UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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Check the appropriate box:

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þ		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to §240.14a-12

 

MYLAN LABORATORIES INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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July 1, 2007

 

Dear Shareholder:

 

You are cordially invited to attend the 2007 Annual Meeting of Shareholders of Mylan Laboratories Inc., which will be held at 9:30 a.m. (Eastern time) on Friday, July 27, 2007, at the Hilton Garden Inn, 1000 Corporate Drive, in Canonsburg, Pennsylvania. Details about the business to be conducted at the Annual Meeting are described in the accompanying Notice of Annual Meeting and Proxy Statement.

 

It is important that your shares be represented at the Annual Meeting, regardless of the number of shares you own. Whether or not you currently plan to attend, you can ensure that your shares are represented and voted at the Annual Meeting by promptly signing, dating and returning the enclosed proxy card. A return envelope, which requires no additional postage if mailed in the United States, is enclosed for your convenience. Alternatively, you may vote over the Internet or by telephone by following the instructions set forth on the enclosed proxy card.

 

We look forward to seeing you at the Annual Meeting.

 

Sincerely,

 

 

Robert J. Coury
Vice Chairman and Chief Executive Officer

 

 

MYLAN LABORATORIES INC.

1500 Corporate Drive

Canonsburg, PA 15317

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

The 2007 Annual Meeting of Shareholders of Mylan Laboratories Inc. (the “Company”) will be held at the Hilton Garden Inn, 1000 Corporate Drive, in Canonsburg, Pennsylvania on Friday, July 27, 2007, at 9:30 a.m. (Eastern time), for the following purposes:

 

 

Shareholders of record of the Company’s common stock at the close of business on June 21, 2007 are entitled to notice of, and to vote at, the meeting and any adjournment or postponement thereof. We will make available at the Annual Meeting a complete list of shareholders entitled to vote at the Annual Meeting.

 

By order of the Board of Directors

 

Stuart A. Williams
Chief Legal Officer and Secretary

 

 

July 1, 2007

 

 

 

 

 

TABLE OF CONTENTS

 

MYLAN LABORATORIES INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
July 27, 2007

 

We are furnishing this Proxy Statement to shareholders of Mylan Laboratories Inc., a Pennsylvania corporation (“Mylan” or the “Company”), in connection with the solicitation of proxies by our Board of Directors for use at our 2007 Annual Meeting of Shareholders (the “Annual Meeting”) and at any adjournment or postponement thereof. The Annual Meeting is scheduled to be held on Friday, July 27, 2007, at 9:30 a.m. (Eastern time), at the Hilton Garden Inn, 1000 Corporate Drive, Canonsburg, Pennsylvania, for the purposes set forth in the accompanying Notice of Annual Meeting. We are mailing this Proxy Statement and the enclosed proxy card to shareholders on or about July 2, 2007.

 

Our Board of Directors has fixed the close of business on June 21, 2007 (the “Record Date”) as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof. As of the close of business on the Record Date, there were 248,716,471 shares of our common stock, par value $0.50 per share (“Common Stock”), outstanding and entitled to vote. Each share of Common Stock is entitled to one vote on each matter properly brought before the Annual Meeting.

 

Holders of a majority of the outstanding shares of our Common Stock entitled to vote on the Record Date must be present in person or represented by proxy to constitute a quorum. Proxies marked as abstaining and proxies returned by brokers as “non-votes” because they have not received voting instructions from the beneficial owners of the shares each will be treated as shares present for purposes of determining the presence of a quorum.

 

You may vote by proxy either by signing, dating and returning the enclosed proxy card, or over the Internet or by telephone by following the instructions set forth on the enclosed proxy card.

 

If you vote by proxy, the individuals named on the enclosed proxy card will vote your shares in the manner you indicate. If you do not specify voting instructions, then the proxy will be voted in accordance with recommendations of the Board of Directors, as described in this Proxy Statement. If any other matter properly comes before the Annual Meeting, the designated proxies will vote on that matter in their discretion.

 

If your shares are held in the name of a brokerage firm, bank nominee or other institution, please sign, date and mail the enclosed instruction card in the enclosed postage-paid envelope or contact your broker, bank nominee or other institution to determine whether you will be able to vote over the Internet or by telephone.

 

If you come to the Annual Meeting to cast your vote in person and you are holding your shares in a brokerage account or through a bank or other nominee (“street name”), you will need to bring a legal proxy obtained from your broker, bank or nominee which will authorize you to vote your shares in person.

 

Your vote is important. We encourage you to sign and date your proxy card and return it in the enclosed postage-paid envelope, or vote over the Internet or by telephone, so that your shares may be represented and voted at the Annual Meeting.

 

You may revoke your proxy at any time before it is voted by submitting another properly executed proxy showing a later date, by filing a written notice of revocation with Mylan’s Corporate Secretary at 1500 Corporate

Drive, Canonsburg, Pennsylvania 15317, by casting a new vote over the Internet or by telephone, or by voting in person at the Annual Meeting.

 

Election of Directors

 

You may vote either “FOR” or “WITHHOLD” with respect to each nominee for the Board. Directors are elected by plurality voting, which means that the ten director nominees who receive the highest number of votes will be elected to the Board. Votes of “WITHHOLD” and broker non-votes, if any, will have no effect on the outcome of the election of directors.

 

Ratification of Selection of Deloitte & Touche LLP as Our Independent Registered Public Accounting Firm

 

The ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2008 requires the affirmative vote of a majority of the votes cast by all shareholders entitled to vote. Abstentions and broker non-votes, if any, will have no effect on the outcome of the vote on either proposal. If the selection of Deloitte & Touche LLP is not ratified by our shareholders, the audit committee will reconsider its recommendation.

 

Mylan will bear the entire cost of this solicitation, including the preparation, assembly, printing and mailing of this Proxy Statement and any additional materials furnished by our Board of Directors to our shareholders. Proxies may be solicited without additional compensation by directors, officers and employees of Mylan and its subsidiaries. Copies of solicitation material will be furnished to brokerage firms, banks and other nominees holding shares in their names that are beneficially owned by others so that they may forward this solicitation material to these beneficial owners. If asked, we will reimburse these persons for their reasonable expenses in forwarding the solicitation material to the beneficial owners. The original solicitation of proxies by mail may be supplemented by telephone, telegram, facsimile, Internet and personal solicitation by our directors, officers or other regular employees. In addition, the Company has retained Morrow & Co., Inc. to assist in soliciting proxies at a cost of approximately $7,500 plus expenses.

 

Mylan’s Board of Directors currently consists of ten members. All nominees listed below have previously been elected as directors by shareholders, other than N. Prasad who was appointed to the Board in January 2007. Our directors are elected to serve for a one-year term and until his or her successor is duly elected and qualified. Each of the ten nominees listed below has consented to act as a director of Mylan if elected. If, however, a nominee is unavailable for election, proxy holders will vote for another nominee proposed by the Board or, as an alternative, the Board may reduce the number of directors to be elected at the Annual Meeting.

 

Information about each director nominee is set forth below, including the nominee’s principal occupation and business experience, other directorships, age and tenure on the Company’s Board.

 

 

 

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
“FOR” THE ELECTION OF EACH OF THE NOMINEES NAMED ABOVE.

 

In fiscal 2007, our Board met 14 times. In addition to meetings of the Board, directors attended meetings of individual Board committees. In fiscal 2007, all of the directors attended at least 75% of the Board meetings and meetings of Board committees of which they were a member. In addition to board and committee meetings, it is the Company’s policy that directors are expected to attend the Annual Meeting. All members of the Board who were Directors at such time attended the 2006 Annual Meeting of Shareholders.

 

Non-management members of the Board meet in executive sessions on a regularly scheduled basis. Neither the Chief Executive Officer nor any other member of management attends such meetings of non-management directors. Milan Puskar, the Chairman of the Board, has been chosen to preside at such executive sessions. For information regarding how to communicate with non-management directors as a group and one or more individual members of the Board, see “Communications with Directors” below.

 

The principal standing committees of the Board include the Audit Committee, the Compensation Committee and the Governance and Nominating Committee. Each such committee operates under a written charter, current copies of which are available on the Company’s corporate website at www.mylan.com under the heading “Corporate Governance.” Copies of the charters are also available in print to shareholders upon request, addressed to Mylan’s Corporate Secretary at 1500 Corporate Drive, Canonsburg, Pennsylvania 15317.

 

The table below provides fiscal 2007 membership and meeting information for our Board Committees.

 

 

 

C = Chairperson

 

X = Member

 

Audit Committee and Audit Committee Financial Expert.  The Audit Committee’s responsibilities include the appointment, compensation, retention and oversight of the Company’s independent registered public accounting firm; reviewing with the independent registered public accounting firm the scope of the audit plan and audit fees; and reviewing the Company’s financial statements and related disclosures. All of the members of the Audit Committee are independent directors, as required by and as defined in the audit committee independence standards of the Securities and Exchange Commission (the “SEC”) and the New York Stock Exchange (the “NYSE”). The Board has determined that each of the Committee members — Mr. Leech, Mr. Dimick and Mr. Piatt — is an “audit committee financial expert”, as that term is defined in the rules of the SEC.

 

Compensation Committee.  The Compensation Committee establishes and regularly reviews the Company’s compensation philosophy, strategy, objectives and ethics and determines the compensation payable to the Chief Executive Officer and approves the compensation payable to other executive officers.

 

The Committee also administers the Company’s equity compensation and benefit plans. All of the members of the Compensation Committee are independent directors as defined in the NYSE rules.

 

Governance and Nominating Committee.  The Governance and Nominating Committee is responsible for the nomination of candidates for the Board and the oversight of all aspects of the Company’s corporate governance initiatives. All of the members of the Governance and Nominating Committee are independent directors as defined in the NYSE rules.

 

For purposes of identifying individuals qualified to become members of the Board, the Committee has adopted the following criteria with regard to traits, abilities and experience that the Board looks for in determining candidates for election to the Board:

 

 

 

In addition, a majority of the members of the Board should be “independent,” not only as that term may be defined legally or mandated by the NYSE rules, but also without the appearance of any conflict in serving as a director. For a director to be considered independent, the Board must determine that he or she does not have any material relationship with the Company, either directly or indirectly (other than in his or her capacity as a director).

 

The Committee will consider director candidates properly submitted by shareholders. In considering candidates submitted by shareholders, the Committee will take into consideration the needs of the Board and the qualifications of the candidate, including those traits, abilities and experience identified above. Any submission of a proposed candidate for consideration by the Committee should include the name of the proposing shareholder and evidence of such person’s ownership of Mylan stock, and the name of the proposed candidate, his or her resume or a listing of his or her qualifications to be a director of the Company, and the proposed candidate’s signed consent to be named as a director if recommended by the Committee. Such information will be considered by the Chairman of the Committee, who will present the information on the proposed candidate to the entire Committee.

 

Any shareholder recommendation of a proposed candidate must be sent to Mylan’s Corporate Secretary at 1500 Corporate Drive, Canonsburg, Pennsylvania 15317, not later than the earlier of (i) 120 days prior to the anniversary date of the Company’s most recent annual meeting of shareholders or (ii) March 31 of the year in which the annual meeting is to be held.

 

The Committee identifies new potential nominees by asking current directors and executive officers to notify the Committee if they become aware of persons, meeting the criteria described above, who would be good candidates for service on the Board. The Committee also, from time to time, may engage firms that specialize in identifying director candidates. As described above, the Committee will also consider candidates recommended by shareholders.

 

Once a person has been identified by the Committee as a potential candidate, the Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Committee determines that the candidate warrants further consideration, the Chairman or another member of the Committee will contact the person. Generally, if the person expresses a willingness to be considered and to serve on the Board, the Committee will request information from the candidate, review the candidate’s accomplishments and qualifications, including in light of any other candidates that the Committee might be considering, and conduct one or more interviews with the candidate. In certain instances, Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments. The Committee’s evaluation process does not vary based on whether or not a candidate is recommended by a shareholder.

 

The Board has determined that Ms. Cameron, Mr. Dimick, Mr. Leech, Dr. Maroon, Mr. Piatt, Mr. Todd and Dr. Vanderveen have no material relationships with the Company and concluded that they are independent directors under the director independence standards of the NYSE. With respect to Mr. Leech, Mr. Piatt and Mr. Todd, the Board considered their past relationships with the Company, which relationships are no longer in existence, and determined that such past relationships are not material. Messrs. Puskar, Coury and Prasad are not independent directors due to their present or past service as executives of the Company.

 

The Board of Directors has adopted a Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Corporate Controller. The Board of Directors also has adopted Corporate Governance Principles as well as a Code of Business Conduct and Ethics applicable to all directors, officers and employees. Current copies of the Code of Ethics, the Corporate Governance Principles and the Code of Business Conduct and Ethics are posted on the Company’s website at www.mylan.com under the heading “Corporate Governance.” Copies of the Code of Ethics,

the Corporate Governance Principles and the Code of Business Conduct and Ethics are also available in print to shareholders upon request, addressed to Mylan’s Corporate Secretary at 1500 Corporate Drive, Canonsburg, Pennsylvania 15317. The Company intends to post any amendments to or waivers from the Code of Ethics on its website.

 

The Audit Committee of our Board has selected Deloitte & Touche LLP as our independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending March 31, 2008, and has directed that management submit the selection of Deloitte & Touche LLP as our independent registered public accounting firm for ratification by the shareholders at the Annual Meeting. A representative of Deloitte & Touche LLP is expected to be present at the Annual Meeting and will be available to respond to appropriate questions from our shareholders and will be given an opportunity to make a statement if he or she desires to do so.

 

Shareholder ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm is not required by our by-laws or otherwise. However, the Audit Committee is submitting the selection of Deloitte & Touche LLP to shareholders for ratification as a matter of good corporate governance. If shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of different independent registered public accountants at any time during the year if they determine that such a change would be in the best interests of Mylan and its shareholders.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
“FOR” RATIFICATION OF THE SELECTION OF
DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM.

 

Deloitte & Touche LLP served as Mylan’s independent registered public accounting firm during fiscal 2007 and fiscal 2006, and no relationship exists other than the usual relationship between independent registered public accounting firm and client. Details about the nature of the services provided by, and the fees the Company paid to, Deloitte & Touche LLP for such services during fiscal 2007 and 2006 are set forth below.

 

 

 

 

The Audit Committee has adopted a policy regarding pre-approval of audit, audit-related, tax and other services that the independent registered public accounting firm may perform for the Company. Under the policy, the Audit Committee must pre-approve on an individual basis any requests for audit, audit-related, tax and other services not covered by certain services that are pre-approved annually by the Audit Committee. The policy also prohibits the engagement of the independent registered public accounting firm for non-audit related financial information systems design and implementation, for certain other services considered to have an impact on independence and for all services prohibited by the Sarbanes-Oxley Act of 2002. All services performed by Deloitte & Touche LLP during fiscal 2006 and 2007 were pre-approved by the Audit Committee in accordance with its policy.

 

The following table sets forth information concerning the compensation earned by the non-employee directors for fiscal 2007. Directors who are also employees of the Company do not receive any consideration for their service on the Board. A discussion of the elements of non-employee director compensation follows the table.

 

 

 

 

Non-employee directors receive $50,000 per year in cash compensation for their service on the Board. In addition, Mr. Puskar receives an additional $200,000 per year for his service as Chairman. Non-employee directors are also reimbursed for actual expenses relating to meeting attendance.

 

In addition:

 

 

 

Non-employee directors, at the discretion of the full Board, are eligible to receive stock options or other awards under the Company’s 2003 Long-Term Incentive Plan. In connection with the Board’s annual meeting following the 2006 Annual Meeting of Shareholders in July 2006, each non-employee director was awarded an immediately exercisable option to purchase 10,000 shares of Common Stock at an exercise price of $22.00 per share, the closing price per share of the Common Stock on the date of grant.

 

The following table sets forth information regarding the beneficial ownership of Common Stock as of June 15, 2007 by the Company’s Chief Executive Officer, Chief Financial Officer, the three other most highly compensated executive officers of the Company who were serving at the end of fiscal 2007, and one executive officer who retired during fiscal 2007 but whose compensation is disclosed herein pursuant to SEC rules (collectively, the “Named Executive Officers”), as well as by our directors and nominees, and by all directors, nominees and executive officers of the Company as a group (based on 248,692,989 shares of Common Stock outstanding as of such date). For purposes of this table, and in accordance with the rules of the SEC, shares are considered “beneficially owned” if the person, directly or indirectly, has sole or shared voting or investment power over such shares. A person is also considered to beneficially own shares that he or she has the right to acquire such shares within 60 days of June 15, 2007. To the Company’s knowledge, the persons in the following table have sole voting and investment power, either directly or through one or more entities controlled by such person, with respect to all shares of the shares shown as beneficially owned by them, unless otherwise indicated in the footnotes below.

 

 

 

 

 

The following table lists the names and addresses of the shareholders known to management to own beneficially more than five percent of our Common Stock as of March 31, 2007:

 

 

 

 

Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own more than 10% of a registered class of our equity securities to file with the SEC within specified due dates reports of ownership and reports of changes of ownership of our Common Stock and our other equity securities. These persons are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based on reports and written representations furnished to us by these persons, we believe that all of our directors and executive officers complied with these filing requirements during fiscal 2007.

 

The names, ages and positions of our executive officers as of June 15, 2007, are as follows:

 

 

See “Item 1 — Election of Directors — Director Nominees” for a description of the recent business experience of Mr. Coury and Mr. Prasad.

 

Mr. Borkowski has served as Mylan’s Chief Financial Officer since March 2002. Prior to joining Mylan, beginning in 1999, he was employed by the Consumer Healthcare Group of Pharmacia Corporation, a pharmaceutical company that merged with Pfizer in 2003, where he served as Assistant Vice President, North American Finance and Administration and later as Vice President, Global Finance and Information Technology. He served in various finance positions for Wyeth, a company specializing in pharmaceuticals, consumer health care products, and animal health care products (then known as American Home Products Corporation), from 1992 to 1999.

 

Ms. Bresch has served as Mylan’s Head of North American Operations since January 2007, before which she was Senior Vice President, Strategic Corporate Development, beginning in February 2006. Ms. Bresch joined Mylan in 1992, and has held a number of management positions, including Vice President, Strategic Corporate Development from May 2005 to February 2006, Vice President of Public and Government Relations from February 2004 to April 2005, Director of Government Relations from March 2002 to February 2004, and Director of Business Development from January 2001 to March 2002.

 

Mr. Korman joined Mylan in 1996. Prior to assuming his present position as President of Mylan Pharmaceuticals Inc. in May 2005, Mr. Korman served as President of UDL Laboratories, Inc. (“UDL”), a wholly-owned subsidiary of the Company, since January 2001, before which he served as Vice President of Sales and Marketing of Mylan Pharmaceuticals from 1997 to December 2000. Mr. Korman became Vice President of Mylan in January 2001. Mr. Korman began working at UDL in 1988, serving as Vice President of Sales until 1996 when Mylan acquired UDL.

 

Mr. Malik has served as Mylan’s Head of Global Technical Operations since January 2007 and as the Chief Executive Officer of Matrix since July 2005. Prior to joining Matrix, he served as Head of Global Development and Registrations for Sandoz GmbH from September 2003 to July 2005. Prior to joining Sandoz, Mr. Malik was Head of Global Regulatory Affairs and Head of Pharma Research for Ranbaxy from October 1999 to September 2003.

 

Dr. Myers has served as President of Mylan Technologies since February 2006. She began her employment with Mylan in June 2003, as Vice President of Branded Business Development and Strategic Marketing, before which she served as Global Director Cardiovascular at Pharmacia Inc. since 2001.

 

Mr. Rizzo joined the Company as Vice President and Corporate Controller in June 2006. Prior to joining the Company, Mr. Rizzo served as Vice President and General Controller of Hexion Specialty Chemicals, Inc. from October 2005 to May 2006, before which he served as Vice President and Corporate Controller at Gardner Denver, Inc. since 1998.

 

Mr. Williams has served as Mylan’s Chief Legal Officer since March 2002, and as its Corporate Secretary since April 2006. From 1999 to March 2002, he was a member of the law firm of DKW Law Group, PC, formerly known as Doepkin Keevican & Weiss, Pittsburgh, Pennsylvania. Prior to his affiliation with DKW Law Group, he was a partner with the law firm of Eckert Seamans Cherin & Mellott.

Officers of Mylan who are appointed by the Board of Directors can be removed by the Board of Directors, and officers appointed by the Vice Chairman and Chief Executive Officer can be removed by him.

 

This Compensation Discussion and Analysis explains the material elements of the compensation of the Named Executive Officers, and describes the objectives and principles underlying the Company’s executive compensation programs.

 

The principal objectives of the Company’s executive compensation program are:

 

 

The Company strives to meet these objectives by implementing the principles listed below:

 

 

 

The primary elements of the Company’s executive compensation program are described below. We believe that these elements of compensation collectively support the objectives of the Company’s executive compensation program and encourage both the short-term and long-term success of the Company.

 

In connection with the development of our compensation program for our Named Executive Officers, our compensation consultant developed a list of companies with which we compete for executive talent. For fiscal 2007, this group consisted of the following fifteen United States-based pharmaceutical companies, including companies in both the generic and branded sectors: Allergan, Inc.; Alpharma Inc.; C.R. Bard, Inc.; Barr Pharmaceuticals, Inc.; Becton, Dickinson and Company; Endo Pharmaceuticals Holdings Inc.; Eon Labs, Inc.; Forest Laboratories, Inc.; Eli Lilly and Company; IVAX Corporation; Par Pharmaceutical Companies, Inc.; Perrigo Company; Schering-Plough Corporation; Watson Pharmaceuticals, Inc.; and Wyeth. The annual revenues in this group were regressed for size in order to provide a more accurate comparison with the Company’s compensation practices. For fiscal 2008, we intend to eliminate Wyeth from the group due to its size. In addition, Eon Labs and IVAX Corporation were eliminated from the comparator group due to acquisitions by other organizations.

 

 

During fiscal 2007, the Company raised its guidance on earnings three times due to Company performance. The Company’s actual earnings per share well exceeded the target level put in place by the Compensation Committee due to the Company’s record-breaking financial results, and product launches and regulatory submissions also exceeded the targeted number. This resulted in overall performance at 182.5% of the target level of performance under the fiscal 2007 short-term incentive program. Thus, each of our Named Executive Officers (other than Mr. Korman, who did not participate in the plan last year, and Mr. DeBone, who retired during the year and did not receive an annual bonus) earned incentive awards equal to approximately 182.5% of their base salaries. The Compensation Committee used its discretion to adjust the actual amount to be paid to Mr. Williams, based on the determination that his bonus for fiscal 2007 should be equal to those paid to Mr. Borkowski and Dr. O’Donnell. The dollar amounts of short-term incentives earned by the Named Executive Officers for fiscal 2007 are set forth below in the Summary Compensation Table.

 

Pursuant to his employment agreement, Mr. Korman’s annual bonus was targeted at 75% of his base salary. In light of the Company’s successful fiscal year and his individual performance, our Compensation Committee determined to award to Mr. Korman a bonus for fiscal 2007 equal to approximately 95% of his base salary. The dollar amount of Mr. Korman’s bonus for fiscal 2007 is set forth below in the Summary Compensation Table. For fiscal 2008, we anticipate that Mr. Korman will participate in the annual bonus program on the same basis as other participating executives.

 

Consistent with the philosophy and methodology used in fiscal 2007, we intend to use the same three annual performance criteria in determining the amount of short-term incentive bonuses for fiscal 2008. We expect that these criteria will again be weighted such that 50% of the bonus will be based on the Company’s earnings per share, while regulatory submissions and product launches will each comprise 25% of the total.

 

 

The long-term equity grants awarded to the Named Executive Officers in fiscal 2007 consisted generally of (i) stock options with an exercise price equal to the closing price of the Common Stock on the date of grant that vest ratably over a period of three years, provided that the executive remains continually employed by the Company and (ii) restricted stock awards that generally vest at the end of a three-year performance period provided that the executive remains continually employed by the Company and provided that certain pre-determined performance goals are met. For two of the Named Executive Officers, time-based restricted stock or stock unit awards were also awarded.

 

The performance criteria for the three-year performance period applicable to the performance-based restricted stock awards are average earnings per share, cumulative regulatory submissions and new product launches. These performance criteria are weighted such that one-third of the vesting will be based on earnings per share, and regulatory submissions and product launches each will comprise one-third of the total.

As noted below, Mr. Coury received a grant of time-based vesting restricted stock units as a special retention incentive in connection with his agreement to extend his period of employment for an additional two years. As an incentive in connection with his taking on significant additional responsibilities, our Compensation Committee determined to grant to Mr. Korman a time-based vesting restricted stock award, as discussed further below.

 

Prior to fiscal 2007, we did not have a formal equity grant policy. The current expectation of our Compensation Committee is to make annual equity grants in the first quarter of the fiscal year, with appropriate exceptions for new hires and promotions. Currently, there is no exact date for the making of these grants, but our Compensation Committee intends to review its equity grant policy from time to time to ensure that it is in line with corporate best practices. Equity grants made to our Named Executive Officers in fiscal 2007 are set forth and described in the table below entitled “Grants of Plan-Based Awards for Fiscal 2007.”

 

 

 

 

 

 

The Company has entered into Retirement Benefit Agreements with several of the Named Executive Officers, in recognition of their continuing service to the Company and to provide a supplemental form of retirement and death benefit. Prior to being amended in April 2006, the Retirement Benefit Agreements provided the Named Executive Officers with retirement benefits that were below the median paid to similar executives at the comparator group of companies. Therefore, with the advice of our outside consultant, our Compensation Committee approved the amendment of the various Retirement Benefit Agreements to better align the retirement component of their overall pay packages with the median for that group of companies. For a more detailed description of the Retirement Benefit Agreements, see the section below entitled “Retirement Benefit Agreements.”

 

The Company also maintains a supplemental health insurance program which provides post-retirement health benefits to designated key employees who attain 55 years of age and 15 years of service.

 

 

Section 162(m) of the Internal Revenue Code (“Section 162(m)”) restricts the deductibility for federal income tax purposes of the compensation paid to the Chief Executive Officer and each of the four other most highly compensated executive officers of a public company for any fiscal year to the extent that such compensation for such executive exceeds $1,000,000 and does not qualify as “performance-based” compensation as defined under Section 162(m). The Board and our Compensation Committee have taken actions, including the grant of stock options, performance-based restricted stock awards and annual bonuses described in this Compensation Discussion and Analysis, intended to enhance the Company’s opportunity to deduct compensation paid to executive officers for federal income tax purposes. Our Compensation Committee intends, to the extent appropriate, to preserve the deductibility of executive compensation without breaching the Company’s contractual commitments or sacrificing the flexibility needed to recognize and reward desired performance.

 

We have reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K and this Proxy Statement on Schedule 14A.

 

Respectfully submitted,

 

Rodney L. Piatt, C.P.A.

Wendy Cameron

Joseph C. Maroon, M.D.

 

The following summary compensation table sets forth the cash and non-cash compensation paid to or earned by the Named Executive Officers for the 2007 fiscal year.

 

 

 

 

 

 

 

 

 

The following table summarizes grants of plan-based awards made to each Named Executive Officer during fiscal 2007.

 

 

 

 

The following table set forth information concerning all of the outstanding equity-based awards held by each Named Executive Officer as of March 31, 2007.

 

 

 

 

The following table summarizes with respect to each Named Executive Officer stock option exercises and stock awards vested during fiscal year 2007.

 

 

 

 

The following table summarizes the benefits accrued by the Named Executive Officers during fiscal 2007 under the Retirement Benefit Agreement in effect with the Named Executive Officer. The Company does not sponsor any other defined benefit pension programs covering the Named Executive Officers.