First you need to have all the characters (gohan, piccolo, vegeta, trunks and goku). After you got them all, increase their level to 50 (ALL OF THEM) and then go to the caves with a number 50. Explore the caves, you should see a trophy. Pick it up. It would be at the capsule corp. Complete all the four trophies. Next, go to the cell games arena and then defeat cell. After you defeated cell, Goku should be dead. Then you will have Hercule in your character selection.(at level 40)

NOTE:
If you defeated cell before you get the trophies, You'll have hercule at level 1