AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 2, 2003
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
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-12
HERCULES INCORPORATED
(Name of Registrant as Specified in Its Charter)
HERCULES SHAREHOLDERS' COMMITTEE FOR NEW MANAGEMENT
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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PROXY STATEMENT OF
THE HERCULES SHAREHOLDERS'
COMMITTEE FOR NEW MANAGEMENT
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2003 ANNUAL MEETING OF SHAREHOLDERS
OF
HERCULES INCORPORATED
We are the Hercules Shareholders' Committee for NEW Management (the
"Committee"). The Committee consists of (i) International Specialty Products
Inc., a Delaware corporation ("ISP") and the second largest shareholder of
Hercules Incorporated, a Delaware corporation ("Hercules" or the "Company"),
(ii) Samuel J. Heyman, Sunil Kumar, Gloria Schaffer and Raymond S. Troubh, four
members of the Company's Board of Directors who were elected at the Hercules'
2001 Annual Meeting of Shareholders (collectively, the "minority directors") and
(iii) Harry Fields, Anthony Kronman, Vincent Tese and Gerald Tsai, Jr., the
Committee's nominees to the Board of Directors.
This solicitation is being conducted by the Committee and is being funded
by ISP. This proxy statement and the enclosed WHITE proxy card are being
furnished by the Committee to holders of shares of common stock of Hercules,
$25/48 stated value per share (the "Shares" or the "Common Stock"), in
connection with the solicitation of proxies to elect four nominees to the Board
of Directors of Hercules (the "Board of Directors") at Hercules' 2003 Annual
Meeting of Shareholders, and at any and all adjournments, postponements,
continuations or reschedulings thereof (the "2003 Annual Meeting").
Hercules has not yet announced the date of the 2003 Annual Meeting but has
set a record date of June 6, 2003 for determining those shareholders of the
Company entitled to vote at the 2003 Annual Meeting (the "Record Date"). The
definitive proxy statement to be filed by Hercules (the "Management Proxy
Statement") with the Securities and Exchange Commission will include the time,
date and place of the 2003 Annual Meeting and such information will also be
provided supplementally to Hercules' shareholders by the Committee.
According to the Company's 2002 Definitive Proxy Statement, there are four
members of the Board of Directors in the class of directors whose term expires
at the 2003 Annual Meeting and who therefore will be standing for election for
three-year terms expiring at the 2006 Annual Meeting of Shareholders (the "2006
Annual Meeting"). In opposition to the solicitation of proxies by the Board of
Directors, the Committee is proposing and soliciting proxies in support of a
slate of four nominees for the Board of Directors to stand for election to the
Board of Directors. We are soliciting your proxy to vote at the 2003 Annual
Meeting for the election of our nominees, Harry Fields, Anthony Kronman, Vincent
Tese and Gerald Tsai, Jr. (collectively, the "Nominees") as directors of
Hercules in the class with a three-year term continuing until the 2006 Annual
Meeting and until their successors are duly elected and qualified.
THIS SOLICITATION IS BEING MADE BY THE HERCULES SHAREHOLDERS' COMMITTEE
FOR NEW MANAGEMENT AND NOT BY OR ON BEHALF OF THE BOARD OF DIRECTORS OF
HERCULES.
As discussed in more detail under the heading "QUORUM AND VOTING" in this
proxy statement, shareholders who vote on the WHITE proxy card furnished by the
Committee will be able to vote for the election of the four Nominees. The
Nominees, if elected, together with the minority directors who were nominated by
ISP in 2001 and became directors of the Company following the 2001 Annual
Meeting of Shareholders (the "2001 Annual Meeting"), will constitute a majority
of the members of the Board of Directors and, since the Company's by-laws
provide that action by the Board of Directors requires a majority vote of the
directors present at a meeting at which a quorum is present, the four Nominees,
together with the minority directors, would be able to cause any action to be
taken or not taken by the Board of Directors.
ISP may be deemed (solely for purposes of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) to beneficially own (as
defined in Rule 13d-3 of the Exchange Act) 9,893,700 Shares of Common Stock,
representing approximately 9.1% of the outstanding Shares. Samuel J. Heyman, the
Chairman of the Board of ISP and a director of the Company, may be deemed
(solely for purposes of Rule 13d-3 of the Exchange Act) to beneficially own (as
defined in Rule 13d-3 of the Exchange Act) 100% of the outstanding shares of
common stock of ISP.
This proxy statement and the enclosed WHITE proxy card are first being
furnished to shareholders on or about June 2, 2003.
WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED WHITE PROXY CARD IN
FAVOR OF THE ELECTION OF OUR NOMINEES DESCRIBED IN THIS PROXY STATEMENT.
YOUR VOTE AT THIS YEAR'S ANNUAL MEETING IS VERY IMPORTANT, NO MATTER HOW
MANY OR HOW FEW SHARES YOU OWN. PLEASE SIGN AND DATE THE ENCLOSED WHITE PROXY
CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY. PROPERLY
VOTING THE ENCLOSED WHITE PROXY CARD WILL REVOKE ANY PROXY PREVIOUSLY SIGNED BY
YOU.
PLEASE DO NOT RETURN ANY PROXY CARD SENT TO YOU BY HERCULES. Even if you
may have voted on any Hercules' proxy card, you can easily change your vote and
revoke that proxy by signing, dating and returning the enclosed WHITE proxy
card. ONLY YOUR LATEST DATED PROXY WILL COUNT AT THE 2003 ANNUAL MEETING.
2
If you have any questions or need any assistance in voting your Shares,
please call the firm assisting us in the solicitation of proxies:
GEORGESON SHAREHOLDER COMMUNICATIONS, INC.
17 State Street
New York, New York 10004
Call Toll-Free: (866) 288-2190
3
BACKGROUND
By way of background, we have been major Hercules shareholders for almost
three years. As a result of our dissatisfaction with the Hercules Board and
management, ISP, an international specialty chemicals company, waged a proxy
contest at the Company's 2001 Annual Meeting, at which Hercules shareholders
elected ISP's four nominees to seats on the Hercules Board. The minority
directors have endeavored to work with Hercules management and the remaining
incumbent directors. Our efforts, however, have been frustrated by management
and the Board's majority directors, who, voting in lockstep, have rebuffed our
almost every initiative.(1)
Although we continued to be sharply critical of the majority directors and
management for their conduct of the Company's affairs, which in our view has
contributed to the destruction of shareholder values at the Company, primarily
in order to provide the Company with one last opportunity to do the right thing
for shareholders, we decided not to wage a proxy contest for control of the
Board at the 2002 Annual Meeting. At the meeting last June, the minority
directors issued the following statement: "Hercules' majority directors and
management still have the opportunity to right themselves and maximize the
potential of the Company and its operating businesses, but they cannot do so
without promptly and fully addressing the issues [we have] outlined. We urge
them to accept that challenge."
Unfortunately, that challenge continues to go unheeded, and we have
decided to wage a proxy contest this year for the four seats up for election,
because in our view there is no other way in which to help maximize shareholder
values for all Hercules shareholders. The Hercules Shareholders' Committee for
NEW Management includes our four current Hercules directors ("minority
directors") and four additional director nominees for this year's Annual
Meeting. Our directors and nominees represent the interests of all Hercules
shareholders, including those of the Company's second largest shareholder,
International Specialty Products Inc., which owns almost 10 million shares of
Hercules stock and has an investment in Hercules of more than $140 million.(2)
In contrast, the four Hercules incumbent directors running for reelection
this year own in the aggregate only slightly more than 50,000 shares. You should
know that Joyce owns 157,230 shares, 156,330 of which were GIVEN to him in
connection with the Company's bonus program and 900 of which were GIVEN to him
in the form of a matching grant in connection with the Company's 401k program.
To our knowledge, Joyce has not PURCHASED a single share of Hercules stock since
he came to the Company.
As one of Hercules' major shareholders, our interests are clearly aligned
with yours, and we are committed to maximizing value for all Hercules
shareholders as we have invested our own money in Hercules as you have.
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(1) You should know that our experience prompted us prior to the 2002
Annual Meeting to propose - a proposal which was rebuffed - that if
Dr. Joyce, Hercules' Chief Executive, and his majority directors
agreed to elect a new Chairman and CEO, acceptable to both majority
and minority directors, we would abandon consideration of a proxy
contest to acquire control of the Hercules Board at the 2002 Annual
Meeting.
(2) ISP's investment is measured at cost.
4
THE HERCULES SHAREHOLDERS' COMMITTEE FOR NEW MANAGEMENT
THE COMMITTEE'S FOUR CURRENT HERCULES DIRECTORS
The four minority directors who were elected at the 2001 Annual Meeting
are:
SAMUEL J. HEYMAN - Mr. Heyman began his career as a lawyer in the United
States Justice Department under Robert F. Kennedy and later served as Chief
Assistant United States Attorney (New Haven Division, District of Connecticut).
In 1968, Mr. Heyman left Government service to run Heyman Properties, a small
but growing family business, which he expanded into a successful, national real
estate development company.
In 1983, Mr. Heyman and a slate of nominees representing shareholder
interests waged a successful proxy contest for control of GAF, in what BARRON'S
a leading financial publication, characterized as "one of the most striking
achievements in the annals of corporate finance." (Aug. 8, 1983) Mr. Heyman
served as GAF's Chairman and Chief Executive Officer (1983-2000) and is
currently ISP's Chairman and controlling shareholder.
Mr. Heyman has been involved as a shareholder activist or potential
acquirer with respect to five public companies, helping to create more than $7
billion of increased wealth for shareholders of those companies, as illustrated
below:(3)
Realized Value
Time per Share for all
Period Initial Subject Stockholder
(initial purchase - value Cost Company Percentage Value Created
Company realization) Per Share Shareholders(4) Increase (rounded)
----------------------------------------------------------------------------------------------------------------
GAF 1981-1989 $ 6.50 $53.00 715% $1.6 billion
Union Carbide 1984-1985 $43.63 $85.00 95% $2.9 billion
Borg-Warner 1986-1987 $29.15 $48.50 66% $1.7 billion
Dexter 1998-2000 $25.18 $62.50 148% $ .9 billion
Life Technologies 1998-2000 $35.80 $60.00 68% $ .2 billion
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Total Shareholder Value Created: $7.3 billion
============
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(3) There is, of course, no assurance that either the efforts of the
Committee or Mr. Heyman will result in similar benefits for Hercules
shareholders.
(4) GAF was acquired by Mr. Heyman and a management group in 1989 at $53
per share. Union Carbide implemented a recapitalization of its own
in response to GAF's premium bid for the Company that resulted in a
market value immediately thereafter of $85 per share. Borg Warner,
Dexter and Life Technologies were acquired by third parties after
GAF or ISP made premium offers for those companies.
5
SUNIL KUMAR - Mr. Kumar was formerly Executive Vice President of
Bridgestone-Firestone, heading up that company's $3 billion national retail
store operations. Mr. Kumar served for three years as President and Chief
Operating Officer of Building Materials Corporation of America, the nation's
leading manufacturer of residential and commercial roofing. Mr. Kumar has been
Chief Executive of ISP since June 1999.
GLORIA SCHAFFER - Mrs. Schaffer has had a distinguished career in
Government service, having held major positions in Connecticut, including
Secretary of State, Commissioner of the Department of Consumer Protection, and
State Senator for six terms. Mrs. Schaffer was also a Member of the Federal
Civil Aeronautics Board and has served as a Board member of several public and
private companies.
RAYMOND S. TROUBH - Mr. Troubh has had broad financial experience,
including as a General Partner of Lazard Freres & Co. and Governor of the
American Stock Exchange. He is a Board member of a number of public companies
and currently serves as the non-executive Chairman of Enron Corp., having joined
that company's Board in the wake of its financial problems last year.
THE COMMITTEE'S FOUR DIRECTOR-NOMINEES
HARRY FIELDS - Mr. Fields served as an executive for more than forty years
at International Flavors and Fragrances Inc., where he was President of the
International Flavor Division and a member of its Board of Directors. He is
currently President of Fields Associates, Ltd. and has served as a director of
other companies.
ANTHONY T. KRONMAN - Mr. Kronman is currently Dean of Yale Law School. Mr.
Kronman is a director of Adelphia Communications Corporation, having been
elected to the Board after the Company's bankruptcy filing last year.
VINCENT TESE - Mr. Tese has had a distinguished career in Government
service, having held the positions of New York State Superintendent of Banks,
Director of Economic Development for the State of New York, and Chairman and
Chief Executive Officer of the Urban Development Corporation. He is currently
the Chairman of Wireless Cable International Inc. and is a Board member of a
number of public companies.
GERALD TSAI, JR. - Mr. Tsai was Chairman and Chief Executive Officer of
Primerica Corporation, a diversified financial services company, and served as
Chairman of the Board, President and Chief Executive Officer of Delta Life
Corporation, a life insurance and annuity company. Mr. Tsai is currently a Board
member of a number of public companies.
Additional information regarding the nominees is contained in this proxy
statement under the heading "THE NOMINEES."
6
REASONS FOR OUR SOLICITATION
Under Joyce's management, the Company's financial and stock price
performance have in our opinion been disastrous. Moreover, we believe that
Hercules has been a case study in failed corporate governance. In addition,
Joyce and the Hercules Board were responsible for selling the Company's best
business in our opinion at the worst possible time, and management's poor
business judgment was in no small measure responsible for the Company's $570
million pension fiasco.
The Committee's four director-nominees, if elected, will, when combined
with our four minority directors, constitute a majority of the Board and will be
in a position to not only avoid the mistakes of the past but cause the Hercules
Board to take positive actions designed to increase shareholder value, such as:
o Focus on the "hands-on" management of Hercules' businesses and
successful, bottom-line operating and growth strategies, both short
and long term.
o Strengthen the Hercules management team. We intend to elect a new,
highly qualified, full-time, "roll up your sleeves" Chief Executive
committed to the turnaround of the Company's businesses, who will
reside in the Wilmington area and whose compensation will be
designed to closely align his or her interests with those of
Hercules shareholders.
o Devote high-level attention to not only the turnaround of Hercules'
operating businesses but also the management of the Company's
critical, non-operating issues, such as the minimization of its
pension exposure.
o Redeem the Company's poison pill, which prevented Hercules
shareholders, in October 2000, from accepting ISP's $17.50 per share
offer for 25 million shares - thereby costing Hercules shareholders
more than $190 million.(5)
o Recommend that shareholders remove a Hercules election Bylaw, which
the Company claims requires the affirmative vote of the holders of a
majority of ALL OUTSTANDING SHARES for the election of directors.
For a more detailed explanation see the Section below captioned
"JOYCE AND THE HERCULES BOARD REFUSE TO NULLIFY A COMPANY BYLAW THAT
DISENFRANCHISES ITS SHAREHOLDERS".
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(5) Cost to Hercules shareholders calculated on the basis of $17.50 per
share less the Company's stock price of $9.81 per share, as of May
29, 2003.
7
THE COMPANY'S PERFORMANCE IN OUR OPINION
HAS GONE FROM BAD TO WORSE UNDER JOYCE
When measured by virtually any financial yardstick, the Company's record
in recent years under Joyce and his predecessors has in our opinion been
disastrous.
CONSIDER THE FOLLOWING:
o After reaching a high of $66.25 on March 19, 1996, Hercules' stock price
has fallen more than 85%, wiping out more than $6.1 billion in shareholder
value. Between the time Joyce became Chief Executive, on May 8, 2001, and
February 11, 2003, the day prior to ISP's filing of an amendment to its
Form 13D which indicated that it was considering waging a proxy contest
for control of the Hercules Board, the price of Hercules stock (which has
paid no dividends since that time) lost 32% of its value, while the S&P
MidCap Specialty Chemicals Index increased by 3.2% (including dividends)
-- an underperformance of more than 35%.(6)
o Hercules' financial performance has in our opinion gone from bad to worse
under Joyce, prompting a financial columnist (Christopher Byron, February
17, 2003, NEW YORK POST) to characterize Hercules as "spewing red ink in
all directions". Under Joyce, the Company has not been profitable in 6 of
the last 7 reported quarters, registering more than $300 million in
after-tax losses (even excluding an almost $400 million "goodwill" and FAS
143 write-down). For the 7 full reported quarters since Joyce became CEO,
even adjusting for almost $385 million in net, after-tax, "non-recurring"
charges as well as the almost $400 million of additional charge-offs, the
Company has managed to register only $78 million in "pro forma" earnings
-- or little more than an average of $0.41 per share per annum.
o In BUSINESS WEEK'S recent performance ranking of companies in the S&P 500
index (BUSINESS WEEK, Report Card on 500 S&P Companies, Spring Issue,
2003), Hercules' performance was ranked 482 out of 500 - down from 466 in
the previous year. In connection with its ranking, the Company received
the following grades:
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(6) On May 8, 2001, Hercules shares closed on the New York Stock
Exchange at $12 per share, and, on February 11, 2003, Hercules
shares closed at $8.12 per share. It should be noted that Hercules
shares have rallied since ISP's February 11th 13D filing, and the
current price, as of the close on May 29, 2003, was $9.81 per share.
Between May 8, 2001, and May 29, 2003, Hercules stock lost 18% of
its value, while the S&P MidCap Specialty Chemicals Index increased
by 15% (including dividends) -- an underperformance for Hercules of
33%.
We believe that the S&P MidCap Specialty Chemicals Index, which
consists of 8 specialty chemicals companies with a mean market
capitalization of $1.16 billion, is the most relevant index,
although it should be noted that Hercules, starting more than 20
years ago when it was a completely different and much larger
company, has been listed in the S&P 500 Chemicals Index. We do not
believe that that index, which is comprised of 14 companies
including Dupont and Dow and other companies with a mean market
capitalization of $8.94 billion, with Hercules being by far the
smallest, is an appropriate reference point with regard to Hercules'
performance. Even so, Hercules' stock price has substantially
underperformed the S&P 500 Chemicals Index as well over the relevant
time frame.
8
PERFORMANCE RANKINGS
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Total Total Sales Profit
Return Return Sales Growth Profit Growth Return
Rank Rank (1 (3 Growth (3 Growth (3 Net on
2003 2002 Year) Years) (1 Year) Years) (1 Year) Years) Margin Equity
----------------------------------------------------------------------------------------------
482 466 Hercules D D D F F F F F
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Similarly, in Fortune's ranking of the Fortune 1000 Industrial Companies
(April 4, 2003) in terms of 2002 profitability vs. 2001 and 2002
profitability as a percentage of revenues, assets, and shareholders
equity, Hercules was ranked 35, 36, 36, and 32, respectively, out of 36
chemicals companies.
o Joyce, operating as his own Chief Financial Officer, has become in our
opinion the master of the one-time, "non-recurring" charge, taking
substantial "non-recurring" charges in all 7 reported quarters since he
came to Hercules -- and doing so in a manner which misleadingly implies
that these charges or "adjustments" are one-time items.
o Even after adjusting for "one-time" charges and goodwill amortization,
Hercules' financial performance has been extremely disappointing, with
2002 earnings being little more than 50% of the results for 2000 (the last
full year prior to Joyce's arrival at Hercules). "Pro forma" earnings per
share for 2000-2002 have been as follows:(7)
2000 $1.12
2001 $0.04
2002 $0.63
o Moreover, Hercules' financial performance (again even after adjustment for
non-recurring charges and on a "pro forma" basis) continues to lag the
specialty chemicals industry (as measured by 8 companies in the S&P MidCap
Specialty Chemicals Index). In 2002, for example, Hercules revenue growth
was only 2.5% compared with 5.7% for the weighted average of companies in
the Index, while its return on assets and sales (excluding goodwill
writedowns) were only approximately 50% and 70%, respectively, of the
returns for the same 8 companies. By way of update, Hercules' performance
in the first quarter of 2003 continued to lag the average performance of
the 8 Index companies with respect to all three metrics.
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(7) 2000 "pro forma" earnings per share includes earnings and related
interest expenses for the BetzDearborn business and excludes
goodwill amortization consistent with the Company's "pro forma"
earnings for 2001 and 2002. "Pro forma" 2001 and 2002 earnings per
share exclude the earnings and related interest expenses for the
BetzDearborn business which was sold.
9
JOYCE'S RECORD AT UNION CARBIDE - DISASTROUS
FINANCIAL PERFORMANCE, BROKEN PROMISES,
AND OUTRAGEOUS COMPENSATION
Prior to coming to Hercules, Joyce spent his entire business career at
Union Carbide, and you should be aware of these FACTS concerning his record as
Union Carbide's Chief Executive (1995 - 2000):
o Under Joyce's leadership, Union Carbide's net income declined from
$925 million in 1995 to $162 million in 2000 - down an astounding
82% - making Union Carbide's performance the worst in the S&P 500
Chemicals Index (consisting of the 15 largest Chemicals companies at
that time).
o Despite Joyce's cost cutting efforts at Union Carbide, the Company's
operating margins declined from 16.2% in 1995 to 2.7% in 2000,
regularly ranking the company in the bottom quartile of the S&P
Chemicals Index for return on assets, including last in Joyce's
final year.
o Joyce's credibility with Union Carbide shareholders was undermined
by repeated broken promises.
(1) In 1997, Joyce advised analysts that Union Carbide planned to
meet or exceed a 15% return on capital over the course of the
chemical cycle, while earning an 8% return at the trough. IN
FACT, Union Carbide's returns on capital were actually 3% at
the trough of the chemical industry cycle in 2000.
(2) In early 1999, Joyce told Union Carbide shareholders that the
Company was "in good shape entering 1999". IN FACT, operating
income was down 30% in 1999 compared with the previous year.
(3) On July 26, 1999, little more than 60 days before the end of
the quarter, Joyce informed Union Carbide shareholders that
"prospects for improved third quarter earnings appear
encouraging based upon current conditions." IN FACT, operating
income was down in the third quarter compared to both the
previous quarter and the same quarter in 1998.
(4) One commitment that Joyce staked his reputation on was his
often-repeated promise that Union Carbide would earn a minimum
of $4 per share in 2000. In a grandstand move, characterized
in an October 13, 1997 BUSINESS WEEK article entitled, "Smoke,
Mirrors, and the Boss' Paycheck," as "clever public relations
.... unlikely to dent Joyce's wallet or stoke up Union
Carbide's performance," Joyce committed to forfeit his salary
if Union Carbide did not earn $4 per share in 2000. As it
turned out, Union Carbide's earnings for 2000 were $1.18 per
share, and, notwithstanding his public commitment Joyce took
his full salary and bonus anyway!
10
o Notwithstanding Union Carbide's dismal performance during the five
years that he was Chief Executive, Joyce's total annual compensation
increased almost three fold -- from $8.8 million per annum in 1995
to $23.3 million per annum in 1999.(8)
o Finally, after five years of Joyce's leadership at Union Carbide,
the Company was acquired by Dow Chemical. Of Joyce's tenure at Union
Carbide, James Kelleher of Argus Research observed in a DELAWARE
NEWS JOURNAL article (May 17, 2001), entitled "Hercules Chief Knows
Trouble," "I think he had a better reputation as a scientist than an
administrator. He did virtually nothing with the Company."
Similarly, in the same article, Paul Leming, an ING Barings security
analyst, had this to say about the condition of Union Carbide at the
conclusion of Joyce's tenure - "The wheels were coming off."
Finally, a BUSINESS WEEK article entitled, "Formula For A Perfect
Marriage" (Diane Brady, August 16, 1999) observed, "For the team in
Danbury, the deal is bound to be bittersweet. Union Carbide has
faced a litany of woes in recent years, from troubled partnerships
in places like Kuwait to delayed plant openings. Joyce also spent
heavily on new facilities, but the payoff eluded his company."
JOYCE'S COMPENSATION CONTINUES TO ESCALATE WHILE
THE FORTUNES OF THE COMPANY AND ITS SHAREHOLDERS SUFFER
To add insult to injury in the face of Hercules' disappointing financial
performance, Joyce enjoys what we believe to be outrageously excessive
compensation - all at the expense of Hercules shareholders.
Consider these facts about Joyce's compensation package in light of his
"track record" and then ask yourself: -- DID HE EARN IT?
o When Joyce came to Hercules in May 2001, he was given a golden
parachute agreement which would provide him today with a payment of
almost $10 million in the event of a "change in control," which was
defined to include a shift in the composition of a majority of
directors as a result of a proxy contest.
o For Joyce's seven months on the job in 2001 (he came to Hercules in
May of that year), a year in which the Company registered a $58
million loss, in addition to stock options for 1,250,000 shares,
Joyce was paid a salary at the rate of $1 million per annum and was
given a $1 million bonus for his seven months on the job.
o For 2002, a year in which the Company posted a loss of $248 million
(excluding a $368 million write-down of goodwill), in addition to
his $1 million annual salary, Joyce was given a bonus of $1.9
million ($900,000 of which was given to him in the form of Hercules
stock at a 15% discount) and additional stock options for 600,000
Hercules shares.
----------
(8) 2000 numbers are not available because of the Dow merger. Total
annual compensation includes, as per Union Carbide's proxy
statements, stock option grants, assuming 10% per annum
appreciation.
11
o On April 23, 2003, the Board's Compensation Committee proposed that
the Board give Joyce a GRANT of 211,000-500,000 restricted shares,
to vest upon a "change in control" defined to include, among other
things, the Committee's winning this very proxy contest, with the
amount of restricted shares depending upon the price of Hercules
stock at the time of the change in control. YOU SHOULD KNOW THAT, IN
PRIOR DISCUSSIONS WITH THE COMPENSATION COMMITTEE, JOYCE HAD
INSISTED ON AN EVEN LARGER GRANT THAN THE ONE THE COMMITTEE
PROPOSED. ONLY AFTER THE OBJECTION OF OUR MINORITY DIRECTORS AT THE
APRIL 24TH BOARD MEETING AND THE ACKNOWLEDGEMENT BY ONE OF THE
MAJORITY DIRECTORS THAT THE PROPOSED COURSE OF ACTION WOULD NOT
"READ WELL ON THE FRONT PAGE OF THE WALL STREET JOURNAL," DID THE
BOARD DECIDE TO DEFER ACTION ON JOYCE'S GRANT UNTIL A LATER TIME.
On May 20, 2003, the Compensation Committee again approved, over the
objection of the one minority director on the committee, a GRANT to
Joyce, subject to Board consent, of restricted shares valued at $3
million with the same above-mentioned vesting provision. As of the
date of this letter, the Board has not yet taken action on this
matter.
o For 2002, including the value of Joyce's long-term incentive
compensation, Joyce's total compensation of $6 million easily ranked
him higher than any CEO of the eight companies in the S&P Mid-Cap
Specialty Chemicals Index - with his compensation being almost 2 1/2
times the average for the eight companies.
You should know that, in the event that Joyce's management is repudiated
in this proxy contest, we estimate that he will have been paid more than $29
million for his two years on the job.(9) ASK YOURSELF WHETHER HERCULES IS BEING
RUN MAINLY FOR YOUR BENEFIT OR FOR THE BENEFIT OF ITS CHIEF EXECUTIVE.
THE BETZDEARBORN SALE - JOYCE AND THE HERCULES
BOARD, AFTER REFUSING TO SEEK SHAREHOLDER
APPROVAL, SELL WHAT WE SAW AS THE COMPANY'S
BEST BUSINESS AT THE WORST TIME
Last year's sale of the Company's BetzDearborn business to General
Electric was in our view a major strategic mistake. Moreover, this transaction
has unfortunately had the effect of significantly reducing the future value of
the Company and the upside with respect to all of our investments.
By way of background, Hercules' $3.1 billion acquisition of BetzDearborn
in 1998, which has been characterized by Paul Leming as "one of the worst
acquisitions in the history of the chemicals industry" (July 18, 2000), is a
dramatic example of the Company's "buy high-sell low" strategy. For the
subsequent sale last year consisted of most of the BetzDearborn businesses
originally acquired by Hercules, with the net sale price being the equivalent of
1.7 x sales compared to the 2.4 x sales paid by Hercules in 1998.
----------
(9) The $29 million estimate assumes final Board approval of the $3
million restricted share grant recommended by the Compensation
Committee.
12
You should know that last year's decision to sell BetzDearborn was taken
by an 8-5 vote over the objection of the four minority directors and one
majority director (not one of Joyce's hand-picked directors, but rather a
director elected during the term of a previous management). The sale would have
only made sense in our opinion had the Company no other way to refinance its
debt. For private sale multiples in the chemicals industry in 2001 (when the
price was established) were at their lowest level in more than 10 years.
WHAT HERCULES AT THE TIME OF THE SALE FAILED TO COMMUNICATE, TO BOTH ITS
SHAREHOLDERS AND WALL STREET ANALYSTS WHO FOLLOW THE COMPANY, IS THAT IT HAD
AVAILABLE WHAT WE BELIEVE TO HAVE BEEN A SUPERIOR ALTERNATIVE. PRIOR TO THE
COMPANY'S DECISION TO SELL BETZDEARBORN, MAJOR BANKS OFFERED THE COMPANY AN
ATTRACTIVE REFINANCING PACKAGE WHICH WOULD NOT HAVE REQUIRED THE COMPANY TO MAKE
ILL-TIMED ASSET SALES.
Sale proceeds, after taxes and transaction costs, amounted to
approximately 6 x estimated 2002 EBITDA, while the Company's already depressed
public stock price at the time was trading at a multiple of approximately 7 x
EBITDA -- a move hardly calculated to increase shareholder value! Moreover, the
sale was made at a time when forward operating profits for the business were
estimated by Hercules to increase substantially as a result of cost reductions
already implemented. Finally, the sale of the business has substantially diluted
the Company's earnings due in part to the fact that Hercules was required to
utilize the net sale proceeds to pay down debt carrying relatively low interest
rates (approximately 5% on average).
YOU SHOULD KNOW THAT THE HERCULES BOARD ACTION APPROVING THE SALE WAS
TAKEN NOTWITHSTANDING THE FACT THAT OTHER MAJOR, INSTITUTIONAL HERCULES
SHAREHOLDERS, TOGETHER WITH OURSELVES, HAD URGED JOYCE TO REJECT THE SALE AND
RETAIN THE BETZDEARBORN BUSINESS. MOREOVER, WHEN THE MINORITY DIRECTORS
REQUESTED THAT THE MOTION APPROVING THE TRANSACTION BE AMENDED TO REQUIRE THAT
THE SALE BE SUBMITTED TO A SHAREHOLDERS' VOTE, THEY WERE RULED "OUT OF ORDER",
AND THE ISSUE OF SHAREHOLDER APPROVAL WAS NEVER SUBMITTED TO A VOTE OF THE
BOARD.
DON'T YOU BELIEVE THAT, WHERE THERE IS SIGNIFICANT QUESTION CONCERNING A
COURSE OF ACTION INVOLVING A SUBSTANTIAL SALE OF ASSETS (AT A PRICE, FOR
EXAMPLE, EQUIVALENT TO ALMOST TWICE THE COMPANY'S ENTIRE MARKET VALUE), JOYCE
AND THE BOARD, KNOWING OF SIGNIFICANT SHAREHOLDER OPPOSITION, SHOULD HAVE
SUBMITTED THE MATTER TO A VOTE OF HERCULES SHAREHOLDERS EVEN WHEN THEY MAY NOT
HAVE BEEN LEGALLY REQUIRED TO DO SO?
THE REVOLVING DOOR AT HERCULES -- SIX CHIEF EXECUTIVES
IN SIX YEARS AND NO APPARENT BUSINESS STRATEGY
The primary responsibilities of a Company's Board of Directors are to
attract and manage by appropriate objectives capable chief executives as well as
establish policies and business strategies for the Company. By this standard of
measurement, the Hercules Board in recent years has been in our opinion an
extraordinary failure.
13
Between 1996-2001, Hercules had six different Chief Executives, awarding
one an estimated $14.25 million severance package for three years of service and
another a $6 million package after only 16 months on the job.(10) Joyce came to
Hercules in May, 2001 after having retired from Dow Chemical upon selling Union
Carbide in February 2001, lives in Connecticut more than 200 miles from the
Hercules Wilmington headquarters, and has been unwilling to relocate to the
Wilmington area.
Finally, the Hercules Board's sorry record is most starkly illustrated by
its failure in our view to provide Joyce with sufficient guidance and direction
in terms of establishing the Chief Executive's objectives and then holding him
accountable for meeting them. In fact, the objectives set forth by the Board's
Compensation Committee were limited almost exclusively to cost reduction and
other measurements directly related thereto. By way of just one example,
management of the Company's two principal non-operating issues, Hercules'
pension and asbestos exposures, which resulted last year in pre-tax charges to
earnings of more than $600 million, were not even mentioned in Joyce's 2002
management objectives.
As further evidence of the Board's failure, aside from reductions to an
obviously bloated cost structure, we have seen no evidence of any focus
whatsoever on a turnaround strategy, long-range or short-term growth strategies,
upgrading of the organization, attracting outstanding people to the Company, or
the hundreds of other matters so basic to the operation of a large corporation.
Even Joyce acknowledged in a quarterly earnings call last year that his
management focus has been almost entirely on cost reduction. This short-term
strategy presumably led Leslie Ravitz, a chemicals analyst at Morgan Stanley, to
question Hercules' long-term prospects (November 2, 2001) and continues to be
illustrated by Joyce's sharp cuts in both research and development and capital
expenditures.
With regard to the Company's capital programs, for example, under the
current Hercules Board and management, capital expenditures have been reduced
from $119 million in 2000 to $49 million in 2001 and $43 million in 2002.(11)
Hercules' capital spending last year approximated only 60% of the Company's
depreciation expense of $71 million. This prompted Andrew Cash, a security
analyst at UBS Warburg, to recently observe, after predicting that 2003 will be
the third consecutive year in which capital spending is below depreciation,
"Although we applaud management's frugality, investors need to be aware that
capital spending cannot remain this low into perpetuity, i.e., equipment ages,
new capital must be invested into the business to allow for growth, etc." (May
2, 2003).
HERCULES' $570 MILLION PENSION FIASCO
Over the last three years, including almost two full years under Joyce's
management, Hercules pension plans, in addition to their failure to earn their
minimum investment hurdle rate, have in fact lost more than $250 million as a
result of negative investment returns. This enormous loss required the Company
earlier this year to take a
----------
(10) The $14.25 million estimate is based on a 20 year life expectancy.
(11) The above-mentioned expenditures are adjusted to exclude all
divested businesses.
14
pre-tax charge to equity of almost $570 million, which has now resulted in a
negative equity for the Company of $123 million.
While other Companies to be sure have been plagued in recent years by
investment underperformance in their pension plans, the seriousness of the
Hercules situation was underscored in a recent Credit Suisse First Boston report
(David Zion, April 14, 2003), which estimates that of 361 S&P 500 companies with
defined benefit pension plans, Hercules' underfunded status ranks it in the 16th
worst position when compared to its equity market capitalization. The report
concluded that Hercules' total pension obligations represent 159% of its market
capitalization, ranking it the 20th highest of the 361 companies in that
category. In addition, an earlier Credit Suisse First Boston report (September
27, 2002) predicted that Hercules may very well be required to incur the 5th
largest after tax charge as a percentage of equity in the fourth quarter of
2002.(12)
Hercules' pension performance has been in no small measure the result of
management's asset allocation decision to invest approximately 70% of its
pension assets in equities, including almost 30% of that amount in international
equities. Interestingly enough, Hercules' investment policy has allocated
nothing to alternative assets, hedge funds, or so-called "market neutral"
investments, which tend to focus on delivering consistent absolute returns with
low correlation to the U.S. stock market or other asset classes. WHEN ONE
CONSIDERS THE SIZE OF THE COMPANY'S PENSION ASSETS COMPARED WITH THE SIZE OF
HERCULES, THE FACT THAT THE COMPANY'S PENSION LIABILITIES ARE ESSENTIALLY FIXED
AND RELATIVELY MATURE INASMUCH AS RETIREES AND INACTIVES OUTNUMBER ACTIVES IN
THE PLAN BY A 10-TO-1 RATIO, HERCULES' ASSET ALLOCATION POLICY HAS BEEN IN OUR
OPINION WHOLLY INAPPROPRIATE AND UNDULY RISKY.
You should know the Hercules pension plan has been largely run on
autopilot for the last 10 years. Despite the importance of the pension plan's
performance to the overall financial performance of the Company as a result of
the size of the plan, there is in our view no one at Hercules that has
demonstrated the slightest expertise in this area. What is more, during Joyce's
tenure, until this issue reached crisis proportions, neither the Board nor its
Finance Committee had ever conducted a meaningful review of management's
investment decisions. While companies normally make pension asset allocation
decisions on as often as a quarterly or at least annual basis, Hercules,
seemingly oblivious to the vicissitudes of the investment climate over the last
10 years, had made no significant change to its investment policy during this
entire period of time, including the last two years under Joyce. At the very
least, this underscores the Company's need for a CFO, which we urged upon Joyce
and the Board almost two years ago.
JOYCE PACKS THE BOARD WITH FIVE HANDPICKED DIRECTORS
The record over the years at Hercules is replete with examples of Boards
who in our opinion do very little to safeguard the interests of the Company's
shareholders and are virtually always supportive of whatever the Chief Executive
wants, failed Chief
----------
(12) The size of Hercules' fourth quarter charge has now materialized
almost as predicted, but whether this charge amounts to the fifth
largest cannot be easily ascertained.
15
Executives who receive what we view as exorbitant parachute payments, and Board
members who until well after our 2001 proxy contest were permitted to fund with
Company monies million dollar gifts to their favorite charities.(13)
Taking advantage of a charter provision which permits the addition of new
directors without shareholder approval, no sooner had the votes been counted in
connection with the 2001 proxy contest, when Joyce, whose own "election" was not
originally submitted to shareholders either, together with the nominating
committee, thumbed their noses at Hercules shareholders by choosing Paula Sneed,
an incumbent director who had been defeated in that contest for reelection, to
fill an existing Board opening. Since that time, Joyce, acting in concert with
the Board's nominating committee, has handpicked Messrs. Wyatt, Kennedy, Lipton,
and Hunter (three of whom are former or current executives in the commodity
chemicals industry) to either replace departing directors or fill existing
openings. WE BELIEVE THAT THESE FOUR DIRECTORS HAVE ONE COMMON QUALIFICATION FOR
THE JOB - A CLOSE RELATIONSHIP WITH JOYCE. IT SHOULD NOT SURPRISE YOU THAT NONE
OF THE FIVE HANDPICKED DIRECTORS (INCLUDING PAULA SNEED WHO RESIGNED EARLIER
THIS YEAR) HAVE VOTED AGAINST JOYCE'S POSITIONS ON A SINGLE ISSUE.
As further evidence of Joyce's view of shareholder democracy, at the
minority directors' first Board meeting in June, 2001, the Nominating Committee
proposed that seven of the eight then majority incumbent directors each be given
one of two major committee assignments - Audit or Compensation. None of the four
minority directors were proposed for membership on either of these
committees.(14) When the minority members protested that they were the only
Hercules directors with a real mandate from the Company's shareholders, they
were told that this was the way committee assignments were made at Hercules and
that Board members had, in words to the effect, "to work their way up" to
qualify for major committee assignments. Parenthetically, Lipton and Kennedy,
who were elected to the Board after the four minority directors, were appointed
shortly thereafter to the Audit and Compensation Committees - so much for the
Hercules seniority system!
HERCULES' POISON PILL COSTS HERCULES
SHAREHOLDERS MORE THAN $190 MILLION
In October 2000, in order to increase its investment in the Company, ISP
proposed a tender offer to all Hercules shareholders to purchase 25 million
additional shares of Hercules stock for $17.50 per share in cash. However,
because of the Company's poison pill, its offer required Board consent. Despite
repeated requests that Hercules permit it to proceed, the Board refused to do so
- thereby costing Hercules shareholders more than $190 million.
You should know that the Hercules poison pill, with its unusually low 10%
trigger point, was adopted in August, 2000, less than two weeks after ISP
publicly reported acquiring 9.9% of Hercules shares, notwithstanding the fact
that Hercules shareholders in
----------
(13) This last practice was stopped at the insistence of our minority
directors some months after we joined the Board in 2001.
(14) At a later time, one of our minority directors received major
committee assignments, although the three other minority directors
still have not.
16
the past had voiced strong opposition to the poison pill.(15) In 1991, a
non-binding proposal to redeem Hercules' then-existing poison pill, or submit it
to a shareholder vote, was approved by shareholders. Despite this earlier
shareholder vote, the Hercules Board refused to seek shareholder approval for
the current pill adopted in 2000.
ASK YOURSELF WHETHER THE POISON PILL DEVICE IS IN YOUR BEST INTEREST AND
WHETHER YOU NEED TO BE "PROTECTED" FROM MAKING YOUR OWN DECISION TO SELL YOUR
SHARES. WE BELIEVE THAT IT IS PARAMOUNT THAT YOU HAVE THE RIGHT TO CONSIDER FOR
YOURSELF THE MERITS OF OFFERS FOR YOUR SHARES. OUR NOMINEES WILL ADVOCATE THAT
THE BOARD REMOVE, OR SUBSTANTIALLY REVISE, BARRIERS TO OFFERS FOR YOUR SHARES SO
THAT YOU CAN MAKE YOUR OWN DECISIONS.
JOYCE AND THE HERCULES BOARD REFUSE TO NULLIFY A
COMPANY BYLAW THAT DISENFRANCHISES ITS SHAREHOLDERS
The disregard of Joyce and the Hercules Board for the interests of the
Company's shareholders is dramatically demonstrated by their refusal to rescind
a Hercules election Bylaw which the Board claims requires an affirmative vote of
the holders of a majority of ALL OUTSTANDING SHARES for the election of
directors, instead of the greatest number of votes actually cast at an Annual
Meeting (a plurality vote). This means, for example, that if each Committee
nominee receives 50 million votes and each incumbent director receives only 10
million votes, the incumbents would retain their seats on the Board because the
Committee nominees would not have received a majority vote of approximately 108
million outstanding shares of Hercules common stock.
This voting requirement disenfranchises shareholders, is highly unusual if
not unique, and is in our view inconsistent with good corporate governance. In
fact, we are unaware of a single other Delaware public company that has such a
provision with regard to election of directors. The Hercules Bylaw, as
interpreted by the Company, serves in our view as a mechanism to entrench the
current Board, because if no nominee receives a majority vote of the outstanding
shares, the incumbent directors would remain in place beyond their three-year
term, even if our nominees received a plurality vote.
As early as 2001, after calling to Hercules' attention this obvious
inequity and requesting that it take the necessary action to remedy this
situation in connection with the 2001 Annual Meeting, the Hercules Board refused
to do so. As it turned out, three of the four minority directors were elected at
the 2001 Annual Meeting by more than 50% of the outstanding shares, and Hercules
agreed to seat the fourth minority director, who had won by a plurality of those
voting, in order to avoid a court test. After joining the Board, the minority
directors again proposed that Joyce and the Hercules Board take action to
effectively nullify the Bylaw, but they have refused to do so.
You should know that in a DELAWARE NEWS JOURNAL article (March 14, 2001)
entitled, "Hercules' Election Method Is Fought", the Hercules voting requirement
----------
(15) According to an Investor Responsibility Research Center study of
more than 2,000 companies with poison pills, only 6% have trigger
points as low as 10%.
17
prompted the following comments from a Wall Street analyst as well as a
corporate governance expert: Gary Hindes, Managing Director of New York's Deltec
Asset Management stated that, "These people [referring to the Hercules
directors] have managed to destroy what was a wonderful company," and is further
reported to have stated that Hercules should be asking for the resignation of
its directors, not supporting them for re-election; and Charles Elson, Director
of the Center for Corporate Governance at the University of Delaware,
characterized Hercules' voting provision as "highly unusual" and further stated,
"In all my years [of tracking corporate policies], I have not seen that with the
election of a board."
THE COMMITTEE'S PROGRAM TO REALIZE HERCULES' UNDERLYING VALUES
The Committee is convinced that there are strong underlying values at
Hercules and that the Company's two remaining, primary businesses, the pulp and
paper and Aqualon businesses, have substantial potential for growth under the
right direction. As major shareholders, we are determined to maximize our
Company's underlying values for all Hercules shareholders.
To this end, we would pursue the following program:
(1) Conduct a thorough search for a new, highly qualified, full-time,
"roll up your sleeves" Chief Executive committed to the turnaround
of the Company's businesses, who will reside in the Wilmington area
and whose compensation will be designed to closely align his or her
interests with those of Hercules shareholders. By making the right
selection and establishing comprehensive goals and objectives, we
intend to avoid the extraordinarily harmful turnover of Chief
Executives at Hercules over the last six years.
(2) Rebuild management ranks which have been allowed to atrophy under
the current Chief Executive and his predecessors. This will include
the election of a first rate Chief Financial Officer, a position
which Joyce and the Board have inexplicably refused to fill during
his two-year term at the Company despite Hercules' myriad financial
challenges.(16)
(3) Eliminate excessive compensation and bonuses as have been enjoyed by
Joyce and other Company executives and make certain that in the
future compensation arrangements at Hercules provide that executive
salaries, bonuses, and benefits be closely related to overall
corporate, individual, and
----------
(16) Parenthetically, of what we believe to be the Company's failures
under Joyce's management, a number of them have come in areas
normally the responsibility of a Company's Chief Financial Officer.
In addition to the pension fiasco referred to earlier and the fact
that the Company has failed to file its periodic, public financial
reports (including its certification last August under the
Sarbanes-Oxley Act of 2002) in a timely fashion on four separate
occasions since January 2001, Hercules has paid, in 2001 and 2002,
what we believe to be an astounding $19 million and $21 million,
respectively, in fees to the Company's auditors. The sum paid by
Hercules last year, for example, was nearly 8 times the average
expense for the eight companies in the S&P MidCap Specialty
Chemicals Index. In fact, we believe that the only chemicals company
that paid more to its auditors than Hercules last year was DuPont,
which is more than ten times the size of Hercules.
18
stock performance. In this regard, it is our view that an effective
belt-tightening program must start at the top, and that the kind of
compensation enjoyed by Joyce is not only unwarranted in and of
itself, but serves also to stiffen the resistance of others at
Hercules to the kinds of cost-cutting measures which may be
necessary.
(4) Despite the axiom that businesses cannot "cost cut their way to
prosperity" and that successful turnaround strategies can never rely
on cost reduction alone, management's overriding preoccupation, as
acknowledged by Joyce, has unfortunately been on cost reduction
alone. But dynamic leadership isn't just about cutting costs or
staying afloat. In addition to cost reduction, we would focus on new
products, acquisitions, expanded field technical services, new
alliances with other manufacturers to add complementary products,
and a rational pricing strategy which places a high priority on
profitability rather than on small market share gains.
(5) We believe that incumbent management has neither the qualifications
nor the expertise to address the Company's two principal
non-operating issues - the minimization of its pension and asbestos
exposures. While current management in our view has given these
critical issues short shrift, we would focus the attention of senior
management, assisted by the best outside professionals, on these
areas.
19
QUESTIONS AND ANSWERS ABOUT THIS PROXY SOLICITATION
Q: WHO IS SOLICITING YOUR PROXY?
A: We are the Hercules Shareholders' Committee for NEW Management (the
"Committee"). The Committee includes: (i) ISP, the second largest shareholder of
Hercules, (ii) Samuel J. Heyman, Sunil Kumar, Gloria Schaffer and Raymond S.
Troubh, four members of the Company's Board of Directors who became directors
following the 2001 Annual Meeting and (iii) Anthony Kronman, Harry Fields,
Vincent Tese and Gerald Tsai, Jr., the Committee's four nominees to the Board of
Directors. The proxy solicitation is being conducted by the Committee. For more
information on the participants in our proxy solicitation, please see "Certain
Information Concerning the Participants" on page 30 and Annex A hereto.
Q: WHO ARE THE NOMINEES?
A: The Nominees are Harry Fields, Anthony Kronman, Vincent Tese and Gerald
Tsai, Jr. If elected to the Board of Directors, each Nominee would act in
accordance with his fiduciary duties to Hercules shareholders with respect to
any action that he takes as a director. We have no reason to believe that any of
the Nominees will be unable or unwilling to serve if elected. However, if any of
the Nominees are unable to serve or for good cause will not serve, proxies may
be voted for another substitute nominee of the Committee.
Q: WHO CAN VOTE AT THE 2003 ANNUAL MEETING?
A: If you owned Hercules shares on June 6, 2003 (the "Record Date"), you
have the right to vote at the 2003 Annual Meeting. Hercules has not yet
announced the number of shares of Common Stock of Hercules issued and
outstanding and entitled to vote at the 2003 Annual Meeting. If you own Hercules
shares on the Record Date, you will have the right to vote at the 2003 Annual
Meeting. Shareholders have one vote for each share of Common Stock they own with
respect to all matters to be considered at the 2003 Annual Meeting. The
definitive proxy statement to be filed by Hercules (the "Management Proxy
Statement") with the Securities and Exchange Commission will include the number
of shares of Common Stock of Hercules issued and outstanding and entitled to
vote at the 2003 Annual Meeting and such information will also be provided
supplementally to Hercules' shareholders by the Committee.
Q: WHAT SHOULD YOU DO TO VOTE?
A: Sign, date and return the enclosed WHITE proxy card TODAY in the
envelope provided. For more information on how to vote your shares, please see
"Quorum and Voting" on page 23.
Q: WHOM DO YOU CALL IF YOU HAVE QUESTIONS ABOUT THE SOLICITATION?
A: Please call Georgeson Shareholder Communications Inc. toll free at
(866) 288-2190.
20
GENERAL
PROXY INFORMATION
As of the date hereof, ISP may be deemed (solely for purposes of Rule
13d-3 of the Exchange Act) to be the beneficial owner of 9,893,700 Shares. The
Shares beneficially owned by ISP represent approximately 9.1% of the Shares
outstanding and entitled to vote on the Record Date. Samuel J. Heyman, ISP's
Chairman and a director of the Company, may be deemed (solely for purposes of
Rule 13d-3 of the Exchange Act) to beneficially own 100% of the outstanding
shares of common stock of ISP. Additional information relating to the ownership
of Shares by the other members of the Committee is set forth in Annex A.
The Shares represented by each WHITE proxy card which is properly executed
and returned will be voted at the 2003 Annual Meeting in accordance with the
instructions marked thereon. Except for the election of directors to the Board
of Directors and the ratification of the selection of PricewaterhouseCoopers LLP
("PWC") as the Company's independent public accountants for 2003, the Committee
currently does not know whether or not any other matter will be presented for
consideration at the 2003 Annual Meeting. Executed but unmarked WHITE proxy
cards will be voted FOR the election of the four Nominees and will ABSTAIN with
respect to the ratification of PWC as the independent public accountants of
Hercules for 2003. An "Abstain" vote on the ratification of PWC as Hercules'
independent public accountants will have the same effect as a vote against such
matter. If any other matter properly comes before the 2003 Annual Meeting, the
named proxies will vote all proxies granted to them in their sole discretion.
PROXY REVOCATION
Whether or not you plan to attend the 2003 Annual Meeting, the Committee
urges you to vote FOR the election of the Nominees by signing, dating and
returning to Georgeson Shareholder Communications Inc. ("Georgeson") the WHITE
proxy card in the enclosed envelope. You can do this even if you may have voted
on any proxy card solicited by the Hercules Board of Directors. It is only the
latest dated proxy that counts.
Execution of a WHITE proxy card will not affect your right to attend the
2003 Annual Meeting and vote in person. Any shareholder granting a proxy
(including a proxy given to Hercules) may revoke it at any time before it is
voted by (i) submitting a duly executed new proxy bearing a later date, (ii)
attending and voting at the 2003 Annual Meeting in person, or (iii) at any time
before a previously executed proxy is voted, giving written notice of revocation
either to Hercules Shareholders' Committee for NEW Management c/o Georgeson
Shareholder Communications Inc., 17 State Street, New York, NY 10004, or to
Hercules, 1313 North Market Street, Wilmington, Delaware, 19894-0001, Attention:
Corporate Secretary. Merely attending the 2003 Annual Meeting without voting at
the 2003 Annual Meeting will not revoke any previous proxy which has been duly
executed by you.
21
After signing the enclosed WHITE proxy card, do not sign or return any
proxy card furnished to you by the Board of Directors of Hercules unless you
intend to change your vote, because only your latest dated proxy card will be
counted.
Please review this document and the enclosed materials carefully. YOUR
VOTE IS VERY IMPORTANT, no matter how many or how few Shares you own.
If you have any questions about giving your proxy or require assistance,
please call:
Georgeson Shareholder Communications Inc.
17 State Street
New York, NY 10004
Call Toll-Free: (866) 288-2190
22
QUORUM AND VOTING
VOTING PROCEDURES
You will be eligible to execute a WHITE proxy only if you own the Common
Stock on the Record Date. The Company has set June 6, 2003 as the Record Date
for determining those shareholders who will be entitled to notice of and to vote
at the 2003 Annual Meeting. Shareholders will have one vote for each Share of
Common Stock they own with respect to all matters to be considered at the 2003
Annual Meeting. You will retain the right to execute a proxy card in connection
with this proxy solicitation even if you sell your shares after the Record Date.
Accordingly, it is important that you vote the Shares held by you on the Record
Date, or grant a proxy to vote such Shares on the WHITE proxy card, even if you
sell such Shares after the Record Date.
Unless otherwise indicated, the WHITE proxy authorizes the persons named
in the proxy to vote, and such persons will vote, properly executed and duly
returned proxies FOR the Nominees. If no instruction is given on your executed
WHITE proxy with respect to the ratification of the appointment of Hercules'
independent public accountants, the persons named in the WHITE proxy will
abstain from voting on such matter.
VOTE REQUIRED
Hercules will furnish shareholders with the Management Proxy Statement in
connection with the Board of Directors' solicitation of proxies at the 2003
Annual Meeting. Information concerning the number of Shares of Common Stock
outstanding and entitled to vote on the Record Date is required to be set forth
in the Management Proxy Statement and, such information will also be provided
supplementally to Hercules' shareholders by the Committee. Only shareholders of
record at the close of business on the Record Date are entitled to notice of and
to vote on matters that come before the 2003 Annual Meeting.
According to Hercules' by-laws, a quorum will exist at the 2003 Annual
Meeting if holders of not less than a majority of the Shares of Common Stock
issued and outstanding and entitled to vote at the 2003 Annual Meeting are
present in person or by proxy. If a quorum is present, the election of directors
requires the following vote:
o Hercules' claims that its by-laws require that in order to be elected,
nominees for director must receive the affirmative vote of a majority of ALL
ISSUED AND OUTSTANDING SHARES entitled to vote at the meeting. The Committee
disagrees with this interpretation and believes that the four nominees who
receive the greatest numbers of votes cast at the 2003 Annual Meeting should be
elected as directors.
METHOD OF COUNTING VOTES
The holders of not less than a majority of the number of Shares of Common
Stock issued and outstanding and entitled to vote at the 2003 Annual Meeting
must be represented in person or by proxy in order to constitute a quorum for
the transaction of business. Abstentions and broker non-votes, if any, will be
counted for purposes of determining whether a quorum exists.
23
Assuming a quorum is determined to exist at the 2003 Annual Meeting,
because Hercules' by-laws require nominees to receive the affirmative vote of a
majority of the outstanding Shares, abstentions, withhold votes and broker
non-votes, if any, with respect to the election of directors, will have the same
effect as voting against the election of directors.
Required information concerning the necessary vote to ratify the selection
of auditors at the 2003 Annual Meeting and the effects, if any, of abstentions
and broker non-votes on such matter, will be set forth in the Management Proxy
Statement and such information will also be referenced in supplemental material
provided to Hercules' shareholders by the Committee.
THE COMMITTEE STRONGLY RECOMMENDS THAT YOU
VOTE "FOR" THE ELECTION OF ITS NOMINEES
ELECTION OF DIRECTORS
The Committee is soliciting your proxy for the election of its Nominees as
directors of the Company to serve for a three-year term expiring at the 2006
Annual Meeting and until their successors are duly elected and qualified. We are
soliciting proxies in support of the election to the Board of Directors of the
following Nominees and until their respective successors are duly elected and
qualified: Harry Fields, Anthony Kronman, Vincent Tese and Gerald Tsai, Jr.
In accordance with Hercules Restated Certificate of Incorporation and
by-laws and the Delaware General Corporation Law, the Board of Directors is to
consist of not less than seven and not more than eighteen directors, the exact
number to be specified by the Board of Directors. The directors are to be
divided into three classes as nearly equal in number as possible. At each annual
meeting of shareholders, members of one of the classes, on a rotating basis, are
elected for a three-year term. According to the Management Preliminary Proxy
Statement, thirteen directors currently serve on the Board of Directors, and
four of these directors have terms that expire in 2003, and four directors are
to be elected at the 2003 Annual Meeting. Messrs. Harry Fields, Anthony Kronman,
Vincent Tese and Gerald Tsai, Jr., if elected, would serve for terms expiring at
the 2006 Annual Meeting. Each of the Nominees has consented to serve as a
Nominee, be named in the Committee's proxy soliciting materials as such and
serve as a director of Hercules, if elected.
If any Nominee is unable to serve or otherwise unavailable to stand for
election as a director at the 2003 Annual Meeting, the Committee intends to
nominate a replacement nominee for election. Should one or more replacement
nominees be required, the named proxies will exercise their discretionary
authority to vote for any replacement nominee selected by the Committee. If any
additional directorships are to be voted upon at the 2003 Annual Meeting, the
Committee reserves the right to nominate additional persons to fill such
positions. The Committee does not expect that the Nominees will be unable to
stand for election but, in the event that any Nominee is unable to do so, Shares
represented by WHITE proxy cards will be voted for the other Nominees and any
replacement nominee. In addition, the Committee reserves the right to nominate
substitute or additional persons if the Company makes or announces any changes
to its
24
by-laws or takes or announces any other action that has, or if consummated would
have, the effect of disqualifying any of the Nominees.
If the Nominees are elected and take office as directors, they intend to
discharge their duties as directors of the Company in compliance with all
applicable legal requirements, including the fiduciary obligations imposed on
corporate directors under Delaware law.
If all of the Nominees are elected to the Board of Directors, the
Nominees, together with the minority directors, would constitute a majority of
the thirteen members serving on the Board of Directors and, since the Company's
by-laws provide that action by the Board of Directors requires a majority vote
of the directors present at a meeting at which a quorum is present, the four
Nominees, together with the minority directors, would be able to cause any
action to be taken or not taken by the Board of Directors.
THE NOMINEES
Set forth below are the names of, and certain biographical information
relating to, the Nominees. The information below concerning age, principal
occupation and directorships has been furnished by each respective Nominee.
HARRY FIELDS
Mr. Fields, age 78, was an executive at International Flavors and
Fragrances Inc. for more than forty years, where he served as President of the
International Flavor Division and as a member of that company's Board of
Directors. Since April 1990, he has been President of Fields Associates, Ltd., a
company specializing in joint ventures between U.S. and foreign companies. Mr.
Fields also served as a director of OPTA Food Ingredients, Inc from 1991 to
2002.
ANTHONY T. KRONMAN
Mr. Kronman, age 56, was appointed the Dean of Yale Law School in 1994. He
became a permanent member of the Yale Law School faculty in 1979 and in 1985 was
appointed Edward J. Phelps Professor of Law. He previously served on the law
faculty of the University of Minnesota and the University of Chicago. Mr.
Kronman became a director of Adelphia Communications Corporation after its
filing of a voluntary petition for reorganization under Chapter 11 of the United
States Bankruptcy Code.
VINCENT TESE
Mr. Tese, age 60, has been the Chairman of Wireless Cable International,
Inc. since July 1995. Mr. Tese also serves on the Boards of Bear Stearns & Co.,
Inc., Cablevision, Inc., Custodial Trust Co., Bowne and Company, Inc., Lynch
Interactive Corporation, Mack-Cali Realty Corp. and National Wireless Holdings,
Inc. Mr. Tese served as Chairman and Chief Executive Officer of the New York
State Urban Development Corporation from 1985 to 1987, and as Director of
Economic Development for New York State from 1987 to December 1994.
25
GERALD TSAI, JR.
Mr. Tsai, age 74, is a private investor and currently a director of the
Sequa Corporation, Triarc Companies Inc., Zenith National Insurance Corporation
and United Rentals, Inc. From February 1993 to October 1997, he was Chairman of
the Board, President and Chief Executive Officer of Delta Life Corporation, a
life insurance and annuity company. From 1988 to 1991, he was the Chairman of
the Executive Committee of the Board of Directors of Primerica Corporation (a
diversified financial services company); from 1987 to 1988, he was Chairman and
Chief Executive Officer of Primerica; and from 1982 to 1987, he held several
other offices at Primerica.
Mr. Tsai currently owns 10,000 Shares, while each of the other Nominees
currently owns 1,000 Shares of the Company.
Each Nominee, if elected, will be entitled to receive compensation
customarily paid by Hercules to its independent directors, which is described in
the Management Proxy Statement.
The Committee reserves the right to nominate substitute persons as
Nominees if Hercules makes or announces any changes to the by-laws or takes or
announces any other action that has, or if consummated would have, the effect of
disqualifying any of the Nominees. In addition, if Hercules causes any
additional directorships to be voted upon at the 2003 Annual Meeting, the
Committee reserves the right to nominate additional persons to fill the added
positions. Shares represented by the Committee's WHITE proxy cards will be voted
for any such substitute or additional nominees of the Committee.
THE COMMITTEE STRONGLY RECOMMENDS THAT YOU VOTE
"FOR" THE ELECTION OF THE NOMINEES
26
CERTAIN EFFECTS OF A CHANGE OF CONTROL
If the Nominees are elected to the Board of Directors, a "Change of
Control" (as such term is defined in the Indenture (the "Indenture") dated as of
November 14, 2000 between the Company and Wells Fargo Bank Minnesota, N.A., as
Trustee, with respect to the Company's 11 1/8% Senior Notes due 2007 (the
"Notes")) will occur. According to the Company's public filings, as of December
31, 2002, there was $400 million principal amount of the Notes outstanding.
Pursuant to the terms of the Indenture, if a "Change of Control" occurs each
noteholder shall have the right on the Change of Control Payment Date (as such
term is defined in the Indenture which date shall be no earlier than 30 days and
no later than 60 days after notice is mailed to the holders notifying them of a
change of control) to require the Company to repurchase all or any part of that
holder's Notes at a repurchase price equal to 101% of the aggregate principal
amount of Notes repurchased, plus accrued and unpaid interest and liquidated
damages. As of May 29, 2003, the last reported trading price of the Notes in the
over-the-counter market was $113 per $100 principal amount of the Notes, a price
in excess of the repurchase price. As a result, the Committee believes it is
unlikely that noteholders will exercise this right.
The Company has entered into employment agreements with several of its
senior executives. Under these agreements, the election of the Nominees would
constitute a "Change of Control" and therefore in the event that the executive's
employment is terminated during the three-year period following a "Change in
Control" either by the executive with Good Reason or by Hercules other than for
Cause, death or disability (as each such term is defined in the agreements) and,
in certain cases, if the executive terminates his employment with 180 days'
notice for any reason after a "Change in Control", the executive would be
entitled to cash severance equal to three times (two times, in some cases) the
sum of his base salary and the higher of his target annual bonus or the actual
bonus paid or payable in the most recently completed year. The executive would
further be entitled to continued welfare and fringe benefits for three years
(two years, in some cases) following termination of employment. Certain of these
agreements also provide for a cash payment equal to the amount the executive
would have received under Hercules' pension plans (including its supplemental
pension plan) if Hercules had contributed to those plans for an additional three
years. These executives would also be entitled to "gross-up" payments in the
event that any payments or benefits they receive in connection with a change in
control would be subject to "golden parachute" excise taxes imposed under
section 4999 of the Internal Revenue Code of 1986, as amended.
If the Nominees are elected, it would also constitute a "Change in
Control" under the Company's Nonemployee Director Stock Accumulation Plan. Under
such plan, in the event of a "Change in Control", all outstanding options
immediately vest and become exercisable, unless otherwise directed by the
Hercules Board prior to such "Change in Control". In addition, all exchanged
shares and cash balances of all deferral accounts become immediately vested and
payable.
According to the Company's Long Term Incentive Plan ("LTIP") pursuant to
which Company employees (including officers and directors who are employees) are
eligible for incentive awards including, stock options and restricted stock, the
Nominees
27
election would constitute a "Change in Control" (as such term is defined in the
LTIP). Until several years ago, the "Change in Control" definition did not
include a change in the composition of the Board.(17) In April 2003, the
minority directors were informed for the first time that the LTIP had been
amended in August 2000 so that it would be triggered if the Nominees are
elected, although the Company never disclosed this to shareholders in apparent
violation of federal securities law.
Upon learning of the August 2000 amendment, the minority directors
notified the Company that it had failed to disclose the existence of the
amendment to the "Change in Control" definition in the LTIP when it asked
shareholders to approve an extension of the LTIP at last year's Annual Meeting.
The minority directors believe that this failure to disclose the August 2000
amendment raises serious question as to the validity of both the extension of
the LTIP past its original termination date of April 30, 2002 as well as any
grants made after that date, including an April 2003 grant of 750,000 restricted
shares of Hercules stock to 137 Company executives.
In response to these questions raised by the minority directors, the
Company's Chief Legal Officer contended, NOT UNTIL ALMOST THREE WEEKS LATER,
that "it appears unclear from the record whether the Compensation Committee
actually amended the Long-Term Incentive Compensation Plan at its August 23,
2000 meeting." At the same time, he informed the Board that "[i]n any event, ...
management will recommend that the Compensation Committee clarify this matter by
adopting a resolution rescinding any such amendment to the Long-Term Incentive
Compensation Plan if and to the extent it may have been adopted in August 2000."
The Committee continues to believe that the record is clear that the LTIP was in
fact amended in August 2000 and that the Company's current position is part of a
transparent attempt to preserve for Hercules senior executives the benefit of
grants of restricted stock without having to resubmit the LTIP extension, after
proper disclosure, to shareholders at the 2003 Annual Meeting.
In the event the Nominees are elected at the 2003 Annual Meeting, the
provisions of the amendment regarding a "Change in Control" would result in all
validly issued outstanding stock options, SARs and PASOs becoming immediately
exercisable for a period of 60 days and all other validly issued awards becoming
fully payable within 30 days at the maximum level of performance. In the event
that it is finally determined that the questionable grants discussed above were
validly issued, such awards would also become fully vested upon a "Change in
Control."
If the Nominees are elected, it would also constitute a "Change in
Control" (as such term is defined in the Company's Annual Management Incentive
Compensation Plan (amended and restated February 21, 2003) (the "MICP")) under
the MICP, pursuant to which employees of the Company (including officers and
employee directors) are granted bonus awards, which over the last two years have
totaled for the Company $9-10 million per annum. Upon a "Change in Control",
participants in the MICP, within thirty (30) days after the effective date of
such Change in Control, would receive payment in full of their Individual Target
Award (as defined therein) for that Plan Year (as defined therein)
----------
(17) Under the version of the LTIP filed with the SEC, a "Change in
Control" would not occur upon election of the Nominees.
28
irrespective of when the "Change in Control" occurred during that year. In the
case of a participant whose employment is terminated during the Plan Year but
prior to such Change in Control, the payment would be pro-rated for the time
actually worked. In the case of a participant who is a party to any individual
agreement under which the participant is or may become entitled to payments with
respect to the same Incentive Award as described above, the Company (or its
successor) may make the right of such participant to receive the payment set
forth above conditioned upon the execution by such participant of a waiver of
the right to receive such payments under the individual agreement to the extent
they would duplicate such payment.
CERTAIN INTERESTS IN THE PROPOSALS
AND SECURITIES OF HERCULES
Other than certain compensation as disclosed in the Management Proxy
Statement that is received by the minority directors for their service as
directors of the Company, including certain equity awards, to the knowledge of
the Committee, there are no contracts, arrangements, understandings or
relationships (legal or otherwise) among any member of the Committee or its
associates with respect to any securities of Hercules. Reference is hereby made
to such information which, to the extent it may be deemed required will be
included in the Management Proxy Statement and will be referenced in
supplemental material provided to Hercules' shareholders by the Committee.
Each Nominee has entered into a letter agreement with ISP. Pursuant to the
letter agreement, each Nominee will receive a fee of $35,000 from ISP for
serving as a nominee, which amount is payable when the Committee files with the
Securities and Exchange Commission its definitive proxy statement. This fee is
not refundable, or contingent in any manner, on the outcome of the Committee's
proxy solicitation or otherwise. The letter agreement provides that ISP will
indemnify and hold harmless the Nominee from any and all liabilities, losses,
claims, damages and out-of-pocket expenses (including reasonable attorneys' fees
and expenses) (collectively, "Losses") based upon or arising out of the
solicitation of proxies from Hercules' shareholders and the willingness of the
Nominee to stand for election as a director of Hercules, except to the extent
that any such Losses (i) may arise out of inaccurate written information
supplied by the Nominee in connection with the solicitation of proxies or (ii)
are found in a final judgment by a court, not subject to further appeal, to have
resulted from bad faith, willful misconduct or gross negligence on the part of
the Nominee.
SOLICITATION OF PROXIES; EXPENSES
The total cost of this proxy solicitation (including fees of attorneys,
proxy solicitors and printing and mailing expenses) will be borne by ISP and is
estimated to be approximately $2,000,000. Approximately $650,000 of such costs
have been incurred to date. Neither ISP nor the Committee will seek
reimbursement from Hercules for the costs of this proxy solicitation, including
the fees being paid by ISP to the Nominees.
Proxies may be solicited by mail, telephone, telefax, telegraph, Internet,
e-mail, in person or by similar means. Officers and certain employees of ISP and
its affiliates and
29
the other participants listed on Annex A hereto, may assist in the solicitation
of proxies without any additional remuneration. Proxies will be solicited from
individuals, brokers, banks, bank nominees and other institutional holders. ISP
has requested banks, brokerage houses and other custodians, nominees and
fiduciaries to forward all solicitation materials to the beneficial owners of
the Shares they hold of record. ISP will reimburse these record holders for
their reasonable out-of-pocket expenses.
ISP has retained Georgeson on behalf of the Committee for solicitation and
advisory services in connection with the solicitation of proxies relating to the
2003 Annual Meeting, for which Georgeson will receive a fee of up to $325,000,
plus reimbursement of its reasonable out-of-pocket expenses. Georgeson will
utilize approximately 50 people to solicit proxies from Hercules' shareholders.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
ISP, ISP Investco LLC, a Delaware limited liability company, International
Specialty Holdings Inc., a Delaware corporation, the Nominees, the minority
directors and certain other persons identified in Annex A may be deemed to be
"participants" (collectively, the "Participants," and each, a "Participant") in
the Committee's solicitation of proxies for the 2003 Annual Meeting within the
meaning of the federal securities laws. Information in this proxy statement and
in Annex A about each Participant was provided by such Participant.
Information relating to the beneficial ownership of Common Stock of
Hercules by the Participants in this solicitation and certain other information
relating to the Participants is contained in Annex A to this proxy statement and
is incorporated in this proxy statement by reference.
USE OF PREVIOUSLY PUBLISHED MATERIAL
This proxy statement includes quotations from previously published
material contained in periodicals, newspapers and analyst reports, the source of
which has been cited when used. The Committee did not seek or obtain the consent
of the author or publication to the use of any such material as proxy soliciting
material. The Committee has not directly or indirectly paid or proposed to pay
any consideration in connection with the publication or republication of such
material.
OTHER INFORMATION
Except for the election of directors to the Board of Directors and the
ratification of the selection of PWC as the Company's independent public
accountants for 2003, the Committee is not aware of any other matter to be
presented for consideration at the 2003 Annual Meeting. However, if any other
matter properly comes before the 2003 Annual Meeting, the persons named as
proxies on the WHITE proxy card will exercise their discretionary authority to
vote on such matters in accordance with their best judgment.
30
The Management Proxy Statement is required to set forth information
regarding, among other things, (a) the beneficial ownership of Shares by (i) any
person known to Hercules to beneficially own more than 5% of any class of voting
securities of Hercules, (ii) each director and nominee, and certain executive
officers of Hercules, and (iii) all directors and executive officers of Hercules
as a group, (b) information concerning Hercules' directors and management,
including information relating to management compensation, and (c) information
concerning the procedures for submitting shareholder proposals for consideration
at Hercules' 2004 Annual Meeting of Shareholders. Reference is hereby made to
such information which, to the extent it may be deemed required, will be
provided supplementally to Hercules' shareholders by the Committee, will be
included in the Management Proxy Statement and will be referenced in
supplemental material provided to Hercules' shareholders by the Committee.
WE URGE YOU TO SIGN, DATE AND RETURN THE WHITE PROXY CARD VOTING "FOR" THE
ELECTION OF THE NOMINEES DESCRIBED IN THIS PROXY STATEMENT.
Dated: June 2, 2003
Sincerely,
The Hercules Shareholders' Committee for NEW Management
31
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ANNEX A
INFORMATION CONCERNING PERSONS WHO MAY BE PARTICIPANTS
IN THE COMMITTEE'S SOLICITATION OF PROXIES
The following sets forth the name and the present principal occupation or
employment, and the name and principal business address of any corporation or
other organization in which such employment is carried on, of persons who may be
deemed to be participants (collectively the "Participants") on behalf of the
Committee in the solicitation of proxies from shareholders of Hercules
Incorporated. Information is also given for each of the entities listed on
Schedule A to this Annex A, each of which is an "associate", as defined under
the proxy rules, of ISP.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS OF HERCULES
The present principal occupation or employment of each of the Nominees
listed below is set forth in the Proxy Statement under the heading "THE
NOMINEES"
--------------------------------------------------------------------------------
NAME BUSINESS ADDRESS
--------------------------------------------------------------------------------
Harry Fields Fields Associates Ltd.
28 Stonewall Lane
Mamaroneck, NY 10543
--------------------------------------------------------------------------------
Anthony Kronman 127 Wall Street
New Haven, CT 06511
--------------------------------------------------------------------------------
Vincent Tese c/o Bear Stearns & Co. Inc.
383 Madison Avenue
6th Floor
New York, NY 10179
--------------------------------------------------------------------------------
Gerald Tsai, Jr. Tsai Management, Inc.
200 Park Ave., Suite 4522
New York, NY 10166
--------------------------------------------------------------------------------
THE MINORITY DIRECTORS
----------------------------------------------------------------------------------------------------
NAME PRINCIPAL OCCUPATION BUSINESS ADDRESS
----------------------------------------------------------------------------------------------------
Samuel J. Chairman of ISP. Chief Executive c/o ISP Management Company,
Heyman Officer, Manager and General Partner Inc., 1361 Alps Road, Wayne,
of a number of closely held real estate New Jersey 07470
development companies and partnerships
whose investments include commercial
real estate and a portfolio of publicly
traded and privately held securities
----------------------------------------------------------------------------------------------------
Sunil Kumar President and CEO of ISP. c/o ISP Management Company,
Inc., 1361 Alps Road, Wayne,
New Jersey 07470
----------------------------------------------------------------------------------------------------
A-1
----------------------------------------------------------------------------------------------------
Gloria Schaffer Partner at C.A. White, Inc., a real estate 1211 Chapel Street, New Haven,
development firm Connecticut 06511
----------------------------------------------------------------------------------------------------
Raymond Financial Consultant 10 Rockefeller Plaza, Suite 712
Troubh New York, New York 10020
----------------------------------------------------------------------------------------------------
ISP INVESTCO LLC
ISP Investco LLC ("Investco") is a Delaware LLC and its principal place of
business is at 300 Delaware Avenue, Wilmington, Delaware 19801. The business of
Investco consists primarily of holding investments for International Specialty
Holdings Inc. ("Holdings") and ISP, including the shares of the Company's Common
Stock. Investco does not have executive officers and directors. All actions
taken for and on behalf of Investco are done by its sole member, Holdings. The
names and positions of the directors, officers and certain employees of Holdings
who may assist in the solicitation of proxies without any additional
remuneration are set forth below.
INTERNATIONAL SPECIALTY HOLDINGS INC.
Holdings is a Delaware corporation and the sole member of Investco. Its
business consists primarily of owning 100% of the outstanding capital stock of
Investco and ISP Chemco Inc. and its principal place of business is at 300
Delaware Avenue, Wilmington, Delaware 19801.
The name and position of the directors, officers and certain employees of
Holdings who may assist in the solicitation of proxies without any additional
remuneration are set forth below. The business address of each director and
executive officer is c/o ISP Management Company, Inc., 1361 Alps Road, Wayne,
New Jersey 07470.
NAME POSITION
Samuel J. Heyman Director and Chairman
Sunil Kumar Director, President and Chief Executive Officer
Richard A. Weinberg Director, Executive Vice President, General Counsel and
Secretary
Susan B. Yoss Executive Vice President-Finance and Treasurer
Neal E. Murphy Senior Vice President and Chief Financial Officer
A-2
INTERNATIONAL SPECIALTY PRODUCTS INC.
ISP is a Delaware corporation and has ownership of all of the outstanding
common stock of Holdings. Its principal place of business is at 300 Delaware
Avenue, Wilmington, Delaware 19801. The business of ISP consists primarily of
owning 100% of the outstanding shares of the capital stock of Holdings.
The name and position of the directors, officers and certain employees of
ISP and its affiliates who may assist in the solicitation of proxies without any
additional remuneration are set forth below. The business address of each
director and executive officer is c/o ISP Management Company, Inc., 1361 Alps
Road, Wayne, New Jersey 07470.
NAME POSITION
Samuel J. Heyman Director and Chairman
Sunil Kumar Director, President and Chief Executive Officer
Richard A. Weinberg Executive Vice President, General Counsel and Secretary
Susan B. Yoss Executive Vice President - Finance and Treasurer
Neal E. Murphy Senior Vice President and Chief Financial Officer
Stephen R. Olsen Senior Vice President - Marketing and Corporate
Development
Jason Pollack Associate General Counsel
Justin L. Topilow Manager Investments & Financial Analysis
Maria Biggio Senior Investment Analyst
SHARES HELD BY PARTICIPANTS
As of the date hereof, the Participants and their associates may be deemed
to have beneficial ownership of Shares as set forth immediately below. Except as
set forth below, as of the date hereof no associates of any of the Participants
owns any shares of Hercules common stock:
A-3
NUMBER OF SHARES APPROXIMATE MARGIN
OF HERCULES INDEBTEDNESS WITH RESPECT
NAME COMMON STOCK TO COMMON STOCK
---- ------------ ---------------
ISP Investco LLC 9,893,700 (2)
(direct ownership)(1)
International Specialty 9,893,700 (2)
Holdings Inc. (indirect ownership)(1)
International Specialty 9,893,700 (2)
Products Inc. (indirect ownership)(1)
Samuel J. Heyman 9,905,198 (2)
(indirect ownership)(1)(3)(4)
Sunil Kumar 25,987(3)(4) $0
Raymond S. Troubh 19,948(3)(4) $0
Gloria Schaffer 7,828(3)(4) $0
Harry Fields 1,000 $0
Anthony Kronman 1,000 $0
Vincent Tese 1,000 $0
Gerald Tsai, Jr. 10,000 $0
Richard A. Weinberg 0 $0
Neal E. Murphy 0 $0
Susan B. Yoss 0 $0
Stephen R. Olsen 0 $0
Jason Pollack 0 $0
Justin L. Topilow 0 $0
Maria Biggio 0 $0
----------
(1) ISP Investco LLC ("Investco") has the sole power to vote, direct the
voting of, dispose of and direct the disposition of the Hercules
Common Stock. International Specialty Holdings Inc., by virtue of it
being the sole member of Investco, may be deemed to own beneficially
(solely for purposes of Rule 13d-3) the Hercules Common Stock owned
by Investco. International Specialty Products Inc., by virtue of its
ownership of all of the outstanding common stock of IS Holdings, may
be deemed to own beneficially (solely for purposes of Rule 13d-3)
the Hercules Common Stock owned by Investco. Mr. Heyman, by virtue
of his beneficial ownership (as defined in Rule 13d-3) of
approximately 100% of the capital stock of ISP, may be deemed to own
beneficially (solely for purposes of Rule 13d-3) the Hercules Common
Stock owned by Investco.
(2) In the ordinary course of its business, Investco purchases
securities for its investment portfolio with funds obtained from the
working capital of Investco, loans from affiliates and borrowings
pursuant to standard margin arrangements. Because the securities
from multiple investments are pooled in one account, the amount of
margin indebtedness incurred by ISP in connection with its purchases
of Hercules Common Stock, which purchases were numerous and made
over several months, is impossible to determine with any degree of
certainty.
A-4
(3) Includes with respect to Mr. Heyman 8,498, Mr. Kumar 22,987, Mr.
Troubh 16,948 and Mrs. Schaffer 4,828 shares of the Company's common
stock acquired and/or granted to each of them in connection with
their service as members of the Board of Directors of the Company.
(4) Includes 3,000 options granted pursuant to the Non-employee
Directors Stock Accumulation Plan which are exercisable between
11/5/02 and 11/5/11 at an exercise price of $8.52.
TRANSACTIONS IN HERCULES SECURITIES INVOLVING PARTICIPANTS
Other than the transactions described below, no Participant has purchased
or sold any securities of Hercules in the past two years.
A. ALL TRANSACTIONS IN SHARES OF HERCULES COMMON STOCK BY INVESTCO
Number of Shares of
Date of Transaction Nature of Transaction Hercules Common Stock
--------------------------------------------------------------------------------
1/23/02 Sell 10,000(1)
2/12/02 Sell 532,000
2/13/02 Sell 115,500
2/14/02 Sell 42,000
2/15/02 Sell 126,000
----------
(1) Private sale to Mr. Kumar.
B. TRANSACTIONS IN SHARES OF HERCULES COMMON STOCK BY MR. HEYMAN
Date Nature Number of Shares of Hercules
of Transaction of Transaction Common Stock
--------------------------------------------------------------------------------
06/21/01 Grant(1) 1,100
11/05/01 Grant(2) 3,000
02/14/02 Grant(3) 2,250
11/05/02 Grant(4) 3,000
12/13/02 Grant(5) 978
02/18/03 Purchase(6) 4,170
----------
(1) Acquisition of restricted stock units pursuant to the Non-employee
Director Retirement Plan.
(2) Options granted pursuant to the Non-employee Directors Stock
Accumulation Plan which are exercisable between 11/5/02 and 11/5/11
at an exercise price of $8.52.
(3) Acquired pursuant to the Non-employee Directors Stock Bonus Program.
(4) Options granted which are exercisable between 11/5/03 and 11/5/12 at
an exercise price of $9.49.
(5) Acquisition of restricted stock units pursuant to Board Resolutions
on December 12, 2002.
(6) Purchased pursuant to Non-employee Directors Stock Accumulation Plan
at a price of 85% of fair market value.
A-5
C. TRANSACTIONS IN SHARES OF HERCULES COMMON STOCK BY MR. KUMAR
Date of Nature Number of Shares of Hercules
Transaction of Transaction Common Stock
--------------------------------------------------------------------------------
06/21/01 Grant(1) 1,100
11/05/01 Grant(2) 3,000
01/23/02 Purchase(3) 10,000
02/05/02 Grant(4) 4,858
02/14/02 Grant(5) 2,250
11/05/02 Grant(6) 3,000
12/13/02 Grant(7) 978
01/06/03 Forfeited(8) 657
02/18/03 Purchase(9) 4,458
----------
(1) Acquisition of restricted stock units pursuant to the Non-employee
Director Retirement Plan.
(2) Options granted pursuant to the Non-employee Directors Stock
Accumulation Plan which are exercisable between 11/5/02 and 11/5/11
at an exercise price of $8.52.
(3) Private purchase from ISP.
(4) Acquired pursuant to the Non-employee Directors Stock Accumulation
Plan.
(5) Acquired pursuant to the Non-employee Directors Stock Bonus Program.
(6) Options granted which are exercisable between 11/5/03 and 11/5/12 at
an exercise price of $9.49.
(7) Acquisition of restricted stock units pursuant to Board Resolutions
on December 12, 2002.
(8) Forfeited shares granted pursuant to Non-employee Directors Stock
Accumulation Plan.
(9) Purchased pursuant to Non-employee Directors Stock Accumulation Plan
at a price of 85% of fair market value.
D. TRANSACTIONS IN SHARES OF HERCULES COMMON STOCK BY MR. TROUBH
Date of Nature Number of Shares of Hercules
Transaction of Transaction Common Stock
--------------------------------------------------------------------------------
05/09/01 Purchase 7,500
06/21/01 Grant(1) 1,100
11/05/01 Grant(2) 3,000
02/05/02 Grant(3) 5,120
02/14/02 Grant(4) 2,250
11/05/02 Grant(5) 3,000
12/13/02 Grant(6) 978
----------
(1) Acquisition of restricted stock units pursuant to the Non-employee
Director Retirement Plan.
(2) Options granted pursuant to the Non-employee Directors Stock
Accumulation Plan which are exercisable between 11/5/02 and 11/5/11
at an exercise price of $8.52.
(3) Acquired pursuant to the Non-employee Directors Stock Accumulation
Plan.
(4) Acquired pursuant to the Non-employee Directors Stock Bonus Program.
(5) Options granted which are exercisable between 11/5/03 and 11/5/12 at
an exercise price of $9.49.
(6) Acquisition of restricted stock units pursuant to Board Resolutions
on December 12, 2002.
A-6
E. TRANSACTIONS IN SHARES OF HERCULES COMMON STOCK BY MS. SCHAFFER
Date of Nature Number of Shares of Hercules
Transaction Of Transaction Common Stock
--------------------------------------------------------------------------------
5/01 Purchase 500
6/21/01 Grant(1) 1,100
11/05/01 Grant(2) 3,000
2/14/02 Grant(3) 2,250
7/15/02 Sell 500
7/22/02 Purchase 500(4)
11/5/02 Grant(5) 3,000
12/13/02 Grant(6) 978
----------
(1) Acquisition of restricted stock units pursuant to the Non-employee
Director Retirement Plan.
(2) Options granted pursuant to the Non-employee Directors Stock
Accumulation Plan which are exercisable between 11/5/02 and 11/5/11
at an exercise price of $8.52.
(3) Acquired pursuant to the Non-employee Directors Stock Bonus Program.
(4) Ms. Schaffer repaid Hercules profits realized from the sale and
purchase that occurred within a period of less than six months.
(5) Options granted which are exercisable between 11/5/03 and 11/5/12 at
an exercise price of $9.49.
(6) Acquisition of restricted stock units pursuant to Board Resolutions
on December 12, 2002.
F. TRANSACTIONS IN SHARES OF HERCULES COMMON STOCK BY MR. MURPHY
Date of Nature Number of Shares of Hercules
Transaction Of Transaction Common Stock
--------------------------------------------------------------------------------
11/19/01 Purchase 300(1)
03/18/02 Sell 300
09/20/02 Purchase 200
10/17/02 Sell 200
12/23/02 Purchase 500
01/14/03 Sell 500
01/27/03 Purchase 500
01/28/03 Sell 500
01/28/03 Purchase 500
01/28/03 Sell 500
----------
(1) Mr. Murphy's employment with ISP began on February 16, 2002.
A-7
G. TRANSACTIONS IN SHARES OF HERCULES COMMON STOCK BY MR. FIELDS
Date of Nature Number of Shares of Hercules
Transaction Of Transaction Common Stock
--------------------------------------------------------------------------------
04/02/03 Purchase 1,000
H. TRANSACTIONS IN SHARES OF HERCULES COMMON STOCK BY MR. KRONMAN
Date of Nature Number of Shares of Hercules
Transaction Of Transaction Common Stock
--------------------------------------------------------------------------------
04/09/03 Purchase 1,000
I. TRANSACTIONS IN SHARES OF HERCULES COMMON STOCK BY MR. TESE
Date of Nature Number of Shares of Hercules
Transaction Of Transaction Common Stock
--------------------------------------------------------------------------------
04/03/03 Purchase 1,000
J. TRANSACTIONS IN SHARES OF HERCULES COMMON STOCK BY MR. TSAI
Date of Nature Number of Shares of Hercules
Transaction Of Transaction Common Stock
--------------------------------------------------------------------------------
04/07/03 Purchase 5,000
04/09/03 Purchase 5,000
A-8
MISCELLANEOUS INFORMATION CONCERNING THE PARTICIPANTS
Except as described in this Annex A or in the proxy statement, no
Participant nor any of their respective associates or affiliates including the
associates set forth in Schedule A (together, the "Participant Affiliates"), is
either a party to any transaction or series of transactions since January 1,
2002 or has knowledge of any currently proposed transaction or series of
proposed transactions, (i) to which Hercules or any of its subsidiaries was or
is to be a party, (ii) in which the amount involved exceeds $60,000, and (iii)
in which any Participant or Participant Affiliate had, or will have, a direct or
indirect material interest. Furthermore, except as described in this Annex A or
in the proxy statement, no Participant or Participant Affiliate (i) directly or
indirectly beneficially owns any securities of Hercules or any securities of any
subsidiary of Hercules, or (ii) has had any relationship with Hercules in any
capacity other than as a shareholder or in the case of the minority directors,
as a director.
To the best of the knowledge of the Participants and the Participant
Affiliates, none has been, within the past year, a party to any contract,
arrangement or understanding with any person with respect to any securities of
Hercules, including but not limited to joint ventures, loan or option
arrangements, puts or calls, guarantees against loss or guarantees of profits,
division of losses or profits, or the giving or withholding of proxies.
No Participant or Participant Affiliate owns any securities of the Company
of record but not beneficially.
Except as described in this Annex A or in the proxy statement, no
Participant or Participant Affiliate has entered into any agreement or
understanding with any person respecting any future employment by Hercules or
any of its affiliates or any future transactions to which Hercules or any of its
affiliates will or may be a party. Except as described in this Annex A or in the
proxy statement, there are no contracts, arrangements or understandings by any
Participant or Participant Affiliate within the past year with any person with
respect to any securities of Hercules.
ISP and certain of its subsidiaries purchase and sell certain chemical
products to Hercules and/or certain subsidiaries or affiliates of Hercules in
the ordinary course of business in an aggregate amount per year that does not
exceed $750,000. Mr. Kronman's wife, Nancy Greenberg, has been a
consultant/employee of Heyman Properties, an affiliate of Mr. Heyman.
A-9
SCHEDULE A
ASSOCIATES OF INTERNATIONAL SPECIALTY PRODUCTS INC.
Belleville Realty Corp.
International Specialty Holdings Inc.
ISP Investco LLC
International Specialty Products ISP (France) S.A.
ISP (Italia) S.r.l.
ISP Ireland
ISP Chemco Inc.
Bluehall Incorporated
Verona Inc.
ISP Alginates Inc.
ISP Environmental Services Inc.
ISP Management Company, Inc.
ISP Management LLC
ISP Administration Inc.
ISP Realty Corporation
ISP Minerals Inc.
ISP Granule Products Inc.
ISP Minerals LLC
ISP Granules Inc.
ISP Mineral Products Inc.
ISP Real Estate Company, Inc.
ISP Technologies Inc.
International Specialty Products Funding Corporation
ISP Funding Corp. II
ISP Technologies LLC
ISP Tech (Texas) Inc.
ISP Chemicals Inc.
ISP Chemicals LLC
ISP Chemical Products Inc.
ISP Freetown Fine Chemicals Inc.
ISP Investments Inc.
ISP Investments LLC
ISP Capital Inc.
ISP Global Technologies Inc.
ISP Global Technologies LLC
ISP GT Inc.
ISP International Corp.
ISP (Puerto Rico) Inc.
ISP Andina, C.A.
ISP Argentina S.A.
ISP Asia Pacific Pte Ltd.
A-10
ISP (Australasia) Pte Ltd.
ISP (Belgium) N.V.
ISP (Belgium) International N.V.
ISP do Brasil Ltda.
ISP (Canada) Inc.
ISP Global Operations (Barbados) Inc.
ISP Ceska Republika Spol, S.R.O.
ISP (China) Limited
ISP Colombia Ltda.
ISP Freight Service N.V.
ISP HC Limited
ISP Hungary Holdings Limited
ISP Global Technologies (Germany) Holding GmbH
ISP Customer Service GmbH
ISP Global Technologies Deutschland GmbH
ISP Holdings (U.K.) Ltd.
ISP Alginates (U.K.) Ltd.
ISP (Great Britain) Co. Ltd.
ISP (Hong Kong) Limited
ISP (Japan) Ltd.
ISP (Korea) Limited
ISP Marl Holdings GmbH
ISP Acetylene GmbH
ISP Marl GmbH
ISP Mexico, S.A. de C.V.
ISP (Norden) A.B.
ISP (Osterreich) Ges.m.b.h.
ISP (Polska) Sp.z. o.p.
ISP Sales (Barbados) Inc.
ISP Sales (U.K.) Limited
ISP (Singapore) Pte Ltd.
ISP (Switzerland) A.G.
ISP (Thailand) Co., Ltd.
Arramara Teoranta
Chemfields Pharmaceuticals Private Limited
Kelp Industries Pty. Ltd
Thorverk Hf
A-11
================================================================================
If you have questions or need assistance in voting your shares, please call:
Georgeson [LOGO OMITTED] Shareholder
17 State Street, 10th Floor
New York, NY 10004
(866) 288-2190 (TOLL FREE)
Banks and Brokerage Firms please call:
(212) 440-9800
================================================================================
WHITE PROXY CARD
HERCULES INCORPORATED
PROXY SOLICITED ON BEHALF OF THE HERCULES SHAREHOLDERS' COMMITTEE
FOR NEW MANAGEMENT (THE "COMMITTEE") FOR THE HERCULES INCORPORATED 2003 ANNUAL
MEETING OF SHAREHOLDERS.
The undersigned shareholder of Hercules Incorporated ("Hercules")
hereby appoints Samuel J. Heyman and Sunil Kumar and each of them, as attorneys
and proxies, each with power of substitution, to represent the undersigned at
the 2003 Annual Meeting of Shareholders of Hercules Incorporated and at any
adjournments, postponements, continuations or reschedulings thereof, with
authority to vote all Shares held or owned by the undersigned in accordance with
the directions indicated herein.
Receipt of the Proxy Statement furnished by the Committee is hereby
acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. ON MATTERS FOR WHICH YOU DO NOT SPECIFY
A CHOICE, YOUR SHARES WILL BE VOTED FOR THE ELECTION OF ALL THE NOMINEES LISTED
IN ITEM 1 AND WILL ABSTAIN ON ITEM 2. IF ANY OTHER MATTER PROPERLY COMES BEFORE
THE MEETING OR ANY ADJOURNMENTS, POSTPONEMENTS, CONTINUATIONS OR RESCHEDULINGS
THEREOF, THE NAMED PROXY HOLDERS WILL VOTE THIS PROXY IN THEIR DISCRETION ON
SUCH MATTER.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
ITEM 1
THE COMMITTEE RECOMMENDS A VOTE
"FOR" THE NOMINEES LISTED BELOW.
ELECTION OF DIRECTORS
---------------------------------------- ---------------------------------------
[_] FOR all nominees listed below: [_] WITHHOLD AUTHORITY to vote for all
nominees:
---------------------------------------- ---------------------------------------
Harry Fields, Anthony Kronman,
Vincent Tese and Gerald Tsai, Jr.
---------------------------------------- ---------------------------------------
To withhold authority to vote for any individual nominee
identified above, check the "FOR" box and write that nominee's name on the line
provided below:
-------------------------------
ITEM 2
THE COMMITTEE MAKES NO RECOMMENDATION ON
THE FOLLOWING MATTER TO BE VOTED ON
AT THE 2003 ANNUAL MEETING
RATIFICATION OF FOR AGAINST ABSTAIN
INDEPENDENT [_] [_] [_]
PUBLIC ACCOUNTANTS
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY BE PRESENTED TO THE MEETING OR ANY ADJOURNMENTS,
POSTPONEMENTS, CONTINUATIONS OR RESCHEDULINGS THEREOF.
P Dated: _____________, 2003
R -------------------------------------------
Signature (Please sign exactly as your name appears to the left)
O
-------------------------------------------
Additional Signature (if held jointly)
X
-------------------------------------------
Title:
Y
Please sign exactly as your name appears on this proxy. When shares are
held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title
as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person. The signer hereby revokes all
proxies heretofore given by the signer to vote at the 2003 Annual
Meeting of Hercules Incorporated and any adjournments postponements,
continuations or reschedulings thereof.
PLEASE SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.