<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 DECEMBER 7, 1999
To the Shareholders:
You are hereby notified that the Annual Meeting of Shareholders of Perrigo
Company will be held at The Embassy Suites Hotel, 670 Verdae Boulevard,
Greenville, South Carolina, on Tuesday, December 7, 1999 at 10:00 A.M. (Eastern
Standard Time), to consider and take action with respect to the following
matters:
1. The election of two 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 October 8, 1999
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.
If you do not expect to attend the meeting in person, please execute the
enclosed proxy and return it as promptly as possible in the accompanying stamped
envelope. You may revoke your proxy at any time before it is exercised and if
you are present at the meeting you may withdraw your proxy and vote in person.
A copy of the Company's 1999 Annual Report to Shareholders accompanies this
notice.
By Order of the Board of Directors
John R. Nichols
Secretary
Allegan, Michigan
October 28, 1999
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 DECEMBER 7, 1999
This proxy statement is furnished in connection with the solicitation of
proxies by the Perrigo Company to be voted at the Annual Meeting of Shareholders
to be held on Tuesday, December 7, 1999.
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 that the Board of Directors intends to present or knows
will be presented is the election of two 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 October 8, 1999, the record date for the Annual Meeting, the Company
had issued and outstanding 73,345,540 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 two 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 28, 1999.
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<PAGE> 4
ELECTION OF DIRECTORS
Following the 1999 Annual Meeting, the Board of Directors will consist of
seven members, divided into three classes. At this Annual Meeting, two 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 two directors having
terms expiring on the date of the Annual Meeting in 2000 and three directors
having terms expiring on the date of the Annual Meeting in 2001. One of the two
nominees is currently a director of the Company. The nominees have agreed to
serve if elected. The proxy holders will vote the proxies received by them for
the two nominees, or in the event of a contingency not presently foreseen, for
different persons as substitutes.
John W. Spoelhof and Mary Alice Taylor, directors of the Company since
April 1995, have notified the Company that they do not intend to stand for
re-election at the 1999 Annual Meeting of Shareholders.
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 ON THE DATE OF THE ANNUAL MEETING IN 2002
Peter R. Formanek, 56, 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 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.
Herman Morris, Jr., 48, has been President and Chief Executive Officer of
Memphis Light, Gas and Water Division since August 1997 and was interim
President and Chief Executive Officer from January 1997 to August 1997. Mr.
Morris was General Counsel of Memphis Light, Gas and Water Division from
February 1989 to January 1997 and prior to then, he practiced law in the state
of Tennessee since 1977.
The Board of Directors recommends a vote FOR the election of the 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 ON THE DATE OF THE ANNUAL MEETING IN 2000
Richard G. Hansen, 54, 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 August 31, 1995 and from November 1998 until his announced
resignation becomes effective on November 1, 1999. Mr. Hansen was Executive Vice
President and Chief Operating Officer of the Company from August 1989 to October
1991. Prior to August 1989, he served in various executive capacities with the
Company since 1979.
F. Folsom Bell, 57, was a director of the Company from January 1981 to
February 1986 and was re-elected a director in June 1988. Mr. Bell was Chairman,
President and Chief Executive Officer of Thermo-Serv, Inc., a manufacturer and
importer of beverageware and tableware, from July 1989 until September 1999. Mr.
Bell is currently acting as a private consultant.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING
IN OFFICE WHOSE TERMS EXPIRE ON THE DATE OF THE ANNUAL MEETING IN 2001
Larry D. Fredricks, 62, was elected a director of the Company in October
1996 and has been Director - Financial Counseling Services with Deloitte &
Touche LLP 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
2
<PAGE> 5
served as Senior Vice President and Chief Financial Officer of First Michigan
Bank Corp. from May 1991 to January 1995.
Michael J. Jandernoa, 49, was elected a director of the Company in January
1981, Chief Executive Officer of the Company in February 1986 and Chairman of
the Board of Directors in October 1991. Mr. Jandernoa also served as President
of the Company from January 1983 to October 1991 and from September 1995 to
November 1998. Upon the resignation of Mr. Hansen, Mr. Jandernoa will resume the
office of President on November 1, 1999. 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., 69, 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, a mutual fund.
BOARD OF DIRECTORS AND ITS COMMITTEES
There were five regular meetings of the Board of Directors of the Company
in fiscal year 1999 and two telephonic meetings. During fiscal year 1999, each
director attended all of the Board meetings and meetings of committees of which
he or she was a member that were held while he or she was a director and/or
committee member, except for Mr. Spoelhof who attended six out of the seven
Board meetings and all of the committee meetings of which he was a 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 1999,
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. Fredricks
(Chairman), Formanek and Jalenak and Ms. Taylor.
The Nominating Committee, which held two meetings in October 1999, 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 12. 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 telephonic meetings in fiscal
year 1999, 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
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<PAGE> 6
the Nasdaq Stock Market. Executive officers, directors and beneficial owners of
10% or more of the Company's Common Stock are required by the Securities and
Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.
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 1999.
PRINCIPAL SECURITYHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of October 1, 1999, (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
as of the end of the fiscal year 1999, and (iv) by all directors and executive
officers of the Company as a group as of October 1, 1999. 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.
<TABLE>
<CAPTION>
OWNERSHIP
---------------------
DIRECTORS, NAMED EXECUTIVE OFFICERS, DIRECTOR NOMINEE AND 5% SHAREHOLDERS NUMBER PERCENT
- ------------------------------------------------------------------------- ------ -------
<S> <C> <C>
DIRECTORS AND NOMINEE
Michael J. Jandernoa(1)............................................ 9,568,085 13.0%
F. Folsom Bell(2).................................................. 12,528 *
Peter R. Formanek(2)............................................... 12,528 *
Larry D. Fredricks(2).............................................. 11,860 *
Richard G. Hansen(3)............................................... 1,468,888 2.0%
L. R. Jalenak, Jr.(4).............................................. 70,528 *
Herman Morris, Jr. ................................................ -- --
John W. Spoelhof(5)................................................ 35,094 *
Mary Alice Taylor(2)............................................... 7,194 *
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
James H. Bloem(6).................................................. 82,852 *
Craig G. Hammond(6)................................................ 72,961 *
Mark P. Olesnavage(7).............................................. 549,774 *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(10 persons)(1)(2)(3)(4)(5)(7)(8)................................ 11,800,193 16.0%
5% SHAREHOLDERS
Wellington Management Company, LLP(9).............................. 10,314,780 14.1%
75 State Street
Boston, MA 02109
Southeastern Asset Management, Inc.(10)............................ 8,002,900 10.9%
6075 Poplar Ave
Memphis, TN 38119
</TABLE>
- ---------------------------
* Less than 1%
4
<PAGE> 7
(1) Includes 6,236,926 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, 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 408,620 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 408,620 shares owned by the Susan M.
Jandernoa Grantor Trust Two of which Mrs. Jandernoa is trustee and under
which she has a reversionary interest. Includes 106,346 shares owned by
Michael J. Jandernoa as Trustee of the Michael J. Jandernoa Charitable
Annuity Lead Trust. Includes 67,570 shares owned by the Susan M. Jandernoa
Trust of which Mrs. Jandernoa is the trustee. Includes 65,003 shares
subject to options exercisable within 60 days following October 1, 1999,
the date as of which the table is prepared. Mr. Jandernoa's address is c/o
Perrigo Company, 515 Eastern Avenue, Allegan, Michigan 49010.
(2) The share total includes 1,860 shares of restricted stock awarded in this
person's capacity as a director. The balance of the shares subject to
options exercisable within 60 days.
(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, 394,904 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 1,860
shares of restricted stock awarded him in his capacity as a director, prior
to November 10, 1998. Includes 100,000 shares subject to options
exercisable within 60 days.
(4) Includes 1,860 shares of restricted stock awarded Mr. Jalenak in his
capacity as a director and 12,668 shares subject to options exercisable
within 60 days.
(5) Includes 2,900 shares owned by trusts for Mr. Spoelhof's grandchildren, for
which Mr. Spoelhof is the trustee, and as to which Mr. Spoelhof disclaims
beneficial ownership. Includes 1,860 shares of restricted stock awarded Mr.
Spoelhof in his capacity as a director and 5,334 shares subject to options
exercisable within 60 days.
(6) All shares consist of shares subject to options exercisable within 60 days
and shares owned through the Company's direct stock purchase plan program
and 401(k) plan.
(7) Includes 150,200 shares subject to options exercisable within 60 days.
Includes 56,472 shares owned by trusts for the benefit of Mr. Olesnavage's
children, of which Mr. Olesnavage is the trustee.
(8) Includes 55,336 shares subject to options exercisable within 60 days by
another executive officer.
(9) Share information has been supplied by the holder as of June 30, 1999.
Wellington Management Company, LLP does not have sole voting or sole
investment power with respect to any of the shares it holds and has shared
voting power and shared investment power with respect to 4,642,980 shares
and 10,314,780 shares, respectively. Of the listed shares, Vanguard Health
Care Fund, P.O. Box 2600, V37, Valley Forge, PA 19482, beneficially owns
4,817,090 shares (6.6%) of the Company's Common Stock as reported in a
Schedule 13G filed with the Securities and Exchange Commission on February
11, 1999, and has sole voting power and shared investment power with
respect to these shares.
(10) Share information has been supplied by the holder as of October 1, 1999.
Southeastern Asset Management, Inc. does not have sole voting power with
respect to any of the shares it holds, has shared voting power and shared
investment power with respect to 7,268,800 shares, and has sole investment
power with respect to 734,100 shares. Of the listed shares, Longleaf
Partners Small-Cap Fund, 6410 Poplar Avenue, Suite 900, Memphis, TN 38119,
beneficially owns 7,268,800 shares (9.9%) of the Company's Common Stock and
has shared voting power and shared investment power with respect to these
shares.
5
<PAGE> 8
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 telephone. 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 the Company's Common Stock at a purchase price per share at
least equal to 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 the Company's Common Stock under the
Directors' Plan. All directors are granted options annually under the Directors'
Plan to purchase 2,000 shares of the Company's 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 October 1, 1999, options to purchase 174,670 shares of Common Stock
had been granted under the Directors' Plan of which options to purchase 100,000
shares of Common Stock were outstanding under the Directors' Plan and 48,007
shares of the outstanding options were vested.
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors reviews and recommends
the compensation arrangements for 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. The Compensation Committee also reviews and recommends the
management incentive bonus, grants of options and profit sharing contribution
for all affected employees.
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 manufacturing companies as
compiled by Watson-Wyatt Worldwide with respect to salary and bonus, with more
emphasis on bonus. The Watson-Wyatt survey is comprised of non-durable goods
manufacturing
6
<PAGE> 9
companies, including some of those reflected in the Nasdaq Pharmaceutical Index
on the Performance Graph set forth on page 11. 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 Watson-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 during fiscal year 1999,
productivity improvements were shared equally between the Company and the
participants in the plans. These plans cover all employees of the Company and
its subsidiaries and were 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 were computed as a percentage of base salary. The
largest amount paid to an executive officer in fiscal year 1999 under the
Improshare(R) Plan or the Excel Plan was $52,669 awarded to Mr. Jandernoa. For
individuals named in the Summary Compensation Table for fiscal year 1999, their
salary plus their payments under the Bonus Plan and Improshare(R) Plan or Excel
Plan composed 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
participated 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 1999) to total
compensation of all participants for the same plan year. For fiscal year 1999,
the Company made Profit Sharing Plan contributions of $7,556 on behalf of
Messrs. Jandernoa, Hansen, Hammond and Olesnavage. A profit sharing contribution
of $2,158 was made under the Perrigo of Tennessee Plan on behalf of Mr. Bloem.
The Company contribution under the Company's 401(k) plan was $400 for
Messrs. Jandernoa, Hansen, Hammond and Olesnavage. In addition, a contribution
under the Perrigo of Tennessee 401(k) Plan was $2,158 for Mr. Bloem.
STOCK OPTION GRANTS
Messrs. Jandernoa, Hansen, Bloem, Hammond and Olesnavage were granted stock
options to purchase 65,000, 100,000, 30,000, 30,000 and 30,000 shares of Common
Stock, respectively, during fiscal year 1999. Stock option grants are intended
to provide broad and deep incentives throughout the Company aligned with
shareholder value.
7
<PAGE> 10
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.
In the view of the Compensation Committee, the Company's results in fiscal
year 1999 were below expectations due in significant part to production and
shipping inefficiencies created by the Company's conversion to a new enterprise
software system in 1999. That conversion resulted in lost sales, increased
outsourcing costs incurred to meet customer service requirements, and increased
write-offs and reserves for inventory obsolescence. While customer service
improved significantly during the second half of fiscal 1999 and the benefits of
the new software system began to be realized, the relative performance of the
Company on a fiscal year basis was disappointing. In addition, the Compensation
Committee noted that the performance of the Company's Common Stock during fiscal
year 1999 declined over the prior year, as illustrated by the performance graph
on page 11. As a result of the Company's overall financial results and its stock
performance, the Compensation Committee determined that no payments would be
made under the Bonus Plan to the Chief Executive Officer or any other executive
officer for fiscal year 1999.
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 1999 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
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<PAGE> 11
SUMMARY COMPENSATION TABLE
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 1999.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
-------------------------------------------- -------------------------
MANAGEMENT STOCK ALL
NAME AND FISCAL IMPROSHARE/ INCENTIVE OPTION OTHER
PRINCIPAL POSITION YEAR SALARY EXCEL BONUS AWARDS COMPENSATION(2)
------------------ ------ ------ ----------- ---------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Jandernoa.............. 1999 $459,600 $52,669 -- 65,000 $10,059
Chairman of the Board of
Directors 1998 437,725 56,246 -- 65,000 10,261
and Chief Executive Officer 1997 372,100 45,614 $307,776 65,000 8,035
Richard G. Hansen(3).............. 1999 $235,154 $23,130 -- 100,000 $ 7,956
President and
Chief Operating Officer
Mark P. Olesnavage................ 1999 $290,400 $33,006 -- 30,000 $ 7,956
President, Customer Business 1998 285,724 36,976 -- 38,000 8,348
Development 1997 266,425 32,156 222,899 60,000 8,035
Craig G. Hammond(4)............... 1999 $263,300 $30,817 -- 30,000 $ 7,956
President, Perrigo International 1998 258,924 34,522 -- 38,000 8,348
1997 239,350 29,737 222,899 60,000 8,035
James H. Bloem(5)................. 1999 $221,884 $27,559 -- 30,000 $ 4,317
President, Personal Care 1998 218,050 29,023 -- 38,000 8,348
1997 198,025 24,538 91,170 60,000 8,035
</TABLE>
- ---------------------------
(1) Except for Mr. Hammond as described in footnote (4) below, none of the named
executive officers received perquisites or other personal benefits in excess
of the lesser of $50,000 or 10% 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) Mr. Hansen was appointed an executive officer during fiscal year 1999.
Accordingly, only fiscal year 1999 compensation data have been included in
the table.
(4) In conjunction with his joining the Company, the Company reimbursed Mr.
Hammond $91,808 in 1998 for relocation expenses which are not included in
the table above. Mr. Hammond is no longer employed by the Company. Pursuant
to an agreement with Mr. Hammond, he will receive one year's base salary of
$284,364 payable from September 1999 through August 2000.
(5) Mr. Bloem's employment by the Company was terminated with the sale of the
Company's personal care business and existing employment obligations were
assumed by the buyer of that business.
9
<PAGE> 12
STOCK OPTIONS
The following table shows the number of options granted to the named
executive officers of the Company in fiscal year 1999 under the Company's 1988
Employee Incentive Stock Option Plan, as amended. Pursuant to Securities and
Exchange Commission rules, the table also shows the value of the options granted
at the end of the option terms (ten years) if the stock price were to appreciate
annually by 5% and 10%, respectively. There is no assurance that the stock price
will appreciate at the rates shown in the table. The table also indicates that
if the stock price does not appreciate, there will be no increase in the
potential realizable value of the options granted.
<TABLE>
<CAPTION>
INDIVIDUAL GRANT
----------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 0% 5% 10%
---- ---------- ------------ -------- ---------- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Michael J. Jandernoa............ 65,000 6.1% $8.5625 09/09/08 $0 $350,019 $887,017
Richard G. Hansen............... 100,000 9.4 7.8750 01/30/00 0 32,879 65,506
Mark P. Olesnavage.............. 30,000 2.8 8.5625 09/09/08 0 161,547 409,392
Craig G. Hammond................ 30,000 2.8 8.5625 09/09/08 0 161,547 409,392
James H. Bloem.................. 30,000 2.8 8.5625 08/25/01 0 39,894 83,689
</TABLE>
FISCAL YEAR END OPTION VALUES
The following table provides information concerning the value of stock
options held by each named executive officer on July 3, 1999.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES JULY 3, 1999 JULY 3, 1999
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE(2)
---- ----------- ----------- ------------- ----------------
<S> <C> <C> <C> <C>
Michael J. Jandernoa..................... 0 -- 32,502/162,498 $ 0/0
Richard G. Hansen........................ 0 -- 100,000/4,000 56,250/125
Mark P. Olesnavage....................... 5,000 $45,312 132,366/114,666 667,800/0
Craig G. Hammond......................... 0 -- 51,335/126,665 0/0
James H. Bloem........................... 0 -- 51,335/126,665 0/0
</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 July 3, 1999 and the exercise price of the option.
10
<PAGE> 13
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Common Stock of the Company from June 30, 1994 through July 3, 1999, with the
cumulative total return on the Nasdaq Composite Index, the Dow Jones
Pharmaceutical Index and the Nasdaq Pharmaceutical Index from June 30, 1994
through June 30, 1999 (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, the Dow Jones Pharmaceutical
Index and the Nasdaq Pharmaceutical Index are published monthly.
Correspondingly, the June 30, 1994 index amounts have been used as the initial
amounts for the graphic comparison. The following companies comprise the Dow
Jones Pharmaceutical Index: Allergan Inc., American Home Products, Bristol-Myers
Squibb, Johnson & Johnson, Eli Lilly & Co., Merck & Co., Pfizer Inc.,
Schering-Plough, Pharmacia & Upjohn Co. and Warner-Lambert. All Nasdaq listed
companies in SIC code 283 (Medicinal Chemicals and Botanical Products,
Pharmaceutical Preparations, Diagnostic Substances and Biological Products)
comprise the Nasdaq Pharmaceutical Index. The Nasdaq Pharmaceutical Index is
comprised of nearly 300 companies including certain companies which are direct
competitors of the Company.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG PERRIGO COMPANY, THE NASDAQ STOCK MARKET - U.S. INDEX,
THE DOW JONES PHARMACEUTICAL INDEX AND THE NASDAQ
PHARMACEUTICAL INDEX
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
6/94 6/95 6/96 6/97 6/98 6/99
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PERRIGO COMPANY $100 $ 80 $ 82 $ 91 $ 73 $ 62
- ---------------------------------------------------------------------------------------------------------
NASDAQ STOCK MARKET(U.S.) $100 $133 $171 $208 $274 $393
- ---------------------------------------------------------------------------------------------------------
DOW JONES PHARMACEUTICALS $100 $150 $222 $345 $496 $569
- ---------------------------------------------------------------------------------------------------------
NASDAQ PHARMACEUTICALS $100 $133 $196 $199 $294 $285
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* $100 invested on June 30, 1994 in stock or index - including reinvestment of
dividends. Fiscal year ending June 30, except 1999 when Perrigo's fiscal year
ended July 3.
This year, the Company added to its comparison table the Nasdaq
Pharmaceutical Index and next year will not include the Dow Jones Pharmaceutical
Index. The reason for this change is the Company's belief that the companies
comprising the Nasdaq Pharmaceutical Index more closely reflect the business
characteristics of the Company. Those companies' drug discovery and development
efforts, depth and breadth of product
11
<PAGE> 14
base, extent of geographical coverage, revenue base and market capitalization
are generally more comparable to the Company than the significantly larger
companies contained in the Dow Jones Pharmaceutical Index. While the Nasdaq
Pharmaceutical Index includes many biotechnology companies, which are not
comparable to the Company, in general the Nasdaq Index is more comparable than
the Dow Jones Pharmaceutical Index.
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 1999 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.
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 fiscal year 2000.
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.
2000 SHAREHOLDER PROPOSALS AND NOMINATING PROCEDURES
If a shareholder wants the Company to consider including a proposal in the
Company's Proxy Statement for the 2000 Annual Meeting of Shareholders, the
shareholder must deliver a copy of such proposal to the Company's Secretary at
the Company's principal executive office at 515 Eastern Avenue, Allegan,
Michigan 49010, no later than July 1, 2000.
If a shareholder wants to nominate a director to be elected at the 2000
Annual Meeting or if a shareholder intends to present a proposal at the
Company's 2000 Annual Meeting, but does not intend to have such proposal
included in the 2000 Proxy Statement, the shareholder must deliver a copy of
such nomination or proposal to the Company's Secretary at the Company's
principal executive office listed above no later than September 28, 2000 and no
earlier than September 8, 2000. If the date of the Company's 2000 Annual Meeting
is more than 30 calendar days before or more than 60 calendar days after the
date of the 1999 Annual Meeting, a shareholder's notice will be timely if the
Company receives it by the close of business on the tenth day following the day
the Company publicly announces the date of the 2000 Annual Meeting. If the
Company does not receive notice of a shareholder proposal within this time
frame, the Company will use its discretionary authority to vote the shares it
represents as the Board of Directors may recommend.
12
<PAGE> 15
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 28, 1999
13
<PAGE> 16
[PERRIGO LOGO]
PGOCO-PS-99
<PAGE> 17
<TABLE>
<CAPTION>
For All With- For All
- -------------------------------------- 1. Election of Directors, Nominees Nominees hold Except
PERRIGO COMPANY
- --------------------------------------
<S> <C> <C>
Peter R. Formanek / / / / / /
Herman Morris, Jr.
NOTE: If you do not wish your shares voted "For" a particular nominee,
mark the "For All Except" box and strike a line through nominee's name.
Your shares will be voted for the remaining nominee.
CONTROL NUMBER:
RECORD DATE SHARES:
For Against Abstain
2. Ratification of Selection of BDO Seldman, 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
- ----------------------------------------------------- Mark box at right if an address change or comment has been noted / /
on the reverse side of this card.
- -----Shareholder sign here-----Co-owner sign here----
DETACH CARD DETACH CARD
</TABLE>
<PAGE> 18
PERRIGO COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS DECEMBER 7, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Michael J. Jandernoz, 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 October 8, 1999, at the Annual Meeting of
Shareholders to be held on December 7, 1999, 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?
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