EXHIBIT C
MINUTES OF HERCULES
BOARD OF DIRECTORS MEETING
February 11, 2002
DISCUSSION DRAFT
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[Redacted]
BD:0202:1 PROPOSED WATER BUSINESS DIVESTITURE
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Dr. Joyce introduced the topics for discussion, described the agenda for
the Meeting, and reviewed the negotiations to date with GE in connection with
the proposed divestiture of the Company's water business. Dr. Joyce then
discussed the topics addressed in the management presentation materials that had
been distributed previously to the Board of Directors (BD:0211:265). He
commented on "The Chemical Cycle", "State of Hercules Business", "Gross Profit
Trend Analysis", and "Hercules' Management Projections". Dr. Joyce also
discussed "Hercules Financials -- Strategic Plan", "Hercules Financials -- Bank
Plan", and "Hercules Financials -- Historical Trend Plan".
MR. HEYMAN EXPRESSED HIS OPINION THAT THE DATA BEING PRESENTED BY DR. JOYCE
WAS UNDULY PESSIMISTIC AND A DISCUSSION ENSUED BETWEEN DR. JOYCE AND MR. HEYMAN
CONCERNING THEIR DIFFERENCES OF OPINION.
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Mr. [Redacted] discussed the impact of the refinancing on Hercules. During
his discussion, he covered "Observations on Potential Trading Value", "Potential
Equity Issuance", and "Key Issues for Hercules".
Mr. [Redacted] then discussed the divestiture of the Water Business versus
the alternative of keeping the Water Business and refinancing Company
indebtedness. During his discussion, he covered the "Implications of Selling the
Water Business".
Dr. Joyce then discussed "Summary and Recommendations". He recommended that
the Company sell the Water Business, continue its cost reduction program, and be
open to value-enhancing "bolt-on" acquisitions. DR. JOYCE STRESSED THAT THE
COMPANY IS NO LONGER IN A CRISIS MODE AND THAT THE COMPANY CAN DO WHATEVER THE
BOARD DECIDES TO DO. He stated that he would like to sell the BetzDearborn water
business, pay down debt, and then run the remainder of the Company to reduce
costs and increase shareholder value. In response to a question from Mr.
Drosdick, Dr. Joyce indicated that under the proposal before the Board of
Directors, the Company would retain approximately one-third of the business it
purchased in 1998 with the acquisition of Betz-Dearborn as a public company.
Mr. Heyman stated that he does not believe the proposed transaction makes
sense and requested time to address the Board of Directors. Mr. Heyman's view
was that with the sale of the water business, the Company would forfeit
significant upside potential. He stated that the transaction was substantially
earnings dilutive and that BetzDearborn represented the Company's largest and
most stable asset. He stated that transaction multiples are at historic lows and
that most economists are predicting a turnaround in the
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general economy. He stated his opinion that our competitors are experiencing
difficulty and that the sale of BetzDearborn will leave Hercules with more
cyclical businesses. According to Mr. Heyman, the Company's remaining businesses
are in poor shape and its remaining management is lackluster. He stated that
size is an important factor and that making the corporation smaller does not
create value. He stated his belief that any "trend line approach" is flawed and
that Dr. Joyce's view of the future of the chemical industry was overly
pessimistic. Mr. Heyman then stated his belief that at least two major
shareholders, in addition to ISP, were opposed to the sale. Dr. Joyce stated his
disagreement with Mr. Heyman's position (and the basis for his disagreement) and
reminded Mr. Heyman that the most conservative case that the Company had set
forth compares well to the published views of analysts for similar companies.
[Redacted]
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