<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

                                  -----------
 

           [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

           [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934


                        COMMISSION FILE NUMBER: 0-28942
                                                -------

                           PRIMEX TECHNOLOGIES, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          VIRGINIA                                            06-1458069
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                          Identification Number)

     10101 NINTH STREET NORTH
      ST. PETERSBURG, FLORIDA                                 33716-3807
(Address of principal executive offices)                      (Zip Code)

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (813) 578-8100
       SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                                                         NAME OF EACH
                                                          EXCHANGE ON
    TITLE OF EACH CLASS                                WHICH REGISTERED
    -------------------                                ----------------

Common Stock, $1.00 Par Value                 The NASDAQ National Market System
Series A Participating Cumulative             The NASDAQ National Market System
Preferred Stock Purchase Rights

   Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.  Yes [_]   No [X]

   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K  [X]

   The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based on the closing price of such stock as of February 28, 1997, as
reported by The NASDAQ National Market System,  was  $96,617,582.

   The number of common shares, par value $1.00 per share, outstanding as of
February 28, 1997  was  5,222,572.
<PAGE>
 
                               TABLE OF CONTENTS
                                   FORM 10-K
<TABLE>
<CAPTION>
 
                                                                                                PAGE NO.
                                                                                                --------
<S>          <C>                                                                                <C>
PART I                                                                                        
  Item 1     Business ........................................................................         1
  Item 2     Properties.......................................................................        13
  Item 3     Legal Proceedings ...............................................................        14
  Item 4     Submission of Matters to a Vote of Security Holders..............................        15
                                                                                              
PART II                                                                                       
  Item 5     Market for Registrant's Common Stock and Related Stockholder Matters.............        15
  Item 6     Selected Financial Data..........................................................        16
  Item 7     Management's Discussion and Analysis of Financial Condition and Results of       
               Operations ....................................................................        17
  Item 8     Financial Statements and Supplementary Data......................................        21
  Item 9     Changes in and Disagreements with Accountants on Accounting and Financial        
               Disclosure.......................................................................      36
                                                                                              
PART III                                                                                      
  Item 10    Directors and Executive Officers of the Registrant...............................        36
  Item 11    Executive Compensation ..........................................................        39
  Item 12    Security Ownership of Certain Beneficial Owners and Management ..................        44
  Item 13    Certain Relationships and Related Transactions ..................................        45
                                                                                              
PART IV                                                                                       
  Item 14    Exhibits, Financial Statements, Schedules, and Reports on Form 8-K...............        46
</TABLE>
<PAGE>
 
                                    PART I


ITEM 1. BUSINESS
----------------


GENERAL

  Primex Technologies, Inc. ("the Company") is an ordnance and aerospace
contractor with strong systems management and manufacturing capability.

  The Company was organized under the laws of the Commonwealth of Virginia on
May 10, 1996 and has been publicly owned since December 31, 1996, when Olin
Corporation ("Olin") made a distribution (the "Distribution") to its
shareholders consisting of all of the outstanding shares of the Company's common
stock (the "Common Stock").  Regular way trading in the Common Stock commenced
on The Nasdaq National Market System on January 7, 1997.

  Prior to December 31, 1996, the Company was a wholly-owned subsidiary of Olin.
In connection with the Distribution, the assets and business entities of Olin's
ordnance and aerospace businesses were transferred to the Company.

  The Company provides a variety of products and services, and it draws upon a
common set of capabilities in bringing these products and services to market.
The Company's systems management and manufacturing capabilities, combined with
its technology base, represent the common skills on which the Company relies in
serving its markets and customers.

  SYSTEMS MANAGEMENT. Systems management in the defense/aerospace industry means
total management responsibility for the completion of a system which can vary
from a large weapons platform to the smaller systems and subsystems managed by
the Company, such as complete rounds of sophisticated tank ammunition and small
space subsystems incorporated in commercial satellites. Systems management
incorporates the management of materials acquisition, configuration data
management, selection and auditing of subcontractors, manufacturing, quality
assurance, testing, and product delivery, as well as administrative support to
ensure that all documentation reflects compliance with contract terms.

  MANUFACTURING. The Company's success in servicing its customers and markets is
largely the result of strict product quality and reliability standards. The
nature of the products offered by the Company require strict compliance with
detailed specifications. Deviations from specifications in the
manufacture of tank or medium caliber ammunition could be the basis for
the customer to reject the final product. The Company's space and
electronics products, intended for use in satellites and aircraft, must be of
the highest reliability. Ball Powder(R) propellant must meet strict quality
standards to assure that the ammunition in which it is incorporated is safe and
effective.

  TECHNOLOGY. The Company's technology base positions it as a leader in a number
of product offerings and provides the key to its future success. The Company's
composite materials technology has helped forge its leadership position in tank
ammunition. The Company is applying its composite expertise and its knowledge of
propellants and physics in developing the next generation of tank ammunition
which will provide improved performance.

  The Company's propellant research and development laboratory is equipped to
perform a wide range of chemical and thermal analyses and propellant syntheses
which enable the Company to tailor its Ball Powder(R) propellant to a wide
variety of ammunition applications.

  In its space products business, the Company's research and development
capabilities enable it to improve existing products by lowering product weight
and cost. These capabilities also have led to the development of new propulsion
products, including those incorporating electric propulsion to reduce the fuel
requirements for performing a given mission.
<PAGE>
 
PRODUCTS AND SERVICES

  The following table sets forth the principal products and services offered by
the Company and identifies the percentage of sales represented by each category
for the years shown.

 
 
                                    PERCENTAGE OF SALES
                                   ---------------------
          PRODUCTS AND SERVICES                       1996     1995     1994
                                                      ----     ----     ----   
Tank and other Large Caliber Ammunition (1).........  35%       28%      37%
Medium Caliber Ammunition...........................  18%       14%      14%
Ball Powder(R) Propellant...........................  10%       11%      13%
Electronic Products.................................   7%        8%       5%
Space Products......................................  12%        4%       6%
Other Products and Services (2).....................  18%       35%      25%
 

(1) The Company currently has two multi-year contracts for the supply of 120mm
    tactical and training ammunition that represent approximately 25% and 10%,
    respectively, of 1996 sales and approximately 15% and 10%, respectively, of
    1995 sales. These multi-year contracts provide for deliveries through mid-
    1999. The Company currently has numerous other contracts, none of which
    individually accounted for more than 9% and 6% of 1996 and 1995 sales,
    respectively.

(2) Approximately 4% of 1996 sales, 15% of 1995 sales and 2% of 1994 sales
    resulted from a U.S. Government contract for combined effects munitions.
    Sales under this contract were completed in 1996 and this contract was not
    renewed.


  TANK AND OTHER LARGE CALIBER AMMUNITION. The Company develops and produces a
family of tactical and training ammunition used primarily in the M1A1 and M1A2
Abrams class tanks of the U.S. Army and Marine Corps and U.S. allies. The
Company is currently the sole source producer of the 120mm M829A-2 round, which
is an armor piercing, fin stabilized, discarding sabot round with a depleted
uranium penetrator that utilizes kinetic energy to penetrate heavily armored
targets and is used primarily in tank-to-tank warfare. This round is the
successor round to the 120mm M829A-1 round that was used successfully during
Operation Desert Storm. The Company is also one of two suppliers of 120mm M865
and M831A-1 training rounds to the U.S. Government. The M865 is the training
round for the M829A-2 round and the M831A-1 is the training round for the 
M830A-1 tactical multipurpose round which is produced by the Company's U.S. tank
ammunition competitor.

  During 1995, the Company entered into two contracts with four-year terms to
produce training and kinetic energy tactical ammunition for the U.S. Government.
The Company is currently performing under the second year of these contracts.

  A number of foreign countries will not buy ammunition containing depleted
uranium and the U.S. Government limits the export of depleted uranium ammunition
to NATO and certain other friendly foreign governments. To improve its
opportunities to sell tank ammunition to foreign buyers, the Company, in
association with the foreign company that is the original developer of 120mm
tank ammunition, has developed an advanced 120mm kinetic energy round with a
tungsten alloy penetrator. During 1995, the Company signed a $20 million
contract with the U.S. Army for the sale of 120mm tungsten penetrator ammunition
to a foreign customer. Delivery is expected in 1997. The Company is actively
pursuing additional international tank ammunition sales involving both training
ammunition and the advanced kinetic energy tungsten round.

  Because the Company believes that a key element of its long-term profitability
is its continued participation as a major producer of tank ammunition for the
U.S. Government, the Company continually invests in research and development in
this area, focusing on improving the effectiveness of kinetic energy tactical
ammunition and reducing the cost of training ammunition.

                                       2
<PAGE>
 
  The majority of the Company's large caliber ammunition production contracts
are for tank ammunition. However, the Company believes that artillery ammunition
presents an opportunity for growth because of an extended past period of minimal
investment by the United States in this arena. This problem was highlighted
during Operation Desert Storm, when United States artillery systems were
outranged by enemy guns. The Company believes that the U.S. Government has
recognized the need to match and surpass the capability of other countries and
is investing in the development of new artillery platforms and ammunition.

  MEDIUM CALIBER AMMUNITION. The Company develops and produces medium caliber
ammunition. The medium caliber product line includes 20mm, 25mm, and 30mm
ammunition, and is utilized on a variety of platforms, including ships,
airplanes, helicopters, and fighting vehicles. The family of medium caliber
ammunition includes armor piercing, high explosive-incendiary and training
rounds. In addition, through a license with Raufoss A/S, the Company is a
leading developer of multi-purpose medium caliber ammunition that combines
armor-piercing, high explosive and incendiary features in one round.

  During 1996, the Company commenced production of the 25mm M919 round, a U.S.
produced medium caliber armor-piercing, fin stabilized, discarding sabot round,
utilizing a depleted-uranium penetrator that offers increased range and
lethality. This round will be the primary anti-armor round of the Bushmaster
cannon used on the Bradley Fighting Vehicle. In addition, the Company has
several contracts with the U.S. Government for the production of multi-purpose
rounds. The Company believes that the U.S. Government will continue to buy both
the M919 and multi-purpose rounds for the next several years, but does not know
whether the Government will purchase material quantities of any other medium
caliber ammunition. During 1995 and 1996, the Company experienced difficulties
in producing the M919 round within its specifications for accuracy and gun
pressure. These difficulties increased the Company's costs and lowered its
margins on this round and delayed recognition of revenue from this contract to
1997. The Company has performed extensive testing and made improvements to its
production processes in an effort to correct these issues. Medium caliber
ammunition historically has been used in aircraft as well as in land vehicles
and ships. However, because of the development of other aircraft weapon
platforms that do not require close strikes to be effective, the Company
believes that medium caliber ammunition will be used to a lesser extent in
future aircraft.

  NEW WEAPONS AND AMMUNITION. The U.S. Army is developing a series of small-arms
weapons to increase the firepower of 21st century soldiers. The Company has been
selected as the systems developer of the objective crew served weapon ("OCSW").
This two-person weapon system is slated to replace the machine gun for use
against lightly-armored vehicles, fortified positions, infantry and low-flying
aircraft. As systems developer, the Company is responsible for the development
of the entire OCSW including both the gun and ammunition. Complementing the OCSW
is the objective individual combat weapon ("OICW"), the future individual weapon
for the dismounted soldier. Two teams of companies are developing the OICW. The
Company is the ammunition developer on one of the teams. The OCSW and OICW are
both expected to be introduced to the field in approximately ten years.

  BALL POWDER(R) PROPELLANT. The Company manufactures and sells Ball Powder(R)
propellant, a smokeless gun powder with a spherical grain shape. The Company
manufactures more than one hundred different varieties of propellant in the Ball
Powder(R) product line. Significant amounts of all U.S. military small caliber
ammunition are loaded with the Company's Ball Powder(R) propellant. In response
to the decline in military procurements over recent years, the Company has
focused on increasing its sales to the commercial ammunition market. In 1995 and
1996, approximately 65% and 55%, respectively, of Ball Powder(R) propellant
sales were to manufacturers of commercial ammunition and to the "reloader"
market ("reloaders" are individuals who buy ammunition components and load their
own rounds).

  Olin's Winchester division, a leading manufacturer of sporting ammunition, was
the Company's largest Ball Powder(R) propellant customer in 1995 and 1996,
accounting for approximately 42% and 32% respectively, of the Company's Ball
Powder(R) Propellant sales. In conjunction with the Distribution, a long term
supply contract was entered into between the Company and Olin with respect to
future Ball Powder(R) Propellant sales to Winchester. See "Item 1. Business -
Relationship Between Olin and the Company".

  Over the years, the Company has attempted to increase the use of Ball
Powder(R) propellant in medium and large caliber military ammunition. Virtually
all of the medium caliber ammunition manufactured by the Company except the 25mm
M919 round is now loaded with Ball Powder(R) propellant. Ball Powder(R)
propellant has achieved only limited use in U.S. Government large caliber
ammunition. The Company continues to pursue the use of Ball Powder(R) propellant
in additional types of large caliber ammunition.

                                       3
<PAGE>
 
  ELECTRONIC PRODUCTS. The Company manufactures a variety of electronic products
for aerospace applications. The Company in recent years has entered the field of
in-flight communications and entertainment ("IFE") through design and production
of a variety of IFE components and products. In 1995, the Company's most
significant IFE contract was for the production of in-flight telephone devices.

  In 1996, the Company introduced its first EmPowerTM product, an in-seat power
supply system for airplane passengers' laptop computers. A universal power
socket is provided in the passenger's seat, to which the passenger's laptop may
be connected in order to operate and recharge the computer. The Company has
contracted to provide EmPowerTM products to three major airline companies, and
is negotiating with several prospective domestic and international customers.

  The Company's line of airborne electronic products also includes controls for
lighting, temperature, audio, power and flight systems.

  The Company produces ground support equipment for military purposes, including
stores management and weapons systems test sets for F-16 and other aircraft. The
Company also produces a variety of power conditioning units ("PCUs") for
military, commercial and space applications. PCUs convert one form of electric
power into another. The Company's space electronics capability includes
spacecraft PCUs, which convert a satellite's electric power for use to power
used in electric propulsion systems.

  SPACE PRODUCTS. The Company is the world's leading supplier of monopropellant
hydrazine products and electric propulsion ("EP") products. The Company's
hydrazine propulsion products include individual rocket engines or thrusters,
rocket engine modules, gas generators, propellant pressurization systems and
complete integrated propulsion systems. Ranging in size from 0.1 to several
hundred pounds of thrust, these products are integral to the growing commercial
launch vehicle and satellite markets. The Company has delivered over 10,000
rocket engines for spacecraft applications including orbit insertion,
maneuvering, and attitude control as well as launch vehicle and upper-stage
attitude and velocity control.

  EP devices represent an advance over standard chemical rocket engines. The
current generation of these products uses satellite electrical power to heat
propellant gases to provide additional energy and velocity in the process of
producing thrust. There are significant gains in fuel efficiency using the
Company's EP products over conventional hydrazine thrusters. This fuel
efficiency translates into economic benefit for satellite manufacturers and
service providers by reducing spacecraft weight, increasing in-orbit life and/or
allowing for the use of lower cost launch vehicles.

  The Company is the only U.S. source of EP products which are currently
operating on orbiting satellites within product life expectancies. The Company
currently has four models in production. The first EP product, a resistojet, was
launched in 1983 and is now flying on a number of satellites. The latest EP
device, the arcjet, was first flown in 1993 on the Telstar-4 satellite.

  The Company is developing advanced EP products which it anticipates will
provide greatly improved performance compared to conventional hydrazine
thrusters with commensurate economic benefits to users. These advanced EP
products are expected to be flight-tested on experimental flights in 1997-98.

  A number of domestic and foreign companies are developing EP products and the
Company expects increased competition in this area.


  OTHER PRODUCTS AND SERVICES. The Company manufactures a range of solid
propellant products. The Company's products are primarily used in military
applications, although the Company is continuously examining potential
commercial applications. Although the products are diverse, they are based on a
common technology, namely, controlled burning of a solid propellant whose
exhaust products are used for a variety of functions.


  The Company provides small gas generators and devices incorporating gas
generators used in a variety of military and commercial applications, including
tactical missiles, jet engine starter cartridges, inflatables, including
buoyance devices 

                                       4

<PAGE>
 
and specialized structures, and ammunition initiating devices. The Company also
is developing a family of fire suppression systems offering a low-cost, low-
volume, alternative to halon compounds in situations, such as fighter aircraft
"dry bay" areas, where size and weight are significant considerations.

  The Company is a supplier of extremely high-power pulsed energy devices
("pulsed power"). Such devices are used in a wide variety of defense
applications including test and evaluation of electronics, materials testing,
nuclear weapons effects simulation, advanced electric weapon technology (such as
electric guns envisioned for 21st century warfare), high-power microwaves, and
electromagnetic pulse simulation.

  The Company is also a developer of precision anti-tank warheads and ordnance
systems for smart weapons for United States, Swiss and other Governmental
agencies. This development activity includes applied research, advanced
development, engineering and development manufacturing and low-rate initial
production programs.

  The U.S. Government has decided that it needs to demilitarize or disassemble
large stocks of obsolete conventional ammunition. The Company has bid on a
number of these contracts, and in 1995 was awarded two small contracts for
demilitarization services and a follow-on contract in 1996.  The Company's
success in this product area is dependent upon the overall level of funding for
ammunition demilitarization, the extent to which these appropriations are
directed to U.S. Government arsenals, and the level of competition.

  In addition, during 1995 and 1996, the Company made commercial sales of forged
petroleum pipeline components and other heavy industrial cylindrical steel
products. These sales were generated by the Company's Red Lion, Pennsylvania
operation, which principally produces components for large caliber ammunition
and successfully utilized its manufacturing expertise for this commercial
application.

CUSTOMERS

  The Company's largest customer is the U.S. Government which includes sales to
the U.S. Department of Defense, NASA, the U.S. Department of Energy, and other
U.S. Government agencies/laboratories. Other customers of the Company include
friendly foreign governments, major ordnance and aerospace contractors and
a variety of commercial customers. The Company is highly dependent on Government
sales, which during 1996, accounted for approximately 78% of the Company's
sales. See "Item 1. Business--U.S. Government Contracts and Regulations."  With
the exception of the U.S. Government and its agencies, no other single customer
accounted for more than 9% of the Company's total annual sales during any of the
Company's last three fiscal years. 

RAW MATERIALS AND SUPPLIES

  The raw materials used in the manufacturing of ammunition and ammunition
components include metals, composite materials, chemicals and nitrocellulose. In
addition, the manufacture of ammunition requires components, including
propellants, cartridge cases and primers, all of which may be provided by
subcontractors or supplied directly by the Government. Various electronic piece
parts, printed wire boards, hydrazine liquid propellants, solid propellant
ingredients and subcontracted components, including capacitors, various metals
and explosives, are also used by the Company. The Company has not experienced
difficulty in recent years in obtaining an adequate supply of any raw materials,
components or other supplies needed in its manufacturing processes, although
continued downsizing in the defense industry may create difficulties in
procuring certain medium caliber ammunition components in the future.
Additionally, availability and cost of certain unique components will reflect
market conditions and the increasing technical complexity of product
requirements.  Government contractors such as the Company are frequently
directed to procure materials, components or services from sources of supply
approved or designated by the U.S. Department of Defense.

U.S. GOVERNMENT CONTRACTS AND REGULATIONS

  The Company's U.S. Government business is performed under fixed-price
contracts (firm fixed-price and fixed-price incentive) and, to a lesser extent,
under cost-reimbursable contracts (cost-plus-fixed-fee or cost-plus-incentive-
fee).

  Under firm fixed-price contracts, the Company agrees to perform certain work
for a fixed price and, accordingly, realizes all the benefit or detriment
resulting from decreases or increases in the costs of performing the contract.
From time to time, the Company has experienced cost overruns on fixed-price
contracts.  Fixed-price incentive contracts are fixed-

                                       5
<PAGE>
 
price contracts providing for adjustment of profit and establishment of final
contract prices by a formula based on the relationship which final total costs
bear to total target cost. In 1996, approximately 78% of the Government sales of
the Company derived from firm fixed-price contracts and approximately 3% from
fixed-price incentive contracts.

  Cost-plus-fixed-fee contracts provide for reimbursement of costs, to the
extent that such costs are allowable, and the payment of a fixed fee. Cost-
plus-incentive-fee contracts provide for increases or decreases in the
contract fee, within specific limits, based upon actual results as compared to
contractual targets for cost. In 1996, approximately 19% of the Government sales
of the Company derived from cost-plus-fixed-fee and cost-plus-incentive-fee
contracts.

  Under U.S. Government regulations, certain costs, including certain
organization and financing costs, portions of research and development costs,
and certain marketing expenses related to the preparation of competitive bids
and proposals, lobbying costs, and international and commercial sales, are not
reimbursable. In addition, the accuracy and appropriateness of certain direct
and indirect costs of the Company under both fixed-price and cost-plus contracts
are subject to extensive regulation, and are audited by the Defense Contract
Audit Agency ("DCAA"), an arm of the United States Department of Defense. The
DCAA has the right to challenge the Company's cost estimates or allocations with
respect to any such contract. If a DCAA audit establishes overcharges or other
discrepancies in costs or accounting, it can seek the repayment of such
overcharges or seek other reconciliations.

  U.S. Government contracts are, by their terms, subject to termination by the
U.S. Government either for its convenience or  for due to default by the
contractor. Cost-reimbursable contracts provide that, upon termination, the
contractor is entitled to reimbursement of its allowable costs; and if the
termination is for convenience, a total fee proportionate to the percentage of
the work completed under the contract. Fixed-priced contracts provide for
payment upon termination for items delivered to and accepted by the Government,
and, if the termination is for convenience, for payment of cost incurred, plus
profit, for work performed, plus the costs of settling and paying claims by
terminated subcontractors and other settlement expenses. If a contract
termination is for default, however, (i) the contractor is paid an amount agreed
upon for completed and partially completed products and services accepted by the
Government, (ii) the Government is not liable for the contractor's costs with
respect to unaccepted items, and is entitled to repayment of advance payments
and progress payments, if any, related to the terminated portions of the
contracts, and (iii) the contractor may be liable for excess costs incurred by
the Government in procuring undelivered items from another source.

  Because the Company engages in Government contracting activities and sells to
the U.S. Government and prime Government contractors, it is subject to extensive
and complex U.S. Government procurement laws and regulations. These laws and
regulations provide for Government audits and reviews of contractor quality,
procurement, performance and administration. Failure to comply, even
inadvertently, with these laws and regulations and with laws governing the
export of munitions and other controlled products and commodities, could subject
the Company or one or more of its businesses to price adjustments, including
adjustments of fixed prices, and to civil and criminal penalties, and under
certain circumstances, suspension or and debarment from bidding on  future
Government contracts for a specified period of time. See "Item 3. Legal
Proceedings". In connection with the resolution of the investigation of certain
testing irregularities at the Company's Marion, Illinois facility, which was
owned by Olin at the time of the alleged irregularities and the investigation,
Olin entered into an Administrative Agreement (the "Agreement") with the United
States Department of the Air Force (the "Air Force"). In addition, the Company
has entered into a similar agreement with the Air Force which obligates the
Company to implement and maintain an ethics actions plan.  The plan is designed
to ensure that the Company and its employees maintain their present
responsibilities as the present responsibility of the Company and its employees
that is required of all U.S. Government contractors. The Agreement requires,
among other things, a communication and training program for all employees, the
operation of a toll-free, dedicated telephone number for confidential calls to
report suspected misconduct and a self-governance program that includes the
periodic submission of written reports to the Air Force describing the measures
taken by the Company to implement the Agreement.

  In addition to the right of the U.S. Government to terminate, Government
contracts are dependent upon the levels and continuing availability of
Congressional appropriations. Congress usually appropriates program funds for a
given program on a fiscal-year basis even though contract performance may
require more than one year. Consequently, for multi-year programs, the contract
is usually partially funded, and additional monies are normally committed to the
contract by the procuring agency only as appropriations are made by Congress for
future fiscal years.

  U.S. Government contract awards may also be subject to protest or challenge by
unsuccessful bidders.

                                       6
<PAGE>
 
  Licenses are required from U.S. Government agencies for export of many of the
Company's products, including munitions and spacecraft and military aircraft
components and subsystems. These licenses are administered by the U.S.
Department of State under the Arms Export Control Act, which restricts exports
of certain products and technologies. Failure to comply with these laws and
regulations could subject the Company or one or more of its businesses to
penalties, including, under certain circumstances, the suspension or debarment
from future export licenses for a specified period of time. In addition, the
U.S. Bureau of Alcohol, Tobacco and Firearms ("BATF") licenses the Company for
the handling of explosives and certain other devices. Failure to comply with
BATF regulations could subject the Company to the revocation of these required
licenses. The Company believes that to the best of its knowledge it is currently
in compliance in all material respects with all such material licenses and
regulations.

  In common with other companies which derive a substantial portion of their
revenues from contracts with the U.S. Government for defense-related products,
the Company is subject to business risks, including changes in Governmental
appropriations and changes in national defense policies. Future reductions in
the level of defense procurement or changes in the strategic direction of
defense spending could adversely affect the Company's financial performance in
future years, including its income, liquidity, capital resources and financial
condition. The impact of any of these changes will depend on the timing and
magnitude thereof and the Company's ability to mitigate their impact with new
business, business consolidations or cost reductions. In view of the uncertainty
regarding the priorities of the Department of Defense, the historical financial
information of the Company's businesses may not be indicative of future
performance.


  Since the U.S. Government usually awards and funds ordnance contracts on a
year-by-year basis and the Company's business is dependent upon periodic awards
of new contracts and the exercise of options contained in existing contracts,
there can be no assurance that the U.S. Government will continue to purchase the
Company's products or services over the long-term. The termination of any of the
Company's significant contracts or the failure to obtain either renewals of
certain existing contracts or additional contracts with the U.S. Government
could have a material adverse effect on its results of future operations and
financial condition.

COMPETITION

  The Company encounters strong competition in each of its product lines. The
degree to which the Company participates in future U.S. Government business will
depend to a large extent on its ability to offer better program performance than
its competitors at a lower price to the Government.

  The Company competes with Alliant Techsystems Inc. ("Alliant") for the supply
of large and medium caliber ammunition to the U.S. Government and foreign
Governments. The Company also faces competition for international sales of tank
and medium caliber ammunition from foreign suppliers.

  The Company's St. Marks, Florida facility is currently the only supplier of
Ball Powder(R) propellant to the U.S. Government for use in small caliber
ammunition. The Company competes with Alliant and Expro Chemical Products
("Expro"), a Canadian company in North America, for the supply of gunpowder for
medium caliber ammunition and other military applications. In many cases, the
gunpowder available varies from one supplier to another and, as a result,
competition is based on both price and performance characteristics. In the
commercial gunpowder market, the Company competes with Alliant, Expro and a
variety of foreign suppliers.

  In other product lines, the Company's principal competitors are: Kaiser
Marquardt Company in the area of monopropellant hydrazine propulsion, Hughes
Aircraft Company and International Space Technology, Inc. with regard to
electric propulsion, and Talley Industries in specialty solid propellant
products. The Company's electronic products compete with a variety of other
companies' technology and hardware. Other than work done by the Government's
National Laboratory System, competition in the field of high-voltage pulsed
power systems is provided principally by Maxwell Laboratories, Inc., and in the
case of high-performance, precision warheads, the competition is comprised of
Alliant, Aerojet-General Corporation and CMS Defense Systems.

RESEARCH AND DEVELOPMENT; PATENTS

  The Company's research activities are conducted at a number of facilities.
Company-sponsored research expenditures were approximately $6 million, $5 
million and $5 million for 1996, 1995, and 1994, respectively. 
Customer-sponsored

                                       7
<PAGE>
 
research expenditures of the Company (primarily U.S. Government) were
approximately $32 million, $48 million, and $81 million, respectively, for such
years. Customer-sponsored research declined in 1996 due to the completion of an
international contract for Electromagnetic Systems in 1995. Customer sponsored
research declines between 1994 and 1995 were primarily a result of the reduction
in Government-funded ammunition programs and the advancement of a major
ammunition development program into the production stage.

  The Company owns, or is the licensee under, a number of technologies and/or
patents relating to various products and processes. The Company believes that,
in the aggregate, the rights under its technological assets and licenses are
important to the Company but, except as discussed herein, the Company does not
consider any one technology, patent or license or group thereof related to a
specific process or product to be of material importance to the Company as a
whole. The Ball Powder(R) propellant technology is material to the Company's St.
Marks, Florida operation. This is proprietary manufacturing know-how and trade
secret information which is critical in the manufacture of propellants. A patent
covers an important aspect of that know-how, namely, a process for the
production of spherical, single-base, low-density propellant grains. The patent
was issued in 1987 and will expire on September 22, 2004.

BACKLOG

  The aggregate amount of contracted backlog orders for the Company on December
31, 1996 and 1995 was $297 million and $328 million, respectively. It is
expected that approximately $276 million of sales during 1997 will fill orders
that were in backlog as of December 31, 1996. The backlog represents the value
of contracts for which goods and services are yet to be provided. Under
multiyear contracts, a portion of the backlog is subject to approval of
Government appropriations. The backlog consists of firm contracts, and although
they can be and sometimes are changed or cancelled, the amount of changes and
cancellations historically has been insignificant.

EXPORT SALES

  The Company's export sales from the United States to unaffiliated customers
were $29 million, $24 million and $16 million in 1996, 1995 and 1994,
respectively.

SEASONALITY

  Although the business of the Company is not seasonal in nature, sales to the
Department of Defense are historically stronger in the latter part of the year
reflecting the procurement cycle utilized by the U.S. Army. Certain commercial
sales, such as Ball Powder(R) propellant volumes, tend to be stronger in the
first half of the year.


EMPLOYEES

  As of December 31, 1996, the Company had approximately 2,550 employees,
approximately six of whom were working in foreign countries. Approximately 450
of the hourly paid employees of the Company located at its St. Marks, Florida
and Marion, Illinois facilities are represented, for purposes of collective
bargaining, by local unions affiliated with the United Steelworkers of America.
The Company is party to labor contracts expiring in October 1997 and December
2001 relating to such employees at its St. Marks, Florida and Marion, Illinois
facilities, respectively. No major work stoppages have occurred in the last
three years. While relations between the Company and its employees and their
various representatives are generally considered satisfactory, there can be no
assurance that new labor contracts can be concluded without stoppages.

ENVIRONMENTAL MATTERS

  The establishment and implementation of Federal, state and local standards to
regulate air, water and land quality has affected, and will continue to affect,
substantially all of the Company's plants. Federal legislation providing for
regulation of the manufacture, transportation, use and disposal of hazardous and
toxic substances has imposed additional regulatory requirements on the industry.
In addition, implementation of environmental laws, such as the Resource
Conservation and Recovery Act and the Clean Air Act, has required and will
continue to require new capital expenditures and will increase operating costs.
In order to help finance the cleanup of waste disposal sites, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 

                                       8
<PAGE>
 
("Superfund"), imposes a tax on the disposal of certain hazardous wastes. The
Company employs waste minimization programs at most of its manufacturing sites.
See the discussion of environmental matters contained in "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Environmental".

  In connection with the Distribution, the Company and Olin have agreed pursuant
to the Assumption of Liabilities and Indemnity Agreement that the Company will
assume, and indemnify and hold Olin harmless against, all liabilities associated
with the removal, remediation and control of environmental conditions at several
of the Company's existing and former plant sites. Such liabilities are not
expected to have a material adverse effect upon the Company's financial
condition or results of operations. See "Item 1. Business - Relationship Between
Olin and the Company - Assumption of Liabilities and Indemnity Agreement".

RELATIONSHIP BETWEEN OLIN AND THE COMPANY

  The Company and Olin  entered into certain agreements, described below,
governing their relationship subsequent to the Distribution and providing for
the allocation of tax and certain other liabilities and obligations arising from
periods prior to the Distribution. While the agreements contain terms which
generally are comparable to those which would have been reached in arms-length
negotiations with unaffiliated parties, these agreements were reached while the
Company was wholly owned by Olin and therefore are not the result of arm's-
length negotiations between independent parties.

Distribution Agreement

  The Company and Olin entered into a Distribution Agreement which provided for,
among other things, certain corporate transactions required to effect the
Distribution and other arrangements between Olin and the Company subsequent to
the Distribution.

  The Distribution Agreement provided for the transfer by Olin to the Company of
the assets and business entities comprising the Ordnance/Aerospace Business. The
assets of the Ordnance/Aerospace Business were transferred to the Company on an
"as is, where is" basis and no representations were made by Olin with respect
thereto. The Distribution Agreement also provided for the Company's assumption
of $145 million of indebtedness incurred by Olin.  See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources". The Distribution Agreement also provides for
the allocation between the Company and Olin of employee obligations,  benefit
plans of certain employees and benefits under existing insurance policies after
the Distribution and sets forth procedures for the administration of insured
claims.

  The Distribution Agreement provides that each of Olin and the Company will be
granted access to certain records and information in the possession of the other
and requires each of Olin and the Company to provide to the other copies of all
documents filed with the Securities and Exchange Commission pursuant to the
periodic and interim reporting requirements of the Exchange Act. 

Assumption of Liabilities and Indemnity Agreement

  The Company and Olin have entered into an assumption of liabilities and
indemnity agreement (the "Assumption of Liabilities and Indemnity Agreement")
which generally provides for the assumption of liabilities and cross indemnities
designed to place with the Company responsibility for liabilities of the
Ordnance/Aerospace Business and with Olin responsibility for liabilities of the
businesses retained by Olin after the Distribution. Specifically, the Company
has agreed, subject to certain exceptions, to assume, and indemnify and hold
Olin harmless from and against, all damages, losses, liabilities, fines,
penalties, costs and expenses arising out of or associated with the business,
conduct, operations, assets, properties or status of the Company prior to, on or
after the Distribution.

  The Assumption of Liabilities and Indemnity Agreement also provides that the
Company will assume, and indemnify and hold Olin harmless from, all liabilities
in connection with the removal, remediation or control of environmental
conditions at certain of the Company's facilities (see "Item 1. Business -
Environmental Matters") and that the Company will indemnify Olin for any
liabilities arising out of Olin's existing guarantee of certain lease
obligations of the Company. The Assumption of Liabilities and Indemnity
Agreement also provides for cross indemnities relating to certain employee
benefit claims.

                                       9
<PAGE>
 
Technology Transfer and License Agreement

  The Company and Olin have entered into a technology transfer and license
agreement (the "Technology Transfer and License Agreement"), which provides for
the transfer by Olin to the Company of certain intellectual property and
proprietary technology relating to the Company's businesses. The Technology
Transfer and License Agreement provides for the grant of licenses by the Company
to Olin to use such transferred intellectual property and technology in certain
of Olin's retained businesses following the Distribution and for the granting of
licenses between Olin and the Company relating to the use of certain jointly-
developed intellectual property and technology.

Tax Sharing Agreement

  The Company and Olin have entered into a Tax Sharing Agreement effectively
providing that Olin will be responsible for the tax liability of the Company for
the years that the Company was included in Olin's consolidated Federal income
tax return. The Tax Sharing Agreement also provides that state, local and
foreign taxes attributable to periods prior to the Distribution will be the
responsibility of Olin and that if the Distribution fails to qualify as a tax-
free spin-off as a result of action taken after the Distribution by Olin or the
Company, the party that took such action will be responsible for the full amount
of any resulting corporate tax liability. Neither Olin nor the Company will
indemnify any shareholder for any tax liability.

Powder Supply Requirements Agreement; Component Supply Agreement

  The Company and Olin have entered into a powder supply requirements agreement
(the "Powder Supply Requirements Agreement") and a component supply agreement
(the "Component Supply Agreement") which set forth the terms on which Olin will
purchase propellant powder from the Company and the Company will purchase
certain ammunition components from Olin following the Distribution.

  The Powder Supply Requirements Agreement generally provides that Olin will
purchase, at prices to be agreed upon from time to time, a certain percentage of
the propellant powder required in any calendar year by its Winchester Division
from the Company, starting at 100% of such requirements for 1997 for Ball
Powder(R) propellant and decreasing annually to 70% for 2002. The prices are
expected to be at a range of discounts from competitive prices depending on
requirements purchased. In 1996 and 1995, Olin's purchases of propellant powder
accounted for approximately 32% and 42%, respectively, of the Company's annual
production. The Powder Supply Requirements Agreement provides for reductions in
the amounts of propellant powder that Olin is required to purchase to the extent
that the Company is unable or unwilling to meet a request by Olin to produce a
type of propellant powder or to match pricing and other terms offered by third
parties. The arrangement provides that Olin will reimburse the Company for any
lost profits resulting from Olin's failure to purchase the required amount of
propellant powder from the Company in any year. The Powder Supply Requirements
Agreement also provides for the purchase by Olin from the Company of certain
powders manufactured by Synthesia A.S., a Czech manufacturer for whom the
Company acts as North American distributor. Any purchases by Olin of such
Synthesia powders are in addition to Olin's required purchase obligations
described above. The term of the Powder Supply Requirements Agreement expires on
December 31, 2002, unless earlier terminated in accordance with its terms.
Pursuant to the Powder Supply Requirements Agreement, the Company shall
indemnify Olin against all losses arising from actual or alleged manufacturing
or design defects in the products delivered pursuant thereto and Olin shall
indemnify the Company against all losses arising from Olin's negligent misuse or
improper handling thereof or defects in the ammunition (other than powder
defects).

  The Component Supply Agreement provides that the Company will purchase certain
ammunition components (the "Components") from Olin at agreed-upon prices until
December 31, 1999, unless the Component Supply Agreement is earlier terminated
in accordance with its terms. Pursuant to the Component Supply Agreement, Olin
will indemnify the Company against all losses arising in connection with actual
or alleged manufacturing and design defects in the Components delivered pursuant
thereto and the Company will indemnify Olin against all losses arising in
connection with the Company's negligent misuse or improper handling of the
Components delivered pursuant thereto.

Ball Powder(R) Assignment Agreement

  The Company and Olin have entered into an assignment agreement (the "Ball
Powder(R) Assignment Agreement") providing for the assignment by Olin to the
Company of Olin's Ball Powder(R) trademarks. Pursuant to the Ball Powder(R)

                                       10
<PAGE>
 
Assignment Agreement, the Company has granted to Olin such rights and licenses
as may be necessary for Olin to fulfill certain existing contractual obligations
to Browning S.A. relating to the manufacture and sale of certain products in
Europe.

Browning Distribution Agreement

  The Company and Olin have entered into a powder distribution agreement (the
"Browning Distribution Agreement") pursuant to which the Company has appointed
Olin its exclusive distributor of canister powder to Browning, S.A., and certain
of its subsidiaries throughout Europe.

Transition Services Agreement

  The Company and Olin have entered into a transition services agreement (the
"Transition Services Agreement") pursuant to which Olin and the Company will
provide each other with certain services which have been provided by Olin and
the Company prior to the Distribution. The length of time for which any such
service shall be provided, and the compensation therefore, vary based upon the
mutual agreement of the Company and Olin. Pursuant to Olin's management of the
receipts and disbursements of the Company for an interim period which is not
expected to exceed six months, periodic intercompany indebtedness may arise in
an amount which will not exceed $5 million.



Covenant Not To Compete Agreement

  The Company and Olin have entered into a covenant not to compete agreement
(the "Covenant Not To Compete Agreement") which generally provides that, for a
period of five years, Olin shall not, subject to certain exceptions, directly or
indirectly manufacture, sell or distribute medium or large caliber ammunition or
components and that the Company shall not, subject to certain exceptions,
directly or indirectly manufacture, sell or distribute small caliber ammunition
or components, ejection cartridges or shotshells.

Raufoss Technology Agreement

  The Company and Olin have entered into an assignment agreement (the "Raufoss
Technology Agreement") pursuant to which Olin has assigned to the Company all of
Olin's rights under and interests in a license agreement with Raufoss A/S
("Raufoss") relating to the use of certain proprietary technology of Raufoss in
the manufacture and sale of ammunition. Pursuant to the Raufoss Technology
Agreement, Olin has also assigned to the Company all of Olin's rights under and
interests in a teaming agreement with Raufoss providing for cooperation in the
manufacture and sale of multipurpose ammunition. The Raufoss Technology
Agreement also provides for the grant by the Company to Olin of an exclusive
sublicense to utilize the Company's rights and licenses with respect to
proprietary technology of Raufoss in the manufacture and sale of small caliber
ammunition.

Australia Agency Agreement

  The Company and Olin Australia Ltd., a subsidiary of Olin ("Olin Australia"),
have entered into an agency agreement (the "Australia Agency Agreement")
pursuant to which the Company has appointed Olin Australia as its non-exclusive
agent for the sale of certain medium and large caliber ammunition to government
agencies in Australia, New Zealand, Papua New Guinea and Oceania. Under the
Australia Agency Agreement, Olin Australia will be paid individually agreed-upon
commissions by the Company at the time of order acceptance by the Company. The
Australia Agency Agreement will continue in effect until such time as either
party thereto provides the other with 30-days' notice of termination.

Trade Name License Agreement

  Olin and the Company have entered into an agreement to permit the Company and
its subsidiaries to use the "Olin" name and its derivatives in certain limited
circumstances for a certain limited period of time.

Novation of U.S. Government Contracts

                                       11
<PAGE>
 
  In connection with the Distribution, the Company became successor in interest
to Olin on certain contracts between Olin and the U.S. Government. As required
by Federal procurement regulations providing for the U.S. Government to
recognize the Company as the successor in interest to Olin on such contracts,
Olin has entered into novation agreements with the Company and the U.S.
Government which provide, among other things, for Olin to directly or indirectly
guarantee or otherwise become liable for the performance of the Company's
obligations under such contracts which were transferred to the Company in
connection with the Distribution (the "Guaranteed Contracts"), including post-
novation modifications to the Guaranteed Contracts. Such novation agreements
also provide that the Company assumes all obligations under the Guaranteed
Contracts and that the U.S. Government recognizes the transfer of such
Guaranteed Contracts and related assets. While these Guaranteed Contracts are
scheduled to be performed over a period of time, it is not expected that they
will be fully and finally discharged for a number of years.

  The Company has agreed in the Assumption of Liabilities and Indemnity
Agreement to perform all of its obligations under each Guaranteed Contract and
to indemnify Olin against any liability Olin may incur under the novation
agreements by reason of any failure by the Company to perform such obligations.

                                       12
<PAGE>
 
ITEM 2.  PROPERTIES
-------------------

  The table below sets forth the locations where the Company conducts its
business and a brief description of the activities conducted at each identified
location. The Company believes that its facilities are sufficiently maintained
and suitable and adequate for its immediate needs and that additional space is
available to accommodate expansion. Unless otherwise noted below, the identified
location is owned by the Company.

<TABLE> 
<CAPTION> 
 
          LOCATION                              PRIMARY ACTIVITIES
          --------                              ------------------
<S>                                   <C>  
St. Petersburg, Florida(1)..........   Corporate headquarters
                                       Systems management operation for large
                                       caliber ammunition
 
Red Lion, Pennsylvania..............   Manufacturing and research and
                                       development facility for large caliber
                                       ammunition metal and composite parts
 
Redmond, Washington.................   Design, manufacturing and test facility
                                       for space, solid propellant and
                                       electronic products 
                                       Office facilities
                                       Research and development laboratory
 
St. Marks, Florida...................  Manufacturing facility for Ball 
                                       Powder(R) Propellant
                                       Research and development laboratory
 
Marion, Illinois(1)..................  Loading, assembly and packing of medium 
                                       caliber ammunition
                                       Manufacturing and test facility for 
                                       solid propellant products
                                       Demilitarization services
                                       Research and development laboratory

Marion, Illinois ....................  Test range

San Leandro, California(1)...........  Pulsed power research and development
                                       laboratory and test facilities; pulsed
                                       power and advanced warhead engineering
                                       and management
 
Downey, California(1)................  Manufacturing facility for medium caliber
                                       ammunition components and air dispensed
                                       munitions components
                                       System management and research and
                                       development
 
Moses Lake, Washington(1)............  Manufacturing and test facility for solid
                                       propellant products

Camden, Arkansas(2)..................  Test range
                                       Support for the ammunition business

Tracy, California....................  Manufacturing and test facility for
                                       advanced anti-armor warhead systems
 
Lucerne, Switzerland(1)..............  Design, development and testing of anti-
                                       armor warhead systems for the Swiss
                                       Government
</TABLE>

(1) Leased.
(2) Leased in part and occupied in part under a subcontract.

                                       13
<PAGE>
 
ITEM 3. LEGAL PROCEEDINGS
-------------------------

  The Company is primarily engaged in providing products and services under
contracts with the U.S. Government and, to a lesser degree, under foreign
Government contracts, some of which are funded by the U.S. Government.  All such
contracts are subject to extensive legal and regulatory requirements and, from
time to time, agencies of the U.S. Government investigate whether the Company's
operations are being conducted in accordance with these requirements.  Such
investigations could result in administrative, civil or criminal liabilities
including repayments, fines or  penalties being imposed upon the Company or
could lead to suspension or debarment from future Government contracting by the
Company.

  The Company has strict policies requiring its employees to comply with all
applicable legal standards relating to contract procurement and administration.
In addition, the Company requires adherence to high ethical standards by its
employees. The Company also has an Ethics and Compliance Program in which each
major location has an ethics officer who acts as a resource for encouraging and
monitoring compliance with these standards. It is the policy of the Company and
its subsidiaries to cooperate fully with all Governmental investigations of
their affairs.

  The Company is a party to a number of pending or threatened investigations,
claims and proceedings.

  One such investigation concluded in 1996.  In May 1994, the Company discovered
that an employee may have modified inspection and testing software used on
certain medium caliber ammunition production lines at its Marion, Illinois
testing facility to permit inspections to be performed at tolerances which may
not have been fully compliant with applicable contract specifications. Upon
discovering the issue, the Company promptly notified U.S. Government contract
representatives, voluntarily disclosed the circumstances then known to the
Department of Defense's Office of the Inspector General and expressed its intent
to investigate fully the matter and take all necessary corrective actions. In
September 1994, a Federal grand jury in the United States District Court for the
Southern District of Illinois issued two subpoenas to the Company requesting
production of documents relating generally to certain medium caliber ammunition
programs and specifically to the software modification described above.
Subsequently, the Company received additional subpoenas and several Marion
employees have received subpoenas to testify before the grand jury. The Company
complied with the subpoenas and cooperated with Government officials to resolve
the matter. After discussion with the U.S. Attorney's Office regarding the
investigation of the performance of the contracts in question, Olin and the U.S.
Attorney entered into an agreement to settle this matter on September 11, 1996.
Under the agreement, the U.S. Government agreed not to pursue any criminal or
civil claims against Olin or its subsidiaries in connection with these
government contracts. Olin has paid to the U.S. Government $8.0 million in
connection with the settlement and without admitting to any wrongdoing or
liability. The Company's financial statements reflect the expenses associated
with this matter, including the $8.0 million settlement, of which $6.0 million
and $2.0 million was charged to operations during 1996 and 1995, respectively.

  The Company is a party to a contract dispute with the Belgium Ministry of
Defense related to a 1985 sale of artillery ammunition. The Belgium Ministry of
Defense has alleged improprieties committed by the Belgium national who
represented the Company in the transaction. Based on these allegations, the
Belgium Ministry of Defense withheld final payment on the contract. On July 2,
1990, the Company's wholly-owned subsidiary G.D. International ("GDI")
instituted an action in the Court of First Instance of Brussels (the "Court")
seeking that the Court declare that because the Ministry of Defense withheld the
final payment, the contract had been terminated and GDI's obligations thereunder
extinguished. The Company agreed to extend a letter of credit related to the
contract guarantee pending resolution of the underlying contract dispute. In
March 1996, the trial court ruled against the Company. The decision has been
appealed. In the event that the trial court's decision is sustained, the
resultant liability is estimated at approximately $4.5 million, net of a $1.1
million receivable, at current exchange rates. The Company's financial
statements reflect this estimate as a charge to operations in 1996. Olin has
agreed, in conjunction with the Distribution, to assume responsibility for legal
fees and costs, monetary judgments and civil settlements associated with this
contract dispute in Belgium.

  While the Company cannot predict the ultimate outcome of the Belgian contract
dispute summarized above, as well as other pending or threatened proceedings,
including matters arising under provisions relating to the protection of the
environment, it does not believe that the consequences will be materially
adverse to its results of operation or financial position or that the Company's
liability with respect thereto will exceed the amounts which have previously
been charged to operations.

                                       14
<PAGE>
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------

No matters were submitted to a vote of security holders during the fourth
quarter ended December 31, 1996.





                                    PART II
                                        

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK HOLDER MATTERS
-------------------------------------------------------------------------------

MARKET INFORMATION

    The shares of the Company's Common Stock commenced regular way trading on
The NASDAQ National Market System under the symbol PRMX  on January 7, 1997.

HOLDERS

       As of February 28, 1997, there were approximately 9,800 record holders
of the Company's common stock.

DIVIDENDS

       The Company declared a quarterly cash dividend of $0.15 per share,
payable on March 20, 1997 to shareholders of record as of February 20, 1997. The
Company anticipates it will pay quarterly cash dividends which, on an annual
basis, will aggregate $0.60 per share in 1997. The payment of cash dividends in
the future will be dependent upon the Company's results of operations, earnings,
capital requirements, contractual restrictions and other factors considered
relevant by the Board of Directors.

       The Company's credit facility limits the payment or declaration of
dividends by the Company on any class of its stock, as well as any other
distribution, liquidation, purchase or other acquisition of the Company's stock
by it or any subsidiary.  At January 1, 1997, the credit agreement permitted
approximately $17 million to be paid in dividends.

                                       15
<PAGE>
 
ITEM 6.  SELECTED FINANCIAL DATA
--------------------------------

                     The following table summarizes certain selected historical
financial and operating information with respect to the Company.  This
historical data should be read in conjunction with the Consolidated Financial
Statements of the Company and the related notes thereto in Item 8 and
"Management's Discussion and analysis of  Financial Condition and Results of
Operations" in Item 7.

                            YEAR ENDED DECEMBER 31,
               -------------------------------------------------
                    ($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
 
                                                          1996             1995              1994              1993        1992
                                                          ----             ----              ----              ----        ----
<S>                                              <C>                 <C>             <C>               <C>              <C> 
OPERATIONS
Sales...........................................       $  471,488        $  508,113        $  416,148       $  376,332  $  430,120
Cost of Goods Sold..............................          399,187           428,707           335,303          304,717     350,942
Selling and Administration......................           53,336            51,297            46,758           43,643      47,991
Research and Development........................            6,241             5,016             5,364            6,055       6,308
Other Charges (1) ..............................           10,500             2,000                 -           12,600           -
                                                       ----------        ----------        ----------       ----------  ----------
Operating Income ...............................            2,224            21,093            28,723            9,317      24,879
Interest Expense................................            9,256             9,276             8,638            7,880       8,490
Interest and Other Income.......................              663               807             1,743            2,307       2,075
                                                       ----------        ----------        ----------       ----------  ----------
Income (Loss) Before Taxes......................           (6,369)           12,624            21,828            3,744      18,464
Income Tax Provision............................            1,533             6,963             9,805            2,722       8,001
                                                       ----------        ----------        ----------       ----------  ----------
Income (Loss) Before Cumulative Effect of       
 Accounting Change..............................           (7,902)            5,661            12,023            1,022      10,463
Accounting Changes..............................                -                 -                -                 -      (6,159)
                                                        ----------        ----------        ----------       ---------- ----------
Net Income (Loss) ..............................        $  (7,902)       $    5,661        $   12,023       $    1,022  $    4,304
Pro Forma Income (Loss) Per Share (2)...........        $   (1.51)            $1.08             $2.30            $0.20  $     0.82
                                                
Number of Common Shares ........................        5,220,276         5,220,276         5,220,276        5,220,276   5,220,276
   Outstanding (2)
</TABLE> 
 



                            YEAR ENDED DECEMBER 31,
                     --------------------------------------
                               ($ IN THOUSANDS) 

<TABLE> 
<CAPTION> 
 
                                              1996             1995              1994              1993             1992
                                              ----             ----              ----              ----             ----
<S>                                       <C>            <C>              <C>                <C>             <C>  
FINANCIAL POSITION
Cash.....................................  $   20,000        $        -        $        -       $        -        $        -
Property Plant and Equipment, Net........     105,023           114,473           114,113           98,771           107,836
Total Assets.............................     373,743           380,979           364,175          294,077           330,551
Capitalization:                          
  Long-Term Debt.........................     145,000           125,000           125,000          125,000           125,000
  Shareholders' Equity...................     145,134           158,535           131,113           91,287           114,775
                                           ----------        ----------        ----------       ----------        ----------
Total Capitalization.....................     290,134           283,535           256,113          216,287           239,775
OTHER                                    
Capital Expenditures.....................      13,273            19,191            17,821           12,682            14,082
Depreciation.............................      17,211            16,633            16,955           14,323            14,220
                                         
Total Debt to Total Capitalization.......        50.0%             44.1%             48.8%            57.8%             52.1%
</TABLE>

(1) Other charges include a charge for the settlement of claims relating to a
    government investigation of certain testing irregularities at the Company's
    Marion, Illinois facility ($6 million in 1996 and $2 million in 1995) and a
    $4.5 million charge in 1996 related to a trial court ruling involving a
    contract dispute with the Belgium Ministry of Defense related to a 1985 sale
    of artillery ammunition. Also, 1993 other charges include a charge for a
    strategic action plan of $12.6 million.
(2) The calculation of net income per share on a pro forma basis assumed that
    all 5,220,276 common shares outstanding immediately after the Distribution
    were outstanding for all periods prior to the Distribution.

                                       16
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-------------------------------------------------------------------------------
OF OPERATIONS
-------------

  This Management's Discussion and Analysis of Financial Condition and Results
of Operations covers periods when the Company operated as the Ordnance and
Aerospace Divisions of Olin. However, this discussion and analysis of financial
condition and results of operations has been prepared as if the Company were a
separate entity for all periods discussed.
 
RESULTS OF OPERATIONS

                                          YEARS ENDED DECEMBER 31,
                                       -----------------------------
                                             ($ IN THOUSANDS)

                                         1996      1995       1994
                                       --------   -------   --------
Sales...........................       $471,488   $508,113  $416,148          
Gross Margin....................         72,301     79,406    80,845          
Selling and Administration......         53,366     51,297    46,758          
Other Charges...................         10,500      2,000         -          
Net Income (Loss) ..............         (7,902)     5,661    12,023           
 

YEAR ENDED DECEMBER 31, 1996 COMPARED TO 1995

  Sales declined 7% principally attributable to lower shipments of combined
effects munitions, Ball Powder(R) propellant, and electromagnetic systems, which
more than offset higher tank ammunition sales. The lower sales levels of
combined effects munitions and electromagnetic systems reflect the completion of
major programs during 1996. The U.S. Government contract for combined effects
munitions is not expected to be renewed. Sales of commercial Ball Powder(R)
propellant declined 16% in the 1996 period as sporting ammunition customers
drastically reduced their purchases. In 1995, heavy consumer buying patterns for
sporting ammunition were driven by a concern over the threat of restrictive
legislation and taxation, which increased the demand for Ball Powder(R)
propellant. Restrictive legislation in the form of the Brady bill and the
assault weapons ban was passed in 1993 and 1994, respectively, while a proposed
prohibitive tax on ammunition was not adopted.

  Gross margin percentage decreased to  15% from 16% due primarily to the
decline in sales of Ball Powder(R) propellant.

  Selling and administration expenses as a percentage of sales increased to 11%
from 10% due to lower sales and a higher level of expenses primarily associated
with the Distribution.

  Other charges in 1996 represents the provision for the settlement of claims
relating to a government investigation of certain testing irregularities at the
Company's Marion, Illinois facility ($6.0 million) and the charge for the
contract dispute with the Belgian Ministry of Defense related to a 1985 sale of
artillery ammunition ($4.5 million).

  Customer-sponsored research of $31.9 million decreased $15.8 million due to
the completion of an international contract for electromagnetic systems in 1995.

  Income tax expense of $1.5 million and $7.0 million was recorded in
1996 and 1995 on pretax losses of $(6.4) million and pretax income of $12.6
million in 1996 and 1995, respectively. The impact of the Marion legal
settlement which is non-deductible and other higher non-deductible expenses on a
lower level of profits in 1996 were the main contributors to the higher
effective tax rate for 1996.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO 1994

Sales increased 22% primarily due to additional shipments of medium caliber
ammunition, strong demand for electronic and solid propellant products and sales
under a combined effects munition contract. The inclusion of a full year of
sales from the Company's acquisition of certain assets of the medium caliber
ammunition business of GenCorp's Aerojet Ordnance Division in April 1994, and
sales under a combined effects munition contract awarded in 1994 accounted for a

                                       17
<PAGE>
 
15% increase in sales. Sales of large caliber ammunition declined due to the
completion of a contract to supply tank ammunition components to the U.S. Army
during 1994. Tank ammunition cartridge sales and profits in 1995 were consistent
with 1994 levels. Ball Powder(R) propellant sales increased slightly as higher
selling prices due to a more favorable product mix more than offset a decline in
volumes. Increased volumes in the electronics business, specifically the in-
flight entertainment product line, and strong demand for the solid propellant
systems product lines contributed 6% to the sales increase.

  The gross margin percentage decreased to 16% from 19%. Cost overruns on
certain production and development programs and additional costs associated with
certain discontinued programs more than offset the increased margins from large
caliber ammunition due to a favorable contract settlement and the profit impact
from the additional medium caliber ammunition volumes.

  Selling and administration expenses as a percentage of sales decreased to 10%
from 11% due primarily to the additional sales from the medium caliber
ammunition acquisition. Selling and administration expenses increased in amount
due to the inclusion of the operating expenses of the medium caliber ammunition
acquisition for a full year and its related relocation and consolidation costs,
and additional legal and consulting fees. Legal and consulting fees associated
with the government investigation of certain testing irregularities at the
Company's Marion, Illinois facility increased to $3.5 million in 1995 from
$0.5 million in 1994.

  Other charges in 1995 of $2.0 million represents a provision for the
settlement of claims relating to a government investigation of certain testing
irregularities at the Company's Marion, Illinois facility.

  Customer-sponsored research of $47.7 million, decreased $33.3 million, due to
the overall reduction in government-funded ammunition programs and the
advancement of a major ammunition development program into the production stage.

  The effective tax rate was 55% in 1995, compared to 45% in 1994. The impact of
the charge related to the Marion legal settlement which is non-deductible and
other non-deductible expenses on a lower level of profits in 1995 were the main
contributors to the effective tax rate increase.

U.S. GOVERNMENT SALES

  U.S. Government sales amounted to $368.3 million in 1996, $391.1 million in
1995 and $318.9 million in 1994. See "Item 1. Business - U.S. Government
Contracts and Regulations". Sales in 1996 reflect the decline in combined
effects munitions resulting from the completion of that contract. Sales under
the combined effects munition contract and a full year of medium caliber
ammunition sales acquired with the Aerojet business were the main contributors
to the increase in 1995 government sales. Approximately 75% and 80%,
respectively, of total 1996 and 1995 U.S. Government sales were to the
Department of Defense ("DoD") or agencies thereof. Changes in the strategic
direction of defense spending, the timing of defense procurements and specific
defense program appropriation decisions may adversely affect the performance of
the Company in future years, including its income, liquidity, capital resources,
and financial condition. The precise impact of these decisions will depend upon
their timing and the size of changes and the Company's ability to mitigate their
impact with new business, business consolidations or cost reductions. In view of
the continuing uncertainty regarding the size, content and priorities of the
annual DoD budget, the historical financial information of the Company may not
be indicative of future performance and the viability of certain facilities and
equipment may also be impacted. DoD sales activities are historically stronger
in the latter part of the year because the timing of the recognition of the DoD
ammunition sales tends to reflect the procurement cycle utilized by the U.S.
Army. Certain commercial sales, such as Ball Powder(R) propellant volumes, tend
to be stronger in the first half of the year because the buying patterns of
sporting ammunition manufacturers are primarily driven by the fall hunting
season.

  Since the U.S. Government usually awards and funds ordnance contracts on a
year-by-year basis and the Company's business is dependent upon periodic awards
of new contracts and the exercise of options contained in existing contracts,
there can be no assurance that the U.S. Government will continue to purchase the
Company's products and services over the long-term. The termination of any of
the Company's significant contracts or the failure to obtain either renewals of
certain existing contracts or additional contracts with the U.S. Government
would have a material adverse effect on its results of future operations and
financial condition.

                                       18
<PAGE>
 
ENVIRONMENTAL

  The Company is party to various governmental and private environmental actions
associated with former manufacturing and test facilities. Associated costs of
investigatory and remedial activities are provided for in accordance with
generally accepted accounting principles governing probability and the ability
to reasonably estimate future costs. Charges to income for investigatory and
remedial efforts were not material to operating results in 1996, 1995 and 1994
and are not expected to be material to net income in future years. The Company's
estimated environmental liability at the end of 1996 was attributable to five
sites.

  Cash outlays for remedial and investigatory activities associated with former
manufacturing and test facilities and past operations were not charged to income
but instead were charged to reserves established for such costs identified and
expensed to income in prior years; such charges to income were none in 1996 and
$0.8 million and $0.1 million in 1995 and 1994, respectively. Cash
outlays for normal plant operations for the disposal of waste and the operation
and maintenance of pollution control equipment and facilities to ensure
compliance with mandated and voluntarily imposed environmental quality standards
were charged to income. Historically, the Company has funded its environmental
capital expenditures through cash flow from operations and expects to do so in
the future.

  The Company's consolidated balance sheets included liabilities for future
environmental expenditures to investigate and remediate known sites amounting to
$1.9 million at December 31, 1996 and $2.6 million at December 31, 1995, of
which $1.9 million and $1.8 million, respectively, were classified as other
noncurrent liabilities. Those amounts did not take into account any discounting
of future expenditures or any consideration of insurance recoveries or advances
in technology. Those liabilities are reassessed periodically to determine if
environmental circumstances have changed and/or remediation efforts and their
costs can be better estimated. As a result of these reassessments, future
charges to income may be made for additional liabilities.

  Total environmental-related cash outlays for 1996 were $3.6 million, of which
$0.7 million was spent on investigatory and remedial efforts, $0.3 million on
capital projects and $2.6 million on normal plant operations.

  Environmental-related cash outlays for site investigation and remediation,
capital projects and normal plant operations are expected to range between $2
million and $5 million annually over the next several years. While the Company
does not anticipate a material increase in the projected annual level of its
environmental-related costs, there is always the possibility that such increases
may occur in the future in view of the uncertainties associated with
environmental exposures. Environmental exposures are difficult to assess for
numerous reasons, including the identification of new sites, developments at
sites resulting from investigatory studies, advances in technology, changes in
environmental laws and regulations and their application, the scarcity of
reliable data pertaining to identified sites, the difficulty in assessing the
involvement and financial capability of other potentially responsible parties
and the Company's ability to obtain contributions from other parties and the
time periods (sometimes lengthy) over which site remediation occurs. It is
possible that some of these matters (the outcomes of which are subject to
various uncertainties) may be resolved unfavorably against the Company.

FUTURE SERVICE COSTS

  From the time of the Distribution to December 31, 1997, the Company and Olin
will share certain services, such as payroll and benefits administration,
mainframe computing services, and telecommunications support. Olin will be
reimbursed by the Company at rates comparable to the pre-Distribution inter-
company charges. By December 31, 1997, the Company will develop and establish
these services on its own, at costs that may be more or less than the rates
charged by Olin. It is anticipated that as a separate public company, costs of
other types of services, in addition to those mentioned, will increase by
approximately $4 million per year as a result of additional financial reporting
requirements, stock transfer fees, director's fees, insurance, and executive
compensation and benefits. Pro forma net loss for 1996, would have been $10.5
million compared to the reported net loss of $7.9 million, and pro forma net
income for 1995, would have been $3.1 million compared to the reported net
income of $5.7 million after giving effect to the additional $4 million of
annual pretax costs expected to be incurred in the future as a separate public
company. 

NEW ACCOUNTING STANDARDS

                                       19
<PAGE>
 
  Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of". The adoption of this
standard did not have a material impact on the Company's financial position and
its operating results.

  Effective January 1, 1996, The Company adopted Statement of Finance
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation."
As allowable by SFAS No. 123, the Company will not adopt the recognition and
measurement provisions of the statement, but rather will disclose in the notes
to the financial statements the impact on net income and earnings per share as
if the fair value based compensation cost had been recognized.

LIQUIDITY AND CAPITAL RESOURCES

  Cash flow from operations supplemented by credit provided by Olin and proceeds
from sales of property, plant and equipment were used to finance the Company's
funding needs of capital spending and the 1994 acquisition of the medium caliber
ammunition business of GenCorp's Aerojet Ordnance Division. In the past and
until the Distribution, the Company's financing requirements were provided by
Olin. In connection with the Distribution, the Company assumed a $160 million
floating rate financing agreement (the "Revolving Credit Agreement") with
participating banks to provide financing for the Company's working capital
requirements, capital expenditures and general corporate purposes. Olin borrowed
$145 million under the Revolving Credit Agreement based on the Company's
estimated working capital at the date of Distribution. A final determination of
the appropriate debt level by Olin resulted in targeted debt of $125 million.
Accordingly, the Company was provided with $20 million in cash by Olin. The
Revolving Credit Agreement permits borrowings on a revolving basis over a five-
year term. It contains restrictive covenants limiting the ratio which earnings
before interest and taxes bears to interest expense, the ratio which total debt
bears to earnings before interest, taxes, depreciation and amortization, and
contains minimum tangible net worth requirements. No principal repayments are
required until the end of the five-year term. During February 1997, the Company
entered into a series of interest rate swaps that fixed the interest rate on a
substantial portion of its borrowings projected over the next four years.

For the year ended December 31, 1996, net cash provided by operations totaled
$14.3 million. During 1996, cash was provided by the reduction in accounts
receivable resulting from completion of the combined effects munition contract
and a cash settlement resulting from an in-flight entertainment contract
cancellation that occurred in 1995, offset in part by lower current liabilities,
primarily accounts payable, and increased inventory associated with medium
caliber ammunition production delays. During the fourth quarter of 1996, the
Company entered into a contract modification under one of its multi-year
contracts which allows for the acceleration of contract payments, in exchange
for a reduction in selling price. To qualify for such payments, the Company must
achieve certain performance milestones. Through February 1997, the Company had
received approximately $61 million of such payments.

  For the year ended December 31, 1995, net cash used for operations totaled
$7.8 million. The utilization of cash by operating activities for the year ended
1995 was due to an increase in working capital required to support the higher
sales from the combined effects munition contract and because of shipment delays
on certain medium caliber and tank ammunition contracts, offset in part by cash
provided by loans taken against the cash surrender value of key employees life
insurance policies. Operating cash flow in 1994 decreased significantly from the
prior year as additional funds were spent for working capital. Increase in
inventories was due to shipment delays on certain medium caliber ammunition and
additional funds to support both the combined effects munition contract and the
commercial in-flight entertainment product line, and was offset in part by
higher current liabilities. Also, funds were spent for the expansion of the
Company's complete line of medium caliber ammunition products.

  Capital spending for the year ended December 31, 1996 decreased 31% from 1995
due to a planned reduction to control capital costs and the completion of the
medium caliber ammunition consolidation and the facilities to demilitarize
obsolete ammunition stocks (ammunition de-mil). Capital spending in 1995
increased 8% from the prior year, mainly to complete the consolidation of some
medium caliber ammunition assembly operations into the Company's Marion
operations and the ammunition de-mil facility. Capital spending in 1994
increased 40% from the prior year mainly to consolidate the acquired medium
caliber ammunition operations with the Company's existing medium caliber
ammunition facilities and to construct a facility to perform ammunition de-mil.

  During 1994, the Company purchased certain medium caliber ammunition and air
dispensed munitions assets of GenCorp's Aerojet Ordnance Division for
approximately $25.4 million. This acquisition provided the Company with a
complete line of medium caliber ammunition as well as air dispensed munitions
products.

                                       20
<PAGE>
 
  The Company believes that, based on its working capital and fixed capital
requirements, amounts available under the Revolving Credit Agreement are
adequate to meet its cash requirements.  

EFFECT OF INFLATION

  Because of the relatively low level of inflation experienced in the U.S.,
inflation did not have a material adverse effect on the revenue or operating
results of the Company during the three most recent fiscal years.


RISK FACTORS

          All forecasts and projections in this Form 10-K are "forwarded-looking
statements" as defined in the Private Securities Litigation Reform Act of 1995,
and are based on management's current expectations of the Company's near term
results, based on current information available and pertaining to the Company.
Actual results may differ materially from those projected in the forward-looking
statements.  These  forward-looking statements involve risks and uncertainties,
including, but not limited to the following: demand for commercial powder;
international business opportunities; ammunition lot acceptance; timing of
contract funding and continued receipt of accelerated payments under the multi-
year tank ammunition contract; changing economic and political conditions in the
United States and in other countries; changes in governmental laws and
regulations surrounding various matters, such as environmental remediation,
contract pricing, and international trading restrictions; changes in
governmental spending and budgetary policies, such as reductions in the level of
defense spending or redirection of Department of Defense program funding;
production and pricing levels of important raw materials, lower than anticipated
levels of plant utilization resulting in production inefficiencies and higher
costs, whether related to the delay of new product introductions, improved
production processes or equipment, or labor relation issues; difficulties or
delays in the development, production, testing and marketing of products;
product margins and customer product acceptance; and costs and effects of legal
and administrative cases, proceedings, settlements and investigations involving
the Company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------

                                   INDEX TO

                       CONSOLIDATED FINANCIAL STATEMENTS

<TABLE> 
<CAPTION> 
 
                                                                                             PAGE
                                                                                              ----

<S>                                                                                           <C>
Independent Auditors' Report................................................................    22

Consolidated Balance Sheets as of December 31, 1996 and December 31, 1995...................    23
 
Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994..    24
 
Consolidated Statements of Cash Flow for the Years Ended December 31, 1996, 1995 and 1994...    25
 
Notes to Consolidated Financial Statements..................................................    26
</TABLE>

                                       21
<PAGE>
 
                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
Primex Technologies, Inc.:

  We have audited the consolidated balance sheets of Primex Technologies, Inc.
and subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations and cash flows for each of the years in the three-year
period ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Primex Technologies, Inc. and subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.



                           KPMG Peat Marwick LLP

Tampa, Florida
February 13, 1997

                                       22
<PAGE>
 
                           PRIMEX TECHNOLOGIES, INC.
                          CONSOLIDATED BALANCE SHEETS


 
 
                                                              DECEMBER 31,
                                                          --------------------
                                                            1996          1995
                                                            ----          ----
ASSETS                                                     ($ IN THOUSANDS)

Current Assets:
  Cash............................................        $ 20,000     $      -
  Receivables.....................................         123,658      153,076
  Inventories, Net................................          57,241       49,763
  Other Current Assets............................           5,843        6,587
                                                          --------     --------
    Total Current Assets..........................         206,742      209,426
Property, Plant and Equipment, Net................         105,023      114,473
Goodwill..........................................          47,385       49,831
Other Assets......................................          14,593        7,249
                                                          --------     --------
                                                                             
    Total Assets..................................        $373,743     $380,979
                                                          ========     ========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
 
Current Liabilities:
--------------------
  Accounts Payable................................        $ 30,147     $ 42,781
  Income Taxes Payable............................               -          625
  Accrued Liabilities.............................          28,873       23,087
                                                          --------     --------
    Total Current Liabilities.....................          59,020       66,493
Long Term Debt....................................         145,000      125,000
Other Liabilities.................................          24,589       30,951
                                                          --------     --------
    Total Liabilities.............................         228,609      222,444 
 
Commitments and Contingencies
 
Stockholders' Equity:
Common Stock, $1.00 par value, 60,000,000 shares
 authorized, issued and outstanding
 5,220,276 shares.................................           5,220            -
Additional Paid-in Capital........................         139,914            -
Equity ...........................................               -      158,535
                                                          --------     --------
    Total Stockholders' Equity....................         145,134      158,535
                                                          --------     --------
                                                                              
    Total Liabilities and Stockholders' Equity....        $373,743     $380,979
                                                          ========     ========
 


         See accompanying notes to consolidated  financial statements.

                                       23
<PAGE>
 
                           PRIMEX TECHNOLOGIES, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
 
                                                     YEARS ENDED DECEMBER 31,
                                               --------------------------------------- 
                                                    1996        1995        1994
                                                    ----        ----        -----
                                               ($ IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                                              <C>          <C>        <C>  
Sales  ......................................    $  471,488   $  508,113  $  416,148
Operating Expenses:                              
     Cost of Goods Sold  ....................       399,187      428,707     335,303
     Selling and Administration  ............        53,336       51,297      46,758
     Research and Development  ..............         6,241        5,016       5,364
     Other Charges  .........................        10,500        2,000           -
                                                 ----------   ----------  ----------
                                                 
 Operating Income  ..........................         2,224       21,093      28,723
                                                 
 Interest Expense  ..........................         9,256        9,276       8,638
 Interest and Other Income  .................           663          807       1,743
                                                 ----------   ----------  ----------
                                                 
 Income (Loss) Before Taxes  ................        (6,369)      12,624      21,828
 Income Tax Provision  ......................         1,533        6,963       9,805
                                                 ----------   ----------  ----------
                                                 
 Net Income (Loss)  .........................    $   (7,902)  $    5,661  $   12,023
                                                 ==========   ==========  ==========
                                                 
 (Unaudited Proforma Information)                
  Proforma Net Income Per Share..............        $(1.51)       $1.08       $2.30
                                                 ==========   ==========  ==========
                                                 
 Common Shares Outstanding...................     5,220,276    5,220,276   5,220,276
                                                 ==========   ==========  ==========
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       24
<PAGE>
 
                           PRIMEX TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW

                                        
<TABLE>
<CAPTION>
                                                                    YEARS ENDED DECEMBER 31,
                                                                 ------------------------------
                                                                   1996      1995       1994
                                                                 --------   --------   --------
                                                                         ($ IN THOUSANDS)
OPERATING ACTIVITIES                                          
--------------------                                          
<S>                                                              <C>        <C>        <C> 
Net Income (Loss)............................................    $ (7,902)  $  5,661   $ 12,023
Adjustments to Reconcile Net Income (Loss) to Net             
 Cash Provided (Used) by Operating Activities:                
Depreciation.................................................      17,211     16,633     16,955
Amortization of Intangibles..................................       2,954      3,042      2,669
Deferred Taxes...............................................      (3,805)     2,502     (2,007)
Changes in Assets and Liabilities                             
 Net of Purchase of Business:                                 
   Receivables...............................................      29,418    (48,182)       (93)
   Inventories...............................................      (7,478)    16,038    (31,149)
   Other Current Assets......................................         659        481       (213)
   Current Liabilities.......................................      (7,473)   (16,899)    23,624
   Other Liabilities.........................................      (2,472)     2,217     (2,945)
   Other Assets..............................................      (7,737)    10,482     (3,280)
Other Operating Activities...................................         947        201        136
                                                                 --------   --------   --------
 Net Operating Activities....................................      14,322     (7,824)    15,720
                                                                 --------   --------   --------
                                                              
INVESTING ACTIVITIES                                          
--------------------                                          
Capital Expenditures.........................................     (13,273)   (19,191)   (17,821)
Acquisition..................................................           -          -    (25,400)
Disposition of Property Plant and Equipment..................       4,565      3,859          -
Other Investing Activities...................................        (195)         -       (302)
                                                                 --------   --------   --------
 Net Investing Activities....................................      (8,903)   (15,332)   (43,523)
                                                                 --------   --------   --------
                                                              
FINANCING ACTIVITIES                                          
--------------------                                          
Net Borrowing (Repayment) ...................................      20,000          -          -
Net Transfers from (to) Olin.................................      (5,419)    23,156     27,803
                                                                 --------   --------   --------
 Net Financial Activities....................................      14,581     23,156     27,803
                                                                 --------   --------   --------
                                                              
Net Increase in Cash.........................................      20,000          -          -
Cash, Beginning of Year......................................           -          -          -
                                                                 --------   --------   --------
Cash, End of Year............................................    $ 20,000   $      -   $      -
                                                                 ========   ========   ========
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       25
<PAGE>
 
                           PRIMEX TECHNOLOGIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    ($ IN THOUSANDS, EXCEPT PER SHARE DATA)



FORMATION OF PRIMEX TECHNOLOGIES, INC. AND DESCRIPTION OF BUSINESS

  Primex Technologies, Inc. (the "Company") was organized in May 1996 and has
been publicly owned since December 31, 1996, when Olin Corporation ("Olin") made
a distribution (the "Distribution") to its shareholders consisting of all of the
outstanding shares of the Company's common stock.  Regular way trading in the
common stock commenced on The Nasdaq National Market System on January 7, 1997.

  Prior to December 31, 1996, the Company was a wholly-owned subsidiary of Olin.
In connection with the Distribution, the assets and liabilities of Olin's former
Ordnance Division ("Ordnance") and Aerospace Division ("Aerospace") were
transferred to the Company.

  Ordnance produces large and medium caliber ammunition for aircraft, artillery,
tanks, warships; air dispensed munitions; Ball Powder(R) propellant for
sporting, military and commercial applications; and propulsion systems for large
caliber gun systems. Ordnance's primary customers are the U.S. Department of
Defense and other government R&D agencies/laboratories, allied governments and
sporting ammunition manufacturers.

  Aerospace products include rocket engines, advanced electric propulsion
systems, aerospace electronic products, pulsed power systems and solid
propellant products, including munitions dispensing systems. Aerospace's primary
customers are satellite, aircraft and missile contractors; other
defense/aerospace subsystems and systems contractors; NASA and other government
R&D agencies/laboratories.

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

  The accompanying consolidated financial statements include the former combined
operations of the Ordnance and Aerospace Divisions.  The consolidated financial
statements have been prepared as if the Company had operated as a separate
stand-alone entity for all periods presented and include only those assets and
liabilities transferred to the Company, and revenues and expenses attributable
to the Company's operations. The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries which were transferred
to the Company prior to the Distribution. Inter-company balances and
transactions between entities included in these financial statements have been
eliminated. These financial statements include the assets, liabilities, revenues
and expenses of the following subsidiaries:

  Primex Aerospace Company
  Primex Physics International Company
  U.S. Ordnance Company
  General Defense Corporation (GDC)
  GD International, LTD, a wholly-owned subsidiary of GDC
  Olin Services, Inc., a wholly-owned subsidiary of GDC
  PI Physics International (Schweiz) A.G., a wholly-owned subsidiary of Primex
   Physics International Company

  The consolidated financial statements include an allocation of Olin's
consolidated debt prior to December 31, 1996 and interest expense related to the
assigned portion of Olin's debt. The amount of debt allocated was based on
providing a debt to equity ratio similar to that of Olin as well as a level of
debt the Company could maintain on an independent basis in the future.
Management believes the method used to allocate the debt is reasonable. An
assessment of corporate overhead is included in selling and administration
expenses with the allocation based on either effort committed or number of
employees. Management believes that the allocation method used to allocate the
costs and expenses is reasonable. However, such allocated amounts may or may not
necessarily be indicative of what selling and

                                       26
<PAGE>
 
                           PRIMEX TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                    ($ IN THOUSANDS, EXCEPT PER SHARE DATA)



administration expenses would have been if the Company operated independently of
Olin. It is anticipated that as a separate public company administration
expenses will increase by approximately $4,000 per year as a result of
additional financial reporting requirements, stock transfer fees, directors'
fees, insurance, and executive compensation and benefits.

  The preparation of the consolidated financial statements requires estimates
and assumptions that affect amounts reported and disclosed in the financial
statements and related notes. Actual results could differ from those estimates.


Long-Term Contracts

  Sales and cost of sales related to government contracts that extend beyond one
year are primarily recognized under the percentage-of-completion method of
accounting as costs are incurred. Profits expected to be realized on contracts
are based on the Company's estimates of costs at completion compared to total
contract sales value; profits for interim reporting periods are based on costs
incurred relative to total estimated costs at completion. When the Company
believes the cost of completing a contract will exceed contract-related
revenues, the full amount of the anticipated contract loss is recognized.  For
contracts or commercial orders with performance periods of under one year, sales
are recognized on the units shipped method of accounting.

  Sales directly to the U.S. government and its agencies amounted to $368,257 in
1996, $391,099 in 1995, and $318,898 in 1994. No other single customer accounted
for more than 9% of the Company's total annual sales during the three-year
period ended December 31, 1996. Export sales from the United States to
unaffiliated customers were $28,875, $24,285 and $16,428 in 1996, 1995 and 1994,
respectively.


Inventories

  Inventories are stated at the lower of cost or net realizable value. Prior to
the Distribution, certain inventories were included in a larger pool of Olin
inventories valued by the dollar value last-in, first-out (LIFO) method of
inventory accounting. The Company was allocated a percentage share of the LIFO
reserve related to this inventory pool (based on first-in, first-out) by Olin as
part of the Distribution.


Property, Plant and Equipment

  Property, plant and equipment are recorded at cost. Depreciation is computed
on a straight-line basis over the following estimated useful lives:
 
               Improvements to land.............  10 to 20 years
               Building and building equipment..   5 to 45 years
               Machinery and equipment..........   3 to 12 years

Leasehold improvements are amortized over the term of the lease or the estimated
useful life of the improvement, whichever is less. Start-up costs are expensed
as incurred.

                                       27
<PAGE>
 
                           PRIMEX TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     ($ IN THOUSAND, EXCEPT PER SHARE DATA)



Goodwill

  Goodwill, the excess of the purchase price of the acquired businesses over the
fair value of the respective net assets, is amortized principally over 30 years
on a straight-line basis. Accumulated amortization was $20,430 and $17,869 at
December 31, 1996 and 1995, respectively. The Company periodically reviews the
value of its goodwill to determine if an impairment has occurred. The Company
assesses the potential impairment of recorded goodwill by the undiscounted value
of expected future operating cash flows in relation to its net capital
investment in the subsidiary. An impairment would be recorded based on the
estimated fair value.

Environmental Liabilities and Expenditures

  Accruals for environmental matters are recorded when it is probable that a
liability has been incurred and the amount of the liability can be reasonably
estimated, based upon current law and existing technologies. These amounts,
which are not discounted and exclusive of claims against third parties, are
adjusted periodically as assessment and remediation efforts progress or
additional technical or legal information becomes available. Environmental
remediation costs are charged to expense. Environmental costs are capitalized if
the costs increase the value of the property and /or mitigate or prevent
contamination from future operations.

Income Taxes

  Prior to the Distribution, the Company's operations were included in the U.S.
federal consolidated tax returns of Olin. The provision for income taxes
includes the Company's allocated share of Olin's consolidated income tax
provision and is calculated on a separate Company basis pursuant to the
requirements of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". Allocated income taxes are settled with Olin on a current
basis. Deferred taxes are provided for differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.

Net Income (Loss) Per Share

The calculation of net income per share on a pro forma basis assumes that all
5,220,276 common shares outstanding immediately after the Distribution were
outstanding for all periods prior to the Distribution.

Accounting Standards

  Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of". The adoption of this
standard did not have a material impact on the Company's financial position and
its operating results.

  Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation". As
allowable by SFAS No. 123, the Company will not adopt the recognition and
measurement provisions of the statement,  but rather will disclose in the notes
to the financial statements the impact on net income and earnings per share as
if the fair value based compensation cost had been recognized.

                                       28
<PAGE>
 
                           PRIMEX TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                    ($ IN THOUSANDS, EXCEPT PER SHARE DATA)



RECEIVABLES

  Receivables, including amounts due under long-term contracts (contract
receivables), consist of the following:
 
                                                        1996      1995   
                                                      --------  -------- 
Contract receivables:                                                    
  Billed receivables...............................   $ 18,490  $ 18,851 
  Unbilled receivables.............................     85,898    92,113 
  Trade receivables................................     18,440    40,621 
                                                      --------  -------- 
    Total accounts receivable trade................    122,828   151,585 
  Other receivables..................................      830     1,491 
                                                      --------  -------- 
    Total                                             $123,658  $153,076 
                                                      ========  ======== 
 


  Unbilled receivables represent the balance of recoverable costs and accrued
profit comprised principally of revenue recognized on contracts for which
billings have not been presented to the customer because the amounts were earned
but not billable as of the balance sheet date under the contractual terms.
Billed and unbilled contract receivables include amounts related to Government
contracts of $12,478 and $72,278 in 1996, and $12,061 and $79,473 in 1995. Also
included in contract receivables are claims in the amount of $266 and $445 at
December 31, 1996 and 1995, respectively.

 
INVENTORIES
 Inventories consist of the following:
                                                     1996      1995 
                                                     ----      ----
 Raw materials and work-in-progress..............  $58,355  $50,690  
 Finished goods..................................    7,927    7,749
                                                   -------  ------- 
                                                    66,282   58,439
 Less revaluation to LIFO........................    9,041    8,676
                                                   -------  ------- 
 Total inventories...............................  $57,241  $49,763
                                                   =======  =======

  Inventory valued at LIFO represented approximately 21% of total inventory at
December 31, 1996 and 22% of total inventory at December 31, 1995.

 
PROPERTY, PLANT AND EQUIPMENT
                                                    1996     1995
                                                    ----     ----

Land and improvements to land................... $ 14,399  $ 17,497
Building and building equipment.................   39,869    37,942
Machinery and equipment.........................  162,419   158,771
Leasehold improvements..........................   20,161    17,961
Construction-in-progress........................   17,502    23,927
                                                 --------  -------- 
Property, plant and equipment...................  254,350   256,098
Less accumulated depreciation...................  149,327   141,625
                                                 --------  --------
                                                 $105,023  $114,473
                                                 ========  ========

Leased assets capitalized and included above are not significant. Maintenance
and repairs charged to operations amounted to $9,824, $ 9,846 and $8,568 in
1996, 1995 and 1994,  respectively.

                                       29
<PAGE>
 
                           PRIMEX TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                    ($ IN THOUSANDS, EXCEPT PER SHARE DATA)



LONG-TERM BORROWINGS

  As a result of the Distribution the Company has assumed all obligations for a
financing agreement entered into on December 23, 1996 by Olin (the "Revolving
Credit Agreement"), under the terms of which participating banks have committed
a maximum of $160,000 to the Company for cash borrowings and letters of credit.
Borrowings under the Revolving Credit Agreement are unsecured.  The Company pays
interest, under the Revolving Credit Agreement, on outstanding borrowings at the
Company's choice of various floating rate options. The Revolving Credit
Agreement expires on December 31, 2001 and contains a number of financial
covenants including requirements of minimum interest coverage, maximum leverage,
and minimum tangible net worth.  It also contains limitations on amounts
available to pay dividends or repurchase Company stock ("Restricted Payments").
At December 31, 1996 the amounts available for Restricted Payments were $17
million. Outstanding borrowings under this facility at December 31, 1996 were
$145,000 with a weighted average interest rate of 6.3%.

  The financial statements include $125,000 of debt for all periods prior to
establishment of the Revolving Credit Agreement which has been reclassified as
long-term debt as a result of the Distribution and assumption of the Revolving
Credit Agreement. Interest expense of $9,256, $9,276 and $8,638 in 1996, 1995,
and 1994, respectively, was determined using Olin's annual average borrowing
rates for those periods.

OTHER CHARGES

  Other charges include a provision for the settlement of claims relating to a
government investigation of certain testing irregularities at the Company's
Marion, Illinois facility of $6,000 in the year ended December 31, 1996 and
$2,000 in the year ended December 31, 1995. Also included in other charges in
the year ended December 31, 1996 is a $4,500 provision relating to the Belgian
contract dispute. See footnote titled "Legal Proceedings" included herein.

ACCRUED LIABILITIES

 Accrued liabilities consist of the following:
 
                                                   1996     1995
                                                   ----     ---- 

Accrued payroll and employee benefits...........  $12,506  $10,802
Contract Liabilities............................   11,776    6,495
Other...........................................    4,591    5,790
                                                  -------  -------
                                                
Total accrued liabilities.......................  $28,873  $23,087
                                                  =======  =======

  Contract liabilities represent principally reserves for anticipated losses on
certain incomplete contracts as well as estimated costs to perform contractual
activities associated with completed contracts.

                                       30
<PAGE>
 
                           PRIMEX TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                    ($ IN THOUSANDS, EXCEPT PER SHARE DATA)

 
 
INCOME TAXES
 
Components of Income Tax Expense:
                                              1996     1995    1994
                                              ----     ----    ----
  Currently payable:
    Federal ...........................      $4,509   $3,774  $9,976
    State .............................         829      687   1,836
  Deferred.............................      (3,805)   2,502  (2,007)
                                             ------   ------  ------      
  Income Tax Expense...................      $1,533   $6,963  $9,805
                                             ======   ======  ======

  The following table accounts for the difference between the income tax
expenses provision and the amounts obtained by applying the statutory U.S.
federal income tax to the income before taxes.

Effective Tax Rate Reconciliation (percent):
                                                    1996       1995     1994
                                                    ----       ----     ----
 
  Statutory Federal Tax Rate.........              (35.0)      35.0     35.0
  State Income Taxes, Net.............               2.4        5.5      4.5
  Goodwill............................              14.1        7.0      4.1
  Fines and Penalties.................              33.0        5.5        -
  Supplemental Pension................                 -        0.8      1.0
  Other, Net..........................               9.6        1.4      0.3
                                                   -----       ----     ----
  Effective Tax Rate..................              24.1       55.2     44.9
                                                   =====       ====     ====
 
Components of Deferred Tax Assets and Liabilities:

                                                           1996     1995
                                                           ----     ----
  Deferred Tax Assets:
    Postretirement Benefits...........................   $ 4,889  $ 3,653
    Non-deductible Reserves...........................    10,941    9,900
    Other Miscellaneous Items.........................     1,300    3,390
                                                         -------  -------
      Total Deferred Tax Assets.......................   $17,130  $16,943
                                                         =======  =======
                                                    
  Deferred Tax Liabilities:                           
    Property, Plant and Equipment.....................   $11,396  $13,895
    Deferred Contract Income..........................     4,942    6,061
                                                         -------  -------
      Total Deferred Tax Liabilities..................   $16,338  $19,956
                                                         =======  =======


  Income from foreign subsidiaries is not significant and represented less than
$70 in each of the years presented. Included in other current assets at December
31, 1996 and 1995, respectively, are $4,717 and $4,802 of net current deferred
assets.

ACQUISITIONS

  In 1994, the Company acquired certain assets of the medium caliber ammunition
business of GenCorp's Aerojet Ordnance Division for approximately $25,400. The
fair value of assets acquired included working capital of $11,170 and property,
plant and equipment of $14,230. This acquisition was accounted for as a purchase
and  accordingly, its results of operations, which were not material, are
included in the combined financial statements from the date of acquisition.

                                       31
<PAGE>
 
                           PRIMEX TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                    ($ IN THOUSANDS, EXCEPT PER SHARE DATA)


EMPLOYEE BENEFIT PLANS

  Prior to the Distribution, virtually all U.S. employees of the Company
participated in one of several Olin pension benefit plans covering employees of
other Olin businesses. The pension liability for active and retired employees
participating in the Olin plans prior to the Distribution will remain with Olin.
Costs and expenses include accruals for pensions at rates determined by Olin
corporate personnel and which amounted to $5,295, $4,622 and $4,427 in 1996,
1995 and 1994, respectively. Effective January 1, 1997, pension benefits for
substantially all domestic employees are provided through the Company's
sponsorship of a defined contribution plan (the "Plan"). The Plan is intended to
meet the requirements of Section 401 (k) of the Internal Revenue code. The Plan
allows the Company to match participant contributions up to certain limits and
to make age weighted profit sharing contributions for eligible participants.

  Certain Company employees prior to the Distribution participated in
supplemental non-qualified pension plans. Costs and expenses associated with the
non-qualified plans were $1,036, $566, and $688 in 1996, 1995, 1994,
respectively. Included in other assets in 1996 and 1995 is the cash surrender
value of the related life insurance policies of  $11,727 and $1,991,
respectively, which is net of loans against those policies of $9,200 in 1995.
The loans were repaid in 1996. Olin will remain liable for payment of benefits
accrued for employees of the Company under any Olin non-qualified benefit plan
at the time of the Distribution. The Company will establish a non-qualified plan
after the Distribution.

  Prior to the Distribution, the Company employees participated in the Olin
Corporation Contributing Employee Ownership Plan, which is a defined
contribution plan available to essentially all domestic Olin employees and
provides a match of employee contributions. The matching contribution allocable
to the Company employees has been included in cost and expenses in the
accompanying financial statements and was $2,577, $2,274, and $1,958 in 1996,
1995, 1994, respectively.

  The Company's employees also participate in Olin-provided postretirement
health care and life insurance benefits for eligible active and retired domestic
employees. Costs and expenses include accruals for post retirement benefits for
both active and retired employees at rates determined by Olin corporate
personnel and which amounted to $1,176, $1,100 and $550 in 1996, 1995, and 1994,
respectively. The liability for retired employees prior to the Distribution will
remain with Olin. The Company has adopted a plan similar to the Olin plan to
provide postretirement benefits for its active employees.

The following table reflects the components of post retirement liability for
active employees of the Company.
 
                                                                 1996    1995
                                                                 ----    ----
Accumulated postretirement benefit obligation:
Fully eligible active plan participants......................... $3,318  $3,473
Other active participants.......................................  5,251   5,666
                                                                 ------  ------
Cumulative accumulated postretirement benefit obligation........  8,569   9,139
Unrecognized loss...............................................      -    (912)
Unrecognized prior service cost.................................      -   1,165
                                                                 ------  ------
Net postretirement benefit liability............................ $8,569  $9,392
                                                                 ======  ======


  The accumulated postretirement benefit obligation was determined using the
projected unit credit method and an assumed discount rate of 8.0% in 1996, 7.5%
in 1995 and 8.5% in 1994. The assumed health care cost trend rate used for pre-
65 retirees was  11.2% in 1996 and 12.5% in 1995 and  13% in 1994, declining
one-half percent per annum to 5.5%.   A one percent increase each year in the
health care cost trend rate used would have resulted in a 10.1% increase in
aggregate service and interest components of expense for the year 1996, and a
$865 increase in the accumulated postretirement benefit obligation at December
31, 1996.

                                       32
<PAGE>
 
                           PRIMEX TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                    ($ IN THOUSANDS, EXCEPT PER SHARE DATA)



LONG-TERM INCENTIVE PLAN

  The Company adopted a long-term incentive plan to encourage selected salaried
employees to acquire a proprietary interest in the Company's growth and
performance and to attract and retain qualified individuals. The plan provides
the ability to issue stock options, stock appreciation rights, restricted stock
and restricted stock units, performance awards, and other stock-based awards.
Subsequent to the Distribution the Company issued restricted stock units to
certain officers of the Company. The value of the restricted stock units is
$5,642 and will be charged to income over the vesting period of 5 years.

SHAREHOLDER RIGHTS PLAN

  The Company has adopted a Shareholder Rights Plan which is designed to prevent
an acquiror from gaining control of the Company without offering a fair price to
all shareholders. Each right entitles a shareholder (other than the acquiror) to
buy one-thousandth of a share of Series A Participating Cumulative Preferred
Stock at an exercise price of $55. The rights are exercisable only if a person
acquires more than 15% of the Company's common stock or if the Board of
Directors so determines following the commencement of a tender or exchange offer
to acquire more than 15% of the Company's common stock. If any person acquires
more than 15% of the Company's common stock and in the event of a subsequent
merger or combination, each right will entitle the holder (other than the
acquiror) to purchase stock or other property of the acquiror having a value of
twice the exercise price. The Company can redeem the rights at $.01 for a
certain period of time. The rights will expire on December 19, 2006, unless
earlier redeemed by the Company.

STOCKHOLDERS' EQUITY

  Equity represents Olin's ownership interest in the recorded net assets of the
Company prior to the Distribution. All cash and inter-company transactions flow
through the equity account.

      Common stock and additional paid-in capital at December 31, 1996
represents the pro forma effect of shares issued as a result of the
Distribution.

 Changes in Stockholders' Equity are Summarized below:

<TABLE>
<CAPTION>
                                                                                        EQUITY IN 
                                                     COMMON STOCK         ADDITIONAL    EARNINGS        TOTAL   
                                                ----------------------     PAID-IN      PRIOR TO     STOCKHOLDERS' 
                                                   SHARES      AMOUNT      CAPITAL     DISTRIBUTION     EQUITY
                                                ------------  --------    ----------   ------------  -------------
<S>                                             <C>           <C>         <C>          <C>           <C>
 
Balance at December 31, 1993....................           -    $    -     $      -      $  91,287     $ 91,287
Net Intercompany Activity with Olin.............           -         -            -         27,803       27,803
Net Income......................................           -         -            -         12,023       12,023
                                                                                         ---------     --------
Balance at December 31, 1994....................           -         -            -        131,113      131,113
Net Intercompany Activity with Olin.............           -         -            -         21,761       21,761
Net Income......................................           -         -            -          5,661        5,661
                                                 -----------    ------     --------      ---------     --------
Balance at December 31, 1995....................           -         -            -        158,535      158,535
Net Intercompany Activity with Olin.............           -         -            -         (5,499)      (5,499)
Net Loss........................................           -         -            -         (7,902)      (7,902)
Capitalization of Divisional Equity.............   5,220,276     5,220      139,914       (145,134)           -
                                                 -----------    ------     --------      ---------     --------
Balance at December 31, 1996....................   5,220,276    $5,220     $139,914      $       -     $145,134
                                                 ===========    ======     ========      =========     ========
</TABLE>

                                       33

<PAGE>
 
                           PRIMEX TECHNOLOGIES, INC.
                           -------------------------
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                    ($ IN THOUSANDS, EXCEPT PER SHARE DATA)



COMMITMENTS AND CONTINGENCIES

  The Company leases certain properties, such as manufacturing, warehousing and
office space, data processing and office equipment. Leases covering these
properties generally contain escalation clauses based on increased costs of the
lessor, primarily property taxes, maintenance and insurance and have renewal or
purchase options. Total rent expense charged to operations amounted to $5,222 in
1996, $4,684 in 1995 and $4,876 in 1994 (sublease income is not significant).
Future minimum rent payments under operating leases having initial or remaining
noncancelable lease terms in excess of one year at December 31, 1996 are as
follows: $4,092 in 1997; $3,419 in 1998; $2,917  in 1999; $2,549 in 2000; $1,870
in 2001.

ENVIRONMENTAL

  The Company is party to various governmental and private environmental actions
associated with waste disposal sites and manufacturing facilities. Environmental
provisions charged to income amounted to none in 1996, $795, in 1995 and $120 in
1994. The consolidated balance sheets include reserves for future environmental
expenditures to investigate and remediate known sites amounting to $1,865 in
1996 and $2,574 in 1995 and are classified as other noncurrent liabilities,
respectively.

  Environmental exposures are difficult to assess for numerous reasons,
including the identification of new sites, developments at sites resulting from
investigator studies, advances in technology, changes in environmental laws and
regulations and their application, the scarcity of reliable data pertaining to
identified sites, the difficulty in assessing the involvement and financial
capability of other potentially responsible parties and the time periods
(sometimes lengthy) over which site remediation occurs. It is possible that some
of these matters (the outcomes of which are subject to various uncertainties)
may be resolved unfavorably against the Company.

LEGAL PROCEEDINGS

  In May 1994, the Company discovered that an employee may have modified
inspection and testing software used on certain medium caliber ammunition
production lines at its Marion, Illinois testing facility to permit inspections
to be performed at tolerances which may not have been fully compliant with
applicable contract specifications. Upon discovering the issue, the Company
promptly notified U.S. Government contracting representatives, voluntarily
disclosed the circumstances then known to the Department of Defense's Office of
the Inspector General and expressed its intent to fully investigate the matter
and take all necessary corrective actions. In September of 1996 this matter was
settled with the U.S. Government for $8,000. The settlement charges of which
$6,000 and $2,000 was charged to operations during 1996 and 1995, respectively,
are included in "Other charges" in the accompanying consolidated statements of
operations.

  The Company is involved in a contract dispute with the Belgium Ministry of
Defense related to the 1985 sale of artillery ammunition. The Belgium Ministry
of Defense has alleged improprieties committed by the Belgium national who
represented the Company in the transaction. Based on these allegations, the
Belgium Ministry of Defense withheld final payment on the contract and the
Company agreed to extend the letter of credit related to the contract guarantee
pending a decision by the Belgium courts on the underlying contract dispute. The
trial court ruled against the Company. The decision has been appealed. In the
event that the trial court's decision is sustained, the resultant liability is
estimated at approximately $4,500, net of a $1,100 receivable, at current
exchange rates. The provision for the estimated settlement is included in "Other
Charges" in the accompanying consolidated statements of operations. However,
since the net liability for this matter including legal fees and costs, monetary
judgements, and cost settlements has been assumed by Olin in conjunction with
the Distribution the balance sheet does not include any reserves related to this
matter.

                                       34
<PAGE>
 
                           PRIMEX TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                    ($ IN THOUSANDS, EXCEPT PER SHARE DATA)


RELATED PARTY TRANSACTIONS


  The Company sells propellant to Olin's Winchester Division which is used in
the manufacturing of sporting ammunition. These product sales aggregated $15,813
in 1996, $23,272 in 1995 and $25,706 in 1994 and are reflected in sales on the
statement of income for the respective periods. Payment of these inter-company
sales occurred at the time of shipments by way of the inter-company account.

  The Company was charged by Olin for the Company's share of expenses of certain
centralized activities using various allocation bases. These activities include,
but are not limited to, administration of employee benefit programs, tax
compliance, management information systems, treasury, legal and general
corporate functions. Charges to the Company for centralized corporate services
were $4,273 in 1996, $2,170 in 1995, and $2,528 in 1994.  In 1996, the charges
for centralized corporate services included a number of one time costs
associated with the Distribution.

QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of unaudited quarterly operating results for 1996 and
1995:

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                               ---------------------------------------------------------------------------------
                                                  1996                                     1995
                               ----------------------------------------   --------------------------------------
                                 FIRST     SECOND     THIRD     FOURTH     FIRST     SECOND    THIRD     FOURTH
                                QUARTER   QUARTER    QUARTER    QUARTER   QUARTER   QUARTER   QUARTER   QUARTER
                               ---------  --------  ---------   -------   --------  --------  --------  --------
<S>                            <C>        <C>       <C>        <C>        <C>       <C>       <C>       <C>
Sales                          $102,081   $125,622  $101,072   $142,713   $109,095  $131,631  $118,856  $148,531
Gross Profit                     16,120     18,631    17,008     20,542     21,596    20,557    17,513    19,740
Operating Income (Loss)          (4,672)     4,273      (156)     2,779      7,895     5,941     3,566     3,691
Net Income (Loss)                (5,671)       959    (3,037)      (153)     2,585     1,758       704       614
Pro Forma Net Income (Loss)
     Per Share                   $(1.08)     $0.18    $(0.58)    $(0.03)     $0.49     $0.34     $0.13     $0.12
</TABLE>

                                       35
<PAGE>
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

          On February 4, 1997,  the Company, based on the recommendation of the
Audit Committee of the Company's Board of Directors, retained Ernst & Young LLP
("Ernst & Young") to serve as independent accountants for the Company and its
subsidiaries for periods ending after December 31, 1996. KPMG Peat Marwick LLP
("Peat Marwick"), the Company's former independant accountants, were
terminated for future periods. No Peat Marwick report on the financial
statements of the Company for the past two years contained an adverse opinion or
a disclaimer of opinion or was qualified or modified as to uncertainty, audit
scope, or accounting principles. During the two most recent fiscal years and the
subsequent interim period, there has been no disagreement between the Company
and Peat Marwick on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedures.


                                   PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-----------------------------------------------------------

BOARD OF DIRECTORS

  The following table sets forth information as to persons who serve as
Directors of the Company.
 
NAME AND AGE                                            YEAR TERM EXPIRES
------------                                            -----------------
  Angelo A. Catani, 64...........................             1998    
  Edwin M. Glasscock, 68(2)......................             1997    
  James G. Hascall, 58...........................             1999    
  David Lasky, 64(2).............................             1999    
  Bob Martinez, 62(2)............................             1998    
  William B. Mitchell, 61(2)... .................             1999    
  Robert H. Rau, 60(1)...... ....................             1997    
  Anthony W. Ruggiero, 55(1).....................             1998    
  Leon E. Salomon, 60(1).........................             1997     

  (1) Member Audit Committee
  (2) Member Compensation and Nominating Committee

  Mr. Catani has served as Vice Chairman of the Company since the Distribution.
Prior thereto, Mr. Catani served with Olin as a Corporate Vice President since
April 1993 and served as President of Olin's Ordnance Division since 1988. Mr.
Catani also served as Vice President and General Manager of Defense Products for
Olin from 1985 to 1987.

  Mr. Glasscock has served as a Director of the Company since the Distribution.
He is President of Edwin M. Glasscock Associates, Inc., a management consulting
firm founded by him in 1966.

  Mr. Hascall has served as Chairman and Chief Executive Officer of the Company
since the Distribution.  Prior thereto, Mr. Hascall served as Executive Vice
President of Olin since January 1, 1996, having operating responsibility for
Olin's Brass, Winchester, Ordnance and Aerospace Divisions. From October 1985
through December 1995, Mr. Hascall served as President of Olin's Brass Division
and as a Corporate Senior Vice President of Olin.

  Mr. Lasky has served as a Director of the Company since the Distribution.  He
has served as Chairman of the Board of Directors of Curtiss-Wright Corporation
since May 1995 and as Director, President and Chief Executive Officer of
Curtiss-Wright since May 1993. Mr. Lasky previously served as Senior Vice
President and General Counsel of Curtiss-Wright.

  Governor Martinez has served as a Director of the Company since the
Distribution.  He is a principal of Bob Martinez & Company, a domestic and
international business development consulting firm, founded by him in 1993. From
1991-1993, Governor Martinez served as the nation's Drug Czar and from 1987 to
1991 as the Governor of the State of Florida. Prior to that time, he served in a
variety of governmental positions, including Mayor of the City of Tampa,
Florida.

                                       36
<PAGE>
 
  Mr. Mitchell has served as a Director of the Company since the Distribution.
He served as Vice Chairman of Texas Instruments Incorporated from 1993 to his
retirement in December, 1996. Mr. Mitchell previously served as Executive Vice
President of Texas Instruments. He is a director of Curtiss-Wright Corporation.

  Mr. Rau has served as a Director of the Company since the Distribution.  He
has served as President and Chief Executive Officer of Rohr, Inc. since April
1993. Mr. Rau previously served as Executive Vice President of Parker Hannifin
Corporation and as President of the Parker Bertea Aerospace Group of Parker
Hannifin. He is also a member of the Board of Directors of Rohr.

  Mr. Ruggiero has served as a Director of the Company since the Distribution.
He has served as Senior Vice President and Chief Financial Officer of Olin since
September 1995. Prior to joining Olin, Mr. Ruggiero was Senior Vice President
and Chief Financial Officer of Reader's Digest Association.

  General Salomon has served as a Director of the Company since the
Distribution.  He is is presently the Corporate Vice President of Purchasing and
Logistics for Rubbermaid Incorporated. General Salomon retired from active duty
in the U.S. Army in April 1996. Prior to his retirement, General Salomon
commanded the U.S. Army Material Command from February 11, 1994. From 1992-1994,
General Salomon was the Deputy Chief of Staff for Logistics, Department of the
Army. Prior to that assignment, he was the Deputy Commanding General for
Combined Arms Support, U.S. Army Training and Doctrine Command, and Commanding
General, U.S. Army Combined Arms Support Command and at Fort Lee, Virginia from
1989 to 1992.

EXECUTIVE OFFICERS

 Set forth below is certain information as to the Company's executive officers.

<TABLE>
<CAPTION>
 
NAME AND AGE                  POSITION
------------                  --------   
<S>                           <C>
James G. Hascall, 58........  Chairman and Chief Executive Officer
Angelo A. Catani, 64........  Vice Chairman
J. Douglas DeMaire, 50......  Executive Vice President
William W. Smith, 62........  Executive Vice President and President,
                               Aerospace and Electronics Division
John E. Fischer, 41.........  Vice President and Chief Financial Officer
George H. Pain, 46..........  Vice President, General Counsel and Secretary
Stephen C. Curley, 44.......  Vice President and Treasurer
Jackson C. Picker, 47.......  Vice President, Human Resources and
                               Administration
Michael S. Wilson, 50.......  Vice President and President, Ordnance and
                               Tactical Systems Division
</TABLE>

  Mr. Hascall has served as Chairman and Chief Executive Officer of the Company
since the Distribution.  Prior thereto, he served with Olin as Executive Vice
President since January 1, 1996, having operating responsibility for Olin's
Brass, Winchester, Ordnance and Aerospace Divisions. From October 1985 through
December 1995, Mr. Hascall served as President of Olin's Brass Division and as a
Corporate Senior Vice President of Olin.

  Mr. Catani has served as Vice Chairman of the Company since the Distribution.
Prior thereto, he served with Olin as Corporate Vice President since April 1993
and served as President of Olin's Ordnance Division since 1988. Mr. Catani also
served as Vice President and General Manager of Defense Products for Olin from
1985 to 1987.

  Mr. DeMaire has served as Executive Vice President of the Company since the
Distribution. Prior thereto, he served with Olin as Corporate Vice President,
Corporate Planning since January 1996. Previously, Mr. DeMaire served as Vice
President, Planning for Olin's Brass and Winchester Divisions from 1986 and
1991, respectively.

  Mr. Smith has served as Executive Vice President of the Company and President,
Aerospace and Electronics Division since the Distribution. Prior thereto, he
served with Olin as a Corporate Vice President since April 1993, having served
as President of Olin's Aerospace Division since 1988.

                                       37
<PAGE>
 
  Mr. Fischer has served as Vice President and Chief Financial Officer of the
Company since the Distribution.  Prior thereto, he served as Vice President and
Financial Officer of Olin's Ordnance Division since January 1995. Mr. Fischer
previously served in a number of financial and contract management positions
with Olin's subsidiary General Defense Corporation ("GDC"), and was corporate
controller of GDC when it was acquired by Olin in 1988.

  Mr. Pain has served as Vice President, General Counsel and Secretary of the
Company since the Distribution. Prior thereto, he served as Vice President,
Legal of Olin's Brass and Winchester Divisions, and as Deputy General Counsel of
Olin, since 1995. Mr. Pain has served in Olin's legal department since at least
1986.

  Mr. Curley has served as Vice President and Treasurer of the Company since the
Distribution.  Prior thereto, he served as Assistant Treasurer of Olin since
September 1990. Previously, Mr. Curley served as the Senior Tax Counsel in
Olin's Tax Department.

  Mr. Picker has served as Vice President, Human Resources and Administration of
the Company since the Distribution. Prior thereto, he served as Vice President,
Human Resources of Olin's Ordnance Division since 1989, and has served in
various other human resource positions with Olin since 1975.

  Mr. Wilson has served as Vice President of the Company, and President,
Ordnance and Tactical Systems Division since the Distribution.  Prior thereto,
he served as Vice President of Tank Ammunition for Olin since 1991. Mr. Wilson
served from 1990 to 1991 as Vice President of Marketing, and from 1988 to 1991
as Vice President of Programs, for Olin's Ordnance Division. Mr. Wilson joined
Olin's Ordnance Division in 1985 as Director of Business Development and
Planning.

                                       38
<PAGE>
 
ITEM 11. EXECUTIVE COMPENSATION
-------------------------------

COMPENSATION OF EXECUTIVE OFFICERS

  The Company was formed on May 10, 1996. The following table discloses
compensation received by the Company's Chief Executive Officer and the four
other most highly compensated executive officers of the Company (the "Named
Executive Officers") for services rendered to Olin for the year ended December
31, 1996 (prior to the Distribution).  The positions of the officers set forth
below are those currently held in the Company.

<TABLE> 
<CAPTION>
                                                 SUMMARY COMPENSATION TABLE
                                                 --------------------------                 LONG TERM
                                                                                           COMPENSATION
                                                                                      -----------------------
                                                 1996 ANNUAL COMPENSATION              AWARDS(a)    PAYOUTS
                                             -------------------------------------    ----------   ----------
                                                                                      SECURITIES
     NAMES AND PRINCIPAL POSITION                                     OTHER ANNUAL    UNDERLYING     LTIP            ALL OTHER
       AS OF DECEMBER 31, 1996              SALARY        BONUS     COMPENSATION(b)   OPTIONS(c)   PAYOUTS(d)     COMPENSATION(e)
       -----------------------              ------        -----     --------------    ----------   ----------     --------------
<S>                                         <C>          <C>         <C>              <C>          <C>            <C>
James G. Hascall
   Chairman and Chief  Executive
   Officer................................  $350,000     $401,553       $25,861         60,000      $233,764          $19,075
                                                                                                                
William W. Smith                                                                                                
   Executive Vice President &                                                                                   
   President Aerospace &                                                                                        
   Electronics Division...................   250,000      113,746         11,210        30,000        95,150           14,875
                                                                                                                
J. Douglas DeMaire                                                                                              
   Executive Vice President............      200,004      140,544          4,589        20,000        58,100           12,463
                                                                                                                
Angelo A. Catani                                                                                                
   Vice Chairman......................       250,000            -         11,446        30,000       105,600           15,173
                                                                                                                
Stephen C. Curley                                                                                               
   Vice President & Treasurer.........       134,480       70,272          1,781         6,000        30,116            8,285
 </TABLE>

(a) All awards shown reflect an equitable adjustment made pursuant to the anti-
    dilution provision of the plan for a 2-for-1 split of Olin Common stock but
    do not reflect an equitable adjustment made pursuant to such provisions as a
    result of the Distribution of the Company.
(b) Includes dividend equivalents on outstanding performance share units paid at
    the same rate as dividends paid on Olin Common Stock. Also includes tax
    gross-ups paid for imputed income on use of company-provided automobiles.
(c) The stock options reported are for Olin Common Stock and do not represent
    options to acquire Common Stock of the Company.
(d) Payouts represent amounts earned under the Olin 1991 Long Term Incentive
    Plan.
(e) Amounts reported in this column for 1996 are comprised of the following
    items:
 
                             CEOP(1)         SUPPLEMENTAL      TERM LIFE
                          COMPANY MATCH      CEOP (1)(2)     INSURANCE (3)
                          -------------      ------------    -------------
 J.G. Hascall...........      $6,393          $8,050            $4,632
 W.W. Smith.............       6,393           3,850             4,632
 J.D. DeMaire...........       6,393           2,210             3,860
 A.A. Catani............       6,179           4,362             4,632
 S.C. Curley............       5,738               -             2,547
---------------
(1)  The Olin Contributing Employee Ownership Plan "CEOP".
(2)  The Supplemental CEOP permits participants in the CEOP to make
     contributions, and Olin to match the same in amounts permitted by the CEOP
     but which would otherwise be in excess of those permitted by certain
     Internal Revenue Service limitations
(3)  Under Olin's key executive insurance program, additional life insurance is
     provided and monthly payments are made to the spouse and dependent children
     of deceased participants.

                                       39
<PAGE>
 
OPTION GRANTS OF OLIN COMMON STOCK TO COMPANY EXECUTIVES IN LAST FISCAL YEAR

  The following table sets forth as to the Named Executive Officers information
relating to options granted by Olin from January 1, 1996 through December 31,
1996. In connection with the Distribution, options to purchase Olin Common Stock
granted on January 25, 1996 to persons who became Company employees, and which
were not exercised (other than those options vesting on January 24, 1997, which
were accelerated and vested immediately prior to the termination of employment
with Olin) were surrendered and cancelled. In their stead, the affected
optionees received grants of restricted stock units pursuant to the Primex 1996
Long Term Incentive Plan described elsewhere herein. In addition, options to
purchase Olin Common Stock outstanding under the 1980 Stock Option Plan of Olin
for such persons were extended to terminate upon the earlier of (i) the end of
their term or (ii) two years following the Distribution. Options to purchase
Olin Common Stock granted under Olin's 1988 Stock Option Plan did not terminate
for such persons when the optionee ceased to be employed by Olin but were
extended to their original terms. No options to acquire Company Common Stock
were granted during the period from January 1, 1996 through December 31, 1996.
                              
<TABLE>
<CAPTION> 
                                                       INDIVIDUAL GRANTS(a) 

                            NUMBER OF           % OF TOTAL                                                     
                            SECURITIES           OPTIONS                                    POTENTIAL REALIZABLE VALUE AT      
                            UNDERLYING           GRANTED                                     ASSUMED RATES OF STOCK PRICE       
                            OPTIONS              TO ALL                                    APPRECIATION FOR OPTION TERM (c) 
                            GRANTED             EMPLOYEES       EXERCISE    EXPIRATION  ---------------------------------------
   NAME                      (a,b)          IN FISCAL YEAR       PRICE (a)    DATE      0%         5%                10%
-------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>               <C>           <C>            <C>          <C>    <C>               <C> 
J. G. Hascall                 60,000             4.3%           $40.00       1/24/06      0    $      503,116    $    1,274,994   
W.W. Smith                    30,000             2.2%           $40.00       1/24/06      0    $      251,558    $      637,497   
J.D. DeMaire                  20,000             1.4%           $40.00       1/24/06      0    $      167,705    $      424,998   
A.A. Catani                   30,000             2.2%           $40.00       1/24/06      0    $      251,558    $      637,497   
S.C. Curley                    6,000             0.4%           $40.00       1/24/06      0    $       50,312    $      127,499   
All Olin Shareholders            N/A              N/A            N/A           N/A        0    $1,313,201,121    $3,327,909,703   
All Olin Optionees         1,387,400           100.0%           $40.00       1/24/06      0    $   29,062,425    $   73,649,889    
---------
</TABLE>

(a) Number of options and the exercise price reflect an equitable adjustment to
    the original grant made pursuant to anti-dilution provisions of the plan as
    a result of the 2-for-1 stock split but do not reflect an anti-dilution
    adjustment that was made for the Distribution of the Company.
(b) Options were awarded on January 25, 1996. One third of the options granted
    to employees who became employees of the Company on January 1, 1997 vested
    on December 31, 1996 and the balance of the grant to these employees was
    canceled. As a result, Mr. Hascall's grant was reduced to 20,000 shares; Mr.
    Smith's to 10,000; Mr. DeMaire's to 6,667; Mr. Catani's to 10,000 and Mr.
    Curley's to 2,000 shares.
(c) No gain to the optionees is possible without appreciation in the stock price
    which will benefit all Olin shareholders commensurately. The dollar amounts
    under these columns are the result of calculations at the 5% and 10%
    assumption rates set by the SEC and therefore are not intended to forecast
    possible future appreciation of Olin's stock price or to establish any
    present value of the options. Note the reduction in grants disclosed in note
    (b) above.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

  The following table sets forth as to the Named Executive Officers information
regarding options to purchase Olin Common Stock exercised during 1996 and the
value of in-the-money outstanding options to purchase Olin Common Stock at the
end of 1996.

<TABLE>
<CAPTION>
                                                                  Number of                Aggregate
                                                          Securities Underlying        Value of Unexercised
                                                           Unexercised Options            In-the-Money
                     Shares                                   at 12/31/96 (a)         Options at 12/31/96 (b)
                     Acquired          Value         -----------------------------  ---------------------------
                   on Exercise (a)    Realized       Exercisable     Unexercisable  Exercisable   Unexercisable
                   --------------------------------------------------------------------------------------------
<S>                <C>       <C>              <C>                      <C>          <C>            <C>
J. G. Hascall             0         $     0             91,996              0         $880,261            $0         
W. W. Smith           1,400          24,724             42,148              0          393,336             0         
J. D. DeMaire         3,180          49,807             12,683              0           65,240             0         
A. A. Catani          6,856          87,227             26,812              0          184,094             0         
S.C. Curley           1,200          19,833              6,112              0           49,087             0          
</TABLE>

(a) Number of options and shares reflect adjustment for the 2-for-1 stock split
    but do not reflect an anti-dilution adjustment made to outstanding options
    as a result of the Distribution of the Company.
(b) Value was computed as the difference between the exercise price and the
    $37.625  per share closing price of Olin Common Stock on December 31, 1996,
    as reported on the consolidated transaction reporting system relating to New
    York Stock Exchange issues.

                                       40
<PAGE>
 
PRIMEX 1996 LONG TERM INCENTIVE PLAN

  The Company has adopted the Primex 1996 Long Term Incentive Plan (the
"Incentive Plan"), which is designed to help the Company attract and retain key
employees by providing an incentive to increase their proprietary interest in
the Company. Awards under the Incentive Plan may be in the form of stock
options (including incentive stock options meeting the requirements of Section
422 of the Code ("ISOs"), stock appreciation rights ("SARs"), restricted stock
and restricted stock units, performance awards, dividend equivalents and in any
other form (including convertible securities) that the committee administering
the Incentive Plan (the "Committee") approves valued in whole or in part by
reference to, or otherwise based on or related to, shares of Company Common
Stock. Three hundred fifty thousand shares of Company Common Stock (subject to
adjustment as provided below and for dividends, stock splits, mergers, spin-
offs, split-ups, recapitalizations and the like) are available for awards under
the Incentive Plan.

  Awards may be granted under the Incentive Plan to salaried employees,
including officers of the Company and any of its controlled subsidiaries who
are not members of the Committee. Awards may also be granted to salaried
employees of any other entity in which the Company has a significant equity
interest as determined by the Committee. Awards will be granted for no cash
consideration or for such minimal cash consideration as may be required by
applicable law. However, the exercise price per share of stock purchasable under
any stock option, the exercise price of any SAR and the purchase price of stock
which may be purchased under any other award providing rights to purchase
Company Common Stock will not be less than the fair market value of such stock
on the date of grant of the option, SAR or other right.

  Administration of the Incentive Plan is the responsibility of the Committee 
consisting of at least two non employee Directors. The Committee will
have the authority to designate participants, determine the nature and size of,
and terms and conditions applicable to, awards, permit deferral of award
payments; permit the settlement or exercise of awards, and make all other
determinations and interpretations relating to the Plan. Committee
determinations and interpretations will be binding on all interested parties.
Under the Incentive Plan, the Company's Board of Directors may act at any time
in lieu of the Committee.

  STOCK OPTIONS. The term of options granted under the Incentive Plan will be
fixed by the Committee; however, such term may not exceed ten years from the
date of grant. The purchase price per share of stock purchasable under any
option will be determined by the Committee but will not be less than the fair
market value of the stock on the date of grant of the option. The Committee will
determine the time or times at which an option may be exercised in whole or in
part, provided that no option may be exercised before the expiration of at least
six months from its date of grant, subject to the provisions of the Incentive
Plan relating to changes in control of the Company. Options may be exercised by
payment in full of the purchase price, either in cash or, at the discretion of
the Committee, in whole or in part in Company Common Stock or other
consideration having a fair market value on the date the option is exercised
equal to the option price.

  STOCK APPRECIATION RIGHTS. Upon exercise of a SAR, the holder will be entitled
to receive the excess of the fair market value (calculated as of the exercise
date) of a specified number of Shares over the exercise price of the SAR. The
exercise price (which may not be less than the fair market value of the shares
on the date of grant), method of payment by the Company upon exercise and other
terms of the SAR will be determined by the Committee. However, the term of a SAR
may not exceed ten years from the date of its grant. Any related stock option
will no longer be exercisable to the extent that a SAR has been exercised, and
the exercise or termination of an option will cancel the related SAR (in the
case of exercise, to the extent thereof).

  RESTRICTED STOCK. Restricted stock or restricted stock units may not be
disposed of by the recipient until certain restrictions established by the
Committee lapse. These restrictions will require recipients to remain in the
employ of the Company (or an affiliate participating in the Incentive Plan) for
at least six months in order to vest, except in the event of a Change in Control
(as defined in the Incentive Plan) or for such specified reasons as the
Committee may approve. Recipients will have with respect to restricted stock all
of the rights of a shareholder of the Company, including the right to vote the
shares and the right to receive any cash dividends, unless the Committee
otherwise determines. Upon termination of employment during the restriction
period, the restricted stock and/or restricted stock units will be forfeited,
subject to such exceptions, if any, as may be authorized by the Committee.

  PERFORMANCE AWARDS. From time to time, the Committee may select a period
during which performance criteria approved by the Committee will be measured for
the purpose of determining the extent to which a performance award has 

                                       41
<PAGE>
 
been earned. Such period will not be less than six months, subject to the Change
in Control provisions of the Incentive Plan. Performance awards may be
denominated or payable in cash, shares of Common Stock, others securities, other
awards or other property.

  AWARDS FOLLOWING THE DISTRIBUTION. Following the Distribution, the
Company granted restricted stock units valued in the aggregate at $5,642,000 to
an aggregate of 25 employees of the Company. Each restricted stock unit
represents one phantom share of Company Common Stock and generally vests and is
payable in one share of Company Common Stock to the employee upon the fifth
anniversary of the grant provided the employee remains employed by the Company
during the five-year period; however, if certain performance targets are met,
the units may vest after three years. Each restricted stock unit will accrue
amounts equivalent to the cash dividends payable on the Company's Common Stock
("dividend equivalents"). Such dividend equivalents will be deferred in the form
of cash and will be payable only when and if the restricted stock unit on which
such dividend equivalents were accrued become vested. Dividend equivalents will
accrue interest at an annual rate equal to the Company's before tax cost of
borrowing compounded quarterly. To the extent a restricted stock unit does not
vest or is otherwise forfeited, the accrued and unpaid dividend equivalents
thereon and any interest thereon shall not vest and be forfeited. In the event
an employee's employment is terminated for cause or without the Company's
written consent, the restricted stock units are forfeited. If employment is
terminated without cause and with written consent or by virtue of death or total
disability or retirement under a Company benefit plan, the Compensation
Committee shall decide in its sole discretion which outstanding restricted stock
units not yet vested shall not be forfeited, provided that in the case of
employees who are not officers or employees of the Company when their employment
terminates and have not been such during the preceding six month period, the
Chief Executive Officer of the Company is authorized to make such determination.
Upon a "Change in Control" of the Company, restricted stock units not yet vested
will automatically vest and be paid out in the form of cash. There is mandatory
tax withholding on all payouts of restricted stock units. The value of such
awards to the Named Executive Officers of the Company are as follows: J.G.
Hascall $1,046,400; W.W. Smith $401,120; J.D. DeMaire $401,120; A.A. Catani
$697,600 and S.C. Curley $209,280. All executive officers as a group received
units aggregating $3,976,320 in value.

SUPPLEMENTAL PLANS

  Following the Distribution, Olin will remain liable for payment of benefits
accrued for employees of the Company under any Olin non-qualified benefit plans
as of the Distribution. Such benefits will not be paid until the participant
retires from the Company. The Company will establish a non-qualified, unfunded
Supplemental Savings and Retirement Plan (the "Supplemental Plan") that is
intended to restore any benefit under the Primex Savings Plan that would
otherwise be reduced as a consequence of certain restrictions required by the
Code. In addition, employees who are covered by the Supplemental Plan may be
able to defer before-tax contributions above the annual limitations imposed on
qualified contribution plans sponsored by the Company.

COMPENSATION OF DIRECTORS

  Each Director who is not an employee of the Company receives a fixed annual
retainer of $20,000 and a fee of $1,000 for each meeting of the Board and for
each meeting of a committee of the Board attended, together with expenses
incurred in the performance of their duties as director. Each Director who
serves as the chair of a Board committee also receives an additional annual
meeting fee of $3,000. Half of the $20,000 annual retainer will be paid in
Company Common Stock, and each director may elect to receive the balance thereof
in cash or Company Common Stock. All meeting fees may be payable in cash or
Company Common Stock, at the election of the Director. Directors may defer the
cash portions of their annual retainer and meetings fees into cash accounts,
which will bear interest and/or into stock accounts which will be credited with
dividend equivalents. The Company's Stock Plan for Non-employee Directors
provides that each non-employee director serving in such capacity on January 1
of each year will be credited with a number of shares of Company Common Stock
having a fair market value equal to $5,000. Fifty thousand shares of Company
Common Stock are available for award under the Stock Plan for Non-employee
Directors.

                                       42
<PAGE>
 
EXECUTIVE AGREEMENTS

  Each of the Nameds Executive Officers and four other employees have agreements
with the Company which provide, among other things, that in the event of a
covered termination of employment (which could include, among other things,
termination of employment other than for cause and termination at the election
of the individual under certain circumstances), the individual will receive a
lump sum severance payment from the Company equal to 12 months' salary plus the
greater of (a) the average incentive compensation award from the Company during
the three years preceding the termination or (b) the then standard annual
incentive compensation award, less any amounts payable under existing severance
or disability plans of the Company.  In the event that a "Change in Control" of
the Company occurs, and there is a covered termination, the individual will
receive twice the severance payment or in the case of the Chairman of the Board
and Chief Executive Officer and Vice Chairman three times.  Insurance coverage
would be afforded for either a one or two-year period.  The agreements also
provide for certain outplacement services.  In addition, employees will receive
a payment representing an amount equal to one or two years of the Company's
contributions to the retirement feature of the Company's defined contribution
plan, in the case of employees who have an accrued benefit under Olin pension
plans and are under age 55, an amount equal to the difference between (x) the
amount that the employee would have received at age 55 upon early retirement
under the Olin pension plan had the employee remained employed with the Company
and (y) the pension amount actually received from such Olin pension plans.  The
agreements will expire on January 31, 2002 (except in the case of Mr. Hascall
on December 31, 2002, and in the case of Mr. Catani on December 31, 1999) or
three years following the date of the "Change in Control". For purposes of the
agreements, "Change in Control" would occur if the Company ceases creases to be
publicly owned; 15% or more of its voting stock is acquired by others (other
than an employee benefit plan of the Company); the incumbent Directors and their
designated successors cease over a two-year period to constitute a majority of
the Board; or all or substantially all of the Company's business is disposed of
in a transaction in which the Company is not the surviving corporation or the
Company combines with another company and is the surviving corporation (unless
shareholders of the Company following the transaction own more than 50% of the
voting stock or other ownership interest of the surviving entity or combined
company). Each agreement provides that the individual agrees to remain in the
Company's employ for six months after a "Potential Change in Control" of the
Company has occurred.  The agreements provide that payments made thereunder or
under any change in control provision of a compensation or benefit plan of the
Company which are subject to "excess parachute payment" tax will be increased so
that the individual will receive a net payment equal to that which would have
been received if such tax did not apply.  Certain of the Company's benefit and
compensation plans also contain "Change in Control" provisions.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

  There are no Compensation Committee interlocks.

                                       43
<PAGE>
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

  The following table shows as of December 31, 1996 (except as noted in footnote
(b) below) the beneficial ownership of each person or entity known by the
Company to own more than five percent of Company Common Stock.

 
                                        AMOUNT AND NATURE OF   PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER    BENEFICIAL OWNERSHIP   OF CLASS
--------------------------------------  ---------------------  --------
 
 FRANKLIN RESOURCES, INC.               356,660 (a) (c)             6.8
 777 MARINERS ISLAND BLVD.
 SAN MATEO, CA 94404
 
 SCUDDER, STEVENS & CLARK, INC.         320,036 (a) (d)             6.1
 345 PARK AVENUE
 NEW YORK, NY 10154
 
 TRAVELERS GROUP INC.                   299,378 (a) (e)             5.7
 388 GREENWICH STREET
 NEW YORK, NY  10013
 
 FMR CORPORATION                        274,270 (a) (f)             5.3
 82 DEVONSHIRE STREET
 BOSTON, MA 02109
 
 JEFFREY J. HALLIS                      478,714 (b) (g)             9.2
 500 PARK AVENUE, 5TH FLOOR
 NEW YORK, NY 10022

(a) The amount of Company Common Stock beneficially owned is derived on the
    basis of a Schedule 13G provided to Olin disclosing beneficial ownership of
    Olin Common Stock as of December 31, 1996.  10% of this disclosed amount of
    Olin Common Stock is reported as beneficial ownership of Company Common
    Stock, reflecting the terms of the Distribution whereby each holder of Olin
    Common Stock received a dividend of one share of Company Common Stock for
    every ten shares of Olin Common Stock held at the close of business on
    December 19, 1996 (the "Record Date").  The number of shares of Company
    Common Stock beneficially owned as of December 31, 1996 cannot be derived
    with certainty because beneficial ownership of Olin Common Stock as of the
    Record Date is unavailable.
(b) The amount of Company Common Stock beneficially owned by Jeffrey J. Hallis
    is as of February 26, 1997 and is reported on the basis of a Schedule 13D
    provided to the Company.
(c) Franklin Resources, Inc. ("FRI") shares are owned by one or more open or
    closed-end investment companies or other managed accounts which are advised
    by direct or indirect investment subsidiaries ("Adviser Subsidiaries") of
    FRI and such advisory contracts grant to such Adviser Subsidiaries all
    voting and investment power over such shares. Franklin Mutual Advisers,
    Inc., has sole power to vote and sole dispositive power with respect to such
    shares. Note the basis for deriving beneficial ownership disclosed in
    Footnote (a) above.
(d) Scudder, Stevens & Clark, Inc., a registered investment adviser, has sole
    dispositive power with respect to the shares, has sole power to vote with
    respect to 64,075 shares, and shared power to vote with respect to 237,090
    shares. Note the basis for deriving beneficial ownership disclosed in
    Footnote (a) above.
(e) Travelers Group Inc. and its wholly owned subsidiary, Smith Barney Holdings
    Inc., have shared voting and shared dispositive power with respect to
    299,378 shares.  They disclaim beneficial ownership of all such shares. Note
    the basis for deriving beneficial ownership disclosed in Footnote (a) above.
(f) Fidelity Management & Research Company ("Fidelity") and Fidelity Management
    Trust Company ("FMTC") beneficially own 270,890 and 3,380 shares,
    respectively.  Both are subsidiaries of FMR Corp. ("FMR").  Edward C.
    Johnson, 3rd ("Johnson"), who is the Chairman of FMR, FMR, through its
    control of Fidelity, and its Funds each has sole dispositive power with
    respect to the 270,890 shares owned by the Funds.  Neither Johnson nor FMR
    has sole voting power with respect to the shares owned by the Funds, which
    power rests with the Funds' Board of Trustees. Johnson and FMR, through its
    control of FMTC, each has sole dispositive power over 3,380 shares, sole
    voting power 

                                       44
<PAGE>
 
    over 1,620 shares and no voting power with respect to 1,760 of the shares.
    Note the basis for deriving beneficial ownership disclosed in Footnote (a)
    above.
(g) Jeffrey J. Hallis has sole power to vote and sole dispositive power with
    respect to such shares owned by each of Tyndall Partners, L.P., Tyndall
    Institutional Partners, L.P., Madison Avenue Partners, L.P. and Halo
    International, Ltd. Tyndall Partners, L.P. owns 342,204 shares, Tyndall
    Institutional Partners, L.P. owns 68,080 shares, Madison Avenue Partners,
    L.P. owns 41,770 shares and Halo International, Ltd. owns 26,660 shares.

    The following table sets forth information as of February 28, 1997,
concerning shares of Company Common Stock beneficially owned by (i) each
Director of the Company (ii) each of the Named Executive Officers of the
Company and (iii) all Directors and executive officers of the Company as a
group. Unless otherwise indicated in the footnotes below, each person or entity
has sole voting and investment power with respect to the shares set forth
opposite such person's or entity's name. Also included in the figures are shares
of Company Common Stock which may be acquired within 60 days through the
exercise of options, if any.

 
                                            NO. OF SHARES
NAME OF BENEFICIAL OWNER                    BENEFICIALLY   PERCENT OF
------------------------                      OWNED (a)      CLASS(b)
                                            ------------   ---------- 
 A.A. Catani...............................       1,411          - 
 S.C. Curley...............................         371          - 
 J.D. DeMaire..............................       1,060          - 
 E.M. Glasscock............................           -          -
 J.G. Hascall..............................       2,324          - 
 D. Lasky..................................         861          - 
 B. Martinez...............................           -          - 
 W.B. Mitchell.............................       1,435          - 
 R.H. Rau..................................           -          - 
 A.W. Ruggiero.............................       1,075          - 
 L.E. Salomon..............................           -          - 
 W.W. Smith................................       1,132          -  

  Directors and executive officers as a group, 
  including those named above (16 persons)       20,137          -
 
-----------------------

(a) Excluded from this table are shares credited to deferred accounts pursuant
    to the arrangements described above under "Compensation of Directors" in the
    amounts of 1,435 shares for Mr. Glasscock, 1,148 shares for Governor
    Martinez, 1,148 shares for Mr. Rau, 1,435 shares for Mr. Ruggiero and 861
    shares for Mr. Salomon. Such shares have no voting power.

(b) Unless otherwise indicated, beneficial ownership of any named
    individual does not exceed 1% of the outstanding shares of Company
    Common Stock.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

      Board member Anthony W. Ruggiero serves as Olin's Senior Vice President 
and Chief Financial Officer.  For a discussion of the relationship between Olin 
and the Company, see "Item 1. Business - Relationship Between Olin and the 
Company".

                                      45
<PAGE>
 

                                    PART IV
                                        

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------

                                                                       PAGE
                                                                       ----
(a)  Documents Filed as Part of this Report:
 
        (1) Financial Statements.

            The following is a list of all the Consolidated Financial 
            Statements included in Item 8 of Part II.

            Independent Auditors' Report...............................  22
            Consolidated Balance Sheets as of December 31, 1996 and 
              1995.....................................................  23  
            Consolidated Income Statements, Years Ended 
              December 31, 1996, 1995 and 1994.........................  24
            Consolidated  Statements of Cash Flow for the Years Ended 
              December 31, 1996, 1995 and 1994.........................  25
            Notes to the Consolidated Financial Statements.............  26

        (2) Financial Statement Schedules

            All schedules are omitted because they are not applicable or not
            required, or because the required information is included in the
            Consolidated Financial Statements or notes thereto.

        (3) Exhibits


Exhibit Number  Description
--------------  -----------

2                Distribution Agreement dated December 30, 1996 between Primex
                 Technologies, Inc. and Olin Corporation.  Incorporated by
                 reference to Exhibit 2 to the Company's Amendment No. 1 to the
                 Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).

3.1              Amended and Restated Articles of Incorporation.  Incorporated
                 by reference to Exhibit 3.1 to the Company's Amendment No. 1 to
                 the Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).

3.2              Amended and Restated By-laws.  Incorporated by reference to
                 Exhibit 3.2 to the Company's Amendment No. 1 to the Form 8-K/A
                 filed January 24, 1997 (SEC File No. 0-28942).

4.1              Specimen Common Share Certificate.  Incorporated by reference
                 to Exhibit 4.1 to the Company's Amendment No. 2 to the Form 10
                 filed December 6, 1996 (SEC File No. 0-28942).

4.2              Amended and Restated Articles of Incorporation.  Incorporated
                 by reference to Exhibit 3.1 to the Company's Amendment No. 1 to
                 the Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).

4.3              Amended and Restated By-laws.  Incorporated by reference to
                 Exhibit 3.2 to the Company's Amendment No. 1 to the Form 8-K/A
                 filed January 24, 1997 (SEC File No. 0-28942).

4.4              Rights Agreement dated December 19, 1996 between Primex
                 Technologies, Inc. and ChaseMellon Shareholder Services,
                 L.L.C., as Rights Agent.

4.5              Right Certificate (attached as Exhibit B to the Rights
                 Agreement filed as Exhibit 4.4 hereto).

4.6              Primex Retirement Investment Management Experience Plan.
                 Incorporated by reference to Exhibit 4(d) to the Company's Form
                 S-8 filed December 17, 1996 (SEC File No. 333-18043).*

                                       46
<PAGE>
 
Exhibit Number  Description
--------------  -----------

4.7              1996 Long Term Incentive Plan of Primex.  Incorporated by
                 reference to Exhibit 4(d) to the Company's Form S-8 filed
                 December 19, 1996 (SEC File No. 333-18299).*

4.8              Primex Stock Plan for Non-employee Directors.  Incorporated by
                 reference to Exhibit 4(d) to the Company's Form S-8 filed
                 December 19, 1996 (SEC File No. 333-18297).*

10.1             Distribution Agreement dated as of December 30, 1996 between
                 Primex Technologies, Inc. and Olin Corporation. Incorporated by
                 reference to Exhibit 2 to the Company's Amendment No. 1 to the
                 Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).

10.2             Technology Transfer and License Agreement dated December 30,
                 1996 between Primex Technologies, Inc. and Olin Corporation.
                 Incorporated by reference to Exhibit 10.2 to the Company's
                 Amendment No. 1 to the Form 8-K/A filed January 24, 1997 (SEC
                 File No. 0-28942).

10.3             Tax Sharing Agreement dated December 31, 1996 between Primex
                 Technologies, Inc. and Olin Corporation. Incorporated by
                 reference to Exhibit 10.3 to the Company's Amendment No. 1 to
                 the Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).

10.4             Powder Supply Requirements Agreement dated December 31, 1996
                 between Primex Technologies, Inc. and Olin Corporation.
                 Incorporated by reference to Exhibit 10.4 to the Company's
                 Amendment No. 1 to the Form 8-K/A filed January 24, 1997 (SEC
                 File No. 0-28942).

10.5             Assignment of Ball Powder (R) Trademark to Primex and Limited
                 License to Olin dated December 30, 1996 between Primex
                 Technologies, Inc. and Olin Corporation. Incorporated by
                 reference to Exhibit 10.5 to the Company's Amendment No. 1 to
                 the Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).

10.6             Assumption of Liabilities and Indemnity Agreement dated
                 December 31, 1996 between Primex Technologies, Inc. and Olin
                 Corporation.  Incorporated by reference to Exhibit 10.6 to the
                 Company's Amendment No. 1 to the Form 8-K/A filed January 24,
                 1997 (SEC File No. 0-28942).

10.7             Covenant Not To Compete Agreement dated December 31, 1996
                 between Primex Technologies, Inc. and Olin Corporation.
                 Incorporated by reference to Exhibit 10.7 to the Company's
                 Amendment No. 1 to the Form 8-K/A filed January 24, 1997 (SEC
                 File No. 0-28942).

10.8             Assignment of Raufoss Agreements to Primex and Sublicense to
                 Olin for Small Caliber Ammunition dated December 30, 1996
                 between Primex Technologies, Inc. and Olin Corporation.
                 Incorporated by reference to Exhibit 10.8 to the Company's
                 Amendment No. 1 to the Form 8-K/A filed January 24, 1997 (SEC
                 File No. 0-28942).

10.9             Credit Agreement dated as of December 23, 1996 among Primex
                 Technologies, Inc., Olin Corporation, Morgan Guaranty Trust Co.
                 of New York, as Agent, and various financial institutions.
                 Incorporated by reference to Exhibit 10.10 to the Company's
                 Amendment No. 1 to the Form 8-K/A filed January 24, 1997 (SEC
                 File No. 0-28942).

10.10            Trade Name License Agreement dated December 31, 1996 between
                 Primex Technologies, Inc. and Olin Corporation. Incorporated by
                 reference to Exhibit 10.11 to the Company's Amendment No. 1 to
                 the Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).

                                       47
<PAGE>
 
Exhibit Number  Description
--------------  -----------

10.11            Transition Services Agreement dated December 31, 1996 between
                 Primex Technologies, Inc. and Olin Corporation. Incorporated by
                 reference to Exhibit 10.12 to the Company's Amendment No. 1 to
                 the Form 8-K/A filed January 24, 1997 (SEC File No. 0-28942).

10.12            Executive Agreement between Primex Technologies and J. G.
                 Hascall dated January 1, 1997.*

10.13            Executive Agreement between Primex Technologies and J. D.
                 DeMaire dated January 1, 1997.*

10.14            Executive Agreement between Primex Technologies and A. A.
                 Catani dated January 1, 1997.*

10.15            Executive Agreement between Primex Technologies and S. C.
                 Curley dated January 1, 1997.*

10.16            Executive Agreement between Primex Technologies, Inc., and W.W.
                 Smith dated January 1, 1997.
                                                                                
10.17            Primex Retirement Investment Management Experience Plan.       
                 Incorporated by reference to Exhibit 4(d) to the Company's Form
                 S-8 filed December 17, 1996 (SEC File No. 333-18043).*

10.18            1996 Long Term Incentive Plan of Primex.  Incorporated by      
                 reference to Exhibit 4(d) to the Company's Form S-8 filed      
                 December 19, 1996 (SEC File No. 333-18299).* 
                                                                                
10.19            Primex Stock Plan for Non-employee Directors.  Incorporated by 
                 reference to Exhibit 4(d) to the Company's Form S-8 filed      
                 December 19, 1996 (SEC File No. 333-18297).* 

16               Letter of consent from KPMG Peat Marwick regarding change in
                 certifying accountant. Incorporated by reference to Exhibit 16
                 to the Company's Amendment No. 1 to the Form 8-K/A filed
                 February 19,1997. (SEC File No. 0-28942).

21               List of Subsidiaries of Primex Technologies, Inc.

23               Consent of KPMG Peat Marwick.

27               Financial Data Schedule.

*Denotes a management contract or compensatory plan or arrangement required to
be filed as an exhibit pursuant to Item 14(c) of this Form 10-K.

(b) Reports on Form 8-K:

    No reports were filed by the Company during the fiscal quarter ended
December 31, 1996.

                                       48
<PAGE>
 
SIGNATURES
----------

      Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report be signed on
its behalf by the undersigned, thereunto duly authorized.



                           PRIMEX TECHNOLOGIES, INC.
                           (REGISTRANT)


                           BY:         /S/GEORGE H. PAIN
                              --------------------------------------------
MARCH 26, 1997                GEORGE H. PAIN
                              VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY



     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE> 
<CAPTION> 

         SIGNATURE                           CAPACITY                                 DATE
         ---------                           --------                                 ----
                                                                             
     <S>                            <C>                                        <C> 
      /S/ JAMES G. HASCALL          CHAIRMAN OF THE BOARD AND                     MARCH  4, 1997
--------------------------------    CHIEF EXECUTIVE OFFICER AND DIRECTOR     
                                                                             
     /S/ ANGELO A. CATANI           VICE CHAIRMAN OF THE BOARD AND DIRECTOR       MARCH  4, 1997
--------------------------------                                             
                                                                             
     /S/ JOHN E. FISCHER            VICE PRESIDENT AND CHIEF FINANCIAL       
--------------------------------    AND ACCOUNTING OFFICER                        MARCH 4, 1997
                                                                             
     /S/ EDWIN M. GLASSCOCK         DIRECTOR                                      MARCH  4, 1997
--------------------------------                                             
                                                                             
     /S/ DAVID LASKY                DIRECTOR                                      MARCH  4, 1997
--------------------------------                                             
                                                                             
     /S/ BOB MARTINEZ               DIRECTOR                                      MARCH  4, 1997
--------------------------------                                             
                                                                             
     /S/ WILLIAM B. MITCHELL        DIRECTOR                                      MARCH  4, 1997
--------------------------------                                             
                                                                             
     /S/ ROBERT H. RAU              DIRECTOR                                      MARCH  4, 1997
--------------------------------                                             
                                                                             
     /S/ ANTHONY W. RUGGIERO        DIRECTOR                                      MARCH  4, 1997
--------------------------------                                             
                                                                             
     /S/ LEON E. SALOMON            DIRECTOR                                      MARCH  4, 1997
--------------------------------                                              
</TABLE> 

                                       49