<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Perrigo Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
PERRIGO COMPANY
515 EASTERN AVENUE ALLEGAN, MICHIGAN 49010
TELEPHONE (616) 673-8451
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 5, 1998
To the Shareholders:
You are hereby notified that the Annual Meeting of Shareholders of Perrigo
Company will be held at the Griswold Auditorium, Allegan, Michigan, on Thursday,
November 5, 1998 at 10:00 A.M. (Eastern Standard Time), for the purpose of
considering and taking action with respect to the following matters:
1. The election of three directors of the Company;
2. The ratification of selection of independent accountants; and
3. Such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on September 8, 1998
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting of Shareholders. The transfer books of the
Company will not be closed.
Any shareholder who does not expect to attend the meeting in person is
requested to execute the enclosed proxy and return it as promptly as possible in
the accompanying stamped envelope. The proxy may be revoked by the shareholder
at any time before it is exercised and shareholders who are present at the
meeting may withdraw their proxies and vote in person.
A copy of the Company's 1998 Annual Report to Shareholders accompanies this
notice.
By Order of the Board of Directors
John R. Nichols
Secretary
Allegan, Michigan
October 5, 1998
IMPORTANT -- PLEASE MAIL YOUR SIGNED PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE PROVIDED FOR THIS PURPOSE
<PAGE> 3
PERRIGO COMPANY
515 EASTERN AVENUE ALLEGAN, MICHIGAN 49010
TELEPHONE (616) 673-8451
-------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 5, 1998
This proxy statement is furnished in connection with the solicitation of
proxies to be voted at the Annual Meeting of Shareholders of Perrigo Company, to
be held on Thursday, November 5, 1998.
The enclosed proxy is solicited by the Board of Directors of the Company
and will be voted at the Annual Meeting and any adjournments thereof. Shares
represented by a properly executed proxy in the accompanying form will be voted
at the Annual Meeting and, when instructions have been given by the shareholder,
will be voted in accordance with those instructions. If no instructions are
given, the shareholder's shares will be voted according to the recommendations
of the Board of Directors. Those recommendations are described later in this
proxy statement.
You may revoke your proxy at any time before it is exercised by sending
written notice of revocation to the Secretary of the Company, or by signing and
delivering a later dated proxy. If you attend the Annual Meeting in person, you
may revoke your proxy by either giving notice of revocation to the inspectors of
election at the Annual Meeting or by voting at the Annual Meeting in person.
The only business which the Board of Directors intends to present or knows
will be presented is the election of three directors and the ratification of
selection of independent accountants. The proxy confers discretionary authority
upon the persons named therein, or their substitutes, with respect to any other
business that may properly come before the meeting.
As of September 8, 1998, the record date for the Annual Meeting, the
Company had issued and outstanding 73,200,245 shares of Common Stock, without
par value. Each share is entitled to one vote.
Under Michigan law and the Company's By-Laws, the necessary quorum for the
Annual Meeting is the presence, in person or by proxy, of a majority of the
shares issued and outstanding as of the record date. If a quorum is present at
the Annual Meeting, the election of the three nominees for directors, the
ratification of selection of independent accountants and any other business that
may properly come before the meeting must be approved by the affirmative vote of
the majority of shares present in person or by proxy and entitled to vote on the
matter. Abstention from voting will have the practical effect of voting against
any of the matters since it is one less vote for approval. Broker nonvotes on
one or more matters will have no impact on such matters since they are not
considered "shares present" for voting purposes.
This proxy statement and the proxy were first mailed to shareholders on or
about October 5, 1998.
1
<PAGE> 4
ELECTION OF DIRECTORS
The Board of Directors consists of eight members, divided into three
classes. At this Annual Meeting, three nominees are to be elected to serve for a
term of three years and in each case until their respective successors are
elected and qualified. The remaining five directors will continue to serve as
set forth below, with three directors having terms expiring in November 1999 and
two directors having terms expiring in November 2000. The three nominees are
currently directors of the Company. The nominees have agreed to serve if
elected. The proxy holders will vote the proxies received by them for the three
nominees, or in the event of a contingency not presently foreseen, for different
persons as substitutes therefor.
The following sets forth with respect to each nominee and each director
continuing to serve, their name, age, principal occupation for the past five
years, the year in which they first became a director of the Company and
directorships in other business corporations.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A THREE YEAR TERM EXPIRING NOVEMBER 2001
Larry D. Fredricks, 61, was elected a director of the Company in October
1996 and has been Director Financial Counseling Services with Deloitte & Touche
L.L.P. since November 1997. Previously, Mr. Fredricks was Executive Vice
President and Chief Financial Officer of First Michigan Bank Corp., a multi-bank
holding company located in Holland, Michigan from January 1995 to October 1997
and also served as Senior Vice President and Chief Financial Officer from May
1991 to January 1995.
Michael J. Jandernoa, 48, was elected a director of the Company in January
1981, Chief Executive Officer of the Company in February 1986, Chairman of the
Board of Directors in October 1991 and President of the Company in September
1995. Mr. Jandernoa also served as President of the Company from January 1983 to
October 1991. Prior to January 1983, Mr. Jandernoa served in various executive
capacities with the Company since 1979. Mr. Jandernoa is a director of Old Kent
Financial Corporation and also serves on the Board of Advisors of the National
Association of Chain Drug Stores.
L. R. Jalenak, Jr., 68, was elected a director of the Company in June 1988.
Mr. Jalenak was Chairman of the Board of Cleo Inc., a manufacturer of gift wrap,
greeting cards and accessory items, from 1990 until his retirement on December
31, 1993 and was President of Cleo Inc. from 1977 to 1990. Mr. Jalenak is a
director of Lufkin Industries, Inc., a manufacturer of oil field pumping
equipment, marine propulsion gear and industrial hardware, a director of
Dyersburg Corporation, a manufacturer of fabric for the apparel industry, and a
trustee of First Funds.
The Board of Directors recommends a vote FOR the election of the
aforementioned nominees. Proxies solicited by the Board of Directors will be so
voted for all nominees unless shareholders specify otherwise in their proxies.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING
IN OFFICE WHOSE TERMS EXPIRE NOVEMBER 1999
John W. Spoelhof, 58, was appointed director of the Company in April 1995.
Mr. Spoelhof has been Chairman of Prince Corporation, an automotive component
manufacturer, since 1996 and employed by Prince Corporation in various
capacities since 1969.
Mary Alice Taylor, 48, was appointed a director of the Company in April
1995. Ms. Taylor has served as Executive Vice President, Worldwide Operations
and Technology of Citicorp since January 1997. Previously Ms. Taylor served
Federal Express Corporation in various capacities from 1985 to 1996, most
recently as Senior Vice President. Ms. Taylor is a director of Autodesk, Inc., a
supplier of design software and multimedia tools, and Allstate Insurance
Company.
Peter R. Formanek, 55, was elected a director of the Company in November
1993. Mr. Formanek is a private investor. Mr. Formanek was Co-founder and
President of AutoZone, Inc., a specialty retailer of
2
<PAGE> 5
automotive parts and accessories, from 1986 to his retirement in 1994. Mr.
Formanek is a director of Borders Group, Inc., a retailer of books and music,
and a director of Gart Sports Company, a sporting goods retailer.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING
IN OFFICE WHOSE TERMS EXPIRE NOVEMBER 2000
Richard G. Hansen, 53, was appointed a director of the Company in September
1995. Mr. Hansen was President and Chief Operating Officer of the Company from
October 1991 until his retirement August 31, 1995. Mr. Hansen was Executive Vice
President and Chief Operating Officer from August 1989 to October 1991. Prior to
August 1989, he served in various executive capacities with the Company since
1979.
F. Folsom Bell, 56, was a director of the Company from January 1981 to
February 1986 and was re-elected a director in June 1988. He has been the
Chairman since 1987 and President and Chief Executive Officer since July 1989 of
Thermo-Serv, Inc., a manufacturer and importer of beverageware and tableware.
BOARD OF DIRECTORS AND ITS COMMITTEES
There were five regular meetings of the Board of Directors of the Company
in fiscal year 1998 and three telephonic meetings. During fiscal year 1998, each
director attended at least 75 percent of the aggregate of the total number of
Board meetings and meetings of committees of which he or she was a member, held
while he or she was a director and/or committee member. The Board of Directors
has established three standing committees, the Audit Committee, the Nominating
Committee and the Compensation Committee, which deal with certain specific areas
of the Board's responsibility.
The Audit Committee, which held three meetings in fiscal year 1998,
recommends the firm to be appointed as independent accountants to audit the
Company's financial statements, discusses the scope and results of the audit
with the independent accountants, reviews with management and the independent
accountants the Company's interim and year-end operating results, considers the
adequacy of the internal accounting controls and audit procedures of the
Company, and reviews the non-audit services to be performed by the independent
accountants. The members of the Audit Committee are Messrs. Hansen (Chairman),
Formanek and Jalenak and Ms. Taylor.
The Nominating Committee, which held no meetings in fiscal year 1998,
develops general criteria regarding the qualifications and selection of Board
members and recommends candidates for election to the Board of Directors. The
Nominating Committee will consider persons recommended by shareholders for
inclusion as nominees for election to the Board of Directors, if names of such
persons are submitted in writing to the Secretary of the Company in compliance
with the procedures discussed on page 13. All recommendations should be
accompanied by a complete statement of such person's qualifications and an
indication of the person's willingness to serve. The members of the Nominating
Committee are Messrs. Jalenak (Chairman), Bell and Fredricks and Ms. Taylor.
The Compensation Committee, which held two meetings in fiscal year 1998,
reviews and recommends the compensation arrangements for top management of the
Company, including salaries, bonuses and grants of options to purchase shares
under the Company's Employee Incentive Stock Option Plan. The members of the
Compensation Committee are Messrs. Bell (Chairman), Formanek and Spoelhof.
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than ten
percent of the Company's stock, to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission and the
Nasdaq Stock Market. Executive officers, directors and greater than ten percent
beneficial owners are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
3
<PAGE> 6
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that all Section 16(a) filing requirements
applicable to its executive officers, directors and greater than ten percent
beneficial owners were complied with during fiscal year 1998, except for the
late filing by Thomas J. Ross of his initial Section 16(a) filing on Form 3.
4
<PAGE> 7
PRINCIPAL SECURITYHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 8, 1998, (i) by each
person who is known to the Company to own beneficially more than 5% of the
Common Stock, (ii) by each director and nominee for director, (iii) by the Chief
Executive Officer and the four next most highly compensated executive officers,
and (iv) by all directors, nominees for director and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
OWNERSHIP
---------------------
DIRECTORS, EXECUTIVE OFFICERS AND 5% SHAREHOLDERS NUMBER PERCENT
------------------------------------------------- ------ -------
<S> <C> <C>
DIRECTORS
Michael J. Jandernoa(1)..................................... 9,535,584 13.0%
F. Folsom Bell(2)........................................... 21,810 *
Peter R. Formanek(2)........................................ 10,010 *
Larry D. Fredricks(2)....................................... 675 *
Richard G. Hansen(3)........................................ 1,378,703 1.9%
L. R. Jalenak, Jr,(4)....................................... 66,010 *
John W. Spoelhof(5)......................................... 32,576 *
Mary Alice Taylor(2)........................................ 4,676 *
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
James H. Bloem(6)........................................... 53,185 *
Craig G. Hammond(6)......................................... 43,175 *
Mark P. Olesnavage(7)....................................... 523,440 *
Thomas J. Ross(8)........................................... 39,713 *
All directors and executive officers as a group
(12 persons)(1)(2)(3)(4)(5)(6)(7)(8)...................... 11,709,557 16.0%
5% SHAREHOLDERS
Wellington Management Company(9)............................ 10,551,320 14.4%
75 State Street
Boston, MA 02109
Lazard Freres & Co. LLC(10)................................. 5,829,808 8.0%
30 Rockefeller Plaza
New York, NY 10020
Ohio - State Teachers Retirement System(11)................. 3,807,000 5.2%
275 East Broad Street
Columbus, OH 43215
</TABLE>
- ---------------------------
* Less than 1%
(1) Includes 6,191,499 shares owned by the Michael J. Jandernoa Trust, of which
Mr. Jandernoa is the trustee. Includes 2,275,000 shares owned by the M.S.J.
Investment Limited Partnership, as a Michigan limited partnership ("MJLP").
Mr. Jandernoa is the sole general partner of MJLP, and 26% of MJLP is held
by each of three trusts established for the benefit of Mr. Jandernoa's
three children. Includes 454,047 shares owned by the Michael J. Jandernoa
Grantor Trust Two of which Mr. Jandernoa is trustee and under which he has
a reversionary interest. Includes 454,047 shares owned by Susan M.
Jandernoa Grantor Trust Two of which Mrs. Jandernoa is trustee and under
which she has a reversionary interest and 106,346 shares owned by Michael
J. Jandernoa as Trustee of the Michael J. Jandernoa Charitable Annuity Lead
Trust. Includes 22,143 shares owned by Susan M. Jandernoa Trust of which
Mrs. Jandernoa is the trustee. Includes 32,502 shares subject to options
exercisable within 60 days following the date hereof. Mr. Jandernoa's
address is c/o Perrigo Company, 515 Eastern Avenue, Allegan, Michigan
49010.
(2) All shares include 675 shares of restricted stock awarded in their capacity
as Director and shares subject to options exercisable within 60 days
following the date hereof.
5
<PAGE> 8
(3) Includes 500,000 shares owned by Richard G. Hansen as Trustee for the
Richard G. Hansen Five-Year Grantor Retained Annuity Trust of which Mr.
Hansen is Trustee and has a reversionary interest, 405,904 shares owned by
Richard G. Hansen as Trustee for the Richard G. Hansen Trust, 320,000
shares owned by Richard G. Hansen as Trustee for the Sandra E. Hansen Trust
and 152,124 shares owned by trusts for the benefit of Mr. Hansen's children
and grandchildren, of which Mr. Hansen is the Trustee. Includes 675 shares
of restricted stock awarded him in his capacity as Director.
(4) Includes 675 shares of restricted stock awarded Mr. Jalenak in his capacity
as Director and 9,335 shares subject to options exercisable within 60 days
following the date hereof.
(5) Includes 2,900 shares owned by trusts for Mr. Spoelhof's grandchildren, for
which Mr. Spoelhof is the trustee, and which Mr. Spoelhof disclaims
beneficial ownership. Includes 675 shares of restricted stock awarded Mr.
Spoelhof in his capacity as Director and 4,001 shares subject to options
exercisable within 60 days following the date hereof.
(6) All shares consist of shares subject to options exercisable within 60 days
or shares owned through the Company's direct stock purchase plan program or
401(k) plan.
(7) Includes 137,366 shares subject to options exercisable within 60 days
following the date hereof. Includes 56,472 shares owned by trusts for the
benefit of Mr. Olesnavage's children, of which Mr. Olesnavage is the
trustee.
(8) Includes 1,240 shares owned by Mr. Ross' spouse and minor children and
includes 36,873 shares subject to options exercisable within 60 days or
shares owned through the Company's direct stock purchase program and 401(k)
plan.
(9) Share information has been supplied by holder. As an institutional
shareholder owning more than 5% of the Company's Common Stock, such
shareholder, in its capacity as investment advisor, has shared dispositive
power and shared voting power with respect to at least some of the shares
and may be deemed the beneficial owner of indicated shares owned by
numerous investment advisory clients. None of these clients individually
owns more than 5% of the Company's Common Stock.
(10) Share information has been supplied by holder.
(11) Share information has been supplied by holder. Holder has sole dispositive
power and sole voting power with respect to these shares.
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<PAGE> 9
COMPENSATION OF DIRECTORS
OUTSIDE DIRECTORS
The Company's directors who are not employees of the Company receive a
retainer fee of $20,000 per year for Board membership of which $10,000 is paid
in cash and $10,000 is paid in the form of an annual restricted stock grant of
Company stock. Non-employee directors also receive a fee of $1,000 for
attendance at each special Board or shareholders' meeting and $500 for
participation in a special Board meeting held by telephone conference call. All
directors are reimbursed for expenses incurred in connection with attending
Board and Committee meetings. The chairman of each standing committee is paid a
fee of $2,000 for attendance at each meeting and a fee of $1,000 for
participation in a meeting held by a telephone call. All other members of the
standing committees are paid a fee of $1,000 for each meeting attended and a fee
of $500 for participation in a meeting held by telephone.
The Company's directors who are not employees of the Company are eligible
to participate in the Company's Non-Qualified Stock Option Plan for Directors
(the "Directors' Plan"). The Directors' Plan is administered by the Board of
Directors of the Company and provides for issuance of options covering up to
268,000 shares of Company Common Stock at a purchase price per share at least
equal to one hundred percent of the fair market value of a share on the date of
grant as determined by the Board of Directors.
Non-employee directors who are newly elected to the Board are granted
options to purchase 5,000 shares of Company Common Stock under the Directors'
Plan. All directors are granted options annually under the Directors' Plan to
purchase 2,000 shares of Company Common Stock, with newly elected directors
eligible for a similar annual grant at the Annual Meeting of Directors next
following his or her election.
As of June 30, 1998, options to purchase 160,670 shares of Common Stock had
been granted under the Directors' Plan and options to purchase 97,800 shares of
Common Stock were outstanding under the Directors' Plan, of which 41,142 shares
were vested.
Larry D. Fredricks, as a non-employee director of the Company, was
appointed an independent director pursuant to the Michigan Business Corporation
Act on October 30, 1996.
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors reviews and recommends
the compensation arrangements for senior management of the Company (including
the executive officers named in the Summary Compensation Table below), with
respect to salaries, bonuses and grants of options to purchase shares of Common
Stock under the Company's Employee Incentive Stock Option Plan.
OBJECTIVES AND POLICIES
The Compensation Committee strives to:
- motivate executive officers to create added value for the Company's
shareholders through compensation incentives that are tied to the
Company's operating and stock market performance;
- reward executive officers for their individual performance and the
performance of the Company;
- provide compensation and benefits at levels that enable the Company to
attract and retain high-quality executives; and
- align the interests of the Company's officers and directors with the
interests of the Company's shareholders through potential stock
ownership.
The Company has designed its management compensation policy to provide a
compensation package for executive officers that is generally competitive with
the compensation of executive officers of comparable
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<PAGE> 10
manufacturing companies as compiled by Wyatt Data Services with respect to
salary and bonus, with more emphasis on bonus. The Wyatt survey is comprised of
non-durable goods manufacturing companies, including some of those reflected in
the Dow Jones Pharmaceutical Index on the Performance Graph set forth on page
12. The incentive portions of the package are intended to encourage and reward
outstanding individual and Company performance. Compensation for executive
officers of the Company consists of a base salary, an annual bonus, if one is
warranted under the criteria of the Management Incentive Bonus Plan ("Bonus
Plan"), any earned bonus payments under one of the Company's productivity
sharing plans (the "Improshare(R) Plan" or the "Excel Plan"), annual
contributions to the Company's Profit Sharing Retirement Plan and Trust, a
defined contribution profit sharing plan for certain Company employees (the
"Profit Sharing Plan"), Company contributions under the Company's 401(k) plan
and, for certain executive officers, the grant of stock options under the
Company's Employee Incentive Stock Option Plan. It is the objective of the
Compensation Committee that executive officers' salaries and bonuses approximate
the median as reflected in the Wyatt survey.
CASH-BASED COMPENSATION
Base Salary and Bonus - The Compensation Committee employs a formal
approach for measuring and evaluating executive officer performance. Executive
officer base salary and individual bonus awards under the Bonus Plan are
determined based on the following factors (ranked in order of importance): (i)
Company-wide performance measured by attainment of specific strategic objectives
and quantitative measures; (ii) individual performance of each executive
officer; (iii) compensation levels at comparable manufacturing companies; and
(iv) historical cash and equity compensation levels. The primary quantitative
measure utilized is return on assets; however, earnings per share and revenue
growth are also considered. Qualitative assessments include the quality and
measured progress of the Company's marketing and manufacturing operations and
the success of strategic actions, such as acquisitions of lines of business or
introduction of new products.
Under the Improshare(R) Plan and the Excel Plan, productivity improvements
are shared equally between the Company and the participants in the plans. These
plans cover all employees of the Company and its subsidiaries and are calculated
based upon the ratio of total labor value of products produced to total hours
worked by all participants. Improshare(R) Plan and Excel Plan payments are
computed as a percentage of base salary. The largest amount paid to an executive
officer in fiscal year 1998 under the Improshare(R) Plan or the Excel Plan was
$56,246 awarded to Mr. Jandernoa. For individuals named in the Summary
Compensation Table for fiscal year 1998, their salary and payments under the
Improshare(R) Plan and Bonus Plan or Excel Plan compose substantially all of
their compensation.
The annual Company contribution under the Profit Sharing Plan is determined
at the discretion of the Board of Directors and is shared by all employees of
the Company and its subsidiaries with one year of service, other than employees
of Perrigo Company of Tennessee, Inc. and Perrigo Company of Missouri, Inc. who
participate in separate retirement plans. The contribution to each individual
under the Profit Sharing Plan is based on the ratio of total individual
compensation (limited to a maximum of $160,000 for fiscal year 1998) to total
compensation of all participants for the same plan year. For fiscal year 1998,
the Company made Profit Sharing Plan contributions of $7,948 on behalf of
Messrs. Jandernoa, Bloem, Hammond, Olesnavage and Ross.
The Company contribution under the Company's 401(k) plan was $400 for
Messrs. Jandernoa, Bloem, Hammond, Olesnavage and Ross.
STOCK OPTION GRANTS
Messrs. Jandernoa, Bloem, Hammond, Olesnavage and Ross were granted stock
options to purchase 65,000, 38,000, 38,000, 38,000 and 12,000 shares of Common
Stock, respectively, during fiscal year 1998. Stock option grants are intended
to provide broad and deep incentives throughout the Company aligned with
shareholder value.
8
<PAGE> 11
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
As a principal shareholder of the Company prior to its sale of shares of
Common Stock to the public in December 1991, Mr. Jandernoa retains a substantial
share ownership in the Company, which aligns his interests with those of the
Company's shareholders. The Compensation Committee believes that Mr. Jandernoa's
compensation as Chief Executive Officer is below the compensation of the chief
executive officers of comparable companies. The same criteria described above
that are used to establish executive officer compensation are employed in
determining Mr. Jandernoa's base salary and annual bonus.
While the Company's return on assets of 6.1% in fiscal year 1998, exclusive
of the restructuring charges, compares favorably to 3.9% for calendar year 1997
Fortune 500 companies and 5.5% for calendar year 1997 Standard and Poor's 500
companies, in the view of the Compensation Committee, the Company's results in
fiscal year 1998 were below expectations. The Company's sales growth was near
targets established for fiscal year 1998, but net income was below expectations.
The trends in fiscal 1998 in gross profit, operating income, net income and
earnings per share were all down from the prior year. The Compensation Committee
believes senior management continued to make good progress on long-term
investments in research and development, international market development and
business process redesign and system implementation.
The Compensation Committee noted that the performance of the Company's
Common Stock during fiscal year 1998 declined over the prior year, as
illustrated by the performance graph on page 12.
As a result of the factors described above, the Compensation Committee
determined that no payments under the Bonus Plan were warranted and thus neither
the chief executive officer nor any other executive officer received incentive
compensation for fiscal 1998.
SUMMARY
Executive compensation at the Company is carefully reviewed by the
Compensation Committee, the Board of Directors and senior management. After
reviewing the Company's compensation programs, the Compensation Committee has
concluded that the amounts paid to executive officers, including stock options,
in fiscal year 1998 appropriately reflect individual performance, are linked to
the financial, operational and market results of the Company and are generally
competitive with amounts paid to executive officers of comparable companies.
COMPENSATION COMMITTEE
F. Folsom Bell (Chairman)
Peter R. Formanek
John W. Spoelhof
9
<PAGE> 12
SUMMARY COMPENSATION
The following table contains information regarding the individual
compensation of the Chief Executive Officer and the four other most highly
compensated executive officers of the Company in fiscal year 1998.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION --------------------------
------------------------------------------------ AWARDS
OTHER ------ ALL
NAME AND FISCAL ANNUAL STOCK OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
------------------ ------ ------ ----- --------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Jandernoa........ 1998 $437,725 $56,246 -- 65,000 $10,261
Chairman of the Board, 1997 372,100 353,391 -- 65,000 8,035
Chief Executive Officer 1996 343,100 45,021 -- 0 11,007
and President
Mark P. Olesnavage.......... 1998 $285,724 $36,976 -- 38,000 $ 8,348
President -- Customer 1997 266,425 255,055 -- 60,000 8,035
Business Development 1996 243,433 32,700 -- 15,000 7,960
Craig G. Hammond(3)......... 1998 $258,924 $34,522 $91,808 38,000 $ 8,348
Executive Vice President 1997 239,350 252,637 -- 60,000 8,035
and Chief Operations 1996 160,064 13,074 -- 50,000 --
Officer
James H. Bloem.............. 1998 $218,050 $29,023 -- 38,000 $ 8,348
President of Personal Care 1997 198,025 115,709 -- 60,000 8,035
1996 155,964 13,230 -- 50,000 --
Thomas J. Ross(4)........... 1998 $150,427 $19,868 -- 12,000 $ 8,348
Vice President -- Finance
</TABLE>
- ---------------------------
(1) Except for Mr. Hammond as described in footnote (3) below, none of the named
executive officers received perquisites or other personal benefits in excess
of the lesser of $50,000 or 10 percent of the total of his annual salary and
bonus as reported above.
(2) The amounts include contributions under the Company's 401(k) plan and Profit
Sharing Plan, and the dollar value of premium benefits under split dollar
life insurance policies for which the Company will be reimbursed for
premiums paid.
(3) In conjunction with his relocation, the Company reimbursed Mr. Hammond
$91,808 for relocation expenses. Such compensation has been included under
the Other Annual Compensation.
(4) Mr. Ross was appointed executive officer during fiscal year 1998.
Accordingly, only fiscal year 1998 compensation data have been included in
the table.
10
<PAGE> 13
STOCK OPTIONS
The following table shows the number of options granted to the named
executive officers of the Company in fiscal year 1998 under the Company's 1988
Employee Incentive Stock Option Plan, as amended. Pursuant to Securities and
Exchange Commission rules, the table also shows the value of the options granted
at the end of the option terms (ten years) if the stock price were to appreciate
annually by 5% and 10%, respectively. There is no assurance that the stock price
will appreciate at the rates shown in the table. The table also indicates that
if the stock price does not appreciate, there will be no increase in the
potential realizable value of the options granted.
<TABLE>
<CAPTION>
INDIVIDUAL GRANT
----------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 0% 5% 10%
---- ---------- ------------ -------- ---------- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Michael J. Jandernoa.......... 65,000 6.4% $12.9688 08/04/07 $0 $530,138 $1,343,475
Mark P. Olesnavage............ 38,000 3.7 12.9688 08/04/07 0 309,927 785,416
Craig G. Hammond.............. 38,000 3.7 12.9688 08/04/07 0 309,927 785,416
James H. Bloem................ 38,000 3.7 12.9688 08/04/07 0 309,927 785,416
Thomas J. Ross................ 12,000 1.2 12.9688 08/04/07 0 97,871 248,026
</TABLE>
The following table provides information concerning the value of stock
options held by each named executive officer on June 30, 1998.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES JUNE 30, 1998 JUNE 30, 1998
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE(2)
---- ----------- ----------- ------------- ----------------
<S> <C> <C> <C> <C>
Michael J. Jandernoa................. 0 -- 10,834/119,166 $ 10,495/52,473
Mark P. Olesnavage................... 5,464 $75,813 118,032/104,000 880,353/48,437
Craig G. Hammond..................... 0 -- 26,668/121,332 9,687/48,437
James H. Bloem....................... 0 -- 26,668/121,332 9,687/48,437
Thomas J. Ross....................... 0 -- 22,003/46,997 3,552/17,760
</TABLE>
- ---------------------------
(1) Represents the difference between the closing price of the Company's Common
Stock on the date of exercise and the exercise price of the option.
(2) Represents the difference between the closing price of the Company's Common
Stock on June 30, 1998 and the exercise price of the option.
11
<PAGE> 14
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Common Stock of the Company from June 30, 1993 through June 30, 1998, with the
cumulative total return on the Nasdaq Composite Index and the Dow Jones
Pharmaceutical Index from June 30, 1993 through June 30, 1998 (assuming the
investment of $100 in the Company's Common Stock and reinvestment of all
dividends). The Company did not pay any dividends during this period. The Nasdaq
Composite Index and the Dow Jones Pharmaceutical Index are published monthly.
Correspondingly, the June 30, 1993 index amounts have been used as the initial
amounts for the graphic comparison. The following companies comprise the Dow
Jones Pharmaceutical Index: American Home Products, Bristol-Myers Squibb,
Johnson & Johnson, Eli Lilly & Co., Merck & Co., Pfizer Inc., Schering-Plough,
Pharmacia & Upjohn Co. and Warner-Lambert.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG PERRIGO COMPANY, THE NASDAQ STOCK MARKET - U.S. INDEX
AND THE DOW JONES PHARMACEUTICAL INDEX
<TABLE>
<CAPTION>
NASDAQ
STOCK
MEASUREMENT PERIOD PERRIGO MARKET DOW JONES
(FISCAL YEAR COVERED) COMPANY (U.S.) PHARMACEUTICALS
<S> <C> <C> <C>
JUN-93 100 100 100
JUN-94 63.04 100.96 97.95
JUN-95 50.72 134.77 147.21
JUN-96 51.58 173.03 217.09
JUN-97 57.31 210.38 337.63
JUN-98 46.13 277.69 486.18
</TABLE>
* $100 invested on June 30, 1993 in stock or index -- including reinvestment of
dividends. Fiscal year ending June 30.
The comparisons in this table are required by the Securities and Exchange
Commission and are not intended to forecast or be indicative of possible future
performance of the Company's Common Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal year 1998 were
Messrs. Bell (Chairman), Formanek and Spoelhof. The directors on the
Compensation Committee are outside directors and have never been officers or
employees of the Company.
12
<PAGE> 15
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of Directors has
selected BDO Seidman, LLP as the independent accountants to examine the
financial statements of the Company and its subsidiaries for the fiscal year
1999. BDO Seidman, LLP has been employed to perform this function for the
Company since 1988.
One or more representatives of BDO Seidman, LLP will be present at the
Annual Meeting and will have the opportunity to make a statement and to respond
to appropriate questions.
Although this appointment is not required to be submitted to a vote of
shareholders, the Board believes it is appropriate as a matter of policy to
request that the shareholders ratify the appointment. If the shareholders do not
ratify the appointment, the Audit Committee will investigate the reasons for the
shareholder rejection and the Board will reconsider this appointment. A majority
of the votes cast is required to ratify the appointment of the independent
accountants.
The Board of Directors recommends a vote FOR the proposal to ratify the
selection of BDO Seidman, LLP. Proxies solicited by the Board of Directors will
be so voted unless shareholders specify otherwise in their proxies.
1999 SHAREHOLDER PROPOSALS AND NOMINATING PROCEDURES
Proposals of shareholders intended for inclusion in the Company's proxy
statement relating to the 1999 Annual Meeting must be received at the Company's
Principal Executive Offices (please address to the attention of John R. Nichols,
Secretary) not later than June 5, 1999. Any such proposal must comply with Rule
14a-8 of Regulation 14A of the proxy rules of the Securities and Exchange
Commission.
The By-Laws of the Company require that nominations for a director to be
elected at the 1999 Annual Meeting, other than those made by the Board, and any
other business to be properly brought before an annual meeting be submitted to
the Secretary of the Company not earlier than August 6, 1999 nor later than
August 26, 1999. Any shareholder may obtain a copy of the applicable By-Law from
the Secretary of the Company upon written request. In addition, the proxy rules
of the Securities and Exchange Commission permit the persons named in the
proxies solicited by the Company's Board of Directors to exercise discretionary
voting power with respect to any proposal that is submitted later than August
21, 1999 for consideration at the November 1999 annual meeting and that is not
submitted for inclusion in the Company's proxy statement and form of proxy.
GENERAL
The cost of the preparing, assembling and mailing this proxy statement and
accompanying materials will be borne by the Company. Solicitations will be made
by mail, but in some cases may also be made by telephone or personal call by
officers, directors or regular employees of the Company, who will not be
specially compensated for such solicitation. The entire cost of such
solicitation will be borne by the Company, which will include the cost of
supplying the necessary additional copies of the solicitation materials for
beneficial owners of shares held of record by brokers, dealers, banks and voting
trustees, and their nominees and, upon request, the reasonable expenses of such
record holders for completing the mailing of the solicitation material to those
beneficial owners.
By Order of the Board of Directors
John R. Nichols
Secretary
Allegan, Michigan
October 5, 1998
13
<PAGE> 16
PERRIGO LOGO
PGOCO-PS-98
<PAGE> 17
PERRIGO COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS NOVEMBER 5, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Michael J. Jandernon, Thomas J. Ross and John R. Nichols, or
any of them with full power of substitution as attorneys and proxies to vote as
designated below, 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 8, 1998, at the Annual Meeting of
Shareholders to be held on November 5, 1998, or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2
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 AND AS OTHERWISE DETERMINED BY THE PROXYHOLDERS IN
THEIR DISCRETION.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. 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.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ----------------------------------- ---------------------------------------
- ----------------------------------- ---------------------------------------
- ----------------------------------- ---------------------------------------
<PAGE> 18
<TABLE>
<S> <C>
[X] PLEASE MARK VOTES ------|
AS IN THIS EXAMPLE |
- ----------------------------------------------- 1. Election of Directors. Nominees:
PERRIGO COMPANY
- ----------------------------------------------- FOR ALL WITH- FOR ALL
NOMINEES HOLD EXCEPT
Mark box at right if an address change or Larry D. Fredricks
comment has been noted on the reverse side Michael J. Jandernon [ ] [ ] [ ]
of this card. [ ] L.R. Jalenak, Jr.
NOTE: If you do not wish your shares voted "For" a particular nominee, mark
RECORD DATE SHARES: the "For All Except" box and strike a line through nominee(s) name(s). Your
shares will be voted for the remaining nominee(s).
FOR AGAINST ABSTAIN
2. Ratification of Selection of BDO Seidman, LLP. [ ] [ ] [ ]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
-----------------------------|
Please be sure to sign and date this Proxy. | Date |
- --------------------------------------------------------------------------|
| |
| |
| |
- -----------Shareholder sign here--------------Co-owner sign here-----------
</TABLE>
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