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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
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:
[ ] PRELIMINARY PROXY STATEMENT
[ ] DEFINITIVE PROXY STATEMENT [ ] CONFIDENTIAL, FOR USE OF THE
[X] DEFINITIVE ADDITIONAL MATERIALS COMMISSION ONLY (AS PERMITTED)
[ ] SOLICITING MATERIAL PURSUANT TO BY RULE 14A-6(E)(2)
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)(4) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
NOT APPLICABLE
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(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES: NOT
APPLICABLE.
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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 FILING FEE IS CALCULATED AND STATE HOW
IT WAS DETERMINED): NOT APPLICABLE.
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(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION: NOT APPLICABLE.
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(5) TOTAL FEE PAID: NOT APPLICABLE.
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[ ] FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS:
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE
ACT RULE 0-11(A)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING
FEE WAS PAID PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRATION
STATEMENT NUMBER, OR THE FORM OR SCHEDULE AND THE DATE OF ITS FILING.
(1) AMOUNT PREVIOUSLY PAID: NOT APPLICABLE.
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(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.: NOT APPLICABLE.
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(3) FILING PARTY: NOT APPLICABLE.
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(4) DATE FILED: NOT APPLICABLE.
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INTERNATIONAL SPECIALTY PRODUCTS
April 14, 2001
Fellow Hercules Stockholder:
The Hercules Board makes no attempt in its recent solicitation
materials to defend its corporate stewardship nor does it make mention of the
Company's disastrous stock price performance over the past five years. During
that time, you have seen the elimination of your dividend and the improvident
BetzDearborn acquisition which has had a crippling effect on the Company's
balance sheet. At the same time, the Board has continued to perpetuate
anti-shareholder positions with respect to important corporate governance issues
and has failed to maintain any semblance of continuity with respect to the
Company's executive leadership, where a revolving door policy has led to a
succession of four Chief Executives in 22 months, with a search for a fifth now
underway.
TIME FOR THE FACTS
The Hercules Board is seeking, we believe, to divert your attention
from its indefensible record, and we urge you to consider the FACTS and then
decide for yourself whose nominees will act in your best interests.
(1) HERCULES' CLAIM: As a result of an exhaustive internal study of the
"rapid consolidation" of the specialty chemicals industry, the Hercules Board
reached the conclusion that "becoming part of a larger enterprise is the best
strategic path for the Company."
THE FACTS: After five years of strategic "flip-flops" - which have taken
the Company from an aggressive acquisition program (adopted at or close to the
top of the specialty chemicals acquisition market), to a niche acquisition
strategy, to a partial restructuring program involving the sale of non-core
businesses - it's about time that the Hercules Board arrived at this obvious
conclusion.
The Hercules Board neglects to point out that its sudden interest in
"maximizing stockholder value" came we believe as a result of our presence as
the Company's largest Hercules stockholder and our letter to the Board more than
six months ago. The letter stated that "it has become all too apparent to us
that the course Hercules is now pursuing will not enhance stockholder value but
erode it instead" and went on to recommend 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."
ASK YOURSELF: WHY DID THE HERCULES BOARD PURSUE SO MANY FLAWED
STRATEGIES, WHICH PRODUCED SO FEW POSITIVE RESULTS, WASTED VALUABLE TIME, AND
ALLOWED THE COMPANY'S OPERATING BUSINESSES TO DETERIORATE WHEN FACTORS NOTED IN
THE COMPANY'S "INTERNAL STUDY" WERE PLAIN FOR ALL TO SEE?
(2) HERCULES' CLAIM: The paramount concern of the Hercules Board is
the maximization of stockholder values for all Hercules stockholders.
THE FACTS: We urge you to consider the record of the Hercules nominees and
their preoccupation with positions, perks, and parachutes. Although Hercules has
been unable to produce anything but capital losses for the Company's
stockholders in recent years, this has not prevented the Board from treating the
Company's top executives in a free-handed fashion. While Hercules' four most
recent Chief Executives were compensated lavishly during their terms of service,
their remuneration pales in comparison to the incentives they were given to take
retirement. We estimate that payments to be made to these executives in
connection with their separation from the Company will cost Hercules in excess
of $30 million, an expense the Company's stockholders can ill afford. And to add
insult to injury, the Board recently granted four of Hercules' top executives
golden parachute contracts which could cost Hercules' stockholders more than an
estimated $10 million.
Not until ISP surfaced last year, did the Hercules Board begin to
take steps to eliminate other unnecessary and costly perks. According to a
recent Delaware News Journal article (March 25, 2001), Hercules just sold its
Wilmington guest house earlier this year for $2.2 million and is currently
attempting to dispose of the Hercules Country Club and corporate jet.
Our nominees have no interest in the perquisites associated with
Board positions. Like you, their sole interest is in the maximization of
stockholder value for the benefit of all Hercules stockholders.
ASK YOURSELF: IS HERCULES BEING RUN MAINLY IN YOUR INTEREST OR FOR
THE BENEFIT OF THE HERCULES BOARD AND INCUMBENT MANAGEMENT, AND WHICH NOMINEES
ARE MORE LIKELY TO BEST REPRESENT YOUR INTERESTS?
(3) HERCULES' CLAIM: We have "serious concerns" about ISP and its interest
in acquiring additional shares in light of the fact that it has declined to make
an offer to acquire the Company.
THE FACTS: First, we made clear in our February 28th letter to Mr. Gossage
that we had decided not to participate in the auction process, in spite of the
Company's repeated invitations, "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." Second, our interest in acquiring additional
Hercules shares was based simply on our judgment that they were undervalued.
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MOREOVER, WE HAVE CONSISTENTLY COMMUNICATED TO HERCULES OUR WILLINGNESS TO ENTER
INTO A "STANDSTILL" AGREEMENT ACCEPTING ANY "REASONABLE CONDITIONS" WITH RESPECT
TO OUR OWNERSHIP POSITION IN ORDER TO ADDRESS ANY OF THE COMPANY'S "LEGITIMATE
CONCERNS" REGARDING POTENTIAL CONTROL ISSUES.
When we proposed our $17.50 per share tender offer last October, we
recommended that the Hercules Board entertain a sale of the Company. In making
our proposal, we acknowledged that "Hercules shares should be worth more in a
sale of the Company" and stated that the offer was an "expression of our
confidence" in the proposed course of action to sell the Company and was
designed to "provide those Hercules shareholders who wished to sell their shares
now with an opportunity to do so at a [then] 25% premium above the current
market price." When the Hercules Board refused to permit our tender offer to go
forward, we then proposed a compromise whereby the Company would revise the
threshold for its poison pill from the current 10% to 20%.
Finally, there is nothing inconsistent with our making an additional
investment in Hercules on the one hand and the Company's "on-going sale process"
on the other. As we stated in our February 28th letter, we have assured Hercules
that, regardless of the size of our holdings in the Company, "we would support
the sale of the Company at a fair price."
ASK YOURSELF: IF THE REAL CONCERN OF THE HERCULES BOARD WITH RESPECT
TO OUR OFFER TO PURCHASE ADDITIONAL SHARES RELATED TO POTENTIAL CONTROL ISSUES,
WHY DID IT REFUSE TO DISCUSS OUR OFFER OF A "STANDSTILL" AGREEMENT WITH
APPROPRIATE RESTRICTIONS ON OUR OWNERSHIP POSITION?
(4) HERCULES' CLAIM: We believe that "because of Mr. Heyman's prior
activities...ISP's nominees are not the right people for the job."
THE FACTS: We agree that the prior activities of Mr. Heyman should be
important to your decision, and we urge you to look at the record.
You should know that Mr. Heyman has been involved as either an
activist stockholder in proxy contests, as is currently the case with respect to
Hercules, or as a potential acquiror, with respect to other companies. While it
is true that we made money in all these instances, the Hercules Board neglects
to point out that we succeeded on each occasion in the creation of more than $5
1/2 billion of increased wealth for ALL stockholders of those companies. This we
believe is why stockholders in those companies supported our past efforts.
Should Hercules stockholders elect our nominees, we will make every effort to
help maximize value for all Hercules stockholders. As to the prior activities of
the Hercules Board, it has presided over the destruction of more than $5 1/2
billion of stockholder value in the last five years.
ASK YOURSELF: BASED ON THE RECORD, WHOM DO YOU CONSIDER MORE
QUALIFIED TO MAXIMIZE STOCKHOLDER VALUES AT HERCULES?
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(5) HERCULES' CLAIM: With respect to the Company's director election
Bylaw, which the Hercules Board claims requires an affirmative vote of a
majority of all outstanding shares to unseat an incumbent director, the Board
has stated, "We do not believe there is anything unfair, or contrary to
shareholder interests, in requiring that a nominee secure the affirmative
support of a majority of the equity of the Company in order to be elected."
THE FACTS: The Hercules' Board neglects to explain that it has established
one rule for insurgent nominees and another for incumbents. Moreover, under its
interpretation of the Company's Bylaw, for which incidentally we have been
unable to find a single precedent in all of Corporate America, our nominees
could receive votes representing 53 million shares of the 108 million shares
outstanding, for example, and the incumbent Hercules directors would continue in
office even if they failed to receive a single vote!
Hercules' indefensible Bylaw makes abundantly clear in our opinion not
only the Board's disregard for the interests of the Company's stockholders but
so also its willingness to say or do anything in order to serve their own
interests and continue themselves in office. The Board's position here is, we
believe, an insult to the intelligence of the Company's stockholders.
ASK YOURSELF: WHETHER HERCULES' BYLAW IS ANYTHING MORE THAN A
STRATAGEM TO ENSURE PERPETUATION OF THE COMPANY'S ENTRENCHED BOARD?
GIVEN THE ELECTION TACTICS OF THE HERCULES BOARD AND THE FACT THAT A
VOTE NOT CAST IS THE EQUIVALENT OF A VOTE FOR THE HERCULES NOMINEES, YOUR VOTE
IS ESPECIALLY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
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IN YOUR OWN BEST INTEREST, WE URGE YOU TO REJECT THE
TACTICS OF THE HERCULES BOARD AND SUPPORT OUR NOMINEES FOR
ELECTION AS HERCULES DIRECTORS. PLEASE SIGN, DATE AND RETURN THE
ENCLOSED BLUE PROXY CARD - TODAY!
----
/s/ Samuel J. Heyman /s/ Sunil Kumar
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If you have any questions or need assistance voting your shares,
please call the firm assisting us in this solicitation:
GEORGESON
SHAREHOLDER
COMMUNICATIONS INC.
17 State Street, 10th Floor
New York, New York 10004
CALL TOLL-FREE (800) 223-2064
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