-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MTPSVAEC96nHw49L/cWJk011ATDl/rkyATfYC9yrWAKFF6eKNSs2bT3KOjg50XH8 Tj/vhIPum/wqvA45SS++CA== 0000950137-02-000325.txt : 20020414 0000950137-02-000325.hdr.sgml : 20020414 ACCESSION NUMBER: 0000950137-02-000325 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20011229 FILED AS OF DATE: 20020124 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERRIGO CO CENTRAL INDEX KEY: 0000820096 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 382799573 STATE OF INCORPORATION: MI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19725 FILM NUMBER: 02516051 BUSINESS ADDRESS: STREET 1: 515 EASTERN AVENUE CITY: ALLEGAN STATE: MI ZIP: 49010 BUSINESS PHONE: 6166738451 MAIL ADDRESS: STREET 1: 515 EASTERN AVENUE CITY: ALLEGAN STATE: MI ZIP: 49010 10-Q 1 c67152e10-q.txt QUARTERLY REPORT ================================================================================ UNITED STATES OF AMERICA SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q --------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: DECEMBER 29, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____ COMMISSION FILE NUMBER 0-19725 PERRIGO COMPANY -------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MICHIGAN 38-2799573 ------------------------------- ------------------ (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 515 EASTERN AVENUE ALLEGAN, MICHIGAN 49010 --------------------- ---------- (ADDRESS OF PRINCIPAL (ZIP CODE) EXECUTIVE OFFICES) (616) 673-8451 ---------------------------------------------------- (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) NOT APPLICABLE ---------------------------------------------------- (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. OUTSTANDING AT CLASS OF COMMON STOCK JANUARY 11, 2002 --------------------- ----------------- WITHOUT PAR 73,375,457 SHARES ================================================================================ PERRIGO COMPANY AND SUBSIDIARIES FORM 10-Q INDEX
PAGE NUMBER ------ PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements (Unaudited) Condensed consolidated statements of income -- For the quarter and the year-to-date ended December 29, 2001 and December 30, 2000 1 Condensed consolidated balance sheets -- December 29, 2001 and June 30, 2001 2 Condensed consolidated statements of cash flows -- For the year-to-date ended December 29, 2001 and December 30, 2000 3 Notes to condensed consolidated financial statements -- December 29, 2001 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risks 11 PART II. OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 - ----------
PERRIGO COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (unaudited)
Second Quarter Year-To-Date -------------------- ------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Net sales $228,694 $189,550 $445,810 $381,692 Cost of sales 167,439 138,787 333,666 285,181 PPA product discontinuation -- 20,200 -- 20,200 --------- --------- --------- --------- Gross profit 61,255 30,563 112,144 76,311 --------- --------- --------- --------- Operating expenses Distribution 4,265 3,961 8,282 7,418 Research and development 4,958 3,470 8,804 7,428 Selling and administration 24,216 22,641 46,792 44,227 Restructuring 2,046 -- 2,046 -- Unusual litigation -- (457) -- (457) --------- --------- --------- --------- 35,485 29,615 65,924 58,616 --------- --------- --------- --------- Operating income 25,770 948 46,220 17,695 Interest and other, net (113) (961) (276) (1,135) --------- --------- --------- --------- Income before income taxes 25,883 1,909 46,496 18,830 Income tax expense 9,318 1,089 16,841 7,476 --------- --------- --------- --------- Net income $ 16,565 $ 820 $ 29,655 $ 11,354 ========= ========= ========= ========= Basic earnings per share $ 0.23 $ 0.01 $ 0.40 $ 0.15 ========= ========= ========= ========= Diluted earnings per share $ 0.22 $ 0.01 $ 0.39 $ 0.15 ========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements. -1- PERRIGO COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
December 29, June 30, 2001 2001 ---------- ---------- (Unaudited) ASSETS Current assets Cash and cash equivalents $ 814 $ 11,016 Accounts receivable, net of allowances of $8,825 and $5,902, respectively 112,214 96,828 Inventories 161,677 161,112 Prepaid expenses and other current assets 10,613 8,771 Current deferred income taxes 23,463 19,203 Assets held for sale -- 16,207 ---------- ---------- Total current assets 308,781 313,137 Property and equipment 388,102 377,269 Less accumulated depreciation 178,593 165,182 ---------- ---------- 209,509 212,087 Goodwill, net of accumulated amortization of $10,459 and $10,459, respectively 47,471 47,195 Other 3,258 3,493 ---------- ---------- $ 569,019 $ 575,912 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 68,429 $ 84,385 Notes payable 6,631 12,759 Payrolls and related taxes 22,531 26,121 Accrued expenses 33,847 27,917 Income taxes 10,680 20,577 ---------- ---------- Total current liabilities 142,118 171,759 Deferred income taxes 17,525 17,419 Long-term debt 1,600 -- Other long-term liabilities 2,426 859 Shareholders' equity Preferred stock, without par value, 10,000 shares authorized, none issued -- -- Common stock, without par value, 200,000 shares authorized, 73,372 and 74,072 issued, respectively 99,218 108,952 Unearned compensation (903) (465) Accumulated other comprehensive income 420 428 Retained earnings 306,615 276,960 ---------- ---------- Total shareholders' equity 405,350 385,875 ---------- ---------- $ 569,019 $ 575,912 ========== ==========
See accompanying notes to condensed consolidated financial statements. -2- PERRIGO COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Year-To-Date -------------------------- 2002 2001 ---- ---- Cash Flows From (For) Operating Activities: Net income $ 29,655 $ 11,354 Depreciation and amortization 12,312 11,766 ---------- --------- 41,967 23,120 Accounts receivable (18,627) (9,903) Inventories (568) 5,462 Current and deferred income taxes (14,053) 19,023 Accounts payable (15,958) 7,110 Restructuring, net of cash 2,046 -- Other 3,606 10,401 ---------- --------- Net cash (for) from operating activities (1,587) 55,213 ---------- --------- Cash Flows (For) From Investing Activities: Additions to property and equipment (9,731) (10,116) Proceeds from sale of assets held for sale 14,161 -- Other (426) -- ---------- --------- Net cash from (for) investing activities 4,004 (10,116) ---------- --------- Cash Flows (For) From Financing Activities: Repayments of short-term debt (6,141) (156) Borrowings of long-term debt 1,600 -- Tax benefit of stock transactions 1,684 -- Issuance of common stock 10,036 34 Repurchase of common stock (21,454) (502) Other 1,645 117 ---------- --------- Net cash for financing activities (12,630) (507) ---------- --------- Net (Decrease) Increase in Cash and Cash Equivalents (10,213) 44,590 Cash and Cash Equivalents, at Beginning of Period 11,016 7,055 Effect of exchange rate changes on cash 11 -- ---------- --------- Cash and Cash Equivalents, at End of Period $ 814 $ 51,645 ========== ========= Supplemental Disclosures of Cash Flow Information: Interest paid $ 1,051 $ 503 Income taxes paid $ 29,970 $ 5,352
See accompanying notes to condensed consolidated financial statements. -3- PERRIGO COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 29, 2001 (in thousands) NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation have been included. The Company has reclassified certain amounts in the prior year to conform with the current year presentation. Operating results for the quarter and year-to-date ended December 29, 2001 are not necessarily indicative of the results that may be expected for the year ending June 29, 2002. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended June 30, 2001. In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 141, "Business Combinations". SFAS 141 requires all business combinations to be accounted for by the purchase method and eliminates use of the pooling-of-interests method. It also requires upon adoption of SFAS 142, that the Company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. Additionally, the statement requires recognition of intangible assets apart from goodwill and provides for additional disclosure of information related to a business combination. This SFAS is effective for all business combinations initiated after June 30, 2001. The adoption of this standard did not have a significant impact on the Company's financial statements. The Company's previous business combinations were accounted for using the purchase method. In July 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible Assets". SFAS 142 eliminates goodwill amortization, provides guidance and requirements for impairment testing of goodwill and discusses the treatment of other intangible assets. Adoption of the standard is required for fiscal years beginning after December 15, 2001. However, because earlier adoption is permissible, the Company adopted the standard effective July 1, 2001. The impairment tests of goodwill and other intangible assets as required by this standard have been performed and resulted in no impairment of these assets. Goodwill amortization, which is non-deductible for tax purposes, was $285 for the second quarter of fiscal 2001 and $568 for the first half of fiscal 2001. The effect on earnings per share of eliminating goodwill amortization was less than $.01 for both the second quarter and first half of fiscal 2001. -4- NOTE B - INVENTORIES December 29, June 30, 2001 2001 ---- ---- Finished goods $ 64,832 $ 73,996 Work in process 58,563 52,573 Raw materials 38,282 34,543 -------- -------- $161,677 $161,112 ======== ======== NOTE C - COMPREHENSIVE INCOME Comprehensive income is comprised of all changes in shareholders' equity during the period other than from transactions with shareholders. Comprehensive income consists of the following:
Second Quarter Year-to-Date -------------------- ------------------------ 2002 2001 2002 2001 ---- ---- ---- ---- Net income $16,565 $820 $29,655 $11,354 Other comprehensive income: Foreign currency translation adjustments (337) (156) (8) 74 ------- ---- ------- ------- Comprehensive income $16,228 $664 $29,647 $11,428 ======= ==== ======= =======
NOTE D - EARNINGS PER SHARE A reconciliation of the numerators and denominators used in the "basic" and "diluted" Earnings per Share (EPS) calculation follows:
Second Quarter Year-to-Date ------------------ ------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Numerator: Net income used for both "basic" and "diluted" EPS $ 16,565 $820 $29,655 $11,354 ======== ====== ======= ======= Denominator: Weighted average shares outstanding for basic EPS 73,343 73,522 73,842 73,513 Dilutive effect of stock options 1,884 431 2,222 428 -------- ------ ------- ------- Weighted average shares outstanding for diluted EPS 75,227 73,953 76,064 73,941 ======== ====== ======= =======
Options outstanding where the exercise price was higher than the market price were 458 and 2,985 for the first half of fiscal 2002 and 2001, respectively. These options are excluded from the diluted EPS calculation. NOTE E - COMMITMENTS AND CONTINGENCIES The Company is currently defending numerous individual lawsuits pending in various state and federal courts involving PPA, an ingredient formerly used in the manufacture of certain OTC cough/cold and diet products. The Company discontinued using PPA in November 2000 at the request of the FDA. These cases allege that the plaintiff suffered injury, generally some type of -5- stroke, from ingesting PPA-containing products. Most of these suits also name other manufacturers or retailers of PPA-containing products. These personal injury suits seek an unspecified amount of compensatory, exemplary and statutory damages. The Company maintains product liability insurance coverage for the claims asserted in these lawsuits. The Company believes that it has meritorious defenses to these lawsuits and intends to vigorously defend them. At this time, the Company cannot determine whether it will be named in additional PPA-related suits, the outcome of existing suits or the effect that PPA-related suits may have on its financial condition or operating results. In August 1999, the Company filed a civil antitrust lawsuit in the U.S. District Court for the Western District of Michigan against a group of vitamin raw material suppliers alleging the defendants conspired to fix the prices of vitamin raw materials sold to the Company. The relief sought includes money damages and a permanent injunction enjoining defendants from future violations of antitrust laws. The case is proceeding to trial and discovery is ongoing. In the second quarter of fiscal 2001, the Company received a settlement payment from a minor defendant of $457, net of attorney fees and expenses that were withheld prior to the disbursement of the funds to the Company. The Company can make no prediction as to the outcome of the litigation with the remaining defendants. NOTE F - SHAREHOLDER'S EQUITY During the second quarter of fiscal 2002, the Company extended its common share repurchase program. The program allows for additional common share purchases of $20,000, for a total of $40,000. Purchases are made on the open market, subject to market conditions. During the first half of fiscal 2002, the Company purchased 1,609 shares for $21,454. Additionally, common stock increased $10,036 primarily due to the exercise of 867 stock options. NOTE G - PRODUCT DISCONTINUATION In the second quarter of fiscal 2001, in response to recommendations by the Food and Drug Administration (FDA), the Company voluntarily halted shipments of all products containing the ingredient Phenylpropanolamine (PPA), effective immediately. In the second quarter of fiscal 2001, the Company recorded sales returns of $14,000 with a negative impact on gross profit of $3,800. Additionally, the Company recorded a charge of $20,200 in cost of sales related to the cost of returned product, product on hand, and product disposal costs. These PPA charges reduced earnings $0.21 per share in the second quarter of fiscal 2001. NOTE H - RESTRUCTURING COSTS In the second quarter of fiscal 2002, the Company sold its logistics facility in LaVergne, Tennessee. The proceeds from the sale were $14,161. The Company recorded a restructuring charge of $2,046 in connection with the sale of this facility. The facility had previously been reflected as an asset held for sale in the consolidated financial statements of the Company. NOTE I - SUBSEQUENT EVENT Subsequent to the second quarter of fiscal 2002, a large customer of the Company filed for protection under Chapter 11 of the U.S. Bankruptcy Code. As a result, the Company recorded a -6- charge of $1,900 in the second quarter of fiscal 2002. The effect on net income was approximately $1,200 or $.02 on earnings per share. The Company cannot predict the future sales to this customer or the resulting effect on net income and earnings per share. -7- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION SECOND QUARTER AND FIRST HALF OF FISCAL YEARS 2002 AND 2001 (in thousands) RESULTS OF OPERATIONS COMPARABILITY ISSUES Described below are certain events that affect the comparability of the Company's financial results in the second quarter and first half of the fiscal year. In the second quarter of fiscal 2001, the Company voluntarily halted shipments of all products containing the ingredient PPA in response to recommendations by the FDA. The Company recorded sales returns of $14,000 with a negative impact on gross profit of $3,800. Additionally, the Company recorded a charge of $20,200 in cost of sales related to the cost of returned product, product on hand and product disposal costs. These PPA charges reduced earnings $.21 per share in the second quarter of fiscal 2001. On June 29, 2001, the Company purchased Wrafton Laboratories Ltd. (Wrafton). Wrafton's financial results were included in the Company's consolidated financial statements beginning in the current fiscal year. On December 20, 2001, the Company sold its logistics facility located in LaVergne, Tennessee. The Company recorded a restructuring charge of $2,046. See Note H to the consolidated financial statements. In the second quarter of fiscal 2002, the Company recorded $1,900 in bad debt expense related to the bankruptcy of a large customer. See Note I to the consolidated financial statements. SECOND QUARTER OF FISCAL YEARS 2002 AND 2001 The Company's net sales increased $39,144 or 21% to $228,694 during fiscal 2002, from $189,550 in fiscal 2001. The increase is primarily due to recording the PPA product charge in fiscal 2001; the sale of PPA replacement products in fiscal 2002; the inclusion of Wrafton in current year results; increases in sales of existing cough and cold products to existing customers; and sales of new products. Excluding the PPA charge recorded in fiscal 2001, sales increased 12% in fiscal 2002. Gross profit increased $30,692 or 100% during fiscal 2002 compared to fiscal 2001. The increase was primarily due to recording the PPA product charges in fiscal 2001, which reduced gross profit $24,000 in total, increased sales in the current year and the inclusion of Wrafton in current year results. The gross profit percent to net sales was 26.8% for fiscal 2002 compared to 16.1% for fiscal 2001. Excluding the PPA charges in fiscal 2001, the gross profit percent would have been 26.8% for fiscal 2001. -8- Operating expenses increased $5,870 or 20% during fiscal 2002 primarily due to research and development, the restructuring charge, bad debt expense, and the inclusion of Wrafton in current year results. Operating expenses as a percent to net sales were 15.5% for fiscal 2002 compared to 15.6% for fiscal 2001. Research and development increased $1,488 or 43% during fiscal 2002 primarily due to expenses related to the development of new products. Selling and administration increased $1,575 primarily due to bad debt expense related to the bankruptcy of a large customer. The restructuring charge of $2,046 is related to the sale of the LaVergne, Tennessee logistics facility. Interest and other, net increased $848 primarily due to interest expense of $439 in fiscal 2002 compared to interest income of $586 in fiscal 2001. This difference in interest is the result of borrowings in fiscal 2002 versus investment of excess cash in fiscal 2001. The effective tax rate was 36.0% for fiscal 2002 compared to 57.0% in fiscal 2001. The effective tax rate for fiscal 2001 was significantly impacted by the decrease in earnings resulting from the PPA charges. FIRST HALF OF FISCAL YEARS 2002 AND 2001 The Company's net sales increased $64,118 or 17% to $445,810 for fiscal 2002, from $381,692 for fiscal 2001, primarily due to recording the PPA product charge in fiscal 2001; the sale of PPA replacement products in fiscal 2002; the inclusion of Wrafton in the current year results; increases in sales of existing cough and cold, analgesic and laxative products to existing customers and sales of new products. Excluding the PPA charge recorded in fiscal 2001, sales increased 13% during fiscal 2002. Retailers anticipated an early cough/cold/flu season with a strong peak in December. Retailers generally built inventory levels around that anticipated demand resulting in strong sales in the first half of fiscal 2002 for the Company. Because the early peak did not materialize, retailers may have inventory on hand to meet current demand. The ultimate effect on the Company's sales for the second half of fiscal 2002 will depend on the severity and longevity of the cough/cold/flu season and cannot be predicted with certainty. Gross profit increased $35,833 or 47% during fiscal 2002 compared to fiscal 2001. The increase was primarily due to recording the PPA product charges in fiscal 2001, which reduced gross margin $24,000 in total, increased sales in the current year and the inclusion of Wrafton in current year results. The gross profit percent to net sales was 25.2% for fiscal 2002 compared to 20.0% for fiscal 2001. Excluding the PPA charges in fiscal 2001, the gross profit percent would have been 25.4% for fiscal 2001. Operating expenses increased $7,308 or 13% for fiscal 2002 compared to fiscal 2001 primarily due to research and development, the restructuring charge, bad debt expense, and the inclusion of Wrafton in current year results. Operating expenses as a percent to net sales were 14.8% for fiscal 2002 compared to 15.4% for fiscal 2001. Research and development increased $1,376 or 19% from fiscal 2001 primarily due to expenses related to the development of new products. Selling and administration increased $2,565 primarily due to bad debt expense related to the bankruptcy of a large customer. The restructuring charge of $2,046 is related to the sale of the -9- LaVergne, Tennessee logistics facility. Interest and other, net increased $859 primarily due to interest expense of $819 for fiscal 2002 compared to interest income of $350 for fiscal 2001. This difference in interest is the result of borrowings in fiscal 2002 versus investment of excess cash in fiscal 2001. The effective tax rate was 36.2% for fiscal 2002 compared to 39.7% for fiscal 2001. LIQUIDITY AND CAPITAL RESOURCES For the first half of fiscal 2002, working capital, excluding cash, increased $35,487. Cash and cash equivalents decreased from $11,016 to $814 as the Company funded working capital requirements. Cash flow for operating activities was $1,587 for the first half of fiscal 2002. Cash flow was positively impacted primarily by net income of $29,655 and depreciation of $12,312. Cash flow was negatively impacted primarily by an increase in accounts receivable of $18,627 due to seasonal sales increases, a decrease in accounts payable of $15,958 due to lower production levels and a decrease in income taxes of $14,053 due to the timing of tax payments partially offset by higher reported income. Capital expenditures for facilities and equipment of $9,731 for the first half of fiscal 2002 were primarily for normal equipment replacement, productivity enhancements and capacity additions. In the second quarter of fiscal 2002, the Company sold its logistics facility in LaVergne, Tennessee. The proceeds from the sale were $14,161. During the second quarter of fiscal 2002, the Company continued its common share repurchase program. The Company purchased 1,609 shares for $21,454 during the first half of fiscal 2002. Common stock increased $10,036 primarily due to the exercise of 867 stock options. Long-term debt was $1,600 at December 29, 2001. The Company had $173,400 available on its $175,000 unsecured credit facility at December 29, 2001. Cash flows from operations and borrowings from its credit facility are expected to be sufficient to finance the known or foreseeable liquidity and capital needs of the Company. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS Certain statements in Management's Discussion and Analysis of Results of Operations and Financial Condition and other portions of this report are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. Please see the "Cautionary Note Regarding Forward-Looking Statements" on pages 24-29 of the Company's Form 10-K for the year ended June 30, 2001 for a discussion of certain important factors that relate to forward-looking statements contained in this report. In addition, the Company's future results may be affected by the impact of events flowing from the September 11, 2001 terrorist attacks, current economic conditions in the United States, retailers' financial difficulties or current cough/cold/flu seasonal trends. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Unless otherwise required by -10- applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Item 3. Quantitative and Qualitative Disclosures About Market Risks The Company is exposed to market risks, which include changes in interest rates and changes in the foreign currency exchange rate as measured against the U.S. dollar. The Company is exposed to interest rate changes primarily as a result of its variable rate line of credit used to finance working capital when necessary and for general corporate purposes. The Company had $1,600 outstanding on its credit facility at December 29, 2001. Management believes that a fluctuation in interest rates in the near future will not have a material impact on the Company's consolidated financial statements. The Company has international operations in Mexico and the United Kingdom. These operations transact business in the local currency, thereby creating exposures to changes in exchange rates. The Company does not currently have hedging or similar foreign currency contracts. Significant currency fluctuations could adversely impact foreign revenues; however, the Company does not expect any significant changes in foreign currency exposure in the near future. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is currently defending numerous individual lawsuits pending in various state and federal courts involving PPA, an ingredient formerly used in the manufacture of certain OTC cough/cold and diet products. The Company discontinued using PPA in November 2000 at the request of the FDA. These cases allege that the plaintiff suffered injury, generally some type of stroke, from ingesting PPA-containing products. Most of these suits also name other manufacturers or retailers of PPA-containing products. These personal injury suits seek an unspecified amount of compensatory, exemplary and statutory damages. The Company maintains product liability insurance coverage for the claims asserted in these lawsuits. The Company believes that it has meritorious defenses to these lawsuits and intends to vigorously defend them. At this time, the Company cannot determine whether it will be named in additional PPA-related suits, the outcome of existing suits or the effect that PPA-related suits may have on its financial condition or operating results. Item 4. Submission of Matters to a Vote of Security Holders At the Company's Annual Shareholders' Meeting held on October 30, 2001, the Company's shareholders voted on the following matter: 1. Election of three directors of the Company; The tabulation of votes provided by the Inspector of Election was as follows: -11- Nominee For Withhold/Against ------- --- ---------------- Larry D. Fredricks 67,109,940 1,637,034 L. R. Jalenak, Jr. 67,017,831 1,639,143 Michael J. Jandernoa 66,830,831 1,826,144 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit Number Description -------------- ----------- 10(l) Registrant's Executive Retention Plan, dated January 1, 2002. 10(m) Registrant's Nonqualified Deferred Compensation Plan, dated December 31, 2001. (b) Reports on Form 8-K The Company filed a report on Form 8-K on October 30, 2001 that announced it held its Annual Shareholders' Meeting in Allegan, Michigan. -12- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PERRIGO COMPANY -------------------------------------- (Registrant) Date: January 24, 2002 By: /s/David T. Gibbons ------------------ ---------------------------------------------------- David T. Gibbons President and Chief Executive Officer Date: January 24, 2002 By: /s/Douglas R. Schrank ------------------ ---------------------------------------------------- Douglas R. Schrank Executive Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) -13- EX-10.(L) 3 c67152ex10-l.txt REGISTRANT'S EXECUTIVE RETENTION PLAN CONFIDENTIAL ------------ EXHIBIT 10(l) PERRIGO 2001 EXECUTIVE RETENTION PLAN EFFECTIVE JANUARY 1, 2002 CONFIDENTIAL ------------ TABLE OF CONTENTS
PAGE ---- Article 1 Definitions......................................................................1 Article 2 Selection, Enrollment and Eligibility............................................6 2.1 Selection by Committee...........................................................6 2.2 Enrollment Requirements..........................................................6 2.3 Eligibility; Commencement of Participation.......................................6 Article 3 Forfeiture Lapse; Account Balance................................................6 3.1 Forfeiture Lapse.................................................................6 3.2 Forfeiture.......................................................................7 Article 4 Benefits.........................................................................7 4.1 Retention Benefit................................................................7 4.2 Employer Benefit.................................................................7 4.3 Withholding and Payroll Taxes....................................................8 Article 5 Beneficiary......................................................................8 5.1 Beneficiary......................................................................8 5.2 Beneficiary Designation; Change; Spousal Consent.................................8 5.3 Acknowledgment...................................................................9 5.4 No Beneficiary Designation.......................................................9 5.5 Doubt as to Beneficiary..........................................................9 5.6 Discharge of Obligations.........................................................9 Article 6 Termination, Amendment or Modification of the Plan...............................9 6.1 Termination, Amendment or Modification Prior to One Year Before Change in Control.........................................................9 6.2 Termination, Amendment or Modification Within One Year Before Change in Control or Following Change in Control.................................9 6.3 Termination of Plan Agreement...................................................10 Article 7 Other Benefits and Agreements...................................................10 7.1 Coordination with Other Benefits................................................10 Article 8 Trust...........................................................................10 8.1 Establishment of the Trust......................................................10 8.2 Interrelationship of the Plan and the Trust.....................................10 8.3 Accounts........................................................................11
i CONFIDENTIAL ------------ Article 9 Insurance Policies..............................................................12 9.1 Policies........................................................................12 9.2 Documents Required by Insurer...................................................12 Article 10 Administration..................................................................12 10.1 Committee Duties................................................................12 10.2 Agents..........................................................................12 10.3 Binding Effect of Decisions.....................................................12 10.4 Indemnity of Committee..........................................................13 10.5 Employer Information............................................................13 Article 11 Claims Procedures...............................................................13 11.1 Presentation of Claim...........................................................13 11.2 Notification of Decision........................................................13 11.3 Review of a Denied Claim........................................................14 11.4 Decision on Review..............................................................14 11.5 Legal Action....................................................................14 Article 12 Miscellaneous...................................................................15 12.1 Unsecured General Creditor......................................................15 12.2 Employer's Liability............................................................15 12.3 Nonassignability................................................................15 12.4 Not a Contract of Employment....................................................15 12.5 Furnishing Information..........................................................15 12.6 Terms...........................................................................15 12.7 Captions........................................................................16 12.8 Governing Law...................................................................16 12.9 Validity........................................................................16 12.10 Notice..........................................................................16 12.11 Successors......................................................................16 12.12 Spouse's Interest...............................................................16 12.13 Incompetent.....................................................................16 12.14 Distribution in the Event of Taxation...........................................17 12.15 Legal Fees to Enforce Rights After Change in Control............................17
ii CONFIDENTIAL ------------ iii CONFIDENTIAL ------------ PERRIGO 2002 EXECUTIVE RETENTION PLAN EFFECTIVE JANUARY 1, 2002 PURPOSE The purpose of this Plan is to provide financial incentives for a select group of management and highly compensated employees of L. Perrigo Company, a Michigan corporation, its subsidiaries, and certain subsidiaries of its parent corporation Perrigo Company, a Michigan corporation, to provide services to such companies both before and after certain Change in Control events. ARTICLE 1 DEFINITIONS For purposes hereof, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meaning: 1.1 "Beneficiary" shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 5 below, that are entitled to receive benefits under this Plan upon the death of a Participant. 1.2 "Beneficiary Designation Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries. 1.3 "Board" shall mean the Board of Directors of the Company. 1.4 "Change in Control" shall mean the date upon which the first of the following events occurs: (a) Any "Person" or "Group" (as such terms are defined in Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and regulations promulgated thereunder) that is or becomes the "Beneficial Owner" (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of an Employer or the Parent, or of any entity resulting from a merger or consolidation involving the Employer or the Parent, of more than fifty percent (50%) of the combined voting power of the then outstanding securities of the Employer, the Parent or such entity. (b) The individuals who, as of the time immediately following the election of directors at the Parent's 2001 Annual Meeting of Stockholders, are members of the board of directors of the Parent (the "Existing Directors"), cease, for any -1- CONFIDENTIAL ------------ reason, to constitute more than fifty percent (50%) of the number of authorized directors of the Parent as determined in the manner prescribed in the Parent's Articles of Incorporation and Bylaws; provided, however, that if the election, or nomination for election, by the Parent's stockholders of any new director was approved by a vote of at least fifty percent (50%) of the Existing Directors, such new director shall be considered an Existing Director; provided further, however, that no individual shall be considered an Existing Director if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies by or on behalf of anyone other than the board of directors of the Parent (a "Proxy Contest"), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest. (c) The consummation of (x) a merger, consolidation or reorganization to which an Employer or the Parent is a party, whether or not the Employer or the Parent is the Person surviving or resulting therefrom, or (y) a sale, assignment, lease, conveyance or other disposition of all or substantially all of the assets of the an Employer or the Parent, in one transaction or a series of related transactions, to any Person other than a wholly owned subsidiary (including lower tier subsidiaries) of the Parent, where any such transaction or series of related transactions as is referred to in clause (x) or clause (y) above in this subparagraph (c) (singly or collectively, a "Transaction") does not otherwise result in a "Change in Control" pursuant to subparagraph (a) of this definition of "Change in Control"; provided, however, that no such Transaction shall constitute a "Change in Control" under this subparagraph (c) if the Persons who were the stockholders of the Parent immediately before the consummation of such Transaction are the Beneficial Owners (within the meaning of Rule 13d-3 under the Exchange Act), immediately following the consummation of such Transaction, of fifty percent (50%) or more of the combined voting power of the then outstanding voting securities and the value of the then outstanding equity securities of all classes (voting or non-voting) of the Person surviving or resulting from any merger, consolidation or reorganization referred to in clause (x) above in this subparagraph (c) or the Person to whom the assets of the Employer or the Parent are sold, assigned, leased, conveyed or disposed of in any transaction or series of related transactions referred to in clause (y) above in this subparagraph (c), in substantially the same proportions in which such Beneficial Owners held voting stock in the Parent immediately before such Transaction. (d) The Parent or an Employer voluntarily files a petition for bankruptcy under Federal bankruptcy law, or an involuntary bankruptcy petition is filed against the Parent or an Employer under federal bankruptcy law, which involuntary petition is not dismissed within 120 days after the filing. -2- CONFIDENTIAL ------------ (e) The Parent or an Employer makes a general assignment for the benefit of creditors. (f) The Parent or an Employer seeks or consents to the appointment of a trustee, receiver, liquidator or similar person. Notwithstanding the foregoing, no transaction described in subparagraphs (a), (b) or (c) shall constitute a "Change in Control" if, in connection with such transaction, the board of directors of the Parent terminates the Rights Agreement, dated as of April 10, 1996, between Parent and State Street Bank & Trust Company, as Rights Agent (the "Rights Plan"), amends the Rights Plan to exempt such transaction from the application of the Rights Plan, or redeems the rights issued under the Rights Plan. With respect to Sections 1.4(d), (e) and (f) above, if the event described occurs only with respect to one or more Employers, but not the Parent, such event shall be a "Change in Control" only with respect to the Participants of that Employer or those Employers; if the event described occurs with respect to the Parent, it shall be a "Change in Control" with respect to all Employers. 1.5 "Claimant" shall have the meaning set forth in Section 11.1 below. 1.6 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 1.7 "Committee" shall mean the administrative committee appointed to manage and administer the Plan in accordance with the provisions of Article 10 below. 1.8 "Company" shall mean L. Perrigo Company, a Michigan corporation. 1.9 "Disability" shall mean a period of disability during which a Participant qualifies for benefits under the Participant's Employer's long-term disability plan (if the Participant participates in such a plan), or, if a Participant does not participate in such a plan, a period of disability during which the Participant would have qualified for benefits under the Employer's long-term disability plan had the Participant been a participant in such a plan (determined in the sole discretion of the Committee), or, if there is no such plan, as determined in the sole discretion of the Committee. 1.10 "Employer" shall mean the Company and/or any of its subsidiaries or subsidiaries of the Parent that have been selected by the Board to participate in the Plan. 1.11 "Employer Benefit" shall mean the benefit set forth in Section 4.2 below. 1.12 "Employer Death Benefit Account" shall mean the account described in Section 8.3(a)(iii). 1.13 "Forfeiture" shall mean a forfeiture of a Participant's rights to benefits under this Plan as set forth in Section 3.2 below. -3- CONFIDENTIAL ------------ 1.14 "Forfeiture Lapse Date" shall mean the date upon which a Participant's Retention Benefit is no longer subject to forfeiture in accordance with Section 3.1 below. 1.15 "Insurer" shall mean the insurance company or companies that issue one or more Policies. 1.16 "Parent" shall mean Perrigo Company, a Michigan corporation. 1.17 "Participant" shall mean any employee of an Employer (a) who is selected to participate in the Plan, (b) who elects to participate in the Plan, (c) who signs a Plan Agreement and a Beneficiary Designation Form, (d) whose signed Plan Agreement and Beneficiary Designation Form are accepted by the Committee, and (e) whose Plan Agreement has not terminated. A spouse or former spouse of a Participant shall not be treated as a Participant in the Plan or have any interest in the Plan, even if he or she has an interest in the Participant's benefits under the Plan as a result of applicable law or property settlements resulting from legal separation or divorce. 1.18 "Participant's Account" shall mean an account maintained in accordance with Section 8.3(a)(i) below. 1.19 "Person" shall mean a natural person, partnership (whether general or limited and whether domestic or foreign), a domestic or foreign limited liability company, trust, estate, association, corporation, joint venture, unincorporated organization, custodian, governmental or regulatory body, agency or authority, nominee or any other individual or entity in its own or representative capacity. 1.20 "Plan" shall mean the Perrigo 2002 Executive Retention Plan, which is defined by this instrument and by each Plan Agreement, all as may be amended from time to time. 1.21 "Plan Agreement" shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant shall provide for the entire benefit to which such Participant is entitled to under the Plan, and the Plan Agreement bearing the latest date of acceptance by the Committee shall govern such entitlement. 1.22 "Plan Year" shall begin on January 1 of each year and continue through December 31 of that year. 1.23 "Policy" or "Policies" shall mean the insurance policy or policies issued in the name of the Trustee in accordance with the terms and conditions of this Plan and each respective Plan Agreement. 1.24 "Retention Benefit" shall mean the benefit set forth in Section 4.1 below. -4- CONFIDENTIAL ------------ 1.25 "Retirement", "Retire(s)" or "Retired" shall mean, with respect to a Participant, severance from employment from all Employers for any reason other than a leave of absence, death or Disability on or after the earlier of the attainment of (a) age sixty-five (65) or (b) five (5) Years of Service. 1.26 "Termination of Employment" shall mean the ceasing of employment with all Employers, voluntarily or involuntarily, for any reason other than Retirement, Disability or death. A leave of absence which is authorized by the Participant's Employer shall not be deemed to be a Termination of Employment under this Plan. Notwithstanding the foregoing, no Termination of Employment shall occur merely by reason of the transfer of employment of a Participant from an Employer to another Employer or to any Person in which the Company or the Parent controls, directly or indirectly, more than forty percent (40%) of the voting power or any subsidiary of the Company that is not an Employer (the "Non-Participating Entities"). Rather, such a Participant's Termination of Employment shall occur on the ceasing of the Participant's employment with all Non-Participating Entities and all Employers. 1.27 "Trust" shall mean the trust established pursuant to the Trust Agreement. 1.28 "Trust Agreement" shall mean that certain Trust Agreement, dated as of January 1, 2002 between the Company and the Trustee, as may be amended from time to time. 1.29 "Trustee" shall mean the trustee named in the Trust and any successor trustee. 1.30 "Years of Service" shall mean the total number of full years in which a Participant has been employed by or in the service of one or more Employers, including authorized paid or unpaid leaves of absences and leaves due to Disability. For purposes of this definition only, a year of employment or service shall be a 365 day period (or 366 day period in the case of a leap year) that, for the first year of employment, commences on the Participant's date of hire (or engagement) and that, for any subsequent year, commences on an anniversary of that hiring date. Any partial year of employment shall not be counted. ARTICLE 2 SELECTION, ENROLLMENT AND ELIGIBILITY 2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to a select group of management and highly compensated employees of the Employers. From that group, the Committee shall select, in its sole discretion, employees of the Employers to participate in the Plan. 2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each selected employee shall complete, execute and return to the Committee a Plan Agreement and a Beneficiary Designation Form. In addition, the Committee, in its sole discretion, shall establish from time to time such other enrollment requirements as it determines are necessary. -5- CONFIDENTIAL ------------ 2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an employee selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Committee, that employee shall commence participation in the Plan on the date specified by the Committee. If a selected employee fails to meet all such requirements prior to that date, that employee shall not be eligible to participate in the Plan until the completion of those requirements. ARTICLE 3 FORFEITURE LAPSE; ACCOUNT BALANCE 3.1 FORFEITURE LAPSE. (a) GENERAL RULE. Upon commencement of participation, each Participant shall have the Retention Benefit described in Section 4.1, subject to forfeiture as provided in Section 3.2. If a Participant has not Retired, died, suffered a Disability or experienced a Termination of Employment prior to 90 days prior to a Change in Control, the Participant's Retention Benefit shall no longer be subject to forfeiture as of the later of (i) six months after the date of the Change in Control, or (ii) January 1 of the Plan Year following the Change in Control (the "Forfeiture Lapse Date"). (b) EARLY FORFEITURE LAPSE DATE. If at any time on or after 90 days prior to a Change in Control and prior to the Forfeiture Lapse Date a Participant Retires, dies, suffers a Disability or experiences an involuntarily termination of employment with all Employers, the Participant's (or the Participant's Beneficiary's in the event of the Participant's death) Retention Benefit shall no longer be subject to forfeiture on the later of (i) the date of the Change in Control or (ii) the date of such Retirement, death, Disability or involuntary termination of employment, and such date (rather than the later of (x) six months after the date of the Change in Control or (y) January 1 of the Plan Year following the Change in Control) shall be considered the "Forfeiture Lapse Date" for purposes of this Plan. 3.2 FORFEITURE. Notwithstanding Section 3.1 above, a Participant shall forfeit any right to benefits under this Plan if he or she: (a) Retires, dies, suffers a Disability or experiences a Termination of Employment prior to 90 days prior to a Change in Control; or (b) Voluntarily terminates his or her employment (other than by death, Retirement or Disability) with all of his or her Employers at any time on or after 90 days prior to the date of a Change in Control and prior to the later of (i) six months after the date of the Change in Control, or (ii) January 1 of the Plan Year following the Change in Control. -6- CONFIDENTIAL ------------ ARTICLE 4 BENEFITS 4.1 RETENTION BENEFIT. (a) BENEFIT AND PAYMENT. The "Retention Benefit" shall be a dollar amount that is equal to the Participant's Account as of any given date. The Retention Benefit shall be calculated as of the payment date and shall be paid to the Participant, or his or her Beneficiary, within 90 days of the Forfeiture Lapse Date. (b) PARTICIPANT'S ACCOUNT. Within 60 days of the end of each calendar year quarter (March 31, June 30, September 30, December 31), each Participant shall receive a statement setting forth the balance of his or her Participant's Account as of the end of such period. 4.2 EMPLOYER BENEFIT. (a) ELIGIBILITY. The Participant's Employer shall be entitled to a contingent "Employer Benefit,"described in Section 4.2(b) below, if: (i) A Participant Retires, dies, suffers a Disability or experiences a Termination of Employment prior to 90 days prior to a Change in Control; (ii) A Participant voluntarily terminates his or her employment (other than by death, Retirement or Disability) with all of his or her Employers at any time on or after 90 days prior to the date of a Change in Control and prior to the later of (i) six months after the date of the Change in Control, or (ii) January 1 of the Plan Year following the Change in Control; or (iii) There is a positive balance in the Employer Death Benefit Account. (b) BENEFIT AND PAYMENT. The "Employer Benefit" shall be a dollar amount that is equal to the balance of a Participant's Account who forfeits his or her rights to such Participant's Retention Benefit, measured as of the date of payment. In the case of 4.2(a)(iii), the Employer Benefit shall be an amount equal to the Employer Death Benefit Account. The Employer Benefit shall be paid to the Participant's Employer within 120 days following the event described in Section 4.2(a) above. 4.3 WITHHOLDING AND PAYROLL TAXES. The Trustee shall withhold from any and all benefit payments made under this Article 4, all federal, state and local income, employment, excise and other taxes required to be withheld in connection with the payment of benefits hereunder, in amounts to be determined in the sole discretion of the Trustee. -7- CONFIDENTIAL ------------ ARTICLE 5 BENEFICIARY 5.1 BENEFICIARY. Each Participant shall have the right, at any time, to designate his or her Beneficiary (both primary as well as contingent) to receive any benefits payable under the Plan to a Beneficiary upon the death of a Participant. 5.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time. If the Participant names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Committee, must be signed by that Participant's spouse and returned to the Committee. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee before his or her death. 5.3 ACKNOWLEDGMENT. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Committee or its designated agent. 5.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a Beneficiary as provided in Sections 5.1, 5.2 and 5.3 above, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan shall be paid to the Participant's issue upon the principle of representation, and if there is no such issue, to the executor or personal representative of the Participant's estate. 5.5 DOUBT AS TO BENEFICIARY. If the Trustee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Trustee shall have the right, exercisable in its discretion, to withhold such payments until this matter is resolved to the Trustee's satisfaction. 5.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant's Plan Agreement shall terminate upon such full payment of benefits. -8- CONFIDENTIAL ------------ ARTICLE 6 TERMINATION, AMENDMENT OR MODIFICATION OF THE PLAN 6.1 TERMINATION, AMENDMENT OR MODIFICATION PRIOR TO ONE YEAR BEFORE CHANGE IN CONTROL. Prior to one year before a Change in Control, each Employer reserves the right to terminate, amend or modify the Plan or any related Plan Agreement, in whole or in part, with respect to Participants whose services are retained by that Employer. Notwithstanding the foregoing, no termination, amendment or modification shall be effective to decrease or reduce a Participant's potential benefits under this Plan below the balance in his or her Participant's Account as of the effective date of the termination, amendment or modification, adjusted for investment gains and losses thereon. 6.2 TERMINATION, AMENDMENT OR MODIFICATION WITHIN ONE YEAR BEFORE CHANGE IN CONTROL OR FOLLOWING CHANGE IN CONTROL. Within one year before a Change in Control and thereafter ("No Change Period"), the Parent, the Company, any subsidiary of the Company, any Employer or any corporation, trust or other Person that succeeds to all or any substantial portion of the assets of any of the above described entities, shall not have the right to terminate, amend or modify the Plan and/or any Plan Agreement in effect prior to such Change in Control, and all benefits under the Plan and any such Plan Agreement shall thereafter be paid in accordance with the terms of the Plan and such Plan Agreement, as in effect immediately prior to the No Change Period. If the Plan is terminated, amended, or modified within the No Change Period, such termination, amendment or modification shall be considered void as of the date of the termination, amendment or modification. Any provision of this Plan or any Plan Agreement to the contrary shall be construed in accordance with this Section 6.2. 6.3 TERMINATION OF PLAN AGREEMENT. Absent the earlier termination, modification or amendment of the Plan, or a Participant's forfeiture of his or her benefits under this Plan, the Plan Agreement of any Participant shall terminate upon the full payment of the applicable benefit provided under Article 4. ARTICLE 7 OTHER BENEFITS AND AGREEMENTS 7.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a Participant and Participant's Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided. -9- ARTICLE 8 TRUST 8.1 ESTABLISHMENT OF THE TRUST; PREMIUMS. The Employers shall establish the Trust and shall at least annually transfer over to the Trust such assets as the Committee determines in its sole and absolute discretion. If directed by the Committee, the Employers shall pay any and all Policy premiums and other costs directly to the Insurer. In addition, if the Trust incurs any tax liability, the Employers shall contribute to the Trust sufficient funds to allow the Trustee to pay any such tax liability. 8.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan and each Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Trustee, Participant and a Participant's Beneficiary as to the assets of the Trust. The Employers shall at all times remain liable to carry out their obligations under the Plan. The Employers and the Company shall cooperate with each other as is necessary to minimize the Trust's tax liability. 8.3 ACCOUNTS. (a) The Trustee shall establish and maintain the following separate accounts: (i) A "Participant's Account" for each Participant, to which the Employers' contributions, or a portion thereof, and earnings thereon shall be allocated, and the amount of such Participant's Account (which can be expressed in dollar terms or as an undivided percentage of the entire Trust corpus) shall be used to calculate the Retention Benefit or the Employer Benefit in accordance with this Plan and the Trust; (ii) An "Administrative Account" for the administrative expenses of the Trust, to which a portion of the Employers' contributions and earnings thereon may be allocated to and held, the assets of which are to be used to pay the administrative expenses, including all taxes, of the Trust in accordance with the terms and provisions of this Plan and the Trust; and (iii) A "Employer Death Benefit Account" to which shall be allocated the amount described in this subsection. In the event of the death of an insured who is insured by a Policy, the excess of (a) the death benefit received from such Policy over (b) the cash surrender value of such Policy as of the date immediately preceding the death of the insured, shall be allocated to the Employer Death Benefit Account. Such amount shall be distributed as an Employer Benefit pursuant to Section 4.2(b). (b) Prior to the date that is 90 days prior to a Change in Control, the Committee shall direct the Trustee in writing as to the allocation of the Employers' contributions, and earnings of the Trust, to the accounts described in Section 8.3(a)(i) & (ii) above as of the end of a calendar year quarter (March 31, June 30, September 30, December 31) as soon as practicable after the end of such calendar year quarter. After a Change -10- CONFIDENTIAL ------------ in Control, the Trustee shall use the allocation set forth in the last quarterly statement received from the Committee prior to the date that is 90 days prior to a Change in Control, and shall allocate any change in the value of the assets in the Trust among the accounts based on the percentage interest in the assets of the Trust that each account had as of the date of such written statement, based on the fair market value of the assets in the Trust on the date of such written statement. (c) Each of the accounts described in Section 8.3(a) above shall qualify for and be treated as separate shares under Code Section 663(c). ARTICLE 9 INSURANCE POLICIES 9.1 POLICIES. The Committee may direct the Trustee in writing to acquire one or more Policies in the Trustee's name. Such direction shall include the Insurer, type of contract and amount. The Trustee shall be the sole and absolute owner and beneficiary of each Policy, with all rights of an owner and beneficiary, including without limitation, the right to surrender Policies for their cash surrender values and to take one or more loans against one or more Policies. Notwithstanding the foregoing, the Trustee shall exercise its ownership rights in each Policy only in accordance with the terms of this Plan, the respective Plan Agreements and the Trust. 9.2 DOCUMENTS REQUIRED BY INSURER. The Trustee, the Participant's Employer and the Participant shall sign such documents and provide such information as may be required from time to time by the Insurer. ARTICLE 10 ADMINISTRATION 10.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee which shall consist of persons approved by the Board. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to direct the Trustee prior to a Change in Control with regard to any Plan matter, make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan; provided however that any conflict between application of this Section and the Trust Agreement shall be resolved in favor of the Trust Agreement. 10.2 AGENTS. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with counsel who may be counsel to any Employer. 10.3 BINDING EFFECT OF DECISIONS. Prior to a Change in Control, the decision or action of the Committee with respect to any question arising out of or in connection with the -11- CONFIDENTIAL ------------ administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan; provided however, that any conflict between the application of this Section and the Trust Agreement shall be resolved in favor of the Trust Agreement. 10.4 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless the members of the Committee against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee or any of its members. 10.5 EMPLOYER INFORMATION. To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of its Participants, the date and circumstances of the Retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Committee may reasonably require. ARTICLE 11 CLAIMS PROCEDURES 11.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. 11.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim within 60 days of receipt of that claim, and shall notify the Claimant in writing: (a) that the Claimant's requested determination has been made, and that the claim has been allowed in full; or (b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: (i) the specific reason(s) for the denial of the claim, or any part of it; (ii) the specific reference(s) to pertinent provisions of the Plan upon which such denial was based; -12- CONFIDENTIAL ------------ (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and (iv) an explanation of the claim review procedure set forth in Section 11.3 below. 11.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than 30 days after the review procedure began, the Claimant (or the Claimant's duly authorized representative): (a) may review pertinent documents; (b) may submit written comments or other documents; and/or (c) may request a hearing, which the Committee, in its sole discretion, may grant. 11.4 DECISION ON REVIEW. The Committee shall render its decision on review promptly, and not later than 60 days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee's decision must be rendered within 120 days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (a) specific reasons for the decision; (b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and (c) such other matters as the Committee deems relevant. 11.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of this Article 11 is a mandatory prerequisite to a Claimant's right to commence any litigation with respect to any claim for benefits under this Plan. ARTICLE 12 MISCELLANEOUS 12.1 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or assets of an Employer. Any and all of an Employer's assets shall be, and remain, the general, unpledged and unrestricted assets of the Employer. An Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. -13- CONFIDENTIAL ------------ 12.2 EMPLOYER'S LIABILITY. An Employer's liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer and a Participant. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan and his or her Plan Agreement. 12.3 NONASSIGNABILITY. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable, except that the foregoing shall not apply to any family support obligations set forth in a court order. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. 12.4 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an "at will" employment relationship that can be terminated at any time for any reason, with or without cause, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be employed in the service of any Employer, or to interfere with the right of any Employer to discipline or discharge the Participant at any time. 12.5 FURNISHING INFORMATION. A Participant will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary. 12.6 TERMS. Whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 12.7 CAPTIONS. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 12.8 GOVERNING LAW. The provisions of this Plan shall be construed and interpreted according to the laws of the State of Michigan, without regard to principles of conflict of laws. 12.9 VALIDITY. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted -14- CONFIDENTIAL ------------ herein. 12.10 NOTICE. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: L. Perrigo Company 515 Eastern Avenue Allegan, Michigan 49010 Attention: Senior Vice President, Human Resources Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant. 12.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the benefit of the Participant's Employer and its successors and assigns and the Participant, the Participant's Beneficiaries, and their permitted successors and assigns. 12.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse's will, nor shall such interest pass under the laws of intestate succession. 12.13 INCOMPETENT. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetency, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount. 12.14 DISTRIBUTION IN THE EVENT OF TAXATION. If, for any reason, all or any portion of a Participant's benefit under this Plan becomes taxable to the Participant prior to the Forfeiture Lapse Date, a Participant may petition the Committee, if prior to a Change in Control, or the Trustee, after a Change in Control, for a distribution of assets sufficient to meet the Participant's tax liability (including additions to tax, penalties and interest). Upon the grant of such a petition, which grant shall not be unreasonably withheld, the Trustee shall -15- CONFIDENTIAL ------------ distribute to the Participant from the Trust immediately available funds in an amount equal to that Participant's federal, state and local tax liability associated with such taxation, which liability shall be measured by using that Participant's then current highest federal, state and local marginal tax rate, plus the rates or amounts for the applicable additions to tax, penalties and interest. If the petition is granted, the tax liability distribution shall be made within 90 days of the date when the Participant's petition is granted. 12.15 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL. The Company is aware that upon the occurrence of a Change in Control, the Board (which might then be composed of new members), or a shareholder of the Company, an Employer or of any successor corporation, might then cause or attempt to cause the Company, an Employer or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause the Company or an Employer to institute, or may institute, litigation seeking to deny Participants the benefits intended under the Plan. In these circumstances, the purpose of the Plan could be frustrated. Accordingly, if, following a Change in Control, it should appear to any Participant that the Company, an Employer or the Committee has failed to comply with any of its obligations under the Plan or any agreement thereunder or, if the Company, an Employer or any other person takes any action to declare the Plan or the Trust void or unenforceable or institutes any litigation or other legal action designed to deny, diminish or to recover from any Participant or Beneficiary the benefits intended to be provided, including without limitation the assets in the Trust, then the Company and the Employer of the Participant (or the former Employer of a deceased Participant in the case of a Beneficiary) irrevocably authorizes such person to retain counsel of his or her choice at the expense of the Company and such Employer (who shall be jointly and severally liable) to represent such person in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company, the Employer, the Committee, or any director, officer, shareholder or other person affiliated with the Company or any successor thereto in any jurisdiction. -16- CONFIDENTIAL ------------ IN WITNESS WHEREOF the Company has signed this Plan document as of January 1, 2002. L. PERRIGO COMPANY, a Michigan corporation By: ----------------------------------- Its: ------------------------------- -17- EX-10.(M) 4 c67152ex10-m.txt REGISTRANT'S NONQUALIFIED DEFERRED COMPENSATION PL EXHIBIT 10(m) L. PERRIGO COMPANY Nonqualified Deferred Compensation Plan Master Plan Document ================================================================================ EFFECTIVE JULY 1, 2001 COPYRIGHT (C) 2001 BY CLARK/BARDES CONSULTING - COMPENSATION RESOURCE GROUP, A DIVISION OF CLARK/BARDES CONSULTING, INC. ALL RIGHTS RESERVED TABLE OF CONTENTS Page ---- PURPOSE ............................................................1 ARTICLE 1 DEFINITIONS.................................................1 ARTICLE 2 SELECTION, ENROLLMENT, ELIGIBILITY..........................6 2.1 Selection by Committee......................................6 2.2 Enrollment Requirements.....................................6 2.3 Eligibility; Commencement of Participation..................6 2.4 Termination of Participation and/or Deferrals...............6 ARTICLE 3 DEFERRAL COMMITMENTS/COMPANY CONTRIBUTION/COMPANY MATCHING/ VESTING/CREDITING/TAXES.....................................7 3.1 Minimum Deferrals...........................................7 3.2 Maximum Deferral............................................7 3.3 Election to Defer; Effect of Election Form..................7 3.4 Withholding of Annual Deferral Amounts......................8 3.5 Annual Company Contribution Amount..........................8 3.6 Annual Company Matching Amount..............................8 3.7 Investment of Trust Assets..................................8 3.8 Vesting.....................................................9 3.9 Crediting/Debiting of Account Balances......................9 3.10 FICA and Other Taxes.......................................11 ARTICLE 4 SHORT-TERM PAYOUT; UNFORESEEABLE FINANCIAL EMERGENCIES; WITHDRAWAL ELECTION...........................11 4.1 Short-Term Payout..........................................11 4.2 Other Benefits Take Precedence Over Short-Term.............12 4.3 Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies................................................12 4.4 Withdrawal Election........................................12 ARTICLE 5 RETIREMENT BENEFIT.........................................12 5.1 Retirement Benefit.........................................12 5.2 Payment of Retirement Benefit..............................12 5.3 Death Prior to Completion of Retirement Benefit............13 i ARTICLE 6 PRE-RETIREMENT SURVIVOR BENEFIT............................13 6.1 Pre-Retirement Survivor Benefit............................13 6.2 Payment of Pre-Retirement Survivor Benefit.................13 ARTICLE 7 TERMINATION BENEFIT........................................13 7.1 Termination Benefit........................................13 7.2 Payment of Termination Benefit.............................13 ARTICLE 8 DISABILITY WAIVER AND BENEFIT..............................14 8.1 Disability Waiver..........................................14 8.2 Continued Eligibility; Disability Benefit..................14 ARTICLE 9 BENEFICIARY DESIGNATION....................................14 9.1 Beneficiary................................................14 9.2 Beneficiary Designation; Change; Spousal Consent...........15 9.3 Acknowledgment.............................................15 9.4 No Beneficiary Designation.................................15 9.5 Doubt as to Beneficiary....................................15 9.6 Discharge of Obligations...................................15 ARTICLE 10 LEAVE OF ABSENCE...........................................15 10.1 Paid Leave of Absence......................................15 10.2 Unpaid Leave of Absence....................................16 ARTICLE 11 TERMINATION, AMENDMENT OR MODIFICATION.....................16 11.1 Termination................................................16 11.2 Amendment..................................................17 11.3 Plan Agreement.............................................18 11.4 Effect of Payment..........................................18 ARTICLE 12 ADMINISTRATION.............................................18 12.1 Committee Duties...........................................18 12.2 Administration Upon Change In Control......................18 12.3 Agents.....................................................19 12.4 Binding Effect of Decisions................................19 12.5 Indemnity of Committee.....................................19 12.6 Employer Information.......................................19 ARTICLE 13 OTHER BENEFITS AND AGREEMENTS..............................19 ii 13.1 Coordination with Other Benefits...........................19 ARTICLE 14 CLAIMS PROCEDURES..........................................19 14.1 Presentation of Claim......................................19 14.2 Notification of Decision...................................20 14.3 Review of a Denied Claim...................................20 14.4 Decision on Review.........................................20 14.5 Legal Action...............................................21 ARTICLE 15 TRUST......................................................21 15.1 Establishment of the Trust.................................21 15.2 Interrelationship of the Plan and the Trust................21 15.3 Distributions From the Trust...............................21 ARTICLE 16 MISCELLANEOUS..............................................21 16.1 Status of Plan.............................................21 16.2 Unsecured General Creditor.................................21 16.3 Employer's Liability.......................................21 16.4 Nonassignability...........................................22 16.5 Not a Contract of Employment...............................22 16.6 Furnishing Information.....................................22 16.7 Terms......................................................22 16.8 Captions...................................................22 16.9 Governing Law..............................................22 16.10 Notice.....................................................22 16.11 Successors.................................................23 16.12 Spouse's Interest..........................................23 16.13 Validity...................................................23 16.14 Incompetent................................................23 16.15 Court Order................................................23 16.16 Distribution in the Event of Taxation......................23 16.17 Insurance..................................................24 16.18 Legal Fees To Enforce Rights After Change in Control.......24 iii L. PERRIGO COMPANY NONQUALIFIED DEFERRED COMPENSATION PLAN Effective July 1, 2001 PURPOSE The purpose of this Plan is to provide specified benefits to a select group of management or highly compensated Employees and Directors who contribute materially to the continued growth, development and future business success of L. Perrigo Company, a Michigan corporation, and its related entities, if any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. ARTICLE 1 DEFINITIONS For the purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 1.1 "Account Balance" shall mean, with respect to a Participant, a credit on the records of the Employer equal to the sum of (i) the Deferral Account balance, (ii) the Company Contribution Account balance, and (iii) the Company Matching Account balance. The Account Balance, and each other specified account balance, shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan. 1.2 "Annual Bonus" shall mean any compensation, in addition to Base Annual Salary, payable to a Participant as an Employee during any applicable Plan Year under any Employer's annual bonus and cash incentive plans, excluding stock options and restricted stock. 1.3 "Annual Company Contribution Amount" shall mean, for any one Plan Year, the amount determined in accordance with Section 3.5. 1.4 "Annual Company Matching Amount" for any one Plan Year shall be the amount determined in accordance with Section 3.6. 1.5 "Annual Deferral Amount" shall mean that portion of a Participant's Base Annual Salary, Annual Bonus and Directors Fees that a Participant elects to have and is deferred in accordance with Article 3 for any one Plan Year. In the event of a Participant's Retirement, Disability (if deferrals cease in accordance with Section 8.1), death or a Termination of Employment prior to the end of a Plan Year, such year's Annual Deferral Amount shall be the actual amount withheld prior to such event. 1.6 "Annual Installment Method" shall be an annual installment payment over the number of years selected by the Participant in accordance with this Plan, calculated as follows: the vested Account Balance of the Participant shall be calculated as of the close of business on the last business day of the year. The annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one and the denominator -1- of which is the remaining number of annual payments due the Participant. By way of example, if the Participant elects a ten (10) year Annual Installment Method, the first payment shall be 1/10 of the vested Account Balance, calculated as described in this definition. The following year, the payment shall be 1/9 of the vested Account Balance, calculated as described in this definition. Each annual installment shall be paid no later than sixty (60) days after the last business day of the applicable year. 1.7 "Base Annual Salary" shall mean the annual cash compensation relating to services performed during any calendar year, whether or not paid in such calendar year or included on the Federal Income Tax Form W-2 for such calendar year, excluding bonuses, commissions, overtime, fringe benefits, stock options, restricted stock, relocation expenses, incentive payments, non-monetary awards, directors fees and other fees, and automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Employee's gross income). Base Annual Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or non-qualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant's gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any Employer; provided, however, that all such amounts will be included in compensation only to the extent that had there been no such plan, the amount would have been payable in cash to the Employee. 1.8 "Beneficiary" shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 9, that are entitled to receive benefits under this Plan upon the death of a Participant. 1.9 "Beneficiary Designation Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries. 1.10 "Board" shall mean the board of directors of the Company. 1.11 "Change in Control" shall mean the date on which (i) any Person (as that term is defined in Section 2(2) of the Securities Act of 1933 and Section 13(d) of the Securities Exchange Act of 1934, as amended from time to time) acquires or otherwise becomes the owner of voting stock of the Company or Perrigo Company ("Perrigo") which, together with all other voting stock of the Company or Perrigo, as applicable, then owned or controlled by such Person, represents fifty percent (50%) or more of the then issued and outstanding voting stock of the Company or Perrigo, or (ii) the composition of the Company or Perrigo's Board of Directors is comprised of individuals who are neither incumbent members nor nominated or appointed by a majority of such incumbent members or their nominees. 1.12 "Claimant" shall have the meaning set forth in Section 14.1. 1.13 "Code" shall mean the Internal Revenue Code of 1986, as it may be amended from time to time. 1.14 "Committee" shall mean the committee described in Article 12. -2- 1.15 "Company" shall mean L. Perrigo Company, a Michigan corporation, and any successor to all or substantially all of the Company's assets or business. 1.16 "Company Contribution Account" shall mean (i) the sum of the Participant's Annual Company Contribution Amounts, plus (ii) amounts credited or debited in accordance with all the applicable crediting and debiting provisions of this Plan that relate to the Participant's Company Contribution Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant's Company Contribution Account. 1.17 "Company Matching Account" shall mean (i) the sum of all of a Participant's Annual Company Matching Amounts, plus (ii) amounts credited in accordance with all the applicable crediting and debiting provisions of this Plan that relate to the Participant's Company Matching Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant's Company Matching Account. 1.18 "Deduction Limitation" shall mean the following described limitation on a benefit that may otherwise be distributable pursuant to the provisions of this Plan. Except as otherwise provided, this limitation shall be applied to all distributions that are "subject to the Deduction Limitation" under this Plan. If an Employer determines in good faith prior to a Change in Control that there is a reasonable likelihood that any compensation paid to a Participant for a taxable year of the Employer would not be deductible by the Employer solely by reason of the limitation under Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution to the Participant pursuant to this Plan prior to the Change in Control is deductible, the Employer may defer all or any portion of a distribution under this Plan. Any amounts deferred pursuant to this limitation shall continue to be credited/debited with additional amounts in accordance with Section 3.9 below, even if such amount is being paid out in installments. The amounts so deferred and amounts credited thereon shall be distributed to the Participant or his or her Beneficiary (in the event of the Participant's death) at the earliest possible date, as determined by the Employer in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Employer during which the distribution is made will not be limited by Section 162(m), or if earlier, the effective date of a Change in Control. Notwithstanding anything to the contrary in this Plan, the Deduction Limitation shall not apply to any distributions made after a Change in Control. 1.19 "Deferral Account" shall mean (i) the sum of all of a Participant's Annual Deferral Amounts, plus (ii) amounts credited in accordance with all the applicable crediting and debiting provisions of this Plan that relate to the Participant's Deferral Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account. 1.20 "Director" shall mean any member of the board of directors of any Employer. 1.21 "Directors Fees" shall mean the annual fees paid by any Employer, including retainer fees and meetings fees, as compensation for serving on the board of directors. -3- 1.22 "Disability" shall mean a period of disability during which a Participant qualifies for permanent disability benefits under the Participant's Employer's long-term disability plan, or, if a Participant does not participate in such a plan, a period of disability during which the Participant would have qualified for permanent disability benefits under such a plan had the Participant been a participant in such a plan, as determined in the sole discretion of the Committee. If the Participant's Employer does not sponsor such a plan, or discontinues to sponsor such a plan, Disability shall be determined by the Committee in its sole discretion. 1.23 "Disability Benefit" shall mean the benefit set forth in Article 8. 1.24 "Election Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan. 1.25 "Employee" shall mean a person who is an employee of any Employer. 1.26 "Employer(s)" shall mean the Company and/or its parent and any of their respective subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor. 1.27 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time. 1.28 "First Plan Year" shall mean the period beginning July 1, 2001 and ending December 31, 2001. 1.29 "401(k) Plan" shall be that certain L. Perrigo Company Profit-Sharing and Investment Plan, as amended from time to time. 1.30 "Participant" shall mean any Employee or Director (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Plan Agreement, an Election Form and a Beneficiary Designation Form, (iv) whose signed Plan Agreement, Election Form and Beneficiary Designation Form are accepted by the Committee, (v) who commences participation in the Plan, and (vi) whose Plan Agreement has not terminated. A spouse or former spouse of a Participant shall not be treated as a Participant in the Plan or have an account balance under the Plan, even if he or she has an interest in the Participant's benefits under the Plan as a result of applicable law or property settlements resulting from legal separation or divorce. 1.31 "Plan" shall mean the Company's Nonqualified Deferred Compensation Plan, which shall be evidenced by this instrument and by each Plan Agreement, as they may be amended from time to time. 1.32 "Plan Agreement" shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant and the Participant's Employer shall provide for the entire benefit to which such Participant is entitled under the Plan; should there be more than one Plan Agreement, the Plan Agreement bearing the latest date of acceptance by the Employer shall supersede all previous Plan Agreements in their entirety and shall govern such entitlement. The terms of any Plan Agreement may be different for any Participant, -4- and any Plan Agreement may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan; provided, however, that any such additional benefits or benefit limitations must be agreed to by both the Employer and the Participant. 1.33 "Plan Year" shall, except for the First Plan Year, mean a period beginning on January 1 of each calendar year and continuing through December 31 of such calendar year. 1.34 "Pre-Retirement Survivor Benefit" shall mean the benefit set forth in Article 6. 1.35 "Retirement", "Retire(s)" or "Retired" shall mean, with respect to an Employee, severance from employment from all Employers for any reason other than a leave of absence, death or Disability on or after the earlier of the attainment of (a) age sixty-five (65) or (b) five (5) Years of Service; and shall mean with respect to a Director who is not an Employee, severance of his or her directorships with all Employers on or after the later of the attainment of (a) age sixty-five (65) or (b) in the sole discretion of the Committee, an age later than age sixty-five (65). If a Participant is both an Employee and a Director, Retirement shall not occur until he or she Retires as both an Employee and a Director, which Retirement shall be deemed to be a Retirement as a Director; provided, however, that such a Participant may elect, at least thirteen months prior to Retirement and in accordance with the policies and procedures established by the Committee, to Retire for purposes of this Plan at the time he or she Retires as an Employee, which Retirement shall be deemed to be a Retirement as an Employee. 1.36 "Retirement Benefit" shall mean the benefit set forth in Article 5. 1.37 "Short-Term Payout" shall mean the payout set forth in Section 4.1. 1.38 "Termination Benefit" shall mean the benefit set forth in Article 7. 1.39 "Termination of Employment" shall mean the severing of employment with all Employers, or service as a Director of all Employers, voluntarily or involuntarily, for any reason other than Retirement, Disability, death or an authorized leave of absence. If a Participant is both an Employee and a Director, a Termination of Employment shall occur only upon the termination of the last position held; provided, however, that such a Participant may elect, at least three years before Termination of Employment and in accordance with the policies and procedures established by the Committee, to be treated for purposes of this Plan as having experienced a Termination of Employment at the time he or she ceases employment with an Employer as an Employee. 1.40 "Trust" shall mean one or more trusts established pursuant to that certain Master Trust Agreement, dated as of ________, 200_ between the Company and the trustee named therein, as amended from time to time. 1.41 "Unforeseeable Financial Emergency" shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, (ii) a loss of the Participant's property due to casualty, or (iii) such other extraordinary and unforeseeable circumstances -5- arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee. 1.42 "Years of Service" shall mean the total number of full years of employment in which a Participant has been employed by one or more Employers, including authorized paid or unpaid leaves of absences and leave due to Disability. For purposes of this definition, a year of employment shall be a 365 day period (or 366 day period in the case of a leap year) that, for the first year of employment, commences on the Employee's date of hiring and that, for any subsequent year, commences on an anniversary of that hiring date. Any partial year of employment shall not be counted. ARTICLE 2 Selection, Enrollment, Eligibility 2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to a select group of management and highly compensated Employees and Directors of the Employers, as determined by the Committee in its sole discretion. From that group, the Committee shall select, in its sole discretion, Employees and Directors to participate in the Plan. 2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each selected Employee or Director shall complete, execute and return to the Committee a Plan Agreement, an Election Form and a Beneficiary Designation Form, all within thirty (30) days after he or she is selected to participate in the Plan. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary. 2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an Employee or Director selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period, that Employee or Director shall commence participation in the Plan on the first day of the month following the month in which the Employee or Director completes all enrollment requirements. If an Employee or a Director fails to meet all such requirements within the period required, in accordance with Section 2.2, that Employee or Director shall not be eligible to participate in the Plan until the first day of the Plan Year following the delivery to and acceptance by the Committee of the required documents. 2.4 TERMINATION OF PARTICIPATION AND/OR DEFERRALS. If the Committee determines in good faith that a Participant no longer qualifies as a member of a select group of management or highly compensated employees, as membership in such group is determined in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, the Committee shall have the right, in its sole discretion, to (i) terminate any deferral election the Participant has made for the remainder of the Plan Year in which the Participant's membership status changes, (ii) prevent the Participant from making future deferral elections and/or (iii) immediately distribute the Participant's then vested Account Balance as a Termination Benefit and terminate the Participant's participation in the Plan. -6- ARTICLE 3 DEFERRAL COMMITMENTS/ COMPANY CONTRIBUTION/COMPANY MATCHING/VESTING/CREDITING/TAXES 3.1 MINIMUM DEFERRALS. (a) BASE ANNUAL SALARY, ANNUAL BONUS AND DIRECTORS FEES. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Base Annual Salary, Annual Bonus and/or Directors Fees. Such amounts must total, in the aggregate, at least $5,000. If an election is made for less than that amount or if no election is made, the amount deferred shall be zero. (b) SHORT PLAN YEAR. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, or in the case of the first Plan Year of the Plan itself, the minimum deferral shall be an amount equal to the minimum set forth above, multiplied by a fraction, the numerator of which is the number of complete months remaining in the Plan Year and the denominator of which is 12. 3.2 MAXIMUM DEFERRAL. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Base Annual Salary, Annual Bonus and/or Directors Fees up to the following maximum percentages for each deferral elected: ----------------------------------------------------------- DEFERRAL MAXIMUM AMOUNT ----------------------------------------------------------- Base Annual Salary 80% ----------------------------------------------------------- Annual Bonus 100% ----------------------------------------------------------- Directors Fees 100% ----------------------------------------------------------- Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, or in the case of the first Plan Year of the Plan itself, the maximum Annual Deferral Amount, with respect to Base Annual Salary, Annual Bonus and Directors Fees shall be limited to the amount of compensation not yet earned by the Participant as of the date the Participant submits a Plan Agreement and Election Form to the Committee for acceptance. 3.3 ELECTION TO DEFER; EFFECT OF ELECTION FORM. (a) FIRST PLAN YEAR. In connection with a Participant's commencement of participation in the Plan, the Participant shall make an irrevocable deferral election for the Plan Year in which the Participant commences participation in the Plan, along with such other elections as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form must be completed and signed by the Participant, timely delivered to the Committee (in accordance with Section 2.2 above) and accepted by the Committee. (b) SUBSEQUENT PLAN YEARS. For each succeeding Plan Year, an irrevocable deferral election for that Plan Year, and such other elections as the Committee deems necessary or desirable under the Plan, shall be made by timely delivering to the -7- Committee, in accordance with its rules and procedures, before the end of the Plan Year preceding the Plan Year for which the election is made, a new Election Form. If no such Election Form is timely delivered for a Plan Year, the Annual Deferral Amount shall be zero for that Plan Year. 3.4 WITHHOLDING OF ANNUAL DEFERRAL AMOUNTS. For each Plan Year, the Base Annual Salary portion of the Annual Deferral Amount shall be withheld from each regularly scheduled Base Annual Salary payroll in equal amounts, as adjusted from time to time for increases and decreases in Base Annual Salary. The Annual Bonus and/or Directors Fees portion of the Annual Deferral Amount shall be withheld at the time the Annual Bonus or Directors Fees are or otherwise would be paid to the Participant, whether or not this occurs during the Plan Year itself. 3.5 ANNUAL COMPANY CONTRIBUTION AMOUNT. For each Plan Year, an Employer, in its sole discretion, may, but is not required to, credit any amount it desires to any Participant's Company Contribution Account under this Plan, which amount shall be for that Participant the Annual Company Contribution Amount for that Plan Year. The amount so credited to a Participant may be smaller or larger than the amount credited to any other Participant, and the amount credited to any Participant for a Plan Year may be zero, even though one or more other Participants receive an Annual Company Contribution Amount for that Plan Year. The Annual Company Contribution Amount, if any, shall be credited as of the last day of the Plan Year. If a Participant is not employed by an Employer as of the last day of a Plan Year other than by reason of his or her Retirement or death while employed, the Annual Company Contribution Amount for that Plan Year shall be zero. 3.6 ANNUAL COMPANY MATCHING AMOUNT. For each Plan Year during which the Company maintains the 401(k) Plan, an Employer shall credit a Participant's Company Matching Account an amount equal to the difference between (i) the amount the Employer contributed on behalf of such Employee Participant under the 401(k) Plan during such Plan Year and (ii) the amount that would have been contributed by the Employer under the 401(k) Plan if the Participant had not deferred any amounts under this Plan during such Plan Year, but rather had deferred his or her Annual Deferral Amount for such Plan Year into the 401(k) Plan, to the extent allowable under the limitations applicable to the 401(k) Plan. If a Participant is not employed by an Employer as of the last day of a Plan Year other than by reason of his or her Retirement or death, the Annual Company Matching Amount for such Plan Year shall be zero. In the event of Retirement or death, a Participant shall be credited with the Annual Company Matching Amount for the Plan Year in which he or she Retires or dies. In no event will an Employee receive an Annual Company Matching Amount for a Plan Year unless the Employee has made the maximum elective deferrals permitted under the 401(k) Plan for the Plan Year pursuant to Code Section 402(g) or the terms of the 401(k) Plan. 3.7 INVESTMENT OF TRUST ASSETS. The Trustee of the Trust shall be authorized, upon written instructions received from the Committee or investment manager appointed by the Committee, to invest and reinvest the assets of the Trust in accordance with the applicable Trust Agreement, including the disposition of stock and reinvestment of the proceeds in one or more investment vehicles designated by the Committee. -8- 3.8 VESTING. (a) A Participant shall at all times be 100% vested in his or her Deferral Account. (b) The Committee, in its sole discretion, will determine over what period of time and in what percentage increments a Participant shall vest in his or her Company Contribution Account. The Committee may credit some Participants with larger or smaller vesting percentages than other Participants, and the vesting percentage credited to any Participant for a Plan Year may be zero, even though one or more other Participants have a greater vesting percentage credited to them for that Plan Year. (c) A Participant shall be vested in his or her Company Matching Account in accordance with the vesting schedule that applies to company matching amounts made to the 401(k) Plan, as set forth in the 401(k) Plan document. (d) Notwithstanding anything to the contrary contained in this Section 3.8, in the event of a Change in Control, a Participant's Company Contribution Account and Company Matching Account shall immediately become 100% vested (if it is not already vested in accordance with the above vesting schedules). (e) Notwithstanding subsection (c), the vesting schedule for a Participant's Company Contribution Account and Company Matching Account shall not be accelerated to the extent that the Committee determines that such acceleration would cause the deduction limitations of Section 280G of the Code to become effective. In the event that all of a Participant's Company Contribution Account and/or Company Matching Account is not vested pursuant to such a determination, the Participant may request independent verification of the Committee's calculations with respect to the application of Section 280G. In such case, the Committee must provide to the Participant within 15 business days of such a request an opinion from a nationally recognized accounting firm selected by the Participant (the "Accounting Firm"). The opinion shall state the Accounting Firm's opinion that any limitation in the vested percentage hereunder is necessary to avoid the limits of Section 280G and contain supporting calculations. The cost of such opinion shall be paid for by the Company. 3.9 CREDITING/DEBITING OF ACCOUNT BALANCES. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be credited or debited to a Participant's Account Balance in accordance with the following rules: (a) ELECTION OF MEASUREMENT FUNDS. A Participant, in connection with his or her initial deferral election in accordance with Section 3.3(a) above, shall elect, on the Election Form, one or more Measurement Fund(s) (as described in Section 3.9(c) below) to be used to determine the amounts to be credited or debited to his or her Account Balance. The Participant may (but is not required to) elect, by submitting an Election Form to the Committee that is accepted by the Committee, to add or delete one or more Measurement Fund(s) to be used to determine the amounts to be credited or debited to his or her Account Balance, or to change the -9- portion of his or her Account Balance allocated to each previously or newly elected Measurement Fund. If an election is made in accordance with the previous sentence, it shall apply as of the first business day deemed reasonably practicable by the Committee, in its sole discretion, and continue thereafter for each subsequent day in which the Participant participates in the Plan, unless changed in accordance with the previous sentence. (b) PROPORTIONATE ALLOCATION. In making any election described in Section 3.9(a) above, the Participant shall specify on the Election Form, in increments of five percentage points (5%), the percentage of his or her Account Balance to be allocated to a Measurement Fund (as if the Participant was making an investment in that Measurement Fund with that portion of his or her Account Balance). (c) MEASUREMENT FUNDS. The Participant may elect one or more of the Measurement Funds selected by the Committee, in its sole discretion, which are based on certain mutual funds or similar investments, for the purpose of crediting or debiting amounts to his or her Account Balance. As necessary, the Committee may, in its sole discretion, discontinue, substitute or add a Measurement Fund. Each such action of the Committee will take effect as of the first day of the calendar quarter that follows by thirty (30) days the day on which the Committee gives Participants advance written notice of such change. (d) CREDITING OR DEBITING METHOD. The performance of each elected Measurement Fund (either positive or negative) will be determined by the Committee, in its reasonable discretion, based on the performance of the Measurement Funds themselves. A Participant's Account Balance shall be credited or debited on a daily basis to the extent values are available, based on the performance of each Measurement Fund selected by the Participant, such performance being determined by the Committee in its sole discretion. (e) NO ACTUAL INVESTMENT. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participant's election of any such Measurement Fund, the allocation to his or her Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant's Account Balance shall not be considered or construed in any manner as an actual investment of his or her Account Balance in any such Measurement Fund. In the event that the Company or the Trustee (as that term is defined in the Trust), in its own discretion, decides to invest funds in any or all of the Measurement Funds, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant's Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by the Company or the Trust; the Participant shall at all times remain an unsecured creditor of the Company. 3.10 FICA AND OTHER TAXES. (a) ANNUAL DEFERRAL AMOUNTS. For each Plan Year in which an Annual Deferral Amount is being withheld from a Participant, the Participant's Employer(s) shall -10- withhold from that portion of the Participant's Base Annual Salary and Bonus that is not being deferred, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes on such Annual Deferral Amount. If necessary, the Committee may reduce the Annual Deferral Amount in order to comply with this Section 3.10. (b) COMPANY MATCHING AND COMPANY CONTRIBUTIONS. When a participant becomes vested in a portion of his or her Company Matching Account and/or Company Contribution Account, the Participant's Employer(s) shall withhold from the Participant's Base Annual Salary and/or Bonus that is not deferred, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes. If necessary, the Committee may reduce the vested portion of the Participant's Company Matching Account and/or Company Contribution Account in order to comply with this Section 3.10. (c) DISTRIBUTIONS. The Participant's Employer(s), or the trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Employer(s), or the trustee of the Trust, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Employer(s) and the trustee of the Trust. ARTICLE 4 SHORT-TERM PAYOUT; UNFORESEEABLE FINANCIAL EMERGENCIES; WITHDRAWAL ELECTION 4.1 SHORT-TERM PAYOUT. In connection with each election to defer an Annual Deferral Amount, a Participant may irrevocably elect to receive a future "Short-Term Payout" from the Plan with respect to such Annual Deferral Amount. Subject to the Deduction Limitation, the Short-Term Payout shall be a lump sum payment in an amount that is equal to the Annual Deferral Amount plus amounts credited or debited in the manner provided in Section 3.9 above on that amount, determined at the time that the Short-Term Payout becomes payable (rather than the date of a Termination of Employment). Subject to the Deduction Limitation and the other terms and conditions of this Plan, each Short-Term Payout elected shall be paid out during a sixty (60) day period commencing immediately after the last day of any Plan Year designated by the Participant that is at least three Plan Years after the Plan Year in which the Annual Deferral Amount is actually deferred. By way of example, if a three year Short-Term Payout is elected for Annual Deferral Amounts that are deferred in the 2002 Plan Year, the first time the three year Short-Term Payout could become payable would be after the end of the 2005 Plan Year. 4.2 OTHER BENEFITS TAKE PRECEDENCE OVER SHORT-TERM. Should an event occur that triggers a benefit under Article 5, 6, 7 or 8, any Annual Deferral Amount, plus amounts credited or debited thereon, that is subject to a Short-Term Payout election under Section 4.1 shall not be paid in accordance with Section 4.1 but shall be paid in accordance with the other applicable Article. -11- 4.3 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES. If the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to (i) suspend any deferrals required to be made by a Participant and/or (ii) receive a partial or full payout from the Plan. The payout shall not exceed the lesser of the Participant's vested Account Balance, calculated as if such Participant were receiving a Termination Benefit, or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency. If, subject to the sole discretion of the Committee, the petition for a suspension and/or payout is approved, suspension shall take effect upon the date of approval and any payout shall be made within sixty (60) days of the date of approval. The payment of any amount under this Section 4.3 shall not be subject to the Deduction Limitation. 4.4 WITHDRAWAL ELECTION. A Participant (or, after a Participant's death, his or her Beneficiary) may elect, at any time, to withdraw all of his or her vested Account Balance calculated as if there had occurred a Termination of Employment as of the day of the election, less a withdrawal penalty equal to 10% of such amount (the net amount shall be referred to as the "Withdrawal Amount"). This election can be made at any time, before or after Retirement, Disability, death or Termination of Employment, and whether or not the Participant (or Beneficiary) is in the process of being paid pursuant to an installment payment schedule. No partial withdrawals of the Account Balance shall be allowed. The Participant (or his or her Beneficiary) shall make this election by giving the Committee advance written notice of the election in a form determined from time to time by the Committee. The Participant (or his or her Beneficiary) shall be paid the Withdrawal Amount within sixty (60) days of his or her election. Once the Withdrawal Amount is paid, the Participant's participation in the Plan shall terminate and the Participant shall not be eligible to participate in the Plan in the future. The payment of this Withdrawal Amount shall not be subject to the Deduction Limitation. ARTICLE 5 RETIREMENT BENEFIT 5.1 RETIREMENT BENEFIT. Subject to the Deduction Limitation, a Participant who Retires shall receive, as a Retirement Benefit, his or her vested Account Balance. 5.2 PAYMENT OF RETIREMENT BENEFIT. A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to receive the Retirement Benefit in a lump sum, pursuant to an Annual Installment Method of 5, 10 or 15 years or pursuant to any other distribution method allowed by the Committee, in its sole discretion. The Participant may subsequently change his or her election to an allowable alternative payout period by submitting a new Election Form to the Committee, provided that any such Election Form is submitted at least thirteen (13) months prior to the Participant's Retirement and is accepted by the Committee in its sole discretion. The Election Form most recently accepted by the Committee shall govern the payout of the Retirement Benefit. If a Participant does not make any election with respect to the payment of the Retirement Benefit, then such benefit shall be payable in a lump sum. Despite the foregoing, if the Participant's vested Account Balance at the time of his or her -12- Retirement is less than $50,000, payment of the Retirement Benefit will be made in a lump sum. The lump sum payment shall be made, or installment payments shall commence, no later than sixty (60) days after the date on which the Participant Retires, unless otherwise determined by the Committee, in its sole discretion. Any payment made shall be subject to the Deduction Limitation. 5.3 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFIT. If a Participant dies after Retirement but before the Retirement Benefit is paid in full, the Participant's unpaid Retirement Benefit payments shall continue and shall be paid to the Participant's Beneficiary (a) over the remaining number of years and in the same amounts as that benefit would have been paid to the Participant had the Participant survived, or (b) in a lump sum, if requested by the Beneficiary and allowed in the sole discretion of the Committee, that is equal to the Participant's unpaid remaining vested Account Balance. ARTICLE 6 PRE-RETIREMENT SURVIVOR BENEFIT 6.1 PRE-RETIREMENT SURVIVOR BENEFIT. Subject to the Deduction Limitation, the Participant's Beneficiary shall receive a Pre-Retirement Survivor Benefit equal to the Participant's vested Account Balance if the Participant dies before he or she Retires, experiences a Termination of Employment or suffers a Disability. 6.2 PAYMENT OF PRE-RETIREMENT SURVIVOR BENEFIT. The Pre-Retirement Survivor Benefit shall be paid to the Participant's Beneficiary in a lump sum payment no later than sixty (60) days after the last day of the Plan Year in which the Committee is provided with proof that is satisfactory to the Committee of the Participant's death. ARTICLE 7 TERMINATION BENEFIT 7.1 TERMINATION BENEFIT. Subject to the Deduction Limitation, the Participant shall receive a Termination Benefit, which shall be equal to the Participant's vested Account Balance if a Participant experiences a Termination of Employment prior to his or her Retirement, death or Disability. 7.2 PAYMENT OF TERMINATION BENEFIT. The Participant shall receive his or her Termination Benefit in a lump sum payment no later than sixty (60) days after the date on which the Participant experiences the Termination of Employment. Any payment made shall be subject to the Deduction Limitation. -13- ARTICLE 8 DISABILITY WAIVER AND BENEFIT 8.1 DISABILITY WAIVER. (a) WAIVER OF DEFERRAL. A Participant who is determined by the Committee to be suffering from a Disability shall be excused from fulfilling that portion of the Annual Deferral Amount commitment that would otherwise have been withheld from a Participant's Base Annual Salary, Annual Bonus and/or Directors Fees for the Plan Year during which the Participant first suffers a Disability. During the period of Disability, the Participant shall not be allowed to make any additional deferral elections, but will continue to be considered a Participant for all other purposes of this Plan. (b) RETURN TO WORK. If a Participant returns to employment, or service as a Director, with an Employer, after a Disability ceases, the Participant may elect to defer an Annual Deferral Amount for the Plan Year following his or her return to employment or service and for every Plan Year thereafter while a Participant in the Plan; provided such deferral elections are otherwise allowed and an Election Form is delivered to and accepted by the Committee for each such election in accordance with Section 3.3 above. 8.2 CONTINUED ELIGIBILITY; DISABILITY BENEFIT. A Participant suffering a Disability shall, for benefit purposes under this Plan, continue to be considered to be employed, or in the service of an Employer as a Director, and shall be eligible for the benefits provided for in Articles 4, 5, 6 or 7 in accordance with the provisions of those Articles. Notwithstanding the above, the Committee shall have the right to, in its sole and absolute discretion and for purposes of this Plan only, and must in the case of a Participant who is otherwise eligible to Retire, deem the Participant to have experienced a Termination of Employment, or in the case of a Participant who is eligible to Retire, to have Retired, at any time (or in the case of a Participant who is eligible to Retire, as soon as practicable) after such Participant is determined to be suffering a Disability, in which case the Participant shall receive a Disability Benefit equal to his or her vested Account Balance at the time of the Committee's determination; provided, however, that should the Participant otherwise have been eligible to Retire, he or she shall be paid in accordance with Article 5. The Disability Benefit shall be paid in a lump sum within sixty (60) days of the Committee's exercise of such right. Any payment made shall be subject to the Deduction Limitation. ARTICLE 9 BENEFICIARY DESIGNATION 9.1 BENEFICIARY. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates. -14- 9.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time. If the Participant names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Committee, must be signed by that Participant's spouse and returned to the Committee. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to his or her death. 9.3 ACKNOWLEDGMENT. No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee or its designated agent. 9.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant's estate. 9.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Participant's Employer to withhold such payments until this matter is resolved to the Committee's satisfaction. 9.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant's Plan Agreement shall terminate upon such full payment of benefits. ARTICLE 10 LEAVE OF ABSENCE 10.1 PAID LEAVE OF ABSENCE. If a Participant is authorized by the Participant's Employer for any reason to take a paid leave of absence from the employment of the Employer, the Participant shall continue to be considered employed by the Employer and the Annual Deferral Amount shall continue to be withheld during such paid leave of absence in accordance with Section 3.3. 10.2 UNPAID LEAVE OF ABSENCE. If a Participant is authorized by the Participant's Employer for any reason to take an unpaid leave of absence from the employment of the Employer, the Participant shall continue to be considered employed by the Employer and the Participant shall be excused from making deferrals until the earlier of the date the leave of -15- absence expires or the Participant returns to a paid employment status. Upon such expiration or return, deferrals shall resume for the remaining portion of the Plan Year in which the expiration or return occurs, based on the deferral election, if any, made for that Plan Year. If no election was made for that Plan Year, no deferral shall be withheld. Notwithstanding the above, the Committee may, in its sole and absolute discretion and for purposes of this Plan only, deem the Participant to have experienced a Termination of Employment, or in the case of a Participant who is eligible to Retire, deem the Participant to have Retired, at any time after the unpaid leave of absence begins. If the Committee chooses to treat the Participant as having experienced a Termination of Employment, the Participant shall receive a Termination Benefit paid in accordance with Article 7. If the Committee chooses to deem the Participant to have Retired, the Participant shall receive a Retirement Benefit paid in accordance with Article 5. The Committee shall, in its sole discretion, choose the valuation date appropriate for purposes of distributing benefits pursuant to Articles 5 and 7. The lump sum payment shall be made, or installments shall commence, no later than sixty (60) days after the date on which the Committee exercises such right. Any payment made shall be subject to the Deduction Limitation. ARTICLE 11 TERMINATION, AMENDMENT OR MODIFICATION 11.1 TERMINATION. Although each Employer anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that any Employer will continue the Plan or will not terminate the Plan at any time in the future. Accordingly, each Employer reserves the right to discontinue its sponsorship of the Plan and/or to terminate the Plan at any time with respect to any or all of its participating Employees and Directors, by action of its board of directors. Upon the termination of the Plan with respect to any Employer, the Plan Agreements of the affected Participants who are employed by that Employer, or in the service of that Employer as Directors, shall terminate and their vested Account Balances shall be paid as follows: (a) If the Participant is not eligible to Retire as of the effective date of the Plan termination, payment shall be made in a lump sum no later than 60 days following the effective date of the termination. (b) If the Participant is eligible to Retire as of the effective date of the Plan termination, payment shall be made in accordance with the Participant's Retirement Benefit election, if any. (c) Notwithstanding the foregoing provisions of this Section 11.1: (i) If the Plan is terminated with respect to all Participants prior to a Change in Control, the Employer, in its sole discretion and notwithstanding any installment payment elections made by Participants eligible to Retire, may designate that benefits shall be paid in a lump sum or annual installments -16- of up to 15 years, with amounts debited and credited during the installment period as described in Section 3.9. (ii) If the Plan is terminated with respect to less than all Participants prior to a Change in Control, the Employer shall pay all benefits in a lump sum notwithstanding any installment payment elections made by Participants eligible to Retire. (iii) If the Plan is terminated coincident with or following a Change in Control, the Employer shall pay all benefits in a lump sum notwithstanding any installment payment elections made by Participants eligible to Retire. The termination of the Plan shall not adversely affect any Participant or Beneficiary who has become entitled to the payment of any benefits under the Plan as of the date of termination; provided however, that the Employer shall have the right to accelerate installment payments without a premium or prepayment penalty by paying the vested Account Balance in a lump sum or pursuant to an Annual Installment Method using fewer years (provided that the present value of all payments that will have been received by a Participant at any given point of time under the different payment schedule shall equal or exceed the present value of all payments that would have been received at that point in time under the original payment schedule). 11.2 AMENDMENT. The Company may, at any time, amend or modify the Plan in whole or in part by the action of its board of directors; provided, however, that: (i) no amendment or modification shall be effective to decrease or restrict the value of a Participant's vested Account Balance in existence at the time the amendment or modification is made, calculated as if the Participant had experienced a Termination of Employment as of the effective date of the amendment or modification or, if the amendment or modification occurs after the date upon which the Participant was eligible to Retire, the Participant had Retired as of the effective date of the amendment or modification, and (ii) no amendment or modification of this Section 11.2 or Section 12.2 of the Plan shall be effective. The amendment or modification of the Plan shall not affect any Participant or Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification; provided, however, that the Company shall have the right to accelerate installment payments by paying the vested Account Balance in a lump sum or pursuant to an Annual Installment Method using fewer years (provided that the present value of all payments that will have been received by a Participant at any given point of time under the different payment schedule shall equal or exceed the present value of all payments that would have been received at that point in time under the original payment schedule). 11.3 PLAN AGREEMENT. Despite the provisions of Sections 11.1 and 11.2 above, if a Participant's Plan Agreement contains benefits or limitations that are not in this Plan document, the Employer may only amend or terminate such provisions with the consent of the Participant. -17- 11.4 EFFECT OF PAYMENT. The full payment of the applicable benefit under Articles 4, 5, 6, 7 or 8 of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under this Plan and the Participant's Plan Agreement shall terminate. ARTICLE 12 ADMINISTRATION 12.1 COMMITTEE DUTIES. Except as otherwise provided in this Article 12, this Plan shall be administered by a Committee which shall consist of the Board, or such committee as the Board shall appoint. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to (i) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or the Company. 12.2 ADMINISTRATION UPON CHANGE IN CONTROL. For purposes of this Plan, the Company shall be the "Administrator" at all times prior to the occurrence of a Change in Control. Upon and after the occurrence of a Change in Control, the "Administrator" shall be an independent third party selected by the Trustee and approved by the individual who, immediately prior to such event, was the Company's Chief Executive Officer or, if not so identified, the Company's highest ranking officer (the "Ex-CEO"). The Administrator shall have the discretionary power to determine all questions arising in connection with the administration of the Plan and the interpretation of the Plan and Trust including, but not limited to benefit entitlement determinations; provided, however, upon and after the occurrence of a Change in Control, the Administrator shall have no power to direct the investment of Plan or Trust assets or select any investment manager or custodial firm for the Plan or Trust. Upon and after the occurrence of a Change in Control, the Company must: (1) pay all reasonable administrative expenses and fees of the Administrator; (2) indemnify the Administrator against any costs, expenses and liabilities including, without limitation, attorney's fees and expenses arising in connection with the performance of the Administrator hereunder, except with respect to matters resulting from the gross negligence or willful misconduct of the Administrator or its employees or agents; and (3) supply full and timely information to the Administrator or all matters relating to the Plan, the Trust, the Participants and their Beneficiaries, the Account Balances of the Participants, the date of circumstances of the Retirement, Disability, death or Termination of Employment of the Participants, and such other pertinent information as the Administrator may reasonably require. Upon and after a Change in Control, the Administrator may be terminated (and a replacement appointed) by the Trustee only with the approval of the Ex-CEO. Upon and after a Change in Control, the Administrator may not be terminated by the Company. -18- 12.3 AGENTS. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer. 12.4 BINDING EFFECT OF DECISIONS. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 12.5 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless the members of the Committee, any Employee to whom the duties of the Committee may be delegated, and the Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee, any of its members, any such Employee or the Administrator. 12.6 EMPLOYER INFORMATION. To enable the Committee and/or Administrator to perform its functions, the Company and each Employer shall supply full and timely information to the Committee and/or Administrator, as the case may be, on all matters relating to the compensation of its Participants, the date and circumstances of the Retirement, Disability, death or circumstances of the Retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Committee or Administrator may reasonably require. ARTICLE 13 OTHER BENEFITS AND AGREEMENTS 13.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a Participant and Participant's Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Participant's Employer. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided. ARTICLE 14 CLAIMS PROCEDURES 14.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. -19- 14.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim within a reasonable time, and shall notify the Claimant in writing: (a) that the Claimant's requested determination has been made, and that the claim has been allowed in full; or (b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: (i) the specific reason(s) for the denial of the claim, or any part of it; (ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and (iv) an explanation of the claim review procedure set forth in Section 14.3 below. 14.3 REVIEW OF A DENIED CLAIM. Within sixty (60) days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than thirty (30) days after the review procedure began, the Claimant (or the Claimant's duly authorized representative): (a) may review pertinent documents; (b) may submit written comments or other documents; and/or (c) may request a hearing, which the Committee, in its sole discretion, may grant. 14.4 DECISION ON REVIEW. The Committee shall render its decision on review promptly, and not later than sixty (60) days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee's decision must be rendered within 120 days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (a) specific reasons for the decision; (b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and (c) such other matters as the Committee deems relevant. 14.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of this Article 14 is a mandatory prerequisite to a Claimant's right to commence any legal action with respect to any claim for benefits under this Plan. -20- ARTICLE 15 TRUST 15.1 ESTABLISHMENT OF THE TRUST. The Company shall establish the Trust, and each Employer shall at least annually transfer over to the Trust such assets as the Employer determines, in its sole discretion, are necessary to provide, on a present value basis, for its respective future liabilities created with respect to the Annual Deferral Amounts, Annual Company Contribution Amounts, and Company Matching Amounts for such Employer's Participants for all periods prior to the transfer, as well as any debits and credits to the Participants' Account Balances for all periods prior to the transfer, taking into consideration the value of the assets in the trust at the time of the transfer. 15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under the Plan. 15.3 DISTRIBUTIONS FROM THE TRUST. Each Employer's obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employer's obligations under this Plan. ARTICLE 16 MISCELLANEOUS 16.1 STATUS OF PLAN. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that "is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employee" within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan shall be administered and interpreted to the extent possible in a manner consistent with that intent. 16.2 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer. For purposes of the payment of benefits under this Plan, any and all of an Employer's assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. An Employer's obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. 16.3 EMPLOYER'S LIABILITY. An Employer's liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer and a Participant. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan and his or her Plan Agreement. 16.4 NONASSIGNABILITY. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly -21- declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise. 16.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an "at will" employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer, either as an Employee or a Director, or to interfere with the right of any Employer to discipline or discharge the Participant at any time. 16.6 FURNISHING INFORMATION. A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary. 16.7 TERMS. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 16.8 CAPTIONS. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 16.9 GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of Michigan without regard to its conflicts of laws principles. 16.10 Notice. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: L. Perrigo Company ----------------------------------------- 515 Eastern Avenue ----------------------------------------- Allegan, MI 49010 Attn: Treasurer ----------------------------------------- Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. -22- Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant. 16.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the benefit of the Participant's Employer and its successors and assigns and the Participant and the Participant's designated Beneficiaries. 16.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse's will, nor shall such interest pass under the laws of intestate succession. 16.13 VALIDITY. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. 16.14 INCOMPETENT. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount. 16.15 COURT ORDER. The Committee is authorized to make any payments directed by court order in any action in which the Plan or the Committee has been named as a party. In addition, if a court determines that a spouse or former spouse of a Participant has an interest in the Participant's benefits under the Plan in connection with a property settlement or otherwise, the Committee, in its sole discretion, shall have the right, notwithstanding any election made by a Participant, to immediately distribute the spouse's or former spouse's interest in the Participant's benefits under the Plan to that spouse or former spouse. 16.16 DISTRIBUTION IN THE EVENT OF TAXATION. (a) IN GENERAL. If, for any reason, all or any portion of a Participant's benefits under this Plan becomes taxable to the Participant prior to receipt, a Participant may petition the Committee before a Change in Control, or the trustee of the Trust after a Change in Control, for a distribution of that portion of his or her benefit that has become taxable. Upon the grant of such a petition, which grant shall not be unreasonably withheld (and, after a Change in Control, shall be granted), a Participant's Employer shall distribute to the Participant immediately available funds in an amount equal to the taxable portion of his or her benefit (which amount shall not exceed a Participant's unpaid vested Account Balance under the Plan). If the petition is granted, the tax liability distribution shall be made within -23- 90 days of the date when the Participant's petition is granted. Such a distribution shall affect and reduce the benefits to be paid under this Plan. (b) TRUST. If the Trust terminates in accordance with its terms and benefits are distributed from the Trust to a Participant in accordance therewith, the Participant's benefits under this Plan shall be reduced to the extent of such distributions. 16.17 INSURANCE. The Employers, on their own behalf or on behalf of the trustee of the Trust, and, in their sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Trust may choose. The Employers or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Employers shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Employers have applied for insurance. 16.18 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL. The Company and each Employer is aware that upon the occurrence of a Change in Control, the Board or the board of directors of a Participant's Employer (which might then be composed of new members) or a shareholder of the Company or the Participant's Employer, or of any successor corporation might then cause or attempt to cause the Company, the Participant's Employer or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause the Company or the Participant's Employer to institute, or may institute, litigation seeking to deny Participants the benefits intended under the Plan. In these circumstances, the purpose of the Plan could be frustrated. Accordingly, if, following a Change in Control, it should appear to any Participant that the Company, the Participant's Employer or any successor corporation has failed to comply with any of its obligations under the Plan or any agreement thereunder or, if the Company, such Employer or any other person takes any action to declare the Plan void or unenforceable or institutes any litigation or other legal action designed to deny, diminish or to recover from any Participant the benefits intended to be provided, then the Company and the Participant's Employer irrevocably authorize such Participant to retain counsel of his or her choice at the expense of the Company and the Participant's Employer (who shall be jointly and severally liable) to represent such Participant in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company, the Participant's Employer or any director, officer, shareholder or other person affiliated with the Company, the Participant's Employer or any successor thereto in any jurisdiction. IN WITNESS WHEREOF, the Company has signed this Plan document as of __________, 2001. -24- "Company" L. Perrigo Company, a Michigan corporation By: ----------------------------------------- Title: -------------------------------------- -25- -----END PRIVACY-ENHANCED MESSAGE-----