Exhibit (10) (c)
Execution Copy
THIS
IS A CHANGE-IN-CONTROL AGREEMENT (the “Agreement”) dated as of May 1,
2003 (the “Effective Date”) between West Pharmaceutical, Services, Inc.,
a Pennsylvania corporation, (the “Company”) and Xxxxx X. Xxxxx
(“Executive”).
Background
The
Company and Executive are parties to a “Confidentiality and Non-Competition
Agreement” dated as of April 7, 2003 (the “Non-Competition
Agreement”) a copy of which is attached hereto as Exhibit “A.” Under
the Non-Competition Agreement, Executive is eligible to receive severance compensation and
certain other benefits in the event his employment is terminated by the Company other than
for cause or by reason of death, disability, continuous willful misconduct to the
detriment of the Company or retirement pursuant to the Company’s Employees’
Retirement Plan.
The
Company now desires to provide Executive with certain enhanced compensation and benefits
in the event that Executive’s employment is terminated following a Change in Control
(as defined herein). The Company and Executive also desire to amend the Non-Competition
Agreement, as set forth in this Agreement.
Agreement
In
consideration of the foregoing, the Company and Executive, each intending to be legally
bound, agree as follows:
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Xxxxxxxxxxx.Xx
used in this Agreement, the following terms will have the meanings set
forth below: |
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(a) |
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An
“Affiliate” of any Person means any Person directly or
indirectly controlling, controlled by or under common control with
such Person. |
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(b) |
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“Change
in Control” means a change in control of a nature that would
be required to be reported in response to Item 1 of a Current Report on
Form 8-K as in effect on the Effective Date pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, (the “Act”)
provided, that, without limitation, a Change in Control shall be
deemed to have occurred if: |
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(i) |
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Any
Person, other than: |
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(2) |
any
Person who on the date hereof is a director or officer of the Company, or |
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(3) |
a
trustee or fiduciary holding securities under an employee benefit plan of the
Company, |
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is
or becomes the “beneficial owner” (as defined in Rule 13-d3 under the Act),
directly or indirectly, of securities of the Company representing more than 50% of the
combined voting power of the Company’s then outstanding securities; or |
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(ii) |
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During
any period of two consecutive years during the term of this Agreement,
individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute at least a majority
thereof, unless the election of each director who was not a director at the
beginning of such period has been approved in advance by directors representing
at least two-thirds of the directors then in office who were directors at the
beginning of the period; or |
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(iii) |
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The
shareholders of the Company approve: (A) a plan of complete liquidation of the
Company; or (B) an agreement for the sale or disposition of all or
substantially all of the Company’s assets; or (C) a merger, consolidation,
or reorganization of the Company with or involving any other corporation, other than
a merger, consolidation, or reorganization (collectively, a “Transaction”)
that would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 50% of the combined voting power of the voting securities of
the Company (or the surviving entity, or an entity which as a result of the
Transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) outstanding
immediately after the Transaction. |
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(c) |
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“Code” means
the Internal Revenue Code of 1986, as amended. |
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(d) |
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“Constructive
Termination” means the occurrence of any of the following events: |
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(i) |
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The
Company requires Executive to assume any duties inconsistent with, or the
Company makes a significant diminution or reduction in the nature or scope of
Executive’s authority or duties from, those assigned to or held by
Executive on the Effective Date; |
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(ii) |
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A
material reduction in Executive’s annual salary or incentive compensation
opportunities; |
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(iii) |
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A
relocation of Executive’s site of employment to a location more than 50
miles from Executive’s site of employment on the Effective Date; |
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(iv) |
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The
Company fails to provide Executive with substantially the same fringe benefits
that were provided to Executive as of the Effective Date, or with a package of
fringe benefits that, although one or more of such benefits may vary from those
in effect as of the Effective Date, is substantially at least as beneficial to
Executive in all material respects as such fringe benefits taken as a whole; or |
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(v) |
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A
successor of the Company does not assume the Company’s obligations under
this Agreement, expressly or as a matter of law. |
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Notwithstanding
the foregoing, no Constructive Termination will be deemed to have occurred under any of
the following circumstances: |
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(1) |
Executive
will have consented in writing or given a written waiver to the occurrence
of any of the events enumerated in clauses (i) through (v) above; |
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(2) |
Executive
will have failed to give the Company written notice stating Executive’s
intention to claim Constructive Termination and the basis for that claim
at least 10 days in advance of the effective date of Executive’s
resignation; or |
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(3) |
The
event constituting a Constructive Termination has been cured by the Company
prior to the effective date of Executive’s resignation. |
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(i) |
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any
amount due or paid to Executive under this Agreement, |
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(ii) |
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any
amount that is due or paid to Executive under any plan, program or
arrangement of the Company and any of its Subsidiaries, and |
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(iii) |
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any
amount or benefit that is due or payable to Executive under this Agreement
or under any plan, program or arrangement of the Company and any of its
Subsidiaries not otherwise covered under clause (i) or (ii) hereof which
must reasonably be taken into account under section 280G of the Code and
the Regulations in determining the amount of the “parachute payments” received
by Executive, including, without limitation, any amounts which must be
taken into account under the Code and Regulations as a result of (1) the
acceleration of the vesting of any option, restricted stock or other
equity award granted under any equity plan of the Company or otherwise,
(2) the acceleration of the time at which any payment or benefit is
receivable by Executive or (3) any contingent severance or other amounts
that are payable to Executive. |
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(g) |
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“Person” means
an individual, a corporation, a partnership, an association, a trust or
other entity or organization. |
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(h) |
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“Regulations” means
the proposed, temporary and final regulations under section 280G of the
Code or any successor provision thereto. |
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(i) |
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“Retirement
Plan” means the West Pharmaceutical Services, Inc. Employees’ Retirement
Plan and any successor plan thereto. |
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(j) |
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“Savings/Deferred
Comp Plan” means The Company’s Salaried Employees’ Savings
Plan, The Company’s Non-Qualified Deferred Compensation Plan for
Designated Executive Officers and any other similar plan established from
time to time that may allow executive officers to defer taxation of
compensation. |
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(k) |
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“Subsidiary” has
the meaning ascribed to the term by section 425(f) of the Code. |
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(l) |
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“Termination
Date” means the date on which Executive ceases to be employed by
the Company or any of its Subsidiaries or Affiliates for any reason. |
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Termination
Following a Change in Control. |
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(a) |
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Executive
will be entitled to the benefits specified in Section 3 (Benefits
Payable Upon Termination of Employment) if, |
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(i) |
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at
any time within two years after a Change in Control has occurred, Executive’s
employment by the Company is terminated: |
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(1) |
by
the Company, other than by reason of death, disability, continuous willful
misconduct to the detriment of the Company, or retirement at Executive’s
normal retirement date under the Retirement Plan, or |
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(2) |
as
a result of Executive’s resignation at any time following Executive’s
Constructive Termination; or |
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(ii) |
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Executive
resigns for any reason within 30 days following the first anniversary of a
Change in Control. |
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Except
as otherwise set forth in Section 2(b) Executive will not be entitled to the benefits
specified in Section 3 hereof if Executive’s employment terminates for any other
reason or if, at any time thereafter, Executive is in breach of any of Executive’s
obligations under this Agreement or the Non-Competition Agreement. |
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(b) |
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If
the Company executes an agreement, the consummation of which would result in
the occurrence of a Change in Control, then, with respect to a termination: |
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(i) |
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by
the Company, other than by reason of death, disability, continuous willful
misconduct to the detriment of the Company, or retirement at Executive’s
normal retirement date under the Retirement Plan, or |
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(ii) |
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as
a result of Executive’s resignation at any time following Executive’s
Constructive Termination occurring after the date of such agreement (and, if
such agreement expires or is terminated prior to consummation, prior to the
expiration or termination of such agreement) |
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a
Change in Control shall be deemed to have occurred as of the date of the execution of
such agreement and Executive will be entitled to the severance compensation specified in
Section 3 hereof. |
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Benefits
Payable Upon Termination of Employment. Upon termination of
employment as set forth in Section 2 (Termination Following a Change in
Control) Executive will be entitled to the following benefits: |
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(a) |
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Severance
Compensation. Executive will be entitled to severance compensation in an
amount equal to three times the sum of: |
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Executive’s
highest annual base salary rate in effect during the year of the termination of
Executive’s employment, plus |
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the
aggregate amount of the annual bonuses paid or payable to Executive for the
three fiscal years immediately preceding a Change in Control divided by the
number of fiscal years as to which such bonuses were paid or payable; |
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provided,
however, that if at any time before the third anniversary of the Termination Date,
Executive either (x) elects retirement under the Retirement Plan, or (y) could have been
compelled to retire under the Retirement Plan if Executive had remained employed by the
Company, Executive’s severance compensation under this Section 3(a) will be reduced
by an amount equal to the product obtained by multiplying such severance compensation by
a fraction the numerator of which is the number of days elapsed from the Termination Date
until the date on which either of the events described in clauses (x) or (y) first
occurs, and the denominator of which is 1095. |
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The
severance compensation paid hereunder will not be reduced to the extent of any other
compensation for Executive’s services that Executive receives or is entitled to
receive from any other employment consistent with the terms of this Agreement. |
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(b) |
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Equivalent
of Vested Savings/Deferred Comp Plan Benefit. The Company will pay to
Executive the difference, if any, between |
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(i) |
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the
benefit Executive would be entitled to receive under the Savings/Deferred Comp
Plan if the Company’s contributions to the Savings/Deferred Comp Plan were
fully vested upon the termination of Executive’s employment, and |
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(ii) |
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the
benefit Executive is entitled to receive under the terms of the
Savings/Deferred Comp Plan upon termination of Executive’s employment. |
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Any |
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such
benefit will be payable at such time and in such manner as benefits are payable to
Executive under the Savings/Deferred Comp Plan. |
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(c) |
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Unvested
Equity Awards. All stock options, other equity-based awards and
shares of the Company’s stock granted or awarded to Executive
pursuant to any Company compensation or benefit plan or arrangement,
but which are unvested, will vest immediately upon termination of
Executive’s employment. The provisions of this Section 3(c) will
supersede the terms of any such grant or award made to Executive
under any such plan or arrangement to the extent there is an
inconsistency between the two. |
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(d) |
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Employee
and Executive Benefits.Executive will be
entitled to a continuation of all hospital, major medical, medical,
dental, life and other insurance benefits not otherwise addressed in
this Agreement in the same manner and amount to which Executive was
entitled on the date of a Change in Control or on the date of
Constructive Termination of Executive’s employment (whichever
benefits are more favorable to Executive) until the earlier of |
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(i) |
a
period of 36 months after the Termination Date, |
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(ii) |
Executive’s
retirement under the Retirement Plan, or |
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(iii) |
Executive’s
eligibility for similar benefits with a new employer. |
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Assistance
in finding new employment will be made available to Executive by the Company if Executive
so requests. Upon termination of Executive’s employment, Company cars must be
returned to the Company. |
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(a) |
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Gross-Up
Payment. Notwithstanding anything herein to the contrary, if it
is determined that any Payment would be subject to the excise tax
imposed by section 4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax, together with any
interest or penalties thereon, is herein referred to as an “Excise
Tax”) then Executive shall be entitled to an additional
payment (a “Gross-Up Payment”) in an amount that
will place Executive in the same after-tax economic position that
Executive would have enjoyed if the Excise Tax had not applied to the
Payment. |
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(b) |
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Determination
of Gross-Up Payment. Subject to the provisions of Section 4(c)
all determinations required under this Section 4, including whether a
Gross-Up Payment is required, the amount of the Payments constituting
excess parachute payments, and the amount of the Gross-Up Payment,
shall be made by the accounting firm that was the Company’s
independent auditors immediately prior to the Change in Control (or,
in default thereof, an accounting firm mutually agreed upon by the
Company and Executive) (the “Accounting Firm”) which
shall provide detailed supporting calculations both to Executive and
the Company within fifteen days of the Change in Control, the
Termination Date or any other date reasonably requested by Executive
or the Company on which a determination under this Section 4 is
necessary or advisable. The Company shall pay to Executive the
initial Gross-Up Payment within five (5) days of the receipt by
Executive and the Company of the Accounting Firm’s
determination. If the Accounting Firm determines that no Excise Tax
is payable by Executive, the Company shall cause the Accounting Firm
to provide Executive with an opinion that the Accounting Firm has
substantial authority under the Code and Regulations not to report an
Excise Tax on Executive’s federal income tax return. Any
determination by the Accounting Firm shall be binding upon Executive
and the Company. If the initial Gross-Up Payment is insufficient to
cover the amount of the Excise Tax that is ultimately determined to be owing
by Executive with respect to any Payment (hereinafter an “Underpayment”)
the Company, after exhausting its remedies under Section 4(c) below,
shall promptly pay to Executive an additional Gross-Up Payment in
respect of the Underpayment. |
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(c) |
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Procedures.
Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notice shall be given as soon
as practicable after Executive knows of such claim and shall apprise
the Company of the nature of the claim and the date on which the
claim is requested to be paid. Executive agrees not to pay the claim
until the expiration of the thirty-day period following the date on
which Executive notifies the Company, or such shorter period ending
on the date the Taxes with respect to such claim are due (the “Notice
Period”). If the Company notifies Executive in writing prior
to the expiration of the Notice Period that it desires to contest the
claim, Executive shall: (i) give the Company any information reasonably
requested by the Company relating to the claim; (ii) take such action
in connection with the claim as the Company may reasonably request,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company and reasonably acceptable to Executive; (iii) cooperate with
the Company in good faith in contesting the claim; and (iv) permit
the Company to participate in any proceedings relating to the claim.
Executive shall permit the Company to control all proceedings related
to the claim and, at its option, permit the Company to pursue or
forgo any and all administrative appeals, proceedings, hearings, and
conferences with the taxing authority in respect of such claim. If
requested by the Company, Executive agrees either to pay the tax
claimed and xxx for a refund or contest the claim in any permissible
manner and to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts as the Company shall determine; provided, however,
that, if the Company directs Executive to pay such claim and pursue a
refund, the Company shall advance the amount of such payment to
Executive on an after-tax and interest-free basis (the “Advance”).
The Company’s control of the contest related to the claim shall
be limited to the issues related to the Gross-Up Payment and
Executive shall be entitled to settle or contest, as the case may be,
any other issues raised by the Internal Revenue Service or other
taxing authority. If the Company does not notify Executive in writing
prior to the end of the Notice Period of its desire to contest the
claim, the Company shall pay to Executive an additional Gross-Up
Payment in respect of the excess parachute payments that are the
subject of the claim, and Executive agrees to pay the amount of the Excise
Tax that is the subject of the claim to the applicable taxing
authority in accordance with applicable law. |
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Repayments.
If, after receipt by Executive of an Advance, Executive becomes
entitled to a refund with respect to the claim to which such Advance
relates, Executive shall pay the Company the amount of the refund
(together with any interest paid or credited thereon after Taxes
applicable thereto). If, after receipt by Executive of an Advance, a
determination is made that Executive shall not be entitled to any
refund with respect to the claim and the Company does not promptly
notify Executive of its intent to contest the denial of refund, then
the amount of the Advance shall not be required to be repaid by
Executive and the amount thereof shall offset the amount of the
additional Gross-Up Payment then owing to Executive. |
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Further
Assurances. The Company shall indemnify Executive and hold
Executive harmless, on an after-tax basis, from any costs, expenses,
penalties, fines, interest or other liabilities (“Losses”)
incurred by Executive with respect to the exercise by the Company of
any of its rights under this Section 4, including, without
limitation, any Losses related to the Company’s decision to
contest a claim or any imputed income to Executive resulting from any
Advance or action taken on Executive’s behalf by the Company
hereunder. The Company shall pay all legal fees and expenses incurred
under this Section 4 and shall promptly reimburse Executive for the
reasonable expenses incurred by Executive in connection with any
actions taken by the Company or required to be taken by Executive
hereunder. The Company shall also pay all of the fees and expenses of
the Accounting Firm, including, without limitation, the fees and
expenses related to the opinion referred to in Section 4(b). |
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Payment
of Severance Compensation. |
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(a) |
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The
severance compensation set forth in Section 3(a) shall be payable in 36
equal monthly installments commencing on the first day of the month
following the month in which Executive’s employment terminates.
However, Executive may elect in writing, in accordance with the
provisions of this Section, to receive Executive’s severance
compensation in a lump sum at a later time or in installments in
amounts and at times elected by Executive, but Executive’s
election will not entitle Executive to receive severance compensation
sooner than permitted by the preceding sentence. |
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(b) |
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Executive
must elect to receive amounts in installments or to defer payments by
filing a written election with the Company, which specifies the time
at which payments are to be made and the amounts of such payments.
Executive’s election to receive installment payments or to defer
payments will not be valid unless it is made prior to the time
Executive is entitled to receive any payments under this Agreement.
The last such election in effect on the day before a termination of
employment will be controlling. No election may be made on or after
termination of employment. |
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(c) |
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The
payment of deferred amounts must commence no earlier than the first business
day of the calendar year following the termination of Executive’s
employment and no later than the third calendar year following the
attainment of normal retirement age under the Retirement Plan. |
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Legal
Fees. The Company will pay all legal fees and expenses
which Executive may incur as a result of the Company’s contesting
the validity or enforceability of this Agreement. |
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Payments
Final. In the event of a termination of Executive’s
employment under the circumstances described in this Agreement, the
arrangements provided for by this Agreement, and any other agreement between
the Company and Executive in effect at that time and by any other
applicable plan of the Company in which Executive then participates,
will constitute the entire obligation of the Company to Executive,
and performance of that obligation will constitute full settlement of
any claim that Executive might otherwise assert against the Company
on account of such termination. The Company’s obligation to pay
Executive under this Agreement will be absolute and unconditional and
will not be affected by any circumstance, including without
limitation, any set-off, counterclaim, defense or other rights the
Company may have against Executive or anyone else as long as
Executive is not in beach of Executive’s obligations under this
Agreement or the Non-Competition Agreement. |
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Vesting
in the Event of a Change in Control. In the event of a
Change in Control, all stock options, equity-based awards and shares of the
Company’s stock granted or awarded to Executive pursuant to any
Company compensation or benefit plan or arrangement, but which are
unvested at that time, will vest immediately upon such Change in
Control. The provisions of this Section 8 will supersede the terms of
any such grant or award made to Executive under any such plan or
arrangement to the extent there is an inconsistency between the two. |
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Duration
of Agreement. This Agreement shall commence on the
Effective Date and shall continue until terminated as provided in
this Section 9. This Agreement may be terminated only under the
following circumstances: |
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(i) |
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At
any time by the mutual written consent of Executive and the Company; and |
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(ii) |
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By
the Company at the end of each successive two-year period commencing on the
Effective Date by giving Executive written notice at least one year
in advance of such termination, except that such termination and
written notice will not be effective unless Executive will be
employed by the Company on the date of termination . |
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Amendment
of Prior Agreements. |
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(a) |
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Amendment
of Non-Competition Agreement. The Company and Executive agree
that the Non-Competition Agreement is amended in the manner set forth
in the form of amendment attached to this Agreement as Exhibit “A.” The
execution of such amendment by Executive shall be a condition to the
Company’s execution of this Agreement. |
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(a) |
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This
Agreement will be binding upon and inure to the benefit of Executive,
Executive’s personal representatives and heirs and the Company
and any successor of the Company, but neither this Agreement nor any
rights arising hereunder may be assigned or pledged by Executive. |
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(b) |
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Should
any provision of this Agreement be adjudged to any extent invalid by any
competent tribunal, that provision will be deemed modified to the
extent necessary to make it enforceable. |
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(c) |
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This
Agreement will be governed and construed in accordance with the laws of the
Commonwealth of Pennsylvania. |
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(d) |
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This
Agreement constitutes the entire agreement and understanding between the
Company and Executive with respect to the subject matter hereof and
merges and supersedes all prior discussions, agreements and
understandings between the Company and Executive with respect to such
matters. |
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(e) |
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This
Agreement may be executed in one or more counterparts, which together shall
constitute a single agreement. |
| IN |
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WITNESS
WHEREOF, the parties have duly executed this Agreement as of the date first written
above. |
By:
Xxxxx X. Xxxxx, Ph.X.
| XXXX |
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PHARMACEUTICAL
SERVICES, INC. |
By:
Xxxxxx X. Xxxxx, Xx., Ph.D., Chairman of the
Board, President and Chief Executive Officer
