Exhibit (10)
West Pharmaceutical Services, Inc.
Executive Incentive Bonus Plan
The Incentive Bonus Plan for 2002 is based on the following concepts:
* Excellent service to our customers will create shareholder value.
* Employees must share in the Company's success.
* Successful achievement of business plan targets will drive profitability
for the entire Company.
Here's how the plan works:
TARGET BONUS
The target bonus is a specific percentage of your base salary (as of December
31, 2002) and represents the amount of bonus you will receive if 100% of all
Performance Factors is achieved.
PERFORMANCE FACTORS
There are two Performance Factors used to calculate bonuses. Each weighted as to
its influence on the overall bonus calculation:
* Corporate Financial Performance (75%) Corporate performance will be
measured on the achievement of the Company's annual:
-earnings per share target [65%]
-cash flow [35%]
* 25% of the bonus calculation will be based on an evaluation of:
1. The executive team's achievement of its strategic goals.
2. Each executive's performance against their personal goals.
BONUS CALCULATION
When the Corporate financial results exceed the target; your bonus opportunity
will increase as results improve. If the results at least reach the threshold
but fall short of the target, your bonus will be something less than your target
bonus opportunity. The following scale will be used for calculating the
Corporate Financial Performance Factor:
% Target Bonus
Achieved Paid
- ---------- ------
150 150
140 140
130 130
120 120
110 110
100 Target 100
90 90
85 Threshold 85
There is no "maximum" payout opportunity. Corporate performance above 150% and
interim amounts on the scale will be calculated using each 1% of the target
bonus.
Keep in mind, the threshold for eligibility for the goals is 75%. The maximum
bonus opportunity for achieving all your goals is 100%.
For participants to receive any bonus payout under the Corporate Performance
Factors, West must reach at least the threshold (85%) of the Corporate Financial
Performance Factor.
As has already been explained, you will receive 100% of your target bonus
opportunity if 100% of all Performance Factors are achieved.
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EXAMPLE
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A executive earning $120,000, who target bonus opportunity is 30%, would have
his/her bonus calculated as follows, the Company achieves 102% of the budgeted
combined EPS and cash flow targets and is awarded 100% for strategic and
personal objective accomplishments:
Target Bonus % Achieved Bonus % Bonus $
Corp. 75% x Bonus = Opp. x (from scale) = Earned x Salary = Earned
Strategic Target Bonus Bonus $
Personal 25% x Bonus = Opp. x % Achieved = Earned x Salary = Earned
Goals
Corp. 75% x 30% = 22.5% x 102% = 22.95% x $120,000 = $27,540
Strategic
Personal
Goals 25% x 30% = 7.5% x 100% = 7.5% x $120,000 = $9,000
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TOTAL BONUS EARNED 30.45% = $36,540
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BONUS PAYOUTS
Once the year's results are confirmed, your bonus award will be calculated
applying appropriate tax deductions. Of the after-tax amount, 75% will be paid
in cash (check) and 25% will be converted into shares of common stock of West
Pharmaceutical Services.
These shares will be deposited with an investment firm where accounts are
maintained for our Stock Bonus Plan. We encourage you to retain these shares and
to take advantage of the Incentive Share opportunities of the Stock Bonus Plan.
Here are the highlights of the Stock Bonus Plan.
STOCK BONUS PLAN
* 25% of your after-tax annual bonus is paid in shares of West Pharmaceutical
Services common stock.
* Participants may elect to commit shares ("bonus shares") to long-term
holding by depositing those shares into an authorized account. Shares will
be held in the participant's name.
* If a participant commits to long-term holding, a number of restricted
shares ("Incentive Shares") equal to 25% of the committed bonus shares will
be issued to the participant.
* The Incentive Shares will contain a legend stipulating that the
restrictions lapse at the end of four years from the date of issuance, so
long as the bonus shares are continuously held by the participant during
that four-year period.
* If a participant retires under West Pharmaceutical Services Salaried
Employees' Retirement Plan, the restrictions will lapse, so long as the
bonus shares have been retained continuously. He/she will be entitled to
receive a portion of the Incentive Shares according to the following
schedule:
25% with at least one but less than two years continuous ownership of the
bonus shares.
50% with at least two but less than three years continuous ownership of the
bonus shares.
75% with at least three but less than four years continuous ownership of
the bonus shares.
* Participants will receive dividends from bonus shares and restricted shares
as they are declared. These dividends will be reinvested in stock of West
Pharmaceutical Services.
* Ownership records will be reviewed annually to verify continuous ownership.
* The Plan is authorized under the 1998 Key Employee Incentive Compensation
Plan.
STOCK OWNERSHIP GUIDELINE
Your personal stock ownership guideline is % of your base salary and is expected
to be achieved in 5-7 years from the year an individual becomes eligible to
participate in the Incentive Bonus Plan.
MONITORING OUR PROGRESS
Our progress in achieving the various financial targets will be communicated
throughout the year, and your manager should review your goals on a periodic
basis.
ELIGIBILITY
Eligibility and the amount and type of awards under this plan are solely at the
discretion of management and the Board of Directors, and are not guaranteed
under any circumstances. Participants must be active employees on December 31,
2002 to be eligible for bonus payment consideration.