UNITED STATES
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SCHEDULE 14A
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Hercules Incorporated
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[HERCULES LOGO] HERCULES INCORPORATED
Hercules Plaza
1313 North Market Street
Wilmington, DE 19894-0001
Thomas L. Gossage
Chairman and Chief Executive Officer
April 11, 2001
Dear Shareholder:
YOUR BOARD OF DIRECTORS IS ACTIVELY PURSUING A SALE OR MERGER OF THE
COMPANY TO MAXIMIZE VALUE FOR ALL HERCULES SHAREHOLDERS. With the assistance of
our financial advisors, Goldman, Sachs & Co. and Credit Suisse First Boston
Corporation, we have contacted many potential purchasers of the Company or
certain of its businesses. As part of this process, we have entered into
confidentiality agreements with, and supplied information to, a large number of
potential transaction participants. Several of these have participated in
management presentations as part of their ongoing financial and legal due
diligence on the Company and/or its businesses. We continue to actively pursue
this course, which we believe has the greatest potential to provide the highest
value to all Hercules shareholders.
You have likely received proxy materials from ISP, which is seeking to
elect its own four nominees to the Hercules Board of Directors. ISP states that
it is seeking election of its nominees in order to, among other things, bring
about the prompt sale of the Company.
YOUR BOARD HAS ALREADY - CLEARLY AND PUBLICLY - DECLARED ITS INTENTION TO
MAXIMIZE SHAREHOLDER VALUE THROUGH A SALE OR MERGER OF THE COMPANY. IF AN OFFER
THAT IS FAIR TO AND IN THE BEST INTERESTS OF ALL HERCULES SHAREHOLDERS IS
PRESENTED TO THE COMPANY, YOUR BOARD IS FULLY COMMITTED TO COMPLETING SUCH A
TRANSACTION. I STRONGLY BELIEVE THAT THE CURRENT BOARD OF DIRECTORS, AND NOT ISP
OR ITS NOMINEES, IS IN THE BEST POSITION TO BRING THIS PROCESS TO A TIMELY AND
SUCCESSFUL CONCLUSION.
I HAVE COMPLETE CONFIDENCE IN YOUR BOARD'S ABILITY AND COMMITMENT TO
MAXIMIZE VALUE FOR ALL SHAREHOLDERS AND THE INTEGRITY OF THE SALE PROCESS
CURRENTLY UNDER WAY.
Neither I nor the other directors know of any reason why ISP's nominees
would be better able to achieve these objectives than your Board. In fact, for
many reasons, including Mr. Heyman's prior activities and the potential conflict
of interest affecting at least two of ISP's nominees, we believe ISP's nominees
are not the right people for the job.
o Because TWO OF ISP'S NOMINEES are officers of ISP, if elected to the
Hercules Board, they COULD FACE A CONFLICT OF INTEREST as a result of
their duties to ISP (and therefore to Mr. Heyman, who controls ISP) on the
one hand and their duties to all Hercules shareholders on the other. In
addition, according to ISP's proxy statement, each of the other two ISP
nominees is being paid by ISP for his or her services as a nominee.
o MR. HEYMAN IS KNOWN AS A VETERAN "CORPORATE RAIDER" WHO HAS MADE TAKEOVER
ATTEMPTS ON A NUMBER OF PUBLIC COMPANIES. These include GAF Corporation,
Union Carbide Corporation, CBI Industries, BorgWarner and Cabot
Corporation, where he generally acquired
an interest in the company, made an acquisition proposal for the company
at a low price and ultimately sold his position in the company at a
profit.
o IN NONE OF THESE TAKEOVER ATTEMPTS DID MR. HEYMAN ULTIMATELY ACQUIRE A
COMPANY, except in 1983, when he gained control of GAF through a proxy
fight. He later took GAF private, taking advantage of the 1987 stock
market crash and GAF's depressed stock price.
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 BELIEVE ISP'S AND MR. HEYMAN'S ACTIONS ARE INCONSISTENT WITH
THEIR STATED OBJECTIVES.
o ISP HAS REFUSED TO SUBMIT A PROPOSAL TO ACQUIRE THE ENTIRE COMPANY,
INDICATING INSTEAD AN INTEREST IN INCREASING ITS OWNERSHIP just to a level
that could give ISP certain veto rights, through a conditional, partial
tender offer. This would have put ISP in a position to exercise control
(or negative control) over the Company in certain circumstances, even
though the offer covered only a fraction of the Company's shares.
o In addition, when we offered ISP the opportunity to participate in our
value-maximization process on a more advantageous basis than other
participants, ISP REJECTED OUR OFFER. Again, ISP demonstrated that it had
no interest in actually acquiring the Company.
o MR. HEYMAN'S PROXY BATTLE HAS INTERFERED WITH THE PROCESS THE BOARD IS
ACTIVELY PURSUING TO MAXIMIZE VALUE FOR ALL SHAREHOLDERS. Mr. Heyman's
statements and actions - including his highly publicized proposals to
acquire a 33% stake in the Company through a conditional, partial tender
offer and to initiate a proxy contest - have raised concerns among
potential transaction parties participating, or considering participating,
in the Board's sale process.
o Although we have repeatedly told Mr. Heyman that his actions are
interfering with our process, MR. HEYMAN HAS REJECTED OUR REQUESTS TO
REFRAIN FROM STATEMENTS AND ACTIVITIES THAT POTENTIAL TRANSACTION
PARTICIPANTS MAY CONSIDER DISRUPTIVE OF THEIR EFFORTS TO FORMULATE A
PURCHASE PROPOSAL.
It is unfortunate that so much time and money is being wasted on this
proxy battle with ISP and Mr. Heyman - time and energy that would be much better
spent on our program to maximize value for all shareholders. Mr. Heyman and ISP
have been disruptive of the sale process even without any representation on the
Board. We believe that a split Board, which would result if any of ISP's
nominees are elected, would be very detrimental to the sale process.
We strongly believe that electing ISP's nominees is likely to impede our
value-maximization process rather than to accelerate it. YOU SIMPLY CANNOT
AFFORD TO RISK PUTTING MR. HEYMAN AND HIS SLATE ON YOUR BOARD. We strongly
recommend that you reject Mr. Heyman's attempt to get your vote to install
himself, the president of ISP and two additional hand-picked nominees on your
Board of Directors at this year's annual meeting. To do so, discard any blue
proxy card that you receive. Please sign, date and mail the WHITE proxy card you
will be receiving shortly.
At the same time that your Board is pursuing a sale or merger of Hercules,
we are undertaking aggressive actions to reduce the Company's debt burden. In
March 2001, we signed a definitive
agreement to sell our hydrocarbon resins business and parts of our rosin resins
business to Eastman Chemical Company. Also in March, we signed a definitive
agreement to sell our peroxy chemicals business to GEO Specialty Chemicals, Inc.
Both transactions are scheduled to close during the second quarter of 2001.
We are also taking decisive steps to cut costs and generate cash. We have
postponed discretionary spending across the Company, restricted hiring, further
reduced capital spending, and we are selling other businesses and assets not
essential to our core businesses. This will allow us to further reduce our debt.
DESPITE MR. HEYMAN'S PROXY FIGHT, WHICH HAS MADE AND CONTINUES TO MAKE OUR
EFFORTS MORE DIFFICULT, WE CONTINUE TO TAKE AGGRESSIVE STEPS TO CREATE VALUE FOR
ALL HERCULES SHAREHOLDERS.
In the next few days, you will be receiving Hercules' proxy statement for
our 2001 Annual Meeting scheduled for May 24, 2001. We encourage you to review
the materials carefully and then vote your WHITE proxy card for the election of
Hercules four director nominees. If you have previously signed a blue proxy card
for ISP and its slate, you can revoke that proxy at any time by simply signing
and returning a later-dated WHITE proxy card.
If you have any questions or need assistance in voting your shares please
call MacKenzie Partners, Inc. TOLL FREE at (800) 322-2885 or collect at (212)
929-5500 or you may call the Company directly toll free at (800) 441-9274.
We appreciate your continued support and patience at this critical time
for Hercules.
Sincerely,
/s/ Thomas L. Gossage
Thomas L. Gossage
* * *
Hercules filed a preliminary proxy statement with the United States Securities
and Exchange Commission on March 12, 2001, as amended on March 16, March 26 and
April 4, 2001, in connection with its 2001 annual meeting of shareholders.
Information regarding the identity of the persons who may, under SEC rules, be
deemed to be participants in the solicitation of Hercules shareholders for the
2001 annual meeting, and their interests in the solicitations, are set forth in
the preliminary proxy statement. Hercules will be filing a definitive proxy
statement and other relevant documents. WE URGE INVESTORS TO READ THE DEFINITIVE
PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Security holders may obtain a
free copy of the proxy statement and other related documents filed by Hercules
at the SEC's website at www.sec.gov or at the SEC's public reference room
located at 450 Fifth Street, NW, Washington D.C 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. When
available, the definitive proxy statement and the other documents may also be
obtained from Hercules by contacting Hercules Incorporated, Attention: Allen
Spizzo, Hercules Plaza, 1313 North Market Street, Wilmington, DE 19894-0001, or
on Hercules' website at www.herc.com.