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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, 1998
[_] 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: (727) 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 26, 1999,
as reported on The Nasdaq Stock Market(R) was $205,334,149.
The number of common shares, par value $1.00 per share, outstanding as of
February 26, 1999 was 5,084,359.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive Proxy Statement for the 1999 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................................................ 13
Item 3 Legal Proceedings......................................... 14
Item 4 Submission of Matters to a Vote of Security Holders....... 14
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters...................................... 15
Item 6 Selected Financial Data................................... 16
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of
Operations............................................... 17
Item 7A Quantitative and Qualitative Disclosure About Market Risk. 23
Item 8 Financial Statements and Supplementary Data............... 24
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial
Disclosure............................................... 46
PART III
Item 10 Directors and Executive Officers of the Registrant........ 46
Item 11 Executive Compensation.................................... 46
Item 12 Security Ownership of Certain Beneficial Owners and
Management............................................... 46
Item 13 Certain Relationships and Related Transactions............ 46
PART IV
Item 14 Exhibits, Financial Statements, Schedules, and Reports on
Form 8-K................................................. 47
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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 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 its subsidiaries 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 segments that correspond
to its primary products and services. Through its Ordnance and Tactical
Systems Division, the Company designs and manufactures tank and other large
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. Additionally, the Ordnance and
Tactical Systems Division manufactures precision metal components and provides
explosive load, assemble, and pack services for a variety of tactical missile
and rocket programs. The Ordnance and Tactical Systems Division also designs
and produces shaped charge 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 this 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.
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 1998 1997 1996
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Tank and other Large Caliber Ammunition (1)...................... 32% 29% 35%
Medium Caliber Ammunition........................................ 15% 19% 18%
Ball Powder(R) propellant........................................ 9% 10% 10%
Electronic Products.............................................. 14% 10% 7%
Space Products................................................... 8% 9% 7%
Other Products and Services (2)(3)............................... 22% 23% 23%
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(1) The Company has two multi-year contracts with the U.S. Government for the
supply of 120mm tactical and training ammunition that represented
approximately 14% and 17%, respectively, of 1998 sales; 16% and 12%,
respectively, of 1997 sales; 25% and 10%, respectively, of 1996 sales.
These multi-year contracts provide for deliveries through mid-1999. In
February 1999, the Company was awarded a follow-on multi-year contract for
the supply of 120mm training ammunition that provides for deliveries
through mid-2004.
(2) Approximately 4% of 1998 sales and 5% of 1997 sales resulted from
artillery propelling charge contracts.
(3) Approximately 4% of 1996 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 fourth year of these contracts. In
February 1999, the Company entered into a follow-on five year contract for the
production of training rounds for the U.S. Government.
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. In
February 1999, the Company entered into a $31.3 million contract for delivery
of advanced kinetic energy tungsten penetrator rounds to a foreign customer.
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
primarily 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
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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 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 is 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 medium caliber ammunition for
the next several years. 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
possible development of other aircraft weapon platforms that do not require
close strikes to be effective, the Company believes that medium caliber
ammunition may 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. The
OCSW is expected to be introduced to the field in seven to 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 1998, 1997 and 1996, approximately 75%,
63% and 55%, respectively, of Ball Powder(R) propellant sales were to
manufacturers of commercial ammunition and other non-U.S. Government
customers.
Olin's Winchester Division, a leading manufacturer of sporting ammunition,
was the Company's largest Ball Powder(R) propellant customer in 1998, 1997 and
1996, accounting for approximately 36%, 34% and 32% respectively, of the
Company's Ball Powder(R) propellant sales. In conjunction with the
Distribution, a long-term supply contract was entered into between the Company
and Olin with respect to future Ball Powder(R) propellant sales to Winchester.
See "Item 1. Business--Relationship Between Olin and the Company."
Over the years, the Company has attempted to increase the use of Ball
Powder(R) propellant in medium and large caliber military ammunition.
Virtually all of the medium caliber ammunition manufactured by the Company,
except the 25mm M919 round, is now loaded with Ball Powder(R) propellant. Ball
Powder(R) propellant has achieved only limited use in U.S. Government large
caliber ammunition. The Company continues to pursue the use of Ball Powder(R)
propellant in additional types of large caliber ammunition.
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Electronic Products. The Company manufactures a variety of electronic
products for aerospace applications. The Company'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 for 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 power 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 were flight-tested on experimental flights in 1998 and
will continue to be tested in 1999. 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
In November 1998, the Company acquired CMS, Inc. and Defense Research
Incorporated (the "CMS Group"). The CMS Group operates in four business
disciplines. First, the CMS Group manufactures precision metal assemblies for
use in tactical missiles and rockets. This manufacturing process utilizes
custom designed tools and fixtures for high volume production at fine
tolerances. Second, the CMS Group provides explosive load, assemble and pack
services for a variety of missile and rocket programs. These services include
the ability to press explosives into large diameter warheads, the mixing and
coating of explosives, and the assembly of ordnance products. Key missile and
rocket programs include the Hydra-70, a 2.75 inch rocket, the Advanced Medium
Range Air to Air Missile (AMRAAM) and the Javelin Missile. The Hydra-70 rocket
is a low cost, unguided munition which is used on a range of rotary and fixed
wing aircraft. Third, the foregoing activities are supported by research and
development in the areas of warhead design and development, and analysis of
system effectiveness and aircraft compatibility. Finally, the CMS Group is the
manufacturer of combat anti-armor weapons systems such as the Shoulder-
Launched-Multipurpose Assault Weapon ("SMAW") and the Dragon
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which are anti-armor weapons used by individual soldiers. The CMS Group
products, which are either tube or rail launched, complement and expand the
range of products offered by the Ordnance Division which have historically
been comprised primarily of gun launched products. The Company believes as
technology and products advance, access to all of these capabilities will be a
determinant of success.
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 buoyancy devices and specialized structures, and ammunition
initiating devices. The Company also is developing a family of fire
suppression systems offering a low-volume alternative to halon compounds, in
situations such as fighter aircraft "dry bay" areas, where size and weight
constraints are significant considerations.
During 1997, the Company entered into an agreement for the production of
artillery propelling charges. 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. A follow-on contract was
entered into in 1998.
The Company is also a developer, for the United States, Swiss and other
governmental agencies, of precision anti-tank warheads and ordnance systems
used in smart weapons. This development activity includes applied research,
advanced development, engineering, 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 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. During 1998, the Company's ammunition demilitarization contracts
were profitable.
Since 1995, the Company has been a supplier of forged-steel petroleum
drilling pipe joints and other heavy industrial cylindrical steel products.
These products are produced at the Company's Red Lion, Pennsylvania facility,
which principally produces components for large caliber ammunition and has
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, 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 67%, 66%, and 78% in 1998, 1997 and
1996, 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, and tactical missile and rocket 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
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may be provided by subcontractors or supplied directly by the customer. The
Company also purchases, for use in its products, various electronic piece
parts, printed wire boards, hydrazine liquid propellants, solid propellant
ingredients and subcontracted components, including capacitors, various metals
and explosives. 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
and consolidation in the defense industry may create difficulties in procuring
certain 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).
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 1998, 1997 and 1996, approximately 91%, 88%, and 78%, 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 1998, 1997 and 1996, approximately 8%, 12%,
and 19%, 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, acquisition and restructuring costs,
portions of research and development costs, certain compensation expenses,
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 U.S. 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, 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
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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 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 and 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 exercise options to
extend existing contracts, not terminate 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
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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.
In other product lines, the Company competes with a number of companies both
foreign and domestic, including the in-house capabilities of major ordnance
and aerospace contractors.
Research and Development; Patents
The Company's research activities are conducted at a number of facilities.
Company-sponsored research expenditures were approximately $9 million, $6
million, and $6 million for 1998, 1997, and 1996, respectively. Customer-
sponsored research expenditures by the Company (primarily sponsored by the
U.S. Government) were approximately $18 million, $54 million, and $32 million,
respectively, for such years. The higher levels of customer-sponsored research
in 1997 were the result of an increased number of programs in the areas of
large and medium caliber ammunition and space products.
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
February 26, 2006.
Backlog
The aggregate amount of contracted backlog orders for the Company on
December 31, 1998, and 1997 was approximately $439 million and $399 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 $53
million, $68 million and $29 million in 1998, 1997, and 1996, respectively.
Higher export sales during 1998 and 1997 are primarily the result
8
<PAGE>
of a contract for artillery propelling charges and EmPower(TM) in-seat laptop
computer power supply systems.
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.
Operations by Industry Segment and Geographic Area
Industry segment and geographic area data for the years 1998, 1997 and 1996
included in the notes to the Company's financial statements on pages 43 and 44
of this report is an integral part of this description of the Company's
business.
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 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, 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 an 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 are parties to 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
purchases propellant powder from the Company and the Company purchases certain
ammunition components from Olin.
The Powder Supply Requirements Agreement generally provides that Olin must
purchase, at prices to be agreed upon from time to time, a certain percentage
of the propellant powder required in any calendar year by
9
<PAGE>
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 must 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 must 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.
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 ending December 31,
2001, 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
10
<PAGE>
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, 1998, the Company had approximately 3,000 employees, six
of whom were working in foreign countries. Approximately 500 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.
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, 60.... Chairman of the Board and Chief Executive Officer
J. Douglas DeMaire, 52.. President
William W. Smith, 64.... Executive Vice President and President, Aerospace and Electronics Division
Michael S. Wilson, 52... Executive Vice President and President, Ordnance and Tactical Systems Division
John E. Fischer, 43..... Vice President and Chief Financial Officer
George H. Pain, 48...... Vice President, General Counsel and Secretary
Stephen C. Curley, 46... Vice President and Treasurer
Jackson C. Picker, 49... Vice President, Human Resources and Administration
</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
an Olin Senior Vice President from 1990 to December 1995.
Mr. DeMaire was elected President of the Company effective January 1, 1999.
From January 1997 to December 1998, he served as Executive Vice President of
the Company. 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.
11
<PAGE>
Mr. Wilson was elected Executive Vice President and President at the
Company's Ordnance and Tactical Systems Division effective January 1, 1999.
From January 1997 to December 1998, he served as Vice President of the Company
and President of the Company's Ordnance and Tactical Systems Division. 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.
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.
12
<PAGE>
ITEM 2. PROPERTIES
The table below sets forth the locations where the Company conducts its
business and a brief description of the activities conducted at each
identified location. The Company believes 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 Corporate headquarters
(1)...................... Systems management operation for large caliber
ammunition
Red Lion, Pennsylvania Manufacturing and research and development
(2)...................... facility for large
caliber ammunition metal parts and composite parts
Redmond, Washington (2)... 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 Advanced warhead engineering and management
(1)......................
Downey, California (2).... Manufacturing facility for medium caliber
ammunition components
and air dispensed munitions components
System management and research and development
Moses Lake, Washington Manufacturing and test facility for solid
(1)...................... propellant products
Camden, Arkansas (2)...... Test range
Load, assembly and pack operations
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
Shalimar, Florida (1)..... Engineering and manufacturing of air dispensed
weapons
Titusville, Florida (1)... Office facilities
Manufacture of munition components
Wiggins, Mississippi (1).. Under construction (load, assembly and pack)
Office facilities
Anniston, Alabama (1)..... Office facilities
Fine tolerance machining and assembly of missile
components
Niceville, Florida (1).... Office facilities
Warhead design, research & development services
Rock Hill, Florida........ Testing of warheads
</TABLE>
- --------
(1) Leased.
(2) Leased in part and owned in part.
13
<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 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 was
charged to operations during 1996.
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 Company's financial statements reflect a 1996 charge to operations in the
amount of $4.5 million, which represented the estimate, at that time, of the
Company's net cost resulting from this judgement. The trial court decision has
been appealed. The resultant liability is currently estimated at approximately
$5.4 million because of accrued interest and exchange rate fluctuations. Since
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, the Company has
not recognized any additional charge in connection with this matter.
While the Company cannot predict the ultimate outcome of the 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 of the year ended December 31, 1998.
14
<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(R) under the symbol PRMX on January 7, 1997. As of
February 26, 1999, there were approximately 6,100 holders of record of the
Company's common stock. The following table sets forth the quarterly high and
low closing sale prices for 1998 and 1997:
<TABLE>
<CAPTION>
Sales Price
----------------
Quarter Ended High Low
------------- ------ -----
<S> <C> <C>
March 30, 1998.......................................... $ 49 1/2 $ 31 1/4
June 28, 1998........................................... $ 53 3/4 $ 44 3/4
September 27, 1998...................................... $ 53 $ 31 1/2
December 31, 1998....................................... $ 43 15/16 $ 28 1/16
<CAPTION>
Sales Price
----------------
Quarter Ended High Low
------------- ------ -----
<S> <C> <C>
March 31, 1997.......................................... $ 21 1/8 $ 16
June 30, 1997........................................... $ 24 $ 17 3/4
September 30, 1997...................................... $ 35 $ 22
December 31, 1997....................................... $ 37 3/4 $ 30 3/4
</TABLE>
The Company has maintained a quarterly dividend rate of $0.15 per share
throughout 1997 and 1998. 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 dividend, as well as any other distribution,
liquidation, purchase or other acquisition of the Company's stock by it or any
subsidiary. At December 31, 1998, the amount available for Restricted Payments
was approximately $20.5 million.
On February 2, 1999, the Company's Board of Directors authorized a 2-for-1
split of its common stock payable March 22, 1999, in the form of a 100% stock
dividend, for shareholders of record on February 22, 1999.
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected historical financial and
operating data of the Company for the five most recently completed fiscal
years. This historical data should be read in conjunction with the
Consolidated Financial Statements of the Company and the related notes thereto
in Item 8 and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Item 7.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
($ in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operations for the Year:
Sales....................... $495,268 $490,824 $471,488 $508,113 $416,148
Cost of Goods Sold.......... 392,956 401,590 399,187 428,707 335,303
Selling and Administration.. 67,756 62,751 53,336 51,297 46,758
Research and Development.... 9,253 5,568 6,241 5,016 5,364
Other Charges (1)........... -- -- 10,500 2,000 --
-------- -------- -------- -------- --------
Operating Income............ 25,303 20,915 2,224 21,093 28,723
Interest Expense............ 3,275 3,735 9,256 9,276 8,638
Other Income, Net........... 2,711 1,776 663 807 1,743
Non-recurring Income........ 2,920 -- -- -- --
-------- -------- -------- -------- --------
Income (Loss) Before Taxes.. 27,659 18,956 (6,369) 12,624 21,828
Income Tax Provision........ 11,396 8,331 1,533 6,963 9,805
-------- -------- -------- -------- --------
Net Income (Loss)........... $ 16,263 $ 10,625 $ (7,902) $ 5,661 $ 12,023
======== ======== ======== ======== ========
Financial Position at Year-
End:
Property Plant and
Equipment, Net............. $118,906 $ 98,660 $105,023 $114,473 $114,113
Total Assets................ 471,335 296,291 373,743 380,979 364,175
Capitalization:
Short-Term Borrowing...... 10,800 24,100 -- -- --
Long-Term Debt............ 160,000 -- 145,000 125,000 125,000
Shareholders' Equity...... 165,483 152,801 145,134 158,535 131,113
-------- -------- -------- -------- --------
Total Capitalization........ $336,283 $176,901 $290,134 $283,535 $256,113
======== ======== ======== ======== ========
Total Debt to Total
Capitalization............. 50.8% 13.6% 50.0% 44.1% 48.8%
Other Operating Data:
Depreciation................ $ 16,862 $ 16,731 $ 17,211 $ 16,633 $ 16,955
Capital Expenditures........ 17,894 10,641 13,273 19,191 17,821
Per Share Data:
Net Income (Loss) Per Share
(2)(3)(4):
Basic..................... $ 3.17 $ 2.05 $ (1.51) $ 1.08 $ 2.30
Diluted................... $ 3.02 $ 2.01 $ (1.51) $ 1.08 $ 2.30
Cash Dividends Per Share.. $ 0.60 $ 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.
(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.
(4) In February 1999, the Company's Board of Directors declared a two-for-one
stock split payable on March 22, 1999 to shareholders of record on
February 22, 1999. Pro forma basic and diluted per share amounts,
respectively, reflecting this split are as follow; 1998: $1.58 and $1.51,
respectively; 1997: $1.03 and $1.00, respectively; 1996: $(0.76) both;
1995: $0.54 both; 1994: $1.15 both.
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations covers the Company's years ended December 31, 1998 and 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
The following table sets forth certain data, expressed as a percentage of
sales, from the Company's consolidated Statements of Operations for the three
years ending December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- -----
<S> <C> <C> <C>
Sales:
Large caliber ammunition...................................... 32% 29% 35 %
Medium caliber ammunition..................................... 15% 19% 18 %
BALL POWDER(R) Propellant..................................... 9% 10% 10 %
Electronic products........................................... 14% 10% 7 %
Space products................................................ 8% 9% 7 %
Other products and services................................... 22% 23% 23 %
---- ---- -----
100% 100% 100 %
Cost of goods sold.............................................. 79% 82% 85 %
---- ---- -----
Gross profit.................................................... 21% 18% 15 %
Selling and administration expense.............................. 14% 13% 11 %
Research and development expense................................ 2% 1% 1 %
Other charges................................................... -- -- 2 %
---- ---- -----
Operating income................................................ 5% 4% 1 %
Interest expense................................................ 1% 1% 2 %
Other income, net............................................... 1% 1% --
Non-recurring income............................................ 1% -- --
---- ---- -----
Income (loss) before income taxes............................... 6% 4% (1)%
Income tax provision............................................ 3% 2% 1 %
---- ---- -----
Net income (loss)............................................... 3% 2% (2)%
==== ==== =====
</TABLE>
Year ended December 31, 1998 compared to 1997
The Company's sales of $495.3 million during 1998 increased by $4.5 million,
or 1% compared to 1997. The 1998 sales increase includes higher Ordnance and
Tactical Systems Division sales which were $360.7 million in 1998 compared to
$358.9 million in 1997. This increase reflects higher sales of large caliber
ammunition, steel pipe joints and the inclusion of $12.0 million of sales
associated with the CMS Group which was acquired in November of 1998. Ordnance
and Tactical Systems sales increases were offset by declines in the sales of
medium caliber ammunition which benefited in 1997 from a catch-up in
production resulting from delays in 1996. Aerospace and Electronics Division
sales increased to $134.6 million in 1998 as compared to $131.9 million in
1997. Aerospace and Electronics Division electronic products sales reflect a
36% increase in
17
<PAGE>
the sales of EmPower(TM) airline passenger seat power supply systems and solid
systems sales reflect a 21% increase resulting from munitions dispensing
devices used on two missile systems. These increases more than offset the
decline in sales associated with the high-power pulsed energy device product
line that was sold in April 1998 and the decline in space systems sales.
Gross margin as a percentage of sales increased to 21% in 1998 from 18% in
1997. Margins on large caliber ammunition increased 11% during 1998 due to
improved operations. Margins on electronic products increased 45% during 1998
due to improved performance and a more favorable product mix. Margins also
improved in 1998 due to the absence of cost overruns, which were experienced
in 1997 on ammunition demilitarization and high-power pulsed energy contracts.
Selling and administrative expenses as a percentage of sales increased to
14% from 13% in 1997. The increase reflects the combination of higher bid and
proposal costs, which increased 43% over the 1997 level, and higher management
incentive expense associated with improvements in the Company's operating
performance. Research and development costs increased 66% from 1997 due to new
product initiatives in the space and electronics businesses.
Non-operating income and expense for 1998 include a pre-tax gain of $0.8
million recognized on the sale of the Company's high-power pulsed energy
device product line and a pre-tax charge of $0.8 million associated with a
settlement regarding costs for environmental remediation at a former
manufacturing site.
During 1998, the Company was awarded, net of expenses, $4.2 million in a
binding arbitration concerning a breach of contract. The award was based on
the defendant's ceasing and failing to complete payments on the production of
certain components used in automobile airbags. $1.3 million of the award
represents payments due under the contract and was included in 1998 operating
income. The balance of $2.9 million represents future payments which have been
recognized as 1998 non-recurring income.
Interest expense during 1998 decreased 12% from 1997. This reduction
reflects lower average outstanding debt balances during 1998 as compared to
1997. The average debt outstanding during 1998 was $47 million with an average
effective interest rate of 6.9% compared to average debt outstanding during
1997 of $54 million with an average effective interest rate of 6.9%.
Income tax expense of $11.4 million and $8.3 million was recorded in 1998
and 1997, respectively, on pre-tax income of $27.7 million in 1998 and $19.0
million in 1997. The Company's 1998 and 1997 effective tax rate of 41.2% and
43.9%, respectively, differ from statutory rates due principally to expenses
associated with goodwill which are not deductible for federal and state income
tax purposes and from the favorable federal tax treatment given to certain
export sales.
Year ended December 31, 1997 compared to 1996
The Company's sales of $490.0 million in 1997 increased by $19.3 million, or
4% compared to 1996. The 1997 sales increase is 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
18
<PAGE>
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-powered 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 effective
interest rate of 7.4%. The average debt outstanding during 1997 was $54
million with an average effective interest rate of 6.9%.
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.
U.S. Government Sales
U.S. Government sales amounted to $330.8 million in 1998, $322.6 million in
1997 and $368.3 million in 1996. See "Item 1. Business--U.S. Government
Contracts and Regulations." Approximately 86%, 88% and 75%, respectively, of
total 1998, 1997 and 1996 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.
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
19
<PAGE>
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 $1.8 million and $1.2 million at December 31, 1998 and 1997, respectively,
which are classified as other non-current 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 1998, the Company obtained these services on its own, at costs
which approximate the rates charged by Olin.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement No.
133 (The "Statement"), Accounting for Derivative Instruments and Hedging
Activities. The Company expects to adopt the new statement effective January
1, 2000. The Statement will require the Company to recognize all derivatives
on the balance sheet at fair value. The Company does not anticipate that the
adoption of this Statement will have a significant effect on its results of
operations or financial position.
Liquidity and Capital Resources
As a result of the Distribution, the Company assumed all obligations for a
revolving credit agreement ("RCA") entered into December 23, 1996, by Olin,
under the terms of which participating banks have committed a maximum of
$160.0 million to the Company for cash borrowings and letters of credit. The
RCA expires on December 31, 2001. 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 ranging from 0.125% to 0.3125%
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 $160.0 million. Outstanding borrowings
under the RCA at December 31, 1998 were $100.0 million with a weighted average
note interest rate of 5.7%. Outstanding borrowings under short-term lines
20
<PAGE>
of credit at December 31, 1998 were $10.8 million with a weighted average note
interest rate of 5.9%. Interest paid in 1998 and 1997 was $2.0 million and
$3.6 million, respectively.
In December 1998, the Company issued 7.5% Senior Notes (the "Term Notes") in
the amount of $60.0 million. Interest on the Term Notes is payable
semiannually. Scheduled principal repayments on the Term Notes are $5.0
million annually commencing in 2000 with the remaining principal balance due
in December 2008.
The RCA and Term Notes both contain 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 contain
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, 1998, the amount available for
Restricted Payments was $20.5 million. Under the terms of these financial
covenants the Company had up to an additional $23.0 million available for
borrowings at December 31, 1998.
During December 1998, the Company entered into hedging transactions, in the
form of interest rate swap agreements, to protect against increases in market
interest rates on long-term borrowings under the RCA. The notional principal
subject to interest rate swap agreements at December 31, 1998 was $40.0
million on which the Company was receiving a weighted-average variable
interest rate of 5.2% and paying a weighted average fixed rate of 4.8%. The
resulting reduction in interest expense for 1998 was not significant.
For the year ended December 31, 1998, net cash used by operations totaled
$5.7 million compared to cash provided by operations in 1997 of $116.3. During
1997, the Company experienced working capital reductions associated with
receipt of contract advances and the correction of delivery delays experienced
in 1996. These contract advances require the achievement of certain
performance milestones which accelerate contract payments in exchange for
reduced selling prices. During 1998, the favorable impact of these contract
advances were reduced due to a reduction in the value of contracts providing
for accelerated payments and an increase in the value of contracts with less
favorable payment terms. This change in the mix of contract payment terms
resulted in a usage of cash of approximately $16.1 million during 1998. During
the fourth quarter, the Company also experienced working capital investment in
accounts receivable and inventories due to delays in the shipment of medium
caliber ammunition and the start-up of an artillery propelling charge
contract. The combined impact of changing levels of contract advances and
working capital investment caused operating cash flow in 1997 to be greater
than, and in 1998 to be less than, the cash flows that ordinarily would have
been realized.
Capital expenditures for property, plant and equipment in 1998 increased 68%
from 1997 due to higher planned spending.
In 1998, the Company received $10.0 million from the sale of assets related
to its high-powered pulsed energy device product line.
In November 1998, the Company acquired all of the issued and outstanding
stock of CMS, Inc. and Defense Research Incorporated (the "CMS" Group") for
$124.8 million, including $1.8 million of transaction costs.
In August 1998, the Board of Directors of the Company authorized the
repurchase, at management's discretion, of up to 500,000 shares of the
Company's common stock. During 1998, the Company purchased and retired 56,400
shares of common stock at an aggregate cost of approximately $2.1 million.
Cash dividends paid during 1998 and 1997 totaled approximately $3.1 million.
The net cash usage from operating activities, after capital spending, stock
repurchases, dividends, acquisitions and divestitures totaled $143.5 million
in 1998 which was funded by increases in debt. During 1997, the Company
generated net cash from operating activities of $100.9 million after capital
spending, stock repurchases and dividends, which was used to reduce debt.
21
<PAGE>
Subject to the risk factors identified in the "Forward-Looking Statements"
section 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 United
States, 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's processes for evaluating and managing the risks and costs
associated with this potential problem are being managed by a team of internal
staff and outside consultants. The Company's financial and operational systems
are being identified and assessed for Year 2000 compliance, and efforts to
modify existing software or convert to new compliant software are underway.
The Company believes the identification and assessment phase of this process
is substantially complete.
The Company employs a number of information technology systems in its
operations, including, without limitation, computer networking systems,
financial systems and other similar systems. A number of these systems have
been recently implemented by the Company and these recently implemented
systems are believed to be Year 2000 compliant. The Company's assessment has
indicated that some of the Company's financial systems could be affected by
the Year 2000 problems and accordingly, the Company has begun a process of
either modifying or converting these systems to make them Year 2000 compliant.
The Company believes that the modification or conversion of these financial
systems will be substantially completed by mid 1999.
The Company also employs electronic equipment containing software and
embedded chips in its production and manufacturing systems. The Company's
assessment has indicated that this electronic equipment is not likely to be
susceptible to a material system failure resulting from Year 2000 problems.
Selective equipment upgrades are currently being implemented where warranted
and the Company believes that it can complete necessary modifications and
conversions without a material impact on the Company.
The Company has completed an assessment of Year 2000 issues associated with
major products that the Company has sold and believes that the Company has no
material exposure related to Year 2000 problems for products it has sold.
The Company has initiated communications with significant vendors, customers
and other third party service providers to evaluate whether they are making
adequate efforts to achieve Year 2000 compliance. To date, the Company is not
aware of any third parties with a Year 2000 issue that would materially impact
the Company. However, the Company has no means of ensuring that third parties
will be Year 2000 ready, and the effect of non-compliance by third parties is
not determinable by the Company. The Company has material relationships with
the U.S. Government. Year 2000 non-compliance by the U.S. Government, such as
the inability to process payments to the Company, could have a material impact
on the Company.
The Company will continue to evaluate the status of its Year 2000 compliance
to determine whether a contingency plan is necessary, but no such contingency
plan has yet been adopted by the Company. The Company has not yet determined
what the nature and timing of any such contingency plan would be.
The total cost of the Company's internal Year 2000 project is presently
estimated to be less than $1.0 million, which includes the purchase of new
software and equipment which will be capitalized.
22
<PAGE>
The cost of the Company becoming Year 2000 compliant and the timing in which
the Company believes it will complete the necessary Year 2000 modifications
are based on management's best estimates, which were derived utilizing
numerous assumptions of future events, including the continued availability of
certain resources, third party modification plans, and other factors. However,
there can be no guarantee that these estimates will be achieved, and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
success of the Company in identifying systems and programs having Year 2000
issues, the nature and amount of programming required to upgrade or replace
the affected programs, the availability and cost of personnel trained in this
area, and the extent to which the Company might be adversely impacted by
vendors, customers and other third party service provider's failure to
remediate their own Year 2000 issues.
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. The Company assumes no obligation to
update publicly any forward-looking statement. 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 performance-based payments under tank ammunition
contracts; changing economic and political conditions in the United States and
in other countries; changes in governmental laws and regulations surrounding
various matters, such as environmental remediation, contract pricing, and
international trading restrictions; changes in governmental spending and
budgetary policies, such as reductions in the level of defense spending or
redirection of Department of Defense program funding; production and pricing
levels of important raw materials, lower than anticipated levels of plant
utilization resulting in production inefficiencies and higher costs, whether
related to the delay of new product introductions, improved production
processes or equipment, or labor relations issues; difficulties or delays in
the development, production, testing and marketing of products; product
margins and customer product acceptance; unforeseen difficulties associated
with the integration of acquired businesses; and costs and effects of legal
and administrative cases, proceedings, settlements and investigations
involving the Company.
ITEM 7A. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk and Risk Management Policies
The Company manages its exposures to changes in foreign currency exchange
rates on certain firm sales commitments and anticipated, but not yet committed
sales, by entering into foreign currency forward contracts and foreign
currency option contracts, respectively. The Company also is exposed to
changes in interest rates, primarily from its long-term revolving credit
agreement, and uses interest rate swap agreements to fix interest rates on
variable rate debt and reduce certain exposures to interest rate fluctuations.
The Company's risk management objective in entering into such contracts and
agreements is only to reduce its exposure to the effects of foreign currency
exchange rate movements and interest rate fluctuations and not for speculative
investment. At December 31, 1998 the fair market values of market risk
sensitive instruments or potential for near-term losses of earnings or cash
flows for such instruments was not material.
23
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report--Ernst & Young LLP........................... 25
Independent Auditors' Report--KPMG LLP.................................... 26
Consolidated Balance Sheets as of December 31, 1998 and December 31, 1997. 27
Consolidated Statements of Operations, Years Ended December 31, 1998, 1997
and 1996................................................................. 28
Consolidated Statements of Shareholders' Equity, Years Ended December 31,
1998, 1997 and 1996...................................................... 29
Consolidated Statements of Cash Flow, Years Ended December 31, 1998, 1997
and 1996................................................................. 30
Notes to Consolidated Financial Statements................................ 31
</TABLE>
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Primex Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Primex
Technologies, Inc. as of December 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity, and cash flows
for the years 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 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Primex
Technologies, Inc. at December 31, 1998 and 1997, and the consolidated results
of its operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Tampa, Florida
February 1, 1999
25
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Primex Technologies, Inc.:
We have audited the consolidated statements of operations, shareholders'
equity, and cash flows of Primex Technologies, Inc. and subsidiaries for the
year 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 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 results of
operations and cash flows of Primex Technologies, Inc. and subsidiaries for
the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
KPMG LLP
Tampa, Florida
February 13, 1997
26
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
------------------
1998 1997
-------- --------
<S> <C> <C>
Assets
Current Assets:
Cash..................................................... $ 3,193 $ --
Receivables.............................................. 131,390 94,657
Inventories, Net......................................... 67,085 35,157
Other Current Assets..................................... 8,449 7,263
-------- --------
Total Current Assets................................... 210,117 137,077
Property, Plant and Equipment, Net......................... 118,906 98,660
Goodwill, Net.............................................. 117,617 44,821
Other Assets............................................... 24,695 15,733
-------- --------
Total Assets........................................... $471,335 $296,291
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-Term Borrowing..................................... $ 10,800 $ 24,100
Accounts Payable......................................... 40,624 28,894
Contract Advances........................................ 18,922 35,070
Accrued Liabilities...................................... 42,797 32,522
-------- --------
Total Current Liabilities.............................. 113,143 120,586
Long-Term Debt............................................. 160,000 --
Other Liabilities.......................................... 32,709 22,904
-------- --------
Total Liabilities...................................... 305,852 143,490
Commitments and Contingencies
Shareholders' Equity:
Common Stock, $1.00 par value; 60,000,000 shares
authorized; 5,081,976 and
5,137,637 shares issued and outstanding in 1998 and
1997, respectively...................................... 5,082 5,138
Additional Paid-in Capital............................... 142,500 144,510
Retained Earnings........................................ 20,301 7,322
Unamortized Value of Restricted Stock Grants............. (2,099) (4,145)
Accumulated Other Comprehensive Income................... (301) (24)
-------- --------
Total Shareholders' Equity............................. 165,483 152,801
-------- --------
Total Liabilities and Shareholders' Equity............. $471,335 $296,291
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Sales............................................. $495,268 $490,824 $471,488
Operating Expenses:
Cost of Goods Sold.............................. 392,956 401,590 399,187
Selling and Administration...................... 67,756 62,751 53,336
Research and Development........................ 9,253 5,568 6,241
Other Charges................................... -- -- 10,500
-------- -------- --------
Operating Income.................................. 25,303 20,915 2,224
Interest Expense.................................. 3,275 3,735 9,256
Other Income, Net................................. 2,711 1,776 663
Non-Recurring Income.............................. 2,920 -- --
-------- -------- --------
Income (Loss) Before Taxes........................ 27,659 18,956 (6,369)
Income Tax Provision.............................. 11,396 8,331 1,533
-------- -------- --------
Net Income (Loss)................................. $ 16,263 $ 10,625 $ (7,902)
======== ======== ========
Net Income (Loss) Per Share (1996 Unaudited Pro
forma Information):
Basic........................................... $ 3.17 $ 2.05 $ (1.51)
======== ======== ========
Diluted......................................... $ 3.02 $ 2.01 $ (1.51)
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
($ in thousands)
<TABLE>
<CAPTION>
Common Stock
-----------------
Accumulated
Unamortized Other Equity in
Additional Value of Compre- Earnings Total
Paid-in Retained Restricted hensive Prior to Shareholders'
Shares Amount Capital Earnings Stock Grants Income Distribution Equity
--------- ------ ---------- -------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
Grant of 2,000
Restricted Stock Units. -- -- 95 -- (95) -- -- --
Forfeiture of Restricted
Stock Units............ -- -- (89) -- 51 -- -- (38)
Amortization of
Restricted Stock Grant. -- -- -- -- 2,090 -- -- 2,090
Dividends Paid.......... -- -- -- (3,078) -- -- -- (3,078)
Dividends on Stock
Compensation........... -- -- -- (206) -- -- -- (206)
Issuance of Stock Under
Directors Stock Plan... 739 -- 25 -- -- -- -- 25
Purchases of Common
Stock.................. (56,400) (56) (2,041) -- -- -- -- (2,097)
Translation Adjustments. -- -- -- -- -- 4 -- 4
Minimum Pension
Liability Adjustment... -- -- -- -- -- (281) -- (281)
Net Income.............. -- -- -- 16,263 -- -- -- 16,263
--------- ------ -------- ------- ------- ----- -------- --------
Balance December 31,
1998................... 5,081,976 $5,082 $142,500 $20,301 $(2,099) $(301) $ -- $165,483
========= ====== ======== ======= ======= ===== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
($ in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1998 1997 1996
--------- --------- --------
<S> <C> <C> <C>
Operating Activities
Net Income (Loss)............................. $ 16,263 $ 10,625 $ (7,902)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided (Used) by Operating
Activities:
Depreciation.................................. 16,862 16,731 17,211
Amortization of Intangibles................... 3,180 2,977 2,954
Deferred Taxes................................ (2,590) (2,863) (3,805)
Stock Compensation............................ 1,869 2,035 --
Other......................................... (91) 43 947
Changes in Operating Assets and Liabilities:
Receivables................................. (29,993) 29,001 29,418
Inventories................................. (9,941) 22,084 (7,478)
Other Current Assets........................ (336) (431) 659
Other Assets................................ (6,348) (1,552) (7,737)
Accounts Payable............................ 10,720 (1,253) (12,634)
Contract Advances........................... (16,148) 35,070 --
Accrued Liabilities......................... 1,261 3,649 5,161
Other Liabilities........................... 9,610 189 (2,472)
--------- --------- --------
Net Operating Activities.................... (5,682) 116,305 14,322
--------- --------- --------
Investing Activities
Expenditures for Property, Plant and
Equipment.................................... (17,894) (10,641) (13,273)
Proceeds from Disposition of Property, Plant
and Equipment................................ 73 -- 4,565
Cash Paid for Purchase of Business............ (124,829) -- --
Proceeds from Sale of Business................ 10,000 -- --
Other Investing Activities.................... -- -- (195)
--------- --------- --------
Net Investing Activities.................... (132,650) (10,641) (8,903)
--------- --------- --------
Financing Activities
Net Short-Term Borrowing (Repayment).......... (13,300) 24,100 --
Net Revolving Credit Agreement Borrowing
(Repayment).................................. 100,000 (145,000) 20,000
Proceeds from Issuance of Term Notes.......... 60,000 -- --
Net Transfers to Olin......................... -- -- (5,419)
Repurchase of Common Shares................... (2,097) (1,666) --
Dividends Paid................................ (3,078) (3,098) --
--------- --------- --------
Net Financing Activities.................... 141,525 (125,664) 14,581
--------- --------- --------
Net Increase (Decrease) in Cash............... 3,193 (20,000) 20,000
Cash, Beginning of Year....................... -- 20,000 --
--------- --------- --------
Cash, End of Year............................. $ 3,193 $ -- $ 20,000
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<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 Stock Market(R) on January 7,
1997. Prior to December 31, 1996, the Company was a wholly owned subsidiary of
Olin.
The Company is an ordnance and aerospace contractor providing systems
management and manufacturing services. The Company's operations are organized
into two segments that correspond to its primary products and services.
The Ordnance and Tactical Systems Division ("Ordnance") produces large and
medium caliber ammunition for aircraft, artillery, tanks and warships; Ball
Powder(R) propellant for sporting, military and commercial applications;
precision metal assemblies for use in missiles and rockets; and propulsion
systems for large caliber gun systems. Ordnance also provides load, assembly
and pack services for a variety of missile and rocket programs. 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.
The Aerospace and Electronics Division's ("Aerospace") products include
rocket engines, advanced electric propulsion systems, aerospace electronic
products, and solid propellant products, including munitions dispensing
systems. Primary Aerospace customers are satellite, aircraft and missile
contractors and airlines; 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 consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. Intercompany balances and
transactions between entities included in these financial statements have been
eliminated.
The accompanying consolidated financial statements, prior to the
Distribution, 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 and 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.
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported and disclosed in the financial
statements and related notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
31
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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 21% and 38% of 1998 and 1997 consolidated total inventories,
respectively, are valued by the dollar value last-in, first-out (LIFO) method
of inventory accounting.
Pursuant to contract provisions, agencies of the U.S. Government and other
customers have title to, or a security interest 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 acquired businesses over the
fair value of their respective net assets, is amortized on a straight-line
basis over periods ranging from thirty to forty years. Accumulated
amortization was $25,732 and $22,994 at December 31, 1998 and 1997
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.
32
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 included the Company's
allocated share of Olin's consolidated income tax provision and was calculated
on a separate Company basis.
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 of a foreign subsidiary into U.S. dollars are included as a
component of other comprehensive income.
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.
The Company uses interest rate swap agreements to fix interest rates on
variable rate debt and reduce certain exposures to interest rate fluctuations.
The agreements involve the exchange of amounts based on a variable interest
rate for amounts based on fixed interest rates over the life of the agreement,
without an exchange of the notional amount upon which the payments are based.
The differential to be paid or received as interest rates change is accrued
and recognized as an adjustment of interest expense related to the debt. The
fair value of the swap agreements are not recognized in the financial
statements. Neither the Company nor the counterparties,
33
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
which are prominent financial institutions, are required to collateralize
their respective obligations under these swaps. The Company does not believe
that any reasonable likely change in interest rates would have a material
adverse effect on the financial position, the results of operations or cash
flow of the Company.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133 (the "Statement"), Accounting of Derivative Instruments and Hedging
Activities. The Company expects to adopt the new statement effective January
1, 2000. The Statement will require the Company to recognize all derivatives
on the balance sheet at fair value. The Company does not anticipate that the
adoption of the Statement will have a significant effect on its results of
operations or financial position.
Acquisitions
On November 6, 1998, the Company acquired all of the issued and outstanding
stock of CMS, Inc. and Defense Research Incorporated (the "CMS Group") for
$124,829 ($123,000 in cash and $1,829 of acquisition related costs). The
operations of the CMS Group are included in the consolidated statement of
operations from the date of acquisition. The transaction was accounted for as
a purchase and the excess cost over fair value of the net assets acquired
(goodwill), of $75,647, is being amortized on a straight-line basis over forty
years. The allocation of the purchase price for the CMS Group acquisition is
tentative pending completion of a facilities consolidation review, assessment
of the underlying value, if any, of certain identifiable intangible assets,
and the assessment of acquired tax net operating losses utilization.
The pro forma results of operations for the years ended December 31, 1998
and 1997, assumes the purchase of the CMS Group had been consummated as of
January 1, 1997. The pro forma results of operations include adjustments to
give effect to amortization of goodwill, interest expense on acquisition debt
and certain other adjustments, together with related income tax effects and is
not necessarily indicative of the results of operations that would have
occurred had the purchase been made at the beginning of the periods presented
or the future results of the combined operations.
Pro Forma Operating Results (Unaudited):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Sales................................................... $568,351 $570,337
Net income.............................................. $ 15,510 $ 8,882
Net income per share:
Basic................................................. $ 3.02 $ 1.72
Diluted............................................... $ 2.88 $ 1.68
</TABLE>
Dispositions
On April 15, 1998, the Company sold substantially all of the assets related
to its high-power pulsed energy device product line for $10,000 in cash. A
gain on this sale of approximately $800 was included in other income. Sales of
products and services in this product line were $3,698 in 1998 prior to the
sale and $16,833 for the year ending December 31, 1997.
34
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Receivables
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Receivables, consist of the following:
Contract receivables:
Billed receivables.................................. $ 69,292 $46,369
Unbilled receivables................................ 61,533 46,823
Trade and other receivables........................... 943 1,475
Allowance for doubtful accounts....................... (378) (10)
-------- -------
Total receivables..................................... $131,390 $94,657
======== =======
</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, respectively, include amounts
related to Government contracts of $46,082 and $42,906 in 1998, and $18,664
and $25,678 in 1997.
Inventories
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Inventories consist of the following:
Raw materials and work-in-progress...................... $65,909 $34,832
Finished goods.......................................... 8,805 8,232
------- -------
Total inventories....................................... 74,714 43,064
Less revaluation to LIFO................................ 7,629 7,907
------- -------
Inventories, net........................................ $67,085 $35,157
======= =======
</TABLE>
Inventory balances at December 31, 1998 and 1997 are net of reductions for
progress payments in the amount of $282 and $9,657, respectively.
During 1998 and 1997, contract inventory quantities valued at LIFO were
reduced resulting in a LIFO liquidation, the effect of which decreased cost of
sales by approximately $278 and $1,616, respectively.
Property, Plant and Equipment
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Land and improvements to land........................... $ 16,817 $ 14,913
Building and building equipment......................... 49,868 41,526
Machinery and equipment................................. 186,920 170,601
Leasehold improvements.................................. 19,844 20,238
Construction-in-progress................................ 14,191 12,911
-------- --------
Total property, plant & equipment....................... 287,640 260,189
Less accumulated depreciation........................... 168,734 161,529
-------- --------
Plant, property & equipment, net........................ $118,906 $ 98,660
======== ========
</TABLE>
35
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Credit Agreements and Long Term Debt
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. 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 ranging from 0.125% to 0.3125%
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. Outstanding borrowings under the
RCA at December 31, 1998 were $100,000 with a weighted average note interest
rate of 5.7%. Outstanding borrowings under short-term lines of credit at
December 31, 1998 were $10,800 with a weighted average note interest rate of
5.9%. RCA interest paid in 1998, 1997 and 1996 was $2,008, $3,585 and $9,256,
respectively.
In December 1998, the Company issued 7.5% Senior Notes (the "Term Notes") in
the amount of $60,000. Interest on the Term Notes is payable semiannually.
Scheduled principal repayments on the Term Notes are $5,000 annually
commencing in 2000 with the remaining principal balance due in December 2008.
The RCA and Term Notes both contain 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 contain
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, 1998, the amount available for
Restricted Payments was $20,506. Under the terms of these financial covenants,
the Company had up to an additional $23,000 available for borrowings at
December 31, 1998.
During December 1998, the Company entered into hedging transactions, in the
form of interest rate swap agreements, to protect against increases in market
interest rates on long-term borrowings under the RCA. The notional principal
subject to interest rate swap agreements at December 31, 1998 was $40,000 on
which the Company was receiving a weighted-average variable interest rate of
5.2% and paying a weighted-average fixed rate of 4.8%. The resulting reduction
in interest expense for 1998 was not significant.
Non-Recurring Items
During 1998, the Company received an arbitration award in the amount, net of
expenses, of $4,189 as the result of a binding arbitration concerning a breach
of contract of which $1,269 represents payments due under the contract which
were included in operating income. The remaining $2,920 balance of the award
represents future payments which have been recognized as non-recurring income.
During 1996, the Company recorded 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 and a $4,500 provision
relating to the Belgian contract dispute, both of which have been recognized
as other charges. See note titled "Legal Proceedings" included herein.
36
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Accrued Liabilities
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Accrued liabilities consist of the following:
Accrued payroll and employee benefits................... $16,045 $17,266
Contract liabilities.................................... 22,510 13,982
Other................................................... 4,242 1,274
------- -------
Total accrued liabilities............................... $42,797 $32,522
======= =======
</TABLE>
Contract liabilities are principally reserves for anticipated losses on
certain incomplete contracts, reserves for contract adjustments and estimated
costs to perform future contractual services in connection with completed
contracts.
Income Taxes
Components of Income Tax Expense (Benefit):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current:
Federal................................... $11,615 $ 9,528 $ 4,509
State..................................... 2,371 1,666 829
Deferred.................................... (2,590) (2,863) (3,805)
------- ------- -------
Income tax expense.......................... $11,396 $ 8,331 $ 1,533
======= ======= =======
Effective Tax Rate Reconciliation (percent):
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Statutory federal tax rate.................. 35.0% 35.0% (35.0)%
State income taxes, net..................... 4.1% 4.4% 2.4%
Goodwill.................................... 3.6% 4.7% 14.1%
Fines and penalties......................... -- -- 33.0%
Supplemental pension........................ (2.0)% (2.6)% --
Foreign sales corporation tax benefit....... (2.5)% (3.6)% --
Other, net.................................. 3.0% 6.0% 9.6%
------- ------- -------
Effective tax rate.......................... 41.2% 43.9% 24.1%
======= ======= =======
Components of Deferred Tax Assets and
Liabilities:
<CAPTION>
1998 1997
------- -------
<S> <C> <C> <C>
Deferred tax assets:
Post-retirement benefits.................. $ 5,602 $ 5,084
Accruals and reserves..................... 20,344 12,622
Net operating loss carryforwards.......... 11,500 --
Other miscellaneous items................. 1,385 1,632
------- -------
Total deferred tax assets................... 38,831 19,338
Deferred tax liabilities:
Property, plant and equipment............. 10,125 9,725
Deferred contract income.................. 9,186 5,958
------- -------
Total deferred tax liability................ 19,311 15,683
------- -------
Net deferred tax asset before valuation
allowance.................................. 19,520 3,655
Valuation allowance......................... (6,300) --
------- -------
Net deferred tax asset...................... $13,220 $ 3,655
======= =======
</TABLE>
37
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Included in other current assets at December 31, 1998 and 1997,
respectively, are $6,436 and $5,706 of net current deferred tax assets.
At December 31, 1998 the Company had net operating loss carryforwards
("NOLs") of approximately $29,606 for income tax purposes that expire from
2003 through 2009. The Company obtained the future benefit of these NOLs as a
result of the 1998 acquisition of the CMS Group. Future utilization of these
NOLs is subject to limitations. For financial reporting purposes, a valuation
allowance of $6,300 has been recorded to offset the deferred tax asset related
to the NOLs, which when realized will be applied to reduce goodwill related to
the acquisition of the CMS Group.
Income taxes paid in 1998 and 1997 were $12,831 and $12,117, respectively.
Income taxes allocated for periods prior to 1997 were settled with Olin on a
current basis.
Employee Benefit Plans
Pension benefits for substantially all domestic employees are provided
through the Company's sponsorship of a defined contribution plan (the "PRIME
Plan"). The PRIME Plan is intended to meet the requirements of Section 401(k)
of the Internal Revenue Code. The PRIME 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 PRIME Plan
contributions in 1998 and 1997 was $6,341 and $6,244, respectively.
Prior to the Distribution, substantially all domestic employees of the
Company participated in one of several Olin defined benefit pension plans. The
pension liability for active and retired employees participating in these 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 was $7,872 in 1996.
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, 1998 and
1997 the discounted value of benefits payable under the MSP Plan, included in
other liabilities, was $7,713 and $8,093, respectively, and the cash value of
the life insurance policies, included in other assets, was $14,876 and
$13,453, respectively. MSP Plan expenses during 1998 and 1997 were $1,250 and
$1,280, respectively, which were offset by increases in insurance cash values
and policy proceeds of $1,318 and $1,490, respectively.
Prior to the Distribution, certain Company employees participated in
supplemental non-qualified executive benefit plans for which the expenses were
$1,036 in 1996. The liability for payment of benefits accrued under these
plans prior to the Distribution remained with Olin.
The Company has a defined benefit pension plan covering approximately 500
bargaining employees (the "Bargaining Employees Pension Plan"). The Bargaining
Employees Pension Plan provides a flat rate benefit based on the employee's
years of service. The Company's funding policy provides that payments to the
pension trust shall be at least equal to the minimum funding required by
applicable regulations.
The Company provides certain post-retirement health care and life insurance
benefits for eligible domestic employees (the "Post-Retirement Benefit Plan").
The Post-Retirement Benefit Plan is unfunded. On August 1, 1998, the Company
amended the Post-Retirement Benefit Plan to limit eligibility to employees who
were employed prior to that date. The liability for similar benefits under
Olin plans for employees retired prior to the Distribution remained with Olin.
38
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The status of the Bargaining Employees Pension Plan and Post-Retirement
Benefit Plan at December 31, 1998 and 1997 is summarized below:
<TABLE>
<CAPTION>
Bargaining Employees Post-Retirement
Pension Plan Benefit Plan
---------------------- -----------------
1998 1997 1998 1997
---------- ---------- -------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of
year............................... $ 1,709 $ -- $ 9,642 $ 7,812
Service cost...................... 479 336 682 639
Interest cost..................... 133 78 616 621
Plan amendments................... 268 969 -- --
Business Divestiture.............. -- -- 262 --
Actuarial losses/(gain)........... (47) 328 (949) 668
Benefits paid..................... (9) (2) (212) (98)
---------- ---------- -------- -------
Benefit obligation at end of year... $ 2,533 $ 1,709 $ 10,041 $ 9,642
========== ========== ======== =======
Change in plan assets:
Fair value of plan assets at
beginning of year.................. $ -- $ -- $ -- $ --
Actual return on plan assets...... 13 -- -- --
Company contributions............. 756 2 -- --
Benefit paid...................... (9) (2) -- --
---------- ---------- -------- -------
Fair value of plan assets at end of
year............................... 760 -- -- --
Under funded status of the plan..... (1,773) (1,709) (10,041) (9,642)
Unrecognized net actuarial (gain)
losses............................. 281 328 (183) 573
Unamortized prior service cost...... 1,074 898 -- --
---------- ---------- -------- -------
Accrued benefit cost................ $ (418) $ (483) $(10,224) $(9,069)
========== ========== ======== =======
Amounts recognized in the statement of
financial position consists of:
Accrued benefit liability......... $ (1,773) $ (1,380) $(10,224) $(9,069)
Intangible asset.................. 1,074 897 -- --
Accumulated other comprehensive
income........................... 281 -- -- --
---------- ---------- -------- -------
Net amount recognized............... $ (418) $ (483) $(10,224) $(9,069)
========== ========== ======== =======
Weighted-average assumptions as of
December 31
Discount rate....................... 7.00% 7.25% 7.00% 7.25%
Expected return on plan assets...... 8.50% 8.50% -- --
Components of net periodic benefit
cost
Service cost........................ $ 479 $ 336 $ 682 $ 639
Interest cost....................... 133 78 616 621
Expected return on plan assets...... (13) -- -- --
Amortization of prior service cost.. 91 71 -- --
Recognized net actuarial loss....... 1 -- -- --
---------- ---------- -------- -------
Net periodic benefit cost........... $ 691 $ 485 $ 1,298 $ 1,260
========== ========== ======== =======
</TABLE>
39
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The assumed health care cost trend rate has a significant effect on the
amounts reported for the Post-Retirement Benefits Plan. A one-percentage-point
change in the assumed health care cost trend rate would have the following
effects:
<TABLE>
<CAPTION>
1-Percentage-Point Increase 1-Percentage-Point Decrease
--------------------------- ---------------------------
<S> <C> <C>
Effect on total of
service and interest
cost components in
1998.................. $ 42 $ (48)
Effect on benefit
obligation as of
December 31, 1998..... $435 $(477)
</TABLE>
Long-Term Incentive Plan
The Company has 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, 1998, a total of 350,000 shares of common stock were
reserved for issuance in connection with restricted stock unit grants, of
which a total of 341,000 restricted stock units have been granted to certain
officers and employees of the Company. Unearned compensation was charged to
shareholder's equity for the market value of the restricted shares when
granted and is being amortized over the vesting period expected to expire in
January 2000. Compensation expense recognized on restricted stock units in
1998 and 1997 was $2,089 and $1,983, respectively.
At December 31, 1998, a total of 500,000 shares of common stock were
reserved for issuance in connection with stock option grants of which a total
of 250,000 and 25,000 stock options were granted to certain key employees on
January 2, and May 5, 1998, respectively. The exercise price of the January
and May options is $33.88 and $47.44 per share, respectively, which was the
fair market value of the Company's common stock on the date of grant. These
options generally become vested in one-third installments over a three-year
period beginning one year from the date of grant and have a ten-year term from
the date of grant. All options granted were outstanding at December 1998. The
Company accounts for stock-based employee compensation using the intrinsic
value method prescribed by Accounting Principles Board Opinion 25, Accounting
for Stock Issued to Employees; accordingly, no compensation cost has been
recognized for the stock options granted.
Had compensation expense been determined for awards under the plan based
upon fair values at the grant dates and the resulting expense amortized over
the options' vesting period in accordance with Statement of Financial
Accounting Standards 123, Accounting for Stock-Based Compensation, the
Company's net income and income per share would have been reduced to the pro
forma amounts indicated below. For purposes of pro forma disclosures, the fair
value for options was estimated at the date of grant using Black-Scholes
option pricing model with the following weighted-average assumptions for 1998:
risk free interest rate range of 5.84% to 5.96% depending on grant date;
dividend yield of 1.40%; volatility factors of the expected market price of
the Company's stock of 41.3%; and an expected life ranging from 2 to 7 years.
The per share weighted-average fair value of options granted during 1998 was
$12.24. The Company's pro forma information for the year ended December, 1998,
the first year which the Company had stock option grants, is as follows:
<TABLE>
<CAPTION>
1998
-------
<S> <C>
Pro forma net income.............................................. $14,609
Pro forma income per share:
Basic........................................................... $ 2.84
Diluted......................................................... $ 2.72
</TABLE>
40
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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, and 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 $5,648 in 1998, $5,515 in 1997 and $5,222 in 1996 (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, 1998 are as follows: $5,253 in 1999; $4,506 in 2000; $2,914 in
2001; $2,484 in 2002; $1,962 in 2003.
In the ordinary course of business, the Company is contingently liable for
performance under letters of credit totaling approximately $8,543 at December
31, 1998. 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.
Environmental provisions charged to operations were $830 in 1998, and none in
1997 and 1996. The consolidated balance sheets include reserves for future
environmental expenditures to investigate and remediate known sites amounting
to $1,834 and $1,186 at December 31, 1998 and 1997, respectively, which are
classified as other non-current liabilities.
During 1998, the Company agreed to a settlement regarding costs associated
with environmental remediation at a location where the Company formerly had
manufacturing operations. As a result of this settlement, a charge to
operations of $800 was made during 1998.
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.
41
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 was charged to operations during 1996, 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. A provision for the estimated settlement, in the amount of $4,500,
is included in "Other Charges" in the accompanying 1996 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 and there have been no subsequent charges to
operations 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(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. Propellant sales to
Olin's Winchester Division were $15,832 in 1998, $16,547 in 1997 and $15,813
in 1996.
The Company obtained various transition related services from Olin after the
distribution. These services include, but are not limited to, administration
of employee benefit programs, tax compliance, internal audit, management
information systems, and treasury. The cost of these services, was
approximately $1,389 during 1997 and not significant during 1998.
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, which included a number of one time costs
associated with the Distribution.
42
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Net Income Per Share
The following sets forth the number of shares of common stock included in
the computation of basic and diluted net income per share for the years ended
December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(Pro
forma)
<S> <C> <C> <C>
Denominator for basic net income per share:
Weighted average shares outstanding and
vested................................... 5,136,915 5,173,669 5,220,276
Effect of dilutive securities:
Employee Stock Options ................... 29,212 -- --
Restricted Stock Unit Grants.............. 212,565 113,239 --
--------- --------- ---------
241,777 113,239 --
--------- --------- ---------
Denominator for diluted net income per
share...................................... 5,378,692 5,286,908 5,220,276
========= ========= =========
</TABLE>
The number of shares included in the 1996 pro forma computation assumes that
all 5,220,276 common shares outstanding immediately after the Distribution
were outstanding for all periods prior to the Distribution.
Accumulated Other Comprehensive Income
The components of other comprehensive income are as follows:
<TABLE>
<CAPTION>
Currency Translation Minimum Pension
Adjustments Liability Adjustment Total
-------------------- -------------------- -----
<S> <C> <C> <C>
Balance at December 31, 1996 .......... $-- $ -- $ --
Currency translation adjustment...... (24) -- (24)
---- ----- -----
Balance at December 31, 1997........... (24) -- (24)
Currency translation adjustment...... 4 -- 4
Minimum pension liability adjustment. -- (281) (281)
---- ----- -----
Balance at December 31, 1998........... $(20) $(281) $(301)
==== ===== =====
</TABLE>
Business Segment Information
The Company's operations are classified into two reportable segments which
reflect management's organization of operations around business units that
offer different products and services. Each reportable segment is managed
separately and requires different technology and marketing strategies. The
Ordnance and Tactical Systems segment ("Ordnance") includes the development
and production of ammunition, propellant, shaped charged warheads and
precision metal assemblies. Additionally, Ordnance provides explosive load
assemble and pack services. The Aerospace and Electronics segment
("Aerospace") includes the design, development and manufacturing of space,
electronic, and solid propellant products and systems.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Corporate administration costs
are allocated between reportable segments based on sales, assets and
personnel. Corporate interest expense is allocated between reportable segments
based on working capital employed. Company management evaluates performance
based on segment profit or loss from operations before unusual items and
income taxes.
The Company's largest customer is the U.S. Government. Sales from contracts
with the U.S. Government or U.S. Government prime contractors were
approximately 67%, 66% and 78% of total 1998, 1997 and 1996 sales,
respectively. Export sales from the United States were $52,984, $67,867 and
$28,875 in 1998, 1997 and 1996, respectively.
43
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table presents information about reportable segment operations
and assets:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues from external customers:
Ordnance...................................... $360,675 $358,879 $341,655
Aerospace..................................... 134,593 131,945 129,833
-------- -------- --------
Total consolidated revenues..................... 495,268 490,824 471,488
======== ======== ========
Depreciation and amortization
Ordnance...................................... 14,256 13,624 13,296
Aerospace..................................... 5,434 5,753 6,457
All other..................................... 352 331 412
-------- -------- --------
Total consolidated depreciation and
amortization................................... 20,042 19,708 20,165
======== ======== ========
Interest expense:
Ordnance...................................... 1,676 957 6,812
Aerospace..................................... 1,599 2,778 2,444
-------- -------- --------
Total consolidated interest expense............. 3,275 3,735 9,256
======== ======== ========
Segment profit (loss):
Ordnance...................................... 18,589 14,428 (1,145)
Aerospace..................................... 6,150 4,528 5,276
-------- -------- --------
Total segment profit............................ 24,739 18,956 4,131
Reconciling items:
Non-recurring income.......................... 2,920 -- --
Non-recurring charges......................... -- -- (10,500)
-------- -------- --------
Total consolidated income (loss) before income
taxes.......................................... 27,659 18,956 (6,369)
======== ======== ========
Segment assets:
Ordnance...................................... 348,264 172,318 241,300
Aerospace..................................... 107,922 115,141 105,838
-------- -------- --------
Total segment assets............................ 456,186 287,459 347,138
Corporate assets................................ 15,149 8,832 26,605
-------- -------- --------
Total consolidated assets....................... 471,335 296,291 373,743
======== ======== ========
Expenditures for additions to long lived assets:
Ordnance...................................... 10,972 6,531 9,885
Aerospace..................................... 6,840 3,793 3,388
All other..................................... 82 317 --
-------- -------- --------
Total expenditures for additions to long-lived
assets......................................... $ 17,894 $ 10,641 $ 13,273
======== ======== ========
</TABLE>
44
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Quarterly Financial Data (Unaudited)
The following is a summary of unaudited quarterly operating results for
years ending December 31, 1998 and 1997:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1998:
Sales ................................. $112,251 $111,068 $112,753 $159,196
Gross Profit .......................... 23,462 26,916 24,146 27,788
Operating Income ...................... 5,217 5,458 5,905 8,723
Net Income ............................ 2,968 5,064 3,800 4,431
Net Income Per Share:
Basic ............................... $ 0.58 $ 0.98 $ 0.74 $ 0.87
Diluted ............................. $ 0.55 $ 0.94 $ 0.71 $ 0.82
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
</TABLE>
Subsequent Event (Unaudited)
On February 2, 1999, subsequent to the date of the independent auditors
report, the Company's Board of Directors authorized a 2-for-1 split of its
common stock payable March 22, 1999, in the form of a 100% stock dividend, for
shareholders of record on February 22, 1999. Pro forma per share amounts
giving effect to the stock split are as follow:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Pro Forma Net Income (Loss)Per Share:
1998:Basic.......................... $ 0.29 $0.49 $ 0.37 $ 0.43
Diluted ......................... $ 0.28 $0.47 $ 0.35 $ 0.41
1997:Basic ......................... $ 0.08 $0.28 $ 0.29 $ 0.38
Diluted ......................... $ 0.08 $0.27 $ 0.29 $ 0.36
1996:Basic.......................... $(0.54) $0.09 $(0.29) $(0.02)
Diluted ......................... $(0.54) $0.09 $(0.29) $(0.02)
</TABLE>
45
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
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 1999
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 1999 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 1999 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 1999 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 1999
Annual Meeting of Shareholders and filed with the Commission is incorporated
herein by reference.
46
<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........................ 25
Independent Auditors' Report--KPMG LLP................................. 26
Consolidated Balance Sheets as of December 31, 1998 and 1997........... 27
Consolidated Statements of Operations, Years Ended December 31, 1998,
1997 and 1996......................................................... 28
Consolidated Statements of Shareholders' Equity, Years Ended December
31, 1998, 1997 and 1996............................................... 29
Consolidated Statements of Cash Flow, Years Ended December 31, 1998,
1997 and 1996......................................................... 30
Notes to the Consolidated Financial Statements......................... 31
</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 Stock Purchase Agreement by and between the Company and Daimler-Benz
Finance Corporation, dated October 9, 1998. Incorporated by reference
to Exhibit 2.1 to the Company's Form 8-K filed November 23, 1998 (SEC
File No. 0-28942). (Pursuant to Item 601(b)(2) of Regulation S-K, the
Company hereby agrees to furnish supplementally to the Commission,
upon request, a copy of any schedule or exhibit omitted from such
Stock Purchase Agreement as filed herewith.)
3.1 Amended and Restated Articles of Incorporation. Incorporated by
reference to Exhibit 3.1 to the Company's Form 8-K/A filed January 24,
1997 (SEC File No. 0-28942).
3.2 Amended and restated By-laws of the Company, dated January 1, 1999.
4.1 Amended and restated Articles of Incorporation. Incorporated by
reference to Exhibit 3.1 to the Company's Amendment No. 1 to the Form
8-K/A filed January 25, 1997 (SEC File No. 0-28942).
4.2 Amended and restated By-laws of the Company, dated January 1, 1999
(filed as Exhibit 3.2 hereto).
4.3 Rights Agreement, dated December 19, 1996, between the Company and
ChaseMellon Shareholder Services, L.L.C. Incorporated by reference to
Exhibit 4.4 to the Company's Form 10-K filed March 27, 1997 (SEC File
No. 0-28942).
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. 0-
28942)
4.5 1996 Long Term Incentive Plan of Primex Technologies, Inc., as
amended.*
4.6 Primex Technologies, Inc. Restoration Bonus Plan, as amended.*
4.7 Primex Technologies, Inc. Stock Plan for Nonemployee Directors, as
amended.*
4.8 The Employment Transition Benefit Plan of Primex Technologies, Inc.,
as amended.*
10.1 Executive Agreement between Primex Technologies, Inc. and James G.
Hascall dated May 5, 1998.*
10.2 Executive Agreement between Primex Technologies, Inc. and Angelo A.
Catani dated May 5, 1998.*
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.3 Executive Agreement between Primex Technologies, Inc. and J. Douglas
DeMaire dated May 5, 1998.*
10.4 Executive Agreement between Primex Technologies, Inc. and Michael S.
Wilson dated May 5, 1998.*
10.5 Executive Agreement between Primex Technologies, Inc. and William W.
Smith dated May 5, 1998.*
10.6 Form of Executive Agreement for Company executives other than the
Named Executive Officers.
10.7 Primex Technologies, Inc. Stock Plan for Nonemployee Directors, as
amended (filed as Exhibit 4.7 hereto).
10.8 1996 Long Term Incentive Plan of Primex Technologies, Inc. as amended
(filed as Exhibit 4.5 hereto).*
10.9 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 Form 8-K/A filed January
24, 1997 (SEC File No. 0-28942).
10.10 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 Form 8-K/A
filed January 24, 1997 (SEC File No. 0-28942).
10.11 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 Form 8-K/A filed January
24, 1997 (SEC File No. 0-28942).
10.12 Primex Technologies, Inc. Incentive Compensation Plan, as amended.
10.13 Transition Bonus Program of Primex Technologies, Inc., as amended.
10.14 Building and Igloo Lease between U.S. Fish and Wildlife Service and
Primex Technologies, Inc. dated January 1, 1997. Incorporated by
reference to Exhibit 10.23 to the Company's 10-K filed March 19, 1998
(SEC File No. 0-28942).
10.15 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. Incorporated by reference to Exhibit 10.24 to
the Company's 10-K filed March 19, 1998 (SEC File No. 0-28942).
10.16 Lease Agreement between Zaser and Longston, Inc. and Rocket Research
Company (now Primex Aerospace Company) dated July 14, 1982.
Incorporated by reference to Exhibit 10.25 to the Company's 10-K filed
March 19, 1998 (SEC File No. 0-28942).
10.17 Lease Agreement between The Northwestern Mutual Life Insurance Company
and Rheem Manufacturing Company (now U.S. Ordnance Company) dated July
1, 1956. Incorporated by reference to Exhibit 10.26 to the Company's
10-K filed March 19, 1998 (SEC File No. 0-28942).
10.18 Facility Lease between The Connecticut National Bank, Merced
Associates and Physics International Company (now Primex Tactical
Systems, Inc.) dated December 29, 1986. Incorporated by reference to
Exhibit 10.27 to the Company's 10-K filed March 19, 1998 (SEC File No.
0-28942).
10.19 Lease Agreement between Heger Realty Corporation and Aerojet Ordnance
Company (now U.S. Ordnance Company) dated October 15, 1985.
Incorporated by reference to Exhibit 10.28 to the Company's 10-K filed
March 19, 1998 (SEC File No. 0-28942).
10.20 Lease Agreement between Hitech, Inc. (now Hitech Holdings, Inc.) and
IP Timberlands Operating Company, Ltd. dated May 26, 1995.
10.21 Lease Agreement between Hitech, Inc. (now Hitech Holdings, Inc.) and
IP Timberlands Operating Company, Ltd. dated May 20, 1985.
10.22 Lease Agreement between CMS Defense Systems, Inc. (now Hitech
Holdings, Inc.) and the Board of Education of the Stone County School
District dated September 1, 1998.
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.23 Lease Agreement between OTI International, Inc. (now Hitech Holdings,
Inc. d/b/a CMS Defense Systems) and Richard R. Bennett and Betty J.
Bennett dated February 27, 1994.
10.24 Stock Purchase Agreement by and between Primex Technologies, Inc. and
Daimler-Benz Finance Corporation, dated October 9, 1998. Incorporated
by reference to Exhibit 2.1 to the Company's Form 8-K/A filed November
23, 1998 (SEC File No. 0-28942). (Pursuant to Item 601(b)(2) of
Regulation S-K, the Company hereby agrees to furnish supplementally to
the Commission, upon request, a copy of any schedule or exhibit
omitted from such Stock Purchase Agreement as filed herewith.)
16 Letter of consent from KPMG LLP regarding change in certifying
accountant. Incorporated by reference to Exhibit 16 to the Company's
Form 8-K/A filed February 19, 1997 (SEC File No. 0-28942).
21 List of subsidiaries of Primex Technologies, Inc.
23.1 Consent of KPMG 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:
Form 8-K/A filed November 23, 1999.
The Company filed a Current Report on Form 8-K, during the fourth quarter of
1998, which report was dated November 6, 1998 and reported the acquisition of
CMS, Inc. and Defense Research Incorporated (the "CMS Group"). That Current
Report on form 8-K was subsequently amended to include the financial
statements of the CMS Group companies required to be filed in accordance with
Regulation S-X.
49
<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 2, 1999
/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 2, 1999
- ------------------------------------- Board and Chief
James G. Hascall Executive Officer
and Director
/s/ J. Douglas DeMaire President and March 2, 1999
- ------------------------------------- Director
J. Douglas DeMaire
/s/ John E. Fischer Vice President and March 2, 1999
- ------------------------------------- Chief Financial and
John E. Fischer Accounting Officer
/s/ Edwin M. Glasscock Director March 2, 1999
- -------------------------------------
Edwin M. Glasscock
/s/ David Lasky Director March 2, 1999
- -------------------------------------
David Lasky
/s/ Bob Martinez Director March 2, 1999
- -------------------------------------
Bob Martinez
/s/ William B. Mitchell Director March 2, 1999
- -------------------------------------
William B. Mitchell
/s/ Robert H. Rau Director March 2, 1999
- -------------------------------------
Robert H. Rau
/s/ Anthony W. Ruggiero Director March 2, 1999
- -------------------------------------
Anthony W. Ruggiero
/s/ Leon E. Salomon Director March 2, 1999
- -------------------------------------
Leon E. Salomon
50
<PAGE>
EXHIBIT 3.2
BY-LAWS
of
PRIMEX TECHNOLOGIES, INC.
as amended January 1, 1999
-----------------------------
ARTICLE I.
MEETINGS OF SHAREHOLDERS.
SECTION 1. Place of Meetings. All meetings of the shareholders of Primex
-----------------
Technologies, Inc. (hereinafter called the "Corporation") shall be held at such
place, either within or without the Commonwealth of Virginia, as may from time
to time be fixed by the Board of Directors of the Corporation (hereinafter
called the "Board").
SECTION 2. Annual Meetings. The annual meeting of the shareholders of the
---------------
Corporation for the election of directors and for the transaction of such other
business as may properly come before the meeting shall be held on the first
Tuesday in May in each year (or, if that day shall be a legal holiday, then on
the next succeeding business day), or on such other day and/or in such other
month as may be fixed by the Board, at such hour as may be specified in the
notice thereof.
SECTION 3. Annual Meeting Business. To be properly brought before an
-----------------------
annual meeting, business must be (i) specified in the notice of the meeting (or
any supplement thereto) given by or at the direction of the Board, (ii)
otherwise properly brought before the meeting by or at the direction of the
Board or (iii) otherwise properly brought before the meeting by a shareholder.
For business to be properly brought before an annual meeting by a shareholder,
the shareholder must have given written notice thereof, either by personal
delivery or by United States mail, postage prepaid, to the Secretary of the
Corporation, not later than 90 days in advance of such meeting (providing that
if the annual meeting of shareholders is held earlier than the first Tuesday in
May, such notice must be given within 10 days after the first public disclosure,
which may include any public filing with the Securities and Exchange Commission,
of the date of the annual meeting). Any such notice shall set forth as to each
matter the shareholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting and in the event that such
business includes a proposal to amend either the Articles of Incorporation as
from time to time amended ("Articles") then in effect or By-laws of the
Corporation, the language of the proposed amendment, (ii) the name and address
of the shareholder proposing such business, (iii) a representation that the
shareholder is a holder of record of stock of the corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
propose such business, (iv) any material interest of the shareholder in such
business and (v) a representation as to whether or not the shareholder will
solicit proxies in support of his proposal. No business shall be conducted at
an annual meeting of shareholders except in accordance with this paragraph and
the chairman of any annual meeting of shareholders may refuse to permit any
business to be brought before an annual meeting which fails to comply with the
foregoing procedures or, in the case of a shareholder proposal, if the
shareholder fails to comply with the representations set forth in the notice.
SECTION 4. Special Meetings. A special meeting of the shareholders for
----------------
any purpose or purposes, unless otherwise provided by law or in the Articles,
may be held at any time only upon the call of the Board or the Chairman of the
Board.
SECTION 5. Notice of Meetings. Except as otherwise provided by law or the
------------------
Articles, not less than ten nor more than sixty days' notice in writing of the
place, day, hour and purpose or purposes of each meeting of the shareholders,
whether annual or special, shall be given to each shareholder of record of the
Corporation entitled to vote at such meeting, either by the delivery thereof to
such
<PAGE>
shareholder personally or by the mailing thereof to such shareholder in a
postage prepaid envelope addressed to such shareholder at his address as it
appears on the stock transfer books of the Corporation. Notice of any meeting of
shareholders shall not be required to be given to any shareholder who shall
attend the meeting in person or by proxy, unless attendance is for the express
purpose of objecting to the transaction of any business because the meeting was
not lawfully called or convened, or who shall waive notice thereof in writing
signed by the shareholder before, at or after such meeting. Notice of any
adjourned meeting need not be given, except when expressly required by law.
SECTION 6. Quorum. Shares representing a majority of the votes entitled
------
to be cast on a matter by each voting group entitled to vote thereon,
represented in person or by proxy at any meeting of the shareholders, shall
constitute a quorum of that voting group for the transaction of business thereat
with respect to such matter, unless otherwise provided by law or the Articles.
In the absence of a quorum at any such meeting or any adjournment or
adjournments thereof, shares representing a majority of the votes cast on the
matter of adjournment, either in person or by proxy, may adjourn such meeting
from time to time until a quorum is obtained. At any such adjourned meeting at
which a quorum has been obtained, any business may be transacted which might
have been transacted at the meeting as originally called.
SECTION 7. Voting. Unless otherwise provided by law or the Articles, at
------
each meeting of the shareholders each shareholder entitled to vote at such
meeting shall be entitled to one vote for each share of stock standing in his
name on the books of the Corporation upon any date fixed as hereinafter
provided, and may vote either in person or by proxy in writing. Unless demanded
by a shareholder present in person or represented by proxy at any meeting of the
shareholders and entitled to vote thereon or so directed by the chairman of the
meeting, the vote on any matter need not be by ballot. On a vote by ballot,
each ballot shall be signed by the shareholder voting or his proxy, and it shall
show the number of shares voted.
SECTION 8. Judges. One or more judges or inspectors of election for any
------
meeting of shareholders may be appointed by the chairman of such meeting, for
the purpose of receiving and taking charge of proxies and ballots and deciding
all questions as to the qualification of voters, the validity of proxies and
ballots and the number of votes properly cast.
SECTION 9. Conduct of Meeting. The chairman of the meeting at each
------------------
meeting of shareholders shall have all the powers and authority vested in
presiding officers by law or practice, without restriction, as well as the
authority to conduct an orderly meeting and to impose reasonable limits on the
amount of time taken up in remarks by any one shareholder.
ARTICLE II.
BOARD OF DIRECTORS.
SECTION 1. Number, Classification, Term, Election. The property, business
--------------------------------------
and affairs of the Corporation shall be managed under the direction of the Board
as from time to time constituted. The Board shall consist of nine directors,
but the number of directors may be increased or decreased by amendment of this
Section 1 of Article II of these By-laws, provided that any increase or decrease
by more than thirty percent of the number of directors of all classes
immediately following the most recent election of directors by the shareholders
may only be effected by the shareholders. No director need be a shareholder.
The Board shall be divided into three classes, Class I, Class II and Class III,
as nearly equal in number as possible, with the members of each class to serve
for the respective terms of office provided in the Articles, and until their
respective successors shall have been duly elected or until death or resignation
or until removal in the manner hereinafter provided. In case the number of
directors shall be increased, the additional directors to fill the vacancies
caused by such increase shall be elected in accordance with the provisions of
Section 4 of Article V of these By-laws. Any increase or decrease in the number
of directors shall be so apportioned among the classes by the Board as to make
all classes as nearly equal in number as possible.
Subject to the rights of holders of any Preferred Stock outstanding,
nominations for the election of directors may be made by the Board or a
committee appointed by the Board or by any shareholder entitled to vote in the
election of directors generally. However, any shareholder entitled to vote in
the election of directors generally may nominate one or more persons for
election as directors at a meeting only if it is a meeting of shareholders for
the purposes of electing
<PAGE>
directors and written notice of such shareholder's intent to make such
nomination or nominations has been given, either by personal delivery or by
United States mail, postage prepaid, to the Secretary of the Corporation not
later than (i) with respect to an election to be held at an annual meeting of
shareholders, 90 days in advance of such meeting and (ii) with respect to an
election to be held at a special meeting of shareholders for the election of
directors, the close of business on the seventh day following the date on which
notice of such meeting is first given to shareholders. Each such notice shall
set forth: (a) the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated; (b) a representation
that the shareholder is a holder of record of shares of the Corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder; (d) a representation as to whether the shareholder intends to
solicit by proxy other shareholders in support of any nominee, (e) such other
information regarding each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission; and (f) the consent of each nominee
to serve as a director of the Corporation if so elected.
SECTION 2. Compensation. Each director, in consideration of his serving
------------
as such, shall be entitled to receive from the Corporation such amount per annum
or such fees for attendance at Board and Committee meetings, or both, in cash or
other property, including securities of the Corporation, as the Board shall from
time to time determine, together with reimbursements for the reasonable expenses
incurred by him in connection with the performance of his duties. Nothing
contained herein shall preclude any director from serving the Corporation, or
any subsidiary or affiliated corporation, in any other capacity and receiving
proper compensation therefor. If the Board adopts a resolution to that effect,
any director may elect to defer all or any part of the annual and other fees
hereinabove referred to for such period and on such terms and conditions as
shall be permitted by such resolution.
SECTION 3. Place of Meetings. The Board may hold its meetings at such
-----------------
place or places within or without the Commonwealth of Virginia as it may from
time to time by resolution determine or as shall be specified or fixed in the
respective notices or waivers of notice thereof.
SECTION 4. Organization Meeting. After each annual election of directors,
--------------------
as soon as conveniently may be, the newly constituted Board shall meet for the
purposes of organization. At such organization meeting, the newly constituted
Board shall elect officers of the Corporation and transact such other business
as shall come before the meeting. Notice of organization meetings of the Board
need not be given. Any organization meeting may be held at any other time or
place which shall be specified in a notice given as hereinafter provided for
special meetings of the Board, or in a waiver of notice thereof signed by all
the directors.
SECTION 5. Regular Meetings. Regular meetings of the Board may be held at
----------------
such time and place as may from time to time be specified in a resolution
adopted by the Board then in effect; and, unless otherwise required by such
resolution, or by law, notice of any such regular meeting need not be given.
SECTION 6. Special Meetings. Special meetings of the Board shall be held
----------------
whenever called by the Chairman of the Board or Chief Executive Officer, or by
the Secretary at the request of any three directors. Notice of a special meeting
shall be mailed to each director, addressed to him at his residence or usual
place of business, not later than the second day before the day on which such
meeting is to be held, or shall be sent addressed to him at such place by
facsimile transmission or e-mail, or be delivered personally or by telephone,
not later than the day before the day on which such meeting is to be held.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Board need be specified in the notice of such meeting,
unless required by the Articles.
SECTION 7. Quorum. At each meeting of the Board the presence of a
------
majority of the number of directors fixed by these By-laws shall be necessary to
constitute a quorum. The act of a majority of the directors present at a
meeting at which a quorum shall be present shall be the act of the Board, except
as may be otherwise provided by law or by these By-laws. Any meeting of the
Board may be adjourned by a majority vote of the directors present at such
meeting. Notice of any adjourned meeting need not be given.
SECTION 8. Waivers of Notice of Meetings. Anything in these By-laws or in
-----------------------------
any resolution adopted by the Board to the contrary notwithstanding, notice of
any meeting of the Board need not be given to any director if such notice shall
be waived in writing signed by such director before, at or after the meeting, or
if such director shall be
<PAGE>
present at the meeting. Any meeting of the Board shall be a legal meeting
without any notice having been given or regardless of the giving of any notice
or the adoption of any resolution in reference thereto, if every member of the
Board shall be present thereat. Except as otherwise provided by law or these By-
laws, waivers of notice of any meeting of the Board need not contain any
statement of the purpose of the meeting.
SECTION 9. Telephone Meetings. Members of the Board or any committee may
------------------
participate in a meeting of the Board or such committee by means of a conference
telephone or other means of communications whereby all directors participating
may simultaneously hear each other during the meeting, and participation by such
means shall constitute presence in person at such meeting.
SECTION 10. Actions Without Meetings. Any action that may be taken at a
------------------------
meeting of the Board or of a committee may be taken without a meeting if a
consent in writing, setting forth the action, shall be signed, either before or
after such action, by all of the directors or all of the members of the
committee, as the case may be. Such consent shall have the same force and
effect as a unanimous vote.
ARTICLE III.
COMMITTEES.
SECTION 1. Executive and Finance Committee. The Board may, by resolution
-------------------------------
or resolutions adopted by a majority of the number of directors fixed by these
By-laws, appoint two or more directors to constitute an Executive and Finance
Committee, each member of which shall serve as such during the pleasure of the
Board, and may designate for such Committee a Chairman, who shall continue as
such during the pleasure of the Board.
All completed action by the Executive and Finance Committee shall be
reported to the Board at its meeting next succeeding such action or at its
meeting held in the month following the taking of such action, and shall be
subject to revision or alteration by the Board; provided, that no acts or rights
of third parties shall be affected by any such revision or alteration.
The Executive and Finance Committee shall fix its own rules of procedure
and shall meet where and as provided by such rules or by resolution of the
Board. At all meetings of the Executive and Finance Committee, a majority of
the full number of members of such Committee shall constitute a quorum, and in
every case the affirmative vote of a majority of members present at any meeting
of the Executive and Finance Committee at which a quorum is present shall be
necessary for the adoption of any resolution.
During the intervals between the meetings of the Board, the Executive and
Finance Committee shall possess and may exercise all the power and authority of
the Board (including, without limitation, all the power and authority of the
Board in the management, control and direction of the financial affairs of the
Corporation) except with respect to those matters reserved to the Board by
Virginia law, in such manner as the Executive and Finance Committee shall deem
best for the interests of the Corporation, in all cases in which specific
directions shall not have been given by the Board.
SECTION 2. Other Committees. To the extent permitted by law, the Board
----------------
may from time to time by resolution adopted by a majority of the number of
directors fixed by these By-laws create such other committees of directors,
officers, employees or other persons designated by it as the Board shall deem
advisable and with such limited authority, functions and duties as the Board
shall by resolution prescribe. The Board shall have the power to change the
members of any such committee at any time, to fill vacancies, and to discharge
any such committee, either with or without cause, at any time.
<PAGE>
ARTICLE IV.
OFFICERS.
SECTION 1. Number, Term, Election. The officers of the Corporation shall
----------------------
be a Chief Executive Officer, a Chairman of the Board, a President, one or more
Vice Presidents, a Treasurer and a Secretary. The Board may appoint such other
officers and such assistant officers and agents with such powers and duties as
the Board may find necessary or convenient to carry on the business of the
Corporation. Such officers and assistant officers shall serve until their
successors shall be chosen, or as otherwise provided in these By-laws. Any two
or more offices may be held by the same person.
SECTION 2. Chief Executive Officer. The Chief Executive Officer shall,
-----------------------
subject to the control of the Board and the Executive and Finance Committee,
have full authority and responsibility for directing the conduct of the
business, affairs and operations of the Corporation. In addition to acting as
Chief Executive Officer of the Corporation, he shall perform such other duties
and exercise such other powers as may from time to time be prescribed by the
Board and shall see that all orders and resolutions of the Board and the
Executive and Finance Committee are carried into effect. In the event of the
inability of the Chief Executive Officer to act, the Board will designate an
officer of the Corporation to perform the duties of that office.
SECTION 3. Chairman of the Board. The Chairman of the Board shall preside
---------------------
at all meetings of the Board and of the shareholders and, in the absence of the
Chairman of the Executive and Finance Committee, at all meetings of the
Executive and Finance Committee. He shall perform such other duties and
exercise such other powers as may from time to time be prescribed by the Board
or, if he shall not be the Chief Executive Officer, by the Chief Executive
Officer.
SECTION 4. President. The President shall have such powers and perform
----------
such duties as may from time to time be prescribed by the Board or, if he shall
not be the Chief Executive Officer, by the Chief Executive Officer.
SECTION 5. Vice Presidents. Each Vice President shall have such powers
---------------
and perform such duties as may from time to time be prescribed by the Board, the
Chief Executive Officer or any officer to whom the Chief Executive Officer may
have delegated such authority. One Vice President shall be the principal
accounting officer of the Corporation with responsibility for keeping full and
accurate accounts of all assets, liabilities, receipts and disbursements and
other transactions of the Corporation and shall cause regular audits of the
books and records of the Corporation to be made. To such extent as the Board
shall deem proper, the duties of any Vice President may be performed by one or
more assistants, to be appointed by the Board.
SECTION 6. Treasurer. The Treasurer shall have the general care and
---------
custody of the funds and securities of the Corporation. He shall perform such
other duties and exercise such other powers as may from time to time be
prescribed by the Board, the Chief Executive Officer or any officer to whom the
Chief Executive Officer may have delegated such authority. To such extent as
the Board shall deem proper, the duties of the Treasurer may be performed by one
or more assistants, to be appointed by the Board.
SECTION 7. Secretary. The Secretary shall keep the minutes of meetings of
---------
shareholders, of the Board, and, when requested, of Committees of the Board; and
he shall attend to the giving and serving of notices of all meetings thereof.
He shall keep or cause to be kept such stock and other books, showing the names
of the shareholders of the Corporation, and all other particulars regarding
them, as may be required by law. He shall also perform such other duties and
exercise such other powers as may from time to time be prescribed by the Board,
the Chief Executive Officer or any officer to whom the Chief Executive Officer
may have delegated such authority. To such extent as the Board shall deem
proper, the duties of the Secretary may be performed by one or more assistants,
to be appointed by the Board.
<PAGE>
ARTICLE V.
REMOVALS, RESIGNATIONS AND VACANCIES.
SECTION 1. Removal of Directors. Any director may be removed at any time
--------------------
but only with cause, by the affirmative vote of the holders of record of a
majority of the shares of the Corporation entitled to vote on the election of
directors, given at a special meeting of the shareholders called expressly for
the purpose.
SECTION 2. Removal of Officers. Any officer, assistant officer or agent
-------------------
of the Corporation may be removed at any time, either with or without cause, by
the Board in its absolute discretion. Any such removal shall be without
prejudice to the recovery of damages for breach of the contract rights, if any,
of the officer, assistant officer or agent removed. Election or appointment of
an officer, assistant officer or agent shall not of itself create contract
rights.
SECTION 3. Resignation. Any director, officer or assistant officer of the
-----------
Corporation may resign as such at any time by giving written notice of his
resignation to the Board, the Chief Executive Officer or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein
or, if no time is specified therein, at the time of delivery thereof, and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 4. Vacancies. Any vacancy in the Board caused by death,
---------
resignation, disqualification, removal, an increase in the number of directors,
or any other cause, may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the Board at any regular or
special meeting thereof. Each director so elected by the Board shall hold
office until the next annual election of directors and until his successor shall
be elected, or until his death, or until he shall resign, or until he shall have
been removed in the manner hereinabove provided. Any vacancy in the office of
any officer or assistant officer caused by death, resignation, removal or any
other cause, may be filled by the Board for the unexpired portion of the term.
ARTICLE VI.
CONTRACTS, LOANS, CHECKS, DRAFTS, DEPOSITS, ETC.
SECTION 1. Execution of Contracts. Except as otherwise provided by law or
----------------------
by these By-laws, the Board (i) may authorize any officer, employee or agent of
the Corporation to execute and deliver any contract, agreement or other
instrument in writing in the name and on behalf of the Corporation, and (ii) may
authorize any officer, employee or agent of the Corporation so authorized by the
Board to delegate such authority by written instrument to other officers,
employees or agents of the Corporation. Any such authorization by the Board may
be general or specific and shall be subject to such limitations and restrictions
as may be imposed by the Board. Any such delegation of authority by an officer,
employee or agent may be general or specific, may authorize re-delegation, and
shall be subject to such limitations and restrictions as may be imposed in the
written instrument of delegation by the person making such delegation.
SECTION 2. Loans. No loans shall be contracted on behalf of the
-----
Corporation and no negotiable paper shall be issued in its name unless
authorized by the Board. When authorized by the Board, any officer, employee or
agent of the Corporation may effect loans and advances at any time for the
Corporation from any bank, trust company or other institution, or from any firm,
corporation or individual, and for such loans and advances may make, execute and
deliver promissory notes, bonds or other certificates or evidences of
indebtedness of the Corporation and when so authorized may pledge, hypothecate
or transfer any securities or other property of the Corporation as security for
any such loans or advances. Such authority may be general or confined to
specific instances.
SECTION 3. Checks, Drafts, etc. All checks, drafts and other orders for
-------------------
the payment of money out of the funds of the Corporation and all notes or other
evidences of indebtedness of the Corporation shall be signed on behalf of the
Corporation in such manner as shall from time to time be determined by the
Board.
SECTION 4. Deposits. All funds of the Corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select or as
<PAGE>
may be selected by the Treasurer or any other officer, employee or agent of the
Corporation to whom such power may from time to time be delegated by the Board.
SECTION 5. Voting of Securities. Unless otherwise provided by the Board,
--------------------
the Chief Executive Officer may from time to time appoint an attorney or
attorneys, or agent or agents of the Corporation, in the name and on behalf of
the Corporation, to cast the votes which the Corporation may be entitled to cast
as the holder of stock or other securities in any other corporation, any of
whose stock or other securities may be held by the Corporation, at meetings of
the holders of the stock or other securities of such other corporation, or to
consent in writing, in the name of the Corporation as such holder, to any action
by such other corporation, and may instruct the person or persons so appointed
as to the manner of casting such votes or giving such consent, or the Chief
Executive Officer may directly cast such votes or execute such consents, and may
execute or cause to be executed in the name and on behalf of the Corporation and
under its corporate seal, or otherwise, all such written proxies or other
instruments as such officer may deem necessary or proper in the premises.
ARTICLE VII.
CAPITAL STOCK.
SECTION 1. Certificates. Every shareholder shall be entitled to a
------------
certificate, or certificates, in such form as shall be approved by the Board,
signed by the Chairman of the Board, the Vice Chairman, the Chief Executive
Officer or a Vice President and the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer or any other officer authorized by these By-
laws or a resolution of the Board, certifying the number of shares owned by him
in the Corporation. Any such certificate may, but need not, bear the seal of
the Corporation or a facsimile thereof. If any such certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation or an employee of the Corporation, the signatures of any of the
officers above specified upon such certificate may be facsimiles. In case any
such officer who shall have signed or whose facsimile signature shall have been
placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such officer had not ceased to be such at the date of its issue.
SECTION 2. Transfers. Shares of stock of the Corporation shall be
---------
transferable on the stock books of the Corporation by the holder in person or by
his attorney thereunto authorized by power of attorney duly executed and filed
with the Secretary or the transfer agent, but, except as hereinafter provided in
the case of loss, destruction or mutilation of certificates, no transfer of
stock shall be entered until the previous certificate, if any, given for the
same shall have been surrendered and canceled. Except as otherwise provided by
law, no transfer of shares shall be valid as against the Corporation, its
shareholders or creditors, for any purpose, until it shall have been entered in
the stock records of the Corporation by an entry showing from and to whom
transferred. The Board may also make such additional rules and regulations as
it may deem expedient concerning the issue and transfer of certificates
representing shares of the capital stock of the Corporation.
SECTION 3. Record Date. For the purpose of determining shareholders
-----------
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the Board
may fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy days prior to
the date on which the particular action, requiring such determination of
shareholders, is to be taken. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof unless the Board fixes
a new record date, which it shall do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
SECTION 4. Lost, Destroyed or Mutilated Certificates. In case of loss,
-----------------------------------------
destruction or mutilation of any certificate of stock, another may be issued in
its place upon proof of such loss, destruction or mutilation and upon the giving
of a bond of indemnity to the Corporation in such form and in such sum as the
Board may direct; provided that a new certificate may be issued without
requiring any bond when, in the judgment of the Board, it is proper so to do.
SECTION 5. Control Share Acquisitions. Article 14.1 of Chapter 9 of Title
--------------------------
13.1 of the Code of Virginia shall not apply to acquisitions of shares of the
Corporation.
<PAGE>
ARTICLE VIII.
INSPECTION OF RECORDS.
The Board from time to time shall determine whether, to what extent, at
what times and places, and under what conditions and regulations the accounts
and books and papers of the Corporation, or any of them, shall be open for the
inspection of the shareholders, and no shareholder shall have any right to
inspect any account or book or paper of the Corporation except as expressly
conferred by statute or by these By-laws or authorized by the Board.
ARTICLE IX.
AUDITOR.
The Board shall annually appoint an independent accountant who shall
carefully examine the books of the Corporation. One such examination shall be
made immediately after the close of the fiscal year and be ready for
presentation at the annual meeting of shareholders of the Corporation, and such
other examinations shall be made as the Board may direct.
ARTICLE X.
SEAL.
The seal of the Corporation shall be circular in form and shall bear the
name of the Corporation and the year "1996."
ARTICLE XI.
FISCAL YEAR.
The fiscal year of the Corporation shall end on the 31st day of December in
each year.
ARTICLE XII.
AMENDMENTS.
The By-laws of the Corporation may be altered, amended or repealed and new
By-laws may be adopted by the Board (except as Section 1 of Article II may
otherwise require), or by the holders of the outstanding shares of the
Corporation entitled to vote generally at any annual or special meeting of the
shareholders when notice thereof shall have been given in the notice of the
meeting of shareholders; provided however, that, notwithstanding any other
provisions of these By-laws, the Articles, or applicable law, the affirmative
vote of at least 80 percent of the outstanding shares of the Corporation
entitled to vote generally at any annual or special meeting of the shareholders
shall be required for the holders of such outstanding shares to alter, amend or
repeal Article I Section 4 or Article II Section 1 of these By-laws or this
proviso to this Article XII of these By-laws.
<PAGE>
EMERGENCY BY-LAWS.
SECTION 1. Definitions. As used in these Emergency By-laws,
-----------
(a) the term "period of emergency" shall mean any period during which a
quorum of the Board cannot readily be assembled because of some catastrophic
event.
(b) the term "incapacitated" shall mean that the individual to whom such
term is applied shall not have been determined to be dead but shall be missing
or unable to discharge the responsibilities of his office; and
(c) the term "senior officer" shall mean the Chairman of the Board, the
President, the Chief Executive Officer, any Vice President, the Treasurer and
the Secretary, and any other person who may have been so designated by the Board
before the beginning of the period of emergency.
SECTION 2. Applicability. These Emergency By-laws, as from time to time
-------------
amended, shall be operative only during any period of emergency. To the extent
not inconsistent with these Emergency By-laws, all provisions of the regular By-
laws of the Corporation shall remain in effect during any period of emergency.
No officer, director or employee shall be liable for actions taken in good
faith in accordance with these Emergency By-laws.
SECTION 3. Board of Directors. (a) A meeting of the Board may be called
------------------
by any director or senior officer of the Corporation. Notice of any meeting of
the Board need be given only to such of the directors as it may be feasible to
reach at the time and by such means as may be feasible at the time, including
publication or radio, and at a time less than twenty-four hours before the
meeting if deemed necessary by the person giving notice.
(b) At any meeting of the Board, three directors in attendance shall
constitute a quorum. Any act of a majority of the directors present at a
meeting at which a quorum shall be present shall be the act of the Board. If
fewer than three directors shall be present at a meeting of the Board, any
senior officer of the Corporation in attendance at such meeting shall serve as a
director for such meeting, selected in order of rank and within the same rank in
order of seniority.
(c) In addition to the Board's powers under the regular By-laws of the
Corporation to fill vacancies on the Board, the Board may elect any individual
as a director to replace any director who may be incapacitated and to serve
until the latter ceases to be incapacitated or until the termination of the
period of emergency, whichever first occurs. In considering officers of the
Corporation for election to the Board, the rank and seniority of individual
officers shall not be pertinent.
(d) The Board, during as well as before any such period of emergency, may
change the principal office or designate several alternative offices or
authorize the officers to do so.
SECTION 4. Appointment of Officers. In addition to the Board's powers
-----------------------
under the regular By-laws of the Corporation with respect to the election of
officers, the Board may elect any individual as an officer to replace any
officer who may be incapacitated and to serve until the latter ceases to be
incapacitated.
SECTION 5. Amendments. These Emergency By-laws shall be subject to repeal
----------
or change by further action of the Board of Directors or by action of the
shareholders, except that no such repeal or change shall modify the provisions
of the second paragraph of Section 2 with regard to action or inaction prior to
the time of such repeal or change. Any such amendment of these Emergency By-
laws may make any further or different provision that may be practical and
necessary for the circumstances of the emergency.
<PAGE>
EXHIBIT 4.5
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.
(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.
<PAGE>
(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.
(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 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
<PAGE>
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, (i) Stock Appreciation Rights payable
solely in cash shall not be deemed to be an Award denominated in
shares and (ii) 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 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:
<PAGE>
(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 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.
(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.
<PAGE>
(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 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 the same time as or at a different time from the grant of
such other Awards or awards or benefits.
<PAGE>
(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 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
<PAGE>
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.
(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.
(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
<PAGE>
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 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 organization or business, the extent of past,
current and potential competition or conflict
<PAGE>
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.
(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
<PAGE>
(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) The term "Change in Control" shall mean the occurrence of any one of the
following events:
(i) the Corporation ceases to be owned by at least 300 shareholders of
record after December 31, 1996, or ceases, by action of the
Corporation's Board of Directors, to be either listed on a national
securities exchange or authorized for quotation on The Nasdaq Stock
Market;
(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 Corporation, a majority-owned
subsidiary of the Corporation, or an employee benefit plan (or related
trust) of the Corporation, or such subsidiary, become(s) the
"beneficial owner" (as defined in Rule 13(d)(3) under the Act) of 15%
or more of the then outstanding voting stock of the Corporation;
(iii) during any period of two consecutive years after 1996,
individuals who at the beginning of such period constitute the
Corporation's Board of Directors (together with any new Director whose
election by the Corporation's Board of Directors or whose nomination
for election by the Corporation'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.
(iv) all or substantially all of the business or assets of the
Corporation is disposed of pursuant to a merger, consolidation or
other transaction in which the Corporation is not the surviving
corporation or the Corporation combines with another company and is
the surviving corporation (unless the shareholders of the Corporation
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 the
Corporation or (y) the combined company; or
(v) the Corporation's Board of Directors determines that a tender offer
for the Corporation's shares indicates a serious intention by the
offeror to acquire control of the Corporation.
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 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.
<PAGE>
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.
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
<PAGE>
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.
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 4.6
PRIMEX TECHNOLOGIES, INC.
RESTORATION BONUS PLAN
Article I. Plan Establishment.
-------------------------------
1.1 Establishment of Plan. Primex Technologies, Inc. (the "Company" or
---------------------
"Primex") hereby establishes a bonus program known as the Primex Technologies,
Inc. Restoration Bonus Plan (the "Plan"), effective as of January 1, 1997.
1.2 Purpose of Plan. The purpose of the Plan is to provide all employees
---------------
the opportunity for bonus payments intended to approximate and restore the value
of Company funded benefits that cannot be provided under the Primex
Technologies, Inc. Retirement Investment Management Experience Plan (the "Prime
Plan") due to the limit on compensation that can be taken into account under
that plan imposed by Section 401(a)(17) of the Internal Revenue Code (the
"401(a)(17) limit").
Article II. Eligibility.
-----------------------
2.1 Participation in Plan. Any employee of Primex Technologies, Inc.
---------------------
who is a participant in the Prime Plan is eligible for participation in the
Restoration Bonus Plan.
Article III. Amount and Payment of Benefits.
-------------------------------------------
3.1 Matching Contribution. With respect to each Plan Year, the Company
---------------------
shall contribute to the Plan, on behalf of each Participant, the same percentage
of such Participant's Compensation in excess of the 401(a)(17) limit as was
being matched under the Prime Plan on the Participant's compensation below the
401(a)(17) limit. By way of example, if the Participant received a Company
matching contribution under the Prime Plan equal to 3% of his Compensation up to
the 401(a)(17) limit under the Prime Plan, the Company shall make a contribution
under this Plan equal to 3% of such Employee's Compensation in excess of the
applicable 401(a)(17) limit. The Participant shall not be required or permitted
to make salary reduction deferrals under this Plan.
3.2 Retirement Contribution. In addition to the contribution provided for
-----------------------
in Section 3.1, the Company shall, with respect to each Participant who
participates in the Prime Retirement account portion of the Prime Plan, make the
following contributions to the Plan on the Compensation of each Participant in
excess of the 401(a)(17) limit, based upon the Participant's attained age as of
the first day of the Plan Year:
Participant's Company Retirement
Age as of Contribution As A
January 1 of Percentage of Participant's
Each Year Compensation over 401(a)(17)
-------------- ----------------------------
Younger than 30 2.0%
30-34 2.8%
35-39 3.6%
40-44 4.8%
45-49 6.9%
50-54 9.3%
55-59 10.8%
60 and over 12.3%
<PAGE>
3.3 Crediting of Contribution to Memorandum Account. The Company shall
-----------------------------------------------
credit the contributions provided for in Sections 3.1 and 3.2 of this Plan to an
unfunded memorandum account on the books of the Company. No interest shall be
credited on such account balances. The Company shall provide each Participant
with a statement at least annually showing the amount credited to the memorandum
account on behalf of each Participant.
3.4 Payment of Account Balances. The Account Balance of each Participant
---------------------------
shall be paid to such Participant on an annual basis in the form of a cash bonus
by December 31 of each year, or as soon thereafter as administratively feasible
but in no event later than January 31 of the following year. In the event that
a Participant terminates service for any reason prior to the last day of the
Plan Year, the amount of his bonus for his final year of employment shall be
determined based upon his actual Compensation received from the Company during
the Plan Year, and shall be paid to him (or in the case of his death, to his
surviving Spouse, if any, otherwise to his estate) within thirty (30) days of
his termination of service from the Company (and all affiliated employers). In
the event that a Participant is absent from active service for a period of at
least six consecutive months due to a disability, his account balance under this
Plan shall be distributed to him in full. The amount of any bonus distribution
shall be net of all applicable withholding taxes.
Notwithstanding the foregoing, if the Plan Administrator determines that
the payment of any portion or all of the Account Balance would result in the
Company not being able to take a tax deduction under Section 162(m) of the Code,
the Plan Administrator may elect, in its sole discretion, instead to defer
payment of any portion or all of such Account Balance until the next succeeding
year (or years) in which the Participant's remuneration does not exceed the
limit set forth in Code Section 162(m) or is not subject to Code Section 162(m).
3.5 Benefit Upon a Change of Control.
---------------------------------
(a) Lump Sum Distribution Upon a Change of Control. Notwithstanding
----------------------------------------------
any other provision of the Plan, upon a Change in control, each Participant
covered by the Plan shall automatically be paid a lump sum amount in cash
equal to his Account Balance under the Plan, including contributions with
respect to the year in which the Change of Control occurs calculated
assuming Participants were entitled to a full year's contribution for such
year. Payment under this Section shall not in and of itself terminate the
Plan, but such payment shall be taken into account in calculating benefits
under the Plan which may otherwise become due the Participant thereafter so
that no duplication of benefit occurs.
(b) Divestment of Account Balance. If a Participant is removed from
-----------------------------
participation in the Plan after a Change of Control has occurred, in no
event shall his Account Balance accrued prior thereto be adversely
affected.
(c) Change of Control Defined. For purposes of the Plan, a "Change in
-------------------------
Control" shall be deemed to have occurred if
(i) The Corporation ceases to be owned by at least 300 shareholders
of record after December 31, 1996, or ceases, by action of the
Corporation's Board of Directors, to be either listed on a national
securities exchange or authorized for quotation on The Nasdaq Stock
Market;
(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 Corporation, a
majority-owned subsidiary of the Corporation, or an employee benefit
plan (or related trust) of the Corporation, or such subsidiary,
become(s) the "beneficial owner" (as defined in Rule 13(d)(3) under
the Act) of 15% or more of the then outstanding voting stock of the
Corporation;
(iii) during any period of two consecutive years after 1996,
individuals who at the beginning of such period constitute the
Corporation's Board of Directors (together with any new Director
whose election by the Corporation's Board of Directors or whose
nomination for election by the Corporation'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
<PAGE>
nomination for election was previously so approved) cease for any
reason to constitute a majority of the Directors then in office;
(iv) all or substantially all of the business or assets of the
Corporation is disposed of pursuant to a merger, consolidation or
other transaction in which the Corporation is not the surviving
corporation or the Corporation combines with another company and is
the surviving corporation (unless the shareholders of the Corporation
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 the
Corporation or (y) the combined company; or
(v) the Corporation's Board of Directors determines that a tender
offer for the Corporation's shares indicates a serious intention by
the offeror to acquire control of the Corporation.
Article IV. Funding
-------------------
4.1 Unfunded Plan. This Plan shall be unfunded. All payments under this
-------------
Plan shall be made from the general assets of the Company. No provision shall
at any time be made with respect to segregating any assets of the Company. No
Participant, surviving Spouse or other individual or entity shall have any
interest in any particular assets of the company by reason of the right to
receive a benefit under this Plan and shall have the rights only of a general
unsecured creditor of the Company with respect to any rights under the plan.
4.2 Anti-Alienation. No Participant or beneficiary shall have the right to
---------------
assign, transfer, encumber or otherwise subject to any lien, any payment or any
other interest under this Plan, nor shall such payment or interest be subject to
attachment, execution or levy of any kind.
Article V. Plan Administration
------------------------------
5.1 Appointment of Plan Administrator. The Company hereby appoints the
---------------------------------
Corporate Vice President of Human Resources and Administration as the Plan
Administrator (the "Plan Administrator").
5.2 Delegation of Duties. The Corporate Vice President of Human Resources
--------------------
and Administration may delegate one or more of his duties to such other
individual(s) as he deems appropriate.
5.3 Powers, Duties and Responsibilities. Except for those powers expressly
-----------------------------------
reserved to the Chief Executive Officer or delegated by the Plan Administrator
to designees, the Plan Administrator shall have all power to administer the Plan
for the exclusive benefit of the Participants and their Beneficiaries, in
accordance with the terms of the Plan. The Plan Administrator shall have the
absolute discretion and power to determine all questions arising in connection
with the administration, interpretation and application of the Plan, except for
questions related to the Plan Administrator individually or to a small group of
which the Plan Administrator is a part. Any such determination by the Plan
Administrator shall be conclusive and binding upon all persons. The Plan
Administrator may correct any defect or reconcile any inconsistency in such
manner and to such extent as shall be deemed necessary or advisable to carry out
the purposes of the Plan; provided, however, that such interpretation or
construction shall be done in a non-discriminatory manner and shall be
consistent with the intent of the Plan.
Questions related to the Plan Administrator individually or to a small group of
employees of which the Plan Administrator is a part shall be referred to the
Primex Vice President, General Counsel and Secretary for resolution; and, in
such case, the Primex Vice President, General Counsel and Secretary shall have
the absolute discretion and power to determine all questions arising in
connection with the administration, interpretation and application of the Plan.
The Plan Administrator shall:
(a) compute the amount and kind of benefits to which any Participant
shall be entitled hereunder;
(b) maintain all necessary records for the administration of the Plan;
<PAGE>
(c) interpret the provisions of the Plan and make and publish such
rules for regulation of the Plan as are consistent with terms hereof;
(d) assist any Participant regarding his rights, benefits or elections
available under the Plan; and
(e) communicate to Participants and their Beneficiaries concerning the
provisions of the Plan.
5.4 Records and Reports. The Plan Administrator shall keep a record of all
-------------------
actions taken and shall keep such other books of account, records and other
information that may be necessary for proper administration of the Plan.
5.5 Appointment of Advisors. The Plan Administrator may appoint
-----------------------
accountants, counsel, advisors and other persons that he deems necessary or
desirable in connection with the administration of the Plan.
5.6 Indemnification of Members. The Company shall indemnify and hold
--------------------------
harmless the Plan Administrator from any liability incurred in his capacity as
such for acts which he undertakes in good faith.
Article VI. Termination and Amendment
-------------------------------------
6.1 Amendment or Termination. The Company may amend or terminate the Plan
------------------------
at any time, in whole or in part, by action of its Board of Directors or any
duly authorized committee or officer. No amendment or termination of the Plan
or withdrawal therefrom by the company shall adversely affect the vested
benefits payable hereunder to any Participant for service rendered prior to the
effective date of such amendment, termination or withdrawal.
Article VII. Miscellaneous
--------------------------
7.1 Gender and Number. Whenever any words are used herein in the masculine
-----------------
feminine or neuter gender, they shall be construed as though they were also used
in another gender in all cases where such would apply, and whenever any words
are used herein in the singular or plural form, they shall be construed as
though they were also used in another form in all cases where they would so
apply.
7.2 Action by the Company. Whenever the Company under the terms of this
---------------------
Plan is permitted or required to do or perform any act or thing, it shall be
done and performed by an officer or committee duly authorized by the Board of
Directors of the Company.
7.3 Headings. The headings and subheadings of this Plan have been inserted
--------
for convenience of reference only and shall not be used in the construction of
any of the provisions hereof.
7.4 Uniformity and Non Discrimination. All provisions of this Plan shall
---------------------------------
be interpreted and applied in a uniform nondiscriminatory manner.
7.5 Governing Law. To the extent that state law has not been preempted by
-------------
the provisions of ERISA or any other laws of the United States heretofore or
hereafter enacted, this Plan shall be construed under the laws of the State of
Florida.
7.6 Employment Rights. Nothing in this Plan shall confer any right upon
-----------------
any Employee to be retained in the service of the Company or any of its
affiliates.
7.7 Incompetency. In the event that the Plan Administrator determines that
------------
a Participant is unable to care for his affairs because of illness or accident
or any other reason, any amounts payable under this Plan may, unless claim shall
have been made therefor by a duly appointed guardian, conservator, committee or
other legal representative, be paid by the Plan Administrator to the spouse,
child, parent or other blood relative or to any other person deemed by the Plan
Administrator to have incurred expenses for such Participant, and such payment
so made shall be complete discharge of the liabilities of the Plan therefor.
<PAGE>
Article VIII. Definitions.
--------------------------
As used in the Plan, the following words shall have the following meaning:
(a) "Board" or "Board of Directors" means the Board of Directors of
Primex Technologies, Inc.
(b) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(c) "Compensation" shall have the same meaning as in the "Prime Plan,"
except that in determining contribution under Article III hereof,
"Compensation" shall not be limited by the 401(a)(17) limit.
(d) "Company" or "Primex" means Primex Technologies, Inc., and its
successors and assigns.
(e) "Employee" means any employee of the Company who is an "Eligible
Employee" as defined in the Prime Plan.
(f) "Olin" means Olin Corporation.
(g) "Participant" means an Employee who has been designated as a
Participant in this Plan in accordance with Section 2.1 of the Plan.
(h) "Plan" means the Primex Technologies, Inc. Restoration Bonus
Plan.
(i) "Plan Year" means the calendar year.
(j) "Prime Plan" means the Primex Technologies, Inc. Retirement
Investment Management Experience Plan.
Dated as of May 5, 1998
PRIMEX TECHNOLOGIES, INC.
By /s/ George H. Pain
-----------------
Its Vice President, General Counsel &
Secretary
<PAGE>
EXHIBIT 4.7
PRIMEX TECHNOLOGIES, INC.
STOCK PLAN FOR NONEMPLOYEE DIRECTORS
(AMENDED AND RESTATED)
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 the occurrence of any one of the following
events:
(i) the Corporation ceases to be owned by at least 300 shareholders
after December 31, 1996, or ceases, by action of the Corporation's Board of
Directors, to be either listed on a national securities exchange or
authorized for quotation on The Nasdaq Stock Market;
(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 Corporation, a majority-owned
subsidiary of the Corporation, or an employee benefit plan (or related
trust) of the Corporation, or such subsidiary, become(s) the "beneficial
owner" (as defined in Rule 13(d)(3) under the Act) of 15% or more of the
then outstanding voting stock of the Corporation;
(iii) during any period of two consecutive years after 1996,
individuals who at the beginning of such period constitute the
Corporation's Board of Directors (together with any new Director whose
election by the Corporation's Board of Directors or whose nomination for
election by the Corporation'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.
(iv) all or substantially all of the business or assets of the
Corporation is disposed of pursuant to a merger, consolidation or other
transaction in which the Corporation is not the surviving corporation or
the Corporation combines with another company and is the surviving
corporation (unless the shareholders of the Corporation 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 the Corporation or (y) the combined
company; or
(v) the Corporation's Board of Directors determines that a tender
offer for the Corporation's shares indicates a serious intention by the
offeror to acquire control of the Corporation.
"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.
<PAGE>
"Company" or "Corporation" 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 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 became effective January 1, 1997. The Plan was amended
by action of the Board on November 5,1997 and May 5, 1998. 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.
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 1998, 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.
<PAGE>
(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 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) 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 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
<PAGE>
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.
(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.
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(g) 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 4.8
THE EMPLOYMENT TRANSITION BENEFIT PLAN
OF
PRIMEX TECHNOLOGIES, INC.
ARTICLE I - ESTABLISHMENT OF PLAN
---------------------------------
1.01 Establishment of Plan and Trust. Primex Technologies, Inc. (the
--------------------------------
"Company") hereby establishes a supplemental unemployment benefit plan (the
"Plan") for the benefit of employees who may, from time to time, be eligible to
benefit hereunder. The Plan shall be known as the "Employment Transition
Benefit Plan of Primex Technologies, Inc." The Company has established a trust
(the "Trust") for the purposes of funding the Plan, the terms of which are
incorporated herein by reference. All contributions made to the Trust by the
Company and other Participating Employers shall be held for the benefit of Plan
Participants in accordance with the terms of the Plan.
1.02 Purpose. The purpose of this Plan is to supplement unemployment
--------
compensation benefits for employees who may become eligible to receive the
benefits of this Plan. This Plan is intended to comply with the requirements of
Section 501(c)(17) and Section 505(b) of the Internal Revenue Code of 1986 (the
"Code").
1.03 Exclusive Benefit. It shall be impossible, prior to the satisfaction of
------------------
all liabilities of the Plan, for any part of income or corpus of the Fund to be
used for, or diverted to, purposes other than providing benefits to Plan
Participants. The payment of necessary or reasonable expenses in connection
with the administration of the Plan shall be considered in furtherance of
providing Plan benefits and shall not adversely affect the tax-exempt status of
the Plan and Trust. Upon satisfaction of all liabilities of the Plan, any assets
remaining may be returned to the Company and other Participating Employers in
proportion to their respective contributions to the Fund.
1.04 Approval by Internal Revenue Service; Deductibility.
----------------------------------------------------
(a) Notwithstanding anything herein to the contrary, if the Internal Revenue
Service should determine that the Plan does not qualify as a tax-exempt
Plan and Trust under Section 501(c)(17) of the Code, and related
regulations, revenue rulings and IRS pronouncements, and such determination
is not contested, or if contested, is finally upheld, then the Plan shall
be void ab initio and all amounts contributed to the Plan, less expenses or
---------
benefits paid, shall be returned within one year to the Company and/or
Participating Employer which made the contribution. The Plan shall then
terminate, and the Trustee shall be discharged from all further
obligations.
(b) Contributions to the Trust Fund are conditioned upon their deductibility.
To the extent that such deduction is disallowed, the Company may request
return of such disallowed contribution within one year following a final
determination of disallowance by the Internal Revenue Service or court of
competent jurisdiction.
ARTICLE II - ELIGIBILITY; PARTICIPATION
2.01 Eligible and Ineligible Classes.
--------------------------------
(a) All Regular Full-time, non-bargaining Employees of the Company and any
other Participating Employer shall be eligible to participate in this Plan.
An "Employee" is any individual whose status would be that of an employee
of the Company (or any other Participating Employer) under common law rules
applicable in determining the employer-employee relationship. The term
"Employee" also includes any individual who qualifies as an employee under
the State or Federal unemployment compensation law covering his employment,
whether or not the individual qualifies as an employee under common law
rules.
<PAGE>
A "Regular, Full-time" Employee is any Employee of Primex Technologies,
Inc. who is regularly scheduled to work at least twenty (20) hours per
week.
(b) The following classes of Employees shall be ineligible to participate:
(i) part-time, seasonal and temporary employees;
(ii) hourly non-bargained employees of the Company located in St. Marks,
Florida and Red Lion, Pennsylvania;
(iii) employees included in a collective bargaining unit where benefits
were the subject of good faith bargaining and with respect to whom
an agreement has not been signed covering such employees under this
Plan; and
(iv) employees of certain divisions and business units of the Company
for whom the Plan has not been approved by the appropriate Division
President.
2.02 Participation. Each Regular Full-time Employee, who is not excluded
--------------
from participation in Section 2.01(b), shall automatically be entitled to
participate in this Plan and shall be referred to hereinafter as an "Eligible
Employee" or "Participant," provided, however, that no benefits shall be paid
hereunder unless the Participant is entitled to State unemployment compensation
benefits and unless the Participant's employment has been involuntarily
terminated as a result of:
(a) a reduction in force;
(b) a plant shutdown, or business closing;
(c) job elimination or restructuring; or
(d) other similar causes.
No benefits shall be payable hereunder to employees who are terminated for
disciplinary or performance reasons, or for any reason other than those
specified in Section 2.02(a)-(d). In addition, no benefits shall be payable
under this Plan if an Employee's employment with the Company or other
Participating Employer is involuntarily terminated as the result of a sale to
another company of a portion of the business or assets of his or her employer
and the Employee is offered employment by the purchaser.
2.03 Determination of Eligibility. The Plan Administrator shall determine
-----------------------------
the eligibility of each Employee for participation in the Plan based upon
information furnished by the Participating Employer. Such determination shall
be conclusive and binding upon all persons. If in any Plan Year any person who
should be included as a Participant in the Plan is erroneously omitted and
discovery of such omission is not made until after a contribution by the Company
for the year has been made, the Company shall make a subsequent contribution
with respect to the omitted Participant. If, in any Plan Year any person who
should not have been included as a Participant in the Plan is erroneously
included, and discovery of such incorrect inclusion is not made until after a
contribution for the Plan Year has been made, the Company shall not be entitled
to recover the contribution made with respect to the ineligible person. In such
event the amount contributed shall be used to provide Participants with the
benefits set forth in the Plan.
ARTICLE III - BENEFITS
----------------------
3.01 Qualifying for Benefits.
-----------------------
(a) In order to qualify for benefits under this Plan, an Eligible Employee who
has been involuntarily separated as provided above must apply for State
unemployment benefits when first eligible, and must comply with any rules
or regulations concerning the continuance of such unemployment compensation
benefits. Eligible Employees will be required (i) to advise the Company
periodically of their employment status and
<PAGE>
continued eligibility for State unemployment compensation benefits and (ii)
make good faith efforts to obtain employment. Failure to comply with the
requirements of this Plan, or any rules regarding the payment of State
unemployment compensation benefits, will result in the immediate cessation
of benefits hereunder.
(b) In order to qualify for supplemental unemployment benefits under this Plan,
an Eligible Employee must be eligible to receive State unemployment
compensation benefits. Notwithstanding the foregoing, supplemental
unemployment benefits may be paid under this Plan to an Eligible Employee
who
(i) has not yet completed a waiting period for State unemployment
compensation benefits;
(ii) has insufficient earnings or "quarters of earnings" to qualify for
State unemployment compensation benefits; or
(iii) has exhausted State unemployment compensation benefits.
3.02 Amount of Benefits. A Participant who has qualified for benefits in
-------------------
accordance with Section 3.01 of the Plan shall receive the following benefits,
subject to the limitations specified in Section 3.03:
(a) Basic Benefits. One Hundred Percent (100%) of Base Weekly Pay (as defined
---------------
in Section 3.02(d) below) for each year, or fraction thereof, of employment
with the Company, up to a maximum of thirty (30) weeks of pay, reduced by
one hundred percent (100%) of any State or Federal unemployment
compensation benefits payable to such Participant.
(b) Extended Benefits. If the Participant remains unemployed after exhausting
------------------
his Basic Benefits, Seventy Five Percent (75%) of Base Weekly Pay (as
defined in Section 3.02(d) below), multiplied by one and one-half (1 /2)
times each year, or fraction thereof, of employment with the Company, up to
a maximum of forty-five (45) weeks of pay, reduced by one hundred percent
(100%) of any State or Federal unemployment compensation benefits payable
to such Participant.
(c) Minimum Basic Benefit. A Participant who, as of the date of his termination
----------------------
of service, is credited with fewer than four (4) Years of Service with a
Participating Company shall receive the following Minimum Basic Benefit:
Years of Service Minimum Basic Benefit
---------------- ---------------------
2 or Fewer Years 2 Weeks of Basic Benefits
More than 2 but fewer than 4 Yrs. 4 weeks of Basic Benefits
(d) Base Weekly Pay Defined. Base weekly pay shall mean an Employee's then
------------------------
current basic compensation paid by the Company or other Participating
Employer for services rendered, excluding additional compensation such as
shift differentials, overtime, bonuses and other extraordinary items of
compensation. The Base Weekly Pay for an Employee whose regular salary is
stated in terms of months will be equal to the then currently monthly salary
divided by 4.33. The Base Weekly Pay for an hourly paid Employee will be
equal to the then current hourly rate of pay times the Employee's regularly
scheduled number of work hours for a week.
3.03 Loss of Entitlement to Benefits. In addition to the limitations set
--------------------------------
forth in Section 3.02, no benefits shall be payable under this Plan once
(a) a Participant no longer qualifies for State or Federal unemployment
compensation benefits, for reasons other than having exceeded the maximum
period of entitlement to unemployment compensation benefits;
(b) a Participant becomes re-employed;
(c) a Participant is employed by a division or business unit which is sold and
the Participant is offered employment with the successor company, whether
or not such offer is accepted; or
<PAGE>
(d) the Plan Administrator in its sole discretion determines that a
Participant is not engaged in a good faith effort to obtain other
employment.
ARTICLE IV - FORM OF BENEFIT PAYMENT
4.01 Form of Payment. Benefits will be paid in bi-weekly installments, or in
----------------
such other form (excluding lump sums) as may be determined by the Plan
Administrator in a uniform and nondiscriminatory manner.
ARTICLE V - CONTRIBUTIONS
5.01 Company Contributions. The Company shall pay to the Trustee from time
---------------------
to time such amounts in cash or property acceptable to the Trustee as the
Administrator and the Company shall determine to be necessary to provide the
benefits under the Plan as determined by the application of accepted actuarial
methods and assumptions on the basis of benefits provided under the Plan, the
number, length of service and compensation of Participants, all in accordance
with the provisions of Code Sections 419 and 419A. The Company shall be
authorized to retain actuaries to make such actuarial determinations from time
to time. In establishing the liabilities and contributions under the Plan, any
actuary retained by the Plan shall use such methods and assumptions as will
reasonably reflect the cost of benefits. The amounts, so contributed, shall be
held in trust by the Trustee for the exclusive benefit of Plan Participants.
The Trustee shall at all times be independent of the Company or any
Participating Employer.
5.02 Participant Contributions. No Participant contributions are permitted
-------------------------
or required to be made to this Plan for the purposes of providing supplemental
unemployment benefits hereunder.
5.03 Actuarial Methods. The Plan assets are to be valued on the basis of any
-----------------
reasonable method of valuation that takes into account fair market value
pursuant to the regulations prescribed by the Secretary of the Treasury.
ARTICLE VI - VALUATION
6.01 Valuation of the Trust Fund. The Administrator shall direct the Trustee
---------------------------
to determine the net worth of the assets comprising the Trust Fund as of each
December 31 (the "Valuation Date") and at such other date or dates deemed
necessary by the Administrator. In determining such net worth, the Trustee
shall value the assets comprising the Trust Fund at their fair market value as
of the Valuation Date prior to taking into consideration any contribution for
that Plan year and shall deduct all expenses for which the Trustee has not yet
obtained reimbursement from the Company or the Trust Fund.
6.02 Method of Valuation. In determining the fair market value of securities
-------------------
held in the Trust Fund which are listed on a registered stock exchange, the
Administrator shall direct the Trustee to value the same at the prices they were
last traded on such exchange preceding the close of business on the valuation
date. If such securities were not traded on the valuation date or if the
exchange in which they are traded was not open for business on the valuation
date, then the securities shall be valued at the prices at which they were last
traded prior to the valuation date. Any unlisted security held in the Trust
Fund shall be valued at its bid price next preceding the close of business on
the valuation date, which bid price shall be obtained from a registered broker
or an investment banker. In determining the fair market value of assets other
than securities for which trading or bid prices can be obtained, the Trustee may
employ one or more appraisers for that purpose and rely on the values
established by such appraiser or appraisers.
ARTICLE VII - ADMINISTRATION
7.01 Powers and Duties of the Company.
--------------------------------
(a) The Company, acting through its Board of Directors or duly authorized
Committee, shall be empowered to appoint and remove the Trustee from time
to time as it deems necessary for the proper
<PAGE>
administration of the Plan and to insure that the Plan is being operated
for the exclusive benefit of the Participants and their Beneficiaries in
accordance with the terms of this Plan, the Code and ERISA.
(b) The Company or Plan Administrator shall establish a "funding policy and
method" to determine the short term needs for liquidity and long term goals
of investment growth. Such needs and goals shall be communicated to the
Trustee, but such communication shall not constitute a directive to the
Trustee as to investment of the Trust funds. Such "funding policy and
method" shall be consistent with requirements of Title I of the Act.
(c) The Company or Plan Administrator may at its discretion appoint an
Investment Manager, to manage all or designated portion of the assets of
the Plan. In such event, the Trustee shall follow the directive of the
Investment Manager as to the investment of any assets of the Plan managed
by the Investment Manager.
(d) The Company or Plan Administrator shall periodically review the performance
of any fiduciary, Investment Manager or other person to whom duties have
been delegated or allocated by it under the provisions of this Plan or
pursuant to procedures established hereunder.
7.02 Assignment and Designation of Administrative Authority. The Company
------------------------------------------------------
hereby appoints the Employee Benefits and Investment Committee ("EBAIC") as the
Administrator of this Plan (the "Plan Administrator" or "Committee"). Any
person, including, but not limited to, the directors, shareholders, officers and
employees of the Company, shall be eligible to serve on the Committee. Any
person so appointed shall signify his acceptance by undertaking the duties
assigned. Any member of the Committee may resign by delivering written
resignation to the Company. The Company may also remove any member of the
Committee by delivery of a written notice of removal, which shall take effect
upon delivery or on a date specified. Upon resignation or removal of a
Committee member, the Company shall promptly designate in writing such other
person or persons as a successor.
7.03 Allocation and Delegation. The Committee members may allocate the
-------------------------
responsibilities among themselves, and shall notify the Company and the Trustee
in writing of such action and the responsibilities allocated to each member.
7.04 Powers, Duties and Responsibilities. The Plan Administrator shall
-----------------------------------
administer the Plan for the exclusive benefit of the Participants and their
Beneficiaries, in accordance with the terms of the Plan. The Plan Administrator
shall have the absolute discretion and power to determine all questions arising
in connection with the administration, interpretation and application of the
Plan. Any such determination by the Plan Administrator shall be conclusive and
binding upon all persons. The Plan Administrator may correct any defect or
reconcile any inconsistency in such manner and to such extent as shall be deemed
necessary or advisable to carry out the purposes of the Plan; provided, however,
that such interpretation or construction shall be done in a non-discriminatory
manner and shall be consistent with the intent of the Plan as well as consistent
with Sections 501(c)(17) and 505 of the Code.
The Plan Administrator shall:
(a) determine all questions relating to eligibility of Employees to participate
or continue participation;
(b) compute, certify and direct the Trustee with respect to the amount and kind
of benefits to which any Participant shall be entitled hereunder;
(c) authorize and direct the Trustee with respect to all nondiscretionary or
otherwise directed disbursements from the Trust;
(d) maintain all necessary records for the administration of the Plan;
(e) interpret the provisions of the Plan and to make and publish such rules for
regulation of the Plan as are consistent with the terms hereof;
(f) assist any Participant regarding his rights, benefits or elections
available under the Plan;
<PAGE>
(g) communicate to Employees, Participants and their Beneficiaries directly and
by a summary plan description outlining the provisions of the Plan.
7.05 Records and Reports. The Plan Administrator shall keep a record of all
-------------------
actions taken and shall keep such other books of account, records and other
information that may be necessary for proper administration of the Plan. The
Plan Administrator shall file and distribute all reports that may be required by
the Internal Revenue Service, Department of Labor or others, as required by law.
7.06 Appointment of Advisors. The Plan Administrator may appoint
-----------------------
accountants, actuaries, counsel, advisors and other persons that it deems
necessary or desirable in connection with the administration of the Plan.
7.07 Payment of Expenses. All expenses of Plan administration may be paid
-------------------
out of the Trust Fund unless paid by the Company. Such expenses may include
fees of accountants, actuaries, counsel or consultants, and other costs of
administering the Plan.
7.08 Majority Actions. The Committee shall act by a majority of their
----------------
numbers, but may authorize one or more of them to sign all papers on their
behalf.
7.09 Indemnification of Members. The Company shall indemnify and hold
--------------------------
harmless any member of the Committee from any liability incurred in his or her
capacity as such for acts which he or she undertakes in good faith as a member
of such Committee.
ARTICLE VIII - CLAIM PROCEDURES
-------------------------------
8.01 Reviewing Denied Claims. Participants who are terminated for the
------------------------
reasons set forth in Section 2.02(a)-(d) of the Plan will be deemed to have made
a claim for benefits and no written claim will be required. If the Plan
Administrator believes that a terminated Participant is not entitled to
benefits, it shall notify the Participant in writing of the denial of benefits
within 90 days of the Participant's termination of service, but this period may
be extended by the Plan Administrator for up to an additional 90 days in special
circumstances. If such an extension of time is required, the Participant shall
be notified prior to the end of the original 90-day period. The notice denying
benefits shall (a) set forth the specific reason or reasons for the denial,
making reference to the provisions of the Plan or Plan documents on which the
denial is based, and (b) inform the Participant of his right pursuant to this
Article VIII to request review of the decision by the Plan Administrator. If a
Participant does not receive benefits within 90 days of his termination of
employment, he should assume that benefits are being denied and may request a
written denial.
Any Participant who believes that he has improperly been denied benefits may
appeal the denial to the Plan Administrator by submitting a written request for
review to the Plan Administrator within 60 days after the date on which such
denial is received. Such period may be extended by the Plan Administrator for
good cause. The person making the request for review may examine pertinent Plan
documents. The request for review may discuss any issues relevant to the
appeal. The Plan Administrator shall decide whether or not to approve payment
of benefits within 60 days after receipt of the request for review, but this
period may be extended by the Plan Administrator up to an additional 60 days in
special circumstances. If such an extension of time for review is required
because of special circumstances, written notice of the extension shall be
furnished to the appellant prior to the commencement of the extension. The Plan
Administrator's decision shall be in writing, shall include specific reasons for
the decision and shall refer to pertinent provisions of the Plan or Plan
documents on which the decision is based.
ARTICLE IX - AMENDMENT, TERMINATION AND MERGERS
9.01 Amendment. The Company may amend the Plan at any time, in whole or in
---------
part, by action of its Board of Directors or any duly authorized committee or
officer. However, no such amendment shall authorize or permit any part of the
Trust Fund (other than such part as may be required to pay taxes and
administration expenses), to be used for or diverted to purposes other than the
exclusive benefit of the Participants or their Beneficiaries.
9.02 Termination. The Company may terminate the Plan at any time by
-----------
resolution of its Board of Directors or any duly authorized committee or
officer. Upon such termination of the Plan, the Company may direct either:
<PAGE>
(a) complete distribution of the assets in the Trust Fund to the Participants
or their Beneficiaries as soon as the Trustee deems it to be in the best
interest of the Participants or their Beneficiaries, which distribution
shall be made on the basis of objective and reasonable standards which do
not result in unequal payments to similarly situated members or their
Beneficiaries or in disproportionate payments to Highly Compensated
Employees (determined under Code Section 414(q)) of an Employer
contributing to or otherwise funding this Plan; or
(b) that any assets remaining in the Plan after the satisfaction of all
liabilities to the existing Participants or their Beneficiaries be returned
to the Company.
ARTICLE X - PARTICIPATING EMPLOYERS
10.01 Adoption by Other Entities. Any affiliate of the Company, with the
--------------------------
consent of the Board of Directors of the Company or its duly authorized
Committee, may adopt this Plan and all of the provisions hereof and participate
herein and be known as a Participating Employer by properly executing a document
evidencing its intent and the authorization of its Board of Directors (or such
other appropriate governing body).
10.02 Requirements of Participating Employers. Each Participating Employer
---------------------------------------
shall be required to use the same Trustee and Trust as provided in this Plan.
The Trustee shall be authorized to create sub-trusts to separately account for
contributions made by Participating Employers as well as all increments thereof,
but shall not be required to separately invest or segregate such contributions.
Any expenses of the Trust which are to be paid by the Company or borne by the
Trust Fund shall be paid by each Participating Employer in the same proportion
that the total amount standing to the credit of Participants employed by such
Employer bears to the total standing to the credit of all Participants.
10.03 Designation of Agent. Each Participating Employer shall be deemed to
--------------------
be part of this Plan; provided, however, that each Participating Employer shall
be deemed to have designated irrevocably the Company as its agent for all
purposes (including Plan amendment). Unless the context of the Plan clearly
indicates the contrary, the word "Company" shall be deemed to mean and include
each Participating Employer as related to its adoption of the Plan.
10.04 Participating Employer's Contribution and Separate Accounts. All
-----------------------------------------------------------
contributions made by a Participating Employer, as provided for in this Plan,
shall be determined separately on the basis of the cost of the benefits provided
to the Participants employed by such Participating Employer, and shall be paid
to and held by the Trustee for the exclusive benefit of the Participants and
their Beneficiaries, subject to all of the terms and conditions of this Plan.
The Trustee and Administrator shall keep separate accounting of the
contributions of each Participating Employer hereunder and as to the accounts
and credits of such Participant.
10.05 Discontinuance of Participation. Any Participating Employer shall be
-------------------------------
permitted to discontinue its participation in the Plan. At the time of such
discontinuance, satisfactory evidence thereof shall be delivered to the Trustee
by the discontinuing Participating Employer. In the event that the
discontinuing Participating Employer had established a new separate Plan for its
Employees, the Trustee shall transfer, deliver and assign contracts or other
Trust Funds allocable to such Participating Employer to such new Trustee as has
been designated by such participating Employer. If no successor is designated,
the Trustee shall retain such assets for the Participants of said Participating
Employer pursuant to the provisions of the Trust Agreement.
ARTICLE XI - MISCELLANEOUS
11.01 Gender and Number. Whenever any words are used herein in the
-----------------
masculine, feminine or neuter gender, they shall be construed as though they
were also used in another gender in all cases where such would apply, and
whenever any words are used herein in the singular or plural form, they shall be
construed as though they were also used in another form in all cases where they
would so apply.
<PAGE>
11.02 Action by the Company. Whenever the Company under the terms of this
---------------------
Plan is permitted or required to do or perform any act or thing, it shall be
done and performed by an officer or committee duly authorized by the Board of
Directors of the Company.
11.03 Headings. The headings and subheadings of this Plan have been inserted
--------
for convenience of reference only and shall not be used in the construction of
any of the provisions hereof.
11.04 Uniformity and Non Discrimination. All provisions of this Plan shall
---------------------------------
be interpreted and applied in a uniform nondiscriminatory manner.
11.05 Anti-alienation Provisions. Except as may be required to comply with a
--------------------------
qualified domestic relations order in accordance with Code Section 414(p), any
benefit that may be or become payable under the Plan shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge any such benefits shall be void; and any such
benefit shall not in any manner be liable for or subject to the debts,
contracts, liabilities, engagements or torts of the person entitled to such
benefit, nor shall it be subject to attachment or legal process for or against
such person.
If any person entitled to any benefit under the Plan shall become bankrupt or
shall attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber
or charge such benefit, such benefit shall, in the sole discretion of the
Company, cease and terminate, and in that event the Company shall cause such
benefit, or any part thereof, to be held or applied for the benefit of such
person, his Spouse, children, or other dependents, or all or any of them, in
such manner and in such proportion as the Plan Administrator shall determine
proper.
11.06 Effective Date of Plan. This Plan shall be effective as of January 1,
----------------------
1998, unless a later effective date is specified by a Participating Employer
with respect to its Employees.
11.07 Plan Year. The Plan Year of this Plan shall be a twelve-month period
---------
ending December 31.
11.08 Governing Law. To the extent that state law has not been preempted by
-------------
the provisions of ERISA or any other laws of the United States heretofore or
hereafter enacted, this Plan shall be construed under the laws of the State of
Connecticut.
11.09 Employment Rights. Nothing in this Plan shall confer any right upon
-----------------
any Employee to be retained in the service of the Company or any of its
affiliates.
11.10 Incompetency. In the event that the Plan Administrator determines that
------------
a Participant is unable to care for his affairs because of illness or accident
or any other reason, any amounts payable under this Plan may, unless claim shall
have been made therefor by a duly appointed guardian, conservator, committee or
other legal representative, be paid by the Plan Administrator to the spouse,
child, parent or other blood relative or to any other person deemed by the Plan
Administrator to have incurred expenses for such Participant, and such payment
so made shall be a complete discharge of the liabilities of the Plan therefor.
Dated: PRIMEX TECHNOLOGIES, INC.
By: /s/ J. C. Picker
--------------------
Its Vice President of Human Resources
---------------------------------
and Administration
------------------
<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 May 5, 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 owned by at least 300 shareholders of record after
December 31, 1996, or ceases, by action of Primex's Board of Directors, to
be either listed on a national securities exchange or authorized for
quotation on The Nasdaq Stock Market;
(ii) a person, partnership, joint venture, corporation or other entity, or two
or more of any of the foregoing acting as a "person" within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Act"), other than Primex, a majority-owned subsidiary of Primex, or an
employee benefit plan (or related trust) of Primex, or such subsidiary,
become(s) the "beneficial owner" (as defined in Rule 13(d)(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;
(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; or
(v) 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.
(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:
<PAGE>
(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;
(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 Primex, a majority-owned
subsidiary of Primex, or an employee benefit plan (or related trust) of
Primex, or such subsidiary,) 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, 1998 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.
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
<PAGE>
(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 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:
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
<PAGE>
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
(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
Bayfront Towers
1 Beach Drive, S. E.
Apartment 2414
St. Petersburg, FL 33701
If to the Company: Primex Technologies, Inc.
10101 Ninth Street North
<PAGE>
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,
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.
PRIMEX TECHNOLOGIES, INC.
By: /s/ George H. Pain
-----------------
George H. Pain
<PAGE>
Title: Vice President, General
Counsel and Secretary
/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 Angelo A. Catani (the "Executive"), dated as of May 5, 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 owned by at least 300 shareholders of record after
December 31, 1996, or ceases, by action of Primex's Board of Directors, to
be either listed on a national securities exchange or authorized for
quotation on The Nasdaq Stock Market;
(ii) a person, partnership, joint venture, corporation or other entity, or two
or more of any of the foregoing acting as a "person" within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Act"), other than Primex, a majority-owned subsidiary of Primex, or an
employee benefit plan (or related trust) of Primex, or such subsidiary,
become(s) the "beneficial owner" (as defined in Rule 13(d)(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;
(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; or
(v) 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.
(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:
<PAGE>
(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;
(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 Primex, a majority-owned
subsidiary of Primex, or an employee benefit plan (or related trust) of
Primex, or such subsidiary,) 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, 1998 between Primex and
the Executive.
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.
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
<PAGE>
(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 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:
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
<PAGE>
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:
(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.
<PAGE>
(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 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
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.
<PAGE>
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 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 10.3
[PRIMEX TIER I AGREEMENT]
EXECUTIVE AGREEMENT
-------------------
Agreement between Primex Technologies, Inc., a Virginia corporation
("Primex"), and J. Douglas DeMaire (the "Executive"), dated as of May 5, 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 owned by at least 300 shareholders of record after
December 31, 1996, or ceases, by action of Primex's Board of Directors, to
be either listed on a national securities exchange or authorized for
quotation on The Nasdaq Stock Market;
(ii) a person, partnership, joint venture, corporation or other entity, or two
or more of any of the foregoing acting as a "person" within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Act"), other than Primex, a majority-owned subsidiary of Primex, or an
employee benefit plan (or related trust) of Primex, or such subsidiary,
become(s) the "beneficial owner" (as defined in Rule 13(d)(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;
(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; or
(v) 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.
(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:
<PAGE>
(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;
(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 Primex, a majority-owned
subsidiary of Primex, or an employee benefit plan (or related trust) of
Primex, or such subsidiary,) 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, 1998 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.
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
<PAGE>
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 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:
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
<PAGE>
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
(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
<PAGE>
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,
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.
PRIMEX TECHNOLOGIES, INC.
By: /s/ James G. Hascall
-------------------
James G. Hascall
Title: Chairman and CEO
/s/ J. Douglas DeMaire
- ----------------------
J. Douglas DeMaire
<PAGE>
EXHIBIT 10.4
[PRIMEX TIER I AGREEMENT]
EXECUTIVE AGREEMENT
-------------------
Agreement between Primex Technologies, Inc., a Virginia corporation
("Primex"), and Michael S. Wilson (the "Executive"), dated as of May 5, 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 owned by at least 300 shareholders of record
after December 31, 1996, or ceases, by action of Primex's Board of Directors, to
be either listed on a national securities exchange or authorized for quotation
on The Nasdaq Stock Market;
(ii) a person, partnership, joint venture, corporation or other
entity, or two or more of any of the foregoing acting as a "person" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Act"), other than Primex, a majority-owned subsidiary of Primex, or an
employee benefit plan (or related trust) of Primex, or such subsidiary,
become(s) the "beneficial owner" (as defined in Rule 13(d)(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;
(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; or
(v) 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.
(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:
<PAGE>
(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;
(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 Primex, a majority-
owned subsidiary of Primex, or an employee benefit plan (or related trust) of
Primex, or such subsidiary,) 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, 1998 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.
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
<PAGE>
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 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:
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
<PAGE>
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 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.
<PAGE>
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,
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.
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 May 5, 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 owned by at least 300 shareholders of record after
December 31, 1996, or ceases, by action of Primex's Board of Directors, to
be either listed on a national securities exchange or authorized for
quotation on The Nasdaq Stock Market;
(ii) a person, partnership, joint venture, corporation or other entity, or two
or more of any of the foregoing acting as a "person" within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Act"), other than Primex, a majority-owned subsidiary of Primex, or an
employee benefit plan (or related trust) of Primex, or such subsidiary,
become(s) the "beneficial owner" (as defined in Rule 13(d)(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;
(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; or
(v) 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.
(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:
<PAGE>
(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;
(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 Primex, a majority-owned
subsidiary of Primex, or an employee benefit plan (or related trust) of
Primex, or such subsidiary,) 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, 1998 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.
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
<PAGE>
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 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:
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
<PAGE>
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 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.
<PAGE>
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,
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.
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
_____________________________________.
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 owned by at least 300 shareholders of record after
December 31, 1996, or ceases, by action of Primex's Board of Directors, to
be either listed on a national securities exchange or authorized for
quotation on The Nasdaq Stock Market;
(ii) a person, partnership, joint venture, corporation or other entity, or two
or more of any of the foregoing acting as a "person" within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Act"), other than Primex, a majority-owned subsidiary of Primex, or an
employee benefit plan (or related trust) of Primex, or such subsidiary,
become(s) the "beneficial owner" (as defined in Rule 13(d)(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;
(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; or
(v) 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.
(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:
<PAGE>
(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;
(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 Primex, a majority-owned
subsidiary of Primex, or an employee benefit plan (or related trust) of
Primex, or such subsidiary,) 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, 1998 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.
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
<PAGE>
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 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:
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
<PAGE>
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 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.
<PAGE>
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,
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.
PRIMEX TECHNOLOGIES, INC.
By: ____________________________
James G. Hascall
Title: Chairman and CEO
_________________________
Executive
<PAGE>
EXHIBIT 10.12
PRIMEX TECHNOLOGIES, INC.
INCENTIVE COMPENSATION PLAN
ARTICLE I
Statement of Purpose
--------------------
1.1 The purpose of the PRIMEX Technologies, Inc. Incentive Compensation Plan
(the "Plan") is to provide a system of incentive compensation which will
promote the maximization of Economic Value Added ("EVA(R)"/1/) over the
long term. In order to align management incentives with shareholder
interests, incentive compensation will reward the creation of value. This
Plan will tie incentive compensation to EVA(R) and, thereby, reward
management for creating value and penalize management for destroying value.
1.2 EVA(R) is the performance measure of value creation for PRIMEX
Technologies, Inc. (the "Company"). Managers create value when they employ
capital in an endeavor that generates a return that exceeds the cost of the
capital employed. Managers destroy value when they employ capital in an
endeavor that generates a return that is less than the cost of capital
employed. By subtracting the cost of capital from the operating profits
generated by a business group, EVA(R) measures the total value created (or
destroyed) by management. The Plan will reward management increases in
EVA(R) and penalize management for decreases in EVA(R).
1.3 The first year of the Plan, which was calendar year 1996, was administered
by Olin Corporation which owned and operated the businesses that now
comprise the Company. The Company was spun off from Olin at the end of
1996. Accordingly, Olin set the Expected Improvement in EVA(R), Leverage
Factor, and Target EVA(R) for the Company and these continue in full force
and effect for the Company. The Bank Balances, whether positive or
negative, for all Olin Participants that joined the Company in connection
with the spin off were transferred to the Participant's Bonus Bank under
the Plan.
ARTICLE II
Definitions
-----------
Unless the context provides a different meaning, the following terms shall have
the following meanings:
"Act" means the Securities Exchange Act of 1934, as amended.
"Actual EVA(R)" means, with respect to an EVA(R) Center for a fiscal year,
the EVA(R) of such center for such year as calculated by the Chief
Financial Officer.
"Bank Balance" means, with respect to a Participant, a bookkeeping record
of the net balance of the amounts credited to and debited against such
Participant's Bonus Bank following the end of each fiscal year. For a
Participant's first year of participation in the Plan, such Participant's
Bank Balance shall initially be equal to zero.
"Bonus Bank" means, with respect to a Participant, a bookkeeping record of
an account to which Declared Bonuses are credited, or debited as the case
may be, from time to time under the Plan and from which bonus payments to
such Participants are debited.
"Bonus Multiple" means, with respect to a Participant for a fiscal year,
the Participant's Performance Multiple plus the Participant's Target
Multiple for such year, except in the case of a Participant who has a
Combined
- ----------------------------
/1/EVA is a registered trademark of Stern Stewart & Co.
<PAGE>
Performance Multiple for such year, the Performance Multiple shall be the
Combined Performance Multiple for such Participant for such year.
"Capital" means, with respect to an EVA(R) Center for a fiscal year, the
investment made (both equity and debt) in such center, as determined by the
Chief Financial Officer for such year. Each component of Capital will be
measured by computing an average balance based on the ending monthly
balance for the twelve months of a fiscal year.
"Capital Charge" means, with respect to an EVA(R) Center for a fiscal year,
the deemed opportunity cost of employing Capital in the business of such
EVA(R) Center for such year, as determined by the Chief Financial Officer.
The Capital Charge is computed as follows:
Capital Charge = Capital x Cost of Capital
"Cause" shall mean (i) dishonesty; (ii) theft or other criminal conduct;
(iii) insubordination; (iv) violation of, or deviation from, any Company or
facility work rule, or (v) other misconduct deemed by the Company to be of
a serious nature warranting termination.
"Change in Control" means the occurrence of any one of the following
events:
(i) ceases, by action of the Corporation's Board of Directors, to be either
listed on a national securities exchange or authorized for quotation on
The Nasdaq Stock Market;
(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 Corporation, a majority-owned
subsidiary of the Corporation, or an employee benefit plan (or related
trust) of the Corporation, or such subsidiary, become(s) the "beneficial
owner" (as defined in Rule 13(d)(3) under the Act) of 15% or more of the
then outstanding voting stock of the Corporation;
(iii) during any period of two consecutive years after 1996, individuals
who at the beginning of such period constitute the Corporation's Board of
Directors (together with any new Director whose election by the
Corporation's Board of Directors or whose nomination for election by the
Corporation'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;
(iv) all or substantially all of the business or assets of the Corporation
is disposed of pursuant to a merger, consolidation or other transaction
in which the Corporation is not the surviving corporation or the
Corporation combines with another company and is the surviving
corporation (unless the shareholders of the Corporation 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 the Corporation or (y) the
combined company); or
(v) the Corporation's Board of Directors determines that a tender offer for
the Corporation's shares indicates a serious intention by the offeror to
acquire control of the Corporation.
"Chief Executive Officer" means the Chief Executive Officer of the Company
as designated by the Board of Directors of the Company from time to time.
"Chief Financial Officer" means the Chief Financial Officer of the Company
as designated by the Board of Directors of the Company from time to time.
"Combined Performance Multiple" means, with respect to a Participant who is
assigned to a Participating Group which has more than on EVA(R) Center, in
any fiscal year, the sum of the Performance Multiples for such centers for
such year as weighted for such Participating Group.
<PAGE>
"Committee" means the Compensation and Nominating Committee of the Board of
Directors of the Company or such other committee as such Board may
designate from time to time.
"Company" or "Corporation" means PRIMEX Technologies, Inc., a Virginia
corporation, and its successors and assigns, including any corporation with
which the Company is merged or consolidated.
"Corporate Officer" means a corporate officer of the Company, elected by
the Board of Directors of the Company, who is not an assistant officer.
"Corporate EVA(R) Center" means the EVA(R) Center consisting of the entire
Company.
"Cost of Capital" means for a fiscal year the weighted average of the cost
of debt and the cost of equity for such year, as determined by the Chief
Financial Officer. The Cost of Capital will be reviewed at least annually
and revised if it has changed significantly. Calculations will be carried
to one decimal point.
"Declared Bonus" means, with respect to a Participant for a fiscal year,
the bonus earned by such Participant for such year and is equal to the
Participant's Initial Declared Bonus for such year except if the
Participant's Participating Group has a Value Driver Factor, such
Participant's Declared Bonus shall be equal to the sum of (i) the EVA(R)-
weighted portion of the Initial Declared Bonus for such year plus (ii) the
product of the non-EVA(R) weighted portion of the Initial Declared Bonus
for such year multiplied by the Value Driver Factor for such year provided
that in all cases prior to a Change in Control the Company in its sole
discretion may reduce a positive Declared Bonus of any and all Participants
to any amount (but no less than zero) prior to the crediting of such
Declared Bonus to the Participant's Bonus Bank.
"EVA(R)" means, with respect to an EVA(R) Center for a fiscal year, NOPAT
of such EVA(R) Center for such year minus Capital Charge of such EVA(R)
Center for such year, all as calculated by the Chief Financial Officer.
EVA(R) may be positive or negative.
"EVA(R) Center" means those centers or business groups, including the
Company, for which EVA(R) is separately calculated, such centers to be
determined annually by the Company for a fiscal year.
"Expected Improvement " means the constant EVA(R) improvement that is added
to shift the target up each year. This is determined by the expected
growth in EVA(R) per year with respect to an EVA(R) Center. In the event
the Long-Term Target is achieved in any one year, no Expected Improvement
is added to next year's target EVA(R). With respect to the Corporate
EVA(R) Center, the Expected Improvement shall be $900,000/year.
"Initial Declared Bonus" means, with respect to a fiscal year for a
Participant, the product of the Participant's Target Incentive for such
year multiplied by such Participant's Bonus Multiple for such year.
"Leverage Factor" means the amount of overscore above EVA(R) target that
yields a 200% payout or underscore that yields a zero % payout.
"Long-Term Target" means summation of Target EVA(R) in the initial year,
plus Expected Improvement multiplied by 7.
"NOPAT" means, with respect to an EVA(R) Center for a fiscal year, the net
operating profit after taxes for such fiscal year, as determined by the
Chief Financial Officer.
"Participating Group" means for a fiscal year a business division or
subunit of a business division which are uniquely identified for the
purpose of bonus awards under this Plan and are so designated by the
Company from time to time as a Participating Group.
"Performance Multiple" means, with respect to an EVA(R) Center for a fiscal
year, the difference between the Actual EVA(R) and the Target EVA(R)
divided by the Leverage Factor. In the case of a Participant who is
assigned to more than one EVA(R) Center, the Participant will have a
Performance Multiple for each EVA(R) Center.
<PAGE>
"Plan" means this Incentive Compensation Plan, as amended from time to
time.
"Target EVA(R)" means, with respect to an EVA(R) Center for the initial
year, of such center the level of EVA(R) as determined by the Company.
With respect to the Corporate EVA(R) Center for 1996, the Target EVA(R)
shall be ($6,400,000). After the initial year of an EVA(R) Center, the
Target EVA(R) for such center for each succeeding fiscal year is revised
according to the following formula:
Target EVA(R) = ((Prior Fiscal Year's Actual EVA(R) + Prior Fiscal Year's
Target EVA(R)) divided by 2) + Expected Improvement provided such Target
EVA(R) shall be adjusted to reflect any change in the Cost of Capital for
such succeeding fiscal year as provided in the EVA(R) Business Management
System prepared by Stern Stewart & Co. and provided further that if Long-
Term Target is achieved, no Expected Improvement will be added.
"Target Incentive" means, with respect to a Participant for a fiscal year,
the Target Incentive for such Participant for such fiscal year as
determined by the Committee in the case of Participants who are Corporate
Officers of the Company at the time of determination and in all other cases
by the Chief Executive Officer or his designee.
"Target Multiple" means 1.0 for each Participant except in the first four
years during which a Participant participates in the Plan, the Target
Multiple shall be 1.5.
"Value Driver Factor" is based on an assessment of individual and/or group
performance as determined annually by the Company.
ARTICLE III
Determination and Distribution of Bonuses
-----------------------------------------
3.1 Determinations. For each fiscal year of the Company beginning with the
--------------
1997 fiscal year, the Company shall determine with respect to such fiscal
year (1) the persons who will be Participants, (2) the Participating Group
for each such Participant, (3) the Target Incentive for each Participant,
(4) the minimum and maximum value of the Value Driver Factor, if any, for
each Participant, (5) the EVA(R) Center or EVA(R) Centers for each
Participating Group, (6) if there is more than one EVA(R) Center for a
Participating Group, the weight each EVA(R) Center will carry in
determining the Bonus Multiple of such Participating Group and (7) Cost of
Capital for each EVA(R) Center. As soon as practicable following the close
of the fiscal year, the Company shall determine the following with respect
to such fiscal year for each Participant: (1) Actual EVA(R) and
Performance Multiple for each EVA(R) Center, (2) the Performance Multiple
or Combined Performance Multiple, as the case may be, for each
Participating Group, (3) the Bonus Multiple, (4) the Value Driver Factor,
(5) the Initial Declared Bonus, (6) the Declared Bonus and (7) the Capital
Charge for each EVA(R) Center. The Committee on behalf of the Company
shall determine the Initial Declared Bonus, Value Driver Factor (if any)
and the Declared Bonus for Participants who are Corporate Officers at the
time of determination. Capital, Cost of Capital, Capital Charge, Expected
Improvement in EVA(R), Leverage Factor and Target EVA(R) may be adjusted
from time to time for a fiscal year to reflect extraordinary or
nonrecurring charges or financial developments.
3.2 Distribution. As soon as practicable, following the close of each fiscal
------------
year of the Company, but no later than March 15 following such close, the
Company shall with respect to each Participant:
(1) Add the Declared Bonus for such fiscal year (including any negative
bonuses) to the Bonus Bank.
(2) Pay out a prescribed portion of any positive Bank Balance in accordance
with the distribution ratio shown below, and
(3) Carry the remaining Bank Balance (positive or negative) forward to the next
fiscal year.
<PAGE>
The prescribed distribution ratios for the Bonus Bank for a Participant
are:
First year of Plan participation 67%
Second year of Plan participation 50%
Third year of Plan participation 40%
Fourth year of Plan participation 33%
If the first period of participation for a Participant is less than six
months, then the first year distribution ratio (i.e. 67%) applies to this
period and the full subsequent year of participation. Thereafter, the
distribution ratios are as above.
Notwithstanding the foregoing, the Company may, as it determines in its
sole discretion, reduce the distribution ratio for any and all Participants
at any time prior to payment of the distribution from the Bonus Bank for a
fiscal year, provided the Committee shall make such determination in the
case of any Corporate Officer.
3.3 Negative Bonus Bank. If, as a result of negative EVA(R), a Bonus Bank has
-------------------
a deficit, no Participant shall be required, at any time, to reimburse his
or her Bonus Bank.
3.4 Lump Sum. All distributions from the Plan shall be made in a cash lump sum
--------
unless payment is deferred in a timely manner by the Participant with the
consent of the Company under the Company's bonus deferral policy as in
effect from time to time.
3.5 Interest. No interest shall be paid on or accrue to any Bank Balance.
--------
ARTICLE IV
Participation, Transfers and Terminations
-----------------------------------------
4.1 Participant Matters. Unless otherwise expressly reserved to the Committee
-------------------
or the Chief Financial Officer and except in cases affecting the Chief
Executive Officer, the Chief Executive Officer or his designee on behalf of
the Company shall determine all Plan matters with respect to all
Participants.
3.1 Transfers. A Participant who transfers his or her employment from one
---------
Participating Group of the Company to another Participating Group shall
retain his or her Bonus Bank and will be eligible to receive future Plan
bonuses in accordance with the provisions of the Plan. During the year of
transfer, the Initial Declared Bonus and Declared Bonus for such
Participant shall be pro rated on time spent in each Participating Group.
4.3 Retirement, Disability or Death. If during a fiscal year a Participant
-------------------------------
terminates employment with the Company by virtue of electing retirement
(must be minimum of fifty-five years of age with at least ten years
service), receiving disability payments under the Company's long-term
disability benefits program or death, such Participant, surviving
beneficiary or estate shall receive the positive Bank Balance. The
Participant, surviving beneficiary or estate, will receive his or her
balance as soon as practical after qualifying for receipt of benefit
payments under the Company's long-term disability benefits program or
retirement. Payments of such balance made under this Section 4.3 shall not
be included in any PRIME Plan or Restoration Plan calculation.
4.4 Involuntary Termination Without Cause. A Participant whose employment is
-------------------------------------
terminated by the Company or any subsidiary without Cause shall be paid the
positive Bank Balance, if any, within 30 days from the date of termination.
Any payments of such balance made under this Section 4.4 shall not be
included in any PRIME Plan or Restoration Plan calculation.
4.5 Voluntary Termination. In the event that a Participant voluntarily
---------------------
terminates employment with the Company or any of its subsidiaries, the
right of Participant to his or her Bonus Bank and any Bank Balance shall be
forfeited unless a different determination is made by the Company. Any
payments of such balance made under this Section 4.5 shall not be included
in any PRIME Plan or Restoration Plan calculation.
<PAGE>
4.6 Involuntary Termination for Cause. In the event of termination of
---------------------------------
employment for Cause, the right of Participant to his or her Bonus Bank and
any Bank Balance shall be forfeited unless a different determination is
made by the Company in its sole discretion. Any payments of such balance
made under this Section 4.6 shall not be included in any PRIME Plan or
Restoration Plan calculation.
4.7 Breach of Agreement. Notwithstanding any other provision of the Plan or
-------------------
any other agreement, in the event that a Participant shall breach any non-
competition agreement or provision relating to the Company or any
subsidiary of the Company or breach any agreement with respect to the post-
employment conduct of such Participant, including those contained in any
benefit or incentive plan or award, the Bonus Bank held by such
Participating Participant shall be forfeited.
4.8 Change in Control. Upon a Change in Control, the Plan shall terminate and
-----------------
positive Bank Balance shall be paid to Participants within five days of
such Change in Control. Any payments of such balance made under this
Section 4.8 shall not be included in any PRIME Plan or Restoration Plan
calculation.
4.9 No Guarantee. Participation in the Plan provides no guarantee that
------------
payments under the Plan will be paid. Selection as a Participant is no
guarantee that payments under the Plan will be paid or that selection as a
Participant will be made for the subsequent fiscal year.
ARTICLE V
General Provisions
------------------
5.1 Withholding of Taxes. The Company shall have the right to withhold the
--------------------
amount of taxes, which in the determination of the Company, are required to
be withheld under law with respect to any amount due or paid under the
Plan.
5.2 Expenses. All expenses and costs in connection with the adoption and
--------
administration of the Plan shall be borne by the Company out of its general
funds.
5.3 Claims for Benefits. Participants whose employment with the Company or
-------------------
any subsidiary is terminated for any reason will be deemed to have made a
claim for benefits under the Plan and no written claim will be required.
Claims for benefits will be decided by the Chief Executive Officer or, in
the case or a claim pertaining to the Chief Executive Officer, by the
Committee (collectively referred to as the "Adjudicator"). If the
Adjudicator believes that a terminated Participant is not entitled to
benefits under the terms and conditions of the Plan, it shall notify the
Participant in writing of the denial of benefits within 90 days of the
Participant's termination of service. In the event that a claim is wholly
or partially denied, the Participant or his representative will receive a
written explanation of the reason for denial. The Participant or his
representative may request a review of the denied claim within 60 days of
receipt of the denial and, in connection therewith, may review pertinent
documents and submit comments in writing. Upon receipt of an appeal, the
Adjudicator shall decide the appeal within 60 days of receipt. The decision
on appeal shall be in writing, shall include specific reasons for the
decision and shall prefer to pertinent provisions of the Plan on which the
decision is based. In reaching its decision, the Adjudicator shall have
complete discretionary authority to determine all questions arising in the
interpretation and administration of the Plan and to construe the terms of
the Plan, including any doubtful or disputed terms and the eligibility of a
Participant for benefits.
5.4 Action Taken In Good Faith. The Company may employ attorneys,
--------------------------
consultants, accountants or other persons and the Company's directors and
officers shall be entitled to rely upon the advice, opinions or valuations
of any such persons. All actions taken and all interpretations and
determinations made by the Committee or Chief Executive Officer in good
faith shall be final and binding upon all employees, the Company and all
other interested parties. No member of the Committee, nor any officer,
director, employee or representative of the Company, or any of its
affiliates acting on behalf of or in conjunction with the Committee, shall
be personally liable for any action, determination, or interpretation,
whether of commission or omission, taken or made with respect to the Plan.
<PAGE>
5.5 Rights Personal to Employee. Subject to Section 4.3 above, any rights
---------------------------
provided to an employee under the Plan shall be personal to such employee,
shall not be transferable (except by will or pursuant to the laws of
descent or distribution), and shall be exercisable during his lifetime,
only by such employee.
5.6 Distribution. Upon termination of the Plan or suspension of the Plan for a
------------
period of more than 90 days, the positive Bank Balance of each Participant
shall be distributed as soon as practicable, but in no event later than 90
days from such event. The Committee, in its sole discretion, may accelerate
distribution of the balance of any Bonus Bank, in whole or in part, at any
time without penalty.
5.7 Non-Allocation of Award. In the event of a suspension or termination of
----------------------------
the Plan during any fiscal year, except where expressly provided for, as
provided herein at Section 10.1, the Declared Bonus for such year shall be
deemed forfeited and no portion thereof shall be allocated to Participants.
In the event of a suspension, any such forfeiture shall not affect the
calculation of EVA(R) in any subsequent year.
ARTICLE VI
Limitations
-----------
6.1 No Continued Employment. Nothing contained herein shall provide any
-----------------------
employee with any right to continued employment or in any way abridge the
rights of the Company and its subsidiaries to determine the terms and
conditions of employment and whether to terminate employment of any
employee. Neither the establishment of the Plan or the grant of an award or
bonus hereunder shall be deemed to constitute an express or implied
contract of employment for any period of time or in any way abridge the
rights of the Company or any of its subsidiaries to determine the terms and
conditions of employment or to terminate the employment of any employee
with or without cause at any time.
6.2 No Vested Rights. Except as otherwise expressly provided herein, no
----------------
employee or other personal shall have any claim of right (legal, equitable,
or otherwise) to any award, allocation, or distribution or any right,
title, or vested interest in any amounts in his Bonus Bank and no officer
or employee of the Company or any subsidiary or any other personnel shall
have any authority to make representations or agreements to the contrary.
No interest conferred herein to a Participant shall be assignable or
subject to any lien or pledge or any claim by a Participant's creditors.
The right of the Participant to receive a distribution thereunder shall be
an unsecured claim against the general assets of the Company and the
Participant shall have no rights in or against any specific assets of the
Company as the result of participation hereunder.
6.3 Not Part of Other Benefits. The benefits provided in this Plan shall not
--------------------------
be deemed a part of any other benefit provided by the Company or any of its
subsidiaries to its employees. Neither the Company nor any of its
subsidiaries assumes any obligation to Participants except as specified
herein.
6.4 Other Plans. Nothing contained herein shall limit the Company and its
-----------
subsidiaries' power or the Committee's power to grant bonuses to employees
of the Company or any of its subsidiaries, whether or not Participants in
this Plan.
6.5 Unfunded Plan. This Plan is unfunded and is maintained by the Company in
-------------
part to provide deferred compensation to a select group of management and
highly compensated employees. Nothing herein shall create or be construed
to create a trust or separate fund of any kind, or a fiduciary relationship
between the Company (or any of its subsidiaries) and any Participant.
ARTICLE VII
Authority
---------
7.1 Full power and authority to interpret and administer this Plan shall be
vested in the Committee, which shall have the authority to make rules and
regulations for the administration of the Plan. The Committee may from time to
time make such decisions and adopt such rules and regulations for implementing
the Plan as it deems appropriate for any Participant under the Plan. Any
decision taken by the Committee arising out of or in connection with the
<PAGE>
construction, administration, interpretation and effect of the Plan shall be
final, conclusive and binding upon all Participants and any person claiming
under or through them. The Committee may delegate its power and authority with
respect to the Plan to the Chief Executive Officer from time to time as it
determines. All powers and responsibilities of the Committee provided in this
Plan may also be exercised by the Board of the Company at any time.
ARTICLE VIII
Notice
------
8.1 Any notice to be given pursuant to the provisions of the Plan shall be in
writing and directed to the appropriate recipient thereof at his business
address or office location.
ARTICLE IX
Effective Date
--------------
9.1 This Plan is deemed to be effective as of January 1, 1996.
ARTICLE X
Amendments
----------
10.1 This Plan may be amended, suspended or terminated in whole or in part at
any time from time to time at the sole discretion of the Committee;
provided however, that no such change in the Plan shall be effective to
eliminate or diminish the distribution of any award that has been allocated
to the Bonus Bank of a Participant prior to the date of such amendment,
suspension or termination. Notice of any such amendment, suspension or
termination shall be given promptly to each Participant.
ARTICLE XI
Applicable Law
--------------
11.1 This Plan shall be construed in accordance with the provisions of the laws
of the State of Florida.
<PAGE>
EXHIBIT 10.13
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 Corporation ceases to be owned by at least 300 shareholders of
record after December 31, 1996, or ceases, by action of the Corporation's
Board of Directors, to be either listed on a national securities exchange
or authorized for quotation on The Nasdaq Stock Market;
(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 Corporation, a majority-owned
subsidiary of the Corporation, or an employee benefit plan (or related
trust) of the Corporation, or such subsidiary, become(s) the "beneficial
owner" (as defined in Rule 13(d)(3) under the Act) of 15% or more of the
then outstanding voting stock of the Corporation;
(iii) during any period of two consecutive years after 1996,
individuals who at the beginning of such period constitute the
Corporation's Board of Directors (together with any new Director whose
election by the Corporation's Board of Directors or whose nomination for
election by the Corporation'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;
(iv) all or substantially all of the business or assets of the
Corporation is disposed of pursuant to a merger, consolidation or other
transaction in which the Corporation is not the surviving corporation or
the Corporation combines with another company and is the surviving
corporation (unless the shareholders of the Corporation 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 Corporation or (y) the combined
company); or
(v) the Corporation's Board of Directors determines that a tender
offer for the Corporation's shares indicates a serious intention by the
offeror to acquire control of the Corporation.
"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.
<PAGE>
"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.
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 and other changes, as the Committee shall deem
appropriate in the circumstances. The determination by the 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.
<PAGE>
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 and 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 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>
APPENDIX A
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
<PAGE>
EXHIBIT 10.20
HUNTING LEASE
849 AR MISC. #007-206
Camden/Hampton Units
------
STATE OF ARKANSAS
COUNTY OF CALHOUN
THIS AGREEMENT, made and entered into the 26 day of May, 1995, by and between
IP TIMBERLANDS OPERATING COMPANY, LTD., a Texas limited partnership (herein
called "Lessor"), and HI-TECH, INC., a corporation, (herein called "Lessee")
having an address at P. O. BOX 3112, E. Camden, AR 71701 c/o Gene Hill (501)
798-4171.
WITNESSETH:
That for the term and in consideration of the rentals hereinafter set forth,
and the covenants, conditions and obligations to be observed and performed by
Lessee, the Lessor does hereby lease unto Lessee exclusive rights and privileges
of protecting, hunting, shooting and taking legal game on the following
described lands of Lessor in Calhoun County, Arkansas:
See EXHIBIT "A"
Together with full rights in Lessee to enter upon, over, across and out of said
lands solely for purposes above-described and for none other whatsoever. This
lease excludes the hunting and taking of the following game species: NO FIREARMS
ALLOWED. See paragraph 16. It is understood that the hunting rights for any
excluded species may be leased to a third party by Lessor.
(1) Lessee covenants and agrees to pay as rental to Lessor at its Office at
International Paper, PO Box 249, Camden AR 71701 the sum of One-thousand-
four-hundred-sixty & 00/100 ($1,460.00) Dollars per annum, in advance.
(2) This lease shall commence on the 1 day of June 1995 and, unless sooner
terminated as hereinafter provided, shall expire on the 30 day of June
1997. The grant of any extension or renewal hereof, as well as its terms
and conditions, shall be at the sole discretion of Lessor, through its
office listed above, and, if granted, shall be reduced to writing and
executed by the parties.
(3) Lessee recognizes, understands and acknowledges that Lessor has acquired
and holds the aforesaid lands for the purpose of future development,
planting, growing, protecting, maintaining, conserving and harvesting there
from trees, timber, pulpwood and other forest products, and for other uses
in connection with its operations, and Lessee agrees that all rights and
privileges hereunder granted are, and shall be, at all times expressly
subject to Lessor's basic and primary rights to prevent any fire, waste,
nuisance, or unnecessary injury to said property or to the commercial
values thereof, and to develop, use, enjoy and protect said lands without
limitation. Therefore, Lessee's exercise of any of its rights under this
agreement shall in nowise impede or hinder Lessor in the full enjoyment of
said lands as above described, and if, in the course of Lessor's land
management operations, it becomes necessary, expedient or advisable for
Lessor to prohibit, curtail or suspend all hunting on the above-described
leased premises, Lessor shall have the right to do so immediately upon
written notice thereof to Lessee, or Lessor may cancel this lease as
provided in paragraph 6 hereof.
(3) Lessee further expressly covenants and agrees:
(a) In the event Lessor shall so require in writing, Lessee agrees to obtain
and keep an up-to-date Charter of Incorporation, as a non-profit
conservation organization, from the State in which the leased property is
situated.
<PAGE>
(b) To furnish Lessor with a copy of Lessee's Charter and By-Laws and to also
provide, either annually or on or before the anniversary date hereof, a
list of the names and addresses of Lessee's membership and of every guest
or licensee to whom the privileges of hunting on said lands have been
granted by Lessee in the form of Exhibit B as provided in paragraph 18.
While Lessee, insofar as its Charter, By-Laws, rules and regulations
permit, shall have the right and privilege of permitting persons other than
its members to use the land for hunting, any privileges so extended to
other persons by Lessee shall be strictly subject to all limitations and
conditions of this lease.
(c) Lessee, its members and guests, shall not engage in any commercial hunting,
fishing or recreational pursuits, on the leased premises, nor permit any
other persons to do so, and Lessee shall not sell or sub-lease the hunting
and fishing rights on said premises, nor make any charge, on a commercial
basis, to members or guests for the privilege of hunting, fishing, or
recreation on the premises. Lessee may, however, require persons to pay a
prescribed fee for the privilege of membership and may require its members
to pay regularly prescribed membership dues, and charge its members for
supplies and facilities furnished and services rendered to them or their
guests.
(d) To use every precaution to protect the aforesaid land, soil, timber, trees
and forest products from fire or other damages, and to the end, Lessee will
assist and exercise every reasonable and careful effort to extinguish any
fire that may occur on said lands. In the event that any fire shall be
willfully or negligently started or allowed to escape on said lands by
Lessee or by its guests or licensees, Lessor shall have the right
immediately to cancel this lease and any unearned rentals theretofore paid
shall be forfeited to Lessor. In addition, Lessor shall be entitled to
recover from Lessee any damages which Lessor sustains as the result of such
fire.
(e) To assume responsibility, and to pay for any trees, timber or other forest
products that may be cut, used, damaged and/or removed from said lands by
Lessee, its guests or Licensees.
(f) To comply, and to require compliance by each and all of its members and all
persons to whom hunting privileges shall be extended hereunder, with all
laws, rules and regulations now existing or hereinafter enacted by any
county, state or federal authority or Lessor with respect to its activities
hereunder. Bag limits and the length of the hunting season shall strictly
conform to the game laws of the particular county or counties in which said
lands are located, unless otherwise defined by Lessor to satisfy the
objectives of a published wildlife management plan. Lessee agrees to use
every reasonable effort to prevent all persons from violating such laws or
regulations while on the premises leased herein.
(g) To exercise all reasonable precautions in and about the leased premises
with respect to the safety of its membership and to the safety of others
using said privileges under Lessee's authority; and to strictly comply with
all hunting and firearm safety rules and regulations, whether established
by the State in which the leased property is situated or by Lessor.
(h) In the event Lessor shall so require in writing, Lessee further agrees to
secure and maintain public liability insurance in connection with the use
of the leased premises in such amounts and with such insurance companies as
shall be agreeable in Lessor; said policy of insurance shall name Lessor as
an insured party and shall provide for the indemnification of Lessor as
provided for in paragraphs 21 and 24 hereof.
(i) Not to construct or install upon said lands any crops, plantings, food
plots, roads, bridges, gates, fences, camps, buildings, lodges, shelters,
docks, piers, landings or other structures, permanent or temporary, without
-------
having first obtained in writing the consent of Lessor thereto. In the
--------------------------------------------------------------
event at any time that such consent is granted by Lessor, Lessee further
covenants to carry out all such construction or installation at its own
cost and expense and in strict compliance with any specifications,
requirements or limitations that may be imposed with respect thereto by
Lessor, and shall further keep and maintain the same in a condition of
repair, cleanliness and safety agreeable to Lessor or its duly authorized
agents. Stands used for hunting shall not be nailed to trees nor fastened
-----------------------------------------------------------------
with any metal device that penetrates the bark. Any buildings or equipment
----------------------------------------------
installed, constructed or maintained by the Lessee shall be subject to
inspection by Lessor at any time. Lessee further agrees to pay all state
and county and valorem taxes, in addition to fee or permits that will be
imposed by the Lessor, which may result from any structure placed on leased
lands.
<PAGE>
(j) Not to hinder, impede or deny access to the public to any developed public
lake, fishing or picnic areas that may be located on the leased premises,
or to any public streams that may traverse the same, provided that no roads
or access ways to such lakes, streams, fishing and/or picnic areas shall be
used by any persons other than those designated by Lessor. Lessee
covenants and agrees to fully cooperate with Lessor's representatives in
the enforcement of such limitations.
(k) Not to erect or display any signs or notices that the leased premises are
posted for hunting without first obtaining the written permission of the
Lessor. Any signs or notices so approved will clearly bear the name of the
Lessee. Only aluminum nails or 1/2" staples (staple gun type) may be used
in securing necessary signs. Signs, if approved, should be attached to
posts or trees of poor quality and form.
(l) That during the term of this lease, Lessee shall make every reasonable
effort to prevent persons other than its membership, guests and licensees
from engaging in hunting activities on any part of the leased premises.
(m) That Lessee, its membership, guests and licensees, will respect the rights
of adjoining landowners and will conduct all activities in and about the
leased premises in a courteous manner, with due regard for the rights,
safety and well-being of all persons on or adjacent to Lessor's lands.
Lessee further agrees to be solely responsible for, and to promptly
resolve, any problems with adjoining landowners that may arise from
Lessee's activities or use of the leased premises and to indemnify and hold
Lessor harmless as provided for in paragraphs 21 and 24 hereof.
(5) It is the intention of the parties that Lessor reserve the right, power and
authority to exclude from its property any person, whether Lessee's member,
guest or licensee, for conduct which, in Lessor's opinion, is violative of
the prohibitions contained in this lease or specifically in this paragraph.
Therefore, Lessor is hereby granted the right to require the resignation
from Lessee's organization of any member, or to require the exclusion of
any other guest or licensee, who, because of their drunkenness,
carelessness with firearms, violation of game laws, trespassing on
adjoining landowners, or because of their activities which hinder timber,
wildlife or the mineral operations of Lessor or its grantees, or because of
their activities which cause embarrassment to Lessor, have conducted
themselves in a manner detrimental to Lessor's interest. Failure of Lessee
to expel any such member or to exclude any other guest or licensee after
being requested to do so by Lessor may result in the termination of its
lease by Lessor without refund as provided for in paragraph 6 hereof.
(6) Except as otherwise provided, Lessor and Lessee each reserve the right to
cancel this agreement, for any reason, after first giving the other party
30 days prior written notice thereof. In the event of cancellation by
Lessor without cause, Lessor covenants and binds itself to refund unto
Lessee any unearned rentals that might have been theretofore paid. In the
event of cancellation by Lessee, or in the event of cancellation by Lessor
for cause, all rentals theretofore paid and unearned shall be forfeited to
Lessor, not as a penalty, but as liquidated damages for breach of this
agreement, and shall not be refunded to Lessee.
(7) Lessee agrees to maintain all activities on the leased premises in a clean
and litter-free manner. Dumping or littering by Lessee is expressly
prohibited.
(8) Upon expiration of the term of this agreement (or of any extension or
renewal thereof), or upon cancellation hereof by either party as herein-
before provided, Lessee shall have the privilege for a period of sixty (60)
days thereafter to take and remove from the aforesaid property any and all
buildings, structures, equipment or other personal property owned by
Lessee; provided that if Lessee shall fail or refuse to remove the same
within the period aforesaid, title thereto shall ipso facto vest in Lessor.
(9) Lessor reserves the right to sell or exchange the land comprising the
leased premises herein without making such a sale or exchange subject to
the continuation of this lease. It is understood that, if Lessor so
chooses, this lease will automatically terminate upon such a sale or
transfer; provided, however, that Lessor will refund a pro-rata amount of
rentals paid for the period of the lease subject to cancellation, and that
Lessor shall allow Lessee sixty (60) days from the date of cancellation for
removal of Lessee's improvements or equipment from the property.
<PAGE>
(10) The rights and privileges granted herein shall not be assigned, transferred
or sublet by Lessee except with the express written consent of Lessor. Any
attempts by Lessee to assign, transfer or sublet the privileges granted by
this lease, without the written consent of Lessor as provided herein, shall
be void ab initio and shall result in cancellation of this lease.
(11) The trapping of any bird, wildfowl, fur bearer or any animal by Lessee or
its membership, guests or licensees, is specifically and expressly
prohibited without first obtaining the written approval of the Lessor.
Trapping, if permitted, will be allowed only under a separate written
agreement between the parties.
(12) No agreement, plan or program concerning the regulation of animal
populations or the management of water, land or other natural resources on
the leased premises shall be made by Lessee, its guests or licensees with
any local, state, federal or private agency, without first obtaining the
written approval of Lessor.
(13) The pursuit and hunting of any animal by use of dogs, snares, baits,
recordings or other means and devices during any time of the year, other
than that prescribed by State law, is expressly prohibited unless prior
written permission is given by Lessor.
(14) That Lessee will assist Lessor in preventing any unauthorized domestic or
feral livestock from grazing upon the leased premises.
(15) It is understood and agreed that Lessee will cooperate with Lessor and any
university in conducting research on any animal or plant species of a
biological or practical nature, which activity shall be independent of and
excluded from the hunting rights herein granted to Lessee.
(16) In the event Lessor requires in writing, Lessee agrees to participate in
deer and other game management programs, including but not limited to
antlerless seasons, weighing and measuring animals taken, and other annual
activities that may be proposed by the Lessor. Lessee further agrees and
accepts the following conditions:
1. Recreation privileges are allowed for no more than six people per year in
-------------------------------------------------------------------------
accordance with all rules for Four Lakes Reserve.
------------------------------------------------
2. Lessee will maintain gates where marked on map with "X" at its' expense.
-----------------------------------------------------------------------
3. During the day, Lessee may leave the gate open on the south end of Evans
------------------------------------------------------------------------
Road at Hwy 274; it must be locked at night. Other gates used by Lessee must
----------------------------------------------------------------------------
be kept locked at all times.
---------------------------
4. A (1%) $14.60 penalty will be added if not paid by June 30, and Lessor may
--------------------------------------------------------------------------
drop lease and lease to another group if not paid by July 30.
------------------------------------------------------------
(17) Lessee, through its officers and directors, agrees to inform its general
membership, as well as its guests and licensees, of their obligations and
responsibilities under this lease, and, in particular, agrees to have all
provisions of the lease read aloud to the membership at its first meeting
following execution of this lease.
(18) The President of the Lessee shall be responsible for all operations of the
Lessee, and is hereby deemed the agent of the Lessee for all purposes of
said lease, including but not limited to the receipt of all notices or
other documents required from time to time, and as agent is authorized to
act on behalf of the Lessee and in its name insofar as its relationship
with the Lessor is concerned. Officers of the Lessee, including but not
limited to the President, should be elected and the names of all officers
and members will be listed on Exhibit B (attached) and submitted to the
Lessor when applying for any renewal. Any subsequent changes in officers
should be submitted to the Lessor at the time such changes are made.
(19) In the event Lessor shall require in writing, Lessee shall maintain a
permanent record of the uses made of the lands under this lease by its
members, guests and licensees, and shall provide a written annual report,
on forms provided by Lessor, listing the times, parties and activities
carried out on the lands hereunder during the prior year.
<PAGE>
(20) The parties hereto agree that there are no oral or other conditions,
promises, covenants, representations, or inducements in addition to or at
variance with any of the terms hereof and that this agreement represents
the voluntary and clear understanding of both parties fully and completely.
(21) Lessee agrees to indemnify and save harmless Lessor, its agents and
employees from and against all claims, demands, payments, suits, actions,
recoveries and judgments of whatsoever nature, kind and description,
brought, recovered or exacted against Lessor for, or on account of, any
injury (including death resulting therefrom) or damage received or
sustained by any person or persons by reason of any act or omission of
Lessee, its members, agents, guests and licensees, resulting from,
incidental to, or arising out of the operations of Lessee hereunder,
whether such is alleged to have been caused in whole or in part by the
negligence of Lessor, its agents and employees. Lessee further agrees to
defend all such actions at its own expense, to pay all charge of attorneys'
fees and court costs and all other expenses of any kind and character and,
in the event that judgment is rendered against Lessor in any such action,
to satisfy the same.
(22) Lessee assumes responsibility for the condition of the premises, and Lessor
shall not be liable or responsible for any damages or injuries caused by
any vices or defects therein to the Lessee, its members, guests and
licensees, or to any other persons in or on said premises who derives his
right to be thereon from the Lessee.
(23) This lease is made and accepted (i) without any representations or
warranties of any kind on the part of Lessor as to the title or suitability
to the purposes for which the same is granted; and (ii) expressly subject
to any and all existing easements, mortgages, reservations, liens, rights-
of-way, contracts, leases (whether grazing, farming, oil, gas or minerals)
or other encumbrances or servitudes now of record or on the ground
affecting the lands herein described, or to any such agreements that may
hereafter be granted from time to time to others by Lessor.
(24) It is further stipulated and agreed that (i) wherever herein the word
"Lessee" is used, it is intended, and shall be deemed, to include and shall
be binding upon, Lessee, its successors and assigns, and Lessee's
membership, servants, employees, invitees, Licensees, guests, agents and
contractors; and (ii) wherever herein the word "Lessor" is used, it is
intended and shall be deemed, to include and shall be binding upon,
Lessor's successors and assigns; save and except only in either case those
instances wherein the text clearly indicates a contrary intention.
IN WITNESS WHEREOF, the parties have caused these presents to be
executed in duplicate originals by their duly authorized officers of the
day and year first hereinabove set out.
IP TIMBERLANDS OPERATING CO., LTD.
WITNESSES: I.P. BY: /s/ Acting Manager
----------------------------------
Its Manager, RICHARD F. TAYLOR
/s/ Donna Burchfield
---------------------------------
/S/
-----------------
WITNESSES: LESSEE LESSEE: HI-TECH, INC.
BY: /s/ Gene Hill
----------------------------------
/s/ Andy Moll Its President
-----------------
/s/ Sharon Lemons P. O. Box 3112
----------------- ----------------------------------
Address
E. Camden, AR 71701
----------------------------------
(501)798-4171
----------------------------------
Telephone
<PAGE>
EXHIBIT "A"
HITECH, INC.
#007-206
CAMDEN and HAMPTON UNITS
<TABLE>
<CAPTION>
SECTION TOWNSHIP RANGE DESCRIPTION
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
CAMDEN UNIT
- -----------
1 13S 15W W 3/4 South of old road, East of Cotton
Belt Tram, And west of Evans Road, Except
railroads and 8-AT area Sold to Highland
Resources;
12 13S 15W W 3/4 N 1/4
North of Highway 274, East of Cotton Belt
Tram West of Evans Road, Except Railroads
and area Sold to Highlands Resources.
- -------------------------------------------------------------------------------------------------------------
CAMDEN UNITS ACRES 231
</TABLE>
<TABLE>
<C> <S> <C> <C>
HAMPTON UNIT
- ------------
1 13S 15W SE 1/4 NE 1/4
South and East of Evans Road and West of
Canal;
NE 1/4 SE 1/4
East of Evans Road, West of Canal and North
of Woods road;
E 1/2 SE 1/4
South of woods road, East of Evans Road, and
west of railroad.
12 13S 15W NE 3/4 NE 1/4
North of Highway 274 East of Evans Road
Except Railroad
6 13S 14W NW 1/4 SW 1/4
South of woods road and West of railroad;
SW 1/4 SW 1/4
South of railroad and West of paved road.
NW 1/4 NW 1/4
North of Highway 274, West of paved road
7 13S 14W South and east of railroad.
- -------------------------------------------------------------------------------------------------------------
HAMPTON UNIT ACRES 61
</TABLE>
TOTAL ACRES 292, more or less
-----------------------------
<PAGE>
EXHIBIT 10.21
STATE OF ARKANSAS )
) HUNTING LEASE
COUNTY OF CALHOUN ) -------------
This Agreement, made and entered into this 20th day of May, 1985, by and
between IP Timberlands Operating Company, Ltd., a Texas limited partnership
(herein called "LESSOR"), and HITECH, Inc., an Arkansas corporation, (herein
called "LESSEE"):
W I T N E S S E T H
-------------------
That for the term and in consideration of the rentals hereinafter set
forth, and the covenants, conditions and obligations to be observed and
performed by the LESSEE, the LESSOR does hereby lease and demise unto LESSEE the
exclusive right and privilege of propagating, protecting, hunting, shooting and
taking game and wildfowl from the following described lands of LESSOR in Calhoun
County, Arkansas and more particularly described as follows:
The Southwest 1/4 of the Southwest 1/4 of Section 9; the West l/4,
Southeast 1/4 Southwest l/4, the South l/2 of the Southeast l/4, the East
l/2 of Northeast l/4, and the Northwest l/4 of the Northeast 1/4 of Section
16, all lying in Township 13 South of Range 14 West.
Together with full rights in LESSEE to enter into, upon, over, across and out
said lands solely for the purposes abovedescribed and for none other whatsoever.
(l) LESSEE covenants and agrees to pay as rental to LESSOR at its office at
P.0. Box 249, Camden, Ar. 71701, the sum of EIGHT HUNDRED AND EIGHTY
DOLLARS ($880.00) per annum, in advance.
(2) This Lease shall commence on the 15th day of August, 1985 and, unless
sooner terminated as hereinafter provided, shall expire on the 15th day of
August, 1988.
(3) LESSEE recognizes, understands and acknowledges that LESSOR has acquired
and holds the aforesaid lands for the purpose of planting, growing,
protecting, maintaining, conserving and harvesting therefrom trees, timber,
pulpwood and other forest products, and for other uses in connection with
the operation of its lands, and Lessee agrees that all rights, titles and
privileges hereunder granted are, and shall be, at all times, expressly
subject to Lessor's basic and primary right to prevent any fire, waste,
nuisance, or unnecessary injury to said property or to the commercial
values thereof, and to develope, use, enjoy and protect its said lands
without limitation. Therefore, Lssee's exercise of any of its rights under
this agreement shall in nowise impede or hinder Lessor in the full
enjoyment of said land as above-described, and if in Lessor's land
management operations as aforesaid it becomes necessary, expedient or
advisable for Lessor to prohibit, curtail or suspend all hunting on the
above-described leased premises, Lessor shall have the right so to do upon
written notice thereof to Lessee, or Lessor may cancel this lease as
provided in Paragraph 6 hereof.
(4) Lessee further expressly covenants and agrees:
a. To furnish Lessor a copy of Lessee's Charter and By-Laws if any, and
also annually or on or before the anniversary date hereof a list of the names
and addresses of its membership and of every guest or license to whom the
privileges of hunting on siad lands have been granted by Lessee. While Lessee
shall have the right and privilege of permitting persons of its selection other
than its members to use the land for hunting insofar as its Charter, By-Laws,
rules and regulations permit, it may do so only upon the prior written approval
of Lessor obtained, and any privileges so extended to such other persons by
Lessee shall be strictly subject, as in the case of all of its members, to the
terms, limitations and conditions of this lease. Moreover, the total membership
of Lessee and the total number of additional guests or licensees which Lessee
may invite to use said premises as hereinbefore provided shall be subject to the
approval of Lessor.
<PAGE>
b. To use every precaution to protect the aforesaid timber, trees and
forest products from fire or other damage, and to that end, Lessee will assist
and exercise every effort in putting out any fire that may occur on said lands.
In the event that any fire shall be willfully or negligently started or allowed
to escape on said lands by Lessee, Lessor shall have the right to immediately
cancel this Lease without notice, and any unearned rentals theretofore paid
shall be forfeited to Lessor. In addition, Lessor shall be entitled to recover
from Lessee any damages which Lessor sustains as the result of such fire.
c. To assume responsibility, and to pay for any trees, timber or other
forest products that may be cut, used, damaged and/or removed from said lands by
Lessee.
d. To comply, and to require compliance by each and all of its members and
all persons to whom hunting and privileges shall be extended hereunder as
aforesaid, with all laws, rules and regulations now existing or hereinafter
enacted by any county, state or federal authority with respect to its activities
hereunder, and any violation of any such laws, rules or regulations, shall
constitute a material breach of this lease and shall give Lessor the right and
privilege of cancelling this lease, with or without notice, and in such an event
any unearned rentals paid hereunder shall be forfeited to Lessor as liquidated
damages for the breach of this agreement. Bag limits and the length of the
hunting season shall strictly conform to the game laws of the particular county
or counties in which lands are located.
e. To exercise all reasonable precautions in and about the enjoyment of
Lessee's rights hereunder respect to its safety and the safety of others using
said privileges under Lessee's authority.
f. To indemnify, save and hold harmless Lessor from and against any claims,
demands, injuries, damages, costs, fees or expenses on the part of any person or
persons whomsoever, arising out of, or attributable to, the use of this said
land by Lessee, its members and guests, under the terms of this agreement,
whether such liability, claims, loss, injury or damage is caused or alleged to
have been caused in whole or in part by the negligence of Lessee, its agents and
employees.
g. Not to construct or install upon said lands any plantings, food plots,
roads, bridges, fences, camps, buildings, lodges, shelters, docks, piers,
landings or other structures, permanent or temporary, without having first
obtained in writing the consent of Lessor thereto. In the event at any time that
such consent is granted by Lessor, Lessee further Covenants to effect such
construction or installation at its own cost and expense and strictly in
compliance with any specifications, requirements or limitations that shall be
imposed with respect thereto by Lessor, and shall further keep and maintain the
same in a condition of repair, cleanliness and safety agreeable to Lessor or its
duly authorized agents.
h. Not to hinder, impede or deny access to the public to any lake, fishing
or picnic areas that may be located on the lands above-described, or to any
streams that may traverse the same, but no roads or access ways to such lakes,
streams, fishing and/or picnic areas shall be used by the public other than
those designated by Lessor for that purpose; and Lessee covenants and agrees to
use all reasonable means and to cooperate with Lessor's representatives in the
enforcement of such limitations.
i. Not to erect or display any signs or notices that the leased premises
are posted for hunting, except and unless such signs shall be approved by Lessor
and shall clearly bear the name of Lessee. Attached hereto, made part hereof as
Exhibit "A", are two artist renderings of the signs which LESSEE shall be
authorized to place every ONE HUNDRED (100) feet on the leased premises.
(5) It is further stipulated and agreed that (i) wherever herein the word
"Lessee" is used, it is intended, and shall be deemed, to include and shall
be binding upon, Lessee's members, agents, officers, servants, employees,
contractees, invitees, licensees, guests, successors and assigns; and (ii)
wherever herein the word "Lessor" is used, it is intended and shall be
deemed, to include and shall be binding upon, Lessor's successors and
assigns; save and except only in either case those instances wherein the
text clearly indicates a contrary intention.
(6) Anything in this Agreement to the contrary notwithstanding, it is expressly
understood and agreeed that Lessor and Lessee each reserve the right to
cancel this agreement, with or without cause, at any time during the term
hereof after first giving the other party 30 days prior written notice
thereof. In the event of cancellation by Lessor (unless elsewhere herein
expressly provided to the contrary) Lessor covenants and binds itself to
refund unto Lessee any
<PAGE>
unearned rentals that might have been theretofore paid. In the event of
cancellation by Lessee all rentals theretofore paid and unearned shall be
forfeited to Lessor as liquidated damages for breach of this agreement, and
shall not be refunded to Lessee.
(7) Upon expiration of the term of this agreement (or of any extension or
renewal thereof), or upon cancellation hereof by either party as
hereinbefore provided, Lessee shall have the privilege for a period of 60
days thereafter to take and remove from the aforesaid property any and all
buildings, structures, equipment or other personal property owned by
Lessee; provided that if Lessee shall fail or refuse to remove the same
--------
within the period aforesaid, title thereto shall ipso facto vest in Lessor.
-----------
(8) This lease shall not be assignable by Lessee except upon the express
written consent of Lessor.
(9) This lease is made and accepted (i) without any representations or
warranties of any kind on the part of Lessor as to the title or suitability
to the purposes for which the same is granted; and (ii) expressly subject
to any and all existing easements, mortgages, reservations, liens, rights-
of-way, contracts, leases (whether grazing, farming, oil, gas or minerals)
or other encumberances or servitudes now of record or on the ground
affecting the lands herein described, or to any such agreements that may
hereafter be granted from time to time to others by Lessor.
(10) Lessee assumes responsibility for the condition of the premises and Lessor
shall not be liable or responsible for any damages or injuries caused by
any vices or defects therein to the Lessee or to any occupant or to anyone
in or on said premises who derives his right ot be thereon from the Lessee.
(11) Lessor hereby agrees and covenants that due to the nature of Lessee's
business and manufacturing, that Lessor shall do no "Controlled Burning" of
the Leased premises without giving prior notice to LESSEE of not less than
five (5) working days prior to control burning the demises premises.
Nothing in this paragraph shall restrict LESSOR from control burning its
properties as and when it sees fit, but the conditions and covenants in
this paragraph shall simply require LESSOR to give five (5) working day
notice of its intention to so control burn.
IN WITNESS WHEREOF, the parties have caused these presents to be executed
in duplicate originals by their duly authorized representatives on the day and
year first hereinabove set out.
IP TIMBERLANDS OPERATING COMPANY, LTD.
By: IP Forest Resources Company
Its Managing General Partner
By: /s/
---------------------------------
Its Treasurer
LESSOR
WITNESSES:
/s/ Dorothy Moseley
- ----------------------------
/s/ Karen Baldwin
- ----------------------------
HITECH, INC.
By: /s/ John Herron
---------------------------------
John Herron, President
LESSEE
ATTEST: /s/ Thomas E. Hill
--------------------------------
Thomas E. Hill
Assistant Secretary
<PAGE>
WITNESSES:
/s/ James D. Foyil
- ----------------------------
/s/ Tracy Carmen
- ----------------------------
RENTAL SCHEDULE
- ---------------
8/15/85 - 8/15/86 - $880.C0 (440 Acres @ $2.00/Ac.)
8/15/86 - 8/15/87 - $880.00 (440 Acres @ $2.00/Ac.)
8/15/87 - 8/15/88 - $880.00 (440 Acres @ $2.00/Ac.
<PAGE>
EXHIBIT 10.22
Revised August 27, 1998
STATE OF MISSISSIPPI
CITY OF STONE
LEASE AGREEMENT
- ---------------
THIS AGREEMENT, made this the 1st day of September, 1998, between THE BOARD
OF EDUCATION OF THE STONE COUN'TY SCHOOL DISTRICT, 214 Critz Street, Wiggins,
Stone County, Mississippi, hereinafter referred to as "LESSOR", and CMS DEFENSE
SYSTEMS, INC., Post Office Box 1479, Winter Park, Florida 32790, hereinafter
referred to as "LESSEE".
1. Lease of Property. LESSOR hereby leases the following 16th Section school
trust lands classified as industrial (hereinafter referred to as "the
Property") unto LESSEE, more particularly described as follows, to-wit:
That portion of Section 16, Township 4 South, Range 11, West, Stone
County, Mississippi, which is situated and located South of East McHenry
Road, containing 465 acres, more or less.
2. Initial Term and Rental. This Lease Agreement shall be for an initial term of
Five (5) years from the date hereof at an annual ground rental of Forty-Two-
Thousand and No/100 Dollars ($42,000.00), with such annual rental to be made
payable to the STONE COUNTY SCHOOL DISTRICT. The initial annual ground
rental payment shall be due and payable as of the date hereof, arid cash
additional annual ground rental payment shall be due and payable as of the
yearly Anniversary date of this agreement. In addition, LESSOR shall, as of
the date of this agreement, pay a onetime sum to LESSEE in the amount of
Thirty-Thousand-Nine-Hundred-Ninety-Seven and No/100 Dollars ($30,997.00) as
payment for loss of previous and future growth of trees to be cleared on the
initial facility area of 21.19 acres together with the costs of site
preparation and tree planting associated therewith. LESSEE shall also pay off
the remaining three (3) years of the existing hunting lease to Three Oaks
Hunting Club, Hollis Williams, President, in total amount of $4,882.50.
3. Extension of Term. LESSEE shall have the option to extend the term of this
Agreement for Four (4) additional consecutive Five (5) year periods, provided
LESSEE: gives LESSOR written notice of its desire for such extension at least
Six (6) months prior to the expiration of the then existing term. The annual
ground rental for the extended terms shall be as follows, to-wit:
(a) First Extension Term - The annual around rental shall be increased by
Five percent (5%) of the initial annual ground rental amount resulting
in a total annual ground rental of Forty-Four-Thousand-One-Hundred and
No/100 Dollars ($44,100,00).
(b) Second Extension Term - The annual ground rental shall be determined as
provided by the procedure set out in the following Paragraph 4 captioned
"Reappraisal and Rent Adjustment".
(c) Third Extension Term - The annual ground rental shall be increased by
Five percent (5%) of the Second Extension Term annual ground rental.
(d) Fourth Extension Term - The annual ground rental shall be determined as
provided by the procedure set out in the following Paragraph 4 captioned
"Reappraisal and Rent Adjustment".
4. Reappraisal and Rent Adjustment. (a) The amount of rental to be paid during
the second (beginning 10th year of lease) and fourth (beginning 20th year of
lease) extension terms shall be determined as provided by this paragraph.
LESSOR shall, six months before the expiration of the first and third
extension terms, cause the subject property to be reappraised and the
redetermination made of the annual fair market rental amount. The reappraisal
shall he made pursuant to the terms of Section 29-3-65 of the Mississippi
Code of 1972, as amended, or pursuant to the statute then in effect governing
such leases and procedures for determining fair market rental value. The
<PAGE>
appraisal shall establish the fair market value of the property and establish
a reasonable current percentage of income on real estate investment for the
purpose of determining annual fair market rental. Such percentage shall be no
less than the minimum acceptable percentage provided by statute then in
effect.
(b) Should the procedure described in subparagraph (a) above (the Statutory
Procedure) result in an increase of the annual ground rental amount over
the amount previously due, LESSEE, within 15 days after receiving notice
of the increase, shall have the right to elect an alternate method of
determining the current fair market rental value of the Property (the
Alternate Procedure) as follows: (1) Lessee may request an appraisal by
an appraiser having, the highest available qualifications and licensed in
accordance with Section 73-34-1 et seq. of the Mississippi Code of 1972,
as amended, to determine a current fair market annual rental value based
on the fair market value of the land and a reasonable percentage of
return on comparable land investments as of the rental adjustment date;
(2) the appraiser appointed by LESSEE and the appraiser previously
appointed by LESSOR under the Statutory Procedure, if they cannot agree,
will mutually select a review appraiser who shall review and analyze the
two appraisal reports and , if needed, inspect the land, consult with the
two appraisers, review their assumptions and source information and
request corrections, revisions or additions to the appraisal reports; (3)
The review appraiser shall report his opinion of annual fair market rent.
The lesser amount as determined by the Statutory Procedure or by the
Alternate Procedure shall be accepted by LESSOR and LESSEE as the current
fair market rental value of the leased property.
(c) If LESSEE. requests the Alternate Procedure, LESSEE shall pay all fees
and expenses of the LESSEE'S appraiser, the review appraiser, and any
additional charges of LESSOR'S appraiser.
(d) In no event, however, shall the adjusted annual ground rental for the
second or fourth extension terms be in an amount that is less than the
amount of annual ground rental for the preceding term.
(e) The amount of rent determined in the above manner shall be promptly
remitted upon conclusion of this rental adjustment procedure effective as
of the rental adjustment date.
5. Use. LESSEE shall use the Properly for the purpose of manufacturing,
maintaining and operating an assembly facility associated with non-nuclear
weapons systems and uses incidental thereto, which may consist of such
buildings as are necessary for such operations (collectively, the "Assembly
Facility"). All improvements to the Property necessary for LESSEE'S use shall
be made at LESSEE'S expense.
LESSEE shall erect an Assembly Facility suitable far its proposed use. It is
understood and agreed that the initial facility area to be cleared consists
of approximately Twenty-One-and-Nineteen-One-Hundredths (21.19) acres as set
out on the plat attached hereto as Exhibit "A'; and LESSOR grants LESSEE the
right to clear all trees, undergrowth, or other obstructions and to trim, cut
and keep trimmed and cut, all limbs which may interfere or fall upon LESSEE'S
facility or the LESSEE'S other improvements on said Twenty-One-and-Nineteen-
One-Hundredths (21.1 9) acre site. It is further understood and agreed that
LESSEE'S operations on the Property may require that its Assembly Facility be
expanded from time to time, and that such expansion will necessitate that
additional land be cleared of trees and other obstructions. It is likewise
further understood and agreed that all timber on the Property is reserved
unto LESSOR by operation of law concerning 16th Section lands. Therefore, if
at any time LESSEE shall determine that it will expand the Assembly Facility
area, it shall first notify LESSOR in writing of its intention to expand and
furnish LESSOR with a designation of the area upon which trees and other
obstructions will need to be cleared. Upon such receipt, LESSOR shall
forthwith notify and direct the Mississippi Forestry Commission to perform
any necessary cruise and/or appraisal of the timber located on the area to be
cleared as said Commission deems necessary to determine the status and value
of the trees situated thereon, and report its findings in writing to LESSOR
and LESSEE. If the Commission's report indicates that merchantable trees are
located on the area designated to be cleared, LESSOR shall forthwith proceed
with the advertisement and sale of said timber by bid as required under state
law governing 16th Section lands with said trees to be cut and removed
<PAGE>
by the successful bidder within a reasonable time thereafter taking into
consideration state law in regard to such sale. LESSEE agrees to pay LESSOR
compensation for any loss of previous and future growth of trees on the
expansion area which are not merchantable at the rate of Fifty Dollars
($50.00) per acre per year based upon a 27 year tree growth cycle together
with the costs of site preparation anal tree planting associated therewith as
reflected by the Commission's report.
LESSOR may continue to grow and harvest timber on any area of the Property
either within or outside of any buffer zone established by LESSEE, other than
the Assembly Facility Area or any expansion area to be cleared as above
described, provided any such harvesting activities are undertaken or
performed at a time that does not interfere with LESSEE'S operations.
Governmental Approvals. LESSOR shall cooperate with LESSEE in its effort to
obtain and maintain in effect all certificates, permits, licenses and other
approvals required by governmental authorities for LESSEE'S use of the
Property.
7. Indemnification. LESSEE shall indemnify and hold LESSOR harmless against any
liability or loss from personal injury or property damage resulting from or
arising out of the use and occupancy of the Property by LESSEE or its
employees or agents, excepting, however, such liabilities and losses as may
be due to or caused by the acts or omissions of LESSOR or its employees or
agents. LESSEE shall provide a comprehensive general public liability policy
covering its operations on the Property. LESSEE shall provide liability
insurance for the Assembly Facility and worker's compensation insurance in
statutory amounts. Certificates of insurance shall be supplied to the LESSOR
prior to the commencement of construction and upon the renewal date of each
policy.
8. Taxes. LESSEE shall be responsible for paying any and all property taxes
separately levied or assessed against the improvements constructed by LESSEE
on the Property.
9. Option For Improvements To Vest In Lessor Upon Termination. Upon termination
of this agreement, LESSOR shall have the option to be vested with title to
the buildings as set out in Paragraph 5 constituting the Assembly Facility,
constructed or installed on the Property by LESSEE. If upon termination of
this agreement LESSOR exercises such option to have such title vested in it,
LESSEE shall within a reasonable period remove all personal properly and any
fixtures therein, provided such removal of fixtures does not significantly
damage or destroy the structural, mechanical or aesthetic integrity of such
buildings. LESSEE shall cooperate with LESSOR concerning such transfer of
title to the buildings, and agrees to execute any appropriate documents that
are necessary or desirable to accomplish such transfer of title to said
buildings. If upon termination of this agreement LESSOR chooses not to take
title to such buildings, then title to such buildings shall remain in LESSEE,
and LESSEE shall within a reasonable period remove all such buildings
together with personal property and fixtures, and restore the Property to its
original condition.
10. Enjoyment. LESSOR covenants that LESSEE, on paying the rental and performing
the covenants, terms and conditions required of LESSEE contained herein,
shall peaceably hold and enjoy the Property and the leasehold estate granted
to LESSEE by virtue of this Agreement.
11. Assignment. This lease Agreement may not be sold, assigned, or otherwise
transferred by either party in whole or in part without the express prior
written consent of the other party, which consent shall not unreasonably be
withheld. The foregoing shall not apply in the event either party shall
change its corporate name, merge or otherwise combine with another
corporation or in cases of inter-company transfer of LESSEE.
12. Condemnation. If the whole of the Property, or such potion thereof as will
make the Property unusable for the purposes herein leased, is condemned by
any legally constituted public authority, then this Agreement, and the term
hereby granted, shall cease from the time when possession thereof is taken
by the public authority, and rental shall be accounted for as between
<PAGE>
LESSOR and LESSEE as of that date. Any lesser condemnation shall in no way
affect the respective rights and obligations of LESSOR and LESSEE hereunder.
However, nothing in this paragraph shall be construed to limit or adversely
affect LESSEE'S right to an award of compensation from any condemnation
proceeding for the taking of LESSEE'S leasehold interest hereunder or for
the taking of LESSEE'S improvements, fixtures, equipment, and personal
property.
13. Title Insurance. LESSEE, at LESSEE'S option, may obtain title insurance on
the Property. LESSOR shall cooperate with LESSEE'S efforts to obtain title
insurance by executing documents or obtaining requested documentation as
required by the title insurance company.
14. Hazardous Substances. LESSEE shall hold LESSOR harmless from and indemnify
LESSOR against any damage, loss, expense, response costs or liability,
including consultant fees and attorneys' fees, resulting from hazardous
substances generated, stored, disposed of or transported to, on or under the
Property as a result of LESSEE'S use of the Property. For purposes of this
Agreement, "hazardous substances" shall mean (a) any substance which
contains gasoline, diesel fuel or other petroleum hydrocarbons, (b) any
substance which is flammable, radioactive, corrosive or carcinogenic, (c)
any substance the presence of which on the Property causes or threatens to
cause a nuisance or health hazard affecting human health, the environment,
the Property or property adjacent thereto, or (d) any substance the presence
of which on the property requires investigation or remediation under any
hazardous substance law, as the same may hereafter be amended. "Hazardous
Substance Law', means the Comprehensive Environmental Response Compensation,
and Liability Act, 42 U.S.C. Section 9601 et seq.; the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq.; the Hazardous Material
Transportation Act, 49 U.S.C. Section 1801 et seq.; the Clean Water Act, 33
U.S C. Section 1251 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et
seq.; the Federal Insecticide, Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. Sections 136 et seq., the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; the Emergency Planning, and Community right to Know
Act (SARA Title III) 42 U.S.C. Section 11001 et seq., and any applicable
state law or regulation.
LESSEE agrees to abide by and comply with all federal and state
environmental laws, rules, and regulations concerning air, water, soil,
toxic substances, and hazardous substances. LESSEE further agrees that if a
fine or other assessment is levied against LESSOR as a result of a violation
of any such federal and/or state environmental law, rule and/or regulation
attributable to LESSEE'S operations concerning the Property, then LESSEE
shall indemnify and hold LESSOR harmless from same. LESSEE further agrees
that if any such federal and/or state environmental law, rule, and/or
regulation requires any monitoring activities as a result of its operations
on the Property,. then LESSEE shall continue such monitoring activities upon
termination of the lease as required by such law, rule, and/or regulation.
LESSEE further agrees that if environmental pollution or contamination is
present on the property at the termination of this lease agreement, then
LESSEE: shall perform any cleanup or remedial operations necessary to remove
such pollution or contamination; arid if such pollution or contamination
cannot be removed or remedied rendering the property unusable, LESSEE agrees
to continue its lease of the property.
15. Opportunity to Cure. If LESSEE shall fail to pay any rental or other amounts
payable under this Agreement when due, or if LESSEE should fail to perform
any other of the covenants, terms or conditions of this Agreement, prior to
exercising any rights or remedies against L.ESSEE on account thereof, LESSOR
shall first provide LESSEE with written notice of the failure and provide
LESSEE with a thirty (30)) day period to cure such failure (if the failure
is a failure to pay rental or any other sum of money under this Agreement)
or a Sixty (60) day period to cure such failure (if the failure is a failure
to perform any other covenant, term or condition of this Agreement). If the
failure is not a failure to pay rental or any other sum of money hereunder
but is not capable of being cured within a Sixty (60) day period, LESSEE
shall be afforded a reasonable period of time to cure the failure provided
that LESSEE promptly commences curing the failure after the notice and
prosecutes the cure to completion
<PAGE>
win due diligence. If the LESSEE fails to cure the failure within a
reasonable time period all payments due for the remaining existing term or
extension thereof shall become due and payable immediately as liquidated
damages for default.
16. Governing law. This Agreement shall be Governed and interpreted by and
construed in accordance with, the laws of the State of Mississippi.
17. Notices. All notices hereunder must be in writing and shall be deemed
validly given on the date when deposited in the United States mail, by
certified mail, return receipt requested, addressed as follows (or to any
other address that the party to be notified may have designated to the other
party by like notice at least Ten (IO) days prior thereto):
LESSEE: CMS DEFENSE SYSTEMS, INC
Post Office Box 1479
Winter Park, Florida 32790
Attention: President
LESSOR: STONE COUNTY SCHOOL DISTRICT
214 Critz Street
Wiggins, Mississippi 39577
Attention: Superintendent of Education
The parties may substitute recipient's names and addresses by giving
notice as provided hereunder. Rejection or refusal to accept delivery of
any notice, or the inability to deliver any notice because of a changed
address of which no notice was given, shall be deemed to be receipt of any
such notice.
18. Miscellaneous. This Agreement cannot be modified except by a written
modification executed by LESSOR and LESSEE in the same manner as this
Agreement is executed. The headings, captions and numbers in this Agreement
are solely for convenience and shall not be considered in construing or
interpreting any provision in this Agreement. Whenever appropriate in this
Agreement, personal pronouns shall be deemed to include other genders and
the singular to include the plural, if applicable. This Agreement contains
all agreements, promises and understandings between the LESSOR and LESSEE;
and no verbal or oral agreements, promise statements, assertions or
representations by LESSOR or LESSEE or any employees, agents, contractors or
other representations of either, shall be binding upon LESSOR or LESSEE.
This Agreement may be executed in several counterparts, each of which shall
constitute an original and all of which shall constitute the same agreement.
19. Survival. The provisions hereof, which by their nature are continuing, shall
continue to bind the parties beyond any termination hereof, including but
not limited to the provisions of Paragraph 14 "Hazardous Substances".
IN WITNESS WHEREOF, the parties hereto have set their hands arid affixed
their respective seals the day and year first above written.
BOARD OF EDUCATION OF THE
STONE COUNTY SCHOOL DISTRICT,
LESSOR DISTRICT,
LESSOR,
By:
/s/ Gloria Fairley
- --------------------------------------
GLORIA FAIRLEY, President
<PAGE>
Attest:
/s/ Henry Rath
- --------------------------------------
HENRY RATH, Executive Secretary
CMS DEFENSE SYSTEMS, INC.,
LESSEE
By:
/s/ Thurman D. Kitchin
- --------------------------------------
THURMAN D. KITCHIN, President
STATE OF MISSISSIPPI
COUNTY OF STONE
Before me, the undersigned Notary Public in and for the aforesaid state and
county, this day personally came and appeared the above and within named GLORIA
FAIRLEY and HENRY RATH, who are the President and Executive Secretary,
respectively, of THE BOARD OF EDUCATION OF THE STONE COUNTY SCHOOL DISTRICT, who
acknowledged that in such capacity, they signed and delivered the above and
foregoing instrument of writing and attached the District's seal thereto, on the
day and year therein written, as the act and deed of said Board of Education,
they being first duly authorized so to do.
Given under my hand and official seal of office this, the 2nd day of
September, 1998
/s/ Norma K. Batson
-------------------------------------
Notary Public
My Commission Expires: SEAL
My Commission Expires Sept. 8, 1998
STATE OF FLORIDA
COUNTY OF ORANGE
Before me, the undersigned Notary Public in and for the aforesaid state and
county, this day personally came and appeared the above and within named THURMAN
D. KITCHIN, who is the President of CMS DEFENSE SYSTEMS, INC., who acknowledged
that in such capacity, he signed and delivered the above and foregoing
instrument of writing and attached the corporate seal thereto, on the day and
year therein written, as the act and deed of said corporation, he being first
duly authorized so to do.
Given under my hand and official seal of office this, the 31st day of
August, 1998.
/s/ Jean A. Brown
-------------------------------------
Notary Public
My Commission Expires:
Jean A. Brown
State of Florida
My Comm. Exp: 08/19/00
Comm #: CC584118
<PAGE>
EXHIBIT 10.23
COMMERCIAL LEASE
THIS COMMERCIAL LEASE AGREEMENT is entered on this, the 27th day of February,
1994, by and between RICHARD R. BENNETT and BETTY J. BENNETT, hereinafter
referred to as "Lessors," and OTI INTERNATIONAL, INC., a Delaware corporation,
with offices at 60 Second Street, Post Office Box 896, Shalimar, Florida 32579,
hereinafter referred to as "Lessee".
IN CONSIDERATION of the mutual agreements to be performed as hereinafter set
forth, the Lessors and the Lessee agree as follows:
1. TERM: Lessors hereby lease to Lessee the real property in Okaloosa County,
----
Florida, together with the buildings and improvements erected thereon,
described more particularly as follows:
Block 65, Lots 1 through 28, Port Dixie Townsite, Shalimar,
Okaloosa County, Florida, EXCLUDING the South 140' x 420' parcel
occupied by the Bennett Construction Yard.
(a) The lease shall commence I January 1995 and shall expire 31 December 1996.
(b) Lessors expressly give and grant to Lessee the right, option, and privilege
of extending the leasehold term of this lease two (2) times for an
additional period of two (2) year each time, in addition to the original
one (1) year leasehold term herein granted, upon the same terms and
conditions as herein set out, all of which shall apply to such extended
term to the same extent and as fully as if this lease had been written for
the period of time covering both the original term and the extended term or
terms provided in this option of extension, and in such event the word
"term" in this agreement shall mean and refer to the original term as
extended.
(c) The option herewith granted by Lessors to Lessee to extend the term of this
lease shall expire, and be of no further force and effect, unless exercised
by Lessee by written notice to Lessors on or before the date which is one
hundred eighty (180) days prior to the expiration of the term then in
effect.
(d) In the event Lessee elects to exercise any such option of extension, then
the giving of the above-described notice by lessee so notifying Lessors in
writing, if given within the time hereinabove provided, shall operate to
automatically extend this lease for an additional term without further
action on the part of either of the parties hereto.
(e) Notwithstanding any of the above provisions, it is agreed that such option
may be exercised only if at the time of such exercise this lease is in full
force and effect, and Lessee is not in default in the performance of any of
the terms or provisions of this lease.
4. RENT: Lessee agrees to pay Lessors an annual lease price of Ninety-seven
----
Thousand Five Hundred ($97,500.00) Dollars, plus applicable Florida State Sales
Tax and 0kaloosa County, Florida Real Property ad valorem taxes.
(a) These payments will be made monthly, in advance, as itemized below for the
year 1995:
$ 97,500.00 Rent
$ 5,850.00 approximate 6% sales tax
$ 7,880.00 approximate ad valorem tax
-----------
$111,230.00
$ 9,269.17 1995 Monthly Payments
<PAGE>
(b) The rent payment will be due on the first day of each month, commencing
January 1, 1995.
(c) The Florida State Sales Tax and the Okaloosa County ad valorem real
property taxes will be based on the actual sums due, and adjusted
accordingly.
(d) The price of the rent for the optional years will be adjusted annually by
the average increase in the Consumer Price Index for all urban Consumers
(CPI-U).
(e) The first and last months' rent payments will be due in advance.
5. Lessors may continue to utilize one (1) of the buildings in the back fenced
area, to be chosen by the Lessee.
6. The Lessee agrees to pay all utility bills for its leased premises after
commencement of the lease term.
7. MAINTENANCE, REPAIRS and ALTERATIONS:
------------------------------------
(a) The Lessors agree to maintain the structure and roof of the building.
(b) ST Keltec Corp., Signal Technology, in accordance with the terms of the
existing lease agreement, shall be required to place the air conditioning,
heating, and electrical systems in acceptable condition to the satisfaction
of the Lessors (Bennett). This shall be accomplished at the end of the
Keltec lease.
(c) Lessors (Bennett) thereafter will be responsible for air conditioning
compressors and fan motors in the air conditioning units.
(d) Lessors are responsible for replacement of air conditioning equipment if
lessor deems replacement to be necessary.
(e) The Lessee agrees to maintain the interior of the building, and further
agrees to use reasonable care in operating the heating and cooling
equipment.
(f) Lessee shall provide periodic cleaning, preventive maintenance, and
servicing of the heating and cooling equipment by a State-certified air
conditioning contractor.
(g) At the expiration of the lease, the property shall be restored to the
Lessors in the same condition as on the commencement of the lease term,
less fair wear and tear.
(h) Lessee shall not, without first obtaining the consent of Lessors, make any
alterations, additions or improvements in, to, or about the premises.
8. INSURANCE and INDEMNIFICATION:
-----------------------------
(a) The Lessors agree to maintain fire and extended coverage insurance
on the building.
(b) The Lessee agrees to maintain liability insurance to protect the
Lessors and insurance on the contents of the building during the term or
terms of this lease.
(c) The amount of contents insurance will be in an amount acceptable
to the Lessors.
(d) The Lessee agrees to indemnify the Lessors from any damage to the
property or that may be sustained by individuals as a result of injuries
on the premises due to the negligence of Lessee.
(e) The Lessee further agrees to carry liability insurance with
minimum $5,000,000 combined single limits, with the said Lessors being
named as additional insureds on the policy. Lessee will supply Lessor
with proof of such insurance.
<PAGE>
9. ASSIGNMENT and SUBLETTING: The Lessee agrees not to sublease or assign
--------------------------
this lease or rent the property to any person, firm or entity without first
obtaining the consent of the Lessors, which consent will not be unreasonably
withheld.
(a) In the event of any assignment of subletting by Lessee, the
Lessors shall receive from the Lessee one-half (1/2) of any sums which
exceed the rents due from Lessee to Lessors under this lease.
10. USE: Lessee shall use and occupy the premises for design, assembly, and
---
light manufacturing of electonics and metal parts, together with administration
and marketing related thereto, and for no other purpose unless expressly
approved by Lessors.
(a) Lessor has been advised by the Lessee of Lessee's intent to
install machinery which may weigh in excess of 5,000 pounds. Lessor
confirms that the floor system of the building will carry loads of this
nature when installed as static loads distributed over dimensions typical
of machine tool base configurations.
(b) Lessee shall not use any portion of the premises for purposes
other than those specified hereinabove, and no unlawful use shall be made
or permitted to be made upon the premises.
(c) Lessee shall commit no act of waste and shall take good care of
the premises and the fixtures and appurtenances on it and shall, in use
and occupancy of the premises, conform to all laws, orders, and
regulations of the federal, state and municipal governments or any of
their departments.
11. DESTRUCTION OF PREMISES:
-----------------------
(a) If the leased property is damaged by fire or other casualty to the
extent of forty percent (40%) or more, either party shall have the option
to rebuild and repair the leased property, or to terminate this lease.
(b) If the leased property is damaged to a lesser extent, the Lessors
will build or repair.
(c) In the event of damage by fire or other casualty, the rent payable
under this lease shall abate in proportion to the impairment of the use
that can reasonably be made of the property for the purposes permitted by
this lease until the lease is terminated or the leased property is rebuilt
or repaired in accordance with this paragraph.
12. If either the Lessee or the Lessors shall fail to perform, or shall
breach any covenant of this lease, other than the agreement of the Lessee to pay
rent, and such failure or breach shall continue for ten (10) days after written
notice specifying the performance required shall have been given to the party
failing to perform, the party so giving notice may institute action in a court
of competent jurisdiction to terminate this lease or to compel performance of
the agreement, and the prevailing party in that litigation shall be paid by the
losing party, all expenses incurred by the winning party in the litigation,
including a reasonable attorney's fee.
13. If any rent required by the lease shall not be paid by the 10th day of
each month, the Lessors shall have the option to:
(a) terminate this lease, resume possession of the property for their
own account, and recover immediately from the Lessee the difference between
the rent specified in the lease and the fair rental value of the property
for the remainder of the term.
(b) resume possession and re-lease or rent the property for the
remainder of the term for the account of the Lessee, and recover from the
Lessee, at the end of the term or at the time each payment of rent comes
due under this lease, as the lessors may choose, the difference between the
rent specified in the lease and the rent received on the releasing or re-
renting.
(c) In such events, Lessors shall also recover all expenses incurred
by the reason of the breach, including a reasonable attorney's fee.
(e) Pursue all other remedies available under the laws of Florida.
<PAGE>
14. Lessor shall have the right to terminate the lease if Lessee shall become
insolvent or bankrupty.
15. PAYMENT OF RENTS and NOTICES:
----------------------------
(a) All rent payable and notice given to the Lessors shall be paid and
given at Post Office Box 753, Shalimar, Florida 32579.
(b) All notices given under this lease to the Lessee or any assignee
of the Lessee shall be given at the leased premises.
(c) Any notice which either party may or is required to give, shall be
given by mailing the same, postage prepaid, to Lessee at the premises, or
Lessor at the address set forth in paragraph (a) above, or at such other
place as may be designated by the parties from time to time.
16. Any waiver or forbearance by the Lessors to apply provided remedies for
breaches of the agreement by the Lessee shall not be implied or constructed to
imply any future or continuing waiver or forbearance unless expressly stated in
writing.
17. The Lessee shall have the right, at termination of the lease, to remove
all trade fixtures from the premises.
18. WAIVER: No failure of Lessors to enforce any term hereof shall be
------
deemed to be a waiver.
19. TIME: Time is of the essence of this lease.
----
20. HEIRS, ASSIGNS, SUCCESSORS: This lease is binding upon and inures to
--------------------------
the benefit of the heirs, assigns, and successors in interest to the parties.
21. ENTIRE AGREEMENT: The foregoing constitutes the entire agreement
----------------
between the parties and may be modified only by a writing signed by both
parties.
22. RADON GAS: Radon is a naturally occurring radioactive gas that, when it
---------
has accumulated in a building in sufficient quantities, may present health risks
to persons who are exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year above written.
WITNESS AS TO LESSORS: LESSORS:
/s/ William T. Lemons /s/ Richard R. Bennett
- ----------------------------------- ----------------------------------
Printed name: William T. Lemons Richard R. Bennett
/s/ Steven R. Bennett /s/ Betty J. Bennett
- ----------------------------------- ----------------------------------
Printed Name: STEVEN R. BENNETT BETTY J. BENNETT
WITNESS AS TO LESSEE: LESSEE
OTI INTERNATIONAL, INC.,
A DELAWARE CORPORATION
:
/s/ Joan E. Cahill
- -----------------------------------
Printed Name: JOAN E. CAHILL By: /s/ Richard R. Bennett
----------------------------------
Its: PRESIDENT
/s/ Kornelia Birner
- -----------------------------------
Printed Name: KORNELIA BIRNER
<PAGE>
EXHIBIT 21
----------
<TABLE>
<CAPTION>
JURISDICTION PERCENTAGE OF DIRECT/
WHERE INDIRECT OWNERSHIP BY
SUBSIDIARY ORGANIZED PRIMEX OF VOTING SECURITIES
- ---------- --------- ---------------------------
<S> <C> <C>
General Defense Corporation Pennsylvania 100%
Primex Aerospace Company Washington 100%
Primex Tactical Systems, Inc. California 100%
U.S. Ordnance Company Delaware 100%
St. Marks Powder, Inc. Delaware 100%
Defense Research Incorporated Alabama 100%
Hitech Holdings, Inc. Delaware 100%
</TABLE>
<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. 333-57857)
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 statements of operations, shareholders'
equity, and cash flows of Primex Technologies, Inc. and subsidiaries for the
year ended December 31, 1996, which report appears in the December 31, 1996
annual report on Form 10-K of Primex Technologies, Inc.
/s/ KPMG LLP
Tampa, Florida
March 16, 1999
<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.
333-57857) pertaining to 1996 Long Term Incentive Plan of Primex Technologies,
Inc., of our report dated February 1, 1999, with respect to the consolidated
financial statements of Primex Technologies, Inc. included in this Annual Report
(Form 10-K) for the year ended December 31, 1998.
/s/ Ernst & Young LLP
Tampa, Florida
March 16, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1998 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE TWELVE MONTHS ENDING DECEMBER 31, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3193
<SECURITIES> 0
<RECEIVABLES> 131768
<ALLOWANCES> 378
<INVENTORY> 67085
<CURRENT-ASSETS> 210117
<PP&E> 287640
<DEPRECIATION> 168734
<TOTAL-ASSETS> 471335
<CURRENT-LIABILITIES> 113143
<BONDS> 0
0
0
<COMMON> 5082
<OTHER-SE> 160401
<TOTAL-LIABILITY-AND-EQUITY> 471335
<SALES> 495268
<TOTAL-REVENUES> 495268
<CGS> 392956
<TOTAL-COSTS> 392956
<OTHER-EXPENSES> 9253
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3275
<INCOME-PRETAX> 27659
<INCOME-TAX> 11396
<INCOME-CONTINUING> 16263
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16263
<EPS-PRIMARY> 3.17
<EPS-DILUTED> 3.02
</TABLE>
