-----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, N471D8BeIP9u1waVHmYILQqQ+Bz+S1zwWC4pkgq3mzFHS2KQ4tgXalwNFLPyQsGD qVAmunCfybS7AxvJMuP/Uw== 0000950154-02-000267.txt : 20020829 0000950154-02-000267.hdr.sgml : 20020829 20020829162601 ACCESSION NUMBER: 0000950154-02-000267 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020829 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-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08036 FILM NUMBER: 02752916 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-K/A 1 wp-10ka_53851.txt WEST PHARMACEUTICAL 10-K/A FILING UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 --------- Commission File Number 1-8036 --------- WEST PHARMACEUTICAL SERVICES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Pennsylvania 23-1210010 ---------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 101 Gordon Drive, PO Box 645, Lionville, PA 19341-0645 ------------------------------------------- ---------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 610-594-2900 -------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ----------------------- ------------------------------------------ Common Stock, par value New York Stock Exchange $.25 per share Securities registered pursuant to Section 12(g) of the Act: None --------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of March 26, 2002, the Registrant had 14,419,590 shares of its Common Stock outstanding. The market value of Common Stock held by non-affiliates of the Registrant as of that date was $432,587,700. The Exhibit Index appears on pages F-1, F-2, F-3, F-4 and F-5. DOCUMENTS INCORPORATED BY REFERENCE ------------------------------------ Documents incorporated by reference: (1) portions of the Registrant's Annual Report to Shareholders for the Company's 2001 fiscal year (the "2001 Annual Report to Shareholders") are incorporated by reference in Parts I and II; and (2) portions of the Registrant's definitive Proxy Statement (the "Proxy Statement") are incorporated by reference in Part III. INTRODUCTORY NOTE ----------------- West Pharmaceutical Services, Inc. is filing this amended Annual Report on Form 10-K for its fiscal year ended December 31, 2001, in order to restate Item 1, as reported in the Company's Annual Report on Form 10-K filed on March 28, 2002, in its entirety and to include as exhibits management contracts which were inadvertently not included in the original filing. PART 1 Item 1. Business West Pharmaceutical Services, Inc. (the Company) applies value-added technologies to the process of bringing new drug therapies and healthcare products to global markets. The Company's technologies include drug formulation research and development, clinical research and laboratory services, and the design, development, and manufacture of components and systems for dispensing and delivering pharmaceutical, healthcare, and consumer products. During 2001 the Company consolidated operations into two operating segments: 1) the Pharmaceutical Systems segment (consisting of four regional business units serving global markets) designs, manufactures and sells stoppers, 2 closures, medical device components and assemblies made from elastomers, metal, and plastics and provides contract laboratory services for testing injectable drug packaging. 2) the Drug Delivery Systems segment (consisting of two business units) identifies and develops drug delivery systems for biopharmaceutical and other drugs to improve their therapeutic performance and/or their method of administration. This segment also provides clinical research for Phase I, II, III and IV studies and clinical and marketing research services mostly for consumer products organizations. As of December 31, 2001, the Company and its subsidiaries had 3,960 employees. The Company, a Pennsylvania business corporation, was founded in 1923. The executive offices of the Company are located at 101 Gordon Drive, PO Box 645, Lionville, Pennsylvania 19341-0645, approximately 35 miles from Philadelphia. The telephone number at the Company's executive offices is 610-594-2900. As used in this Item, the term "Company" includes West Pharmaceutical Services, Inc. and its consolidated subsidiaries, unless the context otherwise indicates. Pharmaceutical Systems Segment Principal Products/Services ---------------------------- Pharmaceutical Stoppers - ----------------------- The Company is one of the world's largest manufacturers of rubber and elastomeric stoppers for sealing injectable drug vials and other pharmaceutical containers, a ranking that is supported by primary market research and the Company's own market resources. The Company offers several hundred proprietary natural rubber and synthetic elastomer formulations, which are molded into a variety of stopper sizes, shapes and colors. The stoppers are used in packaging serums, vaccines, antibiotics, anesthetics, intravenous solutions and other drugs and solutions. They are designed and manufactured to assure the integrity of these solutions during the packaging and throughout the drug product's approved shelf life. Most stopper formulations are specially designed to be compatible with a given drug so that the drug will remain safe and effective during storage. New elastomeric components must be tested with each drug solution to show that ingredients do not leach into the customer's product or affect the drug's potency, sterility, effectiveness, color or clarity. The Company's laboratories conduct tests to determine the compatibility of its rubber stoppers with customers' drugs and, in the United States, file formulation information with the Food and Drug Administration ("FDA"), which is used in support of customers' new drug applications. 3 Rubber stoppers are usually washed, sterilized and subject to other pre-use processes by the customer or a third party before they are fitted on the filled container. The Company has introduced a value-added line of stoppers that are pharmaceutically pre-washed and ready to be sterilized, eliminating several steps in customers' incoming processes. The Company is also developing a line of pre-sterilized stoppers that can be introduced directly into customers' sterile drug-filling operations. Metal Seals - ----------- The Company also offers a broad line of aluminum seals in various sizes, shapes, and colors that help its customers differentiate and distinguish its drug solutions. The seals are crimped onto glass or plastic pharmaceutical containers to hold the rubber stoppers securely in place. The top of the aluminum seals often contains tamper-evident tabs or plastic covers, which must be removed before the drug can be withdrawn. Some aluminum seals are sold with specially formulated rubber or elastomeric discs pre-fitted inside the seal. These "lined" seals may be placed directly onto the pharmaceutical container, thus eliminating the need for a separate stopper. In recent years, the Company has upgraded production processes for metal seal manufacturing, clearly bringing them to state-of-the-art capability. Other Products - --------------- Other products for the pharmaceutical industry include: o Products used in the packaging of non-injectable drugs such as rubber dropper bulbs, plastic contraceptive drug packages, and child-resistant and tamper-evident plastic closures; o Plastic systems used for lyophilized drug reconstitution and delivery, which are molded and fabricated in a clean room environment; o Plastic containers, bottles, and closures for the consumer and medical device and diagnostic markets; o Elastomeric and plastic components for empty and pre-filled disposable syringes such as plungers, hubs, and needle covers; o Blood-sampling system components, including vacuum tube stoppers and needle valves, and a number of specialized elastomeric and plastic components for blood-analyzing systems and other medical devices; o Closures and fitments used in intravenous drug delivery systems; and 4 o Disposable infant nursers and individual nurser components. The Company also makes closures for food and beverage processors, focusing its efforts on multiple-piece closures that require high-speed assembly. Services - -------- The contract laboratory services business was established in 1998. This business, provides a range of testing services for closures and similar drug product packaging as well as the effect of packaging on the stability of a drug product. Services include testing analysis for materials or other substances that may leach from the packaging into the drug product over time; development and validation of methods for conducting such testing; moisture analysis of closures used to package moisture-sensitive drugs; quantification of closure surface silicone; and other custom services. Product Development - ------------------- The Company maintains its own laboratories for testing raw materials and finished goods to assure conformity to customer specifications and to safeguard product quality. Laboratory facilities are also used for development of new products. Engineering staffs are responsible for product and tooling design and testing and for the design and construction of processing equipment. In addition, a corporate product development department develops new packaging and device concepts. Approximately 95 professional employees were engaged in these activities in 2001. Development and engineering expenditures for the creation and application of new and improved device products and manufacturing processes were approximately $10.0 million in 2001, $9.6 million in 2000, and $9.3 million in 1999, net of cost reimbursements by customers. Drug Delivery Systems Segment ------------------------------ Drug Delivery - ------------- Since 1993, the Company has been developing proprietary drug delivery systems for various drug and biological products for which alternative methods and routes of administration might improve therapeutic performance or the cost effectiveness of the therapy. In furtherance of that effort, in 1998 the Company completed the acquisition of DanBioSyst UK Ltd (DBS), a research and development company located in Nottingham, England. DBS was re-named West Pharmaceutical Services Drug Delivery & Clinical Research Center, Ltd. in 1999 and its operations integrated with the Company's Lionville based drug delivery development operation. 5 West Drug Delivery engages in both independent and client-funded research to develop unique delivery technologies, patenting these where possible, and, subject to any rights granted or ceded in connection with client funding, retains the rights to exploit the patented technology. West Drug Delivery has patents or patent applications covering a range of delivery technologies for various routes of administration, including nasal, oral, parenteral, pulmonary, rectal and vaginal. West Drug Delivery then seeks to license the technologies to pharmaceutical companies for use in combination with their drug products. Alternatively, West will develop unique versions of generic drug products, which incorporate its proprietary delivery technologies, and then seek development and marketing partners or licensees for the resulting products. West Drug Delivery also maintains laboratory capabilities that support client and internal development projects. Research and development expenditures for the drug delivery business unit were $7.8 million in 2001, $7.5 million in 2000 and $4.9 million in 1999. In 2001, West Drug Delivery's efforts were focused on: client-funded projects; on the further development of proprietary formulations of the drugs morphine, calcitonin, insulin, flu vaccine, and leuprolide, all using the Company's patented chitosan-based nasal delivery system (ChiSysTM) ; and on the development of a proprietary formulation of budesonide (a steroid) using the Company's TargitR system, an orally administered, specially coated, starch capsule system designed to bypass normal digestion and deliver the drug to the colon for local and systemic effect. The nasal morphine product was licensed to a third party for further development in 2000 and phase II clinical trials for nasal morphine were completed in 2001. The ChiSysTM technology was licensed to a third party for delivery of a flu vaccine in 2001; phase II clinical trials for the nasal flu vaccine were also completed in 2001. Phase I trials for nasal leuprolide, nasal insulin, and TargetR budesonide were also completed in 2001. Clinical Services - ----------------- In April 1999, the Company acquired the Clinical Services division of Collaborative Clinical Research, Inc. Clinical Services operates two distinct divisions and is a business unit within the Drug Delivery Systems segment. The two business divisions, which are described more fully below, are: a Phase I- through- IV Clinical Trial research facility (the "GFI Research Center"); and a clinical research organization ("CRO") that conducts marketing and clinical research studies for customers' prescription drugs, consumer products, and over-the-counter (OTC) switch projects. The GFI Research Center performs human Phase I through Phase IV clinical research trials, which are conducted on behalf of applicants seeking marketing approval for their drug. The GFI Research Center performs these services at its 80-bed unit located in Evansville, Indiana. 6 In conducting the trials, the GFI Research Center contracts with licensed physicians who help develop testing protocols and oversee the administration of individual trials. In addition, an Institutional Review Board, an independent committee that includes medical and non-medical personnel charged with protecting the interest of study subjects, is involved in protocol development and other aspects of the clinical trial. The GFI Research Center employs a staff of approximately 100 people, including nurses, medical technicians and other support staff. West Consumer Healthcare Research (WCHR) is a niche CRO serving the biotech and pharmaceutical industries. WCHR conducts a unique blend of marketing research and clinical research "under one roof." These services include Phase III, Phase IV, Rx-to-OTC switch work and specialty work in naturalistic studies including label and package insert comprehension, consumer self-selection, self-diagnosis, and actual use studies. In addition, WCHR performs claims substantiation studies, experience trials, volumetric forecasting on IND drugs, and other unique and customized research solutions that include clinical and/or marketing research objectives. The Company has access to market research sites and clinical sites across the United States and utilizes a central medical operations group comprised of nurses and physicians for many of its studies. Clinical Services' contracts provide a fixed price for each component or service delivered. The ultimate contract value depends on such variables as the number of research sites selected, the number of patients enrolled and other services required by sponsors. These contracts range in duration from several months up to two years. As services are performed over the life of the contract, revenue is earned under the percentage-of-completion method utilizing units of delivery. Costs associated with contract revenue are recognized as incurred. Cash flows vary with each contract, although generally a portion of the contract fee is paid at the time the trial begins, with the balance paid as pre-determined contract milestones are satisfied. Pre-payments received are recorded as a liability under "deferred revenue" until work has been completed and revenue has been earned. Generally, sponsors may terminate a contract with the Company with or without cause. In the event of termination, the Company is entitled to payment for all work performed through the termination date and for costs associated with termination of the study. The Company may be subject to claims arising from the personal injury or death of persons participating in clinical trials, the professional malpractice of the physicians with whom the Company has contracted or the actions of its own employees in conducting the trials. The Company believes that these risks are mitigated by several factors. First, the physicians who perform the studies are required to carry their own malpractice insurance. Second, review by an Institutional Review Board helps to ensure that the trial is run safely and appropriately. Third, all study subjects are required to sign an informed consent prior to their participation in a particular study. Finally, regulations governing the conduct of clinical trials and the protection of human subjects place responsibility for proper study conduct and the protection of study subjects directly on the 7 principal investigator at each location where a study is performed. To further reduce its exposure to liability, the Company typically obtains indemnification from the trial sponsors, and in some cases, from investigators and affiliated sites contracted by the Company on behalf of the sponsor. However, the indemnification excludes actions by the Company such as negligence or misconduct, and the terms of each indemnification provision may vary. The Company does not believe that it is exposed to significant liability by the market research and other similar activities conducted by WCHR. Government Regulation - --------------------- The Food and Drug Administration ("FDA") extensively regulates under the Food, Drug and Cosmetic Act and FDA regulations the research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing of drugs. The Company's businesses are involved in a number of activities that the FDA regulates. The Company's contract laboratory, which performs certain services for drug manufacturers, is subject to the FDA's current good manufacturing practices ("cGMP") regulations. It must also register as a contract laboratory with the FDA. Such contract laboratories are subject to periodic inspections by the FDA. The Drug Enforcement Administration has licensed the contract laboratory to handle and store controlled substances. The Company's drug packaging components, including stoppers, seals and syringes, are used to package drug products that are regulated by the FDA. To accommodate the needs of its customers, which manufacture drug products, the Company must maintain detailed written procedures for the receipt, identification, storage, handling, sampling, testing and approval or rejection of its products. Before shipment, samples from each lot of components must be tested for conformance with applicable written requirements. Manufacturing facilities must establish and conform to written procedures for production and process controls and must create and retain records for a specified period of time. The FDA regulates the work of the GFI Research Center in certain clinical trials. GFI must comply with the FDA's regulations applicable to activities a sponsor of certain trials delegates to it, such as recruitment of study subjects, documentation of the study, and conducting and monitoring the trial. In addition, the FDA regulates the conduct and activities of the GFI's Institutional Review Board. To be approved for marketing in the United States, drugs must undergo an extensive development and approval process designed to ensure that only those products proven to be safe and effective are made available to the public. As part of that process, applicants seeking approval must conduct, through hospitals and other clinical research facilities, a series of clinical tests of the drug on humans. These clinical trials involve the administration or use of a drug in progressively larger populations of human volunteers, 8 and in some cases, over long periods of time and in higher doses. Human clinical trials are a critical component of the drug development process as the FDA's ultimate approval for marketing of an applicant's drug will depend in large measure on the data and information obtained during the clinical trial work. Clinical trials involve the administration of the investigational drug to human subjects under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing the objectives of the study, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the investigational new drug exemption. Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Each trial must be reviewed and approved by the Institutional Review Board before it can begin. Phase I usually involves the initial introduction of the investigational drug into people to evaluate its safety, dosage tolerance, pharmacodynamics, and, if possible, to gain an early indication of its effectiveness. Phase II usually involves trials in a limited patient population to evaluate dosage tolerance and appropriate dosage; identify possible adverse effects and safety risks; and evaluate preliminarily the efficacy of the drug for specific indications. Phase III trials usually further evaluate clinical efficacy and test further for safety by using the drug in its final form in an expanded patient population. The FDA sometimes requires Phase IV studies to be conducted after a drug has been approved for marketing. These studies are used to monitor the long-term risks and benefits of a particular drug, to study the effect of alternative dosage levels, or to evaluate the safety and efficacy of a drug in targeted patient populations. Recent Developments ------------------- The Company has taken steps to expand its product offerings and improve the competitiveness of each of its operating segments. In November 2001, the Company sold all the operating assets of its contract manufacturing and packaging business unit to DPT Lakewood, Inc., an affiliate of DPT Laboratories, Ltd. and DFB Pharmaceuticals, Inc. The sales price totaled $29.8 million, consisting of $28 million of cash and a $1.8 million note due in 2003. The sale resulted in a net loss of $25.2 million, or $1.76 per share. The balance of the proceeds received was used to repay outstanding debt. Following the sale, the Company announced that it had consolidated its operations into two segments: Pharmaceutical Systems and Drug Delivery Systems. In 2001, the Company recorded a net restructuring charge of $2.9 million. The charge consisted of a restructuring provision of $4.9 million relating principally to the termination of approximately 25 mid-and senior level 9 management positions, and a $2.0 million adjustment related to the sale of a Puerto Rico plastic device manufacturing facility held for sale from the 2000 restructuring program. In 2000, the Company recorded a restructuring charge of $15.0 million. This charge covered a $9.2 million goodwill write-down to the site management organization of the clinical services business unit, a $2.7 million reduction to the estimated net realizable value of a plastic device manufacturing plant in Puerto Rico, and $3.1 million of accrued severance, benefit, and asset disposal costs. Also, in 2000, the Company recorded $5.8 million of restructuring charges in connection with its contract manufacturing and packaging operations. This charge consisted of a $5.0 million reduction to the estimated net realizable value of assets to be sold and $0.8 million of accrued severance, benefit, and asset disposal costs. These costs are recorded as part of discontinued operations. In 1999, the Company changed its business plan with respect to its plastics strategy concerning future market demands and total capacity requirements. As a result, the Company reversed a portion of its 1996 restructuring reserve pertaining to its Puerto Rico facility and wrote off the assets associated with a proprietary plastic product line that had not gained market acceptance. Order Backlog -------------- At December 31, 2001 Pharmaceutical Systems segment order backlog was approximately $105 million, of which $104.7 million is expected to be filled during fiscal year 2002, compared with approximately $92 million at the end of 2000. Order backlog in this segment includes firm orders placed by customers for manufacture over a period of time according to a customer's schedule or upon confirmation by the customer. The Company also has contractual arrangements with a number of its customers, and products covered by these contracts are included in the Company's backlog only as orders are received from those customers. Drug Delivery Systems segment backlog, which is primarily related to the clinical services business unit, consists of signed contracts yet to be completed. Contracts included in backlog are subject to termination or delay at any time and therefore the backlog is not necessarily a meaningful predictor of future results. Delayed contracts remain in the Company's backlog until cancelled. As of December 31, 2001, the Drug Delivery Systems segment backlog was $4.1 million, of which $3.2 million is expected to be filled during fiscal year 2002; at December 31, 2000 the backlog was $6.5 million. 10 Raw Materials ------------- The Company uses three basic raw materials in the manufacture of its device products: elastomers, aluminum, and plastic. The Company has been receiving adequate supplies of raw materials to meet its production needs, and it foresees no significant availability problems in the near future. The Company is pursuing a supply chain management strategy, which involves purchasing from integrated suppliers that control their own sources of supply. This strategy has reduced the number of raw material suppliers used by the Company. In some cases, the Company will purchase raw materials from a single source to assure quality and reduce costs. This strategy increases the risks that the Company's supply lines may be interrupted in the event of a supplier production problem. These risks are managed by selecting suppliers with multiple manufacturing sites, rigid quality control systems, surplus inventory levels and other methods of maintaining supply in case of interruption in production. Patents and Licenses --------------------- The Company's device products patents and trademarks have been useful in establishing the Company's market share and in the growth of the Company's manufactured device product business and may continue to be of value in the future, especially in view of the Company's continuing development of its own proprietary products. Nevertheless, the Company does not consider its current manufactured device product business or its earnings to be materially dependent upon any single patent or trademark. The Company believes its drug delivery development capabilities will play an increasingly important role in the future. The drug delivery business unit has a growing portfolio of patented technologies, which is critical to the Company's success because a significant amount of future income is expected to be derived from licensing this technology to customers. Major Customers ----------------- The Company provides manufactured device components and/or contract services to major pharmaceutical, biotechnology and hospital supply/medical device companies, many of which have several divisions with separate purchasing responsibilities. The Company also provides clinical research and market research services to full service contract research and consumer product organizations. The Company distributes its products and services primarily 11 through its own sales force but also uses regional distributors in the United States and in the Asia/Pacific region. Becton Dickinson and Company ("BD") accounted for approximately 13% of the Company's 2001 consolidated net sales. The principal products sold to BD are synthetic rubber, natural rubber, metal and plastic components used in BD's disposable and pre-filled syringes and blood sampling and analysis devices. The Company expects to continue as a major BD supplier. Excluding BD, the next ten largest customers accounted for approximately 30% of the Company's consolidated net sales in 2001 but no one of these customers accounted for more than 4% of 2001 consolidated net sales. Competition ----------- The Company competes with several companies, some of which are larger than the Company, across its major Pharmaceutical Systems product lines. In addition, many companies worldwide compete with the Company for business related to specific product lines. However, the Company believes that it supplies a major portion of the U.S. market requirements for pharmaceutical elastomer and metal packaging components and has a significant share of the European market for these components. Because of the special nature of these products, competition is based primarily on product design and performance, although total cost is becoming increasingly more important as pharmaceutical companies continue with aggressive cost control programs across their entire operations. Competitors often compete on the basis of price. The Company differentiates itself from its competition as a "full-service" supplier that is able to provide pre-sale compatibility studies and other services and sophisticated post- sale technical support on a global basis. The Company competes against numerous competitors in the field of plastic closures for consumer products, many of which are larger than the Company and command significant market shares. The Company differentiates itself through its expertise in high-speed assembly of multiple-piece closure systems. The clinical research industry is highly fragmented and comprised of several large, full-service Contract Research Organizations (CROs), many small CROs and limited services providers. The major competitors in the industry include the research departments of pharmaceutical companies and CROs. Many companies provide proprietary drug delivery technologies to the pharmaceutical and biotechnology markets. However, unlike West, the majority of 12 these companies are focused on a single route of drug administration, and very few have capabilities necessary to take drug products through all stages of the development process and commercial manufacture. The three largest companies, the market leaders, have multiple-delivery technologies, but their strong franchises are in oral, controlled-release delivery systems. West's drug delivery technologies, none of which is currently in commercial production, are in less competitive segments that do not compete with the market leaders. Environmental Regulations ------------------------- The Company does not believe that it will have any material expenditures relating to environmental matters other than those discussed in the Note "Commitments and Contingencies" of Notes to Consolidated Financial Statements of the 2001 Annual Report to Shareholders, incorporated herein by reference. International ------------- The Note "Affiliated Companies" and the Note "Segment Information" of the Notes to Consolidated Financial Statements of the 2001 Annual Report to Shareholders are incorporated herein by reference. The Company believes that its international business does not involve a substantially greater business risk than its domestic business. Although financial crises have been evident at various times during recent years in the Asia/Pacific region and in major markets in South America and have at times resulted in a decline in demand for the Company's products in these regions, direct sales to customers in these markets have historically not been significant. In 2001, such sales represented less than 11% of consolidated sales. The Company's financial condition and results are impacted by fluctuations in exchange-rate markets (See Notes "Summary of Significant Accounting Policies - Foreign Currency Translation" and "Other Income (Expense)" of Notes to Consolidated Financial Statements of the 2001 Annual Report to Shareholders, incorporated herein by reference). Hedging by the Company of these exposures is discussed in the Note "Summary of Significant Accounting Policies - Financial Instruments" and in the Note "Financial Instruments" of the Notes to Consolidated Financial Statements of the 2001 Annual Report to Shareholders, incorporated herein by reference. 13 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. ---------------------------------------------------------------- (a)1. The following report and consolidated financial statements, included in the 2001 Annual Report to Shareholders, have been incorporated herein by reference: Consolidated Statements of Income for the years ended December 31, 2001, 2000 and 1999 Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2001, 2000 and 1999 Consolidated Balance Sheets at December 31, 2001 and 2000 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2000 and 1999 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 Notes to Consolidated Financial Statements Report of Independent Accountants (a)2. Supplementary Financial Information Schedules are omitted because they are either not applicable, not required or because the information required is contained in the consolidated financial statements or notes thereto. (a)3. See Index to Exhibits on pages F-1, F-2, F-3, F-4 and F-5 of this Report. (b) Reports on Form 8-K Current Report on Form 8-K filed on November 20, 2001 announcing the disposition of all assets of West Pharmaceutical Services Lakewood, Inc., Charter Laboratories, Inc. and Paco Laboratories, Inc. Current Report on Form 8-K dated November 30, 2001 (date of earliest event reported), filed on December 17, 2001 including the unaudited 14 pro forma Consolidated Balance Sheet as of September 30, 2001 and unaudited pro forma Consolidated Statements of Income for the year ended December 31, 2000 and the nine months ended September 30, 2001 for West Pharmaceutical Services, Inc. The unaudited pro forma consolidated financial statements reflect the sale of West Pharmaceutical Services Lakewood, Inc., Charter Laboratories, Inc. and Paco Laboratories, Inc. (c) The exhibits are listed in the Index to Exhibits on pages F-1, F-2, F-3, F-4 and F-5 of this Report. (d) Financial Statements of affiliates are omitted because they do not meet the tests of a significant subsidiary at the 20% level. 15 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, West Pharmaceutical Services, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WEST PHARMACEUTICAL SERVICES, INC. (Registrant) By /s/ Linda R. Altemus - ----------------------------------------------- Linda R. Altemus Vice President and Chief Financial Officer August 29, 2002 - ----------------------------------------------- Date Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Donald E. Morel, Jr. Director August 29, 2002 - ---------------------------------------- and Chief Executive Officer Donald E. Morel, Jr. (Principal Executive Officer) /s/ Joseph E. Abbott Vice President and August 29, 2002 - ---------------------------------------- Corporate Controller Joseph E. Abbott (Principal Accounting Officer) * Director August 29, 2002 - ---------------------------------------- Tenley E. Albright /s/ Linda R. Altemus Vice President and August 29, 2002 - ---------------------------------------- Chief Financial Officer Linda R. Altemus * Director August 29, 2002 - ---------------------------------------- John W. Conway * Director August 29, 2002 - ---------------------------------------- George W. Ebright * Director August 29, 2002 - ---------------------------------------- L. Robert Johnson * Director August 29, 2002 - ---------------------------------------- William H. Longfield * Director August 29, 2002 - ---------------------------------------- John P. Neafsey * Director August 29, 2002 - ---------------------------------------- Anthony Welters * Director August 29, 2002 - ---------------------------------------- Geoffrey F. Worden
* By John R. Gailey III pursuant to a power of attorney. INDEX TO EXHIBITS Exhibit Number (3)(a) Amended and Restated Articles of Incorporation of the Company through January 4, 1999 incorporated by reference to Exhibit (3)(a) of 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) Miscellaneous long term debt instruments and credit facility agreements of the Company, under which the underlying authorized debt is equal to less than ten percent of the total assets of the Company and its subsidiaries on a consolidated basis, may not be filed as exhibits to this report pursuant to Section (b) (4) (iii) A of Item 601 of Reg S-K. The Company agrees to furnish to the Commission, upon request, copies of any such unfiled instruments (File No. 1-8036). (4)(a) Form of stock certificate for common stock incorporated by reference to Exhibit (4) (a) of the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8036). (4)(b) Note Purchase Agreement dated as of April 8, 1999 among the Company and the insurance companies identified on a schedule thereto, incorporated by reference to Exhibit (4)(b) of the Company's Form 10-Q for the quarter ended September 30, 2000 (File No. 1-8036). (4)(c) Credit Agreement, dated as of July 26, 2000 among the Company, the banks identified on a schedule thereto, and PNC Bank, N.A., as agent for the banks (the "Credit Agreement"), incorporated by reference to Exhibit (4) (c) of the Company's Form 10-Q for the quarter ended September 30, 2000 (File No. 1-8036). (4)(c)(1) First Amendment dated as of September 14, 2000, to the Credit Agreement. F-1 (4)(c)(2) Second Amendment dated as of November 17, 2000, to the Credit Agreement. (4)(c)(3) Joinder and Assumption Agreement dated as of February 28, 2001, with respect to the Credit Agreement. (4)(c)(4) Third Amendment dated as of February 28, 2001 to the Credit Agreement. (4)(c)(5) Fourth Amendment dated as of July 13, 2001 to the Credit Agreement, incorporated by reference to Exhibit (10) (a) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (4)(c)(6) Extension Agreement dated as of January 5, 2001 to the Credit Agreement. (9) None. (10)(a) Lease dated as of December 31, 1992 between Lion Associates, L.P. and the Company, relating to the lease of the Company's headquarters in Lionville, Pa., incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 1-8036). (10)(b) First Addendum to Lease dated as of May 22, 1995 between Lion Associates, L.P. and the Company, incorporated by reference to Exhibit (10)(d) of the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 1- 8036). (10)(c) Long-Term Incentive Plan, as amended March 2, 1993, incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992 (File No. 1- 8036). (10)(d) Amendments to the Long Term Incentive Plan, dated April 30, 1996, incorporated herein by reference to Exhibit (10)(a) of the Company's Form 10Q for the quarter ended June 30, 1996 (File No. 1-8036). (10)(d)(1) Amendment to the Long Term Incentive Plan, Effective October 30, 2001. (10)(e) 1999 Non-Qualified Stock Option Plan for Non- Employee Directors, effective as of April 27, 1999, incorporated by F-2 reference Exhibit (10)(c) of to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1- 8036). (10)(f) Amendment No. 1 to 1999 Non-Qualified Stock Option Plan for Non-Employee Directors, Effective October 30, 2001. (10)(g) Change-In-Control Agreement dated as of July 5, 2000 between the Company and Linda R. Altemus. (10)(g)(1) Amendment #1 to Change-In-Control Agreement dated May 1, 2001 between the Company and Linda R. Altemus. (10)(h) Amended and Restated Change-In-Control Agreement dated as of March 25, 2000 between the Company and Michael A. Anderson. (10)(i)(1) Second Amended and Restated Change-In-Control Agreement dated as of March 25, 2000 between the Company and Steven A. Ellers. (10)(i)(2) Amendment #1 to Second Amended and Restated Change-In-Control Agreement dated as of May 1, 2001 between the Company and Steven A. Ellers. (10)(j)(1) Second Amended and Restated Change-In-Control Agreement dated as of March 25, 2000 between the Company and John R. Gailey III. (10)(j)(2) Amendment #1 to Second Amended and Restated Change-In-Control Agreement dated as of May 1, 2001 between the Company and John R. Gailey III. (10)(k)(1) Change-In-Control Agreement dated as of July 10, 2000 between the Company and Herbert L. Hugill. (10)(k)(2) Amendment #1 to Change-In-Control Agreement dated as of May 1, 2001 between the Company and Herbert L. Hugill. (10)(l)(1) Second Amended and Restated Change-In-Control Agreement dated as of March 25, 2000 between the Company and Donald E. Morel, Jr. (10)(l)(2) Amendment #1 to Second Amended and Restated Change-In-Control Agreement dated as of May 1, 2001 between the Company and Donald E. Morel, Jr. (10)(m) Supplemental Employees' Retirement Plan, incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 (File No. 1-8036). F-3 (10)(n) Amendment No. 1 to Supplemental Employees' Retirement Plan, incorporated by reference to Exhibit (10)(l) of the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 1- 8036). (10)(o) Amendment No. 2 to Supplemental Employees' Retirement Plan, incorporated by reference to Exhibit (10)(c) of the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1995 (File No. 1-8036). (10)(p) Amended and Restated Employment Agreement dated as of March 25, 2000 between the Company and William G. Little, incorporated by reference to Exhibit (10)(a) of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 (File No. 1-8036). (10)(p)(1) Amendment No.1 to Amended and Restated Employment Agreement, dated as of May 1, 2001, between the Company and William G. Little. (10)(q) Non-Qualified Deferred Compensation Plan for Designated Executive Officers as amended and restated effective April 1, 2000, incorporated by reference to Exhibit (10)(a) of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (File No. 1-8036). (10)(r) Deferred Compensation Plan for Outside Directors, as amended and restated effective May 27, 1999, incorporated by reference to Exhibit(10)(a) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (File No. 1-8036). (10)(s) 1999 Stock-Equivalents Compensation Plan for Non-Employee Directors, incorporated by reference to Exhibit (10)(a) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (File No. 1-8036). (10)(t) 1998 Key Employee Incentive Compensation Plan, dated March 10, 1998, incorporated by reference to Exhibit (10)(y) of the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (File No.1-8036). (10)(u) Asset Purchase Agreement, dated as of November 15, 2001, by and among DFB Pharmaceuticals, Inc., DPT Lakewood, Inc., West Pharmaceutical Services, Inc., West Pharmaceutical Services Lakewood, Inc., Charter Laboratories, Inc. and Paco Laboratories, Inc., incorporated by reference to Exhibit 2.1 of the Company's Current Report on form 8-K dated November 20, 2001 (File No. 1-8036). F-4 (10)(v) Side letter dated November 30, 2001, incorporated by reference to Exhibit 2.2 of the Company's Current Report on Form 8-K dated November 20, 2001 (File No.1-8036). (10)(w) Amendment No.1 to 1998 Key Employees Incentive Compensation Plan, effective October 30, 2001. (11) Not Applicable. (12) Not Applicable. (13) Portions of 2001 Annual Report to Shareholders. (16) Not applicable. (18) None. (21) Subsidiaries of the Company. (22) None. (23) Consent of Independent Accountants. (24) Powers of Attorney. (99) None. F-5 EX-10 4 wp-exhibit_10g1.txt CHANGE-IN-CONTROL [WEST PHARMACEUTICAL LOGO OMITTED] Exhibit (10)(g)(1) ------------------ AMENDMENT #1 TO CHANGE-IN-CONTROL AGREEMENT ------------------------------------------- THIS IS AMENDMENT #1 TO CHANGE-IN-CONTROL AGREEMENT (the "Agreement"), dated as of May 1, 2001, between West Pharmaceutical Services, Inc., a Pennsylvania corporation, (the "Company") and LINDA R. ALTEMUS ("Executive"). BACKGROUND ---------- The Company and Executive are parties to a Change-in-Control Agreement, dated as of July 5, 2000 (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 (ii) of Section 3 (a) (Benefits Payable Upon Termination of Employment) of the Change-in-Control ----------------------------------------------- Agreement is deleted in its entirety and replaced with the following: "(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 as of the date first written above. WEST PHARMACEUTICAL SERVICES, INC. /s/ Linda R. Altemus By: /s/ William G. Little - ---------------------------- ------------------------------ Linda R. Altemus William G. Little, Chairman of the Board and Chief Executive Officer EX-10 5 wp-exhibit_10h.txt AMENDED CHANGE-IN-CONTROL [WEST PHARMACEUTICAL LOGO OMITTED] Exhibit (10)(h) --------------- AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENT - -------------------------------------------------------------------------------- THIS IS AN AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENT (the "Agreement"), dated as of March 25, 2000 between West Pharmaceutical, Services, Inc., a Pennsylvania corporation, (formerly named "The West Company, Incorporated") (the "Company") and MICHAEL A. ANDERSON ("Executive"). BACKGROUND ---------- The Executive and the Company are parties to a Change-In-Control Agreement dated October 1998 (the "Change-in-Control Agreement"). The Company desires to make an amendment and restatement of the Change-in-Control Agreement to make certain changes as set forth herein. AGREEMENT --------- In consideration of the foregoing and Executive's continued employment with the Company, and intending to be legally bound, the Company agrees with Executive as follows: 1. DEFINITIONS. As used in this Agreement, the following terms will have the meanings set forth below: (a) An "Affiliate" of any Person means any Person directly or indirectly --------- controlling, controlled by or under common control with such Person. (b) "Change in Control" shall mean a change in control of a nature that ----------------- would be required to be reported in response to Item 1 of the Current Report on Form 8-K as in effect on the date of this Agreement pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, (the "Act"), provided, that, without limitation, a Change in Control shall be deemed to have occurred if: (i) Any Person, other than: (1) the Company, (2) any Person who on the date hereof is a director or officer of the Company, or (3) a trustee or fiduciary holding securities under an employee benefit plan of the Company, (ii) is or becomes the "beneficial owner," (as defined in Rule 13-d3 under the Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company's then outstanding securities; or (iii) During any period of two consecutive years during the term of this Agreement, individuals who at the beginning of such period constitute the Board of Directors of the Company cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period; or (iv) The shareholders of the Company approve: (A) a plan of complete liquidation of the Company; or (B) an agreement for the sale or disposition of all or substantially all of the Company's assets; or (C) a merger, consolidation, or reorganization of the Company with or involving any other corporation, other than a merger, ----- consolidation, or reorganization (collectively, a "Transaction"), that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), at least 50% of the combined voting power of the voting securities of the Company (or the surviving entity, or an entity which as a result of the Transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) outstanding immediately after the Transaction. (c) "Code" means the Internal Revenue Code of 1986, as amended. ---- (d) The "Company's Business" means: (i) the contract-manufacturing and ------------------ contract-filing business for the pharmaceutical and consumer-products industries, being carried on by West Pharmaceutical Services Lakewood, Inc. and its subsidiaries; (ii) the manufacture and sale of stoppers, closures, containers, medical-device components and assemblies made from elastomers, metal and plastic for the health-care and consumer-products industries; (iii) the development of proprietary drug-delivery technologies that provide optimized therapeutic effects for challenging drug molecules, such as peptides and proteins, carbohydrates, oligonucleotides, as well as systems for vaccines, gene therapy and diagnostic applications; and (iv) any other business conducted by the Company or any of its Subsidiaries or Affiliates during the term of this Agreement and in which Executive has have been actively involved. (e) "Constructive Termination" means the occurrence of any of the ------------------------ following events: (i) The Company requires Executive to assume any duties inconsistent with, or the Company makes a significant diminution or reduction in the nature or scope of Executive's authority or duties from, those assigned to or held by Executive on the date of this Agreement; (ii) A material reduction in Executive's annual salary or incentive compensation opportunities; (iii) A relocation of Executive's site of employment to a location more than 50 miles from Executive's site of employment on the date of this Agreement; (iv) The Company falls to provide Executive with a reasonable number of paid vacation days at least equal to the number of paid vacation days to which Executive was entitled in the last full calendar year prior to the execution of this Agreement; (v) The Company fails to provide Executive with substantially the same fringe benefits that were provided to Executive immediately prior to the date of this Agreement, or with a package of fringe benefits that, although one or more of such benefits may vary from those in effect immediately prior to the execution of this Agreement, is substantially at least as beneficial to Executive in all material respects is such prior fringe benefits taken as a whole; or (vi) A successor of the Company does not assume the Company's obligations under this Agreement, expressly or as a matter of law. Notwithstanding the foregoing, no Constructive Termination will be deemed to have occurred under any of the following circumstances: (1) Executive will have consented in writing or given a written waiver to the occurrence of any of the events enumerated in clauses (i) through (vi) above; (2) Executive will have failed to give the Company written notice stating Executive's intention to claim Constructive Termination and the basis for that claim at least 10 days in advance of the effective date of Executive's resignation; or (3) The event constituting a Constructive Termination has been cured or reserved by the Company prior to the effective date of Executive's resignation. (f) "Payment" means ------- (i) any amount due or paid to the Executive under this Agreement, (ii) any amount that is due or paid to the Executive under any plan, program or arrangement of the Company and any of its subsidiaries, and (iii) any amount or benefit that is due or payable to the Executive under this Agreement or under any plan, program or arrangement of the Company and any of its subsidiaries not otherwise covered under clause (i) or (ii) hereof which must reasonably be taken into account under section 280G of the Code and the Regulations in determining the amount of the "parachute payments" received by the Executive, including, without limitation, any amounts which must be taken into account under the Code and Regulations as a result of (1) the acceleration of the vesting of any option, restricted stock or other equity award granted under any equity plan of the Company or otherwise, (2) the acceleration of the time at which any payment or benefit is receivable by the Executive or (3) any contingent severance or other amounts that are payable to the Executive. (g) "Person" means an individual, a corporation, a partnership, an ----- association, a trust or other entity or organization. (h) "Regulations" means the proposed, temporary and final regulations ----------- under section 280G of Code or any successor provision thereto. (i) "Restrictive Period" means the period of time that commences on the ------------------ date hereof and ends on the first anniversary of the Termination Date. (j) "Retirement Plan" means the West Pharmaceutical Services, Inc. --------------- Employees' Retirement Plan and any successor plan thereto. (k) "Savings/Deferred Comp Plan" means The Company's Salaried Employees' -------------------------- Savings Plan, The Company's Non-Qualified Deferred Compensation Plan for Designated Executive Officers and any other similar plan established from time to time that may allow executive officers to defer taxation of compensation. (l) "Subsidiary" has the meaning ascribed to the term by section 425(f) of ---------- the Code. (m) "Termination Date" is the date on which Executive ceases to be ---------------- employed by the Company or any of its Subsidiaries or Affiliates for any reason. 2. TERMINATION FOLLOWING A CHANGE IN CONTROL. (a) Executive will be entitled to the benefits specified in Section 3 (BENEFITS PAYABLE UPON TERMINATION OF EMPLOYMENT) if, (i) at any time within two years after a Change in Control has occurred, Executive's employment by the Company is terminated: (1) by the Company, other than by reason of death, disability, continuous willful misconduct to the detriment of the Company, or retirement at Executive's normal retirement date under the Retirement Plan, or (2) as a result of Executive's resignation at any time following Executive's Constructive Termination; or (3) the Executive resigns for any reason within 30 days following the first anniversary of a Change in Control; or (ii) the Executive resigns for any reason within 30 days following the first anniversary of the Termination Date. Except as otherwise set forth in Section 2(b), Executive will not be entitled to the Severance Payment and other benefits specified in Section 3 hereof if Executive's employment terminates for any other reason or if, at any time thereafter, Executive is in breach of any of Executive's obligations under this Agreement or the Employee Confidentiality Agreement dated July 20, 1992 (the "Confidentiality Agreement"), a copy of which is attached hereto and incorporated herein by reference. (b) If the Company executes an agreement, the consummation of which would result in the occurrence of a Change in Control, then, with respect to a termination (i) by the Company, other than by reason of death, disability, continuous willful misconduct to the detriment of the Company, or retirement at Executive's normal retirement date under the Retirement Plan, or (ii) as a result of Executive's resignation at any time following Executive's Constructive Termination occurring after the execution of such agreement (and, if such agreement expires or is terminated prior to consummation, prior to the expiration or termination of such agreement), a Change in Control shall be deemed to have occurred as of the date of the execution of such agreement and the Executive will be entitled to the Severance Payment. The Severance Payment and other benefits paid hereunder will not be reduced to the extent of any other compensation for Executive's services, which Executive receives or is entitled to receive from any other employment consistent with the terms of this Agreement. 3. BENEFITS PAYABLE UPON TERMINATION OF EMPLOYMENT. Upon termination of employment as set forth in Section 2 hereof, Executive will be entitled to the following benefits: (a) Severance Compensation. Executive will be entitled to severance --------------------- compensation of $150,000 in cash (the "Severance Payment"), which shall be payable within 10 days following the Termination Date. (b) Equivalent of Vested Savings/Deferred Comp Plan Benefit. The Company ------------------------------------------------------- will pay to Executive the difference, if any, between (i) the benefit Executive would be entitled to receive under the Savings/Deferred Comp Plan if the Company's contributions to the Savings/Deferred Comp Plan were fully vested upon the termination of Executive's employment, and (ii) the benefit Executive is entitled to receive under the terms of the Savings/Deferred Comp Plan upon termination of Executive's employment. Any such benefit will be payable at such time and in such manner as benefits are payable to Executive under the Savings/Deferred Comp Plan. (c) Unvested Equity Awards. All stock options, other equity-based awards ---------------------- and shares of the Company's stock granted or awarded to Executive pursuant to any Company compensation or benefit plan or arrangement, but which are unvested, will vest immediately upon termination of Executive's employment. The provisions of this Section 3(c) will supersede the terms of any such grant or award made to Executive under any such plan or arrangement to the extent there is an inconsistency between the two. 4. ADDITIONAL PAYMENTS. (a) Gross-Up Payment. Notwithstanding anything herein to the contrary, if ---------------- it is determined that any Payment would be subject to the excise tax imposed by section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any interest or penalties thereon, is herein referred to as an "Excise Tax"), then the Executive shall be entitled to an additional payment (a "Gross-Up Payment") in an amount that will place the Executive in the same after-tax economic position that the Executive would have enjoyed if the Excise Tax had not applied to the Payment. (b) Determination of Gross-Up Payment. Subject to the provisions of -------------------------------- Section 4(c), all determinations required under this Section 4, including whether a Gross-Up Payment is required, the amount of the Payments constituting excess parachute payments, and the amount of the Gross-Up Payment, shall be made by the accounting firm that was the Company's independent auditors immediately prior to the Change in Control (or, in default thereof, an accounting firm mutually agreed upon by the Company and the Executive) (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Executive and the Company within fifteen days of the Change in Control, the date of termination of employment or any other date reasonably requested by the Executive or the Company on which a determination under this Section 4 is necessary or advisable. The Company shall pay to the Executive the initial Gross-Up Payment within 5 days of the receipt by the Executive and the Company of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, the Company shall cause the Accounting Firm to provide the Executive with an opinion that the Accounting Firm has substantial authority under the Code and Regulations not to report an Excise Tax on the Executive's federal income tax return. Any determination by the Accounting Firm shall be binding upon the Executive and the Company. If the initial Gross-Up Payment is insufficient to cover the amount of the Excise Tax that is ultimately determined to be owing by the Executive with respect to any Payment (hereinafter an "Underpayment"), the Company, after exhausting its remedies under Section 4(c) below, shall promptly pay to the Executive an additional Gross-Up Payment in respect of the Underpayment. (c) Procedures. The Executive shall notify the Company in writing of any ---------- claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notice shall be given as soon as practicable after the Executive knows of such claim and shall apprise the Company of the nature of the claim and the date on which the claim is requested to be paid. The Executive agrees not to pay the claim until the expiration of the thirty-day period following the date on which the Executive notifies the Company, or such shorter period ending on the date the Taxes with respect to such claim are due (the "Notice Period"). If the Company notifies the Executive in writing prior to the expiration of the Notice Period that it desires to contest the claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to the claim; (ii) take such action in connection with the claim as the Company may reasonably request, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and reasonably acceptable to the Executive; (iii) cooperate with the Company in good faith in contesting the claim; and (iv) permit the Company to participate in any proceedings relating to the claim. The Executive shall permit the Company to control all proceedings related to the claim and, at its option, permit the Company to pursue or forgo any and all administrative appeals, proceedings, hearings, and conferences with the taxing authority in respect of such claim. If requested by the Company, the Executive agrees either to pay the tax claimed and sue for a refund or contest the claim in any permissible manner and to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts as the Company shall determine; provided, however, that, if the Company directs the Executive to pay such claim and pursue a refund, the Company shall advance the amount of such payment to the Executive on an after-tax and interest-free basis (the "Advance"). The Company's control of the contest related to the claim shall be limited to the issues related to the Gross-Up Payment and the Executive shall be entitled to settle or contest, as the case may be, any other issues raised by the Internal Revenue Service or other taxing authority. If the Company does not notify the Executive in writing prior to the end of the Notice Period of its desire to contest the claim, the Company shall pay to the Executive an additional Gross-Up Payment in respect of the excess parachute payments that are the subject of the claim, and the Executive agrees to pay the amount of the Excise Tax that is the subject of the claim to the applicable taxing authority in accordance with applicable law. (d) Repayments. If, after receipt by the Executive of an Advance, the ---------- Executive becomes entitled to a refund with respect to the claim to which such Advance relates, the Executive shall pay the Company the amount of the refund (together with any interest paid or credited thereon after Taxes applicable thereto). If, after receipt by the Executive of an Advance, a determination is made that the Executive shall not be entitled to any refund with respect to the claim and the Company does not promptly notify the Executive of its intent to contest the denial of refund, then the amount of the Advance shall not be required to be repaid by the Executive and the amount thereof shall offset the amount of the additional Gross-Up Payment then owing to the Executive. (e) Further Assurances. The Company shall indemnify the Executive and hold ------------------ the Executive harmless, on an after-tax basis, from any costs, expenses, penalties, fines, interest or other liabilities ("Losses") incurred by the Executive with respect to the exercise by the Company of any of its rights under this Section 4, including, without limitation, any Losses related to the Company's decision to contest a claim or any imputed income to the Executive resulting from any Advance or action taken on the Executive's behalf by the Company hereunder. The Company shall pay, or cause the Trust to pay, all legal fees and expenses incurred under this Section 4 and shall promptly reimburse the Executive, or cause the Trust to reimburse the Executive, for the reasonable expenses incurred by the Executive in connection with any actions taken by the Company or required to be taken by the Executive hereunder. The Company shall also pay all of the fees and expenses of the Accounting Firm, including, without limitation, the fees and expenses related to the opinion referred to in Section 4(b). 5. LEGAL FEES. The Company will pay all legal fees and expenses that Executive may incur as a result of the Company's contesting the validity or enforceability of this Agreement. 6. PAYMENTS FINAL. In the event of a termination of Executive's employment under the circumstances described in this Agreement, the arrangements provided for by this Agreement, and any other agreement between the Company and Executive in effect at that time and by any other applicable plan of the Company in which Executive then participates, will constitute the entire obligation of the Company to Executive, and performance of that obligation will constitute full settlement of any claim that Executive might otherwise assert against the Company on account of such termination. The Company's obligation to pay Executive under this Agreement will be absolute and unconditional and will not be affected by any circumstance, including without limitation, any set-off, counterclaim, defense or other rights the Company may have against Executive or anyone else as long as Executive is not in beach of Executive's obligations under this Agreement. 7. NON-COMPETITION. (a) During the Restrictive Period, Executive will not, and will not permit any of Executive's Affiliates, or any other Person, directly or indirectly, to: (b) engage in competition with, or acquire a direct or indirect interest or an option to acquire such an interest in any Person engaged in competition with, the Company's Business in the United States (other than an interest of not more than 5 percent of the outstanding stock of any publicly traded company); (i) serve as a director, officer, employee or consultant of, or furnish information to, or otherwise facilitate the efforts of, any Person engaged in competition with the Company's Business in the United States or Puerto Rico; (ii) solicit, employ, interfere with or attempt to entice away from the Company any employee who has been employed by the Company or a Subsidiary in an executive or supervisory capacity in connection with the conduct of the Company's Business within one year prior to such solicitation, employment, interference or enticement; or (iii) approach, solicit or deal with in competition with the Company or any Subsidiary any Person which at any time during the 12 months immediately preceding the Termination Date: (1) was a customer, client, supplier, agent or distributor of the Company or any Subsidiary; (2) was a customer, client, supplier, agent or distributor of the Company or any Subsidiary with whom employees reporting to or under the direct control of Executive had personal contact on behalf of the Company or any Subsidiary; or (3) was a Person with whom Executive had regular, substantial or a series of business dealings on behalf of the Company or any Subsidiary (whether or not a customer, client, supplier, agent or distributor of the Company or any Subsidiary). (c) For the avoidance of doubt, Executive agrees that the phrase "Person engaged in competition with the Company's Business" as used in this Section includes, without limitation, the companies listed on Exhibit "A" to this Agreement, their Affiliates and subsidiaries. 8. VESTING IN THE EVENT OF A CHANGE IN CONTROL. In the event of a Change in Control, all stock options, equity-based awards and shares of the Company's stock granted or awarded to the Executive pursuant to any Company compensation or benefit plan or arrangement, but which are unvested at that time, will vest immediately upon such Change in Control. The provisions of this Section 8 will supersede the terms of any such grant or award made to Executive under any such plan or arrangement to the extent there is an inconsistency between the two. 9. DURATION OF AGREEMENT. This Agreement shall commence on the date hereof and shall continue until terminated as provided in this Section. This Agreement may be terminated only under the following circumstances: (i) At any time by the mutual written consent of Executive and the Company; and (ii) By the Company at the end of each successive two-year period commencing on the date of this Agreement by giving Executive written notice at least one year in advance of such termination, except that such termination and written notice will not be effective unless Executive will be employed by the Company on the Termination Date. 10. MISCELLANEOUS. (a) In consideration for the benefit of having the protection afforded by this Agreement, Executive agrees that the provisions of Section 7 (NON-COMPETITION) and the Confidentiality Agreement apply to Executive, and Executive will be bound by them, whether or not a Change in Control occurs or Executive actually receives the Severance Payment and other benefits specified herein. (b) This Agreement will be binding upon and inure to the benefit of Executive, Executive's personal representatives and heirs and the Company and any successor of the Company, but neither this Agreement nor any rights arising hereunder may be assigned or pledged by Executive. (c) Executive acknowledges that a breach of the covenants contained in Section 7 (NON-COMPETITION) or in the Confidentiality Agreement will cause the Company immediate and irreparable harm for which the Company's remedies at law (such as money damages) will be inadequate. The Company shall have the right, in addition to any other rights it may have, to obtain an injunction to restrain any breach or threatened breach of such Sections. The Company may contact any Person with or for whom you work after your employment by the Company ends and may send that Person a copy of this Agreement. (d) Should any provision of this Agreement be adjudged to any extent invalid by any competent tribunal, that provision will be deemed modified to the extent necessary to make it enforceable. (e) This Agreement will be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania. (f) This Agreement amends and restates the Change-in-Control Agreement, which shall be null and void and of no further effect. This Agreement, together with the Confidentiality Agreement, constitutes the entire agreement and understanding between the Company and Executive with respect to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings between the Company and Executive with respect to such matters. (g) This Agreement may be executed in one or more counterparts, which together shall constitute a single agreement. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above. WEST PHARMACEUTICAL SERVICES, INC. /s/ M.A. Anderson By: /s/ William G. Little - --------------------------- ---------------------------------------- MICHAEL A. ANDERSON William G. Little, Chairman of the Board and Chief Executive Officer EXHIBIT "A" LIST OF PERSONS ENGAGED IN COMPETITION WITH THE COMPANY'S BUSINESS - ------------------------------------------------------------------ Stelmi Trading International, including its subsidiary American Stelmi, Inc. Pharmaceutical packaging division of Swiss Group Datwyler, including its subsidiary Helvoet Pharma, Inc. Comar, Inc. Alusuisse SA, including its subsidiary Lawson Mardon Wheaton, Inc. Sharp Ivers-Lee Corporation Accupac Anderson Packaging, Inc. Packaging Coordinators, Inc. (PCI) Pharmaceutical Packaging Specialties, Inc. Nastech, Inc. Emisphere Technologies Incorporated Elan Corporation, PLC TheraTech, Inc. ALZA Corporation EX-10 6 wp-exhibit_10i2.txt RESTATED CHANGE-SAE [WEST PHARMACEUTICAL LOGO OMITTED] Exhibit (10)(i)(2) ------------------ AMENDMENT #1 TO SECOND AMENDED AND RESTATED ------------------------------------------- CHANGE-IN-CONTROL AGREEMENT --------------------------- THIS IS AMENDMENT #1 TO SECOND AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENT (the "Agreement"), dated as of May 1, 2001, between West Pharmaceutical Services, Inc., a Pennsylvania corporation, (the "Company") and STEVEN A. ELLERS ("Executive"). BACKGROUND ---------- The Company and Executive are parties to a Second Amended and Restated Change-in-Control Agreement, dated as of March 25, 2000 (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 (ii) of Section 3 (a) (Benefits Payable Upon Termination of Employment) of the Change-in-Control ----------------------------------------------- Agreement is deleted in its entirety and replaced with the following: "(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 as of the date first written above. WEST PHARMACEUTICAL SERVICES, INC. /s/ Steven A. Ellers By: /s/ William G. Little - --------------------------------- -------------------------------- Steven A. Ellers William G. Little, Chairman of the Board and Chief Executive Officer EX-10 7 wp-exhibit_10j2.txt RESTATED CHANGE-JRG [WEST PHARMACEUTICAL LOGO OMITTED] Exhibit (10)(j)(2) ------------------ AMENDMENT #1 TO SECOND AMENDED AND RESTATED ------------------------------------------- CHANGE-IN-CONTROL AGREEMENT --------------------------- THIS IS AMENDMENT #1 TO SECOND AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENT (the "Agreement"), dated as of May 1, 2001, between West Pharmaceutical Services, Inc., a Pennsylvania corporation, (the "Company") and JOHN R. GAILEY III ("Executive"). BACKGROUND ---------- The Company and Executive are parties to a Second Amended and Restated Change-in-Control Agreement, dated as of March 25, 2000 (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 (ii) of Section 3 (a) (Benefits Payable Upon Termination of Employment) of the Change-in-Control ----------------------------------------------- Agreement is deleted in its entirety and replaced with the following: "(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 as of the date first written above. WEST PHARMACEUTICAL SERVICES, INC. /s/ John R. Gailey III By: /s/ William G. Little - --------------------------------- ---------------------------------------- John R. Gailey III William G. Little, Chairman of the Board and Chief Executive Officer EX-10 8 wp-exhibit_10k2.txt AMEND TO CHANGE-IN-CONTROL-HLH [WEST PHARMACEUTICAL LOGO OMITTED] Exhibit (10)(k)(2) ------------------ AMENDMENT #1 TO CHANGE-IN-CONTROL AGREEMENT ------------------------------------------- THIS IS AMENDMENT #1 TO CHANGE-IN-CONTROL AGREEMENT (the "Agreement"), dated as of May 1, 2001, between West Pharmaceutical Services, Inc., a Pennsylvania corporation, (the "Company") and HERBERT L. HUGILL ("Executive"). BACKGROUND ---------- The Company and Executive are parties to a Change-in-Control Agreement, dated as of July 10, 2000 (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 (ii) of Section 3 (a) (Benefits Payable Upon Termination of Employment) of the Change-in-Control ----------------------------------------------- Agreement is deleted in its entirety and replaced with the following: "(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 as of the date first written above. WEST PHARMACEUTICAL SERVICES, INC. /s/ Herbert L. Hugill By: /s/ William G. Little - -------------------------------- ------------------------------- Herbert L. Hugill William G. Little, Chairman of the Board and Chief Executive Officer EX-10 9 wp-exhibit_10l2.txt AMEND RESTATED CHANGE-DEM [WEST PHARMACEUTICAL LOGO OMITTED] Exhibit (10)(1)(2) ------------------ AMENDMENT #1 TO SECOND AMENDED AND RESTATED ------------------------------------------- CHANGE-IN-CONTROL AGREEMENT --------------------------- THIS IS AMENDMENT #1 TO SECOND AMENDED AND RESTATED CHANGE-IN-CONTROL AGREEMENT (the "Agreement"), dated as of May 1, 2001, between West Pharmaceutical Services, Inc., a Pennsylvania corporation, (the "Company") and DONALD E. MOREL, JR. ("Executive"). BACKGROUND ---------- The Company and Executive are parties to a Second Amended and Restated Change-in-Control Agreement, dated as of March 25, 2000 (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 (ii) of Section 3 (a) (Benefits Payable Upon Termination of Employment) of the Change-in-Control ----------------------------------------------- Agreement is deleted in its entirety and replaced with the following: "(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 as of the date first written above. WEST PHARMACEUTICAL SERVICES, INC. /s/ Donald E. Morel, Jr. By: /s/ William G. Little - --------------------------------- -------------------------------------- Donald E. Morel, Jr. William G. Little, Chairman of the Board and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----