PRELIMINARY PROXY STATEMENT
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON MARCH 5, 2001
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) of the
Securities Exchange Act of 1934.
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6 (e) (2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
HERCULES INCORPORATED
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INTERNATIONAL SPECIALTY PRODUCTS INC.
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(NAME OF PERSON (S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(I) (1) and
0-11.
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2) Aggregate number of securities to which transaction applies:
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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
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[_] Fee paid previously with preliminary materials:
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NY2:\1005757\13\lk1p13!.DOC\54104.001803/04/01
PRELIMINARY PROXY MATERIALS DATED MARCH 5, 2001
SUBJECT TO COMPLETION
PROXY STATEMENT
OF INTERNATIONAL SPECIALTY PRODUCTS INC.
--------------------------
2001 ANNUAL MEETING OF THE STOCKHOLDERS
OF HERCULES INCORPORATED
--------------------------
We are sending this proxy statement to you as one of the
holders of common stock, $25/48 stated value per share, of Hercules
Incorporated, a Delaware corporation, in connection with our solicitation of
your proxy for use at the 2001 Annual Meeting of the Stockholders of Hercules
scheduled for _____ A.M., local time, on Thursday, April 26, 2001, at
_________________________________________ and at any adjournments or
postponements thereof. We are International Specialty Products Inc., a Delaware
corporation, and beneficially own approximately 9.98% of Hercules' outstanding
shares of common stock.
We are soliciting your proxy to vote on the following
proposals at the 2001 Annual Meeting:
o THE ELECTION OF OUR NOMINEES, Samuel J. Heyman, Sunil
Kumar, Gloria Schaffer and Raymond Troubh, as directors of
Hercules in the class with a three-year term continuing
until the 2004 Annual Meeting;
o THE DIRECTOR ELECTION BYLAW AMENDMENT, which would amend
the Bylaws of Hercules so that there will be no question
that directors shall be elected by a plurality vote of the
shares present in person or by proxy and entitled to vote;
o THE POISON PILL BYLAW PROPOSAL, to adopt a new Bylaw that
would require the Hercules Board of Directors to redeem
the rights distributed under the Company's "Poison Pill"
Rights Agreement, dated as of August 4, 2000, terminate
such Rights Agreement and not adopt any new rights
agreement unless approved by the stockholders;
o THE SECTION 203 BYLAW PROPOSAL, to adopt a new Bylaw that
would become effective in 12 months to cause Hercules to
opt out of Section 203 of the Delaware General Corporation
Law, which restricts certain transactions with a greater
than 15% stockholder not approved by the Board;
o THE BYLAW REPEAL PROPOSAL, to repeal any Bylaw amendments
that may be adopted unilaterally by the Hercules Board
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between March 29, 2000 and the date of the 2001 Annual
Meeting, in order to minimize any attempt by the Hercules
Board to frustrate the consideration or implementation of
our proposals; and
o THE OMNIBUS PROPOSAL, a resolution to set the order in
which our proposals will be voted upon at the 2001 Annual
Meeting.
We refer to the proposed election of the ISP nominees and the other proposals
described above collectively as the "Proposals."
THIS PROXY STATEMENT AND THE BLUE PROXY CARD ARE FIRST BEING FURNISHED TO
STOCKHOLDERS ON OR ABOUT MARCH __, 2001.
WE URGE YOU TO SIGN, DATE AND RETURN THE BLUE PROXY CARD IN FAVOR OF THE
ELECTION OF OUR NOMINEES AND THE ADOPTION OF OUR PROPOSALS DESCRIBED IN THIS
PROXY STATEMENT.
IF YOU HAVE ALREADY SENT A WHITE PROXY CARD TO THE HERCULES DIRECTORS, YOU MAY
REVOKE THAT PROXY AND VOTE AGAINST THE ELECTION OF HERCULES NOMINEES AND
PROPOSALS BY SIGNING, DATING AND RETURNING THE ENCLOSED BLUE PROXY CARD. THE
LATEST DATED PROXY IS THE ONLY ONE THAT COUNTS. ANY PROXY MAY BE REVOKED AT ANY
TIME PRIOR TO THE 2001 ANNUAL MEETING BY DELIVERING A WRITTEN NOTICE OF
REVOCATION OR A LATER DATED PROXY FOR THE 2001 ANNUAL MEETING TO [SOLICITATION
AGENT] OR TO THE SECRETARY OF HERCULES, OR BY VOTING IN PERSON AT THE 2001
ANNUAL MEETING. SEE "VOTING PROCEDURES" ON PAGE ___.
4
REASONS FOR THE SOLICITATION
We are asking you to elect our nominees and adopt our
Proposals in order to:
o elect representatives with a strong ownership interest and
orientation, who are committed to maximize value for all
Hercules stockholders;
o bring about the prompt sale of the Company; and
o remove unwarranted barriers to offers for your shares, so
that you can make your own decisions.
HERCULES' PERFORMANCE HAS BEEN IN OUR VIEW DISASTROUS.
The performance of Hercules in our view has been disastrous
for stockholders. We need only point out that Hercules' stock price has lost
nearly 80% of its value in the last five years. In addition, the Company's
performance has gone from bad to worse, consistently failing to meet its own
earnings expectations, and even reporting a loss of $6 million in its latest
fiscal quarter. Moreover, despite management's commitment to maintain it, your
dividend was first cut and then eliminated.
HERCULES BOARD HAS, WE BELIEVE, DISREGARDED THE INTERESTS OF ITS STOCKHOLDERS.
The Hercules Board has entrenched itself over time by
erecting a fortress of anti-takeover defenses, and we believe that the Board may
feel less urgency than you do with respect to the fate of your investment.
Consider this - in October 2000, we proposed to purchase 25 million additional
shares of Hercules stock for $17.50 per share in cash, a premium of almost 50%
over the closing price on the day before our Hercules share ownership was first
publicly announced. We made this offer because we believe in the Company's
inherent value. However, because of the Company's anti-takeover defenses, our
offer required Board consent and despite repeated requests that Hercules permit
us to proceed, the Board refused to do so. While the incumbent Board refused to
permit our proposal to go forward, it wasted no time adding a poison pill to its
defensive arsenal. This act defied the will of Hercules stockholders who had
adopted a proposal to redeem Hercules' previous poison pill in 1992.
IN ORDER TO REALIZE ITS INHERENT VALUE, WE BELIEVE THAT THE HERCULES BOARD MUST
PROMPTLY PURSUE A SALE OF THE COMPANY.
Management wasted valuable time last year pursuing a flawed
restructuring strategy. Despite our urging a prompt sale of the Company, it was
not until late November that the Company realized we were right and began to
pursue a sale. Notwithstanding its sale announcement, the Company's performance
continues to deteriorate and no sale of the Company is in sight.
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WE ARE ASKING YOU TO ELECT A SLATE OF DIRECTORS WITH A STRONG OWNERSHIP INTEREST
AND ORIENTATION, COMMITTED TO MAXIMIZING VALUE FOR HERCULES STOCKHOLDERS.
As the beneficial owner of more than 10.7 million shares of
Hercules common stock, we have an investment of $150 million at stake. Our
interests are clearly aligned with yours. We want to maximize value for Hercules
stockholders. In contrast, the four incumbent directors up for reelection this
year collectively own less than 50,000 shares of Hercules stock, worth
approximately only $700,000 at current market prices.
We seek the opportunity for our nominees to participate
constructively as directors, and particularly with respect to any sale process
involving Hercules. We are not seeking to control the Company. We have no
special interest. Rather, our concern is to safeguard stockholder interests and
help ensure that a sale be executed in an efficient and timely manner for the
best price. Had Hercules and its Board acted regarding our requests to remove
unwanted barriers to offers for your shares and adopted our recommendations on a
timely basis to move forward promptly with the sale of the Company, we would not
be seeking the representation of our nominees on the Hercules Board. In our
view, the entrenchment of this Board and the use of the variety of anti-takeover
devices they maintain have not served the interests of the stockholders and
raises serious question as to whether the incumbent directors can provide the
best solution to the Company's problems. Their record speaks for itself.
--------------------------------------
QUESTIONS AND ANSWERS ABOUT THIS PROXY SOLICITATION
Q: WHO IS SOLICITING YOUR PROXY?
A: We are International Specialty Products Inc. ("ISP"), a New York Stock
Exchange listed, multinational manufacturer of specialty chemicals and
mineral products. As of the date of this proxy statement, we are the
largest stockholder of the Company and beneficially own 10,719,200
shares of Hercules common stock, representing approximately 9.98% of the
outstanding shares. For more information on the participants in our
proxy solicitation, please see "Certain Information Concerning the
Participants" on page ___.
Q: IS KEEPING THE INCUMBENT BOARD IN PLACE IN YOUR BEST INTERESTS?
A: The Hercules Board has failed in our view to safeguard the value of your
investment in Hercules. Consider the record which continues to go from
bad to worse:
o Hercules' stock price has lost nearly 80% of its value in the
last five years, wiping out more than $5.5 billion in
stockholder value;
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o As recently as last year, Hercules first cut and then totally
eliminated your dividend despite assurances that the dividend
would be maintained;
o Hercules' $3.1 billion acquisition of BetzDearborn in 1998 was
characterized as a "strategic blunder." A well recognized trade
publication even compared managing Hercules after this "bad
deal" with "walk[ing] onto the Titanic;"
o Based on total return to shareholders over the past one, three,
five and 10 years, Hercules was recently ranked 6th worst out of
1,000 public companies by The Wall Street Journal;
o Hercules' debt recently was downgraded by Standard & Poor's; and
o Hercules recorded a net loss of $6 million dollars, excluding
nonrecurring items, in its latest fiscal quarter failing once
again to meet expectations.
In view of this record, ask yourself, can I rely on the current Board to
protect my interests and deliver value to stockholders? Keeping the
incumbent Board in place, we believe, is not in the best interests of
Hercules stockholders. Electing our nominees will send a strong message
that stockholders are dissatisfied with the performance of the incumbent
Board, its disregard for stockholder interests and the lack of progress
in the sale process.
Q: WHY SHOULD THE INCUMBENT DIRECTORS REMAIN IN OFFICE EVEN IF THEY RECEIVE
FEWER VOTES THAN OUR NOMINEES?
A: Hercules claims that its Bylaws require that any director nominee must
receive the affirmative vote of the holders of a majority of all shares
issued and outstanding to be elected, instead of the greatest number of
votes actually cast at the 2001 Annual Meeting (a plurality vote). This
would mean that even if each ISP nominee receives 50,000,000 votes and
each incumbent receives 10,000,000 votes, the incumbents would retain
their seats on the Board because our nominees would not have received
the majority vote of all outstanding shares.
This voting requirement, we believe, is not only highly unusual but also
disenfranchises stockholders and is inconsistent with good corporate
governance. We do not know of any other public company that has such a
provision. In our view, the Hercules Bylaws, as interpreted by the
Company, serve 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.
Based on the reasons set forth in this proxy statement under "Vote
Required," we believe that our nominees should be elected as directors
if they receive the greatest number of votes cast. We are also
proposing to amend the Hercules Bylaws so that there will be no question
that directors may be elected by a plurality vote.
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Q: WHO ARE THE ISP NOMINEES?
A: In addition to Mr. Heyman, the Chairman of ISP's Board, and Mr. Kumar,
President and Chief Executive Officer of ISP, our nominees include two
independent persons who are not affiliated with ISP - Raymond Troubh and
Gloria Schaffer. Mr. Troubh has broad financial experience, with over 25
years in financial consulting, which includes serving as a general
partner at Lazard Freres & Co. Mr. Troubh also served as a governor of
the American Stock Exchange. In addition, Mr. Troubh has served as a
member of the board of directors of eight public companies - including
Starwood Hotels Resorts, Inc., Triarc Companies, Inc. and WHX
Corporation. Gloria Schaffer has served in a number of high profile
government positions including the Secretary of State and the
Commissioner of the Department of Consumer Protection of the State of
Connecticut and a Member of the Civil Aeronautics Board. If elected to
the Hercules Board, each ISP nominee would act in accordance with his or
her fiduciary duties to Hercules stockholders with respect to any action
that he or she takes as a director. We have no reason to believe that
any of our nominees will be disqualified or unable or unwilling to serve
if elected. However, if any of our nominees are unable to serve or for
good cause will not serve, proxies may be voted for another person
nominated by ISP to fill the vacancy.
Q: WHY DOES HERCULES HAVE SO MANY ANTI-TAKEOVER DEFENSES?
A: Hercules has entrenched itself over time with a fortress of
anti-takeover defenses which the Board can use to block a
change-in-control transaction. Ask yourself whether these devices are in
your best interest:
o The Hercules poison pill effectively prevents the acquisition of
10% or more of Hercules' outstanding shares without Board
approval. The pill, with a 10% threshold, was adopted hastily
after we disclosed our ownership interest in the Company,
despite the fact that Hercules stockholders had rejected an
earlier 20% threshold poison pill;
o Hercules directors serve staggered terms, preventing any
independent stockholder or group of stockholders from gaining a
majority of the seats on the Hercules Board in a single year;
o Hercules claims that its Bylaws require directors to be elected
by a majority of all issued and outstanding shares, creating a
higher voting requirement than the typical plurality requirement
used by most public companies. This can result in the incumbent
directors remaining in office even in the event they receive
fewer votes than opposing nominees; and
o any merger or consolidation of Hercules with a 10% or greater
stockholder who has purchased additional shares will require an
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80% stockholder approval, unless the transaction is approved by
the current directors or their hand-picked successors.
As if this were not enough, your Board has additional anti-takeover
protections, including "blank check" preferred stock, an 80%
supermajority vote requirement to amend certain protective Bylaws and
the ability to add directors without stockholder approval. In addition,
the Board has refused to exempt itself from the anti-takeover provisions
of Section 203 of the Delaware General Corporations Law.
Why does the Board need so many barriers? You do not need to be
"protected" from making your own decision to sell your shares. YOU
should have the ultimate right to decide. Our nominees, subject to their
fiduciary duties, will advocate that the Board remove unwarranted
barriers to offers for your shares, so that you can make your own
decisions.
Q: WHY SHOULD YOU VOTE TO TERMINATE THE POISON PILL RIGHTS AGREEMENT?
A: The Rights Agreement, we believe, is harmful to your interests. These
poison pill rights serve as a powerful anti-takeover defense by making
it prohibitively expensive to acquire 10% or more of Hercules' common
stock without Board approval. The Hercules poison pill is in our view
yet another takeover barrier erected by the Company to frustrate
transactions which can be in your interest. It provides the Hercules
Board with the unilateral power to block offers which you may want to
accept.
Hercules stockholders have already voiced their strong opposition to
poison pills. In 1992, a non-binding proposal to redeem Hercules'
then-existing 20% threshold poison pill or submit it to a binding
stockholder vote was approved by stockholders at the Hercules Annual
Meeting. Despite this stockholder mandate, the Hercules Board refused to
terminate the pill for three years and never put it to a definitive
vote. Last year, without consulting stockholders, the Hercules Board
rushed to adopt a new poison pill, less than two weeks after ISP had
publicly announced its ownership position in Hercules. The Hercules
Board adopted this new poison pill with a low 10% threshold, we believe,
to deter us or anyone else from increasing their ownership interest in
the Company.
You do not need to be "protected" from making your own decision to sell
your shares. YOU should have the ultimate right to decide. Since the
Board has chosen to defy the clear wishes of stockholders as expressed
in the 1992 vote, our Poison Pill Bylaw Proposal would leave nothing to
chance - it would require the Hercules Board to redeem the Rights,
terminate the Rights Agreement, and not adopt any new rights agreement
unless approved by the stockholders. The termination of the poison pill
eliminates a significant barrier to offers to purchase Hercules shares,
which you and other stockholders may well choose to accept.
9
Q: DOES ISP PLAN TO SEEK CONTROL OF HERCULES?
A: We have no intention to seek control of the Company. Our nominees, if
elected, will not constitute a majority of the Hercules Board and
accordingly will not be able to control the actions of the Board. If a
sale of the Company does not take place, we may at a future time ask you
to elect additional nominees that, together with the ISP nominees, would
constitute a majority of the Hercules Board.
We continue to be interested in increasing our ownership position in
Hercules. In October 2000, we made a proposal to purchase 25 million
additional Hercules shares for $17.50 per share in cash. Despite our
repeated requests, the Hercules Board refused to exempt our offer from
its poison pill. This refusal was especially suprising to us given the
multitude of takeover defenses the Company has erected and our
willingness to enter into appropriate standstill provisions to address
the Company's concerns about our ownership position.
Q: WHY ARE YOU PROPOSING TO REPEAL BYLAWS ADOPTED BY THE HERCULES BOARD?
A: We propose to repeal any Bylaw amendments adopted by Hercules Board
without stockholder approval between March 29, 2000 and the conclusion
of the 2001 Annual Meeting. We are not aware of any amendments made
between March 29, 2000 and now. Based upon previous Hercules Board
actions, we believe that any Bylaw amendments unilaterally adopted by
the Hercules Board prior to the conclusion of the 2001 Annual Meeting
are likely to be aimed at frustrating our proposals and therefore, are
not likely to be in the best interests of Hercules stockholders. Any
Bylaw amendments validly adopted by the Hercules Board prior to the
conclusion of the 2001 Annual Meeting would remain in effect unless and
until our proposal to repeal such Bylaws is adopted. If the Hercules
Board unilaterally adopts any such Bylaw amendments before the
conclusion of the 2001 Annual Meeting, it will have an opportunity to
inform stockholders of what the Board believes are the benefits of these
amendments and to attempt to persuade stockholders to vote against this
proposal.
Q: WHO CAN VOTE AT THE 2001 ANNUAL MEETING?
A: If you owned Hercules shares on March 6, 2001 (the "Record Date"), you
have the right to vote at the 2001 Annual Meeting. As of the close of
business on the Record Date, we believe that there were [107,434,824]
shares of common stock of Hercules issued and outstanding and entitled
to vote. Stockholders have one vote for each share of common stock they
own with respect to all matters to be considered at the 2001 Annual
Meeting.
10
Q: HOW MANY SHARES MUST BE VOTED IN FAVOR OF OUR OTHER PROPOSALS FOR THEM
TO BECOME EFFECTIVE?
A: Our proposals, other than for the election of our nominees (as discussed
above), can be adopted by the following votes:
Amendment of the Voting Requirement to Elect Directors -- The adoption
of our Director Election Bylaw Amendment will require the affirmative
vote of the holders of at least 80% of all shares issued and outstanding
and entitled to vote at the 2001 Annual Meeting.
Section 203 Bylaw Proposal -- The adoption of our Section 203 Bylaw
Proposal will require the affirmative vote of the holders of a majority
of all shares issued and outstanding and entitled to vote at the 2001
Annual Meeting.
Other Proposals -- The adoption of each of our Poison Pill Bylaw
Proposal, Bylaws Repeal Proposal and Omnibus Proposal will require the
affirmative vote of the holders of a majority of the shares present in
person or by proxy and entitled to vote at the 2001 Annual Meeting.
Q: WHAT SHOULD YOU DO TO VOTE?
A: Sign, date and return the enclosed BLUE Proxy card TODAY in the envelope
provided. For more information on how to vote your shares, please see
"Voting Procedures" on page ___.
Q: WHO DO YOU CALL IF YOU HAVE QUESTIONS ABOUT THE SOLICITATION?
A: Please call ___________________ toll free at ____________.
11
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IMPORTANT
PLEASE REVIEW THIS DOCUMENT AND THE ENCLOSED MATERIALS
CAREFULLY. YOUR VOTE IS VERY IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES YOU
OWN.
1. If your shares are registered in your own name, please sign, date and
mail the enclosed BLUE Proxy Card to _____________________ in the
postage-paid envelope provided today.
2. If you have previously signed and returned a WHITE proxy card to
Hercules, you have every right to change your vote. Only your latest
dated card will count. You may revoke any WHITE proxy card already sent
to Hercules by signing, dating and mailing the enclosed BLUE Proxy Card
in the postage-paid envelope provided. Any proxy may be revoked at any
time prior to the 2001 Annual Meeting by delivering a written notice of
revocation or a later dated proxy for the 2001 Annual Meeting to
_____________________ or the Secretary of Hercules, or by voting in
person at the 2001 Annual Meeting.
3. If your shares are held in the name of a brokerage firm, bank nominee
or other institution, only it can sign a BLUE Proxy Card with respect
to your shares and only after receiving your specific instructions.
Accordingly, please sign, date and mail the enclosed BLUE Proxy Card in
the postage-paid envelope provided, and to ensure that your shares are
voted, you should also contact the person responsible for your account
and give instructions for a BLUE Proxy Card to be issued representing
your shares.
4. After signing the enclosed BLUE Proxy Card, do not sign or return the
WHITE proxy card unless you intend to change your vote, because only
your latest dated proxy card will be counted.
If you have any questions about giving your proxy or
require assistance, please call:
[NAME/ADDRESS OF
PROXY SOLICITOR]
Call Toll-Free: ______________
Banks and Brokerage Firms Call Collect: _____________
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12
BACKGROUND AND RECENT EVENTS
ISP began purchasing shares of Hercules common stock in
January 2000 because we believed that the shares of the Company were
substantially undervalued. On July 24, 2000, we filed a Schedule 13D with
respect to our beneficial ownership of approximately 9.99% of the outstanding
common stock of Hercules and informed the Company's former Chairman and CEO,
Vincent Corbo, that we wished to increase our ownership position and were filing
a Hart-Scott-Rodino application seeking permission to do so.
On August 1, 2000, Hercules released its second quarter
2000 earnings, which reported that net income had fallen 71% from the previous
quarter.
On August 4, 2000, less than two weeks after we filed our
Schedule 13D, the Hercules Board adopted the poison pill Rights Agreement. The
Board, in taking this action, defied the wishes of Hercules stockholders as
evidenced by the adoption of a non-binding proposal to redeem Hercules' previous
pill in 1992. The poison pill serves as a powerful anti-takeover device by
making it prohibitively expensive to acquire 10% or more of Hercules' common
stock without Board approval.
On August 25, 2000, Hercules announced that it was reducing
its quarterly dividend from $0.27 to $0.08 per share. The dividend was totally
eliminated on November 14, 2000.
On October 11, 2000, Mr. Heyman proposed that ISP commence
a tender offer for 25 million shares of Hercules common stock at $17.50 per
share in cash. This price represented a premium of over 22% based on the
Hercules closing price of $14.31 per share on October 10, 2000, and an almost
50% premium over the Hercules closing price of $11.75 per share on July 21,
2000, the day before our first public filing stating that we had acquired a 9.9%
interest in Hercules. In connection with ISP's proposal, Mr. Heyman delivered
the following letter to the Board on October 11, 2000, encouraging the Board to
abandon management's restructuring plan.
Dear Hercules Board member:
As you no doubt are aware, Vince Corbo and I have had a
number of discussions in recent weeks regarding Hercules'
restructuring program. In this regard, I was surprised to learn
from Vince yesterday that, notwithstanding the recent Moody's
downgrade of the Company's debt as well as other developments
referred to below, Hercules does not intend to alter its current
course. Parenthetically, the downgrade, coming at a particularly
turbulent time in the high yield market (I am enclosing an
October 10th, The Wall Street Journal article entitled,
"Junk-Bond Prices Shrink As Investor Caution Grows," regarding
this subject), will now result in a very costly refinancing for
13
the Company -- thereby making it impossible for Hercules to
achieve anywhere near the interest savings previously projected.
While Hercules' game plan may have made good sense when
first adopted, we are convinced that adverse developments in
recent months have now overtaken it. Accordingly, for Hercules to
proceed now with a "too little, too late" program raises serious
question as to whether the Company is pursuing a strategy which
discriminates in favor of its creditors at the expense of its
shareholders.
Consider these recent developments:
(1) Significant delays in asset dispositions,
including the real possibility that FiberVisions
will not be sold at this time;
(2) Decline in growth forecasts for core operations;
(3) Reduction in size of acquisition program; (4)
Significant decline in projected interest rate
savings;
(5) Adverse impact of the euro, which is especially
significant for Hercules given its substantial
European presence;
(6) Decline in overall earnings projections; and
(7) Drastic dividend reduction.
In the face of these developments, it has become all
too apparent to us that the course Hercules is now pursuing will
not enhance shareholder value but erode it instead. What
justification can there be for making asset divestitures which
are earnings dilutive, and which in the end, because of the
credit downgrade as well as other factors, will not be sufficient
to enable Hercules to achieve sufficient financial flexibility to
grow its remaining businesses at anywhere near the targets the
Company established only several months ago? Under all the
circumstances and given the fact that private sale values of
specialty chemicals businesses are still robust and well above
public trading values, we have come to the conclusion that the
only practicable option for realizing Hercules' underlying values
must involve the sale of the Company, in whole or in parts.
Also of serious concern to us is Hercules' apparent
disregard for the interest of its shareholders, as demonstrated
by its adoption of a "poison pill" on August 7th, which provides
for a 10% trigger point. Significantly, the Board adopted this
anti-shareholder provision little more than 2 weeks after we had
notified Vince that we had acquired 9.9% of Hercules' shares,
informing him at the same time that we wished to increase our
ownership position and were filing a Hart-Scott Rodino
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application seeking permission to do so. Moreover, Hercules'
refusal to eliminate or modify its "poison pill" in the face of
our offer of a standstill agreement is further indicative of
Hercules' anti-shareholder bias.
We are therefore requesting that the Hercules Board
abandon its "too little, too late" approach and promptly
entertain a sale of the Company while the time is still
propitious. And the timing here is all the more important in
light of the fact that Hercules is about to embark on a major
refinancing, which we anticipate could become extremely expensive
to unwind should Hercules decide to pursue a sale of the Company
at a later time.
In the meantime, as an expression of our confidence in
this proposed course of action and to provide those Hercules
shareholders who wish to sell their shares now with an
opportunity to do so at a 25% premium above the current market
price, we are prepared to commence a tender offer for 25 million
shares of Hercules common stock at $17.50 per share in cash.
While we believe that Hercules' shares should be worth more, in a
sale of the Company, than our tender offer price, this price
represents an almost 50% premium over Hercules' closing price of
$11.75 per share on July 21st, the day before ISP's 13D filing
providing notice for the first time that it had acquired a 9.9%
interest in Hercules. ISP's tender offer will not be subject to
financing but will obviously require that the Hercules Board
exempt our offer from the "poison pill" and approve ISP's
purchase of shares for purposes of Section 203 of the Delaware
General Corporation Law.
We are prepared to commence the tender offer promptly
should you inform us that you will meet the above conditions. We
would appreciate your timely response.
Sincerely,
/s/ Samuel J. Heyman
On October 11, 2000, Hercules issued a press release
indicating that it had received ISP's letter and that the Board would consider
ISP's proposal. Soon thereafter, on October 17, 2000, Vincent Corbo resigned as
Chairman and CEO of Hercules and Thomas Gossage was named its new Chairman and
CEO. Mr. Gossage stated that Hercules "will consider all strategic alternatives,
as well as the proposal made by Mr. Heyman, based on our considered view of what
is in the best interest of all Hercules shareholders." At the same time,
Hercules announced that it did not expect to meet analysts earnings estimates
for its third quarter ending September 30, 2000.
15
On November 28, 2000, Hercules announced that its Board had
decided to consider the sale or merger of the Company. Mr. Gossage stated that
"the best strategic path for the Company over the long-term is to become part of
a larger enterprise" and that "moving forward on this path provides the maximum
value and opportunity for our shareholders, employees and customers."
On January 18, 2001, Hercules announced that it had ended
discussions on the sale of its FiberVisions Unit. Shortly thereafter, on January
23, 2001, Hercules debt was downgraded by Standard & Poor's.
After receiving no response to our proposal made on October
11, 2000, and in light of the adverse developments at the Company described
above, on January 23, 2001, ISP reiterated its proposal to make an offer to
purchase 25 million shares of Hercules common stock at a price of $17.50 per
share in cash if, as requested by Mr. Heyman, the Hercules Board would exempt
the offer from the poison pill and approve ISP's purchase of shares for purposes
of Section 203 of the Delaware General Corporation Law. In connection with ISP's
proposal, Mr. Heyman delivered the following letter to Mr. Gossage on January
23, 2001:
Dear Tom:
Confirming yesterday's telephone conversation, I have
reiterated ISP's interest in proceeding with its tender offer
first proposed to the Hercules Board last October.
Notwithstanding a number of adverse developments at the Company,
as well as the substantial deterioration of the U.S. economy in
recent months, we are still willing to proceed on the same basis
-- at the original price of $17.50 per share in cash for 25
million shares of Hercules common stock.
Given the delay with respect to execution of the
Company's program and uncertainty as to its outcome, we believe
that a substantial number of Hercules shareholders may very well
wish to avail themselves of the opportunity to sell their
shares, or a portion thereof, at what amounts to a 30% premium
above the current market price and an almost 50% premium over
Hercules' closing price of $11.75 per share on July 21st, the
day before ISP's 13D filing providing notice for the first time
that it had acquired a 9.9% interest in Hercules. As we have
stated earlier, ISP's tender offer will not be subject to
financing but will obviously require that the Hercules Board
exempt our offer from the "poison pill" and approve ISP's
purchase of shares for purposes of Section 203 of the Delaware
General Corporation Law. We are prepared to commence the tender
offer promptly should you inform us that you will meet these
conditions.
16
Finally, ISP's proposed course of action is perfectly
consistent with Hercules' ongoing effort to maximize shareholder
values. In this connection, you can always rely on the fact that
we will be constructive with respect to any actions favorable to
all Hercules shareholders. Moreover, time is of the essence
here. As you know, Tom, we have been extremely patient due in no
small measure to your reassurance to Hercules shareholders over
recent months as well as our desire to be constructive. Now, of
course, Hercules' continued optimistic prognostications over the
past year have yet to be realized, the economic environment
deteriorates with each passing day, and we must be allowed to
proceed expeditiously so that we can hold the price in place.
I would appreciate your prompt response.
All the best.
Sincerely,
/s/ Samuel J. Heyman
After still receiving no response to our tender offer
proposal made on October 11, 2000, and reiterated on January 23, 2001, Mr.
Heyman delivered the following letter to Mr. Gossage on February 7, 2001:
Dear Tom:
I am very disappointed that, notwithstanding our
attempt to impress upon you the urgency that ISP be permitted to
proceed with its tender offer, now more than two weeks later we
still have not received your Board's response. Apparently, it
has decided to await the results of Hercules' divestiture
program, which we believe is a serious mistake. Moreover, as I
indicated to you, it is just not realistic to expect us to keep
our offer in place indefinitely, especially when the Company can
clearly pursue its divestiture program while permitting our
offer to go forward at the same time.
Unless you promptly communicate that we can proceed
with the tender offer, we would now request that Hercules
consider an alternative ISP initiative - which would be to amend
the threshold for the Company's poison pill from the current 10%
to 20% (the latter being a more customary threshold for
companies with poison pills) and approve any party's purchase of
shares up to the 20% threshold for purposes of Section 203 of
the Delaware General Corporation Law. While you have indicated
that you share our philosophic opposition to poison pills
altogether, this more limited, compromise approach is designed
to hopefully elicit your Board's prompt affirmative response and
17
would at least permit ISP, or anyone else for that matter, to
make purchases up to a 20% limitation.
If the Hercules Board refuses to take this action
voluntarily, we intend to seek a vote of Hercules shareholders
at this year's Annual Meeting to repudiate the Company's poison
pill. In this connection, we believe that if the Company will
not act responsibly, its shareholders should be able to decide.
If you require us to proceed in this fashion, we are requesting
that the Hercules Board include the various proposals in the
attached letter in your proxy materials for this year's Annual
Meeting. Should the Board refuse this request, the attached
letter serves as formal notification pursuant to Section 14 of
the Securities Exchange Act of 1934, which we have been advised
must be provided no later than today.
As you can see, we have included a proposal whereby
Hercules would opt out of the provisions of Section 203 of the
Delaware General Corporation Law, as well as various
housekeeping proposals, and have included a proposal relating to
the methodology used to elect directors. In this later
connection, we believe that Hercules Bylaws, which your Company
claims require "the affirmative vote of a majority of the
outstanding shares" to elect directors, is highly unusual and
serves no purpose other than as an entrenchment device. Most
companies require only a majority of the shares voted (a
plurality). Under your interpretation of the bylaws, a nominee
could receive a majority of the votes cast but nevertheless lose
the election.
All the best.
Sincerely,
/s/ Samuel J. Heyman
Attached to Mr. Heyman's letter was a letter from ISP to
Hercules informing the Company of our intention to present our proposals at the
2001 Annual Meeting.
Also on February 7, 2001, Hercules reported fourth quarter
2000 profit from operations of $68 million and a net loss of $6 million, or
$0.05 per diluted share, excluding nonrecurring items. This result was in sharp
contrast to Hercules own announcement only months earlier that it expected
fourth quarter profit from operations to be in the range of $100 million. The
results also reflected a significant decline from Hercules fourth quarter 1999
earnings of $47 million and diluted earnings per share of $0.45. According to
First Call/Thomson Financial, analysts had predicted much better results,
expecting Hercules to post earnings of $0.05 per share.
18
On February 8, 2001, almost four months after our initial
proposal, Hercules said that it would consider ISP's tender offer "in due
course." Mr. Gossage also told analysts on February 8, 2001 that he was working
toward a sale of the Company by midyear, but declined to provide details on the
process.
In light of the Company's failure to respond to ISP's
repeated requests that the Company terminate its poison pill, or in the
alternative amend the poison pill's threshold from 10% to 20%, Mr. Heyman
delivered the following letter to Mr. Gossage on February 20, 2001:
Dear Tom:
Despite our repeated requests that Hercules eliminate
its poison pill (or, in connection with a proposed compromise,
at least increase its trigger point to 20%) to enable ISP (or
anyone else for that matter) to increase its ownership of your
Company's shares - which requests date back to September, 2000,
and have been repeated in letters dated October 11, January 23,
and most recently on February 7 - we continue to receive no
response from you or your Board.
Since we became a shareholder early last year, the
Company and its shareholders have in our opinion paid a high
price for management's procrastination as well as its continued
flawed policies and poor execution. We are also shocked and
surprised by the Company's continued withholding of information
from its shareholders and what we consider to be its remarkable
indifference to their concerns - as was plainly evidenced by the
Company's recent conference call.
Under the circumstances, we believe that you have left
us no alternative but to wage a proxy contest at the Company's
Annual Meeting this Spring. In addition to the previous
notification we have given regarding proposals to be presented
for action at the Meeting, we will also be nominating a slate of
Directors to run for the four Board seats whose terms expire
this year, director-nominees who, I can assure you, will be
committed to the maximization of values for all Hercules
shareholders.
Sincerely,
/s/ Samuel J. Heyman
The Hercules Board failed to respond to ISP's repeated
requests (on October 11, 2000, January 23, 2001 and February 7, 2001) that
Hercules eliminate or revise its poison pill to enable ISP to promptly proceed
with its proposed tender offer.
19
On February 23, 2001, Mr. Gossage sent a letter to Mr.
Heyman stating, among other things, that the Board had declined to amend the
Hercules Shareholder Rights Plan to permit an acquiror to purchase up to an
additional 10% of the Company's shares beyond the current 10% threshold.
In response to Mr. Gossage's February 23 letter, Mr. Heyman
sent Mr. Gossage the following letter on February 28, 2001:
Dear Tom:
I was disappointed in your February 23rd letter and
your Board's decision to reject ISP's compromise proposal.
Contrary to your apparent belief, there is nothing inconsistent
in our view with a shareholder being permitted to underscore its
confidence in the underlying values of the Company by making an
additional investment on the one hand and your "on going sale
process" on the other.
We are concerned with what seems to us Hercules'
narrow, one-dimensional approach to maximizing shareholder
values. If Hercules is unable to sell the Company on an
advantageous basis, it will have needlessly deprived Hercules
shareholders of the opportunity to decide for themselves whether
to accept our previously proposed $17 1/2 tender offer or, under
our compromise approach, sell their shares in the open market to
ISP or any other shareholder wishing to acquire up to 20% of the
Company's shares. This position is especially surprising given
the multitude of takeover defenses the Company has erected and
the fact that we have always been willing to address any of your
legitimate concerns in the form of reasonable conditions with
respect to our ownership position.
With respect to your reference to the withdrawal of
our proposed tender offer, as you know, the October offer
expired by its own terms on account of the fact that your Board
had refused to exempt it from its poison pill and related
Delaware statutory provisions. That is why we put forward the
compromise proposal to permit ISP to acquire up to 20% of
Hercules' shares rather than 35%. While we can only assume that
if your Board is unwilling to permit our acquisition of up to
20% of Hercules shares, it would not have gone along with our
35% proposal either - but if we are missing something in this
regard, please let us know.
With regard to the last point in your letter, your
claim that ISP's actions/statements are a hindrance to your
efforts is sheer nonsense, as in point of fact we have been very
patient and constructive shareholders for some time now. As you
will recall, it was ISP who first encouraged Hercules to abandon
its flawed restructuring strategy and sell the Company. While it
20
took Hercules quite some time to adopt this strategy, we not
only applauded the decision but have provided assurances,
whether we were a 10%, 20%, or 35% owner, that we would support
the sale of the Company at a fair price. In fact, despite your
invitation, we have refrained from taking part in the auction
process in large measure because we view our Hercules stake as
an investment and so that there could be no claim that our
participation, as the Company's major shareholder, would have a
chilling effect on other interested bidders.
Tom, you know that we have a high conviction
concerning the way in which Hercules has conducted the Company's
affairs in recent years. In this connection, we intend to bring
these matters to the attention of Hercules shareholders at the
Company's upcoming Annual Meeting. Moreover, as owners of more
than 10.7 million Hercules shares, we will be seeking to elect a
slate of directors, with a strong ownership orientation
committed to the interests of Hercules shareholders, to replace
the four incumbent directors up for re-election this year, who
we understand (as of the last public filing) own in the
aggregate less than 50,000 shares.
Sincerely,
/s/ Samuel J. Heyman
THE PROPOSALS
PROPOSAL NO. 1: THE OMNIBUS PROPOSAL
We propose the adoption by the stockholders of the
following resolution at the 2001 Annual Meeting:
RESOLVED, that each of the proposals of International
Specialty Products Inc. shall be voted upon by the stockholders of
Hercules Incorporated at the 2001 Annual Meeting in the following
order:
1. This Omnibus Proposal;
2. The Bylaw Repeal Proposal;
3. The Director Election Bylaw Amendment Proposal;
4. Election of Directors;
5. The Poison Pill Bylaw Proposal; and
6. The Section 203 Bylaw Proposal.
21
The purpose of our Omnibus Proposal is to provide an order
of voting at the 2001 Annual Meeting which will facilitate the implementation of
our proposals.
WE STRONGLY RECOMMEND THAT YOU
VOTE "FOR" THE OMNIBUS PROPOSAL.
PROPOSAL NO. 2: THE BYLAW REPEAL PROPOSAL
We propose the adoption by the stockholders of the
following resolution at the 2001 Annual Meeting:
RESOLVED, that any and all amendments made by the Board of
Directors of Hercules Incorporated to the Bylaws of Hercules
Incorporated on or after March 29, 2000, be, and the same hereby are,
repealed, and that, without the approval of the stockholders of
Hercules Incorporated, the Board of Directors may not thereafter
amend any section of the Bylaws affected by such repeal or adopt any
new Bylaw provision which serves to reinstate any repealed provisions
or any similar provisions.
Article VII of the Hercules Bylaws provides that Bylaws may
be repealed by Hercules stockholders. The Bylaw Repeal Proposal, if adopted,
would act to repeal any Bylaw amendments adopted by Hercules Board between March
29, 2000 and the conclusion of the 2001 Annual Meeting. The purpose of this
proposal is to prevent Hercules Board from interfering with the implementation
of the proposals being acted upon by Hercules stockholders pursuant to this
proxy solicitation.
Any Bylaw amendments adopted by Hercules Board prior to the
conclusion of the 2001 Annual Meeting, we believe, are likely to be aimed at or
to have the effect of frustrating our proposals, and therefore are not likely to
be in the best interests of Hercules stockholders. We are not aware of any Bylaw
amendments adopted by Hercules Board since March 29, 2000. Any Bylaw amendments
validly adopted by Hercules Board prior to the conclusion of the 2001 Annual
Meeting would remain in effect unless and until our proposal to repeal such
Bylaws is adopted. If Hercules Board adopts any such Bylaw amendments before the
conclusion of the 2001 Annual Meeting, it will have an opportunity to inform
stockholders of the benefits of these amendments and to attempt to persuade
stockholders to vote against this proposal.
WE STRONGLY RECOMMEND THAT YOU VOTE
"FOR" THE BYLAW REPEAL PROPOSAL.
PROPOSAL NO. 3: THE DIRECTOR ELECTION BYLAW AMENDMENT PROPOSAL
We propose that stockholders adopt our Director Election
Bylaw Amendment Proposal to enact a bylaw amendment to provide that directors be
elected by a plurality vote of the shares present in person or by proxy and
entitled to vote in the election of directors. Our Director Election Bylaw
Amendment Proposal contains the same required vote for the election of directors
22
as that provided by the Delaware General Corporation Law, and is consistent with
the standard applied by most public companies. The full text of the Bylaw
amendment to effect the Director Election Bylaw Amendment Proposal is contained
in Annex I to this proxy statement.
Hercules claims that its Bylaws require that nominees must
receive the affirmative vote of the holders of a majority of all shares issued
and outstanding to be elected, instead of the greatest number of votes actually
cast at the 2001 Annual Meeting (a plurality vote), the standard followed by
most public companies. The Hercules Bylaws, as interpreted by the Company, we
believe, serve 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, even if our nominees received more votes than
the incumbents at the 2001 Annual Meeting. Under this interpretation, if each
ISP nominee receives 50,000,000 votes and each incumbent receives 10,000,000
votes, the incumbent Board members would retain their seats on the Board because
the ISP nominees would not have received a majority vote of the issued and
outstanding shares. This voting requirement, we believe, is not only highly
unusual but also disenfranchises stockholders and is inconsistent with good
corporate governance. Our concerns are accentuated because the Hercules Board is
divided into three classes, and only one-third of the incumbent directors must
stand for reelection in any given year. The Director Election Bylaw Amendment
Proposal would level the playing field and eliminate these concerns by
clarifying that the nominees to the Hercules Board who receive the greatest
number of votes will be elected.
The Delaware General Corporation Law provides that, absent
a specification to the contrary in a company's certificate of incorporation or
bylaws, directors shall be elected by a plurality vote of the shares present in
person or by proxy and entitled to vote on the election of directors. Hercules
Bylaws currently provide that "[a]t each annual meeting, there shall be elected
by ballot, by the majority vote of the stock then issued and outstanding and
entitled to vote thereat, the number of directors necessary to fill the class of
those whose term then expires." For the reasons described in this proxy
statement under "Vote Required," we believe that Hercules Bylaws should be
interpreted as requiring only that a majority of the shares be present and vote
at the 2001 Annual Meeting, and that under Delaware Law, our nominees should be
elected as directors if they receive the greatest number of the votes cast at
the 2001 Annual Meeting.
Hercules Restated Certificate of Incorporation provides
that any amendment of the Bylaw containing the disputed language requires the
supermajority vote of the holders of 80% of the issued and outstanding voting
shares of the Company. The Director Election Bylaw Amendment Proposal, we
believe, will provide you a stronger voice in how your company is run by
removing an unjust impediment to the election of directors other than Hercules'
incumbent directors.
WE STRONGLY RECOMMEND THAT YOU VOTE
"FOR" THE DIRECTOR ELECTION BYLAW AMENDMENT PROPOSAL.
23
PROPOSAL NO. 4: ELECTION OF DIRECTORS
We are soliciting your proxy for the election of the ISP
nominees as directors of the Company to serve until the 2004 Annual Meeting of
Stockholders and until their successors are duly elected and qualified.
In accordance with Hercules Restated Certificate of
Incorporation and Bylaws and the Delaware General Corporation Law, Hercules
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. The Directors
are to be divided into three classes as nearly equal in number as possible. At
each annual meeting of stockholders, members of one of the classes, on a
rotating basis, are elected for a three-year term. Based on information
contained in reports filed by the Company with the Securities and Exchange
Commission, thirteen directors currently serve on the Hercules Board. Four of
these directors have terms that expire in 2001 [and, according to the Company's
proxy statement for the 2001 Annual Meeting, four directors are to be elected at
the 2001 Annual Meeting]. Messrs. Heyman, Kumar, Gloria Schaffer and Raymond
Troubh, if elected, would serve for terms expiring at the Company's annual
meeting of stockholders in 2004. If any additional directorships are to be voted
upon at the 2001 Annual Meeting, we reserve the right to nominate additional
persons to fill such positions. We do not expect that the ISP nominees will be
unable to stand for election but, in the event that any ISP nominee is unable to
do so, shares represented by BLUE proxy cards will be voted for the other ISP
nominees. In addition, ISP reserves the right to nominate substitute or
additional persons if the Company makes or announces any changes to its Bylaws
or takes or announces any other action that has, or if consummated would have,
the effect of disqualifying any of the ISP nominees.
If the ISP 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 general
fiduciary obligations imposed upon corporate directors.
ISP NOMINEES.
The information below concerning age, principal occupation
and directorships has been furnished by each respective nominee. The following
persons are our nominees for election as directors in the class whose terms
expire at the 2004 Annual Meeting of Stockholders:
Name and Business Address Age Present Principal Occupation and Five Year Employment History Class
------------------------- --- ------------------------------------------------------------- -----
Samuel J. Heyman 61 Mr. Heyman has been a director and Chairman of ISP since its 2004
1361 Alps Road formation and served as its Chief Executive Officer from its
Wayne, New Jersey 07470 formation until June 1999. He was a director, Chairman and
Chief Executive Officer of GAF Corporation ("GAF") and its
successor, G-I Holdings Inc. ("G-I Holdings"), and certain
24
of its subsidiaries for more than five years. He continues
to serve as a director of G-I Holdings. G-I Holdings primary
business is conducted through Building Materials Corporation
of America ("BMCA"), an indirect, subsidiary of G-I
Holdings which is primarily engaged in the commercial and
residential roofing business. In January 2001, G-I Holdings
filed for protection under chapter 11 of the United States
Bankruptcy Code as a result of its asbestos liabilities. Mr.
Heyman was a director and Chairman of BMCA from its
formation until September 2000, and served as Chief Executive
Officer of BMCA from June 1996 to January 1999 and from July
1999 to September 2000 and as the President of BMCA from July
1999 to February 2000. He is also the Chief Executive
Officer, Manager and General Partner of a number of closely
held real estate development companies and partnerships
whose investments include commercial real estate and a
portfolio of publicly traded securities.
Sunil Kumar 50 Mr. Kumar has been director, President and Chief Executive 2004
1361 Alps Road Officer of ISP since June 1999. Mr. Kumar has also been
Wayne, New Jersey 07470 President and Chief Executive Officer of certain subsidiaries of
ISP, including ISP Investments Inc., since June 1999. Mr. Kumar
was a director, President and Chief Executive Officer of BMCA
from May 1995, July 1996 and January 1999, respectively, until
June 1999. He was Chief Operating Officer of BMCA from March
1996 to January 1999. Mr. Kumar also was President, Commercial
Roofing Products Division, and Vice President of BMCA from
February 1995 to March 1996.
Raymond S. Troubh 74 Mr. Troubh has been a financial consultant for more than five 2004
10 Rockefeller Plaza years. Prior to that he was a general partner of Lazard Freres
Suite 712 & Co., an investment banking firm, and a governor of the
New York, New York 10020 American Stock Exchange. Mr. Troubh is a director of ARIAD
Pharmaceuticals, Inc., a biopharmaceutical company, Diamond
Offshore Drilling, Inc., a contract drilling company, General
25
American Investors Company, an investment trust company, Gentiva
Health Services, Inc., a healthcare provider, Health Net, Inc.,
a managed healthcare company, Starwood Hotels & Resorts, Inc., a
hotel operating company, Triarc Companies, Inc., a food and
beverage company, and WHX Corporation, a steel products
company. He is also a trustee of Corporate Renaissance Group,
Inc., MicroCap Liquidating Trust and Petrie Stores Liquidating
Trust. Mr. Troubh received his A.B. degree from Bowdoin College
and his LL.B. degree from Yale Law School.
Gloria Schaffer 70 Since 1996, Ms. Schaffer has served as a partner at C.A. White, 2004
1211 Chapel St. Inc., a real estate development firm. Ms. Schaffer served as a
New Haven, CT 06511 Commissioner of the Department of Consumer Protection of the
State of Connecticut from 1991 to 1995, as a Member of the
Civil Aeronautics Board from 1978 to 1984 and as the Secretary
of State of the State of Connecticut from 1970 to 1978. Ms.
Shaffer also previously served on the Board of Directors of
Amity Bank and Amity Bankcorp, Mott's Inc. and Emery Air
Worldwide.
Each of the nominees has consented to serve as a director
until the expiration of his or her respective term and until such nominee's
successor has been elected and qualified or until the earlier resignation or
removal of such nominee. We have no reason to believe that any of the nominees
named above will be disqualified or 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 person nominated by ISP to fill the
vacancy.
The nominees understand that, if elected as directors of
Hercules, each of them will have an obligation under Delaware law to discharge
his or her duties as a director in good faith, consistent with his or her
fiduciary duties to Hercules and its stockholders.
26
WE STRONGLY RECOMMEND THAT YOU VOTE
"FOR" THE ELECTION OF OUR NOMINEES.
PROPOSAL NO. 5: THE POISON PILL BYLAW PROPOSAL
We are proposing the adoption of a new Bylaw that would
require the Board to redeem the Rights, to terminate the Rights Agreement and
not to adopt any new rights agreement without stockholder approval. The Rights
Agreement would cause substantial dilution to a person or group that attempts to
acquire the Company on terms not approved by the Hercules Board or even to any
person or group that acquires more than 10% of the Company's common stock.
Although often described as protecting stockholders from coercive or unfair
acquisition offers, we believe that poison pill plans have the capacity to deter
all acquisition offers that have not been approved by the board of directors,
not just coercive offers. ISP believes that poison pills serve to insulate
management and directors from direct stockholder accountability by making an
unsolicited acquisition or other control transaction unlikely. Our Poison Pill
Bylaw Proposal would require the Hercules Board to redeem the rights distributed
under the Rights Agreement and in the future, when the Company seeks to
"protect" its stockholders through such a "rights plan," that it first obtain
the approval of those whose investment it seeks to protect, the stockholders.
The full text of the proposed Bylaw to effect the Poison Pill Bylaw Proposal is
contained in Annex II to this proxy statement.
In addition to the Rights Agreement, the Hercules Restated
Certificate of Incorporation, its Bylaws and Delaware law already provide
significant impediments to many forms of unsolicited offers for Hercules,
especially those that could be coercive, as described earlier in this proxy
statement.
Poison pills are considered extremely potent corporate
takeover defense mechanisms. Stockholders and others have opposed poison pills
on the grounds that poison pills force potential investors to negotiate
potential acquisitions with management, instead of making their offer directly
to the stockholders and letting the stockholders decide what is in their best
interests. Opponents of poison pills assert that poison pills can pose such an
obstacle to a takeover that management becomes entrenched. Such entrenchment and
the consequent lack of management accountability to stockholders, we believe,
adversely affects stockholder value and that poison pills can deter desirable
acquisition offers that would be in the stockholders' best interests. Poison
pills, we believe, insulate management from the threat of a change in control
because they provide a board, which is generally advised by and includes
representatives of management, with veto power over change in control bids, even
when stockholders believe that such bids are in their best interests.
Proponents of poison pills assert that rights plans, such
as the Rights Agreement, enable the board to respond in an orderly manner to
unsolicited bids by providing sufficient time to carefully evaluate the fairness
of an unsolicited offer and the credibility of the bidder, and thereby giving
the board the flexibility to explore alternative strategies for maximizing
stockholder value. It has been argued that poison pills deter abusive takeover
tactics. Proponents of poison pills also assert that rights plans provide
incentives for a potential bidder to negotiate in good faith with the board, and
27
that such negotiations are likely to maximize value for stockholders by
soliciting the highest possible price from the bidder.
There are special compelling circumstances with respect to
Hercules. Hercules stockholders already have voiced their strong opposition to
poison pills. In 1992, a non-binding proposal to redeem Hercules' then-existing
poison pill or to submit it to a binding shareholder vote was approved by over
55% of the shares voting at the Hercules Annual Meeting. Despite this
stockholder mandate, the Hercules Board refused to terminate the pill for three
years and never put it to a definitive vote. Last year, without consulting
stockholders, the Hercules Board rushed to adopt a new poison pill, less than
two weeks after ISP had publicly announced its ownership position in Hercules.
This new pill contains a low ownership threshold of 10% as a trigger thereby
limiting the market in Hercules shares whether or not a takeover initiative is
undertaken. The Hercules Board has defied the clear position of its stockholders
against poison pills. Accordingly, our binding resolution would leave nothing to
chance by requiring the Board to redeem the Rights and to prevent the adoption
of any new rights agreement without stockholder approval.
The Poison Pill Bylaw Proposal, we believe, is valid under
Delaware law because Delaware law authorizes stockholders to adopt bylaws that
relate to the rights and powers of the stockholders and the board of directors.
However, we recognize that the Delaware courts have not considered the validity
of our proposed Bylaw or any similar bylaw and, therefore, have not resolved the
extent to which stockholder-adopted bylaws may force the board of directors to
redeem a poison pill or limit the authority of the board of directors to adopt a
poison pill. There is a lack of case law in Delaware to either directly
substantiate or directly contradict the validity of our Poison Pill Bylaw
Proposal. However, the following legal analysis supports our position that our
Poison Pill Bylaw Proposal is valid:
Section 109 of the Delaware General Corporation Law, we
believe, authorizes the enactment of the Poison Pill Bylaw Proposal. Section
109(a) gives stockholders the power to "adopt, amend or repeal bylaws." Section
109(b) states: "The bylaws may contain any provision, not inconsistent with law
or with the certificate of incorporation, relating to the business of the
corporation, the conduct of its affairs, and its rights or powers or the rights
or powers of its stockholders, directors, officers or employees." The Poison
Pill Bylaw Proposal relates to "the rights or powers of...stockholders, [or]
directors" because it requires the board of directors to terminate a Rights
Agreement which has been repudiated by a majority vote of the stockholders and
to obtain stockholder approval prior to adopting any similar device, and permits
stockholders to exercise their right to consider and either accept or reject an
offer for their shares.
We do not believe that the Poison Pill Bylaw Proposal is
"inconsistent with law or with the certificate of incorporation," as that phrase
is used in Section 109(b). In our review of the Delaware General Corporation Law
and the Restated Certificate of Incorporation of Hercules Incorporated, we have
not discovered any provision that bars stockholders from adopting the Poison
Pill Bylaw Proposal. In particular, we do not believe that adoption of the
28
Poison Pill Bylaw Proposal would be inconsistent with Section 141(a) of the
Delaware General Corporation Law, which provides in relevant part: "The business
and affairs of every corporation organized under this chapter shall be managed
by or under the direction of a board of directors, except as may be otherwise
provided in this chapter or in its certificate of incorporation."
There are several reasons why we believe that the Poison
Pill Bylaw Proposal should be upheld as a proper exercise of shareholder power
pursuant to Section 109(b) that does not violate Section 141(a). First, the
enactment of the Poison Pill Bylaw Proposal does not involve shareholder
management of the "business and affairs of the corporation," but rather the
creation of a framework or parameters within which such management by the Board
of Directors takes place. The Board of Directors would have full power to
negotiate with a bidder, to fashion a response to any bid or other merger
proposal, to invite other proposals, to recommend that stockholders reject any
bid or other merger proposal, to recommend the adoption or approval by the
stockholders of a poison pill, and to redeem any such poison pill as might be
approved by the stockholders. The Poison Pill Bylaw Proposal does not require
the expenditure of corporate funds, does not interfere with even extraordinary
business decisions (such as the Board's decision to enter into a merger
agreement), and serves to protect the stockholders' vital interest in the
marketability of Hercules shares by encouraging offers to purchase those shares.
Second, the grant of authority to the Board of Directors over the business and
affairs of the corporation is not exclusive, as it is qualified by the phrase
"except as may be otherwise provided in this chapter or in its certificate of
incorporation." Since Section 109 and Section 141 are contained in the same
"chapter" of the Delaware statute, Section 141(a) by its own terms acknowledges
the grant of authority contained in Section 109 for stockholders to adopt bylaws
that relate to the business and affairs of the corporation and the rights and
powers of stockholders and directors. Finally, any reading of Section 141(a)
that invalidates the Poison Pill Bylaw Proposal would make meaningless Section
109's broad grant of authority to shareholders.
There exists no Delaware case law of which we are aware
analyzing the validity of a poison pill bylaw or the interplay between Sections
109(b) and 141(a) of the Delaware General Corporation Law. The Chief Justice of
the Delaware Supreme Court in 1998 described the issue of the validity of a
bylaw that nullifies a poison pill as an "open question of corporate law." E.
Norman Veasey, An Economic Rationale for Judicial Decisionmaking in Corporate
Law, 53 Bus. Law. 681, 695-96 (1998). While scholarly opinion is divided on the
subject, many prominent academics have explained why they believe that
shareholder-adopted bylaws requiring shareholder approval for poison pills
should be upheld as a valid exercise of shareholder power under Delaware law.
See Jeffrey N. Gordon, "Just Say Never?" Poison Pills, Deadhand Pills, and
Shareholder-Adopted Bylaws: An Essay for Warren Buffett, 19 Cardozo L. Rev. 511
(1997); Jonathan R. Macey, The Legality and Utility of the Shareholder Rights
Bylaw, 26 Hofstra L. Rev. 835 (1998); John H. Matheson, Corporate Governance at
the Millennium: The Decline of the Poison Pill Antitakeover Defense, 22 Hamline
L. Rev. 703 (1999); and Ronald J. Gilson, Unocal Fifteen Years Later (and what
we can do about it) Del. J. Corp. L. (forthcoming 2001). Other academics have
opposed either certain forms of poison pill bylaws, see, e.g., John C. Coffee,
29
Jr., The Bylaw Battlefield: Can Institutions Change the Outcome of Corporate
Control Contests, 51 U. Miami L. Rev. 605 (1997); or have opposed them outright,
see Lawrence A. Hamermesh, Corporate Democracy and Stockholder-Adopted By-Laws:
Taking Back the Street?, 73 Tulane L. Rev. 409 (1998).
The Delaware Supreme Court has strongly endorsed the power
of stockholders to adopt bylaws. In a decision upholding a stockholder-adopted
bylaw amendment that required the board of directors to act unanimously, thereby
limiting the corporation's ability to engage in anti-takeover maneuvering, the
Court stated: "The power to make and amend the bylaws of a corporation has long
been recognized as an inherent feature of the corporate structure. The bylaws of
a corporation are presumed to be valid, and the courts will construe the bylaws
in a manner consistent with the law rather than strike down the bylaws." Frantz
v. EAC Indus., Del. Supr., 501 A.2d 401, 407 (1985). It has been suggested by
some that the Delaware Supreme Court's decision in Quickturn Design Systems,
Inc. v. Shapiro, Del. Supr., 721 A.2d 1281 (1998), should be read as
disapproving of bylaws that restrict the discretion of directors. In fact,
Quickturn struck down a form of poison pill that had not been adopted by means
of a bylaw amendment. Therefore, the Quickturn Court did not even consider the
extent to which a bylaw adopted under Section 109(b) can limit the board's
management powers under Section 141(a). Nor did the Quickturn Court consider
whether stockholders have a role in the adoption or redemption of a poison pill.
Additionally, the poison pill struck down in Quickturn restricted the ability of
a future board of directors to redeem the poison pill, potentially rendering the
corporation invulnerable to a hostile tender offer. The Poison Pill Bylaw
Proposal does not have such an impermissible entrenchment effect. It simply
requires termination of the existing poison pill and shareholder approval before
a new poison pill is adopted.
It is inherent, we believe, in the statutory scheme of the
Delaware General Corporation Law that while a board of directors is entitled to
exercise its judgment in responding to a tender offer or other takeover bid, the
board must exercise its judgment within the framework of statutes (including
Section 109), charter provisions and bylaws, such as the Poison Pill Bylaw
Proposal, which in certain instances limit the actions that directors may take,
even when the directors believe that their chosen course of action is in the
best interests of stockholders. We further believe that the Poison Pill Bylaw
Proposal is supported by Delaware case law recognizing that the failure to
redeem a poison pill can constitute a fiduciary breach, see Moore Corp. v.
Wallace Computer Servs, Inc., 907 F. Supp. 1545, 1556 (D. Del. 1995), and by
Delaware case law recognizing that board actions that interfere with stockholder
rights can be struck down, even if the directors believe in good faith that
their actions are in the stockholders' best interests, see Blasius Industries,
Inc. v. Atlas Corporation, Del. Ch., 564 A.2d 651 (1988), and Stahl v. Apple
Bancorp, Del. Ch., 579 A.2d 1115, 1124 (1990).
Case law outside of Delaware supports the validity of the
Poison Pill Bylaw Proposal. In International Brotherhood of Teamsters General
Fund v. Fleming Companies, 975 P.2d 907 (Okla. 1999), the Oklahoma Supreme Court
upheld the validity of a bylaw virtually identical to the Poison Pill Bylaw
Proposal, under a statutory scheme virtually identical to the Delaware General
Corporation Law. The Fleming Court emphatically resolved in the stockholders'
30
favor any apparent conflict between the directors' statutory power to direct the
management of the corporation and the stockholders' statutory power to adopt
bylaws. Older cases have upheld bylaws allocating corporate governance powers to
the stockholders, against claims that these bylaws illegally invade the board's
power to manage the business and affairs of the corporation. Such cases include
Securities and Exchange Commission v. Transamerica Corp., 163 F.2d 511 (3d Cir.
1947), cert. denied, 332 U.S. 847 (1948) (upholding a bylaw which allowed the
stockholders of a Delaware corporation to select the company's independent
auditors) and Ripley v. Storer, N.Y. Sup. Ct., 139 N.Y.S. 2d 786, aff'd N.Y.
App. Div., 142 N.Y.S. 2d 269 (1955) (holding that a New York corporation's
adoption of a bylaw requiring stockholder approval of, among other things, any
contract with a duration of more than one year, would not be violative of the
General Corporation Law mandate that the business of a corporation shall be
managed by its board of directors). Other courts have recognized that
stockholders, as the owners of a corporation, have "the power to prescribe rules
for the government of business corporations." Rogers v. Hill, 289 U.S. 582, 588
(1933). In Rogers, the United States Supreme Court rejected the argument that a
charter provision allowing directors to make or alter bylaws eliminates the
power of stockholders to do so. The Court also noted that such an interpretation
would be in direct conflict with a holding of the New Jersey Supreme Court,
which the Court quoted: "It would be preposterous to leave the real owners of
the corporate property at the mercy of their agents, and the law has not done
so." Id. at 589.
We are aware of two cases in which courts have struck down
proposed bylaws similar to the Poison Pill Bylaw Proposal, but both of those
cases concerned corporations in jurisdictions that had statutes not present in
Delaware, giving the board of directors complete discretionary authority over a
corporation's poison pill. See Amp, Inc. v. Allied Signal Inc., 1998 U.S. Dist.
LEXIS 15617 (E.D. Pa. Oct. 8, 1998) (holding that proposed poison pill bylaw
violated Pennsylvania statute that allows directors to adopt poison pills with
"such terms as are fixed by the board of directors"); Invacare Corp. v.
Healthdyne Technologies, Inc., 968 F. Supp. 1578 (N.D. Ga. 1997) (holding that
proposed poison pill bylaw would infringe upon board's authority under a Georgia
statute that "gives the directors of Georgia corporations the sole discretion to
determine the terms and conditions of a shareholder rights plan"). We do not
believe that a Delaware court would find either of these decisions persuasive,
given the absence of an analogous Delaware statute and the fact that both
decisions upheld the adoption of poison pills that would be invalid in Delaware
under the Quickturn decision.
WE STRONGLY RECOMMEND THAT YOU VOTE
"FOR" THE POISON PILL BYLAW PROPOSAL.
PROPOSAL NO. 6: THE SECTION 203 BYLAW PROPOSAL
We propose that stockholders adopt our Section 203 Bylaw
Proposal, electing not to be governed by Section 203 of the Delaware General
Corporation Law. If our Section 203 Bylaw Proposal is adopted at the 2001 Annual
Meeting, Section 203 itself provides that the Bylaw would not become effective
until the 12-month anniversary of the 2001 Annual Meeting. The full text of the
proposed Bylaw is contained in Annex III to this proxy statement.
31
Section 203 provides, in effect, that if any person
acquires beneficial ownership of 15% or more of the Company's outstanding shares
(thereby becoming an "Interested Stockholder"), the Interested Stockholder may
not engage in a Business Combination with the Company for three years
thereafter, subject to certain exceptions. Among the exceptions are (i) the
board's prior approval of such acquisition; (ii) the acquisition of at least 85%
of the Company's shares (subject to certain exclusions) in the transaction in
which such person becomes an Interested Stockholder; and (iii) the approval of
such Business Combination by 66 2/3% of the outstanding stock not owned by the
Interested Stockholder. As used in Section 203, the term "Business Combination"
encompasses not only mergers, consolidations and sales of substantially all the
assets, but also certain other transactions with an Interested Stockholder,
including sales of 10% or more of the corporation's assets, certain issuances of
stock, loans, guarantees and transactions that increase the Interested
Stockholder's proportional interest in the corporation. Section 203 provides
that the Company's stockholders may, by a vote of a majority of the outstanding
shares, adopt an amendment to the Bylaws or Restated Certificate of
Incorporation electing not to be governed by Section 203. This amendment would
become effective twelve months after adoption, would not be subject to amendment
by the board and would not apply to a Business Combination with a person who
became an Interested Stockholder prior to the adoption of such amendment.
THE FOREGOING IS A SUMMARY OF THE RELEVANT MATERIAL
PROVISIONS OF SECTION 203 AND IS QUALIFIED BY REFERENCE THERETO. THE TEXT OF
SECTION 203 IS ATTACHED AS ANNEX IV TO THIS PROXY STATEMENT.
Section 203 discourages offers to acquire the Company's
shares, in our opinion, by creating obstacles to second-stage mergers and other
"Business Combination" transactions with greater than 15% stockholders. If the
Company were to opt out of Section 203, there would be no specific vote of the
public stockholders required by statute to effect a second-stage merger or other
Business Combination with a greater than 15% stockholder. However, the Restated
Certificate of Incorporation of Hercules would still provide that any merger or
consolidation of the Company with a 10% or greater stockholder generally will
require an 80% stockholder vote, unless the transaction is approved by the
Company's disinterested directors or complies with certain other requirements.
Under the interested stockholder provision of the Restated Certificate of
Incorporation, an acquiror could purchase shares of Hercules pursuant to a
tender offer which raised its ownership to 80% of the issued and outstanding
shares, and then accomplish a second-stage merger or other Business Combination.
Under Section 203, such an acquiror would need to commence a tender offer while
it still owned less than 15% of the issued and outstanding shares, and then
purchase sufficient shares in the tender offer to raise its ownership to 85% of
the issued and outstanding shares.
In addition to the interested stockholder provision
contained in the Restated Certificate of Incorporation, we believe that the
Company's minority stockholders are also protected in a second-stage merger or
32
other Business Combination because under Delaware law, a second-stage merger
with a controlling stockholder would have to satisfy the "entire fairness" test.
This test requires the courts to conduct a comprehensive review of the fairness
of such a transaction. Its scope has been described by the Delaware Supreme
Court in Weinberger v. UOP. Inc., 457 A.2d 701. 711 (Del. 1983): "The concept of
fairness has two basic aspects: fair dealing and fair price. The former embraces
questions of when the transaction was timed, how it was initiated, structured,
negotiated, disclosed to the directors, and how the approvals of the directors
and stockholders were obtained. The latter aspect of fairness relates to the
economic and financial considerations of the proposed merger, including all
relevant factors: assets, market value, earnings, future prospects, and any
other elements that affect the intrinsic or inherent value of a company's
stock."
The adoption of the Section 203 Bylaw Proposal, we believe,
is in the best interests of stockholders because, in our view, Section 203
discourages proposals to acquire the Company's shares; and the interested
stockholder provision of the Restated Certificate of Incorporation and the
Delaware "entire fairness" doctrine described above provide more than adequate
protection of the interests of the other stockholders in a Business Combination
with a controlling stockholder. If the stockholders adopt the Section 203 Bylaw
Proposal, prospective bidders may be encouraged to make offers to acquire
control of the Company, thereby benefiting stockholders who wish to have the
opportunity to consider offers to acquire a controlling interest in the Company.
WE STRONGLY RECOMMEND THAT YOU VOTE
"FOR" THE SECTION 203 BYLAW PROPOSAL.
OTHER MATTERS TO BE CONSIDERED
AT THE 2001 ANNUAL MEETING
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
As set forth in Hercules' proxy statement, at the 2001
Annual Meeting, Hercules stockholders will be asked to ratify the appointment by
Hercules Board of PricewaterhouseCoopers LLP as Hercules' independent auditors
for the year 2001. We are not making any recommendation on this proposal.
OTHER PROPOSALS
Except as set forth above, we are not aware of any
proposals to be brought before the 2001 Annual Meeting. However, we intend to
bring before the 2001 Annual Meeting such business as may be appropriate,
including without limitation nominating additional persons for directorships, or
making other proposals as may be appropriate to address any action of Hercules
Board not publicly disclosed prior to the date of this proxy statement. Should
other proposals be brought before the 2001 Annual Meeting, the persons named as
proxies in the enclosed BLUE proxy card will vote on such matters in their
discretion.
33
VOTING PROCEDURES
In order to ensure that your views on the proposals are
heard by Hercules and your vote represented at the 2001 Annual Meeting, we urge
you to sign and date the enclosed BLUE Proxy Card and return it to
___________________________________, in the enclosed postage paid envelope
TODAY. Execution of the BLUE Proxy Card will not affect your right to attend the
2001 Annual Meeting and to vote in person.
You are eligible to execute a BLUE Proxy only if you owned
the Common Stock on the Record Date. Hercules Board has set [March 6], 2001 as
the Record Date for determining those stockholders who will be entitled to
notice of and to vote at the 2001 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 BLUE proxy card, even if you sell such shares after the Record Date.
As of the close of business on the Record Date, we believe
that there were __________ shares of common stock of Hercules issued and
outstanding and entitled to vote. Stockholders will have one vote for each share
of common stock they own with respect to all matters to be considered at the
2001 Annual Meeting.
In order for your views on the above-described proposals to
be represented at the 2001 Annual Meeting, please sign and date the enclosed
BLUE proxy card and return it to ____________________ in the enclosed prepaid
envelope TODAY. Execution of the BLUE proxy card will not affect your right to
attend the 2001 Annual Meeting and to vote in person. Any proxy may be revoked
at any time prior to the 2001 Annual Meeting by delivering a written notice of
revocation or a later dated proxy for the 2001 Annual Meeting to
____________________ or the Secretary of Hercules, or by voting in person at the
2001 Annual Meeting. Only your latest dated proxy will count.
Unless otherwise indicated, the BLUE Proxy authorizes the
persons named in the proxy to vote, and such persons will vote, properly
executed and duly returned proxies FOR the ISP nominees, FOR the Bylaw Repeal
Proposal, FOR the Poison Pill Termination Proposal, FOR the Director Election
Bylaw Amendment Proposal, FOR the Section 203 Bylaw Proposal, FOR the Interested
Stockholder Approval Proposal and FOR the Omnibus Proposal. If no marking is
made on your BLUE Proxy with respect to the ratification of the appointment of
Hercules' independent auditors, you will be deemed to have given a direction to
abstain from voting on such matter.
VOTE REQUIRED
Based on currently available public information, a quorum
will exist at the 2001 Annual Meeting if holders of not less than a majority of
the shares of Hercules common stock outstanding and entitled to vote at the 2001
Annual Meeting are present in person or by proxy. If a quorum is present, our
34
proposals (other than the election of our nominees, which is described below)
can be adopted by the following vote:
o DIRECTOR ELECTION BYLAW AMENDMENT PROPOSAL: Adoption of our Director
Election Bylaw Amendment Proposal requires the affirmative vote of the
holders of not less than 80% of all shares issued and outstanding and
entitled to vote at the 2001 Annual Meeting.
o SECTION 203 BYLAW PROPOSAL: Adoption of our Section 203 Bylaw Proposal
requires the affirmative vote of the holders of a majority of all shares
issued and outstanding and entitled to vote at the 2001 Annual Meeting.
o OTHER PROPOSALS: The adoption of the Poison Pill Bylaw Proposal, the
Bylaws Repeal Proposal and the Omnibus Proposal will require the
affirmative vote of the holders of a majority of the shares present in
person or by proxy and entitled to vote at the 2001 Annual Meeting.
o ELECTION OF DIRECTORS: Hercules claims that its Bylaws require that in
order to be elected, nominees for director must receive the affirmative
vote of a majority of all issued and outstanding shares. We disagree with
its interpretation and believe, based on the reasons set forth below, that
under Delaware law our nominees should be elected if they receive the
greatest number of votes cast at the 2001 Annual Meeting.
The following legal analysis supports our view that under
Delaware law and the Hercules Bylaws, our nominees should be elected if they
receive the greatest number of votes cast at the 2001 Annual Meeting:
Section 216(3) of the Delaware General Corporation Law
provides that in the absence of specification in the certificate of
incorporation or bylaws of a corporation, "[d]irectors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors." Delaware case
law has established that in order to overcome this voting rule, the certificate
of incorporation or bylaw provision must "not be couched in ambiguous language,
rather the language employed must be positive, explicit, clear and readily
understandable and susceptible to but one reasonable interpretation, which would
indicate beyond doubt that the rule was intended to be abrogated." Standard
Power and Light Corp. v. Investment Associates, Del. Supr., 51 A.2d 572 (1947).
Article II, Section 2 of Hercules Bylaws currently provides
that "[a]t each annual meeting, there shall be elected by ballot, by the
majority vote of the stock then issued and outstanding and entitled to vote
thereat, the number of directors necessary to fill the class of those whose term
then expires." The subordinate clause "by the majority vote of the stock then
issued and outstanding and entitled to vote thereat", we believe, should not be
interpreted as requiring that the winner obtain the affirmative vote of the
holders of a majority of the shares issued and outstanding. Such an
interpretation of the subordinate clause is disfavored because it deviates from
the "fundamental principle of majority rule." Centaur Partners, IV v. National
Intergroup, Inc., Del. Supr., 582 A.2d 923, 927 (1990). It also creates a
35
conflict with the rest of the sentence. Absent the subordinate clause, the
remainder of the sentence requires that a class of directors "shall be elected"
at the annual meeting. A construction that would require the winner to obtain
the affirmative vote of the holders of a majority of the shares issued and
outstanding, we believe, creates the possibility that in a contested election no
candidate will obtain the requisite number of votes, in which event no
successors would be elected at the annual meeting as the By-laws require and the
incumbent directors would continue to hold their seats even though their
three-year terms have expired and indeed, even though the incumbent directors
had received fewer votes than the other candidates or even no votes at all.
The Delaware Supreme Court has interpreted a similar bylaw
in a manner that avoids this same problem. In Standard Power, the Court was
asked to interpret the following provision in a certificate of incorporation:
The holders of the Common Stock Series B shall have the right by the
vote of a majority in number of shares of the Common Stock Series B
issued and outstanding to elect a minority in number of the full
Board of Directors of the corporation, such minority to consist of
the largest number of Directors which will constitute a minority in
number of such full Board of Directors, and the directors so elected
shall be known as Class B directors.
The Court declined to interpret the highlighted phrase as requiring a contestant
to obtain the votes of a majority of the outstanding shares because that result
"would be inequitable, unusual and such as reasonable men would not likely
intend." Id. at 577. The Court ruled that the provision "should be construed to
mean that a majority in number of the issued and outstanding Series B shares
must be voted, and that this is the full extent of the charter requirement in
this regard." Id. At 578. The court accepted that construction even though a
separate provision in the certificate of incorporation "requir[ed] the presence
for quorum purposes of a majority in number of the shares of the Series B stock
before the stockholders are entitled to vote for the election of Class B
directors[.]" Id. At 577.
The clause "by the majority vote of the stock then issued
and outstanding and entitled to vote thereat", we believe, should be interpreted
in identical fashion as the phrase from Standard Power: "by the vote of a
majority in number of shares of the Common Stock Series B issued and
outstanding." The reasons for our interpretation include the following:
o The language of the Hercules Bylaw closely tracks the language
of the bylaw interpreted in Standard Power.
o The Standard Power construction avoids the policy problems of
holdover directors and the possible disenfranchisement of a
plurality or even majority of those voting. These policy
considerations are of particular concern in this case, because
Hercules has a classified board.
36
o The Standard Power construction avoids creating an internal
inconsistency in Article II, Section 2.
o The language of Article II, Section 2 does not track the clear
language of Article I, Section 6: "the affirmative vote of the
holders of a majority of the shares present in person or by
proxy." If the drafters of the Bylaws wanted to deviate from the
default rule in Article I, Section 6, they knew how to clearly
draft such language (e.g., "election of a new director shall
require the affirmative vote of the holders of a majority of the
shares issued and outstanding").
Furthermore, the interpretation by the Company is not
consistent with the scheme of Section 141(d) of the Delaware General Corporation
Law, which establishes the conditions for a classified board of directors. The
statute permits, by the certificate of incorporation or a by-law adopted by the
vote of the stockholders, division of the directors into one, two or three
classes. The term of the first class shall expire at the next annual meeting,
the second class the year thereafter and the third class two years thereafter.
The statute further provides "... and at each annual election held after such
classification and election, directors shall be chosen for a full term, as the
case may be, to succeed those whose terms expired." Should the Company's
interpretation be adopted and a class of directors not be elected in a
particular year, the incumbent directors would remain in office since their
successors would not be elected and qualified. We believe that this result,
which should be impermissible in any event as a matter of good corporate
governance, also runs contrary to New York Stock Exchange policy, as Section
304.00 of the NYSE Listed Company Manual specifies that "... directors' terms of
office should not exceed three years." There are no mechanics in the By-laws to
establish how many classes of directors would be elected in the second year and
third year and the term of each class. While this is also true should a
plurality not elect the new members of the class, the higher voting requirement
makes this a greater likelihood, particularly in the case of a proxy contest.
Our proxy statement and a form of proxy will be delivered
to holders of at least the percentage of the Company's common stock required
under applicable law to carry the Proposals.
WE STRONGLY RECOMMEND THAT YOU
VOTE IN FAVOR OF EACH OF THE PROPOSALS DESCRIBED
IN THIS PROXY STATEMENT.
METHOD OF COUNTING VOTES
The holders of not less than a majority of the number of
shares of Hercules common stock outstanding and entitled to vote at the 2001
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 will
be included for purposes of determining whether a quorum exists. Broker
non-votes occur when brokers do not receive voting instructions from their
customers on non-routine matters and consequently have no discretion to vote on
those matters. If your Hercules shares are held in the name of a brokerage firm,
37
bank nominee or other institution, you should contact the person responsible for
your account and give instructions for a proxy card to be issued so that your
shares will be represented at the 2001 Annual Meeting.
After a quorum is determined to exist at the 2001 Annual
Meeting, abstentions are treated as votes cast against the proposal under
consideration. Broker non-votes with respect to particular proposals brought to
a vote will not be considered as part of the voting power present and entitled
to vote with respect to that proposal. Therefore, abstentions and broker
non-votes with respect to the Director Election Bylaw Amendment and the Section
203 Bylaw Proposal will be treated as votes cast against these proposals. With
respect to the Poison Pill Bylaw Proposal, the Bylaw Repeal Proposal and the
Omnibus Proposal, abstentions will be treated as votes against, but broker
non-votes will have no effect on the outcome of the vote on these proposals.
Under our interpretation of Hercules director election Bylaw, abstentions and
broker non-votes will have no effect on the outcome of the election of
directors. Under Hercules' interpretation of that Bylaw, however, abstentions
and broker non-votes will be counted as votes cast against the election of
directors.
ADDITIONAL INFORMATION
The principal executive offices of Hercules Incorporated
are at Hercules Plaza, 1313 North Market Street, Wilmington, Delaware 19894.
Hercules manufactures chemical specialties used in a variety of home, office and
industrial products including process paper chemicals, water treatment
chemicals, water-soluble polymers, food ingredients, resins and polypropylene
and polyethylene fibers. Hercules' primary markets include pulp and paper,
petroleum refineries, food processors and manufacturers, construction materials,
adhesives, pharmaceutical companies and personal care product manufacturers.
Except as otherwise noted herein, the information concerning Hercules has been
taken from or is based upon documents and records on file with the SEC and other
publicly available information. Although we do not have any knowledge that would
indicate that any statement contained herein based upon such documents and
records is untrue, we do not take any responsibility for the accuracy or
completeness of the information contained in such documents and records, or for
any failure by Hercules to disclose events that may affect the significance or
accuracy of such information.
The principal executive offices of ISP are at 300 Delaware
Avenue, Wilmington, Delaware 19801. We are a manufacturer of specialty chemicals
and mineral products.
We are subject to the informational requirements of the
Exchange Act, and, in accordance with the Exchange Act, file reports, proxy
statements and other documents with the SEC relating to our business, financial
condition and other matters. These reports, proxy statements and other documents
can be inspected and copied at the public reference facilities of the SEC at 450
Fifth Street, N.W., Washington, DC 20549, and at the regional offices of the SEC
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of ISP's filings with the SEC can also be obtained by mail for a fee by
38
writing to the SEC's principal office at 450 Fifth Street, N.W., Washington, DC
20549. You can also get electronic copies of our filings with the SEC for free
on the SEC's Internet web site at http://www.sec.gov. Copies of our filings with
the SEC are also be available for inspection at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
PROXY SOLICITATION; EXPENSES
This proxy statement and the accompanying BLUE Proxy Card
are first being furnished to stockholders on or about _______ __, 2001. Executed
proxies may be solicited in person, by mail, advertisement, telephone,
telecopier, telegraph or similar means. Solicitation may be made by directors,
officers, investor relations personnel and other employees of ISP and their
affiliates, none of whom will receive additional compensation for such
solicitation. Proxies will be solicited from individuals, brokers, banks, bank
nominees and other institutional holders. We have 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. We will reimburse these record holders for their reasonable
out-of-pocket expenses.
In addition, ISP has retained ____________________ to
solicit proxies on our behalf in connection with the 2001 Annual Meeting.
_________________ will employ approximately [75] people in its efforts. We have
agreed to reimburse _________________ for its reasonable expenses and to pay to
_________________ fees not to exceed $_______.
The entire expense of our proxy solicitation is being borne
by ISP. In the event that our nominees are elected to Hercules Board, we may
seek reimbursement of such expenses from Hercules. ISP does not intend to seek
reimbursement for the stipend it pays to its nominees and does not intend to
seek stockholder approval of reimbursement of its other expenses. In addition to
the engagement of _______________ described above, costs related to the
solicitation of proxies include expenditures for printing, postage, legal and
related expenses and are expected to be approximately $__________. Total payment
of costs to date in furtherance of our proxy solicitation is approximately
$_________.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
ISP, our nominees for directorships and the following
officers of ISP may be deemed to be "participants" (as defined in Instruction 3
to Item 4 of Rule 14a-101 of the Exchange Act) in this proxy solicitation:
Richard A. Weinberg, Executive Vice President, General Counsel and Secretary;
Randall R. Lay, Executive Vice President and Chief Financial Officer; Susan B.
Yoss, Executive Vice President and Treasurer; Stephen R. Olsen, Senior Vice
President-Corporate Development; Jared Landaw, Vice President-Law; and Ben
Stoller, Director Corporate Finance and Investments. 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 V to this proxy statement and is incorporated in this proxy
statement by reference. Except as set forth in Annex V, none of the participants
39
in this solicitation are party to any commercial dealings with Hercules or its
subsidiaries required to be discussed pursuant to Schedule 14A promulgated under
the Exchange Act, which governs the disclosure contained in this proxy
statement.
CERTAIN INTERESTS IN THE PROPOSALS AND
WITH RESPECT TO SECURITIES OF HERCULES
To the knowledge of ISP, there are no contracts,
arrangements, understandings or relationships (legal or otherwise) among ISP or
its associates with respect to any securities of Hercules.
Gloria Schaffer and Raymond Troubh, each in his or her
capacity as a nominee for election to the Hercules Board, will receive a stipend
of $25,000 from ISP for his service as a nominee. This stipend is not refundable
in any manner in connection with the outcome of our proxy solicitation or
otherwise. The Nominees are each party to an indemnity agreement with ISP (the
"Director Indemnity Agreements"). In accordance with the terms of the Director
Indemnity Agreements, ISP has agreed to indemnify and hold harmless each of the
nominees from and against, among other things, all expenses, liabilities and
losses, including reasonable attorney's fees, related to any action, suit or
proceeding to which such nominee is made a party or threatened to be made a
party by reason of such nominee's action or inaction while serving as a nominee.
40
SECURITY OWNERSHIP OF DIRECTORS
AND MANAGEMENT OF HERCULES
The following table presents, as of February 28, 2000,
based solely on information contained in Hercules' 2000 proxy statement, the
common stock beneficially owned (as that term is defined by the SEC) by all
directors and named executive officers of Hercules, and the directors and
executive officers of Hercules as a group.
Except as otherwise noted in a footnote below, each
director, nominee and executive officer has sole voting and investment power
with respect to the number of shares of common stock set forth opposite his or
her name in the table.
Shares Options
Beneficially Exercisable Restricted Percent of
Name Owned(1) Within 60 Days Stock Units Shares
------------------------------------------------- ------------------- -------------------- ----------------- -------------------
R. K. Elliott, Director and Officer 232,107 688,000 40,000 *
V. J. Corbo, Director and Officer 222,882 75,200 94,330 *
D. W. DiDonna, Officer 44,275 91,200 0 *
J. G. Drosdick, Director 9,423 12,000 1,100 *
R. M. Fairbanks, III, Director 12,088 27,000 1,253 *
A. R. Hirsig, Director 6,554 12,000 1,100 *
E. E. Holiday, Director 3,999 24,000 1,376 *
R. G. Jahn, Director 14,236 33,000 0 *
G. N. Kelley, Director 7,494 24,000 2,185 *
R. L. MacDonald, Jr., Director 15,421 33,000 1,928 *
G. MacKenzie, Officer 99,986 106,820 10,321 *
H. E. McBrayer, Director 77,324 30,000 1,527 *
P. McCausland, Director 7,784 15,000 1,100 *
L. V. Rankin, Officer 91,230 30,000 0 *
J. A. H. Shober, Director 5,250 12,000 1,100 *
P. A. Sneed, Director 11,925 24,000 1,253 *
H. J. Tucci, Officer 104,025 158,300 0 *
Directors and Officers as a Group 1,213,811 1,702,950 158,573 3%
* Less than 1% of Hercules' outstanding shares of common stock.
(1) Includes shares, as of February 28, 2000, in the Savings and Investment
Plan as follows: R. K. Elliott, 25,224; V. J. Corbo, 3,063, D. W.
DiDonna, 914; G. MacKenzie, 3,041; L. V. Rankin, 10,200; and H. J.
Tucci, 5,328; and all directors and officers as a group, 75,143.
Includes shares with restrictions and forfeiture risks as specified
under the Long-Term Incentive Compensation Plan: R. K. Elliott, 138,304;
V. J. Corbo, 201,159, D. W. DiDonna, 39,747; G. MacKenzie, 59,171; L. V.
Rankin, 53,472; and H. J. Tucci, 62,195; and all directors and officers
as a group, 755,173. Owners have the same voting and dividend rights as
do other stockholders of Hercules, except for the right to sell or
transfer.
Mr. Kelley's total includes 1,594 shares that he holds jointly with his
spouse.
41
PRINCIPAL STOCKHOLDERS OF HERCULES
The following table sets forth, based solely, except as
otherwise described herein, on information contained in Hercules' 2001 proxy
statement, the number and percentage of outstanding shares of common stock
beneficially owned by each person known to ISP as of such date to be the
beneficial owner of more than five percent of the outstanding shares of common
stock. The information with respect to ISP has been provided by the members
thereof as of ____ __, 2000.
SHARES OF PERCENTAGE OF
COMMON STOCK COMMON
BENEFICIALLY STOCK
STOCKHOLDERS OWNED OUTSTANDING
------------ ----- -----------
Capital Research & Management Company
333 South Hope Street
Los Angeles, California........................................ 10,930,000 10.3
ISP
ISP Investments Inc.
ISP Opco Holdings Inc.
c/o ISP Management Company, Inc.
1361 Alps Road, Wayne, New Jersey 07470........................ 10,719,200 9.98(1)
FMR Corp., 82 Devonshire Street Boston, Massachusetts 02109
(Fidelity Managed Funds)....................................... 8,586,484 7.99
T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, Maryland............................................ 7,017,677 6.6
Merrill Lynch & Co. Inc.
250 Vesey Street
New York, New York............................................. 5,644,881 5.31
Morgan Stanley Dean Witter
1585 Broadway
New York, New York............................................. 5,613,074 5.28
Wellington Management Co. LLP
75 State Street
Boston, Massachusetts.......................................... 5,585,600 5.25(2)
Vanguard Windsor Funds Inc.
P.O. Box 2600, V37
Valley Forge, Pennsylvania..................................... 5,500,600 5.17
(1) ISP Investments Inc. (through ISP Investments Grantor Trust) has the sole
power to vote, direct the voting of, dispose of and direct the disposition
of the shares. ISP Opco Holdings Inc., by virtue of its indirect ownership
of all of the outstanding capital stock of ISP Investments Inc., may be
deemed to own beneficially (solely for purposes of Rule 13d-3) the shares.
ISP, by virtue of its ownership of all of the outstanding common stock of
ISP Opco Holdings Inc., may be deemed to own beneficially (solely for
purposes of Rule 13d-3) the shares. Samuel J. Heyman, by virtue of his
beneficial ownership (as defined in Rule 13d-3) of approximately [79]% of
the capital stock of ISP, may be deemed to own beneficially (solely for
purposes of Rule 13d-3) the shares.
42
(2) As of December 31, 1999, Wellington Management Co. LLP ("Wellington"), in
its capacity as investment adviser, may be deemed to have beneficial
ownership of 5,585,600 shares, of the common stock of the Company. Such
shares are owned by numerous investment advisory clients of Wellington, of
which Vanguard Windsor Fund is known to have beneficial ownership of more
than five percent of that class of securities of the Company.
STOCKHOLDERS' PROPOSALS IN HERCULES' PROXY STATEMENT
Pursuant to Rule 14a-8(e)(2) under the Exchange Act, any
proposal by a stockholder at the 2001 Annual Meeting, to be included in
Hercules' proxy statement, must be received in writing at Hercules' principal
executive offices not less than 120 calendar days in advance of the date of
Hercules' proxy statement released to security holders in connection with its
2000 Annual Meeting of Stockholders. However, if the date of the meeting is
changed by more than 30 days from the date of the previous year's meeting, then
the deadline is a reasonable time before Hercules begins to print and mail its
proxy materials.
Proposals should be addressed to the Corporate Secretary,
Hercules Incorporated, Hercules Plaza, 1313 North Market Street, Wilmington,
Delaware 19894.
WE URGE YOU TO SIGN, DATE AND RETURN THE BLUE PROXY CARD IN FAVOR OF THE
ELECTION OF OUR NOMINEES AND THE ADOPTION OF OUR PROPOSALS DESCRIBED IN THIS
PROXY STATEMENT.
Dated: __________ __, 2001
Sincerely,
Your Fellow Stockholder:
INTERNATIONAL SPECIALTY PRODUCTS INC.
43
ANNEX I
THE DIRECTOR ELECTION BYLAW AMENDMENT PROPOSAL
RESOLVED, that the stockholders hereby exercise their right
under Section 109 of the Delaware General Corporation Law to amend
the Bylaws of Hercules Incorporated, effective at the time this
resolution is approved by the stockholders of Hercules Incorporated,
to delete the first sentence of Article II, Section 2 in its entirety
and replace it with the following two sentences:
"At each annual meeting, there shall be elected the number of
directors necessary to fill the class of those whose term then
expires. To be elected as a director, a nominee must receive the
affirmative vote of a plurality of the shares present in person or
represented by proxy and entitled to vote on the election of
directors."
A-I-1
ANNEX II
THE POISON PILL BYLAW PROPOSAL
RESOLVED, that the stockholders hereby exercise
their right under Section 109 of the Delaware General
Corporation Law to amend the Bylaws of Hercules
Incorporated, effective at the time this resolution is
approved by the stockholders of Hercules Incorporated, to
add a new Article VIII which shall read as follows:
ARTICLE VIII
Shareholder Rights Plans
Section 1. The Corporation shall not adopt or maintain a
poison pill, shareholder rights plan, rights agreement or any other
form of "poison pill" which is designed to or has the effect of
making acquisitions of large holdings of the Corporation's shares of
stock more difficult or expensive (such as the "Rights Agreement"
adopted by the Board of Directors on August 4, 2000), unless such a
plan or agreement is first approved by the affirmative vote of the
holders of a majority of the shares of the Corporation's common stock
present in person or represented by proxy at a regular or special
meeting of the stockholders. The Corporation shall promptly redeem
the rights distributed under the Rights Agreement dated as of August
4, 2000, between Hercules Incorporated and ChaseMellon Shareholder
Services L.L.C., and terminate such Rights Agreement.
Section 2. If any particular provision of this Bylaw be
adjudicated to be invalid or unenforceable, such provision shall be
deemed amended to delete therefrom the portion thus adjudicated to be
invalid or unenforceable so that the provisions of this Bylaw are
enforced to the maximum extent possible.
Section 3. Notwithstanding any other provision of these
Bylaws, this Bylaw may not be amended, altered or repealed in any way
except by vote of the Corporation's stockholders.
A-II-1
ANNEX III
THE SECTION 203 BYLAW PROPOSAL
RESOLVED, that pursuant to Section 203(b)(3) of the
Delaware General Corporation Law, the stockholders of Hercules
Incorporated hereby amend the Company's Bylaws by adding a new
Article IX which shall read as follows:
ARTICLE IX
Delaware General Corporation Law Section 203
Section 1. The Corporation shall not be governed by
Section 203 of the Delaware General Corporation Law.
Section 2. If any particular provision of this Bylaw be
adjudicated to be invalid or unenforceable, such provision shall be
deemed amended to delete therefrom the portion thus adjudicated to be
invalid or unenforceable so that the provisions of this Bylaw are
enforced to the maximum extent possible.
A-III-1
ANNEX IV
DELAWARE GENERAL CORPORATION LAW SECTION 203
(a) Notwithstanding any other provisions of this chapter, a corporation
shall not engage in any business combination with any interested
stockholder for a period of 3 years following the time that such
stockholder became an interested stockholder, unless:
(1) Prior to such time the board of directors of the
corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an
interested stockholder;
(2) Upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares
owned (i) by persons who are directors and also officers
and (ii) employee stock plans in which employee
participants do not have the right to determine
confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer; or
(3) At or subsequent to such time the business combination is
approved by the board of directors and authorized at an
annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least 66
2/3% of the outstanding voting stock which is not owned by
the interested stockholder.
(b) The restrictions contained in this section shall not apply if:
(1) The corporation's original certificate of incorporation
contains a provision expressly electing not to be governed
by this section;
(2) The corporation, by action of its board of directors,
adopts an amendment to its bylaws within 90 days of
February 2, 1988, expressly electing not to be governed by
this section, which amendment shall not be further amended
by the board of directors;
(3) The corporation, by action of its stockholders, adopts an
amendment to its certificate of incorporation or bylaws
expressly electing not to be governed by this section;
provided that, in addition to any other vote required by
law, such amendment to the certificate of incorporation or
bylaws must be approved by the affirmative vote of a
majority of the shares entitled to vote. An amendment
adopted pursuant to this paragraph shall be effective
immediately in the case of a corporation that both (i) has
A-IV-1
never had a class of voting stock that falls within any of
the 3 categories set out in subsection (b)(4) hereof, and
(ii) has not elected by a provision in its original
certificate of incorporation or any amendment thereto to be
governed by this section. In all other cases, an amendment
adopted pursuant to this paragraph shall not be effective
until 12 months after the adoption of such amendment and
shall not apply to any business combination between such
corporation and any person who became an interested
stockholder of such corporation on or prior to such
adoption. A bylaw amendment adopted pursuant to this
paragraph shall not be further amended by the board of
directors;
(4) The corporation does not have a class of voting stock that
is: (i) Listed on a national securities exchange; (ii)
authorized for quotation on The NASDAQ Stock Market; or
(iii) held of record by more than 2,000 stockholders,
unless any of the foregoing results from action taken,
directly or indirectly, by an interested stockholder or
from a transaction in which a person becomes an interested
stockholder;
(5) A stockholder becomes an interested stockholder
inadvertently and (i) as soon as practicable divests itself
of ownership of sufficient shares so that the stockholder
ceases to be an interested stockholder; and (ii) would not,
at any time within the 3-year period immediately prior to a
business combination between the corporation and such
stockholder, have been an interested stockholder but for
the inadvertent acquisition of ownership;
(6) The business combination is proposed prior to the
consummation or abandonment of and subsequent to the
earlier of the public announcement or the notice required
hereunder of a proposed transaction which (i) constitutes
one of the transactions described in the 2nd sentence of
this paragraph; (ii) is with or by a person who either was
not an interested stockholder during the previous 3 years
or who became an interested stockholder with the approval
of the corporation's board of directors or during the
period described in paragraph (7) of this subsection (b);
and (iii) is approved or not opposed by a majority of the
members of the board of directors then in office (but not
less than 1) who were directors prior to any person
becoming an interested stockholder during the previous 3
years or were recommended for election or elected to
succeed such directors by a majority of such directors. The
proposed transactions referred to in the preceding sentence
are limited to (x) a merger or consolidation of the
corporation (except for a merger in respect of which,
pursuant to ss. 251(f) of this title, no vote of the
stockholders of the corporation is required); (y) a sale,
lease, exchange, mortgage, pledge, transfer or other
disposition (in 1 transaction or a series of transactions),
whether as part of a dissolution or otherwise, of assets of
the corporation or of any direct or indirect majority-owned
subsidiary of the corporation (other than to any direct or
indirect wholly-owned subsidiary or to the corporation)
having an aggregate market value equal to 50% or more of
A-IV-2
either that aggregate market value of all of the assets of
the corporation determined on a consolidated basis or the
aggregate market value of all the outstanding stock of the
corporation; or (z) a proposed tender or exchange offer for
50% or more of the outstanding voting stock of the
corporation. The corporation shall give not less than 20
days' notice to all interested stockholders prior to the
consummation of any of the transactions described in clause
(x) or (y) of the 2nd sentence of this paragraph; or
(7) The business combination is with an interested stockholder
who became an interested stockholder at a time when the
restrictions contained in this section did not apply by
reason of any of paragraphs (1) through (4) of this
subsection (b), provided, however, that this paragraph (7)
shall not apply if, at the time such interested stockholder
became an interested stockholder, the corporation's
certificate of incorporation contained a provision
authorized by the last sentence of this subsection (b).
Notwithstanding paragraphs (1), (2), (3) and (4) of this subsection,
a corporation may elect by a provision of its original certificate of
incorporation or any amendment thereto to be governed by this
section; provided that any such amendment to the certificate of
incorporation shall not apply to restrict a business combination
between the corporation and an interested stockholder of the
corporation if the interested stockholder became such prior to the
effective date of the amendment.
(c) As used in this section only, the term:
(1) "Affiliate" means a person that directly, or indirectly
through 1 or more intermediaries, controls, or is
controlled by, or is under common control with, another
person.
(2) "Associate," when used to indicate a relationship with any
person, means: (i) Any corporation, partnership,
unincorporated association or other entity of which such
person is a director, officer or partner or is, directly or
indirectly, the owner of 20% or more of any class of voting
stock; (ii) any trust or other estate in which such person
has at least a 20% beneficial interest or as to which such
person serves as trustee or in a similar fiduciary
capacity; and (iii) any relative or spouse of such person,
or any relative of such spouse, who has the same residence
as such person.
(3) "Business combination," when used in reference to any
corporation and any interested stockholder of such
corporation, means:
(i) Any merger or consolidation of the corporation or
any direct or indirect majority-owned subsidiary
of the corporation with (A) the interested
stockholder, or (B) with any other corporation,
A-IV-3
partnership, unincorporated association or other
entity if the merger or consolidation is caused
by the interested stockholder and as a result of
such merger or consolidation subsection (a) of
this section is not applicable to the surviving
entity;
(ii) Any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in 1 transaction
or a series of transactions), except
proportionately as a stockholder of such
corporation, to or with the interested
stockholder, whether as part of a dissolution or
otherwise, of assets of the corporation or of any
direct or indirect majority-owned subsidiary of
the corporation which assets have an aggregate
market value equal to 10% or more of either the
aggregate market value of all the assets of the
corporation determined on a consolidated basis or
the aggregate market value of all the outstanding
stock of the corporation;
(iii) Any transaction which results in the issuance
or transfer by the corporation or by any direct
or indirect majority-owned subsidiary of the
corporation of any stock of the corporation or
of such subsidiary to the interested
stockholder, except: (A) Pursuant to the
exercise, exchange or conversion of securities
exercisable for, exchangeable for or
convertible into stock of such corporation or
any such subsidiary which securities were
outstanding prior to the time that the
interested stockholder became such; (B)
pursuant to a merger underss.251(g) of this
title; (C) pursuant to a dividend or
distribution paid or made, or the exercise,
exchange or conversion of securities
exercisable for, exchangeable for or
convertible into stock of such corporation or
any such subsidiary which security is
distributed, pro rata to all holders of a class
or series of stock of such corporation
subsequent to the time the interested
stockholder became such; (D) pursuant to an
exchange offer by the corporation to purchase
stock made on the same terms to all holders of
said stock; or (E) any issuance or transfer of
stock by the corporation; provided however,
that in no case under items (C)-(E) of this
subparagraph shall there be an increase in the
interested stockholder's proportionate share of
the stock of any class or series of the
corporation or of the voting stock of the
corporation;
(iv) Any transaction involving the corporation or any
direct or indirect majority-owned subsidiary of
the corporation which has the effect, directly or
indirectly, of increasing the proportionate share
of the stock of any class or series, or
securities convertible into the stock of any
class or series, of the corporation or of any
such subsidiary which is owned by the interested
stockholder, except as a result of immaterial
A-IV-4
changes due to fractional share adjustments or as
a result of any purchase or redemption of any
shares of stock not caused, directly or
indirectly, by the interested stockholder; or
(v) Any receipt by the interested stockholder of the
benefit, directly or indirectly (except
proportionately as a stockholder of such
corporation), of any loans, advances, guarantees,
pledges or other financial benefits (other than
those expressly permitted in subparagraphs
(i)-(iv) of this paragraph) provided by or
through the corporation or any direct or indirect
majority-owned subsidiary.
(4) "Control," including the terms "controlling," "controlled
by" and "under common control with," means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person,
whether through the ownership of voting stock, by contract
or otherwise. A person who is the owner of 20% or more of
the outstanding voting stock of any corporation,
partnership, unincorporated association or other entity
shall be presumed to have control of such entity, in the
absence of proof by a preponderance of the evidence to the
contrary; Notwithstanding the foregoing, a presumption of
control shall not apply where such person holds voting
stock, in good faith and not for the purpose of
circumventing this section, as an agent, bank, broker,
nominee, custodian or trustee for 1 or more owners who do
not individually or as a group have control of such entity.
(5) "Interested stockholder" means any person (other than the
corporation and any direct or indirect majority-owned
subsidiary of the corporation) that (i) is the owner of 15%
or more of the outstanding voting stock of the corporation,
or (ii) is an affiliate or associate of the corporation and
was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within the 3-year
period immediately prior to the date on which it is sought
to be determined whether such person is an interested
stockholder; and the affiliates and associates of such
person; provided, however, that the term "interested
stockholder" shall not include (x) any person who (A) owned
shares in excess of the 15% limitation set forth herein as
of, or acquired such shares pursuant to a tender offer
commenced prior to, December 23, 1987, or pursuant to an
exchange offer announced prior to the aforesaid date and
commenced within 90 days thereafter and either (I)
continued to own shares in excess of such 15% limitation or
would have but for action by the corporation or (II) is an
affiliate or associate of the corporation and so continued
(or so would have continued but for action by the
corporation) to be the owner of 15% or more of the
outstanding voting stock of the corporation at any time
within the 3-year period immediately prior to the date on
which it is sought to be determined whether such a person
is an interested stockholder or (B) acquired said shares
from a person described in item (A) of this paragraph by
gift, inheritance or in a transaction in which no
A-IV-5
consideration was exchanged; or (y) any person whose
ownership of shares in excess of the 15% limitation set
forth herein is the result of action taken solely by the
corporation; provided that such person shall be an
interested stockholder if thereafter such person acquires
additional shares of voting stock of the corporation,
except as a result of further corporate action not caused,
directly or indirectly, by such person. For the purpose of
determining whether a person is an interested stockholder,
the voting stock of the corporation deemed to be
outstanding shall include stock deemed to be owned by the
person through application of paragraph (8) of this
subsection but shall not include any other unissued stock
of such corporation which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise
of conversion rights, warrants or options, or otherwise.
(6) "Person" means any individual, corporation, partnership,
unincorporated association or other entity.
(7) "Stock" means, with respect to any corporation, capital
stock and, with respect to any other entity, any equity
interest.
(8) "Voting stock" means, with respect to any corporation,
stock of any class or series entitled to vote generally in
the election of directors and, with respect to any entity
that is not a corporation, any equity interest entitled to
vote generally in the election of the governing body of
such entity.
(9) "Owner," including the terms "own" and "owned," when used
with respect to any stock, means a person that individually
or with or through any of its affiliates or associates:
(i) Beneficially owns such stock, directly or
indirectly; or
(ii) Has (A) the right to acquire such stock
(whether such right is exercisable immediately
or only after the passage of time) pursuant to
any agreement, arrangement or understanding, or
upon the exercise of conversion rights,
exchange rights, warrants or options, or
otherwise; provided, however, that a person
shall not be deemed the owner of stock tendered
pursuant to a tender or exchange offer made by
such person or any of such person's affiliates
or associates until such tendered stock is
accepted for purchase or exchange; or (B) the
right to vote such stock pursuant to any
agreement, arrangement or understanding;
provided, however, that a person shall not be
deemed the owner of any stock because of such
person's right to vote such stock if the
agreement, arrangement or understanding to vote
such stock arises solely from a revocable proxy
A-IV-6
or consent given in response to a proxy or
consent solicitation made to 10 or more
persons; or
(iii) Has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting
(except voting pursuant to a revocable proxy or
consent as described in item (B) of
subparagraph (ii) of this paragraph), or
disposing of such stock with any other person
that beneficially owns, or whose affiliates or
associates beneficially own, directly or
indirectly, such stock.
(d) No provision of a certificate of incorporation or bylaw shall
require, for any vote of stockholders required by this section, a
greater vote of stockholders than that specified in this section.
(e) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all matters with respect to this section.
A-IV-7
ANNEX V
INFORMATION CONCERNING INTERNATIONAL SPECIALTY
PRODUCTS INC. AND OTHER PARTICIPANTS
IN THE SOLICITATION
Information is being given herein for (i) International
Specialty Products Inc., a Delaware corporation ("ISP"), (ii) Samuel J. Heyman,
a natural person and nominee for the Board of Directors of the Company, (iii)
Sunil Kumar, a natural person and nominee for the Board of Directors of the
Company, (iv) Gloria Schaffer, a natural person and nominee for the Board of
Directors of the Company, (v) Raymond Troubh, a natural person and nominee for
the Board of Directors of the Company, (vi) Richard A Weinberg, Executive Vice
President, General Counsel and Secretary of ISP ("Weinberg"), (vii) Randall R.
Lay, Executive Vice President and Chief Financial Officer of ISP ("Lay"), (viii)
Susan B. Yoss, Executive Vice President and Treasurer of ISP ("Yoss"), (ix)
Stephen R. Olsen, Senior Vice President-Corporate Development of ISP ("Olsen"),
(x) Jared Landaw, Vice President-Law of ISP ("Landaw") and (xi) Ben Stoller,
Director-Corporate Finance and Investments of ISP ("Stoller" and together with
Weinberg, Lay, Yoss, Olsen and Landaw, the "ISP Participants"), who are each a
"participant in a solicitation" as defined under the proxy rules (collectively,
the "Participants").
Information is also given for each of the entities listed
on Schedule A to this Annex V, each of which is an "associate", as defined under
the proxy rules, of ISP.
ISP is a Delaware corporation. ISP has its principal place
of business at 300 Delaware Avenue, Wilmington, Delaware 19801. The business
address of each of the ISP Participants is c/o ISP Management Company, Inc.,
1361 Alps Road, Wayne, New Jersey 07470. The address of each of the entities
listed on Schedule A to this Annex VI is c/o ISP Management Company, Inc., 1361
Alps Road, Wayne, New Jersey 07470.
The Participants may be deemed to have beneficial ownership
of Hercules Common Stock as set forth immediately below. Except as set forth
below, no associates of any of the Participants owns any Hercules Common Stock.
A-V-1
NUMBER OF SHARES APPROXIMATE MARGIN
OF HERCULES INDEBTEDNESS WITH RESPECT
NAME COMMON STOCK TO COMMON STOCK
---- ------------ ---------------
ISP Investments Inc. 10,719,200 (2)
(direct ownership)(1)
ISP Opco Holdings Inc. 10,719,200 (2)
(indirect ownership)(1)
International Specialty Products Inc. 10,719,200 (2)
(indirect ownership)(1)
Samuel J. Heyman 10,719,200 (2)
(indirect ownership)(1)
Sunil Kumar 0 $ 0
Gloria Schaffer 0 $ 0
Raymond Troubh 0 $ 0
Richard A. Weinberg 0 $ 0
Randall R. Lay 0 $ 0
Susan B. Yoss 0 $ 0
Stephen R. Olsen 0 $ 0
Jared Landaw 0 $ 0
Ben Stoller 0 $ 0
(1) ISP Investments (through ISP Investments Grantor Trust) has the sole
power to vote, direct the voting of, dispose of and direct the
disposition of the Hercules Common Stock. ISP Opco Holdings Inc.
("ISP Opco"), by virtue of its indirect ownership of all of the
outstanding capital stock of ISP Investments, may be deemed to own
beneficially (solely for purposes of Rule 13d-3) the Hercules Common
Stock owned by ISP Investments. International Specialty Products Inc.
("ISP"), by virtue of its ownership of all of the outstanding common
stock of ISP Opco, may be deemed to own beneficially (solely for
purposes of Rule 13d-3) the Hercules Common Stock owned by ISP
Investments. Mr. Heyman, by virtue of his beneficial ownership (as
defined in Rule 13d-3) of approximately 79% 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 ISP Investments.
(2) In the ordinary course of its business, ISP Investments Inc.
purchases securities for its investment portfolio with funds obtained
from the working capital of ISP Investments, 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
A-V-2
purchases of Hercules Common Stock, which purchases were numerous and
made over several months, is impossible to determine with any degree
of certainty.
To the best of the knowledge of the Participants and their
associates, 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 associate owns any securities of the
Company of record but not beneficially.
ISP does not have any special arrangements with any of the
ISP Participants in connection with this proxy solicitation.
None of the Participants and none of their associates has
any arrangement or understanding with any person with respect to (i) any future
employment with Hercules or (ii) any future transactions to which Hercules or
any of its affiliates may be a party. 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 $500,000. No family relationships
exist among the Participants' nominees or between any Hercules director or
executive officer and any of the Participants' nominees.
The following is a summary of all transactions in Hercules
securities by the Participants over the last two years.
DATE OF TRANSACTION NATURE OF TRANSACTION NUMBER OF SHARES
--------------------------------------------------------------------------------
01/28/00 Buy 21,700
03/01/00 Buy 196,000
03/02/00 Buy 1,030,000
03/03/00 Buy 1,200,000
03/09/00 Buy 60,000
03/13/00 Buy 35,000
03/14/00 Buy 11,800
03/15/00 Buy 45,000
03/20/00 Buy 150,000
03/22/00 Buy 65,000
03/23/00 Buy 13,000
03/28/00 Buy 200,000
03/29/00 Buy 106,000
03/31/00 Buy 55,000
04/03/00 Buy 35,000
04/04/00 Buy 62,600
A-V-3
DATE OF TRANSACTION NATURE OF TRANSACTION NUMBER OF SHARES
--------------------------------------------------------------------------------
04/07/00 Buy 2,500
04/10/00 Buy 102,000
04/12/00 Buy 151,000
04/13/00 Buy 165,500
04/14/00 Buy 102,000
04/17/00 Buy 55,000
04/18/00 Buy 63,000
04/19/00 Buy 60,000
04/20/00 Buy 370,000
04/24/00 Buy 34,900
04/25/00 Buy 100,000
04/26/00 Buy 81,500
04/28/00 Buy 7,500
05/01/00 Buy 200
05/02/00 Buy 35,000
05/03/00 Buy 135,000
05/04/00 Buy 95,000
05/05/00 Buy 50,000
05/08/00 Buy 35,000
05/09/00 Buy 35,000
05/10/00 Buy 1,000
6/5/00 Buy 14,100
6/6/00 Buy 41,200
6/7/00 Buy 35,000
6/8/00 Buy 14,400
6/9/00 Buy 16,000
6/19/00 Buy 70,000
6/20/00 Buy 50,000
6/22/00 Buy 2,500
6/23/00 Buy 25,000
7/10/00 Buy 35,000
7/11/00 Buy 35,000
7/12/00 Buy 11,800
7/14/00 Buy 5,355,000
7/17/00 Buy 40,000
7/20/00 Buy 3,000
7/21/00 Buy 4,000
A-V-4
SCHEDULE A TO ANNEX V
Associates of International Specialty Products Inc.
---------------------------------------------------
ISP Acquisition Corp.
ISP Investments Inc.
ISP Opco Holdings Inc.
Belleville Realty Corp.
ISP Alginates Inc.
ISP Management Company, Inc.
ISP Chemicals Inc.
ISP Minerals Inc.
ISP Technologies Inc.
ISP Mineral Products Inc.
ISP Environmental Services Inc.
Bluehall Incorporated
ISP Realty Corporation
ISP Real Estate Company, Inc.
International Specialty Products Funding Corporation
ISP Newark Inc.
ISP Van Dyk Inc.
ISP Fine Chemicals Inc.
ISP Freetown Fine Chemicals Inc.
Verona Inc.
ISP Global Technologies Inc.
ISP International Corp.
ISP Marl Holdings GmbH
ISP Holdings (U.K.) Ltd.
ISP Ireland
ISP (Puerto Rico) Inc.
ISP Marl GmbH
ISP Acetylene GmbH
ISP Alginates (U.K.) Ltd.
ISP (Great Britain) Co. Ltd.
ISP Andina, C.A.
ISP Argentina S.A.
ISP Asia Pacific Pte Ltd.
ISP (Australasia) Pte Ltd.
ISP (Belgium) N.V.
ISP (Belgium) International N.V.
ISP do Brasil Ltda.
ISP (Canada) Inc.
ISP Ceska Republika Spol S.R.O.
A-V-5
ISP (China) Limited
ISP Colombia Ltda.
ISP Freight Service N.V.
ISP Global Operations (Barbados) Inc.
ISP Global Technologies (Germany) Holding GmbH
ISP Customer Service GmbH
ISP Global Technologies Deutschland GmbH
International Specialty Products ISP (France) S.A.
ISP (Hong Kong) Limited
ISP (Italia) S.r.l.
ISP (Japan) Ltd.
ISP (Korea) Limited
ISP Mexico, S.A. de C.V.
ISP (Norden) A.B.
ISP (Osterreich) GmbH
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.
Chemfields Pharmaceuticals Private Limited
Kelp Industries Pty Ltd
Arramara Teoranta
Thorverk Hf
A-V-6
[PRELIMINARY COPY]
PROXY
HERCULES INCORPORATED
PROXY SOLICITED ON BEHALF OF INTERNATIONAL SPECIALTY
PRODUCTS INC. AND THE OTHER PARTICIPANTS IDENTIFIED IN THE
PROXY STATEMENT FURNISHED HEREWITH ("ISP") FOR THE ANNUAL MEETING OF
STOCKHOLDERS, APRIL 26, 2001 AT ____ A.M.
The undersigned stockholder 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 and revocation, to represent the
undersigned at the Annual Meeting of Stockholders of Hercules Incorporated to be
held at ___________________ on April 26, 2001 at ____ A.M., local time, and at
any adjournment or postponement 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 herewith is hereby
acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. ON MATTERS FOR WHICH YOU DO NOT SPECIFY A CHOICE, YOUR
SHARES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATION OF ISP. YOU MAY
APPROVE OR VOTE SEPARATELY ON ANY OR ALL OF THE PROPOSALS.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
ISP RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED BELOW.
---
ISP RECOMMENDS A VOTE "FOR" PROPOSAL NO. 1.
---
FOR AGAINST ABSTAIN
1. THE OMNIBUS PROPOSAL [_] [_] [_]
ISP RECOMMENDS A VOTE "FOR" PROPOSAL NO. 2.
---
FOR AGAINST ABSTAIN
2. THE BYLAW REPEAL PROPOSAL [_] [_] [_]
ISP RECOMMENDS A VOTE "FOR" PROPOSAL NO. 3.
---
FOR AGAINST ABSTAIN
3. THE DIRECTOR ELECTION [_] [_] [_]
BYLAW AMENDMENT PROPOSAL
ISP RECOMMENDS A VOTE "FOR" PROPOSAL NO. 4.
---
4. Election of Directors
FOR all nominees listed on the right (except WITHHOLD AUTHORITY to vote for NOMINEES: Samuel J. Heyman, Sunil Kumar,
as marked to the contrary hereon). all nominees listed to the Gloria Schaffer, Raymond Troubh
right. (Instructions: To withhold authority to vote for
any individual nominee, write that nominee's name
in the space provided below.)
[_] [_] _____________________________________________
ISP RECOMMENDS A VOTE "FOR" PROPOSAL NO. 5.
---
FOR AGAINST ABSTAIN
5. THE POISON PILL BYLAW PROPOSAL [_] [_] [_]
ISP RECOMMENDS A VOTE "FOR" PROPOSAL NO. 6.
---
FOR AGAINST ABSTAIN
6. THE SECTION 203 BYLAW PROPOSAL [_] [_] [_]
ISP MAKES NO RECOMMENDATION ON
THE FOLLOWING MATTER TO BE VOTED ON
AT THE 2001 ANNUAL MEETING
FOR AGAINST ABSTAIN
RATIFICATION OF INDEPENDENT AUDITORS [_] [_] [_]
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY BE PRESENTED TO THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT
THEREOF.
P Dated: _____________, 2001
R ----------------------------------------
(Signature)
O ----------------------------------------
(Signature if held jointly)
X
----------------------------------------
Title:
Y
Please sign exactly as name appears hereon.
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 2001 Annual Meeting of Hercules
Incorporated and any adjournment or
postponement thereof.