HERCULES INC, PRE 14A, 1995-03-06

HERCULES INC
PRE 14A, 1995-03-06
PLASTIC MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant / /

Filed by a Party other than the Registrant /X/

Check the appropriate box:

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/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 sec.240.14a-11(c) or sec.240.14a-12
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HERCULES, INC.
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(Name of Registrant as Specified In Its Charter)

HERCULES, INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.

/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

/ / 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:
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[LOGO]

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March 15, 1995

Dear Stockholder:

On behalf of your Board of Directors and your management, I cordially
invite you to attend the 1995 Annual Meeting of Stockholders which will be
held on THURSDAY, APRIL 27, 1995, at 11 a.m., local time, at the Delaware
Art Museum, 2301 Kentmere Parkway, Wilmington, Delaware. We hope that you
will be able to attend. However, due to the seating capacity at the
Delaware Art Museum, admittance to the Annual Meeting will be by ticket
only on a first come, first served basis. You may request a ticket by
checking off the appropriate box on your Proxy Card. If you arrive at the
Annual Meeting without a ticket, you will be seated only if space is
available.

The enclosed Notice of Meeting and Proxy Statement describe the
business to be transacted at the Annual Meeting. This year you are being
asked to (i) re-elect three incumbent directors (i.e., Robert G. Jahn,
Ralph L. MacDonald, Jr., and Paula A. Sneed), (ii) ratify the appointment
of Coopers & Lybrand L.L.P. as independent accountants, (iii) approve an
amendment to the Restated Certificate of Incorporation that would increase
the number of authorized shares of common stock from the existing amount
of 150 million shares to 300 million shares; and (iv) approve an amended
and restated Hercules Incorporated Long Term Incentive Compensation Plan.

I plan, as is our custom at the Annual Meeting, to give a report on
the affairs of Hercules. You will have the opportunity to comment on and
ask questions about the affairs of Hercules that may be of interest to
stockholders generally. Your input is important to us; therefore, whether
or not you plan to attend the Annual Meeting, please vote, sign, date and
return your Proxy Card as soon as practicable. This will not prevent you
from voting your shares in person if you do attend the Annual Meeting.

Thank you for your cooperation and your interest in Hercules.

Sincerely,

/s/THOMAS L. GOSSAGE
--------------------------------
Thomas L. Gossage
Chairman of the Board, President
and Chief Executive Officer
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INSIDE OF COVER PAGE

M A P

ON HOW TO REACH
THE DELAWARE ART MUSEUM
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[LOGO]

HERCULES INCORPORATED
Hercules Plaza
Wilmington, DE 19894-0001

NOTICE of the
Annual Meeting of Stockholders
to Be Held Thursday, April 27, 1995

The Annual Meeting of Stockholders of Hercules Incorporated will be held on
THURSDAY, APRIL 27, 1995, at 11 a.m., local time, at the Delaware Art Museum,
2301 Kentmere Parkway, Wilmington, Delaware, for the following purposes:

1) To consider and take action upon the following matters described in the
Proxy Statement:

a) Election of three directors (nominees are Robert G. Jahn, Ralph L.
MacDonald, Jr., and Paula A. Sneed), each for a term of three years;

b) Ratification of the appointment of Coopers & Lybrand L.L.P. as
independent accountants for 1995;

c) Approval of an amendment to the Restated Certificate of Incorporation
of Hercules to increase the number of authorized shares of common
stock from the existing amount of 150 million shares to a new amount
of 300 million shares; and

d) Approval of an amended and restated Hercules Incorporated Long Term
Incentive Compensation Plan.

2) To transact such other business as may properly come before the Annual
meeting.

Stockholders of record at the close of business on February 27, 1995, will
be entitled to vote at the Annual Meeting or any adjournments thereof. PLEASE
MARK THE APPROPRIATE BOX ON YOUR PROXY CARD IF YOU PLAN TO ATTEND THE ANNUAL
MEETING AND A TICKET WILL BE EITHER MAILED TO YOU OR DELIVERED TO YOU UPON YOUR
ARRIVAL AT THE RECEPTION DESK OF THE ANNUAL MEETING.

By order of the Board of Directors,
Wilmington, Delaware
March 15, 1995 /s/ISRAEL J. FLOYD
---------------------
Israel J. Floyd, Esq.
Corporate Secretary
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TABLE OF CONTENTS
Proxy Statement

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I. GENERAL INFORMATION............................................................. 1

Proxy Statement................................................................. 1

Who Can Attend the Annual Meeting............................................... 1

Quorum at the Annual Meeting.................................................... 1

Submission of Proxy Card........................................................ 1

Voting by Proxy Card............................................................ 2

Automatic Dividend Reinvestment and Savings Plan Shares......................... 2

Confidentiality................................................................. 2

Procedure for Director Nominations by Stockholders.............................. 3

Approval of Proxy Statement Items............................................... 3

Stock Split..................................................................... 3

II. MATTERS ON WHICH TO BE VOTED AT THE ANNUAL MEETING.............................. 3

1. Election of Three Directors (Nominees are Robert G. Jahn, Ralph L. MacDonald,
Jr., and Paula A. Sneed)..................................................... 3

2. Ratification of Coopers & Lybrand L.L.P. as Independent Accountants.......... 4

3. Approval of Amendment to the Restated Certificate of Incorporation to
Increase Number of Authorized Shares of Common Stock......................... 4

4. Approval of An Amended and Restated Hercules Incorporated Long Term Incentive
Compensation Plan............................................................ 6

III. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS................................. 8

Principal Stockholders.......................................................... 8

Directors and Officers.......................................................... 8

IV. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................. 9

V. CORPORATE GOVERNANCE -- DIRECTORS AND EXECUTIVES................................ 9

Board and Board Committee Membership............................................ 10

Employee Director Compensation.................................................. 10

Non-employee Director Compensation.............................................. 10

Named Executives................................................................ 11

Compliance with Section 16(a) of the Securities Exchange Act of 1934............ 11

VI. EXECUTIVE COMPENSATION.......................................................... 12

Report of the Compensation Committee............................................ 12

Performance Graph............................................................... 15

Additional Compensation Information............................................. 15

VII. PROXY SOLICITATION COSTS........................................................ 16
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TABLE OF CONTENTS
Proxy Statement

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VIII. 1996 STOCKHOLDER PROPOSALS...................................................... 16

LIST OF APPENDICES.............................................................. 17

Appendix 1: Board of Directors................................................. 18

Appendix 2: Summary Compensation Table......................................... 21

Appendix 3: Option Grants Table................................................ 23

Appendix 4: Option Exercises and Year-End Value Table.......................... 24

Appendix 5: Long-Term Incentive Plan Awards Table.............................. 25

Appendix 6: New Benefits Table................................................. 26

Appendix 7: Pension Plans Table................................................ 27

Appendix 8: Employment Contracts and Termination of Employment And
Change-in-Control Arrangements..................................... 28

Appendix 9: Major Features of the LTIC Plan.................................... 30
</TABLE>

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HERCULES INCORPORATED
Hercules Plaza
[LOGO] Wilmington, DE 19894-0001

PROXY STATEMENT

Annual Meeting of Stockholders
Thursday, April 27, 1995

I. GENERAL INFORMATION

This Proxy Statement, the accompanying proxy/voting instruction card (the
"Proxy Card") and Hercules' Annual Report to Stockholders (the "Annual Report"),
containing financial statements reflecting the financial position and results of
Hercules for 1994, are being distributed to stockholders commencing on or about
March 15, 1995. Whether or not you expect to attend Hercules' 1995 Annual
Meeting of Stockholders (the "Annual Meeting") in person, the Board of Directors
of Hercules Incorporated (the "Board") requests that you complete and return
your Proxy Card for use at the Annual Meeting, and any adjournments thereof.

PROXY STATEMENT. This Proxy Statement consists of Sections I through VIII
and the Appendices hereto. Such Sections and Appendices are intended to be read
and construed together and when taken together they constitute one and the same
instrument. YOU ARE ENCOURAGED TO CAREFULLY REVIEW EACH SECTION AND EACH
APPENDIX.

WHO CAN ATTEND THE ANNUAL MEETING. Only stockholders of record of common
stock issued by Hercules ("Common Stock") at the close of business on February
27, 1995, the Record Date for the Annual Meeting, are entitled to notice of and
to vote at the Annual Meeting. Such stockholders are entitled to one vote for
each share on each matter to be voted upon at the Annual Meeting.

Please note that seating is limited and admission to the Annual Meeting is
by ticket only on a first come, first served basis. If you are a stockholder as
of the Record Date and would like to attend the Annual Meeting, please request a
ticket by checking the appropriate box on your Proxy Card. However, if your
shares are held in the name of a broker or other nominee, please notify the
Corporate Secretary and bring with you a proxy or letter from that firm
confirming your ownership of shares.

QUORUM AT THE ANNUAL MEETING. As of the Record Date, Hercules had issued
and outstanding shares of Common Stock. The holders of a majority of
the outstanding shares of Common Stock, present in person or represented by
proxy, will constitute a quorum for the transaction of business at the Annual
Meeting. The specific vote requirements for the matters being submitted to a
stockholders' vote at the Annual Meeting are provided under "Approval of Annual
Meeting Items."

SUBMISSION OF PROXY CARD. You are urged to sign and date the Proxy Card
and return it in the prepaid reply envelope provided for such purpose; however,
this will not in any way affect your right to attend the Annual Meeting and vote
in person. A stockholder giving a proxy has the right to revoke such proxy at
any time before it is voted by giving notice of such revocation to the Secretary
of Hercules, by attending the meeting and voting in person, or by returning a
later dated proxy.

The number of shares designated on the Proxy Card represents the total
number of shares held in your name on the Record Date (i.e. February 27, 1995),
including any shares held in Hercules' automatic dividend reinvestment service
and/or one or more of its executive compensation plans or employee benefit
plans. The total number also includes shares for which you have voting power
that are credited to your savings plan account held in custody by the trustee.

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If you receive in separate mailings more than one proxy card, it is an
indication that your shares are registered differently in more than one account.
All proxy cards received by you should be signed and mailed by you to ensure
that all your shares are voted.

VOTING BY PROXY CARD. Except as noted herein with respect to participation
in Hercules' automatic dividend reinvestment plan or savings plans, the
following proxy procedure will apply. When your Proxy Card is returned properly
marked and signed, the shares represented thereby will be voted in accordance
with your directions. IT IS NOT NECESSARY TO MARK ANY BOXES ON THE PROXY CARD IF
YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD'S RECOMMENDATIONS; MERELY SIGN,
DATE AND RETURN YOUR PROXY CARD IN THE ENVELOPE PROVIDED, POSTAGE FOR WHICH HAS
BEEN PREPAID. If you return your Proxy Card properly signed, but do not indicate
your voting preferences, Hercules has been informed by the proxyholders named on
the front of your Proxy Card that they will vote your shares FOR:

1. Re-election of Robert G. Jahn, Ralph L. MacDonald, Jr., and Paula A.
Sneed as directors, each for a term of three years;

2. Ratification of the appointment of Coopers & Lybrand L.L.P. as Hercules'
independent accountants for 1995;

3. Approval of an amendment to the Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock from the
existing 150 million shares to 300 million shares; and

4. Approval of the Hercules Incorporated Long Term Incentive Compensation
Plan (Amended and Restated as of April 27, 1995).

As of the date of this Proxy Statement, the Board does not intend to
present any matter for action at the Annual Meeting other than the above items.
However, please note that except as to shares, if any, credited to your account
under the Hercules Incorporated Employee Savings Plan or the Hercules
Incorporated Savings and Investment Plan, your Proxy Card, when properly
executed, confers discretionary authority on the proxyholders named on the face
of your Proxy Card to vote in accordance with their judgment the shares
represented thereby on any matter that was not known on the date of this Proxy
Statement but that may properly be presented for action at the Annual Meeting.

AUTOMATIC DIVIDEND REINVESTMENT AND SAVINGS PLAN SHARES: If you
participate in Hercules' automatic dividend reinvestment plan, the number of
uncertificated, whole shares credited to your account on the Record Date are
included in the total number of shares shown on the Proxy Card. If you
participate in any of the savings plans sponsored by Hercules or any of its
subsidiaries, the number of uncertificated, whole shares credited to your
account on the savings plans record date, which is January 31, 1995, are also
included in the total number of shares shown on the Proxy Card. The shares in
both the dividend reinvestment plan and the savings plans will be voted in
accordance with your voting instructions, if any, indicated on the properly
signed and returned Proxy Card. If your Proxy Card is returned properly signed,
but does not indicate your voting preferences, Hercules has been advised by the
administrator of the automatic dividend reinvestment plan and the trustee of
each of the savings plans that shares represented by your Proxy Card will be
voted in favor of each of the items in the Proxy Statement. IF A PROPERLY SIGNED
PROXY CARD IS NOT RECEIVED, THE SHARES HELD IN YOUR ACCOUNT IN THE AUTOMATIC
DIVIDEND REINVESTMENT PLAN WILL NOT BE VOTED; HOWEVER, THE SHARES HELD BY THE
TRUSTEE FOR THE SAVINGS PLANS WILL BE VOTED IN PROPORTION TO THE WAY THAT THE
OTHER PARTICIPANTS HAVE VOTED THEIR PROXIES.

CONFIDENTIALITY: Proxy Cards, ballots and voting tabulations that identify
individual participants are kept confidential. Such items are available for
examination only by the inspectors of election and certain employees associated
with processing proxy cards and tabulating the vote. Your vote is not disclosed
except as may be necessary to meet legal requirements. Additionally, all your
comments

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directed to management, whether written on the Proxy Card or elsewhere, will be
forwarded to management in a form that does not permit identification of you
unless expressly stated otherwise.

PROCEDURE FOR DIRECTOR NOMINATIONS BY STOCKHOLDERS: Any stockholder may
recommend any person as a nominee for director of Hercules by writing to the
Chairman of the Nominating Committee, c/o Hercules Incorporated, Hercules Plaza,
Wilmington, DE 19894-0001. Recommendations must be received by April 7, 1995,
and must be accompanied by a statement from the nominee indicating his or her
willingness to serve if elected and disclosing his or her principal occupations
or employments over the past five years.

APPROVAL OF PROXY STATEMENT ITEMS: Votes cast at the Annual Meeting will
be counted by The Corporation Trust Company, which has been appointed by
Hercules to act as inspector of election for the Annual Meeting. The inspector
of election will treat shares of Common Stock represented by a properly executed
and returned Proxy Card as present at the Annual Meeting for purposes of
determining a quorum. Directors will be elected by the majority vote of the
shares of Common Stock then issued and outstanding and entitled to vote at the
Annual Meeting. Accordingly, votes withheld as to the election of directors will
have the same effect as votes against each election. All other matters to come
before the Annual Meeting require the approval of a majority of the shares of
Common Stock present and entitled to vote thereat; therefore, abstentions as to
particular proposals will have the same effect as votes against such proposals.
Broker non-votes as to particular proposals will not, however, be deemed to be
part of the voting power present with respect to such proposals and will not
therefore count as votes for or against such proposals and will not be included
in calculating the number of votes necessary for approval of such proposals.

STOCK SPLIT: All share and pre-share data in this Proxy Statement have
been adjusted to reflect the stock split of Hercules Common Stock in the form of
a two hundred percent (200%) stock dividend effected in January, 1995. PLEASE
NOTE THAT THE COMMON STOCK INFORMATION PRESENTED HEREIN IS ON A POST-STOCK SPLIT
BASIS UNLESS OTHERWISE NOTED.

II. MATTERS TO BE VOTED ON AT THE ANNUAL MEETING

- ELECTION OF THREE DIRECTORS (PROXY STATEMENT ITEM NO. 1)

YOUR BOARD RECOMMENDS A VOTE "FOR" THE RE-ELECTION OF EACH OF
ROBERT G. JAHN, RALPH L. MACDONALD, JR. AND PAULA A. SNEED AS DIRECTORS.

The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote at the Annual Meeting is required in order to elect each
nominee.

Hercules' Restated Certificate of Incorporation provides that the number of
directors, as determined from time to time by the Board, shall be not less than
seven nor more than eighteen. It further provides that directors shall be
divided into three classes serving staggered three-year terms, with each class
to be as nearly equal in number as possible. The Board currently consists of
eleven directors. The Board previously consisted of twelve directors; however,
Richard Schwartz resigned as of January 6, 1995, to assume the position of
President & Chief Executive Officer of Alliant Techsystems, Inc.

Three nominees are to be elected at the Annual Meeting. These directors
comprise the class whose current term expires in 1995 and whose term after the
Annual Meeting will expire in 1998. The remaining eight directors are currently
serving terms which will expire in 1996 or 1997.

IN ACCORDANCE WITH THE RECOMMENDATION OF ITS NOMINATING COMMITTEE, THE
BOARD HAS NOMINATED ROBERT G. JAHN, RALPH L. MACDONALD, JR., AND PAULA A. SNEED,
EACH OF WHOM IS CURRENTLY SERVING AS A DIRECTOR, FOR ELECTION AT THE ANNUAL
MEETING FOR A TERM EXPIRING AT THE 1998 ANNUAL MEETING OF STOCKHOLDERS, AND IN
EACH CASE UNTIL THEIR RESPECTIVE SUCCESSORS ARE ELECTED

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AND QUALIFIED. EACH NOMINEE HAS CONSENTED TO BEING NAMED IN THIS PROXY STATEMENT
AND TO SERVE IF ELECTED.

SEE APPENDIX 1 FOR BIOGRAPHICAL INFORMATION OF EACH NOMINEE AND EACH
DIRECTOR NOT STANDING FOR ELECTION.

In the event some unexpected occurrence results in any of the designated
nominees becoming unavailable for election as a director, or otherwise unable or
unwilling to serve, the Board, in its discretion, may by resolution either
provide for a lesser number of directors or designate substitute nominees. In
the latter event, shares represented by proxies may be voted for such substitute
nominee.

- RATIFICATION OF INDEPENDENT ACCOUNTANTS (PROXY STATEMENT ITEM NO. 2)

YOUR BOARD RECOMMENDS A VOTE "FOR" RATIFICATION OF COOPERS & LYBRAND L.L.P. AS
INDEPENDENT ACCOUNTANTS.

The affirmative vote of the majority of the shares of Common Stock present
in person or by proxy and entitled to vote at the Meeting is required in order
to ratify Coopers & Lybrand L.L.P. as independent accountants.

Upon the recommendation of the Audit Committee, the Board has appointed
Coopers & Lybrand L.L.P. as independent accountants of Hercules for 1995. This
appointment is subject to ratification by the stockholders. If the stockholders
do not ratify the appointment, the Audit Committee and the Board will reconsider
the appointment.

Coopers & Lybrand L.L.P., which has offices or affiliates convenient to
most of the localities in which Hercules and its affiliates operate worldwide,
has been the independent public accountant for Hercules and most of its
affiliates for many years. The Board believes that Coopers & Lybrand L.L.P.'s
long-term knowledge of Hercules' business is most valuable, enabling it to carry
out its assignments and responsibilities with effectiveness and efficiency. In
keeping with the established policy of Coopers & Lybrand L.L.P., partners and
employees of the firm engaged in auditing Hercules are periodically changed.
Among other benefits, this practice gives Hercules the advantage of new
expertise and experience. Coopers & Lybrand L.L.P. representatives have direct
access to members of the Audit Committee and regularly attend the Audit
Committee's meetings.

The Audit Committee reviewed all services provided by Coopers & Lybrand
L.L.P. to ensure that the services provided in 1994 were within the scope
previously approved by the Audit Committee. Also, the Audit Committee reviewed
and concluded that the non-audit services performed by Coopers & Lybrand L.L.P.
did not impair its independence as accountants for Hercules.

Hercules has been informed that, as in past years, representatives of
Coopers & Lybrand L.L.P. will be present at the Annual Meeting to respond to
appropriate stockholder questions. They will be given the opportunity to make a
statement if they so desire.

- AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(PROXY STATEMENT ITEM NO. 3)

YOUR BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF AN AMENDMENT
TO THE RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.

The affirmative vote of at least two-thirds (2/3) of the shares of Common
Stock present in person or by proxy and entitled to vote at the Meeting is
required in order to approve an amendment to the Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock.

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Presently, the Hercules' Restated Certificate of Incorporation, dated June
30, 1988 (the "Restated Certificate of Incorporation") provides that the total
number of shares of capital stock authorized is 152 million shares of which 150
million shall be common stock without par value and 2 million shall be Series
Preferred Stock without par value. The Board has determined that the Restated
Certificate of Incorporation should be amended to increase the authorized number
of shares of Common Stock from 150 million to 300 million. This amount does not
include or affect two million shares of Preferred Stock, which was previously
authorized and shall remain unchanged. The text of the proposed amendment is set
forth at the end of this Proxy Statement Item.

On December 8, 1994, the Board declared a 200% stock dividend on shares of
Common Stock. The Board believed that splitting the Common Stock would broaden
interest of the investment community in Hercules Common Stock by reducing the
market price of the Common Stock and further believed that such a stock split
would be in the best interests of Hercules and its stockholders. The stock
dividend has resulted in Hercules having approximately 149 million shares issued
and outstanding. Under the Restated Certificate of Incorporation, the authorized
capital for Common Stock is 150 million shares and for Series Preferred Stock is
2 million shares.

Of the 150 million shares of Common Stock presently authorized, as of
February 27, 1995, approximately 114.8 million shares were outstanding,
approximately 13.2 million shares were reserved for issuance pursuant to stock
incentive and employee benefit plans, 4.9 million shares for conversion of
debentures and bonds, and 16.2 million shares were held in Hercules' Treasury,
leaving 0.9 million shares of Common Stock unreserved and available for future
use. Hercules thus has only a limited number of authorized but unissued shares
available for issuance.

Of the 2 million shares of Series Preferred Stock presently authorized, as
of February 27, 1995 there are no Series Preferred Shares issued or outstanding.

The proposed additional shares of Common Stock, if authorized, could be
issued for any proper corporate purposes, including a split of the then
outstanding shares, sale or contribution to the Hercules' savings plans,
issuance in connection with any employee stock incentive program, the
acquisition of other businesses, or the raising of additional capital for use in
Hercules' business. The Board will make the determinations for future issuances
of authorized shares of Common Stock in the best interests of the Stockholders,
and generally without further action by the stockholders.

Each new share of Common Stock will continue to represent a purchase right
(a "Right") under the provisions of the Rights Agreement, dated as of June 24,
1987, and as amended, which Rights Agreement expires July 13, 1995. The Rights
will continue to trade automatically with the Common Stock and become
exercisable only upon the occurrence of certain events (initiation of a hostile
takeover) which are fully described in the Rights Agreement. Additionally, in
connection with the stock split, and in accordance with the Rights Agreement,
adjustments have been made to the purchase price and the redemption price
attached to each Right. If Rights become exercisable, each holder will be
entitled to purchase one three-thousandth (1/3000) of a share of Hercules Series
A Junior Participating Preferred Stock at a price of $180 per share, as compared
to one one-thousandth (1/1000) of a share prior to the split. The redemption
price has been adjusted to $.007 per Right, from $.02 prior to the split.

Hercules does not have any commitment or understanding at this time for the
issuance of any shares of the additional Common Stock. However, the Board
believes that the authority to issue such shares will give the Board the desired
flexibility to issue Common Stock at any time, without delay, whenever it is in
the best interests of the Stockholders. Under certain circumstances, the
issuance of such shares could have the effect of discouraging attempts to
acquire control of Hercules. The Board does not view the proposed amendment as
an anti-takeover measure and does not currently intend to adopt any
anti-takeover measures. With the possible exception of Hercules' ability to
issue authorized shares of Preferred Stock, its stockholder rights plan and the
staggered Board, there are no other provisions in the Restated Certificate of
Incorporation or Bylaws of Hercules that management believes could reasonably be
deemed to have an anti-

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takeover effect. Please note that the Board has resolved not to issue such
authorized shares of Preferred Stock.

Since Hercules last increased the amount of its authorized Common Stock in
April 1986, it was able to effect the recent stock dividend. While Hercules has
no present plans to further split the Common Stock, it wishes to have the
ability to do so when such a split would be in the best interests of all
stockholders.

The holders of Common Stock do not presently have preemptive rights to
subscribe for any of Hercules' securities and will not have any such rights to
subscribe for the additional Common Stock proposed to be authorized.

Subject to such preferences as may be afforded Preferred Stock, holders of
Common Stock will be entitled to receive dividends at such times and in such
amounts as may be determined by the Board and upon liquidation will be entitled
to share in the remaining assets of Hercules in accordance with their respective
interests. Except as provided by law or the resolutions of the Board providing
for the issue of respective series of Preferred Stock, the holders of Common
Stock will have the exclusive power to vote and will have one vote per share on
each matter submitted to a vote of stockholders. The authorized shares of any
class or classes may be increased or decreased by the affirmative vote of the
majority of the outstanding shares of stock of Hercules entitled to vote except
that with regards to Common Stock, no increase shall be voted unless approved by
two-thirds of the shares in interest which then have voting powers.

The text of the proposed amendment is as follows:

On page 2 of the Restated Certificate of Incorporation of Hercules
Incorporated, dated June 30, 1988, change:

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FROM: "FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is one hundred and fifty-two million
(152,000,000) shares, of which one hundred and fifty million (150,000,000)
shares shall be Common Stock without par value (hereinafter "Common Stock") and
two million (2,000,000) shares shall be Series Preferred Stock with par value
(hereinafter called "Series Preferred Stock"). . .

TO: "FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is three hundred two million (302,000,000)
shares, of which three hundred million (300,000,000) shares shall be Common
Stock without par value (hereinafter "Common Stock") and two million
(2,000,000) shares shall be Series Preferred Stock with par value (hereinafter
called "Series Preferred Stock"). . .
</TABLE>

Financial statements are not included herein as they are not deemed
material for the exercise of prudent judgment with regard to the proposed
amendments to the Certificate of Incorporation. Hercules' Annual Report to
Stockholders, including financial statements as of December 31, 1994, is being
mailed to stockholders with this Proxy Statement.

- APPROVAL OF AN AMENDED AND RESTATED HERCULES INCORPORATED
LONG TERM INCENTIVE COMPENSATION PLAN
(PROXY STATEMENT ITEM NO. 4)

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
AMENDED AND RESTATED LTIC PLAN

The proposed amendments to and restatement of the Hercules Incorporated
Long Term Incentive Compensation Plan (Amended and Restated as of April 27,
1995) (herein the "LTIC Plan") will become effective only if a majority of the
votes cast at the meeting are voted in favor of

6
<PAGE> 13

this Proxy Statement Item. Except as otherwise specified on the Proxy Card,
proxies will be voted FOR approval of the LTIC Plan.

The Hercules Incorporated Long Term Incentive Compensation Plan was
approved by Hercules' stockholders at the 1991 Annual Meeting. The maximum term
of the Plan was until March 31, 2000. The Plan is designed to motivate and
reward key employees to attain and surpass long-range performance goals, and to
compete with other major corporations in securing and retaining key employees.
The Board believes that this Plan has contributed to a significant number of
Hercules managers having a stock ownership in Hercules and thereby having a
direct link with and motivation to create shareholder value. Under this Plan
awards have been made in the form of Performance Shares, Restricted Stock and
Stock Options. The Board believes that continued linkage to and motivation of
shareholder value can be accomplished through (i) the greater use of Stock
Options and the new use of Performance Accelerated Stock Options (options which
cannot be exercised until specific performance goals have been reached) instead
of the use of Performance Shares in the awards to senior level managers and (ii)
the new use of Cash Value Awards (cash denominated incentives which are paid out
in Restricted Stock at the end of the performance period) instead of Restricted
Stock and Performance Shares in the awards to middle level managers.

The proposed changes to this Plan include a decrease in the number of
shares for Stock Options and other equity awards from the current authorization
levels and a reduction of the term from the current authorized maximum term of
March 31, 2000 to April 30 1998.

Set forth below is a list of the major changes to the LTIC Plan, which list
does not purport to be complete and is qualified in its entirety by reference to
the text of the LTIC Plan. SEE APPENDIX 9 FOR A DESCRIPTION OF THE MAJOR
FEATURES OF THE LTIC PLAN. A COPY OF THE LTIC PLAN HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. ANY STOCKHOLDER DESIRING A COPY OF THE LTIC
PLAN MAY OBTAIN IT BY WRITING TO HERCULES, 1313 NORTH MARKET STREET, WILMINGTON,
DE 19894-0001, ATTENTION: CORPORATE SECRETARY, IN TIME TO BE RECEIVED ON OR
BEFORE APRIL 7, 1995.

The major changes in the LTIC Plan are designed to:

(1) reduce the term of the LTIC Plan until April 30, 1998;

(2) authorize the issuance for up to 1,600,000 shares of Common Stock
during the period from May 1, 1995 through April 30, 1998;

(3) authorize the issuance for up to 5,200,000 shares of Common Stock
during the period from May 1, 1994 through April 30, 1998;

(4) provide for the grant of Cash Value Awards (described in Appendix 9);

(5) provide for the grant of Performance Accelerated Stock Options
(described in Appendix 9);

(6) allow nonqualified stock options (including performance accelerated
stock options) to vest over a period of up to nine and one-half
(9 1/2) years (currently five (5) years);

(7) allow nonqualified stock options granted after April 30, 1994 to be
exercised for up to five (5) years after retirement (currently three
(3) years);

(8) impose a limit on the number of stock options and performance
accelerated stock options that can be granted to any one individual
during the period from May 1, 1994 through April 30, 1998; and

(9) permit participants in the LTIC Plan to elect to have Hercules
withhold shares otherwise issuable to them in order to satisfy tax
withholding obligations.

7
<PAGE> 14

THE MAJOR FEATURES OF THE LTIC PLAN ARE DESCRIBED IN APPENDIX 9.

III. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

PRINCIPAL STOCKHOLDERS: Oppenheimer Group, Inc., Oppenheimer Tower, World
Financial Center, New York, NY, has reported holdings, as of February 1, 1995,
of 14,793,840 shares of Common Stock. This amount reported represents 12.5% of
all shares of Common Stock outstanding. Apart from these holdings, Hercules
knows of no other beneficial owner of, or group that owns, five percent (5%) or
more of the Common Stock.

DIRECTORS AND OFFICERS: According to information confirmed by them and
effective as of February 27, 1995, (i) none of the nominees, directors or other
individuals named in the table below (including the five most highly compensated
officers) beneficially owned (as defined by Securities and Exchange Commission
rules) as much as percent ( %) of the Common Stock outstanding; (ii)
all nominees for directors, directors continuing in office and officers as a
group beneficially owned (as defined), a total of shares of Common
Stock, constituting approximately percent ( %) of the total Common
Stock outstanding on that date; and (iii) the individuals named in the table
below beneficially owned (as defined), the number of shares shown in the table.
Except as otherwise noted, these individuals have sole voting and investment
power with respect to the shares listed.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Amount and Nature of Shares
Beneficially Owned
Name as of February 27, 1995
------------------------------------------------------------------------------------------------------------------
Right to Contingent
Direct(1) Acquire(2) Shares(3)
--------- ---------- ----------
<S> <C> <C> <C>
M. Caspari, Director 7,435 3,815 --
V. J. Corbo, Officer 41,122 72,900 10,800
R. K. Elliott, Director and Officer 91,800 16,200
R. M. Fairbanks, III, Director 4,327 3,000 --
T. L. Gossage, Director and Officer 538,200 34,800
E. E. Holiday, Director 2,334 3,000 --
R. G. Jahn, Director 6,164 9,000 --
G. N. Kelley, Director 5,287 9,000 --
R. L. MacDonald, Jr., Director 8,244 9,000 --
H. E. McBrayer, Director 74,121 6,000 --
C. D. Miller, Officer 35,845 43,800 10,800
P. A. Sneed 4,081 0 --
L. M. Thomas, Director 5,283 9,000 --
Directors and Officers as a Group (20)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Reported in this column are shares held individually in the named
individual's name, individually or jointly with others, or in the name of a
bank, broker or nominee for the individual's account. Also included in this
column are:

a. Shares credited, as of January 31, 1995, to individual accounts
under the Hercules Incorporated Savings and Investment Plan ("S&I Plan"):
V. J. Corbo, 2,045 shares; R. K. Elliott, 6,112 shares; T. L. Gossage,
1,814 shares; and C. D. Miller, 5,283 shares; and all directors and
officers as a group, 26,759 shares. As long as such shares remain in the
S&I Plan trust, the named individuals have no power to direct disposition
(except for changes in investment medium within the S&I Plan), but do have
the same rights to vote and receive dividends (although held in trust until
withdrawal as permitted by the S&I Plan) as do other stockholders of
Hercules.

b. Shares subject to restrictions and forfeiture risks during specified
restriction periods under either the LTIC Plan or the Hercules Incorporated
Restricted Stock Plan of 1986: V. J. Corbo, shares; R. K.
Elliott, shares; T. L. Gossage, shares; and

8
<PAGE> 15

C. D. Miller, shares; and all directors and officers as a group,
shares. As long as restricted stock awards are subject to
restrictions under one of the Plans, holders of such awards have the same
rights, including voting and dividend rights, with respect to the shares
covered by the award, as do other stockholders of Hercules, except for the
right to sell or transfer those shares as long as they are subject to the
restrictions the Plans.

c. Mr. Gossage purchased 45,000 shares in 1991 that are subject to
restrictions and risks of forfeiture similar to those under the Hercules
Incorporated Restricted Stock Plan of 1986.

d. Shares awarded (1,500) to and shares purchased (750) by each
non-employee director under the initial, one-time equity award opportunity
described on page of this Proxy Statement. These shares, owned of record
respectively by Ms. Holiday, Ms. Sneed, and Messrs. Caspari, Fairbanks,
Jahn, Kelley, MacDonald, McBrayer, and Thomas, are subject to restrictions
on transfer until retirement or resignation.

e. Shares shown for Mr. Kelley also include 1,419 shares in which he
shares voting and investment power with his spouse.

(2) Reported in this column are shares of Hercules Common Stock which the named
individuals have a right to acquire within 60 days after February 27, 1995.

(3) Reported in this column are shares contingently awarded under the LTIC Plan.
These shares are earned in whole or in part according to the degree of
achievement of predetermined performance goals over specified performance
periods and are subject to restrictions and forfeiture risk during such
performance periods. As long as the shares are subject to such Plan's
restrictions, holders of such awards have the same rights, including voting
and dividend rights (on an accrued basis), with respect to the shares, as do
other stockholders of Hercules, except for the right to sell or transfer
those shares as long as they are subject to the restrictions of such Plan.

IV. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In the ordinary course of business, Hercules and its affiliated entities
from time to time engage in transactions with other entities whose officers or
directors are also directors of Hercules. Hercules believes that all such
transactions of this nature were on terms that were reasonable and competitive.

Additional transactions of this nature are expected to take place in the
ordinary course of business in the future. In 1994, no director or officer had
an involvement in such transaction(s), which involvement was of a nature or
magnitude to require disclosure under the applicable SEC thresholds.

V. CORPORATE GOVERNANCE -- DIRECTORS AND EXECUTIVES

- - BOARD OF DIRECTORS: Business and affairs of Hercules are managed under the
direction of the Board. Board members are kept informed of Hercules' business
and affairs primarily through discussions with Hercules' senior management;
materials provided to Board members each month; and participation in Board and
Board Committee meetings. Board has established the following standing
committees: Audit, Compensation, Executive, Finance, Nominating, Technology, and
Social Responsibility. BIOGRAPHICAL INFORMATION ON EACH BOARD MEMBER IS SET
FORTH IN APPENDIX 1. Board met 9 times in 1994. Each director attended at least
95% of the aggregate of all meetings of the Board and of all committees of which
he was a member during 1994.

- - AUDIT COMMITTEE: Provides oversight and reviews of Hercules' auditing,
accounting, financial reporting and internal accounting control functions.
Recommends the independent accountant.

9
<PAGE> 16

All members of the Audit Committee are non-employee directors. Audit Committee
met 4 times in 1994.

COMPENSATION COMMITTEE: Provides oversight and reviews of Hercules' executive
compensation and employee benefit plans and programs, including the
establishment, modification, and administration thereof. All members of the
Compensation Committee are non-employee directors. Compensation Committee met 5
times in 1994.

EXECUTIVE COMMITTEE: Has limited powers to act on behalf of the Board
whenever the Board is not in session and it would be impractical to call a
meeting of the Board. Meets only as needed and acts only by unanimous vote.
Executive Committee met 1 time in 1994.

FINANCE COMMITTEE: Provides oversight of and reviews financial affairs. Has
been granted by the Board full and final authority on certain financial matters
designated by the Board. Serves as the named fiduciary for all of Hercules'
qualified pension and savings plans. Finance Committee met 6 times in 1994.

NOMINATING COMMITTEE: Considers and recommends nominees for election as
directors. Reviews and evaluates the effectiveness, procedures and practices of
the Board, Standing Committees, and Board members. All members of the Nominating
Committee are non-employee directors. Nominating Committee met 3 times in 1994.

SOCIAL RESPONSIBILITY COMMITTEE: Reviews Hercules' policies, programs and
practices on social issues of significance including equal employment
opportunity; environmental, safety and health matters; and community affairs and
relations. Social Responsibility Committee met 4 times in 1994.

TECHNOLOGY COMMITTEE: Reviews the adequacy of Hercules' technology directions
and resources (including intellectual property estate and research and
development effort and new or emerging technologies) to support Hercules'
strategic and business goals. Technology Committee met 5 times in 1994.

BOARD AND BOARD COMMITTEES MEMBERSHIP:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Social
Name Board Audit Compensation Nominating Finance Technology Executive Respon.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
M. Caspari X X X X X-
R. M. Fairbanks, III X X X
R. K. Elliott X X X X
T. L. Gossage X- X X X-
E. E. Holiday X X X
R. G. Jahn X X X- X X
G. N. Kelley X X X X-
H. E. McBrayer X X X- X
R. L. MacDonald, Jr. X X- X X
P. A. Sneed X X X
L. M. Thomas X X- X
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

- [Note: denotes chairperson.]

EMPLOYEE DIRECTOR COMPENSATION: Employee Directors receive no fee or extra
compensation for service on Board or Board Committees.

NON-EMPLOYEE DIRECTOR COMPENSATION:

Retainer and Fees: Annual fee of $20,000. Meeting fee of $1,000. Annual
fee of $3,000 for Chairmanship of a Board Committee. Fee of $1,000 per day
for special assignments. Reimbursement of expenses (e.g., travel, food and
lodging).

10
<PAGE> 17

- 1994 Group Compensation: Aggregate amount paid in 1994 (including
expenses reimbursed) to Non-employee Directors as a group was $432,551.

- Stock Accumulation Plan: In 1991 and 1993, the stockholders approved the
Hercules Incorporated Non-Employee Director Stock Accumulation Plan as
amended ("NEDSAP"). Under NEDSAP, a Non-employee Director may elect to
defer all or part of his or her retainer and fees and/or to exchange such
deferred amount into Common Stock at 85% of the fair market value of
Common Stock on the date of exchange.

- Stock Options: Under NEDSAP each Non-employee Director receives annually
an automatic grant of a non-qualified stock option (exercisable after a
one-year holding period) to purchase 3,000 shares (on a post-split basis)
of Common Stock. The option price is set at the fair market value of the
Common Stock on the date of grant.

- Initial Equity Award: Under NEDSAP, when a director is first elected to
the Board, he or she receives a one-time equity award opportunity of 1,500
shares (on a post-split basis) of Common Stock, without payment to
Hercules and subject to and upon the purchase of 750 shares (on a
post-split basis) of Common Stock.

- Retirement Policy: A director who has reached age 70 may not stand for
re-election. Under the retirement income plan for Non-employee Directors,
a Non-employee Director with at least five years of Board service will
receive an annual retirement benefit for ten (10) years in the amount of
sixty percent (60%) of the annual Board retainer in effect at the time the
director retires from the Board or reaches age 70, whichever is earlier.

- - NAMED EXECUTIVES

In 1994, Hercules' five most highly compensated executive officers (the
"Named Executives") were as follows:

- THOMAS L. GOSSAGE, CHAIRMAN, PRESIDENT & CHIEF EXECUTIVE OFFICER. 1994
Compensation Highlights: $768,340 salary; $734,000 bonus; $176,880 other
compensation; 132,000 stock options; and 17,400 performance share awards
[post-split basis].

- RICHARD SCHWARTZ, FORMER EXECUTIVE VICE PRESIDENT AND PRESIDENT, HERCULES
AEROSPACE COMPANY. (As of January 6, 1995, Mr. Schwartz left Hercules to
assume the position of President & Chief Executive Officer of Alliant
Techsystems, Inc.) 1994 Compensation Highlights: $420,250 salary; $273,000
bonus; $76,905 other compensation; 54,000 stock options; and 8,100
performance share awards [post-split basis].

- R. KEITH ELLIOTT, EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER. (In
1994, Mr. Elliott held the position of Senior Vice President & Chief
Financial Officer and assumed his current position in January 1995.) 1994
Compensation Highlights: $375,826 salary; $369,000 bonus; $79,954 other
compensation; 54,000 stock options; and 8,100 performance share awards
[post-split basis].

- VINCENT J. CORBO, SENIOR VICE PRESIDENT, TECHNOLOGY. (In 1994, Dr. Corbo
held the position of Group Vice President & President, Hercules Food &
Functional Products Company and assumed his current position in January
1995.) 1994 Compensation Highlights: $233,754 salary; $269,000 bonus;
$81,000 other compensation; 24,000 stock options; and 5,400 performance
share awards [post-split basis].

- C. DOYLE MILLER, GROUP VICE PRESIDENT & PRESIDENT, HERCULES CHEMICAL
SPECIALTIES COMPANY. 1994 Compensation Highlights: $233,496 salary;
$237,000 bonus; $81,867 other compensation; 24,000 stock options; and
5,400 performance share awards [post-split basis].

11
<PAGE> 18

SEE APPENDICES 2 THROUGH 7 FOR ADDITIONAL INFORMATION ON COMPENSATION FOR
THE NAMED EXECUTIVES LISTED ABOVE. ALL SHARES CITED ABOVE ARE ON A POST SPLIT
BASIS.

- - COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934: Based
solely on review of the copies of forms furnished to Hercules, or written
representations that no annual forms (SEC Form 5) were required, Hercules
believes that during 1994 all filing requirements of its officers, directors and
10-percent shareholders for reporting to the Securities and Exchange Commission
their ownership and changes in ownership of Common Stock (as required pursuant
to Section 16(a) of the Securities Exchange Act of 1934) were complied with.

VI. EXECUTIVE COMPENSATION

- REPORT OF THE COMPENSATION COMMITTEE

- - COMPENSATION PHILOSOPHY

The objectives of Hercules' executive compensation program are to motivate
management to create shareholder value by linking executive compensation with
the returns realized by shareholders and ensure the continued growth and
performance of Hercules by attracting, retaining, and motivating talented
executives through competitive compensation.

The Compensation Committee, composed of three independent non-employee
directors, has the responsibility to administer executive compensation programs,
policy and practice.

There are three elements which constitute Hercules' executive compensation
program: base pay, an annual incentive program, and a long-term incentive
compensation program.

- - BASE PAY

Hercules' executive base pay program is based on individual performance and
comparing Hercules' executive compensation to the compensation for executives in
comparable positions in chemical and general industry companies, including many
of the companies designated in the Standard & Poors Chemical Index.

The Compensation Committee determined Mr. Gossage's 1994 base pay by
considering, without specific weighting, (i) an analysis of competitive CEO
compensation in diversified chemical companies; (ii) input from three outside
consulting firms, which reviewed competitive data and estimated a competitive
level of base pay for Mr. Gossage; (iii) achievement of Hercules' stated 14% ROE
goal; (iv) Hercules' improvement in shareholder value during the previous year;
(v) Hercules' sale of the Packaging Films business; and (vi) the continued
improvement of Hercules' operating performance. Pursuant to such considerations,
the Compensation Committee determined that a base pay of $775,000 for Mr.
Gossage in 1994 was appropriate.

In the case of the other Named Executives, their respective base pay was
determined, without specific weighting, upon consideration of competitive
compensation data as obtained from analysis of chemical company salaries,
published industry surveys for comparable positions and individual performance.

- - ANNUAL INCENTIVE COMPENSATION (I.E. BONUS)

Under the Hercules Incorporated Annual Management Incentive Compensation
Plan (MICP), bonuses are paid in cash, or a combination of cash and restricted
stock, in the year following performance, based on the achievement of
predetermined corporate, business unit or corporate staff unit, and individual
goals. The MICP provides that no payouts will occur unless the minimum level of
performance as established by the Compensation Committee is exceeded. A maximum
of

12
<PAGE> 19

two hundred percent (200%) of target may be paid upon achievement of outstanding
performance. Once established, the Compensation Committee may adjust the
performance level expected for minimum, target or maximum payouts only upon the
occurrence of extraordinary event(s). In the last three years, the Compensation
Committee has not waived the minimum level of performance nor adjusted the
target or maximum goals required for payout. For 1994, notwithstanding the
maximum stated in the MICP, the Committee determined that payouts for certain
individuals warranted payouts in excess of the maximum level stated under the
MICP.

The Compensation Committee approved the 1994 MICP pool at one hundred
fifty-nine percent (159%) of target level. In its measurement of Hercules
corporate results for 1994, the Compensation Committee used the 1994 corporate
goal of earnings per share (EPS). EPS was chosen because it is an indicator of
the consistency of company performance. In 1994, Hercules achieved an EPS of
$2.29 up from $1.62 (before the impact of accounting changes) in 1993. In
addition to this goal of EPS, the 1994 pool reflected without specific weighting
(i) Hercules substantial progress on major strategic and tactical initiatives
including the agreement on the sale of the Packaging Films business, and the
early and successful completion of a new plant in Doel, Belgium; (ii) Hercules'
performance, as compared to peer companies; improvement in return on equity to
21%, surpassing the goal by 4.5%; improvement in EPS; and 32% increase in net
income; (iii) strong cash flow (before financing activities and after dividends)
of $248 million; and (v) incremental progress in creating shareholder value. The
Committee determined that the pluses and minuses of the foregoing items (i)
through (v) netted to zero.

Eighty percent of Mr. Gossage's MICP payout is attributable to corporate
performance. With respect to the remaining twenty percent (20%), the
Compensation Committee considered Mr. Gossage's individual accountabilities,
including, without specific weighting, (i) the continued restructuring of
Hercules' assets, including the sale of the Packaging Films business; (ii)
manufacturing cost improvements; (iii) progress on capital expansion projects
and progress on technology programs; (iv) progress on implementing the
Responsible Care program and worldwide safety improvement; and (v) demonstrated
leadership at Hercules and in the business community. In light of such
considerations, a final 1994 MICP payout to Mr. Gossage of $734,000 was approved
by the Compensation Committee.

The final 1994 MICP payouts as approved by the Compensation Committee for
the other Named Executives was an aggregate of $1,148,000 for such four
individuals as a group. In the approval of the 1994 MICP payouts to such
individuals, the Compensation Committee considered, without specific weighting,
Hercules corporate performance, business unit performance, and the individuals'
contributions to Hercules' success.

- - LONG TERM INCENTIVE COMPENSATION PLAN

In 1994, Hercules continued to place long-term compensation emphasis on
shareholder value creation through grants of stock options and on executive
share ownership through grants of performance shares.

Under the LTIC Plan, the Compensation Committee approves the pool of shares
and options to be awarded to all employees and the specific awards for officers
and other key employees. In accordance with the provisions of the LTIC Plan, the
Chief Executive Officer approves all awards for other employees.

Receipt of performance shares under the LTIC Plan is dependent on the
achievement of certain three-year goals and can vary from zero percent (0%) to
two hundred percent (200%) of the targeted number of shares. Once established,
the Compensation Committee will consider changes to such goals only upon the
implementation of mandated accounting changes, such as Financial Accounting
Standards Board (FASB) rule changes. The LTIC Plan provides that no payouts will
occur unless the minimum level of corporate performance as established by the
Compensation Committee is exceeded. In the last three years, the Compensation
Committee has not waived or

13
<PAGE> 20

lowered the minimum level of performance required for payout. For awards made in
1994, the goals for the receipt of performance shares are the accomplishment of
certain return on equity objectives.

In 1994, the Compensation Committee granted Mr. Gossage 17,400 performance
shares payable upon the achievement of performance goals in 1996, and 132,000
stock options. In making this grant, the Compensation Committee considered
without specific weighting, the value of long-term incentives, as such value was
determined by two outside consulting firms; the ratio of performance shares to
stock options; and the number of performance shares and stock options granted in
the prior year.

In 1994, the Compensation Committee also approved grants to the other Named
Executives which aggregated 27,000 performance shares and 156,000 stock options
for such four individuals as a group. In approving these grants, the
Compensation Committee considered, without specific weighting, the same factors
as for Mr. Gossage.

DEDUCTIBILITY OF COMPENSATION

Under Section 162(m) of the Internal Revenue Code, the Company may not
deduct certain forms of compensation in excess of $1,000,000 paid to a Named
Executive. The Compensation Committee undertook a review of Hercules' current
plans and practices and has approved a change to the stock option section of the
LTIC Plan, subject to shareholder approval, designating a maximum number of
options which may be awarded to any one individual in order to satisfy the
requirements of an exception available under Section 162(m). With respect to
other types of compensation, the Compensation Committee concluded that no action
would be taken at this time and that further review would be made during 1996.

14
<PAGE> 21

PERFORMANCE CHART

The Performance Chart below demonstrates a five-calendar year comparison of
cumulative total returns based on an initial investment of $100 in Common Stock
as compared with the S&P 500 (Broad Market Index) and the S&P Chemical Index.

COMPENSATION COMMITTEE

R. L. MacDonald, Jr., Chairperson
G. N. Kelley
H. E. McBrayer

HERCULES INCORPORATED
COMPARISON OF FIVE YEAR CUMULATIVE RETURN*
HERCULES INCORPORATED, S&P 500, & S&P CHEMICAL INDEX

<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P CHEMICAL
(FISCAL YEAR COVERED) HPC S&P 500 INDEX
<S> <C> <C> <C>
1989 100 100 100
1990 92 97 85
1991 146 126 111
1992 192 136 121
1993 352 150 136
1994 365 157 152
</TABLE>

Assumes $100 Invested on December 31, 1989
*Total return assumes reinvestment of dividends

ADDITIONAL COMPENSATION INFORMATION

Set forth in Appendix 2 is the "Summary Compensation Table" which shows,
for the last three fiscal years, cash and other compensation paid or accrued for
those years to each of the Named Executives.

Set forth in Appendix 3 is the "Options Grant Table" which contains
information regarding the grant of stock options in 1994 to the Named
Executives.

Set forth in Appendix 4 is the "Option Exercise and Year-End Value Table"
which shows information with respect to the Named Executives regarding the
exercise of options during the last fiscal year and unexercised options held by
them as of December 31, 1994.

Set forth in Appendix 5 is the "Long Term Incentive Plan Awards Table"
which contains information regarding awards made to the Named Executives under
the LTIC Plan.

15
<PAGE> 22

Set forth in Appendix 6 is the "New Benefits Table" which contains
information regarding benefits or amounts to be received as a result of the
amendments to the LTIC Plan.

Set forth in Appendix 7 is the "Pension Plans Table" which shows the
estimated annual pension benefits payable to a covered participant (e.g. a Named
Executive) at normal retirement age under Hercules' qualified benefits pension
plan, as well as non-qualified supplemental benefits, based on the stated
remuneration and years of service with Hercules and its subsidiaries.

Set forth in Appendix 8 is a description titled "Employment Contracts and
Termination of Employment And Change-in-Control Arrangements" which contains
information regarding the same.

VII. PROXY SOLICITATION COSTS

The entire cost of soliciting proxies will be borne by Hercules. Hercules
has engaged Morrow & Co., Inc. to assist in the distribution of proxy materials
and with the solicitation of proxies for a fee of $10,000 plus out-of-pocket
expenses. Proxies may be solicited through the mail and personally by telephone
or telegram by the directors, officers and regular employees of Hercules without
additional compensation for such services.

Hercules will also reimburse brokerage houses and other custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses for
forwarding soliciting material to the beneficial owners of Common Stock.

VIII. 1996 STOCKHOLDER PROPOSALS

Stockholders of Hercules wishing to include proposals in Hercules' proxy
materials to be distributed in connection with the 1996 annual meeting of
stockholders must submit the same in writing so as to be received by Hercules at
its principal office at Hercules Plaza, 1313 North Market Street, Wilmington, DE
19894-0001, on or before November 15, 1995. Such proposals must also meet the
other requirements of the rules of the Securities and Exchange Commission
relating to stockholders' proposals.

By Authority of the Board of Directors,

ISRAEL J. FLOYD, ESQ.
Corporate Secretary

Wilmington, Delaware
March 15, 1995

16
<PAGE> 23

APPENDICES

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Appendix 1: Board of Directors....................................................... 18
Appendix 2: Summary Compensation Table............................................... 21
Appendix 3: Option Grants Table...................................................... 23
Appendix 4: Option Exercises and Year-End Value Table................................ 24
Appendix 5: Long-Term Incentive Plan Awards Table.................................... 25
Appendix 6: New Benefits Table....................................................... 26
Appendix 7: Pension Plans Table...................................................... 27
Appendix 8: Employment Contracts and Termination of Employment and 28
Change-in-Control Arrangements...........................................
Appendix 9: Major Features of the LTIC Plan.......................................... 30
</TABLE>

17
<PAGE> 24

APPENDIX 1: BOARD OF DIRECTORS

NOMINEES FOR ELECTION FOR TERM EXPIRING IN 1998

<TABLE>
<S> <C>
ROBERT G. JAHN DIRECTOR SINCE 1985

[PICTURE] CHAIRPERSON, TECHNOLOGY COMMITTEE;
MEMBER, EXECUTIVE, NOMINATING
AND SOCIAL RESPONSIBILITY COMMITTEES

Robert G. Jahn, age 64, assumed his present position as professor,
Aerospace Sciences, Princeton University, in 1967. He served as Dean of
the School of Engineering/Applied Science at Princeton from 1971 to
1986. Professor Jahn has been a member of the Board of Trustees of
Associated Universities, Inc. since 1971; a fellow of the American
Physical Society; and a member of the American Association of University
Professors, the American Institute of Physics, and the American Society
for Engineering Education. He is vice president and a founding member of
the Society for Scientific Exploration, and has served as chairman of
the Steering Committee of the Symposia on Engineering Aspects of
Magnetohydrodynamics, and as a member of the Commission on Higher
Education of the Middle States Association of Colleges and Schools.
Professor Jahn is also a director of Roy F. Weston, Incorporated, an
environmental services firm.

RALPH L. MACDONALD, JR. DIRECTOR SINCE 1989

CHAIRPERSON, COMPENSATION COMMITTEE;
[PICTURE] MEMBER, EXECUTIVE AND FINANCE COMMITTEES

Ralph L. MacDonald, age 53, is a principal in Island Capital
Corporation, a private investment firm dedicated to the acquisition and
development of small to medium-sized industrial manufacturing and
distribution companies. Mr. MacDonald was formerly managing director,
Global Corporate Finance, of Bankers Trust Company, a banking
institution. Mr. MacDonald is also a director of United Meridian
Corporation.

PAULA A. SNEED DIRECTOR SINCE 1994

[PICTURE] MEMBER OF THE AUDIT AND TECHNOLOGY COMMITTEES

Paula A. Sneed, age 47, joined General Foods in 1977. During her career
at General Foods, she has held numerous management positions, including
vice president, Consumer Affairs; vice president and president,
Foodservice Division; executive vice president and general manager,
Desserts Division; and executive vice president, Dinner and Enhancers
Division. Currently she is Senior Vice President, Marketing Services,
Kraft Foods, Inc. Ms. Sneed was cited by Black Enterprise Magazine as
one of the 40 most influential African Americans in Corporate America in
1993.
</TABLE>

18
<PAGE> 25

INCUMBENT DIRECTORS CONTINUING IN OFFICE FOR TERM EXPIRING IN 1997

<TABLE>
<S> <C>
RICHARD M. FAIRBANKS, III DIRECTOR SINCE OCTOBER 1993

[PICTURE] MEMBER, FINANCE AND AUDIT COMMITTEES

Mr. Fairbanks, age 54, is managing director, Domestic and International
Issues at the Center for Strategic & International Studies. He was
Ambassador-at- Large under President Reagan. He is a member of the board
of directors of SEACOR Holdings, Inc.; vice chairman of the United
States National Committee of the Pacific Economic Cooperation Council;
member, Council on Foreign Relations; founder, The American Refugee
Committee of Washington; and member, Council of American Ambassadors.

EDITH E. HOLIDAY DIRECTOR SINCE MARCH 1993

[PICTURE] MEMBER, FINANCE AND SOCIAL RESPONSIBILITY COMMITTEES

Edith E. Holiday, an attorney, age 43, was Assistant to the President of
the United States and Secretary of the Cabinet from 1990 until early
1993. Prior to her White House experience, Ms. Holiday was the General
Counsel, United States Treasury Department from 1989 to 1990 and served
as Counselor to the Secretary of the Treasury and Assistant Secretary
for Public Affairs and Public Liaison, United States Treasury Department
from 1988 to 1989. Ms. Holiday is a director of Amerada Hess
Corporation, Bessimer Trust Company, N.A., Bessimer Trust Company of New
Jersey and H. J. Heinz Company.

H. EUGENE MCBRAYER DIRECTOR SINCE APRIL 1992

CHAIRPERSON, FINANCE COMMITTEE
[PICTURE] MEMBER, COMPENSATION AND TECHNOLOGY COMMITTEES

H. Eugene McBrayer, age 63, retired as president of Exxon Chemical Com-
pany, in January 1992, after 37 years with Exxon. Mr. McBrayer is a
former chairman of the Board of the Chemical Manufacturers Association
and is currently a director of American Air Liquide, Inc. and Air
Liquide International. He is also a member of the National Council of
the World Wildlife Fund and the Advisory Committee for the Pacific
Northwest National Laboratory.

LEE M. THOMAS DIRECTOR SINCE 1991

[PICTURE] CHAIRPERSON, AUDIT COMMITTEE
MEMBER, SOCIAL RESPONSIBILITY COMMITTEE

Lee Thomas, age 50, is senior vice-president, Paper, of Georgia-Pacific
Corporation, a paper company. Prior to joining Georgia-Pacific, he was
chairman and chief executive officer of Law Companies Environmental
Group, Inc., an environmental services firm. From January 1985 to
January 1989 he was administrator, United States Environmental
Protection Agency. Mr. Thomas is also chairman of the Marine Spill
Response Corporation.
</TABLE>

19
<PAGE> 26

INCUMBENT DIRECTORS CONTINUING IN OFFICE FOR TERM EXPIRING IN 1996

<TABLE>
<S> <C>
MANFRED CASPARI DIRECTOR SINCE 1990

CHAIRPERSON, SOCIAL RESPONSIBILITY COMMITTEE
[PICTURE] MEMBER, AUDIT, NOMINATING AND TECHNOLOGY COMMITTEES

Manfred Caspari, age 70, retired as the Director General for
Competition, European Economic Community (EEC) in 1989. Prior to his EEC
experience, he worked in the Ministry of Economic Affairs for the German
Government. From January 1990 to December 1992, Dr. Caspari was Chairman
of the International Commission for the Protection of the Rhine against
pollution. Since January 1992, Dr. Caspari has been an advisor to the
Badische Stahlwerke (steelworks) in Kehl, Germany.

R. KEITH ELLIOTT DIRECTOR SINCE 1991

[PICTURE] EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
MEMBER, EXECUTIVE, FINANCE AND TECHNOLOGY COMMITTEES

R. Keith Elliott, age 53, has been Hercules' executive vice president
and chief financial officer since January, 1995, and prior thereto, he
had been senior vice president and chief financial officer since 1991.
Before joining Hercules in 1991, he had been senior vice president and
chief financial officer of Engelhard Corporation, a producer of
catalysts, engineered materials, precious metals and derivative
products. He joined Engelhard in 1981.

THOMAS L. GOSSAGE DIRECTOR SINCE 1989

CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
[PICTURE] CHAIRPERSON, EXECUTIVE COMMITTEE
MEMBER, FINANCE AND TECHNOLOGY COMMITTEES

Thomas L. Gossage, age 60, has been Hercules' chairman of the board and
chief executive officer since January 1991 and was elected president in
June 1992. He had been a senior vice president of Hercules since
September 1989 and president and chief executive officer of The Aqualon
Group, a group of entities wholly owned by Hercules, since October 1989.
Before joining Hercules in 1988 as president, Hercules Specialty
Chemicals Company, he had been a group vice president at Monsanto
Company, a chemical producer. Mr. Gossage is a director of Wilmington
Trust Corporation and The Dial Corp. Mr. Gossage is a member of the
Advisory Board of the Georgia Institute of Technology.

GAYNOR N. KELLEY DIRECTOR SINCE 1989

[PICTURE] CHAIRPERSON, NOMINATING COMMITTEE
MEMBER, AUDIT AND COMPENSATION COMMITTEES

Gaynor N. Kelley, age 63, became chairman and chief executive officer of
The Perkin-Elmer Corporation, a manufacturer of analytical
instrumentation, in December 1990. He was elected president and chief
operating officer of Perkin-Elmer in 1985 and has been a director of the
company since 1984. Mr. Kelley is a member of the Board of Trustees of
Northeast Utilities System and is a member of the board of directors of
Clark Equipment Company. He is on the Advisory Board of the Center for
Management Development at Northeastern University, and is vice chairman
of the Connecticut Business & Industry Association (CBIA) and is
chairman of Southwestern Area Commerce & Industry Association of
Connecticut, Inc. (SACIA).
</TABLE>

20
<PAGE> 27

APPENDIX 2

SUMMARY COMPENSATION TABLE

The following table shows, for the last three fiscal years, cash and other
compensation paid or accrued for those years, to each of Hercules' five most
highly compensated executive officers. PLEASE NOTE THAT THE SHARE NUMBER
MENTIONED IN THE CHART OR IN FOOTNOTES ARE ON A POST-STOCK SPLIT BASIS.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Long Term Compensation
---------------------------------
Annual Compensation Awards Payouts
- -----------------------------------------------------------------------------------------------------------------------
Name Other Restricted Securities
and Annual Stock Underlying LTICP All Other
Principal Salary Bonus Compensation Award(s) Options Payouts Compensation
Position Year ($) ($) ($) (1)($) (#) ($)(2) (3)($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
T. L. Gossage 1994 768,340 734,000 57,269 226,753 132,000 564,113 119,611
Chm., Pres., and CEO 1993 725,834 924,000 18,209 1,870,939 132,000 0 131,516
1992 680,004 816,000 11,347 0 132,000 0 71,451
- -----------------------------------------------------------------------------------------------------------------------
R. Schwartz 1994 420,250 273,000 21,066 102,146 54,000 3,773,234 55,839
Exec. VP & Pres., 1993 403,228 407,000 9,675 650,545 54,000 903,102 55,545
HAC* 1992 386,868 375,000 8,629 0 54,000 0 39,321
- -----------------------------------------------------------------------------------------------------------------------
R. K. Elliott 1994 375,826 369,000 30,212 67,679 54,000 306,233 49,742
Exec. VP & CFO** 1993 350,830 426,000 6,962 164,459 54,000 0 42,028
1992 325,000 330,000 5,545 0 54,000 0 19,144
- -----------------------------------------------------------------------------------------------------------------------
V. J. Corbo 1994 233,754 269,000 16,094 21,873 24,000 210,458 64,906
Group VP & 1993 220,420 248,000 5,444 9,220 24,000 0 52,860
Pres., HF&FP*** 1992 204,334 208,000 2,619 0 54,000 0 43,298
- -----------------------------------------------------------------------------------------------------------------------
C. D. Miller 1994 233,496 237,000 25,210 16,405 24,000 210,220 56,657
Group VP & 1993 223,330 217,000 9,668 24,000
Pres., HCSC 1992 207,200 218,000 1,341 0 54,000 0 18,856
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

Footnotes to Summary Compensation Table:

* In 1994 Mr. Schwartz held the position of Executive Vice President &
President, Hercules Aerospace Company. In January 1995, he left Hercules and
assumed the position of President & Chief Executive Officer of Alliant
Techsystems, Inc.

** In 1994, Mr. Elliott held the position of Senior Vice President & Chief
Financial Officer. In January 1995, he assumed the position of Executive
Vice President & Chief Financial Officer.

*** In 1994, Mr. Corbo held the position of Group Vice President & President,
Hercules Food & Functional Products Company. In January, 1995, he assumed
the position of Senior Vice President, Technology.

(1) The amounts appearing in this column are the dollar values of restricted
stock awards granted during each reporting year. Each value is determined by
multiplying the number of shares in each award by the closing market price
of Common Stock on the date of grant and subtracting the consideration, if
any, paid by the Named Executive. Dividends, as and when payable to
stockholders generally of Common Stock, will be paid on the restricted
stock.

As part of the LTIC Plan, the Committee has permitted executives, including
Mr. Gossage, to acquire restricted stock in exchange for compensation,
including salary, bonus deferred compensation and nonqualified pension.
These acquisitions demonstrate a substantial commitment by Mr. Gossage and
these executives to Hercules' future success, since termination of
employment can result in the forfeiture of all profits since acquisition.

The aggregate number of restricted stock holdings of each Named Executive
as of December 31, 1994, and the value of such holdings (determined by
taking the number of shares multiplied by the closing market price of
Common Stock on December 31, 1994, net of any consideration paid by the
Named Executive) are: T. L. Gossage, 688,269 shares, valued at $14,522,243;
R. Schwartz, 198,879 shares, valued at $3,240,607; R. K. Elliott, 82,779
shares,

21
<PAGE> 28

valued at $1,847,998; V. J. Corbo, 18,402 shares, valued at $509,667; and
C. D. Miller, 16,710 shares, valued at $499,894. Included in the above
totals are restricted shares that each Named Executive purchased under the
terms of the LTIC Plan. The aggregate amount paid for these shares by the
Named Executives was $11,099,908. The total for Mr. Gossage also includes
45,000 shares that he purchased in 1991.

In addition to the restricted stock awards cited above, year-end phantom
stock holdings (the cash equivalent of restricted stock) for the Named
Executives are: R. Schwartz 2,100 units valued at $80,763; V. J. Corbo,
1,200 units valued at $46,150; and C. D. Miller, 1,200 units valued at
$46,150. These amounts are valued in the same manner as the restricted
stock awards shown in this table.

(2) Amounts shown in this column are the payout on performance shares first
granted in 1991. The payout was in the form of either Hercules Common Stock
or Hercules restricted stock. The amounts shown reflect the value of the
award on the date the payout was determined. Amounts paid in restricted
stock are not reflected in the Restricted Stock Awards Column.

In addition, Mr. Schwartz had an opportunity to receive up to 120,000
phantom units under the Phantom Stock Plan upon the achievement of
pre-established performance objectives for the Hercules Aerospace Company
during a performance period extending from January 1, 1992, through December
31, 1994. The amount reported in this column reflects a payout to Mr.
Schwartz on 84,000 phantom units from this award in 1994 and 36,000 in 1993.

(3) The components of the amounts shown in this column consist of (i) matching
contributions made by Hercules on behalf of each of the Named Executives
under the Hercules' Savings and Investment Plan and the Hercules
Nonqualified Savings Plan -- T. L. Gossage, $50,558; R. Schwartz, $23,927;
R. K. Elliott, $23,614; V. J. Corbo, $14,155; and C. D. Miller, $13,485;
(ii) dividend and interest credits accrued in 1994 on performance shares
and/or stock options under the LTIC Plan -- T. L. Gossage, $39,238; R.
Schwartz, $18,285; R. K. Elliott, $18,285; V. J. Corbo, $38,489; and C. D.
Miller, $38,489; and (iii) the dollar value of premiums for life insurance
under Hercules' Executive Survivor Benefit Plan -- T. L. Gossage, $29,815;
R. Schwartz, $13,627; R. K. Elliott, $7,843; V. J. Corbo, $12,262; and C. D.
Miller, $4,683.

22
<PAGE> 29

APPENDIX 3

OPTION GRANTS IN LAST FISCAL YEAR

The following table contains information regarding the grant of stock
options in 1994 to the five most highly compensated executive officers of
Hercules. All grants were made in the form of non-qualified stock options.
PLEASE NOTE THAT THE NUMBER OF SECURITIES UNDERLYING OPTIONS IS ON A POST-SPLIT
BASIS.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Options Granted in Last Fiscal Year
- ------------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
- ------------------------------------------------------------------------------------------------------------------------------
% of
Total
Number of Options
Securities Granted
Underlying to Exercise
Options Employees or Base
Granted in Fiscal Price Expiration
Name (#)(1) Year ($/Sh) Date 0%(2) 5%($)(2) 10%($)(2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
T. L. Gossage 132,000 15.5 $35.29167 5/3/04 0 $2,929,706 $7,424,449
R. Schwartz 54,000 6.3 35.29167 5/3/04 0 1,198,516 3,037,275
R. K. Elliott 54,000 6.3 35.29167 5/3/04 0 1,198,516 3,037,275
V. J. Corbo 24,000 2.8 35.29167 5/3/04 0 532,674 1,349,900
C. D. Miller 24,000 2.8 35.29167 5/3/04 0 532,674 1,349,900
All Optionees 872,700 -- 35.604067(3) 0 19,540,806 49,520,238
All Shareholders 116,635,392 -- 35.604067 -- 0 2,611,607,115 6,618,325,186
Optionee Gain as
% of All
Shareholders
Gain -- -- -- -- 0 0.75% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Footnotes to Option Grants Table:

(1) Grants to Named Executives were made with the following exercise dates: 40%
may be exercised on or after 5/3/95; 40% on or after 5/3/96; and the
remaining 20% on or after 5/3/97.

(2) The dollar amounts illustrate value that might be realized upon the exercise
of the options immediately prior to the expiration of their term, covering
the specific compounded rates of appreciation set by the Securities and
Exchange Commission (5% and 10%) and are not, therefore, intended to be
forecasts by Hercules of possible future appreciation, if any, of the stock
price of Hercules. The 0% column illustrates that value of the options to
the optionee is dependent on stock price appreciation.

(3) Weighted average price for all options granted to employees during 1994.

23
<PAGE> 30

APPENDIX 4

OPTION EXERCISES AND YEAR-END VALUE TABLE

The following table shows information with respect to the five most highly
compensated executive officers regarding the exercise of options during the last
fiscal year and unexercised options held by them as of December 31, 1994. PLEASE
NOTE THAT THE NUMBER OF SECURITIES UNDERLYING OPTIONS IS ON A POST-STOCK SPLIT
BASIS.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Value Number of Securities Value of Unexercised
Shares Acquired Realized Underlying Unexercised In-the-Money Options
Name on Exercise (#) ($) Options at FY-End (#) at FY-End ($)(1)
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
T. L. Gossage 0 0 538,200 237,600 $12,878,650 $2,026,200
R. Schwartz 0 0 175,800 97,200 $ 4,009,725 $ 828,900
R. K. Elliott 0 0 91,800 97,200 $ 1,885,725 $ 828,900
V. J. Corbo 0 0 72,900 73,200 $ 1,625,596 $1,032,150
C. D. Miller 23,100 $573,672 43,800 73,200 $ 916,725 $1,032,150
- ---------------------------------------------------------------------------------------------------------
</TABLE>

(1) The closing price for Common Stock as reported by the New York Stock
Exchange on December 31, 1994, was $115.375. The price has been adjusted to
$38.458 to reflect the post-split stock price. Value is calculated on the
basis of the difference between the option exercise price and $38.458
multiplied by the number of shares of Common Stock underlying the option.

24
<PAGE> 31

APPENDIX 5

LONG-TERM INCENTIVE PLAN AWARDS TABLE

The following table provides information with respect to awards made to the
five most highly compensated executive officers of the LTIC Plan. PLEASE NOTE
THAT THE NUMBERS IN THIS APPENDIX ARE ON A POST-STOCK SPLIT BASIS.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Estimated Future Payouts under
Non-Stock Price Based Plans
Number of Performance or ----------------------------------------
Shares, Units Other Period Threshold Target Maximum
or Other Until Maturation (#) (#) (#)
Name Rights (#)(1) or Payment (2)(5) (3)(5)(6) (4)(5)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
T. L. Gossage 17,400 1/1/94-12/31/96 0 17,400 34,800
R. Schwartz 8,100 1/1/94-12/31/96 0 8,100 16,200
R. K. Elliott 8,100 1/1/94-12/31/96 0 8,100 16,200
V. J. Corbo 5,400 1/1/94-12/31/96 0 5,400 10,800
C. D. Miller 5,400 1/1/94-12/31/96 0 5,400 10,800
- ----------------------------------------------------------------------------------------------------
</TABLE>

(1) The totals in this column reflect the number of performance shares awarded
to each of the named executive officers in 1994 under the Hercules
Incorporated Long Term Incentive Compensation Plan. The actual amount
payable at the conclusion of the performance period is dependent on the
Company's attainment of certain performance goals, including a predetermined
corporate return on equity ("ROE") and a predetermined return on capital
("ROC") of the executive's business unit. As determined by the Compensation
Committee, the above target performance shares will vest to the named
executive officer if Hercules achieves a certain three-year average ROE.

(2) The totals in this column represent the number of shares of Common Stock
that could be received by the named executive officer upon the attainment of
a predetermined minimum performance goal.

(3) The amounts in this column represent the number of shares of Common Stock
that would be received by the named executive officer upon the full
attainment of the predetermined performance goals as set out in Footnote
(1), above.

(4) The amounts in this column reflect the number of shares of Common Stock that
could be received by the named executive officer upon the attainment of
predetermined maximum performance goals. Upon attainment of the maximum
performance goal, the payout received by the executive would consist of the
number of shares of Common Stock payable upon the attainment of the target
performance goal plus an additional amount that would be paid either in
Common Stock or cash at the Compensation Committee's option. The cash value
would be calculated based on the fair market value of the Common Stock on
the date of the payout.

(5) Attainment of a performance level between the predetermined minimum, target,
and maximum goals would yield a payout based on the proportional amount of
the target goal achieved or surpassed.

(6) See New Benefits Table for change in form of award based on proposed
Amendments to the LTIC Plan.

25
<PAGE> 32

APPENDIX 6

NEW BENEFITS TABLE

The following table provides information to the individuals and groups
named below regarding benefits or amounts that will be received as a result of
the amendments to the LTIC Plan. PLEASE NOTE THAT THE NUMBER OF UNITS IN THIS
APPENDIX IS ON A POST-SPLIT BASIS.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Amendments to
Hercules Incorporated
Long Term
Name and Position Incentive Plan(1)
- ------------------------------------------------------------------------------------------------
Dollar Value Number of
($) Units
-----------------------------------
<S> <C> <C>
T. L. Gossage, Director and Officer 0 69,600
R. Schwartz, Former Director and Officer 0 32,400
R. K. Elliott, Director and Officer 0 32,400
V. J. Corbo, Officer 0 21,600
C. D. Miller, Officer 0 21,600
Executive Group 0 300,000
Non-Employee Director Group 0 0
Non-Executive Officer Employee Group 0 170,000
- ------------------------------------------------------------------------------------------------
</TABLE>

(1) The amendments to the LTIC Plan allow the Compensation Committee to change
the form of the LTIC Plan awards. A final decision on the type and number of
awards to be used has not been reached. However, the Committee intends to
replace Performance Shares with Performance Accelerated Stock Options
yielding approximately the same value as the Performance Shares they are
intended to replace. Accordingly, Performance Shares awarded in 1994 for the
Named Executives, the Executive Group, and the Non-Executive Officer
Employees will be replaced with approximately the number of stock options
listed above.

<PAGE> 33

APPENDIX 7

PENSION PLANS TABLE

The following table shows the estimated annual pension benefits payable to
a covered participant at normal retirement age under Hercules' qualified
benefits pension plan, as well as nonqualified supplemental benefits, based on
the stated remuneration and years of service with Hercules and its subsidiaries.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
$ 125,000 28,182.00 37,576.00 46,970.00 56,364.00 67,758.00
175,000 40,182.00 53,576.00 66,970.00 80,364.00 93,758.00
225,000 52,182.00 69,576.00 86,970.00 104,364.00 121,758.00
250,000 58,182.00 77,576.00 96,970.00 116,364.00 135,758.00
300,000 70,182.00 93,576.00 116,970.00 140,364.00 163,758.00
400,000 94,182.00 125,576.00 156,970.00 188,364.00 219,758.00
450,000 106,182.00 141,576.00 176,970.00 212,364.00 247,758.00
500,000 118,182.00 157,576.00 196,970.00 236,364.00 275,758.00
600,000 142,182.00 189,576.00 236,970.00 284,364.00 331,758.00
700,000 166,182.00 221,576.00 276,970.00 332,364.00 387,758.00
800,000 190,182.00 253,576.00 316,970.00 380,364.00 443,758.00
900,000 214,182.00 285,576.00 356,970.00 428,364.00 499,758.00
1,000,000 238,182.00 317,576.00 396,970.00 476,364.00 555,758.00
1,750,000 418,182.00 557,576.00 696,970.00 836,364.00 975,758.00
2,000,000 478,182.00 637,576.00 796,970.00 956,364.00 1,115,758.00
- ---------------------------------------------------------------------------------------------
</TABLE>

Annual contributions by Hercules to its qualified pension plan, if any are
required, are determined actuarially by an independent actuary, and no amount is
attributed to an individual employee. Due to the funded status of the Plan,
there was no Hercules contribution to the Plan in 1994.

Except in special cases (e.g., see below Appendix 8), the aggregate
retirement benefit, under both the qualified and nonqualified plans, is a
monthly amount determined by taking the sum of (i) 1.2% of the employee's
average monthly earnings (based on the highest five consecutive calendar years
during the last 10 calendar years of employment) up to one-half the Social
Security Tax Base ($60,600 in 1994), and (ii) 1.6% of the employee's average
monthly 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 monthly earnings" consist of salary
plus annual incentive or bonus compensation.

For Messrs. Gossage, Elliott, Schwartz, Corbo and Miller, compensation used
for calculating retirement income benefits consists of the highest 5 consecutive
years of average monthly earnings. These amounts for 1994 are shown under the
"Salary" and "Bonus" columns of the Summary Compensation Table. The estimated
credited years of service for Messrs. Gossage, Elliott, Schwartz, Corbo and
Miller are 33, 10, 37, 25 and 27, respectively.

27
<PAGE> 34

APPENDIX 8

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS

It is and has been for many years Hercules' policy to indemnify its
officers and directors against any costs, expenses and other liabilities to
which they may become subject by reason of their service to Hercules, and to
insure its directors and officers against such liabilities, as and to the extent
permitted by applicable law and in accordance with the principles of good
corporate governance. In this regard, Hercules' By-Laws require that Hercules
indemnify and advance costs and expenses to its directors and officers as
permitted by the law of the state of Delaware.

In furtherance to the above indemnification policy, Hercules has purchased
for its directors and officers liability insurance, and has entered into
employment and indemnification agreements with certain employee directors,
officers and other key management personnel. This insurance, together with the
indemnification agreements, and the employment agreements described in the next
succeeding paragraphs, supplement the provisions in Hercules' Restated
Certificate of Incorporation, which eliminates the potential monetary liability
of directors to Hercules or its stockholders in certain situations as permitted
by law. The cost for such insurance was $942,875 in 1992; $1,161,790 in 1993;
and $995,080 in 1994.

Since 1986, Hercules has also entered into separate agreements with certain
employee directors, officers and other key management (including Named
Executives), all of the executive officers named in the Summary Compensation
Table, and a limited number of other key management personnel, that become
operative only upon a change of control of Hercules or other specified event.

For purposes of these agreements, a "Change in Control" shall be deemed to
have occurred if any person (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as such term is modified
in Sections 13(d) and 14(d) of the Exchange Act), other than (1) any employee
plan established by the Company, (2) the Company or any of the Company's
affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act), or (3)
a corporation owned, directly or indirectly, by stockholders of the Company in
substantially the same proportions as their ownership of the Company, is or
becomes the beneficial owner (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such person any securities
acquired directly from the Company or its affiliates) representing (20%) or more
of either the then outstanding shares of stock of the Company ("Stock") or the
combined voting power of the Company's then outstanding voting securities.

These agreements provide for the continuation of salary and certain
benefits for a maximum period of three (3) years after a change in control but
may terminate sooner under certain circumstances. The agreements also provide
that, for as long as they are operative, the contracting executive shall also be
given three additional years of service for purposes of calculating pension
benefits and, to the extent needed for taking an unreduced early retirement, the
contracting executive shall have up to five years added to his actual age
(provided no credit shall accrue to the executive beyond his 65th birthday).
This additional benefit is provided on a nonqualified, unfunded basis.

Mr. Gossage has an arrangement with Hercules whereby he is entitled to
receive pension benefits calculated as though his service with Monsanto Company
had been spent with Hercules, offset by the actual deferred vested pension to
which he is entitled from Monsanto.

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<PAGE> 35

Mr. Schwartz had an arrangement with Hercules whereby his retirement
benefit under the Hercules Pension Plan was calculated using his total credited
service at his former employer and Hercules, less the actual retirement income
received from the former employer.

Mr. Elliott has an arrangement with Hercules whereby unless he voluntarily
terminates his employment or is otherwise discharged for cause, Hercules will
make benefits and incentive compensation calculations as if Mr. Elliott were 55
years of age until February 1997.

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APPENDIX 9: MAJOR FEATURES OF THE LTIC PLAN

Set forth below is a brief description of the major features of the LTIC
Plan, which description does not purport to be complete and is qualified in its
entirety by reference to the text of the LTIC Plan. A COPY OF THE LTIC PLAN HAS
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY STOCKHOLDER DESIRING
A COPY OF THE LTIC PLAN MAY OBTAIN IT BY WRITING TO HERCULES, 1313 NORTH MARKET
STREET, WILMINGTON, DE 19894-0001, ATTENTION: CORPORATE SECRETARY, IN TIME TO BE
RECEIVED ON OR BEFORE APRIL 7, 1995.

EFFECTIVE DATE AND EXPIRATION

The term of the LTIC Plan currently extends until March 31, 1996, and the
Board has the authority to extend the termination date until March 31, 2000,
without further action by the stockholders. The proposed amendment would specify
April 30, 1998 as the termination date for the LTIC Plan. The LTIC Plan could
not be extended beyond April 30, 1998 without stockholder approval. Although no
awards may be made under the LTIC Plan after its termination date, awards made
prior to the termination date may have a distribution or payout date after such
termination date.

NUMBER OF SHARES AVAILABLE

The LTIC Plan currently provides that up to 7,200,000 shares of Common
Stock for stock options and 6,000,000 shares of Common Stock for other equity
awards may be granted during the period from April 1, 1991 through March 31,
1996. The Board may increase these limits by up to 4,800,000 shares for stock
options and 4,200,000 shares for other equity awards for a four-year period
beyond March 1996.

The proposed amendment changes the authorization as follows: (i) under
awards made to date, including potential maximum awards, up to 3,600,000 shares
of Common Stock have been issued for stock options and up to 4,400,000 shares
have been issued for other equity awards and (ii) authorizes awards for up to
5,200,000 shares of Common Stock for stock options during the period May 1,
1994, through April 30, 1998, and up to 1,600,000 shares during the period May
1, 1995, through April 30, 1998, for other equity awards. Under the proposed
amendment, the board would not have the authority to increase these limits
without stockholder approval. The limits would be adjusted to reflect stock
splits, stock dividends, and other changes in capitalization of the Company.

INDIVIDUAL LIMIT

The proposed amendments would limit to 1,500,000 the number of stock
options (including performance accelerated stock options) that could be awarded
to any individual during the period from May 1, 1994 through April 30, 1998. By
adding this individual limit, Hercules will be able to meet the exception for
performance-based compensation under Section 162(m) of the Internal Revenue Code
and any compensation received by certain senior officers as a result of the
exercise of stock options or performance accelerated stock options granted under
the LTIC Plan will not be subject to the $1,000,000 deduction limit.

ADMINISTRATION

The LTIC Plan is administered by the Compensation Committee of the Board
(the "Committee") which consists entirely of non-employee directors as defined
for purposes of Section 162(m) of the Internal Revenue Code. The Committee has
full authority to interpret the LTIC Plan and to establish rules for its
administration.

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<PAGE> 37

ELIGIBILITY FOR AWARDS

Awards can be made to any employee of Hercules or certain specified
subsidiaries. It is impossible to determine the exact number of persons who will
be eligible under the LTIC Plan during its term because the selection of
participants depends on discretionary decisions of the CEO and the Committee.

AWARDS

The LTIC Plan currently provides for the award of stock options (both
incentive stock options and nonqualified stock options), stock appreciation
rights, performance shares, restricted stock and phantom units. Under the
proposed amendments, the LTIC Plan would also permit the award of performance
accelerated stock options and cash value awards. (Each of these awards is
described more fully below.) The form of each award, and the number of shares of
Common Stock or the amount of cash subject to each award, is determined by the
Committee for all LTIC Plan participants who are subject to Section 16 of the
Securities Exchange Act of 1934 and by the CEO for all participants who are not
subject to Section 16.

Stocks Options: Incentive and Nonqualified. Options granted pursuant to
the LTIC Plan may be either in the form of incentive stock options (which are
options that meet the requirements of Code sec. 422) or in the form of
nonqualified stock options. A stock option gives the holder the right to
purchase, during the term of the option, a number of shares of Common Stock at a
price determined on the date the option is granted. The option exercise price
and the time or times at which the option may be exercised are determined at the
time of grant. The option price may not be less than 100% of the fair market
value of the Common Stock on the date of grant. The option price may be paid in
cash or, with the Committee's permission, in the form of Common Stock under such
rules as the Committee may impose, based on the fair market value of such Common
Stock on the date of exercise, or a combination of cash and Common Stock.
However, in the case where the Committee permits payment in the form of Common
Stock, it is the intention of the Committee to allow only such exercises using
shares that have been held by the optionee for more than six months. No shares
shall be issued upon exercise of an option until full payment of the option
price has been made. Stock options may be exercised at such time or times as may
be specified at the time of grant, but in no event more than ten years after the
date of grant. The proposed amendment would extend the permissible vesting
period for stock options from 5 years to 9 1/2 years.

Stock Appreciation Rights ("SAR"). SARs may be granted in connection with
a stock option granted under the LTIC Plan or unrelated to any option. SARs
entitle the holder, upon exercise of the SAR, to receive an amount equal to the
difference between the fair market value of the shares of Common Stock with
respect to which the SAR is being exercised and the option price. Payment may be
made in cash, in shares of Common Stock, or a combination of the two, as the
Committee determines.

Performance Shares. Performance Shares give the holder the right to
receive shares of Common Stock (up to a proportional amount of the number of
shares of Common Stock actually paid out) at the end of a specified performance
period if specified performance goals are met. A performance period may be from
one to five years. Performance goals are typically corporate objectives and
include specified levels of earnings per share, return on investment, return on
shareholder equity and other goals related to the performance of Hercules, a
particular business unit, corporate staff or individual performance. When
circumstances occur that cause predetermined performance objectives to be an
inappropriate measure of performance, the Committee, in its discretion, may
adjust the performance goals. Performance Shares representing achievement of the
target performance goals are issued in the grantee's name at the time of the
award, but held in custody by Hercules during the performance period. The
grantee is generally entitled to vote the shares and to receive dividends
payable in respect of the shares, but may not transfer them. If the target
performance goals are met during the specified period, all shares held in
custody will be

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released and delivered to the participant. If the maximum performance goals are
met, the portion of the award in excess of target will be paid in the form of
cash or Hercules Common Stock as determined by the Committee.

Restricted Stock. In a Restricted Stock award, shares of Common Stock are
granted to an employee for no consideration, but will be forfeited to Hercules
if the recipient ceases to be an employee of Hercules or its subsidiaries (for
any reason other than death, disability, transfer to a related entity or normal
retirement) during a restriction period specified at the time of grant. The
restriction period may be from one to five years. Like target Performance
Shares, Restricted Stock is issued in the employee's name at the time of grant,
but held in custody by Hercules until the end of the restriction period. While
the shares are held in custody, the employee will be entitled to vote the shares
and to receive dividends paid on such shares.

Phantom Units. A phantom unit does not give the holder the right to
receive any shares of Common Stock, but instead involves the creation of an
unfunded account for the participant, the value of which is measured by
reference to the value of the Common Stock. Units vest and are payable at the
end of the vesting period specified at the time of grant, or sooner if the
participant retires, dies or becomes disabled. The vesting period may be from
one to five years.

Performance Accelerated Stock Options. The proposed amendment would
authorize the granting of performance accelerated stock options ("PASOs"). PASOs
are identical in all respects to stock options, except that the vesting of PASOs
may be accelerated if certain specified performance goals are met during the
term of the PASO.

Cash Value Awards. The proposed amendment would authorize the granting of
Cash Value Awards. Cash Value Awards are awards, denominated in dollars, which
are payable in cash or stock if specified performance goals are met by the end
of a specified performance period. The performance goals applicable to Cash
Value Awards will generally be similar to those applied to Performance Shares.

Other Market-Based or Performance-Based Awards. The LTIC Plan also
permits the Committee or the CEO to grant any other type of award that is valued
in whole or in part by reference to the value of Common Stock, on such terms and
conditions as it may determine.

TERMINATION OF EMPLOYMENT

Awards made under the LTIC Plan which have not previously been exercised or
vested will generally be forfeited if the holder ceases to be an employee of
Hercules or its subsidiaries, except in the case of the participant's
retirement, death or disability, or termination of employment due to a reduction
in force, a transfer to a related entity or a decrease in Hercules' ownership of
a subsidiary to below 50%, but more than 20%.

Nonqualified Stock Options. If a holder of nonqualified options ceases to
be employed by Hercules or its subsidiaries for any of the foregoing reasons,
all of his outstanding options will immediately become exercisable and may be
exercised for one year (in the case of a reduction in force or the participant's
death or disability) or three years (in the case of retirement, transfer to a
related entity or a decrease in Hercules' ownership of a subsidiary), but not
beyond the expiration date of the option. The proposed amendments would extend
the exercise period for options granted after April 30, 1994 to five years in
the case of a participant's retirement.

Incentive Stock Options. The LTIC Plan does not provide for the
acceleration of the exercisability of incentive stock options under any
circumstances, but does allow the holder of exercisable incentive stock options
to exercise them for a period of three months following termination of
employment (one year in the case of death or disability), but not beyond the
expiration date of the option.

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<PAGE> 39

Performance Accelerated Stock Options. If the holder of PASOs retires,
any PASO not exercisable at the date of the holder's retirement will become
exercisable at the earlier of (i) when the PASOs become exercisable due to
performance goals being met, (ii) 4 1/2 years after the holder's retirement,
regardless of performance or (iii) 9 1/2 years after the date of the award. Any
PASOs that become exercisable pursuant to the preceding sentence and any PASOs
exercisable on the date of the holder's retirement may be exercised for a period
of five years, but not beyond the expiration date of the PASO. If the holder of
PASOs dies or becomes disabled, any PASO not exercisable on such date will
become exercisable at the earlier of (i) when the PASO's become exercisable due
to performance goals being met, (ii) six months after the holder's death or
termination of employment due to disability or (iii) 9 1/2 years after the date
of the award. Any PASOs that become exercisable pursuant to the preceding
sentence and any PASOs exercisable on the date of the holder's death or
termination of employment due to disability may be exercised for a period of
year, but not beyond the expiration date of the PASO. In the event of a
reduction in force, a transfer to a related entity or a decrease in the
Company's ownership of a subsidiary, the Committee or the CEO, as the case may
be, will determinate the timing, terms and conditions for the exercise of the
PASO, but not beyond the expiration date of the PASO.

Restricted Stock and Phantom Unit Awards. If a participant retires, dies
or becomes disabled, all restrictions applicable to his Restricted Stock and
Phantom Units will lapse. If the participant's employment is terminated due to a
transfer to a related entity or a decrease in the Company's ownership of a
subsidiary, all restrictions will remain in effect until the end of the
applicable restricted period.

Performance Shares and Cash Value Awards. A holder who retires will be
entitled to his Performance Shares or Cash Value Awards at the end of the
applicable performance period, to the extent that the applicable performance
goals were met during the period. If the holder of Performance Shares or a Cash
Value Award terminates employment due to a reduction in force, he will be
entitled to receive, at the end of the applicable performance period, the
minimum payout provided under his award, prorated to reflect the portion of the
performance period during which he was an employee. If he terminates employment
due to death or disability, he will be entitled to receive his Performance
Shares or Cash Value Award (paid in cash) at the target award level on the date
of termination. If his employment terminates due to a transfer to a related
entity or a decrease in the Company's ownership of a subsidiary, all
restrictions applicable to his Performance Shares and Cash Value Awards will
remain in effect.

Discretion. The Committee and the CEO generally have discretion to
provide for earlier vesting or to waive restrictions applicable to awards, to
the extent such modifications are deemed to be in the best interests of
Hercules.

CHANGE IN CONTROL

In the event of an unsolicited change in control (as defined in the LTIC
Plan), all outstanding stock options, SARs and PASOs shall become immediately
exercisable for a period of 60 days and all other awards shall become fully
payable within 30 days at the maximum level of performance.

AMENDMENT

The Board can amend, suspend or terminate the LTIC Plan at any time but
cannot, without stockholder approval, materially increase the benefits accruing
to LTIC Plan participants, materially modify the requirements for eligibility,
extend the term of the LTIC Plan or increase the number of shares of Common
Stock that may be issued under the LTIC Plan.

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FEDERAL INCOME TAX CONSEQUENCES

The following is a brief and general discussion of the principal Federal
income tax rules applicable to LTIC Plan awards:

Stocks Options and PASOs. There is no tax incurred by the participant (or
expense deduction for Hercules) upon the grant. At the time of exercise of a
nonqualified stock option or PASO, the difference between the exercise price and
the fair market value of Common Stock on the date of exercise will constitute
ordinary income. Hercules will be allowed a deduction equal to the amount of
ordinary income realized by the participant. In the case of incentive stock
options, although no income is realized upon exercise and Hercules is not
entitled to a deduction, the excess of the fair market value on the date of
exercise over the exercise price is treated by the participant as an item of tax
preference for alternative minimum tax purposes. If the participant does not
dispose of the shares acquired on the exercise of an incentive stock option
within one year after their receipt or within two years after the grant of the
stock option, gain or loss realized on the subsequent disposition of the shares
will be treated as long-term capital gain or loss. In the event of an earlier
disposition, the participant may realize ordinary income and Hercules will be
entitled to a deduction, equal to the amount of such income, at the time such
income is realized by the participant.

SARs. The participant will not realize any income at the time of grant of
a SAR. Upon the exercise of a SAR, any cash received and the fair market value
on the exercise date of any shares of Common Stock received will constitute
ordinary income to the participant. Hercules will be entitled to a deduction in
the amount of such income at the time of exercise.

Restricted Stock. A participant normally will not realize taxable income
upon an award of Restricted Stock, and Hercules will not be entitled to a
deduction, until the termination of the restrictions, except with respect to the
dividends, or dividend equivalents, received by the participant. Upon
termination of restrictions, the participant will realize ordinary income in an
amount equal to the fair market value of the Common Stock at that time and
Hercules will be entitled to a deduction in the same amount. However, a
participant may elect to realize ordinary income in the year the Restricted
Stock is awarded in an amount equal to the fair market value at the time of the
award, determined without regard to the restrictions. In this event, Hercules
will be entitled to a deduction in such year in the same amount, and any gain or
loss realized by the participant upon subsequent disposition of the stock will
be capital gain or loss. If, after making this election, any Restricted Stock is
forfeited, or if the market value at vesting is lower than the amount on which
the participant was taxed, the participant cannot then claim a deduction.

Phantom Units, Performance Awards, Cash Value Awards and Other Market- or
Performance-Based Awards. A participant normally will not realize taxable
income upon the award of Phantom Units, Performance Awards, Cash Value Awards or
other Market-Based Awards or Performance-Based Awards. Subsequently, when
conditions and requirements established with respect to the grants have been
satisfied and the payment amount determined, any cash and the fair market value
of any shares of Common Stock received, or not subject to substantial risk of
forfeiture, whichever occurs earlier, will constitute ordinary income to the
participant in the year in which paid or when no longer subject to a substantial
risk of forfeiture, and Hercules will be entitled to a deduction in the same
amount. Performance awards up to target level are subject to the same tax
consequences as Restricted Stock described above.

Withholding. Hercules shall have the right to reduce the number of shares
of Common Stock deliverable pursuant to the LTIC Plan by an amount which would
have a fair market value equal to the amount of all federal, state, or local
taxes required to be withheld, or to deduct the amount of such taxes from any
cash payment to be made to the participant, pursuant to the LTIC Plan or
otherwise.

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CERTAIN ACCOUNTING CONSEQUENCES

Under current generally accepted accounting principles, neither the grant
nor the exercise of stock options or PASO will result in a charge to Hercules'
earnings. The award of SARs requires a charge against earnings for the
appreciation on the SARs which have become exercisable and which are anticipated
will be exercised; the amount of such charge is dependent upon the amount, if
any, by which the fair market value of Hercules' Common Stock exceeds the option
price provided for in the related option. As to Phantom Units, a charge against
earnings over the vesting period is required for the fair market value of
equivalent shares of Common Stock at the time of grant adjusted for changes in
stock price. With respect to awards of Performance Shares, periodic estimates of
the compensation expense will be charged against Hercules' earnings over the
performance period based on the likelihood that performance goals will be
achieved and the movement in Common Stock price; the aggregate compensation
expense will equal the number of shares ultimately earned multiplied by the
market price of Hercules' Common Stock at the end of the performance period. The
fair market value of the shares of Restricted Stock Awards on the date of award
will be charged ratably against earnings as compensation expense over the
restriction period.

COMPLIANCE WITH LAWS

The Plan and the grant of Awards shall be subject to all applicable Federal
and state laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required. It is intended that the Plan be applied
and administered in compliance with Rule 16b-3. If any provision of the Plan
would be in violation of Rule 16b-3, if applied as written, such provision shall
not have effect as written and shall be given effect so as to comply with Rule
16b-3, as determined by the Committee. The Board is authorized to amend the Plan
and to make any such modifications to Award Commitments to comply with Rule
16b-3, and to make any such other amendments or modifications as it deems
necessary or appropriate to better accomplish the purposes of the Plan in light
of any amendments made to Rule 16b-3.

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<PAGE> 42

HERCULES INCORPORATED

LONG TERM INCENTIVE COMPENSATION PLAN

(AMENDED AND RESTATED AS OF APRIL 27, 1995)

Hercules Incorporated
Hercules Plaza
Wilmington, DE 19894-0001
April 27, 1995

<PAGE> 43
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(1) Accelerated Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(2) Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(3) APD Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(4) Attributable Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(5) Award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(6) Award Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(7) Award Items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(8) Base Salary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(9) Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(10) Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(11) Bonus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(12) Cash Value Award or CVA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(13) CEO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(14) Change in Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>

- 98 -

<PAGE> 44

<TABLE>
<S> <C>
(15) Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(16) Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(17) Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(18) Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(19) Date of Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(20) Designated Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . 5
(21) Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(22) Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(23) Grantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(24) Grantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(25) Hercules Incorporated Deferred Compensation Plan . . . . . . . . . . . . . . 7
(26) Hercules Incorporated Non-Qualified Savings Plan . . . . . . . . . . . . . . 7
(27) Hercules Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(28) Hercules Pension Restoration Plan . . . . . . . . . . . . . . . . . . . . . . 7
(29) Incentive Stock Option or ISO . . . . . . . . . . . . . . . . . . . . . . . . 7
(30) Management Incentive Compensation Plan . . . . . . . . . . . . . . . . . . . 8
(31) Maximum Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(32) Minimum Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(33) Nonqualified Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(34) Nonreporting Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(35) Normal Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(36) Normal Vesting Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(37) Option or Stock Option . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(38) Optionee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>

- 99 -

<PAGE> 45
<TABLE>
<S> <C>
(39) Option Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(40) Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(41) Other Market-Based Awards . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(42) Other Performance-Based Awards . . . . . . . . . . . . . . . . . . . . . . . 9
(43) Participating Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(44) PASO Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(45) Payout Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(46) Performance Accelerated Stock Option or "PASO" . . . . . . . . . . . . . . . 10
(47) Performance Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(48) Performance Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(49) Performance Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(50) Performance Share Award . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(51) Performance Share Fair Market Value . . . . . . . . . . . . . . . . . . . . . 11
(52) Phantom Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(53) Phantom Unit Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(54) Phantom Unit Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . 11
(55) Reduction in Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(56) Related Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(57) Reporting Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(58) Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(59) Restricted Stock Award . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(60) Restricted Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(61) Restriction Range . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(62) Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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(63) Rule 16b-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(64) SAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(65) SAR Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(66) Stock Appreciation Right. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(67) Stock Appreciation Right Award. . . . . . . . . . . . . . . . . . . . . . . . . 13
(68) Stock Option Award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(69) Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(70) Substitution Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(71) Suspension Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(72) Target Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.2 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
STOCK AVAILABLE FOR AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.1 Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.2 Number of Shares Deliverable . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.3 Reusable Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.4 Shares Not Charged Against Available Shares . . . . . . . . . . . . . . . . . . 16

ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
AWARDS AND AWARD AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.2 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.3 Terms and Conditions; Award Commitments . . . . . . . . . . . . . . . . . . . . 18
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4.3.1 Terms And Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.3.2 Award Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
OPTIONS AND STOCK APPRECIATION RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.1 Award of Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.1 Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.2 Types of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.3 Substantial Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.4 Maximum Award To An Individual. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.2 Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.3 Option Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.4 Exercise of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.4.1 Exercisability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.4.2 Certain Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.4.3 Method of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.5 Time and Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5.1 Form of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5.2 Time of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5.3 Methods for Tendering Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5.4 ISO Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.6 Delivery of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.7 Stockholder Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.8 Incentive Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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5.8.1 Individual Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.8.2 Code Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.8.3 Notice of Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.9 Stock Appreciation Rights Awards. . . . . . . . . . . . . . . . . . . . . . . . 26
5.9.1 Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.9.2 SAR Exercise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.9.3 Value of SAR Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.9.4 Time and Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.9.5 Effect of SAR and Option Exercises. . . . . . . . . . . . . . . . . . . . . . . 28
5.9.6 Nature of SARs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.10 Performance Accelerated Stock Options Awards . . . . . . . . . . . . . . . . . 29
5.10.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.10.2 Accelerated Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.10.3 PASO Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.10.4 Exercisability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.10.5 Corporate or Business Goals . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.10.6 PASOs Treated Like Options . . . . . . . . . . . . . . . . . . . . . . . . . . 31

ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
PERFORMANCE SHARE AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.2 Performance Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.3 Performance Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.4 Payout Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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Section 6.5 Issuance of Stock and Stock Certificates . . . . . . . . . . . . . . . . . . . 33
6.5.1 Issuance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.5.2 Custody and Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.6 Restrictions and Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.7 Stockholder Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.8 Delivery of Shares and Cash Payments. . . . . . . . . . . . . . . . . . . . . . 36
6.8.1 Determination of Performance Results and Award Settlement. . . . . . . . . . . 36
6.8.2 Delivery of Shares and Payment of Cash . . . . . . . . . . . . . . . . . . . . 36
6.8.3 Revisions for Significant Events . . . . . . . . . . . . . . . . . . . . . . . 39
6.8.4 Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.8.5 Performance Share Fair Market Value . . . . . . . . . . . . . . . . . . . . . . 40

ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
RESTRICTED STOCK AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.2 Restricted Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.3 Restrictions and Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.4 Issuance of Stock and Stock Certificate . . . . . . . . . . . . . . . . . . . . . 42
7.4.1 Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.4.2 Custody and Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.5 Stockholder Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.6 Delivery of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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PHANTOM UNIT AWARDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.2 Vesting of Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8.3 Value of Phantom Units Payments . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8.4 Time and Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 8.5 Forfeiture of Phantom Units . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.6 Nature of Phantom Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
CASH VALUE AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.2 Performance Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.3 Performance Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.4 Payout Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.5 Form Of Payout. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.6 Calculation Of Payout . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
OTHER AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.1 Other Market-Based Awards . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.2 Other Performance-Based Awards . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.3 Terms of Other Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.4 Stock Option Dividend Equivalents. . . . . . . . . . . . . . . . . . . . . . . . 53
10.4.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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10.4.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.4.3 Forfeiture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE XI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SUBSTITUTION AWARDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 11.1 Substitution of Performance Shares . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 11.2 Substitution of Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 11.3 Substitution Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.4 Substitutions in Contemplation of Retirement . . . . . . . . . . . . . . . . . . . 55

ARTICLE XII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
TERMINATION OF EMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 12.1 Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.1.1 Stock Options and SARs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.1.2 Performance Share, Restricted Stock,
Phantom Unit, and Cash Value Awards . . . . . . . . . . . . . . . . . . . . . . . 56
12.1.3 Performance Accelerated Stock Options . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.2 Reduction in Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.2.1 Stock Options and SARs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.2.2 Performance Share, Restricted Stock,
Phantom Unit and Cash Value Awards . . . . . . . . . . . . . . . . . . . . . . . . 58
12.2.3 Performance Accelerated Stock Options. . . . . . . . . . . . . . . . . . . . . . . 58
Section 12.3 Transfers to Certain Related Entities. . . . . . . . . . . . . . . . . . . . . . . 59
12.3.1 Stock Options and SARs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
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12.3.2 Performance Share, Restricted Stock, Phantom Unit and Cash Value Awards . . . . . 59
12.3.3 Performance Accelerated Stock Options. . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.4 Disability or Death. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
12.4.1 Stock Options and SARs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
12.4.2 Performance Share, Restricted Stock, Phantom Unit and Cash Value Awards . . . . . 60
Section 12.4.3 Performance Accelerated Stock Options. . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.5 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.5.1 Stock Options, SARs and Performance Accelerated Stock Options . . . . . . . . . . 61
12.5.2 Performance Share, Restricted Stock, Phantom Unit and Cash Value Awards . . . . . 61
Section 12.6 Decrease in Company Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.6.1 Stock Options and SARs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.6.2 Performance Share, Restricted Stock, Phantom Unit and Cash Value Awards . . . . . 63
12.6.3 Performance Accelerated Stock Options . . . . . . . . . . . . . . . . . . . . . . 63
Section 12.7 Termination of Employment for Other Reasons . . . . . . . . . . . . . . . . . . . 64
12.7.1 Stock Options, SARs and Performance Accelerated Stock Options . . . . . . . . . . 64
12.7.2 Performance Share, Restricted Stock, Phantom Unit and Cash Value Awards. . . . . 64
Section 12.8 Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 12.9 Reporting Person Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
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ARTICLE XIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
EXCHANGE AWARDS; ABOVE TARGET MICP AWARDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 13.1 Salary/Bonus Reductions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.1.1 Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.1.2 Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 13.2 Deferred Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
13.2.1 Deferred Compensation Plan Accounts . . . . . . . . . . . . . . . . . . . . . 68
13.2.2 Non-Qualified Savings Plan Accounts . . . . . . . . . . . . . . . . . . . . . 69
Section 13.3 Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
13.3.1 Death, Disability and Reduction in Force . . . . . . . . . . . . . . . . . . . 69
13.3.2 Retirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
13.3.3 Resignation or Termination for Cause . . . . . . . . . . . . . . . . . . . . . 71
Section 13.4 Avoidance of Pension Diminution . . . . . . . . . . . . . . . . . . . . . . . . 72
13.4.1 Governing Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
13.4.2 Exchange Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
13.4.3 Designated Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 13.5 Irrevocability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 13.6 Equivalency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 13.7 MICP Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 13.8 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

ARTICLE XIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
CERTAIN TERMS APPLICABLE TO ALL AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 14.1 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
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Section 14.2 Adjustments to Reflect Capital Changes. . . . . . . . . . . . . . . . . . . . . . 77
14.2.1 Recapitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
14.2.2 Sale or Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
14.2.3 Options to Purchase Stock of Acquired Companies . . . . . . . . . . . . . . . . . 78
Section 14.3 Failure to Comply With Terms and Conditions . . . . . . . . . . . . . . . . . . 79
Section 14.4 Forfeiture Upon Occurrence of Certain Events . . . . . . . . . . . . . . . . . . 79
Section 14.5 Regulatory Approvals and Listing . . . . . . . . . . . . . . . . . . . . . . . 80
Section 14.6 Restrictions Upon Resale of Stock . . . . . . . . . . . . . . . . . . . . . . . 80
Section 14.7 Reporting Person Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . 81

ARTICLE XV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

ARTICLE XVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 16.1 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 16.2 Committee Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 16.3 No Liability of Committee Members . . . . . . . . . . . . . . . . . . . . . . . 84

ARTICLE XVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
EFFECTIVE DATE, TERM OF THE PLAN AND STOCKHOLDER APPROVAL . . . . . . . . . . . . . . . . . . 84

ARTICLE XVIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
CHANGE IN CORPORATE CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
</TABLE>

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<PAGE> 55
<TABLE>
<S> <C>
Section 18.1 Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 18.2 SARs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 18.3 All Other Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 18.4 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

ARTICLE XIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 19.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 19.2 Suspension or Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

ARTICLE XX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 20.1 Deferral Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 20.2 Designation of Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 20.3 No Right to an Award or to Continued Employment . . . . . . . . . . . . . . . . 90
Section 20.4 Discretion of the Committee and the CEO . . . . . . . . . . . . . . . . . . . . 91
Section 20.5 Indemnification and Exculpation . . . . . . . . . . . . . . . . . . . . . . . . 91
20.5.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
20.5.2 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 20.6 Unfunded Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 20.7 Inalienability of Rights and Interests . . . . . . . . . . . . . . . . . . . . . 93
Section 20.8 Awards Not Includable for Benefit Purposes . . . . . . . . . . . . . . . . . . . 94
Section 20.9 No Issuance of Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 20.10 Modification for Overseas Grantees . . . . . . . . . . . . . . . . . . . . . . 94
</TABLE>

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<PAGE> 56
<TABLE>
<S> <C>
Section 20.11 Leaves of Absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 20.12 Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
20.12.1 Communications by the Committee . . . . . . . . . . . . . . . . . . . . . . . 95
20.12.2 Communications by the Participants and Others . . . . . . . . . . . . . . . . . 95
Section 20.13 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 20.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 20.15 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 20.16 No Strict Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 20.17 Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 20.18 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
</TABLE>

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<PAGE> 57
HERCULES INCORPORATED
LONG TERM INCENTIVE COMPENSATION PLAN

ARTICLE I
PURPOSE

The Hercules Incorporated Long Term Incentive Compensation Plan, the
terms of which are herein set forth (as the same is now in effect or as
hereafter amended from time to time, the "Plan"), is intended to advance the
interests of Hercules Incorporated, a Delaware corporation (the "Company"), and
its stockholders by providing a means by which the Company and its
participating subsidiaries and affiliates shall be able to motivate selected
key employees (including officers and directors who are employees) to direct
their efforts to those activities that will contribute materially to the
Company's success. The Plan is also intended to serve the best interests of
the stockholders by linking remunerative benefits paid to employees who have
substantial responsibility for the successful operation, administration and
management of the Company and/or its participating subsidiaries and affiliates
with the enhancement of stockholder value while such key employees increase
their proprietary interest in the Company. Finally, the Plan is intended to
enable the Company to attract and retain in its employ highly qualified persons
for the successful conduct of its business.

The Plan became effective as of April 1, 1991, and was amended and
restated as of June 30, 1993, and is hereby further amended and restated.
Notwithstanding anything to the contrary, the said amendment and restated
Plan shall not terminate or adversely affect any Awards granted prior hereto.

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ARTICLE II
DEFINITIONS AND CONSTRUCTION

Section 2.1 Definitions

The following words and phrases when used in the Plan with an initial
capital letter, unless their context clearly indicates to the contrary, shall
have the respective meanings set forth below in this Section 2.1:

(1) Accelerated Date. As defined in Subsection
5.10.2.

(2) Act. The Securities Exchange Act of 1934, as
now in effect or as hereafter amended from time to time. References
to any section or subsection of the Act are to such section or
subsection as the same may from time to time be amended or renumbered
and/or any comparable or succeeding provisions of any legislation that
amends, supplements or replaces such section or subsection.

(3) APD Election. As defined in Subsection
12.4.2.

(4) Attributable Shares. As defined in
Subsection 9.6.

(5) Award. A grant of Award Items in accordance
with the provisions of the Plan. A grant of a particular Award Item
may sometimes be referred to as follows: "Stock Option Award" for a
grant of Stock Options; "Stock Appreciation Right Award" for Stock

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<PAGE> 59
Appreciation Rights; "PASO Award" for Performance Accelerated Stock
Options; "CVA Award" for Cash Value Awards; "Performance Shares Award"
for Performance Shares; "Restricted Stock Award" for Restricted Stock;
and "Phantom Unit Award" for Phantom Units.

(6) Award Commitment. The written commitment
delivered by the Company to the Grantee evidencing an Award
and setting forth such terms and conditions of the Award as may
be deemed appropriate by the Committee. The Award Commitment shall be
in a form approved by the Committee, and shall be deemed amended from
time to time to include such additional terms and conditions as the
Committee may specify after the execution in the exercise of its
powers under the Plan.

(7) Award Items. Individually and collectively,
as the case may be, the items awarded to any Grantee in accordance
with the provisions of the Plan in the form of Options, Stock
Appreciation Rights, Performance Accelerated Stock Options, Cash Value
Awards, Performance Shares, Restricted Stock, Phantom Units or other
award, or any combination of the foregoing.

(8) Base Salary. The regular salary paid to an
employee. Base salary shall not included bonuses or other forms of
compensation which are not considered regular earnings by the
Committee.

(9) Beneficiary. Any individual, estate or trust
who or which by designation of the Grantee pursuant to Section 20.2
or operation of law succeeds to the rights and

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<PAGE> 60
obligations of the Grantee under the Plan and Award Commitment upon the
Grantee's death.

(10) Board. The Board of Directors of the
Company.

(11) Bonus. An amount payable pursuant to the
Management Incentive Compensation Plan or any other short term
incentive compensation plan approved by the Committee.

(12) Cash Value Award or CVA. A grant in
accordance with the provisions of the Plan in the form of a designated
cash value payable in cash, Common Stock or Restricted Stock, or a
combination thereof, all as determined by the Grantor at the Payout
Date.

(13) CEO. The Chief Executive Officer of the
Company.

(14) Change in Control. The occurrence of an
event defined in Section 18.4, which event is of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A
promulgated under the Act as in effect on the date hereof or, if Item
6(e) is not longer in effect, any regulations issued by the Securities
and Exchange Commission pursuant to the Act which serves similar
purposes.

(15) Code. The Internal Revenue Code of 1986, as
now in effect or as hereafter amended from time to time, and as
construed and interpreted by valid regulations issued by the United
States Internal Revenue Service thereunder. References to any section

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<PAGE> 61
or subsection of the Code are to such section or subsection as the
same may from time to time be amended or renumbered and/or any
comparable or succeeding provisions of any legislation that amends,
supplements or replaces such section or subsection.

(16) Committee. The Compensation Committee of the
Board or such other committee as may be designated by the Board to
administer the Plan.

(17) Common Stock. Voting common stock authorized
for issuance by the Company and issued and outstanding.

(18) Company. Hercules Incorporated and its
successors and assigns.

(19) Date of Grant. The date designated by the
Grantor as the date as of which the Grantor grants an Award, which
shall not be earlier than the date on which the Grantor approves the
granting of such Award.

(20) Designated Retirement Date. As defined in
Section 13.4.3.

(21) Disability. A physical or mental impairment
sufficient to make the individual eligible for benefits under the
Long-Term Disability Plan of Hercules Incorporated or under a
disability plan of one of the Participating Subsidiaries (whether or
not a participant in such disability plan), so long as for Incentive
Stock Options such impairment also constitutes a disability within the
meaning of Section 22(e)(3) of the Code.

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<PAGE> 62
(22) Fair Market Value. Unless otherwise
indicated in the provisions of the Plan, as of any date the closing
price for one share of Common Stock as reported on the Composite
Tape for New York Stock Exchange Listed Companies and published in
the Eastern Edition of The Wall Street Journal, or, if there is no
trading on the date in question, the closing price of the Common
Stock, as so reported and published, on the next preceding date on
which there was trading in Common Stock.

(23) Grantee. An employee of the Company or any
Participating Subsidiary to whom an Award is granted. At the time of
award, such employee (including any director or officer who is also an
employee) must be in the regular full-time employment of the Company
or any Participating Subsidiary, without limitation as to length of
service.

(24) Grantor. The Committee or the CEO, as the
case may be, who grants an Award. The Committee shall (i) grant
Awards to Reporting Persons and (ii) establish the maximum aggregate
amount of particular Award Items to be granted to Nonreporting Persons
as a group and (iii) establish the guidelines and oversight under
which, pursuant to authorities granted by the Committee, the CEO may
grant Awards to Nonreporting Persons. Notwithstanding anything to the
contrary, the CEO is not intended to be nor shall be construed as a
member of the Committee. In making awards to Nonreporting Persons,
the CEO is acting as a delegee of the Committee and is at all times
accountable to the Committee and authorized to act only in accordance
with the provisions of the Plan and the guidelines and direction
provided by the Committee from time to time.

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<PAGE> 63
(25) Hercules Incorporated Deferred Compensation
Plan. The Hercules Incorporated Deferred Compensation Plan as the
same is now in effect or as hereafter amended from time to time.

(26) Hercules Incorporated Non-Qualified Savings
Plan. The Hercules Incorporated Non-Qualified Savings Plan (a
portion of the Hercules Incorporated Deferred Compensation Plan) as
the same is now in effect or as hereafter amended from time to time.

(27) Hercules Pension Plan. The Hercules Pension
Plan as the same is now in effect or as hereafter amended from time to
time.

(28) Hercules Pension Restoration Plan. The
Hercules Employee Pension Restoration Plan as the same is now in
effect or as hereafter amended from time to time.

(29) Incentive Stock Option or ISO. An Option
granted pursuant to Section 5.1 which is intended to meet, and
structured with a view to satisfying, the requirements of Section 422
of the Code and is designated by the Committee as an Incentive Stock
Option. The Award of an Incentive Stock Option shall contain such
provisions as are necessary to comply with such Section 422.

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<PAGE> 64
(30) Management Incentive Compensation Plan. The
Hercules Incorporated Annual Management Incentive Compensation Plan
as the same is now in effect or as hereafter amended from time to
time.

(31) Maximum Award. The number or amount of
Performance Accelerated Stock Options, Cash Value Awards, or
Performance Shares, as the case may be, which vest when the maximum
performance in the relevant Performance Range is achieved.

(32) Minimum Award. The number or amount of
Performance Accelerated Stock Options, Cash Value Awards, or
Performance Shares, as the case may be, which vest when the minimum
performance in the relevant Performance Range is achieved.

(33) Nonqualified Option. An Option granted
pursuant to Section 5.1 which does not qualify as, and is not
designated by the Committee as, an Incentive Stock Option and is
designated as a Nonqualified Option.

(34) Nonreporting Person. A Grantee who is not
subject to Section 16 of the Act.

(35) Normal Retirement Date. Age 65.

(36) Normal Vesting Date. As defined in
Subsection 5.10.1.

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<PAGE> 65
(37) Option or Stock Option. A right granted
pursuant to Article V that for a specified period of time entitles
the holder thereof to purchase full shares of Common Stock at a
stated price. At the discretion of the Committee, an Option may be
an Incentive Stock Option or a Nonqualified Stock Option.

(38) Optionee. A Grantee to whom an Option or
Stock Appreciation Right or Performance Accelerated Stock Option,
as the case may be, is granted pursuant to Article V.

(39) Option Period. As defined in Section 5.3.

(40) Option Price. The per share price at which
shares of Common Stock may be purchased upon exercise of a particular
Option or Performance Accelerated Stock Option.

(41) Other Market-Based Awards. Awards granted in
accordance with Section 9.1.

(42) Other Performance-Based Awards. Awards
granted in accordance with Section 9.2.

(43) Participating Subsidiary. Any Subsidiary
(existing from time to time) designated by the Board as a
Participating Subsidiary; provided, however, for Incentive Stock
Options only, "Participating Subsidiary" means any such Subsidiary
which at the time such

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<PAGE> 66
Option is granted qualifies as a "Subsidiary" of the Company under
Section 424(b) of the Code.

(44) PASO Period. As defined in Subsection
5.10.3.

(45) Payout Schedule. The distribution scheme
for applicable Award Items for a given Plan Year upon performance of
varying goals, all as established by either the Committee with
respect to the Company, or by the CEO (or his designee or designees)
with respect to a given subsidiary, business unit, corporate staff
group or individual.

(46) Performance Accelerated Stock Option or
"PASO". Stock Option with a normal vesting date established by the
Committee; provided, however, that under certain circumstances such
vesting date may be accelerated by the Committee to an earlier date if
the Committee determines that the applicable Performance Goal has been
met.

(47) Performance Goal. The level of performance
established by the Grantor, which must be achieved in order to earn
or vest the applicable Minimum Award, Target Award, Maximum Award or
intermediate level of Award Items.

(48) Performance Period. The period of time
selected by the Committee during which the achievement of Performance
Goals is measured for purposes of determining the extent to which an
applicable Award Item has been earned or will vest.

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<PAGE> 67
(49) Performance Share. A contingent right to
receive, when certain performance criteria have been attained,
without payment to the Company, the amounts of Common Stock and cash
determined under Article VI. Such rights are subject to forfeiture or
reduction if the applicable Performance Goals are not met within the
applicable Performance Period.

(50) Performance Share Award. A Performance
Share Award under Article VI, settlement of which is contingent upon
attainment during a Performance Period of Performance Goals.

(51) Performance Share Fair Market Value. As
defined in Subsection 6.8.5.

(52) Phantom Unit. A right to receive, without
payment to the Company, an amount of cash equal to the value of a
share of Common Stock as of a future date, plus dividend equivalents
and interest payments provided for in Article VIII. A "unit" of
phantom units does not represent or entitle the recipient to any
equity securities of the Company, but instead involves the creation of
an unfunded account for the recipient, the value of which is measured
by reference to the value of Common Stock.

(53) Phantom Unit Award. An Award of Phantom
Units under Article VIII, subject to such forfeiture provisions as are
set forth in the Award Commitment.

(54) Phantom Unit Fair Market Value. As defined
in Section 8.3.

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<PAGE> 68
(55) Reduction in Force. Termination of
employment by the Company or a Participating Subsidiary in such a
manner that the employee so terminated is eligible to receive benefits
under the Company or a Participating Subsidiary dismissal salary plan.

(56) Related Entity. A corporation, partnership,
joint venture or other entity not more than 50% but at least 20% of
whose outstanding voting stock or voting power for the election of
directors is beneficially owned directly or indirectly by the Company.

(57) Reporting Person. A Grantee who is subject
to Section 16 of the Act.

(58) Restricted Stock. Shares of Common Stock
issued, without payment to the Company, pursuant to a Restricted Stock
Award granted under Article VII. For a specific period of time such
shares are subject to a substantial risk of forfeiture and to such
restrictions against sale, transfer or other disposition, as
determined by the Committee at the time of grant.

(59) Restricted Stock Award. An Award of
Restricted Stock under Article VII.

(60) Restricted Period. As defined in Section 7.2.

(61) Restriction Range. As defined in Section 7.2.

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<PAGE> 69
(62) Retirement. Termination of employment at
Normal Retirement Date or with consent of the Company with immediate
eligibility for retirement benefits under a retirement or pension plan
maintained by the Company, a Participating Subsidiary or Related
Entity.

(63) Rule 16b-3. Rule 16b-3 of the General Rules
and Regulations under the Act, or any law, rule, regulation or other
provision that may hereafter replace such Rule.

(64) SAR. A Stock Appreciation Right, as defined
below.

(65) SAR Fair Market Value. As defined in
Subsection 5.9.3.

(66) Stock Appreciation Right. A right granted
pursuant to Article V pursuant to which the holder of a related
Option, upon exercise of the Stock Appreciation Right and in lieu of
exercising the related Option, is entitled to surrender the related
Option, or any applicable portion thereof, to the extent unexercised,
and to receive an amount equal to the appreciation in market value of
a fixed number of shares of Common Stock from the Date of Grant.
Stock Appreciation Rights may be payable in shares of Common Stock or
cash, or a combination of both. Under the Plan, Stock Appreciation
Rights are granted in tandem with Options.

(67) Stock Appreciation Right Award. An Award of
Stock Appreciation Rights under Article V.

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<PAGE> 70
(68) Stock Option Award. An Award of Options
under Article VI.

(69) Subsidiary. Any corporation, partnership,
joint venture or other entity in which the Company owns, directly or
indirectly through one or more intermediaries, at least 50% of the
outstanding voting stock or voting power for the election of
directors or equivalent governing body. In the case of Incentive
Stock Options, Subsidiary shall mean any corporation that qualifies
as a "subsidiary corporation" of the Company under Section 424(f) of
the Code.

(70) Substitution Awards. As defined in Section
10.1

(71) Suspension Period. As defined in Article
XIII.

(72) Target Award. The number or amount of
Performance Accelerated Stock Options, Cash Value Awards or
Performance Shares, as the case may be, which vest when the target
performance in the relevant Performance Range is achieved.

Section 2.2 Construction

Whenever any words are used herein in the masculine gender, they shall
be construed as though they were also used in the feminine gender in all cases
where they would so apply, and wherever any words are used herein in the
singular form they shall be construed as though they were also used in the
plural form in all cases where they would so apply. Headings of sections and
subsections of this Plan are inserted for convenience of reference, are not a
part of this Plan, and are

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<PAGE> 71
not to be considered in the construction hereof. The words "hereof," "herein,"
"hereunder" and other similar compounds of the word "here" shall mean and refer
to the entire Plan, and not to any particular provision or section. The words
"includes", "including" and other similar compounds of the word "include" shall
mean and refer to including without limitation. All references herein
to specific Articles, Sections or Subsections shall mean Articles, Sections or
Subsections of this document unless otherwise qualified.

ARTICLE III
STOCK AVAILABLE FOR AWARDS

Section 3.1 Common Stock

Only Common Stock may be delivered under this Plan, such shares to be
made available from authorized but unissued shares or from shares reacquired by
the Company, including shares purchased in the open market.

Section 3.2 Number of Shares Deliverable

Subject to adjustments as provided in Section 14.2: (i) during the
period April 1, 1991, through April 30, 1995, the maximum aggregate number of
shares for all Award Items (other than Options) shall be 4,400,000 (which is
less than the original 6,000,000 shares authorized under the Plan for Award
Items (other than Options) for the period April 1, 1991 through March 31,
1996); (ii) during the period April 1, 1991 through April 30, 1994, the
maximum aggregate number of shares for which Options may be granted shall be
3,600,000 (which is less than the original 7,200,000 shares authorized under
the Plan for Options during the period April 1, 1991 through March 31, 1996);
and (iii) during the period May 1, 1995, through April 30, 1998, the maximum
aggregate number of shares for all Award Items (other than Options) shall be

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<PAGE> 72
1,600,000 (which is less than the original 4,200,000 shares authorized under
the Plan during the period April 1, 1996 through March 31, 2000); and (iv)
during the period May 1, 1994 through April 30, 1998, the maximum aggregate
number of shares for which Options may be granted shall be 5,200,000 (which
is more than the original 4,800,000 shares authorized for Options under the
Plan from April 1, 1996 through March 31, 2000).

Section 3.3 Reusable Shares

In the event that shares of Common Stock underlying an Award are
returned to the Company for any reason (including forfeited or unexercised
items) other than the surrender of Options upon the exercise of a Stock
Appreciation Rights, the shares so affected shall be available for use under
this Plan to the same Grantee or other Grantee by way of any type or form of
Option or Award authorized under the Plan; provided, however, that shares
received by the Company upon the exercise of an ISO and shares subject to an
ISO surrendered upon exercise of a SAR shall not be available for the
subsequent award of ISOs under this Plan, and that shares received by the
Company upon the return (whether due to forfeiture or otherwise) of Restricted
Stock or Performance Shares shall not be available for a subsequent Award under
this Plan.

Section 3.4 Shares Not Charged Against Available Shares

Shares of Common Stock issued in payment of Stock Appreciation Rights
shall not be charged against the number of shares of Common Stock available for
subsequent Awards. Shares of Common Stock substituted in accordance with
Article XI for shares previously awarded under this Plan or the Hercules
Incorporated Restricted Stock Plan of 1986 shall be counted against the
authorized aggregate number of shares which may be issued under the Plan.

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<PAGE> 73
ARTICLE IV
AWARDS AND AWARD COMMITMENTS

Section 4.1 General

4.1.1 Subject to the provisions of this Plan, the Committee may (i)
determine and designate at any time and from time to time those Reporting
Persons to whom Awards are to be granted; (ii) determine the time or times when
Awards shall be granted; (iii) determine the form or forms of Awards to be
granted to any Reporting Person or to Nonreporting Persons, as a group; (iv)
determine the number of Award Items subject to each Award to be granted to any
Reporting Person; (v) determine the maximum aggregate number of shares of Award
Items subject to Awards to be granted to Nonreporting Persons, as a group; (vi)
determine the terms and conditions of each Award; (vii) determine the number of
shares of Restricted Stock a Reporting Person may acquire by exchange pursuant
to Section 13.1 and the time or times of such acquisition; and (viii) determine
the number of Options a Reporting or Nonreporting Person may acquire by
exchange pursuant to Section 13.1 and the time or times of acquisition.

4.1.2 The CEO shall, subject to the provisions of the Plan, (i)
determine and designate at any time and from time to time those Nonreporting
Persons to whom Awards are to be granted; (ii) determine the form or forms of
Award to be granted any Nonreporting Person and (iii) determine the number of
Award Items subject to each Award to be granted to any Nonreporting Person.
Awards may be granted singly, in combination or in tandem and may be made in
combination or in tandem with or in replacement of, or as alternatives to
awards or grants under any other employee plan

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<PAGE> 74
maintained by the Company or its present or future Participating Subsidiaries.
Unless this Plan is extended, no Awards shall be granted or exchanges effected
under the Plan after April 30, 1998, but any then-current restrictions
applicable to any Awards theretofore granted or exchanges theretofore effected
shall extend beyond that date in accordance with their provisions and any shares
of Common Stock used in payment of Cash Value Awards and/or Performance Shares
originally granted before April 30, 1998, maybe delivered after April 30, 1998,
in accordance with the provisions of the applicable Award. Notwithstanding the
later delivery of such shares of Common Stock, the number of such shares shall
be credited against the maximum aggregate number in effect under Section 3.2 at
the date of such original grant.

Section 4.2 Eligibility

The persons who shall be eligible to receive Awards granted pursuant
to this Plan shall be such employees (including directors and officers who are
also employees) of the Company or any of the Participating Subsidiaries as the
relevant Grantor shall select from time to time from among those who contribute
or may be expected to contribute to the successful performance of the Company
or any Participating Subsidiary. Employees eligible for Phantom Unit Awards
shall include, in addition to employees of the Company or any of the
Participating Subsidiaries, any employees of any other Subsidiary or Related
Entity.

Section 4.3 Terms and Conditions; Award Commitments

4.3.1 Terms And Conditions. Each Award granted pursuant to this
Plan shall be subject to all of the terms, conditions and restrictions provided
in this Plan and such other terms, conditions and

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restrictions, if any, as may be specified by the Committee with respect to the
Award in question at the time of the making of the Award or as may be specified
thereafter by the Committee in the exercise of its powers under the Plan.
Without limiting the foregoing, it is understood that the Committee may, at any
time and from time to time after the granting of an Award hereunder, specify
such additional terms, conditions and restrictions with respect to such Award
as may be deemed necessary or appropriate to ensure compliance with any and all
applicable laws, including, but not limited to, terms and conditions for
compliance with Federal and state securities laws and methods of withholding or
providing for the payment of required taxes. The terms, conditions and
restrictions with respect to any Award, Grantee or Award Commitment need not be
identical with the terms, conditions and restrictions with respect to any other
Award, Grantee or Award Commitment.

4.3.2 Award Commitments. Each Award granted pursuant to the Plan
shall be subject to all the terms, conditions and restrictions provided in the
Plan and such other terms, conditions and restrictions, if any, as may be
specified by the Committee with respect to the Award in question at the time of
the making of the Award or as may be specified thereafter by the Committee in
the exercise of its powers under the Plan. Each Award granted pursuant to the
Plan shall be evidenced by an Award Commitment and shall comply with, and be
subject to, the provisions of the Plan. The Award Commitment shall not be a
precondition to the granting of Awards; however, no person shall have any
rights under any Award granted under the Plan unless and until the Company
shall have executed and delivered an Award Commitment to the Grantee to
whom such Award shall have been granted. An executed original of the Award
Commitment shall be provided to both the Company and the Grantee.

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ARTICLE V
OPTIONS AND STOCK APPRECIATION RIGHTS

Section 5.1 Award of Options

5.1.1 Grants. From time to time and upon the recommendation of the
CEO, the Committee may grant Stock Option Awards in such number as it may
determine to such Reporting Persons as the Committee may select. From time to
time, the CEO may grant Stock Option Awards in such number as he may determine
to such Nonreporting Persons as he may select; provided, however, each and all
such grants shall be subject to any maximum aggregate amount of Options
established by the Committee for grants under the Plan for Nonreporting Persons
as a group. The Committee shall determine the number of shares of Common Stock
to which each Option relates; provided, however, such number of shares of
Common Stock shall automatically be reduced on a share for share basis to the
extent that shares are issued pursuant to the exercise of the Option or shares
subject to the Option are the basis for the exercise of the related Stock
Appreciation Right.

5.1.2 Types of Options. Options granted pursuant to the Plan may be
either in the form of Incentive Stock Options or in the form of Nonqualified
Options. Incentive Stock Options and Nonqualified Options shall be granted
separately hereunder. The Committee shall determine whether and to what extent
Options granted under the Plan shall be Incentive Stock Options or Nonqualified
Options and the Option shall be so designated.

5.1.3 Substantial Stockholder. No Option shall be granted hereunder
to any person who, at the time such Option is to be granted, owns stock of the
Company or of any of its Subsidiaries

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possessing more than 10% of the total combined voting power of all classes of
stock of the Company or of any such Subsidiary. For purposes of the preceding
sentence, the attribution rules of stock ownership set forth in Section 424(d)
of the Code shall apply.

5.1.4 Maximum Award To An Individual. During the period from May
1, 1994, through April 30, 1998, no person shall be granted or receive more
than 1,500,000 Options and/or Performance Accelerated Stock Options in the
aggregate.

Section 5.2 Option Price

The Option Price of Common Stock covered by each Option shall be
determined by the Committee but shall not be less than 100% of the Fair Market
Value of a share of Common Stock on the Date of Grant.

Section 5.3 Option Periods

The Committee shall determine the term of each Option. Subject to
earlier termination as provided in Articles IXI, XII and XIII, the term shall
not exceed ten (10) years from the Date of Grant.

Section 5.4 Exercise of Options

5.4.1 Exercisability. Subject to Subsection 5.4.2 and Articles XII
and XIII, each Option shall be exercisable at any time or times during the
Option Period and in such amount or amounts as the

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Committee may prescribe and specify in the applicable Award Commitment (subject
further in the case of Incentive Stock Options, to such restrictions as may be
imposed from time to time by the Code).

5.4.2 Certain Limitations. The Committee may provide that an Option
may not be exercised in whole or in part for any period or periods of
time, from zero to nine and one-half (9.5) years as specified in the Award
Commitment. Except as provided in Article XII, an Option may be exercised only
during the continuance of the Grantee's employment with the Company or any of
its Subsidiaries. Options granted to a Reporting Person shall not be
exercisable until at least six (6) months have elapsed from the Date of Grant
of the Option. No Option may be exercised after the expiration of the
applicable Option Period. No Option may be exercised for a fractional share.

5.4.3 Method of Exercise. A Grantee may exercise an Option, in whole
or from time to time in part, by giving written notice of exercise to the
Company. The notice of exercise shall be on a form approved by the Committee
and shall state the number of shares with respect to which the Option is being
exercised. Such notice must be received by the office of the Company
designated in the Award Commitment on or before the expiration date of the
Option.

Section 5.5 Time and Method of Payment

5.5.1 Form of Payment. The Optionee shall pay the Option Price in
cash or, with the Committee's permission and according to such rules as they
may prescribe, by delivering shares of Common Stock already owned by the
Optionee for at least six months prior to the date of exercise and having a
Fair Market Value on the date of exercise equal to the Option Price, or a
combination of cash and shares. The Committee may also permit payment in
accordance with a cashless exercise program under which, if so instructed by
the Optionee, shares of Common Stock may be issued

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directly to the Optionee's broker or dealer upon receipt of the purchase price
in cash from the broker or dealer.

5.5.2 Time of Payment. The Optionee shall pay the Option Price not
later than ten (10) days after the date of a statement from the Company
following exercise setting forth the Option Price, Fair Market Value of Common
Stock on the exercise date, the number of shares of Common Stock that may be
delivered in payment of the Option Price (if applicable) and the amount of
withholding tax due, if any. If the Optionee fails to pay the Option Price
within the ten (10) day period, the Committee shall have the right to take
whatever action it deems appropriate, including voiding the Option exercise.

5.5.3 Methods for Tendering Shares. The Committee shall determine
acceptable methods for tendering shares of Common Stock as payment upon
exercise of an Option and may impose such limitations and restrictions on the
use of shares of Common stock to exercise an Option as it deems appropriate.

5.5.4 ISO Limitation. Common Stock acquired by the Grantee which is
identified as having been obtained through an Incentive Stock Option under the
Plan and still subject to Incentive Stock Option holding requirements as
defined in the Code, may not be tendered in payment of the Option Price.

Section 5.6 Delivery of Shares

No shares of Common Stock shall be delivered pursuant to the exercise,
in whole or in part, of any Option, unless and until (i) payment in full of the
Option Price therefor is received by the

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Company and (ii) compliance with all applicable requirements and conditions of
this Plan, the Award Commitment and such rules and regulations as may be
established by the Committee that are preconditions to delivery, including, but
not limited to, the requirements and conditions of Section 14.5. Promptly after
exercise of the Option, payment in full of the Option Price and compliance with
the conditions described in the preceding sentence, the Company shall effect
the issuance to the Optionee of such number of shares of Common Stock as are
subject to the Option exercise.

Section 5.7 Stockholder Rights

An Optionee shall have none of the rights or privileges of a
stockholder with respect to any shares of Common Stock covered by an Option
unless and until the Optionee has given written notice of exercise of the
Option, has paid in full the Option Price for such shares of Common Stock and
has otherwise complied with this Plan, the Award Commitment and such rules and
regulations as may be established by the Committee, and the shares are issued
to him. No adjustment shall be made for dividends in cash or property or other
distributions or rights with respect to any such shares of Common Stock for
which the record date is prior to the date on which the Optionee or a
transferee of the Option shall have become the holder of record of any such
shares covered by the Option. Notwithstanding anything to the contrary, an
Option may include dividend equivalents as described in Section 10.4.

Section 5.8 Incentive Stock Options

5.8.1 Individual Limitation. No Grantee may be granted an ISO under
this Plan (or any other plans of the Company or any Participating Subsidiary)
which would result in Common Stock with an

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aggregate Fair Market Value (measured as of the Date of Grant) of more than
$100,000 first becoming exercisable in any one calendar year, or which would
entitle such Grantee to purchase a number of shares greater than the maximum
number permitted by Section 422(d)(1) of the Code as in effect on the Date of
Grant.

5.8.2 Code Qualification. Whenever possible, each provision in the
Plan and in every Option granted under this Plan which is designated by the
Committee as an ISO shall be interpreted in such a manner as to entitle the
Option to the tax treatment afforded by Section 422 of the Code. If any
provision of the Plan or any Option designated by the Committee as an ISO shall
be held not to comply with requirements necessary to entitle such Option to
such tax treatment, then (i) such provision shall be deemed to have contained
from the outset such language as shall be necessary to entitle such Option to
the tax treatment afforded under Section 422 of the Code, and (ii) all other
provisions of this Plan and the Award Commitment shall remain in full force and
effect. If any Award Commitment covering an Option designated by the Committee
to be an ISO under the Plan shall not explicitly include any terms required to
entitle such ISO to the tax treatment afforded by Section 422 of the Code, all
such terms shall be deemed implicit in the designation of such Option and such
Option shall be deemed to have been granted subject to all such terms.

5.8.3 Notice of Disposition. An Optionee shall give prompt notice to
the Company of any disposition of shares of Common Stock acquired upon exercise
of an ISO if such disposition occurs within either two (2) years after grant or
one year after receipt of such shares by such Optionee. Such Optionee shall
also comply with any applicable withholding requirements.

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Section 5.9 Stock Appreciation Rights Awards

5.9.1 Grants. The Committee may grant SARs at the same time as
Optionees are awarded Options under the Plan. Each SAR shall be in tandem with
and relate to a specific Option under the Plan and shall specify that the
number of Option Shares subject to the SAR shall be equal to the number of
shares of Common Stock that the Optionee is entitled to receive pursuant to the
related Option.

5.9.2 SAR Exercise. A SAR may be exercised, in whole or in part,
within the period specified for the exercise of the Option in the related
Option grant only upon surrender of the related Option (or portion thereof) by
the Optionee. Each SAR shall be exercisable at such time or times, on the
conditions and to the extent, but only to the extent, that the related Option
is exercisable, provided that no such SAR (except in the case of death or
physical or mental incapacity) shall be exercisable prior to the expiration of
six (6) months following the Date of Grant and, provided further, that any SAR
granted hereunder may provide, at the election of the Committee, that the SAR
may be exercised only at a time when the Optionee to whom the SAR has been
granted is subject to the provisions of Section 16(b) of the Act. Each SAR and
all rights and obligations thereunder shall terminate and may no longer be
exercised upon the termination or exercise of the related Option. An Optionee
may exercise a SAR by giving written notice of exercise to the Company stating
the number of shares of Common Stock subject to exercisable Options with
respect to which the SARs are being exercised. The date upon which such
written notice is received by the Company shall be the exercise date for the
SARs.

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An Option and SAR covering the same share of Common Stock may not be
exercised simultaneously.

5.9.3 Value of SAR Payment. If an Optionee exercises a SAR, he shall
receive an amount equal to the product of (i) the amount by which the SAR Fair
Market Value on the exercise date of one share of Common Stock exceeds the
Option Price of the related Option, times (ii) the number of shares covered by
the Option, or portion thereof, which is surrendered. For purposes of this
Article V, "SAR Fair Market Value" of a SAR or share of Common Stock on any
date shall be the average of the daily closing prices of a share of Common
Stock for five (5) consecutive business days immediately preceding the day in
question as reported on the Composite Tape for New York Stock Exchange Listed
Companies and published in the Eastern Edition of The Wall Street Journal,
subject to the provisions of Section 5.9.4.

5.9.4 Time and Method of Payment

5.9.4.1 Any payment which may become due from the Company by reason
of an Optionee's exercise of a SAR may be paid to the Optionee all in cash, all
in shares of Common Stock or partly in shares and partly in cash, as determined
by the Committee. The Committee shall determine the timing of any payment
made.

5.9.4.2 If paid in cash, the amount thereof shall be the amount of
appreciation determined under Subsection 5.9.3. The payments to be made, in
whole or in part, in cash upon the exercise of SARs by any Reporting Person
shall be made in accordance with the provisions relating to the exercise of
SARs of Rule 16b-3 of the General Rules and Regulations under the Act, as in
effect at

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the time of such exercise, or any law, rule, regulation or other provision that
may hereafter replace such Rule.

5.9.4.3 In the event that all or a portion of the payment is made in
shares of Common Stock, the number of shares of Common Stock received shall be
determined by dividing the amount of the appreciation determined under
Subsection 5.9.3 by the SAR Fair Market Value of a share of Common Stock on the
exercise date of the SAR. Cash will be paid in lieu of any fractional share of
Common Stock or, if the Committee should so determine, the number of shares of
Common Stock will be rounded downward to the next whole share of Common Stock.
All shares shall be valued at their SAR Fair Market Value as of the date of
such exercise; provided, however, that with respect to exercises of SARs by an
employee who is subject to the provisions of Section 16(b) of the Act during
any period commencing on the third business day following the date of release
for publication of the quarterly or annual summary statements of the Company's
sales and earnings and ending on the twelfth business day following such date
(a "window period"), the Committee may prescribe, by rule of general
application, such other measure of fair market value per share as the Committee
may, in its discretion, determine, but not in excess of the highest sale price
of the Common Stock reported on the Composite Tape for New York Stock Exchange
Listed Companies and published in the Eastern Edition of The Wall Street
Journal during such window period. Notwithstanding the foregoing, the fair
market value (or SAR Fair Market Value, if applicable) of SARs that relate to
an ISO, shall not be in excess of the maximum amount that would be permissible
under Section 422 of the Code without disqualifying such option as an ISO under
such Section 422.

5.9.5 Effect of SAR and Option Exercises. Upon exercise of a SAR,
the number of shares of Common Stock subject to exercise under the related
Option shall automatically be reduced by the

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number of shares of Common Stock represented by the Option or portion thereof
surrendered, as provided in Subsection 5.1.1. Shares of Common Stock subject to
Options or portions thereof surrendered upon the exercise of SARs shall not be
available for subsequent awards under the Plan. The exercise of any number of
Options shall result in an equivalent reduction in the number of shares
of Common Stock covered by the related SAR and such shares may not again be
subject to a SAR under this Plan.

5.9.6 Nature of SARs. SARs shall be used solely as a device for the
measurement and determination of the amount to be paid to Grantees as provided
in the Plan. SARs shall not constitute or be treated as property or as a trust
fund of any kind. All amounts at any time attributable to the SARs shall be
and remain the sole property of the Company and all Grantees' rights hereunder
are limited to the rights to receive cash and shares of Common Stock as
provided in the Plan.

Section 5.10 Performance Accelerated Stock Options Awards

5.10.1 Grants. From time to time and upon the recommendation of
the CEO, the Committee may grant PASOs in such number as it may determine to
such Reporting Persons as the Committee may select. From time to time, the CEO
may grant PASOs in such number as he may determine to such Nonreporting Persons
as he may select; provided, however, each and all such grants shall be subject
to Subsection 5.1.4 and any maximum aggregate amount of PASOs established by
the Committee for grants under the Plan for Nonreporting Persons as a group.
The Committee shall determine the number of PASOs to be awarded; provided,
however, such number of PASOs shall automatically be reduced on a share for
share basis to the extent that shares are

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issued pursuant to the exercise of the PASO. Subject to Subsection 5.10.2,
each PASO shall specify a normal vesting date ("Normal Vesting Date") (which
shall be less than the PASO Period).

5.10.2 Accelerated Date. The date or event designated by the Grantor
(which shall be earlier than the Normal Vesting Date) at which the vesting of
some or all PASOs shall occur if the Grantor determines that the applicable
Performance Goals have been met.

5.10.3 PASO Period. The Committee shall determine the term of each
PASO. Subject to earlier termination as provided in Articles XII, the term
shall not exceed ten (10) years.

5.10.4 Exercisability. Subject to Subsection 5.10.2 and Articles XII
each PASO shall be exercisable at any time or times during the PASO Period
and in such amount or amounts as the Committee may prescribe and specify
in the applicable Award Committment.

5.10.5 Corporate or Business Goals. From time to time, the Grantor
shall determine Performance Goals to be used for, among other things, purposes
of determining the Accelerated Date. If the Grantor shall determine minimum
target and/or maximum performance goals and (i) if the minimum performance goal
is not reached, then the Normal Vesting Date of the affected PASOs shall not be
accelerated, and the Grantor may either determine new goals on the PASOs or
allow the PASOs to vest at the Normal Vesting Date; (ii) if the minimum
performance goal is reached but the target performance goal is not reached,
then the Grantor may accelerate the Normal Vesting Date to an Accelerated Date
for part of the affected PASOs (as specified in the applicable Award
Commitment), and for the remainder of the PASOs, the Grantor may determine new
goals or allow the PASOs to vest at the Normal Vesting Date; (iii) if the
performance goal is reached and the maximum

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performance goal is not reached, then the Grantor may accelerate the Normal
Vesting Date to an Accelerated Date for part of the affected PASOs, and for the
remainder of the PASOs, the Grantor may determine new goals or allow the PASOs
to vest at the Normal Vesting Date; and (iv) if the maximum performance goal is
reached, then the Normal Vesting Date for all affected PASOs shall
be accelerated to the Accelerated Date.

5.10.6 PASOs Treated Like Options. Except as otherwise provided in
the Plan, PASOs shall be treated identical to Options; provided, however, that
if there is a conflict between a provision specifically covering PASOs and one
generally covering Options, then the specific provision shall control as to
PASOs.

ARTICLE VI
PERFORMANCE SHARE AWARDS

Section 6.1 Grants

From time to time and upon the recommendation of the CEO, the
Committee may grant Performance Share Awards in such number as it may determine
to such Reporting Persons as the Committee may select. From time to time, the
CEO may grant in such number as he may determine Performance Share Awards to
such Nonreporting Persons as he may select; provided, however, each and all
such grants shall be subject to any maximum aggregate number of Performance
Shares established by the Committee for grants under the Plan for Nonreporting
Persons as a group.

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Section 6.2 Performance Period

At the time of a Performance Share Award grant, the Committee shall
establish a Performance Period of not less than one year nor more than five (5)
years, commencing the Date of Grant of the Award.

Section 6.3 Performance Goals

At the time of each grant, the Committee shall establish for all
Performance Share Awards the Performance Goals for the Company and any
Participating Subsidiary, while the CEO (or his designee or designees) shall
establish for each individual Performance Share Award the business unit,
corporate staff group and individual Performance Goals (other than his own
which will be the same as the Performance Goals for the Company), if any. All
of the designated Performance Goals must be met as a precondition to any
distribution or payment being made with respect to the Performance Share Award
following the end of the Performance Period. Except as provided in Article XII,
these Performance Goals (although their measurement, including adjustments, if
any, as permitted under Subsection 6.8.3, will not occur until after the
expiration of the applicable Performance Period) must be met during the
continuance of the Grantee's employment with the Company or any Participating
Subsidiary, prior to the expiration of the applicable Performance Period and
prior to the lapse of restrictions and delivery of any shares of Common Stock
and/or the making of any payment with respect to the Performance Share Award.
Performance Goals may vary among Grantees and among Awards to a Grantee.
Performance Goals shall be based upon such performance criteria or combination
of factors as the Grantor may deem appropriate, including, but not limited to,
specified levels of earnings per share, return on investment, return on
stockholders'

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equity and such other goals related to the Company's performance as are deemed
appropriate by the Committee.

Section 6.4 Payout Schedule

In tandem with the establishment of the Performance Goals, the Grantor
shall establish a Payout Schedule for that Performance Period for each
Performance Share Award. Each Payout Schedule shall establish for each
Performance Period minimum, target, maximum and intermediate performance and
distribution levels for determining the shares of Common Stock deliverable
and/or cash payable, if any, upon settlement of the Performance Share Award at
the conclusion of the Performance Period.

Section 6.5 Issuance of Stock and Stock Certificates

6.5.1 Issuance. As soon as possible after the Date of Grant of a
Performance Share Award, the Company shall cause to be issued to the Grantee
such number of shares of Common Stock as prescribed by the applicable Payout
Schedule for attainment of target level of performance, that is, the Target
Award. Concurrently, the Company shall cause to be issued a stock certificate
or certificates, registered in the name of the Grantee and dated the Date of
Grant, evidencing such shares. Each such issuance (of shares and of a stock
certificate or certificates) shall be subject throughout the Performance Period
to the terms, conditions and restrictions (including forfeiture and
restrictions against transfer provisions of Section 6.6) contained in this Plan
and/or the Award Commitment entered into between the registered owner of such
shares and the Company, except as otherwise provided in this Plan. Although
not a precondition to the granting of a Performance Share

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Award, each such issuance shall be subject to forfeiture to the Company as of
the date of issuance if an Award Commitment and a stock power endorsed by the
Grantee in blank with respect to the shares of Common Stock covered by the
Performance Share Award under this Article VI are not duly executed by the
Grantee and timely returned to the Company.

6.5.2 Custody and Legends. Each certificate for shares of Common
Stock issued in respect of the Performance Share Award awarded under Subsection
6.5.1 shall be held in custody by the Company for the Grantee's account until
the expiration or termination of the applicable Performance Period (except as
provided in Article XII) and the satisfaction of any and all other conditions
of the Award Commitment applicable to Performance Shares covered by the
Performance Share Award. Such certificate shall be imprinted with a legend to
indicate that the transferability thereof and the shares of stock represented
thereby are subject to the terms, conditions and restrictions (including
forfeiture and restrictions against transfer) contained in this Plan and/or an
Award Commitment entered into between the registered owner of such shares and
the Company, a copy of which Plan and Award Commitment is on file in the office
of the Company's Corporate Secretary. Such legend shall not be removed from any
stock certificate evidencing Performance Shares until the lapse or release of
the restoration as described in Section 6.8. Each certificate also shall be
subject to appropriate stop-transfer orders.

Section 6.6 Restrictions and Forfeitures

The shares of Common Stock issued to a Grantee pursuant to Section 6.5
shall be subject to the following restrictions until the expiration or
termination of the Performance Period established pursuant to Section 6.2: (i)
a Grantee shall not be entitled to delivery of a certificate evidencing the

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shares of Common Stock covered by the Performance Share Award until the
expiration or termination of the Performance Period; (ii) none of such shares of
Common Stock may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the Performance Period and until the
satisfaction of any and all other conditions; and (iii) all such Common Stock
shall be forfeited and returned to the Company and all rights of the Grantee
with respect to such Common Stock (including, but not limited to,
those specified in Section 6.7) shall terminate without further obligation on
the part of the Company unless (x) the Grantee has remained a regular full time
employee of the Company or any Participating Subsidiary until the expiration or
termination of the Performance Period (except as provided in Article XII) and
(y) the satisfaction of any and all other conditions of the Award Commitment
applicable to such Common Stock covered by the Performance Share Award is
completed. Upon the forfeiture of any shares of Common Stock, ownership of
such forfeited shares shall be transferred to the Company without further acts
by the Grantee.

Section 6.7 Stockholder Rights

Following registration in the Grantee's name, and subject to execution
of the documents provided for in Section 6.5, during the Performance Period the
Grantee shall have the entire beneficial interest in, and all rights and
privileges of a stockholder as to, such shares of Common Stock awarded to him
with respect to the target level performance, including, but not limited to,
the right to vote and receive dividends, subject to the restrictions and
forfeiture risks set forth in Section 6.6. Any shares of Common Stock
distributed as a dividend or otherwise with respect to any shares issued under
a Performance Share Award as to which the restrictions have not yet lapsed
shall be subject to the same restrictions as such shares.

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Section 6.8 Delivery of Shares and Cash Payments

6.8.1 Determination of Performance Results and Award Settlement. As
soon as practicable after the Performance Period expires or otherwise terminates
with respect to each Performance Share Award, the Committee shall determine
whether and the extent to which any corporate Performance Goals were achieved
during the Performance Period; and the Grantor shall determine whether and the
extent to which applicable business unit, corporate staff and individual
Performance Goals, if any, were achieved during the Performance Period.
Following such determinations, a calculation shall be made of the number of
shares of Common Stock whose restrictions shall lapse and shall be deliverable
and the cash payable, if any, upon settlement of the Performance Share Award.
The computation shall be made by application of the Payout Schedule to the
degree of actual performance achieved against Performance Goals (determined as
provided in the preceding sentence).

6.8.2 Delivery of Shares and Payment of Cash

6.8.2.1 In the event the minimum level of performance established by
the Payout Schedule is not achieved, the entire Performance Share Award is
forfeited, including, without limitation, the shares of Common Stock held in
custody pursuant to Section 6.5.

6.8.2.2 Should the minimum level of performance established by the
Payout Schedule be achieved, the Grantee shall have earned (subject to
adjustments as provided by Subsection 6.8.3) the applicable Minimum Award and
in settlement thereof the Section 6.6 restrictions on that number of shares of
Common Stock held in custody pursuant to Section 6.5 equal to the share number

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specified by the Payout Schedule for performance at the minimum level shall
lapse and as promptly as administratively feasible thereafter, the Company shall
deliver to the Grantee a stock certificate or certificates for the number of
shares of Common Stock earned. Upon such delivery, shares remaining in custody
(which are the difference between the applicable Minimum Award and
the applicable Target Award) shall be forfeited and ownership transferred to the
Company without further acts by the Grantee.

6.8.2.3 In the event the target level of the Payout Schedule is
achieved, the Grantee shall have earned (subject to adjustments as provided by
Subsection 6.8.3) the applicable Target Award and in settlement thereof the
Section 6.6 restrictions on all of the shares held in custody pursuant to
Section 6.5 shall lapse and as soon as administratively feasible thereafter the
Company shall deliver to the Grantee a stock certificate or certificates for
the number of shares of Common Stock earned.

6.8.2.4 For performance at a level between the minimum performance
level of the Payout Schedule and the target level of the Payout Schedule the
Section 6.6 restrictions on that number of shares of Common Stock held in
custody pursuant to Section 6.5 equal to the share number specified by the
Payout Schedule for performance at the applicable intermediate level shall
lapse and as promptly as administratively feasible thereafter, the Company
shall deliver to the Grantee a stock certificate or certificates for the number
of shares of Common Stock earned. Upon such delivery, shares remaining in
custody (which are the difference between the number of shares prescribed for
the level of performance achieved and the Target Award) shall be forfeited and
ownership transferred to the Company without further acts by the Grantee.

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6.8.2.5 Should the maximum level of performance established by the
Payout Schedule be attained or exceeded, the Grantee shall have earned (subject
to adjustments as provided by Subsection 6.8.3) the applicable Maximum Award
and in settlement thereof (i) the restrictions on that number of shares of
Common Stock held in custody pursuant to Section 6.5 equal to the share
number specified by the Payout Schedule for performance at the target level
shall lapse and as promptly as administratively feasible thereafter the Company
shall deliver to the Grantee a stock certificate or certificates for the number
of shares of Common Stock earned at the target level, and (ii) the share
differential between the number of shares specified by the Payout Schedule for
performance at the target level and the number of shares specified in the
Payout Schedule for performance at the maximum level of performance shall be
paid in cash, shares of Common Stock or a combination thereof, as determined by
the Committee. Such share differential shall have a value which is the product
of the number of shares constituting the share differential times the
Performance Share Fair Market Value on the vesting date.

6.8.2.6 For performance between the target level and the maximum
level of performance specified in the Payout Schedule (i) the Section 6.6
restrictions on that number of shares of Common Stock held in custody pursuant
to Section 6.5 equal to the share number specified by the Payout Schedule for
performance at the target level shall lapse and as promptly as administratively
feasible thereafter, the Company shall deliver to the Grantee a stock
certificate or certificates for the number of shares of Common Stock earned at
the target level, and (ii) the share differential between the share number
specified by the Payout Schedule for performance at the target level and the
share number specified by the Payout Schedule for performance at the applicable
intermediate level shall be paid in cash, shares of Common Stock or a
combination thereof, as determined by the Committee.

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Such share differential shall have a value which is the product of the number
of shares constituting the share differential times the Performance Share Fair
Market Value on the vesting date.

6.8.2.7 Cash payments normally will be made as soon as practicable
following the end of the Performance Period. All shares delivered to a Grantee
pursuant to this Subsection 6.8.2 shall be without the legend described in
Subsection 6.5.2 and shall be free of all restrictions and forfeitures, except
as otherwise provided by Article XII or imposed by law. No payment will be
required from the Grantee upon the delivery of any shares of Common Stock,
except that the amount necessary to satisfy applicable Federal, state or local
tax requirements shall be paid by the Grantee in accordance with the
requirements of Section 14.1.

6.8.3 Revisions for Significant Events. When circumstances occur
(including, but not limited to, unusual or nonrecurring events, changes in tax
laws or accounting principles or practices) that cause any Performance Goal,
Payout Schedule and/or level of performance or distribution specified in a
Payout Schedule to be inappropriate in the judgment of the party initially
responsible for establishing the Performance Goal, Payout Schedule and/or
performance or distribution level, such party may make such changes as said
party deems equitable in recognition of any unforeseen events or changes in
circumstances or changed business or economic conditions.

6.8.4 Conditions Precedent. Incentives shall be paid to the Grantee
only upon compliance by the Grantee with all obligations of such Grantee under
the Plan and/or the Award Commitment with respect to such Performance Share
Awards, including the requirement that, except as provided in Article XII, the
Performance Goals (although their measurement, including adjustments, if any,
required by the Committee or the CEO, as provided herein, will not occur until
after the expiration of

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the applicable Performance Period) must be met during the continuance of the
Grantee's employment with the Company or any of the Participating Subsidiaries,
prior to the expiration of the applicable Performance Period and prior to the
lapse of restrictions and delivery of any shares of Common Stock and/or the
making of any payment with respect to the Performance Share Award.

6.8.5 Performance Share Fair Market Value. As used in this Article VI,
"Performance Share Fair Market Value" of a Performance Share Unit or a share of
Common Stock on any date shall be the average of the daily closing prices for a
share of Common Stock for the five (5) consecutive trading days immediately
preceding the day in question as reported on the Composite Tape for New York
Stock Exchange Listed Companies and published in the Eastern Edition of The
Wall Street Journal.

ARTICLE VII
RESTRICTED STOCK AWARDS

Section 7.1 Grants

From time to time and upon the recommendation of the CEO, the
Committee may grant Restricted Stock Awards in such number as it may determine
to such Reporting Persons as the Committee may select. From time to time, the
CEO may grant in such number as he may determine Restricted Stock Awards to
such Nonreporting Persons as he may select; provided, however, each and all
such grants shall be subject to any maximum aggregate number of shares of
Restricted Stock established by the Committee for grants under the Plan for
Nonreporting Persons as a group.

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Section 7.2 Restricted Period

At the time of a Restricted Stock Award grant, the Committee shall
establish (for all Restricted Stock shares which are then being awarded to a
Participant or, if it is the intent that the total of such shares shall be
divided into separate parts, for each part of such total) a Restricted Period of
not be less than one year or more than five (5) years (the "Restriction
Range"), commencing with the Date of Grant of the Award. Different Restricted
Periods may be fixed within the Restriction Range for different parts of the
shares of Restricted Stock which are being awarded to a Grantee.

Section 7.3 Restrictions and Forfeiture

The shares of Restricted Stock covered by the Restricted Stock Award
granted to a Grantee pursuant to Section 7.1 shall be subject to the following
restrictions until the expiration or termination of the Restricted Period
established pursuant to Section 7.2: (i) a Grantee shall not be entitled to
delivery of a certificate evidencing the shares of Restricted Stock covered by
the Restricted Stock Award until the expiration or termination of the
Restricted Period and the satisfaction of any and all other conditions
specified in the Award Commitment applicable to such Restricted Stock shares;
(ii) none of the shares of Restricted Stock may be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of during the Restriction Period
and until the satisfaction of any and all other conditions specified in the
Award Commitment applicable to such Restricted Stock; and (iii) all of the
shares of Restricted Stock shall be forfeited and returned to the Company and
all rights of the Grantee with respect to such Restricted Stock shares
(including, but not limited to, those specified in Section 7.5) shall terminate
without further obligation on the part of the Company unless (x) the Grantee
has remained a regular full time employee of the Company or any Participating
Subsidiary

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until the expiration or termination of the Restricted Period or Periods (y) and
the satisfaction of any and all other conditions of the Award Commitment
applicable to such Restricted Stock shares. Upon the forfeiture of any shares
of Restricted Stock, such forfeited shares shall be transferred to the Company
without further acts by the Grantee.

Section 7.4 Issuance of Stock and Stock Certificate

7.4.1 Issuance. As soon as practicable after the Date of Grant of a
Restricted Stock Award, the Company shall cause to be issued to the Grantee
such number of shares of Common Stock as constitutes the Restricted Stock
shares awarded under the Restricted Stock Award. Concurrently, the Company
shall cause to be issued a stock certificate or certificates, registered in the
name of the Grantee and dated as of the Date of Grant, evidencing such shares.
Each such issuance (of shares and of a stock certificate or certificates) shall
be subject throughout the Performance Period to the terms, conditions and
restrictions (including forfeiture and restrictions against transfer provisions
of Section 7.3) contained in this Plan and/or the Award Commitment entered into
between the registered owner of such shares and the Company, except as
otherwise provided in this Plan. Although not a precondition to the granting
of a Performance Share Award, each such issuance shall be subject to forfeiture
to the Company as of the Date of Grant if an Award Commitment and a stock power
endorsed by the Grantee in blank with respect to the shares of Restricted Stock
covered by the Award under this Article VII are not duly exercised by the
Grantee and timely returned to the Company.

7.4.2 Custody and Legends. Each certificate for shares of Common
Stock issued in respect of the Restricted Stock Award granted under Section 7.1
shall be held in custody by the Company for the Grantee's account until the
expiration or termination of the applicable Restricted Period (except

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as provided in Article XII) and the satisfaction of any and all other
conditions of the Award Commitment applicable to such shares of Restricted Stock
covered by the Restricted Stock Award. Such certificate shall be imprinted
with a legend to indicate that the transferability thereof and the shares of
Common Stock represented thereby are subject to the terms, conditions and
restrictions (including forfeiture and restrictions against transfer) contained
in this Plan and/or an Award Commitment entered into between the registered
owner of such shares and the Company, a copy of which Plan and Award
Commitment is on file in the office of the Company's Corporate Secretary. Such
legend shall not be removed from any stock certificate evidencing such
Restricted Stock shares until the lapse or release of the restrictions as
described in Section 7.3. Each certificate also shall be subject to appropriate
stop-transfer orders.

Section 7.5 Stockholder Rights

Following registration in the Grantee's name and subject to execution
of the documents provided for in Section 7.4, during the Restricted Period the
Grantee shall have the entire beneficial interest in, and all rights and
privileges of a stockholder as to, such shares of Common Stock covered by the
Restricted Stock Award, including, but not limited to, the right to vote such
shares and the right to receive dividends, subject to the restrictions and
forfeitures set forth in Section 7.3. Any shares of Common Stock distributed
as a dividend or otherwise with respect to any shares of Restricted Stock as to
which the restrictions have not yet lapsed shall be subject to the same
restrictions as such Restricted Stock shares.

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Section 7.6 Delivery of Shares

Upon the expiration (without a forfeiture) or earlier termination of
the Restriction Period and the satisfaction of or release from any other
conditions by the Grantee under the Plan and/or the Award Commitment with
respect to such shares of Restricted Stock, or at such earlier time as provided
under the provisions of Article XII and/or Article XIII, all of such shares
shall be released from all restrictions and forfeiture provisions under Section
7.3, any similar restrictions and forfeiture provisions under the Award
Commitment applicable to such shares and all other restrictions and forfeiture
provisions of this Plan or such Award Commitment. As promptly as
administratively feasible thereafter the Company shall deliver or cause to be
delivered to such Grantee a stock certificate or certificates for the
appropriate number of shares of Common Stock, free of such restrictions and
forfeitures, except as otherwise provided by Article XIV or imposed by law. No
payment will be required from the Grantee upon the delivery of any shares of
Restricted Stock, except that amount necessary to satisfy applicable Federal,
state or local tax requirements shall be paid by the Grantee in accordance with
the requirements of Section 14.1.

ARTICLE VIII
PHANTOM UNIT AWARDS

Section 8.1 Grants

From time to time and upon the recommendation of the CEO, the
Committee may grant Phantom Unit Awards in such number as it may determine to
such Reporting Persons as the

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Committee may select. From time to time, the CEO may grant Phantom Unit Awards
in such number as he may determine to such Nonreporting Persons as he may
select; provided, however, each and all such grants shall be subject to any
maximum aggregate number of Phantom Units established by the Committee for
grants under the Plan for Nonreporting Persons as a group.

Section 8.2 Vesting of Awards

The amounts credited with respect to each Phantom Unit shall become
vested on the date or dates determined and set forth in the applicable Award
Commitment at time of grant unless vested sooner as described in Article XII of
the Plan. The vesting period shall be determined by the Committee, but in no
case shall such period be less than one year or more than five (5) years.
Vesting shall be subject to the terms, conditions and provisions hereinafter
with respect to forfeiture and termination of Awards or early vesting or
forfeiture of Awards in accordance with the provisions of Article XII.

Section 8.3 Value of Phantom Units Payments

The amount payable with respect to each vested Phantom Unit Award
shall be the sum of (1) the dividends and interest credited to such account and
(2) an amount determined by multiplying the number of Phantom Units posted to
such account by the Phantom Unit Fair Market Value on the date of vesting. For
the purpose of determining such amount the Company shall establish and maintain
a separate memorandum account for each Grantee granted a Phantom Unit Award
pursuant to Section 8.1. As of the Date of Grant of each grant of a Phantom
Unit Award the Company shall credit to the account of each Grantee who has been
granted a Phantom Unit Award such number of

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Phantom Units as is specified in the Award. From the Date of Grant until the
date that payments under the Plan commence the account of each Grantee shall be
credited quarterly with an amount determined by multiplying the amount of
Phantom Units credited to each account by the per share dividend paid quarterly
by the Company on its Common Stock. In addition, each account
(representing dividends and credited interest) shall be credited quarterly with
an amount determined by multiplying the account balance at the close of each
quarter by an amount representing one-fourth of the average per annum rate of
interest established by Morgan Guaranty Trust Company (or by such other major
New York commercial bank as the Committee shall designate) in New York from
time to time during such quarter as its prime lending rate. As used in this
Article VIII, "Phantom Unit Fair Market Value" of a Phantom Unit or a share of
Common Stock on any date shall be the average of the daily closing prices for a
share of Common Stock for the five (5) consecutive trading days immediately
preceding the day in question as reported on the Composite Tape for New York
Stock Exchange Listed Companies and published in the Eastern Edition of The
Wall Street Journal.

Section 8.4 Time and Method of Payment

Any payment which may become due from the Company upon the vesting of
a Phantom Unit shall be paid to the Grantee in cash. The date or dates upon
which amounts determined pursuant to Section 8.3 shall be paid to the Grantee
shall be determined by the Committee prior to the Date of Grant and set forth
in the applicable Award Commitment or in accord with such rules and regulations
as may be adopted by the Committee.

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Section 8.5 Forfeiture of Phantom Units

Except as otherwise provided in Article XII, all of the Phantom Units
credited to a Grantee's account (including all dividend equivalents and interest
credited thereto) shall be forfeited and all rights of the Grantee with respect
to such Phantom Units (including any dividend equivalents and interest related
thereto) shall terminate without further obligation on the part of the Company
unless and until (i) the Grantee has remained a regular full time employee of
any Participating Subsidiary until vesting as described in Section 8.2 and (ii)
the satisfaction of any other conditions specified in the Plan and/or Award
Commitment applicable to such Phantom Units, except as may otherwise be
determined by the Committee.

Section 8.6 Nature of Phantom Units

Phantom Units shall be used solely as a device for the measurement and
determination of the amount to be paid to Grantees as provided in the Plan.
Phantom Units shall not constitute or be treated as property or as a trust fund
of any kind. All amounts at any time attributable to the Phantom Units shall
be and remain the sole property of the Company and all Grantees' rights
hereunder are limited to the rights to receive cash and shares of Common Stock
as provided in the Plan.

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ARTICLE IX
CASH VALUE AWARDS

Section 9.1 Grants

From time to time and upon the recommendation of the CEO, the
Committee may grant Cash Value Awards in such number as it may determine to
such Reporting Persons as the Committee may select. From time to time, the CEO
may grant Cash Value Awards in such number as he may determine to such
Nonreporting Persons as he may select; provided, however, each and all such
grants shall be subject to any maximum dollar value established by the
Committee for grants under the Plan for Nonreporting Persons as a group.

Section 9.2 Performance Period

At the time of a Cash Value Award grant, the Committee shall establish
a Performance Period of not less than one year nor more than five (5) years,
commencing on the Date of Grant of the Award.

Section 9.3 Performance Goals

At the time of each grant, the Committee shall establish for all Cash
Value Awards the Performance Goals for the Company and any Participating
Subsidiary, while the CEO (or his designee or designees) shall establish for
each individual Cash Value Award the business unit, corporate staff group and
individual Performance Goals (other than his own which will be the same

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as the Performance Goals for the Company), if any. All of the designated
Performance Goals must be met as a precondition to any distribution or payment
being made with respect to the Cash Value Award following the end of the
Performance Period. Except as provided in Article XII, these Performance Goals
(although their measurement, including adjustments, if any, will not occur
until after the expiration of the applicable Performance Period) must be met
during the continuance of the Grantee's employment with the Company or any
Participating Subsidiary, prior to the expiration of the applicable Performance
Period and prior to the making of any payment with respect to the Cash Value
Award. Performance Goals may vary among Grantees and among Awards to a
Grantee. Performance Goals shall be based upon such performance criteria or
combination of factors as the Grantor may deem appropriate, including, but not
limited to, specified levels of earnings per share, return on investment,
return on stockholders' equity and such other goals related to the Company's
performance as are deemed appropriate by the Committee.

Section 9.4 Payout Schedule

In tandem with the establishment of the Performance Goals, the Grantor
shall establish a Payout Schedule for that Performance Period for each Cash
Value Award. Each Payout Schedule shall establish for each Performance Period
minimum, target, maximum and intermediate performance and distribution levels
for determining the payout of the Common Stock, if any, of the Cash Value Award
at the conclusion of the Performance Period.

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Section 9.5 Form Of Payout

Payment of a Cash Value Award shall be made in cash, Common Stock,
Restricted Stock or any combination thereof as determined by the Grantor at the
time of the Payout. Restricted Stock shall be governed by Articles VII and
XII; provided, however, that Restricted Stock granted at less than Fair Market
Value shall also be governed by Section 9.6 and the Attributable Shares
(defined below) shall be governed by Section 13.3.

Section 9.6 Calculation Of Payout

As soon as practicable after the Performance Period expires with
respect to the Cash Value Award, the Grantor shall determine whether and the
extent to which any Performance Goals were achieved during the Performance
Period. The Grantor may also determine the amount and form of the Payout. If
the Payout is to be paid in Restricted Stock, then the number of shares
calculated by the Grantor may be determined by using either 100% or 85% (as
determined by the Committee) of the Fair Market Value on the date of issue. If
the Grantor uses 85% of the Fair Market Value, then those shares attributable
to the discount (i.e., 100% minus 85%) (the "Attributable Shares") shall be
subject to the forfeiture provisions under Section 13.3; and otherwise, the
Restricted Stock shall be subject to forfeiture under Article XII.

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ARTICLE X
OTHER AWARDS

Section 10.1 Other Market-Based Awards

The Grantor may grant other Market-Based Awards, provided that the
purchase price or base price for the equity securities of the Company shall in
no event be less than 100% of the Fair Market Value of such security on the
date of grant. Such Other Market-Based Awards shall be in a form determined by
the Committee, and the Committee shall have complete authority to determine the
terms, conditions and restrictions of the awards, not inconsistent with the
terms of the Plan. The Committee, upon recommendation of the CEO, shall
determine the time or times at which such Other Market-Based Awards shall be
made. Any such Other Market-Based Award shall be confirmed by an Award
Commitment executed by the Company and the Grantee, which Agreement shall
contain such provisions as the Committee determines to be necessary or
appropriate to carry out the intent of the Plan with respect to such Award.

Section 10.2 Other Performance-Based Awards

The Grantor may grant other Performance-Based Awards. Such Other
Performance-Based Awards shall be in a form determined by the Committee, and
the Committee shall have complete authority to determine the terms, conditions
and restrictions of the awards, not inconsistent with the terms of the Plan.
The Committee, upon recommendation of the CEO, shall determine the time or
times at which such Other Performance-Based Awards shall be made. Any such
Other Performance-Based Award shall be confirmed by an Award Commitment executed
by the Company

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and the Grantee, which Agreement shall contain such provisions as the
Committee determines to be necessary or appropriate to carry out the intent of
the Plan with respect to such Award.

Section 10.3 Terms of Other Awards

In addition to the terms and conditions specified in the Award
Commitment, awards made pursuant to this Article X shall be subject to the
following:

(a) Any shares of Common Stock subject to Awards
made under this Article X may not be sold, assigned, transferred,
pledged or otherwise encumbered prior to the date on which the shares
are issued, or, if later, the date on which any applicable restriction
or performance period lapses; and

(b) If specified by the Committee in the Award
Commitment, the recipient of an Award under this Article X shall be
entitled to receive, currently or on a deferred basis, interest or
dividends or dividend equivalents with respect to the Common Stock
covered by the Award; and

(c) The Award Commitment with respect to any Award
shall contain provisions dealing with the disposition of such Award in
the event of a termination of employment prior to the exercise,
realization or payment of such Award, whether such termination occurs
because of retirement, disability, death or other reason, with such
provisions to take account of the specific nature and purpose of the
Award.

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Section 10.4 Stock Option Dividend Equivalents.

10.4.1 Grants. The Grantor may provide that a Grantee to whom an
Option has been granted which is exercisable in whole or in part at a future
time for shares of Common Stock (referred to in this subsection as "Share" or
"Shares") shall be entitled to receive an amount per Share equal in value to the
cash dividends, if any, paid per Share on issued and outstanding Shares, as of
the dividend record dates occurring during the period between the date of the
grant and the time each such Share is delivered pursuant to exercise of such
Stock Option or the related Stock Appreciation Right. Such amounts (herein
called "Dividend Equivalents") shall be paid in cash at the time of the
delivery of such Shares.

10.4.2 Interest. The Grantor may authorize payment of interest on
Dividend Equivalents. The interest will be payable in cash at the same time
the related Dividend Equivalents are paid.

10.4.3 Forfeiture. To the extent the Stock Options to which
Dividend Equivalents and interest are related shall be forfeited all accrued
Dividend Equivalents and interest thereon shall also be forfeited.

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<PAGE> 110
ARTICLE XI
SUBSTITUTION AWARDS

Section 11.1 Substitution of Performance Shares

Upon the request of the Grantee, the Committee may grant Restricted
Stock Awards in substitution for such numbers of shares of Common Stock of
equal value held in custody pursuant to Section 6.5 whose restrictions shall
lapse upon expiration or other termination of a Performance Period. The number
of Performance Shares available for substitution shall be determined by the
method described in Section 11.3. Such Substitution Awards shall be subject to
such Restricted Periods and other terms, conditions and restrictions as the
Committee may from time to time determine. No substitution shall be permitted
after termination of employment, regardless of the reason for termination.
Once substitution has been approved by the Committee, no payment will be made
with respect to an original Award.

Section 11.2 Substitution of Restricted Stock

Upon request of the Grantee, the Committee may grant Restricted Stock
Awards in substitution for shares of Restricted Stock previously awarded either
under this Plan or under the Hercules Incorporated Restricted Stock Plan of
1986. Such Awards shall be subject to such Restricted Periods and other terms,
conditions and restrictions as the Committee may from time to time determine.
No substitution shall be permitted after termination of employment, regardless
of the reason for termination.

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Section 11.3 Substitution Procedures

Any request of a Grantee pursuant to Section 11.1 or 11.2 shall be
filed in writing with the Committee in accordance with such rules and
regulations, including any deadline for the making of such request, as the
Committee may provide. No substitution shall be permitted past any termination
of employment described in Article XII or past the occurrence of any of the
events specified in clauses (i), (ii) and (iii) of Section 14.4.

Section 11.4 Substitutions in Contemplation of Retirement

Prior to the expiration of the Performance Period or Restricted Period
applicable to any Performance Shares or Restricted Stock Awards granted to a
Grantee, such Grantee may, with the consent of the Committee, surrender all or
a portion of his Award in substitution for Phantom Unit Awards subject to the
terms and conditions of Article VIII, and provided that: (i) such surrender
shall be treated as a forfeiture under the Plan; (ii) such substitution shall
be made for retirement planning purposes; (iii) such substitution shall be made
prior to December 31 of the year preceding the Grantee's Normal Retirement Date
but not more than one year prior to the Grantee's Normal Retirement Date; or,
in cases where Retirement with consent occurs prior to the Grantee's Normal
Retirement Date, not less than sixty (60) nor more than three hundred and sixty
(360) days before an announced Retirement approved by the Company; and (iv) any
Phantom Units shall be substituted as of the expiration date of the applicable
Performance Period in an amount consistent with the number of shares calculated
for each Award being substituted.

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ARTICLE XII
TERMINATION OF EMPLOYMENT

12.1 Retirement

12.1.1 Stock Options and SARs. If prior to the expiration of the
Option Period a Grantee who has been given an Option or SAR under the Plan
shall cease to be employed by the Company, any Participating Subsidiary or
Related Entity because of his Retirement, (i) in the case of Nonqualified
Options (except PASOs) and their related SARs, each Option and SAR shall become
immediately exercisable and shall remain exercisable for a period of five (5)
years from the date of cessation of employment, but not beyond the end of the
Option Period, and (ii) in the case of ISOs and their related SARs, each Option
and SAR shall, at such time as it becomes exercisable under the Award Commitment
covering such Option, remain exercisable for a period of three (3) months from
the cessation of employment, but not beyond the end of the Option Period.

12.1.2 Performance Share, Restricted Stock, Phantom Unit, and Cash
Value Awards. If prior to the expiration of the Performance or Restricted
Period a Grantee who has been given a Performance Share, Restricted Stock,
Phantom Unit or Cash Value Award under the Plan shall cease to be employed by
the Company, any Participating Subsidiary or Related Entity because of his
Retirement, (i) that Grantee shall be entitled to Performance Shares or Cash
Value at the end of the Performance Period based upon the extent to which the
Performance Goals were satisfied at the end of such period (provided, however,
the Committee may provide for an earlier payment in settlement of such
Performance Shares in such amount and under such terms and conditions as the
Committee

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deems appropriate or desirable); and (ii) all remaining restrictions with
respect to such Grantee's Restricted Stock and Phantom Unit Awards shall lapse
as of the date of termination.

12.1.3 Performance Accelerated Stock Options. If prior to the
expiration of the PASO Period a Grantee who has been given a PASO Award under
the Plan shall cease to be employed by the Company, any Participating
Subsidiary or Related Entity because of his Retirement, that Grantee shall be
entitled to PASOs as follows: If the PASOs are exercisable on the date of
Retirement, then the PASOs will remain exercisable until the earlier of five
(5) years or the end of the PASO period; if the PASOs are not yet exercisable,
then they shall become exercisable at the earlier of (i) such time as the PASOs
become exercisable through acceleration due to performance, or (ii) four and
one-half (4.5) years after Retirement regardless of performance, or (iii) the
end of nine and one-half (9.5) years from the award date. Once the PASOs become
exercisable, they shall remain exercisable until the earlier of five (5) years
after Retirement or the end of the PASO period, provided, however, the Grantor
may provide for acceleration of the vesting date and/or an earlier settlement
of such PASOs under such terms and conditions as the Grantor deems appropriate
or desirable.

Section 12.2 Reduction in Force

12.2.1 Stock Options and SARs. If prior to the expiration of the
Option Period a Grantee who has been given a Option or SAR under the Plan shall
cease to be employed by the Company or any Participating Subsidiary because of
a Reduction in Force, (i) in the case of Nonqualified Options (except PASOs)
and their related SARs, each Option and SAR shall become immediately
exercisable and shall remain exercisable for a period of one year from the date
of cessation of employment, but not beyond the end of the Option Period, and
(ii) in the case of an ISO, each Option and SAR shall,

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at such time as it becomes exercisable under the Award Commitment covering such
Option, remain exercisable for a period of three (3) months from the cessation
of employment, but not beyond the end of the Option Period.

12.2.2 Performance Share, Restricted Stock, Phantom Unit and Cash
Value Awards. If prior to the expiration of the Performance or Restricted
Period a Grantee who has been given a Performance Share, Restricted Stock,
Phantom Unit or Cash Value Award under the Plan shall cease to be employed by
the Company or any Participating Subsidiary because of a Reduction in Force,
(i) that Grantee shall be entitled to a Minimum Award of Performance Shares or
Cash Value at the end of the Performance Period prorated for the portion of the
Performance Period during which the Grantee was employed by the Company, any
Participating Subsidiary (provided, however, the Committee may provide for an
earlier payment in settlement of such Performance Shares or Cash Value in such
amount and under such terms and conditions as the Committee deems appropriate
or desirable); and (ii) all remaining restrictions with respect to such
Grantee's Restricted Stock and Phantom Unit Awards shall lapse, in an amount
prorated for the amount of time such Awards have remained under restriction, as
of the date of termination.

12.2.3 Performance Accelerated Stock Options. If prior to the
expiration of the PASO Period a Grantee who has been given a PASO Award under
the Plan shall cease to be employed by the Company or any Participating
Subsidiary because of a Reduction in Force, the Grantor shall determine the
timing, terms and conditions of the exercise of the Award as the Grantor deems
appropriate or desirable except that no PASO may be exercised beyond the end of
the PASO Period.

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Section 12.3 Transfers to Certain Related Entities

12.3.1 Stock Options and SARs. If prior to the expiration of the
Option Period a Grantee who has been given a Option or SAR under the Plan shall
cease to be employed by the Company or any Participating Subsidiary because of
a transfer to a Related Entity, (i) in the case of Nonqualified Options (except
PASOs) and their related SARs, each Option and SAR shall become immediately
exercisable and shall remain exercisable for a period of three (3) years from
the date of cessation of employment, but not beyond the end of the Option
Period, and (ii) in the case of an ISO, each Option and SAR shall, at such time
as it becomes exercisable under the Award Commitment covering such Option,
remain exercisable for a period of three (3) months from the cessation of
employment, but not beyond the end of the Option Period.

12.3.2 Performance Share, Restricted Stock, Phantom Unit and Cash
Value Awards. If prior to the expiration of the Performance or Restricted
Period a Grantee who has been given a Performance Share, Restricted Stock,
Phantom Unit or Cash Value Award under the Plan shall cease to be employed by
the Company or any Participating Subsidiary because of a transfer to a Related
Entity, then all restrictions with respect to such Performance Shares,
Restricted Stock or Phantom Units shall remain in effect until the end of the
Performance or Restricted Period; provided, however, the Grantor may provide
as the case may be for an earlier payment in settlement of such Performance
Shares, Restricted Stock or Phantom Units and for payment of Cash Value Awards,
all in such amount and under such terms and conditions as the Grantor deems
appropriate or desirable.

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12.3.3 Performance Accelerated Stock Options. If prior to the
expiration of the PASO Period a Grantee who has been given a PASO Award under
the Plan shall cease to be employed by the Company or any Participating
Subsidiary because of a transfer to a Related Entity, the Grantor shall
determine the timing, terms and conditions of the exercise of the Award as the
Grantor deems appropriate or desirable except that no PASO may be exercised
beyond the end of the PASO Period.

Section 12.4 Disability or Death

12.4.1 Stock Options and SARs. If prior to the end of the Option
Period a Grantee who has been granted a Option shall cease to be employed by
the Company, any Participating Subsidiary or Related Entity by reason of death
or Disability, (i) in the case of Nonqualified Options (excluding PASOs) and
their related SARs, each Option and SAR shall become immediately exercisable
and shall remain exercisable for a period of one year from the date of
cessation of employment, but not beyond the end of the Option Period, and (ii)
in the case of an ISO, each Option and SAR shall, at such time as it becomes
exercisable under the Award Commitment covering such Option, remain exercisable
for a period of one year from the cessation of employment, but not beyond the
end of the Option Period.

12.4.2 Performance Share, Restricted Stock, Phantom Unit and Cash
Value Awards. If prior to the expiration of the Performance or Restricted
Period a Grantee who has been given a Performance Share, Restricted Stock,
Phantom Unit and Cash Value Award under the Plan shall cease to be employed by
the Company, any Participating Subsidiary or Related Entity by reason of death
or Disability, (i) that Grantee shall be entitled to Performance Shares or Cash
Value (paid in cash) at the Target Award level on the date of termination; and
(ii) all remaining restrictions with

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respect to such Grantee's Restricted Stock and Phantom Unit Awards shall lapse
as of the date of termination.

Section 12.4.3 Performance Accelerated Stock Options. If prior to
the expiration of the PASO Period, a Grantee who has been given a PASO Award
under the Plan shall cease to be employed by the Company, any Participating
Subsidiary or Related Entity because of Disability or Death, then such Grantee
(or the Beneficiary of such Grantee) shall be entitled to PASOs as follows: if
the PASOs are exercisable on the date of such Disability or Death, then the
PASOs will remain exercisable until the earlier of one (1) year or the end of
the PASO Period; if the PASOs are not yet exercisable, then they shall become
exercisable at the earlier of (i) such time as the PASOs become exercisable
through acceleration due to performance, or (ii) six (6) months after such
Disability or Death, or (iii) nine and one-half (9.5) years from the award
date. Once the PASOs become exercisable, they shall remain exercisable until
the earlier of one (1) year after or the end of the PASO Period.

Section 12.5 Resignation

12.5.1 Stock Options, SARs and Performance Accelerated Stock
Options. If the Grantee shall voluntarily resign before eligibility for
Retirement (except for Retirement with approval of the Company), the Options
(including PASOs) and SARs granted in tandem shall be canceled coincident with
the effective date of the termination of employment.

12.5.2 Performance Share, Restricted Stock, Phantom Unit and Cash
Value Awards. If prior to the expiration of the Performance or Restricted
Period a Grantee who has been given a

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Performance Share, Restricted Stock, Phantom Unit or Cash Value Award under
the Plan shall voluntarily resign (except for Retirement with approval of the
Company), then all Performance Share, Restricted Stock, Phantom Unit and Cash
Value Awards theretofore awarded to such Grantee as to which there still remains
an unexpired portion of the Performance or Restricted Period or the vesting
period shall, upon such termination of employment, be forfeited by such Grantee
to the Company, without the payment of any consideration by the Company.
Thereafter, neither the Grantee nor any heirs, assigns or personal
representatives of such Grantee shall have any further rights or interest in
such Performance Share, Restricted Stock, Phantom Unit or Cash Value Awards,
and the Grantee's name shall thereupon be deleted from the list of the
Company's stockholders with respect to such Performance Shares, Restricted
Stock, Phantom Units or Cash Value Award. Notwithstanding any other
provisions of this Subsection 12.5.2, the value of any vested and deferred
Phantom Units shall be paid to the Grantee as soon as practicable.

Section 12.6 Decrease in Company Ownership

12.6.1 Stock Options and SARs. If prior to the expiration of the
Option Period a Grantee who has been given an Option or SAR under the Plan
shall cease to be employed by any Participating Subsidiary because of a
decrease in the Company's ownership interest in a Participating Subsidiary to
below 50% but at or above 20%, (i) in the case of Nonqualified Options (except
PASOs) and their related SARs, each Option and SAR shall become immediately
exercisable and shall remain exercisable for a period of three (3) years from
the date of cessation of employment, but not beyond the end of the Option
Period, and (ii) in the case of an ISO, each Option and SAR shall, at such time
as it becomes exercisable under the Award Commitment covering such Option,
remain exercisable for

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a period of three (3) months from the cessation of employment, but not beyond
the end of the Option Period.

12.6.2 Performance Share, Restricted Stock, Phantom Unit and Cash
Value Awards. If prior to the expiration of the Performance or Restricted
Period a Grantee who has been given a Performance Share, Restricted Stock,
Phantom Unit or Cash Value Award under the Plan shall cease to be employed by
any Participating Subsidiary because of a decrease in the Company's ownership
interest in a Participating Subsidiary to below 50% but at or above 20%, then
all restrictions with respect to such Performance Shares, Restricted Stock or
Phantom Units shall remain in effect until the end of the Performance Period or
Restricted Period; provided, however, the Committee may provide, as the case
may be, for an earlier payment in settlement of such Performance Shares,
Restricted Stock or Phantom Units and for payment of Cash Value Awards, all in
such amount and under such terms and conditions as the Committee deems
appropriate or desirable or make any other adjustment deemed appropriate due to
the decrease in Company ownership.

12.6.3 Performance Accelerated Stock Options. If prior to the
expiration of the PASO Period a Grantee who has been given a PASO Award under
the Plan shall cease to be employed by the Company or any Participating
Subsidiary because of a decrease in company ownership, the Grantor shall
determine the timing, terms and conditions of the exercise of the Award as the
Grantor deems appropriate or desirable except that no PASO may be exercised
beyond the end of the PASO Period.

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Section 12.7 Termination of Employment for Other Reasons

12.7.1 Stock Options, SARs and Performance Accelerated Stock Options.
If the Grantee's employment terminates for any reason other than specified in
Sections 12.1, 12.2, 12.3, 12.4, 12.5 or 12.6, each Option, SAR and PASO shall
terminate; provided, however, the Grantor may provide for acceleration of the
vesting date and/or an earlier settlement of such PASOs in such amount and
under such terms and conditions as the Grantor deems appropriate or desirable.

12.7.2 Performance Share, Restricted Stock, Phantom Unit and Cash
Value Awards. If prior to the expiration of the Performance or Restricted
Period a Grantee who has been given a Performance Share, Restricted Stock,
Phantom Unit or Cash Value Award under the Plan shall cease to be employed by
the Company, any Participating Subsidiary or Related Entity because of any
reason other than specified in Sections 12.1, 12.2, 12.3, 12.4, 12.5 or 12.6,
then all Performance Share, Restricted Stock, Phantom Unit and Cash Value
Awards theretofore awarded to such Grantee as to which there still remains an
unexpired portion of the Performance or Restricted Period shall, upon such
termination of employment, be forfeited by such Grantee to the Company, without
the payment of any consideration by the Company; provided, however the Grantor
may provide for settlement of a Cash Value Award in such amount, at such time
and under such terms and conditions as the Grantor deems appropriate or
desirable. Thereafter, neither the Grantee nor any heirs, assigns or personal
representatives of such Grantee shall have any further rights or interest in
such Performance Share, Restricted Stock, Phantom Unit or Cash Value Awards,
and the Grantee's name shall thereupon be deleted from the list of the
Company's stockholders with respect to such Performance Shares or Restricted
Stock. Notwithstanding any other provisions of this Subsection

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12.7.2, the value of any vested and deferred Phantom Units shall be paid to the
Grantee as soon as practicable.

Section 12.8 Termination Date

Termination of employment of a Grantee for any of the reasons
enumerated in this Article XII shall, for purposes of the Plan, be deemed to
have occurred as of the date which is recorded in the ordinary course in the
Company books and records in accordance with the then-prevailing procedures and
practices of the Company.

Section 12.9 Reporting Person Limitation

Notwithstanding any other provision of this Article XII, a Grantee who
ceases to be a Reporting Person through retirement or any other termination of
employment shall not be entitled to exercise a SAR.

ARTICLE XIII
EXCHANGE AWARDS; ABOVE TARGET MICP AWARDS

Section 13.1 Salary/Bonus Reductions

13.1.1 Restricted Stock. A Grantee ( including those described in
Section 13.8 ) may elect to reduce and defer his or her current or future Base
Salary and/or earned Bonus and, thereafter,

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exchange such deferred amounts for Restricted Stock. Such elections shall
direct deferrals and exchanges on a one-time (annual) basis or, in the
alternative in the case of Base Salary, on an ongoing basis covering a period
not exceeding five (5) years. Should a Grantee elect a one-time (annual)
exchange, the deferred amounts shall be credited to his or her deferred
compensation account under this Plan and, thereafter, on the third (3rd)
business day following the public announcement of the Company's annual
earnings, the deferred amounts shall be exchanged for that number of shares of
Restricted Stock that equals the number of whole shares determined by dividing
the deferred amount forgone by 85% of the Fair Market Value of one share of
Common Stock on the date of the exchange. Should a Grantee elect an exchange
of Base Salary on an ongoing basis for a period of one year or less, the number
of shares of Restricted Stock he or she shall acquire through such exchanges,
which shall be effected on the third (3rd) business day following the public
announcement of the Company's annual earnings, shall be determined by dividing
the total projected deferred amounts forgone for the designated period by 85%
of the Fair Market Value of one share of Common Stock on the date of the
exchange. When the elected period extends beyond one year, the number of
shares of Restricted Stock acquired through such exchanges, which shall be
effected on the third (3rd) business day following the public announcement of
the Company's annual earnings, shall equal that number of whole shares of
Restricted Stock determined by dividing the discounted present value of the
total projected deferred amounts forgone for the designated period (using the
appropriate Treasury Bill rates for the applicable period) by 85% of the Fair
Market Value of one share of Common Stock on the date of the exchange.
Restricted Stock acquired pursuant to exchanges under this Subsection 13.1.1
shall have a Restricted Period of not less than three (3) years (such
Restricted Period to be extended up to five (5) years to coincide with a
deferral election that extends beyond three (3) years), as determined by the
Committee, and shall be subject to all of the terms,

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conditions and provisions of Article VII, except as may otherwise be determined
by the Committee prior to their acquisition.

13.1.2 Options. A Grantee may elect to reduce and defer his or her
current or future Base Salary and/or earned Bonus and, thereafter, exchange such
deferred amounts for Nonqualified Options. Such elections shall direct
deferrals and exchanges on a one-time (annual) basis or, in the alternative in
the case of Base Salary, on an ongoing basis covering a period not exceeding
five (5) years. Should a Grantee elect a one-time (annual) exchange, the
deferred amounts shall be credited to his or her deferred compensation account
under this Plan and, thereafter, on the third (3rd) business day following the
public announcement of the Company's annual earnings, the deferred amounts
shall be exchanged for that number of Options as is determined by the
Committee, in its discretion, to be the equivalent in value of that number of
whole shares of Restricted Stock determined by dividing the deferred amount
forgone by 85% of the Fair Market Value of one share of the Common Stock on the
date of the exchange. Should a Grantee elect an exchange of Base Salary on an
ongoing basis for a period of one year or less, the number of Options he or she
shall acquire through such exchanges is that number of Options as is determined
by the Committee, in its discretion, to be the equivalent in value of that
number of whole shares of Restricted Stock determined by dividing the total
projected deferred amount forgone for the designated period by 85% of the Fair
Market Value of one share of Common Stock on the date of the exchange. When
the elected period extends beyond one year, the Options acquired through such
exchanges, which shall be effected on the third (3rd) business day following
the public announcement of the Company's annual earnings, shall be that number
of Options determined by the Committee, in its discretion, to be the equivalent
in value of that number of whole shares of Restricted Stock determined by
dividing the discounted present value of the total projected deferred amounts
forgone for the designated

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period (using the appropriate Treasury Bill rates for the applicable period) by
85% of the Fair Market Value of one share of the Common Stock on the date of the
exchange. Options acquired pursuant to this Subsection 13.1.2 shall be
exercisable according to the following three (3) year schedule (unless the
Grantee's employment with the Company or a Participating Subsidiary is
terminated, in which case the provisions of Section 13.3 or Article XII, as
apposite, shall govern):

40% of the Options will be exercisable beginning one year after the
exchange, a second 40% of the Options will be exercisable beginning
two (2) years after the exchange, and the final 20% of the Options
will be exercisable beginning three (3) years after the exchange;

and shall be subject to all of the terms, conditions and provisions of Article
V (as modified as to exercisability by this Subsection 13.1.2), except as may
otherwise be determined by the Committee prior to their acquisition.

Section 13.2 Deferred Accounts

13.2.1 Deferred Compensation Plan Accounts. Subject to the Company's
approval, amounts accrued under the Hercules Incorporated Deferred Compensation
Plan (other than under the Hercules Incorporated Non-qualified Savings Plan
portion thereof) may, upon the Grantee's request for a one-time (annual)
exchange, be surrendered in exchange for Restricted Stock and/or Nonqualified
Options. The number of shares of Restricted Stock and Options acquired in this
manner shall be determined in the same manner as is specified in Subsections
13.1.1 and 13.1.2, respectively, and all Restricted Stock and Options so
acquired shall be subject to all of the terms,

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conditions and provisions of Subsections 13.1.1 and 13.1.2, respectively.
Exchanges under this Subsection 13.2.1 shall be effected the third (3rd)
business day after the first public announcement of the Company's annual
earnings.

13.2.2 Non-Qualified Savings Plan Accounts. Subject to the Company's
approval, amounts accrued under the Hercules Incorporated Non-Qualified Savings
Plan portion of the Hercules Deferred Compensation Plan may, upon the Grantee's
request for a one-time (annual) exchange, be surrendered in exchange for
Restricted Stock and/or Nonqualified Options. The number of shares of
Restricted Stock and Options acquired in this manner shall be determined in the
same manner as is specified in Subsections 13.1.1 and 13.1.2, respectively,
except that the computation in each case shall be based on 100% of the Fair
Market Value of one share of Common Stock rather than the 85% of the Fair
Market Value specified in Subsection 13.1.1 and Subsection 13.1.2. All
Restricted Stock and Options so acquired shall be subject to all of the terms,
conditions and provisions of Subsections 13.1.1 and 13.1.2, respectively.
Exchanges under this Subsection 13.2.2 shall be effected the third (3rd)
business day after the first public announcement of the Company's annual
earnings.

Section 13.3 Termination of Employment

13.3.1 Death, Disability and Reduction in Force. Notwithstanding any
provisions of Sections 12.2 and 12.4 to the contrary:

(a) If prior to the expiration of an applicable Restricted
Period a Grantee who has received Restricted Stock pursuant to
Subsections 13.1.1, 13.2.1 and/or 13.2.2 shall cease to be employed by
the Company by reason of death, Disability, Reduction in Force or

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Retirement directly attributable to a Reduction in Force, all
restrictions and forfeiture provisions under this Plan with respect to
the Restricted Stock exchanged pursuant to this Article XIII shall
lapse as of the date of termination of employment and delivery of such
shares shall be governed by the provisions of Section 7.6.

(b) If prior to the expiration of an applicable Option Period a
Grantee who has received Options pursuant to Subsections
13.1.2, 13.2.1 and/or 13.2.2 shall cease to be employed by the
Company by reason of death, Disability, Reduction in Force or
Retirement directly attributable to a Reduction in Force, the Option
Period shall be adjusted to the lesser of the remaining Option Period
or one year from the date of employment termination.

13.3.2 Retirement. Notwithstanding any provisions of Section 12.1 to
the contrary:

(a) In the event of Retirement (not directly attributable to a
Reduction in Force) by a Grantee who has received Restricted Stock
pursuant to Subsections 13.1.1, 13.2.1 and/or 13.2.2 prior to the
expiration of an applicable Restricted Period, that number of shares
of Restricted Stock equal to the amount attributable to the 15%
discount made available under this Article XIII, and prorated for the
length of time remaining in the Restricted Period shall be forfeited
and returned to the Company.

(b) If prior to the expiration of an applicable Option Period
a Grantee who has received Options pursuant to Subsections 13.1.2,
13.2.1 and 13.2.2 shall cease to be employed by the Company by reason
of his or her Retirement (not directly related to a Reduction in
Force), the Option Period shall be adjusted to the lesser of the
remaining Option Period or three (3) years

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from the date of termination. In the event of Retirement (not
directly attributable to a Reduction in Force) by a Grantee who has
received Options pursuant to Subsections 13.1.2, 13.2.1 and/or 13.2.2,
a number of Options equal to the amount attributable to the 15%
discount and prorated for the length of time remaining in the period
during which Options may not be exercised shall be forfeited.

13.3.3 Resignation or Termination for Cause. Notwithstanding any
provisions of Sections 12.5 and 12.7 to the contrary:

(a) In the event a Grantee who has received Restricted Shares
pursuant to Subsections 13.1.1, 13.2.1 and/or 13.2.2 voluntarily
resigns (except for retirement with approval of the Company) or
terminates employment for reasons other than any of those specified in
Sections 12.1, 12.2, 12.3, 12.4 and 12.6 prior to the expiration of an
applicable Restricted Period, all shares of Restricted Stock shall be
forfeited and returned to the Company and such Grantee shall receive a
payment equal to the lower of the Fair Market Value of the Restricted
Shares forfeited or the original amount exchanged.

(b) In the event a Grantee who has received Options pursuant
to Subsections 13.1.2, 13.2.1 and/or 13.2 voluntarily resigns (except
for retirement with approval of the Company) or terminates employment
for reasons other than any of those specified in Sections 12.1, 12.2,
12.3, 12.4 and 12.6 prior to the expiration of the applicable Option
Period, all Options shall be forfeited and returned to the Company and
such Grantee shall receive a payment equal to the lower of a value (as
determined by the Committee) of the Options forfeited or the original
amount exchanged.

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Section 13.4 Avoidance of Pension Diminution

13.4.1 Governing Provisions. Grantees electing Base Salary and/or
Bonus reductions under Section 13.1 may suffer a permanent diminution of their
qualified pension entitlement under the Hercules Pension Plan. To offset this
diminution in part,exchange awards in respect of pensions otherwise payable as
nonqualified pensions (as measured from the date of the APD Election defined
next below) may be requested within five (5) years of anticipated retirement.
Subject to the Committee's approval of such a request, all such exchanges shall
be effected in accordance with the provisions of this Section 13.4.

13.4.2 Exchange Awards. A Grantee who is within five (5) years (but
not less than one year) of his or her anticipated retirement date may elect
("APD Election") to exchange the present value (as of the date of the APD
Election) of his or her projected benefits payable as of the Designated
Retirement Date (as defined below) under the Hercules Pension Restoration Plan
(utilizing the method and assumptions used to convert a pension to a partial
cash payment under the Hercules Pension Plan) for Restricted Stock issuable
under Subsection 13.1.1 and/or Options granted under Subsection 13.1.2.
Restricted Stock and/or Options received in such an exchange shall be in
substitution of any pension entitlements under the Hercules Pension Restoration
Plan, the rights to such entitlements being forfeited and canceled in
consideration of such exchange.

13.4.3 Designated Retirement Date. As a part of his or her APD
Election, a Grantee shall designate a retirement date ("Designated Retirement
Date"). In the event of any termination of employment prior to the Designated
Retirement Date, the following will apply:

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(a) If the Grantee elected Restricted Stock, that number of
Restricted Stock shares shall be forfeited as has a value (on the date
of his or her APD Election) equivalent to the present value determined
for purposes of Subsection 13.4.2 minus the present value (as
of the APD Election date) of the amount due under the Hercules Pension
Restoration Plan as of the date of actual retirement, utilizing the
method and assumptions used to convert a pension to a partial cash
payment under the Hercules Pension Plan. Further, in the event that
the Grantee's actual retirement date occurs within three (3)
years of the APD Election, the Grantee shall forfeit that number of
Restricted Stock shares (adjusted by the preceding sentence)
attributable to the 15% discount made available under Subsection
13.1.1 and prorated for the length of time remaining in the three (3)-
year period commencing with the date of the APD Election.

(b) If the Grantee elected Nonqualified Options, that number
of Options shall be forfeited as the Committee in its discretion shall
determine has a value (on the date of his or her APD Election)
equivalent to the present value determined for purposes of Subsection
13.4.2 minus the present value (as of the date of his or her APD
Election) of the amount due under the Hercules Pension Restoration
Plan as of the date of actual retirement, utilizing the method and
assumptions used to convert a pension to a partial cash payment under
the Hercules Pension Plan. Further, in the event that the Grantee's
actual retirement date occurs within three (3) years of the APD
Election, the Grantee shall forfeit that number of Options as the
Committee in its discretion shall determine has a value equal to that
number of Restricted Stock shares (adjusted by the preceding sentence)
attributable to the 15% discount made available under Subsection
13.1.2 and prorated for the length of time remaining in the period
commencing with the date of the APD Election.

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(c) Notwithstanding (a) and (b) next above, in the event of
the Grantee's death, Disability or termination of employment
with the consent of the Company, the Committee may, in its discretion,
waive any forfeitures otherwise applicable under this Subsection
13.4.3.

Section 13.5 Irrevocability

Any election under Sections 13.1, 13.2 or 13.4 shall be irrevocable.

Section 13.6 Equivalency

Notwithstanding any provision in this Article XII to the contrary, all
elections under this Article XII that involve an exchange of future
compensation or pension benefit entitlement shall in each instance be equalized
(that is, recalculated using actual numbers) at the expiration of the period
elected or termination of employment and forfeiture shall be applied, if
appropriate.

Section 13.7 MICP Awards

Any payout under the Management Incentive Compensation Plan for
performance above the target level Performance Goals for any Performance Period
shall be in that number of whole shares of Restricted Stock obtained by
dividing the dollar value of the payout by 85% of the Fair Market Value of one
share of Common Stock on the date of such award. Restricted Stock acquired
pursuant to this Section 13.7 shall be subject to all of the terms, conditions
and provisions of Article VII, except as may otherwise be determined by the
Committee prior to the date of award.

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Section 13.8 Definition

For purposes of this Article XIII, the term "Grantee" includes all
employees of the Company or any Participating Subsidiary who are designated by
the CEO to be eligible for purposes of this Article XIII.

ARTICLE XIV
CERTAIN TERMS APPLICABLE TO ALL AWARDS

Section 14.1 Withholding Taxes

The Company shall withhold (or secure payment from the Grantee in lieu
of withholding) the amount of any withholding or other tax required by law to
be withheld or paid by the Company with respect to any amount payable and/or
shares issuable under such Grantee's Award, or with respect to any income
recognized upon a disqualifying disposition of shares received pursuant to the
exercise of an ISO, and the Company may defer payment or issuance of the cash
or stock upon exercise or vesting of an Award unless indemnified to its
satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Committee and shall be
payable by the Grantee at the time of delivery or when payment is made (except
as otherwise payable under Section 14.1(c) in accordance with the following
rules:

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(a) With respect to Awards payable in cash, the Company will
withhold an amount sufficient to satisfy applicable Federal, state and
local tax withholding requirements and remit the net award to the
Grantee;

(b) With respect to Awards payable in stock, the Company will
notify the Grantee of the amount due from such Grantee to satisfy the
tax withholding requirements with respect to the stock. The
Grantee shall pay the amount due to satisfy the tax withholding
requirements in cash; provided, however, that the Grantee may elect to
meet the tax withholding requirement by requesting the Company, in
writing, to withhold from such Award and sell through a brokerage firm
the appropriate number of shares of Common Stock, rounded up to the
next whole number, which would result in proceeds equal to the tax
withholding requirement. Any election by a Grantee to have shares
withheld under this Section 14.1 shall be subject to such terms and
conditions as the Committee may specify, which may include that the
election shall be irrevocable and in the case of a Reporting Person,
the election to have shares withheld under this Section 14.1 must be
made either (i) not less than six (6) months prior to the date that
the tax is to be withheld by the Company, or (ii) during the period
beginning on the third business day following the date of the release
for publication of the Company's quarterly or annual summary
statements of earnings and ending on the twelfth business day
following such date. If the cash required (whether paid directly or
indirectly through the sale of stock election described above) is not
received by the Company within sixty (60) days of notification by the
Company of the tax withholding due, the Committee shall have the right
to take whatever action it deems appropriate, including voiding the
Award. The Company shall not deliver or pay the Award (net of the tax
withholding) until the tax withholding obligation is satisfied. At
the time that all other restrictions lapse (other

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than being subject to Section 16 of the Act) a Reporting Person
shall make the election described in Subsection (c) below.

(c) If permitted under applicable Federal income tax laws, a
Grantee may elect to include in gross income for Federal income tax
purposes in the year in which a stock Award is made, an amount equal
to the Fair Market Value of the Award on the Date of Grant. If the
Grantee makes such an election, the Grantee shall promptly notify the
Company in writing and shall provide the Company with a copy of the
executed election form as filed with the Internal Revenue Service by
no later than thirty (30) days from the Date of the Grant. Promptly
following such notification, the Grantee shall pay directly to the
Company, or make arrangements satisfactory to the Committee, the cash
amount determined by the Company to be sufficient to satisfy
applicable Federal, state or local withholding tax requirements. If
the Grantee shall fail to make such payments, the Company and its
Subsidiaries shall, to the extent permissible by law, have the right
to deduct from any payment of any kind otherwise due to the Grantee
any Federal, state or local taxes of any kind required by law to be
withheld with respect to such Restricted Stock.

Section 14.2 Adjustments to Reflect Capital Changes

14.2.1 Recapitalization. In the event of any stock dividend, stock
split, combination or exchange of shares, merger, consolidation or other change
in capitalization with a similar substantive effect upon the Plan or the Awards
granted under the Plan, such adjustments shall be made in the number and kind
of shares subject to outstanding Awards, the Option Price for such shares and
the

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number and kind of shares available for Awards subsequently granted under the
Plan as may be determined appropriate by the Committee.

14.2.2 Sale or Reorganization. After any reorganization, merger or
consolidation in which the Company is the surviving corporation, each Grantee
shall, at no additional cost, be entitled upon any exercise of an Option or
receipt of other Award to receive (subject to any required action by
stockholders), in lieu of the number of shares of Common Stock receivable or
exercisable pursuant to such Award, the number and class of shares of stock or
other securities to which such Grantee would have been entitled pursuant to the
terms of the reorganization, merger or consolidation if, at the time of such
reorganization, merger or consolidation, such Grantee had been the holder of
record of a number of shares of stock equal to the number of shares receivable
or exercisable pursuant to such Award. Comparable rights shall accrue to each
Grantee in the event of successive reorganizations, mergers or consolidations
of the character described above.

14.2.3 Options to Purchase Stock of Acquired Companies. After any
reorganization, merger or consolidation in which the Company or a Subsidiary
shall be a surviving corporation, the Committee may grant substituted options
under the provisions of the Plan, pursuant to Section 424 of the Code,
replacing old options granted under a plan of another party to the
reorganization, merger or consolidation whose stock subject to the old options
that may no longer be issued following such merger or consolidation, The
foregoing adjustments and manner of application of the foregoing provisions
shall be determined by the Committee in its sole discretion. Any such
adjustments may provide for the elimination of any fractional shares which
might otherwise become subject to any Options.

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Section 14.3 Failure to Comply With Terms and Conditions

Notwithstanding any other provision of the Plan, no payment or delivery
with respect to any Award shall be made, and all rights of the Grantee who
receives such Award (or his designated Beneficiary or legal representative) to
such payment or delivery under the Plan shall be forfeited, at the discretion of
the Committee, if, prior to the time of such payment or delivery, the Grantee
breaches a restriction or any of the terms, restrictions and/or conditions of
the Plan and/or the Award Commitment.

Section 14.4 Forfeiture Upon Occurrence of Certain Events

Notwithstanding any other provision of the Plan, no payment of any
Award shall be made and all rights of the Grantee who received such Award (or
his designated Beneficiary or legal representative) to the payment thereof
under the Plan shall be forfeited if, prior to the time of such payment, the
Grantee (i) without the Company's consent, shall be employed by a competitor
of, or shall be engaged in any activity in competition with, the Company or a
Subsidiary; (ii) divulges without the consent of the Company any secret or
confidential information belonging to the Company or a Subsidiary; or (iii) has
been dishonest or fraudulent in any matter affecting the Company or a
Subsidiary or has committed any act which, in the sole judgment of the
Committee, has been substantially detrimental to the interests of the Company
or a Subsidiary. The Company shall give a Grantee written notice of the
occurrence of any such event prior to making any such forfeiture. The
determination of the Committee as to the occurrence of any of the events
specified in clauses (i), (ii), and (iii) of this Section 14.4 shall be
conclusive and binding upon all persons for all purposes. Any

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Award shall be subject to forfeiture for the reasons provided in this Section
14.4 in such manner as shall be provided by the Committee.

Section 14.5 Regulatory Approvals and Listing

The Company shall not be required to issue any certificate or
certificates for shares of Common Stock under the Plan prior to (i) obtaining
any approval from any governmental agency which the Company shall, in its
discretion, determine to be necessary or advisable, (ii) the admission of such
shares to listing on any national securities exchange on which the Company's
Common Stock may be listed, and (iii) the completion of any registration or
other qualification of such shares of Common Stock under any state or Federal
law or ruling or regulations of any governmental body which the Company shall,
in its discretion, determine to be necessary or advisable.

Section 14.6 Restrictions Upon Resale of Stock

If the shares of Common Stock that have been issued to a Grantee
pursuant to the terms of the Plan are not registered under the Securities Act
of 1933, as amended ("Securities Act"), pursuant to an effective registration
statement, such Grantee, if the Committee shall deem it advisable, may be
required to represent and agree in writing (i) that any such shares acquired by
such Grantee pursuant to the Plan will not be sold except pursuant to an
effective registration statement under the Securities Act, or pursuant to an
exemption from registration under said Act and (ii) that such Grantee is
acquiring such shares for his own account and not with a view to the
distribution thereof.

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Section 14.7 Reporting Person Limitation

Notwithstanding any other provision of the Plan, to the extent required
to qualify for the exemption provided by Rule 16b-3 under the Act, and any
successor provision, (1) any Common Stock or other equity security offered
under the Plan to a Reporting Person may not be sold for at least six (6)
months after the earlier of acquisition of the security or the date of grant of
the derivative security, if any, pursuant to which the Common Stock or other
equity security was acquired; and (2) any Option, SAR or other similar right
related to an equity security, issued under the Plan to a Reporting Person
shall not be transferable other than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order and shall be
exercisable during the Grantee's lifetime only by the Grantee or the Grantee's
guardian or legal representative.

ARTICLE XV
DISPUTES

If the employment of a Grantee with the Company or any Participating
Subsidiary shall terminate prior to the expiration of the Performance or
Restriction Period applicable to any Performance Share, Restricted Stock or
Phantom Unit Award awarded to such Grantee and there exists a dispute between
such Grantee and the Company or the Committee as to the satisfaction of the
conditions to the release of such shares or units under the Plan or the terms
and conditions of the Performance Share, Restricted Stock or Phantom Unit
Award, the Performance Share, Restricted Stock or Phantom Unit Awards as to
which such dispute shall exist shall remain subject to the

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restrictions of the Plan until the resolution of such dispute, regardless of
any intervening expiration of the Performance or Restriction Period originally
applicable to such shares, except that any dividends which may be declared and
which may be payable to the participant as of a date during the period from
termination of such Grantee's employment to the resolution of such dispute
(the "Suspension Period") shall

(i) to the extent to which such dividends would have been
payable to such Grantee on such Performance Share, Restricted Stock or
Phantom Unit Award, be held by the Company as part of its general
funds and shall be paid to or for the account of such Grantee only
upon, and in the event of, a resolution of such dispute in a manner
favorable to such Grantee and then only with respect to such
Performance Share, Restricted Stock or Phantom Unit Award as to which
such resolution shall be so favorable, and

(ii) in the event the dispute is resolved in a manner
unfavorable to the Grantee, be canceled as dividends payable upon
Performance Share, Restricted Stock or Phantom Unit Award as to which
such resolution shall be so unfavorable.

In addition, to the extent that resolution of any such dispute shall
be unfavorable to the Grantee, the Performance Shares, Restricted or Phantom
Unit Award as to which such dispute shall have existed shall be forfeited in
accordance with the provisions of Article XII or Section 14.4.

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ARTICLE XVI
ADMINISTRATION OF THE PLAN

Section 16.1 Committee

The Plan shall be administered by or under the direction of the
Committee. No person shall be eligible or continue to serve as a member of the
Committee unless such person is a director of the Company and is a
"disinterested person" within the meaning of Rule 16b-3, and no person shall
be, or shall have been, eligible to receive an Award under the Plan to acquire
stock, stock options, stock appreciation rights, performance shares or
restricted stock of the Company or any Participating Subsidiary at any time
within the one (1) year immediately preceding the member's appointment to the
Committee.

Section 16.2 Committee Actions

Except for matters required by the terms of this Plan to be decided by
the CEO or his designee or designees, the Committee shall have full power and
authority to interpret and construe the Plan, to prescribe, amend and rescind
rules, regulations, policies and practices, to impose such conditions and
restrictions on Awards as it deems appropriate and to make all other
determinations necessary or desirable in connection with the administration of,
or the performance of its responsibilities under, this Plan. Subject to the
limitations of provisions of Section 20.4, each decision, determination,
interpretation or other action of the Committee made or taken pursuant to
grants of authority under the Plan shall be final and shall be conclusive and
binding on all persons for all purposes. The Committee's decisions,
determinations and interpretations (including without

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limitations, the terms and provisions of such awards and the agreements
evidencing same) need not be uniform and may be made selectively among Grantees
who receive, or are eligible to receive, awards under the Plan, whether or not
such Grantees are similarly situated. The Committee may, to the extent that any
such action will not prevent the Plan from complying with Rule 16b-3, delegate
any of its powers and authority under the Plan as it deems appropriate to
designated officers or employees of the Company.

Section 16.3 No Liability of Committee Members

As and to the extent provided by Section 20.5, no past, present or
future member of the Committee shall be personally liable by reason of any
contract or other instrument executed by him or on his behalf in his capacity
as a member of the Committee, nor for any mistake of judgment made in good
faith, and the Company shall indemnify and hold harmless each member of the
Committee.

ARTICLE XVII
EFFECTIVE DATE, TERM OF THE PLAN AND STOCKHOLDER APPROVAL

The Plan became effective as of April 1, 1991, and was amended and
restated as of June 30, 1993, and is hereby further amended and restated. The
termination date of the Plan shall be April 30, 1998. No Award shall be
granted under the Plan after such termination

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date. The Plan will continue in effect for existing Awards as long as
any such Awards are outstanding.

ARTICLEX VIII
CHANGE IN CORPORATE CONTROL

Section 18.1 Options And PASOs

In the event of a Change in Control, (1) all Options and PASOs
outstanding on the date of such Change in Control shall become immediately and
fully exercisable, and (2) a Grantee who is an elected officer or director of
the Company will be permitted to surrender for cancellation within sixty (60)
days after such Change in Control any Option or PASO or portion thereof to the
extent not yet exercised (or with respect to an Option or PASO or portion
thereof granted less than six (6) months prior to the date of the Change in
Control, within sixty (60) days after the expiration of a six (6) month period
following the Date of Grant) and to receive a cash payment in an amount equal
to the excess, if any, of (A) in the case of a Nonqualified Stock Option or
PASO, the adjusted Fair Market Value of the Common Stock subject to the Option
or PASO or a portion thereof surrendered or in the case of an ISO, the Fair
Market Value of the Common Stock subject to the Option or PASO or portion
thereof surrendered, over (b) the Option Price. The provisions of this Section
18.1 shall be applicable to Nonqualified Stock Options, PASOs or ISOs. The
provisions of this Section 18.1 shall not be applicable to any Options granted
to a Grantee if any Change in Control results from such Grantee's

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beneficial ownership (within the meaning of Rule 13d-3 under the Act) of Common
Stock or Company voting securities.

Section 18.2 SARs

In the event of a Change in Control, all SARs shall become immediately
and fully exercisable but not before any related ISO is exercisable. Upon any
exercise of a SAR (other than a SAR granted in tandem with a related ISO) or
any portion thereof during the 60-day period following the Change in Control,
(or with respect to a SAR granted to an officer or director of the Company less
than six (6) months prior to the date of the Change in Control, within sixty
(60) days after the expiration of a six (6) month period following the Date of
Grant) the amount payable shall be determined by reference to the SAR Fair
Market Value of the Common Stock and shall be paid in cash. SARs granted in
connection with ISOs will be payable as determined by reference to the Fair
Market Value of the Common Stock on the date of such exercise and shall be paid
in cash. The provisions of this Section 18.2 shall not be applicable to any
SARs granted to a Grantee if any Change in Control results from such Grantee's
beneficial ownership (within the meaning of Rule 13d(3) under the Act) of
Common Stock or Company voting securities.

Section 18.3 All Other Awards

In the event of a Change of Control, all Performance Share Awards,
Restricted Stock Awards, Phantom Unit Awards, Cash Value Awards, Other
Market-Based Awards (if any) and Other Performance-Based Awards (if any) shall
immediately vest and become fully payable within thirty (30)

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days after a Change in Control to all Grantees who have been granted an
Award. In the case of Performance Share Awards and Cash Value Awards, all
Awards shall vest at the Maximum Award.

Section 18.4 Definitions

A Change in Control of the Company shall occur when there is an
unsolicited Change in Control of the Company that is not initiated by the
Company, and is of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act, as in
effect on the effective date of the Plan; provided, however, that no Change in
Control shall be deemed to have occurred unless and until a "person" (as such
term is used in Sections 13(d) and 14(d)(2) of the Act) together with all
"affiliates" and "associates" of such person (as such terms respectively, are
defined in Rule 12b-2 of the General Rules and Regulations under the Act) is or
becomes a beneficial owner, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
then outstanding securities.

ARTICLE XIX
AMENDMENT AND TERMINATION

Section 19.1 Amendment

The Board reserves the right at any time or times to modify, alter or
amend, in whole or in part, any or all of the provisions of the Plan to any
extent and in any manner that it may deem advisable,

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and no consent or approval by the stockholders of the Company or by any other
person, committee or entity of any kind shall be required to make any
modification, alteration or amendment; provided, however, that the Board shall
not, without the requisite affirmative approval of stockholders of the Company,
make any modification, alteration or amendment which (i) except as provided
in Section 3, increases the maximum number of shares of Common Stock available
for Awards under this Plan, (ii) decreases the Option Price to less than 100% of
the Fair Market Value on the date of grant of an Option, (iii) extends the
period during which Awards may be granted under the Plan beyond April 30, 1998,
(iv) changes the employee (or class of employees) eligible to receive Awards
under the Plan, (v) materially increase the benefits accruing to a Grantee
under the Plan, or (vi) requires stockholders approval under Rule 16b-3 or the
Code, unless such compliance is no longer desired, or under any other
applicable law. No modification, alteration or amendment of the Plan may,
without the consent of the Grantee (be Beneficiaries in the call of his death)
to whom any Award shall theretofore have been granted under the Plan adversely
affect any right of such Grantee under such Award, except in accordance with
the provisions of the Plan and/or any Award Commitment applicable to any such
Award. Subject to the provisions of this Section 19.1, any modification,
alteration or amendment of any provisions of the Plan may be made
retroactively.

Section 19.2 Suspension or Termination

The Board reserves the right at any time to suspend or terminate, in
whole or in part, any or all of the provisions of the Plan for any reason and
without the consent of or approval by the stockholders of the Company, any
Grantee or Beneficiary or any other person, committee or entity of any kind;
provided, however, that no such suspension or termination shall affect any
right or obligation with respect to any Award theretofore made except as herein
otherwise provided.

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ARTICLE XX
MISCELLANEOUS

Section 20.1 Deferral Election

At the discretion of the Committee payment of Phantom Units or any
other cash award, or any portion thereof, may be deferred by a Grantee until
such time as the Committee may establish. All such deferrals shall be
accomplished by the delivery of a written, irrevocable election by the Grantee
at such times prior to the time payment would otherwise be made as the
Committee shall determine. All deferrals shall be made in accordance with such
rules and regulations established by the Committee to ensure that such
deferrals comply with all applicable requirements of the Code and its
regulations. Deferred payments shall be paid in a lump sum or installments, as
determined by the Committee. The Committee also may credit interest at such
rates to be determined by the Committee.

Section 20.2 Designation of Beneficiary

Each Grantee shall file with the Company a written designation of one
or more persons as the Beneficiary who shall be entitled to receive the Award,
if any, payable under the Plan upon his death. A Grantee may from time to time
revoke or change his Beneficiary designation without the consent of any prior
Beneficiary by filing a new designation with the Company. The last such
designation received by the Company shall be controlling; provided, however,
that no designation, or change or revocation thereof, shall be effective unless
received by the Company prior to the Grantee's death,

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and in no event shall it be effective as of a date prior to such receipt. If
no such Beneficiary designation is in effect at the time of a Grantee's death,
or if no designated Beneficiary survives the Grantee or if such designation
conflicts with law, the Grantee's estate shall be entitled to receive the Award,
if any, payable under the Plan upon his death. If the Committee is in doubt as
to the right of any person to receive such Award, the Company may retain such
Award, without liability for any interest thereon, until the Committee
determines the rights thereto, or the Company may pay such Award into any court
of appropriate jurisdiction and such payment shall be a complete discharge of
the liability of the Company therefor.

Section 20.3 No Right to an Award or to Continued Employment

No Grantee or other person shall have any claim or right to be granted
an Award under the Plan. Neither the action of the Company in establishing
this Plan, nor any provisions hereof, nor any action taken by the Company, any
Participating Subsidiary, the Committee or the CEO (or his designee or
designees) pursuant to such provisions shall be construed as creating in any
employee or class of employees any right with respect to continuation of
employment by the Company or any of the Participating Subsidiaries, and they
shall not be deemed to interfere in any way with the Company's or any
Participating Subsidiary's right to employ, discipline, discharge, terminate,
lay off or retire any Grantee with or without cause, to discipline any
Employee, or to otherwise affect the Company's right to make employment
decisions with respect to any Grantee.

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Section 20.4 Discretion of the Committee and the CEO

Whenever the terms of the Plan provide for or permit a decision to be
made or an action to be taken by a Grantor, such decision may be made or such
action taken in the sole and absolute discretion of such Grantor and shall be
final, conclusive and binding on all persons for all purposes; provided,
however, that the Board may review any decision or action of the Grantor and if
the Board determines that any Award or other decision or act of the Grantor is
inequitable or contrary to the provisions of this Plan, it may reverse or
modify such Award, decision or act. As provided in Section 16.2 in the case of
the Grantor's determinations under the Plan, including, without limitation the
determination of the person to receive awards and the amount of such awards,
need not be uniform and may be made by him selectively among persons who
receive, or are eligible to receive, awards under this Plan, whether or not
such persons are similarly retired.

Section 20.5 Indemnification and Exculpation

20.5.1 Indemnification. Each person who is or shall have been a
member of the Committee and each director, officer or employee of the Company
or any Participating Subsidiary to whom any duty or power related to the
administration or interpretation of this Plan may be delegated, shall be
indemnified and held harmless by the Company against and from any and all loss,
cost, liability or expense that may be imposed upon or reasonably incurred by
him in connection with or resulting from any claim, action, suit or proceeding
to which he may be or become a party or in which he may be or became involved
by reason of any action taken or failure to act under this Plan and against and
from any and all amounts paid by him in settlement thereof (with the Company's
written approval) or paid by him in satisfaction of a judgment in any such
action, suit or proceeding, except a judgment

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in favor of the Company based upon a finding of his bad faith; subject,
however, to the condition that upon the institution of any claim, action, suit
or proceeding against him, he shall in writing give the Company an opportunity,
at its own expense, to handle and defend the same before he undertakes to handle
and defend it on his own behalf. The foregoing right of indemnification
shall not be exclusive of any other right to which such person may be entitled
under the Company's Restated Certificate of Incorporation, as a matter of law or
otherwise, or any power that the Company may have to indemnify him or hold him
harmless.

20.5.2 Exculpation. Each member of the Committee, and each director,
officer and employee of the Company or of any Participating Subsidiary shall be
fully justified in relying or acting upon in good faith any information
furnished in connection with the administration of this Plan by any appropriate
person or persons other than himself. In no event shall any person who is or
shall have been a member of the Committee, or a director, officer or employee
of the Company or any Participating Subsidiary be liable for any determination
made or other action taken or any omission to act in reliance upon such report
or information, of for any action (including the furnishing of information)
taken or any failure to act, if in good faith.

Section 20.6 Unfunded Plan

This Plan is intended to constitute an unfunded, long term incentive
compensation plan for certain selected employees. No special or separate fund
shall be established and no segregation of assets shall be made to assure
payment of such amounts, except as expressly set forth in the Plan with respect
to Restricted Stock or Performance Shares held in custody accounts. The
Company may, but shall not be obligated to, acquire shares of its Common Stock
from time to time in

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anticipation of its obligations under the Plan, but no Grantee shall have any
right in or against any shares of stock so acquired. All such stock shall
constitute general assets of the Company and may be disposed of by the Company
at such time and for such purposes at it may deem appropriate. No obligation or
liability of the Company to any Grantee with respect to any right to receive a
distribution or payment under the Plan shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company.

Section 20.7 Inalienability of Rights and Interests

The rights and interests of a Grantee under this Plan are personal to
the Grantee and to any person or persons who may become entitled to
distribution or payments under the Plan by reason of death of the Grantee, and
the rights and interests of the Grantee or any such person (including, without
limitation, any Award distributable or payable under the Plan) shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, and any such attempted action shall be void and
no such benefit or interest shall be any manner liable for or subject to debts,
contracts, liabilities, engagements or torts of any Grantees. If any Grantee
shall attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber
or charge any of his rights or interests under the Plan, (including without
limitation, any Award payable under the Plan) then the Committee may hold or
apply such benefit or any part thereof to or for the benefit of such Grantee or
his Beneficiary, his spouse, children, blood relatives or other dependents, or
any of them, in such manner and in such proportions as the Committee may
consider proper.

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Section 20.8 Awards Not Includable for Benefit Purposes

Payments received by a Grantee pursuant to the provisions of the Plan
shall not be included in the determination of benefits under any pension,
group insurance or other benefit plan applicable to the Grantee which are
maintained by the Company or any of its Subsidiaries, except as may be
determined by the Board.

Section 20.9 No Issuance of Fractional Shares

The Company shall not be required to deliver any fractional share of
Common Stock but, as determined by the Committee, may pay in lieu thereof,
except as otherwise provided in this Plan, the Fair Market Value (determined as
of the date of payment the restrictions terminate) of such fractional share to
the Grantee or the Grantee's beneficiary, as the case may be.

Section 20.10 Modification for Overseas Grantees

Notwithstanding any provision to the contrary, the Committee may
incorporate such provisions, or make such modifications or amendments in Award
Commitments of Grantees who reside or are employed outside of the United States
of America, or who are citizens of a country other than the United States of
America, as the Committee deems necessary or appropriate to accomplish the
purposes of the Plan with respect to such Grantee in light of differences in
applicable law, tax policies or customs, and to ascertain compliance with all
applicable laws.

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Section 20.11 Leaves of Absence

The Committee shall be entitled to make such rules, regulations and
determination as it deems appropriate under the Plan in respect of any leave of
absence taken by the recipient of any award. Without limiting the generality
of the foregoing, the Committee shall be entitled to determine (a) whether or
not any such leave of absence shall constitute a termination of employment
within the meaning if the Plan and (b) the impact, if any, of any such leave of
absence on awards under the Plan theretofore made to any recipient who takes
such leave of absence.

Section 20.12 Communications

20.12.1 Communications by the Committee. All notices, statements,
reports and other communications made, delivered or transmitted to a Grantee,
Beneficiary or other person under this Plan shall be deemed to have been duly
given, made or transmitted when delivered to, or when mailed by first-class
mail, postage prepaid and addressed to, such Grantee, Beneficiary or other
person at his address last appearing on the records of the Committee.

20.12.2 Communications by the Participants and Others. All
elections, designations, requests, notices, instructions and other
communications made, delivered or transmitted by the Company, a Participating
Subsidiary, Grantee, Beneficiary or other person to the Committee required or
permitted under this Plan shall be in such form as is prescribed from time to
time by each such Committee, shall be mailed by first-class mail or delivered
to such location as shall be specified by each such Committee, and shall be
deemed to have been given and delivered only upon actual receipt thereof by
such Committee at such location.

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Section 20.13 Parties in Interest

The provisions of the Plan and the terms and conditions of any Award
shall, in accordance with their terms, be binding upon, and inure to the benefit
of, all successors of each Grantee, including, without limitation, such
Grantee's estate and the executors, administrators, or trustees thereof, heirs
and legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such Grantee. The obligations of the Company under the Plan shall
be binding upon the Company and its successors and assigns.

Section 20.14 Severability

Whenever possible, each provision in the Plan and every Award at any
time granted under the Plan shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of the Plan or
any Award at any time granted under the Plan shall be held to be prohibited by
or invalid under applicable law, then (a) such provision shall be deemed
amended to accomplish the objectives of the provision as originally written to
the fullest extent permitted by law and (b) all other provisions of the Plan
and every other Award at any time granted under the Plan shall remain in full
force and effect.

Section 20.15 Compliance with Laws

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any provision of the Plan would be in violation of Rule 16b-3 if applied as
written, such provision shall not have effect as written and shall be given
effect so as to comply with Rule 16b-3, as determined by the Committee. The
Board is authorized to amend the Plan and to make any such modifications to
Award Commitments to comply with Rule 16b-3, and to make any such other
amendments or modifications as it deems necessary or appropriate to better
accomplish the purposes of the Plan in light of any amendments made to Rule
16b-3.

Section 20.16 No Strict Construction

No rule of strict construction shall be implied against the Company,
the Committee, the CEO or any other person in the interpretation of any of the
terms of the Plan, any Award granted under the Plan or any rule or procedure
established by the Committee.

Section 20.17 Modification

This document contains all of the provisions of the Plan and no
provisions may be waived, modified or otherwise altered except in a writing
adopted by the Board.

Section 20.18 Governing Law

All questions pertaining to validity, construction and administration
of the Plan and the rights of all persons hereunder shall be determined with
reference to, and the provisions of the Plan shall be governed by and shall be
construed in conformity with, the internal laws of the State of Delaware.

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[LOGO]

Hercules Incorporated
Hercules Plaza
Wilmington, DE 19894-0001

Dear Stockholder:

You are cordially invited to attend our Annual Meeting of Stockholders,
to be held at 11:00 a.m. on Thursday, April 27, 1995, at the Delaware Art
Museum, 2301 Kentmere Parkway, Wilmington, DE.

At the meeting, we will review the performance of Hercules and answer
any questions you may have. The enclosed Proxy Statement will provide you with
more details about items that will be addressed at the Annual Meeting. After
reviewing the Proxy Statement, please take a moment to sign, date and mark your
vote on the proxy card below and return it in the enclosed postage-paid
envelope. Your vote is important to us, and we ask that you vote your shares
whether or not you plan to attend the meeting.

Since seating is limited at the Annual Meeting, please check the box on
the proxy card if you would like to attend. Tickets will be issued on a first
come, first served basis. If you arrive without an admission ticket, you will
be seated if space is available.

For your convenience, a map showing the location of the Delaware Art
Museum is shown on the back of this letter.

Sincerely,

/s/ THOMAS L. GOSSAGE

Thomas L. Gossage
Chairman of the Board, President
and Chief Executive Officer

PROXY/VOTING INSTRUCTION CARD
[LOGO] HERCULES INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

The undersigned hereby appoints Thomas L. Gossage and Michael B. Keehan, and
each of them, acting jointly or severally and with full power of substitution,
for and in the name of the undersigned to vote, as specified on the reverse
side, all shares of common stock of Hercules Incorporated ("Hercules") that the
undersigned is entitled to vote at Hercules' Annual Meeting of Stockholders to
be held on Thursday, April 27, 1995, at 11:00 A.M. at The Delaware Art Museum,
2301 Kentmere Parkway, Wilmington, DE, or at any adjournment thereof. The
undersigned also hereby revokes previous proxies and acknowledges receipt of
Hercules' Notice of the Annual Meeting and Proxy Statement. This card further
provides voting instructions for shares held for the undersigned in the
Hercules' Dividend Reinvestment Plan and the employee savings plans sponsored
by Hercules or any of its subsidiaries.

Dated , 1995
--------------------------------
Signature(s)
--------------------------------

--------------------------------------------
PLEASE SIGN EXACTLY AS NAME(S) APPEARS TO
THE LEFT. JOINT OWNERS SHOULD EACH SIGN.
EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC.,
SHOULD INDICATE CAPACITY IN WHICH THEY ARE
SIGNING.

<PAGE> 155
PLEASE VOTE PROMPTLY

[GRAPHIC OF SAMPLE PROXY CARD]

UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2, 3, AND 4,
AND WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.

<TABLE>
<CAPTION>
THE BOARD RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, AND 4
<S> <C>
1. Election of Directors for a three-year term _______________________________________ / / FOR / / WITHHOLD
NOMINEES ARE: Robert G. Jahn, Ralph L. MacDonald, Jr. and Paula A. Sneed

Withhold vote only from ________________________________________________________________________________________________________

2. Ratification of Independent Accountants ___________________________________________ / / FOR / / AGAINST / / ABSTAIN

3. Approve the increase in approval of an amendment to the restated certificate of
incorporation to the authorized shares of Common Stock from
150,000,000 shares to 300,000,000 shares __________________________________________ / / FOR / / AGAINST / / ABSTAIN

4. Approval of an amended and restated Hercules Incorporated
Long Term Incentive Compensation Plan _____________________________________________ / / FOR / / AGAINST / / ABSTAIN
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AS SEATING IS LIMITED TO A FIRST COME, FIRST SERVED BASIS, PLEASE CHECK THIS BOX
IF YOU WOULD LIKE AN ADMISSION TICKET TO ATTEND THE MEETING. / /

(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)