SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
Perrigo Company
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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(PERRIGO LOGO)
PERRIGO COMPANY
515 EASTERN AVENUE
ALLEGAN, MICHIGAN 49010
TELEPHONE: (269) 673-8451
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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TUESDAY, OCTOBER 30, 2007
10:00 A.M. EASTERN TIME
ALLEGAN COUNTY AREA TECHNICAL & EDUCATION CENTER
2891 116(TH )AVENUE (M-222)
ALLEGAN, MICHIGAN 49010
The purpose of our 2007 Annual Meeting is to elect three directors for a three-
year term beginning at the Annual Meeting and to consider and act upon other
business that may properly come before the meeting. The Board of Directors
recommends that you vote FOR each of the director nominees.
You can vote at the Annual Meeting in person or by proxy if you were a
shareholder of record on September 7, 2007.
It is important that your shares are represented at the Annual Meeting
regardless of whether you plan to attend. To be certain that your shares are
represented, you should promptly sign, date and return the enclosed proxy card
or proxy voting instruction form or vote by telephone or Internet following the
instructions on the proxy card. Please vote as soon as possible. You may revoke
your proxy at any time prior to the Annual Meeting.
Our 2007 Annual Report to Shareholders is enclosed.
Sincerely,
Todd W. Kingma
Secretary
September 28, 2007
PERRIGO COMPANY
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PROXY STATEMENT
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TABLE OF CONTENTS
PAGE
----
Questions and Answers................................................. 1
Proposal Requiring Your Vote--Election of Directors................... 5
Corporate Governance.................................................. 8
Board and Committee Membership........................................ 11
Director Compensation................................................. 12
Certain Transactions.................................................. 14
Ownership of Perrigo Common Stock..................................... 16
Section 16(a) Beneficial Ownership Reporting Compliance............... 18
Executive Compensation................................................ 18
Compensation Committee Report......................................... 35
Potential Payments Upon Termination or Change in Control.............. 35
Equity Compensation Plan Information.................................. 42
Report of the Audit Committee......................................... 43
Independent Accountants............................................... 44
Annual Report on Form 10-K............................................ 44
The Proxy Statement, form of proxy and voting instructions are being mailed to
shareholders starting on or about September 28, 2007.
QUESTIONS AND ANSWERS
Shareholders of publicly held companies often ask the following questions. We
trust that the answers will assist you in casting your vote.
1. WHY DID I RECEIVE THESE PROXY MATERIALS?
Because you were a shareholder of record or a beneficial owner of Perrigo common
stock on September 7, 2007, the record date, we are providing these proxy
materials to you in connection with the solicitation by the Board of Directors
of Perrigo of proxies to be voted at our 2007 Annual Meeting of Shareholders and
at any adjournment or postponement.
2. WHAT AM I VOTING ON?
We are soliciting your vote on the election of three directors for a three-year
term beginning at the Annual Meeting.
3. WHO MAY VOTE?
Holders of Perrigo common stock at the close of business on September 7, 2007,
the record date, may vote their shares at the Annual Meeting. On that date,
there were 93,666,461 shares of Perrigo common stock outstanding.
4. HOW MANY VOTES DO I HAVE?
Each share of Perrigo common stock that you own entitles you to one vote.
5. WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF RECORD AND
AS A BENEFICIAL OWNER?
If your shares are registered directly in your name with Perrigo's Transfer
Agent, National City Bank, you are considered, with respect to those shares, the
"shareholder of record." If your shares are held in a stock brokerage account or
by a bank or other holder of record for your benefit, you are considered the
"beneficial owner" of shares held in street name. The broker, bank or other
holder of record is considered, with respect to those shares, the shareholder of
record. As the beneficial owner, you have the right to direct your broker, bank
or other holder of record on how to vote your shares by using the proxy card or
proxy voting instructions form included with this proxy statement or by
following the instructions for voting by telephone or on the Internet.
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6. HOW DO I VOTE?
If you own shares that are traded through NASDAQ, you may generally vote your
shares in any of the following four ways:
1. By mail: complete, sign and date the proxy card or voting instruction
form and return it in the enclosed envelope.
2. By telephone: call the toll-free number on the proxy card, enter the
control number on the proxy card and follow the recorded
instructions.
3. By Internet: go to the website listed on the proxy card, enter the
control number on the proxy card and follow the instructions
provided.
4. In person: attend the Annual Meeting, where ballots will be provided.
You may also vote by telephone or over the Internet if you hold your shares
through a bank or broker that offers either of those options. If you choose to
vote in person at the Annual Meeting and your shares are held in the name of
your broker, bank or other nominee, you need to bring an account statement or
letter from the nominee indicating that you were the beneficial owner of the
shares on September 7, 2007, the record date for voting.
If you own shares that are traded through the Tel-Aviv Stock Exchange (the
"TASE"), you may only vote your shares in one of the following two ways:
1. By mail: complete, sign and date the proxy card or voting instruction
form and attach to it an ownership certificate from the Tel
Aviv Stock Exchange Clearing House Ltd. (the "TASE's
Clearing House") member through which your shares are
registered (i.e., your broker, bank or other nominee)
indicating that you were the beneficial owner of the shares
on September 7, 2007, the record date for voting, and return
the proxy card or voting instruction form, along with the
ownership certificate, to our designated address for that
purpose in Israel, P.O. Box 20387, Tel Aviv, Israel 61200.
If the TASE member holding your shares is not a TASE's
Clearing House member, please make sure to include an
ownership certificate from the TASE's Clearing House member
in which name your shares are registered.
2. In person: attend the Annual Meeting, where ballots will be provided.
If you choose to vote in person at the Annual Meeting, you
need to bring an ownership certificate from the TASE's
Clearing House member through which your shares are
registered (i.e., your broker, bank or other nominee)
indicating that you were the beneficial owner of the shares
on September 7, 2007, the record date for voting. If the
TASE member holding your shares is not a TASE's Clearing
House member, please make sure to include an ownership
certificate from the TASE's Clearing House member in which
name your shares are registered.
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7. HOW DOES DISCRETIONARY VOTING AUTHORITY APPLY?
If you sign, date and return your proxy card or vote by telephone or Internet,
your vote will be cast as you direct. If you do not indicate how you want to
vote, you give authority to Judy L. Brown and Todd W. Kingma to vote on the
items discussed in these proxy materials and on any other matter that is
properly raised at the Annual Meeting. In that event, your proxy will be voted
FOR the election of each director nominee, and FOR or AGAINST any other properly
raised matters at the discretion of Judy Brown and Todd Kingma.
8. WHAT CAN I DO IF I CHANGE MY MIND AFTER I VOTE MY SHARES?
If your shares are traded through the NASDAQ, you may revoke your proxy at any
time before it is exercised in one of four ways:
1. notify our Secretary in writing before the Annual Meeting that you
are revoking your proxy (your notice should be sent to our address
on the cover of this proxy statement);
2. submit another proxy with a later date;
3. vote by telephone or Internet after you have given your proxy; or
4. vote in person at the Annual Meeting.
If your shares are traded through the TASE, you may only revoke your proxy by
using one of the following three methods:
1. notify our Secretary in writing before the Annual Meeting that you
are revoking your vote (your notice should be sent to our
designated address for that purpose in Israel, P.O. Box 20387, Tel
Aviv, Israel 61200);
2. submit another proxy with a later date; or
3. vote in person at the Annual Meeting.
9. WHAT VOTE IS REQUIRED TO ELECT THE DIRECTOR NOMINEES?
A plurality of the votes cast will elect directors. This means that the three
nominees who receive the highest number of votes will be elected. If you do not
want to vote your shares for a particular nominee, you may indicate that by
following the instructions on the proxy card, by withholding authority as
prompted during telephone or Internet voting or when you vote in person at the
meeting. Abstentions and broker non-votes will have no effect on the election of
the directors.
10. WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
Your shares are likely registered differently or are in more than one account.
You should sign and return all proxy cards to guarantee that all of your shares
are voted.
11. WHAT CONSTITUTES A QUORUM?
The presence, in person or by proxy, of the holders of a majority of Perrigo
shares entitled to vote at the Annual Meeting constitutes a quorum. You will be
considered part of the quorum if you
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return a signed and dated proxy card, if you vote by telephone or Internet, or
if you attend the Annual Meeting.
Abstentions and broker non-votes are counted as "shares present" at the Annual
Meeting for purposes of determining whether a quorum exists. A broker non-vote
occurs when a broker submits a proxy that does not indicate a vote for a
proposal because he or she does not have voting authority and has not received
voting instructions from you. If you are a beneficial owner, your bank, broker
or other holder of record is permitted to vote your shares on the election of
directors, even if they do not receive voting instructions from you. Therefore,
no broker non-votes will occur.
12. HOW DO I SUBMIT A SHAREHOLDER PROPOSAL FOR NEXT YEAR'S ANNUAL MEETING?
You must submit a proposal to be included in our proxy statement for the 2008
Annual Meeting no later than May 31, 2008. Your proposal must be in writing and
must comply with the proxy rules of the Securities and Exchange Commission (the
"SEC"). You may also submit a proposal that you do not want included in the
proxy statement but that you want to raise at the 2008 Annual Meeting. If you
want to do this, we must receive your written proposal on or after August 1,
2008, but on or before August 21, 2008. If you submit your proposal after the
deadline, then SEC rules permit the individuals named in the proxies solicited
by Perrigo's Board of Directors for that meeting to exercise discretionary
voting power as to that proposal, but they are not required to do so.
To properly bring a proposal before an annual meeting, our by-laws require that
you include in your proposal (1) your name and address as they appear on our
stock records, (2) a brief description of the business you want to bring before
the meeting, (3) the reasons for conducting the business at the meeting, (4) any
interest you have in the business you want to bring before the meeting, and (5)
the number of shares of Perrigo common stock that you own beneficially and of
record. You should send any proposal to our Secretary at the address on the
cover of this proxy statement.
13. HOW DO I NOMINATE A DIRECTOR?
If you wish to nominate an individual for election as a director at the 2008
Annual Meeting, we must receive your nomination on or after August 1, 2008, but
on or before August 21, 2008. In addition, our by-laws require that, for each
person you propose to nominate, you provide (1) your name and address as they
appear on our stock records, (2) the number of shares of Perrigo common stock
that you own beneficially and of record, (3) the nominee's written statement
that he or she is willing to be named in the proxy statement as a nominee and to
serve as a director if elected, and (4) any other information regarding the
nominee that would be required by the SEC to be included in a proxy statement
had Perrigo's Board of Directors nominated that individual. You should send your
proposed nomination to our Secretary at the address on the cover of this proxy
statement.
14. WHO PAYS TO PREPARE, MAIL AND SOLICIT THE PROXIES?
Perrigo will pay all of the costs of preparing and mailing the proxy statement
and soliciting the proxies. We will ask brokers, dealers, banks, voting trustees
and other nominees and fiduciaries
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to forward the proxy materials and our Annual Report to Shareholders to the
beneficial owners of Perrigo common stock and to obtain the authority to execute
proxies. We will reimburse them for their reasonable expenses upon request. In
addition to mailing proxy materials, our directors, officers and employees may
solicit proxies in person, by telephone or otherwise. These individuals will not
be specially compensated.
PROPOSAL REQUIRING YOUR VOTE
ELECTION OF DIRECTORS
Eleven directors currently serve on our Board of Directors. The directors are
divided into three classes. At this Annual Meeting, you will be asked to elect
three directors. Each director will serve for a term of three years, until a
qualified successor has been elected, or until his or her death, resignation,
retirement, or removal by the shareholders for cause. While Larry D. Fredricks,
whose term expires at this Annual Meeting, will retire from the Board in
accordance with the retirement policy in our Corporate Governance Guidelines,
the remaining seven directors will continue to serve on the Board as described
below.
The nominees for this year, Laurie Brlas, Michael J. Jandernoa and Joseph C.
Papa, are currently Perrigo directors. We will vote your shares as you specify
on the enclosed proxy card or through telephone or Internet voting. If you do
not specify how you want your shares voted, we will vote them FOR the election
of the nominees. If unforeseen circumstances (such as death or disability) make
it necessary for the Board of Directors to substitute another person for any of
the nominees, we will vote your shares FOR that other person. The Board of
Directors does not anticipate that any nominee will be unable to serve.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE DIRECTOR
NOMINEES.
The directors have provided the information below about themselves.
NOMINEES FOR ELECTION AT THE 2007 ANNUAL MEETING
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LAURIE BRLAS, 50, has been a director of Perrigo since August 2003 and has
served as Chair of the Audit Committee since October 2004. Since December 2006,
Ms. Brlas has served as the Senior Vice President, Chief Financial Officer and
Treasurer of Cleveland-Cliffs, Inc., the largest producer of iron ore pellets in
North America, the majority of which are sold to integrated steel companies in
the United States and Canada. Ms. Brlas previously served as Senior Vice
President and Chief Financial Officer of STERIS Corporation from April 2000
through November 2006. From September 1995 through March 2000, Ms. Brlas held
various positions with Office Max, Inc., most recently as Senior Vice President
and Corporate Controller.
MICHAEL J. JANDERNOA, 57, has been a director of Perrigo since January 1981 and
served as Lead Independent Director from August 2006 to August 2007. He served
as Perrigo's Chief Executive Officer from February 1988 through April 2000 and
as Chairman of the Board from October 1991 to August 2003. Mr. Jandernoa has
also served in various other executive capacities with Perrigo since 1979. He is
a general partner of Bridge Street Capital Fund 1, LP; a director of Fifth Third
Bank--West Michigan, a Michigan banking corporation; and a director of
Steelcase, Inc., a manufacturer of case good products and furniture systems for
the
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office furniture industry. Mr. Jandernoa also serves on the Boards of the
Strategic Economic Investment and Commercial Board (SEIC) (formerly Michigan
Technology Tri-Corridor and Life Science Corridor) and the Michigan Economic
Development Corporation.
JOSEPH C. PAPA, 51, joined Perrigo on October 9, 2006 as President and Chief
Executive Officer and was elected to the Board of Directors on November 10,
2006. He previously served as Chairman and Chief Executive Officer of the
Pharmaceutical and Technologies Services segment of Cardinal Health, Inc. from
December 2004 to October 2006. Prior to that position he served as President and
Chief Operating Officer of Watson Pharmaceuticals, Inc. from 2001 to 2004.
Additionally, he has held management positions at DuPont Pharmaceuticals,
Pharmacia Corporation, G.D. Searle & Company and Novartis AG.
DIRECTORS CONTINUING UNTIL THE 2008 ANNUAL MEETING
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MOSHE ARKIN, 54, has been a director of Perrigo and has served as Vice Chairman
of Perrigo since March 2005. On September 10, 2007, Mr. Arkin informed Perrigo
that he would retire from the Company at the expiration of his employment
agreement on March 17, 2008. He served as Chairman of the Board of Directors and
was the principal shareholder of Agis Industries (1983) Ltd., now known as
Perrigo Israel Pharmaceuticals Ltd. ("Agis"), from its establishment in 1983
(and prior to that of its affiliated companies) until its acquisition by Perrigo
in March 2005. He also served as President of that company since December 2000.
Mr. Arkin resides in Israel.
GARY K. KUNKLE, JR., 60, has been a director of Perrigo since October 2002 and
has served as Lead Independent Director since August 2007. He has also served as
the Chair of the Compensation Committee since May 2006. Mr. Kunkle served as
Chairman and Chief Executive Officer of DENTSPLY International Inc., a
manufacturer and marketer of products for the professional dental market, from
January 2004 until his retirement on December 31, 2006. He previously served as
President and Chief Operating Officer of DENTSPLY from January 1997 to December
2003. He also was a director of that company from March 2002 until December 31,
2006. From January 1994 to December 1996, he served as President of Vistakon, a
division of Johnson & Johnson.
HERMAN MORRIS, JR., 56, has been a director of Perrigo since December 1999.
Since September 2006, he has been in the private practice of law in Memphis,
Tennessee. From April 2006 to September 2006, Mr. Morris was Vice President and
General Counsel of Pinnacle Airlines. Prior to that Mr. Morris was a partner in
the Baker, Donaldson, Bearman, Caldwell and Berkowitz law firm in Memphis,
Tennessee from April 2004 to June 2006. He served as President and Chief
Executive Officer of Memphis Light, Gas and Water Division from August 1997
until January 2004. Prior to that, Mr. Morris was General Counsel of Memphis
Light, Gas and Water Division.
BEN-ZION ZILBERFARB, 57, has been a director of Perrigo since February 2007.
Since 1978 he has served as a consultant and director for private and public
companies in the areas of banking, insurance and private capital. He also has
served as a Professor of Economics at Bar-Ilan University and the Edmond de
Rothschild Professor of Global Asset Management at Netanya Academic College
since 1988 and 2004, respectively. From 1998 to 1999 he was Director General of
Israel's Ministry of Finance. He is a Board member and Chairman of the Audit
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Committee for Delek Group, a holding and management company investing in Israel
and abroad, and for the Israel Discount Bank, both of which are traded on the
Tel Aviv Stock Exchange. He is also a member of the Board and Audit Committee
for FundTech, Ltd., which is a NASDAQ listed company that is a leading provider
of electronic payments, cash management and settlement solutions for financial
institutions. Mr. Zilberfarb resides in Israel.
DIRECTORS CONTINUING UNTIL THE 2009 ANNUAL MEETING
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GARY M. COHEN, 48, has been a director of Perrigo since January 2003. Since June
2006, he has served as Executive Vice President of Becton, Dickinson and Company
("BD"), a provider of medical supplies, devices, laboratory equipment and
diagnostic systems. He also served as President of BD Medical, one of three
business segments of BD from May 1999 until June 2006. Mr. Cohen has been an
executive officer of BD in various capacities since October 1996. Mr. Cohen
presently serves as a director of the United States Fund for UNICEF, the CDC
Foundation, and the Academic Alliance Foundation, and is a member of the Board
of Trustees of Rutgers University and the Board of Advisors of the Rutgers
Business School.
DAVID T. GIBBONS, 64, has been a director of Perrigo since June 2000. He served
as Executive Chairman of Perrigo from October 9, 2006 until his retirement on
March 31, 2007. Prior to that, Mr. Gibbons served as the President and Chief
Executive Officer of Perrigo since May 2000 and as Chairman of the Board since
August 2003. Although retired from his executive role at Perrigo, he remains
Chairman of the Board. He served as President of Rubbermaid Europe from August
1997 to April 1999 and as President of Rubbermaid Home Products from December
1995 to August 1997. Prior to joining Rubbermaid, Mr. Gibbons served in a
variety of general management, sales and marketing positions during his 27-year
career with 3M Company. Mr. Gibbons is a director of Robbins & Myers, Inc., a
supplier of application-critical equipment and systems to the global
pharmaceutical, energy and industrial markets, and a director of Cott
Corporation, a leading provider of non-alcoholic beverages and store brand soft
drinks.
RAN GOTTFRIED, 63, has been a director of Perrigo since February 2006. Since
July 2006, Mr. Gottfried has served as Chairman and CEO of Powerpaper Ltd., a
leading developer and manufacturer of micro-electrical cosmetic and
pharmaceutical patches. Since 1991 he has also served as a consultant and
director of private and public companies in Israel in the areas of retailing and
distribution, pharmaceuticals, and telecommunications. From January 2001 until
December 2005, he served as Chairman of Magnolia Silver Jewelry, Ltd. Mr.
Gottfried also served as an advisor to Careline-Neca, a consumer division of
Perrigo's Israel subsidiary from 2004 until March 31, 2007 when his consulting
ended. Mr. Gottfried was a director of Agis from 2003 until its acquisition by
Perrigo in March 2005. Mr. Gottfried is also a director of Bezeq, Israel's
leading telecommunications provider. Mr. Gottfried resides in Israel.
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CORPORATE GOVERNANCE
GENERAL
Our Board of Directors has oversight responsibility for our business, property
and affairs. The Chief Executive Officer reports directly to the Board, and
members of our executive management regularly advise the Board on those business
segments for which each has management responsibility. In addition, our Board
approves and authorizes our strategic direction after considering strategic plan
recommendations made to the Board by executive management. Finally, as part of
our ongoing commitment to corporate governance, we have reviewed our corporate
governance policies and practices for compliance with the provisions of the
Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC and the NASDAQ
listing standards.
CORPORATE GOVERNANCE GUIDELINES
The Board of Directors has set forth its corporate governance policies and
practices in a set of Corporate Governance Guidelines that assist the Board in
the exercise of its responsibilities. The Board may amend these Guidelines from
time to time. Our Corporate Governance Guidelines are available on our website
(http://www.perrigo.com) under the heading For Investors--Corporate
Governance--Governance Guidelines. The guidelines also are available in print to
shareholders upon written request made to our General Counsel, Todd W. Kingma,
at the address shown on the cover of this proxy statement.
CODE OF CONDUCT
Our Code of Conduct acknowledges that a reputation for ethical, moral and legal
business conduct is one of Perrigo's most valuable assets. The Code requires
that our employees, officers and directors comply with laws and other legal
requirements, avoid conflicts of interest, protect corporate opportunities and
confidential information, conduct business in an honest and ethical manner and
otherwise act with integrity and in Perrigo's best interest. In addition, our
Code acknowledges special ethical obligations for financial reporting. Our Code
of Conduct is available on our website (http://www.perrigo.com) under the
heading For Investors--Corporate Governance--Code of Conduct, and we will
promptly post any amendments to or waivers of the Code on our website. Our Code
is available in print to shareholders upon written request made to our General
Counsel, Todd W. Kingma, at the address shown on the cover of this proxy
statement.
EXECUTIVE SESSIONS OF INDEPENDENT DIRECTORS
The independent members of the Board of Directors hold regularly scheduled
meetings in executive session without management and also meet in executive
session with the Chief Executive Officer on an as needed basis.
LEAD INDEPENDENT DIRECTOR
The Perrigo Board of Directors has appointed a non-management director to serve
as the Lead Independent Director. The Lead Independent Director coordinates the
activities of the other non-management directors and performs such other duties
and responsibilities as the Board of
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Directors may determine. This position rotates annually, by seniority, among our
independent directors.
The role of the Lead Independent Director includes:
- presiding at all Board meetings at which the Chairman is not
present, including executive sessions of the independent directors;
- serving as a liaison between the Chairman and the independent
directors;
- having the authority to call meetings of the independent directors;
and
- if requested by a major shareholder, ensuring that he or she is
available for consultation and direct communications.
Currently, the Lead Independent Director is Gary K. Kunkle, Jr.
DIRECTOR INDEPENDENCE
Our Corporate Governance Guidelines provide that a substantial majority of the
Board should consist of directors who meet the independence requirements of
NASDAQ. Accordingly, our Board conducts an annual review to determine whether
each of our directors qualifies as independent. A director will not be
considered independent unless the Board of Directors determines that the
director has no relationship that, in the opinion of the Board, would interfere
with the exercise of independent judgment in carrying out the responsibilities
of a director. Based on its most recent annual review, the Board of Directors
has concluded that each director, other than Moshe Arkin, David T. Gibbons and
Joseph C. Papa, is independent as defined in the NASDAQ listing standards. Mr.
Arkin and Mr. Papa are not independent under these standards because they are
currently serving as officers of Perrigo. Mr. Gibbons is not independent under
these standards because he served as an officer of Perrigo within the past three
years. The Nominating & Governance Committee considered the consulting services
Mr. Gottfried previously provided to us and determined that these transactions
did not affect Mr. Gottfried's independence.
COMMUNICATIONS WITH DIRECTORS
Shareholders and other interested parties may communicate with any of our
directors or with the independent directors as a group by writing to them in
care of our General Counsel, Todd W. Kingma, at the address shown on the cover
of this proxy statement. Relevant communications will be distributed to the
appropriate directors depending on the facts and circumstances outlined in the
communication. In accordance with the policy adopted by our independent
directors, any communications that allege or report fiscal improprieties or
complaints about internal accounting controls or other accounting or auditing
matters are forwarded to the Chief Financial Officer, as appropriate. If either
the Chief Financial Officer or the General Counsel believes that the
communication is significant or possibly material to Perrigo, it will be
immediately sent to the Chair of the Audit Committee and, after consultation
with the Chair, may be sent to the other members of the Audit Committee.
Communications that are not immediately sent to the Audit Committee Chair will
be reported to the Audit Committee on a quarterly basis. In addition, the Lead
Independent Director will be advised promptly of any communications that allege
misconduct on the part of Perrigo management or that raise legal,
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ethical or compliance concerns about Perrigo's policies or practices. The Lead
Independent Director will also receive periodic updates on any other
communications that raise issues related to Perrigo's affairs, and he or she
will determine which of these communications he or she would like to see. In
addition, the General Counsel maintains a log of all such communications, which
is available for review upon the request of any Board member.
DIRECTOR NOMINATIONS
Pursuant to our Corporate Governance Guidelines, the Nominating & Governance
Committee, with the involvement of our Chief Executive Officer, is responsible
for screening and recommending candidates for service as a director and
considering recommendations offered by shareholders in accordance with our by-
laws. The Board as a whole is responsible for approving nominees. The Nominating
& Governance Committee recommends individuals as director nominees based on
various criteria, including their business and professional background,
integrity, understanding of our business and demonstrated ability to make
independent analytical inquiries. In addition, directors should be willing and
able to devote the necessary time to Board and committee duties. A director's
qualifications in meeting these criteria are considered at least each time the
director is re-nominated for Board membership.
The Nominating & Governance Committee, our Chairman of the Board and Chief
Executive Officer, our Lead Independent Director or other Board members may
identify a need to add new members to the Board to satisfy specific criteria or
simply to fill a vacancy. In that case, the Committee will initiate a search for
potential director nominees, seeking input from other Board members and senior
management, and may hire outside advisers to assist in identifying and
evaluating candidates.
One of our directors, Moshe Arkin, had the right, subject to Perrigo's Corporate
Governance Guidelines, to nominate one additional independent director and, in
the event of a vacancy on the Board, to nominate a second independent director
to Perrigo's Board of Directors, pursuant to a Nominating Agreement, dated as of
November 14, 2004 and as amended through September 10, 2005. Mr. Arkin exercised
his rights by nominating Messrs. Gottfried and Zilberfarb, who were elected to
the Board in February 2006 and February 2007, respectively. Directors nominated
pursuant to the Nominating Agreement must resign from the Board when Mr. Arkin
ceases to own at least (1) 9% of the outstanding shares of Perrigo common stock
and (2) 9,000,000 shares of Perrigo common stock.
Our by-laws permit shareholders to nominate candidates for consideration at an
annual meeting. The process for shareholders to submit a director candidate in
accordance with our by-laws is described in this proxy statement under
"Questions and Answers--How do I nominate a director?" Assuming that a properly
submitted shareholder recommendation for a potential nominee is received and
appropriate biographical and background information is provided, the Nominating
& Governance Committee and the Board will follow the same process and apply the
same criteria as they do for candidates submitted by other sources.
STOCK OWNERSHIP
Each director is required to maintain a minimum ownership of Perrigo stock equal
to the total of his or her preceding three years' stock grants. If a director
has served less than three years, he or
10
she must maintain a stock ownership level equal to the restricted shares granted
to him or her for service as a director. In addition, the Chief Executive
Officer must own shares of Perrigo stock equal in value to two times his annual
base salary, and each executive officer must own shares of Perrigo stock equal
in value to one times his or her annual base salary. These individuals must
attain that level of ownership within three years of appointment to his or her
executive position. Our directors and executive officers are in compliance with
these guidelines.
ATTENDANCE AT ANNUAL MEETING
We encourage all of our directors to attend our Annual Meeting of Shareholders.
While their attendance is not required, each of our continuing directors that
were serving as a director at that time attended our last annual meeting.
BOARD AND COMMITTEE MEMBERSHIP
Our business, property and affairs are managed under the direction of our Board
of Directors. Members of our Board are kept informed of our business through
discussions with our Chief Executive Officer and other officers, by reviewing
materials provided to them, by visiting our offices and plants, and by
participating in meetings of the Board and its committees.
Perrigo's Board of Directors met seven times during fiscal year 2007. In
addition to these meetings of the full Board, directors attended Board committee
meetings. The Board of Directors has standing Audit, Compensation and Nominating
& Governance Committees and has adopted a charter for each committee. Copies of
the committees' charters are available on our website (http://www.perrigo.com)
under For Investors--Corporate Governance and are available in print to
shareholders upon written request made to our General Counsel, Todd W. Kingma,
at the address shown on the cover of this proxy statement. During fiscal year
2007, each director attended at least 75% percent of the regularly scheduled and
special meetings of the Board and Board committees on which he or she served.
AUDIT COMMITTEE
During fiscal year 2007, the Audit Committee met seven times. The committee
consists solely of independent directors, including Laurie Brlas (Chair), Larry
D. Fredricks, Michael J. Jandernoa and Ben-Zion Zilberfarb.
The Audit Committee monitors our accounting and financial reporting principles
and policies and our internal audit controls and procedures. It is also directly
responsible for the compensation and oversight of the work of the independent
auditor in the preparation and issuance of audit reports and related work,
including the resolution of any disagreements between management and the
independent auditor regarding financial reporting. The Board has adopted an
Audit Committee Charter that specifies the composition and responsibilities of
the committee. Additional information on the committee and its activities is set
forth in the Audit Committee Report.
The Board of Directors has determined that each member of the Audit Committee
(1) meets the audit committee independence requirements of the NASDAQ listing
standards and the rules and regulations of the SEC and (2) is able to read and
understand fundamental financial statements,
11
as required by the NASDAQ listing standards. The Board has also determined that
Laurie Brlas has the requisite attributes of an "audit committee financial
expert" under the SEC's rules and that such attributes were acquired through
relevant education and work experience.
COMPENSATION COMMITTEE
During fiscal year 2007, the Compensation Committee met seven times. The
committee consists solely of independent directors, including Gary K. Kunkle,
Jr. (Chair), Gary M. Cohen and Ran Gottfried.
The Compensation Committee reviews and recommends to the Board compensation
arrangements for the Chief Executive Officer and non-employee directors. It also
reviews and approves the annual compensation for executive officers, including
salaries, bonuses and incentive and equity compensation, and administers
Perrigo's incentive and other long-term employee compensation plans. Additional
information regarding the processes and procedures of the Compensation Committee
is presented in the Compensation Discussion and Analysis--Compensation Program
Administration section, beginning on page 18.
NOMINATING & GOVERNANCE COMMITTEE
During fiscal year 2007, the Nominating & Governance Committee met six times and
consisted solely of independent directors, including Herman Morris, Jr. (Chair),
Larry D. Fredricks and Gary M. Cohen.
The Nominating & Governance Committee identifies and recommends to the Board
qualified director nominees for the next annual meeting of shareholders,
including consideration of shareholder nominations for election to the Board
submitted in accordance with the procedures discussed above under "Questions and
Answers--How do I nominate a director?" This committee also develops and
recommends to the Board the Corporate Governance Guidelines applicable to
Perrigo, leads the Board in its annual review of Board performance and makes
recommendations to the Board with respect to the assignment of individual
directors to various committees.
DIRECTOR COMPENSATION
ANNUAL RETAINER FEES
Directors who are Perrigo employees receive no fees for their services as
directors. Non-employee directors receive a $50,000 annual cash retainer fee
covering all regular and special Board meetings and the Annual Meeting of
Shareholders. Each non-employee director also receives stock options having a
Black-Scholes value of $40,000 on the grant date and an annual restricted stock
grant having a value on the grant date of $40,000 based, in fiscal year 2007,
upon the average of the high and low price of our stock on that date. The
restricted stock grant is made on the date of the Annual Meeting of Shareholders
pursuant to our 2003 Long-Term Incentive Plan (the "LTIP"), which the
shareholders approved at the 2003 Annual Meeting of Shareholders, and is
intended to directly link an element of director compensation to shareholders'
interests. Each grant of restricted shares vests on the date of the next Annual
Meeting of Shareholders.
12
The Chair of the Audit Committee receives an additional annual retainer of
$10,000. The Chairs of the Compensation and Nominating & Governance Committees
receive an additional annual retainer of $5,000.
ATTENDANCE FEES
Directors receive $500 for each telephonic Board or committee meeting in which
they participate and $1,000 per day for activities requiring travel in
furtherance of Board or Perrigo business (other than to and from director
meetings). We also reimburse directors for travel expenses incurred in
connection with attending Board and committee meetings.
For each in-person committee meeting of the Audit Committee attended, the Chair
of the Audit Committee receives $2,000 and the other Audit Committee members
receive $1,500. For each in-person meeting of the Compensation and Nominating &
Governance Committees attended, the Chairs of the Compensation and Nominating &
Governance Committees each receive $1,500 and the other members of the
Compensation and Nominating & Governance Committees each receive $1,000.
The following table summarizes the compensation of our non-employee directors
who served during fiscal year 2007.
DIRECTOR COMPENSATION
-------------------------------------------------------------------------------------------------------
FEES EARNED OR STOCK OPTION
NAME PAID IN CASH ($) AWARDS ($)(3) AWARDS ($)(3) TOTAL ($)
---------------------------------------------------------- --------------- --------------- ------------
Laurie Brlas 64,500 50,365 16,937 131,802
---------------------------------------------------------- --------------- --------------- ------------
Gary M. Cohen 56,000 50,365 16,937 123,302
---------------------------------------------------------- --------------- --------------- ------------
Larry Fredricks 63,750 50,365 16,937 131,052
---------------------------------------------------------- --------------- --------------- ------------
David T. Gibbons(1) 12,500 -- -- 12,500
---------------------------------------------------------- --------------- --------------- ------------
Ran Gottfried 51,500 40,585 16,937 109,022
---------------------------------------------------------- --------------- --------------- ------------
Michael J. Jandernoa 49,500 50,365 16,937 116,802
---------------------------------------------------------- --------------- --------------- ------------
Gary K. Kunkle, Jr. 57,500 50,365 16,937 124,802
---------------------------------------------------------- --------------- --------------- ------------
Herman Morris, Jr. 56,750 50,365 16,937 124,052
---------------------------------------------------------- --------------- --------------- ------------
Ben-Zion Zilberfarb(2) 19,044 12,812 8,448 40,304
---------------------------------------------------------- --------------- --------------- ------------
(1) Mr. Gibbons served as an executive officer of Perrigo until March 31,
2007, at which time he began to receive compensation as a non-employee
director.
(2) Mr. Zilberfarb joined Perrigo's Board of Directors in February 2007.
(3) Amounts reflect the expense recognized for financial statement purposes
for the fiscal year ended June 30, 2007 in accordance with FAS 123(R) and
thus may include amounts from awards granted in and prior to fiscal 2007.
Stock awards include only service-based restricted stock. Stock awards
granted prior to fiscal 2007 vest one-third per year over three years
beginning on the anniversary of the grant. Stock awards granted in fiscal
2007 fully vest after one year. Option awards also fully vest after one
year. Assumptions used in the calculation of expenses related to option
awards are included in footnote J to our audited financial statements for
the fiscal year ended June 30, 2007 included in our Annual Report on Form
10-K.
13
The total number of unvested shares of restricted stock held by each director as
of June 30, 2007 was: Ms. Brlas, 5,133; Mr. Cohen, 5,133; Mr. Fredricks, 5,133;
Mr. Gottfried, 3,585; Mr. Jandernoa, 5,133; Mr. Kunkle, 5,133; Mr. Morris,
5,133; and Mr. Zilberfarb, 1,685.
The total number of unvested stock options held by each director as of June 30,
2007 was: Ms. Brlas, 5,814; Mr. Cohen, 5,814; Mr. Fredricks, 5,814; Mr.
Gottfried, 5,814; Mr. Jandernoa, 5,814; Mr. Kunkle, 5,814; Mr. Morris, 5,814;
and Mr. Zilberfarb, 4,364. The total number of vested stock options held by each
director as of June 30, 2007 was: Ms. Brlas, 5,000; Mr. Cohen, 5,000; Mr.
Fredricks, 0; Mr. Gottfried, 0; Mr. Jandernoa, 18,281; Mr. Kunkle, 5,000; Mr.
Morris, 23,281; and Mr. Zilberfarb, 0.
The FAS 123(R) grant date fair value of the 2,385 restricted shares granted to
each non-employee director, other than Mr. Zilberfarb, in fiscal 2007 was
$40,440 based on a grant price of $16.91, our closing common stock price on
November 10, 2006. The FAS 123(R)grant date fair value of the 1,685 restricted
shares granted to Mr. Zilberfarb in fiscal 2007 was $29,285 based on a grant
price of $17.38, our closing common stock price on February 26, 2007. The number
of restricted shares granted to Mr. Zilberfarb in fiscal 2007 was less than the
number granted to other directors due to the timing of his joining the Board.
The FAS 123(R) grant date fair value of the 5,814 stock options granted to each
non-employee director, other than Mr. Zilberfarb, in fiscal 2007 was $26,626.
The FAS 123(R) grant date fair value of the 4,364 stock options granted to Mr.
Zilberfarb in fiscal 2007 was $17,509. The number of stock options granted to
Mr. Zilberfarb in fiscal 2007 was less than the number granted to other
directors due to the timing of his joining the board.
CERTAIN TRANSACTIONS
Our Code of Conduct provides that our directors, officers and employees must
avoid engaging in any type of activity, such as related-party transactions, that
might create an actual or perceived conflict of interest. These individuals are
required to raise for consideration any proposed or actual transaction that they
believe may create a conflict of interest.
On an annual basis, each director and executive officer completes a Directors'
and Officers' Questionnaire that requires disclosure of any transactions with
Perrigo in which he or she, or any member of his or her immediate family, has a
direct or indirect material interest. In accordance with our Nominating &
Governance Committee charter, the Nominating & Governance Committee conducts an
annual review of the information provided in these questionnaires. In addition,
if a transaction that may create a conflict of interest arises during the year,
it is the practice of the Nominating & Governance Committee to review that
transaction at its first meeting after the transaction arises.
In considering transactions that may create a conflict of interest, the
Nominating & Governance Committee considers the terms of the transaction and the
principles set forth in our Code of Conduct. The Nominating & Governance
Committee also reviews all other relevant factors, including our company's
rationale for entering into a related-party transaction, alternatives to the
transaction, whether the transaction is on terms at least as fair to our company
as would be the
14
case were the transaction entered into with a third party, and the potential for
an actual or apparent conflict of interest.
LEASE AGREEMENT
Through our subsidiary, Perrigo Israel Pharmaceuticals Ltd. (formerly Agis
Industries (1983) Ltd.), we lease approximately 60,000 square feet of office
space in Bnei-Brak, Israel from Arkin Real Estate Holdings (1961) Ltd., a
corporation that is wholly owned by Moshe Arkin, who is a director and the Vice
Chairman of Perrigo. The lease pre-dates Perrigo's acquisition of Agis. Perrigo
Israel exercised an option to extend the lease term until December 31, 2011. The
annual rent under the lease is approximately $580,000, but may be adjusted after
January 1, 2008 based on then-current market rates. We believe the rent and
other terms of this lease are no less favorable to us than terms we could have
obtained from an unrelated third party for similar property.
NOMINATING AGREEMENT
In connection with Perrigo's acquisition of Agis, Perrigo entered into a
Nominating Agreement with Moshe Arkin on November 14, 2004 that was amended on
July 12, 2005 and September 10, 2005. Pursuant to the amended Nominating
Agreement, and subject to Perrigo's Corporate Governance Guidelines, Perrigo
agreed to name Mr. Arkin to Perrigo's Board of Directors and to give him the
right after the closing of the Agis acquisition to nominate an additional
independent director and, in the event of a vacancy on the Perrigo Board, to
nominate a second independent director to the Board.
Each independent director nominated pursuant to the Nominating Agreement will
serve on the Board for the remainder of the term of the class of directors to
which he or she was nominated and will be nominated for election by shareholders
to serve for one additional full term of such class, subject to Perrigo's
Corporate Governance Guidelines, and will also serve on at least one committee
of the Perrigo Board in accordance with and subject to his or her respective
qualifications. Perrigo has agreed that one independent director nominated
pursuant to the Nominating Agreement will be invited to serve on the Audit
Committee and one independent director nominated pursuant to the Nominating
Agreement will be invited to serve on the Compensation Committee, in each case
subject to respective qualifications and Perrigo's Corporate Governance
Guidelines.
The right of the independent directors that Mr. Arkin nominated to serve on the
Board will terminate when Mr. Arkin ceases to own at least (1) 9% of the
outstanding shares of Perrigo common stock and (2) 9,000,000 shares of Perrigo
common stock. Mr. Arkin's right to serve on the Board will terminate when he
ceases to own at least 5,000,000 shares of Perrigo common stock.
Mr. Arkin exercised his rights under the Nominating Agreement by nominating Mr.
Gottfried and Mr. Zilberfarb, who were elected to the Board in February 2006 and
February 2007, respectively.
15
OWNERSHIP OF PERRIGO COMMON STOCK
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table shows how much Perrigo common stock the directors, nominees,
named executive officers, and all directors, nominees and executive officers as
a group beneficially owned as of September 7, 2007, the record date. The percent
of class owned is based on 93,666,461 shares of Perrigo common stock outstanding
as of that date. The named executive officers are the individuals listed in the
Summary Compensation Table.
Beneficial ownership is a technical term broadly defined by the SEC to mean more
than ownership in the usual sense. In general, beneficial ownership includes any
shares a shareholder can vote or transfer and stock options that are exercisable
currently or become exercisable within 60 days. Except as otherwise noted, the
shareholders named in this table have sole voting and investment power for all
shares shown as beneficially owned by them.
--------------------------------------------------------------------------------------------------
OPTIONS
SHARES OF EXERCISABLE
COMMON STOCK WITHIN 60 DAYS OF PERCENT
BENEFICIALLY OWNED RECORD DATE TOTAL OF CLASS
---------------------------- -------------------- ------------------- ----------------------------
DIRECTORS AND NOMINEES
---------------------------- -------------------- ------------------- ----------------------------
Moshe Arkin(1) 10,028,546 25,000 10,053,546 10.7%
---------------------------- -------------------- ------------------- ----------------------------
Laurie Brlas 10,757 10,814 21,571 *
---------------------------- -------------------- ------------------- ----------------------------
Gary M. Cohen 11,186 10,814 22,000 *
---------------------------- -------------------- ------------------- ----------------------------
Larry D. Fredricks 15,594 5,814 21,408 *
---------------------------- -------------------- ------------------- ----------------------------
David T. Gibbons(2) 216,787 753,612 970,399 1.0%
---------------------------- -------------------- ------------------- ----------------------------
Ran Gottfried 4,185 5,814 9,999 *
---------------------------- -------------------- ------------------- ----------------------------
Michael J.
Jandernoa(3) 4,895,223 24,095 4,919,318 5.3%
---------------------------- -------------------- ------------------- ----------------------------
Gary K. Kunkle, Jr. 15,230 10,814 26,044 *
---------------------------- -------------------- ------------------- ----------------------------
Herman Morris, Jr.(4) 22,092 29,095 51,187 *
---------------------------- -------------------- ------------------- ----------------------------
Joseph C. Papa 125,275 17,043 142,318 *
---------------------------- -------------------- ------------------- ----------------------------
Ben-Zion Zilberfarb 1,685 4,364 6,049 *
---------------------------- -------------------- ------------------- ----------------------------
NAMED EXECUTIVE OFFICERS
OTHER THAN DIRECTORS
---------------------------- -------------------- ------------------- ----------------------------
Judy L. Brown 10,454 18,364 28,818 *
---------------------------- -------------------- ------------------- ----------------------------
John T. Hendrickson(5) 49,609 152,621 202,230 *
---------------------------- -------------------- ------------------- ----------------------------
Refael Lebel 33,981 20,000 53,981 *
---------------------------- -------------------- ------------------- ----------------------------
DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (21
PERSONS) (6) 15,520,078 1,472,375 16,992,453 17.9%
---------------------------- -------------------- ------------------- ----------------------------
* Less than 1%.
(1) All shares owned of record by Nichsei Arkin Ltd., which Mr. Arkin
controls. Mr. Arkin is also a named executive officer. Mr. Arkin's
address is c/o Perrigo Company, Attn: General Counsel, 515 Eastern Ave.,
Allegan, MI 49010.
16
(2) Mr. Gibbons served as President and CEO until October 9, 2006 and as
Executive Chairman until March 31, 2007 when he retired as an executive
officer of Perrigo. He continues to serve as Chairman of the Board.
(3) Shares owned consist of 4,796,227 shares owned by the Michael J.
Jandernoa Trust, of which Mr. Jandernoa is trustee; 93,419 shares owned
by the Susan M. Jandernoa Trust, of which Mrs. Jandernoa is trustee; and
5,577 shares owned directly by Mr. Jandernoa. The shares owned by the
Michael J. Jandernoa Trust include 770,000 shares that have been pledged
pursuant to a variable prepaid forward contract. The Michael J. Jandernoa
Trust retains voting power over the pledged shares. Mr. Jandernoa's
address is c/o Perrigo Company, Attn: General Counsel, 515 Eastern Ave.,
Allegan, MI 49010.
(4) Shares owned include 3,000 shares owned as custodian for Mr. Morris'
minor children.
(5) Shares owned include 40,542 shares owned by the Mary Hendrickson Trust,
of which JPMorgan Chase is trustee.
(6) See footnotes 1 through 6. Includes directors and executive officers as
of September 7, 2007, the record date.
OTHER PRINCIPAL SHAREHOLDERS
This table shows all shareholders other than directors, nominees and named
executive officers that we know to be beneficial owners of more than 5% of
Perrigo common stock. The percent of class owned is based on 93,666,461 shares
of Perrigo common stock outstanding as of September 7, 2007.
-------------------------------------------------------------------------------------
NAME AND ADDRESS SHARES OF COMMON STOCK PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
-------------------------------------------------------------------------------------
Royce & Associates, LLC(1)
1414 Avenue of the Americas
New York, NY 10019 9,711,278 10.4%
-------------------------------------------------------------------------------------
Wellington Management Company, LLP(2)
75 State Street Boston, MA 02109 9,385,374 10.0%
-------------------------------------------------------------------------------------
Mac-Per-Wolf Company(3)
311 S. Wacker Dr., Ste. 6000
Chicago, IL 60606 4,597,370 4.9%
-------------------------------------------------------------------------------------
(1) Royce & Associates, LLC, an investment adviser registered under Section
203 of the Investment Advisers Act of 1940, has sole voting and
investment power with respect to all of the shares. This information is
based on a Schedule 13G/A filed with the SEC on January 24, 2007.
(2) Wellington Management Company, LLP, an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940, does not have
sole voting or investment power with respect to any of these shares, has
shared voting power as to 3,128,054 shares and shared investment power as
to 9,338,874 shares. This information is based on a Schedule 13G/A filed
with the SEC on June 11, 2007. Of the listed shares, Vanguard Specialized
Funds--Vanguard Health Care Fund (100 Vanguard Boulevard, Malvern, PA
19355) beneficially owns 5,322,320 shares (5.7% based on shares
outstanding as of September 7, 2007), as reported in a Schedule 13G/A
filed with the SEC on February 13, 2007, and has sole voting and no
investment power as to these shares.
(3) Includes 4,509,787 shares (4.8% based on shares outstanding as of
September 7, 2007) held by Perkins, Wolf, McDonnell and Company, LLC
("PWMC"), a wholly owned subsidiary of Mac-Per-Wolf Company and an
investment adviser registered under Section 203 of the Investment
Advisers Act of 1940. Mac-Per-Wolf Company has sole voting and investment
power as to 87,583 shares and shared voting and investment power as to
the shares held by PWMC. Janus Capital Management LLC, which is a
minority owner of PWMC, also reports beneficial ownership, as a result of
shared voting and investment power, of the 4,509,787 shares held by PWMC.
This information is based on Schedule 13G filings made with the SEC by
Mac-Per-Wolf Company on February 16, 2007 and by Janus Capital Management
LLC (151 Detroit Street, Denver, CO 80206) on January 31, 2007.
17
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that Perrigo's
executive officers, directors and 10% shareholders file reports of ownership and
changes of ownership of Perrigo common stock with the SEC. Based on a review of
copies of these reports provided to us and written representations from
executive officers and directors, we believe that all filing requirements were
met during fiscal year 2007, except that Mr. Gibbons filed a Form 4 in May 2007
reporting the surrender of shares to pay withholding taxes upon the vesting of
shares of restricted stock in a single transaction in March 2007, Mr. Kingma
filed a Form 4 in May 2007 reporting 14 acquisitions that occurred between
December 2003 and March 2007 pursuant to a broker sponsored dividend
reinvestment plan, and Mr. Kunkle filed a Form 4 in August 2007 reporting a
single acquisition that occurred in October 2003.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This section summarizes the compensation program for our Chief Executive
Officer, Chief Financial Officer and the other three most highly compensated
executive officers who were serving at the end of the last fiscal year, as well
as for our former Chief Executive Officer (collectively referred to as the
"named executive officers").(1) This discussion and analysis of our executive
compensation program describes our objectives, each pay element, and how each
element fits within the total compensation program. You should review this
section with the tabular disclosures that begin with the Summary Compensation
Table on page 29.
COMPENSATION PROGRAM ADMINISTRATION
The Compensation Committee of the Board of Directors (the "Committee"), which is
composed entirely of independent directors, oversees our executive compensation
program. The Committee reviews and approves annually the compensation elements
for all executive officers, including the named executive officers. The
Committee submits its decisions regarding compensation for the CEO to the
independent directors of the Board for approval. For other executive officers,
the CEO makes recommendations regarding their compensation to the Committee for
the Committee's approval. Management is responsible for implementing the
executive compensation program as approved by the Committee and the Board.
The Committee has engaged Towers Perrin as its independent consultant to assist
it in considering and analyzing market practices and trends as well as
management's compensation recommendations. Mercer Human Resource Consulting
("Mercer") assists management in gathering and analyzing market pay practices
and preparing management's recommendation. In addition, management and the
Committee periodically access compensation survey data published by ORC
Worldwide, Towers Perrin and Watson Wyatt.
----------
(1) Due to our transition in leadership, Joseph C. Papa became President
and CEO on October 9, 2006. Because David T. Gibbons served as President and CEO
until that date and as Executive Chairman until March 31, 2007, he is included
as a named executive officer.
18
Additional information about the Committee's role and processes is presented in
the "Board and Committee Membership--Compensation Committee" section, on page
12.
OBJECTIVES OF COMPENSATION PROGRAM
The fundamental objective of our executive compensation program is to maximize
long-term returns to our shareholders. We believe this objective is best served
through a program designed to:
- attract and retain highly qualified executives,
- ensure a strong linkage between Perrigo and individual performance
and compensation (pay for performance),
- provide a pay package that is competitive with comparably sized
companies, and
- ensure officers and non-employee directors continually maintain a
minimum level of stock ownership.
TARGET PAY PHILOSOPHY
Our philosophy is to target compensation, on average, at market median levels,
with a significant portion of the compensation package tied to performance. We
consider market levels for positions with comparable responsibilities when we
set an individual executive's salary and target incentive opportunity. In
addition, we consider an individual's competencies, experience and performance,
as well as the aggregate cost to Perrigo. Salary adjustments and incentive
awards are based on company and division financial performance and operational
execution (such as quality and customer service). We set other benefits and
perquisites, which are limited in number, for the executive team based on our
desire to minimize the number of unique benefits for executives, consideration
of market practices, recruiting needs and statutory requirements. Actual
compensation will vary from targeted levels based on company, division and
individual performance.
We review data regarding compensation practices, including the total
compensation levels, of comparably sized consumer packaging and pharmaceutical
companies. We obtain this data from the Committee's consultant as well as from
published surveys. As our business mix has shifted to include more
pharmaceutical products, we have increasingly focused on compensation data
relating to comparably sized pharmaceutical companies. Management also receives
data annually from its consultant, Mercer, regarding market base salary and
annual and long-term incentive target levels for each officer position. While we
do not use a specific peer group to formally benchmark pay and performance, we
do consider all of the foregoing compensation data in determining our targeted
levels of compensation. In addition, management may periodically request its
consultant to assist in other compensation areas, such as reviewing the design
of our compensation programs or presenting market compensation trends.
TALLY SHEETS
To assist it in making compensation decisions, the Committee annually reviews
compensation tally sheets prepared by management and reviewed by the Committee's
compensation consultant. These tally sheets present comprehensive data on the
total compensation and benefits
19
package for each of our executive officers. They include all obligations for
present and projected future compensation as well as analyses for hypothetical
terminations and retirements so that the Committee can consider Perrigo's
obligations under such circumstances. The tally sheets reviewed by the Committee
contained data that was substantially similar to the data contained in the
tables presented below.
ELEMENTS OF COMPENSATION
We believe our objectives for the executive compensation program are
collectively best achieved through a compensation package comprised of the
following elements:
- base salary,
- performance-based compensation (which represents over 50% of the
executive officers' targeted annual compensation) that includes:
- annual cash incentive award opportunities, and
- stock-based compensation (long-term incentive award
opportunities), and
- benefits.
To further these objectives, we also make limited use of perquisites and
employment agreements.
A description of the primary role of each compensation element is highlighted
below, followed by a discussion of the individual elements of compensation for
the named executive officers, including the CEO, during fiscal year 2007.
Base Salaries
Base salaries are a fixed pay element provided to recognize and reward an
individual's position, competencies, experience and performance. Executives are
eligible for annual salary increases based on an evaluation of individual
performance and the level of pay versus the market median for comparable
positions at other companies. Executives are also eligible for salary
adjustments for promotions or changes in job responsibilities.
Annual Incentive Award Opportunities and Bonuses
The Management Incentive Bonus Plan (the "MIB Plan") is intended to motivate
participants and reward them for achieving annual financial goals that support
our objective of increasing long-term shareholder value. Participants in the
Plan include the executive officer, other management level personnel and other
selected individuals. Substantially all other employees participate in another
annual incentive plan.
Near the beginning of each fiscal year, the Committee reviews and approves the
performance target goals and payout schedules for the Plan. The intent is to
reward for performance results that meet or exceed our performance goals,
excluding extraordinary items and events. A range of goals and corresponding
potential award opportunities is set around the target. These goals and
individual bonus targets are communicated to participants near the beginning of
each fiscal year. Following the end of the fiscal year, the Committee reviews
Perrigo's actual results against the
20
performance target goals to determine whether any Management Incentive Bonus
will be paid. Awards are paid in cash.
Reflecting our commitment to pay-for-performance, actual incentive payouts vary
from target levels based on Perrigo, division and individual performance. For
all Corporate participants in the MIB Plan, including the named executive
officers, the Management Incentive Bonus and any discretionary bonus payouts
have together averaged about 98% of target (ranging from 0% to 189% of target)
over the prior five years (fiscal years 2003 to 2007). The expectation is that,
over long periods of time, incentive payouts will average around the target
level.
For fiscal 2007, the Committee set the MIB Plan targets using financial
performance goals based on Return on Assets (ROA), which measures our ability to
efficiently deploy assets to generate income. ROA performance is evaluated at
corporate and business unit/division levels. In fiscal 2007, Perrigo ROA was the
performance measurement for the named executive officers, with one exception. In
fiscal 2007, awards could range from 0% to about 260% of target award
opportunities based on a matrix approved by the Committee that established award
levels corresponding to various levels of actual ROA performance as a percentage
of the ROA goals. In addition, the Compensation Committee had the discretion to
adjust up to 50% of the award opportunity for participants, other than the CEO,
based on individual performance. In assessing individual performance in fiscal
2007, the Compensation Committee focused on the personal efforts of the
participants to help the company meets its ROA and other financial goals. The
CEO provided substantial input to the Committee regarding the personal
performance of MIB Plan participants in this respect.
The fiscal 2007 target annual incentive award opportunities, as a percentage of
base salary, were 100% for the CEO and the former CEO and ranged from 62% to 69%
for the other named executive officers depending on the officer's position. The
CEO's employment agreement provided that he was to receive a minimum payout in
2007 of 100% of his target bonus prorated from his date of hire on October 9,
2006. The range of award opportunities is presented in the Grants of Plan-Based
Awards for Fiscal Year 2007 table on page 32.
Actual 2007 ROA performance was 87% of the Corporate goal under the Plan. Based
on the payout matrix for the MIB Plan 2007 awards, and taking into account
adjustments by the Compensation Committee for individual performance, the Plan
bonus payouts were 33% of the Corporate bonus target. The corresponding Plan
bonus for the EVP and General Manager--Perrigo Israel was 91% of the
Pharmaceutical Plan bonus based on Pharmaceutical ROA performance of 109% of the
Pharmaceutical Plan goal. These bonuses are listed under "Non-Equity Incentive
Plan Compensation" in the Summary Compensation Table.
Following the end of fiscal 2007, the Committee reviewed these payouts and
determined that the MIB Plan payout matrix resulted in:
- incentive compensation for fiscal 2007 that did not appropriately
reflect Perrigo's improvement in net income and shareholder return
in fiscal 2007, and
- fiscal 2007 total compensation packages that would not meet the
objectives of Perrigo's compensation program with respect to
retention and competitiveness of pay package.
21
In order to address these concerns, the Compensation Committee determined that
each participant in the MIB Plan, other than those in the Pharmaceutical Plan
and the CEO who had a contractually determined bonus for fiscal 2007, should
receive an additional discretionary cash bonus for fiscal 2007. For the named
executive officers, the total of the prescribed MIB Plan payout and the
discretionary bonus ranged between 75% and 91% of the participant's target award
under the Plan. The discretionary bonuses, as well as the amount by which Mr.
Papa's guaranteed minimum bonus exceeded his MIB Plan payout, are listed under
"Bonus" in the Summary Compensation Table.
Stock-Based Compensation
Long-term stock-based compensation, which is awarded under the LTIP, is intended
to motivate and reward executives for creating shareholder value as reflected in
the market price of Perrigo's common stock. Awards under the shareholder-
approved LTIP may be in the form of stock options, stock appreciation rights or
stock awards, including restricted shares, performance shares, restricted stock
units, performance units and other stock unit awards. Long-term incentive
opportunities are provided solely through stock-based awards to the executive
officers, management and other key employees. In fiscal 2007, about 250
employees received stock-based compensation.
As a variable component of compensation, the amount realized from stock-based
compensation will vary based on the market price of Perrigo's common stock. In
addition, for performance-based restricted stock, shares are only earned if
specified financial goals are achieved.
The Committee sets stock-based grant levels based on consideration of an
executive's position and performance, market median practices and the aggregate
cost impact. Executive grants are subject to the approval of the Committee and,
in the case of the CEO, the independent directors of the Board.
Effective in fiscal 2007, we moved from granting solely stock options to a mix
of three types of stock-based awards--stock options, service-based restricted
stock and performance-based restricted stock units. The move to use several
award types was driven by a desire to stay aligned with market practice. In
developing the fiscal 2007 grant mix, we considered several alternative award
types, reviewed market practices and considered the cost impact to Perrigo of
the alternative award types. Consistent with our long-standing emphasis on
performance-based compensation, the majority of the award opportunity is
provided through performance-based awards in the form of stock options and
performance-based restricted stock units. A portion of the long-term incentive
opportunity was granted in service-based restricted stock in order to facilitate
retention. A description of each award type and the weighting of the total award
opportunity (percent of the total targeted expected value) are presented below.
- Stock options (50% weighting)
- Vest 20% per year beginning one year after grant (fully vest after
five years)
- 10-year term, after which the options expire
- Exercise price equals the average of the high and low prices of
Perrigo's common stock on the grant date
22
- The ultimate value of the stock options that will be realized, if
any, is not determinable until they are exercised
- Service-based restricted stock (30% weighting)
- Vest 100% three years after grant
- Dividends are paid in cash during the restriction period
- Performance-based restricted stock units (20% weighting)
- Vesting dependent on performance over a three-year period (fiscal
2007 to 2009)
- Shares can be earned based on three-year average net income growth
(average of three discrete one-year net income goals, which are
set based on the annual financial plan). The target goals are set
at challenging levels requiring execution of our financial plan.
Fiscal 2007 was the first year for these awards so historical
payout information is not available.
- Earned awards, if any, can range from 0% to 200% of the target
number of shares
The accounting cost of the stock-based awards is determined at the date of grant
and accrued over the vesting service period. The ultimate expense for
performance-based restricted stock is based on the number of the shares earned.
Stock options and performance-based restricted stock are designed to be
deductible by Perrigo for federal income tax purposes under Section 162(m) of
the Internal Revenue Code (the "Code"). Accordingly, when executives exercise
stock options or vest in performance-based restricted stock, they are taxed at
ordinary income rates (subject to withholding), and Perrigo receives a
corresponding tax deduction. Service-based restricted stock awards may not be
tax deductible by Perrigo for federal income tax purposes under Section 162(m).
The grant date fair value, as calculated under the applicable accounting
standard (FAS 123R), for the fiscal 2007 stock-based grants is presented in the
Grants of Plan-Based Awards for Fiscal Year 2007 table on page 32.
Annual Grant Timing
While the independent directors approve all stock-based awards for the CEO, the
Committee approves all stock-based awards for the other named executive
officers, as well as the maximum potential total grants for other employee
levels, during its regularly scheduled August meeting. All regular annual stock-
based awards are granted on, and priced at the average stock price on, the fifth
trading day after the day on which Perrigo publicly releases its year-end
earnings for the fiscal year. Stock-based awards may be granted during the year
to new hires or to existing employees under special circumstances (promotions,
retention or performance) with the approval of the CEO and CFO.
Executive Stock Ownership Guidelines
In order to ensure ongoing alignment with our shareholders, the executive
officers are subject to minimum stock ownership guidelines. The ownership
guidelines, presented below, are specified
23
as a multiple of base salary and must be achieved within three years of the date
the individual becomes an executive officer.
- CEO: two times salary
- Other executive officers: one times salary
Stock ownership includes (i) shares purchased on the open market, (ii) shares
owned jointly with a spouse and/or children, (iii) shares acquired pursuant to
the exercise of stock options or vesting of restricted stock, (iv) shares held
through the Perrigo Company Profit-Sharing and Investment Plan, and (v) unvested
restricted shares or restricted share units that have not been forfeited.
BENEFITS AND PERQUISITES
Retirement Benefits
We offer retirement benefit plans to provide financial security and to
facilitate employees' saving for their retirement. We make annual contributions
under our Profit Sharing Plan for employees with at least one year of service,
including the executive officers. We also make matching contributions up to the
limits as defined in the applicable regulations under our 401(k) Plan to certain
of our employees, including the executive officers.
We maintain a non-qualified deferred compensation plan that allows executives to
voluntarily elect to defer base salary and earned annual incentive awards. No
Perrigo contributions or special crediting are provided.
Executive Perquisites
We provide a limited number of perquisites to our executive officers. For our
U.S. executive officers, benefits and perquisites may include limited spousal
travel, supplemental long-term disability insurance premiums, executive physical
exams and financial counseling/tax advice. For our executive officers in Israel,
we provide certain additional benefits and perquisites to match common practices
in Israel and to comply with statutory requirements, including a car allowance,
education fund, manager's insurance and severance benefits.
Employment Agreements (Severance Benefits)
Typically we do not enter into employment agreements with our executives.
However, in order to recruit our CEO during fiscal 2007 and consummate the
acquisition of Agis in fiscal 2005, we entered into employment agreements with
the CEO and our two Israeli named executive officers. The agreements specify
certain minimum pay levels, stock-based grants and severance benefits. If these
officers are involuntarily terminated by Perrigo without cause or for good
reason (as defined in the agreements), they receive cash severance benefits,
benefit continuation and continued vesting of certain stock-based awards. The
circumstances under which severance benefits are triggered and the resulting
payouts were set to recruit these officers and were generally consistent with
market practices. There are no enhancements for a termination of employment
following a change of control.
The key payment terms in the CEO's agreement are summarized below. The other two
current agreements are discussed following the Summary Compensation Table
beginning on page 29.
24
Post-employment payments under employment agreements are presented in the
section entitled "Potential Payments Upon Termination or Change in Control"
beginning on page 35.
We do not have a formal severance, automatic vesting, benefit continuation or
change of control plan for the other named executive officers.
COMPENSATION FOR THE CEO
In order to recruit Mr. Papa to Perrigo, the Board of Directors felt it
appropriate for us to enter into an employment agreement specifying certain
compensation levels. This agreement became effective on October 9, 2006 (the
"Effective Date").
The annual compensation package was determined based on consideration of market
practices and the executive's experience. In order to compensate Mr. Papa for
lost equity and other pay opportunities at his former employer, Mr. Papa
received equity grants upon his hire. Consistent with our emphasis on
performance-based pay, the majority of Mr. Papa's compensation is stock-based
with the ultimate value realized based on Perrigo's stock price performance. Key
pay elements of the employment agreement are detailed below.
- Initial base salary of $700,000 per year, subject to an annual
review.
- MIB Plan target opportunity of at least 100% of his annual salary.
In fiscal 2007, Mr. Papa's guaranteed minimum bonus payment was 100%
of his pro-rated target bonus for the year.
- Stock-based long term incentive compensation granted on October 9,
2006:
- stock option grant of 85,212 shares, which represents a grant date
Black-Scholes value of $605,000;
- service-based restricted stock grant of 125,275 shares, with a
value of $2,166,000 based on the grant date closing stock price,
which vests 50% on October 1, 2007 and 50% on October 1, 2008; and
- performance-based restricted stock units grant of 17,872 units,
which was determined by dividing $309,000 by the grant date
closing stock price.
- Fiscal 2008 stock-based compensation with a value equal to 100% of
Mr. Papa's base salary plus targeted annual incentive award
opportunity.
- Participation in Perrigo's other employee benefit plans.
Additional key elements of Mr. Papa's employment agreement are detailed below.
- Mr. Papa was elected to the Board of Directors on November 10, 2006
pursuant to a provision in this agreement.
- The initial term of this agreement commenced on the Effective Date
and expires on the second anniversary of the Effective Date.
Thereafter, the term is automatically extended for additional 12-
month periods unless either Perrigo or Mr. Papa provides written
notice of non-renewal to the other party at least 120 days before
the last day of the then-current term.
25
- Mr. Papa agrees that he will not, at any time during or after his
employment with Perrigo, disclose any confidential information that
he obtained during his employment. In addition, he agrees that for a
period of two years following the date of the termination of his
employment for any reason he will not compete (as defined in the
agreement) with us. Furthermore, for a period of one year following
the date of the termination of his employment for any reason Mr.
Papa agrees not to solicit for employment anyone who was an employee
of Perrigo or its affiliates during the term of the agreement.
Further details regarding potential payments under this agreement upon a
termination of employment are presented in the section entitled "Potential
Payments Upon Termination or Change in Control" beginning on page 35.
COMPENSATION FOR THE FORMER CEO
While Joseph C. Papa became President and CEO on October 9, 2006, David T.
Gibbons served as President and CEO until that date and as Executive Chairman
until March 31, 2007, when he retired as an executive officer of Perrigo. Mr.
Gibbons was compensated according to the terms of an Employment Agreement
entered prior to the time of his employment in May 2000 and as amended through
May 15, 2007 (collectively the "Employment Agreement"). Key pay elements of Mr.
Gibbons' employment are detailed below.
- Base annual salary for fiscal 2007 was $780,000.
- Management Incentive Bonus plan target opportunity of at least 100%
of his annual salary. In fiscal 2007, Mr. Gibbons' prorated
management incentive and discretionary bonus was $435,938.
- Stock-based long term incentive compensation granted on August 16,
2006:
- stock option grant of 116,942 shares, which represented a grant
date Black-Scholes value of $780,000; and
- service-based restricted stock grant of 30,194 shares and
performance-based restricted stock units grant of 20,129 units
with an aggregate value on the date of grant of $780,000 based on
the grant date closing stock price.
- All of Mr. Gibbons' unvested previously granted stock options and
service-based restricted stock became fully vested on March 31, 2007
as he remained employed with Perrigo through the agreement term.
Further details regarding payments under this Employment Agreement upon Mr.
Gibbons' termination of employment are presented in the section entitled
"Potential Payments Upon Termination or Change in Control" beginning on page 35.
CHANGES FOR FISCAL 2008
Annual Incentive Award Opportunities
In June 2007, the Committee approved changes to the MIB Plan for fiscal 2008.
The changes were made to better align the Plan to our fiscal 2008 business
objectives by more specifically linking the Plan with the most critical
financial measures that help us drive bottom line
26
profitability, ensure working capital is used efficiently and achieve
operational goals. The fiscal 2008 performance measures will be the following:
- net income at the corporate level, and
- operating income, working capital turnover and operational goals at
the business unit/division level.
To ensure that awards reflect an executive's performance and contribution to our
results, awards may be adjusted by individual performance against specified,
individual goals. The maximum incentive award opportunity will equal 200% of the
target award, which we believe is consistent with market practices.
Stock-Based Compensation
In June 2007, the Committee also approved changes for fiscal 2008 to the LTIP to
better align that Plan to our long-term business objectives and the new design
of the MIB Plan. Specifically, the performance measure for performance-based
restricted stock units will be return on invested capital (ROIC). ROIC measures
our ability to generate profits from the effective use of all capital invested
in the business.
The mix of the award types was changed to place more weight on performance-based
restricted stock units (decreasing the weight on options). This will provide a
more balanced mix among the three award types while maintaining the emphasis on
performance-based awards. The fiscal 2008 award mix is presented below.
- Stock options (40% weighting)
- Service-based restricted stock units (30% weighting)
- Performance-based restricted stock units (30% weighting)
At middle management levels, the fiscal 2008 award opportunity was solely in
service-based restricted stock units. We believe this ensures the award has the
strongest retention value for the cost to Perrigo since service-based restricted
stock is generally assigned the greatest value by recipients.
Restoration of Profit-Sharing and Investment Plan Contributions
On June 14, 2007, following the Committee's recommendation, the Board of
Directors authorized an amendment to Perrigo's Non-Qualified Deferred
Compensation Plan to provide annual profit-sharing contributions and matching
contributions that cannot be provided under Perrigo's Profit-Sharing and
Investment Plan (the "Tax-Qualified Plan") because of the limitations of
Sections 415 and 401(a)(17) of the Code. Code Section 415 limits the total
annual additions to a participant's account under the Tax Qualified Plan to a
specified dollar amount, currently $45,000 ($50,000 for certain participants who
are at least age 50). Code Section 401(a)(17) limits total compensation that can
be considered under the Tax Qualified Plan. Currently, this limit is $225,000.
Due to these limits, certain Perrigo employees did not receive profit sharing
contributions and matching contributions on their full compensation. The
amendment will provide affected employees, including the named executive
officers, with the profit sharing contributions and matching contributions they
would have been eligible for under the Tax-
27
Qualified Plan in 2007 but for the limitations under the Code. Any such
contributions restored pursuant to this amendment will not be determined until
February 2008.
Fair Market Value of Stock Options
On February 8, 2007, Perrigo's LTIP was amended to provide that fair market
value will be determined based on the last reported sale price of Perrigo's
stock. Prior to this change, we awarded stock options under the LTIP with an
exercise price equal to the average price of Perrigo's stock on the day of the
grant.
OTHER POLICIES
Deductibility of Compensation
Code Section 162(m) limits the deductibility by Perrigo of compensation in
excess of $1 million paid to each of the CEO and the next four most highly paid
officers. Certain "performance based compensation" is not included in
compensation counted for purposes of the limit. The Committee attempts to
establish and maintain a compensation program that will optimize the
deductibility of compensation. The Committee, however, reserves the right to use
its judgment to authorize compensation that may not be fully deductible where
merited by the need to respond to changing business conditions or an executive
officer's individual performance.
28
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2007
The table summarizes the compensation of Joseph C. Papa, our President and CEO,
Judy L. Brown, our Chief Financial Officer, the three next most highly
compensated executive officers of Perrigo serving at the end of fiscal year 2007
and David T. Gibbons, who retired as our President and CEO on October 9, 2006
and as our Executive Chairman on March 31, 2007. These individuals are sometimes
referred to as the named executive officers.
-----------------------------------------------------------------------------------------------------------------------
NON-EQUITY
FIS- INCENTIVE ALL OTHER
NAME AND CAL STOCK OPTION PLAN COMPEN- COMPEN- TOTA-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($)(3) AWARDS($)(3) SATION($)(4) SATION($)(5) L($)
---------------------------- ----------- ---------- -------------- -------------- -------------- ----------------------
Joseph C. Papa, 20- 509,295 341,228 1,223,653 155,239 168,067 20,466 2,417-
President, Chief 07 ,948
Executive
Officer(1)
---------------------------- ----------- ---------- -------------- -------------- -------------- ----------------------
David T. Gibbons, 20- 581,250 244,126 918,456 1,034,178 191,812 29,498 2,999-
Former 07 ,320
President, Chief
Executive
Officer(2)
---------------------------- ----------- ---------- -------------- -------------- -------------- ----------------------
Judy L. Brown, 20- 295,000 84,000 109,363 93,348 66,000 28,827 676,5-
Executive Vice 07 38
President, Chief
Financial
Officer
---------------------------- ----------- ---------- -------------- -------------- -------------- ----------------------
Moshe Arkin, Vice 20- 416,000 122,805 48,536 125,649 96,195 129,824 939,0-
Chairman Global 07 09
Generics & API
---------------------------- ----------- ---------- -------------- -------------- -------------- ----------------------
John T. 20- 378,325 82,823 233,549 224,511 78,177 24,433 1,021-
Hendrickson, 07 ,818
Executive Vice
President--Glo-
bal Operations
and Supply Chain
---------------------------- ----------- ---------- -------------- -------------- -------------- ----------------------
Refael Lebel, 20- 337,833 -- 165,793 100,519 193,000 100,837 897,9-
Executive Vice 07 82
President,
General
Manager--Perrigo
Israel
---------------------------- ----------- ---------- -------------- -------------- -------------- ----------------------
(1) Mr. Papa joined Perrigo on October 9, 2006.
(2) Effective March 31, 2007, Mr. Gibbons ceased to be an executive officer
when he retired from his position as Executive Chairman. Mr. Gibbons has
continued his role as non-executive Chairman of the Board on Perrigo's
Board of Directors.
(3) Amounts reflect the expense recognized for financial statement reporting
purposes for the fiscal year ended June 30, 2007 in accordance with FAS
123(R) and thus may include amounts from awards granted in and prior to
fiscal 2007. Stock awards include both restricted stock and performance-
based restricted stock units. Assumptions used in the calculation of
expense related to option awards are included in footnote J of the
audited financial statements for the fiscal year ended June 30, 2007
included in our Annual Report on Form 10-K filed with the SEC on August
23, 2007. See the "Grants of Plan-Based Awards for Fiscal Year 2007"
table for additional information regarding these stock and option awards.
(4) The compensation amounts set forth in the "Non-Equity Incentive Plan
Compensation" column represent the actual amounts earned under the
Management Incentive Bonus Plan for fiscal 2007 as described in the
Compensation Discussion and Analysis section entitled "Elements of
Compensation--Annual Incentive Award Opportunities and Bonuses."
(5) The following table describes the compensation amounts set forth in the
"All Other Compensation" column of the Summary Compensation Table:
29
----------------------------------------------------------------------------------------------------
REGISTRANT
PERQUISITES AND CONTRIBUTIONS
OTHER TO DEFINED TAX
PERSONAL CONTRIBUTION INSURANCE REIMBURSE-
NAME BENEFITS($)(A) PLANS ($)(B) PREMIUMS ($)(C) MENTS ($) TOTAL ($)
------------------------------------------ --------------- ----------------- ------------ ----------
Joseph C. Papa 19,678 -- 788 20,466
------------------------------------------ --------------- ----------------- ------------ ----------
David T. Gibbons 11,273 17,460 79 686 29,498
------------------------------------------ --------------- ----------------- ------------ ----------
Judy L. Brown 9,110 18,667 1,050 28,827
------------------------------------------ --------------- ----------------- ------------ ----------
Moshe Arkin 52,109 77,715 -- -- 129,824
------------------------------------------ --------------- ----------------- ------------ ----------
John T. Hendrickson 4,456 18,377 1,050 550 24,433
------------------------------------------ --------------- ----------------- ------------ ----------
Refael Lebel 31,236 63,388 -- 6,213 100,837
------------------------------------------ --------------- ----------------- ------------ ----------
a) Represents for Ms. Brown and Messrs. Papa, Gibbons and Hendrickson some
or all of the following perquisites: relocation allowance, personal
travel, supplemental long-term disability, allowance for tax/financial
planning services, spousal travel expenses and executive physical
allowance. Represents for Messrs. Arkin and Lebel an automobile allowance
of $36,909 and $22,790, respectively, and a supplemental education fund
contribution.
b) Represents for Ms. Brown and Messrs. Papa, Gibbons and Hendrickson
Perrigo's contributions to 401(k) and Profit Sharing Plans. Represents
for Messrs. Arkin and Lebel Perrigo's contributions to savings plans
generally provided to employees in Israel, including education fund, and
manager's insurance.
c) Represents life insurance premiums paid by the company.
EMPLOYMENT AGREEMENT WITH VICE CHAIRMAN
On November 14, 2004, we entered into an Employment Agreement with our Vice
Chairman, Moshe Arkin. This agreement became effective upon the completion of
our merger with Agis on March 17, 2005 and replaced Mr. Arkin's prior employment
agreement with Agis. The term of this agreement runs through March 17, 2008,
subject to automatic two-year renewals unless either party provides written
notice of non-renewal to the other party at least 120 days before the last day
of any term. On September 10, 2007, Mr. Arkin informed Perrigo of his intention
not to renew his employment agreement.
Under the agreement, Mr. Arkin receives a base salary that is reviewed at least
annually by the Board to determine if an increase is appropriate. Mr. Arkin's
annualized base salary for fiscal year 2007 was $424,000, effective October 1,
2006.
Mr. Arkin is eligible to participate in the Management Incentive Bonus Plan,
under which he has a target bonus opportunity of not less than $275,000. Mr.
Arkin received a management incentive and discretionary bonus payment of
$219,000 for fiscal 2007. Mr. Arkin was granted an option to purchase 25,000
Perrigo shares as well as 6,454 service-based restricted shares and 4,303
performance-based restricted units in fiscal year 2007 pursuant to Perrigo's
LTIP. Mr. Arkin also receives various payments required under Israeli law, such
as manager's insurance, disability insurance, and recreation funds, as well as
various perquisites customary in Israel, such as educational funds, car
allowance and other similar perquisites.
30
In conjunction with his employment agreement, Mr. Arkin executed a
noncompetition and nondisclosure agreement that provides that he will not
compete for the longer of the term of his agreement and a period of one year
following his termination. In addition, Mr. Arkin has agreed that he will not,
at any time during or after his employment with Perrigo, disclose any
confidential information obtained during his employment.
Further details regarding potential payments under this agreement upon
termination of employment are presented in "Potential Payments Upon Termination
or Change in Control" beginning on page 35.
EMPLOYMENT AGREEMENT WITH EXECUTIVE VICE PRESIDENT &
GENERAL MANAGER--PERRIGO ISRAEL
On November 14, 2004, we entered into an Employment Agreement with our Executive
Vice President & General Manager-Perrigo Israel, Refael Lebel. This agreement
became effective upon the completion of our merger with Agis on March 17, 2005
and replaced Mr. Lebel's prior employment agreement with Agis. The term of this
agreement runs through March 17, 2008, subject to automatic two-year renewals
unless either party provides written notice of non-renewal to the other party at
least 120 days before the last day of any term.
Under the agreement, Mr. Lebel receives a base salary at an initial annual rate
of $325,000, which is reviewed at least annually by the Board to determine if an
increase is appropriate. Mr. Lebel's annualized base salary for fiscal year 2007
was $344,500, effective October 1, 2006.
Mr. Lebel is eligible to participate in the MIB, under which he has a target
bonus opportunity of not less than $200,000. Mr. Lebel received a bonus payment
of $193,000 for fiscal 2007. He was also granted an option to purchase 20,000
Perrigo shares as well as 18,066 service-based restricted shares and 3,442
performance-based restricted units in fiscal year 2007 pursuant to Perrigo's
2003 LTIP. Mr. Lebel also receives various payments required under Israeli law,
such as manager's insurance, disability insurance, and recreation funds, as well
as various perquisites customary in Israel, such as education funds, car
allowance and other similar perquisites.
In conjunction with his employment agreement, Mr. Lebel executed a
noncompetition and nondisclosure agreement that provides that he will not
compete with us for the longer of the term of his agreement and a period of one
year following his termination. In addition, Mr. Lebel has agreed that he will
not, at any time during or after his employment with Perrigo, disclose any
confidential information obtained during his employment.
Further details regarding potential payments under this agreement upon a
termination of employment are presented in "Potential Payments Upon Termination
or Change in Control" beginning on page 35.
31
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2007
The following table provides information regarding equity and non-equity awards
granted to the named executive officers during fiscal year 2007.
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
ESTIMATED POSSIBLE PAYOUTS UNDER NON- ESTIMATED POSSIBLE PAYOUTS UNDER
EQUITY INCENTIVE PLAN AWARDS(3) EQUITY INCENTIVE PLANS(4)
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
ALL OTHER
GRANT STOCK
NAME DATE THRESHOLD ($) TARGET ($) MAXIMUM ($) THRESHOLD (#) TARGET (#) MAXIMUM (#) AWARDS (#)(5)
Joseph C. Papa(1) 9/8/2006 509,295 509,295 1,339,446 -- -- -- --
10/9/2006 -- -- -- -- 17,872 35,744 --
10/9/2006 -- -- -- -- -- -- 125,275
10/9/2006 -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
David T.
Gibbons(2) 8/11/2006 98,812 581,250 1,528,688 -- -- -- --
8/16/2006 -- -- -- -- 20,129 40,258 --
8/16/2006 -- -- -- -- -- -- 30,194
8/16/2006 -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
Judy L. Brown 8/10/2006 34,000 200,000 526,000 -- -- -- --
8/16/2006 -- -- -- -- 4,444 8,888 --
8/16/2006 -- -- -- -- -- -- 4,444
8/16/2006 -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
Moshe Arkin 8/10/2006 49,555 291,500 757,900 -- -- -- --
8/16/2006 -- -- -- -- 4,303 8,606 --
8/16/2006 -- -- -- -- -- -- 6,454
8/16/2006 -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
John T.
Hendrickson 8/10/2006 40,273 236,900 623,047 -- -- -- --
8/16/2006 -- -- -- -- 4,716 9,432 --
8/16/2006 -- -- -- -- -- -- 4,716
8/16/2006 -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
Refael Lebel 8/10/2006 36,040 212,000 551,200 -- -- -- --
8/16/2006 -- -- -- -- 3,442 6,884 --
8/16/2006 -- -- -- -- -- -- 18,066
8/16/2006 -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
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ALL OTHER
OPTION
AWARDS: EXERCISE CLOSING GRANT DATE
NUMBER OF OR BASE MARKET FAIR VALUE
SECURITIES PRICE OF PRICE ON OF STOCK
UNDERLYING OPTION DATE OF AND OPTION
NAME OPTIONS (#)(6) AWARDS GRANT ($)(7) AWARDS ($)
Joseph C. Papa(1) -- -- -- --
-- -- -- 309,007
-- -- -- 2,166,005
85,212 17.29 17.46 512,753
-------------------------------------------------------------------
David T.
Gibbons(2) -- -- -- --
-- -- -- 311,396
-- -- -- 467,101
116,942 15.47 15.52 472,048
-------------------------------------------------------------------
Judy L. Brown -- -- -- --
-- -- -- 68,749
-- -- -- 68,749
25,817 15.47 15.52 140,032
-------------------------------------------------------------------
Moshe Arkin -- -- -- --
-- -- -- 66,567
-- -- -- 99,843
25,000 15.47 15.52 135,602
-------------------------------------------------------------------
John T.
Hendrickson -- -- -- --
-- -- -- 72,957
-- -- -- 72,957
27,400 15.47 15.52 148,620
-------------------------------------------------------------------
Refael Lebel -- -- -- --
-- -- -- 53,248
-- -- -- 279,481
20,000 15.47 15.52 108,482
-------------------------------------------------------------------
(1) Mr. Papa joined Perrigo on October 9, 2006.
(2) Effective March 31, 2007, Mr. Gibbons ceased to be an executive officer
when he retired from his position as Executive Chairman. Mr. Gibbons has
continued his role as non-executive Chairman of Perrigo's Board of
Directors.
(3) These columns show the dollar range of payout targets for fiscal 2007
performance under the Management Incentive Bonus Plan as described in the
section titled "Elements of Compensation--Annual Incentive Award
Opportunities and Bonuses" in the Compensation Discussion and Analysis.
The target values are based on a percentage of each executive's salary.
The maximum award opportunity is equal to 260% of the target value. The
actual payments for fiscal 2007 non-equity incentive awards were made in
September 2007 and are shown in the Summary Compensation Table in the
column titled "Non-equity Incentive Plan Compensation."
(4) These columns show the target range of performance-based restricted stock
units to be earned in fiscal 2007 under the 2003 LTIP as described in the
section titled "Elements of Compensation--Stock-Based Compensation" in
the Compensation Discussion and Analysis. The maximum award opportunity
is equal to 200% of the target grant. The FAS 123(R) value of Mr. Papa's
fiscal 2007 performance-based restricted stock unit award is $17.29 a
share. The FAS 123(R) value of the fiscal 2007 performance-based
restricted stock unit awards granted to all other executives is $15.47 a
share. These awards vest over three years. The FAS 123(R) fiscal 2007
expense recorded for these awards is included in the Summary Compensation
Table in the column titled "Stock Awards."
32
(5) This column shows the service-based restricted stock awards granted
during fiscal 2007 under the 2003 LTIP as described in the section titled
"Elements of Compensation--Stock-Based Compensation" in the Compensation
Discussion and Analysis. The FAS 123(R) value of Mr. Papa's fiscal 2007
service-based restricted stock award is $17.29 a share. The FAS 123(R)
value of the fiscal 2007 service-based restricted stock awards granted to
all other executives is $15.47 a share. These awards vest over three
years, with the exception of Mr. Papa's award, which vests over two
years. The FAS 123(R) fiscal 2007 expense recorded for these awards is
included in the Summary Compensation Table in the column titled "Stock
Awards."
(6) This column shows the stock option awards granted during fiscal 2007
under the 2003 LTIP as described in the section titled "Elements of
Compensation--Stock-Based Compensation" in the Compensation Discussion
and Analysis. The FAS 123(R) value of Mr. Papa's fiscal 2007 stock option
award is $6.02 a share. The FAS(R) value of Mr. Gibbons' fiscal 2007
stock option award is $4.04 a share as vesting was accelerated due to his
retirement. The FAS 123(R) value of the fiscal 2007 stock option awards
granted to all other executives is $5.42 a share. These option awards
vest over five years. The FAS 123(R) fiscal 2007 expense recorded for
these awards is included in the Summary Compensation Table in the column
titled "Option Awards."
(7) Represents the closing price reported on the date of the grant.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2007
The following table sets forth information detailing the outstanding equity
awards held by each of our named executive officers at June 30, 2007.
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
OPTION AWARDS STOCK AWARDS
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
EQUITY
INCENTIVE
PLAN
AWARDS:
NUMBER OF NUMBER OF NUMBER OF NUMBER OF MARKET VALUE
SECURITIES SECURITIES SECURITIES SHARES OR OF SHARES OR
UNDERLYING UNDERLYING UNDERLYING UNITS OF UNITS OF STOCK
OPTION UNEXERCISED UNEXERCISED UNEXERCISED OPTION OPTION STOCK THAT THAT HAVE
GRANT OPTIONS (#) OPTIONS (#) UNEARNED EXERCISE EXPIRATION HAVE NOT NOT VESTED
NAME DATE(1) EXERCISABLE(2) UNEXERCISABLE(2) OPTIONS (#) PRICE ($) DATE VESTED (#) ($)(3)
Joseph Papa 10/9/2006 -- 85,212 -- 17.29 10/9/2016 125,275(5) 2,452,885
--------------------------------------------------------------------------------------------------------------------------------
David T. Gibbons 5/3/2000 83,030 -- -- 5.25 5/3/2010 -- --
5/4/2001 108,058 -- -- 11.81 5/4/2011
8/6/2002 104,674 -- -- 9.84 8/6/2012
8/20/2003 125,000 -- -- 13.90 8/20/2013
8/16/2004 100,000 -- -- 18.18 8/16/2014
9/14/2005 208,333 -- -- 14.69 9/14/2015
8/16/2006 116,942 -- -- 15.47 8/16/2016
--------------------------------------------------------------------------------------------------------------------------------
Judy L. Brown 9/7/2004 4,000 6,000 -- 20.08 9/7/2014 4,444(6) 87,014
9/14/2005 3,600 14,400 -- 14.69 9/14/2015
8/16/2006 -- 25,817 -- 15.47 8/16/2016
--------------------------------------------------------------------------------------------------------------------------------
Moshe Arkin 9/14/2005 10,000 40,000 -- 14.69 9/14/2015 6454(6) 126,369
8/16/2006 -- 25,000 -- 15.47 8/16/2016
--------------------------------------------------------------------------------------------------------------------------------
John T. Hendrickson 7/19/2001 50,000 -- -- 15.51 7/19/2011 4,716(6) 92,339
8/6/2002 27,800 9,000 -- 9.84 8/6/2012
8/20/2003 4,027 19,348 -- 13.90 8/20/2013
8/16/2004 16,890 25,332 -- 18.18 8/16/2014
9/14/2005 10,153 40,611 -- 14.69 9/14/2015
8/16/2006 -- 27,400 -- 15.47 8/16/2016
--------------------------------------------------------------------------------------------------------------------------------
Refael Lebel 9/14/2005 8,000 32,000 -- 14.69 9/14/2015 23,368(7) 457,545
8/16/2006 -- 20,000 -- 15.47 8/16/2016
--------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------
-----------------------------------------------
STOCK AWARDS
-----------------------------------------------
-----------------------------------------------
EQUITY
EQUITY INCENTIVE
INCENTIVE PLAN AWARDS:
PLAN AWARDS: MARKET OR
NUMBER OF PAYOUT VALUE
UNEARNED OF UNEARNED
SHARES OR SHARES OR
UNITS THAT UNITS THAT
HAVE NOT HAVE NOT
NAME VESTED (#)(4) VESTED ($)(3)
Joseph Papa 17,872 349,934
-----------------------------------------------
David T. Gibbons 20,129 394,126
-----------------------------------------------
Judy L. Brown 4,444 87,014
-----------------------------------------------
Moshe Arkin 4,303 84,253
-----------------------------------------------
John T. Hendrickson 4,716 92,339
-----------------------------------------------
Refael Lebel 3,442 67,394
-----------------------------------------------
(1) For better understanding of this table, this column has been added to
show the grant date of all stock option awards outstanding at fiscal year
end.
33
(2) All stock option awards vest one-fifth per year over five years beginning
on the anniversary of the grant, except that Mr. Gibbons' stock option
award granted on September 14, 2005 fully vested on March 31, 2007.
(3) The market value of these unvested awards was calculated using the
closing price of our common stock as of June 30, 2007, which was $19.58 a
share.
(4) All performance-based restricted stock units were granted on August 16,
2006, except that Mr. Papa's were granted on October 9, 2006. All
performance-based restricted stock units fully vest three years from the
grant date.
(5) Amount represents restricted stock awards granted on October 9, 2006 and
vesting one-half per year over two years, beginning on the anniversary of
the grant.
(6) Amount represents restricted stock awards granted on August 16, 2006,
which fully vest three years from the grant date.
(7) Amount consists of 5,301 shares of restricted stock granted on March 17,
2005, which vest one-third per year over three years beginning on the
anniversary of the grant, and 18,066 shares of restricted stock granted
on August 16, 2006, which fully vest three years from the grant date.
OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2007
The table below provides information for each named executive officer concerning
the exercise of stock options and the vesting of restricted stock during fiscal
year 2007.
------------------------------------------------------------------------------------------------------------
OPTION AWARDS STOCK AWARDS
----------------------------------------
---------------------------------------
NUMBER OF NUMBER OF
SHARES ACQUIRED VALUE REALIZED SHARES ACQUIRED VALUE REALIZED
NAME ON EXERCISE (#) ON EXERCISE ($)(2) ON VESTING (#)(3) ON VESTING ($)(4)
------------------------------------------------------------------------------------------------------------
Joseph C. Papa -- -- -- --
------------------------------------------------------------------------------------------------------------
David T. Gibbons(1) 393,470 5,564,033 63,774 1,126,249
------------------------------------------------------------------------------------------------------------
Judy L. Brown -- -- 10,074 199,163
------------------------------------------------------------------------------------------------------------
Moshe Arkin -- -- -- --
------------------------------------------------------------------------------------------------------------
John T. Hendrickson 36,866 278,792 28,790 566,898
------------------------------------------------------------------------------------------------------------
Refael Lebel -- -- 5,303 86,280
------------------------------------------------------------------------------------------------------------
(1) As part of Mr. Gibbons employment contract, all unvested stock option and
service-based restricted stock awards became fully vested upon his
retirement effective March 31, 2007.
(2) The value realized on exercise was calculated using the difference
between the exercise price of the option and closing price of our common
stock on the day the awards were exercised.
(3) Represents service-based restricted shares and performance-based
restricted stock units issued under the 2003 LTIP.
(4) The value realized on vesting was calculated using the closing price our
common stock on the day the awards vested.
NONQUALIFIED DEFERRED COMPENSATION IN FISCAL YEAR 2007
The Perrigo Non-Qualified Deferred Compensation Plan allows certain senior
executives to defer as much as 100% of base salary and 80% of incentive
compensation. Participation in the plan is limited to senior executives. Amounts
deferred under the plan earn a return based on measurement funds made available
to the participant and determined by the retirement plan committee. These
measurement funds mirror the investment choices available in our qualified
deferred compensation plan (with the exception of our stock, which is not an
investment option
34
in the Non-Qualified Deferred Compensation Plan). In-service distributions are
allowed under the plan. Participants in the plan elect the form and timing of
payment of their plan deferral account prior to the year in which it is
deferred. Participants may elect to receive their accounts in a lump sum or in
annual installments (up to fifteen years) upon separation from service. All
participants in the plan are treated as key employees by plan rules (as defined
in the applicable tax regulations) and therefore may not begin receiving
distributions earlier than six months following termination of employment.
The following table sets forth information relating to the Perrigo Company Non-
Qualified Deferred Compensation Plan.
------------------------------------------------------------------------------------------------------------------------------
EXECUTIVE PERRIGO
CONTRIBUTIONS CONTRIBUTIONS AGGREGATE EARNINGS AGGREGATE WITHDRAWALS/ AGGREGATE BALANCE AT
NAME IN LAST FY ($)(1) IN LAST FY ($) IN LAST FY ($) DISTRIBUTIONS ($) LAST FYE ($)
--------------------- ------------------- ---------------- -------------------- ------------------------ ---------------------
Joseph C. Papa 128,333 -- 5,166 -- 133,499
--------------------- ------------------- ---------------- -------------------- ------------------------ ---------------------
David T. Gibbons -- -- 89,726 -- 729,489
--------------------- ------------------- ---------------- -------------------- ------------------------ ---------------------
Judy L. Brown 42,736 -- 13,106 -- 105,421
--------------------- ------------------- ---------------- -------------------- ------------------------ ---------------------
Moshe Arkin -- -- -- -- --
--------------------- ------------------- ---------------- -------------------- ------------------------ ---------------------
John T. Hendrickson -- -- 11,423 58,709 54,536
--------------------- ------------------- ---------------- -------------------- ------------------------ ---------------------
Refael Lebel -- -- -- -- --
--------------------- ------------------- ---------------- -------------------- ------------------------ ---------------------
(1) Amounts shown in this column are included in the Summary Compensation
Table in the column entitled "Salary."
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Perrigo Company Board of Directors consists of
three directors, each of whom is independent, as defined under SEC rules and the
NASDAQ listing standards, and an "outside director" within the meaning of
Section 162(m) of the Internal Revenue Code.
The Compensation Committee has reviewed and discussed the Compensation
Discussion and Analysis with management. Based on the review and discussions,
the Compensation Committee recommended to the Board of Directors that the
"Compensation Discussion and Analysis" be included in this Proxy Statement and
incorporated by reference into Perrigo's Annual Report on Form 10-K for the
fiscal year ended June 30, 2007.
COMPENSATION COMMITTEE
Gary K. Kunkle, Jr., Chair
Gary M. Cohen
Ran Gottfried
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
All of our named executive officers participate in our MIB Plan, our LTIP and
our Non-Qualified Deferred Compensation Plan ("Deferred Compensation Plan").
These plans may require us to provide compensation to these officers in the
event of a termination of employment or a change-in-control of Perrigo. Three of
our named executive officers also will receive compensation under their
employment agreements in the event of a termination of employment or a
35
change-in-control of Perrigo. The Committee retains discretion to provide, and
in the past has provided, additional benefits to executive officers upon
termination or resignation if it determines the circumstances so warrant.
The following table sets forth the expected benefits to be received by each
named executive officer in the event of his or her termination resulting from
various scenarios and assuming a termination date of June 29, 2007, the last
business day of our 2007 fiscal year, and a stock price of $19.58, our closing
stock price on June 29, 2007. Assumptions and explanations of the numbers
included in the table below are set forth in the footnotes to, and in additional
text following, the table.
------------------------------------------------------------------------------------------------------------------------
TERMINATION INVOLUNTARY
TERMINATION FOR WITHOUT CAUSE TERMINATION FOR
CHANGE IN DEATH, DISABILITY, CAUSE OR WITHOUT OR FOR GOOD ECONOMIC
NAME AND BENEFITS CONTROL($) RETIREMENT($) GOOD REASON($) REASON($) REASONS($)
------------------------------------------------------------------------------------------------------------------------
JOSEPH C. PAPA(1)
------------------------------------------------------------------------------------------------------------------------
Cash Severance 3,500,000 700,000 -- 3,500,000 3,500,000
------------------------------------------------------------------------------------------------------------------------
Equity Awards
Service-Based Restricted Stock 2,452,885 2,452,885 -- 2,452,885 2,452,885
Performanced-Based Restricted
Stock 349,934 349,934 -- 349,934 --
Stock Options 195,135 195,135 -- 195,135 78,057
------------------------------------------------------------------------------------------------------------------------
Retirement Benefits -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Other Benefits -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Total Estimated Incremental Value 6,497,954 3,697,954 0 6,497,954 6,030,942
------------------------------------------------------------------------------------------------------------------------
JUDY L. BROWN(2)
------------------------------------------------------------------------------------------------------------------------
Cash Severance -- 200,000 -- -- --
------------------------------------------------------------------------------------------------------------------------
Equity Awards
Service-Based Restricted Stock 284,262 284,262 -- -- 197,349
Performanced-Based Restricted
Stock 87,014 87,014 -- -- --
Stock Options 176,524 176,524 -- -- 77,656
------------------------------------------------------------------------------------------------------------------------
Retirement Benefits -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Other Benefits -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Total Estimated Incremental Value 547,800 747,800 0 0 275,005
------------------------------------------------------------------------------------------------------------------------
MOSHE ARKIN(3)
------------------------------------------------------------------------------------------------------------------------
Cash Severance 1,007,000 291,500 -- 1,007,000 1,007,000
------------------------------------------------------------------------------------------------------------------------
Equity Awards
Service-Based Restricted Stock 126,369 126,369 -- 126,369 --
Performanced-Based Restricted
Stock 84,253 84,253 -- 84,253 --
Stock Options 298,350 298,350 -- 138,900 138,900
------------------------------------------------------------------------------------------------------------------------
Retirement Benefits -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Other Benefits 98,919 -- -- 98,919 98,919
------------------------------------------------------------------------------------------------------------------------
Total Estimated Incremental Value 1,614,891 800,472 0 1,455,441 1,244,819
------------------------------------------------------------------------------------------------------------------------
JOHN T. HENDRICKSON(2)
------------------------------------------------------------------------------------------------------------------------
Cash Severance -- 236,900 -- -- --
------------------------------------------------------------------------------------------------------------------------
Equity Awards
Service-Based Restricted Stock 421,087 421,087 -- -- 328,748
Performanced-Based Restricted
Stock 92,339 92,339 -- -- --
Stock Options 544,223 544,223 -- -- 365,553
------------------------------------------------------------------------------------------------------------------------
Retirement Benefits -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Other Benefits -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Total Estimated Incremental Value 1,057,649 1,294,549 0 0 694,301
------------------------------------------------------------------------------------------------------------------------
REFAEL LEBEL(4)
------------------------------------------------------------------------------------------------------------------------
Cash Severance 768,500 212,000 -- 768,500 768,500
------------------------------------------------------------------------------------------------------------------------
Equity Awards
Service-Based Restricted Stock 457,545 457,545 -- 457,545 103,794
Performanced-Based Restricted
Stock 67,394 67,394 -- 67,394 --
Stock Options 238,680 238,680 -- 111,120 111,120
------------------------------------------------------------------------------------------------------------------------
Retirement Benefits -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------
Other Benefits 80,372 -- -- 80,372 80,372
------------------------------------------------------------------------------------------------------------------------
Total Estimated Incremental Value 1,612,491 975,619 0 1,484,931 1,063,786
------------------------------------------------------------------------------------------------------------------------
36
(1) Mr. Papa: Cash Severance represents 24 months of salary ($1,400,000), 24
months of bonus ($1,400,000) and any earned prorated bonus ($700,000) if
he leaves Perrigo because of a change of control, without cause or for
good reason, or involuntary termination for economic reasons. Cash
Severance represents any earned prorated bonus if his employment is
terminated because of death, disability or retirement.
(2) Ms. Brown and Mr. Hendrickson will receive cash severance for any earned
prorated bonus if their employment is terminated because of death,
disability or retirement.
(3) Mr. Arkin: Cash Severance represents 12 months of salary ($424,000), 12
months of bonus ($291,500) and any earned prorated bonus ($291,500) if he
leaves Perrigo because of a change of control, without cause or for good
reason, or involuntary termination for economic reasons. Cash Severance
represents any earned prorated bonus if his employment is terminated
because of death, disability or retirement. Other Benefits represents 12
months of company contributions made to manager's insurance, disability
fund, education fund and recreation fund.
(4) Mr. Lebel: Cash Severance represents 12 months of salary ($344,500), 12
months of bonus ($212,000) and any earned prorated bonus ($212,000) if he
leaves Perrigo because of a change of control, without cause or for good
reason, or involuntary termination for economic reasons. Cash Severance
represents any earned prorated bonus if his employment is terminated
because of death, disability or retirement. Other Benefits represents 12
months of company contributions made to manager's insurance, disability
fund, education fund and recreation fund.
Compensation payable to our three named executive officers who have employment
agreements with us in the event of a termination or a change-in-control of
Perrigo is as follows:
EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
Under Mr. Papa's employment agreement, his employment may be terminated during
the term of this agreement under the following circumstances:
- upon Mr. Papa's death or disability;
- by Perrigo for cause (as defined in the agreement);
- by Mr. Papa upon 30 days' written notice;
- by mutual agreement;
- by Perrigo without cause upon 30 days' written notice; or
- by Mr. Papa with good reason (as defined in the agreement).
If Mr. Papa's employment is terminated during the term of this agreement for any
reason, he will receive compensation and benefits earned to date, including
payment for unused vacation days. If Mr. Papa's employment is terminated as a
result of death or disability, Mr. Papa also will receive a pro rata management
incentive bonus for the portion of the year he was employed. If we terminate Mr.
Papa's employment for cause, he will receive compensation and benefits earned to
date, but he will forfeit any options (whether vested or unvested), restricted
stock and unvested benefits. Any salary and unused vacation days will be paid to
Mr. Papa in a lump sum as soon as practicable following the date of termination.
Other benefits will be paid to Mr. Papa in accordance with applicable law and
the terms of any applicable plan or arrangement.
If during the term of this agreement Mr. Papa's employment is terminated by us
without cause or by him for good reason and he agrees to a release of claims
against Perrigo, he will also be entitled to compensation and benefits earned to
that date, as well as:
- payment of an amount equal to 24 months of his then-current salary
and target bonus, payable in regular payroll installments;
37
- continued vesting as if he had remained employed with Perrigo of the
stock option and restricted stock awards granted to him on the
Effective Date and the ability to exercise those options, to the
extent they were vested at termination or vest subsequently, until
the later of (i) 25 months after the date of termination, (ii) 30
days after the last vesting date of an option that vests after
termination, or (iii) any later applicable date specified in the
Long Term Incentive Award Agreement ("Award Agreement") pursuant to
which the options were granted; provided that no option may be
exercised later than the expiration of the option term as specified
in the Award Agreement;
- continued vesting for a period of 24 months of all other stock
option and restricted stock awards granted to him, and the ability
to exercise those options, to the extent they were vested at
termination or vest subsequently, until the later of (i) 25 months
after the date of termination, or (ii) any later applicable date
specified in the Award Agreement pursuant to which the options were
granted; provided that no option may be exercised later than the
expiration of the option term as specified in the Award Agreement;
and
- a pro rata management incentive bonus for the portion of the year he
was employed.
EMPLOYMENT AGREEMENT WITH VICE CHAIRMAN
In the event Mr. Arkin's employment agreement terminates due to non-renewal,
then he will be entitled to vest (whether or not his employment terminates) as
of the date of the notice of non-renewal in that number of unvested stock
options and restricted stock awards which would have vested during the 24-month
period following the end of the agreement term.
If Mr. Arkin's employment is terminated for any reason, he will receive
compensation and benefits earned to date, including payment for unused vacation
days. If Mr. Arkin resigns for "good reason" or if we terminate his employment
"without cause", each as defined in the employment agreement, then, in addition
to receiving earned compensation and benefits, he will receive his prorated
bonus for the year in which the termination occurs; his salary, entitled bonus
and benefits for the greater of 12 months or the balance of the employment
agreement; immediate vesting of his restricted stock; and immediate vesting of
his stock options that would have otherwise vested within the following 24
months. Any salary and unused vacation days will be paid to Mr. Arkin in a lump
sum as soon as practicable following the date of termination. Other benefits
will be paid in accordance with applicable law and the terms of any applicable
plan or arrangement.
Under his employment agreement, Mr. Arkin is also entitled to all accrued
payments due to him under his previous employment agreement with Agis.
EMPLOYMENT AGREEMENT WITH EXECUTIVE VICE PRESIDENT &GENERAL MANAGER--PERRIGO
ISRAEL
In the event Mr. Lebel's employment agreement terminates due to non-renewal,
then he will be entitled to vest (whether or not his employment terminates) as
of the date of the notice of non-
38
renewal in that number of unvested stock options and restricted stock awards
which would have vested during the 24-month period following the end of the
agreement term.
If Mr. Lebel's employment is terminated for any reason, he will receive
compensation and benefits earned to date, including payment for unused vacation
days. If Mr. Lebel resigns for "good reason" or if we terminate his employment
"without cause", each as defined in the employment agreement, then, in addition
to receiving earned compensation and benefits, he will receive his prorated
bonus for the year in which the termination occurs; his salary, entitled bonus
and benefits for the greater of 12 months or the balance of the employment
agreement; immediate vesting of his restricted stock; and immediate vesting of
his stock options that would have otherwise vested within the following 24
months. Any salary and unused vacation days will be paid in a lump sum as soon
as practicable following the date of termination. Other benefits will be paid in
accordance with applicable law and the terms of any applicable plan or
arrangement.
Under his employment agreement, Mr. Lebel is also entitled to all accrued
payments due to him under his previous employment agreement with Agis.
PAYMENTS UNDER THE MANAGEMENT INCENTIVE BONUS PLAN
Generally, no portion of the payments under the MIB Plan is considered earned or
payable for a particular year unless the named executive officer is employed by
us and in good standing on the first day of the following fiscal year. The MIB
Plan, however, may require us to make payments to named executive officers who
are no longer employed by us on the first day of the following fiscal year under
the following circumstances:
- retirement at age 65 or older;
- retirement at age 60 or older with at least 10 years of service;
- early retirement of a named executive officer under an early
retirement plan;
- permanent disability as determined by the Compensation Committee; or
- death.
Under all circumstances listed above, the named executive officer, or his or her
estate in the case of death, will be entitled to a pro rata portion of any
payment under the MIB Plan for that fiscal year, computed to the date of the
termination. In addition, the CEO, in his sole discretion, may make exceptions
to the circumstances listed above and allow payments in the event of other types
of termination.
A named executive officer eligible to receive a post-termination payment under
the MIB Plan will be paid in a lump sum within a reasonable time after the close
of the fiscal year in which termination occurred.
PAYMENTS UNDER THE LONG TERM INCENTIVE PLAN
If a named executive officer terminates employment with us due to death,
disability or retirement, his or her outstanding options and stock appreciation
rights will (i) be free of any restriction period and (ii) immediately vest in
full and may be exercised in whole or in part
39
by the participant or his or her fiduciary, beneficiary of conservator, as
applicable, at any time prior to their respective expiration dates.
If a named executive officer is involuntarily terminated for economic reasons,
he or she may exercise his or her options and stock appreciation rights, to the
extent vested, at any time prior to the earlier of (i) the date that is 30 days
after the date that is 24 months after the termination date, or (ii) their
respective expiration dates. Any options, stock appreciation rights or
restricted shares that are not vested on the termination date, but are scheduled
to vest during the 24-month period according to the vesting schedule in effect
prior to the termination date vest as if the participant had continued to
provide services to us during the 24-month period. Any options, stock
appreciation rights and restricted shares that are not scheduled to vest during
the 24-month period will be forfeited on the termination date. If a named
executive officer dies after the termination date while his or her options or
stock appreciation rights remain exercisable, the fiduciary of the named
executive officer's estate or his or her beneficiary may exercise the options
and stock appreciation rights (to the extent that those options and stock
appreciation rights were vested and exercisable prior to the executive officer's
death), at any time prior to the later of the date that is (i) 30 days after the
date that is 24 months after the named executive officer's termination date, or
(ii) 12 months after the date of death, but in no event later than their
respective expiration dates.
Upon an event of termination for any reason during the restriction period,
restricted shares still subject to restriction generally will be forfeited by
the named executive officer and reacquired by Perrigo. We may in our sole
discretion, waive in whole or in part any or all remaining restrictions with
regard to a named executive officer's shares, except for restricted share awards
that are intended to comply with certain performance-based compensation
requirements.
If a named executive officer is terminated for cause, any restricted shares
subject to a restriction period will be forfeited and his or her right to
exercise his or her options and stock appreciation rights will terminate. If
within 60 days after a named executive officer is terminated, we discover
circumstances that would have permitted us to terminate a named executive
officer for cause, any shares, cash or other property paid or delivered to the
named executive officer will be forfeited and the named executive officer must
repay those amounts to Perrigo.
If the named executive officer is terminated for any reason other than those
described above, the named executive officer will have the right to exercise his
or her options and stock appreciation rights at any time prior to the earlier of
(i) the date that is three months after the termination date, or (ii) their
respective expiration dates, but only to the extent that those options or stock
appreciation rights, as applicable, were vested prior to the termination date.
Any options or stock appreciation rights that are not vested at the termination
date will be forfeited on the termination date. If a named executive officer
dies after the termination date while his or her options or stock appreciation
rights remain exercisable, the fiduciary of the named executive officer's estate
or his or her beneficiary may exercise the options and stock appreciation rights
(to the extent that those options and stock appreciation rights were vested and
exercisable prior to the executive officer's death), at any time prior to the
earlier of (i) 12 months after the date of death, or (ii) their respective
expiration dates.
In the event of a change-in-control (as defined in the LTIP), options and stock
appreciation rights outstanding under the LTIP as of the date of the change-in-
control that have not vested will
40
become vested and fully exercisable. The restrictions and deferral limitations
applicable to any restricted shares will lapse and the restricted shares will
become free of all restrictions and limitations and will become fully vested and
transferable. In addition, upon a change-in-control, all performance awards will
be considered to be earned and payable in full, and any deferral or other
restriction will lapse and the performance awards will be immediately settled
and distributed. The restrictions and deferral limitations and other conditions
applicable to any other stock unit awards or any other awards will lapse and
those other stock unit awards and other awards will become free of all
restrictions, limitations or conditions and will become fully vested and
transferable to the full extent of the original grant.
PAYMENTS UNDER THE NON-QUALIFIED DEFERRED COMPENSATION PLAN
If a named executive officer is terminated for any reason other than death, he
or she will receive a termination benefit under the Deferred Compensation Plan
equal to his or her vested account balance. The Nonqualified Deferred
Compensation in Fiscal Year 2007 table above reflects account balances as of the
end of our 2007 fiscal year.
This termination benefit will be paid to the named executive officer in a lump
sum or under an annual installment method of up to 15 years, based on the named
executive officer's choice when he or she began participation in the plan or as
he or she subsequently changed the election. If the named executive officer did
not make an election with respect to method of payment for a termination
benefit, he or she will be deemed to have elected to be paid in a lump sum.
Payments generally will be made no later than 60 days after the named executive
officer terminates his or her employment with us.
A named executive officer's beneficiary will receive a survivor benefit equal to
the named executive officer's vested account balance if the named executive
officer dies before he or she commences payment under the Deferred Compensation
Plan. The survivor benefit will be paid to the named executive officer's
beneficiary in a lump sum payment as soon as administratively practicable, but
in no event later than 60 days after the last day of the plan year in which the
named executive officer dies.
PAYMENTS TO RETIRED CHIEF EXECUTIVE OFFICER
On March 31, 2007, David T. Gibbons ceased to be an executive officer of
Perrigo. At that time Mr. Gibbons received the following benefits:
- Mr. Gibbons received a pro rata MIB payout and discretionary bonus
for the fiscal year ending June 30, 2007 of $435,938;
- all of Mr. Gibbons' unvested, previously granted stock options and
restricted stock became fully vested as of March 31, 2007; and
- Mr. Gibbons' vested options may be exercised until the later of (i)
December 31 of the calendar year in which the options would have
otherwise expired according to their terms as of the original grant
date, or (ii) the fifteenth day of the third month following the
date on which the options would have otherwise expired according to
their terms as of the original grant date.
41
Mr. Gibbons also had entered into a noncompetition and nondisclosure agreement
with Perrigo. This agreement provides that Mr. Gibbons will not compete with us
during the term of his employment and for one year thereafter. In addition, Mr.
Gibbons has agreed that he will not, at any time during or after his employment
with Perrigo, disclose any confidential information that he obtained during his
employment.
EQUITY COMPENSATION PLAN INFORMATION
The table below provides information about Perrigo's common stock that may be
issued upon the exercise of options and rights under all of our equity
compensation plans as of June 30, 2007. Shareholder-approved plans include our
LTIP, as well as our Employee Stock Option Plan and Non-Qualified Stock Option
Plan for Directors, which were replaced by our LTIP.
--------------------------------------------------------------------------------------------------------------
(C)
NUMBER OF SECURITIES
(A) (B) REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
ISSUED UPON EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
--------------------------------------------------------------------------------------------------------------
EQUITY COMPENSATION
PLANS APPROVED BY
SHAREHOLDERS 6,780,000 $16.08 4,594,000(1)
--------------------------------------------------------------------------------------------------------------
EQUITY COMPENSATION
PLANS NOT APPROVED BY
SHAREHOLDERS 0 -- 0
--------------------------------------------------------------------------------------------------------------
TOTAL 6,780,000 $16.08 4,594,000
--------------------------------------------------------------------------------------------------------------
(1) All of these shares were available for issuance under our 2003 Long-Term
Incentive Plan. Excludes 504,110 shares of unvested restricted stock. If
these shares do not vest, they will no longer constitute shares
outstanding and will be available for future issuance under the terms of
the plan.
42
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board is responsible for monitoring: (1) Perrigo's
accounting and financial reporting principles and policies; (2) Perrigo's
financial statements and the independent audit thereof; (3) the qualifications,
independence and performance of Perrigo's independent auditors; and (4)
Perrigo's internal control over financial reporting. In particular, these
responsibilities include, among other things, the appointment and compensation
of Perrigo's independent auditors, reviewing with the independent auditors the
plan and scope of the audit of the financial statements and internal control
over financial reporting and audit fees, monitoring the adequacy of reporting
and internal controls and meeting periodically with internal auditors and the
independent auditors. All of the members of the Audit Committee are independent,
as such term is defined in Rule 4200(a)(15) of the National Association of
Securities Dealers listing standards. The Board has adopted an Audit Committee
Charter, which it reviews annually based upon input from the Committee.
In connection with the June 30, 2007 financial statements, the Audit Committee:
(1) reviewed and discussed the audited financial statements with management; (2)
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards (SAS) No. 61, as amended, and (3) received and
discussed with the independent auditors the written disclosures and letter from
the independent auditors required by Independence Standards No. 1 and has
discussed with the independent auditors their independence. Based upon these
reviews and discussions, the Audit Committee has recommended to the Board of
Directors, and the Board of Directors has approved, that Perrigo's audited
financial statements be included in Perrigo's Annual Report on Form 10-K filed
with the SEC for the fiscal year ended June 30, 2007.
THE AUDIT COMMITTEE
Laurie Brlas, Chair
Larry D. Fredricks
Michael J. Jandernoa
Ben-Zion Zilberfarb
43
INDEPENDENT ACCOUNTANTS
BDO Seidman, LLP has been Perrigo's independent registered public accounting
firm since 1988. The Board has engaged BDO Seidman, LLP as our independent
registered public accountants for fiscal year 2008. Representatives of BDO
Seidman, LLP will be present at the Annual Meeting and will have the opportunity
to make a statement and respond to questions.
During fiscal years 2007 and 2006, we retained BDO Seidman, LLP to perform
auditing and other services for us and paid them the following amounts for these
services:
Fiscal Year 2007 Fiscal Year 2006
Audit Fees $1,622,800 Audit Fees $1,405,000
Audit-Related Fees 39,000 Audit-Related Fees 33,000
Tax Fees 77,700 Tax Fees 69,000
---------- ----------
Total $1,739,500 Total $1,507,000
Audit-related fees in 2007 and 2006 were for benefit plan audits. Tax fees
related primarily to tax compliance services.
The Audit Committee maintains a policy pursuant to which it reviews and pre-
approves audit and permitted non-audit services (including the fees and terms
thereof) to be provided by our independent auditors, subject to the de minimis
exceptions for non-audit services described in Section 10A(i)(1)(B) of the
Securities Exchange Act of 1934 that are approved by the Audit Committee prior
to the completion of our audit. The Chair of the Audit Committee, or any other
member or members designated by the Audit Committee, is authorized to pre-
approve non-audit services, provided that any pre-approval shall be reported to
the full Audit Committee at its next scheduled meeting. All auditing and other
services performed by our independent auditors in fiscal 2007 were approved in
accordance with the Audit Committee's policy.
ANNUAL REPORT ON FORM 10-K
A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30,
2007, INCLUDING SCHEDULES, WHICH IS ON FILE WITH THE SECURITIES AND EXCHANGE
COMMISSION IS INCLUDED IN THE ANNUAL REPORT DELIVERED WITH THIS PROXY STATEMENT.
IF YOU WOULD LIKE A COPY OF THE EXHIBITS TO THE FORM 10-K, PLEASE CONTACT TODD
W. KINGMA, SECRETARY, PERRIGO COMPANY, 515 EASTERN AVE., ALLEGAN, MI 49010.
44
(PERRIGO LOGO)
(PERRIGO(R) LOGO) ------------------------------
c/o National City Bank VOTE BY TELEPHONE
Shareholder Services Operations ------------------------------
Loc 5352 Have your proxy card available
P.O. Box 94509 when you call the TOLL-FREE
Cleveland, OH 44101-4509 NUMBER 1-888-693-8683 using a
Touch-Tone phone and follow
the simple instructions to
record your vote.
------------------------------
VOTE BY INTERNET
------------------------------
Have your proxy card available
when you access the website
HTTP://WWW.CESVOTE.COM and
follow the simple instructions
to record your vote.
------------------------------
VOTE BY MAIL
------------------------------
Please mark, sign and date
your proxy card and return it
in the POSTAGE-PAID ENVELOPE
provided or return it to:
National City Bank, P.O. Box
535300, Pittsburgh PA
15253-9837.
VOTE BY TELEPHONE VOTE BY INTERNET VOTE BY MAIL
Call TOLL-FREE using a Access the WEBSITE and Return your proxy
Touch-Tone phone: cast your vote: in the POSTAGE-PAID
1-888-693-8683 HTTP://WWW.CESVOTE.COM envelope provided
VOTE 24 HOURS A DAY, 7 DAYS A WEEK!
YOUR TELEPHONE OR INTERNET VOTE MUST BE RECEIVED BY 6:00 A.M. EASTERN STANDARD
TIME ON TUESDAY, OCTOBER 30, 2007 TO BE COUNTED IN THE FINAL TABULATION.
IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT SEND YOUR PROXY BY MAIL.
----------------
-
----------------
PROXY MUST BE SIGNED AND DATED BELOW.
- PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. -
--------------------------------------------------------------------------------
PERRIGO COMPANY PROXY
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS ON OCTOBER 30, 2007.
The undersigned appoints Judy L. Brown and Todd W. Kingma, or either of them,
with full power of substitution as attorneys and proxies to vote as designated,
with all powers which the undersigned would possess if personally present, all
the shares of Common Stock of Perrigo Company held of record by the undersigned
on September 7, 2007, at the Annual Meeting of Shareholders to be held on
October 30, 2007 or any adjournment thereof.
This proxy also provides voting instructions to the trustee under the Perrigo
Company Profit Sharing Plan and directs the trustee to vote all the shares of
Common Stock of Perrigo Company allocated to the undersigned's account as
indicated on the reverse side.
----------------------------------------
Signature
----------------------------------------
Signature
Date: ____________________________, 2007
Please sign exactly as name appears
hereon. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such. If a corporation, please sign full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
For your comments: _____________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
--------------------------------------------------------------------------------
- PLEASE FOLD AND DETACH COMMENT CARD AT PERFORATION BEFORE MAILING. -
YOUR VOTE IS IMPORTANT!
If you do not vote by telephone or Internet, please sign and date this
proxy card and return it promptly in the enclosed postage-paid envelope so
your shares may be represented at the Meeting.
PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
- PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. -
--------------------------------------------------------------------------------
PERRIGO COMPANY PROXY
--------------------------------------------------------------------------------
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" PROPOSAL 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
1. Election of Directors whose three-year term of office will expire in 2010.
Nominees: (1) Laurie Brlas (2) Michael J. Jandernoa (3) Joseph C. Papa
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as listed to the contrary below) to vote for all nominees
listed above
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT
NOMINEE'S NAME OR NUMBER BELOW:
___________________________________________________________________________
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
IMPORTANT--THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
(PERRIGO(R) LOGO) -------------------------------
P.O. Box 20387 VOTE BY MAIL
Tel Aviv, Israel 61200 -------------------------------
If you own shares that are
traded through the Tel Aviv
Stock Exchange ("TASE"): Please
mark, sign and date your proxy
card, add to it an Ownership
Certificate from the Tel Aviv
Stock Exchange Clearing House
Ltd. member through which your
shares are registered and
return it to Perrigo Company
P.O. Box 20387, Tel Aviv,
Israel 61200.
VOTE BY MAIL
Return your proxy to
Perrigo Company
P.O. Box 20387
Tel Aviv, Israel 61200
PROXY MUST BE SIGNED AND DATED BELOW.
- PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. -
--------------------------------------------------------------------------------
PERRIGO COMPANY PROXY
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS ON OCTOBER 30, 2007.
The undersigned appoints Judy L. Brown and Todd W. Kingma, or either of them,
with full power of substitution as attorneys and proxies to vote as designated,
with all powers which the undersigned would possess if personally present, all
the shares of Common Stock of Perrigo Company held of record by the undersigned
on September 7, 2007, at the Annual Meeting of Shareholders to be held on
October 30, 2007 or any adjournment thereof.
This proxy also provides voting instructions to the trustee under the Perrigo
Company Profit Sharing Plan and directs the trustee to vote all the shares of
Common Stock of Perrigo Company allocated to the undersigned's account as
indicated on the reverse side.
----------------------------------------
Signature
----------------------------------------
Signature
Date: ____________________________, 2007
Please sign exactly as name appears in
the ownership certificate provided by
the TASE clearing house member. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign full corporate
name by President or other authorized
officer. If a partnership, please sign
in partnership name by authorized
person.
For your comments: _____________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
--------------------------------------------------------------------------------
- PLEASE FOLD AND DETACH COMMENT CARD AT PERFORATION BEFORE MAILING. -
YOUR VOTE IS IMPORTANT!
Please sign and date this proxy card and return it promptly together with
an Ownership Certificate from your bank, broker or other TASE Clearing
House member, through which your shares are registered, to Perrigo Company,
P.O. Box 20387, Tel Aviv, Israel 61200 so your shares may be represented at
the Meeting.
PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
- PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. -
--------------------------------------------------------------------------------
PERRIGO COMPANY PROXY
--------------------------------------------------------------------------------
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" PROPOSAL 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
1. Election of Directors whose three-year term of office will expire in 2010.
Nominees: (1) Laurie Brlas (2) Michael J. Jandernoa (3) Joseph C. Papa
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as listed to the contrary below) to vote for all nominees
listed above
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT
NOMINEE'S NAME OR NUMBER BELOW:
___________________________________________________________________________
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
IMPORTANT--THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.