<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[HERCULES LOGO]
1999 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
SMALL WONDERS
.....INFINITE POSSIBILITIES
<PAGE> 3
[HERCULES LOGO]
Letter to Shareholders HERCULES INCORPORATED
[HERCULES LETTERHEAD] Hercules Plaza
1313 North Market Street
Wilmington, DE 19894-0001
R. Keith Elliott
Chairman and
Chief Executive Officer
March 19, 1999
Dear Shareholders:
This past year was a monumental one in the history of Hercules. Despite some
very difficult market conditions, we made some bold moves during 1998 to
reposition our company for enhanced growth. We acquired five strategic
businesses that add more than $1.6 billion in revenues, including the October 15
acquisition of BetzDearborn. We also announced or completed several new capacity
projects that will strengthen our market position in key growth areas. We
believe these moves will generate significant returns to our shareholders.
Please come to our Annual Meeting on April 29. At the Meeting we'll fill you
in on our progress in 1998, and you will have the opportunity to ask questions
and make comments.
Enclosed with this Proxy Statement are your voting card and the 1998 Annual
Report. Whether you choose to vote by proxy card, telephone, or computer, please
vote as soon as possible. I look forward to seeing you at the Annual Meeting.
/s/ R. Keith Elliott
R. Keith Elliott
Chairman and Chief Executive Officer
[PHOTOGRAPH R. KEITH ELLIOTT]
2
<PAGE> 4
SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST]
Letter to Shareholders
[LETTER TO SHAREHOLDERS IN FRENCH] [LETTER TO SHAREHOLDERS IN CHINESE]
[HERCULES LOGO] [HERCULES LOGO]
[LETTER TO SHAREHOLDERS IN GERMAN] [LETTER TO SHAREHOLDERS IN SPANISH]
[HERCULES LOGO] [HERCULES LOGO]
3
<PAGE> 5
[HERCULES LOGO] HERCULES INCORPORATED
[HERCULES LETTERHEAD] Hercules Plaza
1313 North Market Street
Wilmington, DE 19894-0001
To: Our Shareholders
Subject: Notice of 1999 Annual Meeting of Shareholders
The Annual Meeting of Shareholders of Hercules Incorporated will be held on
Thursday, April 29, 1999, at 11:00 a.m., at Winterthur Museum, Garden & Library,
Winterthur, Delaware, to consider and take action on the following proposals:
1. Re-election of five directors: Vincent J. Corbo, John G. Drosdick, R.
Keith Elliott, Gaynor N. Kelley, and Peter McCausland, each for a term of three
years;
2. Ratification of PricewaterhouseCoopers LLP as independent accountants for
1999;
3. Approval of amendments to the Long-Term Incentive Compensation Plan; and
4. Transaction of other business that properly comes before the Annual
Meeting.
Shareholders as of March 1, 1999, will be entitled to vote at the Annual
Meeting. Seating is limited. An admission ticket, which is required for entry
into the Annual Meeting, is attached to your proxy card. If you plan to attend
the Annual Meeting, please vote your proxy but keep the admission ticket and
bring it to the Annual Meeting. If your shares are held in the name of a bank,
broker or other holder of record and you plan to attend the Meeting, you can
obtain an admission ticket in advance by contacting the Office of the Corporate
Secretary (800-441-9274).
This Proxy Statement, voting instruction card, and Hercules' 1998 Annual
Report are being distributed on or about March 19, 1999.
By order of the Board of Directors,
/s/ Israel J. Floyd
Israel J. Floyd
Assistant General Counsel
and Corporate Secretary
4
<PAGE> 6
SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST GRAPHIC]
Table of Contents
QUESTIONS AND ANSWERS ....................................................... 6
PROPOSALS TO BE VOTED UPON .................................................. 8
VOTING METHODS .............................................................. 9
BOARD OF DIRECTORS .......................................................... 10
DIRECTORS HIGHLIGHTS ........................................................ 13
HIGHLY COMPENSATED OFFICERS ................................................. 16
PERFORMANCE GRAPH ........................................................... 17
REPORT OF THE COMPENSATION COMMITTEE ........................................ 19
BENEFICIAL OWNERSHIP TABLE .................................................. 22
SUMMARY COMPENSATION TABLE .................................................. 23
OPTION GRANTS TABLE ......................................................... 24
OPTION EXERCISES AND VALUE TABLE ............................................ 25
PENSION PLAN TABLE .......................................................... 25
ANNEX A - EMPLOYMENT CONTRACTS .............................................. 26
5
<PAGE> 7
[HERCULES LOGO]
QUESTIONS AND ANSWERS
Q: WHAT AM I VOTING ON?
A: Re-election of five directors (Vincent J. Corbo, John G. Drosdick, R. Keith
Elliott, Gaynor N. Kelley, and Peter McCausland); ratification of
PricewaterhouseCoopers LLP as Hercules' independent accountants; and
approval of amendments to the Long-Term Incentive Compensation Plan (see
page 8 for more details).
Q: WHO IS ENTITLED TO VOTE?
A: Shareholders as of the close of business on March 1, 1999 (the Record
Date). Each share of common stock is entitled to one vote.
Q: HOW DO I VOTE?
A: You can vote on the Internet, by telephone or sign and mail your proxy
card. (See your proxy card for specific instructions for Internet and
telephone voting).
Q: HOW DOES DISCRETIONARY AUTHORITY APPLY?
A: If you sign your proxy card, but do not make any selections, you give
authority to R. Keith Elliott and Richard G. Dahlen to vote on the
proposals and any other matter that may arise at the Annual Meeting.
Q: IS MY VOTE CONFIDENTIAL?
A: Yes. Only the inspector of election, ChaseMellon Shareholder Services, and
certain employees of Hercules will have access to your proxy card. All
comments will remain confidential, unless you ask that your name be
disclosed.
Q: WHO WILL COUNT THE VOTES?
A: ChaseMellon Shareholder Services will tabulate the votes and act as
inspector of election.
Q: WHAT SHARES ARE INCLUDED IN THE PROXY CARD?
A: Common shares held as of March 1, 1999 (Record Date) are included.
For employees, shares held in the Hercules automatic dividend reinvestment
plan, the executive compensation plans, employee benefit plans, and shares
credited to your savings plan account (held in custody by the trustee) are
also included.
Q: IS THE VOTING PROCEDURE DIFFERENT IF I PARTICIPATE IN ONE OF THE EMPLOYEE
SAVINGS PLANS?
A: Yes, but you still need to vote. The plan trustee will vote your shares as
indicated by your voting preferences. However, if you do not vote, the plan
trustee will vote your shares in proportion to the other proxies received.
Shares credited to your savings plan account as of March 1, 1999, are
included on your card; fractional shares are not.
Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: Your shares are probably registered differently or are in more than one
account. Vote all proxy cards to ensure that all your shares are voted.
Contact our transfer agent, ChaseMellon Shareholder Services
(800-237-9980), to have your accounts registered in the same name and
address.
6
<PAGE> 8
SMALL WONDERS, INFINITE POSSIBILITIES
Q: WHAT CONSTITUTES A QUORUM?
A: As of March 1, 1999, 102,474,187 shares of Hercules common stock were
issued and outstanding. A majority of the shares entitled to vote, present
in person or represented by proxy, constitutes a quorum. If you vote by
proxy card, telephone, or Internet, you will be considered part of the
quorum. The inspector of election will treat shares represented by a
properly executed proxy as present at the Annual Meeting. Abstentions and
broker non-votes will not affect the determination of a quorum.
Q: WHAT PERCENTAGE OF STOCK DO THE DIRECTORS AND OFFICERS OWN?
A: Approximately 2.0% of our common stock was held by the directors and
officers as of March 1, 1999. (See page 22 for more details.)
Q: WHO ARE THE LARGEST PRINCIPAL SHAREHOLDERS?
A: Oppenheimer Group, Inc. (Oppenheimer Tower, World Financial Center, New
York, NY) owned 13,869,263 shares, or 13.8%, as of February 9, 1999.
Fidelity Management & Research Co. (82 Devonshire, Boston, MA) owned
7,205,592 shares, or 7.2%, as of February 1, 1999.
T. Rowe Price Associates, Inc. (100 E. Pratt Street, Baltimore, MD) owned
6,854,654 shares or 6.8%, as of February 12, 1999.
Capital Research & Management (333 South Hope Street, Los Angeles, CA)
owned 6,582,800 shares, or 6.5%, as of February 8, 1999.
Q: WHEN ARE THE SHAREHOLDER PROPOSALS DUE FOR THE YEAR 2000 ANNUAL MEETING?
A: To be included in next year's proxy statement, shareholder proposals must
be submitted in writing by November 19, 1999, to Israel J. Floyd, Esq.,
Corporate Secretary, Hercules Incorporated, Hercules Plaza, 1313 North
Market Street, Wilmington, DE 19894-0001. If any stockholder proposal is
submitted after February 2, 2000, the Board will be allowed to use its
discretionary voting authority when the proposal is raised at the Annual
Meeting, without any discussion of the matter in the proxy statement.
Q: HOW DOES A SHAREHOLDER NOMINATE A DIRECTOR OF HERCULES?
A: Submit a written recommendation (accompanied by a notarized statement from
the nominee indicating willingness to serve if elected and principal
occupations or employment over the past five years) to the Chairman of the
Nominating Committee, c/o Corporate Secretary, Hercules Incorporated,
Hercules Plaza, 1313 North Market Street, Wilmington, DE 19894-0001.
Q: WHAT ARE THE SOLICITATION EXPENSES?
A: ChaseMellon Shareholder Services was hired to assist in the distribution of
proxy materials and solicitation of votes for $9,000, plus out-of-pocket
expenses.
Hercules will reimburse stockbrokers and other custodians, nominees, and
fiduciaries for their reasonable out-of-pocket expenses for forwarding
proxy and solicitation material to the owners of common stock.
7
<PAGE> 9
[HERCULES LOGO]
PROPOSALS
1. RE-ELECTION OF DIRECTORS
Nominees for reelection this year are:
- Vincent J. Corbo (director since 1997)
- John G. Drosdick (director since 1998)
- R. Keith Elliott (director since 1991)
- Gaynor N. Kelley (director since 1989)
- Peter McCausland (director since 1997)
Each has consented to serve a three-year term. (See page 10 for biographical
information.)
If any director is unable to stand for re-election, the Board may provide for a
lesser number of directors or designate a substitute. In the latter event,
shares represented by proxies may be voted for a substitute director.
The affirmative vote of a majority of the outstanding shares of common stock
entitled to vote at the Annual Meeting is required to elect a director. We
recommend a vote "FOR" each of the nominees.
2. RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS FOR
1999
The Audit Committee and the Board believe that PricewaterhouseCoopers LLP
("PWC") has invaluable knowledge about Hercules. Partners and employees of PWC
are periodically changed, providing Hercules with new expertise and experience.
Representatives of PWC have direct access to the Audit Committee and regularly
attend the Committee's meetings. Representatives of PWC will attend the Annual
Meeting to answer questions.
The affirmative vote of the majority of shares present in person or by proxy and
entitled to vote at the Annual Meeting is required to ratify PWC as independent
accountants for 1999. We recommend a vote "FOR" the ratification of
PricewaterhouseCoopers LLP as independent accountants.
3. APPROVAL OF AMENDMENTS TO THE LONG-TERM INCENTIVE COMPENSATION PLAN
The Plan was originally adopted in 1991 and is designed to motivate, reward, and
retain employees who attain and surpass long-range performance goals and to
compete with other major corporations in attracting and retaining key managers
in a highly-competitive marketplace. We believe that this Plan is the best means
for aligning management focus with shareholder interest.
The Plan provides for the granting of various types of awards, including stock
options, performance accelerated stock options, restricted shares and restricted
stock units, to eligible employees of Hercules. You are being asked to approve
the following amendments to the Plan:
- - EXTEND THE EXPIRATION DATE TO APRIL 30, 2002 FROM APRIL 30, 2000.
As a result of the acquisition of BetzDearborn, our employee population has
doubled in size, and our projections for future use of shares under the
Plan have changed. We anticipate that the remaining shares authorized for
awards under the Plan will be depleted by the end of this year (prior to
the existing expiration date of April 30, 2000).
- - INCREASE THE NUMBER OF SHARES THAT MAY BE USED FOR AWARDS UNDER THE PLAN BY
7,000,000
The proposed amendments will allow us to issue up to 7,000,000 additional
shares in connection with future awards under the Plan. Currently, the Plan
authorizes a total of 8,000,000 shares, of which only approximately
2,200,000 remain available. The increase is necessary due to our increased
employee population and the extension of the expiration date of the Plan.
As of March 1, 1999, 102,474,187 shares of Hercules common stock were
issued and outstanding.
- - PROHIBIT REPRICING OF STOCK OPTIONS GRANTED UNDER THE PLAN
Although we have never repriced stock options, we are proposing to amend
the Plan to expressly prohibit the repricing of any stock options granted
under the Plan, or the granting of new stock options in connection with the
cancellation of outstanding options with a higher exercise price.
- - GIVE THE COMPENSATION COMMITTEE THE ABILITY TO DETERMINE AND EXTEND THE
TIME FOR STOCK OPTIONS TO BE EXERCISED FOLLOWING AN EMPLOYEE'S DEATH OR
DISABILITY.
If the proposed amendment is adopted, the Compensation Committee would have
the discretion to determine for new options, and to extend for outstanding
options, on a case-by-case basis, the period during which the option can be
exercised after an employee dies or becomes disabled (but not beyond the
stated expiration of the option). We believe that the Committee should be
given this discretion so that it can address these unique situations as
they arise.
8
<PAGE> 10
SMALL WONDERS, INFINITE POSSIBILITIES
You may obtain a copy of the current Plan by writing to Hercules Incorporated,
Hercules Plaza, 1313 North Market Street, Wilmington, DE 19894-0001, Attention:
Corporate Secretary. Requests may also be made by phone to 800-441-9274.
The affirmative vote of the majority of the shares present in person or by proxy
and entitled to vote at the Annual Meeting is required to approve these
amendments to the Long-Term Incentive Compensation Plan. The Board recommends a
vote "FOR" these amendments.
Abstentions will have the effect of a negative vote. Broker non-votes will have
no effect on the outcome of the vote.
VOTING METHODS
YOU HAVE THE RIGHT TO VOTE AND TO REVOKE YOUR PROXY ANY TIME BEFORE IT IS VOTED
AT THE ANNUAL MEETING.
COMPUTER VOTING
1. Go to the website address on your proxy card. [COMPUTER]
2. Enter your Control Number
3. Mark your selections
4. Click on "register vote"
TELEPHONE VOTING
1. Dial the telephone number indicated on your proxy card [TELEPHONE}
2. Enter your Control Number
3. Follow voice prompts
PROXY CARD VOTING
1. Mark your selections [MAIL SLOT]
2. Date and sign your name exactly as it appears on your card
3. Mail it in the return envelope
9
<PAGE> 11
[HERCULES LOGO]
BOARD OF DIRECTORS - STANDING FOR RE-ELECTION
[PHOTO] Mr. Elliott, age 57, is chairman and chief executive
officer of Hercules Incorporated. In 1995, Mr. Elliott
held the position of executive vice president and
chief financial officer, and later that year was named
president and chief operating officer. Mr. Elliott
joined Hercules in 1991 from Engelhard Corporation.
R. KEITH ELLIOTT - Mr. Elliott is a director of Computer Task Group, PECO
Director since 1991 Energy Company, and Wilmington Trust Company.
Dr. Corbo, age 55, is president and chief operating [PHOTO]
officer of Hercules Incorporated. He held positions in
research engineering and business management, including
executive vice president, responsible for Technology
and the Paper Technology and Fibers businesses, 1996;
group vice president and president, Food & Functional
Products, 1993, and Materials, 1992. Dr. Corbo serves
on the following: the Board of Managers of Fibervisions
L.L.C.; the Advisory Board of the College of Sciences,
Georgia Institute of Technology; the Advisory Council
of the Department of Engineering, Princeton University;
Engineering College Advisory Council of the University
of Delaware; Trustee of Delaware Symphony Orchestra and VINCENT J. CORBO -
The Grand Opera House; and President of Opera Delaware. Director since 1997
[PHOTO] Mr. Drosdick, age 55, is president and chief operating
officer of Sunoco, Inc., an independent petroleum
refiner-marketer in the United States. Mr. Drosdick
was president of Ultramar Corporation from 1992 to
1996. He is a director of Sunoco, Inc., and serves on
JOHN G. DROSDICK - the Board of Trustees of the Philadelphia Museum of
Director since 1998 Art and Villanova University.
Mr. Kelley, age 67, is the retired chairman and chief [PHOTO]
executive officer of The Perkin-Elmer Corporation, a
manufacturer of analytical and biotechnology
instrumentation. He is a member of the board of directors
of Alliant Techsystems Inc. and Prudential Insurance Co. of
America. He is on the advisory board of the Center for GAYNOR N. KELLEY -
Management Development at Northeastern University. Director since 1989
10
<PAGE> 12
SMALL WONDERS, INFINITE POSSIBILITIES
[PHOTO] Mr. McCausland, age 49, is chairman and chief
executive officer of Airgas, Inc. (a distributor of
industrial, medical, and specialty gases and related
equipment), a company he founded in 1987. He served as
general counsel for MG Industries, Inc., an industrial
gas producer. He was a partner in the firm of
McCausland, Keen & Buckman which specialized in
mergers, acquisitions, and financings. He is a
PETER MCCAUSLAND - director of the Fox Chase Cancer Center and the
Director since 1997 Independence Seaport Museum.
BOARD OF DIRECTORS - CONTINUING AS DIRECTORS
In order to comply with our Certificate of Incorporation and By-Laws which
provide for three classes of directors of equal size to the extent practical, it
was necessary for the Board of Directors to reclassify some directors. There
remains a vacancy on the Board due to the resignation of William R. Cook.
Mr. Fairbanks, age 58, is managing director for [PHOTO]
Domestic and International Issues, Center for
Strategic & International Studies. He was
Ambassador-at-Large under President Reagan. He is
a member of the board of directors of SEACOR Smit,
Inc. and GATX Corporation; vice chairman of the
U.S. National Committee of the Pacific Economic
Cooperation Council; member, Council on Foreign
Relations, Council of American Ambassadors; and RICHARD M. FAIRBANKS,
founder, The American Refugee Committee of III - Director since 1993
Washington.
[PHOTO] Mr. Hirsig, age 59, is retired president and chief
executive officer of ARCO Chemical Company, which was
bought by Lyondell Chemical Company. He is a director
of Philadelphia Suburban Corporation and Checkpoint
Systems Corporation. Additionally, he is chairman,
Prime Advisory Board, and director or trustee of Bryn
Mawr College, Curtis Institute of Music, Rosenbach
Museum and Library, and YMCA of Philadelphia. Mr.
ALAN R. HIRSIG - Hirsig served as past chairman of the Chemical
Director since 1998 Manufacturers Association.
11
<PAGE> 13
[HERCULES LOGO]
Ms. Holiday, age 47, is an attorney. She was Assistant [PHOTO]
to the President of the United States and Secretary of
the Cabinet from 1990 until early 1993 and served as
General Counsel of the U.S. Treasury Department from
1989 through 1990. She served as Counselor to the
Secretary of the Treasury and Assistant Secretary for
Public Affairs and Public Liaison, U.S. Treasury
Department from 1988 to 1989. Ms. Holiday is a director
of Amerada Hess Corporation, H. J. Heinz Company,
Beverly Enterprises, Inc., and director or trustee of
various investment companies in the Franklin Templeton EDITH E. HOLIDAY -
Group of Funds. Director since 1993
[PHOTO] Professor Jahn, age 68, has taught at Princeton
University, Department of Mechanical and Aerospace
Sciences since 1962. He was Dean of the School of
Engineering and Applied Science at Princeton,
1971-1986. Professor Jahn is a trustee, fellow, and a
member of several academic and professional societies.
ROBERT G. JAHN - He is vice president and a founding member of the
Director since 1985 Society for Scientific Exploration.
Mr. McBrayer, age 67, retired as president of Exxon [PHOTO]
Chemical Company in January 1992, after 37 years of
service. He 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 Advisory
Committee for the Pacific Northwest National H. EUGENE MCBRAYER -
Laboratory. Director since 1992
[PHOTO] Mr. MacDonald, age 57, is a principal in Amelia
Investment Corp. (AIC), a private investment firm
dedicated to the acquisition and development of small-
to medium-sized industrial manufacturing and
distribution companies. Prior to AIC, he was a
principal in Island Capital Corporation, a similar
firm, and managing director, Global Corporate Finance,
RALPH L. MACDONALD, JR. Bankers Trust Company. He is also a director of
- - Director since 1989 Gaylord Container Corporation.
12
<PAGE> 14
SMALL WONDERS, INFINITE POSSIBILITIES
[PHOTO] Mr. Shober, age 65, is a private investor. He served
as vice chairman of the board of directors of Penn
Virginia Corporation, a natural resources company,
from 1992 to 1996. Mr. Shober is a director of Airgas,
Inc., Anker Coal Company, C&D Technologies, Ensign
Bickford Industries, Inc., First Reserve Corporation,
MIBRAG gmH, Penn Virginia Corporation, and several
JOHN A.H. SHOBER - other organizations including The Eisenhower Exchange
Director since 1998 Fellowships.
Ms. Sneed, age 51, is senior vice president, Marketing [PHOTO]
Services, Kraft Foods, Inc., the nation's largest
packaged foods company. She joined General Foods in
1977 and has held a variety of management positions,
including vice president, Consumer Affairs; senior vice
president and president, Foodservice Division;
executive vice president and general manager, Desserts
Division; and executive vice president and general PAULA A. SNEED -
manager, Dinners and Enhancers Division. Director since 1994
BOARD OF DIRECTORS - HIGHLIGHTS
BOARD COMPENSATION
- - Employee directors receive no additional compensation other than their
normal salary for serving on the Board or its Committees.
- - During 1998, nonemployee directors received:
- Annual grant of 3,000 stock options;
- Award of 9,000 stock options, which were granted in lieu of any annual
stock options for the next three years;
- Right to defer compensation in exchange for restricted stock;
- $23,000 annual fee;
- $1,000 for each meeting attended;
- $3,000 for chairing a committee;
- $1,000 per day for special assignments;
- Reimbursement for out-of-pocket expenses.
ANNUAL BOARD EVALUATION
- - Solicited and reviewed written commentary from all members regarding
critical duties and matters and quality of performance
- - Conducted peer evaluation of performance
- - Increased communication between members and management
NONEMPLOYEE DIRECTOR PROGRAMS (see page 15)
- - Nonemployee Director Stock Accumulation Plan (deferral capability and
option grants)
- - Equity Award Program (one time award if director makes a purchase)
- - Restricted Stock Units Program (one-time grant at joining -- long-term
vesting)
- - Charitable Award Program (life insurance with beneficiary being a
designated charity)
13
<PAGE> 15
[HERCULES LOGO]
STOCK OWNERSHIP
(as of March 1, 1999)
STOCK OWNERSHIP FOR NONEMPLOYEE
DIRECTORS (AS A GROUP)
RSUs RESTRICTED COMMON OPTIONS
- ------ ---------- ------ -------
13,922 66,251 78,110 249,000
<TABLE>
<S> <C> <C>
RSUs
[ ] Restricted .................. 13,922 66,251
[ ] Common ...................... 78,110
[ ] Options ..................... 249,000
</TABLE>
BOARD MEMBERS
R. K. Elliott, Chair
V. J. Corbo
J. G. Drosdick
R. M. Fairbanks, III
A. R. Hirsig
E. E. Holiday
R. G. Jahn
G. N. Kelley
R. L. MacDonald, Jr.
H. E. McBrayer
P. McCausland
J. A. H. Shober
P. A. Sneed
19 Meetings held in 1998
COMMITTEE MEMBERS
AUDIT
P. A. Sneed, Chair
J. G. Drosdick
R. M. Fairbanks, III
E. E. Holiday
3 Meetings held in 1998
COMPENSATION
R. L. MacDonald, Jr., Chair
G. N. Kelley
H. E. McBrayer
6 Meetings held in 1998
EXECUTIVE
R. K. Elliott, Chair
V. J. Corbo
R. L. MacDonald, Jr.
H. E. McBrayer
1 Meeting held in 1998
FINANCE
H. E. McBrayer, Chair
V. J. Corbo
R. K. Elliott
R. M. Fairbanks, III
E. E. Holiday
R. L. MacDonald, Jr.
P. McCausland
4 Meetings held in 1998
NOMINATING
G. N. Kelley, Chair
R. M. Fairbanks, III
R. G. Jahn
2 Meetings held in 1998
SOCIAL RESPONSIBILITY
E. E. Holiday, Chair
R. G. Jahn
J. A. H. Shober
P. A. Sneed
3 Meetings held in 1998
TECHNOLOGY
R. G. Jahn, Chair
V. J. Corbo
R. K. Elliott
A. R. Hirsig
G. N. Kelley
H. E. McBrayer
P. A. Sneed
4 Meetings held in 1998
14
<PAGE> 16
SMALL WONDERS, INFINITE POSSIBILITIES
Board Committees
AUDIT: Reviews auditing, accounting, financial reporting, and internal control
functions. Recommends our independent accountant and reviews their services. All
members are nonemployee directors.
COMPENSATION: Administers executive compensation programs, policies, and
practices. Acts in an advisory role on employee compensation. All members are
nonemployee directors.
EXECUTIVE: Limited powers to act on behalf of the Board whenever the Board is
not in session. Meets only as needed and acts only by unanimous vote. If any
nonemployee director wants a matter to be addressed by the Board rather than the
Executive Committee, then such matter is submitted to the Board.
FINANCE: Reviews Hercules' financial affairs. Has full and final authority on
certain financial matters and serves as the named fiduciary for all of Hercules'
employee benefit plans.
NOMINATING: Considers and recommends nominees for election as directors and
officers. Reviews and evaluates the Board and its members. All members are
nonemployee directors.
SOCIAL RESPONSIBILITY: Reviews Hercules' policies, programs and practices on
equal employment opportunity; environmental, safety, and health matters; ethics;
and community affairs.
TECHNOLOGY: Reviews the strategic direction of Hercules' intellectual property,
research and development, and emerging technologies.
Board of Directors - Other Information
NONEMPLOYEE DIRECTOR PROGRAMS
NONEMPLOYEE DIRECTOR STOCK ACCUMULATION PLAN. Directors can defer all or part of
their compensation in exchange for stock (restricted until retirement from the
Board) at 85% of the fair market value of such stock on the date of exchange.
Each director annually receives a non-qualified stock option (exercisable after
a one-year holding period) to purchase 3,000 shares of common stock. The option
price is the fair market value of the common stock on the date of grant. In
1998, each nonemployee director received an accelerated grant of 9,000 stock
options in lieu of any annual stock option grant for the next three years.
Vesting occurs in three equal annual increments beginning one year after the
grant date.
EQUITY AWARD. A director has a single opportunity to purchase 750 shares of
common stock at fair market value when first elected to the Board. Upon the
purchase, Hercules awards an additional 1,500 shares which cannot be transferred
until retirement or resignation from the Board.
RESTRICTED STOCK UNITS. Upon election to the Board, each director receives 1,100
restricted stock units, which are placed in an unfunded account where they
accrue dividend equivalents and interest. Each unit represents the right to
receive one share of Hercules stock at retirement. Units do not carry any voting
rights. Of these units, 200 immediately vest. Thereafter, for every year served
on the Board, 100 additional units vest (up to a maximum of nine years). Upon
retirement from the Board, all vested units are paid in shares as a lump sum or
spread over a period not to exceed ten years.
CHARITABLE AWARD PROGRAM. This program is designed to promote charitable giving.
It is available to directors and is funded by life insurance policies on
directors. Upon the retirement or death of a director, Hercules will donate
common stock, with an expected aggregate value of $1,000,000, to one or more
designated charitable institutions over a ten-year period. The actual number of
shares delivered to the charitable institutions will be based on a projected
share price growth. The first installment will be paid immediately after the
director's retirement or death, but no sooner than April 1, 2001.
Directors derive no financial benefit from this program since all charitable
deductions accrue solely to Hercules. Furthermore, the insurance funding is
structured so that the program results in nominal cost to Hercules over time.
15
<PAGE> 17
[HERCULES LOGO]
Highly Compensated Officers
[PHOTO]
R. KEITH ELLIOTT
Chairman and
Chief Executive Officer
[PHOTO]
VINCENT J. CORBO
President and
Chief Operating Officer
[1998 Compensation Highlights BAR GRAPH]
<TABLE>
<CAPTION>
R.K. Elliott W.R. Cook* V.J. Corbo G. MacKenzie D.W. DiDonna H.J. Tucci
<S> <C> <C> <C> <C> <C> <C>
Salary $750,000 $ 145,833 $ 494,273 $271,670 $ 260,402 $245,850
Bonus 530,880 0 320,000 200,000 120,000 185,000
Other Annual Compensation 89,049 0 90,493 19,514 11,260 18,707
Restricted Stock 0 2,966,994 2,367,602 0 0 50,083
</TABLE>
*The salary for Mr. Cook reflects the period from October 15, 1998 to year-end.
[PHOTO]
GEORGE MACKENZIE
Senior Vice President and
Chief Financial Officer
[PHOTO]
DOMINICK W. DIDONNA
Senior Vice President and
General Manager
Pulp and Paper Division
[PHOTO]
HARRY J. TUCCI
Senior Vice President
Corporate Development
16
<PAGE> 18
SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST GRAPHIC]
Performance Graph
Comparison Of Five Year Cumulative Return*
[LINE GRAPH]
Hercules Incorporated (NYSE Trading symbol HPC)
S&P 500
S&P Speciality Chemical Index
S&P Chemical Index
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hercules Incorporated
(NYSE Trading
symbol HPC) $100.0 101.7 149.0 114.3 132.3 72.0
S&P 500 $100.0 98.5 132.0 158.8 208.0 263.5
S&P Speciality
Chemical Index $100.0 84.7 109.8 111.9 136.2 113.1
S&P Chemical Index $100.0 111.1 140.7 183.7 218.6 198.6
- -------------------------------------------------------------------------------
</TABLE>
Assumes $100 invested on December 31, 1993
* Total return assumes reinvestment of dividends
17
<PAGE> 19
[HERCULES LOGO]
Highlights of the Compensation Committee
COMPENSATION PHILOSOPHY
- Link executive compensation with shareholder returns
- Guidelines for substantial stock ownership for executives
- Attract and retain talented employees through competitive compensation
EXECUTIVE COMPENSATION STRUCTURE
- Base pay
- Annual incentive
- Long-term incentive
- Recognition awards
MR. ELLIOTT'S 1998 TARGET BONUS
- 80% based on corporate performance
- 20% based on individual accountabilities
STOCK OWNERSHIP GUIDELINES
- Chairman & CEO: 5 times salary plus target bonus
- President & COO: 4 times salary plus target bonus
- Management Committee: 3 times salary plus target bonus
- Senior Management: 2 times salary plus target bonus
EMPLOYEE STOCK AND COMPENSATION PROGRAMS
- Broadbased employee incentive plan
- Employee Stock Purchase Plan
- 401(k) Plan
- Option Advantage
- Accountability system and awards
18
<PAGE> 20
SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST GRAPHIC]
Report of the Compensation Committee
COMPENSATION PHILOSOPHY
Our philosophy is to align compensation of both executive management and
employees with the long-term interests of our shareholders. Executive
compensation is structured to motivate management to create sustained
shareholder value by:
- - linking total executive compensation with the returns realized by
shareholders,
- - aligning the interests of management and shareholders through
substantial stock ownership for executives, and
- - ensuring the continued growth and performance of Hercules by
attracting, motivating and rewarding talented executives and employees
through competitive compensation.
Hercules' compensation program focuses on specific corporate goals that are
generally believed to reflect measures (such as earnings per share and return on
shareholders' equity) related to shareholders' total return. In addition to
these measures, shareholders' total return is viewed in light of conditions in
the specialty chemical industry, general economy and the stock market.
STRUCTURE OF EXECUTIVE COMPENSATION
The elements of executive compensation programs are:
- - base pay,
- - annual incentives,
- - long-term incentives, and
- - special awards in recognition of extraordinary achievement or
significant appointments.
Each executive's base salary is designed to be competitive with similarly sized
chemical and specialty chemical companies, while short- and long-term incentives
are performance-based.
DETERMINATION OF BASE PAY
Base pay is determined by individual performance and comparisons to similar
positions in chemical, specialty chemical, and general industry companies,
including those designated in the Standard & Poor's Chemical and Specialty
Chemical Indices. As a result of the BetzDearborn acquisition in October 1998,
which doubled the size of the company, the Compensation Committee re-evaluated
the compensation levels and made adjustments so that salaries would be
competitive with other companies of similar size. As a result, the Committee
increased base salaries for Messrs. Corbo, MacKenzie, DiDonna and Tucci to
$562,500, $330,000, $327,000, and $300,000, respectively. Mr. Elliott's salary
for 1998 was $750,000.
DETERMINATION OF ANNUAL BONUSES
Under our Management Incentive Compensation Plan, annual bonuses are paid in a
combination of cash and restricted stock based on the achievement of
predetermined corporate, business or corporate staff unit, and individual goals.
The Plan provides that no payouts will occur unless the minimum level of
performance, as established by the Compensation Committee, is exceeded. A
maximum of 200% of the total target pool may be paid upon achievement of
outstanding performance. Once established, the Committee may adjust the expected
performance level only upon the occurrence of an extraordinary event. In the
last five years, the Committee has not waived the minimum level of performance
nor adjusted the target or maximum goals required for payout.
BONUS PAYOUT LEVEL FOR 1998
The Compensation Committee approved the 1998 bonus pool at 79% of the target
level. The three measures of corporate performance used for bonus pool creation
were earnings per share, return on equity, and free cash flow. In determining
the bonus pool creation, these measures were weighted 50%, 25% and 25%,
respectively.
Additionally, the 1998 bonus pool reflected:
- - Long-term strategic and portfolio management
- - Strong financial management
- - Improved management development and succession planning
- - Long-term value creation through mergers and acquisitions
These additional measures impacted the 1998 bonus pool by less than 25% of the
pool value.
MR. ELLIOTT'S 1998 BONUS
In 1998, Hercules and its peers in the specialty chemical industry faced
difficult markets and business conditions. After consideration of all relevant
factors (including earnings per share, free cash flow, and return on shareholder
equity), the Compensation Committee concluded that Hercules' relative
performance placed it in the upper half among its peers in the specialty
chemical industry.
Our performance has been reflected both positively and negatively in the
compensation paid to Mr. Elliott over the past three years. In particular, Mr.
Elliott's performance bonus in 1997 increased significantly over his 1996 bonus.
On the other hand, Hercules did not achieve maximum performance levels under the
annual
19
<PAGE> 21
[HERCULES LOGO]
Management Incentive Compensation Plan in 1998 and, accordingly, Mr. Elliott's
annual bonus in 1998 was 42% lower than that of 1997. Mr. Elliott's bonus
represented 41% of his total direct compensation in 1998.
Mr. Elliott's target bonus is 80% directly attributable to corporate
performance. With respect to the remaining 20% of target bonus, the Compensation
Committee considered individual accountabilities, including:
- - Long-term strategic and portfolio management;
- - Continued implementation of cost improvement and growth initiatives;
- - Management development; and
- - Implementation of corporate development strategy
In light of such considerations, Mr. Elliott's bonus payout for 1998 was
$530,880.
OTHER HIGHLY COMPENSATED EXECUTIVES' 1998 BONUSES
The final 1998 bonuses for Messrs. Corbo, MacKenzie, DiDonna, and Tucci were an
aggregate of $825,000. In awarding these bonuses, the Compensation Committee
considered Hercules' corporate and business unit performance, and individual
contributions to our success.
LONG-TERM INCENTIVES
The focus of the Long-Term Incentive Compensation Plan is to increase
shareholder value. Under this Plan, the Compensation Committee approves pools of
regular stock options and performance accelerated stock options. Performance
accelerated stock options are nonqualified stock options that normally vest
9 1/2 years from the date of grant. Vesting can be accelerated upon the
achievement of specific goals. The Committee also approves specific awards for
officers and other key employees. The Plan permits the chief executive officer
to approve all awards for other eligible employees.
In 1998, performance options that were granted in 1995 completed a three-year
performance period. The Compensation Committee determined that the target
portion of these performance options and all of the performance options granted
to senior managers remain unvested and will be reviewed again in February 2000.
The above-target portion of the performance options granted to certain
executives, including Messrs. Elliott, Corbo, MacKenzie, DiDonna, and Tucci,
would not vest until September 30, 2004, with no future review based on
corporate performance.
1998 AWARDS
The Compensation Committee approved a pool and granted options for the regularly
scheduled May 1998 award. The Committee also made an accelerated grant of the
1999 options in August 1998 in connection with the acquisition of BetzDearborn.
Messrs. DiDonna and Tucci received stock options to purchase 52,000 and 48,000
shares, respectively. These options vest 40%, 40%, and 20%, respectively, on the
first three anniversaries of the grant date. In making the grants, the Committee
considered competitive compensation, the number of stock options previously
granted, current and future accountabilities, and the responsibilities of the
executives.
The Committee also granted to Messrs. DiDonna and Tucci 29,375 and 27,000
performance options, respectively, with a normal vesting period of 9 1/2 years.
Vesting will be accelerated if Hercules' stock price exceeds certain target
prices for five consecutive trading days. These performance options are
structured in two components: (1) 23,500 and 21,600 shares for Messrs. DiDonna
and Tucci, respectively, vest immediately if our stock price exceeds $67.00 and
(2) an additional 5,875 and 5,400 shares for Messrs. DiDonna and Tucci,
respectively, vest if our stock price exceeds $76.50.
SPECIAL AWARDS
From time to time, special awards are granted in recognition of extraordinary
results. In 1998, awards were made under the Long-Term Incentive Compensation
Plan to certain executives who were instrumental in completing the acquisition
of BetzDearborn. Options to purchase shares were granted as noted below. The
option was the price of Hercules stock on the grant date.
- - Mr. Elliott received 300,000 options which vest 40%, 40%, and 20% on
the first, second and third grant date anniversaries;
- - Mr. MacKenzie received 160,000 options (60,000 options with a staggered
three-year vesting schedule of 40%, 40%, and 20%, and 100,000 options
with a staggered three-year vesting schedule of 20%, 30% and 50% on the
first, second, and third grant date anniversaries); and
- - Messrs. DiDonna and Tucci received 100,000 options with a staggered
three-year vesting schedule of 20%, 30%, and 50% on the first, second,
and third grant date anniversaries.
MR. COOK'S COMPENSATION AS CO-CEO
In connection with the acquisition of BetzDearborn, Mr. Cook became
vice-chairman and co-CEO of Hercules on October 15, 1998. On November 30, 1998,
it was announced that Mr. Cook would resign these positions and leave Hercules.
20
<PAGE> 22
SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST GRAPHIC]
Annex A of this proxy describes Mr. Cook's employment contract. The major
components of his contract were:
- - An initial base salary of $700,000;
- - A target bonus at 70% of base salary (prorated for the portion of the year
that he served as co-CEO);
- - As a replacement for pre-existing obligations and to assist in the
transition, a grant of 93,818 restricted shares on October 15, 1998,
vesting in three equal installments in June 1999, February 2000 and
October 2000;
- - A grant of 500,000 performance options on October 15, 1998, with a
commitment to receive future performance options of 250,000 on September
30, 1999, and 250,000 on June 30, 2000. (Since Mr. Cook left Hercules, the
1999 and 2000 performance options will not be issued.) These performance
options have a normal vesting period of 9-1/2 years which can be
accelerated at any time after October 15, 2001, if the Company's average
stock price (measured over 60 trading days) exceeds a 12% annual
compounded growth rate to that point.
- - A supplemental pension benefit.
STOCK OWNERSHIP GUIDELINES
As mentioned in previous years, stock ownership guidelines have been established
for our executives. These guidelines reinforce our compensation approach of
linking management's interests with those of our shareholders. The guidelines
specify stock ownership as a multiple of base salary plus target bonus for the
following levels:
<TABLE>
- ----------------------------------------------------------
<S> <C>
Chairman and Chief 5 times salary plus
Executive Officer: target bonus
- ----------------------------------------------------------
President and Chief 4 times salary plus
Operating Officer: target bonus
- ----------------------------------------------------------
Hercules Management 3 times salary plus
Committee: target bonus
- ----------------------------------------------------------
Senior Management: 2 times salary plus
target bonus
- ----------------------------------------------------------
</TABLE>
STOCK OWNERSHIP PROGRAM
Dr. Corbo made an irrevocable election this year to purchase an additional 7,195
restricted stock units and received a matching grant of 10,792 shares of
restricted stock.
RESPONSE TO IRS LIMITS ON DEDUCTIBILITY OF COMPENSATION
Under Section 162(m) of the Internal Revenue Code, Hercules may not deduct
certain forms of compensation in excess of $1,000,000 paid to a highly
compensated executive.
The Compensation Committee tries to structure executive compensation to minimize
the amount of compensation that is not tax deductible. Based upon a review of
our current compensation plans and practices, the Committee concluded that no
action would be taken at this time and that further review would be made during
1999.
COMPENSATION PHILOSOPHY EXTENDED TO EMPLOYEES
As mentioned in last year's proxy statement, essentially all Hercules employees
worldwide received non-qualified stock options in 1997. The grants ranged in
size from 100 to 300 options, with a staggered three-year vesting schedule of
40%, 40%, and 20%. This grant provided an additional tool to focus our employees
on how their individual and combined contributions can affect overall corporate
performance.
In 1998, we expanded our worldwide emphasis on pay-for-performance with broader
incentive opportunities for employees. Our objective is to motivate all
employees to achieve certain corporate, business unit and department, team and
plant results. Eligible employees were given the opportunity to earn additional
income if corporate performance exceeded earnings expectations.
In most areas of the world, our employees are encouraged to build ownership in
Hercules stock by participating in our Employee Stock Purchase Plan. Employees
can purchase stock quarterly at a 15% discount through payroll deduction.
Further, U.S. employees who participate in the 401(k) Savings and Investment
Plan receive their company match in the form of Hercules stock. This
contribution must remain in stock until the account is paid out or until the
employee reaches retirement age. These programs encourage our employees to think
and act like shareholders.
Our accountability system provides a link between compensation and Hercules'
overall performance. This goal-setting and measurement system provides direction
and guidance in efforts that will best support the business and corporate
objectives. Outstanding performance against accountabilities is recognized in
the form of cash and stock option awards.
Compensation Committee
R. L. MacDonald, Jr., Chair
G. N. Kelley
H. E. McBrayer
21
<PAGE> 23
[HERCULES LOGO]
Stock Ownership of Directors and Officers
Compliance With Section 16(a) Reporting: The rules of the Securities and
Exchange Commission require that Hercules disclose late filings of reports of
stock ownership (and changes in stock ownership) by its directors and executive
officers. To the best of Hercules' knowledge, there were three late Form 3
filings (Thomas W. Fredericks, J. Frank Raboud, and David A. Simpson) and one
late transaction reported on a Form 4 filing (Monika Riese-Martin) during 1998.
These late filings did not involve any of the directors or highly compensated
officers.
BENEFICIAL OWNERSHIP CHART AS OF MARCH 1, 1999
<TABLE>
<CAPTION>
SHARES OPTIONS
BENEFICIALLY EXERCISABLE RESTRICTED PERCENT OF
NAME OWNED(1) WITHIN 60 DAYS STOCK UNITS SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R. K. Elliott, Director and Officer 227,664 313,000 40,000 *
V. J. Corbo, Director and Officer 71,599 75,200 94,330 *
D. W. DiDonna, Officer 6,064 41,400 -- *
J. G. Drosdick, Director 4,419 -- 1,100 *
R. M. Fairbanks, III, Director 9,088 15,000 1,253 *
A. R. Hirsig, Director 1,419 -- 1,100 *
E. E. Holiday, Director 3,344 12,000 1,376 *
R. G. Jahn, Director 11,088 21,000 -- *
G. N. Kelley, Director 8,025 21,000 2,185 *
R. L. MacDonald, Jr., Director 21,864 21,000 1,928 *
G. MacKenzie, Officer 60,944 62,820 10,321 *
H. E. McBrayer, Director 74,307 18,000 1,527 *
P. McCausland, Director 5,030 3,000 1,100 *
J. A. H. Shober, Director 3,000 -- 1,100 *
P. A. Sneed, Director 8,777 12,000 1,253 *
H. J. Tucci, Officer 62,145 119,100 -- *
W. R. Cook(2) 123,289 0 0 *
Directors and Officers as a Group(35) 899,373 1,034,560 158,573 2.0%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than 1% of Hercules' outstanding shares of common stock.
(1) Includes shares, as of March 1, 1999, in the Savings and Investment Plan
as follows: R. K. Elliott, 1,163; V. J. Corbo, 2,718; D. W. DiDonna, 703;
G. MacKenzie, 2,750; and H. J. Tucci, 4,779; and all directors and
officers as a group, 20,756.
Includes shares with restrictions and forfeiture risks as specified under
the Long-Term Incentive Compensation Plan: R. K. Elliott, 148,087; V. J.
Corbo, 50,221; D. W. DiDonna, 1,747; G. MacKenzie, 20,420; and H. J.
Tucci, 21,973; and all directors and officers as a group, 451,915. Owners
have the same voting and dividend rights as do other shareholders of
Hercules, except for the right to sell or transfer.
Included in the non-employee directors' totals is the one-time equity
award described on page 15.
Mr. Kelley's total includes 1,537 shares that he holds jointly with his
spouse.
(2) Effective January 4, 1999, Mr. Cook resigned as co-chief executive officer
and vice chairman.
22
<PAGE> 24
SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST GRAPHIC]
Summary Compensation Table for 1998
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
- --------------------------------------------------------------------- -------------------------------------------------------------
NAME AND POSITION YEAR SALARY BONUS OTHER RESTRICTED OPTIONS INCENTIVE ALL OTHER
($) ($) ($) STOCK(1) ($) (SHARES) PAYOUTS($) COMPENSATION(2)
- --------------------------------------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. K. Elliott 1998 750,000 530,880 89,049 -- 300,000 -- 80,170
Chairman and Chief 1997 750,000 910,000 70,106 3,770,000 -- 2,433,671 34,300
Executive Officer 1996 600,004 232,800 38,556 106,747 1,191,300 -- 46,787
W. R. Cook(3,4)
Former co-Chief Executive 1998 145,833 -- -- 2,966,994 500,000 -- --
Officer and Vice Chairman
V. J. Corbo 1998 494,273 320,000 90,493 2,367,602 -- -- 93,048
President and Chief 1997 433,334 550,000 43,064 1,306,153 150,000 -- 66,061
Operating Officer 1996 298,751 145,000 42,357 27,351 356,000 -- 63,000
G. MacKenzie 1998 271,670 200,000 19,514 -- 160,000 -- 37,581
Sr. Vice President and 1997 260,004 468,000 4,043 607,960 -- 608,393 23,591
Chief Financial Officer 1996 242,501 72,000 7,101 14,111 245,000 -- 21,634
D. W. DiDonna 1998 260,402 120,000 11,260 -- 181,375 -- 7,855
Sr. Vice President and 1997 226,984 190,000 2,421 -- 48,125 -- 7,366
General Manager, 1996 185,430 67,475 -- 11,568 39,000 -- 7,450
Pulp and Paper Division
H. J. Tucci 1998 245,850 185,000 18,707 50,083 175,000 -- 27,369
Sr. Vice President 1997 235,020 142,515 26,418 17,050 50,000 -- 18,601
Corporate Development 1996 220,450 95,000 -- 95,252 37,500 -- 19,459
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These values are determined by multiplying the number of shares of
restricted stock awarded by the closing market price of Hercules' common
stock on the date of grant and subtracting the consideration, if any, paid
by the executive officer. Dividends may be paid on a current basis or
accrued. This column also includes the matching grant against the
irrevocable purchase election for Dr. Corbo.
The number and value (determined by taking the number of shares of
restricted stock multiplied by the year-end closing market price, $27.25,
net of any consideration paid) of aggregate restricted stock holdings is
shown below. Included in the chart are restricted shares that each
executive officer purchased under the terms of the Hercules Long-Term
Incentive Compensation Plan. The aggregate amount paid for restricted
shares by executive officers was $8,353,101.
<TABLE>
<CAPTION>
(2) MAJOR COMPONENTS OF ALL OTHER COMPENSATION INCLUDE:
DIVIDEND &
AGGREGATE RESTRICTED COMPANY MATCH INTEREST CREDITS PREMIUM PAID
SHARES NET VALUE (DEFINED CONTRIBUTION PLANS) ON STOCK OPTIONS (LIFE INSURANCE)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
R. K. Elliott 193,258 $2,319,242 $60,225 -- $19,945
W. R. Cook 93,818 2,556,540 -- -- --
V. J. Corbo 147,757 2,849,233 27,461 $49,686 15,901
G. MacKenzie 32,395 351,552 19,679 13,147 4,755
D. W. DiDonna 3,103 0 4,800 -- 3,055
H. J. Tucci 24,260 44,962 12,951 5,679 8,739
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(3) Effective January 4, 1999, Mr. Cook resigned as co-chief executive officer
and vice chairman. Salary reflects period from October 15, 1998 to
year-end.
(4) The grant price of Mr. Cook's restricted shares is the average of the fair
market value of Hercules common stock during the five trading days
immediately prior to October 15, 1998.
23
<PAGE> 25
[HERCULES LOGO]
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
NO. OF SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR BASE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED TO EMPLOYEES PRICE ($/SH) DATE VALUE(1)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
R. K. Elliott 300,000(3) 7.9% $25.56250 9/1/2008 $1,954,020
W. R. Cook 500,000(5) 13.1% 32.4375 1/5/2004 3,429,300
V. J. Corbo -- -- -- -- --
G. MacKenzie 160,000(3,4) 4.2% 25.56250 9/1/2008 1,042,144
D. W. DiDonna 26,000(2) 47.81250 5/5/2008 334,812
29,375(5) 4.7% 47.81250 5/5/2008 325,595
126,000(3,4) 25.56250 9/1/2008 820,688
H. J. Tucci 24,000(2) 47.81250 5/5/2008 309,058
27,000(5) 4.6% 47.81250 5/5/2008 299,271
124,000(3,4) 25.56250 9/1/2008 807,662
</TABLE>
(1) The Black-Scholes option-pricing model was used to determine the fair
value of employee stock options as of the date of grant. No adjustments
for risk of forfeiture have been made. Significant assumptions are as
follows:
<TABLE>
<CAPTION>
Regular Performance
Options(3) Options(4)
---------- ----------
<S> <C> <C>
Dividend yield 3.0% 3.0%
Risk-free interest rate 5.2% 4.6%
Expected life 8 yrs. 5 yrs.
Expected volatility 23.4% 24.6%
</TABLE>
(2) Vesting schedule is as follows: 40% on May 5, 1999; 40% on May 5, 2000;
and 20% on May 7, 2001.
(3) Vesting schedule is as follows: 40% on August 31, 1999; 40% on August 31,
2000; and 20% on August 31, 2001. (This vesting schedule applies to 60,000
options for Mr. MacKenzie; 26,000 options for Mr. DiDonna, and 24,000
options for Mr. Tucci.)
(4) Vesting schedule is as follows: 20% on August 31, 1999; 30% on August 31,
2000; and 50% on August 31, 2001. (This vesting schedule applies to
100,000 options for Messrs. MacKenzie, DiDonna, and Tucci.)
(5) Performance accelerated stock options (target and outstanding) become
exercisable upon the achievement of predetermined performance goals. If
goals are not achieved, the options become exercisable at 9-1/2 years.
(Mr. Cook's performance options can be accelerated at any time after
October 15, 2001 if Hercules' average stock price, measured over 60
trading dates, exceeds a 12% annual compounded growth rate.)
24
<PAGE> 26
SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST GRAPHIC]
Options Exercises and Value Table
This table shows the number and value of stock options (exercised and
unexercised) for the executive officers during 1998. Value is calculated using
the difference between the option exercise price and $27.25 (year-end stock
price) multiplied by the number of shares underlying the option.
<TABLE>
<CAPTION>
NO. OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NO. OF SHARES OPTIONS AT YEAR-END AT YEAR-END
ACQUIRED VALUE ----------------------------------------------------------------------------
NAME ON EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE ($) UNEXERCISABLE ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R. K. Elliott -- -- 299,000 1,575,800 $1,030,498 $506,250
W. R. Cook -- -- 0 500,000 0 0
V. J. Corbo -- -- 70,000 512,200 327,510 0
G. MacKenzie -- -- 58,620 415,700 46,570 270,000
D. W. DiDonna -- -- 37,800 266,100 0 212,625
H. J. Tucci 2,700 88,708 115,800 261,900 585,000 209,250
</TABLE>
Pension Plan Table
This table shows the estimated annual pension benefits payable to a covered
participant at normal retirement age under Hercules' qualified Pension Plan, as
well as non-qualified supplemental benefits, based on the stated renumeration
and years of service with Hercules and its subsidiaries.
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------------------------------------------
RENUMERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 250,000 $ 57,948 $ 77,264 $ 96,580 $115,896 $ 135,212
300,000 69,948 93,264 116,580 139,896 163,212
400,000 93,948 125,264 156,580 187,896 219,212
450,000 105,948 141,264 176,580 211,896 247,212
500,000 117,948 157,264 196,580 235,896 275,212
600,000 141,948 189,264 236,580 283,896 331,212
700,000 165,948 221,264 276,580 331,896 387,212
800,000 189,948 253,264 316,580 379,896 443,212
1,000,000 237,948 317,264 396,580 475,896 555,212
1,500,000 357,948 477,264 596,580 715,896 835,212
2,000,000 477,948 637,264 796,580 955,896 1,115,212
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Annual contributions by Hercules to the Pension Plan, if required, are
determined by an independent actuary, and no amount is attributed to an
individual employee. Due to the funded status of the Pension Plan, there were no
Hercules contributions in 1998.
Except in special cases, the aggregate retirement benefit, under both the
qualified and nonqualified plans, is a monthly amount determined by taking the
sum of 1) 1.2% of the employee's average monthly earnings (based on the highest
five consecutive calendar years during the last ten calendar years of
employment) up to one-half the Social Security Tax Base ($68,400 in 1998) and 2)
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 management incentive or bonus
compensation.
For Messrs. Elliott, Corbo, MacKenzie, DiDonna, and Tucci, compensation used for
calculating retirement income benefits consists of the highest five consecutive
years of average monthly earnings. These amounts for 1998 are shown under the
"Salary" and "Bonus" columns of the Summary Compensation Table. The estimated
credited years of service for Messrs. Elliott, Corbo, MacKenzie, DiDonna and
Tucci are 17, 29, 19, 18, and 17, respectively.
The amounts reflected in this chart may be reduced due to voluntary elections
made under the Long-Term Incentive Compensation Plan to exchange nonqualified
pension rights for discounted restricted stock.
25
<PAGE> 27
[HERCULES LOGO]
ANNEX A
Employment Contracts And Termination Of
Employment and Change-In-Control Arrangements
WILLIAM R. COOK
Following the acquisition of BetzDearborn, Mr. Cook was appointed vice chairman
of the Board and co-chief executive officer of Hercules, effective October 15,
1998 (the "Effective Date"). His initial base salary was $700,000. The agreement
also provided for subsequent increases in base salary and for bonus targets,
which will not apply due to Mr. Cook's resignation from Hercules.
As described in the Compensation Committee Report, Mr. Cook received a grant of
93,818 restricted shares of Hercules common stock, vesting in three equal
installments at the end of the 8th, 16th and 24th month following the Effective
Date. Accelerated vesting occurs as follows:
- - Mr. Cook's employment is terminated by Hercules without cause;
- - He resigns for good reason;
- - Upon his death or disability;
In the event that the stock price declines in value upon vesting, additional
shares of common stock will be granted.
Pursuant to his employment agreement, Mr. Cook purchased 59,458 shares of
Hercules common stock to comply with his stock ownership guidelines. Mr. Cook
also received (in lieu of all options that would otherwise be granted to him
under Hercules' plans for the three years after the Effective Date) a grant of
500,000 performance accelerated stock options on the Effective Date; (The
250,000 options that Mr. Cook was scheduled to receive on September 30, 1999,
and on June 30, 2000 were forfeited due to his resignation from Hercules).
Mr. Cook will receive pension benefits unreduced due to age or service under
BetzDearborn's qualified and nonqualified pension plans, and fringe benefits
comparable to those provided to Mr. Elliott. Mr. Cook's annual pension is
$525,571.
Pursuant to Mr. Cook's employment agreement, he is receiving severance pay equal
to three times his salary and target bonus.
VINCENT J. CORBO
In anticipation of the acquisition of BetzDearborn, Dr. Corbo was confirmed as
president and chief operating officer. The terms and conditions of his
employment include cash compensation consisting of:
- - A base salary of $550,000 or no less than 75% of the highest annualized
rate in effect for the chief executive officer;
- - A bonus target of 75% of base salary in 1998, and 85% of base salary in
1999 and future years; and
- - A cash award of $1,000,000 if still employed on January 1, 2001.
Additionally, Dr. Corbo received a grant of restricted stock units (60,606),
valued at $2,000,000, which he will receive if still employed on January 1,
2001.
If still employed on January 1, 2001, Dr. Corbo will earn the right to an
enhancement of pension benefit when he retires. This enhancement includes three
additional years of service and as many additional years of age as necessary to
attain age 60 for purposes of calculating pension benefits. Finally, performance
options granted under the Long-Term Incentive Compensation Plan in 1996 and 1997
will deem to be vested if he is still employed on January 1, 2001.
CHANGE IN CONTROL AGREEMENTS
Since 1986, Hercules has entered into Change in Control Agreements with senior
executives, which provide for the continuation of salary and certain benefits
for a maximum period of three years after a change in control. The provisions of
these amendments have been reviewed and amended by Hercules' Compensation
Committee to reflect contemporary practices and to maintain the competitiveness
of the benefit.
As of January 1, 1999, Hercules entered into agreements with Messrs. Elliott,
Corbo, MacKenzie, DiDonna, and Tucci that become operative only upon a change in
control or other specified event. For purposes of these agreements, a change in
control occurs if:
- - Any person, entity, or group (with certain exceptions) becomes the
beneficial owner of 20% or more of the outstanding shares of Hercules
common stock; or
- - There is a change in a majority of the Board during any two-year period,
other than by election or nomination by a vote of two-thirds of the Board
members as of the beginning of the period; or
- - Hercules' shareholders approve a merger, consolidation, or share exchange
resulting in our shareholders owning less than 40% of the combined voting
power of the surviving corporation following the transaction.
26
<PAGE> 28
SMALL WONDERS, INFINITE POSSIBILITIES [STARBURST LOGO]
Following a change in control, Hercules will continue to employ the executive
for a maximum period of three years (or earlier if the executive reaches age 65
prior to the end of the three-year period) in substantially the same position,
substantially the same compensation and benefits. If the executive's employment
is terminated by Hercules (other than for cause or due to death or disability),
or the executive terminates with good reason (as defined in the agreement), he
or she receives an amount (payable in monthly installments) equal to current
salary and bonus, multiplied by the number of years (including partial years)
remaining in the executive's term of employment (but in no event less than one
year). In addition, the executive receives compensation for the loss of benefits
during the period.
Further, the executive:
- - Continues to participate in employee benefit plans;
- - Becomes fully vested in all outstanding stock options and restricted stock
- - Receives credit for three additional years of service for purposes of
calculating pension benefits; and,
- - To the extent needed for taking an unreduced early retirement, has up to
five years added to his or her actual age (up to age 65).
If the benefits and amount payable to the executives are subject to the excise
tax imposed by the Internal Revenue Code on excess parachute payments, the
executive officers will also be entitled to receive an additional payment so
that they will receive (on a net basis) the same amount that they would have
received absent the applicability of the excise tax.
27
<PAGE> 29
[HERCULES LOGO]
Hercules Incorporated, established in 1912, is a global manufacturer of chemical
specialties used in a variety of home, office, and industrial products.
Hercules' focus is on sustainable, long-term growth in shareholder value, driven
by new products and continuous improvement in manufacturing costs.
Our business segments and key products are:
- - Functional Products
- Aqualon, for thickeners used in water-based products such as latex
paint;
- Food Gums, for natural gum ingredients in food and beverages;
- - Process Chemicals and Services
- Pulp and Paper, for functional and processing aids used in
manufacturing paper;
- BetzDearborn, for water and industrial process treatment;
- - Chemical Specialities
- Fibervisions, for fine-denier staple fibers used in disposable
hygiene products;
- Resins, for hydrocarbon and rosin resins used in adhesives.
For more information about Hercules, please visit our web site at www.herc.com
- --------------------------------------------------------------------------------
Special thanks to Israel J. Floyd, Carol M. Kelleher, Amy Cohen, Anabel Pichler,
and Kevin Murphy at Hercules and Jean Gardner at Bowne of Philadelphia for their
contributions to this 1999 Proxy Statement.
- --------------------------------------------------------------------------------
<PAGE> 30
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Please mark
your votes as [X]
indicated in
this example.
The Board recommends a vote FOR Items 1, 2, and 3
FOR WITHHOLD
1. Election of Directors for a three-year term [ ] [ ]
NOMINEES ARE: 01. Vincent J. Corbo,
02. John G. Drosdick,
03. R. Keith Elliott,
04. Gaynor N. Kelley, and
05. Peter McCausland
Withhold vote only from
- ----------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of PricewaterhouseCoopers LLP as [ ] [ ] [ ]
independent accountants
FOR AGAINST ABSTAIN
3. Approval of amendments to the Long-Term [ ] [ ] [ ]
Incentive Compensation Plan
I plan to attend the Annual Meeting. [ ]
Signature(s) Date
------------------------------------------- -------------------
Note: Please sign as name appears above. When signing as attorney, executor,
administrator, trustee, guardian or officer of a corporation, please give full
title.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
VOTE BY INTERNET
1. Read the accompanying Proxy Statement and proxy card.
2. Go to website www.http://www.eproxy.com/hpc/
3. Enter your Control Number located on your proxy card.
4. Follow the online instructions.
VOTE BY TELEPHONE
1. Read the accompanying Proxy Statement and proxy card.
2. Call the toll-free number 1-800-840-1208
3. Enter your Control Number located on your proxy card.
4. Follow the voice prompt instructions.
YOUR VOTE IS IMPORTANT!
DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING BY INTERNET OR TELEPHONE.
- --------------------------------------------------------------------------------
ADMISSION TICKET
Hercules Incorporated
Annual Meeting of Shareholders
Thursday, April 29, 1999
11:00 a.m.
The Winterthur Museum, Garden & Library
Winterthur, Delaware
<PAGE> 31
PROXY
PROXY/VOTING INSTRUCTION CARD
HERCULES INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R. Keith Elliott and Richard G. Dahlen, and each
of them, acting jointly or severally and with full power of substitution, for
and in the name of the undersigned to vote all shares of common stock of
Hercules Incorporated that the undersigned is entitled to vote at the Annual
Meeting of Shareholders to be held on Thursday, April 29, 1999, at 11:00 A.M. at
Wintherthur Museum, Garden & Library, Winterthur, 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.
Unless otherwise specified, this proxy will be voted FOR items 1, 2, and 3, 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.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
DIRECTIONS TO WINTERTHUR
MUSEUM, GARDEN & LIBRARY
[MAP GRAPHIC]
<PAGE> 32
VoteDirect Page 1 of 2
HERCULES
[CHASEMELLON SHAREHOLDER SERVICES LOGO]
[VOTEDIRECT LOGO]
GLOSSARY OF PROXY TERMS
- -----------------------
ANNUAL REPORT
- -------------
PROXY STATEMENT
- ---------------
PROXY/VOTING INSTRUCTION CARD
HERCULES INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby appoints R. Keith Elliott and Richard G. Dahlen, and each
of them, acting jointly or severally and with full power of substitution, for
and in the name of the undersigned to vote all shares of common stock of
Hercules Incorporated that the undersigned is entitled to vote at the Annual
Meeting of Shareholders to be held on Thursday, April 29, 1999, at 11:00 A.M.
at Wintherthur Museum, Garden & Library, Winterthur, DE, or at any adjournments
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.
Unless otherwise specified, this proxy will be voted FOR Items 1, 2, and 3 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.
- --------------------------------------------------------------------------------
The Board recommends a vote FOR Items 1, 2, and 3.
- --------------------------------------------------------------------------------
To vote in accordance with the Board of Directors' recommendations, just submit
this blank form; no boxes need to be checked.
- --------------------------------------------------------------------------------
1. Election of Directors for a three-year term:
( )FOR all nominees (except those marked below).
( )WITHHOLD to vote for all nominees.
[ ]Vincent J. Corbo
[ ]John G. Drosdick
[ ]R. Keith Elliott
[ ]Gaynor N. Kelley
[ ]Peter McCausland
- --------------------------------------------------------------------------------
2. Ratification of PricewaterhouseCoopers LLP as independent accountants.
Friday, March 05, 1999 9:05 AM
<PAGE> 33
VoteDirect Page 2 of 2
( )FOR
( )AGAINST
( )ABSTAIN
- --------------------------------------------------------------------------------
3. Approval of Amendments to Long-Term Incentive Compensation Plan
( )FOR
( )AGAINST
( )ABSTAIN
- --------------------------------------------------------------------------------
IN THEIR DISCRETION, the proxy holders are authorized to vote upon such other
business as may properly come before the meeting or any adjournments thereof.
- --------------------------------------------------------------------------------
[ ]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.
- --------------------------------------------------------------------------------
Comments:
- ----------------------------------------
|
|
|
|
|
- ----------------------------------------
- --------------------------------------------------------------------------------
To consent to receive the HERCULES INCORPORATED proxy material electronically in
the future, provide your e-mail address below:
- ---------------------------------
|
- ---------------------------------
- --------------------------------------------------------------------------------
To authorize your vote, click the "Submit Proxy" button.
- ------------
Submit Proxy|
- ------------
- --------------------------------------------------------------------------------
To change the address of record for your registered shares, please use
ChaseMellon Shareholder Services' CHANGE OF ADDRESS FORM.
[VOTEDIRECT LOGO]
[CHASEMELLON SHAREHOLDER SERVICES LOGO]
Copyright 1999 ChaseMellon Shareholder Services, L.L.C. All rights reserved.
This site is operated by ChaseMellon Shareholder Services.
Friday, March 05, 1999 9:05 AM
<PAGE> 34
VoteDirect Page 1 of 2
[HERCULES LOGO]
[CHASEMELLON SHAREHOLDER SERVICES LOGO]
[VOTEDIRECT LOGO]
GLOSSARY OF PROXY TERMS
- -----------------------
ANNUAL REPORT
- -------------
PROXY STATEMENT
- ---------------
YOU HAVE VOTED YOUR PROXY IN THE FOLLOWING MANNER:
- --------------------------------------------------------------------------------
ON ITEM 1 "ELECTION OF DIRECTORS" YOUR VOTE WAS:
FOR ALL NOMINEES.
- --------------------------------------------------------------------------------
ON ITEM 2 "RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS" YOUR VOTE WAS:
FOR.
- --------------------------------------------------------------------------------
ON ITEM 3 "APPROVAL OF AMENDMENTS TO LONG-TERM INCENTIVE COMPENSATION PLAN"
YOUR VOTE WAS:
FOR.
- --------------------------------------------------------------------------------
If this is NOT how you intended to vote, please use the back function of your
browser to return to the card and correct your vote.
If this IS how you intended to vote, your vote has been recorded and there is no
need to return your paper proxy card.
Thank you for your attention,
Sincerely,
HERCULES INCORPORATED
[VOTEDIRECT LOGO]
[CHASEMELLON SHAREHOLDER SERVICES LOGO]
Copyright 1999 ChaseMellon Shareholder Services, L.L.C. All rights reserved.
This site is operated by ChaseMellon Shareholder Services.
Friday, March 05, 1999 9:08 AM
<PAGE> 35
PROXY SERVICES CORPORATION / AUTOMATED VOICE LINK INC.
UNIVERSAL SCRIPT FOR REGISTERED SHAREOWNER TELEPHONE
VOTING
- --------------------------------------------------------------------------------
SHAREOWNER HEARS THIS SCRIPT
- --------------------------------------------------------------------------------
Speech 1* Welcome. Please enter the control number located in the lower
right hand corner of the form.
- --------------------------------------------------------------------------------
Speech 2 To vote as the name of the company Board recommends Press 1 now
- --------------------------------------------------------------------------------
Speech 2A You voted as the Board recommended. If correct, press 1. If
incorrect, Press 0.
- --------------------------------------------------------------------------------
Speech 3 To vote on each proposal separately, press 0 now.
- --------------------------------------------------------------------------------
Speech 4 Proposal 1:
To vote FOR all nominees, Press 1
To WITHHOLD for all nominees, Press 9
To WITHHOLD for an individual nominee, press 0
- --------------------------------------------------------------------------------
Speech 5 Enter the two digit number that appears next to the nominee you
DO NOT wish to vote for.
- --------------------------------------------------------------------------------
Speech 5A Press 1 to withhold for another nominee or Press 0 if you have
completed voting for Directors.
- --------------------------------------------------------------------------------
Speech 6 Proposal 2:
To vote FOR, Press 1; AGAINST, Press 9, ABSTAIN, Press 0
- --------------------------------------------------------------------------------
Speech 7 Proposal 3:
To vote FOR, Press 1; AGAINST, Press 9, ABSTAIN, Press 0
- --------------------------------------------------------------------------------
Speech 7A You voted as follows:
Proposal 1: For ALL or Withhold All OR for ALL Except...
Proposal 2: For, Against, Abstain
and so on. If this is correct, Press 1 now; if incorrect,
press 0
- --------------------------------------------------------------------------------
Closing A Thank you for voting
- --------------------------------------------------------------------------------
Closing B** Your vote has been canceled. Please try again, or mark, sign
and return your proxy.
- --------------------------------------------------------------------------------
Speech 8*** If you do NOT wish to receive an Annual Report for this
current account, Press 1 now.
- --------------------------------------------------------------------------------
Speech 9*** If you plan to attend the Annual Meeting, Press 1 - if not
Press 0
- --------------------------------------------------------------------------------
*Note: Speech 1 wording for location of control number can be changed. **Closing
B - If shareholder indicates their vote was incorrect. ***Optional to save
future production and postage costs; or to obtain attendance information.
TTTV universal script 9-16-98
