SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 2000
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Commission File Number 1-8036
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WEST PHARMACEUTICAL SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania
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(State or other jurisdiction of
incorporation or organization)
101 Gordon Drive, PO Box 645,
Lionville, PA
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(Address of principal executive
offices)
23-1210010
----------------------
(I.R.S. Employer
Identification Number)
19341-0645
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(Zip Code)
Registrant's telephone number, including area code 610-594-2900
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N/A
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Former name, former address and former fiscal year, if changed since last
report.
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 twelve months,
and (2) has been subject to such filing requirements for the past
90 days. Yes X . No .
--- ---
March 31, 2000 -- 14,497,080
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<PAGE>
Page 2
Index
Form 10-Q for the
Quarter Ended March 31, 2000
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Income for the
Three Months ended March 31, 2000 and March 3
31, 1999
Condensed Consolidated Balance Sheets at March 31,
2000 and December 31, 1999 4
Condensed Consolidated Statements of Cash Flows
for the Three Months ended March 31, 2000 and
March 31, 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosure about Market Risk 12
Part II - Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and reports on Form 8-K 13
SIGNATURES 14
Index to Exhibits F-1
<PAGE>
Page 3
Part I - Financial Information
Item 1. Financial Statements
West Pharmaceutical Services, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended
March 31, 2000 March 31, 1999
--------------- --------------
<S> <C> <C> <C> <C>
Net sales .................................. $107,700 100% $114,200 100%
Cost of goods and services sold ............ 79,500 74 79,800 70
---------------------------------
Gross profit ...................... 28,200 26 34,400 30
Selling, general and administrative expenses 17,400 16 17,000 15
Other expense, net ......................... 400 -- -- --
---------------------------------
Operating profit .................. 10,400 10 17,400 15
Interest expense ........................... 3,000 3 2,000 2
---------------------------------
Income before income taxes
and minority interests ......... 7,400 7 15,400 13
Provision for income taxes ................. 2,700 3 5,900 5
Minority interests ......................... 100 -- 100 --
---------------------------------
Income from consolidated operations 4,600 4% 9,400 8%
Equity in net income of affiliated companies 500 100
---------------------------------
Net income ........................ $ 5,100 $ 9,500
---------------------------------
Net income per share:
Basic ............................. $ .35 $ .63
Assuming dilution ................. $ .35 $ .63
Average common shares outstanding .......... 14,546 15,082
Average shares assuming dilution ........... 14,562 15,133
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> Page 4
West Pharmaceutical Services, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
2000 1999
---------- -----------
ASSETS ...................................
Current assets:
Cash, including equivalents ..... $ 55,000 $ 45,300
Accounts receivable ............. 69,300 74,600
Inventories ..................... 43,100 42,100
Deferred income tax benefits .... 7,200 7,300
Other current assets ............ 18,800 15,400
---------------------
Total current assets ..................... 193,400 184,700
---------------------
Net property, plant and equipment ........ 228,700 227,600
Investments in affiliated companies ...... 20,600 20,200
Goodwill ................................. 64,400 66,500
Deferred charges and other assets ........ 55,700 52,800
---------------------
Total Assets ............................. $562,800 $551,800
---------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 11,500 $ 2,200
Notes payable ................... 52,800 27,400
Accounts payable ................ 22,400 25,500
Salaries, wages, benefits ....... 11,600 15,600
Income taxes payable ............ 6,400 5,500
Other current liabilities ....... 28,800 27,800
----------------------
Total current liabilities ................ 133,500 104,000
----------------------
Long-term debt, excluding current portion 130,700 141,500
Deferred income taxes .................... 47,500 48,000
Other long-term liabilities .............. 25,600 26,300
Minority interests ....................... 800 800
Shareholders' equity ..................... 224,700 231,200
----------------------
Total Liabilities and Shareholders' Equity $562,800 $551,800
----------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> Page 5
West Pharmaceutical Services, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended
March 31, March 31,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income, plus net non-cash items ......... $ 10,400 $ 16,600
Changes in assets and liabilities ........... 100 (3,200)
-----------------------
Net cash provided by operating activities ............ 10,500 13,400
-----------------------
Cash flows from investing activities:
Property, plant and equipment acquired ...... (14,200) (7,700)
Payment for acquisition (1,000) --
Customer advances, net of repayments ........ (1,400) 100
-----------------------
Net cash used in investing activities ................ (16,600) (7,600)
-----------------------
Cash flows from financing activities:
Repayment of long-term debt ................. (300) (800)
Notes payable, net .......................... 25,200 2,400
Dividend payments ........................... (2,500) (2,400)
Sale of common stock, net ................... 600 1,400
Purchase of common stock .................... (6,000) (2,900)
-----------------------
Net cash provided by (used in) financing activities .. 17,000 (2,300)
-----------------------
Effect of exchange rates on cash ..................... (1,200) (1,800)
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Net increase in cash, including equivalents .......... $ 9,700 $ 1,700
-----------------------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
Page 6
West Pharmaceutical Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
The interim consolidated financial statements for the quarter ended March 31,
2000 should be read in conjunction with the consolidated financial statements
and notes thereto of West Pharmaceutical Services, Inc., appearing in the
Company's 1999 Annual Report on Form 10-K. The year-end condensed consolidated
balance sheet data was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
Interim results are based on the Company's accounts without audit.
1. Interim Period Accounting Policy
---------------------------------
In the opinion of management, the unaudited Condensed Consolidated Balance
Sheet as of March 31, 2000 and the related unaudited Consolidated
Statement of Income and the unaudited Condensed Consolidated Statement
of Cash Flows for the three month period then ended and for the
comparative period in 1999 contain all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the financial
position as of March 31, 2000 and the results of operations and cash flows
for the respective periods. The results of operations for any interim
period are not necessarily indicative of results for the full year.
Operating Expenses
------------------
To better relate costs to benefits received or activity in an interim
period, certain operating expenses have been annualized for interim
reporting purposes. Such expenses include certain employee benefit costs,
annual quantity discounts and advertising.
Income Taxes
-------------
The tax rate used for interim periods is the estimated annual effective
consolidated tax rate, based on the current estimate of full year results,
except that taxes applicable to operating results in Brazil and prior year
adjustments, if any, are recorded as identified.
<PAGE>
Page 7
West Pharmaceutical Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(continued)
2. Inventories at March 31, 2000 and December 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
(in thousands) 2000 1999
------- -------
Finished goods....$14,200 $14,000
Work in process... 14,800 12,800
Raw materials..... 14,100 15,300
------- -------
$43,100 $42,100
------- -------
------- -------
</TABLE>
3. The carrying value of property, plant and equipment at March
31, 2000 and December 31, 1999 is determined as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
(in thousands) 2000 1999
-------- --------
Property, plant and equipment............... $491,800 $489,200
Less accumulated depreciation
and amortization ......................... 263,100 261,600
-------- --------
Net property, plant and equipment .......... $228,700 $227,600
-------- --------
-------- --------
<PAGE> Page 8
</TABLE>
West Pharmaceutical Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(Continued)
4. For the three months ended March 31, 2000 and 1999, the
Company's comprehensive income is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, 2000 March 31, 1999
-------------- ---------------
Net income .............. $ 5,100 $ 9,500
Foreign currency
translation adjustments (3,700) (8,600)
------- -------
Comprehensive income .... $ 1,400 $ 900
------- -------
------- -------
</TABLE>
5. Net sales to external customers and operating profit by operating
segment for the three months ended March 31, 2000 and March 31, 1999
are as follows:
<TABLE>
<CAPTION>
Net Sales Operating Profit
<S> <C> <C> <C> <C>
2000 1999 2000 1999
------- -------- --------- --------
Device product development $ 92,100 $ 93,400 $ 19,800 $ 21,500
Contract services ........ 15,300 20,600 (3,600) 2,200
Drug delivery research &
development ............ 400 200 (2,300) (1,400)
Corporate and unallocated
items .................. (100) -- (3,500) (4,900)
--------- -------- -------- --------
Consolidated total ....... $ 107,700 $114,200 $ 10,400 $ 17,400
--------- -------- -------- --------
--------- -------- -------- --------
</TABLE>
Compared with December 31, 1999, there were no material changes in the
amount of assets as of March 31, 2000 for any operating segment.
6. Common stock issued at March 31, 2000 was 14,497,080 shares, of which
2,668,061 shares were held in treasury. Dividends of $.17 per common
share were paid in the first quarter of 2000 and a dividend of $.17
per share payable to holders of record on April 19, 2000 was declared
on March 27, 2000.
<PAGE> Page 9
West Pharmaceutical Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(Continued)
7. The Company has accrued the estimated cost of environmental compliance
expenses related to soil or ground water 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 $1.4 million at March 31,
2000 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.
8. In January 2000, the Company paid $1 million to acquire additional
ownership in a firm involved in developing genotyping technology. As
of March 31, 2000 the Company's cumulative investment in this firm is
$2.3 million, representing a 12.8% ownership interest. Upon the
satisfaction of certain future milestones, the Company is
conditionally committed to investing up to an additional $1.3 million,
which would result in a cumulative ownership percentage of up to
19.95%.
<PAGE>
Page 10
Item 2.
Management's Discussion and Analysis of Financial Condition and
- ----------------------------------------------------------------
Results of Operations for the Quarter Ended March 31, 2000 versus
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March 31, 1999.
- --------------
Net Sales
- ----------
Net Sales for the first quarter of 2000 were $107.7 million; a 5.6% decrease
compared with net sales of $114.2 million for the same quarter in 1999. The U.S.
dollar's continued strength accounted for $4 million, or 60%, of the drop in
sales with the remainder due to low volume in the contract services segment that
more than offset sales growth (at constant exchange rates) in the device product
development segment.
First quarter 2000 sales of the device product development segment were $92.1
million, an increase of 3% at constant exchange rates. Sales to domestic markets
increased by 2%; while sales to international markets grew at 4% (at constant
exchange rates) despite the low plastic medical device sales of a United Kingdom
(UK) operation. The product mix for this segment had a higher ratio of lower
margin medical device components compared with 1999, as some customers continued
to work-down year end inventories of higher margin pharmaceutical packaging
components.
The contract services segment's results were, as previously noted, significantly
below last year's first quarter. Both of the major business units - contract
manufacturing and packaging and clinical services - suffered from low volumes.
In total, sales for the contract services segment were $15.3 million; $5.3
million, or 26%, below first quarter 1999 levels. Both of these business units
have been experiencing low volumes since late in the second half of 1999 due to
customers' delays, cancellations or reduced orders for specific products or
projects. In response to these difficulties in the contract services segment,
management has increased the sales force, strengthened the management team and
is upgrading the equipment in the contract packaging area. Management now
projects an operating loss for this segment to extend through the second
quarter, with sales showing improvement compared with first quarter. Although
management anticipates operating profit for this segment in the later half of
the year, the slow recovery in the backlog for this segment has reduced full
year earnings expectations.
Gross Profit
- ------------
The consolidated gross margin was 26.2%, compared with 30.2% in 1999. The low
volumes in the contract manufacturing and packaging business unit were unable to
absorb plant overhead costs resulting in a negative gross margin for the
contract services segment. In addition, the lower value product mix experienced
mainly in domestic markets within the device product development segment coupled
with low utilization of a UK plastics medical device plant resulted in a lower
margin for this business segment.
<PAGE> Page 11
Results of Operations for the Quarter Ended March 31, 2000 versus
- -----------------------------------------------------------------
March 31, 1999, continued
- --------------------------
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses were 2% higher compared with the
prior year. The added costs of the clinical services group acquired in April
1999, and the higher expenses incurred for drug delivery systems development
were essentially offset by increased income from pension plan assets and the
impact of favorable foreign exchange rates on non-U.S. dollar expenses. Drug
delivery systems costs were higher as the Company initiated clinical trials for
nasal delivery of morphine using the Company's proprietary chitosan-based
delivery system at its Evansville, Indiana clinical facility. The Company is in
active negotiations with several parties interested in licensing agreements
covering products utilizing the Company's chitosan-based nasal delivery system.
Other expense
- ----------------------
The line item "other expense, net" mainly reflects a foreign currency
transaction loss and a loss related to a one-time environmental action by
Brazilian customs that resulted in the destruction of raw material and finished
products that were imported into that country.
Interest Expense and Equity in Affiliates
- -----------------------------------------
Interest expense increased by $1.0 million in the first quarter comparison,
largely because of debt associated with the Company's stock buyback program. The
Company has purchased 727,500 shares at an average cost of $33.18 per share
under the one million share buyback program announced in March of 1999. In
2000's first quarter, 196,700 shares were purchased at an average cost of $30.67
per share. Higher interest rates and debt associated with acquisitions also
contributed to the increase in interest expense.
Equity in net income of affiliates increased by $0.4 million compared with first
quarter 1999. This increase reflects the improved operating results of Daikyo
Seiko, Ltd., a Japanese company in which the Company has a 25% ownership
interest. Daikyo's improved results were generated from increased sales and a
significant improvement in its gross margin.
Taxes
- -----
The estimated tax rate in the quarter was 37% compared with 38.5% in the same
period of 1999. The decrease in the effective tax rate is due to the European
tax reorganization completed in the fourth quarter of 1999. However, the current
expected geographic mix of earnings and the potential elimination of the U.S.
tax benefit of foreign sales corporations is raising the rate above management's
earlier expectation. The estimated 2000 tax rate of 37% is lower by half a
percentage point compared with 1999's full year rate on operations of 37.5%.
<PAGE>
Page 12
Results of Operations for the Quarter Ended March 31, 2000 versus
- -----------------------------------------------------------------
March 31, 1999, continued
- --------------------------
Net Income
- ----------
Net income for the first quarter 2000 was $5.1 million, or $.35 per share,
compared with net income of $9.5 million, or $.63 per share, in the same period
of 1999. Average common shares outstanding in the first quarter were 14.5
million compared with 15.1 million in the first quarter 1999. The reduction in
average common shares outstanding is due to the Company's stock buyback program
noted above.
Financial Position
- ------------------
Working capital at March 31, 2000 was $59.9 million compared with $80.7 million
at December 31, 1999. The working capital ratio at March 31, 2000 was 1.4 to 1.
The primary reason for the decrease in working capital is due to the increase in
current debt outstanding. The increase reflects maturities of long-term debt and
borrowings related to share repurchases and capital spending. The Company's
current revolving credit facility expires in August 2000. The Company is
currently negotiating a replacement long-term credit facility. Debt as a
percentage of total invested capital at March 31, 2000 was 46.4% compared with
42.5% at December 31, 1999.
Cash totaled $55 million at March 31, 2000. The net increase in cash for the
first quarter of 2000 of $9.7 million is expected to reverse in the second
quarter as certain loans resulting from the European tax reorganization are
repaid. In the quarter, cash flows from operations of $10.5 million and $25.2
million of short-term borrowings were used to fund $14.2 million of capital
spending primarily related to maintenance and efficiency upgrades on device
product development segment assets, a $1 million additional investment in a
genotyping technology company, and $1.4 million of advances for customer
projects. In addition, the Company paid cash dividends of $.17 per share and
purchased 196,700 of its common shares at an average cost of $30.67 per share.
The Company believes its financial condition and current capitalization indicate
an ability to finance substantial future growth.
<PAGE>
Page 13
Results of Operations for the Quarter Ended March 31, 2000 versus
- -----------------------------------------------------------------
March 31, 1999, continued
- --------------------------
Recently Issued Accounting Pronouncements
- ------------------------------------------
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101). Among
other things, SAB 101 provides guidance for recording revenue related to
non-refundable, up-front fees received in connection with conveying licensing or
other intangible rights or for delivery of products or services. In general, SAB
101 requires the recognition of revenue from up-front payments over any
continuing service period. While the Company's historical revenue recognition
practices are in compliance with SAB 101, revenue recognition from up-front
licensing and other fees that may result from agreements currently being
negotiated for the Company's drug delivery technologies may be deferred
depending on final terms of such agreements.
Market Risk
- ---------------
The Company is exposed to various market risk factors such as fluctuating
interest rates and foreign currency rate fluctuations. These risk factors can
impact results of operations, cash flows and financial position. These risks are
managed periodically with the use of derivative financial instruments such as
interest rate swaps and forward exchange contracts. In accordance with Company
policy, derivative financial instruments are not used for speculation or trading
purposes. At March 31, 2000 and December 31, 1999 the Company had three interest
rate swap agreements in effect, with an estimated fair value less than $0.1
million. There were no forward exchange contracts in effect at March 31, 2000.
Statements concerning forecasted results, financial or otherwise, which are
contained in the above material, constitute "forward looking statements" that
involve risks and uncertainties. The Company's actual results may differ
materially from those expressed in any forward looking statement and are
dependent on a number of factors including but not limited to, sales demand,
timing of customers' projects, competitive pressures, the strength or weakness
of the U.S. dollar, inflation, the cost of raw materials, successful
continuance of cost-improvement programs and statutory tax rates.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
---------------------------------------------------------
The information called for by this item is incorporated by reference to the text
appearing in Item 2 "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Market Risk".
<PAGE> Page 14
Part II - Other Information
Item 1. Legal Proceedings
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) See Index to Exhibits on pages F-1 and F-2 of this
Report.
(b) No reports on Form 8-K have been filed for the
quarter ended March 31, 2000.
<PAGE>
Page 15
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEST PHARMACEUTICAL SERVICES, INC.
-----------------------------------
(Registrant)
May 15, 2000 /s/ Steven A. Ellers
- ------------ -----------------------------------
Date (Signature)
Steven A. Ellers
Senior Vice President and
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
(3) (a) Amended and Restated Articles of Incorporation
of the Company through January 4, 1999,
incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1998 (File No. 1-8036).
(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,
incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1998 (File No. 1-8036).
(10)(a) Amended and Restated Employment Agreement dated as of
March 25, 2000 between the Company and William G. Little.
(10)(b) Form of second amended and restated agreement between the
Company and certain of its executive officers, dated as of
March 25, 2000.
(10)(c) Schedule of Agreements with Executive Officers.
(11) Not Applicable.
(12) Not Applicable.
(15) None.
(16) Not Applicable.
(18) None.
(19) None.
(22) None.
F - 1
<PAGE>
Exhibit
Number
(23) None.
(24) None.
(27) Financial Data Schedule
(99) None.
F - 2
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS IS AN AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the
"Agreement"), dated as of March 25, 2000, between West Pharmaceutical
Services, Inc., a Pennsylvania corporation, (formerly named "The West
Company, Incorporated") (the "Company") and William G. Little (the
"Employee").
Background
The Company and Employee are parties to an Employment Agreement, dated
as of May 20, 1991 (the "1992 Employment Agreement") and an amendment to
the 1992 Employment Agreement, dated April 28, 1998 (as so amended, the
"Amended Employment Agreement"). The Company desires to amend and restate
the Amended Employment Agreement to incorporate the previous amendment as
well as to make certain other changes as set forth herein.
Agreement
Intending to be legally bound, the parties agree as follows:
1. Position. The Company engages the Employee as its Chief
Executive Officer. The Employee will perform such services as
may be assigned to him by the Company's Bylaws and Board of
Directors. The Company will also cause the Employee to become
a director of the Company.
2. Exclusive Services. The Employee will diligently devote his
entire time, effort and attention to the affairs of the
Company and to the successful development of its business.
Without the Company's advance written consent, the Employee
will not render business services to others or engage in any
other activity that would materially interfere with the
performance of his duties under this Agreement. Nevertheless,
as long as the following activities do not interfere with the
Employee's obligations to the Company, the Employee may: (a)
serve as a director, officer or trustee of any trade
association or of any civic, educational or charitable
organization; (b) acquire solely as an investment securities
of any entity so long as (i) he remains a passive investor in
that entity and (ii) that entity does not, directly or
indirectly, compete with the Company; and (c) with the prior
consent of the Company's Board of Directors, serve as director
of any corporation which does not, directly or indirectly,
compete with the Company.
3. Term of Employment. Unless sooner terminated as provided in
Sections 6 or 7 of this Agreement, the Employee's employment
term shall begin on the date of the 1992 Employment Agreement
(the "Commencement Date") and shall end on the sooner of the
Employee's normal retirement date or the second anniversary of
the Company's giving notice of termination, which notice may
be given at any time on or after (but not before) May 20,
1992.
4. Compensation and Benefits.
4.1 Compensation.
(a) Base Salary. The Employee's annual base salary
will be determined in accordance with the Company's
regular executive compensation review arrangements.
(b) Bonuses. In addition to his base salary, the
Employee will be entitled to participate in the
executive compensation arrangements described in
Section 5.
4.2 Employee Benefits.
(a) The Employee will be entitled to participate in the
Company's employee benefit plans that are generally
available to the Company's executive management.
These include any group life, hospitalization,
surgical, major medical and accidental death and
dismemberment insurance plans and the Company's
Supplemental Executives' Retirement Plan and the
Company's Salaried Employees' Retirement Plan.
(b) In determining the Employee's benefits under the
Company's Supplemental Executive Retirement Plan
(i) his years of service under that Plan will
include the years of service taken into account in
determining his benefits under qualified pension
plans sponsored by The Kendall Company and C. R.
Bard, Inc. and (ii) on the date of the 1992
Employment Agreement, the Employee will be deemed
to be vested under that Plan by virtue of such
prior service.
(c) In determining the Employee's benefits and vesting
rights under the Company's Salaried Employee's
Retirement Plan, the Employee will be treated as
though he joined the Company on the date of the
1992 Employment Agreement without credit for prior
service with previous employers. However, on
Employee's retirement under that plan, he will be
entitled to receive a supplemental retirement
benefit which, when added to the payments he
receives under all of the Company's pension plans
in which he participates, will equal the amount he
would have received had his service under those
plans included his service taken into account in
determining his benefits under qualified pension
plans sponsored by The Kendall Company and C. R.
Bard, Inc.
(d) However, notwithstanding Sections 4.2 (b) and (c),
amounts paid to the Employee by the Company and by
its pension plans will be reduced by the benefits
the Employee is or would have been entitled to
receive under pension plans sponsored by The
Kendall Company and C. R. Bard, Inc. if he has or
had retained the right to retire under the plans
sponsored by those employers. In computing that
reduced amount, the Company may rely on information
furnished to it by those other employers, and on
appropriate actuarial adjustments (if practical, or
otherwise adjusted as the parties may reasonably
agree) to reflect the value of any benefits that
are or would have been payable under those other
plans in a manner or at a time different from the
manner or time that benefits are payable under the
Company's plans.
(e) For purposes of determining vacation leave under
the Company's vacation policy, the Employee will
receive credit for periods of prior service with
The Kendall Company and C. R. Bard, Inc.
4.3 Reimbursement of Expenses. The Company will reimburse
the Employee in accordance with the Company's expense
reimbursement policy as in effect from time to time,
for expenses reasonably and properly incurred by him in
performing his duties. The Employee shall furnish the
Company with evidence of his disbursements in
sufficient detail to qualify them as deductions under
the Internal Revenue Code of 1986, as amended (the
"Code"). The Company will also reimburse the Employee
for reasonable personal financial and tax planning
expenses incurred in connection with the Employee's
initial employment in an aggregate amount not to exceed
$3,500.
4.4 Relocation. The Company will assist the Employee with
relocation expenses and other activities associated
with Employee's relocation to a new residence in the
area of the Company's executive offices in accordance
with the Company's relocation policy applicable to
salaried employees in the form attached.
4.5 Automobile. The Company will provide the Employee with
the use of an automobile and will pay or reimburse the
Employee for maintenance and operation expenses of that
automobile in accordance with the Company's executive
automobile policy.
5. Establishment of Executive Compensation Arrangements. The
Board of Directors has revised its executive incentive
compensation arrangements under the Shareholder-approved Long
Term Incentive Plan to provide for substantial incentive
compensation opportunities for all of the Company's key
executives. That plan shall be in effect for 1992 and each
subsequent year of the Employee's employment. That plan will
provide for bonuses of up to 100% of annual base salary based
on the participant's rank and the achievement of fundamental
and substantial increases in shareholder value. The latter
will be determined by performance criteria established by the
Compensation Committee in consultation with the Company's
senior executives.
6. Termination.
6.1 Termination for Cause. The Company may terminate the
Employee's employment, and the Company's obligations
under this Agreement, at any time for Cause by giving
notice to the Employee. Such termination will be
effective as of the date of such notice and all rights of
the Employee under this Agreement shall terminate on such
date.
In this Agreement, "Cause" means: (i) the Employee's
conviction of a felony; or (ii) the Employee's bankruptcy
or insolvency; or (iii) the Employee's failure to perform
his duties under this Agreement (other than due to
physical or mental illness) and the failure by the
Employee to correct that failure within 30 days after
written notice from the Company; or (iv) the Employee's
gross negligence or willful misconduct in the performance
of his duties; or (v) Employee's conduct which causes
substantial damage to the Company or any of its
affiliated companies or any of their business
reputations, or which brings them into disrepute; or (vi)
the Employee's breach of his undertakings under Sections
9 ("Confidential Information") or 10 ("Non-Competition").
6.2 Employee's Disability. If, due to the Employee's
Disability, he resigns or is terminated by the Company,
the Employee shall be entitled to receive all base
salary earned and accrued to the date of termination or
resignation, as well as any other benefits payable
under the Company's then current disability policy, but
all other rights of the Employee hereunder shall
terminate as of the date of Employee's termination or
resignation.
In this Agreement, "Disability" means any physical or
mental ailment which prevents the Employee from
performing the duties incident to the Employee's
employment with the Company and which (i) has continued
for a period of 45 consecutive days, or for a period of
90 days whether or not consecutive, during any 360-day
period; or (ii) is determined by a physician as highly
likely to persist for 90 consecutive days or to be of
permanent duration. Any question as to the existence,
extent, duration or potentiality of the Employee's
Disability shall be made by a qualified, independent
physician selected by the Company, whose determination
shall be final and conclusive for all purposes of this
Agreement.
6.3 Termination Other Than For Cause. The Company may
terminate the Employee's employment at any time other
than for Cause, Disability or by giving the two years
notice specified in Section 3, but if it does so, and
the Employee is not then in breach of this Agreement,
the Company shall pay the Employee either: (i) an
amount equal to the Employee's annual base salary then
in effect, plus an amount equal to his annual base
salary that would be in effect for the next following
year if such amount can be determined from this
Agreement or has been set by the Compensation Committee
to the Board of Directors; or (ii) if the subsequent
year's annual base salary has not been so determined or
set, an amount equal to two times the Employee's then
current annual base salary. Such amount will be payable
as a lump sum within 30 days following the date of
termination and the payment will be in full
satisfaction of all claims Employee may have against
the Company. If the circumstances of the termination
are such that the Employee is also entitled to
severance compensation under Section-7 ("Termination
Following a Change in Control"), the Employee will be
entitled to receive the larger of the two amounts under
Sections 6.3 or 7, but not both. The provisions of
Section 8.2 ("Additional Payment") will apply to all
will apply to all payments made under this Section 6.3.
6.4 Death. In the event that the Employee dies while
employed under this Agreement, the Employee's estate
shall be entitled to receive: (i) all base salary
earned and accrued to the date of death; and (ii) any
other benefits payable under any then current life
insurance policy provided to the Employee pursuant to
Section 4.2, hereof, but all other rights of the
Employee hereunder shall terminate.
7. Termination Following a Change in Control.
7.1 Termination Following the Consummation of a Change in
Control. The Employee will be entitled to the severance
compensation specified in Section 8 if, (a) at any time
within two years after a Change in Control has
occurred, the Employee's employment is terminated: (i)
by the Company other than for Cause, death or
Disability or retirement at the Employee's normal
retirement date under the Company's Salaried Employees'
Retirement Plan; or (ii) as a result of Employee's
resignation at any time following his Constructive
Termination or (b) the Employee resigns for any reason
within 30 days following the first anniversary of a
Change in Control. Except as otherwise set forth in
Section 7.2, the Employee will not be entitled to the
benefits specified in Section 8 if his employment
terminates for any other reason or if, at any time
thereafter, the Employee is in breach of his
undertakings under this Agreement.n breach of his
undertakings under this Agreement.
7.2 Termination Following a Contemplated Change in Control.
If the Company executes an agreement, the consummation
of which would result in the occurrence of a Change in
Control, then, with respect to a termination (i) by the
Company other than for Cause, death or Disability or
retirement at the Employee's normal retirement date
under the Company's Salaried Employees' Retirement
Plan; or (ii) as a result of the Employee's resignation
following his Constructive Termination occurring after
the execution of such agreement (and, if such agreement
expires or is terminated prior to consummation, prior
to the expiration or termination of such agreement), a
Change in Control shall be deemed to have occurred as
of the date of the execution of such agreement and the
Employee will be entitled to the severance compensation
specified in Section 8.
As used in this Section 7, the following terms shall have
the meanings described below:
(a) "Change in Control" means a change in control of a
nature that would be required to be reported in
response to Item I 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.
(i) any "Person" (as such term is used in Sections
13(d) and 14(d) of the Act), other than:
A. the Company,
B. any Person who on the date hereof
is an employee or officer of the
Company, or
C. a trustee or fiduciary holding
securities under an employee
benefit plan of the Company,
(ii) 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
(iii) 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
(iv) 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 (collectively, a "Transaction") 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 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 the 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 the Transaction."
(b) "Constructive Termination" means the occurrence of any
of the following events during the Employment Term:
(i) the Company requires the Employee to assume any duties
inconsistent with, or the Company makes a significant
diminution or reduction in the nature or scope of the
Employee's authority or duties from, those assigned to
or held by the Employee on the Commencement Date;
(ii) a material reduction in the Employee's base salary or
incentive compensation opportunities;
(iii)a relocation of the Employee's site of employment to a
location more than 51) miles from the Employee's site
of employment with the Company on the Commencement
Date;
(iv) the Company fails to provide the Employee with a
reasonable number of paid vacation days at least equal
to the number of paid vacation days to which the
Employee was entitled in the immediately preceding full
calendar year;
(v) the Company fails to provide the Employee with
substantially the same fringe benefits that were
provided to the Employee on the Commencement Date or
with a package of fringe benefits that, though one or
more such benefits may vary from those in effect on the
Commencement Date, is substantially at least as
beneficial to the Employee in all material respects as
such prior fringe benefits taken as a whole; or
(vi) a successor of the Company does not assume the
Company's obligations under this Agreement, expressly
or as a matter of law.
Notwithstanding the foregoing, no Constructive
Termination shall be deemed to have occurred if: (x)
the Employee shall have consented in writing or given
a written waiver to the occurrence of any to the events
enumerated in clauses (i) through (vi) above; or (y)
the Employee shall have failed to give the Company
written notice stating his intention to claim
Constructive Termination and the basis for that claim
at least 10 days in advance of the effective date of
the resignation; or (z) the event constituting a
constructive dismissal has been cured or reversed by
the Company prior to the effective date of his
resignation.
8. Severance Compensation Following a Change in Control.
8.1 Determination of Severance Compensation. Upon
termination of employment as set forth in Section 7,
the Employee shall be entitled to:
(a) severance compensation in an amount equal to three
times the sum of: (i) the Employee's highest annual
base salary rate in effect during the year of the
termination of employment, and (ii) an amount equal to
the annual bonus paid or payable for the fiscal year
immediately preceding a Change in Control or the
termination of employment (whichever amount is
greater); provided, however, that if at any time before
the third anniversary of the termination of the
Employee's employment, the Employee either elects
retirement under the Company's Salaried Employees'
Retirement Plan, or could have been compelled to retire
under that Plan if the Employee had remained employed
by the Company, the severance compensation under this
Section shall be reduced by an amount equal to the
pension benefit payable to the Employee under that
Plan, determined after any applicable actuarial
reductions for early commencement. The amount of
pension benefit taken into account for this purpose
shall be limited to those benefits payable before the
third anniversary of the termination of employment. The
severance compensation paid hereunder shall not be
reduced to the extent of any other compensation for the
Employee's services which the Employee receives or is
entitled to receive from any other employment as long
as that employment is consistent with the terms of
this Agreement;
(b) the difference, if any, between (i) the benefit the
Employee would be entitled to receive under the
Company's Salaried Employees' Savings Plan (the
"Savings Plan") if the Company's contributions to the
Savings Plan were fully vested upon the termination of
the Employee's employment and (ii) the benefit the
Employee is entitled to receive under the terms of the
Savings Plan upon termination of employment. Any
benefit payable hereunder shall be payable at such time
and in such manner as benefits are payable under the
Savings Plan; and
(c) a continuation of all hospital, major medical, medical,
dental, life and other insurance benefits not otherwise
addressed in this Agreement in the same manner and
amount to which the Employee was entitled on the date
of a Change in Control or on the date of termination of
employment (whichever benefits are more favorable to
the Employee) until the earlier of: (i) a period of 36
months after termination of employment; (ii) the
Employee's retirement under the Company's Salaried
Employees' Retirement Plan; or (iii) the Employee's
eligibility for similar benefits with a new employer.
Assistance in finding new employment will be made
available by the Company if the Employee so requests.
(d) the immediate vesting, upon the termination of the
Employee's employment, of all stock options, other
equity-based awards and shares of the Company's stock
awarded to the Employee pursuant to this Agreement, the
executive incentive plan referred to in Section 5, or
any other Company compensation or benefit plan or
arrangement generally, which are unvested at that time.
The provisions of this Section 8.1 (d) shall supersede
the terms of any stock-option, equity or other grant or
award made to the Employee under any such other plan or
arrangement to the extent that there is an
inconsistency between the two.
8.2. Additional Payment.
(a) Gross-Up Payment. Notwithstanding anything herein to
the contrary, if it is determined that any Payment
would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax, together
with any interest or penalties thereon, is herein
referred to as an "Excise Tax"), then the Employee
shall be entitled to an additional payment (a "Gross-Up
Payment") in an amount that will place the Employee in
the same after-tax economic position that the Employee
would have enjoyed if the Excise Tax had not applied to
the Payment.
(b) Determination of Gross-Up Payment. Subject to the
provisions of Section 8.2(c), all determinations
required under this Section 8.2, including whether a
Gross-Up Payment is required, the amount of the
Payments constituting excess parachute payments, and
the amount of the Gross-Up Payment, shall be made by
the accounting firm that was the Company's independent
auditors immediately prior to the Change in Control
(or, in default thereof, an accounting firm mutually
agreed upon by the Company and the Employee) (the
"Accounting Firm"), which shall provide detailed
supporting calculations both to the Employee and the
Company within fifteen days of the Change in Control,
the date of termination of employment or any other date
reasonably requested by the Employee or the Company on
which a determination under this Section 8.2 is
necessary or advisable. The Company shall pay to the
Employee the initial Gross-Up Payment within 5 days of
the receipt by the Employee and the Company of the
Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the
Employee, the Company shall cause the Accounting Firm
to provide the Employee with an opinion that the
Accounting Firm has substantial authority under the
Code and Regulations not to report an Excise Tax on the
Employee's federal income tax return. Any determination
by the Accounting Firm shall be binding upon the
Employee and the Company. If the initial Gross-Up
Payment is insufficient to cover the amount of the
Excise Tax that is ultimately determined to be owing
by the Employee with respect to any Payment
(hereinafter an "Underpayment"), the Company, after
exhausting its remedies under Section 8.2(c) below,
shall promptly pay to the Employee an additional
Gross-Up Payment in respect of the Underpayment.
(c) Procedures. The Employee shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notice shall be
given as soon as practicable after the Employee knows
of such claim and shall apprise the Company of the
nature of the claim and the date on which the claim is
requested to be paid. The Employee agrees not to pay
the claim until the expiration of the thirty-day period
following the date on which the Employee notifies the
Company, or such shorter period ending on the date the
Taxes with respect to such claim are due (the "Notice
Period"). If the Company notifies the Employee in
writing prior to the expiration of the Notice Period
that it desires to contest the claim, the Employee
shall: (i) give the Company any information reasonably
requested by the Company relating to the claim; (ii)
take such action in connection with the claim as the
Company may reasonably request, including, without
limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the
Company and reasonably acceptable to the Employee;
(iii) cooperate with the Company in good faith in
contesting the claim; and (iv) permit the Company to
participate in any proceedings relating to the claim.
The Employee shall permit the Company to control all
proceedings related to the claim and, at its option,
permit the Company to pursue or forgo any and all
administrative appeals, proceedings, hearings, and
conferences with the taxing authority in respect of
such claim. If requested by the Company, the Employee
agrees either to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner
and to prosecute such contest to a determination before
any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts as the
Company shall determine; provided, however, that,if the
Company directs the Employee to pay such claim and
pursue a refund, the Company shall advance the amount
of such payment to the Employee on an after-tax and
interest-free basis (the "Advance"). The Company's
control of the contest related to the claim shall be
limited to the issues related to the Gross-Up Payment
and the Employee shall be entitled to settle or
contest, as the case may be, any other issues raised by
the Internal Revenue Service or other taxing authority.
If the Company does not notify the Employee in writing
prior to the end of the Notice Period of its desire to
contest the claim, the Company shall pay to the
Employee an additional Gross-Up Payment in respect of
the excess parachute payments that are the subject of
the claim, and the Employee agrees to pay the amount of
the Excise Tax that is the subject of the claim to the
applicable taxing authority in accordance with
applicable law.
(d) Repayments. If, after receipt by the Employee of an
Advance, the Employee becomes entitled to a refund with
respect to the claim to which such Advance relates, the
Employee shall pay the Company the amount of the refund
(together with any interest paid or credited thereon
after Taxes applicable thereto). If, after receipt by
the Employee of an Advance, a determination is made
that the Employee shall not be entitled to any refund
with respect to the claim and the Company does not
promptly notify the Employee of its intent to contest
the denial of refund, then the amount of the Advance
shall not be required to be repaid by the Employee and
the amount thereof shall offset the amount of the
additional Gross-Up Payment then owing to the Employee.
(e) Further Assurances. The Company shall indemnify the
Employee and hold the Employee harmless, on an
after-tax basis, from any costs, expenses, penalties,
fines, interest or other liabilities ("Losses")
incurred by the Employee with respect to the exercise
by the Company of any of its rights under this Section
8.2, including, without limitation, any
Losses related to the Company's decision to contest a
claim or any imputed income to the Employee resulting
from any Advance or action taken on the Employee's
behalf by the Company hereunder. The Company shall pay,
or cause the Trust to pay, all legal fees and expenses
incurred under this Section 8.2 and shall promptly
reimburse the Employee, or cause the Trust to reimburse
the Employee, for the reasonable expenses incurred by
the Employee in connection with any actions taken by
the Company or required to be taken by the Employee
hereunder. The Company shall also pay all of the fees
and expenses of the Accounting Firm, including, without
limitation, the fees and expenses related to the
opinion referred to in Section 8.2(b).
As used in this Section 8.2, the following terms shall
have the meanings described below:
"Payment" means (i) any amount due or paid to the Employee
under this Agreement, (ii) any amount that is due or paid
to the Employee under any plan, program or arrangement of
the Company and any of its subsidiaries, and (iii) any
amount or benefit that is due or payable to the Employee
under this Agreement or under any plan, program or
arrangement of the Company and any of its subsidiaries not
otherwise covered under clause (i) or (ii) hereof which
must reasonably be taken into account under Section 280G
of the Code and the Regulations in determining the amount
of the "parachute payments" received by the Employee,
including, without limitation, any amounts which must be
taken into account under the Code and Regulations as a
result of (A) the acceleration of the vesting of any
option, restricted stock or other equity award granted
under any equity plan of the Company or otherwise, (B) the
acceleration of the time at which any payment or benefit
is receivable by the Employee or (C) any contingent
severance or other amounts that are payable to the
Employee.
"Regulations" means the proposed, temporary and final
regulations under Section 280G of Code or any successor
provision thereto.
8.3 Payment of Severance Compensation.
(a) The severance compensation set forth in Sections 8.1(a)
and 8.1(b) will be payable in 36 equal monthly
installments commencing on the first day of the month
following the month in which employment terminates.
However, the Employee may elect in writing, in
accordance with the provisions of this Section, to
receive his severance compensation in a lump sum at a
later time or in installments in amounts and at times
elected by the Employee, but that election will not
entitle the Employee to receive severance compensation
sooner than permitted by the preceding sentence.
(b) The Employee must elect to receive amounts in
installments or to defer payments by filing a written
election with the Company. Such election must specify
the time at which payments are to be made and the
amounts of such payments. The election to receive
installment payments or to defer payments will not be
valid unless it is made prior to the time the Employee
is entitled to receive any payments under this
Agreement. The last such election in effect on the day
before a termination of employment shall be
controlling. No election may be made on or after
termination of employment.
(c) The payment of deferred amounts must commence no
earlier than the first business day of the calendar
year following the termination of employment and no
later than the third calendar year following the
attainment of normal retirement age under the Company's
Salaried Employees' Retirement Plan.
8.4 Termination of Rights to Severance Compensation. The
Employee's rights to severance compensation under Sections 7
and 8 may be terminated only: (a) at any time by the mutual
written consent of the Employee and the Company; and (b) the
Company may also terminate
these rights at the end of each successive two-year
period commencing on the date of this Agreement. The Company
may terminate this Agreement under clause (b) of this
Section 8.4 by giving written notice at least one year in
advance of such termination, except that such termination
and written notice shall not be effective unless the
Employee is employed by the Company on the termination date.
9. Confidential Information.
9.1 Covenant. The Employee acknowledges that his employment by
the Company will, throughout the duration of this Agreement,
bring him into close contact with many confidential affairs
of the Company. These include (but are not limited to)
information about markets, key personnel, client lists and
client information, operational methods, proprietary
intellectual property, plans for future developments
relating thereto, and other information not readily
available to the public. The Employee also further
acknowledges that the services to be performed under this
Agreement are of a special, unique, unusual, extraordinary
and intellectual character. In recognition of these factors,
the Employee covenants and agrees that, both during and
after the term of this Agreement:
(i) he will keep secret all material confidential matters
of the Company known to him which are not otherwise in
the public domain and will not intentionally disclose
them to anyone outside of the Company, wherever
located, except with the Company's prior written
consent; and
(ii) he will deliver promptly to the Company on termination
of his employment by the Company, or at any other time
the Company may so request, all memoranda, notes,
records, reports and other documents (and all copies
thereof) relating to the business
of the Company which he obtained while employed by,
or otherwise serving or acting on behalf of, the
Company and which he may then possess or have under his
control.
9.2 Specific Remedy. If the Employee commits a
material breach of any of the provisions of
Section 9.1, the Company shall have the right
and remedy to have such provisions
specifically enforced by any court having
equity jurisdiction, it being acknowledged and
agreed that any such breach or threatened
breach will cause irreparable injury to the
Company and that money damages will not
provide an adequate remedy to the Company.
10. Non-Competition.
10.1 Covenant. During the term of this Agreement and for a period of
one year after the termination of Employee's employment
hereunder, the Employee will not directly or indirectly:
(i) as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, or in
any other capacity whatsoever (other than as the holder of
not more than five percent of the total outstanding stock of
a publicly held company), engage in the business of
developing, producing, marketing or selling products of the
kind or type developed or being developed, produced,
marketed or sold by the Company while the Employee was
employed by the Company within any market or territory in
which the Company is then actively engaged; or
(ii) recruit any employee of the Company or solicit or induce, or
attempt to solicit or induce, any employee of the Company to
terminate his or her employment with, or otherwise cease
his or her relationship with, the Company; or
(iii)solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any of the clients,
customers or accounts, or prospective clients, customers or
accounts, of the Company which were contacted, solicited or
served by the Employee while employed by the Company.
10.2 Specific Remedy. The restrictions contained in this Section 10 are
necessary for the protection of the business and goodwill of the
Company and are considered by the Employee to be reasonable for that
purpose. The Employee agrees that any breach of this Section 10 will
cause the Company substantial and irrevocable harm for which money
damages will be inadequate and therefore, in the event of any such
breach or threatened breach, in addition to such other remedies as may
be available, the Company shall have the right to seek specific
performance and injunctive relief.
11. Independence, Severability and Non-Exclusivity. All of the
rights and remedies enumerated in Sections 9.2 and 10.2 are
in addition to and not in lieu of any other rights and
remedies available to the Company under law or in equity and
shall survive termination of this Agreement. If any of the
provisions of this Agreement (including Sections 9 and 10)
are determined to be invalid or unenforceable, that will not
affect the remainder of this Agreement which will be given
full effect without regard to the invalid portions. If any
part of Section 10 is held to be unenforceable by a competent
tribunal because of its duration or the area covered thereby,
the parties agree that the court making that determination
will have the power to reduce the duration or area (and those
provisions will be deemed to be amended by the parties) to
the extent necessary to make those provisions enforceable
12. Vesting In the Event of a Change in Control. In the event of
a Change in Control, all stock options, other equity-based
awards and shares of the Company's stock awarded to the
Employee pursuant to this Agreement, the executive incentive
plan referred to in Section 5, or any other Company
compensation or benefit plan or arrangement generally, which
are unvested at that time, will immediately become fully
vested. The provisions of this Section 12 shall supersede
the terms of any equity award made to the Employee under any
such other plan or arrangement to the extent that there is an
inconsistency between them.
13. Assignment of the Employee Benefits. Absent the prior
written consent of the Company, and subject to will and the
laws of descent and distribution, the Employee will have no
right to exchange, convert, encumber or dispose of the rights
of the Employee to receive benefits and payments under this
Agreement, which payments and benefits are non-assignable and
non-transferable.
14. Notices. All notices under this Agreement shall be given in
writing by personal delivery or by registered or certified
mail addressed to the Company at its principal place of
business and to the Employee at his residence address as then
listed in the Company's records.
15. Return of Company Property. On the termination of Employee's
employment hereunder at any time, he will promptly return to
the Company all of its property then in his possession.
16. General.
16.1 Survival. Notwithstanding anything to the contrary in
this Agreement, (i) the rights and obligations of the
parties under Sections 8, 9 and 10 hereof, (ii) the
Company's obligation to make payments under Section 6
hereof, and (iii) any cause of action or claim of
either party, accrued or to accrue, because of any
breach or default by the other party, shall survive any
termination of this Agreement to the degree necessary
to permit their complete fulfillment or discharge.
16.2 Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws
of the Commonwealth of Pennsylvania, without giving
effect to conflicts of laws principles thereof which
might refer such interpretations to the laws of a
different state or jurisdiction.
16.3 Captions. The section headings contained herein are
for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
16.4 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to
the subject matter hereof, and supersedes all prior
agreements, arrangements and understandings, written or
oral, between the parties.
16.5 No Other Representations. No representation, promise
or inducement has been made by any party hereto that is
not embodied in this Agreement, and no party shall be
bound by or liable for any alleged representation,
promise or inducement not so set forth.
16.6 Successors and Assigns. This Agreement shall inure to
the benefit of and shall be binding upon the Company
and the Employee and, subject to the provisions of
Section 11, their respective heirs, executors, personal
representatives, successors and assigns.
16.7 Amendments; Waivers. This Agreement may not be
amended, modified, superseded, canceled, renewed or
extended, and the terms or covenants hereof may be
waived, except by a written instrument executed by the
parties to this Agreement or in the case of a waiver,
by the party waiving compliance. The failure of any
party to require performance of any provision of, or to
exercise any right under, this Agreement shall not
affect the right of that party at a later time to
enforce that provision or exercise that right. No
waiver of any term of this Agreement, whether by
conduct or otherwise, will be deemed to be, or
construed as, a further or continuing waiver of that or
any other breach.
IN WITNESS WHEREOF, the parties hereto have executed this
Amended and Restated Employment Agreement as of the date first set
forth above.
WEST PHARMACEUTICAL SERVICES, INC.
By: /s/ George R. Bennyhoff
George R. Bennyhoff, Senior Vice President,
Human Resources
/s/ William G. Little
William G. Little
SECOND AMENDED AND RESTATED
CHANGE-IN-CONTROL AGREEMENT
THIS IS A SECOND AMENDED AND RESTATED CHANGE-IN-CONTROL
AGREEMENT (the "Agreement"), dated as of March 25, 2000
between West Pharmaceutical, Services, Inc., a Pennsylvania
corporation, (formerly named "The West Company, Incorporated")
(the "Company") and [NAME] ("Executive").
Background
The Executive and the Company are parties to a certain
letter agreement dated [DATE] (the "Change-in-Control
Agreement"). The Company and the Executive amended and
restated the Change-in-Control Agreement on April 28, 1998
(the "Amended and Restated Change-in-Control Agreement"). The
Company desires to make a second amendment and restatement of
the Change-in-Control Agreement to make certain changes as set
forth herein.
Agreement
In consideration of the foregoing and Executive's
continued employment with the Company, and intending to be
legally bound, the Company agrees with Executive as follows:
1. Definitions. As used in this Agreement, the following
terms will have the meanings set forth below:
(a) An "Affiliate" of any Person means any Person
directly or indirectly controlling, controlled by or
under common control with such Person.
(b) "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 the date of this Agreement 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:
(i) Any Person, 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,
(ii) 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
(iii)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
(iv) 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 (collectively, a "Transaction"),
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 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 the
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 the Transaction.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) The "Company's Business" means: (i) the contract-
manufacturing and contract-filing business for the
pharmaceutical and consumer-products industries,
being carried on by West Pharmaceutical Services
Lakewood, Inc. and its subsidiaries; (ii) the
manufacture and sale of stoppers, closures,
containers, medical-device components and assemblies
made from elastomers, metal and plastic for the
health-care and consumer-products industries; (iii)
the development of proprietary drug-delivery
technologies that provide optimized therapeutic
effects for challenging drug molecules, such as
peptides and proteins, carbohydrates,
oligonucleotides, as well as systems for vaccines,
gene therapy and diagnostic applications; and (iv)
any other business conducted by the Company or any of
its Subsidiaries or Affiliates during the term of
this Agreement and in which Executive has have been
actively involved.
(e) "Constructive Termination" means the occurrence of
any of the following events:
(i) The Company requires Executive to assume any
duties inconsistent with, or the Company makes
a significant diminution or reduction in the
nature or scope of Executive's authority or
duties from, those assigned to or held by
Executive on the date of this Agreement;
(ii) A material reduction in Executive's annual
salary or incentive compensation
opportunities;
(iii) A relocation of Executive's site of employment
to a location more than 50 miles from
Executive's site of employment on the date of
this Agreement;
(iv) The Company falls to provide Executive with a
reasonable number of paid vacation days at
least equal to the number of paid vacation
days to which Executive was entitled in the
last full calendar year prior to the execution
of this Agreement;
(v) The Company fails to provide Executive with
substantially the same fringe benefits that
were provided to Executive immediately prior
to the date of this Agreement, or with a
package of fringe benefits that, although one
or more of such benefits may vary from those
in effect immediately prior to the execution
of this Agreement, is substantially at least
as beneficial to Executive in all material
respects is such prior fringe benefits taken
as a whole; or
(vi) A successor of the Company does not assume the
Company's obligations under this Agreement,
expressly or as a matter of law.
Notwithstanding the foregoing, no Constructive
Termination will be deemed to have occurred under any
of the following circumstances:
(1) Executive will have consented in writing
or given a written waiver to the
occurrence of any of the events
enumerated in clauses (i) through (vi)
above;
(2) Executive will have failed to give the
Company written notice stating
Executive's intention to claim
Constructive Termination and the basis
for that claim at least 10 days in
advance of the effective date of
Executive's resignation; or
(3) The event constituting a Constructive
Termination has been cured or reserved by
the Company prior to the effective date
of Executive's resignation.
(f) "Payment" means
(i) any amount due or paid to the Executive under
this Agreement,
(ii) any amount that is due or paid to the
Executive under any plan, program or
arrangement of the Company and any of its
subsidiaries, and
(iii) any amount or benefit that is due or payable
to the Executive under this Agreement or under
any plan, program or arrangement of the
Company and any of its subsidiaries not
otherwise covered under clause (i) or (ii)
hereof which must reasonably be taken into
account under section 280G of the Code and
the Regulations in determining the amount of
the "parachute payments" received by the
Executive, including, without limitation, any
amounts which must be taken into account
under the Code and Regulations as a result of
(1) the acceleration of the vesting of any
option, restricted stock or other equity
award granted under any equity plan of the
Company or otherwise, (2) the acceleration of
the time at which any payment or benefit is
receivable by the Executive or (3) any
contingent severance or other amounts that are
payable to the Executive.
(g) "Person" means an individual, a corporation, a
partnership, an association, a trust or other entity
or organization.
(h) "Regulations" means the proposed, temporary and final
regulations under section 280G of Code or any
successor provision thereto.
(i) "Restrictive Period" means the period of time that
commences on the date hereof and ends on the first
anniversary of the Termination Date.
(j) "Retirement Plan" means the West Pharmaceutical
Services, Inc. Employees' Retirement Plan and any
successor plan thereto.
(k) "Savings/Deferred Comp Plan" means The Company's
Salaried Employees' Savings Plan, The Company's Non-
Qualified Deferred Compensation Plan for Designated
Executive Officers and any other similar plan
established from time to time that may allow
executive officers to defer taxation of compensation.
(l) "Subsidiary" has the meaning ascribed to the term by
section 425(f) of the Code.
(m) "Termination Date" is the date on which Executive
ceases to be employed by the Company or any of its
Subsidiaries or Affiliates for any reason.
2. Termination Following a Change in Control.
(a) Executive will be entitled to the benefits specified
in Section 3 (Benefits Payable Upon Termination of
Employment) if,
(I) at any time within two years after a Change in
Control has occurred, Executive's employment
by the Company is terminated:
(1) by the Company, other than by reason of
death, disability, continuous willful
misconduct to the detriment of the
Company, or retirement at Executive's
normal retirement date under the
Retirement Plan, or
(2) as a result of Executive's resignation at
any time following Executive's
Constructive Termination; or
(II) the Executive resigns for any reason within 30
days following the first anniversary of a
Change in Control.
Except as otherwise set forth in Section 2(b),
Executive will not be entitled to the benefits
specified in Section 3 hereof if Executive's
employment terminates for any other reason or if, at
any time thereafter, Executive is in breach of any of
Executive's obligations under this Agreement.
(b) If the Company executes an agreement, the
consummation of which would result in the occurrence
of a Change in Control, then, with respect to a
termination
(i) by the Company, other than by reason of death,
disability, continuous willful misconduct to
the detriment of the Company, or retirement at
Executive's normal retirement date under the
Retirement Plan, or
(ii) as a result of Executive's resignation at any
time following Executive's Constructive
Termination occurring after the execution of
such agreement (and, if such agreement expires
or is terminated prior to consummation, prior
to the expiration or termination of such
agreement),
a Change in Control shall be deemed to have occurred
as of the date of the execution of such agreement and
the Executive will be entitled to the severance
compensation specified in Section 3 hereof.
3. Benefits Payable Upon Termination of Employment. Upon
termination of employment as set forth in Section 2
(Termination Following a Change in Control), Executive
will be entitled to the following benefits:
(a) Severance Compensation. Executive will be entitled
to severance compensation in an amount equal to three
times the sum of
(i) Executive's highest annual base salary rate in
effect during the year of the termination of
Executive's employment, plus
(ii) the annual bonus paid or payable for the
fiscal year immediately preceding a Change in
Control or upon the termination of Executive's
employment (whichever amount is greater);
provided, however, that if at any time before the
third anniversary of the Termination Date, Executive
either (x) elects retirement under the Retirement
Plan, or (y) could have been compelled to retire
under the Retirement Plan if Executive had remained
employed by the Company, Executive's severance
compensation under this Section 3(a) will be reduced
by an amount equal to the product obtained by
multiplying such severance compensation by a fraction
the numerator of which is the number of days elapsed
from the Termination Date until the date on which
either of the events described in clauses (x) or (y)
first occurs, and the denominator of which is 1095.
The severance compensation paid hereunder will not be
reduced to the extent of any other compensation for
Executive's services that Executive receives or is
entitled to receive from any other employment
consistent with the terms of this Agreement.
(b) Equivalent of Vested Savings/Deferred Comp Plan
Benefit. The Company will pay to Executive the
difference, if any, between
(i) the benefit Executive would be entitled to
receive under the Savings/Deferred Comp Plan
if the Company's contributions to the
Savings/Deferred Comp Plan were fully vested
upon the termination of Executive's
employment, and
(ii) the benefit Executive is entitled to receive under the terms of the
Savings/Deferred Comp Plan upon termination of Executive's employment.
Any such benefit will be payable at such time and in
such manner as benefits are payable to Executive
under the Savings/Deferred Comp Plan.
(c) Unvested Equity Awards. All stock options, other
equity-based awards and shares of the Company's stock
granted or awarded to Executive pursuant to any
Company compensation or benefit plan or arrangement,
but which are unvested, will vest immediately upon
termination of Executive's employment. The provisions
of this Section 3(c) will supersede the terms of any
such grant or award made to Executive under any such
plan or arrangement to the extent there is an
inconsistency between the two.
(d) Employee and Executive Benefits. Executive will be
entitled to a continuation of all hospital, major
medical, medical, dental, life and other insurance
benefits not otherwise addressed in this Agreement in
the same manner and amount to which Executive was
entitled on the date of a Change in Control or on the
date of Constructive Termination of Executive's
employment (whichever benefits are more favorable to
Executive) until the earlier of
(i) a period of 36 months after termination of
Executive's employment,
(ii) Executive's retirement under the Retirement
Plan, or
(iii) Executive's eligibility for similar benefits
with a new employer.
Assistance in finding new employment will be made
available to Executive by the Company if Executive so
requests. Upon termination of Executive's employment,
Company cars must be returned to the Company.
4. Additional Payments.
(a) Gross-Up Payment. Notwithstanding anything herein to
the contrary, if it is determined that any Payment
would be subject to the excise tax imposed by section
4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax, together
with any interest or penalties thereon, is herein
referred to as an "Excise Tax"), then the Executive
shall be entitled to an additional payment (a "Gross-
Up Payment") in an amount that will place the
Executive in the same after-tax economic position
that the Executive would have enjoyed if the Excise
Tax had not applied to the Payment.
(b) Determination of Gross-Up Payment. Subject to the
provisions of Section 4(c), all determinations
required under this Section 4, including whether a
Gross-Up Payment is required, the amount of the
Payments constituting excess parachute payments, and
the amount of the Gross-Up Payment, shall be made by
the accounting firm that was the Company's
independent auditors immediately prior to the Change
in Control (or, in default thereof, an accounting
firm mutually agreed upon by the Company and the
Executive) (the "Accounting Firm"), which shall
provide detailed supporting calculations both to the
Executive and the Company within fifteen days of the
Change in Control, the date of termination of
employment or any other date reasonably requested by
the Executive or the Company on which a determination
under this Section 4 is necessary or advisable. The
Company shall pay to the Executive the initial Gross-
Up Payment within 5 days of the receipt by the
Executive and the Company of the Accounting Firm's
determination. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, the
Company shall cause the Accounting Firm to provide
the Executive with an opinion that the Accounting
Firm has substantial authority under the Code and
Regulations not to report an Excise Tax on the
Executive's federal income tax return. Any
determination by the Accounting Firm shall be binding
upon the Executive and the Company. If the initial
Gross-Up Payment is insufficient to cover the amount
of the Excise Tax that is ultimately determined to be
owing by the Executive with respect to any Payment
(hereinafter an "Underpayment"), the Company, after
exhausting its remedies under Section 4(c) below,
shall promptly pay to the Executive an additional
Gross-Up Payment in respect of the Underpayment.
(c) Procedures. The Executive shall notify the Company
in writing of any claim by the Internal Revenue
Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such
notice shall be given as soon as practicable after
the Executive knows of such claim and shall apprise
the Company of the nature of the claim and the date
on which the claim is requested to be paid. The
Executive agrees not to pay the claim until the
expiration of the thirty-day period following the
date on which the Executive notifies the Company, or
such shorter period ending on the date the Taxes with
respect to such claim are due (the "Notice Period").
If the Company notifies the Executive in writing
prior to the expiration of the Notice Period that it
desires to contest the claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to the claim; (ii)
take such action in connection with the claim as the
Company may reasonably request, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company and reasonably acceptable to
the Executive; (iii) cooperate with the Company in
good faith in contesting the claim; and (iv) permit
the Company to participate in any proceedings
relating to the claim. The Executive shall permit
the Company to control all proceedings related to the
claim and, at its option, permit the Company to
pursue or forgo any and all administrative appeals,
proceedings, hearings, and conferences with the
taxing authority in respect of such claim. If
requested by the Company, the Executive agrees either
to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner and to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts as
the Company shall determine; provided, however, that,
if the Company directs the Executive to pay such
claim and pursue a refund, the Company shall advance
the amount of such payment to the Executive on an
after-tax and interest-free basis (the "Advance").
The Company's control of the contest related to the
claim shall be limited to the issues related to the
Gross-Up Payment and the Executive shall be entitled
to settle or contest, as the case may be, any other
issues raised by the Internal Revenue Service or
other taxing authority. If the Company does not
notify the Executive in writing prior to the end of
the Notice Period of its desire to contest the claim,
the Company shall pay to the Executive an additional
Gross-Up Payment in respect of the excess parachute
payments that are the subject of the claim, and the
Executive agrees to pay the amount of the Excise Tax
that is the subject of the claim to the applicable
taxing authority in accordance with applicable law.
(d) Repayments. If, after receipt by the Executive of an
Advance, the Executive becomes entitled to a refund
with respect to the claim to which such Advance
relates, the Executive shall pay the Company the
amount of the refund (together with any interest paid
or credited thereon after Taxes applicable thereto).
If, after receipt by the Executive of an Advance, a
determination is made that the Executive shall not be
entitled to any refund with respect to the claim and
the Company does not promptly notify the Executive of
its intent to contest the denial of refund, then the
amount of the Advance shall not be required to be
repaid by the Executive and the amount thereof shall
offset the amount of the additional Gross-Up Payment
then owing to the Executive.
(e) Further Assurances. The Company shall indemnify the
Executive and hold the Executive harmless, on an
after-tax basis, from any costs, expenses, penalties,
fines, interest or other liabilities ("Losses")
incurred by the Executive with respect to the
exercise by the Company of any of its rights under
this Section 4, including, without limitation, any
Losses related to the Company's decision to contest
a claim or any imputed income to the Executive
resulting from any Advance or action taken on the
Executive's behalf by the Company hereunder. The
Company shall pay, or cause the Trust to pay, all
legal fees and expenses incurred under this Section
4 and shall promptly reimburse the Executive, or
cause the Trust to reimburse the Executive, for the
reasonable expenses incurred by the Executive in
connection with any actions taken by the Company or
required to be taken by the Executive hereunder. The
Company shall also pay all of the fees and expenses
of the Accounting Firm, including, without
limitation, the fees and expenses related to the
opinion referred to in Section 4(b).
5. Payment of Severance Compensation.
(a) The severance compensation set forth in Section 3 (a)
will be payable in 36 equal monthly installments
commencing on the first day of the month following
the month in which Executive's employment terminates.
However, Executive may elect in writing, in
accordance with the provisions of this Section, to
receive Executive's severance compensation in a lump
sum at a later time or in installments in amounts and
at times elected by Executive, but Executive's
election will not entitle Executive to receive
severance compensation sooner than permitted by the
preceding sentence.
(b) Executive must elect to receive amounts in
installments or to defer payments by filing a written
election with the Company, which specifies the time
at which payments are to be made and the amounts of
such payments. Executive's election to receive
installment payments or to defer payments will not be
valid unless it is made prior to the time Executive
is entitled to receive any payments under this
Agreement. The last such election in effect on the
day before a termination of employment will be
controlling. No election may be made on or after
termination of employment.
(c) The payment of deferred amounts must commence no
earlier than the first business day of the calendar
year following the termination of Executive's
employment and no later than the third calendar year
following the attainment of normal retirement age
under the Retirement Plan.
6. Non-Disclosure and Confidentiality.
(a) Executive agrees that Executive will keep secret and
maintain in confidence all confidential information
of the Company and will not use such information
other than for the Company's benefit or disclose such
information to anyone outside of the Company, either
during or after Executive's employment with the
Company.
(b) Executive will promptly deliver to the Company on the
termination of Executive's employment with the
Company, or at any time the Company requests, all
memoranda, notes, records and other documents (and
all copies thereof) relating to the Company's
business or confidential matters which Executive then
has or controls.
(c) All inventions, improvements, new ideas and
techniques which relate to the Company's business
which Executive makes or conceives during Executive's
employment with the Company or within six months
thereafter will be the Company's property. Without
additional compensation to Executive, Executive will
promptly inform the Company of such inventions,
improvements, ideas and techniques, and will assist
the Company in preserving them and will not disclose
them to anyone else without the Company's consent.
(d) Executive understands that, as used in this Section,
the phrase "confidential information of the Company"
includes all information of a technical, commercial
or other nature of or about the Company (such as
formulae, trade secrets, customer lists and know-how)
not made available to the general public.
7. Legal Fees. The Company will pay all legal fees and
expenses which Executive may incur as a result of the
Company's contesting the validity or enforceability of
this Agreement.
8. Payments Final. In the event of a termination of
Executive's employment under the circumstances described
in this Agreement, the arrangements provided for by this
Agreement, and any other agreement between the Company and
Executive in effect at that time and by any other
applicable plan of the Company in which Executive then
participates, will constitute the entire obligation of the
Company to Executive, and performance of that obligation
will constitute full settlement of any claim that
Executive might otherwise assert against the Company on
account of such termination. The Company's obligation to
pay Executive under this Agreement will be absolute and
unconditional and will not be affected by any
circumstance, including without limitation, any set-off,
counterclaim, defense or other rights the Company may have
against Executive or anyone else as long as Executive is
not in beach of Executive's obligations under this
Agreement.
9. Non-Competition.
(a) During the Restrictive Period, Executive will not,
and will not permit any of Executive's Affiliates, or
any other Person, directly or indirectly, to:
(b) engage in competition with, or acquire a direct or
indirect interest or an option to acquire such an
interest in any Person engaged in competition with,
the Company's Business in the United States (other
than an interest of not more than 5 percent of the
outstanding stock of any publicly traded company);
(i) serve as a director, officer, employee or
consultant of, or furnish information to, or
otherwise facilitate the efforts of, any
Person engaged in competition with the
Company's Business in the United States or
Puerto Rico;
(ii) solicit, employ, interfere with or attempt to
entice away from the Company any employee who
has been employed by the Company or a
Subsidiary in an executive or supervisory
capacity in connection with the conduct of the
Company's Business within one year prior to
such solicitation, employment, interference or
enticement; or
(iii) approach, solicit or deal with in competition
with the Company or any Subsidiary any Person
which at any time during the 12 months
immediately preceding the Termination Date:
(1) was a customer, client, supplier, agent
or distributor of the Company or any
Subsidiary;
(2) was a customer, client, supplier, agent
or distributor of the Company or any
Subsidiary with whom employees reporting
to or under the direct control of
Executive had personal contact on behalf
of the Company or any Subsidiary; or
(3) was a Person with whom Executive had
regular, substantial or a series of
business dealings on behalf of the
Company or any Subsidiary (whether or not
a customer, client, supplier, agent or
distributor of the Company or any
Subsidiary).
(c) For the avoidance of doubt, Executive agrees that the
phrase "Person engaged in competition with the
Company's Business" as used in this Section includes,
without limitation, the companies listed on Exhibit
"A" to this Agreement, their Affiliates and
subsidiaries.
10. Vesting in the Event of a Change in Control. In the
event of a Change in Control, all stock options,
equity-based awards and shares of the Company's stock
granted or awarded to the Executive pursuant to any
Company compensation or benefit plan or arrangement,
but which are unvested at that time, will vest
immediately upon such Change in Control. The
provisions of this Section 10 will supersede the
terms of any such grant or award made to Executive
under any such plan or arrangement to the extent
there is an inconsistency between the two.
11. Duration of Agreement. This Agreement shall commence
on the date hereof and shall continue until
terminated as provided in this Section. This
Agreement may be terminated only under the following
circumstances:
(i) At any time by the mutual written consent of
Executive and the Company; and
(ii) By the Company at the end of each successive two-year
period commencing on the date of this Agreement by
giving Executive written notice at least one year in
advance of such termination, except that such
termination and written notice will not be effective
unless Executive will be employed by the Company on
the Termination Date.
12. Miscellaneous.
(a) In consideration for the benefit of having the
protection afforded by this Agreement,
Executive agrees that the provisions of
Section 6 (Non-Disclosure and Confidentiality)
and Section 9 (Non-Competition) of this
Agreement apply to Executive, and Executive
will be bound by them, whether or not a Change
in Control occurs or Executive actually
receives the benefits specified in Section 3
hereof.
(b) This Agreement will be binding upon and inure
to the benefit of Executive, Executive's
personal representatives and heirs and the
Company and any successor of the Company, but
neither this Agreement nor any rights arising
hereunder may be assigned or pledged by
Executive.
(c) Executive acknowledges that a breach of the
covenants contained in Section 6 (Non-
Disclosure and Confidentiality) and Section 9
(Non-Competition) will cause the Company
immediate and irreparable harm for which the
Company's remedies at law (such as money
damages) will be inadequate. The Company shall
have the right, in addition to any other
rights it may have, to obtain an injunction to
restrain any breach or threatened breach of
such Sections. The Company may contact any
Person with or for whom you work after your
employment by the Company ends and may send
that Person a copy of this Agreement.
(d) Should any provision of this Agreement be
adjudged to any extent invalid by any
competent tribunal, that provision will be
deemed modified to the extent necessary to
make it enforceable.
(e) This Agreement will be governed and construed
in accordance with the laws of the
Commonwealth of Pennsylvania.
(f) This Agreement amends and restates the Amended
and Restated Change in Control Agreement,
which shall be null and void and of no further
effect. This Agreement constitutes the entire
agreement and understanding between the
Company and Executive with respect to the
subject matter hereof and merges and
supersedes all prior discussions, agreements
and understandings between the Company and
Executive with respect to such matters.
(g) This Agreement may be executed in one or more
counterparts, which together shall constitute
a single agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
WEST PHARMACEUTICAL SERVICES, INC.
- --------------------- By:-----------------------------
[NAME] William G. Little, Chairman of
the Board and Chief Executive Officer
Exhibit "A"
List of Persons Engaged In Competition With
the Company's Business
Stelmi Trading International, including its
subsidiary American Stelmi, Inc.
Pharmaceutical packaging division of Swiss Group
Datwyler, including its subsidiary Helvoet Pharma,
Inc.
Comar, Inc.
Alusuisse SA, including its subsidiary Lawson Mardon
Wheaton, Inc.
Sharp Ivers-Lee Corporation
Accupac
Anderson Packaging, Inc.
Packaging Coordinators, Inc. (PCI)
Pharmaceutical Packaging Specialties, Inc.
Nastech, Inc.
Emisphere Technologies Incorporated
Elan Corporation, PLC
TheraTech, Inc.
ALZA Corporation
SCHEDULE OF AGREEMENTS WITH EXECUTIVE OFFICERS
----------------------------------------------
The Company has entered into agreement with the following individuals. Such
agreements are substantially identical in all material respects to the form of
agreement set forth in Exhibit (10) (h).
George R. Bennyhoff
Steven A. Ellers
John R. Gailey III
Stephen M. Heumann
Lawrence P. Higgins
Donald E. Morel, Jr.
Anna Mae Papso
<TABLE> <S> <C>
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<LEGEND>
This schedule contains summary financial information extracted
from the financial statements included in the Company's Form
10-Q for the quarterly period ended March 31, 2000 and is
qualified in its entirety by reference to such financial
information.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 55,000
<SECURITIES> 0
<RECEIVABLES> 69,300
<ALLOWANCES> 0
<INVENTORY> 43,100
<CURRENT-ASSETS> 26,000
<PP&E> 491,800
<DEPRECIATION> 263,100
<TOTAL-ASSETS> 562,800
<CURRENT-LIABILITIES> 133,500
<BONDS> 130,700
0
0
<COMMON> 4,300
<OTHER-SE> 220,400
<TOTAL-LIABILITY-AND-EQUITY> 562,800
<SALES> 107,700
<TOTAL-REVENUES> 107,700
<CGS> 79,500
<TOTAL-COSTS> 79,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,000
<INCOME-PRETAX> 7,400
<INCOME-TAX> 2,700
<INCOME-CONTINUING> 5,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,100
<EPS-BASIC> .35
<EPS-DILUTED> .35
</TABLE>
