**EXHIBIT 10.27**

** **

**EMPLOYMENT AGREEMENT**

** **

AGREEMENT, dated as of the 24th****day of August,****2000 (this “Agreement”),by and between Hercules Incorporated, a Delaware corporation (the “Company”),and Israel Floyd****(the “Executive”).

 

WHEREAS, the Board of Directors of the Company (the “Board”),has determined that it is in the best interests of the Company and itsshareholders/stockholders to assure that the Company will have the continueddedication of the Executive, notwithstanding the possibility, threat or occurrenceof a Change of Control (as defined herein). The Board believes it is imperative to diminish the inevitabledistraction of the Executive by virtue of the personal uncertainties and riskscreated by a pending or threatened Change of Control and to encourage theExecutive’s full attention and dedication to the current Company and in theevent of any threatened or pending Change of Control, and to provide theExecutive with compensation and benefits arrangements upon a Change of Controlthat ensure that the compensation and benefits expectations of the Executivewill be satisfied and that are competitive with those of othercorporations.  Therefore, in order toaccomplish these objectives, the Board has caused the Company to enter intothis Agreement.

 

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

# **Section 1.****                                         ****Certain Definitions**.  (a) “Effective Date” means thefirst date during the Change of Control Period (as defined herein) on which aChange of Control occurs. Notwithstanding anything in this Agreement to the contrary, if a Changeof Control occurs and if the Executive’s employment with the Company isterminated prior to the date on which the Change of Control occurs, and if itis reasonably demonstrated by the Executive that such termination of employment(1) was at the request of a third party that has taken steps reasonablycalculated to effect a Change of Control or (2) otherwise arose in connectionwith or anticipation of a Change of Control, then “Effective Date” means thedate immediately prior to the date of such termination of employment.

#  

## (b) “Change of ControlPeriod” means the period commencing on the date hereof and ending on the thirdanniversary of the date hereof; *provided*, *however*, that, commencing on the date one year after thedate hereof, and on each annual anniversary of such date (such date and eachannual anniversary thereof, the “Renewal Date”), unless previously terminated,the Change of Control Period shall be automatically extended so as to terminatethree years from such Renewal Date, unless, at least 60 days prior to theRenewal Date, the Company shall give notice to the Executive that the Change ofControl Period shall not be so extended.

##  

## (c) “Affiliated Company”means any company controlled by, controlling or under common control with theCompany.

##  

## (d) “Change of Control”means:

 

----

 

#### (1)                                  Theacquisition by any individual, entity or group (within the meaning of Section13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “ExchangeAct”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3promulgated under the Exchange Act) of 20% or more of either (A) thethen-outstanding shares of common stock of the Company (the “OutstandingCompany Common Stock”) or (B) the combined voting power of the then-outstandingvoting securities of the Company entitled to vote generally in the election ofdirectors (the “Outstanding Company Voting Securities”); *provided*,*however*, that, for purposes of thisSection 1(d), the following acquisitions shall not constitute a Change ofControl:  (i) any acquisition directlyfrom the Company, (ii) any acquisition by the Company, (iii) any acquisition byany employee benefit plan (or related trust) sponsored or maintained by the Companyor any Affiliated Company or (iv) any acquisition by any corporation pursuantto a transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and1(d)(3)(C).

####  

#### (2)                                  Individualswho, as of the date hereof, constitute the Board (the “Incumbent Board”) ceasefor any reason to constitute at least a majority of the Board; *provided*, *however*, thatany individual becoming a director subsequent to the date hereof whoseelection, or nomination for election by the Company’s shareholders, wasapproved by a vote of at least a majority of the directors then comprising theIncumbent Board shall be considered as though such individual were a member ofthe Incumbent Board, but excluding, for this purpose, any such individual whoseinitial assumption of office occurs as a result of an actual or threatenedelection contest with respect to the election or removal of directors or otheractual or threatened solicitation of proxies or consents by or on behalf of aPerson other than the Board.

####  

#### (3)                                  Approval bythe shareholders of the Company of a reorganization, merger, consolidation orsale or other disposition of all or substantially all of the assets of theCompany (a “Business Combination”), in each case, unless, following suchBusiness Combination, (A) all or substantially all of the individuals andentities that were the beneficial owners of the Outstanding Company CommonStock and the Outstanding Company Voting Securities immediately prior to suchBusiness Combination beneficially own, directly or indirectly, 60% or more ofthe then-outstanding shares of common stock and the combined voting power ofthe then-outstanding voting securities entitled to vote generally in theelection of directors, as the case may be, of the corporation resulting fromsuch Business Combination (including, without limitation, a corporation that,as a result of such transaction, owns the Company or all or substantially allof the Company’s assets either directly or through one or more subsidiaries) insubstantially the same proportions as their ownership immediately prior to suchBusiness Combination of the Outstanding Company Common Stock and theOutstanding Company Voting Securities, as the case may be, (B) no Person(excluding any corporation resulting from such Business Combination or anyemployee benefit plan (or related trust) of the Company or such corporationresulting from such Business Combination) beneficially owns, directly orindirectly, 20% or more of, respectively, the then-outstanding shares of commonstock of the corporation resulting from such

 

2

----

 

#### Business Combination orthe combined voting power of the then-outstanding voting securities of suchcorporation, except to the extent that such ownership existed prior to theBusiness Combination, and (C) at least a majority of the members of the boardof directors of the corporation resulting from such Business Combination weremembers of the Incumbent Board at the time of the execution of the initialagreement or of the action of the Board providing for such Business Combination;or

####  

#### (4)                                  Approval bythe shareholders of the Company of a complete liquidation or dissolution of theCompany.

####  

## (e) “Alternative Changeof Control” means a Change of Control as defined above, except that the phrase “Approvalby the shareholder of the Company” in clause (3) of Section 1(d) shall bedeemed to read “Consummation.”

##  

# **Section 2.****                                         ****Employment Period**.  The Company hereby agrees tocontinue the Executive in its employ, subject to the terms and conditions ofthis Agreement, for the period commencing on the Effective Date and ending onthe third anniversary of the Effective Date (the “Employment Period”).  The Employment Period shall terminate uponthe Executive’s termination of employment for any reason.

#  

# **Section 3.****                                         ****Terms of Employment****.**  (a)  **Position and Duties.**  (1) During the Employment Period, (A) the Executive’s position (includingstatus, offices, titles and reporting requirements), authority, duties andresponsibilities shall be at least commensurate in all material respects withthe most significant of those held, exercised and assigned at any time duringthe 120-day period immediately preceding the Effective Date and (B) theExecutive’s services shall be performed at the office where the Executive wasemployed immediately preceding the Effective Date or at any other location lessthan 30 miles from such office.

#  

### (2)                                  During theEmployment Period, and excluding any periods of vacation and sick leave towhich the Executive is entitled, the Executive agrees to devote reasonableattention and time during normal business hours to the business and affairs ofthe Company and, to the extent necessary to discharge the responsibilitiesassigned to the Executive hereunder, to use the Executive’s reasonable bestefforts to perform faithfully and efficiently such responsibilities.  During the Employment Period, it shall not bea violation of this Agreement for the Executive to (A) serve on corporate,civic or charitable boards or committees, (B) deliver lectures, fulfillspeaking engagements or teach at educational institutions and (C) managepersonal investments, so long as such activities do not significantly interferewith the performance of the Executive’s responsibilities as an employee of theCompany in accordance with this Agreement. It is expressly understood and agreed that, to the extent that any suchactivities have been conducted by the Executive prior to the Effective Date,the continued conduct of such activities (or the conduct of activities similarin nature and scope thereto) subsequent to the Effective Date shall notthereafter be deemed to interfere with the performance of the Executive’sresponsibilities to the Company.

 

3

----

 

## (b) **Compensation.**  (1)  **Base Salary. **During the Employment Period, theExecutive shall receive an annual base salary (the “Annual Base Salary”) at anannual rate at least equal to 12 times the highest monthly base salary paid orpayable, including any base salary that has been earned but deferred, to theExecutive by the Company and the Affiliated Companies in respect of the12-month period immediately preceding the month in which the Effective Dateoccurs.  The Annual Base Salary shall bepaid at such intervals as the Company pays executive salaries generally.  During the Employment Period, the Annual BaseSalary shall be reviewed at least annually, beginning no more than 12 monthsafter the last salary increase awarded to the Executive prior to the EffectiveDate.  Any increase in the Annual BaseSalary shall not serve to limit or reduce any other obligation to the Executiveunder this Agreement.  The Annual BaseSalary shall not be reduced after any such increase and the term “Annual BaseSalary” shall refer to the Annual Base Salary as so increased.

##  

### (2)                                  **Annual Bonus****.**  In addition to the Annual Base Salary, theExecutive shall be awarded, for each fiscal year ending during the EmploymentPeriod, an annual bonus (the “Annual Bonus”) in cash at least equal to theExecutive’s Recent Target Bonus, as defined in the next sentence.  The “Recent Target Bonus” means the AnnualBase Salary times a percentage equal to the percentage of base salary mostrecently established, before the Effective Date, for purposes of determiningthe Executive’s target bonus under the Company’s Management IncentiveCompensation Plan or any predecessor or successor plan (the “MICP”).  Each such Annual Bonus shall be paid no laterthan the end of the third month of the fiscal year next following the fiscalyear for which the Annual Bonus is awarded, unless the Executive shall elect todefer the receipt of such Annual Bonus. Any bonus paid to the Executive under the MICP as a result of the Changeof Control (a “Change of Control Bonus”) shall be taken into account indetermining whether the requirements of this Section 3(b)(2) have been met withrespect to the fiscal year in which the Change of Control occurs.

###  

### (3)                                  **Incentive, Savings and Retirement Plans****. **During theEmployment Period, the Executive shall be entitled to participate in all cashincentive, equity incentive, savings and retirement plans, practices, policies,and programs applicable generally to other peer executives of the Company andthe Affiliated Companies, but in no event shall such plans, practices, policiesand programs provide the Executive with incentive opportunities (measured withrespect to both regular and special incentive opportunities, to the extent, ifany, that such distinction is applicable), savings opportunities and retirementbenefit opportunities, in each case, less favorable, in the aggregate, than themost favorable of those provided by the Company and the Affiliated Companiesfor the Executive under such plans, practices, policies and programs as ineffect at any time during the 120-day period immediately preceding the EffectiveDate or, if more favorable to the Executive, those provided generally at anytime after the Effective Date to other peer executives of the Company and theAffiliated Companies.  The Executiveshall also continue to be entitled to any supplemental pension benefits towhich he may be entitled pursuant to any individual agreement with the companyor any Affiliated Companies (collectively, “Enhanced Pension Benefits”).

###  

### (4)                                  **Welfare Benefit Plans****. **During the Employment Period, the Executive and/or the Executive’sfamily, as the case may be, shall be eligible for participation in and shallreceive

 

4

----

 

### allbenefits under welfare benefit plans, practices, policies and programs providedby the Company and the Affiliated Companies (including, without limitation,medical, prescription, dental, disability, employee life, group life,accidental death and travel accident insurance plans and programs) to theextent applicable generally to other peer executives of the Company and theAffiliated Companies, but in no event shall such plans, practices, policies andprograms provide the Executive with benefits that are less favorable, in theaggregate, than the most favorable of such plans, practices, policies andprograms in effect for the Executive at any time during the 120-day periodimmediately preceding the Effective Date or, if more favorable to theExecutive, those provided generally at any time after the Effective Date toother peer executives of the Company and the Affiliated Companies.

###  

### (5)                                  **Expenses****. **During theEmployment Period, the Executive shall be entitled to receive promptreimbursement for all reasonable expenses incurred by the Executive inaccordance with the most favorable policies, practices and procedures of theCompany and the Affiliated Companies in effect for the Executive at any timeduring the 120-day period immediately preceding the Effective Date or, if morefavorable to the Executive, as in effect generally at any time thereafter withrespect to other peer executives of the Company and the Affiliated Companies.

###  

### (6)                                  **Fringe Benefits****. **During the Employment Period, the Executive shall beentitled to fringe benefits, including, without limitation, tax and financialplanning services, payment of club dues, and, if applicable, use of anautomobile and payment of related expenses, in accordance with the mostfavorable plans, practices, programs and policies of the Company and theAffiliated Companies in effect for the Executive at any time during the 120-dayperiod immediately preceding the Effective Date or, if more favorable to theExecutive, as in effect generally at any time thereafter with respect to otherpeer executives of the Company and the Affiliated Companies.

###  

### (7)                                  **Office and Support Staff****. **During the Employment Period, the Executive shall beentitled to an office or offices of a size and with furnishings and otherappointments, and to exclusive personal secretarial and other assistance, atleast equal to the most favorable of the foregoing provided to the Executive bythe Company and the Affiliated Companies at any time during the 120-day periodimmediately preceding the Effective Date or, if more favorable to theExecutive, as provided generally at any time thereafter with respect to other peerexecutives of the Company and the Affiliated Companies.

###  

### (8)                                  **Vacation****. **During theEmployment Period, the Executive shall be entitled to paid vacation inaccordance with the most favorable plans, policies, programs and practices ofthe Company and the Affiliated Companies as in effect for the Executive at anytime during the 120-day period immediately preceding the Effective Date or, ifmore favorable to the Executive, as in effect generally at any time thereafterwith respect to other peer executives of the Company and the AffiliatedCompanies.

###  

# **Section 4.****                                         ****Termination of Employment****.**  (a)  **Death or Disability.**  The Executive’s employment shall terminateautomatically if the Executive dies during the Employment Period.  If the Company determines in good faith thatthe Disability (as defined herein) of the

 

5

----

 

# Executive has occurred during the Employment Period(pursuant to the definition of “Disability”), it may give to the Executivewritten notice in accordance with Section 11(b) of its intention to terminatethe Executive’s employment.  In suchevent, the Executive’s employment with the Company shall terminate effective onthe 30th day after receipt of such notice by the Executive (the “DisabilityEffective Date”), *provided*that, within the 30 daysafter such receipt, the Executive shall not have returned to full-timeperformance of the Executive’s duties.  “Disability”means the absence of the Executive from the Executive’s duties with the Companyon a full-time basis for 180 consecutive business days as a result ofincapacity due to mental or physical illness that is determined to be total andpermanent by a physician selected by the Company or its insurers and acceptableto the Executive or the Executive’s legal representative.

#  

## (b) **Cause. **The Company may terminate the Executive’semployment during the Employment Period for Cause.  “Cause” means:

##  

#### (1)                                  the willfuland continued failure of the Executive to perform substantially the Executive’sduties (as contemplated by Section 3(a)(1)(A)) with the Company or anyAffiliated Company (other than any such failure resulting from incapacity dueto physical or mental illness or following the Executive’s delivery of a Noticeof Termination for Good Reason), after a written demand for substantialperformance is delivered to the Executive by the Board or the Chief ExecutiveOfficer of the Company that specifically identifies the manner in which theBoard or the Chief Executive Officer of the Company believes that the Executivehas not substantially performed the Executive’s duties, or

####  

#### (2)                                  the willfulengaging by the Executive in illegal conduct or gross misconduct that ismaterially and demonstrably injurious to the Company.

####  

For purposes of this Section 4(b), no act, or failureto act, on the part of the Executive shall be considered “willful” unless it isdone, or omitted to be done, by the Executive in bad faith or withoutreasonable belief that the Executive’s action or omission was in the bestinterests of the Company.  Any act, orfailure to act, based upon authority given pursuant to a resolution dulyadopted by the Board or upon the instructions of the Chief Executive Officer ofthe Company or a senior officer of the Company or based upon the advice ofcounsel for the Company shall be conclusively presumed to be done, or omittedto be done, by the Executive in good faith and in the best interests of theCompany.  The cessation of employment ofthe Executive shall not be deemed to be for Cause unless and until there shallhave been delivered to the Executive a copy of a resolution duly adopted by theaffirmative vote of not less than three-quarters of the entire membership ofthe Board (excluding the Executive, if the Executive is a member of the Board)at a meeting of the Board called and held for such purpose (after reasonablenotice is provided to the Executive and the Executive is given an opportunity,together with counsel for the Executive, to be heard before the Board), findingthat, in the good faith opinion of the Board, the Executive is guilty of theconduct described in Section 4(b)(1) or 4(b)(2), and specifying the particularsthereof in detail.

 

6

----

 

## (c) **GoodReason. **The Executive’semployment may be terminated by the Executive for Good Reason or by theExecutive voluntarily without Good Reason. “Good Reason” means:

##  

#### (1)                                  theassignment to the Executive of any duties inconsistent in any respect with theExecutive’s position (including status, offices, titles and reportingrequirements), authority, duties or responsibilities as contemplated by Section3(a), or any other diminution in such position, authority, duties orresponsibilities (whether or not occurring solely as a result of the Company’sceasing to be a publicly traded entity), excluding for this purpose anisolated, insubstantial and inadvertent action not taken in bad faith and thatis remedied by the Company promptly after receipt of notice thereof given bythe Executive;

####  

#### (2)                                  any failureby the Company to comply with any of the provisions of Section 3(b), other thanan isolated, insubstantial and inadvertent failure not occurring in bad faithand that is remedied by the Company promptly after receipt of notice thereofgiven by the Executive;

####  

#### (3)                                  the Company’srequiring the Executive (i) to be based at any office or location other than asprovided in Section 3(a)(1)(B), (ii) to be based at a location other than theprincipal executive offices of the Company if the Executive was employed atsuch location immediately preceding the Effective Date, or (iii) to travel onCompany business to a substantially greater extent than required immediatelyprior to the Effective Date;

####  

#### (4)                                  anypurported termination by the Company of the Executive’s employment otherwise thanas expressly permitted by this Agreement; or

####  

#### (5)                                  any failureby the Company to comply with and satisfy Section 10(c).

####  

For purposes of thisSection 4(c), any good faith determination of Good Reason made by the Executiveshall be conclusive.  The Executive’smental or physical incapacity following the occurrence of an event describedabove in clauses (1) through (5) shall not affect the Executive’s ability toterminate employment for Good Reason.

 

## (d) **Notice ofTermination. **Anytermination by the Company for Cause, or by the Executive for Good Reason,shall be communicated by Notice of Termination to the other party hereto givenin accordance with Section 11(b).  “Noticeof Termination” means a written notice that (1) indicates the specifictermination provision in this Agreement relied upon, (2) to the extentapplicable, sets forth in reasonable detail the facts and circumstances claimedto provide a basis for termination of the Executive’s employment under theprovision so indicated, and (3) if the Date of Termination (as defined herein)is other than the date of receipt of such notice, specifies the Date ofTermination (which Date of Termination shall be not more than 30 days after thegiving of such notice).  The failure bythe Executive or the Company to set forth in the Notice ofTermination any fact or circumstance that contributes to a showing of GoodReason or Cause shall not waive any right of the Executive or the

 

7

----

 

Company, respectively, hereunder or preclude the Executive or theCompany, respectively, from asserting such fact or circumstance in enforcingthe Executive’s or the Company’s respective rights hereunder.

 

## (e) **Date ofTermination. **“Date ofTermination” means (1) if the Executive’s employment is terminated by theCompany for Cause, or by the Executive for Good Reason, the date of receipt ofthe Notice of Termination or any later date specified in the Notice ofTermination, (which date shall not be more than 30 days after the giving of suchnotice), as the case may be, (2) if the Executive’s employment is terminated bythe Company other than for Cause or Disability, the Date of Termination shallbe the date on which the Company notifies the Executive of such termination,and (3) if the Executive’s employment is terminated by reason of death orDisability, the Date of Termination shall be the date of death of the Executiveor the Disability Effective Date, as the case may be.

##  

# **Section 5.****                                         ****Obligations of the Company upon Termination****.  (a)  Good Reason; Other Than for Cause, Deathor Disability.**  If, during the Employment Period, the Companyterminates the Executive’s employment other than for Cause or Disability or theExecutive terminates employment for Good Reason:

#  

#### (1)                                  the Companyshall pay to the Executive, in a lump sum in cash within 30 days after the Dateof Termination, the aggregate of the following amounts:

####  

##### (A)                              the sum of:(i) the Executive’s Annual Base Salary through the Date of Termination to theextent not theretofore paid; (ii) the product of (x) the higher of (I) theRecent Target Bonus and (II) the Annual Bonus paid or payable, including anybonus or portion thereof that has been earned but deferred (and annualized forany fiscal year consisting of less than 12 full months or during which theExecutive was employed for less than 12 full months), for the most recentlycompleted fiscal year during the Employment Period, if any (such higher amount,the “Highest Annual Bonus”) and (y) a fraction, the numerator of which is thenumber of days in the current fiscal year through the Date of Termination andthe denominator of which is 365; *provided,* thatif the Date of Termination occurs in the same fiscal year as the Change ofControl, then such product shall be reduced (but not below zero) by the amountof any Change of Control Bonus payable to the Executive; and (iii) any accruedvacation pay, in each case, to the extent not theretofore paid (the sum of theamounts described in subclauses (i), (ii) and (iii), the “Accrued Obligations”);

#####  

##### (B)                                the amountequal to the product of (i) three and (ii) the sum of (x) the Executive’sAnnual Base Salary and (y) the Highest Annual Bonus; and

#####  

##### (C)                                an amountequal to the excess of (i) the actuarial equivalent of the benefit under theCompany’s qualified defined benefit retirement plan (the “Retirement Plan”)(utilizing actuarial assumptions no less favorable to the Executive than thosein effect under the Retirement Plan immediately prior to the Effective Date),any excess or supplemental retirement plan in which the

 

8

----

 

##### Executive participates(collectively, the “SERP”) and any Enhanced Pension Benefits that the Executivewould receive if the Executive’s employment had continued for a number of yearsand fractions of years equal to the sum of (I) one or, if greater, the numberof years and fractions of years from the Date of Termination through the thirdanniversary of the Change of Control (the “Continuation Period”) plus (II)three years, and had achieved an age equal to the (x) Executive’s actual age,plus (y) the number of years and fractions of years in the Continuation Period,plus (z) such additional number of years and fractions thereof, as may benecessary for the Executive to be eligible for unreduced early retirementbenefits under the Retirement Plan, the SERP and the Enhanced Pension Benefits(if any), but the number described in this clause (z) shall not exceed five;with the foregoing calculations being made with the assumptions that all accruedbenefits are fully vested, and that the Executive’s compensation during theperiod of assumed continued employment is that required by Sections 3(b)(1) and3(b)(2); over (ii) the actuarial equivalent of the Executive’s actual benefit(paid or payable), if any, under the Retirement Plan, the SERP and the EnhancedPension Benefits (if any) as of the Date of Termination;

#####  

#### (2)                                  for threeyears after the Executive’s Date of Termination, or such longer period as maybe provided by the terms of the appropriate plan, program, practice or policy,the Company shall continue welfare and fringe benefits to the Executive and/orthe Executive’s family at least equal to those that would have been provided tothem in accordance with the plans, programs, practices and policies describedin Section 3(b)(4) and (6) if the Executive’s employment had not beenterminated or, if more favorable to the Executive, as in effect generally atany time thereafter with respect to other peer executives of the Company andthe Affiliated Companies and their families, *provided*,*however*, that, if the Executive becomesreemployed with another employer and is eligible to receive medical or otherwelfare benefits under another employer provided plan, the medical and otherwelfare benefits described herein shall be secondary to those provided undersuch other plan during such applicable period of eligibility; and for purposesof determining eligibility (but not the time of commencement of benefits) ofthe Executive for retiree benefits pursuant to such plans, practices, programsand policies, the Executive shall be considered to have remained employed untilthree years after the Date of Termination and to have retired on the last dayof such period;

####  

#### (3)                                  the Companyshall, at its sole expense as incurred, provide the Executive with outplacementservices the scope and provider of which shall be selected by the Executive inthe Executive’s sole discretion provided, that the cost of suchoutplacement shall not exceed $50,000;

####  

#### (4)                                  all stockoptions and restricted stock held by the Executive immediately before the Dateof Termination shall vest in full, and such stock options shall remain

 

9

----

 

#### exercisable until thefirst to occur of the first anniversary of the Date of Termination and theexpiration of their original terms; and

####  

#### (5)                                  to theextent not theretofore paid or provided, the Company shall timely pay orprovide to the Executive any other amounts or benefits required to be paid orprovided or that the Executive is eligible to receive under any plan, program,policy or practice or contract or agreement of the Company and the AffiliatedCompanies (such other amounts and benefits, the “Other Benefits”).

####  

## (b) **Death.**  If the Executive’s employment is terminatedby reason of the Executive’s death during the Employment Period, the Companyshall provide the Executive’s estate or beneficiaries with the AccruedObligations and the timely payment or delivery of the Other Benefits, and shallhave no other severance obligations under this Agreement.  The Accrued Obligations shall be paid to theExecutive’s estate or beneficiary, as applicable, in a lump sum in cash within30 days of the Date of Termination.  Withrespect to the provision of the Other Benefits, the term “Other Benefits” asutilized in this Section 5(b) shall include, without limitation, and theExecutive’s estate and/or beneficiaries shall be entitled to receive, benefitsat least equal to the most favorable benefits provided by the Company and theAffiliated Companies to the estates and beneficiaries of peer executives of theCompany and the Affiliated Companies under such plans, programs, practices andpolicies relating to death benefits, if any, as in effect with respect to otherpeer executives and their beneficiaries at any time during the 120-day periodimmediately preceding the Effective Date or, if more favorable to the Executive’sestate and/or the Executive’s beneficiaries, as in effect on the date of theExecutive’s death with respect to other peer executives of the Company and theAffiliated Companies and their beneficiaries.

##  

## (c) **Disability. **If the Executive’s employment isterminated by reason of the Executive’s Disability during the EmploymentPeriod, the Company shall provide the Executive with the Accrued Obligationsand the timely payment or delivery of the Other Benefits, and shall have noother severance obligations under this Agreement.  The Accrued Obligations shall be paid to theExecutive in a lump sum in cash within 30 days of the Date of Termination.  With respect to the provision of the OtherBenefits, the term “Other Benefits” as utilized in this Section 6(c) shallinclude, and the Executive shall be entitled after the Disability EffectiveDate to receive, disability and other benefits at least equal to the mostfavorable of those generally provided by the Company and the AffiliatedCompanies to disabled executives and/or their families in accordance with suchplans, programs, practices and policies relating to disability, if any, as ineffect generally with respect to other peer executives and their families atany time during the 120-day period immediately preceding the Effective Date or,if more favorable to the Executive and/or the Executive’s family, as in effectat any time thereafter generally with respect to other peer executives of theCompany and the Affiliated Companies and their families.

##  

## (d) **Cause;Other Than for Good Reason. **Ifthe Executive’s employment is terminated for Cause during the EmploymentPeriod, the Company shall provide to the Executive (1) the Executive’s AnnualBase Salary through the Date of Termination, (2) the amount of any compensationpreviously deferred by the Executive, and (3) the Other Benefits,

 

10

----

 

in each case, to the extent theretofore unpaid, and shall have no otherseverance obligations under this Agreement. If the Executive voluntarily terminates employment during the EmploymentPeriod, excluding a termination for Good Reason, the Company shall provide tothe Executive the Accrued Obligations and the timely payment or delivery of theOther Benefits, and shall have no other severance obligations under thisAgreement.  In such case, all the AccruedObligations shall be paid to the Executive in a lump sum in cash within 30 daysof the Date of Termination.

##  

# **Section 6.****                                         ****Non-exclusivity of Rights****.**  Nothing in this Agreement shall prevent orlimit the Executive’s continuing or future participation in any plan, program,policy or practice provided by the Company or the Affiliated Companies and forwhich the Executive may qualify, nor, subject to Section 11(f), shall anythingherein limit or otherwise affect such rights as the Executive may have underany other contract or agreement with the Company or the AffiliatedCompanies.  Amounts that are vestedbenefits or that the Executive is otherwise entitled to receive under any plan,policy, practice or program of or any contract or agreement with the Company orthe Affiliated Companies at or subsequent to the Date of Termination shall bepayable in accordance with such plan, policy, practice or program or contractor agreement, except as explicitly modified by this Agreement.  Notwithstanding the foregoing, if the Executivereceives payments and benefits pursuant to Section 5(a) of this Agreement, theExecutive shall not be entitled to any severance pay or benefits under anyseverance plan, program or policy of the Company and the Affiliated Companies,including without limitation the Executive Severance Plan, unless otherwisespecifically provided therein in a specific reference to this Agreement.

#  

# **Section 7.****                                         ****Full Settlement; Contests****.**  (a) The Company’s obligation to make thepayments provided for in this Agreement and otherwise to perform itsobligations hereunder shall not be affected by any set-off, counterclaim,recoupment, defense, or other claim, right or action that the Company may haveagainst the Executive or others.  In noevent shall the Executive be obligated to seek other employment or take any otheraction by way of mitigation of the amounts payable to the Executive under anyof the provisions of this Agreement, and such amounts shall not be reducedwhether or not the Executive obtains other employment.

#  

## (b) The Company agreesto pay as incurred (within 10 days following the Company’s receipt of aninvoice from the Executive), to the full extent permitted by law, all legalfees and expenses that the Executive may reasonably incur as a result of anycontest (regardless of the outcome thereof) by the Company, the Executive orothers of the validity or enforceability of, or liability under, any provisionof this Agreement or any guarantee of performance thereof (including as aresult of any contest by the Executive about the amount of any payment pursuantto this Agreement), plus, in each case, interest on any delayed payment at theapplicable federal rate provided for in Section 7872(f)(2)(A) of the InternalRevenue Code of 1986, as amended (the “Code”). Notwithstanding the foregoing, the Company shall have no obligation topay the Executive’s legal fees and expenses in connection with any action initiatedby the Executive as to which the trier of fact finds that the Executive’s claimwas frivolous or brought in bad faith.

 

11

----

 

# **Section 8.****                                         ****Certain Additional Payments by the Company****.**

#  

## (a) Anything in thisAgreement to the contrary notwithstanding, in the event it shall be determinedthat any payment or distribution in the nature of compensation (within the meaningof Section 280G(b)(2) of the Code) to or for the benefit of the Executive,whether paid or payable pursuant to this Agreement or otherwise (a “Payment”),would be subject to the excise tax imposed by Section 4999 of the Code,together with any interest or penalties imposed with respect to such excise tax(the “Excise Tax”), then the Executive shall be entitled to receive anadditional payment (the “Gross-Up Payment”) in an amount such that, after paymentby the Executive of all taxes (and any interest or penalties imposed withrespect to such taxes), including, without limitation, any income taxes (andany interest and penalties imposed with respect thereto) and Excise Tax imposedupon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Paymentequal to the Excise Tax imposed upon the Payments.

##  

## (b) Subject to theprovisions of Section 8(c), all determinations required to be made underthis Section 8, including whether and when a Gross-Up Payment is required, theamount of such Gross-Up Payment and the assumptions to be utilized in arrivingat such determination, shall be made by PriceWaterhouseCoopers (the “AccountingFirm”).  The Accounting Firm shallprovide detailed supporting calculations both to the Company and the Executivewithin 15 business days of the receipt of notice from the Executive that therehas been a Payment or such earlier time as is requested by the Company.  In the event that the Accounting Firm isserving as accountant or auditor for the individual, entity or group effectingthe Change of Control, the Executive may appoint another nationally recognizedaccounting firm to make the determinations required hereunder (which accountingfirm shall then be referred to as the Accounting Firm hereunder).  All fees and expenses of the Accounting Firmshall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall bepaid by the Company to the Executive within 5 days of the receipt of the AccountingFirm’s determination.  Any determinationby the Accounting Firm shall be binding upon the Company and theExecutive.  As a result of theuncertainty in the application of Section 4999 of the Code at the time of theinitial determination by the Accounting Firm hereunder, it is possible thatGross-Up Payments that will not have been made by the Company should have beenmade (the “Underpayment”), consistent with the calculations required to be madehereunder.  In the event the Companyexhausts its remedies pursuant to Section 8(c) and the Executive thereafter isrequired to make a payment of any Excise Tax, the Accounting Firm shalldetermine the amount of the Underpayment that has occurred and any suchUnderpayment shall be promptly paid by the Company to or for the benefit of theExecutive.

##  

## (c) The Executive shallnotify the Company in writing of any claim by the Internal Revenue Servicethat, if successful, would require the payment by the Company of the Gross-UpPayment.  Such notification shall begiven as soon as practicable, but no later than 10 business days after theExecutive is informed in writing of such claim. The Executive shall apprise the Company of the nature of such claim andthe date on which such claim is requested to be paid.  The Executive shall not pay such claim prior tothe expiration of the 30-day period

 

12

----

 

following the date on which the Executive gives such notice to theCompany (or such shorter period ending on the date that any payment of taxeswith respect to such claim is due).  Ifthe Company notifies the Executive in writing prior to the expiration of such periodthat the Company desires to contest such claim, the Executive shall:

##  

#### (1)                                  give theCompany any information reasonably requested by the Company relating to suchclaim,

####  

#### (2)                                  take suchaction in connection with contesting such claim as the Company shall reasonablyrequest in writing from time to time, including, without limitation, acceptinglegal representation with respect to such claim by an attorney reasonablyselected by the Company,

####  

#### (3)                                  cooperatewith the Company in good faith in order effectively to contest such claim, and

####  

#### (4)                                  permit theCompany to participate in any proceedings relating to such claim;

####  

*provided*,*however*, that the Company shall bear andpay directly all costs and expenses (including additional interest andpenalties) incurred in connection with such contest, and shall indemnify andhold the Executive harmless, on an after-tax basis, for any Excise Tax orincome tax (including interest and penalties) imposed as a result of suchrepresentation and payment of costs and expenses.  Without limitation on the foregoingprovisions of this Section 8(c), the Company shall control all proceedingstaken in connection with such contest, and, at its sole discretion, may pursueor forgo any and all administrative appeals, proceedings, hearings andconferences with the applicable taxing authority in respect of such claim andmay, at its sole discretion, either direct the Executive to pay the tax claimedand sue for a refund or contest the claim in any permissible manner, and theExecutive agrees to prosecute such contest to a determination before anyadministrative tribunal, in a court of initial jurisdiction and in one or moreappellate courts, as the Company shall determine; *provided*,*however*, that, if the Company directsthe Executive to pay such claim and sue for a refund, the Company shall advancethe amount of such payment to the Executive, on an interest-free basis, andshall indemnify and hold the Executive harmless, on an after-tax basis, fromany Excise Tax or income tax (including interest or penalties) imposed withrespect to such advance or with respect to any imputed income in connectionwith such advance; and *provided*, *further*, that any extension of the statute of limitationsrelating to payment of taxes for the taxable year of the Executive with respectto which such contested amount is claimed to be due is limited solely to suchcontested amount.  Furthermore, theCompany’s control of the contest shall be limited to issues with respect towhich the Gross-Up Payment would be payable hereunder, and the Executive shallbe entitled to settle or contest, as the case may be, any other issue raised bythe Internal Revenue Service or any other taxing authority.

 

## (d) If, after thereceipt by the Executive of an amount advanced by the Company pursuant toSection 8(c), the Executive becomes entitled to receive any refund withrespect to such claim, the Executive shall (subject to the Company’s complyingwith the requirements of Section 8(c)) promptly pay to the Company theamount of such refund

 

13

----

 

(together with any interest paid or credited thereon after taxesapplicable thereto).  If, after thereceipt by the Executive of an amount advanced by the Company pursuant toSection 8(c), a determination is made that the Executive shall not be entitledto any refund with respect to such claim and the Company does not notify theExecutive in writing of its intent to contest such denial of refund prior tothe expiration of 30 days after such determination, then such advance shall beforgiven and shall not be required to be repaid and the amount of such advanceshall offset, to the extent thereof, the amount of Gross-Up Payment required tobe paid.

##  

## (e) Notwithstanding anyother provision of this Section 8, the Company may, in its sole discretion,withhold and pay over to the Internal Revenue Service or any other applicabletaxing authority, for the benefit of the Executive, all or any portion of theGross-Up Payment, and the Executive hereby consents to such withholding.

##  

# **Section 9.****                                         ****Confidential Information****.**  The Executive shall hold in a fiduciarycapacity for the benefit of the Company all secret or confidential information,knowledge or data relating to the Company or the Affiliated Companies, andtheir respective businesses, which information, knowledge or data shall havebeen obtained by the Executive during the Executive’s employment by the Companyor the Affiliated Companies and which information, knowledge or data shall notbe or become public knowledge (other than by acts by the Executive orrepresentatives of the Executive in violation of this Agreement).  After termination of the Executive’semployment with the Company, the Executive shall not, without the prior writtenconsent of the Company or as may otherwise be required by law or legal process,communicate or divulge any such information, knowledge or data to anyone otherthan the Company and those persons designated by the Company.  In no event shall an asserted violation ofthe provisions of this Section 9 constitute a basis for deferring orwithholding any amounts otherwise payable to the Executive under this Agreement.

#  

# **Section 10.****                                  ****Successors****.**  (a)  ThisAgreement is personal to the Executive, and, without the prior written consentof the Company, shall not be assignable by the Executive other than by will orthe laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by theExecutive’s legal representatives.

#  

## (b) This Agreement shallinure to the benefit of and be binding upon the Company and its successors andassigns.  Except as provided in Section10(c), without the prior written consent of the Executive this Agreement shallnot be assignable by the Company.

##  

## (c) The Company willrequire any successor (whether direct or indirect, by purchase, merger,consolidation or otherwise) to all or substantially all of the business and/orassets of the Company to assume expressly and agree to perform this Agreementin the same manner and to the same extent that the Company would be required toperform it if no such succession had taken place.  “Company” means the Company as hereinbeforedefined and any successor to its business and/or assets as aforesaid thatassumes and agrees to perform this Agreement by operation of law or otherwise.

 

14

----

 

# **Section 11.****                                  ****Miscellaneous****.**  (a) This Agreement shall be governed by and construed in accordance with thelaws of the State of Delaware, without reference to principles of conflict oflaws.  The captions of this Agreement arenot part of the provisions hereof and shall have no force or effect.  This Agreement may not be amended or modifiedother than by a written agreement executed by the parties hereto or theirrespective successors and legal representatives.

#  

## (b) All notices andother communications hereunder shall be in writing and shall be given by handdelivery to the other party or by registered or certified mail, return receiptrequested, postage prepaid, addressed as follows:

 

if to the Executive:

 

**Israel Floyd**

**Hercules Incorporated**

**Hercules Plaza**

**Wilmington, Delaware  19894-0001**

 

if to the Company:

 

Hercules Incorporated

Hercules Plaza

Wilmington, Delaware 19894-0001

 

Attn:  ChiefExecutive Officer

 

or to such other addressas either party shall have furnished to the other in writing in accordanceherewith.  Notice and communicationsshall be effective when actually received by the addressee.

 

## (c) The invalidity orunenforceability of any provision of this Agreement shall not affect thevalidity or enforceability of any other provision of this Agreement.

##  

## (d) The Company maywithhold from any amounts payable under this Agreement such United Statesfederal, state or local or foreign taxes as shall be required to be withheldpursuant to any applicable law or regulation.

##  

## (e) The Executive’s orthe Company’s failure to insist upon strict compliance with any provision ofthis Agreement or the failure to assert any right the Executive or the Companymay have hereunder, including, without limitation, the right of the Executiveto terminate employment for Good Reason pursuant to Sections 4(c)(1) through4(c)(5), shall not be deemed to be a waiver of such provision or right or anyother provision or right of this Agreement.

##  

## (f) The Executive andthe Company acknowledge that, except as may otherwise be provided under anyother written agreement between the Executive and the Company, the

 

15

----

 

employment of the Executive by the Company is “at will” and, subject toSection 1(a), prior to the Effective Date, the Executive’s employment may beterminated by either the Executive or the Company at any time prior to theEffective Date, in which case the Executive shall have no further rights underthis Agreement.  From and after theEffective Date, except as specifically provided herein, this Agreement shallsupersede any other agreement between the parties with respect to the subjectmatter hereof.

 

16

----

 

IN WITNESS WHEREOF, the Executive has hereunto set theExecutive’s hand and, pursuant to the authorization from the Board, the Companyhas caused these presents to be executed in its name on its behalf, all as ofthe day and year first above written.

 
|          |                  |                    |
|---------------|-----------------------|-------------------------|
|          | **Israel  Floyd**     |                    |
|          | ** **            |                    |
|          | HERCULES INCORPORATED |                    |
|          |                  |                    |
|          |                  |                    |
|          | By                    |                    |   |
|          |                  | Vincent J. Corbo        |   |
|          |                  | Chairman, President and |   |
|          |                  | Chief Executive Officer |   |
|          |                  |                    |   |
|          |                  |                    |   |
| Attest:       |                  |                    |   |
|          |                  |                    |   |
|          |                  |                    |   |   |
| June B. Barry |                  |                    |   |
|               |                       |                         |  |  |

 

17

----