UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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

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þ		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to Rule 14a-12

MYLAN INC.

(Name of Registrant as Specified In Its Charter)

 

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

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March 27, 2009

 

Dear Shareholder:

 

You are cordially invited to attend the 2009 Annual Meeting of Shareholders of Mylan Inc., which will be held at 9:30 a.m. (Pacific time) on May 7, 2009, at the JW Marriott, 500 Post Street, in San Francisco, California. Details about the business to be conducted at the Annual Meeting are described in the accompanying Notice of Annual Meeting and Proxy Statement.

 

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

 

We look forward to seeing you at the Annual Meeting.

 

Sincerely,

 

 

Robert J. Coury
Vice Chairman and Chief Executive Officer

 

 

1500 Corporate Drive

Canonsburg, PA 15317

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

The 2009 Annual Meeting of Shareholders of Mylan Inc. (the “Company”) will be held at the JW Marriott, 500 Post Street, in San Francisco, California on Thursday, May 7, 2009, at 9:30 a.m. (Pacific time), for the following purposes:

 

 

Shareholders of record of the Company’s common stock at the close of business on March 20, 2009 are entitled to notice of, and to vote at, the meeting and any adjournment or postponement thereof. We will make available at the Annual Meeting a complete list of shareholders entitled to vote at the Annual Meeting.

 

By order of the Board of Directors,

 

 

Joseph F. Haggerty
Corporate Secretary

 

 

March 27, 2009

 

 

 

 

TABLE OF CONTENTS

 

MYLAN INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 7, 2009

 

We are furnishing this Proxy Statement to shareholders of Mylan Inc., a Pennsylvania corporation (“Mylan” or the “Company”), in connection with the solicitation of proxies by our Board of Directors (the “Board”) for use at our 2009 Annual Meeting of Shareholders (the “Annual Meeting”) and at any adjournment or postponement thereof. The Annual Meeting is scheduled to be held on Thursday, May 7, 2009, at 9:30 a.m. (Pacific time), at the JW Marriott, 500 Post Street, in San Francisco, California, for the purposes set forth in the accompanying Notice of Annual Meeting. We are mailing this Proxy Statement and the enclosed proxy card to shareholders on or about March 31, 2009.

 

Our Board of Directors has fixed the close of business on March 20, 2009 (the “Record Date”) as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof. As of the close of business on the Record Date, there were 304,894,578 shares of our common stock, par value $0.50 per share (“Common Stock”), outstanding and entitled to vote. Each share of Common Stock is entitled to one vote on each matter properly brought before the Annual Meeting. Shareholders do not have cumulative voting rights.

 

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

 

Shareholders may cast their votes at the meeting, over the Internet, by submitting a printed proxy card, or by calling a toll-free number.

 

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

 

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

 

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

 

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

 

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

vote over the Internet or by telephone, or by voting in person at the Annual Meeting. The contact information for the Company’s Secretary is stated on page 37 under “Communications With Directors.”

 

Election of Directors

 

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

 

Amendment of Articles of Incorporation, Amendment of the 2003 LTIP, Amendment of Bylaws and Ratification of Selection of Deloitte & Touche LLP as Our Independent Registered Public Accounting Firm

 

The amendment of each of our Articles of Incorporation, 2003 Long-Term Incentive Plan and Bylaws and the ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2009 each will require the affirmative vote of a majority of the votes cast by all shareholders entitled to vote. Abstentions and broker non-votes, if any, will have no effect on the outcome of the vote on any of these proposals. If the selection of Deloitte & Touche LLP is not ratified by our shareholders, the audit committee will reconsider its recommendation.

 

In accordance with the notices we previously sent to street name shareholders who share a single address, we are sending only one 2008 Annual Report and proxy statement to that address unless we have received contrary instructions from any shareholder at that address. This practice, known as “householding,” is designed to reduce our printing and postage costs. However, if any shareholder residing at such an address wishes to receive a separate 2008 Annual Report and Proxy Statement, we will promptly deliver the requested documents upon written or oral request to Mylan’s Corporate Secretary. If you are receiving multiple copies of our 2008 Annual Report and Proxy Statement, you can request householding by contacting Mylan’s Corporate Secretary. The contact information for the Company’s Secretary is stated on page 37 under “Communications With Directors.”

 

Mylan will bear the entire cost of this solicitation, including the preparation, assembly, printing and mailing of this Proxy Statement and any additional materials furnished by our Board of Directors to our shareholders. Proxies may be solicited without additional compensation by directors, officers and employees of Mylan and its subsidiaries. Copies of solicitation material will be furnished to brokerage firms, banks and other nominees holding shares in their names that are beneficially owned by others so that they may forward this solicitation material to these beneficial owners. If asked, we will reimburse these persons for their reasonable expenses in forwarding the solicitation material to the beneficial owners. The original solicitation of proxies by mail may be supplemented by telephone, telegram, facsimile, Internet and personal solicitation by our directors, officers or other regular employees. In addition, the Company has retained Morrow & Co., LLC to assist in soliciting proxies at a cost of approximately $9,500 plus expenses.

 

In October 2007, we changed our fiscal year end from March 31 to December 31. As a result, certain information in this Proxy Statement is presented for the nine-month period from April 1, 2007 to December 31, 2007, which is referred to in this Proxy Statement as the 2007 Transitional Period.

 

Mylan’s Board of Directors currently consists of ten members. However, the Board has approved a decrease in the number of directors constituting the full Board to nine, effective as of the date of the Annual Meeting, because

N. Prasad has decided not to seek re-election to the Board. All nominees listed below have previously been elected as directors by shareholders. Our directors are elected to serve for a one-year term and until his or her successor is duly elected and qualified. Each of the nine nominees listed below has consented to act as a director of Mylan if elected. If, however, a nominee is unavailable for election, proxy holders will vote for another nominee proposed by the Board or, as an alternative, the Board may reduce the number of directors to be elected at the Annual Meeting.

 

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

 

 

 

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE

“FOR” THE ELECTION OF EACH OF THE NOMINEES NAMED ABOVE.

 

In 2008, our Board met 14 times. In addition to meetings of the Board, directors attended meetings of individual Board committees. In 2008, all of the directors attended at least 75% of the Board meetings and meetings of Board committees of which they were a member, except for Mr. Prasad, who lives overseas, and Mr. Leech. In addition to Board and committee meetings, it is the Company’s policy that directors are expected to attend the Annual Meeting. All members of the Board attended the 2008 Annual Meeting of Shareholders.

 

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

 

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

 

The table below provides 2008 membership and meeting information for our principal Board committees.

 

 

 

C = Chairperson

X = Member

 

Audit Committee and Audit Committee Financial Expert.  The Audit Committee’s responsibilities include the appointment, compensation, retention and oversight of the Company’s independent registered public accounting firm; reviewing with the independent registered public accounting firm the scope of the audit plan and audit fees; and reviewing the Company’s financial statements and related disclosures. All of the members of the Audit Committee are independent directors, as required by and as defined in the audit committee independence standards of the Securities and Exchange Commission (the “SEC”) and the NASDAQ listing standards. The Board has determined that each of the Audit Committee members — Mr. Leech, Mr. Dimick and Mr. Piatt — is an “audit committee financial expert”, as that term is defined in the rules of the SEC. The Board of Directors has determined with regard to Mr. Dimick, who serves on the audit committees of more than three public companies, that such simultaneous service does not impair his ability to effectively serve on our Audit Committee.

 

Compensation Committee.  The Compensation Committee establishes and regularly reviews the Company’s compensation philosophy, strategy, objectives and ethics and oversees and approves the compensation program for the Company’s executive officers. The Compensation Committee plays a very active role, including the regular

review of the Company’s compensation programs against industry practices, the Company’s strategic goals and emerging trends as well as to ensure strong links between executive pay and performance, as well as alignment with shareholder interests. The Compensation Committee also administers the Company’s equity compensation and benefit plans. All of the members of the Compensation Committee are independent directors as defined in the applicable NASDAQ listing standards.

 

Governance and Nominating Committee.  The Governance and Nominating Committee (the “G&N Committee”) is responsible for the nomination of candidates for the Board and the oversight of all aspects of the Company’s corporate governance initiatives. All of the members of the G&N Committee are independent directors as defined in the applicable NASDAQ listing standards.

 

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

 

 

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

 

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

 

Any shareholder recommendation of a proposed candidate must be sent to Mylan’s Corporate Secretary at 1500 Corporate Drive, Canonsburg, Pennsylvania 15317, not later than 120 days prior to the anniversary date of the Company’s most recent annual meeting of shareholders.

 

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

 

Once a person has been identified by the G&N Committee as a potential candidate, the G&N Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the G&N Committee determines that the candidate warrants further consideration, the Chairman or another member of the G&N Committee will contact the person. Generally, if the person expresses a willingness to be considered and to serve on the Board, the G&N Committee will request information from the

candidate, review the candidate’s accomplishments and qualifications, including in light of any other candidates that the G&N Committee might be considering, and conduct one or more interviews with the candidate. In certain instances, G&N Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments. The G&N Committee’s evaluation process does not vary based on whether or not a candidate is recommended by a shareholder.

 

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

 

The Board of Directors has adopted a Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Corporate Controller. The Board of Directors also has adopted Corporate Governance Principles as well as a Code of Business Conduct and Ethics applicable to all directors, officers and employees. Current copies of the Code of Ethics, the Corporate Governance Principles and the Code of Business Conduct and Ethics are posted on the Company’s website at www.mylan.com under the heading “Corporate Governance.” Copies of the Code of Ethics, the Corporate Governance Principles and the Code of Business Conduct and Ethics are also available in print to shareholders upon request, addressed to Mylan’s Corporate Secretary at 1500 Corporate Drive, Canonsburg, Pennsylvania 15317. The Company intends to post any amendments to or waivers from the Code of Ethics on its website.

 

On February 17, 2009, Mylan’s Board of Directors unanimously approved, and recommended that the shareholders of Mylan approve, an amendment to Paragraph 5.A. of Mylan’s Articles of Incorporation, as amended to date (the “Articles”), to increase the number of authorized shares of Mylan’s common stock from 600,000,000 to 1,500,000,000. The proposed amendment would replace Paragraph 5.A. in its entirety as follows:

 

“5.A. The aggregate number of shares which the corporation shall have authority to issue is 1,505,000,000 shares, consisting of 1,500,000,000 shares of common stock, par value $.50 per share (hereinafter referred to as the “common stock”), and 5,000,000 shares of preferred stock, par value $.50 per share.”

 

No increase in the number of authorized shares of Mylan’s preferred stock is proposed at this time. The respective rights and limitations applicable to Mylan’s common stock will remain unchanged under the proposed amendment. Mylan’s common stock has no associated preemptive rights.

 

Of the 600,000,000 currently authorized shares of common stock, as of March 20, 2009, 304,894,578 shares of Mylan’s common stock were issued and outstanding, with an additional 90,487,121 held in treasury. In addition, at March 20, 2009, an aggregate of 27,334,442 shares were underlying outstanding awards under the Company’s equity plans. Additionally, up to 152,785,775 shares will be required in 2010 upon the mandatory conversion of our convertible preferred stock, and we have reserved 133,159,125 shares under warrant agreements related to Mylan’s convertible notes.

 

The Board of Directors believes that the proposed increase in the number of authorized shares of Mylan’s common stock will be beneficial to the Company in a number of ways, including the following:

 

 

 

If the proposed amendment to Mylan’s Articles is approved, Articles of Amendment will be filed promptly with the Secretary of State of the Commonwealth of Pennsylvania. The amendment would be effective upon the date of filing.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT MYLAN’S SHAREHOLDERS VOTE “FOR” THE AMENDMENT TO THE COMPANY’S RESTATED ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF MYLAN COMMON STOCK FROM 600,000,000 TO 1,500,000,000 SHARES. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED FROM SHAREHOLDERS WILL BE VOTED IN FAVOR OF THIS PROPOSAL.

 

The Company’s 2003 Long-Term Incentive Plan (the “2003 Plan” or the “Plan”) was adopted by the Board of Directors in 2003, approved by shareholders on July 25, 2003, and then approved by the shareholders, as amended, on April 25, 2008.

 

Mylan currently has an aggregate of 37,500,000 shares available for issuance under the 2003 Plan. Of those, no more than 5,000,000 shares may be issued as restricted shares, restricted units, performance shares or other stock-based awards (i.e., awards other than stock options and stock appreciation rights) (collectively, “stock-based awards”).

 

The Board of Directors is not seeking approval for an increase in the 37,500,000 shares available for grant under the Plan. Instead, we are requesting that, within that aggregate number of shares, an additional 3,000,000 shares be allocated to the number of shares that may be used for stock-based awards. Shareholder approval is required at this time to increase the maximum number of shares issuable under the 2003 Plan as stock-based awards from 5,000,000 to 8,000,000. As of March 20, 2009, there were 1,223,608 shares remaining available for grant as stock-based awards.

 

The Company believes that increasing the maximum number of shares issuable as stock-based awards from 5,000,000 to 8,000,000 is essential for a number of reasons, including the need for us to retain and continue to appropriately incent executives and other employees after a period of transformational growth. A key component of

the Company’s compensation philosophy is that a mix of stock options and stock-based awards as part of total compensation currently plays a key role in attracting and retaining quality individuals, and the reallocation of the 3,000,000 shares will allow us to act accordingly. In addition, changes in accounting rules since the inception of the Plan have made options somewhat less attractive in terms of their impact on earnings. For example, if the value of the options to the employee is zero, the Company would have recognized compensation expense without any value being transferred to the employee, whereas stock-based awards have value to the employee even if the market price of our common stock declines and, therefore, continue to serve as an effective incentive.

 

The following is a summary of the 2003 Plan. This summary is qualified in its entirety by reference to the complete text of the amended 2003 Plan.

 

Purpose.  The Board of Directors believes that the grant of stock-based and cash-based incentive awards to key employees, consultants, independent contractors, and non-employee directors of Mylan is a vital factor in attracting and retaining effective and capable personnel who contribute to the growth and success of Mylan and in establishing a direct link between the financial interests of these individuals and Mylan shareholders.

 

Duration of the 2003 Plan.  The 2003 Plan became effective in 2003 upon approval by the Board and shareholders, and will remain effective until terminated by the Board of Directors. No incentive stock options may be granted under the 2003 Plan after the tenth anniversary of the effective date, and certain provisions of the 2003 Plan relating to performance-based awards under Section 162(m) of the Internal Revenue Code (“Section 162(m)”), which were set to expire on the fifth anniversary of the effective date of the 2003 Plan, were re-approved by shareholders in 2008.

 

Amendment of the 2003 Plan.  The Board of Directors may amend the 2003 Plan at any time, but no amendment may, without the participant’s consent, materially adversely affect the right of such participant under a previously granted award. In addition, no amendment may, without approval by the shareholders of Mylan, (i) increase the total number of shares of common stock which may be issued under the 2003 Plan; (ii) increase the total number of shares which may be covered by awards to any one participant; or (iii) amend the provision in the 2003 Plan prohibiting the reduction of the exercise price of a stock option without shareholder approval.

 

Shares to be Issued.  Mylan initially reserved 15,000,000 shares, which, was automatically adjusted to 22,500,000 shares as a result of a stock split in 2003, and in 2008 the Company added an additional 15,000,000 shares to the Plan upon approval by the shareholders, in light of the Company’s recent significant growth. Shares subject to expired or forfeited awards once again become available for grant under the 2003 Plan. If shares of common stock are tendered or withheld to pay the exercise price or withholding taxes due upon an option exercise, only the net number of shares issued will count against the number of shares available for issuance under the 2003 Plan. The shares of common stock to be issued or delivered under the 2003 Plan will be authorized and unissued shares or previously issued and outstanding shares of common stock reacquired by Mylan. As stated above, at present no more than 5,000,000 shares may be issued as stock-based awards. If the proposed amendment is approved, a maximum of 8,000,000 shares may be used for such purpose. As of March 20, 2009, there were 19,054,272 shares remaining available for grant of any type of award under the Plan, and, within that amount, 1,223,608 shares were available for grant as stock-based awards.

 

On March 26, 2009, the closing price of the common stock as quoted on NASDAQ was $13.69 per share.

 

Administration.  The 2003 Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”). The Committee (i) determines the employees, consultants, independent contractors, and non-employee directors who will be eligible for and granted awards; (ii) determines the amount and type of awards; (iii) establishes rules and guidelines relating to the 2003 Plan; (iv) establishes, modifies, and determines terms and conditions of awards; and (v) takes such other action as may be necessary for the proper administration of the 2003 Plan. Members of the Committee are entitled to be indemnified by Mylan with respect to claims relating to their actions in the administration of the 2003 Plan except, in the case of willful misconduct.

 

Participants.  Any employee, consultant, independent contractor or non-employee director of Mylan or its subsidiaries may be selected by the Committee to receive an award under the 2003 Plan. Presently, there are approximately 12,000 individuals who may be eligible to participate in the 2003 Plan. No participant is eligible to receive an award during any one calendar year in respect of more than 800,000 shares (whether through grants of

options, stock appreciation rights, restricted shares, restricted units, performance shares, or other stock-based awards). In applying these limitations, if it is the Committee’s intention that an award will be earned over a period of more than one calendar year, then the amount subject to the award will be allocated to the first calendar year in which such amount may be earned (determined without regard to possible vesting acceleration as a result of a change in control or Committee action).

 

Certain Adjustments.  The share limitations under the 2003 Plan, as well as the terms of outstanding awards, are subject to adjustment in accordance with the anti-dilution provisions of the 2003 Plan in connection with any certain changes in the capitalization of Mylan. The 2003 Plan also contains provisions regarding the treatment of outstanding awards in connection with mergers and similar transactions involving Mylan.

 

Stock Options.  The Committee may grant to a participant incentive stock options that qualify under Section 422 of the Internal Revenue Code, options which do not qualify as incentive stock options (“non-qualified stock options”), or a combination thereof. The terms and conditions of stock option grants including the quantity, price, waiting periods, and other conditions on exercise will be determined by the Committee. Options generally will have a term of ten years, except that the option may expire earlier upon a participant’s termination of services (which include the participant’s death, permanent disability, retirement, reduction in force, or other termination) as set forth in the 2003 Plan and in the participant’s option agreement.

 

The exercise price for stock options will be determined by the Committee at its discretion, provided that the exercise price per share for each stock option shall be at least equal to 100% of the fair market value of one share of common stock on the date when the stock option is granted. Payment for shares of common stock on the exercise of stock options may be made in cash, by the delivery (actually or by attestation) of shares of common stock held by the participant for at least six months prior to the date of exercise (unless the Committee determines that such holding period is not necessary), or a combination of cash and shares of common stock. In the discretion of the Committee, payment may be made in accordance with a “cashless” exercise through a brokerage firm.

 

Stock Appreciation Rights.  Stock appreciation rights may be granted by the Committee to a participant either separate from or in tandem with non-qualified stock options or incentive stock options. A stock appreciation right entitles the participant to receive, upon its exercise, a payment equal to (i) the excess of the fair market value of a share of common stock on the exercise date over the exercise price of the stock appreciation rights, multiplied by (ii) the number of shares of common stock with respect to which the stock appreciation right is exercised. The exercise price of a stock appreciation right is determined by the Committee, but in the case of stock appreciation rights granted in tandem with stock options, the exercise price may not be less than the exercise price of the related stock option. Upon exercise of a stock appreciation right, payment will be made in cash or shares of common stock, or a combination thereof, as determined in the discretion of the Committee.

 

Restricted Shares and Restricted Units.  The Committee may award to a participant shares of common stock subject to specified restrictions (“restricted shares”). The restricted shares are subject to forfeiture and are non-transferable until the participant meets certain conditions such as continued employment over a specified forfeiture period and/or attains specified performance targets over the forfeiture period.

 

The Committee, in its sole discretion, may waive all restrictions with respect to a restricted share award under certain circumstances (including the death, disability, or retirement of a participant, or a material change in circumstances arising after the date of grant), subject to such terms and conditions as it deems appropriate.

 

The Committee may also grant units representing the right to receive shares of common stock in the future subject to the achievement of one or more goals relating to the completion of service by the participant and/or the achievement of performance or other objectives (“restricted units”). The Committee has the sole discretion to waive the forfeiture period and any other conditions with respect to restricted units under appropriate circumstances (including the death, permanent disability or retirement of the participant or a material change in circumstances).

 

Any performance targets applicable to restricted shares or restricted units will be determined by the Committee. However, awards intended to qualify as “performance-based” for purposes of Section 162(m) will include specified levels of one or more of the following metrics: revenue, economic value added operating income, return on shareholders’ equity, return on sales, stock price, earnings per share, earnings before interest, taxes, depreciation and amortization, cash flow, sales growth, margin improvement, income before taxes (“IBT”), IBT

margin, return on investment, return on capital, return on assets, value of assets, market share, market penetration goals, personnel performance goals, business development goals (including without limitation regulatory submissions, product launches and other business development-related opportunities), regulatory compliance goals, international business expansion goals, customer retention goals, customer satisfaction goals, goals relating to acquisitions or divestitures, gross or operating margins, operating efficiency, working capital performance, earnings per share, growth in earnings per share, expense targets and/or productivity targets or ratios (the “Performance Goals”). Where applicable, the Performance Goals may be expressed in terms of attaining a specified level of the particular criteria, and may be applied to one or more of the Company, a subsidiary, or affiliate, or a division of or strategic business unit of the Company or may be applied to the performance of the Company relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee. The Committee will have the authority to make equitable adjustments to Performance Goals in recognition of unusual or non-recurring events affecting the Company or any subsidiary or affiliate, or the financial statements of the Company or any subsidiary or affiliate, in response to changes in applicable laws or regulations, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles.

 

Performance Awards.  The Committee may grant performance awards to participants under such terms and conditions as the Committee deems appropriate. A performance award entitles a participant to receive a payment from Mylan, the amount of which is based upon the attainment of predetermined performance targets over a specified award period. Performance awards may be paid in cash, shares of common stock or a combination thereof, as determined by the Committee.

 

Award periods and performance targets will be determined by the Committee. Awards intended to qualify as “performance-based” for purposes of Section 162(m) will include specified levels of one or more of the Performance Goals listed above.

 

With respect to restricted shares, restricted unit awards, and performance awards intended to qualify for the “performance-based” exception contained in Section 162(m), in the 2003 Plan, as amended, no more than 250,000 shares (subject to adjustment) may be granted to a single participant for any performance period.

 

Other Stock-Based Awards.  The Committee may make other awards of stock purchase rights or cash awards, common stock awards or other types of awards that are valued in whole or in part by reference to the value of the common stock. The Committee will determine the terms and conditions that apply to these awards.

 

Short-Term Cash Awards.  The Committee may make performance-based annual cash incentive awards to employees using whatever performance criteria the Committee deems appropriate. However, with respect to those employees whom the Committee determines to be subject to Section 162(m), annual cash incentive awards that are intended to qualify as “performance-based” compensation exempt from the Section 162(m) limitation on deductibility will be based only on attainment of specified levels of the Performance Goals. In administering the incentive program and determining short-term incentive awards, the Committee will not have the flexibility to pay a covered executive more than the incentive amount indicated by the executive’s attainment under the applicable payment schedule. The Committee will have the flexibility, however, to reduce this amount. The maximum value of short-term cash incentive awards for covered employees (as defined in Section 162(m)) shall not exceed $5,000,000 for any fiscal year.

 

Change in Control.  Unless otherwise provided by the Committee in an applicable award agreement, in the event of a change in control (as defined in the 2003 Plan), the following shall occur: (i) all options and stock appreciation rights outstanding on the date of the change in control will become immediately and fully exercisable; (ii) all restrictions applicable to restricted shares and restricted unit awards will terminate fully and the participant will immediately have the right to the delivery of share certificates; (iii) all performance awards for all award periods will immediately become fully payable (at the maximum level) to all participants and will be paid to participants within thirty days after the change in control; and (iv) all other stock-based awards will immediately become fully vested and payable to all participants and will be paid to participants within thirty days after the change in control.

Federal Income Tax Consequences.  The following is a summary of the principal federal income tax consequences of 2003 Plan benefits under present tax law. This summary is not intended to be exhaustive and, among other things, does not describe state, local or foreign tax consequences. The discussion of Mylan tax deductions assumes that all awards are structured to comply with the “performance-based” compensation exception, or are otherwise deductible, under Section 162(m).

 

Stock Options.  No tax is incurred by the participant, and no amount is deductible by Mylan, upon the grant of a nonqualified stock option. At the time of exercise of such an option, the difference between the exercise price and the fair market value of the common stock will constitute ordinary income to the participant. Mylan will be allowed a deduction equal to the amount of ordinary income recognized by the participant.

 

In the case of incentive stock options, although no income is recognized upon exercise by the participant and Mylan is not entitled to a deduction, the excess of the fair market value of the common stock on the date of exercise over the exercise price is counted in determining the participant’s alternative minimum taxable income. If the participant does not dispose of the shares acquired on the exercise of an incentive stock option within one year after their receipt and within two years after the grant of the incentive stock option, gain or loss recognized on the disposition of the shares will be treated as long-term capital gain or loss. In the event of an earlier disposition of shares acquired upon the exercise of an incentive stock option, the participant may recognize ordinary income, and if so, Mylan will be entitled to a deduction in the same amount.

 

Stock Appreciation Rights.  The participant will not recognize any income at the time of the grant of a stock appreciation right. Upon the exercise of a stock appreciation right, the cash and the value of any common stock received will constitute ordinary income to the participant. Mylan will be entitled to a deduction in the amount of such income at the time of exercise.

 

Restricted Shares.  A participant normally will not recognize taxable income upon an award of restricted shares, and Mylan will not be entitled to a deduction until the lapse of the applicable restrictions. Upon the lapse of the restrictions, the participant will recognize ordinary taxable income in an amount equal to the fair market value of the common stock as to which the restrictions have lapsed, and Mylan will be entitled to a deduction in the same amount. However, a participant may elect under Section 83(b) of the Internal Revenue Code to recognize taxable ordinary income in the year the restricted shares are awarded in an amount equal to the fair market value of the shares at that time, determined without regard to the restrictions. In such event, Mylan will then be entitled to a deduction in the same amount. Any gain or loss subsequently recognized by the participant will be a short-term or long-term capital gain or loss, depending on how long the shares are held by the participant.

 

Restricted Units.  A participant normally will not recognize taxable income upon an award of restricted units, and Mylan will not be entitled to a deduction until the lapse of the applicable restrictions. Upon the lapse of the restrictions and the issuance of the earned shares, the participant will recognize ordinary taxable income in an amount equal to the fair market value of the common stock received and Mylan will be entitled to a deduction in the same amount.

 

Performance Awards, Other Stock-Based Awards and Short-Term Cash Awards.  Normally, a participant will not recognize taxable income upon the award of such grants. Subsequently, when the conditions and requirements for the grants have been satisfied and the payment determined, any cash received and the fair market value of any common stock received will constitute ordinary income to the participant. Mylan will then be entitled to a deduction in the same amount.

 

Plan Benefits.  The specific long-term equity awards and annual cash bonus opportunities granted in March 2009 under the 2003 Plan for the year ending December 31, 2009 are set forth in the table below. Future awards under the 2003 Plan are not determinable at this time.

 

 

 

 

The following table shows information about the securities authorized for issuance under Mylan’s equity compensation plans as of December 31, 2008:

 

 

THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT TO THE 2003 PLAN AND RECOMMENDS THAT MYLAN’S SHAREHOLDERS VOTE “FOR” SUCH AMENDMENT.

 

The Pennsylvania Business Corporation Law (the “BCL”) permits a lower threshold for approval of director nominees than it does for other shareholder action. Section 1758(b) of the BCL provides that the director candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected. This approach to the election of directors ensures that each director position for which there are nominees will be filled. It is often described as a “plurality” voting approach, because it would potentially permit the election of a director nominee who only receives a plurality of votes, as long as the nominee receives the highest number of votes for the position to which the nominee is being elected.

 

A number of independent investors have advocated a move away from the sort of “plurality” voting represented by Section 1758(b) of the BCL. One reason they advocate this change is that, in their view, the procedure sets too low a standard of shareholder approval for management slates of directors. In other words, some independent shareholders want management’s nominees to receive a stronger mandate than a mere plurality in order to be able to serve as director.

 

In contrast, another perspective is that a majority vote standard (i.e., that a director be elected by a majority vote of the shares present in person or by proxy) may raise risks that a corporation would fail to elect any nominee to a director position that is to be filled at a shareholder meeting. In an extreme situation, the failure to elect directors to the available positions could make it difficult to continue to manage the affairs of the corporation.

 

The amendment proposed for consideration is to include in the Bylaws a standard requiring that a director nominee receive a majority of the votes cast. The majority voting standard, however, would not apply in a contested election, so that the person who receives the most affirmative votes would be elected in a contested election. In connection with the approval of the amendment to the Bylaws, the Board will amend Mylan’s Corporate Governance Principles to include a Director Resignation Policy that will require a director who receives less than a majority vote to submit his or her resignation to the Chairman of the Board for consideration by the G&N Committee.

 

More specifically, Section 2.01 of the Bylaws would be amended and restated to read as follows:

 

“Section 2.01. Number, Election and Term of Office

 

The number of Directors which shall constitute the full Board shall be such number, not less than three, as shall be fixed by the Board or the shareholders; provided, however, that if all the shares of the Corporation shall be owned beneficially and of record by either one or two shareholders, the number of Directors may be less than three but not less than the number of shareholders. The shareholders shall elect a full Board at each annual meeting of shareholders. Except as provided below with respect to Contested Elections and in Section 2.02, each Director shall be elected by the vote of the majority of the votes cast with respect to the Director.

 

For the purposes of this Section 2.01, a majority of votes cast means that the number of shares cast “for” a Director’s election exceeds the number of votes cast “against” that Director’s election. The following shall not be votes cast: (a) a share otherwise present at the meeting but for which there is an abstention and (b) a share otherwise present at the meeting as to which a shareholder gives no authority or direction. The Governance and Nominating Committee has established procedures under which any Director who is not elected shall offer to tender his or her resignation to the Board. The Governance and Nominating Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date of the certification of the election results. In a Contested Election, the Directors shall be elected by the vote of a plurality of the votes cast. For purposes of these Bylaws, a “Contested Election” means an election of Directors with respect to which, as of five days prior to the date the Corporation first mails the notice of meeting for such meeting to shareholders, there are more nominees for election than positions on the Board to be filled by election at the meeting. Each Director shall serve until the next annual shareholders meeting, and thereafter until his successor has been selected and qualified, or until his death, resignation or removal. The Board shall elect from among its members a Chairman of the Board who shall appoint a Vice Chairman of the Board.”

If this proposal is approved, the Bylaws would be amended as promptly as practicable following the Annual Meeting, and the new voting standards would be in effect commencing with the 2010 Annual Meeting of Shareholders. Under the BCL, the Board may amend the Bylaws without shareholder action, but instead the Board has elected to put this proposal to a vote of our shareholders. After careful consideration, the Board has determined that it wants this proposal to serve as an opportunity for shareholders to express their views without being influenced by any Board recommendation.

 

THE BOARD OF DIRECTORS MAKES NO VOTING RECOMMENDATION TO SHAREHOLDERS ON THIS PROPOSAL. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED FROM SHAREHOLDERS WILL BE COUNTED AS ABSTENTIONS.

 

The Audit Committee of our Board has selected Deloitte & Touche LLP as our independent registered public accounting firm to audit our consolidated financial statements for the year ending December 31, 2009, and has directed that management submit the selection of Deloitte & Touche LLP as our independent registered public accounting firm for ratification by the shareholders at the Annual Meeting. A representative of Deloitte & Touche LLP is expected to be present at the Annual Meeting and will be available to respond to appropriate questions from our shareholders and will be given an opportunity to make a statement if he or she desires to do so.

 

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

 

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

 

Deloitte & Touche LLP served as Mylan’s independent registered public accounting firm during 2008 and during the 2007 Transitional Period, and no relationship exists other than the usual relationship between independent registered public accounting firm and client. Details about the nature of the services provided by, and the fees the Company paid to, Deloitte & Touche LLP for such services during 2008 and the 2007 Transitional Period are set forth below.

 

 

 

 

 

The Audit Committee has adopted a policy regarding pre-approval of audit, audit-related, tax and other services that the independent registered public accounting firm may perform for the Company. Under the policy, the Audit Committee must pre-approve on an individual basis any requests for audit, audit-related, tax and other services not covered by certain services that are pre-approved annually by the Audit Committee. The policy also prohibits the engagement of the independent registered public accounting firm for non-audit related financial information systems design and implementation, for certain other services considered to have an impact on independence and for all services prohibited by the Sarbanes-Oxley Act of 2002. All services performed by Deloitte & Touche LLP during 2008 and the 2007 Transitional Period were pre-approved by the Audit Committee in accordance with its policy.

 

The following table sets forth information concerning the compensation earned by the non-employee directors for 2008. Directors who are also employees of the Company do not receive any consideration for their service on the Board. A discussion of the elements of non-employee director compensation follows the table.

 

 

 

 

Effective May 1, 2008, non-employee directors receive $75,000 per year in cash compensation for their service on the Board. In addition, Mr. Puskar receives an additional $200,000 per year for his service as Chairman. Non-employee directors are also reimbursed for actual expenses relating to meeting attendance.

 

In addition:

 

 

 

Non-employee directors, at the discretion of the full Board, are eligible to receive stock options or other awards under the 2003 Plan. In connection with the Board’s annual meeting following the Annual Meeting of Shareholders in April 2008, each non-employee director was awarded an option to purchase 19,994 shares of common stock, at an exercise price of $12.96 per share, the closing price per share of the Company’s common stock on the date of grant, which option vests on the first anniversary of the date of grant, and 6,269 restricted stock units, also vesting on the first anniversary of the grant date.

 

 

 

The following table sets forth information regarding the beneficial ownership of our Common Stock as of March 20, 2009 by the Company’s Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers of the Company who were serving at the end of 2008 (collectively, the “Named Executive Officers”), as well as by our directors and nominees, and by all directors, nominees and executive officers of the Company as a group (based on 304,894,578 shares of Common Stock outstanding as of such date). For purposes of this table, and in accordance with the rules of the SEC, shares are considered “beneficially owned” if the person, directly or indirectly, has sole or shared voting or investment power over such shares. A person is also considered to beneficially own shares that he or she has the right to acquire such shares within 60 days of March 20, 2009. To the Company’s knowledge, the persons in the following table have sole voting and investment power, either directly or through one or more entities controlled by such person, with respect to all shares of the shares shown as beneficially owned by them, unless otherwise indicated in the footnotes below.

 

 

 

 

 

The following table lists the names and addresses of the shareholders known to management to own beneficially more than five percent of our Common Stock as of December 31, 2008:

 

 

 

 

 

Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own more than 10% of a registered class of our equity securities to file with the SEC within specified due dates reports of ownership and reports of changes of ownership of our Common Stock and our other equity securities. These persons are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based on reports and written representations furnished to us by these persons, we believe that all of our directors and executive officers complied with these filing requirements during 2008, except that we recently became aware that Mr. Puskar’s share ownership had been under-reported in the past by 1,459 shares, and that Mr. Piatt’s August 2007 open market acquisition was under-reported by 600 shares, in each case due to clerical errors and as subsequently disclosed in Form 5s. In addition, Mr. Todd, through his trust, gifted an aggregate of 8,000 shares in October 2008, and, through the partnership described in Note 14 of the table entitled Security Ownership of Directors, Nominees and Executive Officers above, sold 100,000 shares in December 2006, both of which were reported on a Form 5 filed in March 2009.

 

The names, ages and positions of our executive officers and Named Executive Officers as of March 20, 2009, are as follows:

 

 

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

 

Mr. Borkowski has served as Mylan’s Chief Financial Officer since March 2002 and as Executive Vice President since October 2007. Prior to joining Mylan, beginning in 1999, he was employed by the Consumer Healthcare Group of Pharmacia Corporation, a pharmaceutical company that merged with Pfizer in 2003, where he served as Assistant Vice President, North American Finance and Administration and later as Vice President, Global Finance and Information Technology. He served in various finance positions for Wyeth, a company specializing in pharmaceuticals, consumer health care products, and animal health care products (then known as American Home Products Corporation), from 1992 to 1999. As announced on February 19, 2009, Mr. Borkowski will be leaving the Company following a transition period.

 

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

 

Mr. Malik has served as Mylan’s Head of Global Technical Operations since January 2007, as Executive Vice President since October 2007. Previously, he served as Chief Executive Officer of Matrix 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, Mr. Malik was Head of Global Regulatory Affairs and Head of Pharma Research for Ranbaxy from October 1999 to September 2003.

 

Mr. Barret has served as President, Europe, Middle East and Africa since October 2007, prior to which he served as the Regional Director of Merck Generics from 2004 to 2007 (which at the time was owned by Merck KGaA). From 2000 to 2004, Mr. Barret was the Area Director for Merck Generics in France, Belgium, Italy, Spain and Portugal.

 

Mr. Rizzo has served as the Company’s Corporate Controller since June 2006 and as Senior Vice President since October 2007. He joined the Company as Vice President and Corporate Controller in June 2006, prior to which he served as Vice President and General Controller of Hexion Specialty Chemicals, Inc. from October 2005 to May 2006, before which he served as Vice President and Corporate Controller at Gardner Denver, Inc. since 1998.

 

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

 

Overview

 

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

 

Objectives and Principles of Our Executive Compensation Program

 

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

 

 

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

 

 

Our Executive Compensation Program

 

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

 

In connection with the development of our compensation program for our Named Executive Officers, our compensation consultant developed a list of peer companies. For 2008, this peer group consisted of the following 14 companies, including companies in both the generic and branded sectors: Allergan, Inc.; C.R. Bard, Inc.; Becton, Dickinson and Company; Biogen Idec, Inc.; Bristol-Myers Squibb Co.; Celgene Corporation; Eli Lilly and Company; Forest Laboratories, Inc.; Gilead Sciences, Inc.; Schering-Plough Corporation; Sepracor, Inc.; Warner Chilcott Limited.; Watson Pharmaceuticals, Inc.; and Wyeth. Among other matters, we utilize these companies to assess competitive market data. A change was made to the peer group this year to reflect consolidation in the industry.

 

The competitive market data contained companies within our industry and included the following components:

 

 

For 2008, actual adjusted diluted earnings per share, global regulatory submissions and synergies were $0.80, 154 and $104 million, respectively, in each case exceeding the target levels put in place by the Compensation Committee. This resulted in overall performance at 200% of the target level of performance under the Bonus Program (and 250% in the case of Mr. Coury). The Compensation Committee, in its deliberations on the actual awards, primarily took into consideration the performance criteria’s formulaic results; in addition, the Compensation Committee also considered subjective factors such as an executive’s individual performance, duties and responsibilities; an executive’s leadership as demonstrated by contributions to the strategic development, governance and vision of the Company; the executives’ titles; the Company’s overall progress in reaching organizational development and growth; and the executive’s commitment to the Company’s overall business philosophy. Accordingly, each of Messrs. Coury and Borkowski and Ms. Bresch were paid annual incentive awards equal to 200% of their targets under the bonus program (i.e., 250% of base salary for Mr. Coury and 200% of base salary for Mr. Borkowski and Ms. Bresch), and Mr. Malik was awarded an amount equal to 160% of his base target. The dollar amounts of short-term incentive compensation earned by the Named Executive Officers for 2008 (including Mr. Barret, whose bonus is discussed below) are set forth below in the Summary Compensation Table.

 

Consistent with the philosophy and methodology used in 2008, for 2009 the metrics will also be adjusted earnings per share, global regulatory submissions and attainment of synergies, likewise weighted at 50%, 25% and 25%, respectively.

 

Mr. Barret, in accordance with his employment contract, has an annual discretionary bonus target equal to 75% of his annual base salary.

 

 

The long-term equity grants awarded to the Named Executive Officers in 2008 included (i) stock options with an exercise price equal to the closing price of the Company’s common stock on the date of grant that vest ratably over a period of three years, provided that the executive remains continually employed by the Company; (ii) awards of RSUs that vest annually over a three-year period provided that the executive remains continually employed by the Company (except for Mr. Barret’s RSUs for which two-thirds vest after two years and one-third after the third year); and (iii) performance-based RSUs that generally vest at the end of a three-year period (subject to continued employment) based upon the achievement of performance criteria (those being adjusted diluted earnings per share, regulatory submissions and synergies, each weighted one-third). Each of Messrs. Coury, Borkowski and Malik and Ms. Bresch were awarded special recognition RSUs in March 2008, one-third of which vested immediately, with the remainder vesting in two equal annual installments starting on the first and second anniversary of grant provided that the Named Executive Officer is employed by the Company on the relevant vesting date, in order to recognize their extraordinary efforts including their work on consummating the acquisition of, and successfully integrating, Merck KGaA’s generics business and the additional responsibilities they had undertaken in light of the Company’s global expansion. Please see the notes to the table entitled “Outstanding Equity Awards at the End of 2008” with regard to Mr. Borkowski’s RSUs.

 

Equity grants made to our Named Executive Officers in 2008 are set forth and described in the table below entitled “Grants of Plan-Based Awards for 2008.”

 

The current expectation of our Compensation Committee is to make annual equity grants, most likely in the first quarter of a fiscal year, with appropriate exceptions for new hires and promotions. The 2009 annual equity grant was made on March 27, 2009. Messrs. Coury and Malik and Ms. Bresch received a grant of options and restricted stock units (RSUs) that each time-vest over three years, beginning on the first anniversary of the date of grant. Details of these awards are set forth in this Proxy Statement under the table entitled “New Plan Benefits in 2009”. Currently, there is no exact date for the making of these grants each year, but our Compensation Committee intends to review its equity grant policy from time to time to ensure that it is in line with corporate best practices. We believe these annual grants serve as a retention incentive as well as another manner in which to align executives’ interests with those of our shareholders.

 

Also in March 2009, the Named Executive Officers (other than Mr. Borkowski) were granted long-term performance-based incentives in the form of RSUs that cliff-vest after a three-year period, assuming specified performance criteria are met. Consistent with the short-term cash performance-based incentives for 2009 described above, adjusted earnings per share, regulatory submissions and attainment of synergies constitute the performance metrics, but in the case of these long-term awards such metrics are weighted one-third each.

 

 

 

 

We believe it is essential to have employment agreements with our executive officers and other key employees. These agreements memorialize critical terms of employment, including termination rights and obligations, non-competition covenants and compensation and perquisites and thereby enhance the stability and continuity of our employment relationships. Each of the Named Executive Officers is party to an Executive Employment Agreement. These agreements (other than Mr. Barret’s) were amended in December 2008, to bring them into documentary compliance with Section 409A of the Internal Revenue Code (“Section 409A”). For a detailed description of the Employment Agreements, see the section below entitled “Employment Agreements”.

 

 

The Company has entered into Retirement Benefit Agreements (“RBAs”) with two of the Named Executive Officers, Messrs. Coury and Borkowski, in recognition of their service to the Company and to provide a supplemental form of retirement and death benefit. These agreements were amended in December 2008, to bring them into documentary compliance with Section 409A. For a detailed description of the RBAs, see the section below entitled “Retirement Benefit Agreements.”

 

When Mr. Malik joined the Company in January 2007, the Company put in place a nonqualified deferred compensation plan on his behalf until such time as he relocates to, and is paid through, the U.S. and can participate in the Company’s 401(k) plan. The Company contributes to Mr. Malik’s account each pay period. The plan account will be distributed to Mr. Malik upon the Company’s termination of the plan, the termination of Mr. Malik’s employment, or other qualifying distribution events, such as his retirement, disability or death.

 

 

Deductibility Cap on Executive Compensation

 

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

 

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

 

Respectfully submitted,

 

Rodney L. Piatt, C.P.A.

Wendy Cameron

Joseph C. Maroon, M.D.

 

The following summary compensation table sets forth the cash and non-cash compensation paid to or earned by the Named Executive Officers for 2008, the 2007 Transitional Period (abbreviated below as “2007T”) and the year ended March 31, 2007 (abbreviated below as “2007”).

 

 

 

 

 

 

 

 

The following table summarizes grants of plan-based awards made to each Named Executive Officer during 2008.

 

 

 

 

The following table sets forth information concerning all of the outstanding equity-based awards held by each Named Executive Officer as of December 31, 2008.