SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 11, 1994
-----------------------
HERCULES INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 1-496 51-0023450
(State or other (Commission File Number) (I.R.C. Employer
jurisdiction of Identification
incorporation) Number)
1313 North Market Street
Wilmington, Delaware 19804-0001
(Address of principal executive offices) (Zip Code)
(302) 594-5000
(Registrant's telephone number, including area code)
Item 5. Other Events
On July 11, 1994 Hercules Incorporated and Alliant Techsystems
("Hercules" and "Alliant" respectively and together the "Parties") executed a
letter of intent (the "Letter") whereby the Parties agreed in principle to the
terms of the sale of certain assets of the Hercules Aerospace Company (the
"Business"). Pursuant to the terms of the Letter and the terms of the
definitive sales agreements which are yet to be negotiated Hercules will sell
the Business to Alliant for approximately $365 million and 3.5 million shares
of Alliant stock.
The Business assets that are included in the sale are those of the Space
and Strategic, Tactical Missiles, Ordnance and Powder, and Composite
Structures units. Also included are Hercules' 100% ownership interests in
Hercules Defense Electronics Systems, Inc. and Global Environmental Solutions,
Inc.
The closing of the sale will be contingent on certain conditions
including but not limited to the negotiation, execution and delivery of the
final sale agreements; the approval of the sale by the Parties' respective
Boards of Directors and Alliant's stockholders; the obtainment of all required
corporate and governmental filings, consents or approvals; the completion of a
"due diligence review" by the Parties; and Hercules' conduct of the Business
without material adverse change.
The parties also intend to enter into an agreement covering certain
intellectual property of the Business.
The above references to the terms of the Letter are qualified in their
entirety by reference to the full text of the Letter which is being filed
herewith as an exhibit and is incorporated by reference herein in its
entirety.
Item 7. Exhibits
1. Letter of Intent between Hercules Incorporated and Alliant Techsystems
Inc., dated July 11, 1994.
2. Press release from Hercules Incorporated, dated July 12, 1994.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HERCULES INCORPORATED
By: /s/ Israel J. Floyd
----------------------
Israel J. Floyd
Assistant General Counsel and
Corporate Secretary
Date: July 22, 1994
EXHIBIT INDEX
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Exhibit Description Page
99(1) Letter of Intent between Hercules Incorporated and
Alliant Techsystems Inc. dated July 11, 1994 5
99(2) Press Release from Hercules Incorporated
dated July 12, 1994 29
Hercules Incorporated
Hercules Plaza
Wilmington, DE 19894-0001
(302) 594-5000
Telex: 4994538
July 11, 1994
Alliant Techsystems Inc.
MN11-2013
600 Second Street NE
Hopkins, MN 55343-8384
Attn: Donald E. Willis
Vice President, Strategic
Development and Planning
RE: Letter of Intent Concerning
Hercules Aerospace Company ("HAC")
Gentlemen:
Alliant Techsystems Inc. (herein "ALLIANT") has expressed an interest in
a possible transaction concerning the HAC BUSINESS. Pursuant to such interest,
ALLIANT and Hercules Incorporated (herein "HERCULES") began discussions which
led to the execution of the CONFIDENTIALITY AGREEMENT on January 14, 1994,
under which HERCULES provided to ALLIANT confidential or proprietary
information about the HAC BUSINESS.
ALLIANT and HERCULES have continued their discussions and now wish to
enter this letter of intent (herein the "LETTER") as the next step in their
negotiation process. Based upon this LETTER, the negotiation process may
proceed to later steps, such as the conduct of due diligence review(s); the
negotiation and execution of a definitive sale and purchase agreement and
related documents; and the conduct of a closing to consummate such sale and
purchase and the transactions contemplated herein.
This LETTER is a non-binding agreement (except for certain specified
provisions) and is intended, among other things, to facilitate the negotiation
of the DEFINITIVE AGREEMENTS. The PARTIES acknowledge that this LETTER is not
inclusive or exhaustive of the matters that are covered herein, that may arise
during the negotiation process or that may be covered by the DEFINITIVE
AGREEMENTS.
PARTY or PARTIES shall mean respectively individually and collectively
ALLIANT or HERCULES as a party to this LETTER or ALLIANT and HERCULES as the
parties to this LETTER.
The PARTIES hereby set forth their mutual desire and intent to effectuate
the TRANSACTION, all subject to and in accordance with the terms, conditions
and provisions set forth herein.
1. DEFINITIONS: For purposes of this LETTER, the following terms shall
have the following meanings:
(a) CLOSING shall mean the closing to be held on a date (herein the
"CLOSING DATE"), at a time and at a place mutually agreed upon
by the PARTIES for purposes of consummating the TRANSACTION;
(b) CONFIDENTIALITY AGREEMENT shall mean that letter agreement
between the PARTIES and dated January 14, 1994, as the same may
be amended from time to time;
(c) DEFINITIVE AGREEMENTS shall mean collectively (i) that Sale and
Purchase Agreement (drafted by ALLIANT, other than the
representations and warranties which will be drafted by
HERCULES) to be executed by the PARTIES; (ii) the Standstill
Agreement (drafted by ALLIANT) to be executed by the PARTIES
and described in Section 17 hereof; and (iii) the Supply
Agreements (drafted by HERCULES) to be executed by the PARTIES
and described in Section 8(a) hereof;
(d) HAC BUSINESS shall mean (i) the businesses and related
activities of HERCULES' Space and Strategic; Tactical Missiles;
Ordnance and Powder; and Composite Structures units; (ii)
HERCULES' 100% ownership interest in Hercules Defense
Electronics Systems, Inc. and Global Environmental Solutions,
Inc. (provided that, the sale of the foregoing entities shall
be effectuated so as to put ALLIANT in the same position as if
ALLIANT had purchased the assets hereof); and (iii) Hercules'
25% equity interest in [TAEMA];
(e) HAC BUSINESS ITEMS shall mean individually and collectively the
INCLUDED ASSETS described in Section 2 hereof and the INCLUDED
LIABILITIES AND OBLIGATIONS described in Section 3 hereof;
(f) the terms "include", "includes", "including" and all forms and
derivations of such term shall mean including without
limitation; and
(g) TRANSACTION shall mean individually and collectively (i) the
sale and purchase of the INCLUDED ASSETS; (ii) the assumption
of the INCLUDED LIABILITIES AND OBLIGATIONS; and (iii) the
taking of all actions (including the execution and delivery of
agreements and documents) necessary, appropriate or convenient
to the effectuation of such sale, purchase and assumption.
2. ASSETS: As part of the TRANSACTION, HERCULES will sell and ALLIANT
will purchase all assets used solely or substantially solely in the
HAC BUSINESS (herein the "INCLUDED ASSETS") and excluding those
assets mutually agreed upon by the PARTIES to be "EXCLUDED ASSETS".
Included as part of the INCLUDED ASSETS are tangible and intangible
property, rights, contracts of any nature, inventories and
intellectual property, except to the extent they are EXCLUDED
ASSETS. The INCLUDED ASSETS are part of the HAC BUSINESS ITEMS and
will include all assets necessary to operate the HAC BUSINESS, as
such business is conducted on the date hereof and on the CLOSING
DATE.
3. LIABILITIES: As part of the TRANSACTION, ALLIANT will assume (a) all
liabilities and obligations (including those under executory
contracts) of the HAC BUSINESS incurred in the ordinary course of
the HAC BUSINESS as such business was conducted since December 31,
1993 (other than expressly excluded pursuant to Section 13 hereof);
(b) all liabilities and obligations for medical and life insurance
benefits for active and inactive (including retirees) HAC BUSINESS
employees; (c) all liabilities and obligations to be assumed by
ALLIANT pursuant to Section 13 hereof; and (d) all liabilities and
obligations which the PARTIES mutually agree that ALLIANT shall
assume and which are specified in the DEFINITIVE AGREEMENTS. The
liabilities and obligations described in the foregoing (a), (b), (c)
and (d) are collectively herein the "INCLUDED LIABILITIES AND
OBLIGATIONS" and are part of the HAC BUSINESS ITEMS. The INCLUDED
LIABILITIES are expected to include the contingent liabilities
associated with the HAC BUSINESS (including litigation), except as
specifically agreed by the PARTIES in the DEFINITIVE AGREEMENTS or
otherwise set forth herein. Except for the INCLUDED LIABILITIES AND
OBLIGATIONS, ALLIANT will not assume or be responsible for any other
liabilities or obligations of the HAC BUSINESS and/or HERCULES.
ALLIANT will not assume any liabilities or obligations for
indebtedness (including that under credit agreements, industrial
revenue bonds or obligations, or evidence of loans) or related to
taxes on income.
4. PURCHASE PRICE: The Purchase Price for the HAC BUSINESS (herein the
"PURCHASE PRICE") shall be equal to Three and one-half million
shares of ALLIANT STOCK, plus $364.5 million in cash, as such cash
portion shall be adjusted dollar-for-dollar to reflect changes in
the net book value of the HAC BUSINESS from December 1, 1993 to the
CLOSING DATE in accordance with an ADJUSTMENT PROTOCOL to be
executed by the PARTIES within ten (10) days after the signing of
this LETTER; and upon such execution, the said protocol shall become
forthwith a part of this LETTER, the same as if it were set forth
herein in its entirety.
No later than five days prior to the CLOSING DATE, the PARTIES will
agree as to the estimated amount of the cash portion of the PURCHASE
PRICE that will be paid at CLOSING. The ADJUSTMENT PROTOCOL will
contain procedures for final resolution of the cash portion of the
PURCHASE PRICE.
5. ALLIANT STOCK: ALLIANT STOCK shall mean fully paid and nonassessable
shares of voting common stock of ALLIANT. ALLIANT will either
maintain an effective shelf registration statement with the
Securities and Exchange Commission or will grant HERCULES demand
registration rights with respect to the resale of such shares by
HERCULES, as agreed by the PARTIES. As of the date hereof, ALLIANT
has outstanding approximately ten million (10,000,000) shares of
such common stock. Such common stock is traded on the New York Stock
Exchange (the "NYSE") under the symbol "ATK". Any and all
registrations (including those under applicable federal and state
securities laws), filings, notices and approvals that may be
necessary or appropriate in connection with the issuance of shares
in the TRANSACTION or for the resale of shares of ALLIANT STOCK
delivered to HERCULES as part of the PURCHASE PRICE or the listing
of such shares on the NYSE shall be obtained by ALLIANT at its cost
and expense.
6. DUE DILIGENCE:
(a) HERCULES shall provide ALLIANT the opportunity to conduct a
reasonable "due diligence review" in accordance with a due
diligence protocol (herein the "DUE DILIGENCE PROTOCOL") to be
executed by the PARTIES within ten (10) days after the signing
of this LETTER. Upon the signing of such DUE DILIGENCE PROTOCOL
by the PARTIES, it shall become forthwith a part of this LETTER
the same as if it were set forth herein in its entirety. Such
due diligence review by ALLIANT (except for due diligence with
respect to environmental matters) shall be completed within
ninety (90) days after the signing of this LETTER.
(b) Upon the signing of this LETTER, ALLIANT will provide to
HERCULES a set of ALLIANT's most recently available unaudited,
internal financial statements and a set of ALLIANT'S business
plans. In order to permit HERCULES to determine the financial
worthiness of ALLIANT and the underlying value of the ALLIANT
STOCK to be received by HERCULES as part of the PURCHASE PRICE,
ALLIANT shall provide HERCULES the opportunity to conduct a
reasonable "due diligence review" in accordance with the DUE
DILIGENCE PROTOCOL. Such due diligence review by HERCULES
(except for due diligence with respect to environmental
matters) shall be completed within ninety (90) days after the
signing of this LETTER.
7. KEY DATES: To facilitate the negotiations of the DEFINITIVE
AGREEMENTS, ALLIANT shall prepare and provide to HERCULES a draft
Sale And Purchase Agreement within thirty (30) days after the
signing of this LETTER. The negotiation of the DEFINITIVE AGREEMENTS
is expected to be completed by September 30, 1994. The CLOSING is
expected to occur on or before December 31, 1994, at the offices of
Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York 10014, or at such time, on such date and at such
place as the PARTIES may otherwise agree.
8. OTHER MATTERS; BEST EFFORTS:
(a) The DEFINITIVE AGREEMENTS shall include agreements or
provisions to effect the terms hereof and such matters as the
PARTIES mutually agree are necessary, appropriate or convenient
to the TRANSACTION. Such matters will include transition,
intellectual propertty, representations, warranties, and
indemnifications. In addition, the PARTIES shall enter into
Supply Agreements, which shall have 5 year terms, providing for
the purchase by ALLIANT from HERCULES of (i) specified
materials manufactured by HERCULES' Composite Materials unit
and (ii) nitrocellulose manufactured by HERCULES' Aqualon unit,
in each case in accordance with the principles of a supply
agreement protocol (herein the "SUPPLY AGREEMENT PROTOCOL") to
be executed within 30 days after the signing of this LETTER.
Upon the signing of such SUPPLY AGREEMENT PROTOCOL by the
PARTIES, it shall become forthwith a part of this LETTER the
same as if it were set forth herein in its entirety. As to
indemnifications, no claims for indemnification can be made by
any indemnified person against an indemnifying PARTY until all
such claims incurred by such indemnifying person exceeds a
specified dollar amount (to be negotiated by the PARTIES) in
the aggregate.
(b) The PARTIES agree to use their respective best efforts to
negotiate and enter into the DEFINITIVE AGREEMENTS as promptly
as practicable.
(c) The PARTIES agree to cooperate with each other and to use their
best efforts to make all filings necessary under the HSR ACT
(as defined herein) as soon as practicable after the date
hereof.
9. CONDITIONS TO THE CLOSING: The conduct of the CLOSING shall be
subject to and conditioned upon each and all of the following:
(a) the negotiation, execution and delivery of the DEFINITIVE
AGREEMENTS;
(b) the approval of the TRANSACTION and the DEFINITIVE AGREEMENTS
by the Boards of Directors of ALLIANT and of HERCULES, prior to
the execution thereof;
(c) the obtainment of all required corporate, governmental or other
filings, consents, waivers or approvals, including any
necessary consents of third parties to the assignment of
material contracts and including any necessary filings and
approvals under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR ACT");
(d) the completion of a "due diligence review" by ALLIANT of the
HAC BUSINESS and, if desired by HERCULES, then by HERCULES of
ALLIANT, all in accordance with the DUE DILIGENCE PROTOCOL and
each within 90 days from the date hereof (other than for due
diligence with respect to environmental matters);
(e) HERCULES' conduct of the HAC BUSINESS in the ordinary course
without material adverse change from December 31, 1993, through
the CLOSING DATE; however, ALLIANT understands and agrees that
the consolidation of the Tactical Missiles Operations (as
described in Section 10 hereof), and the transition of HAC's
Radford Facility to a "facility use contract" (as disclosed to
ALLIANT) will be undertaken by HERCULES and will not be deemed
to be a violation of this provision;
(f) the negotiation, execution and delivery of mutually agreeable,
non-competition agreements or provisions to the effect that for
a period of five (5) years after the CLOSING DATE, HERCULES
will not directly or indirectly compete against ALLIANT in
those businesses in which the HAC BUSINESS participated as of
the Closing Date;
(g) the approval of the TRANSACTION by the requisite vote of the
stockholders of ALLIANT; and
(h) ALLIANT shall have taken all actions necessary to (i) ensure
that the TRANSACTION will not invoke any "change of control" or
similar provision in any agreement of ALLIANT (including any
employment, termination or credit or any stockholders' rights
plan) and (ii) approve the TRANSACTION and the acquisition of
ALLIANT STOCK by HERCULES for all purposes, including Section
203 of the Delaware General Corporation Law.
The consummation of the Sale and Purchase Agreement will not be
subject to the fulfillment of any financing condition, but will
provide that ALLIANT may terminate such agreement, without further
liability or obligation, if it shall have failed to obtain financing
necessary to enable it to consummate the TRANSACTION, as a result of
one or more of the following (which continue for a period to be
agreed upon): (a) a suspension of trading generally on the NYSE, (b)
a calamity, crisis or other unusual event seriously affecting the
U.S. financial markets, or (c) a declaration of a banking moratorium
by either federal or New York authorities.
HERCULES shall have the right to terminate the DEFINITIVE
AGREEMENTS, without any liability or obligation, in the event that
the closing price of the ALLIANT STOCK on the trading day
immediately preceding the CLOSING DATE is less than $25 per share.
10. ALLEGHENY BALLISTICS LAB: McGREGOR FACILITY: It is understood that
in 1995 the Tactical Missiles Operations conducted at the McGregor,
Texas facility will be moved to Allegheny Ballistics Lab in West
Virginia, and the McGregor, Texas facility will be closed. During
the Due Diligence Period, ALLIANT will be provided with (i) a copy
of the plan(s) and material information (including that related to
consolidation, close-down, relocation and environmental costs)
related to such move and closing, and (ii) a reasonable opportunity
to discuss such plan(s) and material information with HERCULES.
11. SUMIKA-HERCULES AND HISPAN: ALLIANT agrees to cooperate with
HERCULES in connection with the shutdown of certain lines at
Sumika-Hercules Company, Ltd. (a Japanese entity) and the
domesticity issues relating to HISPAN Corporation (a Delaware
corporation).
12. KEY EMPLOYEES: In a writing separate from this LETTER and executed
within 30 days hereof, the PARTIES will identify certain key
employees of the HAC BUSINESS and the terms and conditions of
employment under which ALLIANT will employ such key employees as of
and after the CLOSING DATE.
13. HUMAN RESOURCES: Nothing in this LETTER is intended to confer any
benefits on the HERCULES' employees. The DEFINITIVE AGREEMENTS shall
include agreements or provisions to the effect of the following:
(a) ALLIANT agrees to employ all employees employed by HERCULES
immediately prior to CLOSING who are assigned to the HAC
BUSINESS and who are not otherwise mutually agreed to by the
PARTIES to be specifically excluded (herein "TRANSFERRED
EMPLOYEES"). HERCULES believes that the HAC BUSINESS has an
adequate number of employees for the conduct of the businesses
in which it participates and that based on HAC's current
business level the surplus employees, if any, are minimum in
number.
(b) ALLIANT agrees to offer employment to TRANSFERRED EMPLOYEES on
an at-will basis on terms and conditions of employment which in
the aggregate are comparable to those which are applicable to
such employees prior to the CLOSING DATE, except that each of
the key employees described in Section 12 hereof will likely
have special and individualized terms and conditions of
employment.
(c) ALLIANT agrees to recognize credited service and service
capable of reinstatement under HERCULES' plans for purposes of
ALLIANT's employee benefit plans, including but not limited to
pension, vacation, dismissal pay and other benefits.
(d) As to pension plan benefits subject to paragraph (c) above,
HERCULES agrees to transfer to ALLIANT's pension plan pension
assets (including any applicable surplus that exists) to cover
the accrued pension obligations of the TRANSFERRED EMPLOYEES
and inactive (including retiree) HAC BUSINESS employees as of
the CLOSING DATE. The said transfer shall be a qualified
plan-to-qualified plan transfer. In no event shall the pension
assets so transferred to ALLIANT be less than the aggregate
Projected Benefit Obligations for the TRANSFERRED EMPLOYEES and
inactive (including retirees) HAC BUSINESS employees as of the
CLOSING DATE (as determined in accordance with the assumptions
set forth in HERCULES 1993 Annual Report to Stockholders).
(e) The Sale and Purchase Agreement may include a provision
addressing the liabilities or disallowances, if any, which may
relate to the transfer of employee benefits (including pension
assets and/or liabilities), including any claims relating to
the closure of a segment or termination of a defined benefit
plan.
(f) As to savings plans, ALLIANT and HERCULES will cooperate to
effect a qualified plan-to-qualified plan transfer from the
HERCULES defined contribution to plans maintained or
established by ALLIANT.
(g) For purposes of other employement issues and subject to
exceptions to be negotiated and set forth in the DEFINITIVE
AGREEMENT, HERCULES' liability with respect to TRANSFERRED
EMPLOYEES shall cease as of the CLOSING DATE and ALLIANT's
liability shall commence from such date forward. Such
exceptions will include without limitation that as to HAC
BUSINESS employees who are hospitalized as of the Closing Date,
HERCULES shall be responsible for medical insurance coverage of
such employees until such employees are discharged from the
hospital.
14. ENVIRONMENTAL MATTERS: The DEFINITIVE AGREEMENTS shall include
agreements or provisions consistent with the following:
(a) Radford and Sunflower Facilities: The HAC BUSINESS includes the
management and operation by HERCULES of facilities at Radford,
Virginia, and Sunflower, Kansas. These facilities are owned by
the U.S. Government and to date have been operated as
government owned/company operated (GOCO) facilities.
(b) McGregor and ABL Facilities: The HAC BUSINESS includes the
management and operation by HERCULES of facilities at McGregor,
Texas, and at the Allegheny Ballistics Lab in West Virginia. A
substantial portion of these facilities are owned by the U.S.
Government and leased to HERCULES free of charge for government
work and at a fee for commercial work.
(c) Bacchus, Kenvil and Clearwater Facilities: The HAC BUSINESS
includes the management and operation of the facilities at
Magna, Utah; Clearfield, Utah; Kenvil, New Jersey; and
Clearwater, Florida. These facilities are, directly or
indirectly, owned or leased by HERCULES from a non-government
party. A substantial amount of government work is done at each
of these facilities. However, at the Kenvil facility, a
substantial amount of commercial work is also done.
(d) Treatment of Environmental Matters: The liabilities rising from
environmental conditions existing prior to the CLOSING DATE at
the facilities listed in paragraphs (a), (b) and (c) above
shall be addressed as follows:
As to facilities (or portions thereof) owned by the U.S.
Government, ALLIANT will be entitled to indemnification from
HERCULES, except to the extent that the U.S. government is
responsible. As to all other facilities (or portions thereof),
ALLIANT will look first to recovery as an "allowable cost" from
the U.S. Government and then (if the method of recovery of such
costs is not agreed to within two years) to indemnification by
HERCULES.
(e) Other HAC Related Facilities: Due to the ownership, location
and nature of these facilities, the PARTIES shall negotiate and
include in the DEFINITIVE AGREEMENTS mutually acceptable
environmental provisions.
(f) Baseline Assessment: A baseline environmental assessment of
each relevant HAC BUSINESS facility shall be conducted in
accordance with the following:
(i) the PARTIES shall jointly determine the scope of work for
each baseline assessment and engage reputable and
competent environmental firms to perform such work and
share the costs of such firms equally;
(ii) no borings, sampling, drilling of wells or the like of any
kind shall be conducted as part of or in connection with
any baseline assessment unless and until the Sale and
Purchase Agreement has been executed by the PARTIES,
except as HERCULES may agree otherwise;
(iii) reasonable efforts will be made to complete all baseline
assessments by a date specified in the Sale and Purchase
Agreement; however, if and as the PARTIES may agree, the
period for completion of the baseline assessments may be
extended beyond such date on a month-to-month basis;
(iv) if the environmental liabilities to be assumed by ALLIANT
or retained by HERCULES exceed certain standards as set
forth in the Sale and Purchase Agreement, then either
PARTY shall be entitled to terminate the Sale and Purchase
Agreement without further liability or obligation; and
(v) such other provisions as the PARTIES may agree upon and
include in the Sale and Purchase Agreement.
15. AUDIT: If the PARTIES determine that audited financial statements or
audit(s) of the HAC BUSINESS are required for the TRANSACTION, then
such statements shall be prepared and such audit(s) shall be
conducted by Coopers & Lybrand. The fees of Coopers & Lybrand shall
be paid by HERCULES and the expenses of Coopers & Lybrand up to
$250,000 shall be paid by ALLIANT and amounts in excess thereof
shall be paid by HERCULES.
16. APPROVALS: Promptly after the signing of this LETTER, the PARTIES
shall discuss and agree upon the appropriate approach to obtain the
necessary consents of third parties to the assignment of material
contracts of the HAC BUSINESS. Except as required by law, neither
PARTY shall make any filing, or contact any governmental authority
with respect to the proposed TRANSACTION, without the consent of the
other PARTY, which consent shall not be unreasonably withheld.
17. STANDSTILL AGREEMENT: As part of the DEFINITIVE AGREEMENTS, the
PARTIES will negotiate, execute and deliver a Standstill Agreement
(drafted by ALLIANT) providing that, among other things:
(a) Standstill Period: The earlier of (i) five (5) years after the
CLOSING DATE, or (ii) until HERCULES owns less than five
percent (5%) of the then total outstanding shares of ALLIANT
STOCK.
(b) Restrictions On Purchases Of ALLIANT STOCK: During the
Standstill Period, HERCULES may purchase from time to time
additional shares of ALLIANT STOCK provided that HERCULES shall
at no time beneficially own in excess of 40% of the then
outstanding shares of ALLIANT STOCK, and further provided that
such purchases do not violate the federal securities laws.
Notwithstanding anything to the contrary, purchases of shares
of ALLIANT STOCK made by the trustees for pension, savings and
employee benefit plans of HERCULES, wherein the trustee(s)
independently make the purchase and sale decisions for the
investment of the plan funds and the decisions of the voting of
shares of stock purchased with plan funds, shall not be viewed
or construed as purchases by HERCULES.
(c) Restrictions On Sales And Transfers Of ALLIANT STOCK: During
the first year of the Standstill Period, HERCULES may sell or
transfer shares of ALLIANT STOCK only with the prior consent of
ALLIANT in each instance. After the said first year, HERCULES
may freely sell or transfer shares of ALLIANT STOCK; provided,
however, that HERCULES may not at any time during the
Standstill Period knowingly sell or transfer shares of ALLIANT
STOCK to (i) any person who after acquiring such shares will
beneficially own, together with any of its affiliates, in
excess of 10% of ALLIANT's outstanding voting securities or
(ii) any non-United States person. ALLIANT shall have a right
of first refusal on any such shares that HERCULES wishes to
sell.
Notwithstanding anything to the contrary, HERCULES shall be
free without restrictions at all times during the Standstill
Period to sell or transfer shares of ALLIANT STOCK (i) if a
third party has made an offer to purchase a controlling
interest in ALLIANT (e.g., 50.1% of ALLIANT STOCK) and such
offer is approved by ALLIANT'S Board of Directors, or (ii) if
ALLIANT'S Board of Directors has recommended the redemption of
or has redeemed ALLIANT'S poison pill or other anti-takeover
provisions.
Notwithstanding anything to the contrary, HERCULES may from
time to time sell or transfer to selected individuals (e.g.,
directors, officers or employees) up to a maximum of 350,000
shares of ALLIANT STOCK in the aggregate during the Standstill
Period. Such shares will remain subject to the provisions of
the Standstill Agreement and be included in calculating
HERCULES' ownership of ALLIANT STOCK for purposes of paragraph
(b) above.
(d) Restrictions On Seeking Control: During the Standstill Period,
HERCULES will not initiate or engage in a proxy contest,
consent or other solicitation, join in any group with respect
to ALLIANT STOCK, or otherwise act, alone or in concert with
others, to seek control of ALLIANT or its Board of Directors.
During the Standstill Period, HERCULES may not seek a waiver or
modification of any provisions of the Standstill Agreement
relating to the matters covered by Sections 17(b) or (d)
hereof.
(e) Representation On ALLIANT's Board of Directors: During the
Standstill Period, HERCULES shall be entitled to twenty-five
percent of the non-employee directors on ALLIANT's Board of
Directors, so long as such Board has no less than eight
non-employee directors. In no event shall ALLIANT's Board of
Directors be increased to more than eleven directors during the
Standstill Period. The Standstill Agreement will contain
provisions relating to the proportional reduction in the number
of HERCULES' designees on the ALLIANT Board in the event of the
sale by HERCULES of any portion of the shares of ALLIANT STOCK
received by HERCULES in the TRANSACTION.
ALLIANT shall use its best efforts and shall exercise all
authority under applicable law to cause designees of HERCULES
to be elected to ALLIANT's Board of Directors in accordance
with the Standstill Agreement. In the event that HERCULES
designees are not nominated to serve on the ALLIANT Board as
set forth above other than through the fault of HERCULES, the
Standstill Agreement shall automatically terminate. In each
election of directors for ALLIANT'S Board of Directors,
HERCULES will vote its shares of ALLIANT STOCK in favor of the
HERCULES nominees and in favor of other directors as
recommended by ALLIANT'S Board of Directors. Other than the
foregoing, there shall be no restrictions on HERCULES' ability
to vote its shares of ALLIANT STOCK.
18. EXCLUSIVE NEGOTIATIONS: In consideration of the payment of Two
million eight hundred thousand dollars ($2,800,000) by ALLIANT to
HERCULES on the date hereof, HERCULES agrees that, until December
31, 1994 or the earlier termination of this LETTER, it will
negotiate exclusively with ALLIANT and will not directly or
indirectly solicit, negotiate, furnish non-public information, or
enter agreements, undertakings and/or understandings with any
persons other than ALLIANT concerning the sale and purchase of all
or substantially all of the HAC BUSINESS or take any action that is
intended to frustrate the purposes of this LETTER.
ALLIANT fully understands that by HERCULES negotiating exclusively
with ALLIANT, HERCULES shall be precluded from pursuing other offers
or alternatives for the repositioning of the HAC BUSINESS, and if
ALLIANT should not execute the DEFINITIVE AGREEMENTS, then HERCULES
will have suffered substantial damages which are difficult to
identify and quantify.
If the CLOSING occurs, then any exclusivity payment paid by ALLIANT
(with interest thereon at an annual simple interest rate of six
percent (6%)) shall be credited against the PURCHASE PRICE at the
CLOSING. If the CLOSING does not occur, then HERCULES shall retain
the exclusivity payment (with all interest earned thereon), except
as provided below.
If the CLOSING is not held due to non-obtainment of a
Hart-Scott-Rodino or other governmental approval, through no fault
of ALLIANT, or the willful breach of this LETTER or the DEFINITIVE
AGREEMENTS by HERCULES, then any exclusivity payment paid by ALLIANT
shall be refunded to ALLIANT with interest thereon at an annual
simple interest rate of six percent (6%) from the date that HERCULES
received such exclusivity payment through the date that ALLIANT
receives the refunded exclusivity payment.
Notwithstanding anything to the contrary, HERCULES may consider, to
the extent required by law, unsolicited offers or inquiries from
third persons for the purchase of all or substantially all of the
HAC BUSINESS.
19. INDEMNIFICATION: ALLIANT hereby agrees to indemnify and hold
harmless HERCULES (and its directors and officers) against all
claims, actions and proceedings (including attorneys' fees) by
ALLIANT stockholders asserted in connection with the Capstay proxy
solicitation to the extent that such claims relate to the
transactions contemplated hereby, provided that it is not judicially
determined that such claim, action or proceeding is based on the
violation by HERCULES of applicable law.
20. PROSPECTIVE TRANSACTION NOT TO BE DISCLOSED: Except to the extent
required by law, neither HERCULES nor ALLIANT shall make outside of
its respective internal organization and its advisors (on a need to
know basis), any disclosures about the existence or contents of this
LETTER or the transactions contemplated hereby without prior notice
to and approval of the other PARTY in each instance, which approval
shall not be unreasonably withheld; provided, however, written
consent shall not be required (but in each instance, the PARTIES
shall consult with each other in advance) with respect to private
discussions intended to facilitate the TRANSACTION with customers,
suppliers and other persons whose approval of the TRANSACTION is
deemed necessary. Each PARTY shall furnish to the other PARTY
advance copies of any releases or disclosures which it wishes to
make concerning this LETTER and/or the transactions contemplated
hereby. If a public statement is required to be made by law, the
PARTIES shall consult with each other in advance as to the contents
and timing thereof.
21. CONFIDENTIALITY AGREEMENT: This LETTER is not intended to and shall
not adversely affect the CONFIDENTIALITY AGREEMENT, except as
specifically set forth in Section 22 below. Any and all confidential
or proprietary information provided by HERCULES or ALLIANT under or
in connection with this LETTER (including provided information
during a due diligence review) shall be covered by the
CONFIDENTIALITY AGREEMENT. The secrecy and non-disclosure
obligations of the CONFIDENTIALITY AGREEMENT shall survive the
expiration or termination of this LETTER for a period of five (5)
years after the date of the CONFIDENTIALITY AGREEMENT.
22. EACH PARTY TO BEAR OWN EXPENSES:
(a) Except as otherwise provided herein, each PARTY shall bear its
respective expenses incurred in connection with the
negotiation, preparation, execution, delivery and consummation
of this LETTER (including the conduct of its due diligence
review), the DEFINITIVE AGREEMENTS and the TRANSACTION;
(b) Notwithstanding the foregoing, on the date hereof, ALLIANT will
pay HERCULES Three million two hundred thousand dollars
($3,200,000) in order to reimburse HERCULES for its costs and
expenses (including internal charges) incurred by HERCULES in
connection with the TRANSACTION. In the event that the CLOSING
occurs, such amount, together with interest at the rate of 6%
per annum, shall be applied against the PURCHASE PRICE. If the
CLOSING does not occur as a result of the failure to obtain the
HSR ACT approval or other governmental approval, through no
fault of ALLIANT, or the willful breach of this LETTER by
HERCULES, such amount, together with interest thereon at the
rate of 6% per annum shall be repaid to ALLIANT. If the CLOSING
does not occur for any other reason, HERCULES shall be entitled
to retain such amount.
23. PRIOR COMMUNICATIONS: This LETTER supersedes all prior
communications between the PARTIES or their respective agents or
representatives with respect to the TRANSACTION, except for the
information provided by HERCULES to ALLIANT in December 1993 and in
March 1994 and the CONFIDENTIALITY AGREEMENT which shall survive the
execution hereof; provided, however, it is expressly agreed that (i)
the second and third sentences of Section 12 of the CONFIDENTIALITY
AGREEMENT shall be amended and superseded by Section 18 hereof, and
(ii) Sections 5 and 6 of the CONFIDENTIALITY AGREEMENT shall be
amended and superseded by Section 19 hereof.
24. TERMINATION: This LETTER may be terminated by either PARTY in the
event that the DEFINITIVE AGREEMENTS are not executed by the PARTIES
on or before October 31, 1994.
25. MISCELLANEOUS: The index, captions and headings in this LETTER are
for convenience only and shall not define, limit or affect the
scope, intent, construction or interpretation of this LETTER or any
provision hereof. The binding portions of this LETTER may not be
amended or modified, except by a written document signed by the
PARTIES.
26. GOVERNING LAW: This LETTER shall be governed by and construed under
the laws of the State of Delaware, without giving effect to any
conflict of law principle or any other provision or principle that
would result in application of the law of some other
jurisdiction(s).
27. SEVERABILITY: In the event that any provision(s) of this LETTER
shall be held illegal, invalid or unenforceable under applicable
law, then such illegality, invalidity or unenforceability shall not
affect any other provision(s) hereof and this LETTER shall remain in
force and be effectuated as if such illegal, invalid or
unenforceable provision is not part of this LETTER; provided,
however, (i) if the deletion of any provision of this LETTER
frustrates a material purpose or right of a PARTY, then such PARTY
may terminate this LETTER forthwith and without further liability or
obligation and (ii) absent such frustration and to the extent
legally possible, the PARTIES shall seek in good faith alternate
provisions or arrangements to achieve the same purposes as such
provision.
28. NON-BINDING LETTER: This LETTER is not intended to be nor shall it
be construed as an offer to sell or purchase, an acceptance thereof
or a commitment or obligation of HERCULES to sell the HAC BUSINESS
or the HAC BUSINESS ITEMS or of ALLIANT to purchase the same. Any
such offer, acceptance, commitment and/or obligation must be set
forth in the DEFINITIVE AGREEMENTS.
It is understood and agreed that neither PARTY has any obligation to
the other PARTY prior to the execution and delivery of the
DEFINITIVE AGREEMENTS, except for the obligations set forth in
Sections 8(b) and (c), 18 through 28 hereof and in the
CONFIDENTIALITY AGREEMENT, which Sections and CONFIDENTIALITY
AGREEMENT shall be binding on the PARTIES.
If this LETTER is satisfactory, then please indicate your acceptance and
agreement by signing four (4) originals of this LETTER. Kindly retain two (2)
fully signed originals for your files and return two (2) fully signed
originals to HERCULES.
Very truly yours,
HERCULES INCORPORATED
By: /s/ R. Keith Elliott
---------------------------------
R. Keith Elliott
Senior Vice President and
Chief Financial Officer
ACCEPTED AND AGREED BY
ALLIANT TECHSYSTEMS INC.
By: /s/ Donald E. Willis
--------------------------------
Donald E. Willis
Vice President, Strategic Development
and Planning
Hercules Incorporated
Hercules Plaza
Wilmington, DE 19894-0001
(302) 594-5000
94-21-B NEWS RELEASE
------------
- ------------------
RELEASE ON RECEIPT
- ------------------
HERCULES AEROSPACE AND ALLIANT TECHSYSTEMS
TO FORM NEW MAJOR AEROSPACE AND DEFENSE COMPANY
July 12, 1994 . . . Hercules Incorporated and Alliant Techsystems have
signed a Letter of Intent under which Alliant Techsystems will acquire
Hercules Aerospace for $365 million in cash and 3.5 million shares of newly
issued Alliant Techsystems common stock. The proposed transaction would
exclude Hercules' composite materials (graphite fiber and prepreg) business.
Hercules Aerospace is a fully integrated manufacturer of rocket motors
for space exploration, strategic and tactical weapon systems, and ordnance for
the U.S. Army. Included in the proposed sale are Space and Strategic
Propulsion, Composite Structures, Tactical Propulsion, Ordnance, Hercules
Defense Electronics Systems, Inc., and Global Environmental Solutions, Inc.
These units reported combined revenues of $660 million in 1993 and operating
profit of $105 million. They employ approximately 5,700 employees in seven
states.
The combined operations of Alliant Techsystems and Hercules Aerospace
would have approximately $1.4 billion in sales and 10,500 employees.
The two companies have also agreed that Hercules will hold two of the
eight nonemployee seats on the Alliant Board of Directors. It will be proposed
that Thomas L. Gossage, Hercules chairman, president, and chief executive
officer, and R. Keith Elliott, Hercules senior vice president and chief
financial officer, serve on the Alliant Board of Directors. In addition,
Richard Schwartz, executive vice president and president, Hercules Aerospace,
would serve on the Alliant Board as an employee director as well as hold a
senior management position within the company.
According to Mr. Gossage, "The pending cash and stock sale of Hercules
Aerospace is in keeping with our company's stated intention of repositioning
Aerospace both to create greater shareholder value for our owners and to
establish a stronger player in the defense and aerospace industries. This
combination of the Hercules Aerospace business and Alliant Techsystems creates
a new company committed to the defense and aerospace industries. The future of
Alliant Techsystems is bright, and Hercules Aerospace brings to the new
company several new potential programs that could result in major added future
revenue and profit. The employees of both companies will be better positioned
for the future in a company with the resources and technical expertise to be a
major player in our nation's defense and aerospace industry in the years to
come. At the same time, Hercules will benefit from the opportunity for
creation of shareholder value through its 26-percent ownership in the new
company."
According to Toby G. Warson, Alliant Techsystems president and chief
executive officer, "The proposed acquisition of Hercules Aerospace will be
immediately accretive to earnings and will yield significant future cash flow.
"From a strategic perspective," he continued, the Hercules businesses
will add significant new markets in the aerospace industry while strengthening
our existing core defense business. This is the kind of acquisition we have
been looking for, one that brings critical mass and significant new markets
and complements our core Government business. Of particular significance is
the vertical integration in propellant production, which is important to our
ordnance competitive position. The result will be a stronger, more diversified
Alliant Techsystems with leading market positions, attractive earnings, and
representation on a broad range of space and military programs. Clearly, we
will be better positioned to serve the needs of our shareholders, customers,
and employees."
The transaction is subject to certain conditions, including the
negotiation of a definitive agreement, Hart-Scott-Rodino filing, expiration of
the waiting period, and approval by Alliant shareholders. Closing is
anticipated by year end 1994.
Hercules Incorporated is a diversified, worldwide producer of chemicals
and related products. Upon completion of the anticipated sale of Hercules
Aerospace, Hercules revenues will be approximately $2 billion, and the company
will have approximately 45 plants located throughout the world, with 20 major
facilities in the United States.
Alliant Techsystems supplies defense and marine systems to the U.S.
Government and its allies. The company employs approximately 4,800 people
throughout the United States. Sales and operating profit for the fiscal year
ended March 31, 1994, were $775 million and $39 million, respectively.
* * * * * *