[LOGO OMITTED]
NOTICE OF 2003 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 29, 2003
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Dear Shareholder,
The 2003 Annual Meeting of Shareholders of West Pharmaceutical
Services, Inc. will be held at the Company's headquarters, 101 Gordon Drive,
Lionville, Pennsylvania 19341, on Tuesday, April 29, 2003, at 9:30 AM, to
consider and take action on the following:
1. Election of four Class I directors: William H. Longfield,
Anthony Welters, Robert C. Young and Patrick J. Zenner, each
for a term of three years;
2. Approval of the 2003 Employee Stock Purchase Plan;
3. Ratification of the appointment of PricewaterhouseCoopers LLP
as independent accountants for 2003; and
4. Any other matters that properly come before the meeting.
Your Board of Directors recommends a vote "FOR" Proposals 1, 2 and 3.
Only shareholders of record at the close of business on Thursday, March
20, 2003, are entitled to notice of and to vote at the meeting or any
postponement or adjournment of the meeting.
Please date, sign and return the enclosed proxy in the enclosed
envelope, whether or not you expect to attend the meeting in person.
By Order of the Board of Directors,
JOHN R. GAILEY III
SECRETARY
March 28, 2003
PROXY STATEMENT
GENERAL INFORMATION ABOUT THE MEETING
We, the Board of Directors of West Pharmaceutical Services, Inc. (the
"Company"), invite you to submit the enclosed proxy for use at the Company's
2003 Annual Meeting of Shareholders. The meeting will be held on Tuesday, April
29, 2003, at 9:30 AM, at the Company's headquarters, 101 Gordon Drive,
Lionville, Pennsylvania 19341. The proxy and this proxy statement are being
mailed on or about March 28, 2003.
At the Annual Meeting, shareholders will act on the matters outlined in
the accompanying notice of meeting. A quorum is necessary to take action at the
meeting. A quorum means that shareholders of record holding at least a majority
of the outstanding shares of the Company's common stock, par value $.25 per
share, are present, either in person or represented by proxy. As of the record
date, 14,488,069 shares of common stock were outstanding.
You may vote at the meeting, or any postponement or adjournment of the
meeting, only if you were a record owner of the Company's common stock at the
close of business on the record date, March 20, 2003. You are entitled to one
vote for each share you own. If you complete and properly sign the accompanying
proxy card and return it to the Company, your shares will be voted as you
direct. A pre-addressed envelope is enclosed for your convenience. If you return
your signed proxy card without indicating any voting instructions, the proxy
holders will vote your shares according to our recommendations, which are to
vote "FOR" each of the three proposals listed in the accompanying notice of
meeting.
If you are a registered shareholder and attend the meeting, you may
deliver your completed proxy card in person. If you have shares held in "street
name" and you wish to vote those shares at the meeting, you will need to follow
the procedures of the institution that holds those shares. Even after you have
submitted your proxy, you may revoke or change your vote at any time before the
proxy is exercised by filing with the Company's Secretary either a notice of
revocation or a duly executed proxy bearing a later date. You may also vote in
person at the meeting, although attendance at the meeting will not by itself
revoke a previously granted proxy.
Directors will be elected by plurality vote. Other matters to be voted
on at the meeting will be determined by a majority of the votes cast at the
meeting. Votes withheld from director nominees, abstentions and broker non-votes
(i.e., shares held in street name that cannot be voted by a broker on specific
matters without instructions from the beneficial owner) will be counted in
determining the presence of a quorum, but are not considered to be "votes," and
therefore will have no effect on the outcome of the vote.
The Company will pay the entire cost of preparing, assembling,
printing, mailing and distributing these proxy materials. The Company will also
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses for forwarding proxy and solicitation
materials to shareholders. Officers and other Company employees may also contact
you about submitting your proxy through the mails, or by personal conversations,
telephone, facsimile or other electronic means.
PROPOSAL #1: ELECTION OF DIRECTORS
Our Board of Directors is divided into three classes. Each year, the
directors in one class are elected to serve a three-year term. We may increase
or decrease the size of the Board, elect directors to fill vacancies on the
Board and assign directors to a class. Pursuant to that authority, in July 2002
the Board of Directors was increased to 12 members from 10 and Robert C. Young
and Patrick J. Zenner were appointed directors in Class I to fill the vacancies
and serve until the 2003 Annual Meeting. William G. Little will retire from the
Board on March 31, 2003.
We have nominated William H. Longfield, Anthony Welters, Robert C.
Young and Patrick J. Zenner for election as Class I directors at the 2003 Annual
Meeting. The nominees have all agreed to be named and to serve if elected. If
any nominee becomes unavailable, which we do not expect, the Board's Nominating
and Corporate Governance Committee will recommend to us a replacement nominee.
We may then designate the other nominee to stand for election. If you voted for
the unavailable nominee, your vote will be cast for his or her replacement.
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CLASS I NOMINEES FOR TERMS TO EXPIRE IN 2006
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WILLIAM H. LONGFIELD Mr. Longfield, age 64, is Chief Executive
DIRECTOR SINCE 1995 Officer and Chairman of the Board of C. R.
Bard, Inc., a medical device manufacturer.
He is a director of Manor Care, Inc.,
AdvaMed (Advanced Medical Technology
Association), Horizon Health Corporation and
Cytyc Corporation. He is a trustee of
Atlantic Health System and the Health Care
Institute of New Jersey.
ANTHONY WELTERS Mr. Welters, age 48, is President and
DIRECTOR SINCE 1997 Chief Executive Officer of AmeriChoice
Corporation, a managed health-care services
holding company, and its predecessor
companies, where he also served as Chairman
until September 2002. Mr. Welters is a
director of C. R. Bard, Inc., Health Care
Leadership Council, New York University
School of Law, the National Board of the
Smithsonian Institution and Vice Chair of
Morehouse School of Medicine.
ROBERT C. YOUNG, M.D. Dr. Young, age 63, is President of Fox
DIRECTOR SINCE 2002 Chase Cancer Center. He is also a member of
the National Cancer Policy Board at the
Institute of Medicine and the Board of
Scientific Advisors of the National Cancer
Institute. Dr. Young also serves as
Immediate Past President of the American
Cancer Society.
PATRICK J. ZENNER Mr. Zenner, age 56, is the retired
DIRECTOR SINCE 2002 President and Chief Executive Officer of
Hoffmann-La Roche Inc. He is a director of
ArQule, Dendrite International, Praecis
Pharmaceuticals Inc., Geron Corporation,
Genta Inc., First Horizon Pharmaceutical
Corporation, Xoma Ltd. and CuraGen
Corporation.
WE RECOMMEND THAT YOU VOTE "FOR" THESE NOMINEES.
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CLASS II DIRECTORS WHOSE TERMS EXPIRE IN 2004
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GEORGE W. EBRIGHT Mr. Ebright, age 64, is the retired
DIRECTOR SINCE 1992 Chairman of the Board and Chief Executive
Officer of Cytogen Corp., a biotechnology
pharmaceutical company. He is a director of
Nabi and Arrow International Incorporated.
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L. ROBERT JOHNSON Mr. Johnson, age 61, is Managing General
DIRECTOR SINCE 1989 Partner of Founders Capital Partners, L.P.,
a venture capital partnership. He is a
director of Indigo Systems Corp. and
Chairman of the Board of HealthBanks Inc.
Mr. Johnson is a member of the Corporation
of the Massachusetts Institute of Technology
and a trustee of the Scholarship Foundation
of Santa Barbara.
JOHN P. NEAFSEY Mr. Neafsey, age 63, is President of JN
DIRECTOR SINCE 1987 Associates, an investment consulting firm.
He is Chairman of the Board of Alliance
Resources, LP, a director of Longhorn
Partners Pipeline Company and Special
Director of Olympic Pipeline Company. He is
also a trustee emeritus and presidential
counselor of Cornell University and an
overseer of Weill/Cornell Medical College.
GEOFFREY F. WORDEN Mr. Worden, age 63, is President of South
DIRECTOR SINCE 1993 Street Capital, Inc., a consulting and
investment company. He is a director of
Princess House, Inc. and the New York City
Outward Bound Center. Mr. Worden is a
trustee and member of the Executive
Committee of Outward Bound USA.
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CLASS III DIRECTORS WHOSE TERMS EXPIRE IN 2005
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TENLEY E. ALBRIGHT, M.D. Dr. Albright, age 67, is a physician and
DIRECTOR SINCE 1993 surgeon, a faculty member at Harvard Medical
School and is Chairman of Western Resources,
Inc. (a real estate holding company). She
serves on the boards of State Street Bank
and Trust Company and State Street
Corporation. She is a director of the
Whitehead Institute for Biomedical Research
and chairs the Conflict of Interest
Committee of its Board of Directors. She is
Consultant to, and formerly Chairman of, the
Board of Regents of the National Library of
Medicine at the National Institutes of
Health. She is a member of the corporation
of Woods Hole Oceanographic Institution and
of the New England Baptist Hospital where
she is also on surgical staff.
JOHN W. CONWAY Mr. Conway, age 57, has served as Chief
DIRECTOR SINCE 1997 Executive Officer and Chairman of the Board
of Crown, Cork & Seal Company, Inc., a
supplier of packaging products, since
January 2001. He was the President and Chief
Operating Officer of Crown, Cork & Seal
Company, Inc. from 1998 to January 2001 and,
prior to that time, its Executive Vice
President.
DONALD E. MOREL, JR., PH.D. Dr. Morel, age 45, has been Chairman of
DIRECTOR SINCE 2002 the Board of the Company since March 2003
and President and Chief Executive Officer of
the Company since April 2002. He was the
Company's President and Chief Operating
Officer from May 2001 to April 2002,
Division President, Drug Delivery Systems
from October 1999 to May 2001, Group
President from April 1998 to October 1999
and, prior thereto, Vice President,
Scientific Services.
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PROPOSAL #2: APPROVAL OF THE 2003 EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION. We adopted the 2003 Employee Stock Purchase Plan (the
"Plan") on January 14, 2003, and, subject to shareholder approval, the Plan will
become effective on June 1, 2003. Prior to January 14, 2003, the Company
maintained the Discounted Stock Purchase Plan (the "DSPP"), which allowed
eligible employees to purchase stock at a discount. However, this discount was
taxable to the employee. We determined it was in the best interest of the
Company and our shareholders to replace the DSPP with a new tax-advantaged
employee stock purchase plan. The purpose of the Plan is to encourage stock
ownership by employees of the Company and its participating subsidiaries in
order to provide further incentives for these employees to remain in the
employment of the Company, improve operations and contribute more significantly
to the Company's long-term success. Additionally, the Plan will permit the
Company to compete with other corporations offering similar plans in obtaining
and retaining the services of talented employees.
The aggregate number of shares of Company common stock available for
purchase under the Plan is 1,500,000. The Plan is intended to satisfy the
requirements of Section 423 of the U.S. Internal Revenue Code (the "Code").
Because benefits under the Plan will depend on employee elections and
the fair market value of the Company's common stock, it is not possible to
determine the benefits that will be received by eligible participants if the
Plan is approved by our shareholders. A summary of the Plan is set forth below.
This summary is qualified in its entirety by the full text of the Plan, which is
attached hereto as Appendix A.
ADMINISTRATION. A committee consisting of one or more directors or
officers of the Company appointed by us from time to time (the "Plan Committee")
will administer the Plan. The Plan Committee will serve at our sole discretion
and be subject to replacement, substitution or removal by us at any time for any
reason. The Plan Committee will have the exclusive power and authority to
administer the Plan, including without limitation, the right and authority to
interpret the provisions of the Plan and make all determinations deemed
necessary or advisable for the administration of the Plan, with all such
actions, interpretations and determinations made in good faith being final,
conclusive and binding on the Company, each participating subsidiary of the
Company and all other parties without subjecting the Plan Committee to any
liability. The initial members of the Plan Committee, effective June 1, 2003,
will be the Company's Vice President, Human Resources and the Company's
Treasurer.
ELIGIBILITY. Any employee of the Company or a participating subsidiary
of the Company whose customary employment is for more than five months per
calendar year and more than 20 hours per week and who has been a continuous
employee of the Company or a participating subsidiary of the Company for not
less than 90 days as of the day preceding the first day of an offering period
may participate in the Plan.
ENROLLMENT AND PARTICIPATION. The Plan provides for the commencement of
two six-month offering periods for each calendar year. The first offering period
will commence on June 1 of each calendar year and the second offering period
will commence on December 1 of each calendar year. Eligible employees can elect
to participate in the Plan by filing an enrollment form with the Plan Committee
no later than 15 days prior to the commencement of an offering period. Once
enrolled, a plan participant will continue to participate in the Plan until he
or she ceases to be an eligible employee, withdraws from the Plan, purchases the
maximum dollar amount, share amount or percentage amount of Company common stock
permitted in any offering period or year as set forth in the Plan, or makes a
hardship withdrawal from the Company's tax-qualified retirement plan maintained
under Section 401(k) of the Code.
The consummation of a merger or consolidation of the Company with or
into another entity or any other corporate reorganization, or the sale, transfer
or other disposition of all or substantially all of the Company's assets, or the
complete liquidation or dissolution of the Company will cause the offering
period then in progress to immediately terminate and shares of Company common
-4-
stock to be purchased, unless the Plan is assumed by any surviving corporation
or its parent corporation pursuant to a plan of merger or consolidation.
Additionally, a change in a plan participant's employment status due to
employment termination, leave of absence or death may cause the termination of
the participant's participation in the Plan.
EMPLOYEE CONTRIBUTIONS. A plan participant may purchase shares of
Company stock by means of payroll deductions by electing to contribute either a
flat dollar amount each payday, so long as the designated flat dollar amount is
not less than $10.00, or a whole percentage of the participant's compensation,
so long as the designated whole percentage is not less than 1% or more than 25%
of the participant's compensation. A plan participant also may purchase shares
by remitting a cash contribution, in a form and manner acceptable to the Plan
Committee, within 15 days before the end of any offering period.
PURCHASE OF SHARES OF COMPANY COMMON STOCK. Contributions made by a
plan participant throughout an offering period will be credited to an account
that the Company will maintain on its books in the name of each such plan
participant. Amounts credited to these accounts will not be trust funds, and may
be commingled with the Company's general assets and applied to general corporate
purposes. As of the last day of each offering period, the amount in the plan
participant's account will be divided by the applicable stock purchase price,
and the number of shares of common stock that results will be purchased from the
Company with the funds in the plan participant's account. However, no plan
participant will be permitted to purchase more than 2,000 shares of common stock
in any offering period. In addition, no plan participant will be permitted to
purchase common stock if immediately after his or her election to purchase
Company common stock such plan participant would own stock possessing more than
5% of the total combined voting power or value of all classes of stock of the
Company or any parent or subsidiary of the Company.
STOCK PURCHASE PRICE. The purchase price per share of common stock
under the Plan will be the lesser of 85% of the fair market value of such share
on the last trading day in the offering period, or 85% of the fair market value
of such share on the last trading day before the commencement of the offering
period. Whenever possible, the determination of fair market value by the Plan
Committee will be based on the prices of the Company's common stock reported in
The Wall Street Journal or as reported directly to the Company by the New York
Stock Exchange (or other exchange, if applicable). The Plan Committee's
determination of fair market value, in any event, will be conclusive and binding
on all persons.
FEDERAL TAX TREATMENT. The following discussion is a summary of the
general U.S. federal income tax rules applicable to purchases under the Plan.
However, employees should consult their own tax advisors since a taxpayer's
particular situation may be such that some variation of the rules described
below will apply.
If a plan participant does not dispose of shares purchased under the
Plan during the two-year period following the beginning of the offering period,
he or she will not recognize any income on the date of grant or exercise of the
right. When the stock is disposed of after the required holding period, the plan
participant will realize ordinary income to the extent of the lesser of (a) the
difference between the stock price at the end of the offering period and the
purchase price paid at the end of the offering period, or (b) the difference
between the stock price on the date of its sale and the purchase price paid at
the end of the offering period. Any further gain (or loss) will be taxed as a
capital gain.
If a plan participant sells his or her shares before the expiration of
the two-year holding period, he or she would realize ordinary income to the
extent of the difference between the discounted price paid and the Company
common stock price on the date the right was exercised (the last day of the
offering period).
RIGHTS NOT TRANSFERABLE. The rights of any plan participant under the
Plan are not transferable by voluntary or involuntary assignment or by operation
of law, or in any manner other than by beneficiary designation or by the laws of
descent and distribution.
-5-
NO RIGHTS AS AN EMPLOYEE. Nothing in the Plan or in any right granted
under the Plan shall confer upon a plan participant any right to continued
employment by the Company or by any participating subsidiary of the Company for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Company or any participating subsidiary to terminate his
or her employment at any time for any reason, with or without cause.
NO RIGHTS AS A SHAREHOLDER. A plan participant will not have any rights
as a shareholder with respect to any shares of Company common stock that he or
she may have a right to purchase under the Plan until such shares have been
purchased on the last day of the applicable offering period.
COMPLIANCE WITH SECURITIES LAWS. No shares will be issued under the
Plan unless their issuance and delivery comply with, or are exempt from, all
applicable requirements of law, including without limitation, the Securities Act
of 1933, as amended, the rules and regulations promulgated thereunder, state
securities laws and regulations, and the regulations of any stock exchange or
other securities market on which the Company's securities may then be traded.
ANTIDILUTION ADJUSTMENTS. The aggregate number of shares of common
stock offered under the Plan, the 2,000-share limitation per offering period and
the price of shares that any plan participant has elected to purchase shall be
adjusted proportionately by the Plan Committee for any increase or decrease in
the number of outstanding shares of common stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, any other increases
or decreases in such shares effected without receipt or payment of consideration
by the Company, the distribution of the shares of a subsidiary of the Company to
the Company's shareholders or a similar event.
AMENDMENT OR TERMINATION OF THE PLAN. The Board will have the right to
amend, suspend or terminate the Plan at any time and without notice. Except for
the antidilution adjustments set forth above, any increase in the aggregate
number of shares of Company common stock to be issued under the Plan shall be
subject to approval by a vote of shareholders.
TAX WITHHOLDING. To the extent any payments or distributions under the
Plan are subject to federal, state or local taxes, the Company or a
participating subsidiary of the Company, as the case may be, is authorized to
withhold any and all applicable taxes. The Company or a participating subsidiary
of the Company, as the case may be, may satisfy its withholding obligation by
(i) withholding shares allocated to a plan participant's account, (ii) deducting
cash from a plan participant's account or (iii) deducting cash from other
compensation of a plan participant. A plan participant's election to participate
in the Plan authorizes the Company or a participating subsidiary, as the case
may be, to take any of these actions.
WE RECOMMEND THAT YOU VOTE "FOR" THE APPROVAL OF THE ADOPTION OF
THE COMPANY'S 2003 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL #3: RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, we reappointed
PricewaterhouseCoopers LLP as independent accountants for the Company in 2003,
subject to ratification by shareholders. If the appointment is not ratified, we
will consider the appointment of other auditors. A representative of
PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting and
will have the opportunity to make a statement and to respond to appropriate
questions from shareholders.
WE RECOMMEND THAT YOU VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS FOR 2003.
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PRINCIPAL OWNERS OF COMPANY STOCK
The following table and footnotes contain information about persons who
beneficially own more than 5% of the issued and outstanding common stock. Except
as indicated below, the beneficial owners have sole voting and investment power
over the shares shown opposite their names. This table was compiled from
Securities and Exchange Commission share-ownership reports. The amount of shares
beneficially owned is as of December 31, 2002.
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Amount and Percent
Name and Address of Nature of Beneficial Of
Beneficial Owner Ownership Class
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Franklin Advisory Services, LLC ......................... 1,636,900(1) 11.30%
One Parker Plaza, Sixteenth Floor
Fort Lee, NJ 07024
Private Capital Management
Bruce S. Sherman
Gregg J. Powers.......................................... 1,804,097(2) 12.50%
8889 Pelican Bay Blvd.
Naples, FL 34108
Wachovia Corporation .................................... 1,127,780(3) 7.80%
One First Union Center
Charlotte, NC 28288-0133
Wilmington Trust Corporation ............................ 912,058(4) 6.30%
1100 North Market Street
Wilmington, DE 19890
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(1) Based upon information set forth in a Schedule 13G/A filing made by
Franklin Resources, Inc. ("FRI"), Charles B. Johnson, Rupert H. Johnson,
Jr. and Franklin Advisory Services, LLC dated February 12, 2003. Represents
shares beneficially owned by one or more open or closed-end investment
companies or other managed accounts, which are advised by direct and
indirect investment advisory subsidiaries of FRI. Charles B. Johnson and
Rupert H. Johnson, Jr. are principal owners of FRI, and they, along with
FRI and each of FRI's advisory subsidiaries, disclaim any economic interest
or beneficial ownership in any of the shares covered by the Schedule. They
disclaim the existence of a group.
(2) Based upon information set forth in a Schedule 13G filing made by Private
Capital Management, Inc. ("PCM"), Bruce S. Sherman and Gregg J. Powers
dated February 14, 2003. The reporting persons share voting and investment
power with respect to all of the shares owned. Mr. Sherman is Chief
Executive Officer of PCM and Mr. Powers is President of PCM. They disclaim
beneficial ownership of shares held by PCM's clients and disclaim the
existence of a group.
(3) Based upon information set forth in a Schedule 13G filing made by Wachovia
Corporation dated February 13, 2003. The total amount includes (i) sole
voting power with respect to 927,780 shares, (ii) sole investment power
with respect to 340,570 shares and (iii) shared investment power with
respect to 653,570 shares.
(4) Based upon information set forth in a Schedule 13G/A filing made by
Wilmington Trust Corporation ("WTC") dated February 10, 2003. WTC, together
with its affiliates Wilmington Trust Company and Wilmington Trust Federal
Savings Bank, have (i) sole voting and investing power with respect to
439,620 shares and (ii) shared voting and investing power with respect to
472,438 shares.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the beneficial ownership of common stock of
each director, each executive officer named in the Summary Compensation Table on
page 10 and all directors and executive officers as a group. Also included are
shares underlying stock options, shares held in plan accounts and
"stock-equivalents" credited to directors' accounts under the Non-Qualified
Deferred Compensation Plan for Outside Directors (the "Director Deferred
Compensation Plan"). The table reflects shares held in participant accounts
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under the Savings Plan and the Company's Non-Qualified Deferred Compensation
Plan for Designated Executive Officers (the "Officer Deferred Compensation
Plan") as of December 31, 2002. All other information is as of March 10, 2003.
Shares underlying stock options exercisable within 60 days after March 10, 2003
are treated as beneficially owned by the individual and as outstanding when
computing the percentages owned by the individual and group. All directors and
officers as a group beneficially own less than 1% of the outstanding shares of
common stock. The table is compiled from information provided by the individuals
and from Company records.
----------------------- ---------------------- ---------------------------------- -----------------------------------
Shares Owned Right to Acquire Ownership Under Stock-Equivalent Units Under
Directly and Options Exercisable Within 60 Director Deferred Compensation
Name Indirectly(1)(2) Days Plan
----------------------- ---------------------- ---------------------------------- -----------------------------------
Tenley E. Albright 24,002(3) 7,500 4,617
Linda R. Altemus 3,222 32,000 -
John W. Conway 800 7,500 2,256
George W. Ebright 2,928 7,500 5,240
Steven A. Ellers 15,481 116,000 -
John R. Gailey III 10,975 46,400 -
Herbert L. Hugill 11,696 45,000 -
L. Robert Johnson 7,500 7,500 6,519
William G. Little 69,335 471,000 -
William H. Longfield 2,500 7,500 14,384
Donald E. Morel, Jr. 12,914 185,000 -
John P. Neafsey 7,466 7,500 18,336
Anthony Welters 300 7,500 2,289
Geoffrey F. Worden 3,762 7,500 11,620
Robert C. Young -0- -0- -0-
Patrick J. Zenner -0- -0- -0-
All directors and
executive officers as
a group (20 persons) 181,132(3) 1,041,200 65,261
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(1) Includes restricted shares awarded under the Company's Management Incentive
Bonus Plan, as follows: Mr. Little -- 1,929 shares; Dr. Morel -- 832
shares; Mr. Ellers -- 668 shares; Ms. Altemus -- 319 shares; Mr. Hugill --
232 shares; Mr. Gailey -- 375 shares; and all directors and executive
officers as a group -- 4,960 shares. The holders of restricted shares have
voting power over the shares. The restricted shares are subject to transfer
and forfeiture restrictions.
(2) Also includes shares held in participant accounts under the Company's
Savings Plan and the Officer Deferred Compensation Plan, respectively, as
follows: Mr. Little -- 1,081 and 1,951 shares; Dr. Morel -- 362 and 1,091
shares; Mr. Ellers -- 1,311 and 936 shares; Ms. Altemus -- 654 and 283
shares; Mr. Hugill -- -0- and 523 shares; Mr. Gailey -- 92 and 381 shares;
and all directors and officers as a group -- 4,221 and 5,910 shares. Plan
participants have voting power over the shares held in their accounts.
These shares vest over the first five years of employment with the Company.
(3) Includes 24,002 shares held by the Company's charitable foundation. Dr.
Albright and Richard D. Luzzi, an executive officer of the Company, are
trustees of the foundation and, in that capacity, are each deemed be the
beneficial owner of the shares held by the foundation because they share
voting and dispositive power over those shares. Dr. Albright and Mr. Luzzi
disclaim any economic interest in shares held by the trust.
INFORMATION ABOUT THE BOARD AND BOARD COMMITTEES
We have designated directors who are independent of management as
"independent directors." All of the directors, except for the Company's former
Chief Executive Officer William G. Little and current Chief Executive Officer
Donald E. Morel, Jr., Ph.D., are independent directors. The independent
directors' primary duties are to evaluate the performance of the Company's Chief
Executive Officer, to assure that he has appropriate leadership succession plans
and to review and monitor achievement of his long-range strategic plans for the
Company. One independent director is designated as "Chairman, Independent
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Directors." The Chairman, Independent Directors confers with the CEO on the
Board's agenda items and information requirements. He also calls meetings of the
independent directors. William H. Longfield is the current Chairman, Independent
Directors. In 2002, the Board met seven times, and the Independent Directors
held three meetings. All directors, except Anthony Welters, attended more than
75% of the total number of meetings of the Board and the committees on which
they served.
The Board has four committees: Audit, Compensation, Finance and
Nominating and Corporate Governance. Last year, the Audit Committee and the
Finance Committee met five times, the Compensation Committee met four times and
the Nominating and Corporate Governance Committee met three times.
The Audit Committee assists us in fulfilling our oversight
responsibilities by monitoring: (1) the integrity of the financial statements of
the Company; (2) the system of internal control, audit process and the process
of compliance with legal and regulatory requirements as they relate to the
Company's financial statements; and (3) the independence and performance of the
Company's internal and external auditors. We have determined in our business
judgment that each of the directors who serves on this Committee is
"independent" as defined in the listing standards of the New York Stock
Exchange. The Committee has adopted a written charter. Directors Worden
(Chairman), Conway, Ebright and Welters serve on the Audit Committee.
The Compensation Committee establishes the base salaries of, and
approves all other compensation and benefits made available to, the Company's
corporate officers. This Committee also establishes and administers stock and
cash incentive compensation plans for senior management, submitting such plans
to us for approval as required by applicable regulations. Directors Welters
(Chairman), Johnson, Longfield and Neafsey serve on the Compensation Committee.
The Finance Committee serves as our liaison with management on
important financial transactions and financial-policy matters. This Committee
consults with and advises management on financial strategies, policies and
procedures, acquisitions, divestitures, capital-expenditure requests and similar
matters. This Committee also monitors the performance of the Company's savings
and retirement plan investment committee. The Finance Committee makes
recommendations on these matters to us. Directors Neafsey (Chairman), Conway,
Ebright, Johnson and Zenner serve on the Finance Committee.
The Nominating and Corporate Governance Committee evaluates and makes
recommendations on director and officer nominees and appointments to board
committees. The Nominating and Corporate Governance Committee will consider
nominees recommended by shareholders that are submitted in the manner described
under "Shareholder Proposals for the 2004 Annual Meeting." After review by the
independent directors, this Committee formally recommends to us a successor to
the Chief Executive Officer. This Committee also reviews the Company's legal
compliance policies and programs periodically with the Company's General
Counsel. Directors Longfield (Chairman), Albright, Worden and Young serve on the
Nominating and Corporate Governance Committee.
COMPENSATION OF DIRECTORS AND NAMED EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company or any of its
subsidiaries receives an annual retainer of $20,000. The chairman of each board
committee and the Chairman, Independent Directors also receive an annual
retainer of $3,500. Non-employee directors receive meeting fees of $1,500 for
each board and independent-director meeting and $1,000 for each committee
meeting attended.
Each non-employee director may also defer some or all of his or her
director's fees under the Director Deferred Compensation Plan. Deferred fees are
deposited each calendar quarter into either an interest-bearing account or into
-9-
a stock-equivalents account. Amounts in the interest-bearing account earn
interest at the prime rate in effect on the last day of each quarter. Amounts
deposited into the stock-equivalents account are converted into common
stock-equivalent rights based on the fair market value of one share of the
Company's common stock on the last day of the quarter. Upon termination of board
service, the director receives a cash payment equal to the balance in the
interest-bearing account and the value of the stock-equivalents account, which
is determined by multiplying the number of stock-equivalents in the account by
the fair market value of one share of the Company's common stock on the date of
termination.
Each non-employee director also receives an annual grant of 600
stock-equivalents under the 1999 Stock-Equivalents Plan for Non-Employee
Directors (the "Stock-Equivalents Plan"). These stock-equivalents are eligible
for deferral and held in a separate account under the Director Deferred
Compensation Plan. When dividends are paid on common stock, additional
stock-equivalents are credited to each director's account as if those dividends
were used to purchase additional shares.
Under the 1999 Non-Qualified Stock Option Plan for Non-Employee
Directors (the "1999 Director Option Plan"), Directors Young and Zenner will
receive a stock option covering 3,000 shares of common stock. The options will
be granted on the date of the 2003 Annual Meeting, will vest in three equal
installments on the first through third anniversaries of the grant date and will
expire 10 years after the grant date. The exercise price will be the fair market
value of the Company's common stock on the grant date.
SUMMARY COMPENSATION TABLE
The following table contains information on compensation paid to Mr.
Little and Dr. Morel, and each of the four other most highly compensated
executive officers of the Company.
----------------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation Awards
------------------- -------------------
Other Restricted Securities
Name and Annual Stock Underlying All Other
Principal Position Year Salary($)(1) Bonus($)(1) Compensation($) Award(s)($)(2) Options(#) Compensation($)(3)
----------------------------------------------------------------------------------------------------------------------------
WILLIAM G. LITTLE 2002 564,826 194,068 - 8,345 - 20,350
Chief Executive Officer and 2001 545,201 442,876 - 18,765 75,000 19,283
Chairman of the Board 2000 534,473 -0- - -0- 185,000 18,408
DONALD E. MOREL, JR., PH.D 2002 398,288 151,878 - 6,440 160,000 11,943
Chief Executive Officer and 2001 278,756 162,010 - 6,774 40,000 8,356
President 2000 233,714 -0- - -0- 100,000 7,005
STEVEN A. ELLERS 2002 280,010 92,626 - 3,829 - 8,394
President, Pharmaceutical 2001 265,013 121,502 - 5,044 35,000 7,944
Systems Division 2000 241,557 -0- - -0- 60,000 7,240
LINDA R. ALTEMUS(4) 2002 232,469 43,202 - 1,071 10,000 6,923
Vice President and Chief 2001 184,629 72,005 - 2,883 10,000 -0-
Financial Officer
HERBERT L. HUGILL 2002 216,613 61,601 - 2,436 - 6,496
President of the Americas, 2001 210,046 75,599 - 3,055 20,000 6,299
Pharmaceutical Systems Division 2000 198,806 -0- - -0- 30,000 -0-
JOHN R. GAILEY III 2002 206,754 37,803 - 1,469 - -0-
Vice President, General 2001 200,212 72,005 - 2,883 8,000 4,000
Counsel 2000 197,440 -0- - -0- 24,000 5,917
and Secretary
-------------
(1) The Bonus columns include the value of any bonus (unrestricted) shares
awarded under the Company's Management Incentive Bonus Plan, but not the
value of any incentive (restricted) shares. Incentive share awards are
reflected in the Restricted Stock Award(s) column. Bonuses are paid in the
fiscal year following the fiscal year in which they are earned.
-10-
(2) Restricted stock awards are made in the fiscal year following the fiscal
year in which they are earned. Restricted stock awards vest four years from
the grant date. Values are determined by multiplying the number of shares
awarded by the average of the high and low prices of the Company's common
stock on the grant date, which was $19.34 for awards made in 2003 and
$28.83 for awards made in 2002. Dividends are paid on restricted stock and
reinvested in additional shares of common stock. The following table
contains information on the restricted stock held by the named executives
at December 31, 2002. Values are determined by multiplying the number of
shares by $24.40, the December 31, 2002 closing price of the common stock.
Number of Restricted Current Market Value
Name Shares Held of Restricted Shares Held
------------------------------------------------ -------------------------------
William G. Little 1,497 $36,527
Donald E. Morel, Jr. 499 12,176
Steven A. Ellers 470 11,468
Linda R. Altemus 231 5,636
Herbert L. Hugill 106 2,586
John R. Gailey III 299 7,296
(3) Represents Company contributions under the Company's Savings Plan and the
Officer Deferred Compensation Plan. With respect to Mr. Little, includes
term life insurance premiums paid by the Company of $3,411 in 2002, $2,933
in 2001, and $2,380 in 2000.
(4) Information is provided only for fiscal years during which the individual
served as an executive officer of the Company. Ms. Altemus became an
executive officer in June of 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND 2002 YEAR-END OPTION VALUES
The following table shows how many stock options were exercised by each
of the named executive officers in 2002 and the number and value of their
unexercised options as of December 31, 2002.
----------------------------------------------------------------------------------------------------------------
Shares Number of Shares Value of Unexercised
Acquired Value Underlying Unexercised In-the-Money
On Realized Options Held at Options at
Name Exercise(#) ($)(1) Fiscal Year-End(#) Fiscal Year-End($)(1)(2)
----------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
William G. Little -0- -0- 434,000 111,000 -0- -0-
Donald E. Morel, Jr. 4,061 8,284 125,000 220,000 -0- -0-
Steven A. Ellers 10,000 13,500 104,000 36,000 -0- -0-
Linda R. Altemus -0- -0- 22,000 10,000 -0- -0-
Herbert L. Hugill -0- -0- 39,000 18,000 -0- -0-
John R. Gailey III 8,000 10,800 41,600 14,400 -0- -0-
---------------
(1) Market value on exercise date of shares covered by options exercised, less
option exercise price.
(2) The dollar amounts shown under the Exercisable and Unexercisable columns of
this heading represent the number of exercisable and unexercisable options,
respectively, multiplied by the difference between the closing price of the
Company's common stock on December 31, 2002 ($24.40) and the exercise price
of the options.
EMPLOYMENT AND OTHER AGREEMENTS WITH EXECUTIVES
On April 30, 2002, Mr. Little and the Company entered into an amendment
to his employment agreement providing for his retirement from the position of
Chief Executive Officer of the Company and the commencement of his service as
Chairman of the Board of the Company from April 30, 2002 to March 31, 2003. His
annual base compensation is $575,000 through March 31, 2003 and he remains
eligible to participate in the Company's 2002 annual incentive plan. In
conjunction with this amendment to his employment agreement, Mr. Little and the
Company entered into a non-competition agreement that restricts Mr. Little's
activities with competitors of the Company in any market or territory through
October 18, 2007. As compensation for his agreement to these restrictions Mr.
Little will receive enhanced retirement benefits, continued medical and
insurance coverage, financial planning assistance, office space and
administrative support and other benefits under the Company's company car policy
through October 18, 2007. In addition, stock options awarded to Mr. Little under
the Company's incentive plan will continue to vest during that time.
-11-
Dr. Morel has an employment agreement with the Company under which he
serves as Chief Executive Officer. His annual base salary from April 30, 2002
through the regular salary review date in 2003 is $450,000. Thereafter, Dr.
Morel's annual base salary will be determined by Company compensation-review
policies. The agreement also entitles him to participate in the Company's annual
and long-term incentive plans. The Company may terminate his employment by
giving two years' prior notice or earlier for cause, or due to disability or
death.
The Company has entered into agreements with each of the named
executive officers that provide benefits if their employment is terminated
following a change in control of the Company. These agreements are designed to
assist the Company in attracting and retaining highly qualified executives and
to help ensure that, if the Company is faced with an unsolicited tender offer
proposal, its executives will continue to manage the Company without being
unduly distracted by the uncertainties of their personal affairs and thereby
will be better able to assist in evaluating such a proposal in an objective
manner.
Each executive is entitled to receive severance compensation under his
or her agreement if, within two years following a change in control of the
Company, he or she resigns following a constructive termination of his or her
employment or his or her employment is terminated by the Company other than by
reason of death, disability, willful misconduct or normal retirement. The
agreement also permits the executive to receive severance upon a voluntary
resignation taken during a one-time, 30-day period beginning 12 months from the
change in control. The severance compensation includes the immediate vesting of
the executive's interest, if any, in the Company's employee-benefit plans,
continuing salary and bonus payments at the level prior to termination and
continuation of certain health and welfare benefits for up to three years
following termination. Each agreement prohibits the executive from being
employed by any competitor of the Company or competing with the Company in any
part of the United States (any market or territory, in the case of Dr. Morel)
for up to one year (two years, in the case of Dr. Morel) following employment
termination for any reason. The payment of severance compensation is not
conditioned upon the executive seeking other employment and is not subject to
reduction if the executive secures other employment consistent with the
agreement.
A "change in control" under the agreements is defined generally as any
such event that requires a report to the Securities and Exchange Commission, but
includes any acquisition or other transaction that results in a change in
ownership of more than 50% of the Company's stock or a change in the majority of
the Board over a two-year period that is not approved by at least two-thirds of
the directors.
PENSION PLAN TABLE
The following table shows estimated annual retirement benefits payable
to participants in the Company's Salaried Employees' Retirement Plan (the
"Retirement Plan") whose employment terminates at normal retirement (age 65).
The normal retirement benefit equals 1.9% of the average of a participant's five
highest consecutive calendar years of compensation out of the participant's last
ten calendar years of service, multiplied by his or her years of service up to
25 years, plus 0.5% of such average multiplied by his or her years of service in
excess of 25 but not more than 35 years.
In general, compensation covered by the Retirement Plan are base
salary, overtime, bonuses (paid in cash or stock) and other cash remuneration,
plus a participant's contributions to the Company's Savings Plan and amounts
contributed to the Officer Deferred Compensation Plan. The figures shown include
benefits payable under the Retirement Plan and the Company's related
supplemental plan for certain individuals. The figures are stated before
reduction for Social Security payments. Although age 65 is the normal retirement
age, participants with 10 years of service may retire upon reaching age 55. The
benefit in such cases will be reduced by 1/4 of 1% for each month for ages 60-64
and 1/3 of 1% for each month from ages 55-59. As of December 31, 2002, the
credited full years of service for the named executive officers were as follows:
Mr. Little -- 27 years; Dr. Morel -- 10 years; Mr. Ellers -- 19 years; Ms.
Altemus -- 5 years; Mr. Hugill -- 2 years; and Mr. Gailey -- 11 years. Benefits
are computed as straight-line annuity amounts.
-12-
PENSION PLAN TABLE
Estimated Annual Retirement Benefits
Years of Pension Plan Participation
------------------------------------------------------------------------
Five-Year
Average Annual Earnings 15 20 25 30 35
--------------------------------------- ------------- -------------- -------------- -------------- -------------
$200,000 $ 57,000 $ 76,000 $ 95,000 $100,000 $105,000
250,000 71,250 95,000 118,750 125,000 131,250
300,000 85,500 114,000 142,500 150,000 157,500
400,000 114,000 152,000 190,000 200,000 210,000
500,000 142,000 190,000 237,500 250,000 262,500
600,000 171,000 228,000 285,000 300,000 315,000
650,000 185,250 247,000 308,750 325,000 341,250
700,000 199,500 266,000 332,500 350,000 367,500
750,000 213,750 285,000 336,250 375,000 393,750
800,000 228,000 304,000 380,000 400,000 420,000
850,000 242,250 323,000 403,750 425,000 446,250
900,000 256,500 342,000 427,500 450,000 472,500
950,000 270,750 361,000 451,250 475,000 498,750
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information, as of December 31, 2002,
about the Company's common stock that may be issued upon the exercise of options
and rights under all of the Company's equity compensation plans. The table does
not include information about the proposed 2003 Employee Stock Purchase Plan.
----------------------- --------------------------- ------------------------- --------------------------------------
(A) (B) (C)
Number of Securities to Weighted-Average Number of Securities Remaining
be Issued Upon Exercise Exercise Price of Available for Future Issuance Under
of Outstanding Options, Outstanding Options, Equity Compensation Plans (Excluding
Plan Category Warrants and Rights Warrants and Rights Securities Reflected in Column (A))
----------------------- --------------------------- ------------------------- --------------------------------------
Equity compensation
plans approved by
security holders (1) 2,117,900 $27.89 378,000 (2)
Equity compensation
plans not approved by
security holders - N/A - (3) (4) (5)
Total 2,117,900 $27.89 378,000
----------------------
(1) Includes outstanding stock options granted under the following plans: the
1992 Non-Qualified Stock Option Plan for Non-Employee Directors (the "1992
Director Option Plan"); the 1999 Director Option Plan; the Long Term
Incentive Plan (the "LTIP"); and the 1999 Key Employee Incentive
Compensation Plan ("KEICP"). Does not include 9,031 restricted shares
awarded under the KEICP. The terms of these restricted share awards are
more fully described under the "Annual Incentive Compensation" section of
the Board Compensation Committee Report on Executive Compensation in this
proxy statement.
(2) Includes 47,000 shares available for issuance under the 1999 Director
Option Plan and 331,000 shares available for issuance under the KEICP. The
1992 Director Option Plan and the LTIP have expired by their terms, and the
Company will not make additional grants or awards under those plans.
(3) Does not include stock-equivalents deferred under the Director Deferred
Compensation Plan or awarded to directors under the Stock-Equivalents Plan.
The terms of these plans are described under "Compensation of Directors" on
pages 9 and 10.
(4) Does not include Company contributions to executive officers pursuant to
the Officer Deferred Compensation Plan. Under this plan, executive officers
of the Company designated by the Compensation Committee may elect to defer
some or all of their compensation to one of three accounts established and
-13-
maintained by the Company. In the first two accounts, deferred compensation
is invested in one or more investment funds chosen by the participant. In
the third account, the Company uses the deferred compensation to purchase
shares of the Company's common stock in open market transactions for the
participant's benefit. Regardless of the account, the Company contributes
to the executive officer's account an amount equal to 50% of the first 6%
of base salary he or she elects to defer. An executive officer is fully
vested in the amount of deferred compensation. However, the Company's
matching contributions vest over five years, with 40% vesting after two
years of employment and the balance vesting in equal installments at the
end of each of the following three years.
(5) Does not include Company contributions made pursuant to the DSPP. Under
this plan, a full-time employee who has been employed by the Company for at
least six months may elect to apply up to a maximum of 10% of his or her
base salary towards the purchase of shares of the Company's common stock.
Participating employees may make separate cash contributions of up to
$2,500 per calendar quarter to purchase additional shares. The Company
contributes, on behalf of the participating employee, an amount sufficient
to effect a 15% discount on the employee's stock purchase. If the 2003
Employee Stock Purchase Plan is approved by the Company's shareholders, the
Company the DSPP will terminate.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMMITTEE DUTIES AND RESPONSIBILITIES
The primary functions of the Compensation Committee are to ensure that
the compensation of the Board of Directors, corporate officers and other senior
management of the Company enables the Company to attract and retain high-quality
leadership and is consistent with the Company's established compensation
philosophy. In carrying out these functions, the Committee has the power and
duty to, among other things, establish the base salaries of corporate officers
(which include the CEO and other executive officers named in the Summary
Compensation Table on page 10) and approve all other compensation, benefits and
perquisites made available to these officers.
COMPENSATION PHILOSOPHY
The overriding philosophy governing the Company's senior executive
compensation program is to align shareholder and management interests. This goal
is accomplished by rewarding management for adding value to the business and
achieving results that reflect constantly improving performance.
The components of compensation are base salary, annual incentive bonus
and long-term incentive compensation in the form of stock options. Consistent
with the Company's policy of attracting and retaining the highest caliber
executives, base salaries are targeted to the median of comparable positions,
while total compensation opportunity (i.e., base salary, bonus and stock
options) is designed to provide superior reward opportunities for superior
results. Long-term incentive programs are designed to provide management with
the opportunity to create wealth by participating in the consistent improvement
of shareholder value.
A significant portion of incentive compensation is "at risk." Annual
bonuses are tied to the achievement of financial and strategic objectives, and
stock options have value only to the extent that the market price of the
underlying Company stock exceeds the options' exercise price.
Each year, the Committee receives a report from its independent
compensation consultant, which compares each component of the Company's
executive compensation with compensation data reported by industry peer
companies, published survey and proprietary sources. In making compensation
decisions, the Committee relies heavily on such information and the consultant's
recommendations.
To further align management and shareholder interests, the Committee
has developed share-ownership goals for senior management. These goals call for
executive officers to own common stock with a market value equal to specified
multiples of the executive's base salary, ranging from 200% of base salary for
senior executives to 500% of base salary for the CEO. The Committee would like
to see executives reach their goal within five to seven years of attaining their
position and annually reviews each executive's progress.
-14-
2002 EXECUTIVE COMPENSATION
BASE SALARIES
In April 2002, Mr. Little stepped down as Chief Executive Officer and
Dr. Morel was promoted to that position. At that time, the Committee set Mr.
Little's salary at $575,000 per annum, an increase of 6%. The Committee believed
this was an appropriate increase in light of Mr. Little's ongoing
responsibilities as Chairman of the Board. The Committee set Dr. Morel's base
salary at $450,000 per annum, an increase of 50% from his prior base salary of
$300,000. The higher salary reflects Dr. Morel's increased responsibilities as
Chief Executive Officer. In setting his salary level, the Committee considered
compensation data from peer group and general industry surveys provided by an
outside compensation consulting firm and the consultant's recommendations.
Other named executives received salary increases averaging 4.7% last
year. In setting 2002 base salaries for these executives, the Committee
considered the Company's overall financial performance, each executive's
performance relative to his or her ongoing responsibilities and personal
objectives, comparative salary survey data provided by its consultant and the
consultant's recommendations.
ANNUAL INCENTIVE COMPENSATION
Each of the named executive officers participates in the Company's
Management Incentive Bonus Plan (the "Bonus Plan"), which allows participants to
earn annual bonuses paid in a combination of cash and stock as described below.
Each participant has a target bonus opportunity measured as a
percentage of base salary, ranging from 40% for certain of the named executive
officers to 75% for Dr. Morel and Mr. Little. A full payout is made if the Bonus
Plan goals are met, with higher payouts for exceeding goals and lower payouts
for falling short of targets. Payouts may be reduced or eliminated if the
Committee determines performance was unsatisfactory. To encourage share
ownership, one-fourth of a participant's after-tax annual bonus is paid in
shares of common stock, referred to as "bonus shares." Each participant also
receives a number of additional, restricted shares equal to 25% of the number of
bonus shares received. The restricted shares are forfeited if the underlying
bonus shares are sold or transferred within four years after the date of grant.
The Committee decided to pay the named executives a partial bonus for
2002. Dr. Morel and Mr. Little each were awarded 45% of their target bonus
opportunity. Consequently, Mr. Little received a bonus of $194,068, including
1,724 bonus shares and 432 incentive shares, and Dr. Morel received a bonus of
$151,878, including 1,329 bonus shares and 333 incentive shares. Other
executives received bonuses of between 45% and 70% of their target bonus
opportunity, also paid in a combination of cash, bonus and incentive shares.
The Committee's decision to award bonuses was based on its overall
evaluation of management's performance in important financial and strategic
areas, including the following: significant year-over-year revenue and
operating-profit growth in the Pharmaceutical Systems Division; improvements in
key financial measurements such as operating cash flow, debt levels and the
ratio of debt to total capitalization; improved product delivery performance in
the Pharmaceutical Systems Division; control of capital expenditures and raw
material costs; and progress in facility expansion projects.
-15-
LONG-TERM INCENTIVE COMPENSATION
In connection with Dr. Morel's promotion to CEO, the Committee granted
him a stock option covering 160,000 shares of the Company's common stock, which
vests in four equal annual installments of 40,000 shares. Two other named
executives also received stock options last year ranging in size from 8,000
shares to 10,000 shares in connection with promotions. In determining the size
of stock option grants to Dr. Morel and the other executives, the Committee
relied primarily on competitive market data provided by its compensation
consultant and the consultant's recommendations.
DEDUCTIBLE COMPENSATION UNDER THE TAX LAWS
Under section 162(m) of the Internal Revenue Code, a publicly held
corporation such as the Company is denied a federal tax deduction for
compensation in excess of $1,000,000, which is paid to its chief executive
officer and its four most-highly compensated executive officers other than the
CEO. "Qualified performance-based compensation" and certain other compensation
are not subject to the deduction limitation. The Board of Directors has taken
action to ensure that awards of stock options, bonus and incentive shares under
the Company's incentive plans will be treated as qualified performance-based
compensation and, therefore, remain tax deductible by the Company. While there
is no firm policy on whether to permit executive compensation to exceed the
$1,000,000 limit, the Committee periodically monitors the compensation of
Company executives and believes that no tax deductions for executive
compensation will be lost in the near future.
Anthony Welters, Chairman
L. Robert Johnson
William H. Longfield
John P. Neafsey
AUDIT COMMITTEE REPORT
The Company's management is responsible for the Company's financial
reporting process, including its system of internal control, and for the
preparation of consolidated financial statements in accordance with generally
accepted accounting principles and applicable laws and regulations. The
Company's independent accountants PricewaterhouseCoopers LLP are responsible for
auditing the Company's annual financial statements in accordance with generally
accepted auditing standards and for expressing an opinion based on their audit
as to the conformity of the those financial statements with generally accepted
accounting principles. The Audit Committee reports to and acts on behalf of the
Board of Directors by providing oversight of these processes.
In performing its oversight function, the Committee has reviewed and
discussed the audited financial statements contained in the 2002 Annual Report
on Form 10-K with the Company's management and the independent accountants. The
Committee also has discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61 (Codification
of Statements on Auditing Standards, AU 380). In addition, the Committee has
discussed with the independent accountants their independence from the Company
and its management, including the matters in the written disclosures and letter,
which were received by the Committee from the independent accountants as
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), as amended.
The Committee members are not employees of the Company and do not serve
as accountants or auditors by profession or experts in the fields of accounting
or auditing. Therefore, the Committee has relied, without independent
verification, on management's representation that the financial statements have
been prepared with integrity and objectivity and in conformity with generally
accepted accounting principles and on the representations of the independent
accountants included in their report on the Company's financial statements.
-16-
Based upon the review and discussions described in this Report, and
subject to the limitations on the role and responsibilities of the Committee,
certain of which are referred to above, the Committee recommended to the Board
of Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2002 and filed with
the Securities and Exchange Commission.
Geoffrey F. Worden, Chairman
John W. Conway
George W. Ebright
Anthony Welters
AUDIT FEES
Fees for the fiscal year 2002 audit and the review of Forms 10-Q were
$673,100.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
PricewaterhouseCoopers LLP did not render any services related to
financial information systems design and implementation for the fiscal year
ended December 31, 2002.
ALL OTHER FEES
Aggregate fees billed for all other services rendered by
PricewaterhouseCoopers LLP for the fiscal year ended December 31, 2002 were
$472,000, principally for tax compliance and planning services.
The Audit Committee has considered whether the provision of the
services described under this caption is compatible with maintaining the
independence of PricewaterhouseCoopers LLP as accountants and has determined
that they are so compatible.
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the cumulative total return to holders of
the Company's common stock with the cumulative total return of the Standard &
Poor's Small Cap 600 Index and of a Company-selected peer group for the five
years ended December 31, 2002. Cumulative total-return-to-shareholders is
measured by dividing total dividends (assuming dividend reinvestment) plus the
per-share price change for the period by the share price at the beginning of the
period. The Company's cumulative shareholder return is based on an investment of
$100 on December 31, 1997 and is compared to the cumulative total return of the
Small Cap 600 Index and peer group over the period with a like amount invested.
The peer group selected this year by the Company is different from the
peer group it has used in previous years. The new peer group is composed of
Cambrex Corp., AptarGroup, Inc., Alaris Medical Systems, Inc., Viasys Healthcare
Inc., Andrx Corp. and Nektar Therapeutics, Inc. (formerly Inhale Therapeutic
Systems, Inc.). The previous peer group was composed of Applera Corp., Applied
Biosystems, Amphenol Corporation, Andrew Corporation, Applied Magnetics
Corporation, Augat Inc., Beckman Instruments, Inc., C.R. Bard, Inc., CTS Corp.,
Millipore Corporation, Pall Corporation, Sealed Air Corporation and Thomas &
Betts Corporation. The following graph reflects both the new and previous peer
groups. The Company selected a new peer group because the companies that
composed its previous peer group no longer met the peer-group selection criteria
initially established by the Company. This is a result of some of the previous
peer-group companies either currently generating revenues no longer compatible
with those of the Company or ceasing to exist altogether as a result of mergers
and consolidations. The new peer-group companies were selected by the Company
based principally on nature of business, revenues, market complexity, products
and manufacturing, employee base, technology base, market share, type of
customer and customer relationship.
-17-
FIVE YEAR CUMULATIVE TOTAL RETURN
[CHART OMITTED-PLOT POINTS AS FOLLOWS:]
Dec 97 Dec 98 Dec 99 Dec 00 Dec 01 Dec 02
West Pharmaceutical Services Inc 100 122.44 108.11 88.34 98.42 93.19
S&P Smallcap 600 Index 100 98.69 110.94 124.03 132.13 112.80
New Peer Group 100 116.86 137.64 265.34 257.89 117.57
Old Peer Group 100 108.46 151.61 178.22 136.19 90.21
SHAREHOLDER PROPOSALS FOR THE 2004 ANNUAL MEETING
Under the Company's Bylaws, any shareholder who desires to present a
proposal for consideration at the 2004 annual meeting must deliver timely
written notice to the Company's Secretary, 101 Gordon Drive, Lionville,
Pennsylvania 19341. In lieu of delivering to the Secretary, the notice may be
mailed to the Secretary by certified mail, return receipt request, at the same
address. To be timely, the notice must be received not later than February 2,
2004. The notice must contain or be accompanied by the following as to each
matter the shareholder proposes to bring before the annual meeting:
o A brief description of the business to be brought before the annual
meeting and the reasons for conducting the business at the meeting;
o The name and record address of the shareholder proposing the business
as they appear on the Company's books;
o The number and class of shares of the Company that are beneficially
owned by the shareholder; and
o Any material interest of the shareholder in the business.
Under the Company's Bylaws, nominations for election of directors may
be made by any shareholder by delivery of a timely written notice of intent to
nominate a director to the Company's Secretary at the address and in the manner
set forth in the immediately preceding paragraph. To be timely, the notice must
be received not later than February 2, 2004. The notice must contain or be
accompanied by the following information:
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o The name and record address of the nominating shareholder as they
appear on the Company's books;
o The number and class of shares of the Company that are beneficially
owned by the shareholder;
o As to each proposed nominee: (1) his or her name, age, business address
and, if known, residence address, (2) his or her principal occupation
or employment, (3) the number and class of the Company's securities
beneficially owned by him or her and (4) any other information
regarding the nominee that is required to be included in a proxy
statement filed with the Securities and Exchange Commission;
o A description of all arrangements or understandings among the
shareholder and each proposed nominee and any other persons pursuant to
which the nomination is to be made by the shareholder; and
o The consent of each proposed nominee to serve as a director of the
Company if so elected.
You may obtain a copy of the Bylaw provisions relating to the
requirements for making shareholder proposals or nominations by contacting the
Company's Secretary, 101 Gordon Drive, Lionville, Pennsylvania 19341.
OTHER MATTERS
We are not aware of any matters to be presented at the meeting other
than those set forth in the notice. On any other matter that properly comes
before the meeting, the proxy holders will vote as we recommend or, if we make
no recommendation, in their own discretion.
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WEST PHARMACEUTICAL SERVICES, INC.
2003 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose of the Plan.
The West Pharmaceutical Services, Inc. 2003 Employee Stock Purchase
Plan (the "Plan") was adopted by the board on January 14, 2003 of West
Pharmaceutical Services, Inc. (the "Company"). If approved by the shareholders
of the Company, the Plan will become effective on June 1, 2003. The purpose of
the Plan is to provide eligible employees of the Company and participating
subsidiary companies with an opportunity to increase their proprietary interest
in the success of the Company by purchasing Company stock on favorable terms and
to pay for such purchases through payroll deductions, if elected. The Plan is
intended to meet the requirements of section 423 of the U.S. Internal Revenue
Code.
2. Definitions.
(a) "ACCOUNT" means the account established for each Participant
pursuant to Section 8(a).
(b) "BOARD" means the board of directors of the Company, as constituted
from time to time.
(c) "CODE" means the United States Internal Revenue Code of 1986, as
amended.
(d) "COMMITTEE" means a committee of directors or officers appointed by
the Board, as described in Section 3.
(e) "COMPANY" means West Pharmaceutical Services, Inc., a Pennsylvania
corporation.
(f) "COMPANY SAVINGS PLAN" means the West Pharmaceutical Services, Inc.
Savings Plan, any successor Plan thereto, or any other tax-qualified retirement
plan maintained under section 401(k) of the Code by a Participating Company.
(g) "COMPENSATION" means the base rate of compensation paid in cash to
a Participant by a Participating Company, including salaries and wages, and
without deduction for any pre-tax contributions made by the Participant under
sections 401(k), 125 or 132(f)(4) of the Code. "Compensation" shall exclude
bonuses, incentive compensation, commissions, overtime pay, shift premiums, all
non-cash items, moving or relocation allowances, cost-of-living equalization
payments, car allowances, tuition reimbursements, imputed income attributable to
cars or life insurance, severance pay, fringe benefits, contributions or
benefits received under employee benefit plans, income attributable to the
exercise of stock options, and similar items. The Committee shall determine
whether a particular item is included in Compensation.
(h) "CORPORATE REORGANIZATION" means:
(i) The consummation of a merger or consolidation of the
Company with or into another entity, or any other corporate
reorganization; or
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets or the complete liquidation
or dissolution of the Company.
(i) "ELIGIBLE EMPLOYEE" means any employee of a Participating Company
who meets each of the following requirements:
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(i) His or her customary employment is for more than five
months per calendar year; and
(ii) His or her customary employment is for more than 20 hours
per week; and
(iii) He or she has been a continuous employee of a
Participating Company for not less than 90 days.
The foregoing notwithstanding, an individual shall not be considered an Eligible
Employee if his or her participation in the Plan is prohibited by the law of any
country which has jurisdiction over him or her or if he or she is subject to a
collective bargaining agreement that does not provide for participation in the
Plan.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(k) "FAIR MARKET VALUE" means the market price of Stock, determined by
the Committee as follows:
(i) If Stock was traded on the New York Stock Exchange or
other stock exchange on the date in question, then the Fair Market
Value shall be equal to the closing price reported by the applicable
composite transactions report for such date; or
(ii) If (i) is not applicable, then the Fair Market Value
shall be determined by the Committee in good faith on such basis as it
deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in the WALL STREET JOURNAL or as reported
directly to the Company by the stock exchange. Such determination shall be
conclusive and binding on all persons.
(l) "OFFERING PERIOD" means a six-month period with respect to which
the right to purchase Stock may be granted under the Plan, as determined
pursuant to Section 4(a).
(m) "PARTICIPANT" means an Eligible Employee who elects to participate
in the Plan, as provided in Section 4(b).
(n) "PARTICIPATING COMPANY" means (i) the Company and (ii) each present
or future Subsidiary designated by the Committee as a Participating Company.
(o) "PLAN" means this West Pharmaceutical Services, Inc. 2003 Employee
Stock Purchase Plan, as it may be amended in accordance with its terms from time
to time.
(p) "PURCHASE PRICE" means the price at which Participants may purchase
Stock under the Plan, as determined pursuant to Section 8(b).
(q) "STOCK" means the common stock of the Company, par value $0.25 per
share.
(r) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
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3. Administration of the Plan.
(a) COMMITTEE COMPOSITION. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of one or more directors or
officers of the Company, who shall be appointed by the Board from time to time.
The Committee shall serve at the pleasure of the Board and be subject to
replacement, substitution or removal by the Board at any time for any reason.
The initial members of the Committee, effective June 1, 2003, shall be the
Company's Vice President-Human Resources, and the Company's Treasurer.
(b) AUTHORITY OF THE COMMITTEE. The Committee shall have the exclusive
power and authority to administer the Plan, including without limitation the
right and power to interpret the provisions of the Plan and make all
determinations deemed necessary or advisable for the administration of the Plan.
All such actions, interpretations and determinations which are done or made by
the Committee in good faith shall be final, conclusive and binding on the
Company, each Subsidiary, each Participant and all other parties and shall not
subject the Committee to any liability.
4. Enrollment and Participation.
(a) OFFERING PERIODS. While the Plan is in effect, two Offering Periods
shall commence in each calendar year. The Offering Periods shall consist of the
six-month periods commencing on each June 1 and December 1.
(b) ENROLLMENT. Subject to Section 4(c), any Eligible Employee may
elect to become a Participant in the Plan for such Offering Period by executing
and filing the enrollment form prescribed for this purpose by the Committee not
later than 15 days prior to the commencement of such Offering Period.
(c) RESTRICTION ON PARTICIPATION. An Employee who makes a hardship
withdrawal from the Company Savings Plan shall be prohibited from contributing
to the Plan until the first day of the Offering Period that coincides with or
next follows the six month anniversary of the date of such hardship withdrawal.
(d) DURATION OF PARTICIPATION. Once enrolled in the Plan, a Participant
shall continue to participate in the Plan until he or she ceases to be an
Eligible Employee, withdraws from the Plan under Section 6(a) or reaches the end
of the Offering Period in which his or her employee contributions were
discontinued under Section 5(c) or 9(b). A Participant who discontinued employee
contributions under Section 5(c) or withdrew from the Plan under Section 6(a)
may again become a Participant, if he or she then is an Eligible Employee, by
following the procedure described in Section 3(b) above. A Participant whose
employee contributions were discontinued automatically under Section 9(b) shall
automatically resume participation at the beginning of the earliest Offering
Period ending in the next calendar year, if he or she then is an Eligible
Employee.
5. Employee Contributions.
A Participant may purchase shares of Stock under the Plan by means of
payroll deductions described in Section 5(a) or additional cash contributions
described in Section 5(b).
(a) PAYROLL DEDUCTION CONTRIBUTIONS.
(i) FREQUENCY OF PAYROLL DEDUCTIONS. Payroll deductions, as
designated by the Participant pursuant to this Section 5(a), shall
occur on each payday during participation in the Plan.
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(ii) AMOUNT OF PAYROLL DEDUCTIONS. An Eligible Employee shall
designate on the enrollment form the portion of his or her
Compensation that he or she elects to have withheld for the purchase
of Stock. He or she may elect to contribute a flat dollar amount (but
not less than $10.00 per pay period) or a whole percentage of his or
her Compensation (of not less than 1% or more than 25% of his or her
Compensation).
(iii) CHANGING WITHHOLDING RATE. If a Participant wishes to
change the rate of payroll withholding, he or she may do so by filing
a new enrollment form with the Company in the manner prescribed by the
Committee but no more frequently than monthly. The new withholding
rate shall be effective as soon as reasonably practicable after such
form has been received by the Company.
(iv) DISCONTINUING PAYROLL DEDUCTIONS. If a Participant wishes
to discontinue employee contributions entirely, he or she may do so by
filing a new enrollment form with the Company in the manner prescribed
by the Committee. Payroll withholding shall cease as soon as
reasonably practicable after such form has been received by the
Company. In addition, employee contributions may be discontinued
automatically pursuant to Section 9(b). A Participant who has
discontinued employee payroll deduction contributions may resume such
contributions by filing a new enrollment form with the Company in the
manner prescribed by the Committee. Payroll withholding shall resume
as soon as reasonably practicable after such form has been received by
the Company.
(b) ADDITIONAL CASH CONTRIBUTIONS. A Participant may make an additional
contribution, subject to Section 9(b), to purchase Stock by remitting a cash
contribution, in a form and manner acceptable to the Committee on or before the
date which is 15 calendar days prior to the end of any Offering Period; provided
that the Participant is still an Eligible Employee at such time.
(c) RESTRICTION ON EMPLOYEE CONTRIBUTIONS. An Employee who makes a
hardship withdrawal from the Company Savings Plan shall be prohibited from
participating in the Plan until the first day of the Offering Period that
coincides with or next follows the six month anniversary of the date of such
hardship withdrawal.
6. Withdrawal from the Plan.
(a) WITHDRAWAL. A Participant may elect to withdraw from the Plan in
the manner prescribed by the Company at any time before the last day of an
Offering Period. As soon as reasonably practicable thereafter, payroll
contributions shall cease and the entire amount credited to the Participant's
Account shall be refunded to him or her in cash, without interest. No partial
withdrawals shall be permitted.
(b) RE-ENROLLMENT AFTER WITHDRAWAL. A former Participant who has
withdrawn from the Plan shall not be a Participant until he or she re-enrolls in
the Plan under Section 4(d). Re-enrollment may be effective only at the
commencement of an Offering Period and a former Participant may not make an
additional cash contribution under Section 5(b) during the Offering Period in
which he or she withdrew.
7. Change in Employment Status.
(a) TERMINATION OF EMPLOYMENT. Termination of employment as an Eligible
Employee for any reason, including death, shall be treated as an automatic
withdrawal from the Plan under Section 6(a).
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(b) LEAVE OF ABSENCE. For purposes of the Plan, employment shall not be
deemed to terminate when the Participant goes on a military leave, sick leave
disability or another bona fide leave of absence, if the leave was approved by
the Company in writing. Employment, however, shall be deemed to terminate 90
days after the Participant goes on a leave, unless a contract or statute
guarantees his or her right to return to work. Employment shall be deemed to
terminate in any event when the approved leave ends, unless the Participant
immediately returns to work.
(c) DEATH. In the event of the Participant's death, the amount credited
to his or her Account shall be paid to a beneficiary designated by him or her
for this purpose on the prescribed form or, if none, to the Participant's
estate. Such form shall be valid only if it was filed with the Company at the
prescribed location before the Participant's death.
(d) TRANSFER TO ANOTHER PARTICIPATING COMPANY. A transfer from one
Participating Company to another shall not be treated as a termination of
employment.
8. Accounts and Purchase of Shares.
(a) ACCOUNTS. The Company shall maintain an Account on its books in the
name of each Participant. Amounts deducted from the Participant's Compensation
under Section 5(a) and additional cash contributions under Section 5(b) shall
be credited to the Participant's Account. Amounts credited to Accounts shall
not be trust funds and may be commingled with the Company's general assets and
applied to general corporate purposes. No interest shall be credited to any
Participant's Account.
(b) PURCHASE PRICE. The Purchase Price for each share of Stock
purchased at the close of an Offering Period shall be the lesser of:
(i) 85% of the Fair Market Value of such share on the last
trading day in such Offering Period; or
(ii) 85% of the Fair Market Value of such share on the last
trading day before the commencement of such Offering Period.
(c) NUMBER OF SHARES PURCHASED. As of the last day of each Offering
Period, each Participant shall be deemed to have elected to purchase the
number of shares of Stock calculated in accordance with this Section 8(c),
unless the Participant has previously elected to withdraw from the Plan in
accordance with Section 6(a). The amount then in the Participant's Account
shall be divided by the Purchase Price, and the number of shares that results
shall be purchased from the Company with the funds in the Participant's
Account. The foregoing notwithstanding, no Participant shall purchase more
than 2,000 shares of Stock with respect to any Offering Period nor more than
the amounts of Stock set forth in Sections 9(b) and 14(a). The Committee may
determine with respect to all Participants that any fractional share, as
calculated under this Section 8(c), shall be (i) rounded down to the next
lower whole share or (ii) credited as a fractional share.
(d) AVAILABLE SHARES INSUFFICIENT. In the event that the aggregate
number of shares that all Participants elect to purchase during an Offering
Period exceeds the maximum number of shares remaining available for issuance
under Section 14(a), then the number of shares to which each Participant is
entitled shall be determined by multiplying the number of shares available for
issuance by a fraction, the numerator of which is the number of shares that
such Participant has elected to purchase and the denominator of which is the
number of shares that all Participants have elected to purchase.
(e) ISSUANCE OF STOCK. Certificates representing the shares of Stock
purchased by a Participant under the Plan shall be issued to him or her as
soon as reasonably practicable after the close of the applicable Offering
A-5
Period, except that the Committee may determine that such shares shall be held
for each Participant's benefit by a broker designated by the Committee (unless
the Participant has elected that certificates be issued to him or her). Shares
may be registered in the name of the Participant or jointly in the name of the
Participant and his or her spouse as joint tenants with right of survivorship
or as community property.
(f) UNUSED CASH BALANCES. Any amount remaining in the Participant's
Account that represents the Purchase Price for a fractional share shall be
carried over in the Participant's Account to the next Offering Period. Any
amount remaining in the Participant's Account that represents the Purchase
Price for whole shares that could not be purchased by reason of Section 8(c),
9(b) or 14(a) shall be refunded to the Participant in cash, without interest.
(g) STOCKHOLDER APPROVAL. Any other provision of the Plan
notwithstanding, no shares of Stock shall be purchased under the Plan unless
and until the Company's stockholders have approved the adoption of the Plan.
9. Limitations on Stock Ownership.
(a) FIVE PERCENT LIMIT. Any other provision of the Plan
notwithstanding, no Participant shall be granted a right to purchase Stock
under the Plan if such Participant, immediately after his or her election to
purchase such Stock, would own stock possessing more than 5% of the total
combined voting power or value of all classes of stock of the Company or any
parent or Subsidiary of the Company. For purposes of this Section 9(a), the
following rules shall apply:
(i) Ownership of stock shall be determined after applying
the attribution rules of section 424(d) of the Code;
(ii) Each Participant shall be deemed to own any stock that he
or she has a right or option to purchase under this or any other plan;
and
(iii) Each Participant shall be deemed to have the right to
purchase 2,000 shares of Stock under this Plan with respect to each
Offering Period.
(b) DOLLAR LIMIT.
(i) Any other provision of the Plan notwithstanding in the
case of Stock purchased during an Offering Period that commenced
during a calendar year, no Participant shall purchase Stock with Fair
Market Value in excess of: (i) $25,000 minus (ii) the Fair Market
Value of the Stock that the Participant previously purchased in the
current calendar year under this Plan and all other employee stock
purchase plans (described in section 423 of the Code) of the Company
or any parent or Subsidiary of the Company.
For purposes of this Subsection (a), the Fair Market Value of Stock
shall be determined in each case as of the beginning of the Offering Period in
which such Stock is purchased. If a Participant is precluded by this Section
9(b) from purchasing additional Stock under the Plan, then his or her employee
payroll deduction contributions shall automatically be discontinued and he shall
be prohibited from making additional cash contributions under Section 5(b). His
or her employee payroll deduction contributions shall resume at the beginning of
the earliest Offering Period that ends in the next calendar year (if he or she
then is an Eligible Employee).
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10. Rights Not Transferable.
The rights of any Participant under the Plan, or any Participant's
interest in any Stock or moneys to which he or she may be entitled under the
Plan, shall not be transferable by voluntary or involuntary assignment or by
operation of law, or in any other manner other than by beneficiary designation
or the laws of descent and distribution. If a Participant in any manner attempts
to transfer, assign or otherwise encumber his or her rights or interest under
the Plan, other than by beneficiary designation or the laws of descent and
distribution, then such act shall be treated as an election by the Participant
to withdraw from the Plan under Section 6(a).
11. No Rights as an Employee.
Nothing in the Plan or in any right granted under the Plan shall confer
upon the Participant any right to continue in the employ of a Participating
Company for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Participating Companies or of the
Participant, which rights are hereby expressly reserved by each, to terminate
his or her employment at any time and for any reason, with or without cause.
12. No Rights as a Stockholder.
A Participant shall have no rights as a stockholder with respect to any
shares of Stock that he or she may have a right to purchase under the Plan until
such shares have been purchased on the last day of the applicable Offering
Period.
13. Securities Law Requirements.
Shares of Stock shall not be issued under the Plan unless the issuance
and delivery of such shares comply with (or are exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange or other
securities market on which the Company's securities may then be traded.
14. Stock Offered Under The Plan.
(a) AUTHORIZED SHARES. The aggregate number of shares of Stock
available for purchase under the Plan shall be 1,500,000 subject to adjustment
pursuant to this Section 14.
(b) ANTIDILUTION ADJUSTMENTS. The aggregate number of shares of Stock
offered under the Plan, the 2,000-share limitation per Offering Period described
in Section 8(c) and the price of shares that any Participant has elected to
purchase shall be adjusted proportionately by the Committee for any increase or
decrease in the number of outstanding shares of Stock resulting from a
subdivision or consolidation of shares or the payment of a stock dividend, any
other increase or decrease in such shares effected without receipt or payment of
consideration by the Company, the distribution of the shares of a Subsidiary to
the Company's stockholders or a similar event.
(c) REORGANIZATIONS. Any other provision of the Plan notwithstanding,
immediately prior to the effective time of a Corporate Reorganization, the
Offering Period then in progress shall terminate and shares shall be purchased
pursuant to Section 8, unless the Plan is assumed by the surviving corporation
or its parent corporation pursuant to the plan of merger or consolidation. The
Plan shall in no event be construed to restrict in any way the Company's right
to undertake a dissolution, liquidation, merger, consolidation or other
reorganization.
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15. Amendment or Discontinuance.
The Board shall have the right to amend, suspend or terminate the Plan
at any time and without notice. Except as provided in Section 14, any increase
in the aggregate number of shares of Stock to be issued under the Plan shall be
subject to approval by a vote of the stockholders of the Company. In addition,
any other amendment of the Plan shall be subject to approval by a vote of the
stockholders of the Company to the extent required by any applicable law or
regulation.
16. Tax Withholding.
To the extent any payments or distributions under this Plan are subject
to Federal, state or local taxes, the applicable Participating Company is
authorized to withhold any and all applicable taxes. The applicable
Participating Company may satisfy its withholding obligation by (i) withholding
shares of Stock allocated to a Participant's Account, (ii) deducting cash from a
Participant's Account, or (iii) deducting cash from a Participant's other
compensation. A Participant's election to participate in the Plan authorizes the
Company or the appropriate Subsidiary to take any of the actions described in
the preceding sentence.
17. Governing Law.
Except to the extent superseded by federal law, the laws of the State
of Delaware will govern all matters relating to the Plan.
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PROXY [LOGO OMMITTED]
WEST PHARMACEUTICAL SERVICES, INC.
101 Gordon Drive, Lionville, Pennsylvania 19341
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John R. Gailey III and Linda R. Altemus as
Proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
common stock of West Pharmaceutical Services, Inc., held of record by the
undersigned on March 20, 2003, at the Annual Meeting of Shareholders to be held
on April 29, 2003 or any postponement or adjournment thereof.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this
Proxy will be voted FOR Proposals 1, 2 and 3.
(To be Signed on Reverse Side)
ANNUAL MEETING OF SHAREHOLDERS OF WEST PHARMACEUTICAL SERVICES, INC.
April 29, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach and mail in the envelope provided.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
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1. Election of 4 Class I Directors
NOMINIES
[ ] FOR ALL NOMINEES O William H. Longfield
[ ] WITHHOLD AUTHORITY O Anthony Welters
FOR ALL NOMINEES O Robert C. Young
[ ] FOR ALL EXCEPT O Patrick J. Zenner
(See instructions below)
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here:
________________________________________________________________________________
2. Approval of the 2003 Employee Stock Purchase Plan. FOR AGAINST ABSTAIN
3. Ratification of the appointment of PricewaterhouseCoopers LLP as independent [ ] [ ] [ ]
accountants of the corporation for the fiscal year ending December 31, 2003.
4. In their discretion, the Proxies are authorized to vote upon such other [ ] [ ] [ ]
matters as may properly come before the meeting. This Proxy when properly
executed will be voted in the manner directed herein by the undersigned
shareholder. If no direction is made, this Proxy will be voted FOR Proposals 1,
2 and 3.
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To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method. [ ]
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Signature of Shareholder _______________________ Date: _____________________
Signature of Shareholder _______________________ Date: _____________________
Note: This proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.