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SCHEDULE
14A INFORMATION
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Proxy
Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment
No. )
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Filed
by Registrant [X]
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Filed
by a Party other than the Registrant [ ]
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Check
the appropriate box:
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[X]
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Preliminary
Proxy Statement
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[
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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[
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Definitive
Proxy Statement
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[
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Definitive
Additional Materials
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[
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Soliciting
Material Pursuant to Section 240.14a-12
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HERCULES
INCORPORATED
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(Name
of Registrant as Specified in Its Charter)
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(Name
of Person(s) Filing Proxy Statement if other than the
Registrant)
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Payment of Filing Fee (Check the appropriate
box):
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[X
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No
fee required.
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[
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11
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1)
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Title
of each class of securities to which transaction applies:
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2)
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Aggregate
number of securities to which transaction applies:
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3)
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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):
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4)
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Proposed
maximum aggregate value of transaction:
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5)
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Total
fee paid:
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[
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Fee
paid previously by written preliminary materials.
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[
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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.
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1)
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Amount
Previously Paid:
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2)
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Form Schedule
or Registration Statement No.:
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3)
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Filing
Party:
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4)
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Date
Filed:
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EXPLANATORY
NOTE
The
purpose of this Amendment is to add the Schedule 14A cover page
which was
inadvertently omitted from the Preliminary Proxy Statement filed
earlier
today. Except for the Schedule 14A cover page added hereby, the
attached
Preliminary Proxy Statement is the same as the earlier filed
Preliminary
Proxy Statement.
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PRELIMINARY
COPY
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2007
Proxy
Statement
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Invitation
to 2007
Annual
Meeting
of
Shareholders
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Hercules
Incorporated, Hercules Plaza, 1313 North Market Street
Wilmington,
Delaware 19894-0001 (302) 594-5000
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Hercules
Incorporated
Hercules
Plaza
1313
North Market Street
Wilmington,
DE 19894-0001
John
K. Wulff
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Chairman
of the Board
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Craig
A. Rogerson
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President
and
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Chief
Executive Officer
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March
21, 2007
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Dear
Shareholder:
We
are
pleased to invite you to attend the 2007 Annual Meeting of Shareholders of
Hercules Incorporated, scheduled for Thursday, April 19, 2007, at 11:00 A.M.,
local time, at Hercules Plaza, 1313 North Market Street, Wilmington, Delaware
19894-0001. Directions to Hercules Plaza are on the following
pages.
The
items
to be considered and voted on at the Annual Meeting are described in the notice
of the 2007 Annual Meeting of Shareholders and the Proxy Statement accompanying
this letter. We encourage you to carefully read all of these materials, as
well
as the copy of our Annual Report which is enclosed with this Proxy
Statement.
It
is
important that your shares be represented at the Annual Meeting even if you
cannot attend and vote your shares in person. Please complete, sign and date
the
Proxy Card and return it in the enclosed, postage-prepaid envelope as soon
as
possible to ensure that your shares will be duly represented and voted at the
Annual Meeting. If you choose to do so, you may vote by telephone or by use
of
the Internet instead of voting by Proxy Card. In any event, please vote prior
to
the Annual Meeting whether or not you plan to attend the Annual
Meeting.
We
appreciate your continued interest in and support of Hercules.
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Sincerely
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John
K. Wulff
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Chairman
of the Board
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Craig
A. Rogerson
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President
and Chief Executive Officer
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DIRECTIONS
TO HERCULES PLAZA
(1313
North Market Street, Wilmington, Delaware 19894-0001)
From
Philadelphia, New Jersey and Areas North of Wilmington:
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Take
Interstate 95 South to Wilmington (do not take I-495 - follow I-95
signs
for Wilmington).
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Take
Exit 7B, which is Delaware Avenue/Route
52.
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Stay
to the left as you come up grade to traffic light. Turn left onto
Delaware
Avenue and take center lane. There is a sign marked "Business District
52
South."
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You
will pass seven streets - Adams, Jefferson, Washington, West, Tatnall,
Orange and Shipley. After crossing over Orange Street, the Hotel
DuPont
will be on your right. Get into the left
lane.
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The
next street is Market Street. Turn
left.
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Proceed
down Market Street crossing over 12th
and 13th
Streets (traffic lights at each corner). Hercules Plaza is at
13th
Street and will be on your left. Hercules Plaza is a twelve-story
granite/glass building with green tinted
windows.
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If
traveling from New Jersey over the Delaware Memorial
Bridge:
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Stay
to the far left lane as you exit the Delaware Memorial Bridge. Stay
left
heading toward sign stating Wilmington Delaware Turnpike - Baltimore
- 295
- 95 - 495.
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Bear
to the right heading for Interstate 95
North.
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Take
the center lane as it will narrow to two lanes past Exit 6 (Martin
Luther
King Boulevard).
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Take
Exit 7, Delaware Avenue. Stay to the right as you come up grade to
traffic
light. You are on Adams Street - continue straight ahead to dead
end
(about 3 blocks) to Delaware Avenue. Turn right onto Delaware Avenue
and
take center lane. You will pass under sign "Business District 52
South."
Pass five streets - Jefferson, Washington, West, Tatnall and Orange.
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After
crossing over Orange Street, the Hotel DuPont will be on your right.
Get
into the left lane.
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Turn
left onto Market Street. Pass 12th
and 13th
Streets (traffic lights at each). Hercules Plaza is at 13th
Street and will be on your left. Hercules Plaza is a twelve-story
granite/glass building with green tinted
windows.
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From
Pennsylvania on I-476 (the Blue Route):
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Take
the Blue Route to Interstate 95 South to Wilmington.
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Follow
the above directions for traveling from
Philadelphia.
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From
Baltimore, Washington and Areas South of Wilmington:
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Take
Interstate 95 North to Wilmington. Take Exit 7, which is Delaware
Avenue/Route 52.
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Stay
to the right as you come up grade to traffic light. You are on Adams
Street - continue straight ahead to dead end (about 3 blocks) to
Delaware
Avenue. Turn right on to Delaware Avenue and take center lane. You
will
pass under sign "Business District 52 South." Pass five streets -
Jefferson, Washington, West, Tatnall and Orange.
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After
crossing over Orange Street, the Hotel DuPont will be on your right.
Get
into the left lane.
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Turn
left onto Market Street. Pass 12th
and 13th
Streets (traffic lights at each). Hercules Plaza is at 13th
Street and will be on your left. Hercules Plaza is a twelve-story
granite/glass building with green tinted
windows.
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From
the Wilmington Train (Amtrak) Station:
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The
Wilmington Train Station is located between King and French Streets
on
Front Street.
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Hercules
Plaza is at Market and 13th
Streets, 12 blocks north of the station. Cabs are usually
available at the station.
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Hercules
Plaza is on the NW corner of Market and 13th
Streets. Hercules Plaza is a twelve-story granite/glass building
with
green tinted windows.
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After
you enter the building, follow the posted signs to the meeting room
located in the Lower Atrium.
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Hotel
Accommodations
Wilmington
has numerous hotels and motels in both the downtown and surrounding areas.
For a
listing you may want to refer to the Wilmington area website at http://www.wilmcvb.net/accommodations.html.
Parking
Near Hercules Plaza
There
is
limited parking under the Hercules Plaza building. However, in addition to
the
parking available under the building, there are parking garages located across
the street from Hercules Plaza between Orange and 12th
Streets
and on the side of Hercules Plaza between Market and 14th
Streets.
Important
Note
Please
bring photograph identification (e.g. driver’s license, passport or other) with
you in order to gain admission to the Annual Meeting. If your shares are held
in
the name of a bank, broker or other nominee and you plan to attend the Annual
Meeting, please bring evidence of your ownership of Hercules shares, such as
a
copy of your broker statement or a copy of the Proxy Card mailed to you by
your
bank or broker. Cameras, cell phones, pagers, recording equipment and other
electronic devices will not be permitted at the Annual Meeting.
Hercules
Incorporated
Hercules
Plaza
1313
North Market Street
Wilmington,
DE 19894-0001
March
21,
2007
To: Shareholders
of Hercules Incorporated
Subject: Notice
of 2007
Annual Meeting of Shareholders
The
2007
Annual Meeting of Shareholders (the “Annual Meeting”) is scheduled for Thursday,
April 19, 2007, at 11:00 A.M., local time, at Hercules Plaza, 1313 North Market
Street, Wilmington, Delaware 19894-0001 (telephone: 800-441-9274) to consider
and take action on the following proposals:
| 1. |
Re-election
of each of the following three (3) director nominees: John C. Hunter,
III,
Robert D. Kennedy and Craig A. Rogerson, each for a new three-year
term
expiring at the 2010 Annual Meeting of Shareholders (Proposal No.
1);
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Ratification
of the appointment of BDO Seidman, LLP as Hercules’ independent registered
public accountants for 2007 (Proposal No. 2);
and
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Amendments
to Hercules’ Amended and Restated Certificate of Incorporation and
Hercules’ Revised and Amended By-laws (Proposal No.
3).
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Shareholders
of record as of the close of business on March 5, 2007, will be entitled to
vote
at the Annual Meeting. We encourage you, whether or not you plan to attend
the
Annual Meeting, to vote by Proxy Card, telephone or Internet in advance of
the
Annual Meeting. You may attend the Annual Meeting and change your vote at that
time if you wish to do so.
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By
order of the Board of Directors
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Israel
J. Floyd
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Corporate
Secretary
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and
General Counsel
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TABLE
OF CONTENTS
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Page
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5
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5
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6
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| Method and Cost of Proxy Solicitation |
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6
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7
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8
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10
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| Board Committees |
12
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| DIRECTOR COMPENSATION |
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| Compensation of Employee Directors |
14
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| Compensation of Non-Employee Directors |
14
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20
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21
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24
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| PRINCIPAL ACCOUNTANT FEES AND SERVICES |
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| HUMAN RESOURCES COMMITTEE REPORT |
31
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| COMPENSATION DISCUSSION AND ANALYSIS |
31
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| SUMMARY COMPENSATION TABLE |
42
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| GRANT OF PLAN-BASED AWARDS |
44
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| PENSION BENEFITS |
47
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| HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION |
51
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| BENEFICIAL OWNERSHIP OF COMMON STOCK |
52
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PROXY
STATEMENT
Hercules
Incorporated
Hercules
Plaza
1313
North Market Street
Wilmington,
DE 19894-0001
March
21,
2007
The
accompanying proxy is being solicited on behalf of the Board of Directors of
Hercules Incorporated (the “Board”) for use at the 2007 Annual Meeting of
Shareholders to be held at Hercules Plaza on Thursday, April 19, 2007 at 11:00
A.M., local time, and at any adjournment, postponement, continuation or
rescheduling of the Annual Meeting.
This
Proxy Statement and the accompanying Proxy Card are being distributed on or
about March 21, 2007. A copy of the Hercules 2006 Annual Report is enclosed
with this Proxy Statement.
Shareholders
of record as of the close of business on March 5, 2007, which is the Record
Date, will be entitled to one vote for each share of Hercules common stock
registered in the shareholder’s name. Shareholders of record will retain their
voting rights even if they sell their Hercules shares after the Record Date.
As
of the Record Date, there were [112,859,768]
shares
of Hercules common stock outstanding.
You
may
vote by completing and mailing the enclosed Proxy Card or you may vote by
telephone or by use of the Internet.
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To
vote your proxy by mail, mark your selections on the enclosed Proxy
Card,
date and sign your name exactly as it appears on your Proxy Card,
and
return your Proxy Card in the enclosed envelope.
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To
vote by telephone, please dial 1-866-540-5760, have your Proxy Card
in
hand when you call and follow the voice prompts.
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To
vote by use of the Internet, please log on to the Internet at
http://www.proxyvoting.com/herc and
have your Proxy Card in hand when you access the
website.
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If
your
Hercules’ shares are held in the name of a bank, broker or nominee (e.g.
custodians, fiduciaries or trustees), then only your bank, broker or
nominee can sign a Proxy Card with respect to your shares and only upon
specific instructions from you. Therefore, if your bank, broker or
nominee has not sent you a Proxy Card and requested your instructions, then
please contact your bank, broker or nominee. You should provide instructions
to
your bank, broker or nominee for a Proxy Card to be signed representing your
shares.
Please
vote in advance of the Annual Meeting, whether or not you plan to attend the
Annual Meeting. If, however, you are a shareholder of record and plan to attend
the Annual Meeting, please bring with you valid government-issued photographic
identification (such as a driver’s license or passport) in order to gain
admission to the Annual Meeting. If your shares are held in the name of a bank,
broker or nominee, you will have to bring evidence of your ownership of Hercules
shares as of the Record Date, in addition to valid government-issued
photographic identification, if you wish to attend the Annual Meeting. Examples
of proof of ownership include the following:
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a
letter from your bank, broker or nominee stating that you owned your
shares as of the Record Date;
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an
account statement from your bank, broker or nominee indicating that
you
owned your shares as of the Record Date; or
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a
copy of the voting instruction card provided by your bank, broker
or
nominee indicating that you owned your shares as of the Record
Date.
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If
you
are a proxy holder for a Hercules shareholder, to gain entry to the Annual
Meeting you must bring:
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a
validly executed proxy naming you as the proxy holder, signed by
a
Hercules shareholder who owned Hercules shares as of the Record Date;
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valid
government-issued photographic identification (such as a driver’s license
or passport); and
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if
the shareholder whose proxy you hold was not a record holder of Hercules
shares as of the Record Date, proof of the shareholder’s ownership of
Hercules shares as of the Record Date, in the form of a letter or
statement from a bank, broker or nominee or the voting instruction
card
provided by the bank, broker or nominee in each case, indicating
that the
shareholder owned those shares as of the Record
Date.
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If
you
sign your Proxy Card and do not indicate your vote on any one or more of the
proposals, you will give authority to each of Craig A. Rogerson, our President
and Chief Executive Officer, Allen A. Spizzo, our Vice President and Chief
Financial Officer, and Israel J. Floyd, our Corporate Secretary and General
Counsel, to vote on such proposal(s) and any other matter that may arise at
the
Annual Meeting. Messrs. Rogerson, Spizzo and Floyd each intend to use that
authority to vote as follows:
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FOR
the election of each of the three director nominees (Proposal No.
1);
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FOR
the ratification of the appointment of BDO Seidman, LLP as Hercules’
independent registered public accountants for 2007 (Proposal No.
2); and
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FOR
the amendments to Hercules’ Amended and Restated Certificate of
Incorporation and to Hercules’ Revised and Amended By-laws (Proposal No.
3).
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Under
Hercules’ Revised and Amended By-laws, a majority of the total number of shares
of Hercules common stock entitled to vote, present in person or represented
by
proxy, constitutes a quorum. Votes will be counted by our transfer agent.
Pursuant to applicable rules of the Securities and Exchange Commission (the
“SEC”), boxes and a designated blank space are provided on the Proxy Card for
you to mark if you wish:
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to
vote “FOR” or “WITHHOLD” authority for one or more of the director
nominees (see Proposal No. 1);
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to
vote “FOR” or “AGAINST,” or to “ABSTAIN” from voting on, the ratification
of the appointment of BDO Seidman, LLP as Hercules’ independent registered
public accountants for 2007 (see Proposal No. 2);
or
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to
vote “FOR” or “AGAINST,” or to “ABSTAIN” from voting on, the amendments to
the Hercules' Amended and Restated Certificate of Incorporation and
the
Hercules' Revised and Amended By-laws (see Proposal No.
3).
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If
you
vote by telephone, please dial 1-866-540-5760, enter the control number
indicated on your Proxy Card and follow the voice prompts. If you vote by the
use of the Internet, please log on to http://www.proxyvoting.com/herc
and have
your Proxy Card in hand when you access the website.
Pursuant
to Hercules’ Revised and Amended By-laws (“By-laws”), election of directors
(Proposal No. 1) by shareholders requires the affirmative vote of the holders
of
a majority of the total number of issued and outstanding shares of Hercules
common stock. Ratification by shareholders of the appointment of BDO Seidman,
LLP as Hercules’ independent registered public accountants for 2007 (Proposal
No. 2) requires the affirmative vote of the holders of a majority of the total
number of issued and outstanding shares of Hercules common stock. Approval
by
shareholders of the amendments to Hercules’ Amended and Restated Certificate of
Incorporation (“Certificate of Incorporation”) and the By-laws (Proposal No. 3)
requires the affirmative vote of at least eighty percent (80%) of the total
number of issued and outstanding shares of Hercules common stock.
Abstentions,
votes withheld in connection with the election of one or more nominees for
director and broker non-votes, which occur when brokers that hold shares in
street name do not receive instructions from the beneficial owners of those
shares, will be counted in determining whether a quorum is present at the Annual
Meeting but will not be counted as votes for or against any of the proposals.
Therefore, such votes will have the same effect as votes against each of the
proposals and will make it more difficult to obtain the required approval on
each proposal.
A
shareholder giving a proxy has the power to revoke such proxy at any time before
the voting at the Annual Meeting, by submitting a written revocation or a duly
executed proxy bearing a later date. A written revocation must be received
by
Hercules Incorporated, 1313 North Market Street, Wilmington, Delaware
19894-0001, Attention: Corporate Secretary by mail or by facsimile at
(302)
594-7315,
no
later than the beginning of voting at the Annual Meeting. In addition, any
shareholder who attends the Annual Meeting in person may vote by ballot at
the
Annual Meeting, thereby canceling any proxy previously
given, or may give notice of revocation to the inspector of election. Merely
attending the Annual Meeting without voting, however, will not revoke any
previously executed proxy.
If
you
are a participant in the Hercules Incorporated Savings and Investment Plan
(“SIP”), you will receive a separate packet of information about how to provide
voting instructions to the SIP trustee. The SIP trustee will vote the Hercules
shares that are allocable to your account under the SIP in accordance with
your
instructions unless the SIP trustee determines that it is legally obligated
to
do otherwise. If you do not provide the SIP trustee with instructions, the
SIP
trustee will vote your Hercules shares in proportion to the manner in which
it
votes the shares allocable to other SIP participants who provided instructions
unless the SIP trustee determines that it is legally obligated to do otherwise.
Our
2006
Annual Report is enclosed with this Proxy Statement. Shareholders of record
who
did not receive the Annual Report may request a copy free of charge by
contacting Helen Calhoun, Hercules Incorporated, 1313 North Market Street,
Wilmington, Delaware 19894-0001, facsimile (302) 594-6909, telephone (302)
594-5129 or e-mail at hcalhoun@herc.com. The Annual Report can also be found
on
our website at www.herc.com.
To
be
included in our 2008 Proxy Statement, shareholder proposals must be submitted
in
writing and received by Israel J. Floyd, Corporate Secretary and General
Counsel, Hercules Incorporated, Hercules Plaza, 1313 North Market Street,
Wilmington, Delaware 19894-0001, no later than November 19, 2007 (or, if
the date of the 2008 Annual Meeting is changed by more than 30 days from the
date of the 2007 Annual Meeting, a reasonable time before Hercules begins to
print and mail its proxy materials). Upon receipt of a shareholder proposal,
we
will determine whether or not to include such proposal in our 2008 Proxy
Statement in accordance with applicable law.
Shareholder
proposals submitted after November 19, 2007 will not be included in our 2008
Proxy Statement but may be presented at the 2008 Annual Meeting. However, if
any
shareholder wishes to present a proposal for the 2008 Annual Meeting that is
not
included in our 2008 Proxy Statement and fails to submit that proposal on or
before February 2, 2008, then the persons named as proxies in the Proxy Card
accompanying our 2008 Proxy Statement will be allowed to use their discretionary
voting authority when the proposal is raised at the 2008 Annual Meeting, without
any discussion of the matter in our 2008 Proxy Statement.
A
class
of directors is elected to the Board each year at the annual meeting. The
Board is responsible for filling vacancies on the Board that may occur at any
time during the year, and for nominating director nominees to stand for election
at the annual meeting. The Corporate Governance, Nominating and Ethics
Committee of the Board of Directors ("Governance Committee") reviews potential
director candidates, and recommends potential director candidates to the full
Board. Director candidates may be identified by current directors and officers
of Hercules, as well as by shareholders. The Governance Committee is comprised
entirely of independent directors, as defined in the New York Stock
Exchange Listing Standards. Depending upon the then existing circumstances,
the Governance Committee may utilize the services of director search firms
and/or recruiting consultants to assist in identifying and screening potential
candidates. The
Governance Committee has an extensive diligence process
for reviewing potential candidates, including an assessment of each candidate’s
education, experience, independence and other relevant factors, as described
under “The Board - Director Qualifications” in Hercules’ Corporate Governance
Guidelines (which can be found on our website at www.herc.com).
The
Board reviews and has final approval of all potential director candidates being
recommended to the shareholders for election.
The
Governance Committee seeks nominees who have the highest personal and
professional integrity, who have demonstrated exceptional ability and judgment,
and who would be most effective, in conjunction with the other nominees and
members of the Board, in collectively serving the long-term interests of the
shareholders and Hercules. The Governance Committee considers potential director
candidates recommended by Hercules’ shareholders. Nominations from shareholders
for the election of directors, which are in compliance with all applicable
laws
and regulations and which are properly submitted in writing to our Corporate
Secretary, will be referred to the Governance Committee for
consideration.
A
shareholder may recommend any person as a nominee for director of Hercules
for
consideration by the Governance Committee by submitting the name
and supporting information for each person in writing to the Governance
Committee of the Board of Directors, Hercules Incorporated, Hercules Plaza,
1313
North Market Street, Wilmington, Delaware 19894-0001. Recommendations must
be in
writing and received by November 19, 2007 for our 2008 Annual Meeting, and
should be accompanied by:
| · |
the
name, residence and business address of the nominating
shareholder;
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a
representation that the shareholder is a record holder of Hercules
stock
or holds Hercules stock through a bank, broker or other nominee and
the
number of shares held;
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information
regarding each nominee which would be required to be included in
a proxy
statement;
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a
description of any arrangements or understandings between and among
the
shareholder and each and every nominee;
and
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the
written consent of each nominee to serve as a director, if
elected.
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No
nominations were received from shareholders for the 2007 Annual
Meeting.
The
Board
provides a process for shareholders and interested parties to send
communications to the Board. Shareholders and interested parties may communicate
with any of Hercules’ directors, any Board Committee chairperson, the
non-management directors as a group or the full Board by writing to them in
care
of Hercules Incorporated, Attention: Corporate Secretary, Hercules Plaza, 1313
North Market Street, Wilmington, Delaware 19894-0001. Communications received
by
the Corporate Secretary for any Hercules director are forwarded directly to
the
director. If the communication is addressed to the Board and no particular
director is named, the communication will be forwarded, depending on the subject
matter, to the Chairman, the appropriate Board Committee chairperson, all
non-management directors, or all directors.
Access
to
information on our website (www.herc.com)is
free
of charge (except for any Internet provider or telephone charges). We provide
access through our website to all SEC filings submitted by Hercules, as well
as
to information relating to corporate governance. Copies of the documents found
on our website include the following: the Audit Committee Charter; the Human
Resources Committee Charter; the Governance Committee Charter; the Directors
Code of Business Conduct and Ethics; the Corporate Governance Guidelines; the
Business Practices Policy; the Code of Ethics for Senior Financial Executives;
the Certificate of Incorporation; and the By-laws. Paper copies of
such documents may be obtained free of charge by contacting
Hercules Incorporated, Hercules Plaza, 1313 North Market Street, Wilmington,
Delaware 19894-0001, Attention: Corporate Secretary, telephone
(800) 441-9274, facsimile (302) 594-7315. Hercules will post on its website
any waivers to the Directors Code of Business Conduct and Ethics and the Code
of
Ethics for Senior Financial Executives, which are required to be disclosed
by
applicable law and the New York Stock Exchange Listing Standards. Information
contained on Hercules’ website is not part of this Proxy Statement.
Proxies
may be solicited, without additional compensation, by directors, officers or
employees of Hercules by mail, telephone, telegram, in person or otherwise.
Hercules will bear the costs of the solicitation of proxies, which may include
the cost of preparing, printing and mailing the proxy materials. In addition,
Hercules will request banks, brokers and nominees (e.g. custodians,
fiduciaries or trustees) to forward proxy materials to the beneficial
owners of common stock and obtain their voting instructions. Hercules will
reimburse those firms for their expenses in accordance with the rules of the
SEC
and the New York Stock Exchange.
Our
Certificate of Incorporation and By-laws provide for three classes of directors,
with the term of one class expiring at each annual meeting of shareholders.
Pursuant to the authority granted to the Board in our Certificate of
Incorporation, the Board has fixed the number of directors at nine (9): three
(3) directors in the class whose terms expire in 2007 (i.e. John C. Hunter,
III,
Robert D. Kennedy and Craig A. Rogerson), three (3) directors in the class
with
a term that expires in 2008 (i.e. Burton M. Joyce, Jeffrey M. Lipton and John
K.
Wulff), and three (3) directors in the class with a term that expires in 2009
(i.e. Anna C. Catalano, Thomas P. Gerrity and Joe B. Wyatt).
At
the
Annual Meeting, three directors are to be elected, each of whom, if elected,
will constitute the class with a term that expires in 2010. The Board has
nominated for election at the Annual Meeting Messrs. Hunter, Kennedy and
Rogerson, each of whom has agreed to serve as a director and has consented
to
being named in this Proxy Statement.
It
is
intended that the shares represented by the accompanying proxy will be voted
for
the election of Messrs. Hunter, Kennedy and Rogerson. If for any reason any
nominee should be unavailable to serve as a director at the time of the Annual
Meeting, a contingency which we do not expect as of the date of this Proxy
Statement, the shares represented by the accompanying proxy may be voted for
the
election of such other person as may be determined by the holders of the proxy,
unless the proxy withholds authority to
vote
for all director nominees. Pursuant to our By-laws, a majority vote of the
total
number of shares of Hercules common stock issued and outstanding is required
to
elect each director.
Craig
A. Rogerson
-
Director since 2003Mr.
Rogerson, age 50, is President and Chief Executive Officer of Hercules. He
joined Hercules in 1979 in the firm's Water Management Chemicals Division and
progressed in Hercules to Vice President and General Manager of the Fibers
Division in 1996. In April 1997, Mr. Rogerson joined Wacker Silicones
Corporation, where he served as President and Chief Executive Officer. In May
2000, Mr. Rogerson rejoined Hercules as Vice President, Business Operations,
BetzDearborn Division. In August 2000, Mr. Rogerson was promoted to Vice
President and General Manager, BetzDearborn Division. In April 2002, he was
promoted to President, FiberVisions; President, Pinova; and Vice President,
Global Procurement. In October 2003, Mr. Rogerson was named Acting President
and
Chief Operating Officer of Hercules. He assumed his current position in December
2003. He is on the Board of Directors of PPL Corporation, the Delaware Business
Roundtable, First State Innovation and the American Chemistry Council. Mr.
Rogerson also served as trustee of Abington Friends School, Jenkintown, PA
from
2002 until June 2006.
John
C. Hunter, III -
Director since 2002Mr.
Hunter, age 60, is the former Chairman, President and Chief Executive Officer
of
Solutia Inc., a specialty chemicals company created in 1997 as a spin-off from
the Monsanto Company. Mr. Hunter joined Monsanto in 1969 and held a number
of
executive and senior management positions until his retirement in 2004. He
is a
member of the Board of Directors of the Penford Corporation and Energizer
Holdings, Inc.
Robert
D. Kennedy -
Director since 2001Mr.
Kennedy, age 74, held a number of executive and senior management positions
with
Union Carbide Corporation, including Chairman, Chief Executive Officer and
President. He retired as Chairman from Union Carbide in 1995 after a career
that
spanned 40 years. He retired as a director of Sunoco Inc. and International
Paper in 2005. He is a director of Blount International and on the Advisory
Board of RFE Investment Associates.
Terms
Expiring 2008:
Burton
M. Joyce
-
Director since 2005Mr.
Joyce, age 65, is the Chairman of the Board of Directors of IPSCO Inc., a
leading steel producer. He has held this position since 2000 and has been a
member of the Board of Directors since 1993. Previously, Mr. Joyce was with
Terra Industries, Inc. where he served as Vice Chairman (2001 - 2003), President
and Chief Executive Officer (1991-2001), Chief Operating Officer (1987-1991)
and
Chief Finance Officer (1986-1987). Mr. Joyce also serves on the Board of
Directors of Norfolk Southern Corporation.
Jeffrey
M. Lipton -
Director since 2001Mr.
Lipton, age 64, is the President and Chief Executive Officer and a Director
of
NOVA Chemicals Corporation. He joined NOVA in 1993 after a 29-year career with
the DuPont Company, where he held a number of management and executive
positions. He is Chairman of the Board of Trimeris, Inc., and is on the Board
of
Directors of United States Steel Corporation. He is a past Chairman of the
Board
of Directors of the American Chemistry Council and the American Section of
the
Society of Chemical Industries. He is currently a member of the Board of
Directors of the Canadian Council of Chief Executives.
John
K. Wulff -
Director since 2003Mr.
Wulff, age 58, is the Non-Executive Chairman of the Board, a position he has
held since December 2003. He was first elected as a director in July 2003 and
served as Interim Chairman from October 2003 to December 2003. He
served
as a member of the Financial Accounting Standards Board from July 2001
until June 2003. From January 1996 to March 2001, he was the Chief Financial
Officer of Union Carbide Corporation. He is a member of the Board of Directors
of Sunoco, Inc., Moody’s Corporation, Federal National Mortgage Association
(“Fannie Mae”) and Celanese Corporation.
Terms
Expiring 2009:
Anna
C. Catalano
-
Director since 2005Ms.
Catalano, age 47, is the former Group Vice President Marketing for BP plc.
Ms.
Catalano held a number of executive and senior management positions during
her
23 years with Amoco (which merged with BP plc in 1998), particularly in the
areas of global sales and marketing. Ms. Catalano serves on the Board of
Directors of SSL International Plc where she serves on the Remuneration and
Audit Committees, and is a member of the Board of Directors of Willis Group
Holdings where she serves on the Corporate Governance and Nominating Committee.
She is also a member of the Board of Gulf Coast Chapter for Juvenile Diabetes
Research Fund where she serves as strategic champion.
Thomas
P. Gerrity -
Director since 2003 Dr.
Gerrity,
age 65, is the Joseph Aresty Professor of Management and Dean Emeritus at the
Wharton School of the University of Pennsylvania. He served as the 11th Dean
of
the Wharton School from 1990 to 1999. Prior to Wharton, he was the founder
and
Chief Executive Officer for 20 years of the Index Group, a leading consulting
firm in business reengineering and information technology strategy. Dr. Gerrity
currently serves on the Board of Directors of CVS Corporation, Sunoco, and
Internet Capital Group. He also serves as a member of the MIT Corporation,
which
is the Board of Trustees of the Massachusetts Institute of Technology. He is
a
Trustee of the Baldwin School. Until
December 31, 2006, Dr. Gerrity was a Member of the Board of Directors of Fannie
Mae and served as the Chair of Fannie Mae’s Audit Committee from January 1999
until May 2006, when he stepped down from the Committee. Fannie Mae restated
its
audited financial statements for certain periods during which Dr. Gerrity was
Chair of the Audit Committee. For additional information, see Fannie Mae’s
reports filed with the SEC.
Joe
B. Wyatt -
Director since 2001Mr.
Wyatt, age 71, is Chancellor Emeritus of Vanderbilt University in Nashville,
Tennessee. He served as Vanderbilt’s sixth Chancellor and Chief Executive
Officer for 18 years, beginning in 1982. From 1972 to 1982, he was a member
of
the faculty and administration at Harvard University. He is Chairman of the
Board of Directors of the Universities Research Association Inc. of Washington,
D.C., and a director of the EAA Aviation Foundation, Ingram Micro, Inc. (where
he is Chairman of the Audit Committee)
and El Paso Corporation (where he is Chairman of the Compensation Committee),
and he is a Principal of the Washington Advisory Group, LLC in Washington,
D.C.
The
Board
currently consists of nine directors. Ms. Catalano and Messrs. Gerrity, Hunter,
Joyce, Kennedy, Lipton, Wulff and Wyatt have been determined by the Board to
be
independent under the New York Stock Exchange Listing Standards and the
standards set forth in the Board’s Corporate Governance Guidelines.
Any
changes to the Board's standards will be reflected in
the Guidelines
as
posted on Hercules’ website (www.herc.com).
Board’s
Standards for Determining Director Independence
Below
is
a general description of the Board’s standards for determining director
independence. The full text of such standards is set forth in the Corporate
Governance Guidelines on our website (www.herc.com).
All
members of the Board shall be independent, except that up to two (2) directors
may be members of management, including the Chief Executive Officer. A director
is considered “independent” only when the Board has affirmatively determined
that the director has no material relationship with the Company or any entity
owned or controlled by the Company (either directly or as a partner, shareholder
or officer of an organization that has a relationship with the Company or any
entity owned or controlled by the Company), following a review of all relevant
information and factors the Board deems appropriate, and a recommendation by
the
Governance Committee. Among others, the Board recognizes that material
relationships can include commercial, industrial, banking, consulting, legal,
accounting, charitable and familial relationships. However, as the key concern
is independence from management, the ownership of a significant amount of stock,
by itself, shall not be considered a bar to an independence finding (except
as
discussed below in connection with the Audit Committee).
Except
in
an unusual circumstance, the Board shall not include more than two (2) members
of the Company’s management, one of whom shall be the Chief Executive Officer.
The Governance Committee is responsible for reviewing the independence of the
members of the Board and Board Committees on a periodic basis (but at least
annually), as well as any relationships directors may have with the Company
and/or its subsidiaries or affiliates or otherwise that may reasonably create
the appearance of non-independence. The Company shall disclose each
determination of an “independent director” in its annual proxy
statement.
Without
limiting the information and factors that the Board may review and consider,
a
director shall meet the criteria for independence established in applicable
laws, rules and regulations concerning independence, including those of
the SEC and of the New York Stock Exchange. However, a director shall not
be considered to be independent in the following cases:
| · |
the
director is, or within the last three (3) years has been, an
employee* of
the Company;
|
| · |
an
immediate family member of the director is, or has been within the
last
three (3) years, an executive officer**
of
the Company;
|
| · |
the
director is a current partner or employee of a firm that is the Company’s
internal or external auditor;
|
| · |
an
immediate family member of the director is a current partner of a
firm
that is the Company’s internal or external
auditor;
|
| · |
an
immediate family member of the director is a current employee of
the
Company’s internal or external auditor and participates in the firm's
audit, assurance or tax compliance (but not tax planning) practice;
|
| · |
the
director or an immediate family member was within the last three
years a
partner or employee of a firm that is the Company’s internal or external
auditor and personally worked on the Company’s audit within that
time;
|
| · |
the
director or an immediately family member of the director is, or has
been
within the last three (3) years, an executive officer of another
company
where any of the Company’s present executive officers at the same time
serves or served on that other company’s compensation committee;
|
| · |
the
director is a current employee, or an immediate family member of
the
director is a current executive officer, of a company that has made
payments to, or received payments from, the Company for property
or
services in an amount which, in any of the last three fiscal years,
exceeds the greater of $1 million, or 2% of such other company’s
consolidated gross revenues; and
|
| · |
the
director or an immediate family member of the director has received
during
any twelve-month period within the last three years more than $100,000
in
direct compensation from the Company (other than in director and
committee
fees and pension or other forms of deferred compensation for prior
service
(provided such compensation is not contingent in any way on continued
service) and compensation received by an immediate family member
for
service as a non-executive employee and compensation received by
a
director for former service as an interim executive officer of the
Company).
|
*
The New York Stock Exchange provides that employment as an interim executive
officer does not, in and of itself, disqualify a director from being considered
independent following such employment.
**
“Executive Officer” has the meaning ascribed to such term in Section 16a-1(f) of
the Securities Exchange Act of 1934.
An
“immediate family member” includes a person’s spouse, parents, children,
siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and
sisters-in-law, and anyone (other than domestic employees) who shares such
person’s home.
For
the
purposes of service on the Audit Committee, a director will not be considered
“independent,” unless, in addition to meeting the above criteria and such other
qualifications as may be required by the Board, he or she (A) does not receive,
directly or indirectly, any consulting, advisory, or other compensatory fee
from
the Company or any of its subsidiaries and (B) is not an affiliate of the
Company or any of its subsidiaries. The foregoing shall be interpreted in
accordance with, and shall be subject to the exceptions provided under, Rule
10A(m) promulgated under the Securities Exchange Act of 1934, as
amended.
A
general
description of the functions of the Board Committees is set forth below. The
respective charters of the Audit Committee, the Human Resources Committee and
the Governance Committee are available on our website (www.herc.com).
Audit
Committee.
Monitors the integrity of the financial statements, financial reporting process
and systems of internal accounting and financial controls of Hercules, engages
Hercules’ independent registered public accountants, and monitors their
qualifications, independence and performance. Has oversight responsibility
for
the performance of Hercules’ internal audit function and compliance with legal
and regulatory requirements, including Hercules’ disclosure controls and
procedures. All members of this committee are independent as defined under
relevant SEC rules and the New York Stock Exchange Listing Standards. The report
of our Audit Committee is included in this Proxy Statement. In addition, the
Audit Committee meets in regularly scheduled private sessions (without the
Chief
Executive Officer or other Hercules personnel) with management (including the
Chief Financial Officer), the independent registered public accountant and
the head of the internal audit function.
Governance
Committee.
Takes a
leadership role in shaping Hercules’ corporate governance policies and
practices, including recommending Corporate Governance Guidelines to the Board
and monitoring Hercules’ compliance with these policies and the Guidelines. Is
responsible for identifying individuals qualified to be Board members and
recommending to the Board the director nominees for the next annual meeting
of
shareholders. Leads the Board in its annual review of the performance of the
Board and its committees, has oversight of management’s succession planning and
recommends to the Board director candidates for each Board committee. Has
oversight responsibility for legal and regulatory compliance matters (other
than
those matters relating to accounting, auditing, financial reporting and/or
internal controls). All members of this committee are independent as defined
under relevant SEC rules and the New York Stock Exchange Listing Standards.
Human
Resources Committee.
Responsible for determining the compensation of the chief executive officer
and
all of the executive officers, approving and evaluating all compensation plans,
policies and programs as they affect the Chief Executive Officer and executive
officers as well as all other programs for all employees. Produces an annual
report on executive compensation that is included in Hercules’ Proxy Statement.
The policies and plans developed by the Human Resources Committee are approved
by the Board. All members of this committee are independent directors as defined
under relevant SEC rules and the New York Stock Exchange Listing Standards.
The
report of our Human Resources Committee is included in this Proxy
Statement.
Emergency
Committee.
Has
limited powers to act on behalf of the Board whenever the Board is not in
session. Meets only as needed and acts only by unanimous vote. If any
non-employee director wants a matter to be addressed by the Board rather than
the Emergency Committee, then the matter is submitted to the Board. All members
of the Board attending a meeting of the Emergency Committee are members of
the
Emergency Committee for the purposes of such meeting.
Finance
Committee.
Reviews
Hercules’ financial affairs. Has full and final authority on certain financial
matters. Serves as a named fiduciary for all of Hercules’ employee benefit
plans.
Responsible
Care Committee.
Reviews
Hercules’ policies, programs and practices on Safety, Health, Environment and
Regulatory Affairs programs, plant and facility security issues, community
affairs and university relations.
The
following chart shows the respective current membership and number of meetings
held in 2006 for each of our standing Board Committees.
|
Director
|
Audit
Committee
|
Human
Resources
Committee
|
Emergency
Committee
|
Finance
Committee
|
Governance
Committee
|
Respon-
sible
Care
Committee
|
|
Anna
C. Catalano
|
X
|
X
|
X
|
|||
|
Thomas
P. Gerrity
|
X
|
X
|
X
|
|||
|
John
C. Hunter, III
|
X
|
X
|
C
|
X
|
||
|
Burton
M. Joyce
|
C
|
X
|
X
|
|||
|
Robert
D. Kennedy
|
X
|
X
|
X
|
C
|
||
|
Jeffrey
M. Lipton
|
C
|
X
|
X
|
X
|
||
|
Craig
A. Rogerson
|
C
|
|||||
|
John
K. Wulff
|
X
|
X
|
X
|
X
|
||
|
Joe
B. Wyatt
|
X
|
X
|
C
|
X
|
||
|
Number
of Meetings in 2006
|
13
|
3
|
0
|
4
|
5
|
4
|
C
=
Chairperson
In
2006,
the Board held eight meetings. During 2006, the directors attended at least
92%
of the aggregate number of meetings of the Board and 95% of the aggregate number
of meetings of committees of the Board on which they served during the time
for
which they served. In 2006, nine out of ten directors attended the Annual
Meeting. Directors are expected to attend the Annual Meeting, as well as regular
Board and committee meetings, and to spend the time needed and meet as
frequently as necessary to properly fulfill their responsibilities.
Executive
and Independent Directors Sessions
As
the
Board deems appropriate, Board meetings include an executive session of all
directors and the Chief Executive Officer. In addition, the Board meets in
regularly scheduled independent directors’ sessions without the Chief Executive
Officer or other Hercules personnel. The Chairman of the Board,
currently Mr.
Wulff,
presides
over the executive sessions and the independent directors’ sessions but may
delegate authority to any Board Committee Chair with respect to matters within
the responsibility of a particular Board Committee.
Employee
directors receive no additional compensation other than their normal employee
compensation for serving as a director. Hercules currently has only one employee
director.
Objective
of Non-Employee Directors Compensation
The
objective of our Non-Employee Director Compensation Plan is to provide
attractive and equitable compensation for non-employee directors which will
enhance recruitment and retention of qualified individuals who are much in
demand and whose time and intellectual commitment has significantly increased
in
the past few years.
For
2006,
non-employee directors received a $40,000 annual cash retainer, $1,200 for
each
meeting attended, $5,000 per year for chairing a Board Committee ($7,500 for
chairing the Audit Committee or the Human Resources Committee), reimbursement
for out-of-pocket expenses and equity compensation grants (long term incentives)
valued at $59,000. In light of the personal commitment required of the
Non-Executive Chairman of the Board, the Board approved additional annual
compensation for Mr. Wulff of $50,000 for as long as he remains Chairman,
payable in cash or in equivalent restricted stock units.
How
We Determine Non-Employee Director Compensation
Each
year, Towers Perrin, an internationally recognized compensation consultant,
is
commissioned by the Board to undertake a survey and study of non-employee
director compensation including retainer fees, meeting fees, chair fees and
other forms of compensation paid by a group of chemical companies with average
revenues of less than $5 billion (the “Peer Companies”). The most recent study
was concluded in October 2006.
Each
component of director compensation (i.e., retainers, meeting fees, chair fees,
special committee fees and annualized expected value of stock-based
compensation) is benchmarked separately and then the total compensation is
benchmarked.
The
October 2006 study showed that Hercules’ total cash compensation (retainers plus
cash meeting fees) for outside directors was 10% below the Peer Companies.
Stock-based compensation was determined to be at the 50th
percentile of the Peer Companies and 5% below the general industry group.
As
a
result of this study and in accordance with Hercules’ policy of paying
non-employee directors at the 50th
percentile of the Peer Companies, the Board approved a $10,000 increase in
the
annual cash retainer to $50,000; an increase in the Audit Committee chair fee
to
$10,000 per year and an increase in the annual cash retainer for the
non-employee Chairman of the Board from $50,000 per year to $75,000 per year.
Both the increases for the Audit Committee Chair and the non-employee Chairman
of the Board were made as a result of the competitive benchmark study and in
recognition of the increased time commitment for these two positions. All
increases were effective January 1, 2007.
Total
direct compensation (cash plus stock-based compensation) is now slightly
above
the 50th
percentile for the Peer Companies and the general industry group.
The
following table sets forth information regarding the compensation of
non-employee directors in 2006.
2006
Non-Employee Director Compensation
|
Name
|
Fees
Earned or
Paid
in
Cash
($)(1)
|
Stock
Awards
($)(2)(5)
|
Option
Awards
($)(3)(5)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compen-
sation
Earnings(4)
|
All
Other
Compen-sation
($)
|
Total
($)
|
|
Anna
C. Catalano
|
$56,800
|
$14,505
|
$21,083
|
-
|
-
|
$92,389
|
|
Thomas
P. Gerrity
|
$56,800
|
$26,427
|
$21,083
|
$4
|
-
|
$104,314
|
|
John
C. Hunter III
|
$79,800
|
$26,289
|
$21,083
|
$6
|
-
|
$127,178
|
|
Burton
M. Joyce
|
$75,048
|
$14,505
|
$21,083
|
-
|
-
|
$110,637
|
|
Robert
D. Kennedy
|
$78,600
|
$47,866
|
$21,083
|
$5
|
-
|
$147,554
|
|
Jeffrey
M. Lipton
|
$64,300
|
$47,866
|
$21,083
|
$2,270
|
-
|
$135,519
|
|
John
K. Wulff
|
$62,800
|
$58,372
|
$21,083
|
$2,503
|
-
|
$144,758
|
|
Joe
B. Wyatt
|
$67,800
|
$47,560
|
$21,083
|
$7
|
-
|
$136,451
|
| (1) |
The
fees earned by each director are determined by the number of meetings
held
by the respective committees on which the director served. Since
the
Committee membership and meetings are not the same for each committee
or
director, the fees are not the same for each director. Pursuant to
the
Non-Employee Director Stock Accumulation Plan, Messrs. Joyce, Lipton
and
Wulff exchanged 100% of their fees for stock. Mr. Wyatt exchanged 50%
of his fees for stock and Mr. Hunter exchanged 25% of his fees for
stock. In each case, the number of shares of stock was determined
using
85% of fair market value on the date of
grant.
|
| (2) |
Amounts
reflect the dollar amount recognized for financial statement reporting
purposes for the fiscal year ended December 31, 2006, in accordance
with
FAS 123(R) and thus may include amounts from awards granted in and
prior
to 2006. Assumptions used in the calculation of these amounts are
included
in footnote 14 to the Company’s audited financial statements for the
fiscal year ended December 31, 2006, included in the Company’s Annual
Report on Form 10-K filed with the Securities and Exchange Commission
on
February 28, 2007. The following lists the grant date fair value of
each stock award computed in accordance with FAS 123 (R):
|
|
Grant
Date
|
Value
|
Grant
Date
|
Value
|
|||
|
A.
C. Catalano
|
6/16/2005
11/7/2005
10/26/2006
|
$15,939
$47,835
$37,900
|
R.
D. Kennedy
|
8/23/2001
12/13/2002
11/4/2003
11/12/2004
11/7/2005
10/26/2006
|
$12,408
$8,900
$32,328
$28,856
$47,835
$37,900
|
|
|
T.
P. Gerrity
|
9/30/2003
11/4/2003
11/12/2004
11/7/2005
10/26/2006
|
$12,463
$32,328
$28,856
$47,835
$37,900
|
J.
M. Lipton
|
8/23/2001
12/13/2002
11/4/2003
11/12/2004
11/7/2005
10/26/2006
|
$12,408
$8,900
$32,328
$28,856
$47,835
$37,900
|
|
|
J.
C. Hunter, III
|
1/2/2003
11/4/2003
11/12/2004
11/7/2005
10/26/2006
|
$10,109
$32,328
$28,856
$47,835
$37,900
|
J.
K. Wulff
|
9/30/2003
11/4/2003
11/12/2004
3/28/2005
11/7/2005
2/7/2006
10/26/2006
|
$12,463
$32,328
$28,856
$50,000
$47,835
$50,000
$37,900
|
|
|
B.
M. Joyce
|
6/16/2005
11/7/2005
10/26/2006
|
$15,939
$47,835
$37,900
|
J.
B. Wyatt
|
10/29/2001
12/13/2002
11/4/2003
11/12/2004
11/7/2005
10/26/2006
|
$9,042
$8,900
$32,328
$28,856
$47,835
$37,900
|
| (3) |
Amounts
reflect the dollar amount recognized for financial statement reporting
purposes for the fiscal year ended December 31, 2006, in accordance
with
FAS 123(R) with respect to the annual grant of 3,000 stock options
under
the Omnibus Plan. FAS 123 (R) value for 2006 grant was $21,083.
Assumptions used in the calculation of these amounts are included
in
footnote 14 to the Company’s audited financial statements for the fiscal
year ended December 31, 2006, included in the Company’s Annual Report on
Form 10-K filed with the SEC on February 28,
2007.
|
| (4) |
Hercules
does not maintain any defined benefit pension plans for current
directors. Non-Employee Directors cash accounts are credited
quarterly with interest based on the Morgan Guaranty Trust prime
rate of
interest.
|
| (5) | The following table lists the aggregate number of stock awards and options outstanding as of December 31, 2006. |
|
Aggregate
Restricted
Stock
Unit Awards at Year-End
|
Aggregate
Stock Option
Awards
at Year End
|
|
|
Anna
C. Catalano
|
9,899
|
6,000
|
|
Thomas
P. Gerrity
|
16,673
|
12,000
|
|
John
C. Hunter, III
|
21,657
|
12,000
|
|
Burton
M. Joyce
|
16,639
|
6,000
|
|
Robert
D. Kennedy
|
20,317
|
18,000
|
|
Jeffrey
M. Lipton
|
43,215
|
18,000
|
|
John
K. Wulff
|
44,255
|
12,000
|
|
Joe
B. Wyatt
|
31,010
|
18,000
|
Stock
Ownership Guidelines - Non-Employee Directors
The
chart
below sets forth the stock ownership targets and stock holdings of the
non-employee directors as of December 31, 2006, using the closing stock price
on
that date of $19.31. The guidelines require the non-employee directors to hold
Hercules stock having a value of at least five times the annual cash retainer.
Non-employee directors have five years to comply with these guidelines after
being elected to the Board.
|
Ownership
Target
(Shares)
@ $19.31
|
Total
Qualifying Shares(1)
|
|
|
Anna
C. Catalano(2)
|
12,947
|
9,899
|
|
Thomas
P. Gerrity
|
12,947
|
16,673
|
|
John
C. Hunter, III
|
12,947
|
23,657
|
|
Burton
M. Joyce
|
12,947
|
17,639
|
|
Robert
D. Kennedy
|
12,947
|
43,817
|
|
Jeffrey
M. Lipton
|
12,947
|
53,215
|
|
John
K. Wulff
|
12,947
|
69,255
|
|
Joe
B. Wyatt
|
12,947
|
31,010
|
(1)
Qualifying shares include stock, restricted stock, and restricted stock units.
(2)
Ms.
Catalano has until June 2010 to comply with these guidelines.
Non-Employee
Director Compensation Plans
Non-Employee
Director Stock Accumulation Plan.
Each
year in the fourth quarter, under Hercules’ Non-Employee Director Stock
Accumulation Plan (the “NEDSAP”), each non-employee director may elect to
exchange (and defer) projected cash retainers and fees for a grant of restricted
(to retirement) shares of Hercules Common Stock valued at 85% of fair market
value determined at the market close on the third business day following the
release of Hercules’ annual results. Alternatively, a non-employee director may
elect to defer such amounts to a cash account under which interest is credited
quarterly at the Morgan Guaranty Trust prime rate. This Plan contains a
provision that accelerates vesting of any unvested restricted stock shares
in
the event of a Change in Control.
Hercules
Incorporated Omnibus Equity Compensation Plan for Non-Employee
Directors.
Under
the Hercules Incorporated Omnibus Equity Compensation Plan for Non-Employee
Directors (the “Omnibus Plan”), non-employee directors receive nonqualified
stock options to purchase 3,000 shares of common stock each year. The options
have an exercise price equal to the fair market value of Hercules’ common stock
on the date of grant and vest one year from the grant date. The date of grant
is
the third business day following the announcement of Hercules’ third quarter
earnings. Each director also receives an
additional grant of a number of restricted stock units that is equal to the
difference between $59,000 and the value of the 3,000 stock options granted
under the Omnibus Plan (determined using the Black Scholes valuation
methodology). The restricted stock units are placed in an unfunded account
and
accrue dividend equivalents, to the extent any dividends are paid on Hercules’
common stock. Each restricted stock unit represents the right to receive one
share of Hercules common stock at retirement or the equivalent in cash.
Restricted stock units do not carry any voting rights. These restricted stock
units are also valued and granted on the third business day following the
announcement of Hercules’ third quarter earnings.
Equity
Award.
On or
following initial election to the Board, each director has a one-time
opportunity to purchase 750 shares of Hercules common stock at fair market
value
during a window period beginning on the third business day after the release
of
Hercules’ earnings for the quarter following the quarter in which the director
is elected. If a director purchases these shares, Hercules awards the director
an additional 1,500 shares of Hercules common stock that cannot be transferred
until retirement or resignation from the Board.
Retirement
Restricted Stock Units.
Upon
initial election to the Board, each director receives a one-time grant of 1,100
restricted stock units. The restricted stock units are placed in an unfunded
account and accrue dividend equivalents, to the extent any dividends are paid
on
Hercules’ common stock. Each restricted stock unit represents the right to
receive one share of Hercules common stock at retirement. Restricted stock
units
do not carry any voting rights. Of the 1,100 restricted stock units, 200 vest
immediately and 100 additional restricted stock units vest for every year served
on the Board. Upon retirement from the Board, all vested restricted stock units
are paid in Hercules common shares distributed in a lump sum or distributed
over
a period not to exceed ten years, at the option of the director, subject to
applicable regulations covering deferred compensation plans.
Trust
Arrangements.
Hercules has a “rabbi trust” to provide for the funding of accrued benefits
under NEDSAP and other plans that are currently not funded. Under the terms
of the rabbi trust, the funding is triggered by an “Unsolicited Change in
Control Event” as defined in the trust documents. A copy of the rabbi trust was
filed with the SEC as an exhibit to our 2002 Annual Report on Form 10-K/A.
Certain
Relationships and Related Person Transactions
We
have
relationships with many businesses, including the entities referred to below
with which our directors are involved. Our relationships with these entities
existed before the related director joined our Board. We believe that all of
the
transactions described below were entered into on commercially reasonable terms
and are in the best interest of Hercules. In addition, our Board has determined
that all of our directors, other than our Chief Executive Officer, are
independent as defined in our Corporate Governance Guidelines and the New York
Stock Exchange Listing Standards. Our Board has concluded that all transactions
were entered into in the normal course of business, that none of the
relationships interferes with the exercise of independent judgment by any of
our
independent directors, that the transactions relate to commercial matters in
which the independent directors are not involved and that none of the
relationships require any additional disclosure.
Mr.
Hunter is the former Chairman, President and Chief Executive Officer of Solutia
Inc. ("Solutia"). In 2006, Hercules purchased products from Solutia or
subsidiaries or affiliates of Solutia in the ordinary course of business, for
which it paid Solutia approximately $14 million.
Messrs.
Wulff and Gerrity are on the Board of Directors of Sunoco, Inc. In 2006,
Hercules purchased products from Sunoco or subsidiaries or affiliates of Sunoco
in the ordinary course of business, for which it paid Sunoco approximately
$2
million.
Mr.
Joyce
is on the Board of Directors of Norfolk Southern Corporation. In 2006, Norfolk
Southern or subsidiaries or affiliates of Norfolk Southern provided services
to
Hercules in the ordinary course of business, for which Hercules paid Norfolk
Southern approximately $200,000.
General
Description of Our Written "Policy and Procedures with respect to Related
Persons Transactions"
The
Board
through its Audit Committee has formally adopted a written policy titled “Policy
and Procedures with respect to Related Persons Transactions.” The policy
provides that the Audit Committee shall evaluate the material facts of each
Related Person Transaction and either approve, disapprove or ratify the Related
Person Transaction. The Audit Committee in good faith shall only approve and/or
ratify those Related Person Transactions that are in, or are not inconsistent
with, the best interest of the Company and its shareholders. The following
is a general description of the material terms of the policy.
| · |
A
Related Person includes (i) any person since the beginning of our
last
fiscal year who was a Director, Executive Officer or nominee to become
a
Director and certain of their respective immediate family members
or (ii)
any person who is known to be a beneficial owner of more than five
percent
(5%) of any class of our voting securities.
|
| · |
A
Related Person Transaction is a transaction, arrangement or relationship
(or any series of similar transactions, arrangements or relationships)
in
which the Company (including any of its subsidiaries or controlled
affiliates) was, is or will be a participant and the amount involved
exceeds One Hundred Twenty Thousand Dollars ($120,000), or the equivalent
thereof in other relevant currencies, and in which any Related Person
had,
has or will have a direct or indirect interest
(“Transaction”).
|
| · |
No
Director or Audit Committee member shall participate in any discussion,
evaluation, approval, disapproval or ratification of a proposed
Transaction with respect to which he or she
or his or her immediate family member is a Related Person, except
that the
Director shall provide all material information concerning the proposed
Transaction to the Audit Committee and the Corporate Secretary and
respond
to any questions that are raised by the Audit Committee.
|
| · |
The
Audit Committee has determined that certain defined Transactions
shall be
deemed pre-approved even if the aggregate amount of such Transaction
exceeds One Hundred Twenty Thousand Dollars ($120,000), or the equivalent
thereof in other relevant
currencies.
|
| · |
The
Corporate Secretary will compile, maintain and update a Master List
of
Related Persons and distribute such list within the Company as necessary
to effectuate the policy. Once a proposed transaction is identified,
notice thereof is provided to the Corporate Secretary. The Corporate
Secretary will determine if the noticed transaction qualifies as
a
Transaction and if so, he or she will submit such Transaction to
the Audit
Committee for consideration at the next scheduled Audit Committee
meeting
or, if appropriate or if between meetings of the Audit Committee,
to the
Chair of the Audit Committee. The Audit Committee (or the Chair of
the
Audit Committee) will approve, disapprove or ratify the proposed
Transaction. If the Audit Committee or Chair of the Audit Committee
determines that the Transaction may have an impact on a Director’s
independence then such Transaction will be discussed with the Chair
of
the Governance Committee before the Audit Committee or the Chair, as
the case may be, renders a decision on such Transaction.
|
| · |
Transactions
that are ongoing and have a remaining term of more than six (6) months
or
remaining amounts payable to or receivable from the Company of more
than
Two Hundred Fifty Thousand Dollars ($250,000) or the equivalent in
other
relevant currencies shall be reviewed at the first meeting of the
Audit
Committee in each fiscal year. The Audit Committee will determine
if it is
in the best interests of the Company to continue, modify, terminate
or
establish guidelines for the Company’s management to follow with respect
to the Transaction.
|
| · |
The
Audit Committee will approve or ratify proposed charitable contributions,
or pledges of charitable contributions by the Company to a charitable
or
non-profit organization identified on the Master List. The Audit
Committee
will review on a periodic basis all charitable contributions in excess
of
Fifty Thousand Dollars ($50,000) or the equivalent in other relevant
currencies in the aggregate by the Company’s Executive Officers (as
defined) and their spouses to charitable or non-profit organizations
identified on the Master List.
|
| · |
No
immediate family member of a Director or Executive Officer shall
be hired
as an employee of the Company unless the employment arrangement is
approved by the Board’s Human Resources Committee (with notice to the
Audit Committee) or approved by the Audit Committee. If a person
becomes a
Director or an Executive Officer and an immediate family member is
already
an employee, no material changes in the terms of employment, including
compensation, may be made without prior written approval of the Board’s
Human Resources Committee or the Audit Committee.
|
| · |
All
Transactions that are required to be disclosed in the Company’s SEC
filings, as required by the Securities Act of 1933 or the Securities
Exchange Act of 1934 and related rules and regulations, shall be
so
disclosed in accordance with such laws, rules and
regulations.
|
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors, executive officers and holders of more than ten percent of our common
stock to file with the SEC and the New York Stock Exchange reports of beneficial
ownership and changes in beneficial ownership of the common stock and other
equity securities of Hercules within two days of the changes. These persons
are
required by SEC rules to furnish Hercules with copies of all Section 16(a)
forms
they file.
Based
solely on a review of the copies of those reports furnished to Hercules, we
believe that, during 2006, our directors, executive officers and holders of
more
than ten percent of our common stock complied with all applicable Section 16(a)
filing requirements.
The
Board of Directors recommends a vote FOR the election of each of the three
Hercules director nominees: Messrs. Hunter, Kennedy and
Rogerson.
Our
Audit
Committee has appointed BDO Seidman, LLP ("BDO") as our independent registered
public accountants for 2007. Partners and employees of BDO are periodically
changed, providing Hercules with new expertise and experience. Representatives
of BDO have direct access to our Audit Committee and regularly attend Audit
Committee meetings.
Representatives
of BDO will attend the Annual Meeting to answer appropriate questions and make
a
statement if they choose to do so. The affirmative vote of the majority of
Hercules shares present in person or by proxy and entitled to vote at the Annual
Meeting is required to approve this proposal. If the appointment is not
ratified, the adverse vote will be considered as an indication to the Board
that
it should consider other independent registered public accounting firms for
the
following fiscal year.
The
appointment of independent registered public accountants is approved annually
by
our Audit Committee and subsequently submitted by the Board to the shareholders
for ratification. The decision of the Audit Committee is based on its review
and
approval of the audit scope, the types of non-audit services and the estimated
fees for the coming year. The Audit Committee also reviews and approves
non-audit services to ensure that they will not impair the independence of
the
accountants. Before requesting that the Board submit the approval of BDO to
the
shareholders for ratification, the Audit Committee carefully considered that
firm’s qualifications as independent registered public accountants for Hercules.
This included a review of their service proposal as well as their integrity
and
competence in the fields of accounting and auditing. The Audit Committee has
expressed its satisfaction with BDO in all of these respects. For more
information, see the “Audit Committee Report”.
The
Board of Directors recommends a vote FOR ratification of the appointment of
BDO
Seidman, LLP as independent registered public accountants for
2007.
Shareholders
are being asked to vote on proposed changes (as set forth in detail at the
end
of this Proposal No. 3) to (i) Article Sixth, Section I, Paragraph 1 of the
Certificate of Incorporation and (ii) Article II, Section 2 of the By-Laws.
The
effect of these changes, if approved, would be to declassify Hercules’ Board and
provide for the annual election of the entire Board.
At
the
2006 Annual Meeting, a shareholder proposal that requested the Board take the
necessary steps, in the most expeditious manner possible, to adopt the annual
election of each director was approved. As discussed in the 2006 Proxy
Statement, implementation of the shareholder proposal would require an
affirmative shareholder vote by at least eighty percent (80%) of the total
number of outstanding shares to amend the Certificate of Incorporation and
the
By-Laws and could take several years to implement.
In
the
2006 Proxy Statement, the Board recommended a vote against the shareholder
proposal and explained why the Board believed the shareholder proposal was
not
in the best interest of shareholders. At the same time, the Board stated its
intention to be responsive to shareholder views and present amendments to the
Certificate of Incorporation and the By-Laws at the 2007 Annual Meeting in
the
event that the shareholder proposal was approved at the 2006 Annual Meeting.
Accordingly, the Board is presenting amendments to the Certificate of
Incorporation and to the By-Laws, both in the form set forth below, for
shareholder consideration at the 2007 Annual Meeting.
This
proposal results from an ongoing review of corporate governance matters by
both
the Board and its Governance Committee. In making their recommendations, the
Board and its Governance Committee weighed the potential benefits and detriments
of maintaining the current classified board structure. A classified board can
provide stability and preserve board experience and expertise, help prevent
an
opportunist from gaining immediate control on terms unfavorable to all
shareholders, and ensure time for an appropriate evaluation process in a change
of control situation. The current structure has been in place for many years
and
is believed to have been beneficial during such time.
The
Board
and its Governance Committee also considered potential benefits of
declassification, including the ability of shareholders to evaluate directors
annually, as well as Hercules’ maintenance of best practices in corporate
governance. In making their evaluations, the Board and its Governance Committee
gave significant weight to the approval of the shareholder proposal made at
the
2006 Annual Meeting. After thorough review, including consideration of advice
from outside experts, the Board and its Governance Committee determined to
approve the proposed amendments to the Certificate of Incorporation and By-Laws
to provide for the annual election of directors and to recommend approval of
the
amendments to Hercules’ shareholders.
Current
Version of Article Sixth, Section 1, Paragraph 1 of the Certificate of
Incorporation
“1. Except
as
otherwise fixed by or pursuant to the provisions of Article Fourth of the
Restated Certificate of Incorporation relating to the rights of holders of
any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect additional directors under specified
circumstances, the Board of Directors of the Corporation shall consist of not
less than seven (7) nor more than eighteen (18) persons. The exact number of
directors within the minimum and maximum limitations specified in the preceding
sentence shall be fixed from time to time by the Board of Directors pursuant
to
a resolution adopted by a majority of the entire Board of Directors. At the
1986
Annual Meeting of Stockholders, the directors shall be classified, with respect
to the time for which they severally hold office, into three classes as equal
in
number as possible as determined by the Board of Directors of the Corporation,
with the term of office of one class to expire at the 1987 Annual Meeting of
Stockholders, the term of another class to expire at the 1988 Annual Meeting
of
Stockholders, and the term of the third class to expire at the 1989 Annual
Meeting of Stockholders, the members of each class to hold office until their
respective successors shall have been duly elected and qualified. At each annual
meeting of the stockholders of the Corporation following such initial
classification and election, directors elected to succeed those directors whose
term expires at that meeting shall be elected to hold office for a term expiring
at the annual meeting of stockholders held in the third year following the
year
of their election.
Proposed
Amended Version of Article Sixth, Section 1, Paragraph 1 of the
Certificate
of Incorporation
(New
text in bold and italics for purposes of this Proxy Statement
only.)
“1. Except
as
otherwise fixed by or pursuant to the provisions of Article Fourth of the
Restated Certificate of Incorporation relating to the rights of holders of
any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect additional directors under specified
circumstances, the Board of Directors of the Corporation shall consist of not
less than seven (7) nor more than eighteen (18) persons. The exact number of
directors within the minimum and maximum limitations specified in the preceding
sentence shall be fixed from time to time by the Board of Directors pursuant
to
a resolution adopted by a majority of the entire Board of Directors.
At
the 2008 Annual Meeting of Stockholders, the successors of the directors whose
terms expire at that meeting shall be elected for a term expiring at the 2009
Annual Meeting of Stockholders and each shall hold office until the next
succeeding annual meeting and until his or her successor shall be elected and
shall qualify, but subject to prior death, resignation, disqualification,
removal or departure from the Board for other cause; at the 2009 Annual Meeting
of Stockholders, the successors of the directors whose terms expire at that
meeting shall be elected for a term expiring at the 2010 Annual Meeting of
Stockholders and each shall hold office until the next succeeding annual meeting
and until his or her successor shall be elected and shall qualify, but subject
to prior death, resignation, disqualification, removal or departure from the
Board for other cause; and at each annual meeting of stockholders thereafter,
the directors shall be elected for terms expiring at the next annual meeting
of
stockholders and each shall hold office until the next succeeding annual meeting
and until his or her successor shall be elected and shall qualify, but subject
to prior death, resignation, disqualification, removal or departure from the
Board for other cause.”
Current
Version of Article II, Section 2 of the Company’s By-Laws
Section
2. Election and Terms.
At 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. Each
director shall serve for a three-year term and until his successor is elected
and qualified or until his earlier death, resignation or removal.
Proposed
Amended Version of Article II, Section 2 of the Company’s
By-Laws
(New
text in bold and italics for purposes of this Proxy Statement
only.)
Section
2. Election and Terms.
At 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 equal to the number of directors whose terms then expire. Each
director shall serve for a one-year
term and
until his successor is elected and qualified or until his earlier death,
resignation or removal; provided,
however, that each director elected for a term scheduled to expire in 2008,
2009
or 2010 shall complete such elected term unless such director resigns from
or
otherwise leaves the Board of Directors prior to completion of such elected
term.
The
Board of Directors recommends a vote “FOR” the Amendments to Hercules'
Amended and Restated Certificate of Incorporation and Hercules' Revised and
Amended By-laws.
The
Board
is not aware of any matters, other than those described above, that will be
presented for consideration at the Annual Meeting. If other matters properly
come before the Annual Meeting, it is the intention of the persons named on
the
enclosed Proxy Card to vote thereon in accordance with their respective best
judgment. Moreover, the Board reserves the right to adjourn, postpone, continue
or reschedule the Annual Meeting, depending on circumstances and the Board’s
belief that such adjournments, postponements, continuations or reschedulings
would be in the best interests of all Hercules shareholders.
The
Board
has charged the Audit Committee with a number of responsibilities, including
review of the adequacy of Hercules’ financial reporting and internal control
over financial reporting. The Audit Committee is directly responsible for the
appointment, compensation and oversight of the work of Hercules’ independent
registered public accountants and Hercules’ Director, Internal Audit. Private
sessions are held at least quarterly with the independent registered public
accountants, the Director, Internal Audit, and Hercules’ Chief Financial
Officer. In accordance with Section 301 of the Sarbanes-Oxley Act of 2002 (the
“Act”), the Audit Committee is composed entirely of independent directors as
defined by the Hercules Corporate Governance Guidelines and the listing
standards of the New York Stock Exchange. The Board has adopted and reviews
at
least annually a written Audit Committee charter, a copy of which is posted
on
Hercules’ website at www.herc.com.
Audit
Committee Financial Expert
In
accordance with Section 407 of the Act, effective March 2003 the SEC issued
rules requiring public companies to disclose whether they have an audit
committee financial expert. These rules were initially effective for Hercules
for the year ending December 31, 2003. Mr. Burton M. Joyce has been designated
by the Board as the Audit Committee Financial Expert.
The
Audit
Committee appointed BDO as the Company’s independent registered public
accountant on April 18, 2005. BDO commenced providing services for the quarterly
period ended June 30, 2005. PricewaterhouseCoopers, LLP
(“PricewaterhouseCoopers”), the prior independent registered public accountant,
served until the appointment of BDO, including for the quarterly period ended
March 31, 2005.
The
aggregate fees for professional services rendered for the Company by BDO for
the
year ended December 31, 2006 and by BDO and PricewaterhouseCoopers for the
year
ended December 31, 2005 were:
|
(Dollars
in millions)
|
|||||||
|
2006
|
2005
|
||||||
|
Audit
|
$
|
3.0
|
$
|
3.7
|
|||
|
Audit
Related
|
--
|
0.4
|
|||||
|
Tax
|
0.1
|
--
|
|||||
|
All
Other
|
--
|
--
|
|||||
|
$
|
3.1
|
$
|
4.1
|
||||
Audit
Fees
Fees
billed by our independent registered public accountants for professional
services rendered to us in connection with the audit of the Company's financial
statements for the years ended December 31, 2006 and 2005, reviews of the
financial statements included in the quarterly reports on Form 10-Q that we
were
required to file during 2006 and 2005, audits of the Company’s internal control
over financial reporting as of December 31, 2006 and 2005, and statutory audits
performed during both years were approximately $3.0 million and $3.7 million,
respectively, of which aggregate amounts of $2.0
million
and $1.3 million had been billed through December 31, 2006 and 2005,
respectively.
Audit-
Related Fees
Audit-related
fees billed by our independent registered public accountants were approximately
$0.1 million and $0.4 million in 2006 and 2005, respectively. Audit-related
fees
in both years were for stand-alone audited consolidated financial statements
for
FiberVisions, LLC and subsidiaries (“FiberVisions”) for the years ended December
31, 2005, 2004 and 2003 and reviews of the stand-alone consolidated financial
statements of FiberVisions for the nine months ended September 30, 2005 and
2004
in connection with Hercules’ sale of 51% of FiberVisions. The Audit Committee
approved 100% of the fees for services rendered in 2006 and 2005.
The
Audit
Committee has received from the independent registered public accountants
written disclosures and a letter concerning the independent registered public
accountants’ independence from Hercules, as required by Independence Standards
Board Standard No. 1, “Independence Discussions with Audit Committees.” These
disclosures have been reviewed by the Audit Committee and discussed with the
independent registered public accountants. The Audit Committee has also
considered whether the provision of other services by the independent registered
public accountants is compatible with maintaining the principal accountant’s
independence.
In
the
discharge of its responsibilities, the Audit Committee has reviewed and
discussed with management and the independent registered public accountants
the
audited consolidated financial statements for Hercules fiscal year ended
December 31, 2006. In addition, the Audit Committee has discussed with the
independent registered public accountants matters such as the quality (in
addition to acceptability), clarity, consistency and completeness of Hercules’
financial reporting, as required by Statement on Auditing Standards No. 61,
“Communication with Audit Committees.”
Based
on
these reviews and discussions, the Audit Committee recommended to the Board
that
the audited consolidated financial statements be included in the Hercules
2006
Annual Report on Form 10-K and filed with the SEC.
|
Audit
Committee
|
|
B.
M. Joyce (Chair)
|
|
J.
C. Hunter, III
|
|
R.
D. Kennedy
|
The
Audit
Committee has adopted a policy for the approval of audit and non-audit services.
Under this policy, services are segregated into three categories:
| · |
Legally
Prohibited/Restricted Services - Those services which our auditor
may not
provide by statute.
|
| · |
Additional
Prohibited Services - Those services which our auditor may legally
provide, but which we will not obtain from our
auditor.
|
| · |
Permitted
Services - Those services which our auditor may provide if pre-approved
by
the Audit Committee.
|
Legally
Prohibited/Restricted Services
The
auditor is prohibited from providing the following non-audit
services:
| 1. |
Bookkeeping
or other services related to the accounting records or financial
statements of the audit client
|
| 2. |
Financial
information systems design and
implementation
|
| 3. |
Appraisal
or valuation services, fairness opinions or contribution-in-kind
reports
|
| 4. |
Actuarial
services
|
| 5. |
Internal
audit outsourcing activities
|
| 6. |
Management
functions or human resources
|
| 7. |
Broker
or dealer, investment adviser or investment banking
services
|
| 8. |
Legal
services and expert services unrelated to the
audit
|
| 9. |
Any
other service that the Public Company Accounting Oversight Board
determines by regulation is
impermissible
|
Additional
Prohibited Services
In
addition to the Legally Prohibited services, the Company has decided it will
not
engage its auditor to provide the following services.
| · |
Large-scale
Information System Design and Implementation
Services
|
We
will
prohibit our auditor from providing any information system design or
implementation services.
| · |
Tax
Shelters
|
Our
auditors will not be engaged to render tax advice on any "tax shelter" (as
currently defined on an ongoing basis by the Internal Revenue Code and
Regulations thereunder).
Permitted
Services
Rule
2-01
of Regulation S-X requires all services (audit and non-audit) that are provided
by an audit firm to be pre-approved by the Audit Committee, but the Audit
Committee may delegate the authority to grant pre-approvals to one or more
members of the Committee.
We
believe that, for certain non-audit services, there may be benefits to engaging
our auditors, as our auditors may be best positioned to provide services more
efficiently and effectively. Also, due to confidentiality concerns, we may
decide engaging our auditing firm is preferable to engaging another
firm.
The
Company has adopted the following policy for audit and non-audit services not
prohibited elsewhere in this policy.
Audit
and Audit-Related Services
This
category comprises those audit and audit-related services that we have
traditionally purchased from our external audit firm. The Company believes
that
the audit-related services described below are consistent with the auditor's
role and are either: (i) directly or inherently related to evaluating the
Company's underlying internal control structure or financial information
affecting the consolidated financial statements; or (ii) directly involved
in
performing audit or attestation services:
|
§ Services
related to SEC filings
§ Accounting
and financial reporting consultations
§ Carve-out
audits
§ Statutory
audits
§ Agreed-upon
audit procedures performed to comply with a contract between the
Company
and a third party
|
§ Acquisition
and divestiture-related due diligence and transaction
services
§ Fraud
and forensic investigations
§ Dispute
resolution and litigation support
§ Benefit
plan audits
|
The
Audit
Committee has pre-approved the purchase of this category of services. Individual
projects with fees in excess of $100,000 and $500,000 in the aggregate are
discussed with and approved by the Committee in advance of the
project.
Internal
Control-Related Consulting
Given
the
auditor's understanding of the Company and our internal control environment,
the
Company may engage our auditors to assess and recommend improvements as to
our
internal control structure, procedures or policies. The Company believes our
auditors often are best positioned to provide these services. However, the
Company has specifically precluded our auditors from implementing internal
controls, policies or procedures.
The
Audit
Committee has pre-approved the purchase of this category of services. Individual
projects with fees in excess of $100,000 are discussed with and approved by
the
Committee in advance.
Tax-Related
Services
It
is
important to the Company that it be able to engage its independent accountant
to
provide tax services, with the exception that the auditor will not be used
to
provide advice on any structure that would be classified as a "tax shelter,"
as
discussed above.
Tax
Services are included in the category of "Permitted Services," which our
auditors may provide if pre-approved by the Audit Committee. This category
of
permitted services includes:
| · |
Tax
return preparation, review, consultation and
assistance
|
| · |
Tax
audit support
|
| · |
Tax
planning on acquisition/divestiture structuring, dividend planning,
etc.
|
| · |
Tax
consulting
|
| · |
Expatriate
tax services
|
| · |
Transfer
pricing tax services
|
The
Audit
Committee has pre-approved the purchase of a specific set of this category
of
services. In addition, individual projects with fees in excess of $100,000
and
$300,000 in the aggregate are discussed with and approved by the Committee
in
advance of the project.
These
permitted tax services, if required, are reported to the Audit Committee at
the
regularly scheduled Audit Committee meetings following the decision to purchase
the services.
The
Human
Resources Committee of the Board reviews compensation objectives and policies
for all employees and determines all compensation (cash and equity) for
Hercules’ executive officers, including the individuals named in the Summary
Compensation Table set forth below. Additionally, the Human Resources Committee
is responsible for executive officer succession planning and implementation
of
development plans applicable to the management ranks of Hercules. The policies
and plans developed by the Human Resources Committee are approved by the Board.
Administration of the plans is the responsibility of the Human Resources
Committee. The Vice President of Human Resources is a resource to the Committee
in fulfilling its responsibilities with respect to executive and Board
compensation. In addition, the Committee, in accordance with its authority,
has
engaged a compensation consultant (the “Compensation Consultant”) at Towers
Perrin, an international human resources consulting firm. The Compensation
Consultant’s role is to advise the Committee on issues and proposals dealing
with executive and Board compensation matters. Other individuals at Towers
Perrin provide consulting and actuarial services to Hercules’ defined benefit
pension plan and the Human Resources organization but the Compensation
Consultant’s only responsibility with respect to Hercules is to the Human
Resources Committee. None of the members of the Human Resources Committee is
an
officer, employee or former officer or employee of Hercules or its subsidiaries,
and each member is independent, as such term is defined in the New York Stock
Exchange Listing Standards. Compensation matters relating to the Chief Executive
Officer and other executive officers, including the named executive officers,
are referred to the Board for separate approval.
A
complete description of the Committee’s responsibilities, which are summarized
below, can be found in the Human Resources Committee Charter, which is available
on Hercules’ website at www.herc.com.
Committee
Authority and Responsibilities
The
Human
Resources Committee has the following authority and
responsibilities:
| · |
Subject
to Board approval, to establish compensation policy consistent with
corporate goals and objectives and shareholder
interests.
|
| · |
To
review and approve or, to the extent the Human Resources Committee
may
deem appropriate, recommend for approval by
the independent members of the Board, at
least once a year corporate goals and objectives relevant to the
Chief Executive Officer’s compensation and
evaluate at least once a year the Chief Executive Officer’s performance in
light of established goals and objectives. Based upon these evaluations
the Human Resources Committee shall
approve or, to the extent the Human Resources Committee may deem
appropriate,
recommend for approval by the independent members of the Board,
the Chief Executive Officer’s annual compensation, including salary,
bonus, incentive and equity compensation.
In determining the incentive components of the Chief Executive Officer’s
compensation, the Human Resources Committee may consider a number
of
factors, including, but not limited to, Hercules’ performance and relative
shareholder return, the value of similar incentive awards to Chief
Executive Officers at comparable companies and the awards given to
the
Chief Executive Officer in past years.
|
| · |
To
review and approve
or, to the extent the Human Resources Committee may deem appropriate,
recommend
for Board approval,
at least annually,
changes in the annual base salaries and annual incentive opportunities
of
the executive officers. In addition, periodically and as and when
appropriate, the Human Resources Committee shall review and approve
or, to the extent the Human Resources Committee may deem
appropriate,
recommend for approval by the independent members of the Board, the
following as they affect the Chief Executive Officer and the executive
officers: (a) all other incentive awards and opportunities, including
both
cash-based and equity-based awards and opportunities; (b) any employment
agreements and severance arrangements; and (c) any change-in-control
agreements and change-in-control provisions affecting any elements
of
compensation and benefits. In addition, the Human Resources Committee
shall receive periodic reports on Hercules’ compensation programs as they
affect all employees. Finally, the Human Resources Committee shall
review
and approve
or, to the extent the Human Resources Committee may deem appropriate,
recommend
for approval by the independent members of the Board,
any special or supplemental compensation and benefits for the Chief
Executive Officer and the executive officers and individuals who
formerly
served as the Chief Executive Officer and/or as executive officers,
including supplemental retirement benefits and the perquisites provided
to
them during and after employment.
|
| · |
Notwithstanding
the foregoing, if any grant or award to the Chief Executive Officer
or any
other executive is intended to qualify for the performance-based
compensation exemption from the limitations on deductibility of executive
compensation imposed by Section 162(m) of the Internal Revenue Code
of
1986, as amended, or any successor thereto, the Human Resources Committee,
rather than the independent members of the Board, shall approve such
award, but it may refer such award to the independent members of
the Board
for ratification.
|
| · |
To
evaluate the methods for establishing the amounts, types and
competitiveness of Director compensation benefits, including under
any
incentive compensation plans and equity-based compensation
plans.
|
| · |
In
conjunction with the Governance Committee, to assist the Board in
developing
and evaluating potential candidates for the Chief Executive Officer
position, and in oversight of executive succession
plans.
|
| · |
To
assure systems are in place for development of management competencies
that are linked to those competencies identified to be critical to
attaining the business and strategic plans of
Hercules.
|
| · |
To
monitor Hercules’ compliance with relevant laws applicable to compensation
plans, policies and programs, including without limitation, those
relating
to (i) 401(k) and similar savings and benefit items and (ii) loans
to
directors or officers under Section 402 of the Sarbanes-Oxley Act
or
otherwise.
|
| · |
To
oversee Hercules’ compliance with the requirement under the New York Stock
Exchange rules that shareholders approve equity compensation plans,
with
limited exceptions.
|
| · |
To
prepare the
annual report
required by the rules of the SEC to be included
in
Hercules’ proxy statement
and annual report on Form 10-K in compliance with the rules and
regulations promulgated by the SEC.
|
| · |
To
review and discuss the Compensation Discussion and Analysis (the
"CD&A") required to be included in Hercules’ proxy statement and
annual report on Form 10-K by the rules and regulations of the SEC
with
management and, based on such review and discussion, determine whether
or
not to recommend to the Board that the Compensation Discussion and
Analysis be so included.
|
In
carrying out its responsibilities, the Committee solicits recommendations from
the Vice President of Human Resources and the Chief Executive Officer and the
advice of its Compensation Consultant.
The
Human
Resources Committee has reviewed and discussed the Compensation Discussion
and Analysis with management and, based on that review and discussion, has
recommended to the Board that it be included in Hercules’ Proxy
Statement.
Human
Resources Committee
J.
M.
Lipton (Chair)
A.
C.
Catalano
T.
P.
Gerrity
J.
K.
Wulff
J.
B.
Wyatt
Objective
of Hercules’ Executive Compensation Policies
The
objective of Hercules executive compensation policy is to attract, retain and
motivate highly qualified individuals and to align their interests with our
shareholders. We do this by offering competitive, interrelated compensation
components that are designed to attract and retain executives and to reward
them
for results that have been identified as important factors in enhancing
shareholder value.
Elements
of Executive Compensation
Hercules
executive compensation policy, as established by the Human Resources Committee,
is designed to pay a base salary measured at the 50th
percentile of base salaries paid by other chemical companies, as adjusted using
regression analysis to take into account differences in revenue size and for
individual performance. To counter the significant impact executive turnover
can
have on survey results, Hercules uses the average of the data for the current
and previous year where significant increases or decreases on survey results
are
reported. Additionally, the Human Resources Committee and the Board annually
approve variable compensation target awards under the Management Incentive
compensation Plan (“MICP”) calculated to pay at the 50th
percentile of the same peer companies when pre-established goals are achieved.
As part of this process, the Human Resources Committee recommends the Chief
Executive
Officer’s MICP award to the Board for approval and reviews and approves the
awards recommended by the Chief Executive Officer with respect to the other
executive officers. Finally, the Human Resources Committee approves equity
based
awards under the Long Term Incentive Compensation Plan (the “LTICP”), the value
of which are targeted at the 50th
percentile of similar awards by the peer companies. Such awards reward
participants for achieving long term goals. Stock price performance below
targeted levels can result in a delay in vesting of restricted stock up to
a
maximum of seven years, while stock price performance above targeted levels
can
accelerate vesting to as little as three years.
The
total
potential aggregate value of these three components is also targeted at the
50th
percentile of total compensation paid by the peer companies, as adjusted using
regression analysis to take into account differences in revenue size.
Additionally, it is the policy of the Human Resources Committee to recognize
extraordinary achievements through special periodic cash or stock-based
awards.
Typically,
increases in compensation are only granted once a year. However, significant
changes in job responsibility, notable changes in the job market or exceptional
performance could trigger an off-cycle increase in base pay or MICP target
or a
LTICP grant (with Board approval).
Normally,
previous compensation actions do not influence current year’s awards or grants
except in the case of awards intended to cover multi-year periods.
Survey
Sources
Each
year
the Vice President of Human Resources commissions Towers Perrin to conduct
a
survey of chemical companies in their database. In 2006, those
companies
included:
|
Air
Liquide America
|
Huber
(J.M.)
|
|
Air
Products & Chemicals
|
Huntsman
Corp.
|
|
Akzo
Nobel
|
International
Flavors & Fragrances
|
|
Amcor
PET Packaging NA
|
INVISTA
|
|
Arch
Chemicals
|
Koppers
Holdings Inc.
|
|
Arkema
|
Lubrizol
|
|
Ashland
Inc
|
Lyondell
Chemical Co.
|
|
Basell
USA
|
Mosaic
|
|
Bayer
Material Science
|
Nalco
Holding Co.
|
|
Cabot
Corp
|
Nova
Chemicals Corp.
|
|
Chemtura
Corp
|
Noveon
|
|
Chevron
Phillips Chemicals
|
Occidental
Chemical
|
|
Church
& Dwight Co. Inc.
|
PPG
Industries
|
|
Ciba
Specialty Chemicals
|
Potash
Corp.
|
|
Clariant
|
Praxair
Inc.
|
|
Cytec
Industries
|
Saint-Gobain
- Ceramics
|
|
Degussa
|
Sasol
North America
|
|
Dow
Chemical Co.
|
Scotts
Miracle-Gro Co.
|
|
DuPont
|
Sigma-Aldrich
Corp.
|
|
Eastman
Chemical Co.
|
Solutia,
Inc.
|
|
Ecolab
Inc.
|
Solvay
America
|
|
Engelhard
|
Sunoco
Chemical
|
|
FMC
|
Tronox
|
|
Fuller
(H.B.)
|
W.
R. Grace
|
|
Georgia
Gulf Corp.
|
Westlake
Chemical
|
|
Hexion
Specialty Chemicals
|
Regression
analysis was used to adjust the data for differences between the revenues of
the
companies surveyed and $2.0 billion, which was Hercules’ approximate revenue in
2006. To assure the results were reasonable, data for chemical companies with
annual revenues of $1 billion to $3 billion was also reviewed. Finally, the
data
was blended with the survey information in Hay Associates’ PayNet database of 37
chemical companies. This produced a very broad based market reference for
surveyed positions. The results of these surveys were provided to the Human
Resources Committee as a resource for their deliberations.
How
Base Salaries are Determined
The
objective of base salaries is to attract and retain qualified personnel,
which is especially critical in today’s competitive labor market.
The
process of determining base salaries for executive officers begins each year
with defining or confirming job content and scope, revenue impact,
accountability for achieving results, leadership requirements and impact on
results of Hercules. For U.S. employees, Hercules then reviews surveys published
by Towers Perrin and Hay Associates. This data is adjusted using regression
analysis to reflect Hercules’ revenue and becomes the competitive reference
point for each covered job. Hercules follows similar processes for non-U.S.
management employees. Non-U.S. compensation plans and budgets are approved
by
the Vice President, Human Resources.
Each
February (or when significant changes in job content or scope occur), the Human
Resources Committee reviews the base salary of each executive officer, including
the Chief Executive Officer, in relation to the market reference information
described above. The Committee also reviews each executive officer’s performance
during the previous year against documented and agreed-to measurable
accountabilities which had been set at the beginning of the year. In addition,
the Committee evaluates competencies of each executive officer that are
considered essential to the successful performance of Hercules. The Committee
also makes a determination as to whether competitive adjustments are necessary
to assure retention. Based on this review, the Committee either approves or
modifies the recommendation of the Chairman of the Board with respect to the
Chief Executive Officer’s base salary and the recommendations of the Chief
Executive Officer with respect to the base salaries of all other executive
officers. Increases or adjustments typically become effective March 1 of each
year.
While
Hercules’ overall results are a critical element of each executive officer’s
performance, the most important determinant of base salary is the delivery
of
results with respect to annual accountabilities. This is because annual
accountabilities are based on results viewed as critical to achieving Hercules’
business and strategic plans. Appropriate positioning along the market reference
curve and consistency in relation to other positions are also important in
setting base pay. Based on the base salaries paid to Chief Executive Officers
at
the companies included in the surveys described above, the Board approved an
increase to the Chief Executive Officer’s base salary of $105,000, or 16.8%, in
2006. This placed the Chief Executive Officer’s salary midway between his
previous salary and the 50th
percentile market survey reference. This increase is consistent with the
multi-year salary plan established when Mr. Rogerson became Chief Executive
Officer. Other executive officers received merit increases which, for the group,
averaged 3.0%.
How
Management Incentive Compensation Plan Awards are
Determined
The
purpose of providing variable compensation through the Management Incentive
Compensation Plan (“MICP”) is to motivate and reward executive officers for
achieving accountabilities or specific results which are identified and defined
as the critical results needed to successfully implement Hercules’ business
plan.
Annual
variable compensation benchmarking follows the same process as base salaries.
The focus for variable compensation is linkage to financial and non-financial
accountabilities established early in the first quarter of each year through
the
annual planning process. Hercules’ overall performance is a more important
factor in determining variable compensation than individual performance. Most
agreed-upon accountabilities are the “building blocks” for future success in
terms of shareholder value. For example, the Board unanimously agreed that
generating increased cash flow from operations and improving ongoing earnings
per share were the key success metrics for 2006.
For
2006,
consistent with the above, the Board and the Chief Executive Officer agreed
that
the factors in determining the 2006 MICP pool and the Chief Executive Officer’s
accountabilities would be cash flow from operations (weighted at two-thirds)
and
ongoing earnings per share improvement (weighted at one-third). Based on the
year-end results, cash flow from operations and ongoing earnings per share
improvement significantly exceeded their respective targets (200% of target
in
both cases). The Board approved an MICP pool of $7.6 million reflecting this
success. While the overall pool is established based on these calculated
measures, the Board, at the suggestion of the Committee or the Chief Executive
Officer, may reduce the pool for a particular business or function due to that
unit’s performance. Similarly, the Board, at the suggestion of the Chief
Executive Officer, may increase or decrease a calculated award based on
individual performance but in no event may an individual award exceed the
maximum payout (200% of target).
Consistent
with the results of the surveys described above and Hercules’ policy of paying
at the 50th
percentile, individual award targets range from 25% of market referenced base
salary for certain executive officers to 100% of market referenced base salary
for the Chief Executive Officer. The Human Resources Committee may adjust these
percentages from time to time.
Approximately
125 individuals, including the Chief Executive Officer and those holding
positions one or two reporting levels below the Chief Executive Officer, are
eligible for awards under the MICP. The total of the target awards for all
participants is the target pool for the performance year. In 2006, the target
pool was $5,000,000.
In
2006,
as illustrated in the graphs below, actual results produced a pool at the
maximum of 200% of target. However, the performance of certain businesses and
functional groups was rated below the 200% level and the pools for these
units were adjusted accordingly.
|
Ongoing EPS
|
|
|
Payout
|
33%
Weighting
|
|
Threshold
|
$0.85
|
|
Target
|
$0.95
|
|
Maximum
|
$1.05
|
|
2006
Actual
|
$1.23
|
|
Cash
Flow from Operations
|
|
|
Payout
|
67%
Weighting
|
|
Threshold
|
$135
MM
|
|
Target
|
$150
MM
|
|
Maximum
|
$165
MM
|
|
2006
Actual
|
$173
MM
|
• = 2006 Performance
With
respect to individual awards to be paid from the MICP pool, the Board approved
the Human Resources Committee’s recommendation for the Chief Executive
Officer and the Human Resources Committee reviewed the Chief Executive
Officer’s recommendations for awards to other executive officers. The Chief
Executive Officer’s recommendations were based on a documented accountability
review process, weighing results achieved against key accountabilities for
the
year and overall contribution to the achievement of Hercules’ long-term
Strategic Plan. Awards for executive officers ranged from 130% to 200% of
individual targets.
For
the
Chief Executive Officer’s award, the Board relied on a review of his performance
against pre-set written and approved accountabilities. The most heavily weighted
accountability was improving cash flow from operations, followed by improving
ongoing earnings per share. These financial objectives contributed over 60%
of
the value of the award. Safety, health and environment, productivity
improvement, personnel/organizational development, compliance and other broader
strategic objectives comprised the remaining 40% of the accountability
objectives.
The
following table sets forth the annual incentive awards made to the named
executive officers.
|
Target
Incentive %
|
Actual
Payout $
|
Payout
as %
of
Base Salary
|
|
|
C.
A. Rogerson
|
100%
of base
|
$1,387,000
|
190%
|
|
E.
V. Carrington
|
50%
of competitive base
|
$
182,000
|
67%
|
|
J.
E. Panichella
|
50%
of base
|
$
315,000
|
100%
|
|
P.
C. Raymond
|
50%
of competitive base
|
$
227,500
|
72%
|
|
A.
A. Spizzo
|
53%
of competitive base
|
$
400,000
|
114%
|
If
Hercules is required to restate its financial statements in a way that would
change the results on which MICP awards were based, the Human Resources
Committee will make a determination as to whether the restatement warrants
a
recovery of any portion of any MICP award by reducing future awards or
otherwise.
How
Long Term Incentive Compensation Plan (“LTICP”) Awards are
Determined
The
Human
Resources Committee believes that equity compensation should be a significant
portion of total compensation for executive officers because it links their
interests to those of shareholders. For the Chief Executive Officer, the equity
compensation target value is approximately 61% of total compensation. For other
executive officers, it ranges from 15% to 43%. The total number of participants
in the LTICP for 2006 was 119.
Equity
compensation is designed to motivate executive officers and key managers and
professionals who impact improvement in long term value to strive to achieve
longer term goals and accountabilities. The proportion of total compensation
that is equity compensation corresponds to the potential impact of the position
on creation of shareholder value.
In
determining LTICP awards, annual performance is secondary to consistent longer
term performance. For 2006, this was reflected in the vesting period applicable
to each award, which ranged from three to seven years for restricted stock
and
up to three years for stock options. Restricted stock vests on the third
anniversary of the grant date if Hercules’ share price has outperformed the
S&P Chemical Index since the grant date. If Hercules’ share price has not
outperformed the S&P Chemical Index since the grant date, the restricted
stock will vest on the first subsequent anniversary of the grant date on which
it has or by default on the seventh anniversary of the grant date. For stock
options, 40% of the options vest one year after the grant date; 40% two years
after the grant date; and 20% three years after the grant date. The option
period is ten years or such shorter period as may be required by the terms
of
the Long Term Incentive Compensation Plan.
The
process of determining awards takes into account the surveys described above.
Hercules not only looks at the competitive long term incentive award value
specifically but also reviews this component when added to “Total Target Cash”
(base salary and target variable incentive), or “Total Direct Compensation”
(salary plus variable incentives plus equity compensation). The objective is
to
target Total Direct Compensation at the 50th
percentile.
In
recent
years, awards typically have been granted in shares of restricted stock or
stock
options. The number of shares or options awarded to executive officers is
determined by dividing the surveyed 50th
percentile market reference value for each benchmark position adjusted for
other
considerations as the Board deems appropriate by the fair market value of a
share on the grant date.
In
2006,
participants, other than the Chief Executive Officer, were allowed to elect
to
exchange up to 50% of a restricted stock grant for options to purchase three
shares for each share of restricted stock. This exchange rate was intended
to
reflect risk and time value. As an example, if an executive
was eligible for a grant of 1,000 restricted shares, he or she could exchange
up
to 500 restricted shares for options to purchase 1,500 shares with an exercise
price equal to fair market value at the time of the initial grant of restricted
stock by the Board.
The
Board
fixes the restricted stock/stock option mix for the Chief Executive Officer
at
the time of grant. In 2006 the Board awarded Mr. Rogerson an award of 94,108
shares of restricted stock and options to purchase 282,324 shares with an
exercise price equal to fair market value at the time of grant by the Board.
This award was valued at slightly above the 50th
percentile benchmark for Chief Executive Officers of chemical companies of
similar size.
The
Board
has approved the Equity Plan Administration Policy which defines roles,
responsibilities and rules for administering the LTICP. Annual long term
incentive awards for executive officers are normally reviewed and approved
by
the Board in February of each year. The date on which the Board reviews and
approves the recommendation of the Committee is the grant date and the closing
price of Hercules Common Stock on that date is used to determine the exercise
price for options. Awards may occasionally be made during the year to reflect
significant increases in job responsibility or as part of a new hire package.
In
2002, the Board approved a pool of 300,000 stock options or equivalent shares
of
restricted stock (100,000) to be granted by the Chief Executive Officer to
new
hires or as spot awards to managers or key contributors, other than those
reviewed by the Committee. 76,685 shares or equivalent options remain in this
pool. The Chief Executive Officer provides the Committee with a summary of
any
grants made since the last report at least once a year. In addition, the
Hercules LTICP specifically prohibits repricing of options or discounted option
awards.
In
addition, the LTICP provides that awards granted under it may not be subject
to
transactions such as anticipation, assignment, pledging, encumbrance or charge
nor may options be priced lower than the price on the grant date.
Special
Severance Benefits
All
U.S.
executive officers are employed on an “at will” basis, meaning Hercules or the
executive officer may terminate employment at any time. As such, there is no
contractual notice period (except as may be required by law), nor is there
a
requirement to pay severance except in the cases listed below.
Change
in Control Agreements
Until
2002, Hercules entered into agreements providing change in control benefits
with
key management personnel to maintain management stability during times of
organizational stress due to possible business transactions that could result
in
a change of ownership.
Prior
to
2002, Hercules entered into change in control agreements with certain executive
officers. Each of the agreements entered into in 2001 with Messrs. Carrington
and Dahlen provides that, following a change in control, as defined in the
agreement, the executive officer will continue to receive compensation,
including base salary and the greater of the annual variable incentive target
under the MICP or the most recent award received under the MICP, for a period
of
two years. Each of these agreements with the other executive officers provides
that if the executive officer’s position is materially changed or the executive
officer’s compensation is reduced following a change in control, as defined in
the agreement, the executive officer will continue to receive compensation,
including base salary and the greater of the annual variable incentive target
(MICP) or the most recent MICP received, for a period of three years and will
receive credit for three additional years of service and age under the Hercules
Employee Pension Restoration Plan. The following table sets forth the names
of the executive officers with change in control agreements, along with the
indemnity periods provided under such agreements and an indication
of whether such agreements provide for crediting of service and age for the
indemnity period under the Hercules Employee Pension Restoration Plan.
|
Executive
Officer
|
Indemnity
Period
|
Crediting
of Service
|
|
Fred
G. Aanonsen
|
3
years
|
Yes
|
|
Edward
V. Carrington
|
2
years
|
No
|
|
Richard
G. Dahlen
|
2
years
|
No
|
|
Israel
J. Floyd
|
3
years
|
Yes
|
|
Craig
A. Rogerson
|
3
years
|
Yes
|
|
Stuart
C. Shears
|
3
years
|
Yes
|
|
Allen
A. Spizzo
|
3
years
|
Yes
|
Position
Elimination
Like
all
U.S. salaried employees, an executive officer whose position is eliminated
and
who is not offered other employment by Hercules may become eligible for
severance benefits in accordance with the Severance Pay Plan. These benefits
are
provided as an income bridge during periods of no-fault unexpected unemployment,
but are not available to executive officers with change in control agreements
if
benefits are also triggered under those agreements. Benefits are based on
credited service accruing at the rate of two weeks of base salary for each
year
of credited service up to a maximum of 52 weeks of base salary. Additionally,
impacted individuals are eligible for three months of welfare benefit plan
continuation and outplacement assistance. In the event of a no-fault
termination, all equity awards vest immediately and stock options may be
exercised for one year.
Termination
for Other Reasons
Normally
no compensation is payable in the event of termination other than due to
position elimination. However, in special situations where the termination
is
due to position competency changes or unusual job changes and considered to
be
no-fault, management may elect to provide special indemnity.
Special
Severance Benefit
As
part
of Mr. Raymond’s employment offer, a special severance benefit equal to the
greater of the benefit accrued under the Severance Pay Plan or one year’s base
salary and target MICP was negotiated. This benefit would be triggered by
no-fault termination or relocation from Hercules’ Wilmington, Delaware
headquarters.
As
part
of Mr. Panichella’s employment offer, the Company approved including Target MICP
in the compensation base under the Severance Pay Plan.
Estimated
Value of Severance Benefits Under Different Scenarios
The
Termination Scenarios Table herein sets forth the compensation that would
be payable to the named executive officers in certain termination scenarios.
This disclosure ranges from forfeiture of equity compensation in the event
of
voluntary resignation or involuntary termination for cause to severance
indemnities, acceleration of vesting of equity compensation and additional
pension benefits in the
case
of a change in control. Any present value calculation is made using current
FAS
87 and IRC 280G assumptions. The values shown for retirement benefits and equity
reflect multiple termination scenarios and are based on individual plan
provisions that provide for such payments and they are not
cumulative.
IRS
Limits on the Deductibility of Compensation and Other Regulatory
Considerations
Section
162(m) of the Internal Revenue Code of 1986, as amended, provides that
compensation in excess of $1 million paid to executives is not deductible unless
it is performance-based and satisfies the conditions of the exemption. While
the
Board considers all compensation paid to the Chief Executive Officer and the
named executive officers to be performance-based, it does not meet the
definition of “performance-based” compensation in Section 162(m). Variable
compensation paid to the Chief Executive Officer and other named executive
officers is designed to otherwise qualify as performance-based compensation
under Section 162(m) but the Human Resources Committee strongly believes that
retaining discretion in determining awards within the parameters of the
performance goals is essential to their overall responsibilities. In the past,
the amount paid in excess of the deductibility amount has not been material.
While the Human Resources Committee will continue to consider the impact of
Section 162(m) on Hercules’ compensation program, it reserves the right to pay
nondeductible compensation in the future if it determines that it is appropriate
to do so. It is Hercules’ policy to review all compensation plans and policies
against tax, accounting and SEC regulations including Internal Revenue Code
Section 162(m), Internal Revenue Code section 409A and SFAS 123R.
All
U.S.-based executive officers are employed on an “at will” basis, meaning
Hercules or the executive officers may terminate employment at any time, subject
to any applicable legal requirements. There are no written employment agreements
with the named executive officers, other than the change in control agreements
described above and Mr. Panichella’s employment offer letter, which provided
that Hercules would pay him $108,000 if he forfeited his incentive compensation
from his prior employer by joining Hercules and that he would receive a minimum
MICP award for 2006 of $110,000. Mr. Raymond's special employment offer
included relocation benefits under Hercules' Relocation Policy and 2005 partial
reimbursement of compensation forfeited in 2005 as a result of leaving his
previous employer.
In
accordance with Hercules’ offer of employment to Mr. Aanonsen, Hercules will
credit his unfunded Deferred Compensation Plan account with an amount equal
to 10% of his gross annual pension payable under the Union Carbide Pension
Plan
until the earlier of five years from the date his employment with Hercules
commenced or the termination of his employment with Hercules. June 2006 was
the
last date a contribution was made. Mr. Aanonsen’s offer of employment letter
also provides reimbursement of reasonable commuting expenses to his home in
Connecticut.
If
the
employment of any executive officer terminates for reasons other than cause
or
resignation, he or she may be entitled to benefits under the change in control
agreements or the Severance Pay Plan mentioned above but not both. Additionally,
executive officers may be entitled to other benefits, such as pension and
defined contribution plan distributions, under other plans which are described
herein.
Savings
& Investment Plan
The
Savings & Investment Plan is a defined contribution retirement plan
qualified under Section 401(k) of the Internal Revenue Code in which
all U.S. employees of Hercules, including the named executive officers, are
eligible to participate. Participants can save from 1% to 50% of their pay
on a
before-tax basis, an after-tax basis, or a combination of both subject to
Internal Revenue Code ("IRC") limitations which limit highly compensated
employees’ savings. The Company matches fifty cents for every dollar saved up to
6% of pay. In addition, most employees whose credited service date is after
2004 who are not eligible to participate
in the Hercules Pension Plan receive a company contribution of 2% of pay,
referred to as the Basic Retirement Contribution. Dependent on achieving annual
business performance goals, most employees are eligible to receive a
discretionary Company contribution up to 9% of pay, referred to as the
Performance Retirement Contribution. This performance-based contribution can
be
zero, but has a target of 3%. Participants may direct their savings and the
Company contribution to any of 17 available investment options.
In
addition to the qualified Savings & Investment Plan, named executive
officers and certain other eligible executives can participate in the Deferred
Compensation Plan described below. In addition to allowing eligible
participants to defer receipt of a portion of their income, it incorporates
a
non-qualified savings plan feature. This allows participants to save and
receive the Company matching contributions in excess of IRC limitations but
not in excess of the IRC qualified Savings & Investment Plan
limitations. Interest at the Morgan Guaranty Trust prime rate is credited
to accounts on a quarterly basis. As with the Savings & Investment
Plan, the Company matches fifty cents for every dollar saved up to 6% of pay
but
offset by the full matching contributions eligible to be made under the
qualified plan.
Deferred
Compensation Plan
Hercules
maintains a Deferred Compensation Plan that permits management employees who
are
eligible to participate in the LTICP to elect to defer receipt of base salary
or
MICP awards. All elections must be made in the calendar year prior to earning
base salary or MICP awards to be deferred.
Participants
in Hercules’ Savings and Investment Plan (401(k)) may elect to have savings or
annual contributions that exceed IRC limits credited to the Deferred
Compensation Plan. Elections must be made in the calendar year prior to making
contributions to be deferred.
Interest
is credited to deferred compensation accounts quarterly based on one-quarter
of
the current reported Morgan Guaranty Trust annual prime rate of
interest.
Participants
may not accelerate, revoke or otherwise change an election under the Deferred
Compensation Plan.
The
following table sets forth contributions and interest credited in 2006 and
balances as of December 31, 2006 with respect to the deferred compensation
accounts of the named executive officers.
Deferred
Compensation
|
Name
|
Executive
Contributions in Last FY ($)(1)
|
Registrant
Contributions in Last FY ($)(2)
|
Aggregate
Earnings in Last FY ($)(3)
|
Aggregate
Withdrawals / Distributions ($)
|
Aggregate
Balance at Last FYE ($)(4)
|
|
C.
A. Rogerson
|
$64,875
|
TBD
|
$17,242
|
-
|
TBD
|
|
E.
V. Carrington
|
-
|
TBD
|
$
1,915
|
-
|
TBD
|
|
P.
C. Raymond
|
$12,900
|
TBD
|
$
1,125
|
-
|
TBD
|
|
J.
E. Panichella
|
-
|
TBD
|
-
|
-
|
TBD
|
|
A.
A. Spizzo
|
-
|
TBD
|
$
4,495
|
-
|
TBD
|
(1)
Employee’s base salary, MICP, and Hercules Deferred Compensation Plan -
Non-Qualified Savings Plan deferrals.
(2)
Reflects
Hercules matching and discretionary contributions. Registrants
contributions are included in the column "All Other Compensation" in the Summary
Compensation Table.
(3)
Participants’
accounts are credited quarterly with interest based on the Morgan Guaranty
Trust
Company prime rate of interest. These amounts are included in the column “Change
in Pension Value
and
Non-Qualified Deferred Compensation Earnings” in the Summary Compensation
Table.
(4)
The
Performance Retirement Contribution as described under "Savings
& Investment Plan" that was earned in 2006 but not credited until
March 2007 is not included in the aggregate balance at year-end. However,
this amount is included in the "Registrant Contribution in Last
FY."
Effective
January 1, 2005, Hercules amended its defined benefit pension plan. The major
change was to modify the benefit calculation base from a percentage of the
highest 5 years covered compensation to a career average compensation formula.
Additionally, those whose credited service date is later than January 1, 2005
are not eligible to participate in the career average plan. In recognition
of
this modification, employees whose credited service date is later than January
1, 2005 are eligible to receive a special 2% of covered compensation
contribution to Hercules’ 401(k) plan or if IRC limits have been reached, to the
Non-Qualified Savings Plan). Amounts contributed to them are included in
“Registrant Contributions in Last FY” column in the table above. Additionally,
all participants are eligible to receive a performance-based contribution
ranging from 0% to 9% depending upon Hercules’ performance (the same metrics as
used in the MICP) and the years of credited service used for benefits
calculation.
Hercules
Employee Pension Restoration Plan
Under
ERISA, as it applies to defined benefit plans, and the regulations related
thereto, certain limits are applicable to “highly compensated” individuals. The
regulations have the effect of reducing what a highly compensated participant
is
eligible to accrue under the pension formula applicable to all other
participants. In some cases, highly compensated employees are only eligible
to
accrue 30% to 40% of their pension entitlement under a tax qualified, ERISA
covered plan.
To
allow
highly compensated employees the opportunity to accrue benefits comparable
to
other employees, many companies have adopted what are called ERISA make up
plans
which provide a “vehicle” to accrue benefits they would be otherwise entitled to
if not for the limitations.
The
Hercules Employee Pension Restoration Plan (the “EPRP”) is such a plan. It is an
unfunded plan, meaning no prefunding is made against its recorded liabilities.
All payment and accrual provisions of the IRS qualified Pension Plan of Hercules
Incorporated apply to the Hercules Employee Pension Restoration
Plan.
Participants
who meet the requirements of the EPRP and who anticipate retirement within
five
years may elect to exchange the present value of the accrued benefit under
the
Employee Pension Restoration Plan, determined as of December 31, 2004, into
restricted stock valued at 85% of the fair market value on the date of exchange.
The same factors and assumptions are used to calculate the exchange amount
as
are used to calculate the lump sum benefit under the qualified plan. This is
an
irrevocable exchange subject to proposed regulations dealing with deferred
compensation. This option is no longer available for benefit accruals after
December 31, 2004.
Rabbi
Trust
Hercules
maintains a “rabbi trust” to provide for the funding of accrued benefits under
the Deferred Compensation Plan, benefits accrued under the Hercules
Non-Qualified Supplemental Retirement Income Plan and other retirement benefits
which are not currently funded. Under the terms of the rabbi trust, the funding
is triggered by an “Unsolicited Change in Control” as defined in the trust
documents. A copy of the rabbi trust was filed with the SEC as an exhibit to
our
2002 Annual Report on Form 10-K/A.
Personal
Benefits (“Perks”)
Our
executive compensation package includes base salary paid on a monthly basis,
an
annual cash incentive opportunity and long term incentive compensation awards
granted in equity or equity equivalents. The following perquisites are offered
to certain executive officers:
|
“Perk”
|
Approximate
Value
|
Eligibility
|
|
Pool
Car/Driver
|
$62,000/year
|
CEO
(occasional use
|
|
(including
tax gross up)
|
for
commuting only)
|
|
|
Reserved
Parking
|
$2,010/year
|
Executive
Officers
|
One
executive officer who is not a named executive officer is covered under a group
life insurance plan that is no longer offered to other executives.
Hercules
does not maintain or lease any aircraft or personal company cars, or provide
any
special travel benefits, special medical benefits, enhanced benefit plans,
special private club benefits or financial and/or tax planning benefits
applicable to executive officers.
Stock
Ownership Guidelines
In
2003,
Hercules established new stock ownership guidelines for members of the Senior
Management Team, which consists of the Chief Executive Officer and those who
report directly to the Chief Executive Officer. The guidelines require the
Senior Management Team to hold Hercules stock having a value of at least five
times base salary (in the case of the Chief Executive Officer) and three times
base salary (in the case of each other member of the Senior Management Team).
Executives have five years from the date ownership guidelines were established
or five years from the date they became members of the Senior Management Team
to
comply with these new guidelines. The guidelines reinforce the practice of
encouraging executives to hold Hercules stock and to closely link their
interests with those of shareholders. Based on typical measurement methodology,
all of the named executive officers hold restricted stock in excess of the
amount required by the guidelines or are on track to meet the requirements
within the prescribed time frame.
The
chart
below sets forth the stock ownership targets and stock holdings of the named
executive officers as of December 31, 2006, using the closing stock price
on that date of $19.31.
|
Name
|
Ownership
- Target
(Shares) @ $19.31/Share
|
Total
Qualifying Shares(1)
|
|
C.
A. Rogerson
|
189,023
|
574,636
|
|
E.
V. Carrington
|
42,415
|
95,640
|
|
J.
E. Panichella(2)
|
48,938
|
29,058
|
|
P.
C. Raymond
|
48,938
|
76,599
|
|
A.
A. Spizzo
|
54,377
|
122,772
|
(1)
Qualifying shares include stock, restricted stock, Savings and Investment
Plan
shares, and 2006 restricted stock shares exchanged for stock
options. See the “2006 Grants of Plan-Based Awards”
Table.
(2)
Mr.
Panichella has until January 3, 2011 to comply with these
guidelines
SUMMARY
COMPENSATION TABLE
The
following table discloses information concerning compensation awarded, paid
or
to be paid to the Chief Executive Officer, the Chief Financial Officer, and
the
next three most highly compensated executive officers of Hercules for services
rendered to Hercules and its subsidiaries during the past year. When setting
total compensation for each of the named executive officers, the Board or
Human
Resources Committee follows the processes described in the
CD&A.
Hercules
annual variable compensation is included in “Non-Equity Incentive Plan
Compensation.” These amounts were determined by the Board at its February 21,
2007 meeting and were paid out March 1, 2007.
The
Company has not entered into any employment agreements with any of the named
executive officers other than the change in control agreements described
under
“Change in Control Agreements.” Mr. Panichella’s employment offer letter
provided that Hercules would pay him $108,000 if he forfeited his incentive
compensation from his prior employer and that he would receive a minimum
variable award payout for 2006 of $110,000. Mr. Raymond’s special employment
offer included relocation benefits under Hercules’ Relocation Policy and 2005
partial reimbursement of compensation forfeited in 2005 as a result of leaving
his previous employer.
.
|
2006
Summary Compensation Table
|
|||||||||
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
Name
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)(1)
|
Option
Awards
($)(1)
|
Non-Equity
Incentive Plan Comp
($)(2)
|
Change
in Pension Value and Non-Qualified Deferred
Compensation
Earnings ($)(3)
|
All
Other Compensation
($)(4)
|
Total
($)
|
|
C.A.
Rogerson
President
& CEO
|
2006
|
$712,508
|
-
|
$1,131,676
|
$1,237,157
|
$1,387,000
|
$740,017(5)
|
TBD
|
TBD
|
|
E.V.
Carrington
Vice
President, Human Resources
|
2006
|
$271,678
|
-
|
$
153,031
|
$
81,719
|
$
182,000
|
$
99,372
|
TBD
|
TBD
|
|
J.E.
Panichella
President,
Aqualon Division
|
2006
|
$313,807
|
-
|
$
64,165
|
-
|
$
315,000
|
$349,972(6)
|
TBD
|
TBD
|
|
P.C.
Raymond
President,
Paper Technologies & Ventures
|
2006
|
$312,500
|
-
|
$
214,726
|
$
124,359
|
$
227,500
|
$
26,335
|
TBD
|
TBD
|
|
A.A.
Spizzo
Chief
Financial Officer
|
2006
|
$345,838
|
-
|
$
386,178
|
-
|
$
400,000
|
$226,005(7)
|
TBD
|
TBD
|
| (1) |
The
amounts in columns (e) and (f) reflect the dollar amount recognized
for
financial statement reporting purposes for the fiscal year December
31,
2006, in accordance with FAS 123(R) of awards pursuant to the Long
Term
Incentive Compensation Plan (LTICP) and thus may include amounts
for
awards granted in and prior to 2006. Assumptions used in the calculation
of these amounts are included in footnote 14 to the Company's audited
financial statements for the fiscal year ended December 31, 2006,
included
in the Company's Annual Report on Form 10-K filed with the SEC on
February
28, 2007.
|
| (2) |
The
amounts in column (g) reflect the cash awards to the named executive
officers under the Management Incentive Compensation Plan (MICP),
which is
discussed in further detail under the heading "How Management Incentive
Compensation Plan (MICP) Awards are
Determined".
|
| (3) |
The
amounts in column (h) reflect the actuarial increase in the present
value
of the name executive officers' benefits under all pension plans
established by the Company determined using interest rate and mortality
rate assumptions consistent with those used in the Company's financial
statements and includes amounts which the named executive officers
may not
currently be entitled to receive because such amounts are not
vested. The amounts also include interest credited quarterly based
on the Morgan Guaranty Trust prime rate of interest. The interest
earnings are disclosed in the Deferred Compensation Plan Table.
|
| (4) |
The
amounts in column (i) include:
|
All
Other Compensation - 2006
|
Hercules
Savings & Investment Plan - Employer Contributions
|
Hercules
Deferred Compensation Plan Nonqualified Savings - Employer
Contributions
|
Chauffeur/
Car
|
Tax
Gross-Up
|
Relocation
|
Parking
|
Miscellaneous
|
|
|
C.A.
Rogerson
|
TBD
|
TBD
|
$34,893
|
$26,755
|
-
|
$2,010
|
-
|
|
E.V.
Carrington
|
TBD
|
TBD
|
-
|
-
|
-
|
$2,010
|
-
|
|
J.E.
Panichella
|
TBD
|
TBD
|
-
|
-
|
$203,475
|
$2,010
|
$108,000(a)
|
|
P.C.
Raymond
|
TBD
|
TBD
|
-
|
-
|
$
9,684
|
$2,010
|
-
|
|
A.A.
Spizzo
|
TBD
|
TBD
|
-
|
-
|
-
|
$2,010
|
-
|
(a)Consists
of payment to partially compensate Mr. Panichella for cash benefits under his
previous employer’s compensation plans forfeited in connection with his
accepting employment with Hercules. See "Employment Agreements and
Employment of Executive Officers."
| (5) |
A
significant portion of this amount is attributable to Mr. Rogerson
first
becoming eligible in 2006 for subsidized early retirement benefits
under
the Pension Plan of Hercules Incorporated and the impact of his increased
compensation used to calculate his pension
benefit.
|
| (6) | A significant portion of this amount is attributable to Mr. Panichella returning to Hercules' employment in January 2006 and the impact of his increased compensation used to calculate his pension benefit. |
| (7) | A significant portion of this amount is attributable to Mr. Spizzo's increased compensation used to calculate his pension benefit. |
The
following table contains information concerning individual grants during
the
last completed fiscal year to the named executive officers.
The
2006
Long Term Incentive Compensation Plan (LTICP) awards were granted in the
form of
restricted stock with an option to receive up to 50% of the value of the
award
in stock options at fair market value on the date the Board approved the
awards.
The exchange rate was three (3) options for every one (1) restricted stock
share.
Restricted
stock vesting can occur as early as the third anniversary of the grant if
Hercules’ share price improvement rate exceeds the S&P Chemical Index share
price improvement rate since the grant date. If vesting does not occur on
the
third anniversary, performance goal measurements will be done annually on
each
succeeding anniversary using the same measurement. If the award has not vested,
it will vest on the seventh anniversary of grant. At vesting, these
awards will be paid out as stock and will be valued using the closing stock
price on the vesting date.
Forty
percent of the options can be exercised beginning one year after the grant
date;
40% two years after the grant date; and 20% three years after the grant date.
The option period is ten (10) years or such shorter period as may be required
by
the terms of the LTICP.
2006
Grants of Plan-Based Awards
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
(k)
|
(l)
|
|
Est.
Future Payouts Under Non-
Equity
Incentive Plan Awards (1)
|
Est.
Future Payouts Under
Equity
Incentive Plan Awards
|
||||||||||
|
Name
|
Grant
Date
|
Thres-
Hold
($)
|
Target
($)
|
Maximum
($)
|
Thres-
Hold
(#)
|
Target
(#)
|
Maxi-
Mum
(#)
|
All
Other Stock Awards: Number of Shares of Stock or Units (#)
|
All
Other Option Awards: Number of Securities Underlying Options
(#)
|
Exercise
or Base Price of Option Awards ($/sh)
|
Grant
Date Fair Value of Stock and Option Awards (2)
|
|
C.A.Rogerson
|
2/16/2006
-
|
-
0
|
-
$730,000
|
-
$1,460,000
|
-
-
|
-
-
|
-
-
|
94,108
-
|
282,324
-
|
$12.22
-
|
$2,487,340
-
|
|
E.V.Carrington
|
2/16/2006
-
|
-
0
|
-
$140,000
|
-
$
280,000
|
-
-
|
-
-
|
-
-
|
9,411
-
|
28,230
-
|
$12.22
-
|
$
248,725
-
|
|
J.E.Panichella
|
2/16/2006
-
|
-
0
|
-
$157,500
|
-
$
315,000
|
-
-
|
-
-
|
-
-
|
28,641
-
|
-
-
|
-
-
|
$
349,993
-
|
|
P.C.Raymond(3)
|
2/16/2006
4/17/2006
-
|
-
-
0
|
-
-
$175,000
|
-
-
$
350,000
|
-
-
-
|
-
-
-
|
-
-
-
|
14,321
7,500
-
|
42,960
-
-
|
$12.22
-
-
|
$
378,500
$
103,275
-
|
|
A.A.Spizzo
|
2/16/2006
-
|
-
0
|
-
$200,000
|
-
$
400,000
|
-
-
|
-
-
|
-
-
|
31,423
-
|
-
-
|
-
-
|
$
383,989
-
|
| (1) |
The
amounts shown in column (c), (d) and (e) reflect the minimum, target,
and
maximum payment level under the Company's Management Incentive
Compensation Plan (MICP). Payouts range from 0% to 200% of
Target.
|
| (2) |
Restricted
stock value based on stock price of $12.22 and $13.77 on the date
of
grants (February 16, 2006 and April 17, 2006). Stock
options are valued based on SFAS 123(R) value of $4.7369 on the date
of grant (February 16, 2006).
|
| (3) |
Mr.
Raymond's April 17, 2006 grant was a one-time award pursuant to
the
Long-Term Incentive Compensation Plan, Article VII. Vesting will
occur on
April 18, 2011.
|
|
|
2006
Outstanding Equity Awards at Fiscal Year-End
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
|
Option
Awards
|
Stock
Awards
|
|||||||||
|
Name
|
Number
of Securities Underlying Unexercised
Options
(#)
Exercisable
(1)
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
(2)
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
/
Unearned Options (#)(3)
|
Option
Exercise Price ($)
|
Option
Exp. Date
|
Number
of
Shares or Units of Stock That Have Not Vested (#)
(4)
|
Market
Value of Shares or Units of Stock That Have Not Vested
($)
(5)(6)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other
Rights
That Have Not Vested (#)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or
Other Rights That Have Not Vested ($)
|
|
|
C.A.
Rogerson
|
45,500
|
-
|
-
|
$17.1875
|
05/17/2010
|
477,701
|
$9,224,406
|
- | - | |
|
35,500
|
-
|
-
|
$11.2800
|
08/23/2011
|
||||||
|
50,000
|
-
|
-
|
$11.9100
|
05/09/2012
|
||||||
|
78,892
|
118,337
|
-
|
$14.4500
|
02/18/2015
|
||||||
|
-
|
282,324
|
-
|
$12.2200
|
02/16/2016
|
||||||
|
E.V.Carrington
|
-
|
28,230
|
-
|
$12.2200
|
02/16/2016
|
84,432
|
$1,630,382
|
- | - | |
|
J.E.
Panichella
|
-
|
-
|
-
|
-
|
-
|
28,641
|
$553,058
|
- | - | |
|
P.C.
Raymond
|
-
|
42,960
|
-
|
$12.2200
|
02/16/2016
|
55,350
|
$1,068,809
|
- | - | |
|
A.A.
Spizzo
|
2,400
|
-
|
1,200
|
$52.1250
|
08/27/2007
|
118,028
|
$2,279,121
|
- | - | |
|
3,000
|
-
|
1,500
|
$47.8125
|
05/05/2008
|
||||||
|
3,000
|
-
|
-
|
$25.5625
|
09/01/2008
|
||||||
|
-
|
-
|
1,500
|
$37.5625
|
05/04/2009
|
||||||
|
4,275
|
-
|
-
|
$17.2500
|
02/18/2010
|
||||||
|
13,475
|
-
|
-
|
$15.3125
|
04/05/2010
|
||||||
|
30,000
|
-
|
-
|
$11.9100
|
05/09/2012
|
||||||
|
20,000
|
-
|
-
|
$11.6000
|
06/28/2012
|
||||||
(1)
All options in column (b) are vested.
(2)
Vesting dates are as follows:
C.
A.
Rogerson: 112,930 options vested February 16,
2007;
78,892 options vested February 19, 2007; 39,445 options vested
February 18, 2008; 112,930 options will vest
February
19, 2008; 56,464 options will vest February 16, 2009.
E.
V.
Carrington: 11,292 options vested February 16, 2007; 11,292
options will vest February 19, 2008; 5,646 options vest February 16,
2009.
P.
C.
Raymond: 17,184 options vested February 16, 2007; 17,184 options will vest
February 19, 2008; 8,592 options will vest February 16, 2009.
(3)
Awards in column (d) are performance accelerated stock options. Vesting
can be accelerated if performance targets are met. If targets are not met,
the award will vest in 9.5 years. Vesting dates are as
follows: 1,200 options vested February 26, 2007; 1,500 options
will vest November 5, 2007; 1,500 options will vest on November 4,
2008.
(4) Vesting
dates are as follows:
C.
A.
Rogerson: 252,100 shares vested on February 20, 2007; 6,956 shares will
vest February 21, 2008; 38,000 shares will vest April 24, 2008; 20,794 shares
will vest February 24, 2009; 65,743 shares will vest as early as February
19,
2008 or as late as February 20, 2012; 94,108 shares will vest as early as
February 17, 2009 or as late as February 19, 2013.
E.
V.
Carrington: 18,635 shares vested on February 20, 2007; 4,555 shares will
vest
February 21, 2008; 22,000 shares will vest April 24, 2008; 14,883 shares
will
vest February 24, 2009; 14,948 shares will vest as early
as
February 19, 2008 or as late as February 20, 2012; 9,411 shares will vest
as
early as February 17, 2009 or as late as February 19, 2013.
J.
E.
Panichella: 28,641 shares will vest as early as February 17, 2009 or as late
as
February 19, 2013.
P.
C.
Raymond: 5,000 shares vested on January 31, 2007; 5,000 shares will vest
January
31, 2008; 23,529 shares will vest as early as February 19, 2008 or as late
as
February 20, 2012; 14,321 shares will vest as early as February 17, 2009
or as
late as February 19, 2013; 7,500 shares will vest April 18, 2011.
A.
A.
Spizzo: 22,023 shares vested on February 20, 2007; 26,000 shares will vest
April
24, 2008; 12,977 shares will vest as early as April 2, 2007 or as late as
April
1, 2011; 25,605 shares will vest as early as February 19, 2008 or as late
as February 20, 2012; 31,423 shares will vest as early as February 17, 2009
or
as late as February 19, 2013.
(5)
Market value determined by multiplying the aggregate number of shares of
restricted stock by the December 29, 2006 closing market price, or
$19.31.
(6)
Messrs. Rogerson and Carrington's totals include shares purchased using
Above-Target MICP Awards. Amounts paid by these executives for restricted
shares were
$216,943
and $150,966 respectively.
2006
Option Exercises and Stock Vested
|
(a)
|
Option
Awards
|
Stock
Awards
|
||
|
(b)
|
(c)
|
(d)
|
(e)
|
|
|
Name
|
Number
of Shares Acquired on Exercise (#)
|
Value
Realized on Exercise
($)(1)
|
Number
of Shares Acquired on Vesting (#)
|
Value
Realized
on
Vesting
($)
(2)
|
|
C.A.
Rogerson
|
-
|
-
|
10,000(3)
|
$
164,400
|
|
E.
V. Carrington
|
85,500
|
$
362,239
|
-
|
-
|
|
J.
E. Panichella
|
-
|
-
|
-
|
-
|
|
P.
C. Raymond
|
-
|
-
|
5,000
|
$
58,550
|
|
A.
A. Spizzo
|
25,000
|
$
172,577
|
14,457(4)
|
$
174,062
|
| (1) |
Stock
option value realized is equal to the difference between the option
exercise price and the market value of Hercules common stock on the
date
of exercise multiplied by the number of options exercised.
|
| (2) |
Stock
value realized is equal to the number of vesting shares multiplied
by the
closing stock price on the vest date, without netting any shares
surrendered to cover tax withholding.
|
| (3) |
3,340
shares withheld from acquired shares to cover
taxes.
|
| (4) |
These
shares were purchased using Above Target MICP compensation in 2003
and
were restricted for three years. 4,865 shares were withheld from
acquired
shares to cover taxes.
|
Qualified
Pension Plan of Hercules Incorporated
Hercules
sponsors the Pension Plan of Hercules Incorporated, an Internal Revenue Service
(“IRS”) qualified defined benefit pension plan to provide retirement benefits to
eligible U.S.-based employees of the Company (the “Qualified Plan”). The
Qualified Plan pays benefits at retirement to participants who terminate or
retire from the Company after meeting the eligibility requirements for a
benefit. The retirement benefit is based on a percentage of a participant’s
Final Average Earnings (as described below). Generally, employees
whose credited service date is prior to January 1, 2005 are not eligible to
participate in this Plan. A description of the Basic Retirement
Contribution feature of the Savings and Investment Plan is included under
"Savings & Investment Plan" which replaces this Plan for
new hires.
Under the Qualified Plan, a participant’s annual benefit accrual is calculated
as 1.2% of Final Average Earnings up to the Social Security integration point
plus 1.6% of Final Average Earnings in excess of such integration point. Final
Average Earnings for the Qualified Plan are defined as the average monthly
earnings for the highest five consecutive years during the last ten years of
service, limited as required by the Tax Reform Act of 1986. Effective January
1,
2005, the averaging period of five years extends one additional month for each
month that the individual is employed beyond January 1, 2005. Earnings include
overtime, holidays, vacations, commissions, MICP bonuses and non-occupational
and temporary occupational disability benefits. Because this is an IRS qualified
plan, the Qualified Plan compensation is restricted by the compensation limit
imposed by the Internal Revenue Code. In 2006, this compensation limit was
$220,000. The Social Security integration point for the Qualified Plan is
defined as one-half of the annual Social Security taxable wage base in effect
for the calendar year immediately prior to the effective date of retirement
or
termination. For effective dates during calendar year 2006, this integration
point is $47,100.
The
annual retirement benefit payable from this plan is provided by the formula
above, based on Final Average Earnings determined as of the date of retirement,
and multiplied by years and months of Credited Service at retirement. This
amount is available at the earlier of the plan’s normal retirement age of 65 or
age 60 with 10 years of service. If a participant has attained age 55 with
10
years of service, a reduced early retirement benefit is available. The annual
retirement benefit is reduced by a factor equal to 150% divided by service,
with
a maximum annual reduction of 5%, for each year of payment prior to age 60
to
reflect the earlier payments.
Hercules
Employee Pension Restoration Plan
Hercules also
maintains a nonqualified pension plan, the Hercules Employee Pension Restoration
Plan (the “Nonqualified Plan”). The Nonqualified Plan is intended to help
attract and retain the executive workforce by providing benefits calculated
in
the same manner as the IRS Qualified Plan but in excess of the limits imposed
by
the IRC.
The
Nonqualified Plan is designed to restore retirement benefits that cannot be
paid
by the Qualified Plan solely due to IRC limits. The benefit provided under
the
Nonqualified Plan will effectively equal the difference between the benefit
that
would have been earned under the Qualified Plan without regard to any pay or
benefit limits imposed by the IRC and the actual benefit payable from the
Qualified Plan (reflecting the limits).
All
participants in the Qualified Plan are potentially eligible for the Nonqualified
Plan, provided their Qualified Plan benefits are limited by the IRC limits.
A
participant’s annual benefit accrual is determined in the same manner as under
the Qualified Plan, without regard to any pay or benefit limits, offset by
the
Qualified Plan annual benefit. The Nonqualified Plan uses the same plan
definitions as the Qualified Plan but is not restricted by the compensation
limit imposed by the IRC.
The
annual retirement benefit payable is calculated according to the methodology
above, based on Final Average Earnings determined as of the date of the
Nonqualified Plan retirement, and multiplied by years and months of Credited
Service at retirement. This amount is available at the earlier of the plan’s
normal retirement age of 65 or age 60 with 10 years of service. If a participant
has attained age 55 with at least 10 years of service, an early retirement
benefit is available. The annual retirement benefit is reduced by a factor
equal
to 150% divided by service, with a maximum annual reduction of 5%, for each
year
of payment prior to age 60 to reflect the earlier payments.
Present
Value of Accumulated Benefits As of December 31, 2006
|
Name
|
Plan
|
Number
of Years Credited Service
(#)
|
Present
Value of Accumulated Benefit (1)(7)
|
Payments
During Last Fiscal Year
|
Change
in Pension Value During 2006
|
|
C.
A. Rogerson(2)
|
Nonqualified
|
24.5
|
$1,926,375
|
0
|
$678,055
|
|
Qualified
|
24.5
|
531,868
|
0
|
44,720
|
|
|
Total
|
2,458,243
|
0
|
722,775
|
||
|
E.
V. Carrington(3)
|
Nonqualified
|
37.3
|
$1,631,790
|
0
|
$78,730
|
|
Qualified
|
33.3
|
1,123,808
|
0
|
18,727
|
|
|
Total
|
2,755,778
|
0
|
97,457
|
||
|
J.
E. Panichella(4)
|
Nonqualified
|
23.0
|
$408,241
|
0
|
$312,801
|
|
Qualified
|
23.0
|
359,568
|
0
|
37,171
|
|
|
Total
|
767,809
|
0
|
349,972
|
||
|
P.
C. Raymond(5)
|
Nonqualified
|
1.9
|
$42,624
|
0
|
$25,210
|
|
Qualified
|
1.9
|
0
|
0
|
0
|
|
|
Total
|
42,624
|
0
|
25,210
|
||
|
A.
A. Spizzo(6)
|
Nonqualified
|
27.7
|
$737,441
|
0
|
$178,981
|
|
Qualified
|
25.4
|
$499,448
|
0
|
45,529
|
|
|
Total
|
$1,236,889
|
0
|
221,510
|
|
(1)
|
Benefits were valued as a 51% lump sum and 49%
single
life annuity using the assumptions described in the table below.
Earliest
age at which the executive is eligible for an unreduced benefit.
This
value differs from Termination Scenario Table which assumes a
December 29, 2006 termination.
|
|
(2)
|
The
increase in pension value is attributable to Mr. Rogerson
first becoming eligible for the subsidized early retirement
benefit available to all Hercules employees with similar service
in 2006
and his increased compensation used to calculate his pension
benefit.
|
|
(3)
|
Mr.
Carrington's nonqualified pension benefit reflects 4-1/2 years service
granted in 1997 under the Hercules Pension Plan attributable to service
earned with an acquired
company.
|
|
(4)
|
The
increase in pension value is attributable to reinstatement of Mr.
Panichella's former service when he rejoined Hercules in January 2006
and his increased compensation used to calculate his pension
benefit.
|
|
(5)
|
Mr.
Raymond joined Hercules in January 2005, and as an inducement for
him to
leave his previous employer, Hercules granted him 4 years of service
for
vesting and eligibility purposes but not for benefit calculation.
Because
of this special service recognition, he is a participant in the
Nonqualified Plan effective on hire
date.
|
|
(6)
|
Mr.
Spizzo's nonqualified pension plan benefit is calculated as though
he had
continued employment from May 22, 1979. Mr. Spizzo left employ in
April 1995 and returned August 1997. As an inducement for Mr. Spizzo
to return, Hercules credited his 2 years-3 months period while he
was
employed by another employer. Benefit service for qualified plan
purposes is based on his adjusted service date of August 1,
1981. The increase in Mr. Spizzo's pension value is
attributable to increased compensation used to calculate his pension
benefit.
|
|
(7)
|
These
calculations do not reflect offsets from other Company sponsored
plans or
other offsets provided for under the
Plan.
|
The
amounts provided in the Present Value of Accumulated Benefits Table are the
actuarial present values of the benefits earned as of December 31, 2006. An
actuarial present value is calculated by estimating the expected future payments
starting at the assumed retirement age, weighting the estimated payments by
the
estimated probability of surviving to each post-retirement age, and discounting
the weighted payments to the participant’s current age to reflect the time value
of money.
The
actuarial present value reflects
the estimated amount that, if invested today in a fund that earns the assumed
discount rate, would be sufficient on average to provide the estimated future
payments for the participant’s lifetime based on the current accumulated
benefit. For each plan, the assumed retirement age for each executive is
the
earliest age at which the executive could retire without any reduction for
early
commencement based on current accrued service in the eligibility criteria.
The
actual benefit present values will vary from these estimates depending on
several factors, including the executive’s actual retirement age.
The
present value of accumulated benefits as of December 31, 2006 and the change
in
pension value during 2006 shown in the table above use the following limits
and
assumption:
|
Definition
|
December
31, 2006
|
December
31, 2005
|
|
Discount
Rate - Lump Sum
|
4.69%
|
4.73%
|
| Discount Rate - Annuity | 5.90% | 5.70% |
|
IRC
Section 401(a)(17) pay limitation
|
$220,000
|
$210,000
|
|
IRC
Section 415 benefit limitation
|
$175,000
|
$170,000
|
|
Retirement
Ages
|
Later
of current age or age at which participant is first eligible for
an
unreduced benefit
|
Later
of current age or age at which participant is first eligible for
an
unreduced benefit
|
|
Termination
and disability rates
|
None
|
None
|
|
Pre-Retirement
Mortality
|
None
|
None
|
|
Post-Retirement
Mortality (Annuities)
|
RP-2000
(projected to 2015 with phased-out improvements, no collar
adjustments)
|
RP-2000
(projected to 2015 with phased-out improvements, no collar
adjustments)
|
|
Post-Retirement
Mortality (Minimum Lump Sums)
|
GAR
1994 Unisex
|
GAR
1994 Unisex
|
|
Form
of Pension Payment
|
If
eligible, 51% Lump Sum (based on December 31, 2004 accrued benefit);
49%
Single Life Annuity; otherwise, 100% Single Life Annuity
|
If
eligible, 51% Lump Sum (based on December 31, 2004 accrued benefit);
49%
Single Life Annuity; otherwise, 100% Single Life
Annuity
|
Potential
Post Employment Payments
Hercules
executives are entitled to receive certain payments upon termination of their
employment. The following table summarizes these payments under different
termination scenarios and reflects the estimated value of those payments had
the
termination occurred effective December 29, 2006.
The
plans
and agreements under which the payments summarized in the following
table would be made have been previously described herein.
Termination
Scenarios Table
(Assumes
December 29, 2006 Termination Events)
|
Type
of Compensation
|
Voluntary
|
Involuntary
|
Change
in
Control(10)(11)
|
|||
|
Resign
|
Retire
(1)(9)
|
Cause
|
w/o
Cause
|
|||
|
C.
A. Rogerson
|
|
|
||||
|
Separation
Bonus(2)
|
$0
|
$730,000
|
$0
|
$730,000
|
$730,000
|
|
|
Cash
Severance
|
0
|
0
|
0
|
686,034
|
4,380,024
|
|
|
Equity
- Regular (3)(4)(5)
|
0
|
11,801,201
|
0
|
11,801,201
|
4,649,764
|
|
| Equity - CiC Addition |
0
|
0
|
0
|
0
|
7,157,437
|
|
|
Retirement
- Regular (6)
|
3,370,722
|
3,370,722
|
1,211,722
|
3,370,722
|
3,370,722
|
|
| Retirement - CiC Addition |
0
|
0
|
0
|
0
|
2,700,000
|
|
|
Deferred
Compensation (7)
|
291,379
|
291,379
|
291,379
|
291,379
|
291,379
|
|
|
Other
Benefits
|
0
|
0
|
0
|
11,700
|
237,497
|
|
|
Excise
Tax Gross Up (8)
|
0
|
0
|
0
|
0
|
4,097,003
|
|
|
Total
|
$3,662,101
|
$16,193,302
|
$1,503,101
|
$16,891,037
|
$27,607,826
|
|
|
A.
A. Spizzo
|
||||||
|
Separation
Bonus(2)
|
$0
|
$200,000
|
$0
|
$200,000
|
$200,000
|
|
|
Cash
Severance
|
0
|
0
|
0
|
350,004
|
1,650,012
|
|
|
Equity
- Regular (3)(4)(5)
|
0
|
2,279,121
|
0
|
1,040,837
|
1,040,837
|
|
| Equity - CiC Addition |
0
|
0
|
0
|
0
|
1,238,284
|
|
|
Retirement
- Regular (6)
|
801,029
|
801,029
|
436,029
|
801,029
|
801,029
|
|
| Retirement - CiC Addition |
0
|
0
|
0
|
0
|
1,746,000
|
|
|
Deferred
Compensation (7)
|
59,918
|
59,918
|
59,918
|
59,918
|
59,918
|
|
|
Other
Benefits
|
0
|
0
|
0
|
11,700
|
156,497
|
|
|
Excise
Tax Gross Up (8)
|
0
|
0
|
0
|
0
|
2,382,707
|
|
|
Total
|
$860,947
|
$3,340,068
|
$495,947
|
$2,463,488
|
$9,275,284
|
|
|
J.
E. Panichella
|
||||||
|
Separation
Bonus (2)
|
$0
|
$157,500
|
$0
|
$157,500
|
$157,500
|
|
|
Cash
Severance
|
0
|
0
|
0
|
472,500
|
472,500
|
|
|
Equity
- Regular(3)(4)(5)
|
0
|
553,058
|
0
|
68,700
|
68,700
|
|
| Equity - CiC Addition |
0
|
0
|
0
|
0
|
484,358
|
|
|
Retirement
- Regular (6)
|
404,194
|
404,194
|
198,194
|
404,194
|
404,194
|
|
| Retirement - CiC Addition |
0
|
0
|
0
|
0
|
0
|
|
|
Deferred
Compensation (7)
|
0
|
0
|
0
|
0
|
0
|
|
|
Other
Benefits
|
0
|
0
|
0
|
11,700
|
11,700
|
|
|
Excise
Tax Gross Up (8)
|
0
|
0
|
0
|
0
|
0
|
|
|
Total
|
$404,194
|
$1,114,752
|
$198,194
|
$1,114,594
|
$1,598,952
|
|
|
P.
C. Raymond
|
||||||
|
Separation
Bonus(2)
|
$0
|
$175,000
|
$0
|
$175,000
|
$175,000
|
|
|
Cash
Severance
|
0
|
0
|
0
|
490,000
|
490,000
|
|
|
Equity
- Regular (3)(4)(5)
|
0
|
1,373,395
|
0
|
795,780
|
795,780
|
|
| Equity - CiC Addition |
0
|
0
|
0
|
0
|
577,615
|
|
|
Retirement
- Regular (6)
|
81,483
|
81,483
|
41,483
|
81,483
|
81,483
|
|
| Retirement - CiC Addition |
0
|
0
|
0
|
0
|
0
|
|
|
Deferred
Compensation (7)
|
30,127
|
30,127
|
30,127
|
30,127
|
30,127
|
|
|
Other
Benefits
|
0
|
0
|
0
|
11,700
|
11,700
|
|
|
Excise
Tax Gross Up (8)
|
0
|
0
|
0
|
0
|
0
|
|
|
Total
|
$111,611
|
$1,660,006
|
$71,611
|
$1,584,090
|
$2,161,706
|
|
|
E.
V. Carrington
|
||||||
|
Separation
Bonus(2)
|
$0
|
$140,000
|
$0
|
$140,000
|
$140,000
|
|
|
Cash
Severance
|
0
|
0
|
0
|
273,012
|
826,024
|
|
|
Equity
- Regular(3)(4)(5)
|
0
|
1,830,533
|
0
|
1,830,533
|
797,056
|
|
| Equity - CiC Addition |
0
|
0
|
0
|
0
|
1,033,477
|
|
|
Retirement -
Regular(6)
|
2,836,822
|
2,836,822
|
1,159,822
|
2,836,822
|
2,836,822
|
|
| Retirement - CiC Addition |
0
|
0
|
0
|
0
|
0
|
|
|
Deferred
Compensation (7)
|
25,292
|
25,292
|
25,292
|
25,292
|
25,292
|
|
|
Other
Benefits
|
0
|
0
|
0
|
11,700
|
67,471
|
|
|
Excise
Tax Gross Up (8)
|
0
|
0
|
0
|
0
|
377,998
|
|
|
Total
|
$2,862,114
|
$4,832,647
|
$1,185,114
|
$5,117,359
|
$6,104,140
|
|
| 1. |
Scenario
for Death or Disability nearly identical to
Retire.
|
| 2. |
“Separation
Bonus” is the 2006 MICP target assuming the individual is employed for
full Plan year and the Board approves the award; MICP affords Company
payout discretion.
|
| 3. |
Equity
values assume $19.31/share.
|
| 4. |
Stock
option value assumes immediate exercise at $19.31/share at
termination.
|
| 5. |
Restricted
stock is full value if executive is retirement eligible, otherwise
it is
prorated.
|
| 6. |
“Retirement”
data includes present value of benefits accrued to December 29,
2006 under the Defined Benefit Pension Plan but 100% lump sum
is available only for Change in Control
increment.
|
| 7. |
Deferred
Compensation and 401(k) balances (included in “Retirement”) on December
29, 2006.
|
| 8. |
Excise
Tax Gross-up calculation as of December 29,
2006.
|
| 9. |
“Retire”
scenario illustrative only for Messrs. Panichella, Raymond and Spizzo
who
are not yet retirement eligible.
|
| 10. |
Double
trigger Change in Control except for Mr. Carrington who has a single
trigger (i.e., event only).
|
| 11. | Messrs. Rogerson and Carrington would become eligible for Equity - Change in Control Addition, if they retire concurrent with a Change in Control. |
AND
INSIDER PARTICIPATION
Our Human Resources Committee is composed of five members: Messrs. Gerrity,
Lipton (Chair), Wulff, Wyatt and Ms. Catalano. In 2006, none of the members
of
our Human Resources Committee had any interlocks or insider participation
requiring disclosure under Item 407(e)(4) of Regulation S-K.
The
following table sets forth information, as of March 5, 2007 (unless otherwise
noted), with respect to the beneficial ownership of our common stock
by:
| · |
beneficial
owners of more than five percent of Hercules common
stock;
|
| · |
each
Hercules director and nominee for
director;
|
| · |
each
of the executive officers named in the 2006 Summary
Compensation Table set forth under “Compensation Discussion and
Analysis”; 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 SEC.
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.
|
Name
|
Shares
Beneficially
Owned(1)
|
Options
Exercisable
Within 60 Days
|
Percent
of Shares(2)
|
|
5%
Shareholders
|
|||
|
State
Street Global Advisors (U.S) (3)
225
Franklin Street
Boston,
MA 02110
|
[TBD]
|
[TBD]
|
[TBD]
|
|
Sasco
Capital, Inc. (4)
10
Sasco Hill Road
Fairfield,
Connecticut 06824
|
[TBD]
|
[TBD]
|
[TBD]
|
|
GAMCO
Investors, Inc. (5)
One
Corporate Center
Rye,
New York 10580
|
[TBD]
|
[TBD]
|
[TBD]
|
|
T.
Rowe Price Associates, Inc. (6)
100
E. Pratt Street
Baltimore,
Maryland 21202
|
[TBD]
|
[TBD]
|
[TBD]
|
|
Directors
and Officers
|
|
||
|
C.
A. Rogerson, Director and Officer
|
[TBD]
|
[TBD]
|
[TBD]
|
|
A.
A. Spizzo, Officer
|
[TBD]
|
[TBD]
|
[TBD]
|
|
E.
V. Carrington, Officer
|
[TBD]
|
[TBD]
|
[TBD]
|
|
A.
C. Catalano, Director
|
[TBD]
|
[TBD]
|
[TBD]
|
|
T.
P. Gerrity, Director
|
[TBD]
|
[TBD]
|
[TBD]
|
|
J.
C. Hunter, III, Director
|
[TBD]
|
[TBD]
|
[TBD]
|
|
B.
M. Joyce, Director
|
[TBD]
|
[TBD]
|
[TBD]
|
|
R.
D. Kennedy, Director
|
[TBD]
|
[TBD]
|
[TBD]
|
|
J.
M. Lipton, Director
|
[TBD]
|
[TBD]
|
[TBD]
|
|
J.
E. Panichella, Officer
|
[TBD]
|
[TBD]
|
[TBD]
|
| P. C. Raymond, Director |
[TBD]
|
[TBD]
|
[TBD]
|
|
J.
K. Wulff, Director
|
[TBD]
|
[TBD]
|
[TBD]
|
|
J.
B. Wyatt, Director
|
[TBD]
|
[TBD]
|
[TBD]
|
|
All
directors and executive officers as a group
|
[TBD]
|
[TBD]
|
[TBD]
|
_________________________________
|
*
|
Less
than 1% of the outstanding Hercules common
shares.
|
|
(1)
|
[To
be determined based upon Beneficial Ownership Table.] Includes
shares acquired by officers pursuant to our Management Incentive
Compensation Plan, or MICP, under which award amounts for above-target
performance may be used by the participant to purchase restricted
stock at
85% of the fair market value through our Long Term Incentive Compensation
Plan, or LTICP. The above table includes the following shares that
were
purchased in 2002 and 2003 pursuant to the MICP: [___________],
[___________]; and [___________], [___________]. Restrictions and
forfeiture risks are specified under the LTICP. Also included
are: (1) 2004, 2005, 2006 and 2007 annual long-term
incentive grants: [___________], [___________]; [___________],
[___________]; [___________], [___________]; [___________], [___________];
[___________], [___________]; [___________], [___________]; and
[___________], [___________]; and all executive officers as a group,
[___________]; and (2) shares owned in the Hercules Savings and
Investments Plan as of March 5, 2007: [___________],
[___________][___________], [___________]; [___________], [___________];
and [___________], [___________]and all directors and executive officers
as a group, [___________]. The total number of shares with restrictions
and forfeiture risks for all directors and executive officers is
[___________]. Owners have the same voting and dividend rights as
other
shareholders of Hercules, but no right to sell or transfer. Non-employee
directors and named executive officers have restricted stock units,
or
Restricted stock units, representing the following numbers of shares:
A.
C. Catalano, [___________]; P. Duff, [___________]; T. P. Gerrity,
[___________]; J. C. Hunter, [___________]; B. M. Joyce, [___________];
R.
D. Kennedy, [___________]; J. M. Lipton, [___________]; C.A. Rogerson,
[___________]; J. K. Wulff, [___________]; and J. B. Wyatt,
[___________]. Non-employee directors and named executive officers
do not
have any current voting rights or the right to dispose of these restricted
stock units, although they may receive actual shares with respect
to
certain restricted stock units when they leave the Board or Hercules.
Further discussion of these restricted stock unit grants can be found
in
Proposal No. 1 of this Proxy Statement under “Board of Directors
—Directors Compensation.”
|
| (2) |
Based
on public filings for 5% shareholders and on [112,859,768]
shares outstanding on March 5, 2007 for directors and officers.
|
| (3) |
Share
holding as of December 31, 2006, as reported on Schedule 13G filed
by
State Street Bank and Trust Company acting in various fiduciary
capabilities on February 12, 2007.
|
| (4) |
Share
holding as of December 31, 2006, as reported on Amendment No. 2 to
the
Schedule 13G filed by Sasco Capital, Inc. on February 8,
2007.
|
| (5) |
Share
holding as of September 30, 2006, as reported on Amendment No. 14
to
Schedule 13D filed by Gamco Investors, Inc. on January 5,
2007.
|
| (6) |
Share
holding as of December 31, 2006, as reported on Amendment No. 8
to
Schedule 13G filed by T. Rowe Price on February 13,
2007.
|
PRELIMINARY
COPY
[PROXY
CARD - FRONT SIDE]
HERCULES
INCORPORATED
2007
ANNUAL MEETING OF SHAREHOLDERS
This
proxy is solicited on behalf of the Hercules' Board of Directors
for
the 2007 Annual Meeting of Shareholders on April 19, 2007.
The
undersigned hereby appoints Craig A. Rogerson, Allen A. Spizzo and Israel J.
Floyd, and each of them, as proxies, acting jointly and severally and with
full
power of substitution, for and in the name of the undersigned to vote all shares
of common stock of Hercules Incorporated that the undersigned is entitled to
vote at the Annual Meeting of Shareholders to be held on Thursday, April 19,
2007, at 11:00 A.M., local time, at Hercules Plaza, 1313 North Market Street,
Wilmington, Delaware, or at any adjournments or postponements thereof, as
directed, upon the matters set forth in the Hercules Proxy Statement and upon
such other matters as may properly come before the Annual Meeting.
Signing
and dating Hercules’ Proxy Card will have the effect of revoking any Proxy Card
you signed on an earlier date, and will constitute a revocation of all
previously granted authority to vote for every proposal included on any Proxy
Card. This card further provides voting instructions for shares held for the
undersigned in the Hercules Dividend Reinvestment Plan.
If
you
choose to vote by telephone or Internet you do not have to return this Proxy
Card. To vote by telephone, please dial 1-866-540-5760, have your Proxy Card
in
hand when you call and follow the voice prompts. To vote by the Internet, please
log on to http://www.proxyvoting.com/herc
and have
your Proxy Card in hand when you access the website.
This
proxy when properly executed will be voted in the manner directed herein. If
no
choice is specified and the proxy is signed and returned, then the proxy will
be
voted FOR approval of each of Proposal No. 1, Proposal No. 2 and
Proposal No. 3 and in the discretion of the proxies on any other matters
as may properly come before the Annual Meeting.
(CONTINUED
AND TO BE MARKED, DATED AND SIGNED ON REVERSE SIDE)
________________________________________________________________________
--
Fold and Detach Here --
[PROXY
CARD - REVERSE SIDE]
Please
mark votes as in this sample: [X]
HERCULES
PROPOSALS
Your
Board of Directors Recommends a Vote “FOR”
Proposal No. 1, Proposal No. 2 and Proposal No. 3.
1. Election
of the following director nominees for a three-year term.
|
Nominees
are:
|
1.
John
C. Hunter, III
|
|
2. Robert
D. Kennedy
|
|
|
3. Craig
A. Rogerson
|
|
FOR
|
WITHHOLD
|
|
[
]
|
[
]
|
Withhold
vote only from ______________________________.
2. Ratification
of BDO Seidman, LLP as independent registered public accountants for
2007.
|
FOR
|
AGAINST
|
ABSTAIN
|
|
[
]
|
[
]
|
[
]
|
3.
Amendments to the Hercules' Amended and Restated Certificate of Incorporation
and the Hercules' Revised and Amended By-laws.
|
FOR
|
AGAINST
|
ABSTAIN
|
|
[
]
|
[
]
|
[
]
|
*
* *
*
|
Mark
here if your address has changed and provide us with your new address
in
the space provided to the right: [ ]
|
New
Address:
___________________________________________
___________________________________________
___________________________________________
|
Mark
here
if you plan to attend the Annual Meeting: [ ]
|
Signature: _________________
|
Signature: ________________
|
Date __________,
2007
|
|
Title: _________________
|
Title: ________________
|
NOTE:
Please
sign exactly as name or names appear on this proxy. Joint owners should each
sign personally. When signing as attorney, executor, administrator, trustee
or
guardian, please give your full title as such. When signing as a corporation
or
a partnership, please sign in the name of the entity by an authorized
person.
PLEASE
MARK, SIGN AND DATE THIS PROXY CARD
AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE,
WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
________________________________________________________________________
--
Fold and Detach Here --
-
56
-