10-K/A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K/A

(Amendment No. 1)

 

Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2017

OR

 

Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                  to                  .

Commission file number 333-199861

MYLAN N.V.

(Exact name of registrant as specified in its charter)

 

The Netherlands   98-1189497
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)

Building 4, Trident Place, Mosquito Way, Hatfield, Hertfordshire, AL10 9UL, England

(Address of principal executive offices)

+44 (0) 1707 853 000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class:   Name of Each Exchange on Which Registered:
Ordinary shares, nominal value €0.01   The NASDAQ Stock Market

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  ☑    No  ☐

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  ☐    No  ☑

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  ☑    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☑    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s 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.  ☑

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

☐                      (Do not check if  a smaller reporting company)

  

Smaller reporting company

 

Emerging growth company

 

    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☑

The aggregate market value of the outstanding ordinary shares, nominal value €0.01, of the registrant other than shares held by persons who may be deemed affiliates of the registrant, as of June 30, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $20,669,862,339.

The number of ordinary shares outstanding, nominal value €0.01, of the registrant as of April 25, 2018 was 515,420,019.

DOCUMENTS INCORPORATED BY REFERENCE

None.

 

 

 


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EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (this “Amendment”) amends our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, originally filed on March 1, 2018 (the “Original Filing”). We are filing this Amendment to include the information required by Part III and not included in the Original Filing, as we do not intend to file a definitive proxy statement for an annual general meeting of shareholders within 120 days of the end of our fiscal year ended December 31, 2017. In addition, in connection with the filing of this Amendment and pursuant to the rules of the Securities and Exchange Commission (the “SEC”), we are including with this Amendment new certifications of our principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Accordingly, Item 15 of Part IV has also been amended to reflect the filing of these new certifications.

Except as described above, no other changes have been made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing, and we have not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Filing.

As used in this Amendment, unless the context requires otherwise, the “Company,” “Mylan,” “our,” and “we” mean Mylan N.V. and its consolidated subsidiaries, “NASDAQ” means The NASDAQ Global Select Stock Market, and “U.S. GAAP” means accounting principles generally accepted in the United States of America (“U.S.”).

Forward-Looking Statements

This Amendment contains “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 Mylan’s future operations, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competition and other expectations and targets for future periods. These may often be identified by the use of words such as “will,” “may,” “could,” “should,” “would,” “project,” “believe,” “anticipate,” “expect,” “plan,” “estimate,” “forecast,” “potential,” “pipeline,” “intend,” “continue,” “target” and variations of these words or comparable words. Because forward-looking statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: actions and decisions of healthcare and pharmaceutical regulators; failure to achieve expected or targeted future financial and operating performance and results; uncertainties regarding future demand, pricing and reimbursement for our products; any regulatory, legal, or other impediments to Mylan’s ability to bring new products to market, including, but not limited to, where Mylan uses its business judgment and decides to manufacture, market, and/or sell products, directly or through third parties, notwithstanding the fact that allegations of patent infringement(s) have not been finally resolved by the courts (i.e., an “at-risk launch”); success of clinical trials and Mylan’s ability to execute on new product opportunities, including but not limited to products in our biosimilar pipeline; any changes in or difficulties with our manufacturing facilities, supply chain or inventory or our ability to meet anticipated demand; the scope, timing and outcome of any ongoing legal proceedings, including government investigations, and the impact of any such proceedings on our financial condition, results of operations and/or cash flows; the ability to meet expectations regarding the accounting and tax treatments of acquisitions, including Mylan’s acquisition (the “EPD Transaction”) of Mylan Inc. and Abbott Laboratories’ (“Abbott”) non-U.S. developed markets specialty and branded generics business (the “EPD Business”); changes in relevant tax and other laws, including but not limited to changes in the U.S. tax code and healthcare and pharmaceutical laws and regulations in the U.S. and abroad; any significant breach of data security or data privacy or disruptions to our information technology systems; the ability to protect intellectual property and preserve intellectual property rights; the effect of any changes in customer and supplier relationships and customer purchasing patterns; the ability to attract and retain key personnel; the impact of competition; identifying, acquiring and integrating complementary or strategic acquisitions of other companies, products, or assets being more difficult, time-consuming or costly than anticipated; the possibility that Mylan may be unable to achieve expected synergies and operating efficiencies in


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connection with strategic acquisitions or restructuring programs within the expected time-frames or at all; uncertainties and matters beyond the control of management, including but not limited to general political and economic conditions and global exchange rates; and inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements, and the providing of estimates of financial measures, in accordance with U.S. GAAP and related standards or on an adjusted basis. For more detailed information on the risks and uncertainties associated with Mylan’s business activities, see the risks described in the Original Filing and our other filings with the SEC. You can access Mylan’s filings with the SEC through the SEC website at www.sec.gov or through our website, and Mylan strongly encourages you to do so. Mylan routinely posts information that may be important to investors on our website at investor.mylan.com, and we use this website address as a means of disclosing material information to the public in a broad, non-exclusionary manner for purposes of the SEC’s Regulation Fair Disclosure (Reg FD). The contents of our website are not incorporated by reference in this Amendment and shall not be deemed “filed” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Mylan undertakes no obligation to update any statements herein for revisions or changes after the filing date of this Amendment.

Reconciliation of Non-GAAP Financial Measures

This Amendment includes the presentation and discussion of certain financial information that differs from what is reported under U.S. GAAP. These non-GAAP financial measures, including, but not limited to, adjusted diluted earnings per share (“adjusted EPS”), adjusted free cash flow and return on invested capital (“ROIC”), are presented in order to supplement investors’ and other readers’ understanding and assessment of Mylan’s financial performance. Management uses these measures internally for forecasting, budgeting, measuring its operating performance and incentive-based awards. In addition, primarily due to acquisitions, Mylan believes that an evaluation of its ongoing operations (and comparisons of its current operations with historical and future operations) would be difficult if the disclosure of its financial results were limited to financial measures prepared only in accordance with U.S. GAAP. We believe that non-GAAP financial measures are useful supplemental information for our investors and when considered together with our U.S. GAAP financial measures and the reconciliation to the most directly comparable U.S. GAAP financial measure, provide a more complete understanding of the factors and trends affecting our operations. The financial performance of the Company is measured by senior management, in part, using the adjusted metrics included herein, along with other performance metrics. Management’s annual incentive compensation is derived, in part, based on the adjusted EPS metric and the adjusted free cash flow metric. Appendix A to this Amendment contains reconciliations of such non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures. Investors and other readers are encouraged to review the related U.S. GAAP financial measures and the reconciliations of the non-GAAP measures to their most directly comparable U.S. GAAP measures set forth in Appendix A, and investors and other readers should consider non-GAAP measures only as supplements to, not as substitutes for or as superior measures to, the measures of financial performance prepared in accordance with U.S. GAAP.


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MYLAN N.V.

INDEX TO FORM 10-K/A

For the Year Ended December 31, 2017

 

          Page  
PART III   

ITEM 10.

  

Directors, Executive Officers and Corporate Governance

     1  

ITEM 11.

   Executive Compensation      15  

ITEM 12.

   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters      51  

ITEM 13.

   Certain Relationships and Related Transactions, and Director Independence      53  

ITEM 14.

   Principal Accounting Fees and Services      55  
PART IV   

ITEM 15.

   Exhibits      56  

Signature

     57  

Appendix A  — Reconciliation of Non-GAAP Measures (Unaudited)

      

 


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PART III

 

ITEM 10. Directors, Executive Officers and Corporate Governance

Executive Officers

The names, ages, and positions of Mylan’s executive officers as of April 30, 2018, are as follows:

 

Heather Bresch

  

48

  

Chief Executive Officer (principal executive officer)

Rajiv Malik

  

57

  

President

Kenneth S. Parks

  

54

  

Chief Financial Officer (principal financial officer)

Daniel M. Gallagher

  

45

  

Chief Legal Officer

Anthony Mauro

  

45

  

Chief Commercial Officer

Ms. Bresch and Mr. Malik also are members of Mylan’s Board of Directors (the “Board”). A discussion of their respective business experience and other relevant biographical information is provided under “Mylan’s Board” below.

Mr. Parks has served as Chief Financial Officer since June 2016. Mr. Parks previously served as chief financial officer for WESCO International, Inc. (“WESCO”), a leading provider of electrical, industrial and communication products, from June 2012 to May 2016, where he led all aspects of the finance function. From June 2012 to December 2013, Mr. Parks also served as a vice president, and starting in January 2014, he served as senior vice president at WESCO. Prior to joining WESCO, Mr. Parks spent the majority of his career at United Technologies Corporation (“UTC”) in a variety of U.S. and international finance roles. He most recently served as vice president, Finance, for the $7 billion UTC Fire & Security division from 2008 to February 2012.

Mr. Gallagher has served as Chief Legal Officer since April 2017. Mr. Gallagher previously served as president of Patomak Global Partners, a financial services consulting firm, from January 2016 to March 2017. From November 2011 to October 2015, he served as a commissioner of the SEC. As commissioner, he called for reform on various corporate governance issues, advocated for conducting a comprehensive holistic review of equity market structure issues, and encouraged building the SEC’s fixed income market expertise. Before being appointed commissioner, Mr. Gallagher also served on the staff of the SEC in several capacities, including as counsel to SEC Commissioner Paul Atkins and Chairman Christopher Cox, working on matters involving the Division of Enforcement and the Division of Trading and Markets. Mr. Gallagher served as deputy director and co-acting director of the Division of Trading and Markets from 2008 to 2010, where he was on the front lines of the agency’s response to the financial crisis, including representing the SEC in the Lehman Brothers liquidation. Mr. Gallagher has significant private-sector experience, having been a partner in the Washington, D.C. office of WilmerHale, and senior vice president and general counsel of Fiserv Securities, Inc.

Mr. Mauro has served as Chief Commercial Officer since January 2016. Prior to that date, Mr. Mauro served as President, North America, of Mylan since January 1, 2012. He served as President of Mylan Pharmaceuticals Inc. from 2009 through February 2013. In his 22 years at Mylan, Mr. Mauro has held roles of increasing responsibility, including Chief Operating Officer for Mylan Pharmaceuticals ULC in Canada and Vice President of Strategic Development, North America, and Vice President of Sales, North America for Mylan.

Each executive officer listed above, other than Messrs. Parks and Gallagher, was an executive officer of Mylan Inc. on February 27, 2015, the date on which Mylan N.V. completed the EPD Transaction, and became an officer of Mylan N.V. on such date in connection with the EPD Transaction.

Pursuant to the Rules for the Board of Directors of Mylan N.V., the Board appoints the Chief Executive Officer (“CEO”) and may appoint, or delegate authority to the Chairman or the CEO to appoint, a President, a Chief Financial Officer, a Chief Legal Officer, a Secretary and any other Mylan officers as the Board, the Chairman or

 

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the CEO may desire. Each officer appointed by Mylan’s Board, the Chairman or the CEO, holds office until his or her successor shall have been appointed, or until his or her death, resignation or removal. Officers of Mylan who are appointed by the Board can be removed by it, and the Board may delegate to the Chairman or the CEO the right to remove any officer the Chairman or the CEO has appointed (though not any officer directly appointed by the Board).

Mylan’s Board

Mylan’s Board currently consists of 11 directors, each of whom is either an executive director or a non-executive director pursuant to applicable Dutch law. On April 29, 2018, the Board voted to increase the size of the Board to 12 directors, effective after the 2018 Annual General Meeting of Shareholders (the “2018 AGM”). Ms. Cameron will retire from the Board effective June 29, 2018, and therefore has not been nominated for re-election. On February 22, 2018, the Board nominated Pauline van der Meer Mohr and on April 29, 2018, the Board nominated Harry A. Korman, each to be elected by shareholders at the 2018 AGM to serve as a non-executive director for a term ending immediately after the next annual general meeting held after his or her respective election.

Executive directors are responsible for the daily management and operation of the Company, and non-executive directors are responsible for overseeing and monitoring the performance of the executive directors.

Consistent with established Dutch law and the Company’s Articles of Association, executive directors and non-executive directors are appointed by the general meeting from a binding nomination proposed by Mylan’s Board. If appointed, each director’s term begins at the general meeting at which he or she is appointed and, unless such director resigns or is suspended or dismissed at an earlier date, his or her term of office lapses immediately after the next annual general meeting held after his or her appointment.

 

 

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Name

   Age(2)   

Other Positions with Mylan and Principal Occupation

  

Has
served
as
director
since(3)

Heather Bresch(1)

  

48

   Chief Executive Officer    2011

Wendy Cameron(4)

  

58

   Director and Co-Owner, Cam Land LLC    2002

Hon. Robert J. Cindrich

  

74

   President, Cindrich Consulting, LLC    2011

Robert J. Coury

  

57

   Chairman    2002

JoEllen Lyons Dillon

  

54

   Retired Executive Vice President, Chief Legal Officer and Corporate Secretary, The ExOne Company    2014

Neil Dimick, C.P.A.(5)

  

68

   Retired Executive Vice President and Chief Financial Officer, AmerisourceBergen Corporation    2005

Melina Higgins

  

50

   Retired Partner and Managing Director, Goldman Sachs    2013

Rajiv Malik(1)

  

57

   President    2013

Mark W. Parrish

  

62

   Lead Independent Director and Vice Chairman; Chief Executive Officer, TridentUSA Health Services    2009

Randall L. (Pete) Vanderveen, Ph.D

  

67

   Retired Professor of Pharmaceutical Policy and Economics, Senior Adviser to the Leonard D. Schaeffer Center of Health Policy and Economics, Director of the Margaret and John Biles Center for Leadership, and Senior Adviser to the Dean for Advancement, School of Pharmacy, University of Southern California    2002

Sjoerd S. Vollebregt

  

63

   Chairman, Supervisory Board of Heijmans N.V.; Chairman, Advisory Board of Airbus Defence and Space Netherlands B.V.; Chairman, Economic Development Board Drecht Cities    2017

Nominated for election for the first time at the 2018 AGM

        

Harry A. Korman

  

60

   Retired Chief Operating Officer and Former Consultant to Mylan Inc.   

Pauline van der Meer Mohr

  

58

   Former President of the Executive Board at Erasmus University, Rotterdam   

 

(1) 

Refers to an executive director. All other directors listed above are non-executive directors.

 

(2) 

Ages as of April 30, 2018.

 

(3) 

Includes service as director of Mylan Inc. and Mylan N.V. Each director listed above, other than Mr. Vollebregt (as well as Mr. Korman and Ms. van der Meer Mohr who are not currently directors of Mylan but will be nominated for the first time at the 2018 AGM), was a director of Mylan Inc. on February 27, 2015, the date on which Mylan N.V. completed the EPD Transaction, and became a director of Mylan N.V. on such date in connection with the EPD Transaction.

 

(4) 

Ms. Cameron will retire from the Board effective June 29, 2018 and, therefore, has not been nominated for re-election.

 

(5) 

C.P.A. distinction refers to “inactive” status.

 

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Heather Bresch. Ms. Bresch has served as Mylan’s CEO since January 1, 2012. Throughout her 26-year career with Mylan, Ms. Bresch has held roles of increasing responsibility in more than 15 functional areas. Prior to becoming CEO, Ms. Bresch served as the Company’s President, where she was responsible for its day-to-day operations. Before that, she served as Chief Operating Officer and Chief Integration Officer, leading the successful integration of two international acquisitions – Matrix Laboratories and Merck KGaA’s generics business — which more than doubled Mylan’s size and transformed it from a purely U.S. company to a global one.

As CEO, Ms. Bresch has been leading the next chapter of Mylan’s growth and performance, pursuing a strategy that already has produced a sustainable organization that is making great strides in its mission of delivering better health for a better world by providing 7 billion people access to high quality medicine. In continuing to execute on this strategy, Ms. Bresch is focused on further diversifying the Company in terms of products, markets and channels, a process proven to expand access and generate durable cash flows that can be reinvested to further differentiate Mylan and position it to support the transformation of outdated healthcare systems.

To achieve Mylan’s goals, Ms. Bresch emphasizes a collaborative company culture focused on leading, learning, teaching and performing to inspire innovation and help set new standards in healthcare. She also remains a vocal champion of initiatives and policy changes aimed at removing access barriers. Among her policy priorities is increasing generic utilization, driving biosimilars interchangeability, stemming the tide of HIV/AIDS, ensuring a fair and a level competitive playing field, and strengthening the global supply chain to make it safer.

Ms. Bresch served as chair of the U.S. Generic Pharmaceutical Association’s board of directors in 2016, 2005, and 2004, and as vice chair in 2003 and 2006. She is a frequent speaker on issues such as affordable healthcare and global competitiveness, and has testified before the U.S. Congress and the Food and Drug Administration (the “FDA”) on issues related to access to medicine. Ms. Bresch is the pharmaceutical industry’s first female CEO of a Fortune 500 company and has been named by Fortune magazine as one of its “50 Most Powerful Women.” Ms. Bresch’s qualifications to serve on Mylan’s Board, include, among others, her leadership and unique and deep knowledge of the Company, its businesses, markets and strategies, as well as its global research, supply chain, manufacturing and commercial platforms; her knowledge and experience regarding issues, risks and opportunities in the global healthcare industry; and her knowledge and expertise regarding political and public policy healthcare-related matters, public company management and leadership and international business transactions and integration.

Wendy Cameron. Ms. Cameron has served as Co-Owner and Director of Cam Land LLC, a harness racing business in Washington, Pennsylvania, since January 2003. From 1981 to 1998, she was vice president, Divisional Sales & Governmental Affairs, Cameron Coca-Cola Bottling Company, Inc. Ms. Cameron served as chairman of the Washington Hospital Board of Trustees and of the Washington Hospital Executive Committee until she stepped down in 2012. She was a member of the hospital’s board of trustees from 1997 through 2012 and a member of the Washington Hospital Foundation board from 1993 through 2012. In addition to being a business owner and having held an executive position with one of the nation’s largest bottlers for nearly 20 years, Ms. Cameron has invaluable experience and knowledge regarding the business, platforms, strategies, challenges, opportunities, and management of the Company, among other matters. Ms. Cameron’s qualifications to serve on Mylan’s Board include, among others, her independence, business experience, leadership, and judgment. On February 20, 2018, Ms. Cameron notified the Company that she will retire from the Board effective as of the end of her term at the 2018 AGM.

Hon. Robert J. Cindrich. Since February 2011, Judge Cindrich has been serving as president of Cindrich Consulting, LLC, a business and healthcare consulting company that advises clients on corporate governance, compliance and business strategies. From October 1, 2013, through January 31, 2014, he served as interim general counsel for United States Steel Corporation (“U.S. Steel”) (NYSE: X), an integrated steel producer of flat-rolled and tubular products. Judge Cindrich joined Schnader Harrison Segal & Lewis (“Schnader”), a law firm, as legal counsel in April 2013 and took a temporary leave of absence on October 1, 2013, to join U.S. Steel

 

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as interim general counsel, returning to Schnader after his time there and remaining until December 2017. In May 2012, he joined the board of directors of Allscripts Healthcare Solutions, Inc. (NASDAQ: MDRX), which provides healthcare information technology solutions, where he served until April 2015. From 2011 through 2012, Judge Cindrich served as a senior advisor to the Office of the President of the University of Pittsburgh Medical Center (“UPMC”), an integrated global health enterprise. From 2004 through 2010, Judge Cindrich was a senior vice president and the chief legal officer of UPMC. From 1994 through January 2004, Judge Cindrich served as a judge on the U.S. District Court for the Western District of Pennsylvania. Prior to that appointment, he was active as an attorney in government and private practice, including positions as the U.S. Attorney for the Western District of Pennsylvania and as the Allegheny County Assistant Public Defender and Assistant District Attorney. Judge Cindrich’s qualifications to serve on Mylan’s Board include, among others, his knowledge and expertise regarding legal and regulatory matters, compliance, corporate governance, issues affecting the healthcare industry and public company risk management oversight and strategy.

Robert J. Coury. Robert J. Coury is the Chairman of Mylan N.V. Under his continuing visionary leadership and strategic direction, Mylan has transformed from the third largest generics pharmaceutical company in the U.S. into one of the largest pharmaceutical companies in the world in terms of revenue, earning spots on both the S&P 500 and, prior to the Company’s reincorporation outside of the U.S. in 2015, the Fortune 500. Mr. Coury first was elected to Mylan’s Board in February 2002, having served since 1995 as a strategic advisor to the Company. He became the Board’s Vice Chairman shortly after his election and served as CEO from September 2002 until January 2012. He served as Executive Chairman from 2012 until June 2016, when he ceased to be an employee and became Chairman.

Since 2007, Mr. Coury has led Mylan through a series of transactions totaling approximately $25 billion, which transformed Mylan into a global powerhouse within the highly competitive pharmaceutical industry, with a global workforce of approximately 35,000 and products sold in more than 165 countries. In 2007, Mylan purchased India-based Matrix Laboratories Limited, a major producer of active pharmaceutical ingredients, and the generics and specialty pharmaceuticals business of Europe-based Merck KGaA. Subsequent acquisitions under Mr. Coury’s leadership further expanded Mylan into new therapeutic categories and greatly enhanced its geographic and commercial footprint. In 2010, Mylan acquired Bioniche Pharma (“Bioniche”), a global injectables business in Ireland; in 2013, Mylan acquired India-based Agila Specialties, a global injectables company; and in 2015, Mylan acquired the EPD Business and Famy Care Ltd.’s women’s healthcare businesses. More recently, Mylan acquired Meda AB (publ.) (“Meda”), a leading international specialty pharmaceutical company that sells prescription and over-the-counter products and the non-sterile, topicals-focused business of Renaissance Acquisition Holdings, LLC.

During this period of expansion, Mr. Coury’s vision and leadership led to the building of an unmatched, high quality foundation for the future, supporting Mylan’s mission of providing the world’s 7 billion people with access to high quality medicine and benefiting investors, patients, customers and other stakeholders. Before becoming Executive Chairman, Mr. Coury also executed a successful executive leadership transition after cultivating and developing a powerful leadership team. Grooming executive talent from within and recruiting dynamic leaders from outside Mylan both were key components of the Company’s past, current and future growth strategies.

Mr. Coury’s qualifications to serve on Mylan’s Board include, among others, demonstrated outstanding business acumen and strong business judgment.

JoEllen Lyons Dillon. Ms. Dillon served most recently as chief legal officer and corporate secretary of The ExOne Company (“ExOne”) (NASDAQ: XONE), a global provider of three-dimensional printing machines, from March 2013 to August 2017, and as executive vice president from December 2014 to August 2017. Previously, she was a legal consultant on ExOne’s initial public offering. Prior to that, Ms. Dillon was a partner with Reed Smith LLP, a law firm, from 2002 until 2011. She previously had been at the law firm Buchanan Ingersoll & Rooney PC from 1988 until 2002, where she became a partner in 1997. Ms. Dillon is a member of

 

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the board of trustees of the Allegheny District chapter of the National Multiple Sclerosis Society and has previously served as chair and audit committee chair. Ms. Dillon’s qualifications to serve on Mylan’s Board include, among others, her knowledge and expertise regarding legal and regulatory matters, financial matters, compliance, corporate governance, public company oversight and international business and strategy.

Neil Dimick, C.P.A* Currently retired, Mr. Dimick previously served as executive vice president and chief financial officer of AmerisourceBergen Corporation (NYSE: ABC), a wholesale distributor of pharmaceuticals, from 2001 to 2002. From 1992 to 2001, he was senior executive vice president and chief financial officer of Bergen Brunswig Corporation, a wholesale drug distributor. Prior to that, Mr. Dimick served as a partner with Deloitte & Touche LLP (“Deloitte”) for eight years. Mr. Dimick also serves on the board of directors of Resources Connection, Inc. (NASDAQ: RECN). Mr. Dimick also served on the boards of directors of WebMD Health Corp. from 2005 to September 2017, at which time it was purchased by Internet Brands, a portfolio company of investment funds affiliated with Kohlberg Kravis Roberts & Co., LP; Alliance HealthCare Services, Inc. from 2002 to August 2017, at which time it was purchased by Tahoe Investment Group Co., Ltd.; and Thoratec Corporation from 2003 to October 2015, at which time it was purchased by St. Jude Medical, Inc. Mr. Dimick’s qualifications to serve on Mylan’s Board include, among others, his experience and expertise regarding accounting, finance, the healthcare industry, international business, corporate governance, public company management, oversight and strategy, and international business transactions.

Melina Higgins. Currently retired, Ms. Higgins held senior roles of increasing responsibility at The Goldman Sachs Group, Inc. (NYSE: GS), a global investment banking, securities and investment management firm, including partner and managing director, during her nearly 20-year career at the firm from 1989 to 1992 and 1994 to 2010. During her tenure there, Ms. Higgins served as a member of the Investment Committee of the Principal Investment Area, which oversaw and approved global private equity and private debt investments and was one of the largest alternative asset managers in the world. She also served as head of the Americas and as cochairperson of the Investment Advisory Committee for GS Mezzanine Partners funds, which managed over $30 billion of assets and were global leaders in their industry. Ms. Higgins also is a member of the Women’s Leadership Board of Harvard University’s John F. Kennedy School of Government. In September 2013, Ms. Higgins joined the board of directors of Genworth Financial Inc. (NYSE: GNW), an insurance company. In January 2016, Ms. Higgins became non-executive chairman of Antares Midco Inc., a private company that provides financing solutions for middle-market, private equity-backed transactions. Ms. Higgins’ qualifications to serve on Mylan’s Board include, among others, her experience and expertise in finance, capital markets, international business and strategy, and international business transactions.

Rajiv Malik. Mr. Malik has served as Mylan’s President since January 1, 2012 and has more than 35 years of experience in the pharmaceutical industry. Previously, Mr. Malik held various senior roles at Mylan, including Executive Vice President and Chief Operating Officer from July 2009 to December 2012, and Head of Global Technical Operations from January 2007 to July 2009. Mr. Malik has been integral in developing the strategies for the company’s acquisitions and, more importantly, in the execution and integration of acquisitions, specifically the generics business of Merck KgaA; the injectables business of Bioniche; Agila Specialties, a global injectables company; the EPD Business; Famy Care Ltd.’s women’s healthcare businesses; Meda, a leading international specialty pharmaceutical company that sells prescription and over-the-counter products; and most recently, the non-sterile, topicals-focused business of Renaissance Acquisition Holdings, LLC.

Mr. Malik oversees the day-to-day operations of the Company which includes commercial, scientific affairs, manufacturing, supply chain and quality as well as business development and information technology. Mr. Malik has been instrumental in expanding and optimizing Mylan’s product portfolio, leveraging Mylan’s global research and development capabilities and expanding Mylan’s presence in emerging markets. Previously, he served as chief executive officer of Matrix Laboratories Limited (n/k/a Mylan Laboratories Limited) from July 2005 to June 2008. Prior to joining Matrix, he served as head of global development and registrations for Sandoz GmbH from September 2003 to July 2005. Prior to joining Sandoz GmbH, Mr. Malik was head of global

 

* 

C.P.A. distinction refers to “inactive” status.

 

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regulatory affairs and head of pharma research for Ranbaxy from October 1999 to September 2003. Mr. Malik’s qualifications to serve on Mylan’s Board include, among others, his leadership and unique and deep knowledge of the Company, its businesses, markets and strategies, as well as its global research, supply chain, manufacturing and commercial platforms; his knowledge and experience regarding issues, risks and opportunities in the global healthcare industry; and his knowledge and expertise regarding global regulatory matters, public company management and leadership, and international business transactions and integration.

Mark W. Parrish. Mr. Parrish has served as the Lead Independent Director and Vice Chairman of Mylan’s Board since August 2017. He has served as chief executive officer of TridentUSA Health Services, a provider of mobile X-ray and laboratory services to the long-term care industry, since 2008 and served as chairman from 2008 to 2013. Since January 2013, Mr. Parrish also has served on the board of directors of Omnicell, Inc. (NASDAQ: OMCL), a company that specializes in healthcare technology. Mr. Parrish also serves on the boards of directors of Silvergate Pharmaceuticals, a private company that develops and commercializes pediatric medications, and GSMS, a private company that specializes in meeting unique labeling and sizing needs for its customers and pharmaceutical packaging, serialization and distribution. From 2001 to 2007, Mr. Parrish held management roles of increasing responsibility with Cardinal Health Inc. (NYSE: CAH) and its affiliates, including chief executive officer of Healthcare Supply Chain Services for Cardinal from 2006 to 2007. Mr. Parrish also serves as president of the International Federation of Pharmaceutical Wholesalers, an association of pharmaceutical wholesalers and pharmaceutical supply chain service companies, and as senior adviser to Frazier Healthcare Ventures, a healthcare oriented growth equity firm. Mr. Parrish’s qualifications to serve on Mylan’s Board include, among others, his experience as a chief executive officer; his knowledge and experience regarding issues, risks and opportunities in the global healthcare industry; and his knowledge and expertise regarding compliance, corporate governance, risk management oversight, supply chain, the healthcare industry and technology, public company management and strategy, and international business transactions.

Randall L. (Pete) Vanderveen, Ph.D. Currently retired, Dr. Vanderveen most recently was Professor of Pharmaceutical Policy and Economics, Senior Adviser to the Leonard D. Schaeffer Center of Health Policy and Economics, Director of the Margaret and John Biles Center for Leadership, and Senior Adviser to the Dean for Advancement at the School of Pharmacy, University of Southern California in Los Angeles, California from 2015 to August 2017. Dr. Vanderveen previously served as Dean, Professor and John Stauffer Decanal Chair of the USC School of Pharmacy from 2005 to 2015, where he was named “Outstanding Pharmacy Dean in the Nation” in 2013 by the American Pharmacist Association. From 1998 to 2005, he served as Dean and Professor of Pharmacy of the School of Pharmacy and the Graduate School of Pharmaceutical Sciences at Duquesne University, before which he was Assistant Dean at Oregon State University from 1988 to 1998. Dr. Vanderveen has an extensive pharmaceutical and academic background. In addition, Dr. Vanderveen has invaluable experience and knowledge regarding the business, platforms, strategies, challenges, opportunities and management of Mylan, among other matters. Dr. Vanderveen’s qualifications to serve on Mylan’s Board include, among others, his experience and expertise regarding the healthcare industry, pharmaceuticals and pharmacy practice, public healthcare policy and economics, and scientific matters.

Sjoerd S. Vollebregt. Mr. Vollebregt has been chairman of the Supervisory Board of Heijmans N.V., a Euronext Amsterdam listed company that operates in property development, residential building, non-residential building, roads and civil engineering, since 2015; chairman of the Advisory Board of Airbus Defence and Space Netherlands B.V., a subsidiary of Airbus SE, a Euronext Paris listed company, that develops solar arrays, satellite instruments and structures for launchers, since 2015; and chairman of the Economic Development Board Drecht Cities, a strategic collaboration between business, education and government in Drecht Cities, Netherlands, since December 2016. Mr. Vollebregt had served as chairman of the Executive Board of Stork B.V. and its predecessor from 2002 to 2014, which was an Amsterdam Stock Exchange-listed industrial group until 2008, consisting of a global provider of knowledge-based maintenance, modification and asset integrity products and services, food and textile equipment manufacturer and chief executive officer of Fokker Technologies Group B.V., an aerospace company and a Stork B.V. subsidiary from 2010 to 2014. Previously, Mr. Vollebregt served as a member of the Supervisory Board of TNT Express N.V., an international courier delivery services company,

 

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from 2013 to 2016, and has held various other senior positions at Excel plc, Ocean plc, Intexo Holding and Royal Van Ommeren. Mr. Vollebregt’s qualifications to serve on Mylan’s Board include, among others, his experience as a chief executive officer; his experience and expertise in public company management outside of the U.S. and strategy; his experience and expertise in manufacturing, supply chain, and technology, as well as international business transactions; and his governance and oversight experience with respect to Dutch companies.

On February 22, 2018, the Board nominated Pauline van der Meer Mohr to be elected by shareholders at the 2018 AGM to serve as a non-executive director for a term ending immediately after the next annual general meeting held after her election. Ms. van der Meer Mohr is currently an independent non-executive director of HSBC Holdings plc (LON:HSBA), chairing that company’s Group Remuneration Committee and serving as a member of its Group Risk Committee and Nomination Committee. She also is a member of the supervisory boards of Royal DSM N.V. (AMS: DSM), currently serving as Vice-Chairman, chairing its Remuneration Committee and serving on its Nomination Committee and EY Netherlands LLP, currently serving as Chair. Ms. van der Meer Mohr recently served on the supervisory board of ASML Holding N.V. (NASDAQ and AMS: ASML) until April 2018, and as president of the Executive Board of Erasmus University in Rotterdam from 2010 to 2016. Ms. van der Meer Mohr began her career in the legal profession and previously held several legal and management positions within Royal Dutch Shell Group from 1989 to 2004. In 2004, she was appointed group human resources director at TNT N.V. before becoming senior executive vice president and head of group human resources at ABN AMRO NV in 2006. She served as a member of the Dutch Banking Code Monitoring Commission in the Netherlands from 2010 to 2013, and began her own human capital consulting firm in 2008. Ms. Van der Meer Mohr’s qualifications to serve on Mylan’s Board include, among others, her experience and expertise regarding corporate governance, finance, public company oversight outside of the U.S., legal and regulatory matters, human resources and executive compensation, risk management and oversight, corporate social responsibility and governance and oversight experience with respect to Dutch companies.

On April 29, 2018, the Board nominated Harry A. Korman to be elected by shareholders at the 2018 AGM to serve as a non-executive director for a term ending immediately after the next annual general meeting held after his election. Currently retired, Mr. Korman previously held senior executive roles of increasing responsibility at Mylan Inc. and its subsidiaries from 1996 until July 2014. He served as Mylan Inc.’s global Chief Operating Officer from January 2012 until his retirement in July 2014, after which he served in a consultant role with Mylan Inc. for one year. Prior to his service as Chief Operating Officer, he was the President, North America of Mylan Inc. commencing in October 2007. Mr. Korman also served as President of Mylan Pharmaceuticals Inc. from February 2005 to December 2009. During his time as an executive at Mylan, Mr. Korman was instrumental in identifying, evaluating and executing on significant commercial and business development opportunities in the United States and other countries, including the expansion of Mylan’s global generics businesses around the world, among many other important contributions to the Company and its stakeholders. He joined Mylan in 1996 after the Company’s acquisition of UDL Laboratories (n/k/a Mylan Institutional), and served as its president, among other prior responsibilities. Mr. Korman has served as a past director and vice chairman of the Generic Pharmaceutical Association, now known as the Association for Accessible Medicines. He also previously served as a director and vice chairman of the HDMA Foundation, which serves the healthcare industry by providing research and education focused on healthcare supply issues. Mr. Korman’s qualifications to serve on Mylan’s Board include, among others, his extensive industry and leadership experience, his knowledge of healthcare systems and the U.S. and global commercial markets, and his leadership experience in the areas of global strategy, sales and marketing, commercial operations, supply chain and business development, among other areas relevant and important to Mylan’s global business.

Meetings of Mylan’s Board

Mylan’s Board met four times in 2017. In addition to meetings of the Board, directors attended meetings of individual Board committees of which they were members. Each of the directors attended at least 75% of the aggregate of Mylan’s Board meetings and meetings of committees of which they were a member during the periods for which they served in 2017. Directors are expected to attend the annual general meeting of

 

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shareholders of Mylan where practicable. All current members of the Board attended Mylan’s 2017 Annual General Meeting of Shareholders (the “2017 AGM”) as did Joseph C. Maroon, M.D., who was not nominated for re-election at the 2017 AGM and retired from Mylan’s Board effective June 22, 2017.

As noted, Mark W. Parrish has served as Vice Chairman and Lead Independent Director of Mylan’s Board since August 2017. Mylan’s Corporate Governance Principles require the independent directors of the Board to meet in executive session from time to time, and at least twice annually, without any members of management present. During 2017, non-management members of the Board met in executive session four times. Mr. Parrish presided at such executive sessions after his election as Lead Independent Director. Prior to Mr. Parrish’s election, Rodney L. Piatt, a former director and the Lead Independent Director prior to Mr. Parrish, presided at such sessions during his term as a director, while Mr. Dimick presided at an executive session prior to Mr. Parrish’s election as Lead Independent Director.

Board Education

Mylan’s Board or individual members participate at least annually in director educational seminars, conferences and other director education programs presented by external and internal resources, on matters that may relate to, among other topics, compensation, governance, risk oversight, business, industry, audit and accounting, credit and financial, regulatory and other current issues confronting boards of directors of public companies. Directors may also elect to attend additional third-party educational events at their discretion. The Company reimburses the directors for costs associated with any seminars and conferences, including travel expenses.

Mylan’s Board Committees

The standing committees of Mylan’s Board are the Audit Committee, the Compensation Committee, the Compliance Committee, the Executive Committee, the Finance Committee, the Governance and Nominating Committee, the Risk Oversight Committee and the Science and Technology Committee. Each committee operates under a written charter, a current copy of which, along with our Articles of Association, Rules for the Board of Directors and Corporate Governance Principles, are available on Mylan’s website at http://www.mylan.com/en/company/corporate-governance.

All members of the Audit, Compensation, Compliance, Finance, Governance and Nominating and Risk Oversight Committees are independent directors, as defined in the applicable NASDAQ listing standards, applicable SEC rules and the Dutch Corporate Governance Code (“DCGC”). Mylan’s Board has determined that each member of the Audit Committee – Mr. Dimick, Ms. Dillon, Ms. Higgins and Mr. Parrish – is an “audit committee financial expert,” as that term is defined in the rules of the SEC. The Board appoints directors to each committee, provided that the approval of any such appointment to the Audit, Compensation, Compliance, Governance and Nominating and Risk Oversight Committees includes at least a majority of the independent directors (as defined in the applicable NASDAQ listing standards).

 

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The table below provides the current membership and 2017 meeting information for each of the Board committees.

 

Director

  Audit   Compensation   Compliance   Executive   Finance   Governance
and
Nominating
  Risk
Oversight(3)
  Science
and
Technology

Heather Bresch

                X

Wendy Cameron(1)(2)

    C            

Hon. Robert J. Cindrich

      X       X   C   X

Robert J. Coury

        C        

JoEllen Lyons Dillon(1)

  X   X     X     C    

Neil Dimick (1)

  C       X   X     X  

Melina Higgins(1)

  X   X       C      

Rajiv Malik

                X

Mark W. Parrish(1)

  X     C   X       X  

Randall L. (Pete) Vanderveen, Ph.D.(1)

      X           C

Sjoerd S. Vollebregt(1)

      X     X   X    

Meetings during 2017

  4   4   4   3   2   4   0   2

 

(1) 

On August 1, 2017, Ms. Dillon joined the Compensation Committee and Executive Committee and became Chair of the Governance and Nominating Committee; Mr. Dimick joined the Finance Committee; Ms. Higgins joined the Compensation Committee; Mr. Parrish joined the Audit Committee and Executive Committee; Dr. Vanderveen became Chair of the Science and Technology Committee; and Mr. Vollebregt joined the Compliance Committee, Finance Committee, and Governance and Nominating Committee. Until August 1, 2017, Ms. Cameron served on the Governance and Nominating Committee; Ms. Dillon served on the Compliance Committee; Mr. Dimick served on the Compensation Committee and Governance and Nominating Committee; and Mr. Parrish served on the Compensation Committee and Finance Committee.

 

(2)

As noted above, Ms. Cameron will retire from the Board effective June 29, 2018 and, therefore, has not been nominated for re-election.

 

(3) 

On February 22, 2018, Mylan’s Board established the Risk Oversight Committee and appointed Judge Cindrich (Chair), Mr. Dimick and Mr. Parrish to such Committee. See pages 12 and 13 of this Amendment for more information on this committee.

C = Chair

X = Member

Audit Committee

The Audit Committee’s key oversight responsibilities include, but are not limited to:

 

   

Integrity of the Company’s financial statements and its accounting and financial reporting processes

 

   

The effectiveness of the Company’s internal control over financial reporting

 

   

Compliance with applicable legal and regulatory requirements

 

   

The qualifications, independence and performance of the independent registered public accounting firm for U.S. public reporting purposes and the Company’s external auditor for purposes of Dutch law

 

   

The Internal Audit group

 

   

The Company’s processes and procedures related to risk assessment and risk management

 

   

Related party transactions

 

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Compensation Committee

The Compensation Committee’s key oversight responsibilities include, but are not limited to:

 

   

CEO and senior management compensation, including the corporate goals and objectives relevant to such compensation and evaluating performance in light of those goals and objectives

 

   

Board and committee compensation

 

   

Relationship between the Company’s compensation policies and practices and risk management

 

   

Compensation and benefits-related disclosures

 

   

Equity compensation plans in which executives participate

Compliance Committee

The Compliance Committee’s key oversight responsibilities include, but are not limited to:

 

   

Chief Compliance Officer’s implementation of Mylan’s corporate compliance program

 

   

Considering or evaluating significant global compliance-related policies, including with respect to pricing and/or commercialization of Company products

 

   

Making recommendations to the Board with respect to the formulation, implementation, maintenance and monitoring of Mylan’s corporate compliance program and Code of Business Conduct and Ethics

Executive Committee

The Executive Committee’s key responsibilities include, but are not limited to:

 

   

Assisting the Board in fulfilling its fiduciary responsibilities by exercising those powers of the Board not otherwise limited by a resolution of the Board or by law

 

   

Strategic planning and additional oversight of strategy implementation

Finance Committee

The Finance Committee’s key oversight responsibilities include, but are not limited to:

 

   

Material mergers, acquisitions and combinations with other companies

 

   

Swaps and derivatives transactions

 

   

Establishment of credit facilities

 

   

Financings with commercial lenders

 

   

Issuance and repurchase of the Company’s debt, equity, hybrid or other securities

Governance and Nominating Committee

The Governance and Nominating Committee’s key oversight responsibilities include, but are not limited to:

 

   

Corporate governance matters

 

   

Nomination or re-nomination of director candidates

 

   

The Board’s review and consideration of shareholder recommendations for director candidates

 

   

The annual self-evaluation of the Board and its committees

 

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Risk Oversight Committee

The Risk Oversight Committee’s key oversight responsibilities include, but are not limited to:

 

   

Mylan’s enterprise risk framework

 

   

Material enterprise risks not allocated to the Board or another committee

Science and Technology Committee

The Science and Technology Committee’s key responsibilities include, but are not limited to:

 

   

R&D strategy and portfolio from a scientific and technological perspective

 

   

Significant emerging scientific and technological developments relevant to Mylan

Mylan’s Board Leadership Structure

Mylan’s current Board structure enables it to best oversee and empower its management team to support and drive the Company’s outstanding results for shareholders and other stakeholders. The Company’s short- and long-term performance and the ongoing execution of our mission demonstrate the success of this structure. The Company and its stakeholders continue to benefit from the leadership, judgment, vision, experience — and performance — of the Board and management team under the highly active and extraordinary visionary leadership, insight and strategic direction of Mr. Coury as Chairman. Our Board is highly qualified, engaged, experienced and independent. Our executive directors, Ms. Bresch (CEO) and Mr. Malik (President), together with our other outstanding management team members, have worked with the Board to develop a unique vision for the Company and continue to execute on this vision, consistent with the Board’s philosophy.

The Board’s determination that the current Board structure and management team is optimal for Mylan is based on, among other factors: the Company’s consistent long-term performance and durability; the Board’s deep and unique knowledge of the complexity, size and dramatic growth of the Company, as well as the industry and markets in which we operate; senior management’s demonstrated leadership abilities; the respective talents and capabilities of each of the directors and members of management; and the Board’s demonstrated ability to take advantage of opportunities and respond to commercial, competitive, regulatory, industry and other challenges, both anticipated and unanticipated.

The Board’s governance structure provides robust and effective oversight in the following ways:

 

   

Eight independent members;

 

   

The Board has established robust Corporate Governance Principles;

 

   

We have a strong Lead Independent Director responsible for, among other things;

 

   

Calling and presiding at executive sessions and meetings of the independent directors;

 

   

Consulting with the Chairman in determining information to be sent to the Board, meeting agendas and meeting schedules, and separately approving those items;

 

   

Serving as a contact person for shareholders and other stakeholders wishing to communicate with the Board; and

 

   

Acting as liaison between the Chairman and independent directors;

 

   

The Audit, Compensation, Compliance, Finance, Governance and Nominating and Risk Oversight Committees all are composed entirely of independent directors (as defined in the applicable NASDAQ listing standards and within the meaning of the DCGC);

 

   

All Board committees operate pursuant to written charters and conduct annual self-assessments;

 

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In early 2018, the Board formed a Risk Oversight Committee to assist in its oversight of the Company’s enterprise risk framework;

 

   

Approval of any appointment of members to the Audit, Compensation, Compliance, Governance and Nominating and Risk Oversight Committees must include at least a majority of the independent directors;

 

   

The independent directors on Mylan’s Board and its committees receive extensive information and input from multiple layers of management and external advisors, engage in detailed discussion and analysis regarding matters brought before them (including in executive session) and consistently and actively engage in the development and approval of significant corporate strategies;

 

   

Mylan’s Board and its committees have unrestricted access to management;

 

   

Mylan’s Board and its committees can retain, at their discretion and at Company expense, any advisors they deem necessary with respect to any matter brought before them (although the Science and Technology Committee retains such advisors in consultation with the Chairman and Lead Independent Director);

 

   

In 2017, Mylan’s Board held four executive sessions of non-management members, and its committees collectively held 16 executive sessions.

Risk Oversight

Risk Management

Mylan operates in a complex and rapidly changing environment that involves many risks. In addition to general market and economic risks, the Company faces risks related to its industry; information technology and cybersecurity; data privacy; financial controls and reporting; legal, regulatory and compliance; finances and taxation; global operations; environment and social responsibility; and product portfolio and commercialization. As a company committed to operating ethically and with integrity, we proactively manage and, where possible, mitigate risks to help ensure compliance with applicable rules and regulations, maintain integrity and continuity in our operations and business and to protect our assets and reputation. Risk management is an enterprise-wide objective subject to oversight by the Board and its committees.

It is the responsibility of Mylan’s management and employees to implement and administer risk-management processes to identify material risks to our business. In addition, management must assess, manage and monitor those risks, all while maintaining flexibility in how we operate. To further embed risk management and compliance into our culture, Mylan implements appropriate policies and procedures and trains employees on how to comply with them.

Mylan’s Board, in turn, directly or through its committees, oversees management’s implementation of risk management. We have approved a robust Code of Business Conduct and Ethics and other related policies, and the Board and its committees rigorously review with management key actual and potential significant risks at least quarterly. Consistent with our proactive approach to risk management, the Board recently formed a Risk Oversight Committee to assist in its oversight of our enterprise risk management framework, in coordination with the respective oversight responsibilities of other Board committees.

Board committees’ role in risk oversight:

 

   

The Risk Oversight Committee recently was formed to assist the Board in its oversight of Mylan’s enterprise risk management framework. The Committee reviews the enterprise risk framework, infrastructure and controls implemented by management to help identify, assess, manage and monitor material risks; reviews management’s exercise of its responsibility to identify, assess and manage material risks not allocated to the Board or another committee; and reviews Mylan’s efforts to foster a culture of risk-adjusted decision-making without constraining reasonable risk-taking and innovation.

 

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The Audit Committee focuses on financial and disclosure controls and reporting risks as well as oversight of Mylan’s internal audit function. The Committee oversees, among other matters, Mylan’s processes and procedures relating to risk assessment and risk management and the quality and adequacy of the Company’s internal control over financial reporting. Mylan’s internal audit function meets with the Committee at least quarterly to discuss potential risk or control issues. The Committee also meets quarterly with Mylan’s global independent auditor and Dutch independent auditor.

 

   

The Compensation Committee focuses on compensation-related risks that may be inherent in our business and the design of compensation-related plans and programs, and receives reports from management and/or outside advisors and experts regarding various related matters on at least a quarterly basis.

 

   

The Compliance Committee is responsible for overseeing the Chief Compliance Officer’s implementation of Mylan’s Corporate Compliance Program and related policies and procedures. The Committee appoints and replaces this individual, and reviews his or her performance, responsibilities, plans and resources. The Committee makes recommendations with respect to the Corporate Compliance Program and Code of Business Conduct and Ethics, including monitoring and evaluating significant reports of actual or alleged violations by employees and executive officers and third-party risks. The Committee also considers and evaluates significant global compliance-related policies, including policies related to pricing and/or commercialization of Company products and services. The Committee receives reports from various levels of management and outside advisors and meets on at least a quarterly basis.

 

   

The Finance Committee is responsible for reviewing and providing advice to Mylan’s Board with respect to the Company’s capital structure, capital management, financing and material business transactions and the risks related to such activities.

 

   

The Governance and Nominating Committee is responsible for identifying, recruiting and nominating qualified individuals to become members of Mylan’s Board, recommending committee assignments, overseeing the Board’s annual evaluation of the independence of directors and other risks related to corporate governance.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires all directors and certain executive officers and persons who own more than 10% of a registered class of Mylan’s equity securities to file with the SEC within specified due dates reports of ownership and reports of changes of ownership of Mylan ordinary shares and the Company’s other equity securities. These persons are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based on reports and written representations furnished to us by these persons, we believe that all Mylan directors and “officers” (as defined in Rule 16a-1(f) of the Exchange Act) complied with these filing requirements during 2017.

 

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ITEM 11. Executive Compensation

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) describes the compensation of the following named executive officers (“NEOs”) for 2017.

 

NAMED EXECUTIVE OFFICERS

 

 

LOGO

 

 

 

 

Heather Bresch      

Chief Executive Officer  

 

 

 

 

LOGO

 

 

 

 

Rajiv Malik  

President         

 

 

 

 

LOGO

 

 

 

 

Kenneth S. Parks  

 

Chief Financial Officer   

 

 

 

LOGO

 

 

 

 

Daniel M. Gallagher  

Chief Legal Officer             

 

 

 

 

LOGO

 

 

 

Anthony Mauro        

Chief Commercial Officer  

 

TABLE OF CONTENTS

 

 

 

  
 

 

15

 

 

 

Named Executive Officers

 

  
 

 

  
 

 

16

 

 

 

Executive Summary

 

  
 

16

 

        

 

 

Shareholder Engagement and Board Responsiveness

 

  
 

 

17

 

   

 

 

Business Performance and How It Aligns to Compensation

 

  
 

 

19

 

   

 

 

2017 CEO Compensation Summary

 

  
 

20

 

   

 

 

Compensation Practices Overview

 

  
 

 

  
 

 

21

 

 

 

Compensation Philosophy & Process

 

  
 

21

 

   

 

 

Compensation Philosophy

 

  
 

21

 

   

 

 

Role of the Compensation Committee 

 

  
 

22

 

   

 

 

Process and Peer Group

 

  
 

 

23

 

   

 

 

Consideration of Risk in Company Compensation Policies

 

  
 

 

  
 

 

24

 

 

 

Components of 2017 Executive Compensation

 

  
 

25

 

   

 

 

Base Salary

 

  
 

26

 

   

 

 

Annual Incentive Compensation

 

  
 

28

 

   

 

 

Long-Term Incentive Compensation

 

  
 

 

30

 

   

 

 

Limited Perquisites

 

  
 

 

  
 

 

31

 

 

 

Other Compensation Matters and Considerations

 

  
 

 

31

 

   

 

 

Ordinary Share Ownership Requirements for NEOs

 

  
 

 

31

 

   

 

 

Clawback Policy

 

  
 

 

31

 

   

 

 

Anti-Hedging and Pledging Policy

 

  
 

31

 

   

 

 

Employment Agreements

 

  
 

32

 

   

 

 

Transition and Succession Agreements

 

  
 

32

 

   

 

 

Retirement Benefits

 

  
 

33

 

   

 

 

Deductibility Cap on Executive Compensation

 

  
 

33

 

   

 

 

Compensation Committee Report

 

  
 

 

34

 

   

 

 

Compensation Committee Interlocks and Insider Participation

 

  
 

 

  
 

 

35

 

 

 

Executive Compensation Tables

 

  
 

 

  
 

42

 

 

Retirement Programs and Employment Agreements

 

  
 

 

  
 

43

 

 

Potential Payments Upon Termination or Change in Control

 

  
 

 

  
 

 

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Executive Summary

 

 

 

Shareholder Engagement and Board Responsiveness

Engaging with our shareholders is a key priority for the Board and it is committed to maintaining this dialogue to ensure we continue to focus on helping shareholders to understand the various facets of our business model and Mylan’s differentiated approach. The dialogue also ensures that we are informed by their perspectives on topics that matter most to them. The Board was disappointed with the results of the Say-on-Pay vote at the 2017 AGM. Accordingly, following the 2017 AGM and into the second quarter of 2018, five independent directors and the Chairman and, separately, the CEO and other members of management, undertook an extensive shareholder-outreach initiative.

Shareholders expressed support for the members of our management team and for the structure of our ongoing compensation program, including pay mix and metrics used to measure performance for purposes of annual and long-term incentive compensation. Shareholders did, however, express their concerns regarding total reported compensation in Mylan’s Proxy Statement for the 2017 AGM (the “2017 Proxy Statement”) as the key reason for votes against the 2017 Say-on-Pay vote. During those discussions, we explained the background on the compensation amounts reported for 2016 and referred shareholders to prior public documents, explaining the basis for compensation (reported in 2016) as well as decisions the Board had already taken in 2017.

The Board further explained its perspective to shareholders and also listened to their feedback. The Board has also proactively taken several additional actions relating to our executive compensation program and the Board’s oversight of the program, which is intended to further address shareholder feedback:

 

   

We refreshed 2/3 of our Compensation Committee to introduce new perspectives. Following the 2018 AGM, we expect that the Committee will have a third new member upon the retirement of Ms. Cameron, resulting in a complete refreshment.

 

   

We reaffirmed our intention to rely primarily on a simplified pay mix of salary, annual performance-based incentives and long-term incentives heavily weighted toward performance-based awards.

 

   

The Compensation Committee’s independent compensation consultant again reviewed market data and confirmed that our program design and 2017 CEO and NEO compensation is in line with peers and market practice.

In fact, we note that our CEO compensation as reported in the Summary Compensation Table has declined in each of the last three years and for 2017 ranks third lowest out of the 14 members of our peer group

(including Mylan) that have reported fiscal year 2017 CEO compensation as of April 30, 2018, and fifth lowest out of the 22 members of our 2017 ISS-selected peer group (including Mylan) that have reported fiscal year 2017 CEO compensation as of April 30, 2018.

 

   

For 2018, we adopted a new metric for performance-based restricted stock units (“PRSUs”) tied to cash flow as a percentage of debt to incentivize prudent balance sheet management, while maintaining return on invested capital (“ROIC”) and relative total shareholder return (“TSR”) as important factors in determining PRSU payouts.

 

   

We revised our CD&A to further enhance and streamline the disclosure.

We acknowledge the results from our 2017 AGM and the feedback we received from some shareholders regarding our 2016 compensation, and the Committee is confident that our ongoing executive compensation program – and the actions taken both before and after the 2017 AGM to refine the compensation program and the Board’s oversight of it – appropriately address the feedback we have heard from our shareholders. We will continue to engage with shareholders and remain committed to being responsive to their perspectives.

 

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Business Performance and How It Aligns to Compensation

Over the last decade, we have continued to transform from a mid-sized U.S. generics company to a highly differentiated global pharmaceutical company capable of delivering better health to customers around the world. Our experienced executive leadership team has led our workforce of approximately 35,000 in building a one-of-a-kind durable, differentiated platform that is capable of withstanding market volatility – something that sets Mylan apart in a rapidly changing industry.

2017 Highlights

 

 

Access

 

 

  Filed 184 regulatory submissions demonstrating the depth of our global pipeline

 

  Gained approval on several key products, including OgivriTM (U.S.), Glatiramer Acetate (U.S. and Europe) and Generic Estrace® Cream (U.S.)

 

  Received FDA acceptance for review of our New Drug Application for Revefenacin and our Biologics License Application for Pegfilgrastim

 

  Introduced MyHep AllTM in India to combat hepatitis C

 

  Helped stem the tide of HIV by introducing the first Tenofovir Alafenamide-based, fixed-dose combination product to be offered to patients in developing countries

 

  Secured marketing authorization for Trastuzumab in 20 emerging markets

 

  Launched more than 40 injectable products worldwide, further advancing our strategy

 

 

 

 

Diversification

 

 

  Generated $11.9 billion in total revenues with more than 50% from outside the U.S., further demonstrating that we are no longer dependent on any one geography or product

 

  Advanced our ONE Mylan commercial strategy across our geographies and channels to distinguish us as customers’ partner of choice

 

  Enhanced our portfolio through inorganic investments in key areas including OTC, complex and niche active pharmaceutical ingredients, and specialty dermatological products

 

 

 

 

Durability

 

 

  Increased net cash provided by operating activities to $2.06 billion and adjusted free cash flow to $2.6 billion, reflecting the strength and durability of our portfolio

 

  Paid down debt of ~$1.36 billion

 

  Leveraged the integration of acquisitions and realized opportunities to optimize our operations

 

 

Our executive compensation program continues to demonstrate the strong alignment between Company performance – including driving access for patients, building diversification into our business model and enhancing the durability of our results – and how our leaders are rewarded. Company performance has remained strong over an extended period, including in 2017. This is perhaps most impressive given recent periods of

 

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turmoil and disruption in the industry and healthcare systems around the world (particularly in the U.S. over the past several years). We did not meet all of our challenging compensation metric targets in 2017 and, as a direct result, the resulting CEO and other executive compensation has been directly impacted.

 

   

Compensation totals reported in the Summary Compensation Table have generally declined over the last three years; 7.5% for our CEO since 2016.

 

   

The annual incentive payouts, which are driven solely by Company performance, have declined for three straight years.

 

   

The recently completed long-term performance period for the PRSUs granted in 2015 achieved 75% of target performance and the value of the shares earned at vesting was 61% of target on the date of the grant.

PAY AND PERFORMANCE AT A GLANCE: 2015-2017

 

LOGO

 

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2017 CEO Compensation Summary

The following summary describes the compensation for our CEO for the last two years. Please see page 35 for the compensation of all other NEOs.

 

  Chief Executive Officer            

 

         

 

 

 

2016

 

 

  

 

 

 

2017

 

 

Heather Bresch

   Base Salary:      $1,300,000        $1,300,000  
   Annual Incentive Payout:      $2,276,625        $1,950,000  
  

 

Annual LTI Grant:

  

 

 

 

$8,996,430

 

 

  

 

 

 

 

 

$9,100,045

 

 

 

  

 

Change in Pension Value:

  

 

 

 

$506,765

 

 

  

 

 

 

 

 

 

 

 

   All Other Compensation:      $697,300        $394,352  
     

 

 

    

 

 

 
     Summary Compensation Total:      $13,777,120       

 

$12,744,397

 

 

 

 

2017 Compensation Decisions

 

   

Base Salary: No change was made to Ms. Bresch’s base salary in 2017. It has remained the same since March 2015.

 

 

   

Annual Incentive: $1,950,000 calculated by applying the Company Performance Factor under the plan formula (100% for 2017) (see page 27). No change was made to Ms. Bresch’s target opportunity in 2017 and it has remained the same since 2015.

 

 

   

Long-Term Incentive: Ms. Bresch received a long-term incentive (“LTI”) grant in March 2017 valued at $9,100,045, of which 70% of the total is performance-based. The LTI award was delivered through PRSUs, restricted stock units (“RSUs”) and stock options.

 

CEO Reported and Realizable Pay

The following graph demonstrates that the CEO’s total realizable pay over a three-year period is aligned with Mylan’s TSR relative to the Company’s 2017 peer group.

 

3-Year CEO Realizable Pay vs TSR*

 

LOGO

 

*

Realizable pay includes cumulative salary and annual incentives paid for the most recent three years for which peer group data was publicly available (2014-2016), plus the current value (as of December 31, 2017) of stock options (intrinsic value) and time-based RSUs granted during the most recent three years, plus the value (as of December 31, 2017) of performance-based LTI awards, other than stock options, earned during the most recent three years, plus the change in pension value and all other compensation for the most recent three years. TSR data derived from the S&P Capital IQ. The 12 peer companies in this chart reflect the current peer group, excluding Teva Pharmaceutical Industries Ltd., for which sufficient information was not publicly available.

 

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Compensation Practices Overview

The Compensation Committee oversees the design and implementation of executive compensation programs aligned to industry best practices. It also serves to reinforce our unique, performance-driven culture by incentivizing the right behaviors and values expected of Mylan leaders and encouraging ownership of results. We balance competitive base pay and annual and long-term incentives to attract, retain, motivate and reward outstanding executive talent.

The summary below identifies certain features of our compensation program, which are described throughout the CD&A.

 

What We Do

 

 

✓  Maintain a significant portion of compensation aligned with shareholder interests and tied to ordinary share price or financial and operational business performance

 

 

✓  Balance annual and long-term incentives, which are both aligned with performance and broader stakeholder interests

 

 

✓  Employ balanced and different metrics for annual and long-term incentives

 

 

✓  Base long-term incentives heavily on performance-based metrics

 

 

✓  Use double-trigger vesting for annual LTI awards upon a change in control

 

 

✓  Consider peer groups and market data in determining compensation

 

 

✓  Retain an independent compensation consultant that reports directly to the Compensation Committee

 

 

✓  Maintain strong ordinary share ownership guidelines, which our senior management significantly exceeds

 

 

✓  Maintain a robust clawback policy

 

 

✓  Conduct an annual compensation-related risk review to ensure that compensation is aligned with shareholder interests

 

 

 

What We Don’t Do

 

 

û   No automatic accelerated vesting of stock options, RSUs and PRSUs upon satisfying retirement eligibility (55 years of age
with 10+ years of service) effective January 1, 2017

 

 

û   No exercise of positive discretion in determining annual or LTI payouts

 

 

û   No re-pricing of stock options

 

 

û   No hedging or pledging of ordinary shares

 

 

û   No new 280G tax gross-ups

 

 

û   No Company matching contributions to the Restoration Plan for NEOs with Retirement Benefit Agreements

 

 

 

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Compensation Philosophy & Process

 

 

Compensation Philosophy

Mylan’s approach to executive compensation is designed to:

Reinforce Mylan’s unique, performance-driven culture: Our performance metrics align to the creation and sustainability of shareholder value and encourage the behaviors and values expected of Mylan leaders. Our simplified program is weighted more heavily toward long-term incentives to align our executives’ performance with the durability of the business and interests of our stakeholders.

Drive and reward performance: Mylan’s Board has designed programs to ensure continued execution against our strategy to create a leading, robust, sustainable organization, while aligning compensation with Company performance, shareholder value creation and other stakeholder interests.

Attract, retain and reward outstanding executive talent: Mylan provides a highly competitive mix of compensation with an emphasis on long-term incentives to retain talented executives.

Given the disruptions and changes in the management of certain companies in our industry, the hyper-competitive market for outstanding executive leadership talent is becoming increasingly competitive. Recognizing the significant results generated by our current, long-tenured management team, as well as the important contributions of so many others in our organization, we design our compensation programs to help ensure that the Company, shareholders and other stakeholders continue to benefit from the talents of our leadership team and global workforce.

Simplified Primary Components of 2017 Compensation:

 

   

Base salary

 

   

Annual incentive

 

   

Long-term incentive

Role of the Compensation Committee

Our Compensation Committee, comprised solely of independent directors, oversees the design and implementation of our executive compensation programs. The Committee reviews and evaluates the performance of our NEOs and determines their compensation and objectives, or, in the case of our CEO and President, recommends compensation and objectives to the independent, non-executive members of the Board. The Committee monitors compensation trends and developments periodically and undertakes a comprehensive assessment of our compensation programs at least annually. In fulfilling these responsibilities, the Committee utilizes the support of an independent compensation consulting firm, independent outside counsel and an internal executive compensation team.

In 2017, the Compensation Committee retained Meridian Compensation Partners, LLC (“Meridian”) to provide advice and information regarding the design and implementation of Mylan’s executive compensation programs. Meridian also provided information to the Compensation Committee regarding regulatory and other technical developments that may be relevant to Mylan’s executive compensation programs. In addition, Meridian provided the Compensation Committee with competitive market information, analyses and trends on executive base salary, annual incentives, long-term incentives, benefits and perquisites.

The Compensation Committee also receives advice from outside counsel including, but not limited to, Cravath, Swaine & Moore LLP and NautaDutilh N.V.

Additionally, the Compensation Committee receives input from management; however, decisions on NEO compensation matters are made solely by the Compensation Committee and/or the independent directors.

 

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The Compensation Committee performs an annual review of the independence of its outside advisors, consistent with NASDAQ requirements and the Compensation Committee charter.

Process and Peer Group

Compensation Committee Process

Our culture and our success continue to depend on our ability to attract and retain talented leaders in critical roles.

The decisions of the Compensation Committee and the independent directors relating to executive compensation each year reflect a variety of subjective considerations, in addition to quantitative metrics. The Committee’s determinations reflect its members’ individual and collective experience and business judgment, and are based on extensive interactions with, and observations of, management and our assessment of some or all of the following factors, among others:

 

   

Company performance (relative to peers and budget);

 

   

The tenure and experience of members of our management team;

 

   

Individual leadership performance and contributions to the success of Mylan;

 

   

Responsibilities of, and future expectations for, the individual;

 

   

Short-, medium- and long-term personnel needs of Mylan;

 

   

The need to reward and retain our uniquely talented NEOs and other key employees;

 

   

Other qualitative contributions of each executive, including, among others, the actual and potential value and impact of his or her leadership style, strategic vision and execution, talent development, and ability to adapt to and drive the change necessary to our success;

 

   

Peer group pay levels and published survey data; and

 

   

Advice from independent external experts and advisors.

We consider these and other qualitative and quantitative factors from time-to-time in assessing our compensation philosophy and approach, in addition to using these factors to make individual compensation decisions. The Compensation Committee and the independent directors believe that the peer group is the right reference point for compensation decisions when coupled with the independent judgment and experience of our independent directors who are intimately familiar with matters that the Board oversees and guides, including the Company’s business, strategies, challenges and opportunities, as well as the unique respective talents, contributions, leadership, responsibilities and future expectations of the executives who drive performance and long-term sustainability.

Peer Group

While the competitive market for our executives is one factor the Compensation Committee considers when making compensation decisions, it does not target the compensation of NEOs within a specific percentile of any set of peer companies. As noted, the Committee considers peer group and industry data along with many other factors when determining compensation programs.

The peer group is used for compensation information for NEOs and for assessing the relative total shareholder return metric applicable to PRSUs. Due to Mylan’s unique position in the market and long-tenured management team, pay is not formulaically tied to a particular percentile of the peer group. In 2017, the Committee restructured the peer group to include 13 companies, six of which were also in the 2016 peer group. The 2016 peer group contained 19 companies from a mix of industries, including pharmaceutical, healthcare equipment and biotech. The 2017 peer group provides a more direct focus on Mylan’s business competitors and the companies Mylan competes with for executive talent. The Committee also believes this group of 13 companies provides a more relevant performance comparison for total shareholder return.

 

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    Peer Group

 

     
 

Abbott Laboratories

 

Novartis AG

 
 

Amgen Inc.

 

Perrigo Company plc

 
 

Celgene Corp.

 

Pfizer Inc.

 
 

Endo International plc

 

Regeneron Pharmaceuticals, Inc.

 
 

Gilead Sciences, Inc.

 

Sanofi

 
 

Mallinckrodt Public Limited Company

 

Teva Pharmaceutical Industries Ltd.

 
 

Merck & Co., Inc.

 

   

Consideration of Risk in Company Compensation Policies

Our compensation programs are designed to encourage outstanding, consistent business performance over extended periods of time. Management and the Compensation Committee have considered and discussed the risks inherent in our business and the design of our compensation plans, policies and programs that are intended to drive the achievement of our long-term business objectives while avoiding excessive short-term risk-taking. In addition, we utilize a mix of performance measures, so that undue emphasis is not placed on one particular measure, and employ different types of compensation to provide value over the short-, medium- and long-term. These performance measures are reevaluated annually in light of the evolving risk environment facing our business. When making compensation decisions, we also consider qualitative factors to avoid the consequence that an overly formulaic approach may have on excessive risk-taking by management.

 

 

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Components of 2017 Executive Compensation

 

 

Our executive compensation program is designed to incentivize our NEOs to deliver exceptional long-term shareholder value and to fully align the interests of our executives with those of our shareholders and other stakeholders. We pay our NEOs through three primary components of compensation: base salary, an annual incentive and a long-term incentive. In addition, our NEOs receive certain benefits and perquisites. Our program is heavily weighted toward performance-based compensation and annual and long-term incentive outcomes are primarily dependent on the achievement of outstanding performance results.

 

 

Pay Element

  Performance-
Based
   Form   2017 Metrics  

2017 Performance / Shareholder

Alignment

Salary

 

Fixed

  

Cash

 

N/A

  Attracts and retains executives through competitive base compensation

Annual Incentive

Compensation

 

Variable

  

Cash

 

Adjusted EPS

  Reinforces the importance of earnings, which are expected to have a direct relationship to the price of Mylan’s ordinary shares
      

Cash

 

Global Regulatory

Submissions

  Encourages the approval and commercialization of new products to yield new revenue sources that are essential for Mylan to remain competitive, and as such are fundamental to our short- and long-term sustainable growth strategy
      

Cash

  Adjusted Free Cash Flow   Captures the potential impact of all types of business transactions on the generation of adjusted operating cash flow
      

Cash

 

U.S. GAAP Revenue

  Incentivizes management to focus on top-line growth, essential to Mylan’s ongoing value creation and consistent with our long-term growth strategy

Long-Term

Incentive

Compensation

 

Variable

  

Stock Options

  Stock Price   Provides value only if the stock price increases from the grant date
    

RSUs

 

  Stock Price   Offers realized value dependent on continued employment and absolute stock performance over time
    

PRSUs

 

ROIC

 

Focuses executives on earning an appropriate return on investment

      

PRSUs

 

Relative TSR

  Incentivizes executives to deliver superior shareholder returns as compared to competitors

 

 

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2017 Pay Mix

 

LOGO    LOGO

Base Salary

The Compensation Committee considers a variety of factors in deciding base salary, including, among others: individual performance, responsibilities and expected future performance; Company performance; management structure; marketplace practices; internal pay equity considerations; competitive recruitment for outstanding talent; and the executive’s experience, tenure and leadership. The Compensation Committee also considers, among other factors, what the marketplace would require in terms of the replacement costs to hire a qualified individual to replace an executive, as well as the fact that a new executive would lack the critical knowledge base regarding Mylan as compared to the executive he or she would be replacing.

For 2017, no NEOs received base salary increases except for Mr. Parks. The Compensation Committee increased Mr. Parks’ base salary by 14% effective as of September 1, 2017, to reflect his strong performance and expanded responsibility for the Global Integrated Services function. Ms. Bresch and Mr. Malik’s salaries have not increased since 2015, and Mr. Mauro’s salary has not increased since 2016.

 

 

  NEO

  

 

Position

  

 

2016

    

 

2017

    

 

Change in
Base Salary

 

 

 

Heather Bresch

 

  

 

Chief Executive Officer

 

  

 

 

 

 

$1,300,000

 

 

 

 

  

 

 

 

 

$1,300,000

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Rajiv Malik

 

  

 

President

 

  

 

 

 

 

$1,000,000

 

 

 

 

    

 

 

$1,000,000

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Kenneth S. Parks

 

  

 

Chief Financial Officer

 

  

 

 

 

 

$600,000

 

 

 

 

  

 

 

 

 

$685,000

 

 

 

 

  

 

 

 

 

14%

 

 

 

 

 

Daniel M. Gallagher

 

  

 

Chief Legal Officer

 

  

 

 

 

 

N/A

 

 

 

 

  

 

 

 

 

$800,000

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Anthony Mauro

 

  

 

Chief Commercial Officer

 

  

 

 

 

 

$700,000

 

 

 

 

  

 

 

 

 

$700,000

 

 

 

 

  

 

 

 

 

 

 

 

 

 

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Annual Incentive Compensation

Mylan’s annual incentive compensation consists of performance-based annual cash awards that are determined according to the achievement of objective operational and financial measures identified by the Board as critical to the successful execution of Mylan’s business strategy and tied to the continued creation of shareholder value.

For 2017, the Compensation Committee set challenging performance goals based on four key performance indicators of the current and future strength of our business. In addition, the metrics were selected specifically because they are related to the actions and leadership of our management team and measure their ability to extract the greatest value from our assets. U.S. GAAP Revenue was introduced as a new performance metric for the 2017 annual incentive program. This metric was added to further incentivize senior management to focus on top-line growth. The Compensation Committee chose to use adjusted metrics for the other two financial goals (adjusted EPS and adjusted free cash flow) because it believes that these adjusted metrics present the most consistent measure of evaluating Mylan’s financial performance, and the ongoing operations of the Company.

IMPORTANT FACTS ABOUT OUR 2017 ANNUAL INCENTIVE TARGETS

 

Challenging Targets Based on Past Performance Results and Future Expectations

Adjusted EPS

 

   

Reinforces the importance of a performance measure of earnings, which are expected to have a direct relationship to the price of Mylan’s ordinary shares

 

Global Regulatory Submissions

 

   

Encourages the approval and commercialization of new products to yield new revenue sources that are essential for Mylan to remain competitive, and as such are fundamental to our short- and long-term growth strategy

 

Adjusted Free Cash Flow

 

   

Captures the potential impact of all types of business transactions on the generation of net cash provided by operating activities, adjusted for certain special items and capital expenditures, and strengthens our balance sheet

 

U.S. GAAP Revenue

 

   

Incentivizes management to focus on top-line growth, essential to Mylan’s ongoing value creation and consistent with our long-term growth strategy

 

 

     

 

2017

 
Goal   Weighting     Threshold     Target     Maximum  

Adjusted EPS

    30%       $5.15       $5.35       $5.55  

Global Regulatory Submissions

    25%       120       135       150  

Adjusted Free Cash Flow

($ in millions)

    25%       $2,000       $2,200       $2,400  

U.S. GAAP Revenue

($ in millions)

    20%       $12,250       $13,000       $13,750  

Payout Opportunity (as % of Target)

            50%       100%       200%  

No annual incentives are paid with respect to a metric if threshold performance is not achieved. Furthermore, the Compensation Committee has committed to not using its discretion to upwardly adjust annual incentive award amounts generated by the performance metrics.

 

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2017 NEO Target Award Opportunities (Including Maximum Opportunity) Subject to Performance

 

  NEO

 

  

Position

 

  

 

Base Salary

 

    

Target
(% of Salary)

 

  

 

Target

Annual

Incentive

 

    

 

Maximum
Annual
Incentive

 

 

 

 

Heather Bresch

  

 

 

Chief Executive Officer

  

 

 

$

 

 

1,300,000

 

 

 

  

 

 

150%

  

 

 

$

 

 

1,950,000

 

 

 

  

 

 

 

 

 

$3,900,000

 

 

 

 

 

Rajiv Malik

  

 

 

President

  

 

 

$

 

 

1,000,000

 

 

 

  

 

 

125%

  

 

 

$

 

 

1,250,000

 

 

 

  

 

 

 

 

 

$2,500,000

 

 

 

 

 

Kenneth S. Parks

  

 

 

Chief Financial Officer

  

 

 

 

 

 

$685,000

 

 

 

  

 

 

115%

  

 

 

 

 

 

$787,750

 

 

 

  

 

 

 

 

 

$1,575,500

 

 

 

 

 

Daniel M. Gallagher

  

 

 

Chief Legal Officer

  

 

 

 

 

 

$800,000

 

 

 

  

 

 

115%

  

 

 

 

 

 

$920,000

 

 

 

  

 

 

 

 

 

$1,840,000

 

 

 

 

 

Anthony Mauro

  

 

 

Chief Commercial Officer

  

 

 

 

 

 

$700,000

 

 

 

  

 

 

115%

  

 

 

 

 

 

$805,000

 

 

 

  

 

 

 

 

 

$1,610,000

 

 

 

The payout opportunities are one-half (50%) of the target amount for threshold performance and two times (200%) the target amount for maximum performance.

2017 Actual Annual Incentive Compensation

The Company achieved below-threshold performance with respect to the adjusted EPS metric, maximum performance on the global submissions metric, maximum performance on the adjusted free cash flow metric, and below-threshold performance on the U.S. GAAP revenue metric in 2017. As a result, the NEOs received payouts of annual incentive awards for 2017 at 100% of target.

 

Goal*

 

 

Weighting

 

  

 

2017

Target

 

    

2017 Actual Results

 

    

Weighted

Score

 

 

 

Adjusted EPS

 

 

 

30%

 

  

 

 

 

 

$5.35

 

 

 

 

  

 

 

 

 

$4.56

 

 

 

 

  

 

 

 

 

Below Threshold

 

 

 

 

  

 

 

 

 

0

 

 

 

 

Global Regulatory Submissions

 

 

 

25%

 

  

 

 

 

 

135

 

 

 

 

  

 

 

 

 

184

 

 

 

 

  

 

 

 

 

Above Maximum

 

 

 

 

  

 

 

 

 

50

 

 

 

 

Adjusted Free Cash Flow ($ in millions)

 

 

 

25%

 

  

 

 

 

 

$2,200

 

 

 

 

  

 

 

 

 

$2,627

 

 

 

 

  

 

 

 

 

Above Maximum

 

 

 

 

  

 

 

 

 

50

 

 

 

 

U.S. GAAP Revenue ($ in millions)

 

 

 

20%

 

  

 

 

 

 

$13,000

 

 

 

 

  

 

 

 

 

$11,908

 

 

 

 

  

 

 

 

 

Below Threshold

 

 

 

 

  

 

 

 

 

0

 

 

 

 

2017 Company Performance

 

                                 

 

 

 

 

100

 

 

% 

 

* The adjusted EPS amount is derived from Mylan’s audited financial statements in the same manner as Mylan publicly reports adjusted EPS (which for 2017 is reconciled to the most directly comparable U.S. GAAP measure in Appendix A), but for annual incentive plan purposes is measured on a constant currency basis. Adjusted free cash flow is derived from Mylan’s audited financial statements in the same manner as Mylan publicly reports adjusted free cash flow (which for 2017 is reconciled to the most directly comparable U.S. GAAP measure in Appendix A).

 

LOGO

 

NEO

 

  

Position

 

  

Base Salary 

 

    

 

Target
(% of  Salary)

 

 

Company
Performance

 

 

Actual
Incentive
Payout 

 

 

 

 

Heather Bresch

  

 

 

Chief Executive Officer

  

 

 

 

 

 

$1,300,000

 

 

 

  

 

 

150%

 

 

 

100%

 

 

 

 

 

 

$1,950,000

 

 

 

 

 

Rajiv Malik

  

 

 

President

  

 

 

 

 

 

$1,000,000

 

 

 

  

 

 

125%

 

 

 

100%

 

 

 

 

 

 

$1,250,000

 

 

 

 

 

Kenneth S. Parks

  

 

 

Chief Financial Officer

  

 

 

 

 

 

$685,000

 

 

 

  

 

 

115%

 

 

 

100%

 

 

 

 

 

 

$787,500

 

 

 

 

 

Daniel M. Gallagher

  

 

 

Chief Legal Officer

  

 

 

 

 

 

$800,000

 

 

 

  

 

 

115%

 

 

 

100%

 

 

 

 

 

 

$920,000

 

 

 

 

 

Anthony Mauro

  

 

 

Chief Commercial Officer

  

 

 

 

 

 

$700,000

 

 

 

  

 

 

115%

 

 

 

100%

 

 

 

 

 

 

$805,000

 

 

 

 

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Table of Contents

Long-Term Incentive Compensation

The Compensation Committee believes that the value of long-term incentives should be directly related to the performance of Mylan’s ordinary shares, as well as other measures associated with the growth and success of Mylan. The Compensation Committee has historically approved annual LTI award grants in the first quarter of the fiscal year, with the grant effective following the release of year-end audited financial results with exceptions for new hires (as was the case for Mr. Gallagher in 2017), promotions and other special awards, grants or circumstances.

Long-Term Incentive Structure. For 2017, LTI awards were granted to our NEOs in the form of PRSUs, stock options and RSUs in the proportions shown below.

 

  Vehicle

 

  

 

LTI Mix
for all
NEOs

 

    

 

Incentive Opportunity

  

 

Vesting Schedule

 

PRSUs

Performance

 

  

 

 

 

 

50%

 

 

 

 

  

 

PRSUs provide value
based on Mylan’s
ROIC and relative
TSR performance,
strongly linking
payouts with long-
term value creation.

  

 

PRSUs cliff-vest at the end of the three-year performance period based on the achievement of pre-determined performance criteria, generally provided that the NEO remains continuously employed by Mylan.

 

 

Stock Options

Performance

 

  

 

 

 

 

20%

 

 

 

 

  

 

Stock options provide
value only if Mylan’s
ordinary share price
rises from the grant
date price.

  

 

Stock options are granted with an exercise price equal to the closing price of Mylan’s ordinary shares on the date of grant. They vest in three equal annual installments, generally provided that the NEO remains continuously employed by Mylan.

 

 

RSUs

Time

  

 

 

 

 

30%

 

 

 

 

  

 

RSU value increases/
decreases with
ordinary share price
performance and
provides a strong
retention incentive.

  

RSUs vest in three equal annual installments, generally provided that the NEO remains continuously employed by Mylan.

This mix of awards provides recipients with a combination of incentive opportunities, aligns our executives with shareholders and ensures each vehicle has its own risk-reward profile with a unique benefit. The mix of the 2017 LTI grant was generally consistent with the mix of the 2016 grant. After a review of peer company practices, the Committee recognized that many peer companies provided a greater proportion of their long-term incentive mix in the form of RSUs. The Committee believes the 2017 long-term incentive mix provides a strong performance alignment, with 70% of the mix in PRSUs or stock options. The RSUs create ownership alignment with shareholders and provide a stable element of long-term compensation to encourage retention of executive talent.

2017- 2019 PRSU Performance Metrics

 

Metric

 

  

Weighting

 

    

Threshold

 

    

Target

 

    

Maximum

 

 

ROIC*

 

    

 

50%

 

 

 

    

 

8%

 

 

 

    

 

10%

 

 

 

    

 

12%

 

 

 

Relative TSR**

     50%       

 

25th Percentile of
Peer Group

 

 
 

 

    

 

50th  Percentile of
Peer Group

 

 
 

 

    

 

75th Percentile of
Peer Group

 

 
 

 

 

Payout Opportunity (as % of Target)

           

 

 

 

50%

 

 

  

 

 

 

100%

 

 

  

 

 

 

150%

 

 

*

ROIC is calculated from Mylan’s audited financial statements in the same manner as set forth in the reconciliations provided in Appendix A. Starting in 2016, the definition of ROIC was updated to include intangible assets and goodwill in the denominator to more appropriately reflect the strategic acquisitions Mylan has made.

**

Relative TSR is calculated by comparing the difference between Mylan’s 30-day trailing average closing ordinary share price at the day before the beginning of the performance period and day before the end of the performance period plus any dividends paid during the performance period against the same metric for each company in our peer group.

 

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Each NEO’s 2017 LTI award had a targeted value at grant equal to a percentage of the NEO’s base salary. Values are determined based on a variety of factors, including peer group compensation, individual performance and tenure.

Below are the actual annual LTI award values approved by the Compensation Committee for our NEOs:

 

       

 

Performance-Based

        Time-Based    

Total LTI

Award

 

 

 

  NEO

 

 

Position

 

 

PRSUs 

 

   

Stock Options

 

       

RSUs

 

   

 

Heather Bresch

 

 

 

Chief Executive Officer

 

 

 

 

 

 

$4,550,033

 

 

 

 

 

 

 

 

 

$1,820,011

 

 

 

 

   

 

 

 

 

$2,730,001

 

 

 

 

 

 

 

 

 

$9,100,045

 

 

 

 

 

Rajiv Malik

 

 

 

President

 

 

 

 

 

 

$2,800,031

 

 

 

 

 

 

 

 

 

$1,120,004

 

 

 

 

   

 

 

 

 

$1,680,018

 

 

 

 

 

 

 

 

 

$5,600,053

 

 

 

 

 

Kenneth S. Parks

 

 

 

Chief Financial Officer

 

 

 

 

 

 

$900,031

 

 

 

 

 

 

 

 

 

$360,012

 

 

 

 

   

 

 

 

 

$540,037

 

 

 

 

 

 

 

 

 

$1,800,080

 

 

 

 

 

Daniel M. Gallagher*

 

 

 

Chief Legal Officer

 

 

 

 

 

 

$1,600,006

 

 

 

 

 

 

 

 

 

$640,009

 

 

 

 

   

 

 

 

 

$960,027

 

 

 

 

 

 

 

 

 

$3,200,042

 

 

 

 

 

Anthony Mauro

 

 

 

Chief Commercial Officer

 

 

 

 

 

 

$1,250,040

 

 

 

 

 

 

 

 

 

$500,017

 

 

 

 

     

 

 

 

 

$750,033

 

 

 

 

 

 

 

 

 

$2,500,090

 

 

 

 

 

*

Excludes Mr. Gallagher’s Sign-On RSUs and awards under the One-Time Special Performance-Based Five-Year Realizable Value Incentive Program. For details regarding these awards, see “Other Compensation Matters and Considerations – Employment Agreements.”

PRSUs Granted in 2015

Although Mylan typically grants equity awards in the first quarter of the fiscal year, in 2015, PRSU grants to NEOs were postponed until the end of the year because of the EPD Transaction. Due to the timing of the 2015 PRSU grants, the awards were based on performance measured in 2016-2017 rather than the three-year performance period that is typically applied to PRSUs. The Company achieved higher than maximum performance with respect to the ROIC metric and below-threshold performance on the relative TSR metric. As a result, the NEOs received a payout for the PRSUs at 75% of the target number of shares.

 

LOGO

 

2016-2017 Goal

 

  

Weighting

 

    

 

2-Year Target

 

    

Actual Result

 

    

% of Target
Achieved

 

    

Weighted
Score

 

 

 

 

ROIC*

  

 

 

 

 

 

50%

 

 

 

  

 

 

 

 

 

38%

 

 

 

  

 

 

 

 

 

67%

 

 

 

  

 

 

 

 

Above
Maximum

 

 

 
 

 

  

 

 

 

 

 

75%

 

 

 

 

 

Relative TSR of Peer Group

  

 

 

 

 

 

50%

 

 

 

  

 

 

 

 

50th percentile of
Peer Group

 

 

 
 

 

  

 

 

 

 

22nd percentile of
Peer Group

 

 

 
 

 

  

 

 

 

 

Below
Threshold

 

 

 
 

 

  

 

 

 

 

 

0%

 

 

 

 

 

Total Payout (as % of Target)

                                         75%  

 

*

ROIC for the PRSUs granted in 2015 is calculated from Mylan’s audited financial statements in the same manner as set forth in the reconciliations provided in Appendix A.

 

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Table of Contents

When applying the Mylan closing ordinary share price at vesting of $40.97, the NEOs received approximately 61% of the targeted grant date value of the award.

 

NEO

 

 

Position

 

 

Target
Shares (#)

 

   

Grant Date
Value Target

 

   

Company
Performance

 

   

 

Actual
Shares

Earned (#)

 

   

 

Actual
Award Value
at $40.97 per
Share

 

 

 

 

Heather Bresch

 

 

 

Chief Executive Officer

 

 

 

 

 

 

76,984

 

 

 

 

 

 

 

 

 

$3,900,009

 

 

 

 

 

 

 

 

 

75%

 

 

 

 

 

 

 

 

 

57,738

 

 

 

 

 

 

 

 

 

$2,365,526

 

 

 

 

 

Rajiv Malik

 

 

 

President

 

 

 

 

 

 

47,375

 

 

 

 

 

 

 

 

 

$2,400,018

 

 

 

 

 

 

 

 

 

75%

 

 

 

 

 

 

 

 

 

35,532

 

 

 

 

 

 

 

 

 

$1,455,746

 

 

 

 

 

Kenneth S. Parks*

 

 

 

Chief Financial Officer

 

 

 

 

 

 

N/A

 

 

 

 

 

 

 

 

 

N/A

 

 

 

 

 

 

 

 

 

N/A

 

 

 

 

 

 

 

 

 

N/A

 

 

 

 

 

 

 

 

 

N/A

 

 

 

 

 

Daniel M. Gallagher*

 

 

 

Chief Legal Officer

 

 

 

 

 

 

N/A

 

 

 

 

 

 

 

 

 

N/A

 

 

 

 

 

 

 

 

 

N/A

 

 

 

 

 

 

 

 

 

N/A

 

 

 

 

 

 

 

 

 

N/A

 

 

 

 

 

Anthony Mauro

 

 

 

Chief Commercial Officer

 

 

 

 

 

 

18,506

 

 

 

 

 

 

 

 

 

$937,514

 

 

 

 

 

 

 

 

 

75%

 

 

 

 

 

 

 

 

 

13,880

 

 

 

 

 

 

 

 

 

$568,664

 

 

 

 

*

Neither Mr. Parks nor Mr. Gallagher received the 2016-2017 PRSUs as they were not employed by Mylan when the PRSU award was granted in November 2015.

Limited Perquisites

Perquisites include the following:

 

   

Each NEO receives a car allowance or the use of a leased vehicle and payment of certain ancillary expenses. The NEOs are responsible for paying any taxes incurred relating to this perquisite.

 

   

Our senior executives take an extraordinarily active approach to overseeing and managing our global operations, which necessitates a significant amount of U.S. domestic and international travel time due to our diverse set of business centers, manufacturing and other facilities and many client and vendor locations around the world. Mylan provides management with access to corporate aircraft to assist in the management of Mylan’s global platform by providing a more efficient and secure traveling environment, including where sensitive business issues may be discussed or reviewed, as well as maximum flexibility to our executives in the conduct of Company business. For reasons of business efficiency and continued security-related concerns (including personal security, especially given the global nature of Mylan’s business, as well as privacy of business information and communications), we have required Ms. Bresch to use Mylan aircraft for business and personal purposes. During 2017, other executives from time-to-time also were authorized to have personal use of the corporate aircraft for similar reasons. The Compensation Committee monitors business and personal aircraft usage on a periodic basis. To the extent any travel on the corporate aircraft results in imputed taxable income to an NEO, Mylan does not provide gross-up payments to cover the NEO’s personal income tax obligation due to such imputed income. For a summary of how this perquisite is calculated, see footnote (b) to the Summary Compensation Table on page 35 of this Amendment.

 

   

Executives will also receive tax equalization payments for incremental tax liabilities, if any, incurred as a result of attendance at meetings of the Board in the U.K.

 

 

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Other Compensation Matters and Considerations

 

 

Ordinary Share Ownership Requirements for NEOs

The ownership requirements are expressed as a multiple of base salary as follows:

 

Position

 

  

 

Ownership Requirement  

(Multiple of Base Salary)  

 

 

 

CEO

 

  

 

 

 

 

6x  

 

 

 

 

 

President

 

  

 

 

 

 

4x  

 

 

 

 

 

Other NEOs

 

  

 

 

 

 

3x  

 

 

 

 

As of December 31, 2017, all NEOs exceeded their ownership requirements. In addition to the NEOs, Mylan’s ordinary share ownership policy covers the most senior employees at Mylan to promote an ownership culture and stronger alignment with the interests of shareholders among the broader leadership team. Each covered employee generally has five years from the date they became subject to the policy to achieve the minimum ownership requirement. Ordinary shares actually owned by the covered employee (including ordinary shares held by the covered employee in Mylan’s 401(k) and Profit Sharing Plan), as well as restricted ordinary shares and unvested RSUs and PRSUs count toward compliance with these requirements. Our NEOs substantially exceed the ownership threshold set forth in the share ownership policy.

Clawback Policy

The Board has approved a clawback policy relating to incentive compensation programs. The provisions of the policy allow Mylan to recoup certain bonus and equity-based incentive compensation gains resulting from specified misconduct that causes Mylan to materially restate its financial statements. The Board considers updates to this policy from time-to-time. In addition, to the extent that the SEC adopts rules for clawback policies that require changes to our policy, we will respond accordingly.

Anti-Hedging and Pledging Policy

The Board has approved a securities trading policy that prohibits directors and certain employees from engaging in any transaction designed to limit or eliminate economic risks associated with the ownership of our equity or debt securities by trading in certain types of hedging instruments relating to any of our securities. Hedging instruments include prepaid variable forward contracts, equity swaps, collars, exchange funds, insurance contracts, short sales, options, puts, calls or other instruments designed to hedge or offset movements in the price of our ordinary shares or debt. The policy also prohibits directors and certain employees from entering into transactions that involve the holding of Mylan securities in margin accounts (other than the “cashless exercise” of stock options) or the pledging of Mylan equity or debt securities as collateral for loans, with certain exceptions approved by the Compensation Committee if the executive demonstrates that he or she has the continuing financial capacity to repay any underlying loan or potential margin call without resorting to Mylan equity or debt securities. To the extent that the SEC adopts rules for anti-hedging and pledging policies that require changes to our policy, we will respond accordingly.

Employment Agreements

We believe it is important to have employment agreements with our executive officers and other key employees. These agreements memorialize certain key terms of employment, including termination rights and obligations, non-competition and other restrictive covenants, and compensation and perquisites, and we believe thereby enhance the stability and continuity of our employment relationships. Each of the NEOs is party to an employment agreement with Mylan Inc.

 

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Appointment of Chief Legal Officer

In connection with his appointment as Chief Legal Officer, on March 24, 2017, Mr. Gallagher and Mylan Inc. entered into an employment agreement effective as of April 1, 2017.

Mr. Gallagher’s employment agreement had an initial term of one year, automatically renews for successive one-year periods unless earlier terminated by Mr. Gallagher or Mylan, and provides for the following during his term of employment:

 

   

a base salary of $800,000;

 

   

eligibility for a discretionary annual bonus with a target amount equal to 115% of his base salary;

 

   

an annual grant of LTI awards under Mylan’s Amended and Restated 2003 Long-Term Incentive Plan (the “Amended 2003 Plan”) with a value equal to 400% of his base salary;

 

   

a signing bonus of $350,000, which was subject to full or partial repayment in the event Mr. Gallagher had left Mylan prior to the first anniversary of his appointment, except in certain circumstances; and

 

   

a grant of RSUs (the “Gallagher Sign-On RSUs”) with a grant date value of $650,035 and an award of 40,507 PRSUs with a grant date value of $1,546,152 pursuant to the One-Time Special Five-Year Performance-Based Realizable Value Incentive Program. A description of the One-Time Special Five-Year Performance-Based Realizable Value Incentive Program can be found in the Proxy Statement for Mylan Inc.’s 2014 Annual Meeting of Shareholders.

For a detailed description of the employment agreements entered into with the other NEOs, see the section below entitled “Employment Agreements,” beginning on page 43 of this Amendment.

Transition and Succession Agreements

Mylan Inc. is party to separate Transition and Succession Agreements with each NEO with an aim to assuring that Mylan will have the NEO’s full attention and dedication to Mylan during the pendency of a possible change in control transaction that might optimize shareholder value, and to provide the officer with compensation and benefits in connection with a change in control. The Transition and Succession Agreements are independent of each NEO’s employment agreement. Subsequent to the execution of certain legacy agreements, Mylan adopted a policy that no new Transition and Succession Agreements will provide for an excise tax gross-up for golden parachute payments. Consistent with this commitment, the Transition and Succession Agreements with Messrs. Parks and Gallagher do not contain excise tax gross-ups. For legal and other considerations, the Transition and Succession Agreements currently in effect and executed prior to the new policy are not subject to that policy. Mylan does not have the right to unilaterally abrogate pre-existing binding contracts with its executives, and does not believe it would be in shareholders’ best interests to expend funds to “buy out” the executives from these rights. Since implementation of the new policy, no new or amended Transition and Succession Agreements with excise tax gross-up provisions have been executed and several have expired as executives have ceased to be actively employed with Mylan. The agreements with Messrs. Parks and Gallagher provide that they will, in the event subject to an excise tax on any golden parachute payments, be subject to a “best net” approach, under which they will receive the full amount of such payments or the greatest amount of such payments that will not subject them to the excise tax, whichever would result in the greatest after-tax amount.

For a detailed description of these Transition and Succession Agreements, see the section below entitled “Termination Under Transition and Succession Agreements (Change in Control)” beginning on page  45 of this Amendment.

Retirement Benefits

Mylan previously entered into Retirement Benefit Agreements (“RBAs”) with Ms. Bresch and Mr. Malik in recognition of their service to Mylan, to encourage their retention and to provide a supplemental form of

 

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retirement and death benefit. For a detailed description of the RBAs with Ms. Bresch and Mr. Malik, see the section below entitled “Retirement Benefit Agreements” beginning on page 42 of this Amendment.

Mylan also maintains a 401(k) Restoration Plan (the “Restoration Plan”) and an Income Deferral Plan permitting senior-level employees to elect to defer the receipt of a portion of their compensation and, in the case of the Restoration Plan, providing matching contributions to employees who make such an election. However, effective April 1, 2013, Mylan modified the Restoration Plan so that U.S. employees with an RBA would no longer receive matching contributions under the Restoration Plan.

When Mr. Malik joined Mylan in January 2007, Mylan established a nonqualified deferred compensation plan on his behalf. Although Mylan no longer contributes to the plan account, it will be distributed to Mr. Malik upon termination of his employment, or upon other qualifying distribution events, such as his retirement, disability or death or Mylan’s termination of the plan.

The footnotes to the Summary Compensation Table include changes in pension values calculated based on certain actuarial assumptions regarding discount rates. In computing these amounts, we used the same assumptions that were used to determine the expense amounts recognized in our 2017 financial statements. In 2017, the impact of an increase in the applicable discount rates led to a decrease in the present value of accumulated benefits of approximately $198,000 for Ms. Bresch and approximately $110,000 for Mr. Malik.

Deductibility Cap on Executive Compensation

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), as in effect for 2017, restricts the deductibility for federal income tax purposes of the compensation paid to the CEO and each of the other NEOs who was an executive officer at the end of the applicable fiscal year (other than our Chief Financial Officer) for such fiscal year to the extent that such compensation for such executive exceeds $1 million and does not qualify as “qualified performance-based compensation” as defined under Section 162(m) of the Code. The Compensation Committee historically considered available opportunities to deduct compensation paid to NEOs for U.S. federal income tax purposes. The Tax Cuts and Jobs Act, which was enacted on December 22, 2017, eliminated the exception for “performance-based” compensation and expanded the number of executives to which the 162(m) limit may apply. As a result, except to the extent provided in limited transition relief, compensation over $1 million paid to any NEO will no longer be deductible under Section 162(m) of the Code. The Board and the Compensation Committee reserve the right to provide compensation to our executives that is not deductible, including but not limited to when necessary to comply with contractual commitments, or to maintain the flexibility needed to attract talent, promote retention or recognize and reward desired performance.

Compensation Committee Report

We have reviewed and discussed the CD&A with management. Based on such review and discussions, we recommended to the Board that the CD&A be included in this Amendment.

Respectfully submitted,

Wendy Cameron

JoEllen Lyons Dillon

Melina Higgins

 

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Table of Contents

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee during 2017 (Ms. Cameron, Ms. Dillon, Mr. Dimick, Ms. Higgins and Mr. Parrish) was an officer or employee of the Company, was formerly an officer of the Company, or had any relationship requiring disclosure by the Company under Item 404 of Regulation S-K. During 2017, no executive officer of the Company served on the compensation committee or board of another entity, one of whose executive officers served on the Compensation Committee or the Board.

 

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Table of Contents

Executive Compensation Tables

2017 Summary Compensation Table

 

 

The following summary compensation table sets forth the cash and non-cash compensation paid or granted to or earned by the NEOs for 2017, 2016 and 2015.

 

Name and

Principal Position

  Fiscal
Year
    Salary
($)(1)
    Bonus
($)(2)
    Stock
Awards
($)(3)
    Option
Awards
($)(4)
    Non-Equity
Incentive Plan
Compensation

($)(5)
    Changes in
Pension Value
and Non-
qualified

Deferred
Compensation
Earnings
($)(6)
    All Other
Compensation
($)(7)
    Total
($)
 

Heather Bresch

Chief Executive Officer

 

 

2017

 

 

 

1,300,000

 

 

 

 

 

 

7,280,034

 

 

 

1,820,011

 

 

 

1,950,000

 

 

 

 

 

 

394,352

 

 

 

12,744,397

 

    2016       1,300,000             7,436,421       1,560,009       2,276,625       506,765       697,300       13,777,120  
      2015       1,330,769             5,200,046       1,300,007       3,900,000       768,216       6,432,030       18,931,068  

Kenneth S. Parks

Chief Financial Officer

    2017       628,115             1,440,068       360,012       787,750             130,072       3,346,017  
      2016       346,154       375,000       2,766,841       300,000       700,500             18,498       4,506,993  

Rajiv Malik

President

    2017       1,000,000             4,480,049       1,120,004       1,250,000             892,077       8,742,130  
    2016       1,000,000             4,319,120       900,014       1,459,375       616,520       391,373       8,686,402  
      2015       1,019,231             3,200,041       800,017       2,500,000       970,676       11,411,770       19,901,735  

Daniel M. Gallagher

Chief Legal Officer

 

 

2017

 

 

 

600,000

 

 

 

350,000

 

 

 

4,756,220

 

 

 

640,009

 

 

 

920,000

 

 

 

 

 

 

62,958

 

 

 

7,329,187

 

Anthony Mauro

Chief Commercial Officer

    2017       700,000             2,000,073       500,017       805,000             191,921       4,197,011  
    2016       700,000             2,213,881       490,013       939,838             259,102       4,602,834  
    2015       634,615             1,250,036       312,517       1,437,500             1,220,083       4,854,751  

 

(1)

Represents the value of the base salary actually paid to the NEO in 2017, 2016 or 2015. The annual base salary approved by the Compensation Committee for each of the NEOs is payable in accordance with the Company’s normal payroll practices for its senior executives, so that an NEO’s total base salary amount is paid in 26 bi-weekly installments. 2015 included an additional payment date (a total of 27 payments were made in 2015), therefore the amounts shown for 2015 are greater than the applicable NEO’s annual base salary.

(2)

For Mr. Parks, the amount shown for 2016 represents the value of his sign-on bonus, which is subject to full or partial repayment in the event Mr. Parks leaves Mylan prior to the third anniversary of his joining Mylan. For Mr. Gallagher, the amount shown for 2017 represents the value of his sign-on bonus, which was subject to full or partial repayment in the event Mr. Gallagher left Mylan prior to the first anniversary of his joining Mylan (except in certain circumstances).

(3)

Represents the grant date fair value of the stock awards granted to the NEO in 2017, 2016 or 2015, as applicable. The grant date fair value of PRSUs for 2017 is based on the target value and is as follows: Ms. Bresch ($4,550,033), Mr. Parks ($900,031), Mr. Malik ($2,800,031), Mr. Gallagher ($1,600,006) and Mr. Mauro ($1,250,040). If the maximum achievement of performance goals had been assumed, the grant date fair value of the PRSUs for 2017, would have been as follows: Ms. Bresch ($6,825,072), Mr. Parks ($1,350,069), Mr. Malik ($4,200,068), Mr. Gallagher ($2,400,028), and Mr. Mauro ($1,875,060). For Mr. Parks, the amount shown for 2016 also includes the grant date fair value of PRSUs granted to him under the One-Time Special Five-Year Performance-Based Realizable Value Incentive Program, which was $1,566,811, which assumes achievement of performance targets at maximum level. For Mr. Gallagher, the amount shown for 2017 also includes the grant date fair value of PRSUs granted to him under the One-Time Special Five-Year Performance-Based Realizable Value Incentive Program, which was $1,546,152, which assumes the achievement of performance targets at maximum level. For information regarding assumptions used in determining the expense of such awards, please refer to Note 11 to the Company’s Consolidated Financial Statements contained in the Original Filing.

(4)

Represents the grant date fair value of the option awards granted to the NEO in 2017, 2016 or 2015, as applicable. For information regarding assumptions used in determining the expense of such awards, please refer to Note 11 to the Company’s Consolidated Financial Statements contained in the Original Filing.

(5)

Represents amounts paid under the Company’s non-equity incentive compensation plan. For a discussion of this plan, see the CD&A set forth above.

 

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(6)

Represents the aggregate change in present value of the applicable NEO’s accumulated benefit under his or her respective RBA. In computing these amounts, we used the same assumptions that were used to determine the expense amounts recognized in our 2017 financial statements. In 2017, the impact of an increase in the applicable discount rates led to a decrease in the present value of accumulated benefits of approximately $198,000 for Ms. Bresch and approximately $110,000 for Mr. Malik. For further information concerning the RBAs, see the Pension Benefits for 2017 Table set forth below and the section below entitled “Retirement Benefit Agreements,” beginning on page 42 of this Amendment.

(7)

Amounts shown in this column are detailed in the following chart:

 

    Fiscal
Year
    Use of
Company-
Provided
Automobile
($)(a)
    Personal
Use of
Company
Aircraft

($)(b)
    Lodging
Reimbursement
($)(c)
    Expatriate
Benefits
($)(d)
    401(k) and
Profit Sharing
Plan
Matching and
Profit Sharing
Contribution
($)(e)
    Restoration
Plan
Contribution
($)(f)
    Transaction-
Related Excise
Tax
Reimbursement
($)(g)
    Other
($)(h)
 

Heather Bresch

    2017       20,736       158,038                   24,420       165,331             25,827  
    2016       20,507       184,020                   29,419       302,790             160,564  
      2015       19,200       310,312                   28,792       218,454       5,828,995       26,277  

Kenneth S. Parks

    2017       19,766       10,440                   18,115       73,440             8,311  
      2016       10,944                         6,908                   646  

Rajiv Malik

    2017       30,170       28,896             691,967       24,300       109,469             7,275  
    2016       30,725       80,295             247,421       10,600                   22,332  
      2015       23,392       29,557       50,000       6,333,891                   4,859,071       115,859  

Daniel M. Gallagher

    2017       14,400                         18,039       29,700             819  

Anthony Mauro

    2017       19,200       2,595                   24,238       123,285             22,603  
    2016       19,200       608                   28,335       170,589             40,370  
    2015       19,200                         28,800       131,918       1,020,722       19,443  

 

  (a)

In the case of Ms. Bresch and Messrs. Parks, Gallagher and Mauro, these numbers represent a vehicle allowance and ancillary expenses associated with such vehicle. In the case of Mr. Malik, this number represents the cost of a vehicle (based on lease value), insurance and ancillary expenses associated with such vehicle.

  (b)

Amounts disclosed represent the actual aggregate incremental costs incurred by Mylan associated with the personal use of the Company’s aircraft. Incremental costs include annual average hourly fuel and maintenance costs, landing and parking fees, customs and handling charges, passenger catering and ground transportation, crew travel expenses, away from home hanger fees, and other trip-related variable costs. Because the aircrafts are used primarily for business travel, incremental costs exclude fixed costs that do not change based on usage, such as pilots’ salaries, aircraft purchase or lease costs, home-base hangar costs and certain maintenance fees. Aggregate incremental cost as so determined with respect to personal deadhead flights is allocable to the NEO. In certain instances where there are both business and personal passengers, the incremental costs per hour are pro-rated.

  (c)

Beginning in 2016, Mr. Malik was no longer eligible to receive a housing allowance or home-leave benefit, both of which he received in prior years.

  (d)

Expatriate benefits for Mr. Malik represent income taxes paid by Mylan in connection with Mr. Malik’s expatriate assignment to the United States from India effective January 1, 2012. Specifically, Mr. Malik is responsible for, and has continued to pay taxes equal to those he would have been obligated to pay had he maintained his principal work location and residence in India rather than having transferred, at Mylan’s request, to the United States, while Mylan generally has responsibility for all additional taxes, including Mr. Malik’s tax obligations on the imputed income associated with Mylan’s payment of taxes on his behalf. Beginning in 2016, Mr. Malik no longer receives a tax equalization benefit in respect of his LTI awards. Amounts shown for 2017, 2016 and 2015 for Mr. Malik are net of Mylan’s estimated tax refunds for each year. Estimated refunds were $15,685 for 2017, and approximately $0.2 million for 2016 and approximately $1.1 million for 2015.

  (e)

For 2017, amounts disclosed included, for Ms. Bresch and Messrs. Parks, Malik, Gallagher and Mauro, a matching contribution of $10,920, $4,615, $10,800, $4,539 and $10,738, respectively, and a profit sharing contribution received in March 2018 in respect of fiscal year 2017 equal to $13,500 for each NEO. In March 2017, the Company made a profit sharing contribution to each NEO, other than Mr. Gallagher, in respect of fiscal year 2016 equal to $13,250. For 2016, amounts disclosed included, for Ms. Bresch and Messrs. Parks, Malik and Mauro, a matching contribution of $10,869, $6,908, $10,600 and $9,785, respectively, and, for Ms. Bresch and Mr. Mauro, a profit sharing contribution from the Company of $18,550. For 2015, amounts disclosed for Ms. Bresch included a matching contribution of $10,592, and a profit sharing contribution from the Company of $18,200. For 2015, amounts disclosed for Mr. Mauro included a matching contribution of $10,600, and a profit sharing contribution from the Company of $18,200. Mr. Malik became eligible to participate in Mylan’s U.S. retirement plans in 2016.

  (f)

For 2017, amounts disclosed included, for Messrs. Parks, Gallagher and Mauro, a matching contribution under the Restoration Plan of $20,509, $13,200 and $54,793, respectively, and a profit sharing contribution under the Restoration Plan received in March 2018 in respect of fiscal year 2017 for each of Ms. Bresch and Messrs. Parks, Malik, Gallagher and Mauro equal to $165,331, $52,931, $109,469, $16,500 and $68,492, respectively. In March 2017, the Company made a profit sharing contribution to each of Ms. Bresch and Messrs. Parks, Malik and Mauro under the Restoration Plan in respect of fiscal year 2016 equal to $246,750, $4,058, $161,750 and $93,740, respectively. Ms. Bresch is no longer eligible to receive a matching contribution under the Restoration Plan. Although he became eligible to participate in Mylan’s U.S. retirement plans in 2016, Mr. Malik is not eligible to receive a matching contribution under the Restoration Plan. See page 41 of this Amendment for further information regarding Restoration Plan contributions.

 

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  (g)

Represents the one-time tax reimbursement payment with respect to the excise tax under Section 4985 of the Code that was imposed in connection with the EPD Transaction on the value of certain LTI awards held by the directors and NEOs. Such payment ensured that, on a net after-tax basis, the NEO would be in the same position as if such excise tax had not been imposed. See the Proxy Statement for Mylan’s 2016 Annual Meeting of Shareholders for further discussion of the excise tax imposed in connection with the EPD Transaction and this one-time payment.

  (h)

Represents events for all NEOs other than Mr. Gallagher; life insurance retention plan premium for Ms. Bresch and Mr. Mauro; long-term disability premiums; a health insurance premium for Mr. Malik; for 2016 and 2015, only, contributions to the Provident Fund, a statutory plan in India, for Mr. Malik; for 2016 only, matching of certain charitable contributions for Ms. Bresch and Messrs. Malik and Mauro; for 2016 only, certain personal security services for Ms. Bresch; and tax preparation services related to U.K. tax returns for all NEOs other than Mr. Gallagher.

 

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Grants of Plan-Based Awards for 2017

 

 

The following table summarizes grants of plan-based awards made to each NEO during 2017.

 

Estimated Future Payments Under

Non-Equity Incentive Plan Awards(1)

 

Estimated Future Payments Under

Equity Incentive Plan Awards(2)

Name

 

Grant
Date

 

Approval
Date

 

Threshold
($)

 

Target

($)

 

Maximum
($)

 

Threshold
(#)

 

Target
(#)

 

Maximum
(#)

 

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units

(#)(3)

 

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(4)

 

Exercise
or Base
Price of
Option
Awards
($/Sh)

 

Grant Date
Fair Value
of Stock
and Option
Awards
($)(5)

Heather Bresch

     

975,000

 

1,950,000

 

3,900,000

 

 

 

 

 

 

 

  3/3/2017   2/22/2017         50,355   100,709   151,064         4,550,033
  3/3/2017   2/22/2017               60,425       2,730,001
    3/3/2017   2/22/2017                 106,558   45.18   1,820,011

Kenneth S. Parks

      393,875   787,750   1,575,500              
  3/3/2017   2/22/2017         9,961   19,921   29,882         900,031
  3/3/2017   2/22/2017               11,953       540,037
    3/3/2017   2/22/2017                 21,078   45.18   360,012

Rajiv Malik

      625,000   1,250,000   2,500,000              
  3/3/2017   2/22/2017         30,988   61,975   92,963         2,800,031
  3/3/2017   2/22/2017               37,185       1,680,018
    3/3/2017   2/22/2017                 65,574   45.18   1,120,004

Daniel M. Gallagher

      460,000   920,000   1,840,000              
  5/2/2017   5/2/2017         20,253   40,507           1,546,152
  5/12/2017   5/2/2017         20,545   41,089   61,634         1,600,006
  5/2/2017   5/2/2017               17,030       650,035
  5/12/2017   5/2/2017               24,654       960,027
    5/12/2017   5/2/2017                       49,247   38.94   640,009

Anthony Mauro

      402,500   805,000   1,610,000              
  3/3/2017   2/22/2017         13,834   27,668   41,502         1,250,040
  3/3/2017   2/22/2017               16,601       750,033
  3/3/2017   2/22/2017  

              29,275   45.18   500,017

 

(1)

The performance goals under the annual incentive compensation program applicable to the NEOs during 2017 are described above in the CD&A.

(2)

Consists of PRSUs awarded under the Amended 2003 Plan. The vesting terms applicable to these awards are described above in the CD&A and below following the Outstanding Equity Awards at the End of 2017 table.

(3)

Consists of RSUs awarded under the Amended 2003 Plan. The vesting terms applicable to these awards are described below following the Outstanding Equity Awards at the End of 2017 table.

(4)

Represents the grant of 10-year stock options awarded under the Amended 2003 Plan. Stock options were granted with an exercise price equal to the closing price of the Company’s ordinary shares on the date of grant. The vesting terms applicable to these awards are described below following the Outstanding Equity Awards at the End of 2017 table.

(5)

Represents the grant date fair value of the specific award granted to the NEO. For information regarding assumptions used in determining such value, please refer to Note 11 to the Company’s Consolidated Financial Statements contained in the Original Filing.

 

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Outstanding Equity Awards at the End of 2017

 

 

The following table sets forth information concerning all of the outstanding LTI awards held by each NEO as of December 31, 2017.

 

Option Awards

    Stock Awards  

Name

  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable(1)
    Option
Exercise
Price

($)
    Option
Expiration
Date
    Number of
Shares or
Units of
Stock That
Have Not
Vested (#)(2)
    Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(3)
    Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
(#)
    Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
($)(3)
 

Heather Bresch

    14,196             21.13       3/3/2020                          
    4,413             22.66       3/2/2021                          
    4,266             23.44       2/22/2022                          
    3,236             30.90       3/6/2023                          
    65,502             55.84       3/5/2024                      
    45,106       22,553       50.66       11/17/2025                          
    28,986       57,971       46.27       2/17/2026                          
          106,558       45.18       3/3/2027                          
                                        378,071 (4)      15,996,184  
                            8,554       361,920       76,984 (5)      3,257,193  
                            48,333       2,044,969       101,146 (5)      4,279,487  
                              60,425       2,556,582       100,709 (5)      4,260,998  

Kenneth S. Parks

    5,517       11,032       46.52       6/6/2026                          
          21,078       45.18       3/3/2027                          
                            4,299       181,891       19,347 (5)      818,572  
                                        40,507 (4)      1,713,851  
                              11,953       505,731       19,921 (5)      842,858  

Rajiv Malik

    34,389             55.84       3/5/2024                          
    27,758       13,879       50.66       11/17/2025                          
    16,723       33,445       46.27       2/17/2026                          
          65,574       45.18       3/3/2027                          
                                        324,061 (4)      13,711,021  
                            5,264       222,720       47,375 (5)      2,004,436  
            28,508       1,206,173       58,354 (5)      2,468,958  
                              37,185       1,573,297       61,975 (5)      2,622,162  

Daniel M. Gallagher

          49,247       38.94       5/12/2027                          
                                        40,507 (4)      1,713,851  
                            24,654       1,043,111       41,089 (5)      1,738,476  
                              17,030       720,539              

Anthony Mauro

    4,757             22.66       3/2/2021                          
    4,266             23.44       2/22/2022                          
    3,236             30.90       3/6/2023                          
    12,009             55.84       3/5/2024                          
    10,844       5,421       50.66       11/17/2025                          
    9,105       18,209       46.27       2/17/2026                          
          29,275       45.18       3/3/2027                          
                                        67,512 (4)      2,856,433  
                            2,056       86,989       18,506 (5)      782,989  
            12,545       530,779       31,771 (5)      1,344,231  
                            16,601       702,388       27,668 (5)      1,170,633  

 

(1)

Vesting dates applicable to unvested stock options are as follows, in each case generally subject to continued employment with Mylan: on March 4, 2018, the unvested options at the $50.66 exercise price for Ms. Bresch and Messrs. Malik and Mauro vested; on

 

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February 17, 2018, one-half of the unvested options at the $46.27 exercise price for Ms. Bresch and Messrs. Malik and Mauro vested and one-half of the unvested options at the $46.52 exercise price for Mr. Parks vested, and, in each case, the remaining one-half will vest on February 17, 2019; the unvested options at the $45.18 exercise price for Ms. Bresch and Messrs. Malik, Mauro and Parks and at the $38.94 exercise price for Mr. Gallagher will vest in three equal annual installments beginning on March 3, 2018. Subject to applicable employment agreement provisions, following termination of employment, vested stock options will generally remain exercisable for 30 days following termination, except that (i) in the case of termination because of disability, 100% of options become vested and vested options will remain exercisable for two years following termination; (ii) in the case of a termination due to a reduction in force, vested options will remain exercisable for one year following termination; (iii) in the case of death, including within two years following termination because of disability, or, in the case of options granted prior to January 1, 2017, retirement, 100% of options become vested and vested options will remain exercisable for the remainder of the original term; and (iv) in the case of an involuntary termination without cause or a voluntary resignation for good reason that occurs within two years following a change in control, 100% of options become vested (double-trigger awards). In the case of options granted in 2013, 2014, 2015, 2016 or 2017 to Ms. Bresch, and in 2014, 2015, 2016 or 2017 to Mr. Malik, and, solely with respect to options granted to Mr. Gallagher in 2017, following termination of employment without “cause” or resignation for “good reason” as defined in the applicable employment agreement, 100% of options become vested and vested options will remain exercisable for one year following termination.

(2)

On March 4, 2018, 8,554 RSUs for Ms. Bresch, 5,264 RSUs for Mr. Malik and 2,056 RSUs for Mr. Mauro vested. Of the 48,333 RSUs for Ms. Bresch, 11,239 vested on February 17, 2018 and 37,094 will vest on February 17, 2019, of the 28,508 RSUs for Mr. Malik, 6,484 vested on February 17, 2018 and 22,024 will vest on February 17, 2019, and of the 12,545 RSUs for Mr. Mauro, 3,530 vested on February 17, 2018 and 9,015 will vest on February 17, 2019. 60,425 RSUs for Ms. Bresch, 11,953 RSUs for Mr. Parks, 37,185 RSUs for Mr. Malik, 24,654 RSUs for Mr. Gallagher and 16,601 RSUs for Mr. Mauro vest in three equal annual installments beginning on March 3, 2018. 17,030 RSUs for Mr. Gallagher, which represent the Gallagher Sign-On RSUs, vest 50% on April 1, 2019 and 50% on April 1, 2020. In accordance with their terms, all of these awards would vest upon an involuntary termination without cause or a voluntary resignation for good reason that occurs within two years following a change in control (double-trigger awards) or upon the executive’s death or disability. In the case of awards granted to Ms. Bresch and Messrs. Malik and Gallagher (for Mr. Gallagher, solely with respect to RSUs granted in 2017), the awards would also vest upon the executive’s termination without “cause,” or resignation for “good reason” as defined in the applicable employment agreement.

(3)

The market value of restricted ordinary shares, RSUs and PRSUs was calculated using the closing price of the Company’s ordinary shares as of December 31, 2017, $42.31.

(4)

These awards consist of restricted ordinary shares under the One-Time Special Five-Year Performance-Based Realizable Value Incentive Program. The restricted ordinary shares remain subject to forfeiture and additional vesting conditions, including achievement of adjusted EPS of $6.00 for full vesting and continued service through December 31, 2018, or, in the case of Mr. Gallagher only, April 1, 2020, and the other terms and conditions of the program. The One-Time Special Five-Year Performance-Based Realizable Value Incentive Program is described in detail in the Proxy Statement for Mylan Inc.’s 2014 Annual Meeting of Shareholders. In accordance with their terms, the restricted ordinary shares would vest upon a change in control. In the case of awards granted to Ms. Bresch and Mr. Malik, the restricted ordinary shares would also vest upon the executive’s termination due to death or disability or without “cause” or resignation for “good reason” as defined in the applicable employment agreement, subject to the achievement of the applicable performance goals.

(5)

The vesting of these PRSUs is subject to the attainment of performance goals. On March 4, 2018, Ms. Bresch vested in 57,738 ordinary shares or 75% of the target 76,984 PRSUs, Mr. Malik vested in 35,532 ordinary shares or 75% of the target 47,375 PRSUs and Mr. Mauro vested in 13,680 ordinary shares or 75% of the target 18,506 PRSUs. On February 17, 2019, Ms. Bresch is expected to vest in PRSUs relating to 101,146 ordinary shares, Mr. Parks is expected to vest in PRSUs relating to 19,347 ordinary shares, Mr. Malik is expected to vest in PRSUs relating to 58,354 ordinary shares and Mr. Mauro is expected to vest in PRSUs relating to 31,771 ordinary shares. On March 3, 2020, Ms. Bresch is expected to vest in PRSUs relating to 100,709 ordinary shares, Mr. Parks is expected to vest in PRSUs relating to 19,921 ordinary shares, Mr. Malik is expected to vest in PRSUs relating to 61,975 ordinary shares, Mr. Gallagher is expected to vest in PRSUs relating to 41,089 ordinary shares and Mr. Mauro is expected to vest in PRSUs relating to 27,668 ordinary shares. The PRSUs are expected to vest upon the earliest to occur of (i) February 17, 2019 or March 3, 2020, as applicable, provided that the performance goals have been satisfied, (ii) an involuntary termination without cause or a voluntary resignation for good reason within two years following a change in control, (iii) the executive’s death or disability and (iv) in the case of awards granted to Ms. Bresch and Messrs. Malik and Gallagher (for Mr. Gallagher, solely with respect to PRSUs granted in 2017), the executive’s termination without “cause,” or resignation for “good reason” as defined in the applicable employment agreement. Any outstanding ordinary shares subject to the award that remain unvested as of February 17, 2019, or March 3, 2020, as applicable, will be forfeited.

 

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Option Exercises and Stock Vested for 2017

 

 

The option awards and ordinary share awards reflected in the table below were exercised or became vested for the NEOs during 2017.

 

Option Awards

           Stock Awards  

Name

  Number of Shares
Acquired on Exercise
(#)
    Value Realized
on Exercise ($)
    

 

    Number of Shares
Acquired on Vesting
(#)
    Value Realized
on Vesting ($)
 

Heather Bresch

                   19,793       859,070  

Kenneth S. Parks

                   2,150       90,408  

Rajiv Malik

                   11,748       510,480  

Daniel M. Gallagher

                          

Anthony Mauro

                         5,587       241,369  

Pension Benefits for 2017

 

 

The following table summarizes the benefits accrued by Ms. Bresch and Mr. Malik as of December 31, 2017, under the RBA (or Executive Plan, in the case of Mr. Malik) in effect during 2017. The Company does not sponsor any other defined benefit pension programs covering the NEOs.

 

Name

 

  

Plan Name(1)

 

  

 

Number

of Years
of Credited
Service

(#)

 

    

 

Present
Value of
Accumulated
Benefit

($)(2)

 

    

 

Payments
During
Last Fiscal
Year

($)

 

 

 

Heather Bresch

 

  

 

Retirement Benefit Agreement

 

  

 

 

 

 

13

 

 

 

 

  

 

 

 

 

6,735,866

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Kenneth S. Parks

 

  

 

N/A

 

  

 

 

 

 

N/A

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Rajiv Malik

 

  

 

The Executive Plan for Rajiv Malik(3)

 

  

 

 

 

 

N/A

 

 

 

 

  

 

 

 

 

360,874

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Rajiv Malik

 

  

 

Retirement Benefit Agreement

 

  

 

 

 

 

11

 

 

 

 

  

 

 

 

 

4,191,581

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Daniel M. Gallagher

 

  

 

N/A

 

  

 

 

 

 

N/A

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

Anthony Mauro

 

  

 

N/A

 

  

 

 

 

 

N/A

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

(1)

Messrs. Parks, Gallagher and Mauro are not party to a defined benefit pension arrangement.

(2)

See page 45 of this Amendment for further information on the value of the accumulated pension benefit.

(3)

This is a deferred compensation plan established for the benefit of Mr. Malik. The Company is no longer contributing to this plan.

Nonqualified Deferred Compensation

 

 

The following table sets forth information relating to the Restoration Plan for 2017. There was no NEO participation in the Mylan Executive Income Deferral Plan in 2017.

 

  Name

 

  

Aggregate
Balance at
Last FYE

($)

 

    

Executive
Contributions
in Last FY

($)

 

    

 

Company Profit
Sharing and
Match Contributions
in Last FY

($)

 

    

 

Aggregate
Earnings
(Loss)
in
Last FY

($)(1)

 

    

Aggregate
Withdrawals/
Distributions
($)

 

    

Aggregate
Balance at
FYE

($)

 

 

 

Heather Bresch

 

  

 

 

 

 

3,022,352

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

246,750

 

 

 

 

  

 

 

 

 

516,098

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

3,785,200

 

 

 

 

 

Kenneth S. Parks

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

20,509

 

 

 

 

  

 

 

 

 

24,567

 

 

 

 

  

 

 

 

 

3,000

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

48,076

 

 

 

 

 

Rajiv Malik

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

161,750

 

 

 

 

  

 

 

 

 

13,719

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

175,469

 

 

 

 

 

Daniel M. Gallagher

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

13,200

 

 

 

 

  

 

 

 

 

13,200

 

 

 

 

  

 

 

 

 

994

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

27,394

 

 

 

 

 

Anthony Mauro

 

  

 

 

 

 

1,338,426

 

 

 

 

  

 

 

 

 

54,793

 

 

 

 

  

 

 

 

 

148,534

 

 

 

 

  

 

 

 

 

184,247

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

1,726,000

 

 

 

 

(1)

These amounts include earnings (losses), dividends and interest provided on account balances, including the change in value of the underlying investments in which our NEOs are deemed to be invested. These amounts are not reported in the Summary Compensation Table.

 

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Retirement Programs and Employment Agreements

 

 

Restoration Plan

The Restoration Plan permits employees (including NEOs) who earn compensation in excess of the limits imposed by Section 401(a)(17) of the Code to (i) defer a portion of base salary and bonus compensation, (ii) be credited with a Company matching contribution in respect of deferrals under the Restoration Plan and (iii) be credited with Company non-elective contributions (to the extent so made by Mylan), in each case, to the extent that participants otherwise would be able to defer or be credited with such amounts, as applicable, under Mylan’s 401(k) and Profit Sharing Plan if not for the limits on contributions and deferrals imposed by the Code. Company matching contributions immediately vest and Company profit sharing contributions are subject to an initial three-year vesting period. Upon a change in control (as defined in the Restoration Plan), a participant will become 100% vested in any unvested portion of his or her profit sharing contributions. Distributions of a participant’s vested account balance will be made in a lump sum within 60 days following a participant’s separation from service (or such later date as may be required by Section 409A of the Code).

Ms. Bresch and Mr. Malik are no longer eligible to receive matching contributions under the Restoration Plan because they are party to RBAs with Mylan Inc.

Retirement Benefit Agreements

Mylan Inc. entered into RBAs with Ms. Bresch and Mr. Malik in August 2009. Pursuant to the RBAs of Ms. Bresch and Mr. Malik, upon retirement following completion of 10 or more years of service, each executive would be entitled to receive a lump sum retirement benefit equal to the present value of an annual payment of 20% and 15%, respectively, of the sum of their base salary and target annual bonus on the date of retirement, for a period of 15 years, discounted to the executive’s current age from age 55 (“retirement benefit”). Having completed at least 10 years of continuous service as an executive, Ms. Bresch and Mr. Malik are each 100% vested in their retirement benefit under the RBAs.

Each of the RBAs provide that the executive is prohibited for one year following termination from engaging in activities that are competitive with the Company’s activities, provided that this provision will have no effect if, after the occurrence of a change in control, Mylan refuses, fails to make or disputes any payments to be made to the executive under the RBA, whether or not the executive actually receives payments under the RBA.

Each of the RBAs provide that during the five-year period following termination, except for any termination occurring following a change in control, Mylan may request that the executive provide consulting services for the Company, which services will be reasonable in scope, duration and frequency, and not to exceed 20 hours per month. The hourly rate for such consulting services will be determined by the parties at the time, but may not be less than $500 per hour, payable monthly. The executive would also be entitled to reimbursement of all out-of-pocket expenses incurred in the course of providing these services.

Information concerning the estimated value of benefits under Ms. Bresch’s and Mr. Malik’s RBAs assuming retirement as of December 31, 2017, is in the section below entitled “Potential Payments Upon Termination or Change in Control,” beginning on page 43 of this Amendment.

In 2007, Mylan established a nonqualified deferred compensation plan for Mr. Malik, who was then living outside the U.S. and therefore unable to participate in Mylan’s 401(k) and Profit Sharing Plan. Although Mylan no longer contributes to the account, the plan account will be distributed to Mr. Malik upon termination of the plan, the termination of Mr. Malik’s employment or other qualifying distribution events, such as his retirement, disability or death.

 

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Employment Agreements

Mylan Inc. was party to employment agreements with each of the NEOs in 2017. The information below is based on the employment agreements in effect as of December 31, 2017. For a further description of the employment agreement with Mr. Gallagher, see “Other Compensation Matters and Considerations – Employment Agreements” on page 31 of this Amendment.

Mylan Inc. entered into amended and restated employment agreements with Ms. Bresch and Mr. Malik in February 2014, each effective January 1, 2014 (through December 31, 2018, unless earlier terminated or extended in accordance with its terms); entered into an employment agreement with Mr. Parks in April 2016, effective June 6, 2016; entered into an employment agreement with Mr. Gallagher in March 2017, effective April 1, 2017; and entered into an amended and restated employment agreement with Mr. Mauro in October 2011, effective January 1, 2012, which was further amended on April 10, 2015 and January 8, 2016. Each of these agreements provides for the payment of a minimum base salary, as of December 31, 2017, of $1,300,000; $685,000; $1,000,000; $800,000 and $700,000, with respect to Ms. Bresch and Messrs. Parks, Malik, Gallagher and Mauro, respectively, subject to reduction only in the event of similar decreases among Mylan’s executives. Each employment agreement also provides for the executive’s eligibility to receive fringe benefits of employment as are customarily provided to senior executives of Mylan.

The agreements provide for a target bonus equal to 150%, 115%, 125%, 115% and 115% of base salary with respect to Ms. Bresch and Messrs. Parks, Malik, Gallagher and Mauro, respectively. Each of the agreements also provide that throughout the term of the agreement and for a period of one year following the executive’s termination of employment for any reason, the executive may not engage in activities that are competitive with the Company’s activities and may not solicit the Company’s customers or employees.

For a description of the termination provisions under these agreements for Ms. Bresch and Messrs. Parks, Malik, Gallagher and Mauro, please see immediately below, at “Potential Payments Upon Termination or Change in Control.”

Potential Payments Upon Termination or Change in Control

 

 

The following discussion summarizes the termination and change in control-related provisions of the employment agreements, RBAs and Transition and Succession Agreements entered into between Mylan Inc. and the applicable NEO and in effect as of December 31, 2017, and termination of employment and change in control provisions under the Amended 2003 Plan. In the discussions that follow, all amounts payable upon termination or change in control that include the value of LTI awards, include the value, if any, attributable to awards granted under the One-Time Special Five-Year Performance-Based Realizable Value Incentive Program.

Termination Under Employment Agreements

Ms. Bresch. Under Ms. Bresch’s employment agreement in effect as of December 31, 2017, if Ms. Bresch were to resign for “good reason” or be terminated by Mylan without “cause” (each as defined in her employment agreement in effect as of December 31, 2017), or if her employment had been terminated due to death or disability, in each case, prior to a change in control, she would have been entitled to a lump sum payment equal to two times her annual base salary, two years of health benefits at Mylan’s cost and a pro rata bonus based upon the actual bonus she would have been entitled to receive for the fiscal year in which the termination occurs. Such payments and benefits would have been reduced by Company-provided death or disability benefits in the event of termination of Ms. Bresch’s employment due to death or disability. Pursuant to the applicable individual award agreements and Ms. Bresch’s employment agreement, if Ms. Bresch’s employment had been terminated without cause, for good reason or due to death or disability, all outstanding LTI awards granted to Ms. Bresch, including awards granted under the One-Time Special Five-Year Performance-Based Realizable Value Incentive Program, would have fully vested (with any performance-based equity awards deemed achieved at “target” level performance). Pursuant to the terms of Ms. Bresch’s employment agreement in effect as of December 31, 2017,

 

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if Mylan does not offer to extend or renew the term on substantially similar terms and conditions, she would be entitled to the same payments and benefits as if she had been terminated without cause. If Mylan offers to renew Ms. Bresch’s term of employment on substantially similar terms and conditions, and Ms. Bresch rejects such offer, she would be entitled to a lump sum payment equal to her annual base salary and one year of health benefits at Mylan’s cost.

If Ms. Bresch’s employment had been terminated on December 31, 2017, by Mylan without cause or by Ms. Bresch for good reason prior to a change in control or because of Ms. Bresch’s death or disability, she would have been entitled to cash severance and other benefits under her employment agreement and LTI award agreements having an estimated aggregate value of $37,338,204 (with any performance-based equity awards deemed achieved at “target” level performance).

Mr. Parks. Under Mr. Parks’ employment agreement as in effect on December 31, 2017, if Mr. Parks were to resign for “good reason” or be terminated by Mylan without “cause” (each as defined in his employment agreement in effect as of December 31, 2017), or if his employment had been terminated due to death or disability, in each case, prior to a change in control, he would have been entitled to a lump sum payment equal to his annual base salary, 12 months of health benefits at Mylan’s cost and a pro rata bonus equal to the bonus he would have been entitled to receive for the fiscal year in which the termination occurs. Such payments and benefits would have been reduced by Company-provided death or disability benefits in the event of termination of Mr. Parks’ employment due to death or disability.

If Mr. Parks’ employment had been terminated on December 31, 2017, by Mylan without cause or by Mr. Parks for good reason prior to a change in control, he would have been entitled to cash severance and other benefits under his employment agreement having an estimated aggregate value of $1,492,500. If Mr. Parks’ employment with Mylan had been terminated on December 31, 2017, because of his death or disability, he would have been entitled to cash severance and other benefits under his employment agreement and LTI award agreements in effect on such date having an aggregate value of $3,841,552 (with any performance-based equity awards deemed achieved at “target” level performance).

Mr. Malik. Under Mr. Malik’s employment agreement in effect as of December 31, 2017, if Mr. Malik were to resign for “good reason” or be terminated by Mylan without “cause” (each as defined in his employment agreement in effect as of December 31, 2017), or if his employment had been terminated due to death or disability, in each case, prior to a change in control, he would have been entitled to a lump sum payment equal to one-and-one-half times his annual base salary, 18 months of health benefits at Mylan’s cost and a pro rata bonus based upon the actual bonus he would have been entitled to receive for the fiscal year in which the termination occurs. Such payments and benefits would have been reduced by Company-provided death or disability benefits in the event of termination of Mr. Malik’s employment due to death or disability. Pursuant to the applicable individual award agreements and Mr. Malik’s employment agreement, if Mr. Malik’s employment had been terminated without cause, for good reason or due to death or disability, all outstanding LTI awards granted to Mr. Malik, including his awards granted under the One-Time Special Five-Year Performance-Based Realizable Value Incentive Program, would have fully vested (with any performance-based equity awards deemed achieved at “target” level performance). Pursuant to the terms of Mr. Malik’s employment agreement in effect as of December 31, 2017, if Mylan does not offer to extend or renew the term on substantially similar terms and conditions, he would be entitled to the same payments and benefits as if he had been terminated without cause. If Mylan offers to renew Mr. Malik’s term of employment on substantially similar terms and conditions, and Mr. Malik rejects such offer, he would be entitled to a lump sum payment equal to his annual base salary and one year of health benefits at Mylan’s cost.

If Mr. Malik’s employment had been terminated on December 31, 2017, by Mylan without cause or by Mr. Malik for good reason prior to a change in