-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V+e5sEbHu7MeroexsQQnGD+Q5UyE1QaHuoO49Rnp7H2lPuUaJw0VAKV1Y8o2H2zy vLBU7mXFS7SkJ+dx25qE7A== 0000105770-01-500052.txt : 20010813 0000105770-01-500052.hdr.sgml : 20010813 ACCESSION NUMBER: 0000105770-01-500052 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEST PHARMACEUTICAL SERVICES INC CENTRAL INDEX KEY: 0000105770 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED RUBBER PRODUCTS, NEC [3060] IRS NUMBER: 231210010 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08036 FILM NUMBER: 1704488 BUSINESS ADDRESS: STREET 1: 101 GORDON DR STREET 2: P O BOX 645 CITY: LIONVILLE STATE: PA ZIP: 19341-0645 BUSINESS PHONE: 6105942900 MAIL ADDRESS: STREET 1: 101 GORDON DRIVE STREET 2: PO BOX 645 CITY: LIONVILLE STATE: PA ZIP: 19341-0645 FORMER COMPANY: FORMER CONFORMED NAME: WEST CO INC DATE OF NAME CHANGE: 19990405 10-Q 1 file10q22001.txt 10 Q 2ND QUARTER 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 June 30, 2001 --------------- Commission File Number 1-8036 ------ WEST PHARMACEUTICAL SERVICES, INC. ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania ------------------------------------- (State or other jurisdiction of incorporation or organization) 101 Gordon Drive, PO Box 645, Lionville, PA ------------------------------------- (Address of principal executive offices) 23-1210010 ---------------------- (I.R.S. Employer Identification Number) 19341-0645 ---------------------- (Zip Code) Registrant's telephone number, including area code 610-594-2900 -------------- N/A ----------------------------------------------------------------- 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 . --- --- June 30, 2001 -- 14,336,609 ------------------------------------------------------------------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Page 2 Index Form 10-Q for the Quarter Ended June 30, 2001 Page ----- Part I - Financial Information Item 1. Financial Statements Consolidated Statements of Income for the Three and Six Months ended June 30, 2001 and June 30, 2000 3 Condensed Consolidated Balance Sheets at June 30, 2001 and December 31, 2000 4 Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2001 and June 30, 2000 5 Consolidated Statement of Shareholders' Equity at June 30, 2001 and December 31, 2000 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosure about Market Risk 16 Part II - Other Information Item 1. Legal Proceedings 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 18 Index to Exhibits F-1 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)
Quarter Ended Six Months Ended June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000 --------------- --------------- -------------- -------------- Net sales ............................ $117,200 100% $113,600 100% $233,400 100% $222,300 100% Cost of goods and services sold....... 85,600 73 85,400 75 171,100 73 165,900 75 --------------- --------------- -------------- -------------- Gross profit ...................... 31,600 27 28,200 25 62,300 27 56,400 25 Selling, general and administrative expenses ........... 19,000 16 17,000 15 38,300 17 34,400 15 Restructuring charge.................. 4,500 4 -- -- 4,500 2 -- -- Other expense, net.................... -- -- -- -- (300) -- 400 -- --------------- --------------- -------------- -------------- Operating profit .................. 8,100 7 11,200 10 19,800 8 21,600 10 Interest expense ..................... 3,400 3 3,400 3 7,100 3 6,400 3 --------------- --------------- -------------- -------------- Income before income taxes and minority interests ........... 4,700 4 7,800 7 12,700 5 15,200 7 Provision for income taxes ........... 1,700 1 3,000 3 4,600 2 5,700 3 Minority interests ................... 100 -- 100 -- 100 -- 200 -- --------------- --------------- -------------- -------------- Income from consolidated operations 2,900 3% 4,700 4% 8,000 3% 9,300 4% --- --- --- --- Equity in net income of affiliated companies ............. 200 300 500 800 -------- -------- -------- -------- Net income ....................... 3,100 $ 5,000 $ 8,500 $ 10,100 -------- -------- -------- -------- Net income per share: Basic ..............................$ 0.22 $ 0.35 $ 0.59 $ 0.70 Assuming dilution ..................$ 0.22 $ 0.35 $ 0.59 $ 0.70 -------- -------- -------- -------- Average common shares outstanding ....... 14,336 14,463 14,328 14,487 Average shares assuming dilution ........ 14,356 14,465 14,342 14,495 See accompanying notes to consolidated financial statements
Page 4 West Pharmaceutical Services, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands)
Unaudited June 30, Dec. 31, 2001 2000 ASSETS --------- -------- Current assets: Cash, including equivalents ............ $ 39,300 $ 42,700 Accounts receivable .................... 69,700 60,900 Inventories ............................ 41,300 41,000 Income tax refundable................... 4,000 7,700 Deferred income tax benefits............ 8,200 7,700 Other current assets ................... 10,100 13,100 -------- -------- Total current assets ............................ 172,600 173,100 -------- -------- Net property, plant and equipment ............... 234,100 235,800 Investments in affiliated companies ............. 20,400 22,000 Goodwill ........................................ 48,600 52,400 Prepaid pension asset 44,200 40,200 Deferred income tax benefits......... ........... 17,700 18,000 Other assets..................................... 18,000 15,900 -------- -------- Total Assets .................................... $555,600 $557,400 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt ...... $ 500 $ 500 Notes payable .......................... 14,400 3,100 Accounts payable ....................... 26,200 27,600 Accrued expenses: Salaries, wages, benefits ........... 14,000 11,300 Income taxes payable ................ 4,700 7,200 Restructuring costs.................. 6,600 4,200 Deferred income taxes................ 1,900 1,900 Other ............................... 22,400 23,500 -------- -------- Total current liabilities ....................... 90,700 79,300 -------- -------- Long-term debt, excluding current portion ....... 195,100 195,800 Deferred income taxes ........................... 50,700 51,000 Other long-term liabilities ..................... 24,100 25,500 Minority interests .............................. 1,000 1,000 Shareholders' equity ............................ 194,000 204,800 -------- -------- Total Liabilities and Shareholders' Equity ...... $555,600 $557,400 -------- --------
See accompanying notes to consolidated financial statements. Page 5 West Pharmaceutical Services, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six Months Ended June 30, June 30, 2001 2000 -------- -------- Cash flows from operating activities: Net income......................... ............... $ 8,500 $ 10,100 Depreciation and amortization.... ................. 18,700 18,800 Other non-cash items, net.......................... (4,300) (7,800) Changes in assets and liabilities.................. (7,600) 3,000 -------- -------- Net cash provided by operating activities .................. 15,300 24,100 -------- -------- Cash flows from investing activities: Property, plant and equipment acquired ............ (23,400) (29,500) Payment for acquisitions, net of cash acquired .... -- (1,000) Customer advances, net of repayments .............. (200) (1,900) -------- -------- Net cash used in investing activities ...................... (23,600) (32,400) -------- -------- Cash flows from financing activities: Net borrowings under revolving credit agreements .. 12,600 30,500 Repayment of other long-term debt ................. (200) (14,500) Dividend payments ................................. (5,100) (5,000) Sale of common stock, net ......................... 500 600 Purchase of treasury stock ........................ (100) (9,900) -------- -------- Net cash provided by financing activities .................. 7,700 1,700 Effect of exchange rates on cash ........................... (2,800) (1,400) -------- -------- Net (decrease) increase in cash, including equivalents ..... $(3,400) $ (8,000) -------- -------- See accompanying notes to consolidated financial statements
Page 6 West Pharmaceutical Services, Inc. and Subsidiaries Consolidated Statement of Shareholders' Equity (unaudited) (in thousands)
Capital in Other Common excess of Retained comprehensive Treasury Stock par value Earnings income (loss) stock Total ------------------------------------------------------------------- Balance, December 31, 2000 $ 4,300 $ 32,100 $269,800 $ (14,500) $ (86,900) $ 204,800 Net income 8,500 8,500 Shares issued under stock plans (500) 1,000 500 Shares repurchased (100) (100) Cash dividends declared (5,100) (5,100) Foreign currency translation adjustment (14,400) (14,400) Fair value of financial instruments adjustment (200) (200) -------------------------------------------------------------------- Balance, June 30, 2001 $ 4,300 $ 31,600 $273,200 $ (29,100) $ (86,000) $ 194,000 --------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements Page 7 West Pharmaceutical Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (In thousands, except share and per share data) The interim consolidated financial statements for the six-month period ended June 30, 2001 should be read in conjunction with the consolidated financial statements and notes thereto of West Pharmaceutical Services, Inc., appearing in the Company's 2000 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 and Consolidated Statement of Shareholders' Equity as of June 30, 2001 and the related unaudited Consolidated Statements of Income for the three and six-month periods then ended, and the unaudited Condensed Consolidated Statement of Cash Flows for the six-month period then ended and for the comparative period in 2000 contain all adjustments, consisting only of normal recurring accruals, necessary to present fairly the financial position as of June 30, 2001 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. Reclassification ---------------- Certain items have been reclassified to conform to current classifications. In particular, freight charge reimbursements are reported as net sales and freight expenses are reported as costs of goods and services sold, rather than reported on a net basis. The impact of the reclassification of the freight expenses increased previously reported second quarter and six-months 2000 sales and cost of goods and services sold by $900 and $1,900, respectively, with no impact on gross profit. 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 prior year adjustments, if any, are recorded as identified. Page 8 West Pharmaceutical Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (continued) 2. Inventories at June 30, 2001 and December 31, 2000 are summarized as follows: 6/30/01 12/31/00 ------- ------- Finished goods $16,100 $17,300 Work in process 10,200 9,400 Raw materials 15,000 14,300 ------- ------- $41,300 $41,000 ------- ------- ------- ------- 3. A summary of property, plant and equipment at June 30, 2001 and December 31, 2000 is presented in the following table: 6/30/01 12/31/00 -------- -------- Property, plant and equipment $515,400 $521,400 Less accumulated depreciation and amortization .......... 281,300 285,600 -------- -------- Net property, plant and equipment ............. $234,100 $235,800 -------- -------- -------- -------- 4. For the three and six months ended June 30, 2001 and 2000, the Company's comprehensive income (loss) is as follows: Three Months Ended Six Months Ended 6/30/01 6/30/00 6/30/01 6/30/00 -------- ------- ------- ------- Net income ............. $ 3,100 $ 5,000 $ 8,500 $10,100 Foreign currency translation adjustments (4,500) (500) (14,400) (4,200) Fair value adjustment on derivative financial instruments............ 200 -- (200) -- -------- ------- -------- -------- Comprehensive (loss) income................ $(1,200) $ 4,500 $(6,100) $ 5,900 -------- ------- -------- -------- -------- ------- -------- -------- Page 9 West Pharmaceutical Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Continued) The Company adopted Financial Accounting Standards Statement No. 133, "Accounting for Derivative Financial Instruments and Hedging Activities", as amended, on January 1, 2001. This accounting standard requires the Company to recognize all derivatives as either assets or liabilities and measure those instruments at fair value as of the balance sheet date. The change in fair value of a derivative designated and qualified as part of a hedging transaction is generally matched with the recognition of the item or risk being hedged. At the adoption date the Company had four interest rate swap agreements in effect and recorded a $300 charge to other comprehensive income. The swaps hedge cash flow risk associated with interest payments on variable rate debt. This charge decreased to $200 at June 30, 2001 reflecting the maturity of one of the swap agreements and current market valuations. Amounts recorded in comprehensive income are recognized in net income in the period when the hedged interest payment affects net income. 5. Net sales to external customers and operating profit (loss) by operating segment for the three and six months ended June 30, 2001 and June 30, 2000 are as follows: Three Months Ended Six Months Ended June 30 June 30 Net Sales: 2001 2000 2001 2000 - ---------- -------- -------- -------- -------- Device product development $ 94,500 $ 95,400 $189,800 $188,500 Contract services......... 20,300 18,100 40,400 33,400 Drug delivery research and development ........ 2,400 300 3,200 700 Corporate and unallocated items................... -- (200) -- (300) -------- -------- -------- -------- Consolidated Total ....... $117,200 $113,600 $233,400 $222,300 -------- -------- -------- -------- -------- -------- -------- -------- Page 10 West Pharmaceutical Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Continued) Three Months Ended Six Months Ended June 30 June 30 Operating Profit (Loss): 2001 2000 2001 2000 - ------------------------ -------- -------- -------- -------- Device product development $ 17,800 $ 20,400 $ 36,500 $ 40,200 Contract services ........ 700 (3,800) 300 (7,400) Drug delivery research and development ........ (800) (2,400) (2,600) (4,700) Corporate and unallocated items .................. (9,600) (3,000) (14,400) (6,500) -------- -------- -------- -------- Consolidated Total ....... $ 8,100 $ 11,200 $ 19,800 $ 21,600 -------- -------- -------- -------- -------- -------- -------- -------- Corporate and unallocated items include a second quarter 2001 restructuring charge of $4,500. Compared with December 31, 2000, there were no material changes in the amount of assets as of June 30, 2001 for any operating segment. 6. Common stock issued at June 30, 2001 was 17,165,141 shares, of which 2,828,532 shares were held in treasury. Dividends of $.18 per common share were paid in the second quarter of 2001 and a dividend of $.18 per share payable August 1, 2001 to holders of record on July 18, 2001 was declared on June 19, 2001. 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 $1,400 at June 30, 2001 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. West Pharmaceutical Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Continued) Page 11 8. In the second quarter of 2001, the Company recorded a pre-tax restructuring charge of $4,500. The charge consists of severance, post-employment medical coverage and outplacement costs, resulting from the elimination of 25 senior and mid-level management positions. The remaining balance of this accrual at June 30, 2001 was $4,000. Under the restructuring plan, cash payments for severance and outplacement costs will be completed within two years and medical coverage for select members will continue through 2008. In 2000, the Company recorded a pre-tax restructuring charge of $20,800, consisting of $16,900 of goodwill and asset write-downs to estimated net realizable value and a $3,900 accrual for severance, benefits and asset disposal costs. The restructuring initiatives included personnel reductions affecting approximately 180 employees. As of June 30, 2001, the severance accrual balance was $2,200, reflecting the closure of the site management office, the closure of a packaging plant in Puerto Rico, and other personnel reductions. The remaining accrual relates primarily to the Company's plastic manufacturing plant in Puerto Rico, which is scheduled to cease operations by the end of the third quarter of 2001. Page 12 Item 2. Management's Discussion and Analysis of Financial Condition and - ---------------------------------------------------------------- Results of Operations for the Three and Six Months ended June 30, 2001 - ---------------------------------------------------------------------- versus Comparable 2000 periods. - ------------------------------- Net Sales - --------- Net Sales for the second quarter of 2001 were $117.2 million compared to $113.6 million reported in the second quarter of 2000. At constant exchange rates, sales for the second quarter 2001 increased 6% versus the prior year quarter. Second quarter 2001 sales for the Device Product Development segment, which represents 80% of total revenue, were $94.5 million representing a small decline versus prior year reported sales of $95.4 million. At constant exchange rates, sales increased by 3%. Demand in Latin American and Asian markets, remained strong with total international sales growing at 6% at constant exchange rates. Sales to domestic markets were level with the prior year quarter. Contract Services segment sales were $20.3 million, $2.2 million, or 12% above second quarter 2000 levels. The sales increases for this segment were driven primarily by new customers in the contract manufacturing and packaging unit, as this unit continues to recover from the prior year's lower demand for outsourced services. The Drug Delivery Research and Development segment had record revenues of $2.4 million for the quarter. These revenues include the recognition of $1.4 million of the up-front license payment received in 2000 for the nasal morphine project. Net sales for the first half of 2001 were $233.4 million, 5% higher than sales in the same period of 2000 and 8% higher at constant exchange rates. Excluding exchange rate variances, Device Product Development sales were 5% higher led by strong results in international markets. Year-to-date Contract Services segment sales increased by 21% over the prior year, reflecting the recovery of the contract manufacturing and packaging unit. Drug Delivery segment revenues increased to $3.2 million in the six month 2001 period, as compared to $.7 million in the prior year period, benefiting primarily from progress on the nasal morphine project. Gross Profit - ------------ The second quarter 2001 consolidated gross margin was 27.0%, compared with 24.9% in 2000. The improvement in margins reflects the recovery of the contract manufacturing and packaging unit of the Contract Services segment, which is generating positive gross margins in 2001 versus below breakeven results in 2000. The increased revenues in the Drug Delivery segment also contributed to the gross margin improvement. These factors were partially offset by decreased margins in the Device Product Development segment reflecting higher raw material, utility and wage and benefit costs. In addition, sales volume increases in Europe strained certain product capacity levels and required a higher use of overtime. Additional capacity scheduled to come on-line in 2002 through 2003 will alleviate this condition. Page 13 Management's Discussion and Analysis of Financial Condition and - ---------------------------------------------------------------- Results of Operations for the Three and Six Months ended June 30, 2001 - ---------------------------------------------------------------------- versus Comparable 2000 periods(continued) - ------------------------------------------ The consolidated gross profit margin for the six-month period was 26.7% compared with 25.4% in the same period of 2000. The same factors that influenced the quarter comparisons affect the six-month comparisons. Selling, General and Administrative Expenses - -------------------------------------------- Selling, general and administrative expenses increased $2.0 million (11%) as compared with the second quarter of 2000. The major contributors to the increase include a reduction of income from pension assets, higher incentive bonus and stock-price based compensation costs, and the costs of the strategic review concluded in May, 2001. Partially offsetting these increases were lower costs in the Contract Services segment resulting from restructuring activities, and the effect of the stronger U.S. dollar. For the six-month period ending June 30 2001, selling, general and administrative expenses increased by $3.9 million versus the prior year. Lower pension income, higher stock-price based compensation expenses, and strategic review costs more than offset the positive benefits of the restructuring cost savings achieved in the Contract Services segment and the favorable impact of foreign exchange rates on non-U.S. dollar expenses. Restructuring charge - -------------------- In the second quarter of 2001, the Company recorded a pre-tax restructuring charge of $4.5 million, resulting in the elimination of approximately 25 mid-and senior level management positions in the global salaried workforce. The charge consists of severance, post-employment medical coverage and outplacement costs. Cash payments under the restructuring plan will be largely completed within two years. Other (income) expense - ---------------------- Foreign currency transaction losses and losses on fixed asset disposals were offset by interest income for both the 2001 and 2000 second quarter periods. The six-month period for 2000 contains costs related to a one-time environmental action by Brazilian customs which resulted in the destruction of raw material and finished products which were imported into that country, and a higher amount of foreign exchange transaction losses connected with the tax re-organization of the Company's European affiliates. Interest Expense - ---------------- Interest expense remained level with second quarter 2000, as higher debt levels were offset by decreases in second quarter 2001 interest rates on the Company's revolving credit facility. For the six-month period, interest expense exceeded the prior year by $.7 million. The increase in 2001 debt levels reflects the high level of capital spending relative to cash flow from operations. Page 14 Management's Discussion and Analysis of Financial Condition and - ---------------------------------------------------------------- Results of Operations for the Three and Six Months ended June 30, 2001 - ---------------------------------------------------------------------- versus Comparable 2000 periods(continued) - ------------------------------------------ Provision for income taxes - -------------------------- The estimated annual tax rate for the 2001 second quarter and six-month periods was 36% compared with a 38% rate used for second quarter 2000 and a 37.5% for the six-month 2000 period. The decrease in the Company's effective tax rate reflects the favorable impact of the tax reorganization of European affiliates which was fully implemented in the second half of 2000, and lower German statutory rates. Excluding unusual items, the full year effective tax rate in 2000 was 36.4%. Equity in net income of affiliated companies - -------------------------------------------- Equity in net income of affiliates is lower in both the second quarter and six-month comparisons to the prior year. Contributions from Daikyo Seiko, Ltd., the 25% owned affiliate operating in Japan, were lower in the current quarter and six-month periods reflecting higher depreciation charges connected with recent capital improvements. Results from the 49% owned Mexican affiliates are approximately the same as in the prior year, with small losses reported in the quarter and six-month periods. Net Income - ---------- Net income for the second quarter of 2001 was $3.1 million, or $.22 per share. Excluding the $2.9 million (net of tax) impact of the restructuring charge, second quarter 2001 net income increased 20% to $6.0 million or $0.42 per share as compared to second quarter 2000 net income of $5.0 million or $0.35 per share. Average common shares outstanding in the second quarter were 14.3 million, compared with 14.5 million during second quarter 2000. The reduction in average common shares outstanding is due to the Company's stock buyback program. For the six-month period, 2001 net income was $8.5 million, or $.59 per share. Excluding the restructuring charge, net income for the first half increased 13% to $11.4 million, or $0.80 per share, compared to $10.1 million, or $0.70 per share, in 2000. Average common shares outstanding for the first six months of 2001 were 14.3 million, compared with 14.5 million in 2000. FINANCIAL CONDITION - ------------------- Working capital at June 30, 2001 was $81.9 million compared with $93.8 million at December 31, 2000. The working capital ratio at June 30, 2001 was 1.9 to 1. Accounts receivable increased significantly reflecting the increase in second quarter 2001 sales levels versus fourth quarter 2000. Cash flow from operations is lower than prior year six month results, largely as a result of the lower fourth quarter 2000 sales levels. Accounts receivable days sales outstanding comparisons remain consistent with prior year results. Page 15 Management's Discussion and Analysis of Financial Condition and - ---------------------------------------------------------------- Results of Operations for the Three and Six Months ended June 30, 2001 - ---------------------------------------------------------------------- versus Comparable 2000 periods(continued) - ------------------------------------------ For the six-month period, capital spending was $23.4 million, primarily for facility expansions at two European plants, equipment upgrades in the Device Product Development segment and an enterprise resource planning initiative. Full year 2001 capital spending is projected to be about even with prior year levels, in the range of $60 million. The Company paid cash dividends totaling $5.1 million ($0.36 per share) during first six months of 2001. These cash outflows were financed by operating cash flow and $12.4 million of increased net borrowings. Debt as a percentage of total invested capital at June 30, 2001 was 51.9% compared with 49.2% at December 31, 2000. Total debt increased to $210 million and shareholder's equity declined due to currency translation adjustments on non-U.S. dollar denominated assets of international subsidiaries. The Company believes its financial condition and current capitalization provide sufficient flexibility to meet future cash flow requirements. Accounting Changes - ------------------ The Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Financial Instruments and Hedging Activities", as amended, on January 31, 2001. This accounting standard requires the Company to recognize all derivatives as either assets or liabilities and measure those instruments at fair value as of the balance sheet date. The change in fair value of a derivative designated and qualified as part of a hedging transaction is generally matched with the recognition of the items being hedged. At the adoption date, the Company had four interest rate swap agreements in effect and recorded a $0.3 million charge to other comprehensive income. The swaps hedge cash flow risk associated with interest payments on variable rate debt. This charged decreased to $0.2 million at June 30, 2001 reflecting the maturity of one of the swap agreements and current market valuations. Amounts recorded in comprehensive income are recognized in net income in the period when the hedged interest payment affects net income. In July 2001, the Financial Accounting Standards Board issued SFAS No. 141 "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS 141 supercedes Accounting Principles Board Opinion No. 16, "Business Combinations". SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. In addition, SFAS 141 establishes specific criteria for identifying intangible assets that must be recognized separately from goodwill and establishes disclosure requirements for the primary reasons for a business combination and the allocation of the purchase price paid to the assets acquired and liabilities assumed. Page 16 Management's Discussion and Analysis of Financial Condition and - ---------------------------------------------------------------- Results of Operations for the Three and Six Months ended June 30, 2001 - ---------------------------------------------------------------------- versus Comparable 2000 periods(continued) - ------------------------------------------ SFAS 142 supercedes APB 17, "Intangible Assets". SFAS 142 eliminates the current requirement to amortize goodwill and indefinite-lived intangible assets. Instead, goodwill and intangible assets with indefinite lives will be tested for impairment on at least an annual basis. The SFAS 142 impairment test begins with an estimate of the fair value of the reporting unit or intangible asset. Previous accounting principles utilized undiscounted cash flows to determine if an impairment had occurred. The Company will adopt SFAS 142 on January 1, 2002. Impairment losses that arise due to the initial application of this statement are to be reported as a change in accounting principle. Management is currently assessing the provisions of this statement to determine their impact on the Company's consolidated results of operations and financial position. Annual goodwill amortization in 2001 will be approximately $2 million. 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. Forward-Looking Information - --------------------------- Certain statements in this report, including management's discussion and analysis, that are not historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words "estimate", "expect", "intend", "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including but not limited to (1) sales demand, (2) the timing and success of customers' projects, (3) competitive pressures, (4) the strength or weakness of the U.S. dollar, (5) inflation, (6) the cost of raw materials, (7) continued cost-improvement programs, (8) statutory tax rates and (9) significant asset dispositions. The Company does not intend to update these forward-looking statements. 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 17 Part II - Other Information Item 1. Legal Proceedings ----------------- None. Item. 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The Company held its annual meeting of shareholders on May 1, 2001. (c) Class II directors (with a term expiring in 2004) were elected by a vote of : For Against --- ------- George W. Ebright 11,477,382 931,987 L. Robert Johnson 11,485,284 924,085 John P. Neafsey 11,485,290 924,080 Geoffrey F. Worden 11,473,935 935,434 Tenley E. Albright, John W. Conway, William G. Little, William H. Longfield, Monroe E. Trout, Anthony Welters, J. Roffe Wike, II continued their term of office after the meeting. The appointment of PricewaterhouseCoopers LLP as the Company's independent accountants for the year ending December 31, 2001 was approved by a vote of 12,321,773 for the appointment and 75,224 against, with 12,370 abstentions. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) See Index to Exhibits on page F-1 of this Report. (b) No reports on Form 8-K have been filed for the quarter ended June 30, 2001. Page 18 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) August 8, 2001 /s/ Linda R. Altemus - --------------- --------------------------------- Date (Signature) Linda R. Altemus Vice President, Finance & Administration INDEX TO EXHIBITS Exhibit Number (2) None. (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) Form of Bonus Termination Agreement between the Company and certain of its executive officers dated as of May 1, 2001. (10) (b) Schedule of agreements with executive officers. (10) (c) Form of Amendment Agreement between the Company and certain of its executive officers dated as of May 1, 2001. (10) (d) Schedule of agreements with executive officers. (10) (e) Letter Agreement dated July 17, 2001. (10) (f) Letter Agreement dated June 25, 2001. (10) (g) Letter Agreement dated June 29, 2001. (11) Not Applicable. (15) None. (18) None. (19) None. (22) None. F - 1 INDEX TO EXHIBITS Exhibit Number (23) Not Applicable. (24) None. (27) None. (99) None. F - 2 EX-10 4 bonusterminagree.txt EX 10A BONUS TERMINATION AGREEMENT EXHIBIT (10)(a) Execution Copy BONUS TERMINATION AGREEMENT - -------------------------------------------------------------------------------- THIS IS A BONUS TERMINATION AGREEMENT (the "Agreement"), dated as of May 1, 2001 between West Pharmaceutical Services, Inc., a Pennsylvania corporation, (the "Company") and __________________ ("Executive"). In October 2000 the Company's Board of Directors authorized a review of strategic alternatives to identify opportunities for enhancing shareholder value. As incentive to successfully implement the strategic review, the Company and Executive entered into a Bonus Agreement dated as of December 21, 2000 (the "Bonus Agreement"), a copy of which is attached hereto. Under the Bonus Agreement, the Executive would receive a cash bonus if a Change in Control (as defined therein) occurs under certain circumstances. The strategic review was completed without a Change in Control, and the Company desires to terminate the Bonus Agreement in accordance with its terms. Accordingly, the Company and the Executive, each intending to be legally bound, agree as follows: 1. Termination of Bonus Agreement. Pursuant to Paragraph 2 (b) of the Bonus Agreement, the Company hereby notifies Executive that the Company is no longer considering a transaction or business combination involving the Company that would constitute a Change in Control (as such term is defined in the Bonus Agreement). Accordingly, the Bonus Agreement is terminated effective on and as of the date of this Agreement. 2. Counterparts. This Agreement may be executed in one or more counterparts, which together shall constitute a single agreement. 2. Counterparts. 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: - ------------------------------------ --------------------------------- EX-10 5 exexofficers10b.txt EX 10B EXECUTIVE OFFICERS EXHIBIT (10)(b) SCHEDULE OF CERTAIN EXECUTIVE OFFICERS The following executive officers have entered into Bonus Termination Agreements with the Company dated as of May 1, 2001. Executive Officer 1. Linda R. Altemus 2. George R. Bennyhoff 3. Steven A. Ellers 4. John R. Gailey III 5. Stephen M. Heumann 6. Lawrence P. Higgins 7. Herbert L. Hugill 8. William G. Little 9. Donald E. Morel, Jr. 10. Anna Mae Papso EX-10 6 amendchangeagree10q22001.txt EXH 10C AMENDMENT TO CHANGE CONTROL AGREEMENT EXHIBIT (10)(c) Execution Copy AMENDMENT TO THIS IS AN AMENDMENT TO ___________________________________ (the "Agreement") dated as of May 1, 2001, between West Pharmaceutical Services, Inc., a Pennsylvania corporation, (the "Company") and ________________ ("Executive"). Background The Company and Executive are parties to a __________________________ Agreement, dated as of ________________ (the "Change-in-Control Agreement"). The Company desires to amend the Change-in-Control Agreement to change the method of calculating the amount of severance compensation payable to Executive upon Executive's termination pursuant to a Change in Control (as defined in the Change-in-Control Agreement) and the Executive agrees to accept such amendment. Agreement Intending to be legally bound, the parties agree as follows: 1. Effective as of the date of this Agreement, clause ___ of Section ____ (Benefits Payable Upon Termination of Employment) of the Change-in-Control Agreement is deleted in its entirety and replaced with the following provision: "(ii) the aggregate amount of the annual bonuses paid or payable to Executive for the three fiscal years immediately preceding a Change in Control divided by the number of fiscal years as to which such bonuses were paid or payable;" 2. Except as otherwise set forth in Paragraph 1 of this Agreement, the Change-in-Control Agreement shall remain in full force and effect in accordance with its terms. 3. This Agreement may be executed in one or more counterparts, which together shall constitute a single agreement. IN WITNESS WHEREOF, the parties have executed this Agreement in two counterparts as of the date first written above. WEST PHARMACEUTICAL SERVICES, INC. _____________________________ By: _________________________________ EX-10 7 exexofficers10d.txt EXHIBIT 10 D CERTAIN EXECUTIVE OFFICERS EXHIBIT (10)(d) SCHEDULE OF CERTAIN EXECUTIVE OFFICERS -------------------------------------- The following sets forth the following information with respect to the Amendment Agreements filed as Exhibit 10(c) to this Report: (i) the name of each executive officer who has signed the Agreement; (ii) the title and date of the agreement being amended; and (iii) the section of the agreement being amended. Executive Officer Title and Date of Section of Agreement Amended Agreement Amended Linda R. Altemus Change-in-Control Clause (ii), Section 3(a) Agreement dated as of May 1, 2001 George R. Bennyhoff Second Amended and Clause (ii), Section 3(a) Restated Change-in-Control Agreement dated as of May 1, 2001 Steven A. Ellers Second Amended and Clause (ii), Section 3(a) Restated Change-in-Control Agreement dated as of May 1, 2001 John R. Gailey III Second Amended and Clause (ii), Section 3(a) Restated Change-in-Control Agreement dated as of May 1, 2001 Herbert L. Hugill Change-in-Control Clause (ii), Section 3(a) Agreement dated as of May 1, 2001 William G. Little Amended and Restated First sentence of Employment Agreement Clause ii, Section 8.1(a) dated as of May 1, 2001 Donald E. Morel, Jr. Second Amended and Clause (ii), Section 3(a) Restated Change-in-Control Agreement dated as of May 1, 2001 EX-10 8 higginsseverance10q22001.txt EX10E HIGGINS SEVERANCE 10Q 22001 EXHIBIT (10)(e) July 17, 2001 Mr. Lawrence P. Higgins 758 Inverness Way Hershey Mills West Chester, PA 19380 Dear Larry: This letter (the "Agreement") sets forth the enhanced severance arrangement agreed to by West Pharmaceutical Services, Inc. (the "Company") and you. The terms contained in this Agreement represent an exception to, and provide for benefits in excess of, the Company's standard severance policy. Please read this letter carefully. It contains the terms and conditions of your severance, including important deadlines with respect to the continuation of key benefits. Each of the benefits listed below is expressly conditioned on your complying with all of your obligations under this Agreement and the Agreement and General Release (the "Release"), which is attached hereto as Exhibit "A" and incorporated herein by reference. Each of such benefits is also expressly conditioned on your complying with the provisions of Section 6 (Non-Disclosure and Confidentiality) and Section 9 (Non-Competition) of the Second Amended and Restated Change-in-Control Agreement dated as of March 25, 2000 between the Company and you (such provisions being collectively referred to herein as the "Non-Compete and Confidentiality Obligations"). 1. Termination Date. Your last day of employment with the Company will be June 29, 2001 (the "Termination Date"). Between the date of this Agreement and the Termination Date, you will report to and your duties will be specified by Steven A. Ellers. 2. Severance Payments. You will receive severance salary payments totaling $418,038, paid biweekly in accordance with Company practice with normal deductions such as health insurance and taxes, for the period commencing on July 1, 2001 and continuing until June 27, 2003 (the "Severance Period"). These payments represent 12 weeks of severance pay to which you would be entitled under the Company's severance policy plus an additional 92 weeks of severance pay to be provided in consideration of your execution of the Release. You will receive the full amount of severance pay regardless of whether you find other employment prior to the end of the Severance Period. Any earned/unused vacation owed for this year will be paid to you as soon as practical. You will not be eligible to receive salary increases, cash bonuses or incentive stock-based grants or awards of any kind on or after the Termination Date. 3. Financial Planning Assistance. You will receive $3,000 towards financial planning, which will be paid to you in a lump sum within 30 days following the date on which you deliver an executed copy of this Agreement to the Company. 4. Company Car. You may continue the use of your company car until the Termination Date. You may purchase your company car from the Company for the sum of $1.00 (one dollar). You must notify the Company if you elect to purchase the car on or before the date on which you deliver an executed copy of this Agreement to the Company. 5. Medical Coverage. The Company will continue standard medical and dental benefits until the last day of the month prior to your becoming 65 years old. This coverage will be available to you and your dependents. The levels of coverage will be those in effect from time to time for employees of the Company. You and your dependents will also be eligible for Executive Medical benefits currently available to active senior executive officers of the Company. The Company will continue to pay the same portion of the cost of the coverage as it did when you were employed, and your cost will be deducted from your severance payments. 6. Life Insurance. Coverage under the Company's group-term life insurance policy, including any supplemental insurance coverage that you may have purchased, will also continue through the end of the Severance Period. You are eligible to convert this group-term life insurance policy to an individual life policy. However, to do so, you must apply and pay the first premium within 31 days after the end of the Severance Period. A Group Conversion form will be mailed to you during the 30-day period preceding the end of the Severance Period. 7. Short and Long-Term Disability. Your short and long term disability insurance coverage will cease as of the Termination Date. 8. Deferred Compensation and Savings Plan. You will need to contact American Express Trust Company at (800) 355-5770 to receive a complete rollover/distribution package with respect to your participation in the Company's Savings Plan. If you have an outstanding loan, you should contact American Express promptly to ensure that you avoid any adverse tax consequences. Any balances in your accounts under the Deferred Compensation Plan for Designated Executive Officers will be distributed to you in accordance with your elections under that plan and applicable plan provisions. We urge you to review the plan document and other information on the plan that has been provided to you. If you have questions about the plan or its operation, please contact John Gailey at (610) 594-3319. 9. Retirement Plan. You will be eligible to accrue up to an additional 12 months years-of-service credit under the West Pharmaceutical Services, Inc. Employees' Retirement Plan. At the end of that period, a calculation of your estimated pension benefit will be forwarded to you. Stock-Based Incentive Plans. Any unvested stock options and incentive (restricted) shares awarded to you under the Long Term Incentive Plan and 1998 Key Employee Incentive Compensation Plan will become vested on the Termination Date. Solely for purposes of determining the post-termination stock-option exercise period, you will be deemed to have retired from the Company as of the Termination Date. Your bonus shares and incentive shares will be issued to you as soon as practical after termination. For your convenience, information concerning your vested stock options is attached as Schedule I hereto. You are encouraged to refer to the applicable plan documents and information statements previously sent to you, as well as the individual agreements covering such awards and grants, for additional information. 10 Termination of Benefits. Participation in all other benefit or compensation programs and arrangements not specifically continued in accordance with this Agreement will cease as of the Termination Date. 11. Reimbursement of Expenses. You confirm that you have been reimbursed for any outstanding qualified travel and entertainment expenses. 12. Outplacement Assistance. As part of the Company's commitment to you and in exchange for the consideration given by the Company to you, you will be provided with "executive" level outplacement services of a value of up to $25,000 to be used as needed by you. 13. Notices. Any notifications or other communications required or permitted under this Agreement shall be sent in writing via the U.S. mails or facsimile to the following addresses: If to you: Mr. Lawrence P. Higgins 758 Inverness Way Hershey Mills West Chester, PA 19380 If to the Company: West Pharmaceutical Services, Inc. 101 Gordon Drive Lionville, PA 19341 Attention: General Counsel Facsimile: 610 594-3013 or to such other address, or facsimile number, as may be notified in writing in accordance with this paragraph. 14. Agreementand General Release. In exchange for the compensation package described above, you expressly agree to and will sign the Release and the Resignation Letter attached hereto as Exhibit "B" and deliver them to the Company at the time of delivery of a countersigned copy of this Agreement. 15. Miscellaneous. (a) As noted in the first paragraph hereof, your breach of any provision of this Agreement, the Release or the Confidentiality and Non-Compete and Confidentiality Obligations will result in an immediate termination of all obligations of the Company hereunder. (b) This Agreement will be binding upon and inure to your benefit and the benefit of your personal representatives and heirs and the Company and any successor of the Company. In the event of your death prior to expiration of the Severance Period, the balance of any unpaid cash severance payments will be paid in a lump sum to the beneficiary listed on the survivor beneficiary form attached to this Agreement as Exhibit "C" no later than the end of the month following the month in which death occurs. All other benefits otherwise payable under this Agreement will terminate upon your death. (c) Should any provision of this Agreement be adjudged to any extent invalid by any court of competent jurisdiction, that provision will be deemed modified to the extent necessary to make it enforceable. (d) This Agreement will be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania. (e) This Agreement, together with the Release, the Resignation Letter and the Non-Compete and Confidentiality Obligations, constitute the entire agreement and understanding between you and the Company with respect to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings between you and the Company with respect to such matters. (f) This Agreement may be executed in one or more counterparts, which together shall constitute a single agreement. * * * * * * * * By signing below, you signify your intent to be legally bound by the terms of this Agreement. Very truly yours, West Pharmaceutical Services, Inc. By: _______________________________ George R. Bennyhoff, Senior Vice President, Human Resources Intending to be legally bound, agreed to and accepted this day of July, 2001 ------ - ------------------------------ Lawrence P. Higgins ATTACHMENTS Release (attached as Exhibit "A") Resignation Letter (attached as Exhibit "B") Designation of Beneficiary (attached as Exhibit "C") Stock Options information (attached as Schedule I) EXHIBIT "A" AGREEMENT AND GENERAL RELEASE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTICE: This is a very important legal document, and you should thoroughly review and understand the terms and effect of this document before signing it. By signing this Agreement and General Release, you will be completely releasing West Pharmaceutical Services, Inc. from all liability to you. Therefore, you should consult with an attorney before signing this Agreement and General Release. You have 45 days from the date of distribution of these materials to consider this document. If you have not returned a signed copy of this Agreement and General Release by that time, we will assume that you have elected not to sign the Agreement and General Release. If you choose to sign the Agreement and General Release, you will have an additional seven (7) days following the date of your signature to revoke the Agreement and General Release, and the Agreement and General Release shall not become effective or enforceable until the revocation period has expired. - -------------------------------------------------------------------------------- Intending to be legally bound by the provisions of this Agreement and in consideration of the negotiated payments and benefits specified in the accompanying letter agreement which shall be incorporated as if fully set forth within, dated July 17, 2001 between West Pharmaceutical Services, Inc. and me, providing valuable consideration to which I would otherwise not be entitled, I, LAWRENCE P. HIGGINS hereby release and discharge West Pharmaceutical Services, Inc. and its affiliates, parents, subsidiaries, successors, and predecessors and all of their employees, agents, attorneys, officers, and directors (individually and collectively referred to as the "Company") from any and all claims and/or causes of action, known or unknown, which I may have or could claim to have against the Company in connection with my employment with the Company up to and including the date of my signing of this General Release. This General Release includes, but is not limited to, all claims arising from or during my employment or as a result of the termination of my employment and all claims arising under federal, state, or local laws prohibiting employment discrimination based upon age, race, sex, religion, handicap, national origin, or any other protected characteristic, including, but not limited to, any and all claims arising under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964 and 1991, the Americans with Disabilities Act, the Family and Medical Leave Act, the Equal Pay Act, the Pennsylvania Wage Payment and Collection Law, the Pennsylvania Human Relations Act, any other federal, state or local labor or employment law, and claims under the common law and/or growing out of any legal restrictions, express or implied, in contract or on any other grounds, or the Company's right to control or terminate the employment fits employees. By signing below, I acknowledge that I have carefully read and fully understand the provisions of this Agreement and General Release. I further acknowledge that I am signing this Agreement and General Release knowingly and voluntarily and without duress, coercion or undue influence. I further agree that should I file a claim with any agency or any lawsuit in court which is found to be barred in whole or in part by this General Release, I will pay the legal fees and costs incurred by the Company in defending those claims found to be barred and shall also be obligated to tender back upon filing of such complaint in state or federal court or before any administrative agency any consideration that I have received pursuant to the severance arrangements provided within the accompanying Letter Agreement. This Agreement and General Release constitutes the total and complete understanding between me and the Company relating to the subject matter covered by this Agreement and General Release and all other prior or contemporaneous written oral agreements or representations, except the accompanying Letter Agreement setting forth the terms of my severance arrangement, if any, otherwise relating to the subject matter of this Agreement and General Release are null and void. It is also expressly understood and agreed that the terms of this Agreement and General Release may not be altered except in writing signed by both the Company and me. I further understand and agree that the terms and conditions of this Agreement and General Release shall not be communicated to any persons other than those referred to herein and to my spouse or legal counsel, if applicable. INTENDING TO BE LEGALLY BOUND, I hereby set my hand and seal below: Witnessed by: - ------------------------------ ------------------------------------------ Witness LAWRENCE P. HIGGINS - ------------------------------ ------------------------------------------ Dated Dated Exhibit "B" June 30, 2001 To the Board of Directors West Pharmaceutical Services, Inc. 101 Gordon Drive Lionville, PA 19341 To Whom It May Concern: Please be advised that I hereby resign from all positions that I currently hold with West Pharmaceutical Services, Inc., its subsidiaries and its affiliated companies. Very truly yours, Lawrence P. Higgins EXHIBIT "C" DESIGNATION OF BENEFICIARY FOR SEVERANCE PAYMENTS Designation of Beneficiary. I understand that I may designate one beneficiary who, in the event of my death before all amounts due to me under the Severance Letter Agreement dated July 17, 2001 have been distributed, will receive such amounts. I hereby designate as my beneficiary: ------------------------------------------------------------------------------ Name Relationship ------------------------------------------------------------------------------ 1. ------------------------------------------------------------------------------ If the person named above as beneficiary does not survive me, I hereby designate as my contingent beneficiary: ------------------------------------------------------------------------------ 2. ------------------------------------------------------------------------------ If no beneficiary has been designated under this Exhibit, or all beneficiary designations are ineffective, then all amounts payable pursuant to the Severance Letter Agreement shall be paid to my estate. Any benefits which may be payable to my beneficiary shall be paid in the form of a lump sum. ------------------------------------------------------------------------------ I reserve the right to revoke or amend this designation of beneficiary by written notice. Date: - --------------------------------- ---------------------------- Lawrence P. Higgins Schedule I Lawrence P. Higgins Summary of Options as of May 10, 2001 Number of Option Price Last Date Grant Date Shares Exercisable Per Share To Exercise 03/26/1997 8,518 $27.50 03/25/2002 08/05/1997 45,000 $29.40630 06/28/2002 03/25/2000 24,000 $26.03130 06/28/2002 05/02/2001 8,000 $26.75 06/28/2002 EX-10 9 papsoseverance10q22001.txt EX 10F SEVERANCE AGREEMENT PAPSO 10Q2 2001 EXHIBIT (10)(f) June 25, 2001 Ms. Anna Mae Papso 341 Kenilworth Lane Ambler, PA 19002 Dear Anna Mae: This letter (the "Agreement") sets forth the enhanced severance arrangement agreed to by West Pharmaceutical Services, Inc. (the "Company") and you, and will supersede and replace the severance arrangement outlined in my letter to you of May 18, 2001. The terms contained in this Agreement represent an exception to, and provide for benefits in excess of, the Company's standard severance policy. Please read this letter carefully. It contains the terms and conditions of your severance, including important deadlines with respect to the continuation of key benefits. Each of the benefits listed below is expressly conditioned on your complying with all of your obligations under this Agreement and the Agreement and General Release (the "Release"), which is attached hereto as Exhibit "A" and incorporated herein by reference. Each of such benefits is also expressly conditioned on your complying with the provisions of Section 6 (Non-Disclosure and Confidentiality) and Section 9 (Non-Competition) of the Second Amended and Restated Change-in-Control Agreement dated as of March 25, 2000 between the Company and you (such provisions being collectively referred to herein as the "Non-Compete and Confidentiality Obligations"). 1. Termination Date. Your last day of employment with the Company will be June 29, 2001 (the "Termination Date"). Between the date of this Agreement and the Termination Date, you will report to and your duties will be specified by Linda R. Altemus. 2. Severance Payments. You will receive severance salary payments totaling $408,012, paid biweekly in accordance with Company practice with normal deductions such as health insurance and taxes, for the period commencing on July 1, 2001 and continuing until June 27, 2003 (the "Severance Period"). These payments represent 12 weeks of severance pay to which you would be entitled under the Company's severance policy plus an additional 92 weeks of severance pay to be provided in consideration of your execution of the Release. You will receive the full amount of severance pay regardless of whether you find other employment prior to the end of the Severance Period. Any earned/unused vacation owed for this year will be paid to you as soon as practical. You will not be eligible to receive salary increases, cash bonuses or incentive stock-based grants or awards of any kind on or after the Termination Date. 3. Financial Planning Assistance. You will receive $3,000 towards financial planning, which will be paid to you in a lump sum within 30 days following the Termination Date. 4. Outplacement Assistance. Instead of outplacement assistance, you will receive $25,000, which will be paid to you in a lump sum within 30 days following the Termination Date. 5. Company Car. You may continue the use of your company car until the Termination Date. You may purchase your company car from the Company for the sum of $1.00 (one dollar). You must notify the Company on or before the Termination Date if you elect to purchase the car. 6. Medical Coverage. The Company will continue both the standard medical and dental benefits and the Executive Medical coverage currently available to you and your dependents until the last day of the month before your attaining the age of 65. To continue these benefits you must pay the applicable employee contribution, which during the Severance Period will be deducted from your severance payments. The Company will continue to pay the same portion of the cost of the coverage as it did when you were employed. 7. Life Insurance. The Company will continue your coverage under the Company's group-term life insurance policy, including any supplemental insurance coverage that you may have purchased, until the end of the Severance Period. The cost of the premium for the supplemental coverage will be deducted from your severance payments. At the end of the Severance Period, you are eligible to convert this group-term life insurance policy to an individual life policy. However, to do so, you must apply and pay the first premium within 31 days after the end of the Severance Period. A Group Conversion form will be mailed to you during the 30-day period preceding the end of the Severance Period. 8. KEEP Insurance. Your KEEP insurance policy will remain in effect through end of the Severance Period. The Company will make the same employer contribution towards the cost of the policy premium as it has during your employment and your employee contribution will be deducted from your severance payments. You are encouraged to contact Jeff White or Peter Hoover at American Financial Group, at (610) 296-3393, to discuss your options concerning your KEEP policy prior to the end of the Severance Period. 9. Short and Long-Term Disability. Your short-term and long-term disability insurance coverage will cease as of the Termination Date. 10. Deferred Compensation and Savings Plan. You will need to contact American Express Trust Company at (800) 355-5770 to receive a complete rollover/distribution package with respect to your participation in the Company's Savings Plan. If you have an outstanding loan, you should contact American Express promptly to ensure that you avoid any adverse tax consequences. Any balances in your accounts under the Deferred Compensation Plan for Designated Executive Officers will be distributed to you in accordance with your elections under that plan and applicable plan provisions. We urge you to review the plan document and other information on the plan that has been provided to you. If you have questions about the plan or its operation, please contact John Gailey at (610) 594-3319. 11. Retirement Plan. You will be eligible to accrue up to an additional 12 months years-of-service credit under the West Pharmaceutical Services, Inc. Employees' Retirement Plan. At the end of that period, a calculation of your estimated pension benefit will be forwarded to you. 12. Stock-Based Incentive Plans. Any unvested stock options and incentive (restricted) shares awarded to you under the Long Term Incentive Plan and 1998 Key Employee Incentive Compensation Plan will become vested on the Termination Date. Solely for purposes of determining the post-termination stock-option exercise period, you will be deemed to have retired from the Company as of the Termination Date. Your bonus shares and incentive shares will be issued to you as soon as practical after termination. For your convenience, information concerning your vested stock options is attached as Schedule I hereto. You are encouraged to refer to the applicable plan documents and information statements previously sent to you, as well as the individual agreements covering such awards and grants, for additional information. 13. Termination of Benefits. Participation in all other benefit or compensation programs and arrangements not specifically continued in accordance with this Agreement will cease as of the Termination Date. 14. Reimbursement of Expenses. You confirm that you have been reimbursed for any outstanding qualified travel and entertainment expenses. 15. Notices. Any notifications or other communications required or permitted under this Agreement shall be sent in writing via the U.S. mails or facsimile to the following addresses: If to you: Ms. Anna Mae Papso 341 Kenilworth Lane Ambler, PA 19002 If to the Company: West Pharmaceutical Services, Inc. 101 Gordon Drive Lionville, PA 19341 Attention: General Counsel Facsimile: 610 594-3013 or to such other address, or facsimile number, as may be notified in writing in accordance with this paragraph. 16. Agreement and General Release. In exchange for the compensation package described above, you expressly agree to and will sign the Release and the Resignation Letter attached hereto as Exhibit "B" and deliver them to the Company at the time of delivery of a countersigned copy of this Agreement. 17. Continuing Indemnification Obligations. The Company confirms that you will continue to be indemnified by the Company under its bylaws to the fullest extent provided therein and by applicable law. 18. Miscellaneous. (a) As noted in the first paragraph hereof, your breach of any provision of this Agreement, the Release or the Confidentiality and Non-Compete and Confidentiality Obligations will result in an immediate termination of all obligations of the Company hereunder. (b) This Agreement will be binding upon and inure to your benefit and the benefit of your personal representatives and heirs and the Company and any successor of the Company. In the event of your death prior to expiration of the Severance Period, the balance of any unpaid cash severance payments will be paid in a lump sum to the beneficiary listed on the survivor beneficiary form attached to this Agreement as Exhibit "C" no later than the end of the month following the month in which death occurs. All other benefits otherwise payable under this Agreement will terminate upon your death. (c) Should any provision of this Agreement be adjudged to any extent invalid by any court of competent jurisdiction, that provision will be deemed modified to the extent necessary to make it enforceable. (d) This Agreement will be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania. (e) This Agreement, together with the Release, the Resignation Letter and the Non-Compete and Confidentiality Obligations, constitute the entire agreement and understanding between you and the Company with respect to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings between you and the Company with respect to such matters. (f) This Agreement may be executed in one or more counterparts, which together shall constitute a single agreement. * * * * * * * * By signing below, you signify your intent to be legally bound by the terms of this Agreement. Very truly yours, West Pharmaceutical Services, Inc. By: _______________________________ George R. Bennyhoff, Senior Vice President, Human Resources Intending to be legally bound, agreed to and accepted this day of June, 2001 ------ - ------------------------------ Anna Mae Papso ATTACHMENTS Release (attached as Exhibit "A") Resignation Letter (attached as Exhibit "B") Designation of Beneficiary (attached as Exhibit "C") Stock Options information (attached as Schedule I) -2- EXHIBIT "A" AGREEMENT AND GENERAL RELEASE - -------------------------------------------------------------------------------- NOTICE: This is a very important legal document, and you should thoroughly review and understand the terms and effect of this document before signing it. By signing this Agreement and General Release, you will be completely releasing West Pharmaceutical Services, Inc. from all liability to you. Therefore, you should consult with an attorney before signing this Agreement and General Release. You have 45 days from the date of distribution of these materials to consider this document. If you have not returned a signed copy of this Agreement and General Release by that time, we will assume that you have elected not to sign the Agreement and General Release. If you choose to sign the Agreement and General Release, you will have an additional seven (7) days following the date of your signature to revoke the Agreement and General Release, and the Agreement and General Release shall not become effective or enforceable until the revocation period has expired. - -------------------------------------------------------------------------------- Intending to be legally bound by the provisions of this Agreement and in consideration of the negotiated payments and benefits specified in the accompanying letter agreement which shall be incorporated as if fully set forth within, dated June 25, 2001 between West Pharmaceutical Services, Inc. and me, providing valuable consideration to which I would otherwise not be entitled, I, ANNA MAE PAPSO hereby release and discharge West Pharmaceutical Services, Inc. and its affiliates, parents, subsidiaries, successors, and predecessors and all of their employees, agents, attorneys, officers, and directors (individually and collectively referred to as the "Company") from any and all claims and/or causes of action, known or unknown, which I may have or could claim to have against the Company in connection with my employment with the Company up to and including the date of my signing of this General Release. This General Release includes, but is not limited to, all claims arising from or during my employment or as a result of the termination of my employment and all claims arising under federal, state, or local laws prohibiting employment discrimination based upon age, race, sex, religion, handicap, national origin, or any other protected characteristic, including, but not limited to, any and all claims arising under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964 and 1991, the Americans with Disabilities Act, the Family and Medical Leave Act, the Equal Pay Act, the Pennsylvania Wage Payment and Collection Law, the Pennsylvania Human Relations Act, any other federal, state or local labor or employment law, and claims under the common law and/or growing out of any legal restrictions, express or implied, in contract or on any other grounds, or the Company's right to control or terminate the employment fits employees. Nothing contained herein shall be construed to waive any claims, whether known or unknown, relating to my eligibility to participate in employee benefit plans or the level of benefits that I may be entitled to under such plans. By signing below, I acknowledge that I have carefully read and fully understand the provisions of this Agreement and General Release. I further acknowledge that I am signing this Agreement and General Release knowingly and voluntarily and without duress, coercion or undue influence. I further agree that should I file a claim with any agency or any lawsuit in court which is found to be barred in whole or in part by this General Release, I will pay the legal fees and costs incurred by the Company in defending those claims found to be barred and shall also be obligated to tender back upon filing of such complaint in state or federal court or before any administrative agency any consideration that I have received pursuant to the severance arrangements provided within the accompanying Letter Agreement. This Agreement and General Release constitutes the total and complete understanding between me and the Company relating to the subject matter covered by this Agreement and General Release and all other prior or contemporaneous written oral agreements or representations, except the accompanying Letter Agreement setting forth the terms of my severance arrangement, if any, otherwise relating to the subject matter of this Agreement and General Release are null and void. It is also expressly understood and agreed that the terms of this Agreement and General Release may not be altered except in writing signed by both the Company and me. I further understand and agree that the terms and conditions of this Agreement and General Release shall not be communicated to any persons other than those referred to herein and to my spouse or legal counsel, if applicable. INTENDING TO BE LEGALLY BOUND, I hereby set my hand and seal below: Witnessed by: - ------------------------------ ------------------------------------------ Witness ANNA MAE PAPSO - ------------------------------ ------------------------------------------ Dated Dated Exhibit "B" June 30, 2001 To the Board of Directors West Pharmaceutical Services, Inc. 101 Gordon Drive Lionville, PA 19341 To Whom It May Concern: Please be advised that I hereby resign from all positions that I currently hold with West Pharmaceutical Services, Inc., its subsidiaries and its affiliated companies. Very truly yours, Anna Mae Papso EXHIBIT "C" DESIGNATION OF BENEFICIARY FOR SEVERANCE PAYMENTS Designation of Beneficiary. I understand that I may designate one beneficiary who, in the event of my death before all amounts due to me under the Severance Letter Agreement dated June 25, 2001 have been distributed, will receive such amounts. I hereby designate as my beneficiary: ---------------------------------------------------------------------------- Name Relationship ---------------------------------------------------------------------------- 1. ---------------------------------------------------------------------------- If the person named above as beneficiary does not survive me, I hereby designate as my contingent beneficiary: ---------------------------------------------------------------------------- 2. ---------------------------------------------------------------------------- If no beneficiary has been designated under this Exhibit, or all beneficiary designations are ineffective, then all amounts payable pursuant to the Severance Letter Agreement shall be paid to my estate. Any benefits which may be payable to my beneficiary shall be paid in the form of a lump sum. ---------------------------------------------------------------------------- I reserve the right to revoke or amend this designation of beneficiary by written notice. Date: -------------------------------------------- ------------------------- Anna Mae Papso Schedule I Anna Mae Papso Summary of Options as of May 10, 2001 Number of Option Price Last Date Grant Date Shares Exercisable Per Share To Exercise 03/26/1997 7,000 $27.50000 03/25/2002 08/05/1997 18,000 $29.40630 06/28/2002 03/25/2000 18,000 $26.03130 06/28/2002 05/02/2001 8,000 $26.75 06/28/2002 EX-10 10 heumannseverance10q22001.txt EX10 G HEUMANN SEVERANCE AGREEMENT, 10Q2 2001 EXHIBIT 10 (g) June 29, 2001 Mr. Stephen M. Heumann 1057 Argyle Road Berwyn, PA 19312 Dear Steve: This letter (the "Agreement") sets forth the enhanced severance arrangement agreed to by West Pharmaceutical Services, Inc. (the "Company") and you. The terms contained in this Agreement represent an exception to, and provide for benefits in excess of, the Company's standard severance policy. Please read this letter carefully. It contains the terms and conditions of your severance, including important deadlines with respect to the continuation of key benefits. Each of the benefits listed below is expressly conditioned on your complying with all of your obligations under this Agreement and the Agreement and General Release (the "Release"), which is attached hereto as Exhibit "A" and incorporated herein by reference. Each of such benefits is also expressly conditioned on your complying with the provisions of Section 6 (Non-Disclosure and Confidentiality) and Section 9 (Non-Competition) of the Second Amended and Restated Change-in-Control Agreement dated as of March 25, 2000 between the Company and you (such provisions being collectively referred to herein as the "Non-Compete and Confidentiality Obligations"). 1. Termination Date. Your last day of employment with the Company will be June 29, 2001 (the "Termination Date"). Between the date of this Agreement and the Termination Date, you will report to and your duties will be specified by Linda R. Altemus. 2. Severance Payments. You will receive severance salary payments totaling $340,038, paid biweekly in accordance with Company practice with normal deductions such as health insurance and taxes, for the period commencing on July 1, 2001 and continuing until June 27, 2003 (the "Severance Period"). These payments represent 12 weeks of severance pay to which you would be entitled under the Company's severance policy plus an additional 92 weeks of severance pay to be provided in consideration of your execution of the Release. You will receive the full amount of severance pay regardless of whether you find other employment prior to the end of the Severance Period. Any earned/unused vacation owed for this year will be paid to you as soon as practical. You will not be eligible to receive salary increases, cash bonuses or incentive stock-based grants or awards of any kind on or after the Termination Date. 3. Financial Planning Assistance. You will receive $3,000 towards financial planning, which will be paid to you in a lump sum within 30 days following the Termination Date. 4. Company Car. You may continue the use of your company car until the Termination Date. You may purchase your company car from the Company for the sum of $1.00 (one dollar). You must notify the Company on or before the Termination Date if you elect to purchase the car. 5. Medical Coverage. The Company will continue standard medical and dental benefits until the last day of the month prior to your becoming 65 years old. This coverage will be available to you and your dependents. The levels of coverage will be those in effect from time to time for employees of the Company. You and your dependents will also be eligible for Executive Medical benefits currently available to active senior executive officers of the Company. The Company will continue to pay the same portion of the cost of the coverage as it did when you were employed, and your cost will be deducted from your severance payments. 6. Life Insurance. Coverage under the Company's group-term life insurance policy, including any supplemental insurance coverage that you may have purchased, will also continue through the end of the Severance Period. You are eligible to convert this group-term life insurance policy to an individual life policy. However, to do so, you must apply and pay the first premium within 31 days after the end of the Severance Period. A Group Conversion form will be mailed to you during the 30-day period preceding the end of the Severance Period. 7. KEEP Insurance. KEEP insurance will remain in effect through the Severance Period. You are encouraged to contact Jeff White or Peter Hoover at American Financial Group, at (610) 296-3393, to discuss your options concerning these policies prior to the end of the Severance Period. 8. Short and Long-Term Disability. Your short and long term disability insurance coverage will cease as of the Termination Date. 9. Deferred Compensation and Savings Plan. You will need to contact American Express Trust Company at (800) 355-5770 to receive a complete rollover/distribution package with respect to your participation in the Company's Savings Plan. If you have an outstanding loan, you should contact American Express promptly to ensure that you avoid any adverse tax consequences. Any balances in your accounts under the Deferred Compensation Plan for Designated Executive Officers will be distributed to you in accordance with your elections under that plan and applicable plan provisions. We urge you to review the plan document and other information on the plan that has been provided to you. If you have questions about the plan or its operation, please contact John Gailey at (610) 594-3319. 10. Retirement Plan. You will be eligible to accrue up to an additional 12 months years-of-service credit under the West Pharmaceutical Services, Inc. Employees' Retirement Plan. At the end of that period, a calculation of your estimated pension benefit will be forwarded to you. 11. Stock-Based Incentive Plans. Any unvested stock options and incentive (restricted) shares awarded to you under the Long Term Incentive Plan and 1998 Key Employee Incentive Compensation Plan will become vested on the Termination Date. Solely for purposes of determining the post-termination stock-option exercise period, you will be deemed to have retired from the Company as of the Termination Date. Your bonus shares and incentive shares will be issued to you as soon as practical after termination. For your convenience, information concerning your vested stock options is attached as Schedule I hereto. You are encouraged to refer to the applicable plan documents and information statements previously sent to you, as well as the individual agreements covering such awards and grants, for additional information. 12. Termination of Benefits. Participation in all other benefit or compensation programs and arrangements not specifically continued in accordance with this Agreement will cease as of the Termination Date. 13. Outplacement Assistance. Instead of outplacement assistance, you will receive $25,000, which will be paid to you in a lump sum within 30 days following the Termination Date. 14. Reimbursement of Expenses. You confirm that you have been reimbursed for any outstanding qualified travel and entertainment expenses. 15. Notices. Any notifications or other communications required or permitted under this Agreement shall be sent in writing via the U.S. mails or facsimile to the following addresses: If to you: Stephen M. Heumann 1057 Argyle Road Berwyn, PA 19312 If to the Company: West Pharmaceutical Services, Inc. 101 Gordon Drive Lionville, PA 19341 Attention: General Counsel Facsimile: 610 594-3013 or to such other address, or facsimile number, as may be notified in writing in accordance with this paragraph. 16. Agreement and General Release. In exchange for the compensation package described above, you expressly agree to and will sign the Release and the Resignation Letter attached hereto as Exhibit "B" and deliver them to the Company at the time of delivery of a countersigned copy of this Agreement. 17. Miscellaneous. (a) As noted in the first paragraph hereof, your breach of any provision of this Agreement, the Release or the Confidentiality and Non-Compete and Confidentiality Obligations will result in an immediate termination of all obligations of the Company hereunder. (b) This Agreement will be binding upon and inure to your benefit and the benefit of your personal representatives and heirs and the Company and any successor of the Company. In the event of your death prior to expiration of the Severance Period, the balance of any unpaid cash severance payments will be paid in a lump sum to the beneficiary listed on the survivor beneficiary form attached to this Agreement as Exhibit "C" no later than the end of the month following the month in which death occurs. All other benefits otherwise payable under this Agreement will terminate upon your death. (c) Should any provision of this Agreement be adjudged to any extent invalid by any court of competent jurisdiction, that provision will be deemed modified to the extent necessary to make it enforceable. (d) This Agreement will be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania. (e) This Agreement, together with the Release, the Resignation Letter and the Non-Compete and Confidentiality Obligations, constitute the entire agreement and understanding between you and the Company with respect to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings between you and the Company with respect to such matters. (f) This Agreement may be executed in one or more counterparts, which together shall constitute a single agreement. * * * * * * * * By signing below, you signify your intent to be legally bound by the terms of this Agreement. Very truly yours, West Pharmaceutical Services, Inc. By: _______________________________ George R. Bennyhoff, Senior Vice President, Human Resources Intending to be legally bound, agreed to and accepted this day of June, 2001 ------ - ------------------------------ Stephen M. Heumann ATTACHMENTS Release (attached as Exhibit "A") Resignation Letter (attached as Exhibit "B") Designation of Beneficiary (attached as Exhibit "C") Stock Options information (attached as Schedule I) EXHIBIT "A" AGREEMENT AND GENERAL RELEASE ------------------------------- - -------------------------------------------------------------------------------- NOTICE: This is a very important legal document, and you should thoroughly review and understand the terms and effect of this document before signing it. By signing this Agreement and General Release, you will be completely releasing West Pharmaceutical Services, Inc. from all liability to you. Therefore, you should consult with an attorney before signing this Agreement and General Release. You have 45 days from the date of distribution of these materials to consider this document. If you have not returned a signed copy of this Agreement and General Release by that time, we will assume that you have elected not to sign the Agreement and General Release. If you choose to sign the Agreement and General Release, you will have an additional seven (7) days following the date of your signature to revoke the Agreement and General Release, and the Agreement and General Release shall not become effective or enforceable until the revocation period has expired. - -------------------------------------------------------------------------------- Intending to be legally bound by the provisions of this Agreement and in consideration of the negotiated payments and benefits specified in the accompanying letter agreement which shall be incorporated as if fully set forth within, dated June 29, 2001 between West Pharmaceutical Services, Inc. and me, providing valuable consideration to which I would otherwise not be entitled, I, STEPHEN M. HEUMANN hereby release and discharge West Pharmaceutical Services, Inc. and its affiliates, parents, subsidiaries, successors, and predecessors and all of their employees, agents, attorneys, officers, and directors (individually and collectively referred to as the "Company") from any and all claims and/or causes of action, known or unknown, which I may have or could claim to have against the Company in connection with my employment with the Company up to and including the date of my signing of this General Release. This General Release includes, but is not limited to, all claims arising from or during my employment or as a result of the termination of my employment and all claims arising under federal, state, or local laws prohibiting employment discrimination based upon age, race, sex, religion, handicap, national origin, or any other protected characteristic, including, but not limited to, any and all claims arising under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964 and 1991, the Americans with Disabilities Act, the Family and Medical Leave Act, the Equal Pay Act, the Pennsylvania Wage Payment and Collection Law, the Pennsylvania Human Relations Act, any other federal, state or local labor or employment law, and claims under the common law and/or growing out of any legal restrictions, express or implied, in contract or on any other grounds, or the Company's right to control or terminate the employment fits employees. By signing below, I acknowledge that I have carefully read and fully understand the provisions of this Agreement and General Release. I further acknowledge that I am signing this Agreement and General Release knowingly and voluntarily and without duress, coercion or undue influence. I further agree that should I file a claim with any agency or any lawsuit in court which is found to be barred in whole or in part by this General Release, I will pay the legal fees and costs incurred by the Company in defending those claims found to be barred and shall also be obligated to tender back upon filing of such complaint in state or federal court or before any administrative agency any consideration that I have received pursuant to the severance arrangements provided within the accompanying Letter Agreement. This Agreement and General Release constitutes the total and complete understanding between me and the Company relating to the subject matter covered by this Agreement and General Release and all other prior or contemporaneous written oral agreements or representations, except the accompanying Letter Agreement setting forth the terms of my severance arrangement, if any, otherwise relating to the subject matter of this Agreement and General Release are null and void. It is also expressly understood and agreed that the terms of this Agreement and General Release may not be altered except in writing signed by both the Company and me. I further understand and agree that the terms and conditions of this Agreement and General Release shall not be communicated to any persons other than those referred to herein and to my spouse or legal counsel, if applicable. INTENDING TO BE LEGALLY BOUND, I hereby set my hand and seal below: Witnessed by: - ------------------------------ ------------------------------------------ Witness STEPHEN M. HEUMANN - ------------------------------ ------------------------------------------ Dated Dated Exhibit "B" June 30, 2001 To the Board of Directors West Pharmaceutical Services, Inc. 101 Gordon Drive Lionville, PA 19341 To Whom It May Concern: Please be advised that I hereby resign from all positions that I currently hold with West Pharmaceutical Services, Inc., its subsidiaries and its affiliated companies. Very truly yours, Stephen M. Heumann EXHIBIT "C" DESIGNATION OF BENEFICIARY FOR SEVERANCE PAYMENTS Designation of Beneficiary. I understand that I may designate one beneficiary who, in the event of my death before all amounts due to me under the Severance Letter Agreement dated June 29, 2001 have been distributed, will receive such amounts. I hereby designate as my beneficiary: ----------------------------------------------------------------------------- Name Relationship ----------------------------------------------------------------------------- 1. ----------------------------------------------------------------------------- If the person named above as beneficiary does not survive me, I hereby designate as my contingent beneficiary: ----------------------------------------------------------------------------- 2. ----------------------------------------------------------------------------- If no beneficiary has been designated under this Exhibit, or all beneficiary designations are ineffective, then all amounts payable pursuant to the Severance Letter Agreement shall be paid to my estate. Any benefits which may be payable to my beneficiary shall be paid in the form of a lump sum. ---------------------------------------------------------------------------- I reserve the right to revoke or amend this designation of beneficiary by written notice. Date: -------------------------------------------- ----------------------------- Stephen M. Heumann Schedule I Stephen M. Heumann Summary of Options as of June 30, 2001 Number of Option Price Last Date Grant Date Shares Exercisable Per Share To Exercise 03/26/1997 7,000 $27.50 03/25/2002 08/05/1997 18,000 $29.40630 06/28/2002 03/25/2000 18,000 $26.03130 06/28/2002 05/02/2001 6,000 $26.75 06/28/2002 -----END PRIVACY-ENHANCED MESSAGE-----