-----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, K9WO44DHGo6tELQZvRSKsrfpMSok4xVnqPMaX9iobmMWLCZH25/jBL0wo25zUDR9 /KloOg8ORPEQFc98Hvi02A== 0000105770-99-000031.txt : 19990817 0000105770-99-000031.hdr.sgml : 19990817 ACCESSION NUMBER: 0000105770-99-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 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: SEC FILE NUMBER: 001-08036 FILM NUMBER: 99692444 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 10-Q 1 10Q2-1999 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, 1999 --------------- Commission File Number 1-8036 ------ WEST PHARMACEUTICAL SERVICES, INC. ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-1210010 ------------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 101 Gordon Drive, PO Box 645, Lionville, PA 19341-0645 ------------------------------------- ---------------------- (Address of principal executive (Zip Code) offices) 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, 1999 -- 14,872,419 ----------------------------------------------------------------- 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, 1999 Page ----- Part I - Financial Information Item 1. Financial Statements Consolidated Statements of Operations for the Three and Six Months ended June 30, 1999 and June 30, 1998 3 Condensed Consolidated Balance Sheets at June 30, 1999 and December 31, 1998 4 Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 1999 and June 30, 1998 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosure about Market Risk 16 Part II - Other Information Item 1. Legal Proceedings 18 Item 2. Changes in Securities and Use of Proceeds 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURES 19 Index to Exhibits F-1 Page 3 Part I. Financial Information Item 1. Financial Statements West Pharmaceutical Services, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data) Quarter Ended Six Months Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998 ---------------- ------------- --------------- -------------- Net sales $124,400 100% $115,800 100% $238,600 100% $221,000 100% Cost of goods sold 84,600 68 81,000 70 164,400 69 154,900 70 ---------------------------------------------------------------------------------------------------- Gross profit 39,800 32 34,800 30 74,200 31 66,100 30 Selling, general and administrative expenses 19,700 16 18,400 16 36,700 15 35,200 16 Acquired research and development - - - - - - 28,200 13 Other expense (income), net 300 - (800) (1) 300 - (1,400) (1) ---------------------------------------------------------------------------------------------------- Operating profit 19,800 16 17,200 15 37,200 16 4,100 2 Interest expense 2,800 2 1,900 2 4,800 2 3,100 1 ---------------------------------------------------------------------------------------------------- Income before income taxes and minority interests 17,000 14 15,300 13 32,400 14 1,000 1 Provision for income taxes 6,600 6 5,800 5 12,500 6 11,200 5 Minority interests - - 100 - 100 - 100 - ---------------------------------------------------------------------------------------------------- Income (loss) from consolidated operations 10,400 8% 9,400 8% 19,800 8% (10,300) (4)% --- --- --- ---- Equity in net income of affiliated companies - 500 100 500 ---------------------------------------------------------------------------------------------------- Net income (loss) $ 10,400 $9,900 $ 19,900 $ (9,800) ---------------------------------------------------------------------------------------------------- Net income (loss) per share: Basic $ 0.70 $ .58 $ 1.33 $ (0.59) Assuming dilution $ 0.69 $ .58 $ 1.32 $ (0.59) ---------------------------------------------------------------------------------------------------- Average common shares outstanding 14,945 16,991 15,017 16,798 Average shares assuming dilution 15,043 17,071 15,113 16,798 Page 4 See accompanying notes to consolidated financial statements.
Page 5 West Pharmaceutical Services, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands)
Unaudited June 30, 1999 Dec. 31, 1998 ASSETS -------------- ------------- Current assets: Cash, including equivalents $ 39,600 $ 31,300 Accounts receivable 75,200 64,400 Inventories 40,500 43,500 Current deferred income tax benefits 9,600 9,700 Other current assets 11,500 10,800 --------------------------------------------------------------------------- Total current assets 176,400 159,700 --------------------------------------------------------------------------- Net property, plant and equipment 214,500 220,300 Investments in affiliated companies 15,500 15,700 Goodwill 71,300 61,200 Deferred charges and other assets 52,300 48,700 --------------------------------------------------------------------------- Total Assets $530,000 $ 505,600 --------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 2,700 $ 800 Notes payable 2,400 35,300 Accounts payable 19,900 20,800 Accrued expenses: Salaries, wages, benefits 14,800 17,100 Income taxes payable 9,900 8,500 Other 28,500 21,700 --------------------------------------------------------------------------- Total current liabilities 78,200 104,200 --------------------------------------------------------------------------- Long-term debt, excluding current portion 160,300 105,000 Deferred income taxes 39,300 39,100 Other long-term liabilities 26,700 26,600 Minority interests 600 600 --------------------------------------------------------------------------- Shareholders' equity 224,900 230,100 --------------------------------------------------------------------------- Page 6 Total Liabilities and Shareholders' Equity $530,000 $505,600 ---------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. Page 7 West Pharmaceutical Services, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six Months Ended June 30, 1999 June 30, 1998 ---------------- ------------------- Cash flows from operating activities: Net income, plus net non-cash items $ 35,000 $ 31,500 Changes in assets and liabilities (4,700) (15,200) ----------------------------------------------------------------------------------------- Net cash provided by operating activities 30,300 16,300 ----------------------------------------------------------------------------------------- Cash flows from investing activities: Property, plant and equipment acquired (19,500) (18,700) Proceeds from sale of assets 100 800 Payment for acquisitions, net of cash acquired (15,900) (6,900) Customer advances, net of repayments (1,400) 1,000 ----------------------------------------------------------------------------------------- Net cash used in investing activities (36,700) (23,800) ----------------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from long-term debt 100,000 - Net (repayments) borrowings under revolving credit agreements (71,600) 9,700 Repayment of other long-term debt (900) (1,900) Notes payable, net 1,600 (500) Dividend payments (4,800) (5,000) Sale of common stock, net 1,600 1,800 Purchase of treasury stock (9,000) - ----------------------------------------------------------------------------------------- Net cash provided by financing activities 16,900 4,100 ----------------------------------------------------------------------------------------- Effect of exchange rates on cash (2,200) (300) ----------------------------------------------------------------------------------------- Net increase (decrease) in cash, including equivalents $ 8,300 $ (3,700) -----------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. Page 8 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, 1999 should be read in conjunction with the consolidated financial statements and notes thereto of West Pharmaceutical Services, Inc., appearing in the Company's 1998 Annual Report on Form 10-K. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. Interim results are based on the Company's accounts without audit. 1. Interim Period Accounting Policy --------------------------------- In the opinion of management, the unaudited Condensed Consolidated Balance Sheet as of June 30, 1999 and the related unaudited Consolidated Statements of Operations 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 1998 contain all adjustments, consisting only of normal recurring accruals, necessary to present fairly the financial position as of June 30, 1999 and the results of operations and cash flows for the respective periods. The results of operations for any interim period are not necessarily indicative of results for the full year. Operating Expenses ------------------ To better relate costs to benefits received or activity in an interim period, certain operating expenses have been annualized for interim reporting purposes. Such expenses include certain employee benefit costs, annual quantity discounts and advertising. Income Taxes ------------- The tax rate used for interim periods is the estimated annual effective consolidated tax rate, based on the current estimate of full year results (excluding the charge for acquired research and development in 1998), except that taxes applicable to operating results in Brazil and prior year adjustments, if any, are recorded as identified. Net Loss Per Share --------------------- For the six months ended June 30, 1998, because of the reported net loss, the incremental shares from potential issuance of common stock under the Company's stock option and award plans are not included in average shares assuming dilution. Page 9 West Pharmaceutical Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (continued) 2. Inventories at June 30, 1999 and December 31, 1998 are summarized as follows:
1999 1998 -------- -------- Finished goods $ 13,800 $ 15,700 Work in process 13,700 13,700 Raw materials 13,000 14,100 -------- -------- $ 40,500 $ 43,500 -------- -------- -------- --------
3. The carrying value of property, plant and equipment at June 30, 1999 and December 31, 1998 is determined as follows:
1999 1998 -------- -------- Property, plant and equipment $471,700 $472,200 Less accumulated depreciation and amortization 257,200 251,900 -------- -------- Net property, plant and equipment $214,500 $220,300 -------- -------- -------- --------
4. For the three and six months ended June 30, 1999 and 1998, the Company's comprehensive income (loss) is as follows:
Three Months Ended Six Months Ended 6/30/99 6/30/98 6/30/99 6/30/98 -------- ------- ------- ------- Net income (loss) $10,400 $ 9,900 $19,900 $(9,800) Foreign currency translation adjustments (4,600) (100) (13,200) (2,700) ------- ------- ------- ------- Comprehensive income (loss) $5,800 $9,800 $ 6,700 $(12,500) ------- ------- ------- ------- ------- ------- ------- ------- Page 10
West Pharmaceutical Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Continued) 5. Net sales to external customers and operating profit (loss) by operating segment for the three and six months ended June 30, 1999 and June 30, 1998 are as follows:
Three Months Ended Six Months Ended Net Sales: 1999 1998 1999 1998 ---------- ---- ---- ---- ---- Device product development $100,800 $93,400 $194,200 $179,500 Contract services 23,400 21,800 44,000 40,900 Drug delivery research and development 200 600 400 600 ------- ------- -------- -------- Consolidated Total $124,400 $115,800 $238,600 $221,000 ------- ------- -------- -------- ------- ------- -------- -------- Three Months Ended Six Months Ended Operating Profit (Loss): 1999 1998 1999 1998 ------------------------ ---- ---- ---- ---- Device product development $26,000 $21,700 $47,500 $41,600 Contract services 1,800 2,000 4,000 2,900 Drug delivery research and development (1,600) (1,300) (3,000) (2,100) Corporate and unallocated items (6,400) (5,200) (11,300) (38,300) ------- ------- ------- ------- Consolidated Total $19,800 $17,200 $37,200 $4,100 ------- ------- ------- ------- ------- ------- ------- -------
Compared with December 31, 1998, the only material change in operating segment assets as of June 30, 1999 was the acquisition of the Clinical Services Division of Collaborative Clinical Research, Inc. on April 20, 1999 (see Note 9). This business unit is included in the Contract Services segment. 6. Common stock issued at June 30, 1999 was 17,165,141 shares, of which 2,292,722 shares were held in treasury. Dividends of $.16 per common share were paid in the first quarter of 1999 and a dividend of $.16 per share payable to holders of record on July 21, 1999 was declared on April 27, 1999. 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 Page 11 West Pharmaceutical Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (Continued) accordance with applicable regulatory requirements, the Company believes the accrued liability of $1,000 at June 30, 1999 is sufficient to cover the future costs of these remedial actions, which will be carried out over the next several years. The Company has not anticipated any possible recovery from insurance or other sources. 8. On September 8, 1998, the Company recorded a pre-tax charge of $4,000. The charge is related to employee reductions associated with identified manufacturing and other efficiencies. The charge covers severance and benefits for 92 employees and other related charges. Through June 30, 1999, the total payout of severance and benefits associated with this charge was $3,000. 9. On April 20, 1999, the Company acquired the assets of the Clinical Services Division (CSD) of Collaborative Clinical Research, Inc.. The cash purchase price was $15,900, which was financed with available cash, and the Company assumed $2,300 of current liabilities of CSD. The acquisition was accounted for as a purchase and CSD was consolidated on May 1, 1999. The preliminary allocation of the purchase price is as follows: Current assets $ 2,900 Equipment and leasehold improvements 800 Goodwill 14,500 ------- $18,200 ------- ------- Pro forma results assuming acquisition of CSD as of January 1, 1999 would not have had any material effect on consolidated results. 10. On April 8, 1999, the Company entered into an agreement with five insurance companies to borrow a total of $100,000 for ten years at a coupon rate of 6.81%; the effective interest rate is 6.91%. Interest is payable quarterly. The proceeds were used to repay debt under existing lines of credit, for the acquisition of CSD, and for general corporate purposes. Page 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. ----------------------------------------------------------------- Results of Operations for the Three and Six Months ended June 30, 1999 Versus Comparable 1998 Periods ----------------------------------------------------------------- Net Sales --------- Net sales for the second quarter of 1999 were $124.4 million; a 7.5% increase compared with 1998's second quarter sales of $115.8 million. At constant exchange rates, consolidated net sales increased 9.5% in the second quarter. Device product development segment sales increased $7.4 million, or 7.9%, to $100.8 million; at constant exchange rates the increase was 10.5%. For this segment, sales showed strong increases in all regions with the exception of the South America region where sales were essentially flat at constant exchange rates. The primary growth driver for this segment was demand for packaging components for parenteral pharmaceuticals. Management believes three factors were the major reasons for this strong demand. First, customer demand for components for insulin and vaccines, typically high-value components, increased. Second, certain customers switched to higher value components to improve their production efficiency. Third, customers increased certain product inventories. The inventory adjustments relate in part to an earlier summer shutdown schedule in Europe compared with 1998, an event which normally prompts some customers to place additional orders ahead of shutdown to secure supply. Medical device component sales grew modestly, excluding the impact of the acquisition of Betraine Limited in July 1998. Personal care and food dispensing components declined, mainly due to lower Spout-Pak sales compared with last year. Contract services segment sales increased 7.6% to $23.4 million, with the growth attributable to the clinical services business unit acquired in April 1999. The contract manufacturing and packaging unit's sales were $1.1 million lower due to the switch by two customers to in-house production, as expected, and due to disappointing sales of several customers' new products resulting in customer reductions or stoppages of production. Revenues in the start-up contract labs business and in the drug delivery research and development segment were not significant, as expected. Net sales for the first half of 1999 were $238.6 million, 8% higher than sales in the same period of 1998 and 9.1% higher at constant exchange rates. Device product development sales were 8.2% higher and the contract services segment sales were 7.6% higher than first half 1998 sales. The major drivers for these increases are noted above. Page 13 Results of Operations for the Three and Six Months ended June 30, 1999 Versus Comparable 1998 Periods ----------------------------------------------------------------- Gross Profit ------------ The 32% consolidated gross margin in the second quarter of 1999 was unusually high and resulted in gross profit of $39.8 million; a 14.3% increase compared with the same period of 1998. The margins in both the device product development segment and the contract services segment showed significant improvement. The high-margin product mix and another quarter of successful cost saving programs more than offset the impact of price competition in the device product development segment. In the contract services segment, the gross margin improvement reflects the combination of the addition of the higher-margin clinical services business unit and the successful operating efficiency initiatives and elimination of loss/low-margin business at the contract manufacturing and packaging business unit. The consolidated gross profit margin for the six-month period was 31.1% compared with 29.9% in the same period of 1998. The favorable product mix in second quarter sales of the device product development segment and the May 1999 addition of the higher margin clinical services business unit combined with continued operating efficiency improvements in both segments were the primary factors in the margin increase. Selling, General and Administrative Expenses -------------------------------------------- Selling, general and administrative (SG&A) expenses totaled $19.7 million, or 15.8% of net sales, in the second quarter of 1999 compared with $18.4 million, or 15.9% of net sales, in the comparable 1998 quarter. The increase of $1.3 million in total expenses includes $1.4 million of expenses related to acquired businesses; namely, Betraine Limited in July 1998 and the clinical services business unit in April 1999. In addition, the quarter includes expenses related to the completion of upgrades in our desktop computers for Year 2000 issues and related systems upgrades. Offsetting these increases, in part, were higher income from pension plan assets and a favorable exchange rate impact. These same factors were evident in the SG&A expense comparison for the first half of 1999 and 1998. Of the total 1999 SG&A expense increase of $1.5 million, acquired companies added $2.6 million. Higher income from pension plan assets and the impact of a stronger U.S. dollar offset the majority of the increased expenses. SG&A spending is being tightly controlled as the Company invests in drug delivery system research and development and the core manufacturing operations. Other (Income) Expense ---------------------- Net losses on foreign currency transactions and the decline in interest income due to lower cash investments were largely responsible for the other expense in the quarter and first half of 1999 compared with income in the same periods of 1998. Page 14 Results of Operations for the Three and Six Months ended June 30, 1999 Versus Comparable 1998 Periods ----------------------------------------------------------------- Interest Expense ---------------- Interest expense increased $.9 million and $1.7 million in comparisons of second quarter and first half 1999 results with comparable 1998 periods. Average borrowings have increased as a result of stock buybacks of two million shares in October 1998 at an average cost of $30.20 per share and 265,800 shares in 1999 at an average cost of $33.79 per share, and due to acquisitions of three business units since March 31, 1998. Equity in Affiliates -------------------- Equity in net income of affiliates located in Japan and Mexico declined in both the quarter and the six months compared with 1998 due to poor market demand in those countries due largely to government spending and reimbursement policies. Income Taxes ------------ The effective tax rate for the quarter and first half of 1999 was 38.5%, slightly higher than the tax rate in second quarter of 1998 but flat with the first-half 1998 tax rate, excluding the charge for the acquired research and development. The effective tax rate for the full year 1998, excluding the impact of the charge for acquired research and development, was 37.8%. The estimated increase in the 1999 tax rate reflects the geographic mix of earnings forecasted. Net Income (Loss) ----------------- The net income for the second quarter of 1999 was $10.4 million, or $.70 per share, compared with $9.9 million, or $.58 per share, in 1998. Average common shares outstanding in the 1999 quarter were 14.9 million compared with 17.0 million in second quarter 1998. For the six-month period 1999 net income was $19.9 million, or $1.33 per share, compared to a loss of $9.8 million, or $.59 per share, in the same period of 1998. The net loss for the first six months includes a $28.2 million charge for acquired research and development related to the acquisition of DanBioSyst U.K. Ltd.; excluding the charge, net income for the first half of 1998 was $18.4 million, or $1.10 per share. Average shares outstanding for the first six months of 1999 were 15.0 million compared with 16.8 million in the like period of 1998. The reduction in average common shares outstanding reflects the Company's buyback of common shares as noted above. Financial Position ------------------ Working capital at June 30, 1999 was $98.2 million compared with $55.5 million at December 31, 1998. The working capital ratio at June 30, 1999 was 2.3 to 1. The primary reason for the increase in working capital is the Company's ability to finance $37.6 million Page 15 Results of Operations for the Three and Six Months ended June 30, 1999 Versus Comparable 1998 Periods ----------------------------------------------------------------- of short-term notes payable on a long-term basis using proceeds from a $100 million, 10-year private debt placement closed on April 9, 1999. This private debt placement has a coupon rate of 6.81%, and an effective interest rate of 6.91%. Total debt outstanding at June 30, 1999 was $165.4 million, an increase of $24.3 million compared with year end 1998. Debt as a percentage of total invested capital at June 30, 1999 was 42.3% compared with 37.9% at December 31, 1998. In 1999, funds generated from operations covered capital spending of $19.5 million, cash dividends of $.32 per share, and repurchase of 265,800 shares of common stock at an average price of $33.79 per share. The stock repurchases were made pursuant to a plan authorized by the Company's Board of Directors and announced on March 10, 1999. The plan provides for purchase of up to one million shares of the Company's common stock in open market or privately negotiated transactions. The Company believes its financial condition and current capitalization indicate an ability to finance substantial future growth. Market Risk ----------- The Company is exposed to various market risk factors such as fluctuating interest rates and foreign currency rate fluctuations. These risk factors can impact results of operations, cash flows and financial position. These risks are managed periodically with the use of derivative financial instruments such as interest rate swaps and forward exchange contracts. In accordance with Company policy, derivative financial instruments are not used for speculation or trading purposes. At June 30, 1999 and December 31, 1998 the Company had three interest rate swap agreements in effect, with an estimated fair value less than $0.1 million. There were no forward exchange contracts in effect at June 30, 1999. Year 2000 --------- The Company continues to execute a comprehensive plan to address the Year 2000 issue. Using internal and external resources the Company identified and prioritized critical business processes and plant locations, and completed an inventory of all computer hardware and software and computer-controlled equipment. As a result of this work, which started in April 1997, decisions were made to remediate or replace mission-critical items. Page 16 Results of Operations for the Three and Six Months ended June 30, 1999 Versus Comparable 1998 Periods ----------------------------------------------------------------- At June 30, 1999, the Company had completed remediation or replacement of all critical information systems that support business functions. This includes all manufacturing, financial- reporting and payroll systems, desktop computer hardware and software and software-dependent systems and equipment used in research and development, manufacturing processes and facility management. The Company also has received Year-2000 readiness certifications from its major supplier base. As a follow-up measure to the certification program, the Company completed on-site assessments of the 20 key suppliers to its device product development segment. On-site assessments of 15 additional suppliers are planned through the end of the year. The Company believes it has completed all modifications required to address critical information systems. Nonetheless, the Company is actively developing contingency plans and conducting related training to cover an unexpected interruption of critical systems and operations due to the Year 2000 problem. In addition, efforts to address any modifications to non- critical systems will continue through the end of the year and possibly into 2000, but the failure of such systems is not considered to have any significant impact on the Company's business or financial position or results. Total pretax costs incurred through June 30 are approximately $5.5 million, of which $4.9 million has been capitalized. The Company expects to spend approximately $2.0 million in the remainder of 1999 on the project. The cost of the Year 2000 project and the date on which the Company believes it will substantially complete all modifications are based on management's best estimates. The estimates are based on numerous assumptions of future events, including the continued availability of certain resources and other factors. Because none of these estimates can be guaranteed, actual time and cost to complete the project plan could differ materially from those anticipated. Specific factors that might cause such differences include, but are not limited to, the reliability and timely receipt of vendor certifications, the appropriateness and effectiveness of testing and validation methods, the availability and cost of trained personnel and the timely availability of replacement computer hardware, software and equipment and similar uncertainties. Page 17 Item 3. Quantitive 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 18 Part II - Other Information Item 1. Legal Proceedings ----------------- None. Item 2. Changes in Securities and Use of Proceeds ----------------------------------------- None. Item 3. Defaults Upon Senior Securities ------------------------------- None. Item. 4. Submission of Matters to a Vote of Security Holders -------------------------------------------------- (a) The Company held its annual meeting of shareholders on April 27, 1999. (c) Class II directors (with a term expiring in 2002) were elected by a vote of : For Against --- ------- Tenley E. Albright 9,100,521 168,652 John Conway 9,100,521 168,652 J. Roffe Wike, II 9,100,346 168,737 George W. Ebright, L. Robert Johnson, William G. Little, William H. Longfield, John P. Neafsey, Monroe E. Trout, Anthony Welters and Geoffrey F. Worden 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, 1999 was approved by a vote of 9,260,257 for the appointment and 4,840 against, with 4,076 abstentions. The 1999 Non-Qualified Stock Option Plan for Non-Employee Directors was approved by a vote of 8,243,031 for the Plan and 939,978 against, with 86,161 abstentions. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) See Index to Exhibits on pages F-1 and F-2 of this Report. Page 19 (b) No reports on Form 8-K have been filed for the quarter ended June 30, 1999. 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 16, 1999 /s/ Steven A. Ellers ------------- --------------------------------- Date (Signature) Steven A. Ellers Senior Vice President and Chief Financial Officer Page 20 INDEX TO EXHIBITS Exhibit Number (3) (a) Amended and Restated Articles of Incorporation of the Company through January 4, 1999, incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1- 8036). (3) (b) ByLaws of the Company, as amended through October 27, 1998, incorporated by reference to Exhibit (3)(b) to the Company's Form 10-Q for the quarter ended September 30, 1998 (File No. 1-8036). (4) (a) Form of stock certificate for common stock, incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8036). (4) (b) Flip-In Rights Agreement between the Company and American Stock Transfer & Trust Company, as Rights Agent, dated as of January 16, 1990, incorporated by reference to Exhibit 1 to the Company's Form 8-A Registration Statement (File No. 1-8036). (4) (c) Flip-Over Rights Agreement between the Company and American Stock Transfer & Trust Company, as Rights Agent, dated as of January 16, 1990, incorporated by reference to Exhibit 2 to the Company's Form 8-A Registration Statement (File No. 1-8036). (9) None. (10) (a) Retirement Plan for Non-Employee Directors reflecting amendments effective on November 5, 1991, April 28, 1998 and May 27, 1999. (10) (b) Deferred Compensation Plan for Outside Directors, as amended and restated effective May 27, 1999. (10) (c) 1999 Non-Qualified Stock Option Plan for Non-Employee Directors, effective as of April 27, 1999. (10) (d) Form of Director Stock Option Agreement (11) Not Applicable. (12) Not Applicable. (15) None. F - 1 Page 21 Exhibit Number (16) Not applicable. (18) None. (19) None. (22) None. (23) None. (24) None. (27) Financial Data Schedule (99) None. F - 2 EX-10 2 EXHIBIT 10A Exhibit 10 (a) WEST PHARMACEUTICAL SERVICES, INC. RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS Adopted October 30, 1990 Reflecting Amendments Effective on November 5, 1991, April 28, 1998 and May 27, 1999 ----------------------------------------------------------------- PLAN DOCUMENT ----------------------------------------------------------------- RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS 1. Background and Purpose. This Retirement Plan was first adopted to give appropriate recognition to the past services of non-employee Directors of the Company and to assist in attracting and retaining individuals of superior talent and achievement as Directors of the Company. In April 1999 the Board of Directors agreed to discontinue the Plan, allowing current Directors to elect a distribution of stock- equivalents in lieu of retirement benefits and closing the Plan to future Directors. As a result of this decision, the Compensation Committee of the Board, under authority delegated to it by the Board, adopted amendments to the Plan, effective May 27, 1999. 2. Definitions. For purposes of this Plan, the following words and phrases shall have the meanings indicated below: a) "Plan" means the West Pharmaceutical Services, Inc. Retirement Plan for Non-Employee Directors, as amended through May 27, 1999. b) "Company" means West Pharmaceutical Services, Inc. (formerly named "The West Company, Incorporated"). c) "Director" means a duly elected member of the Board. d) "Participant" means a Director eligible to receive benefits under the Plan pursuant to Section 4 hereof. e) "Board" means the Board of Directors of the Company. f) "Years of Service" means the number of completed, twelve consecutive month periods beginning on the first day an individual becomes a Director and on each anniversary thereof, throughout which the Director was a member of the Board. Years of Service include such twelve consecutive month periods of membership on the Board before and after January 1, 1990. g) "Base Retainer" means the amount of annual retainer payable to non-employee Directors for service on the Board. The Base Retainer shall not include any Board meeting fees or other payments for membership or attendance, chairmanship of Board Committees or otherwise. h) "Disability" means that a physician acceptable to the Compensation Committee has concluded that the Participant is unable to engage in substantial gainful activity by reason of a physical or mental impairment which will be of long-continued and indefinite duration. i) "Electing Director" means any Participant in office on May 27, 1999 who makes an election to continue to receive benefits at retirement under paragraph 3b) ii) of the Stock-Equivalents Plan j) "Stock-Equivalents Plan" means the West Pharmaceutical Services, Inc. Stock-Equivalents Compensation Plan. 3. Effective Date. The Plan shall be effective as of January 1, 1990. 4. Eligiblity for Participation. Directors who have not been employees of the Company or any of its subsidiaries or affiliates shall be eligible to receive a retirement benefit under the Plan to the extent set forth below: a) Any Participant receiving retirement benefits as of May 27, 1999 under the Plan shall continue to be eligible to receive the benefits set forth in Section 5 a) hereof. b) Any Electing Director shall be entitled to receive the retirement benefits specified in the Stock-Equivalents Plan. c) No other person shall be entitled to any benefits whatsoever under the Plan. 5. Retirement Benefits. a) Normal Retirement Benefit. A Participant who has completed a minimum of five (5) Years of Service as a Director and who ceases to be a Director before May 27, 1999 shall be entitled to receive an annual retirement benefit commencing at age sixty (60) computed as follows: 1) An amount equal to fifty percent (50%) of the Participant s Base Retainer at the time of retirement, plus 2) An amount equal to ten percent (10%) of the Participant's Base Retainer at the time of retirement for each full Year of Service in excess of five (5) Years of Service, but not in excess of ten (10) Years of Service. b) Retirement Benefit for Electing Directors. An Electing Director who ceases to be a Director on or after May 27, 1999 shall be entitled to receive an annual retirement benefit in the amount set forth in the Stock-Equivalents Plan, payable in accordance with Section 6 hereof. c) Maximum Retirement Benefit. The maximum annual retirement benefit payable under this Plan shall be equal to one-hundred percent (100%) of the Participant's Base Retainer at the time of retirement. d) Disability Retirement Benefit. In the event an Electing Director ceases to be a Director by reason of Disability, the Electing Director shall be entitled to receive disability benefits determined in accordance with the Stock-Equivalents Plan. The Electing Director's disability benefit shall be paid in accordance with the provisions of Section 6 hereof. 6. Payment and Duration of Retirement Benefits. a) All retirement benefits shall be payable in quarterly installments on the first day of the calendar quarter. b) Retirement benefits shall continue for no more than fifteen (15) years. Upon the death of a retired Participant, benefit payments will cease with the month immediately following the date of the retired Participant's death. Spousal payments may then begin as described in Section 6 c). c) If a retired Participant dies before receiving the full fifteen (15) years of benefits, the surviving spouse, if any, shall receive fifty percent (50%) of any remaining benefit payments. If there is no surviving spouse at the time of a retired Participant's death or if the surviving spouse dies before receiving the remaining benefit payments, then there will be no further payment obligations under the Plan. 7. No Funding. This Plan shall not be deemed to create any trust, escrow or other funding arrangement. No retirement benefit payable under the Plan shall be considered segregated funds and all such amounts shall, at all times prior to the payment of same, be and continue to be the property of the Company commingled with its other assets. The right of any Participant or his or her eligible spouse to benefits under this Plan shall be an unsecured claim against the general assets of the Company. 8. Plan Administration. The general administration of the Plan and the responsibility for interpreting the Plan and carrying out its provisions shall be vested in the Compensation Committee. The Compensation Committee may adopt such rules and regulations as it may deem necessary for the proper administration of this Plan, and its decision in all matters shall be final, conclusive and binding. If one or more members of the Committee are disqualified by personal interest from taking part in a particular decision, the remaining member or members of the Committee (although less than a quorum) shall have full power to act on the matter. 9. Termination of the Plan. The Board reserves the right to terminate the Plan at any time without the consent of any current or former Director. Upon termination of the Plan, all Participants shall continue to have the right to receive benefits earned and accrued hereunder prior to such termination. 10. Amendment of the Plan. The Board has the right to amend the Plan at any time and from time to time without the consent of any current or former Director. 11. Change in Control. a) Notwithstanding any other provision of this Plan, in the event of a Change in Control (as defined herein), each Electing Director in service on the Board immediately prior to the effective time of the Change in Control shall, at the Electing Director's option, be entitled to either: A) a $20,000 annual retirement benefit commencing at age sixty (60), payable in accordance with Section 6 hereof; or B) a lump sum payment in the amount of the present value of an annuity equal to $20,000 paid annually for fifteen years, such lump sum payment to be in lieu of any payment under Sections 5 or 6 hereof or under the Stock-Equivalents Plan. b) Within sixty (60) days following a Change in Control as defined herein, a Participant or surviving spouse who is already receiving payments under the Plan at the time of a Change in Control will be paid a lump sum equal to the present value of the remaining annuity payments as of the time of the Change in Control. c) A "Change in Control" shall mean a change in control of a nature that would be required to be reported in response to Item 1 of the Current Report on Form 8-K as in effect on April 28, 1998 pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Act"), provided, that, without limitation, a Change in Control shall be deemed to have occurred if: 1) any "Person" (as such term is used in Sections 13(d) and 14(d) of the Act), other than: the Company, any Person who on the date hereof is a director or officer of the Company, or a trustee or fiduciary holding securities under an employee benefit plan of the Company, is or becomes the "beneficial owner" (as defined in Rule 13-d3 under the Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company's then outstanding securities; or 2) during any period of two consecutive years during the term of this Plan, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period; or 3) the shareholders of the Company approve: (1) a plan of complete liquidation of the Company; or (2) an agreement for the sale or disposition of all or substantially all of the Company's assets; or (3) a merger, consolidation, or reorganization of the Company with or involving any other corporation, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or the surviving entity, or an entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) outstanding immediately after such merger, consolidation, or reorganization. d) For purposes of this Section, present value will be calculated using the Pension Benefit Guaranty Corporation interest rate that would be used on that date for purposes of determining lump sum distributions upon Plan termination. e) Notwithstanding any other provisions of this Plan, this Section 11 shall apply only to Directors who have not been employed by the Company or any of its subsidiaries or affiliates and whether or not any such person has attained five or more Years of Service. 12. Miscellaneous. a) No Agreement to Retain Directors. The Plan does not in any way obligate the shareholders to continue to retain a Director on the Board, nor does this Plan limit the right of the shareholders to terminate a Director's service on the Board. b) Rights Non-Assignable. No retirement benefit payable hereunder may be assigned, pledged, mortgaged or hypothecated and, to the extent permitted by law, no such retirement benefit shall be subject to legal process or attachment for the payment of any claims against any person entitled to receive the same. c) Withholding. Payments made by the Company under this Plan to any eligible Participant shall be subject to such withholding as shall, at the time of such payment, be required under any income tax or other laws, whether of the United States or any other jurisdiction. d) Successorship. It is the intent that the obligation of the Company to pay benefits accrued or payable hereunder shall be binding upon any successor corporation or organization which shall succeed to substantially all of the assets and business of the Company. The term Company wherever used herein shall mean and include any such corporation or organization after such succession, and such obligations shall be deemed to have been expressly assured by any such corporation or other organization. e) Governing Law. This Plan shall be governed by the laws of the Commonwealth of Pennsylvania and shall be construed for all purposes in accordance with the laws of said Commonwealth. * * * * Certified True and Correct Copy of the Plan as Amended Through May 27, 1999. [CORPORATE SEAL] WEST PHARMACEUTICAL SERVICES, INC. Date: By: ----------------- --------------------------- John R. Gailey III Secretary EX-10 3 EXHIBIT 10B Exhibit 10 (b) WEST PHARMACEUTICAL SERVICES, INC. DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS ----------------------------------------------------------------- PLAN DOCUMENT ----------------------------------------------------------------- As Amended and Restated Effective May 27, 1999 NON-QUALIFIED DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS (As Amended and Restated Effective May 27, 1999) The Board of Directors of West Pharmaceutical Services, Inc. (the "Company") hereby adopts the West Pharmaceutical Services, Inc. Non-Qualified Deferred Compensation Plan for Outside Directors, as amended and restated (the "Plan"), effective May 27, 1999, except as otherwise provided herein. The Plan was formerly known as The West Company, Incorporated Non-Qualified Deferred Compensation Plan for Outside Directors. The purpose of the Plan is to defer the receipt of all or a portion of the Directors' Fees payable to the Company's Eligible Directors. The Plan also provides for the crediting, using a separate account, of stock equivalents (the "Stock Equivalents") that (i) are awarded to a Director under the West Pharmaceutical Services, Inc. Stock-Equivalents Compensation Plan for Non-Employee Directors (the "Stock-Equivalents Plan"), or (ii) were credited to the Director pursuant to the conversion of the Director's benefit under the Company's Retirement Plan for Non-Employee Directors under the terms of the Stock-Equivalents Plan. ----------------------------- 1. Eligible Directors. Duly elected members of the Board of Directors of the Company ("Directors") eligible to participate in this Plan shall be those Directors who are not officers or employees of the Company or any of its subsidiaries as defined in section 425 (f) of the Internal Revenue Code of 1986, as amended. 2. Deferrable Compensation. An Eligible Director may elect to defer all or any part or none of the compensation payable to such Eligible Director by the Company for services rendered as a director ("Directors' Fees"). 3 Crediting of Stock Equivalents. An Eligible Director shall also be credited with any Stock Equivalents awarded or credited to the Director under the Stock-Equivalents Plan, in accordance with the terms and conditions contained therein. 4. Election to Defer. An Eligible Director who desires to defer payment of his or her Directors' Fees in any calendar year shall notify the Company's Secretary in writing on or before December 15 of the prior year, stating how much of his or her Directors' Fees shall be deferred. An election so made shall be irrevocable and shall apply to payments made in each calendar year thereafter until the Director shall, on or before December 15, notify the Company's Secretary in writing that a different election shall apply to the following calendar years. Any such election shall likewise continue in effect until similarly changed. 5. Non-Deferred Compensation. Any Directors' Fees that are not deferred under this Plan shall be paid in line with normal Company policy. 6. Deferred Compensation Accounts. a) Credits. At the time that a Director makes an election to defer under Paragraph 4 above, the Director shall also indicate whether the amount he or she chooses to defer shall be credited to an "A" Account or to a "B" Account, as described below. The Company shall then establish such an Account for that Director. The Company shall also establish a "C" Account for purposes of crediting Stock Equivalents awarded or credited under the Stock-Equivalents Plan. i) "A" Account. If a Director elects an "A" Account, his or her account shall be credited on the last business day of each calendar quarter with the amount of his or her Directors' Fees earned during that quarter but deferred pursuant to Paragraph 4. ii) "B" Account. If a Director elects a "B" Account, his or her account shall be credited on the last business day of each calendar quarter with a number of Stock Equivalents equal to that number (including fractions) obtained by dividing the amount of his or her Directors' Fees earned during that quarter but deferred under Paragraph 4, by the Fair Market Value of the Company's common stock (the "Common Stock") on the last business day of such calendar quarter. iii) "C" Account. A Director's "C" Account shall be credited, from time to time, with the Stock Equivalents, if any, that are awarded to the Director under the Stock-Equivalents Plan. iv) "Fair Market Value" (for all purposes of this Plan) shall mean on any given date the mean between the highest and lowest prices of actual sales of Common Stock on the New York Stock Exchange (or other principal exchange on which it is traded) on such date. If no sales were made on such date, then the mean shall be calculated using the highest and lowest prices of sales on the last preceding date on which the Common Stock was traded. b) Earnings. In addition, the Company shall credit the indicated Account as follows: i) "A" Account. As of January 1, April 1, July 1 and October 1 of each year, the Company shall credit, as earnings to each "A" Account established on behalf of a Director, an amount equal to a percentage of the balance in each such A Account at the end of the preceding calendar quarter, determined without regard to any additions made to such "A" Account as of the last business day of that calendar quarter. Such percentage shall be equal to one-fourth of the prime rate of interest at the Company's principal commercial bank in effect on the last day of such quarter. ii) "B" Account. As of January 1, April 1, July 1 and October 1 of each year, the Company shall credit as earnings to each "B" Account, an additional number of Stock Equivalents. The number of additional Stock Equivalents to be credited shall be determined by dividing the dividends paid during the preceding calendar quarter with respect to the number of shares of Common Stock equal to the Stock Equivalents in the B Account on the relevant dividend record dates, by the Fair Market Value of the Common Stock on the last business day of the previous calendar quarter. iii) "C" Account. As of January 1, April 1, July 1 and October 1 of each year, the Company shall credit as earnings to each "C" Account an additional number of Stock Equivalents. The number of additional Stock Equivalents to be credited shall be determined by dividing the dividends paid during the preceding calendar quarter with respect to the number of shares of Common Stock equal to the Stock Equivalents in the "C" Account on the relevant dividend record dates, by the Fair Market Value of the Common Stock on the last business day of the previous calendar quarter. 7. Adjustments. In the event of any change in the Common Stock, the value and attributes of each Stock Equivalent shall be appropriately adjusted consistent with such change to the same extent as if such Stock Equivalents were instead, issued and outstanding shares of Common Stock. A change referred to in this Paragraph includes, without limitation, a stock dividend, recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares, or rights offering to purchase Common Stock at a price substantially below fair market value, or any similar change affecting the Common Stock 8. Payment of Deferred Compensation. The balance in a Director's Account shall be determined on the first day of the calendar quarter following the calendar quarter in which he or she ceases to be a Director of the Company, whether by reason of death, resignation, removal, failure of re- election, or otherwise ("Termination Date"). a) The balance in a Director's "A" Account shall be the dollar amount credited to such Account as of the Termination Date. The balance in a Director's "B" and "C" Accounts shall be the dollar amount that would be derived if shares of Common Stock equal in number to the Stock Equivalents credited to such Account as of the Termination Date were sold at Fair Market Value on the Termination Date. b) The balance in a Director's "A" Account, "B" Account and "C" Account, as determined in the preceding paragraph, shall be paid to him or her in cash in a lump sum payable during the month following the Termination Date. An election to receive a lump sum payment of the balance in a Director's Accounts must be made no later than at the time the Director makes his or her election to defer under Paragraph 4 above. c) If no election to receive a lump sum is made, a Director shall receive the balance in each of his or her Accounts in ten equal installments. The first installment shall be paid on the January 15 immediately following the Termination Date, and the others shall be paid on January 15 of the second through tenth years following the Termination Date. The second through tenth installments shall be increased by earnings that would have been credited to the remaining balance if it had been held in an "A" Account during the year. 9. Designation of Beneficiary. If a Director dies before receiving the entire balance of his or her Accounts, any balance remaining in the Accounts shall be paid in a lump sum to the Director's designated beneficiary. If the Director has not designated a beneficiary in writing to the Company's Secretary, then the balance shall be paid to the Director's estate. Any designation of beneficiary may be revoked or modified at any time by the Director. 10. Unsecured Obligation of Company. The Company's obligations to establish and maintain Accounts for each electing Eligible Director and to make payments of deferred compensation to such Eligible Director under this Plan shall be the general unsecured obligations of the Company. The Company shall have no obligation to establish any separate fund, purchase any annuity contract or in any other way make special provision or specially earmark any funds for the payment of any amounts called for under this Plan. Neither this Plan nor any actions taken under or pursuant to this Plan shall be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Eligible Director, his or her designated beneficiary, executors or administrators, or any other person or entity. If the Company chooses to establish such a fund or purchase such an annuity contract or make any other arrangement to provide for the payment of any amounts called for under this Plan, such fund, contract or arrangement shall remain part of the general assets of the Company. No person claiming benefits under this Plan shall have any right, title, or interest in or to any such fund, contract or arrangement. 11. Withholding of Taxes. The rights of a Director to payments under this Plan shall be subject to the Company's obligations to withhold from such payments all applicable federal, state, local or foreign withholding taxes. 12. Assignability. Except as described in Paragraph 9, no portion of a Director's Account may be assigned or transferred in any manner, and no Account shall be subject to anticipation or to voluntary or involuntary alienation. 13. Amendments and Termination. a) The Plan may be amended at any time by the entire Board of Directors or by a Committee of the Board of Directors consisting only of Directors not eligible to defer compensation under the Plan. The Board may amend or terminate the Plan at any time; provided that no amendment may be made without: i) the appropriate approval of the Company's shareholders if such approval is necessary to comply with any tax or other regulatory requirement, including any shareholder approval required as a condition to the exemptive relief under Section 16(b) of the Securities Exchange Act of 1934, as amended from time to time, and the regulations promulgated thereunder (the "Exchange Act'); or ii) the Director's consent, if such amendment would adversely impair or affect any rights or obligations of the Director under the Plan. b) Prior Shareholder and Eligible Director Approval. Anything herein to the contrary notwithstanding, the Board may amend the Plan without the consent of Eligible Directors or shareholders to comply with the requirements of Rule 16b-3 issued under the Exchange Act, or any successor rules promulgated by the Securities and Exchange Commission. 14. Effective Date. The Plan shall be effective with respect to Director's Fees payable by the Company after May 27, 1999. ********************* As adopted by the Compensation Committee of the Board of Directors under delegated authority this 27th day of May, 1999. [CORPORATE SEAL] WEST PHARMACEUTICAL SERVICES, INC. By: ------------------------- John R. Gailey, Secretary EX-10 4 EXHIBIT 10C Exhibit 10 (c) WEST PHARMACEUTICAL SERVICES, INC. 1999 NON-QUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS ----------------------------------------------------------------- PLAN DOCUMENT ----------------------------------------------------------------- Adopted March 6, 1999, effective as of April 27, 1999 1999 NON-QUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS 1. Purpose. The purpose of the Plan is to attract and retain the services of knowledgeable and experienced non-employee directors by providing incentive to such directors to achieve long-term and consistent growth in shareholder value, as measured by relative stock price growth. In doing so, the Plan is intended to promote the continued growth and financial success of the Company. 2. Definitions. As used in the Plan, the following terms shall have the meanings set forth below: a) "Board" means the Board of Directors of the Company. b) "Code" means the Internal Revenue Code of 1986, as amended. c) "Common Stock" means the common stock, par value $0.25 per share, of the Company. d) "Company" means West Pharmaceutical Services, Inc. e) "Current Eligible Director" means each Eligible Director in office on April 27, 1999. f) "Eligible Director' means each director of the Company who is not an employee of the Company or any of the Company's subsidiaries (as defined in section 424 (f) of the Code), which term shall include both Current Eligible Directors and Future Eligible Directors. g) "Exercise Price" means the purchase price per Share purchasable under an Option, which shall be 100% of the Fair Market Value of a Share on the Grant Date. h) "Exchange Act" means the Securities Exchange Act of 1934, as amended. i) "Fair Market Value" means on any given date the mean between the highest and lowest prices of actual sales of Common Stock on the New York Stock Exchange (or other principal exchange on which it is traded) on such date. If no sales were made on such date, then the mean shall be calculated using the highest and lowest prices of sales on the last preceding day on which the Common Stock was traded. j) "Future Eligible Director" means each person not a Current Eligible Director who becomes an Eligible Director at any time during the term of the Plan. k) "Grant Date" means the date on which an Option is granted under the Plan. For each Current Eligible Director, the Grant Dates shall be April 27, 1999, and the date on which the 2002 Annual Meeting of Shareholders is held. For each FutureEligible Director, the Grant Date(s) shall depend on the date the individual first becomes a Future Eligible Director and is set forth in the Table of Grant Date(s) and Shares Underlying Option Grant(s), attached hereto as Exhibit "A". l) "1992 Option Plan" means the 1992 Non-Qualified Stock Option Plan for Outside Directors, as amended, which shall be terminated upon adoption by the shareholders of the Plan. m) "Option" means any right granted to an Optionee allowing such Optionee to purchase Shares at their Fair Market Value on the Grant Date and during such period or periods as are set forth in the Plan. All Options shall be non-qualified options and shall not be qualified for the favorable tax treatment afforded under section 422 of the Code. n) "Optionee" means an Eligible Director who receives an Option under the Plan. o) "Shares" means shares of Common Stock. 3. Administration. Subject to the terms of the Plan, the Board shall have the power to interpret the provisions and supervise the administration of the Plan. 4. Shares Subject to the Plan. a) Total Number. Subject to the following provisions of this Section 4, the maximum number of Shares that may be delivered to Optionees and their beneficiaries under the Plan shall be 125,000 Shares, which shall include: (i) any Shares remaining available for future delivery under the 1992 Option Plan and not subject to outstanding stock options thereunder; and (ii) any Shares subject to outstanding options under the 1992 Option Plan, which lapse, expire, are canceled or otherwise terminate without delivery of Shares. b) Reduction in Number of Shares Available. i) The grant of an Option shall reduce the Shares as to which Options may be granted by the number of Shares subject to such Option. ii) Any Shares issued by the Company under any other stock option plan of the Company shall not reduce the Shares available for grants under this Plan. c) Increase in Number of Shares Available. i) The lapse, expiration, cancellation or other termination of an Option that has not been fully exercised shall increase the number of Shares as to which Options may be granted by the number of Shares that have not been issued upon exercise of such Option. ii) To the extent any Shares covered by an Option are not delivered to an Eligible Director or beneficiary because the Option expires or is terminated, such Shares shall not be deemed to have been delivered for purposes of determining the maximum number of Shares available for delivery under the Plan. d) Maximum Number of Shares Available. Subject to Section 4 e), the following additional maximums are imposed under the Plan: i) The maximum number of Shares that may be covered by Options granted to any single Eligible Director pursuant to Section 5 (relating to the grant of Options) shall be 9,000 Shares. ii) If the Exercise Price of any Option is satisfied by tendering Shares to the Company (by either actual delivery or by attestation), only the number of Shares issued net of the Shares tendered shall be deemed delivered for purposes of determining the maximum number of Shares available for delivery under the Plan. e) Change in Number and Kind of Shares. In the event of a corporate transaction involving the Company (including, without limitation, any stock dividend or distribution, stock split, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares), the Board may adjust Options to preserve the benefits or potential benefits of the Options. Action by the Board may include adjustments of: (i) the number and kind of shares that may be delivered under the Plan; (ii) the number and kind of shares subject to outstanding Options; and (iii) the Exercise Price of outstanding Options; as well as any other adjustments that the Board determines to be equitable. 5. Grant of Options. Each Eligible Director shall be granted an Option to purchase the number of Shares and on the Grant Date(s) that are set forth on Exhibit A. Each Option shall become exercisable in three equal annual installments on the first through third anniversaries of the relevant Grant Date; provided, however, that an Option shall become immediately exercisable (i) upon the Optionee's retirement from the Board, and (ii) in the event the market price of the Shares reaches a level that is at least equal to a 10% annual growth rate measured over the three-year vesting term. 6. General Terms. The following provisions shall apply to each Option. a) Expiration Date. Options shall expire upon the earliest to occur of: i) the ten-year anniversary of the Option's Grant Date; ii) if the Optionee's service as a director of the Company terminates by reason of retirement, the one-year anniversary of the date of such termination, provided, however, that if the Director dies during the one-year period after retirement, the earlier of such anniversary date or 90 days after death; iii) if the Optionee's service as a director of the Company terminates by reasons other than retirement (including death or disability), the 90-day anniversary of the date of such termination; The existence of retirement and the existence of and the date of disability shall be determined by the Board in its sole discretion. b) Removal for Cause. Notwithstanding any other provision of this Plan, in the event an Eligible Director is removed from office for cause, all unexercised Options outstanding at that time shall terminate. c) Method of Exercise. Any portion of an Option that has become exercisable in accordance with Section 5 may be exercised by the Optionee in whole or in part at any time until it expires or is terminated. d) Transferability. No Options may be transferred by the Optionee otherwise than by will, by the laws of descent and distribution or pursuant to a qualified domestic relations order. During the Optionee's lifetime the Option may be exercised only by him or her. e) Payment of Option Exercise Price. The payment of the Exercise Price of an Option granted under Section 5 shall be subject to the following: i) The full Exercise Price for Shares purchased upon the exercise of any Option shall be paid at the time of such exercise. ii) The Exercise Price shall be payable in cash or by tendering Shares (by either actual delivery of Shares or by attestation, with such Shares valued at Fair Market Value as of the date of exercise), or in any combination thereof, as determined by the Board. Such determination may include a restriction on the use of any Shares unless they have been held by the Optionee for at least six months before delivery, and have not been used for another exercise during such period. f) Issuance of Certificates; Payment of Cash. Only whole Shares shall be issuable upon exercise of Options. Any right to a fractional Share shall be satisfied in cash. Upon payment to the Company of the Exercise Price, the Company shall deliver to the Optionee the number of whole Shares and a check for the Fair Market Value on the date of exercise of the fractional share to which the Optionee is entitled. 7. Change in Control a) Effect of Change in Control. Notwithstanding anything in this Plan to the contrary, all Options shall become immediately exercisable upon the occurrence of a Change in Control, provided that if a proposed transaction involving a Change in Control is affirmatively recommended by a majority of the Board to the Company's shareholders, the Company may, at any time on or after the third business day preceding the consummation of such transaction, with respect to the any unexercisable Option which is or may become exercisable prior to such consummation, require the surrender of the Option by the Optionee upon the payment by the Company to the Optionee in cash of an amount equal to the difference between the Exercise Price and the Fair Market Value of the Shares that are subject to purchase under the terms thereof. b) Definition. For purposes of this Plan, a "Change in Control' shall mean a change in control of a nature that would be required to be reported in response to Item 1 of the Current Report on Form 8-K as in effect on April 27, 1998 pursuant to Section 13 or 15(d) of the Exchange Act, provided, that, without limitation, a Change in Control shall be deemed to have occurred if: i) any "Person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than: the Company, any Person who on the date hereof is a director or officer of the Company, or a trustee or fiduciary holding securities under an employee benefit plan of the Company, is or becomes the "beneficial owner," (as defined in Rule 13-d3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company's then-outstanding securities; or ii) during any period of two consecutive years during the term of the Plan, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period; or iii) the shareholders of the Company approve: (A) a plan of complete liquidation of the Company; or (B) an agreement for the sale or disposition of all or substantially all of the Company's assets; or (C) a merger, consolidation, or reorganization of the Company with or involving any other corporation, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or the surviving entity, or an entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) outstanding immediately after such merger, consolidation, or reorganization. 8. Amendments and Termination. a) Board Authority. The Board may amend, alter, or terminate the Plan, but no amendment, alteration, or termination shall be made (i) that would impair or adversely affect the rights of an Optionee under an Option theretofore granted, without the Optionee's consent, or (ii) without the approval of the shareholders if such approval is necessary to comply with any tax or regulatory requirement, including for these purposes any approval requirement that is a prerequisite for exemptive relief from Section 16(b) of the Exchange Act, or if the proposed alteration or amendment would increase the aggregate number of Shares that may be issued upon the exercise of Options (other than pursuant to Section 4 e)); provided, however, that in no event shall this Plan be amended more frequently than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act, or the rules thereunder. b) Prior Shareholder and Optionee Approval. Notwithstanding anything in this Plan to the contrary, in the event that amendments to the Plan are required in order that the Plan or any other stock-based compensation plan of the Company comply with the requirements of Rule 16b-3 promulgated under the Exchange Act or any successor rule promulgated by the Securities and Exchange Commission related to the treatment of benefit and compensation plans under Section 16 of the Exchange Act, the Board is authorized to make such amendments without the consent of Optionees or the shareholders of the Company. 9. General Provisions. a) Limits on Distribution. Distribution of Shares or other amounts under the Plan shall be subject to the following: i) Notwithstanding any other provision of the Plan, if at any time the Board shall determine that (i) the listing, registration or qualification of the Shares subject or related thereto upon any securities exchange or under any state or federal law, (ii) the consent or approval of any government regulatory body, or (iii) an agreement by an Optionee with respect to the disposition of Shares, is necessary or desirable as a condition of, or in connection with the Plan or the granting of such Option or the issue or purchase of Shares thereunder, the Company shall have no liability to deliver any Shares under the Plan or make any other distribution of benefits under the Plan unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board. ii) To the extent that the Plan provides for issuance of stock certificates to reflect the issuance of Shares, the issuance may be effected on a non- certificate basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange. b) Other Plans. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required by applicable law or the rules of any stock exchange on which the Common Stock is then listed; and such arrangements may be either generally applicable or applicable only in specific cases. c) Withholding of Taxes. Each Optionee shall pay to the Company, upon the Company's request, all amounts necessary to satisfy the Company's federal, state and local tax withholding obligations with respect to the grant or exercise of any Option. d) Conformity With Law. If any provision of the Plan is or becomes or is deemed invalid, illegal, or unenforceable in any jurisdiction, or would disqualify the Plan or any Option under any law deemed applicable by the Board, such provision shall be construed or deemed amended in such jurisdiction to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan, it shall be stricken and the remainder of the Plan shall remain in full force and effect. 10. Effective Date and Termination. The Plan shall become effective on April 27, 1999, upon the approval of the shareholders of the Company at the 1999 Annual Meeting of Shareholders, and shall terminate on January 1, 2005. No Options shall be granted after the termination date. Any Options outstanding on the termination date shall expire or terminate in accordance with the terms of any written instrument evidencing such Option and the terms and provisions of this Plan. Certified True and Correct Copy of the Plan ************ [CORPORATE SEAL] WEST PHARMACEUTICAL SERVICES, INC. Date: By: ------------------------ --------------------------- John R. Gailey III, Secretary Exhibit A Table of Grant Date(s) and Shares Underlying Option Grant(s) --------------------------------------------------------------- Shares Underlying Stock Options and Date of Option Grant Annual Meeting Date
Date Director Joins Board Election Date 1999 2000 2001 2002 2003 2004 2005 Totals ------------------------------------------------------------------------------------------ On or before 1999 Annual Meeting 4,500 4,500 9,000 After 1999 Annual Meeting and before January 1, 2000 750 3,000 4,500 8,250 Between January 1, 2000 and 2000 Annual Meeting 3,000 4,500 7,500 After 2000 Annual Meeting and before January 1, 2001 750 1,500 4,500 6,750 Date Director Joins Board Election Date 1999 2000 2001 2002 2003 2004 2005 Totals ------------------------------------------------------------------------------------------ Between January 1, 2001 and 2001 Annual Meeting 1,500 4,500 6,000 After 2001 Annual Meeting and before January 1, 2002 750 4,500 5,250 Between January 1, 2002 and 2002 Annual Meeting 4,500 4,500 After 2002 Annual Meeting and before January 1, 2003 750 3,000 3,750 Between January 1, 2003 and 2003 Annual Meeting 3,000 3,000 After 2003 Annual Meeting and before January 1, 2004 750 1,500 2,250 Between January 1, 2004 and 2004 Annual Meeting 1,500 1,500 After 2004 Annual Meeting and before January 1, 2005 750 750
EX-10 5 EXHIBIT 10D Exhibit 10 (d) West Pharmaceutical Services The Law Department DIRECTOR STOCK OPTION AGREEMENT GRANT DATE: APRIL 27, 1999 ----------------------------------------------------------------- West Pharmaceutical Services, Inc. (the "Company") and <> << LastName>> ("Director") agree: 8. Definitions. As used herein: a) "Board" means the Board of Directors of the Company. b) "Business Day" means a day on which the New York Stock Exchange is open for the transaction of business in New York City and at least one share of the Company's common stock is traded. c) "Expiration Date" means the earliest of the following: 1) April 27, 2009; 2) if the Director's service as a director of the Company terminates by reason of retirement, the one-year anniversary of the date of such termination, provided, however, that if the Director dies during the one-year period after retirement, the earlier of such anniversary date or 90 days after death; 3) if the Director's service as a director of the Company terminates by reasons other than retirement (including death or disability), the 90-day anniversary of the date of such termination; or 4) If the Director is removed for cause, the date of such removal. d) "Fair Market Value" means the Fair Market Value of a share of Company common stock as determined pursuant to the Plan. e) "Grant Date" means April 27, 1999, the date on which the Company awarded the Stock Option. f) "Stock Option" means the option to purchase the Option Shares hereby granted. g) "Plan" means the West Pharmaceutical Services, Inc. 1999 Non-Qualified Stock Option Plan for Non-Employee Directors, the terms of which are incorporated herein by reference. h) "Share Price" means the closing price of the Company's common stock quoted in the New York Stock Exchange Composite Transactions as published in the New York edition of The Wall Street Journal. i) "Option Shares" means the 4,500 shares of the Company's common stock, par value $.25 per share, which are the subject of the Stock Option hereby granted 2. Grant of Stock Option. The Company grants to the Director, as of the Grant Date, the Stock Option to purchase any or all of the Option Shares at a price of $32.8438 per Share, on the terms and conditions set forth herein and in the Plan. The Stock Option hereby granted is a non-qualified stock option. 3. Time of Exercise. The Stock Option shall become exercisable in three equal installments of 1,500 Option Shares as follows:
No. of Option Shares Date of Exercisability -------------------- --------------------------- 1,500 The first anniversary of the Grant Date; 1,500 The second anniversary of the Grant Date; 1,500 The third anniversary of the Grant Date;
Provided, however, that the Stock Option shall become immediately exercisable in full as follows: 1) upon the Director's retirement from the Board; and 2) on the day after both of the following occur: (A) the Share Price exceeds $43.7150; and (B) the average Share Price over the next 30 consecutive Business Days exceeds $43.7150; 3) upon the occurrence of a Change in Control (as that term is defined in the Plan) to the extent and in the manner set forth therein. 4. Payment for Option Shares. Full payment for Option Shares purchased upon the exercise of the Stock Option shall be made in cash, common stock of the Company valued at its Fair Market Value on the date of exercise, or in a combination thereof, as the Board may determine. 5. Manner and Date of Exercise. The Stock Option shall be exercised by giving written notice of exercise to the Board, in care of the Secretary, at the Company's main office in Lionville, Pennsylvania. The date of exercise shall be the date on which such notice is hand-delivered, placed in the United States mail, or transmitted via facsimile. Any such notice shall be irrevocable once given. 6. Issuance of Certificates. Subject to the terms of the Plan, a certificate for Option Shares issuable on exercise of the Stock Option shall be delivered to the Director or to his personal representative, heir or legatee as promptly as possible after the date of exercise. Fractional Option Shares shall not be issued and will be accounted for in accordance with the Plan. Neither the Director nor his personal representative, heir or legatee shall have any of the rights of a shareholder with respect to any Option Shares until the date of the issuance of such certificate. 9. Interpretation. The Board shall have the sole power to resolve any dispute or disagreement arising out of this Agreement. The interpretation and construction of any provision of this Stock Option or the Plan made by the Board shall be final and conclusive and, insofar as possible, shall be consistent with the requirements of a non-qualified stock option. 10. Entire Agreement. This Agreement, including the terms and conditions of the Plan incorporated herein by reference, is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. IN WITNESS WHEREOF, the parties have executed this Agreement in two counterparts as of the Grant Date. WEST PHARMACEUTICAL SERVICES, INC. --------------------------------------------- By: John R. Gailey III Vice President, General Counsel and Secretary Witness: ------------------ --------------------------------------------- <> <> EX-27 6 EXHIBIT 27
5 6-MOS DEC-31-1998 JUN-30-1999 39,600 0 75,200 0 40,500 21,100 471,700 257,200 530,000 78,200 160,300 0 0 4,300 220,600 530,000 238,600 238,600 164,400 164,400 0 0 4,800 32,400 12,500 19,900 0 0 0 19,900 1.33 1.32
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