AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 14, 2003
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.)
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[ ] Soliciting Material Pursuant to Rule 14a-12
HERCULES INCORPORATED
(Name of Registrant as Specified in Its Charter)
THE HERCULES SHAREHOLDERS' COMMITTEE FOR NEW MANAGEMENT
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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THE HERCULES SHAREHOLDERS' COMMITTEE FOR NEW MANAGEMENT
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17 State Street, New York, NY 10004
July 14, 2003
Fellow Hercules Shareholders:
While we have been sharply critical of Joyce and his majority
directors, we remain convinced that there are still strong underlying values at
Hercules and that the Company's two remaining, primary businesses, Aqualon and
Pulp and Paper, under the right direction, have substantial potential for
growth. As a further expression of its confidence in the future of the Company,
ISP is announcing today its intention to purchase an additional 10 million
shares of Hercules common stock -- over and above our current ownership of 9.9
million Hercules shares -- conditioned upon the election of the Committee's
nominees.
ISP intends to commence a tender offer for five million shares of
Hercules at $12 per share in cash and to purchase an additional five million
shares of Hercules common stock through open market purchases thereafter. ISP's
tender offer will commence promptly after final certification of the election of
the Committee's four nominees and will be conditioned on the Board's elimination
of the poison pill, which will be one of the first actions taken should our
nominees be elected to the Board. The $12 price represents an almost 50% premium
over Hercules' closing price of $8.12 per share on February 11, 2003 -- the day
prior to ISP's filing of an amendment to its Schedule 13D indicating that it was
considering waging a proxy contest at the Company's 2003 Annual Meeting.
After completion of its tender offer, ISP intends to purchase an
additional five million shares of Hercules common stock in the open market
during the following twelve-month period. The completion of the tender offer and
the open market purchase program would increase ISP's holdings in Hercules from
9.9 million shares to 19.9 million shares (or 18% of the outstanding shares), a
more than 100% increase in ISP's current interest in Hercules.
Not only does ISP's commitment demonstrate its confidence in the future
of Hercules under NEW management, but it further aligns the interests of our
Committee members with those of Hercules shareholders, INCREASING OUR INVESTMENT
TO APPROXIMATELY $250 MILLION AS A RESULT OF ISP'S TENDER OFFER AND OPEN MARKET
PURCHASE PROGRAM.
COMPARE THIS WITH THE FACT THAT JOYCE HAS NOT PURCHASED A SINGLE SHARE
IN HERCULES AND ASK YOURSELF: WHO BETTER REPRESENTS THE INTERESTS OF HERCULES
SHAREHOLDERS - THE COMMITTEE, INCLUDING OUR NOMINEES, AN OUTSTANDING GROUP OF
EXPERIENCED BUSINESS PEOPLE AND PROFESSIONALS, WITH AN AGGREGATE INVESTMENT IN
HERCULES OF $250 MILLION, WHO ARE COMMITTED TO ENHANCING VALUES FOR ALL HERCULES
SHAREHOLDERS AS WE HAVE INVESTED OUR OWN MONEY IN HERCULES AS YOU HAVE, OR
JOYCE, WHO HAS NOT PURCHASED A SINGLE SHARE OF HERCULES STOCK AND IS MORE
INTERESTED IN POSITIONS, PARACHUTES AND PERKS?
On another subject, several Hercules shareholders have expressed the
view that they would like to see further assurances designed to prevent the
possibility of a conflict of interest between Hercules and ISP and its
affiliates, including Mr. Heyman. As you may recall from our June 24th letter,
in order to avoid a repeat of Joyce's outrageous self-dealing in connection with
his $9 per share LBO offer, ISP and Mr. Heyman provided a written commitment
effectively safeguarding the interests of Hercules shareholders with respect to
any corporate transaction involving Hercules and ISP, by requiring a two-thirds
vote of Hercules shareholders EXCLUDING the shares of ISP and its affiliates.(1)
In order to remove even the slightest remaining appearance of a
conflict of interest, address the stated concerns of these Hercules
shareholders, and broaden the shareholder mandate for our Committee's nominees,
the Committee has obtained a further commitment from ISP and its affiliates to
enter into a standstill agreement (attached as an exhibit to this letter), which
would become effective upon the election of our four nominees to the Hercules
Board. Pursuant to the standstill agreement, ISP and Mr. Heyman would agree, for
a period of two years, not to make any acquisition or merger proposal for
Hercules or any of its business units, unless a third party makes an acquisition
proposal first, and to otherwise limit their ownership in Hercules' stock to 20%
of the Company's outstanding shares.
* * * * * * * * * * *
In yet another transparent election ploy, Hercules late last week
released "earnings guidance" for the second quarter. While the "headline" number
was an estimated 27-29(cent) per share for the quarter, a review of management's
eleventh-hour, "smoke and mirrors" release serves as an example of how
misleading management's earnings reports have really been under Joyce over the
last two years.
o The estimate includes INCOME of 2(cent) per share for "Discontinued
operations," 1(cent) per share for a reversal of "Restructuring costs,"
and 6(cent) per share for "Tax benefit attributable to donation of
intellectual property" - FOR A TOTAL OF 9(CENT) PER SHARE OF ONE-TIME
INCOME ITEMS.
o With respect to income from ongoing operations, management forecasted
21-23(cent) per share which, based upon the experience of our four
minority directors with management estimates, MEANS 21(CENT) PER SHARE
- a 1(cent) increase over the 20(cent) per share reported in the second
quarter of 2002. WHAT MANAGEMENT HAS FAILED TO
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(1) Contrary to the recent report from Institutional Shareholder Services, these
assurances go well beyond Delaware law and the Company's charter and Bylaws.
2
DISCLOSE, HOWEVER, IS THAT ALMOST 2 1/2(CENT) PER SHARE OF THE 21(CENT)
CAME FROM A ONE-TIME INSURANCE BENEFIT, AND OF THE REMAINING 18
1/2(CENT) PER SHARE, AT LEAST 5(CENT) PER SHARE WE ESTIMATE IS
ATTRIBUTABLE TO THE IMPACT OF THE LOWER U.S. DOLLAR. PUT ANOTHER WAY,
WITHOUT THE BENEFIT OF THE ONE-TIME INSURANCE ITEM AND THE FAVORABLE
CURRENCY IMPACT, INCOME FROM ONGOING OPERATIONS FOR THE SECOND QUARTER
WOULD HAVE BEEN SHARPLY LOWER THAN THE SAME QUARTER LAST YEAR.
o Although reported sales for the Company were projected to be 8% higher
than the second quarter last year, we estimate that 6% of the 8%
resulted from the lower U.S. dollar.
ASK YOURSELF:
DOESN'T THIS LATEST EARNINGS ESTIMATE ILLUSTRATE THE LACK OF ANY REAL
PROGRESS WITH RESPECT TO THE OPERATING PERFORMANCE OF THE COMPANY'S BUSINESSES
UNDER JOYCE?
AND
ISN'T JOYCE'S PENCHANT FOR "PRO FORMA" EARNINGS, "NON-RECURRING"
CHARGES, AND "ONE-TIME INCOME ITEMS" RELATED TO HIS REFUSAL FOR ALMOST TWO YEARS
NOW TO HIRE A CHIEF FINANCIAL OFFICER FOR THE COMPANY?
It is now clear why Joyce pushed his associates on the Hercules Board
to authorize restricted stock grants in the amount of more than one million
shares to himself and other executives just prior to the June 6 record date. In
addition to the obvious economic benefit of stock GRANTS rather than OPTIONS, to
add insult to injury, Joyce is now claiming the right to have most all the
shares covered by these unvested, restricted grants voted in the proxy contest.
WHAT DO YOU THINK OF A CHIEF EXECUTIVE WHO IS WILLING NOT ONLY TO
MISLEAD SHAREHOLDERS ABOUT THE PERFORMANCE OF THE COMPANY UNDER HIS MANAGEMENT
BUT TO RESORT TO "STUFFING OF THE BALLOT BOX" IN AN ATTEMPT TO PERPETUATE
HIMSELF IN OFFICE?
* * * * * * * * * * *
The Hercules stock price, between the time Joyce became Chief
Executive, on May 8th, 2001 and the closing price on July 11th, has
underperformed the S&P MidCap Specialty Chemicals Index by almost 30%. The
Company's RECENT stock price performance, however, measured from February 11,
2003, the day prior to ISP's filing of an amendment to its Schedule 13D which
indicated that it was considering waging a proxy contest for control of the
Hercules Board, to the close on July 11th, has outpaced, for the first time in
Joyce's tenure, the S&P MidCap Specialty Chemicals Index by approximately 19%.
The improvement of Hercules' stock price performance has come
3
only in the wake of the Committee's proxy campaign, the prospect of new
management and a new direction for the Company, and the Committee's expressed
determination to enhance shareholder values.
WE ASK YOU TO JUDGE FOR YOURSELF WHETHER THE PRICE OF YOUR STOCK IS
LIKELY TO BE HIGHER OR LOWER AS A RESULT OF A CHANGE IN LEADERSHIP AT HERCULES.
PLEASE SIGN, DATE, AND RETURN OUR WHITE PROXY CARD TODAY!
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Sincerely,
THE HERCULES SHAREHOLDERS' COMMITTEE FOR NEW MANAGEMENT
/s/Samuel J. Heyman /s/Harry Fields /s/Anthony T. Kronman /s/Sunil Kumar
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Samuel J. Heyman Harry Fields Anthony T. Kronman Sunil Kumar
/s/Gloria Schaffer /s/Vincent Tese /s/Raymond S. Troubh /s/Gerald Tsai, Jr.
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Gloria Schaffer Vincent Tese Raymond S. Troubh Gerald Tsai, Jr.
EXHIBIT A
July 14, 2003
To The Hercules Shareholders' Committee for NEW Management
17 State Street
New York, NY 10004
While the undersigned and our respective affiliates (the "Heyman
parties") have no intention of making a proposal to acquire Hercules, we hereby
agree, subject to all of the Committee's nominees being elected to Hercules'
Board of Directors, to enter into a standstill agreement with Hercules that will
contain the following terms:
1. The Heyman parties will agree that for a period of two years (the
"Term") they will not acquire or agree, offer, seek or propose to
acquire the Company or substantially all of its assets, by merger,
tender or exchange offer or consolidation or to make a proposal to
acquire any of Hercules' business units or to otherwise enter into any
other business combination transaction (in each case, a "Takeover
Proposal").
2. Notwithstanding anything contained above, in the event that (x) a
third party proposes to enter into an agreement with Hercules or any
of its subsidiaries with respect to a merger, consolidation or other
business combination involving Hercules or any of its subsidiaries,
(y) a bona fide tender offer or exchange offer is announced by a third
party which would result, if consummated in accordance with its terms,
in a change of control of Hercules or (z) a third party proposes to
enter into an agreement with Hercules with respect to the sale,
transfer, conveyance or other disposition, in one transaction or a
series of related transactions, of a material portion of the assets of
Hercules and its subsidiaries taken as a whole or of any business unit
of Hercules (in each case, an "Acquisition Proposal"), then the Heyman
parties will be entitled to make a Takeover Proposal if such Takeover
Proposal is a Superior Proposal (as defined below). Additionally,
notwithstanding anything contained above, in the event the third party
Acquisition Proposal is for assets of Hercules and its subsidiaries
not constituting all or substantially all of such assets, then the
Heyman parties' Takeover Proposal, if any, shall not be for more
assets than those subject to such third party's Acquisition Proposal.
A-1
As used in this paragraph (2), "Superior Proposal" means a bona fide
written proposal that is on terms that would, if consummated, result
in a transaction that would, or would be reasonably likely to, be more
favorable to Hercules or its shareholders than the transactions
contemplated by the Acquisition Proposal.
3. In the event the Heyman parties make a permitted Takeover Proposal
pursuant to paragraph (2) above or after the expiration of the Term,
Samuel J. Heyman and Sunil Kumar agree to resign from the Hercules
Board upon making such a Takeover Proposal.
4. The Heyman parties will agree that, except as expressly permitted in
paragraph (2) above, during the Term they will not acquire or agree,
offer, seek or propose to acquire more than twenty percent (20%) of
the then outstanding shares of Hercules common stock.
5. The commitments referred to in paragraphs (1), (2) and (3) are in
addition to the procedural safeguards set forth in the June 24th
letter from the Heyman parties to the Committee, which continue in
full force and effect.
Sincerely,
International Specialty Products Inc.
By: /s/Sunil Kumar /s/Samuel J. Heyman
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Sunil Kumar Samuel J. Heyman
Chief Executive Officer
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IMPORTANT
PLEASE RETURN YOUR WHITE PROXY CARD AND DO NOT RETURN ANY OF THE
COMPANY'S GOLD PROXY CARDS, EVEN AS A PROTEST VOTE AGAINST HERCULES. ONLY YOUR
LATEST DATED, SIGNED PROXY CARD WILL BE COUNTED, AND ANY GOLD PROXY CARD YOU
SIGN FOR ANY REASON COULD INVALIDATE PREVIOUS WHITE PROXY CARDS SENT BY YOU TO
SUPPORT THE COMMITTEE.
Your vote is important. If you have any questions or need assistance in
voting your shares, please call:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 State Street, 10th Floor
New York, New York 10004
(866) 288-2190 (TOLL FREE)
Banks and Brokerage Firms please call:
(212) 440-9800
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