Exhibit 10 (a)
CHANGE-IN-CONTROL AGREEMENT
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THIS IS A CHANGE-IN-CONTROL AGREEMENT (the "Agreement"), dated as of April
28, 2004 (the "Effective Date"), between West Pharmaceutical, Services, Inc., a
Pennsylvania corporation, (the "Company") and Xxxxxxx X. Xxxxxxxx ("Executive").
Background
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The Board of Directors of the Company and the Compensation Committee of the
Board have determined that it is in the best interests of the Company and its
shareholders for the Company to make the following arrangements with Executive.
These arrangements provide for compensation in the event Executive should leave the
employment of the Company under the circumstances described in this Agreement.
Agreement
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In consideration of Executive's assuming the position of Vice President
and Chief Financial Officer, and the mutual covenants and agreements herein,
and intending to be legally bound, the Company and Executive agree 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" means a change in control of a nature that would be
required to be reported in response to Item 1 of a 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,
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
(ii) 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
(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 (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 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; (ii) the performance of human
clinical trial studies and related services carried on by the
Company's Clinical Services Group and GFI Research Center; (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
Effective Date;
(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
50 miles from Executive's site of employment on the Effective Date;
(iv) The Company fails to provide Executive with substantially the same fringe
benefits that were provided to Executive as of the Effective
Date, or with a package of fringe benefits that, although one or more
of such benefits may vary from those in effect as of the Effective Date,
is substantially at least as beneficial to Executive in all material
respects as such fringe benefits taken as a whole; or
(v) 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 (v) 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
by the Company prior to the effective date of Executive's resignation.
(f) "Payment" means
(i) any amount due or paid to Executive under this Agreement,
(ii) any amount that is due or paid to 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 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 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
Executive or (3) any contingent severance or other amounts
that are payable to 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
Effective Date hereof and ends on the first anniversary of the
Termination Date.
(j) "Retirement Plan" means the West Pharmaceutical Services, Inc. Employees'
Retirement Plan and any successor plan thereto.
(k) "Savings/Deferred Comp Plan" means The Company's Salaried Employees' Savings
Plan, The Company's Non-Qualified Deferred Compensation Plan for
Designated Executive Officers and any other similar plan
established from time to time that may allow executive officers to
defer taxation of compensation.
(l) "Subsidiary" has the meaning ascribed to the term by section 425(f)of the
Code.
(m) "Termination Date" is the date on which Executive ceases to be employed
by the Company or any of its Subsidiaries or Affiliates for any reason.
2. Termination Following a Change in Control.
(a) Executive will be entitled to the benefits specified in Section 3
(Benefits Payable Upon Termination of Employment) if,
(i) at any time within two years after a Change in Control has occurred,
Executive's employment by the Company is terminated:
(1) by the Company, other than by reason of death, disability,
continuous willful misconduct to the detriment of the Company,
or retirement at Executive's normal retirement date under
the Retirement Plan, or
(2) as a result of Executive's resignation at any time following
Executive's Constructive Termination; or
(ii) Executive resigns for any reason within 30 days following the first
anniversary of a Change in Control.
Except as otherwise set forth in Section 2(b), Executive will not
be entitled to the benefits specified in Section 3 hereof if
Executive's employment terminates for any other reason or if, at
any time thereafter, Executive is in breach of any of Executive's
obligations under this Agreement.
(b) If the Company executes an agreement, the consummation of which would
result in the occurrence of a Change in Control, then, with respect
to a termination
(i) by the Company, other than by reason of death, disability, continuous
willful misconduct to the detriment of the Company, or retirement
at Executive's normal retirement date under the Retirement Plan, or
(ii) as a result of Executive's resignation at any time following
Executive's Constructive Termination occurring after the date
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 Executive will be entitled
to the severance compensation specified in Section 3 hereof.
3. Benefits Payable Upon Termination of Employment. Upon termination of
employment as set forth in Section 2 (Termination Following a Change in
Control), Executive will be entitled to the following benefits:
(a) Severance Compensation. Executive will be entitled to severance
compensation in an amount equal to three times the sum of
(i) Executive's highest annual base salary rate in effect during the
year of the termination of Executive's employment, plus
(ii) the 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;
provided, however, that if at any time before the third anniversary
of the Termination Date, Executive either (x) elects retirement
under the Retirement Plan, or (y) could have been compelled to
retire under the Retirement Plan if Executive had remained employed
by the Company, Executive's severance compensation under this
Section 3(a) will be reduced by an amount equal to the product
obtained by multiplying such severance compensation by a fraction
the numerator of which is the number of days elapsed from the
Termination Date until the date on which either of the events
described in clauses (x) or (y) first occurs, and the denominator
of which is 1095.
The severance compensation paid hereunder will not be reduced to
the extent of any other compensation for Executive's services that
Executive receives or is entitled to receive from any other
employment consistent with the terms of this Agreement.
(b) Equivalent of Vested Savings/Deferred Comp Plan Benefit. The Company will
pay to Executive the difference, if any, between
(i) the benefit Executive would be entitled to receive under the
Savings/Deferred Comp Plan if the Company's contribution to the
Savings/Deferred Comp Plan were fully vested upon the termination
of Executive's employment, and
(ii) the benefit Executive is entitled to receive under the terms of the
Savings/Deferred Comp Plan upon termination of Executive's employment.
Any such benefit will be payable at such time and in such manner as
benefits are payable to Executive under the Savings/Deferred Comp
Plan.
(c) Unvested Equity Awards. All stock options, other equity-based awards and
shares of the Company's stock granted or awarded to Executive
pursuant to any Company compensation or benefit plan or
arrangement, but which are unvested, will vest immediately upon
termination of Executive's employment. The provisions of this
Section 3(c) will supersede the terms of any such grant or award
made to Executive under any such plan or arrangement to the extent
there is an inconsistency between the two.
(d) Employee and Executive Benefits. Executive will be entitled to a
continuation of all hospital, major medical, medical, dental, life
and other insurance benefits not otherwise addressed in this
Agreement in the same manner and amount to which Executive was
entitled on the date of a Change in Control or on the date of
Constructive Termination of Executive's employment (whichever
benefits are more favorable to Executive) until the earlier of
(i) a period of 36 months after termination of Executive's employment,
(ii) Executive's retirement under the Retirement Plan, or
(iii) Executive's eligibility for similar benefits with a new employer.
Assistance in finding new employment will be made available to
Executive by the Company if Executive so requests. Upon termination
of Executive's employment, Company cars must be returned to the
Company.
4. Additional Payments.
(a) Gross-Up Payment. Notwithstanding anything herein to the contrary, if it is
determined that any Payment would be subject to the excise tax
imposed by section 4999 of the Code or any interest or penalties
with respect to such excise tax (such excise tax, together with any
interest or penalties thereon, is herein referred to as an "Excise
Tax"), then Executive shall be entitled to an additional payment (a
"Gross-Up Payment") in an amount that will place Executive in the
same after-tax economic position that 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 Executive) (the "Accounting Firm"), which
shall provide detailed supporting calculations both to Executive
and the Company within fifteen days of the Change in Control, the
Termination Date or any other date reasonably requested by
Executive or the Company on which a determination under this
Section 4 is necessary or advisable. The Company shall pay to
Executive the initial Gross-Up Payment within 5 days of the receipt
by Executive and the Company of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise
Tax is payable by Executive, the Company shall cause the Accounting
Firm to provide Executive with an opinion that the Accounting Firm
has substantial authority under the Code and Regulations not to
report an Excise Tax on Executive's federal income tax return. Any
determination by the Accounting Firm shall be binding upon
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 Executive with respect to any
Payment (hereinafter an "Underpayment"), the Company, after
exhausting its remedies under Section 4(c) below, shall promptly
pay to Executive an additional Gross-Up Payment in respect of the
Underpayment.
(c) Procedures. 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 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. Executive agrees
not to pay the claim until the expiration of the thirty-day period
following the date on which 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
Executive in writing prior to the expiration of the Notice Period
that it desires to contest the claim, 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 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.
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, Executive agrees either
to pay the tax claimed and xxx 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 Executive to pay such claim and pursue a refund, the
Company shall advance the amount of such payment to 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 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 Executive in writing prior to the
end of the Notice Period of its desire to contest the claim, the
Company shall pay to Executive an additional Gross-Up Payment in
respect of the excess parachute payments that are the subject of
the claim, and 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 Executive of an Advance, Executive becomes
entitled to a refund with respect to the claim to which such
Advance relates, 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 Executive of an
Advance, a determination is made that Executive shall not be
entitled to any refund with respect to the claim and the Company
does not promptly notify Executive of its intent to contest the
denial of refund, then the amount of the Advance shall not be
required to be repaid by Executive and the amount thereof shall
offset the amount of the additional Gross-Up Payment then owing to
Executive.
(e) Further Assurances. The Company shall indemnify Executive and hold
Executive harmless, on an after-tax basis, from any costs,
expenses, penalties, fines, interest or other liabilities
("Losses") incurred by 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 Executive resulting from
any Advance or action taken on 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 Executive, or cause the Trust to reimburse
Executive, for the reasonable expenses incurred by Executive in
connection with any actions taken by the Company or required to be
taken by Executive hereunder. The Company shall also pay all of
the fees and expenses of the Accounting Firm, including, without
limitation, the fees and expenses related to the opinion referred
to in Section 4(b).
5. Payment of Severance Compensation.
(a) The severance compensation set forth in Section 3 (a) will be payable in 36
equal monthly installments commencing on the first day of the month
following the month in which Executive's employment terminates.
However, Executive may elect in writing, in accordance with the
provisions of this Section, to receive Executive's severance
compensation in a lump sum at a later time or in installments in
amounts and at times elected by Executive, but Executive's election
will not entitle Executive to receive severance compensation sooner
than permitted by the preceding sentence.
(b) Executive must elect to receive amounts in installments or to defer payments
by filing a written election with the Company, which specifies the
time at which payments are to be made and the amounts of such
payments. Executive's election to receive installment payments or
to defer payments will not be valid unless it is made prior to the
time Executive is entitled to receive any payments under this
Agreement. The last such election in effect on the day before a
termination of employment will be controlling. No election may be
made on or after termination of employment.
(c) The payment of deferred amounts must commence no earlier than the first
business day of the calendar year following the termination of
Executive's employment and no later than the third calendar year
following the attainment of normal retirement age under the
Retirement Plan.
6. Non-Disclosure and Confidentiality.
(a) Executive agrees that Executive will keep secret and maintain in confidence
all confidential information of the Company and will not use such
information other than for the Company's benefit or disclose such
information to anyone outside of the Company, either during or
after Executive's employment with the Company.
(b) Executive will promptly deliver to the Company on the termination of
Executive's employment with the Company, or at any time the Company
requests, all memoranda, notes, records and other documents (and
all copies thereof) relating to the Company's business or
confidential matters which Executive then has or controls.
(c) All inventions, improvements, new ideas and techniques which relate to the
Company's business which Executive makes or conceives during
Executive's employment with the Company or within six months
thereafter will be the Company's property. Without additional
compensation to Executive, Executive will promptly inform the
Company of such inventions, improvements, ideas and techniques, and
will assist the Company in preserving them and will not disclose
them to anyone else without the Company's consent.
(d) Executive understands that, as used in this Section, the phrase
"confidential information of the Company" includes all information
of a technical, commercial or other nature of or about the Company
(such as formulae, trade secrets, customer lists and know-how) not
made available to the general public.
7. Legal Fees. The Company will pay all legal fees and expenses which
Executive may incur as a result of the Company's contesting the validity or
enforceability of this Agreement.
8. Payments Final. In the event of a termination of Executive's employment
under the circumstances described in this Agreement, the arrangements
provided for by this Agreement, and any other agreement between the Company
and Executive in effect at that time and by any other applicable plan of the
Company in which Executive then participates, will constitute the entire
obligation of the Company to Executive, and performance of that obligation
will constitute full settlement of any claim that Executive might otherwise
assert against the Company on account of such termination. The Company's
obligation to pay Executive under this Agreement will be absolute and
unconditional and will not be affected by any circumstance, including
without limitation, any set-off, counterclaim, defense or other rights the
Company may have against Executive or anyone else as long as Executive is
not in beach of Executive's obligations under this Agreement.
9. Non-Competition.
(a) During the Restrictive Period, Executive will not, and will not permit any
of Executive's Affiliates, or any other Person, directly or
indirectly, to:
(b) engage in competition with, or acquire a direct or indirect interest or an
option to acquire such an interest in any Person engaged in
competition with, the Company's Business in the United States
(other than an interest of not more than 5 percent of the
outstanding stock of any publicly traded company);
(i) serve as a director, officer, employee or consultant of, or furnish
information to, or otherwise facilitate the efforts of,
any Person engaged in competition with the Company's
Business in the United States;
(ii) solicit, employ, interfere with or attempt to entice away from the Company
any employee who has been employed by the Company or a
Subsidiary in an executive or supervisory capacity in
connection with the conduct of the Company's Business
within one year prior to such solicitation, employment,
interference or enticement; or
(iii) approach, solicit or deal with in competition with the Company or any
Subsidiary any Person which at any time during the 12
months immediately preceding the Termination Date:
(1) was a customer, client, supplier, agent or distributor
of the Company or any Subsidiary;
(2) was a customer, client, supplier, agent or distributor of
the Company or any Subsidiary with whom employees reporting
to or under the direct control of Executive had personal
contact on behalf of the Company or any Subsidiary; or
(3) was a Person with whom Executive had regular, substantial
or a series of business dealings on behalf of the Company
or any Subsidiary (whether or not a customer, client,
supplier, agent or distributor of the Company or
any Subsidiary).
(c) For the avoidance of doubt, Executive agrees that the phrase "Person engaged
in competition with the Company's Business" as used in this Section
includes, without limitation, the companies listed on Exhibit "A"
to this Agreement, their Affiliates and subsidiaries.
10. Vesting in the Event of a Change in Control. In the event of a Change in
Control, all stock options, equity-based awards and shares of the Company's
stock granted or awarded to Executive pursuant to any Company compensation
or benefit plan or arrangement, but which are unvested at that time, will
vest immediately upon such Change in Control. The provisions of this
Section 10 will supersede the terms of any such grant or award made to
Executive under any such plan or arrangement to the extent there is an
inconsistency between the two.
11. Duration of Agreement. This Agreement shall commence on the Effective Date
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 periods
commencing on the date of this Agreement by giving Executive written
notice at least one year in advance of such termination,
except that such termination and written notice will not
be effective unless Executive will be employed by the
Company on the Termination Date.
12.Miscellaneous.
(a) In consideration for the benefit of having the protection afforded by this
Agreement, Executive agrees that the provisions of Section 6
(Non-Disclosure and Confidentiality) and Section 9 (Non-Competition)
of this Agreement apply to Executive, and Executive will be bound
by them, whether or not a Change in Control occurs or Executive
actually receives the benefits specified in Section 3 hereof.
(b) This Agreement will be binding upon and inure to the benefit of Executive,
Executive's personal representatives and heirs and the Company and
any successor of the Company, but neither this Agreement nor any
rights arising hereunder may be assigned or pledged by Executive.
(c) Executive acknowledges that a breach of the covenants contained in Section 6
(Non-Disclosure and Confidentiality) and Section 9
(Non-Competition) will cause the Company immediate and irreparable
harm for which the Company's remedies at law (such as money
damages) will be inadequate. The Company shall have the right, in
addition to any other rights it may have, to obtain an injunction
to restrain any breach or threatened breach of such Sections. The
Company may contact any Person with or for whom Executive works
after Executive's 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 constitutes the entire agreement and understanding between
the Company and Executive with respect to the subject matter hereof
and merges and supersedes all prior discussions, agreements and
understandings between the Company and Executive with respect to
such matters.
(g) This Agreement may be executed in one or more counterparts, which together
shall constitute a single agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
WEST PHARMACEUTICAL SERVICES, INC.
------------------------- By:--------------------------------------
XXXXXXX X. XXXXXXXX Xxxxxx X. Xxxxx, Xx. Ph.D.
President and Chief Executive Officer
Exhibit "A"
List of Persons Engaged In Competition With the Company's Business
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3-M Drug Delivery Systems Division
Aerogen
Alkermes
ALZA Corp.
Andrx
Antares (Medi-Ject)
Aradigm
Bentley Pharmaceutical
Bestpak
Biovail Corp.
Elan Corp.
Elite Pharmaceuticals
Emisphere
Ethypharm XX
Xxxxx- Xxxxxxxxxx
Focus Inhalation
Guilford Pharmaceutical
Innovative Drug Delivery Systems
In-Site Vision
Lavipharm Corp.
Nastech
Nektar
Penwest Pharmaceuticals
Phasex Corporation
XX Xxxxxxx
Rx Kinetix
Sheffield Pharmaceuticals
Unigene
