AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 2003
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.)
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[ ] Confidential, For Use of the Commission Only (as permitted by
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[ ] Soliciting Material Pursuant to Rule 14a-12
HERCULES INCORPORATED
(Name of Registrant as Specified in Its Charter)
HERCULES SHAREHOLDERS' COMMITTEE FOR NEW MANAGEMENT
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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THE HERCULES SHAREHOLDERS' COMMITTEE FOR NEW MANAGEMENT
17 State Street, New York, NY 10004
June 11, 2003
Fellow Hercules Shareholders:
We are enclosing another copy of the Committee's Proxy Statement and
supplement as well as our WHITE Proxy Card as required by law in view of the
fact that the Board has now scheduled the long-delayed Annual Meeting for July
25th - which incidentally just happens to be a Friday in the middle of the
summer!
With respect to the two shareholder sponsored resolutions (#4 and #5),
we support both proposals to redeem the Company's poison pill and provide
shareholders with the right to call special meetings, while predictably Joyce
and the majority directors oppose these resolutions. As to the Company's
proposal #3 to approve a special equity compensation plan for non-employee
directors, the Committee opposes the resolution. The proposal authorizes the
Board to increase the amount of stock GRANTS for non-employee directors from
60,000 to 660,000 shares and provides the Board with UNFETTERED AUTHORITY to
transform the stock portion of its own compensation from OPTIONS to GRANTS. We
are opposed to free stock GRANTS for directors because, by their terms, they
reward directors irrespective of how Hercules shareholders do. We believe that
any director stock compensation should be in the form of stock OPTIONS, which
will only have value if the Company creates shareholder value for ALL Hercules
shareholders.
On the subject of director compensation, you should know that it was
our minority directors who succeeded in getting the Board to eliminate a program
whereby the Company was about to give away millions of dollars to the favorite
charities of its directors. We also initially got the Board to reduce directors'
fees, which the majority directors unfortunately increased a year later. We took
that position not because the fees were so high, but rather to set an example
for the thousands of hard working employees at the Company who were either
losing their jobs or being asked to make substantial financial sacrifices in
connection with the Company's belt-tightening program. The minority directors
asked Joyce to take at least some token cut in his compensation for the same
reason, but he refused.
We should like to call your attention to several recent developments.
o Three majority directors, who all came to the Board prior to Joyce
becoming Chief Executive, have refused to stand for reelection.
Joyce and the remaining majority directors have named four
nominees for election, one of whom is an incumbent director
handpicked by Joyce and the majority directors last year without
shareholder approval. The three new nominees include a former
Union Carbide CFO and a former Union Carbide director and, if
elected, the Board will be comprised of four former Union Carbide
associates.
JOYCE'S FIVE HANDPICKED DIRECTORS HAVE NEVER VOTED AGAINST HIS
POSITION ON A SINGLE ISSUE. ASK YOURSELF: DO YOU BELIEVE THAT THE
NEW NOMINEES ARE LIKELY TO EXERCISE ANY MORE INDEPENDENCE OF
THOUGHT OR ACTION THAN THE OTHERS?
o With Joyce and his majority directors never having shown the
slightest interest in corporate governance reform, the Board
announced just last week what we believe to be token governance
changes. On June 3rd, in a transparent election ploy in our view
to spruce up the Company's corporate governance image, the Board
approved mostly cosmetic corporate governance changes, involving
the establishment of Committee charters, corporate governance and
ethics codes and the renaming of the Nominating Committee (now
called the "Corporate Governance, Nominating, and Ethics
Committee").
You should know that the only substantive changes include several
adjustments to the poison pill, which permit "qualified buyers,"
defined as EXCLUDING 13D filers such as ISP, and others APPROVED
BY THE BOARD, to purchase up to 20% of the Company's shares,
EFFECTIVE ONLY AFTER THIS YEAR'S PROXY ELECTION. The second change
requires that the Company expense stock OPTIONS beginning with NEW
AWARDS AFTER JANUARY 1, 2003, but since the Company has recently
adopted a practice to award stock GRANTS instead of OPTIONS, the
change in the Company's policy will be of no effect.
Notwithstanding the NEW FOUND interest of Joyce and his majority
directors in corporate governance reform, they have nevertheless
refused to eliminate their arsenal of anti-shareholder,
anti-takeover provisions -- which include a poison pill, a
staggered board, an interpretation of a Company Bylaw to require
an affirmative vote of a majority of all outstanding shares for
election of directors, and the ability to add directors without
shareholder approval.
o At the same June 3rd Board meeting, the Company's majority
directors, over the objection of our minority directors, extended
Joyce's employment contract for another year and approved a second
golden parachute arrangement for him. The second parachute
includes a $3 million restricted stock grant that will immediately
vest in the event that the Committee's nominees prevail in the
proxy contest or if Joyce retires at the end of this year.
The background of Joyce's $3 million stock grant is illustrative
of the way he and the majority directors do business. When the
Board recommended that Joyce be given the grant less than two
months ago, our minority directors pointed out that the grant
would be improper because it was being made pursuant to a 2002
shareholder authorization where the Company, in apparent violation
of securities laws, had failed to disclose to Hercules
shareholders that grants would vest upon a "change of control,"
which was defined to include a change in Board composition as a
result of a proxy contest. The minority directors took the
position that, if the majority directors were insistent on issuing
grants, they should be required to resubmit the authorization to
shareholders, with proper disclosure, at this year's Annual
Meeting.
Joyce and the majority directors decided instead on another course
of action in an attempt to avoid seeking shareholder approval.
Under their stratagem, after acknowledging their failure to make
proper disclosure last year, they retroactively rescinded the
change of control provision in the 2002 grant authorization--
thereby claiming to have validated the illegally procured
authorization. Then, acting pursuant
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to the "newly validated" 2002 authorization, they granted Joyce
almost 293,000 restricted Hercules shares having a value of $3
million. Significantly, these shares were granted Joyce under a
newly amended and extended employment contract, WHICH GRANT JUST
HAPPENS TO HAVE BEEN ISSUED SUBJECT TO A SPECIAL "CHANGE OF
CONTROL" AGREEMENT WITH JOYCE, WHICH WILL BE TRIGGERED IF THE
COMMITTEE'S NOMINEES ARE ELECTED--THEREBY PRODUCING THE IDENTICAL
RESULT AS THE JUST RESCINDED 2002 CHANGE OF CONTROL PROVISION
WOULD HAVE.(1) AS HERCULES SHAREHOLDERS, WE SHOULD ALL WISH THAT
JOYCE AND THE MAJORITY DIRECTORS WOULD ONLY CHANNEL THEIR
"INGENUITY" INTO MORE CONSTRUCTIVE ENDEAVORS ON BEHALF OF HERCULES
SHAREHOLDERS!
MAKING MATTERS WORSE IS THE FACT JOYCE AND HIS MAJORITY DIRECTORS
HAVE YET TO COME CLEAN WITH SHAREHOLDERS ABOUT THEIR
SLEIGHT-OF-HAND. THE COMMITTEE BELIEVES THAT THE BOARD'S ACTION
NOT ONLY DEMONSTRATES BLATANT DISREGARD FOR SHAREHOLDERS ON THE
PART OF JOYCE AND HIS MAJORITY DIRECTORS BUT IS ALSO SIMPLY
ILLEGAL. IF ELECTED, WE PLEDGE TO CHALLENGE JOYCE'S GRANT.
ADDING THE $3 MILLION STOCK GRANT AND THE SEVERANCE PROVIDED UNDER
HIS NEW CONTRACT EXTENSION TO HIS ORIGINAL $9 MILLION GOLDEN
PARACHUTE CONTRACT, SHOULD THE COMPANY BE REQUIRED TO MAKE PAYMENT
UNDER THESE LEGALLY QUESTIONABLE ARRANGEMENTS, WE ESTIMATE THAT
JOYCE WOULD BE "REWARDED" FOR LOSING THE PROXY CONTEST WITH A $14
MILLION "PAYDAY" - BRINGING HIS TOTAL COMPENSATION TO
APPROXIMATELY $30 MILLION FOR TWO YEARS ON THE JOB.
* * * * * * * * * * * *
Hercules' stock price, which we believe is currently being buttressed
by the prospect of new management and a new direction for the Company, continues
to substantially lag that of its peers. From the time Joyce came to the Company
to the close on June 10th, Hercules stock has lost 17% of its value, while the
S&P MidCap Specialty Chemicals Index, which consists of eight comparable
specialty chemicals companies, has increased by 19% -- an underperformance for
Hercules of almost 36%. At the same time, Joyce continues to enjoy outrageous
and ever escalating compensation bearing no relationship to overall corporate,
individual, and stock performance. For 2002, for example, Joyce's compensation
(not counting his golden parachute awards) was more than 2-1/2 times the average
compensation for the CEOs of the eight specialty chemicals companies referred to
above.
Regrettably, Joyce has no strategy for the Company in our view except
for cost cutting which has reached the point of diminishing returns (with
relatively nominal cost reductions projected for the last half of 2003). The
morale of Hercules employees, whose compensation has either been frozen or
severely capped and who have witnessed first hand the continued floundering of
the Company, we believe is at an all-time low. Finally, while the Company has
more than its share of challenges, the better part of our last three Board
meetings has been
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(1) In taking care of himself and his Chief Legal Officer, Joyce and his
majority directors left behind 170 other Hercules executives, who will
receive their restricted shares without the now rescinded "change of
control" provision because of the fact they were not issued subject to
"change of control" agreements like Joyce's.
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devoted to matters relating to Joyce's compensation and the majority directors'
corporate governance "window dressing" program - NEITHER OF WHICH WILL PUT ANY
MONEY IN THE POCKETS OF THE COMPANY OR ITS SHAREHOLDERS.
AS HERCULES' SECOND LARGEST SHAREHOLDER, WITH AN INVESTMENT IN HERCULES
OF MORE THAN $140 MILLION, OUR INTERESTS ARE CLEARLY ALIGNED WITH YOURS. WE HAVE
NO INTEREST IN PARACHUTES, POSITIONS, OR PERKS, AND ALL WE WANT IS TO MAXIMIZE
VALUE FOR ALL HERCULES SHAREHOLDERS INCLUDING OURSELVES.
GIVEN THE COMPANY'S INTERPRETATION OF ITS ELECTION BYLAW, A VOTE NOT
CAST IS THE EQUIVALENT OF A VOTE FOR JOYCE AND THE MAJORITY DIRECTORS, AND YOUR
VOTE IS THEREFORE ESPECIALLY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU
OWN.
IN YOUR OWN BEST INTEREST, WE URGE YOU TO SUPPORT OUR NOMINEES FOR
ELECTION AS HERCULES DIRECTORS. PLEASE SIGN, DATE AND RETURN THE ENCLOSED WHITE
PROXY CARD - TODAY!
Sincerely,
THE HERCULES SHAREHOLDERS' COMMITTEE FOR NEW MANAGEMENT
/s/ Samuel J. Heyman /s/ Harry Fields
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Samuel J. Heyman Harry Fields
/s/ Gloria Schaffer /s/ Vincent Tese
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Gloria Schaffer Vincent Tese
/s/ Anthony T. Kronman /s/ Sunil Kumar
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Anthony T. Kronman Sunil Kumar
/s/ Raymond S. Troubh /s/ Gerald Tsai, Jr.
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Raymond S. Troubh Gerald Tsai, Jr.
Enclosure
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IMPORTANT
PLEASE RETURN YOUR REVISED WHITE PROXY CARD AND DO NOT RETURN ANY OF
THE COMPANY'S GOLD PROXY CARDS, EVEN AS A PROTEST VOTE AGAINST HERCULES. ONLY
YOUR LATEST DATED, SIGNED PROXY CARD WILL BE COUNTED, AND ANY GOLD PROXY YOU
SIGN FOR ANY REASON COULD INVALIDATE PREVIOUS WHITE PROXY CARDS SENT BY YOU TO
SUPPORT THE COMMITTEE.
Your vote is important. If you previously voted or vote on the
Committee's original WHITE proxy card, you will not be voting on Proposals 3, 4
and 5. If you wish to specify the manner in which your Shares are to be voted on
Proposals 3, 4 and 5, you should mark, sign, date and return the accompanying
revised WHITE proxy card. If you have any questions or need assistance in voting
your shares, please call:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 State Street, 10th Floor
New York, New York 10004
(866) 288-2190 (TOLL FREE)
Banks and Brokerage Firms please call:
(212) 440-9800
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