-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TCQL8DHknY6tpzwA3LywR/md9KCZA4bgtynSgaWtEfhq+Qb2ntePzoG7FYTs6HD1 yOnKdgqbeDXNveH0FMlvGQ== 0000893220-99-000348.txt : 19990322 0000893220-99-000348.hdr.sgml : 19990322 ACCESSION NUMBER: 0000893220-99-000348 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990429 FILED AS OF DATE: 19990319 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HERCULES INC CENTRAL INDEX KEY: 0000046989 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [2890] IRS NUMBER: 510023450 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-00496 FILM NUMBER: 99568891 BUSINESS ADDRESS: STREET 1: 1313 N MARKET ST STREET 2: HERCULES PLZ CITY: WILMINGTON STATE: DE ZIP: 19894 BUSINESS PHONE: 3025945000 MAIL ADDRESS: STREET 1: HERCULES PLAZA STREET 2: RM 8151 NW CITY: WILMINGTON STATE: DE ZIP: 19894-0001 FORMER COMPANY: FORMER CONFORMED NAME: HERCULES POWDER CO DATE OF NAME CHANGE: 19680321 DEF 14A 1 HERCULES, CORPORATION NOTICE OF ANNUAL MEETING 1 SCHEDULE 14A (RULE 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 - -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: - -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: - -------------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): - -------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: - -------------------------------------------------------------------------------- (5) Total fee paid: - -------------------------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. (1) Amount previously paid: - -------------------------------------------------------------------------------- (2) Form, schedule or registration statement no.: - -------------------------------------------------------------------------------- (3) Filing party: - -------------------------------------------------------------------------------- (4) Date filed: - -------------------------------------------------------------------------------- 2 [HERCULES LOGO] 1999 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF SHAREHOLDERS SMALL WONDERS .....INFINITE POSSIBILITIES 3 [HERCULES LOGO] Letter to Shareholders HERCULES INCORPORATED [HERCULES LETTERHEAD] Hercules Plaza 1313 North Market Street Wilmington, DE 19894-0001 R. Keith Elliott Chairman and Chief Executive Officer March 19, 1999 Dear Shareholders: This past year was a monumental one in the history of Hercules. Despite some very difficult market conditions, we made some bold moves during 1998 to reposition our company for enhanced growth. We acquired five strategic businesses that add more than $1.6 billion in revenues, including the October 15 acquisition of BetzDearborn. We also announced or completed several new capacity projects that will strengthen our market position in key growth areas. We believe these moves will generate significant returns to our shareholders. Please come to our Annual Meeting on April 29. At the Meeting we'll fill you in on our progress in 1998, and you will have the opportunity to ask questions and make comments. Enclosed with this Proxy Statement are your voting card and the 1998 Annual Report. Whether you choose to vote by proxy card, telephone, or computer, please vote as soon as possible. I look forward to seeing you at the Annual Meeting. /s/ R. Keith Elliott R. Keith Elliott Chairman and Chief Executive Officer [PHOTOGRAPH R. KEITH ELLIOTT] 2 4 SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST] Letter to Shareholders [LETTER TO SHAREHOLDERS IN FRENCH] [LETTER TO SHAREHOLDERS IN CHINESE] [HERCULES LOGO] [HERCULES LOGO] [LETTER TO SHAREHOLDERS IN GERMAN] [LETTER TO SHAREHOLDERS IN SPANISH] [HERCULES LOGO] [HERCULES LOGO] 3 5 [HERCULES LOGO] HERCULES INCORPORATED [HERCULES LETTERHEAD] Hercules Plaza 1313 North Market Street Wilmington, DE 19894-0001 To: Our Shareholders Subject: Notice of 1999 Annual Meeting of Shareholders The Annual Meeting of Shareholders of Hercules Incorporated will be held on Thursday, April 29, 1999, at 11:00 a.m., at Winterthur Museum, Garden & Library, Winterthur, Delaware, to consider and take action on the following proposals: 1. Re-election of five directors: Vincent J. Corbo, John G. Drosdick, R. Keith Elliott, Gaynor N. Kelley, and Peter McCausland, each for a term of three years; 2. Ratification of PricewaterhouseCoopers LLP as independent accountants for 1999; 3. Approval of amendments to the Long-Term Incentive Compensation Plan; and 4. Transaction of other business that properly comes before the Annual Meeting. Shareholders as of March 1, 1999, will be entitled to vote at the Annual Meeting. Seating is limited. An admission ticket, which is required for entry into the Annual Meeting, is attached to your proxy card. If you plan to attend the Annual Meeting, please vote your proxy but keep the admission ticket and bring it to the Annual Meeting. If your shares are held in the name of a bank, broker or other holder of record and you plan to attend the Meeting, you can obtain an admission ticket in advance by contacting the Office of the Corporate Secretary (800-441-9274). This Proxy Statement, voting instruction card, and Hercules' 1998 Annual Report are being distributed on or about March 19, 1999. By order of the Board of Directors, /s/ Israel J. Floyd Israel J. Floyd Assistant General Counsel and Corporate Secretary 4 6 SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST GRAPHIC] Table of Contents QUESTIONS AND ANSWERS ....................................................... 6 PROPOSALS TO BE VOTED UPON .................................................. 8 VOTING METHODS .............................................................. 9 BOARD OF DIRECTORS .......................................................... 10 DIRECTORS HIGHLIGHTS ........................................................ 13 HIGHLY COMPENSATED OFFICERS ................................................. 16 PERFORMANCE GRAPH ........................................................... 17 REPORT OF THE COMPENSATION COMMITTEE ........................................ 19 BENEFICIAL OWNERSHIP TABLE .................................................. 22 SUMMARY COMPENSATION TABLE .................................................. 23 OPTION GRANTS TABLE ......................................................... 24 OPTION EXERCISES AND VALUE TABLE ............................................ 25 PENSION PLAN TABLE .......................................................... 25 ANNEX A - EMPLOYMENT CONTRACTS .............................................. 26 5 7 [HERCULES LOGO] QUESTIONS AND ANSWERS Q: WHAT AM I VOTING ON? A: Re-election of five directors (Vincent J. Corbo, John G. Drosdick, R. Keith Elliott, Gaynor N. Kelley, and Peter McCausland); ratification of PricewaterhouseCoopers LLP as Hercules' independent accountants; and approval of amendments to the Long-Term Incentive Compensation Plan (see page 8 for more details). Q: WHO IS ENTITLED TO VOTE? A: Shareholders as of the close of business on March 1, 1999 (the Record Date). Each share of common stock is entitled to one vote. Q: HOW DO I VOTE? A: You can vote on the Internet, by telephone or sign and mail your proxy card. (See your proxy card for specific instructions for Internet and telephone voting). Q: HOW DOES DISCRETIONARY AUTHORITY APPLY? A: If you sign your proxy card, but do not make any selections, you give authority to R. Keith Elliott and Richard G. Dahlen to vote on the proposals and any other matter that may arise at the Annual Meeting. Q: IS MY VOTE CONFIDENTIAL? A: Yes. Only the inspector of election, ChaseMellon Shareholder Services, and certain employees of Hercules will have access to your proxy card. All comments will remain confidential, unless you ask that your name be disclosed. Q: WHO WILL COUNT THE VOTES? A: ChaseMellon Shareholder Services will tabulate the votes and act as inspector of election. Q: WHAT SHARES ARE INCLUDED IN THE PROXY CARD? A: Common shares held as of March 1, 1999 (Record Date) are included. For employees, shares held in the Hercules automatic dividend reinvestment plan, the executive compensation plans, employee benefit plans, and shares credited to your savings plan account (held in custody by the trustee) are also included. Q: IS THE VOTING PROCEDURE DIFFERENT IF I PARTICIPATE IN ONE OF THE EMPLOYEE SAVINGS PLANS? A: Yes, but you still need to vote. The plan trustee will vote your shares as indicated by your voting preferences. However, if you do not vote, the plan trustee will vote your shares in proportion to the other proxies received. Shares credited to your savings plan account as of March 1, 1999, are included on your card; fractional shares are not. Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD? A: Your shares are probably registered differently or are in more than one account. Vote all proxy cards to ensure that all your shares are voted. Contact our transfer agent, ChaseMellon Shareholder Services (800-237-9980), to have your accounts registered in the same name and address. 6 8 SMALL WONDERS, INFINITE POSSIBILITIES Q: WHAT CONSTITUTES A QUORUM? A: As of March 1, 1999, 102,474,187 shares of Hercules common stock were issued and outstanding. A majority of the shares entitled to vote, present in person or represented by proxy, constitutes a quorum. If you vote by proxy card, telephone, or Internet, you will be considered part of the quorum. The inspector of election will treat shares represented by a properly executed proxy as present at the Annual Meeting. Abstentions and broker non-votes will not affect the determination of a quorum. Q: WHAT PERCENTAGE OF STOCK DO THE DIRECTORS AND OFFICERS OWN? A: Approximately 2.0% of our common stock was held by the directors and officers as of March 1, 1999. (See page 22 for more details.) Q: WHO ARE THE LARGEST PRINCIPAL SHAREHOLDERS? A: Oppenheimer Group, Inc. (Oppenheimer Tower, World Financial Center, New York, NY) owned 13,869,263 shares, or 13.8%, as of February 9, 1999. Fidelity Management & Research Co. (82 Devonshire, Boston, MA) owned 7,205,592 shares, or 7.2%, as of February 1, 1999. T. Rowe Price Associates, Inc. (100 E. Pratt Street, Baltimore, MD) owned 6,854,654 shares or 6.8%, as of February 12, 1999. Capital Research & Management (333 South Hope Street, Los Angeles, CA) owned 6,582,800 shares, or 6.5%, as of February 8, 1999. Q: WHEN ARE THE SHAREHOLDER PROPOSALS DUE FOR THE YEAR 2000 ANNUAL MEETING? A: To be included in next year's proxy statement, shareholder proposals must be submitted in writing by November 19, 1999, to Israel J. Floyd, Esq., Corporate Secretary, Hercules Incorporated, Hercules Plaza, 1313 North Market Street, Wilmington, DE 19894-0001. If any stockholder proposal is submitted after February 2, 2000, the Board will be allowed to use its discretionary voting authority when the proposal is raised at the Annual Meeting, without any discussion of the matter in the proxy statement. Q: HOW DOES A SHAREHOLDER NOMINATE A DIRECTOR OF HERCULES? A: Submit a written recommendation (accompanied by a notarized statement from the nominee indicating willingness to serve if elected and principal occupations or employment over the past five years) to the Chairman of the Nominating Committee, c/o Corporate Secretary, Hercules Incorporated, Hercules Plaza, 1313 North Market Street, Wilmington, DE 19894-0001. Q: WHAT ARE THE SOLICITATION EXPENSES? A: ChaseMellon Shareholder Services was hired to assist in the distribution of proxy materials and solicitation of votes for $9,000, plus out-of-pocket expenses. Hercules will reimburse stockbrokers and other custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation material to the owners of common stock. 7 9 [HERCULES LOGO] PROPOSALS 1. RE-ELECTION OF DIRECTORS Nominees for reelection this year are: - Vincent J. Corbo (director since 1997) - John G. Drosdick (director since 1998) - R. Keith Elliott (director since 1991) - Gaynor N. Kelley (director since 1989) - Peter McCausland (director since 1997) Each has consented to serve a three-year term. (See page 10 for biographical information.) If any director is unable to stand for re-election, the Board may provide for a lesser number of directors or designate a substitute. In the latter event, shares represented by proxies may be voted for a substitute director. The affirmative vote of a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting is required to elect a director. We recommend a vote "FOR" each of the nominees. 2. RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS FOR 1999 The Audit Committee and the Board believe that PricewaterhouseCoopers LLP ("PWC") has invaluable knowledge about Hercules. Partners and employees of PWC are periodically changed, providing Hercules with new expertise and experience. Representatives of PWC have direct access to the Audit Committee and regularly attend the Committee's meetings. Representatives of PWC will attend the Annual Meeting to answer questions. The affirmative vote of the majority of shares present in person or by proxy and entitled to vote at the Annual Meeting is required to ratify PWC as independent accountants for 1999. We recommend a vote "FOR" the ratification of PricewaterhouseCoopers LLP as independent accountants. 3. APPROVAL OF AMENDMENTS TO THE LONG-TERM INCENTIVE COMPENSATION PLAN The Plan was originally adopted in 1991 and is designed to motivate, reward, and retain employees who attain and surpass long-range performance goals and to compete with other major corporations in attracting and retaining key managers in a highly-competitive marketplace. We believe that this Plan is the best means for aligning management focus with shareholder interest. The Plan provides for the granting of various types of awards, including stock options, performance accelerated stock options, restricted shares and restricted stock units, to eligible employees of Hercules. You are being asked to approve the following amendments to the Plan: - - EXTEND THE EXPIRATION DATE TO APRIL 30, 2002 FROM APRIL 30, 2000. As a result of the acquisition of BetzDearborn, our employee population has doubled in size, and our projections for future use of shares under the Plan have changed. We anticipate that the remaining shares authorized for awards under the Plan will be depleted by the end of this year (prior to the existing expiration date of April 30, 2000). - - INCREASE THE NUMBER OF SHARES THAT MAY BE USED FOR AWARDS UNDER THE PLAN BY 7,000,000 The proposed amendments will allow us to issue up to 7,000,000 additional shares in connection with future awards under the Plan. Currently, the Plan authorizes a total of 8,000,000 shares, of which only approximately 2,200,000 remain available. The increase is necessary due to our increased employee population and the extension of the expiration date of the Plan. As of March 1, 1999, 102,474,187 shares of Hercules common stock were issued and outstanding. - - PROHIBIT REPRICING OF STOCK OPTIONS GRANTED UNDER THE PLAN Although we have never repriced stock options, we are proposing to amend the Plan to expressly prohibit the repricing of any stock options granted under the Plan, or the granting of new stock options in connection with the cancellation of outstanding options with a higher exercise price. - - GIVE THE COMPENSATION COMMITTEE THE ABILITY TO DETERMINE AND EXTEND THE TIME FOR STOCK OPTIONS TO BE EXERCISED FOLLOWING AN EMPLOYEE'S DEATH OR DISABILITY. If the proposed amendment is adopted, the Compensation Committee would have the discretion to determine for new options, and to extend for outstanding options, on a case-by-case basis, the period during which the option can be exercised after an employee dies or becomes disabled (but not beyond the stated expiration of the option). We believe that the Committee should be given this discretion so that it can address these unique situations as they arise. 8 10 SMALL WONDERS, INFINITE POSSIBILITIES You may obtain a copy of the current Plan by writing to Hercules Incorporated, Hercules Plaza, 1313 North Market Street, Wilmington, DE 19894-0001, Attention: Corporate Secretary. Requests may also be made by phone to 800-441-9274. The affirmative vote of the majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting is required to approve these amendments to the Long-Term Incentive Compensation Plan. The Board recommends a vote "FOR" these amendments. Abstentions will have the effect of a negative vote. Broker non-votes will have no effect on the outcome of the vote. VOTING METHODS YOU HAVE THE RIGHT TO VOTE AND TO REVOKE YOUR PROXY ANY TIME BEFORE IT IS VOTED AT THE ANNUAL MEETING. COMPUTER VOTING 1. Go to the website address on your proxy card. [COMPUTER] 2. Enter your Control Number 3. Mark your selections 4. Click on "register vote" TELEPHONE VOTING 1. Dial the telephone number indicated on your proxy card [TELEPHONE} 2. Enter your Control Number 3. Follow voice prompts PROXY CARD VOTING 1. Mark your selections [MAIL SLOT] 2. Date and sign your name exactly as it appears on your card 3. Mail it in the return envelope 9 11 [HERCULES LOGO] BOARD OF DIRECTORS - STANDING FOR RE-ELECTION [PHOTO] Mr. Elliott, age 57, is chairman and chief executive officer of Hercules Incorporated. In 1995, Mr. Elliott held the position of executive vice president and chief financial officer, and later that year was named president and chief operating officer. Mr. Elliott joined Hercules in 1991 from Engelhard Corporation. R. KEITH ELLIOTT - Mr. Elliott is a director of Computer Task Group, PECO Director since 1991 Energy Company, and Wilmington Trust Company. Dr. Corbo, age 55, is president and chief operating [PHOTO] officer of Hercules Incorporated. He held positions in research engineering and business management, including executive vice president, responsible for Technology and the Paper Technology and Fibers businesses, 1996; group vice president and president, Food & Functional Products, 1993, and Materials, 1992. Dr. Corbo serves on the following: the Board of Managers of Fibervisions L.L.C.; the Advisory Board of the College of Sciences, Georgia Institute of Technology; the Advisory Council of the Department of Engineering, Princeton University; Engineering College Advisory Council of the University of Delaware; Trustee of Delaware Symphony Orchestra and VINCENT J. CORBO - The Grand Opera House; and President of Opera Delaware. Director since 1997 [PHOTO] Mr. Drosdick, age 55, is president and chief operating officer of Sunoco, Inc., an independent petroleum refiner-marketer in the United States. Mr. Drosdick was president of Ultramar Corporation from 1992 to 1996. He is a director of Sunoco, Inc., and serves on JOHN G. DROSDICK - the Board of Trustees of the Philadelphia Museum of Director since 1998 Art and Villanova University. Mr. Kelley, age 67, is the retired chairman and chief [PHOTO] executive officer of The Perkin-Elmer Corporation, a manufacturer of analytical and biotechnology instrumentation. He is a member of the board of directors of Alliant Techsystems Inc. and Prudential Insurance Co. of America. He is on the advisory board of the Center for GAYNOR N. KELLEY - Management Development at Northeastern University. Director since 1989 10 12 SMALL WONDERS, INFINITE POSSIBILITIES [PHOTO] Mr. McCausland, age 49, is chairman and chief executive officer of Airgas, Inc. (a distributor of industrial, medical, and specialty gases and related equipment), a company he founded in 1987. He served as general counsel for MG Industries, Inc., an industrial gas producer. He was a partner in the firm of McCausland, Keen & Buckman which specialized in mergers, acquisitions, and financings. He is a PETER MCCAUSLAND - director of the Fox Chase Cancer Center and the Director since 1997 Independence Seaport Museum. BOARD OF DIRECTORS - CONTINUING AS DIRECTORS In order to comply with our Certificate of Incorporation and By-Laws which provide for three classes of directors of equal size to the extent practical, it was necessary for the Board of Directors to reclassify some directors. There remains a vacancy on the Board due to the resignation of William R. Cook. Mr. Fairbanks, age 58, is managing director for [PHOTO] Domestic and International Issues, Center for Strategic & International Studies. He was Ambassador-at-Large under President Reagan. He is a member of the board of directors of SEACOR Smit, Inc. and GATX Corporation; vice chairman of the U.S. National Committee of the Pacific Economic Cooperation Council; member, Council on Foreign Relations, Council of American Ambassadors; and RICHARD M. FAIRBANKS, founder, The American Refugee Committee of III - Director since 1993 Washington. [PHOTO] Mr. Hirsig, age 59, is retired president and chief executive officer of ARCO Chemical Company, which was bought by Lyondell Chemical Company. He is a director of Philadelphia Suburban Corporation and Checkpoint Systems Corporation. Additionally, he is chairman, Prime Advisory Board, and director or trustee of Bryn Mawr College, Curtis Institute of Music, Rosenbach Museum and Library, and YMCA of Philadelphia. Mr. ALAN R. HIRSIG - Hirsig served as past chairman of the Chemical Director since 1998 Manufacturers Association. 11 13 [HERCULES LOGO] Ms. Holiday, age 47, is an attorney. She was Assistant [PHOTO] to the President of the United States and Secretary of the Cabinet from 1990 until early 1993 and served as General Counsel of the U.S. Treasury Department from 1989 through 1990. She served as Counselor to the Secretary of the Treasury and Assistant Secretary for Public Affairs and Public Liaison, U.S. Treasury Department from 1988 to 1989. Ms. Holiday is a director of Amerada Hess Corporation, H. J. Heinz Company, Beverly Enterprises, Inc., and director or trustee of various investment companies in the Franklin Templeton EDITH E. HOLIDAY - Group of Funds. Director since 1993 [PHOTO] Professor Jahn, age 68, has taught at Princeton University, Department of Mechanical and Aerospace Sciences since 1962. He was Dean of the School of Engineering and Applied Science at Princeton, 1971-1986. Professor Jahn is a trustee, fellow, and a member of several academic and professional societies. ROBERT G. JAHN - He is vice president and a founding member of the Director since 1985 Society for Scientific Exploration. Mr. McBrayer, age 67, retired as president of Exxon [PHOTO] Chemical Company in January 1992, after 37 years of service. He is a former chairman of the board of the Chemical Manufacturers Association and is currently a director of American Air Liquide, Inc., and Air Liquide International. He is also a member of the Advisory Committee for the Pacific Northwest National H. EUGENE MCBRAYER - Laboratory. Director since 1992 [PHOTO] Mr. MacDonald, age 57, is a principal in Amelia Investment Corp. (AIC), a private investment firm dedicated to the acquisition and development of small- to medium-sized industrial manufacturing and distribution companies. Prior to AIC, he was a principal in Island Capital Corporation, a similar firm, and managing director, Global Corporate Finance, RALPH L. MACDONALD, JR. Bankers Trust Company. He is also a director of - - Director since 1989 Gaylord Container Corporation. 12 14 SMALL WONDERS, INFINITE POSSIBILITIES [PHOTO] Mr. Shober, age 65, is a private investor. He served as vice chairman of the board of directors of Penn Virginia Corporation, a natural resources company, from 1992 to 1996. Mr. Shober is a director of Airgas, Inc., Anker Coal Company, C&D Technologies, Ensign Bickford Industries, Inc., First Reserve Corporation, MIBRAG gmH, Penn Virginia Corporation, and several JOHN A.H. SHOBER - other organizations including The Eisenhower Exchange Director since 1998 Fellowships. Ms. Sneed, age 51, is senior vice president, Marketing [PHOTO] Services, Kraft Foods, Inc., the nation's largest packaged foods company. She joined General Foods in 1977 and has held a variety of management positions, including vice president, Consumer Affairs; senior vice president and president, Foodservice Division; executive vice president and general manager, Desserts Division; and executive vice president and general PAULA A. SNEED - manager, Dinners and Enhancers Division. Director since 1994 BOARD OF DIRECTORS - HIGHLIGHTS BOARD COMPENSATION - - Employee directors receive no additional compensation other than their normal salary for serving on the Board or its Committees. - - During 1998, nonemployee directors received: - Annual grant of 3,000 stock options; - Award of 9,000 stock options, which were granted in lieu of any annual stock options for the next three years; - Right to defer compensation in exchange for restricted stock; - $23,000 annual fee; - $1,000 for each meeting attended; - $3,000 for chairing a committee; - $1,000 per day for special assignments; - Reimbursement for out-of-pocket expenses. ANNUAL BOARD EVALUATION - - Solicited and reviewed written commentary from all members regarding critical duties and matters and quality of performance - - Conducted peer evaluation of performance - - Increased communication between members and management NONEMPLOYEE DIRECTOR PROGRAMS (see page 15) - - Nonemployee Director Stock Accumulation Plan (deferral capability and option grants) - - Equity Award Program (one time award if director makes a purchase) - - Restricted Stock Units Program (one-time grant at joining -- long-term vesting) - - Charitable Award Program (life insurance with beneficiary being a designated charity) 13 15 [HERCULES LOGO] STOCK OWNERSHIP (as of March 1, 1999) STOCK OWNERSHIP FOR NONEMPLOYEE DIRECTORS (AS A GROUP) RSUs RESTRICTED COMMON OPTIONS - ------ ---------- ------ ------- 13,922 66,251 78,110 249,000 RSUs [ ] Restricted .................. 13,922 66,251 [ ] Common ...................... 78,110 [ ] Options ..................... 249,000
BOARD MEMBERS R. K. Elliott, Chair V. J. Corbo J. G. Drosdick R. M. Fairbanks, III A. R. Hirsig E. E. Holiday R. G. Jahn G. N. Kelley R. L. MacDonald, Jr. H. E. McBrayer P. McCausland J. A. H. Shober P. A. Sneed 19 Meetings held in 1998 COMMITTEE MEMBERS AUDIT P. A. Sneed, Chair J. G. Drosdick R. M. Fairbanks, III E. E. Holiday 3 Meetings held in 1998 COMPENSATION R. L. MacDonald, Jr., Chair G. N. Kelley H. E. McBrayer 6 Meetings held in 1998 EXECUTIVE R. K. Elliott, Chair V. J. Corbo R. L. MacDonald, Jr. H. E. McBrayer 1 Meeting held in 1998 FINANCE H. E. McBrayer, Chair V. J. Corbo R. K. Elliott R. M. Fairbanks, III E. E. Holiday R. L. MacDonald, Jr. P. McCausland 4 Meetings held in 1998 NOMINATING G. N. Kelley, Chair R. M. Fairbanks, III R. G. Jahn 2 Meetings held in 1998 SOCIAL RESPONSIBILITY E. E. Holiday, Chair R. G. Jahn J. A. H. Shober P. A. Sneed 3 Meetings held in 1998 TECHNOLOGY R. G. Jahn, Chair V. J. Corbo R. K. Elliott A. R. Hirsig G. N. Kelley H. E. McBrayer P. A. Sneed 4 Meetings held in 1998 14 16 SMALL WONDERS, INFINITE POSSIBILITIES Board Committees AUDIT: Reviews auditing, accounting, financial reporting, and internal control functions. Recommends our independent accountant and reviews their services. All members are nonemployee directors. COMPENSATION: Administers executive compensation programs, policies, and practices. Acts in an advisory role on employee compensation. All members are nonemployee directors. EXECUTIVE: 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 nonemployee director wants a matter to be addressed by the Board rather than the Executive Committee, then such matter is submitted to the Board. FINANCE: Reviews Hercules' financial affairs. Has full and final authority on certain financial matters and serves as the named fiduciary for all of Hercules' employee benefit plans. NOMINATING: Considers and recommends nominees for election as directors and officers. Reviews and evaluates the Board and its members. All members are nonemployee directors. SOCIAL RESPONSIBILITY: Reviews Hercules' policies, programs and practices on equal employment opportunity; environmental, safety, and health matters; ethics; and community affairs. TECHNOLOGY: Reviews the strategic direction of Hercules' intellectual property, research and development, and emerging technologies. Board of Directors - Other Information NONEMPLOYEE DIRECTOR PROGRAMS NONEMPLOYEE DIRECTOR STOCK ACCUMULATION PLAN. Directors can defer all or part of their compensation in exchange for stock (restricted until retirement from the Board) at 85% of the fair market value of such stock on the date of exchange. Each director annually receives a non-qualified stock option (exercisable after a one-year holding period) to purchase 3,000 shares of common stock. The option price is the fair market value of the common stock on the date of grant. In 1998, each nonemployee director received an accelerated grant of 9,000 stock options in lieu of any annual stock option grant for the next three years. Vesting occurs in three equal annual increments beginning one year after the grant date. EQUITY AWARD. A director has a single opportunity to purchase 750 shares of common stock at fair market value when first elected to the Board. Upon the purchase, Hercules awards an additional 1,500 shares which cannot be transferred until retirement or resignation from the Board. RESTRICTED STOCK UNITS. Upon election to the Board, each director receives 1,100 restricted stock units, which are placed in an unfunded account where they accrue dividend equivalents and interest. Each unit represents the right to receive one share of Hercules stock at retirement. Units do not carry any voting rights. Of these units, 200 immediately vest. Thereafter, for every year served on the Board, 100 additional units vest (up to a maximum of nine years). Upon retirement from the Board, all vested units are paid in shares as a lump sum or spread over a period not to exceed ten years. CHARITABLE AWARD PROGRAM. This program is designed to promote charitable giving. It is available to directors and is funded by life insurance policies on directors. Upon the retirement or death of a director, Hercules will donate common stock, with an expected aggregate value of $1,000,000, to one or more designated charitable institutions over a ten-year period. The actual number of shares delivered to the charitable institutions will be based on a projected share price growth. The first installment will be paid immediately after the director's retirement or death, but no sooner than April 1, 2001. Directors derive no financial benefit from this program since all charitable deductions accrue solely to Hercules. Furthermore, the insurance funding is structured so that the program results in nominal cost to Hercules over time. 15 17 [HERCULES LOGO] Highly Compensated Officers [PHOTO] R. KEITH ELLIOTT Chairman and Chief Executive Officer [PHOTO] VINCENT J. CORBO President and Chief Operating Officer [1998 Compensation Highlights BAR GRAPH]
R.K. Elliott W.R. Cook* V.J. Corbo G. MacKenzie D.W. DiDonna H.J. Tucci Salary $750,000 $ 145,833 $ 494,273 $271,670 $ 260,402 $245,850 Bonus 530,880 0 320,000 200,000 120,000 185,000 Other Annual Compensation 89,049 0 90,493 19,514 11,260 18,707 Restricted Stock 0 2,966,994 2,367,602 0 0 50,083
*The salary for Mr. Cook reflects the period from October 15, 1998 to year-end. [PHOTO] GEORGE MACKENZIE Senior Vice President and Chief Financial Officer [PHOTO] DOMINICK W. DIDONNA Senior Vice President and General Manager Pulp and Paper Division [PHOTO] HARRY J. TUCCI Senior Vice President Corporate Development 16 18 SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST GRAPHIC] Performance Graph Comparison Of Five Year Cumulative Return* [LINE GRAPH] Hercules Incorporated (NYSE Trading symbol HPC) S&P 500 S&P Speciality Chemical Index S&P Chemical Index
1993 1994 1995 1996 1997 1998 - ------------------------------------------------------------------------------ Hercules Incorporated (NYSE Trading symbol HPC) $100.0 101.7 149.0 114.3 132.3 72.0 S&P 500 $100.0 98.5 132.0 158.8 208.0 263.5 S&P Speciality Chemical Index $100.0 84.7 109.8 111.9 136.2 113.1 S&P Chemical Index $100.0 111.1 140.7 183.7 218.6 198.6 - -------------------------------------------------------------------------------
Assumes $100 invested on December 31, 1993 * Total return assumes reinvestment of dividends 17 19 [HERCULES LOGO] Highlights of the Compensation Committee COMPENSATION PHILOSOPHY - Link executive compensation with shareholder returns - Guidelines for substantial stock ownership for executives - Attract and retain talented employees through competitive compensation EXECUTIVE COMPENSATION STRUCTURE - Base pay - Annual incentive - Long-term incentive - Recognition awards MR. ELLIOTT'S 1998 TARGET BONUS - 80% based on corporate performance - 20% based on individual accountabilities STOCK OWNERSHIP GUIDELINES - Chairman & CEO: 5 times salary plus target bonus - President & COO: 4 times salary plus target bonus - Management Committee: 3 times salary plus target bonus - Senior Management: 2 times salary plus target bonus EMPLOYEE STOCK AND COMPENSATION PROGRAMS - Broadbased employee incentive plan - Employee Stock Purchase Plan - 401(k) Plan - Option Advantage - Accountability system and awards 18 20 SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST GRAPHIC] Report of the Compensation Committee COMPENSATION PHILOSOPHY Our philosophy is to align compensation of both executive management and employees with the long-term interests of our shareholders. Executive compensation is structured to motivate management to create sustained shareholder value by: - - linking total executive compensation with the returns realized by shareholders, - - aligning the interests of management and shareholders through substantial stock ownership for executives, and - - ensuring the continued growth and performance of Hercules by attracting, motivating and rewarding talented executives and employees through competitive compensation. Hercules' compensation program focuses on specific corporate goals that are generally believed to reflect measures (such as earnings per share and return on shareholders' equity) related to shareholders' total return. In addition to these measures, shareholders' total return is viewed in light of conditions in the specialty chemical industry, general economy and the stock market. STRUCTURE OF EXECUTIVE COMPENSATION The elements of executive compensation programs are: - - base pay, - - annual incentives, - - long-term incentives, and - - special awards in recognition of extraordinary achievement or significant appointments. Each executive's base salary is designed to be competitive with similarly sized chemical and specialty chemical companies, while short- and long-term incentives are performance-based. DETERMINATION OF BASE PAY Base pay is determined by individual performance and comparisons to similar positions in chemical, specialty chemical, and general industry companies, including those designated in the Standard & Poor's Chemical and Specialty Chemical Indices. As a result of the BetzDearborn acquisition in October 1998, which doubled the size of the company, the Compensation Committee re-evaluated the compensation levels and made adjustments so that salaries would be competitive with other companies of similar size. As a result, the Committee increased base salaries for Messrs. Corbo, MacKenzie, DiDonna and Tucci to $562,500, $330,000, $327,000, and $300,000, respectively. Mr. Elliott's salary for 1998 was $750,000. DETERMINATION OF ANNUAL BONUSES Under our Management Incentive Compensation Plan, annual bonuses are paid in a combination of cash and restricted stock based on the achievement of predetermined corporate, business or corporate staff unit, and individual goals. The Plan provides that no payouts will occur unless the minimum level of performance, as established by the Compensation Committee, is exceeded. A maximum of 200% of the total target pool may be paid upon achievement of outstanding performance. Once established, the Committee may adjust the expected performance level only upon the occurrence of an extraordinary event. In the last five years, the Committee has not waived the minimum level of performance nor adjusted the target or maximum goals required for payout. BONUS PAYOUT LEVEL FOR 1998 The Compensation Committee approved the 1998 bonus pool at 79% of the target level. The three measures of corporate performance used for bonus pool creation were earnings per share, return on equity, and free cash flow. In determining the bonus pool creation, these measures were weighted 50%, 25% and 25%, respectively. Additionally, the 1998 bonus pool reflected: - - Long-term strategic and portfolio management - - Strong financial management - - Improved management development and succession planning - - Long-term value creation through mergers and acquisitions These additional measures impacted the 1998 bonus pool by less than 25% of the pool value. MR. ELLIOTT'S 1998 BONUS In 1998, Hercules and its peers in the specialty chemical industry faced difficult markets and business conditions. After consideration of all relevant factors (including earnings per share, free cash flow, and return on shareholder equity), the Compensation Committee concluded that Hercules' relative performance placed it in the upper half among its peers in the specialty chemical industry. Our performance has been reflected both positively and negatively in the compensation paid to Mr. Elliott over the past three years. In particular, Mr. Elliott's performance bonus in 1997 increased significantly over his 1996 bonus. On the other hand, Hercules did not achieve maximum performance levels under the annual 19 21 [HERCULES LOGO] Management Incentive Compensation Plan in 1998 and, accordingly, Mr. Elliott's annual bonus in 1998 was 42% lower than that of 1997. Mr. Elliott's bonus represented 41% of his total direct compensation in 1998. Mr. Elliott's target bonus is 80% directly attributable to corporate performance. With respect to the remaining 20% of target bonus, the Compensation Committee considered individual accountabilities, including: - - Long-term strategic and portfolio management; - - Continued implementation of cost improvement and growth initiatives; - - Management development; and - - Implementation of corporate development strategy In light of such considerations, Mr. Elliott's bonus payout for 1998 was $530,880. OTHER HIGHLY COMPENSATED EXECUTIVES' 1998 BONUSES The final 1998 bonuses for Messrs. Corbo, MacKenzie, DiDonna, and Tucci were an aggregate of $825,000. In awarding these bonuses, the Compensation Committee considered Hercules' corporate and business unit performance, and individual contributions to our success. LONG-TERM INCENTIVES The focus of the Long-Term Incentive Compensation Plan is to increase shareholder value. Under this Plan, the Compensation Committee approves pools of regular stock options and performance accelerated stock options. Performance accelerated stock options are nonqualified stock options that normally vest 9 1/2 years from the date of grant. Vesting can be accelerated upon the achievement of specific goals. The Committee also approves specific awards for officers and other key employees. The Plan permits the chief executive officer to approve all awards for other eligible employees. In 1998, performance options that were granted in 1995 completed a three-year performance period. The Compensation Committee determined that the target portion of these performance options and all of the performance options granted to senior managers remain unvested and will be reviewed again in February 2000. The above-target portion of the performance options granted to certain executives, including Messrs. Elliott, Corbo, MacKenzie, DiDonna, and Tucci, would not vest until September 30, 2004, with no future review based on corporate performance. 1998 AWARDS The Compensation Committee approved a pool and granted options for the regularly scheduled May 1998 award. The Committee also made an accelerated grant of the 1999 options in August 1998 in connection with the acquisition of BetzDearborn. Messrs. DiDonna and Tucci received stock options to purchase 52,000 and 48,000 shares, respectively. These options vest 40%, 40%, and 20%, respectively, on the first three anniversaries of the grant date. In making the grants, the Committee considered competitive compensation, the number of stock options previously granted, current and future accountabilities, and the responsibilities of the executives. The Committee also granted to Messrs. DiDonna and Tucci 29,375 and 27,000 performance options, respectively, with a normal vesting period of 9 1/2 years. Vesting will be accelerated if Hercules' stock price exceeds certain target prices for five consecutive trading days. These performance options are structured in two components: (1) 23,500 and 21,600 shares for Messrs. DiDonna and Tucci, respectively, vest immediately if our stock price exceeds $67.00 and (2) an additional 5,875 and 5,400 shares for Messrs. DiDonna and Tucci, respectively, vest if our stock price exceeds $76.50. SPECIAL AWARDS From time to time, special awards are granted in recognition of extraordinary results. In 1998, awards were made under the Long-Term Incentive Compensation Plan to certain executives who were instrumental in completing the acquisition of BetzDearborn. Options to purchase shares were granted as noted below. The option was the price of Hercules stock on the grant date. - - Mr. Elliott received 300,000 options which vest 40%, 40%, and 20% on the first, second and third grant date anniversaries; - - Mr. MacKenzie received 160,000 options (60,000 options with a staggered three-year vesting schedule of 40%, 40%, and 20%, and 100,000 options with a staggered three-year vesting schedule of 20%, 30% and 50% on the first, second, and third grant date anniversaries); and - - Messrs. DiDonna and Tucci received 100,000 options with a staggered three-year vesting schedule of 20%, 30%, and 50% on the first, second, and third grant date anniversaries. MR. COOK'S COMPENSATION AS CO-CEO In connection with the acquisition of BetzDearborn, Mr. Cook became vice-chairman and co-CEO of Hercules on October 15, 1998. On November 30, 1998, it was announced that Mr. Cook would resign these positions and leave Hercules. 20 22 SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST GRAPHIC] Annex A of this proxy describes Mr. Cook's employment contract. The major components of his contract were: - - An initial base salary of $700,000; - - A target bonus at 70% of base salary (prorated for the portion of the year that he served as co-CEO); - - As a replacement for pre-existing obligations and to assist in the transition, a grant of 93,818 restricted shares on October 15, 1998, vesting in three equal installments in June 1999, February 2000 and October 2000; - - A grant of 500,000 performance options on October 15, 1998, with a commitment to receive future performance options of 250,000 on September 30, 1999, and 250,000 on June 30, 2000. (Since Mr. Cook left Hercules, the 1999 and 2000 performance options will not be issued.) These performance options have a normal vesting period of 9-1/2 years which can be accelerated at any time after October 15, 2001, if the Company's average stock price (measured over 60 trading days) exceeds a 12% annual compounded growth rate to that point. - - A supplemental pension benefit. STOCK OWNERSHIP GUIDELINES As mentioned in previous years, stock ownership guidelines have been established for our executives. These guidelines reinforce our compensation approach of linking management's interests with those of our shareholders. The guidelines specify stock ownership as a multiple of base salary plus target bonus for the following levels: - ---------------------------------------------------------- Chairman and Chief 5 times salary plus Executive Officer: target bonus - ---------------------------------------------------------- President and Chief 4 times salary plus Operating Officer: target bonus - ---------------------------------------------------------- Hercules Management 3 times salary plus Committee: target bonus - ---------------------------------------------------------- Senior Management: 2 times salary plus target bonus - ----------------------------------------------------------
STOCK OWNERSHIP PROGRAM Dr. Corbo made an irrevocable election this year to purchase an additional 7,195 restricted stock units and received a matching grant of 10,792 shares of restricted stock. RESPONSE TO IRS LIMITS ON DEDUCTIBILITY OF COMPENSATION Under Section 162(m) of the Internal Revenue Code, Hercules may not deduct certain forms of compensation in excess of $1,000,000 paid to a highly compensated executive. The Compensation Committee tries to structure executive compensation to minimize the amount of compensation that is not tax deductible. Based upon a review of our current compensation plans and practices, the Committee concluded that no action would be taken at this time and that further review would be made during 1999. COMPENSATION PHILOSOPHY EXTENDED TO EMPLOYEES As mentioned in last year's proxy statement, essentially all Hercules employees worldwide received non-qualified stock options in 1997. The grants ranged in size from 100 to 300 options, with a staggered three-year vesting schedule of 40%, 40%, and 20%. This grant provided an additional tool to focus our employees on how their individual and combined contributions can affect overall corporate performance. In 1998, we expanded our worldwide emphasis on pay-for-performance with broader incentive opportunities for employees. Our objective is to motivate all employees to achieve certain corporate, business unit and department, team and plant results. Eligible employees were given the opportunity to earn additional income if corporate performance exceeded earnings expectations. In most areas of the world, our employees are encouraged to build ownership in Hercules stock by participating in our Employee Stock Purchase Plan. Employees can purchase stock quarterly at a 15% discount through payroll deduction. Further, U.S. employees who participate in the 401(k) Savings and Investment Plan receive their company match in the form of Hercules stock. This contribution must remain in stock until the account is paid out or until the employee reaches retirement age. These programs encourage our employees to think and act like shareholders. Our accountability system provides a link between compensation and Hercules' overall performance. This goal-setting and measurement system provides direction and guidance in efforts that will best support the business and corporate objectives. Outstanding performance against accountabilities is recognized in the form of cash and stock option awards. Compensation Committee R. L. MacDonald, Jr., Chair G. N. Kelley H. E. McBrayer 21 23 [HERCULES LOGO] Stock Ownership of Directors and Officers Compliance With Section 16(a) Reporting: The rules of the Securities and Exchange Commission require that Hercules disclose late filings of reports of stock ownership (and changes in stock ownership) by its directors and executive officers. To the best of Hercules' knowledge, there were three late Form 3 filings (Thomas W. Fredericks, J. Frank Raboud, and David A. Simpson) and one late transaction reported on a Form 4 filing (Monika Riese-Martin) during 1998. These late filings did not involve any of the directors or highly compensated officers. BENEFICIAL OWNERSHIP CHART AS OF MARCH 1, 1999
SHARES OPTIONS BENEFICIALLY EXERCISABLE RESTRICTED PERCENT OF NAME OWNED(1) WITHIN 60 DAYS STOCK UNITS SHARES - ---------------------------------------------------------------------------------------------------------------------- R. K. Elliott, Director and Officer 227,664 313,000 40,000 * V. J. Corbo, Director and Officer 71,599 75,200 94,330 * D. W. DiDonna, Officer 6,064 41,400 -- * J. G. Drosdick, Director 4,419 -- 1,100 * R. M. Fairbanks, III, Director 9,088 15,000 1,253 * A. R. Hirsig, Director 1,419 -- 1,100 * E. E. Holiday, Director 3,344 12,000 1,376 * R. G. Jahn, Director 11,088 21,000 -- * G. N. Kelley, Director 8,025 21,000 2,185 * R. L. MacDonald, Jr., Director 21,864 21,000 1,928 * G. MacKenzie, Officer 60,944 62,820 10,321 * H. E. McBrayer, Director 74,307 18,000 1,527 * P. McCausland, Director 5,030 3,000 1,100 * J. A. H. Shober, Director 3,000 -- 1,100 * P. A. Sneed, Director 8,777 12,000 1,253 * H. J. Tucci, Officer 62,145 119,100 -- * W. R. Cook(2) 123,289 0 0 * Directors and Officers as a Group(35) 899,373 1,034,560 158,573 2.0% - ----------------------------------------------------------------------------------------------------------------------
* Less than 1% of Hercules' outstanding shares of common stock. (1) Includes shares, as of March 1, 1999, in the Savings and Investment Plan as follows: R. K. Elliott, 1,163; V. J. Corbo, 2,718; D. W. DiDonna, 703; G. MacKenzie, 2,750; and H. J. Tucci, 4,779; and all directors and officers as a group, 20,756. Includes shares with restrictions and forfeiture risks as specified under the Long-Term Incentive Compensation Plan: R. K. Elliott, 148,087; V. J. Corbo, 50,221; D. W. DiDonna, 1,747; G. MacKenzie, 20,420; and H. J. Tucci, 21,973; and all directors and officers as a group, 451,915. Owners have the same voting and dividend rights as do other shareholders of Hercules, except for the right to sell or transfer. Included in the non-employee directors' totals is the one-time equity award described on page 15. Mr. Kelley's total includes 1,537 shares that he holds jointly with his spouse. (2) Effective January 4, 1999, Mr. Cook resigned as co-chief executive officer and vice chairman. 22 24 SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST GRAPHIC] Summary Compensation Table for 1998
LONG-TERM ANNUAL COMPENSATION COMPENSATION AWARDS - --------------------------------------------------------------------- ------------------------------------------------------------- NAME AND POSITION YEAR SALARY BONUS OTHER RESTRICTED OPTIONS INCENTIVE ALL OTHER ($) ($) ($) STOCK(1) ($) (SHARES) PAYOUTS($) COMPENSATION(2) - --------------------------------------------------------------------- ------------------------------------------------------------- R. K. Elliott 1998 750,000 530,880 89,049 -- 300,000 -- 80,170 Chairman and Chief 1997 750,000 910,000 70,106 3,770,000 -- 2,433,671 34,300 Executive Officer 1996 600,004 232,800 38,556 106,747 1,191,300 -- 46,787 W. R. Cook(3,4) Former co-Chief Executive 1998 145,833 -- -- 2,966,994 500,000 -- -- Officer and Vice Chairman V. J. Corbo 1998 494,273 320,000 90,493 2,367,602 -- -- 93,048 President and Chief 1997 433,334 550,000 43,064 1,306,153 150,000 -- 66,061 Operating Officer 1996 298,751 145,000 42,357 27,351 356,000 -- 63,000 G. MacKenzie 1998 271,670 200,000 19,514 -- 160,000 -- 37,581 Sr. Vice President and 1997 260,004 468,000 4,043 607,960 -- 608,393 23,591 Chief Financial Officer 1996 242,501 72,000 7,101 14,111 245,000 -- 21,634 D. W. DiDonna 1998 260,402 120,000 11,260 -- 181,375 -- 7,855 Sr. Vice President and 1997 226,984 190,000 2,421 -- 48,125 -- 7,366 General Manager, 1996 185,430 67,475 -- 11,568 39,000 -- 7,450 Pulp and Paper Division H. J. Tucci 1998 245,850 185,000 18,707 50,083 175,000 -- 27,369 Sr. Vice President 1997 235,020 142,515 26,418 17,050 50,000 -- 18,601 Corporate Development 1996 220,450 95,000 -- 95,252 37,500 -- 19,459 - -----------------------------------------------------------------------------------------------------------------------------------
(1) These values are determined by multiplying the number of shares of restricted stock awarded by the closing market price of Hercules' common stock on the date of grant and subtracting the consideration, if any, paid by the executive officer. Dividends may be paid on a current basis or accrued. This column also includes the matching grant against the irrevocable purchase election for Dr. Corbo. The number and value (determined by taking the number of shares of restricted stock multiplied by the year-end closing market price, $27.25, net of any consideration paid) of aggregate restricted stock holdings is shown below. Included in the chart are restricted shares that each executive officer purchased under the terms of the Hercules Long-Term Incentive Compensation Plan. The aggregate amount paid for restricted shares by executive officers was $8,353,101.
(2) MAJOR COMPONENTS OF ALL OTHER COMPENSATION INCLUDE: DIVIDEND & AGGREGATE RESTRICTED COMPANY MATCH INTEREST CREDITS PREMIUM PAID SHARES NET VALUE (DEFINED CONTRIBUTION PLANS) ON STOCK OPTIONS (LIFE INSURANCE) - ----------------------------------------------------------------------------------------------------------------------------------- R. K. Elliott 193,258 $2,319,242 $60,225 -- $19,945 W. R. Cook 93,818 2,556,540 -- -- -- V. J. Corbo 147,757 2,849,233 27,461 $49,686 15,901 G. MacKenzie 32,395 351,552 19,679 13,147 4,755 D. W. DiDonna 3,103 0 4,800 -- 3,055 H. J. Tucci 24,260 44,962 12,951 5,679 8,739 - -----------------------------------------------------------------------------------------------------------------------------------
(3) Effective January 4, 1999, Mr. Cook resigned as co-chief executive officer and vice chairman. Salary reflects period from October 15, 1998 to year-end. (4) The grant price of Mr. Cook's restricted shares is the average of the fair market value of Hercules common stock during the five trading days immediately prior to October 15, 1998. 23 25 [HERCULES LOGO] Option Grants in Last Fiscal Year
NO. OF SECURITIES PERCENT OF TOTAL UNDERLYING OPTIONS GRANTED EXERCISE OR BASE EXPIRATION GRANT DATE NAME OPTIONS GRANTED TO EMPLOYEES PRICE ($/SH) DATE VALUE(1) - ---------------------------------------------------------------------------------------------------------------------------- R. K. Elliott 300,000(3) 7.9% $25.56250 9/1/2008 $1,954,020 W. R. Cook 500,000(5) 13.1% 32.4375 1/5/2004 3,429,300 V. J. Corbo -- -- -- -- -- G. MacKenzie 160,000(3,4) 4.2% 25.56250 9/1/2008 1,042,144 D. W. DiDonna 26,000(2) 47.81250 5/5/2008 334,812 29,375(5) 4.7% 47.81250 5/5/2008 325,595 126,000(3,4) 25.56250 9/1/2008 820,688 H. J. Tucci 24,000(2) 47.81250 5/5/2008 309,058 27,000(5) 4.6% 47.81250 5/5/2008 299,271 124,000(3,4) 25.56250 9/1/2008 807,662
(1) The Black-Scholes option-pricing model was used to determine the fair value of employee stock options as of the date of grant. No adjustments for risk of forfeiture have been made. Significant assumptions are as follows:
Regular Performance Options(3) Options(4) ---------- ---------- Dividend yield 3.0% 3.0% Risk-free interest rate 5.2% 4.6% Expected life 8 yrs. 5 yrs. Expected volatility 23.4% 24.6%
(2) Vesting schedule is as follows: 40% on May 5, 1999; 40% on May 5, 2000; and 20% on May 7, 2001. (3) Vesting schedule is as follows: 40% on August 31, 1999; 40% on August 31, 2000; and 20% on August 31, 2001. (This vesting schedule applies to 60,000 options for Mr. MacKenzie; 26,000 options for Mr. DiDonna, and 24,000 options for Mr. Tucci.) (4) Vesting schedule is as follows: 20% on August 31, 1999; 30% on August 31, 2000; and 50% on August 31, 2001. (This vesting schedule applies to 100,000 options for Messrs. MacKenzie, DiDonna, and Tucci.) (5) Performance accelerated stock options (target and outstanding) become exercisable upon the achievement of predetermined performance goals. If goals are not achieved, the options become exercisable at 9-1/2 years. (Mr. Cook's performance options can be accelerated at any time after October 15, 2001 if Hercules' average stock price, measured over 60 trading dates, exceeds a 12% annual compounded growth rate.) 24 26 SMALL WONDERS, INFINITE POSSIBILITIES [SUNBURST GRAPHIC] Options Exercises and Value Table This table shows the number and value of stock options (exercised and unexercised) for the executive officers during 1998. Value is calculated using the difference between the option exercise price and $27.25 (year-end stock price) multiplied by the number of shares underlying the option.
NO. OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS NO. OF SHARES OPTIONS AT YEAR-END AT YEAR-END ACQUIRED VALUE ---------------------------------------------------------------------------- NAME ON EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE ($) UNEXERCISABLE ($) - ---------------------------------------------------------------------------------------------------------------------------------- R. K. Elliott -- -- 299,000 1,575,800 $1,030,498 $506,250 W. R. Cook -- -- 0 500,000 0 0 V. J. Corbo -- -- 70,000 512,200 327,510 0 G. MacKenzie -- -- 58,620 415,700 46,570 270,000 D. W. DiDonna -- -- 37,800 266,100 0 212,625 H. J. Tucci 2,700 88,708 115,800 261,900 585,000 209,250
Pension Plan Table This table shows the estimated annual pension benefits payable to a covered participant at normal retirement age under Hercules' qualified Pension Plan, as well as non-qualified supplemental benefits, based on the stated renumeration and years of service with Hercules and its subsidiaries.
YEARS OF SERVICE ------------------------------------------------------------------------------------------- RENUMERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS - ----------------------------------------------------------------------------------------------------------------- $ 250,000 $ 57,948 $ 77,264 $ 96,580 $115,896 $ 135,212 300,000 69,948 93,264 116,580 139,896 163,212 400,000 93,948 125,264 156,580 187,896 219,212 450,000 105,948 141,264 176,580 211,896 247,212 500,000 117,948 157,264 196,580 235,896 275,212 600,000 141,948 189,264 236,580 283,896 331,212 700,000 165,948 221,264 276,580 331,896 387,212 800,000 189,948 253,264 316,580 379,896 443,212 1,000,000 237,948 317,264 396,580 475,896 555,212 1,500,000 357,948 477,264 596,580 715,896 835,212 2,000,000 477,948 637,264 796,580 955,896 1,115,212 - ----------------------------------------------------------------------------------------------------------------
Annual contributions by Hercules to the Pension Plan, if required, are determined by an independent actuary, and no amount is attributed to an individual employee. Due to the funded status of the Pension Plan, there were no Hercules contributions in 1998. Except in special cases, the aggregate retirement benefit, under both the qualified and nonqualified plans, is a monthly amount determined by taking the sum of 1) 1.2% of the employee's average monthly earnings (based on the highest five consecutive calendar years during the last ten calendar years of employment) up to one-half the Social Security Tax Base ($68,400 in 1998) and 2) 1.6% of the employee's average monthly earnings (as determined above) in excess of one-half of the Social Security Tax Base, multiplied by the employee's total years and months of credited service. For this purpose, "average monthly earnings" consist of salary plus annual management incentive or bonus compensation. For Messrs. Elliott, Corbo, MacKenzie, DiDonna, and Tucci, compensation used for calculating retirement income benefits consists of the highest five consecutive years of average monthly earnings. These amounts for 1998 are shown under the "Salary" and "Bonus" columns of the Summary Compensation Table. The estimated credited years of service for Messrs. Elliott, Corbo, MacKenzie, DiDonna and Tucci are 17, 29, 19, 18, and 17, respectively. The amounts reflected in this chart may be reduced due to voluntary elections made under the Long-Term Incentive Compensation Plan to exchange nonqualified pension rights for discounted restricted stock. 25 27 [HERCULES LOGO] ANNEX A Employment Contracts And Termination Of Employment and Change-In-Control Arrangements WILLIAM R. COOK Following the acquisition of BetzDearborn, Mr. Cook was appointed vice chairman of the Board and co-chief executive officer of Hercules, effective October 15, 1998 (the "Effective Date"). His initial base salary was $700,000. The agreement also provided for subsequent increases in base salary and for bonus targets, which will not apply due to Mr. Cook's resignation from Hercules. As described in the Compensation Committee Report, Mr. Cook received a grant of 93,818 restricted shares of Hercules common stock, vesting in three equal installments at the end of the 8th, 16th and 24th month following the Effective Date. Accelerated vesting occurs as follows: - - Mr. Cook's employment is terminated by Hercules without cause; - - He resigns for good reason; - - Upon his death or disability; In the event that the stock price declines in value upon vesting, additional shares of common stock will be granted. Pursuant to his employment agreement, Mr. Cook purchased 59,458 shares of Hercules common stock to comply with his stock ownership guidelines. Mr. Cook also received (in lieu of all options that would otherwise be granted to him under Hercules' plans for the three years after the Effective Date) a grant of 500,000 performance accelerated stock options on the Effective Date; (The 250,000 options that Mr. Cook was scheduled to receive on September 30, 1999, and on June 30, 2000 were forfeited due to his resignation from Hercules). Mr. Cook will receive pension benefits unreduced due to age or service under BetzDearborn's qualified and nonqualified pension plans, and fringe benefits comparable to those provided to Mr. Elliott. Mr. Cook's annual pension is $525,571. Pursuant to Mr. Cook's employment agreement, he is receiving severance pay equal to three times his salary and target bonus. VINCENT J. CORBO In anticipation of the acquisition of BetzDearborn, Dr. Corbo was confirmed as president and chief operating officer. The terms and conditions of his employment include cash compensation consisting of: - - A base salary of $550,000 or no less than 75% of the highest annualized rate in effect for the chief executive officer; - - A bonus target of 75% of base salary in 1998, and 85% of base salary in 1999 and future years; and - - A cash award of $1,000,000 if still employed on January 1, 2001. Additionally, Dr. Corbo received a grant of restricted stock units (60,606), valued at $2,000,000, which he will receive if still employed on January 1, 2001. If still employed on January 1, 2001, Dr. Corbo will earn the right to an enhancement of pension benefit when he retires. This enhancement includes three additional years of service and as many additional years of age as necessary to attain age 60 for purposes of calculating pension benefits. Finally, performance options granted under the Long-Term Incentive Compensation Plan in 1996 and 1997 will deem to be vested if he is still employed on January 1, 2001. CHANGE IN CONTROL AGREEMENTS Since 1986, Hercules has entered into Change in Control Agreements with senior executives, which provide for the continuation of salary and certain benefits for a maximum period of three years after a change in control. The provisions of these amendments have been reviewed and amended by Hercules' Compensation Committee to reflect contemporary practices and to maintain the competitiveness of the benefit. As of January 1, 1999, Hercules entered into agreements with Messrs. Elliott, Corbo, MacKenzie, DiDonna, and Tucci that become operative only upon a change in control or other specified event. For purposes of these agreements, a change in control occurs if: - - Any person, entity, or group (with certain exceptions) becomes the beneficial owner of 20% or more of the outstanding shares of Hercules common stock; or - - There is a change in a majority of the Board during any two-year period, other than by election or nomination by a vote of two-thirds of the Board members as of the beginning of the period; or - - Hercules' shareholders approve a merger, consolidation, or share exchange resulting in our shareholders owning less than 40% of the combined voting power of the surviving corporation following the transaction. 26 28 SMALL WONDERS, INFINITE POSSIBILITIES [STARBURST LOGO] Following a change in control, Hercules will continue to employ the executive for a maximum period of three years (or earlier if the executive reaches age 65 prior to the end of the three-year period) in substantially the same position, substantially the same compensation and benefits. If the executive's employment is terminated by Hercules (other than for cause or due to death or disability), or the executive terminates with good reason (as defined in the agreement), he or she receives an amount (payable in monthly installments) equal to current salary and bonus, multiplied by the number of years (including partial years) remaining in the executive's term of employment (but in no event less than one year). In addition, the executive receives compensation for the loss of benefits during the period. Further, the executive: - - Continues to participate in employee benefit plans; - - Becomes fully vested in all outstanding stock options and restricted stock - - Receives credit for three additional years of service for purposes of calculating pension benefits; and, - - To the extent needed for taking an unreduced early retirement, has up to five years added to his or her actual age (up to age 65). If the benefits and amount payable to the executives are subject to the excise tax imposed by the Internal Revenue Code on excess parachute payments, the executive officers will also be entitled to receive an additional payment so that they will receive (on a net basis) the same amount that they would have received absent the applicability of the excise tax. 27 29 [HERCULES LOGO] Hercules Incorporated, established in 1912, is a global manufacturer of chemical specialties used in a variety of home, office, and industrial products. Hercules' focus is on sustainable, long-term growth in shareholder value, driven by new products and continuous improvement in manufacturing costs. Our business segments and key products are: - - Functional Products - Aqualon, for thickeners used in water-based products such as latex paint; - Food Gums, for natural gum ingredients in food and beverages; - - Process Chemicals and Services - Pulp and Paper, for functional and processing aids used in manufacturing paper; - BetzDearborn, for water and industrial process treatment; - - Chemical Specialities - Fibervisions, for fine-denier staple fibers used in disposable hygiene products; - Resins, for hydrocarbon and rosin resins used in adhesives. For more information about Hercules, please visit our web site at www.herc.com - -------------------------------------------------------------------------------- Special thanks to Israel J. Floyd, Carol M. Kelleher, Amy Cohen, Anabel Pichler, and Kevin Murphy at Hercules and Jean Gardner at Bowne of Philadelphia for their contributions to this 1999 Proxy Statement. - -------------------------------------------------------------------------------- 30 THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED "FOR" THE PROPOSALS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. Please mark your votes as [X] indicated in this example. The Board recommends a vote FOR Items 1, 2, and 3 FOR WITHHOLD 1. Election of Directors for a three-year term [ ] [ ] NOMINEES ARE: 01. Vincent J. Corbo, 02. John G. Drosdick, 03. R. Keith Elliott, 04. Gaynor N. Kelley, and 05. Peter McCausland Withhold vote only from - ---------------------------------------- FOR AGAINST ABSTAIN 2. Ratification of PricewaterhouseCoopers LLP as [ ] [ ] [ ] independent accountants FOR AGAINST ABSTAIN 3. Approval of amendments to the Long-Term [ ] [ ] [ ] Incentive Compensation Plan I plan to attend the Annual Meeting. [ ] Signature(s) Date ------------------------------------------- ------------------- Note: Please sign as name appears above. When signing as attorney, executor, administrator, trustee, guardian or officer of a corporation, please give full title. - -------------------------------------------------------------------------------- - FOLD AND DETACH HERE - VOTE BY INTERNET 1. Read the accompanying Proxy Statement and proxy card. 2. Go to website www.http://www.eproxy.com/hpc/ 3. Enter your Control Number located on your proxy card. 4. Follow the online instructions. VOTE BY TELEPHONE 1. Read the accompanying Proxy Statement and proxy card. 2. Call the toll-free number 1-800-840-1208 3. Enter your Control Number located on your proxy card. 4. Follow the voice prompt instructions. YOUR VOTE IS IMPORTANT! DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING BY INTERNET OR TELEPHONE. - -------------------------------------------------------------------------------- ADMISSION TICKET Hercules Incorporated Annual Meeting of Shareholders Thursday, April 29, 1999 11:00 a.m. The Winterthur Museum, Garden & Library Winterthur, Delaware 31 PROXY PROXY/VOTING INSTRUCTION CARD HERCULES INCORPORATED THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints R. Keith Elliott and Richard G. Dahlen, and each of them, acting jointly or 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 29, 1999, at 11:00 A.M. at Wintherthur Museum, Garden & Library, Winterthur, DE, or at any adjournment thereof. The undersigned also hereby revokes previous proxies and acknowledges receipt of Hercules' Notice of the Annual Meeting and Proxy Statement. This card further provides voting instructions for shares held for the undersigned in the Hercules' Dividend Reinvestment Plan and the employee savings plans sponsored by Hercules or any of its subsidiaries. Unless otherwise specified, this proxy will be voted FOR items 1, 2, and 3, and will be voted in the discretion of the proxies on such other matters as may properly come before the meeting or any adjournment thereof. - -------------------------------------------------------------------------------- - FOLD AND DETACH HERE - DIRECTIONS TO WINTERTHUR MUSEUM, GARDEN & LIBRARY [MAP GRAPHIC] 32 VoteDirect Page 1 of 2 HERCULES [CHASEMELLON SHAREHOLDER SERVICES LOGO] [VOTEDIRECT LOGO] GLOSSARY OF PROXY TERMS - ----------------------- ANNUAL REPORT - ------------- PROXY STATEMENT - --------------- PROXY/VOTING INSTRUCTION CARD HERCULES INCORPORATED THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints R. Keith Elliott and Richard G. Dahlen, and each of them, acting jointly or 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 29, 1999, at 11:00 A.M. at Wintherthur Museum, Garden & Library, Winterthur, DE, or at any adjournments thereof. The undersigned also hereby revokes previous proxies and acknowledges receipt of Hercules' Notice of the Annual Meeting and Proxy Statement. This card further provides voting instructions for shares held for the undersigned in the Hercules' Dividend Reinvestment Plan and the employee savings plans sponsored by Hercules or any of its subsidiaries. Unless otherwise specified, this proxy will be voted FOR Items 1, 2, and 3 and will be voted in the discretion of the proxies on such other matters as may properly come before the meeting or any adjournment thereof. - -------------------------------------------------------------------------------- The Board recommends a vote FOR Items 1, 2, and 3. - -------------------------------------------------------------------------------- To vote in accordance with the Board of Directors' recommendations, just submit this blank form; no boxes need to be checked. - -------------------------------------------------------------------------------- 1. Election of Directors for a three-year term: ( )FOR all nominees (except those marked below). ( )WITHHOLD to vote for all nominees. [ ]Vincent J. Corbo [ ]John G. Drosdick [ ]R. Keith Elliott [ ]Gaynor N. Kelley [ ]Peter McCausland - -------------------------------------------------------------------------------- 2. Ratification of PricewaterhouseCoopers LLP as independent accountants. Friday, March 05, 1999 9:05 AM 33 VoteDirect Page 2 of 2 ( )FOR ( )AGAINST ( )ABSTAIN - -------------------------------------------------------------------------------- 3. Approval of Amendments to Long-Term Incentive Compensation Plan ( )FOR ( )AGAINST ( )ABSTAIN - -------------------------------------------------------------------------------- IN THEIR DISCRETION, the proxy holders are authorized to vote upon such other business as may properly come before the meeting or any adjournments thereof. - -------------------------------------------------------------------------------- [ ]As seating is limited to a first come, first served basis, please check this box if you would like an admission ticket to attend the meeting. - -------------------------------------------------------------------------------- Comments: - ---------------------------------------- | | | | | - ---------------------------------------- - -------------------------------------------------------------------------------- To consent to receive the HERCULES INCORPORATED proxy material electronically in the future, provide your e-mail address below: - --------------------------------- | - --------------------------------- - -------------------------------------------------------------------------------- To authorize your vote, click the "Submit Proxy" button. - ------------ Submit Proxy| - ------------ - -------------------------------------------------------------------------------- To change the address of record for your registered shares, please use ChaseMellon Shareholder Services' CHANGE OF ADDRESS FORM. [VOTEDIRECT LOGO] [CHASEMELLON SHAREHOLDER SERVICES LOGO] Copyright 1999 ChaseMellon Shareholder Services, L.L.C. All rights reserved. This site is operated by ChaseMellon Shareholder Services. Friday, March 05, 1999 9:05 AM 34 VoteDirect Page 1 of 2 [HERCULES LOGO] [CHASEMELLON SHAREHOLDER SERVICES LOGO] [VOTEDIRECT LOGO] GLOSSARY OF PROXY TERMS - ----------------------- ANNUAL REPORT - ------------- PROXY STATEMENT - --------------- YOU HAVE VOTED YOUR PROXY IN THE FOLLOWING MANNER: - -------------------------------------------------------------------------------- ON ITEM 1 "ELECTION OF DIRECTORS" YOUR VOTE WAS: FOR ALL NOMINEES. - -------------------------------------------------------------------------------- ON ITEM 2 "RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS" YOUR VOTE WAS: FOR. - -------------------------------------------------------------------------------- ON ITEM 3 "APPROVAL OF AMENDMENTS TO LONG-TERM INCENTIVE COMPENSATION PLAN" YOUR VOTE WAS: FOR. - -------------------------------------------------------------------------------- If this is NOT how you intended to vote, please use the back function of your browser to return to the card and correct your vote. If this IS how you intended to vote, your vote has been recorded and there is no need to return your paper proxy card. Thank you for your attention, Sincerely, HERCULES INCORPORATED [VOTEDIRECT LOGO] [CHASEMELLON SHAREHOLDER SERVICES LOGO] Copyright 1999 ChaseMellon Shareholder Services, L.L.C. All rights reserved. This site is operated by ChaseMellon Shareholder Services. Friday, March 05, 1999 9:08 AM 35 PROXY SERVICES CORPORATION / AUTOMATED VOICE LINK INC. UNIVERSAL SCRIPT FOR REGISTERED SHAREOWNER TELEPHONE VOTING - -------------------------------------------------------------------------------- SHAREOWNER HEARS THIS SCRIPT - -------------------------------------------------------------------------------- Speech 1* Welcome. Please enter the control number located in the lower right hand corner of the form. - -------------------------------------------------------------------------------- Speech 2 To vote as the name of the company Board recommends Press 1 now - -------------------------------------------------------------------------------- Speech 2A You voted as the Board recommended. If correct, press 1. If incorrect, Press 0. - -------------------------------------------------------------------------------- Speech 3 To vote on each proposal separately, press 0 now. - -------------------------------------------------------------------------------- Speech 4 Proposal 1: To vote FOR all nominees, Press 1 To WITHHOLD for all nominees, Press 9 To WITHHOLD for an individual nominee, press 0 - -------------------------------------------------------------------------------- Speech 5 Enter the two digit number that appears next to the nominee you DO NOT wish to vote for. - -------------------------------------------------------------------------------- Speech 5A Press 1 to withhold for another nominee or Press 0 if you have completed voting for Directors. - -------------------------------------------------------------------------------- Speech 6 Proposal 2: To vote FOR, Press 1; AGAINST, Press 9, ABSTAIN, Press 0 - -------------------------------------------------------------------------------- Speech 7 Proposal 3: To vote FOR, Press 1; AGAINST, Press 9, ABSTAIN, Press 0 - -------------------------------------------------------------------------------- Speech 7A You voted as follows: Proposal 1: For ALL or Withhold All OR for ALL Except... Proposal 2: For, Against, Abstain and so on. If this is correct, Press 1 now; if incorrect, press 0 - -------------------------------------------------------------------------------- Closing A Thank you for voting - -------------------------------------------------------------------------------- Closing B** Your vote has been canceled. Please try again, or mark, sign and return your proxy. - -------------------------------------------------------------------------------- Speech 8*** If you do NOT wish to receive an Annual Report for this current account, Press 1 now. - -------------------------------------------------------------------------------- Speech 9*** If you plan to attend the Annual Meeting, Press 1 - if not Press 0 - -------------------------------------------------------------------------------- *Note: Speech 1 wording for location of control number can be changed. **Closing B - If shareholder indicates their vote was incorrect. ***Optional to save future production and postage costs; or to obtain attendance information. TTTV universal script 9-16-98 -----END PRIVACY-ENHANCED MESSAGE-----