Stock-Based Incentive Plan

Mylan’s shareholders have approved the 2003 Long-Term Incentive Plan (as amended, the “2003 Plan”). Under the 2003 Plan, 55,300,000 shares of common stock are reserved for issuance to key employees, consultants, independent contractors and non-employee directors of Mylan through a variety of incentive awards, including: stock options, stock appreciation rights (“SAR”), restricted shares and units, performance awards (“PSU”), other stock-based awards and short-term cash awards. Stock option awards are granted at the fair value of the shares underlying the options at the date of the grant, generally become exercisable over periods ranging from three to four years, and generally expire in ten years. Upon approval of the 2003 Plan, no further grants of stock options have been made under any other plan.

In February 2014, Mylan’s Compensation Committee and the independent members of the Board of Directors adopted the One-Time Special Performance-Based Five-Year Realizable Value Incentive Program (the “2014 Program”) under the 2003 Plan. Under the 2014 Program, certain key employees received a one-time, performance-based incentive award (the “Awards”) either in the form of a grant of SAR or PSU. The Awards were granted in February 2014 and contain a five-year cliff-vesting feature based on the achievement of various performance targets, external market conditions and the employee’s continued services.

The following table summarizes stock option and SAR (“stock awards”) activity:



	Number of Shares Under Stock Awards		Weighted Average Exercise Price per Share
Outstanding at December 31, 2013	13,563,881		$	22.05
Granted	5,653,732		52.61
Exercised	(1,586,817	)	19.34
Forfeited	(355,868	)	28.36
Outstanding at June 30, 2014	17,274,928		$	32.21
Vested and expected to vest at June 30, 2014	16,610,392		$	32.19
Exercisable at June 30, 2014	8,390,521		$	20.12

As of June 30, 2014, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had average remaining contractual terms of 7.30 years, 7.26 years and 5.39 years, respectively. Also, at June 30, 2014, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had aggregate intrinsic values of $344.0 million, $331.1 million and $263.8 million respectively.

A summary of the status of the Company’s nonvested restricted stock and restricted stock unit awards, including PSUs, (“restricted stock awards”) as of June 30, 2014 and the changes during the six months ended June 30, 2014 are presented below:



	Number of Restricted Stock Awards		Weighted Average Grant-Date Fair Value per Share
Nonvested at December 31, 2013	3,321,836		$	27.13
Granted	2,083,796		40.30
Released	(1,160,689	)	25.58
Forfeited	(188,922	)	29.61
Nonvested at June 30, 2014	4,056,021		$	34.25

As of June 30, 2014, the Company had $163.8 million of total unrecognized compensation expense, net of estimated forfeitures, related to all of its stock-based awards, which will be recognized over the remaining weighted average vesting period of 3.17 years. The total intrinsic value of stock-based awards exercised and restricted stock units converted during the six months ended June 30, 2014 and 2013 was $112.8 million and $51.6 million, respectively.

Under the 2014 Program, approximately 4.4 million SARs and 1.5 million PSUs were granted. The fair value of the Awards was determined using a Monte Carlo simulation as both the SARs and PSUs contain the same performance and market conditions. The Monte Carlo simulation involves a series of random trials that result in different future stock price paths over the contractual life of the SAR or PSU based on appropriate probability distributions. Conditions are imposed on each Monte Carlo simulation to determine the extent to which the performance conditions would have been met, and therefore the extent to which the Awards would have vested, for the particular stock price path. Once the Company determines that it is probable that the performance targets will be met, compensation expense is recorded for these Awards. Each SAR or PSU is equal to one common share with the maximum value of each Award upon vesting subject to varying limitations.

The key assumptions used in the valuation of the Awards are as follows:



	2014
Volatility	29.4		%
Risk-free interest rate	1.6		%
Expected term (years)	5.0
Forfeiture rate	5.5		%
Weighted average grant date fair value per stock appreciation right	$	9.43
Weighted average grant date fair value per performance award	$	34.58