MYLAN LABORATORIES INC. 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
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Annual Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of
1934
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For the Fiscal Year Ended
March 31, 2007
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Transition Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of
1934
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For the transition period
from to
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Commission File
No. 1-9114
MYLAN LABORATORIES
INC.
(Exact name of registrant as
specified in its charter)
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Pennsylvania
(State of Incorporation)
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25-1211621
(IRS Employer
Identification No.)
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1500 Corporate Drive, Canonsburg, Pennsylvania 15317
(724) 514-1800
(Address, including zip code, and
telephone number, including area code, of principal executive
offices)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class:
Common Stock, par value
$0.50 per share
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Name of Each Exchange on Which
Registered:
New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer or a non-accelerated
filer. See definition of accelerated filer and
large accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
Large Accelerated
Filer þ Accelerated
Filer
o Non-Accelerated
Filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value of the outstanding common stock,
other than shares held by persons who may be deemed affiliates
of the registrant, as of September 30, 2006, the last
business day of the registrants most recently completed
second fiscal quarter, was approximately $4,151,843,863.
The number of outstanding shares of common stock of the
registrant as of May 18, 2007, was 248,658,693.
DOCUMENTS
INCORPORATED BY REFERENCE
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Parts of
Form 10-K
into which
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Document is
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Document
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Incorporated
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Proxy Statement for the 2007
Annual Meeting of Shareholders, which will be filed with the
Securities and Exchange Commission within 120 days after
the end of the registrants fiscal year ended
March 31, 2007.
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III
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MYLAN
LABORATORIES INC.
INDEX TO
FORM 10-K
For the Fiscal Year Ended March 31, 2007
2
PART I
Mylan Laboratories Inc. and its subsidiaries (the
Company, Mylan or we)
develop, license, manufacture, market and distribute generic,
brand and branded generic pharmaceutical products and active
pharmaceutical ingredients (API). The Company was
incorporated in Pennsylvania in 1970. References herein to a
fiscal year shall mean the 12 months ended March 31.
Overview
of Our Business
Prescription pharmaceutical products in the United States
(U.S.) are generally marketed as either brand or
generic drugs. Brand products are marketed under brand names
through marketing programs that are designed to generate
physician and consumer loyalty. Brand products generally are
patent protected, which provides a period of market exclusivity
during which they are sold with little or no competition.
Additionally, brand products may benefit from other periods of
non-patent, market exclusivity. Exclusivity generally provides
brand products with the ability to maintain their profitability
for relatively long periods of time. Brand products generally
continue to have a significant role in the market after the end
of patent protection or other market exclusivities due to
physician and consumer loyalties.
Generic pharmaceutical products are the chemical and therapeutic
equivalents of reference brand drugs. A reference brand drug is
an approved drug product listed in the U.S. Food and Drug
Administration (FDA) publication entitled
Approved Drug Products with Therapeutic Equivalence
Evaluations, popularly known as the Orange Book.
The Drug Price Competition and Patent Term Restoration Act of
1984 (Waxman-Hatch Act) provides that generic drugs
may enter the market after the approval of an Abbreviated New
Drug Application (ANDA) and the expiration,
invalidation or circumvention of any patents on the
corresponding brand drug, or the end of any other market
exclusivity periods related to the brand drug. Generic drugs are
bioequivalent to their brand name counterparts. Accordingly,
generic products provide a safe, effective and cost-efficient
alternative to users of these brand products. Branded generic
pharmaceutical products are generic products that are more
responsive to the promotion efforts generally used to promote
brand products. Growth in the generic pharmaceutical industry
has been and will continue to be driven by the increased market
acceptance of generic drugs, as well as the number of brand
drugs for which patent terms
and/or other
market exclusivities have expired.
We obtain new generic products primarily through internal
product development. Additionally, we license or co-develop
products through arrangements with other companies. New generic
product approvals are obtained from the FDA through the ANDA
process, which requires us to demonstrate bioequivalence to a
reference brand product. Generic products are generally
introduced to the marketplace at the expiration of patent
protection for the brand product or at the end of a period of
non-patent market exclusivity. However, if an ANDA applicant
files an ANDA containing a certification of invalidity,
non-infringement or unenforceability related to a patent listed
in the Orange Book with respect to a reference drug
product, that generic equivalent may be able to be marketed
prior to the expiration of patent protection for the brand
product. Such patent certification is commonly referred to as a
Paragraph IV certification. An ANDA applicant that is first
to file a Paragraph IV certification is eligible for a
period of generic marketing exclusivity. This exclusivity, which
under certain circumstances may be required to be shared with
other applicable ANDA sponsors with Paragraph IV
certifications, lasts for 180 days during which the FDA
cannot grant final approval to other ANDA sponsors holding
applications for the same generic equivalent.
An ever-increasing trend in the pharmaceutical industry involves
the practice of authorized generics. This occurs
when the patent or New Drug Application (NDA) holder
sells its brand product as a generic, often through a licensing
agreement with a generic company or through a subsidiary, at the
same time other generic competition enters the market. This
practice has the most significant impact on a generic company
that is entitled to the
180-day
exclusivity period described above or that would otherwise be
the only company on the market with a generic product being sold
under an approved ANDA. This practice may effectively eliminate
the 180-day
exclusivity period if launched at the beginning of the generic
companys exclusivity period and, exclusivity aside, could
significantly lower the price at which the generic company could
otherwise sell its product upon launch. Additionally, this could
affect the extent to which Paragraph IV challenges are
pursued by generic companies.
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We have attained a position of leadership in the generic
industry through our ability to obtain ANDA approvals, our
uncompromising quality control and our devotion to customer
service. We continue to bolster our traditional solid oral dose
products with unit dose, transdermal and extended release
products. We have entered into strategic alliances with several
pharmaceutical companies through product development,
distribution and licensing agreements that provide us with
additional opportunities to broaden our product line.
On May 12, 2007, Mylan and Merck KGaA announced the signing
of a definitive agreement under which Mylan will acquire
Mercks generics business (Merck Generics) for
Euro 4.9 billion (approximately $6.7 billion) in an
all-cash transaction. Management believes that the combination
of Mylan and Merck Generics will create a vertically and
horizontally integrated generics and specialty pharmaceuticals
leader with a diversified revenue base and a global footprint,
and also believes the combined company will be among the top
tier of global generic companies, with a significant presence in
the top five global generics markets. The transaction remains
subject to regulatory review in relevant jurisdictions and
certain other customary closing conditions and is expected to
close in the second half of calendar 2007.
In conjunction with the Merck Generics transaction, the Company
entered into a deal-contingent foreign currency option contract
in order to mitigate the risk of foreign currency exposure. The
contract is contingent upon the closing of this acquisition and
the premium of approximately $121.9 million will be paid
only upon such closing. The Company will account for this
instrument under the provisions of Statement of Financial
Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging
Activities. This instrument does not qualify for hedge
accounting treatment under SFAS No. 133 and,
therefore, will be adjusted to fair value at each reporting date
with the change in the fair value of the instrument recorded in
earnings.
On August 28, 2006, Mylan announced that it agreed to
acquire a controlling interest in Matrix Laboratories Limited
(Matrix), a publicly traded Indian company, for 306
rupees per Matrix share. On December 21, 2006, in
accordance with the terms of the transaction, Mylan completed an
open offer in which it acquired approximately 20% of
Matrixs shares outstanding for approximately
$210.6 million. On January 8, 2007, Mylan purchased
approximately 51.5% of Matrixs shares outstanding pursuant
to an agreement with certain selling shareholders for
approximately $545.6 million. Certain selling shareholders
of Matrix used approximately $168.0 million of their
proceeds from the sale to purchase approximately
8.1 million shares of Mylan Laboratories Inc. common stock.
The results of operations of Matrix have been consolidated since
January 8, 2007.
Matrix is primarily engaged in the manufacture of API and solid
oral dosage products. Matrix has a wide range of products in
multiple therapeutic categories and focuses on developing APIs
with non-infringing processes to partner with generic
manufacturers in regulated markets at market formation.
With the addition of Matrix, Mylan will now report as two
reportable segments, the Mylan Segment and the
Matrix Segment. Mylan previously reported as one
segment. In accordance with SFAS No. 131,
Disclosures about Segments of an Enterprise and Related
Information, information for earlier periods has been recast.
The Mylan
Segment
The Mylan Segment operates through three principal subsidiaries,
Mylan Pharmaceuticals Inc. (MPI), UDL Laboratories,
Inc. (UDL) and Mylan Technologies Inc. (Mylan
Tech), all of which are wholly owned subsidiaries of
Mylan. MPI is our primary pharmaceutical research, development,
manufacturing, marketing and distribution subsidiary. MPIs
net revenues are derived primarily from the sale of solid oral
dosage products. Additionally, MPIs net revenues are
augmented by transdermal patch products that are developed and
manufactured by Mylan Tech. UDL packages and markets products,
either obtained from MPI or purchased from third parties, in
unit dose formats, for use primarily in hospitals and other
medical institutions.
The Mylan Segment manufactures over 93% of all doses it sells.
Our product portfolio is one of the largest among all
U.S. generic pharmaceutical companies, consisting of
approximately 170 products, of which approximately 160 are in
capsule or tablet form in an aggregate of approximately 400
dosage strengths. Included in these totals are 15 extended
release products in a total of 38 dosage strengths.
Additionally, our product portfolio includes four transdermal
patch products in a total of 18 dosage strengths that are
developed and manufactured by Mylan Tech.
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In addition to those products that we manufacture, we also
market, principally through UDL, 72 generic products in a total
of 118 dosage strengths under supply and distribution agreements
with other pharmaceutical companies. We believe that the breadth
of our product offerings allows us to successfully meet our
customers demands and helps us to better compete in the
generic industry over the long term.
Approximately 14%, 17% and 18% of Mylan Segment net revenues in
fiscal years 2007, 2006 and 2005, respectively, were contributed
by calcium channel blockers, primarily nifedipine. Additionally,
approximately 19% of Mylan Segment net revenues in fiscal 2007
and 15% of Mylan Segment net revenues in fiscal year 2006 were
contributed by narcotic agonist analgesics, primarily fentanyl.
The future success of our generic products is partially
dependent upon continued increasing market acceptance of generic
products as substitutes for existing products. Additionally, we
expect that our future growth will result from regularly
launching new products, including an emphasis on the development
or acquisition of new products that may attain FDA
first-to-file
status, as well as the pursuit of products that are difficult to
formulate or for which the API is difficult to obtain. In
addition, for generic and branded generic products, we intend to
continue to seek complementary strategic acquisitions of
products as well as companies such as Merck Generics.
The
Matrix Segment
Matrix is the worlds second largest API manufacturer with
respect to the number of Drug Master Files (DMF)
filed with regulatory agencies and has more than 174 APIs in the
market or under development. Matrix is a fast growing API
manufacturer, with a focus on regulated markets such as the U.S.
and the European Union (EU).
In Europe, the Matrix Segment operates through Docpharma, its
wholly owned subsidiary and a leading distributor and marketer
of branded generic pharmaceutical products in Belgium, the
Netherlands and Luxembourg. Matrix also has investments in
companies located in China, South Africa and India.
Included in Matrixs product portfolio are anti-retroviral
APIs, used in the treatment of HIV. Matrix is currently the
worlds largest supplier of generic anti-retroviral APIs,
supplying more than 50% of the total market.
Matrix has 10 API and intermediate manufacturing facilities and
one finished dosage form (FDF) facility. Of these,
seven are U.S. FDA approved for API manufacturing, making
Matrix one of the largest companies in India in terms of
FDA-approved API manufacturing capacity. The FDF facility is
also U.S. FDA approved.
Product
Development
Research and development efforts are conducted primarily to
enable us to develop, manufacture and market FDA-approved
pharmaceuticals in accordance with FDA regulations. With the
acquisition of Matrix, we will look to further bolster our
product pipeline in terms of both geographic reach and portfolio
diversity. On a consolidated basis, research and development
expenses, excluding $147.0 million of acquired in process
research and development, were $103.7 million,
$102.4 million and $88.3 million in fiscal 2007, 2006
and 2005, respectively. Our research and development strategy
includes the following areas:
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development of controlled-release technologies and the
application of these technologies to reference products;
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development of NDA and ANDA transdermal and polymer film
products;
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development of drugs technically difficult to formulate or
manufacture because of either unusual factors that affect their
stability or bioequivalence or unusually stringent regulatory
requirements;
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development of drugs that target smaller, specialized or
underserved markets;
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development of generic drugs that represent
first-to-file
opportunities;
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expansion of our existing solid oral dosage product portfolio,
including with respect to additional dosage strengths;
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completion of additional preclinical and clinical studies for
approved NDA products required by the FDA, known as
post-approval (Phase IV) commitments; and
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conducting life cycle management studies intended to further
define the profile of products subject to pending or approved
NDAs.
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All applications for FDA approval must contain information
relating to product formulation, raw material suppliers,
stability, manufacturing processes, packaging, labeling and
quality control. Information to support the bioequivalence of
generic drug products or the safety and effectiveness of new
drug products for their intended use is also required to be
submitted. There are generally two types of applications used
for obtaining FDA approval of new products:
New Drug Application (NDA). An NDA is filed
when approval is sought to market a drug with active ingredients
that have not been previously approved by the FDA. NDAs are
filed for newly developed brand products and, in certain
instances, for a new dosage form, a new delivery system, or a
new indication for previously approved drugs.
Abbreviated New Drug Application (ANDA). An
ANDA is filed when approval is sought to market a generic
equivalent of a drug product previously approved under an NDA
and listed in the FDAs Orange Book or for a
new dosage strength or a new delivery system for a drug
previously approved under an ANDA.
One requirement for FDA approval of NDAs and ANDAs is that our
manufacturing procedures and operations conform to FDA
requirements and guidelines, generally referred to as current
Good Manufacturing Practices (cGMP). The
requirements for FDA approval encompass all aspects of the
production process, including validation and recordkeeping, and
involve changing and evolving standards.
Generic
Product Development
FDA approval of an ANDA is required before marketing a generic
equivalent of a drug approved under an NDA in the U.S. or
for a previously unapproved dosage strength or delivery system
for a drug approved under an ANDA. The ANDA development process
is generally less time consuming and complex than the NDA
development process. It typically does not require new
preclinical and clinical studies because it relies on the
studies establishing safety and efficacy conducted for the drug
previously approved through the NDA process. The ANDA process,
however, does require one or more bioequivalence studies to show
that the ANDA drug is bioequivalent to the previously approved
drug. Bioequivalence compares the bioavailability of one drug
product with that of another formulation containing the same
active ingredient. When established, bioequivalence confirms
that the rate of absorption and levels of concentration in the
bloodstream of a formulation of the previously approved drug and
the generic drug are equivalent. Bioavailability indicates the
rate and extent of absorption and levels of concentration of a
drug product in the bloodstream needed to produce the same
therapeutic effect.
Supplemental ANDAs are required for approval of various types of
changes to an approved application, and these supplements may be
under review for six months or more. In addition, certain types
of changes may be approved only once new bioequivalence studies
are conducted or other requirements are satisfied.
During fiscal 2007, the Mylan Segment received 29 application
approvals from the FDA, consisting of 15 final ANDA approvals,
nine tentative ANDA approvals, four supplemental ANDA approvals,
and one tentative supplemental ANDA approval. In the twelve
months ended March 31, 2007, the Matrix Segment made
28 regulatory filings for finished dosage forms, including
12 with the FDA, six with the European regulatory agencies and
10 with the World Health Organization. Also during the twelve
months ended March 31, 2007, the Matrix Segment received
three ANDA approvals from the FDA and two more approvals have
been received for the dossiers filed under the European
regulatory agencies.
We have a robust generic product pipeline. As of March 31,
2007, the Mylan Segment had 65 product applications pending at
the FDA, representing approximately $51.6 billion in
U.S. sales for the 12 months ended December 31,
2006 for the brand name versions of these products, according to
IMS Health data. Thirteen of these applications were
first-to-file
Paragraph IV ANDA patent challenges, which offer the
opportunity for 180 days of generic marketing exclusivity
if approved by the FDA and if we are successful in the patent
challenge. These
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13 Paragraph IV ANDAs relate to pharmaceuticals
representing approximately $10.7 billion in
U.S. branded sales for the 12 months ended
December 31, 2006. Further, the Mylan Segment has
approximately 165 products currently in development and advanced
evaluation.
In addition to its regulatory filings for finished dosage forms,
the Matrix Segment has also filed 111 DMFs in the U.S. and 726
outside the U.S. DMFs are confidential documents containing
information on the manufacturing facility and processes used in
the manufacture, packaging and storage of an API and are
required for all manufacturers wishing to sell APIs in the U.S.
We believe the Mylan Segments already robust pipeline,
coupled with that of the Matrix Segment, provides a strong
platform for future growth.
A large number of high-value branded pharmaceutical patent
expirations are expected over the next three years. By 2010,
approximately $100.0 billion is expected in U.S. brand
sales for such products according to IMS Health data. These
patent expirations should provide additional generic product
opportunities. We intend to concentrate our generic product
development activities on brand products with significant sales
in specialized or growing markets or in areas that offer
significant opportunities and other competitive advantages. In
addition, we intend to continue to focus our development efforts
on technically
difficult-to-formulate
products or products that require advanced manufacturing
technology.
Brand
Product Development
The process required by the FDA before a pharmaceutical product,
with active ingredients that have not been previously approved,
may be marketed in the U.S. generally involves the
following:
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laboratory and preclinical tests;
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submission of an Investigational New Drug (IND)
application, which must become effective before clinical studies
may begin;
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adequate and well-controlled human clinical studies to establish
the safety and efficacy of the proposed product for its intended
use;
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submission of an NDA containing the results of the preclinical
tests and clinical studies establishing the safety and efficacy
of the proposed product for its intended use, as well as
extensive data addressing matters such as manufacturing and
quality assurance;
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scale-up to
commercial manufacturing; and
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FDA approval of an NDA.
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Preclinical tests include laboratory evaluation of the product,
its chemistry, formulation and stability, as well as toxicology
and pharmacology studies to help define the pharmacological
profile of the drug and assess the potential safety and efficacy
of the product. The results of these studies are submitted to
the FDA as part of the IND. They must demonstrate that the
product delivers sufficient quantities of the drug to the
bloodstream or intended site of action to produce the desired
therapeutic results before human clinical trials may begin.
These studies must also provide the appropriate supportive
safety information necessary for the FDA to determine whether
the clinical studies proposed to be conducted under the IND can
safely proceed. The IND automatically becomes effective
30 days after receipt by the FDA unless the FDA, during
that 30-day
period, raises concerns or questions about the conduct of the
proposed trials as outlined in the IND. In such cases, the IND
sponsor and the FDA must resolve any outstanding concerns before
clinical trials may begin. In addition, an independent
institutional review board must review and approve any clinical
study prior to initiation.
Human clinical studies are typically conducted in three
sequential phases, which may overlap:
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Phase I: The drug is initially introduced into a relatively
small number of healthy human subjects or patients and is tested
for safety, dosage tolerance, mechanism of action, absorption,
metabolism, distribution and excretion.
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Phase II: Studies are performed with a limited patient
population to identify possible adverse effects and safety
risks, to assess the efficacy of the product for specific
targeted diseases or conditions, and to determine dosage
tolerance and optimal dosage.
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Phase III: When Phase II evaluations demonstrate that
a dosage range of the product is effective and has an acceptable
safety profile, Phase III trials are undertaken to evaluate
further dosage and clinical efficacy and to test further for
safety in an expanded patient population at geographically
dispersed clinical study sites.
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The results of the product development, preclinical studies and
clinical studies are then submitted to the FDA as part of the
NDA. The NDA drug development and approval process could take
from three to more than 10 years.
Patents,
Trademarks and Licenses
We own or license a number of patents in the U.S. and foreign
countries covering certain products and have also developed
brand names and trademarks for other products. Generally, the
brand pharmaceutical business relies upon patent protection to
ensure market exclusivity for the life of the patent. Following
patent expiration, brand products often continue to have market
viability based upon the goodwill of the product name, which
typically benefits from trademark protection. We consider the
overall protection of our patents, trademarks and license rights
to be of material value and act to prevent these rights from
infringement. However, our business is not dependent upon any
single patent, trademark or license.
Customers
and Marketing
The Mylan Segment markets products directly to wholesalers,
distributors, retail pharmacy chains, mail order pharmacies and
group purchasing organizations within the U.S. We also
market our generic products indirectly to independent
pharmacies, managed care organizations, hospitals, nursing
homes, pharmacy benefit management companies and government
entities. These customers, called indirect
customers, purchase our products primarily through our
wholesale customers.
The Matrix Segment sells API mainly to generic finished dosage
form manufacturers throughout the world.
Consistent with industry practice, we have a return policy that
allows our customers to return product within a specified period
prior to and subsequent to the expiration date. See the
Application of Critical Accounting Policies section of our
Managements Discussion and Analysis of Results of
Operations and Financial Condition for a discussion of our
revenue provisions.
Sales of Mylan Segment products to AmerisourceBergen
Corporation, Cardinal Health, Inc. and McKesson Corporation
represented approximately 14%, 19% and 20%, respectively, of
Mylan Segment net revenues in fiscal 2007. Sales of products to
AmerisourceBergen Corporation, Cardinal Health, Inc. and
McKesson Corporation represented approximately 16%, 14% and 17%,
respectively, of Mylan Segment net revenues in fiscal 2006.
Sales of products to AmerisourceBergen Corporation, Cardinal
Health, Inc. and McKesson Corporation represented approximately
11%, 19% and 16%, respectively, of Mylan Segment net revenues in
fiscal 2005.
Competition
Mylan
Segment
The U.S. pharmaceutical industry is very competitive. Our
competitors vary depending upon therapeutic and product
categories. Primary competitors include the major manufacturers
of brand name and generic pharmaceuticals.
The primary means of competition are innovation and development,
timely FDA approval, manufacturing capabilities, product
quality, marketing, customer service, reputation and price. To
compete effectively on the basis of price and remain profitable,
a generic drug manufacturer must manufacture its products in a
cost-effective manner. Our competitors include other generic
manufacturers, as well as brand companies that license their
products to generic manufacturers prior to patent expiration or
as relevant patents expire. No further regulatory approvals are
required for a brand manufacturer to sell its pharmaceutical
products directly or through a third party to the generic
market, nor do such manufacturers face any other significant
barriers to entry into such market.
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The U.S. pharmaceutical market is undergoing, and is
expected to continue to undergo, rapid and significant
technological changes, and we expect competition to intensify as
technological advances are made. We intend to compete in this
marketplace by developing or licensing brand pharmaceutical
products that are either patented or proprietary and that are
primarily for indications having relatively large patient
populations or that have limited or inadequate treatments
available and by developing therapeutic equivalents to brand
products that offer unique marketing opportunities.
Matrix
Segment
DMF applications from India to the U.S. have been
increasing rapidly. We expect that Indian pharmaceutical
industry growth will be led by the export of API and generic
products to developed markets. Intense competition in the Indian
formulations market has, in recent years, led to increased
pressure on prices, with the growth in Indian formulation sales
being led by volumes and new products. In 2005, India brought
about regulatory changes that included the introduction of
product patents. This development is expected to lead the growth
in Indian formulations sales and exports.
The largest market for Indian exports is the U.S. A number
of Indian companies currently supply Intermediates, APIs and
Finished Dosage Forms (FDF) to generic
pharmaceutical companies in the highly regulated markets of the
U.S. and Europe. The success of Indian pharmaceutical companies
in the generics industry is attributable to established
development expertise in chemical synthesis and process
engineering, availability of highly skilled labor and the
low-cost manufacturing base. India-based companies have built
upon these strengths over the past several years, reflected in
the fact that a large number of DMFs have been filed in the
U.S. as well as being the country with the highest number
of FDA-approved manufacturing facilities outside the U.S.
Increasing focus on exports to regulated markets is leading to
high dependence on demand from these markets and increased
exposure to regulatory policies in such countries. Additionally,
with competition intensifying in these markets, developing a
profitable product portfolio will continue to be challenging.
Thus, investments in product development and competencies in
understanding patent-related issues assumes significant
importance as much as manufacturing capabilities and requisite
quality approvals. As such, a growing number of Indian
pharmaceutical companies are expecting to scale up to global
standards across manufacturing, product and process development.
In Europe, the Matrix Segment competes with other generic
companies (several major multinational generic drug companies
and various local generic drug companies) and branded drug
companies that continue to sell or license branded
pharmaceutical products after patent expirations and other
statutory expirations. As in the U.S., the generic market in
Europe is very competitive, with the main competitive factors
being price, time to market, reputation, customer service and
breadth of product line.
Product
Liability
Product liability litigation represents an inherent risk to
firms in the pharmaceutical industry. Our insurance coverage at
any given time reflects market conditions, including cost and
availability, existing at the time the policy is written, and
the decision to obtain insurance coverage or to self-insure
varies accordingly.
For the Mylan Segment, we utilize a combination of
self-insurance (through our wholly owned captive insurance
subsidiary) and traditional third-party insurance policies to
cover product liability claims. For the current policy period,
which began on September 30, 2006 and ends on
September 30, 2007, we are self-insured for the first
$10.0 million of costs incurred relating to product
liability claims and maintain third-party insurance that
provides, subject to specified co-insurance requirements,
coverage limits totaling $25.0 million through the next
$40.0 million.
The Matrix Segment maintains commercial coverage up to
$15.0 million with minimal retentions.
Raw
Materials
The APIs and other materials and supplies used in the Mylan
Segments pharmaceutical manufacturing operations are
generally available and purchased from many different domestic
and foreign suppliers, including Matrix. However, in some cases,
the raw materials used to manufacture pharmaceutical products
are available only
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from a single FDA-approved supplier. Even when more than one
supplier exists, we may choose, and in some cases have chosen,
only to list one supplier in our applications submitted to the
FDA. Any change in a supplier not previously approved must then
be submitted through a formal approval process with the FDA.
The Matrix Segment is mainly a manufacturer of APIs. Generally,
APIs are produced either by chemical synthesis or by biological
processes. The Matrix Segment sells APIs to many different
customers throughout the world. We believe that our ability to
produce API for internal use may provide us with a strategic
competitive advantage with respect to the availability of API
supply.
Government
Regulation
United
States
All pharmaceutical manufacturers are subject to extensive,
complex and evolving regulation by the federal government,
principally the FDA and, to a lesser extent, other federal and
state government agencies. The Federal Food, Drug, and Cosmetic
Act, the Controlled Substances Act, the Waxman-Hatch Act, the
Generic Drug Enforcement Act, and other federal government
statutes and regulations govern or influence the testing,
manufacturing, packaging, labeling, storing, recordkeeping,
safety, approval, advertising, promotion, sale and distribution
of products.
FDA approval is required before any new drug can be marketed.
The FDA requires extensive testing of new pharmaceutical
products to demonstrate that such products are both safe and
effective in treating the indications for which approval is
sought. Testing in humans may not be commenced until after an
IND exemption is granted by the FDA. An NDA or supplemental NDA
must be submitted to the FDA both for new drugs that have not
been previously approved by the FDA and for new combinations of,
new indications for or new delivery methods for previously
approved drugs.
FDA approval of an ANDA is required before a generic equivalent
of an existing or referenced brand drug can be marketed. The
ANDA process is abbreviated in that the FDA waives the
requirement of conducting complete preclinical and clinical
studies and, instead, relies on bioequivalence studies.
A sponsor of an NDA is required to identify in its application
any patent that claims the drug or a use of the drug that is the
subject of the application. Upon NDA approval, the FDA lists the
approved drug product and these patents in the Orange
Book. Any applicant that files an ANDA seeking approval of
a generic equivalent version of a referenced brand drug before
expiration of the referenced patent(s) must certify to the FDA
either that the listed patent is not infringed or that it is
invalid or unenforceable (a Paragraph IV certification). If
the holder of the NDA sues claiming infringement within
45 days of notification by the applicant, the FDA may not
approve the ANDA application until the earlier of the rendering
of a court decision favorable to the ANDA applicant or the
expiration of 30 months.
In addition to patent exclusivity, the holder of the NDA for the
listed drug may be entitled to a period of non-patent, market
exclusivity, during which the FDA cannot approve an application
for a bioequivalent product. If the listed drug is a new
chemical entity, the FDA may not accept an ANDA for a
bioequivalent product for up to five years following approval of
the NDA for the new chemical entity. If it is not a new chemical
entity but the holder of the NDA conducted clinical trials
essential to approval of the NDA or a supplement thereto, the
FDA may not approve an ANDA for a bioequivalent product before
expiration of three years. Certain other periods of exclusivity
may be available if the listed drug is indicated for treatment
of a rare disease or is studied for pediatric indications.
Facilities, procedures, operations
and/or
testing of products are subject to periodic inspection by the
FDA, the Drug Enforcement Administration and other authorities.
In addition, the FDA conducts pre-approval and post-approval
reviews and plant inspections to determine whether our systems
and processes are in compliance with cGMP and other FDA
regulations. Certain suppliers are subject to similar
regulations and periodic inspections.
Medicaid, Medicare and other reimbursement legislation or
programs govern reimbursement levels and require all
pharmaceutical manufacturers to rebate a percentage of their
revenues arising from Medicaid-reimbursed drug sales to
individual states. The required rebate is currently 11% of the
average manufacturers price for sales of
Medicaid-reimbursed products marketed under ANDAs. Sales of
Medicaid-reimbursed products marketed
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under NDAs generally require manufacturers to rebate the greater
of approximately 15% of the average manufacturers price or
the difference between the average manufacturers price and
the best price during a specific period. We believe that federal
or state governments may continue to enact measures aimed at
reducing the cost of drugs to the public.
Under Part D of the Medicare Modernization Act, which
became effective January 1, 2006, Medicare beneficiaries
are eligible to obtain discounted prescription drug coverage
from private sector providers. As a result, usage of
pharmaceuticals have increased, a trend which we believe will
continue to benefit the generic pharmaceutical industry.
However, such potential sales increases may be offset by
increased pricing pressures due to the enhanced purchasing power
of the private sector providers that are negotiating on behalf
of Medicare beneficiaries.
The primary regulatory approval required for API manufacturers
selling APIs for use in FDFs to be marketed in the U.S. is
approval of the manufacturing facility in which the APIs are
produced, as well as the manufacturing processes and standards
employed in that facility. The FDA requires that the
manufacturing operations of both API and FDF manufacturers
comply with cGMP.
Other
Markets
There are several factors affecting the global pharmaceuticals
market, including;
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Global proliferation of legislation and regulation permitting or
requiring pharmacists to substitute generic equivalents for
innovator pharmaceuticals;
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Pressure from governments, managed care and other third-party
payers on health care providers and consumers to minimize
costs;and
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Increased acceptance of generic pharmaceuticals by physicians,
pharmacists and consumers.
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Regulations governing marketing approval of pharmaceuticals in
Europe are similarly extensive and as robust as regulations in
the U.S., with approval of a pharmaceutical product being
subject to an assessment of the quality, safety and efficacy of
the product.
A directive of the EU requires that medicinal products shall
have a marketing authorization before they are placed on the
market in the EU. Authorizations are granted after the
assessment of quality, safety and efficacy. In order to control
expenditures on pharmaceuticals, most member states of the EU
regulate the pricing of such products and in some cases limit
the range of different forms of a drug available for
prescription by national health services. These controls can
result in considerable price differences among member states.
Data exclusivity provisions exist in many countries worldwide,
including in the EU, although their application is not uniform.
Similar provisions may be adopted by additional countries or
otherwise strengthened. In general, these exclusivity provisions
prevent the approval
and/or
submission of generic drug applications to the health
authorities for a fixed period of time following the first
approval of a novel brand-name product in that country. As these
exclusivity provisions operate independently of patent
exclusivity, they may prevent the approval
and/or
submission of generic drug applications for some products even
after the patent protection has expired.
Seasonality
Our business is not materially affected by seasonal factors.
Environment
We believe that our operations comply in all material respects
with applicable laws and regulations concerning the environment.
While it is impossible to predict accurately the future costs
associated with environmental compliance and potential
remediation activities, compliance with environmental laws is
not expected to require significant capital expenditures and has
not had, and is not expected to have, a material adverse effect
on our earnings or competitive position.
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Employees
We employ approximately 6,400 persons, approximately 1,800 of
whom serve in clerical, sales and management capacities. The
remaining employees are engaged in production and maintenance
activities.
The production and maintenance employees at our manufacturing
facility in Morgantown, West Virginia, are represented by the
United Steelworkers of America (USW) (AFL-CIO) and its Local
Union 957 AFL-CIO under a contract that expires on
April 15, 2012.
Backlog
Open orders for the Mylan Segment were approximately
$33.4 million and for the Matrix Segment were approximately
$18.5 million. Because of the relatively short lead time
required in filling orders for our products, we do not believe
these backlog amounts bear a significant relationship to sales
or income for any full
12-month
period.
Securities
Exchange Act Reports
The Company maintains an Internet website at the following
address: www.mylan.com. We make available on or through our
Internet website certain reports and amendments to those reports
that we file with the Securities and Exchange Commission (the
SEC) in accordance with the Securities Exchange Act
of 1934. These include our annual reports on
Form 10-K,
our quarterly reports on
Form 10-Q
and our current reports on
Form 8-K.
We make this information available on our website free of charge
as soon as reasonably practicable after we electronically file
the information with, or furnish it to, the SEC. The contents of
our website are not incorporated by reference in this Annual
Report on
Form 10-K
and shall not be deemed filed under the Securities
Exchange Act of 1934.
ITEM 1A. Risk
Factors
The following risk factors could have a material adverse effect
on our business, financial position or results of operations and
could cause the market value of our common stock to decline.
These risk factors may not include all of the important factors
that could affect our business or our industry or that could
cause our future financial results to differ materially from
historic or expected results or cause the market price of our
common stock to fluctuate or decline.
OUR FUTURE REVENUE GROWTH AND PROFITABILITY ARE DEPENDENT
UPON OUR ABILITY TO DEVELOP AND/OR LICENSE, OR OTHERWISE
ACQUIRE, AND INTRODUCE NEW PRODUCTS ON A TIMELY BASIS IN
RELATION TO OUR COMPETITORS PRODUCT INTRODUCTIONS. OUR
FAILURE TO DO SO SUCCESSFULLY COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR FINANCIAL POSITION AND RESULTS OF OPERATIONS AND
COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.
Our future revenues and profitability will depend, to a
significant extent, upon our ability to successfully develop
and/or
license, or otherwise acquire and commercialize new generic and
patent or statutorily protected (usually brand) pharmaceutical
products in a timely manner. Product development is inherently
risky, especially for new drugs for which safety and efficacy
have not been established, and the market is not yet proven.
Likewise, product licensing involves inherent risks including
uncertainties due to matters that may affect the achievement of
milestones, as well as the possibility of contractual
disagreements with regard to terms such as license scope or
termination rights. The development and commercialization
process, particularly with regard to new drugs, also requires
substantial time, effort and financial resources. We, or a
partner, may not be successful in commercializing any of the
products that we are developing or licensing (including, without
limitation, nebivolol) on a timely basis, if at all, which could
adversely affect our product introduction plans, financial
position and results of operations and could cause the market
value of our common stock to decline.
FDA approval is required before any prescription drug product,
including generic drug products, can be marketed. The process of
obtaining FDA approval to manufacture and market new and generic
pharmaceutical products is rigorous, time consuming, costly and
largely unpredictable. We, or a partner, may be unable to obtain
requisite FDA approvals on a timely basis for new generic or
brand products that we may develop, license or otherwise
acquire. Also, for products pending approval, we may obtain raw
materials or produce batches of
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inventory to be used in efficacy and bioequivalence testing, as
well as in anticipation of the products launch. In the
event that FDA approval is denied or delayed, we could be
exposed to the risk of this inventory becoming obsolete. The
timing and cost of obtaining FDA approvals could adversely
affect our product introduction plans, financial position and
results of operations and could cause the market value of our
common stock to decline.
The ANDA approval process often results in the FDA granting
final approval to a number of ANDAs for a given product at the
time a patent claim for a corresponding brand product or other
market exclusivity expires. This often forces us to face
immediate competition when we introduce a generic product into
the market. Additionally, ANDA approvals often continue to be
granted for a given product subsequent to the initial launch of
the generic product. These circumstances generally result in
significantly lower prices, as well as reduced margins, for
generic products compared to brand products. New generic market
entrants generally cause continued price and margin erosion over
the generic product life cycle.
The Waxman-Hatch Act provides for a period of 180 days of
generic marketing exclusivity for each ANDA applicant that is
first to file an ANDA containing a certification of invalidity,
non-infringement or unenforceability related to a patent listed
with respect to a reference drug product, commonly referred to
as a Paragraph IV certification. During this exclusivity
period, which under certain circumstances may be required to be
shared with other applicable ANDA sponsors with
Paragraph IV certifications, the FDA cannot grant final
approval to other ANDA sponsors holding applications for the
same generic equivalent. If an ANDA containing a
Paragraph IV certification is successful and the applicant
is awarded exclusivity, it generally results in higher market
share, net revenues and gross margin for that applicant. Even if
we obtain FDA approval for our generic drug products, if we are
not the first ANDA applicant to challenge a listed patent for
such a product, we may lose significant advantages to a
competitor that filed its ANDA containing such a challenge. The
same would be true in situations where we are required to share
our exclusivity period with other ANDA sponsors with
Paragraph IV certifications. Such situations could have a
material adverse effect on our ability to market that product
profitably and on our financial position and results of
operations, and the market value of our common stock could
decline.
OUR APPROVED PRODUCTS MAY NOT ACHIEVE EXPECTED LEVELS OF
MARKET ACCEPTANCE, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR PROFITABILITY, FINANCIAL POSITION AND RESULTS OF OPERATIONS
AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO
DECLINE.
Even if we are able to obtain regulatory approvals for our new
pharmaceutical products, generic or brand, the success of those
products is dependent upon market acceptance. Levels of market
acceptance for our new products could be impacted by several
factors, including:
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the availability of alternative products from our competitors;
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the price of our products relative to that of our competitors;
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the timing of our market entry;
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the ability to market our products effectively to the retail
level; and
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the acceptance of our products by government and private
formularies.
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Some of these factors are not within our control. Our new
products may not achieve expected levels of market acceptance.
Additionally, continuing studies of the proper utilization,
safety and efficacy of pharmaceutical products are being
conducted by the industry, government agencies and others. Such
studies, which increasingly employ sophisticated methods and
techniques, can call into question the utilization, safety and
efficacy of previously marketed products. For example, on
July 15, 2005, the FDA issued a Public Health Advisory
regarding the safe use of transdermal fentanyl patches, a
product we currently market, the loss of revenues of which could
have a significant impact on our business. In some cases,
studies have resulted, and may in the future result, in the
discontinuance of product marketing or other risk management
programs such as the need for a patient registry. These
situations, should they occur, could have a material adverse
effect on our profitability, financial position and results of
operations, and the market value of our common stock could
decline.
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A RELATIVELY SMALL GROUP OF PRODUCTS MAY REPRESENT A
SIGNIFICANT PORTION OF OUR NET REVENUES, GROSS PROFIT OR NET
EARNINGS FROM TIME TO TIME. IF THE VOLUME OR PRICING OF ANY OF
THESE PRODUCTS DECLINES, IT COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS
AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO
DECLINE.
Sales of a limited number of our products often represent a
significant portion of our net revenues, gross profit and net
earnings. If the volume or pricing of our largest selling
products declines in the future, our business, financial
position and results of operations could be materially adversely
affected, and the market value of our common stock could decline.
WE FACE VIGOROUS COMPETITION FROM OTHER PHARMACEUTICAL
MANUFACTURERS THAT THREATENS THE COMMERCIAL ACCEPTANCE AND
PRICING OF OUR PRODUCTS, WHICH COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF
OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK
TO DECLINE.
Our competitors may be able to develop products and processes
competitive with or superior to our own for many reasons,
including that they may have:
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proprietary processes or delivery systems;
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larger research and development and marketing staffs;
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larger production capabilities in a particular therapeutic area;
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more experience in preclinical testing and human clinical trials;
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more products; or
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more experience in developing new drugs and financial resources,
particularly with regard to brand manufacturers.
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Any of these factors and others could have a material adverse
effect on our business, financial position and results of
operations and could cause the market value of our common stock
to decline.
BECAUSE THE PHARMACEUTICAL INDUSTRY IS HEAVILY REGULATED, WE
FACE SIGNIFICANT COSTS AND UNCERTAINTIES ASSOCIATED WITH OUR
EFFORTS TO COMPLY WITH APPLICABLE REGULATIONS. SHOULD WE FAIL TO
COMPLY WE COULD EXPERIENCE MATERIAL ADVERSE EFFECTS ON OUR
BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS, AND THE
MARKET VALUE OF OUR COMMON STOCK COULD DECLINE.
The pharmaceutical industry is subject to regulation by various
governmental authorities. For instance, we must comply with FDA
requirements with respect to the manufacture, labeling, sale,
distribution, marketing, advertising, promotion and development
of pharmaceutical products. Failure to comply with FDA and other
governmental regulations can result in fines, disgorgement,
unanticipated compliance expenditures, recall or seizure of
products, total or partial suspension of production
and/or
distribution, suspension of the FDAs review of NDAs or
ANDAs, enforcement actions, injunctions and criminal
prosecution. Under certain circumstances, the FDA also has the
authority to revoke previously granted drug approvals. Although
we have internal regulatory compliance programs and policies and
have had a favorable compliance history, there is no guarantee
that these programs, as currently designed, will meet regulatory
agency standards in the future. Additionally, despite our
efforts at compliance, there is no guarantee that we may not be
deemed to be deficient in some manner in the future. If we were
deemed to be deficient in any significant way, our business,
financial position and results of operations could be materially
affected and the market value of our common stock could decline.
In addition to the new drug approval process, the FDA also
regulates the facilities and operational procedures that we use
to manufacture our products. We must register our facilities
with the FDA. All products manufactured in those facilities must
be made in a manner consistent with current good manufacturing
practices (cGMP). Compliance with cGMP regulations
requires substantial expenditures of time, money and effort in
such areas as
14
production and quality control to ensure full technical
compliance. The FDA periodically inspects our manufacturing
facilities for compliance. FDA approval to manufacture a drug is
site-specific. Failure to comply with cGMP regulations at one of
our manufacturing facilities could result in an enforcement
action brought by the FDA which could include withholding the
approval of NDAs, ANDAs or other product applications of that
facility. If the FDA were to require one of our manufacturing
facilities to cease or limit production, our business could be
adversely affected. Delay and cost in obtaining FDA approval to
manufacture at a different facility also could have a material
adverse effect on our business, financial position and results
of operations and could cause the market value of our common
stock to decline.
We are subject, as are generally all manufacturers, to various
federal, state and local laws regulating working conditions, as
well as environmental protection laws and regulations, including
those governing the discharge of materials into the environment.
Although we have not incurred significant costs associated with
complying with environmental provisions in the past, if changes
to such environmental laws and regulations are made in the
future that require significant changes in our operations or if
we engage in the development and manufacturing of new products
requiring new or different environmental controls, we may be
required to expend significant funds. Such changes could have a
material adverse effect on our business, financial position and
results of operations and could cause the market value of our
common stock to decline.
OUR REPORTING AND PAYMENT OBLIGATIONS UNDER THE MEDICAID
REBATE PROGRAM AND OTHER GOVERNMENTAL PURCHASING AND REBATE
PROGRAMS ARE COMPLEX AND MAY INVOLVE SUBJECTIVE DECISIONS. ANY
DETERMINATION OF FAILURE TO COMPLY WITH THOSE OBLIGATIONS COULD
SUBJECT US TO PENALTIES AND SANCTIONS WHICH COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND
RESULTS OF OPERATIONS, AND THE MARKET VALUE OF OUR COMMON STOCK
COULD DECLINE.
The regulations regarding reporting and payment obligations with
respect to Medicaid reimbursement and rebates and other
governmental programs are complex, and as discussed elsewhere in
this
Form 10-K,
we and other pharmaceutical companies are defendants in a number
of suits filed by state attorneys general and have been notified
of an investigation by the U.S. Department of Justice with
respect to Medicaid reimbursement and rebates. Because our
processes for these calculations and the judgments involved in
making these calculations involve, and will continue to involve,
subjective decisions and complex methodologies, these
calculations are subject to the risk of errors. In addition,
they are subject to review and challenge by the applicable
governmental agencies, and it is possible that such reviews
could result in material changes.
In addition, as also disclosed in this
Form 10-K,
a number of state and federal government agencies are conducting
investigations of manufacturers reporting practices with
respect to Average Wholesale Prices (AWP), in which
they have suggested that reporting of inflated AWP has led to
excessive payments for prescription drugs. We and numerous other
pharmaceutical companies have been named as defendants in
various actions relating to pharmaceutical pricing issues and
whether allegedly improper actions by pharmaceutical
manufacturers led to excessive payments by Medicare
and/or
Medicaid.
Any governmental agencies that have commenced, or may commence,
an investigation of the Company could impose, based on a claim
of violation of fraud and false claims laws or otherwise, civil
and/or
criminal sanctions, including fines, penalties and possible
exclusion from federal health care programs (including Medicaid
and Medicare). Some of the applicable laws may impose liability
even in the absence of specific intent to defraud. Furthermore,
should there be ambiguity with regard to how to properly
calculate and report payments-and even in the absence of any
such ambiguity-a governmental authority may take a position
contrary to a position we have taken, and may impose civil
and/or
criminal sanctions. Any such penalties or sanctions could have a
material adverse effect on our business, financial position and
results of operations and could cause the market value of our
common stock to decline.
15
WE EXPEND A SIGNIFICANT AMOUNT OF RESOURCES ON RESEARCH AND
DEVELOPMENT EFFORTS THAT MAY NOT LEAD TO SUCCESSFUL PRODUCT
INTRODUCTIONS. FAILURE TO SUCCESSFULLY INTRODUCE PRODUCTS INTO
THE MARKET COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
FINANCIAL POSITION AND RESULTS OF OPERATIONS, AND THE MARKET
VALUE OF OUR COMMON STOCK COULD DECLINE.
Much of our development effort is focused on technically
difficult-to-formulate
products
and/or
products that require advanced manufacturing technology. We
conduct research and development primarily to enable us to
manufacture and market FDA-approved pharmaceuticals in
accordance with FDA regulations. Typically, research expenses
related to the development of innovative compounds and the
filing of NDAs are significantly greater than those expenses
associated with ANDAs. As we continue to develop new products,
our research expenses will likely increase. Because of the
inherent risk associated with research and development efforts
in our industry, particularly with respect to new drugs
(including, without limitation, nebivolol), our, or a
partners, research and development expenditures may not
result in the successful introduction of FDA approved new
pharmaceutical products. Also, after we submit an NDA or ANDA,
the FDA may request that we conduct additional studies and as a
result, we may be unable to reasonably determine the total
research and development costs to develop a particular product.
Finally, we cannot be certain that any investment made in
developing products will be recovered, even if we are successful
in commercialization. To the extent that we expend significant
resources on research and development efforts and are not able,
ultimately, to introduce successful new products as a result of
those efforts, our business, financial position and results of
operations may be materially adversely affected, and the market
value of our common stock could decline.
A SIGNIFICANT PORTION OF OUR NET REVENUES ARE DERIVED FROM
SALES TO A LIMITED NUMBER OF CUSTOMERS. ANY SIGNIFICANT
REDUCTION OF BUSINESS WITH ANY OF THESE CUSTOMERS COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND
RESULTS OF OPERATIONS, AND THE MARKET VALUE OF OUR COMMON STOCK
COULD DECLINE.
A significant portion of our net revenues are derived from sales
to a limited number of customers. As such, a reduction in or
loss of business with one customer, or if one customer were to
experience difficulty in paying us on a timely basis, our
business, financial position and results of operations could be
materially adversely affected, and the market value of our
common stock could decline.
THE USE OF LEGAL, REGULATORY AND LEGISLATIVE STRATEGIES BY
COMPETITORS, BOTH BRAND AND GENERIC, INCLUDING AUTHORIZED
GENERICS AND CITIZENS PETITIONS, AS WELL AS THE
POTENTIAL IMPACT OF PROPOSED LEGISLATION, MAY INCREASE OUR COSTS
ASSOCIATED WITH THE INTRODUCTION OR MARKETING OF OUR GENERIC
PRODUCTS, COULD DELAY OR PREVENT SUCH INTRODUCTION AND/OR
SIGNIFICANTLY REDUCE OUR PROFIT POTENTIAL. THESE FACTORS COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL
POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET
VALUE OF OUR COMMON STOCK TO DECLINE.
Our competitors, both brand and generic, often pursue strategies
to prevent or delay competition from generic alternatives to
brand products. These strategies include, but are not limited to:
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entering into agreements whereby other generic companies will
begin to market an authorized generic, a generic
equivalent of a branded product, at the same time generic
competition initially enters the market;
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filing citizens petitions with the FDA, including timing
the filings so as to thwart generic competition by causing
delays of our product approvals;
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seeking to establish regulatory and legal obstacles that would
make it more difficult to demonstrate bioequivalence;
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initiating legislative efforts in various states to limit the
substitution of generic versions of brand pharmaceuticals;
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filing suits for patent infringement that automatically delay
FDA approval of many generic products;
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introducing next-generation products prior to the
expiration of market exclusivity for the reference product,
which often materially reduces the demand for the first generic
product for which we seek FDA approval;
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obtaining extensions of market exclusivity by conducting
clinical trials of brand drugs in pediatric populations or by
other potential methods as discussed below;
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persuading the FDA to withdraw the approval of brand name drugs
for which the patents are about to expire, thus allowing the
brand name company to obtain new patented products serving as
substitutes for the products withdrawn; and
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seeking to obtain new patents on drugs for which patent
protection is about to expire.
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The Food and Drug Modernization Act of 1997 includes a pediatric
exclusivity provision that may provide an additional six months
of market exclusivity for indications of new or currently
marketed drugs if certain agreed upon pediatric studies are
completed by the applicant. Brand companies are utilizing this
provision to extend periods of market exclusivity.
Some companies have lobbied Congress for amendments to the
Waxman-Hatch legislation that would give them additional
advantages over generic competitors. For example, although the
term of a companys drug patent can be extended to reflect
a portion of the time an NDA is under regulatory review, some
companies have proposed extending the patent term by a full year
for each year spent in clinical trials rather than the one-half
year that is currently permitted.
If proposals like these were to become effective, our entry into
the market and our ability to generate revenues associated with
new products may be delayed, reduced or eliminated, which could
have a material adverse effect on our business, financial
position and results of operations and could cause the market
value of our common stock to decline.
THE INDENTURE FOR OUR SENIOR NOTES, OUR CREDIT FACILITIES AND
ANY ADDITIONAL INDEBTEDNESS WE INCUR IN THE FUTURE IMPOSE, OR
MAY IMPOSE, SIGNIFICANT OPERATING AND FINANCIAL RESTRICTIONS,
WHICH MAY PREVENT US FROM CAPITALIZING ON BUSINESS OPPORTUNITIES
AND TAKING SOME ACTIONS. THESE FACTORS COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS
OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON
STOCK TO DECLINE.
The indenture for our Senior Notes, our credit facilities and
any additional indebtedness we incur in the future impose, or
may impose, significant operating and financial restrictions on
us. These restrictions limit the ability of us and our
subsidiaries to, among other things, incur additional
indebtedness at our subsidiaries, make investments, sell assets,
incur certain liens, and enter into agreements restricting our
subsidiaries ability to pay dividends, or merge or
consolidate. In addition, our senior credit facility requires us
to maintain specified financial ratios. We cannot assure you
that these covenants will not adversely affect our ability to
finance our future operations or capital needs or to pursue
available business opportunities. A breach of any of these
covenants or our inability to maintain the required financial
ratios could result in a default under the related indebtedness.
If a default occurs, the relevant lenders could elect to declare
our indebtedness, together with accrued interest and other fees,
to be immediately due and payable. These factors could have a
material adverse effect on our business, financial position and
results of operations and could cause the market value of our
common stock to decline.
OUR ABILITY TO SERVICE OUR DEBT AND MEET OUR CASH
REQUIREMENTS DEPENDS ON MANY FACTORS, SOME OF WHICH ARE BEYOND
OUR CONTROL. THESE FACTORS COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS
AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO
DECLINE.
Our ability to satisfy our obligations, including our Senior
Notes, our credit facilities and any additional indebtedness we
incur in the future will depend on our future operating
performance and financial results, which will be subject, in
part, to factors beyond our control, including interest rates
and general economic, financial and
17
business conditions. If we are unable to generate sufficient
cash flow, we may be required to: refinance all or a portion of
our debt, including the notes and our senior credit facility;
obtain additional financing in the future for acquisitions,
working capital, capital expenditures and general corporate or
other purposes; redirect a substantial portion of our cash flow
to debt service, which as a result, might not be available for
our operations or other purposes; sell some of our assets or
operations; reduce or delay capital expenditures; or revise or
delay our operations or strategic plans. If we are required to
take any of these actions, it could have a material adverse
effect on our business, financial condition or results of
operations. In addition, we cannot assure you that we would be
able to take any of these actions, that these actions would
enable us to continue to satisfy our capital requirements or
that these actions would be permitted under the terms of our
credit facilities and the indenture governing the notes. The
leverage resulting from our notes offering, our credit facility
and indebtedness we may incur in the future could have certain
material adverse effects on us, including limiting our ability
to obtain additional financing and reducing cash available for
our operations and acquisitions. As a result, our ability to
withstand competitive pressures may be decreased and, we may be
more vulnerable to economic downturns, which in turn could
reduce our flexibility in responding to changing business,
regulatory and economic conditions. These factors could have a
material adverse effect on our business, financial position and
results of operations and could cause the market value of our
common stock to decline.
WE DEPEND ON THIRD-PARTY SUPPLIERS AND DISTRIBUTORS FOR THE
RAW MATERIALS, PARTICULARLY THE CHEMICAL COMPOUND(S) COMPRISING
THE ACTIVE PHARMACEUTICAL INGREDIENT, THAT WE USE TO MANUFACTURE
OUR PRODUCTS, AS WELL AS CERTAIN FINISHED GOODS. A PROLONGED
INTERRUPTION IN THE SUPPLY OF SUCH PRODUCTS COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND
RESULTS OF OPERATIONS, AND THE MARKET VALUE OF OUR COMMON STOCK
COULD DECLINE.
We typically purchase the active pharmaceutical ingredient (i.e.
the chemical compounds that produce the desired therapeutic
effect in our products) and other materials and supplies that we
use in our manufacturing operations, as well as certain finished
products, from many different foreign and domestic suppliers.
Additionally, we maintain safety stocks in our raw materials
inventory, and in certain cases where we have listed only one
supplier in our applications with the FDA, have received FDA
approval to use alternative suppliers should the need arise.
However, there is no guarantee that we will always have timely
and sufficient access to a critical raw material or finished
product. A prolonged interruption in the supply of a
single-sourced raw material, including the active ingredient, or
finished product could cause our financial position and results
of operations to be materially adversely affected, and the
market value of our common stock could decline. In addition, our
manufacturing capabilities could be impacted by quality
deficiencies in the products which our suppliers provide, which
could have a material adverse effect on our business, financial
position and results of operations, and the market value of our
common stock could decline.
The Company utilizes controlled substances in certain of its
current products and products in development and therefore must
meet the requirements of the Controlled Substances Act of 1970
and the related regulations administered by the Drug Enforcement
Administration (DEA). These regulations relate to
the manufacture, shipment, storage, sale and use of controlled
substances. The DEA limits the availability of the active
ingredients used in certain of our current products and products
in development and, as a result, our procurement quota of these
active ingredients may not be sufficient to meet commercial
demand or complete clinical trials. We must annually apply to
the DEA for procurement quota in order to obtain these
substances. Any delay or refusal by the DEA in establishing our
procurement quota for controlled substances could delay or stop
our clinical trials or product launches, or could cause trade
inventory disruptions for those products that have already been
launched, which could have a material adverse effect on our
business, financial position and results of operations and could
cause the market value of our common stock to decline.
18
WE USE SEVERAL MANUFACTURING FACILITIES TO MANUFACTURE OUR
PRODUCTS. HOWEVER, A SIGNIFICANT NUMBER OF OUR PRODUCTS ARE
PRODUCED AT ONE LOCATION. PRODUCTION AT THIS FACILITY COULD BE
INTERRUPTED, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD
CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.
Although we have other facilities, we produce a significant
number of our products at our largest manufacturing facility. A
significant disruption at that facility, even on a short-term
basis, could impair our ability to produce and ship products to
the market on a timely basis, which could have a material
adverse effect on our business, financial position and results
of operations and could cause the market value of our common
stock to decline.
WE MAY EXPERIENCE DECLINES IN THE SALES VOLUME AND PRICES OF
OUR PRODUCTS AS THE RESULT OF THE CONTINUING TREND TOWARD
CONSOLIDATION OF CERTAIN CUSTOMER GROUPS, SUCH AS THE WHOLESALE
DRUG DISTRIBUTION AND RETAIL PHARMACY INDUSTRIES, AS WELL AS THE
EMERGENCE OF LARGE BUYING GROUPS. THE RESULT OF SUCH
DEVELOPMENTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD
CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.
We make a significant amount of our sales to a relatively small
number of drug wholesalers and retail drug chains. These
customers represent an essential part of the distribution chain
of generic pharmaceutical products. Drug wholesalers and retail
drug chains have undergone, and are continuing to undergo,
significant consolidation. This consolidation may result in
these groups gaining additional purchasing leverage and
consequently increasing the product pricing pressures facing our
business. Additionally, the emergence of large buying groups
representing independent retail pharmacies and the prevalence
and influence of managed care organizations and similar
institutions potentially enable those groups to attempt to
extract price discounts on our products. The result of these
developments may have a material adverse effect on our business,
financial position and results of operations and could cause the
market value of our common stock to decline.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL AND OTHER
PROPRIETARY PROPERTY IN AN EFFECTIVE MANNER, WHICH COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND
RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR
COMMON STOCK TO DECLINE.
Although our brand products may have patent protection, this may
not prevent other companies from developing functionally
equivalent products or from challenging the validity or
enforceability of our patents. If any patents we use in our
business are found or even alleged to be non-infringed, invalid
or not enforceable, we could experience an adverse effect on our
ability to commercially promote our patented products. We could
be required to enforce our patent or other intellectual property
rights through litigation, which can be protracted and involve
significant expense and an inherently uncertain outcome. Any
negative outcome could have a material adverse effect on our
business, financial position and results of operations and could
cause the market value of our common stock to decline.
OUR COMPETITORS INCLUDING BRAND COMPANIES OR OTHER THIRD
PARTIES MAY ALLEGE THAT WE ARE INFRINGING THEIR INTELLECTUAL
PROPERTY, FORCING US TO EXPEND SUBSTANTIAL RESOURCES IN
RESULTING LITIGATION, THE OUTCOME OF WHICH IS UNCERTAIN. ANY
UNFAVORABLE OUTCOME OF SUCH LITIGATION COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS
OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON
STOCK TO DECLINE.
Companies that produce brand pharmaceutical products routinely
bring litigation against ANDA applicants that seek FDA approval
to manufacture and market generic forms of their branded
products. These companies allege patent infringement or other
violations of intellectual property rights as the basis for
filing suit against an ANDA applicant. Likewise, patent holders
may bring patent infringement suits against companies that are
currently marketing and selling their approved generic products.
Litigation often involves significant expense and can delay or
prevent introduction or sale of our generic products.
19
There may also be situations where the Company uses its business
judgment and decides to market and sell products,
notwithstanding the fact that allegations of patent
infringement(s) have not been finally resolved by the courts.
The risk involved in doing so can be substantial because the
remedies available to the owner of a patent for infringement
include, among other things, damages measured by the profits
lost by the patent owner and not by the profits earned by the
infringer. In the case of a willful infringement, the definition
of which is subjective, such damages may be trebled. Moreover,
because of the discount pricing typically involved with
bioequivalent products, patented brand products generally
realize a substantially higher profit margin than bioequivalent
products. An adverse decision in a case such as this or in other
similar litigation could have a material adverse effect on our
business, financial position and results of operations and could
cause the market value of our common stock to decline.
WE MAY EXPERIENCE REDUCTIONS IN THE LEVELS OF
REIMBURSEMENT FOR PHARMACEUTICAL PRODUCTS BY GOVERNMENTAL
AUTHORITIES, HMOs OR OTHER THIRD-PARTY PAYERS. ANY SUCH
REDUCTIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE
MARKET VALUE OF OUR COMMON STOCK TO DECLINE.
Various governmental authorities and private health insurers and
other organizations, such as HMOs, provide reimbursement to
consumers for the cost of certain pharmaceutical products.
Demand for our products depends in part on the extent to which
such reimbursement is available. Third-party payers increasingly
challenge the pricing of pharmaceutical products. This trend and
other trends toward the growth of HMOs, managed health care and
legislative health care reform create significant uncertainties
regarding the future levels of reimbursement for pharmaceutical
products. Further, any reimbursement may be reduced in the
future, perhaps to the point that market demand for our products
declines. Such a decline could have a material adverse effect on
our business, financial position and results of operations and
could cause the market value of our common stock to decline.
LEGISLATIVE OR REGULATORY PROGRAMS THAT MAY INFLUENCE PRICES
OF PRESCRIPTION DRUGS COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND
COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.
Current or future federal or state laws and regulations may
influence the prices of drugs and, therefore, could adversely
affect the prices that we receive for our products. Programs in
existence in certain states seek to set prices of all drugs sold
within those states through the regulation and administration of
the sale of prescription drugs. Expansion of these programs, in
particular, state Medicaid programs, or changes required in the
way in which Medicaid rebates are calculated under such
programs, could adversely affect the price we receive for our
products and could have a material adverse effect on our
business, financial position and results of operations and could
cause the market value of our common stock to decline.
WE ARE INVOLVED IN VARIOUS LEGAL PROCEEDINGS AND CERTAIN
GOVERNMENT INQUIRIES AND MAY EXPERIENCE UNFAVORABLE OUTCOMES OF
SUCH PROCEEDINGS OR INQUIRIES, WHICH COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS
OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON
STOCK TO DECLINE.
We are involved in various legal proceedings and certain
government inquiries, including, but not limited to, patent
infringement, product liability, breach of contract and claims
involving Medicaid and Medicare reimbursements, some of which
are described in our periodic reports and involve claims for, or
the possibility of fines and penalties involving, substantial
amounts of money or other relief. If any of these legal
proceedings or inquiries were to result in an adverse outcome,
the impact could have a material adverse effect on our business,
financial position and results of operations and could cause the
market value of our common stock to decline.
With respect to product liability, the Company maintains
commercial insurance to protect against and manage a portion of
the risks involved in conducting its business. Although we carry
insurance, we believe that no reasonable amount of insurance can
fully protect against all such risks because of the potential
liability inherent in the business of producing pharmaceuticals
for human consumption. To the extent that a loss occurs,
depending on
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the nature of the loss and the level of insurance coverage
maintained, it could have a material adverse effect on our
business, financial position and results of operations and could
cause the market value of our common stock to decline.
WE ENTER INTO VARIOUS AGREEMENTS IN THE NORMAL COURSE OF
BUSINESS WHICH PERIODICALLY INCORPORATE PROVISIONS WHEREBY WE
INDEMNIFY THE OTHER PARTY TO THE AGREEMENT. IN THE EVENT THAT WE
WOULD HAVE TO PERFORM UNDER THESE INDEMNIFICATION PROVISIONS, IT
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL
POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET
VALUE OF OUR COMMON STOCK TO DECLINE.
In the normal course of business, we periodically enter into
employment, legal settlement, and other agreements which
incorporate indemnification provisions. We maintain insurance
coverage which we believe will effectively mitigate our
obligations under certain of these indemnification provisions.
However, should our obligation under an indemnification
provision exceed our coverage or should coverage be denied, our
business, financial position and results of operations could be
materially affected and the market value of our common stock
could decline.
OUR ACQUISITION OF A CONTROLLING INTEREST IN MATRIX
LABORATORIES AND OUR PLANS FOR FURTHER GLOBAL EXPANSION WITH THE
ACQUISITION OF MERCK GENERICS EXPOSE THE COMPANY TO ADDITIONAL
RISKS WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD
CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.
With our recently completed acquisition of Matrix and our
planned acquisition of Merck Generics, Mylans operations
extend or will extend to numerous countries outside the U.S.
Operating globally exposes us to certain additional risks
including, but not limited to:
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compliance with a variety of national and local laws of
countries in which we do business, including restrictions on the
import and export of certain intermediates, drugs and
technologies, and the risk that our competitors may have more
experience with operations in such countries or with
international operations generally;
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difficulties integrating new facilities in different countries
into our existing operations, as well as integrating employees
that we hire in different countries into our existing corporate
culture;
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fluctuations in exchange rates for transactions conducted in
currencies other than the U.S. dollar;
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adverse changes in the economies in which we operate as a result
of a slowdown in overall growth, a change in government or
economic liberalization policies, or financial instability in
other countries who influence the economies in which we operate,
particularly emerging markets;
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wage increases or rising inflation in other countries in which
we operate or will operate;
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natural disasters, including drought, floods and earthquakes in
other countries in which we operate or will operate; and
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communal disturbances, terrorist attacks, riots or regional
hostilities in other countries in which we operate or will
operate.
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Certain of the above factors could have a material adverse
effect on our business, financial position and results of
operations and could cause a decline in the market value of our
common stock.
21
OUR PLANNED ACQUISITION OF MERCK GENERICS SPECIFICALLY AND
OUR ACQUISITION STRATEGY GENERALLY, INVOLVE A NUMBER OF INHERENT
RISKS. THESE RISKS COULD CAUSE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD
CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.
We continually seek to expand our product line through
complementary or strategic acquisitions of other companies,
products and assets, and through joint ventures, licensing
agreements or other arrangements. On May 12, 2007, we
signed a definitive agreement to acquire Merck Generics. This
transaction and any acquisitions, joint ventures and other
business combinations involve various inherent risks, such as:
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diversion of managements attention from our ongoing
business;
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the failure to assess accurately the values, strengths,
weaknesses, contingent and other liabilities, regulatory
compliance and potential profitability of acquisition or other
transaction candidates;
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the potential loss of key personnel or customers of an acquired
business;
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failing to successfully manage acquired businesses or increase
our cash flow from their operations;
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failing to successfully integrate the operations and personnel
of the acquired businesses with our ongoing business, and our
resulting inability to achieve identified financial and
operating synergies anticipated to result from an acquisition or
other transaction;
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unanticipated changes in business and economic conditions
affecting an acquisition or other transaction;
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incurring substantial additional indebtedness, assuming
liabilities and incurring significant additional capital
expenditures, transaction and operating expenses and
non-recurring acquisition-related charges;
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potentially experiencing an adverse impact on our earnings from
acquired in-process research and development and the write-off
or amortization of acquired goodwill and other intangible assets;
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acquiring businesses or entering new markets with which we are
not familiar; and
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international acquisitions, and other transactions, could also
be affected by export controls, exchange rate fluctuations,
domestic and foreign political conditions and the deterioration
in domestic and foreign economic conditions.
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We may be unable to realize synergies or other benefits expected
to result from acquisitions, joint ventures and other
transactions or investments we may undertake, or be unable to
generate additional revenue to offset any unanticipated
inability to realize these expected synergies or benefits.
Realization of the anticipated benefits of acquisitions or other
transactions could take longer than expected, and implementation
difficulties, unforeseen expenses, complications and delays,
market factors and the deterioration in domestic and global
economic conditions could alter the anticipated benefits of any
such transactions. These factors could impair our growth and
ability to compete, require us to focus resources on integration
of operations rather than other profitable areas, otherwise
cause a material adverse effect on our business, financial
position and results of operations and could cause a decline in
the market value of our common stock.
In addition, we may compete for certain acquisition targets with
companies having greater financial resources than us or other
advantages over us that may prevent us from acquiring a target.
We plan to finance the acquisition of Merck Generics through
cash on hand, cash provided by operating activities, borrowings
under our credit facilities and other significant indebtedness,
which will reduce our cash available for other purposes,
including the repayment of indebtedness.
22
OUR FUTURE SUCCESS IS HIGHLY DEPENDENT ON OUR CONTINUED
ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL. ANY FAILURE TO
ATTRACT AND RETAIN KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF
OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK
TO DECLINE.
Because our success is largely dependent on the scientific
nature of our business, it is imperative that we attract and
retain qualified personnel in order to develop new products and
compete effectively. If we fail to attract and retain key
scientific, technical or management personnel, our business
could be affected adversely. Additionally, while we have
employment agreements with certain key employees in place, their
employment for the duration of the agreement is not guaranteed.
If we are unsuccessful in retaining all of our key employees, it
could have a material adverse effect on our business, financial
position and results of operations and could cause the market
value of our common stock to decline.
RECENT DECISIONS BY THE FDA, CURRENT BRAND TACTICS AND OTHER
FACTORS BEYOND OUR CONTROL HAVE PLACED OUR BUSINESS UNDER
INCREASING PRESSURE, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS
AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO
DECLINE.
We believe that certain recent FDA rulings are contrary to
multiple sections of the Federal Food, Drug, and Cosmetic Act
and the Administrative Procedures Act, the FDAs published
regulations and the legal precedent on point. These decisions
call into question the rules of engagement in our industry and
have added a level of unpredictability that may materially
adversely affect our business and the generic industry as a
whole. While we continue to challenge these recent decisions as
well as current brand tactics that undermine congressional
intent, we cannot guarantee that we will prevail or predict when
or if these matters will be rectified. If they are not, our
business, financial position and results of operations could
suffer and the market value of our common stock could decline.
WE HAVE BEGUN THE IMPLEMENTATION OF AN ENTERPRISE RESOURCE
PLANNING SYSTEM. AS WITH ANY IMPLEMENTATION OF A SIGNIFICANT NEW
SYSTEM, DIFFICULTIES ENCOUNTERED COULD RESULT IN BUSINESS
INTERRUPTIONS, AND COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD
CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.
We have begun the implementation of an enterprise resource
planning (ERP) system to enhance operating
efficiencies and provide more effective management of our
business operations. Implementations of ERP systems and related
software carry risks such as cost overruns, project delays and
business interruptions and delays. If we experience a material
business interruption as a result of our ERP implementation, it
could have a material adverse effect on our business, financial
position and results of operations and could cause the market
value of our common stock to decline.
WE MUST MAINTAIN ADEQUATE INTERNAL CONTROLS AND BE ABLE, ON
AN ANNUAL BASIS, TO PROVIDE AN ASSERTION AS TO THE EFFECTIVENESS
OF SUCH CONTROLS. FAILURE TO MAINTAIN ADEQUATE INTERNAL CONTROLS
OR TO IMPLEMENT NEW OR IMPROVED CONTROLS COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS
OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON
STOCK TO DECLINE.
Effective internal controls are necessary for the Company to
provide reasonable assurance with respect to its financial
reports. We are spending a substantial amount of management time
and resources to comply with changing laws, regulations and
standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act of 2002, new SEC
regulations and the New York Stock Exchange rules. In
particular, Section 404 of the Sarbanes-Oxley Act of 2002
requires managements annual review and evaluation of our
internal control over financial reporting and attestations as to
the effectiveness of these controls by our independent
registered public accounting firm. If we fail to maintain the
adequacy of our internal controls, we may not be able to ensure
that we
23
can conclude on an ongoing basis that we have effective internal
control over financial reporting. Additionally, internal control
over financial reporting may not prevent or detect misstatements
because of its inherent limitations, including the possibility
of human error, the circumvention or overriding of controls, or
fraud. Therefore, even effective internal controls can provide
only reasonable assurance with respect to the preparation and
fair presentation of financial statements. In addition,
projections of any evaluation of effectiveness of internal
control over financial reporting to future periods are subject
to the risk that the control may become inadequate because of
changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. If the Company fails to
maintain the adequacy of its internal controls, including any
failure to implement required new or improved controls, this
could have a material adverse effect on our business, financial
position and results of operations, and the market value of our
common stock could decline.
During fiscal year 2007 the Company acquired a controlling stake
in Matrix Laboratories Limited. For purposes of
Managements evaluation of our internal control over
financial reporting as of March 31, 2007 we have elected to
exclude Matrix from the scope of managements assessment as
permitted by guidance provided by the Securities and Exchange
Commission (SEC). The two part acquisition resulting
in 71.5% ownership of this business was completed by us on
January 8, 2007 and represents approximately 13% of our
consolidated assets at March 31, 2007 and contributed
approximately 5% of total revenues for the year ended
March 31, 2007. This acquired business will be included in
managements assessment of the effectiveness of the
Companys internal controls over financial reporting in
fiscal year 2008. If the Company fails to implement and maintain
adequate internal controls at Matrix, it could have a material
adverse effect on our business, financial position and results
of operations, and the market value of our common stock could
decline.
THERE ARE INHERENT UNCERTAINTIES INVOLVED IN ESTIMATES,
JUDGMENTS AND ASSUMPTIONS USED IN THE PREPARATION OF FINANCIAL
STATEMENTS IN ACCORDANCE WITH GAAP. ANY FUTURE CHANGES IN
ESTIMATES, JUDGMENTS AND ASSUMPTIONS USED OR NECESSARY REVISIONS
TO PRIOR ESTIMATES, JUDGMENTS OR ASSUMPTIONS COULD LEAD TO A
RESTATEMENT WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD
CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. IN
ADDITION, BEGINNING IN FISCAL 2008, WE ARE NOT PROVIDING
ESTIMATED EPS GUIDANCE AND CAUTION THAT INVESTORS SHOULD NOT
RELY ON ESTIMATES MADE BY OTHERS.
The consolidated and condensed consolidated financial statements
included in the periodic reports we file with the SEC are
prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP). The
preparation of financial statements in accordance with GAAP
involves making estimates, judgments and assumptions that affect
reported amounts of assets (including intangible assets),
liabilities, revenues, expenses (including acquired in process
research and development) and income. Estimates, judgments and
assumptions are inherently subject to change in the future and
any necessary revisions to prior estimates, judgments or
assumptions could lead to a restatement. Any such changes could
result in corresponding changes to the amounts of assets
(including goodwill and other intangible assets), liabilities,
revenues, expenses (including acquired in process research and
development) and income. Any such changes could have a material
adverse effect on our business, financial position and results
of operations and could cause the market value of our common
stock to decline.
On February 1, 2007, we announced that for fiscal 2008 and
beyond we will no longer be providing detailed earnings
guidance. Any third-party estimates of our expected earnings per
share have been and will be made without our participation or
endorsement. Because these estimates may be inaccurate, we
caution against reliance upon them in making an investment
decision.
WE ARE SUBJECT TO THE U.S. FOREIGN CORRUPT PRACTICES ACT
AND SIMILAR WORLDWIDE ANTI-BRIBERY LAWS, WHICH IMPOSE
RESTRICTIONS AND MAY CARRY SUBSTANTIAL PENALTIES. ANY VIOLATIONS
OF THESE LAWS, OR ALLEGATIONS OF SUCH VIOLATIONS, COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND
RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR
COMMON STOCK TO DECLINE.
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The U.S. Foreign Corrupt Practices Act and similar
anti-bribery laws in other jurisdictions generally prohibit
companies and their intermediaries from making improper payments
to
non-U.S. officials
for the purpose of obtaining or retaining business. Our policies
mandate compliance with these anti-bribery laws, which often
carry substantial penalties. We operate in jurisdictions that
have experienced governmental corruption to some degree, and, in
certain circumstances, strict compliance with anti-bribery laws
may conflict with certain local customs and practices. We cannot
assure you that our internal control policies and procedures
always will protect us from reckless or other inappropriate acts
committed by our affiliates, employees or agents. Violations of
these laws, or allegations of such violations, could have a
material adverse effect on our business, financial position and
results of operations and could cause the market value of our
common stock to decline.
WE HAVE GROWN, AND CONTINUE TO GROW, AT A VERY RAPID PACE.
OUR INABILITY TO PROPERLY MANAGE OR SUPPORT THE GROWTH MAY HAVE
A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION
AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF
OUR COMMON STOCK TO DECLINE.
We have grown very rapidly over the past few years and
anticipate continuing our rapid expansion including the
acquisition of Merck Generics, extending our processes, systems
and people. We expect to make significant investments in systems
and internal control processes to help manage the growing
company. Attracting, retaining and motivating key employees in
various departments and locations to support our growth are
critical to our business, and competition for these people can
be intense. If we are unable to hire and retain qualified
employees and if we do not continue to invest in systems and
processes to manage and support our rapid growth, there may be a
material adverse effect on our business, financial condition and
results of operations, and the market value of our common stock
to decline.
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ITEM 1B.
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Unresolved
Staff Comments
|
None.
25
We maintain various facilities that are used for research and
development, manufacturing, warehousing, distribution and
administrative functions. These facilities consist of both owned
and leased properties.
The following summarizes the properties used to conduct our
operations:
|
|
|
|
|
|
|
Primary Segment
|
|
Location
|
|
Status
|
|
Primary Use
|
|
Mylan
|
|
North Carolina
|
|
Owned
|
|
Distribution
Warehousing
|
|
|
West Virginia
|
|
Owned
|
|
Manufacturing
Warehousing
Research and Development
Administrative
|
|
|
|
|
Leased
|
|
Warehousing
Administrative
|
|
|
Illinois
|
|
Owned
|
|
Manufacturing
Warehousing
Administrative
|
|
|
Puerto Rico
|
|
Owned
|
|
Manufacturing
Warehousing
Administrative
|
|
|
Texas
|
|
Owned
|
|
Manufacturing
Warehousing
|
|
|
Vermont
|
|
Owned
|
|
Manufacturing
Research and Development
Administrative
Warehousing
|
Matrix
|
|
China
|
|
Owned
|
|
Manufacturing
Warehousing
Administrative
|
|
|
India
|
|
Owned
|
|
Manufacturing
Warehousing
Research and Development
Administrative
|
|
|
|
|
Leased
|
|
Administrative
Research and Development
|
|
|
Belgium
|
|
Leased
|
|
Distribution
Administrative
Research and Development
|
|
|
Netherlands
|
|
Leased
|
|
Administrative
Distribution
|
|
|
Luxembourg
|
|
Leased
|
|
Administrative
|
|
|
France
|
|
Leased
|
|
Administrative
|
|
|
Switzerland
|
|
Leased
|
|
Administrative
|
Corporate/Other
|
|
Pennsylvania
|
|
Owned
|
|
Administrative
|
We believe that all facilities are in good operating condition,
the machinery and equipment are well-maintained, the facilities
are suitable for their intended purposes and they have
capacities adequate for current operations.
26
|
|
ITEM 3.
|
Legal
Proceedings
|
While it is not possible to determine with any degree of
certainty the ultimate outcome of the following legal
proceedings, the Company believes that it has meritorious
defenses with respect to the claims asserted against it and
intends to vigorously defend its position. An adverse outcome in
any of these proceedings could have a material adverse effect on
the Companys financial position and results of operations.
Omeprazole
In fiscal 2001, Mylan Pharmaceuticals Inc. (MPI), a
wholly owned subsidiary of Mylan Labs, filed an Abbreviated New
Drug Application (ANDA) seeking approval from the
FDA to manufacture, market and sell omeprazole delayed-release
capsules and made Paragraph IV certifications to several
patents owned by AstraZeneca PLC (AstraZeneca) that
were listed in the U.S. Food and Drug Administrations
(FDA) Orange Book. On September 8,
2000, AstraZeneca filed suit against MPI and Mylan Labs in the
U.S. District Court for the Southern District of New York
alleging infringement of several of AstraZenecas patents.
On May 29, 2003, the FDA approved MPIs ANDA for the
10 mg and 20 mg strengths of omeprazole
delayed-release capsules, and, on August 4, 2003, Mylan
Labs announced that MPI had commenced the sale of omeprazole
10 mg and 20 mg delayed-release capsules. AstraZeneca
then amended the pending lawsuit to assert claims against Mylan
Labs and MPI and filed a separate lawsuit against MPIs
supplier, Esteve Quimica S.A. (Esteve), for
unspecified money damages and a finding of willful infringement,
which could result in treble damages, injunctive relief,
attorneys fees, costs of litigation and such further
relief as the court deems just and proper. MPI has certain
indemnity obligations to Esteve in connection with this
litigation. MPI, Esteve and the other generic manufacturers who
are co-defendants in the case filed motions for summary judgment
of non-infringement and patent invalidity. On January 12,
2006, those motions were denied. A non-jury trial regarding
liability only was completed on June 14, 2006.
Lorazepam
and Clorazepate
On June 1, 2005, a jury verdict was rendered against Mylan
Labs and MPI in the U.S. District Court for the District of
Columbia (D.C.) in the amount of approximately
$12.0 million which has been accrued for by the Company.
The jury found Mylan willfully violated Massachusetts, Minnesota
and Illinois state antitrust laws in connection with Active
Pharmaceutical Ingredient (API) supply agreements
entered into between the Company and its API supplier and broker
for two drugs, lorazepam and clorazepate, in 1997, and
subsequent price increases on these drugs in 1998. The case was
brought by four health insurers that opted out of earlier class
action settlements agreed to by the Company in 2001 and
represents the last remaining claims relating to Mylans
1998 price increases for lorazepam and clorazepate. In
post-trial filings, the plaintiffs have requested that the
verdict be trebled. Plaintiffs are also seeking an award of
attorneys fees, litigation costs and interest on the
judgment in unspecified amounts. In total, the plaintiffs have
moved for judgments that could result in a liability of
approximately $69 million for Mylan (not including the
request for attorneys fees and costs). The Company filed a
motion for judgment as a matter of law, a motion for a new
trial, a motion to dismiss two of the insurers and a motion to
reduce the verdict. On December 20, 2006, the
Companys motion for judgment as a matter of law and motion
for a new trial were denied. A hearing on the pending post-trial
motions took place on February 28, 2007. The Company
intends to appeal to the U.S. Court of Appeals for the D.C.
Circuit.
Pricing
and Medicaid Litigation
On June 26, 2003, MPI and UDL Laboratories Inc.
(UDL), a subsidiary of Mylan Labs, received requests
from the U.S. House of Representatives Energy and Commerce
Committee (the Committee) seeking information about
certain products sold by MPI and UDL in connection with the
Committees investigation into pharmaceutical reimbursement
and rebates under Medicaid. MPI and UDL cooperated with this
inquiry and provided information in response to the
Committees requests in 2003. Several states
attorneys general (AG) have also sent letters to
MPI, UDL and Mylan Bertek, demanding that those companies retain
documents relating to Medicaid reimbursement and rebate
calculations pending the outcome of unspecified investigations
by those AGs into such matters. In addition, in July 2004, Mylan
Labs received subpoenas from the AGs of California and Florida
in connection with civil investigations purportedly related to
price reporting and marketing practices regarding various drugs.
As noted
27
below, both California and Florida subsequently filed suits
against Mylan, and the Company believes any further requests for
information and disclosures will be made as part of that
litigation.
Beginning in September 2003, Mylan Labs, MPI
and/or UDL,
together with many other pharmaceutical companies, have been
named in a series of civil lawsuits filed by state AGs and
municipal bodies within the state of New York alleging generally
that the defendants defrauded the state Medicaid systems by
allegedly reporting Average Wholesale Prices
(AWP)
and/or
Wholesale Acquisition Costs that exceeded the actual
selling price of the defendants prescription drugs. To
date, Mylan Labs, MPI
and/or UDL
have been named as defendants in substantially similar civil
lawsuits filed by the AGs of Alabama, Alaska, California,
Florida, Hawaii, Illinois, Kentucky, Massachusetts, Mississippi,
Missouri, South Carolina and Wisconsin and also by the city of
New York and approximately 40 counties across New York State.
Several of these cases have been transferred to the AWP
multi-district litigation proceedings pending in the
U.S. District Court for the District of Massachusetts for
pretrial proceedings. Others of these cases will likely be
litigated in the state courts in which they were filed. Each of
the cases seeks an unspecified amount in money damages, civil
penalties
and/or
treble damages, counsel fees and costs, and injunctive relief.
In each of these matters, with the exception of the California,
Florida, Alaska and South Carolina AG actions and the actions
brought by various counties in New York, excluding the actions
brought by Erie, Oswego and Schenectady counties, Mylan Labs,
MPI and/or
UDL have answered the respective complaints denying liability.
Mylan Labs and its subsidiaries intend to defend each of these
actions vigorously.
In addition, by letter dated January 12, 2005, MPI was
notified by the U.S. Department of Justice of an
investigation concerning MPIs calculations of Medicaid
drug rebates. MPI is cooperating fully with the
governments investigation.
Modafinil
Antitrust Litigation and FTC Inquiry
Beginning in April 2006, Mylan Labs, along with four other drug
manufacturers, has been named in a series of civil lawsuits
filed in the Eastern District of Pennsylvania by a variety of
plaintiffs purportedly representing direct and indirect
purchasers of the drug modafinil and one action brought by
Apotex, Inc., a manufacturer of generic drugs seeking approval
to market a generic modafinil product. These actions allege
violations of federal and state laws in connection with the
defendants settlement of patent litigation relating to
modafinil. These actions are in their preliminary stages, and
motions to dismiss each action are pending. Mylan Labs intends
to defend each of these actions vigorously. In addition, by
letter dated July 11, 2006, Mylan was notified by the
U.S. Federal Trade Commission (FTC) of an
investigation relating to the settlement of the modafinil patent
litigation. In its letter, the FTC requested certain information
from Mylan Labs, MPI and Mylan Technologies Inc. pertaining to
the patent litigation and the settlement thereof. On
March 29, 2007, the FTC issued a subpoena, and on
April 26, 2007, the FTC issued a civil investigative demand
to Mylan Labs requesting additional information from the Company
relating to the investigation. Mylan is cooperating fully with
the governments investigation and its outstanding requests
for information.
Other
Litigation
The Company is involved in various other legal proceedings that
are considered normal to its business. While it is not feasible
to predict the ultimate outcome of such other proceedings, the
Company believes that the ultimate outcome of such other
proceedings will not have a material adverse effect on its
financial position or results of operations.
|
|
ITEM 4.
|
Submission
of Matters to a Vote of Security Holders
|
None.
28
PART II
|
|
ITEM 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Our common stock is traded on the New York Stock Exchange under
the symbol MYL. The following table sets forth the
quarterly high and low sales prices for our common stock for the
periods indicated:
|
|
|
|
|
|
|
|
|
Fiscal 2007
|
|
High
|
|
|
Low
|
|
|
First quarter
|
|
$
|
23.73
|
|
|
$
|
19.72
|
|
Second quarter
|
|
|
23.49
|
|
|
|
18.65
|
|
Third quarter
|
|
|
22.10
|
|
|
|
19.72
|
|
Fourth quarter
|
|
|
22.75
|
|
|
|
19.18
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2006
|
|
High
|
|
|
Low
|
|
|
First quarter
|
|
$
|
20.03
|
|
|
$
|
15.21
|
|
Second quarter
|
|
|
20.00
|
|
|
|
17.19
|
|
Third quarter
|
|
|
21.69
|
|
|
|
18.29
|
|
Fourth quarter
|
|
|
25.00
|
|
|
|
19.05
|
|
As of May 11, 2007, there were approximately 139,766
holders of record of our common stock, including those held in
street or nominee name.
During the first quarter of fiscal 2006, the Companys
Board of Directors voted to double the quarterly dividend to 6.0
cents per share, effective with the dividend paid for the first
quarter of fiscal 2006. However, as announced on May 12,
2007, in conjunction with the contemplated acquisition of Merck
KGaAs generic business, the Company is suspending the
dividend on its common stock.
The following table shows information about the securities
authorized for issuance under Mylans equity compensation
plans as of March 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities to be
|
|
Weighted-Average Exercise
|
|
|
|
|
Issued upon Exercise of
|
|
Price of Outstanding
|
|
Number of Securities
|
|
|
Outstanding Options,
|
|
Options, Warrants and
|
|
Remaining Available for
|
Plan Category
|
|
Warrants and Rights
|
|
Rights
|
|
Future Issuance
|
|
Equity compensation plans approved
by security holders
|
|
|
17,711,689
|
|
|
$
|
16.17
|
|
|
|
15,186,223
|
|
Equity compensation plans not
approved by security holders
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
Total
|
|
|
17,771,689
|
|
|
$
|
16.17
|
|
|
|
15,186,223
|
|
In the past three years, we have issued unregistered securities
in connection with the following transactions:
In conjunction with Mylans acquisition of a controlling
interest in Matrix, certain selling shareholders agreed to
purchase approximately 8.1 million unregistered shares of
Mylan Laboratories Inc. common stock for approximately
$168.0 million. Each of these selling shareholders
represented to Mylan that it was an accredited investor.
On March 1, 2007, Mylan entered into a purchase agreement
with Merrill Lynch & Co. and J.P. Morgan
Securities Inc., as representatives of the underwriters named
therein, relating to the sale by the Company of
$600.0 million aggregate principal amount of the
Companys 1.25% Senior Convertible Notes due 2012 (the
Notes).
29
On March 1, 2007, the Company entered into a purchase
agreement with Merrill Lynch & Co. and
J.P. Morgan Securities Inc., as representatives of the
underwriters named therein, relating to the sale of
26,162,500 shares of common stock. Both the Notes and the
common stock were sold pursuant to an effective registration
statement on
Form S-3
(No. 333-140778)
under the Securities Act of 1933, as amended.
Proceeds from the issuance of common stock were approximately
$489.1 million, net of underwriters discount and
offering expenses of $21.1 million and the proceeds from
the Notes were approximately $586.8 million, net of
underwriters discounts and offering expenses of
approximately $13.2 million. Approximately
$80.6 million of the proceeds was used to cover the cost of
the convertible note hedge described below and approximately
$995.3 million will be used for general corporate purposes,
including research and development, and expansion of our global
operations.
The Notes are governed by the terms of an indenture dated as of
March 7, 2007, among the Company, the guarantors named
therein and The Bank of New York, as trustee. The Notes bear
interest at a rate of 1.25% per year, accruing from
March 7, 2007. Interest is payable semiannually in arrears
on March 15 and September 15 of each year, beginning
September 15, 2007. The Notes will mature on March 15,
2012, subject to earlier repurchase or conversion. The Notes
have an initial conversion rate of 44.5931 shares of common
stock per $1,000 principal amount (equivalent to an initial
conversion price of approximately $22.43 per share),
subject to adjustment.
On March 1, 2007, concurrently with the sale of the Notes,
Mylan entered into a convertible note hedge transaction,
comprised of a purchased call option, and two warrant
transactions with each of Merrill Lynch International, an
affiliate of Merrill Lynch, and JPMorgan Chase Bank, National
Association, London Branch, an affiliate of JPMorgan, each of
which we refer to as a counterparty. The net cost to us of the
transactions was approximately $80.6 million.
The purchased call options cover approximately
26,755,853 shares of our common stock, subject to
anti-dilution adjustments substantially similar to the
anti-dilution adjustments for the Notes, which under most
circumstances represents the maximum number of shares that
underlie the Notes. Concurrently with entering into the
purchased call options, we entered into warrant transactions
with the counterparties. Pursuant to the warrant transactions,
we sold to the counterparties warrants to purchase in the
aggregate approximately 26,755,853 shares of our common
stock, subject to customary anti-dilution adjustments. The
warrants may not be exercised prior to the maturity of the
Notes, subject to certain limited exceptions.
The purchased call options are expected to reduce the potential
dilution upon conversion of the Notes in the event that the
market value per share of our common stock at the time of
exercise is greater than approximately $22.43, which corresponds
to the initial conversion price of the notes. The sold warrants
have an exercise price that is 60.0% higher than the price per
share of $19.50 at which we offered our common stock in the
concurrent equity offering.
If the market price per share of our common stock at the time of
conversion of any Notes is above the strike price of the
purchased call options, the purchased call options will, in most
cases, entitle us to receive from the counterparties in the
aggregate the same number of shares of our common stock as we
would be required to issue to the holder of the converted notes.
Additionally, if the market price of our common stock at the
time of exercise of the sold warrants exceeds the strike price
of the sold warrants, we will owe the counterparties an
aggregate of approximately 26,755,853 shares of our common
stock. The purchased call options and sold warrants may be
settled for cash at our election.
The purchased call options and sold warrants are separate
transactions entered into by the Company with the
counterparties, are not part of the terms of the Notes and will
not affect the holders rights under the Notes. Holders of
the Notes will not have any rights with respect to the purchased
call options or the sold warrants.
30
|
|
ITEM 6.
|
Selected
Financial Data
|
The selected consolidated financial data set forth below should
be read in conjunction with Managements Discussion
and Analysis of Results of Operations and Financial
Condition and the Consolidated Financial Statements and
related Notes to Consolidated Financial Statements included
elsewhere in this Annual Report on
Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
March 31,
|
|
2007(1)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
1,611,819
|
|
|
$
|
1,257,164
|
|
|
$
|
1,253,374
|
|
|
$
|
1,374,617
|
|
|
$
|
1,269,192
|
|
Cost of sales
|
|
|
768,151
|
|
|
|
629,548
|
|
|
|
629,834
|
|
|
|
612,149
|
|
|
|
597,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
843,668
|
|
|
|
627,616
|
|
|
|
623,540
|
|
|
|
762,468
|
|
|
|
671,436
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
103,692
|
|
|
|
102,431
|
|
|
|
88,254
|
|
|
|
100,813
|
|
|
|
86,748
|
|
Acquired in process research and
development
|
|
|
147,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
215,538
|
|
|
|
225,380
|
|
|
|
259,105
|
|
|
|
201,612
|
|
|
|
173,070
|
|
Litigation settlements, net
|
|
|
(50,116
|
)
|
|
|
12,417
|
|
|
|
(25,990
|
)
|
|
|
(34,758
|
)
|
|
|
(2,370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
|
427,554
|
|
|
|
287,388
|
|
|
|
302,171
|
|
|
|
494,801
|
|
|
|
413,988
|
|
Interest expense
|
|
|
52,276
|
|
|
|
31,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
|
50,234
|
|
|
|
18,502
|
|
|
|
10,076
|
|
|
|
17,807
|
|
|
|
12,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes and
minority interest
|
|
|
425,512
|
|
|
|
274,605
|
|
|
|
312,247
|
|
|
|
512,608
|
|
|
|
426,513
|
|
Provision for income taxes
|
|
|
208,017
|
|
|
|
90,063
|
|
|
|
108,655
|
|
|
|
177,999
|
|
|
|
154,160
|
|
Minority interest
|
|
|
211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
217,284
|
|
|
$
|
184,542
|
|
|
$
|
203,592
|
|
|
$
|
334,609
|
|
|
$
|
272,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Selected balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,253,867
|
|
|
$
|
1,870,526
|
|
|
$
|
2,135,673
|
|
|
$
|
1,885,061
|
|
|
$
|
1,745,223
|
|
Working capital
|
|
|
1,711,509
|
|
|
|
926,650
|
|
|
|
1,282,945
|
|
|
|
1,144,073
|
|
|
|
962,440
|
|
Deferred revenue
|
|
|
90,673
|
|
|
|
89,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term obligations
|
|
|
29,760
|
|
|
|
22,435
|
|
|
|
19,325
|
|
|
|
19,130
|
|
|
|
19,943
|
|
Long-term debt
|
|
|
1,654,932
|
|
|
|
685,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
1,648,860
|
|
|
|
787,651
|
|
|
|
1,845,936
|
|
|
|
1,659,788
|
|
|
|
1,446,332
|
|
Per common share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.01
|
|
|
$
|
0.80
|
|
|
$
|
0.76
|
|
|
$
|
1.24
|
|
|
$
|
0.98
|
|
Diluted
|
|
$
|
0.99
|
|
|
$
|
0.79
|
|
|
$
|
0.74
|
|
|
$
|
1.21
|
|
|
$
|
0.96
|
|
Shareholders
equity diluted
|
|
$
|
7.52
|
|
|
$
|
3.36
|
|
|
$
|
6.75
|
|
|
$
|
6.01
|
|
|
$
|
5.12
|
|
Cash dividends declared and paid
|
|
$
|
0.24
|
|
|
$
|
0.24
|
|
|
$
|
0.12
|
|
|
$
|
0.10
|
|
|
$
|
0.08
|
|
Weighted average common shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
215,096
|
|
|
|
229,389
|
|
|
|
268,985
|
|
|
|
268,931
|
|
|
|
278,789
|
|
Diluted
|
|
|
219,120
|
|
|
|
234,209
|
|
|
|
273,621
|
|
|
|
276,318
|
|
|
|
282,330
|
|
|
|
|
(1) |
|
Fiscal 2007 includes the results of the Matrix acquisition from
January 8, 2007. In addition to the write-off of acquired
in-process research and development ($147.0 million), cost
of sales includes approximately $17.6 million related to
the amortization of intangibles and the inventory
step-up
associated with the |
31
|
|
|
|
|
acquisition. Fiscal 2007 also includes $22.2 million of
stock-based compensation expense from the adoption of
SFAS 123(R) on April 1, 2006. |
|
|
ITEM 7.
|
Managements
Discussion and Analysis of Results of Operations and Financial
Condition
|
The following discussion and analysis, as well as other sections
in this Annual Report, should be read in conjunction with the
Consolidated Financial Statements and related Notes to
Consolidated Financial Statements included elsewhere in this
report. All references to fiscal years shall mean the
12-month
period ended March 31.
This discussion and analysis may contain forward-looking
statements. These statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements may include,
without limitation, statements about the Companys market
opportunities, strategies, competition, and expected activities
and expenditures and at times may be identified by the use of
words such as may, could,
should, would, project,
believe, anticipate, expect,
plan, estimate, forecast,
potential, intend, continue
and variations of these words or comparable words.
Forward-looking statements inherently involve risks and
uncertainties. Accordingly, actual results may differ materially
from those expressed or implied by these forward-looking
statements. Factors that could cause or contribute to such
differences include, but are not limited to, the risks described
under Risk Factors in ITEM 1A. The Company
undertakes no obligation to update any forward-looking
statements for revisions or changes after the date of this
Form 10-K.
Overview
Mylan Laboratories Inc. and its subsidiaries (the
Company, Mylan or we)
develop, license, manufacture, market and distribute generic,
brand and branded generic pharmaceutical products and active
pharmaceutical ingredients (APIs).
On May 12, 2007, Mylan and Merck KGaA announced the signing
of a definitive agreement under which Mylan will acquire
Mercks generic business (Merck Generics) for
Euro 4.9 billion (approximately $6.7 billion) in an
all-cash transaction. Management believes that the combination
of Mylan and Merck Generics will create a vertically and
horizontally integrated generic and specialty pharmaceuticals
leader with a diversified revenue base and a global footprint,
and also believes the combined company will be among the top
tier of global generic companies, with a significant presence in
the top five global generics markets. The transaction remains
subject to regulatory review in relevant jurisdictions and
certain other customary closing conditions and is expected to
close in the second half of calendar 2007.
In conjunction with the Merck Generics transaction, the Company
entered into a deal-contingent foreign currency option contract
in order to mitigate the risk of foreign currency exposure. The
contract is contingent upon the closing of this acquisition, and
the premium of approximately $121.9 million will be paid
only upon such closing. The Company will account for this
instrument under the provisions of Statement of Financial
Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities
(SFAS 133). This instrument does not
qualify for hedge accounting treatment under
SFAS No. 133 and, therefore, will be adjusted to fair
value at each reporting date with the change in the fair value
of the instrument recorded in earnings.
During the fourth quarter of fiscal 2007, Mylan completed an
acquisition of 71.5% of the outstanding common shares of Matrix
Laboratories Limited (Matrix), a publicly traded
Indian company, for 306 rupees per Matrix share. On
December 21, 2006, in accordance with the terms of the
transaction, Mylan completed an open offer in which it acquired
approximately 20% of Matrixs shares outstanding for
approximately $210.6 million. Then, on January 8,
2007, Mylan purchased approximately 51.5% of Matrixs
shares outstanding pursuant to an agreement with certain selling
shareholders for approximately $545.6 million. The
transaction was funded using Mylans existing revolving
credit facility and cash on hand. Approximately
$168.0 million of the funds received by three of the
selling shareholders (and their affiliates) were used to
purchase approximately 8.1 million shares of Mylan
Laboratories Inc. common stock in private transactions with the
Company.
Matrix provides Mylan with a significant presence in important
emerging pharmaceutical markets, including India, China and
Africa, as well as a European footprint and distribution network
through Matrixs Docpharma subsidiary. This transaction
combines Matrixs API and drug development business with
Mylans expertise in
32
finished dosage forms. The transaction also expands Mylans
high-barrier-to-entry
product capabilities, particularly in the area of
anti-retrovirals.
With the addition of Matrix, Mylan will now report as two
reportable segments, the Mylan Segment and the
Matrix Segment. Mylan previously reported as one
segment. In accordance with SFAS No. 131,
Disclosures about Segments of an Enterprise and Related
Information (SFAS 131), information
for earlier periods has been recast.
Total revenues for fiscal 2007 were $1.61 billion. Mylan
Segment total revenues were $1.53 billion, and our Matrix
Segment had total revenues of $79.4 million.
For fiscal 2006, Mylan had total revenues of $1.26 billion.
On a consolidated basis, year over year, this represents an
increase of 28% in total revenues. Consolidated gross profit for
fiscal 2007 was $843.7 million compared to
$627.6 million in the prior year, an increase of 34%, while
gross margins increased from 49.9% to 52.3%. Operating income
increased by 49% to $427.6 million in fiscal 2007, compared
to $287.4 million in fiscal 2006.
Net earnings for fiscal 2007 were $217.3 million compared
to $184.5 million in fiscal 2006, an increase of 18%.
Earnings per diluted share increased from $0.79 in fiscal 2006
to $0.99 in fiscal 2007. Comparability of results between fiscal
2007 and fiscal 2006 is affected by the following items:
Fiscal
2007:
|
|
|
|
|
The write-off of acquired in-process research and development
related to the Matrix acquisition in the amount of
$147.0 million (pre-tax and after-tax);
|
|
|
|
Stock-based compensation expense totaling $22.2 million,
pre-tax, as a result of the Companys adoption of
SFAS No. 123 (revised 2004), Share-Based Payment
(SFAS No. 123R);
|
|
|
|
A gain on a foreign exchange forward contract of
$16.2 million, pre-tax; and
|
|
|
|
A net gain of $50.1 million, pre-tax, related to the
favorable settlement of certain litigation.
|
Fiscal
2006:
|
|
|
|
|
A charge of $12.0 million, pre-tax, with respect to a
contingent legal liability related to previously, pre-tax,
disclosed litigation in connection with the Companys
lorazepam and clorazepate products and $20.9 million of
restructuring costs.
|
A more detailed discussion of the Companys financial
results can be found under the section titled Results of
Operations.
Other factors which impacted fiscal 2007 were:
|
|
|
|
|
Amlodipine Besylate On March 23, 2007,
Mylan launched Amlodipine Besylate Tablets, 2.5 mg (base),
5 mg (base) and 10 mg (base). Amlodipine Besylate
Tablets (amlodipine) are the generic version of
Pfizers
Norvasc®
Tablets, which had U.S. sales of approximately
$2.7 billion for the
12-month
period ended December 31, 2006, according to IMS Health.
Mylan was the first generic company to file on all strengths of
amlodipine.
|
|
|
|
The FDA has stated that in the event an appellate court mandate
from the March 21, 2007 appellate court decision related to
the validity of the amlodipine patent is issued prior to
September 25, 2007, the only ANDA eligible for approval
during that period will be from Apotex because of the favorable
court decision in its case against Pfizer. However, there are
several other ANDA applicants seeking immediate approval.
|
|
|
|
On May 21, 2007, an appellate court mandate was issued and
Apotex has launched its amlodipine product. Consistent with past
practice and as a result of uncertainties concerning pricing and
market conditions for this product, revenue is being deferred
until the product is sold by Mylans customers or until
such time that the uncertainties are resolved. For the year
ended March 31, 2007, therefore, substantially all revenues
on shipments of amlodipine are deferred.
|
33
|
|
|
|
|
Issuance of Senior Convertible Notes and Common
Stock On March 2, 2007, Mylan completed an
offering of $600.0 million aggregate principal amount of
senior convertible notes due 2012. The notes bear interest at
1.25% and are convertible by holders at an initial conversion
rate of 44.5931 shares of common stock per $1,000 principal
amount of notes (subject to adjustment in certain
circumstances), which represents an intial conversion price of
approximately $22.43 per share.
|
|
|
|
Also on March 2, 2007, Mylan completed the sale of
26.2 million shares of its common stock at a price of
$19.50 per share.
|
|
|
|
Oxybutynin On November 10, 2006, Mylan
announced that the FDA granted final approval for Mylan
Pharmaceuticals Inc.s ANDAs for oxybutynin chloride
extended-release tablets (oxybutynin), 5 mg and
10 mg, the generic version of Alza Corporations
Ditropan
®
XL. Mylan was the first generic drug company to file ANDAs with
the FDA for 5 mg and 10 mg oxybutynin and, as such,
had 180 days of market exclusivity for those strengths. In
the third fiscal quarter of 2007, Mylan launched its 5 mg
and 10 mg oxybutynin products upon receiving approval and
also launched a 15 mg strength under our agreement with
Ortho-McNeil
Pharmaceuticals. Mylans exclusivity on this product
expired on May 9, 2007.
|
Results
of Operations
Fiscal
2007 Compared to Fiscal 2006
Total
Revenues and Gross Profit
Total revenues for fiscal 2007 were $1.61 billion compared
to $1.26 billion for fiscal 2006, an increase of
$354.7 million or 28%. Mylan Segment total revenues were
$1.53 billion, and Matrix Segment total revenues were
$79.4 million. In arriving at net revenues, gross revenues
are reduced by provisions for estimates, including discounts,
customer performance and promotions, price adjustments, returns
and chargebacks. See the section titled Application of
Critical Accounting Policies in this ITEM 7, for a
thorough discussion of our methodology with respect to such
provisions. For the fiscal year ended March 31, 2007, the
most significant amounts charged against gross revenues were for
chargebacks in the amount of $1.19 billion and customer
performance and promotions in the amount of $180.7 million.
For fiscal 2006, chargebacks of $1.11 billion and customer
performance and promotions of $160.8 million were charged
against gross revenues. Customer performance and promotions
include direct rebates as well as promotional programs.
For the Mylan Segment, net revenues increased by
$267.5 million or 22% compared to fiscal 2006 primarily as
a result of increased volume and contribution from new products.
Pricing was relatively stable compared to the prior year.
New products in fiscal 2007 contributed net revenues of
$108.7 million primarily due to oxybutynin, which was
launched in the third quarter.
Excluding new products, fentanyl, which continues to be the only
ANDA-approved, AB-rated generic alternative to
Duragesic®
on the market, was a primary driver of both the increased volume
and relatively stable pricing. Fentanyl accounted for
approximately 18% of Mylan Segment net revenues for fiscal 2007.
For the Mylan Segment, doses shipped during fiscal 2007
increased over 12% from the same prior year period to
approximately 14.1 billion.
Other revenues for the Mylan Segment in fiscal 2007 increased by
$7.7 million from $17.2 million in fiscal 2006 to
$24.9 million for the current fiscal year. This increase
was primarily related to the recognition of amounts that had
been deferred with respect to
Apokyn®,
which was sold in the prior year, with the remainder related to
other business development activities.
Net revenues for the Matrix Segment were $95.8 million, of
which $79.4 million were sold to third parties. Mylan began
consolidating the results of Matrix on January 8, 2007.
Approximately 50% of the Matrix Segments third-party
revenues come from the sale of API and intermediates and
approximately 27% mainly from the distribution of branded
generic products in Europe. Intercompany revenue was derived
from API sales to the Mylan Segment primarily in conjunction
with the launch of amlodipine which is a vertically integrated
product, as well as revenue earned through intercompany product
development agreements.
34
Consolidated gross profit increased 34% or $216.1 million
to $843.7 million from $627.6 million, and gross
margins increased to 52.3% from 49.9%. For the Mylan Segment,
gross profit was $846.6 million compared to
$627.6 million in fiscal 2006, while gross margins
increased to 55.2% from 49.9%. For the Matrix Segment gross
profit was negatively impacted by approximately
$17.6 million representing the reduction of the fair value
step-up in
inventory, intangible assets and property, plant and equipment
recorded as part of the acquisition.
For the Mylan Segment, a significant portion of gross profit, as
well as the increase in gross margins, was comprised of fentanyl
and oxybutynin. Fentanyl contributes margins well in excess of
most other products in our portfolio, excluding new products.
Absent any changes to market dynamics or significant new
competition for fentanyl, the Company expects the product to
continue to be a significant contributor to sales and gross
profit. Products generally contribute most significantly to
gross margin at the time of their launch and, as is the case
with oxybutynin, even more so in periods of market exclusivity.
As is typical in the generic industry, the entrance into the
market of other generic competition generally has a negative
impact on the volume and pricing of the affected products.
Operating
Expenses
Consolidated research and development (R&D)
expense for fiscal 2007 was $103.7 million compared to
$102.4 million in fiscal 2006, which represents an increase
of $1.3 million or 1%. Matrix Segment R&D expense was
$12.7 million for fiscal 2007. Excluding Matrix, R&D
expense decreased by $11.4 million or 11%. The Mylan
Segment had R&D expense of $81.8 million in fiscal
2007 compared to $101.1 million in fiscal 2006. The overall
decrease is primarily the result of the outlicensing of
nebivolol, which occurred late in fiscal 2006.
Additionally, during the fourth quarter, the Company recognized
a charge of $147.0 million to write off acquired in-process
R&D associated with the Matrix acquisition. This amount
represents the fair value of purchased in-process technology for
research projects that, as of the closing date of the
acquisition, had not reached technological feasibility and had
no alternative future use.
Selling, general and administrative (SG&A)
expense for fiscal 2007 was $215.5 million compared to
$225.4 million in fiscal 2006, a decrease of
$9.8 million or 4%. Mylan Segment SG&A expense was
$65.4 million, a decrease of $10.4 million from fiscal
2006. This decrease is primarily the result of approximately
$20.0 million of cost savings realized from the closure of
Mylan Bertek, the Companys branded subsidiary, in the
prior year. Partially offsetting this decrease was an increase
of approximately $4.5 million in stock-based compensation
expense. Corporate and Other SG&A expense was
$144.4 million in fiscal 2007 compared to
$149.6 million in the prior year, a decrease of
$5.2 million or 4%. Prior year Corporate and Other
SG&A included $19.9 million of restructuring costs
associated with the closure of Mylan Bertek, which accounts for
the majority of the decrease realized in fiscal 2007. Partally
offsetting this were increases in other general and
administrative costs, including stock-based compensation expense
of approximately $7.7 million. For the Matrix Segment,
SG&A expense was $5.8 million in fiscal 2007.
Litigation,
net
Net favorable settlements of $50.1 million were recorded in
fiscal 2007. In the same period of the prior year, litigation,
net was a $12.4 million charge of which $12.0 million
was for a contingent liability with respect to the
Companys previously disclosed lorazepam and clorazepate
product litigation.
Interest
Expense
Interest expense for fiscal 2007 totaled $52.3 million
compared to $31.3 million for the same period of the prior
year. The Company has had its financing outstanding for all of
fiscal 2007, while it was only completed during the second
quarter of fiscal 2006. Also included in fiscal 2007 interest
expense is interest related to the debt assumed in the Matrix
acquisition as well as additional debt borrowed to fund the
Matrix acquisition, the convertible notes issued in March of
2007, a commitment fee on the revolving credit facilities and
the amortization of debt issuance costs.
35
Other
Income, net
Other income, net was $50.2 million for fiscal 2007
compared to $18.5 million in the same prior year period.
The change is primarily the result of a $16.2 million net
gain on a foreign currency forward contract related to the
acquisition of Matrix. Additionally, during fiscal 2007, the
Company received a cash payment of $5.5 million from
Somerset Pharmaceuticals, Inc., in which Mylan owns a 50% equity
interest and accounts for this investment using the equity
method of accounting. The amount in excess of the carrying value
of our investment in Somerset, approximately $5.0 million,
was recorded as equity income.
Income
Tax Expense
The Companys effective tax rate increased for fiscal 2007
to 48.9% from 32.8% in fiscal 2006. This increase is primarily
due to the acquisition of Matrix and the related non-deductible
$147.0 million charge related to acquired in-process R&D.
In addition, higher pre-tax income for fiscal 2007 resulted in
higher state taxes while state credits remained relatively
fixed. Additionally, the favorable impact of federal tax credits
on the effective tax rate was less significant in fiscal 2007
primarily because of the expiration of the Section 936
credits and lower R&D credits when compared to the previous
fiscal year.
Fiscal
2006 Compared to Fiscal 2005
Total
Revenues and Gross Profit
During fiscal 2006, in accordance with SFAS No. 131
Mylan reported as one segment, Pharmaceuticals. With
the addition of Matrix, Mylan now has two reportable segments,
the Mylan Segment (which is the former
Pharmaceuticals segment) and the Matrix
Segment. The discussion below has been updated to reflect
this change in segment reporting. In fiscal 2006 and 2005, the
Matrix Segment did not exist.
Net revenues for fiscal 2006 were $1.24 billion compared to
$1.25 billion for fiscal 2005, a decrease of
$7.8 million or 1%. In arriving at net revenues, gross
revenues are reduced by provisions for estimates, including
discounts, customer performance and promotions, price
adjustments, returns and chargebacks. See the section titled
Application of Critical Accounting Policies in this
ITEM 7 for a thorough discussion of our methodology with
respect to such provisions. For the fiscal year ended
March 31, 2006, the most significant amounts charged
against gross revenues were for chargebacks in the amount of
$1.11 billion and customer performance and promotions in
the amount of $160.8 million. For fiscal 2005, chargebacks
of $892.6 million and customer performance and promotions
of $195.1 million were charged against gross revenues. The
increase in the amounts charged against gross revenues for
chargebacks in the current year is the result of pricing
pressures on certain products in the Companys portfolio,
most notably omeprazole and carbidopa/levodopa, a full year of
chargebacks related to fentanyl and an increase in sales to
customers who are entitled to chargeback credits. Customer
performance and promotions include direct rebates as well as
promotional programs. A greater amount was charged against gross
revenues for customer performance and promotions in fiscal 2005
primarily due to promotions offered to customers in connection
with the launch of fentanyl that occurred in the fourth quarter
of the prior fiscal year.
New products launched during fiscal 2006 contributed
$6.7 million to net revenues in fiscal 2006 compared to
$87.3 million in fiscal 2005 primarily due to fentanyl,
which was launched in the fourth quarter of fiscal 2005. The
Company considers a product to be a new product only in the year
it is launched. Net revenues in fiscal 2006, however, did
realize a significant benefit from a full year of sales of
fentanyl, which accounted for over 10% of net revenues, as well
as other products that were launched during fiscal 2005. The
favorable impact of these products served to offset lower
revenue on other products in the Companys portfolio, most
notably omeprazole and carbidopa/levodopa. Both of these
products realized lower net revenues as a result of increased
competition. As is the case in the generic industry, the
entrance into the market of other generic competition generally
has a negative impact on the volume and pricing of the affected
products.
As it relates to other products, the trend generally observed
throughout the Companys product portfolio in fiscal 2006
was favorable volume, which essentially offset unfavorable
pricing. Doses shipped during fiscal 2006 were
12.6 billion, an increase over fiscal 2005 doses shipped of
12.5 billion.
36
The fiscal 2006 results include other revenue of
$17.2 million compared to $5.6 million in the prior
year. The majority of this increase relates to the sale of
Apokyn in fiscal 2006, for which $8.9 million of revenue
was recognized. The remainder of the increase in fiscal 2006 is
related to royalties.
Gross profit for fiscal 2006 was $627.6 million, an
increase of $4.1 million or 1% over fiscal 2005, while
gross margins were consistent at approximately 50%. A
significant portion of gross profit was comprised of fentanyl.
Absent any changes to market dynamics or the current competitive
landscape for fentanyl, we expect the product to continue to be
a significant contributor to sales and gross profit.
Additionally, gross margins in the current year were impacted by
favorable product mix, partially offset by lower margins on
certain products, such as omeprazole and carbidopa/levodopa as a
result of competition.
Operating
Expenses
Research and development (R&D) expense for
fiscal 2006 was $102.4 million compared to
$88.3 million in fiscal 2005, which represents an increase
of $14.2 million or 16%. Mylan Segment R&D expense was
$101.1 million in fiscal 2006 compared to
$87.9 million in fiscal 2005, while Corporate and Other
R&D expense was $1.4 million and $0.4 million,
respectively. The increase in Mylan Segment R&D expense is
primarily due to costs incurred for clinical studies related to
nebivolol incurred prior to the outlicensing of the product in
the fourth quarter of fiscal 2006, as well as an overall
increase in the number of ongoing studies. The Companys
continued commitment to, and investment in, R&D activities
has resulted in a robust ANDA pipeline, and it is expected that
R&D expenses will continue to increase in future periods.
Selling, general and administrative (SG&A)
expense for fiscal 2006 was $225.4 million compared to
$259.1 million in fiscal 2005, a decrease of
$33.7 million or 13%. Corporate and Other SG&A expense
was $149.6 million in fiscal 2006 compared to
$145.4 million in fiscal 2005, an increase of
$4.2 million or 3%. This increase was offset by the Mylan
Segment which had $75.8 million of SG&A expense in
fiscal 2006 compared to $113.7 million in the prior year, a
decrease of $37.9 million or 33%. Included in fiscal 2005
SG&A were costs of $22.9 million related to the
terminated acquisition of King Pharmaceuticals, Inc. Legal costs
also decreased by approximately $9.0 million from fiscal
2005 to fiscal 2006, primarily as a result of the timing of
certain litigation. Legal challenges continue to be an integral
part of the Companys strategy and its ability to continue
to deliver new generic products to the market. The remainder of
the change in SG&A during fiscal 2006 is primarily the
result of the closure of Mylan Bertek as part of the
Companys restructuring. Charges of $19.9 million were
incurred primarily in the first and second quarters related to
employee termination and severance costs, lease termination
costs and asset write-downs. These costs, which were primarily
related to the termination of the Mylan Bertek sales force,
resulted in significant cost savings realized throughout the
remainder of fiscal 2006.
Litigation
Settlements, net
Litigation settlements, included in Corporate and Other, during
fiscal 2006 consisted primarily of a charge of
$12.0 million for a contingent liability with respect to
the Companys previously disclosed lorazepam and
clorazepate product litigation. In the prior year, net gains of
$26.0 million were recorded with respect to settlement of
other litigation.
Interest
Expense
During the second quarter of fiscal 2006, Mylan completed a
financing of $500.0 million in Senior Notes and a
$500.0 million senior secured credit facility (see
Contractual Obligations herein). Included in
Corporate and Other is interest expense related to this
financing of $31.3 million for fiscal 2006. Included in
interest expense is a commitment fee on the unused portion of
the revolving credit facility and the amortization of financing
fees.
Other
Income, net
Corporate and Other includes other income, net of non-operating
expenses, of $18.5 million in fiscal 2006 compared to
$10.1 million in fiscal 2005. The increase is primarily the
result of higher interest and dividend income on our investments
in marketable securities as well as less of a loss recorded on
our investment in Somerset Pharmaceuticals, Inc.
37
We own a 50% equity interest in Somerset and account for this
investment using the equity method of accounting. The recorded
loss in Somerset for fiscal 2006 was $2.5 million compared
to a loss of $3.3 million in fiscal 2005.
Income
Taxes
The effective income tax rate for fiscal 2006 was 32.8%, a
decrease from the fiscal 2005 effective tax rate of 34.8%.
During fiscal 2006, we recorded a tax benefit of
$7.5 million, primarily related to the resolution of
certain tax positions with taxing authorities. These previously
uncertain tax positions were resolved through the completion of
audits or through the acceptance of our amended return filings.
This tax benefit was partially offset by liabilities booked
primarily for certain state tax filing positions. Despite our
belief that our tax return positions are correct, we have
established liabilities in both the current and prior fiscal
years for these tax positions that may become payable in the
event our positions are not upheld. In addition, the fiscal 2006
effective tax rate benefited from the new domestic production
deduction and an increase in tax exempt interest as compared to
the prior year, offset by higher state taxes.
Liquidity
and Capital Resources
Cash flows from operating activities were $390.2 million
for fiscal 2007, resulting from net income and non-cash
add-backs (including acquired in-process R&D of
$147.0 million), partially offset by changes in certain
working capital items. In total, working capital as of
March 31, 2007 was $1.7 billion compared to
$926.7 million at March 31, 2006. The most significant
working capital items affecting cash were accounts receivable
and income taxes payable. The increase in accounts receivable is
related to increased overall sales. The increase to income taxes
payable is the result of increased net income and the timing of
tax payments.
Cash used in investing activities for the fiscal year ended
March 31, 2007 was $730.7 million. Of the
Companys $4.3 billion of total assets at
March 31, 2007, $1.4 billion was held in cash, cash
equivalents and marketable securities. Investments in marketable
securities consist of a variety of high-credit quality debt
securities, including U.S. government, state and local
government and corporate obligations. These investments are
highly liquid and available for working capital and other needs.
As these instruments mature, the funds are generally reinvested
in instruments with similar characteristics.
Capital expenditures during fiscal 2007 were
$161.9 million. These expenditures were incurred primarily
for equipment, including with respect to the Companys
previously announced planned expansions and the implementation
of an integrated ERP system.
Also included in investing activities was $761.0 million
paid to acquire a controlling interest of 71.5% in Matrix, net
of cash acquired. Upon the closing of the purchase of the
controlling interest, Mylan received a cash payment of
$16.2 million as the result of a foreign currency forward
contract that had been entered into with respect to the Matrix
transaction. As a result, the net cash paid by Mylan for Matrix
was approximately $744.8 million. Additionally, certain of
Matrixs selling shareholders used $168.0 million of
the funds received by them to purchase shares of Mylan
Laboratories Inc. common stock from the Company. The receipt of
these proceeds is included in financing activities as discussed
below.
Cash provided by financing activities was $1.44 billion for
fiscal 2007. Mylan generated $657.7 million through the
issuance of common stock as a result of the Matrix transaction
as described above and through the sale of 26.2
million shares on March 1, 2007 at a price of
$19.50 per share. Proceeds from the issuance of common
stock are shown net of underwriters discounts and offering
expenses of approximately $21.1 million.
Proceeds from the issuance of long-term debt were
$1.56 billion, consisting primarily of $600.0 million
of convertible notes issued on March 1, 2007, borrowings of
$315.0 million under the revolving credit facility in order
to finance the Matrix acquisition (of which $52.0 million
was subsequently repaid) and a term loan of $450.0 million
borrowed on March 26, 2007. The term loan was used to pay
$450.0 million of debt outstanding under the Companys
revolving credit facility. Additionally, Mylan repaid
$187.9 million of a 2005 term loan outstanding under a
previous credit facility that was refinanced in the second
quarter of the current fiscal year. The term loan was part of a
credit agreement entered by Mylan for a $750.0 million
senior unsecured credit facility which, in addition
38
to the term loan, includes a multicurrency revolving credit
facility (the Revolving Credit Facility) in an
aggregate amount of up to a U.S. dollar equivalent of
$300.0 million, which is expected to be used for working
capital and general corporate purposes, including expansion of
global operations. At March 31, 2007, the Company had
$1.0 billion available under its credit facilities.
At the time of issuance of the convertible notes, Mylan entered
into a convertible note hedge transaction, comprised of a
purchased call option and two warrant transactions with each of
Merrill Lynch International, an affiliate of Merrill Lynch, and
JPMorgan Chase Bank, National Association, London Branch, an
affiliate of JPMorgan. The sale of the warrants resulted in cash
proceeds of $45.4 million which was used, along with the
proceeds from the issuance of the notes, to purchase the bond
hedge for approximately $126.0 million. Subject to the
conversion provisions outlined in the Convertible
Notes Purchase Agreement, the notes are convertible by
holders at an initial conversion rate of 44.5931 shares of
common stock per $1,000 principal amount of notes, with the
principal amount payable in cash and the remainder in stock or
cash at the option of the Company.
Also included in cash flows from financing activities are
proceeds of $49.8 million from the exercise of stock
options and cash dividends paid of $50.8 million. In the
first quarter of fiscal 2006, the Board voted to double the
amount of the quarterly dividend to 6.0 cents per share from 3.0
cents per share, effective with the dividend paid for the first
quarter of fiscal 2006. However, as announced on May 12,
2007, in conjunction with the contemplated acquisition of Merck
KGaAs generic business, the Company is suspending the
dividend on its common stock.
On May 12, 2007, Mylan and Merck KGaA announced the signing
of a definitive agreement under which Mylan will acquire
Mercks generics business (Merck Generics) for
Euro 4.9 billion (approximately $6.7 billion) in an
all-cash transaction. Management believes that the combination
of Mylan and Merck Generics will create a vertically and
horizontally integrated generics and specialty pharmaceuticals
leader with a diversified revenue base and a global footprint,
and also believes the combined company will be among the top
tier of global generic companies, with a significant presence in
the top five global generics markets. Mylan has obtained fully
committed financing from Merrill Lynch, Citigroup and Goldman
Sachs.
In conjunction with the Merck Generics transaction, the Company
entered into a deal-contingent foreign currency option contract
in order to mitigate the risk of foreign currency exposure. The
contract is contingent upon the closing of this acquisition, and
the premium of approximately $121.9 million will be paid
only upon such closing. The Company will account for this
instrument under the provisions of SFAS No. 133. This
instrument does not qualify for hedge accounting treatment under
SFAS No. 133 and, therefore, will be adjusted to fair
value at each reporting date with the change in the fair value
of the instrument recorded in earnings.
The Company is involved in various legal proceedings that are
considered normal to its business (see Note 18 to the
Consolidated Financial Statements). While it is not feasible to
predict the outcome of such proceedings, an adverse outcome in
any of these proceedings could materially affect the
Companys financial position and results of operations.
The Company is actively pursuing, and is currently involved in,
joint projects related to the development, distribution and
marketing of both generic and brand products. Many of these
arrangements provide for payments by the Company upon the
attainment of specified milestones. While these arrangements
help to reduce the financial risk for unsuccessful projects,
fulfillment of specified milestones or the occurrence of other
obligations may result in fluctuations in cash flows.
The Company is continuously evaluating the potential acquisition
of products, as well as companies, as a strategic part of its
future growth. Consequently, the Company may utilize current
cash reserves or incur additional indebtedness to finance any
such acquisitions, which could impact future liquidity.
39
Contractual
Obligations
The following table summarizes our contractual obligations at
March 31, 2007 and the effect that such obligations are
expected to have on our liquidity and cash flows in future
periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
One-Three
|
|
|
Three-Five
|
|
|
|
|
As of March 31,
2007
|
|
Total
|
|
|
One Year
|
|
|
Years
|
|
|
Years
|
|
|
Thereafter
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
$
|
20,164
|
|
|
$
|
5,848
|
|
|
$
|
9,621
|
|
|
$
|
2,662
|
|
|
$
|
2,033
|
|
Other long-term obligations
|
|
|
33,112
|
|
|
|
3,440
|
|
|
|
13,225
|
|
|
|
3,612
|
|
|
|
12,835
|
|
Total debt
|
|
|
1,776,362
|
|
|
|
121,430
|
|
|
|
254,932
|
|
|
|
1,050,000
|
|
|
|
350,000
|
|
Scheduled interest payments
|
|
|
362,752
|
|
|
|
71,394
|
|
|
|
202,801
|
|
|
|
66,244
|
|
|
|
22,313
|
|
Revolving credit facility
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,192,390
|
|
|
$
|
202,112
|
|
|
$
|
480,579
|
|
|
$
|
1,122,518
|
|
|
$
|
387,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We lease certain real property under various operating lease
arrangements that expire generally over the next five years.
These leases generally provide us with the option to renew the
lease at the end of the lease term. We have also entered into
agreements to lease vehicles, which are typically 24 to
36 months, for use by our key employees.
Long-term debt consists of $500.0 million in Senior Notes,
a Term Loan Facility of $450.0 million and
$600.0 million in convertible notes. Additionally, with the
acquisition of Matrix, Mylan assumed debt of approximately
$226.4 million consisting primarily of two term loans of
Euro 82.5 million each.
The Senior Notes consist of $150.0 million of Senior Notes
due 2010, and bearing interest at
53/4% per
annum (the 2010 Notes), and $350.0 million of
Senior Notes due 2015, and bearing interest at
63/8% per
annum (the 2015 Notes, and collectively, the
Notes). The Senior Notes were originally issued on
July 21, 2005 but were exchanged on January 14, 2006
in accordance with a registration rights agreement in a
transaction consummated on January 19, 2006. The form and
terms of the Senior Notes are identical in all material respects
to the original notes except the transfer restrictions,
registration rights and additional interest provisions relating
to the original notes do not apply to the Notes.
On March 26, 2007, Mylan and its wholly owned indirect
subsidiary Euro Mylan B.V. (Euro Mylan) entered into
a credit agreement with a syndicate of bank lenders for a
$750.0 million senior unsecured credit facility (the
2007 Credit Facility), including (i) a
multicurrency revolving credit facility (the Revolving
Credit Facility) in an aggregate amount of up to a
U.S. dollar equivalent of $300.0 million due
July 24, 2011, and (ii) a term loan facility (the
Term Loan Facility) denominated in
U.S. dollars in aggregate amount of up to
$450.0 million due December 26, 2011. Upon closing,
the Company borrowed $450.0 million under the Term
Loan Facility and used the proceeds to repay the revolving
loans outstanding under the Companys existing 2006 Credit
Facility. The Company intends to use the Revolving Credit
Facility for working capital and general corporate purposes,
including expansion of its global operations. At the
Companys option, loans under the 2007 Credit Facility will
bear interest either at a rate equal to LIBOR plus an effective
applicable margin or at a base rate, which is defined as the
higher of the rate announced publicly by the Administrative
Agent, from time to time, as its prime rate or 0.5% above the
federal funds rate. In the case of the effective applicable
margin for outstanding term loans and revolver advances based on
LIBOR, after the delivery by the Company to the Administrative
Agent of its financial statements for the fiscal quarter ended
March 31, 2007, the effective applicable margin may
increase or decrease, within a range from 0.50% to 1.25%, based
on the Companys total leverage ratio. The interest rate in
effect at March 31, 2007 on the outstanding borrowings
under the Term Loan facility was 6.2%.
On March 1, 2007, Mylan entered into a Purchase Agreement
(the Convertible Notes Purchase Agreement)
relating to the sale by the Company of $600.0 million
aggregate principal amount of the Companys
1.25% Senior Convertible Notes due 2012 (the
Convertible Notes). The Convertible Notes bear
interest at a rate of 1.25% per year, accruing from
March 7, 2007. Interest is payable semiannually in arrears
on March 15 and September 15 of each year, beginning
September 15, 2007. The Notes will mature on March 15,
2012, subject to earlier repurchase or conversion. The Notes
have an initial conversion rate of 44.5931 shares of common
stock per $1,000 principal amount (equivalent to an initial
conversion price of approximately $22.43 per share),
subject to adjustment.
40
Matrixs term loan borrowings consist of two Facilities
(Facility A and Facility B), both of
which are denominated in euros. Matrixs effective interest
rate for these loans is Euro Interbank Offered Rate
(Euribor) plus 110 basis points for Facility A
of Euro 82.50 million and Euribor plus 129 basis
points for Facility B of Euro 82.50 million for the
period ended March 31, 2007. Facility A is repayable in
July 2007, and Facility B is payable over three years in semi
annual installments beginning in October 2007.
Scheduled interest payments represent the estimated interest
payments on the Notes, the Term Loan, the Convertible Notes and
Matrix debt. Variable debt interest payments are estimated using
current interest rates, as discussed above.
Other long-term obligations, primarily deferred compensation,
consist of the discounted future payments under individually
negotiated agreements with certain key employees and directors.
On May 12, 2007, Mylan and Merck KGaA announced the signing
of a definitive agreement under which Mylan will acquire Merck
Generics for Euro 4.9 billion (approximately
$6.7 billion) in an all-cash transaction. Mylan has secured
fully committed financing through Merrill Lynch, Citigroup and
Goldman Sachs.
In addition to the above, the Company has entered into various
product licensing and development agreements. In some of these
arrangements, we provide funding for the development of the
product or obtain the rights to the use of the patent, through
milestone payments, in exchange for marketing and distribution
rights to the product. Because milestones represent the
completion of specific contractual events and it is uncertain if
and when these milestones will be achieved, such contingencies
have not been recorded on the Companys Consolidated
Balance Sheet. In the event that all projects are successful,
milestone and development payments of approximately
$21.7 million would be paid.
The Company periodically enters into licensing agreements with
other pharmaceutical companies for the manufacture, marketing
and/or sale
of pharmaceutical products. These agreements generally call for
the Company to pay a percentage of amounts earned from the sale
of the product as a royalty.
We have entered into employment and other agreements with
certain executives that provide for compensation and certain
other benefits. These agreements provide for severance payments
under certain circumstances.
At March 31, 2007, the Company has $13.1 million in
letters of credit outstanding.
Application
of Critical Accounting Policies
Our significant accounting policies are described in Note 2
to the Consolidated Financial Statements, which were prepared in
accordance with accounting principles generally accepted in the
United States of America. Included within these policies are
certain policies which contain critical accounting estimates
and, therefore, have been deemed to be critical accounting
policies. Critical accounting estimates are those which
require management to make assumptions about matters that were
uncertain at the time the estimate was made and for which the
use of different estimates, which reasonably could have been
used, or changes in the accounting estimates that are reasonably
likely to occur from period to period could have a material
impact on our financial condition or results of operations. The
Company has identified the following to be its critical
accounting policies: the determination of net revenue
provisions, intangible assets and goodwill and the impact of
existing legal matters.
Net
Revenue Provisions
Net revenues are recognized for product sales upon shipment when
title and risk of loss have transferred to the customer and when
provisions for estimates, including discounts, rebates,
promotional adjustments, price adjustments, returns, chargebacks
and other potential adjustments are reasonably determinable.
Accruals for these provisions are presented in the Consolidated
Financial Statements as reductions to net revenues and accounts
receivable and within other current liabilities. Accounts
receivable are presented net of allowances relating to these
provisions, which were $404.7 million and
$381.8 million at March 31, 2007 and 2006,
respectively. Other current liabilities include
$51.9 million and $60.4 million at March 31, 2007
and 2006, respectively, for certain rebates and other
adjustments that are paid to indirect customers.
41
The following is a rollforward of the most significant
provisions for estimated sales allowances during fiscal year
ended March 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision Related
|
|
|
|
|
|
|
|
|
|
Checks/Credits
|
|
|
to Sales Made in
|
|
|
|
|
|
|
Balance at
|
|
|
Issued to Third
|
|
|
the Current
|
|
|
Balance at
|
|
|
|
3/31/2006
|
|
|
Parties
|
|
|
Period
|
|
|
3/31/2007
|
|
|
Chargebacks
|
|
$
|
191,237
|
|
|
$
|
(1,168,824
|
)
|
|
$
|
1,186,549
|
|
|
$
|
208,962
|
|
Customer performance and promotions
|
|
$
|
62,762
|
|
|
$
|
(170,217
|
)
|
|
$
|
180,677
|
|
|
$
|
73,222
|
|
Returns
|
|
$
|
51,768
|
|
|
$
|
(29,532
|
)
|
|
$
|
27,340
|
|
|
$
|
49,576
|
|
The accrual for chargebacks increased primarily as a result of
increased sales, including sales generated from the launch of
oxybutynin in the current year. The accrual for customer
performance and promotions includes direct rebates as well as
promotional programs. The accrual for direct rebates increased
primarily as a result of higher sales in the current year, while
the increase in the accrual for promotional programs was also
driven in part by the launch of oxybutynin in the later part of
fiscal 2007.
Provisions for estimated discounts, rebates, promotional and
other credits require a lower degree of subjectivity and are
less complex in nature yet, combined, represent a significant
portion of the overall provisions. These provisions are
estimated based on historical payment experience, historical
relationship to revenues, estimated customer inventory levels
and contract terms. Such provisions are determinable due to the
limited number of assumptions and consistency of historical
experience. Others, such as price adjustments, returns and
chargebacks, require management to make more subjective
judgments and evaluate current market conditions. These
provisions are discussed in further detail below.
Price Adjustments Price adjustments, which
include shelf stock adjustments, are credits issued to reflect
decreases in the selling prices of our products. Shelf stock
adjustments are based upon the amount of product that our
customers have remaining in their inventories at the time of the
price reduction. Decreases in our selling prices and the
issuance of credits are discretionary decisions made by us to
reflect market conditions. Amounts recorded for estimated price
adjustments are based upon specified terms with direct
customers, estimated launch dates of competing products,
estimated declines in market price and, in the case of shelf
stock adjustments, estimates of inventory held by the customer.
In most cases, data with respect to the level of inventory held
by the customer is obtained directly from certain of our largest
customers. Additionally, internal estimates are prepared based
upon historical buying patterns and estimated end-user demand.
Such information allows us to assess the impact that a price
adjustment will have given the quantity of inventory on hand. We
regularly monitor these and other factors and evaluate our
reserves and estimates as additional information becomes
available.
Returns Consistent with industry practice, we
maintain a return policy that allows our customers to return
product within a specified period prior to and subsequent to the
expiration date. Our estimate of the provision for returns is
based upon our historical experience with actual returns, which
is applied to the level of sales for the period that corresponds
to the period during which our customers may return product.
This period is known by us based on the shelf lives of our
products at the time of shipment. Additionally, we consider
factors such as levels of inventory in the distribution channel,
product dating, and expiration period, size and maturity of the
market prior to a product launch, entrance in the market of
additional generic competition, changes in formularies or launch
of
over-the-counter
products, to name a few, and make adjustments to the provision
for returns in the event that it appears that actual product
returns may differ from our established reserves. We obtain data
with respect to the level of inventory in the channel directly
from certain of our largest customers. Although the introduction
of additional generic competition does not give our customers
the right to return product outside of our established policy,
we do recognize that such competition could ultimately lead to
increased returns. We analyze this on a
case-by-case
basis, when significant, and make adjustments to increase our
reserve for product returns as necessary.
Chargebacks The provision for chargebacks is
the most significant and complex estimate used in the
recognition of revenue. The Company markets products directly to
wholesalers, distributors, retail pharmacy chains, mail order
pharmacies and group purchasing organizations. The Company also
markets products indirectly to independent pharmacies, managed
care organizations, hospitals, nursing homes and pharmacy
benefit
42
management companies, collectively referred to as indirect
customers. Mylan enters into agreements with its indirect
customers to establish contract pricing for certain products.
The indirect customers then independently select a wholesaler
from which to actually purchase the products at these contracted
prices. Alternatively, certain wholesalers may enter into
agreements with indirect customers that establish contract
pricing for certain products which the wholesalers provide.
Under either arrangement, Mylan will provide credit to the
wholesaler for any difference between the contracted price with
the indirect party and the wholesalers invoice price. Such
credit is called a chargeback, while the difference between the
contracted price and the wholesalers invoice price is
referred to as the chargeback rate. The provision for
chargebacks is based on expected sell-through levels by our
wholesaler customers to indirect customers, as well as estimated
wholesaler inventory levels. For the latter, in most cases,
inventory levels are obtained directly from certain of our
largest wholesalers. Additionally, internal estimates are
prepared based upon historical buying patterns and estimated
end-user demand. Such information allows us to estimate the
potential chargeback that we may ultimately owe to our customers
given the quantity of inventory on hand. We continually monitor
our provision for chargebacks and evaluate our reserve and
estimates as additional information becomes available.
Intangible
Assets and Goodwill
We account for acquired businesses using the purchase method of
accounting which requires that the assets acquired and
liabilities assumed be recorded at the date of acquisition at
their respective estimated fair values. The cost to acquire a
business, including transaction costs, is allocated to the
underlying net assets of the acquired business based on
estimates of their respective fair values. Amounts allocated to
acquired in-process research and development are expensed at the
date of acquisition. Intangible assets are amortized over the
expected life of the asset. Any excess of the purchase price
over the estimated fair values of the net assets acquired is
recorded as goodwill.
The purchase price allocation for the acquisition of Matrix is
preliminary and is based on the information that was available
as of the acquisition date to estimate the fair value of assets
acquired and liabilities assumed. Management believes that
information provides a reasonable basis for allocating the
purchase price, but the Company is awaiting additional
information necessary to finalize the purchase price allocation.
The fair values reflected in the purchase price allocation may
be adjusted upon the final valuation, and such adjustments could
be significant. The Company expects to finalize the valuation
and complete the purchase price allocation as soon as possible
but no later than one year from the acquisition date.
The judgments made in determining the estimated fair value
assigned to each class of assets acquired and liabilities
assumed, as well as asset lives, can materially impact our
results of operations. Fair values and useful lives are
determined based on, among other factors, the expected future
period of benefit of the asset, the various characteristics of
the asset and projected cash flows. Because this process
involves management making estimates with respect to future
sales volumes, pricing, new product launches, anticipated cost
environment and overall market conditions and because these
estimates form the basis for the determination of whether or not
an impairment charge should be recorded, these estimates are
considered to be critical accounting estimates. As a result of
our acquisition of Matrix, we recorded on our balance sheet
goodwill of $505.8 million and $270.4 million of
intangible assets.
Goodwill and intangible assets are reviewed for impairment
annually or when events or other changes in circumstances
indicate that the carrying amount of the assets may not be
recoverable. Impairment of goodwill and indefinite-lived
intangibles is determined to exist when the fair value is less
than the carrying value of the net assets being tested.
Impairment of definite-lived intangibles is determined to exist
when undiscounted cash flows related to the assets are less than
the carrying value of the assets being tested.
As discussed above with respect to determining an assets
fair value and useful life, because this process involves
management making certain estimates and because these estimates
form the basis for the determination of whether or not an
impairment charge should be recorded, these estimates are
considered to be critical accounting estimates. As of
March 31, 2007, the Company determined through its
estimates that no impairment of goodwill or intangible assets
existed. The Company will continue to assess the carrying value
of its goodwill and intangible assets in accordance with
applicable accounting guidance.
43
Legal
Matters
The Company is involved in various legal proceedings, some of
which involve claims for substantial amounts. An estimate is
made to accrue for a loss contingency relating to any of these
legal proceedings if it is probable that a liability was
incurred as of the date of the financial statements and the
amount of loss can be reasonably estimated. Because of the
subjective nature inherent in assessing the outcome of
litigation and because of the potential that an adverse outcome
in a legal proceeding could have a material impact on the
Companys financial position or results of operations, such
estimates are considered to be critical accounting estimates.
During fiscal 2006, the Company recorded an accrual of
$12.0 million following a jury verdict of approximately
that amount in the Companys lorazepam and clorazepate
litigation. See ITEM 3, Legal Proceedings, for
further discussion. The Company will continue to evaluate all
legal matters as additional information becomes available.
Recent
Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board
(FASB) issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes an
Interpretation of FASB Statement 109
(FIN 48), which clarifies the accounting
for uncertain tax positions. This Interpretation provides that
the tax effects from an uncertain tax position be recognized in
the Companys financial statements, only if the position is
more likely than not of being sustained upon audit, based on the
technical merits of the position. The provisions of FIN 48
are effective for Mylan as of April 1, 2007. The Company is
currently evaluating the impact of adopting FIN 48 on its
consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements (SFAS 157),
which defines fair value, establishes a framework for
measuring fair value in GAAP and expands disclosure about fair
value measurements. The statement is effective for fiscal years
beginning after November 15, 2007. The Company is currently
evaluating the impact of adopting SFAS No. 157 on its
consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities
(SFAS 159), providing companies with an
option to report selected financial assets and liabilities at
fair value. This statement is effective for fiscal years
beginning after November 15, 2007. The Company is currently
evaluating the impact of adopting SFAS 159 on its
consolidated financial statements.
|
|
ITEM 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
The Company is subject to market risk from changes in the market
values of investments in its marketable securities and interest
rate risk from changes in interest rates associated with its
long-term debt.
Marketable
Debt Securities
In addition to marketable debt and equity securities,
investments are made in overnight deposits, money market funds
and marketable securities with maturities of less than three
months. These instruments are classified as cash equivalents for
financial reporting purposes and have minimal or no interest
rate risk due to their short-term nature.
The following table summarizes the investments in marketable
debt and equity securities which subject the Company to market
risk at March 31, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
(in thousands)
|
|
|
|
|
|
|
|
Marketable debt securities
|
|
$
|
171,548
|
|
|
$
|
362,458
|
|
Marketable equity securities
|
|
|
2,659
|
|
|
|
5,545
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
174,207
|
|
|
$
|
368,003
|
|
|
|
|
|
|
|
|
|
|
The primary objectives for the marketable debt securities
investment portfolio are liquidity and safety of principal.
Investments are made to achieve the highest rate of return while
retaining principal. Our investment policy limits investments to
certain types of instruments issued by institutions and
government agencies with investment grade credit ratings. At
March 31, 2007, the Company had invested
$171.5 million in marketable debt
44
securities, of which $31.4 million will mature within one
year and $140.1 million will mature after one year. The
short duration to maturity creates minimal exposure to
fluctuations in market values for investments that will mature
within one year. However, a significant change in current
interest rates could affect the market value of the remaining
$140.1 million of marketable debt securities that mature
after one year. A 5% change in the market value of the
marketable debt securities that mature after one year would
result in a $7.0 million change in marketable debt
securities.
Long-Term
Debt
On July 21, 2005, the Company issued $500.0 million in
Senior Notes with fixed interest rates of
53/4%
and
63/8%
(which were exchanged for registered notes, as described
previously) and, on July 24, 2006, entered into a five-year
$700.0 million senior unsecured revolving credit facility
(the 2006 Credit Facility). On March 26, 2007,
Mylan and its wholly owned indirect subsidiary Euro Mylan B.V.
(Euro Mylan) entered into a credit agreement with a
syndicate of bank lenders for a $750.0 million senior
unsecured credit facility (the 2007 Credit
Facility), including (i) a multicurrency revolving
credit facility (the Revolving Credit Facility) in
an aggregate amount of up to a U.S. Dollar equivalent of
$300.0 million due July 24, 2011, and (ii) a term
loan facility (the Term Loan Facility)
denominated in U.S. Dollars in aggregate amount of up to
$450.0 million due December 26, 2011. The Company
borrowed $450.0 million under the Term Loan Facility
and used the proceeds to repay the revolving loans outstanding
under the Companys existing 2006 Credit Facility. The
interest rate in effect at March 31, 2007 on the
outstanding borrowings under the Term Loan Facility was
6.2%.
On March 1, 2007, Mylan entered into a purchase agreement
relating to the sale by the Company of $600.0 million
aggregate principal amount of the Companys
1.25% Senior Convertible Notes due 2012 (the
Convertible Notes). The Convertible Notes bear
interest at a rate of 1.25% per year, accruing from
March 7, 2007. Interest is payable semiannually in arrears
on March 15 and September 15 of each year, beginning
September 15, 2007. The Notes will mature on March 15,
2012, subject to earlier repurchase or conversion. The Notes
have an initial conversion rate of 44.5931 shares of common
stock per $1,000 principal amount (equivalent to an initial
conversion price of approximately $22.43 per share),
subject to adjustment.
Upon the acquisition of Matrix, Mylan assumed Matrixs
long-term debt which includes two term loan borrowings both of
which are denominated in euros. Matrixs effective interest
rate for these loans is Euro Interbank Offered Rate (Euribor)
plus 110 basis points for the first (Facility
A) of Euro 82.50 million and Euribor plus
129 basis points for the second (Facility B) of
Euro 82.50 million for the period ended March 31,
2007. Facility A is repayable in July 2007.
Generally, the fair market value of fixed interest rate debt
will decrease as interest rates rise and increase as interest
rates fall. The fair market value of the Convertible Notes will
fluctuate as the market value of our common stock fluctuates. As
of March 31, 2007, the fair value of our Senior Notes was
approximately $495.8 million, and our Convertible Notes
were approximately $640.4 million. The carrying value of
our Term Loan facility and Matrixs term loan borrowings
approximated fair value. A 10% change in interest rates on the
variable rate debt would result in a change in interest expense
of approximately $3.9 million per year.
Foreign
Exchange Option Contract
In conjunction with the Merck Generics transaction, the Company
entered into a deal-contingent foreign currency option contract
in order to mitigate the risk of foreign currency exposure. The
contract is contingent upon the closing of this acquisition, and
the premium of approximately $121.9 million will be paid
only upon such closing. The Company will account for this
instrument under the provisions of SFAS No. 133. This
instrument does not qualify for hedge accounting treatment under
SFAS No. 133 and, therefore, will be adjusted to fair
value at each reporting date with the change in the fair value
of the instrument recorded in earnings.
45
|
|
ITEM 8.
|
Financial
Statements and Supplementary Data
|
Index to
Consolidated Financial Statements and
Supplementary Financial Information
|
|
|
|
|
|
|
Page
|
|
|
|
|
47
|
|
|
|
|
48
|
|
|
|
|
49
|
|
|
|
|
50
|
|
|
|
|
51
|
|
|
|
|
85
|
|
|
|
|
86
|
|
|
|
|
89
|
|
46
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
March 31,
|
|
2007
|
|
|
2006
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,252,365
|
|
|
$
|
150,124
|
|
Marketable securities
|
|
|
174,207
|
|
|
|
368,003
|
|
Accounts receivable, net
|
|
|
350,294
|
|
|
|
242,193
|
|
Inventories
|
|
|
429,111
|
|
|
|
279,008
|
|
Deferred income tax benefit
|
|
|
145,343
|
|
|
|
137,672
|
|
Prepaid expenses and other current
assets
|
|
|
60,724
|
|
|
|
14,900
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
2,412,044
|
|
|
|
1,191,900
|
|
Property, plant and equipment, net
|
|
|
686,739
|
|
|
|
406,875
|
|
Intangible assets, net
|
|
|
352,780
|
|
|
|
105,595
|
|
Goodwill
|
|
|
612,742
|
|
|
|
102,579
|
|
Deferred income tax benefit
|
|
|
45,779
|
|
|
|
|
|
Other assets
|
|
|
143,783
|
|
|
|
63,577
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,253,867
|
|
|
$
|
1,870,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders
equity
Liabilities
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
160,286
|
|
|
$
|
76,859
|
|
Short-term borrowings
|
|
|
108,259
|
|
|
|
|
|
Income taxes payable
|
|
|
78,387
|
|
|
|
12,963
|
|
Current portion of long-term
obligations
|
|
|
124,782
|
|
|
|
4,336
|
|
Cash dividends payable
|
|
|
14,902
|
|
|
|
12,605
|
|
Other current liabilities
|
|
|
213,919
|
|
|
|
158,487
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
700,535
|
|
|
|
265,250
|
|
Deferred revenue
|
|
|
90,673
|
|
|
|
89,417
|
|
Long-term debt
|
|
|
1,654,932
|
|
|
|
685,188
|
|
Other long-term obligations
|
|
|
29,760
|
|
|
|
22,435
|
|
Deferred income tax liability
|
|
|
85,900
|
|
|
|
20,585
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,561,800
|
|
|
|
1,082,875
|
|
|
|
|
|
|
|
|
|
|
Minority Interest
|
|
|
43,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
Preferred stock par
value $0.50 per share
|
|
|
|
|
|
|
|
|
Shares authorized:
5,000,000 Shares issued: none
|
|
|
|
|
|
|
|
|
Common stock par value
$0.50 per share
|
|
|
|
|
|
|
|
|
Shares authorized: 600,000,000 in
fiscal 2007 and fiscal 2006
|
|
|
|
|
|
|
|
|
Shares issued: 339,361,201 in
fiscal 2007 and 309,150,251 in fiscal 2006
|
|
|
169,681
|
|
|
|
154,575
|
|
Additional paid-in capital
|
|
|
962,746
|
|
|
|
418,954
|
|
Retained earnings
|
|
|
2,103,282
|
|
|
|
1,939,045
|
|
Accumulated other comprehensive
earnings
|
|
|
1,544
|
|
|
|
2,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,237,253
|
|
|
|
2,515,024
|
|
Less treasury stock at
cost
|
|
|
|
|
|
|
|
|
Shares: 90,948,957 in fiscal 2007
and 98,971,431 in fiscal 2006
|
|
|
1,588,393
|
|
|
|
1,727,373
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
1,648,860
|
|
|
|
787,651
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
4,253,867
|
|
|
$
|
1,870,526
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
47
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
March 31,
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
1,586,947
|
|
|
$
|
1,240,011
|
|
|
$
|
1,247,785
|
|
Other revenues
|
|
|
24,872
|
|
|
|
17,153
|
|
|
|
5,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
1,611,819
|
|
|
|
1,257,164
|
|
|
|
1,253,374
|
|
Cost of sales
|
|
|
768,151
|
|
|
|
629,548
|
|
|
|
629,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
843,668
|
|
|
|
627,616
|
|
|
|
623,540
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
103,692
|
|
|
|
102,431
|
|
|
|
88,254
|
|
Acquired in-process research and
development
|
|
|
147,000
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
215,538
|
|
|
|
225,380
|
|
|
|
259,105
|
|
Litigation settlements, net
|
|
|
(50,116
|
)
|
|
|
12,417
|
|
|
|
(25,990
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
416,114
|
|
|
|
340,228
|
|
|
|
321,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
|
427,554
|
|
|
|
287,388
|
|
|
|
302,171
|
|
Interest expense
|
|
|
52,276
|
|
|
|
31,285
|
|
|
|
|
|
Other income, net
|
|
|
50,234
|
|
|
|
18,502
|
|
|
|
10,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes and
minority interest
|
|
|
425,512
|
|
|
|
274,605
|
|
|
|
312,247
|
|
Provision for income taxes
|
|
|
208,017
|
|
|
|
90,063
|
|
|
|
108,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before minority interest
|
|
|
217,495
|
|
|
|
184,542
|
|
|
|
203,592
|
|
Minority interest
|
|
|
211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
217,284
|
|
|
$
|
184,542
|
|
|
$
|
203,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.01
|
|
|
$
|
0.80
|
|
|
$
|
0.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.99
|
|
|
$
|
0.79
|
|
|
$
|
0.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
215,096
|
|
|
|
229,389
|
|
|
|
268,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
219,120
|
|
|
|
234,209
|
|
|
|
273,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
48
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Common stock shares
issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares at beginning of year
|
|
|
309,150,251
|
|
|
|
304,434,724
|
|
|
|
303,553,121
|
|
Issuance of common stock , net
|
|
|
26,162,500
|
|
|
|
|
|
|
|
|
|
Stock options exercised, net of
shares tendered for payment
|
|
|
4,048,450
|
|
|
|
4,715,527
|
|
|
|
881,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares at end of year
|
|
|
339,361,201
|
|
|
|
309,150,251
|
|
|
|
304,434,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares at beginning of year
|
|
|
(98,971,431
|
)
|
|
|
(35,129,643
|
)
|
|
|
(35,129,643
|
)
|
Issuance of restricted stock, net
of shares withheld
|
|
|
(35,665
|
)
|
|
|
35,463
|
|
|
|
|
|
Shares issued for the acquisition
of Matrix
|
|
|
8,058,139
|
|
|
|
|
|
|
|
|
|
Stock purchases
|
|
|
|
|
|
|
(63,877,251
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares at end of year
|
|
|
(90,948,957
|
)
|
|
|
(98,971,431
|
)
|
|
|
(35,129,643
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding
|
|
|
248,412,244
|
|
|
|
210,178,820
|
|
|
|
269,305,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.50 par:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
154,575
|
|
|
$
|
152,217
|
|
|
$
|
151,777
|
|
Issuance of common stock , net
|
|
|
13,081
|
|
|
|
|
|
|
|
|
|
Stock options exercised
|
|
|
2,025
|
|
|
|
2,358
|
|
|
|
440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
169,681
|
|
|
|
154,575
|
|
|
|
152,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
418,954
|
|
|
|
354,172
|
|
|
|
338,143
|
|
Issuance of common stock, net
|
|
|
476,015
|
|
|
|
|
|
|
|
|
|
Sale of warrants
|
|
|
45,360
|
|
|
|
|
|
|
|
|
|
Shares issued for the acquisition
of Matrix
|
|
|
23,045
|
|
|
|
|
|
|
|
|
|
Purchase of bond hedge, net of tax
of $44,100
|
|
|
(81,900
|
)
|
|
|
|
|
|
|
|
|
Stock options exercised
|
|
|
47,242
|
|
|
|
54,531
|
|
|
|
9,628
|
|
Issuance of restricted stock
|
|
|
(2,526
|
)
|
|
|
181
|
|
|
|
|
|
Unearned compensation
|
|
|
|
|
|
|
3,142
|
|
|
|
3,901
|
|
Stock based compensation expense
|
|
|
22,156
|
|
|
|
|
|
|
|
|
|
Tax benefit of stock option plans
|
|
|
14,419
|
|
|
|
7,221
|
|
|
|
2,500
|
|
Other
|
|
|
(19
|
)
|
|
|
(293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
962,746
|
|
|
|
418,954
|
|
|
|
354,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
1,939,045
|
|
|
|
1,808,802
|
|
|
|
1,637,497
|
|
Net earnings
|
|
|
217,284
|
|
|
|
184,542
|
|
|
|
203,592
|
|
Dividends declared ($0.24 per
share for fiscals 2007 and 2006, $0.12 per share for fiscal
2005)
|
|
|
(53,047
|
)
|
|
|
(54,299
|
)
|
|
|
(32,287
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
2,103,282
|
|
|
|
1,939,045
|
|
|
|
1,808,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive
earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
2,450
|
|
|
|
870
|
|
|
|
2,496
|
|
Adoption of SFAS No. 158,
net of tax
|
|
|
(1,272
|
)
|
|
|
|
|
|
|
|
|
Translation adjustment
|
|
|
1,266
|
|
|
|
|
|
|
|
|
|
Net unrealized gain (loss) on
marketable securities, net of tax
|
|
|
(900
|
)
|
|
|
1,580
|
|
|
|
(1,626
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
1,544
|
|
|
|
2,450
|
|
|
|
870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock, at cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
(1,727,373
|
)
|
|
|
(470,125
|
)
|
|
|
(470,125
|
)
|
Issuance of restricted stock, net
of shares withheld
|
|
|
(1,716
|
)
|
|
|
619
|
|
|
|
|
|
Shares issued for the acquisition
of Matrix
|
|
|
140,696
|
|
|
|
|
|
|
|
|
|
Stock purchases
|
|
|
|
|
|
|
(1,257,867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
(1,588,393
|
)
|
|
|
(1,727,373
|
)
|
|
|
(470,125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
$
|
1,648,860
|
|
|
$
|
787,651
|
|
|
$
|
1,845,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
217,284
|
|
|
$
|
184,542
|
|
|
$
|
203,592
|
|
Other comprehensive earnings
(loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized holding gains
(losses) gains on securities
|
|
|
(1,569
|
)
|
|
|
1,397
|
|
|
|
(1,711
|
)
|
Reclassification for losses
included in net earnings
|
|
|
669
|
|
|
|
183
|
|
|
|
85
|
|
Translation adjustment
|
|
|
1,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings
(loss), net of tax
|
|
|
366
|
|
|
|
1,580
|
|
|
|
(1,626
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive earnings
|
|
$
|
217,650
|
|
|
$
|
186,122
|
|
|
$
|
201,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
49
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
March 31,
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
217,284
|
|
|
$
|
184,542
|
|
|
$
|
203,592
|
|
Adjustments to reconcile net
earnings to net cash provided from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
61,512
|
|
|
|
46,827
|
|
|
|
45,100
|
|
Stock-based compensation expense
|
|
|
22,156
|
|
|
|
|
|
|
|
|
|
In-process research and development
|
|
|
147,000
|
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
211
|
|
|
|
|
|
|
|
|
|
Net (income) loss from equity
method investees
|
|
|
(6,659
|
)
|
|
|
2,538
|
|
|
|
2,372
|
|
Change in estimated sales allowances
|
|
|
14,386
|
|
|
|
41,047
|
|
|
|
108,778
|
|
Restructuring provision
|
|
|
|
|
|
|
20,921
|
|
|
|
|
|
Deferred income tax benefit
|
|
|
(50,479
|
)
|
|
|
(23,635
|
)
|
|
|
(36,899
|
)
|
Other non-cash items
|
|
|
7,703
|
|
|
|
15,768
|
|
|
|
7,951
|
|
Litigation settlements, net
|
|
|
(50,116
|
)
|
|
|
12,417
|
|
|
|
(25,990
|
)
|
Receipts from litigation
settlements, net
|
|
|
56,580
|
|
|
|
1,691
|
|
|
|
42,990
|
|
Cash received from Somerset
|
|
|
5,870
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(60,773
|
)
|
|
|
19,081
|
|
|
|
(192,799
|
)
|
Inventories
|
|
|
(28,987
|
)
|
|
|
6,012
|
|
|
|
34,530
|
|
Trade accounts payable
|
|
|
(29,312
|
)
|
|
|
20,534
|
|
|
|
8,082
|
|
Income taxes
|
|
|
73,567
|
|
|
|
(23,821
|
)
|
|
|
22,010
|
|
Deferred revenue
|
|
|
(5,504
|
)
|
|
|
106,642
|
|
|
|
|
|
Other operating assets and
liabilities, net
|
|
|
15,753
|
|
|
|
(14,003
|
)
|
|
|
(16,006
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
390,192
|
|
|
|
416,561
|
|
|
|
203,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(161,851
|
)
|
|
|
(103,689
|
)
|
|
|
(90,746
|
)
|
Acquisition of Matrix, net of cash
acquired of $10,943
|
|
|
(761,049
|
)
|
|
|
|
|
|
|
|
|
Purchase of marketable securities
|
|
|
(655,948
|
)
|
|
|
(686,569
|
)
|
|
|
(780,806
|
)
|
Proceeds from sale of marketable
securities
|
|
|
848,520
|
|
|
|
991,060
|
|
|
|
693,289
|
|
Other items, net
|
|
|
(407
|
)
|
|
|
(5,710
|
)
|
|
|
3,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
investing activities
|
|
|
(730,735
|
)
|
|
|
195,092
|
|
|
|
(174,891
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid
|
|
|
(50,751
|
)
|
|
|
(49,772
|
)
|
|
|
(32,261
|
)
|
Payment of financing fees
|
|
|
(15,329
|
)
|
|
|
(14,662
|
)
|
|
|
|
|
Excess tax benefit from stock-based
compensation
|
|
|
4,158
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common
stock, net
|
|
|
657,678
|
|
|
|
|
|
|
|
|
|
Purchase of bond hedge
|
|
|
(126,000
|
)
|
|
|
|
|
|
|
|
|
Proceeds from issuance of warrants
|
|
|
45,360
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt
|
|
|
1,556,251
|
|
|
|
775,000
|
|
|
|
|
|
Payment of long-term debt
|
|
|
(689,938
|
)
|
|
|
(87,062
|
)
|
|
|
|
|
Purchase of common stock
|
|
|
|
|
|
|
(1,257,867
|
)
|
|
|
|
|
Proceeds from exercise of stock
options
|
|
|
49,824
|
|
|
|
56,889
|
|
|
|
10,068
|
|
Increase (decrease) in outstanding
checks in excess of cash in disbursement accounts
|
|
|
10,403
|
|
|
|
(21,788
|
)
|
|
|
19,622
|
|
Other items, net
|
|
|
1,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
1,442,816
|
|
|
|
(599,262
|
)
|
|
|
(2,571
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on cash of changes in
exchange rates
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
|
1,102,241
|
|
|
|
12,391
|
|
|
|
26,249
|
|
Cash and cash
equivalents beginning of year
|
|
|
150,124
|
|
|
|
137,733
|
|
|
|
111,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents end of year
|
|
$
|
1,252,365
|
|
|
$
|
150,124
|
|
|
$
|
137,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash
flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
176,353
|
|
|
$
|
137,519
|
|
|
$
|
123,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
59,996
|
|
|
$
|
29,110
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
50
Mylan
Laboratories Inc.
Notes to
Consolidated Financial Statements
|
|
Note 1.
|
Nature of
Operations
|
Mylan Laboratories Inc. and its subsidiaries (the
Company, Mylan or we) are
engaged in the development, licensing, manufacture, marketing
and distribution of generic, brand and branded generic
pharmaceutical products for resale by others and active
pharmaceutical ingredients (API). The principal
markets for the Mylan Segment products are proprietary and
ethical pharmaceutical wholesalers and distributors, drug store
chains, drug manufacturers, institutions, and public and
governmental agencies within the United States. The principal
markets for the Matrix Segment are regulated markets such as the
U.S. and the European Union. Matrix has a wide range of products
in multiple therapeutic categories and focuses on developing API
with non-infringing processes to partner with generic
manufacturers in regulated markets at market formation. In
Europe, Matrix operates through Docpharma, its wholly owned
subsidiary and a leading distributor and marketer of branded
generic pharmaceutical products in Belgium, the Netherlands and
Luxembourg. Matrix also has investments in companies in China,
South Africa and India.
|
|
Note 2.
|
Summary
of Significant Accounting Policies
|
Principles of Consolidation. The Consolidated
Financial Statements include the accounts of Mylan Laboratories
Inc. and those of its wholly owned and majority-owned
subsidiaries. All intercompany accounts and transactions have
been eliminated in consolidation. Non-controlling interests in
the Companys subsidiaries are recorded net of tax as
minority interest.
On January 8, 2007, Mylan completed its acquisition of
approximately 51.5% of Matrix Laboratories Limited
(Matrix), which, combined with the acquisition of
20% of the outstanding share capital of Matrix on
December 21, 2006, brought Mylans total ownership of
Matrix to 71.5%. Accordingly, Mylan began consolidating
Matrixs results of operations as of January 8, 2007.
See Note 3 for additional information. With the addition of
Matrix, Mylan will now report as two reportable segments, the
Mylan Segment and the Matrix Segment.
Mylan previously reported as one segment. In accordance with
Statement of Financial Accounting Standards
(SFAS) 131, Disclosures about Segments of an
Enterprise and Related Information (SFAS
No. 131), information for earlier periods has been
recast.
Cash Equivalents. Cash equivalents are composed of
highly liquid investments with an original maturity of three
months or less at the date of purchase. The Company utilizes a
cash management system under which a book cash overdraft in the
amount of $18,008,000 and $7,605,000 at March 31, 2007 and
2006, respectively, exists for the Companys primary
disbursement accounts. This overdraft, which is included in
accounts payable, represents uncleared checks in excess of the
cash balance in the bank account at the end of the reporting
period. The Company transfers cash on an as-needed basis to fund
clearing checks.
Marketable Securities. Marketable securities are
classified as available for sale and are recorded at fair value
based on quoted market prices, with net unrealized gains and
losses, net of income taxes, reflected in accumulated other
comprehensive earnings as a component of shareholders
equity. Net gains and losses on sales of securities available
for sale are computed on a specific security basis and are
included in other income.
Concentrations of Credit Risk. Financial
instruments that potentially subject the Company to credit risk
consist principally of interest-bearing investments and accounts
receivable.
Mylan invests its excess cash in high-quality, liquid money
market instruments (principally commercial paper, government,
municipal and government agency notes and bills) maintained by
financial institutions. The Company maintains deposit balances
at certain of these financial institutions in excess of
federally insured amounts.
Mylan performs ongoing credit evaluations of its customers and
generally does not require collateral. Approximately 51% and 76%
of the accounts receivable balances represent amounts due from
three customers at March 31, 2007 and March 31, 2006,
respectively. Total allowances for doubtful accounts were
$15,149,000 and $10,954,000 at March 31, 2007 and 2006,
respectively.
51
Inventories. Inventories are stated at the lower
of cost or market, with cost determined by the
first-in,
first-out method. Provisions for potentially obsolete or
slow-moving inventory, including pre-launch inventory, are made
based on our analysis of inventory levels, historical
obsolescence and future sales forecasts.
Property, Plant and Equipment. Property, plant and
equipment are stated at cost less accumulated depreciation.
Depreciation is computed and recorded on a straight-line basis
over the assets estimated service lives (3 to
19 years for machinery and equipment and 15 to
39 years for buildings and improvements). The Company
periodically reviews the original estimated useful lives of
assets and makes adjustments when appropriate. Depreciation
expense was $39,093,000, $32,126,000 and $26,455,000 for fiscal
years 2007, 2006 and 2005, respectively.
Intangible Assets and Goodwill. Intangible assets
are stated at cost less accumulated amortization. Amortization
is generally recorded on a straight-line basis over estimated
useful lives ranging from 5 to 20 years. The Company
periodically reviews the original estimated useful lives of
assets and makes adjustments when events indicate a shorter life
is appropriate.
The Company accounts for acquired businesses using the purchase
method of accounting which requires that the assets acquired and
liabilities assumed be recorded at the date of acquisition at
their respective fair values. The cost to acquire a business,
including transaction costs, is allocated to the underlying net
assets of the acquired business in proportion to their
respective fair values. Amounts allocated to acquired in-process
research and development are expensed at the date of
acquisition. Intangible assets are amortized over the expected
life of the asset. Any excess of the purchase price over the
estimated fair values of the net assets acquired is recorded as
goodwill.
The judgments made in determining the estimated fair value
assigned to each class of assets acquired and liabilities
assumed, as well as asset lives, can materially impact the
Companys results of operations. Fair values and useful
lives are determined based on, among other factors, the expected
future period of benefit of the asset, the various
characteristics of the asset and projected cash flows.
Impairment of Long-Lived Assets. The carrying
values of long-lived assets, which include property, plant and
equipment and intangible assets with definite lives, are
evaluated periodically in relation to the expected future cash
flows of the underlying assets. Adjustments are made in the
event that estimated undiscounted net cash flows are less than
the carrying value.
Goodwill is tested for impairment at least annually based on
managements assessment of the fair value of the
Companys identified reporting units as compared to their
related carrying value. If the fair value of a reporting unit is
less than its carrying value, additional steps, including an
allocation of the estimated fair value to the assets and
liabilities of the reporting unit, would be necessary to
determine the amount, if any, of goodwill impairment.
Indefinite-lived intangibles are tested at least annually for
impairment. Impairment is determined to exist when the fair
value is less than the carrying value of the assets being tested.
Other Assets. Investments in business entities in
which we have the ability to exert significant influence over
operating and financial policies (generally 20% to 50%
ownership) are accounted for using the equity method. Under the
equity method, investments are initially recorded at cost and
are adjusted for dividends, distributed and undistributed
earnings and losses, and additional investments. Other assets
are periodically reviewed for
other-than-temporary
declines in fair value.
Short-Term Borrowings. Matrix has a financing
arrangement for the sale of its accounts receivable with certain
commercial banks. The commercial banks purchase the receivables
at a discount and Matrix records the proceeds as short-term
borrowings. Upon receipt of payment of the receivable, the
short-term borrowings are reversed. As the banks have recourse
on the receivables sold, the receivables are included in
accounts receivable, net on the Consolidated Balance Sheet.
Additionally, Matrix has working capital facilities with several
banks which are secured first by Matrixs current assets
and second by Matrixs property, plant and equipment. The
working capital facilities carry interest rates of 4%-14%.
Revenue Recognition. Mylan recognizes revenue for
product sales upon shipment when title and risk of loss pass to
its customers and when provisions for estimates, including
discounts, rebates, price adjustments, returns,
52
chargebacks and other promotional programs, are reasonably
determinable. No revisions were made to the methodology used in
determining these provisions during the fiscal year ended
March 31, 2007. The following briefly describes the nature
of each provision and how such provisions are estimated.
As of March 31, 2007, as a result of significant
uncertainties surrounding the pricing and market conditions with
respect to a product launched by the Company in late March 2007,
the Company is not able to reasonably estimate the amount of
potential price adjustments. For the year ended March 31,
2007, therefore, substantially all revenues on shipments of this
product are being deferred until such uncertainties are
resolved. Such uncertainties are resolved upon our
customers sale of this product or the resolution of
uncertainties concerning pricing and market conditions of this
product.
Discounts are reductions to invoiced amounts offered to
customers for payment within a specified period and are
estimated upon shipment utilizing historical customer payment
experience.
Rebates are offered to key customers to promote customer loyalty
and encourage greater product sales. These rebate programs
provide that upon the attainment of pre-established volumes or
the attainment of revenue milestones for a specified period, the
customer receives credit against purchases. Other promotional
programs are incentive programs periodically offered to our
customers. The Company is able to estimate provisions for
rebates and other promotional programs based on the specific
terms in each agreement at the time of shipment.
Consistent with industry practice, Mylan maintains a return
policy that allows customers to return product within a
specified period prior to and subsequent to the expiration date.
The Companys estimate of the provision for returns is
based upon historical experience with actual returns.
Price adjustments, which include shelf stock adjustments, are
credits issued to reflect decreases in the selling prices of
products. Shelf stock adjustments are based upon the amount of
product which the customer has remaining in its inventory at the
time of the price reduction. Decreases in selling prices are
discretionary decisions made by the Company to reflect market
conditions. Amounts recorded for estimated price adjustments are
based upon specified terms with direct customers, estimated
launch dates of competing products, estimated declines in market
price and, in the case of shelf stock adjustments, estimates of
inventory held by the customer.
The Company has agreements with certain indirect customers, such
as independent pharmacies, managed care organizations,
hospitals, nursing homes, governmental agencies and pharmacy
benefit management companies, which establish contract prices
for certain products. The indirect customers then independently
select a wholesaler from which to actually purchase the products
at these contracted prices. Mylan will provide credit to the
wholesaler for any difference between the contracted price with
the indirect party and the wholesalers invoice price. Such
credit is called a chargeback. The provision for chargebacks is
based on expected sell-through levels by our wholesaler
customers to indirect customers, as well as estimated wholesaler
inventory levels.
Accounts receivable are presented net of allowances relating to
the above provisions. No revisions were made to the methodology
used in determining these provisions during the fiscal years
ended March 31, 2007 and 2006. Such allowances were
$404,687,000 and $381,800,000 at March 31, 2007 and 2006,
respectively. Other current liabilities include $51,873,000 and
$60,374,000 at March 31, 2007 and 2006, respectively, for
certain rebates and other adjustments that are paid to indirect
customers.
The Company periodically enters into various types of revenue
arrangements with third parties, including agreements for the
sale or license of product rights or technology, research and
development agreements, collaboration agreements and others.
These agreements may include the receipt of upfront and
milestone payments, royalties, and payment for contract
manufacturing and other services.
The Company recognizes all non-refundable payments as revenue in
accordance with the guidance provided in the Securities and
Exchange Commissions (SEC) Staff Accounting
Bulletin (SAB) No. 104, Revenue Recognition,
corrected copy and Emerging Issues Task Force Issue
No. 00-21,
Revenue Arrangements with Multiple Deliverables.
Non-refundable fees received upon entering into license and
other collaborative agreements where the Company has continuing
involvement are recorded as deferred revenue and recognized as
other revenue over a period of time.
53
Royalty revenue from licensees, which are based on third-party
sales of licensed products and technology, is earned in
accordance with the contract terms when third-party sales can be
reliably measured and collection of the funds is reasonably
assured. Royalty revenue is included in other revenue on the
Consolidated Statement of Earnings.
The Company recognizes contract manufacturing and other service
revenue when the service is performed or the product shipped,
which is when the Companys partners take ownership and
title has passed, collectibility is reasonably assured, the
sales price is fixed or determinable and there is persuasive
evidence of an arrangement.
Three of the Companys customers accounted for 13%, 18% and
19%, respectively of consolidated net revenues in fiscal 2007.
Three customers accounted for 16%, 14% and 17%, respectively, of
net revenues in fiscal 2006, and three customers accounted for
11%, 19% and 16%, respectively, of net revenues in fiscal 2005.
Research and Development. Research and development
expenses are charged to operations as incurred.
Advertising Costs. Advertising costs are expensed
as incurred and amounted to $3,644,000, $5,435,000 and
$9,745,000 in fiscal years 2007, 2006 and 2005, respectively.
Income Taxes. Income taxes have been provided for
using an asset and liability approach in which deferred income
taxes reflect the tax consequences on future years of events
that we have already recognized in the financial statements or
tax returns. Changes in enacted tax rates or laws will result in
adjustments to the recorded tax assets or liabilities in the
period that the new tax law is enacted.
Earnings per Common Share. Basic earnings per
common share is computed by dividing net earnings by the
weighted average common shares outstanding for the period.
Diluted earnings per common share is computed by dividing net
earnings by the weighted average common shares outstanding
adjusted for the dilutive effect of stock options, restricted
stock or restricted units granted, excluding antidilutive
shares, under our stock option plans (see Note 13). At
March 31, 2007, 2006 and 2005, there were 1,562,645,
312,750 and 6,779,000 shares, respectively, that were
antidilutive.
A reconciliation of basic and diluted earnings per common share
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
March 31,
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
217,284
|
|
|
$
|
184,542
|
|
|
$
|
203,592
|
|
Weighted average common shares
outstanding
|
|
|
215,096
|
|
|
|
229,389
|
|
|
|
268,985
|
|
Assumed exercise of dilutive stock
options, restricted stock and restricted units
|
|
|
4,024
|
|
|
|
4,820
|
|
|
|
4,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common
shares outstanding
|
|
|
219,120
|
|
|
|
234,209
|
|
|
|
273,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.01
|
|
|
$
|
0.80
|
|
|
$
|
0.76
|
|
Diluted
|
|
$
|
0.99
|
|
|
$
|
0.79
|
|
|
$
|
0.74
|
|
Stock Options. The Company adopted
SFAS No. 123 (revised 2004), Share-Based Payment
(SFAS 123R), effective April 1, 2006.
SFAS 123R requires the recognition of the fair value of
stock-based compensation in net earnings. Prior to April 1,
2006, the Company accounted for its stock options using the
intrinsic value method of accounting provided under Accounting
Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, (APB 25), and related
Interpretations, as permitted by SFAS No. 123,
Accounting for Share Based Compensation,
(SFAS 123).
Mylan adopted the provisions of SFAS 123R, using the
modified prospective transition method. Under this method,
compensation expense recognized in the 12 month period
ended March 31, 2007 includes: (a) compensation cost
for all share-based payments granted prior to April 1,
2006, but for which the requisite service period had not been
completed as of April 1, 2006 based on the grant date fair
value, estimated in accordance with the original provisions of
SFAS 123, and (b) compensation cost for all
share-based payments granted subsequent to April 1,
54
2006, based on the grant date fair value estimated in accordance
with the provisions of SFAS 123R. Results for prior periods
have not been restated.
The previously disclosed pro forma effects of recognizing the
estimated fair value of stock-based employee compensation for
the fiscal years ended March 31, 2006 and 2005 were as
follows:
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
March 31,
|
|
2006
|
|
|
2005
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
Net earnings, as reported
|
|
$
|
184,542
|
|
|
$
|
203,592
|
|
Add: Stock-based
compensation expense included in reported net earnings, net of
related tax effects
|
|
|
2,649
|
|
|
|
2,543
|
|
Deduct: Total
compensation expense determined under fair-value based method
for all stock awards, net of related tax effects
|
|
|
(11,845
|
)
|
|
|
(14,852
|
)
|
|
|
|
|
|
|
|
|
|
Pro forma net earnings
|
|
$
|
175,346
|
|
|
$
|
191,283
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Basic as reported
|
|
$
|
0.80
|
|
|
$
|
0.76
|
|
|
|
|
|
|
|
|
|
|
Basic pro forma
|
|
$
|
0.76
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
Diluted as reported
|
|
$
|
0.79
|
|
|
$
|
0.74
|
|
|
|
|
|
|
|
|
|
|
Diluted pro forma
|
|
$
|
0.75
|
|
|
$
|
0.70
|
|
|
|
|
|
|
|
|
|
|
Foreign Currencies. The consolidated financial
statements are presented in U.S. dollars (USD).
The functional currency of the Company is the USD. Statements of
earnings and cash flows of all of the Companys
subsidiaries that are expressed in currencies other than USD are
translated at an average exchange rate for the period, whereas
assets and liabilities are translated at the end of the period
exchange rates. Translation differences are recorded directly in
shareholders equity as cumulative translation adjustments.
Gains or losses on transactions denominated in a currency other
than the Companys functional currency which arise as a
result of changes in foreign exchange rates are recorded in the
statement of earnings.
Use of Estimates in the Preparation of Financial
Statements. The preparation of financial statements, in
conformity with accounting principles generally accepted in the
United States of America, requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Because of the uncertainty inherent in such estimates,
actual results could differ from those estimates.
Reclassification. Certain prior year amounts were
reclassified to conform to the fiscal 2007 presentation.
Fiscal Year. The Companys fiscal year ends
on March 31. All references to fiscal year shall mean the
12 months ended March 31.
Recent Accounting Pronouncements. In July 2006,
the Financial Accounting Standards Board (FASB)
issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes an Interpretation of
FASB Statement 109 (FIN 48), which
clarifies the accounting for uncertain tax positions. This
Interpretation provides that the tax effects from an uncertain
tax position be recognized in the Companys financial
statements, only if the position is more likely than not of
being sustained upon audit, based on the technical merits of the
position. The provisions of FIN 48 are effective for Mylan
as of April 1, 2007. The Company is currently evaluating
the impact of adopting FIN 48 on its consolidated financial
statements.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements (SFAS 157),
which defines fair value, establishes a framework for measuring
fair value in GAAP and expands disclosure about fair value
measurements. The statement is effective for fiscal years
beginning after November 15, 2007. The Company is currently
evaluating the impact of adopting SFAS 157 on our
consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial
Liabilities (SFAS 159), providing companies
with an option to report selected financial assets and
liabilities at
55
fair value. This statement is effective for fiscal years
beginning after November 15, 2007. The Company is currently
evaluating the impact of adopting SFAS 159 on its
consolidated financial statements.
|
|
Note 3.
|
Acquisition
of Matrix Laboratories Limited
|
On August 28, 2006, Mylan Laboratories Inc. entered into a
Share Purchase Agreement (the Share Purchase
Agreement) to acquire, through MP Laboratories (Mauritius)
Ltd, its wholly owned indirect subsidiary, a controlling
interest in Matrix, a publicly traded company in India. Matrix
is engaged in the manufacture of APIs and solid oral dosage
forms and is based in Hyderabad, India.
The acquisition of Matrix provides Mylan with a significant
presence in important emerging pharmaceutical markets, including
India, China and Africa, as well as a European footprint and
distribution network through Matrixs Docpharma subsidiary.
By combining Matrixs API and drug development business
with Mylans expertise in finished dosage forms, management
believes this transaction allows Mylan to capture incremental
pieces of the value chain through backward vertical integration.
Pursuant to the Share Purchase Agreement, Mylan agreed to pay a
cash purchase price of 306 rupees per share for approximately
51.5% of the outstanding share capital of Matrix held by certain
selling shareholders (the Selling Shareholders).
In accordance with applicable Indian law, MP Laboratories
(Mauritius) Ltd, along with the Company, commenced an open offer
to acquire up to an additional 20% of the outstanding shares of
Matrix (the Public Offer) from Matrixs
shareholders (other than the Selling Shareholders) on
November 22, 2006, which Public Offer expired on
December 11, 2006. The price in the Public Offer was 306
rupees per share, in accordance with applicable Indian
regulations.
On December 21, 2006, the Public Offer was completed and a
total of 54,585,189 shares were validly tendered, of which
Mylan accepted 30,836,662 shares. Payment in the amount of
$210,601,000 for the shares properly tendered and accepted was
dispatched to the shareholders. On January 8, 2007, Mylan
completed its acquisition of approximately 51.5% of
Matrixs outstanding shares from certain selling
shareholders for approximately $545,551,000, thereby increasing
its ownership to approximately 71.5% of the voting share capital
of Matrix. Including the Matrix shareholdings maintained by
Prasad Nimmagadda (one of the selling shareholders), which are
subject to a voting arrangement with Mylan, Mylan controls in
excess of 75% of the voting share capital of Matrix.
Following the closing of this transaction, certain of the
selling shareholders used approximately $168,000,000 of their
proceeds to acquire Mylan Laboratories Inc. common stock from
the Company in a private sale at a price of $20.85 per
share. In connection with these transactions a total of
8,058,139 shares were issued to the selling shareholders.
For purchase accounting purposes, the Company valued these
shares at $20.32 per share, which represents Mylans
average stock price for the period two business days before and
two business days after the August 28, 2006 announcement of
the acquisition.
As a result of Mylans total ownership in Matrix, Mylan
accounted for this transaction as a purchase under SFAS
No. 141, Business Combinations
(SFAS 141) and has consolidated the results
of operations of Matrix since January 8, 2007. The purchase
price has been allocated to the fair value of the tangible and
intangible assets and liabilities with the excess being recorded
as goodwill as of the effective date of the acquisition. As the
acquisition was structured as a purchase of equity, the
amortization of purchase price assigned to assets in excess of
Matrixs historic tax basis will not be deductible for
income tax purposes.
56
The total purchase price of $776,173,000, including acquisition
costs of $24,334,000, less cash acquired of $10,943,000, was
$765,230,000. The preliminary allocation of assets acquired and
liabilities assumed for Matrix is as follows:
|
|
|
|
|
(in thousands)
|
|
|
|
|
Current assets (excluding cash and
inventories)
|
|
$
|
129,621
|
|
Inventories
|
|
|
123,000
|
|
Property, plant and equipment, net
|
|
|
152,580
|
|
Identifiable intangible assets
|
|
|
270,440
|
|
Other non-current assets
|
|
|
65,878
|
|
In-process research and
development(1)
|
|
|
147,000
|
|
Goodwill
|
|
|
505,801
|
|
|
|
|
|
|
Total assets acquired
|
|
|
1,394,320
|
|
Current liabilities
|
|
|
(374,458
|
)
|
Deferred tax liabilities
|
|
|
(106,470
|
)
|
Other non-current liabilities
|
|
|
(104,045
|
)
|
|
|
|
|
|
Total liabilities assumed
|
|
|
(584,973
|
)
|
Total minority interest
|
|
|
(44,117
|
)
|
|
|
|
|
|
Net assets acquired
|
|
$
|
765,230
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amount allocated to acquired in-process research and
development represents an estimate of the fair value of
purchased in-process technology for research projects that, as
of the closing date of the acquisition, had not reached
technological feasibility and had no alternative future use. |
The above purchase price allocation is preliminary and is based
on the information that was available as of the acquisition date
to estimate the fair value of assets acquired and liabilities
assumed. Management believes that the information provides a
reasonable basis for allocating the purchase price but the
Company is awaiting additional information necessary to finalize
the purchase price allocation. The fair values reflected above
may be adjusted upon the final valuation and such adjustments
could be significant. The Company expects to finalize the
valuation and complete the purchase price allocation as soon as
possible but no later than one year from the acquisition date.
The operating results of Matrix have been included in
Mylans consolidated financial statements since
January 8, 2007. Pro forma results of operations for the 12
months ended March 31, 2007 and 2006 are included below as
if the acquisition occurred on the first day of the respective
periods. This summary of the pro forma results of operations is
not necessarily indicative of what Mylans results of
operations would have been had Matrix been acquired at the
beginning of the periods indicated, nor does it purport to
represent results of operations for any future periods.
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
March 31,
|
|
2007
|
|
|
2006
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
1,825,754
|
|
|
$
|
1,487,434
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
143,423
|
|
|
$
|
(28,474
|
)
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.65
|
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.64
|
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares
|
|
|
|
|
|
|
|
|
Basic
|
|
|
221,171
|
|
|
|
237,489
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
225,195
|
|
|
|
237,489
|
|
|
|
|
|
|
|
|
|
|
57
The pro forma financial information for both of the above
periods includes the following material, non-recurring charges
directly attributable to the accounting for the acquisition:
amortization of the
step-up of
inventory of $16,113,000 and an acquired in-process research and
development charge of $147,000,000.
In conjunction with the Matrix transaction, the Company entered
into a foreign exchange forward contract to purchase Indian
rupees with U.S. dollars in order to mitigate the risk of
foreign currency exposure related to the transaction. The
Company accounted for this instrument under the provisions of
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS 133). This
instrument did not qualify for hedge accounting treatment under
SFAS 133 and therefore was required to be adjusted to fair
value with the change in the fair value of the instrument
recorded in current earnings. The Company recorded a gain of
$16,200,000 for the 12 month period ended March 31, 2007
related to this deal contingent forward contract. This amount is
included within other income, net in the Consolidated Statements
of Earnings.
On June 14, 2005, the Company announced that it was closing
its branded subsidiary, Mylan Bertek, and transferring the
responsibility for marketing Mylan Berteks products to
other Mylan subsidiaries. In conjunction with this
restructuring, the Company incurred restructuring charges of
$20,921,000, pre-tax, during the year ended March 31, 2006.
Of this, $1,000,000 is included in research and development
expense, with the remainder in selling, general and
administrative expense. Of the $20,921,000 charge, $15,117,000
was related to employee termination and severance costs
primarily with respect to the involuntary termination of the
Mylan Bertek sales force and represented cash termination
payments paid to the affected employees as a direct result of
the restructuring. The remainder consisted of non-cash asset
write-downs of $1,636,000 and exit costs of $4,168,000,
primarily lease termination costs. As of March 31, 2006,
the Companys restructuring was substantially complete.
|
|
Note 5.
|
Balance
Sheet Components
|
Selected balance sheet components consisted of the following at
March 31:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
(in thousands)
|
|
|
|
|
|
|
|
Inventories:
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
148,109
|
|
|
$
|
98,259
|
|
Work in process
|
|
|
95,655
|
|
|
|
36,073
|
|
Finished goods
|
|
|
185,347
|
|
|
|
144,676
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
429,111
|
|
|
$
|
279,008
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment:
|
|
|
|
|
|
|
|
|
Land and improvements
|
|
$
|
29,850
|
|
|
$
|
10,639
|
|
Buildings and improvements
|
|
|
297,505
|
|
|
|
175,343
|
|
Machinery and equipment
|
|
|
471,990
|
|
|
|
287,202
|
|
Construction in progress
|
|
|
141,301
|
|
|
|
144,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
940,646
|
|
|
|
617,613
|
|
Less accumulated depreciation
|
|
|
253,907
|
|
|
|
210,738
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
686,739
|
|
|
$
|
406,875
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities:
|
|
|
|
|
|
|
|
|
Payroll and employee benefit plan
accruals
|
|
$
|
43,655
|
|
|
$
|
24,323
|
|
Accrued rebates
|
|
|
51,873
|
|
|
|
60,374
|
|
Royalties and product license fees
|
|
|
15,215
|
|
|
|
9,320
|
|
Deferred revenue
|
|
|
10,465
|
|
|
|
17,225
|
|
Legal and professional
|
|
|
40,095
|
|
|
|
30,074
|
|
Other
|
|
|
52,616
|
|
|
|
17,171
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
213,919
|
|
|
$
|
158,487
|
|
|
|
|
|
|
|
|
|
|
58
|
|
Note 6.
|
Marketable
Securities
|
The amortized cost and estimated fair value of marketable
securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
$
|
171,862
|
|
|
$
|
151
|
|
|
$
|
465
|
|
|
$
|
171,548
|
|
Equity securities
|
|
|
|
|
|
|
2,659
|
|
|
|
|
|
|
|
2,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
171,862
|
|
|
$
|
2,810
|
|
|
$
|
465
|
|
|
$
|
174,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
$
|
364,266
|
|
|
$
|
79
|
|
|
$
|
1,887
|
|
|
$
|
362,458
|
|
Equity securities
|
|
|
|
|
|
|
5,545
|
|
|
|
|
|
|
|
5,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
364,266
|
|
|
$
|
5,624
|
|
|
$
|
1,887
|
|
|
$
|
368,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains on marketable securities were reported net
of tax of $801,000 and $1,287,000 in fiscal 2007 and fiscal
2006, respectively.
Maturities of debt securities at fair value as of March 31,
2007, were as follows:
|
|
|
|
|
(in thousands)
|
|
|
|
|
Mature within one year
|
|
$
|
31,395
|
|
Mature in one to five years
|
|
|
10,352
|
|
Mature in five years and later
|
|
|
129,801
|
|
|
|
|
|
|
|
|
$
|
171,548
|
|
|
|
|
|
|
Gross gains of $805,476, $878,000 and $7,000 and gross losses of
$1,834,785, $1,160,000 and $67,000 were realized during fiscal
years 2007, 2006 and 2005, respectively.
|
|
Note 7.
|
Goodwill
and Other Intangible Assets
|
|
|
|
|
|
|
|
Total
|
|
(in thousands)
|
|
|
|
|
Goodwill balance at March 31,
2006
|
|
$
|
102,579
|
|
Acquisition of Matrix
|
|
|
505,801
|
|
Other
|
|
|
4,362
|
|
|
|
|
|
|
Goodwill balance at March 31,
2007
|
|
$
|
612,742
|
|
|
|
|
|
|
59
Intangible assets, excluding goodwill, consisted of the
following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Life
|
|
|
Original
|
|
|
Accumulated
|
|
|
Net Book
|
|
|
|
(years)
|
|
|
Cost
|
|
|
Amortization
|
|
|
Value
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents and technologies
|
|
|
20
|
|
|
$
|
118,927
|
|
|
$
|
61,000
|
|
|
$
|
57,927
|
|
Product rights and licenses
|
|
|
8
|
|
|
|
367,805
|
|
|
|
86,349
|
|
|
|
281,456
|
|
Other
|
|
|
14
|
|
|
|
20,821
|
|
|
|
8,207
|
|
|
|
12,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
507,553
|
|
|
$
|
155,556
|
|
|
|
351,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets no longer
subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
352,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents and technologies
|
|
|
20
|
|
|
$
|
118,935
|
|
|
$
|
54,836
|
|
|
$
|
64,099
|
|
Product rights and licenses
|
|
|
12
|
|
|
|
111,135
|
|
|
|
77,444
|
|
|
|
33,691
|
|
Other
|
|
|
20
|
|
|
|
14,267
|
|
|
|
7,245
|
|
|
|
7,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
244,337
|
|
|
$
|
139,525
|
|
|
|
104,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets no longer
subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
105,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangibles consist principally of customer lists and
contracts. As a result of the acquisition of a controlling
interest in Matrix (see Note 3) the Company recorded
intangible assets of $270,440,000, primarily product rights and
licenses, which have a weighted average useful life of eight
years.
Amortization expense for fiscal years 2007, 2006 and 2005 was
$22,419,000, $14,701,000 and $17,708,000, respectively, and is
expected to be $47,666,000, $46,466,000, $43,565,000,
$43,123,000 and $37,232,000 for fiscal years 2008 through 2012,
respectively.
Other assets consisted of the following components at
March 31:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
(in thousands)
|
|
|
|
|
|
|
|
Cash surrender value
|
|
$
|
43,529
|
|
|
$
|
40,945
|
|
Financing fees
|
|
|
26,801
|
|
|
|
12,813
|
|
Investments in affiliates
|
|
|
52,907
|
|
|
|
462
|
|
Other
|
|
|
20,546
|
|
|
|
9,357
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
143,783
|
|
|
$
|
63,577
|
|
|
|
|
|
|
|
|
|
|
60
Cash surrender value is related to insurance policies on certain
officers and key employees and the value of split-dollar life
insurance agreements with certain former executive officers. See
Note 9 for a discussion of financing fees.
Investments in affiliates are comprised of the following
investments. In November 1988, the Company acquired 50% of the
outstanding common stock of Somerset Pharmaceuticals, Inc.
(Somerset). Mylan accounts for this investment using
the equity method of accounting. During fiscal 2007, the Company
received a cash payment of $5,500,000 from Somerset. The amount
in excess of the carrying value of our investment in Somerset,
approximately $5,000,000, was recorded as equity income. In
fiscal 2006 and 2005, the Company recorded losses of $2,538,000
and $3,265,000 with respect to this investment. The investment
balance at March 31, 2007, for Somerset is $0. Through the
acquisition of a controlling interest in Matrix, the Company
acquired an ownership interest in certain equity method
investees of Matrix. These investments are accounted for under
the equity method whereby the Company recognizes its
proportionate shares of the investees profit or loss.
A summary of long-term debt at March 31:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
(in thousands)
|
|
|
|
|
|
|
|
Senior Notes(A)
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
Credit facilities(B)
|
|
|
450,000
|
|
|
|
187,938
|
|
Senior convertible notes(C)
|
|
|
600,000
|
|
|
|
|
|
Matrix facility loans(D)
|
|
|
226,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,776,362
|
|
|
$
|
687,938
|
|
Less: Current portion
|
|
|
121,430
|
|
|
|
2,750
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
1,654,932
|
|
|
$
|
685,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
On July 21, 2005, the Company issued $500,000,000 in Senior
Notes, which consisted of $150,000,000 of Senior Notes due
August 15, 2010, and bearing interest at
53/4% per
annum (the 2010 Restricted Notes) and $350,000,000
of Senior Notes due August 15, 2015, and bearing interest
at
63/8%
per annum (the 2015 Restricted Notes, and
collectively the Restricted Notes). The Restricted
Notes were exchanged on January 14, 2006, in accordance
with a registration rights agreement in a transaction
consummated on January 19, 2006. The form and terms of the
registered notes (the Notes) are identical in all
material respects to the original notes. Interest is payable
semiannually on February 15 and August 15 and commenced on
February 15, 2006. |
Prior to maturity, the Company may, under certain circumstances,
redeem the Notes in whole or in part at prices specified in the
bond indenture governing the Notes. Upon a change of control (as
defined in the indenture governing the Notes) of the Company,
each holder of the Notes may require the Company to purchase all
or a portion of such holders Notes at 101% of the
principal amount of such Notes, plus accrued and unpaid interest.
The Notes are senior unsecured obligations of the Company and
rank junior to all of the Companys secured obligations.
The Notes are guaranteed jointly and severally on a full and
unconditional senior unsecured basis by all of the
Companys wholly owned domestic subsidiaries except a
captive insurance company.
The Notes indenture contains covenants that, among other things,
limit the ability of the Company to (a) incur additional
secured indebtedness, (b) make investments or other
restricted payments, (c) pay dividends on, redeem or
repurchase the Companys capital stock, (d) engage in
sale-leaseback transactions and (e) consolidate, merge or
transfer all or substantially all of its assets. Certain of the
covenants contained in the indenture will no longer be
applicable or will be less restrictive if the Company achieves
investment grade ratings as outlined in the indenture.
61
|
|
|
(B) |
|
On July 21, 2005, the Company entered into a $500,000,000
senior secured credit facility (the Credit
Facility). The Credit Facility consisted of a $225,000,000
five-year revolving credit facility and a $275,000,000 five-year
term loan (the Term Loan). |
On July 24, 2006, the Company completed the refinancing of
its existing Credit Facility by entering into a credit agreement
for a five-year $700,000,000 senior unsecured revolving credit
facility (the 2006 Credit Facility). At the
Companys discretion, the 2006 Credit Facility was
expandable to $1,000,000,000. Borrowings totaling $187,000,000
were made under the 2006 Credit Facility and, along with
existing cash, were used to repay the Term Loan. Additional net
borrowings of $263,000,000 were made under the 2006 Credit
Facility in order to finance the acquisition of Matrix. The
spread over LIBOR for borrowings will subsequently be adjusted
based upon the Companys total leverage ratio as discussed
below. The Companys obligations under the 2006 Credit
Facility are guaranteed on a senior unsecured basis by all of
the Companys direct and indirect domestic subsidiaries,
except a captive insurance company.
The 2006 Credit Facility includes covenants that
(a) require the Company to maintain a minimum interest
coverage ratio and a maximum total leverage ratio,
(b) place limitations on the Companys
subsidiaries ability to incur debt, (c) place
limitations on the Companys and the Companys
subsidiaries ability to grant liens, carry out mergers,
consolidations and sales of all or substantially all of its
assets and (d) place limitations on the Companys and
the Companys subsidiaries ability to pay dividends
or make other restricted payments. The 2006 Credit Facility
contains customary events of default, including nonpayment,
misrepresentation, breach of covenants and bankruptcy.
On March 26, 2007, Mylan and its wholly owned indirect
subsidiary Euro Mylan B.V. (Euro Mylan) entered into
a credit agreement (the Credit Agreement), effective
March 26, 2007 (the Closing Date), with a
syndicate of bank lenders for a $750,000,000 senior unsecured
credit facility including (i) a multicurrency revolving
credit facility (the Revolving Credit Facility) in
an aggregate amount of up to a U.S. dollar equivalent of
$300,000,000 due July 24, 2011, and (ii) a term loan
agreement (the Term Loan Agreement) denominated in
U.S. dollars to the Company in an aggregate amount of up to
$450,000,000 due December 26, 2011 (collectively, the
2007 Credit Facility).
On the Closing Date, the Company borrowed $450,000,000 under the
Term Loan Agreement and used the proceeds to repay the revolving
loans outstanding under the Companys existing 2006 Credit
Facility. The Company intends to use the Revolving Credit
Facility for working capital and general corporate purposes,
including expansion of its global operations.
The 2007 Credit Facility contains provisions for the issuance of
letters of credit up to a sublimit of $25,000,000. The 2007
Credit Facility also provides that the entire principal amount
of the Revolving Credit Facility may be borrowed by the Company
or Euro Mylan in euros or other foreign currencies that are
agreed to by the Company and the Administrative Agent. At the
request of the Company, but subject to obtaining commitments
from the Lenders or new lenders and the other terms and
conditions specified in the Credit Agreement, the Company may
elect to increase the commitments under the 2007 Credit Facility
up to an aggregate amount not to exceed $850,000,000. At
March 31, 2007 and 2006, the Company had outstanding
letters of credit of $13,117,000 and $975,000, respectively.
At the Companys option, loans under the 2007 Credit
Facility will bear interest either at a rate equal to LIBOR plus
an effective applicable margin or at a base rate, which is
defined as the higher of the rate announced publicly by the
Administrative Agent, from time to time, as its prime rate or
0.5% above the federal funds rate. In the case of the effective
applicable margin for outstanding term loans and revolver
advances based on LIBOR, after the delivery by the Company to
the Administrative Agent of its financial statements for the
fiscal quarter ending on March 31, 2007, the effective
applicable margin may increase or decrease, within a range from
0.50% to 1.25%, based on the Companys total leverage
ratio. The interest rate in effect at March 31, 2007 on the
outstanding borrowings under the Term Loan Agreement was 6.2%.
At March 31, 2007, the Company had a total of
$1,000,000,000 available under the 2006 and 2007 Credit
Facilities.
62
The Companys and Euro Mylans obligations under the
2007 Credit Facility are guaranteed on a senior unsecured basis
by all of the Companys direct and indirect domestic
subsidiaries, except a captive insurance company. Euro
Mylans obligations are also guaranteed by the Company.
The 2007 Credit Facility includes covenants similar to those of
the 2006 Credit Facility. The 2007 Credit Facility contains
customary events of default, including nonpayment,
misrepresentation, breach of covenants and bankruptcy.
In addition, on March 26, 2007 the Company entered into an
amendment (the Amendment) to the 2006 Credit
Agreement to modify the interest rates to conform to the
effective interest rates applicable to the Credit Agreement and
to make certain other changes conforming the 2006 Credit
Facility to the 2007 Credit Facility.
|
|
|
(C) |
|
On March 1, 2007, Mylan entered into a purchase agreement
relating to the sale by the Company of $600,000,000 aggregate
principal amount of the Companys 1.25% Senior
Convertible Notes due 2012 (the Convertible Notes).
The Convertible Notes bear interest at a rate of 1.25% per
year, accruing from March 7, 2007. Interest is payable
semiannually in arrears on March 15 and September 15 of each
year, beginning September 15, 2007. The Notes will mature
on March 15, 2012, subject to earlier repurchase or
conversion. Holders may convert their notes subject to certain
conversion provisions determined by, among others, the market
price of the Companys common stock and the trading price
of the Convertible Notes. The Notes have an initial conversion
rate of 44.5931 shares of common stock per $1,000 principal
amount (equivalent to an initial conversion price of
approximately $22.43 per share), subject to adjustment,
with the principal amount payable in cash and the remainder in
cash or stock at the option of the Company. |
On March 1, 2007, concurrently with the sale of the
Convertible Notes, Mylan entered into a convertible note hedge
transaction, comprised of a purchased call option, and two
warrant transactions with each of Merrill Lynch
International, an affiliate of Merrill Lynch, and JPMorgan Chase
Bank, National Association, London Branch, an affiliate of
JPMorgan, each of which we refer to as a counterparty. The net
cost of the transactions was approximately $80,600,000. The
purchased call options will cover approximately
26,755,853 shares of our common stock, subject to
anti-dilution adjustments substantially similar to the
anti-dilution adjustments for the Convertible Notes, which under
most circumstances represents the maximum number of shares that
underlie the Convertible Notes. Concurrently with entering into
the purchased call options, we entered into warrant transactions
with the counterparties. Pursuant to the warrant transactions,
we will sell to the counterparties warrants to purchase in the
aggregate approximately 26,755,853 shares of our common
stock, subject to customary anti-dilution adjustments. The
warrants may not be exercised prior to the maturity of the
Convertible Notes, subject to certain limited exceptions.
The purchased call options are expected to reduce the potential
dilution upon conversion of the Convertible Notes in the event
that the market value per share of our common stock at the time
of exercise is greater than approximately $22.43, which
corresponds to the initial conversion price of the Convertible
Notes. The sold warrants have an exercise price that is 60.0%
higher than the price per share of $19.50 at which we offered
our common stock in a concurrent equity offering (see
Note 12). If the market price per share of our common stock
at the time of conversion of any Convertible Notes is above the
strike price of the purchased call options, the purchased call
options will, in most cases, entitle us to receive from the
counterparties in the aggregate the same number of shares of our
common stock as we would be required to issue to the holder of
the converted Convertible Notes. Additionally, if the market
price of our common stock at the time of exercise of the sold
warrants exceeds the strike price of the sold warrants, we will
owe the counterparties an aggregate of approximately
26,755,853 shares of our common stock. The purchased call
options and sold warrants may be settled for cash at our
election.
The purchased call options and sold warrants are separate
transactions entered into by the Company with the
counterparties, are not part of the terms of the Convertible
Notes and will not affect the holders rights under the
Convertible Notes. Holders of the Convertible Notes will not
have any rights with respect to the purchased call options or
the sold warrants. The purchased call options and sold warrants
meet the definition of derivatives under SFAS 133,
Accounting for Derivative Instruments and Hedging Activities
(as amended by FAS 138 &
FAS 149). However, because these instruments have
been determined to be indexed to the Companys own stock
(in accordance with the guidance of Emerging Issues Task Force
(EITF) Issue
63
No. 01-6,
The Meaning of Indexed to a Companys Own Stock) and
have been recorded in stockholders equity in the
Companys Consolidated Balance Sheet (as determined under
EITF Issue
No. 00-19,
Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Companys Own Stock) the
instruments are exempted out of the scope of SFAS 133 and
are not subject to the mark to market provisions of that
standard.
|
|
|
(D) |
|
Matrixs borrowings consist primarily of two Facilities
(Facility A and Facility B) both of
which are denominated in euros. Matrixs effective interest
rate for these loans is Euro Interbank Offered Rate (Euribor)
plus 110 basis points for Facility A of Euro
82.50 million, or 4.96% at March 31, 2007, and Euribor
plus 129 basis points for Facility B of Euro
82.50 million, or 5.15% at March 31, 2007. Facility A
is due in July 2007 and Facility B is payable over three years
in semi-annual installments beginning in October 2007. These
loans are collateralized by the pledge of certain of Matrix
subsidiaries shares and by a Matrix corporate guarantee to
ABN Amro Bank NV. These loans also require Matrix and certain of
its subsidiaries to comply with certain covenants, under which
the approval of the lenders is required for certain transactions
which include incurring additional indebtedness or guarantees;
declaration of payment of dividends; entering into acquisitions
or mergers, joint ventures, consolidations or sales of Matrix
assets; and entering into new lines of business. The covenants
also prescribe certain maximum ratios of debt to earnings or
equity ratios and minimum levels of interest and debt service
coverage ratios. |
All financing fees associated with the Companys borrowings
are being amortized over the life of the related debt. The total
unamortized amounts of $26,801,000 and $12,813,000 are included
in other assets in the Consolidated Balance Sheets at
March 31, 2007 and March 31, 2006.
At March 31, 2007 the fair value of the Notes was
approximately $496,000,000 and the fair value of the Convertible
Notes was approximately $640,400,000. The carrying values of the
Term Loan Facility and on Matrixs term loan
borrowings approximated fair value. As of March 31, 2006,
the carrying value of the Companys long-term debt
approximated fair value.
Certain of the Companys debt agreements contain certain
cross-default provisions.
Principal maturities of the Companys long-term debt for
the next five years and thereafter, as of March 31, 2007,
are as follows:
|
|
|
|
|
Fiscal
|
|
|
|
(in thousands)
|
|
|
|
|
2008
|
|
$
|
121,430
|
|
2009
|
|
|
41,770
|
|
2010
|
|
|
41,000
|
|
2011
|
|
|
172,162
|
|
2012
|
|
|
1,050,000
|
|
Thereafter
|
|
|
350,000
|
|
|
|
|
|
|
|
|
$
|
1,776,362
|
|
|
|
|
|
|
64
|
|
Note 10.
|
Other
Long-Term Obligations
|
Other long-term obligations consisted of the following
components at March 31:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
(in thousands)
|
|
|
|
|
|
|
|
Deferred compensation
|
|
$
|
18,171
|
|
|
$
|
17,789
|
|
Retirement benefits
|
|
|
6,362
|
|
|
|
3,905
|
|
Other
|
|
|
8,579
|
|
|
|
2,327
|
|
|
|
|
|
|
|
|
|
|
Total long-term obligations
|
|
|
33,112
|
|
|
|
24,021
|
|
Less: Current portion of long-term
obligations
|
|
|
3,352
|
|
|
|
1,586
|
|
|
|
|
|
|
|
|
|
|
Long-term obligations, net of
current portion
|
|
$
|
29,760
|
|
|
$
|
22,435
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation consists of the discounted future payments
under individually negotiated agreements with certain key
employees, directors and retired executives. The agreements with
certain key employees provide for annual payments ranging from
$18,000 to $1,000,000 to be paid over periods commencing at
retirement and ranging from 10 years to life.
Income tax expense (benefit) consisted of the following
components:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
March 31,
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Federal:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
242,434
|
|
|
$
|
104,204
|
|
|
$
|
134,994
|
|
Deferred
|
|
|
(46,593
|
)
|
|
|
(22,359
|
)
|
|
|
(34,513
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195,841
|
|
|
|
81,845
|
|
|
|
100,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and Puerto Rico:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
16,746
|
|
|
|
9,494
|
|
|
|
10,560
|
|
Deferred
|
|
|
(3,740
|
)
|
|
|
(1,276
|
)
|
|
|
(2,386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,006
|
|
|
|
8,218
|
|
|
|
8,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
174
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
(1,004
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(830
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
208,017
|
|
|
$
|
90,063
|
|
|
$
|
108,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax earnings (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
586,298
|
|
|
$
|
274,605
|
|
|
$
|
312,247
|
|
Foreign
|
|
|
(160,786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
425,512
|
|
|
$
|
274,605
|
|
|
$
|
312,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
48.9
|
%
|
|
|
32.8
|
%
|
|
|
34.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65
Temporary differences and carry forwards that result in the
deferred tax assets and liabilities were as follows at
March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee benefits
|
|
$
|
16,501
|
|
|
$
|
10,948
|
|
|
$
|
10,301
|
|
Legal matters
|
|
|
5,048
|
|
|
|
4,551
|
|
|
|
|
|
Deferred revenue
|
|
|
43,250
|
|
|
|
14,488
|
|
|
|
10,615
|
|
Accounts receivable allowances
|
|
|
126,191
|
|
|
|
121,235
|
|
|
|
113,267
|
|
Inventories
|
|
|
8,859
|
|
|
|
4,851
|
|
|
|
3,587
|
|
Investments
|
|
|
7,256
|
|
|
|
6,028
|
|
|
|
6,003
|
|
Tax credits
|
|
|
3,112
|
|
|
|
|
|
|
|
|
|
Net operating losses
|
|
|
17,111
|
|
|
|
1,644
|
|
|
|
|
|
Convertible debt
|
|
|
44,100
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
3,801
|
|
|
|
2,783
|
|
|
|
1,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275,229
|
|
|
|
166,528
|
|
|
|
144,890
|
|
Less: Valuation Allowance
|
|
|
(18,355
|
)
|
|
|
(1,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
256,874
|
|
|
|
164,884
|
|
|
|
144,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment
|
|
|
40,698
|
|
|
|
21,168
|
|
|
|
22,848
|
|
Intangible assets
|
|
|
98,285
|
|
|
|
23,977
|
|
|
|
25,946
|
|
Investments
|
|
|
10,779
|
|
|
|
2,547
|
|
|
|
1,569
|
|
Other
|
|
|
1,890
|
|
|
|
105
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
151,652
|
|
|
|
47,797
|
|
|
|
50,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset, net
|
|
$
|
105,222
|
|
|
$
|
117,087
|
|
|
$
|
94,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification in the Consolidated
Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax
benefit current
|
|
$
|
145,343
|
|
|
$
|
137,672
|
|
|
$
|
119,327
|
|
Deferred income tax
benefit noncurrent
|
|
|
45,779
|
|
|
$
|
|
|
|
$
|
|
|
Deferred income tax
liability noncurrent
|
|
|
85,900
|
|
|
|
20,585
|
|
|
|
24,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset, net
|
|
$
|
105,222
|
|
|
$
|
117,087
|
|
|
$
|
94,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the statutory tax rate to the effective tax
rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Statutory tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State and Puerto Rico income taxes
|
|
|
4.1
|
%
|
|
|
4.0
|
%
|
|
|
2.8
|
%
|
State and Puerto Rico tax credits
|
|
|
(1.3
|
%)
|
|
|
(1.5
|
%)
|
|
|
(1.3
|
%)
|
Federal tax credits
|
|
|
(0.3
|
%)
|
|
|
(1.0
|
%)
|
|
|
(2.1
|
%)
|
Resolution of prior year tax
positions
|
|
|
|
%
|
|
|
(2.7
|
%)
|
|
|
|
%
|
Acquired in-process R&D
|
|
|
12.1
|
%
|
|
|
|
|
|
|
|
|
Other items
|
|
|
(0.7
|
%)
|
|
|
(1.0
|
%)
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
48.9
|
%
|
|
|
32.8
|
%
|
|
|
34.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
Valuation Allowance
A valuation allowance is provided when it is more likely than
not that some portion or all of the deferred tax assets will not
be realized. A valuation allowance has been applied to certain
foreign and state deferred tax assets in the amount of
$18,355,000. Approximately $11,180,000 of the valuation
allowance will result in a reduction to goodwill if such
deferred tax assets are ever realized. The remainder of the
increase in the valuation allowance is due to current year state
net operating losses.
Net Operating Losses
As of March 31, 2007, the Company has net operating loss
carryforwards for international and U.S. state income tax
purposes of approximately $90,966,000 which will expire in
fiscal years 2015 through 2027. Of these loss carryforwards,
there is an amount of $50,851,000 related to state losses. A
majority of the state net operating losses are attributable to
Pennsylvania where a taxpayers use is limited to
$3,000,000 each taxable year. In addition, the Company has
foreign net operating loss carryforwards of approximately
$40,115,000 of which $33,149,000 can be carried forward
indefinitely with the remainder expiring in fiscal years 2011
through 2016. Most of the net operating losses (foreign and
state) are fully reserved.
Acquired In Process Research and Development
On January 8, 2007, we acquired a controlling interest in
Matrix as discussed in Note 3. Of the purchase price,
$147,000,000 was allocated to acquired in-process research and
development and expensed. This amount is not deductible for tax
purposes, and no deferred tax benefit is recorded as required by
EITF Issue
No. 96-7,
Accounting for Deferred Taxes on In-Process Research
and Development Activities Acquired in a Purchase Business
Combination.
Undistributed Earnings
At March 31, 2007, we had an aggregate of $17,500,000 of
unremitted earnings of foreign subsidiaries that are intended to
be permanently reinvested for continued use in foreign
operations under the provisions of Accounting Principles Board
Opinion No. 23, and that, if distributed, would result in
taxes at approximately the U.S. statutory rate.
Operations in Puerto Rico benefit from incentive grants from the
government of Puerto Rico, which partially exempt the Company
from income, property and municipal taxes. In fiscal 2001, a new
tax grant was negotiated with the government of Puerto Rico
extending tax incentives until fiscal 2010. This grant exempts
all earnings during this grant period from tollgate tax upon
repatriation of cash to the United States. In fiscal 2007 and
fiscal 2004, $46,500,000 and $100,000,000 of cash from
post-fiscal 2000 earnings, respectively, was repatriated to the
United States. Pursuant to the terms of our new tax grant, no
tollgate tax was due for these repatriations.
Federal
Tax credits, Certain Deductions and Ongoing IRS
Examinations
Federal tax credits result principally from operations in Puerto
Rico and from qualified research and development expenditures,
including orphan drug research. State tax credits are comprised
mainly of awards for expansion and wage credits at our
manufacturing facilities and research credits awarded by certain
states. State income taxes and state tax credits are shown net
of the federal tax effect.
Under Section 936 of the U.S. Internal Revenue Code
(IRC), Mylan was a grandfathered entity
and was entitled to the benefits under such statute through
fiscal 2006. Our Section 936 federal tax credits totaled
approximately $1,461,000 in fiscal 2006 and $3,874,000 in fiscal
2005. The decrease in the credit in fiscal 2006 was offset by
newly-enacted IRC Section 199, Deduction for Domestic
Production Activities, which resulted in a tax benefit of
approximately $3,000,000 in fiscal 2006. The tax benefit from
the Deduction for Domestic Production Activities was
approximately $4,093,000 in fiscal 2007.
The Internal Revenue Service (IRS) completed its
federal tax audit for fiscal years 2002 through 2004 in the
first quarter of fiscal 2007. Tax and interest related to the
negotiated settlement of certain federal tax positions as a
result of those audits was recorded as of March 31, 2006.
Beginning with fiscal 2007, Mylan became a voluntary participant
in the IRS Compliance Assurance Process (CAP) which
results in real-time federal issue resolution. In connection
with the CAP program, the IRS commenced the audits of
Mylans tax returns for fiscal 2005 and 2006.
67
We expect to complete the fiscal 2005 and 2006 audits and file
the fiscal 2007 CAP return in the third quarter of fiscal 2008.
Tax and interest continue to be accrued related to certain tax
positions.
|
|
Note 12.
|
Preferred
and Common Stock
|
In fiscal 1985, the Board of Directors (the Board)
authorized 5,000,000 shares of $0.50 par value
preferred stock. No shares of the preferred stock have been
issued.
The Company entered into a Rights Agreement (the Rights
Agreement) with American Stock Transfer & Trust
Company, as rights agent, in August 1996, and declared a
dividend of one share purchase right on each outstanding share
of common stock, to provide the Board with sufficient time to
assess and evaluate any takeover bid and explore and develop a
reasonable response. Effective November 1999, the Rights
Agreement was amended to eliminate certain limitations on the
Boards ability to redeem or amend the rights to permit an
acquisition and also to eliminate special rights held by
incumbent directors unaffiliated with an acquiring shareholder.
In August 2004, the Rights Agreement was amended to change the
original expiration date of the rights from September 5,
2006 to August 13, 2014. The Rights Agreement was further
amended in September 2004, to temporarily change the threshold
at which Rights (as defined in the Rights Agreement) will become
immediately exercisable from 15% to 10%. By a December 2005
amendment to the Rights Agreement, the term for the lower
ownership threshold expired on December 31, 2005, and
reverted back to the 15% threshold on January 1, 2006,
subject to certain exceptions.
On June 14, 2005, the Company announced a
$1,250,000,000 share buyback, comprised of a modified
Dutch Auction self-tender for up to $1,000,000,000
and a $250,000,000 follow-on share repurchase program. The
Dutch Auction self-tender closed on July 21,
2005, at which time the Company announced that it accepted for
payment an aggregate of 51,282,051 shares of its common
stock at a purchase price of $19.50 per share. The
follow-on repurchase was completed during fiscal 2006 through
the purchase of 12,595,200 shares for approximately
$250,000,000 on the open market.
On March 1, 2007, the Company entered into a Purchase
Agreement (the Common Stock Purchase Agreement) with
Merrill Lynch & Co. and J.P. Morgan Securities
Inc., as representatives of the underwriters named therein,
relating to the sale of 26,162,500 shares of common stock
at a price of $19.50 per share. Upon completion of this
transaction in the Companys fourth quarter, the Company
received proceeds of approximately $488,800,000, net of
underwriters discounts and offering expenses of
approximately $21,100,000.
On March 1, 2007, concurrently with the sale of the
Convertible Notes, (see Note 9) Mylan entered into a
convertible note hedge transaction, comprised of a purchased
call option, and two warrant transactions with each of Merrill
Lynch International, an affiliate of Merrill Lynch, and JPMorgan
Chase Bank, National Association, London Branch, an affiliate of
JPMorgan, each of which we refer to as a counterparty. The net
cost of the transactions was approximately $80,600,000. The
purchased call options will cover approximately
26,755,853 shares of our common stock, subject to
anti-dilution adjustments substantially similar to the
anti-dilution adjustments for the Convertible Notes, which under
most circumstances represents the maximum number of shares that
underlie the Convertible Notes. Concurrently with entering into
the purchased call options, we entered into warrant transactions
with the counterparties. Pursuant to the warrant transactions,
we will sell to the counterparties warrants to purchase in the
aggregate approximately 26,755,853 shares of our common
stock, subject to customary anti-dilution adjustments. The
warrants may not be exercised prior to the maturity of the
Convertible Notes, subject to certain limitations.
The purchased call options are expected to reduce the potential
dilution upon conversion of the Convertible Notes in the event
that the market value per share of our common stock at the time
of exercise is greater than approximately $22.43, which
corresponds to the initial conversion price of the Convertible
Notes. The sold warrants have an exercise price that is 60.0%
higher than the price per share of $19.50 at which we offered
our common stock in a concurrent equity offering described
above. If the market price per share of our common stock at the
time of conversion of any Convertible Notes is above the strike
price of the purchased call options, the purchased call options
will, in most cases, entitle us to receive from the
counterparties in the aggregate the same number of shares of our
common stock as we would be required to issue to the holder of
the converted Convertible Notes. Additionally, if the market
price of our common stock at the time of exercise of the sold
warrants exceeds the strike
68
price of the sold warrants, we will owe the counterparties an
aggregate of approximately 26,755,853 shares of our common
stock. The purchased call options and sold warrants may be
settled for cash at our election.
The purchased call options and sold warrants are separate
transactions entered into by the Company with the
counterparties, are not part of the terms of the Convertible
Notes and will not affect the holders rights under the
Convertible Notes. Holders of the Convertible Notes will not
have any rights with respect to the purchased call options or
the sold warrants.
The purchased call options and sold warrants are separate
transactions entered into by the Company with the
counterparties, are not part of the terms of the Convertible
Notes and will not affect the holders rights under the
Convertible Notes. Holders of the Convertible Notes will not
have any rights with respect to the purchased call options or
the sold warrants. The purchased call options and sold warrants
meet the definition of derivatives under SFAS 133,
Accounting for Derivative Instruments and Hedging Activities
(as amended by FAS 138 & FAS 149). However,
because these instruments have been determined to be indexed to
the Companys own stock (in accordance with the guidance of
Emerging Issues Task Force (EITF) Issue
No. 01-6,
The Meaning of Indexed to a Companys Own Stock) and
have been recorded in stockholders equity in the
Companys Consolidated Balance Sheet (as determined under
EITF Issue
No. 00-19,
Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Companys Own Stock) the
instruments are exempted out of the scope of SFAS 133 and
are not subject to the mark to market provisions of that
standard.
Following the closing of the Matrix transaction,
(Note 3) certain of the selling shareholders used
approximately $168,000,000 of their proceeds to acquire Mylan
Laboratories Inc. common stock from the Company in a private
sale at a price of $20.85 per share. In connection with
these transactions a total of 8,058,139 shares were issued
to these selling shareholders.
|
|
Note 13.
|
Stock
Option Plan
|
On July 25, 2003, Mylans shareholders approved the
Mylan Laboratories Inc. 2003 Long-Term Incentive Plan,
and approved certain amendments on July 28, 2006 (the
2003 Plan). Under the 2003 Plan,
22,500,000 shares of common stock are reserved for issuance
to key employees, consultants, independent contractors and
non-employee directors of Mylan through a variety of incentive
awards, including: stock options, stock appreciation rights,
restricted shares and units, performance awards, other
stock-based awards and short-term cash awards. Awards are
generally granted at the market price of the shares underlying
the options at the date of the grant and generally become
exercisable over periods ranging from three to four years and
generally expire in ten years.
Upon approval of the 2003 Plan, The Mylan Laboratories Inc.
1997 Incentive Stock Option Plan was frozen, and no further
grants of stock options will be made under that plan. However,
there are stock options outstanding from expired plans and other
plans assumed through acquisitions.
69
The following table summarizes stock option activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Number of Shares
|
|
|
Exercise Price
|
|
|
|
Under Option
|
|
|
per Share
|
|
|
Outstanding at March 31, 2004
|
|
|
22,829,908
|
|
|
$
|
13.99
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
649,900
|
|
|
|
19.05
|
|
Options exercised
|
|
|
(891,092
|
)
|
|
|
11.30
|
|
Options forfeited
|
|
|
(286,928
|
)
|
|
|
19.13
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2005
|
|
|
22,301,788
|
|
|
|
14.17
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
5,780,123
|
|
|
|
17.61
|
|
Options exercised
|
|
|
(4,729,113
|
)
|
|
|
12.03
|
|
Options forfeited
|
|
|
(1,994,128
|
)
|
|
|
18.65
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2006
|
|
|
21,358,670
|
|
|
|
15.16
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
1,139,400
|
|
|
|
21.65
|
|
Options exercised
|
|
|
(4,053,061
|
)
|
|
|
12.18
|
|
Options forfeited
|
|
|
(797,281
|
)
|
|
|
17.28
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2007
|
|
|
17,647,728
|
|
|
$
|
16.17
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at
March 31, 2007
|
|
|
17,348,879
|
|
|
$
|
16.13
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at
March 31, 2007
|
|
|
11,651,414
|
|
|
$
|
14.91
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2007, options outstanding, options vested
and expected to vest, and options exercisable had average
remaining contractual terms of 6.18 years, 6.14 years
and 5.25 years, respectively. Also at March 31, 2007,
options outstanding, options vested and expected to vest and
options exercisable had aggregate intrinsic values of
$89,146,000, $88,539,000 and $73,180,000, respectively.
A summary of the status of the Companys nonvested
restricted stock and restricted stock unit awards is presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
Restricted
|
|
Number of Restricted
|
|
|
Grant-Date
|
|
Stock Awards
|
|
Stock Awards
|
|
|
Fair Value
|
|
|
Nonvested at March 31, 2006
|
|
|
507,962
|
|
|
$
|
24.69
|
|
Granted
|
|
|
209,161
|
|
|
|
23.19
|
|
Released
|
|
|
(505,807
|
)
|
|
|
24.79
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at March 31, 2007
|
|
|
211,316
|
|
|
$
|
23.10
|
|
|
|
|
|
|
|
|
|
|
Of the 209,161 awards granted in fiscal 2007, approximately
135,000 are performance based. The remaining awards vest ratably
over three years.
As of March 31, 2007, the Company had $20,580,000 of total
unrecognized compensation expense, net of estimated forfeitures,
related to all of its stock-based awards, which will be
recognized over the remaining weighted average period of
1.4 years. The total intrinsic value of options exercised
during fiscal 2007 was $29,954,000. The total fair value of all
options which vested during fiscal 2007, 2006 and 2005 was
$51,360,000, $27,949,000 and $60,106,000, respectively.
As a result of the adoption of SFAS 123R, the Company
recognized stock-based compensation expense of $21,806,000 for
the fiscal year ended March 31, 2007. The after tax impact
of recognizing the compensation expense related to
SFAS 123R on basic and diluted earnings per share for the
fiscal year was $0.06.
With respect to options granted under the Companys
stock-based compensation plan, the fair value of each option
grant was estimated at the date of grant using the Black-Scholes
option pricing model. Black-Scholes utilizes
70
assumptions related to volatility, the risk-free interest rate,
the dividend yield and employee exercise behavior. Expected
volatilities utilized in the model are based mainly on the
historical volatility of the Companys stock price and
other factors. The risk-free interest rate is derived from the
U.S. Treasury yield curve in effect at the time of grant.
The model incorporates exercise and post-vesting forfeiture
assumptions based on an analysis of historical data. The
expected lives of the grants are derived from historical and
other factors. The assumptions used are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ended
March 31,
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Volatility
|
|
|
34.0
|
%
|
|
|
38.70
|
%
|
|
|
41.80
|
%
|
Risk-free interest rate
|
|
|
4.8
|
%
|
|
|
4.00
|
%
|
|
|
3.20
|
%
|
Dividend yield
|
|
|
1.1
|
%
|
|
|
1.30
|
%
|
|
|
0.60
|
%
|
Expected term of options (in years)
|
|
|
4.5
|
|
|
|
4.5
|
|
|
|
4.2
|
|
Forfeiture rate
|
|
|
3.0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Weighted average grant date fair
value per option
|
|
$
|
6.90
|
|
|
$
|
5.92
|
|
|
$
|
6.73
|
|
Pro forma disclosure of net income and earnings per share had
the Company applied the fair value recognition provisions of
SFAS No. 123 to stock-based compensation using the
above assumptions is presented in Note 2.
In addition, Matrix has a stock option plan under which
3,288,965 options have been granted to its employees as of
March 31, 2007. These grants were made prior to the
acquisition of Matrix by Mylan. As of March 31, 2007,
696,580 options were exercisable. Stock compensation expense of
$350,000 was recognized in Mylans consolidated statement
of earnings for the year ended March 31, 2007, related to
Matrixs historical options.
|
|
Note 14.
|
Employee
Benefits
|
The Company has a plan covering substantially all employees in
the United States and Puerto Rico to provide for limited
reimbursement of postretirement supplemental medical coverage.
In addition, in December 2001, the Supplemental Health Insurance
Program for Certain Officers of Mylan Laboratories was adopted
to provide full postretirement medical coverage to certain
officers and their spouses and dependents. The program was
terminated in April 2006, except with respect to certain
individuals. These plans generally provide benefits to employees
who meet minimum age and service requirements. The Company
accounts for these benefits under SFAS No. 106,
Employers Accounting for Postretirement Benefits Other
Than Pensions. The amounts accrued related to these
benefits were not material at March 31, 2007 and 2006.
In accordance with Indian law, Matrix provides a defined benefit
retirement plan covering all employees located in India. The
amounts accrued related to these benefits were not material at
March 31, 2007.
The Company has defined contribution plans covering essentially
all of its employees in the United States and Puerto Rico. Its
defined contribution plans consist primarily of a 401(k)
retirement plan with a profit sharing component for non-union
employees and a 401(k) retirement plan for union employees.
Profit sharing contributions are made at the discretion of the
Board. The Companys matching contributions are based upon
employee contributions or service hours, depending upon the
plan. Total employer contributions to all plans for fiscal years
2007, 2006 and 2005 were $16,469,000, $12,168,000 and
$11,144,000, respectively.
Additionally, Matrix has several defined contribution plans
covering certain employees, and a Provident Fund which, in
accordance with Indian Law, covers all employees located in
India. Total contributions to all such plans of $718,000 are
included in Mylans Consolidated Statement of Earnings
since the date of acquisition.
The Company provides supplemental life insurance benefits to
certain management employees. Such benefits require annual
funding and may require accelerated funding in the event that we
would experience a change in control.
The production and maintenance employees at the Companys
manufacturing facilities in Morgantown, West Virginia, are
covered under a collective bargaining agreement that expires in
April 2012. These employees represented approximately 29% of the
Companys total workforce at March 31, 2007.
71
|
|
Note 15.
|
Segment
Information
|
The Company has two reportable segments, the Mylan
Segment and the Matrix Segment. The Mylan
Segment primarily develops, manufactures, sells and distributes
generic or branded generic pharmaceutical products in tablet,
capsule or transdermal patch form, while the Matrix Segment
engages mainly in the manufacture and sale of APIs and the
distribution of branded generic products. Additionally, certain
general and administrative expenses, as well as litigation
settlements, and non-operating income and expenses are reported
in Corporate/Other.
The Companys chief operating decision maker evaluates the
performance of its reportable segments based on net revenues and
segment earnings from operations. Items below the earnings from
operations line of the consolidated statements of earnings are
not presented by segment, since they are excluded from the
measure of segment profitability reviewed by the Companys
chief operating decision maker. The Company does not report
depreciation expense, total assets and capital expenditures by
segment as such information is not used by the chief operating
decision maker.
The accounting policies of the segments are the same as those
described in Note 2. Intersegment revenues are accounted
for at current market values.
The table below presents segment information for the fiscal
years identified and provides a reconciliation of segment
information to total consolidated information. For the Mylan and
Matrix Segments, segment earnings from operations (Segment
profitability (loss)) represents segment gross profit less
direct research and development expenses and direct selling,
general and administrative expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
March 31, 2007
|
|
Mylan Segment
|
|
|
Matrix Segment
|
|
|
Corporate/Other(1)
|
|
|
Consolidated
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment revenues
|
|
$
|
|
|
|
$
|
16,389
|
|
|
$
|
(16,389
|
)
|
|
$
|
|
|
Third-party net revenues
|
|
|
1,507,535
|
|
|
|
79,412
|
|
|
|
|
|
|
|
1,586,947
|
|
Segment profitability (loss)
|
|
|
699,342
|
|
|
|
(168,319
|
)
|
|
|
(103,469
|
)
|
|
|
427,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
March 31, 2006
|
|
Mylan Segment
|
|
|
Matrix Segment
|
|
|
Corporate/Other(1)
|
|
|
Consolidated
|
|
|
Intersegment revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Third-party net revenues
|
|
|
1,240,011
|
|
|
|
|
|
|
|
|
|
|
|
1,240,011
|
|
Segment profitability (loss)
|
|
|
450,765
|
|
|
|
|
|
|
|
(163,377
|
)
|
|
|
287,388
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
March 31, 2005
|
|
Mylan Segment
|
|
|
Matrix Segment
|
|
|
Corporate/Other(1)
|
|
|
Consolidated
|
|
|
Intersegment revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Third-party net revenues
|
|
|
1,247,785
|
|
|
|
|
|
|
|
|
|
|
|
1,247,785
|
|
Segment profitability (loss)
|
|
|
421,951
|
|
|
|
|
|
|
|
(119,780
|
)
|
|
|
302,171
|
|
|
|
|
(1) |
|
Includes corporate overhead, intercompany eliminations and
charges not directly attributable to segments. |
The Companys consolidated net revenues are generated via
the sale of products in the following therapeutic categories:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
March 31,
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Cardiovascular
|
|
$
|
463,610
|
|
|
$
|
422,727
|
|
|
$
|
484,588
|
|
Central nervous system
|
|
|
579,814
|
|
|
|
475,898
|
|
|
|
366,654
|
|
Dermatology
|
|
|
58,066
|
|
|
|
72,843
|
|
|
|
74,048
|
|
Gastrointestinal
|
|
|
59,655
|
|
|
|
46,701
|
|
|
|
93,713
|
|
Endocrine and Metabolic
|
|
|
133,967
|
|
|
|
84,048
|
|
|
|
68,360
|
|
Renal and Genitourinary
|
|
|
148,494
|
|
|
|
63,967
|
|
|
|
121
|
|
Other(1)
|
|
|
143,341
|
|
|
|
73,827
|
|
|
|
160,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,586,947
|
|
|
$
|
1,240,011
|
|
|
$
|
1,247,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Other consists of numerous therapeutic classes, none of which
individually exceeds 5% of consolidated net revenues. |
Geographic
Information
The Companys principal markets are the United States,
India and Europe. Net revenues are classified based on the
geographic location of the customers and are as follows:
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
March 31,
|
|
2007
|
|
|
2006
|
|
(in thousands)
|
|
|
|
|
|
|
|
Net external revenues
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,506,419
|
|
|
$
|
1,233,990
|
|
India
|
|
|
14,836
|
|
|
|
|
|
Europe
|
|
|
50,958
|
|
|
|
2,694
|
|
Rest of world
|
|
|
14,734
|
|
|
|
3,327
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
1,586,947
|
|
|
$
|
1,240,011
|
|
|
|
|
|
|
|
|
|
|
Sales outside of the United States in fiscal 2005 were not
significant.
The Company leases certain real property under various operating
lease arrangements that expire over the next eight years. These
leases generally provide the Company with the option to renew
the lease at the end of the lease term. The Company also entered
into agreements to lease vehicles for use by certain key
employees which are typically 24 to 36 months, For fiscal
years 2007, 2006 and 2005, the Company made lease payments of
$3,944,000, $3,666,000 and $4,939,000, respectively.
73
Future minimum lease payments under these commitments are as
follows:
|
|
|
|
|
|
|
Operating
|
|
Fiscal
|
|
Leases
|
|
(in thousands)
|
|
|
|
|
2008
|
|
$
|
5,848
|
|
2009
|
|
|
4,033
|
|
2010
|
|
|
3,323
|
|
2011
|
|
|
2,265
|
|
2012
|
|
|
1,371
|
|
Thereafter
|
|
|
3,324
|
|
|
|
|
|
|
|
|
$
|
20,164
|
|
|
|
|
|
|
The Company has entered into various product licensing and
development agreements. In some of these arrangements, the
Company provides funding for the development of the product or
to obtain rights to the use of the patent, through milestone
payments, in exchange for marketing and distribution rights to
the product. Milestones represent the completion of specific
contractual events, and it is uncertain if and when these
milestones will be achieved. In the event that all projects are
successful, milestone and development payments of approximately
$21,671,000 would be paid.
The Company has also entered into employment and other
agreements with certain executives that provide for compensation
and certain other benefits. These agreements provide for
severance payments under certain circumstances. Additionally,
the Company has split-dollar life insurance agreements with
certain retired executives.
In the normal course of business, Mylan periodically enters into
employment, legal settlement and other agreements which
incorporate indemnification provisions. While the maximum amount
to which Mylan may be exposed under such agreements cannot be
reasonably estimated, the Company maintains insurance coverage
which management believes will effectively mitigate the
Companys obligations under these indemnification
provisions. No amounts have been recorded in the consolidated
financial statements with respect to the Companys
obligations under such agreements.
|
|
Note 17.
|
Product
Agreements
|
On November 24, 2005, the Company announced the sale of the
U.S. and Canadian rights for
Apokyn®
to Vernalis plc. Under the terms of the agreement, Mylan
received a cash payment of $23,000,000. In addition, Mylan
performed certain transitional services for one year, which
included supply chain management and customer service
assistance. There was $12,200,000 and $8,900,000 of revenue
associated with the sale which was recognized in fiscal 2007 and
2006, respectively, and included in other revenues.
On January 11, 2006, the Company announced an agreement
with Forest Laboratories Holdings, Ltd. (Forest), a
wholly owned subsidiary of Forest Laboratories, Inc., for the
commercialization, development and distribution of Mylans
nebivolol in the United States and Canada. Under the terms of
the agreement, Mylan received an up-front payment of
$75,000,000, which will be deferred until the commercial launch
of the product. Mylan also has the potential to earn future
milestone payments as well as royalties on nebivolol sales. Upon
commercial launch the up-front payment will be amortized into
revenue over the remaining term of the license agreement. Forest
will assume all expenses for future nebivolol development
programs and will be responsible for all sales and marketing
expenses. Mylan has retained an option to co-promote the product
in the future.
Legal
Proceedings
While it is not possible to determine with any degree of
certainty the ultimate outcome of the following legal
proceedings, the Company believes that it has meritorious
defenses with respect to the claims asserted against it and
intends to vigorously defend its position. An adverse outcome in
any of these proceedings could have a material adverse effect on
the Companys financial position and results of operations.
74
Omeprazole
In fiscal 2001, Mylan Pharmaceuticals Inc. (MPI), a
wholly-owned subsidiary of Mylan Laboratories Inc. (Mylan
Labs), filed an Abbreviated New Drug Application
(ANDA) seeking approval from the U.S. Food and
Drug Administration (FDA) to manufacture, market and
sell omeprazole delayed-release capsules and made
Paragraph IV certifications to several patents owned by
AstraZeneca PLC (AstraZeneca) that were listed in
the FDAs Orange Book. On September 8,
2000, AstraZeneca filed suit against MPI and Mylan Labs in the
U.S. District Court for the Southern District of New York
alleging infringement of several of AstraZenecas patents.
On May 29, 2003, the FDA approved MPIs ANDA for the
10 mg and 20 mg strengths of omeprazole
delayed-release capsules, and, on August 4, 2003, Mylan
Labs announced that MPI had commenced the sale of omeprazole
10 mg and 20 mg delayed-release capsules. AstraZeneca
then amended the pending lawsuit to assert claims against Mylan
Labs and MPI and filed a separate lawsuit against MPIs
supplier, Esteve Quimica S.A. (Esteve), for
unspecified money damages and a finding of willful infringement,
which could result in treble damages, injunctive relief,
attorneys fees, costs of litigation and such further
relief as the court deems just and proper. MPI has certain
indemnity obligations to Esteve in connection with this
litigation. MPI, Esteve and the other generic manufacturers who
are co-defendants in the case filed motions for summary judgment
of non-infringement and patent invalidity. On January 12,
2006, those motions were denied. A non-jury trial regarding
liability only was completed on June 14, 2006.
Lorazepam
and Clorazepate
On June 1, 2005, a jury verdict was rendered against Mylan
Labs and MPI in the U.S. District Court for the District of
Columbia (D.C.) in the amount of approximately
$12,000,000 which has been accrued for by the Company. The jury
found Mylan willfully violated Massachusetts, Minnesota and
Illinois state antitrust laws in connection with API supply
agreements entered into between the Company and its API supplier
and broker for two drugs, lorazepam and clorazepate, in 1997,
and subsequent price increases on these drugs in 1998. The case
was brought by four health insurers who opted out of earlier
class action settlements agreed to by the Company in 2001 and
represents the last remaining claims relating to Mylans
1998 price increases for lorazepam and clorazepate. In
post-trial filings, the plaintiffs have requested that the
verdict be trebled. Plaintiffs are also seeking an award of
attorneys fees, litigation costs and interest on the
judgment in unspecified amounts. In total, the plaintiffs have
moved for judgments that could result in a liability of
approximately $69,000,000 for Mylan (not including the request
for attorneys fees and costs). The Company filed a motion
for judgment as a matter of law, a motion for a new trial, a
motion to dismiss two of the insurers and a motion to reduce the
verdict. On December 20, 2006, the Companys motion
for judgment as a matter of law and motion for a new trial were
denied. A hearing on the pending post-trial motions took place
on February 28, 2007. The Company intends to appeal to the
U.S. Court of Appeals for the D.C. Circuit.
Pricing
and Medicaid Litigation
On June 26, 2003, MPI and UDL Laboratories Inc.
(UDL), a subsidiary of Mylan Labs, received requests
from the U.S. House of Representatives Energy and Commerce
Committee (the Committee) seeking information about
certain products sold by MPI and UDL in connection with the
Committees investigation into pharmaceutical reimbursement
and rebates under Medicaid. MPI and UDL cooperated with this
inquiry and provided information in response to the
Committees requests in 2003. Several states
attorneys general (AG) have also sent letters to
MPI, UDL and Mylan Bertek, demanding that those companies retain
documents relating to Medicaid reimbursement and rebate
calculations pending the outcome of unspecified investigations
by those AGs into such matters. In addition, in July 2004, Mylan
Labs received subpoenas from the AGs of California and Florida
in connection with civil investigations purportedly related to
price reporting and marketing practices regarding various drugs.
As noted below, both California and Florida subsequently filed
suits against Mylan, and the Company believes any further
requests for information and disclosures will be made as part of
that litigation.
Beginning in September 2003, Mylan Labs, MPI
and/or UDL,
together with many other pharmaceutical companies, have been
named in a series of civil lawsuits filed by state AGs and
municipal bodies within the state of New York alleging generally
that the defendants defrauded the state Medicaid systems by
allegedly reporting Average Wholesale Prices
(AWP)
and/or
Wholesale Acquisition Costs that exceeded the actual
selling price
75
of the defendants prescription drugs. To date, Mylan Labs,
MPI and/or
UDL have been named as defendants in substantially similar civil
lawsuits filed by the AGs of Alabama, Alaska, California,
Florida, Hawaii, Illinois, Kentucky, Massachusetts, Mississippi,
Missouri, South Carolina and Wisconsin and also by the city of
New York and approximately 40 counties across New York State.
Several of these cases have been transferred to the AWP
multi-district litigation proceedings pending in the
U.S. District Court for the District of Massachusetts for
pretrial proceedings. Others of these cases will likely be
litigated in the state courts in which they were filed. Each of
the cases seeks an unspecified amount in money damages, civil
penalties
and/or
treble damages, counsel fees and costs, and injunctive relief.
In each of these matters, with the exception of the California,
Florida, Alaska and South Carolina AG actions and the actions
brought by various counties in New York, excluding the actions
brought by Erie, Oswego and Schenectady counties, Mylan Labs,
MPI and/or
UDL have answered the respective complaints denying liability.
Mylan Labs and its subsidiaries intend to defend each of these
actions vigorously.
In addition by letter dated January 12, 2005, MPI was
notified by the U.S. Department of Justice of an
investigation concerning MPIs calculations of Medicaid
drug rebates. MPI is cooperating fully with the
governments investigation.
Modafinil
Antitrust Litigation and FTC Inquiry
Beginning in April 2006, Mylan Labs, along with four other drug
manufacturers, has been named in a series of civil lawsuits
filed in the Eastern District of Pennsylvania by a variety of
plaintiffs purportedly representing direct and indirect
purchasers of the drug modafinil and one action brought by
Apotex, Inc., a manufacturer of generic drugs seeking approval
to market a generic modafinil product. These actions allege
violations of federal and state laws in connection with the
defendants settlement of patent litigation relating to
modafinil. These actions are in their preliminary stages, and
motions to dismiss each action are pending. Mylan Labs intends
to defend each of these actions vigorously. In addition, by
letter dated July 11, 2006, Mylan was notified by the
U.S. Federal Trade Commission (FTC) of an
investigation relating to the settlement of the modafinil patent
litigation. In its letter, the FTC requested certain information
from Mylan Labs, MPI and Mylan Technologies Inc. pertaining to
the patent litigation and the settlement thereof. On
March 29, 2007, the FTC issued a subpoena, and on
April 26, 2007, the FTC issued a civil investigative demand
to Mylan Labs requesting additional information from the Company
relating to the investigation. Mylan is cooperating fully with
the governments investigation and its outstanding requests
for information.
Other
Litigation
The Company is involved in various other legal proceedings that
are considered normal to its business. While it is not feasible
to predict the ultimate outcome of such other proceedings, the
Company believes that the ultimate outcome of such other
proceedings will not have a material adverse effect on its
financial position or results of operations. The Company
realized net gains of $50,116,000, net losses of $12,417,000 and
net gains of $25,990,000 in fiscal years 2007, 2006 and 2005,
respectively, related to the settlements of various legal
matters.
Previously Reported Matters That Have Been Resolved or
Dismissed
Shareholder Litigation
On November 22, 2004, an individual purporting to be a
Mylan Labs shareholder filed a civil action in the Court of
Common Pleas of Allegheny County, Pennsylvania, against Mylan
Labs and all members of its Board of Directors alleging that the
Board members had breached their fiduciary duties by approving
the planned acquisition of King Pharmaceuticals, Inc. and by
declining to dismantle the Companys anti-takeover defenses
to permit an auction of the Company to Carl Icahn or other
potential buyers of the Company and also alleging that certain
transactions between the Company and its directors (or their
relatives or companies with which they were formerly affiliated)
may have been wasteful. On November 23, 2004, a
substantially identical complaint was filed in the same court by
another purported Mylan Labs shareholder. The actions were
styled as shareholder derivative suits on behalf of Mylan Labs
and class actions on behalf of all Mylan Labs shareholders
and were consolidated by the court under the caption In re
Mylan Laboratories Inc. Shareholder Litigation. Mylan Labs
and its directors filed preliminary objections seeking dismissal
of the complaints. On January 19, 2005, the plaintiffs
amended their complaints to add Bear Stearns & Co.,
Inc., Goldman Sachs & Co., Richard C. Perry, Perry
Corp., American Stock
76
Transfer & Trust Company and John Does
1-100 as additional defendants and to add claims regarding
trading activity by the additional defendants and the
implications on Mylan Labs shareholder rights agreement.
On October 26, 2005, the court approved the voluntary
dismissal of these cases by the plaintiffs, with prejudice.
Paclitaxel
In June 2001, Tapestry Pharmaceuticals, Inc. (formerly NAPRO
Biotherapeutics Inc.) (Tapestry) and Abbott
Laboratories Inc. (Abbott) filed suit against Mylan
Labs, MPI and UDL, also a wholly-owned subsidiary of the
Company, in the U.S. District Court for the Western
District of Pennsylvania alleging that the manufacture, use and
sale of MPIs paclitaxel product, which MPI began selling
in July 2001, infringes certain patents owned by Tapestry and
allegedly licensed to Abbott. During the first quarter of fiscal
2005, all parties agreed to a settlement of this case and the
lawsuit has been dismissed, with prejudice. MPI paid $9,000,000
pursuant to the settlement.
|
|
Note 19.
|
Related
Party Transactions
|
Mylan and Matrix routinely enter into transactions with certain
affiliates in the ordinary course of business. Transactions
between Mylan and its consolidated subsidiaries are eliminated
in consolidation.
The following represent the significant transactions between the
Company and Somerset for the years ended March 31, 2007 and
2006:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
(in thousands)
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
5,295
|
|
|
$
|
419
|
|
Royalties received
|
|
|
1,283
|
|
|
|
|
|
At March 31, 2007 and 2006, receivables from Somerset in
the amount of $2,478,000 and $1,198,613 were included in
accounts receivable on the consolidated balance sheet. No
significant transactions between Mylan and Somerset occurred in
fiscal 2005.
The following represent the significant transactions between the
Matrix Segment and companies in which the Matrix Segment holds
an equity investment for the year ended March 31, 2007:
|
|
|
|
|
(in thousands)
|
|
|
|
|
Net revenues
|
|
$
|
6,695
|
|
Other
|
|
|
655
|
|
|
|
Note 20.
|
Guarantor
Financial Statements
|
Each of the Companys wholly owned domestic subsidiaries,
except a captive insurance company, has guaranteed, on a full,
unconditional and joint and several basis, the Companys
performance under the Notes (collectively, the Guarantor
Subsidiaries). Matrix is not a guarantor of the Notes.
There are certain restrictions under the Notes indenture on the
ability of the Company and the Guarantor Subsidiaries to receive
or distribute funds in the form of cash dividends, loans or
advances. The following combined financial data provides
information regarding the financial position, results of
operations and cash flows of the Guarantor Subsidiaries
(condensed consolidating financial data). Separate financial
statements and other disclosures concerning the Guarantor
Subsidiaries are not presented because management has determined
that such information would not be material to the holders of
the debt. During fiscal 2007, the Company merged a guarantor
subsidiary into Mylan Labs which substantially increased the
total assets of Mylan Labs at March 31, 2007.
77
GUARANTOR
SUBSIDIARIES
CONDENSED
CONSOLIDATING BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
Consolidating and
|
|
|
|
|
|
|
Mylan
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Eliminating
|
|
|
|
|
March 31, 2007
|
|
Labs
|
|
|
Subs
|
|
|
Subs
|
|
|
Entries
|
|
|
Consolidated
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,146,380
|
|
|
$
|
21,689
|
|
|
$
|
84,312
|
|
|
$
|
(16
|
)
|
|
$
|
1,252,365
|
|
Marketable securities
|
|
|
143,220
|
|
|
|
|
|
|
|
30,987
|
|
|
|
|
|
|
|
174,207
|
|
Accounts receivable, net
|
|
|
10,708
|
|
|
|
262,024
|
|
|
|
79,712
|
|
|
|
(2,150
|
)
|
|
|
350,294
|
|
Inventories
|
|
|
|
|
|
|
324,767
|
|
|
|
108,096
|
|
|
|
(3,752
|
)
|
|
|
429,111
|
|
Other current assets
|
|
|
5,400
|
|
|
|
158,488
|
|
|
|
47,129
|
|
|
|
(4,950
|
)
|
|
|
206,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,305,708
|
|
|
|
766,968
|
|
|
|
350,236
|
|
|
|
(10,868
|
)
|
|
|
2,412,044
|
|
Intercompany receivables, net
|
|
|
(390,417
|
)
|
|
|
1,009,683
|
|
|
|
(776,231
|
)
|
|
|
156,965
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
16,741
|
|
|
|
510,853
|
|
|
|
159,145
|
|
|
|
|
|
|
|
686,739
|
|
Intangible assets, net
|
|
|
|
|
|
|
89,321
|
|
|
|
263,459
|
|
|
|
|
|
|
|
352,780
|
|
Goodwill
|
|
|
|
|
|
|
102,579
|
|
|
|
510,163
|
|
|
|
|
|
|
|
612,742
|
|
Other assets
|
|
|
162,480
|
|
|
|
12,191
|
|
|
|
64,891
|
|
|
|
(50,000
|
)
|
|
|
189,562
|
|
Investments in subsidiaries
|
|
|
2,007,547
|
|
|
|
|
|
|
|
|
|
|
|
(2,007,547
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,102,059
|
|
|
$
|
2,491,595
|
|
|
$
|
571,663
|
|
|
$
|
(1,911,450
|
)
|
|
$
|
4,253,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders
equity
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
302
|
|
|
$
|
56,617
|
|
|
$
|
105,532
|
|
|
$
|
(2,165
|
)
|
|
$
|
160,286
|
|
Income taxes payable
|
|
|
(177,857
|
)
|
|
|
252,404
|
|
|
|
5,464
|
|
|
|
(1,624
|
)
|
|
|
78,387
|
|
Current portion of long-term
obligations
|
|
|
3,352
|
|
|
|
|
|
|
|
121,430
|
|
|
|
|
|
|
|
124,782
|
|
Cash dividends payable
|
|
|
14,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,902
|
|
Other current liabilities
|
|
|
61,312
|
|
|
|
114,255
|
|
|
|
148,295
|
|
|
|
(1,684
|
)
|
|
|
322,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
(97,989
|
)
|
|
|
423,276
|
|
|
|
380,721
|
|
|
|
(5,473
|
)
|
|
|
700,535
|
|
Deferred revenue
|
|
|
|
|
|
|
90,673
|
|
|
|
|
|
|
|
|
|
|
|
90,673
|
|
Long-term debt
|
|
|
1,550,000
|
|
|
|
|
|
|
|
104,932
|
|
|
|
|
|
|
|
1,654,932
|
|
Other long-term obligations
|
|
|
2,700
|
|
|
|
1,309
|
|
|
|
161,651
|
|
|
|
(50,000
|
)
|
|
|
115,660
|
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
44,469
|
|
|
|
(1,262
|
)
|
|
|
43,207
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
169,681
|
|
|
|
7,494
|
|
|
|
210
|
|
|
|
(7,704
|
)
|
|
|
169,681
|
|
Additional paid-in capital
|
|
|
962,415
|
|
|
|
593,831
|
|
|
|
10,048
|
|
|
|
(603,548
|
)
|
|
|
962,746
|
|
Retained earnings
|
|
|
2,103,282
|
|
|
|
1,375,003
|
|
|
|
(131,540
|
)
|
|
|
(1,243,463
|
)
|
|
|
2,103,282
|
|
Accumulated other comprehensive
earnings
|
|
|
363
|
|
|
|
9
|
|
|
|
1,172
|
|
|
|
|
|
|
|
1,544
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock at cost
|
|
|
(1,588,393
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,588,393
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
1,647,348
|
|
|
|
1,976,337
|
|
|
|
(120,110
|
)
|
|
|
(1,854,715
|
)
|
|
|
1,648,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
3,102,059
|
|
|
$
|
2,491,595
|
|
|
$
|
571,663
|
|
|
$
|
(1,911,450
|
)
|
|
$
|
4,253,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
Consolidating and
|
|
|
|
|
|
|
Mylan
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Eliminating
|
|
|
|
|
March 31, 2006
|
|
Labs
|
|
|
Subs
|
|
|
Subs
|
|
|
Entries
|
|
|
Consolidated
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,911
|
|
|
$
|
128,191
|
|
|
$
|
9,417
|
|
|
$
|
7,605
|
|
|
$
|
150,124
|
|
Marketable securities
|
|
|
|
|
|
|
340,390
|
|
|
|
27,613
|
|
|
|
|
|
|
|
368,003
|
|
Accounts receivable, net
|
|
|
1,064
|
|
|
|
241,135
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
242,193
|
|
Inventories
|
|
|
|
|
|
|
280,617
|
|
|
|
|
|
|
|
(1,609
|
)
|
|
|
279,008
|
|
Other current assets
|
|
|
2,986
|
|
|
|
150,882
|
|
|
|
451
|
|
|
|
(1,747
|
)
|
|
|
152,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
8,961
|
|
|
|
1,141,215
|
|
|
|
37,475
|
|
|
|
4,249
|
|
|
|
1,191,900
|
|
Intercompany receivables, net
|
|
|
(913,694
|
)
|
|
|
913,701
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
Property, plant and equipment, net
|
|
|
13,478
|
|
|
|
393,397
|
|
|
|
|
|
|
|
|
|
|
|
406,875
|
|
Intangible assets, net and Goodwill
|
|
|
|
|
|
|
208,174
|
|
|
|
|
|
|
|
|
|
|
|
208,174
|
|
Other assets
|
|
|
54,911
|
|
|
|
9,236
|
|
|
|
|
|
|
|
(570
|
)
|
|
|
63,577
|
|
Investment in subsidiaries
|
|
|
2,340,569
|
|
|
|
|
|
|
|
|
|
|
|
(2,340,569
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,504,225
|
|
|
$
|
2,665,723
|
|
|
$
|
37,475
|
|
|
$
|
(2,336,897
|
)
|
|
$
|
1,870,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders
equity
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
990
|
|
|
$
|
68,272
|
|
|
$
|
|
|
|
$
|
7,597
|
|
|
$
|
76,859
|
|
Income taxes payable
|
|
|
(6,412
|
)
|
|
|
18,128
|
|
|
|
1,247
|
|
|
|
|
|
|
|
12,963
|
|
Current portion of long-term
obligations
|
|
|
4,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,336
|
|
Cash dividends payable
|
|
|
12,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,605
|
|
Other current liabilities
|
|
|
12,482
|
|
|
|
143,411
|
|
|
|
4,344
|
|
|
|
(1,750
|
)
|
|
|
158,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
24,001
|
|
|
|
229,811
|
|
|
|
5,591
|
|
|
|
5,847
|
|
|
|
265,250
|
|
Deferred revenue
|
|
|
|
|
|
|
89,417
|
|
|
|
|
|
|
|
|
|
|
|
89,417
|
|
Long-term debt
|
|
|
685,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
685,188
|
|
Other long-term obligations
|
|
|
9,823
|
|
|
|
33,767
|
|
|
|
|
|
|
|
(570
|
)
|
|
|
43,020
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
154,575
|
|
|
|
7,407
|
|
|
|
210
|
|
|
|
(7,617
|
)
|
|
|
154,575
|
|
Additional
paid-in-capital
|
|
|
418,954
|
|
|
|
1,091,196
|
|
|
|
9,718
|
|
|
|
(1,100,914
|
)
|
|
|
418,954
|
|
Retained earnings
|
|
|
1,939,045
|
|
|
|
1,211,370
|
|
|
|
22,273
|
|
|
|
(1,233,643
|
)
|
|
|
1,939,045
|
|
Accumulated other comprehensive
earnings
|
|
|
12
|
|
|
|
2,755
|
|
|
|
(317
|
)
|
|
|
|
|
|
|
2,450
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock at cost
|
|
|
(1,727,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,727,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
785,213
|
|
|
|
2,312,728
|
|
|
|
31,884
|
|
|
|
(2,342,174
|
)
|
|
|
787,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
1,504,225
|
|
|
$
|
2,665,723
|
|
|
$
|
37,475
|
|
|
$
|
(2,336,897
|
)
|
|
$
|
1,870,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
GUARANTOR
SUBSIDIARIES
CONDENSED
CONSOLIDATING STATEMENTS OF EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
Consolidating and
|
|
|
|
|
|
|
Mylan
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Eliminating
|
|
|
|
|
For the Year Ended
March 31, 2007
|
|
Labs
|
|
|
Subs
|
|
|
Subs
|
|
|
Entries
|
|
|
Consolidated
|
|
|
Net revenues
|
|
$
|
|
|
|
$
|
1,507,535
|
|
|
$
|
95,801
|
|
|
$
|
(16,389
|
)
|
|
$
|
1,586,947
|
|
Other revenue
|
|
|
|
|
|
|
24,872
|
|
|
|
|
|
|
|
|
|
|
|
24,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
1,532,407
|
|
|
|
95,801
|
|
|
|
(16,389
|
)
|
|
|
1,611,819
|
|
Cost of sales
|
|
|
|
|
|
|
691,022
|
|
|
|
84,498
|
|
|
|
(7,369
|
)
|
|
|
768,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
841,385
|
|
|
|
11,303
|
|
|
|
(9,020
|
)
|
|
|
843,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
9,233
|
|
|
|
88,497
|
|
|
|
159,662
|
|
|
|
(6,700
|
)
|
|
|
250,692
|
|
Selling, general &
administrative
|
|
|
126,300
|
|
|
|
83,252
|
|
|
|
5,986
|
|
|
|
|
|
|
|
215,538
|
|
Litigation settlements, net
|
|
|
(50,106
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(50,116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
85,427
|
|
|
|
171,739
|
|
|
|
165,648
|
|
|
|
(6,700
|
)
|
|
|
416,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
|
(85,427
|
)
|
|
|
669,646
|
|
|
|
(154,345
|
)
|
|
|
(2,320
|
)
|
|
|
427,554
|
|
Interest expense
|
|
|
46,726
|
|
|
|
|
|
|
|
5,550
|
|
|
|
|
|
|
|
52,276
|
|
Other income, net
|
|
|
17,696
|
|
|
|
21,779
|
|
|
|
7,165
|
|
|
|
(3,433
|
)
|
|
|
43,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes,
minority interest and equity in earnings (loss) of subsidiaries
|
|
|
(114,457
|
)
|
|
|
691,425
|
|
|
|
(152,730
|
)
|
|
|
(5,753
|
)
|
|
|
418,485
|
|
Provision for income taxes
|
|
|
(8,450
|
)
|
|
|
215,597
|
|
|
|
2,494
|
|
|
|
(1,624
|
)
|
|
|
208,017
|
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
211
|
|
|
|
|
|
|
|
211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before equity in earnings
(loss) of subsidiaries
|
|
|
(106,007
|
)
|
|
|
475,828
|
|
|
|
(155,435
|
)
|
|
|
(4,129
|
)
|
|
|
210,257
|
|
Equity in earnings (loss) of
subsidiaries
|
|
|
323,291
|
|
|
|
(151,562
|
)
|
|
|
1,621
|
|
|
|
(166,323
|
)
|
|
|
7,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
217,284
|
|
|
$
|
324,266
|
|
|
$
|
(153,814
|
)
|
|
$
|
(170,452
|
)
|
|
$
|
217,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
GUARANTOR
SUBSIDIARIES
CONDENSED
CONSOLIDATING STATEMENTS OF EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
Consolidating and
|
|
|
|
|
|
|
Mylan
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Eliminating
|
|
|
|
|
For the year ended
March 31, 2006
|
|
Labs
|
|
|
Subs
|
|
|
Subs
|
|
|
Entries
|
|
|
Consolidated
|
|
|
Net revenues
|
|
$
|
|
|
|
$
|
1,240,011
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,240,011
|
|
Other revenue
|
|
|
|
|
|
|
17,153
|
|
|
|
|
|
|
|
|
|
|
|
17,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
1,257,164
|
|
|
|
|
|
|
|
|
|
|
|
1,257,164
|
|
Cost of sales
|
|
|
38
|
|
|
|
633,101
|
|
|
|
|
|
|
|
(3,591
|
)
|
|
|
629,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
(38
|
)
|
|
|
624,063
|
|
|
|
|
|
|
|
3,591
|
|
|
|
627,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
990
|
|
|
|
101,441
|
|
|
|
|
|
|
|
|
|
|
|
102,431
|
|
Selling, general &
administrative
|
|
|
17,382
|
|
|
|
206,745
|
|
|
|
1,253
|
|
|
|
|
|
|
|
225,380
|
|
Litigation settlements, net
|
|
|
|
|
|
|
12,417
|
|
|
|
|
|
|
|
|
|
|
|
12,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
18,372
|
|
|
|
320,603
|
|
|
|
1,253
|
|
|
|
|
|
|
|
340,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from operations
|
|
|
(18,410
|
)
|
|
|
303,460
|
|
|
|
(1,253
|
)
|
|
|
3,591
|
|
|
|
287,388
|
|
Interest expense
|
|
|
31,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,285
|
|
Other income, net
|
|
|
1,753
|
|
|
|
15,685
|
|
|
|
4,655
|
|
|
|
(3,591
|
)
|
|
|
18,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes and
equity in earnings (loss) of subsidiaries
|
|
|
(47,942
|
)
|
|
|
319,145
|
|
|
|
3,402
|
|
|
|
|
|
|
|
274,605
|
|
Provision for income taxes
|
|
|
(12,482
|
)
|
|
|
101,330
|
|
|
|
1,215
|
|
|
|
|
|
|
|
90,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before equity in earnings
(loss) of subsidiaries
|
|
|
(35,460
|
)
|
|
|
217,815
|
|
|
|
2,187
|
|
|
|
|
|
|
|
184,542
|
|
Equity in earnings (loss) of
subsidiaries
|
|
|
220,002
|
|
|
|
|
|
|
|
|
|
|
|
(220,002
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
184,542
|
|
|
$
|
217,815
|
|
|
$
|
2,187
|
|
|
$
|
(220,002
|
)
|
|
$
|
184,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
Consolidating and
|
|
|
|
|
|
|
Mylan
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
Eliminating
|
|
|
|
|
For the year ended
March 31, 2005
|
|
Labs
|
|
|
Subs
|
|
|
Subs
|
|
|
Entries
|
|
|
Consolidated
|
|
|
Net revenues
|
|
$
|
|
|
|
$
|
1,247,785
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,247,785
|
|
Other revenue
|
|
|
|
|
|
|
5,589
|
|
|
|
|
|
|
|
|
|
|
|
5,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
1,253,374
|
|
|
|
|
|
|
|
|
|
|
|
1,253,374
|
|
Cost of sales
|
|
|
|
|
|
|
632,219
|
|
|
|
|
|
|
|
(2,385
|
)
|
|
|
629,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
621,155
|
|
|
|
|
|
|
|
2,385
|
|
|
|
623,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
|
|
|
88,254
|
|
|
|
|
|
|
|
|
|
|
|
88,254
|
|
Selling, general &
administrative
|
|
|
1,059
|
|
|
|
257,356
|
|
|
|
810
|
|
|
|
(120
|
)
|
|
|
259,105
|
|
Litigation settlements, net
|
|
|
|
|
|
|
(25,990
|
)
|
|
|
|
|
|
|
|
|
|
|
(25,990
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,059
|
|
|
|
319,620
|
|
|
|
810
|
|
|
|
(120
|
)
|
|
|
321,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from operations
|
|
|
(1,059
|
)
|
|
|
301,535
|
|
|
|
(810
|
)
|
|
|
2,505
|
|
|
|
302,171
|
|
Other income, net
|
|
|
1,066
|
|
|
|
7,598
|
|
|
|
3,917
|
|
|
|
(2,505
|
)
|
|
|
10,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes and
equity in earnings (loss) of subsidiaries
|
|
|
7
|
|
|
|
309,133
|
|
|
|
3,107
|
|
|
|
|
|
|
|
312,247
|
|
Provision for income taxes
|
|
|
(183
|
)
|
|
|
107,753
|
|
|
|
1,085
|
|
|
|
|
|
|
|
108,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before equity in earnings
(loss) of subsidiaries
|
|
|
190
|
|
|
|
201,380
|
|
|
|
2,022
|
|
|
|
|
|
|
|
203,592
|
|
Equity in earnings (loss) of
subsidiaries
|
|
|
203,402
|
|
|
|
|
|
|
|
|
|
|
|
(203,402
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
203,592
|
|
|
$
|
201,380
|
|
|
$
|
2,022
|
|
|
$
|
(203,402
|
)
|
|
$
|
203,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
GUARANTOR
SUBSIDIARIES
CONDENSED
CONSOLIDATING STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Mylan
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
For the Period Ended
March 31, 2007
|
|
Labs
|
|
|
Subs
|
|
|
Subs
|
|
|
Eliminating
|
|
|
Consolidated
|
|
|
Cash flows provided by (used in)
operations
|
|
$
|
(77,738
|
)
|
|
$
|
449,812
|
|
|
$
|
25,739
|
|
|
$
|
(7,621
|
)
|
|
$
|
390,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from (purchase of)
capital assets
|
|
|
(5,574
|
)
|
|
|
(151,970
|
)
|
|
|
(4,307
|
)
|
|
|
|
|
|
|
(161,851
|
)
|
Acquisition of Matrix, net of cash
acquired
|
|
|
|
|
|
|
|
|
|
|
(761,049
|
)
|
|
|
|
|
|
|
(761,049
|
)
|
Sale of assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of marketable securities
|
|
|
(539,189
|
)
|
|
|
|
|
|
|
(116,759
|
)
|
|
|
|
|
|
|
(655,948
|
)
|
Sale of marketable securities
|
|
|
697,483
|
|
|
|
|
|
|
|
151,037
|
|
|
|
|
|
|
|
848,520
|
|
Other items, net
|
|
|
(2,811
|
)
|
|
|
|
|
|
|
2,404
|
|
|
|
|
|
|
|
(407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in ) provided from
investing activities
|
|
|
149,909
|
|
|
|
(151,970
|
)
|
|
|
(728,674
|
)
|
|
|
|
|
|
|
(730,735
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid
|
|
|
(50,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50,751
|
)
|
Payment of financing fees
|
|
|
(15,329
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,329
|
)
|
Excess tax benefit from stock
based compensation
|
|
|
4,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,158
|
|
Proceeds from issuance of common
stock, net
|
|
|
657,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
657,678
|
|
Purchase of bond hedge
|
|
|
(126,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(126,000
|
)
|
Proceeds from issuance of warrants
|
|
|
45,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,360
|
|
Proceeds from long-term debt
|
|
|
1,552,000
|
|
|
|
|
|
|
|
4,251
|
|
|
|
|
|
|
|
1,556,251
|
|
Payments on long-term debt
|
|
|
(689,938
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(689,938
|
)
|
Purchase of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock
options
|
|
|
49,365
|
|
|
|
|
|
|
|
459
|
|
|
|
|
|
|
|
49,824
|
|
Increase in outstanding checks in
excess of cash in disbursement accounts
|
|
|
|
|
|
|
10,403
|
|
|
|
|
|
|
|
|
|
|
|
10,403
|
|
Transfer from (to) affiliates
|
|
|
(357,245
|
)
|
|
|
(414,747
|
)
|
|
|
771,992
|
|
|
|
|
|
|
|
|
|
Other items, net
|
|
|
|
|
|
|
|
|
|
|
1,160
|
|
|
|
|
|
|
|
1,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in (provided by)
financing activities
|
|
|
1,069,298
|
|
|
|
(404,344
|
)
|
|
|
777,862
|
|
|
|
|
|
|
|
1,442,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on cash of changes in
exchange rates
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
|
1,141,469
|
|
|
|
(106,502
|
)
|
|
|
74,895
|
|
|
|
(7,621
|
)
|
|
|
1,102,241
|
|
Cash and cash
equivalents beginning of year
|
|
|
4,911
|
|
|
|
128,191
|
|
|
|
9,417
|
|
|
|
7,605
|
|
|
|
150,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents end of year
|
|
$
|
1,146,380
|
|
|
$
|
21,689
|
|
|
$
|
84,312
|
|
|
$
|
(16
|
)
|
|
$
|
1,252,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Mylan
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
For the Period Ended
March 31, 2006
|
|
Labs
|
|
|
Subs
|
|
|
Subs
|
|
|
Eliminating
|
|
|
Consolidated
|
|
|
Cash flows provided by (used in)
operations
|
|
$
|
(14,539
|
)
|
|
$
|
446,317
|
|
|
$
|
(22,822
|
)
|
|
$
|
7,605
|
|
|
$
|
416,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from (purchase of)
capital assets
|
|
|
(4,380
|
)
|
|
|
(99,309
|
)
|
|
|
|
|
|
|
|
|
|
|
(103,689
|
)
|
Purchase of marketable securities
|
|
|
|
|
|
|
(635,076
|
)
|
|
|
(51,493
|
)
|
|
|
|
|
|
|
(686,569
|
)
|
Sale of marketable securities
|
|
|
|
|
|
|
916,730
|
|
|
|
74,330
|
|
|
|
|
|
|
|
991,060
|
|
Other items, net
|
|
|
|
|
|
|
(5,710
|
)
|
|
|
|
|
|
|
|
|
|
|
(5,710
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in ) provided from
investing activities
|
|
|
(4,380
|
)
|
|
|
176,635
|
|
|
|
22,837
|
|
|
|
|
|
|
|
195,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid
|
|
|
(49,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49,772
|
)
|
Payment of financing fees
|
|
|
(14,662
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,662
|
)
|
Proceeds from long-term debt
|
|
|
775,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
775,000
|
|
Payments on long-term debt
|
|
|
(87,062
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87,062
|
)
|
Purchase of common stock
|
|
|
(1,257,867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,257,867
|
)
|
Proceeds from exercise of stock
options
|
|
|
56,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,889
|
|
Transfer from (to) affiliates
|
|
|
599,624
|
|
|
|
(599,624
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in outstanding checks in
excess of cash in disbursement accounts
|
|
|
|
|
|
|
(21,788
|
)
|
|
|
|
|
|
|
|
|
|
|
(21,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in (provided by)
financing activities
|
|
|
22,150
|
|
|
|
(621,412
|
)
|
|
|
|
|
|
|
|
|
|
|
(599,262
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
|
3,231
|
|
|
|
1,540
|
|
|
|
15
|
|
|
|
7,605
|
|
|
|
12,391
|
|
Cash and cash
equivalents beginning of year
|
|
|
1,680
|
|
|
|
126,651
|
|
|
|
9,402
|
|
|
|
|
|
|
|
137,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents end of year
|
|
$
|
4,911
|
|
|
$
|
128,191
|
|
|
$
|
9,417
|
|
|
$
|
7,605
|
|
|
$
|
150,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Mylan
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
For the Period Ended
March 31, 2005
|
|
Labs
|
|
|
Subs
|
|
|
Subs
|
|
|
Eliminating
|
|
|
Consolidated
|
|
|
Cash flows provided by (used in)
operations
|
|
$
|
17,190
|
|
|
$
|
206,283
|
|
|
$
|
(19,762
|
)
|
|
$
|
|
|
|
$
|
203,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from (purchase of)
capital assets
|
|
|
(1,289
|
)
|
|
|
(89,457
|
)
|
|
|
|
|
|
|
|
|
|
|
(90,746
|
)
|
Purchase of marketable securities
|
|
|
|
|
|
|
(752,697
|
)
|
|
|
(28,109
|
)
|
|
|
|
|
|
|
(780,806
|
)
|
Sale of marketable securities
|
|
|
|
|
|
|
641,292
|
|
|
|
51,997
|
|
|
|
|
|
|
|
693,289
|
|
Other items, net
|
|
|
|
|
|
|
3,372
|
|
|
|
|
|
|
|
|
|
|
|
3,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in ) provided from
investing activities
|
|
|
(1,289
|
)
|
|
|
(197,490
|
)
|
|
|
23,888
|
|
|
|
|
|
|
|
(174,891
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid
|
|
|
(32,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,261
|
)
|
Proceeds from exercise of stock
options
|
|
|
10,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,068
|
|
Transfer from (to) affiliates
|
|
|
3,911
|
|
|
|
(3,911
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in outstanding checks in
excess of cash in disbursement accounts
|
|
|
|
|
|
|
19,622
|
|
|
|
|
|
|
|
|
|
|
|
19,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing
activities
|
|
|
(18,282
|
)
|
|
|
15,711
|
|
|
|
|
|
|
|
|
|
|
|
(2,571
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
|
(2,381
|
)
|
|
|
24,504
|
|
|
|
4,126
|
|
|
|
|
|
|
|
26,249
|
|
Cash and cash
equivalents beginning of year
|
|
|
4,061
|
|
|
|
102,147
|
|
|
|
5,276
|
|
|
|
|
|
|
|
111,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents end of year
|
|
$
|
1,680
|
|
|
$
|
126,651
|
|
|
$
|
9,402
|
|
|
$
|
|
|
|
$
|
137,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On May 12, 2007, Mylan and Merck KGaA announced the signing
of a definitive agreement under which Mylan will acquire
Mercks generics business (Merck Generics) for
Euro 4.9 billion (approximately $6.7 billion) in an
all-cash transaction. Management believes that the combination
of Mylan and Merck Generics will create a vertically and
horizontally integrated generics and specialty pharmaceuticals
leader with a diversified revenue base and a global footprint,
and also believes the combined company will be among the top
tier of global generic companies, with a significant presence in
the top five global generics markets. The transaction remains
subject to regulatory review in relevant jurisdictions and
certain other customary closing conditions and is expected to
close in the second half of calendar 2007.
In conjunction with the Merck Generics transaction, the Company
entered into a deal-contingent foreign currency option contract
in order to mitigate the risk of foreign currency exposure. The
contract is contingent upon the closing of this acquisition and
the premium of approximately $121.9 million will be paid
only upon such closing. The Company will account for this
instrument under the provisions of Statement of Financial
Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging
Activities. This instrument does not qualify for hedge
accounting treatment under SFAS No. 133 and,
therefore, will be adjusted to fair value at each reporting date
with the change in the fair value of the instrument recorded in
earnings.
84
Managements
Report on Internal Control over Financial Reporting
Management of Mylan Laboratories Inc. (the Company)
is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over
financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the
United States of America. Because of its inherent limitations,
internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions
or that the degree of compliance with the policies or procedures
may deteriorate.
During fiscal year 2007 the Company acquired a controlling stake
in Matrix Laboratories Limited (Matrix). For
purposes of Managements evaluation of the Companys
internal control over financial reporting as of March 31,
2007 we have elected to exclude Matrix from the scope of
managements assessment as permitted by guidance provided
by the Securities and Exchange Commission (SEC). The
two part acquisition resulting in 71.5% ownership of this
business was completed by us on January 8, 2007. Matrix
represents approximately 13% of our consolidated assets at
March 31, 2007 and contributed approximately 5% of total
revenues for the year ended March 31, 2007. This acquired
business will be included in managements assessment of the
effectiveness of the Companys internal controls over
financial reporting in fiscal year 2008.
In conducting the 2007 assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control
Integrated Framework (COSO). As a result of this
assessment and based on the criteria in the COSO framework,
management has concluded that, as of March 31, 2007, the
Companys internal control over financial reporting was
effective.
Our independent registered public accounting firm,
Deloitte & Touche LLP, has audited managements
assessment of our internal control over financial reporting.
Deloitte & Touche LLPs opinion on
managements assessment and on the effectiveness of our
internal control over financial reporting appears on
page 87 of this Annual Report on
Form 10-K.
85
Report of
Independent Registered Public Accounting Firm
Board of Directors and Shareholders of
Mylan Laboratories Inc.:
We have audited the accompanying consolidated balance sheets of
Mylan Laboratories Inc. and subsidiaries (the
Company) as of March 31, 2007 and 2006, and the
related consolidated statements of earnings, shareholders
equity, and cash flows for each of the three years in the period
ended March 31, 2007. Our audits also included the
financial statement schedule included in Item 15. These
financial statements and financial statement schedule are the
responsibility of the Companys management. Our
responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Mylan Laboratories Inc. and subsidiaries as of March 31,
2007 and 2006, and the results of their operations and their
cash flows for each of the three years in the period ended
March 31, 2007, in conformity with accounting principles
generally accepted in the United States of America. Also, in our
opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in Note 2 to the consolidated financial
statements, effective April 1, 2006, the Company adopted
FASB Statement No. 123R, Share-Based Payment.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over
financial reporting as of March 31, 2007, based on the
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated
May 29, 2007 expressed an unqualified opinion on
managements assessment of the effectiveness of the
Companys internal control over financial reporting and an
unqualified opinion on the effectiveness of the Companys
internal control over financial reporting.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
May 29, 2007
86
Report of
Independent Registered Public Accounting Firm
Board of Directors and Shareholders of
Mylan Laboratories Inc.:
We have audited managements assessment, included in the
accompanying Managements Report on Internal Control over
Financial Reporting, that Mylan Laboratories Inc. and
subsidiaries (the Company) maintained effective
internal control over financial reporting as of March 31,
2007, based on criteria established in Internal
Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. As described in Managements Report on Internal
Control over Financial Reporting, management excluded from its
assessment the internal control over financial reporting at
Matrix Laboratories Limited, which was acquired on
January 8, 2007 and whose financial statements constitute
13% percent of consolidated assets and 5% percent of total
revenues of the consolidated financial statement amounts as of
and for the year ended March 31, 2007. Accordingly, our
audit did not include the internal control over financial
reporting at Matrix Laboratories Limited. The Companys
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on managements
assessment and an opinion on the effectiveness of the
Companys internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinions.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, managements assessment that the Company
maintained effective internal control over financial reporting
as of March 31, 2007, is fairly stated, in all material
respects, based on the criteria established in Internal
Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of March 31, 2007, based on the criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
87
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements and financial statement
schedule as of and for the year ended March 31, 2007 of the
Company and our report dated May 29, 2007 expressed an
unqualified opinion on those financial statements and financial
statement schedule and included an explanatory paragraph
regarding the Companys adoption of FASB Statement
No. 123R, Share-Based Payment.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
May 29, 2007
88
Mylan
Laboratories Inc.
Quarterly Financial Data
(unaudited, in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st
|
|
|
2nd
|
|
|
3rd
|
|
|
4th
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Year
|
|
|
Fiscal 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
356,140
|
|
|
$
|
366,657
|
|
|
$
|
401,761
|
|
|
$
|
487,261
|
|
|
$
|
1,611,819
|
|
Gross profit
|
|
|
188,200
|
|
|
|
196,090
|
|
|
|
224,531
|
|
|
|
234,847
|
|
|
|
843,668
|
|
Net earnings
|
|
|
75,587
|
|
|
|
77,541
|
|
|
|
135,445
|
|
|
|
(71,289
|
)(3)
|
|
|
217,284
|
|
Earnings per
share(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.36
|
|
|
$
|
0.37
|
|
|
$
|
0.64
|
|
|
$
|
(0.31
|
)(3)
|
|
$
|
1.01
|
|
Diluted
|
|
$
|
0.35
|
|
|
$
|
0.36
|
|
|
$
|
0.63
|
|
|
$
|
(0.31
|
)(3)
|
|
$
|
0.99
|
|
Share
prices(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
23.55
|
|
|
$
|
23.05
|
|
|
$
|
22.07
|
|
|
$
|
22.61
|
|
|
$
|
23.55
|
|
Low
|
|
$
|
20.00
|
|
|
$
|
19.06
|
|
|
$
|
19.91
|
|
|
$
|
19.42
|
|
|
$
|
19.06
|
|
Fiscal 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
323,378
|
|
|
$
|
297,994
|
|
|
$
|
311,246
|
|
|
$
|
324,546
|
|
|
$
|
1,257,164
|
|
Gross profit
|
|
|
167,834
|
|
|
|
143,231
|
|
|
|
155,797
|
|
|
|
160,754
|
|
|
|
627,616
|
|
Net earnings
|
|
|
42,915
|
|
|
|
35,770
|
|
|
|
48,207
|
|
|
|
57,650
|
|
|
|
184,542
|
|
Earnings per
share(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.16
|
|
|
$
|
0.16
|
|
|
$
|
0.23
|
|
|
$
|
0.27
|
|
|
$
|
0.80
|
|
Diluted
|
|
$
|
0.16
|
|
|
$
|
0.16
|
|
|
$
|
0.22
|
|
|
$
|
0.27
|
|
|
$
|
0.79
|
|
Share
prices(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
19.85
|
|
|
$
|
19.84
|
|
|
$
|
21.61
|
|
|
$
|
24.92
|
|
|
$
|
24.92
|
|
Low
|
|
$
|
15.50
|
|
|
$
|
17.36
|
|
|
$
|
19.00
|
|
|
$
|
19.30
|
|
|
$
|
15.50
|
|
|
|
|
(1) |
|
The sum of earnings per share for the four quarters may not
equal earnings per share for the total year due to changes in
the average number of common shares outstanding. |
|
(2) |
|
Closing prices as reported on the New York Stock Exchange (NYSE). |
|
(3) |
|
Fourth quarter results include the results of Matrix since its
acquisition on January 8, 2007, and certain purchase
accounting adjustments, including $147,000 related to acquired
in- process research and development. |
|
|
ITEM 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
ITEM 9A.
|
Controls
and Procedures
|
An evaluation was performed under the supervision and with the
participation of the Companys management, including the
Chief Executive Officer and the Chief Financial Officer, of the
effectiveness of the design and operation of the Companys
disclosure controls and procedures as of March 31, 2007.
Based upon that evaluation, the Chief Executive Officer and the
Chief Financial Officer concluded that the Companys
disclosure controls and procedures were effective.
Other than the 71.5% acquisition of Matrix Laboratories Limited
discussed in Managements Report on Internal Control over
Financial Reporting on page 85, Management has not
identified any changes in the Companys internal control
over financial reporting during the last fiscal quarter that has
materially affected, or is reasonably likely to materially
affect, the Companys internal control over financial
reporting.
89
Subsequent to year end, the Company began utilizing a new ERP
business system called System Application Products
(SAP) at its largest subsidiary, Mylan
Pharmaceuticals, Inc., and its corporate offices.
Managements Report on Internal Control over Financial
Reporting is on page 85. Managements assessment of
the effectiveness of Mylans internal control over
financial reporting as of March 31, 2007, has been audited
by Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their report which is on
page 87.
|
|
ITEM 9B.
|
Other
Information
|
None.
PART III
|
|
ITEM 10.
|
Directors,
Executive Officers and Corporate Governance
|
Certain information required by this ITEM will be set forth
under the captions ITEM I Election of
Directors, Executive Officers and
Security Ownership of Certain Beneficial Owners and
Management Section 16(a) Beneficial Ownership
Reporting Compliance in our 2007 Proxy Statement and is
incorporated herein by reference.
Code of
Ethics
The Company has adopted a Code of Ethics that applies to our
Chief Executive Officer, Chief Financial Officer and Corporate
Controller. This Code of Ethics is posted on the Companys
Internet website at www.mylan.com. The Company intends to post
any amendments to or waivers from the Code of Ethics on that
website.
|
|
ITEM 11.
|
Executive
Compensation
|
The information required by this ITEM 11 will be set forth
under the caption Executive Compensation in our 2007
Proxy Statement and is incorporated herein by reference.
|
|
ITEM 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by this ITEM 12 will be set forth
under the captions Security Ownership of Certain
Beneficial Owners and Management and Executive
Compensation Equity Compensation Plan
Information in our 2007 Proxy Statement and is
incorporated herein by reference.
|
|
ITEM 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information required by this ITEM 13 will be set forth
under the caption Certain Relationships and Related
Transactions in our 2007 Proxy Statement and is
incorporated herein by reference.
|
|
ITEM 14.
|
Principal
Accounting Fees and Services
|
The information required by this ITEM 14 will be set forth
under the captions Independent Registered Public
Accounting Firms Fees and Audit Committee
Pre-Approval Policy in our 2007 Proxy Statement and is
incorporated herein by reference.
PART IV
|
|
ITEM 15.
|
Exhibits,
Financial Statement Schedules
|
1. Consolidated Financial Statements
The Consolidated Financial Statements listed in the Index to
Consolidated Financial Statements are filed as part of this Form.
90
2. Financial Statement Schedules
MYLAN
LABORATORIES INC.
SCHEDULE II VALUATION AND QUALIFYING
ACCOUNTS
(in thousands)
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Additions/Deductions
|
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|
Additions
|
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Charged to
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Charged to
|
|
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Beginning
|
|
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Costs and
|
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Other
|
|
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|
|
|
Ending
|
|
Description
|
|
Balance
|
|
|
Expenses
|
|
|
Accounts
|
|
|
Deductions
|
|
|
Balance
|
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
March 31, 2007
|
|
$
|
10,954
|
|
|
$
|
(500
|
)
|
|
$
|
4,778
|
*
|
|
$
|
83
|
|
|
$
|
15,149
|
|
March 31, 2006
|
|
$
|
7,340
|
|
|
$
|
3,614
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,954
|
|
March 31, 2005
|
|
$
|
5,965
|
|
|
$
|
2,007
|
|
|
$
|
|
|
|
$
|
632
|
|
|
$
|
7,340
|
|
|
|
|
* |
|
Allowance recorded as part of the Matrix acquisition. |
3. Exhibits
|
|
|
|
|
|
3
|
.1
|
|
Amended and Restated Articles of
Incorporation of the registrant, as amended, filed as
Exhibit 3.1 to
Form 10-Q
for the quarter ended June 30, 2003, and incorporated
herein by reference.
|
|
3
|
.2
|
|
Amended and Restated By-laws of
the registrant, as amended to date, filed as Exhibit 3.1 to
the Report on
Form 8-K
filed with the SEC on February 22, 2005, and incorporated
herein by reference.
|
|
4
|
.1(a)
|
|
Rights Agreement dated as of
August 22, 1996, between the registrant and American Stock
Transfer & Trust Company, filed as Exhibit 4.1 to
Form 8-K
filed with the SEC on September 3, 1996, and incorporated
herein by reference.
|
|
4
|
.1(b)
|
|
Amendment to Rights Agreement
dated as of November 8, 1999, between the registrant and
American Stock Transfer & Trust Company, filed as
Exhibit 1 to
Form 8-A/A,
filed with the SEC on March 31, 2000, and incorporated
herein by reference.
|
|
4
|
.1(c)
|
|
Amendment No. 2 to Rights
Agreement dated as of August 13, 2004, between the
registrant and American Stock Transfer & Trust
Company, filed as Exhibit 4.1 to the Report on
Form 8-K
filed with the SEC on August 16, 2004, and incorporated
herein by reference.
|
|
4
|
.1(d)
|
|
Amendment No. 3 to Rights
Agreement dated as of September 8, 2004, between the
registrant and American Stock Transfer & Trust
Company, filed as Exhibit 4.1 to the Report on
Form 8-K
filed with the SEC on September 9, 2004, and incorporated
herein by reference.
|
|
4
|
.1(e)
|
|
Amendment No. 4 to Rights
Agreement dated as of December 2, 2004, between the
registrant and American Stock Transfer & Trust
Company, filed as Exhibit 4.1 to the Report on
Form 8-K
filed with the SEC on December 3, 2004, and incorporated
herein by reference.
|
|
4
|
.1(f)
|
|
Amendment No. 5 to Rights
Agreement dated as of December 19, 2005, between the
registrant and American Stock Transfer & Trust
Company, filed as Exhibit 4.1 to the Report on
Form 8-K
filed with the SEC on December 19, 2005, and incorporated
herein by reference.
|
|
4
|
.2
|
|
Indenture, dated as of
July 21, 2005, between the registrant and The Bank of New
York, as trustee, as filed as Exhibit 4.1 to the Report on
Form 8-K
filed with the SEC on July 27, 2005, and incorporated
herein by reference.
|
|
4
|
.3
|
|
Registration Rights Agreement,
dated as of July 21, 2005, among the registrant, the
Guarantors party thereto and Merrill Lynch, Pierce, Fenner and
Smith Incorporated, BNY Capital Markets, Inc., KeyBanc Capital
Markets (a Division of McDonald Investments Inc.), PNC Capital
Markets, Inc. and SunTrust Capital Markets, Inc., filed as
Exhibit 4.2 to the Report on
Form 8-K
filed with the SEC on July 27, 2005, and incorporated
herein by reference.
|
|
4
|
.4
|
|
Indenture, dated March 7,
2007 among the registrant, the Guarantors named therein and The
Bank of New York, as Trustee, filed as Exhibit 4.1 to the
Report on
Form 8-K,
filed with the SEC on March 7, 2007, and incorporated
herein by reference.
|
91
|
|
|
|
|
|
4
|
.5
|
|
Confirmation of OTC Convertible
Note Hedge Transaction, dated March 2, 2007, between
the registrant and Merrill Lynch International, filed as
Exhibit 4.2 to the Report on
Form 8-K,
filed with the SEC on March 7, 2007, and incorporated
herein by reference.
|
|
4
|
.6
|
|
Confirmation of OTC Convertible
Note Hedge Transaction, dated March 2, 2007, between
the registrant and JPMorgan Chase Bank, National Association,
London Branch. filed as Exhibit 4.3 to the Report on
Form 8-K,
filed with the SEC on March 7, 2007, and incorporated
herein by reference.
|
|
4
|
.7
|
|
Confirmation of OTC Warrant
Transaction, dated March 1, 2007, between the Company and
Merrill Lynch International filed as Exhibit 4.4 to
the Report on
Form 8-K,
filed with the SEC on March 7, 2007, and incorporated
herein by reference.
|
|
4
|
.8
|
|
Confirmation of OTC Warrant
Transaction, dated March 1, 2007, between the Company and
JPMorgan Chase Bank, National Association, London Branch.
International filed as Exhibit 4.5 to the Report on
Form 8-K,
filed with the SEC on March 7, 2007, and incorporated
herein by reference.
|
|
4
|
.9
|
|
Confirmation of Additional OTC
Warrant Transaction, dated March 2, 2007, between the
Company and Merrill Lynch International. filed as
Exhibit 4.6 to the Report on
Form 8-K,
filed with the SEC on March 7, 2007, and incorporated
herein by reference.
|
|
4
|
.10
|
|
Confirmation of Additional OTC
Warrant Transaction, dated March 2, 2007, between the
Company and JPMorgan Chase Bank, National Association, London
Branch filed as Exhibit 4.7 to the Report on
Form 8-K,
filed with the SEC on March 7, 2007, and incorporated
herein by reference.
|
|
10
|
.1
|
|
Mylan Laboratories Inc. 1986
Incentive Stock Option Plan, as amended to date, filed as
Exhibit 10(b) to
Form 10-K
for the fiscal year ended March 31, 1993, and incorporated
herein by reference.*
|
|
10
|
.2
|
|
Mylan Laboratories Inc. 1997
Incentive Stock Option Plan, as amended to date, filed as
Exhibit 10.3 to
Form 10-Q
for the quarter ended September 30, 2002, and incorporated
herein by reference.*
|
|
10
|
.3
|
|
Mylan Laboratories Inc. 1992
Nonemployee Director Stock Option Plan, as amended to date,
filed as Exhibit 10(l) to
Form 10-K
for the fiscal year ended March 31, 1998, and incorporated
herein by reference.*
|
|
10
|
.4(a)
|
|
Mylan Laboratories Inc. 2003
Long-Term Incentive Plan, filed as Appendix A to Definitive
Proxy Statement on Schedule 14A, filed with the SEC on
June 23, 2003, and incorporated herein by reference.*
|
|
10
|
.4(b)
|
|
Form of Stock Option Agreement
under the Mylan Laboratories Inc. 2003 Long-Term Incentive Plan,
filed as Exhibit 10.4(b) to
Form 10-K
for the fiscal year ended March 31, 2005, and incorporated
herein by reference.*
|
|
10
|
.4(c)
|
|
Form of Restricted Share Award
under the Mylan Laboratories Inc. 2003 Long-Term Incentive Plan,
filed as Exhibit 10.4(c) to
Form 10-K
for the fiscal year ended March 31, 2005, and incorporated
herein by reference.*
|
|
10
|
.4(d)
|
|
Amendment No. 1 to Mylan
Laboratories Inc. 2003 Long-Term Incentive Plan, filed as
Exhibit 10.4(d) to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.4(e)
|
|
Amendment No. 2 to Mylan
Laboratories Inc. 2003 Long-Term Incentive Plan, filed as
Exhibit 10.4(e) to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.5
|
|
Amended and Restated Executive
Employment Agreement dated as of April 3, 2006, between the
registrant and Robert J. Coury filed as Exhibit 10.5 to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.6(a)
|
|
Executive Employment Agreement
dated as of July 1, 2004, between the registrant and Edward
J. Borkowski, filed as Exhibit 10.27 to
Form 10-Q/A
for the quarter ended September 30, 2004, and incorporated
herein by reference.*
|
|
10
|
.6(b)
|
|
Amendment No. 1 to Executive
Employment Agreement dated as of April 3, 2006, between the
registrant and Edward J. Borkowski filed as Exhibit 10.6(b)
to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.7(a)
|
|
Executive Employment Agreement
dated as of July 1, 2004, between the registrant and John
P. ODonnell, filed as Exhibit 10.29 to
Form 8-K,
filed with the SEC on December 3, 2004, and incorporated
herein by reference.*
|
|
10
|
.7(b)
|
|
Amendment No. 1 to Executive
Employment Agreement dated as of April 3, 2006, between the
registrant and John P. ODonnell filed as
Exhibit 10.8(b) to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
92
|
|
|
|
|
|
10
|
.8(a)
|
|
Executive Employment Agreement
dated as of July 1, 2004, between the registrant and Stuart
A. Williams, filed as Exhibit 10.30 to
Form 10-Q/A
for the quarter ended September 30, 2004, and incorporated
herein by reference.*
|
|
10
|
.8(b)
|
|
Amendment No. 1 to Executive
Employment Agreement dated as of April 3, 2006, between the
registrant and Stuart A. Williams filed as Exhibit 10.9(b)
to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.8(c)
|
|
Amendment No. 2 to Executive
Employment Agreement dated as of March 31, 2007, between
the registrant and Stuart A. Williams.*
|
|
10
|
.9(a)
|
|
Form of Employment Agreement dated
as of December 15, 2003, between the registrant and certain
executive officers (other than named executive officers), filed
as Exhibit 10.18 to
Form 10-Q
for the quarter ended December 31, 2003, and incorporated
herein by reference.*
|
|
10
|
.9(b)
|
|
Form of Amendment No. 1 to
Executive Employment Agreement dated as of April 3, 2006,
between the registrant and certain executive officers (other
than named executive officers) filed as Exhibit 10.10(b) to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.10(a)
|
|
Retirement Benefit Agreement dated
as of December 31, 2004, between the registrant and Robert
J. Coury filed as Exhibit 10.7 to
Form 10-Q
for the quarter ended December 31, 2004, and incorporated
herein by reference.*
|
|
10
|
.10(b)
|
|
Amendment No. 1 to Retirement
Benefit Agreement dated as of April 3, 2006, between the
registrant and Robert J. Coury filed as Exhibit 10.11(b) to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.11(a)
|
|
Retirement Benefit Agreement dated
as of December 31, 2004, between the registrant and Edward
J. Borkowski, filed as Exhibit 10.8 to
Form 10-Q
for the quarter ended December 31, 2004, and incorporated
herein by reference.*
|
|
10
|
.11(b)
|
|
Amendment No. 1 to Retirement
Benefit Agreement dated as of April 3, 2006, between the
registrant and Edward J. Borkowski filed as
Exhibit 10.12(b) to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.12(a)
|
|
Retirement Benefit Agreement dated
as of December 31, 2004, between the registrant and Stuart
A. Williams, filed as Exhibit 10.9 to
Form 10-Q
for the quarter ended December 31, 2004, and incorporated
herein by reference.*
|
|
10
|
.12(b)
|
|
Amendment No. 1 to Retirement
Benefit Agreement dated as of April 3, 2006, between the
registrant and Stuart A. Williams filed as Exhibit 10.13(b)
to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.13(a)
|
|
Amended and Restated Retirement
Benefit Agreement dated as of December 31, 2004, between
the registrant and Louis J. DeBone, filed as Exhibit 10.10
to
Form 10-Q
for the quarter ended December 31, 2004, and incorporated
herein by reference.*
|
|
10
|
.13(b)
|
|
Amendment No. 1 to Amended
and Restated Retirement Benefit Agreement dated as of
April 3, 2006, between the registrant and Louis J. DeBone
filed as Exhibit 10.14(b) to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.14(a)
|
|
Amended and Restated Retirement
Benefit Agreement dated as of December 31, 2004, between
the registrant and John P. ODonnell, filed as
Exhibit 10.11 to
Form 10-Q
for the quarter ended December 31, 2004, and incorporated
herein by reference.*
|
|
10
|
.14(b)
|
|
Amendment No. 1 to Amended
and Restated Retirement Benefit Agreement dated as of
April 3, 2006, between the registrant and John P.
ODonnell filed as Exhibit 10.15(b) to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.15
|
|
Retirement Benefit Agreement dated
January 27, 1995, between the registrant and C.B. Todd,
filed as Exhibit 10(b) to
Form 10-K
for the fiscal year ended March 31, 1995, and incorporated
herein by reference.*
|
|
10
|
.16(a)
|
|
Retirement Benefit Agreement dated
January 27, 1995, between the registrant and Milan Puskar,
filed as Exhibit 10(b) to
Form 10-K
for the fiscal year ended March 31, 1995, and incorporated
herein by reference.*
|
|
10
|
.16(b)
|
|
First Amendment to Retirement
Benefit Agreement dated September 27, 2001, between the
registrant and Milan Puskar, filed as Exhibit 10.1 to
Form 10-Q
for the quarter ended September 30, 2001, and incorporated
herein by reference.*
|
93
|
|
|
|
|
|
10
|
.17
|
|
Split Dollar Life Insurance
Arrangement between the registrant and the Milan Puskar
Irrevocable Trust filed as Exhibit 10(h) to
Form 10-K
for the fiscal year ended March 31, 1996, and incorporated
herein by reference.*
|
|
10
|
.18(a)
|
|
Transition and Succession
Agreement dated as of December 15, 2003, between the
registrant and Robert J. Coury, filed as Exhibit 10.19 to
Form 10-Q
for the quarter ended December 31, 2003, and incorporated
herein by reference.*
|
|
10
|
.18(b)
|
|
Amendment No. 1 to Transition
and Succession Agreement dated as of December 2, 2004,
between the registrant and Robert J. Coury, filed as
Exhibit 10.1 to
Form 10-Q
for the quarter ended December 31, 2004, and incorporated
herein by reference.*
|
|
10
|
.18(c)
|
|
Amendment No. 2 to Transition
and Succession Agreement dated as of April 3, 2006, between
the registrant and Robert J. Coury filed as
Exhibit 10.19(c) to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.19(a)
|
|
Transition and Succession
Agreement dated as of December 15, 2003, between the
registrant and Edward J. Borkowski, filed as Exhibit 10.20
to
Form 10-Q
for the quarter ended December 31, 2003, and incorporated
herein by reference.*
|
|
10
|
.19(b)
|
|
Amendment No. 1 to Transition
and Succession Agreement dated as of December 2, 2004,
between the registrant and Edward J. Borkowski, filed as
Exhibit 10.2 to
Form 10-Q
for the quarter ended December 31, 2004, and incorporated
herein by reference.*
|
|
10
|
.19(c)
|
|
Amendment No. 2 to Transition
and Succession Agreement dated as of April 3, 2006, between
the registrant and Edward J. Borkowski filed as
Exhibit 10.20(c) to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.20
|
|
Amended and Restated Transition
and Succession Agreement dated as of April 3, 2006, between
the registrant and Stuart A. Williams filed as
Exhibit 10.23 to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.21(a)
|
|
Form of Transition and Succession
Agreement dated as of December 15, 2003, with certain
executive officers (other than named executive officers), filed
as Exhibit 10.24 to
Form 10-Q
for the quarter ended December 31, 2003, and incorporated
herein by reference.*
|
|
10
|
.21(b)
|
|
Amendment No. 1 to Form of
Transition and Succession Agreement dated as of April 3,
2006, with certain executive officers (other than named
executive officers) filed as Exhibit 10.24(b) to
Form 10-K
for the fiscal year ended March 31, 2006, and incorporated
herein by reference.*
|
|
10
|
.22
|
|
Executives Retirement
Savings Plan, filed as Exhibit 10.14 to
Form 10-K
for the fiscal year ended March 31, 2001, and incorporated
herein by reference.*
|
|
10
|
.23
|
|
Supplemental Health Insurance
Program For Certain Officers of Mylan Laboratories Inc.,
effective December 15, 2001, filed as Exhibit 10.1 to
Form 10-Q
for the quarter ended December 31, 2001, and incorporated
herein by reference.*
|
|
10
|
.24
|
|
Mylan Laboratories Inc. Severance
Plan, filed as Exhibit 10.12 to
Form 10-Q
for the quarter ended December 31, 2004, and incorporated
herein by reference.*
|
|
10
|
.25
|
|
Form of Indemnification Agreement
between the registrant and each Director, filed as
Exhibit 10.31 to
Form 10-Q/A
for the quarter ended September 30, 2004, and incorporated
herein by reference.*
|
|
10
|
.26
|
|
Description of the
registrants Director Compensation Arrangements in effect
as of May 21, 2007.
|
|
10
|
.27(a)
|
|
Credit Agreement, dated as of
July 24, 2006, among the registrant, the lenders party
thereto, including Bank of Tokyo-Mitsubishi UFJ Trust Company,
Citibank, N.A. and PNC Bank, National Association, as
Co-Documentation Agents, Merrill Lynch Capital Corporation, as
Syndication Agent, JPMorgan Chase, National Association, as
Administrative Agent and J.P. Morgan Securities Inc., as
Sole Bookrunner and Sole Lead Arranger, filed as
Exhibit 99.1 to the Report on
Form 8-K
filed with the SEC on July 26, 2006, and incorporated
herein by reference.
|
|
10
|
.27(b)
|
|
Amendment No. 1 to Credit
Agreement dated as of March 26, 2007, among the registrant,
the lenders party thereto, including Bank of Tokyo-Mitsubishi
UFJ Trust Company, Citibank, N.A. and PNC Bank, National
Association, as Co-Documentation Agents, Merrill Lynch Capital
Corporation, as Syndication Agent, JPMorgan Chase, National
Association, as Administrative Agent and J.P. Morgan
Securities Inc., as Sole Bookrunner and Sole Lead Arranger.
|
94
|
|
|
|
|
|
10
|
.28
|
|
Credit Agreement dated as of
March 26, 2007 by and among the registrant, Euro Mylan B.V.
and a syndicate of bank lenders, including J.P. Morgan
Securities Inc., as sole lead arranger and sole bookrunner,
Merrill Lynch Pierce, Fenner & Smith Incorporated, as
syndication agent, The Bank of Tokyo Mitsubishi UFJ,
Ltd., New York Branch, Citibank, N.A., PNC Bank, National
Association and ABN AMRO N.V., as co-documentation agents, and
JPMorgan Chase Bank, National Association, as administrative
agent.
|
|
10
|
.29(a)
|
|
Executive Employment Agreement
dated as of January 8, 2007, by and between the registrant
and Prasad Nimmagadda, filed as Exhibit 10.1 to the Report
on
Form 8-K,
filed with the SEC on January 9, 2007, and incorporated
herein by reference.*
|
|
10
|
.29(b)
|
|
Secondment Agreement dated as of
January 8, 2007, by and among the registrant, Mylan
Singapore Pte. Ltd. and Prasad Nimmagadda.*
|
|
10
|
.30
|
|
Transition and Succession
Agreement dated as of January 8, 2007, by and between the
registrant and Prasad Nimmagadda, filed as Exhibit 10.2 to
the Report on
Form 8-K,
filed with the SEC on January 9, 2007, and incorporated
herein by reference.*
|
|
10
|
.31
|
|
Executive Employment Agreement
dated as of January 31, 2007, by and between the registrant
and Rajiv Malik.*
|
|
10
|
.32
|
|
Transition and Succession
Agreement dated as of January 31, 2007, by and between the
registrant and Rajiv Malik.*
|
|
10
|
.33
|
|
Executive Employment Agreement
dated as of January 31, 2007, by and between the registrant
and Heather Bresch.*
|
|
10
|
.34
|
|
Purchase Agreement, dated as of
March 1, 2007, among the registrant, Merrill
Lynch & Co. and J.P. Morgan Securities Inc., as
representatives of the underwriters named therein, filed as
Exhibit 1.1 to the Report on
Form 8-K,
filed with the SEC on March 7, 2007, and incorporated
herein by reference.
|
|
10
|
.35
|
|
Purchase Agreement, dated as of
March 1, 2007, among the registrant, Merrill
Lynch & Co. and J.P. Morgan Securities Inc., as
representatives of the underwriters named therein, filed as
Exhibit 1.2 to the Report on
Form 8-K,
filed with the SEC on March 7, 2007, and incorporated
herein by reference.
|
|
10
|
.36
|
|
Share Purchase Agreement, dated as
of August 28, 2006, by and among the registrant, MP
Laboratories (Mauritius) Ltd, Prasad Nimmagadda, Prasad
Nimmagadda-HUF, G2 Corporate Services Limited, India Newbridge
Investments Limited, India Newbridge Partners FDI Limited, India
Newbridge Coinvestment Limited, Maxwell (Mauritius) Pte. Limited
and Spandana Foundation filed as Exhibit 10.2 to
Form 10-Q
for the quarter ended September 30, 2006, and incorporated
herein by reference.
|
|
10
|
.37
|
|
Shareholders Agreement, dated as
of August 28, 2006, by and among the registrant, India
Newbridge Investments Limited, India Newbridge Partners FDI
Limited, India Newbridge Coinvestment Limited, Maxwell
(Mauritius) Pte. Limited and Prasad Nimmagadda filed as
Exhibit 10.3 to
Form 10-Q
for the quarter ended September 30, 2006, and incorporated
herein by reference.
|
|
12
|
.1
|
|
Statement of computation of ratios
of earnings to fixed charges, filed as Exhibit 12.1 to
Registration Statement on Form S-3 filed with the SEC on
February 20, 2007, and incorporated herein by reference.
|
|
21
|
|
|
Subsidiaries of the registrant.
|
|
23
|
|
|
Consent of Independent Registered
Public Accounting Firm.
|
|
31
|
.1
|
|
Certification of CEO pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31
|
.2
|
|
Certification of CFO pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
|
|
Certifications of CEO and CFO
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Denotes management contract or compensatory plan or arrangement. |
95
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this Form to be signed on its behalf by the undersigned,
thereunto duly authorized on May 30, 2007.
Mylan Laboratories Inc.
Robert J. Coury
Vice Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this Form has been signed below by the following persons
on behalf of the registrant and in the capacities indicated as
of May 30, 2007.
|
|
|
Signature
|
|
Title
|
|
/s/ ROBERT
J. COURY
Robert
J. Coury
|
|
Vice Chairman, Chief Executive
Officer and Director (Principal Executive Officer)
|
|
|
|
/s/ EDWARD
J. BORKOWSKI
Edward
J. Borkowski
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
/s/ DANIEL
C. RIZZO, Jr.
Daniel
C. Rizzo, Jr.
|
|
Vice President and Corporate
Controller
(Principal Accounting Officer)
|
|
|
|
/s/ MILAN
PUSKAR
Milan
Puskar
|
|
Chairman and Director
|
|
|
|
/s/ WENDY
CAMERON
Wendy
Cameron
|
|
Director
|
|
|
|
/s/ NEIL
DIMICK
Neil
Dimick
|
|
Director
|
|
|
|
/s/ DOUGLAS
J. LEECH
Douglas
J. Leech
|
|
Director
|
|
|
|
/s/ JOSEPH
C. MAROON, M.D.
Joseph
C. Maroon, M.D.
|
|
Director
|
|
|
|
/s/ PRASAD
NIMMAGADDA
Prasad
Nimmagadda
|
|
Director
|
|
|
|
/s/ ROD
PIATT
Rod
Piatt
|
|
Director
|
|
|
|
/s/ C.B.
TODD
C.B.
Todd
|
|
Director
|
|
|
|
/s/ R.L.
VANDERVEEN, PH.D.,
R.PH.
R.L.
Vanderveen, Ph.D., R.Ph.
|
|
Director
|
96
EXHIBIT INDEX
|
|
|
|
|
|
10
|
.8(c)
|
|
Amendment No. 2 to Executive
Employment Agreement dated as of March 31, 2007, between
the registrant and Stuart A. Williams.*
|
|
10
|
.26
|
|
Description of the
registrants Director Compensation Arrangements in effect
as of May 21, 2007.
|
|
10
|
.27(b)
|
|
Amendment No. 1 to Credit
Agreement dated as of March 26, 2007, among the registrant,
the lenders party thereto, including Bank of Tokyo-Mitsubishi
UFJ Trust Company, Citibank, N.A. and PNC Bank, National
Association, as Co-Documentation Agents, Merrill Lynch Capital
Corporation, as Syndication Agent, JPMorgan Chase, National
Association, as Administrative Agent and J.P. Morgan
Securities Inc., as Sole Bookrunner and Sole Lead Arranger.
|
|
10
|
.28
|
|
Credit Agreement dated as of
March 26, 2007 by and among the registrant, Euro Mylan B.V.
and a syndicate of bank lenders, including J.P. Morgan
Securities Inc., as sole lead arranger and sole bookrunner,
Merrill Lynch Pierce, Fenner & Smith Incorporated, as
syndication agent, The Bank of Tokyo Mitsubishi UFJ,
Ltd., New York Branch, Citibank, N.A., PNC Bank, National
Association and ABN AMRO N.V., as co-documentation agents, and
JPMorgan Chase Bank, National Association, as administrative
agent.
|
|
10
|
.29(b)
|
|
Secondment Agreement dated as of
January 8, 2007, by and among the registrant, Mylan
Singapore Pte. Ltd. and Prasad Nimmagadda.*
|
|
10
|
.31
|
|
Executive Employment Agreement
dated as of January 31, 2007, by and between the registrant
and Rajiv Malik.*
|
|
10
|
.32
|
|
Transition and Succession
Agreement dated as of January 31, 2007, by and between the
registrant and Rajiv Malik.*
|
|
10
|
.33
|
|
Executive Employment Agreement
dated as of January 31, 2007, by and between the registrant
and Heather Bresch.*
|
|
21
|
|
|
Subsidiaries of the registrant.
|
|
23
|
|
|
Consent of Independent Registered
Public Accounting Firm.
|
|
31
|
.1
|
|
Certification of CEO pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31
|
.2
|
|
Certification of CFO pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
|
|
Certifications of CEO and CFO
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Denotes management contract or compensatory plan or arrangement. |
97
EX-10.8(C)
Exhibit 10.8c
AMENDMENT NO. 2 TO EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 2 TO EXECUTIVE EMPLOYMENT AGREEMENT (this Amendment) is made effective as
of the 31st day of March, 2007, by and between Mylan Laboratories Inc., a Pennsylvania
corporation (the Company), and Stuart A. Williams (Executive).
WHEREAS, the Company and Executive are party to that certain Executive Employment Agreement
dated as of July 1, 2004, as amended by Amendment No. 1 thereto dated as of April 3, 2006 (the
Agreement), pursuant to which the Company agreed to employ Executive, and Executive accepted such
employment, as more particularly described in the Agreement (capitalized terms used but not defined
herein shall have the meanings assigned to them in the Agreement); and
WHEREAS, pursuant to Sections 8(e) and 14 of the Agreement, the Company and Executive desire
to modify the Term of Employment, upon the terms and conditions set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
1. Pursuant to Section 8(e) of the Agreement, the parties hereby mutually agree to extend the
Term of Employment until March 31, 2008. Further, the reference to March 31, 2007 in Section 2
of the Agreement is hereby amended to read March 31, 2008.
2. (a) The parties acknowledge and agree that this Amendment is an integral part of the
Agreement. Notwithstanding any provision of the Agreement to the contrary, in the event of any
conflict between this Amendment and the Agreement or any part of either of them, the terms of this
Amendment shall control.
(b) Except as expressly set forth herein, the terms and conditions of the Agreement are and
shall remain in full force and effect.
(c) The Agreement, as amended by this Amendment, sets forth the entire understanding of the
parties with respect to the subject matter thereof and hereof.
(d) This Amendment shall be governed by, interpreted under and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
(e) This Amendment may be executed in any number of counterparts, each of which shall be an
original and all of which shall constitute one and the same document.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as of the day and year
first above written.
|
|
|
|
|
|
MYLAN LABORATORIES INC.
|
|
|
By: |
/s/ Robert J. Coury
|
|
|
|
Name: |
Robert J. Coury |
|
|
|
Title: |
Vice Chairman and CEO |
|
|
|
EXECUTIVE:
|
|
|
/s/ Stuart A. Williams
|
|
|
Stuart A. Williams |
|
|
|
|
2
EX-10.26
Exhibit 10.26
Mylan Laboratories Inc.
Arrangements for Director Compensation
In Effect as of May 21, 2007
In accordance with guidance provided by the staff of the Division of Corporation Finance of the
Securities and Exchange Commission (the SEC) in late November 2004, Mylan Laboratories Inc. (the
Company) is providing a written description of the oral compensation arrangements that the
Company currently has with its Board of Directors (Board), which the SEC may deem to be material
definitive agreements with the directors.
Non-employee directors receive $50,000 per year in cash compensation
for their service on the Board. In addition, Milan 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 and,
at the discretion of the full Board, are eligible to receive stock options or other awards under
the Companys 2003 Long-Term Incentive Plan.
Directors who are also employees of the Company do not receive any consideration for their service
on the Board.
In addition:
|
|
Non-employee directors (other than Mr. Puskar) receive fees for each
Board meeting they attend (other than any Board meeting held primarily
to consider board compensation matters). The fee is $1,500 for each
meeting attended in person and $1,000 for each meeting attended by
phone. |
|
|
Non-employee directors receive fees for each Board Committee meeting
they attend (other than: (i) Committee meetings held in conjunction
with Board meetings; (ii) any Committee meetings held primarily to
consider board compensation matters; and (iii) meetings of the
Executive Committee). The fee is $750 for each meeting attended in
person and $500 for each meeting attended by phone. |
|
|
|
The Chairperson of the Audit Committee receives an additional fee of
$10,000 per year. |
|
|
The Chairpersons of the Compensation Committee, the Finance Committee,
the Governance and Nominating Committee, and the Compliance Committee
each receive an additional fee of $5,000 per year. |
EX-10.27(B)
Exhibit 10.27(b)
EXECUTION COPY
CREDIT AND GUARANTEE AGREEMENT
dated as of
March 26, 2007
among
MYLAN LABORATORIES INC.
EURO MYLAN B.V.
The Lenders Party Hereto
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH,
CITIBANK, N.A.,
PNC BANK, NATIONAL ASSOCIATION and
LASALLE BANK NATIONAL ASSOCIATION,
as Co-Documentation Agents
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
as Syndication Agent
and
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
as Administrative Agent
J.P. MORGAN SECURITIES INC.,
as Sole Bookrunner and Sole Lead Arranger
TABLE OF CONTENTS
|
|
|
|
|
|
|
Page |
ARTICLE I Definitions |
|
|
|
|
|
|
|
|
|
SECTION 1.01. Defined Terms |
|
|
1 |
|
SECTION 1.02. Classification of Loans and Borrowings |
|
|
23 |
|
SECTION 1.03. Terms Generally |
|
|
23 |
|
SECTION 1.04. Accounting Terms; GAAP |
|
|
24 |
|
SECTION 1.05. Payments on Business Days |
|
|
24 |
|
|
|
|
|
|
ARTICLE II The Credits |
|
|
24 |
|
|
|
|
|
|
SECTION 2.01. Commitments |
|
|
24 |
|
SECTION 2.02. Loans and Borrowings |
|
|
25 |
|
SECTION 2.03. Requests for Revolving Borrowings |
|
|
25 |
|
SECTION 2.04. Determination of Dollar Amounts |
|
|
26 |
|
SECTION 2.05. Swingline Loans |
|
|
26 |
|
SECTION 2.06. Letters of Credit |
|
|
28 |
|
SECTION 2.07. Funding of Borrowings |
|
|
33 |
|
SECTION 2.08. Interest Elections |
|
|
33 |
|
SECTION 2.09. Termination and Reduction of Commitments |
|
|
35 |
|
SECTION 2.10. Repayment of Loans; Evidence of Debt |
|
|
36 |
|
SECTION 2.11. Prepayment of Loans. |
|
|
36 |
|
SECTION 2.12. Fees |
|
|
37 |
|
SECTION 2.13. Interest |
|
|
38 |
|
SECTION 2.14. Alternate Rate of Interest |
|
|
39 |
|
SECTION 2.15. Increased Costs |
|
|
40 |
|
SECTION 2.16. Break Funding Payments |
|
|
41 |
|
SECTION 2.17. Taxes |
|
|
42 |
|
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs |
|
|
43 |
|
SECTION 2.19. Mitigation Obligations; Replacement of Lenders |
|
|
45 |
|
SECTION 2.20. Expansion Option |
|
|
46 |
|
SECTION 2.21. Market Disruption |
|
|
47 |
|
SECTION 2.22. Judgment Currency |
|
|
48 |
|
|
|
|
|
|
ARTICLE III Representations and Warranties |
|
|
48 |
|
|
|
|
|
|
SECTION 3.01. Organization; Powers; Subsidiaries |
|
|
48 |
|
SECTION 3.02. Authorization; Enforceability |
|
|
49 |
|
SECTION 3.03. Governmental Approvals; No Conflicts |
|
|
49 |
|
SECTION 3.04. Financial Condition; No Material Adverse Change |
|
|
49 |
|
SECTION 3.05. Properties |
|
|
49 |
|
SECTION 3.06. Litigation and Environmental Matters |
|
|
50 |
|
SECTION 3.07. Compliance with Laws and Agreements |
|
|
50 |
|
SECTION 3.08. Investment Company Status |
|
|
50 |
|
Table of Contents
(continued)
|
|
|
|
|
|
|
Page |
SECTION 3.09. Taxes |
|
|
50 |
|
SECTION 3.10. ERISA |
|
|
50 |
|
SECTION 3.11. Disclosure |
|
|
51 |
|
SECTION 3.12. Federal Reserve Regulations |
|
|
51 |
|
SECTION 3.13. No Default |
|
|
51 |
|
SECTION 3.14. Dutch Financial Supervision Act |
|
|
51 |
|
|
|
|
|
|
ARTICLE IV Conditions |
|
|
51 |
|
|
|
|
|
|
SECTION 4.01. Effective Date |
|
|
51 |
|
SECTION 4.02. Each Credit Event |
|
|
53 |
|
|
|
|
|
|
ARTICLE V Affirmative Covenants |
|
|
53 |
|
|
|
|
|
|
SECTION 5.01. Financial Statements and Other Information |
|
|
54 |
|
SECTION 5.02. Notices of Material Events |
|
|
55 |
|
SECTION 5.03. Existence; Conduct of Business |
|
|
55 |
|
SECTION 5.04. Payment of Obligations |
|
|
56 |
|
SECTION 5.05. Maintenance of Properties; Insurance |
|
|
56 |
|
SECTION 5.06. Books and Records; Inspection Rights |
|
|
56 |
|
SECTION 5.07. Compliance with Laws; Compliance with Agreements |
|
|
56 |
|
SECTION 5.08. Use of Proceeds and Letters of Credit |
|
|
56 |
|
SECTION 5.09. Subsidiary Guaranty |
|
|
57 |
|
|
|
|
|
|
ARTICLE VI Negative Covenants |
|
|
57 |
|
|
|
|
|
|
SECTION 6.01. Subsidiary Indebtedness |
|
|
57 |
|
SECTION 6.02. Liens |
|
|
59 |
|
SECTION 6.03. Fundamental Changes |
|
|
60 |
|
SECTION 6.04. Restricted Payments |
|
|
61 |
|
SECTION 6.05. Transactions with Affiliates |
|
|
62 |
|
SECTION 6.06. Changes in Fiscal Year |
|
|
62 |
|
SECTION 6.07. Financial Covenants |
|
|
62 |
|
SECTION 6.08. Restrictive Agreements |
|
|
62 |
|
|
|
|
|
|
ARTICLE VII Events of Default |
|
|
63 |
|
|
|
|
|
|
ARTICLE VIII The Administrative Agent |
|
|
66 |
|
|
|
|
|
|
ARTICLE IX Miscellaneous |
|
|
68 |
|
|
|
|
|
|
SECTION 9.01. Notices |
|
|
68 |
|
SECTION 9.02. Waivers; Amendments |
|
|
70 |
|
ii
Table of Contents
(continued)
|
|
|
|
|
|
|
Page |
SECTION 9.03. Expenses; Indemnity; Damage Waiver |
|
|
71 |
|
SECTION 9.04. Successors and Assigns |
|
|
72 |
|
SECTION 9.05. Survival |
|
|
75 |
|
SECTION 9.06. Counterparts; Integration; Effectiveness |
|
|
75 |
|
SECTION 9.07. Severability |
|
|
76 |
|
SECTION 9.08. Right of Setoff |
|
|
76 |
|
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process |
|
|
76 |
|
SECTION 9.10. WAIVER OF JURY TRIAL |
|
|
77 |
|
SECTION 9.11. Headings |
|
|
78 |
|
SECTION 9.12. Confidentiality |
|
|
78 |
|
SECTION 9.13. USA PATRIOT Act |
|
|
78 |
|
SECTION 9.14. Release of Guarantors |
|
|
78 |
|
|
|
|
|
|
ARTICLE X |
|
|
79 |
|
iii
Table of Contents
(continued)
SCHEDULES:
Schedule 1.01A Applicable Rate
Schedule 1.01B Notice Requirements for Borrowings
Schedule 1.01C Material Acquisition
Schedule 2.01 Commitments
Schedule 2.02 Mandatory Cost
Schedule 2.03 Description of Specified Litigation
Schedule 3.01 Subsidiaries
Schedule 3.06 Disclosed Matters
Schedule 6.01 Existing Indebtedness
Schedule 6.02 Existing Liens
Schedule 6.05 Affiliate Transactions
EXHIBITS:
Exhibit A Form of Assignment and Assumption
Exhibit B-1 Form of Opinion of Loan Parties Special U.S. Counsel
Exhibit B-2 Form of Opinion of Loan Parties Corporate Counsel
Exhibit B-3 Form of Opinion of Loan Parties Special Dutch Counsel
Exhibit C Form of Increasing Lender Supplement
Exhibit D Form of Augmenting Lender Supplement
Exhibit E List of Closing Documents
Exhibit F Form of Subsidiary Guaranty
Exhibit G-1 Form of Revolving Borrowing Request
Exhibit G-2 Form of Swingline Loan Borrowing Request
Exhibit G-3 Form of Interest Election Request
Exhibit G-4 Form of Letter of Credit Issuance Request
Exhibit H Form of Compliance Certificate
CREDIT AND GUARANTEE AGREEMENT (this Agreement) dated as of March 26, 2007 among
MYLAN LABORATORIES INC., EURO MYLAN B.V., the LENDERS party hereto, The Bank of Tokyo-Mitsubishi
UFJ, Ltd., New York Branch, Citibank, N.A., PNC Bank, National Association and LASALLE BANK
NATIONAL ASSOCIATION, as Co-Documentation Agents, MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, as Syndication Agent and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as Administrative
Agent.
The parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the
meanings specified below:
ABR, when used in reference to any Loan or Borrowing, refers to a Loan, or the Loans
comprising such Borrowing, bearing interest at a rate determined by reference to the Alternate Base
Rate.
Acquisition means any acquisition (by merger or consolidation) by the Company or any
Subsidiary of (i) all or substantially all the assets of or (ii) all the Equity Interests in, a
Person or division or line of business of a Person.
Adjusted EURIBO Rate means, with respect to any Eurocurrency Borrowing denominated
in euro for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the
next 1/16 of 1%) equal to the sum of (i) (a) the EURIBO Rate for such Interest Period multiplied by
(b) the Statutory Reserve Rate plus, without duplication, (ii) in the case of Loans by a
Lender from its office or branch in the United Kingdom, the Mandatory Cost.
Adjusted LIBO Rate means, with respect to any Eurocurrency Borrowing denominated in
an Agreed Currency (other than euro) for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the sum of (i) (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate plus, without duplication,
(ii) in the case of Loans by a Lender from its office or branch in the United Kingdom, the
Mandatory Cost.
Administrative Agent means JPMorgan Chase Bank, National Association, in its
capacity as administrative agent for the Lenders hereunder.
Administrative Questionnaire means an Administrative Questionnaire in a form
supplied by the Administrative Agent.
Affiliate means, with respect to a specified Person, another Person that directly,
or indirectly through one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.
Agreed Currencies means (a) Dollars, (b) euro and (c) such other currencies as are
acceptable to each Lender and the Administrative Agent.
Alternate Base Rate means, for any day, a rate per annum equal to the greater of (a)
the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day
plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
Applicable Percentage means, with respect to any Lender, (a) with respect to
Revolving Loans, LC Exposure or Swingline Loans, a percentage equal to a fraction the numerator of
which is such Lenders Revolving Commitment and the denominator of which is the aggregate Revolving
Commitment of all Revolving Lenders (if the Revolving Commitments have terminated or expired, the
Applicable Percentages shall be determined based upon such Lenders share of the aggregate
Revolving Credit Exposures at that time) and (b) with respect to the Term Loans, a percentage equal
to a fraction the numerator of which is such Lenders outstanding principal amount of the Term
Loans and the denominator of which is the aggregate outstanding amount of the Term Loans of all
Term Lenders.
Applicable Rate shall be as set forth in Schedule 1.01A hereto.
Approved Fund has the meaning assigned to such term in Section 9.04.
Approximate Equivalent Amount of any currency with respect to any amount of Dollars
shall mean the Equivalent Amount of such currency with respect to such amount of Dollars on or as
of such date, rounded up to the nearest amount of such currency as determined by the Administrative
Agent from time to time.
Asset Sale means any Disposition of Property or series of Dispositions of Property
which yields net cash proceeds to the Company or any of its Subsidiaries in excess of $25,000,000
in the aggregate in any fiscal year of the Company.
Assignment and Assumption means an assignment and assumption agreement entered into
by a Lender and an assignee (with the consent of any party whose consent is required by Section
9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form
approved by the Administrative Agent.
Attributable Debt means, in respect of a Sale and Leaseback Transaction means, at
any date of determination, (a) if such Sale and Leaseback Transaction is a Capital Lease
Obligation, the amount of Indebtedness represented thereby according to the definition of Capital
Lease Obligations, and (b) in all other instances, the present value (discounted at the interest
rate implicit in such transaction, determined in accordance with GAAP) of the total obligations of
the lessee for rental payments during the remaining term of the lease included in such Sale and
Leaseback Transaction (including any period for which such lease has been extended).
Attributable Receivables Indebtedness at any time shall mean the principal amount of
Indebtedness which (i) if a Permitted Receivables Facility is structured as a secured
2
lending agreement, would constitute the principal amount of such Indebtedness or (ii) if a
Permitted Receivables Facility is structured as a purchase agreement, would be outstanding at such
time under the Permitted Receivables Facility if the same were structured as a secured lending
agreement rather than a purchase agreement.
Augmenting Lender has the meaning assigned to such term in Section 2.20.
Availability Period means the period from and including the Effective Date to but
excluding the earlier of the Revolving Credit Maturity Date and the date of termination of the
Commitments.
Board means the Board of Governors of the Federal Reserve System of the United
States of America.
Borrower means the Company and/or the Dutch Borrower, as the context may require.
Borrowing means (a) Revolving Loans of the same Type, made, converted or continued
on the same date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in
effect, (b) a Term Loan made on the same date and, in the case of Eurocurrency Loans, as to which a
single Interest Period is in effect or (c) a Swingline Loan.
Borrowing Request means a request by any Borrower for a Revolving Borrowing in
accordance with Section 2.03.
Business Day means any day that is not a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to remain closed; provided
that, when used in connection with a Eurocurrency Loan, the term Business Day shall also
exclude any day on which banks are not open for dealings in Agreed Currencies in the London
interbank market or the principal financial center of the country in which payment or purchase of
such Agreed Currency can be made (and, if the Borrowings or LC Disbursements which are the subject
of a borrowing, drawing, payment, reimbursement or rate selection are denominated in euro, the term
Business Day shall also exclude any day on which the TARGET payment system is not open
for the settlement of payments in euro).
Capital Lease Obligations of any Person means the obligations of such Person to pay
rent or other amounts under any lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of
such obligations shall be the capitalized amount thereof determined in accordance with GAAP.
Captive Insurance Subsidiary means American Triumvirate Insurance Company, a Vermont
corporation or any successor thereto, so long as such Subsidiary is maintained as a special purpose
self insurance subsidiary.
Change in Control means (a) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person or group (within the meaning of the Securities
3
Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in
effect on the date hereof), of Equity Interests representing more than 35% of the aggregate
ordinary voting power represented by the issued and outstanding Equity Interests of the Company;
(b) occupation of a majority of the seats (other than vacant seats) on the board of directors of
the Company by Persons who were neither (i) nominated by the board of directors of the Company nor
(ii) appointed by directors so nominated; or (c) a Specified Change in Control.
Change in Law means (a) the adoption of any law, rule or regulation after the date
of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or
application thereof by any Governmental Authority after the date of this Agreement or (c)
compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.15(b), by any lending
office of such Lender or by such Lenders or the Issuing Banks holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any Governmental
Authority made or issued after the date of this Agreement.
Class, when used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are Revolving Loans, Term Loans or Swingline Loans.
Code means the Internal Revenue Code of 1986, as amended from time to time.
Co-Documentation Agent means each of The Bank of Tokyo-Mitsubishi UFJ, Ltd., New
York Branch, Citibank, N.A., PNC Bank, National Association and LaSalle Bank National Association,
in its capacity as co-documentation agent for the credit facility evidenced by this Agreement.
Commitment means, with respect to each Lender, the sum of such Lenders Revolving
Commitment and Term Loan Commitment. The initial amount of each Lenders Commitment is set forth
on Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender shall
have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders
Commitments is $750,000,000.
Company means Mylan Laboratories Inc., a Pennsylvania corporation.
Company Guaranty means the Guarantee of the Company provided in Article X.
Computation Date is defined in Section 2.04.
Consolidated EBITDA means Consolidated Net Income plus, to the extent
deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense
and charges, deferred financing fees and milestone payments in connection with any investment or
series of related investments, (ii) expense for taxes paid or accrued, (iii) depreciation, (iv)
amortization (including amortization of intangibles, including, but not limited to goodwill), (v)
non-cash charges recorded pursuant to Financial Accounting Standards Board Statements 141, 142 or
144 in respect of purchase accounting or impairment of goodwill or assets, (vi) any other non-cash
items except to the extent representing an accrual for future cash outlays, (vii) any unusual,
infrequent or extraordinary loss, (viii) up to $21,000,000 of cash
4
restructuring charges related to the closing of Mylan Bertek Pharmaceuticals Inc., (ix)
non-recurring cash charges in connection with the litigation described on Schedule 2.03 and
(x) without duplication, income of any non-wholly owned Subsidiaries minus, to the extent
included in Consolidated Net Income, the sum of (xi) any unusual, infrequent or extraordinary
income or gains and (xii) any other non-cash income, all calculated for the Company and its
relevant Subsidiaries in accordance with GAAP on a consolidated basis. Consolidated EBITDA shall
be calculated on a Pro Forma Basis to give effect to any investment or series of related
investments for aggregate consideration in excess of $10,000,000 and any Asset Sale consummated at
any time on or after the first day of the period for which Consolidated EBITDA is being calculated
as if each such investment had been effected on the first day of such period and as if each such
Asset Sale had been consummated on the day prior to the first day of such period.
Consolidated Interest Coverage Ratio means, for any period, the ratio of (a)
Consolidated EBITDA of the Company and its Subsidiaries (other than the Captive Insurance
Subsidiary) for such period to (b) Consolidated Interest Expense of the Company and its
Subsidiaries (other than the Captive Insurance Subsidiary) for such period.
Consolidated Interest Expense means, with reference to any period, the interest
expense whether or not paid in cash (including, without limitation, interest expense under Capital
Lease Obligations that is treated as interest in accordance with GAAP) of any Person and its
Subsidiaries calculated on a consolidated basis for such period with respect to (a) all outstanding
Indebtedness of the Company and its Subsidiaries allocable to such period in accordance with GAAP,
(b) Swap Agreements (including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers acceptance financing and net costs
under Swap Agreements in respect of interest rates to the extent such net costs are allocable to
such period in accordance with GAAP) and (c) the interest component of all Attributable Receivables
Indebtedness of such Person and its Subsidiaries, calculated on a consolidated basis for such
Person and its Subsidiaries for such period in accordance with GAAP; provided that (i)
deferred financing fees in connection with any acquisitions of any Person hereunder shall be
excluded from Consolidated Interest Expense and (ii) Consolidated Interest Expense shall be
calculated on a Pro Forma Basis to give effect to any Indebtedness incurred, assumed or permanently
repaid or extinguished during the relevant period in connection with any investment or series of
related investments for aggregate consideration in excess of $10,000,000, any Restricted Payment or
any Asset Sale as if such incurrence, assumption, repayment or extinguishing had been effected on
the first day of such period.
Consolidated Leverage Ratio means, for any period, the ratio of (a) Consolidated
Total Indebtedness of the Company and its Subsidiaries (other than the Captive Insurance
Subsidiary) for such period to (b) Consolidated EBITDA of the Company and its Subsidiaries (other
than the Captive Insurance Subsidiary) for such period.
Consolidated Net Income means, with reference to any period, the net income (or
loss) of the Company and its Subsidiaries calculated in accordance with GAAP on a consolidated
basis (without duplication) for such period; provided, that in calculating Consolidated Net
Income of the Company and its Subsidiaries for any period, there shall be excluded (a) the income
(or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Company or is
merged into or consolidated with the Company or any of its
5
Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the
Company) in which the Company or any of its Subsidiaries has an ownership interest, except to the
extent that any such income is actually received by the Company or such Subsidiary in the form of
dividends or similar distributions, (c) the undistributed earnings of any Subsidiary of the Company
to the extent that the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted (other than under any Loan Document) and (d) the income (or
deficit) of the Captive Insurance Subsidiary.
Consolidated Total Assets means, as of the date of any determination thereof, total
assets of the Company and its Subsidiaries calculated in accordance with GAAP on a consolidated
basis as of such date.
Consolidated Total Indebtedness means at any time the sum, without duplication, of
the aggregate Indebtedness of the Company and its Subsidiaries (other than the Captive Insurance
Subsidiary) calculated on a consolidated basis as of such time in accordance with GAAP.
Control means, with respect to any Person, the power, directly or indirectly, to
direct or cause the direction of the management and policies of such Person, whether by contract or
otherwise.
Country Risk Event means:
(i) any law, action or failure to act by any Governmental Authority in any Borrowers or
Letter of Credit beneficiarys country which has the effect of:
(a) changing the obligations under the relevant Letter of Credit, the Credit
Agreement or any of the other Loan Documents as originally agreed or otherwise
creating any additional material liability, cost or expense to the Issuing Bank, any
of the Lenders or the Administrative Agent,
(b) changing the ownership or control by such Borrower or Letter of Credit
beneficiary of its business, or
(c) preventing or restricting the conversion into or transfer of the applicable
Agreed Currency;
(ii) force majeure; or
(iii) any similar event
which, in relation to (i), (ii) and (iii), directly or indirectly, prevents or restricts the
payment or transfer of any amounts owing under the relevant Letter of Credit in the applicable
Agreed Currency into an account designated by the Administrative Agent or the Issuing Bank and
freely available to the Administrative Agent or the Issuing Bank.
Credit Event means a Borrowing, an LC Disbursement or both.
6
Credit Exposure means, as to any Lender at any time, the sum of (a) such Lenders
Revolving Credit Exposure at such time, plus (b) an amount equal to the aggregate principal
amount of its Term Loans outstanding at such time.
Default means any event or condition which constitutes an Event of Default or which
upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
Disclosed Matters means the actions, suits and proceedings and the environmental
matters disclosed in Schedule 3.06.
Disposition means, with respect to any Property, any sale, lease, sale and
leaseback, assignment, conveyance, transfer or other disposition thereof; and the terms
Dispose and Disposed of shall have correlative meanings.
Dollar Amount of any currency at any date shall mean (i) the amount of such currency
if such currency is Dollars or (ii) the equivalent in such currency of Dollars if such currency is
a Foreign Currency, determined by the Administrative Agent in accordance with the definition of
Exchange Rate, on or as of the most recent Computation Date provided for in Section 2.04.
Dollars or $ refers to lawful money of the United States of America.
Domestic Subsidiary means a Subsidiary organized under the laws of a jurisdiction
located in the United States of America.
Dutch Borrower means Euro Mylan B.V., a private limited liability company
incorporated under the laws of The Netherlands having its corporate seat (statutaire zetel) in
Amsterdam, The Netherlands.
Dutch Financial Supervision Act means the Dutch Financial Supervision Act 2007 (Wet
op het Financieel Toezicht 2007), as amended from time to time.
Effective Date means the date on which the conditions specified in Section 4.01 are
satisfied (or waived in accordance with Section 9.02).
Environmental Laws means all laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into
by any Governmental Authority, imposing liability or standards of conduct concerning protection of
the environment, preservation or reclamation of natural resources, the management, release or
threatened release of any Hazardous Material or to protection of health and safety matters.
Environmental Liability means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the
Company or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
7
threatened release of any Hazardous Materials into the environment or (e) any contract,
agreement or other consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.
Equity Interests means shares of capital stock, partnership interests, membership
interests in a limited liability company, beneficial interests in a trust or other equity ownership
interests in a Person, and any warrants, options or other rights entitling the holder thereof to
purchase or acquire any such equity interest.
Equivalent Amount of any currency with respect to any amount of Dollars at any date
shall mean the equivalent in such currency of such amount of Dollars, determined by the
Administrative Agent in accordance with the definition of Exchange Rate, on the date on or as of
which such amount is to be determined.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from
time to time.
ERISA Affiliate means any trade or business (whether or not incorporated) that,
together with the Company, is treated as a single employer under Section 414(b) or (c) of the Code
or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
ERISA Event means (a) any reportable event, as defined in Section 4043 of ERISA or
the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day
notice period is waived); (b) the existence with respect to any Plan of an accumulated funding
deficiency (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived;
(c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application
for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the
Company or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Company or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to an intention to terminate any Plan or Plans or to
appoint a trustee to administer any Plan; (f) the incurrence by the Company or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal of the Company or
any of its ERISA Affiliates from any Plan or Multiemployer Plan; or (g) the receipt by the Company
or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Company or
any ERISA Affiliate of any notice, concerning the imposition upon the Company or any of its ERISA
Affiliates of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected
to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
EU means the European Union.
EURIBO Rate means, with respect to any Eurocurrency Borrowing denominated in euro
for any Interest Period, the rate appearing on Page 248 of the Telerate screen (it being understood
that this rate is the euro interbank offered rate sponsored by the Banking Federation of the
European Union and the Financial Markets Association) (or on any successor or substitute page of
such service, or any successor to or substitute for such service
8
providing rate quotations comparable to those currently provided on such page of such service,
as determined by the Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to deposits in euro in the London interbank market) at approximately
11:00 a.m., Local Time, two (2) Business Days prior to the commencement of such Interest Period, as
the rate for deposits in euro with a maturity comparable to such Interest Period. In the event
that such rate is not available at such time for any reason, then the EURIBO Rate with respect to
such Eurocurrency Borrowing for such Interest Period shall be the rate at which deposits in euro in
an Equivalent Amount of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in immediately available funds
in the London interbank market at approximately 11:00 a.m., Local Time, two (2) Business Days prior
to the commencement of such Interest Period.
euro and/or EUR means the single currency of the participating member
states of the EU.
Eurocurrency, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Adjusted LIBO Rate or the Adjusted EURIBO Rate, as applicable.
Eurocurrency Payment Office of the Administrative Agent shall mean, for each of the
Agreed Currencies which is a Foreign Currency, the office, branch, affiliate or correspondent bank
of the Administrative Agent for such currency as specified from time to time by the Administrative
Agent to the Company and each Lender.
Event of Default has the meaning assigned to such term in Article VII.
Exchange Rate means, on any day, with respect to any Foreign Currency, the rate at
which such Foreign Currency may be exchanged into Dollars, as set forth at approximately 11:00
a.m., London time, on such date on the Reuters World Currency Page for such Foreign Currency. In
the event that such rate does not appear on any Reuters World Currency Page, the Exchange Rate with
respect to such Foreign Currency shall be determined by reference to such other publicly available
service for displaying exchange rates as may be agreed upon by the Administrative Agent and the
Company or, in the absence of such agreement, such Exchange Rate shall instead be calculated on the
basis of the arithmetical mean of the buy and sell spot rates of exchange of the Administrative
Agent for such Foreign Currency on the London market at 11:00 a.m., London time, on such date for
the purchase of Dollars with such Foreign Currency, for delivery two Business Days later;
provided, that if at the time of any such determination, for any reason, no such spot rate
is being quoted, the Administrative Agent, after consultation with the Company, may use any
reasonable method it deems appropriate to determine such rate, and such determination shall be
conclusive absent manifest error.
Excluded Taxes means, with respect to the Administrative Agent, any Lender, the
Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of
the Company hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by
the United States of America, or by the jurisdiction under the laws of
9
which such recipient is organized or in which its principal office is located or, in the case
of any Lender, in which its applicable lending office is located, (b) any branch profits taxes
imposed by the United States of America or any similar tax imposed by any other jurisdiction in
which the Company is located and (c) in the case of a Foreign Lender (other than an assignee
pursuant to a request by the Company under Section 2.19(b)), any withholding tax that is imposed on
amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this
Agreement (or designates a new lending office) or is attributable to such Foreign Lenders failure
to comply with Section 2.17(e), except to the extent that such Foreign Lender (or its assignor, if
any) was entitled, at the time of designation of a new lending office (or assignment), to receive
additional amounts from the Company with respect to such withholding tax pursuant to Section
2.17(a).
Federal Funds Effective Rate means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received
by the Administrative Agent from three federal funds brokers of recognized standing selected by it.
Financial Officer means the chief financial officer, principal accounting officer,
treasurer or controller of the Company.
Financials means the annual or quarterly financial statements, and accompanying
certificates and other documents, of the Company required to be delivered pursuant to Section
5.01(a) or 5.01(b).
Foreign Currencies means each Agreed Currency other than Dollars.
Foreign Currency LC Exposure means, at any time, the sum of (a) the Dollar Amount of
the aggregate undrawn and unexpired amount of all outstanding Foreign Currency Letters of Credit at
such time plus (b) the aggregate principal Dollar Amount of all LC Disbursements in respect
of Foreign Currency Letters of Credit that have not yet been reimbursed at such time.
Foreign Currency Letter of Credit means a Letter of Credit denominated in a Foreign
Currency.
Foreign Lender means any Lender that is organized under the laws of a jurisdiction
other than that in which the Company is located. For purposes of this definition, the United
States of America, each State thereof and the District of Columbia shall be deemed to constitute a
single jurisdiction.
GAAP means generally accepted accounting principles in the United States of America.
10
Governmental Authority means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
Guarantee of or by any Person (the guarantor) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other Person (the primary
obligor) in any manner, whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or obligation;
provided, that the term Guarantee shall not include endorsements for collection or deposit
in the ordinary course of business. The amount of any Guarantee of any guaranteeing person shall
be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Guarantee is made and (b) the maximum amount for which
such guaranteeing person may be liable pursuant to the terms of the instrument embodying such
Guarantee, unless such primary obligation and the maximum amount for which such guaranteeing person
may be liable are not stated or determinable, in which case the amount of such Guarantee shall be
such guaranteeing persons maximum reasonably anticipated liability in respect thereof as
determined by the Company in good faith.
Hazardous Materials means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.
Increasing Lender has the meaning assigned to such term in Section 2.20.
Incremental Term Loan has the meaning assigned to such term in Section 2.20.
Indebtedness of any Person means, without duplication, (a) all obligations of such
Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, (c) all obligations of such Person under conditional sale or other title
retention agreements relating to property acquired by such Person, (d) all obligations of such
Person in respect of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business and milestone payments incurred in
connection with any investment or series of related investments), (e) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
11
Person, whether or not the Indebtedness secured thereby has been assumed, (f) all Guarantees
by such Person of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h) all
obligations, contingent or otherwise, of such Person as an account party in respect of letters of
credit and letters of guaranty, (i) all obligations, contingent or otherwise, of such Person in
respect of bankers acceptances, (j) all obligations of such Person under any Swap Agreement or
under any similar type of agreement, (k) all Attributable Receivables Indebtedness, (l) all
Attributable Debt of such Person under Sale and Leaseback Transactions and (m) all obligations of
such Person under any synthetic lease transaction that may hereinafter be entered into by the
Company or any of its Subsidiaries. The Indebtedness of any Person shall include the Indebtedness
of any other entity (including any partnership in which such Person is a general partner) to the
extent such Person is expressly liable therefor as a result of such Persons ownership interest in
or other relationship with such entity and pursuant to contractual arrangements, except to the
extent the terms of such Indebtedness provide that such Person is not liable therefor.
Indemnified Taxes means Taxes other than Excluded Taxes.
Information Memorandum means the Confidential Information Memorandum dated March
2007 relating to the Company and the Transactions.
Interest Election Request means a request by the applicable Borrower to convert or
continue a Revolving Borrowing in accordance with Section 2.08.
Interest Payment Date means (a) with respect to any ABR Loan (other than a Swingline
Loan), the last day of each March, June, September and December, (b) with respect to any
Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such
Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than
three months duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months duration after the first day of such Interest Period and (c) with
respect to any Swingline Loan, the day that such Loan is required to be repaid.
Interest Period means with respect to any Eurocurrency Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically corresponding day in the
calendar month that is one, two, three or six months, or any other period as may be agreed to and
is available to all Lenders, thereafter, as the applicable Borrower (or the Company on behalf of
the applicable Borrower) may elect; provided, that (i) if any Interest Period would end on
a day other than a Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless, in the case of a Eurocurrency Borrowing only, such next succeeding Business
Day would fall in the next calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (ii) any Interest Period pertaining to a Eurocurrency Borrowing that
commences on the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the last calendar month of such Interest Period) shall end on the
last Business Day of the last calendar month of such Interest Period. For purposes hereof, the
date of a Borrowing initially shall be the date on which such Borrowing is made and, in the case of
a Revolving Borrowing, thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
12
Issuing Bank means JPMorgan Chase Bank, National Association, in its capacity as the
issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section
2.06(i). The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be
issued by Affiliates of the Issuing Bank, in which case the term Issuing Bank shall include any
such Affiliate with respect to Letters of Credit issued by such Affiliate.
LC Disbursement means a payment made by the Issuing Bank pursuant to a Letter of
Credit.
LC Exposure means, at any time, the sum of (a) the aggregate undrawn Dollar Amount
of all outstanding Letters of Credit at such time plus (b) the aggregate Dollar Amount of all LC
Disbursements that have not yet been reimbursed by or on behalf of the Company at such time. The
LC Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the total LC
Exposure at such time.
LC Exposure Sublimit means $25,000,000.
Lenders means the Persons listed on Schedule 2.01 and any other Person that
shall have become a Lender hereunder pursuant to Section 2.20 or pursuant to an Assignment and
Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment
and Assumption. Unless the context otherwise requires, the term Lenders includes the Swingline
Lender.
Letter of Credit means any letter of credit issued pursuant to this Agreement.
Leverage Ratio has the meaning assigned to such term in Section 6.12(b).
LIBO Rate means, with respect to any Eurocurrency Borrowing denominated in an Agreed
Currency (other than euro) for any Interest Period, the rate appearing on, in the case of Dollars,
Page 3750 of the Dow Jones Market Service and, in the case of any Foreign Currency (other than
euro), the appropriate page of such service which displays British Bankers Association Interest
Settlement Rates for deposits in such Foreign Currency (or, in each case, on any successor or
substitute page of such service, or any successor to or substitute for such service, providing rate
quotations comparable to those currently provided on such page of such service, as determined by
the Administrative Agent from time to time for purposes of providing quotations of interest rates
applicable to deposits in the relevant Agreed Currency in the London interbank market) at
approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such
Interest Period, as the rate for deposits in the relevant Agreed Currency with a maturity
comparable to such Interest Period. In the event that such rate is not available at such time for
any reason, then the LIBO Rate with respect to such Eurocurrency Borrowing for such Interest
Period shall be the rate at which deposits in the relevant Agreed Currency in an Equivalent Amount
of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal
London office of the Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of
such Interest Period.
Lien means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, and (b)
13
the interest of a vendor or a lessor under any conditional sale agreement, capital lease or
title retention agreement (or any financing lease having substantially the same economic effect as
any of the foregoing) relating to such asset.
Loans means the loans made by the Lenders to the Borrowers pursuant to this
Agreement.
Loan Documents means this Agreement, the Subsidiary Guaranty, any promissory notes
executed and delivered pursuant to Section 2.10(e) and any amendments, waivers, supplements or
other modifications to any of the foregoing.
Loan Parties means, collectively, the Borrowers and the Subsidiary Guarantors.
Local Time means (i) New York City time in the case of a Loan, Borrowing or LC
Disbursement denominated in Dollars to, or for the account of, the Company and (ii) local time at
the place of the relevant Loan, Borrowing or LC Disbursement (or such earlier local time as is
necessary for the relevant funds to be received and transferred to the Administrative Agent for
same day value on the date the relevant reimbursement obligation is due) in the case of a Loan,
Borrowing or LC Disbursement which is denominated in a Foreign Currency or which is made to, or for
the account of, the Dutch Borrower.
Mandatory Cost is described in Schedule 2.02.
Material Adverse Effect means a material adverse effect on (a) the business, assets,
property or financial condition of the Company and the Subsidiaries taken as a whole or (b) the
validity or enforceability of this Agreement or any and all other Loan Documents or the rights or
remedies of the Administrative Agent and the Lenders thereunder.
Material Acquisition means any acquisition or investment for which the aggregate
cash consideration paid or otherwise delivered in connection therewith (including the principal
amount of any Indebtedness issued as deferred purchase price) plus the aggregate amount of
transaction costs and expenses incurred in connection therewith plus the aggregate
principal amount of all Indebtedness or other liabilities otherwise repaid, retired or otherwise
satisfied, or incurred or assumed in connection with, or resulting from, such acquisition or
investment (including Indebtedness of any acquired Persons outstanding at the time of the
applicable acquisition or investment) exceeds $300,000,000, all of the foregoing being subject to
Schedule 1.01C.
Material Domestic Subsidiary means each Domestic Subsidiary (i) which, as of the
most recent fiscal quarter of the Company, for the period of four consecutive fiscal quarters then
ended, for which financial statements have been delivered pursuant to Section 5.01, contributed
greater than five percent 5% of the Companys Consolidated EBITDA for such period or (ii) which
contributed greater than five percent 5% of the Companys Consolidated Total Assets as of such
date; provided that, if at any time the aggregate amount of the Companys Consolidated
EBITDA or Consolidated Total Assets of all Domestic Subsidiaries that are not Material Domestic
Subsidiaries exceeds ten percent (10%) of the Companys Consolidated EBITDA for any such period or
ten percent (10%) of the Companys Consolidated Total Assets as of the end of any such fiscal
quarter, the Company (or, in the event the Company
14
has failed to do so within ten (10) days, the Administrative Agent) shall, to the extent there
is sufficient Consolidated EBITDA or Consolidated Total Assets available at Domestic Subsidiaries
to do so, designate sufficient Domestic Subsidiaries as Material Domestic Subsidiaries to
eliminate such excess, and such designated Subsidiaries shall for all purposes of this Agreement
constitute Material Domestic Subsidiaries.
Material Indebtedness means Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the
Company and its Subsidiaries in an aggregate principal amount exceeding the greater of (x)
$40,000,000 and (y) 10% of Consolidated EBITDA for the four (4) most recently ended fiscal quarters
of the Company. For purposes of determining Material Indebtedness, the principal amount of the
obligations of the Company or any Subsidiary in respect of any Swap Agreement at any time shall be
the maximum aggregate amount (giving effect to any netting agreements) that the Company or such
Subsidiary would be required to pay if such Swap Agreement were terminated at such time.
Material Subsidiary means any Subsidiary (or group of Subsidiaries as to which a
specified condition applies) that would be a significant subsidiary under Rule 1-02(w) of
Regulation S-X.
Multiemployer Plan means a multiemployer plan as defined in Section 4001(a)(3) of
ERISA.
New Money Credit Event means with respect to the Issuing Bank, any increase
(directly or indirectly) in the Issuing Banks exposure (whether by way of additional credit or
banking facilities or otherwise, including as part of a restructuring) to any Borrower or any
Governmental Authority in any Borrowers or any applicable Letter of Credit beneficiarys country
occurring by reason of (i) any law, action or requirement of any Governmental Authority in such
Borrowers or such Letter of Credit beneficiarys country, or (ii) any request in respect of
external indebtedness of borrowers in such Borrowers or such Letter of Credit beneficiarys
country applicable to banks generally which conduct business with such borrowers, or (iii) any
agreement in relation to clause (i) or (ii), in each case to the extent calculated by reference to
the aggregate Revolving Credit Exposures outstanding prior to such increase.
Obligations means all indebtedness (including interest accruing during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), obligations and liabilities of any of the Company and its
Subsidiaries to any of the Lenders and the Administrative Agent, individually or collectively,
existing on the Effective Date or arising thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured,
arising by contract, operation of law or otherwise, arising or incurred under this Agreement or any
of the other Loan Documents or any Swap Agreement or in respect of any of the Loans made or
reimbursement or other obligations incurred or any of the Letters of Credit or other instruments at
any time evidencing any thereof, in each case whether now existing or hereafter arising, whether
all such obligations arise or accrue before or after the commencement of any bankruptcy, insolvency
or receivership proceedings, including, without limitation, interest and fees accruing pre-petition
or post-petition and costs, expenses, and attorneys and paralegals
15
fees, whenever incurred (and whether or not such claims, interest, costs, expenses or fees are
allowed or allowable in any such proceeding); provided, that (i) obligations of the Company
or any Subsidiary under any Swap Agreement shall be guaranteed pursuant to the Subsidiary Guaranty
only to the extent that, and for so long as, the other Obligations are so guaranteed and (ii) any
release of Subsidiary Guarantors effected in the manner permitted by this Agreement shall not
require the consent of holders of obligations under Swap Agreements.
Other Taxes means any and all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any payment made hereunder
or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.
Overnight Foreign Currency Rate means, for any amount payable in a Foreign Currency,
the rate of interest per annum as determined by the Administrative Agent at which overnight or
weekend deposits in the relevant currency (or if such amount due remains unpaid for more than three
(3) Business Days, then for such other period of time as the Administrative Agent may elect) for
delivery in immediately available and freely transferable funds would be offered by the
Administrative Agent to major banks in the interbank market upon request of such major banks for
the relevant currency as determined above and in an amount comparable to the unpaid principal
amount of the related Credit Event, plus any taxes, levies, imposts, duties, deductions, charges or
withholdings imposed upon, or charged to, the Administrative Agent by any relevant correspondent
bank in respect of such amount in such relevant currency.
Participant has the meaning set forth in Section 9.04.
PBGC means the Pension Benefit Guaranty Corporation referred to and defined in ERISA
and any successor entity performing similar functions.
Permitted Acquisition means any Acquisition so long as, at the time of and
immediately after giving effect thereto, (a) no Event of Default has occurred and is continuing or
would arise after giving effect thereto, (b) such Person or division or line of business is engaged
in the same or a similar line of business as the Company or any Subsidiary or business reasonably
related, ancillary or complementary thereto and reasonable extensions thereof, (c) the Company and
the Subsidiaries are in compliance on a Pro Forma Basis after giving effect to such Acquisition
with the covenants contained in Section 6.07 (giving effect, if necessary, to the increase in the
permitted maximum Consolidated Leverage Ratio in connection with a Material Acquisition set forth
in Section 6.07(b) on the date of such Acquisition) and (d) the Company shall have delivered to the
Administrative Agent a certificate of a Financial Officer of the Company to such effect, together
with all relevant financial information reasonably requested by the Administrative Agent.
Permitted Encumbrances means:
(a) Liens imposed by law for taxes, assessments or other governmental charges that are not
yet due or are being contested in compliance with Section 5.04;
(b) carriers, warehousemens, mechanics, materialmens, repairmens and other like Liens
imposed by law, arising in the ordinary course of business and securing
16
obligations that are not overdue by more than sixty (60) days or are being contested in
compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of business in compliance with
workers compensation, unemployment insurance and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of a like nature,
in each case in the ordinary course of business;
(e) judgment liens in respect of judgments that do not constitute an Event of Default
under clause (k) of Article VII;
(f) easements, zoning restrictions, rights-of-way and similar encumbrances on real
property imposed by law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the affected property or
materially interfere with the ordinary conduct of business of the Company or any Subsidiary;
(g) any interest or title of a lessor, sub-lessor, licensor or sub-licensor under any
lease, sub-lease, license or sub-license entered into by the Company or any other Subsidiary in
the ordinary course of its business and covering only the assets so leased; and
(h) rights of setoff and similar arrangements and Liens in favor of depository and
securities intermediaries to secure customary fees and similar amounts related to bank accounts
or securities accounts;
provided that the term Permitted Encumbrances shall not include any Lien securing
Indebtedness.
Permitted Receivables Facility shall mean the receivables facility or facilities
created under the Permitted Receivables Facility Documents, providing for the sale or pledge by the
Company and/or one or more other Receivables Sellers of Permitted Receivables Facility Assets
(thereby providing financing to the Company and the Receivables Sellers) to the Receivables Entity
(either directly or through another Receivables Seller), which in turn shall sell or pledge
interests in the respective Permitted Receivables Facility Assets to third-party investors pursuant
to the Permitted Receivables Facility Documents (with the Receivables Entity permitted to issue
investor certificates, purchased interest certificates or other similar documentation evidencing
interests in the Permitted Receivables Facility Assets) in return for the cash used by the
Receivables Entity to purchase the Permitted Receivables Facility Assets from the Company and/or
the respective Receivables Sellers, in each case as more fully set forth in the Permitted
Receivables Facility Documents.
Permitted Receivables Facility Assets shall mean (i) Receivables (whether now
existing or arising in the future) of the Company and its Subsidiaries which are transferred or
pledged to the Receivables Entity pursuant to the Permitted Receivables Facility and any related
Permitted Receivables Related Assets which are also so transferred or pledged to the Receivables
17
Entity and all proceeds thereof and (ii) loans to the Company and its Subsidiaries secured by
Receivables (whether now existing or arising in the future) of the Company and its Subsidiaries
which are made pursuant to the Permitted Receivables Facility.
Permitted Receivables Facility Documents shall mean each of the documents and
agreements entered into in connection with the Permitted Receivables Facility, including all
documents and agreements relating to the issuance, funding and/or purchase of certificates and
purchased interests, all of which documents and agreements shall be in form and substance
reasonably customary for transactions of this type, in each case as such documents and agreements
may be amended, modified, supplemented, refinanced or replaced from time to time so long as (i) any
such amendments, modifications, supplements, refinancings or replacements do not impose any
conditions or requirements on the Company or any of its Subsidiaries that are more restrictive in
any material respect than those in existence immediately prior to any such amendment, modification,
supplement, refinancing or replacement, and (ii) any such amendments, modifications, supplements,
refinancings or replacements are not adverse in any material respect to the interests of the
Lenders.
Permitted Receivables Related Assets means any other assets that are customarily
transferred or in respect of which security interests are customarily granted in connection with
asset securitization transactions involving receivables similar to Receivables and any collections
or proceeds of any of the foregoing.
Person means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, Governmental Authority or other entity.
Plan means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which the Company or any ERISA Affiliate is (or, if such plan were terminated,
would under Section 4069 of ERISA be deemed to be) an employer as defined in Section 3(5) of
ERISA.
Prime Rate means the rate of interest per annum publicly announced from time to time
by JPMorgan Chase Bank, National Association as its prime rate in effect at its principal office in
New York City; each change in the Prime Rate shall be effective from and including the date such
change is publicly announced as being effective.
Pro Forma Basis means on a basis in accordance with GAAP and Regulation S-X and
otherwise reasonably satisfactory to the Administrative Agent.
Property means any right or interest in or to property of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible, including, without limitation,
Equity Interests.
Receivables shall mean all accounts receivable (including, without limitation, all
rights to payment created by or arising from sales of goods, leases of goods or the rendition of
services rendered no matter how evidenced whether or not earned by performance).
18
Receivables Entity shall mean a wholly-owned Subsidiary of the Company which engages
in no activities other than in connection with the financing of accounts receivable of the
Receivables Sellers and which is designated (as provided below) as the Receivables Entity (a) no
portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any other Subsidiary of the Company (excluding guarantees of
obligations (other than the principal of, and interest on, Indebtedness)) pursuant to Standard
Securitization Undertakings, (ii) is recourse to or obligates the Company or any other Subsidiary
of the Company in any way (other than pursuant to Standard Securitization Undertakings) or (iii)
subjects any property or asset of the Company or any other Subsidiary of the Company, directly or
indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard
Securitization Undertakings, (b) with which neither the Company nor any of its Subsidiaries has any
contract, agreement, arrangement or understanding (other than pursuant to the Permitted Receivables
Facility Documents (including with respect to fees payable in the ordinary course of business in
connection with the servicing of accounts receivable and related assets)) on terms less favorable
to the Company or such Subsidiary than those that might be obtained at the time from persons that
are not Affiliates of the Company, and (c) to which neither the Company nor any other Subsidiary of
the Company has any obligation to maintain or preserve such entitys financial condition or cause
such entity to achieve certain levels of operating results. Any such designation shall be
evidenced to the Administrative Agent by filing with the Administrative Agent an officers
certificate of the Company certifying that, to the best of such officers knowledge and belief
after consultation with counsel, such designation complied with the foregoing conditions.
Receivables Sellers shall mean the Company and those Subsidiaries (other than
Receivables Entities) that are from time to time party to the Permitted Receivables Facility
Documents.
Register has the meaning set forth in Section 9.04.
Regulation S-X means Regulation S-X under the Securities Act of 1933, as amended.
Related Parties means, with respect to any specified Person, such Persons
Affiliates and the respective directors, officers, employees, agents and advisors of such Person.
Required Domestic Subsidiary means each Domestic Subsidiary which has guaranteed the
payment or performance of (i) any Material Indebtedness or (ii) any Indebtedness under the Senior
Notes.
Required Lenders means, at any time, Lenders having Credit Exposure and unused
Commitments representing more than 50% of the sum of the total Credit Exposure and unused
Commitments at such time.
Required Revolving Lenders means, at any time, Lenders having Revolving Credit
Exposures and unused Revolving Commitments representing more than 50% of the sum of the total
Revolving Credit Exposures and unused Revolving Commitments at such time.
19
Restricted Payments means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interests in the Company or any
Subsidiary, or any payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such Equity Interests in the Company or any option, warrant or
other right to acquire any such Equity Interests in the Company.
Restricted Subsidiary means any Person acquired by the Company on or after the
Effective Date which is subject to restrictions and conditions with respect to its ability to
guarantee Indebtedness of the Company, so long as such restrictions and conditions only relate to
such Person so acquired and are not created in contemplation of such acquisition.
Revolving Commitment means, with respect to each Lender, the commitment, if any, of
such Lender to make Revolving Loans and to acquire participations in Letters of Credit and
Swingline Loans hereunder, expressed as an amount representing the maximum possible aggregate
amount of such Lenders Revolving Credit Exposure hereunder, as such commitment may be (a) reduced
from time to time pursuant to Section 2.09, (b) increased from time to time pursuant to Section
2.20 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04. The initial amount of each Lenders Revolving Commitment is set forth on
Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender shall have
assumed its Revolving Commitment, as applicable. The initial aggregate amount of the Lenders
Revolving Commitments is $300,000,000.
Revolving Credit Exposure means, with respect to any Lender at any time, the sum of
the outstanding principal amount of such Lenders Revolving Loans and its LC Exposure and Swingline
Exposure at such time.
Revolving Credit Maturity Date means July 24, 2011.
Revolving Lender means, each Lender that has a Revolving Commitment or that holds
Revolving Loans.
Revolving Loan means a Loan made pursuant to Section 2.01(a).
Sale and Leaseback Transaction means any sale or other transfer of Property by any
Person with the intent to lease such Property as lessee.
SEC means the Securities and Exchange Commission, any successor thereto and any
analogous Governmental Authority.
Senior Note Indenture means any Indenture entered into by the Company and certain of
its Subsidiaries in connection with the issuance of any Senior Notes, together with all instruments
and other agreements entered into by the Company or such Subsidiaries in connection therewith, as
the same may be amended, supplemented or otherwise modified from time to time.
Senior Notes means (i) the 5 3/4% senior unsecured notes due 2010 (the 2010
Notes) and the 6 3/8% senior unsecured notes due 2015 of the Company issued on July 21,
20
2005 pursuant to a Senior Note Indenture or any supplement thereto, and any notes issued in
exchange therefor pursuant to the exchange offer contemplated by the offering memorandum, (ii) the
1.25% senior convertible notes of the Company due 2012 issued on March 7, 2007 pursuant to a Senior
Note Indenture or any supplement thereto and (iii) any other unsecured debt securities which do not
have a final maturity that is earlier than the final maturity of the 2010 Notes or a Weighted
Average Life to Maturity that is shorter than the Weighted Average Life to Maturity of the 2010
Notes.
Specified Change in Control means a Change of Control, or like event, if any, as
defined in the Senior Note Indenture.
Standard Securitization Undertakings shall mean representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary thereof in connection with
the Permitted Receivables Facility which are reasonably customary in an accounts receivable
financing transaction.
Statutory Reserve Rate means, with respect to any currency, a fraction (expressed as
a decimal), the numerator of which is the number one and the denominator of which is the number one
minus the aggregate of the maximum reserve, liquid asset, fees or similar requirements (including
any marginal, special, emergency or supplemental reserves or other requirements) established by any
central bank, monetary authority, the Board, the Financial Services Authority, the European Central
Bank or other Governmental Authority for any category of deposits or liabilities customarily used
to fund loans in such currency, expressed in the case of each such requirement as a decimal. Such
reserve percentages shall, in the case of Dollar denominated Loans, include those imposed pursuant
to Regulation D of the Board. Eurocurrency Loans shall be deemed to be subject to such reserve,
liquid asset or similar requirements without benefit of or credit for proration, exemptions or
offsets that may be available from time to time to any Lender under any applicable law, rule or
regulation, including Regulation D. The Statutory Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in any reserve, liquid asset or similar requirement.
subsidiary means, with respect to any Person (the parent) at any date, any
corporation, limited liability company, partnership, association or other entity the accounts of
which would be consolidated with those of the parent in the parents consolidated financial
statements if such financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50% of the equity or
more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as
of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by
the parent and one or more subsidiaries of the parent.
Subsidiary means any subsidiary of the Company.
Subsidiary Guarantor means each Material Domestic Subsidiary and each Required
Domestic Subsidiary (other than the Captive Insurance Subsidiary, any Receivables
21
Entity and any Restricted Subsidiary). The Subsidiary Guarantors on the Effective Date are
identified as such in Schedule 3.01 hereto.
Subsidiary Guaranty means that certain Guaranty dated as of the Effective Date in
the form of Exhibit F (including any and all supplements thereto) and executed by each
Subsidiary Guarantor on the Effective Date, as amended, restated, supplemented or otherwise
modified from time to time.
Swap Agreement means any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement involving, or settled by reference to, one or
more rates, currencies, commodities, equity or debt instruments or securities, or economic,
financial or pricing indices or measures of economic, financial or pricing risk or value or any
similar transaction or any combination of these transactions; provided that no phantom
stock or similar plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Company or the Subsidiaries shall be a
Swap Agreement.
Swingline Exposure means, at any time, the aggregate principal amount of all
Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall
be its Applicable Percentage of the total Swingline Exposure at such time.
Swingline Lender means JPMorgan Chase Bank, National Association, in its capacity as
lender of Swingline Loans hereunder.
Swingline Loan means a Loan made pursuant to Section 2.05.
Swingline Loan Sublimit means $10,000,000.
Syndication Agent means Merrill Lynch, Pierce, Fenner & Smith Incorporated in its
capacity as syndication agent for the credit facility evidenced by this Agreement.
TARGET means the Trans-European Automated Real-time Gross Settlement Express
Transfer (TARGET) payment system (or, if such payment system ceases to be operative, such other
payment system (if any) reasonably determined by the Administrative Agent to be a suitable
replacement) for the settlement of payments in euro.
Taxes means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
Term Lender means, as of any date of determination each Lender having a Term Loan
Commitment or that holds Term Loans.
Term Loan Commitment means (a) as to any Term Lender, the aggregate commitment of
such Term Lender to make Term Loans as set forth on Schedule 2.01 or in the most recent
Assignment Agreement executed by such Term Lender and (b) as to all Term Lenders, the aggregate
commitment of all Term Lenders to make Term Loans, which aggregate commitment shall be $450,000,000
on the date of this Agreement. After advancing the Term
22
Loan, each reference to a Term Lenders Term Loan Commitment shall refer to that Term Lenders
Applicable Percentage of the Term Loans.
Term Loan Maturity Date means December 26, 2011.
Term Loans means the Loan made pursuant to Section 2.01(b) and any incremental term
loans extended by one or more of the Term Lenders to the Company pursuant to Section 2.20 hereof.
Transactions means the execution, delivery and performance by the Loan Parties of
this Agreement and the other Loan Documents, the borrowing of Loans, the use of the proceeds
thereof and the issuance of Letters of Credit hereunder.
Type, when used in reference to any Loan or Borrowing, refers to whether the rate of
interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the
Adjusted LIBO Rate or the Alternate Base Rate.
Weighted Average Life to Maturity shall mean, when applied to any Indebtedness at
any date, the number of years obtained by dividing (a) the original aggregate principal amount of
such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the
amount of each scheduled installment, sinking fund, serial maturity or other required payment of
principal including payment at final maturity, in respect thereof, by (ii) the number of years
(calculated to the nearest one-twelfth) which will elapse between such date and the making of such
payment.
Withdrawal Liability means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of this
Agreement, Loans may be classified and referred to by Class (e.g., a Revolving Loan) or
by Type (e.g., a Eurocurrency Loan) or by Class and Type (e.g., a Eurocurrency
Revolving Loan). Borrowings also may be classified and referred to by Class (e.g., a
Revolving Borrowing) or by Type (e.g., a Eurocurrency Borrowing) or by Class and Type
(e.g., a Eurocurrency Revolving Borrowing).
SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally
to the singular and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms. The words include,
includes and including shall be deemed to be followed by the phrase without limitation. The
word will shall be construed to have the same meaning and effect as the word shall. Unless the
context requires otherwise (a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented, refinanced, restated, replaced or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such Persons successors and
assigns, (c) the words herein, hereof and hereunder, and words of similar import, shall be
construed to refer to
23
this Agreement in its entirety and not to any particular provision hereof, (d) all references
herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words asset and property
shall be construed to have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein,
all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time; provided that, if the Company notifies the Administrative Agent
that the Company requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on the operation of
such provision (or if the Administrative Agent notifies the Company that the Required Lenders
request an amendment to any provision hereof for such purpose), regardless of whether any such
notice is given before or after such change in GAAP or in the application thereof, then such
provision shall be interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith.
SECTION 1.05. Payments on Business Days. When the payment of any Obligation or the
performance of any covenant, duty or obligation is stated to be due or performance required on a
day which is not a Business Day, the date of such payment or performance shall extend to the
immediately succeeding Business Day and such extension of time shall be reflected in computing
interest or fees, as the case may be; provided that, with respect to any payment of
interest on or principal of Eurocurrency Loans, if such extension would cause any such payment to
be made in the next succeeding calendar month, such payment shall be made on the immediately
preceding Business Day.
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, (a)
each Revolving Lender agrees to make Revolving Loans to the Borrowers in Agreed Currencies from
time to time during the Availability Period in an aggregate principal amount that will not result
in (i) the Dollar Amount of such Lenders Revolving Credit Exposure exceeding such Lenders
Revolving Commitment or (ii) subject to Section 2.04, the Dollar Amount of the total Revolving
Credit Exposures exceeding the sum of the total Revolving Commitments and (b) each Term Lender with
a Term Loan Commitment agrees to make a Term Loan to the Company in Dollars on the Effective Date,
in an amount equal to such Lenders Term Loan Commitment by making immediately available funds
available to the Administrative Agents designated account, not later than the time specified by
the Administrative Agent. Within the foregoing limits and subject to the terms and conditions set
forth herein, the Borrowers may borrow, prepay and reborrow Revolving Loans. Amounts repaid in
respect of Term Loans may not be reborrowed.
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SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than a Swingline Loan)
shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the
Lenders ratably in accordance with their respective Commitments of the applicable Class. The
failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender
of its obligations hereunder; provided that the Commitments of the Lenders are several and
no Lender shall be responsible for any other Lenders failure to make Loans as required. Any
Swingline Loan shall be made in accordance with the procedures set forth in Section 2.05.
(b) Subject to Section 2.14, each Revolving Borrowing and Term Borrowing shall be
comprised entirely of ABR Loans or Eurocurrency Loans as the relevant Borrower may request in
accordance herewith; provided that all Borrowings made on the Effective Date must be made as ABR
Borrowings but may be converted into Eurocurrency Borrowings in accordance with Section 2.08.
Each ABR Loan shall only be made in Dollars. Each Swingline Loan shall be an ABR Loan. Each
Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Loan; provided that any exercise of such option
shall not affect the obligation of the relevant Borrower to repay such Loan in accordance with
the terms of this Agreement.
(c) At the commencement of each Interest Period for any Eurocurrency Revolving Borrowing,
such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 (or
the Approximate Equivalent Amount of such amount if such Borrowing is denominated in a Foreign
Currency) and not less than $5,000,000 (or the Approximate Equivalent Amount of such amount if
such Borrowing is denominated in a Foreign Currency). At the time that each ABR Revolving
Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple
of $1,000,000 and not less than $1,000,000; provided that an ABR Revolving Borrowing may
be in an aggregate amount that is equal to the entire unused balance of the total Revolving
Commitments or that is required to finance the reimbursement of an LC Disbursement as
contemplated by Section 2.06(e). Each Swingline Loan shall be in an amount that is an integral
multiple of $100,000 and not less than $500,000. Borrowings of more than one Type and Class may
be outstanding at the same time; provided that there shall not at any time be more than
a total of ten (10) Eurocurrency Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, no Borrower shall be entitled
to request, or to elect to convert or continue, any Borrowing if the Interest Period requested
(i) with respect to a Revolving Borrowing would end after the Revolving Credit Maturity Date or
(ii) with respect to a Term Loan Borrowing would end after the Term Loan Maturity Date.
SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving Borrowing,
the applicable Borrower, or the Company on behalf of the applicable Borrower, shall notify the
Administrative Agent of such request in accordance with the procedures for Revolving Borrowings set
forth on Schedule 1.01B. Each such telephonic Borrowing Request shall be irrevocable and
shall be confirmed promptly by hand delivery or telecopy or transmission by electronic
communication in accordance with Section 9.01(b) to the Administrative Agent of a written Borrowing
Request in a form attached hereto as Exhibit G-1 and signed by the applicable
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Borrower, or the Company on behalf of the applicable Borrower. Each such telephonic and
written Borrowing Request shall specify the following information in compliance with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing;
(iv) in the case of a Eurocurrency Borrowing, the Agreed Currency and initial Interest
Period to be applicable thereto, which shall be a period contemplated by the definition of
the term Interest Period; and
(v) the location and number of the applicable Borrowers account to which funds are to
be disbursed, which shall comply with the requirements of Section 2.07.
If no election as to the Type of Revolving Borrowing is specified, then, in the case of a Borrowing
denominated in Dollars to any Borrower, the requested Revolving Borrowing shall be an ABR
Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Revolving
Borrowing, then the relevant Borrower shall be deemed to have selected an Interest Period of one
months duration. Promptly following receipt of a Borrowing Request in accordance with this
Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount
of such Lenders Loan to be made as part of the requested Borrowing.
SECTION 2.04. Determination of Dollar Amounts. The Administrative Agent will
determine the Dollar Amount of (a) each Eurocurrency Revolving Borrowing as of the date three (3)
Business Days prior to the date of such Borrowing or, if applicable, the date of
conversion/continuation of any Borrowing as a Eurocurrency Revolving Borrowing, (b) the LC Exposure
as of the date of each request for the issuance, amendment, renewal or extension of any Letter of
Credit and (c) each of (i) the total Revolving Credit Exposures and (ii) the sum of the total
outstanding Revolving Loans denominated in Foreign Currencies and the Foreign Currency LC Exposure,
on and as of the last Business Day of each calendar quarter and, during the continuation of an
Event of Default, on any other Business Day elected by the Administrative Agent in its discretion
or upon instruction by the Required Revolving Lenders. Each day upon or as of which the
Administrative Agent determines Dollar Amounts as described in the preceding clauses (a), (b) and
(c) is herein described as a Computation Date with respect to each Credit Event for which
a Dollar Amount is determined on or as of such day.
SECTION 2.05. Swingline Loans. (a) Subject to the terms and conditions set forth
herein, the Swingline Lender agrees to make Swingline Loans in Dollars to the Company from time to
time during the Availability Period, in an aggregate principal amount at any time outstanding that
will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding the
Swingline Loan Sublimit or (ii) the Dollar Amount of the total Revolving Credit Exposures exceeding
the total Revolving Commitments; provided that the Swingline Lender shall not be required
to make a Swingline Loan to refinance an outstanding Swingline
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Loan. Within the foregoing limits and subject to the terms and conditions set forth herein,
the Company may borrow, prepay and reborrow Swingline Loans.
(b) To request a Swingline Loan, the Company shall notify the Administrative Agent of such
request in accordance with the procedures for Swingline Loans set forth on Schedule
1.01B. The Administrative Agent will promptly advise the Swingline Lender of any notice of
a request for a Swingline Loan Borrowing received from the Company. The Swingline Lender shall
make each Swingline Loan available to the Company by means of a credit to the general deposit
account of the Company with the Swingline Lender (or, in the case of a Swingline Loan made to
finance the reimbursement of an LC Disbursement as provided in Section 2.06(e), by remittance to
the Issuing Bank) by 3:00 p.m., New York City time, on the requested date of such Swingline
Loan.
(c) The Swingline Lender may by written notice given to the Administrative Agent not later
than 10:00 a.m., New York City time, on any Business Day require the Revolving Lenders to
acquire participations on such Business Day in all or a portion of the Swingline Loans
outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which
Revolving Lenders will participate. Promptly upon receipt of such notice, the Administrative
Agent will give notice thereof to each Revolving Lender, specifying in such notice such Lenders
Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender hereby absolutely
and unconditionally agrees, upon receipt of notice as provided above, to pay to the
Administrative Agent, for the account of the Swingline Lender, such Lenders Applicable
Percentage of such Swingline Loan or Loans. Each Revolving Lender acknowledges and agrees that
its obligation to acquire participations in Swingline Loans pursuant to this paragraph is
absolute and unconditional and shall not be affected by any circumstance whatsoever, including
the occurrence and continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding or reduction
whatsoever. Each Revolving Lender shall comply with its obligation under this paragraph by wire
transfer of immediately available funds, in the same manner as provided in Section 2.07 with
respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis
mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall
promptly pay to the Swingline Lender the amounts so received by it from the Revolving Lenders.
The Administrative Agent shall notify the Company of any participations in any Swingline Loan
acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan
shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received
by the Swingline Lender from the Company (or other party on behalf of the Company) in respect of
a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of
participations therein shall be promptly remitted to the Administrative Agent; any such amounts
received by the Administrative Agent shall be promptly remitted by the Administrative Agent to
the Revolving Lenders that shall have made their payments pursuant to this paragraph and to the
Swingline Lender, as their interests may appear; provided that any such payment so remitted
shall be repaid to the Swingline Lender or to the Administrative Agent, as applicable, if and to
the extent such payment is required to be refunded to the Company for any reason. The purchase
of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Company
of any default in the payment thereof.
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SECTION 2.06. Letters of Credit. (a) General. Subject to the terms and
conditions set forth herein, the Company may request the issuance of Letters of Credit denominated
in Agreed Currencies for its own account, in a form reasonably acceptable to the Administrative
Agent and the Issuing Bank, at any time and from time to time during the Availability Period. In
the event of any inconsistency between the terms and conditions of this Agreement and the terms and
conditions of any form of letter of credit application or other agreement submitted by the Company
to, or entered into by the Company with, the Issuing Bank relating to any Letter of Credit, the
terms and conditions of this Agreement shall control; provided, however, if the
Issuing Bank is requested to issue Letters of Credit with respect to a jurisdiction the Issuing
Bank deems, in its reasonable judgment, may at any time subject it to a New Money Credit Event or a
Country Risk Event, the Company shall, at the request of the Issuing Bank, guaranty and indemnify
the Issuing Bank against any and all costs, liabilities and losses resulting from such New Money
Credit Event or Country Risk Event, other than any costs, liabilities or losses resulting from the
bad faith, gross negligence or willful misconduct of the Issuing Bank, in each case in a form and
substance reasonably satisfactory to the Issuing Bank.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
request the issuance of a Letter of Credit (or the amendment, renewal or extension of an
outstanding Letter of Credit), the Company shall hand deliver or telecopy (or transmit by
electronic communication, if arrangements for doing so have been approved by the Issuing Bank)
to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of
issuance, amendment, renewal or extension) a notice in the form attached hereto as Exhibit
G-4 requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be
amended, renewed or extended, and specifying the date of issuance, amendment, renewal or
extension (which shall be a Business Day), the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit,
the Agreed Currency applicable thereto, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such Letter of
Credit. The Issuing Bank shall promptly notify the Administrative Agent of, and the
Administrative Agent shall in turn promptly furnish to the Lenders notice of, any such issuance.
If requested by the Issuing Bank, the Company also shall submit a letter of credit application
on the Issuing Banks standard form in connection with any request for a Letter of Credit. A
Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance,
amendment, renewal or extension of each Letter of Credit the Company shall be deemed to
represent and warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the Dollar Amount of the LC Exposure shall not exceed the LC Exposure Sublimit and
(ii) subject to Section 2.04, the Dollar Amount of the total Revolving Credit Exposures shall
not exceed the total Revolving Commitments.
(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close
of business on the earlier of (i) the date one year after the date of the issuance of such
Letter of Credit (or, in the case of any renewal or extension thereof, one year after such
renewal or extension) and (ii) the date that is five (5) Business Days prior to the Revolving
Credit Maturity Date.
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(d) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action on the part of
the Issuing Bank or the Revolving Lenders, the Issuing Bank hereby grants to each Revolving
Lender, and each Revolving Lender hereby acquires from the Issuing Bank, a participation in such
Letter of Credit equal to such Lenders Applicable Percentage of the aggregate Dollar Amount
available to be drawn under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of the Issuing Bank, such Revolving Lenders Applicable
Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Company on
the date due as provided in paragraph (e) of this Section, or of any reimbursement payment
required to be refunded to the Company for any reason. Each Revolving Lender acknowledges and
agrees that its obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any Letter of Credit or the
occurrence and continuance of a Default or reduction or termination of the Commitments, and that
each such payment shall be made without any offset, abatement, withholding or reduction
whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect
of a Letter of Credit, the Company shall reimburse such LC Disbursement by paying to the
Administrative Agent in Dollars the Dollar Amount equal to such LC Disbursement, calculated as
of the date the Issuing Bank made such LC Disbursement (or if the Issuing Bank shall so elect in
its sole discretion by notice to the Company, in such other Agreed Currency which was paid by
the Issuing Bank pursuant to such LC Disbursement in an amount equal to such LC Disbursement)
not later than 2:00 p.m., Local Time, on the date that such LC Disbursement is made, if the
Company shall have received notice of such LC Disbursement prior to 1:00 p.m., Local Time, on
such date, or, if such notice has not been received by the Company prior to such time on such
date, then not later than 2:00 p.m., Local Time, on (i) the Business Day that the Company
receives such notice, if such notice is received prior to 10:00 a.m., Local Time, on the day of
receipt, or (ii) the Business Day immediately following the day that the Company receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that the Company may, subject to the conditions to borrowing set forth herein,
request in accordance with Section 2.03 or 2.05 that such payment be financed with an ABR
Revolving Borrowing or Swingline Loan in an equivalent amount of such LC Disbursement and, to
the extent so financed, the Companys obligation to make such payment shall be discharged and
replaced by the resulting ABR Revolving Borrowing or Swingline Loan. If the Company fails to
make such payment when due, the Administrative Agent shall notify each Revolving Lender of the
applicable LC Disbursement, the payment then due from the Company in respect thereof and such
Revolving Lenders Applicable Percentage thereof. Promptly following receipt of such notice,
each Revolving Lender shall pay to the Administrative Agent its Applicable Percentage of the
payment then due from the Company, in the same manner as provided in Section 2.07 with respect
to Loans made by such Revolving Lender (and Section 2.07 shall apply, mutatis
mutandis, to the payment obligations of the Revolving Lenders), and the Administrative
Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Revolving
Lenders. Promptly following receipt by the Administrative Agent of any payment from the Company
pursuant to this paragraph, the Administrative Agent shall
29
distribute such payment to the Issuing Bank or, to the extent that Revolving Lenders have
made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and
the Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant
to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding
of ABR Revolving Loans or a Swingline Loan as contemplated above) shall not constitute a Loan
and shall not relieve the Company of its obligation to reimburse such LC Disbursement. If the
Companys reimbursement of, or obligation to reimburse, any amounts in any Foreign Currency
would subject the Administrative Agent, the Issuing Bank or any Lender to any stamp duty, ad
valorem charge or similar tax that would not be payable if such reimbursement were made or
required to be made in Dollars, the Company shall, at its option, either (x) pay the amount of
any such tax requested by the Administrative Agent, the Issuing Bank or the relevant Lender or
(y) reimburse each LC Disbursement made in such Foreign Currency in Dollars, in an amount equal
to the Equivalent Amount, calculated using the applicable exchange rates, on the date such LC
Disbursement is made, of such LC Disbursement.
(f) Obligations Absolute. The Companys obligation to reimburse LC Disbursements
as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable,
and shall be performed strictly in accordance with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any
Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other
document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the
Issuing Bank under a Letter of Credit against presentation of a draft or other document that
does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions
of this Section, constitute a legal or equitable discharge of, or provide a right of setoff
against, the Companys obligations hereunder. Neither the Administrative Agent, the Revolving
Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of any Letter of
Credit or any payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission, interruption, loss
or delay in transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence arising from causes beyond the
control of the Issuing Bank; provided that the foregoing shall not be construed to
excuse the Issuing Bank from liability to the Company to the extent of any direct damages (as
opposed to consequential damages, claims in respect of which are hereby waived by the Company to
the extent permitted by applicable law) suffered by the Company that are caused by the Issuing
Banks failure to exercise care when determining whether drafts and other documents presented
under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree
that, in the absence of bad faith, gross negligence or willful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank
shall be deemed to have exercised care in each such determination. In furtherance of the
foregoing and without limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance with the
30
terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept
and make payment upon such documents without responsibility for further investigation,
regardless of any notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the terms of such Letter
of Credit.
(g) Disbursement Procedures. The Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for payment under a
Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the
Company by telephone (confirmed by telecopy or transmission by electronic communication in
accordance with Section 9.01(b)) of such demand for payment and whether the Issuing Bank has
made or will make an LC Disbursement thereunder; provided that any failure to give or
delay in giving such notice shall not relieve the Company of its obligation to reimburse the
Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then,
unless the Company shall reimburse such LC Disbursement in full on the date such LC Disbursement
is made, the unpaid amount thereof shall bear interest, for each day from and including the date
such LC Disbursement is made to but excluding the date that the Company reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans (or in the case such
LC Disbursement is denominated in a Foreign Currency, at the Overnight Foreign Currency Rate for
such Agreed Currency plus the then effective Applicable Rate with respect to
Eurocurrency Revolving Loans); provided that, if the Company fails to reimburse such LC
Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.13(d) shall
apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing
Bank, except that interest accrued on and after the date of payment by any Revolving Lender
pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account
of such Lender to the extent of such payment.
(i) Replacement of Issuing Bank. The Issuing Bank may be replaced at any time by
written agreement among the Company, the Administrative Agent, the replaced Issuing Bank and the
successor Issuing Bank. The Administrative Agent shall notify the Revolving Lenders of any such
replacement of the Issuing Bank. At the time any such replacement shall become effective, the
Company shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant
to Section 2.12(b). From and after the effective date of any such replacement, (i) the
successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this
Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein
to the term Issuing Bank shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall require. After
the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party
hereto and shall continue to have all the rights and obligations of an Issuing Bank under this
Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall
not be required to issue additional Letters of Credit.
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(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, on the Business Day that the Company receives notice from the Administrative Agent
or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving
Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the
deposit of cash collateral pursuant to this paragraph, the Company shall deposit in an account
with the Administrative Agent, in the name of the Administrative Agent and for the benefit of
the Revolving Lenders, an amount in cash equal to the Dollar Amount of the LC Exposure as of
such date plus any accrued and unpaid interest thereon; provided that (i) the portions
of such amount attributable to undrawn Foreign Currency Letters of Credit or LC Disbursements in
a Foreign Currency that the Company is not late in reimbursing shall be deposited in the
applicable Foreign Currencies in the actual amounts of such undrawn Letters of Credit and LC
Disbursements and (ii) the obligation to deposit such cash collateral shall become effective
immediately, and such deposit shall become immediately due and payable, without demand or other
notice of any kind, upon the occurrence of any Event of Default with respect to the Company
described in clause (h) or (i) of Article VII. For the purposes of this paragraph, the Dollar
Amount of the Foreign Currency LC Exposure shall be calculated on the date notice demanding cash
collateralization is delivered to the Company. The Company also shall deposit cash collateral
pursuant to this paragraph as and to the extent required by Section 2.11(c). Such deposit shall
be held by the Administrative Agent as collateral for the payment and performance of the
obligations of the Company under this Agreement. The Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such account. Other
than any interest earned on the investment of such deposits, which investments shall be made at
the option and sole discretion of the Administrative Agent and at the Companys risk and
expense, such deposits shall not bear interest. Interest or profits, if any, on such
investments shall accumulate in such account. Moneys in such account shall be applied by the
Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not
been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the
reimbursement obligations of the Company for the LC Exposure at such time or, if the maturity of
the Loans has been accelerated (but subject to the consent of Revolving Lenders with LC Exposure
representing greater than 50% of the total LC Exposure), be applied to satisfy other
obligations of the Company under this Agreement. If the Company is required to provide an
amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such
amount (to the extent not applied as aforesaid) shall be returned to the Company within three
(3) Business Days after all Events of Default have been cured or waived.
(k) Conversion. In the event that the Loans become immediately due and payable on
any date pursuant to Article VII, all amounts (i) that the Company is at the time or thereafter
becomes required to reimburse or otherwise pay to the Administrative Agent in respect of LC
Disbursements made under any Foreign Currency Letter of Credit (other than amounts in respect of
which the Company has deposited cash collateral pursuant to paragraph (j) above, if such cash
collateral was deposited in the applicable Foreign Currency to the extent so deposited or
applied), (ii) that the Lenders are at the time or thereafter become required to pay to the
Administrative Agent and the Administrative Agent is at the time or thereafter becomes required
to distribute to the Issuing Bank pursuant to paragraph (e) of this Section in respect of
unreimbursed LC Disbursements made under any Foreign
32
Currency Letter of Credit and (iii) of each Revolving Lenders participation in any Foreign
Currency Letter of Credit under which an LC Disbursement has been made shall, automatically and
with no further action required, be converted into its Dollar Amount on such date (or in the
case of any LC Disbursement made after such date, on the date such LC Disbursement is made). On
and after such conversion, all amounts accruing and owed to the Administrative Agent, the
Issuing Bank or any Revolving Lender in respect of the obligations described in this paragraph
shall accrue and be payable in Dollars at the rates otherwise applicable hereunder.
SECTION 2.07. Funding of Borrowings. (a) Each Lender shall make each Loan to be
made by it hereunder on the proposed date thereof by wire transfer of immediately available funds
(i) in the case of Loans denominated in Dollars by 2:00 p.m., New York City time, to the account of
the Administrative Agent most recently designated by it for such purpose by notice to the Lenders
in an amount equal to such Lenders Applicable Percentage; provided that, Term Loans shall
be made as provided in Section 2.01(b) and (ii) in the case of each Loan denominated in a Foreign
Currency, by 2:00 p.m., Local Time, in the city of the Administrative Agents Eurocurrency Payment
Office for such currency and at such Eurocurrency Payment Office for such currency;
provided that Swingline Loans shall be made as provided in Section 2.05. The
Administrative Agent will make such Loans available to the relevant Borrower by promptly crediting
the amounts so received, in like funds, to (x) an account designated by the relevant Borrower in
the applicable Borrowing Request, in the case of Loans denominated in Dollars and (y) an account of
such Borrower in the relevant jurisdiction and designated by the applicable Borrower in the
applicable Borrowing Request, in the case of Loans denominated in a Foreign Currency;
provided that ABR Revolving Loans made to finance the reimbursement of an LC Disbursement
as provided in Section 2.06(e) shall be remitted by the Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Borrowing that such Lender will not make available to the Administrative
Agent such Lenders share of such Borrowing, the Administrative Agent may assume that such
Lender has made such share available on such date in accordance with paragraph (a) of this
Section and may, in reliance upon such assumption, make available to the relevant Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable Lender and such
Borrower severally agree to pay to the Administrative Agent forthwith on demand such
corresponding amount with interest thereon, for each day from and including the date such amount
is made available to such Borrower to but excluding the date of payment to the Administrative
Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry rules on
interbank compensation (including without limitation the Overnight Foreign Currency Rate in the
case of Loans denominated in a Foreign Currency) or (ii) in the case of such Borrower, the
interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative
Agent, then such amount shall constitute such Lenders Loan included in such Borrowing.
SECTION 2.08. Interest Elections. (a) Each Revolving Borrowing initially shall be
of the Type specified in the applicable Borrowing Request and, in the case of a
33
Eurocurrency Revolving Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the relevant Borrower may elect to convert such Borrowing to a
different Type or to continue such Borrowing and, in the case of a Eurocurrency Revolving
Borrowing, may elect Interest Periods therefor, all as provided in this Section. A Borrower may
elect different options with respect to different portions of the affected Borrowing, in which case
each such portion shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.
This Section shall not apply to Swingline Borrowings, which may not be converted or continued.
(b) To make an election pursuant to this Section, a Borrower, or the Company on its
behalf, shall notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if such Borrower were requesting a
Revolving Borrowing of the Type resulting from such election to be made on the effective date of
such election. Each such telephonic Interest Election Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy or transmission by electronic communication in
accordance with Section 9.01(b) to the Administrative Agent of a written Interest Election
Request in a form attached hereto as Exhibit G-3 or such other form approved by the
Administrative Agent and signed by the relevant Borrower, or the Company on its behalf.
Notwithstanding any contrary provision herein, this Section shall not be construed to permit any
Borrower to (i) change the currency of any Borrowing, (ii) elect an Interest Period for
Eurocurrency Loans that does not comply with Section 2.02(d) or (iii) convert any Borrowing to a
Borrowing of a Type not available under the Class of Commitments pursuant to which such
Borrowing was made.
(c) Each telephonic and written Interest Election Request shall specify the following
information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and, if different
options are being elected with respect to different portions thereof, the portions thereof
to be allocated to each resulting Borrowing (in which case the information to be specified
pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency
Borrowing; and
(iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period and
Agreed Currency to be applicable thereto after giving effect to such election, which
Interest Period shall be a period contemplated by the definition of the term Interest
Period.
If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an
Interest Period, then the applicable Borrower shall be deemed to have selected an Interest Period
of one months duration.
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(d) Promptly following receipt of an Interest Election Request, the Administrative Agent
shall advise each Lender of the details thereof and of such Lenders portion of each resulting
Borrowing.
(e) If the relevant Borrower fails to deliver a timely Interest Election Request with
respect to a Eurocurrency Borrowing prior to the end of the Interest Period applicable thereto,
then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period (i)
in the case of a Borrowing denominated in Dollars, such Borrowing shall be converted to an ABR
Borrowing and (ii) in the case of a Borrowing denominated in a Foreign Currency, such Borrowing
shall automatically continue as a Eurocurrency Borrowing in the same Agreed Currency with an
Interest Period of one month unless (x) such Eurocurrency Borrowing is or was repaid in
accordance with Section 2.11 or (y) such Borrower shall have given the Administrative Agent an
Interest Election Request requesting that, at the end of such Interest Period, such Eurocurrency
Borrowing continue as a Eurocurrency Borrowing for the same or another Interest Period.
Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is
continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the
Company, then, so long as an Event of Default is continuing (i) no outstanding Revolving
Borrowing borrowed by the Company may be converted to or continued as a Eurocurrency Borrowing
and (ii) unless repaid, each Eurocurrency Revolving Borrowing borrowed by the Company shall be
converted to an ABR Borrowing at the end of the Interest Period applicable thereto.
SECTION 2.09. Termination and Reduction of Commitments. (a) Unless previously
terminated, (i) the Term Loan Commitments shall terminate at 5:00 p.m., New York City time, on the
Effective Date and (ii) all other Commitments shall terminate on the Revolving Credit Maturity
Date.
(b) The Company may at any time terminate, or from time to time reduce, the Revolving
Commitments; provided that (i) each reduction of the Revolving Commitments shall be in
an amount that is an integral multiple of $1,000,000 and not less than $1,000,000 and (ii) the
Company shall not terminate or reduce the Revolving Commitments if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 2.11, the Dollar Amount of the
total Revolving Credit Exposures would exceed the total Revolving Commitments.
(c) The Company shall notify the Administrative Agent of any election to terminate or
reduce the Commitments under paragraph (b) of this Section at least three (3) Business Days
prior to the effective date of such termination or reduction, specifying such election and the
effective date thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the Company pursuant
to this Section shall be irrevocable; provided that a notice of termination of the
Commitments delivered by the Company may state that such notice is conditioned upon the
effectiveness of other credit facilities or instruments of Indebtedness, in which case such
notice may be revoked by the Company (by notice to the Administrative Agent on or prior to the
specified effective date) if such condition is not satisfied. Any termination or reduction of
the Commitments shall be permanent. Each reduction of the
35
Commitments shall be made ratably among the Lenders in accordance with their respective
Commitments.
SECTION 2.10. Repayment of Loans; Evidence of Debt. (a) Each Borrower hereby
unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the
then unpaid principal amount of each Revolving Loan made to such Borrower on the Revolving Credit
Maturity Date in the currency of such Loan and (ii) in the case of the Company, to the Swingline
Lender the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving
Credit Maturity Date and the first date after such Swingline Loan is made that is the
15th or last day of a calendar month and is at least two (2) Business Days after such
Swingline Loan is made; provided that on each date that a Revolving Loan is made, the
Company shall repay all Swingline Loans then outstanding. To the extent not previously repaid, all
unpaid Term Loans shall be paid in full in Dollars by the Company on the Term Loan Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Loan
made by such Lender, including the amounts of principal and interest payable and paid to such
Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall record (i) the
amount of each Loan made hereunder, the Class, Agreed Currency and Type thereof and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and payable or to
become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any
sum received by the Administrative Agent hereunder for the account of the Lenders and each
Lenders share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this
Section shall be prima facie evidence of the existence and amounts of the
obligations recorded therein absent manifest error; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error therein shall not in
any manner affect the obligation of any Borrower to repay the Loans in accordance with the terms
of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by promissory notes. In
such event, the Borrowers shall prepare, execute and deliver to such Lender promissory notes
payable to the order of such Lender (or, if requested by such Lender, to such Lender and its
registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans
evidenced by such promissory notes and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form
payable to the order of the payee named therein (or, if any such promissory note is a registered
note, to such payee and its registered assigns).
SECTION 2.11. Prepayment of Loans.
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(a) Any Borrower shall have the right at any time and from time to time to prepay any
Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this
Section.
(b) The applicable Borrower, or the Company on behalf of the applicable Borrower, shall
notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the
Swingline Lender) by telephone (confirmed by telecopy or transmission by electronic
communication in accordance with Section 9.01(b)) of any prepayment hereunder (i) in the case of
prepayment of a Eurocurrency Borrowing, not later than 11:00 a.m., New York City time, three (3)
Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing,
not later than 11:00 a.m., New York City time, one (1) Business Day before the date of
prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 noon,
New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall
specify the prepayment date and the principal amount of each Borrowing or portion thereof to be
prepaid; provided that, if a notice of prepayment is given in connection with a
conditional notice of termination of the Commitments as contemplated by Section 2.09, then such
notice of prepayment may be revoked if such notice of termination is revoked in accordance with
Section 2.09. Promptly following receipt of any such notice relating to a Borrowing, the
Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment
of any Borrowing shall be in an amount that would be permitted in the case of an advance of a
Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the notice of prepayment. Prepayments shall be
accompanied by (i) accrued interest to the extent required by Section 2.13 and (ii) break
funding payments pursuant to Section 2.16.
(c) If at any time, (i) other than as a result of fluctuations in currency exchange rates,
the sum of the aggregate principal Dollar Amount of all of the Revolving Credit Exposures
(calculated, with respect to those Credit Events denominated in Foreign Currencies, as of the
most recent Computation Date with respect to each such Credit Event) exceeds the total Revolving
Commitments or (ii) solely as a result of fluctuations in currency exchange rates, the sum of
the aggregate principal Dollar Amount of all of the outstanding Revolving Loans and LC Exposure,
in each case denominated in Foreign Currencies, as of the most recent Computation Date with
respect to each such Credit Event, exceeds 105% of the Revolving Commitment, the Borrowers shall
immediately repay Borrowings or cash collateralize LC Disbursements in an account with the
Administrative Agent pursuant to Section 2.06(j), as applicable, in an aggregate principal
amount sufficient to eliminate any such excess.
SECTION 2.12. Fees. (a) The Company agrees to pay to the Administrative Agent for
the account of each Revolving Lender a facility fee, which shall accrue at the Applicable Rate on
the daily Dollar Amount of the Revolving Commitment of such Lender (whether used or unused) during
the period from and including the Effective Date to but excluding the date on which such Commitment
terminates; provided that, if such Lender continues to have any Revolving Credit Exposure
after its Revolving Commitment terminates, then such facility fee shall continue to accrue on the
daily Dollar Amount of such Lenders Revolving Credit Exposure from and including the date on which
its Revolving Commitment
37
terminates to but excluding the date on which such Lender ceases to have any Revolving Credit
Exposure. Accrued facility fees shall be payable in arrears on the last day of March, June,
September and December of each year and on the date on which the Revolving Commitments terminate,
commencing on the first such date to occur after the date hereof; provided that any
facility fees accruing after the date on which the Revolving Commitments terminate shall be payable
on demand. All facility fees shall be computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed (including the first day but excluding the last day).
(b) The Company agrees to pay (i) to the Administrative Agent for the account of each
Revolving Lender a participation fee with respect to its participations in Letters of Credit,
which shall accrue at the same Applicable Rate used to determine the interest rate applicable to
Eurocurrency Revolving Loans on the average daily Dollar Amount of such Lenders LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period
from and including the Effective Date to but excluding the later of the date on which such
Lenders Revolving Commitment terminates and the date on which such Lender ceases to have any LC
Exposure and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.125%
per annum on the average daily Dollar Amount of the LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) attributable to Letters of Credit issued by the
Issuing Bank during the period from and including the Effective Date to but excluding the later
of the date of termination of the Revolving Commitments and the date on which there ceases to be
any LC Exposure, as well as the Issuing Banks standard fees and commissions with respect to the
issuance, amendment, cancellation, negotiation, transfer, presentment, renewal or extension of
any Letter of Credit or processing of drawings thereunder. Unless otherwise specified above,
participation fees and fronting fees accrued through and including the last day of March, June,
September and December of each year shall be payable on the third (3rd) Business Day
following such last day, commencing on the first such date to occur after the Effective Date;
provided that all such fees shall be payable on the date on which the Revolving
Commitments terminate and any such fees accruing after the date on which the Revolving
Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank
pursuant to this paragraph shall be payable within ten (10) days after demand. All
participation fees and fronting fees shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first day but excluding
the last day).
(c) The Company agrees to pay to the Administrative Agent, for its own account, fees
payable in the amounts and at the times separately agreed upon between the Company and the
Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in Dollars and immediately
available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees
payable to it) for distribution, in the case of facility fees and participation fees, to the
Lenders. Fees paid shall not be refundable under any circumstances.
SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing (including
each Swingline Loan) shall bear interest at the Alternate Base Rate.
38
(b) (i) The Loans comprising each Eurocurrency Borrowing denominated in an Agreed Currency
other than euro shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect
for such Borrowing plus the Applicable Rate. (ii) The Loans comprising each Eurocurrency
Borrowing denominated in euro shall bear interest at the Adjusted EURIBO Rate for the Interest
Period in effect for such Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee
or other amount payable by any Borrower hereunder is not paid when due, whether at stated
maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well
as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any
Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding
paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate
applicable to ABR Loans as provided in paragraph (a) of this Section.
(d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment
Date for such Loan and, in the case of Revolving Loans, upon termination of the Revolving
Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this
Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan
(other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period),
accrued interest on the principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Revolving
Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan
shall be payable on the effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a year of 360 days, except
that interest (i) computed by reference to the Alternate Base Rate at times when the Alternate
Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and (ii) for Borrowings denominated in Pounds Sterling shall be
computed on the basis of a year of 365 days, and in each case shall be payable for the actual
number of days elapsed (including the first day but excluding the last day). The applicable
Alternate Base Rate, Adjusted LIBO Rate, LIBO Rate, Adjusted EURIBO Rate or EURIBO Rate shall be
determined by the Administrative Agent, and such determination shall be conclusive absent
manifest error.
SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurocurrency Borrowing:
(a) the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for ascertaining the
Adjusted LIBO Rate, LIBO Rate, Adjusted EURIBO Rate or EURIBO Rate, as applicable, for such
Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO
Rate, LIBO Rate, Adjusted EURIBO Rate or EURIBO Rate, as applicable, for such Interest
Period will not adequately and fairly reflect the cost to such
39
Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such
Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the applicable Borrower and the Lenders
by telephone or telecopy or transmission by electronic communication in accordance with Section
9.01(b) as promptly as practicable thereafter and, until the Administrative Agent notifies the
applicable Borrower and the Lenders that the circumstances giving rise to such notice no longer
exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing
to, or continuation of any Revolving Borrowing as, a Eurocurrency Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurocurrency Revolving Borrowing, such Borrowing shall
be made as an ABR Borrowing.
SECTION 2.15. Increased Costs. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit extended by,
any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate or the
Adjusted EURIBO Rate) or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London interbank market any other
condition affecting this Agreement or Eurocurrency Loans made by such Lender or any Letter
of Credit or participation therein (excluding imposition of Taxes, which shall be governed
by Section 2.17);
and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurocurrency Loan or of maintaining its obligation to make any such Loan
(including, without limitation, pursuant to any conversion of any Borrowing denominated in an
Agreed Currency into a Borrowing denominated in any other Agreed Currency) or to increase the cost
to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit
(including, without limitation, pursuant to any conversion of any Borrowing denominated in an
Agreed Currency into a Borrowing denominated in any other Agreed Currency) or to reduce the amount
of any sum received or receivable by such Lender or the Issuing Bank hereunder, whether of
principal, interest or otherwise (including, without limitation, pursuant to any conversion of any
Borrowing denominated in an Agreed Currency into a Borrowing denominated in any other Agreed
Currency), then the applicable Borrower will pay to such Lender or the Issuing Bank, as the case
may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as
the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines in good faith that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate of return on
such Lenders or the Issuing Banks capital or on the capital of such Lenders or the Issuing
Banks holding company, if any, as a consequence of this Agreement or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the
Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lenders or
the Issuing Banks holding company could have achieved but for such Change in Law (taking into
consideration such Lenders or the Issuing Banks
40
policies and the policies of such Lenders or the Issuing Banks holding company with
respect to capital adequacy), then from time to time the applicable Borrower will pay to such
Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lenders or the Issuing Banks holding
company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts
necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may
be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Company and
shall be conclusive absent manifest error. The Company shall pay, or cause the other Borrowers
to pay, such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such
certificate within ten (10) days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation
pursuant to this Section shall not constitute a waiver of such Lenders or the Issuing Banks
right to demand such compensation; provided that the Company shall not be required to
compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or
reductions incurred more than 180 days prior to the date that such Lender or the Issuing Bank,
as the case may be, notifies the Company of the Change in Law giving rise to such increased
costs or reductions and of such Lenders or the Issuing Banks intention to claim compensation
therefor; provided further that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.
SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any
principal of any Eurocurrency Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default or as a result of any prepayment pursuant to
Section 2.11), (b) the conversion of any Eurocurrency Loan other than on the last day of the
Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any
Eurocurrency Loan on the date specified in any notice delivered pursuant hereto (regardless of
whether such notice may be revoked under Section 2.11(b) and is revoked in accordance therewith) or
(d) the assignment of any Eurocurrency Loan other than on the last day of the Interest Period
applicable thereto as a result of a request by the Company pursuant to Section 2.19, then, in any
such event, the Borrowers shall compensate each Lender for the loss, cost and expense (excluding
loss of anticipated profit) attributable to such event. Such loss, cost or expense to any Lender
may be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount of such Loan had such event not
occurred, at the Adjusted LIBO Rate or Adjusted EURIBO Rate (as applicable) that would have been
applicable to such Loan (and excluding any Applicable Rate), for the period from the date of such
event to the last day of the then current Interest Period therefor (or, in the case of a failure to
borrow, convert or continue, for the period that would have been the Interest Period for such
Loan), over (ii) the amount of interest which would accrue on such principal amount for such period
at the interest rate which such Lender would bid were it to bid, at the commencement of such
period, for deposits in the relevant currency of a comparable amount and period from other banks in
the eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such
Lender is entitled to receive pursuant to this Section shall be delivered to the applicable
Borrower and shall be
41
conclusive absent manifest error. The applicable Borrower shall pay such Lender the amount
shown as due on any such certificate within ten (10) days after receipt thereof.
SECTION 2.17. Taxes. (a) Any and all payments by or on account of any obligation
of each Borrower hereunder shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if any Borrower shall be required to deduct
any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower
shall pay the full amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(b) In addition, each Borrower shall pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.
(c) The relevant Borrower shall indemnify the Administrative Agent, each Lender and the
Issuing Bank, within ten (10) days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing
Bank, as the case may be, on or with respect to any payment by or on account of any obligation
of such Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or liability delivered to the Company
by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf
of a Lender or the Issuing Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by any
Borrower to a Governmental Authority, such Borrower shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding
tax under the law of the jurisdiction in which a Borrower is located, or any treaty to which
such jurisdiction is a party, with respect to payments under this Agreement shall deliver to
such Borrower (with a copy to the Administrative Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed by applicable law
or reasonably requested by such Borrower as will permit such payments to be made without
withholding or at a reduced rate.
(f) If the Administrative Agent or a Lender determines, in its sole discretion, that it
has received a refund of any Taxes or Other Taxes as to which it has been indemnified
42
by the Borrowers or with respect to which a Borrower has paid additional amounts pursuant
to this Section 2.17, it shall pay over such refund to such Borrower (but only to the extent of
indemnity payments made, or additional amounts paid, by such Borrower under this Section 2.17
with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket
expenses of the Administrative Agent or such Lender and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such refund); provided,
that such Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay
the amount paid over to such Borrower (plus any penalties, interest or other charges imposed by
the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the
Administrative Agent or such Lender is required to repay such refund to such Governmental
Authority. This Section shall not be construed to require the Administrative Agent or any Lender
to make available its tax returns (or any other information relating to its taxes which it deems
confidential) to any Borrower or any other Person.
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
(a) Each Borrower shall make each payment required to be made by it hereunder (whether of
principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under
Section 2.15, 2.16 or 2.17, or otherwise) prior to (i) in the case of payments by the Company
denominated in Dollars, 2:00 p.m., New York City time and (ii) in the case of payments by the
Dutch Borrower or payments denominated in a Foreign Currency, 2:00 p.m., Local Time, in the city
of the Administrative Agents Eurocurrency Payment Office for such currency, in each case on the
date when due, in immediately available funds, without set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the Administrative Agent, be
deemed to have been received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made (i) in the same currency in which the
applicable Credit Event was made (or where such currency has been converted to euro, in euro)
and (ii) to the Administrative Agent at its offices at 270 Park Avenue, New York, New York 10017
or, in the case of a Credit Event denominated in a Foreign Currency, the Administrative Agents
Eurocurrency Payment Office for such currency, except payments to be made directly to the
Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant
to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto.
The Administrative Agent shall distribute any such payments denominated in the same currency
received by it for the account of any other Person to the appropriate recipient promptly
following receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding Business Day, and,
in the case of any payment accruing interest, interest thereon shall be payable for the period
of such extension. Notwithstanding the foregoing provisions of this Section, if, after the
making of any Credit Event in any Foreign Currency, currency control or exchange regulations are
imposed in the country which issues such currency with the result that the type of currency in
which the Credit Event was made (the Original Currency) no longer exists or any
Borrower is not able to make payment to the Administrative Agent for the account of the Lenders
in such Original Currency, then all payments to be made by such Borrower hereunder in such
currency shall instead be made when due in Dollars in an amount equal to the Dollar Amount (as
of the date of repayment) of such payment due, it
43
being the intention of the parties hereto that the Borrowers take all risks of the
imposition of any such currency control or exchange regulations.
(b) If at any time insufficient funds are received by and available to the Administrative
Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees
then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees
then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, towards payment of principal and
unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of principal and unreimbursed LC Disbursements then due to such
parties.
(c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of its Revolving Loans or
participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment
of a greater proportion of the aggregate amount of its Revolving Loans and participations in LC
Disbursements and Swingline Loans and accrued interest thereon than the proportion received by
any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at
face value) participations in the Revolving Loans and participations in LC Disbursements and
Swingline Loans of other Lenders to the extent necessary so that the benefit of all such
payments shall be shared by the Lenders ratably in accordance with the aggregate amount of
principal of and accrued interest on their respective Revolving Loans and participations in LC
Disbursements and Swingline Loans; provided that (i) if any such participations are purchased
and all or any portion of the payment giving rise thereto is recovered, such participations
shall be rescinded and the purchase price restored to the extent of such recovery, without
interest, and (ii) the provisions of this paragraph shall not be construed to apply to any
payment made by any Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of
a participation in any of its Loans or participations in LC Disbursements and Swingline Loans to
any assignee or participant, other than to the Company or any Subsidiary or Affiliate thereof
(as to which the provisions of this paragraph shall apply). Each Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may exercise against
such Borrower rights of set-off and counterclaim with respect to such participation as fully as
if such Lender were a direct creditor of such Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from the relevant Borrower
prior to the date on which any payment is due to the Administrative Agent for the account of the
Lenders or the Issuing Bank hereunder that such Borrower will not make such payment, the
Administrative Agent may assume that such Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the
Issuing Bank, as the case may be, the amount due. In such event, if such Borrower has not in
fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be,
severally agrees to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender or Issuing Bank with interest thereon, for each day from and
including the date such amount is
44
distributed to it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation (including without limitation
the Overnight Foreign Currency Rate in the case of Loans denominated in a Foreign Currency).
(e) If any Lender shall fail to make any payment required to be made by it pursuant to
Section 2.05(c), 2.06(d) or (e), 2.07(b), 2.18(d) or 9.03(c), then the Administrative Agent may,
in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for the account of such Lender to satisfy such Lenders
obligations under such Sections until all such unsatisfied obligations are fully paid.
SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender
requests compensation under Section 2.15, or if any Borrower is required to pay any additional
amount to any Lender or any Governmental Authority for the account of any Lender pursuant to
Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office
for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or
2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed
cost or expense and would not otherwise be disadvantageous to such Lender. The Company hereby
agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.
(b) If any Lender requests compensation under Section 2.15, or if any Borrower is required
to pay any additional amount to any Lender or any Governmental Authority for the account of any
Lender pursuant to Section 2.17, or if any Lender defaults in its obligation to fund Loans
hereunder, or any Lender is unable to fund its portion of any Loan as a result of any applicable
law or regulation prohibiting, or any order, judgment or decree of any Governmental Authority
enjoining, prohibiting or restraining, any Lender from making any Loan requested by such
Borrower or the Issuing Bank or any Lender from issuing, renewing, extending or increasing the
face amount of or participating in the Letter of Credit requested to be issued, renewed,
extended or increased by such Borrower, or if any Lender fails to grant a consent in connection
with any proposed change, waiver, discharge or termination of the provisions of this Agreement
as contemplated by Section 9.02 but the consent of the Required Lenders is obtained, then the
Company may, at its sole expense and effort, upon notice to such Lender and the Administrative
Agent, require such Lender to assign and delegate, without recourse (in accordance with and
subject to the restrictions contained in Section 9.04), all its interests, rights and
obligations under the Loan Documents to an assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided that (i)
the Company shall have received the prior written consent of the Administrative Agent, which
consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans and participations in LC Disbursements
and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and accrued interest
and fees) or the
45
Company (in the case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.15 or payments required to be made
pursuant to Section 2.17, such assignment will result in a reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the
Company to require such assignment and delegation cease to apply.
SECTION 2.20. Expansion Option. The Company may from time to time elect to increase
the Revolving Commitments or enter into one or more tranches of term loans (each, an
Incremental Term Loan), in each case in minimum increments of $25,000,000 so long as,
after giving effect thereto, the aggregate amount of the Commitments, Term Loans outstanding and
all such Incremental Term Loans does not exceed $850,000,000. The Company may arrange for any such
increase or tranche to be provided by one or more Lenders (each Lender so agreeing to an increase
in its Revolving Commitment, or to participate in such Incremental Term Loan, an Increasing
Lender), or by one or more new banks, financial institutions or other entities (each such new
bank, financial institution or other entity, an Augmenting Lender), to increase their
existing Revolving Commitment, or to participate in such Incremental Term Loan, or extend Revolving
Commitments, as the case may be; provided that (i) each Augmenting Lender, shall be subject
to the approval of the Company and the Administrative Agent and (ii) (x) in the case of an
Increasing Lender, the Company and such Increasing Lender execute an agreement substantially in the
form of Exhibit C hereto, and (y) in the case of an Augmenting Lender, the Company and such
Augmenting Lender execute an agreement substantially in the form of Exhibit D hereto.
Increases and new Revolving Commitments and Incremental Term Loans created pursuant to this Section
2.20 shall become effective on the date agreed by the Company, the Administrative Agent and the
relevant Increasing Lenders or Augmenting Lenders and the Administrative Agent shall notify each
Lender thereof. Notwithstanding the foregoing, no increase in the Revolving Commitments (or in the
Revolving Commitment of any Lender) or tranche of Incremental Term Loan shall become effective
under this paragraph unless, (i) on the proposed date of the effectiveness of such increase or
Incremental Term Loan, the conditions set forth in paragraphs (a) and (b) of Section 4.02 shall be
satisfied or waived by the Required Lenders and the Administrative Agent shall have received a
certificate to that effect dated such date and executed by a Financial Officer of the Company, (ii)
the Administrative Agent shall have received documents consistent with those delivered on the
Effective Date as to the corporate power and authority of the Borrowers to borrow hereunder after
giving effect to such increase and (iii) the Company and its Subsidiaries shall be in compliance,
calculated on a Pro Forma Basis (giving effect, if necessary, to the increase in the permitted
maximum Consolidated Leverage Ratio in connection with a Material Acquisition set forth in Section
6.07(b) on the date of such Acquisition), with the covenants contained in Section 6.07. On the
effective date of any increase in the Revolving Commitments or any Incremental Term Loans being
made, (i) each relevant Increasing Lender and Augmenting Lender shall make available to the
Administrative Agent such amounts in immediately available funds as the Administrative Agent shall
determine, for the benefit of the other Lenders, as being required in order to cause, after giving
effect to such increase and the use of such amounts to make payments to such other Lenders, each
Lenders portion of the outstanding Loans of all the Lenders to equal its Applicable Percentage of
such outstanding Loans, and (ii) except in the case of any Incremental Term Loans, the Borrowers
shall be deemed to have repaid and reborrowed all outstanding Revolving Loans as of the date of any
increase in the Revolving Commitments (with such reborrowing to consist of the
46
Types of Revolving Loans, with related Interest Periods if applicable, specified in a notice
delivered by the applicable Borrower, or the Company on behalf of the applicable Borrower, in
accordance with the requirements of Section 2.03). The deemed payments made pursuant to clause
(ii) of the immediately preceding sentence shall be accompanied by payment of all accrued interest
on the amount prepaid and, in respect of each Eurocurrency Loan, shall be subject to
indemnification by the Borrowers pursuant to the provisions of Section 2.16 if the deemed payment
occurs other than on the last day of the related Interest Periods. The Incremental Term Loans (a)
shall rank pari passu in right of payment with the Revolving Loans and the initial Term Loans, (b)
shall not mature earlier than the Term Loan Maturity Date (but may have amortization prior to such
date) and (c) shall be treated substantially the same as (and in any event no more favorably than)
the Revolving Loans and the initial Term Loans, provided that (i) the terms and conditions
applicable to any tranche of Incremental Term Loans maturing after the Term Loan Maturity Date may
provide for material additional or different financial or other covenants or prepayment
requirements applicable only during periods after the Term Loan Maturity Date and (ii) the
Incremental Term Loans may be priced differently than the Revolving Loans and the initial Term
Loans.
SECTION 2.21. Market Disruption. Notwithstanding the satisfaction of all conditions
referred to in Article II and Article IV with respect to any Borrowing to be effected in any
Foreign Currency, if (i) there shall occur on or prior to the date of such Borrowing any change in
national or international financial, political or economic conditions or currency exchange rates or
exchange controls which would in the reasonable opinion of the Administrative Agent, the Issuing
Bank (if such Credit Event is a Letter of Credit) or the Required Lenders make it impracticable for
the applicable Eurocurrency Borrowings or Letters of Credit comprising such Credit Event to be
denominated in the Agreed Currency specified by the applicable Borrower or (ii) an Equivalent
Amount of such currency is not readily calculable, then the Administrative Agent shall forthwith
give notice thereof to such Borrower, the Lenders and, if such Credit Event is a Letter of Credit,
the Issuing Bank, and such Credit Events shall not be denominated in such Agreed Currency but
shall, except as otherwise set forth in Section 2.07, be made on the date of such Credit Event in
Dollars, (a) if such Credit Event is a Borrowing, in an aggregate principal amount equal to the
Dollar Amount of the aggregate principal amount specified in the related Borrowing Request or
Interest Election Request, as the case may be, unless such Borrower notifies the Administrative
Agent at least one (1) Business Day before such date that (i) it elects not to borrow on such date
or (ii) it elects to borrow on such date in a different Agreed Currency, as the case may be, in
which the denomination of such Loans would, in the reasonable opinion of the Administrative Agent
and the Required Lenders, be practicable and in an aggregate principal amount equal to the Dollar
Amount of the aggregate principal amount specified in the related Borrowing Request or Interest
Election Request, as the case may be or (b) if such Credit Event is a Letter of Credit, in a face
amount equal to the Dollar Amount of the face amount specified in the related request or
application for such Letter of Credit, unless such Borrower notifies the Administrative Agent at
least one (1) Business Day before such date that (i) it elects not to request the issuance of such
Letter of Credit on such date or (ii) it elects to have such Letter of Credit issued on such date
in a different Agreed Currency, as the case may be, in which the denomination of such Letter of
Credit would in the reasonable opinion of the Issuing Bank, the Administrative Agent and the
Required Lenders be practicable and in face amount equal to the Dollar Amount of the face amount
specified in the related request or application for such Letter of Credit, as the case may be.
47
SECTION 2.22. Judgment Currency. If for the purposes of obtaining judgment in any
court it is necessary to convert a sum due from any Borrower hereunder in the currency expressed to
be payable herein (the specified currency) into another currency, the parties hereto
agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall
be that at which in accordance with normal banking procedures the Administrative Agent could
purchase the specified currency with such other currency at the Administrative Agents main New
York City office on the Business Day preceding that on which final, non appealable judgment is
given. The obligations of each Borrower in respect of any sum due to any Lender or the
Administrative Agent hereunder shall, notwithstanding any judgment in a currency other than the
specified currency, be discharged only to the extent that on the Business Day following receipt by
such Lender or the Administrative Agent (as the case may be) of any sum adjudged to be so due in
such other currency such Lender or the Administrative Agent (as the case may be) may in accordance
with normal, reasonable banking procedures purchase the specified currency with such other
currency. If the amount of the specified currency so purchased is less than the sum originally due
to such Lender or the Administrative Agent, as the case may be, in the specified currency, each
Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the Administrative Agent, as the
case may be, against such loss, and if the amount of the specified currency so purchased exceeds
(a) the sum originally due to any Lender or the Administrative Agent, as the case may be, in the
specified currency and (b) any amounts shared with other Lenders as a result of allocations of such
excess as a disproportionate payment to such Lender under Section 2.18, such Lender or the
Administrative Agent, as the case may be, agrees to remit such excess to such Borrower.
ARTICLE III
Representations and Warranties
Each Borrower represents and warrants to the Lenders as of the Effective Date and (except as
to representations and warranties made as of a date certain) as of the date such representations
and warranties are deemed to be made under Section 4.02 of this Agreement, that:
SECTION 3.01. Organization; Powers; Subsidiaries. Each of the Company and its
Subsidiaries is duly organized, validly existing and in good standing (to the extent such concept
is applicable in the relevant jurisdiction) under the laws of the jurisdiction of its organization,
has all requisite power and authority to carry on its business as now conducted and, except where
the failure to do so, individually or in the aggregate, could not reasonably be expected to result
in a Material Adverse Effect, is qualified to do business in, and is in good standing (to the
extent such concept is applicable) in, every jurisdiction where such qualification is required.
Schedule 3.01 hereto (as supplemented from time to time) identifies each Subsidiary, if
such Subsidiary is a Material Domestic Subsidiary, the jurisdiction of its incorporation or
organization, as the case may be, the percentage of issued and outstanding shares of each class of
its capital stock or other equity interests owned by the Company and the other Subsidiaries and, if
such percentage is not 100% (excluding directors qualifying shares as required by law), a
description of each class issued and outstanding. All of the outstanding
48
shares of capital stock and other equity interests, to the extent owned by the Company or any
Subsidiary, of each Subsidiary are validly issued and outstanding and fully paid and nonassessable
and all such shares and other equity interests indicated on Schedule 3.01 as owned by the
Company or another Subsidiary are owned, beneficially and of record, by the Company or any
Subsidiary free and clear of all Liens, other than Liens permitted under Section 6.02. As of the
Effective Date, there are no outstanding commitments or other obligations of the Company or any
Subsidiary to issue, and no options, warrants or other rights of any Person to acquire, any shares
of any class of capital stock or other equity interests of the Company or any Subsidiary, except as
disclosed on Schedule 3.01.
SECTION 3.02. Authorization; Enforceability. The Transactions are within each Loan
Partys corporate powers and have been duly authorized by all necessary corporate and, if required,
stockholder action. The Loan Documents have been duly executed and delivered by the Loan Parties
and constitute a legal, valid and binding obligation of the Loan Parties party thereto, enforceable
in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other action by, any
Governmental Authority, except such as have been obtained or made and are in full force and effect,
(b) will not violate any material applicable law or material regulation or the charter, by-laws or
other organizational documents of any Loan Party or any order of any Governmental Authority, (c)
will not violate or result in a default under any indenture, material agreement or other material
instrument binding upon any Loan Party or its assets, or give rise to a right thereunder to require
any payment to be made by any Loan Party, and (d) will not result in the creation or imposition of
any Lien on any material asset of any Loan Party.
SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Company
has heretofore furnished to the Lenders its consolidated balance sheet and statements of income,
stockholders equity and cash flows (i) as of and for the fiscal year ended March 31, 2006 reported
on by Deloitte & Touche LLP independent public accountants and (ii) as of and for the fiscal
quarter and the portion of the fiscal year ended December 31, 2006, certified by its chief
financial officer. Such financial statements present fairly, in all material respects, the
financial position and results of operations and cash flows of the Company and its consolidated
Subsidiaries as of such dates and for such periods in accordance with GAAP.
(b) Since March 31, 2006, there has been no material adverse change in the business,
assets, properties or financial condition of the Company and its Subsidiaries, taken as a whole.
SECTION 3.05. Properties. (a) Each of the Company and its Subsidiaries has title
in fee simple to, or valid leasehold interests in, all its material real and personal property
material to its business, except for minor defects in title that do not interfere with its ability
to conduct its business as currently conducted or to utilize such properties for their intended
purposes. There are no Liens on any of the material real or personal properties of the Company
or any Subsidiary except for Liens permitted by Section 6.02.
49
(b) Each of the Company and its Subsidiaries owns, or is licensed to use, all trademarks,
tradenames, copyrights, patents and other intellectual property necessary to its business, and,
to the knowledge of any Borrower, the use thereof by the Company and its Subsidiaries does not
infringe upon the rights of any other Person, except for any such infringements that,
individually or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions,
suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to
the knowledge of any Borrower, threatened against or affecting the Company or any of its
Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and
that, if adversely determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve this
Agreement or the Transactions. There are no labor controversies pending against or, to the
knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries
(i) which could reasonably be expected, individually or in the aggregate, to result in a Material
Adverse Effect, or (ii) that involve this Agreement or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any other matters that,
individually or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect, neither the Company nor any of its Subsidiaries (i) has failed to comply with
any Environmental Law or to obtain, maintain or comply with any permit, license or other
approval required under any Environmental Law, (ii) has become subject to any Environmental
Liability, (iii) has received notice of any claim with respect to any Environmental Liability or
(iv) knows of any basis for any Environmental Liability.
SECTION 3.07. Compliance with Laws and Agreements. Each of the Company and its
Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority
applicable to it or its property and all indentures, agreements and other instruments binding upon
it or its property, except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.08. Investment Company Status. Neither the Company nor any of its
Subsidiaries is an investment company as defined in, or subject to regulation under, the
Investment Company Act of 1940.
SECTION 3.09. Taxes. Each of the Company and its Subsidiaries has timely filed or
caused to be filed all material Tax returns and material reports required to have been filed and
has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are
being contested in good faith by appropriate proceedings and for which the Company or such
Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP or
(b) to the extent that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events for which liability
50
is reasonably expected to occur, could reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.11. Disclosure. The Company has disclosed to the Lenders all agreements,
instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject,
and all other matters known to it, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. Neither the Information Memorandum nor any of the
other reports, financial statements, certificates or other written information (excluding any
financial projections, pro forma financial information or projected industry data) furnished by or
on behalf of the Company to the Administrative Agent or any Lender in connection with the
negotiation of this Agreement or delivered hereunder (as modified or supplemented by other
information so furnished), when taken as a whole and when taken together with the Companys SEC
filings, contains as of the date of such statement, information, document or certificate was so
furnished any material misstatement of fact or omits to state any material fact necessary to make
the statements therein, in the light of the circumstances under which they were made, not
misleading. The projections and pro forma financial information contained in the materials
referenced above are based upon good faith estimates and assumptions believed by management of the
Company to be reasonable at the time made, it being recognized by the Lenders that such financial
information as it relates to future events is not to be viewed as fact and that actual results
during the period or periods covered by such financial information may differ from the projected
results set forth therein by a material amount. The projected industry data concerning the Company
and the Subsidiaries or the transactions contemplated hereby was derived from sources believed by
Company to be reasonably reliable.
SECTION 3.12. Federal Reserve Regulations. No part of the proceeds of any Loan have
been used or will be used, whether directly or indirectly, for any purpose that entails a violation
of any of the Regulations of the Board, including Regulations T, U and X.
SECTION 3.13. No Default. No Default or Event of Default has occurred and is
continuing.
SECTION 3.14. Dutch Financial Supervision Act. To the extent the Dutch Borrower
would qualify as a credit institution (kredietinstelling) under the Dutch Financial Supervision
Act, it is in compliance therewith.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of
the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on
which each of the following conditions is satisfied (or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have received from (i) each party
hereto either (A) a counterpart of this Agreement signed on behalf of such party or (B)
written evidence satisfactory to the Administrative Agent (which may include
51
telecopy or electronic mail transmission in accordance with Section 9.01(b) of a signed
signature page of this Agreement) that such party has signed a counterpart of this Agreement
and (ii) each initial Subsidiary Guarantor either (A) a counterpart of the Subsidiary
Guaranty signed on behalf of such Subsidiary Guarantor or (B) written evidence satisfactory
to the Administrative Agent (which may include telecopy or electronic mail transmission in
accordance with Section 9.01(b) of a signed signature page of the Subsidiary Guaranty) that
such Subsidiary Guarantor has signed a counterpart of the Subsidiary Guaranty.
(b) The Administrative Agent shall have received the executed legal opinions of
Skadden, Arps, Slate, Meagher & Flom LLP, special U.S. counsel to the Loan Parties
substantially in the form of Exhibit B-1, from Kristin Kolesar, Esq. or Roger
Foster, Esq., corporate counsels to the Company covering the matters set forth in
Exhibit B-2, from Allen & Overy LLP, special Dutch counsel to the Loan Parties
substantially in the form of Exhibit B-3, and covering such other matters relating
to the Loan Parties, the Loan Documents or the Transactions as the Required Lenders shall
reasonably request. The Company hereby requests such counsel to deliver such opinion.
(c) The Lenders shall have received (i) audited consolidated financial statements of
the Company for the two most recent fiscal years ended prior to the Effective Date as to
which such financial statements are available, (ii) unaudited interim consolidated financial
statements of the Company for each quarterly period ended subsequent to the date of the
latest financial statements delivered pursuant to clause (i) of this paragraph as to which
such financial statements are available and (iii) financial statement projections
(reasonably satisfactory to the Administrative Agent) through and including the Companys
2012 fiscal year (pro forma for recent acquisitions), together with such information as the
Administrative Agent and the Lenders shall reasonably request (including, without
limitation, a detailed description of the assumptions used in preparing such projections).
(d) The Administrative Agent shall have received such documents and certificates as
the Administrative Agent or its counsel may reasonably request relating to the organization,
existence and good standing of the initial Loan Parties, the authorization of the
Transactions and any other legal matters relating to such Loan Parties, the Loan Documents
or the Transactions, all in form and substance satisfactory to the Administrative Agent and
its counsel and as further described in the list of closing documents attached as
Exhibit E.
(e) The Administrative Agent shall have received from the Dutch Borrower a
confirmation by an authorized signatory of the Dutch Borrower that there is no central works
council (centrale ondernemingsraad) or works council (ondernemingsraad) with jurisdiction
over the transactions as envisaged by this Agreement, or, if a (central) works council is
established, a confirmation that all consultation obligations in respect of such (central)
works council have been complied with and that positive unconditional advice has been
obtained, attaching a copy of such advice and a copy of the request for such advice.
52
(f) The Administrative Agent shall have received a certificate, dated the Effective
Date and signed by the President, a Vice President or a Financial Officer of the Company,
confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section
4.02.
(g) The Administrative Agent shall have received all fees and other amounts due and
payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement
or payment of all reasonable out-of-pocket expenses required to be reimbursed or paid by the
Company hereunder.
The Administrative Agent shall notify the Company and the Lenders of the Effective Date, and such
notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the
Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02)
at or prior to 3:00 p.m., New York City time, on the Effective Date (and, in the event such
conditions are not so satisfied or waived, the Commitments shall terminate at such time).
SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the
occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or extend any Letter of
Credit, is subject to the satisfaction of the following conditions:
(a) The representations and warranties of the Borrowers set forth in this Agreement
shall be true and correct in all material respects on and as of the date of such Borrowing
or the date of issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, except where any representation and warranty is expressly made as of a specific
earlier date, such representation and warranty shall be true in all material respects as of
any such earlier date.
(b) At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no
Default shall have occurred and be continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be
deemed to constitute a representation and warranty by the Borrowers on the date thereof as to the
matters specified in paragraphs (a) and (b) of this Section.
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the principal of and interest on
each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit
shall have expired or terminated and all LC Disbursements shall have been reimbursed, each Borrower
covenants and agrees with the Lenders that:
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SECTION 5.01. Financial Statements and Other Information. The Company will furnish
to the Administrative Agent (who shall promptly furnish a copy to each Lender):
(a) as soon as available, but in any event within ninety (90) days after the end of
each fiscal year of the Company, its audited consolidated balance sheet and related
statements of operations, stockholders equity and cash flows as of the end of and for such
year, setting forth in each case in comparative form the figures for the previous fiscal
year, all reported on by Deloitte & Touche LLP or other independent public accountants of
recognized national standing (without a going concern or like qualification or exception
and without any qualification or exception as to the scope of such audit) to the effect that
such consolidated financial statements present fairly in all material respects the financial
condition and results of operations of the Company and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
(b) as soon as available, but in any event within forty-five (45) days after the end
of each of the first three fiscal quarters of each fiscal year of the Company, its unaudited
consolidated balance sheet and related statements of operations, stockholders equity and
cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the
fiscal year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of the end of)
the previous fiscal year, all certified by one of its Financial Officers as presenting
fairly in all material respects the financial condition and results of operations of the
Company and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the absence of
footnotes;
(c) concurrently with any delivery of financial statements under clause (a) or (b)
above, a certificate substantially in the form of Exhibit H executed by a Financial
Officer of the Company (i) certifying as to whether a Default has occurred and, if a Default
has occurred, specifying the details thereof and any action taken or proposed to be taken
with respect thereto and (ii) setting forth reasonably detailed calculations demonstrating
compliance with Sections 6.07;
(d) concurrently with any delivery of financial statements under clause (a) above, a
certificate of the accounting firm that reported on such financial statements stating
whether they obtained knowledge during the course of their examination of such financial
statements of any failure to comply with Section 6.07 (which certificate may be limited to
the extent required by accounting rules or guidelines or by such accounting firms
professional standards and customs of the profession);
(e) promptly upon receipt thereof, copies of all management letters submitted to the
Company by the independent public accountants referred to in clause (a) above in connection
with each audit made by such accountants;
(f) promptly after the same become publicly available, copies of all periodic and
other reports, proxy statements and other materials filed by the Company or any
54
Subsidiary with the Securities and Exchange Commission, or any Governmental Authority
succeeding to any or all of the functions of said Commission, or with any national
securities exchange, or distributed by the Company to its shareholders generally, as the
case may be;
(g) promptly following any request therefor, such other information regarding the
operations, business affairs and financial condition of the Company or any Subsidiary, or
compliance with the terms of this Agreement, as the Administrative Agent or any Lender
(through the Administrative Agent) may reasonably request; and
(h) concurrently with the delivery thereof pursuant to the terms of the Senior Notes
and the Senior Note Indenture, copies of any compliance certificate delivered thereunder
evidencing compliance with the terms and conditions thereof.
Financial statements and other information required to be delivered pursuant to Sections 5.01(a),
5.01(b) and 5.01(f) shall be deemed to have been delivered if such statements and information shall
have been posted by the Company on its website or shall have been posted on Intralinks or similar
site to which all of the Lenders have been granted access.
SECTION 5.02. Notices of Material Events. The Company will furnish to the
Administrative Agent and each Lender prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or before any
arbitrator or Governmental Authority against or affecting the Company or any Affiliate
thereof that could reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any other ERISA
Events that have occurred, could reasonably be expected to result in a Material Adverse
Effect; and
(d) any other development that results in, or could reasonably be expected to result
in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer
or other executive officer of the Company setting forth the details of the event or development
requiring such notice and any action taken or proposed to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business. The Company will, and will cause each
of its Material Subsidiaries to, do or cause to be done all things necessary to preserve, renew and
keep in full force and effect (i) its legal existence and (ii) the rights, licenses, permits,
privileges and franchises material to the conduct of its business, except, in the case of the
preceding clause (ii), to the extent that the failure to do so could not reasonably be expected to
have a Material Adverse Effect; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 6.03.
55
SECTION 5.04. Payment of Obligations. The Company will, and will cause each of its
Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could
reasonably be expected to result in a Material Adverse Effect before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) the Company or such Subsidiary has set aside on its
books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make
payment pending such contest could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 5.05. Maintenance of Properties; Insurance. The Company will, and will cause
each of its Material Subsidiaries to, (a) keep and maintain all Property material to the conduct of
its business in good working order and condition, ordinary wear and tear excepted, and (b)
maintain, with financially sound and reputable insurance companies or through self-insurance,
insurance in such amounts and against such risks as are customarily maintained by companies engaged
in the same or similar businesses operating in the same or similar locations.
SECTION 5.06. Books and Records; Inspection Rights. The Company will, and will cause
each of its Subsidiaries to, keep proper books of record and account in which full, true and
correct entries in conformity with GAAP, if applicable, or (in the case of a Subsidiary that is not
a Domestic Subsidiary) other local accounting standards, if applicable, and requirements of
applicable law are made of all dealings and transactions in relation to its business and
activities. The Company will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice,
to visit and inspect its properties, to examine and make extracts from its books and records, and
to discuss its affairs, finances and condition with its officers and use commercially reasonable
efforts to make its independent accountants available to discuss the affairs, finances and
condition of the Borrowers, all at such reasonable times and as often as reasonably requested;
provided, that (i) the Lenders will conduct such requests for visits and inspections
through the Administrative Agent and (ii) unless an Event of Default has occurred and is
continuing, such visits and inspections can occur no more frequently than once per year.
SECTION 5.07. Compliance with Laws; Compliance with Agreements. The Company will,
and will cause each of its Subsidiaries to, (i) comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to it or its property (including without limitation
Environmental Laws) and (ii) perform in all material respects its obligations under material
agreements to which it is a party, in each case except where the failure to do so, individually or
in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.08. Use of Proceeds and Letters of Credit. The proceeds of the Loans will
be used only to finance the working capital needs, and for general corporate purposes (including
refinancing of existing Indebtedness and investments), of the Company and its Subsidiaries. No
part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that
entails a violation of any of the Regulations of the Board, including Regulations T, U and X.
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SECTION 5.09. Subsidiary Guaranty. As promptly as possible but in any event within
thirty (30) days (or such later date as may be agreed upon by the Administrative Agent) after any
Person becomes (or is designated as) a Material Domestic Subsidiary or a Required Domestic
Subsidiary (other than a Restricted Subsidiary or a Receivables Entity), the Company shall provide
the Administrative Agent with written notice thereof setting forth information in reasonable detail
describing the material assets of such Person and shall cause each such Subsidiary to deliver to
the Administrative Agent a Subsidiary Guaranty in the form of Exhibit F pursuant to which
such Subsidiary agrees to be bound by the terms and provisions thereof, and such Subsidiary
Guaranty to be accompanied by appropriate corporate resolutions, other corporate documentation and
legal opinions in form and substance reasonably satisfactory to the Administrative Agent and its
counsel.
ARTICLE VI
Negative Covenants
Until the Commitments have expired or terminated and the principal of and interest on each
Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired
or terminated and all LC Disbursements shall have been reimbursed, each Borrower covenants and
agrees with the Lenders that:
SECTION 6.01. Subsidiary Indebtedness. The Company will not permit any Subsidiary to
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness created under the Loan Documents;
(b) Indebtedness existing on the date hereof and set forth in Schedule 6.01
and extensions, renewals, amendments, restatements, refinancings and replacements of any
such Indebtedness with Indebtedness that does not increase the outstanding principal amount
thereof;
(c) Indebtedness of (i) any Loan Party to any other Loan Party, (ii) any Subsidiary to
any Loan Party and (iii) any Subsidiary that is not a Loan Party to any other Subsidiary
that is not a Loan Party;
(d) Guarantees by any Subsidiary of Indebtedness of the Company or any other
Subsidiary, all to the extent permitted by this Section 6.01;
(e) Indebtedness incurred to finance the acquisition, construction or improvement of
any fixed or capital assets, including Capital Lease Obligations and any Indebtedness
assumed in connection with the acquisition of any such assets or secured by a Lien on any
such assets prior to the acquisition thereof, and extensions, renewals, amendments,
restatements, refinancings and replacements of any such Indebtedness that do not increase
the outstanding principal amount thereof; provided that (i) such Indebtedness (other
than a refinancing permitted above in this clause (e)) is incurred prior to or within one
hundred and eighty (180) days after such acquisition or the completion of such
57
construction or improvement and (ii) the aggregate principal amount of Indebtedness
permitted by this clause (e) shall not exceed $50,000,000 at any time outstanding;
(f) Indebtedness of any Subsidiary as an account party in respect of trade letters of
credit;
(g) Indebtedness incurred pursuant to Permitted Receivables Facilities;
provided that the Attributable Receivables Indebtedness thereunder shall not exceed
an aggregate amount of $250,000,000 at any time outstanding;
(h) Guarantee obligations of any Subsidiary Guarantor in respect of the Senior Notes;
(i) Indebtedness of Subsidiaries which are not Subsidiary Guarantors (including
Guarantee Obligations) in an aggregate amount not exceeding an amount equal to 10% of
Consolidated Total Assets (or the foreign equivalent thereof) at any time outstanding;
(j) Indebtedness under Swap Agreements entered into in the ordinary course of business
and not for speculative purposes;
(k) Indebtedness in respect of bid, performance, surety, appeal or replevin bonds
issued in the ordinary course of business, including guarantees or obligations of any
Subsidiary with respect to letters of credit supporting such obligation, in each case, not
in connection with Indebtedness for money borrowed;
(l) Indebtedness in respect of judgments or awards not deemed to be a default under
Section 7(k);
(m) Indebtedness consisting of customary purchase price adjustments, earn-outs,
indemnification obligations and similar items incurred in connection with acquisitions and
asset sales not restricted by Section 6.03;
(n) (i) Indebtedness of a Person existing at the time such Person becomes a Subsidiary
and not created in contemplation thereof; provided, that after giving effect to the
acquisition of such Person, the Company would be in compliance on a Pro Forma Basis with
each of the covenants set forth in Section 6.07 (giving effect, if necessary, to the
increase in the permitted maximum Consolidated Leverage Ratio in connection with a Material
Acquisition set forth in Section 6.07(b) on the date of such Acquisition) and (ii) any
refinancings, refundings, renewals, replacements or extensions thereof (without any increase
in the principal amount thereof or any shortening of the maturity of any principal amount
thereof or the addition of any obligors thereunder other than the Person so acquired);
(o) Indebtedness of any of the Companys Subsidiaries in an aggregate amount not to
exceed the foreign currency equivalent of $10,000,000 in respect of letters of credit
denominated in currencies other than Dollars;
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(p) Indebtedness in the form of loans and advances to employees, and the guarantees of
loans and advances to employees, in an aggregate amount not to exceed $5,000,000 at any one
time outstanding;
(q) Indebtedness under the Credit Agreement, dated as of July 24, 2006, by and among
the Company, the lenders party thereto and JPMorgan Chase Bank, National Association as
administrative agent, as amended, restated, supplemented and otherwise modified from time to
time; and
(r) additional Indebtedness of any of the Subsidiary Guarantors so long as no Event of
Default has occurred and is continuing or would arise after giving effect thereto and the
Company and the Subsidiaries are in compliance on a Pro Forma Basis (giving effect, if
necessary, to the increase in the permitted maximum Consolidated Leverage Ratio in
connection with a Material Acquisition set forth in Section 6.07(b) on the date of such
Acquisition) with the covenants contained in Section 6.07.
SECTION 6.02. Liens. The Company will not, and will not permit any Subsidiary to,
create, incur, assume or permit to exist any Lien on any Property now owned or hereafter acquired
by it, or assign or sell any income or revenues (including accounts receivable) or rights in
respect of any thereof, except:
(a) Permitted Encumbrances;
(b) any Lien on any Property of the Company or any Subsidiary existing on the date
hereof and set forth in Schedule 6.02; provided that (i) such Lien shall not
apply to any other Property of the Company or any Subsidiary and (ii) such Lien shall secure
only those obligations which it secures on the date hereof and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount thereof;
(c) any Lien existing on any Property prior to the acquisition thereof by the Company
or any Subsidiary or existing on any Property of any Person that becomes a Subsidiary after
the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such
Lien is not created in contemplation of or in connection with such acquisition or such
Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any
other Property of the Company or any Subsidiary and (iii) such Lien shall secure only those
obligations which it secures on the date of such acquisition or the date such Person becomes
a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do
not increase the outstanding principal amount thereof;
(d) Liens on fixed or capital assets acquired, constructed or improved by the Company
or any Subsidiary; provided that (i) such security interests secure Indebtedness
permitted by clause (e) of Section 6.01, (ii) such security interests and the Indebtedness
secured thereby (other than refinancing Indebtedness permitted by clause (e) of Section
6.01) are incurred prior to or within one hundred eighty (180) days after such acquisition
or the completion of such construction or improvement, (iii) the Indebtedness secured
thereby does not exceed the cost of acquiring, constructing or improving such fixed or
59
capital assets and (iv) such security interests shall not apply to any other Property
of the Company or any Subsidiary;
(e) rights of setoff and similar arrangements and Liens in favor of depository and
securities intermediaries to secure customary fees and similar amounts related to bank
accounts or securities accounts;
(f) Liens in connection with or to secure Indebtedness arising under Permitted
Receivables Facilities;
(g) Liens on assets of a Subsidiary which is not a Subsidiary Guarantor securing
Indebtedness of such Subsidiary pursuant to Section 6.01(i);
(h) Liens on earnest money or similar deposits in connection with acquisitions not
restricted by Section 6.03;
(i) Liens on cash and cash equivalents securing Indebtedness permitted by Section
6.01(o);
(j) Liens in connection with Indebtedness permitted by Section 6.01(n); and
(k) Liens not otherwise permitted by this Section 6.02 so long as the aggregate
outstanding principal amount of the obligations secured thereby subject to such Liens does
not exceed 10% of Consolidated Total Assets at any time outstanding.
SECTION 6.03. Fundamental Changes. (a) The Company will not, and will not permit
any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one
transaction or in a series of transactions) all or substantially all of its assets, or all or
substantially all of the Equity Interests of any of its Subsidiaries (in each case, whether now
owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and
immediately after giving effect thereto no Event of Default shall have occurred and be continuing:
(i) the Company may enter into and consummate Permitted Acquisitions;
(ii) any Person may merge with or into or consolidate with a Loan Party (other than a
Borrower), or such Loan Party (other than a Borrower) may sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) all of substantially all of
its Property to such Person, in a transaction in which (a) the surviving entity is such Loan
Party or (b) if the surviving entity will not be the Loan Party, simultaneously with such
transaction, the Person formed by such consolidation or into which such Loan Party is
merged, or the Person which acquires by sale, lease, transfer or other disposition all or
substantially all of such Loan Partys Property shall, if such Subsidiary is a Required
Domestic Subsidiary or a Material Domestic Subsidiary, become a Subsidiary Guarantor and the
Company shall comply with Section 5.09 in connection therewith (it being understood and
agreed that a Loan Party shall not be merged with, and shall not dispose all or
substantially all of its Property to, a Person organized in a jurisdiction located outside
of the United States of America);
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(iii) any Subsidiary may sell, transfer, lease or otherwise dispose of all or
substantially all of its assets to the Company or to another Loan Party;
(iv) the Company or any Subsidiary may sell Receivables under Permitted Receivables
Facilities (subject to the limitation that the Attributable Receivables Indebtedness
thereunder shall not exceed an aggregate amount of $250,000,000);
(v) any Subsidiary may liquidate or dissolve, or the Company or any Subsidiary may
sell, transfer, lease or otherwise dispose of all or substantially all of the Equity
Interests of any of its Subsidiaries, if the Company or such Subsidiary, as applicable,
determines in good faith that such liquidation or dissolution is in the best interests of
the Company and its Subsidiaries, considered as a whole, and is not materially
disadvantageous to the Lenders; and
(vi) any Subsidiary that is not a Subsidiary Guarantor may merge with or into or
consolidate with any other Subsidiary that is not a Subsidiary Guarantor or any other Person
that will become a Subsidiary following such transaction, and may sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of transactions) any or all of its
Property (upon voluntary liquidation or otherwise) to any other Subsidiary or any other
Person that will become a Subsidiary following such transaction.
(b) The Company will not, and will not permit any of its Subsidiaries to, engage to any
material extent in any business other than businesses of the type conducted by the Company and
its Subsidiaries on the date of execution of this Agreement and businesses reasonably related,
ancillary or complementary thereto and reasonable extensions thereof.
SECTION 6.04. Restricted Payments. The Company will not, and will not permit any of
its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any
Restricted Payment, except (a) the Company may declare and pay dividends with respect to its Equity
Interests payable solely in additional shares of its common stock or options to purchase common
stock, (b) Subsidiaries may declare and pay dividends ratably with respect to their Equity
Interests, (c) the Company may make Restricted Payments pursuant to and in accordance with stock
option plans or other benefit plans for present or former management or employees of the Company
and its Subsidiaries, (d) the Company may pay cash dividends on its common stock in an amount not
to exceed $0.06 per share in any fiscal quarter (as adjusted so that the aggregate amount payable
pursuant to this clause (d) is not increased or decreased solely as a result of any stock-split,
stock dividend or similar reclassification) plus the payment of pro rata dividends on shares
subject to issuance pursuant to outstanding options for each fiscal quarter thereafter; and (e) the
Company may make any other Restricted Payment; provided that the Company may only make the
Restricted Payments permitted under the foregoing clauses (c), (d) and (e) so long as (i) no Event
of Default has occurred and is continuing or would arise after giving effect thereto and the
Company and the Subsidiaries are in compliance on a Pro Forma Basis (giving effect, if necessary,
to the increase in the permitted maximum Consolidated Leverage Ratio in connection with a Material
Acquisition set forth in Section 6.07(b) on the date of such Acquisition), both before and
immediately after giving effect to such Restricted Payment with the covenants contained in Section
6.07 and the Company shall have delivered to the Administrative Agent a certificate of a Financial
Officer of the Company to such effect, together
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with all relevant financial information reasonably requested by the Administrative Agent and
(ii) such Restricted Payment is then not restricted under the Senior Note Indenture.
SECTION 6.05. Transactions with Affiliates. The Company will not, and will not
permit any of its Subsidiaries to, sell, lease or otherwise transfer any Property to, or purchase,
lease or otherwise acquire any Property from, or otherwise engage in any other transactions with,
any of its Affiliates, except (a) at prices and on terms and conditions not less favorable to the
Company or such Subsidiary than could be obtained on an arms-length basis from unrelated third
parties, (b) transactions between or among the Company and its Subsidiaries not involving any other
Affiliate, (c) pay reasonable and customary fees to and the provision of indemnity on behalf of,
directors, officers, employees or members of the Boards of Directors of the Company or such
Subsidiary, (d) make loans and advances to employees in the ordinary course of business, (e) make
Restricted Payments permitted under Section 6.04, (f) employment arrangements entered into in the
ordinary course of business with officers of the Company or its Subsidiaries, and (g) the
transactions set forth in Schedule 6.05.
SECTION 6.06. Changes in Fiscal Year. The Company will not, nor will it permit any
of its Subsidiaries to, change its fiscal year from the basis in effect on the Effective Date.
SECTION 6.07. Financial Covenants.
(a) Minimum Consolidated Interest Coverage Ratio. The Company will not permit the
Consolidated Interest Coverage Ratio, determined as of the end of each of its fiscal quarters
for the period of four (4) consecutive fiscal quarters ending with the end of such fiscal
quarter, to be less than 3.0 to 1.0.
(b) Maximum Consolidated Leverage Ratio. The Company will not permit the
Consolidated Leverage Ratio, determined as of the end of each of its fiscal quarters ending for
the period of four (4) consecutive fiscal quarters ending with the end of such fiscal quarter,
to be greater than 3.5 to 1.0; provided that if the Company has consummated a Material
Acquisition and at the end of the fiscal quarter in which such Material Acquisition was
consummated (such quarter, the Trigger Quarter) the Consolidated Leverage Ratio is
(or, if calculated on a Pro Forma Basis, would be) greater than 3.5 to 1.0, then the
Consolidated Leverage Ratio may be greater than 3.5 to 1.0 but less than or equal to 4.5 to 1.0
for the Trigger Quarter and for the seven (7) fiscal quarters immediately following the Trigger
Quarter (such eight-quarter period, the Covenant Holiday); provided,
further, that in the event the Company consummates another Material Acquisition during
the Covenant Holiday, such subsequent Material Acquisition will not give rise to another Trigger
Quarter and Covenant Holiday unless the Companys Consolidated Leverage Ratio prior to such
subsequent Material Acquisition shall have been reduced back down to 3.5 to 1.0 or less for at
least one fiscal quarter. Notwithstanding anything contained in this Section to the contrary,
the Company will not permit the Consolidated Leverage Ratio to be greater than 4.0 to 1.0 for
the final two (2) fiscal quarters prior to the Term Loan Maturity Date.
SECTION 6.08. Restrictive Agreements. The Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any
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agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the
ability of the Company or any Subsidiary to create, incur or permit to exist any Lien upon any of
its property or assets, or (b) the ability of any Subsidiary to pay dividends or other
distributions with respect to holders of its Equity Interests or to make or repay loans or advances
to the Company or any other Subsidiary or to Guarantee Indebtedness of the Company or any other
Subsidiary; provided that the foregoing shall not apply to (i) restrictions and conditions imposed
by law or by this Agreement, (ii) restrictions and conditions existing on the date hereof (but
shall apply to any extension or renewal of, or any amendment or modification, in each case, which
expands the scope of, any such restriction or condition), (iii) customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary or any of its assets
pending such sale, provided such restrictions and conditions apply only to the Subsidiary or assets
that is to be sold and such sale is not prohibited hereunder, (iv) customary restrictions and
conditions contained in agreements relating to a Permitted Receivables Facility or the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply only to the
Subsidiary that is to be sold and such sale is not prohibited hereunder, (v) agreements binding on
a Subsidiary at the time such Subsidiary becomes a Subsidiary of the Company, (vi) restrictions set
forth in Indebtedness of a Subsidiary that is not a Subsidiary Guarantor which is permitted by this
Agreement, (vii) agreements that are customary provisions in joint venture agreements and other
similar agreements applicable to joint ventures, (vii) restrictions or conditions imposed by any
agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such Indebtedness, (viii) customary
provisions in leases, subleases, licenses, sublicenses or permits so long as such restrictions
relate only to the property subject thereto, (ix) customary provisions in leases restricting the
assignment or subletting thereof, (x) customary provisions restricting assignment or transfer of
any contract entered into in the ordinary course of business or otherwise permitted hereunder, (xi)
restrictions or conditions on Liens set forth in any Indebtedness permitted by this Agreement but
solely to the extent any such restrictions or conditions expressly permit Liens for the benefit of
the Lenders with respect to credit facilities established under this Agreement and the Obligations
under the Loan Documents, and other similar senior credit facilities and related obligations, in
each case on a senior basis and (xii) restrictions or conditions set forth in that certain Credit
Agreement dated as of July 24, 2006 among the Company, the lenders from time to time party thereto
and JPMorgan Chase Bank, National Association as administrative agent, as such agreement may be
amended, restated, or otherwise modified from time to time.
ARTICLE VII
Events of Default
If any of the following events (Events of Default) shall occur and be continuing:
(a) any Borrower shall fail to pay any principal of any Loan or any reimbursement
obligation in respect of any LC Disbursement when and as the same shall become due and payable,
whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;
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(b) any Borrower shall fail to pay any interest on any Loan or any fee or any other amount
(other than an amount referred to in clause (a) of this Article) payable under this Agreement,
when and as the same shall become due and payable, and such failure shall continue unremedied
for a period of five (5) days;
(c) any representation or warranty made or deemed made by or on behalf of any Borrower or
any Subsidiary in or in connection with this Agreement or any other Loan Document or any
amendment or modification thereof or waiver thereunder, or in any report, certificate, financial
statement or other document furnished pursuant to or in connection with this Agreement or any
other Loan Document or any amendment or modification thereof or waiver thereunder, shall prove
to have been incorrect in any material respect when made or deemed made;
(d) (i) the Company shall fail to observe or perform any covenant, condition or agreement
contained in Section 5.02, 5.03 (with respect to any Borrowers existence), 5.08 or 5.09, in
Article VI or Article X or (ii) any Loan Document shall for any reason not be or shall cease to
be in full force and effect (other than by reason of the express release thereof pursuant to
Section 9.14) or is declared to be null and void, or the Company or any Subsidiary Guarantor
takes any action for the purpose of terminating, repudiating or rescinding any Loan Document or
any of its obligations thereunder;
(e) any Borrower or any Subsidiary Guarantor, as applicable, shall fail to observe or
perform any covenant, condition or agreement contained in this Agreement (other than those
specified in clause (a), (b) or (d) of this Article) or any other Loan Document, and such
failure shall continue unremedied for a period of thirty (30) days after notice thereof from the
Administrative Agent to the Company (which notice will be given at the request of any Lender);
(f) any Borrower or any Material Subsidiary shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any Material Indebtedness, when
and as the same shall become due and payable, or if a grace period shall be applicable to such
payment under the agreement or instrument under which such Indebtedness was created, beyond such
applicable grace period;
(g) any event or condition occurs that results in any Material Indebtedness of any
Borrower or any Material Subsidiary becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or both, but, after giving
effect to any applicable grace period) the holder or holders of any Material Indebtedness or any
trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to
require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity; provided that this clause (g) shall not apply to secured Indebtedness that
becomes due as a result of the voluntary sale or transfer of the property or assets securing
such Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed
seeking (i) liquidation, reorganization or other relief in respect of any Borrower or any
Material Subsidiary or its debts, or of a substantial part of its assets, under any
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Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for any Borrower or any Material Subsidiary or for a substantial
part of its assets, and, in any such case, such proceeding or petition shall continue
undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing
shall be entered;
(i) any Borrower or any Material Subsidiary shall (i) voluntarily commence any proceeding
or file any petition seeking liquidation, reorganization or other relief under any Federal,
state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect,
(ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official
for any Borrower or any Material Subsidiary or for a substantial part of its assets, (iv) file
an answer admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action
for the purpose of effecting any of the foregoing;
(j) any Borrower or any Material Subsidiary shall become unable, admit in writing its
inability or fail generally to pay its debts as they become due;
(k) one or more final, non-appealable judgments for the payment of money in an aggregate
amount in excess of the greater of (x) $40,000,000 and (y) 10% of Consolidated EBITDA for the
four (4) most recently ended fiscal quarters of the Company, which is not fully covered by
insurance as to which the relevant insurance company has acknowledged coverage, shall be
rendered against any Borrower, any Material Subsidiary or any combination thereof and the same
shall remain unpaid or undischarged for a period of thirty (30) consecutive days during which
execution shall not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of any Borrower or any Subsidiary to enforce any such
judgment;
(l) an ERISA Event shall have occurred that, when taken together with all other ERISA
Events that have occurred, could reasonably be expected to result in a Material Adverse Effect
or in the imposition of a Lien or security interest on any assets of the Company or any
Subsidiary under Sections 401(a)(29) or 412(n) of the Code or under Section 4068 of ERISA; or
(m) a Change in Control shall occur;
then, and in every such event (other than an event with respect to any Borrower described in clause
(h) or (i) of this Article), and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders shall, by notice to the
Company, take either or both of the following actions, at the same or different times: (i)
terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be due and payable),
and thereupon the principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Borrowers accrued
65
hereunder and under the other Loan Documents, shall become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are hereby waived by the
Borrowers; and in case of any event with respect to any Borrower described in clause (h) or (i) of
this Article, the Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other Obligations accrued
hereunder and under the other Loan Documents, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are hereby waived by the
Borrowers.
ARTICLE VIII
The Administrative Agent
(a) Each of the Lenders and the Issuing Bank hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to take such actions
on its behalf and to exercise such powers as are delegated to the Administrative Agent by the
terms hereof, together with such actions and powers as are reasonably incidental thereto.
(b) The bank serving as the Administrative Agent hereunder shall have the same rights and
powers in its capacity as a Lender as any other Lender and may exercise the same as though it
were not the Administrative Agent, and such bank and its Affiliates may accept deposits from,
lend money to and generally engage in any kind of business with the Company or any Subsidiary or
other Affiliate thereof as if it were not the Administrative Agent hereunder.
(c) The Administrative Agent shall not have any duties or obligations except those
expressly set forth herein. Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless
of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have
any duty to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated hereby that the Administrative Agent is
required to exercise in writing as directed by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as provided in Section
9.02), and (c) except as expressly set forth herein, the Administrative Agent shall not have any
duty to disclose, and shall not be liable for the failure to disclose, any information relating
to the Company or any of its Subsidiaries that is communicated to or obtained by the bank
serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative
Agent shall not be liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 9.02) or in the absence of its own bad
faith, gross negligence or willful misconduct. The Administrative Agent shall be deemed not to
have knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Company or a Lender, and the Administrative Agent shall not be
responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this
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Agreement, (ii) the contents of any certificate, report or other document delivered
hereunder or in connection herewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement or any other agreement,
instrument or document, or (v) the satisfaction of any condition set forth in Article IV or
elsewhere herein, other than to confirm receipt of items expressly required to be delivered to
the Administrative Agent.
(d) The Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent, statement, instrument,
document or other writing believed by it to be genuine and to have been signed or sent by the
proper Person. The Administrative Agent also may rely upon any statement made to it orally or
by telephone and believed by it to be made by the proper Person, and shall not incur any
liability for relying thereon. The Administrative Agent may consult with legal counsel (who may
be counsel for the Company), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts in the absence of gross negligence or willful misconduct.
(e) The Administrative Agent may perform any and all its duties and exercise its rights and
powers by or through any one or more sub-agents appointed by the Administrative Agent. The
Administrative Agent and any such sub-agent may perform any and all its duties and exercise its
rights and powers through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective activities in
connection with the syndication of the credit facilities provided for herein as well as
activities as Administrative Agent.
(f) Subject to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time by notifying the
Lenders, the Issuing Bank and the Company. Upon any such resignation, the Required Lenders
shall have the right, in consultation with the Company and (unless an Event of Default shall
have occurred and be continuing) with the consent of the Company (which consent of the Company
shall not be unreasonably withheld or delayed), to appoint a successor. If no successor shall
have been so appointed by the Required Lenders and shall have accepted such appointment within
thirty (30) days after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a
successor Administrative Agent from among the Lenders which shall be a bank with an office in
New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and obligations hereunder.
The fees payable by any Borrower to a successor Administrative Agent shall be the same as those
payable to its predecessor unless otherwise agreed between such Borrower and such successor.
After the Administrative Agents resignation hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
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Administrative Agent, its sub-agents and their respective Related Parties in respect of any
actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.
(g) Each Lender acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this Agreement.
Each Lender also acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and information as it shall
from time to time deem appropriate, continue to make its own decisions in taking or not taking
action under or based upon this Agreement, any related agreement or any document furnished
hereunder or thereunder.
(h) The Lenders irrevocably authorize the Administrative Agent, at its option and in its
discretion, to release any Subsidiary Guarantor from its obligations under the Subsidiary
Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted
hereunder or ceases to be required to be a Subsidiary Guarantor pursuant to the terms hereof.
Upon request by the Administrative Agent at any time, the Required Lenders will confirm in
writing the Administrative Agents authority to release any Subsidiary Guarantor from its
obligations under the Subsidiary Guaranty pursuant to this paragraph. In each case as specified
herein, the Administrative Agent will, at the Companys expense, execute and deliver to the
applicable Loan Party such documents as such Loan Party may reasonably request to release such
Subsidiary Guarantor from its obligations under the Subsidiary Guaranty in accordance with the
terms of the Loan Documents and this paragraph.
(i) None of the Lenders, if any, identified in this Agreement as a Syndication Agent or
Co-Documentation Agent shall have any right, power, obligation, liability, responsibility or
duty under this Agreement other than those applicable to all Lenders as such. Without limiting
the foregoing, none of such Lenders shall have or be deemed to have a fiduciary relationship
with any Lender. Each Lender hereby makes the same acknowledgments with respect to the relevant
Lenders in their respective capacities as Syndication Agent or Co-Documentation Agents, as
applicable, as it makes with respect to the Administrative Agent in the preceding paragraph.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. (a) Except in the case of notices and other communications
expressly permitted to be given by telephone or other electronic communications (and subject to
paragraph (b) below), all notices and other communications provided for herein shall be in writing
and shall be delivered by hand or overnight courier service, mailed by certified or registered mail
or sent by telecopy or transmission by electronic communication, as follows:
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(i) if to any Borrower, to it c/o Mylan Laboratories Inc. at 1500 Corporate Drive,
Canonsburg, Pennsylvania 15317, Attention of Chief Financial Officer (Telecopy No. (724)
514-1871; Telephone No. (724) 514 1800); with a copy to Treasurer and (in the case of a
notice of a Default) to Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New
York, New York 10036, Attention of James Douglas, Esq. (Telecopy No. (212) 735-2000));
(ii) if to the Administrative Agent, to (A) in the case of Borrowings by the Company
denominated in Dollars, JPMorgan Chase Bank, National Association, Loan and Agency Services
Group, 10 South Dearborn, 19th Floor, Chicago, Illinois 60603, Attention of Mi Y Kim
(Telecopy No. (312) 385-7098) and (B) in the case of Borrowings by the Dutch Borrower or
denominated in Agreed Currencies other than Dollars, JPMorgan Europe Limited, 125 London
Wall, London EC2Y 5AJ, Attention of Belinda Lucas (Telecopy No. 011-44207-777-2360), and in
each case with a copy to JPMorgan Chase Bank, National Association, 277 Park Avenue, New
York, New York 10172, Attention of James P. Minton (Telecopy No. (646) 534-3081);
(iii) if to the Issuing Bank, to it at JPMorgan Chase Bank, National Association, Loan
and Agency Services Group, 10 South Dearborn, 19th Floor, Chicago, Illinois 60603, Attention
of Mi Y Kim (Telecopy No. (312) 385-7098), with a copy to JPMorgan Chase Bank, National
Association, 277 Park Avenue, New York, New York 10172, Attention of James P. Minton
(Telecopy No. (646) 534-3081);
(iv) if to the Swingline Lender, to it at JPMorgan Chase Bank, National Association,
Loan and Agency Services Group, 10 South Dearborn, 19th Floor, Chicago, Illinois 60603,
Attention of Mi Y Kim (Telecopy No. (312) 385-7098), with a copy to JPMorgan Chase Bank,
National Association, 277 Park Avenue, New York, New York 10172, Attention of James P.
Minton (Telecopy No. (646) 534-3081); and
(v) if to any other Lender, to it at its address (or telecopy number) set forth in its
Administrative Questionnaire.
(b) Notices and other communications to the Lenders hereunder may be delivered or furnished
by electronic communications pursuant to procedures approved by the Administrative Agent;
provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise
agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the
Company may, in its discretion, agree to accept notices and other communications to it hereunder
by electronic communications pursuant to procedures approved by it; provided that approval of
such procedures may be limited to particular notices or communications.
(c) Any party hereto may change its address, electronic mail address or telecopy number for
notices and other communications hereunder by notice to the other parties hereto. All notices
and other communications given to any party hereto in accordance with the provisions of this
Agreement shall be deemed to have been given on the date of delivery, or three Business Days
after being deposited in the mail, postage prepaid.
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SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative
Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other
Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any other right or power.
The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and
under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provision of this Agreement or consent to any
departure by any Borrower therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given. Without limiting the generality of
the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a
waiver of any Default, regardless of whether the Administrative Agent, any Lender or the Issuing
Bank may have had notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to an agreement or agreements in writing entered into by the Borrowers and the
Required Lenders or by the Borrowers and the Administrative Agent with the consent of the
Required Lenders; provided that no such agreement shall (i) increase the Commitment of
any Lender without the written consent of such Lender, (ii) reduce the principal amount of any
Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable
hereunder, without the written consent of each Lender affected thereby, (iii) postpone the
scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any
interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any
such payment, or postpone the scheduled date of expiration of any Commitment, without the
written consent of each Lender affected thereby, (iv) change Section 2.18(b) or (c) in a manner
that would alter the pro rata sharing of payments required thereby, without the written consent
of each Lender, (v) change any of the provisions of this Section or the definition of Required
Lenders or any other provision hereof specifying the number or percentage of Lenders required
to waive, amend or modify any rights hereunder or make any determination or grant any consent
hereunder without the written consent of each Lender, (vi) release all or substantially all of
the Subsidiary Guarantors from their obligations under the Subsidiary Guaranty, without the
written consent of each Lender or (vii) release the Company from the Company Guaranty, without
the written consent of each Lender; provided further that no such agreement
shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the
Issuing Bank or the Swingline Lender hereunder without the prior written consent of the
Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be.
Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) with the
written consent of the Required Lenders, the Administrative Agent and the Borrowers (i) to add one
or more additional credit facilities to this Agreement and to permit the extensions of credit from
time to time outstanding thereunder and the accrued interest and fees in respect thereof to share
ratably in the benefits of this Agreement and the other Loan Documents with the Term Loans and
Revolving Credit Exposures and the accrued interest and fees in respect thereof
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and (ii) to include appropriately the Lenders holding such credit facilities in any determination
of the Required Lenders.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) Each Borrower shall pay (i)
all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent and its
Affiliates, including the reasonable and documented fees, charges and disbursements of counsel for
the Administrative Agent, in connection with the syndication of the credit facilities provided for
herein, the preparation and administration of this Agreement and the other Loan Documents or any
amendments, modifications or waivers of the provisions hereof or thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable and
documented out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance,
amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and
(iii) all out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or any
Lender, including the fees, charges and disbursements of one counsel for the Administrative Agent,
and one additional counsel (and appropriate local counsel) for the Issuing Bank and the Lenders,
collectively, in connection with the enforcement or protection of its rights in connection with
this Agreement, including its rights under this Section, or in connection with the Loans made or
Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of Credit.
(b) Each Borrower shall indemnify the Administrative Agent, the Issuing Bank and each
Lender, and each Related Party of any of the foregoing Persons (each such Person being called an
Indemnitee) against, and hold each Indemnitee harmless from, any and all losses,
claims, damages, liabilities and related expenses, including the fees, charges and disbursements
of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any
agreement or instrument contemplated hereby, the performance by the parties hereto of their
respective obligations hereunder or the consummation of the Transactions or any other
transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds
therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a
Letter of Credit if the documents presented in connection with such demand do not strictly
comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release
of Hazardous Materials on or from any property owned or operated by the Company or any of its
Subsidiaries, or any Environmental Liability related in any way to the Company or any of its
Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the bad faith, gross negligence or willful
misconduct of such or any other Indemnitee.
(c) To the extent that any Borrower fails to pay any amount required to be paid by it to
the Administrative Agent, the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of
this Section, each Lender severally agrees to pay to the Administrative Agent, the Issuing Bank
or the Swingline Lender, as the case may be, such Lenders
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Applicable Percentage (determined as of the time that the applicable unreimbursed expense
or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed
expense or indemnified loss, claim, damage, liability or related expense, as the case may be,
was incurred by or asserted against the Administrative Agent, the Issuing Bank or the Swingline
Lender in its capacity as such.
(d) To the extent permitted by applicable law, no Borrower shall assert, and each Borrower
hereby waives, any claim against any Indemnitee, on any theory of liability, for special,
indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out
of, in connection with, or as a result of, this Agreement, any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or Letter of
Credit or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable not later than fifteen (15) days
after written demand therefor.
SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of
Credit), except that (i) no Borrower may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by any Borrower without such consent shall be null and void) and (ii) no
Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance
with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer
upon any Person (other than the parties hereto, their respective successors and assigns permitted
hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit),
Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and
the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b)(i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender
may assign to one or more assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans at the time owing
to it) with the prior written consent (such consent not to be unreasonably withheld) of:
(A) the Company, provided that no consent of the Company shall be
required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund
or, if an Event of Default has occurred and is continuing, any other assignee;
(B) the Administrative Agent; provided that no consent of the
Administrative Agent shall be required for an assignment of all or any portion of a
Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund; and
(C) the Issuing Bank; provided that no consent of any Issuing Bank
shall be required for an assignment of all or any portion of a Term Loan to a
Lender, an Affiliate of a Lender or an Approved Fund.
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(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an Approved Fund or an assignment of the entire remaining amount of the assigning
Lenders Commitment or Loans of any Class, the amount of the Commitment or Loans of
the assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 or, in the case of a Term
Loan, $1,000,000 unless each of the Company and the Administrative Agent otherwise
consent, provided that (1) no such consent of the Company shall be required
if an Event of Default has occurred and is continuing and (2) no assignment
(including to a Lender or an Affiliate of a Lender or an Approved Fund) shall be in
an amount of less than 50,000 (or the Equivalent Amount thereof in Dollars);
(B) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lenders rights and obligations under this Agreement,
provided that this clause shall not be construed to prohibit the assignment of a
proportionate part of all the assigning Lenders rights and obligations in respect
of one Class of Commitments or Loans;
(C) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing and
recordation fee of $3,500; and
(D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.
For the purposes of this Section 9.04(b), the term Approved Fund has the following
meaning:
Approved Fund means any Person (other than a natural person) that is engaged in
making, purchasing, holding or investing in bank loans and similar extensions of credit in the
ordinary course of its business and that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a
Lender.
(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this
Section, from and after the effective date specified in each Assignment and Assumption the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment
and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption,
be released from its obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lenders rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of
Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section
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9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (c) of this Section.
(iv) The Administrative Agent, acting for this purpose as an agent of each Borrower, shall
maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the Commitment of, and
principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms
hereof from time to time (the Register). The entries in the Register shall be
conclusive, and the Borrowers, the Administrative Agent, the Issuing Bank and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register
shall be available for inspection by the Company, the Issuing Bank and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.
(v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning
Lender and an assignee, the assignees completed Administrative Questionnaire (unless the assignee
shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph
(b) of this Section and any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption and record the
information contained therein in the Register; provided that if either the assigning Lender
or the assignee shall have failed to make any payment required to be made by it pursuant to Section
2.05(c), 2.06(d) or (e), 2.07(b), 2.18(d) or 9.03(c), the Administrative Agent shall have no
obligation to accept such Assignment and Assumption and record the information therein in the
Register unless and until such payment shall have been made in full, together with all accrued
interest thereon. No assignment shall be effective for purposes of this Agreement unless it has
been recorded in the Register as provided in this paragraph.
(c) (i) Any Lender may, without the consent of the Company, the Administrative Agent, the
Issuing Bank or the Swingline Lender, sell participations to one or more banks or other entities (a
Participant) in all or a portion of such Lenders rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that
(A) such Lenders obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of such obligations and
(C) the Borrowers, the Administrative Agent, the Issuing Bank and the other Lenders shall continue
to deal solely and directly with such Lender in connection with such Lenders rights and
obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells
such a participation shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision of this Agreement;
provided that such agreement or instrument may provide that such Lender will not, without
the consent of the Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (c)(ii) of
this Section, each Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law,
each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender,
provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender.
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(ii) A Participant shall not be entitled to receive any greater payment under Section 2.15 or
2.17 than the applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to such Participant is
made with the Companys prior written consent. A Participant that would be a Foreign Lender if it
were a Lender shall not be entitled to the benefits of Section 2.17 unless the Company is notified
of the participation sold to such Participant and such Participant agrees, for the benefit of the
Company, to comply with Section 2.17(e) as though it were a Lender.
(d) Any Lender may at any time pledge or assign a security interest in all or any portion of
its rights under this Agreement to secure obligations of such Lender, including without limitation
any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall
not apply to any such pledge or assignment of a security interest; provided that no such pledge or
assignment of a security interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.
(e) Notwithstanding any other provision of this Agreement, no Lender will assign its rights
and obligations under this Agreement, or sell participations in its rights and/or obligations under
this Agreement, to any Person who is (i) listed on the Specially Designated Nationals and Blocked
Persons List maintained by the U.S. Department of Treasury Office of Foreign Assets Control
(OFAC) and/or on any other similar list maintained by OFAC pursuant to any authorizing
statute, executive order or regulation or (ii) either (A) included within the term designated
national as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515 or (B) designated
under Sections 1(a), 1(b), 1(c) or 1(d) of Executive Order No. 13224, 66 Fed. Reg. 49079 (published
September 25, 2001) or similarly designated under any related enabling legislation or any other
similar executive orders.
SECTION 9.05. Survival. All covenants, agreements, representations and warranties
made by the Loan Parties in the Loan Documents and in the certificates or other instruments
delivered in connection with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit,
regardless of any investigation made by any such other party or on its behalf and notwithstanding
that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of
any Default or incorrect representation or warranty at the time any credit is extended hereunder,
and shall continue in full force and effect as long as the principal of or any accrued interest on
any Loan or any fee or any other amount payable under this Agreement or any other Loan Document is
outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have
not expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article VIII
shall survive and remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the
Letters of Credit and the Commitments or the termination of this Agreement or any other Loan
Document or any provision hereof or thereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different counterparts), each of which
shall constitute an original, but all of which when taken together shall constitute a single
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contract. This Agreement, the other Loan Documents and any separate letter agreements with
respect to fees payable to the Administrative Agent constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received counterparts hereof
which, when taken together, bear the signatures of each of the other parties hereto, and thereafter
shall be binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement
by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such invalidity, illegality or unenforceability without affecting the validity, legality
and enforceability of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final and in whatever currency denominated) at any time
held and other obligations at any time owing by such Lender or Affiliate to or for the credit or
the account of any Borrower against any of and all the obligations of such Borrower now or
hereafter existing under this Agreement held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement and although such obligations may be
unmatured. The rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This
Agreement shall be construed in accordance with and governed by the law of the State of New York.
(b) Each Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting
in New York County and of the United States District Court of the Southern District of New York,
and any appellate court from any thereof, in any action or proceeding arising out of or relating
to this Agreement, or for recognition or enforcement of any judgment, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this
Agreement or any other Loan Document shall affect any right that the Administrative Agent, the
Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this
Agreement against any Borrower or its properties in the courts of any jurisdiction.
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(c) Each Borrower hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to this Agreement
or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding in any such
court.
(d) Each party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 9.01. The Dutch Borrower irrevocably designates and appoints
the Company, as its authorized agent, to accept and acknowledge on its behalf, service of any
and all process which may be served in any suit, action or proceeding of the nature referred to
in Section 9.09(b) in any federal or New York State court sitting in New York City. The Company
hereby represents, warrants and confirms that the Company has agreed to accept such appointment.
Said designation and appointment shall be irrevocable by the Dutch Borrower until all Loans,
all reimbursement obligations, interest thereon and all other amounts payable by the Dutch
Borrower hereunder and under the other Loan Documents shall have been paid in full in accordance
with the provisions hereof and thereof. The Dutch Borrower hereby consents to process being
served in any suit, action or proceeding of the nature referred to in Section 9.09(b) in any
federal or New York State court sitting in New York City by service of process upon the Company
as provided in this Section 9.09(d); provided that, to the extent lawful and possible,
notice of said service upon such agent shall be mailed by registered or certified air mail,
postage prepaid, return receipt requested, to the Company and (if applicable to) the Dutch
Borrower to the address of which the Dutch Borrower shall have given written notice to the
Administrative Agent (with a copy thereof to the Company). The Dutch Borrower irrevocably
waives, to the fullest extent permitted by law, all claim of error by reason of any such service
in such manner and agrees that such service shall be deemed in every respect effective service
of process upon the Dutch Borrower in any such suit, action or proceeding and shall, to the
fullest extent permitted by law, be taken and held to be valid and personal service upon and
personal delivery to the Dutch Borrower. To the extent the Dutch Borrower has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process (whether from
service or notice, attachment prior to judgment, attachment in aid of execution of a judgment,
execution or otherwise), the Dutch Borrower hereby irrevocably waives such immunity in respect
of its obligations under the Loan Documents. Nothing in this Agreement or any other Loan
Document will affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT
OF
77
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. Headings. Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement and shall not affect
the construction of, or be taken into consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Issuing Bank and
the Lenders agrees to maintain the confidentiality of the Information (as defined below), except
that Information may be disclosed (a) to its and its Affiliates directors, officers, employees and
agents, including accountants, legal counsel and other advisors solely for the purpose of, or
otherwise directly in connection with this Agreement (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested by any Governmental
Authority, (c) to the extent required by applicable laws or regulations or by any subpoena or
similar legal process (provided, however, that, to the extent permitted by law, the
Company has been notified prior to such disclosure so that the Company may seek, at the Companys
sole expense, a protective order or other appropriate remedy), (d) to any other party to this
Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or any other Loan Document or the enforcement of rights
hereunder or thereunder (provided, however, to the extent permitted by law, the
Company is notified prior to such disclosure so that the Company may seek, at the Companys sole
expense, a protective order or other appropriate remedy), (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee of or Participant
in, or any prospective assignee of or Participant in, any of its rights or obligations under this
Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to any Borrower and its obligations, (g) with the consent of the
Company or (h) to the extent such Information (i) becomes publicly available other than as a result
of a breach of this Section, or to the knowledge of such disclosing person, as a result of a breach
of a confidentiality agreement with any other Person or (ii) becomes available to the
Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other
than the Company. For the purposes of this Section, Information means all information
received from the Company relating to the Company or its business, other than any such information
that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential
basis prior to disclosure by the Company.
SECTION 9.13. USA PATRIOT Act. Each Lender that is subject to the requirements of the
USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the
Act) hereby notifies each Borrower that pursuant to the requirements of the Act, it is
required to obtain, verify and record information that identifies such Borrower, which information
includes the name and address of such Borrower and other information that will allow such Lender to
identify such Borrower in accordance with the Act.
SECTION 9.14. Release of Guarantors. Notwithstanding anything to the contrary
contained herein or in any other Loan Document, upon request of the Company in
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connection with any Disposition of Property not prohibited by the Loan Documents, the
Administrative Agent shall (without notice to, or vote or consent of, any Lender, or any affiliate
of any Lender that is a party to any Swap Agreement) take such actions as shall be required to
release any Subsidiary Guarantor from its obligations under any Loan Document, to the extent
necessary to permit consummation of such Disposition in accordance with the Loan Documents.
Notwithstanding anything to the contrary contained herein or any other Loan Document, when all
Obligations (other than obligations in respect of any Swap Agreement) have been paid in full, all
Commitments have terminated or expired and no Letter of Credit shall be outstanding, upon request
of the Company, the Administrative Agent shall (without notice to, or vote or consent of, any
Lender, or any affiliate of any Lender that is a party to any Swap Agreement) take such actions as
shall be required to release any Subsidiary Guarantor from its obligations under any Loan Document,
whether or not on the date of such release there may be outstanding Obligations in respect of Swap
Agreements.
ARTICLE X
Company Guarantee
In order to induce the Lenders to extend credit to the Dutch Borrower hereunder, the Company
hereby irrevocably and unconditionally guarantees, as a primary obligor and not merely as a surety,
the payment when and as due of the Obligations of the Dutch Borrower. The Company further agrees
that the due and punctual payment of such Obligations may be extended or renewed, in whole or in
part, without notice to or further assent from it, and that it will remain bound upon its guarantee
hereunder notwithstanding any such extension or renewal of any such Obligation.
The Company waives presentment to, demand of payment from and protest to any Borrower of any
of the Obligations, and also waives notice of acceptance of its obligations and notice of protest
for nonpayment. The obligations of the Company hereunder shall not be affected by (a) the failure
of the Administrative Agent, the Issuing Bank or any Lender to assert any claim or demand or to
enforce any right or remedy against any Borrower under the provisions of this Agreement, any other
Loan Document or otherwise; (b) any extension or renewal of any of the Obligations; (c) any
rescission, waiver, amendment or modification of, or release from, any of the terms or provisions
of this Agreement, or any other Loan Document or agreement; (d) any default, failure or delay,
willful or otherwise, in the performance of any of the Obligations; (e) the failure of the
Administrative Agent to take any steps to perfect and maintain any security interest in, or to
preserve any rights to, any security or collateral for the Obligations, if any; (f) any change in
the corporate, partnership or other existence, structure or ownership of any Borrower or any other
guarantor of any of the Obligations; (g) the enforceability or validity of the Obligations or any
part thereof or the genuineness, enforceability or validity of any agreement relating thereto or
with respect to any collateral securing the Obligations or any part thereof, or any other
invalidity or unenforceability relating to or against any Borrower or any other guarantor of any of
the Obligations, for any reason related to this Agreement, any Swap Agreement, any other Loan
Document, or any provision of applicable law, decree, order or regulation of any jurisdiction
purporting to prohibit the payment by such Borrower or any other guarantor of the Obligations, of
any of the Obligations or otherwise affecting any term of any of
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the Obligations; or (h) any other act, omission or delay to do any other act which may or
might in any manner or to any extent vary the risk of the Company or otherwise operate as a
discharge of a guarantor as a matter of law or equity or which would impair or eliminate any right
of the Company to subrogation.
The Company further agrees that its agreement hereunder constitutes a guarantee of payment
when due (whether or not any bankruptcy or similar proceeding shall have stayed the accrual or
collection of any of the Obligations or operated as a discharge thereof) and not merely of
collection, and waives any right to require that any resort be had by the Administrative Agent, the
Issuing Bank or any Lender to any balance of any deposit account or credit on the books of the
Administrative Agent, the Issuing Bank or any Lender in favor of any Borrower or any other Person.
The obligations of the Company hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, and shall not be subject to any defense or set-off,
counterclaim, recoupment or termination whatsoever, by reason of the invalidity, illegality or
unenforceability of any of the Obligations, any impossibility in the performance of any of the
Obligations or otherwise.
The Company further agrees that its obligations hereunder shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is
rescinded or must otherwise be restored by the Administrative Agent, the Issuing Bank or any Lender
upon the bankruptcy or reorganization of any Borrower or otherwise.
In furtherance of the foregoing and not in limitation of any other right which the
Administrative Agent, the Issuing Bank or any Lender may have at law or in equity against the
Company by virtue hereof, upon the failure of any other Borrower to pay any Obligation when and as
the same shall become due, whether at maturity, by acceleration, after notice of prepayment or
otherwise, the Company hereby promises to and will, upon receipt of written demand by the
Administrative Agent, the Issuing Bank or any Lender, forthwith pay, or cause to be paid, to the
Administrative Agent, the Issuing Bank or any Lender in cash an amount equal to the unpaid
principal amount of such Obligations then due, together with accrued and unpaid interest thereon.
The Company further agrees that if payment in respect of any Obligation shall be due in a currency
other than Dollars and/or at a place of payment other than New York, Chicago or any other
Eurocurrency Payment Office and if, by reason of any Change in Law, disruption of currency or
foreign exchange markets, war or civil disturbance or other event, payment of such Obligation in
such currency or at such place of payment shall be impossible or, in the reasonable judgment of the
Administrative Agent, the Issuing Bank or any Lender, disadvantageous to the Administrative Agent,
the Issuing Bank or any Lender in any material respect, then, at the election of the Administrative
Agent, the Company shall make payment of such Obligation in Dollars (based upon the applicable
Equivalent Amount in effect on the date of payment) and/or in New York, Chicago or such other
Eurocurrency Payment Office as is designated by the Administrative Agent and, as a separate and
independent obligation, shall indemnify the Administrative Agent, the Issuing Bank and any Lender
against any losses or reasonable out-of-pocket expenses that it shall sustain as a result of such
alternative payment.
Upon payment by the Company of any sums as provided above, all rights of the Company against
any Borrower arising as a result thereof by way of right of subrogation or otherwise shall in all
respects be subordinated and junior in right of payment to the prior
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indefeasible payment in full in cash of all the Obligations owed by such Borrower to the
Administrative Agent, the Issuing Bank and the Lenders.
Nothing shall discharge or satisfy the liability of the Company hereunder except the full
performance and payment of the Obligations.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.
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MYLAN LABORATORIES INC.
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By: |
/s/ Edward J. Borkowski
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Name: |
Edward J. Borkowski |
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Title: |
Chief Financial Officer |
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Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
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TRUST INTERNATIONAL MANAGEMENT (T.I.M.) B.V.,
as Corporate Managing Director of EURO MYLAN B.V.
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By: |
/s/ Stefan Boermans
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Name: |
Stefan Boermans |
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Title: |
Attorney in Fact A |
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By: |
/s/ Christiaan Mol
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Name: Christiaan Mol |
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Title: Attorney in Fact B |
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Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
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JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION, individually as a Lender, as the
Swingline
Lender, as the Issuing Bank and as
Administrative Agent
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By: |
/s/ Helene Sprung
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Name: |
Helene Sprung |
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Title: |
Senior Vice President |
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Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
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MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, as Syndication Agent
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By: |
/s/ Michael E. OBrien
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Name: |
Michael E. OBrien |
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Title: |
Director |
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MERRILL LYNCH CAPITAL CORPORATION,
individually as a Lender
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By: |
/s/ John Rowland
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Name: |
John Rowland |
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Title: |
Vice President |
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Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
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CITIBANK, N.A.,
individually as a Lender and as a
Co-Documentation Agent
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By: |
/s/ Mark Floyd
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Name: |
Mark Floyd |
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Title: |
Vice President |
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Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
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THE BANK OF TOKYO-MITSUBISHI UFJ,
LTD., NEW YORK BRANCH, individually as a Lender and as a Co-Documentation Agent
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By: |
/s/ Scott Schaffer
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Name: |
Scott Schaffer |
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Title: |
Authorized Signatory |
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Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
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PNC BANK, NATIONAL ASSOCIATION,
individually as a Lender and as a Co-Documentation Agent
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By: |
/s/ Thomas A. Majeski
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Name: |
Thomas A. Majeski |
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Title: |
Vice President |
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Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
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LASALLE BANK NATIONAL ASSOCIATION,
individually as a Lender and as a Co-Documentation Agent
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By: |
/s/ Philip R. Medsger
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Name: |
Philip R. Medsger |
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Title: |
First Vice President |
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Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
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THE BANK OF NEW YORK,
as a Lender
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By: |
/s/ John M. Lokay
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Name: |
John M. Lokay, JR. |
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Title: |
Vice President |
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Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
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CITIZENS BANK OF PENNSYLVANIA,
as a Lender
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By: |
/s/ Clifford A. Mull
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Name: |
Clifford A. Mull |
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Title: |
Vice President |
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Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
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NATIONAL CITY BANK,
as a Lender
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By: |
/s/ Susan J. Dimmick
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Name: |
Susan J. Dimmick |
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Title: |
Vice President |
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Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
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SUNTRUST BANK,
as a Lender
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By: |
/s/ Helen C. Hartz
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Name: |
Helen C. Hartz |
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Title: |
Vice President |
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Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
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HSBC BANK USA, NATIONAL ASSOCIATION, as a Lender
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By: |
/s/ Thomas C. Lillis
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|
Name: |
Thomas C. Lillis |
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|
|
Title: |
Vice President |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
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|
THE BANK OF NOVA SCOTIA,
as a Lender
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By: |
/s/ Richard Hawthorne
|
|
|
|
Name: |
Richard Hawthorne |
|
|
|
Title: |
Director |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
COMMERZBANK AG, NEW YORK AND CAYMAN
BRANCHES, as a Lender
|
|
|
By: |
/s/ Robert S. Taylor
|
|
|
|
Name: |
Robert S. Taylor |
|
|
|
Title: |
Senior Vice President |
|
|
|
|
|
|
By: |
/s/ Eric J. Rogowski
|
|
|
|
Name: |
Eric J. Rogowski |
|
|
|
Title: |
Assistant Treasurer |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
FORTIS CAPITAL CORP,
as a Lender
|
|
|
By: |
/s/ Barbara Nash
|
|
|
|
Name: |
Barbara Nash |
|
|
|
Title: |
Managing Director |
|
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|
|
By: |
/s/ Steven Silverstein
|
|
|
|
Name: |
Steven Silverstein |
|
|
|
Title: |
Vice President |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
FIFTH THIRD BANK,
as a Lender
|
|
|
By: |
/s/ Jim Janowsky
|
|
|
|
Name: |
Jim Janowsky |
|
|
|
Title: |
Vice President |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
HUNTINGTON NATIONAL BANK,
as a Lender
|
|
|
By: |
/s/ John M. Luehmann
|
|
|
|
Name: |
John M. Luehmann |
|
|
|
Title: |
Vice President |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
MIZUHO CORPORATE BANK, LTD.,
as a Lender
|
|
|
By: |
/s/ Raymond Ventura
|
|
|
|
Name: |
Raymond Ventura |
|
|
|
Title: |
Deputy General Manager |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
U.S. BANK NATIONAL ASSOCIATION,
as a Lender
|
|
|
By: |
/s/ Michael P. Dickman
|
|
|
|
Name: |
Michael P. Dickman |
|
|
|
Title: |
Vice President |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
WACHOVIA BANK,
NATIONAL ASSOCIATION,
as a Lender
|
|
|
By: |
/s/ Eric M. Del Viscio
|
|
|
|
Name: |
Eric M. Del Viscio |
|
|
|
Title: |
Vice President |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
KBC BANK N.V.,
as a Lender
|
|
|
By: |
/s/ Thomas G. Jackson
|
|
|
|
Name: |
Thomas G. Jackson |
|
|
|
Title: |
First Vice President |
|
|
|
|
|
|
By: |
/s/ Jean-Pierre Diels
|
|
|
|
Name: |
Jean-Pierre Diels |
|
|
|
Title: |
First Vice President |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
|
|
|
By: |
/s/ Michael Tschida
|
|
|
|
Name: |
Michael Tschida |
|
|
|
Title: |
Vice President |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
MAYLAYAN BANKING BERHAD,
as a Lender
|
|
|
By: |
/s/ Fauzi Zulkifli
|
|
|
|
Name: |
Fauzi Zulkifli |
|
|
|
Title: |
General Manager |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
BANK LEUMI USA,
as a Lender
|
|
|
By: |
/s/ Joung Hee Hong
|
|
|
|
Name: |
Joung Hee Hong |
|
|
|
Title: |
First Vice President |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
FIRST COMMERCIAL BANK NEW YORK AGENCY,
as a Lender
|
|
|
By: |
/s/ Helen Tong
|
|
|
|
Name: |
Helen Tong |
|
|
|
Title: |
FVP & Manager |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
HUA NAN COMMERCIAL BANK, LTD. NEW YORK AGENCY,
as a Lender
|
|
|
By: |
/s/ Te-Chin Wang
|
|
|
|
Name: |
Te-Chin Wang |
|
|
|
Title: |
Assistant Vice President |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
THE NORINCHUKEN BANK, NEW YORK BRANCH,
as a Lender
|
|
|
By: |
/s/ Kaoru Yamada
|
|
|
|
Name: |
Kaoru Yamada |
|
|
|
Title: |
Joint General Manager |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
CHANG HWA COMMERCIAL BANK, LTD., NEW YORK BRANCH,
as a Lender
|
|
|
By: |
/s/ Jim C. Y. Chen
|
|
|
|
Name: |
Jim C. Y. Chen |
|
|
|
Title: |
V.P. & General Manager |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
TAIPE FUBON COMMERCIAL BANK, NEW YORK AGENCY,
as a Lender
|
|
|
By: |
/s/ Sophia Jing
|
|
|
|
Name: |
Sophia Jing |
|
|
|
Title: |
VP & General Manager |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
|
|
|
|
|
|
COMERICA BANK,
as a Lender
|
|
|
By: |
/s/ Erica M. Krzeminski
|
|
|
|
Name: |
Erica M. Krzeminski |
|
|
|
Title: |
Account Officer |
|
Signature Page to Credit and Guarantee Agreement
Mylan Laboratories Inc. and Euro Mylan B.V.
March 2007
SCHEDULE 1.01A
APPLICABLE RATE
The Applicable Rate means, for any day, with respect to any Eurocurrency Term Loan,
Eurocurrency Revolving Loan, or with respect to the facility fees payable hereunder, as the case
may be, the applicable rate per annum set forth below under the caption Eurocurrency Spread (Term
Loans), Eurocurrency Spread (Revolving Loans) or Facility Fee Rate, as the case may be, based
upon the Leverage Ratio applicable on such date:
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
Eurocurrency |
|
Eurocurrency |
|
Facility |
|
|
Spread |
|
Spread |
|
Fee |
Leverage Ratio: |
|
(Term Loans) |
|
(Revolving Loans) |
|
Rate |
Category 1: £ 1.00x |
|
|
0.50 |
% |
|
|
0.40 |
% |
|
|
0.100 |
% |
Category 2: >
1.00x but £ 2.00x |
|
|
0.625 |
% |
|
|
0.50 |
% |
|
|
0.125 |
% |
Category 3: >
2.00x but £ 3.00x |
|
|
0.750 |
% |
|
|
0.60 |
% |
|
|
0.150 |
% |
Category 4: >
3.00x but £ 3.50x |
|
|
0.875 |
% |
|
|
0.70 |
% |
|
|
0.175 |
% |
Category 5: >
3.50x but £ 4.00x |
|
|
1.00 |
% |
|
|
0.80 |
% |
|
|
0.200 |
% |
Category 6: > 4.00x |
|
|
1.25 |
% |
|
|
1.00 |
% |
|
|
0.250 |
% |
For purposes of the foregoing,
(i) if at any time the Company fails to deliver the Financials on or before the date
the Financials are due, Category 6 shall be deemed applicable for the period commencing five
(5) Business Days after the required date of delivery and ending on the date which is five
(5) Business Days after the Financials are actually delivered, after which the Category
shall be determined in accordance with the table above as applicable;
(ii) except as otherwise provided in clause (iii) below, adjustments, if any, to the
Category then in effect shall be effective five (5) Business Days after the Administrative
Agent has received the applicable Financials (it being understood and agreed that each
change in Category shall apply during the period commencing on the effective date of such
change and ending on the date immediately preceding the effective date of the next such
change); and
(iii) notwithstanding the foregoing, Category 4 shall be deemed to be applicable until
the Administrative Agents receipt of the applicable Financials for the Companys fiscal
quarter ending on or about March 31, 2007 (unless such Financials demonstrate that Category
5 or 6 should have been applicable during such period, in which case such other Category
shall be deemed to be applicable during such period), and adjustments to
the Category then in effect shall thereafter be effected in accordance with the preceding
paragraphs.
EX-10.28
Exhibit
99.2
EXECUTION
COPY
AMENDMENT NO. 1
Dated as of March 26, 2007
to
CREDIT AGREEMENT
Dated as of July 24, 2006
THIS AMENDMENT NO. 1 (Amendment) is made as of March 26, 2007 (the Effective
Date) by and among Mylan Laboratories, Inc., a Pennsylvania corporation (the
Borrower), the financial institutions listed on the signature pages hereof and JPMorgan
Chase Bank, National Association, as Administrative Agent (the Administrative Agent),
under that certain Credit Agreement dated as of July 24, 2006 by and among the Borrower, the
Lenders and the Administrative Agent (as amended, supplemented or otherwise modified from time to
time, the Credit Agreement). Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings given to them in the Credit Agreement.
WHEREAS, the Borrower has requested that certain modifications be made to the Credit
Agreement;
WHEREAS, the Borrower, the Lenders party hereto and the Administrative Agent have agreed to
amend the Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions
contained herein, and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Borrower, the Lenders party hereto and the Administrative Agent hereby
agree to the following amendments to the Credit Agreement.
1. Amendments to Credit Agreement. Effective as of the Effective Date but subject to
the satisfaction of the conditions precedent set forth in Section 2 below, the Credit
Agreement is hereby amended as follows:
(a) Section 1.01 of the Credit Agreement is hereby amended to delete and immediately
preceding clause (ix) of the definition of Consolidated EBITDA set forth in such Section
1.01 and substitute , in lieu thereof and insert a new clause (x) immediately following
clause (ix) as follows (and redesignating the existing clauses (x) and (xi) as (xi) and (xii),
respectively):
and (x) without duplication, income of any non-wholly owned Subsidiaries
(b) Section 1.01 of the Credit Agreement is hereby amended to delete the reference to
such amount of immediately preceding the word Dollars in clause (ii) of the definition of
Dollar Amount set forth in such Section 1.01.
(c) Section 1.01 of the Credit Agreement is hereby amended to insert the following new
definition in the appropriate alphabetical order:
Material Acquisition means any acquisition or investment for which the
aggregate cash consideration paid or otherwise delivered in connection therewith (including
the principal amount of any Indebtedness issued as deferred purchase price) plus the
aggregate amount of transaction costs and expenses incurred in connection therewith plus the
aggregate principal amount of all Indebtedness or other liabilities otherwise repaid,
retired or otherwise satisfied, or incurred or assumed in connection with, or resulting
from, such acquisition or investment (including Indebtedness of any acquired Persons
outstanding at the time of the applicable acquisition or investment) exceeds $300,000,000,
all of the foregoing being subject to Schedule 1.01C.
(d) Section 1.01 of the Credit Agreement is hereby amended to delete the word that
contained in the first line of the definition of Permitted Acquisition set forth in such
Section 1.01 substitute so long as in lieu thereof.
(e) Section 1.01 of the Credit Agreement is hereby amended to insert (giving effect,
if necessary, to the increase in the permitted maximum Consolidated Leverage Ratio in connection
with a Material Acquisition set forth in Section 6.07(b) on the date of such Acquisition)
immediately following the reference to covenants contained in Section 6.07 contained in the
definition of Permitted Acquisition set forth in such Section 1.01.
(f) Section 1.01 of the Credit Agreement is hereby amended to restate the definitions
of Senior Note Indenture and Senior Notes in their entirety as follows:
Senior Note Indenture means any Indenture entered into by the Borrower and
certain of its Subsidiaries in connection with the issuance of any Senior Notes, together
with all instruments and other agreements entered into by the Borrower or such Subsidiaries
in connection therewith, as the same may be amended, supplemented or otherwise modified from
time to time.
Senior Notes means (i) the 5 3/4% senior unsecured notes due 2010 (the
2010 Notes) and the 6 3/8% senior unsecured notes due 2015 of the Borrower issued
on July 21, 2005 pursuant to a Senior Note Indenture or any supplement thereto, and any
notes issued in exchange therefor pursuant to the exchange offer contemplated by the
offering memorandum, (ii) the 1.25% senior convertible notes of the Borrower due 2012 issued
on March 7, 2007 pursuant to a Senior Note Indenture or any supplement thereto and (iii) any
other unsecured debt securities which do not have a final maturity that is earlier than the
final maturity of the 2010 Notes or a Weighted Average Life to Maturity that is shorter than
the Weighted Average Life to Maturity of the 2010 Notes.
(g) Section 2.04 of the Credit Agreement is hereby amended to move the (a)
designating the beginning of clause (a) therein to immediately precede the phrase each
Eurocurrency Borrowing in the second line thereof.
(h) Section 2.04 of the Credit Agreement is hereby further amended to delete
2
the reference to last Business Day of each calendar month therein and substitute last
Business Day of each calendar quarter in lieu thereof.
(i) Section 2.06(b) of the Credit Agreement is hereby amended to insert a new sentence
immediately following the first sentence thereof as follows:
The Issuing Bank shall promptly notify the Administrative Agent of, and the
Administrative Agent shall in turn promptly furnish to the Lenders notice of, any such
issuance.
(j) Section 2.20 of the Credit Agreement is hereby amended to insert (giving effect,
if necessary, to the increase in the permitted maximum Consolidated Leverage Ratio in connection
with a Material Acquisition set forth in Section 6.07(b) on the date of such Acquisition)
immediately following the reference to (iii) the Borrower and its Subsidiaries shall be in
compliance, calculated on a Pro Forma Basis contained in such Section 2.20.
(k) Section 3.01 of the Credit Agreement is hereby amended to restate the third
sentence thereof in its entirety as follows:
All of the outstanding shares of capital stock and other equity interests, to the
extent owned by the Borrower or any Subsidiary, of each Subsidiary are validly issued and
outstanding and fully paid and nonassessable and all such shares and other equity interests
indicated on Schedule 3.01 as owned by the Borrower or another Subsidiary are owned,
beneficially and of record, by the Borrower or any Subsidiary free and clear of all Liens,
other than Liens permitted by Section 6.02.
(l) Section 5.01 of the Credit Agreement is hereby amended to insert to the following
immediately after clause (h) thereof:
Financial statements and other information required to be delivered pursuant to
Sections 5.01(a), 5.01(b) and 5.01(f) shall be deemed to have been delivered if such
statements and information shall have been posted by the Borrower on its website or shall
have been posted on Intralinks or similar site to which all of the Lenders have been granted
access.
(m) Section 5.06 of the Credit Agreement is amended to restate the first sentence
thereof as follows:
The Borrower will, and will cause each of its Subsidiaries to, keep proper books of
record and account in which full, true and correct entries in conformity with GAAP, if
applicable, or (in the case of a Subsidiary that is not a Domestic Subsidiary) other local
accounting standards, if applicable, and requirements of applicable law are made of all
dealings and transactions in relation to its business and activities.
(n) Section 6.01(c) of the Credit Agreement is hereby amended to delete the reference
to any Subsidiary this is not a Loan Party therein and substitute any Subsidiary that is not a
Loan Party in lieu thereof.
3
(o) Section 6.01(n) of the Credit Agreement is hereby amended to insert (giving
effect, if necessary, to the increase in the permitted maximum Consolidated Leverage Ratio in
connection with a Material Acquisition set forth in Section 6.07(b) on the date of such
Acquisition) immediately following the reference to covenants set forth in Section 6.07
contained in such Section 6.01(n).
(p) Section 6.01 of the Credit Agreement is hereby amended to redesignate clause (q)
as clause (r) and to insert a new clause (q) therein as follows:
(q) Indebtedness of Euro Mylan B.V. (or another European subsidiary of the Borrower
designated by the Borrower and reasonably acceptable to the Administrative Agent) under a
certain credit and guarantee agreement, dated as of March 26, 2007, by and among the
Borrower, Euro Mylan B.V., the lenders party thereto and JPMorgan Chase Bank, National
Association as administrative agent thereunder, as amended, restated, supplemented and
otherwise modified from time to time; and
(q) Section 6.01(r) of the Credit Agreement is hereby amended to insert (giving
effect, if necessary, to the increase in the permitted maximum Consolidated Leverage Ratio in
connection with a Material Acquisition set forth in Section 6.07(b) on the date of such
Acquisition) immediately following the reference to the Borrower and the Subsidiaries are in
compliance on a Pro Forma Basis contained in such Section 6.01(r).
(r) Section 6.03(a) of the Credit Agreement is hereby amended to insert (it being
understood and agreed that a Loan Party shall not be merged with, and shall not dispose all or
substantially all of its Property to, a Person organized in a jurisdiction located outside of the
United States of America) at the end of clause (ii) thereof.
(s) Section 6.04 of the Credit Agreement is hereby amended to insert (giving effect,
if necessary, to the increase in the permitted maximum Consolidated Leverage Ratio in connection
with a Material Acquisition set forth in Section 6.07(b) on the date of such Acquisition)
immediately following the reference to the Borrower and the Subsidiaries are in compliance on a
Pro Forma Basis contained in such Section 6.04.
(t) Section 6.07(b) of the Credit Agreement is hereby amended and restated in its
entirety as follows:
(b) Maximum Consolidated Leverage Ratio. The Borrower will not permit the
Consolidated Leverage Ratio, determined as of the end of each of its fiscal quarters ending
for the period of four (4) consecutive fiscal quarters ending with the end of such fiscal
quarter, to be greater than 3.5 to 1.0; provided that if the Borrower has
consummated a Material Acquisition and at the end of the fiscal quarter in which such
Material Acquisition was consummated (such quarter, the Trigger Quarter) the
Consolidated Leverage Ratio is (or, if calculated on a Pro Forma Basis, would be) greater
than 3.5 to 1.0, then the Consolidated Leverage Ratio may be greater than 3.5 to 1.0 but
less than or equal to 4.5 to 1.0 for the Trigger Quarter and for the seven (7) fiscal
quarters immediately following the Trigger Quarter (such eight-quarter period, the Covenant
Holiday); provided, further, that in the event the Borrower consummates
another
4
Material Acquisition during the Covenant Holiday, such subsequent Material Acquisition
will not give rise to another Trigger Quarter and Covenant Holiday unless the Borrowers
Consolidated Leverage Ratio prior to such subsequent Material Acquisition shall have been
reduced back down to 3.5 to 1.0 or less for at least one fiscal quarter. Notwithstanding
anything contained in this Section to the contrary, the Borrower will not permit the
Consolidated Leverage Ratio to be greater than 4.0 to 1.0 for the final two (2) fiscal
quarters prior to the Term Loan Maturity Date (as defined in that certain Credit and
Guarantee Agreement dated as of March 26, 2007 among the Borrower, Euro Mylan B.V., the
lenders from time to time party thereto and JPMorgan Chase Bank, National Association as
administrative agent, as such agreement may be amended, restated, or otherwise modified from
time to time).
(u) A new Section 6.08 is hereby added to the Credit Agreement immediately following
the existing Section 6.07, and such Section 6.08 shall read as follows:
SECTION 6.08. Restrictive Agreements. The Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement that prohibits, restricts or imposes any condition
upon (a) the ability of the Borrower or any Subsidiary to create, incur or permit to exist
any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay
dividends or other distributions with respect to holders of its Equity Interests or to make
or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee
Indebtedness of the Borrower or any other Subsidiary; provided that the foregoing shall not
apply to (i) restrictions and conditions imposed by law or by this Agreement, (ii)
restrictions and conditions existing on the date hereof (but shall apply to any extension or
renewal of, or any amendment or modification, in each case, which expands the scope of, any
such restriction or condition), (iii) customary restrictions and conditions contained in
agreements relating to the sale of a Subsidiary or any of its assets pending such sale,
provided such restrictions and conditions apply only to the Subsidiary or assets that is to
be sold and such sale is not prohibited hereunder, (iv) customary restrictions and
conditions contained in agreements relating to a Permitted Receivables Facility or the sale
of a Subsidiary pending such sale, provided such restrictions and conditions apply only to
the Subsidiary that is to be sold and such sale is not prohibited hereunder, (v) agreements
binding on a Subsidiary at the time such Subsidiary becomes a Subsidiary of the Borrower,
(vi) restrictions set forth in Indebtedness of a Subsidiary that is not a Subsidiary
Guarantor which is permitted by this Agreement, (vii) agreements that are customary
provisions in joint venture agreements and other similar agreements applicable to joint
ventures, (vii) restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions apply only to
the property or assets securing such Indebtedness, (viii) customary provisions in leases,
subleases, licenses, sublicenses or permits so long as such restrictions relate only to the
property subject thereto, (ix) customary provisions in leases restricting the assignment or
subletting thereof, (x) customary provisions restricting assignment or transfer of any
contract entered into in the ordinary course of business or otherwise permitted hereunder,
(xi) restrictions or conditions on Liens set forth in any Indebtedness permitted by this
Agreement but solely to the extent any such restrictions or conditions expressly permit
Liens for the benefit of the Lenders with respect to credit facilities
5
established under this Agreement and the Obligations under the Loan Documents, and
other similar senior credit facilities and related obligations, in each case on a senior
basis and (xii) restrictions or conditions set forth in that certain Credit and Guarantee
Agreement dated as of March 26, 2007 among the Borrower, Euro Mylan B.V., the lenders from
time to time party thereto and JPMorgan Chase Bank, National Association as administrative
agent, as such agreement may be amended, restated, or otherwise modified from time to time.
(v) Schedules 1.01A, 2.03, 3.01, 3.06, 6.01,
6.02 and 6.05 of the Credit Agreement are hereby amended and restated in its
entirety as set forth on Exhibit A hereto.
(w) A new Schedule 1.01C is hereby inserted into the Credit Agreement as set forth on
Exhibit B hereto.
2. Conditions of Effectiveness. The effectiveness of this Amendment is subject to the
conditions precedent that the Administrative Agent shall have received (i) counterparts of this
Amendment duly executed by the Borrower, the Required Lenders and the Administrative Agent and (ii)
counterparts of the Consent and Reaffirmation attached hereto as Exhibit C duly executed by
the Subsidiary Guarantors.
3. Representations and Warranties of the Borrower. The Borrower hereby represents and
warrants as follows:
(a) This Amendment and the Credit Agreement as amended hereby constitute legal, valid and
binding obligations of the Borrower and are enforceable against the Borrower in accordance with
their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law.
(b) As of the date hereof and giving effect to the terms of this Amendment, (i) no Default
shall have occurred and be continuing and (ii) the representations and warranties of the Borrower
set forth in the Credit Agreement, as amended hereby, are true and correct in all material respects
as of the date hereof, except where any such representation and warranty is expressly made as of a
specific earlier date, in which case such representation and warranty shall be true and correct in
all material respects as of any such earlier date.
4. Reference to and Effect on the Credit Agreement.
(a) Upon the effectiveness hereof, each reference to the Credit Agreement in the Credit
Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as
amended hereby.
(b) Except as specifically amended above, the Credit Agreement and all other documents,
instruments and agreements executed and/or delivered in connection therewith shall remain in full
force and effect and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver
of any right, power or remedy of the Administrative Agent or the Lenders,
6
nor constitute a waiver of any provision of the Credit Agreement or any other documents,
instruments and agreements executed and/or delivered in connection therewith.
5. Governing Law. This Amendment shall be construed in accordance with and governed
by the law of the State of New York.
6. Headings. Section headings in this Amendment are included herein for convenience
of reference only and shall not constitute a part of this Amendment for any other purpose.
7. Counterparts. This Amendment may be executed by one or more of the parties hereto
on any number of separate counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
[Signature Pages Follow]
7
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above
written.
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MYLAN LABORATORIES, INC., |
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as the Borrower |
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By:
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/s/ Edward Borkowski |
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Name: Edward Borkowski |
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Title: Chief Financial Officer |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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JPMORGAN CHASE BANK, |
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NATIONAL ASSOCIATION, |
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individually as a Lender, as the Swingline Lender, as the Issuing Bank and as Administrative Agent |
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By:
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/s/ Helene Sprung |
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Name: Helene Sprung |
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Title: Senior Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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MERRILL LYNCH CAPITAL CORPORATION, |
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individually as a Lender and as Syndication Agent |
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By:
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/s/ Michael E. OBrien |
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Name: Michael E. OBrien |
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Title: Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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BANK OF TOKYO-MITSUBISHI UFJ TRUST COMPANY, |
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individually as a Lender and as Co-Documentation Agent |
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By:
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/s/ Scott Schaffer |
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Name: Scott Schaffer |
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Title: Authorized Signatory |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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CITIBANK, N.A., |
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individually as a Lender and as Co-Documentation Agent |
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By:
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/s/ Mark Floyd |
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Name: Mark Floyd |
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Title: Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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PNC BANK, NATIONAL ASSOCIATION, |
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individually as a Lender and as Co-Documentation Agent |
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By:
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/s/ Thomas A. Majeski |
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Name: Thomas A. Majeski |
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Title: Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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CITIZENS BANK OF PENNSYLVANIA, |
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individually as a Lender |
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By:
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/s/ Clifford A. Mull |
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Name: Clifford A. Mull |
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Title: Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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THE BANK OF NEW YORK, |
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individually as a Lender |
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By:
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/s/ John M. Lokay |
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Name: John M. Lokay, Jr. |
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Title: Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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NATIONAL CITY BANK, |
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individually as a Lender |
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By:
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/s/ Susan J. Dimmick |
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Name: Susan J. Dimmick |
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Title: Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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SUNTRUST BANK, |
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individually as a Lender |
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By:
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/s/ Helen C. Hartz |
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Name: Helen C. Hartz |
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Title: Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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FIFTH THIRD BANK, |
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individually as a Lender |
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By:
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/s/ Jim Janovsky |
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Name: Jim Janovsky |
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Title: Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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HUNTINGTON NATIONAL BANK, |
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individually as a Lender |
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By:
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/s/ John M. Luehmann |
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Name: John M. Luehmann |
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Title: Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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COMERICA BANK, |
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individually as a Lender |
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By:
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/s/ Erica M. Krzeminski |
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Name: Erica M. Krzeminski |
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Title: Account Officer |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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HSBC BANK USA, NATIONAL ASSOCIATION, |
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individually as a Lender |
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By:
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/s/ Thomas C. Lillis |
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Name: Thomas C. Lillis |
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Title: Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
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UNION BANK OF CALIFORNIA, N.A., |
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individually as a Lender |
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By:
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/s/ Michael Tschida |
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Name: Michael Tschida |
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Title: Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of July 24, 2006
Mylan Laboratories, Inc.
EXHIBIT A
SCHEDULE 1.01A
APPLICABLE RATE
The Applicable Rate means, for any day, with respect to any Eurocurrency Revolving Loan, or
with respect to the facility fees payable hereunder, as the case may be, the applicable rate per
annum set forth below under the caption Eurocurrency Spread or Facility Fee Rate, as the case
may be, based upon the Leverage Ratio applicable on such date:
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Eurocurrency |
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Facility Fee |
Leverage Ratio: |
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Spread |
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Rate |
Category 1: £ 1.00x |
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0.40 |
% |
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0.100 |
% |
Category 2: > 1.00x but £ 2.00x |
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0.50 |
% |
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0.125 |
% |
Category 3: > 2.00x but £ 3.00x |
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0.60 |
% |
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0.150 |
% |
Category 4: > 3.00x but £ 3.50x |
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0.70 |
% |
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0.175 |
% |
Category 5: > 3.50x but £ 4.00x |
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0.80 |
% |
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0.200 |
% |
Category 6: > 4.00x |
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1.00 |
% |
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0.250 |
% |
For purposes of the foregoing,
(i) if at any time the Borrower fails to deliver the Financials on or before the date
the Financials are due, Category 6 shall be deemed applicable for the period commencing five
(5) Business Days after the required date of delivery and ending on the date which is five
(5) Business Days after the Financials are actually delivered, after which the Category
shall be determined in accordance with the table above as applicable;
(ii) except as otherwise provided in clause (iii) below, adjustments, if any, to the
Category then in effect shall be effective five (5) Business Days after the Administrative
Agent has received the applicable Financials (it being understood and agreed that each
change in Category shall apply during the period commencing on the effective date of such
change and ending on the date immediately preceding the effective date of the next such
change).
EXHIBIT C
CONSENT AND REAFFIRMATION
Each of the undersigned hereby acknowledges receipt of a copy of the foregoing Amendment No. 1
to the Credit Agreement dated as of July 24, 2006 (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the Credit Agreement) by and among
Mylan Laboratories, Inc., a Delaware corporation (the Borrower) the Lenders and JPMorgan
Chase Bank, National Association, as Administrative Agent (the Administrative Agent),
which Amendment No. 1 is dated as of March 26, 2007 and is by and among the Borrower, the financial
institutions listed on the signature pages thereof and the Administrative Agent (the
Amendment). Capitalized terms used in this Consent and Reaffirmation and not defined
herein shall have the meanings given to them in the Credit Agreement. Without in any way
establishing a course of dealing by the Administrative Agent or any Lender, each of the undersigned
consents to the Amendment and reaffirms the terms and conditions of the Subsidiary Guaranty and any
other Loan Document executed by it and acknowledges and agrees that the Subsidiary Guaranty and
each and every such Loan Document executed by the undersigned in connection with the Credit
Agreement remains in full force and effect and is hereby reaffirmed, ratified and confirmed. All
references to the Credit Agreement contained in the above-referenced documents shall be a reference
to the Credit Agreement as so modified by the Amendment and as the same may from time to time
hereafter be amended, modified or restated.
Dated March 26, 2007
[Signature Pages Follow]
IN WITNESS WHEREOF, this Consent and Reaffirmation has been duly executed as of the day and
year above written.
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BERTEK INTERNATIONAL, INC. |
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By:
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/s/ Kristin A. Kolesar
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Name: Kristin A. Kolesar |
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Title: Secretary |
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MLRE LLC |
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By:
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/s/ David L. Kennedy
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Name: David L. Kennedy |
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Title: Manager |
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MYLAN BERTEK PHARMACEUTICALS INC. |
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By:
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/s/ Kristin A. Kolesar
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Name: Kristin A. Kolesar |
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Title: Secretary |
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MYLAN INC. |
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By:
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/s/ Kristin A. Kolesar
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Name: Kristin A. Kolesar |
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Title: Secretary |
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MYLAN PHARMACEUTICALS INC. |
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By:
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/s/ Kristin A. Kolesar
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Name: Kristin A. Kolesar |
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Title: Secretary |
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UDL LABORATORIES, INC. |
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By:
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/s/ Kristin A. Kolesar
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Name: Kristin A. Kolesar |
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Title: Secretary |
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MYLAN HOLDING INC. |
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By:
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/s/ Kristin A. Kolesar
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Name: Kristin A. Kolesar |
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Title: Secretary |
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MP AIR, INC. |
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By:
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/s/ Kristin A. Kolesar
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Name: Kristin A. Kolesar |
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Title: Secretary |
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MYLAN CARIBE, INC. |
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By:
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/s/ Kristin A. Kolesar
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Name: Kristin A. Kolesar |
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Title: Secretary |
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MYLAN INTERNATIONAL HOLDINGS, INC. |
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By:
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/s/ Kristin A. Kolesar
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Name: Kristin A. Kolesar |
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Title: Secretary |
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MYLAN TECHNOLOGIES, INC. |
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By:
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/s/ Kristin A. Kolesar
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Name: Kristin A. Kolesar |
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Title: Secretary |
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EX-10.29(B)
Exhibit 10.29b
THIS SECONDMENT AGREEMENT (this Agreement) is made on January 8, 2007
AMONG:
(1) |
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MYLAN LABORATORIES INC., a company incorporated in Pennsylvania
with its registered address at 1500 Corporate Drive, Canonsburg, Pennsylvania
15317 U.S.A. (hereinafter referred to as the Mylan Labs); |
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(2) |
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MYLAN SINGAPORE PTE. LTD., incorporated in Singapore, Company
Registration No 200700904W (hereinafter referred to as Mylan Singapore);
and |
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(3) |
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PRASAD NIMMAGADDA, Passport No. Zl38849, of Plot No. D-19, Gayatri
Arcade, Vikrampuri, Kharkhana Secunderabad 500 009 India (Prasad). |
WHEREAS:
Under the terms of that certain employment agreement (the Executive Employment Agreement) dated
January 8, 2007 between Mylan Labs and Prasad, Prasad is employed by Mylan Labs as Head of Global
Strategies in the Office of the CEO. The parties to this Agreement agree that Prasad shall be
seconded to Mylan Singapore and perform his employment duties at Mylan Singapores office as Head
of Global Strategies on the terms set out in this Agreement (the Secondment).
IT IS HEREBY AGREED as follows:
1. |
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Secondment Period. The effective date of the commencement of Prasads
Secondment will be January 8, 2007 and the Secondment shall remain in effect
until January 7, 2010 (the Secondment Period), unless terminated earlier in
accordance with Section 7. |
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2. |
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Position. Prasads title/position is Head of Global Strategies. |
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3. |
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Duties and Responsibilities; Place of Employment. During the Secondment Period,
Prasad shall perform his duties and services as Head of Global Strategies in the offices of
Mylan Singapore. During the Secondment Period, Prasad shall: |
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(a) |
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devote all of his working time, attention and ability to the best interests
of Mylan Singapore; |
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(b) |
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not carry out any professional or business activities, undertake any similar
services or accept any appointments other than for the Mylan Singapore
without the express prior written consent of Mylan Singapore; |
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1
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(c) |
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faithfully and diligently perform his services and exercise such powers
consistent with them which are from time to time assigned to or vested in
him; |
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(d) |
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use his best endeavours to promote the interests of Mylan Singapore; |
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(e) |
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comply with all the rules and regulations of employment of Mylan
Singapore as communicated to Prasad; and |
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(f) |
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be fully responsible for all his personal tax liabilities in respect of his
remuneration and fees received in this Agreement. |
In addition to the terms of the Secondment set out herein, Prasad shall also be subject to
such other existing general terms and conditions of service as may be laid down by Mylan
Labs to govern its employees and any rule or regulation that may be introduced by Mylan
Labs from time to time, each to the extent communicated to Prasad. To the extent such terms
and conditions of service conflict with the terms and conditions of service of Mylan
Singapore, the terms and conditions of Mylan Singapore shall prevail.
4. |
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Relationship of the Parties. |
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(a) |
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Nothing in this Agreement or in Prasads Secondment will affect or alter
his status as an employee of Mylan Labs. For the avoidance of doubt,
Prasad shall continue to be an employee of Mylan Labs. |
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(b) |
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Nothing in this Agreement shall create or be deemed to create a
partnership or the relationship of principal and agent between any of the
parties and no party shall be responsible for the acts or omissions of the
representatives of the other parties. |
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(c) |
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During the period of Secondment, Prasad shall not hold himself out as or
be Mylan Labs agent for any purpose. Specifically, Prasad does not have
the authority to sign any contract, agreement, undertaking or any other
written document that will serve to give rise to any legal obligation on the
part of Mylan Labs or that will or may serve to legally bind Mylan Labs. |
5. |
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Compensation. During the Secondment Period, Mylan Labs shall pay Prasad
compensation in accordance with Section 4(a) through (c) of the Executive
Employment Agreement. |
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6. |
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Benefits. During the Secondment Period, Prasad shall be entitled to benefits and
expense reimbursement in accordance with Section 4(d) of the Executive
Employment Agreement. |
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7. |
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Termination of Secondment; Termination of Employment. |
Page 2/5
2
(a) Mylan Labs specifically reserves all rights to terminate this Secondment at
any time prior to the expiration of the Secondment Period.
(b) The Secondment is subject to Prasad obtaining visa, work, residency and
permit approval as may be regulated by the authorities in Singapore. In the event
that any necessary approval is not obtained (regardless of whichever partys fault),
the Secondment shall be terminated.
(c) Mylan Singapore shall not have the right to terminate Mr. Prasads
employment.
(d) All terminations of employment shall be governed by the Executive
Employment Agreement.
8. |
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Confidentiality. Prasad shall treat as secret and confidential and not at any time
for any reason disclose or permit to be disclosed to any person or otherwise make
use of or permit to be made use of any confidential information which was
received before and during the period of his Secondment and upon termination of
his Secondment for whatever reason, Prasad shall deliver up to Mylan Labs or
Mylan Singapore (as shall be determined by Mylan Labs) all working papers,
computer disks and tapes or other material and copies provided to him relating to
any confidential information before and during the period of his Secondment. |
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9. |
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Return of Company Property. Upon termination of this Agreement for whatever
reason, Prasad shall deliver to Mylan Singapore all books, documents, lists of
clients/customers, papers, statistics, records, materials and other property relating
to the business or affairs of Mylan Singapore which may then be in his possession,
power or control (and for the avoidance of doubt it is hereby declared that the
property in such books, documents, materials as aforesaid shall at all times be
vested in Mylan Labs). |
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10. |
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Compliance with Ministry of Manpower and the Revenue. Upon termination of
the Secondment, Prasad shall satisfy all requirements of the Ministry of
Manpower and the Revenue for exit, including cancellation of his employment
pass or work permit and submission regarding the absence or satisfaction of any
outstanding personal tax liability. Prasad shall indemnify Mylan Singapore for
any liabilities, fees or expenses it may incur in satisfying such requirements. |
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11. |
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Amendment. This Agreement may only be amended by written agreement of the
parties hereto. |
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12. |
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Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties hereto with respect to the Secondment and supersedes
any previous agreement or understanding in relation to the Secondment.
Notwithstanding the foregoing, the Executive Employment Agreement shall |
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continue to be in force and effect and shall be construed to be amended by the terms
set out in this Agreement. |
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13. |
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No Waiver. No failure in exercising any right or remedy under this Agreement
shall constitute a waiver thereof and no single or partial exercise of any right or
remedy under this Agreement shall preclude or restrict any further exercise of
such right or remedy. The rights and remedies contained in this Agreement are
cumulative and not exclusive of any rights and remedies provided by law. |
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14. |
|
Severability. If any term or provision of this Agreement shall in whole or in part
be held to any extent to be illegal or unenforceable under any enactment or rule of
law that term or provision or part shall to that extent be deemed not to form part
of this Agreement and the enforceability of the remainder of this Agreement shall
not be affected thereby. |
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15. |
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Notice. Any notice or communication under or in connection with this
Agreement shall be in writing and shall be delivered personally, or by registered
mail or facsimile to the addresses given in this Agreement or at such other address
as the recipient may have notified to the other parties in writing. Proof of posting
or despatch of any notice or communication to either of the parties shall be
deemed to be proof of receipt. |
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16. |
|
Counterparts. This Agreement may be executed in any number of counterparts
and by the parties in separate counterparts, but shall not be effective until each of
the parties has executed at least one counterpart. Each counterpart shall constitute
an original Agreement but all of the counterparts together shall form one or the
same instrument. |
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17. |
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The Contracts Act. The Contracts (Rights of Third Parties) Act, Cap. 53B of
Singapore shall not under any circumstances apply to this Agreement and any
person who is not a party to this Agreement (whether or not such person shall be
named, referred to, or otherwise identified, or shall form part of a class of persons
so named, referred to, or identified, in this Agreement) shall have no right
whatsoever under the Contracts (Rights of Third Parties) Act Cap. 53B of
Singapore to enforce this Agreement or any of its terms. |
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18. |
|
Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of Singapore and the parties irrevocably submit to the
non-exclusive jurisdiction of the Singapore Courts. Each of the parties irrevocably
consents to the process of any legal action arising out of or in connection with this
Agreement being served on them in accordance with the provisions of this
Agreement relating to service of communications. Nothing contained in this
Agreement shall affect the right to service process in any other manner permitted
by law. This Agreement has been executed on the date hereinabove
stated. |
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19. |
|
Headings. The headings contained in this Agreement are for convenience of the
parties only and are not intended to be a part hereof or to affect the meaning or
interpretation hereof. |
As witness this Agreement has been entered into the day and year first above written.
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Signed by
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) |
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For and on behalf of
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) |
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/s/ Robert J. Coury |
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Mylan Laboratories Inc
In the presence of
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)
) |
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Signed by
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) |
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For and on behalf of
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) |
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/s/ Robert J. Coury |
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Mylan Singapore Pte. Ltd
In the presence of
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)
) |
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/s/ Prasad Nimmaggadda
Signed by
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) |
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Prasad Nimmaggadda
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5
EX-10.31
Exhibit 10.31
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the Agreement) is dated as of January 31, 2007, by and
between Mylan Laboratories Inc. (the Company) and Rajiv Malik (Executive).
RECITALS:
WHEREAS, Executive and Matrix Laboratories Limited, an Indian corporation (Matrix), are
party to that certain letter of appointment dated July 28, 2005 (the Matrix Appointment Letter),
relating to Executives employment as Chief Executive Officer of Matrix;
WHEREAS, effective as of January 8, 2007. the Company acquired a controlling interest in
Matrix; and
WHEREAS, the Company wishes to employ Executive as Head of Global Technical Operations of the
Company and likewise wishes Executive to serve as acting Chief Executive Officer of Matrix, in
each case effective as of the date hereof, but may be interested in utilizing Executive in other
capacities, in order to avail itself of Executives skills and abilities in light of the Companys
business needs;
WHEREAS, in connection herewith, the Matrix Appointment Letter will be terminated and
superseded by an agreement between Executive and Matrix relating to his service as acting Chief
Executive Officer of Matrix;
NOW, THEREFORE, in consideration of the promises and mutual obligations of
the parties contained herein, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and Executive agree as follows:
1. Employment of Executive; Best Efforts. The Company agrees to employ
Executive, and Executive accepts employment by the Company, on the terms and
conditions provided herein. Effective as of the date hereof, Executive shall serve as Head
of Global Technical Operations of the Company and as acting Chief Executive Officer of
Matrix.
2. Effective Date: Term of Employment. This Agreement shall commence and
be effective as of the date hereof and shall remain in effect, unless earlier terminated, or
extended or renewed, as provided in Section 9 of this Agreement, through the third
anniversary of the date hereof (the Third Anniversary).
3. Performance
of Duties. (a) Best Efforts. During the term of this Agreement,
Executive shall devote his full working time and attention to the business and affairs of
the Company and its subsidiaries, parents and affiliates (collectively the Mylan
Companies) and the performance of his duties hereunder, serve Mylan faithfully and to
the best of his ability, and use his best efforts to promote the interests of the Mylan
Companies. Without limitation, Executive shall travel in connection with his
employment in accordance with the reasonable direction of the Chief Executive Officer
of the Company, commensurate with the activities of his position with the Company and
with Matrix. During the term of this Agreement, Executive agrees to promptly and fully
disclose to the Mylan Companies, and not to divert to Executives own use or benefit or
the use or benefit of others, any business opportunities involving any existing or
prospective line of business, supplier, product or activity of the Mylan Companies or any
business opportunities which otherwise should rightfully be afforded to the Mylan
Companies.
(b) No Power to Bind in India. Notwithstanding anything to the contrary in this
Agreement, Executive shall not be authorized to bind the Company contractually in India or
otherwise to make commitments on behalf of the Company in India. While in India, Executive shall
not represent or hold out to any person or statutory authority that he is possessed of such
authority, and the scope of Executives authority and powers in India shall comprise solely in
making recommendations in respect of matters, which are assigned to him by the Company, to persons
designated and employed by the Company in this behalf. It is understood that no such recommendation
of Executive shall be binding on the Company, in any manner whatsoever.
4. Executives
Compensation. Executives compensation shall include the following:
(a) Minimum Annual Base Salary. The Executives minimum annual base salary
(the Minimum Annual Base Salary) shall be Four Hundred Fifty Thousand Dollars
($450,000), payable in accordance with the Companys normal payroll practices for its
executive officers. The Minimum Annual Base Salary may be increased from time to
time at the discretion of the Compensation Committee of the Board of Directors of the
Company, any other committee authorized by the Board of Directors or any officer
having authority over executive compensation.
(b) Annual Bonus. Executive shall have an annual discretionary bonus
opportunity of seventy-five percent (75%) of Executives then-current Minimum Annual Base Salary,
to be paid upon satisfaction of certain criteria established by the Compensation Committee of the
Board of Directors, or by any other committee or officer having authority over executive
compensation.
(c) Non-Qualified Stock Options; Performance-Based Compensation. On the
date hereof, Executive shall receive non-qualified stock options to purchase one hundred twenty
thousand (120,000) shares of Mylan common stock under the 2003 Long-Term incentive Plan (the
Plan) in accordance with the following vesting schedule, provided
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that Executive remains employed by Mylan on the following vesting dates: on the first
anniversary of the date hereof, Executive shall vest in the first 30,000 shares; on the second
anniversary of the date hereof, Executive shall vest in an additional 30,000 shares; on the third
anniversary of the date hereof, Executive shall vest in an additional 30,000 shares; and on the
fourth anniversary of the date hereof, Executive shall vest in the remaining 30,000 shares. These
options will be subject to all terms of the Plan and the applicable stock option agreement.
Notwithstanding any term or provision to the contrary set forth elsewhere herein, Executive shall
be entitled to one hundred percent (100%) vesting of the above-referenced options in, the event
Executive resigns for Good Reason or is Terminated Without Cause, as provided in Section 9 herein.
(d) Restricted Stock. On the date hereof, Executive shall also receive a grant of
ten thousand (10,000) shares of restricted stock under the Plan, which shares shall vest on
the third anniversary of the date hereof, provided that Executive remains employed by
Mylan on such date. These options will be subject to all terms of the Plan and the
applicable restricted stock award agreement.
(e) Fringe Benefits and Expense Reimbursement. The Executive shall receive
benefits and perquisites of employment similar to those as have been customarily
provided to the Companys other executive officers including but not limited to, health
insurance coverage, short-term disability benefits, automobile usage and expense
reimbursement, and twenty (20) vacation days, in each case in accordance with the plan
documents or policies that govern such benefits. The Company shall reimburse
Executive for all ordinary and necessary business expenses in accordance with
established Company policy and procedures.
5. Confidentiality. Executive recognizes and acknowledges that the business interests
of the Mylan Companies require a confidential relationship between the Company and Executive and
the fullest protection and confidential treatment of the financial data, customer information,
supplier information, market information, marketing and/or promotional techniques and methods,
pricing information, purchase information, sales policies, employee lists, policy and procedure
information, records, advertising information, computer records, trade secrets, know how, plans and
programs, sources of supply, and other knowledge of the business of the Mylan Companies (all of
which are hereinafter jointly termed Confidential Information) which have or may in whole or in
part be conceived, learned or obtained by Executive in the course of Executives employment with
the Company. Accordingly, Executive agrees to keep secret and treat as confidential all
Confidential Information whether or not copyrightable or patentable, and agrees not to use or aid
others in learning of or using any Confidential Information except in the ordinary course of
business and in furtherance of the Companys interests. During the term of this Agreement and at
all times thereafter, except insofar as is necessary disclosure consistent with the Companys
business interests:
(a) Executive will not, directly or indirectly, disclose any Confidential
Information to anyone outside the Mylan Companies;
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(b) Executive
will not make copies of or otherwise disclose the contents of documents containing or constituting Confidential Information;
(c) As to documents which are delivered to Executive or which are made
available to him as a necessary part of the working relationships and duties of Executive
within the business of the Company, Executive will treat such documents confidentially
and will treat such documents as proprietary and confidential, not to be reproduced,
disclosed or used without appropriate authority of the Company;
(d) Executive will not advise others that the information and/or know how
included in Confidential Information, is known to or used by the Company; and
(e) Executive will not in any manner disclose or use Confidential Information for
Executives own account and will not aid, assist or abet others in the use of Confidential
Information for their account or benefit, or for the account or benefit of any person or
entity other than the Company.
The obligations set forth in this paragraph are in addition to any other agreements the
Executive may have with the Company and any and all rights the Company may have under state or
federal statutes or common law.
6. Non-Competition and Non-Solicitation. Executive agrees that for a period ending one
(1) year after termination of Executives employment with the Company for any reason:
(a) Executive shall not, directly or indirectly, whether for himself or for any other person,
company, corporation or other entity be or become associated in any
way (including but not limited
to the association set forth in i-vii of this subsection) with any business or organization which
is directly or indirectly engaged in the research, development, manufacture, production, marketing,
promotion or sale of any product the same as or similar to those of the Mylan Companies, or which
competes or intends to compete in any line of business with the Mylan Companies. Notwithstanding
the foregoing, Executive may during the period in which this paragraph is in effect own stock or
other interests in corporations or other entities that engage in businesses the same or
substantially similar to those engaged in by the Mylan Companies, provided that Executive does not,
directly or indirectly (including without limitation as the result of ownership or control of
another corporation or other entity), individually or as part of a group (as that term is defined
in Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder) (i) control or have the ability to control the corporation or other entity,
(ii) provide to the corporation or entity, whether as an Executive, consultant or otherwise, advice
or consultation, (iii) provide to the corporation or entity any confidential or proprietary
information regarding the Mylan Companies or its businesses or regarding the conduct of businesses
similar to those of the Mylan Companies, (iv) hold or have the right by contract or arrangement or
understanding with other parties to hold a position on the board of directors or other
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governing body of the corporation or entity or have the right by contract or arrangement or
understanding with other parties to elect one or more persons to any
such position, (v) hold a
position as an officer of the corporation or entity, (vi) have the purpose to change or influence
the control of the corporation or entity (other than solely by the voting of his shares or
ownership interest) or (vii) have a business or other relationship, by contract or otherwise, with
the corporation or entity other than as a passive investor in it; provided, however, that Executive
may vote his shares or ownership interest in such manner as he chooses provided that such action
does not otherwise violate the prohibitions set forth in this
sentence.
(b) Executive will not, either directly or indirectly, either for himself or for any
other person, partnership, firm, company, corporation or other entity, contact, solicit,
divert, or take away any of the customers or suppliers of the Mylan Companies.
(c) Executive will not solicit, entice or otherwise induce any employee of the
Mylan Companies to leave the employ of the Mylan Companies for any reason
whatsoever; nor will Executive directly or indirectly aid, assist or abet any other person
or entity in soliciting or hiring any employee of the Mylan Companies, nor will Executive
otherwise interfere with any contractual or other business relationships between the
Mylan Companies and its employees.
7. Severability. Should a court of competent jurisdiction determine that any section
or sub-section of this Agreement is unenforceable because one or all of them are vague or overly
broad, the parties agree that this Agreement may and shall be enforced to the maximum extent
permitted by law. It is the intent of the parties that each section and sub-section of this
Agreement be a separate and distinct promise and that unenforceability of any one subsection shall
have no effect on the enforceability of another.
8. Injunctive Relief. The parties agree that in the event of Executives violation
of Sections 5 and/or 6 of this Agreement or any subsection thereunder, that the damage to
the Company will be irreparable and that money damages will be difficult or impossible
to ascertain. Accordingly, in addition to whatever other remedies the Company may have
at law or in equity, Executive recognizes and agrees that the Company shall be entitled to
a temporary restraining order and a temporary and permanent injunction enjoining and
prohibiting any acts not permissible pursuant to this Agreement. Executive agrees that
should either party seek to enforce or determine its rights because of an act of Executive
which the Company believes to be in contravention of Sections 5 and/or 6 of this
Agreement or any subsection thereunder, the duration of the restrictions imposed thereby
shall be extended for a time period equal to the period necessary to obtain judicial
enforcement of the Companys rights.
9. Termination of Employment.
(a) Resignation. (i) Executive may resign from employment at any time upon 90 days written
notice to the Chief Executive Officer. During the 90 days notice period
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Executive will continue to perform duties and abide by all other terms and conditions of this
Agreement. Additionally, Executive will use his best efforts to effect a smooth and effective
transition to whoever will replace Executive. Mylan reserves the right to accelerate the effective
date of Executives resignation, provided that Executive shall receive Executives salary and
benefits through the ninety (90) day period. (ii) If Executive resigns without Good Reason (as
defined below), Mylan shall have no liability to Executive under this Agreement other than that the
Company shall pay Executives wages and benefits through the effective date of Executives
resignation. Executive, however, will continue to be bound by all provisions of this Agreement that
survive termination of employment. For purposes of this Agreement Good Reason shall mean: (a) a
reduction of Executives annual base salary below the Minimum Annual Base Salary stipulated in this
Agreement, unless other executive officers of the Company are required to accept a similar
reduction; or (b) the assignment of duties to the Executive which are inconsistent with those of an
executive officer. (iii) If Executive resigns with Good Reason and complies in all respects with
his obligations hereunder, Mylan will pay Executive his then-current Base Salary for 12 months
following his separation from the Company, payable in accordance with the Companys normal payroll
practices (or, at the Companys discretion, in a lump sum), plus an amount equal to the bonus that
Executive would have been entitled to receive for the fiscal year in which the termination occurs,
pro rated based on the portion of such year during which Executive
was employed by the Company.
Mylan shall also pay the cost of continuing Executives health insurance benefits for the 12 months
following his separation from the Company; provided, however, that in the case of health insurance
continuation, Mylans obligation to provide health insurance benefits shall end at such time as
Executive obtains health insurance benefits through another employer or otherwise in connection
with rendering services for a third party. Executive will continue to be bound by all provisions of
this Agreement that survive termination of employment.
(b) Termination for Cause. If Mylan determines to terminate Executives
employment during the term of this Agreement for Cause, as defined herein, Mylan will
give Executive written notice of its belief that acts or events constituting Cause exist.
Executive has the right to cure within five (5) days of Mylans giving of such notice, the
acts, events or conditions which led to such notice being given. For purposes of this
Agreement, Cause shall mean: (i) Executives willful and gross misconduct with
respect to the business or affairs of any of the Mylan Companies; (ii) Executives
insubordination, gross neglect of duties, dishonesty or deliberate disregard of any
material rule or policy of any of the Mylan Companies; (iii) Executives conviction of a
crime involving moral turpitude; or (iv) Executives conviction of any felony. If Mylan
terminates Executives employment for Cause, the Company shall have no liability to
Executive other than to pay Executives wages and benefits through the effective date of
Executives termination. Executive, however, will continue to be bound by all provisions
of this Agreement that survive termination of employment.
(c) Termination Without Cause. If Mylan discharges Executive without Cause,
Mylan will pay Executive his then-current Base Salary for 12 months following his
separation from the Company, payable in accordance with the Companys normal payroll
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practices (or, at the Companys discretion, in a lump sum), plus a pro rata bonus equal to the
bonus that Executive would have been entitled to receive for the fiscal year in which the
termination occurs. Mylan shall also pay the cost of continuing Executives health insurance
benefits (including, as applicable, those benefits that cover eligible members of his immediate
family) for the 12 months following such termination without Cause; provided, however, that in the
case of health insurance continuation, Mylans obligation to provide health insurance benefits
shall end at such time as Executive obtains health insurance benefits through another employer or
otherwise in connection with rendering services for a third party. Executive will continue to be
bound by all provisions of this Agreement that survive termination of
employment.
(d) Death
or Incapacity. The employment of Executive shall automatically
terminate upon Executives death or upon the occurrence of a disability that renders
Executive incapable of performing the essential functions of his position within the
meaning of the Americans With Disabilities Act of 1990. For all purposes of this
Agreement, any such termination shall be treated in the same manner as a termination
without Cause, as described in Section 9(c) above, and Executive, or Executives estate,
as applicable, shall receive all consideration, compensation and benefits that would be
due and payable to Executive for a termination without Cause, provided, however, that
such consideration, compensation and benefits shall be reduced by any death or disability
benefits (as applicable) that the Executive or his estate or beneficiaries (as applicable) are
entitled to pursuant to plans or arrangements of the Company.
(e) Extension
or Renewal. The Term of Employment may be extended or
renewed upon mutual agreement of Executive and the Company. If the Term of
Employment is not extended or renewed on terms mutually acceptable to Executive and
the Company, and if this Agreement has not been sooner terminated for reasons stated in
Section 9(a), (b), (c) or (d) of this Agreement, Executive shall be paid his then-current
Base Salary for 12 months following the Third Anniversary, payable in accordance with
the Companys normal payroll practices (or, at the Companys discretion, in a lump sum),
and Executives health insurance benefits shall be continued for 12 months at the
Companys cost; provided, however, that in the case of health insurance continuation, the
Companys obligation to provide health insurance benefits shall end at such time as
Executive, at his option, voluntarily obtains heath insurance benefits,
(f) Return
of Company Property. Upon the termination of Executives employment for any reason,
Executive shall immediately return to Mylan all records, memoranda, files, notes, papers,
correspondence, reports, documents, books, diskettes, hard drives, electronic files, and all copies
or abstracts thereof that Executive has concerning any or all of the Mylan Companies business,
Executive shall also immediately return all keys, identification cards or badges and other company
property.
(g) No
Duty to Mitigate. There shall be no requirement on the part of Executive to seek other
employment or otherwise mitigate damages in order to be entitled to the full amount of any payments
and benefits to which Executive is otherwise entitled under any
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contract and the amount of such payments and benefits shall not be reduced by any
compensation or benefits received by Executive from other employment.
(h) Section 409A. Notwithstanding anything to the contrary in this Agreement, the payment of
consideration, compensation, and benefits pursuant to this Section 9 shall be interpreted and
administered in manner intended to avoid the imposition of additional taxes under Section 409A of
the Internal Revenue Code.
10. Indemnification. The Company shall maintain D&O liability coverage
pursuant to which Executive shall be a covered insured. Executive shall receive indemnification in
accordance with the Companys Bylaws in effect as of the date of this Agreement. Such
indemnification shall be contractual in nature and shall remain in effect notwithstanding any
future change to the Companys Bylaws.
To the extent not otherwise limited by the Companys Bylaws in effect as of the date of this
Agreement, in the event that Executive is made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, (including those brought by or in the right of the
Company) whether civil, criminal, administrative or investigative (proceeding), by reason of the
fact that he is or was an officer, employee or agent of or is or was serving the Company or any
subsidiary of the Company, or is or was serving at the request of the Company or another
corporation, or of a partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, Executive shall be indemnified and held harmless by the
Company to the fullest extent authorized by law against all expenses, liabilities and losses
(including attorneys fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by Executive in connection therewith. Such
right shall be a contract right and shall include the right to be paid by the Company expenses
incurred in defending any such proceeding in advance of its final disposition; provided, however,
that the payment of such expenses incurred by Executive in his capacity as a director or officer
(and not in any other capacity in which service was or is rendered by Executive while a director or
officer, including, without limitation, service to an employee benefit plan) in advance of the
final disposition of such proceeding will be made only upon delivery to the Company of an
undertaking, by or on behalf of Executive, to repay all amounts to Company so advanced if it should
be determined ultimately that Executive is not entitled to be indemnified under this section or
otherwise.
Promptly after receipt by Executive of notice of the commencement of any action, suit or
proceeding for which Executive may be entitled to be indemnified, Executive shall notify the
Company in writing of the commencement thereof (but the failure to notify the Company shall not
relieve it from any liability which it may have under this Section 10 unless and to the extent that
it has been prejudiced in a material respect by such failure or from the forfeiture of substantial
rights and defenses). If any such action, suit or proceeding is brought against Executive and he
notifies the Company of the commencement thereof, the Company will be entitled to participate
therein, and, to the
8
extent it may elect by written notice delivered to Executive promptly after receiving the aforesaid
notice from Executive, to assume the defense thereof with counsel reasonably satisfactory to
Executive, which may be the same counsel as counsel to the Company. Notwithstanding the foregoing,
Executive shall have the right to employ his own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of Executive unless (i) the employment of such
counsel shall have been authorized in writing by the Company, (ii) the Company shall not have
employed counsel reasonably satisfactory to Executive to take charge of the defense of such action
within a reasonable time after notice of commencement of the action or (iii) Executive shall have
reasonably concluded, after consultation with counsel to Executive, that a conflict of interest
exists which makes representation by counsel chosen by the Company not advisable (in which case the
Company shall not have the right to direct the defense of such action on behalf of Executive), in
any of which events such fees and expenses of one additional counsel
shall be borne by the Company.
Anything in this Section 10 to the contrary notwithstanding, the Company shall not be liable for
any settlement of any claim or action effected without its written consent.
11. Other
Agreements. The rights and obligations contained in this Agreement are in addition
to and not in place of any rights or obligations contained in any other agreements between the
Executive and the Company.
12. Notices. All notices hereunder to the parties hereto shall be in writing sent by
certified mail, return receipt requested, postage prepaid, and by fax, addressed to the
respective parties at the following addresses:
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If to the Company:
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Mylan Laboratories Inc. |
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1500 Corporate Drive |
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Canonsburg, Pennsylvania 15317 |
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Attention: Chief Executive Officer |
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If to Executive:
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at the most recent address on record at the Company. |
Either party may, by written notice complying with the requirements of this section, specify
another or different person or address for the purpose of notification hereunder. All notices shall
be deemed to have been given and received on the day a fax is sent or, if mailed only, on the third
business day following such mailing.
13. Withholding. All payments required to be made by the Company hereunder
to Executive or his dependents, beneficiaries, or estate will be subject to the withholding
of such amounts relating to tax and/or other payroll deductions as may be required by
law.
14. Modification
and Waiver. This Agreement may not be changed or terminated
rally, nor shall any change, termination or attempted waiver of any of the provisions contained in
this Agreement be binding unless in writing and signed by the party against whom the same is sought
to be enforced, nor shall this section itself by waived verbally.
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This
Agreement may be amended only by a written instrument duly executed by or on behalf of the
parties hereto.
15. Construction of Agreement. This Agreement and all of its provisions were
subject to negotiation and shall not be construed more strictly against one party than
against another party regardless of which party drafted any particular provision.
16. Successors and Assigns. This Agreement and all of its provisions, rights
and obligations shall be binding upon and inure to the benefit of the parties hereto and the
Companys successors and assigns. This Agreement may be assigned by the Company to
any person, firm or corporation which shall become the owner of substantially all of the
assets of the Company or which shall succeed to the business of the Company; provided,
however, that in the event of any such assignment the Company shall obtain an
instrument in writing from the assignee in which such assignee assumes the obligations
of the Company hereunder and shall deliver an executed copy thereof to Executive. No
right or interest to or in any payments or benefits hereunder shall be assignable by
Executive; provided, however, that this provision shall not preclude him from designating
one or more beneficiaries to receive any amount that may be payable after his death and
shall not preclude the legal representative of his estate from assigning any right hereunder
to the person or persons entitled thereto under his will or, in the case of intestacy, to the
person or persons entitled thereto under the laws of intestacy applicable to his estate. The
term beneficiaries as used in this Agreement shall mean a beneficiary or beneficiary or
beneficiaries so designated to receive any such amount, or if no beneficiary has been so
designated, the legal representative of the Executives estate. No right, benefit, or
interest hereunder, shall be subject to anticipation, alienation, sale, assignment,
encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt, or
obligation, or to execution, attachment, levy, or similar process, or assignment by
operation of law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law, be null,
void, and of no effect.
17. Choice of Law and Forum. This Agreement shall be construed and enforced
according to, and the rights and obligations of the parties shall be governed in all respects
by, the laws of the Commonwealth of Pennsylvania. Any controversy, dispute or claim
arising out of or relating to this Agreement, or the breach hereof, including a claim for
injunctive relief, or any claim which, in any way arises out of or relates to, Executives
employment with the Company or the termination of said employment, including but not
limited to statutory claims for discrimination, shall be resolved by arbitration in
accordance with the then current rules of the American Arbitration Association
respecting employment disputes except that the parties shall be entitled to engage in all
forms of discovery permitted under the Pennsylvania Rules of Civil Procedure (as such
rules may be in effect from time to time). The hearing of any such dispute will be held in
Pittsburgh, Pennsylvania, and the losing party shall bear the costs, expenses and counsel
fees of such proceeding. Executive and Company agree for themselves, their, employees,
successors and assigns and their accountants, attorneys and experts that any arbitration
hereunder will be held in complete confidence and, without the other partys prior written
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consent, will not be disclosed, in whole or in part, to any other person or entity except as
may be required by law. The decision of the arbitrator(s) will be final and binding on all parties.
Executive and the Company expressly consent to the jurisdiction of any such arbitrator over them.
18. Headings. The headings of the sections of this Agreement have been inserted
for convenience of reference only and shall in no way affect the interpretation of any of the terms
or conditions of this Agreement.
19. Execution in Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
[Signature page follows]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year
first above mentioned.
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MYLAN LABORATORIES INC. |
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EXECUTIVE: |
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/s/ Robert J. Coury |
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/s/ Rajiv Malik |
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By: |
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Robert J. Coury |
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Rajiv Malik |
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Its: |
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Vice Chairman and CEO |
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EX-10.32
Exhibit 10.32
TRANSITION AND SUCCESSION AGREEMENT
THIS TRANSITION AND SUCCESSION AGREEMENT (this Agreement) is entered into as of this
31st day of January, 2007 (this Agreement), by and between Mylan Laboratories Inc., a
Pennsylvania corporation (the Company), and Rajiv Malik (the Executive).
WHEREAS, the Board of Directors of the Company (the Board) has determined that it is in the
best interests of the Company and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a
Change of Control (as defined herein), to ensure the Executives full attention and dedication to
the Company in the event of any threatened or actual Change of Control and to provide the Executive
with compensation and benefits arrangements upon a Change of Control.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
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(a) |
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Effective Date means the first date during the Change of Control Period (as
defined herein) on which a Change of Control occurs. Notwithstanding anything in this
Agreement to the contrary, if a Change of Control occurs and if the Executives
employment with the Company is terminated prior to the date on which the Change of
Control occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (1) was at the request of a third party that has taken steps
reasonably calculated to effect a Change of Control or (2) otherwise arose in
connection with or anticipation of a Change of Control, then Effective Date means the
date immediately prior to the date of such termination of employment. For the sake of
clarity, it is understood that if the Executives employment terminates prior to the
Effective Date other than as described in the preceding sentence, this Agreement shall
thereupon be null and void and of no further force and effect. |
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(b) |
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Change of Control Period means the period commencing on the date hereof and
ending on the third anniversary of the date hereof; provided, however, that, commencing
on the date one year after the date hereof, and on each annual anniversary of such date
(such date and each annual anniversary thereof, the Renewal Date), unless previously
terminated, the Change of Control Period shall be automatically extended so as to
terminate three years from such Renewal Date, unless, at least 60 days prior to a
Renewal Date no less than three years from the date hereof, the Company shall give
notice to the Executive that the Change of Control Period shall not be so extended. |
|
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(c) |
|
Affiliated Company means any company controlled by, controlling or under
common control with the Company. |
|
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(d) |
|
Change of Control means: |
|
(1) |
|
The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the Exchange Act)) (a Person) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the Company (the
Outstanding Company Common Stock) or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the Outstanding Company Voting Securities);
provided, however, that, for purposes of this Section 1(d), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with Sections
1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C); |
|
|
(2) |
|
Individuals who, as of the date hereof, constitute the Board
(the Incumbent Board) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Companys shareholders, was approved by a vote of at least two-thirds of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; |
|
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(3) |
|
Consummation of a reorganization, merger, statutory share
exchange or consolidation or similar corporate transaction involving the
Company or any of its subsidiaries, a sale or other disposition of all or
substantially all of the assets of the Company, or the acquisition of assets or
stock of another entity by the Company or any of its subsidiaries (each, a
Business Combination), in each case unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation that, as a
result of such transaction, owns the Company or all or substantially all of the
Companys assets either directly or through one or more subsidiaries) in
substantially the same proportions |
2
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as their ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and the Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly or indirectly,
20% or more of, respectively, the then-outstanding shares of common stock of
the corporation resulting from such Business Combination or the combined
voting power of the then-outstanding voting securities of such corporation,
except to the extent that such ownership existed prior to the Business
Combination, and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement or of the action of the Board providing for such Business
Combination; or |
|
(4) |
|
Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company. |
|
(e) |
|
Employment Agreement means the Executive Employment Agreement dated as of
January 31, 2007, by and between the Company and the Executive, and any extension or
modification thereof or any successor agreement thereto. |
2. |
|
Employment Period; Employment Agreement. The Company hereby agrees to continue the
Executive in its employ, subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second anniversary of the Effective Date
(the Employment Period), provided the Employment Period shall terminate sooner upon the
Executives termination of employment for any reason. Upon the Effective Date, the Employment
Agreement, with the exception of Section 10 thereof, which shall survive in all respects,
shall be null and void and of no further force or effect, provided the Executive shall be paid
all amounts earned and due to the Executive thereunder within twenty-four (24) hours of the
Effective Date, subject in all respects to Section 6 below. |
|
3. |
|
Terms of Employment. |
|
(1) |
|
During the Employment Period, (A) the Executives position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 180-day period immediately preceding the Effective Date and (B)
the Executives services shall be performed at the office where the Executive
was employed immediately preceding the Effective Date or at any other location
less than 30 miles from such office. |
3
|
(2) |
|
During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business hours to
the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executives reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executives responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that, to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executives
responsibilities to the Company. |
|
(1) |
|
Base Salary. During the Employment Period, the Annual Base
Salary shall be reviewed at least annually, beginning no more than 12 months
after the Executives last salary review. The Annual Base Salary shall be paid
at such intervals as the Company pays executive salaries generally. During the
Employment Period, the Annual Base Salary shall be reviewed at least annually,
beginning no more than 12 months after the last salary increase awarded to the
Executive prior to the Effective Date. Any increase in the Annual Base Salary
shall not serve to limit or reduce any other obligation to the Executive under
this Agreement. The Annual Base Salary shall not be reduced after any such
increase and the term Annual Base Salary shall refer to the Annual Base
Salary as so increased. |
|
|
(2) |
|
Annual Bonus. In addition to the Annual Base Salary, the
Executive shall participate in a bonus program during the Employment Period and
have a bonus which is no less favorable than the bonus for other employees of
his level at the Company and its Affiliated Companies. |
|
|
(3) |
|
Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all cash incentive,
equity incentive, savings and retirement plans, practices, policies, and
programs applicable generally to other peer executives of the Company and the
Affiliated Companies (with such appropriate deviations by virtue of country of
residence, commensurate with deviations in place prior to the Effective Date),
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured |
4
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|
with respect to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and the
Affiliated Companies for the Executive under such plans, practices, policies
and programs as in effect at any time during the 180-day period immediately
preceding the Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer
executives of the Company and the Affiliated Companies. |
|
(4) |
|
Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executives family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit
plans, practices, policies and programs provided by the Company and the
Affiliated Companies (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other peer executives of the Company and the Affiliated Companies (with such
appropriate deviations by virtue of country of residence, commensurate with
deviations in place prior to the Effective Date), but in no event shall such
plans, practices, policies and programs provide the Executive with benefits
that are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 180-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies. If, on or prior to the Executives Date of Termination (as defined
herein), the Executive has attained at least age 50 with at least 20 years of
service with the Company (including all cumulative service, notwithstanding any
breaks in service) the Executive shall be entitled to retiree medical and life
insurance benefits at least equal to those that were provided to peer
executives of the Company and the Affiliated Companies and their dependents
(taking into account any required employee contributions, co-payments and
similar costs imposed on the executives and the executives dependents and the
tax treatment of participation in the plans, programs, practices and policies
by the executive and the executives dependents) (with such appropriate
deviations by virtue of country of residence, commensurate with deviations in
place prior to the Effective Date), in accordance with the retiree medical
plans, programs, practices and policies of the Company and the Affiliated
Companies in effect as of the Date of Termination. |
|
|
(5) |
|
Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices |
5
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|
and procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 180-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of
the Company and the Affiliated Companies. |
|
(6) |
|
Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if applicable, use of
an automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and the
Affiliated Companies in effect for the Executive at any time during the 180-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and the Affiliated Companies. |
|
|
(7) |
|
Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and the Affiliated Companies at any
time during the 180-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as provided generally at any time thereafter
with respect to other peer executives of the Company and the Affiliated
Companies. |
|
|
(8) |
|
Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and the Affiliated Companies as
in effect for the Executive at any time during the 180-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives
of the Company and the Affiliated Companies. |
4. |
|
Termination of Employment. |
|
(a) |
|
Death or Disability. The Executives employment shall terminate
automatically if the Executive dies during the Employment Period. If either the
Company or the Executive (or his legal representative) determines in good faith that
the Disability (as defined herein) of the Executive has occurred during the Employment
Period, such party may give the other party written notice (Disability Notice) in
accordance with Section 12(b) of his or its intention that the Executives employment
be terminated. In such event, the Executives employment with the Company shall
terminate effective on the 30th day after receipt of the Disability Notice by the
Executive or by the Company, as the case may be (the Disability Effective Date),
provided that, within 30 days after such receipt, the Executive |
6
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|
shall not have returned to full-time performance of the Executives duties.
Disability means the absence of the Executive from the Executives duties with the
Company on a full-time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness that is determined to be total and
permanent by a physician selected by the party providing the Disability Notice and
reasonably acceptable to the other party. |
|
(b) |
|
Cause. The Company may terminate the Executives employment during the
Employment Period for Cause. Cause means: |
|
(1) |
|
the willful and continued failure of the Executive to perform
substantially the Executives duties (as contemplated by Section 3(a)(1)(A))
with the Company or any Affiliated Company (other than any such failure
resulting from incapacity due to physical or mental illness or following the
Executives delivery of a Notice of Termination for Good Reason (as defined
herein)), after a written demand for substantial performance is delivered to
the Executive by the Board or the Chief Executive Officer of the Company that
specifically identifies the manner in which the Board or the Chief Executive
Officer of the Company believes that the Executive has not substantially
performed the Executives duties, or |
|
|
(2) |
|
the willful engaging by the Executive in illegal conduct or
gross misconduct that is materially and demonstrably injurious to the Company
which, in the case of clauses (1) and (2), has not been cured within 30 days
after a written demand for substantial performance is delivered to the
Executive by the Company that specifically identifies the manner in which the
Company believes that the Executive has grossly neglected his duties or has
engaged in gross misconduct. |
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered willful unless it is done, or omitted to be done, by
the Executive in bad faith or without reasonable belief that the Executives action
or omission was in the best interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution duly adopted by the Board or
upon the instructions of the Chief Executive Officer of the Company or a senior
officer of the Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in good
faith and in the best interests of the Company. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters of the entire membership of the Board
(excluding the Executive, if the Executive is a member of the Board) at a meeting of
the Board called and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together with counsel for
the Executive, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is
7
guilty of the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the
particulars thereof in detail.
|
(c) |
|
Good Reason. The Executives employment may be terminated by the
Executive for Good Reason or by the Executive voluntarily without Good Reason. Good
Reason means: |
|
(1) |
|
the assignment to the Executive of any duties inconsistent in
any respect with the Executives position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a), or any other diminution in such position (or
removal from such position), authority, duties or responsibilities (whether or
not occurring solely as a result of the Companys ceasing to be a publicly
traded entity or becoming a subsidiary or a division of a publicly traded
entity), excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and that is remedied by the Company promptly
after receipt of notice thereof given by the Executive; |
|
|
(2) |
|
any failure by the Company to comply with any of the provisions
of Section 3(b), other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and that is remedied by the Company promptly after
receipt of notice thereof given by the Executive; |
|
|
(3) |
|
the Companys requiring the Executive (i) to be based at any
office or location other than as provided in Section 3(a)(1)(B), (ii) to be
based at a location other than the principal executive offices of the Company
if the Executive was employed at such location immediately preceding the
Effective Date, or (iii) to travel on Company business to a substantially
greater extent than required immediately prior to the Effective Date; |
|
|
(4) |
|
the failure by the Company to pay to the Executive any portion
of any installment of deferred compensation, or lump sum under any deferred
compensation program of the Company within 7 days after the Executive provides
the Company with written notice of the failure to pay such compensation when it
is due; |
|
|
(5) |
|
the failure by the Company to provide the Executive with the
number of paid vacation days and holidays to which the Executive was entitled
as of the Effective Date; |
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|
(6) |
|
any purported termination by the Company of the Executives
employment otherwise than as expressly permitted by this Agreement; |
|
|
(7) |
|
any failure by the Company to comply with and satisfy Section
11(c); |
|
|
(8) |
|
if the Company (or the entity effectuating a Change of Control)
continues to exist and be a company registered under the Securities Exchange
Act of |
8
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|
|
1934, as amended, after the Effective Date and continues to have in effect
an equity-compensation plan, the failure of the Company to grant to the
Executive equity-based compensation with respect to a number of shares of
common stock of the Company (or the entity effectuating the Change of
Control) at least as great as the average annual percentage of the
outstanding common stock of the Company with respect to which the Executive
received such equity-based compensation during the three calendar years
immediately prior to the Effective Date, which equity-based compensation is
on terms, including pricing relative to the market price at the time of
grant, that is at least as favorable to the Executive as the terms of the
grant last made to the Executive prior to the Effective Date; or |
|
(9) |
|
failure to include the Executive in any program or plan of
benefits (including, but not limited to, stock option and deferred compensation
plans), and failure to provide the Executive similar levels of benefit amounts
or coverage, which benefits are either provided or otherwise offered to peer
executives of the Company and the Affiliated Companies following the Effective
Date. |
For purposes of this Section 4(c), any good faith determination of Good Reason made
by the Executive shall be conclusive. Anything in this Agreement to the contrary
notwithstanding, a termination by the Executive for any reason pursuant to a Notice
of Termination given during the 90-day period immediately following the first
anniversary of the occurrence of a Change in Control (other than a Change in Control
occurring solely under Section 1(d)(3) of this Agreement where all or substantially
all of the individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to a Business Combination beneficially own, directly or
indirectly, more than 50% of the then-outstanding shares of common stock following
the Business Combination) shall be deemed to be a termination for Good Reason for
all purposes of this Agreement. The Executives mental or physical incapacity
following the occurrence of an event described above shall not affect the
Executives ability to terminate employment for Good Reason.
|
(d) |
|
Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason (other than Disability, which is addressed in Section
4(a)), shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 12(b). Notice of Termination means a written notice that
(1) indicates the specific termination provision in this Agreement relied upon, (2) to
the extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executives employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein) is other
than the date of receipt of such notice, specifies the Date of Termination (which Date
of Termination shall be not more than 30 days |
9
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|
|
after the giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or the
Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the Executives
or the Companys respective rights hereunder. |
|
(e) |
|
Date of Termination. Date of Termination means (1) if the Executives
employment is terminated by the Company for Cause, or by the Executive for Good Reason,
the date of receipt of the Notice of Termination or any later date specified in the
Notice of Termination (which date shall not be more than 30 days after the giving of
such notice), as the case may be, (2) if the Executives employment is terminated by
the Company other than for Cause or Disability, the Date of Termination shall be the
date on which the Company notifies the Executive of such termination, and (3) if the
Executives employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability Effective
Date, as the case may be. |
5. |
|
Obligations of the Company upon Termination. |
|
(a) |
|
Good Reason, Death or Disability; Other Than for Cause. If, during the
Employment Period, the Company terminates the Executives employment other than for
Cause or the Executive resigns for Good Reason or if the Executives employment is
terminated as a result of the Executives death or Disability: |
|
(1) |
|
the Company shall pay to the Executive (or the Executives
estate or beneficiary, in the event of the Executives death), in a lump sum in
cash within 30 days after the Date of Termination (or, if required by Section
409A of the Code to avoid the imposition of additional taxes, on the date that
is six (6) months following the Date of Termination), the aggregate of the
following amounts: |
|
(A) |
|
the sum of (i) the Executives Annual Base
Salary through the Date of Termination to the extent not theretofore
paid, and (ii) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case, to the extent not theretofore paid
(the sum of the amounts described in subclauses (i) and (ii) the
Accrued Obligations); and |
|
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(B) |
|
the amount equal to three (3) times the sum of:
(i) the Executives then-current Annual Base Salary, plus (ii) an
amount equal to the highest bonus determined to date under Section 4(b)
of the Employment Agreement or paid to the Executive hereunder (in the
case of death or the Executives Disability, reduced (but not below
zero) by any disability or death benefits that the Executive or the |
10
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Executives estate or beneficiaries are entitled to pursuant to plans
or arrangements of the Company); |
|
(2) |
|
for three years after the Executives Date of Termination (or
such shorter period as required by Section 409A of the Code to avoid the
imposition of additional taxes), the Company shall continue to provide benefits
to the Executive and/or the Executives dependents at least equal to those that
were provided to them (taking into account any required employee contributions,
co-payments and similar costs imposed on the Executive and the Executives
dependents and the tax treatment of participation in the plans, programs,
practices and policies by the Executive and the Executives dependents) by or
on behalf of the Company and or the Affiliated Companies in accordance with the
benefit plans, programs, practices and policies (including those provided under
the Employment Agreement) in effect immediately prior to a Change of Control
or, if more favorable to the Executive, as in effect any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies
and their dependents; provided, however, that, if the Executive becomes
reemployed with another employer and is eligible to receive such benefits under
another employer provided plan, program, practice or policy, the medical and
other welfare benefits described herein shall be secondary to those provided
under such other plan, program, practice or policy during such applicable
period of eligibility; and |
|
|
(3) |
|
to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any Other Benefits (as defined in
Section 6). |
|
(b) |
|
Cause; Other Than for Good Reason. If the Executives employment is
terminated for Cause during the Employment Period, the Company shall provide to the
Executive (1) the Executives Annual Base Salary through the Date of Termination, (2)
the amount of any compensation previously deferred by the Executive, and (3) the Other
Benefits, in each case, to the extent theretofore unpaid, and shall have no other
severance obligations under this Agreement. If the Executive voluntarily terminates
employment during the Employment Period, excluding a termination for Good Reason, the
Company shall provide to the Executive the Accrued Obligations and the timely payment
or delivery of the Other Benefits, and shall have no other severance obligations under
this Agreement. In such case, all the Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination. |
6. |
|
Employment Agreement; Non-Exclusivity of Rights. The Executive shall be entitled to
the higher of the benefits and compensation payable under this Agreement or those payable
under the Employment Agreement as if the Change of Control were deemed a termination without
Cause (as defined therein). It is the intent of the parties that nothing in this Agreement or
in the Employment Agreement shall affect any right the Executive may have with respect to: (i)
any vested or other Benefits that the Executive is entitled to |
11
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|
receive under any plan, policy, practice or program of or any other contract or agreement
with the Company or the Affiliated Companies at or subsequent to a Change of Control (Other
Benefits); and (ii) continuing or future participation in any plan, program, policy or
practice provided by the Company or the Affiliated Companies and for which the Executive may
qualify. If the Executives employment is terminated by reason of the Executives Disability
(or death), with respect to the provision of the Other Benefits, the term Other Benefits
shall include, and the Executive (or the estate or beneficiary of the Executive, in the
event of the Executives death) shall be entitled after the Disability Effective Date (or
upon the Executives death) to receive, disability (or death) benefits and other benefits at
least equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives (or to the estates and beneficiaries of deceased
executives) and/or their families in accordance with such plans, programs, practices and
policies relating to disability (or death), if any, as in effect generally with respect to
other peer executives of the Company and the Affiliated Companies and their families at any
time during the 180-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executives family, as in effect at any time
thereafter generally with respect to other peer executives of the Company and the Affiliated
Companies and their families. . |
7. |
|
No Set-Off; Companys Obligations; Mitigation. The Companys obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations hereunder
shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right
or action that the Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this Agreement, and
such amounts shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred (within 10 days following the Companys receipt of an
invoice from the Executive), to the full extent permitted by law, all legal fees and expenses
that the Executive may reasonably incur as a result of any contest or disagreement (regardless
of the outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Executive about the amount of
any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment
at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue
Code of 1986, as amended (the Code). No obligation of the Company under this Agreement to
pay the Executives fees or expenses shall in any manner confer upon the Company any right to
select or approve any of the attorneys or accountants engaged by the Executive. |
8. |
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Certain Additional Payments by the Company. |
|
(a) |
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Whether or not the Executive becomes entitled to any payments hereunder, if any
of the payments or benefits received or to be received by the Executive (including any
payment or benefits received in connection with a Change of Control or the Executives
termination of employment, whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement) (all such payments and benefits, excluding the Gross-Up
Payment, being hereinafter referred to as the |
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Total Payments) will be subject to the excise tax (the Excise Tax) imposed under
Section 4999 of the Internal Revenue Code of 1986, as amended (the Code), the
Company shall pay to the Executive an additional amount (the Gross-Up Payment)
such that the net amount retained by the Executive, after deduction of any Excise
Tax on the Total Payments and any federal, state and local income and employment
taxes and Excise Tax upon the Gross-Up Payment, and after taking into account the
phase out of itemized deductions and personal exemptions attributable to the
Gross-Up Payment, shall be equal to the Total Payments. |
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(b) |
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For purposes of determining whether any of the Total Payments will be subject
to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments
shall be treated as parachute payments (within the meaning of Section 280G(b)(2) of
the Code) unless, in the opinion of tax counsel (Tax Counsel) reasonably acceptable
to the Executive and selected by the accounting firm which was, immediately prior to
the Change of Control, the Companys independent auditor (the Auditor), such payments
or benefits (in whole or in part) do not constitute parachute payments, including by
reason of Section 280G(b)(4)(A) of the Code, (ii) all excess parachute payments
within the meaning of Section 280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually rendered
(within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount
(as defined in Section 280G(b)(3) of the Code) allocable to such reasonable
compensation, or are otherwise not subject to the Excise Tax, and (iii) the value of
any noncash benefits or any deferred payment or benefit shall be determined by the
Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the Executive shall be
deemed to pay federal income tax at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and locality
of the Executives residence on the Date of Termination (or if there is no Date of
Termination, then the date on which the Gross-Up Payment is calculated for purposes of
this Section 8(b)), net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes. |
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(c) |
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In the event that the Excise Tax is finally determined to be less than the
amount taken into account hereunder in calculating the Gross-Up Payment, the Executive
shall repay to the Company, within five (5) business days following the time that the
amount of such reduction in the Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the Executive), to the
extent that such repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Executives taxable income and wages for purposes of
federal, state and local income and employment taxes, |
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plus interest on the amount of such repayment at 120% of the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder in calculating the Gross-Up
Payment (including by reason of any payment the existence or amount of which cannot
be determined at the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any interest, penalties
or additions payable by the Executive with respect to such excess) within five (5)
business days following the time that the amount of such excess is finally
determined. The Executive and the Company shall each reasonably cooperate with the
other in connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the Total Payments. |
9. |
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Covenants of Executive. |
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(a) |
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Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or the Affiliated Companies, and their
respective businesses, which information, knowledge or data shall have been obtained by
the Executive during the Executives employment by the Company or the Affiliated
Companies and which information, knowledge or data shall not be or become public
knowledge (other than by acts by the Executive or representatives of the Executive in
violation of this Agreement). After termination of the Executives employment with the
Company, the Executive shall not, without the prior written consent of the Company or
as may otherwise be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those persons
designated by the Company. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement. |
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(b) |
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Non-Competition. In consideration for the protections provided to the
Executive under this Agreement, the Executive agrees that from the Date of Termination
until the first anniversary thereof (the Covenant Period), the Executive will not,
directly or indirectly, own, manage, operate, control or participate in the ownership,
management, operation or control of, or be connected as an officer, employee, partner,
director or otherwise with, or (other than through the ownership of not more than five
percent (5%) of the voting stock of any publicly held corporation) have any financial
interest in, or aid or assist anyone else in the conduct of, a business which at the
time of such termination competes in the United States with a business conducted by the
Company or any group, division or subsidiary of the Company (Company Group) as of the
Date of Termination. Notwithstanding the foregoing, the Executives employment by a
business that competes with the business of the Company, or the retention of the
Executive as a consultant by any such business shall not violate this Section 9(b) if
the Executives duties and actions for the business are solely for groups, divisions or
subsidiaries that are not engaged in a business that competes with a business |
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conducted by the Company. No business shall be deemed to be a business conducted by
the Company unless the Company was engaged in the business as of the Date of
Termination and continues to be engaged in the business and at least twenty-five
percent (25%) of the Companys consolidated gross sales and operating revenues, or
net income, is derived from, or at least twenty-five percent (25%) of the Companys
consolidated assets are devoted to, such business and no business shall be deemed to
compete with a business conducted by the Company unless at least twenty-five percent
(25%) of the consolidated gross sales and operating revenues, or net income, of any
consolidated group that includes the business, is derived from, or at least
twenty-five percent (25%) of the consolidated assets of any such consolidated group
are devoted to, such business. |
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Non-Solicitation. During the Covenant Period, the Executive shall not
solicit on the Executives behalf or on behalf of any other person the services, as
employee, consultant or otherwise of any person who on the Date of Termination is
employed by the Company Group, whether or not such person would commit any breach of
his contract of service in leaving such employment, except for any employee (i) whose
employment is terminated by the Company or any successor thereof prior to such
solicitation of such employee, (ii) who initiates discussions regarding such employment
without any solicitation by the Executive, (iii) who responds to any public
advertisement unless such advertisement is designed to target, or has the effect of
targeting, employees of the Company, or (iv) who is initially solicited for a position
other than by the Executive and without any suggestion or advice from the Executive.
Nothing herein shall restrict businesses that employ the Executive or retain the
Executive as an executive from soliciting from time to time employees of the Company,
if (A) such solicitation occurs in the ordinary course of filling the businesss
employment needs, and (B) the solicitation is made by persons at the business other
than the Executive who have not become aware of the availability of any specific
employees as a result of the advice of the Executive. |
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(d) |
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Continuation of Employment. The Executive agrees not to voluntarily
terminate employment with the Company (other than (i) as a result of an event that
would constitute Good Reason that is at the request of a third party that has taken
steps reasonably calculated to effectuate a Change of Control or otherwise arose in
connection with or in anticipation of a Change of Control or (ii) by reason of
non-extension or non-renewal of the Employment Agreement or such other employment
agreement entered into by and between the Executive and the Company from time to time)
from such time as the Company has entered into an agreement that would result in a
Change of Control until the Change of Control; provided, that such provision shall
cease to apply upon the termination of such agreement or if the Change of Control has
not occurred within one year following the execution of such agreement |
10. |
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Arbitration. Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the |
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arbitrators award in any court having jurisdiction; provided, however, that the Executive
shall be entitled to seek specific performance of the Executives right to be paid any
amounts or provided with any benefits due to the Executive hereunder during the pendency of
any dispute or controversy arising under or in connection with this Agreement. |
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(a) |
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This Agreement is personal to the Executive, and, without the prior written
consent of the Company, shall not be assignable by the Executive; provided, however,
the Executive may designate one or more beneficiaries to receive amounts payable
hereunder after his death. This Agreement shall inure to the benefit of and be
enforceable by the Executives legal representatives. |
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(b) |
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This Agreement shall inure to the benefit of and be binding upon the Company
and its successors and assigns. Except as provided in Section 11(c), without the prior
written consent of the Executive this Agreement shall not be assignable by the Company. |
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(c) |
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The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be required
to perform it if no such succession had taken place. Company means the Company as
hereinbefore defined and any successor to its business and/or assets as aforesaid that
assumes and agrees to perform this Agreement by operation of law or otherwise. |
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This Agreement shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or modified other than by a
written agreement executed by the parties hereto or their respective successors,
permitted assigns and legal representatives. |
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(b) |
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All notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows: |
if to the Executive:
at the most recent address on record at the Company;
if to the Company:
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Mylan Laboratories Inc.
1500 Corporate Drive
Canonsburg, PA 15317
Attention: Chief Legal Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective when
actually received by the addressee.
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(c) |
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The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement. Any
invalid or unenforceable provision shall be deemed severed from this Agreement to the
extent of its invalidity or unenforceability, and this Agreement shall be construed and
enforced as if the Agreement did not contain that particular provision to the extent of
its invalidity or unenforceability, provided that in lieu of any such invalid or
unenforceable term or provision, the parties hereto intend that there shall be added as
a part of this Agreement a provision as similar in terms to such invalid or
unenforceable provision as may be possible and be valid and enforceable. |
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(d) |
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The Company may withhold from any amounts payable under this Agreement such
United States federal, state or local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation. |
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(e) |
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The Executives or the Companys failure to insist upon strict compliance with
any provision of this Agreement or the failure to assert any right the Executive or the
Company may have hereunder, including, without limitation, the right of the Executive
to terminate employment for Good Reason under Section 4(c), shall not be deemed to be a
waiver of such provision or right or any other provision or right of this Agreement. |
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(f) |
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The Executive and the Company acknowledge that, except as provided in the
Employment Agreement or any other written agreement between the Executive and the
Company, the employment of the Executive by the Company is at will and, subject to
Section 1(a), prior to the Effective Date, the Executives employment may be terminated
by either the Executive or the Company at any time prior to the Effective Date, in
which case the Executive shall have no further rights under this Agreement. From and
after the date of the Effective Date, except for any agreements providing for
retirement benefits and as otherwise specifically provided herein (including without
limitation in Section 6), this Agreement shall supersede any other agreement between
the parties with respect to the subject matter hereof. |
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IN WITNESS WHEREOF, the Executive has hereunto set the Executives hand and the Company has
caused these presents to be executed in its name on its behalf, all as of the day and year first
above written.
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MYLAN LABORATORIES INC.
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/s/ Robert J. Coury
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By: Robert J. Coury |
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Vice Chairman and CEO |
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EXECUTIVE
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/s/ Rajiv Malik
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Rajiv Malik |
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18
EX-10.33
Exhibit 10.33
EXECUTIVE
EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the Agreement) is dated as of January 31, 2007, by and
between Mylan Laboratories Inc. (the Company) and Heather Bresch (Executive).
RECITALS:
WHEREAS, the Company wishes to employ Executive as Head of North American Operations,
effective as of the date hereof, but may be interested in utilizing Executive in other capacities,
in order to avail itself of Executives skills and abilities in light of the Companys business
needs;
NOW, THEREFORE, in consideration of the promises and mutual obligations of the parties
contained herein, and for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and Executive agree as follows:
1. Employment of Executive; Best Efforts. The Company agrees to employ Executive, and
Executive accepts employment by the Company, on the terms and conditions provided herein. Effective
as of the date hereof, Executive shall serve as Head of North American Operations.
2. Effective Date: Term of Employment. This Agreement shall commence and be effective
as of the date hereof and shall remain in effect, unless earlier terminated, or extended or
renewed, as provided in Section 9 of this Agreement, through the third anniversary of the date
hereof (the Third Anniversary).
3. Performance of Duties; Best Efforts. During the term of this Agreement, Executive
shall devote her full working time and attention to the business and affairs of Mylan and the
performance of her duties hereunder, serve Mylan faithfully and to the best of her ability, and use
her best efforts to promote Mylans interests. Without limitation, Executive shall travel in
connection with her employment in accordance with the reasonable direction of the Chief Executive
Officer of the Company, commensurate with the activities of her position. During the term of this
Agreement, Executive agrees to promptly and fully disclose to Mylan, and not to divert to
Executives own use or benefit or the use or benefit of others, any business opportunities
involving any existing or prospective line of business, supplier, product or activity of Mylan or
any business opportunities which otherwise should rightfully be afforded to Mylan.
4. Executives Compensation. Executives compensation shall include the
following:
(a) Minimum Annual Base Salary. The Executives minimum annual base salary (the
Minimum Annual Base Salary) shall be Three Hundred Fifty Thousand Dollars ($350,000), payable in
accordance with the Companys normal payroll practices for its
($350,000), payable in accordance with the Companys normal payroll practices for its executive
officers. The Minimum Annual Base Salary may be increased from time to time at the discretion of
the Compensation Committee of the Board of Directors of the Company, any other committee authorized
by the Board of Directors or any officer having authority over executive compensation.
(b) Annual Bonus. Executive shall have an annual discretionary bonus opportunity of
seventy-five percent (75%) of Executives then-current Minimum Annual Base Salary, to be paid upon
satisfaction of certain criteria established by the Compensation Committee of the Board of
Directors, or by any other committee or officer having authority over executive compensation.
(c) Non-Qualified Stock Options; Performance-Based Compensation. On the date hereof,
Executive shall receive non-qualified stock options to purchase one hundred thousand (100,000)
shares of Mylan common stock under the 2003 Long-Term Incentive Plan (the Plan) in accordance
with the following vesting schedule, provided that Executive remains employed by Mylan on the
following vesting dates: on the first anniversary of the date hereof, Executive shall vest in the
first 25,000 shares; on the second anniversary of the date hereof, Executive shall vest in an
additional 25,000 shares; on the third anniversary of the date hereof, Executive shall vest in an
additional 25,000 shares; and on the fourth anniversary of the date hereof, Executive shall vest in
the remaining 25,000 shares. These options will be subject to all terms of the Plan and the
applicable stock option agreement. Notwithstanding any term or provision to the contrary set forth
elsewhere herein, Executive shall be entitled to one hundred percent (100%) vesting of the
above-referenced options in the event Executive resigns for Good Reason or is Terminated Without
Cause, as provided in Section 9 herein.
(d) Fringe Benefits and Expense Reimbursement. The Executive shall receive benefits
and perquisites of employment similar to those as have been customarily provided to the Companys
other executive officers including but not limited to, health insurance coverage, short-term
disability benefits and twenty (20) vacation days, in each case in accordance with the plan
documents or policies that govern such benefits. The Company shall reimburse Executive for all
ordinary and necessary business expenses in accordance with established Company policy and
procedures.
5. Confidentiality. Executive recognizes and acknowledges that the business interests
of the Company and its subsidiaries, parents and affiliates (collectively the Mylan Companies)
require a confidential relationship between the Company and Executive and the fullest protection
and confidential treatment of the financial data, customer information, supplier information,
market information, marketing and/or promotional techniques and methods, pricing information,
purchase information, sales policies, employee lists, policy and procedure information, records,
advertising information, computer records, trade secrets, know how, plans and programs, sources of
supply, and other knowledge of the business of the Mylan Companies (all of which are hereinafter
jointly termed Confidential Information) which have or may in whole or in part be conceived,
learned or obtained by Executive in the course of Executives
2
employment with the Company. Accordingly, Executive agrees to keep secret and treat as confidential
all Confidential Information whether or not copyrightable or patentable, and agrees not to use or
aid others in learning of or using any Confidential Information except in the ordinary course of
business and in furtherance of the Companys interests. During the term of this Agreement and at
all times thereafter, except insofar as is necessary disclosure consistent with the Companys
business interests:
(a) Executive will not, directly or indirectly, disclose any Confidential
Information to anyone outside the Mylan Companies;
(b) Executive will not make copies of or otherwise disclose the contents of documents
containing or constituting Confidential Information;
(c) As to documents which are delivered to Executive or which are made available to her as a
necessary part of the working relationships and duties of Executive within the business of the
Company, Executive will treat such documents confidentially and will treat such documents as
proprietary and confidential, not to be reproduced, disclosed or used without appropriate authority
of the Company;
(d) Executive will not advise others that the information and/or know how included in
Confidential Information is known to or used by the Company; and
(e) Executive will not in any manner disclose or use Confidential Information for Executives
own account and will not aid, assist or abet others in the use of Confidential Information for
their account or benefit, or for the account or benefit of any person or entity other than the
Company.
The obligations set forth in this paragraph are in addition to any other agreements the
Executive may have with the Company and any and all rights the Company may have under state or
federal statutes or common law.
6. Non-Competition and Non-Solicitation. Executive agrees that for a period ending one
(1) year after termination of Executives employment with the Company for any reason:
(a) Executive shall not, directly or indirectly, whether for herself or for any other person,
company, corporation or other entity be or become associated in any way (including but not limited
to the association set forth in i-vii of this subsection) with any business or organization which
is directly or indirectly engaged in the research, development, manufacture, production, marketing,
promotion or sale of any product the same as or similar to those of the Mylan Companies, or which
competes or intends to compete in any line of business with the Mylan Companies within North
America. Notwithstanding the foregoing, Executive may during the period in which this paragraph is
in effect own stock or other interests in corporations or other entities that engage in businesses
the same or substantially similar to those engaged in by the Mylan Companies, provided that
Executive does not, directly or indirectly (including without limitation as
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the result of ownership or control of another corporation or other entity), individually or as part
of a group (as that term is defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder) (i) control or have the ability to
control the corporation or other entity, (ii) provide to the corporation or entity, whether as an
Executive, consultant or otherwise, advice or consultation, (iii) provide to the corporation or
entity any confidential or proprietary information regarding the Mylan Companies or its businesses
or regarding the conduct of businesses similar to those of the Mylan Companies, (iv) hold or have
the right by contract or arrangement or understanding with other parties to hold a position on the
board of directors or other governing body of the corporation or entity or have the right by
contract or arrangement or understanding with other parties to elect one or more persons to any
such position, (v) hold a position as an officer of the corporation or entity, (vi) have the
purpose to change or influence the control of the corporation or entity (other than solely by the
voting of her shares or ownership interest) or (vii) have a business or other relationship, by
contract or otherwise, with the corporation or entity other than as a passive investor in it;
provided, however, that Executive may vote her shares or ownership interest in such manner as she
chooses provided that such action does not otherwise violate the prohibitions set forth in this
sentence.
(b) Executive will not, either directly or indirectly, either for herself or for any other
person, partnership, firm, company, corporation or other entity, contact, solicit, divert, or take
away any of the customers or suppliers of the Mylan Companies.
(c) Executive will not solicit, entice or otherwise induce any employee of the Mylan Companies
to leave the employ of the Mylan Companies for any reason whatsoever; nor will Executive directly
or indirectly aid, assist or abet any other person or entity in soliciting or hiring any employee
of the Mylan Companies, nor will Executive otherwise interfere with any contractual or other
business relationships between the Mylan Companies and its employees.
7. Severability. Should a court of competent jurisdiction determine that any section
or sub-section of this Agreement is unenforceable because one or all of them are vague or overly
broad, the parties agree that this Agreement may and shall be enforced to the maximum extent
permitted by law. It is the intent of the parties that each section and sub-section of this
Agreement be a separate and distinct promise and that unenforceability of any one subsection shall
have no effect on the enforceability of another.
8. Injunctive Relief. The parties agree that in the event of Executives violation of
Sections 5 and/or 6 of this Agreement or any subsection thereunder, that the damage to the Company
will be irreparable and that money damages will be difficult or impossible to ascertain.
Accordingly, in addition to whatever other remedies the Company may have at law or in equity,
Executive recognizes and agrees that the Company shall be entitled to a temporary restraining order
and a temporary and permanent injunction enjoining and prohibiting any acts not permissible
pursuant to this Agreement. Executive agrees that should either party seek to enforce or determine
its rights because of an act of Executive
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which the Company believes to be in contravention of Sections 5 and/or 6 of this Agreement or
any subsection thereunder, the duration of the restrictions imposed thereby shall be extended for a
time period equal to the period necessary to obtain judicial enforcement of the Companys rights.
9. Termination of Employment.
(a) Resignation, (i) Executive may resign from employment at any time upon 90 days
written notice to the Chief Executive Officer. During the 90 days notice period Executive will
continue to perform duties and abide by all other terms and conditions of this Agreement.
Additionally, Executive will use her best efforts to effect a smooth and effective transition to
whoever will replace Executive. Mylan reserves the right to accelerate the effective date of
Executives resignation, provided that Executive shall receive Executives salary and benefits
through the ninety (90) day period. (ii) If Executive resigns without Good Reason (as defined
below), Mylan shall have no liability to Executive under this Agreement other than that the Company
shall pay Executives wages and benefits through the effective date of Executives resignation.
Executive, however, will continue to be bound by all provisions of this Agreement that survive
termination of employment. For purposes of this Agreement Good Reason shall mean: (a) a reduction
of Executives annual base salary below the Minimum Annual Base Salary stipulated in this
Agreement, unless other executive officers of the Company are required to accept a similar
reduction; or (b) the assignment of duties to the Executive which are inconsistent with those of an
executive officer. (iii) If Executive resigns with Good Reason and complies in all respects with
her obligations hereunder, Mylan will pay Executive her then-current Base Salary for 12 months
following her separation from the Company, payable in accordance with the Companys normal payroll
practices (or, at the Companys discretion, in a lump sum), plus an amount equal to the bonus that
Executive would have been entitled to receive for the fiscal year in which the termination occurs,
pro rated based on the portion of such year during which Executive was employed by the Company.
Mylan shall also pay the cost of continuing Executives health insurance benefits for the 12 months
following her separation from the Company; provided, however, that in the case of health insurance
continuation, Mylans obligation to provide health insurance benefits shall end at such time as
Executive obtains health insurance benefits through another employer or otherwise in connection
with rendering services for a third party. Executive will continue to be bound by all provisions of
this Agreement that survive termination of employment.
(b) Termination for Cause. If Mylan determines to terminate Executives employment
during the term of this Agreement for Cause, as defined herein, Mylan will give Executive written
notice of its belief that acts or events constituting Cause exist. Executive has the right to cure
within five (5) days of Mylans giving of such notice, the acts, events or conditions which led to
such notice being given. For purposes of this Agreement, Cause shall mean: (i) Executives
willful and gross misconduct with respect to the business or affairs of any of the Mylan Companies;
(ii) Executives insubordination, gross neglect of duties, dishonesty or deliberate disregard of
any material rule or policy of any of the Mylan Companies; (iii) Executives conviction of a
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crime involving moral turpitude; or (iv) Executives conviction of any felony. If Mylan terminates
Executives employment for Cause, the Company shall have no liability to Executive other than to
pay Executives wages and benefits through the effective date of Executives termination.
Executive, however, will continue to be bound by all provisions of this Agreement that survive
termination of employment.
(c) Termination Without Cause. If Mylan discharges Executive without Cause, Mylan will
pay Executive her then-current Base Salary for 12 months following her separation from the Company,
payable in accordance with the Companys normal payroll practices (or, at the Companys discretion,
in a lump sum), plus a pro rata bonus equal to the bonus that Executive would have been entitled to
receive for the fiscal year in which the termination occurs. Mylan shall also pay the cost of
continuing Executives health insurance benefits (including, as applicable, those benefits that
cover eligible members of her immediate family) for the 12 months following such termination
without Cause; provided, however, that in the case of health insurance continuation, Mylans
obligation to provide health insurance benefits shall end at such time as Executive obtains health
insurance benefits through another employer or otherwise in connection with rendering services for
a third party. Executive will continue to be bound by all provisions of this Agreement that survive
termination of employment.
(d) Death or Incapacity. The employment of Executive shall automatically terminate
upon Executives death or upon the occurrence of a disability that renders Executive incapable of
performing the essential functions of her position within the meaning of the Americans With
Disabilities Act of 1990. For all purposes of this Agreement, any such termination shall be treated
in the same manner as a termination without Cause, as described in Section 9(c) above, and
Executive, or Executives estate, as applicable, shall receive all consideration, compensation and
benefits that would be due and payable to Executive for a termination without Cause, provided,
however, that such consideration, compensation and benefits shall be reduced by any death or
disability benefits (as applicable) that the Executive or her estate or beneficiaries (as
applicable) are entitled to pursuant to plans or arrangements of the Company.
(e) Extension or Renewal. The Term of Employment may be extended or renewed upon
mutual agreement of Executive and the Company. If the Term of Employment is not extended or renewed
on terms mutually acceptable to Executive and the Company, and if this Agreement has not been
sooner terminated for reasons stated in Section 9(a), (b), (c) or (d) of this Agreement, Executive
shall be paid her then-current Base Salary for 12 months following the Third Anniversary, payable
in accordance with the Companys normal payroll practices (or, at the Companys discretion, in a
lump sum), and Executives health insurance benefits shall be continued for 12 months at the
Companys cost; provided, however, that in the case of health insurance continuation, the Companys
obligation to provide health insurance benefits shall end at such time as Executive, at her option,
voluntarily obtains heath insurance benefits.
(f) Return of Company Property. Upon the termination of Executives employment
for any reason, Executive shall immediately return to Mylan all records,
6
memoranda, files, notes, papers, correspondence, reports, documents, books, diskettes, hard
drives, electronic files, and all copies or abstracts thereof that Executive has concerning any or
all of the Mylan Companies business. Executive shall also immediately return all keys,
identification cards or badges and other company property.
(g) No Duty to Mitigate. There shall be no requirement on the part of Executive to
seek other employment or otherwise mitigate damages in order to be entitled to the full amount of
any payments and benefits to which Executive is otherwise entitled under any contract and the
amount of such payments and benefits shall not be reduced by any compensation or benefits received
by Executive from other employment.
(h) Section 409A. Notwithstanding anything to the contrary in this Agreement, the
payment of consideration, compensation, and benefits pursuant to this Section 9 shall be
interpreted and administered in manner intended to avoid the imposition of additional taxes under
Section 409A of the Internal Revenue Code.
10. Indemnification. The Company shall maintain D&O liability coverage pursuant to
which Executive shall be a covered insured. Executive shall receive indemnification in accordance
with the Companys Bylaws in effect as of the date of this Agreement. Such indemnification shall be
contractual in nature and shall remain in effect notwithstanding any future change to the Companys
Bylaws.
To the extent not otherwise limited by the Companys Bylaws in effect as of the date of this
Agreement, in the event that Executive is made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, (including those brought by or in the right of the
Company) whether civil, criminal, administrative or investigative (proceeding), by reason of the
fact that she is or was an officer, employee or agent of or is or was serving the Company or any
subsidiary of the Company, or is or was serving at the request of the Company or another
corporation, or of a partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, Executive shall be indemnified and held harmless by the
Company to the fullest extent authorized by law against all expenses, liabilities and losses
(including attorneys fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by Executive in connection therewith. Such
right shall be a contract right and shall include the right to be paid by the Company expenses
incurred in defending any such proceeding in advance of its final disposition; provided, however,
that the payment of such expenses incurred by Executive in her capacity as a director or officer
(and not in any other capacity in which service was or is rendered by Executive while a director or
officer, including, without limitation, service to an employee benefit plan) in advance of the
final disposition of such proceeding will be made only upon delivery to the Company of an
undertaking, by or on behalf of Executive, to repay all amounts to Company so advanced if it should
be determined ultimately that Executive is not entitled to be indemnified under this section or
otherwise.
7
Promptly after receipt by Executive of notice of the commencement of any action, suit or
proceeding for which Executive may be entitled to be indemnified, Executive shall notify the
Company in writing of the commencement thereof (but the failure to notify the Company shall not
relieve it from any liability which it may have under this Section 10 unless and to the extent that
it has been prejudiced in a material respect by such failure or from the forfeiture of substantial
rights and defenses). If any such action, suit or proceeding is brought against Executive and she
notifies the Company of the commencement thereof, the Company will be entitled to participate
therein, and, to the extent it may elect by written notice delivered to Executive promptly after
receiving the aforesaid notice from Executive, to assume the defense thereof with counsel
reasonably satisfactory to Executive, which may be the same counsel as counsel to the Company.
Notwithstanding the foregoing, Executive shall have the right to employ her own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of Executive unless (i) the
employment of such counsel shall have been authorized in writing by the Company, (ii) the Company
shall not have employed counsel reasonably satisfactory to Executive to take charge of the defense
of such action within a reasonable time after notice of commencement of the action or (iii)
Executive shall have reasonably concluded, after consultation with counsel to Executive, that a
conflict of interest exists which makes representation by counsel chosen by the Company not
advisable (in which case the Company shall not have the right to direct the defense of such action
on behalf of Executive), in any of which events such fees and expenses of one additional counsel
shall be borne by the Company. Anything in this Section 9 to the contrary notwithstanding, the
Company shall not be liable for any settlement of any claim or action effected without its written
consent.
11. Other Agreements. The rights and obligations contained in this Agreement
are in addition to and not in place of any rights or obligations contained in any other
agreements between the Executive and the Company.
12. Notices. All notices hereunder to the parties hereto shall be in writing sent by
certified mail, return receipt requested, postage prepaid, and by fax, addressed to the
respective parties at the following addresses:
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If to the Company: |
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Mylan Laboratories Inc. 1500 Corporate Drive Canonsburg,Pennsylvania 15317 Attention: Chief Executive Officer |
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If to Executive: |
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at the most recent address on record at the Company. |
Either party may, by written notice complying with the requirements of this section, specify
another or different person or address for the purpose of notification hereunder. All notices shall
be deemed to have been given and received on the day a fax is sent or, if mailed only, on the third
business day following such mailing.
8
13. Withholding. All payments required to be made by the Company hereunder
to Executive or her dependents, beneficiaries, or estate will be subject to the withholding
of such amounts relating to tax and/or other payroll deductions as may be required by
law.
14. Modification and Waiver. This Agreement may not be changed or terminated
rally, nor shall any change, termination or attempted waiver of any of the provisions
contained in this Agreement be binding unless in writing and signed by the party against
whom the same is sought to be enforced, nor shall this section itself by waived verbally.
This Agreement may be amended only by a written instrument duly executed by or on
behalf of the parties hereto.
15. Construction of Agreement. This Agreement and all of its provisions were
subject to negotiation and shall not be construed more strictly against one party than
against another party regardless of which party drafted any particular provision.
16. Successors and Assigns. This Agreement and all of its provisions, rights and
obligations shall be binding upon and inure to the benefit of the parties hereto and the
Companys successors and assigns. This Agreement may be assigned by the Company to
any person, firm or corporation which shall become the owner of substantially all of the
assets of the Company or which shall succeed to the business of the Company; provided,
however, that in the event of any such assignment the Company shall obtain an
instrument in writing from the assignee in which such assignee assumes the obligations
of the Company hereunder and shall deliver an executed copy thereof to Executive. No
right or interest to or in any payments or benefits hereunder shall be assignable by
Executive; provided, however, that this provision shall not preclude her from designating
one or more beneficiaries to receive any amount that may be payable after her death and
shall not preclude the legal representative of her estate from assigning any right
hereunder to the person or persons entitled thereto under her will or, in the case of
intestacy, to the person or persons entitled thereto under the laws of intestacy applicable
to her estate. The term beneficiaries as used in this Agreement shall mean a
beneficiary or beneficiary or beneficiaries so designated to receive any such amount, or if
no beneficiary has been so designated, the legal representative of the Executives estate.
No right, benefit, or interest hereunder, shall be subject to anticipation, alienation, sale,
assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any
claim, debt, or obligation, or to execution, attachment, levy, or similar process, or
assignment by operation of law. Any attempt, voluntary or involuntary, to effect any
action specified in the immediately preceding sentence shall, to the full extent permitted
by law, be null, void, and of no effect.
17. Choice of Law and Forum. This Agreement shall be construed and enforced
according to, and the rights and obligations of the parties shall be governed in all respects
by, the laws of the Commonwealth of Pennsylvania. Any controversy, dispute or claim
arising out of or relating to this Agreement, or the breach hereof, including a claim for
injunctive relief, or any claim which, in any way arises out of or relates to, Executives
employment with the Company or the termination of said employment, including but not
9
limited to statutory claims for discrimination, shall be resolved by arbitration in accordance with
the then current rules of the American Arbitration Association respecting employment disputes
except that the parties shall be entitled to engage in all forms of discovery permitted under the
Pennsylvania Rules of Civil Procedure (as such rules may be in effect from time to time). The
hearing of any such dispute will be held in Pittsburgh, Pennsylvania, and the losing party shall
bear the costs, expenses and counsel fees of such proceeding. Executive and Company agree for
themselves, their, employees, successors and assigns and their accountants, attorneys and experts
that any arbitration hereunder will be held in complete confidence and, without the other partys
prior written consent, will not be disclosed, in whole or in part, to any other person or entity
except as may be required by law. The decision of the arbitrator(s) will be final and binding on
all parties. Executive and the Company expressly consent to the jurisdiction of any such arbitrator
over them.
18. Headings. The headings of the sections of this Agreement have been inserted
for convenience of reference only and shall in no way affect the interpretation of any of
the terms or conditions of this Agreement.
19. Execution in Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
20. Original Agreement. The parties agree that that certain Employment
Agreement dated as of February 14, 2006, by and between the Company and Executive is
terminated and superseded in all respects upon the effectiveness of this Agreement.
[Signature page follows]
10
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first
above mentioned.
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MYLAN LABORATORIES INC.
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EXECUTIVE: |
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/s/ Robert J. Coury
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/s/ Heather Bresch
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By: Robert J. Coury
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Heather Bresch |
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Its: Vice Chairman and CEO |
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11
EX-21
EXHIBIT 21
Subsidiaries
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Name
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State or Country of
Organization
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Mylan Pharmaceuticals Inc.
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West Virginia
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Mylan Technologies Inc.
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West Virginia
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Mylan Bertek Pharmaceuticals Inc.
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Texas
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UDL Laboratories, Inc.
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Illinois
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Mylan Inc.
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Delaware
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Mylan Caribe, Inc.
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Vermont
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Mylan International Holdings, Inc.
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Vermont
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MLRE LLC
MP Air Inc.
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Pennsylvania
West Virginia
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Bertek International, Inc.
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Vermont
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American Triumvirate Insurance
Company
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Vermont
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Bertek Pharmaceuticals
International Limited
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United Kingdom
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Euro Mylan B.V.
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Netherlands
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MP Laboratories (Mauritius) Ltd
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Mauritius
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Mylan Singapore Pte. Ltd
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Singapore
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Mylan India Private Limited
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India
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Mylan Europe BVBA
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Belgium
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Matrix Laboratories Limited
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India
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Matrix Laboratories BV
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Netherlands
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Matrix Laboratories N.V.
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Belgium
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Matrix Laboratories (Singapore)
Pte Limited
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Singapore
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Matrix Laboratories Inc.
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Delaware
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Docpharma N.V.
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Belgium
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Concord Biotech Limited
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India
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Xiamen Mchem Pharma Group Limited
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Peoples Republic of China
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Shanghai Fine Source Co. Ltd.
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Peoples Republic of China
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Mchem Research &
Development Co., Ltd.
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Peoples Republic of China
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Dafeng Mchem Pharmaceutical
Chemical Co. Ltd.
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Peoples Republic of China
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Xiamen Mchem Laboratories Limited
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Peoples Republic of China
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Fuzhou Airuike (R&D Co.)
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Peoples Republic of China
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AB Medical PRS B.V.
Aktuapharma N.V.
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Netherlands
Belgium
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Apothecon B.V.
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Netherlands
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Aprime N.V.
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Belgium
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DAA Pharma N.V.
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Switzerland
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DCI Pharma S.A.
Docpharma Luxembourg Saarl
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France
Luxembourg
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Farma 1 S.r.l
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Italy
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Hospithera N.V.
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Belgium
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Nutripharm S.A.
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Belgium
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Servipharma S.A.
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Luxembourg
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Vascucare N.V.
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Belgium
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Vascumed N.V.
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Belgium
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Value Pharma International
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Belgium
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EX-23
EXHIBIT 23
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration
Statement Nos.
333-35887,
333-42182,
333-43081,
333-65327,
333-65329,
333-98811,
333-111076
and
333-111077
on
Form S-8
and Registration Statement No. 333-140778 on Form S-3
of our reports dated May 29, 2007 (which report on the
consolidated financial statements and financial statement
schedule expresses an unqualified opinion and includes an
explanatory paragraph relating to the Companys adoption of
FASB Statement No. 123R, Share-Based Payment),
relating to the consolidated financial statements and financial
statement schedule of Mylan Laboratories Inc. and
managements report on the effectiveness of internal
control over financial reporting, appearing in this Annual
Report on
Form 10-K
of Mylan Laboratories Inc. for the year ended March 31,
2007.
/s/
Deloitte &
Touche LLP
Pittsburgh, Pennsylvania
May 29, 2007
EX-31.1
Exhibit 31.1
Certification
of CEO Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Robert J. Coury, certify that:
1. I have reviewed this Annual Report on
Form 10-K
of Mylan Laboratories Inc.;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the period[s] presented in this report;
4. The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act
Rules 13a-15(f)
and
15d-15(f))
for the registrant and have:
a) designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
b) designed such internal control over financial reporting,
or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
that has materially affected, or is reasonably likely to
materially affect, the registrants internal control over
financial reporting.
5. The registrants other certifying officer and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of registrants board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in
the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting.
Robert J. Coury
Chief Executive Officer
Date: May 30, 2007
EX-31.2
Exhibit 31.2
Certification
of CFO Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Edward J. Borkowski, certify that:
1. I have reviewed this Annual Report on
Form 10-K
of Mylan Laboratories Inc.;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the period[s] presented in this report;
4. The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act
Rules 13a-15(f)
and
15d-15(f))
for the registrant and have:
a) designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
b) designed such internal control over financial reporting,
or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
that has materially affected, or is reasonably likely to
materially affect, the registrants internal control over
financial reporting.
5. The registrants other certifying officer and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of registrants board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in
the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting.
Edward J. Borkowski
Chief Financial Officer
Date: May 30, 2007
EX-32
EXHIBIT 32
CERTIFICATIONS
of CEO and CFO PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on
Form 10-K
of Mylan Laboratories Inc. (the Company) for the
year ended March 31, 2007 as filed with the Securities and
Exchange Commission on the date hereof (the Report),
each of the undersigned, in the capacities and on the date
indicated below, hereby certifies pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
2. The information contained in the Report fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
Date: May 30, 2007
Robert J. Coury
Chief Executive Officer
Edward J. Borkowski
Chief Financial Officer
A signed original of this written statement required by
Section 906 has been provided to the Company and will be
retained by the Company and furnished to the Securities and
Exchange Commission or its staff upon request.
The foregoing certification is being furnished in accordance
with Securities and Exchange Commission Release
No. 34-47551
and shall not be considered filed as part of the
Form 10-K.