UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
(AS PERMITTED BY RULE 14A-6(E)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
HERCULES INCORPORATED
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
5) Total fee paid:
--------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
--------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
3) Filing Party:
--------------------------------------------------------------------------------
4) Date Filed:
--------------------------------------------------------------------------------
HERCULES INCORPORATED
Hercules Plaza
1313 North Market Street
Wilmington, DE 19894-0001
[HERCULES LOGO]
March __, 2001
Dear Shareholder:
We are pleased to invite you to attend the 2001 annual meeting of
shareholders of Hercules Incorporated, which will be held on Thursday, April 26,
2001, at 11:00 a.m., local time, at the Delaware Art Museum, 2301 Kentmere
Parkway, Wilmington, Delaware.
The items to be considered and voted on at the meeting are described in the
notice of the 2001 annual meeting of shareholders and proxy statement
accompanying this letter.
You may have already received proxy-soliciting materials from International
Specialty Products Inc, or ISP, in connection with items ISP intends to present
at the meeting. YOUR BOARD OF DIRECTORS BELIEVES THAT THE ELECTION OF ISP'S
NOMINEES IS NOT IN YOUR BEST INTERESTS. WE ARE ACTIVELY PURSUING STRATEGIC
ALTERNATIVES IN ORDER TO MAXIMIZE VALUE FOR ALL SHAREHOLDERS. WE STRONGLY URGE
YOU TO VOTE FOR THE NOMINEES PROPOSED BY YOUR BOARD USING THE ENCLOSED WHITE
PROXY CARD AND AGAINST ISP'S NOMINEES.
Your vote is important. We encourage you to vote your shares as soon as
possible. If you have any questions or need assistance in voting your shares,
please call our proxy solicitor, MacKenzie Partners, Inc., toll free at (800)
322-2885.
Sincerely,
Thomas L. Gossage
Chairman and Chief Executive Officer
HERCULES INCORPORATED
Hercules Plaza
1313 North Market Street
Wilmington, DE 19894-0001
To: Our Shareholders
Subject: Notice of 2001 Annual Meeting of Shareholders
The Annual Meeting of Shareholders of Hercules Incorporated will be held on
April 26, 2001, at 11:00 a.m., at the Delaware Art Museum, 2301 Kentmere
Parkway, Wilmington, Delaware, to consider and take action on the following
proposals:
1. Re-election of the following four directors to each serve for three-year
terms expiring at the 2004 annual meeting of shareholders: Thomas L.
Gossage, Ralph L. MacDonald, Jr., John A. H. Shober and Paula A. Sneed.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE REELECTION OF
THE HERCULES DIRECTOR NOMINEES AND AGAINST THE ELECTION OF ISP'S DIRECTOR
NOMINEES.
2. Ratification of the selection of PricewaterhouseCoopers LLP as independent
accountants for 2001. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THIS PROPOSAL.
3. To transact such other business as may properly come before the meeting or
at any adjournments or postponements thereof.
Shareholders of record as of March 6, 2001, will be entitled to vote at the
Annual Meeting. Seating is limited. THIS ANNUAL MEETING IS OF PARTICULAR
IMPORTANCE TO ALL SHAREHOLDERS OF THE COMPANY IN LIGHT OF THE COMPANY'S ONGOING
VALUE MAXIMIZATION PROCESS BEGUN IN NOVEMBER 2000. WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING IN PERSON AND REGARDLESS OF THE NUMBER OF SHARES OF
COMMON STOCK YOU OWN, YOUR BOARD URGES YOU TO COMPLETE, SIGN, DATE AND RETURN
THE WHITE PROXY CARD IN THE ACCOMPANYING ENVELOPE, WHICH IS POSTAGE PAID IF
MAILED IN THE UNITED STATES.
YOUR BOARD ALSO URGES YOU NOT TO SIGN ANY BLUE PROXY CARDS SENT TO YOU BY
ISP. EVEN IF YOU HAVE PREVIOUSLY SIGNED A PROXY CARD SENT TO YOU BY ISP, YOU CAN
REVOKE IT BY SIGNING, DATING AND MAILING THE ENCLOSED WHITE PROXY CARD IN THE
ENVELOPE PROVIDED.
An admission ticket, which is required for entry into the Annual Meeting,
is attached to your proxy card. If you plan to attend the Annual Meeting, please
vote your proxy but keep the admission ticket and bring it to the Annual
Meeting. If your shares are held in the name of a bank,
broker or other holder of record and you plan to attend the Annual Meeting, you
can obtain an admission ticket in advance by contacting the Office of the
Corporate Secretary at (800) 441-9274.
By order of the Board of Directors,
Israel J. Floyd
Executive Vice President, Secretary
and General Counsel
-2-
PRELIMINARY PROXY MATERIALS DATED MARCH 16, 2001
SUBJECT TO COMPLETION
PROXY STATEMENT
Hercules Incorporated
Hercules Plaza
1313 North Market Street
Wilmington, DE 19894-0001
March ___, 2001
The accompanying proxy is solicited on behalf of the Board of Directors of
Hercules Incorporated for use at the Annual Meeting of Shareholders to be held
on April 26, 2001, and at any adjournments or postponements thereof. Throughout
this document we refer to our company as Hercules or the Company. This proxy
statement and the accompanying proxy are first being mailed to shareholders on
or about March ___, 2001. Hercules' Annual Report will be mailed to shareholders
not later than April 6, 2001, a date at least 20 calendar days before the date
of the 2001 Annual Meeting.
International Specialty Products Inc. ("ISP"), a company controlled by Mr.
Samuel J. Heyman, is conducting a proxy solicitation in opposition to the Board
of Directors of Hercules. ISP has notified the Company and has filed a
preliminary proxy statement with the Securities and Exchange Commission stating
that it will nominate four individuals for election to the Board of Directors in
opposition to Hercules' nominees for election as directors.
The Board of Directors has commenced a process intended to maximize value
for all of the Company shareholders and believes that the Company's nominees are
independent, familiar with the Company and its businesses and operations and
committed to exploring all strategic alternatives that may be available to
bring this process to fruition. Your Board of Directors is soliciting votes
FOR Hercules' slate of nominees for election to the Board of Directors, FOR
ratification of the appointment of the firm of PricewaterhouseCoopers LLC as the
Company's independent accountants for the year 2001 and AGAINST ISP's Director
Election Proposal. Unless contrary instructions are indicated on the WHITE proxy
card, all shares represented by valid proxies received pursuant to this
solicitation (and not revoked) will be voted:
o FOR the election of all of the Hercules nominees for directors named in
this proxy statement, and
o FOR the ratification of the appointment of PricewaterhouseCoopers LLC as
the Company's independent accountants for the year 2001.
If you specify a different choice on the proxy card, your shares will be
voted as specified. Signing and dating Hercules' WHITE proxy card will have the
effect of revoking any ISP proxy card you signed on an earlier date, and will
constitute a revocation of all previously granted authority to vote for the
election of the nominees named in the ISP proxy card.
BACKGROUND OF THE BOARD OF DIRECTORS' EFFORTS
TO MAXIMIZE SHAREHOLDER VALUE AND ISP'S PROXY CONTEST
On October 17, 2000, the Board of Directors of the Company named Thomas L.
Gossage Chairman and Chief Executive Officer of the Company. Mr. Gossage retired
in 1996 as Hercules' Chairman and Chief Executive Officer. Upon his appointment,
Mr. Gossage stated that he and the Board would consider all strategic
alternatives available to the Company.
On November 28, 2000, Hercules publicly announced its intention to pursue
a sale or merger of the Company in the belief that over the long-term becoming
part of a larger enterprise is the best strategic path for the Company, one that
will provide the maximum value and opportunity for shareholders, employees and
customers. The Company hired financial and legal advisors who are leaders in
their respective businesses to assist it in pursuing this strategic path. The
Company's financial advisors are Goldman, Sachs & Co. and Credit Suisse First
Boston Corporation. The Company, with the assistance of those advisors, has
contacted many potential purchasers of all or part of the Company's business,
and has entered into confidentiality agreements and supplied information to
numerous such potential transaction partners.
Shortly after Mr. Gossage was named Chairman and Chief Executive Officer
and stated that the Company would consider its strategic alternatives,
representatives of the Company were in contact with ISP regarding ISP's
participation in the process the Company was pursuing with respect to its
strategic alternatives. ISP indicated that it was interested in receiving the
confidential information memorandum prepared by the Company and expressed an
interest in potentially making a proposal to acquire all of the Company. In the
course of negotiating the form of confidentiality agreement, Hercules offered to
amend the standard form to permit ISP to conduct a proxy contest if it chose to
do so. Despite the Company's willingness to accommodate ISP's concerns about
restricting its future options in this fashion, ISP declined to enter into such
a form of confidentiality agreement. In late February 2001, a representative of
ISP informed representatives of Hercules that ISP did not wish to receive
confidential information because it was no longer interested in acquiring the
Company.
On January 23, 2001, Mr. Gossage received a letter from Samuel J. Heyman,
the Chairman and controlling shareholder of ISP, expressing ISP's willingness to
purchase 25 million shares, or approximately 23%, of the Company's common stock
at a price of $17.50 per share, which would result in ISP owning approximately
33% of the Company. That letter followed an October 11 letter, in which Mr.
Heyman had stated that he was prepared to commence a partial tender offer on the
terms reiterated in the January 23 letter. On February 7, 2001, the Company
received another letter from Mr. Heyman asking that, if Hercules did not
promptly allow ISP to proceed with its partial tender offer, the Company
consider an alternative ISP proposal to raise the threshold under the rights
plan to 20% and exempt any such purchase from the provisions of the Delaware
takeover statute. The next day, Mr. Gossage stated publicly that Mr. Heyman's
proposals were being reviewed by the Board as part of the entire process of
considering alternatives for the Company and that the Board would respond to
these proposals in due course. At that time, Mr. Gossage stated that whatever
course the Board decided to pursue, it would decide on the basis of what is in
the best interest of all of the Company's shareholders, rather than pursuing a
course that benefits any single shareholder or group of shareholders to the
detriment of others.
-2-
On February 20, 2001, Mr. Heyman sent a letter to Mr. Gossage stating that,
in addition to his previous proposals for shareholder action at the Company's
annual meeting, ISP would also be nominating a slate of directors to run for the
four Board seats held by directors whose terms expire in 2001. On February 21,
ISP announced it was withdrawing its proposal to make a partial tender offer. On
February 23, Mr. Gossage wrote to Mr. Heyman to advise him that at its February
22 meeting, the Board had considered ISP's request to amend the rights plan, and
had unanimously concluded that such an amendment would not be in the best
interests of the Company's shareholders, in light of the purposes served by the
rights plan and, in particular, the ongoing process to consider a sale or merger
of the Company as announced in November 2000. Mr. Gossage also pointed out that
he considered Mr. Heyman's recent public statements detrimental to the Company's
efforts to achieve this goal, particularly in light of concerns expressed by
third parties with respect to Mr. Heyman's statements and activities, which
could negatively impact their continuing participation in that process. Mr.
Gossage stated that, should Mr. Heyman submit a proposal to acquire the entire
Company rather than a significant minority interest, it would be considered
along with other potential offers. Because ISP had withdrawn its partial tender
offer shortly before the Board meeting, the Board did not take any action with
respect to it. In a February 28, 2001 letter to Mr. Gossage, Mr. Heyman
reiterated his intention to present ISP's proposals to the Company's
shareholders at the upcoming Annual Meeting.
On March 5, 2001, ISP filed with the SEC a preliminary proxy statement
soliciting proxies from the Company's shareholders to vote for its own slate of
director nominees and to vote on six proposals, including (A) amendments to the
Company Bylaws requiring that directors be elected by a plurality vote, that the
Board redeem the rights distributed under the Company's rights plan, terminate
the plan and refrain from adopting any new rights plan without shareholder
approval, and that Hercules opt out of Section 203 of the Delaware corporation
law (which restricts certain transactions between the Company and a shareholder
owning 15% or more of its common stock), and (B) a resolution repealing any and
all amendments made by the Board to the Company Bylaws between March 29, 2000
and the date of the Annual Meeting. On March 12, 2001, the Company filed its
preliminary proxy statement responding to ISP's various proposals and soliciting
proxies for the election of the Hercules nominees. Also on March 12, 2001, ISP
filed an amended preliminary proxy statement and sent a letter to Mr. Gossage
indicating that ISP would "table" all of the proposals made in its March 5
preliminary proxy statement "to focus the proxy contest on the election of [its]
nominees."
In its March 12 filing, ISP alleges that it is seeking election of its
nominees in order to, among other things, maximize value for all Hercules
shareholders, and bring about the prompt sale of the Company. For the reasons
described below, we have serious reservations about ISP's real intentions
concerning value maximization for all Hercules shareholders. In addition, THE
BOARD OF DIRECTORS HAS ALREADY, CLEARLY AND UNAMBIGUOUSLY, DECLARED ITS
INTENTION TO MAXIMIZE SHAREHOLDER VALUE THROUGH A SALE OR MERGER OF THE COMPANY.
We have retained Goldman, Sachs & Co. and Credit Suisse First Boston Corporation
as financial advisors to assist the Company in carrying out this process
and, UNDER CIRCUMSTANCES THAT ARE FAIR TO AND IN THE BEST INTEREST OF ALL
SHAREHOLDERS OF THE COMPANY, THE BOARD IS FULLY COMMITTED TO BRINGING THE
PROCESS TO FRUITION. We have given both Goldman Sachs and Credit Suisse First
Boston a clear mandate to this effect, and each of them has conducted and is
continuing to conduct thorough and extensive searches, within the United States
and internationally, for potential transaction candidates. We know of no reason,
nor has ISP disclosed any such reason, why ISP's nominees would be better
positioned than the Board to achieve these objectives.
-3-
The Board's actions to maximize shareholder value through a sale or merger
of the Company are consistent with Mr. Gossage's statement, at the time of his
appointment as Chairman and Chief Executive Officer of the Company, in
October 2000, that he and the Board would explore all strategic alternatives
for the Company, based on their considered view of what is in the best interest
of all Hercules shareholders. MR. GOSSAGE HAS EXPRESSED HIS COMPLETE
CONFIDENCE IN THE BOARD'S COMMITMENT TO MAXIMIZE SHAREHOLDER VALUE FOR ALL
SHAREHOLDERS AND THE INTEGRITY OF THE SALE PROCESS CURRENTLY UNDER WAY.
Not only do we believe that the Hercules' nominees are best positioned to
fulfill the Board's commitment to maximizing shareholder value, we also believe
that, because of Mr. Heyman's prior activities, and the conflicts of interest
affecting ISP's nominees (see "Election of Directors"), ISP'S NOMINEES ARE
NOT THE RIGHT PEOPLE FOR THE JOB.
Notwithstanding public declarations by Mr. Heyman that ISP's intentions are
consistent with the Company's desire to maximize value for all our shareholders,
we continue to have grave concerns about ISP's intentions with respect to the
Company. ISP has declined to submit a proposal to acquire the entire Company,
indicating instead an interest in increasing its ownership in the Company from
its current 9.9% to approximately 33% through a partial tender offer
(subsequently withdrawn), in an attempt, we believe, to obtain effective control
of the Company without paying a premium to all Hercules shareholders. It would
not be the first time that Mr. Heyman has pursued his personal gain in the name
of shareholder value maximization. Mr. Heyman's involvement with Union Carbide
Corporation in 1985, CBI Industries in 1986, BorgWarner in 1987 and Cabot
Corporation in 1988 where, according to public sources, he generally acquired an
investment in the company, made an acquisition proposal at a low price and
ultimately sold his position in the company at a profit, shows a clear pattern.
Again, in 2000, Mr. Heyman mounted an unsuccessful bid for Dexter Corporation,
which led to its breakup and brought him a substantial financial gain.
The Board also believes that Mr. Heyman has been interfering with the
Company's efforts to maximize value by his highly public statements and
activities, which raise concerns among third parties participating in the
Board's value-maximization process, or considering participating in that
process, regarding ISP's real intentions with respect to the Company. Although
we have told Mr. Heyman that his actions with respect to the Company are
interfering with that process, Mr. Heyman has rejected our requests to refrain
from statements and activities that those parties may consider disruptive of
their efforts to formulate a purchase proposal. Mr. Heyman has repeatedly been
invited to enter into a confidentiality agreement on terms even more favorable
than those offered to other participants in the Company's sale process and, like
such other participants, submit an offer for the entire Company, but has refused
to do so.
ISP's March 12 filing also states that ISP is seeking election of its
nominees in order to remove barriers to offers for Hercules shares, particularly
the Company's rights plan. The Board has clearly and unambiguously declared that
it is exploring alternatives to maximize shareholder value through a sale or
merger of the Company. The Board will not attempt to utilize the Company's
rights plan to block a business combination or other transaction that is fair
to and in the best interest of all of the shareholders and is reasonably capable
of being consummated. In fact, IF THE BOARD RECEIVES A PROPOSAL TO ACQUIRE THE
COMPANY AT AN ATTRACTIVE PRICE, THE BOARD IS COMMITTED TO APPROVING SUCH A
TRANSACTION AND WOULD, UNDER SUCH CIRCUMSTANCES, RENDER THE RIGHTS PLAN
INEFFECTIVE.
-4-
The Board also believes that ISP is incorrect in contending that rights
plans, such as the Company's rights plan, generally serve to deter credible
acquisition proposals. There is no evidence that the Company's rights plan has
in any way deterred credible acquisition proposals or had any sort of negative
effect on the process undertaken by the Company. None of the entities that have
engaged in discussions with the Company in connection with a potential purchase
of the Company or its businesses have expressed the view that the existence of
the Company's rights plan (or, for that matter, the fact that the Company is
subject to Section 203 of the Delaware corporation law) is in any way an
impediment to their interest in the Company or their ability to formulate a
proposal. Not one of them has asked the Company to remove its rights plan (or
opt out of Section 203) in advance of making a bid or entering into a
transaction. In addition, empirical studies, including two conducted by J.P.
Morgan & Co. in 1995 and 1997, show that companies with rights plans receive
higher takeover premiums than those without such plans and that rights plans do
not decrease the likelihood that takeover bids will be made or completed. For
example, the 1997 J.P. Morgan & Co. study found that:
o premiums paid to companies with rights plans were nearly 10% higher on
average than premiums paid to purchase target companies that did not
have such rights plans;
o the presence of a rights plans did not increase the likelihood that a
hostile takeover bid would be defeated or that a friendly bid would be
withdrawn; and
o a rights plans did not reduce the likelihood that a company would
become a takeover target.
FOR THESE REASONS, THE BOARD DOES NOT BELIEVE THAT REPEAL OF THE COMPANY'S
RIGHTS PLAN WOULD HAVE ANY POSITIVE EFFECT ON THE COMPANY'S EFFORTS TO MAXIMIZE
SHAREHOLDER VALUE THROUGH A SALE OR MERGER OF THE COMPANY. THE BOARD DOES
BELIEVE, HOWEVER, THAT DISMANTLING THE RIGHTS PLAN COULD HINDER THE SALE
PROCESS.
It is also important to remember that the Board's use of the rights plan is
subject to its fiduciary duties to shareholders and to review by the courts. The
Delaware courts have made clear that a board's decision to refuse to make a
rights plan inapplicable to an acquisition proposal is subject to review under
well established principles of Delaware law. By the same token, by precluding
the Board from using the rights plan under circumstances in which the Board
believes it would benefit shareholders, a repeal of the rights plan could
actually require the Board to act in a manner inconsistent with what it believes
to be its fiduciary duties. As repeatedly stated by the Delaware courts, a board
of directors has the affirmative legal duty to respond to and resist
takeover attempts that it determines in good faith to be contrary to the best
interests of the corporation and its shareholders.
ISP's March 12 filing finally states that ISP is seeking election of its
nominees in order to reverse the requirement under the Company Bylaws that
directors be elected by a majority vote of all outstanding shares. ISP claims
that the Company's directors should be elected by plurality vote -- that is,
based on the number of votes cast at the Annual Meeting. Article II, Section 2
of the Company Bylaws provides that directors are elected at each annual meeting
by the majority vote of the stock then issued and outstanding and entitled to
vote at the meeting. ISP claims that the voting requirement for electing
directors stated in this provision is supposedly "ambiguous," and
-5-
that the existing bylaw provision should be interpreted to mean that directors
may be elected by plurality vote.
The Company believes that ISP's contention is without merit. The provisions
of Article II, Section 2 plainly state that: "[a]t each annual meeting, there
shall be elected by ballot, by the majority vote of the stock then issued and
outstanding and entitled to vote thereat, the number of directors necessary to
fill the class of those whose term then expires." There is no ambiguity in that
provision.
The Board believes that a requirement that new directors acquire their
seats on the Company's Board only if a majority of the outstanding shares vote
in favor of the nominee, far from disenfranchising shareholders, is desirable
because Board composition should not be affected unless a genuine majority of
the equity of the Company supports the election of a particular nominee or
nominees. We do not believe there is anything unfair, or contrary to shareholder
interests, in requiring that a nominee secure the affirmative support of a
majority of the equity of the Company in order to be elected.
THE ANNUAL MEETING
WHO IS ENTITLED TO VOTE
Shareholders of record as of the close of business on March 6, 2001, will
be entitled to vote for each share registered in the shareholder's name. As of
that date, there were 108,115,824 shares of Hercules common stock outstanding.
HOW YOU MAY VOTE
You may vote by completing and returning the enclosed WHITE proxy card by
mail, by using the [Internet] or by telephone. To vote your proxy by mail, mark
your selections on the enclosed WHITE proxy card, date and sign your name
exactly as it appears on your card. [To vote your proxy using the Internet,
follow the instructions on the proxy card which you must have available when you
access the Internet website. Once you have accessed the Internet website you
will be prompted to enter your control number and then will be instructed to
mark your selections and finally to register your vote.] You may also vote your
proxy by telephone as described on the proxy card.
If you sign your WHITE proxy card but do not make any selections, you will
give authority to Thomas L. Gossage and Israel J. Floyd to vote on the proposals
and any other matter that may arise at the Annual Meeting. Messrs. Gossage and
Floyd intend to use that authority to vote for the election of all of the
Hercules nominees and for the appointment of PricewaterhouseCoopers LLC as the
Company's 2001 independent accountants.
VOTE REQUIRED AND VOTING PROCEDURES
According to the Company Bylaws, a majority of the shares entitled to vote,
present in person or represented by proxy, constitutes a quorum. Votes will be
counted and certified by independent inspectors of election. Under the rules of
the SEC, boxes and a designated blank space are provided on the proxy card for
you to mark if you wish to vote "for" or "against" or "abstain" from voting on
the proposal concerning the Company's 2001 public accountants, or to
-6-
vote "for" or "withhold" authority for one or more of the nominees for director.
Abstentions are counted in determining whether a quorum is present but are not
counted in determining the votes cast for or against the 2001 public accountants
selection proposal. Votes withheld in connection with the election of one or
more nominees for director will not be counted as votes cast for those
individuals. Broker non-votes, which occur when brokers do not receive voting
instructions from their customers on non-routine matters and, consequently, have
no discretion to vote on those matters, are not counted as votes cast for any
proposal.
Pursuant to the Company Bylaws, directors are elected by a majority vote of
all issued and outstanding Hercules shares.
Ratification of the selection of PricewaterhouseCoopers LLP as independent
accountants for 2001 will require the affirmative vote of the holders of a
majority of the shares present in person or by proxy and entitled to vote at the
2001 Annual Meeting.
You are urged to sign and date the enclosed WHITE proxy card and return it
in the enclosed prepaid envelope whether or not you plan to attend the meeting.
A person giving any proxy has the power to revoke it (even if such proxy was not
solicited by the Board of Directors or ISP) at any time before the voting by
submitting to the Company or to ISP a written revocation or duly executed proxy
bearing a later date. In addition, any shareholder who attends the meeting in
person may vote by ballot at the meeting, thereby canceling any proxy previously
given. YOU ARE ALSO URGED NOT TO SIGN ANY BLUE PROXY CARDS SENT TO YOU BY ISP.
EVEN IF YOU HAVE PREVIOUSLY SIGNED A PROXY CARD SENT TO YOU BY ISP, YOU CAN
REVOKE IT BY SIGNING, DATING AND MAILING THE ENCLOSED WHITE PROXY CARD IN THE
ENVELOPE PROVIDED.
EMPLOYEE SAVINGS PLANS
Your proxy card will include full shares credited to your savings plan as
of March 6, 2001. Fractional shares are not included. The plan trustee will vote
your shares after consideration of your preferences as indicated on your proxy
card. If you do not vote, the plan trustee will vote your shares in proportion
to the other proxies received from plan participants.
SHAREHOLDER PROPOSALS
To be included in Hercules' 2002 Proxy Statement, shareholder proposals
must be submitted in writing and received by Israel J. Floyd, Esquire, Corporate
Secretary, Hercules Incorporated, Hercules Plaza, 1313 North Market Street,
Wilmington, Delaware 19894-0001, no later than November ___, 2001 (or, if the
date of the meeting is changed by more than 30 days from the date of the
previous year's meeting, a reasonable time before the Company begins to print
and mail its proxy materials). Upon receipt of a proposal, the Company will
determine whether or not to include the proposal in the Proxy Statement in
accordance with applicable law.
SHAREHOLDER NOMINATION OF DIRECTORS
Shareholders may submit written recommendations with respect to director
nominees (accompanied by a notarized statement from the nominee indicating
willingness to serve if elected and principal occupations or employment over the
past five years) to the Chairman of the Nominating Committee, c/o Israel J.
Floyd, Esquire, Corporate Secretary, Hercules Incorporated, Hercules Plaza, 1313
North Market Street, Wilmington, Delaware 19894-0001.
-7-
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and Bylaws provide for
three classes of directors, with the term of one class expiring at each annual
meeting of the shareholders. Pursuant to the authority granted to the Board in
Article Six of the Restated Certificate of Incorporation, the Board of Directors
has determined that, effective on the date of the 2001 Annual Meeting, the
number of directors is fixed at 12: 4 in the class whose term expires in 2002, 4
in the class whose term expires in 2003 and four in the class whose term expires
in 2004. At the 2001 annual meeting, 4 directors are to be elected, all of whom
shall constitute the class whose term will expire in 2004. The Board of
Directors has nominated Mr. Thomas L. Gossage (director since 2000), Mr. Ralph
L. MacDonald, Jr. (director since 1989), Mr. John A. H. Shober (director since
1998) and Ms. Paula A. Sneed (director since 1994), who are currently serving as
directors. Dr. Robert G. Jahn, whose term expires in 2001, has reached the
retirement age of 70 under the Company's Board policies and, accordingly, is not
seeking reelection. Each nominee has consented to serve for the specified term.
It is intended that the shares represented by the accompanying proxy will be
voted for the election of Messrs. Gossage, MacDonald and Shober and Ms. Sneed.
If for any reason any nominee should be unavailable to serve as a director
at the time of the meeting, a contingency which the Board of Directors does not
expect, the shares represented by the accompanying proxy may be voted for the
election in his or her stead of such person as may be determined by the holders
of the proxy, unless the proxy withholds authority to vote for all director
nominees. The majority vote of the outstanding shares of common stock entitled
to vote at the Annual Meeting is required to elect each director. We unanimously
recommend a vote "FOR" each of the nominees.
ISP is seeking to elect its own slate of four directors in opposition to
the nominees proposed by your Board. YOUR BOARD BELIEVES THAT THE ELECTION OF
ISP'S NOMINEES WOULD NOT BE IN YOUR BEST INTERESTS AND OPPOSES SUCH ELECTION FOR
SEVERAL REASONS.
Under "Background of ISP's Proxy Contest," we explain the reasons why we do
not believe that, contrary to its public statements, ISP is actually seeking to
maximize value for all Hercules shareholders, or that ISP is better positioned
than your Board to bring about the sale of the Company. Since the Board is
actively engaged, with the assistance of its financial advisors, in a
shareholder value maximization process, the Board believes that it is in the
best position to be an impartial auctioneer for the sale of the Company -- in
its entirety or by business unit -- in order to maximize value for all of the
Company shareholders, while protecting shareholders against potential abuses
during a takeover.
Independence is a key qualification for a director of the Company,
particularly in light of the Hercules' announced decision to explore all
strategic alternatives that may be available to maximize shareholder value. The
Board believes that the ISP nominees lack independence. Two of ISP's nominees --
Samuel J. Heyman and Sunil Kumar -- are officers and directors of ISP. The Board
believes they would be committed first and foremost to furthering the interests
of ISP and its shareholders, by virtue of their affiliation with ISP and legal
duties to ISP and its shareholders, rather than the interests of Hercules'
shareholders. The potential for conflicts of interests is exacerbated in this
case by the fact that both Hercules and ISP operate in the same
-8-
industry, and the ISP nominees' promotion of ISP's interests may be detrimental
to Hercules and its shareholders.
FOR THESE REASONS, YOUR BOARD BELIEVES YOU WOULD BE FAR BETTER SERVED BY
ELECTING THE COMPANY'S NOMINEES -- THOMAS L. GOSSAGE, RALPH L. MACDONALD, JR.,
JOHN A. H. SHOBER AND PAULA A. SNEED -- TO THE BOARD, AND YOU ARE URGED TO VOTE
FOR THESE INDIVIDUALS ON THE ENCLOSED WHITE PROXY CARD. THE BOARD OF DIRECTORS
URGES YOU NOT TO SIGN ANY BLUE PROXY CARD SENT TO YOU BY ISP.
The following information relates to the Company's nominees for reelection
at the 2001 annual meeting, the other directors and the named executive officers
of the Company, who include the chief executive officer and the other four most
highly compensated executive officers of the Company. There are no family
relationships among the directors and executive officers of the Company. The
Board of Directors held 20 meetings in 2000.
HERCULES NOMINEES FOR DIRECTORS
THOMAS L. GOSSAGE -- Director since 2000
Mr. Gossage, age 66, is Chairman and Chief Executive Officer of Hercules
Incorporated. Mr. Gossage became Chairman and Chief Executive Officer on October
17, 2000. He is a native of Nashville, Tennessee, and earned his B.S. and M.S.
degrees in Chemical Engineering from the Georgia Institute of Technology in 1956
and 1957, respectively. Mr. Gossage joined Hercules in 1988 as President,
Hercules Specialty Chemicals Company, after serving 26 years with Monsanto
Company. He was named President and Chief Executive Officer of Aqualon Company
in 1989. Later that year, he was named Senior Vice President of Hercules and was
elected to the Hercules Board of Directors. Mr. Gossage became Chairman and
Chief Executive Officer of Hercules in 1991 and was also President from 1992 to
1995. Mr. Gossage stepped down as Chief Executive Officer on August 1, 1996, and
as Chairman on December 31, 1996. He retired from Hercules in January 1997. In
May 1997, The American Section of the Societe de Chimie Industrielle awarded Mr.
Gossage the International Palladium Medal. Mr. Gossage is a member of the Board
of Directors of The Dial Corporation, Alliant Techsystems Inc., and Fluor
Corporation.
RALPH L. MACDONALD, JR. -- Director since 1989
Mr. MacDonald, age 59, has been a principal in Amelia Investment Corp. (AIC), a
private investment firm dedicated to the acquisition and development of small-
to medium-sized industrial manufacturing and distribution companies, since July
1996. Prior to AIC, he was a principal in Island Capital Corporation, a similar
firm, and managing director, Global Corporate Finance, Bankers Trust Company. He
is also a director of Gaylord Container Corporation.
JOHN A. H. SHOBER -- Director since 1998
Mr. Shober, age 67, is a private investor. He served as Vice Chairman of the
board of directors of Penn Virginia Corporation, a natural resources company,
from 1992 to 1996. Mr. Shober is a director of Airgas, Inc., Anker Coal Company,
C&D Technologies, Inc., Ensign Bickford Industries, Inc., First Reserve
Corporation, MIBRA GmbH, Penn Virginia Corporation, and several other
organizations including The Eisenhower Exchange Fellowships.
-9-
PAULA A. SNEED -- Director since 1994
Ms. Sneed, age 53, is Group Vice President, President e-Commerce and Marketing
Services of Kraft Foods, Inc., the nation's largest packaged foods company. She
joined General Foods (which later merged with Kraft Foods) in 1977 and has held
a variety of management positions, including Vice President, Consumer Affairs;
Senior Vice President and President, Foodservice Division; Executive Vice
President and General Manager, Desserts Division; Executive Vice President and
General Manager, Dinners and Enhancers Division; Senior Vice President,
Marketing Services and Chief Marketing Officer; and Executive Vice President,
President e-Commerce Division. She is also a director of Airgas, Inc.
DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 2002:
JOHN G. DROSDICK -- Director since 1998
Mr. Drosdick, age 57, is Chairman, Chief Executive Officer and President of
Sunoco, Inc., an independent petroleum refiner-marketer in the United States. He
was president and Chief Operating Officer of Sunoco from 1996 to 2000.
Mr. Drosdick was president of Ultramar Corporation from 1992 to 1996. He is a
director of Sunoco, Inc., and serves on the board of Lincoln National
Corporation.
GAYNOR N. KELLEY -- Director since 1989
Mr. Kelley, age 69, retired as Chairman and Chief Executive Officer of The
Perkin-Elmer Corporation, a manufacturer of biotechnology instrumentation and
systems, in June 1996. He is a member of the boards of directors of Alliant
Techsystems Inc. and Prudential Insurance Co. of America.
PETER MCCAUSLAND -- Director since 1997
Mr. McCausland, age 51, is Chairman and Chief Executive Officer of Airgas, Inc.
(a distributor of industrial, medical, and specialty gases and related
equipment), a company he founded in 1982. He served as General Counsel for MG
Industries, Inc., an industrial gas producer. He was a partner in the firm of
McCausland, Keen & Buckman that specialized in mergers, acquisitions, and
financings. He is a director of the Independence Seaport Museum and The
Eisenhower Exchange Fellowships.
GEORGE MACKENZIE -- Director since 2000
Mr. MacKenzie, age 51, is Vice Chairman of the Board of Directors of Hercules
Incorporated. Mr. MacKenzie joined Hercules in 1979, in 1988 was named Vice
President and Controller and in 1991 became Vice President and Treasurer. In
1995, he was named Vice President, Finance, and later that year he was named
Vice President and Chief Financial Officer. In 1996, he was named Senior Vice
President and Chief Financial Officer, and in 1999 became Executive Vice
President, Hercules Incorporated, President, Chemical Specialties Segment and
Chief Financial Officer. Mr. MacKenzie became Executive Vice President and Chief
Financial Officer in April 2000. He assumed his current position in November
2000. Mr. MacKenzie is a member of the
-10-
Board of Trustees of the Medical Center of Delaware and the Investment Committee
at the University of Delaware as well as Manufacturers' Alliance. Mr. MacKenzie
is also on the Board of Directors of C&D Technologies, Inc., Blue Bell,
Pennsylvania, where he is chair of the Audit Committee.
TERMS EXPIRING IN 2003:
RICHARD FAIRBANKS -- Director since 1993
Mr. Fairbanks, age 60, is a Counselor at the Center for Strategic &
International Studies. He was Ambassador-at-Large under President Reagan. He is
a member of the boards of directors of SEACOR Smit, Inc., GATX Corporation, and
SPACEHAB, Inc.; member, Council on Foreign Relations, Council of American
Ambassadors; and founder, The American Refugee Committee of Washington.
ALAN R. HIRSIG -- Director since 1998
Mr. Hirsig, age 61, retired as President and Chief Executive Officer of ARCO
Chemical Company, which was bought by Lyondell Chemical Company, in 1998. He is
a director of Philadelphia Suburban Corporation, Celanese A.G., and Checkpoint
Systems Corporation. Additionally, he is a director or trustee of Bryn Mawr
College, Curtis Institute of Music, Rosenbach Museum and Library, as well as a
chairman of the YMCA of Philadelphia. Mr. Hirsig served as past chairman of the
Chemical Manufacturers Association.
EDITH E. HOLIDAY -- Director since 1993
Ms. Holiday, age 49, is an attorney. She was assistant to the President of the
United States and Secretary of the Cabinet from 1990 until early 1993 and served
as General Counsel of the U.S. Treasury Department from 1989 through 1990. She
served as counselor to the Secretary of the Treasury and Assistant Secretary for
Public Affairs and Public Liaison, U.S. Treasury Department from 1988 to 1989.
Ms. Holiday is a director of Amerada Hess Corporation, H. J. Heinz Company,
Beverly Enterprises, Inc., RTI International Metals, Inc., and member of RTI's
stock plan committee, and director or trustee of various investment companies in
the Franklin Templeton Group of Funds.
H. EUGENE MCBRAYER -- Director since 1992
Mr. McBrayer, age 69, retired as President of Exxon Chemical Company in January
1992, after 37 years of service. He is a former Chairman of the Board of the
Chemical Manufacturers Association.
DIRECTORS RETIRING FROM OFFICE
ROBERT G. JAHN -- Director since 1985
Professor Jahn, age 70, has taught at Princeton University, Department of
Mechanical and Aerospace Sciences since 1962. He was Dean of the School of
Engineering and Applied Science at Princeton, 1971-1986. Professor Jahn is a
trustee, fellow, and a member of several academic
-11-
and professional societies. He is Vice President and a founding member of the
Society for Scientific Exploration.
Professor Jahn, whose term expires in 2001, has reached the retirement age of 70
under the Company's Board policies and, accordingly, is not seeking reelection
and will be retiring after 16 years of service.
BOARD OF DIRECTORS
The members of our Board of Directors are: J. G. Drosdick, R. Fairbanks, T.
L. Gossage, A. R. Hirsig, E. E. Holiday, R. G. Jahn, G. N. Kelley, R. L.
MacDonald, Jr., G. MacKenzie, H. E. McBrayer, P. McCausland, J. A. H. Shober,
and P. A. Sneed. Mr. Gossage was appointed a director on October 17, 2000 and is
the Chairman of the Board. Mr. MacKenzie was appointed a director on April 5,
2000, and became Vice Chairman of the Board on November 15, 2000. Dr. Jahn,
whose term expires in 2001, has reached the retirement age of 70 under the
Company's Board policies and, accordingly, is not seeking reelection and will be
retiring as of the 2001 Annual Meeting.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT -- Reviews and discusses auditing, accounting, financial reporting
and internal control functions with management. Recommends our independent
accountant, reviews its services and receives written disclosures from the
independent auditors. Our Audit Committee is governed by a charter. All members
are independent as independence is defined in the NYSE listing standards. The
members of the Audit Committee are: H. E. McBrayer, A. R. Hirsig, R. L.
MacDonald, Jr. and J. A. H. Shober. Mr. McBrayer is the Chairman of the Audit
Committee. The Audit Committee held 8 meetings in 2000.
COMPENSATION -- Administers executive compensation programs, policies and
practices. Acts in an advisory role on employee compensation. All members are
nonemployee directors. The members of the Compensation Committee are: J. G.
Drosdick, G. N. Kelley, P. McCausland and P. A. Sneed. Mr. Kelley is the
Chairman of the Compensation Committee. The Compensation Committee held 7
meetings in 2000.
EMERGENCY -- Has limited powers to act on behalf of the Board whenever the
Board is not in session. Meets only as needed and acts only by unanimous vote.
If any nonemployee director wants a matter to be addressed by the Board rather
than the Emergency Committee, then such matter is submitted to the Board. The
members of the Emergency Committee are: J. G. Drosdick, T. L. Gossage, R. G.
Jahn, A. R. Hirsig, P. McCausland, and J. A. H. Shober. Mr. Shober is the
Chairman of the Emergency Committee. The Emergency Committee held no meetings in
2000.
FINANCE -- Reviews Hercules' financial affairs. Has full and final
authority on certain financial matters. Serves as the named fiduciary for all of
Hercules' employee benefit plans. The members of the Finance Committee are: R.
Fairbanks, T. L. Gossage, E. E. Holiday, R. L. MacDonald, Jr. and P. A. Sneed.
Mr. MacDonald is the Chairman of the Finance Committee. The Finance Committee
held 3 meetings in 2000.
INTERNATIONAL -- Reviews Hercules' international business, programs and
activities with a focus on opportunities for expansion. The members of the
International Committee are: R.
-12-
Fairbanks, E. E. Holiday, H. E. McBrayer and J. A. H. Shober. Mr. Fairbanks is
the Chairman of the International Committee. The International Committee held 3
meetings in 2000.
NOMINATING -- Considers and recommends nominees for election as directors
and officers. Conducts an annual evaluation of the Board. All members are
nonemployee directors. The members of the Nominating Committee are: J. G.
Drosdick, E. E. Holiday, R. G. Jahn, G. N. Kelley and P. McCausland. Mr. Holiday
is the Chairman of the Nominating Committee. The Nominating Committee held 8
meetings in 2000.
SOCIAL RESPONSIBILITY -- Reviews Hercules' policies, programs and practices
on equal employment opportunity; environmental, safety and health matters;
ethics; and community affairs. The members of the Social Responsibility
Committee are: T. L. Gossage, A. R. Hirsig, R. G. Jahn and P. A. Sneed. Ms.
Sneed is the Chairman of the Social Responsibility Committee. The Social
Responsibility Committee held 3 meetings in 2000.
TECHNOLOGY -- Reviews the strategic direction of Hercules' intellectual
property, research and development and emerging technologies. The members of the
Technology Committee are: T. L. Gossage, A. R. Hirsig, R. G. Jahn, G. N. Kelley
and H. E. McBrayer. Dr. Jahn is the Chairman of the Technology Committee. The
Technology Committee held 4 meetings in 2000.
During 2000, each of the directors attended at least 75% of the aggregate
number of meetings of the Board of Directors and committees of the Board of
Directors.
COMPENSATION OF DIRECTORS
Employee directors receive no additional compensation other than their
normal salary for serving on the Board or its Committees.
During 2000, nonemployee directors received a right to defer compensation
in exchange for restricted stock under the Non-employee Director Stock
Accumulation Plan; a $23,000 annual fee; $1,000 for each meeting attended;
$3,000 for chairing a committee; $1,000 per day for special assignments; and
reimbursement for out-of-pocket expenses.
NON-EMPLOYEE DIRECTOR STOCK ACCUMULATION PLAN. Directors can defer all or
part of their compensation in exchange for stock (restricted until retirement
from the Board) at 85% of the fair market value of such stock on the date of
exchange.
Each director annually receives a nonqualified stock option to purchase
3,000 shares of common stock. The option price is the fair market value of the
common stock on the date of grant. As each nonemployee director received an
accelerated grant of 9,000 stock options in 1998 in lieu of any annual stock
option grant for the next three years, no grant was made during 2000. Vesting
occurs in three equal annual increments beginning one year after the grant date.
EQUITY AWARD. A director has a single opportunity to purchase 750 shares of
common stock at fair market value when first elected to the Board. Upon the
purchase, Hercules awards an additional 1,500 shares that cannot be transferred
until retirement or resignation from the Board.
RESTRICTED STOCK UNITS. Upon election to the Board, each director receives
1,100 restricted stock units, which are placed in an unfunded account where they
accrue dividend equivalents and
-13-
interest. Each unit represents the right to receive one share of Hercules stock
at retirement. Units do not carry any voting rights. Of these units, 200
immediately vest. Thereafter, for every year served on the Board, 100 additional
units vest (up to a maximum of nine years). Upon retirement from the Board, all
vested units are paid in shares in a lump sum or spread over a period not to
exceed ten years.
CHARITABLE AWARD PROGRAM. This program is designed to promote charitable
giving. It is available to directors and is funded by life insurance policies on
directors. Upon the retirement or death of a director, Hercules will donate
common stock, with an expected aggregate value of $1,000,000, to one or more
designated charitable institutions over a ten-year period. The actual number of
shares delivered to the charitable institutions will be based on a projected
share price growth. The first installment will be paid immediately after the
director's retirement or death, but no sooner than April 1, 2002.
Directors derive no financial benefit from this program since all
charitable deductions accrue solely to Hercules. Furthermore, the insurance
funding is structured so that the program results in nominal cost to Hercules
over time.
CERTAIN TRANSACTIONS AND LEGAL MATTERS
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's common stock to file with the SEC and
the New York Stock Exchange reports of beneficial ownership and changes in
beneficial ownership of the common stock and other equity securities of the
Company. These persons are required by SEC rules to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on a review of the
copies of those reports furnished to the Company, the Company believes that,
during 2000, its directors, executive officers and holders of more than 10% of
the Company's common stock complied with all applicable Section 16(a) filing
requirements.
RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS FOR 2001
The Audit Committee and the Board believe that PricewaterhouseCoopers LLP
("PWC") has invaluable knowledge about Hercules. Partners and employees of PWC
are periodically changed, providing Hercules with new expertise and experience.
Representatives of PWC have direct access to the Audit Committee and regularly
attend the Audit Committee's meetings. Representatives of PWC will attend the
Annual Meeting to answer questions. The affirmative vote of the majority of
shares present in person or by proxy and entitled to vote at the Annual Meeting
is required to ratify PWC as independent accountants for 2001.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS.
OTHER MATTERS
The Board is not aware of any matters, other than those described above,
that will be presented for consideration at the Annual Meeting. If other matters
properly come before the Annual Meeting, it is the intention of the persons
named in the enclosed proxy card to vote
-14-
thereon in accordance with their best judgment. Moreover, the Board reserves the
right to adjourn or postpone the Annual Meeting, depending on circumstances and
the Board's belief that such adjournments or postponements would be in the best
interests of the Hercules shareholders.
AUDIT COMMITTEE REPORT
The Board of Directors has charged the Audit Committee with a number of
responsibilities, including review of the adequacy of the Company's financial
reporting and accounting systems and controls. The Committee has a direct line
of communication with the Company's independent accountants and the Director,
Auditing Services. The Committee is composed entirely of independent directors
as defined by the listing standards of the New York Stock Exchange. The Board
has adopted a written Audit Committee charter, a copy of which is included as
Annex III to this Proxy Statement.
The Audit Committee has received from the independent accountants written
disclosures and a letter concerning the independent accountants' independence
from Hercules, as required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees. These disclosures have been
reviewed by the Committee and discussed with the independent accountants.
In the discharge of its responsibilities, the Audit Committee will
review and discuss with management and the independent accountants the
audited consolidated financial statements for fiscal 2000. In addition, the
Committee will discuss with the independent accountants matters such as the
quality (in addition to acceptability), clarity, consistency and completeness of
the Company's financial reporting, as required by Statement on Auditing
Standards No. 61, Communication with Audit Committees.
Based on these reviews and discussions, the Committee will recommend to
the Board that the audited consolidated financial statements be included in the
Hercules 2000 Annual Report on Form 10-K, for filing with the SEC.
FEES OF INDEPENDENT AUDITORS
AUDIT FEES. The aggregate fees billed by our independent auditors for
professional services rendered to us in connection with the audit of the
company's financial statements for the year ended December 31, 2000 and the
review conducted by the independent auditors of the financial statements
included in the Quarterly Reports on Form 10-Q that we were required to file
during 2000 were approximately $________.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. Our
independent auditors did not render information technology services to us during
fiscal 2000.
ALL OTHER FEES. The aggregate fees billed by our independent auditors for
professional services tendered to us during 2000, other than the audit services
referred to above, were approximately $_______, and primarily include services
rendered to us in connection with ___________________.
The following report of the audit committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other of our filings under
-15-
the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent we specifically incorporate this report by reference therein
Audit Committee
H.E. McBrayer, Chair
A.R. Hirsig
R.L. MacDonald, Jr.
J.A.H. Shober
REPORT OF THE COMPENSATION COMMITTEE
The Hercules Executive Compensation Policy, as set by the Compensation
Committee, is to pay a competitive base salary component adjusted for individual
performance while linking annual incentive compensation to achievement of
specific corporate goals, which are identified as necessary components in
achieving the Business Plan of the Company. The Executive Compensation Policy
also includes a long-term incentive component that is directly linked to
shareholder interest through grants of stock-based awards. The total potential
value of these components is then benchmarked against competitive norms for our
industry group. Additionally, it is the policy of the Compensation Committee to
recognize extraordinary achievements through special stock-based awards.
BASE SALARY
In 1999, Dr. Corbo, consistent with his executive team concept, requested
Compensation Committee approval to adjust the base salaries of team members to
the same level. Following approval, salary adjustments were made in 1999 and in
early 2000 taking into consideration competitive pay levels for similar level
positions in the chemical and general industry segments, including those
designated in the Standard & Poor's Chemical and Specialty Chemical Indices.
Since 1999, there have been no merit increases granted or performance
adjustments made to such salaries.
In 2000, the Company's performance did not meet the goals established at
the beginning of the year. Accordingly, Dr. Corbo's salary was not adjusted from
the level that was established in 1999. Effective November 1, 2000, Dr. Corbo
retired from Hercules.
In accordance with his agreement to return to Hercules on October 17,
2000, as Chairman of the Board and Chief Executive Officer, the Compensation
Committee entered into an Agreement with Mr. Gossage under which Mr. Gossage
agreed to forego a base monthly salary (other than one dollar per week for
benefit participation purposes).
ANNUAL INCENTIVE
The Management Incentive Compensation Plan ("MICP") is based upon the
achievement of predetermined financial, corporate, organizational unit and
individual goals. For 2000, corporate and business unit performance was measured
by earnings per share (weighted 30%), net cash flow (weighted 30%), revenue
growth (weighted 10%) and earnings before interest, taxes, depreciation and
amortization (weighted 30%) against business plan goals established at the
beginning of the year. Individual performance is measured primarily by
performance against
-16-
goals formally established at the beginning of the year. For the Chief Executive
Officer and other executive officers, the Compensation Committee reviews these
individual objectives versus results achieved, and determines MICP payouts
accordingly. MICP awards are paid in cash up to the target bonus level and in
Restricted Stock if performance warrants payouts above the target level. No
payouts occur under the Plan unless certain minimum performance levels are
exceeded. The maximum payout under the Plan is 200% of the target pool at
outstanding levels of performance. The Compensation Committee intends that
payouts at target levels result in executive compensation at competitive market
levels.
For the performance year 2000, plan thresholds were not achieved.
Therefore, no payouts were made under the plan for the Chief Executive Officer,
named officers or any other participant in the Management Incentive Compensation
Plan.
Mr. Gossage has agreed not to be eligible for any MICP award.
LONG-TERM INCENTIVES
The focus of the Long-Term Incentive Compensation Plan is to place pay at
risk and to align its value directly with shareholder value. Under this plan the
Compensation Committee grants to officers and other key employees stock and/or
stock options that vest at predetermined intervals and/or on an accelerated
basis upon achievement of predetermined objectives. The Plan permits the Chief
Executive Officer to approve all awards for other eligible employees.
In 2000, the Compensation Committee granted stock options to Messrs.
Corbo, DiDonna, MacKenzie, Floyd and Tucci and to Ms. Barry, as listed in the
Summary Compensation Table. In addition, Messrs. MacKenzie and Floyd were
granted restricted stock in the year 2000. In determining the above grants, the
Compensation Committee considered the individual executives' responsibilities,
accountabilities, position in the Company, and competitive compensation data
provided by an outside consulting firm.
In lieu of receiving a fixed salary or annual incentive award (other than
the previously referenced salary of one dollar per week), Mr. Gossage was
granted restricted stock and stock options, listed in the Summary Compensation
Table, as his total compensation package.
IRS LIMITS ON THE DEDUCTIBILITY OF COMPENSATION
IRC Code ss.162(m) provides that compensation in excess of $1 million paid
to named executives is not deductible unless it is performance-based
compensation and satisfies the conditions of the available exemption. Base
salary does not qualify as performance-based compensation for purposes of IRC
ss.162(m) while option grants made to the Chief Executive Officer and other
named executives qualify for deductibility under ss.162(m).
STOCK OWNERSHIP GUIDELINES
In 1997, Hercules established formal stock ownership guidelines for
executives. The guidelines reinforce the practice of encouraging executives to
hold Hercules stock and to closely link their interests with those of
shareholders.
-17-
PERFORMANCE GRAPH
The following graph shows how an initial investment of $100 in the
Company's common stock would have compared to an equal investment in the S&P 500
Index, the S&P Specialty Chemicals Index or the S&P Chemical Index over the
five-year period beginning December 31, 1995 and ending December 31, 2000. The
graph reflects reinvestment of all dividends.
The total shareholder return shown on the graph below is not necessarily
indicative of future returns on the Company's common stock.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURNS
(ASSUMING AN INVESTMENT OF $100 ON DECEMBER 31, 1995)
[GRAPH OMITTED]
Hercules Incorporated S&P 500 Index S&P Specialty Chemicals Index S&P Chemical Index
--------------------- ------------- ----------------------------- ------------------
1995 $100.00 $100.00 $100.00 $100.00
1996 $ 78.06 $122.96 $102.57 $132.11
1997 $ 92.28 $163.98 $127.01 $162.37
1998 $ 51.80 $210.85 $108.16 $147.89
1999 $ 54.96 $255.21 $119.73 $193.45
2000 $ 39.06 $231.98 $106.50 $161.82
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of four members: J. G. Drosdick,
G. N. Kelley (Chairman), P. McCausland and P. A. Sneed. None of the members
of the Compensation Committee is an officer, employee or former officer or
employee of the Company or its subsidiaries. In 2000, none of the members of the
Compensation Committee had any relationship requiring disclosure in accordance
with Item 402(j)(3) of Regulation S-K of the SEC.
-18-
BENEFICIAL OWNERSHIP OF STOCK
The following table sets forth information, as of March 6, 2001, with
respect to the beneficial ownership of shares of the common stock of the Company
by
o beneficial owners of more than five percent of the Common Stock of the
Company,
o each director and nominee for director of the Company,
o each of the executive officers named in the Summary Compensation Table
set forth below, and
o all directors, nominees and executive officers of the Company as a
group.
Such beneficial ownership is reported in accordance with the rules of the
SEC, under which a person may be deemed to be the beneficial owner of shares of
such common stock if such person has or shares the power to vote or dispose of
such shares or has the right to acquire beneficial ownership of such shares
within 60 days (for example, through the exercise of an option). Accordingly,
the shares shown in the table as beneficially owned by certain individuals may
include shares owned by certain members of their respective families. Because of
such rules, more than one person may be deemed to be the beneficial owner of the
same shares. The inclusion of the shares shown in the table is not necessarily
an admission of beneficial ownership of those shares by the person indicated.
OPTIONS
SHARES EXERCISABLE RESTRICTED
BENEFICIALLY WITHIN 60 STOCK PERCENT
NAME OWNED (1) DAYS UNITS OF SHARES
--------------------------------- ---------- ---------- ----- --------
DIRECTORS AND OFFICERS
Thomas L. Gossage, Director and
Officer (2) 129,003 264,000 0 *
J. Barry, Officer 71,954 7,200 0 *
D. W. DiDonna, Officer 44,637 148,100 0 *
J. G. Drosdick, Director 9,423 6,000 1,100 *
R. M. Fairbanks, III, Director 12,088 21,000 1,253 *
I. J. Floyd, Officer 65,944 71,800 0 *
A.R. Hirsig, Director 6,554 6,000 1,100 *
E. E. Holiday, Director 3,999 18,000 1,376 *
R. G. Jahn, Director 14,236 27,000 0 *
G. N. Kelley, Director 9,744 27,000 2,185 *
R. L. MacDonald, Jr., Director 15,421 27,000 1,928 *
G. MacKenzie, Officer 125,997 170,280 1,299 *
H. E. McBrayer, Director 77,324 24,000 1,527 *
P. McCausland, Director 7,784 9,000 1,100 *
J. A. H. Shober, Director 5,250 6,000 1,100 *
P. A. Sneed, Director 11,925 18,000 1,253 *
V.J. Corbo, Director and Officer (3) 109,119 275,200 0 *
H.J. Tucci, Officer (4) 53,231 209,200 0 *
ALL DIRECTORS AND OFFICERS AS A
GROUP 773,633 1,448,520 15,221 2%
-19-
OPTIONS
SHARES EXERCISABLE RESTRICTED
BENEFICIALLY WITHIN 60 STOCK PERCENT
NAME OWNED (1) DAYS UNITS OF SHARES
--------------------------------- ------------ ----------- ----- ---------
5% SHAREHOLDERS
International Specialty Products, 10,719,200 9.98%
Inc. (5)
ISP Investments Inc.
ISP Opco Holdings Inc.
c/o ISP Management Company, Inc.
1361 Alps Road
Wayne, New Jersey 07670
T. Rowe Price Associates, Inc. (6) 7,198,428 6.7%
100 E. Pratt Street
Baltimore, Maryland 21202
Mario J. Gabelli and related 6,707,400 6.23%
entities(7)
c/o Gabelli Asset Management Inc.
One Corporate Center
Rye, New York 10580
--------------------------------
* Less than 1% of Hercules' outstanding shares of common stock
(1) Includes shares, as of December 31, 2000, in the Savings and Investments
Plan as follows: J. Barry, 2,351; D.W. DiDonna, 1,276; I.J. Floyd, 1,372;
and G. MacKenzie, 3,421; and all directors and officers as a group, 8,420.
Includes shares with restrictions and forfeiture risks as specified under
the Long-Term Incentive Compensation Plan: T.L. Gossage, 128,003; J. Barry,
38,000; D.W. DiDonna, 39,747; G. MacKenzie, 76,270; I.J. Floyd, 45,910;
H.J. Tucci, 1,821; and all directors and officers as a group, 274,956.
Owners have the same voting and dividend rights as other shareholders of
Hercules, except for the right to sell or transfer. Included in the
non-employee directors' totals is a one-time equity award. Mr. Kelley's
total includes 1,594 shares that he holds jointly with his spouse.
(2) Named Chairman and Chief Executive Officer on October 17, 2000.
(3) Resigned as President, Chairman and Chief Executive Officer on October 17,
2000.
(4) Retired on December 1, 2000.
(5) Share holding as of March 6, 2001, as reported on Amendment No. 7 to the
Schedule 13D filed by such shareholder.
(6) Share holding as of March 6, 2001, as reported on Schedule 13G most
recently filed by such shareholder.
(7) Share holding as of March 6, 2001, as reported on Amendment No. 1 to the
Schedule 13D filed by such shareholder.
-20-
COMPENSATION OF EXECUTIVE OFFICERS
The following table contains information concerning compensation paid or
to be paid to the chief executive officer and the other four most highly
compensated executive officers of the Company for services rendered to the
Company and its subsidiaries during the past three completed fiscal years.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM
COMPENSATION AWARDS
-------------------------------------------------------- -------------------------------------
ALL OTHER
SALARY BONUS OTHER RESTRICTED OPTIONS INCENTIVE COMPEN-
YEAR ($) ($) ($) STOCK(6)($) (SHARES) PAYOUTS($) SATION(7)
--- ---------- -------- --------- ------------ -------- --------- --------
T. L. Gossage 2000 (1) 27,995 1,848,043 1,000,000 63,588(8)
Chief Executive Officer 1999
and Chairman 1998
V. J. Corbo(2) 2000 687,500 281,217 387,500 2,718,000 6,181,087
Chairman, President 1999 721,878 160,679 3,548,500 112,500 102,116
and Chief Executive 1998 494,273 320,000 90,493 2,367,602 93,048
Officer
G. MacKenzie 2000 500,004 17,601 639,375 50,000 29,649
Vice Chairman(3) 1999 359,170 20,910 893,000 37,470
1998 271,670 200,000 19,514 160,000 37,581
D. W. DiDonna 2000 400,008 22,029 142,000 5,100
Executive Vice President 1999 357,420 27,508 893,000 33,375 9,669
Corporate Development 1998 260,402 120,000 11,260 181,375 7,855
H. J. Tucci(4) 2000 400,006 31,566 50,000 16,355
Executive Vice President 1999 341,670 72,618 893,000 33,000 29,966
and Chief Development 1998 245,850 185,000 18,707 50,083 175,000 27,369
Officer
I. J. Floyd 2000 383,340 24,029 256,000 50,000 9,926
Executive Vice President, 1999 225,259 3,110 517,000 9,375 10,647
Secretary, and General 1998 165,328 33,000 50,375 7,274
Counsel
J. B. Barry(5) 2000 400,000 18,167 50,000 12,447
Executive Vice President 1999 323,519 9,824 893,000 39,000 5,536
Corporate Resources 1998 46,851 20,000
-----------------
(1) Effective October 17, 2000, Mr. Gossage succeeded Dr. Corbo as Chief
Executive Officer and Chairman. Mr. Gossage received a nominal salary of
$1.00/week for benefit participation purposes. Mr. Gossage received no
other cash compensation (base or annual incentive).
(2) Dr. Corbo resigned his positions as Chairman of the Board, President and
Chief Executive Officer of the Company on October 17, 2000, and retired
from the Company effective November 1, 2000. His base salary reflects
the period through October 31, 2000. Other ($) column includes $90,272 for
use of the company plane for Dr. Corbo. Dr. Corbo's termination of
employment arrangements are described more fully below under "Employment
Contracts". Dr. Corbo's "All Other Compensation" includes, pursuant to
the severance agreement outlined under "Employment Contracts",
48 semi-monthly payments of $65,312.50 each, totaling $3,135,000,
plus a cash payment of $2,830,754. Amounts also included in this column
are $22,250, the total value of the annual company contributions to the
defined contribution plans plus earnings thereon, $47,096, the dividends
and interest on stock options, and $143,987, dividends on restricted
stock units.
(3) Prior to December 1, 2000, Mr. MacKenzie was Executive Vice President and
Chief Financial Officer.
(4) Mr. Tucci retired on December 1, 2000. His base salary reflects the period
through November 30, 2000.
(5) Ms. Barry became a Hercules employee on October 15, 1998. Salary and bonus
for 1998 reflect period from October 15, 1998, to December 31, 1998.
(6) These values are determined by multiplying the number of shares of
restricted stock awarded by the closing market price of Hercules common
stock on the date of grant and subtracting the consideration, if any, paid
by the
-21-
executive officer. Dividends may be paid on a current basis or
accrued. Mr. Floyd's restricted stock grant for the year 2000 will vest
only if Hercules' stock price reaches $50 before 11/4/2002.
The number and value (determined by taking the number of shares of
restricted stock multiplied by the year-end closing market price, $19.0625,
net of any consideration paid) of aggregate restricted stock holdings is
shown below. Included in the table are restricted shares that each
executive officer purchased under the terms of the Hercules Long-Term
Incentive Compensation Plan as well as shares that have been granted
outright. The aggregate amount paid for restricted shares by executive
officers was $1,071,907.
(7) Major components of All Other Compensation are listed below in addition to
components indicated in footnotes 2 & 8:
COMPANY MATCH DIVIDEND AND
AGGREGATE (DEFINED INTEREST
RESTRICTED CONTRIBUTION CREDITS ON STOCK
NAME SHARES NET VALUE PLANS) OPTIONS
---------------- ---------- ------------- ---------------- --------------
T. L. Gossage 128,003 $2,440,057 0 0
V. J. Corbo 0 0 22,250 47,096
G. MacKenzie 99,492 1,542,175 18,334 11,314
D. W. DiDonna 39,747 724,375 5,100 0
H. J. Tucci 0 0 11,846 4,509
I. J. Floyd 42,910 741,531 9,926 0
J. B. Barry 38,000 724,375 12,447 0
(8) When Mr. Gossage retired from Hercules in 1997, as reported in Hercules'
1997 proxy statement, he was granted a special pension benefit to be paid
over the period from his retirement through the end of 2001. In connection
with his return to Hercules effective October 17, 2000, the remaining 14
monthly payments under this arrangement were settled in a lump sum, as
reflected in Annex A. The value to Mr. Gossage of this lump sum payment
without discount was $63,588, as shown in the table above.
OPTION GRANTS IN LAST FISCAL YEAR
The following table discloses information concerning individual grants of
stock options made during the last completed fiscal year to the executive
officers named in the Summary Compensation Table.
NO. OF
SECURITIES PERCENT OF
UNDERLYING TOTAL OPTIONS EXERCISE OR
OPTIONS GRANTED TO BASE PRICE EXPIRATION GRANT VALUE GRANT DATE
NAME GRANTED EMPLOYEES ($/SH) DATE DATE VALUE(1)
----------------------- ------------ ------------ ----------- ---------- ---------- ----------
T. L. Gossage 500,000(2) 13.9% 14.4375 (2) 10/17/2000 $2,130,500
500,000(2) 13.9% 17.325 (2) 10/17/2000 1,636,550
V. J. Corbo 200,000(3) 5.5% 17.25 10/17/2005 2/18/2000 1,469,580
187,500(4) 5.2% 14.0625 10/17/2005 6/30/2000 1,097,888
G. MacKenzie 50,000(3) 1.4% 17.25 2/18/2010 2/18/2000 442,385
D. W. DiDonna 50,000(3) 1.4% 17.25 2/18/2010 2/18/2000 442,385
92,000(5) 2.5% 16.00 4/27/2010 4/27/2000 746,442
H. J. Tucci 50,000(3) 1.4% 17.25 12/1/2005 2/18/2000 367,395
I. J. Floyd 40,000(3) 1.1% 17.25 2/18/2010 2/18/2000 353,908
10,000(5) 0.3% 16.00 4/27/2010 4/27/2000 81,135
J. B. Barry 50,000(3) 1.4% 17.25 2/18/2010 2/18/2000 442,385
(1) The Black-Scholes option-pricing model was used to determine the fair value
of employee stock options in the table above as of the date of the grant.
No adjustments for risk of forfeiture have been made. Significant
assumptions are as follows:
-22-
REGULAR
OPTIONS PASOS
------- -------
Dividend yield 0.0% 0.0%
Risk free interest 5.9% 6.2%
rate
Expected life 3.6 years 5 years
Expected volatility 41.3% 35.6%
(2) Vesting date is the earlier of October 15, 2001, or retirement, death or
termination because of disability, or a change of control. The expiration
date is the first anniversary of retirement, death or termination because
of disability.
(3) Vesting schedule is as follows: 40% on 2/19/01; 40% on 2/18/02; and 20% on
2/18/03.
(4) Performance-accelerated stock options (PASOs) become exercisable upon the
achievement of predetermined performance goals. If goals are not achieved,
the options become exercisable at 9.5 years and expire at 10 years;
however, due to retirement, the expiration date for this award is October
17, 2005.
(5) Vesting schedule is as follows: 40% on 4/27/01; 40% on 4/29/02; and 20% on
4/28/03.
-23-
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The table set forth below discloses certain information concerning the
exercise of stock options (exercised and unexercised) during the last completed
fiscal year by the executive officers named in the Summary Compensation Table as
well as certain information concerning the number and value of unexercised
options. The value of options is calculated using the difference between the
option exercise price and $19.0625 (year-end stock price) multiplied by the
number of shares underlying the option.
NO. OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NO. OF SHARES OPTIONS AT YEAR-END AT YEAR-END
ACQUIRED ON VALUE -------------------------- --------------------------------
NAME EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE($) UNEXERCISABLE($)
-------------- ---------- ----------- ----------- ------------- --------------- -----------------
T. L. Gossage 0 264,000 1,174,000 0 3,181,250
V. J. Corbo (1) 0 275,200 807,000 444,376 937,500
G. MacKenzie 0 170,820 353,500 3,231 90,625
D. W. DiDonna 0 148,100 331,175 0 372,375
H. J. Tucci 9,900 33,825 322,400 120,000 176,975 0
I. J. Floyd 0 71,800 112,575 35,812 103,125
J. B. Barry 0 7,200 81,800 0 90,625
--------------------
(1) Dr. Corbo resigned his positions as Chairman of the Board, President and
Chief Executive Officer of the Company on October 17, 2000, and retired
from the Company effective November 1, 2000. As a result of his
retirement, 187,500 of Dr. Corbo's options became exercisable as of
November 1, 2000.
PENSION PLANS
The following table shows the estimated annual pension benefits payable to
a covered participant at normal retirement age under Hercules' qualified
benefits pension plan (the "Pension Plan"), as well as nonqualified supplemental
benefits, based on the stated remuneration and years of service with Hercules
and its subsidiaries.
REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
------------- ----------- --------- ----------- --------- -----------
$200,000 $45,714.00 $60,952.00 $76,190.00 $91,428.00 $106,666.00
250,000 57,714.00 76,952.00 96,190.00 115,428.00 134,666.00
300,000 69,714.00 92,952.00 116,190.00 139,428.00 162,666.00
350,000 81,714.00 108,952.00 136,190.00 163,428.00 190,666.00
400,000 93,714.00 124,952.00 156,190.00 187,428.00 218,666.00
450,000 105,714.00 140,952.00 176,190.00 211,428.00 246,666.00
500,000 117,714.00 156,952.00 196,190.00 235,428.00 274,666.00
600,000 141,714.00 188,952.00 236,190.00 283,428.00 330,666.00
700,000 165,714.00 220,952.00 276,190.00 331,428.00 386,666.00
750,000 177,714.00 236,952.00 296,190.00 355,428.00 414,666.00
800,000 189,714.00 252,952.00 316,190.00 379,428.00 442,666.00
900,000 213,714.00 284,952.00 356,190.00 427,428.00 498,666.00
1,000,000 237,714.00 316,952.00 396,190.00 475,428.00 554,666.00
1,500,000 357,714.00 476,952.00 596,190.00 715,428.00 834,666.00
2,000,000 477,714.00 636,952.00 796,190.00 955,428.00 1,114,666.00
-24-
Annual contributions by Hercules to its qualified pension plan, if any are
required, are determined statistically by an independent actuary, and no amount
is attributed to an individual employee. Due to the funded status of the Pension
Plan, there was no Hercules contribution to the Pension Plan in 2000.
Except in special cases, the aggregate retirement benefit, under both the
qualified and nonqualified plans, is an amount determined by taking the sum of
(i) 1.2% of the employee's average annual earnings (based on the highest sixty
consecutive months during the last 10 years of employment) up to one-half the
Social Security Tax Base ($76,200 in 2000), and (ii) 1.6% of the employee's
average annual earnings (as determined above) in excess of one-half of the
Social Security Tax Base, multiplied by the employee's total years and months of
credited service. For this purpose, "average annual earnings" consist of salary
plus annual incentive or bonus compensation.
For Ms. Barry, who participates in the former BetzDearborn Retirement
Plan, the aggregate retirement benefit is determined by taking the sum of (i)
1.2% of the employee's average annual earnings (based on the highest three
consecutive calendar years during the last 10 calendar years of employment) up
to the Social Security Covered Compensation (average of 35 years of the Social
Security Taxable Wage Base), and (ii) 1.8% of the employee's average annual
earnings (as determined above) in excess of the Social Security Covered
Compensation, multiplied by the employee's total years of credited service.
For Messrs. Gossage, Corbo, MacKenzie, DiDonna, Tucci and Floyd and Ms.
Barry, the compensation amounts used for average annual earnings for 2000 are
shown under the "Salary" and "Bonus" columns of the foregoing Summary
Compensation Table. The estimated credited years of service for Messrs. Gossage,
Corbo, MacKenzie, DiDonna, Tucci and Floyd and Ms. Barry are 35, 31, 21, 20, 23,
27 and 9, respectively.
Until attainment of age 55, Ms. Barry is entitled to, upon retirement or
termination for reason other than cause, an enhancement of pension benefits of
approximately $750,000 with interest, payable in a lump sum, which represents
her years of service to BetzDearborn prior to becoming an employee of Hercules.
If Ms. Barry remains with the company until she attains 55 years of age, she is
entitled to 50% of her final average earnings.
In February 2000, Hercules granted to Mr. MacKenzie an enhancement of
pension benefits upon retirement if he is employed through March 31, 2004, which
provides for a supplemental retirement benefit of $4,166.67 per month for 120
consecutive months plus an additional 3 years of service credit and the
elimination of the early retirement reduction, if otherwise applicable.
EMPLOYMENT CONTRACTS
On October 17, 2000, Hercules entered into a written agreement with Mr.
Gossage which provides for him to suspend his regular Hercules retirement
benefits and serve as our Chairman and Chief Executive Officer. Mr. Gossage's
compensation consists of (i) a nominal salary of $1.00 per week to cover
employee benefit participation requirements plus employment-related benefits
available to other salaried employees and (ii) the grant under the terms of our
Long-Term Incentive Compensation Plan of (a) a stock option to purchase
1,000,000 shares of our stock, half at a per share exercise price of $14.4375
(the price of our common stock on the date of grant) and the balance at a per
share exercise price of $17.325 and (b) 128,003 shares of restricted stock. The
stock options and restricted stock vest at the earlier of October 15, 2001, or
his retirement, death or
-25-
termination because of disability or a change in control. Hercules also agreed
to accelerate payment of the balance of a special pension benefit of $1,300,000
per year over 5 years, which became effective January 1, 1997. This special
pension was reported in the 1997 Proxy Statement.
On October 17, 2000, Dr. Corbo resigned from all of his positions
at Hercules and its subsidiaries including his positions as Chief Executive
Officer and Chairman of Board of Directors of Hercules. Dr. Corbo has received
and he (or in the event in his death, his estate or named beneficiary) is
entitled to receive certain severance payments and continuing benefits pursuant
to a resignation agreement between Dr. Corbo and Hercules dated October 17, 2000
(the "Resignation Agreement"). Specifically, Dr. Corbo received a lump sum cash
payment of $2,832,753.83 upon his resignation and Dr. Corbo (or in the event of
his death, his estate or named beneficiary) will receive (i) two times his then
current salary and target annual bonus (or a total of $3,135,000), which
amount is paid over 48 semi-monthly equal installments beginning November 1,
2000, (ii) certain continuing rights and accelerated vesting schedules under
Hercules' various stock option plans and Long Term Compensation Plans, (iii)
certain continuing pension benefits based on granting three additional years of
service credits plus elimination of early retirement reduction and (iv) certain
one-time perquisites, such as, reimbursement for legal fees incurred in
connection with the Resignation Agreement and reimbursement for tax return
preparation and advice. Additionally, Dr. Corbo and his immediate family will
receive medical, dental and vision benefits until the earlier of his death and
December 31, 2002 and life insurance benefits payable at his death. Many of the
above listed items are contingent upon Dr. Corbo's adherence to certain
covenants regarding confidentiality, non-competition and non-disparagement.
On December 1, 2000, Mr. Tucci retirned from the Company. He is currently
serving as the Chairman, Chief Executive Officer and President of CP Kelco, a
joint venture in which Hercules holds a minority interest. In conjunction with
Mr. Tucci's resignation, Hercules agreed to make certain severance payments to
Mr. Tucci. Mr. Tucci will receive (i) 120 consecutive monthly payments of
$7,000, (ii) an additional four full years of pension service credit as well as
additional pension payments depending upon the number of years of service to CP
Kelco, (iii) reimbursement for certain equity interests in Hercules held by Mr.
Tucci, which were forfeited upon his resignation and (iv) reimbursement for
certain other perquisites. Additionally, Hercules will pay, in the event of Mr.
Tucci's death, his named beneficiary or estate an amount equal to two times his
final twelve-month salary plus average of his last two calendar year MICP
awards.
CHANGE IN CONTROL AGREEMENTS
Since 1986, Hercules has entered into Change in Control Agreements with
its senior executives. These agreements seek to ensure the stability of
Hercules' management during a period of transition within Hercules and only
become effective upon a change in control event. Hercules' Compensation
Committee periodically reviews these agreements and revises them, if necessary,
to reflect contemporary business practices in change in control situations.
During fiscal year 2000, Hercules entered into Change in Control Agreements
with each of Ms. Barry, Messrs. DiDonna, Floyd and MacKenzie. Under the terms
of the agreements, a change in control occurs if:
o Any person, entity or group (with certain exceptions) becomes the
beneficial owner of 20% or more of the outstanding shares of Hercules
common stock;
-26-
o There is a change in a majority of the Board of Directors other than
by election or nomination by a vote of the majority of directors
comprising the Incumbent Board;
o Upon consummation of a reorganization, merger, consolidation or sale
that results in Hercules' shareholders owning less than 60% of the
combined voting power of the surviving corporation following the
transaction; or
o Hercules' shareholders approve a complete liquidation of the Company.
Under the terms of the agreements, upon a change in control, Hercules is
required to continue to employ the above named executives, in substantially the
same position and level of compensation (including benefits) as that executive
held immediately before the change in control, for a period of three years
following the change in control.
If Hercules terminates the executive (within the three year period
following a change in control) for any reason other than cause, death or
disability, or if Hercules takes actions which permit the executive to terminate
his or her employment for good reason, such as diminishing the executive's
responsibilities or requiring the executive to relocate, during such three year
period, the executive is entitled to the following:
o a lump sum cash payment equal to:
- any unpaid prorated portion of the executive's bonus;
- three times the executive's base salary and bonus; and
- the difference between the amount the executive would be entitled
to if Hercules contributed for up to an additional six years of
service and five years of age to the executive's benefit plans
and that amount the executive was actually entitled to under
these plans on the date of termination;
o three years of continued welfare benefits and perquisites;
o outplacement services equal to $50,000;
o full vesting of all stock options held by or previously granted
to the executive; and
o payment for any IRS excise taxes for excess parachute payments,
as defined under the Internal Revenue Code.
SEVERANCE AGREEMENTS
In addition to the Change in Control Agreements, Hercules has entered into
a severance agreement with Mr. MacKenzie which provides for the payment of two
years' base salary plus two years' target bonus in the event of Mr. MacKenzie's
termination by Hercules other than for cause or change of control.
-27-
ANNUAL REPORT
PURSUANT TO RULE 14a-13 UNDER THE EXCHANGE ACT, THE COMPANY UNDERTAKES TO
FURNISH A COPY OF THE COMPANY'S ANNUAL REPORT CONTAINING AUDITED FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2000, PREPARED IN CONFORMITY WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, TO HERCULES SHAREHOLDERS NOT LATER
THAN APRIL 6, 2001, A DATE 20 CALENDAR DAYS BEFORE THE DATE OF THE 2001 ANNUAL
MEETING.
A copy of the Company's Annual Report on Form 10-K, as filed with the SEC,
will be sent without charge to any shareholder upon written request directed to:
Hercules Incorporated
Hercules Plaza
1313 North Market Street
Wilmington, DE 19894-0001
Attention: Secretary
METHOD AND COST OF PROXY SOLICITATION
Proxies may be solicited, without additional compensation, by directors,
officers or employees of the Company by mail, telephone, telegram, in person or
otherwise. The Company will bear the costs of the solicitation of proxies, which
may include the cost of preparing, printing and mailing the proxy materials. In
addition, the Company will request banks, brokers and other custodians, nominees
and fiduciaries to forward proxy materials to the beneficial owners of common
stock and obtain their voting instructions. The Company will reimburse those
firms for their expenses in accordance with the rules of the SEC and the New
York Stock Exchange. In addition, the Company has retained MacKenzie Partners,
Inc., 156 Fifth Avenue, New York, NY 10010, to assist in soliciting proxies, for
which services the Company will pay a fee expected not to exceed $_______ plus
out-of-pocket expenses. MacKenzie will employ approximately __ persons in
connection with its solicitation of proxies.
Expenses related to the solicitation of shareholders, in excess of those
normally spent for an annual meeting and excluding the costs of litigation, are
expected to aggregate approximately $_______, of which approximately $_______
has been spent to date. ANNEX I SETS FORTH CERTAIN INFORMATION RELATING TO THE
COMPANY'S DIRECTORS, NOMINEES, OFFICERS AND OTHER EMPLOYEES OF THE COMPANY WHO
WILL BE SOLICITING PROXIES ON THE COMPANY'S BEHALF ("PARTICIPANTS").
YOUR VOTE AT THIS YEAR'S ANNUAL MEETING IS ESPECIALLY IMPORTANT. PLEASE
SIGN AND DATE THE ENCLOSED WHITE PROXY CARD AND RETURN IT IN THE ENCLOSED
ENVELOPE PROMPTLY.
WE URGE YOU NOT TO SIGN OR RETURN ANY PROXY CARD THAT MAY BE SENT TO YOU BY
ISP, EVEN AS A PROTEST VOTE AGAINST ISP. IF YOU PREVIOUSLY VOTED ON AN ISP BLUE
PROXY CARD, YOU HAVE EVERY LEGAL RIGHT TO CHANGE YOUR VOTE. YOU CAN DO SO SIMPLY
BY SIGNING, DATING AND RETURNING THE ENCLOSED WHITE PROXY CARD. A PERSON GIVING
ANY PROXY HAS THE POWER TO REVOKE IT (WHETHER SUCH PROXY WAS SOLICITED BY THE
BOARD OF DIRECTORS OR BY ISP) AT ANY TIME BEFORE THE VOTING BY SUBMITTING TO
HERCULES OR TO ISP A WRITTEN REVOCATION OR DULY
-28-
EXECUTED PROXY CARD BEARING A LATER DATE. ONLY YOUR LATEST DATED PROXY CARD WILL
COUNT. PLEASE REFER TO "VOTE REQUIRED AND VOTING PROCEDURES" ON PAGE __ FOR A
DISCUSSION OF HOW TO REVOKE YOUR PROXY.
IMPORTANT: If your shares of the Company's stock are held in the name of a
brokerage firm, bank, nominee or other institution, only it can sign a WHITE
proxy card with respect to your shares and only upon specific instructions from
you. Please contact the person responsible for your account and give
instructions for a WHITE proxy card to be signed representing your shares of the
Company's stock. We urge you to confirm in writing your instructions to the
person responsible for your account and to provide a copy of such instructions
to the Company's proxy solicitor, MacKenzie Partners, Inc., at the address
indicated below so that MacKenzie Partners can attempt to ensure that your
instructions are followed. If you have any questions about executing your proxy
or require assistance, please contact:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
Call Toll Free: (800) 322-2885
or Call Collect: (212) 929-5500
-29-
ANNEX I
INFORMATION CONCERNING THE DIRECTORS AND CERTAIN OFFICERS
OF THE COMPANY WHO MAY ALSO SOLICIT PROXIES
The following table sets forth the name, principal business address and the
present office or other principal occupation or employment, and the name,
principal business and the address of any corporation or other organization in
which their employment is carried on, of the directors and certain officers of
the Company ("Participants") who may also solicit proxies from shareholders of
the Company. Unless otherwise indicated, the principal occupation refers to such
person's position with the Company and the business address is Hercules
Incorporated, Hercules Plaza, 1313 North Market Street, Wilmington, DE
19894-0001.
DIRECTORS
The principal occupations of the Company's directors who are deemed Participants
in the solicitation are set forth under "Proposal (1) Election of Directors" in
this Proxy Statement. The principal business address of Mr. Gossage is that of
the Company. The name, business and address of the director-Participants'
organization of employment are as follows:
NAME ADDRESS
---- -------
Thomas L. Gossage Hercules Incorporated, 1313 N. Market Street,
Wilmington, DE 19894-0001
John G. Drosdick Sunoco, Inc., Ten Penn Center, 1801 Market Street,
Philadelphia, PA 19103-1699
Richard M. Fairbanks, III Center for Strategic & International Studies, Suite
400, 1800 K Street, N.W., Washington, DC 20006-2202
Alan R. Horsig *
Edith E. Holiday *
Gaynor N. Kelley *
Ralph L. MacDonald Amelia Investment Corp., 1890 South 14th Street,
Suite 110, Amelia Island, FL 32034-4730
George MacKenzie Hercules Incorporated, 1313 N. Market Street,
Wilmington, DE 19894-0001
H. Eugene McBrayer *
Peter McCausland Airgas, Inc., PO Box 6675, Radnor, PA 19087-8675
John A.H. Shober ESU Associates, 12 Bugle Lane, Blue Bell, PA 19422
Paula A. Sneed Kraft Foods, 3 Lakes Drive, Northfield, IL 60093-9999
----------------
* Unless otherwise indicated, the Director's address is c/o Hercules
Incorporated, 1313 N. Market Street, Wilmington, Delaware 19894-0001
I-1
EXECUTIVE OFFICERS AND CERTAIN CORPORATE OFFICERS
NAME PRINCIPAL OCCUPATION
---- ------------------------------------------------------
Thomas L. Gossage Chairman and Chief Executive Officer
Israel J. Floyd Executive Vice President, Secretary and General
Counsel
George MacKenzie Vice Chairman
J. Neil Stalter Vice President, Corporate Communications
Allen A. Spizzo Vice President, Corporate Affairs and Strategic
Planning
INFORMATION REGARDING OWNERSHIP OF THE COMPANY'S SECURITIES BY PARTICIPANTS
None of the Participants owns any of the Company's securities of record but
not beneficially. The number of shares of common stock of the Company held by
directors and the named executive officers is set forth on page __ of this proxy
statement. The number of shares of common stock of the Company held by the other
Participants as of March 6, 2001 is set forth below. The information includes
shares that may be acquired by the exercise of stock options within 60 days of
such date:
NAME SHARE OWNERSHIP*
---- ------------------------------------------------------
Allen A. Spizzo 3,056
J. Neil Stalter 12,339
-------------------
(*) Includes shares as of December 31, 2000, in the Savings and Investments
Plans as follows: A.A. Spizzo, 1,201 and J.N. Stalter, 485. Includes shares with
restrictions and forfeiture risks as specified under the Long-Term Incentive
Compensation Plan: A.A. Spizzo, 1,055 and J.N. Stalter, 8,854.
I-2
INFORMATION REGARDING TRANSACTIONS IN THE COMPANY'S SECURITIES BY PARTICIPANTS
The following table sets forth purchases and sales of the Company's securities
by the Participants listed below during the past two years. Unless otherwise
indicated, all transactions are in the public market.
NUMBER OF SHARES
OF COMMON STOCK
NAME DATE PURCHASED OR (SOLD) NOTES
------------------------ ---------- ------------------- ---------
DIRECTORS
---------
John G. Drosdick 2/18/1999 1,419 (1)
5/11/1999 750 (1)
5/11/1999 1,500 (1)
2/8/2000 2,754 (1)
Richard Fairbanks 2/18/1999 1,711 (1)
11/30/1999 82 (1)
2/8/2000 2,754 (1)
Thomas L. Gossage 10/17/2000 128 (2)
Alan R. Hirsig 2/18/1999 1,419 (1)
5/11/1999 750 (1)
5/11/1999 1,500 (1)
2/8/2000 2,885 (1)
Edith E. Holiday 2/18/1999 417 (1)
2/8/2000 655 (1)
Robert G. Jahn 1/18/1999 1,836 (1)
2/8/2000 3,148 (1)
Gaynor N. Kelley 2/18/1999 918 (1)
2/8/2000 1,605 (1)
Ralph L. MacDonald 2/18/1999 1,711 (1)
2/8/2000 2,557 (1)
George MacKenzie 2/1/1999 (609) (3)
2/18/1999 751 (2)
11/2/1999 38,000 (2)
1/20/2000 30,000 (2)
H. Eugene McBrayer 2/18/1999 1,878 (1)
2/8/2000 3,017 (1)
Peter McCausland 2/18/1999 1,419 (1)
2/8/2000 2,754 (1)
Paula A. Sneed 2/18/1999 1,878 (1)
2/8/2000 3,148 (1)
I-3
NUMBER OF SHARES
OF COMMON STOCK
NAME DATE PURCHASED OR (SOLD) NOTES
------------------------ ---------- ------------------- ---------
EXECUTIVE OFFICERS
------------------
June B. Barry 6/15/1999 (3,778) (3)
11/2/1999 38,000 (2)
2/15/2000 (6,612) (3)
2/15/2000 7,512 (4)
10/16/2000 (7,901) (3)
10/16/2000 11,453 (3)
Vincent J. Corbo 2/1/1999 (1,170) (3)
11/2/1999 151,000 (2)
11/1/2000 (2,722) (3)
11/1/2000 (64,024) (3)
Dominick W. DiDonna 2/1/1999 (539) (3)
11/2/1999 38,000 (2)
Israel J. Floyd 2/1/1999 697 (2)
5/3/1999 900 (2)
11/2/1999 22,000 (2)
3/1/2000 16,000 (2)
5/1/2000 1,500 (2)
Harry J. Tucci 2/1/1999 (833) (3)
2/18/1999 3,957 (2)
5/13/1999 8,400 (5)
11/2/1999 38,000 (2)
6/2/2000 (597) (3)
12/1/2000 (13) (3)
12/1/2000 (177) (3)
12/1/2000 (14) (3)
12/1/2000 (57) (3)
12/1/2000 (8,230) (3)
12/1/2000 (38,000) (3)
----------------
(1) Acquisition of restricted shares pursuant to the Company's Nonemployee
Director Stock Accumulation Plan.
(2) Acquisition of restricted shares pursuant to the Company's Long-Term
Incentive Compensation Plan.
(3) Surrender of shares to pay withholding tax on restricted shares whose
restrictions lapsed.
(4) Acquired under the Company's Long-Term Incentive Compensation Plan.
(5) Acquired upon exercise of options.
MISCELLANEOUS INFORMATION CONCERNING PARTICIPANTS
Except as described in this Annex I or in the proxy statement, none of the
participants nor any of their respective affiliates or associates (together, the
"Participant Affiliates"), (i) directly beneficially owns any shares of common
stock of the Company or any securities of any subsidiary of the Company or (ii)
has had any relationship with the Company in any capacity other than as a
shareholder, employee, officer or director. Furthermore, except as described in
this Annex I or in the proxy statement, no Participant or Participant Affiliate
is either a party to any transaction or
I-4
series of transactions since December 31, 1999, or has knowledge
of any currently proposed transaction or series of transactions, (i) to which
the Company or any of its subsidiaries was or is to be a party, (ii) in which
the amount involved exceeds $60,000, and (iii) in which any Participant or
Participant Affiliate had or will have, a direct or indirect material interest.
Except as described in this Annex I or in the proxy statement, no participant or
Participant Affiliate has any arrangement or understanding with any person (i)
with respect to any future employment by the registrant or its affiliates; or
(ii) with respect to any future transactions to which the registrant or any of
its affiliates will or may be a party.
I-5
ANNEX II
HERCULES INCORPORATED
AUDIT COMMITTEE CHARTER
ORGANIZATION
MEMBERSHIP
The Committee is composed of non-employee members of the Board of
Directors. Membership is determined by the Board on the recommendation of
the Nominating Committee. As needed, the Audit Committee should consider
training and education programs to ensure that its membership has the
proper background and knowledge base and stays current as to relevant
developments in accounting and finance. At least one member of the Audit
Committee should have accounting or related financial management expertise.
MEETINGS
The Committee generally meets once a quarter, or more frequently as
circumstances require. Regular meetings are scheduled in accordance with
the annual schedule approved by the Board. Minutes are recorded by the
Secretary to the Committee. The Chairman and Chief Executive Officer, the
other Senior Officers of the Company, the Director of Auditing Services
(internal auditors), and representatives of the Company's independent
public accountant (PricewaterhouseCoopers) attend meetings at the
invitation of the Committee.
BASIC FUNCTION AND PURPOSE
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. The Committee reviews and discusses the
adequacy of the Company's internal controls; accounting practices;
financial reports; and the scope, specific plans, and effectiveness of the
audits performed by the internal auditors and the independent accountants.
The Audit Committee should conduct candid discussions with management, the
internal auditors, and outside auditors regarding issues implicating
judgment and impacting quality.
At least annually, the Audit Committee should consider the relevance of
this Charter.
RESPONSIBILITIES
INDEPENDENT PUBLIC ACCOUNTANTS
The Committee shall:
1. Recommend to the Board of Directors the selection and retention of
independent public accountants, subject to ratification by
shareholders, to perform the annual audit of financial statements and
the appropriate fees to compensate the independent public accountant.
In this regard, the outside auditor is ultimately accountable to the
Board of Directors and the Audit Committee.
2. Consider, in consultation with the independent public accountant and
management, the planned scope of the annual audit of financial
statements, including a review of coordination of audit efforts
between the independent public accountant and Auditing Services
Division (internal auditors), and reliance of the independent public
accountant on the work of Auditing Services.
3. Confirm and ensure the independence of the independent public
accountant, including a review of any significant out-of-scope
services and related compensation provided by the independent public
accountant.
4. Consider and review with the independent public accountant and
management: a) the adequacy of the Company's internal controls; b) the
Company's annual financial statements and related footnotes including
the quality of accounting principles as applied and the Company's
compliance with "Generally Accepted Accounting Principles" in all
material respects; c) emerging accounting standards and issues
affecting the Company; d) any significant and related findings and
recommendations of the independent public accountant, together with
management's response.
5. At least annually, at a regularly scheduled meeting of the Committee,
meet privately with the independent public accountant without members
of management in attendance to discuss any necessary matters.
6. Prior to public release of quarterly earnings, require that the
outside auditor, in conjunction with SAS 71 Interim Financial Review
related to the Company's future filing of its form 10-Q, discuss with
the Committee whenever possible or with the chair of the Audit
Committee or his/her designee if not possible with the Committee, and
a representative of financial management, in person or by telephone
conference call, the matters described in AU Section 380,
Communications with the Audit Committee.
INTERNAL AUDITING
The Committee shall:
1. Consider and review with management the annual work plan and planned
activities of Auditing Services, the budget and staffing for the
internal audit function, the charter of Auditing Services, and
compliance of the internal audit function with the STANDARDS FOR THE
PROFESSIONAL PRACTICE OF INTERNAL AUDITING (IIA).
2. Consider and review the coordination of audit efforts between Auditing
Services and the independent public accountant to ensure completeness
of coverage and efficient use of audit resources, including internal
audit assistance to the independent public accountant.
3. Consider and review with management and Auditing Services significant
internal auditing findings and recommendations related to the adequacy
of internal controls, compliance with policies and procedures, and
effective and efficient use of Company resources; also consider and
review management's response.
II-2
4. Meet privately with Auditing Services as required, but at least
annually, at a regularly scheduled meeting of the Committee.
OFFICERS AND DIRECTORS EXPENSES AND SIGNIFICANT MANAGEMENT ESTIMATES
The Committee shall:
1. Review policies and procedures with respect to expense accounts and
perquisites of officers and directors, including their use of
corporate assets; and consider the results of an annual review of
expenses and perquisites of officers and directors by Auditing
Services or the independent public accountant.
2. Review policies and procedures with respect to the adequacy of
significant management estimates particularly with respect to
recognition of contingent liabilities, such as those resulting from
identified environmental problems, and legal matters, including the
use of outside counsel.
REPORTING RESPONSIBILITY
All action taken by the Audit Committee shall be reported to the Board of
Directors at its next meeting succeeding such action.
Note: The revision of paragraph No. "6" under "Responsibilities" was
approved at the Audit Committee meeting of February 21, 2001.
II-3
[PROXY CARD: FRONT SIDE]
HERCULES INCORPORATED
2001 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE HERCULES BOARD OF DIRECTORS FOR
THE 2001 ANNUAL MEETING OF SHAREHOLDERS ON APRIL 26, 2001.
The undersigned hereby appoints Thomas L. Gossage and Israel J. Floyd, and
each of them, as proxies, acting jointly and severally and with full power of
substitution, for and in the name of the undersigned to vote all shares of
common stock of Hercules Incorporated that the undersigned is entitled to vote
at the Annual Meeting of Shareholders to be held on Thursday, April 26, 2001, at
11:00 A.M., local time, at the Delaware Art Museum, 2301 Kentmere Parkway,
Wilmington, Delaware, or at any adjournments or postponements thereof, as
directed, upon the matters set forth in the Hercules Proxy Statement and upon
such other matters as may properly come before the Annual Meeting.
Signing and dating Hercules's proxy card will have the effect of revoking
any ISP proxy card you signed on an earlier date, and will constitute a
revocation of all previously granted authority to vote for every proposal
included on the ISP proxy card.
(CONTINUED AND TO BE MARKED, DATED AND SIGNED ON REVERSE SIDE)
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
YOUR VOTE IS VERY IMPORTANT!
MARK, SIGN AND DATE YOUR PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
[PROXY CARD: FIRST HALF OF REVERSE SIDE]
--------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN PLEASE MARK
THE MANNER DIRECTED HEREIN. IF NO CHOICE IS VOTES AS IN
SPECIFIED AND THE PROXY IS RETURNED WITH THE THIS
STOCKHOLDER'S SIGNATURE(S), THEN THE PROXY WILL BE SAMPLE:
VOTED FOR APPROVAL OF EACH OF PROPOSALS 1 AND 2,
AND IN THE DISCRETION OF THE PROXIES ON ANY OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING. /X/
--------------
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
1. Election of the following director nominees for a three-year term
Nominees are: 1. Thomas L. Gossage
2. Ralph L. MacDonald, Jr.
3. John A. H. Shober
4. Paula A. Sneed
FOR WITHHOLD
/ / / /
Withhold vote only from ______________________________.
2. Ratification of PricewaterhouseCoopers LLP as independent accountants
FOR AGAINST ABSTAIN
/ / / / / /
Mark here if your address has changed New Address:
and provide us with your new address in _________________________________
the space provided to the right: / / ________________________________
_________________________________
Mark here if you plan to attend the Annual Meeting: / /
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED PROXY RETURN
ENVELOPE.
Signature(s): Dated: , 2001
----------------------------- --------
Title: ______________________________
-2-
IMPORTANT: Please sign exactly as name or names appear on this proxy. Joint
owners should each sign personally. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title as such. When
signing as a corporation or a partnership, please sign in the name of the entity
by an authorized person.
PLEASE SIGN THIS PROXY AND RETURN PROMPTLY WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING.
--------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
-3-
[PROXY CARD: SECOND HALF OF REVERSE SIDE]
[HERCULES LOGO]
--------------------------------------------------------------------------------
VOTE BY TELEPHONE VOTE BY INTERNET
It's fast, convenient and immediate! It's fast, convenient and your vote is
Call Toll-Free on a Touch-Tone Phone. immediately confirmed and posted.
--------------------------------------------------------------------------------
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement and proxy card. Statement and proxy card.
2. Call the toll-free number 2. Go to the website
1-800-___-____. Stockholders HTTP://WWW.________.
residing outside the United States
can call collect on a touch-tone 3. Enter your Control Number
phone at 1-___-___-____. There is located on your proxy card above
NO CHARGE for this call. your name.
3. Enter your Control Number located 4. Follow the online instructions
on your proxy card above your name. provided.
4. Follow the recorded instructions.
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-800-___-____ anytime! Go to HTTP://WWW__________ anytime!
--------------------------------------------------------------------------------
IF YOU ARE VOTING BY TELEPHONE OR INTERNET, THERE
IS NO NEED TO MAIL BACK YOUR PROXY CARD.
THANK YOU FOR VOTING
--------------------------------------------------------------------------------
-4-
---------------------------------------
ADMISSION TICKET
HERCULES INCORPORATED
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, APRIL 26, 2001
11:00 A.M.
THE DELAWARE ART MUSEUM,
2301 KENTMERE PARKWAY
WILMINGTON, DELAWARE
--------------------------------------
-5-