<PAGE> 1
Rule 424(b)(3) Prospectus
Registration No. 333-29225
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 23, 1997)
HERCULES INCORPORATED HERCULES (LOGO)
$100,000,000
6.15% NOTES DUE AUGUST 1, 2000
Interest payable February 1 and August 1
ISSUE PRICE: 99.936%
$100,000,000
6.60% DEBENTURES DUE AUGUST 1, 2027
Interest payable February 1 and August 1
ISSUE PRICE: 99.842%
Interest on the 6.15% Notes due August 1, 2000 (the "2000 Notes") and on the
6.60% Debentures due August 1, 2027 (the "2027 Debentures") (collectively, the
"Securities") of Hercules Incorporated ("Hercules" or the "Company") is payable
semi-annually in arrears on February 1 and August 1 of each year, commencing
February 1, 1998. The 2000 Notes will not be redeemable prior to maturity and
will not be subject to any sinking fund. The 2027 Debentures will not be
redeemable by the Company prior to maturity and will not be subject to any
sinking fund, but will be redeemable, in whole or in part, at the option of each
of the holders on August 1, 2007 at a redemption price equal to 100% of the
principal amount thereof. See "Description of Securities -- 2027 Debentures"
herein.
Each series of the Securities will be represented by a global note or a global
debenture (the "Global Securities") registered in the name of The Depository
Trust Company (the "Depositary") or its nominee. Interests in the Global
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary (with respect to beneficial
interests of participants) or by participants or persons that hold interests
through participants (with respect to interests of beneficial owners). Except as
described herein and in the accompanying Prospectus, Securities in definitive
form will not be issued. See "Description of Debt Securities -- Global
Securities" in the accompanying Prospectus and "Description of
Securities -- Book-Entry System" herein.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 2000 Note 99.936% .450% 99.486%
- --------------------------------------------------------------------------------------------------------
Total $99,936,000 $450,000 $99,486,000
- --------------------------------------------------------------------------------------------------------
Per 2027 Debenture 99.842% .650% 99.192%
- --------------------------------------------------------------------------------------------------------
Total $99,842,000 $650,000 $99,192,000
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</TABLE>
(1) Plus accrued interest, if any, from August 4, 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
See "Underwriting" herein.
(3) Before deducting estimated expenses of $248,000 payable by the Company.
The Securities are being offered severally by the Underwriters, subject to prior
sale, when, as and if accepted and subject to approval of certain legal matters
by Brown & Wood LLP, counsel for the Underwriters. It is expected that delivery
of the Securities will be made in book-entry form only on or about August 4,
1997 through the facilities of the Depositary, against payment therefor in
immediately available funds.
J.P. MORGAN & CO.
NATIONSBANC CAPITAL MARKETS, INC.
GOLDMAN, SACHS & CO.
DILLON, READ & CO. INC.
July 30, 1997
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, THE SECURITIES IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or by any Underwriter.
This Prospectus Supplement and the accompanying Prospectus do not constitute an
offer to sell or the solicitation of an offer to buy the Securities by anyone in
any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus Supplement or the Prospectus nor any sale made
hereunder and thereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof or thereof or that the information contained or incorporated by reference
herein or therein is correct as of any time subsequent to the date of such
information.
TABLE OF CONTENTS
<TABLE>
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PAGE
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PROSPECTUS SUPPLEMENT
The Company.......................................................................... S-3
Recent Developments.................................................................. S-4
Use of Proceeds...................................................................... S-5
Capitalization....................................................................... S-5
Selected Consolidated Financial Data................................................. S-6
Description of Securities............................................................ S-7
Underwriting......................................................................... S-10
Legal Opinions....................................................................... S-10
PROSPECTUS
Available Information................................................................ 2
Incorporation of Certain Documents by Reference...................................... 2
The Company.......................................................................... 3
Use of Proceeds...................................................................... 3
Ratio of Earnings to Fixed Charges................................................... 3
Description of Debt Securities....................................................... 3
Plan of Distribution................................................................. 10
Legal Matters........................................................................ 11
Experts.............................................................................. 11
</TABLE>
S-2
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THE COMPANY
GENERAL
Hercules manufactures chemical specialty products for a variety of markets
worldwide. Its businesses include Aqualon Water-Soluble Polymers, Paper
Technology, Resins and Food Gums. With shareholder value as its guiding focus,
Hercules concentrates on value-added, high-performance products where it has a
market or technological advantage. Hercules employs 6,500 people and operates
more than 40 manufacturing plants around the world.
INDUSTRY SEGMENTS
Hercules operates both domestically and throughout the world in two
industry segments: Chemical Specialties and Food & Functional Products. Each of
the segments consists of business units. The products developed, manufactured
and sold by Hercules typically serve highly specialized markets and represent an
important functional component (but relatively small portion of the cost) of the
end products or processes in which they are used.
Information regarding principal products manufactured and sold by each
industry segment and principal markets served by each segment are presented
below. These products are sold directly to customers from plants and warehouses
and, in some cases (particularly in markets outside the United States) to and
through distributors.
<TABLE>
<CAPTION>
CHEMICAL SPECIALTIES
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<S> <C> <C>
BUSINESS UNITS PRINCIPAL PRODUCTS PRIMARY MARKETS
Paper Technology Reactive sizes, rosin size, Writing and printing
dispersed rosin sizes, wet-strength paper, tissues and
and dry-strength resins, wax toweling, liquid
emulsions, defoamers and retention packaging, kraft paper,
aids. corrugated and linerboard
packaging and kraft
specialties.
Resins Rosin resins, hydrocarbon resins and Adhesives for tapes,
peroxides. labels, carpet backing,
packaging and sealants;
graphic arts,
particularly inks and
toners; rubber, including
plastic compounds, for
wire and cable
insulation, the
construction industry and
household products.
</TABLE>
Net sales in the Chemical Specialties industry segment were $1,085 million,
$1,154 million and $1,081 million for 1996, 1995 and 1994, respectively.
Operating income in the Chemical Specialties industry segment for the same
periods was $205 million, $211 million and $197 million. For the first quarter
ended March 31, 1997, net sales in the Chemical Specialties industry segment
were $272 million and operating income (loss) was $(46) million, as compared to
$252 million and $45 million, respectively, for the same period in 1996.
<TABLE>
<CAPTION>
FOOD & FUNCTIONAL PRODUCTS
- ----------------------------
<S> <C> <C>
BUSINESS UNITS PRINCIPAL PRODUCTS PRIMARY MARKETS
Aqualon Water-Soluble
Polymers Carboxymethylcellulose, Paints and lacquers,
hydroxypropylcellulose, adhesives, paper,
ethylcellulose, nitrocellulose, personal care products
hydroxyethylcellulose, and cosmetics,
methylcellulose and pentaerythritol. pharmaceuticals, food and
beverages, inks, oil well
drilling, rubber and
smokeless powder.
Food Gums Pectin, carrageenan and agar. Processed meats, jellies
and jams, baked goods,
convenience foods and
beverages.
</TABLE>
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Net sales in the Food & Functional Products industry segment were $923
million, $1,046 million and $945 million for 1996, 1995 and 1994, respectively.
Operating income in the Food & Functional Products industry segment for the same
periods was $217 million, $187 million and $148 million. For the first quarter
ended March 31, 1997, net sales in the Food & Functional Products industry
segment were $223 million and operating income (loss) was $(3) million, as
compared to $228 million and $51 million, respectively, for the same period in
1996.
EQUITY HOLDINGS
Hercules holds an approximately 30% interest in Alliant Techsystems, Inc.,
a public company which designs, develops and manufactures solid propulsion
systems, gun propellants, defense electronics, close combat systems, tank
ammunition and artillery and marine and air-delivered systems for the United
States and allied governments.
In March 1997, Hercules completed transactions to monetize its investment
in Tastemaker, a world-scale flavors company owned in a 50/50 joint venture with
Mallinckrodt, Inc., for approximately $608 million. Equity in income of
affiliated companies includes Tastemaker earnings of $11 million and $8 million
for the quarters ended March 31, 1997 and 1996, respectively. Tastemaker
earnings included in equity income for the year 1996 were $32 million.
Future equity income will also include income from Fiberco, a newly formed
joint venture. See "Recent Developments -- Formation of Joint Venture."
CORPORATE STRATEGIC FOCUS ON SHAREHOLDER VALUE
In 1991, Hercules announced a new management direction to focus Hercules'
assets (both personnel and capital) in areas that build shareholder value. Since
then, Hercules has divested underperforming businesses, streamlined corporate
overhead and priced products for value in use. Proceeds from the divestitures,
as well as operating cash flow, have been used for both capital expenditures and
share repurchases. Profitability, cash flow and shareholder value increased
dramatically over the six-year period ended December 1996; consolidated gross
margin increased from 26% to 36%; operating margin increased from 6% to 21%; net
income margin increased from 3% to 16%; return on equity increased from 5% to
33%; and fixed charge coverage increased from 3.1 to 10.2 times. Historical
results of operations may not be indicative of results of operations in the
future.
Hercules' commitment to shareholder value continues. At this time, key
areas of focus include cost improvement, revenue growth and the use of excess
cash flows, if any, to repurchase Hercules shares pursuant to its common stock
repurchase program most recently reaffirmed in February 1997. Growth
opportunities are likely to include both internal and external initiatives, with
external initiatives focused on joint ventures and acquisitions.
RECENT DEVELOPMENTS
FORMATION OF JOINT VENTURE
In June 1997, Hercules announced the formation of a joint venture (Fiberco)
with Jacob Holm & Sons A/S (Denmark). Fiberco combines the Hercules Fibers
Division with the Jacob Holm (Danaklon) interests in its fibers business.
Fiberco provides Hercules with a 51% ownership position, retires over $103
million of Hercules' debt and is expected to generate $300 million per year in
sales.
The business of Fiberco is to develop, manufacture and sell polypropylene
nonwoven fibers for the disposable hygiene products industry and polypropylene
textile yarn for home furnishings and automotive industries.
S-4
<PAGE> 5
SECOND QUARTER FINANCIAL RESULTS
Net sales of Hercules for the second quarter ended June 30, 1997 were $502
million as compared to $545 million for the same period in 1996. Profit from
operations for the second quarter ended June 30, 1997 was $107 million as
compared to $117 million for the same period in 1996. Net income for the second
quarter ended June 30, 1997 was $75 million as compared to $88 million for the
same period in 1996 (1996 includes income from businesses divested and a net
non-recurring gain of $.05 per share). The results include negative impact from
weaker foreign currencies relative to the U.S. dollar and the effect of divested
businesses. On a comparable basis, for the second quarter ended June 30, 1997,
sales increased 4% and operating profit increased 5%.
USE OF PROCEEDS
The Company expects to use the proceeds from the sale of the Securities for
the repayment of commercial paper with an average maturity as of June 30, 1997
of 28 days and an average yield of 5.66% per annum.
CAPITALIZATION
The following table sets forth the Company's consolidated capitalization at
March 31, 1997 and as adjusted to give effect to the sale of the Securities
offered hereby and the application of the proceeds therefrom (before deducting
expenses).
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------
ACTUAL AS ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-Term Debt:
Commercial paper.................................................. $ 300,000 $ 100,000
Bank debt......................................................... 52,000 52,000
---------- ----------
Short-Term Debt........................................... $ 352,000 $ 152,000
---------- ----------
Long-Term Debt:
8% convertible subordinated debentures due 2010................... $ 41,000 $ 41,000
7.85% notes due 2000.............................................. 25,000 25,000
6.625% notes due 2003............................................. 125,000 125,000
Commercial paper.................................................. 50,000 50,000
Other............................................................. 14,000 14,000
Securities offered hereby......................................... -- 200,000
---------- ----------
Long-Term Debt............................................ 255,000 455,000
---------- ----------
Stockholders' Equity:
Common stock...................................................... 79,000 79,000
Additional paid-in capital........................................ 485,000 485,000
Foreign currency translation adjustment........................... 11,000 11,000
Retained earnings................................................. 2,025,000 2,025,000
Reacquired stock at cost -- 50,881,229 shares..................... (1,678,000) (1,678,000)
---------- ----------
Total Stockholders' Equity................................ 922,000 922,000
---------- ----------
Total Capitalization (Total Debt plus Stockholders' Equity)......... $ 1,529,000 $ 1,529,000
========== ==========
</TABLE>
S-5
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SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below have been derived
from the consolidated financial statements for the Company for each of the
periods indicated (and restated where appropriate to accord with the Company's
current accounting policies and presentations) and should be read in conjunction
with the consolidated financial statements and related notes included in the
Company's reports filed with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), each of which is incorporated by reference herein. See
"Documents Incorporated by Reference" in the accompanying Prospectus.
<TABLE>
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AT OR FOR THE
THREE MONTHS
ENDED MARCH 31,
(UNAUDITED) AT OR FOR THE YEAR ENDED
----------------- ------------------------------------------
1997(1) 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
($ IN MILLIONS) ($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Net Sales................................................... $ 495 $ 503 $2,060 $2,427 $2,821 $2,773 $2,865
Operating Costs and Expenses:
Cost of Sales........................................... 320 326 1,320 1,591 1,924 1,931 2,092
Selling, General and Administrative..................... 66 66 262 367 374 372 372
Research and Development................................ 14 14 56 59 65 76 70
Other Operating Expenses (Income)....................... 163 (1) (19) 47 39 87 87
------ ------ ------ ------ ------ ------ ------
Profit (Loss) from Operations............................. (68) 98 441 363 419 307 244
Equity in Income of Affiliated Companies.................. 17 14 53 41 26 24 16
Interest and Debt Expense................................. 10 8 35 28 28 36 41
Other Income (Expense) Net................................ 335 12 26 129 (9) 16 46
------ ------ ------ ------ ------ ------ ------
Income Before Income Taxes................................ 274 116 485 505 408 311 265
Provision for Income Taxes................................ 166 40 160 172 134 103 97
------ ------ ------ ------ ------ ------ ------
Income Before Effect of Changes in Accounting
Principles.............................................. 108 76 325 333 274 208 168
Extraordinary Charge for Early Retirement of Debt......... 0 0 0 0 0 (4) 0
Effect of Changes in Accounting Principles................ 0 0 0 0 0 (238) 0
------ ------ ------ ------ ------ ------ ------
Net Income................................................ 108 76 325 333 274 (33) 168
RATIO OF EARNINGS TO FIXED CHARGES.......................... 19.9x 11.1x 10.2x 11.8x 9.2x 6.4x 5.0x
RATIO OF DEBT TO CAPITAL.................................... 39.7% 37.7% 42.6% 31.8% 27.7% 26.0% 23.8%
BALANCE SHEET DATA
Working Capital........................................... $ (82) $ 123 $ 45 $ 180 $ 385 $ 342 $ 475
Property, Plant and Equipment............................. 733 972 865 1,000 1,216 1,309 1,348
Total Assets.............................................. 2,654 2,481 2,386 2,493 2,941 3,162 3,228
Total Debt................................................ 607 620 658 505 496 481 544
Stockholders' Equity...................................... 922 1,025 887 1,082 1,295 1,368 1,746
STATEMENT OF CASH FLOW DATA
Net Cash Provided by Operations........................... $ 33 $ (6) $ 225 $ 328 $ 298 $ 659 $ 305
Proceeds of Investment and Fixed Asset Disposals.......... 108 8 196 376 202 61 115
Capital Expenditures...................................... 24 21 120 117 164 149 150
Depreciation.............................................. 22 31 106 133 148 169 172
Dividends................................................. 25 25 95 95 89 95 101
Common Stock Reacquired (Net of Common Stock Issued)...... 25 108 402 569 333 304 221
</TABLE>
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(1) Income Before Income Taxes and the Ratio of Earnings to Fixed Charges for
the first quarter of 1997 have been impacted by (i) completion of
transactions which monetized the Company's investment in Tastemaker, a
50%-owned flavors joint venture, at a pre-tax gain of $357 million, (ii)
changes in executive leadership and the adoption of alternative strategies
intended to strengthen current businesses, which resulted in a pre-tax
charge to earnings of $161 million and (iii) charges of $37 million related
to legal settlements and other accruals.
S-6
<PAGE> 7
DESCRIPTION OF SECURITIES
The following description of the particular terms of the Securities (which
represent two separate series of, and are referred to in the accompanying
Prospectus as, Debt Securities), supplements, and to the extent inconsistent
therewith replaces, the description of the general terms and provisions of the
Debt Securities set forth in the accompanying Prospectus, to which reference is
hereby made.
The Securities are to be issued under the Indenture, dated as of May 15,
1993 (the "Indenture"), between the Company and PNC Bank, Delaware, as successor
Trustee, described in the accompanying Prospectus. The following information
relating to the Securities and the Indenture is a summary of provisions
contained therein and does not purport to be complete. The provisions of the
Indenture are incorporated herein by reference and the following summary is
qualified in its entirety thereby.
As used in the Prospectus or this Prospectus Supplement, a "holder" refers
to a registered holder of a Security.
2000 NOTES
The 2000 Notes will mature on August 1, 2000 and will be unsecured
obligations of the Company. The 2000 Notes will rank pari passu with all other
unsecured and unsubordinated debt of the Company, including the 2027 Debentures.
Each 2000 Note will bear interest at the rate of 6.15% per annum from the date
of issue, payable semi-annually in arrears on February 1 and August 1 of each
year, commencing February 1, 1998, to the person in whose name such 2000 Note
(or any predecessor 2000 Note) is registered at the close of business on the
January 15 or July 15 next preceding such interest payment date. The 2000 Notes
will be issued only in fully registered form in denominations of $1,000 or any
integral multiple thereof.
The 2000 Notes will not be redeemable prior to maturity and will not be
subject to any sinking fund.
2027 DEBENTURES
The 2027 Debentures will mature on August 1, 2027 and will be unsecured
obligations of the Company. The 2027 Debentures will rank pari passu with all
other unsecured and unsubordinated debt of the Company, including the 2000
Notes. Each 2027 Debenture will bear interest at the rate of 6.60% per annum
from the date of issue, payable semi-annually in arrears on February 1 and
August 1 of each year, commencing February 1, 1998, to the person in whose name
such 2027 Debenture (or any predecessor 2027 Debenture) is registered at the
close of business on the January 15 or July 15 next preceding such interest
payment date. The 2027 Debentures will be issued only in fully registered form
in denominations of $1,000 or any integral multiple thereof.
The 2027 Debentures will not be redeemable at the option of the Company
prior to maturity and will not be subject to any sinking fund.
The 2027 Debentures will be redeemable, in whole or in part, at the option
of each of the holders on August 1, 2007 at a redemption price equal to 100% of
the principal amount thereof. Interest due on August 1, 2007 will be payable on
such date to holders at the close of business on July 15, 2007. To exercise the
redemption option, a holder must deliver a notice of exercise of such option to
the Company at the Corporate Trust Office of the Trustee (or such other location
of which the Company shall have provided written notice thereof to the holders)
no earlier than June 2, 2007 and no later than June 30, 2007. Any such notice of
exercise of the redemption option shall be irrevocable. The redemption option
may be exercised by a holder for less than the entire principal amount of the
2027 Debentures held by such holder so long as the principal amount that is to
be redeemed is equal to $1,000 or any integral multiple thereof.
So long as the 2027 Debentures are represented by the Global Debenture (as
defined below) held by or on behalf of the Depositary, and registered in the
name of the Depositary or the Depositary's nominee, the holders' redemption
option may be exercised only by the Depositary or the Depositary's nominee, as
registered holder on behalf of the beneficial owners of interests in the Global
Debenture representing 2027 Debentures. Accordingly, beneficial owners of
interests in the Global Debenture representing 2027 Debentures who desire
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<PAGE> 8
to have the Depositary or the Depositary's nominee exercise the redemption
option on their behalf will be required to give timely notice thereof to the
Depositary through the participant in the Depositary through which such interest
is held in accordance with the policies and procedures of the Depositary and
such participant in effect at that time. See "-- Book-Entry System" herein.
Under the Depositary procedures currently in effect, in order to ensure
that a notice is received by the Company on a particular day, each beneficial
owner of an interest in the Global Debenture representing 2027 Debentures must
so direct the participant in the Depositary through which such beneficial owner
holds its interest before such participant's deadline for accepting instructions
for that day. Different firms may have different deadlines for accepting
instructions from their customers. Accordingly, each beneficial owner of an
interest in the Global Debenture representing 2027 Debentures should consult the
participant through which it owns its interest therein for the deadline for such
participant. All notices must be executed by a duly authorized officer of such
beneficial owner (with signature guaranteed) and must be irrevocable. In
addition, each beneficial owner of an interest in the Global Debenture
representing 2027 Debentures must effect delivery at the time such notices are
given by causing the applicable participant to transfer such beneficial owner's
interest in such Global Debenture representing 2027 Debentures on the
Depositary's records to the Trustee.
BOOK-ENTRY SYSTEM
Upon issuance, the 2000 Notes will each be represented by a single fully
registered global certificate (the "Global Note") and upon issuance, the 2027
Debentures will each be represented by a single fully registered global
certificate (the "Global Debenture"). The Global Note and the Global Debenture
will each be legended as required by the Indenture, will represent the
respective aggregate principal amount of the applicable series of Securities
that will be deposited with, or on behalf of, the Depositary, and will be
registered in the name of Cede & Co., as nominee of the Depositary.
Except as set forth below, the Global Note or the Global Debenture may not
be transferred except as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor of the Depositary or a nominee of such successor.
The Depositary has advised the Company and the Underwriters that it is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. The Depositary was created
to hold securities of its participants and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic computerized book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depositary's participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representatives) own the Depositary. Access to the Depositary's book-entry
system is also available to others, such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Persons who are
not participants may beneficially own securities held by the Depositary only
through participants. The rules applicable to the Depositary and its
participants are on file with the Commission.
Upon the issuance by the Company of the Global Note and the Global
Debenture, the Depositary will credit, on its book-entry registration and
transfer system, the respective principal amount of the Securities to the
accounts of participants. The accounts to be credited will be designated by the
applicable Underwriter. Beneficial ownership of interests in the Global Note or
the Global Debenture will be limited to participants or persons that may hold
interests through participants and will be shown on, and the transfer thereof
will be effected only through, records maintained by the Depositary (with
respect to beneficial interests of participants) or by participants or persons
that may hold interests through participants (with respect to interests of
beneficial owners). The laws of some states require that certain purchasers of
securities take
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<PAGE> 9
physical delivery of such securities in definitive form. Such laws may impair
the ability to transfer beneficial ownership of interests in the Global Note or
the Global Debenture.
For the Global Note or the Global Debenture, so long as the Depositary or
its nominee is the registered owner of such Global Note or Global Debenture, the
Depositary or its nominee, as the case may be, will be considered the sole owner
and holder of the Securities represented by such Global Note or Global Debenture
for all purposes under the Indenture. Except as provided below, beneficial
owners of interests in the Global Note or the Global Debenture will not be
entitled to have Securities represented by such Global Note or Global Debenture
registered in their names, will not receive or be entitled to receive physical
delivery of such Securities in definitive form and will not be considered the
owners or holders thereof under the Indenture.
Principal and interest payments in respect of the Securities will be made
in immediately available funds by or on behalf of the Company to the Depositary
or its nominee, as the case may be, as the holder of the related Global Note or
Global Debenture. Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
the Global Debenture or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests. Neither the Company nor the
Trustee will have any responsibility or liability for the Depositary's exercise
of or failure to exercise the redemption option with respect to any of the 2027
Debentures on behalf of any holder of a beneficial interest therein, except as
to the Company's obligation to redeem such 2027 Debentures if such option is
properly exercised by the Depositary or its nominee, as registered holder, in
accordance with the procedures specified therefor. The Company expects that the
Depositary, upon receipt of any payment of principal or interest in respect of
the Global Note or the Global Debenture, will credit immediately the accounts of
the related participants with payment in amounts proportionate to their
respective holdings in principal amount of beneficial ownership interests in
such Global Note or Global Debenture as shown on the records of the Depositary.
The Company also expects that payments by participants to beneficial owners of
interests in the Global Note or the Global Debenture will be governed by
standing customer instructions and customary practices, as is now the case, with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such participants. Payments to
the Depositary in respect of the Securities which are represented by the Global
Note or the Global Debenture shall be the responsibility of the Company or the
Trustee, disbursement of such payments to direct participants shall be the
responsibility of the Depositary and disbursement of such payments to beneficial
owners shall be the responsibility of direct and indirect participants.
Conveyance of notices and other communications by the Depositary to direct
participants, by direct participants to indirect participants and by direct and
indirect participants to beneficial owners, and vice versa, will be governed by
arrangements among them, subject to statutory or regulatory requirements as may
be in effect from time to time; and neither the Company nor the Trustee will
have any responsibility or liability with respect thereto.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy of such information.
If (i) the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within 90
days, (ii) the Company at any time determines not to have Securities represented
by the Global Note or the Global Debenture, (iii) the Company defaults on the
payment of principal, premium, if any, or interest with respect to the Global
Note or the Global Debenture or (iv) an Event of Default has occurred and is
continuing with respect to the Global Note or the Global Debenture, then the
Company will issue Securities of the applicable series in definitive form in
exchange for the Global Note and/or the Global Debenture to beneficial owners of
interests therein equal in principal amount to such interest and will have such
Securities registered in their names. Securities so issued in definitive form
will be issued in denominations of $1,000 or any integral multiple thereof and
will be issued in registered form only, without coupons.
S-9
<PAGE> 10
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the underwriters named
below (the "Underwriters"), and each of the Underwriters has severally agreed to
purchase, the principal amount of Securities set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF SECURITIES
--------------------------------
NAME 2000 NOTES 2027 DEBENTURES
- --------------------------------------------------------------- ------------ ---------------
<S> <C> <C>
J.P. Morgan Securities Inc. ................................... $ 30,000,000 $ 30,000,000
NationsBanc Capital Markets, Inc. ............................. 30,000,000 30,000,000
Goldman, Sachs & Co. .......................................... 30,000,000 30,000,000
Dillon, Read & Co. Inc. ....................................... 10,000,000 10,000,000
------------ ------------
Total................................................ $100,000,000 $ 100,000,000
============ ============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are obligated to take and pay for all of the Securities of a
particular series if any are taken.
The Underwriters propose to offer the 2000 Notes and 2027 Debentures
directly to the public at the respective public offering prices set forth on the
cover page of this Prospectus Supplement and to certain dealers at such prices
less a concession not in excess of .25% of the principal amount of the 2000
Notes and .40% of the principal amount of the 2027 Debentures. The Underwriters
may allow, and such dealers may re-allow, a concession not in excess of .20% of
the principal amount of the 2000 Notes or .25% of the principal amount of the
2027 Debentures to certain other dealers. After the initial public offering,
such prices and such concessions may be changed by the Underwriters.
Each series of the Securities is a new issue of securities with no
established trading market and will not be listed on any national securities
exchange. The Company has been advised by the Underwriters that the Underwriters
intend to make a market for each series of Securities, but are not obligated to
do so and may discontinue market making at any time without notice. No assurance
can be given as to the development or liquidity of any trading market for the
Securities.
In connection with the offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Securities. Specifically, the Underwriters may overallot the offering, creating
a syndicate short position. In addition, the Underwriters may bid for, and
purchase, in the open market to cover syndicate shorts or to stabilize the price
of the Securities. Finally, the underwriting syndicate may reclaim selling
concessions allowed for distributing the Securities in the offering, if the
syndicate repurchases previously distributed Securities in syndicate covering
transactions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Securities above
independent market levels. The Underwriters are not required to engage in these
activities, and may end any of these activities at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or contribute to payments which the Underwriters may be required to make in
respect thereof.
In the ordinary course of their respective businesses, the Underwriters and
their affiliates have engaged and may in the future engage in commercial banking
and investment banking transactions with the Company and its affiliates.
LEGAL OPINIONS
Certain legal matters in connection with the Securities will be passed upon
for the Company by Ballard Spahr Andrews & Ingersoll, Philadelphia, Pennsylvania
and by Richard G. Dahlen, Esquire, Vice President and General Counsel of the
Company, and for the Underwriters by Brown & Wood LLP, New York, New York. Mr.
Dahlen owned beneficially, as of July 22, 1997, 12,222 shares of restricted
stock under Hercules Incorporated Long Term Incentive Compensation Plan (the
"LTICP"), 110 shares of Hercules common stock under the Hercules Incorporated
Savings and Investment Plan, and the right to acquire within 60 days hereof
8,400 shares under options held pursuant to the LTICP.
S-10
<PAGE> 11
HERCULES (LOGO)
PROSPECTUS
$500,000,000
HERCULES INCORPORATED
DEBT SECURITIES
------------------------
Hercules Incorporated (the "Company" or "Hercules") intends from time to
time to issue and offer debt securities (the "Debt Securities") in an aggregate
principal amount of up to U.S. $500,000,000 (or the equivalent thereof in one or
more foreign currencies or currency units) which will be offered on terms to be
determined at the time of sale. When each series of Debt Securities is offered,
a supplement to this Prospectus (a "Prospectus Supplement") will be delivered
with this Prospectus setting forth with respect to the series of Debt Securities
offered: the specific designation, aggregate principal amount, interest rate
(which may be fixed or variable) and interest payment dates, if any, purchase
price, maturity date, any redemption or pre-payment terms, any terms for
repayment at the option of the holder, any sinking or analogous fund provisions,
and any other specific terms. The Debt Securities may be sold for U.S. dollars
or any foreign denominated currency or currency units, and the principal of,
premium, if any, and any interest on, the Debt Securities may be payable in U.S.
dollars or any foreign denominated currency or currency units.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The Debt Securities will be sold directly, through agents, dealers, or
underwriters as designated from time to time, or through a combination of such
methods. If any agents of the Company or any dealers or underwriters are
involved in the sale of a series of Debt Securities, the names of such agents,
dealers, or underwriters and any applicable agent's commission, dealer's
purchase price, or underwriter's discount will be set forth in or may be
calculated from information set forth in the Prospectus Supplement. The net
proceeds to the Company from such sale will be the purchase price less such
commission in the case of an agent, the purchase price in the case of a dealer,
or the public offering price less such discount in the case of an underwriter
and less, in each case, other attributable issuance expenses. The Prospectus
Supplement will also set forth the securities exchanges, if any, on which the
Debt Securities will be listed. See "Plan of Distribution."
The Debt Securities may be offered on a continuing basis. The Company or
such agents, dealers, or underwriters may reject, in whole or in part, any offer
to purchase the Notes. See "Plan of Distribution."
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
The date of this Prospectus is July 23, 1997.
<PAGE> 12
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC"), Washington, DC, a registration statement on Form S-3 (herein, together
with all amendments and exhibits, referred to as the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Debt Securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the SEC. For
further information pertaining to the Debt Securities and the Company, reference
is made to the Registration Statement.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith files reports, proxy statements and other information with the SEC.
Such reports, proxy statements and other information can be inspected and copied
at the public reference facilities maintained by the SEC at Room 1024, 450 5th
Street, N.W., Washington, DC 20549, and at the regional offices of the SEC,
which include: Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661, and 7 World Trade Center, Suite 1300, New
York, NY 10048. Such material can also be inspected and copied at the offices of
the New York Stock Exchange, Inc., 20 Broad Street, New York, NY 10005, on which
certain of this Company's securities are listed. Copies can be obtained from the
SEC by mail, at prescribed rates, or from the SEC's Internet website at
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated herein by
reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997; and
(c) The Company's Current Reports on Form 8-K dated April 15, 1997 and
July 16, 1997.
All documents filed pursuant to Sections 13(a), 13(c), 14, or 15(d) of the
Exchange Act after the date of this Prospectus and prior to the termination of
the offering of the particular Debt Securities shall be deemed to be
incorporated by reference into this Prospectus and the applicable Prospectus
Supplement and to be a part hereof and thereof from the date of filing of such
documents. Any statement contained herein or therein or in a document
incorporated or deemed to be incorporated by reference herein or therein shall
be deemed to be modified or superseded for purposes of this Prospectus and the
applicable Prospectus Supplement to the extent that a statement contained herein
or therein or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference herein and therein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or the applicable Prospectus Supplement.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF
THIS PROSPECTUS AND THE APPLICABLE PROSPECTUS SUPPLEMENT IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST, A COPY OF ANY OR ALL OF THE DOCUMENTS WHICH HAVE BEEN
OR MAY BE INCORPORATED HEREIN AND THEREIN BY REFERENCE OTHER THAN EXHIBITS TO
SUCH DOCUMENTS (UNLESS EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN
SUCH DOCUMENTS). REQUESTS SHOULD BE DIRECTED TO: ISRAEL J. FLOYD, HERCULES
INCORPORATED, HERCULES PLAZA, 1313 NORTH MARKET STREET, WILMINGTON, DELAWARE
19894-0001 (TELEPHONE: 302-594-5128; TELEFACSIMILE: 302-594-7252; INTERNET
E-MAIL: [email protected]).
2
<PAGE> 13
THE COMPANY
Hercules Incorporated ("Hercules" or the "Company") is a diversified,
worldwide producer of chemicals and related products. The Company was
incorporated in Delaware in 1912 and its principal executive offices are at
Hercules Plaza, 1313 North Market Street, Wilmington, Delaware 19894-0001. The
telephone number for its corporate headquarters in Wilmington is (302) 594-5000.
Hercules operates, both domestically and throughout the world, in two
industry segments: Chemical Specialties and Food & Functional Products. Chemical
Specialties manufactures, markets and sells such products as wet-strength resins
and sizings to improve the properties of paper; resins for inks and adhesives;
and polypropylene fibers and textile yarns used in disposable hygiene products
and home furnishings. Major worldwide manufacturing locations include Brunswick,
Georgia; Franklin, Virginia; Jefferson, Pennsylvania; Middelburg, the
Netherlands; Milwaukee, Wisconsin; Paulinia, Brazil; Portland, Oregon; Savannah,
Georgia; and Zwijndrecht, the Netherlands.
Food & Functional Products manufactures, markets and sells natural food
gums for the food industry and water-soluble polymers used as thickeners and
stabilizers in paints, personal care products, rubber and coatings. Major
worldwide manufacturing locations include Alizay, France; Doel, Belgium;
Hopewell, Virginia; Kenedy, Texas; Lille Skensved, Denmark; and Parlin, New
Jersey.
As of December 31, 1996, Hercules had 7,114 employees worldwide.
Approximately 4,300 were located in the United States.
USE OF PROCEEDS
Except as may otherwise be disclosed in a Prospectus Supplement, the net
proceeds to be received by the Company from the sale of the Debt Securities will
be used for general corporate purposes.
The Company expects that it will, on a recurring basis, engage in
additional financings in character and amount to be determined as the need
arises.
RATIO OF EARNINGS TO FIXED CHARGES
The following are the Company's consolidated ratios of earnings to fixed
charges for each of the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEARS ENDED DECEMBER 31,
MARCH 31, 1997 ----------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Historical Ratio of Earnings to Fixed
Charges................................ 19.9 10.2 11.8 9.2 6.4 5.04
</TABLE>
For the purpose of determining earnings in the calculation of the ratio,
consolidated pre-tax income (loss) has been adjusted by the equity income of
majority-owned subsidiaries and the distributed income of less than 50 percent
owned subsidiaries, increased by the amount of previously capitalized interest
amortized during the period, and increased by the amount of fixed charges,
excluding capitalized interest expense. Fixed charges consist of interest
expense on borrowings (including capitalized interest) and one-third (the
proportion deemed representative of the interest portion) of rents.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an indenture dated as of May 15,
1993, as the same may be amended or modified from time to time as described in a
Prospectus Supplement (the "Indenture"), between the Company and PNC Bank,
Delaware, as trustee (the "Trustee"), a copy of which is an exhibit to the
Registration Statement filed with the SEC. Effective July 23, 1997, PNC Bank,
Delaware replaced Mellon Bank, N.A. as trustee through execution of an
Instrument of Resignation, Appointment and Acceptance, a copy of which is also
an exhibit to the Registration Statement. Effective June 4, 1996, Mellon Bank,
N.A. replaced the original trustee, BankAmerica National Trust Company, through
execution of an Instrument of Resignation, Appointment and Acceptance, a copy of
which is also an exhibit to the Registration Statement.
3
<PAGE> 14
The following summaries of certain provisions of the Indenture describe
general terms to which any securities issued under the Indenture may be subject.
Specific terms and provisions of any series of Debt Securities offered pursuant
to the Indenture, as well as the extent to which the general terms described
below may apply thereto, will be described in the Prospectus Supplement that
relates to the offering and sale of the series of Debt Securities in respect of
which this Prospectus is being delivered. Accordingly, for description of the
terms of a particular issue of Debt Securities, reference must be made both to
the Prospectus Supplement relating thereto and the following description.
The descriptions that follow do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all provisions of the
Indenture, including the definitions therein of certain terms. Particular
sections of the Indenture which are relevant to the discussion are cited
parenthetically.
GENERAL
The Debt Securities will be unsecured and will rank equally and ratably
with other unsecured and unsubordinated debt of the Company, unless the Company
is required to secure the Debt Securities pursuant to the negative pledge
provisions described below under "Certain Covenants of the Company." The
Indenture does not limit the amount of Debt Securities that can be issued
thereunder. (Section 301)
Reference is made to the Prospectus Supplement for the following terms, if
applicable, of the series of Debt Securities offered thereby: (i) the title of
the series of Debt Securities; (ii) any limit upon the aggregate principal
amount of the series of Debt Securities; (iii) the rate or rates (which may be
fixed or variable) at which the series of Debt Securities will bear interest, if
any, or the method or methods, if any, by which such rate or rates are to be
determined, the date or dates from which any such interest will accrue and on
which such interest will be payable, and the record date for the interest
payable on any interest payment date; (iv) the price or prices (expressed as a
percentage of the principal amount) at which the Debt Securities will be issued;
(v) the date or dates on which the principal of the Debt Securities will be
payable; (vi) the terms of any mandatory redemption or optional redemption by
the Company or the holder thereof (including any provisions for any sinking,
purchase or other analogous fund); (vii) if other than the principal amount
thereof, the portion of the principal amount of the series of Debt Securities
that will be payable upon declaration of acceleration of the maturity thereof,
(viii) whether and under what circumstances the Company will pay additional
amounts on the series of Debt Securities held by a Person who is not a U.S.
Person in respect of taxes or similar charges withheld or deducted and, if so,
whether the Company will have the option to redeem such Debt Securities rather
than pay such additional amounts; (ix) the currency, currency unit or currency
composites for which the Debt Securities may be purchased and the currency,
currency unit or currency composites in which the principal and any interest
thereon are payable; (x) whether the currency, currency unit or currency
composites for which the Debt Securities may be purchased or in which the
principal and any interest thereon may be payable is at the purchaser's election
and, if so, the manner in which such election may be made; (xi) any covenants
and events of default with respect to the series of Debt Securities, and
remedies with respect thereto, if not set forth in the Indenture; and (xii) any
additional provisions or other special terms, not inconsistent with the
provisions of the Indenture, including any terms that may be required by or
advisable under United States laws or regulations or advisable in connection
with the marketing of Debt Securities of such series.
The Debt Securities may be issued in one or more series with the same or
various maturities at par or at a discount which may be substantially below
their stated principal amount, and may bear no interest or interest at a rate
which at the time of issuance is below market rates. Federal income tax
consequences and other special considerations applicable to any such
substantially discounted Debt Securities will be described in the Prospectus
Supplement relating thereto.
Unless otherwise specified in a Prospectus Supplement, the Debt Securities
shall be issued only in denominations of U.S. $1,000 and any integral multiple
thereof. (Sections 301 and 302)
Principal, premium, if any, and interest will be payable, and the Debt
Securities will be transferable and exchangeable, in the manner described in the
Prospectus Supplement relating to such Debt Securities. No service charge will
be made for any transfer or exchange of any Debt Securities but the Company may,
except
4
<PAGE> 15
in certain specified cases not involving any transfer, require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. (Section 305)
Unless otherwise specified in the Prospectus Supplement, principal of, any
premium on, and any interest on, Debt Securities will be payable at the
Corporate Trust Office of the Trustee in the Borough of Manhattan, The City of
New York, provided that payment of interest, if any, may be made at the option
of the Company by check mailed on or before the payment date, first class mail,
to the address of the person entitled thereto as it appears on the registry
books of the Company.
FOREIGN CURRENCY
If any of the Debt Securities are sold for any foreign currency, currency
unit or currency composites or if principal of or any interest on any of the
Debt Securities is payable in any foreign currency, currency unit or currency
composites, the restrictions, elections, tax consequences, specific terms and
other information with respect to such issue of Debt Securities and such foreign
currency, currency unit or currency composites will be specified in a Prospectus
Supplement. (Section 311)
GLOBAL SECURITIES
A series of Debt Securities may be issued in whole or in part in the form
of one or more global securities ("Global Securities") that will be deposited
with, or on behalf of, a depositary (the "Depositary") identified in the
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
Permanent Global Securities will be issued in definitive form. Unless and until
exchanged in whole or in part for other Debt Securities in definitive form, a
Global Security may not be transferred except as a whole by the Depositary for
such Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary to any such nominee to a successor of such Depositary or a nominee of
such successor Depositary. (Sections 201, 203, 304 and 305)
The specific terms of the depositary arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company anticipates that the following provisions will apply to
all depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of institutions that have accounts with such Depositary
("Participants"). The accounts to be credited shall be designated by the
underwriters or agents of such Debt Securities or, if such Debt Securities are
offered and sold directly by the Company, by the Company. Ownership of
beneficial interest in a Global Security will be limited to Participants or
persons that may hold interests through Participants; however, the Company has
no obligations to any persons that hold interests through Participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depositary for such Global Security or by Participants or persons that
hold through Participants. The laws of some states require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such laws may impair the ability to transfer beneficial interests in a
Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
owner of such Global Security, such Depositary or such nominee, as the case may
be, will be considered the sole owner or holder of the Debt Securities
represented by such Global Security for all purposes under the Indenture. Except
as provided below, owners of beneficial interests in a Global Security will not
be entitled to have Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in definitive form and will
not be considered the owners or holders thereof under the Indenture.
Accordingly, each person owning a beneficial interest in a Global Security must
rely on the procedures of the Depositary and, if such person is not a
Participant, on the procedures of the Participant and, if applicable, the
indirect participant, through which such person owns its interest, to exercise
any rights of a holder under the Indenture.
5
<PAGE> 16
Principal of, and premium, if any, and interest on, Debt Securities
registered in the name of or held by a Depositary or its nominee will be made to
the Depositary or its nominee, as the case may be, as the registered owner or
the holder of the Global Security representing such Debt Securities. None of the
Company, the Trustee, and Paying Agent or the Security Registrar will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Global
Security for such Securities or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Company expects that the Depositary for a series of Debt Securities,
upon receipt of any payment of principal, premium or interest in respect of a
permanent Global Security, will credit immediately Participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Security as shown on the records of such
Depositary. The Company also expects that payments by Participants to owners of
beneficial interests in such Global Security held through such Participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such Participants.
If a Depositary for a series of Debt Securities is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days, the Company will issue Debt Securities of such
series in definitive form in exchange for the Global Security representing the
corresponding Debt Securities. In addition, the Company may at any time and in
its sole discretion determine not to have any Debt Securities of a series
represented by one or more Global Securities and, in such event, will issue Debt
Securities of such series in definitive form in exchange for the Global Security
or Global Securities representing such Debt Securities. Further, if the Company
so specifies with respect to the Debt Securities of a series, upon the
Depositary's request an owner of a beneficial interest in a Global Security
representing Debt Securities of such series may, on terms acceptable to the
Company and the Depositary for such Global Security, receive Debt Securities of
such series in definitive form. In any such instance, an owner of a beneficial
interest in a Global Security will be entitled to physical delivery in
definitive form of Debt Securities of the series represented by such Global
Security equal in principal amount to such beneficial interest and to have such
Debt Securities registered in its name (if the Debt Securities of such series
are issuable as Registered Securities). (Section 305)
CERTAIN COVENANTS OF THE COMPANY
Restrictions on Creation of Secured Debt. The Company covenants that, so
long as any of the Debt Securities remain outstanding, it will not, nor will it
permit any Restricted Subsidiary (as defined below), to issue, assume or
guarantee any debt for money borrowed (herein referred to as "Debt") if such
Debt is secured by a mortgage, security interest, pledge, lien or other
encumbrance (any of such are hereinafter referred to as a "lien") on any
Principal Property (as defined below), or on any shares of stock or indebtedness
of any Restricted Subsidiary (whether such Principal Property, shares of stock
or indebtedness are now owned or acquired after the date of the Indenture),
without, in any such case, effectively providing concurrently with the issuance,
assumption of or guaranty of any such Debt that the Debt Securities (together
with, if the Company shall so determine, any other indebtedness of or guaranty
of the Company or such Restricted Subsidiary ranking equally with the Securities
and then existing or thereafter created) shall be secured equally and ratably
with such Debt. This restriction, however, shall not apply to Debt secured by
liens: (i) on property, shares of stock or indebtedness of any corporation
existing at the time such corporation becomes a Restricted Subsidiary; (ii) on
property existing at the time that it is acquired or to secure Debt incurred for
the purpose of financing the purchase price of such property or improvements or
construction on the property, which Debt is incurred prior to or within one year
after the later of such acquisition, completion of such construction, or the
commencement of commercial operation of such property; provided, however, that
in the case of any such acquisition, construction or improvement the lien shall
not apply to any property theretofore owned by the Company or a Restricted
Subsidiary, other than, in the case of any such construction or improvement, any
theretofore unimproved real improvement, on which the property is constructed,
or the improvement is located; (iii) securing Debt owing by any Restricted
Subsidiary to the Company or another Restricted
6
<PAGE> 17
Subsidiary; (iv) on property of a corporation existing at the time such
corporation is merged into or consolidated with the Company or a Restricted
Subsidiary or at the time of a sale, lease or other disposition of the
properties of a corporation as an entirety or substantially as an entirety to
the Company or a Restricted Subsidiary; (v) on advance, partial or progress
payments pursuant to contracts with U.S. federal and state Governments for
production, research or development, or on any material or supplies in
connection with the performance of such contracts in order to secure such
payments to such Governments; and liens on equipment, tools, machinery, land or
buildings constructed or purchased by the Company or a Restricted Subsidiary for
the purpose of manufacturing a product, or performing any research or
development work for such Governments to secure indebtedness owing to such
Governments for the construction or purchase of such equipment, tools,
machinery, land and buildings (including liens incurred in connection with
pollution control, industrial revenue or similar financings); (vi) existing at
the date of the Indenture; or (vii) on particular property (or any proceeds of
the sale thereof) to secure all or any part of the cost of exploration,
drilling, mining or development thereof (including construction of facilities
for field processing of minerals) intended to obtain or materially increase the
production and sale or other disposition of oil, gas, coal, uranium, copper or
other minerals therefrom, or any indebtedness created, issued, assumed or
guaranteed to provide funds for any or all such purposes; or (viii) any
extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any lien referred to in the foregoing
clauses (i) through (vii) inclusive; provided, however, that the principal
amount of Debt secured thereby shall not exceed the principal amount of Debt so
secured at the time of such extension, renewal or replacement and that such
extension, renewal or replacement shall be limited to all or a part of the
property which secured the lien so extended, renewed or replaced (plus
improvements on such property). (Section 1006)
Notwithstanding the above, the Company and one or more Restricted
Subsidiaries may, without securing the Debt Securities, issue, assume or
guarantee secured Debt which would otherwise be subject to the foregoing
restrictions, provided that the aggregate amount of Debt secured by a lien then
outstanding (not including secured Debt permitted under the foregoing
exceptions) does not exceed 5% of the consolidated stockholders' equity of the
Company as of the end of the last preceding year. (Section 1006)
For the purposes of the foregoing covenant, the following types of
transactions shall not be deemed to create Debt secured by a lien: the sale or
other transfer of (i) oil, gas, coal, uranium, copper or other minerals in place
for a period of time until, or in an amount such that, the purchaser will
realize therefrom a specified amount of money (however determined) or a specific
amount of such minerals; or (ii) any other interest in property of the character
commonly referred to as a "production payment." (Section 1006)
Restrictions of Sale and Leaseback Transactions. Sale and leaseback
transactions by the Company or any Restricted Subsidiary of any Principal
Property are prohibited (except a temporary lease for a term of not more than
three years and except for leases between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries) unless (i) the Company or such
Restricted Subsidiary would be entitled to issue, assume or guarantee Debt
secured by the property involved at least equal to the Attributable Debt
(defined below) in respect of such transaction without equally and ratably
securing the Debt Securities, provided that such Attributable Debt shall then be
deemed for all purposes under Section 1006 and the provisions of this covenant
to be Debt subject to the provisions of Section 1006, or (ii) an amount in cash
equal to such Attributable Debt is applied to the retirement of Debt then having
a maturity of more than one year. (Section 1007)
Restrictions on Consolidations and Mergers. The Company will not
consolidate or merge with or dispose of all or substantially all of its property
to any corporation unless the surviving corporation (if other than the Company)
shall assume the obligations of the Company under the Indenture and under the
Debt Securities. (Section 801) If on any consolidation or merger of the Company
or any Restricted Subsidiary with or into any other corporation, or on any sale,
conveyance or lease of substantially all its properties, any Principal Property
or any shares of stock or indebtedness of any Restricted Subsidiary would then
become subject to any mortgage, pledge, security interest or other lien or
encumbrance, the Company, prior to such event, will secure the Debt Securities
by a direct lien on such Principal Property, shares of stock or indebtedness,
prior to all liens other than any such liens previously existing. (Section 802)
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CERTAIN DEFINITIONS
"Attributable Debt" means the present value (discounted as provided in the
Indenture) of the obligation of a lessee for rental payments during the
remaining term of any lease. (Section 1007)
"Consolidated Net Tangible Assets" means as of any particular time the
aggregate amount of assets after deducting therefrom (a) all current liabilities
and (b) all goodwill, patents, copyrights, trademarks, tradenames, unamortized
debt discount and expense and other like intangibles, all as shown in the most
recent consolidated financial statements of the Company and its Subsidiaries
prepared in accordance with generally accepted accounting principles. (Section
101)
"Principal Property" means any manufacturing plant or other facility of the
Company or any Restricted Subsidiary, whether owned as of the date of the
Indenture or acquired thereafter, which is located within the continental United
States and, in the opinion of the Board of Directors or an officer designated by
the Board of Directors, is of material importance to the total business
conducted by the Company and its Restricted Subsidiaries taken as a whole.
(Section 101)
"Restricted Subsidiary" means any Subsidiary all the property of which is
located within the continental United States of America which owns a Principal
Property or in which the Company's investment, whether in the form of equity or
debt, is in excess of 10% of the Consolidated Net Tangible Assets of the Company
as of the end of the fiscal year preceding the date of determination, provided,
however, that the term "Restricted Subsidiary" shall not include any Subsidiary
principally engaged in financing exports from or operations outside the
continental United States of America. (Section 101)
EVENTS OF DEFAULT, NOTICE AND WAIVER; DEBT SECURITIES IN FOREIGN CURRENCIES
As to any series of Debt Securities, an Event of Default is defined in the
Indenture as (a) default for 30 days in payment of any interest on the Debt
Securities of such series; (b) default in payment of principal of or any premium
on the Debt Securities of such series at maturity, upon redemption or repayment,
by declaration or otherwise; (c) default in payment of any sinking or purchase
fund or analogous obligation, if any, on the Debt Securities of such series and
continuance of such default for a period of 30 days; (d) default by the Company
in the performance of any other material covenant or warranty contained in the
Indenture for the benefit of such series which shall not have been remedied for
a period of 60 days after notice given as specified in the Indenture; (e)
certain events of bankruptcy, insolvency and reorganization of the Company; or
(f) any other events of default provided with respect to a particular series of
Debt Securities. (Section 501)
The Indenture provides that, if an Event of Default shall have occurred and
be continuing with respect to any series, either the Trustee or the holders of
not less than 25% in aggregate principal amount of the Debt Securities of such
series then outstanding (each such series acting as a separate class) may
declare the principal (or, in the case of Original Issue Discount Securities,
the portion thereof specified in the terms thereof) of all outstanding Debt
Securities of such series and the interest accrued thereon, if any, to be
immediately due and payable; upon certain conditions, however, such declarations
may be annulled and past defaults (except for defaults in the payment of
principal of, any premium on, or any interest on, such Debt Securities and in
compliance with certain covenants) may be waived by the holders of a majority in
principal amount of the Debt Securities of such series then outstanding.
(Sections 502 and 513)
Under the Indenture, the Trustee must give to the holders of each series of
Debt Securities notice of all uncured defaults known to it with respect to such
series within 90 days after such a default occurs (the term default includes the
events specified above without notice or grace periods); provided that, except
in the case of default in the payment of principal of, any premium on, or any
interest on, any of the Debt Securities of such series, or default in the
payment of any sinking or purchase fund installment or analogous obligations,
the Trustee shall be protected in withholding such notice if it in good faith
determines that the withholding of such notice is in the interests of the
holders of the Debt Securities of such series; provided, further, that in the
case of any default by the Company in the performance of any material covenants
or warranties contained in the Indenture, no such notice shall be given until at
least 30 days after the occurrence thereof. (Sections 501 and 602)
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No holder of any Debt Securities of any series may institute any action
under the Indenture unless (a) such holder shall have given the Trustee written
notice of a continuing Event of Default, (b) the holders of not less than 25% in
aggregate principal amount of the Debt Securities of such series then
outstanding shall have requested the Trustee to institute proceedings in respect
of such Event of Default, (c) such holder or holders shall have offered the
Trustee such reasonable indemnity as the Trustee may require, (d) the Trustee
shall have failed to institute an action for 60 days thereafter and (e) no
inconsistent direction shall have been given to the Trustee during such 60-day
period by the holders of a majority in aggregate principal amount of Debt
Securities then outstanding of such series. (Section 507)
The holders of a majority in aggregate principal amount of the Debt
Securities of any series affected and then outstanding will have the right,
subject to certain limitations, to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to such series of Debt
Securities. (Section 512) The Indenture provides that in case an Event of
Default shall occur and be continuing, the Trustee, in exercising its rights and
powers under the Indenture, will be required to use the degree of care of a
prudent man in the conduct of his own affairs. (Section 601)
The Indenture requires the Company to file annually with the Trustee an
Officers' Certificate as to the officers' knowledge of any defaults under the
terms of the Indenture. (Section 1009)
If any Debt Securities are denominated in coin or currency other than that
of the United States, then for the purposes of determining whether the holders
of the requisite principal amount of Debt Securities have taken any action as
herein described, the principal amount of such Debt Securities shall be deemed
to be that amount of United States dollars that could be obtained for such
principal amount on the basis of the noon Dollar buying rate for cable transfers
quoted in New York City for the currency in which such Debt Securities are
denominated (as evidenced to the Trustee by an Officers' Certificate) as of the
date of the taking of such action by the holders of such requisite principal
amount as evidenced to the Trustee as provided in the Indenture. (Section 311)
If any Debt Securities are Original Issue Discount Securities, then for the
purposes of determining whether the holders of the requisite principal amount of
Debt Securities have taken any action herein described, the principal amount of
such Debt Securities shall be deemed to be the portion of such principal amount
that would be due and payable at the time of the taking of such action upon a
declaration of acceleration of maturity thereof. (Section 101)
MODIFICATION OF THE INDENTURE
With certain exceptions, the Indenture or the rights of the holders of the
Debt Securities under the Indenture may be modified by the Company and the
Trustee with the consent of the holders of a majority in aggregate principal
amount of the Debt Securities of each series adversely affected by such
modification then outstanding, but no such modification may be made without the
consent of each holder of such Debt Securities which would (i) change the
maturity of, any principal of or any premium on, or any installment of interest
on, any Debt Security, or reduce the principal amount thereof or the interest or
any premium thereon, or change the method of computing the amount of principal
thereof or interest thereon on any date or change any place of payment where, or
the coin or currency in which, any Debt Security or any premium or interest
thereon is payable, or impair the right to institute suit for the enforcement of
any such payment on or after the maturity thereof (or, in the case of redemption
or repayment, on or after the redemption date or the repayment date, as the case
may be), or (ii) reduce the percentage in principal amount of the outstanding
Debt Securities of any series, the consent of whose holders is required for any
such supplemental indenture, or (iii) modify any of the provisions of certain
Sections of the Indenture, including the provisions summarized in this
paragraph, except to increase any such percentage or to provide that certain
other provisions of the Indenture cannot be modified or waived without the
consent of the holder of each outstanding Debt Security affected thereby.
(Section 902)
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DEFEASANCE OF THE INDENTURE AND DEBT SECURITIES
If the terms of any series of Debt Securities so provide, the Company will
be deemed to have paid and discharged the entire indebtedness on all the
outstanding Debt Securities of any series of Debt Securities by (a) depositing
with the Trustee (i) as trust funds in trust an amount sufficient to pay and
discharge the entire indebtedness on all Debt Securities of such series for
principal, premium and interest, or (ii) as obligations in trust such amount of
direct obligations of or obligations the principal of and interest on which are
fully guaranteed by the United States government as will, together with the
income to accrue thereon without consideration of any reinvestment thereof, be
sufficient to pay and discharge the entire indebtedness on all such Debt
Securities for principal, premium and interest and (b) satisfying certain other
conditions precedent specified in the Indenture including the delivery to the
Trustee of an Opinion of Counsel to the effect that the Holders of the Debt
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of the Company's exercise of its option to defease the Debt
Securities and will be subject to federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if such option
had not been exercised. (Section 403) In the event of any such defeasance,
holders of such Debt Securities would be able to look only to such trust fund
for payment of principal of, any premium on, and any interest on, their Debt
Securities.
CONCERNING THE TRUSTEE
The Trustee is PNC Bank, Delaware which has, from time to time, provided
loans and other customary banking services to the Company in the ordinary course
of business.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities (i) through underwriters or
dealers; (ii) through agents; (iii) directly to purchasers; or (iv) through a
combination of any such methods of sale. Any such underwriter, dealer or agent
may be deemed to be an underwriter within the meaning of the Securities Act. The
Prospectus Supplement relating to a series of the Debt Securities sets forth
their offering terms, including the name or names of any underwriters, the
purchase price of the Debt Securities and the proceeds to the Company from such
sale, any underwriting discounts, commissions and other items constituting
underwriters' compensation, any initial public offering price and any
underwriting discounts, commissions and other items allowed or reallowed or paid
to dealers and any securities exchanges on which the Debt Securities may be
listed.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed price or
prices, which may be changed, or at market prices prevailing at the time of
sale, or at prices related to such prevailing market prices, or at negotiated
prices. The Debt Securities may be offered to the public either through
underwriting syndicates represented by one or more managing underwriters or
directly by one or more of such firms. Unless otherwise set forth in a
Prospectus Supplement, the obligations of the underwriters to purchase the Debt
Securities will be subject to certain conditions precedent and the underwriters
will be obligated to purchase all the Debt Securities if any are purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Debt Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Debt Securities in respect of which this Prospectus is delivered
will be named, and any commissions payable by the Company to such agent will be
set forth, in a Prospectus Supplement. Unless otherwise indicated in a
Prospectus Supplement, any such agent will be acting on a reasonable efforts
basis for the period of its appointment.
If so indicated in a Prospectus Supplement, the Company will authorize
underwriters, dealers or agents to solicit offers by certain specified
institutions to purchase Debt Securities from the Company at the public offering
price set forth in such Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
Such contracts will be subject to any conditions set
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forth in the Prospectus Supplement and the Prospectus Supplement will set forth
the commission payable for solicitation of such contracts. The underwriters and
other persons soliciting such contracts will have no responsibility for the
validity or performance of any such contracts.
Underwriters, dealers and agents may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
by the Company to payments they may be required to make in respect thereof.
LEGAL MATTERS
Certain legal matters in connection with the Debt Securities being offered
hereby will be passed upon for the Company by Ballard Spahr Andrews & Ingersoll,
Philadelphia, Pennsylvania and Richard G. Dahlen, Esquire, Vice President and
General Counsel of the Company, unless otherwise specified in a Prospectus
Supplement. Mr. Dahlen owned beneficially, as of July 22, 1997, 12,222 shares of
restricted stock under the Hercules Incorporated Long Term Incentive
Compensation Plan (the "LTICP"), 110 shares of Hercules common stock under the
Hercules Incorporated Savings and Investment Plan, and the right to acquire
within 60 days hereof 8,400 shares under options held pursuant to the LTICP.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
which are included in the Company's most recent Annual Report on Form 10-K have
been audited and reported upon by Coopers & Lybrand, L.L.P., independent
accountants, and are incorporated by reference in this Prospectus. Such
financial statements are incorporated herein in reliance on the report of
Coopers & Lybrand, L.L.P., given on the authority of such firm as experts in
accounting and auditing.
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