SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002 Commission file number 1-496
HERCULES INCORPORATED
A DELAWARE CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NO. 51-0023450
HERCULES PLAZA
1313 NORTH MARKET STREET
WILMINGTON, DELAWARE 19894-0001
TELEPHONE: 302-594-5000
Securities registered pursuant to Section 12(b) of the Act
(Each class is registered on the New York Stock Exchange, Inc.)
Title of each class
Common Stock ($25/48 Stated Value)
8% Convertible Subordinated Debentures due August 15, 2010
9.42% Trust Originated Preferred Securities ($25 liquidation amount), issued by
Hercules Trust I
and guaranteed by Hercules Incorporated
Preferred Share Purchase Rights
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No | |
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements in
Part III of this Form 10-K/A or any amendment to this Form 10-K/A. | |
Indicate by check mark whether the Registrant is an accelerated filer (as
defined by Rule 12b-2 of the Act). Yes |X| No | |
The aggregate market value of registrant's common stock, $25/48 stated
value ("Common Stock") held by non-affiliates based on the closing price on the
last day of the Company's most recently completed second fiscal quarter, or June
28, 2002, was approximately $1.2 billion.
As of March 31, 2003, registrant had 109,922,726 shares of Common Stock
outstanding, which is registrant's only class of common stock.
On the corporate website, www.herc.com, Hercules Incorporated provides
access to the Company's filings with the Securities and Exchange Commission via
a hyperlink to the Commission's website.
HERCULES INCORPORATED
PART III
EXPLANATORY NOTE
In Part III of the Form 10-K filed on March 31, 2003, certain disclosures
were incorporated by reference to the Company's Proxy Statement. Due to the fact
that the Company's Proxy Statement will be filed after April 30, 2003, the
information reported in this Form 10-K/A furnishes the disclosures required in
Part III of the Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Employee directors receive no compensation for serving on the Board of
Directors or its committees.
Non-employee directors receive a $30,000 annual fee ($16,000 payable
quarterly in cash installments and $14,000 payable quarterly in Restricted Stock
Units (RSUs)), $1,000 for each meeting attended in person or by telephone,
$3,000 for chairing a committee, $1,000 per day for special assignments and
reimbursement for out-of-pocket expenses. The annual fee was increased from
$16,000 to $30,000 by the Board of Directors in October 2002, effective
immediately. The annual fee for 2002 was prorated based upon the date the fees
were changed.
Additionally, at the October meeting, the Board of Directors approved
making annual grants of RSUs, the number of which are equal to the value
difference between $45,000 and the value of 3,000 stock options granted under
the Non-Employee Director Stock Accumulation Plan as discussed below and valued
using the Black-Scholes option-pricing model.
NON-EMPLOYEE DIRECTOR STOCK ACCUMULATION PLAN. In 2002, as in past years,
non-employee directors had the right to elect to receive restricted stock or
equivalent options in lieu of part or all of their fees under Hercules'
Non-Employee Director Stock Accumulation Plan (the "NEDSAP"). Restricted stock
issued pursuant to the NEDSAP is restricted until the director's retirement from
the Board of Directors and is valued at 85% of the fair market value of the
Company's common stock. Options issued pursuant to the NEDSAP are valued using
the Black-Scholes formula.
Under the NEDSAP, each director also receives an annual nonqualified stock
option to purchase 3,000 shares of common stock. The option exercise price is
the fair market value of Hercules' common stock on the date of grant. Vesting
occurs one year from the grant date.
EQUITY AWARD. Each director has a one-time opportunity to purchase 750
Hercules common shares at fair market value when first elected to the Board of
Directors. Upon the purchase, Hercules awards an additional 1,500 Hercules
common shares that cannot be transferred until retirement or resignation from
the Board of Directors.
RESTRICTED STOCK UNIT GRANT. Upon being elected to the Board of Directors,
each director receives 1,100 restricted stock units. The units are placed in an
unfunded account and accrue dividend equivalents, to the extent any dividends
are paid on the Company's common stock. Each restricted stock unit represents
the right to receive one Hercules common share at retirement. Restricted stock
units do not carry any voting rights. Of the 1,100 units, 200 vest immediately.
Thereafter, for every year served on the Board of Directors, 100 additional
units vest. Upon retirement from the Board of Directors, all vested restricted
stock units are paid in Hercules common shares. This payout will be made in a
lump sum or spread over a period not to exceed ten years, as elected by the
director.
TRUST ARRANGEMENTS
The Company has previously established a Trust (sometimes referred to as
a "Rabbi Trust") to provide for the funding of accrued benefits under the
Hercules Incorporated Retirement Plan for Nonemployee Directors and the
Hercules Incorporated Deferred Compensation Plan for Nonemployee Directors that
are currently not funded. Under the terms of the Trust, the funding is
triggered by an "Unsolicited Change in Control Event" as defined therein. A
copy of the Trust is filed as an exhibit hereto. Management intends to
recommend to the Board of Directors that the Trust be amended to provide, among
other things, for a substantial reduction in the funding that would be required
should such funding be triggered.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is currently composed of four members. Through
June 2002, Mr. McCausland served as Chairman of the Compensation Committee with
Mr. Lipton, Ms. Holiday and Ms. Sneed. Mr. Drosdick also served on the
Compensation Committee until his retirement in April 2002. In June 2002, Mr.
Lipton became Chairman of the Compensation Committee and served with Ms.
Holiday, Mr. Troubh and Ms. Sneed until her resignation from the Board of
Directors in October 2002. Presently, the Compensation Committee consists of
Messrs. Hunter, Lipton (Chairman), Troubh and Ms. Holiday. None of the members
of the Compensation Committee is an officer, employee or former officer or
employee of the Company or its subsidiaries. In 2002, none of the members of the
Compensation Committee had any relationship requiring disclosure in accordance
with Item 402(j)(3) of Regulation S-K.
2
HERCULES INCORPORATED
COMPENSATION OF EXECUTIVE OFFICERS
The following table contains information concerning compensation paid or
to be paid to those serving as Chief Executive Officer and the other four most
highly compensated executive officers of the Company for services rendered to
the Company and its subsidiaries during the past three completed fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- -------------------
VARIABLE ALL OTHER
SALARY COMPENSATION RESTRICTED OPTIONS COMPENSATION
YEAR $ (4) $ OTHER ($) STOCK (6)($) (SHARES) (7) ($)
---- - - --------- ------------ -------- -------
W. H. Joyce (1) 2002 $1,000,000 $1,930,000 $ 30,084 $ -- 600,000 $ 54,619
Chairman and Chief Executive 2001 666,667 997,500 5,662 -- 1,250,000 10,126
Officer 2000 -- -- -- -- -- --
F. G. Aanonsen (2) 2002 260,000 250,000 8,473 -- 50,000 4,737
Vice President and Controller 2001 130,000 175,000 -- -- 35,500 650
2000 -- -- -- -- -- --
R. G. Dahlen (3) 2002 300,000 259,000 -- -- 50,000 12,460
Chief Legal Officer 2001 163,095 150,000 -- -- 35,500 587,484
2000 -- -- -- -- -- --
R. C. Flexon 2002 257,920 260,000 -- -- 50,000 11,615
Vice President, Work Processes, 2001 248,000 175,000 -- -- 35,500 5,100
Corporate Resources and 2000 138,182 -- 58,181(5) 93,750 30,700 3,000
Development
C. A. Rogerson 2002 267,082 281,000 8,335(5) -- 50,000 12,482
Vice President and 2001 257,928 200,000 4,631(5) -- 35,500 7,772
General Manager, 2000 157,614 -- 114,742(5) -- 45,500 4,375
FiberVisions and Pinova
(1) Dr. Joyce became Chief Executive Officer on May 8, 2001. Dr. Joyce's
"Other" column includes taxes paid by the Company.
(2) Mr. Aanonsen was hired as Vice President and Controller on July 2, 2001.
Mr. Aanonsen's "Other" column includes taxes paid by the Company.
(3) Mr. Dahlen was rehired as Chief Legal Officer on June 15, 2001. Prior to
Mr. Dahlen being rehired, he was engaged as a consultant to Hercules. As a
result of this consulting agreement, Mr. Dahlen was paid $270,000, which
is reflected in the 2001 total in the "All Other Compensation" column.
Additionally, included in this total is $307,509 as full settlement of
payments owed to Mr. Dahlen as a result of his previous Hercules
employment and $9,975 of other compensation, which was primarily the
Company's matching contribution and interest on defined contribution
plans.
(4) The 2002 variable compensation was awarded in March 2003 for services
rendered in 2002.
(5) Messrs. Rogerson and Flexon's "Other" columns include taxes and relocation
expenses paid by the Company.
(6) These values are determined by multiplying the number of shares of
restricted stock awarded by the closing market price of Hercules common
stock on the date of grant and subtracting the consideration, if any, paid
by the executive officer. Dividends, if any are payable, may be paid on a
current basis or accrued. The number and value (determined by taking the
number of shares of restricted stock multiplied by the year-end closing
market price, or $8.80, net of any consideration paid) of aggregate
restricted stock holdings is shown below. Included in the chart are
restricted shares that each executive officer purchased under the terms of
the Hercules Long-Term Incentive Compensation Plan, reported in the column
entitled "Above Target MICP Grant," as well as shares that have been
granted outright, which are reported in
3
HERCULES INCORPORATED
the column entitled "Restricted Stock Grant." The aggregate amount paid for
restricted shares by executive officers was $424,419.
Above Target MICP Grant Restricted Stock Grant
--------------------------- ---------------------------
Aggregate Aggregate
Restricted 12/31/02 Restricted 12/31/02
Shares Net Value Shares Net Value
---------- --------- ---------- ----------
W. H. Joyce 24,509 -- -- --
F. G. Aanonsen 1,881 -- -- --
R. G. Dahlen 3,713 -- -- --
R. C. Flexon 4,971 -- 5,000 $ 44,000
C. A. Rogerson 6,956 -- -- --
(7) The amounts listed in the "All Other Compensation" column for 2002 reflect
the Company's matching contribution and interest on both the qualified and
non-qualified defined contribution plans.
OPTION GRANTS IN LAST FISCAL YEAR
The following table discloses information concerning individual grants of
stock options made during the last completed fiscal year to the executive
officers named in the summary compensation table.
Percent of
No. of Securities Total Options Exercise or
Underlying Granted to Base Price Expiration Grant Grant Date
Name Options Granted Employees ($/Share) Date Date Value (1)
---------------- ----------------- ------------- ------------- ---------- -------- ------------
W. H. Joyce 600,000(2) 29.5% $ 11.91 5/9/2012 5/9/2002 $ 3,069,240
F. G. Aanonsen 50,000(2) 2.5% 11.91 5/9/2012 5/9/2002 255,770
R. G. Dahlen 50,000(2) 2.5% 11.91 5/9/2012 5/9/2002 255,770
R. C. Flexon 50,000(2) 2.5% 11.91 5/9/2012 5/9/2002 255,770
C. A. Rogerson 50,000(2) 2.5% 11.91 5/9/2012 5/9/2002 255,770
(1) The Black-Scholes option-pricing model was used to determine the fair
value of employee stock options in the table above as of the date of the
grant. No adjustments for risk of forfeiture have been made. Significant
assumptions are as follows:
Dividend yield 0.0%
Risk free interest rate 5.0%
Expected life 6 years
Expective volatility 34.6%
In the fourth quarter of 2000, the Board of Directors approved suspension
of the Hercules common stock dividend. During the period from January 1,
1997 to December 31, 2002, the dividend yield on Hercules common stock
averaged 2.03%. Had the stock options been valued using the historical
dividend yield in the Black-Scholes option-pricing model, the value of Dr.
Joyce's grant would have been $2,449,740. Other grants reported herein
would be similarly adjusted downward.
(2) Vesting schedule is as follows: 40% on 5/9/03; 40% on 5/10/04; and 20% on
5/9/05. Options are immediately vested and exercisable upon retirement and
remain exercisable for a period of five years. Dr. Joyce and Mr. Dahlen
are both currently eligible to retire.
4
HERCULES INCORPORATED
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The table set forth below discloses certain information concerning the
exercise of stock options (exercised and unexercised) during the last completed
fiscal year by the executive officers named in the summary compensation table as
well as certain information concerning the number and value of unexercised
options. The value of options is calculated using the difference between the
option exercise price and $8.80 (year-end stock price) multiplied by the number
of shares underlying the option.
No. of No. of Securities Value of Unexercised
Shares Value Underlying Unexercised In-The-Money Options
Acquired Realized Options at Year-End At Year-End
Name on Exercise $ Exercisable Unexercisable Exercisable ($) Unexercisable ($)
------------------ ------------ ----------- ----------- ------------- --------------- -----------------
W. H. Joyce 0 0 0 1,850,000 $0 $0
F. G. Aanonsen 0 0 14,200 71,300 0 0
R. G. Dahlen 0 0 138,200 167,300 0 0
R. C. Flexon 0 0 38,760 77,440 0 0
C. A. Rogerson 0 0 50,600 80,400 0 0
5
HERCULES INCORPORATED
PENSION PLANS
The following table shows the estimated annual pension benefits payable to
a covered participant at normal retirement age under Hercules' qualified
benefits pension plan, as well as nonqualified supplemental benefits, based on
the stated remuneration and years of service with Hercules and its subsidiaries.
REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
------------ -------- -------- -------- -------- --------
$ 200,000 $ 45,453 $ 60,604 $ 75,755 $ 90,906 $ 106,057
250,000 57,453 76,604 95,755 114,906 134,057
300,000 69,453 92,604 115,755 138,906 162,057
350,000 81,453 108,604 135,755 162,906 190,057
400,000 93,453 124,604 155,755 186,906 218,057
450,000 105,453 140,604 175,755 210,906 246,057
500,000 117,453 156,604 195,755 234,906 274,057
600,000 141,453 188,604 235,755 282,906 330,057
700,000 165,453 220,604 275,755 330,906 386,057
800,000 189,453 252,604 315,755 378,906 442,057
900,000 213,453 284,604 355,755 426,906 498,057
1,000,000 237,453 316,604 395,755 474,906 554,057
1,500,000 357,453 476,604 595,755 714,906 834,057
2,000,000 477,453 636,604 795,755 954,906 1,114,057
Annual contributions by Hercules to its qualified pension plan, if any are
required, are determined statistically by an independent actuary, and no amount
is attributed to an individual employee. In 2002, the Company contributed $97
million to the Company's pension plans.
Generally, the aggregate annual retirement benefit, under both the
qualified and nonqualified plans, is an amount determined by taking the sum of
(i) 1.2% of the employee's average annual earnings (based on the highest five
consecutive years during the last 10 years of employment) up to one-half the
Social Security Tax Base ($42,450 in 2002), and (ii) 1.6% of the employee's
average annual earnings (as determined above) in excess of one-half of the
Social Security Tax Base, multiplied by the employee's total years and months of
credited service. For this purpose, "average annual earnings" consists of salary
plus annual incentive or variable compensation. Certain exceptions apply to
union represented employees.
For Dr. Joyce and Messrs. Aanonsen, Dahlen, Flexon and Rogerson,
compensation used for calculating retirement income benefits consists of the
highest 5 consecutive years of average annual earnings. These amounts for 2002
are shown under the "Salary" and "Variable Compensation" columns of the Summary
Compensation Table. The estimated credited years of service for Dr. Joyce and
Messrs. Aanonsen, Dahlen, Flexon and Rogerson are 1, 1, 8, 2 and 20,
respectively.
TRUST ARRANGEMENTS
The Company has previously established a Trust (sometimes referred to as a
"Rabbi Trust") to provide for the funding of accrued benefits under the
Hercules Incorporated Deferred Compensation Plan, the Hercules Incorporated
Non-qualified Supplemental Retirement Plan, the Hercules Incorporated Phantom
Stock Plan and other retirement income or employment agreements that are
currently not funded. Under the terms of the Trust, the funding is triggered by
an "Unsolicited Change in Control Event" as defined therein. A copy of the
Trust is filed as an exhibit hereto. Management intends to recommend to the
Board of Directors that the Trust be amended to provide, among other things,
for a substantial reduction in the funding that would be required should such
funding by triggered.
EMPLOYMENT CONTRACTS
On May 8, 2001, Hercules entered into a two-year written employment
agreement with Dr. Joyce which provides for him to serve as Chairman and Chief
Executive Officer. Under the agreement, Dr. Joyce's initial compensation
consisted of (i) a base annual salary of $1,000,000, (ii) target annual variable
compensation of $1,000,000 and (iii) a grant of stock options to acquire
1,250,000 shares of common stock at a per share exercise price of $12.00 (the
price of Hercules' common stock on the date of grant). The stock options have
ten-year terms and vest at the earliest of April 30, 2003, a "change in
control", death, disability or termination other than for cause. Dr. Joyce's
employment agreement also provides for further grants of stock options for each
calendar year after 2001, at such times as Hercules generally makes stock option
grants to other employees and in amounts and with terms and conditions
consistent with his position.
6
HERCULES INCORPORATED
CHANGE IN CONTROL AGREEMENTS
Since 1986, Hercules has entered into change in control agreements with
its senior executives. These agreements seek to ensure the stability of
Hercules' management during a period of transition within Hercules and only
become effective upon a change in control event. Hercules' Compensation
Committee periodically reviews these agreements and revises them, if necessary,
to reflect contemporary business practices in change in control situations.
Change in Control Agreements are in force for Dr. Joyce and Messrs.
Aanonsen, Dahlen, Flexon and Rogerson. These Agreements, the form of which has
been filed with the Securities and Exchange Commission, provide that a change in
control occurs:
- if any individual, entity or group (with certain exceptions) becomes
the beneficial owner of 20% or more of the outstanding shares of
Hercules common stock;
- if there is a change in a majority of the Board of Directors other
than by election or nomination by a vote of the majority of
directors comprising the incumbent Board of Directors;
- upon approval by the shareholders of a reorganization, merger,
consolidation or sale that results in Hercules' shareholders owning
less than 60% of the combined voting power of the surviving
corporation following the transaction; or
- if Hercules' shareholders approve a complete liquidation of the
Company.
The full definition of change in control is set forth in the Agreements.
Under the terms of these agreements, upon a change in control, Hercules or
its successor is required to continue to employ the above named executives, in
substantially the same position and level of compensation (including benefits)
as that executive held immediately before the change in control, for a period of
three years following the change in control.
Under the terms of these agreements, as amended in 2001, if Hercules or
its successor terminates the executive (within the three year period following a
change in control) for any reason other than cause, death or disability, or if
Hercules or its successor takes actions which permit the executive to terminate
his or her employment for good reason, such as diminishing the executive's
responsibilities or requiring the executive to relocate, during such three year
period, the executive is entitled to the following:
- a lump sum cash payment equal to:
- any unpaid prorated portion of the executive's variable
compensation or, if greater, the most recent variable
compensation received by the executive;
- any monthly salary earned but unpaid as of the date of
termination;
- three times the executive's base salary and variable
compensation; and
- the difference between the amount the executive would be
entitled to if Hercules or its successor contributed to the
executive's retirement plan for up to three additional years
of service (in addition to the years of service credited
during the employment period) and three additional years of
age and that amount the executive was actually entitled to
under this plan on the date of termination;
- three years of continued welfare benefits and perquisites;
- outplacement services at a cost of up to $50,000;
- full vesting of all stock options and restricted stock held by or
previously granted to the executive; and
- payment for any Internal Revenue Service excise taxes for "excess
parachute payments" (as defined under the Internal Revenue Code).
Dr. Joyce's and Mr. Dahlen's change in control agreements also provide
that if they terminate their employment on at least 180 days' advance notice
after a change of control and, in the case of a change in control triggered by
shareholder approval of a reorganization, merger, consolidation or sale
described above, after consummation of that transaction, the termination will be
treated as a termination for good reason, giving rise to the severance pay and
benefits described above. The agreements entered into with Dr. Joyce and Mr.
Dahlen do not provide for the additional pension service or age credits
described above.
Mr. Dahlen's change in control agreement provides in the case of a change
in control or termination by the Company for good reason for two times base
salary and variable compensation instead of the three times base salary and
variable compensation discussed above.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information, as of March 31, 2003, with
respect to the beneficial ownership of Hercules common shares by:
- beneficial owners of more than five percent of Hercules common
stock,
7
HERCULES INCORPORATED
- each Hercules director and nominee for director,
- each of the executive officers named in the Summary Compensation
Table set forth above, and
- all directors, nominees and executive officers of Hercules as a
group.
This information is based upon Hercules' records, as well as publicly
available information filed with the Securities and Exchange Commission.
This beneficial ownership is reported in accordance with the rules of the
SEC, under which a person may be deemed to be the beneficial owner of shares if
that person has or shares the power to vote or dispose of those shares or has
the right to acquire beneficial ownership of those shares within 60 days (for
example, through the exercise of an option). Accordingly, the shares shown in
the table as beneficially owned by certain individuals may include shares owned
by certain members of their respective families. Because of these rules, more
than one person may be deemed to be the beneficial owner of the same shares. The
inclusion of the shares shown in the table is not necessarily an admission of
beneficial ownership of those shares by the person indicated.
OPTIONS
SHARES EXERCISABLE
BENEFICIALLY WITHIN RESTRICTED PERCENT OF
NAME OWNED (1) 60 DAYS STOCK UNITS (2) SHARES (3)
-------------------------------------------------- ------------ ----------- --------------- ----------
DIRECTORS AND OFFICERS
W. H. Joyce, Director and Officer 157,374 1,490,000 -- 1.5%
F. G. Aanonsen, Officer 19,576 14,200 -- *
R. G. Dahlen, Officer 34,537 254,200 -- *
R. Fairbanks, Director 25,949 27,000 2,231 *
R. C. Flexon, Officer 29,743 58,760 -- *
S. J. Heyman, Director (4) 9,900,120 3,000 2,078 9.0%
A. R. Hirsig, Director 6,554 12,000 2,078 *
E. E. Holiday, Director 3,999 24,000 2,354 *
J. C. Hunter, III, Director -- -- 1,100 *
R. D. Kennedy, Director 12,250 3,000 2,078 *
S. Kumar, Director 20,909 3,000 2,078 *
J. M. Lipton, Director 21,865 3,000 2,078 *
P. McCausland, Director 20,560 15,000 2,078 *
C. A. Rogerson, Officer 28,895 79,700 -- *
G. Schaffer, Director 2,750 3,000 2,078 *
R. S. Troubh, Director 14,870 3,000 2,078 *
J. B. Wyatt, Director 7,010 3,000 2,078 *
All directors and executive officers as a group 10,549,685 2,747,360 24,387 11.8%
5% SHAREHOLDERS
Mario J. Gabelli and related entities (5) 10,218,507 -- -- 9.3%
C/o Gabelli Asset Management Inc.
One Corporate Center
Rye, New York 10580
International Specialty Products, Inc 9,893,700 -- -- 9.0%
and related entities (6)
C/o ISP Management Company, Inc.
1361 Alps Road
Wayne, New Jersey 07670
T. Rowe Price Associates, Inc. (7) 9,209,934 -- -- 8.4%
100 E. Pratt Street
Baltimore, Maryland 21202
8
HERCULES INCORPORATED
OPTIONS
SHARES EXERCISABLE
BENEFICIALLY WITHIN RESTRICTED PERCENT OF
NAME OWNED (1) 60 DAYS STOCK UNITS (2) SHARES (3)
-------------------------------------------------- ------------ ----------- --------------- ----------
Vanguard Fiduciary Trust Company (8) 8,315,904 -- -- 7.6%
500 Admiral Nelson Boulevard
Malvern, PA 19355
FMR Corp. and related entities (9) 7,562,431 -- -- 6.9%
82 Devonshire Street
Boston, MA 02109
* Less than 1% of the outstanding Hercules common shares.
(1) Includes shares as of March 31, 2003 in the Hercules Savings and
Investments Plan as follows: W. H. Joyce, 1,044; F. G. Aanonsen, 686; R.
G. Dahlen, 3,075; R. C. Flexon, 1,316; C. A. Rogerson, 1,145; and all
directors and officers as a group, 39,531. Includes shares with
restrictions and forfeiture risks as specified under the Long Term
Incentive Compensation Plan; W. H. Joyce, 156,330; F. G. Aanonsen, 18,890;
R. G. Dahlen, 19,163; R. C. Flexon, 28,427; C. A. Rogerson, 27,750; and
all directors and officers as a group, 414,208. Owners have the same
voting and dividend rights as other shareholders of Hercules, but no right
to sell or transfer. Included in the non-employee directors' totals is a
one-time equity award.
(2) The non-employee director does not have any voting rights or the right to
dispose of these restricted stock units until the non-employee director
leaves the Board of Directors. Further discussion of this Restricted Stock
Unit Grant can be found in Part III Item 11 Compensation of Directors in
this Form 10-K/A filing.
(3) Based on 109,922,726 shares outstanding on March 31, 2003. The calculation
of Percent of Shares excludes the share amounts listed in the Restricted
Stock Units column.
(4) Includes 9,893,700 shares held by International Specialty Products, Inc.
("ISP") and related entities. Mr. Heyman beneficially owns (as defined in
Rule 13d-3 of the Exchange Act) 100% of the capital stock of ISP and
therefore may be deemed to beneficially own (solely for purposes of Rule
13d-3) the Hercules common stock owned by ISP and related entities.
(5) Share holding as of December 10, 2002, as reported on Amendment No. 6 to
the Schedule 13D filed by such shareholder on December 12, 2002.
(6) Share holding as of April 16, 2003, as reported on the preliminary Proxy
Statement filed by the Hercules Shareholders' Committee for New Management
on April 16, 2003.
(7) Share holding as of December 31, 2002, as reported on Amendment No. 4 to
the Schedule 13G filed by such shareholder on January 31, 2003.
(8) Share holding as of December 31, 2002, as reported on the Schedule 13G
filed by such shareholder on April 2, 2003.
(9) Share holding as of December 31, 2002, as reported on the Scheduled 13G
filed by such shareholder on February 13, 2003.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
3. Exhibits:
A complete listing of exhibits is included in the
Exhibit Index that precedes the exhibits filed with this
Report.
9
HERCULES INCORPORATED
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HERCULES INCORPORATED
By: /s/ Fred G. Aanonsen
---------------------------------------
Fred G. Aanonsen
Vice President and Controller
(Principal Financial Officer and duly
authorized signatory)
April 30, 2003
10
HERCULES INCORPORATED
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William H. Joyce, Chairman and Chief Executive Officer, certify that:
1. I have reviewed this annual report on Form 10-K/A of Hercules
Incorporated;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: April 30, 2003
/s/ William H. Joyce
------------------------------------
William H. Joyce
Chairman and Chief Executive Officer
11
HERCULES INCORPORATED
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Fred G. Aanonsen, Vice President and Controller, certify that:
1. I have reviewed this annual report on Form 10-K/A of Hercules
Incorporated;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: April 30, 2003
/s/ Fred G. Aanonsen
--------------------------------
Fred G. Aanonsen
Vice President and Controller
12
HERCULES INCORPORATED
EXHIBIT INDEX
NUMBER DESCRIPTION INCORPORATED BY REFERENCE TO
10-Q Form of Change-of-Control Employment Agreements entered Exhibit 10-19, Registration Statement on Form
into as of August 24, 2000 by Hercules Incorporated and S-4, filed August 9, 2001
each of Robert C. Flexon and Craig. A. Rogerson.
10-W Form of Change-of-Control Employment Agreements entered Exhibit 10-25, Regtistration Statement on Form
into as of June 15, 2001 by Hercules Incorporated and S-4, filed August 9, 2001.
Richard G. Dahlen.
10-Ee* Hercules Incorporated Compensation Benefits Grantor
Trust Agreement for Management Employees.
10-Ff* Hercules Incorporated Compensation Benefits Grantor
Trust Agreement for Nonemployee Directors.
10-Gg* Amended and Restated Hercules Incorporated Management
Incentive Compensation Plan, dated February 21, 2003.
99.3* Certification of Chairman and Chief Executive Officer
Pursuant to 18. U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
99.4* Certification of Vice President and Controller Pursuant
to 18. U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
* Filed herewith
13