SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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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.
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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) 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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FRIDAY, OCTOBER 28, 2005
10:00 A.M. EASTERN TIME
PERRIGO CORPORATE OFFICE
515 EASTERN AVENUE
ALLEGAN, MICHIGAN 49010
The purpose of our 2005 Annual Meeting is to elect three directors for a
three-year term beginning at the Annual Meeting and to consider and act upon a
proposed amendment to the 2003 Long-Term Incentive Plan (the "Plan") to increase
the number of shares issuable under the Plan by 4,500,000 shares. The Board of
Directors recommends that you vote FOR each of the director nominees and FOR the
amendment of the Plan.
You can vote at the Annual Meeting in person or by proxy if you were a
shareholder of record on September 2, 2005.
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. Whatever method you choose, please vote as soon
as possible. You may revoke your proxy at any time prior to the Annual Meeting.
Our 2005 Annual Report to Shareholders is enclosed.
Sincerely,
Todd W. Kingma
Secretary
September 28, 2005
PERRIGO COMPANY
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PROXY STATEMENT
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TABLE OF CONTENTS
PAGE
----
Questions and Answers....................................... 1
Election of Directors....................................... 5
Corporate Governance........................................ 7
Board of Directors and Its Committees....................... 10
Director Compensation....................................... 12
Certain Transactions........................................ 13
Ownership of Perrigo Common Stock........................... 14
Section 16(a) Beneficial Ownership Reporting Compliance..... 16
Executive Compensation...................................... 17
Equity Compensation Plan Information........................ 25
Report of the Compensation Committee on Executive
Compensation............................................. 26
Company Performance......................................... 29
Amendment of 2003 Long-Term Incentive Plan.................. 30
Report of the Audit Committee............................... 37
Independent Accountants..................................... 38
Annual Report on Form 10-K.................................. 38
Appendix A--Audit Committee Charter......................... A-1
The proxy statement and form of proxy are first being sent to shareholders
on or about September 28, 2005.
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.
WHAT AM I VOTING ON?
We are soliciting your vote on:
1. the election of three directors for a three-year term beginning at
the Annual Meeting, and
2. the amendment of our 2003 Long-Term Incentive Plan to increase the
number of shares issuable under the Plan by 4,500,000 shares.
WHO MAY VOTE?
Shareholders of record at the close of business on September 2, 2005, the
record date, may vote. On that date, there were 93,500,156 shares of Perrigo
common stock outstanding.
HOW MANY VOTES DO I HAVE?
Each share of Perrigo common stock that you own entitles you to one vote.
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 2, 2005, the record date for voting.
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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 2, 2005, 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 20021, 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 2, 2005, 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.
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 Douglas R. Schrank and Todd W. Kingma to
vote for 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, FOR the amendment of the 2003
Long-Term Incentive Plan, and FOR or AGAINST any other properly raised matters
at the discretion of Messrs. Schrank and Kingma.
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MAY I REVOKE MY PROXY?
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 20021, Tel Aviv Israel
61200);
2. Submit another proxy with a later date; or
3. Vote in person at the Annual Meeting.
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.
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 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.
WHAT VOTE IS REQUIRED TO ELECT THE DIRECTOR NOMINEES AND TO APPROVE THE
AMENDMENT
TO THE 2003 LONG-TERM INCENTIVE PLAN?
Election of Directors: 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.
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Amendment of 2003 Long-Term Incentive Plan: Approval of the amendment to
the 2003 Long-Term Incentive Plan requires the affirmative vote of a majority of
the votes cast by the holders of shares entitled to vote on the proposal.
Abstentions will not be treated as votes cast in determining approval of the
amendment and, therefore, will not have the effect of a vote for or against the
proposal. In addition, uninstructed shares may not be voted on this matter, and
therefore, a broker non-vote also will have no effect.
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
2006 Annual Meeting no later than May 31, 2006. 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 2006 Annual Meeting. If you
want to do this, we must receive your written proposal on or after July 28,
2006, but on or before August 21, 2006. 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.
HOW DO I NOMINATE A DIRECTOR?
If you wish to nominate an individual for election as a director at the
2006 Annual Meeting, we must receive your nomination on or after July 28, 2006,
but on or before August 21, 2006. 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.
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
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nominees and fiduciaries 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.
ELECTION OF DIRECTORS
Ten 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 director has been elected, or until he or she resigns or is
removed by the Board. Peter R. Formanek, whose term expires at this Annual
Meeting, is not standing for re-election. The remaining six directors will
continue to serve on the Board as described below. The nominees for this year,
Moshe Arkin, Gary K. Kunkle, Jr., and Herman Morris, Jr., are currently Perrigo
directors. Mr. Arkin's current term does not expire until the 2007 annual
meeting, but he has agreed to stand for re-election this year so that our
directors will be evenly divided among the three classes.
We will vote your shares as you specify on the enclosed proxy card or
during 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 nominees have provided the
following information about themselves.
NOMINEES FOR ELECTION AT THE 2005 ANNUAL MEETING
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MOSHE ARKIN, 53, has been a director of Perrigo and has served as Vice
Chairman of Perrigo since March 2005. He served as Chairman of the Board of
Directors and was the principal shareholder of Agis Industries (1983) Ltd. 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 Agis' Chief
Executive Officer from its establishment through December 2000 and from that
date to the present as its President. Mr. Arkin is also a Director and the
interim Chairman of the Board of Bezeq, Israel's leading full-service
telecommunications provider. Mr. Arkin resides in Israel.
GARY K. KUNKLE, JR., 58, has been a director of Perrigo since October 2002.
He is Chairman and Chief Executive Officer of DENTSPLY International Inc. and
has served as the Chief Executive Officer since January 2004. He previously
served as President and Chief Operating Officer from January 1997 to December
2003. DENTSPLY International is a manufacturer and marketer of products for the
dental market. He has been a director of that company since April 2002. From
January 1994 to December 1996, he served as President of Vistakon, a division of
Johnson & Johnson.
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HERMAN MORRIS, JR., 54, has been a director of Perrigo since December 1999
and has served as Lead Independent Director since August 2005. He is a partner
in the Baker Donelson Bearman Caldwell and Berkowitz law firm in Memphis,
Tennessee. He served as President and Chief Executive Officer of Memphis Light,
Gas and Water Division from August 1997 until January 2004 and was interim
President and Chief Executive Officer from January 1997 until August 1997. Mr.
Morris was General Counsel of Memphis Light, Gas and Water Division from
February 1989 to January 1997.
DIRECTORS CONTINUING UNTIL THE 2006 ANNUAL MEETING
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GARY M. COHEN, 46, has been a director of Perrigo since January 2003. He
has served as President of BD Medical, one of three business segments of Becton,
Dickinson and Company, since May 1999, and as Executive Vice President of
Becton, Dickinson from July 1998 to May 1999. From October 1997 to June 1998,
Mr. Cohen served as President, Becton Dickinson Europe and Worldwide Sample
Collection. He has been an executive officer of Becton Dickinson since October
1996. Mr. Cohen presently serves as a member of the Board of Trustees of Rutgers
University and the Board of Advisors of the Rutgers Business School, and as a
director of the Academic Alliance Foundation, which is devoted to training and
preparing African clinicians in response to the HIV pandemic.
DAVID T. GIBBONS, 62, has been a director of Perrigo since June 2000. He
has served as the President and Chief Executive Officer of Perrigo since May
2000 and as Chairman of the Board since August 2003. 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 of
Banta Corporation, a provider of printing and digital imaging solutions.
JUDITH A. HEMBERGER, 58, has been a director of Perrigo since January 2003.
Since January 2000, she has served as Executive Vice President and Chief
Operating Officer and as a director of Pharmion Corporation, a global specialty
pharmaceutical company that she co-founded. From 1979 to 1998, Dr. Hemberger
worked at Marion Laboratories and its successor companies, leading a number of
functions including Professional Education, Global Medical Affairs and
Commercial Development. Her final role in the company was Senior Vice President
of Global Drug Regulatory Affairs. Dr. Hemberger also serves on the board of
directors of Renovis, Inc., a biopharmaceutical company that develops drugs to
treat neurological diseases and disorders.
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DIRECTORS CONTINUING UNTIL THE 2007 ANNUAL MEETING
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LAURIE BRLAS, 47, has been a director of Perrigo since August 2003. Since
April 2000, she has served as Senior Vice President and Chief Financial Officer
of STERIS Corporation, a provider of infection prevention, decontamination and
health science technologies, products and services. From September 1995 through
March 2000, Ms. Brlas held various positions with Office Max, Inc., most
recently as Senior Vice President and Corporate Controller.
LARRY D. FREDRICKS, 68, has been a director of Perrigo since October 1996
and served as Lead Independent Director from August 2004 to August 2005. Mr.
Fredricks is currently an independent financial consultant. Previously, Mr.
Fredricks was Director--Financial Counseling Services with Deloitte & Touche LLP
from November 1997 through May 2000. He was Executive Vice President and Chief
Financial Officer of First Michigan Bank Corp., a multi-bank holding company,
from January 1995 through October 1997.
MICHAEL J. JANDERNOA, 55, has been a director of Perrigo since January
1981. 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 also served as Perrigo's President from January 1983 to February 1986,
from April 1988 to October 1991, from September 1995 to November 1998 and from
November 1999 through April 2000. Prior to January 1983, Mr. Jandernoa served in
various 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 Steelcase, Inc., a manufacturer of casegood
products and furniture systems for the office furniture industry. Mr. Jandernoa
also serves on the Boards of the Michigan Technology Tri-Corridor (formerly Life
Science Corridor) and the Michigan Economic Development Corporation.
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 report regularly to 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.
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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 Investor Relations--Corporate
Governance--Corporate 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
The Board of Directors has adopted a Code of Conduct applicable to all of
our employees, officers and directors, including our chief executive officer and
senior financial and accounting officers. 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 all 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
the company'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 Investor
Relations--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.
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
Michael J. Jandernoa, is independent as defined in the Nasdaq listing standards.
The Board has no fixed policy with respect to the combining or separating
of the offices of the Chairman of the Board and the Chief Executive Officer. The
Board believes that this issue is part of the succession planning process and
that it is in Perrigo's best interests for the Board to make a determination
whenever it elects a new Chief Executive Officer. The independent members of the
Board of Directors meet
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periodically in executive session without management and also meet in executive
session with the Chief Executive Officer on an "as needed" basis.
The Board has a Lead Independent Director. That position is filled on a
rotating basis by the directors based on seniority, with each independent
director serving as the Lead Independent Director for a one-year term. Duties of
the Lead Independent Director include presiding at all Board meetings at which
the Chairman is not present, including executive sessions; serving as liaison
between the Chairman and the independent directors; and having the authority to
call meetings of the independent directors.
COMMUNICATIONS WITH DIRECTORS
Stockholders 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. 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 is immediately sent to the Chairman of the Audit Committee and, after
consultation with the Chairman, may be sent to the other members of the Audit
Committee. If the communication is not immediately sent to the Audit Committee
Chairman, it will be reported to the Audit Committee on a quarterly basis. In
addition, the Lead Independent Director is advised promptly of any
communications that allege misconduct on the part of Perrigo management or that
raise legal, ethical or compliance concerns about Perrigo's policies or
practices. On a regular basis, the Lead Independent Director receives updates on
other communications that raise issues related to Perrigo's affairs, and he or
she determines 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.
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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. 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, has the right, subject to Perrigo's
Corporate Governance standards, to nominate one additional person to Perrigo's
Board of Directors, pursuant to a Nominating Agreement, dated as of November 14,
2004 and as amended through September 10, 2005. In addition, upon the next Board
vacancy, Mr. Arkin will have the right to designate a replacement director.
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 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 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 or her 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 the later of three years of appointment to his or her executive
position or July 1, 2005. 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 directors,
except Peter R. Formanek, attended our last annual meeting.
BOARD OF DIRECTORS AND ITS COMMITTEES
Perrigo's Board of Directors met nine times during fiscal year 2005. 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 charters are
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available on our website (http://www.perrigo.com) under Investor Relations --
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. In addition, a copy of our Audit Committee Charter is
attached as Appendix A to this proxy statement. All committees consist solely of
independent Board members. During fiscal year 2005, each director attended at
least 75% of the meetings of the Board and of the committees on which he or she
served.
AUDIT COMMITTEE
Fiscal 2005 Meetings:
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Members: Laurie Brlas (Chair)
Larry D. Fredricks
Herman Morris, Jr.
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, as required by
the Nasdaq listing standards. The Board has also determined
that Larry D. Fredricks 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.
Function: 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.
COMPENSATION COMMITTEE
Fiscal 2005 Meetings:
5
Members: Judith A. Hemberger (Chair)
Gary K. Kunkle, Jr.
Peter R. Formanek (through October 28, 2005)
Function: 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 evaluation
11
processes, compensation structure and 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.
NOMINATING & GOVERNANCE COMMITTEE
Fiscal 2005 Meetings:
5
Members: Larry D. Fredricks (Chair)
Gary M. Cohen
Herman Morris, Jr.
Function: 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 "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 assignment of individual
directors to various committees.
DIRECTOR COMPENSATION
ANNUAL RETAINER AND ATTENDANCE FEES
Directors who are Perrigo employees receive no fees for their services as
directors. Non-employee directors receive a $25,000 annual cash retainer fee
covering all regular and special Board meetings and the Annual Meeting of
Shareholders. Each non-employee director also receives an annual restricted
stock grant having a value on the grant date of $40,000 based upon the average
of the high and low price of our stock on that date. The restricted stock grant
is made pursuant to the company's 2003 Long-Term Incentive Plan approved by the
shareholders at the 2003 Annual Meeting of Shareholders and is intended to
directly link an element of director compensation to shareholders' interests.
One-third of the restricted shares vest fully for each director annually over
the three-year period following the grant date.
Compensation and Nominating & Governance Committee members each receive
$1,000 for each in-person committee meeting attended and $500 for each
telephonic committee meeting in which they participate. Audit Committee members
each receive $1,500 for each in-person committee meeting attended and $750 for
each telephonic meeting in which they participate. The Chairs of the
Compensation and Nominating & Governance Committees each receive an additional
annual retainer of $4,000, and the Chair of the Audit Committee receives an
additional annual retainer of $6,000. We also reimburse directors for expenses
incurred in connection with attending Board and committee meetings.
12
CERTAIN TRANSACTIONS
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. The
annual rent under the lease is approximately $522,000 and the lease expires on
December 31, 2006. 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 Industries (1983) Ltd.,
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
standards, Perrigo agreed to name Mr. Arkin to Perrigo's Board of Directors and
to give him the right after 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 replacement director) to the Perrigo Board, all as subject
to Perrigo's Nominating & Governance Guidelines.
Each independent director nominated pursuant to the Nominating Agreement
will serve on the Perrigo Board for the remainder of the term of the class of
directors to which he or she will be nominated and for one additional full term
of such class, subject to Perrigo's Nominating & Governance Guidelines. Each
independent director nominated pursuant to the Nominating Agreement 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 of the Perrigo Board and one independent
director nominated pursuant to the Nominating Agreement will be invited to serve
on the Compensation Committee of the Perrigo Board, in each case subject to
respective qualifications and Perrigo's Nominating & Governance Guidelines.
Mr. Arkin's right under the Nominating Agreement to designate the
independent directors (and the right of the independent directors to serve on
the Perrigo 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 Perrigo Board will
terminate when he ceases to own at least 5,000,000 shares of Perrigo common
stock.
13
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 2, 2005. 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.
---------------------------------------------------------------------------------------------------------
SHARES OF OPTIONS
COMMON STOCK EXERCISABLE PERCENT
BENEFICIALLY OWNED WITHIN 60 DAYS TOTAL OF CLASS
---------------------------------------------------------------------------------------------------------
DIRECTORS AND NOMINEES
Moshe Arkin(1) 10,022,092 -- 10,022,092 10.7%
Laurie Brlas 5,344 5,000 10,344 *
Gary M. Cohen 5,773 5,000 10,773 *
Peter R. Formanek(2) 203,855 24,281 228,136 *
Larry D. Fredricks 16,279 32,281 48,560 *
David T. Gibbons(3) 212,325 684,234 896,559 *
Judith A. Hemberger 5,773 5,000 10,773 *
Michael J. Jandernoa(4) 5,766,169 18,281 5,784,450 6.2%
Gary K. Kunkle, Jr. 6,022 5,000 11,022 *
Herman Morris, Jr.(5) 16,679 23,281 39,960 *
NAMED EXECUTIVE OFFICERS OTHER THAN
DIRECTORS
John T. Hendrickson(6) 56,664 142,506 199,170 *
Refael Lebel 15,915 -- 15,915 *
Douglas R. Schrank 52,917 125,771 178,688 *
Mark P. Olesnavage(7) 437,014 334,308 771,322 *
F. Folsom Bell(8) 21,111 116,400 137,511 *
DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP (13 PERSONS)(9) 16,385,807 1,070,635 17,456,442 18.5%
* 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.
(2) Shares owned include 192,576 shares owned by Mr. Formanek as Trustee for the
Formanek Investment Trust.
(3) Mr. Gibbons is also a named executive officer.
14
(4) Shares owned consist of 5,205,846 shares owned by the Michael J. Jandernoa
Trust, of which Mr. Jandernoa is trustee; 81,942 shares owned by the Michael
J. Jandernoa Grantor Trust Two, of which Mr. Jandernoa is trustee and under
which he has a reversionary interest; 81,942 shares owned by the Susan M.
Jandernoa Grantor Trust Two, of which Mrs. Jandernoa is trustee and under
which she has a reversionary interest; and 394,248 shares owned by the Susan
M. Jandernoa Trust, of which Mrs. Jandernoa is trustee. Mr. Jandernoa's
address is c/o Perrigo Company, 333 Bridge Street, NW, Suite 800, Grand
Rapids, MI 49504.
(5) Shares owned include 3,000 shares owned as custodian for Mr. Morris' minor
children.
(6) Shares owned include 266 shares owned by the Mary Hendrickson Trust, of
which Bank One is trustee.
(7) Shares owned include 56,472 shares owned by trusts for the benefit of Mr.
Olesnavage's children, of which Mr. Olesnavage is trustee. Mr. Olesnavage
ceased to be an executive officer in June 2005.
(8) Mr. Bell ceased to be an executive officer in June 2005.
(9) See footnotes 1 through 8.
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 93,500,156 shares
of Perrigo common stock outstanding as of September 2, 2005.
------------------------------------------------------------------------------------------------------
NAME AND ADDRESS SHARES OF COMMON STOCK PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------------------------------------------------------------------------------------------
Royce & Associates, LLC(1) 9,133,600 9.8%
1414 Avenue of the Americas
New York, NY 10019
Wellington Management Company, LLP(2) 8,094,295 8.7%
75 State Street
Boston, MA 02109
Mac-Per-Wolf Company(3) 7,156,780 7.7%
310 S. Michigan Ave.
Chicago, IL 60604
Barclays Global Investors, NA(4) 5,314,312 5.7%
45 Fremont Street
San Francisco, CA 94105
(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 filed with the Securities and Exchange Commission on February 10, 2005.
(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 2,476,005 shares and shared investment power as to all of
the shares. This information is based on a Schedule 13G filed with the
Securities and Exchange Commission on February 14, 2005. 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 2, 2005), as reported in a
Schedule 13G filed
15
with the Securities and Exchange Commission on February 10, 2005, and has
sole voting and shared investment power as to these shares.
(3) This information is based on a Schedule 13G filed with the Securities and
Exchange Commission on January 10, 2005.
(4) Barclays Global Investors, NA has sole voting and investment power as to
2,948,066 of the shares and sole dispositive power as to 3,353,375 of the
shares. Barclays Global Fund Advisors has sole voting and investment power
as to 1,875,424 of the shares and sole dispositive power as to 1,877,010 of
the shares. Palomino Limited has sole voting and investment power as to
83,927 of the shares and sole dispositive power as to 83,927 of the shares.
This information is based on a Schedule 13G filed with the Securities and
Exchange Commission on February 14, 2005.
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 Securities
and Exchange Commission. 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 2005.
16
EXECUTIVE COMPENSATION
This table summarizes the compensation of David T. Gibbons, our Chairman of
the Board, President and Chief Executive Officer, and the other most highly
compensated executive officers of Perrigo during fiscal year 2005. These
individuals are sometimes referred to as the named executive officers.
SUMMARY COMPENSATION
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
MANAGEMENT RESTRICTED SECURITIES
NAME AND INCENTIVE OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) AWARDS OPTIONS COMPENSATION
David T. Gibbons(3) 2005 $629,776 -- -- -- 100,000 $13,389
Chairman of the Board, 2004 $567,000 $1,073,520 -- -- 125,000 $16,331
President and Chief 2003 $540,000 $ 847,800 -- -- 125,000 $22,860
Executive Officer
Moshe Arkin(4) 2005 $127,432 -- $38,802 -- -- --
Vice Chairman--Global
Generics & API
John T. Hendrickson(5) 2005 $317,553 -- -- -- 42,222 $14,009
Executive Vice President, 2004 $301,744 $ 376,806 -- $226,620 48,375 $15,603
General Manager-- 2003 $282,188 $ 312,457 -- -- 45,000 $13,691
Perrigo Consumer
Healthcare
Refael Lebel(6) 2005 $103,539 $ 58,000 $39,854 -- -- --
Executive Vice President,
General Manager--Perrigo
Israel
Douglas R. Schrank(7) 2005 $335,152 -- -- -- 40,000 $14,040
Executive Vice President, 2004 $301,757 $ 376,806 -- $226,620 46,034 $16,036
Chief Financial Officer 2003 $287,388 $ 312,457 -- -- 45,000 $14,254
Mark P. Olesnavage(8) 2005 $325,706 -- -- -- 35,556 $14,048
Executive Vice President, 2004 $319,319 $ 376,806 -- -- 43,693 $15,957
General Manager-- 2003 $314,600 $ 312,457 -- -- 35,000 $13,626
Perrigo Pharmaceuticals
F. Folsom Bell(9) 2005 $262,230 -- -- -- 32,000 $15,768
Executive Vice President, 2004 $253,344 $ 239,509 -- -- 40,000 $17,240
Business Development 2003 $247,200 $ 198,607 -- -- 40,000 $15,180
17
(1) The following amounts were deferred from salary for fiscal year 2005: Mr.
Hendrickson $18,000. The following amounts were deferred from salary for
fiscal year 2004: Mr. Gibbons $48,000; and Mr. Hendrickson $12,000. The
following amounts were deferred from the Management Incentive Bonus for
fiscal year 2004: Mr. Hendrickson $16,000. The following amounts were
deferred from salary for fiscal year 2003: Mr. Gibbons $124,000; and Mr.
Hendrickson $12,000. The following amounts were deferred from the Management
Incentive Bonus for fiscal year 2003: Mr. Gibbons $84,780; and Mr.
Hendrickson $28,000.
(2) Other Annual Compensation for Mr. Arkin in 2005 consists of $19,900 in
premiums for supplemental insurance as required by Mr. Arkin's employment
agreement, $6,750 in contributions to an education fund and $12,152 in car
allowance. Other Annual Compensation for Mr. Lebel in 2005 consists of
$16,408 in premiums for supplemental insurance as required by Mr. Lebel's
employment agreement, $7,170 in contributions to an education fund and
$16,276 in car allowance. None of the other named executive officers
received perquisites in fiscal years 2005, 2004 or 2003 with a value in
excess of the lesser of either $50,000 or 10% of the total of his annual
salary and bonus reported above for each year.
(3) All Other Compensation in fiscal year 2005 consists of a $6,300 matching
contribution under our 401(k) Plan and a $7,089 contribution under our
Profit Sharing Plan.
(4) Mr. Arkin became an executive of Perrigo in March 2005.
(5) All Other Compensation in fiscal year 2005 consists of a $6,560 matching
contribution under our 401(k) Plan; a $7,089 contribution under our Profit
Sharing Plan; and $360 representing the taxable benefit for certain premium
payments made on Mr. Hendrickson's behalf by us for Group Term Life
Insurance. At the end of fiscal year 2005, Mr. Hendrickson held a total of
12,000 shares of restricted stock with an aggregate value of $170,280. These
restricted shares were issued pursuant to our Long-Term Incentive Plan and
vest on July 1, 2007. Mr. Hendrickson receives dividends on his restricted
stock to the extent we pay dividends on our common stock.
(6) Mr. Lebel became an executive of Perrigo in March 2005.
(7) All Other Compensation in fiscal year 2005 consists of a $6,951 matching
contribution under our 401(k) Plan and a $7,089 contribution under our
Profit Sharing Plan. At the end of fiscal year 2005, Mr. Schrank held a
total of 12,000 shares of restricted stock with an aggregate value of
$170,280. These restricted shares were issued pursuant to our Long-Term
Incentive Plan and vest on July 1, 2007. Mr. Schrank receives dividends on
his restricted stock to the extent we pay dividends on our common stock.
(8) All Other Compensation in fiscal year 2005 consists of a $6,131 matching
contribution under our 401(k) Plan; a $7,089 contribution under our Profit
Sharing Plan; and $828 representing the taxable benefit for certain premium
payments made on Mr. Olesnavage's behalf by us for Group Term Life
Insurance. Mr. Olesnavage ceased to be an executive officer in June 2005.
(9) All Other Compensation in fiscal year 2005 consists of a $6,303 matching
contribution under our 401(k) Plan; a $7,089 contribution under our Profit
Sharing Plan; and $2,376 representing the taxable benefit for certain
premium payments made on Mr. Bell's behalf by us for Group Term Life
Insurance. Mr. Bell ceased to be an executive officer in June 2005.
18
OPTION GRANTS IN FISCAL YEAR 2005
This table gives information relating to option grants to the named
executive officers during fiscal year 2005. All of the options were granted
under our Employee Stock Option Plan. Since our stockholders approved our 2003
Long-Term Incentive Plan at the Annual Meeting held on October 28, 2003, no
further grants have been, or will be, made under the Employee Stock Option Plan.
The potential realizable value is calculated based on the term of the option at
its time of grant, 10 years. The calculation assumes that the fair market value
on the date of grant appreciates at the indicated rate compounded annually for
the entire term of the option and that the option is exercised at the exercise
price and sold on the last day of its term at the appreciated price. Stock price
appreciation of 5% and 10% is assumed under the rules of the Securities and
Exchange Commission. We cannot assure you that the actual stock price will
appreciate over the 10-year option term at the assumed levels or any other
defined level.
INDIVIDUAL GRANTS
PERCENT OF
TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS VALUE AT ASSUMED
SECURITIES GRANTED TO ANNUAL RATES OF STOCK
UNDERLYING EMPLOYEES EXERCISE PRICE APPRECIATION FOR
OPTIONS IN FISCAL PRICE PER EXPIRATION OPTION TERM
NAME GRANTED(1) YEAR SHARE DATE 5% 10%
David T. Gibbons 100,000 9.6% $18.18 Aug. 16, 2014 $1,143,330 $2,897,423
Moshe Arkin -- -- -- -- -- --
John T. Hendrickson 42,222 4.0% $18.18 Aug. 16, 2014 $ 482,736 $1,223,350
Refael Lebel -- -- -- -- -- --
Douglas R. Schrank 40,000 3.8% $18.18 Aug. 16, 2014 $ 457,332 $1,158,969
Mark P. Olesnavage 35,556 3.4% $18.18 Aug. 16, 2014 $ 406,522 $1,030,208
F. Folsom Bell 32,000 3.1% $18.18 Aug. 16, 2014 $ 365,865 $ 927,175
(1) These options vest in five equal annual installments, beginning on the first
anniversary date of the grant. The date of the grant was August 16, 2004.
19
OPTION EXERCISES IN FISCAL YEAR 2005 AND
FISCAL YEAR-END 2005 OPTION VALUES
This table provides information regarding the exercise of options during
fiscal year 2005 and options outstanding at the end of fiscal year 2005 for the
named executive officers. The "value realized" is calculated using the
difference between the option exercise price and the price of Perrigo common
stock on the date of exercise multiplied by the number of shares underlying the
option. The "value of unexercised in-the-money options at fiscal year end" is
calculated using the difference between the option exercise price and $14.19
(the closing price of Perrigo stock on June 24, 2005, the last trading day of
fiscal year 2005) multiplied by the number of shares underlying the option. An
option is in-the-money if the market value of Perrigo common stock is greater
than the option's exercise price.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE OPTIONS AT FISCAL YEAR END FISCAL YEAR END
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
David T. Gibbons 274,768 $3,310,976 620,234 299,998 $4,647,984 $414,866
Moshe Arkin -- -- -- -- -- --
John T. Hendrickson 36,243 $ 266,376 102,052 131,254 $ 296,799 $149,460
Refael Lebel -- -- -- -- -- --
Douglas R. Schrank 39,480 $ 370,598 89,564 135,492 $ 357,270 $197,061
Mark P. Olesnavage 9,000 $ 39,420 311,457 116,510 $1,496,394 $132,671
F. Folsom Bell 21,000 $ 194,174 69,000 123,000 $ 173,442 $215,202
EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
We entered into an Amendment to Employment Agreement with our Chief
Executive Officer, David T. Gibbons, on June 30, 2005 that amended Mr. Gibbons'
original employment agreement. The term of Mr. Gibbons' amended agreement now
expires on December 31, 2006 and renews for consecutive one-year terms unless
either party gives 90 days' notice of non-renewal prior to the expiration of any
term. Under the amended agreement, Mr. Gibbons' base salary is reviewed at least
annually by the Board to determine if an increase is appropriate. Mr. Gibbons'
annual base salary was $589,700 in fiscal year 2005 through April 1, 2005, when
the Board increased his annual base salary to $750,000.
Mr. Gibbons is eligible to participate in the Management Incentive Bonus
Plan, under which he has a target bonus opportunity of at least 100% of his
annual salary. Pursuant to the amended agreement, Mr. Gibbons will be granted
67,159 shares of restricted stock in fiscal year 2006 that will be forfeited if
his employment with Perrigo terminates before December 31, 2006. Mr. Gibbons
will also be granted, pursuant to Perrigo's 2003 Long-Term Incentive Plan,
options with an exercise price per share equal to the fair market value of a
share of Perrigo common stock on the date of grant to purchase a number of
shares of Perrigo common stock that will cause the options to
20
have a Black-Scholes value on the date of grant of $1,645,500 in fiscal year
2006 and $1,500,000 in fiscal year 2007 (the "Additional Options"). These
options will become exercisable on January 1, 2007. Under the amended agreement,
all Perrigo stock options held by Mr. Gibbons, other than the Additional
Options, became fully vested on June 30, 2005.
Mr. Gibbons also was granted an option to purchase 750,000 shares of
Perrigo common stock under our Employee Stock Option Plan at the time of his
employment. Under the terms of the employment agreement, Mr. Gibbons received
options to purchase 125,000 shares of Perrigo common stock for each of fiscal
years 2002 and 2003. The options for fiscal year 2002 were actually issued to
Mr. Gibbons in May 2001 prior to the end of fiscal year 2001. Mr. Gibbons also
received 95,715 shares of restricted Perrigo common stock and a cash transition
bonus of $160,000. On June 30, 2003, the restrictions lapsed on all 95,715
shares of Mr. Gibbons' restricted stock.
If Mr. Gibbons dies or becomes disabled during his employment, he will
receive compensation and benefits earned to date, including payment for unused
vacation days and a pro rata management incentive bonus for the portion of the
year he was employed, and his options and restricted stock will vest in
accordance with their terms. If Mr. Gibbons resigns for "good reason" or if we
terminate his employment "without cause", each as defined in the employment
agreement, Mr. Gibbons, in addition to receiving earned compensation and
benefits and vesting of options and restricted stock, will receive a cash
payment equal to 12 months' salary. If we terminate Mr. Gibbons' employment for
cause, as defined in the employment agreement, he will receive compensation and
benefits earned to date, but he will forfeit any options (whether vested or
unvested), restricted stock, and unvested benefits. The employment agreement
also provides for the payment of earned compensation and benefits as well as the
automatic vesting of options and lapse of restrictions on restricted stock
following a change in control of Perrigo.
Mr. Gibbons has also entered into a Noncompetition and Nondisclosure
agreement with Perrigo. The agreement provides that Mr. Gibbons will not compete
with us in the store brand business 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.
EMPLOYMENT AGREEMENT WITH VICE CHAIRMAN--GLOBAL GENERICS & API
On November 14, 2004, we entered into an Employment Agreement with our Vice
Chairman--Global Generics & API, Moshe Arkin. This agreement became effective
upon the completion of our merger with Agis Industries (1983) Ltd. 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. Under the agreement,
Mr. Arkin receives a base salary at an annual rate of $400,000, which,
commencing on or around October 2006, will be
21
reviewed for increase at least annually by the Board to determine if an increase
is appropriate.
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 will be granted an initial option to purchase 50,000 Perrigo shares in
fiscal year 2006 pursuant to Perrigo's 2003 Long-Term Incentive Plan. Mr. Arkin
also receives various perquisites as customary under Israeli law, such as
manager's insurance, disability insurance, education funds, recreation funds,
car allowance and other similar perquisites. 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.
Under his employment agreement, Mr. Arkin is also entitled to all accrued
payments due to him under his previous employment agreement with Agis.
In conjunction with his employment agreement, Mr. Arkin executed a
noncompetition and nondisclosure agreement that restricts his ability to compete
with Perrigo in the store brand and value brand business for the longer of the
term of his agreement and a period of one year following his termination.
EMPLOYMENT AGREEMENT WITH CHIEF FINANCIAL OFFICER
On July 21, 2005, we entered into an Employment Agreement with our Chief
Financial Offer, Douglas R. Schrank. The term of this agreement runs through
June 30, 2006, subject to automatic one-year renewals unless either party
provides written notice of non-renewal to the other party at least 90 days
before the last day of any term. Under the agreement, Mr. Schrank's base salary
is reviewed at least annually by the Board to determine if an increase is
appropriate. Mr. Schrank's annual base salary was $317,608 in fiscal year 2005
through April 1, 2005, when the Board increased his annual base salary to
$400,000 per year.
Mr. Schrank is eligible to participate in the Management Incentive Bonus
Plan, under which he has a target bonus opportunity of not less than $300,000
for fiscal year 2006. Mr. Schrank is eligible to participate in Perrigo's equity
compensation plans and will be entitled to receive in fiscal year 2006 a grant
pursuant to Perrigo's 2003
22
Long-Term Incentive Plan of an option, which will have an exercise price per
share equal to the fair market value of a share of Perrigo common stock on the
date of grant, to purchase a number of shares of Perrigo common stock that will
cause the option to have a Black-Scholes value on the date of grant of $533,200.
In addition, Mr. Schrank will be awarded 20,148 shares of restricted stock that
will be forfeited if his employment with Perrigo terminates prior to June 30,
2006. If Mr. Schrank remains employed by Perrigo through June 30, 2006, all of
his unvested stock options and restricted stock will continue to vest as if he
had remained employed by Perrigo beyond the term of his agreement, and all
vested options may be exercised at any time prior to the end of their stated
life.
If Mr. Schrank dies or becomes disabled during his employment, all of Mr.
Schrank's unvested equity compensation will vest, and he will receive all
salary, bonuses and other compensation that he has earned at the time his
employment terminates, as well as any amounts under Perrigo's compensation plans
and programs that he has then earned or accrued or that, by the terms of such
plans or programs, become payable upon death or disability. If Mr. Schrank
resigns for "good reason" or if we terminate his employment "without cause",
each as defined in the employment agreement, and, in either case, he does not
compete with Perrigo for one year following termination and executes a written
waiver of claims against Perrigo, Mr. Schrank will, in addition to receiving
earned compensation and benefits and vesting of options and restricted stock,
receive a lump sum payment of the base salary and annual bonus that would have
been paid to him if he continued to be employed by Perrigo through June 30,
2006, and he and his dependents will be entitled to participate in Perrigo's
employee benefit plans for a period of 18 months following his termination date.
If we terminate Mr. Schrank's employment for cause, as defined in the employment
agreement, he will receive compensation and benefits earned to date, but he will
forfeit any unvested options, restricted stock, and unvested benefits. The
employment agreement also provides for the payment of earned compensation and
benefits, as well as the automatic vesting of options and lapse of restrictions
on restricted stock, following a change of control of Perrigo.
Mr. Schrank has also entered into a noncompetition and nondisclosure
agreement with Perrigo. The agreement provides that Mr. Schrank will not compete
with us during the term of his employment and for one year thereafter. In
addition, Mr. Schrank 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.
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
Industries (1983) Ltd. 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
23
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 annual rate of $325,000,
which, commencing on or around October 2006, will be reviewed for increase at
least annually by the Board to determine if an increase is appropriate.
Mr. Lebel is eligible to participate in the Management Incentive Bonus
Plan, under which he has a target bonus opportunity of not less than $200,000.
However, under the agreement, Mr. Lebel was entitled to a minimum bonus payment
of $58,000 for fiscal 2005. Mr. Lebel will be granted an initial option to
purchase 50,000 Perrigo shares in fiscal year 2006 pursuant to Perrigo's 2003
Long-Term Incentive Plan. Mr. Lebel also receives various perquisites as
customary under Israeli law, such as manager's insurance, disability insurance,
education funds, recreation funds, and other similar perquisites. 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-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.
Under his employment agreement, Mr. Lebel is also entitled to all accrued
payments due to him under his previous employment agreement with Agis.
In conjunction with his employment agreement, Mr. Lebel executed a
noncompetition and nondisclosure agreement that restricts his ability to compete
with Perrigo in the store brand and value brand business for the longer of the
term of his agreement and a period of one year following his termination.
SEPARATION AND GENERAL RELEASE AGREEMENTS
On June 29, 2005, Perrigo and Mark P. Olesnavage, Executive Vice President,
General Manager--Perrigo Pharmaceuticals, entered into a Separation and General
Release Agreement pursuant to which Mr. Olesnavage agreed to end employment with
Perrigo. The agreement provided that Mr. Olesnavage, upon the satisfaction of
certain conditions, will receive, among other things: (1) separation pay through
June 30, 2006, and (2) continued vesting of his employee stock options as if his
employment had not ended, through their stated life.
On July 5, 2005, Perrigo and F. Folsom Bell, Executive Vice President,
Business Development, entered into a Separation and General Release Agreement
pursuant to
24
which Mr. Bell agreed to end employment with Perrigo. This agreement provides
that Mr. Bell, upon the satisfaction of certain conditions, will receive, among
other things: (1) separation pay through June 30, 2006, and (2) continued
vesting of his employee stock options as if his employment had not ended,
through their stated life.
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 25, 2005. At the Annual Meeting held on October
28, 2003, shareholders approved our 2003 Long-Term Incentive Plan. Prior to the
approval of the Long-Term Incentive Plan, equity compensation grants were made
under our shareholder-approved Employee Stock Option Plan and Non-Qualified
Stock Option Plan for Directors, as well as under our Restricted Stock Plan for
Directors II and certain individual restricted stock arrangements that were not
approved by shareholders. No further grants will be made pursuant to the
Employee Stock Option Plan, Non-Qualified Stock Option Plan for Directors or
Restricted Stock Plan for Directors II.
--------------------------------------------------------------------------------------------------------------
(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
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, PLANS (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
--------------------------------------------------------------------------------------------------------------
EQUITY COMPENSATION
PLANS APPROVED BY
SHAREHOLDERS 6,428,000 $10.00 3,056,000
--------------------------------------------------------------------------------------------------------------
EQUITY COMPENSATION
PLANS NOT APPROVED
BY SHAREHOLDERS 0 -- 0
--------------------------------------------------------------------------------------------------------------
TOTAL 6,428,000 $10.00 3,056,000
--------------------------------------------------------------------------------------------------------------
INDIVIDUAL ARRANGEMENT
In July 2002, we granted John R. Nichols, a member of our law department,
4,000 shares of restricted common stock under an individual Restricted Stock
Agreement. Under the terms of the Restricted Stock Agreement, these shares
vested upon Mr. Nichols' retirement from Perrigo in fiscal 2005.
25
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
COMPENSATION POLICY
During fiscal year 2005, the Compensation Committee of the Board of
Directors was composed of three independent non-employee directors. The Board of
Directors has adopted a Compensation Committee Charter, which specifies the
composition and responsibilities of the Committee. The Board reviews the Charter
annually based on input from the Committee.
The Chief Executive Officer's salary and bonus and any stock-based
incentive awards granted to him under the 2003 Long-Term Incentive Plan are
approved by the independent directors after review and recommendation by the
Committee. The Committee reviews and approves the compensation arrangements for
all other executive officers with respect to their salaries, bonuses and
stock-based incentive awards under the 2003 Long-Term Incentive Plan.
The Committee strives to:
- motivate officers to create added value for Perrigo shareholders
through compensation incentives that are tied to Perrigo's operating
and stock market performance;
- reward officers for their individual performance as well as Perrigo's
performance;
- provide compensation and benefits at levels that enable Perrigo to
attract and retain high-quality executives; and
- align the interests of officers and directors with the interests of
Perrigo shareholders through stock ownership.
Perrigo's management compensation policy is intended to provide a
compensation package for executive officers that is generally competitive with
the compensation of executive officers of comparable manufacturing companies. In
establishing executive compensation, the Committee considers salary and bonus
information compiled by Mercer Human Resource Consulting. The Mercer
compensation data includes non-durable goods manufacturing companies, some of
which are reflected in the Nasdaq Pharmaceutical Index shown on the Performance
Graph included in this proxy statement. The Committee's objective is that the
total cash compensation for Perrigo's executive officers approximate the median
reflected in the Mercer data.
EXECUTIVE OFFICER COMPENSATION
Executive officer compensation includes cash-based and stock-based
components. Cash-based compensation consists of base salary and an annual bonus
if one is warranted under the criteria of the Management Incentive Bonus Plan.
In addition, Perrigo makes annual contributions under its Profit Sharing Plan
for employees with at least one year of service, including the executive
officers. Perrigo also makes matching contributions under
26
its 401(k) Plan to certain of its employees, including the executive officers.
The executive officers are also eligible to receive grants of stock-based
incentive awards under the 2003 Long-Term Incentive Plan.
Cash-Based Compensation
As discussed above, the Committee considers compensation data provided by
Mercer in determining executive officer base salary and bonus awards under the
Management Incentive Bonus Plan. In addition, the Committee evaluates the
following factors, which are ranked in order of importance:
- company-wide performance measured by attainment of specific strategic
objectives and quantitative measures;
- individual performance;
- compensation levels at comparable manufacturing companies; and
- historical cash and equity compensation levels.
The primary quantitative measure that the Committee considers is return on
assets, although earnings per share and revenue growth are also relevant.
Qualitative factors include the quality and progress of Perrigo's marketing and
manufacturing operations and the success of strategic actions, such as
acquisitions of lines of business or introduction of new products.
Stock-Based Compensation
Certain designated key management employees, including the Chief Executive
Officer and other executive officers are eligible to participate in the 2003
Long-Term Incentive Plan approved by the shareholders. Awards under this plan
may be in the form of stock options, stock appreciation rights or stock awards,
including restricted shares, performance shares, performance units and other
stock unit awards. The number of stock-based incentive awards granted to these
employees is based on an evaluation of the officer's performance and is subject
to the approval of the Committee. Options granted under the 2003 Long-Term
Incentive Plan must have an exercise price at least equal to the fair market
value of Perrigo common stock on the grant date as determined by the Committee.
The fair market value, as provided in the plan, is the average of the high and
low prices of our stock on the date of the grant. The Committee views the grant
of stock-based incentive awards pursuant to the shareholder-approved plan as an
effective incentive for executive officers to create value for shareholders
since the ultimate value of these awards is directly related to the increase in
the market price of Perrigo's common stock.
CHIEF EXECUTIVE OFFICER COMPENSATION
David T. Gibbons, our Chief Executive Officer, is compensated in accordance
with the terms of an Employment Agreement entered into at the time of his
employment in May 2000 and amended in June 2005. A more complete description of
his compensation arrangement can be found in this proxy statement under the
heading "Employment
27
Agreement with Chief Executive Officer". Mr. Gibbons' compensation is reviewed
and adjusted annually by the independent directors based upon the same criteria
used to evaluate and determine the appropriate compensation for other executive
officers. For fiscal year 2005, Mr. Gibbons was paid a base salary of $629,776
under the terms of his Employment Agreement, but no bonus was paid under the
terms of the Management Incentive Bonus Plan.
The Committee believes that the terms of Mr. Gibbons' employment are
similar to terms granted to chief executive officers of comparable companies and
are necessary to attract and retain a chief executive officer of his stature.
SUMMARY
The Committee carefully reviews executive compensation. After reviewing
Perrigo's compensation programs, the Committee has concluded that the amounts
paid to the executive officers, including stock-based incentive awards, in
fiscal year 2005 appropriately reflect individual performance, are linked to
Perrigo's financial, operational and market results, and are generally
competitive with amounts paid to executive officers of comparable companies.
DEDUCTIBILITY OF COMPENSATION
Internal Revenue Code Section 162(m) limits the deductibility by Perrigo of
compensation in excess of $1,000,000 paid to each of the Chief Executive Officer
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's policy is 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.
Judith A. Hemberger, Chair
Gary K. Kunkle, Jr.
Peter R. Formanek
28
COMPANY PERFORMANCE
This graph shows a five-year comparison of cumulative total return for
Perrigo with the cumulative total returns for the Nasdaq Composite Index and the
Nasdaq Pharmaceutical Index from July 1, 2000 through June 25, 2005. Data points
are, for Perrigo, the last day of each fiscal year and, for the indices, June 30
of each year. The last day of our fiscal year for the fiscal years 2000 through
2005 is noted in each of the columns below. The graph assumes an investment of
$100 at the beginning of the period and the reinvestment of any dividends.
[PERFORMANCE GRAPH]
-----------------------------------------------------------------------------------------------------------
7/1/2000 6/30/2001 6/29/2002 6/28/2003 6/26/2004 6/25/2005
-----------------------------------------------------------------------------------------------------------
Perrigo Company $100 $264 $206 $252 $303 $229
Nasdaq Stock Market (U.S.) $100 $ 56 $ 37 $ 32 $ 43 $ 44
Nasdaq Pharmaceutical $100 $ 87 $ 52 $ 73 $ 77 $ 77
29
AMENDMENT OF 2003 LONG-TERM INCENTIVE PLAN
The Board of Directors previously adopted the 2003 Long-Term Incentive
Plan, which was approved by our shareholders. The Board has approved an
amendment of the 2003 Plan to increase the number of shares reserved for
issuance under the Plan by 4,500,000 shares. The Board believes that the
increase will ensure that enough shares are available for future grants under
the 2003 Plan to attract new employees and to compensate current employees. The
Board recommends that you approve the amendment to the Plan.
The following summary of the 2003 Plan describes the material features of
the Plan; however, it is not complete and, therefore, you should not rely solely
on it for a detailed description of every aspect of the Plan. A copy of the
Plan, as originally adopted, was filed with the SEC as an appendix to the proxy
statement for our 2003 Annual Meeting.
THE LONG-TERM INCENTIVE PLAN GENERALLY
The Board originally adopted the Plan in August 2003, and our shareholders
approved it on October 28, 2003, which was the effective date of the 2003 Plan.
No awards may be granted under the 2003 Plan more than 10 years after the
effective date.
Under the Plan, the Compensation Committee may grant stock-based incentives
to employees, directors and other individuals providing material services to
Perrigo. Awards under the Plan may be in the form of incentive stock options,
nonstatutory stock options, stock appreciation rights or stock awards (including
restricted shares, performance shares, performance units and other stock unit
awards). We currently have approximately 5,800 employees and 8 non-employee
directors who are eligible for awards under the 2003 Plan, but not all eligible
employees receive awards under the 2003 Plan.
SHARES AVAILABLE FOR THE PLAN
The 2003 Plan was adopted as a replacement for our Employee Stock Option
Plan, Non-Qualified Stock Option Plan for Directors and Restricted Stock Plan
for Directors. No further awards were made under those plans after the effective
date of the 2003 Plan, and the remaining shares available for issuance under
those plans became available for issuance under the 2003 Plan.
The number of shares of common stock initially reserved for issuance under
the Plan was 2,500,000, plus an additional 1,719,000 shares of common stock that
remained reserved for issuance under the Employee Stock Option Plan,
Non-Qualified Stock Option Plan for Directors and Restricted Stock Plan for
Directors on the effective date of the 2003 Plan. If approved by our
shareholders, an additional 4,500,000 shares will be reserved for issuance under
the 2003 Plan.
As of September 2, 2005, there were 2,879,000 shares remaining available
for issuance. If any award under the 2003 Plan expires or is terminated on or
after the effective date of the 2003 Plan without the issuance of the shares,
then the shares subject to the award will be added to the shares available for
issuance under the 2003
30
Plan. As of September 2, 2005, there were 1,551,581 shares underlying
outstanding awards under the 2003 Plan.
In addition, awards that are outstanding under the Employee Stock Option
Plan, the Non-Qualified Stock Option Plan for Directors and the Restricted Stock
Plan for Directors that are cancelled, forfeited or otherwise settled without
the delivery of shares on or after the effective date of the 2003 Plan are
available for awards under the 2003 Plan.
The number of shares that may be issued with respect to awards under the
Plan to any one participant in a calendar year may not exceed 400,000 shares.
The number of shares that can be issued and the number of shares subject to
outstanding awards may be adjusted in the event of a stock split, stock
dividend, recapitalization or other similar event affecting the number of shares
of Perrigo's outstanding common stock. In that event, the Compensation Committee
also may make appropriate adjustments to any stock appreciation rights,
restricted stock or performance units outstanding under the Plan.
PLAN ADMINISTRATION
The Compensation Committee administers the Plan. Subject to the specific
provisions of the Plan, the Committee determines award eligibility, timing and
the type, amount and terms of the awards. The Committee also interprets the
Plan, establishes rules and regulations under the Plan and makes all other
determinations necessary or advisable for the Plan's administration.
STOCK OPTIONS
Options under the Plan may be either "incentive stock options," as defined
under the tax laws, or nonstatutory stock options; however, only employees may
be granted incentive stock options. The per share exercise price may not be less
than the fair market value of Perrigo common stock on the date the option is
granted. The Compensation Committee may specify any period of time following the
date of grant during which options are exercisable, but the period cannot be
longer than 10 years for incentive stock options. Incentive stock options are
subject to additional limitations relating to such things as employment status,
minimum exercise price, length of exercise period, maximum value of the stock
underlying the options and a required holding period for stock received upon
exercise of the option.
Upon exercise, the option holder may pay the exercise price in several
ways. He or she may pay in cash, in previously acquired shares or, if permitted
by the Committee, other consideration having a fair market value equal to the
exercise price, or through a combination of the foregoing.
Except for adjustments to effect stock splits, stock dividends,
recapitalizations or similar events, in no event shall the purchase price of an
option be decreased after the grant date or surrendered in consideration of a
new option grant with a lower exercise price without shareholder approval.
31
STOCK APPRECIATION RIGHTS
A stock appreciation right allows its holder to receive payment from us
equal to the amount by which the fair market value of a share of Perrigo common
stock exceeds the grant price of the right on the exercise date. The grant price
may not be less than the fair market value of Perrigo common stock on the grant
date of the right.
Under the Plan, the Compensation Committee can grant the rights in
conjunction with the awarding of stock options or on a stand-alone basis. If the
Committee grants a right with an option award, then the holder can exercise the
rights at any time during the life of the related option, but the exercise will
proportionately reduce the number of his or her related stock options. The
holder can exercise stand-alone stock appreciation rights during the period
determined by the Compensation Committee. Upon the exercise of a stock
appreciation right, the holder receives cash, shares of Perrigo common stock or
other property, or a combination thereof, in the discretion of the Committee.
RESTRICTED SHARES
Restricted shares refers to shares of Perrigo common stock that are subject
to a risk of forfeiture or other restrictions on ownership for a certain period
of time. During the restricted period, the holder of restricted shares may not
sell or otherwise transfer the shares, but he or she may vote the shares and may
be entitled to any dividend or other distributions if determined by the
Committee. The restricted shares become freely transferable when the restriction
period expires.
PERFORMANCE SHARES AND PERFORMANCE UNITS
A performance share is a right to receive shares of Perrigo common stock or
equivalent value in the future, contingent on the achievement of performance or
other objectives during a specified period. A performance unit represents an
award valued by reference to property other than shares of Perrigo common stock,
as designated by the Compensation Committee, contingent on the achievement of
performance or other objectives during a specified period.
The Compensation Committee sets the terms and conditions of each award,
including the performance goals that its holder must attain and the various
percentages of performance unit value to be paid out upon full or partial
attainment of those goals. The Committee also determines whether the goals have
been satisfied and the form of payment, which may be in cash, Perrigo common
stock, other property or a combination thereof. Payment may be made in a lump
sum or in installments, as determined by the Committee.
OTHER STOCK UNIT AWARDS
An "other stock unit award" refers to any award, other than an option,
stock appreciation right, restricted stock, performance share or performance
unit, that is valued in whole or part by reference to shares of Perrigo common
stock. The Compensation Committee determines the terms and conditions of other
stock unit awards, including whether such awards are payable in cash, shares of
Perrigo common stock or other
32
property. If the other stock unit award is a right to purchase shares of Perrigo
common stock, the purchase price of such shares cannot be less than the fair
market value of the shares on the date the Committee awards the purchase right.
TERMINATION OF EMPLOYMENT
The Plan provides that upon a participant's death, disability or
retirement, all outstanding awards immediately vest, and stock options and stock
appreciation rights may be exercised by the participant, or his or her estate,
beneficiary or conservator in the case of death or disability, at any time prior
to their stated expiration dates. If the participant's employment is terminated
involuntarily for economic reasons, for example, restructurings, dispositions or
layoffs, as determined in the discretion of the Compensation Committee, he or
she may exercise any vested options or stock appreciation rights until the
earlier of 24 months after the termination date or the expiration date of the
options or stock appreciation rights. Unvested options, stock appreciation
rights and restricted shares that are scheduled to vest during the 24 month
period following the termination date will continue to vest as if the
participant had continued to perform services during the 24 month period. Those
not scheduled to vest during the 24 month period are forfeited on the
termination date. If a participant's termination date is for cause, all
outstanding awards are forfeited. In all other terminations, unvested awards are
forfeited on the termination date and the participant may exercise his or her
vested options and stock appreciation rights during the three-month period after
the termination, but not later than the expiration date of the option or stock
appreciation right. In certain circumstances, the Plan provides for extended
exercisability when a participant dies following termination.
CHANGE IN CONTROL
Regardless of the vesting requirements that otherwise apply to an award
under the Plan, all outstanding awards vest upon a change in control of Perrigo.
Generally, a change in control is defined in the Plan to mean (1) the ownership
of 50% or more of Perrigo common stock by a person who was not a shareholder on
the date the Plan was initially adopted and (2) a change in Board composition so
that a majority of the Board is comprised of individuals who are neither
incumbent members nor their nominees.
PERFORMANCE-BASED AWARDS
The Compensation Committee may designate any award of restricted shares,
performance shares, performance units or other stock unit awards as
"performance-based compensation" for purposes of Section 162(m) of the Internal
Revenue Code. These awards will be conditioned on the achievement of one or more
performance measures based on one or any combination of the following, as
selected by the Committee: specified levels of earnings per share from
continuing operations, funds from operations, operating income, revenues, gross
margin, return on operating assets, return on equity, economic value added,
share price appreciation, total shareholder return (measured in terms of share
price appreciation and dividend growth), or cost control of Perrigo or of a
division or affiliate of Perrigo that employs the participant.
33
TRANSFERABILITY
The recipient of an award under the Plan generally may not pledge, assign,
sell or otherwise transfer his or her stock options, stock appreciation rights,
restricted shares or performance units other than by will or by the laws of
descent and distribution. The Compensation Committee, however, may establish
rules and procedures to allow participants in the Plan to transfer nonstatutory
stock options to immediate family members or to certain trusts or partnerships.
OUTSTANDING OPTIONS
We cannot determine the number of shares that may be acquired under stock
options that will be awarded under the Plan. On September 2, 2005, the last
reported sale price of Perrigo common stock on the Nasdaq National Market was
$14.75 per share. As of September 2, 2005, options had been granted under the
2003 Plan to purchase the number of shares shown below:
--------------------------------------------------------------------------------
NAME NUMBER OF SHARES
--------------------------------------------------------------------------------
David T. Gibbons 100,000
Chairman of the Board, President and Chief Executive
Officer
Moshe Arkin --
Vice Chairman--Global Generics & API
John T. Hendrickson 42,222
Executive Vice President, General Manager--Perrigo
Consumer Healthcare
Refael Lebel --
Executive Vice President, General Manager--Perrigo Israel
Douglas R. Schrank 40,000
Executive Vice President, Chief Financial Officer
Mark P. Olesnavage 35,556
Executive Vice President, General Manager--Perrigo
Pharmaceuticals
F. Folsom Bell 32,000
Executive Vice President, Business Development
All current executive officers 182,222
All current directors who are not executive officers --
All employees (other than current executive officers) 849,336
TAX CONSEQUENCES
The holder of an award granted under the Plan may be affected by certain
federal income tax consequences. Special rules may apply to individuals who may
be subject to Section 16(b) of the Securities Exchange Act of 1934. The
following discussion of tax consequences is based on current federal tax laws
and regulations and you should not consider it to be a complete description of
the federal income tax consequences that apply to participants in the Plan.
Accordingly, information relating to tax consequences is qualified by reference
to current tax laws.
34
Incentive Stock Options. There are no federal income tax consequences
associated with the grant or exercise of an incentive stock option, so long as
the holder of the option was our employee at all times during the period
beginning on the grant date and ending on the date three months before the
exercise date. The "spread" between the exercise price and the fair market value
of Perrigo common stock on the exercise date, however, is an adjustment for
purposes of the alternative minimum tax. A holder of incentive stock options
defers income tax on the stock's appreciation until he or she sells the shares.
Upon the sale of the shares, the holder realizes a long-term capital gain
(or loss) if he or she sells the shares at least two years after the grant date
and has held them for at least one year. The capital gain (or loss) equals the
difference between the sales price and the exercise price of the shares. If the
holder disposes of the shares before the expiration of these periods, then he or
she recognizes ordinary income at the time of sale (or other disqualifying
disposition) equal to the lesser of (1) the gain he or she realized on the sale
and (2) the difference between the exercise price and the fair market value of
the shares on the exercise date. This ordinary income is treated as compensation
for tax purposes. The holder will treat any additional gain as short-term or
long-term capital gain, depending on whether he or she has held the shares for
at least one year from the exercise date. If the holder does not satisfy the
employment requirement described above, then he or she recognizes ordinary
income (treated as compensation) at the time he or she exercises the option
under the tax rules applicable to the exercise of a nonstatutory stock option.
We are entitled to an income tax deduction to the extent that an option holder
realizes ordinary income.
Nonstatutory Stock Options. There are no federal income tax consequences
to us or to the recipient of a nonstatutory stock option upon grant. Upon
exercise, the option holder recognizes ordinary income equal to the spread
between the exercise price and the fair market value of Perrigo stock on the
exercise date. This ordinary income is treated as compensation for tax purposes.
The basis in shares acquired by an option holder on exercise equals the fair
market value of the shares at that time. The capital gain holding period begins
on the exercise date. We receive an income tax deduction upon the exercise of a
nonstatutory stock option in an amount equal to the spread.
Stock Appreciation Rights. There are no tax consequences associated with
the grant of stock appreciation rights that may be settled solely in shares of
our common stock. Upon exercise, the holder of such a stock appreciation right
recognizes ordinary income in the amount of the appreciation paid to him or her.
This ordinary income is treated as compensation for tax purposes. We receive a
corresponding deduction in the same amount that the holder recognizes as income.
Due to recent legislation, the taxation of stock appreciation rights that
may be settled in cash is unclear. We do not anticipate awarding any stock
appreciation rights that may be settled in cash until the Internal Revenue
Service issues additional guidance on the tax treatment of these awards.
Restricted Shares. The holder of restricted shares does not recognize any
taxable income on the shares while they are restricted. When the restrictions
lapse, the holder's
35
taxable income (treated as compensation) equals the fair market value of the
shares. The holder may, however, avoid the delay in computing the amount of
taxable gain by filing with the Internal Revenue Service, within 30 days after
receiving the shares, an election to determine the amount of taxable income at
the time of receipt of the restricted shares. Generally, at the time the holder
recognizes taxable income with respect to restricted shares, we will receive a
deduction in the same amount.
Performance Shares, Performance Units, and Other Stock Unit Awards. There
are no tax consequences associated with the grant of performance shares,
performance units, or other stock unit awards. The holder recognizes ordinary
income (treated as compensation) upon a payment on the performance shares,
performance units or other stock unit awards in an amount equal to the payment
received, and we receive a corresponding tax deduction.
Excise Taxes. Under certain circumstances, the accelerated vesting of an
award in connection with a change in control of Perrigo might be deemed an
"excess parachute payment" for purposes of the golden parachute tax provisions
of Section 280G of the Internal Revenue Code. To the extent the accelerated
vesting is considered an excess parachute payment, a participant in the Plan may
be subject to a 20% excise tax and we may be unable to receive a tax deduction.
PLAN AMENDMENT AND TERMINATION
Generally, the Board of Directors may amend or terminate the Plan at any
time without shareholder approval. Without shareholder approval, however, the
Board may not: (1) increase the number of shares of Perrigo stock available for
issuance under the Plan; (2) change the employees or class of employees eligible
to participate in the Plan; (3) change the minimum purchase price for any option
grant below fair market value; or (4) materially change the terms of the Plan.
In addition, if any action that the Board proposes to take will have a
materially adverse effect on the rights of any participant or beneficiary under
an outstanding award, then the affected participants or beneficiaries must
consent to the action.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE AMENDMENT TO THE 2003 LONG-TERM INCENTIVE PLAN.
36
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 auditor;
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 25, 2005 financial statements, the Audit
Committee: (1) reviewed and discussed the audited financial statements with
management; (2) discussed with the auditors the matters required to be discussed
by Statement on Auditing Standards (SAS) No. 61, as amended, and (3) received
and discussed with the auditors the written disclosures and letter from the
auditors required by Independence Standards No. 1 and has discussed with the
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 for the fiscal year ended June 25, 2005
filed with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
Laurie Brlas, Chair
Larry D. Fredricks
Herman Morris, Jr.
37
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 2006. 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 2005 and 2004, we retained BDO Seidman, LLP to perform
auditing and other services for us and paid them the following amounts for these
services:
Fiscal Year 2005 Fiscal Year 2004
------------------ ------------------
Audit Fees $1,497,000 Audit Fees $536,000
Audit-Related Fees 160,000 Audit-Related Fees 180,000
Tax Fees 52,000 Tax Fees 38,000
---------- --------
Total $1,709,000 Total $754,000
Audit fees in 2005 were substantially higher than in 2004 due to the
acquisition of Agis Industries (1983) Ltd. and the first time audit of Perrigo's
internal control over financial reporting. Audit-related fees in 2005 and 2004
were for benefit plan audits and due diligence services, and in 2004 were also
for internal control review services. 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 2005 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 25,
2005, 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 AVENUE, ALLEGAN,
MICHIGAN 49010.
38
APPENDIX A
PERRIGO COMPANY
AUDIT COMMITTEE CHARTER
PURPOSE
The primary purpose of the Audit Committee is to assist the Board of
Directors of Perrigo Company (the "Company") in fulfilling its responsibility of
monitoring:
- the Company's accounting and financial reporting principles and
policies;
- the Company's financial statements and the independent audit thereof;
- the qualifications, independence and performance of the Company's
independent auditor;
- the qualifications and performance of the Company's internal audit
function, including where that service is outsourced; and
- the Company's internal control over financial reporting.
COMPOSITION OF THE AUDIT COMMITTEE
The Audit Committee shall be comprised of at least three directors, each of
whom shall meet the independence and experience requirements of the National
Association of Securities Dealers, Inc., Section 10A(m)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the
Securities and Exchange Commission ("SEC").
Accordingly, all of the members of the Audit Committee shall be directors
who are able to read and understand fundamental financial statements. In
addition, at least one member of the Audit Committee shall have past employment
experience in finance or accounting, requisite professional certification in
accounting, or any other comparable experience or background that results in
financial sophistication. The Board shall determine whether at least one member
of the Audit Committee qualifies as an "audit committee financial expert" as
defined by the SEC.
Audit Committee members shall not simultaneously serve on the audit
committees of more than two other public companies.
MEETINGS OF THE AUDIT COMMITTEE
The Audit Committee shall:
1. meet with management four times annually (more frequently if
circumstances dictate) to discuss the annual audited financial
statements and quarterly financial results;
A-1
2. meet separately with management, the internal auditors and the
independent auditor to discuss any matters that the Audit Committee or
any of these persons believe should be discussed privately (at least
annually);
3. be permitted to request any officer or employee of the Company, the
Company's outside counsel or independent auditor to attend a meeting of
the Audit Committee or to meet with any members of, or consultants to,
the Audit Committee; and
4. be permitted to conduct its meetings by means of a conference call or
similar communications equipment in which all persons participating in
the meeting can hear each other.
AUDIT COMMITTEE AUTHORITY AND RESPONSIBILITIES
Generally
1. The Audit Committee shall have the sole authority to appoint or replace
the Company's independent auditor. The Audit Committee shall be directly
responsible for the compensation and oversight of the work of the
independent auditor for the purpose of preparing or issuing an audit
report or related work, including the resolution of any disagreements
between management and the independent auditor regarding financial
reporting. The independent auditor is ultimately accountable to, and
shall report directly to, the Audit Committee. The Company shall provide
appropriate funding, as determined by the Audit Committee, for payment
of compensation to the independent auditor for the purpose of rendering
or issuing an audit report.
2. The Audit Committee shall maintain 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 to the Company by the independent
auditor, subject to the de minimis exceptions for non-audit services
described in Section 10A(i)(1)(B) of the Exchange Act that are approved
by the Audit Committee prior to the completion of the audit. The Chair
of the Audit Committee, or any other member or members designated by the
Audit Committee, shall be authorized to pre-approve audit and permitted
non-audit services, provided that any pre-approval shall be reported to
the full Audit Committee at its next scheduled meeting.
3. The Audit Committee shall have sole authority over the Company's
internal audit function, including, but not limited to, the appointment
or replacement of outsourced services, approval of services to be
rendered and approval of fees for services. Any outsourced firm is
ultimately accountable to, and shall report directly to, the Audit
Committee.
4. The Audit Committee shall prepare the report of the Audit Committee
required by the SEC to be included in the Company's annual proxy
statement.
5. The Audit Committee shall review this Charter at least annually and
recommend any changes to the full Board of Directors.
A-2
6. The Audit Committee shall report its activities to the full Board of
Directors on a regular basis and make such recommendations with respect
to the matters addressed in this Charter and other matters as the Audit
Committee may deem necessary or appropriate.
7. The Audit Committee shall perform such other functions as assigned by
law, the Company's Articles of Incorporation or Bylaws, or the Board.
Financial Statement and Disclosure Matters
The Audit Committee, to the extent it deems necessary or appropriate,
shall:
1. review the annual audited financial statements with the independent
auditor and with Company management;
2. advise management and the independent auditor that they are expected to
provide to the Audit Committee a timely analysis of significant
financial reporting issues and practices;
3. discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended,
relating to the conduct of the audit;
4. consider any reports or communications (and management's responses
thereto) submitted to the Audit Committee by the independent auditor;
5. review any disclosures made to the Audit Committee by the Company's CEO
and CFO during the certification process for Forms 10-K and 10-Q about
any significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any corrective actions
taken, and any fraud involving management or other employees who have a
significant role in the Company's internal controls;
6. recommend to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K;
7. review the form of opinion the independent auditor proposes to render to
the Board of Directors and shareholders;
8. inquire of management and the independent auditor regarding significant
risks or exposures and assess the steps management has taken to minimize
such risks to the Company;
9. review significant changes to the Company's auditing and accounting
principles, policies, controls, procedures and practices proposed or
contemplated by the independent auditor or management;
10. obtain from the independent auditor assurance that the audit was
conducted in a manner consistent with Section 10A(b) of the Exchange
Act, which sets forth certain procedures to be followed in any audit of
financial statements required under the Exchange Act; and
A-3
11. review with the Company's General Counsel any significant legal or
regulatory matters and compliance policies that may have a material
effect on the financial statements, including material notices to or
inquiries received from governmental agencies.
The Company's Relationship with its Independent Auditor
The Audit Committee, to the extent it deems necessary or appropriate,
shall:
1. require that the independent auditor annually prepare and deliver a
Statement (consistent with Independence Standards Board Standard No. 1)
as to their independence and take appropriate action if the independence
of the outside auditor is in question;
2. at least annually, evaluate and report to the Board regarding the Audit
Committee's assessment of the independent auditor's qualifications,
performance (including the lead partner) and independence, taking into
account the opinions of management and the internal auditors and
considering whether the auditor's quality controls are adequate and the
provision of permitted non-audit services is compatible with maintaining
the auditor's independence;
3. monitor the regular rotation of the audit partners as required by law;
and
4. set clear policies compliant with applicable laws or regulations for
hiring employees or former employees of the independent auditor.
Internal Audit Function
The Audit Committee, to the extent it deems necessary or appropriate,
shall:
1. review the budget and internal audit plan of the Company's internal
audit function; and
2. review the progress and results of the internal audit projects.
Internal Control Over Financial Reporting
Annually, the Audit Committee shall review the report prepared by
management and attested to by the independent auditors, assessing the
effectiveness of the Company's internal control over financial reporting and
stating managements' responsibility for establishing and maintaining adequate
internal control over financial reporting prior to its inclusion in the
Company's annual report.
PROCEDURES FOR COMPLAINTS
The Audit Committee shall establish procedures for the receipt, retention
and treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters, and the confidential,
anonymous submission by the Company's employees of concerns regarding
questionable accounting or auditing matters.
A-4
RESOURCES AND AUTHORITY OF THE AUDIT COMMITTEE
The Audit Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to engage independent
auditors for special audits, reviews and other procedures and to retain
independent counsel and other advisors. The Company shall provide appropriate
funding, as determined by the Audit Committee, for payment of compensation to
any advisors employed by the Audit Committee.
LIMITATION OF THE ROLE OF THE AUDIT COMMITTEE
The Audit Committee has the authority and responsibilities described in
this Charter. Management is responsible for the preparation, presentation and
integrity of the Company's financial statements; maintenance of appropriate
accounting and financial reporting principles and policies; and maintenance of
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent auditor is
responsible for planning and carrying out proper audits and reviews. Each member
of the Audit Committee shall be entitled to rely on (i) the integrity of those
persons and organizations within the Company and outside the Company that it
receives information from and (ii) the accuracy of information provided to the
Audit Committee by such persons or organizations (absent actual knowledge to the
contrary).
This Charter was adopted August 7, 2003; amended through August 30, 2005.
A-5
(PERRIGO LOGO)
[PERRIGO LOGO]
c/o National City Bank
Corporate Trust Operations
Locator 5352
P. O. Box 92301
Cleveland, OH 44193-0900
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V O T E B Y T E L E P H O N E
------------------------------------------
Have your proxy card available when you
call the TOLL-FREE NUMBER 1-888-693-8683
using a Touch-Tone phone and follow the
simple instructions to record your vote.
------------------------------------------
V O T E B Y I N T E R N E T
------------------------------------------
Have your proxy card available when you
access the website http://www.cesvote.com
and follow the simple instructions to
record your vote.
------------------------------------------
V O T E B Y M A I L
------------------------------------------
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 TIME
ON FRIDAY OCTOBER 28, 2005 TO BE COUNTED IN THE FINAL TABULATION.
IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT SEND YOUR PROXY BY MAIL.
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== >
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Proxy must be signed and dated below.
\/ Please fold and detach card at perforation before mailing. \/
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PERRIGO COMPANY PROXY
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS ON OCTOBER 28, 2005.
The undersigned hereby appoints Douglas R. Schrank 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 2, 2005, at the Annual Meeting of
Shareholders to be held on October 28, 2005 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:___________________________________ , 2005
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:
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/\ PLEASE FOLD AND DETACH COMMENT CARD AT PERFORATION BEFORE MAILING. /\
Y O U R V O T E I S I M P O R T A N T!
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. \/
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PERRIGO COMPANY PROXY
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This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1 AND 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
1. Election of Directors whose three-year term of office will expire in 2008.
Nominees: (1) Moshe Arkin (2) Gary K. Kunkle, Jr. (3) Herman Morris, Jr.
[ ] 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:
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2. Approval of the proposed amendment of the Company's 2003 Long-Term Incentive Plan to increase the number of shares issuable
under the plan by 4,500,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. 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.
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[PERRIGO LOGO] V O T E B Y M A I L
P.O. Box 20021 -----------------------------------------
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 20021, Tel Aviv,
Israel 61200.
----------------------
VOTE BY MAIL
Return your proxy to
Perrigo Company
P.O. Box 20021
Tel Aviv, Israel 61200
----------------------
PROXY MUST BE SIGNED AND DATED BELOW.
\/ PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. \/
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PERRIGO COMPANY PROXY
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS ON OCTOBER 28, 2005.
The undersigned hereby appoints Douglas R. Schrank 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 2, 2005, at the Annual Meeting of
Shareholders to be held on October 28, 2005 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: _______________________________________ , 2005
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:
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/\ PLEASE FOLD AND DETACH COMMENT CARD AT PERFORATION BEFORE MAILING. /\
Y O U R V O T E I S I M P O R T A N T !
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 20021, 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. \/
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PERRIGO COMPANY PROXY
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This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1 AND 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
1. Election of Directors whose three-year term of office will expire in 2008.
Nominees: (1) Moshe Arkin (2) Gary K. Kunkle, Jr. (3) Herman Morris, Jr.
[ ] 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:
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2. Approval of the proposed amendment of the Company's 2003 Long-Term Incentive Plan to increase the number of shares issuable under
the plan by 4,500,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. 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.