UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
----------------
Commission File Number 1-8036
---------
WEST PHARMACEUTICAL SERVICES, INC.
--------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1210010
------------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
101 Gordon Drive, PO Box 645, Lionville, PA 19341-0645
--------------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-594-2900
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
-----------------------------------------------------------------
Common Stock, par value New York Stock Exchange
$.25 per share
Securities registered pursuant to Section 12(g) of the Act:
None
----
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
<PAGE>
As of March 17, 1999, the Registrant had 15,099,072 shares of its
Common Stock outstanding. The market value of Common Stock held
by non-affiliates of the Registrant as of that date was
$514,312,140.
Exhibit Index appears on pages F-1, F-2, F-3, and F-4.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
------------------------------------
Documents incorporated by reference: 1) portions of the
Registrant's Annual Report to Shareholders for the Company's 1998
fiscal year (the "1998 Annual Report to Shareholders") are
incorporated by reference in Parts I and II; and (2) portions of
the Registrant's definitive Proxy Statement (the "Proxy
Statement") are incorporated by reference in Part III.
<PAGE>
2
PART I
Item l. Business
--------
The Company
-----------
West Pharmaceutical Services, Inc. (formerly The West Company,
Incorporated) applies value-added services to the process of
bringing new drug therapies and healthcare products to global
markets. West's technologies include the design and manufacture
of packaging components for pharmaceutical, healthcare and
consumer products; the research and development of drug delivery
systems, and contract laboratory services and other services that
support the manufacturing, filling and packaging of
pharmaceutical, healthcare and consumer products. The Company's
activities are organized in three operating segments: 1) the
Device Product Development segment (consisting of four regional
business units serving global markets) designs, manufactures, and
sells stoppers, closures, medical device components and
assemblies made from elastomers, metal and plastics; 2) the
Contract Services segment (consisting of two business units
serving the United States and Puerto Rico markets) provides
contract manufacturing and contract packaging services to the
pharmaceutical and personal care industries and contract
laboratory services for testing injectable drug packaging; and
3) the Drug Delivery Research and Development segment (consisting
of two business units) identifies and develops drug delivery
systems for biopharmaceutical and other drugs to improve their
therapeutic performance and/or their method of administration.
As of December 31, 1998, the Company and its subsidiaries had
4,800 employees.
The Company, a Pennsylvania business corporation, was founded in
1923. The executive offices of the Company are located at 101
Gordon Drive, PO Box 645, Lionville, Pennsylvania 19341-0645,
approximately 35 miles from Philadelphia. The telephone number
at the Company's executive offices is 610-594-2900. As used in
this Item, the term "Company" includes West Pharmaceutical
Services, Inc. and its consolidated subsidiaries, unless the
context otherwise indicates.
Device Product Development
Principal Products
--------------------------------------------------------
Pharmaceutical Stoppers
-----------------------
The Company is the world's largest independent manufacturer of
stoppers for sealing drug vials and other pharmaceutical
containers. Several hundred proprietary formulations are molded
from natural rubber and synthetic elastomers into a variety of
3
stopper sizes, shapes and colors. The stoppers are used in
packaging serums, vaccines, antibiotics, anesthetics, intravenous
solutions and other drugs.
Most stopper formulations are specially designed to be compatible
with drugs so that the drugs will remain effective and unchanged
during storage. New rubber compounds must be tested to show that
they do not leach into the customer's product or affect its
potency, sterility, effectiveness, color or clarity. The
Company's laboratories conduct tests to determine the
compatibility of its stoppers with customers' drugs and, in the
United States, file formulation information with the Food and
Drug Administration in support of customers' new drug
applications.
Stoppers usually are washed, sterilized and subject to other pre-
use processes by the customer or a third-party before they are
fitted on the container. However, the Company has recently
introduced a value-added line of stoppers that are pre-washed and
ready to be sterilized, eliminating several steps in customers'
incoming processes. The Company is also marketing a line of pre-
sterilized stoppers that can be introduced directly into
customers' sterile drug-filling operations.
Metal Seals
-----------
The Company also offers a broad line of aluminum seals in various
sizes, shapes and colors. The seals are crimped onto glass or
plastic pharmaceutical containers to hold the stoppers securely
in place. The top of aluminum seals often contains tamper-evident
tabs or plastic covers, which must be removed before the drug can
be withdrawn.
Some aluminum seals are sold with specially formulated rubber or
elastomeric discs pre-fitted inside the seal. These "lined"
seals may be placed directly onto the pharmaceutical container,
thus eliminating the need for a separate stopper.
Other Products
---------------
Other products for the pharmaceutical industry include:
Products used in the packaging of non-injectable drugs
such as rubber dropper bulbs, plastic contraceptive drug
packages and child-resistant and tamper-evident plastic
closures
Plastic bottles and containers for the pharmaceutical
industry
Rubber and plastic components for empty and pre-filled
disposable syringes such as plungers, hubs and needle
covers
4
Blood-sampling system components, including vacuum tube
stoppers and needle valves, and a number of specialized
rubber and plastic components for blood-analyzing systems
and other medical devices
Disposable infant nursers and individual nurser components
The Company also manufactures a wide range of standard and
custom-designed plastic threaded caps and containers for the
personal-care industry. The caps, produced mainly for cosmetics
and toiletries, come in many different sizes and colors. The
Company also makes closures for food and beverage processors.
The Company focuses its efforts on multiple-piece closures that
require high-speed assembly.
Product Development
------------------------
The Company maintains its own laboratories for testing raw
materials and finished goods to assure conformity to customer
specifications and to safeguard product quality. Laboratory
facilities are also used for development of new products.
Engineering staffs are responsible for product and tooling design
and testing and for the design and construction of processing
equipment. In addition, a corporate product development
department develops new packaging and device concepts.
Approximately 120 professional employees were engaged full time
in these activities in 1998. Development and engineering
expenditures for the creation and application of new and improved
device products and manufacturing processes were approximately
$9.2 million in 1998, $8.8 million in 1997 and $8.9 million in
1996, net of cost reimbursements by customers.
Recent Developments
-------------------
The Company has taken steps to expand its product offerings and
improve competitiveness of its Device Product Development
operating segment.
The Company increased its capacity in the components area with
the acquisition of Schubert Seals A/S, a Danish manufacturer of
rubber components and metal seals servicing the European
pharmaceutical industry. A 51% ownership interest was acquired
in May 1994 and the remaining 49% in December 1995. The
company's name was recently changed to "West Pharmaceutical
Services Danmark A/S."
In 1996 and 1997, the Company implemented a major restructuring
plan announced in 1996. The plan included the closing or
downsizing of six manufacturing facilities, withdrawal from the
machinery business and an approximate 5% reduction in the
workforce. The restructuring was designed to reduce the costs
associated with multiple plant sites and shift certain production
capacity to lower-cost locations. In 1998, a further 1%
5
reduction in the workforce, made possible by manufacturing and
other operating efficiencies, was announced. (Additional
information pertaining to these activities is incorporated by
reference to the Note "Restructuring Charges" of Notes to
Consolidated Financial Statements of the 1998 Annual Report to
Shareholders.)
In 1998, the Company acquired Betraine Limited, a company located
in the U.K., which manufactures precision injection molded
plastic components for the healthcare and consumer industries.
The acquisition expanded global capabilities in the non-
injectable market.
Contract Services
Principal Services
--------------------------------
Contract Packaging and Contract Manufacturing
---------------------------------------------
The Company entered into the pharmaceutical services market in
1995 with its acquisition of Paco Pharmaceutical Services, Inc.
("Paco"). Paco's name was recently changed to West
Pharmaceutical Services Lakewood, Inc. (West Lakewood).
West Lakewood provides contract manufacturing and packaging of
products for pharmaceutical and consumer-products companies.
With its flexible manufacturing environment and workforce, West
Lakewood has the capability to quickly undertake to make and
package products according to customers' specifications, usually
employing customer-supplied raw materials. Once the operation is
complete, West Lakewood delivers the finished product to the
customer for final sale and distribution to the end user.
Customers typically use West Lakewood services on a temporary
basis to supplement their own manufacturing or packaging
capability during a new-product introduction or special
promotion. However, West Lakewood does retain long-term
business in both the manufacturing and packaging areas. West
Lakewood operates facilities in Lakewood, New Jersey and
Canovanas, Puerto Rico.
West Lakewood contract packaging and manufacturing processes and
services are subject to the Good Manufacturing Practice standards
applicable to the pharmaceutical industry as well as to numerous
other federal and state laws and regulations governing the
manufacture, handling and packaging of drugs and other regulated
substances.
West Lakewood manufactures liquids and creams, solids,
suspensions, and powders. These products produced include:
headache and cold medications
skin lotions
6
deodorants
toothpaste and mouthwash
metaproterenol and albuterol, products used for inhalation
therapy.
West Lakewood contract-packaging services include the design,
assembly and filling of a broad variety of packages, including
"blister" packages (i.e., a plastic film with a foil
backing)
bottles and tubes
laminated and other flexible pouches or strip packages
aluminum and plastic liquid cup containers
paperboard specialty packages
innovative tamper-evident and child-resistant packages
Although the type of package depends on the requirements of the
customer, blister packaging or bottles typically are used for
tablets and capsules while aluminum or plastic cups, pouches,
bottles and tubes are used for liquids, creams, ointments and
powders.
Contract Laboratory Services
-----------------------------
In 1998, the Company established the contract laboratory services
business, which provides testing services to analyze customers'
injectable product packaging. Regulatory agencies require drug
companies to demonstrate that packaging components will not
contaminate the drug. The test data is generated in a format
acceptable for U.S. Food and Drug Administration (FDA)
submissions. The services offered include product/closure
interaction testing, extractables testing, moisture analysis of
closures, particle quantification/analysis, quantification of
closure surface silicone, and other custom services. The
Company's laboratory complies with applicable Good Manufacturing
Practice standards and its laboratory will be FDA registered.
Research and Development
Drug Delivery Systems
---------------------------------------------------------
In 1993, the Company began developing drug-delivery systems for
bio-pharmaceuticals and other drugs that are difficult to
administer effectively through traditional injectable or oral
routes. Improving the therapeutic performance of these drugs in
an economical fashion calls for sophisticated delivery solutions.
7
To advance the Company's efforts in this area, in 1994 the
Company began acquiring interests in DanBioSyst UK Ltd. (DBS) in
10% annual increments; and in March 1998, acquired the remaining
70% ownership interest, making DBS a wholly-owned subsidiary.
DBS is a research company located in Nottingham, England, which
specializes in identifying and developing systems for delivery of
complex drug molecules, or to assist in delivering drugs to a
specific site in the body. DBS engages in research to develop
these unique systems and then patents this technology. DBS has
patents or patent applications covering a range of delivery
platforms including nasal, oral, parenteral, pulmonary and
rectal/vaginal. DBS enters into agreements with
biopharmaceutical and other drug companies, to apply its delivery
system technology to the customers' drug molecule to achieve the
desired result.
The Company's Lionville-based resources are dedicated to
development of drug delivery systems. This group's work, until
recently, was focused on the Ocufit SR system, a silicone rod
small enough to fit behind the eyelid. The Ocufit SR can be
designed to release a number of different drugs in predefined
quantities over time periods ranging from two weeks to several
months without physical intervention. The Ocufit SR is being
jointly developed with Escalon Medical Corporation, which owns
the basic technology. An Investigative New Drug Application was
filed with the FDA late in 1998, and Escalon is now conducting
Phase I clinical trials. The Lionville group is also developing
products based on DBS patented technology. The current projects
relate to nasal delivery of leuprolide and morphine and further
development of the Targit delivery system, a coated starch
capsule, designed to deliver medication to a specific site in the
body.
The Company had 58 employees directly engaged in these activities
as of December 31, 1998 and total expenses were $5.3 million, net
of revenues received, in 1998.
Order Backlog
--------------
Device product orders on hand at December 31, 1998 were
approximately $90 million, compared with approximately $80
million at the end of 1997. Orders on hand include those placed
by customers for manufacture over a period of time according to a
customer's schedule or upon confirmation by the customer. Orders
are generally considered firm when goods are manufactured or
orders are confirmed. The Company also has contractual
arrangements with a number of its customers, and products covered
by these contracts are included in the Company's backlog only as
orders are received from those customers.
West Lakewood's twelve-month backlog of unfilled customer orders
was approximately $18 million at December 31, 1998 and December
31, 1997. Backlog is defined by West Lakewood as orders written
8
and included in production schedules during the next 12 months.
Such orders generally may be cancelled by the customer without
penalty.
Raw Materials
--------------
The Company uses three basic raw materials in the manufacture of
its device products: rubber; aluminum; and plastic. The Company
has been receiving adequate supplies of raw materials to meet its
production needs, and it foresees no significant availability
problems in the near future.
The Company is pursuing a supply chain management strategy, which
involves purchasing from integrated suppliers that control their
own sources of supply. This strategy has reduced the number of
raw-materials suppliers used by the Company. In some cases, the
Company will purchase raw materials from a single source to
assure quality and reduce costs. This strategy increases the
risks that the Company's supply lines may be interrupted in the
event of a supplier production problem. These risks are managed
by selecting suppliers with multiple manufacturing sites, rigid-
quality control systems, surplus inventory levels and other
methods of maintaining supply in case of interruption in
production.
Patents and Licenses
---------------------
The Company's device products patents and trademarks have been
useful in establishing the Company's market share and in the
growth of the Company's manufactured device product business and
may continue to be of value in the future, especially in view of
the Company's continuing development of its own proprietary
products. Nevertheless, the Company does not consider its
current manufactured device product business or its earnings to
be materially dependent upon any single patent or trademark.
Although not material at this time, the Company believes its drug
delivery development capabilities will play an increasingly
important role in the future. DBS has a growing portfolio of
patented technology, which is critical to our success because a
significant amount of future income is expected to be derived
from licensing this technology to customers.
Major Customers
-----------------
The Company provides manufactured device components and/or
contract services to major pharmaceutical and hospital
supply/medical device companies, many of which have several
divisions with separate purchasing responsibilities. The Company
also provides contract-packaging and contract-manufacturing
services for many of the leading manufacturers of personal-care
products. The Company distributes its products and services
9
primarily through its own sales force but also uses regional
distributors in the United States and Asia/Pacific. The business
units have separate sales forces but the Company is increasing
the sales effort of each group to sell all of the Company's
capabilities.
Becton Dickinson and Company ("B-D") accounted for approximately
12% of the Company's 1998 consolidated net sales. The principal
products sold to B-D are synthetic rubber, natural rubber, metal
and plastic components used in B-D's disposable syringes and
blood sampling and analysis devices. The Company expects to
continue as a major B-D supplier.
Excluding B-D, the next ten largest customers accounted for
approximately 30% of the Company's consolidated net sales in
1998, but no one of these customers accounted for more than 5% of
1998 consolidated net sales.
Competition
------------
The Company competes with several companies, some of which are
larger than the Company, across its major Device Product
Development product lines. In addition, many companies worldwide
compete with the Company for business related to specific product
lines. However, the Company believes that it supplies a major
portion of the U.S. market requirements for pharmaceutical
elastomer and metal packaging components and has a significant
share of the European market for these components.
Because of the special nature of these products, competition is
based primarily on product design and performance, although total
cost is becoming increasingly more important as pharmaceutical
companies initiate aggressive cost-control measures across their
entire operations. Competitors often compete on the basis of
price. The Company differentiates itself from its competition as
a "full-service" supplier, which is able to provide pre-sale
compatibility studies and other services and sophisticated post-
sale technical support on a global basis.
The Company competes against numerous competitors in the field of
plastic closures for consumer products, many of which are larger
than the Company and command dominant market shares. The Company
attempts to differentiate itself through its expertise in high-
speed assembly of multiple-piece closures.
The U.S. contract-packaging and manufacturing service industry is
highly competitive. For packaging services, West Lakewood
competes with three significant companies, only two of which are
larger than it. For contract-manufacturing services, West
Lakewood competes with four major competitors and several smaller
regional companies; several of these competitors are larger than
it. In addition, most domestic pharmaceutical companies maintain
in-house manufacturing and packaging capabilities and at times
will offer their excess capacity to manufacture or package other
10
companies' products on a contract basis. However, most large
pharmaceutical and personal healthcare companies have
traditionally made extensive use of contract packagers and
manufacturers during times of peak demand, during the
introduction of a new product and for production of samples and
special product promotions.
Many companies provide proprietary drug delivery technologies to
the pharmaceutical and biotech markets. However, unlike West,
the majority of these companies are focused on a single route of
drug administration, and very few have capabilities necessary to
take drug products through all stages of the development process
and commercial manufacture. The three largest companies, the
market leaders, have multiple-delivery technologies, but their
strong franchises are in oral, controlled-release delivery
systems. West's drug delivery technologies, none of which is
currently in commercial production, are in less competitive
segments that do not compete with the market leaders.
Environmental Regulations
---------------------------------------------------
The Company does not believe that it will have any material
expenditures relating to environmental matters other than those
discussed in the Note "Commitments and Contingencies" of Notes to
Consolidated Financial Statements of the 1998 Annual Report to
Shareholders, incorporated by reference herein.
International
---------------
The Note "Affiliated Companies" and the Note "Segment
Information" of Notes to Consolidated Financial Statements of the
1998 Annual Report to Shareholders are incorporated herein by
reference.
The Company believes that its international business does not
involve a substantially greater business risk than its domestic
business. Financial crises in the Asia/Pacific region and more
recently in our major markets in South America have resulted in a
decline in demand for the Company's products in these regions;
however, direct sales to customers in these markets have
historically not been significant, representing less than 10% of
consolidated sales.
The Company's financial condition and results are impacted by
fluctuations in exchange-rate markets (See Notes "Summary of
Significant Accounting Policies - Foreign Currency Translation"
and "Other Income (Expense)" of Notes to Consolidated Financial
Statements of the 1998 Annual Report to Shareholders,
incorporated herein by reference). Hedging by the Company of
these exposures is discussed in the Note "Debt" and in the Note
"Financial Instruments" of Notes to Consolidated Financial
11
Statements of the 1998 Annual Report to Shareholders,
incorporated herein by reference.
Item 2. Properties
-----------
In the Device Product Development operating segment, the Company
maintains nine manufacturing plants and two mold and die
production facilities in the United States, one manufacturing
plant in Puerto Rico, and a total of eight manufacturing plants
and two mold and die production facilities in Germany, England,
France, Denmark, Brazil and Singapore.
In the Contract Services operating segment, the Company maintains
one facility in the United States and one facility in Puerto Rico
to provide contract manufacturing and packaging services.
Contract Laboratory services are provided from the Company's
Lionville, Pennsylvania facility.
The Company's executive offices, U.S. research and development
center and pilot plant are located in a leased facility at
Lionville, Pennsylvania, about 35 miles from Philadelphia. The
Company conducts drug delivery research and development in a
leased facility located in Nottingham, England. All other
company facilities are used for manufacturing and distribution,
and facilities in Eschweiler, Germany are also used for device
product development activities.
The production facilities of the Company are well-maintained, are
operating generally on a two- or three-shift basis and are
adequate for the Company's present needs.
The principal facilities in the United States and Puerto Rico are
as follows:
- Approximately 839,000 square feet of owned and 997,000 square
feet of leased space in Pennsylvania, New Jersey, Florida,
Nebraska, North Carolina and Puerto Rico.
The principal international facilities are as follows:
- Approximately 530,000 square feet of owned space and 67,700
square feet of leased space in Germany, England, Denmark and
France.
- Approximately 69,000 square feet of owned space in Brazil.
- Approximately 92,000 square feet of owned space in Singapore.
Of the aforementioned currently owned facilities, approximately
354,000 square feet are subject to mortgages to secure the
Company's real estate mortgage notes. See the Note "Debt" of
Notes to Consolidated Financial Statements of the 1998 Annual
12
Report to Shareholders, which information is incorporated herein
by reference.
Sales office facilities in separate locations are leased
under short-term arrangements.
The Company also holds for sale former manufacturing facility
space in Puerto Rico - totaling 42,000 square feet.
Item 3. Legal Proceedings.
-----------------
None
13
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 4 (a) Executive Officers of the Registrant
-----------------------------------------
The executive officers of the Company at March 31, 1999 were as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Business Experience During Past Five
Years
---- --- ---------------------------------------
George R. Bennyhoff1 55 Senior Vice President, Human Resources
and Public Affairs.
Jerry E. Dorsey1 54 President and Chief Operating Officer
since September 1998, previously
Executive Vice President and Chief
Operating Officer from June 1994 to
August 1998; Group President from
August 1993 to June 1994; President,
Health Care Division from May 1992 to
July 1993 for the Company.
Steven A. Ellers1 48 Senior Vice President and Chief
Financial Officer since March 1998;
previously Group President from August
1997 to February 1998; Corporate Vice
President, Sales from April 1996 to
July 1997; Vice President, Operations
from June 1994 to March 1996; Vice
President Asia/Pacific and Managing
Director, Singapore from May 1990 to
May 1994 for the Company.
John R. Gailey III1 44 Vice President since December 1995,
General Counsel since May 1994 and
Secretary.
Stephen M. Heumann1 57 Vice President since May 1994 and
Treasurer.
Lawrence P. Higgins1 59 Vice President, Operations since May
1996 and prior to joining the Company
an international business consultant
from 1994 to 1996 and Senior Vice
President International Operations for
Revlon, Inc., a cosmetics company,
from 1992 to 1994.
1 Holds position as corporate officer elected by the Board of
Directors for one year term.
14
Name Age Business Experience During Past Five
Years
---- --- ---------------------------------------
William G. Little1 56 Chairman of the Board since May 1995,
Director and Chief Executive Officer
for the Company and President of the
Company until September 1998.
Donald E. Morel, Jr.1 41 Group President since March 1998;
previously, Corporate Vice President,
Scientific Services from May 1995 to
February 1998; Vice President, Research
& Development from August 1993 to May
1995 and prior thereto Director
Research & Development, Health Care
Products Division from May 1993 to
August 1993 for the Company.
Anna Mae Papso1 55 Vice President and Corporate Controller
Anthony A. Sinkula 61 Vice President and Chief Scientific
Officer since July 1998 and prior to
joining the Company a consultant to
several major pharmaceutical companies
and the National Cancer Institute.
</TABLE>
1 Holds position as corporate officer elected by the Board of
Directors for one year term.
15
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
--------------------------------------------------
The Company's common stock is listed on the New York Stock
Exchange and the high and low prices for the stock for each
calendar quarter in 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
High Low High Low High Low High Low High Low
1998 321/4 2815/16 33 28 30 25 3511/16 27 3511/16 25
1997 291/4 27 30 27 343/16 281/2 351/16 28 351/16 27
</TABLE>
As of December 31, 1998, the Company had 1,903 shareholders of
record. There were also 2,900 holders of shares registered in
nominee names. The Company's common stock paid a quarterly
dividend of $.14 per share in each of the first three quarters of
1997; $.15 per share in the fourth quarter of 1997 and each of
the first three quarters of 1998; and $.16 per share in the
fourth quarter of 1998.
Item 6. Selected Financial Data.
-----------------------
Information with respect to the Company's net sales, income
(loss) from consolidated operations, income (loss) before change
in accounting method, income (loss) before change in accounting
method per share (basic and assuming dilution) and dividends paid
per share is incorporated by reference to the line items
corresponding to those categories under the heading "Ten-Year
Summary - Summary of Operations" of the 1998 Annual Report to
Shareholders. Information with respect to total assets and total
debt is incorporated by reference to the line items corresponding
to those categories under the heading "Ten-Year Summary - Year-
End Financial Position" of the 1998 Annual Report to
Shareholders.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
---------------------------------------------------------
The information called for by this Item is incorporated by
reference to the text appearing in the "Financial Review" section
of the 1998 Annual Report to Shareholders.
Item 7A. Quantitative and Qualitative Disclosure about Market
Risk
--------------------------------------------------------
The information called for by this Item is incorporated by
reference to the Notes "Financial Instruments", "Summary of
Significant Accounting Policies" of Notes to Consolidated
Financial Statements of the 1998 Annual Report to Shareholders.
16
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
The information called for by this Item is incorporated by
reference to "Consolidated Financial Statements", "Notes to
Consolidated Financial Statements", and "Quarterly Operating and
Per Share Data (Unaudited)" of the 1998 Annual Report to
Shareholders.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.
-------------------------------------------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
---------------------------------------------------
Information called for by this Item is incorporated by reference
to "PROPOSAL #1: ELECTION OF DIRECTORS" and "OWNERSHIP OF COMPANY
STOCK" in the Proxy Statement.
Information about executive officers of the Company is set forth
in Item 4 (a) of this report.
Item 11. Executive Compensation.
-----------------------
Information called for by this Item is incorporated by reference
to "INFORMATION ABOUT THE BOARD AND BOARD COMMITTEES -
Compensation of Directors"; "BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION"; and "COMPENSATION OF NAMED EXECUTIVE
OFFICERS" contained in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
---------------------------------------------------
Information called for by this Item is incorporated by reference
to "OWNERSHIP OF COMPANY STOCK" contained in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
-----------------------------------------------
None
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
-------------------------------------------------------
(a) 1. The following report and consolidated financial
statements, included in the 1998 Annual Report to
Shareholders, have been incorporated herein by
reference:
17
Consolidated Statements of Income for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Comprehensive
Income for the years ended December 31, 1998,
1997 and 1996
Consolidated Balance Sheets at December 31, 1998 and
1997
Consolidated Statements of Shareholders' Equity for
the years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Report of Independent Accountants
(a) 2. Supplementary Financial Information
Schedules are omitted because they are either not
applicable, not required or because the information
required is contained in the consolidated financial
statements or notes thereto.
(a) 3. See Index to Exhibits on pages F-1, F-2, F-3 and
F-4 of this Report.
(b) There were no reports on Form 8-K filed by the
Company in the fourth quarter of 1998.
(c) The exhibits are listed in the Index to Exhibits on
pages F-1, F-2, F-3 and F-4 of this Report.
(d) Financial Statements of affiliates are omitted
because they do not meet the tests of a significant
subsidiary at the 20% level.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, West Pharmaceutical Services,
Inc. has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
WEST PHARMACEUTICAL SERVICES, INC.
(Registrant)
By /s/ Steven A. Ellers
--------------------------------
Steven A. Ellers
Senior Vice President
and Chief Financial Officer
March 31, 1999
--------------------------------
Date
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
Signature Title Date
--------- ------ -------
William G. Little Chairman, Director March 31, 1999
--------------------------------- and Chief Executive
William G. Little Officer
(Principal Executive Officer)
Tenley E. Albright Director March 31, 1999
-----------------------------------
Tenley E. Albright *
John W. Conway Director March 31, 1999
___________________________________
John W. Conway*
George W. Ebright Director March 31, 1999
------------------------------------
George W. Ebright*
Steven A. Ellers Senior Vice President March 31, 1999
------------------------------------ and Chief Financial
Steven A. Ellers Officer
L. Robert Johnson Director March 31, 1999
------------------------------------
L. Robert Johnson*
William H. Longfield Director March 31, 1999
--------------------------------------
William H. Longfield*
20
Signature Title Date
--------- ------ -------
John P. Neafsey Director March 31, 1999
--------------------------------------
John P. Neafsey*
Anna Mae Papso Vice President March 31, 1999
-------------------------------------- and Corporate Controller
Anna Mae Papso
(Principal Accounting Officer)
Director March 31, 1999
---------------------------------------
Monroe E. Trout
Anthony Welters Director March 31, 1999
---------------------------------------
Anthony Welters*
J. Roffe Wike, II Director March 31, 1999
---------------------------------------
J. Roffe Wike, II*
Geoffrey F. Worden Director March 31, 1999
----------------------------------------
Geoffrey F. Worden*
</TABLE>
* By William G. Little pursuant to a power of attorney.
21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit
Number
(3) (a) Amended and Restated Articles of Incorporation of the
Company through January 4, 1999.
(3) (b) Bylaws of the Company, as amended through October 27, 1998,
incorporated by reference to Exhibit (3)(b) to the
Company's Form 10-Q for the quarter ended September 30,
1998 (File No. 1-8036).
(4) (a) Form of stock certificate for common stock.
(4) (b) Flip-In Rights Agreement between the Company and American
Stock Transfer & Trust Company, as Rights Agent, dated as
of January 16, 1990, incorporated by reference to Exhibit 1
to the Company's Form 8-A Registration Statement (File No.
1-8036).
(4) (c) Flip-Over Rights Agreement between the Company and American
Stock Transfer & Trust Company, as Rights Agent, dated as
of January 16, 1990, incorporated by reference to Exhibit 2
to the Company's Form 8-A Registration Statement (File No.
1-8036).
(9) None.
(10) (a) Lease dated as of December 31, 1992 between Lion
Associates, L.P. and the Company, relating to the lease of
the Company's headquarters in Lionville, Pa., incorporated
by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992 (File No. 1-8036).
(10) (b) First Addendum to Lease dated as of May 22, 1995 between
Lion Associates, L.P. and the Company, incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 (File No. 1-8036).
(10) (c) Long-Term Incentive Plan, as amended March 2, 1993,
incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992 (File No. 1-
8036).
(10) (d) Amendments to the Long Term Incentive Plan, dated April 30,
1996, incorporated herein by reference to the Company's
Form 10Q for the quarter ended June 30, 1996 (File No. 1-
8036).
(10) (e) Executive Incentive Bonus Plan 1999.
22
F - 1
Exhibit
Number
(10) (f) Non-Qualified Stock Option Plan for Non-Employee Directors,
reflecting amendments effective April 30, 1996 and April
28, 1998 incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1998 (File No. 1-8036).
(10) (g) Form of amended and restated agreement between the Company
and certain of its executive officers, incorporated by
reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998 (File No.1-8036).
(10) (h) Schedule of agreements with executive officers,
incorporated herein by reference to the Company's Quarterly
Report on Form 10Q for the quarter ended March 31, 1998
(File No.1-8036).
(10) (i) Supplemental Employees' Retirement Plan, incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1989 (File No. 1-8036).
(10) (j) Amendment No. 1 to Supplemental Employees' Retirement Plan,
incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995 (File No. 1-
8036).
(10) (k) Amendment No. 2 to Supplemental Employees' Retirement Plan,
incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1995 (File
No. 1-8036).
(10) (l) Retirement Plan for Non-Employee Directors of the Company,
as amended April 28, 1998, incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998 (File No. 1-8036).
(10) (m) Employment Agreement dated May 20, 1991 between the Company
and William G. Little, incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1991 (File No. 1-8036).
(10) (n) Non-Qualified Deferred Compensation Plan for Designated
Executive Officers and Amendments Nos. 1 and 2 thereto.
(10) (o) Non-qualified Deferred Compensation Plan for Outside
Directors and Amendment No. 1 thereto.
23
F - 2
Exhibit
Number
(10) (p) Lease Agreement, dated August 31, 1978, between Paco
Packaging, Inc. and Nineteenth Lakewood Corp., as amended
by Amendment of Lease, dated November 30, 1978, Second
Amendment of Lease, dated August 6, 1979, Third Amendment
of Lease, dated July 24, 1980 and Fourth Amendment of
Lease, dated August 14, 1980, incorporated by reference to
the Exhibits to Paco Pharmaceutical Services, Inc's
Registration Statement on Form S-1, Registration No. 33-
48754, filed with the Commission.
(10) (q) Fifth Amendment of Lease, dated May 13, 1994, to the Lease
Agreement, dated August 31, 1978, between Paco Packaging,
Inc. and Nineteenth Lakewood Corp., incorporated by
reference to the Exhibits to Paco Pharmaceutical Services,
Inc.'s Annual Report on Form 10-K for the year ended March
31, 1994 (File number 0-20324).
(10) (r) Lease Agreement, dated December 9, 1977, between Paco
Packaging, Inc. and New Oak Street Corp., as amended by the
Amendment to Lease Agreement, dated August 31, 1978, Second
Amendment of Lease, dated April 8, 1979 and Third Amendment
of Lease, dated November 16, 1983, incorporated by
reference to the Exhibits to Paco Pharmaceutical Services,
Inc.'s Registration Statement on Form S-1, Registration No.
33-48754, filed with the Commission.
(10) (s) Lease Agreement, dated April 7, 1986, between Northlake
Realty Co. Inc. and Paco Packaging, Inc., as amended by
Amendment to Lease, dated July 1, 1986, Second Amendment of
Lease, dated June 15, 1987 between Paco Packaging and C. P.
Lakewood, L. P., Agreement, dated December 29, 1987, and
Lease Modification Agreement, dated December 13, 1989,
incorporated by reference to the Exhibits to Paco
Pharmaceutical Services, Inc.'s Registration Statement on
Form S-1, Registration No. 33-48754, filed with the
Commission.
(10) (t) Collective Bargaining Agreement, dated December 1, 1997, by
and between Paco Pharmaceutical Services, Inc. and Teamster
Local 35 (affiliated with the International Brotherhood of
Teamsters), incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31,
1997 (File No.1-8036).
(10) (u) 1998 Key Employee Incentive Compensation Plan, dated
March 10, 1998, incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1997 (File No.1-8036).
(10) (v) Asset Purchase Agreement Among Collaborative Clinical
Research, Inc., GFI Pharmaceutical Services, Inc., and WCE
clinical Evaluations and West Pharmaceuticals, Inc. dated
December 28, 1998.
24
F - 3
Exhibit
Number
(11) Not Applicable.
(12) Not Applicable.
(13) Portions of 1998 Annual Report to Shareholders.
(16) Not applicable.
(18) None.
(21) Subsidiaries of the Company.
(22) None.
(23) Consent of Independent Accountants.
(24) Powers of Attorney.
(27) Financial Data Schedules
(99) None.
</TABLE>
F - 4
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF WEST PHARMACEUTICAL SERVICES, INC.
1. The name of the Corporation is West Pharmaceutical
Services, Inc.
2. The location and post office address of the
Corporation's registered office in Pennsylvania is c/o
Corporation Service Company, 319 Market Street, Harrisburg,
PA 17101.
3. The Corporation is incorporated under the
Pennsylvania Business Corporation Law and shall have
unlimited power to engage in and to do any lawful act
concerning any or all lawful business, including
manufacturing, processing, research and development, for
which corporations may be incorporated under the
Pennsylvania Business Corporation Law.
4. The term for which the Corporation is to exist is
perpetual.
5. Capital Stock. The aggregate number of shares of
capital stock which the Corporation shall have authority to
issue is 53,000,000 shares, consisting of (i) 3,000,000
shares of Preferred Stock, par value $.25 per share
("Preferred Stock") and (ii) 50,000,000 shares of Common
Stock, par value $.25 per share ("Common Stock").
The following is a statement of the designations,
preferences qualifications, limitations, restrictions and
the special or relative rights granted to or imposed upon
the shares of each such class:
Preferred Stock
(a) Issue in Series. Preferred Stock may be
issued from time to time in one or more series, each such
series to have the terms stated herein and in the resolution
of the board of directors providing for its issue. All
shares of any one series of Preferred Stock shall be
identical, but shares of different series of Preferred Stock
need not rank equally or be identical except insofar as
provided by law or hereunder.
(b) Creation of Series. The board of directors
shall have authority by resolution to cause to be created
one or more series of Preferred Stock, and to determine and
fix with respect to each series, prior to the issuance of
any shares of the series to which such resolution relates:
(i) The distinctive designation of the
<PAGE>
series and the number of shares which shall constitute the
series, which number may be increased or decreased (but not
below the number of shares then outstanding) from time to
time by action of the board of directors;
(ii) The dividend rate and the times of
payment of dividends on the shares of the series, whether
dividends shall be cumulative, and, if so, from what date or
dates;
(iii) The price or prices at which, and
the terms and conditions on which, the shares of the series
may be redeemed at the option of the Corporation;
(iv) Whether or not the shares of the series
shall be entitled to the benefit of a retirement or sinking
fund to be applied to the purchase or redemption of such
shares and, if so entitled, the annual amount of such fund
and the terms and provisions relative to the operation
thereof;
(v) Whether or not the shares of the series
shall be convertible into, or exchangeable for, shares of
any other series of the same or any other class or classes
of stock of the Corporation, and if so convertible or
exchangeable, the conversion price or prices, or the rates
of exchange, and any adjustments thereof, if any, at which
such conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;
(vi) The rights of the shares of the series
in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
(vii) Whether or not the shares of the
series shall have priority over or parity with or be junior
to the shares of any other series or class in any respect or
shall be entitled to the benefit of limitations restricting
the issuance of shares of any other series or class having
priority over or being on a parity with the shares of such
series in any respect, or restricting the payment of
dividends on, or the making of other distributions in
respect of shares of any other series or class ranking
junior to the shares of the series as to dividends or
assets, or restricting the purchase or redemption of the
shares of any such junior series or class, and the terms of
any such restrictions;
(viii) Whether the series shall have
voting rights, in addition to the voting rights provided by
law, and, if so, the terms of such voting rights; and
(ix) Any other preferences qualifications,
privileges and other relative or special
<PAGE>
rights and limitations of that series.
(c) Dividends. Holders of Preferred Stock shall
be entitled to receive, when and as declared by the board of
directors, out of funds legally available for the payment
thereof, dividends at the rates fixed by the board of
directors for the respective series, and no more, before any
dividends shall be declared and paid, or set apart for
payment, on Common Stock with respect to the same dividend
period.
(d) Preference on Liquidation. In the event of
the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, holders of each series of
Preferred Stock shall be entitled to receive the amount
fixed for such series plus, in the case of any series on
which dividends shall have been determined by the board of
directors to be cumulative, an amount equal to all dividends
accumulated and unpaid thereon to the date of final
distribution whether or not earned or declared. If the
assets of the Corporation are not sufficient to pay such
amounts in full, holders of all shares of Preferred Stock
shall participate ratably in the distribution of assets in
proportion to the full amounts to which they are entitled or
in such order or priority, if any, as shall have been fixed
in the resolution or resolutions providing for the issuance
of the series of Preferred Stock. Neither the merger nor
consolidation of the Corporation into or with any other
corporation, nor a sale, transfer or lease of all or part of
its assets, shall be deemed a liquidation of the Corporation
within the meaning of this paragraph.
(e) Redemption. The Corporation at the option of
the board of directors may redeem all or part of the shares
of any series of Preferred Stock on the terms and conditions
fixed for such series. In case of the redemption of less
than all outstanding shares of any series of Preferred
Stock, the shares to be redeemed shall be selected by lot or
in such other manner as the board of directors determines.
(f) Voting Rights. Except as otherwise required
by law or as otherwise provided in any certificate creating
any series of Preferred Stock, the holders of such of the
series of Preferred Stock, if any, as shall have been
granted such power pursuant to any certificate creating any
series of Preferred Stock shall, together with the holders
of Common Stock, exclusively possess voting power in the
election of directors and for all other purposes, and the
holders of the other series of Preferred Stock shall have no
voting power and shall not be entitled to any notice of any
meeting of shareholders.
Series A Junior Participating Preferred Stock
<PAGE>
(a) Designation and Amount. There shall be a
series of Preferred Stock designated as "Series A Junior
Participating Preferred Stock" and the aggregate number of
shares constituting such series shall be 50,000.
(b) Dividends and Distributions.
(i) Subject to the prior and superior rights
of the holders of any shares of any series of Preferred
Stock ranking prior and superior to the shares of Series A
Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior
Participating Preferred Stock shall be entitled to receive,
when, as and if declared by the board of directors out of
funds legally available for the purpose, quarterly dividends
payable in cash on March 31, June 30, September 30 and
December 31 in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing
on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A
Junior Participating Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a)
$10 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share
amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A
Junior Participating Preferred Stock. In the event the
Corporation shall at any time after January 16, 1990 (the
"Rights Declaration Date") (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares
of Series A Junior Participating Preferred Stock were
entitled immediately prior to such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to
such event.
(ii) The Corporation shall declare a
dividend or distribution on the Series A Junior
Participating Preferred Stock as provided in paragraph (i)
above immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend
<PAGE>
payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared
on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $10 per share on the
Series A Junior Participating Preferred Stock shall
nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(iii) Dividends shall begin to
accrue and be cumulative on outstanding shares of Series A
Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of
such shares of Series A Junior Participating Preferred
Stock, unless the date of issue of such shares is prior to
the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the
date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock
in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may
fix a record date for the determination of holders of shares
of Series A Junior participating Preferred Stock entitled to
receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
(c) Voting Rights. The holders of shares of
Series A Junior Participating Preferred Stock shall have the
following voting rights:
(i) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Junior
Participating Preferred Stock shall entitle the holder
thereof to 1,000 votes on all matters submitted to a vote of
the shareholders of the Corporation. In the event the
Corporation shall at any time after the Rights Declaration
Date (a) declare any dividend on Common Stock payable in
shares of Common Stock, (b) subdivide the outstanding Common
Stock, or (c) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the number
of votes per share to which holders of shares of Series A
Junior Participating Preferred Stock were entitled
immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which
is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.
<PAGE>
(ii) Except as otherwise provided herein or
by law, the holders of shares of Series A Junior
Participating Preferred Stock and the holders of shares of
common Stock shall vote together as one class on all matters
submitted to a vote of shareholders of the Corporation.
(iii) (A) If at any time dividends on
any Series A Junior Participating Preferred Stock shall be
in arrears in an amount equal to six (6) quarterly dividends
thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period")
which shall extend until such time when all accrued and
unpaid dividends for all previous quarterly dividend periods
and for the current quarterly dividend period on all shares
of Series A Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart
for payment. During each default period, all holders of
Preferred Stock (including holders of the Series A Junior
Participating Preferred Stock) with dividends in arrears in
an amount equal to six (6) quarterly dividends thereon,
voting as a class, irrespective of series, shall have the
right to elect two (2) directors.
(B) During any default period, such
voting right of the holders of Series A Junior Participating
Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (C) of this
paragraph (c)(iii) or at any annual meeting of shareholders,
and thereafter at annual meetings of shareholders, provided
that neither such voting right nor the right of the holders
of any other series of Preferred Stock, if any, to increase,
in certain cases, the authorized number of directors shall
be exercised unless the holders of ten percent (10)% in
number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of
the holders of Common Stock shall not affect the exercise by
the holders of Preferred Stock of such voting right. At any
meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing
default period, they shall have the right, voting as a
class, to elect directors to fill such vacancies, if any, in
the board of directors as may then exist up to two (2)
directors or, if such right is exercised at an annual
meeting, to elect two (2) directors. If the number which
may be so elected at any special meeting does not amount to
the required number, the holders of the Preferred Stock
shall have the right to make such increase in the number of
directors as shall be necessary to permit the election by
them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect
directors in any default period and during the continuance
of such period, the number of directors shall not be
increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights
<PAGE>
of any equity securities ranking senior to or pari passu
with the Series A Junior Participating Preferred Stock.
(C) Unless the holders of Preferred
Stock shall, during an existing default period, have
previously exercised their right to elect directors, the
board of directors may order, or any shareholder or
shareholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Preferred
Stock outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Preferred
Stock, which meeting shall thereupon be called by the
President, a Vice-President or the Secretary of the
Corporation. Notice of such meeting and of any annual
meeting at which holders of Preferred Stock are entitled to
vote pursuant to this subparagraph (C) shall be given to
each holder of record of Preferred Stock by mailing a copy
of such notice to him at his last address as the same
appears on the books of the Corporation. Such meeting shall
be called for a time not earlier than 20 days and not later
than 60 days after such order or request or in default of
the calling of such meeting within 60 days after such order
or request, such meeting may be called on similar notice by
any shareholder or shareholders owning in the aggregate not
less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding. Notwithstanding the provisions
of this subparagraph (C), no such special meeting shall be
called during the period within 60 days immediately
preceding the date fixed for the next annual meeting of the
shareholders.
(D) In any default period, the holders
of Common Stock, and other classes of stock of the
Corporation if applicable, shall continue to be entitled to
elect the whole number of directors until the holders of
Preferred Stock shall have exercised their right to elect
two (2) directors voting as a class, after the exercise of
which right (x) the directors so elected by the holders of
Preferred Stock shall continue in office until their
successors shall have been elected by such holders or until
the expiration of the default period, and (y) any vacancy in
the board of directors may (except as provided in
subparagraph (B) of this paragraph (c)(iii) be filled by
vote of a majority of the remaining directors theretofore
elected by the holders of the class of stock which elected
the director whose office shall have become vacant.
References in this subparagraph (D) to directors elected by
the holders of a particular class of stock shall include
directors elected by such directors to fill vacancies as
provided in clause (y) of the preceding sentence.
(E) Immediately upon the expiration of
a default period, (x) the right of the holders of Preferred
Stock as a class to elect directors shall cease, (y) the
<PAGE>
term of any directors elected by the holders of Preferred
Stock as a class shall terminate, and (z) the number of
directors shall be such number as may be provided for in the
Articles of Incorporation or Bylaws irrespective of any
increase made pursuant to the provisions of subparagraph (B)
of this paragraph (c)(iii) (such number being subject,
however, to change thereafter in any manner provided by law
or in the Articles of Incorporation or Bylaws). Any
vacancies in the board of directors effected by the
provisions of clauses (y) and (z) in the preceding sentence
may be filled by a majority of the remaining directors.
(iv) Except as set forth herein, holders of
Series A Junior participating Preferred Stock shall have no
special voting rights and their consent shall not be
required (except to the extend they are entitled to vote
with holders of Common Stock as set forth herein) for taking
any corporate action.
(d) Certain Restrictions
(i) Whenever quarterly dividends or other
dividends or distributions payable on the Series A Junior
Participating Preferred Stock as provided in paragraph (b)
are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on
shares of Series A Junior Participating Preferred Stock
outstanding shall have been paid in full, the Corporation
shall not
(A) declare or pay dividends on, make
any other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior
Participating Preferred Stock;
(B) declare or pay dividends on or make
any other distributions on any shares of stock ranking on a
party (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably
on the Series A Junior Participating Preferred Stock and all
such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(C) redeem or purchase or otherwise
acquire for consideration shares of any stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares
of any such parity stock in exchange for shares of any stock
<PAGE>
of the Corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series A
Junior Participating Preferred Stock; or
(D) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating
Preferred Stock, or any shares of stock ranking on a parity
with the Series A Junior Participating Preferred Stock,
except in accordance with a purchase offer made in writing
or by publication (as determined by the board of directors)
to all holders of such shares upon such terms as the board
of directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series or classes.
(ii) the Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise
acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph
(d)(i), purchase or otherwise acquire such shares at such
time and in such manner.
(e) Reacquired Shares. Any shares of Series A
Junior Participating Preferred Stock purchased or otherwise
acquired by the Corporation in any manner whatsoever shall
be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the board of
directors, subject to the conditions and restrictions on
issuance set forth herein.
(f) Liquidation, Dissolution or Winding Up.
(i) Upon any liquidation (voluntary or
otherwise), dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior
Participating Preferred Stock unless, prior thereto, the
holders of shares of Series A Junior Participating Preferred
Stock shall have received $10 per share, plus an amount
equal to accrued and unpaid dividends any distribution
thereon, whether or not declared, to the date of such
payment (the "Series A Liquidation Preference"). Following
the payment of the full amount of the Series A Liquidation
Preference, no additional distributions shall be made to the
holders of shares of Series A Junior Participating Preferred
Stock unless, prior thereto, the holders of shares of Common
Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (a)
<PAGE>
the Series A Liquidation Preference by (b) 1,000 (as
appropriately adjusted as set forth in paragraph (iii) below
to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such
number in clause (b), the AAdjustment Number@). Following
the payment of the full amount of the Series A Liquidation
Preference and the Common Adjustment in respect of all
outstanding shares of Series A Junior participating
Preferred Stock and common Stock, respectively, holders of
Series A Junior Participating Preferred Stock and holders of
shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with
respect to such Preferred Stock and common Stock, on a per
share basis, respectively.
(ii) In the event, however, that there are
not sufficient assets available to permit payment in full of
the Series A Liquidation Preference and the liquidation
preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Junior
Participating Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation
preferences. In the event, however, that there are not
sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(iii) In the event the Corporation shall
at any time after the Rights Declaration Date (a) declare
any dividend on Common Stock payable in shares of Common
Stock, (b) subdivide the outstanding Common Stock, or (c)
combine the outstanding common Stock into a smaller number
of shares, then in each such case the Adjustment Number in
effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(g) Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any
such case the shares of Series A Junior Participating
Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to
1,000 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is
<PAGE>
changed or exchanged. In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred
Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(h) No Redemption. The shares of Series A Junior
Participating Preferred Stock shall not be redeemable.
(i) Ranking. The Series A Junior Participating
Preferred Stock shall rank junior to all other series of
Preferred Stock as to the payment of dividends and the
distribution of assets unless the terms of any such series
shall provide otherwise.
(j) Amendment. The Articles of Incorporation
of the Corporation shall not be further amended in any
manner which would materially alter or change the powers,
preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or
more of the outstanding shares of Series A Junior
Participating Preferred Stock, voting separately as a class.
(k) Fractional Shares. Series A Junior
Participating Preferred Stock may be issued in fractions of
a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights,
receive dividends participate in distributions and to have
the benefit of all other rights of holders of Series A
Junior Participating Preferred Stock.
Common Stock
(a) Dividends. Holders of Common Stock shall be
entitled to receive such dividends as may be declared by the
board of directors, except that the Corporation will not
declare, pay or set apart for payment any dividend on shares
of Common Stock (other than dividends payable in Common
Stock), or directly or indirectly make any distribution on,
redeem, purchase or otherwise acquire any such shares, if at
the time of such action the Corporation is in default with
respect to any dividend due and payable on, or any sinking
or purchase fund requirement relating to, any shares of
Preferred Stock.
<PAGE>
(b) Distribution of Assets. In the event of
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, holders of Common Stock shall be
entitled to receive pro rata all of the remaining assets of
the Corporation available for distribution to its
shareholders after all amounts to which the holders of
Preferred Stock are entitled have been paid or set aside in
cash for payment.
(c) Voting Rights. Except as otherwise required
by law or provided in any certificate creating any series of
Preferred Stock, the holders of Common Stock shall have the
exclusive right to vote in the election of directors and for
all other purposes, each such holder being entitled to one
vote for each share thereof held.
6. Vote Required for Certain Significant Transactions
(a) Higher Vote for Certain Significant
Transactions. In addition to any affirmative vote required
by law or these Articles of Incorporation, and except as
otherwise expressly provided in paragraph (b) of this
Article 6:
(i) any merger or consolidation of the
Corporation or any Subsidiary (as hereinafter defined) with
(a) any Related Person (as hereinafter defined), or (b) any
other corporation (whether or not itself a Related Person)
which is, or after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of a Related Person; or
(ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition(in one transaction or
a series of transactions) to or with any Related Person or
any Affiliate of any Related Person of any assets of the
Corporation or any Subsidiary having an aggregate Fair
Market Value (as hereinafter defined) of $1,000,000 or more;
or
(iii) the issuance or transfer by the
Corporation or any Subsidiary (in one transaction or a
series of transactions) of any securities of the Corporation
or any Subsidiary to any Related Person or any Affiliate of
any Related Person in exchange for cash, securities or other
property (or a combination thereof) having an aggregate Fair
Market Value of $1,000,000 or more; or
(iv) the purchase by the Corporation or any
Subsidiary (in one transaction or a series of transactions
within a two year period) of any outstanding shares of
capital stock of the Corporation which entitles the holder
thereof to vote generally in the election of directors (the
"Voting Stock") in exchange for cash, securities or other
property (or a combination thereof) having an aggregate Fair
<PAGE>
Market Value of $1,000,000 or more; or
(v) the adoption of any plan or proposal for
the liquidation or dissolution of the Corporation proposed
by or on behalf of a Related Person or any Affiliate of any
Related Person; or
(vi) any reclassification of securities
(including any reverse stock split), or recapitalization of
the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise
involving a Related Person) which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible
securities of the Corporation or any Subsidiary which is
directly or indirectly owned by any Related Person or any
Affiliate of any Related Person;
shall require the affirmative vote of the holders of at
least 80% of the voting power of the then-outstanding shares
of voting Stock, voting together as a single class. (For
purposes of this Article 6, each share of the Voting Stock
shall have the number of votes granted to it pursuant to
Article 5 of these Articles of Incorporation). Such
affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage
may be specified, by law or in any agreement with any
national securities exchange or otherwise.
The term ASignificant Transaction@ as used in this
Article 6 shall mean any transaction which is referred to in
any one or more of paragraphs (i) through (vi) of paragraph
(a) of this Article 6.
(b) When Higher Vote is Not Required. The
provisions of paragraph (a) of this Article 6 shall not be
applicable to any particular Significant Transaction, and
such Significant Transaction shall require only such action
as is required by law, the Bylaws of the Corporation, and
any other provision of these Articles of Incorporation, if
all of the conditions specified in either of the following
paragraphs (i) and (ii) are met:
(i) The Significant Transaction shall have
been approved by a majority of the continuing Directors (as
hereinafter defined) or
(ii) All of the following conditions shall
have been met:
(A) The aggregate amount of the cash
and the Fair Market Value as of the date of the consummation
of the Significant Transaction of consideration other than
<PAGE>
cash to be received per share by holders of Common Stock in
such Significant Transaction shall be at least equal to the
highest of the following:
(1) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Related Person for any
shares of Common Stock acquired by it (a) within the two-
year period immediately prior to the first public
announcement of the proposal of the significant Transaction
(the "Announcement Date"), or (b) in the transaction in
which it became a Related Person, whichever is higher; and
(2) the Fair Market Value per
share of Common Stock on the Announcement Date or on the
date on which the Related Person became a Related Person,
whichever is higher; and
(3) the earnings per share of
Common Stock for the four full consecutive fiscal quarters
immediately preceding the Announcement Date as to which
financial results have been published by the Corporation,
multiplied by the then highest price/earnings multiple (if
any) of such Related Person or any of its Affiliates as
customarily computed and reported in the financial
community; and
(4) the price per share equal to
the Fair Market Value per share of Common Stock determined
pursuant to subparagraph (A)(2) of this paragraph (b)(ii),
multiplied by a fraction the numerator of which is the
highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers= fees)
paid by the Related Person for any shares of Common Stock
acquired by it within the two-year period immediately prior
to the Announcement Date and the denominator of which is the
Fair Market Value per share of Common Stock on the first day
in such two-year period upon which the Related Person
acquired any shares of Common Stock.
(B) the consideration to be received by
the holders of Common Stock in such Significant Transaction
shall be either cash or the same type of consideration used
by the Related Person in acquiring the largest portion of
its holdings of Common Stock prior to the first public
announcement of the proposed Significant Transaction.
(C) After such Related Person has
become a Related Person and prior to the consummation of
such Significant Transaction: (1) there shall have been (a)
no failure to pay nor reduction in the annual rate of
dividends paid on the Common Stock (as such rate may be
adjusted from time to time to reflect changes in the
Corporation=s capitalization) unless such failure to pay or
<PAGE>
reduction is approved by a majority of the continuing
Directors; and (2) such Related Person shall not have become
the beneficial owner of any additional shares of Voting
Stock except as part of the transaction which results in
such Related Person becoming a Related Person.
(D) after such Related Person has
become a Related Person, such Related Person shall not have
received the benefit, directly or indirectly (except
proportionately as a shareholder of the Corporation), of any
loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation of or
in connection with such Significant Transaction or
otherwise.
(E) A proxy or information statement
describing the proposed Significant Transaction and
complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or
regulations) shall be mailed to public shareholders of the
Corporation at least 30 days prior to the consummation of
such Significant Transaction (whether or not such proxy or
information statement is required to be mailed pursuant to
such Act or subsequent provisions).
(c) Certain Definitions. For the purposes of
this Article 6:
(i) A "person" shall mean any individual,
firm, corporation or other entity.
(ii) "Related Person" shall mean any person
(other than the Corporation or any Subsidiary) who or which:
(A) is the beneficial owner, directly
or indirectly, of more than 10% of the voting power of the
outstanding Voting Stock; or
(B) is an Affiliate of the Corporation
and at any time within the two-year period immediately prior
to the date in question was the beneficial owner, directly
or indirectly, of 10% or more of the voting power of the
then-outstanding Voting Stock; or
(C) is an assignee of or has otherwise
succeeded to any shares of Voting Stock which were at any
time within the two-year period immediately prior to the
date in question beneficially owned by any Related Person,
if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not
involving a public offering within the meaning of the
Securities Act of 1993.
<PAGE>
If two or more person shall at any time be
"Related Persons," each Related Person whose involvement in
a transaction causes it to be a Significant Transaction
shall be treated as: (a) "the Related Person" for purposes
of the application of the requirements of paragraph (b) of
this Article 6 to such transaction, and (b) "the Related
Person in question" for purposes of determining whether a
person is a "Continuing Director" with respect to such
transaction.
(iii) A person shall be a "beneficial owner" of
any Voting Stock:
(A) which such person or any of its
Affiliates or Associates (as hereinafter defined)
beneficially owns, directly or indirectly; or
(B) which such person or any of its
Affiliates or Associates has (1) the right to acquire
(whether such right is exercisable immediately or only after
the passage of time), pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (2)
the right to vote pursuant to any agreement, arrangement or
understanding; or
(C) which is beneficially owned, directly or
indirectly, by any other person with which such person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
(iv) For the purposes of determining whether a
person is a Related Person pursuant to paragraph (c)(ii),
the number of share of Voting Stock deemed to be outstanding
shall include shares deemed owned through application of
paragraph (c)(iii) but shall not include any other shares of
Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(v) "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulation under the Securities
Exchange Act of 1934, as in effect on May 5, 1983.
(vi) "Subsidiary" means any corporation of which
a majority of any class of equity security is owned,
directly or indirectly, by the Corporation; provided,
however, that for the purposes of the definition of Related
Person set forth in paragraph (c)(ii), the term "Subsidiary"
shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly,
by the Corporation.
<PAGE>
(vii) "Continuing Director" means any member of
the board of directors of the Corporation (the "Board") who
(a) was a member of the Board as of May 5, 1983, or (b) is
not affiliated with the Related Person and was a member of
the Board prior to the time that the Related Person became a
Related Person, or (c) is a successor of a Continuing
Director who is unaffiliated with the Related Person and is
recommended to succeed a Continuing Director by a majority
of Continuing Directors then on the Board.
(viii) "Fair Marker Value" means: (a) in the
case of stock, the highest closing sale price during the 30-
day period immediately preceding the date in question of a
share of such stock on the Composite Tape for New York Stock
Exchange--Listed Stocks, or, if such stock is not quoted on
the Composite Tape, on the New York Stock Exchange, or, if
such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is
listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to
a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities
Deals, Inc. Automated Quotations System or any system then
in use, or if no such quotations are available, the fair
market value on the date in question of a share of such
stock as determined by the Board in good faith; and (b) in
the case of property other than cash or stock, the fair
market value of such property on the date in question as
determined by the Board in good faith.
(ix) In the event of any Significant Transaction
in which the Corporation survives, the phrase "consideration
other than cash to be received" as used in subparagraph (A)
of paragraph (b)(ii) of this Article 6 shall include the
shares of Common Stock, and/or the shares of any other class
of outstanding Voting Stock retained by the holders of such
shares.
(x) The Continuing Directors of the Corporation
shall have the power and duty to determine for the purposes
of this Article 6, on the basis of information known to them
after reasonable inquiry, (a) whether a person is a Related
Person, (b) the number of shares of Voting Stock
beneficially owned by any person, (c) whether a person is an
Affiliate or Associate of another, and (d) whether the
assets which are the subject of any Significant Transaction
have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any
Subsidiary in any Significant Transaction has an aggregate
Fair Market Value of $1,000,000 or more.
(d) No Effect on Fiduciary Obligations of
Related Persons. Nothing contained in this Article 6 shall
<PAGE>
be construed to relieve any Related Person from any
fiduciary obligation imposed by law.
7. Evaluation of Certain Proposals by the Board of
Directors. The board of directors of the Corporation, when
evaluating any proposal from another party to (a) make a
tender offer for securities of the Corporation, (b) merge or
consolidate the Corporation with another corporation, (c)
purchase or otherwise acquire substantially all of the
properties or assets of the Corporation, (d) engage in any
transaction of the sort specified in paragraph (a) of
Article 6 of these Articles of Incorporation, or (e) engage
in any other transaction having a similar effect upon the
properties, operations or control of the Corporation, shall,
in connection with the exercise of its judgment in
determining what is the best interests of the Corporation
and its shareholders, give due consideration to the
following:
(i) the character, integrity, business
philosophy and financial status of the other party or
parties to the transaction;
(ii) the consideration to be received by the
Corporation or its shareholders in connection with such
transaction, as compared to: (a) the current market price
or value of the Corporation's properties or securities; (b)
the estimated future value of the Corporation, its
properties or securities; and (c) such other measures of the
value of the Corporation, its properties or securities as
the directors may deem appropriate.
(iii) the projected social, legal and
economic effects of the proposed action or transaction upon
the Corporation, its employees, suppliers and customers and
the communities in which the Corporation does business;
(iv) the general desirability of the
Corporation's continuing as an independent entity; and
(v) such other factors as the board of
directors may deem relevant.
8. Directors
(a) Number, Election and Term. The number
of the directors of the Corporation shall be fixed from time
to time by or pursuant to the Bylaws of the Corporation.
The directors shall be classified with respect to the time
for which they severally hold into three classes, as nearly
their equal in number as possible, as shall be provided in
the manner specified in the bylaws of the Corporation. At
the annual meeting of shareholders held in 1990, one class
shall be originally elected for a term expiring at the
<PAGE>
annual meeting of shareholders to be held in 1991, another
class shall be originally elected for a term expiring at the
annual meeting of shareholders to be held in 1992, and
another class shall be originally elected for a term
expiring at the annual meeting of shareholders to be held in
1993, with the members of each class to hold office until
their successors are elected and qualified. At each
succeeding annual meeting of the shareholders of the
Corporation, the successors of the class of directors whose
term expires at that meeting shall, subject to paragraph (c)
of this Article 8, be elected by plurality vote of all votes
cast at such meeting to hold office for a term expiring at
the annual meeting of shareholders held in the third year
following the year of their election.
(b) Vacancies. Vacancies in the board of
directors, including vacancies resulting from an increase in
the number of directors, shall be filled only by a majority
of the directors then in office, though less than a quorum,
and each person so elected shall be a director to serve for
the balance of the unexpired term and until his successor is
duly elected and qualified.
(c) Cumulative Voting in Certain Circumstances
(i) Except as and to the extent otherwise
provided in this paragraph (c) shareholders of the
Corporation shall not be entitled to cumulative voting
rights in any election of directors of the Corporation.
(ii) There shall be cumulative voting in any
election of directors of the Corporation on or after the
occurrence of both of the following events:
(A) the public announcement (which, for
purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), by the Corporation or a 40% Shareholder
that a 40% Shareholder has become such.
and
(B) such 40% Shareholder makes, or in any
way participates in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are defined or
used in Regulation 14A under the Exchange Act) or becomes a
"participant" in any "election contest" (as such terms are
defined or used in Rule 14a-11 of the Exchange Act) with
respect to the Corporation; seeks to advise or influence any
person (within the meaning of Section 13(d)(3) of the
Exchange Act) with respect to the voting of any securities
of the Corporation: or executes any written consent in lieu
of a meeting of holders of the Voting Stock.
<PAGE>
"40% Shareholder" shall mean any Person who or which,
together with all Affiliates and Associate of such Person,
shall be the Beneficial Owner of 40% or more of the Voting
Stock but shall not include (i) the Corporation, (ii) any
wholly owned Subsidiary, (iii) any employee benefit plan of
the Corporation or of any Subsidiary, or (iv) any Person
holding securities of the Corporation for or pursuant to the
terms of any such plan.
Notwithstanding the foregoing, no Person shall become a "40%
Shareholder" as the result of an acquisition of Common Stock
by the Corporation which, by reducing the number of shares
outstanding, increases the proportionate number of shares
beneficially owned by such Person to 40% or more of the
Voting Stock; provided, however, that if a Person who would
otherwise be a 40% Shareholder but for the provisions of
this sentence shall, after such share purchases by the
Corporation, become the Beneficial Owner of any additional
Voting Stock then such Person shall be deemed to be a "40%
Shareholder."
(ii) Certain Definitions. For purposes of
this Article 8:
"Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in rule 12b-2 of the General
Rules and Regulations under the Exchange Act as in effect on
May 3, 1990.
A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(A) which such Person or any such Persons's
affiliates or Associates beneficially owns, directly or
indirectly:
(B) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire
(whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement
or understanding (whether or not in writing), or upon the
exercise of conversion rights, exchange rights, rights
(other than the Rights granted pursuant to the Flip-In
Rights Agreement and Flip-Over-Rights Agreement between the
Corporation and American Stock Transfer & Trust Company,
dated as of January 16, 1990), warrants or options, or
otherwise or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however,
that a Person shall not be deemed the Beneficial Owner of,
or to beneficially own, securities tendered pursuant to a
tender or exchange offer made by or on behalf of such Person
or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange;
or
<PAGE>
(C) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or
any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any securities of
the Corporation.
"Person" shall mean any individual, firm, corporation
or other entity, and shall include any successor (by merger
or otherwise) of such entity.
"Subsidiary" shall mean any corporation or other entity
of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or
indirectly, by the Corporation.
"Voting Stock" means Common Stock and any other
securities of the Corporation entitled to vote generally for
the election of directors or any security convertible into
or exchangeable for or exercisable for the purchase of
Common Stock or other securities of the Corporation entitled
to vote generally for the election of directors.
9. Vote Required for Amendment of Articles 6, 7, 8 or
9. Any provision in these Articles of Incorporation or in
the Bylaws of the Corporation to the contrary
notwithstanding, no provisions of Articles 6, 7, 8 or 9 of
these Articles shall be altered, amended, supplemented or
repealed by the shareholders of the Corporation, and no
provision of the Bylaws or of these Articles of
Incorporation inconsistent with such provisions shall be
adopted by the shareholders of the Corporation, except by
the affirmative vote of the holders of at least 80% of the
outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors,
considered for this purpose as one class.
Exhibit 4a
Page 1
Front Side of Certificate of Stock
Picture of Scientist
in early laboratory scene
FOUNDED IN 1923 BY HERMAN O. WEST
Number Shares
W_______________
COMMON STOCK COMMON STOCK
INCORPORATED UNDER THE LAWS CUSIP 955306 10 5
OF THE COMMONWEALTH OF
PENNSYLVANIA
WEST PHARMACEUTICAL SERVICES, INC.
This certifies that
SEE REVERSE
FOR CERTAIN
DEFINITIONS
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE
PAR VALUE OF $.25 PER SHARE OF
West Pharmaceutical Services, Inc. transferable on the books of
the corporation by the holder hereof in person or by duly
authorized attorney upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are
issued and shall be held subject to all the provisions of (1) the
Articles of Incorporation and all amendments thereto and (2) any
statement on the reverse side of this certificate.
This certificate is not valid unless countersigned and
registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the corporation and the
facsimile signatures of its duly authorized officers.
Dated:
John R. Gailey Picture of William G. Little
Secretary Company Seal Chairman of the Board
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, N.Y.)
BY TRANSFER AGENT
AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE>
Back side of Certificate of Stock Page 2
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or
regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT --Custodian --
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to Minors
JT TEN - as joint tenants Act_________________________
with right of (State)
survivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above
list.
For value received, ________hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE______________________
_________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE,
OF ASSIGNEE)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
of the capital stock represented by the within Certificate, and
do hereby irrevocably constitute and appoint
__________________________________________ Attorney to transfer
the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated______________________
___________________________________________________________
NOTICE: The signature to this agreement must correspond with the
name as written upon the face of the certificate in every
particular, without alteration or enlargement or any change
whatever.
This certificate also evidences and entitles the holder
hereof to certain Flip-In Rights as set forth in a Flip-In Rights
Agreement between The West Company, Incorporated and American
Stock Transfer & Trust Company, as Right Agent, dated as of
January 16,
<PAGE>
Back Side of Certificate of Stock (continued) Page 3
1990 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file
at the principal executive offices of West Pharmaceutical
Services, Inc..
Under certain circumstances , as set forth in the Rights
Agreement, such Flip-In Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.
The Company will mail to the holder of this certificate a copy of
the Rights Agreement, as in effect on the date of mailing,
without charge promptly following receipt of a written request
therefor.
Under certain circumstances, Flip-In Rights beneficially
owned by Acquiring Persons or Associates or Affiliates thereof
(as defined in the Rights Agreement) and any subsequent holder of
such Flip-In Rights may become null and void.
This certificate also evidences and entitles the holder
hereof to certain Flip-Over Rights as set forth in a Flip-Over
Rights Agreement between The West Company, Incorporated, and
American Stock Transfer & Trust Company, as Rights Agent, dated
as of January 16, 1990 (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of the
Company.
Under certain circumstances, as set forth in the Rights
Agreement, such Flip-Over Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.
The Company will mail to the holder of this certificate a copy of
the Rights Agreement, as in effect on the date of mailing,
without charge promptly following receipt of a written request
therefor.
Exhibit 10 (e)
West Pharmaceutical Services, Inc.
Executive Incentive Bonus Plan
The Incentive Bonus Plan is based on the following concepts:
* Excellent service to our customers will create shareholder
value.
* Employees must share in the Company's success.
* Earnings per share (EPS) is the measurement of success for
the total corporation.
Here's how the plan works:
TARGET BONUS
The target bonus is a specific percentage of your base salary (in
effect on December 31 of the prior year) and represents the
amount of bonus you will receive if 100% of all performance
factors is achieved.
PERFORMANCE FACTORS
There are two performance factors which are used to calculate
bonuses:
* 75% of the bonus calculation (referred to as the "EPS
Portion") will depend on achievement of the earnings-per-
share (EPS) target contained in the Company s business plan
for the bonus year.
* 25% of the bonus calculation will be based on the board of
directors' evaluation of:
1. Our success in growing revenues from West's current
businesses
2. Our success in growing West's revenues through new
business opportunities (acquisitions, mergers,
licensing agreements, etc.)
The EPS Portion of your bonus is tied directly to the percentage
achievement of the EPS target. Thus, for example, if the Company
achieves 110% of budgeted EPS results, you will receive 110% of
your Bonus Portion. Of course, this means that your EPS Portion
will be less than 100% if EPS results fall short of budget. There
is no "maximum" payout opportunity, but no bonus at all will be
paid if EPS does not equal at least 89% of the EPS target.
<PAGE>
ILLUSTRATION OF BONUS CALCULATION
An executive earning $120,000, whose target bonus opportunity is
30%, would have his/her bonus calculated as follows if the
Company achieves an 101% of budgeted EPS and the Board
determines that management has achieved 100% for revenue
growth success:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C><C>
Target Bonus %Achieved Bonus% Bonus$
EPS 75% x Bonus = Opp. x (from scale) = Earned x Salary = Earned
Rev. Target Bonus Bonus$
Growth 25% x Bonus = Opp. x %Achieved = Earned x Salary = Earned
EPS 75% x 30% = 22.5% x 101% = 22.73% x 120,000 = $27,276
Rev.
Growth 25% x 30% = 7.5% x 100% = 7.5% x 120,000 = $9,000
Total Bonus Earned 30.4% = $36,276
</TABLE>
BONUS AND INCENTIVE SHARES
You will receive a portion of your annual bonus in shares of the
Company's common stock. Here's how this program works:
* Your total bonus award will be calculated applying
appropriate tax deductions. 75% of that after-tax amount
will be paid in cash (check) and 25% will be paid in shares
of the Company s common stock (referred to as Bonus
Shares ) based on the fair market value of the shares at the
time of award.
* A number of restricted shares (referred to as "Incentive
Shares") equal to 25% of the Bonus Shares will also be
issued to you at that time.
* The Bonus Shares and Incentive will be deposited into an
account in your name with a brokerage firm selected by the
Company. You will receive dividends from Bonus Shares and
Incentive Shares, which will be automatically reinvested in
additional shares of stock.
* The Incentive Shares will vest (i.e., will be yours to keep)
at the end of four years from the date of award, so long as
you do not sell or transfer your Bonus Shares during that
period.
* If you sell the Bonus Shares or leave the Company for any
reason other than disability, retirement or death, the
Incentive Shares awarded to you will be forfeited.
* If your employment terminates due to death, retirement or
disability, the restrictions will lapse and you will be
entitled to receive a portion of the Incentive Shares
according to the following schedule:
25% with at least one but less than two years continuous
ownership of the Bonus Shares.
50% with at least two but less than three years
continuous ownership of the Bonus Shares.
75% with at least three but less than four years
continuous ownership of the Bonus Shares.
Ownership records will be reviewed annually to verify continuous
ownership.
STOCK OWNERSHIP GUIDELINE
Your personal stock ownership guideline is_________% of your base
salary and is expected to be achieved in 5-7 years from the year
an individual becomes eligible to participate in the Incentive
Bonus Plan.
MONITORING OUR PROGRESS
Our progress in achieving the EPS target will be communicated
throughout the year, and your manager will review your individual
objectives on a quarterly basis.
Use your TQM skills to lead the organization in overachieving our
business objectives. You will share in the reward when we
succeed.
ELIGIBILITY
Eligibility and the amount and type of awards under this plan are
solely at the discretion of management and are not guaranteed
under any circumstances. Participants must be active employees
on December 31, 1999 to be eligible for bonus payment
consideration.
Exhibit 10 (n)
THE WEST COMPANY, INCORPORATED
NON-QUALIFIED DEFERRED COMPENSATION PLAN
FOR
DESIGNATED EXECUTIVE OFFICERS
ADOPTED AUGUST 30, 1994
REFLECTING AMENDMENTS
EFFECTIVE ON MARCH 7, 1995 AND APRIL 28, 1998
<PAGE>
THE WEST COMPANY
NON-QUALIFIED DEFERRED COMPENSATION
PLAN FOR DESIGNATED EXECUTIVE OFFICERS
The West Company (the "Company") hereby adopts this Plan to
permit designated Executive Officers of the Company to defer
receipt of a specified portion of their annual compensation:
1. Eligible Officers: Employees of the Company or its
subsidiaries are eligible to make the election set forth in
this Plan if they are: (i) employed in the United Sates as
an Executive Officer of the company or any of its
subsidiaries, and (ii) designated as an eligible Executive
Officer by the Compensation Committee.
2. Deferrable Compensation: an eligible Executive Officer may
elect to defer any whole percentage of (i) his annual base
salary, (ii) cash bonus, or (iii) both ( Compensation ).
3. Election to Defer:
a) An eligible Executive Officer who desires to defer
payment of any portion of his Compensation in any
calendar year shall notify the Company s Secretary in
writing on or before December 15 of the prior year,
stating how much of his Compensation shall be deferred.
an election so made shall be irrevocable and shall
apply to each calendar year thereafter until the
Executive Officer shall, on or before any December 15,
notify the Company's Secretary in writing that a
different election shall apply to the following
calendar years, which election shall likewise continue
in effect until similarly changed. For 1994 only, an
eligible Executive Officer may elect to defer
compensation earned after the date the Executive
Officer notifies the Company s Secretary in writing of
the amount of his compensation he elects to defer.
b) notwithstanding Section 3(a) above, if an eligible
Executive Officer is hired by the company during a
calendar year, the Executive Officer may elect to
participate in the Plan by notifying the Company's
Secretary in writing before the Executive Officer
performs any services for the Company how much of his
Compensation shall be deferred. An election so made
shall be irrevocable during that calendar year and
shall apply to each calendar year thereafter until the
Executive Officer changes his election in accordance
with the procedure set forth in Section 3(a) above.
c) An eligible Executive Officer who elects to defer
Compensation to the Plan during a calendar year shall
be deemed to have waived his right to participate in
The West Company Savings Plan for that year and,
accordingly, shall be ineligible to participate in the
Savings Plan.
<PAGE>
4. Matching Contributions: The Company will contribute to the
Plan an amount equal to 50% of the first 6% of base salary
an Executive Officer elects to defer. matching
contributions shall not be made for deferrals of base salary
in excess of 6% or any portion of a cash bonus deferred by
an Executive Officer.
5. Investment of Deferred Compensation Accounts:
a) Allocations: The Company shall establish an "A"
Account and a "B" Account for each Executive Officer
contributing to the Plan. an Executive Officer's
Compensation deferred pursuant to Paragraph 3 during a
month shall be allocated to his A Account as of the
last day of the payroll period to which they relate.
company matching contributions made pursuant to
Paragraph 4 during a month shall be allocated to his
"B" Account as of the last day of the payroll period to
which they relate.
b) Investment: Each Executive Officer shall direct the
investment of his "A" Account and "B" Account among the
Investment Funds offered under the Plan by complying
with administrative procedures established by the
Company. An Executive Officer's election shall specify
the whole percentage of his "A" Account and B Account
to be invested in an Investment Fund. an Executive
Officer s election shall remain in effect until a new
election is made. an Executive Officer may change an
election of Investment Funds or transfer existing
Account balances among Investment Funds once per month
by complying with the administrative procedures
established by the company. The Company shall
establish procedures to review the investment elections
made by an Executive Officer and shall retain the
authority to override any investment election if it
determines, in its sole discretion, that such an
override is in the Company s best interests.
c) Investment Funds. An Executive Officer may invest
amounts credited to his "A" Account and "B" Account
among the Investment Funds selected by the company. The
Company shall make available to each Executive Officer
literature summarizing the investment characteristics
of each Investment Fund.
d) Valuation of Participant Accounts. Any increase or
decrease in the fair market value of an Investment Fund
shall be computed and credited to or deducted from the
Accounts of all Executive Officers who invested in the
Investment Fund in accordance with policies and
procedures established by the Company.
e) Indemnity. By electing to defer Compensation pursuant
to the Plan, each Executive Officer hereby recognizes
and agrees that the Company and any other individual
responsible for administering the Plan (including the
<PAGE>
Company's Secretary or any trustee responsible for
holding assets under the Plan) (collectively, the
"Administrators') are in no way responsible for the
investment performance of the Executive Officer's
Account.
6. Vesting:
a) Regular Vesting: An Executive Officer shall always be
100% vested in the Compensation deferred pursuant to
Paragraph 3. An Executive Officer shall be 40% vested
in matching contribution made on his behalf under
Paragraph 4 after two years of employment with the
company or any of its subsidiaries. An Executive
Officer s vested interest in such matching
contributions will increase by 20% per year of
employment, so that he is 100% vested after five years
of employment with the Company or any of its
subsidiaries. A "year of employment" will be credited
to an Executive Officer for each 12 month period,
beginning on his date of hire by the Company or any of
its subsidiaries (and each anniversary thereof), during
which he is continuously employed by the company or any
of its subsidiaries.
b)
1) Notwithstanding Paragraph 6(a) above, an Executive
Officer shall immediately be 100% vested in
matching contributions made pursuant to Paragraph
4 after a Change in Control, as defined below.
ii) A "Change in Control" shall mean a change in
control of a nature that would be required to be
reported in response to Item 1 of the Current
Report on Form 8-K as in effect on April 28, 1998
pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Act"),
provided, that, without limitation, a Change in
Control shall be deemed to have occurred if:
a) any "Person" (as such term is used in
Sections 13(d) and 14(d) of the Act), other
than:
(1) the Company,
(2) any Person who on the date hereof is a
director or officer of the Company, or
(3) a trustee or fiduciary holding
securities under an employee benefit
plan of the Company,
b) is or becomes the "beneficial owner," (as defined
in Rule 13-d3 under the Act), directly or
indirectly, of securities of the Company
<PAGE>
representing more than 50% of the combined voting
power of the Company's then outstanding
securities; or
c) during any period of two consecutive years during
the term of this Agreement, individuals who at the
beginning of such period constitute the board of
directors of the Company cease for any reason to
constitute at least a majority thereof, unless the
election of each director who was not a director
at the beginning of such period has been approved
in advance by directors representing at least two-
thirds of the directors then in office who were
directors at the beginning of the period; or
d) the shareholders of the Company approve: (i) a
plan of complete liquidation of the Company; or
(ii) an agreement for the sale or disposition of
all or substantially all of the Company's assets;
or (iii) a merger, consolidation, or
reorganization of the Company with or involving
any other corporation, other than a merger,
consolidation, or reorganization that would result
in the voting securities of the Company
outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or
by being converted into voting securities of the
surviving entity), at least fifty percent (50%) of
the combined voting power of the voting securities
of the Company (or the surviving entity, or an
entity which as a result of such transaction owns
the Company or all or substantially all of the
Company's assets either directly or through one or
more subsidiaries) outstanding immediately after
such merger, consolidation, or reorganization.
7. Payment of Deferred Compensation:
a) Distribution Event: an Executive Officer s Accounts
(or relevant portion thereof) shall be distributed as
soon as reasonably feasible after the appropriate
Valuation Date following a Distribution Event. The
following events, and no others, shall constitute
Distribution Events:
i) For allocations to an Executive Officer's "A"
Account and "B" Account, the termination of his
employment with the Company and all of its
subsidiaries for any reason, including retirement,
death or disability;
ii) For allocations to an Executive Officer's "A"
Account during each calendar year, the fifth
anniversary of the end of that year unless the
Executive Officer elects (by informing the
Company s Secretary) before the fourth anniversary
of the end of that year to defer the distribution
<PAGE>
to a later, specified date (in which case the
distribution shall be made on the date specified
by the Executive Officer); or
iii) For allocations to an Executive Officer's "A"
Account, the determination by the company
Committee that the Executive Officer has incurred
a hardship. For purposes of this Paragraph, a
"Hardship" is a financial burden of the general
type described in Section 10.2 of The West Company
Savings Plan that cannot reasonably be relieved
through use of the Executive Officer s personal
assets. To apply for a Hardship distribution, an
Executive Officer must submit a written
application to the Company's Secretary indicating
(i) the nature of the hardship, (ii) the amount
the Executive Officer needed to alleviate the
hardship, and (iii) the Account from which a
distribution, if approved, shall be made. The
Compensation Committee shall have complete and
unfettered discretion to approve or deny, for any
or no reason, any application for a hardship
distribution submitted by an Executive Officer.
Amounts allocated to an Executive Officer s B Account
shall not be available for distribution under Paragraphs
&(a)(ii) and (iii).
b) Valuing Accounts for Distributions: The value of an
Executive Officer s "A" Account and "B" Account shall
be determined as of the effective date of a
distribution from the Plan (the "Valuation Date"),
which shall be a date selected by the Company within a
administratively reasonable time period following a
Distribution Event. The relevant portion of an
Executive Officer's Account shall then be distributed
in accordance with this Paragraph 7.
c) Form of Distribution: Except as otherwise provided,
all distributions from the Plan shall be made in a cash
lump sum. For amounts payable upon termination of
employment pursuant to Paragraph 7(a)(i), an Executive
Officer may receive the distribution in a lump sum or
in five equal annual installments. If an installment
distribution is elected, the first installment shall be
paid on the January 15 immediately following the
Executive's termination from employment, and the others
on January 15 of the second, third, fourth and fifth
years following such termination. The Executive
Officer shall continue to direct the investment of any
amount remaining in his Account and the second to fifth
installments shall be adjusted to take into account any
earnings or losses.
At the time the Executive Officer elects to defer
Compensation pursuant to Paragraph 3, he shall elect whether
a distribution pursuant to Paragraph 7(a)(i) shall be made
<PAGE>
in a cash lump sum or in five equal annual installments.
This election shall continue in effect until changed by the
Executive Officer, provided that any such change shall be
effective only if the Executive Officer submits appropriate
instructions, in accordance with administrative procedures
established by the Company, by December 15 of the year prior
to the year in the Executive Officer becomes entitled to a
distribution.
8. Designation of Beneficiary: If a Executive Officer dies
prior to receiving the entire balance of his Account, any
balance remaining in his Account shall be paid in a lump sum
to the Executive Officer s designated beneficiary, or if the
Executive Officer has not designated a beneficiary in
writing to the company s Secretary, to his estate. Any
designation of beneficiary may be revoked or modified at any
time by the Executive Officer.
9. Unsecured Obligation of Company: The Company's obligations
t establish and maintain Accounts for each eligible electing
Executive Officer and to make payments of deferred
compensation to him under this Plan shall be the general
unsecured obligations of the Company. the Company shall be
under no obligation to establish any separate fund, purchase
any annuity contract, or in any other way make special
provision or specifically earmark any funds for the payment
of any amounts called for under this Plan, nor shall this
Plan or any actions taken under or pursuant to this Plan be
construed to create a trust of any kind, or a fiduciary
relationship between the Company and any eligible Executive
Officer, his designated beneficiary, executors or
administrators, or any other person or entity. If the
Company chooses to establish such a fund or purchase such an
annuity contract or make any other arrangement to provide
for the payment of any amounts called for under this Plan,
such fund contract or arrangement shall remain part of the
general assets of the Company, and no person claiming
benefits under this Plan shall have any right, title, or
interest in or to any such fund, contract or arrangement.
10. Withholding of Taxes: The rights of a Executive Officer
(and his beneficiaries) to payments under this plan shall be
subject to the Company s obligations at any time to withhold
from such payments for any income or other tax on such
payments.
11. Assignability: No portion of a Executive Officer's Account
may be assigned or transferred in any manner, nor shall any
Account be subject to anticipation or to voluntary or
involuntary alienation.
12. Amendments and Termination: This Plan may be amended by a
Committee of the Board of Directors consisting only of
Directors not eligible to defer compensation under this
Plan. This Plan may be terminated at any time by the Board
of Directors. No amendment or termination may adversely
affect a Executive Officer's Account existing on the date
<PAGE>
such amendment or termination is made, nor any election
previously made under the Plan as to compensation for the
calendar year in which the amendment or termination occurs.
13. Effective Date: The Plan shall be effective with respect to
Executive Officer s Compensation earnedafter August 30,1994.
Certified True and Correct Copy of the Plan as Amended
Through April 28, 1998.
[CORPORATE SEAL] THE WEST COMPANY, INCORPORATED
By: ______________________________________
John R. Gailey III, Secretary
Exhibit 10 (o)
THE WEST COMPANY, INCORPORATED
NON-QUALIFIED DEFERRED COMPENSATION PLAN
FOR
OUTSIDE DIRECTORS
ADOPTED APRIL 23, 1990
REFLECTING AMENDMENT
EFFECTIVE ON APRIL 28, 1998
<PAGE>
THE WEST COMPANY, INCORPORATED
NON-QUALIFIED DEFERRED COMPENSATION PLAN
FOR OUTSIDE DIRECTORS
The West Company (the "Company") hereby adopts this Plan to
defer receipt of all or a portion of the Directors' Fees payable
to its eligible directors:
1. Eligible Directors. Directors of the Company eligible to
make the election set forth in this Plan shall be those Directors
who are not officers or employees of the Company or any of its
subsidiaries.
2. Deferrable Compensation. An eligible Director may elect to
defer all or any part or none of the compensation payable to him
by the Company for services rendered as a director ("Directors'
Fees").
3. Election to Defer. An eligible Director who desires to
defer payment of his Directors' Fees in any calendar year shall
notify the Company's Secretary in writing on or before December
15 of the prior year, stating how much of his Directors' Fees
shall be deferred. An election so made shall be irrevocable and
shall apply to each calendar year thereafter until the Director
shall, on or before any December 15, notify the Company s
Secretary in writing that a different election shall apply to the
following calendar years, which election shall likewise continue
in effect until similarly changed.
4. Non-Deferred Compensation. Any Directors Fees that are not
deferred under this Plan shall be paid in accordance with normal
Company policy.
5. Deferred Compensation Accounts.
(a) Credits. At the time that a Director makes an election
to defer pursuant to Paragraph 3 above, he shall also indicate
whether the amount he chooses to defer shall be credited to an
A Account or to a "B" Account, as described below. The Company
shall then establish such an Account for that Director.
(i) "A' Account. If a Director elects an A
Account, his account shall be credited on the last business day
of each calendar quarter with the amount of his Directors' Fees
earned during that quarter but deferred pursuant to Paragraph 3.
(ii) "B" Account. If a Director elects a "B" Account,
his account shall be credited on the last business day of each
calendar quarter with a number of shares equal to that number
(including fractions) obtained by dividing the amount of his
Directors' Fees earned during that quarter but deferred pursuant
to Paragraph 3, by the fair market value of the Company's common
<PAGE>
stock ("Stock Equivalents"). Fair market value shall be equal to
the mean between the high and low prices at which such shares
were traded on the New York Stock Exchange ("NYSE") on the last
business day of such calendar quarter, or if no sales were quoted
on such date, on the most recent preceding date on which sales
were quoted.
(b) Earnings. In addition, the Company shall credit the
indicated Account as follows:
(i) "A" Account. As of January 1, April 1, July 1,
and October 1 of each year, the Company shall credit, as
earnings, to each A Account established on behalf of a
Director, an amount equal to a percentage of the balance in each
such A Account at the end of the preceding calendar quarter,
determined without regard to any addition made to such A
Account as of the last business day of that calendar quarter.
Such percentage shall be equal to one-fourth of the prime rate of
interest at Fidelity Bank in effect on the last day of such
quarter.
(ii) "B" Account. As of January 1, April 1, July 1,
and October 1 of each year, the Company shall credit, as
earnings, to each "B" Account, an amount equal to the cash
dividends paid during the preceding calendar quarter with respect
to that number of shares of its common stock equal to the number
of Stock Equivalents in the "B" Account on the relevant dividend
record dates. The amount so credited shall then be converted
into Stock Equivalents in the manner described earlier using the
last day of such preceding calendar quarter as the valuation
date.
In the event of any change in the common stock of the
Company by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or
exchange of shares, or rights offering to purchase common stock
at a price substantially below fair market value, or of any
similar change affecting the common stock, the value and
attributes of each Stock Equivalent shall be appropriately
adjusted consistent with such change to the same extent as if
such Stock Equivalents were, instead, issued and outstanding
shares of common stock of the Company.
(c) (i) In the event of a Change in Control (as
defined herein), the full value of any Director's "B" Account
shall be credited to an "A" Account for that Director. The value
of the B Account shall be determined using the Fair Market
Value (as defined in Paragraph 5(a)(ii) hereof) of the Company's
common stock on the day before the effective date of the Change
in Control.
(ii) A "Change in Control" shall mean a change in
control of a nature that would be required to be reported in
response to Item 1 of the Current Report on Form 8-K as in effect
on April 28, 1998 pursuant to Section 13 or 15(d) of the
<PAGE>
Securities Exchange Act of 1934, as amended (the "Act"),
provided, that, without limitation, a Change in Control shall be
deemed to have occurred if:
(A) any "Person" (as such term is used in
Sections 13(d) and 14(d) of the Act), other than:
(1) the Company,
(2) any Person who on the date hereof
is a director or officer of the
Company, or
(3) a trustee or fiduciary holding
securities under an employee
benefit plan of the Company,is or
becomes the "beneficial owner," (as
defined in Rule 13-d3 under the
Act), directly or indirectly, of
securities of the Company
representing more than 50% of the
combined voting power of the
Company's then outstanding
securities; or
(B) during any period of two consecutive
years during the term of this Agreement, individuals who at the
beginning of such period constitute the board of directors of the
Company cease for any reason to constitute at least a majority
thereof, unless the election of each director who was not a
director at the beginning of such period has been approved in
advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning of
the period; or
(C) the shareholders of the Company approve:
(A) a plan of complete liquidation of the Company; or (B) an
agreement for the sale or disposition of all or substantially all
of the Company's assets; or (C) a merger, consolidation, or
reorganization of the Company with or involving any other
corporation, other than a merger, consolidation, or
reorganization that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity), at least fifty
percent (50%) of the combined voting power of the voting
securities of the Company (or the surviving entity, or an entity
which as a result of such transaction owns the Company or all or
substantially all of the Company s assets either directly or
through one or more subsidiaries) outstanding immediately after
such merger, consolidation, or reorganization.
6. Payment of Deferred Compensation. The balance in a
Director's Account shall be determined on the first day of the
calendar quarter following the calendar quarter in which he
<PAGE>
ceases to be a Director of the Company, whether by reason of
death, resignation, removal, failure of re-election, or otherwise
("Termination Date"). The balance in a Director's "A" Account
shall be the dollar amount credited to such Account as of the
Termination Date. The balance in a Director's "B" Account shall
be the dollar amount that would be derived if shares of common
stock of the Company equal in number to the Stock Equivalents
credited to such Account as of Termination Date were sold at fair
market value.
The balance in a Director's Account as determined in
the preceding paragraph shall be paid to him in cash in a lump
sum payable during the month following the Termination Date,
provided that an election to receive a lump sum is made no later
than at the time he makes his election to defer pursuant to
Paragraph 3 above.
If no election to receive a lump sum as described in
the preceding paragraph is made, a Director shall receive the
balance in his Account in five equal installments, the first on
the January 15 immediately following the Termination Date, and
the others on January 15 of the second, third, fourth and fifth
years following the Termination Date. The second to fifth
installments shall be increased by earnings that would have been
credited to the remaining balance if it had been held in an "A"
Account during the year.
7. Designation of Beneficiary. If a Director dies prior
to receiving the entire balance of his Account, any balance
remaining in his Account shall be paid in a lump sum to the
Director's designated beneficiary, or if the Director has not
designated a beneficiary in writing to the Company's Secretary,
to his estate. Any designation of beneficiary may be revoked or
modified at any time by the Director.
8. Unsecured Obligation of Company. The Company's
obligations to establish and maintain Accounts for each eligible
electing Director and to make payments of deferred compensation
to him under this Plan shall be the general unsecured obligations
of the Company. The Company shall be under no obligation to
establish any separate fund, purchase any annuity contract, or in
any other way make special provision or specifically earmark any
funds for the payment of any amounts called for under this Plan,
nor shall this Plan or any actions taken under or pursuant to
this Plan be construed to create a trust of any kind, or a
fiduciary relationship between the Company and any eligible
Director, his designated beneficiary, executors or
administrators, or any other person or entity. If the Company
chooses to establish such a fund or purchase such an annuity
contract or make any other arrangement to provide for the payment
of any amounts called for under this Plan, such fund contract or
arrangement shall remain part of the general assets of the
Company, and no person claiming benefits under this Plan shall
have any right, title, or interest in or to any such fund,
<PAGE>
contract or arrangement.
9. Withholding of Taxes. The rights of a Director to
payments under this Plan shall be subject to the Company's
obligations at any time to withhold from such payments for any
income or other tax on such payments.
10. Assignability. No portion of a Director's Account may
be assigned or transferred in any manner, nor shall any Account
be subject to anticipation or to voluntary or involuntary
alienation.
11. Amendments and Termination. This Plan may be amended
by a Committee of the Board of Directors consisting only of
Directors not eligible to defer compensation under this Plan.
This Plan may be terminated at any time by the Board of
Directors. No amendment or termination may adversely affect a
Director's Account existing on the date such amendment or
termination is made, nor any election previously made under the
Plan as to compensation for the calendar year in which the
amendment or termination occurs.
12. Effective Date. The Plan shall be effective with
respect to Director s Fees payable by the Company after December
31, 1984.
* * * *
Certified True and Correct Copy of the Plan as Amended Through
April 28, 1998.
[CORPORATE SEAL] THE WEST COMPANY, INCORPORATED
Date: October 19, 1998 By: John R. Gailey III
---------------------
John R. Gailey III
Vice President, General Counsel
and Secretary
Exhibit 10 (v)
=================================================================
ASSET PURCHASE AGREEMENT
Among
COLLABORATIVE CLINICAL RESEARCH, INC.,
GFI PHARMACEUTICAL SERVICES, INC., and
COLLABORATIVE HOLDINGS, INC.
and
THE WEST COMPANY, INCORPORATED
DATED: December 21, 1998
=================================================================
<PAGE>
TABLE OF CONTENTS
Page No.
<TABLE>
<CAPTION>
<S> <C> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. DEFINITIONS; GENERAL PROVISIONS. . . . . . . . . . . . . 1
1.2 General Provisions; Incorporation of Recitals. . . 10
2. PURCHASE AND SALE OF ASSETS; CLOSING . . . . . . . . . . 11
2.1 Acquired Assets . . . . . . . . . . . . . . . . . 11
2.2 Assumption of Liabilities; Excluded Liabilities . 11
2.3 Purchase Price Amount; Estimated Purchase Price . 11
2.4 Final Closing Date Balance Sheet . . . . . . . . . 12
2.5 Purchase Price Adjustment for
Uncollected Receivables . . . . . . . . . . . . . 14
2.6 Closing Deliveries . . . . . . . . . . . . . . . . 15
2.7 Closing . . . . . . . . . . . . . . . . . . . . . 16
2.8 Allocation of the Purchase Price . . . . . . . . . 16
3. REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . 17
3.1 Organization and Good Standing . . . . . . . . . . 17
3.2 Authority; No Conflict . . . . . . . . . . . . . . 17
3.3 Financial Statements; Accounts Receivable . . . . 18
3.4 Books and Records . . . . . . . . . . . . . . . . 19
3.5 Title To Assets; Encumbrances . . . . . . . . . . 19
3.6 Condition and Sufficiency of Assets . . . . . . . 20
3.7 No Undisclosed Liabilities . . . . . . . . . . . . 21
3.8 Taxes . . . . . . . . . . . . . . . . . . . . . . 21
3.9 No Material Adverse Change . . . . . . . . . . . . 22
3.10 Employee Benefits . . . . . . . . . . . . . . . . 22
3.11 Compliance With Legal Requirements; Governmental
Authorizations . .. . . . . . . . . . . . . . . . 22
3.12 Legal Proceedings; Orders . . . . . . . . . . . . 23
3.13 Absence of Certain Changes and Events . . . . . . 24
3.14 Contracts; No Defaults . . . . . . . . . . . . . . 25
3.15 Insurance . . . . . . . . . . . . . . . . . . . . 27
3.16 Environmental Matters . . . . . . . . . . . . . . 28
3.17 Employees . . . . . . . . . . . . . . . . . . . . 30
3.18 Labor Disputes; Compliance . . . . . . . . . . . . 30
3.19 Intellectual Property . . . . . . . . . . . . . . 30
3.20 Relationships With Related Persons . . . . . . . . 31
3.21 Brokers or Finders . . . . . . . . . . . . . . . . 31
3.22 Disclosure . . . . . . . . . . . . . . . . . . . . 32
4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . 32
4.1 Organization and Good Standing . . . . . . . . . . 32
4.2 Authority; No Conflict . . . . . . . . . . . . . . 32
4.3 Certain Proceedings . . . . . . . . . . . . . . . 33
4.4 Brokers or Finders . . . . . . . . . . . . . . . . 33
5. COVENANTS OF SELLERS PRIOR TO AND FOLLOWING CLOSING DATE 33
<PAGE>
5.1 Access and Investigation . . . . . . . . . . . . . 33
5.2 Operation of the Clinical Business of Sellers. . 33
5.3 Negative Covenant . . . . . . . . . . . . . . . . 34
5.4 Required Approvals . . . . . . . . . . . . . . . . 34
5.5 Notification . . . . . . . . . . . . . . . . . . . 34
5.6 No Negotiation . . . . . . . . . . . . . . . . . . 35
5.7 Best Efforts . . . . . . . . . . . . . . . . . . . 36
5.8 HSR Act Filing . . . . . . . . . . . . . . . . . . 36
5.9 Labor Matters . . . . . . . . . . . . . . . . . . 36
5.10 Subsequent Financial Statements . . . . . . . . . 37
5.11 Excluded Liabilities . . . . . . . . . . . . . . . 37
5.12 Voting of Shares . . . . . . . . . . . . . . . . . 38
5.13 Collaborative Shareholder Approvals . . . . . . . 38
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE . . . . . . . . 38
6.1 Approvals of Governmental Bodies . . . . . . . . . 38
6.2 Best Efforts . . . . . . . . . . . . . . . . . . . 38
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE . . 38
7.1 Accuracy of Representations . . . . . . . . . . . 39
7.2 Sellers' Performance . . . . . . . . . . . . . . . 39
7.3 Consents . . . . . . . . . . . . . . . . . . . . . 39
7.4 Additional Documents . . . . . . . . . . . . . . . 39
7.5 No Proceedings . . . . . . . . . . . . . . . . . . 39
7.6 No Prohibition . . . . . . . . . . . . . . . . . . 40
7.7 HSR Act . . . . . . . . . . . . . . . . . . . . . 40
7.8 Bulk Sales . . . . . . . . . . . . . . . . . . . . 40
7.9 No Material Adverse Change . . . . . . . . . . . . 40
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE . . 40
8.1 Accuracy of Representations . . . . . . . . . . . 41
8.2 Buyer's Performance . . . . . . . . . . . . . . . 41
8.3 Consents . . . . . . . . . . . . . . . . . . . . . 41
8.4 Additional Documents . . . . . . . . . . . . . . . 41
8.5 Shareholder Approval . . . . . . . . . . . . . . . 41
8.6 No Injunction . . . . . . . . . . . . . . . . . . 42
9. TERMINATION . . . . . . . . . . . . . . . . . . . . . . 42
9.1 Termination Events . . . . . . . . . . . . . . . . 42
9.2 Effect of Termination . . . . . . . . . . . . . . 43
9.3 Termination Fee; Expense Fee . . . . . . . . . . . 43
10. INDEMNIFICATION; REMEDIES . . . . . . . . . . . . . . . 43
10.1 Survival . . . . . . . . . . . . . . . . . . . . . 43
10.2 Indemnification and Reimbursement by Sellers . . . 43
10.3 Indemnification and Reimbursement by Buyer . . . . 44
10.4 Procedure for Indemnification - Third Party Claims 45
10.5 Limitation of Claims . . . . . . . . . . . . . . . 46
11. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . 47
11.1 Expenses . . . . . . . . . . . . . . . . . . . . . 47
11.2 Public Announcements . . . . . . . . . . . . . . . 47
11.3 Confidentiality . . . . . . . . . . . . . . . . . 47
11.4 Notices . . . . . . . . . . . . . . . . . . . . . 47
<PAGE>
11.5 Jurisdiction; Service of Process . . . . . . . . . 48
11.6 Further Assurances . . . . . . . . . . . . . . . . 49
11.7 Waiver . . . . . . . . . . . . . . . . . . . . . . 49
11.8 Entire Agreement and Modification . . . . . . . . 49
11.9 Schedules . . . . . . . . . . . . . . . . . . . . 49
11.10 Assignments, Successors, and No Third-Party Rights 49
11.11 Severability . . . . . . . . . . . . . . . . . . . 50
11.12 Section Headings . . . . . . . . . . . . . . . . . 50
11.13 Time of Essence . . . . . . . . . . . . . . . . . 50
11.14 Governing Law . . . . . . . . . . . . . . . . . . 50
11.15 Counterparts . . . . . . . . . . . . . . . . . . . 50
11.16 Use of Name . . . . . . . . . . . . . . . . . . . 50
11.17 Records Retention . . . . . . . . . . . . . . . . 50
11.18 Joinder by DataTRAK . . . . . . . . . . . . . . . 51
</TABLE>
EXHIBITS
--------
<TABLE>
<CAPTION>
<S> <C> <C>
A - Acquired Assets
B - Assumed Liabilities
C - Escrow Agreement
D - Intentionally Omitted
E - Excluded Assets
F - Non-Competition Agreement
G - Seller Agreement
H - Sellers' Certificate
I - Assumption Agreement
J - Buyer's Certificate
K - Allocation of Purchase Price
L - Management Letter
M - Opinion of Calfee, Halter & Griswold LLP
N - Opinion of Buyer's Counsel
SCHEDULES
---------
A - Sellers' Management Personnel (for purposes of
Knowledge definition)
2.6(a)(ix) - Terms of Sublease Agreement
3.1 - Jurisdictions of Incorporation
3.2(b) - Conflicts; Consents
3.3 - Financial Statements
3.5(b) - Facilities
3.6 - Condition of Certain Assets
3.7 - Undisclosed Liabilities
3.8 - Contested Taxes; Assessments
3.10 - Employee Benefit Plans
3.11(a) - Compliance with Legal Requirements, etc.
3.11(b) _ Governmental Authorizations
3.12 - Proceedings; Orders
3.13 - Absence of Certain Changes
3.14 - Contracts
3.15 - Insurance
3.16 - Environmental Matters
3.17 - Employees
3.18 - Labor Disputes, etc.
3.19 - Intellectual Property Assets
3.20 - Relationships with Related Persons
3.22 - Material Adverse Changes
5.9(d) - Employee Severance Obligations
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
-------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is
made this 21st day of December, 1998, by and among THE WEST
COMPANY, INCORPORATED, a Pennsylvania corporation (the "Buyer"),
and COLLABORATIVE CLINICAL RESEARCH, INC., an Ohio corporation,
("Collaborative"), GFI PHARMACEUTICAL SERVICES, INC., an Indiana
corporation and a wholly-owned subsidiary of Collaborative
("GFI"), and COLLABORATIVE HOLDINGS, INC., an Ohio corporation
and a wholly-owned subsidiary of Collaborative ("CHI")
(Collaborative, GFI, and CHI being each sometimes individually
referred to herein as a "Seller" and being collectively referred
to as the "Sellers"; GFI and CHI are sometimes collectively
referred to herein as the "Selling Subsidiaries").
RECITALS
---------
A. The Sellers are engaged in various businesses,
including the business of providing clinical research and "over-
the-counter" drug testing and related services (such business, as
heretofore conducted by Collaborative and the Selling
Subsidiaries, being collectively referred to herein as the
"Clinical Business"). The Sellers also engage in activities
other than the Clinical Business.
B. The Sellers desire to sell, and Buyer desires to
purchase, substantially all of the assets of the Sellers relating
to or used in the Clinical Business for the consideration and on
the terms set forth in this Agreement.
C. Buyer is not assuming any liabilities or obligations of
or relating to any Seller or the Business except as expressly
provided in this Agreement, and the parties do not intend in any
way to effectuate a merger or consolidation.
AGREEMENT
----------
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto,
each intending to be legally bound, hereby agree as follows:
1. DEFINITIONS; GENERAL PROVISIONS.
--------------------------------
1.1 For purposes of this Agreement and the Exhibits
and Schedules attached hereto, the following terms shall have the
meanings specified or referred to below in this Section 1:
"ACQUIRED ASSETS" - As defined in Exhibit A.
<PAGE>
"ACQUISITION PROPOSAL" - As defined in Section 5.6(a).
"ASSIGNED CONTRACT" - Any Contract which is designated
as an "Assigned Contract" in Exhibit A and assigned to Buyer by
Seller.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" - As defined in
Section 2.6(b)(ii)
"ASSUMED LIABILITIES" - As defined in Exhibit B.
"BASE AMOUNT" - As defined in Section 2.3(a).
"BREACH" - A "BREACH" of a representation, warranty,
covenant, obligation or other provision of this Agreement or any
Related Agreement will be deemed to have occurred if there is or
has been (a) any inaccuracy in or breach of, or any failure to
perform or comply with, such representation, warranty, covenant,
obligation or other provision, or (b) any claim or other
occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation or other
provision, and the term "Breach" means any such inaccuracy,
breach, failure, claim, occurrence, or circumstance.
"BUYER" - As defined in the heading of this Agreement.
"CHI" - As defined in the heading of this Agreement.
"CHI FACILITY" - The laboratory and related facilities
leased by and operated by the WCE division of CHI and situate at
6963 Hillsdale Court, Building 46250, Indianapolis, Indiana
32796.
"CLINICAL BUSINESS" - As defined in Paragraph A of the
Recitals.
"CLOSING" - As defined in Section 2.7.
"CLOSING CASH PAYMENT" - As defined as
Section 2.3(d)(i).
"CLOSING DATE" - The date and time as of which the
Closing actually takes place.
"CLOSING DATE NET WORKING CAPITAL" - The Net Working
Capital as of the Closing Date, as determined by reference to the
Final Closing Date Balance Sheet.
<PAGE>
"CODE" - The Internal Revenue Code of 1986, as amended,
or any successor law, and any regulations issued by the IRS
pursuant to the Internal Revenue Code of 1986, as amended, or any
successor law.
"COLLABORATIVE" - As defined in the heading of this
Agreement.
"COLLABORATIVE BOARD" - The Board of Directors of
Collaborative.
"COLLABORATIVE PREMISES" - Collectively the office
space leased by Collaborative and situate in the Tower Building,
20600 Chagrin Boulevard, Suite 1050, Cleveland, Ohio 44122.
"CONFIDENTIALLY AGREEMENT" - The confidentiality
agreement dated as of July 31, 1998, among the Buyer and the
Sellers.
"CONSENT" - Any approval, consent, ratification,
waiver, or other authorization (including any Governmental
Authorization).
"CONTEMPLATED TRANSACTIONS" - All of the transactions
described in this Agreement and each of the Related Agreements.
"CONTRACT" - Any agreement, contract, obligation,
promise, undertaking, letter of intent, or memorandum of
understanding (whether written or oral and whether express or
implied) that is legally binding.
"CURRENT ASSETS" - At any applicable time, all assets
included in the Acquired Assets which, in accordance with GAAP,
should be classified as current assets of Sellers (after
eliminating inter-company items).
"CURRENT LIABILITIES" - At any applicable time, all
liabilities included in the Assumed Liabilities which, in
accordance with GAAP, should be classified as current liabilities
of Sellers.
"DAMAGES" - As defined in Section 10.2.
"DATATRAK" - DataTRAK, Inc., an Ohio corporation and
wholly-owned subsidiary of Collaborative.
"EMPLOYEE BENEFIT PLANS" - All "Plans" (as defined in
ERISA 3(3)) of which Seller is or was a "Plan Sponsor" or to
<PAGE>
which Seller otherwise contributes or has contributed or in which
Seller otherwise participates or has participated.
"ENCUMBRANCE" - Any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge,
security interest, right of first refusal or restriction of any
kind.
"ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES" - Any
Damages, Liabilities, or other responsibility arising from or
under any Environmental Law or Occupational Safety and Health
Law.
"ENVIRONMENTAL LAWS" - All Legal Requirements
(including rules, regulations, codes, plans, injunctions,
judgments, Orders, policies, decrees, rulings and charges
thereunder) concerning pollution or protection of the
environment, including laws relating to emissions, discharges,
Releases, or threatened Releases of pollutants, contaminants, or
Hazardous Materials into ambient air, surface water, groundwater,
or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling of Hazardous Materials, including, but not limited to,
the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. '' 9601 et seq., the Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
'' 1001 et seq., the Resource Conservation and Recovery Act of
1976, 42 C.S.C. '' 6901 et seq., each as amended from time to
time.
"ERISA" - The Employee Retirement Income Security Act
of 1974 or any successor law, and regulations and rules issued
pursuant thereto or to any successor law.
"ESCROW AGREEMENT" - The Escrow Agreement among Buyer,
Sellers, and Escrow Holder, the form of which is attached hereto
as Exhibit C.
"ESCROW DEPOSIT" - As defined in Section 2.3(d)(ii).
"ESCROW HOLDER" - An independent third party jointly
selected by the Buyer and the Sellers prior to the Closing Date
to serve as the escrow holder pursuant to the Escrow Agreement.
"ESTIMATED CLOSING DATE NET WORKING CAPITAL" - As
defined in Section 2.3(b).
"ESTIMATED PURCHASE PRICE" - As defined in
Section 2.3(a).
<PAGE>
"EXCLUDED ASSETS" - As defined in Exhibit D.
"EXCLUDED LIABILITIES" - As defined in Section 2.2.
"EXPENSE FEE" - As defined in Section 9.3.
"FACILITIES" - Any real property, leaseholds, or other
interests currently owned or operated by any Seller and used in
connection with the Clinical Business, and any buildings, plants,
structures or equipment currently owned, leased or operated by
any Sellers and used in connection with the Clinical Business or
which otherwise comprise a part of the Clinical Business
(including, but not limited to, the Leased Properties).
"FDA" - The United States Food and Drug Administration,
together with any department thereof.
"FINAL CLOSING DATE STATEMENT" - As defined in
Section 2.4(a).
"FINANCIAL STATEMENTS" - Collectively, the Prior
Financial Statements and the Interim Financial Statements.
"GAAP" - At any particular time, generally accepted
accounting principles as in effect in the United States at such
time.
"GFI" - As defined in the heading of this Agreement.
"GFI FACILITY" - Collectively, the clinical and
laboratory testing facility leased by GFI and situate in the
Saint Mary's Medical Center, 800 Saint Mary's Drive, Evansville,
Indiana 47714.
"GOVERNMENTAL AUTHORIZATION" - Any Consent, license or
permit issued, granted or given by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY" - Any federal, state, local,
municipal, foreign or other governmental or quasi-governmental
entity or authority of any nature (including, without limitation,
the FDA).
"HAZARDOUS MATERIALS" - Any pollutants, contaminants,
toxic or hazardous or extremely hazardous substances, materials,
wastes, constituents, compounds, chemicals, natural or man-made
elements or forces (including, but not limited to, petroleum or
any byproducts or fractions thereof, any form of natural gas,
<PAGE>
Bevill Amendment materials, lead, asbestos, and asbestos-
containing materials, building construction materials and debris,
polychlorinated biphenyls ("PCBs") and PCB-containing equipment,
radon and other radioactive elements, ionizing radiation,
electromagnetic field radiation and other non-ionizing radiation,
sonic forces and other natural forces, infectious, carcinogenic,
mutagenic, or etiologic agents, pesticides, defoliants,
explosives, flammables, corrosives, and urea formaldehyde foam
insulation) that is now or has heretofore been regulated by or
may now form the basis for Liabilities under, any Environmental
Laws, whether or not listed or classified in any Environmental
Laws.
"HSR ACT" - The Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"INDEMNIFIED PERSONS" - As defined in Section 10.2.
"INTELLECTUAL PROPERTY ASSETS" - As defined in
Section 3.19.
"INTERIM BALANCE SHEET" - As defined in Section 3.5(a).
"INTERIM FINANCIAL STATEMENTS" - As defined in
Section 3.3(a)(ii).
"IRS" - The Internal Revenue Service.
"KNOWLEDGE" - An individual will be deemed to have
"Knowledge" of a particular fact or matter if:
(a) such individual is aware of such fact or
other matter; or
(b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other
matter in the course of conducting a reasonably
comprehensive investigation concerning the existence of such
fact or other matter.
A Seller will be deemed to have "Knowledge" of a particular fact
or other matter if any of the following Persons has, or at any
time had, Knowledge of such fact or other matter: (1) any
individual who, as of the date hereof and during any period
hereafter through and including the Closing Date, is serving as a
director or officer of any Seller; or (2) any member of Sellers'
management identified on Schedule A hereto.
"LAB SERVICE CONTRACT" - Any Contract to which any
<PAGE>
Seller is a party relating to laboratory and related services
utilized in connection with clinical research studies conducted.
"LEASED PROPERTIES" and "LEASED PROPERTY" -
Collectively or individually, as appropriate, the Collaborative
Premises, the GFI Facility, and the CHI Facility.
"LEASES" and "LEASE" - Collectively or individually, as
appropriate, the leases relating to the Leased Properties and
more particularly described in EXHIBIT A.
"LEGAL REQUIREMENT" - Any federal, state, local,
municipal, foreign, international, multi-national, or other law,
ordinance, regulation, statute or treaty (including, without
limitation, rules and regulations promulgated by the FDA).
"LIABILITIES" - Any debts, obligations, or liabilities
of any nature (including, but not limited to, any unknown,
undisclosed, unaccrued, unasserted, contingent, or conditional
debt, obligation, or liability), regardless of whether such
debts, obligations, or liabilities would be required to be
disclosed on a balance sheet prepared in accordance with GAAP.
"MARKS" - As defined in Section 3.19(a).
"MATERIAL ADVERSE EFFECT" - A material adverse effect
upon the financial condition of any Seller or the Clinical
Business.
"NET WORKING CAPITAL" - As at any applicable time,
(i) Current Assets minus (ii) Current Liabilities.
"NON-COMPETITION AGREEMENT" - As defined in
Section 2.6(a)(i).
"OCCUPATIONAL SAFETY AND HEALTH LAW" - Any Legal
Requirement designed to provide safe and healthful working
conditions, and to reduce occupational safety and health hazards,
and any program, whether governmental or private, designed to
provide safe and healthful working conditions.
"ORDER" - Any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or
rendered by any court, administrative agency, or other
Governmental Body or by any arbitrator.
"ORDINARY COURSE OF CLINICAL BUSINESS" - An action
taken by a Person will be deemed to have been taken in the
"Ordinary Course of Clinical Business" only if:
<PAGE>
(a) such action is consistent with the past
practices of such Person and is taken in the ordinary course
of the normal operations of such Person;
(b) such action is not required to be authorized
by the board of directors of such Person (or by any Person
or group of Persons exercising similar authority), and does
not require any other separate or special authorization; and
(c) such action is similar in nature and
magnitude to actions customarily taken, without any separate
or special authorization, in the ordinary course of the
operations of other Persons that are engaged in the same
type or line of business as such Person.
"PATENTS" - As defined in Section 3.19(a)(ii).
"PERSON" - Any individual, corporation, general or
limited partnership, limited liability company, joint venture,
estate, trust, association, organization, or other entity or
Governmental Body.
"PRIOR FINANCIAL STATEMENTS" - As defined in
Section 3.3(a)(i).
"PROCEEDING" - Any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
"PURCHASE PRICE" - As defined in Section 2.3(a).
"RELATED AGREEMENTS" - All agreements, documents,
certificates and instruments to be delivered pursuant to this
Agreement or the Contemplated Transactions, including, without
limitation, the Assignment and Assumption Agreement, the Escrow
Agreement, the Non-Competition Agreement, the Sublease Agreement,
and the Seller Agreements.
"RELATED PERSON" - With respect to a particular
individual shall mean:
(a) each other member of such individual's
family;
(b) any Person that is directly or indirectly
controlled by any one or more members of such individual's
family;
<PAGE>
(c) any Person in which members of such
individual's family hold (individually or in the aggregate)
a material interest; and
(d) any Person with respect to which one or more
members of such individual's family serves as a director,
officer, partner, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual shall
mean:
(a) any Person that directly or indirectly
controls, is directly or indirectly controlled by, or is
directly or indirectly under common control with such
specified Person;
(b) each Person that serves as a director,
officer, partner, or trustee of such specified Person (or in
a similar capacity); and
(c) any Person in which specified Person holds a
material interest.
"RELEASE" - Any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, ejecting, escaping, dumping or
other dissemination.
"REPRESENTATIVE" - With respect to a particular Person,
any director, officer, employee, agent, consultant, advisor, or
other representative of such Person, including legal counsel,
accountants and financial advisors.
"SEC" - The Securities Exchange Commission, or any
successor agency.
"SELLERS" and "SELLER" - As defined in the heading of
this Agreement.
"SELLER AGREEMENTS" - As defined in Section 2.6(a)(ii).
"SELLING SUBSIDIARIES" - As defined in the heading of
this Agreement.
"SITE CONTRACTS" - Collectively, any Contract to which
<PAGE>
any Seller is a party with hospitals, physicians, clinics, and
other sites, pursuant to which such sites conduct clinical
studies for and on behalf of such Seller.
"SPONSOR" - Collectively, each pharmaceutical company,
biotechnology company, and contract research organization which
is a party to the Sponsor Contracts.
"SPONSOR CONTRACTS" - Collectively, any Contract to
which any Seller is a party with a pharmaceutical company,
biotechnology company, and contract research organization,
pursuant to which such Seller has agreed to provide, or cause to
be provided, clinical studies for and on behalf of such company
or organization.
"SUBLEASE AGREEMENT" - As defined in Section
2.6(a)(ix).
"SUPERIOR PROPOSAL" - As defined in Section 5.6(b).
"SUPPLEMENTAL CLOSING" - As defined in Section 2.4(c).
"TAX" - Any tax, levy, assessment, tariff, duty,
deficiency or other fee, and any related charge or amount
imposed, assessed or collected by or under the authority of any
Governmental Body.
"TAX ALLOCATION" - The manner in which the Purchase
Price is allocated among the Acquired Assets pursuant to
Section 2.7.
"TAX RETURN" - Any return, report, form or other
document or information filed with or submitted to, or required
to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection, or
payment of any Tax.
"TERMINATION FEE" - As defined in Section 9.3.
"THREATENED" - A Proceeding, claim, dispute or other
matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has
been given (orally or in writing), or if any other event has
occurred or any other circumstances exist, which could reasonably
be expected to result in such a Proceeding, claim, dispute or
other matter.
"34 ACT" - The Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
<PAGE>
"THRESHOLD AMOUNT" - As defined in Section 10.5(b).
"UNCOLLECTED RECEIVABLES" - As defined in Section 2.5.
"WARN" - The Worker Adjustment and Retraining
Notification Act (29 U.S.C. '' 2101 et seq.) and the regulations
adopted pursuant thereto.
1.2 General Provisions; Incorporation of Recitals.
(a) Unless expressly provided otherwise in this
Agreement or the Related Agreements, or unless the context
requires otherwise:
(i) all capitalized terms used in the
Related Agreements that are defined in this Agreement shall
have the respective meanings assigned to them herein;
(ii) all accounting terms used in this
Agreement and in the Related Agreements shall have the
meanings given to them in accordance with GAAP;
(iii) the singular shall mean the plural,
the plural shall mean the singular, and the use of any
gender shall include all genders; and all references to any
particular party defined herein shall be deemed to refer to
each and every Person defined herein as such party
individually, and to all of them, collectively, jointly and
severally, as though each were named wherever the applicable
defined term is used;
(iv) all references to "Sections" shall be
deemed to refer to the provision of this Agreement and all
references to "Schedules" and "Exhibits" shall be deemed to
refer to the schedules and exhibits annexed to this
Agreement, as appropriate;
(v) all references to time herein shall
mean Eastern Standard Time or Eastern Daylight Time, as then
in effect; and
(vi) all references to sections,
subsections, paragraphs or other provisions of any Legal
Requirement that consists of a law, ordinance, regulation,
statute or treaty, shall be deemed to include successor,
amended, renumbered and replacement provisions thereof.
(vii) the word "including" shall not limit
the preceding words or terms.
<PAGE>
(b) The recitals set forth above (including,
without limitation, the defined terms set forth therein) are
hereby incorporated by reference into this Agreement and made a
part hereof as if set forth in their entirety in this
Section 1.2(b).
2. PURCHASE AND SALE OF ASSETS; CLOSING
2.1 Acquired Assets. On and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from
Sellers, and Sellers agree to sell, transfer, convey and deliver
to Buyer, all of the Acquired Assets at the Closing for the
consideration specified in Section 2.3 and also in consideration
of the covenants of Buyer set forth herein. Sellers shall
specifically retain, and the Acquired Assets shall not include,
any of the Excluded Assets.
2.2 Assumption of Liabilities; Excluded Liabilities.
On and subject to the terms and conditions of this Agreement,
Buyer agrees to assume and become responsible for all of the
Assumed Liabilities at the Closing. Notwithstanding anything in
this Agreement or any of the Exhibits or Schedules attached
hereto to the contrary, Buyer will not assume or have any
responsibility for or with respect to, or purchase the Acquired
Assets subject to, any Liabilities of any nature whatsoever
(collectively, the "Excluded Liabilities") which are not
expressly included within the definition of "Assumed
Liabilities."
2.3 Purchase Price Amount; Estimated Purchase Price.
(a) Subject to adjustment as provided in
Section 2.5 and the other provisions of this Section 2.3, the
purchase price for the Acquired Assets shall be an amount equal
to (i) Fifteen Million Dollars ($15,000,000) (the "Base Amount")
PLUS (ii) the Closing Date Net Working Capital (if positive)
MINUS (iii) the Closing Date Net Working Capital (if negative)
(the amount calculated pursuant to the foregoing being referred
to herein as the "Purchase Price").
(b) The parties hereto recognize and acknowledge
that they will be unable to calculate the Closing Date Net
Working Capital until after the Closing in accordance with the
provisions of Section 2.4. Accordingly, the parties hereto have
agreed to calculate the Purchase Price on the Closing Date based
upon an estimate of the Closing Date Net Working Capital (the
"Estimated Closing Date Net Working Capital"). The parties
hereto shall mutually agree upon the Estimated Closing Date Net
Working Capital within fifteen (15) days prior to the Closing
Date based upon and determined by reference to the financial
statements of the Sellers as of the date on which the Estimated
<PAGE>
Closing Date Net Working Capital is determined, and such other
information which Buyer may require in connection therewith. The
parties hereto shall set forth their agreement with respect to
the Estimated Closing Date Net Working Capital in a written
instrument signed by them and which shall be attached to and
become a part of this Agreement.
(c) At the Closing and for purposes thereof, the
Purchase Price shall be estimated in an amount equal to (i) the
Base Amount PLUS (ii) the Estimated Closing Date Net Working
Capital (if positive) MINUS (iii) the Estimated Closing Date Net
Working Capital (if negative) (the amount calculated pursuant to
the foregoing being referred to herein as the "Estimated Purchase
Price").
(d) The Estimated Purchase Price shall be
payable as follows:
(i) an amount equal to the Estimated
Purchase Price LESS the Escrow Deposit (the "Closing Cash
Payment") shall be paid by the Buyer to the Sellers at the
Closing by means of wire transfer of immediately available
funds to an account or accounts designated by the Sellers,
in writing, at least three (3) business days prior to the
Closing Date.
(ii) the sum of One Million Dollars
($1,000,000) (the "Escrow Deposit") shall be paid by the
Buyer to the Escrow Holder at the Closing by means of wire
transfer of immediately available funds to an account
designed by the Escrow Agent, in writing, at least three (3)
business days prior to the Closing Date, to be held in
escrow by the Escrow Holder pursuant to the Escrow Agreement
for (A) the payment of any sums due to the Buyer under
Sections 2.4(c)(ii) and 2.5 hereof, and (B) the payment and
satisfaction of indemnity claims of the Buyer hereunder
after the Closing, all in accordance with and subject to the
provisions of the Escrow Agreement.
2.4 Final Closing Date Balance Sheet; Calculation of
Closing Date Net Working Capital.
(a) As soon as practicable, but in no event
later than sixty (60) days after the Closing Date, Buyer will
prepare and deliver to Sellers a statement of Acquired Assets and
Assumed Liabilities as of the Closing Date setting forth Buyer's
calculation of the Closing Date Net Working Capital by reference
thereto (such statement of Acquired Assets and Assumed
Liabilities, including Buyer's calculation of Closing Date Net
Working Capital, being referred to as the "Final Closing Date
Statement"). The Final Closing Date Statement shall be prepared
<PAGE>
in a manner consistent with the preparation of the Financial
Statement (provided that the Financial Statements have been
prepared in accordance with GAAP consistently applied).
(b) Upon the completion of the Final Closing
Date Statement, a copy thereof shall be delivered to Sellers.
Sellers shall have the right, for a period of fifteen (15) days
following their receipt thereof, to review the Final Closing Date
Statement to determine whether the Final Closing Date Statement
was prepared in accordance with the provisions hereof. If,
following such review, Sellers determine that the Final Closing
Date Statement was not prepared in accordance with the provisions
hereof and that Buyer's calculation of Closing Date Net Working
Capital is in error as a result thereof, Sellers shall so notify
Buyer. For a period of fifteen (15) days following the receipt
of such notice, Buyer and Sellers shall attempt to resolve any
such dispute with respect to the Final Closing Date Statement.
If, at the expiration of such fifteen (15) day period, Buyer and
Sellers are not able to resolve such dispute, within the three
(3) day period immediately following the expiration of such
fifteen (15) day period, the Buyer and Sellers shall promptly
submit to the Pittsburgh, Pennsylvania office of any "big five"
firm of independent, certified public accountants recommended by
the Pennsylvania Institute of Certified Public Accountants
(provided that such accountants do not then serve as accountants
to Buyer or Seller), which firm shall resolve all matters in
dispute with respect to the Final Closing Date Balance Sheet
within the fifteen (15) day period immediately following such
submission and whose determination shall be final, binding and
conclusive upon Buyer and Sellers. The fees of any such
independent, certified public accounting firm shall be borne
equally by Buyer and Sellers.
(c) At a supplemental closing to be held within
the later of ninety (90) days after the Closing Date or ten (10)
days after the final determination of the Final Closing Date
Statement and calculation of the Closing Date Net Working Capital
pursuant to Section 2.4(b) (the "Supplemental Closing"), payment
shall be made from Buyer to Sellers or Sellers to Buyer, as
appropriate, to take into account any difference between the
Estimated Purchase Price (based upon the Estimated Closing Date
Net Working Capital) and the Purchase Price (based upon the
actual Closing Date Net Working Capital). Such difference, if
any, will be paid as follows:
(i) If the Purchase Price EXCEEDS the
Estimated Purchase Price, at the Supplemental Closing,
Sellers will be entitled to receive from Buyer an amount
equal to such excess, which shall be paid by Buyer by means
of wire transfer of immediately available funds to an
account or accounts designated by Seller in writing.
<PAGE>
(ii) If the Estimated Purchase Price
EXCEEDS the Purchase Price, Buyer will be entitled to
receive from the Escrow Holder funds from the Escrow Deposit
in an amount equal to such excess, which amount shall be
paid by Escrow Holder pursuant to the terms of the Escrow
Agreement at the Supplemental Closing by means of wire
transfer of immediately available funds to an account or
accounts designated by Buyer in writing. If the amount by
which the Estimated Purchase Price EXCEEDS the Purchase
Price is greater than the Escrow Deposit, Sellers will pay
to Buyer an amount equal to such excess which shall be paid
by Sellers at the Supplemental Closing by means of wire
transfer of immediately available funds to an account or
accounts designated by Buyer in writing.
2.5 Purchase Price Adjustment for Uncollected
Receivables. Notwithstanding anything contained herein to the
contrary, to the extent that all or any portion of the accounts
receivable of Sellers included in the Acquired Assets (net of any
reserve therefor reflected in the Final Closing Date Balance
Sheet), including both billed and unbilled accounts receivable,
are not collected in full and in cash by the Buyer in the
ordinary course of its business and using the Buyer's customary
collection practices (without resort to legal proceedings),
within one hundred eighty (180) days after the Closing Date
(collectively, the "Uncollected Receivables") there shall be a
dollar-for-dollar reduction in the Purchase Price in an amount
equal to the aggregate amount of the Uncollected Receivables.
Any adjustment to the Purchase Price pursuant to this Section 2.5
shall be paid in the manner provided by Section 2.4(c)(ii).
Following the satisfaction by the Sellers of all of their
obligations under this Section 2.5, the Buyer shall, if requested
by the Sellers, assign and transfer (without recourse,
representation, or warranty) to Sellers all of Buyer's right,
title, and interest in, to, and under the Uncollected
Receivables, pursuant to a written instrument of assignment
reasonably satisfactory to Buyer and Sellers; PROVIDED, HOWEVER,
Sellers shall not disrupt the Clinical Business conducted by
Buyer in connection with any effort by Sellers to collect the
Uncollected Receivables following such assignment and transfer
thereof. The parties further agree that if the Buyer collects in
cash an aggregate amount in respect of billed and unbilled
accounts receivable of the Sellers included in the Acquired
Assets (net of any reserve therefor reflected in the Final
Closing Date Balance Sheet) which is in excess of such billed and
unbilled accounts receivable reflected in the Final Closing Date
Balance Sheet (net of the aforesaid reserve) as of the date which
is one hundred eighty (180) days after the Closing Date, the
Purchase Price shall be increased, dollar-for-dollar, by an
amount equal to such excess (such Purchase Price increase to be
paid in the manner provided by the provisions of Section
2.4(c)(i)).
<PAGE>
2.6 Closing Deliveries. At the Closing:
(a) Sellers will deliver, or cause to be
delivered, to Buyer:
(i) a non-competition agreement(s) in the
form of EXHIBIT F executed by each Seller, DataTRAK and
Dr. Jeffrey A. Green (the "Non-Competition Agreement");
(ii) The agreements in the form of
EXHIBITS G1 and G2 executed by Collaborative and DataTRAK,
respectively (the "Seller Agreements");
(iii) any other Related Agreements to which
any Seller is a party;
(iv) a bill of sale and such assignments
and other instruments of sale, transfer, conveyance and
assignment (including certificates of title and an
assignment to Buyer of all of Seller's rights in, to and
under the Lease) regarding the Acquired Assets as Buyer and
its counsel may request;
(v) a certificate executed by Sellers to
the effect that each of Sellers' representations and
warranties in this Agreement and in each Related Agreement
to which Sellers (or any of them) are parties was accurate
in all respects as of the date of this Agreement and is
accurate in all respects as of the Closing Date as if made
on the Closing Date, which certificate shall be in the form
of EXHIBIT H hereto;
(vi) estoppel certificates from the
landlord under each Lease, in form and substance
satisfactory to Buyer;
(vii) for each Leased Property subject to
Encumbrance against any of the Landlord's interest therein,
satisfactory evidence that the Lease pertaining thereto is
subject to a non-disturbance and attornment agreement in
favor of the applicable Seller thereunder (and any assignee
of such Seller), which non-disturbance and attornment
agreement shall be satisfactory, in form and substance, to
Buyer;
(viii) the Assignment and Assumption
executed by Sellers;
(ix) a sublease agreement (the "Sublease
<PAGE>
Agreement") executed by Collaborative, pursuant to which
Collaborative shall sublease that portion of the
Collaborative Premises which Collaborative and the Buyer
deem reasonably necessary in order for the Buyer to conduct
the Clinical Business thereat, which Sublease Agreement
shall be satisfactory, in form and substance, to
Collaborative and the Buyer and shall incorporate those
terms set forth on SCHEDULE 2.6(a)(ix); and
(x) all other certificates, instruments and
documents to be delivered by Sellers (or any of them)
pursuant to this Agreement or any of the Related Agreements.
(b) Buyer will deliver, or cause to be
delivered, to Sellers:
(i) the Closing Cash Payment;
(ii) an assignment, delegation and
assumption agreement (the "Assumption Agreement") in the
form of EXHIBIT I hereto;
(iii) the Non-Competition Agreement
executed on behalf of Buyer;
(iv) the Services Agreement executed on
behalf of Buyer;
(v) the Sublease Agreement; and
(vi) a certificate executed by Buyer to the
effect that each of Buyer's representations and warranties
in this Agreement and in each Related Agreement to which
Buyer is a party was accurate in all respects as of the date
of this Agreement and is accurate in all respects as of the
Closing Date as if made on the Closing Date, which
certificate shall be in the form of EXHIBIT J hereto.
2.7 Closing. The purchase and sale (the "Closing")
provided for in this Agreement will take place at the offices of
Stevens & Lee, One Glenhardie Corporate Center, 1275 Drummers
Lane, Wayne, Pennsylvania 19087, at 10:00 A.M., within five (5)
business days after the conditions set forth in Sections 7.7 and
8.5 have been satisfied, on or at such other earlier time and
place as the parties may mutually agree upon in writing.
2.8 Allocation of the Purchase Price. The Purchase
Price shall be allocated among the Acquired Assets and the
Assumed Liabilities in accordance with EXHIBIT K attached hereto.
<PAGE>
As soon as practicable after the Supplemental Closing, but in any
event not later than thirty (30) days after the Supplemental
Closing, the Sellers and Buyer shall make any and all appropriate
adjustments to the Tax Allocation by reason of any adjustment to
the Purchase Price under Section 2.4(c). It is understood and
agreed that the Tax Allocation shall be prepared pursuant to and
an in accordance with the provisions of Section 1060 of the Code
and Buyer shall prepare Form 8594 under Section 1060 of the Code
relating to the Contemplated Transactions based upon the final
Tax Allocation prepared pursuant hereto. The Tax Allocation
shall, for tax purposes, be binding on Sellers and Buyer, and
Sellers and Buyer shall file their respective Tax Returns in
accordance with such Tax Allocation and shall not take any
position inconsistent with the Tax Allocation.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby jointly and severally represent and
warrant to Buyer as follows:
3.1 Organization and Good Standing. Each Seller is a
corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation (as
set forth on SCHEDULE 3.1), with full corporate power and
authority to conduct the Clinical Business as it is now being
conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under
all Assigned Contracts. Each Seller is duly qualified to do
business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which the failure
to be so qualified and in good standing could reasonably be
expected to have a Material Adverse Effect.
3.2 Authority; No Conflict.
(a) Subject to approval by the shareholders of
Collaborative contemplated by Section 8.5, this Agreement
constitutes the legal, valid, and binding obligation of Sellers,
enforceable against Sellers in accordance with its terms.
Subject to approval by the shareholders of Collaborative
contemplated by Section 8.5, upon the execution and delivery by
Sellers of the Related Agreements to which Sellers (or any of
them) are parties, the Related Agreements will constitute the
legal, valid, and binding obligations of Sellers, enforceable
against Sellers in accordance with their respective terms.
Sellers have the requisite right, power, authority, and capacity
to execute and deliver this Agreement and such Related Agreements
and to perform their obligations under this Agreement and such
Related Agreements.
(b) Except for those Consents set forth in
<PAGE>
SCHEDULE 3.2(b), neither the execution and delivery of this
Agreement or the Related Agreements to which Sellers (or any of
them) are parties nor the consummation or performance of any of
the Contemplated Transactions will, directly or indirectly (with
or without notice or lapse of time):
(i) contravene, conflict with, or result in
a violation of any provision of the articles of
incorporation, code of regulations, or other organizational
documents of Sellers;
(ii) contravene, conflict with, or result
in a violation of, or give any Governmental Body or other
Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which Sellers
or any of the Acquired Assets may be subject;
(iii) contravene, conflict with, or result
in a violation of any of the terms or requirements of, or
give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by any Seller or that otherwise
relates to the Clinical Business or any of the Acquired
Assets or the Leased Property;
(iv) cause any of the Acquired Assets to be
reassessed or revalued by any taxing authority or other
Governmental Body;
(v) contravene, conflict with, or result in
a violation or breach of any provision of, or give any
Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Assigned Contract; or
(vi) except pursuant to any Contract to
which the Buyer is a party, result in the imposition or
creation of any Encumbrance upon or with respect to any of
the Acquired Assets.
Except for those Consents set forth in SCHEDULE 3.2(b), Seller is
not, and will not be, required to give any notice to or obtain
any Consent from any Person (including parties to the Assigned
Contracts) in connection with the execution and delivery of this
Agreement or any of the Related Agreements or the consummation or
performance of any of the Contemplated Transactions.
3.3 Financial Statements; Accounts Receivable.
(a) SCHEDULE 3.3 includes the following:
<PAGE>
(i) Audited consolidated and consolidating
balance sheets of Collaborative and its subsidiaries
(including the Selling Subsidiaries) as at the close of each
of the years December 31, 1995, December 31, 1996, and
December 31, 1997, inclusive, and the related consolidated
and consolidating statements of income, changes in
stockholders' equity, and cash flow of collaborative and its
subsidiaries (including the Selling Subsidiaries) for each
of the fiscal years then ended, all on a comparative basis,
together with the notes thereto and the report thereon of
Seller's Accountant (the "Prior Financial Statements"); and
(ii) a consolidated and consolidating
balance sheet of Collaborative and its subsidiaries as at
September 30, 1998, and the related internally prepared
consolidated and consolidating statements of income, changes
in stockholders' equity and cash flow for the nine (9) month
period then ended (which, together with any financial
statements delivered pursuant to Section 5.11, shall be
collectively referred to as the "Interim Financial
Statements").
(b) The Financial Statements fairly present, in
all material respects, the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of
Collaborative and its subsidiaries as at the respective dates of
and for the periods referred to in such Financial Statements, all
in accordance with GAAP, subject, in the case of interim
financial statements, to normal year-end adjustments (the effect
of which will not, individually or in the aggregate, be
materially adverse), and the Financial Statements reflect the
consistent application of such accounting principles throughout
the periods involved. Except to the extent provided otherwise in
such Financial Statements, (i) adequate provision was made in the
Financial Statements for doubtful accounts or other receivables;
(ii) sales were stated in the Financial Statements net of
discounts, returns and allowances; and (iii) all Taxes due or
paid were timely reflected in the Financial Statements and all
Taxes not yet due and payable were accrued or otherwise provided
for therein. At the respective dates of each of the Financial
Statements, Sellers had no Liability required to be reflected or
disclosed in the Financial Statements under GAAP which was not so
reflected or disclosed. No provision in the Financial Statements
as of and for the periods covered by such Financial Statements
was necessary, under GAAP, for Liability on account of warranties
or with respect to the Clinical Business. Any significant items
of income or expense which were unusual or of a nonrecurring
nature were separately disclosed in the Financial Statements.
(c) All of the Accounts Receivable of Sellers
included in the Acquired Assets represent amounts receivable for
services actually provided, have arisen from bona-fide
<PAGE>
transactions in the Ordinary Course of Business, are not subject
to any counterclaims or offsets, and have been billed or are
billable, as appropriate, in accordance with the terms of the
Assigned Contract applicable thereto.
3.4 Books and Records. The books of account, minute
books, stock record books, and other records of each Seller, all
of which have been made available to Buyer, are complete and
correct in all material respects.
3.5 Title To Assets; Encumbrances.
(a) Sellers have or will have and convey to
Buyer at the Closing, good and merchantable title to, or a valid
leasehold interest in, all of the properties and assets (other
than the Excluded Assets) used or usable by Sellers in the
Clinical Business or shown on the balance sheet of Sellers dated
as of September 30, 1998, which comprises a portion of the
Interim Financial Statements (the "INTERIM BALANCE SHEET"), or
acquired after the date thereof, free and clear of all
Encumbrances, except for (i) the Assumed Liabilities, and (ii)
properties and assets disposed of in the Ordinary Course of
Clinical Business since the date of the Interim Balance Sheet.
Without limiting the generality of the foregoing, Sellers have,
and will convey to Buyer at the Closing, good and merchantable
title to all of the Acquired Assets, free and clear of any
Encumbrance or restriction on transfer of any nature, other than
the Assumed Liabilities.
(b) SCHEDULE 3.5(b) contains a complete and
accurate list of all Facilities at which any Seller currently
conducts the Clinical Business. To the best of the Sellers'
Knowledge, all Facilities currently used by Sellers lie wholly
within the boundaries of the real property owned or leased by
Seller and do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person. The use
and operation of such Facilities are in compliance with all
applicable Legal Requirements, Orders, Consents and Governmental
Authorizations. To the best of the Sellers' Knowledge, there are
no existing, pending, or Threatened (i) requests, applications or
proceedings to alter or restrict the zoning or other use
restrictions applicable to any such Facilities, (ii) condemnation
proceedings that would affect any of such Facilities in any way,
or (iii) public improvements that would result in any charge or
Taxes being levied or assessed against, or would result in the
creation of any Encumbrance upon, any of such Facilities.
(c) DataTRAK has no right, title or interest in
any of the Acquired Assets.
3.6 Condition and Sufficiency of Assets.
<PAGE>
(a) Except as set forth in SCHEDULE 3.6, (i) the
machinery, equipment, tools, supplies and other tangible personal
property included in the Acquired Assets are in good operating
condition and repair, ordinary wear and tear excepted and (ii)
none of such machinery, equipment, tools, supplies and other
tangible personal property included in the Acquired Assets is in
need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost.
(b) To the best of the Sellers' Knowledge, all
buildings, structures and other improvements and fixtures which
comprise the Facilities (i) are free of any structural or
engineering defects, (ii) are in good repair and condition,
ordinary wear and tear excepted, and (iii) are free from any
latent defects and (iv) suitable for their intended use.
3.7 No Undisclosed Liabilities. Except as set forth
in SCHEDULE 3.7 or any other SCHEDULE hereto, Sellers have no
Liabilities of any nature with respect to the Clinical Business
except for Liabilities reflected or reserved against in the
Interim Balance Sheet and current Liabilities incurred in the
Ordinary Course of Business since the date thereof; provided,
however, notwithstanding the foregoing or the meaning ascribed to
the term Liability herein, Liabilities of the Sellers which are
expressly described in or expressly covered by the provisions of
any other representation and warranty contained in this Section 3
or as otherwise disclosed in the applicable Schedule thereto, or
which are not required to be disclosed in such other
representation or warranty (or the applicable Schedule thereto)
by reason of materiality qualifiers therein, need not be
disclosed in SCHEDULE 3.7 solely by reason of the representation
and warranty in this Section 3.7.
3.8 Taxes.
(a) Sellers have filed or caused to be filed on
a timely basis all Tax Returns that are or were required to be
filed by or with respect to Sellers, either separately or as a
member of a group of corporations, pursuant to applicable Legal
Requirements for all periods prior to the Closing Date. Sellers
have paid, or made provision for the payment of, all Taxes that
have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Sellers,
except such Taxes, if any, as are listed in SCHEDULE 3.8 and are
being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the
Interim Balance Sheet.
(b) The charges, accruals, and reserves with
respect to Taxes on the books of Sellers are adequate (determined
in accordance with GAAP) and are at least equal to Sellers
<PAGE>
liability for Taxes. There exists no proposed tax assessment
against Seller to Seller Knowledge except as disclosed in
SCHEDULE 3.8. All Taxes that Seller is or was required by Legal
Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the
proper Governmental Body or other Person.
(c) All Tax Returns filed by Sellers (or that
include Sellers on a consolidated basis) are true, correct, and
complete in all material respects.
(d) No audit or examination by any Tax authority
is pending with respect to or relating to any Taxes and no Seller
has received any notice from any Tax authority of (i) any pending
or Threatened claim for any Tax deficiency, (ii) intention to
examine or audit any Tax Return for any period, or
(iii) intention to reassess any of the Acquired Assets for Tax
purposes.
3.9 No Material Adverse Change. Since the date of
the Interim Balance Sheet, there has not been any material
adverse change in the operations, properties, assets,
Liabilities, or financial condition of Sellers relating to the
Clinical Business or any material adverse change in the Clinical
Business taken as a whole, and no event, condition or
circumstance exists that could reasonably be expected to result
in such a material adverse change.
3.10 Employee Benefits.
(a) SCHEDULE 3.10 lists each Employee Benefit
Plan that any Seller maintains or to which any Seller contributes
with respect to any employee of the Clinical Business. All
contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to
each such Employee Benefit Plan and all contributions for any
period ending on or before the Closing Date which are not yet due
have been paid to each such Employee Benefit Plan or accrued in
accordance with the past custom and practice of Seller.
(b) Sellers do not contribute to, never have
contributed to, and never has been required to contribute to any
Multiemployer Plan (as defined in ERISA ' 3(37)(A)) or have any
Liability (including withdrawal Liability) under any
Multiemployer Plan.
(c) Except as set forth on SCHEDULE 3.10, no
Seller maintains or contributes to any bonus, deferred
compensation, incentive, severance, termination, or other
compensation plan or arrangement, for the benefit of any employee
<PAGE>
of Seller.
3.11 Compliance With Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in SCHEDULE 3.11(a):
(i) Each Seller is, and at all times since
December 31, 1995 has been, in full compliance with each
Legal Requirement that is or was applicable to it or to the
conduct or operation of its Clinical Business or the
ownership or use of any of the Acquired Assets or the
Facilities;
(ii) no event has occurred or circumstance
exists that (with or without notice or lapse of time)
(A) may constitute or result in a violation by Seller of, or
a failure on the part of any Seller to comply with, any
Legal Requirement, or (B) may give rise to any obligation on
the part of Seller to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature;
(iii) Sellers have not received, at any
time since December 31, 1995, any notice or other
communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any
actual, alleged, or potential violation of, or failure to
comply with, any Legal Requirement, or (B) any actual,
alleged, or potential obligation on the part of Seller to
undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and
(iv) Sellers have timely filed any and all
reports, forms, and documents required to be filed by them
under and pursuant to the 34 Act.
(b) SCHEDULE 3.11(b) contains a complete and
accurate list of each Governmental Authorization that is held by
any Seller or that otherwise relates to the Clinical Business, or
to any of the Acquired Assets or the Facilities. Each
Governmental Authorization listed or required to be listed in
Schedule 3.12 is valid and in full force and effect. Except as
set forth in SCHEDULE 3.11(b):
(i) each Seller is, and at all times has
been, in full compliance with all of the terms and
requirements of each Governmental Authorization identified
or required to be identified in SCHEDULE 3.11(b); and
<PAGE>
(ii) no event has occurred or circumstance
exists that may (with or without notice or lapse of time)
(A) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or
requirement of any Governmental Authorizations listed or
required to be listed in SCHEDULE 3.11(b), or (B) result
directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or
required to be listed in SCHEDULE 3.11(b).
The Governmental Authorizations listed in SCHEDULE 3.11(b)
collectively constitute all of the Governmental Authorizations
necessary to permit Sellers to lawfully conduct and operate the
Clinical Business in the manner it currently conducts and
operates such Clinical Business and to permit Sellers to own and
use the Acquired Assets and to use the Facilities in the manner
in which they currently own and use such assets.
3.12 Legal Proceedings; Orders.
(a) Except as set forth in SCHEDULE 3.12, there
is no pending Proceeding:
(i) that has been commenced by or against
Seller or that otherwise relates to or may affect the
Clinical Business or any of the Acquired Assets or the
Facilities; or
(ii) that challenges, or that may have the
effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions or
the Related Transactions.
To the Knowledge of Sellers, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists
that could reasonably be expected to give rise to or serve as a
basis for the commencement of any such Proceeding. The
Proceedings listed in SCHEDULE 3.12 will not have a material
adverse effect on the Clinical Business of any Seller or the
Acquired Assets or the Facilities.
(b) Except as set forth in SCHEDULE 3.12:
(i) there is no Order to which any of the
Sellers, or any of the Acquired Assets or the Facilities is
subject; and
(ii) each Seller is in full compliance with
<PAGE>
all of the terms and requirements of each Order set forth in
SCHEDULE 3.12.
(c) SCHEDULE 3.12 sets forth a complete and
accurate summary and current status of all pending and Threatened
workers' compensation claims by any current or former employees
of Seller.
3.13 Absence of Certain Changes and Events. Since the
date of the Interim Balance Sheet, each Seller has conducted the
Clinical Business only in the Ordinary Course of Business.
Without limiting the generality of the foregoing sentence, since
the date of the Interim Balance Sheet, there has not been, with
respect to the Clinical Business, any of the following except as
set forth on Schedule 3.13 (or any supplement thereto delivered
pursuant to Section 7.10):
(i) amendment to the certificate of
incorporation, bylaws or other organizational documents of
Seller;
(ii) payment or increase by any Seller of
any bonuses, salaries, or other compensation to any
director, officer, or (except in the Ordinary Course of
Clinical Business) employee or entry into any employment,
severance, or similar Contract with any director, officer,
or employee;
(iii) payment by Seller of the personal
expenses of any shareholder, director, officer or employee;
(iv) adoption of, or increase in the
payments to or benefits under, any Employee Benefit Plan for
or with any employees of any Seller;
(v) damage to or destruction or loss of any
asset or property of any Seller, whether or not covered by
insurance, materially and adversely affecting the
properties, assets, Clinical Business or financial condition
of Seller, taken as a whole;
(vi) ^ termination of, or receipt of notice
of termination of (i) any license, distributorship, sales
representative, joint venture, credit, or similar agreement,
or (ii) any Contract or transaction which are individually
or in the aggregate material to the Clinical Business;
(vii) sale, lease, or other disposition of
any asset or property of Seller or mortgage, pledge, or<PAGE>
imposition of any Encumbrance on any of the Acquired Assets,
including the sale, lease, or other disposition of any of
the Intellectual Property Assets;
(viii) cancellation or waiver of any claims
or rights material to the conduct of the Clinical Business
or any cancellation or waiver of any debts or claims
affecting the Clinical Business;
(ix) material change in the accounting
methods used by any Seller; or
(x) agreement, whether oral or written, by
Seller to do any of the foregoing.
3.14 Contracts; No Defaults.
(a) SCHEDULE 3.14 contains (except as provided
in clause (iii) below) a complete and accurate list, and Sellers
have made available to Buyer true and complete copies, of all
Contracts in effect as of the date hereof with respect to the
Clinical Business or the Acquired Assets including the following:
(i) each Lab Service Contract;
(ii) each Sponsor Contract;
(iii) a list of all Site Contracts (to be
delivered no later than five (5) business days before
Closing);
(iv) to the extent not included under
clauses (i) through (iii) above, each Contract that involves
performance of services or delivery of goods or materials by
Seller relating to the Clinical Business;
(v) to the extent not included under
clauses (i) through (iii) above, each Contract that involves
performance of services or delivery of goods or materials to
Seller relating to the Clinical Business;
(vi) each Contract relating to the Clinical
Business that was not entered into in the Ordinary Course of
Business and that involves expenditures or receipts of
Seller;
(vii) each lease, rental or occupancy
agreement, license, installment and conditional sale
<PAGE>
agreement, and other Contract affecting the ownership of,
leasing of, title to, use of, or any leasehold or other
interest in, any real or personal property (including the
Leases);
(viii) each joint venture, partnership, and
other Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by Seller with any
other Person;
(ix) each Contract containing covenants
that in any way purport to restrict Seller's business
activity or limit the freedom of Seller to engage in any
line of business or to compete with any Person;
(x) each Contract entered into other than
in the Ordinary Course of Business that contains or provides
for an express undertaking by Seller to be responsible for
consequential damages;
(xi) each Contract for capital expenditures
in excess of Five Thousand Dollars ($5,000);
(xii) each written warranty, guaranty, and
or other similar undertaking extended by Seller other than
in the Ordinary Course of Business; and
(xiii) each amendment, supplement, and
modification (whether oral or written) in respect of any of
the foregoing.
SCHEDULE 3.14 also sets forth the details concerning such
Contracts which are specified in such SCHEDULE 3.14, including
the parties to the Contracts and the amount of the remaining
commitment of Seller under the Contracts.
(b) Except as set forth in SCHEDULE 3.14:
(i) Sellers do not have and cannot acquire
any rights under, and Sellers do not have and cannot become
subject to any Liability under, any Contract that relates to
the Clinical Business or any of the Acquired Assets;
(ii) each Contract identified or required
to be identified in SCHEDULE 3.14 is in full force and
effect and is valid and enforceable against such Seller in
accordance with its terms;
(iii) to the best of the Sellers'
<PAGE>
Knowledge, each Contract identified or required to be
identified in SCHEDULE 3.14 is enforceable against the other
party thereto in accordance with its terms;
(iv) each Seller is and at all times has
been in full compliance with all applicable terms and
requirements of each Contract under which Seller has or had
any Liability or by which Seller or any of the Acquired
Assets is or was bound;
(v) each other Person that has or had any
Liability under any Contract under which any Seller has or
had any rights is, and at all times has been, in full
compliance with all applicable terms and requirements of
such Contract; and
(vi) no event has occurred or circumstance
exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or
breach of, or give any Seller or other Person the right to
declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Contract involving any Seller or
the Clinical Business or any of the Acquired Assets.
3.15 Insurance.
(a) Sellers have made available to Buyer:
(i) true and complete copies of all current
policies of insurance to which Seller is a party or under
which any Seller is or has been covered at any time within
the three (3) years preceding the date of this Agreement
relating to the Clinical Business or the Acquired Assets;
and
(ii) true and complete copies of all
pending applications for policies of insurance relating to
the Clinical Business or the Acquired Assets.
(b) SCHEDULE 3.15 describes:
(i) any self-insurance arrangement by or
affecting any Seller, including any reserves established
thereunder;
(ii) any Contract or arrangement, other
than a policy of insurance, for the transfer or sharing of
any risk by any Seller; and
<PAGE>
(iii) all obligations of any Seller to
provide coverage to third parties (for example, under leases
or service agreements).
(c) Except as set forth in SCHEDULE 3.15:
(i) All policies to which any Seller is a
party or that provide coverage to any Seller:
(A) are valid, outstanding,
enforceable, and are in full force and effort;
(B) taken together, to the best of the
Sellers' Knowledge, provide adequate insurance coverage
for the assets and the operations of any Seller for all
risks normally insured against by a Person carrying on
the same business or businesses as the Sellers; and
(C) are sufficient for compliance with
all Legal Requirements and Contracts to which any
Sellers are a party or by which any Seller is bound.
3.16 Environmental Matters. Except as set forth in
SCHEDULE 3.16:
(a) Each Seller is, and at all times prior to
the date hereof has been, in compliance in all material aspects
with, and has not been and is not in violation of or liable
under, any applicable Environmental Law. No Seller has any
reasonable basis to expect, nor has any Seller received, any
actual or Threatened order, notice, or other communication from
(i) any Governmental Body or other Person, or (ii) the current or
prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with in any material
respect any Environmental Law, or of any actual or Threatened
obligation to undertake or bear the cost of any Environmental,
Health, and Safety Liabilities with respect to any of the
Facilities or any Acquired Assets, or with respect to any
property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or
processed by any Seller, or any other Person for whose conduct
any Seller is or may be held responsible, or from which Hazardous
Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of
Sellers, Threatened claims or Encumbrances resulting from any
Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting
any of the Facilities or any Acquired Asset.
<PAGE>
(c) No Seller has Knowledge of any basis to
expect, nor has any of them received, any Order, notice,
communication, inquiry, warning, citation, summons, directive, or
any other indication that relates to any alleged, actual, or
potential violation or failure by any Seller to comply in any
material respect with any Environmental Law, or of any alleged,
actual, or potential obligation of any Seller to undertake or
bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any of the
Acquired Assets, or with respect to any property or facility to
which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by any Seller, or any
other Person for whose conduct any Seller is or may be held
responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) To the best of the Sellers' Knowledge, no
Seller nor any other Person for whose conduct any Seller is or
may be held responsible, has any Environmental, Health, and
Safety Liabilities with respect to the Facilities or any of the
Acquired Assets, at any property geologically or hydrologically
adjoining the Facilities.
(e) There are no Hazardous Materials present on
or in the Facilities in violation of any applicable Environmental
Law, including any Hazardous Materials contained in barrels,
above or underground storage tanks, landfills, land deposits,
dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land,
water, swamps, or any other part of the Facilities or such
adjoining property, or incorporated into any structure therein or
thereon. No Seller, nor any other Person for whose conduct any
Seller is or may be held responsible, or to the Knowledge of any
Seller, any other Person, has permitted or conducted, or is aware
of, any hazardous activity conducted with respect to Hazardous
Materials at the Facilities or any of the Acquired Assets, except
in full compliance with all applicable Environmental Laws.
(f) There has been no Release or, to the
Knowledge of any Seller, threat of Release, of any Hazardous
Materials at or from the Facilities or, to the best of Sellers'
Knowledge at any other locations where any Hazardous Materials
were generated, manufactured, refined, transferred, produced,
imported, used, or processed from or by the Facilities, or from
or by any of the Acquired Assets, or to the Knowledge of Sellers
any geologically or hydrologically adjoining property, whether by
any Seller or any other Person.
(g) Each Seller has made available to Buyer true
and complete copies and results of any reports, studies,
analyses, tests, or monitoring possessed or initiated by such
Seller pertaining to Hazardous Materials or hazardous activities
<PAGE>
in, on, or under the Facilities, or concerning compliance by such
Seller or any other Person for whose conduct such Seller is or
may be held responsible with Environmental Laws.
3.17 Employees.
(a) SCHEDULE 3.17 contains a complete and
accurate list of the following information for each employee of
Sellers engaged in the Clinical Business, including each employee
on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable and any change in
compensation since the date of the Interim Balance Sheet;
vacation accrued; and service credited for purposes of vesting
and eligibility to participate under any Employee Benefit Plan.
(b) To the best of the Sellers' Knowledge, no
Seller has received any verbal or written indication that any
director, officer, or other employee of any Seller engaged in the
Clinical Business will terminate his or her employment with such
Seller prior to the Closing (whether as a result of the
Contemplated Transactions or otherwise).
3.18 Labor Disputes; Compliance. Except as disclosed
in SCHEDULE 3.18, none of the Sellers is a party to any
collective bargaining or other labor Contract, and there has not
been, there is not presently pending or existing, and to Sellers'
Knowledge there is not Threatened any strike, slowdown,
picketing, work stoppage, labor arbitration or proceeding in
respect of the grievance of any employee, application or
complaint filed by an employee or union with the National Labor
Relations Board or any comparable Governmental Body,
organizational activity, or other labor dispute against or
affecting any Seller with respect to the Clinical Business, and
no application for certification of a collective bargaining agent
is pending or to any Sellers' Knowledge is Threatened; to any
Sellers' Knowledge, no event has occurred or circumstance exist
that could provide the basis for any work stoppage or other labor
dispute. Except as disclosed in SCHEDULE 3.18, each Seller has
complied in all respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the
payment of social security and similar taxes, occupational safety
and health, and plant closing (including WARN). No Seller is
liable for the payment of any Taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of
the foregoing Legal Requirements.
3.19 Intellectual Property.
(a) Intellectual Property Assets - The term
"Intellectual Property Assets" includes:
<PAGE>
(i) corporate names (and any derivation
thereof), fictitious business names, trade names, registered
and unregistered trademarks, service marks, and applications
(collectively, "Marks");
(ii) all patents and patent applications
(collectively, "Patents"); and
(iii) all know-how, trade secrets,
confidential information, software, technical information,
processes, technology, plans, drawings, and blue prints
(collectively, "Trade Secrets");
owned or used by any Seller, or licensed by any Seller as
licensee or licensor, and, in any case, used in the Clinical
Business.
(b) AGREEMENTS - SCHEDULE 3.19 contains a
complete and accurate list and summary description of all
Intellectual Property Assets pertaining to the Clinical Business
and any Contracts relating to such Intellectual Property Assets
to which any Seller is a party or by which any Seller is bound.
There are no outstanding and, to Sellers' Knowledge, no
Threatened disputes or disagreements with respect to any such
Contract.
(c) Know-How Necessary for the Clinical Business
- The Intellectual Property Assets described in SCHEDULE 3.19 are
all Intellectual Property Assets necessary for the operation of
the Clinical Business as currently conducted. Sellers are the
owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all Encumbrances,
and has the right to use without payment to a third party all of
the Intellectual Property Assets.
3.20 Relationships With Related Persons. No Related
Person of Seller has any interest in the Clinical Business or any
of the Assigned Contracts or any of the other Acquired Assets.
Except as described in SCHEDULE 3.20, to the best of the Sellers'
Knowledge, no Related Person of Seller owns of record or as a
beneficial owner, an equity interest or any other financial or
profit interest in any Person that has (a) business dealings or a
material financial interest in any transaction with any Seller,
or (b) engages in competition with Sellers with respect to the
Clinical Business in any market presently served by Seller.
Except as set forth in SCHEDULE 3.20, no Related Person of any
Seller is a party to any Contract with, or has any claim or right
against, Seller.
3.21 Brokers or Finders. Sellers and their agents
<PAGE>
have incurred no obligation or Liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement or the
Contemplated Transactions for which Buyer will have any
Liability.
3.22 Disclosure.
(a) No representation or warranty of Sellers in
this Agreement or any Related Agreement and no statement in any
of the Schedules omits to state a material fact necessary to make
the statements herein or therein, in light of the circumstances
in which they were made, not misleading.
(b) Except as described on SCHEDULE 3.22, there
is no fact known to Sellers that has specific application to
Sellers (other than general economic or industry conditions) and
that materially adversely affects or, as far as Sellers can
reasonably foresee, materially threatens, the Clinical Business
or the Acquired Assets, or the financial condition, or results of
operations or prospects relating to the Clinical Business or the
Acquired Assets that has not been set forth in this Agreement or
the Schedules to this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 Organization and Good Standing. Buyer is a
corporation duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Pennsylvania.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid,
and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms. Upon the execution and delivery by
Buyer of the Related Agreements to which Buyer is a party, the
Related Agreements to which Buyer is a party will constitute the
legal, valid, and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms. Buyer
has the absolute and unrestricted right, power, and authority to
execute and deliver this Agreement and the Related Agreements to
which Buyer is a party and to perform its obligations under this
Agreement and the Related Agreements to which Buyer is a party.
(b) Neither the execution and delivery by Buyer
of this Agreement or the Related Agreements to which Buyer is a
party nor the consummation or performance of any of the
<PAGE>
Contemplated Transactions by Buyer will give any Person the right
to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of Buyer's certificate of
incorporation, bylaws or other organizational documents;
(ii) any Legal Requirement or order to
which Buyer may be subject; or
(iii) any Contract to which Buyer is a
party or by which Buyer may be bound.
Except for the Consents identified in Section 7, Buyer is not and
will not be required to obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or
the Related Agreements to which Buyer is a party or the
consummation or performance of any of the Contemplated
Transactions.
4.3 Certain Proceedings. There is no pending
Proceeding that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such
Proceeding has been Threatened.
4.4 Brokers or Finders. Buyer and its officers and
agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement or any
of the Contemplated Transactions for which Sellers will have any
Liability.
5. COVENANTS OF SELLERS PRIOR TO AND FOLLOWING CLOSING
DATE
5.1 Access and Investigation. Between the date of
this Agreement and the Closing Date, Sellers will, and will cause
their Representatives to, (a) afford to Buyer and its
Representatives full and free access (subject to reasonable
advance notice from Buyer to authorized personnel designated by
the Sellers from time to time, which may be verbal) to
Collaborative's senior executive management, Seller's Accountant
and counsel, as well as access to Sellers' properties, Contracts,
books and records, and other documents and data, (b) furnish
Buyer and Buyer's Representatives with copies of all such
Contracts (other than Site Contracts), books and records, and
other existing documents and data as Buyer may reasonably
request, (c) provide the Buyer and Buyer's Representatives with
<PAGE>
access to all Site Contracts, and (d) furnish Buyer and Buyer's
Representatives with such additional financial, operating, and
other data and information as Buyer may reasonably request;
provided, however, that Buyer and its Representative will, in
connection with the performance of such investigation, use
commercially reasonable efforts to avoid materially interfering
with the day-to-day operations of the Clinical Business. Any and
all information furnished by the Sellers to or otherwise obtained
by the Buyer pursuant to this Section 5.1 shall, pending the
closing, remain subject to the provisions of the Confidentiality
Agreement and the provisions of Section 11.3.
5.2 Operation of the Clinical Business of Sellers.
Between the date of this Agreement and the Closing Date, unless
otherwise agreed in writing by Buyer, Sellers will:
(i) conduct the Clinical Business only in
the Ordinary Course of Business;
(ii) use commercially reasonable efforts to
preserve intact the current business organization of Sellers
with respect to the Clinical Business, keep available the
services of the current officers, employees, and agents of
Sellers, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees,
agents, and others having business relationships with
Sellers;
(iii) cooperate with Buyer on all
transitional matters, and in communications and dealings
with third parties be supportive of Buyer and the
Contemplated Transactions;
(iv) confer with Buyer from time to time as
reasonably requested by the Buyer concerning operational
matters of a material nature; and
(v) as and when reasonably requested by the
Buyer from time to time, otherwise report periodically to
Buyer concerning the status and operation of the Clinical
Business.
5.3 Negative Covenant. Except as otherwise expressly
permitted by this Agreement, between the date of this Agreement
and the Closing Date, Sellers will not, without the prior written
consent of Buyer, take any affirmative action, or fail to take
any reasonable action within their control, as a result of which
any of the changes or events listed in Section 3.13 is likely to
occur.
<PAGE>
5.4 Required Approvals. As promptly as practicable
after the date of this Agreement, Sellers will make all filings
required by Legal Requirements to be made by them in order to
consummate the Contemplated Transactions. Between the date of
this Agreement and the Closing Date, Sellers will reasonably
(a) cooperate with Buyer with respect to all filings that Buyer
elects to make or is required by Legal Requirements to make in
connection with the Contemplated Transactions (including any
filing under the HSR Act), and (b) cooperate with Buyer in
obtaining all Consents that may be required to complete the
Contemplated Transactions.
5.5 Notification. Between the date of this Agreement
and the Closing Date, Sellers will promptly notify Buyer in
writing if Sellers become aware of any fact or condition that
causes or constitutes a Breach of any of Sellers' representations
and warranties in any material respect as of the date of this
Agreement, or if Sellers become aware of the occurrence after the
date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or
constitute a Breach of any such representation or warranty in any
material respect had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition.
Should any fact or condition require any change in the Schedules
to this Agreement if the Schedules were dated the date of the
occurrence or discovery of any such fact or condition, Sellers
will promptly deliver to Buyer a supplement to the appropriate
Schedule specifying such change. During the same period, Sellers
will promptly notify Buyer of the occurrence of any Breach of any
covenants of Sellers in this Agreement or of the occurrence of
any event that may reasonably make the satisfaction of the
conditions in Section 7 impossible or unlikely. Delivery of such
notification or supplement will be for information purposes only
and will not modify in any respect any representation, warranty,
covenant, obligation or condition or other provision contained in
this Agreement or in any Related Agreement.
5.6 No Negotiation.
(a) From the date hereof until the Closing Date
or the earlier termination of this Agreement pursuant to
Section 9, Sellers will not, nor will they cause or permit any of
their respective Representatives to, directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any nonpublic information to,
or consider the merits of any inquiries or proposals from, any
Person (other than Buyer) relating to any transaction involving
the sale of the Clinical Business or the Acquired Assets (an
"Acquisition Proposal"); provided, however, that nothing
contained in this Section 5.6 or any other provision hereof shall
prohibit Collaborative or the Collaborative Board from engaging
in negotiations or soliciting proposals concerning a possible
<PAGE>
transaction involving DataTRAK or the Excluded Assets, including
a possible sale, merger or other transaction not involving the
Clinical Business or the Acquired Assets; provided further that
nothing contained in this Section 5.6 or any other provision
hereof shall prohibit Collaborative or the Collaborative Board
from (i) taking and disclosing to Collaborative's shareholders a
position with respect to a tender or exchange offer by a third
party pursuant to Rules 14d-9 and 14e-2 promulgated under the 34
Act, or (ii) making such disclosure to Collaborative's
shareholders as, in the good faith judgment of the Collaborative
Board, after receiving advice from outside counsel, is required
under applicable law, provided that Collaborative may not, except
as permitted by Section 5.6(b), withdraw or modify, or propose to
withdraw or modify, its position with respect to the Contemplated
Transactions or approve or recommend, or propose to approve or
recommend any Acquisition Proposal, or enter into any agreement
with respect to any Acquisition Proposal. Collaborative will
immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal.
(b) Notwithstanding the foregoing, prior to the
Closing Date, Collaborative may respond to an unsolicited request
for information concerning Collaborative from any corporation,
partnership, person or other entity or group pursuant to
appropriate confidentiality agreements, and may negotiate and
participate in discussions and negotiations with such entity or
group concerning an Acquisition Proposal if such entity or group
has submitted a bona fide written proposal to Collaborative
relating to any such transaction which the Collaborative Board
determines in good faith, after receiving advice from its legal
counsel and consulting with its financial advisors, represents a
superior transaction to the Contemplated Transaction (a "Superior
Proposal"). Collaborative will promptly notify Buyer of the
existence of any proposal or inquiry received by Collaborative,
the identity of the party making such proposal or inquiry, and
the terms (both initial and modified) of any such proposal or
inquiry (an will disclose any written materials delivered in
connection therewith) and Collaborative will keep Buyer
reasonably informed of the status (including amendments or
proposed amendments) of any such proposal or inquiry.
Collaborative will promptly provide to Buyer any material non-
public information regarding Collaborative provided to any other
party which was not previously provided to Buyer. At any time
following notification to Buyer of Collaborative's intent to do
so (which notification shall include the identity of the bidder
and the material terms and conditions of the proposal) and if
Collaborative has otherwise complied with the terms of this
Section 5.6(b), the Collaborative Board may withdraw or modify
its approval or recommendation of the Contemplated Transactions
and may enter into an agreement with respect to a Superior
Proposal, provided it shall concurrently with entering into such
agreement pay or cause to be paid to Buyer the Termination Fee
<PAGE>
and the Expense Fee. If Collaborative shall have notified Buyer
of its intent to enter into an agreement with respect to a
Superior Proposal in compliance with the preceding sentence and
has otherwise complied with such sentence, Collaborative may
enter into an agreement with respect to such Superior Proposal.
5.7 Best Efforts. Between the date of this Agreement
and the Closing Date, Sellers will use their reasonable best
efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
5.8 HSR Act Filing. Seller agrees to pay one-half
(1/2) of the filing fees associated with any filings made by
Buyer under the HSR Act in connection with the Contemplated
Transactions.
5.9 Labor Matters.
(a) Sellers shall terminate all of their
employees (other than employees who are parties to employment
agreements included in the Assigned Contracts) as of the Closing
Date and shall take all actions which are necessary or
appropriate in connection therewith. Without limiting the
generality of the foregoing, Sellers shall provide appropriate
and compliant advance notices of termination pursuant to and in
accordance with all provisions of (i) WARN and all other state
and local plant closing laws (if and to the extent applicable),
and (ii) all other Legal Requirements. In this regard, Sellers
will identify all such notification requirements to Buyer and
coordinate the content and timing of such notices with Buyer.
(b) Except as otherwise provided in Section
5.9(d), Sellers shall liquidate and pay or make adequate
provision for all Liabilities accrued through the Closing Date
for compensation, including salary, wages, bonuses, overtime
premiums, and vacation benefits, with respect to employees of
Sellers, provided that payments to such employees for accrued
vacation benefits shall be paid directly to such employees at or
prior to Closing.
(c) Sellers shall make available to the Buyer
all personnel information to allow Buyer to evaluate Sellers'
employees engaged in the Clinical Business in connection with
Buyer's decision of which employees of Sellers are to be hired as
Buyer's employees following the Closing.
(d) Subject to Buyer's satisfactory review of
the employees identified on SCHEDULE 5.9(d), pursuant to and in
accordance with the Buyer's standard and customary pre-employment
review and screening practices, the Buyer covenants and agrees to
<PAGE>
(i) offer employment to those employees of Sellers identified on
SCHEDULE 5.9(d) immediately after the Closing and (ii) assume (as
part of the Assumed Liabilities) those severance obligations of
such employees described on Schedule 5.9(d) in connection
therewith. The Sellers shall provide the Buyer with reasonable
assurances prior to the Closing that such employees will accept
Buyer's offer of employment herein described.
5.10 Subsequent Financial Statements. As soon as
practicable after the end of each month during the period from
the date of this Agreement until the Closing Date, and in no
event later than twenty-five (25) days after the end of each such
month, Sellers will prepare and promptly deliver to Buyer copies
of an unaudited balance sheet and related unaudited income and
cash flow statements for Sellers relating to the Clinical
Business, the Acquired Assets, and the Assumed Liabilities for
the month then ended. All financial statements delivered
pursuant to this Section 5.10 will, when delivered, comply in all
respects with, and otherwise be subject to, the representations
and warranties set forth herein including those set forth in
Section 3.3.
5.11 Excluded Liabilities. Sellers shall pay, perform
or discharge, or cause to be paid, performed or discharged, when
due all Excluded Liabilities in the Ordinary Course of Business.
5.12 Voting of Shares. Concurrently with the
execution and delivery of this Agreement, the Sellers shall cause
all members of the Collaborative Board and Collaborative's
executive management who own shares of Collaborative common stock
to deliver a letter to the Buyer in the form of EXHIBIT L
attached hereto.
5.13 Collaborative Shareholder Approvals.
Collaborative agrees to take, in accordance with applicable law,
applicable stock exchange rules, its Articles of Incorporation
and its Code of Regulations, all action necessary to convene, and
shall hold, an appropriate meeting of shareholders of
Collaborative to consider and vote upon the approval of the
Contemplated Transactions and any other matters required to be
approved by Collaborative's shareholders for consummation of the
Contemplated Transactions as promptly as practicable after this
Agreement is executed. Unless the Collaborative Board, after
having consulted with and considered the written advice of
outside counsel, has determined in good faith that it is
otherwise required in order to discharge properly the directors'
fiduciary duties in accordance with the Ohio General Corporation
law, the Collaborative Board shall recommend such approval, and
Collaborative shall take all reasonable lawful action to solicit
such approval by its shareholders.
<PAGE>
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 Approvals of Governmental Bodies. As promptly as
practicable after the date of this Agreement, Buyer will, and
will cause each of its Related Persons to, make all filings
required by Legal Requirements to be made by them to consummate
the Contemplated Transactions. Between the date of this
Agreement and the Closing Date, Buyer will, and will cause each
Related Person of Buyer to, (a) cooperate with Sellers with
respect to all filings that Sellers are required by Legal
Requirements to make in connection with the Contemplated
Transactions, and (b) cooperate with Sellers in obtaining all
Consents identified in SCHEDULE 3.2(b); provided that Buyer shall
in no event be required to dispose of or make any change in any
portion of its business or to incur any other significant burden
to obtain a Governmental Authorization.
6.2 Best Efforts. Except as set forth in the proviso
to Section 6.1, between the date of this Agreement and the
Closing Date, Buyer shall use its best efforts to cause the
conditions in Sections 8.1, 8.2, 8.4 and 8.5 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Acquired Assets and
assume the Assumed Liabilities and to take the other actions
required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Buyer, in
whole or in part):
7.1 Accuracy of Representations. All of Sellers'
representations and warranties in this Agreement and any Related
Agreement (considered collectively), and each of these
representations and warranties (considered individually), must
have been accurate in all material respects as of the date of
this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without
giving effect to any supplement to any Schedule made after the
date of this Agreement.
7.2 Sellers' Performance.
(a) All of the covenants and obligations that
Sellers are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and
complied with in all material respects.
<PAGE>
(b) Sellers must have delivered, or caused to be
delivered, each of the documents required to be delivered
pursuant to Section 2.6 and each of the other covenants and
obligations in Sections 5.4, 5.6 and 5.7 must have been performed
and complied with in all respects.
7.3 Consents. Each of the Consents identified in
SCHEDULE 3.2(b) must have been obtained and must be in full
force and effect (including the consents of the lessors to
Sellers' assignment of the Leases to Buyer hereunder).
7.4 ADDITIONAL DOCUMENTS. Sellers shall have caused
the following documents to be delivered to Buyer:
(a) an opinion of Calfee, Halter $Griswold LLP,
addressed to Buyer and dated the Closing Date, in the form of
EXHIBIT M hereto; and
(b) such other documents as Buyer may reasonably
request for the purpose of (i) enabling its counsel to provide
the opinion referred to in Section 8.4(a), (ii) evidencing the
accuracy of any of Sellers' representations and warranties, (iii)
evidencing the performance by Sellers of, or the compliance by
Sellers with, any covenant or obligation required to be performed
or complied with by Sellers, (iv) evidencing the satisfaction of
any condition referred to in this Section 7, or (v) otherwise
facilitating the consummation or performance of any of the
Contemplated Transactions.
7.5 No Proceedings. Since the date of this
Agreement, there must not have been commenced or Threatened
against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of
the Contemplated Transactions.
7.6 No Prohibition. Neither the consummation nor the
performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time),
contravene, or conflict with, or result in a violation of, or
cause Buyer or any Person affiliated with Buyer to suffer any
adverse consequence under, any applicable Legal Requirement or
Order.
7.7 HSR Act. Any waiting period applicable to the
Contemplated Transactions under the HSR Act shall have been
terminated or shall have expired.
<PAGE>
7.8 Bulk Sales. Sellers shall have furnished to
Buyer satisfactory evidence that Sellers have complied with all
bulk sales, bulk clearance, and related Legal Requirements in
connection with the sale of the Acquired Assets.
7.9 No Material Adverse Change. Since the date of
this Agreement, there shall have been no material adverse change
in the operations, properties, assets, Liabilities, or financial
condition of the Sellers relating to the Clinical Business or any
material adverse change in the Clinical Business taken as a
whole, and no event, condition or circumstance shall exist that
could reasonably be expected to result in such a material adverse
change.
7.10 Supplement to Schedule 3.13. Because the parties
anticipate changes will be necessary to SCHEDULE 3.13 by reason
of clause (vi) of Section 3.13 and the operation of the Clinical
Business pending the Closing, the Sellers shall have delivered to
the Buyer prior to the Closing a supplement to SCHEDULE 3.13 to
reflect matters required to be disclosed to the Buyer under
clause (vi) of Section 3.13 by reason of the Sellers' operation
of the Clinical Business pending the Closing, as aforesaid.
7.11 Delivery of Site Contracts. Not less than five
(5) business days prior to the Closing Date, the Sellers shall
have delivered to the Buyer true, correct and complete copies of
all Site Contract then in effect, which shall be subject to the
review and approval of the Buyer.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Acquired Assets and to
take the other actions required to be taken by Sellers at the
Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be
waived by Sellers, in whole or in part):
8.1 Accuracy of Representations. All of Buyer's
representations and warranties in this Agreement (considered
collectively), and each of those representations and warranties
(considered individually), must have been accurate in all
material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if
made on the Closing Date.
8.2 Buyer's Performance.
(a) All of the covenants and obligations that
Buyer is required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively),
<PAGE>
and each of these covenants and obligations (considered
individually), must have been performed and complied with in all
material respects.
(b) Buyer must have delivered each of the
documents required to be delivered by Buyer pursuant to Section
2.6 and must have made, or caused to have been made, the Closing
Cash Payments.
8.3 Consents. Each of the Consents identified in
SCHEDULE 3.2(b) must have been obtained and must be in full force
and effect.
8.4 Additional Documents. Buyer must have caused the
following documents to be delivered to Sellers:
(a) an opinion of in-house counsel to Buyer,
dated the Closing Date, in the form of EXHIBIT M; and
(b) such other documents as Sellers may
reasonably request for the purpose of (i) enabling their counsel
to provide the opinion referred to in Section 7.4(a), (ii)
evidencing the accuracy of any representation or warranty of
Buyer, (iii) evidencing the performance by Buyer of, or the
compliance by Buyer with, any covenant or obligation required to
be performed or complied with by Buyer, (iv) evidencing the
satisfaction of any condition referred to in this Section 8, or
(v) otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.5 Shareholder Approval. This Agreement and the
Contemplated Transactions shall have been approved by the
affirmative vote of the shareholders of Collaborative in
accordance with applicable law. The Sellers may terminate and
cancel this Agreement without liability to the Buyer if such
shareholder approval is not obtained and the Sellers have not
otherwise breached any provision of this Agreement by providing
written notice thereof to the Buyer by no later than April 30,
1999. Failure by the Sellers to furnish any such written notice
to the Buyer pursuant to this Section 8.5 shall constitute a
waiver by the Sellers of the condition contained herein.
8.6 No Injunction. There must not be in effect any
Legal Requirement or any injunction or other Order that prohibits
the sale of the Acquired Assets by Sellers to Buyer.
9. TERMINATION
9.1 Termination Events. This Agreement may, by
<PAGE>
notice given prior to or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material
Breach of any provision of this Agreement has been committed by
the other party and such Breach has not been waived or cured to
the reasonable satisfaction of the non-breaching party within
fifteen (15) days following the breaching party's receipt of
written notice of such Breach from the non-breaching party;
(b) by Buyer if any of the conditions in
Section 7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other
than through the failure of Buyer to comply with its obligations
under this Agreement) and Buyer has not waived such condition on
or before the Closing Date;
(c) by Sellers, if any of the conditions in
Section 8 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other
than through the failure of Sellers to comply with their
obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;
(d) by mutual consent of Buyer and Sellers;
(e) by the Sellers if a Superior Proposal is
accepted in accordance with Section 5.6(b); provided that, the
Sellers shall not be permitted to terminate this Agreement
pursuant to this Section 9.1(e) unless the Sellers have provided
the Buyer with written notification thereof that includes the
identity of the Person making such Acquisition Proposal and a
description of the material terms of such Acquisition Proposal in
accordance with Section 5.6 and the Sellers' intent to so
terminate this Agreement; provided, further, such right of
termination shall be expressly conditioned upon payment by the
Sellers to the Buyer of the Termination Fee and Expense Fee in
the manner provided by Section 9.3; or
(f) by either Buyer or Sellers if the Closing
has not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before April 30, 1999, or
such later date as the parties may agree upon.
9.2 Effect of Termination. Each party's right of
termination under Section 9.1 is in addition to any other rights
it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies or
relieve any party hereto of liability for any Breach of this
Agreement. Subject to the provisions of the immediately
<PAGE>
preceding sentence, if this Agreement is terminated pursuant to
Section 9.1, all further obligations of the parties under this
Agreement will terminate, except that the obligations in Sections
9.3, 11.1 and 11.3 will survive.
9.3 Termination Fee; Expense Fee. Notwithstanding
anything contained herein to the contrary, if this Agreement is
terminated by the Sellers pursuant to the provisions of Section
9.1(e), the Sellers shall promptly, but in no event later than
one (1) business day after the date on which such right to
terminate is exercised, pay to Buyer a fee of One Million Dollars
($1,000,000) (the "Termination Fee") and shall also reimburse
Buyer for all reasonable out-of-pocket expenses and fees payable
by it or its affiliates up to the maximum aggregate amount of Two
Hundred Thousand Dollars ($200,000) (collectively, the
"Expenses") (including, without limitation, fees and expenses of
all counsel, printers, banks, accountants, and investment banking
firms, and their respective agents) (the "Expense Fee") related
to the Contemplated Transactions, such amount to be paid in cash
in the immediately available funds by wire transfer to an account
designated by Buyer.
10. INDEMNIFICATION; REMEDIES
10.1 Survival. Subject to the limitations set forth
in Section 10.5, all representations, warranties, covenants, and
obligations in this Agreement, the Schedules to this Agreement,
and the Related Agreement will survive the Closing. The right to
indemnification, reimbursement, or other remedy based on such
representations, warranties, covenants, and obligations will not
be affected by any investigation conducted with respect to, or
any Knowledge acquired (or capable of being acquired) about the
accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of
any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to
indemnification, reimbursement, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2 Indemnification and Reimbursement by Sellers.
Sellers, jointly and severally, shall indemnify and hold harmless
Buyer and its Representatives, stockholders, controlling persons,
and affiliates (collectively, the "Indemnified Persons"), and
will reimburse the Indemnified Persons, for any loss, Liability,
claim, damage and expense (including costs of investigation and
defense and reasonable attorneys' fees), whether or not involving
a third-party claim (collectively, "Damages"), arising from or in
connection with any of the following:
(a) any Breach of any representation or warranty
<PAGE>
made by Sellers in this Agreement, the Schedules to this
Agreement, the certificate delivered pursuant to
Section 2.6(a)(v), or any other Related Agreements delivered by
Sellers pursuant to or in connection with this Agreement;
(b) any Breach by any Seller of any covenant or
obligation of any Seller in this Agreement or any Related
Agreement;
(c) the Excluded Liabilities;
(d) any Environmental, Health and Safety
Liabilities arising out of or relating to (i) the ownership,
operation or condition at any time on or prior to the Closing
Date of any of the Facilities or any other properties or assets
in which any Seller has or had an interest; (ii) any Hazardous
Materials or other contaminants that were present at such
Facilities or such other properties or assets at any time on or
prior to the Closing Date; (iii) any Hazardous Materials or other
contaminants, wherever located, that were, or were allegedly,
generated, transported, stored, treated, Released or otherwise
handled or any hazardous activities that were, or were allegedly,
conducted by any Seller or by any other Person for whose conduct
they are or may be held responsible; and (iv) any bodily injury
(including illness, disability and death), personal injury, and
property damage or other damage of or to any Person, in any way
arising from or allegedly arising from any hazardous activity
conducted or allegedly conducted with respect to such Facilities
or the operations of any Seller prior to the Closing Date or from
Hazardous Material that was present on or before the Closing Date
on or at such Facilities or that was Released or allegedly
Released at any time on or prior to the Closing Date by any
Seller or its predecessors;
(e) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by any such
Person with any Seller (or any Person acting on such Seller's
behalf) in connection with any of the Contemplated Transactions;
or
(f) without limiting the generality of
Section 10.2(c), any failure by the Sellers to comply with all
bulk sales, bulk clearance, and related legal requirements in
connection with the sale of the Acquired Assets or the
Contemplated Transactions.
10.3 Indemnification and Reimbursement by Buyer.
Buyer shall indemnify and hold harmless Sellers, and will
reimburse Sellers, for any Damages arising from or in connection
with any of the following:
<PAGE>
(a) any Breach of any representation or warranty
made by Buyer in this Agreement or in any Related Agreement
delivered by Buyer pursuant to or in connection with this
Agreement;
(b) any Breach by Buyer of any covenant or
obligation of Buyer in this Agreement or any Related Agreement;
or
(c) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in
connection with any of the Contemplated Transactions.
10.4 Procedure for Indemnification - Third Party
Claims.
(a) Promptly after receipt by an indemnified
party under Section 10.2 or 10.3 of notice of the commencement of
any Proceeding against it, such indemnified party shall, if a
claim is to be made against an indemnifying party under such
Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the
indemnifying party will not relieve the indemnifying party of any
liability that it may have to any indemnified party, except to
the extent that the indemnifying party demonstrates that the
defense of such action is materially prejudiced by the
indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in
Section 10.4(a) is brought against an indemnified party and it
gives notice to the indemnifying party of the commencement of
such Proceeding, the indemnifying party shall be entitled to
participate in such Proceeding and, if (i) the indemnifying party
acknowledges in writing to the indemnified party, without
qualification or limitation, its obligation to indemnify the
indemnified party for all Damages arising from such Proceeding
and (ii) provides the indemnified party with satisfactory
assurances that it has the financial ability to fully indemnify
the indemnified party for such Damages, the indemnifying party
shall assume the defense of such Proceeding with counsel
reasonably satisfactory to the indemnified party. If notice is
given to an indemnifying party of the commencement of any
Proceeding and the indemnifying party does not, within ten days
after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any
determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
<PAGE>
(c) Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a
reasonable probability that a Proceeding may adversely affect it
or its Related Persons other than as a result of monetary damages
for which it would be entitled to indemnification under this
Agreement, or if an indemnified party reasonably believes that it
may not receive the indemnification to which it may be entitled
from the indemnifying party, the indemnified party may, by notice
to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party
will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its
consent (which may not be unreasonably withheld).
10.5 Limitation of Claims.
(a) Except as set forth below, there shall be no
liability under or with respect to any of the warranties or
representations of Sellers or Buyer in or under this Agreement or
in any Schedule hereto, unless a claim for indemnity is given by
the party seeking indemnification within the six (6) month period
immediately following the Closing Date, except for Damages
arising as a result of, or in connection with, or with respect to
the following, with respect to which there shall be no limitation
as to the time period within which an indemnity claim must be
made by Buyer hereunder: (i) the Excluded Liabilities; or (ii)
the Breach of any agreements or covenants of any Seller
hereunder.
(b) The maximum aggregate amount recoverable by
Buyer from Sellers pursuant to this Section 10 arising by reason
or Breach of a representation or warranty of Sellers hereunder
shall be limited to the sum of One Million Dollars ($1,000,000);
provided, however, (i) the Buyer shall be entitled to
indemnification hereunder only when the aggregate of all such
claims exceeds One Hundred Thousand Dollars ($100,000) (the
"Threshold Amount"), and (ii) all such claims shall be
recoverable by the Buyer after the Threshold Amount of claims has
been reached.
(c) The maximum amount recoverable by Sellers
from Buyer pursuant to this Section 10 arising by reason or
Breach of a representation or warranty of Buyer hereunder shall
be limited to the sum of One Million Dollars ($1,000,000);
provided, however, (i) the Sellers shall be entitled to
indemnification hereunder only when the aggregate of all such
claims exceed the Threshold Amount, and (ii) all such claims
shall be recoverable by the Sellers after the Threshold Amount
has been reached.
(d) Anything to the contrary set forth in this
<PAGE>
Section 10 notwithstanding, the provisions of this Section 10
shall not apply to any Damages relating to, or arising out of, or
in connection with, the fraud of any party hereto.
11. GENERAL PROVISIONS
11.1 Expenses. Except as otherwise expressly provided
in this Agreement, each party to this Agreement will bear its
respective expenses incurred in connection with the preparation,
execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants.
11.2 Public Announcements. Any public announcement or
similar publicity with respect to this Agreement or the
Contemplated Transactions will be issued, if at all, at such time
and in such manner as Buyer and Sellers mutually determine.
Unless consented to by Buyer in advance or required by Legal
Requirements, prior to the Closing the Sellers shall keep this
Agreement strictly confidential and may not make any disclosure
of this Agreement to any Person. Sellers and Buyer will consult
with each other concerning the means by which Seller's employees,
customers, and suppliers and others having dealings with Seller
will be informed of the Contemplated Transactions, and both the
Sellers and the Buyer will have the right to be present for any
such communication. The Buyer acknowledges that the Sellers
intend to issue a press release with respect to the Contemplated
Transactions following the execution of this Agreement and that
the form of such press release will be subject to the prior
approval of the Buyer.
11.3 Confidentiality. Between the date of this
Agreement and the Closing Date, Buyer and Sellers will maintain
in confidence, and will cause the Related Persons and
Representatives of Buyer and Sellers to maintain in confidence
any confidential or proprietary written, oral, or other
information obtained from the other party or such parties'
Related Persons or Representatives in connection with this
Agreement or the Contemplated Transactions, unless (a) such
information is already known to such party or to others not bound
by a duty of confidentiality or such information becomes publicly
available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation
of the Contemplated Transactions, or (c) the furnishing or use of
such information is required by or necessary or appropriate in
connection with a Legal Requirement or Proceeding. Without
limiting the generality of the foregoing, if the Contemplated
Transactions are not completed, the Buyer agrees to make no use
whatsoever of any of the confidential information made available
to it by the Sellers including, without limitation, customer
lists, Sponsor Contracts, or Site Contracts and each party will
<PAGE>
return or destroy as much of such written information as the
other party may reasonably request.
11.4 Notices. All notices, consents, waivers, and
other communications under this Agreement must be in writing and
will be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is
also mailed to such party, or (c) when received by the addressee,
if sent by a nationally recognized overnight delivery service
(receipt requested) or by mailing, certified mail (return receipt
requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to the
other parties):
Sellers: Collaborative Clinical Research, Inc.
20600 Chagrin Boulevard, Suite 1050
Cleveland, Ohio 44122
Attn: Mr. Jeffrey A. Green, Chief
Executive Officer
Telecopy No.: (216) 491-3888
with a copy to: Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Attn: Thomas F. McKee, Esquire
Telecopy No.: (216) 241-0816
Buyer: The West Company, Incorporated
101 Gordon Drive
Lionville, Pennsylvania 19341-0645
Attn: Mr. Michael A. Anderson, Vice
President, Strategic Planning &
New Clinical Business
Development
Telecopy No.: (610) 594-3010
<PAGE>
with a copy to: The West Company, Incorporated
101 Gordon Drive
Lionville, Pennsylvania 19341-0645
Attn: John R. Gailey, III, Esquire
Telecopy No.: (610) 594-3013
11.5 Jurisdiction; Service of Process. Any action or
proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any
of the parties in the courts of the Commonwealth of Pennsylvania,
County of Philadelphia, or, if it has or can acquire
jurisdiction, in the United States District Court for the Eastern
District of Pennsylvania, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection
to venue laid therein.
11.6 Further Assurances. The parties agree (a) to
furnish upon request to each other such further information, (b)
to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of
this Agreement and the Related Agreements and the documents
referred to in this Agreement and the Related Agreements.
Without limiting the foregoing, Sellers shall assist Buyer in
obtaining all permits, licenses, approvals and other Governmental
Authorizations which may be necessary or appropriate in
connection with the Contemplated Transactions.
11.7 Waiver. The rights and remedies of the parties
to this Agreement are cumulative and not alternative. Neither
the failure nor any delay by any party in exercising any right,
power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege.
11.8 Entire Agreement and Modification. Except as
otherwise provided by the last sentence of Section 5.1, this
Agreement supersedes all prior agreements between the parties
with respect to its subject matter and constitutes (along with
the Related Agreements) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its
and their subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged
with the amendment.
<PAGE>
11.9 Schedules.
(a) The disclosures in the Schedules to this
Agreement, and those in any supplements thereto, relate only to
the representations and warranties in the Section of the
Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
(b) In the event of any inconsistency between
the statements in the body of this Agreement and those in the
Schedules (other than an exception expressly set forth in a
Schedule with respect to a specifically identified representation
or warranty), the statements in the body of this Agreement will
control.
11.10 Assignments, Successors, and No Third-Party
Rights. Neither party may assign any of its rights under this
Agreement without the prior consent of the other parties, except
that Buyer (a) may assign any of its rights under this Agreement
to any affiliate of Buyer (but such assignment will not relieve
Buyer of any of its obligations under this Agreement), (b) shall
have the right to require Sellers to transfer and convey at the
Closing any of the Acquired Assets specified by Buyer to one or
more affiliates of Buyer, and (c) assign or pledge all of its
rights hereunder to the financial institutions providing
financing to Buyer, as security for Buyer's obligations to such
institutions. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or
with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
11.11 Severability. If any provision of this Agreement
is held invalid or unenforceable by any court of competent
jurisdiction, the other provisions of this Agreement will remain
in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or
unenforceable.
11.12 Section Headings. The headings of Sections in
this Agreement are provided for convenience only and will not
affect its construction or interpretation.
11.13 Time of Essence. With regard to all dates and
time periods set forth or referred to in this Agreement, time is
<PAGE>
of the essence.
11.14 Governing Law. This Agreement will be governed
by and construed under the laws of the Commonwealth of
Pennsylvania without regard to conflicts of laws principles.
11.15 Counterparts. This Agreement may be executed in
one or more counterparts, each of which will be deemed to be an
original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same
agreement.
11.16 Use of Name. Buyer will acquire all rights to
each corporate name and tradename of each Seller, and any
variations and derivations thereof. Accordingly, each Seller
will change its name and cause all of their Related Persons, if
any, which are not individuals to change their names immediately
after the Closing to names that are not similar to such Seller's
corporate name, tradename, or any derivation thereof.
11.17 Records Retention. For a period of two (2) years
after the Closing Date or until the sale, merger, or liquidation
(at least forty-five (45) days' advance written notice of which
shall have been furnished by the Sellers to the Buyer), whichever
first occurs, Sellers shall afford Buyer access to, and Sellers
shall retain and shall not destroy, all of its books, records,
Government Authorizations, reports, data, materials, and
documents which are not included in the Acquired Assets but which
relate to the Clinical Business as conducted prior to the Closing
Date.
11.18 Joinder by DataTRAK. Except as otherwise
expressly permitted under and pursuant to the Non-Competition
Agreement to which DataTRAK is a party, DataTRAK has also
executed and delivered this Agreement at the request of
Collaborative for the purpose of joining in the provisions of
this Agreement to evidence its agreement to transfer and convey
to the Buyer, at the Closing, any right, title or interest that
DataTRAK may have in or to any of the Acquired Assets and to
execute and deliver any and all agreements, documents and
instruments reasonably requested by the Buyer in connection
therewith.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
COLLABORATIVE CLINICAL RESEARCH,
INC., an Ohio corporation
By________________________________
<PAGE>
Name:
Title:
Attest:___________________________
Name:
Title:
GFI PHARMACEUTICAL SERVICES, INC.,
an Indiana corporation
By________________________________
Name:
Title:
Attest:___________________________
Name:
Title:
(SIGNATURE LINES CONTINUED ON NEXT PAGE)
<PAGE>
CHI COLLABORATIVE HOLDINGS, an
Ohio corporation
By________________________________
Name:
Title:
Attest:___________________________
Name:
Title:
DATATRAK, INC., an Ohio
corporation
By________________________________
Name:
Title:
Attest:___________________________
Name:
Title:
("Sellers")
THE WEST COMPANY, INCORPORATED, a
Pennsylvania corporation
By________________________________
Name:
Title:
Attest:___________________________
Name:
Title:
("Buyer")
<PAGE>
EXHIBIT A
THE ACQUIRED ASSETS
The "ACQUIRED ASSETS" to be purchased by Buyer and
sold, conveyed, assigned, transferred and delivered on the
Closing Date to Buyer by Sellers shall include all right, title
and interest in and to all of the assets, rights, privileges, and
interests of Sellers used by the Sellers in connection with the
Clinical Business, of whatever nature and wherever located, other
than the "EXCLUDED ASSETS", including without limitation all of
the following:
1. Account Receivable. All accounts receivable and
other amounts owed or otherwise payable to any Seller that exist
as of the Closing Date.
2. Tangible Personal Property. All items of
machinery, equipment, trade fixtures, furnishings, motor
vehicles, furniture, and other tangible personal property,
including such items as are referred to on EXHIBIT A-2 (but with
such additions thereto and deletions therefrom in the Ordinary
Course of Clinical Business as may be contemplated or permitted
by this Agreement).
3. Assigned Contracts. All of Sellers' rights and
interests as of the Closing Date under or relating to the
"ASSIGNED CONTRACTS" (as defined below).
4. Claims, Prepayments, Deposits, Etc. All claims,
deposits, prepayments, prepaid expenses, refunds, causes of
action, chooses in action, rights of recovery, rights of setoff
and rights of recoupment.
5. Books and Records. All books, records, ledgers,
files, documents, correspondence, lists (including, without
limitation, sponsor lists, provider lists, site lists, and
prospect lists), plats, architectural plans, drawings,
specifications, studies, reports, computer software, systems,
procedures manuals, and related materials used in the Acquired
Assets.
6. Advertising. All advertising and promotional
materials, market research, business plans and projections,
artwork, masters, tapes, mats and other similar items pertaining
to the Acquired Assets.
7. Permits and Licenses. All transferable
<PAGE>
approvals, permits, licenses, orders, registrations,
certificates, variances and other Governmental Authorizations.
8. Intellectual Property Assets. Intellectual
Property Assets pertaining to the Clinical Business (including,
without limitation, the names "Collaborative Clinical Research,"
GFI Pharmaceutical Services," and "[CHI/WCE] Clinical
Evaluations" and any derivations thereof).
The "Assigned Contracts" shall be comprised of the
agreements and other instruments identified on SCHEDULE A
attached to this EXHIBIT A; PROVIDED, HOWEVER, that if the
Consent of any Person is required in order to permit the
assignment to Buyer of any such agreement or other instrument,
and if such Consent is not obtained on or before the Closing
Date, then Buyer may elect, on the Closing Date, either (i) to
include such agreement or other instrument among the "Assigned
Contracts," or (ii) to exclude such agreement or other instrument
from the "Assigned Contracts."
<PAGE>
SCHEDULE A
[This SCHEDULE A shall be prepared by Sellers and
include, among other things, Employment Agreements being assigned
to Buyer (Richard J. Kasmer, William Stigelman, Wade Lange,
Gregory A. Folz, Herbert L. Hugill, and David Hirsch), the
Leases, the Lab Testing Contracts, the Site Contracts, and the
Sponsor Contracts.]
<PAGE>
EXHIBIT B
ASSUMED LIABILITIES
The liabilities to be assumed by Buyer pursuant to the
Agreement or otherwise in connection with the transactions
described therein shall consist only of the following Liabilities
(the "Assumed Liabilities") in connection with the operation of
the Clinical Business:
1. Assigned Contracts. All obligations of Seller
under the Assigned Contracts which are to be performed after, and
relate to the period after, the Closing Date (to the extent that
the existence of such obligations is ascertainable solely by
reference to the written provisions of the Assigned Contracts as
disclosed to Buyer before the Closing Date or the descriptions of
any oral Assigned Contracts set forth in SCHEDULE 3.14), but
specifically excluding any obligations to be performed prior to
the Closing and any obligations relating to breaches, defaults or
non-performance under any of the Assigned Contracts occurring or
commencing prior to the Closing Date.
2. Accrued Expenses; Trade Payables. All accrued
expenses and accounts payable of Sellers as of the Closing Date
that were incurred in the Ordinary Course of Clinical Business, a
list and description (including amounts) of which is attached as
EXHIBIT B-2 hereof.
3. Scheduled Severance Obligations. Those severance
obligations described on SCHEDULE 5.9(d) for and with respect to
those employees of Sellers hired by the Buyer pursuant to
Section 5.9(d).
<PAGE>
EXHIBIT E
EXCLUDED ASSETS
The Acquired Assets shall not include, and Sellers
shall specifically retain, all of the following (the "Excluded
Assets"):
1. Cash; Cash Equivalents. All cash and cash
equivalents (including marketable equity services and short-term
investments) of Sellers as of the Closing Date.
2. Corporate Charters, Etc. The corporate charter,
qualifications to conduct business as foreign corporations,
arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books and other documents relating
to the organization, maintenance and existence of Seller as a
corporation.
3. Rights Under This Agreement. All of the rights
of the Sellers under this Agreement or under any Related
Agreement between Sellers on the one hand and the Buyer on the
other hand entered into on or after the date of this Agreement.
4. Non-Clinical Business Assets. All of the assets,
rights, privileges, and interests of Sellers not used in
connection with the Clinical Business.
5. DataTRAK. The capital stock of DataTRAK owned by
Collaborative.
6. Tax Records. The Sellers' tax returns and
related corporate records.
7. Privileged Information. All information
protected by the Sellers' attorney-client or attorney work
product privilege.
8. Third-Party Claims. Claims and similar rights of
any Seller against third parties which are not related to the
Clinical Business.
9. Shared Assets. [TO BE COVERED IN SELLER
AGREEMENTS].
<PAGE>
EXHIBIT G-1
The Sellers and the Buyer shall in good faith use their
joint best efforts to negotiate a mutually satisfactory Services
Agreement prior to the Closing, pursuant to which the parties
shall share with one another certain assets and/or services which
relate to both the Clinical Business and other businesses of the
Sellers and DataTRAK (including, by way of example but not
limitation, accounting, payroll and telephone systems). The
execution and delivery of the Services Agreement shall be a
condition precedent to the parties' obligation to complete the
Contemplated Transactions.
<PAGE>
Exhibit G-2
Seller Agreement required by EXHIBIT G-2 shall be in
substantially the following form.
December 21, 1998
The West Company, Incorporated
101 Gordon Drive
Lionville, Pennsylvania 19341
Attention: Mr. Michael Anderson
Dear Mr. Anderson:
On December 21, 1998, The West Company, Incorporated
("Buyer"), Collaborative Clinical Research, Inc.
("Collaborative"), GFI Pharmaceutical Services, Inc. ("GFI"), and
Collaborative Holdings, Inc. ("CHI") (Collaborative, GFI and CHI
being collectively referred to herein as the "Sellers") entered
into an Asset Purchase Agreement (the "Purchase Agreement").
Pursuant to the terms of the Purchase Agreement, the Sellers
agreed to sell and the Buyer agreed to purchase substantially all
of the assets of the Sellers relating to the Clinical Business
(as defined in the Purchase Agreement). DataTRAK, Inc.
("DataTRAK") is engaged in, among other things, the business of
developing and providing software, technology and related
electronic data handling services (as more fully described on
Exhibit "A" on the Non-Competition Agreement to be executed by
the Sellers and DataTRAK pursuant to the Purchase Agreement).
In connection with the transactions described in the
Purchase Agreement and as a material inducement for the Buyer to
complete such transactions, DataTRAK covenants and agrees to make
the services and the products of DataTRAK's electronic data
capture business available to the Buyer on royalty, fee and other
material terms which are no less favorable than those terms
offered to other non-affiliated customers (excluding, however,
<PAGE>
arrangements made by DataTRAK with any members of any Consortium
described in Section 1(c) of the above mentioned Non-Competition
Agreement.
DataTRAK has executed this letter intending to be legally
bound.
DATATRAK, INC.
By_________________________________
Name:
Title:
<PAGE> Exhibit 13
FINANCIAL REVIEW
--------------------
West Pharmaceutical Services (the Company) applies value-added
services to the process of bringing new drug therapies and
healthcare products to global markets. West s technologies
include the design and manufacture of packaging components for
pharmaceutical, healthcare and consumer products (device product
development); research and development of drug delivery systems;
and contract laboratory services and other services that support
the manufacturing, filling and packaging of pharmaceutical,
healthcare and consumer products (contract services).
The following is management's discussion and analysis of the
Company's operating results for the three years ended December
31, 1998 and its financial position as of year-end 1998. The
information should be read in conjunction with the financial
statements and accompanying notes appearing elsewhere in this
report.
RESULTS OF OPERATIONS
---------------------
The Company's 1998 net income was $6.7 million, or $.41 per
share. Net income includes a charge of $28.2 million related to
in-process research and development associated with the 1998
acquisition of DanBioSyst UK Ltd. (DanBioSyst) and a $2.5 million
net restructuring charge to income in the third quarter of 1998
related to staff reductions. In 1997, net income was $44.4
million, or $2.69 per share, and includes a $7.9 million net tax
benefit associated mainly with the tax reorganization of the
Company s German subsidiaries. The 1996 net income of $16.4
million, or $1.00 per share, reflects a $15 million net charge to
income in the first quarter of 1996 related to a restructuring
plan. Excluding the in-process research and development charge
in 1998, the tax benefit in 1997 and restructuring charges in
1998 and 1996, the Company s 1998 net income was $37.4 million,
or $2.28 per share, which compares with 1997 net income of $36.5
million, or $2.21 per share, and 1996 net income of $31.3
million, or $1.91 per share.
During 1996 and 1997, the Company implemented a major
restructuring plan. The plan included downsizing or closing
manufacturing facilities. Three manufacturing facilities in
Argentina, Puerto Rico and Germany were closed and the machinery
business was sold. Facilities in Brazil and Pennsylvania were
downsized and a development facility in Colorado was closed. An
approximate 5% reduction in the workforce was completed. The
total restructuring charge was $21.5 million, approximately $7.3
million of which represented severance and benefits. The
remaining charge covered the facility closing costs and the
reduction to net realizable value of the facilities and equipment
made excess by the restructuring actions. Part of an overall
strategy to enhance technical capabilities and assure the quality
of products, the restructuring plan created focused, more
efficient factories and shifted certain production to lower-cost
locations. In the third quarter of 1998, a further restructuring
charge was recorded related to staff reductions which reduced
headcount by 1%.
<PAGE>
Net Sales
---------
Net sales were $449.7 million in 1998, as compared with $452.5
million for 1997. Lower comparable sales in the first half of
1998 were nearly offset by sales growth in the second half of the
year, particularly in contract services and in packaging
components for European markets. Reported consolidated sales
comparisons were negatively impacted by about $2.6 million due to
the stronger U.S. dollar versus most European and Asian
currencies.
Sales of manufactured device products for the healthcare and
consumer markets decreased 1% (measured at constant exchange
rates) in 1998 compared with 1997. Sales declined in all markets
with the exception of Europe, where sales increased 9% partially
due to the mid-1998 acquisition of Betraine Limited. Sales in
domestic markets decreased 6% with lower sales to both healthcare
and consumer markets, mainly reflecting lower sales to several
key customers. These declines resulted in part from reductions
in customers inventory levels, and a combination of lower resin
prices and loss of business at three accounts to competitors.
The Company is working on new or improved product offerings to
regain lost business.
Sales in Asian and South American markets were lower primarily
due to the impact on demand of local financial crises. Continued
consumer and government pressure to control and even reduce the
cost of healthcare delivery is transforming the healthcare
markets. Customers have responded by establishing aggressive
cost reduction programs and in certain instances reducing
inventory levels. The Company s ability to increase prices is
becoming more limited and competitive activity is increasing.
Part of the Company s continuing strategy to combat this
environment is to focus on the needs of its customers with
planned introductions of new services and products.
Contract manufacturing and packaging services sales increased
by 3% for the full year, but excluding the impact of the lower
level of company-supplied materials for 1998 production, sales
increased by 8%. Demand in the last half of the year was strong
with sales of these services increasing by 16% compared with
1997. The Company is investing in the capability of its contract
manufacturing and packaging facilities and is leveraging its
sales effort to offer customers the full supply chain capability
of its business units.
Revenues attributable to drug delivery research and development
totaled $1.5 million in 1998.
Net sales were $452.5 million in 1997, a decrease of $6.3
million, or 1%, compared with net sales of $458.8 million in
1996. Without the effect of the strong U.S. dollar, which
reduced reported sales by about $12.9 million, and without the
1996 machinery sales, a business sold in 1996, sales in 1997 were
2% higher compared with 1996.
Contract manufacturing and packaging service sales increased 13%
in 1997 compared with 1996, largely as a result of stronger
demand and because the Company supplied a larger portion of the
materials used in 1997 production.
<PAGE>
Sales of manufactured device products were flat in 1997
compared with 1996. Sales in domestic markets increased by 2%.
Domestic healthcare market sales growth of about 3% reflects the
modest growth rate of the market and a favorable product mix.
Domestic consumer market sales decreased 4% compared with 1996.
The decline occurred in the fourth quarter, in part due to lower
demand for Spout-pak , a fitment for gable-carton juice
containers, low demand for certain customers' products and the
loss of customers replacement products to other suppliers. Sales
in international markets were lower and the product mix was
unfavorable.
Gross Profit
------------
The consolidated gross margin in 1998 was 30.1% and gross
profit was $135.2 million. These results compare with a 29.2%
gross margin and gross profit of $132.1 million in 1997.
Margins on contract manufacturing and packaging services sales
increased significantly due to sales volumes, price increases, a
shift to higher margin, longer-running jobs and improved
efficiencies.
Margins on manufactured device product sales were slightly
lower than 1997 due to the inclusion of Betraine Limited, a
company acquired in 1998. The Company is working to improve the
cost structure and product mix at this subsidiary. Excluding
Betraine, gross margins for this operating segment increased
slightly due to cost savings and efficiency programs. These cost
reductions offset the combined negative impact of lower volumes,
a less favorable product mix and price competition.
The gross margin of 29.2% in 1997 represented an increase from
the 27.5% gross margin in 1996, and gross profit increased from
$126.1 million to $132.1 million
Contract services' gross margin doubled in 1997 compared with
1996 due to sales volumes and efficiencies achieved. Margins on
manufactured device product sales increased by more than one
percentage point due to the combined impact of cost savings
initiatives, a more profitable product mix in domestic markets
and lower resin raw material costs which are passed through to
customers.
Expenses
--------
Selling, general and administrative expenses as a percentage of
sales were 15.7% in 1998, 15.5% in 1997 and 15.9% in 1996.
Selling, general and administrative expenses totaled $70.5
million in 1998, $70.2 million in 1997 and $72.8 million in 1996.
The $.3 million increase in these expenses in 1998 compared with
1997 was primarily the result of expenses associated with
acquisitions. These increases more than offset the following
favorable factors: lower pension costs due to higher income on
U.S. pension plan assets, the impact of the stronger U.S. dollar
and lower U.S. employee fringe benefit costs.
The 4% decrease in these expenses in 1997 compared with 1996
<PAGE>
was primarily the result of lower pension costs due to higher
income on U.S. pension plan assets and the impact of the stronger
U.S. dollar. These decreases more than offset the following
factors: inflationary cost increases, increased bad debt expense
primarily related to the bankruptcy of a domestic customer and
higher expenses in Asia/Pacific due to the financial crisis in
that market, an increase in estimated expenses associated with
environmental remediation activity, and higher spending related
to drug delivery system development.
Included in the other income category is interest income
totaling $2.7 million in 1998, $2.0 million in 1997 and $1.3
million in 1996, a result of higher cash balances available for
investment, due to strong cash flow from operations. Foreign
currency gains and losses were not significant in the last three
years. In 1998, the Company s subsidiary in Brazil was no longer
accounted for as operating in a hyperinflationary economy because
the cumulative inflation rate has declined dramatically. Net
losses on real estate and investments totaled $.3 million in
1998, $.7 million in 1997, and $.2 million in 1996. Losses on
disposition of obsolete equipment were lower in both 1998 and
1997 compared with the prior year.
Interest
---------
Interest costs totaled $7.5 million in 1998 compared with $6.0
million in 1997 and $7.3 million in 1996, of which $.3 million in
1998 and $.4 million in 1997 and 1996 were capitalized as part of
the cost of capital asset acquisitions.
The average consolidated debt level increased in 1998 after
having decreased in 1997. Higher debt levels in 1998 reflect the
1998 acquisitions of DanBioSyst and Betraine and the Company s
Dutch Auction self tender for two million shares at $30 per
share, completed in the fourth quarter of 1998.
Income Taxes
------------
The effective tax rate on consolidated income was 76.1% in 1998,
23.2% in 1997 and 41.8% in 1996. Unusual events have impacted the
effective tax rate in each of these years. Excluding the impact
of these unusual items would result in comparative tax rates of
37.8% for 1998, 37% for 1997 and 36.6% for 1996.
Pretax earnings for 1998 were reduced by a non-deductible $28.2
million charge for acquired in-process research and development.
Excluding this charge, the effective tax rate of 37.8% reflects
the higher proportion of pretax earnings generated in non-U.S.
subsidiaries with higher tax rates.
Significantly impacting the tax accrual for 1997 were two events
which produced a net tax benefit of $7.9 million. The events
were: 1) a tax reorganization of the German subsidiaries which
both increased the tax basis for the assets of these entities and
resulted in tax credit refunds, and 2) repatriation of cash
dividends from certain foreign subsidiaries. Excluding this net
benefit , the effective tax rate was 37%, which included an
increase in the statutory tax rate in France, enacted in 1997.
<PAGE>
The low tax benefit on certain components of the 1996
restructuring charge increased the 1996 effective tax rate.
Excluding the restructuring charge and the applicable tax
benefits, the 1996 effective tax rate would have been 36.6%.
Equity in Affiliates
--------------------
The contribution to earnings from a 25% ownership interest in
Daikyo Seiko,Ltd. and a 49% ownership interest in three
associated companies in Mexico has declined in each of the past
three years. Daikyo s contribution to earnings has steadily
decreased due to a combination of higher expenses related to
introduction of a new product line, Resin CZ vials, lower sales
due to reduced government reimbursements of healthcare costs and
a three-year weakening of the Japanese yen versus the U.S.
dollar. The decrease in earnings contributions from the
affiliates in Mexico is also due to declining sales over the
three years in part as a result of more aggressive competition.
The lower contributions from these affiliates also reflect
currency exchange rate losses. In 1997, expenses related to the
Company's 30% ownership interest in DanBioSyst also reduced
comparisons to 1996.
FINANCIAL POSITION
--------------------
The Company believes that its financial position and current
capitalization indicate an ability to finance substantial future
growth. Cash flow from operations totaled $71.0 million in 1998.
Working capital at December 31, 1998, totaled $55.5 million, a
ratio of current assets to current liabilities of 1.5 to 1, and
includes a cash balance of $31.3 million. Debt to total invested
capital (total debt, minority interests and shareholders' equity)
was 37.9%; the outstanding debt balance was $141.1 million at
December 31, 1998, compared with $89 million at year-end 1997.
Available cash and record cash flow from 1998 operations
combined with cash from stock option exercises and borrowings
under available credit lines to fund the following:$41.8 million
of 1998 capital expenditures, the $34.9 million cash portion of
the purchase price for two acquisitions, the $60.4 million cost
of repurchasing two million common shares following a Dutch
Auction self tender offer, and $9.4 million of cash dividends to
shareholders ($.61 per share).
The Company has two revolving credit facilities which provide
for borrowings up to $70 million for a term of 364 days,
renewable at the lender's option, and borrowings up to $55
million through August 2000. At year-end 1998, the Company had
$35 million and $2.8 million available under the short-term and
long-term facilities, respectively. The Company is in
negotiations with a group of insurance companies for a
substantial long-term debt facility. Agreement is expected to be
reached in the second quarter 1999.
<PAGE>
1999 REQUIREMENTS
------------------
Capital Expenditures: Cash requirements for capital projects in
1999 are estimated at $50 million. These projects focus on new
business opportunities as well as cost reduction and quality
improvements through technology upgrades and product and process
standardization. New device product tooling and equipment and
facilities to support the development of drug delivery systems
are planned. Acquisition and implementation of new information
management systems to address the year 2000 issue continues , as
does maintenance and improvements to the existing production
capacity.
Year 2000 Costs: The year 2000 issue relates to computer
programs which use two digits, rather than four, to specify the
year. Such programs will recognize a date using "00" as the year
1900 rather than the year 2000, resulting in potential system
failure or miscalculations.
The Company has developed a comprehensive, corporate-wide project
plan designed to address the year 2000 issue. The Company's
project implementation team includes representatives from staff
functions and each of the Company's locations. The plan calls
for the Company to have completed required modifications to
address the year 2000 issue by June 30, 1999. The progress of
these efforts is closely monitored by senior management and
periodic reports are provided to the Board of Directors.
The Company plan is based on a risk assessment, which identified
and prioritized critical business processes and plant locations,
and an inventory of all computer hardware and software and
computer-controlled manufacturing and facility equipment. Based
on these results, remediation or replacement plans were
developed. The project began in April 1997.
The Company has made significant progress in remediating or
replacing critical information systems which support business
functions. Due to multiple geographical locations, discrete
computer systems exist in the U.S., Europe, South America and
Asia regions. The U.S. and European-based manufacturing
(excluding West's contract services operations in Lakewood),
financial reporting and payroll application systems have been
completed, and other systems, including West Lakewood's
manufacturing systems, are at various stages of completion, but
are on schedule to be completed during the first half of 1999.
Desktop computer hardware and software inventory and assessment
are complete and required remedial activity is scheduled to be
essentially completed by June 30, 1999.
Remediation or replacement of software-dependent research and
development, manufacturing process and facility management
systems and equipment is progressing well at all locations. These
activities, a combination of testing, replacement and
certification from equipment and system vendors, are expected to
be completed by June 30, 1999.
The Company has received year 2000 compliance certifications
from all of its major raw materials suppliers and major service
providers indicating that delivery of required supplies and
<PAGE>
services will continue uninterrupted. The Company recently
initiated a program of on-site audits of key suppliers.
Although management is satisfied with the progress of the plan,
the Company is in the process of preparing a contingency plan
which will be further detailed in the coming months. The
Company's year 2000 project schedule is expected to be
substantially completed by June 30, 1999. The Company believes
adequate time will be available in the last half of 1999 to
address deficiencies without a material impact on the critical
business functions.
Internal and external resources are being used to execute the
year 2000 plan. The pretax costs incurred to date for this effort
were approximately $3.7 million and $1.0 million in 1998 and
1997,respectively. Purchases and implementation costs for
compliant software which also improves functionality is being
capitalized. As a result, $3.3 million and $1.0 million have
been capitalized in 1998 and 1997, respectively. The Company
does not separately track the incidental costs and time that its
own internal employees spend on the year 2000 project. Such
costs principally relate to salary, employee benefits and
facility costs. The Company expects costs of approximately $5.0
million will be incurred in 1999 to substantially complete the
effort, much of which will represent new equipment and computer
hardware and software, which will be capitalized.
The cost of the year 2000 project and the date on which the
Company believes it will substantially complete modifications are
based on management's best estimates. The estimates are based on
numerous assumptions of future events, including the continued
availability of certain resources and other factors. Because
none of these estimates can be guaranteed, actual time and cost
to complete modifications could differ materially from those
anticipated. Specific factors that might cause such differences
include, but are not limited to, the reliability and timely
receipt of vendor certifications, the appropriateness and
effectiveness of testing and validation methods, the availability
and cost of trained personnel and the timely availability of
replacement computer hardware, software and equipment and similar
uncertainties.
Foreign exchange exposure: In accordance with the Company's
foreign exchange management policy, the adverse consequences
resulting from foreign currency exposure are mitigated by
engaging in certain hedging activities. Foreign exchange forward
contracts are used to minimize exposure related to foreign
currency transactions and commitments for raw material purchases.
The Company has entered into interest rate swap agreements to
minimize risk to interest rate increases. The Note "Financial
Instruments" to the Consolidated Financial Statements explains
the impact of such hedges and interest rate swaps on the
Company's results of operations and financial position.
Remedial activities: Cash requirements for remedial activity
related to environmental cleanup are expected to approximate 1998
expenditures of $.4 million. The Company has been indemnified by
other financially responsible parties against future government
claims relating to groundwater contamination at a Puerto Rico
site, and the Company does not anticipate any remedial expenses
<PAGE>
with respect to this site.
In 1999, management believes cash generated from operations and
option exercises, available credit facilities and the Company's
current capitalization will provide sufficient flexibility to
meet future cash flow requirements, pursue its stated strategy
and implement its recently announced stock repurchase program for
up to one million shares.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
WEST PHARMACEUTICAL SERVICES, INC.
AND SUBSIDIARIES FOR THE YEARS
ENDED DECEMBER 31, 1998, 1997 AND 1996
(in thousands, except per share data)
<TABLE>
<CAPTION> 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------
Net sales $449,700 100% $452,500 100% $458,800 100%
Cost of goods sold 314,500 70 320,400 71 332,700 73
--------------------------------------------------------------
Gross profit 135,200 30 132,100 29 126,100 27
Selling, general and
administrative expenses 70,500 16 70,200 16 72,800 16
Restructuring charge 4,000 1 - - 21,500 5
Acquired research and development 28,200 6 - - - -
Other income, net (2,500) (1) (1,100) (1) (900) (1)
--------------------------------------------------------------
Operating profit 35,000 8 63,000 14 32,700 7
Interest expense 7,200 2 5,600 1 6,900 1
--------------------------------------------------------------
Income before income taxes and
minority interests 27,800 6 57,400 13 25,800 6
Provision for income taxes 21,200 5 13,300 3 10,800 2
Minority interests 100 - 200 - 100 -
--------------------------------------------------------------
Income from consolidated operations 6,500 1% 43,900 10% 14,900 4%
Equity in net income of --- ---
affiliated companies 200 500 1,500
--------------------------------------------------------------
Net income $ 6,700 $ 44,400 $ 16,400
--------------------------------------------------------------
Net income per share:
Basic $ .41 $ 2.69 $ 1.00
Assuming Dilution $ .40 $ 2.68 $ .99
--------------------------------------------------------------
Average common shares outstanding 16,435 16,475 16,418
Average shares assuming dilution 16,504 16,572 16,500
The accompanying notes are an integral
part of the financial statements.
9
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
WEST PHARMACEUTICAL SERVICES, INC. AND
SUBSIDIARIES FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Unrealized
Foreign gains Total other Total
currency (losses) comprehensive Net comprehensive
items on securities income income income
------------------------------------------------------------------------------
Cumulative Balance,
January 1, 1996 $20,100 $ 300 $20,400
Comprehensive
income 1996 (3,800) 100 (3,700) $16,400 $12,700
------------------------------------------------------------------------------
Balance,
December 31, 1996 16,300 400 16,700
Comprehensive
income 1997 (12,900) (300) (13,200) $44,400 $31,200
-----------------------------------------------------------------------------
Balance,
December 31, 1997 3,400 100 3,500
Comprehensive
income 1998 4,100 (400) 3,700 $ 6,700 $10,400
------------------------------------------------------------------------------
Balance,
December 31, 1998 $7,500 $(300) $7,200
------------------------------------------------
------------------------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
10
<PAGE>
CONSOLIDATED BALANCE SHEETS
WEST PHARMACEUTICAL SERVICES, INC. AND SUBSIDIARIES
AT DECEMBER 31, 1998 AND 1997
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
ASSETS ----------------------
Current assets:
Cash, including equivalents (1998--$13,700; 1997--$41,700) $ 31,300 $ 52,300
Accounts receivable, less allowance (1998--$1,900; 1997--$3,000) 64,400 60,400
Inventories 43,500 38,300
Current deferred income tax benefit 9,700 9,400
Other current assets 10,800 10,300
----------------------
Total current assets 159,700 170,700
----------------------
Property, plant and equipment 472,200 428,600
Less accumulated depreciation and amortization 251,900 226,400
----------------------
220,300 202,200
Investments in affiliated companies 15,700 22,700
Goodwill 61,200 51,600
Deferred charges and other assets 48,700 30,700
---------------------
$505,600 $477,900
----------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 800 $ 700
Notes payable 35,300 900
Accounts payable 20,800 18,600
Accrued expenses:
Salaries, wages and benefits 17,100 13,400
Income taxes payable 8,500 5,400
Other 21,700 19,000
----------------------
Total current liabilities 104,200 58,000
----------------------
Long-term debt, excluding current portion 105,000 87,400
11
Deferred income taxes 39,100 30,100
Other long-term liabilities 26,600 24,300
Minority interests 600 400
Shareholders' equity:
Preferred stock, shares authorized: 3,000;
shares issued and outstanding: 1998-0; 1997-0
Common stock, par value $.25 per share; shares authorized: 50,000;
shares issued: 1998--17,165; 1997--16,845;
shares outstanding: 1998--15,026; 1997--16,568 4,300 4,200
Capital in excess of par value 32,900 24,000
Retained earnings 249,300 252,500
Accumulated other comprehensive income 7,200 3,500
----------------------
293,700 284,200
Less treasury stock (1998--2,139 shares; 1997--277 shares) 63,600 6,500
----------------------
Total shareholders' equity 230,100 277,700
----------------------
$505,600 $477,900
----------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
12
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
WEST PHARMACEUTICAL SERVICES, INC. AND
SUBSIDIARIES FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Capital in Other
Common excess of Retained comprehensive Treasury
stock par value earnings income stock Total
----------------------------------------------------------------
Balance, January 1, 1996 $4,200 $23,500 $210,200 $20,400 $(4,200) $254,100
----------------------------------------------------------------
Net income 16,400 16,400
Shares issued under stock plans 400 3,200 3,600
Shares issued for acquisition 100 400 500
Shares repurchased (10,000) (10,000)
Cash dividends declared
($.54 per share) (8,900) (8,900)
Changes-other comprehensive income (3,700) (3,700)
----------------------------------------------------------------
Balance, December 31, 1996 4,200 24,000 217,700 16,700 (10,600) 252,000
----------------------------------------------------------------
Net income 44,400 44,400
Shares issued under stock plans 4,100 4,100
Cash dividends declared ($.58 per share) (9,600) (9,600)
Changes-other comprehensive income (13,200) (13,200)
----------------------------------------------------------------
Balance, December 31, 1997 4,200 24,000 252,500 3,500 (6,500) 277,700
----------------------------------------------------------------
Net income 6,700 6,700
Shares issued under stock plans 300 3,300 3,600
Shares issued for acquisition 100 8,600 8,700
Shares repurchased (60,400) (60,400)
Cash dividends declared ($.62 per share) (9,900) (9,900)
Changes-other comprehensive income 3,700 3,700
----------------------------------------------------------------
Balance, December 31, 1998 $4,300 $32,900 $249,300 $7,200 $(63,600) $230,100
----------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
13
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
WEST PHARMACEUTICAL SERVICES, INC. AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
-------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $6,700 $44,400 $16,400
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 32,300 31,900 30,700
Acquired research and development 28,200 - -
Restructuring charge 4,000 - 21,500
Loss on sales of real estate and invest 300 700 200
Deferred income taxes 5,900 (7,500) (5,700)
Pension and other retirement plans (6,000) (4,100) (600)
Equity in undistributed earnings of affiliated
companies, net (100) (100) (1,100)
Decrease (increase) in accounts receiva (700) 1,000 (3,400)
Decrease (increase) in inventories (2,400) 2,700 (2,700)
Decrease (increase) in other current as 800 400 (300)
(Decrease) increase in other current lia 500 (1,300) 5,900
Other operating items 1,500 (400) 2,500
-----------------------------
Net cash provided by operating activities 71,000 67,700 63,400
-------------------------------
Cash flows from investing activities:
Property, plant and equipment acquired (41,800) (34,400) (31,700)
Proceeds from sales of assets 1,200 1,700 7,200
Payments for acquisitions, net of cash (34,900) - (1,600)
Customer advances, net of repayments 1,700 (300) 1,600
------------------------------
Net cash used in investing activities (73,800) (33,000) (24,500)
------------------------------
Cash flows from financing activities:
Borrowings under revolving
credit agreements, net 65,000 200 1,500
Proceeds from other long-te 1,500 - -
Repayment of long-term debt (19,100) (1,200) (9,000)
Other notes payable, net 800 (700) (6,200)
14
<PAGE>
Issuance of common stock, net 2,600 4,000 3,500
Dividend payments (9,400) (9,400) (8,700)
Purchase of treasury stock (60,400) - (10,000)
-------------------------------
Net cash used in financing activities (19,000) (7,100) (28,900)
-------------------------------
Effect of exchange rates on cash 800 (2,600) (100)
-------------------------------
Net (decrease) increase in cash and
cash equivalents (21,000) 25,000 9,900
Cash and cash equivalents at
beginning of year 52,300 27,300 17,400
-------------------------------
Cash and cash equivalents at end of year $31,300 $52,300 $27,300
-------------------------------
Supplemental cash flow information:
Interest paid, net of amounts capitalized$ 5,100 $ 5,700 $ 6,200
Income taxes paid $14,700 $20,000 $14,300
------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation: The financial statements are prepared in
conformity with generally accepted accounting principles in the
United States. These principles require management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and revenue and expenses and the
disclosure of contingencies in the financial statements. Actual
amounts realized may differ from these estimates.
Principles of Consolidation: The consolidated financial
statements include the accounts of the Company and all majority-
owned subsidiaries. Material intercompany transactions and
accounts are eliminated in consolidation. Investments in
affiliated companies in which ownership exceeds 20% are accounted
for on the equity method.
Statement of Cash Flows: Cash flows from operating activities are
reported under the indirect method; cash equivalents include time
deposits, certificates of deposit and all highly liquid debt
instruments with original maturities of three months or less.
Inventories: Inventories are valued at the lower of cost or
market. The cost of inventories located in the United States is
determined on the last-in, first-out (LIFO) method, except for
the cost of inventories of West Pharmaceutical Services Lakewood,
Inc. (West Lakewood), a wholly owned subsidiary, which is
determined on the first-in, first-out (FIFO) method. The cost of
inventories located outside the United States is determined
principally on the average cost method.
Foreign Currency Translation: Foreign currency transaction gains
and losses and translation gains and losses of subsidiaries
operating in high-inflation economies are recognized in the
determination of net income. Foreign currency translation
adjustments of other subsidiaries and affiliates operating
outside the United States are accumulated in other comprehensive
income, a separate component of shareholders' equity.
Financial Instruments: The Company uses interest rate swaps and
forward exchange contracts to minimize the economic exposure
related to fluctuating interest and foreign exchange rates.
Amounts to be paid or received under interest rate swaps are
accrued as interest expense, and presented in the financial
statements on a net basis. Gains and losses on hedges of existing
assets and liabilities are recognized monthly and offset gains
and losses on the underlying transaction. Gains and losses
related to firm commitments, primarily raw material purchases
including local needs in foreign subsidiaries, are deferred and
recognized as part of the underlying transaction.
In 1998, Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities", was issued. This
standard, which will be adopted by the Company in the year 2000,
requires derivatives to be recorded on the balance sheet as
16
assets or liabilities, measured at fair value. Gains or losses
resulting from changes in the value of those derivatives would be
accounted for depending on the use of the derivative and whether
it qualifies for hedge accounting. The impact of adopting this
standard cannot be determined at this time.
Marketable Securities: Investments in debt and marketable
securities are classified under one of three categories: held-to-
maturity, available-for-sale and trading, based on management's
intentions. Investments in marketable securities are stated at
fair market value. Unrealized gains and losses on trading
securities are included in income. Unrealized gains and losses on
securities available-for-sale are accumulated in other
comprehensive income, a separate component of shareholders'
equity. Cost of marketable securities is determined on the
moving average method.
Revenue Recognition: Sales are recorded at the time title
passes, which generally occurs when the goods are shipped.
Revenue associated with drug delivery systems development is
recognized when earned in accordance with the terms of the
customer agreement.
Property, Plant And Equipment: Property, plant and equipment are
carried at cost. Maintenance and minor repairs and renewals are
charged to expense as incurred. Upon sale or retirement of
depreciable assets, costs and related depreciation are
eliminated, and gains or losses are recognized in the
determination of net income. The Company continually evaluates
the appropriateness of the remaining estimated useful life and
the carrying value of its operating assets, goodwill and other
intangible assets. Carrying values in excess of undiscounted
estimates of related cash flows are expensed when such
determination is made.
Depreciation And Amortization: For financial reporting purposes,
depreciation is computed principally on the straight-line method
over the estimated useful lives of the assets, or the remaining
term of the lease, if shorter. For income tax purposes,
depreciation is computed using accelerated methods. Goodwill is
being amortized on the straight-line method over periods ranging
from 13 to 40 years.
Research and Development: Research, development and engineering
expenditures for the creation and application of new or improved
products and processes, and drug delivery systems, the total of
which amounted to $14,500 in 1998, $12,000 in 1997 and $11,200 in
1996, are expensed as incurred, net of customer reimbursements.
Environmental Remediation and Compliance Costs: Environmental
remediation costs are accrued when such costs are probable and
reasonable estimates are determinable. Cost estimates are not
discounted and include investigation, cleanup and monitoring
activities; such estimates are adjusted, if necessary, based on
additional findings. In general, environmental compliance costs
are expensed. Environmental compliance costs at current operating
sites are capitalized if they increase the value of the property
and/or prevent environmental hazards from occurring.
17
Income Taxes: Deferred income taxes are recognized by applying
enacted statutory tax rates, applicable to future years, to
temporary differences between the tax bases and financial
statement carrying values of the Company's assets and
liabilities. Valuation allowances are recorded to reduce deferred
tax assets to amounts that are more likely than not to be
realized. United States income taxes and withholding taxes are
accrued on the portion of earnings of international subsidiaries
and affiliates (which qualify as joint ventures) intended to be
remitted to the parent company.
Stock-Based Compensation: The Company accounts for stock-based
compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Accordingly,
compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company s stock at the
date of the grant over the amount an employee must pay to acquire
the stock.
Net Income Per Share: Basic net income per share is computed by
dividing net income by the weighted-average number of shares of
common stock outstanding during each period. Net income per
share, assuming dilution, considers the potential issuance of
common shares under the Company s stock option and award plans,
based on the treasury stock method. The treasury stock method
assumes use of exercise proceeds to repurchase common stock at
the average fair market value in the period.
Other Income (Expense)
----------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
-----------------------------
Interest income $ 2,700 $ 2,000 $1,300
Foreign exchange gains (losses) 200 - (100)
Loss on sales of real estate
and investments (300) (700) (200)
Other (100) (200) (100)
-----------------------------
$ 2,500 $ 1,100 $ 900
-----------------------------
</TABLE>
Restructuring Charges
---------------------
On September 8, 1998, the Company recorded a pre-tax charge of
$4,000. The charge is related to employee reductions associated
with identified manufacturing and other operating efficiencies.
The charge includes severance and benefits for 90 employees
including manufacturing and staff positions and other related
charges. At December 31, 1998, the total payout of severance and
benefits to date associated with this charge was $1,700.
On March 29, 1996, the Company approved a major restructuring
18
plan that included the closing or substantial downsizing of six
manufacturing facilities, disposition of related excess equipment
and properties and an approximate 5% reduction of the workforce.
The total estimated charge related to these actions was $15,000,
net of $6,500 of income tax benefits, which was accrued in the
first quarter of 1996. Approximately one-third of the net charge
related to reduction in personnel, including manufacturing and
staff positions, and covered severance pay and other benefits to
be provided to terminated employees. At December 31, 1998, all
employees affected by the plan have been terminated and total
payout of severance and benefits to date is $6,900; the remaining
liability for these costs is $400. The remaining net charge
covered facility closing costs and the reduction of the carrying
value of equipment and facilities made excess by the
restructuring plan to net realizable value. Facilities in Puerto
Rico, Colorado, Germany and Argentina were closed; three of four
buildings idled have been sold to date. Facilities in Brazil and
Pennsylvania were downsized and the machinery manufacturing
operations were sold.
Restructuring activities, except for the sale of one building and
certain excess equipment and payout of remaining benefit costs
for terminated employees, have been completed.
Acquisitions and Investments
-----------------------------
On July 1, 1998 the Company acquired Betraine Limited for BPS
7,200 ($11,800 at July 1, 1998). Betraine manufactures precision
injection molded plastic components for the healthcare and
consumer products industries. The acquisition was accounted for
as a purchase and Betraine operating results were consolidated
beginning July 1, 1998. The acquisition was financed with
existing cash. The excess of the purchase price over the net
assets acquired will be amortized on a straight line basis over
20 years.
On March 31, 1998, the Company acquired for BPS 20,000 ($33,500
at March 31, 1998) the remaining 70% interest in DanBioSyst UK
Ltd. (DBS), making DBS a wholly-owned subsidiary. DBS is engaged
in drug delivery system research and development. This
transaction was accounted for by the purchase method and was
financed with cash of $9,400, 320,406 shares of restricted common
stock valued at $8,700, and short-term notes of $15,400.
Operating results of DBS were consolidated beginning on April 1,
1998. The allocation of the purchase price, determined by an
independent appraiser using the income approach, follows:
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 1,300
Equipment and leasehold improvements 800
In-process research and development 28,200
Patents 2,800
Other intangibles 400
In-process research and development was written off at the date
19
of acquisition. This value relates to various drug delivery
platforms which DBS has in different stages of the development
process. The appraisal was based on licensing of such delivery
systems with significant revenues generated beginning in 2003. A
discount rate of 32% was used.
The initial 30% interest in DBS was acquired in 10% increments,
the last of these purchases occurring in 1996. The cost of the
1996 acquisition was $2,100, paid $1,600 in cash and $500 in the
Company's common stock.
Income Taxes
------------
Income before income taxes and minority interests was derived as
follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
---------------------------
Domestic operations $ 8,600 $39,500 $11,500
International operations 19,200 17,900 14,300
---------------------------
$27,800 $57,400 $25,800
---------------------------
</TABLE>
The related provision for income taxes consists of:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
---------------------------
Currently payable:
Federal $ 8,800 $16,000 $ 8,000
State 900 600 700
International 5,600 4,200 7,800
---------------------------
15,300 20,800 16,500
---------------------------
Deferred:
Federal 4,200 1,800 (3,600)
State - - (200)
International 1,700 (9,300) (1,900)
---------------------------
5,900 (7,500) (5,700)
---------------------------
$21,200 $13,300 $10,800
---------------------------
</TABLE>
A reconciliation of the United States statutory corporate tax
rate to the Company's effective consolidated tax rate on income
before income taxes and minority interests is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
--------------------------
Statutory corporate tax rate 35.0% 35.0% 35.0%
20
Tax on international operations
in excess of
United States tax rate 1.2 4.7 2.4
German tax reorganization benefit - (21.7) -
Acquired in-process
research and development 35.5 - -
United States tax on repatriated
international earnings .8 4.3 1.0
State income taxes, net of Federal
tax benefit 2.3 .7 1.8
Other 1.3 .2 1.6
--------------------------
Effective tax rate 76.1% 23.2% 41.8%
--------------------------
</TABLE>
In the third quarter of 1997, the Company completed a tax
reorganization of certain German subsidiaries. The benefit of
this reorganization was reduced in 1997's fourth quarter due to a
tax law change and completion of a tax audit.
The net current and noncurrent components of deferred income
taxes recognized in the balance sheet at December 31 are as
follows:
<TABLE>
<CAPTION> <C> <C>
1998 1997
------------------------------
Net current assets $ 7,800 $ 9,000
Net noncurrent liabilities $27,900 $19,500
------------------------------
</TABLE>
The following is a summary of the significant components of the
Company's deferred tax assets and liabilities as of December 31:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
-------------------------------
Deferred tax assets:
Loss on asset dispositions
and plant closings $ 2,400 $ 2,500
Severance and deferred
compensation 9,900 9,200
German tax reorganization 7,800 8,300
Net operating loss carryovers 1,100 2,300
Foreign tax credit carryovers 800 900
Restructuring charge 1,400 1,200
Other 4,500 4,000
Valuation allowance (1,700) (2,500)
-------------------------------
Total $26,200 $25,900
-------------------------------
21
1998 1997
-------------------------------
Deferred tax liabilities:
Accelerated depreciation $32,200 $26,900
Severance and deferred compensation 7,600 4,300
Other 6,500 5,200
-------------------------------
Total $46,300 $36,400
-------------------------------
</TABLE>
At December 31, 1998, subsidiaries' had operating tax loss
carryovers of $20,000, which will be available to apply against
the future taxable income of such subsidiaries. The carryover
periods expire beginning with $1,500 in 1999 and continue through
2001.
In 1997, the Company repatriated $12,000 of undistributed
earnings of international subsidiaries and $2,400 of tax was
recorded. At December 31, 1998, undistributed earnings of
international subsidiaries, on which deferred income taxes have
not been provided, amounted to $73,800. It is the Company s
intention to reinvest these undistributed earnings of foreign
subsidiaries, and it is not practicable to determine the amount
of income or withholding tax that would be payable upon the
remittance of those earnings. Such earnings would become taxable
upon the sale or liquidation of foreign subsidiaries or upon the
remittance of dividends. Tax credits that would become available
upon distribution of such earnings could reduce income taxes then
payable at the United States statutory rate. As of December 31,
1998, the Company had available foreign tax credit carryovers of
approximately $800 expiring in 1999 through 2003.
Net Income Per Share
--------------------
The following table reconciles shares used in basic income
per share to the shares used in income per share assuming
dilution. There is no adjustment to the net income of the
Company in the calculation of net income per share assuming
dilution.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
------ ------ ------
Net Income $ 6,700 $44,400 $16,400
----------------------------------------------------------------
Basic average common
shares outstanding 16,435 16,475 16,418
Assumed stock options exercised
and awards vested 69 97 82
-----------------------------------------------------------------
Average common shares
assuming dilution 16,504 16,572 16,500
</TABLE>
Comprehensive Income
--------------------
In 1998, the Company adopted Financial Accounting Standards No.
22
130, "Reporting Comprehensive Income," requiring the reporting
and display of comprehensive income. Comprehensive income
consists of reported net income and other comprehensive income
which reflects revenue, expenses and gains and losses which
generally accepted accounting principles exclude from net income.
For the Company the items excluded from current net income are
unrealized gains or losses on available-for-sale securities and
cumulative foreign currency adjustments. Comprehensive income
and the cumulative balance of each item of other comprehensive
income is displayed in the accompanying Consolidated Statements
of Comprehensive Income.
Inventories
-----------
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
---------------------------
Finished goods $15,700 $15,800
Work in process 13,700 8,100
Raw materials 14,100 14,400
---------------------------
$43,500 $38,300
---------------------------
</TABLE>
Included above are inventories located in the United States that
are valued on the LIFO basis, amounting to $10,200 and $12,600 at
December 31, 1998 and 1997, respectively, which are approximately
$7,200 and $7,600, respectively, lower than replacement value.
Property, Plant and Equipment
------------------------------
A summary of property, plant and equipment at December 31 is
presented in the following table:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Years of
expected
useful
life 1998 1997
----------------------------------------
Land $ 3,400 $ 3,500
Buildings and improvements 7-50 104,200 97,000
Machinery and equipment 3-20 291,100 261,800
Molds and dies 4-7 55,600 52,600
Construction in progress 17,900 13,700
----------------------------------------
$472,200 $428,600
----------------------------------------
</TABLE>
Affiliated Companies
--------------------
At December 31, 1998, the following affiliated companies were
23
accounted for under the equity method:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal
year Ownership
Location end interest
--------------------------------------
The West Company de Mexico S.A. Mexico Dec. 31 49%
Aluplast S.A. de C.V. Mexico Dec. 31 49%
Pharma-Tap S.A. de C.V. Mexico Dec. 31 49%
Daikyo Seiko, Ltd. Japan Oct. 31 25%
--------------------------------------
</TABLE>
A summary of the financial information for these companies is
presented below:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
------------------------
Balance Sheets:
Current assets $ 83,400 $ 78,500
Noncurrent assets 99,600 91,700
------------------------
Total assets $183,000 $170,200
------------------------
Current liabilities $ 45,000 $ 46,500
Noncurrent liabilities 79,800 66,500
Owners' equity 58,200 57,200
------------------------
Total liabilities and owners' equity $183,000 $170,200
------------------------
1998 1997 1996
---------------------------
Income Statements:
Net sales $69,500 $77,200 $80,800
Gross profit 14,500 18,700 25,500
Net income 1,000 2,900 5,900
----------------------------
</TABLE>
Unremitted income of affiliated companies included in
consolidated retained earnings amounted to $11,100, $11,100 and
$11,000 at December 31, 1998, 1997 and 1996, respectively.
Dividends received from affiliated companies were $200 in 1998,
$400 in 1997 and $400 in 1996.
The Company's equity in unrealized gains and losses of Daikyo
Seiko, Ltd.'s investment in securities available for sale
included in other comprehensive income, a separate component of
shareholders' equity, was $(300), $100 and $400 at December 31,
1998, 1997 and 1996, respectively. The 1998 loss is net of
24
income tax benefit of $300.
Debt
----
Short-Term: Notes payable in the amounts of $35,300 and $900 at
December 31, 1998 and 1997, respectively, are payable within one
year and bear interest at a weighted-average interest rate of
6% and 4%, respectively. At December 31, 1998, short-term debt
of $2,800 (under a revolving credit line) was classified as long-
term because of the Company's intent to renew the borrowings
using an available long-term credit facility.
<TABLE>
<CAPTION>
<S> <C> <C>
Long-term:
At December 31, 1998 1997
-------------------
Unsecured:
Revolving credit facility,
due 2000 (5.51%) $55,000 $22,100
Tax-exempt industrial revenue bonds,
due 2005 (4.2% to 5.95%) (a) 11,100 11,100
Subordinated debentures, due 2007 (6.5%) 3,300 3,200
Other notes, due 1999 to 2006 (3.5% to 8.17%) 29,800 42,400
Collateralized:
Mortgage notes, due 1999 to 2016 (6.8% to
6.94%) (b) 6,600 9,300
-------------------
Total long-term debt 105,800 88,100
Less current portion 800 700
-------------------
$ 105,000 $ 87,400
-------------------
</TABLE>
(a) The proceeds of industrial revenue bonds that were not
required for the respective construction projects have been
invested by the Company. Use of these excess funds and earnings
thereon is restricted to servicing the debt. The aggregate of
unexpended proceeds and earnings thereon of $1,400 is reflected
as a reduction of the principal outstanding on the bonds.
(b) Real estate, machinery and equipment with a carrying value of
$12,100 at December 31, 1998, are pledged as collateral.
The Company's revolving credit agreement provides for borrowings
up to $70,000 and $55,000 with a term of 364 days and five years
through August 2000, respectively, renewable at the lenders'
option. Interest is charged at a floating rate based on LIBOR,
and a commitment fee ranging up to 3/20% per annum is payable on
the facility.
At December 31, 1998, $4,300 at par value of West Lakewood's
subordinated debentures were outstanding. The subordinated
debentures are reflected in the balance sheet net of discount,
which is being amortized through the maturity date of the
subordinated debentures, March 1, 2007. The unamortized discount
totaled $1,000 and $1,100 at December 31, 1998 and 1997,
25
respectively. The holders have the right to convert such
subordinated debentures into cash for an amount approximating 50%
of the par value of the subordinated debentures converted.
Interest is payable semiannually.
Long-term debt maturing in the years following 1999 is: $67,300
in 2000, $800 in 2001, $3,200 in 2002 and $12,400 in 2003.
Certain of the financing agreements, among other things, require
the maintenance of certain working capital, interest coverage and
debt-to-capitalization ratios and tangible net worth; restrict
the sale of assets; and limit the payment of dividends.
Interest costs incurred during 1998, 1997 and 1996 were $7,500,
$6,000 and $7,300, respectively, of which $300, $400 and $400,
respectively, were capitalized as part of the cost of acquiring
certain assets.
At December 31, 1998, the Company has three interest rate swap
contracts outstanding, with notional value of $3,000 each, to fix
the interest rates at 6.51%, 6.54% and 6.775% through August
2001. Under the terms of these agreements, the Company makes
periodic interest payments based on these fixed rates of interest
on the notional principal amounts to a counterparty that makes
payments based on a market interest rate. The net interest
expense recognized in connection with these agreements was less
than $100 in the past three years.
Financial Instruments
---------------------
The following disclosure reflects the estimated fair value of
financial instruments of the Company as of December 31.
<TABLE>
<CAPTION>
Carrying value Estimated fair value
--------------------------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
-------------------------------------
Cash and cash equivalents $31,300 $52,300 $31,300 $52,300
Short-and long-term debt 141,100 89,000 135,000 88,400
Interest rate swaps(a) - - - -
Forward exchange contracts(a) - -
-------------------------------------
</TABLE>
(a) The estimated fair value of the interest rate swaps was less
than $100 at December 31, 1998 and 1997. The estimated fair value
of forward exchange contracts was less than $100 at December 31,
1997. There were no forward exchange contracts in effect at
December 31, 1998.
Methods used to estimate the fair market values of the above
listed financial instruments are as follows: cash and cash
equivalents due to their short maturity are estimated at carrying
values that approximate market; debt is estimated based on
current market quotes for instruments of similar maturity;
interest rate swaps (see preceding Note" Debt") and forward
26
exchange contracts are valued at published market prices, market
prices of comparable instruments or quotes.
Notional amounts upon which current interest rate swap contracts
are based do not represent amounts exchanged and are not a
measure of the Company s exposure. Failure by the contract
counterparty to make interest payments under an interest swap
contract would result in an accounting loss to the Company only
if interest rates exceeded the fixed rate to be paid by the
Company. The accounting loss corresponds to the cost to replace
the swap contract.
Benefit Plans
-------------
The Company and certain domestic and international subsidiaries
sponsor defined benefit pension plans. In addition, the Company
provides minimal life insurance benefits for certain United
States retirees and pays a portion of healthcare (medical and
dental) costs for retired United States salaried employees and
their dependents. Benefits for participants are coordinated with
medicare and the plan mandates medicare risk (HMO) coverage
wherever possible and caps the total contribution for non-HMO
coverage.
Total (income) expense for 1998, 1997 and 1996 of these plans
includes the following:
<TABLE>
<CAPTION>
Pension benefits Other retirement benefits
<S> <C> <C> <C> <C> <C> <C>
1998 1997 1996 1998 1997 1996
- -------------------------------------------------------------------------
Service cost $ 3,600 $ 3,600 $ 3,900 $500 $400 $500
Interest cost 8,500 8,000 7,700 500 500 600
Expected return
on assets (15,400) (13,400) (11,300) - - -
Amortization of
unrecognized
transition asset (800) (800) (800) - - -
Amortization of
prior service cost 400 200 100 (1,500) (1,400)(1,200)
Recognized actuarial
gains (1,800) (1,200) (100) - - -
--------------------------- ----------------------
Pension (income) $(5,500) $(3,600) $(500) $(500) $(500) $(100)
--------------------------- ----------------------
</TABLE>
The following tables provide a reconciliation of the benefit obligation,
plan assets and funded status of the plans:
<TABLE>
<CAPTION>
Pension benefits Other retirement benefits
--------------------- -------------------------
<S> <C> <C> <C> <C>
Change in 1998 1997 1998 1997
benefit
obligation: ---------------------- ----------------------
Benefit obligation,
27
January 1 $(120,400) $(108,800) $(7,400) $(6,600)
Service cost (3,600) (3,600) (500) (400)
Interest cost (8,500) (8,000) (500) (500)
Plan participants'
contributions 200 200 100 100
Actuarial gain (5,500) (6,200) (400) (300)
Benefits/
expenses paid 6,200 5,400 300 300
Foreign exchange
impact (300) 600 - -
--------------------- ----------------------
Benefit obligation,
December 31 $(131,900) $(120,400) $(8,400) $(7,400)
--------------------- ----------------------
Change in plan assets:
Fair value of plan
assets, January 1 $165,900 $144,200 $ - $ -
Actual return on
plan assets 28,600 26,500 - -
Employer contribution 900 600 200 200
Plan participants'
contributions 200 200 100 100
Benefits/expenses
paid (6,200) (5,400) (300) (300)
Foreign exchange
impact - (200) - -
--------------------- ----------------------
Fair value of plan
assets, December 31 $189,400 $165,900 $ - $ -
--------------------- ----------------------
Assets in excess
(less than)
benefits: $57,500 $45,500 $(8,400) $(7,400)
Unrecognized net
actuarial gain (47,800) (38,100) 1,100 900
Unrecognized
transition asset (3,300) (4,100) - -
Unrecognized prior
service cost 3,300 200 (6,000) (7,500)
-------- -------- -------- --------
December 31:
Prepaid benefit
cost $16,700 $9,900 - -
Accrued liability $(7,000) $(6,400) $(13,300) $(14,000)
-------- -------- -------- --------
</TABLE>
The aggregate projected benefit obligation and aggregate fair
value of plan assets for pension plans with obligation in excess
of plan assets were $8,500 and $600, respectively, as of December
31, 1998, and $12,900 and $4,700, respectively, at December 31,
1997.
28
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Other retirement
Pension benefits benefits
1998 1997 1998 1997
---------------------------------------------
Weighted average assumptions
as of December 31:
Discount rate 6.7% 7.0% 6.75% 7.0%
Rate of compensation
increase 5.5% 5.9% - -
Long-term
rate of return on assets 9.3% 9.2% - -
</TABLE>
The assumed healthcare cost trend used is 8.5% in 1999,
decreasing to 5.5% by 2006. Increasing or decreasing the assumed
trend rate for healthcare costs by one percentage point would
result in a $500 increase and decrease, respectively, in the
accumulated postretirement benefit obligation. The related
change in the aggregate service and interest cost components of
the 1998 plan expense is a $100 increase and decrease,
respectively.
The Company provides certain post-employment benefits for
terminated and disabled employees, including severance pay,
disability-related benefits and healthcare benefits. These costs
are accrued over the employee s active service period under
certain circumstances or at the date of the event triggering the
benefit.
The Company also sponsors a defined contribution savings plan for
certain salaried and hourly United States employees. Company
contributions are equal to 50% of each participant s contribution
up to 6% of the participant s base compensation. Total expense of
$1,200, $900 and $900 was incurred for Company contributions in
1998, 1997 and 1996, respectively.
Capital Stock
-------------
Purchases (sales) of common stock held in treasury during the
three years ended December 31, 1998, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
-------------------------------------
Shares held, January 1 277,200 462,200 224,000
Purchases, net at
fair market value 2,026,300 40,200 507,200
Shares issued for
acquisition - - (19,600)
Stock option
exercises (164,000) (225,200) (249,400)
-------------------------------------
Shares held,
December 31 2,139,500 277,200 462,200
-------------------------------------
</TABLE>
In October 1998, the Company purchased 2,000,000 shares of its
common stock in a Dutch Auction self-tender at a price of $30.00
29
per share.
In 1996, the Company purchased, in accordance with an agreement
approved by a majority of non-interested members of the Board of
Directors, 440,000 shares of its common stock owned by a director
who retired from the Board of Directors. The aggregate purchase
price was $10,000.
The Company's Shareholders Rights Plan entitles a shareholder to
purchase 1/1000 of a share of a newly designated series of the
Company s preferred stock at a price of $75.00 with each Right. A
Right becomes exercisable if a person or group (acquiror)
acquires 15% or more of the common stock or commences a tender
offer that would result in the acquiror owning 18% or more of the
common stock. After the Rights become exercisable, and in the
event the Company is involved in a merger or other business
combination, sale of 50% or more of its assets or earning power,
or if an acquiror purchases 18% or more of the common stock or
engages in self-dealing transactions, a Right will entitle its
holder to purchase common stock of the surviving company having a
market value twice the exercise price of the Right. The Rights
may be redeemed by the Company at $.001 per Right at any time
before certain events occur. Two Rights are attached to each
share of common stock, and such Rights will not trade separately
unless they become exercisable. All Rights expire on January 15,
2000.
In 1992, the Company made an offering under an employee stock
purchase plan, which provides for the sale of the Company s
common stock to substantially all employees at 85% of fair market
value. The offer has been extended to December 31, 1999. An
employee's purchases are limited annually to 10% of base
compensation. Shares are purchased in the open market, or
treasury shares are used.
Stock Option and Award Plans
----------------------------
The Company has two long-term incentive plans for officers and
key management employees of the Company and its subsidiaries.
Options may no longer be granted under one of the plans. The
plans provide for the grant of stock options, stock appreciation
rights, restricted stock awards and performance awards. At
December 31, 1998, 1,364,700 shares of common stock are available
for future grants. A committee of the Board of Directors
determines the terms and conditions of grants, except that the
exercise price of certain options cannot be less than 100% of the
fair market value of the stock on the date of grant. All stock
options and stock appreciation rights are exercisable at the date
indicated in connection with their issuance, but not later than
10 years after the date of grant. Option activity is summarized
in the following table.
30
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
----------------------------------------------------------------
Options outstanding,
January 1 1,285,200 750,400 854,600
Granted 132,500 748,500 209,800
Exercised (144,100) (213,700) (249,400)
Forfeited (53,000) - (64,600)
-----------------------------------------------------------------
Options outstanding,
December 31 1,220,600 1,285,200 750,400
Options exercisable,
December 31 594,200 640,200 630,400
-----------------------------------------------------------------
Weighted-Average
Exercise Price 1998 1997 1996
-----------------------------------------------------------------
Options outstanding,
January 1 $27.23 $23.42 $22.60
Granted 30.46 28.82 22.45
Exercised 22.32 21.45 20.00
Forfeited 28.84 - 22.73
-----------------------------------------------------------------
Options outstanding,
December 31 28.08 27.23 23.42
Options exercisable,
December 31 27.67 27.04 22.13
-----------------------------------------------------------------
The range of exercise prices at December 31, 1998, is $15.13 to
$30.63 per share.
</TABLE>
Under the Company's management incentive plan, participants are
paid cash bonuses on the attainment of certain financial goals.
Bonus participants are required to use 25% of their cash bonus,
after certain adjustments for taxes payable, to purchase common
stock of the Company at current fair market value. Bonus
participants are given a restricted stock award equal to one
share for each four shares of common stock purchased with bonus
awards. These stock awards vest at the end of four years
provided that the participant has not made a disqualifying
disposition of the stock purchased. Restricted stock awards were
granted for 3,800 shares in 1998 and 2,900 shares in 1997, and in
1998, 1997 and 1996, respectively, 300 shares, 300 shares and
1700 shares were forfeited. Compensation expense is being
recognized over the vesting period based on the fair market value
of common stock on the award date: $31.47 per share in 1998 and
$27.57 per share in 1997.
A nonqualified stock option plan for non-employee directors
provides for an annual grant to each eligible director of options
covering 1,500 shares at an option price equal to 100% of the
fair market value of the Company's common stock on the date of
grant. At December 31, 1998, 102,500 shares are available for
future grants. Option activity under this plan during the three
years ended December 31, 1998, is summarized below:
31
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
-----------------------------------------------------------------
Options outstanding,
January 1 63,500 61,500 48,000
Granted 15,000 13,500 13,500
Exercised (12,000) (11,500) -
-----------------------------------------------------------------
Options outstanding, 66,500 63,500 61,500
December 31
Options exercisable,
December 31 51,500 63,500 61,500
-----------------------------------------------------------------
Weighted-Average
Exercise Price 1998 1997 1996
-----------------------------------------------------------------
Options outstanding,
January 1 $25.49 $24.18 $24.60
Granted 30.72 28.13 22.69
Exercised 23.81 22.28 -
-----------------------------------------------------------------
Options outstanding,
December 31 26.97 25.49 24.18
Options exercisable,
December 31 25.88 25.49 24.18
-----------------------------------------------------------------
</TABLE>
The range of exercise prices at December 31, 1998, is $22.69 to
$30.72 per share. The weighted-average remaining contractual
life at December 31, 1998 for all plans is 5.2 years.
The Company has elected to measure compensation cost using the
intrinsic value method of accounting. Accordingly, no
compensation cost has been recognized related to stock option and
stock purchase plans because grants are at 100% of fair market
value on the grant date. If the fair-value based method of
accounting had been applied to stock option grants in the most
recent three years, the Company's net income and basic net income
per share would have been reduced as summarized below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
------ ------- -------
Net income:
As reported $ 6,700 $44,400 $16,400
Pro forma 5,700 43,200 15,700
Net income per share:
As reported $ .41 $ 2.69 $ 1.00
Pro forma .35 2.62 .96
</TABLE>
The following assumptions were used to compute the fair value of
the option grants in 1998, 1997 and 1996 using the Black-Scholes
option-pricing model: a risk-free interest rate of 5.75%, 6.15%
32
and 5.87%, respectively, stock volatility of 22.4%, 22.2% and
25.7%, respectively; dividend yield of 2% for all years; and
expected option lives of three years for the long-term plan and
two years for the non-employee directors plan.
Commitments and Contingencies
------------------------------
The Company announced on December 22, 1998, a definitive
agreement to acquire the assets of the Clinical Services Division
of Collaborative Clinical Research, Inc. for $15,000, subject to
post-closing adjustments.
At December 31, 1998, the Company was obligated under various
operating lease agreements with terms ranging from one month to
20 years. Rental expense in 1998, 1997 and 1996 was $7,300,
$7,600 and $7,900, respectively. Minimum rentals for
noncancelable operating leases with initial or remaining terms in
excess of one year are: 1999--$7,600; 2000--$6,700; 2001--$6,500;
2002--$6,000; 2003--$6,100 and thereafter $46,200. Minimum
operating lease payments have been reduced by related minimum
sublease income.
At December 31, 1998, outstanding contractual commitments
for the purchase of equipment and raw materials amounted to
$13,800, all of which is due to be paid in 1999.
The Company has accrued the estimated cost of environmental
compliance expenses related to soil or groundwater contamination
at current and former manufacturing facilities. The ultimate
cost to be incurred by the Company and the timing of such
payments cannot be fully determined. However, based on
consultants' estimates of the costs of remediation in accordance
with applicable regulatory requirements, the Company believes the
accrued liability of $1,300 at December 31, 1998, is sufficient
to cover the future costs of these remedial actions, which will
be carried out over the next several years. The Company has not
anticipated any possible recovery from insurance or other
sources.
Segment Information
--------------------
The Company adopted Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related
Information" at December 31, 1998. Prior years' data on segment
and geographic information has been restated. West
Pharmaceutical Services, Inc. serves the healthcare and consumer
products industries through design, manufacture and sales of
stoppers, closures, medical device components and assemblies made
from elastomers, metal and plastics. This segment is referred to
as Device Product Development and it consists of four regional
business units that manufacture and sell these products to
customers mainly in their respective regions. The Company also
provides contract services to healthcare and consumer companies
consisting of manufacture and/or packaging of drugs and personal
care items and laboratory testing. This segment is referred to
as Contract Services and consists of two business units.
Finally, the Company is engaged in research and development of
drug delivery systems for bio-pharmaceutical and other drugs to
33
improve their therapeutic performance and/or the method of
administration. This segment, consisting of two business units,
is referred to as Drug Delivery Research and Development.
The Company's executive management evaluates performance of these
segments based on operating profit, and allocates resources to
them based on the assessment for market growth and profitability.
Operating profit is income before interest expense, income taxes,
minority interests and equity in affiliates. Corporate expenses,
including global functional management costs, and unusual items
(restructuring charges in 1998 and 1996 and the 1998 acquired
research and development charge) are not allocated to segments.
The accounting policies of the segments are the same as those
reported in the Summary of Significant Accounting Policies on
page 22. Total net sales generated from the Device Product
Development segment include sales to one customer of
approximately $53,200, $50,500 and $48,300 in 1998, 1997 and
1996, respectively.
Summarized financial information concerning the Company's
segments is shown in the following table. The consolidated total
of operating profit corresponds to operating profit in the
accompanying Consolidated Statements of Income.
34
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Device Drug delivery Corporate and
product Contract research and unallocated Consolidated
development services development items total
----------- -------- ----------- ------------ -------------
1998
-----
Net sales $365,600 $82,600 $1,500 $ - $449,700
Interest income 1,600 100 - 1,000 2,700
Operating profit 83,800 9,700 (5,300) (53,200) 35,000
Segment assets 337,300 80,500 13,400 74,400 505,600
Capital expenditures 31,500 6,700 1,400 2,200 41,800
Depreciation and
amortization expense 24,000 4,400 1,300 2,600 32,300
1997
-----
Net sales $371,900 $80,600 $ - $ - $452,500
Interest income 1,300 100 - 600 2,000
Operating profit 85,300 3,800 (3,200) (22,900) 63,000
Segment assets 324,200 73,300 2,800 77,600 477,900
Capital expenditures 25,200 4,300 1,200 3,700 34,400
Depreciation and
amortization expense 24,500 4,400 200 2,800 31,900
1996
-----
Net sales $387,300 $71,500 $ - $ - $458,800
Interest income 900 - - 400 1,300
Operating profit 83,700 (700) (2,300) (48,000) 32,700
Segment assets 344,200 77,600 2,000 53,600 477,400
Capital expenditures 25,500 4,500 400 1,300 31,700
Depreciation and
amortization expense 24,300 3,700 200 2,500 30,700
The following table presents sales by country in which the
legal subsidiary is domiciled and assets are located.
35
Sales Long lived assets
--------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
United States $282,300 $293,200 $283,900 $135,400 $127,700 $125,400
Germany 50,000 51,800 59,500 29,100 26,200 30,600
Other European countries 85,400 71,300 76,700 50,800 35,500 38,700
Other 32,000 36,200 38,700 17,300 17,100 20,200
------- ------- ------- ------- ------- -------
$449,700 $452,500 $458,800 $232,600 $206,500 $214,900
------- ------- ------- ------- ------- -------
</TABLE>
36
QUARTERLY OPERATING AND PER SHARE DATA (UNAUDITED)
WEST PHARMACEUTICAL SERVICES, INC. AND SUBSIDIARIES
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net income (loss)
Net per share
Net Gross income Assuming
Quarter ended sales profit (loss) Basic dilution
-------------------------------------------------------------------------
March 31, 1998(1) $105,200 $ 31,300 $(19,700) $(1.19) $(1.19)
June 30, 1998 115,800 34,800 9,900 .58 .58
September 30, 1998(2) 113,900 33,400 6,500 .38 .38
December 31, 1998 114,800 35,700 10,000 .66 .66
-------- --------- --------- --------- ---------
$449,700 $135,200 $ 6,700 $ .41 $ .40
-------- --------- --------- --------- ---------
March 31, 1997 $114,700 $ 32,700 $ 8,400 $ .51 $ .51
June 30, 1997 123,100 36,300 10,100 .61 .61
September 30, 1997(3) 105,200 29,200 17,300 1.05 1.05
December 31, 1997(3) 109,500 33,900 8,600 .52 .51
-------- --------- --------- --------- ---------
$452,500 $132,100 $ 44,400 $ 2.69 $2.68
-------- --------- --------- --------- ---------
</TABLE>
(1) First quarter 1998 results include a charge for acquired
research and development. See Note "Acquisitions and
Investments" on page 23.
(2) Third quarter 1998 results include a charge related to
staff reductions. See Note "Restructuring Charges" on
page 23.
(3) Third quarter 1997 results include net tax benefits
related mainly to the legal reorganization of subsidiaries
located in Germany; fourth quarter 1997 results include
adjustment to these net tax benefits related to changes
in the tax law and a tax audit. See Note "Income Taxes"
on page 24.
37
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF
WEST PHARMACEUTICAL SERVICES, INC.:
In our opinion, the accompanying consolidated balance sheets
and the related consolidated statements of income, comprehensive
income, shareholders' equity and cash flows present fairly, in
all material respects, the financial position of West
Pharmaceutical Services, Inc. and its subsidiaries at December
31, 1998 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is
to express an opinion on these financial statements based on our
audits. We conducted our audits in accordance with generally
accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 26, 1999
38
REPORT OF MANAGEMENT
The Company's management is responsible for the integrity,
reliability and objectivity of publicly reported financial
information. Management believes that the financial statements
as of and for the year ended December 31, 1998, have been
prepared in conformity with generally accepted accounting
principles and that information presented in this Annual Report
is consistent with those statements. In preparing the financial
statements, management makes informed judgments and estimates
where necessary, with appropriate consideration given to
materiality.
In meeting its responsibility for preparing financial
statements, management maintains a system of internal accounting
controls to assure the safety of its assets against unauthorized
acquisition, use or disposition. This system is designed to
provide reasonable assurance that assets are safeguarded and
transactions are executed in accordance with management's
authorization and recorded properly, allowing for preparation of
reliable financial statements. There are inherent limitations in
the effectiveness of all internal control systems. The design of
the Company's system recognizes that errors or irregularities may
occur and that estimates and judgments are required to assess the
relative cost and expected benefits of the controls. Management
believes that the Company's accounting controls provide
reasonable assurance that errors or irregularities that could be
material to the financial statements are prevented or would be
detected within a timely period.
The independent accountants are appointed by the Board of
Directors, with the approval of the shareholders. As part of
their engagement, the independent accountants audit the Company's
financial statements, express their opinion thereon, and review
and evaluate selected systems, accounting procedures and internal
controls to the extent they consider necessary to support their
report.
/s/ William G. Little
--------------------------------------------
William G. Little
Chairman and Chief Executive Officer
/s/ Steven A. Ellers
---------------------------------------------
Steven A. Ellers
Senior Vice President and Chief Financial Officer
39
<PAGE>TEN-YEAR SUMMARY
WEST PHARMACEUTICAL SERVICES, INC. AND SUBSIDIARIES
(in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
--------------------------------------
SUMMARY OF OPERATIONS
Net sales $ 449,700 452,500 458,800
Operating profit (loss) $ 35,000 63,000 32,700
Income (loss) before income taxes and minority interests $ 27,800 57,400 25,800
Provision for income taxes $ 21,200 13,300 10,800
Minority interests $ 100 200 100
--------------------------------------
Income (loss) from consolidated operations $ 6,500 43,900 14,900
Equity in net income of affiliated companies $ 200 500 1,500
--------------------------------------
Income (loss)before change in accounting method $ 6,700 44,400 16,400
--------------------------------------
Income (loss) before change in accounting method per share:
Basic (a) $ .41 2.69 1.00
Assuming dilution (b) $ .40 2.68 .99
Average common shares outstanding 16,435 16,475 16,418
Average shares, assuming dilution 16,504 16,572 16,500
Dividends paid per common share $ .61 .57 .53
--------------------------------------
Research, development and engineering expenses $ 14,500 12,000 11,200
Capital expenditures $ 41,800 34,400 31,700
--------------------------------------
YEAR-END FINANCIAL POSITION
Working capital $ 55,500 112,700 91,100
Total assets $ 505,600 477,900 477,400
Total invested capital:
Total debt $ 141,100 89,000 98,400
Minority interests $ 600 400 300
Shareholders' equity $ 230,100 277,700 252,000
--------------------------------------
Total $ 371,800 367,100 350,700
--------------------------------------
PERFORMANCE MEASUREMENTS
Gross margin (c) % 30.1 29.2 27.5
Operating profitability (d) % 7.8 13.9 7.1
40
Tax rate % 76.1 23.2 41.8
Asset turnover ratio (e) .91 .95 .96
Return on average shareholders' equity % 2.6 16.7 6.5
Total debt as a percentage of total invested capital % 37.9 24.2 28.1
--------------------------------------
Shareholders' equity per share $ 15.31 16.76 15.39
Stock price range $3511/16-25 351/16-27 30-22
--------------------------------------
</TABLE>
(a) Based on average common shares outstanding.
(b) Based on average shares, assuming dilution.
(c) Net sales minus cost of goods sold, including applicable
depreciation and amortization, divided by net sales.
(d) Operating profit (loss) divided by net sales.
(e) Net sales divided by average total assets; 1993 asset
turnover ratio is based on 12 months' sales for
international subsidiaries.
1998 includes a charge for acquired research and development
and a restructuring charge that reduced operating
results by $1.72 per share and $.15 per share, respectively,
and 1998 includes for the first time the results of two
companies acquired in 1998.
1997 includes the net tax benefit mainly from a German tax
reorganization which increased net income per share by $.48.
1996 includes a restructuring charge that reduced
operating results by $.91 per share.
1995 includes for the first time the net operating results of
Paco from May 1.
1994 includes for the first time the results of two companies
in which majority ownership was acquired in 1994.
1993 includes 13 months of operating results for international
subsidiaries.
Beginning in 1992 the Company's ownership interest in glass
manufacturing operating results is reported as equity in net
income of affiliates. Prior to the 1992 sale of a majority
interest in such operation, operating results were fully
consolidated.
1991 includes a restructuring charge that reduced operating
results by $1.37 per share.
1990 includes a restructuring charge that reduced operating
results by $.45 per share, and 1990 included for the first
time the results of two companies in which controlling
41
ownership was acquired in 1989.
<PAGE>
TEN YEAR SUMMARY
WEST PHARMACEUTICAL SERVICES, INC. AND SUBSIDIARIES
(in thousands, except per share data)
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990 1989
-------------------------------------------------------------------------------------
412,900 365,100 348,700 337,500 328,900 323,200 308,700
49,800 45,400 40,600 38,700 (1,600) 15,600 38,700
42,500 42,100 37,500 34,800 (7,700) 9,600 34,400
13,900 13,400 14,300 14,300 4,700 6,400 13,200
800 1,900 1,700 1,700 (2,400) 300 2,100
-------------------------------------------------------------------------------------
27,800 26,800 21,500 18,800 (10,000) 2,900 19,100
900 500 1,000 900 1,500 1,400 1,600
-------------------------------------------------------------------------------------
28,700 27,300 22,500 19,700 (8,500) 4,300 20,700
-------------------------------------------------------------------------------------
1.73 1.70 1.42 1.26 (.55) .27 1.28
1.71 1.69 1.41 1.25 (.55) .27 1.27
16,557 16,054 15,838 15,641 15,527 15,793 16,235
16,718 16,215 16,010 15,776 15,527 15,816 16,301
.49 .45 .41 .40 .40 .40 .31
-------------------------------------------------------------------------------------
12,000 12,000 11,400 11,100 10,800 10,900 11,900
31,300 27,100 33,500 22,400 25,600 33,200 34,300
-------------------------------------------------------------------------------------
86,600 50,400 46,400 37,700 26,500 36,500 50,400
480,100 397,400 309,200 304,400 313,200 343,500 313,000
114,300 57,800 32,300 42,000 58,400 78,500 58,100
200 1,900 10,900 10,100 8,400 11,700 9,100
254,100 227,300 188,100 168,600 152,600 176,100 179,700
-------------------------------------------------------------------------------------
368,600 287,000 231,300 220,700 219,400 266,300 246,900
-------------------------------------------------------------------------------------
42
28.6 32.1 30.2 28.8 25.6 24.4 26.5
12.1 12.4 11.7 11.5 (.5) 4.8 12.5
32.8 31.8 38.2 41.1 61.7 66.5 38.5
.94 1.04 1.11 1.10 1.00 .98 1.01
11.9 13.2 13.2 12.3 (8.9) 2.4 11.8
31.0 20.1 14.0 19.1 26.6 29.5 23.5
-------------------------------------------------------------------------------------
15.29 13.81 11.82 10.71 9.81 11.37 11.15
305/8-225/8 291/8-211/4 251/4-197/8 241/8-163/4 183/4-111/8 20-101/2 225/8 -147/8
-------------------------------------------------------------------------------------
</TABLE>
44
Exhibit 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C>
State/Jurisdiction Direct
Incorporation Stock
of Ownership
West Pharmaceutical Services, Inc. Pennsylvania Parent Co.
The West Company of Michigan, Inc. Michigan 100.0
West Pharmaceutical Services Lakewood, Inc. Delaware 100.0
Paco Packaging, Inc. Delaware 100.0
Paco Technologies, Inc. Delaware 100.0
Paco Laboratories, Inc. Delaware 100.0
Charter Laboratories, Inc. Delaware 100.0
West Pharmaceutical Services Canovanas, Inc. Delaware 100.0
Citation Plastics Co. New Jersey 100.0
West Pharmaceutical Services Vega Alta, Inc. Delaware 100.0
West Pharmaceutical Services of Florida, Inc. Florida 100.0
Senetics, Inc. Colorado 100.0
West International Sales Corporation U.S. Virgin Islands 100.0
West Pharmaceutical Services of Delaware, Inc. Delaware 100.0
West Pharmaceutical Services Colombia S.A. Colombia 52.1 (1)
The West Company Holding GmbH Germany 100.0
The West Company (Custom &
Specialty Services) GmbH Germany 100.0
The West Company Danmark A/S Denmark 100.0
The West Company Italia S.R.L. Italy 95.0 (3)
West Pharmaceutical Services France S.A. France 99.99 (4)
The West Company Verwaltungs GmbH Germany 100.0
The West Company Deutschland GmbH & Co KG Germany 100.0
The West Company Hispania S.A. Spain 27.4 (5)
Pharma-Gummi Beograd Yugoslavia 84.7 (2)
The West Company (Mauritius) Ltd. Mauritius 100.0
The West Company (India) Private Ltd. India 100.0
<PAGE>
West Pharmaceutical Services Group Limited England 100.0
West Pharmaceutical Services Drug Delivery
& Clinical Research Centre Ltd. England 100.0
West Pharmaceutical Services Cornwall Ltd. England 100.0
Plasmec PLC England 100.0
West Pharmaceutical Services Lewes Ltd. England 100.0
The West Company Argentina S.A. Argentina 100.0
West Pharmaceutical Services Brasil Ltda. Brasil 100.0
The West Company Venezuela C.A. Venezuela 100.0
The West Company Singapore Pty. Ltd. Singapore 100.0
West Pharmaceutical Services Australia Pty. Ltd. Australia 100.0
West Company Korea Ltd. Korea 100.0
(1) In addition, 46.16 % is owned directly by West
Pharmaceutical Services, Inc.; 1.55% is held in
treasury by West Pharmaceutical Services Colombia S.A.
(2) Affiliated company accounted for on the cost basis.
(3) In addition, 5 % is owned directly by West Pharmaceutical
Services, Inc.;
(4) In addition, .01% is owned directly by 9
Individual Shareholders.
(5) In addition, 54.7% is owned directly by West Pharmaceutical
Services, Inc.; 17.9% is owned by one shareholder.
</TABLE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of West Pharmaceutical Services, Inc. and
subsidiaries, on Form S-8 (Registration Nos. 2-95618, 2-45534,
33-39506, 33-32580, 33-37825, 33-61074, 33-61076, 33-12287, 33-
12289, and 33-53817) of our report dated February 26, 1999, on
our audits of the consolidated financial statements of West
Pharmaceutical Services, Inc. and subsidiaries as of December 31,
1998 and 1997, and for the years ended December 31, 1998, 1997,
and 1996, which report is incorporated in this Annual Report on
Form 10-K.
________________________________
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 31, 1999
<PAGE> Exhibit 24
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G.
Little and John R. Gailey III, and each of them, as her
attorneys-in-fact to sign on her behalf and in her capacity as a
director of West Pharmaceutical Services, Inc., and to file, the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and all amendments, exhibits and supplements
thereto.
Date: March 6, 1999 /s/ Tenley E. Albright, M.D.
--------------- ------------------------------
Tenley E. Albright, M.D.
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G.
Little and John R. Gailey III, and each of them, as his
attorneys-in-fact to sign on his behalf and in his capacity as a
director of West Pharmaceutical Services, Inc., and to file, the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and all amendments, exhibits and supplements
thereto.
Date: March 6, 1999 /s/ John W. Conway
-------------- -------------------
John W. Conway
<PAGE>
POWER OF ATTORNEY
The undersigned hereby authorizes and appoints William G.
Little and John R. Gailey III, and each of them, as his
attorneys-in-fact to sign on his behalf and in his capacity as a
director of West Pharmaceutical Services, Inc., and to file, the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and all amendments, exhibits and supplements
thereto.
Date: March 6, 1999 /s/ G. W. Ebright
-------------- -------------------
George W. Ebright
<PAGE>
POWER OF ATTORNEY
-------------------
The undersigned hereby authorizes and appoints William G.
Little and John R. Gailey III, and each of them, as his
attorneys-in-fact to sign on his behalf and in his capacity as a
director of West Pharmaceutical Services, Inc., and to file, the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and all amendments, exhibits and supplements
thereto.
Date: March 6, 1999 /s/ L. Robert Johnson
-------------- -----------------------
L. Robert Johnson
<PAGE>
POWER OF ATTORNEY
----------------------
The undersigned hereby authorizes and appoints William G.
Little and John R. Gailey III, and each of them, as his
attorneys-in-fact to sign on his behalf and in his capacity as a
director of West Pharmaceutical Services, Inc., and to file, the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and all amendments, exhibits and supplements
thereto.
Date: March 6, 1999 /s/ William H. Longfield
-------------- ------------------------------
William H. Longfield
<PAGE>
POWER OF ATTORNEY
---------------------
The undersigned hereby authorizes and appoints William G.
Little and John R. Gailey III, and each of them, as his
attorneys-in-fact to sign on his behalf and in his capacity as a
director of West Pharmaceutical Services, Inc., and to file, the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and all amendments, exhibits and supplements
thereto.
Date: March 6, 1999 /s/ J. P. Neafsey
-------------- --------------------
John P. Neafsey
<PAGE>
POWER OF ATTORNEY
----------------------
The undersigned hereby authorizes and appoints William G.
Little and John R. Gailey III, and each of them, as his
attorneys-in-fact to sign on his behalf and in his capacity as a
director of West Pharmaceutical Services, Inc., and to file, the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and all amendments, exhibits and supplements
thereto.
Date: March 6, 1999 /s/ Anthony Welters
-------------- --------------------
Anthony Welters
<PAGE>
POWER OF ATTORNEY
------------------------
The undersigned hereby authorizes and appoints William G.
Little and John R. Gailey III, and each of them, as his
attorneys-in-fact to sign on his behalf and in his capacity as a
director of West Pharmaceutical Services, Inc., and to file, the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and all amendments, exhibits and supplements
thereto.
Date: March 6, 1999 /s/ J. Roffe Wike, II
-------------- --------------------
J. Roffe Wike, II
<PAGE>
POWER OF ATTORNEY
---------------------
The undersigned hereby authorizes and appoints William G.
Little and John R. Gailey III, and each of them, as his
attorneys-in-fact to sign on his behalf and in his capacity as a
director of West Pharmaceutical Services, Inc., and to file, the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and all amendments, exhibits and supplements
thereto.
Date: March 6, 1999 /s/ Geoffrey F. Worden
------------- ----------------
Geoffrey F. Worden
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 31,300
<SECURITIES> 0
<RECEIVABLES> 64,400
<ALLOWANCES> 0
<INVENTORY> 43,500
<CURRENT-ASSETS> 20,500
<PP&E> 472,200
<DEPRECIATION> 251,900
<TOTAL-ASSETS> 505,600
<CURRENT-LIABILITIES> 104,200
<BONDS> 105,000
0
0
<COMMON> 4,300
<OTHER-SE> 225,800
<TOTAL-LIABILITY-AND-EQUITY> 505,600
<SALES> 449,700
<TOTAL-REVENUES> 449,700
<CGS> 314,500
<TOTAL-COSTS> 314,500
<OTHER-EXPENSES> (2,500)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,200
<INCOME-PRETAX> 27,800
<INCOME-TAX> 21,200
<INCOME-CONTINUING> 6,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,700
<EPS-PRIMARY> .40
<EPS-DILUTED> .41
</TABLE>
