall be more than one tenant in the building containing the
Premises, shall tend to disturb such other tenants.
6.3 CONDITION OF PREMISES.
(a) Lessor shall deliver the Premises to Lessee clean and
free of debris on Lease commencement date (unless Lessee is already in
possession) and Lessor further warrants to Lessee that the plumbing, lighting,
air conditioning, heating, and loading doors in the Premises shall be in good
operating condition on the Lease commencement date. In the event that it is
determined that this warranty has been violated then it shall be the obligation
of Lessor, after receipt of written notice from Lessee setting forth with
specificity the nature of the violation, to promptly, at Lessor's sole cost,
rectify such violation. Lessee's failure to give such written notice to Lessor
within thirty (30) days after the Lease commencement date shall cause the
conclusive presumption that Lessor has complied with all of Lessor's obligations
hereunder. The warranty contained in this Paragraph 6.3(a) shall be of no force
or effect if prior to the date of this Lease, Lessee was the owner or occupant
of the Premises.
(b) Except as otherwise provided in this Lease, Lessee
hereby accepts the Premises in their condition existing as of the Lease
commencement date or the date that Lessee takes possession of the Premises,
whichever is earlier, subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the use of the
Premises, and any covenants or restrictions of record, and accepts this Lease
subject thereto and to all matters disclosed thereby and by any exhibits
attached hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has
made any representation or warranty as to the present or future suitability of
the Premises for the conduct of Lessee's business.
7. MAINTENANCE, REPAIRS AND ALTERATIONS
7.1 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 6,
7.2, and 9 and except for damage caused by any negligent or intentional act or
omission of Lessee, Lessee's agents, employees, or invitees in which event
Lessee shall repair the damage, Lessor, at Lessor's expense, shall keep in good
order,
<PAGE>
condition and repair the foundations, exterior walls and the exterior roof of
the Premises. Lessor shall not, however, be obligated to paint such exterior,
nor shall Lessor be required to maintain the interior surface of exterior walls,
windows, doors or plate glass. Lessor shall have no obligation to make repairs
under this Paragraph 7.1 until a reasonable time after receipt of written notice
of the need for such repairs Lessee expressly waives the benefits of any statute
now or hereafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Premises in good order, condition and repair.
7.2 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 6, 7.1 and 9,
Lessee, at Lessee's expense, shall keep in good order, condition and repair the
Premises and every part thereof (whether or not the damaged portion of the
Premises or the means of repairing the same are reasonably or readily accessible
to Lessee) including, without limiting the generality of the foregoing, all
plumbing, heating, air conditioning, (Lessee shall procure and maintain, at
Lessee's expense, an air conditioning system maintenance contract) ventilating,
electrical and lighting facilities and equipment within the Premises, fixtures,
interior walls and interior surface of exterior walls, ceilings, windows, doors,
plate glass, and skylights, located within the Premises, and all landscaping,
driveways, parking lots, fences and signs located in the Premises and all
sidewalks and parkways adjacent to the Premises.
(b) If Lessee fails to perform Lessee's obligations under
the Paragraph 7.2 or under any other paragraph of this Lease, Lessor may at
Lessor's option enter upon the Premises after 10 days' prior written notice to
Lessee (except in the case of emergency, in which case no notice shall be
required), perform such obligations on Lessee's behalf and put the Premises in
good order, condition and repair, and the cost thereof together with interest
thereon at the maximum rate then allowable by law shall be due and payable as
additional rent to Lessor together with Lessee's next rental installment.
(c) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as received, ordinary wear and tear excepted, clean and free of debris. Lessee
shall repair any damage to the Premises occasioned by the installation or
removal of its trade fixtures, furnishings and equipment. Notwithstanding
anything to the contrary otherwise stated in this Lease, Lessee shall leave the
air lines, power panels, electrical distribution systems, lighting fixtures,
space heaters, air conditioning, plumbing and fencing on the premises in good
operating condition.
7.3 ALTERATIONS AND ADDITIONS.
(a) Lessee shall not, without Lessor's prior written
consent make any alterations, improvements, additions, or Utility installations
in, on or about the Premises, except for nonstructural alterations not exceeding
$2,500 in cumulative costs during the term of this Lease. In any event, whether
or not in excess of $2,500 in cumulative cost, Lessee shall make no change or
alteration to the exterior of the Premises nor the exterior of the building(s)
on the Premises without Lessor's prior written consent. As used in this
Paragraph 7.3 the term "Utility Installation" shall mean carpeting, window
coverings, air lines, power panels, electrical distribution systems, lighting
fixtures, space heaters, air conditioning, plumbing, and fencing. Lessor may
require that Lessee remove any or all of said alterations, improvements,
additions or Utility Installations at the expiration of the term, and restore
the Premises to their prior condition. Lessor may require Lessee to provide
Lessor, at Lessee's sole cost and expense, a lien and completion bond in an
amount equal to one and one-half times the estimated cost of such improvements,
to insure Lessor against any liability for mechanic's and materialmen's liens
and to insure completion of the work. Should Lessee make any alterations,
improvements, additions or Utility Installations without the prior approval of
Lessor, Lessor may require that Lessee remove any or all of the same.
(b) Any alterations, improvements, additions or Utility
Installations in, or about the Premises that Lessee shall desire to make and
which requires the consent of the Lessor shall be presented to Lessor in written
form, with proposed detailed plans. If Lessor shall give its consent, the
consent shall be deemed conditioned upon Lessee acquiring a permit to do so from
appropriate governmental agencies, the furnishing of a copy thereof to Lessor
prior to the commencement of the work and the compliance by Lessee of all
conditions of said permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use in the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in the Premises, and Lessor shall have the right to post notices of non-
responsibility in or on the Premises as provided by law. If Lessee shall, in
good faith,
<PAGE>
contest the validity of any such lien, claim or demand, then Lessee shall, at
its sole expense defend itself and Lessor against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises, upon the condition that
if Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to such contested lien claim or demand
indemnifying Lessor against liability for the same and holding the Premises free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's attorneys fees and costs in participating in such action if Lessor
shall decide it is to its best interest to do so.
(d) Unless Lessor requires their removal, as set forth in
Paragraph 7.3(a), all alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made on the Premises, shall become the
property of Lessor and remain upon and be surrendered with the Premises at the
expiration of the term. Notwithstanding the provisions of this Paragraph 7.3(d),
Lessee's machinery and equipment, other than that which is affixed to the
Premises so that it cannot be removed without material damage to the Premises,
shall remain the property of Lessee and may be removed by lessee subject to the
provisions of Paragraph 7.2(c).
8. INSURANCE, INDEMNITY.
8.1 LIABILITY INSURANCE - LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of Combined
Single Limit Bodily Injury and Property Damage Insurance insuring Lessee and
Lessor against any liability arising out of the use, occupancy or maintenance of
the Premises and all other areas appurtenant thereto. Such insurance shall be in
an amount not less than $500,000 per occurrence. The policy shall insure
performance by Lessee of the indemnity provisions of this Paragraph 8. The
limits of said insurance shall not, however, limit the liability of Lessee
hereunder.
8.2 LIABILITY INSURANCE - LESSOR. Lessor shall obtain and keep in
force during the term of this Lease a policy of Combined Single Limit Bodily
Injury and Property Damage Insurance insuring Lessor, but not Lessee, against
any liability arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto in an amount not less than $500,000
per occurrence.
8.3 PROPERTY INSURANCE. Lessor shall obtain and keep in force during
the term of this Lease a policy or policies of insurance covering loss or damage
to the Premises, but not Lessee's fixtures, equipment or tenant improvements in
an amount not to exceed the full replacement value thereto, as the same may
exist from time to time, providing protection against all perils included within
the classification of fire, extended coverage, vandalism, malicious mischief,
flood (in the event same is required by a lender having a lien on the Premises)
special extended perils ("all risk", as such term is used in the insurance
industry) but not plate glass insurance. In addition, the Lessor shall obtain
and keep in force, during the term of this Lease, a policy of rental value
insurance covering a period of one year, with loss payable to Lessor, which
insurance shall also cover all real estate taxes and insurance costs for said
period.
8.4 PAYMENT OF PREMIUM INCREASE.
(a) Lessee shall pay to Lessor, during the term hereof, in
addition to the rent, the amount of any increase in premiums for the insurance
required under Paragraph 8.2 and 8.3 over and above such premiums paid during
the Base Period, as hereinafter defined whether such premium increase shall be
the result of the nature of Lessee's occupancy, any act or omission of Lessee,
requirements of the holder of a mortgage or deed of trust covering the Premises,
increased valuation of the Premises, or general rate increases. In the event
that the Premises have been occupied previously, the words "Base Period" shall
mean the last twelve months of the prior occupancy. In the event that the
Premises have never been previously occupied, the premiums during the "Base
Period" shall be deemed to be the lowest premiums reasonably obtainable for said
insurance assuming the most nominal use of the Premises. Provided, however, in
lieu of the Base Period, the parties may insert a dollar amount at the end of
this sentence which figure shall be considered as the insurance premium for the
Base Period: $4,127.53. In no event, however, shall Lessee be responsible for
any portion of the premium cost attributable to liability insurance coverage in
excess of $1,000,000 procured under Paragraph 8.2
(b) Lessee shall pay any such premium increases to Lessor
within 30 days after receipt by Lessee of a copy of the premium statement or
other satisfactory evidence of the amount due. If the insurance policies
maintained hereunder cover other improvements in addition to the Premises,
Lessor shall also deliver to
<PAGE>
Lessee a statement of the amount of such increase attributable to the Premises
and showing in reasonable detail, the manner in which such amount was computed.
If the term of this Lease shall not expire concurrently with the expiration of
the period covered by such insurance, Lessee's liability for premium increases
shall be prorated on an annual basis.
(c) If the Premises are part of a larger building, then
Lessee shall not be responsible for paying any increase in the property
insurance premium caused by the acts or omissions of any other tenant of the
building of which the Premises are a part.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of at least B plus, or such
other rating as may be required by a lender having a lien on the Premises, as
set forth in the most current issue of "Best's Insurance Guide". Lessee shall
deliver to Lessor copies of policies of liability insurance required under
Paragraph 8.1 or certificates evidencing the existence and amounts of such
insurance. No such policy shall be cancellable or subject to reduction of
coverage or other modification except after thirty (30) days' prior written
notice to Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with renewals or "binders" thereof,
or Lessor may order such insurance and charge the cost thereof to Lessee, which
amount shall be payable by Lessee upon demand. Lessee shall not do or permit to
be done anything which shall invalidate the insurance policies referred to in
Paragraph 8.3.
8.6 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
under Paragraph 8.3, which perils occur in, on or about the Premises, whether
due to the negligence of Lessor or Lessee or their agents, employees,
contractors and/or invitees. Lessee and Lessor shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.
8.7 INDEMNITY. Lessee shall indemnify and hold harmless Lessor from
and against any and all claims arising from Lessee's use of the Premises, or
from the conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and shall
further indemnify and hold harmless Lessor from and against any and all claims
arising from any breach or default in the performance of any obligation on
Lessee's part to be performed under the terms of this Lease, or arising from any
negligence of the Lessee, or any of Lessee's agents, contractors, or employees,
and from and against all costs, attorney's fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon; and in case any action or proceeding be brought against Lessor by
reason of any such claim. Lessee upon notice from Lessor shall defend the same
at Lessee's expense by counsel satisfactory to Lessor. Lessee, as a material
part of the consideration to Lessor, hereby assumes all risk of damage to
property or injury to persons, in, upon or about the Premises arising from any
cause and Lessee hereby waives all claims in respect thereof against Lessor.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or about
the Premises, nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said damage or injury results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant, if any, of the building in which the Premises are
located.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
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(a) "Premises Partial Damage" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is less than
50% of the fair market value of the Premises immediately prior to such damage or
destruction. "Premises Building Partial Damage" shall herein mean damage or
destruction to the building of which the Premises are a part to the extent that
the cost of repair is less than 50% of the fair market value of such building as
a whole immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall herein mean damage
or destruction to the Premises to the extent that the cost of repair is 50% or
more of the fair market value of the Premises immediately prior to such damage
or destruction. "Premises Building Total Destruction" shall herein mean damage
or destruction to the building of which the Premises are a part to the extent
that the cost of repair is 50% or more of the fair market value of such building
as a whole immediately prior to such damage or destruction.
(c) "Insured Loss" shall herein mean damage or destruction
which was caused by an event required to be covered by the Insurance described
in Paragraph 8.
9.2 PARTIAL DAMAGE - INSURED LOSS. Subject to the provisions of
Paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease there
is damage which is an Insured Loss and which falls into the classification of
Premises Partial Damage or Premises Building Partial Damage, then Lessor shall,
at Lessor's sole cost, repair such damage, but not Lessee's fixtures, equipment
or tenant improvements, as soon as reasonably possible and this Lease shall
continue in full force and effect.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. Subject to the provisions of
Paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease there
is damage which is not an Insured Loss and which falls within the classification
of Premises Partial Damage or Premises Building Partial Damage, unless caused by
a negligent or willful act of Lessee (in which event Lessee shall make the
repairs at Lessee's expense), Lessor may at Lessor's option either (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after the date of the occurrence of such
damage of Lessor's intention to cancel and terminate this Lease, as of the date
of the occurrence of such damage. In the event Lessor elects to give such notice
of Lessor's intention to cancel and terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's intention to repair such damage at Lessee's
expense, without reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed to make such repairs
as soon as reasonably possible. If Lessee does not give such notice within such
10-day period this Lease shall be cancelled and terminated as of the date of the
occurrence of such damage.
9.4 TOTAL DESTRUCTION. If at any time during the term of this Lease
there is damage, whether or not an Insured Loss, (including destruction required
by any authorized public authority), which falls into the classification of
Premises Total Destruction or Premises Building Total Destruction, this Lease
shall automatically terminate as of the date of such total destruction.
9.5 DAMAGE NEAR END OF TERM.
(a) If at any time during the last six months of the term
of this Lease there is damage, whether or not an Insured Loss, which falls
within the classification of Premises Partial Damage, Lessor may at Lessor's
option cancel and terminate this Lease as of the date of occurrence of such
damage by giving written notice to Lessee of Lessor's election to do so within
30 days after the date of occurrence of such damage.
(b) Notwithstanding Paragraph 9.5(a), in the event that
Lessee has an option to extend or renew this Lease, and the time within which
said option may be exercised has not yet expired, Lessee shall exercise such
option, if it is to be exercised at all, no later than 20 days after the
occurrence of an Insured Loss falling within the classification of Premises
Partial Damage during the last six months of the term of this Lease. If Lessee
duly exercises such option during said 20 day period, Lessor shall, at Lessor's
expense, repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option
during said 20 day period, then Lessor may at Lessor's option terminate and
cancel this Lease as of the expiration of said 20 day period by giving written
notice to Lessee of Lessor's election to do so within 10 days after the
expiration of said 20 day period, notwithstanding any term or provision in the
grant of option to the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
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(a) In the event of damage described in Paragraphs 9.2 or
9.3, and Lessor or Lessee repairs or restores the Premises pursuant to the
provisions of this Paragraph 9, the rent payable hereunder for the period during
which such damage, repair or restoration continues shall be abated in proportion
to the degree to which Lessee's use of the Premises is impaired. Except for
abatement of rent, if any, Lessee shall have no claim against Lessor for any
damage suffered by reason of any such damage, destruction, repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence such
repair or restoration within 90 days after such obligations shall accrue, Lessee
may at Lessee's option cancel and terminate this Lease by giving Lessor written
notice of Lessee's election to do so at any time prior to the commencement of
such repair or restoration. In such event this Lease shall terminate as of the
date of such notice.
9.7 TERMINATION - ADVANCE PAYMENTS. Under termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.8 WAIVER. Lessor and Lessee waive the provisions of any statutes
which relate to termination of leases when leased property is destroyed and
agree that such event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAX INCREASE. Lessor shall pay the real property tax,
as defined in Paragraph 10.3, applicable to the Premises, provided, however,
that Lessee shall pay, in addition to rent, the amount, if any, by which real
property taxes applicable to the Premises increase over the fiscal real estate
tax year 1985, 1986., Such payment shall be made by Lessee within thirty (30)
days after receipt of Lessor's written statement setting forth the amount of
such increase and the computation thereof. If the term of this Lease shall not
expire concurrently with the expiration of the tax fiscal year, Lessee's
liability for increased taxes for the last partial lease year shall be prorated
on an annual basis.
10.2 ADDITIONAL IMPROVEMENTS. Notwithstanding Paragraph 10.1 hereof,
Lessee shall pay to Lessor upon demand therefor the entirety of any increase in
real property tax if assessed solely by reason of additional improvements placed
upon the Premises by Lessee or at Lessee's request.
10.3 DEFINITION OF "REAL PROPERTY TAX". As used herein, the term
"real property tax" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed on the Premises by any authority having
the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, as against any legal or equitable interest
of Lessor in the Premises or in the real property of which the Premises are a
part, as against Lessor's right to rent or other income therefrom, and as
against Lessor's business of leasing the Premises. The term "real property tax"
shall also include any tax, fee, levy, assessment or charge (i) in substitution
of, partially or totally, any tax, fee, levy, assessment or charge hereinabove
included within the definition of "real property tax," or (ii) the nature of
which was hereinbefore included within the definition of "real property tax," or
(iii) which is imposed for a service or right not charged prior to June 1, 1978,
or, if previously charged, has been increased since June 1, 1978, or (iv) which
is imposed as a result of a transfer, either partial or total, of Lessor's
interest in the Premises or which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such transfer,
or (v) which is imposed by reason of this transaction, any modifications or
changes hereto, or any transfers hereof.
10.4 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
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10.5 PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes
assessed against and levied upon trade fixtures, furnishings, equipment and all
other personal property of Lessee contained in the Premises or elsewhere. When
possible, Lessee shall cause said trade fixtures, furnishings, equipment and all
other personal property to be assessed and billed separately from the real
property of Lessor.
(b) If any of Lessee's said personal property shall be
assessed with Lessor's real property, Lessee shall pay Lessor the taxes
attributable to Lessee within 10 days after receipt of a written statement
setting forth the taxes applicable to Lessee's property.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to
Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor of
all charges jointly metered with other premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in this Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease.
12.2 LESSEE AFFILIATE. Notwithstanding the provisions of Paragraph
12.1 hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, provided that said assignee assumes in full, the
obligations of Lessee under this Lease. Any such assignment shall not, in any
way, affect or limit the liability of Lessee under the terms of this Lease even
if after such assignment or subletting the terms of this Lease are materially
changed or altered without the consent of Lessee, the consent of whom shall not
be necessary.
12.3 NO RELEASE OF LESSEE. Regardless of Lessor's consent, no
subletting or assignment shall release Lessee of Lessee's obligation or alter
the primary liability of Lessee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed to be a waiver by Lessor of any
provision hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent assignment or subletting. In the event of default by
any assignee of Lessee or any successor of Lessee, in the performance of any of
the terms hereof, Lessor may proceed directly against Lessee without the
necessity of exhausting remedies against said assignee. Lessor may consent to
subsequent assignments or subletting of this Lease or amendments or
modifications to this Lease with assignees of Lessee, without notifying Lessee,
or any successor of Lessee, and without obtaining its or their consent thereto
and such action shall not relieve Lessee of liability under this Lease.
12.4 ATTORNEY'S FEES. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorneys fees incurred in connection
therewith, such attorneys fees not to exceed $350.00 for each such request.
13. DEFAULTS; REMEDIES.
13.1 DEFAULTS. The occurrence of any one or more of the following
events shall constitute a material default and breach of this Lease. Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
<PAGE>
(b) The failure by Lessee to make any payment of rent or
any other payment required to be made by Lessee hereunder, as and when due where
such failure shall continue for a period of three days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
under Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
(c) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Lessee, other than described in paragraph (b) above, where such failure shall
continue for a period of 30 days after written notice thereof from Lessor to
Lessee; provided, however, that if the nature of Lessee's default is such that
more than 30 days are reasonably required for its cure, the Lessee shall not be
deemed to be in default if Lessee commenced such cure within said 30-day period
and thereafter diligently prosecutes such cure to completion.
(d) (i) the Making by Lessee of any general arrangement or
assignment for the benefit of creditors; (ii) Lessee becomes a "debtor" as
defined in 11 U.S.C. ss.101 or any successor statute thereto (unless, in the
case of a petition filed against Lessee, the same is dismissed within 6 days);
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within 30
days; or (iv) the attachment, execution or other judicial seizure or
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within 30 days.
Provided, however, in the event that any provision of this Paragraph 13.1(d) is
contrary to any applicable law, such provision shall be of no force or effect.
(e) The discovery by Lessor that any financial statement
given to Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any
successor in interest of Lessee or any guarantor of Lessee's obligation
hereunder, and any of them, was materially false.
13.2 REMEDIES. In the event of any such material default or breach by
Lessee, Lessor may at any time thereafter, with or without notice of demand and
without limiting Lessor in the exercise of any right or remedy which Lessor may
have by reason of such default or breach;
(a) Terminate Lessee's right to possession of the Premises
by any lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event Lessor
shall be entitled to recover from Lessee all damages incurred by Lessor by
reason of Lessee's default including, but not limited to, the cost of recovering
possession of the Premises; expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorney's fees, and any
real estate commission actually paid; the worth at the time of award by the
court having jurisdiction thereof of the amount by which the unpaid rent for the
balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee proves could be reasonably avoided,
that portion of the leasing commission paid by Lessor pursuant to Paragraph 15
applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case
this Lease shall continue in effect whether or not Lessee shall have abandoned
the Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located. Unpaid installments of rent and other unpaid monetary obligations
of Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.
13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time but in
no event later than thirty (30) days after written notice by Lessee to Lessor
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance thereto, Lessor shall not be
in default if Lessor commences performance within such 30-day period and
thereafter diligently prosecutes the same to completion.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Lessor by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be
<PAGE>
received by Lessor or Lessor's designee within ten (10) days after such amount
shall be due, then, without any requirement for notice to Lessee, Lessee shall
pay to Lessor a late charge equal to 6% of such overdue amount. The parties
hereby agree that such late charge represents a fair and reasonable estimate of
the costs Lessor will incur by reason of late payment by Lessee. Acceptance of
such late charge by Lessor shall in no event constitute a waiver of Lessee's
default with respect to such overdue amount, nor prevent Lessor from exercising
any of the other rights and remedies granted hereunder. In the event that a late
charge is payable hereunder, whether or not collected, for three (3) consecutive
installments of rent, then rent shall automatically become due and payable
quarterly in advance, rather than monthly, notwithstanding Paragraph 4 or any
other provision of this Lease to the contrary.
13.5 IMPOUNDS. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of rent or any other
monetary obligation of Lessee under the terms of this Lease, Lessee shall pay to
Lessor, if Lessor shall so request, in addition to any other payment required
under this Lease, a monthly advance installment, payable at the same time as the
monthly rent, as estimated by Lessor, for real property tax and insurance
expenses on the Premises which are payable by Lessee under the terms of this
Lease. Such fund shall be established to insure payment when due, before
delinquency, of any or all such real property taxes and insurance premiums. If
the amounts paid to Lessor by Lessee under the provisions of this paragraph are
insufficient to discharge the obligations of Lessee to pay such real property
taxes and insurance premiums as the same become due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums necessary to pay such obligations.
All moneys paid to Lessor under this paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In the event of a default in the
obligations of Lessee to perform under this Lease, then any balance remaining
from funds paid to Lessor under the provisions of this paragraph may, at the
option of Lessor, be applied to the payment of any monetary default of Lessee in
lieu of being applied to the payment of real property tax and insurance
premiums.
14. CONDEMNATION. If the Premises or any portion thereof are taken under
the power of eminent domain, or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than 10% of the floor area
of the building on the Premises, or more than 25% of the land area of the
Premises which is not occupied by any building, is taken by condemnation, Lessee
may, at Lessee's option, to be exercised in writing only within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the rent shall be
reduced in the proportion that the floor area of the building taken bears to the
total floor area of the building situated on the Premises. No reduction of rent
shall occur if the only area taken is that which does not have a building
located thereon. Any award for the taking of all or any part of the Premises
under the power of eminent domain or any payment made under threat of the
exercise of such power shall be the property of Lessor, whether such award shall
be made as compensation for diminution in value of the leasehold or for the
taking of the fee, or as severance damages; provided, however, that Lessee shall
be entitled to any award for loss of or damage to Lessee's trade fixtures and
removable personal property. In the event that this Lease is not terminated by
reason of such condemnation, Lessor shall to the extent of severance damages
received by Lessor in connection with such condemnation, repair any damages to
the Premises caused by such condemnation except to the extent that Lessee has
been reimbursed therefor by the condemning authority. Lessee shall pay any
amount in excess of such severance damages required to complete such repair.
15. BROKER'S FEE.
(a) Upon execution of this Lease by both parties, Lessor
shall pay to Heger Realty Corporation, Licensed real estate broker(s), a fee as
set forth in a separate agreement between Lessor and said broker(s), or in the
event there is no separate agreement between Lessor and said broker(s), the sum
of $_____, for brokerage services rendered by said broker(s) to Lessor in this
transaction.
(b) Lessor further agrees that if Lessee exercises any
Option as defined in Paragraph 39.1 of this Lease, which is granted to Lessee
under this Lease, or any subsequently granted option which is substantially
similar to an Option granted to Lessee under this Lease, or if Lessee acquires
any rights to the Premises or other
<PAGE>
premises described in this Lease which are substantially similar to what Lessee
would have acquired had an Option herein granted to Lessee been exercised, or if
Lessee remains in possession of the Premises after the expiration of the term of
this Lease after having failed to exercise an Option, or if said broker(s) are
the procuring cause of any other lease or sale entered into between the parties
pertaining to the Premises and/or any adjacent property in which Lessor has an
interest, then as to any of said transactions, Lessor shall pay said broker(s) a
fee in accordance with the schedule of said broker(s) in effect at the time of
execution of this Lease.
(c) Lessor agrees to pay said fee not only on behalf of
Lessor but also on behalf of any person, corporation, association, or other
entity having an ownership interest in said real property or any part thereof,
when such fee is due hereunder. Any transferee of Lessor's interest in this
Lease, whether such transfer is by agreement or by operation of law, shall be
deemed to have assumed Lessor's obligation under this Paragraph 15. Said broker
shall be a third party beneficiary of the provisions of this Paragraph 15.
16. ESTOPPEL CERTIFICATE.
(a) Lessee shall at any time upon not less than ten (10)
days' prior written notice from Lessor execute, acknowledge and deliver to
Lessor a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Lessee's
knowledge, any uncured defaults on the part of Lessor hereunder, or specifying
such defaults if any are claimed. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Premises.
(b) At Lessor's option, Lessee's failure to deliver such
statement within such time shall be a material breach of this Lease or shall be
conclusive upon Lessee (i) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (ii) that there are no
uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance or such failure may be considered by
Lessor as a default by Lessee under this Lease.
(c) If Lessor desires to finance, refinance, or sell the
Premises, or any part thereof, Lessee hereby agrees to deliver to any lender
purchaser designated by Lessor the financial statements of Lessee as may be
reasonably required by such lender or purchaser. Such statement shall include
the past three years' financial statements of Lessee. All such financial
statements shall be received by lessor and such lender purchaser in confidence
and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean
only the owner or owners at the time in question of the fee title or a lease
interest in a ground lease of the Premises, and except as expressly provided in
Paragraph 15, in the event of any transfer of such title or interest Lessor
herein named (and in case of any subsequent transfers then the grantor) shall be
relieved from and after the date of such transfer of liability as respects
Lessor's obligations thereafter to be performed, provided that any funds in the
hands of Lessor or the then grantor at the time such transfer, in which Lessee
has an interest, shall be delivered to the grantee. The obligations contained in
this Lease to be performed by Lessor shall, subject as aforesaid, be binding on
Lessor's successors and assigns, only during their respective periods of
ownership.
18. SEVERABILITY. The invalidity of any provision of this Lease as determined by
a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law from the date due. Payment of such interest shall not
excuse or cure any default by Lessee under this Lease provided, however, that
interest shall not be payable on late charges incurred by Lessee nor on any
amounts upon which late charges are paid to Lessee.
20. TIME OF ESSENCE. Time is of the essence.
21. ADDITIONAL RENT. Any monetary obligations of Lessee to Lessor under the
terms of this Lease shall be deemed to be rent.
<PAGE>
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in interest at
the time of the modification. Except as otherwise stated in this Lease, Lessee
hereby acknowledges that neither the real estate broker listed in Paragraph 15
hereof nor any cooperating broker on this transaction nor the Lessor or any
employees or agents of any of said persons has made any oral or written
warranties or representations to Lessee relative to the condition or use by
Lessee of said Premises and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable laws
and regulations in effect during the term of this Lease except as otherwise
specifically stated in this Lease.
23. NOTICES. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified mail and if given
personally or by mail, shall be deemed sufficiently given if addressed to Lessee
or to Lessor at the address noted below the signature of the respective parties,
as the case may be. Either party may by notice to the other specify a different
address for notice purposes except that upon Lessee's taking possession of the
Premises, the Premises shall constitute Lessee's address for notice purposes. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by notice to Lessee.
24. WAIVERS. No waiver by Lessor or any provision hereof shall be deemed
a waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of any act,
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder by
Lessor shall not be a waiver of any preceding breach by Lessee of any provision
hereof, other than the failure of Lessee to pay the particular rent so accepted,
regardless of Lessor's knowledge of such preceding breach at the time of
acceptance of such rent.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession
of the Premises or any part thereof after the expiration of the term hereof,
such occupancy shall be a tenancy from month to month upon all the provisions of
this Lease pertaining to the obligations of Lessee, but all options and rights
of first refusal, if any, granted under the terms of this Lease shall be deemed
terminated and be of no further effect during said month to month tenancy.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
Paragraph 17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
wherein the Premises are located.
30. SUBORDINATION.
(a) This Lease, at Lessor's option, shall be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation of security
now or hereafter placed upon the real property of which the Premises are a part
and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall given written
notice thereof to Lessee, this Lease shall be
<PAGE>
deemed prior to such mortgage, deed of trust, or ground lease, whether this
Lease is dated prior or subsequent to the date of said mortgage, deed of trust
or ground lease or the date of recording thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee's failure to
execute such documents within 10 days after written demand shall constitute a
material default by Lessee hereunder, or, at Lessor's option, Lessor shall
execute such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee
does hereby make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to execute such
documents in accordance with this Paragraph 30(b).
31. ATTORNEY'S FEES. If either party or the broker named herein brings an
action to enforce the terms hereof or declare rights hereunder, the prevailing
party in any such action, on trial or appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as fixed by the court.
The provisions of this paragraph shall inure to the benefit of the broker named
herein who seeks to enforce a right hereunder.
32. LESSOR'S ACCESS. Lessor and Lessor's agent shall have the right to
enter the Premises at reasonable times for the purpose of inspecting the same,
showing the same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs, all without
rebate of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted,
either voluntarily or involuntarily, any auction upon the Premises without first
having obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the Premises without
Lessor's prior written consent except that Lessee shall have the right, without
the prior permission of Lessor to place ordinary and usual for rent or sublet
signs thereon.
35. MERGER. The voluntary or other surrender of this Lease by Lessee, or
a mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. CONSENTS. Except for Paragraph 33 hereof, wherever in this Lease the
consent of one party is required to an act of the other party, such consent
shall not be unreasonably withheld.
37. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Premises.
39. OPTIONS.
39.1 DEFINITION. As used in this paragraph the word "Options" has the
following meaning: (1) the right or option to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option or right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of first
refusal to lease other property of Lessor or the right of first offer to lease
other property of Lessor; (3) the right or option to purchase the Premises, or
the right of first refusal
<PAGE>
to purchase the Premises, or the right of first officer to purchase the Premises
or the right or option to purchase other property of Lessor, or the right of
first refusal to purchase other property of Lessor or the right of first offer
to purchase other property of Lessor.
39.2 OPTIONS PERSONAL. Each Option granted to Lessee in this Lease
are personal to Lessee and may not be exercised or be assigned, voluntarily or
involuntarily, by or to any person or entity other than Lessee, provided,
however, the Option may be exercised by or assigned to any Lessee Affiliate as
defined in Paragraph 12.2 of this Lease. The Options herein granted Lessee are
not assignable separate and apart from this Lease.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
options to extend or renew this Lease a later option cannot be exercised unless
the prior option to extend or renew this Lease has been so exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i) during
the time commencing from the date Lessor gives to Lessee a notice of default
pursuant to Paragraph 13.1(b) or 13.1(c) and continuing until the default
alleged in said notice of default is cured, or (ii) during the period of time
commencing on the day after a monetary obligation to Lessor is due from Lessee
and unpaid (without any necessity for notice thereof to Lessee) continuing until
the obligation is paid, or (iii) at any time after an event of default described
in Paragraphs 13.1(a), 13.1(d) or 13.1(e) (without any necessity of Lessor to
give notice of such default to Lessee), or (iv) in the event that Lessor has
given to Lessee three or more notices of default under Paragraph 13.1(b), where
a late charge becomes payable under Paragraph 13.4 for each of such defaults, or
Paragraph 13.1(c) whether or not the defaults are cured, during the 12 month
period prior to the time that Lessee intends to exercise the subject Option.
(b) The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Lessee's inability to
exercise an Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of
Lessee for a period of 30 days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessee fails to
commence to cure a default specified in Paragraph 13.1(c) within 30 days after
the date that Lessor gives notice to Lessee of such default and/or Lessee fails
thereafter to diligently prosecute said cure to completion , or (iii) Lessee
commits a default described in Paragraph 13.1(a), 13.1(d) or 13.1(e) (without
any necessity of Lessor to give notice of such default to Lessee), or (iv)
Lessor gives to Lessee three or more notices of default under Paragraph 13.1(b),
where a late charge becomes payable under Paragraph 13.4 for each such default,
or Paragraph 13.1(c), whether or not the defaults are cured.
40. MULTIPLE TENANT BUILDING. In the event that the Premises are part of
a larger building or group of buildings then Lessee agrees that it will abide
by, keep and observe all reasonable rules and regulations which Lessor may make
from time to time for the management, safety, care, and cleanliness of the
building and grounds, the parking of vehicles and the preservation of good order
therein as well as for the convenience of other occupants and tenants of the
building. The violations of any such rules and regulations shall be deemed a
material breach of this Lease by Lessee.
41. SECURITIES MEASURES. Lessee hereby acknowledges that the rental
payable to Lessor hereunder does not include the cost of guard service or other
security measures, and that Lessor shall have no obligation whatsoever to
provide same. Lessee assumes all responsibility for the protection of Lessee,
its agents and invitees from acts of third parties.
42. EASEMENTS. Lessor reserves to itself the right, from time to time, to
grant such easements, rights and dedications that Lessor deems necessary or
desirable, and to cause the recordation of Parcel Maps and restrictions, so long
as such easements, rights, dedications, Maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee shall sign
any of the aforementioned documents upon request of Lessor and failure to do so
shall constitute a material breach of this Lease.
<PAGE>
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment, and there shall survive the right
on the part of said party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said party
to pay such sum or any part thereof, said party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.
44. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after execution of this
Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
45. CONFLICT. Any conflict between the printed provisions of this Lease
and the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. ADDENDUM. Attached hereto is an addendum or addenda containing Items
1 through 35, including Paragraphs 47 through 51 which constitutes a part of
this Lease.
Form No. RE-3-383, as modified thereon and initialed by the parties constitutes
a part of this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME OF
THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR
ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER OR ITS
AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO; THE PARTIES
SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND
TAX CONSEQUENCES OF THIS LEASE.
The parties hereto have executed this Lease at the place on the dates specified
immediately adjacent to their respective signatures.
Executed at Los Angeles, California HEGER REALTY CORPORATION
dba Downey Industrial Center
on October 31, 1985 By: __________________________
President
"LESSOR" (Corporate seal)
Aerojet Ordnance Company
By: ___________________________
Vice President, Contracts
<PAGE>
"LESSEE" (Corporate seal)
For these forms write or call the American Industrial Real Estate Association,
350 South Figueroa St., Suite 275, Los Angeles, CA 9007
<PAGE>
EXHIBIT A
November 2, 1995
VIA CERTIFIED MAIL - RETURN RECEIPT REQUESTED
Heger Realty Corporation
Agent for Downey Industrial Center
5657 E. Washington Boulevard
Los Angeles, CA 90040
Re: Lease with U.S. Ordnance Company
9300 East Hall Road
Downey, California
Ladies and Gentlemen:
This letter is being written with respect to that certain Standard
Industrial Lease - Gross dated October 15, 1985, as amended by that certain
Lease Amendment Agreement dated September 26, 1988, and by that certain Second
Amendment to Lease dated September 14, 1990 (collectively, the "Lease") between
Heger Realty Corporation, dba Downey Industrial Center, representing all owners
(the "Lessor") and U.S. Ordnance Company ("Lessee") for the property referenced
above (the "Property"). Aerojet-General Corporation, the original lessee under
the Lease, assigned all of its right, title and interest under the Lease to
Lessee pursuant to that certain Assignment and Assumption of Lease dated April
29, 1994.
Pursuant to the terms of the Lease, and specifically Paragraph 2 of
the Second Amendment to Lease dated September 14, 1990, Lessee hereby exercises
its next option to extend the Lease term for an additional five (5) years. The
option being exercised pursuant hereto is the third of nine options that were
granted to the Lessee, and as a result of the exercise of this option, the Lease
term shall now expire June 30, 2001. Based upon the exercise of said option, the
Lessee continues to have six remaining options to extend the Lease term, each
for a period of five years.
If you have any questions or comments regarding the exercise of this
option or the extension of the Lease term, please contact me.
Very truly yours,
U. S. ORDNANCE COMPANY
By: _____________________
John W. Hudkins, Esq.
Secretary
cc: Glenn T. Sherman, Esq.
<PAGE>
RECORDED AT THE REQUEST OF
AND WHEN RECORDED RETURN TO:
Freeman, Freeman & Smiley
3415 Sepulveda Boulevard
Suite 1200
Los Angeles, California 90034
Attention: Laurence L. Hummer
ASSIGNMENT AND ASSUMPTION OF LEASE
This Assignment and Assumption of Lease ("Assignment") is made and
entered into as of this 29th day of April, 1994, by and between AEROJET-GENERAL
CORPORATION, an Ohio corporation ("Assignor"), and U.S. ORDNANCE COMPANY, a
Delaware corporation ("Assignee"), with reference to the following recitals of
fact:
RECITALS:
A. Heger Realty Corporation, dba Downey Industrial Center,
representing all owners of the below described Premises, and Aerojet Ordnance
company, a division of Assignor, are the respective Lessor and Lessee under that
certain Standard Industrial Lease-Gross dated October 15, 1985, as amended by
that certain Lease Amendment Agreement dated September 26, 1988, and that
certain Second Amendment to Lease dated September 14, 1990 (collectively, the
"Lease") for those certain premises located in the City of Downey, County of Los
Angeles, State of California, commonly known as 9236 East Hall Road, and more
particularly described on Exhibit "A" attached hereto and incorporated herein by
this reference (the "premises").
B. Assignor desires by this Assignment to assign all of its right,
title and interest in and to the Lease to Assignee and Assignee desires to
assume all liabilities and obligations arising under or related to such Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto do hereby agree as
follows:
AGREEMENT
1. Effective Date: As used in this Assignment, the term "Effective
Date" shall mean April 29, 1994.
2. Assignment: As of the Effective Date, Assignor hereby assigns,
sells, transfers and conveys to Assignee all of the Assignor's right, title and
interest in and to the Lease, subject to and in accordance with the terms and
conditions of that certain Assignment and Assumption Agreement between
Aerojet-General Corporation and U.S. Ordnance Company dated April 29, 1994.
3. Assignee's Assumption: As of the Effective Date, Assignee hereby
assumes all of the liabilities and obligations arising under or related to the
Lease, subject to and in accordance with the terms and conditions of that
certain Assignment and Assumption Agreement between Aerojet-General Corporation
and U.S. Ordnance Company dated April 29, 1994.
4. Binding Effect: This Assignment shall be binding upon and inure to
the benefit of parties hereto and their respective heirs, executors,
administrators, successors, and assigns.
IT WITNESS HEREOF, Assignor and Assignee have executed and delivered
this Assignment as of the day and year first above written.
<PAGE>
ASSIGNOR: ASSIGNEE:
AEROJET-GENERAL CORPORATION U.S. ORDNANCE COMPANY,
an Ohio Corporation a Delaware Corporation
By: By:
Name: D. M. Steuert Name: D. M. Steuert
Title: Assistant Treasurer Title: President
By: By:
Name: Edward R. Dye Name: James C. LeMay
Title: Secretary Title: Secretary
<PAGE>
STATE OF OHIO
COUNTY OF SUMMIT
On April 29, 1994, before me Maria L. Sullivan, a Notary Public of
the State of Ohio, personally appeared D. M. Steuert, Asst. Treasurer and Edward
R. Dye, Secretary each of Aerojet-General Corporation, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the persons whose
names are subscribed to the within instrument, and acknowledged to me that they
executed the same in their authorized capacities and that by their signatures on
the instrument, the persons, or the entity upon behalf of which the persons
acted, executed the instrument.
WITNESS my hand and official seal
(SEAL)
Maria L. Carson (nee Sullivan)
Notary Public
Summit County, Ohio
My Commission Expires February 9, 1996
STATE OF OHIO
COUNTY OF SUMMIT
On April 29, 1994, before me Maria L. Sullivan, a Notary Public of
the State of Ohio, personally appeared D. M. Steuert, President and James C.
LeMay, Secretary each of U.S. Ordnance Company, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the persons whose
names are subscribed to the within instrument, and acknowledged to me that they
executed the same in their authorized capacities and that by their signatures on
the instrument, the persons, or the entity upon behalf of which the persons
acted, executed the instrument.
WITNESS my hand and official seal
(SEAL)
Maria L. Carson (nee Sullivan)
Notary Public
Summit County, Ohio
My Commission Expires February 9, 1996
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Primex Technologies, Inc.:
Re: Registration Statement on Form S-8 (No. 333-33051)
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 sheet of Primex Technologies, Inc. and
subsidiaries as of December 31, 1996, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the years in the
two-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
/s/ KPMG Peat Marwick LLP
-------------------------
Tampa, Florida
March 16, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements,
(Form S-8, No. 333-33051) pertaining to Primex Technologies, Inc. Retirement
Investment Management Experience Plan; (Form S-8, No. 333-18297) pertaining to
Primex Technologies, Inc. Stock Plan for Non-employees Directors; (Form S-8, No.
333-18299) pertaining to 1996 Long Term Incentive Plan of Primex Technologies,
Inc., of our report dated January 26, 1998, with respect to the consolidated
financial statements of Primex Technologies, Inc. included in the Annual Report
(Form 10-K) for the year ended December 31, 1997.
Ernst & Young LLP
/s/ Ernst & Young LLP
---------------------
Tampa, Florida
March 16, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1997
AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR
ENDING DECEMBER 31, 1997 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-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 94,657
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<INVENTORY> 35,157
<CURRENT-ASSETS> 137,077
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0
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<COMMON> 5,138
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<SALES> 490,824
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<CGS> 401,590
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