SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended March 31, 1995 Commission File No. 1-9114
MYLAN LABORATORIES INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1211621
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification
No.)
130 Seventh Street
1030 Century Building
Pittsburgh, Pennsylvania 15222
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412-232-0100
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, par value $.50 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by checkmark 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 X No
----- ------
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is not contained herein,
and will not be contained, to the best of 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.[ ]
The aggregate market value of voting stock held by persons other than Directors and Officers of
the registrant
computed by reference to the closing price of such stock as of May 31, 1995:
$2,200,910,441
The number of shares of Common Stock of the registrant outstanding as of May 31, 1995:
79,514,544
Documents incorporated by reference into this Report are:
Annual Report to Shareholders for year ended March 31, 1995. . . . . . . . Parts I and II,
Items 1, 5-8
Proxy Statement for 1995 Annual Meeting of Shareholders. . . . . . . . . . Part III, Items 10-13
PART I
ITEM 1. Business
Mylan Laboratories Inc., a Pennsylvania corporation incorporated in 1970, and its
subsidiaries (herein referred to collectively as the "Company") are engaged in the development,
manufacturing and distribution of pharmaceutical products for resale by others. References
herein to fiscal 1995, 1994 and 1993 mean the fiscal years ended March 31, 1995, 1994 and
1993, respectively.
Through its subsidiary, Mylan Pharmaceuticals Inc., the Company is recognized as one of
the leaders in the generic pharmaceutical industry. Pharmaceutical products initially sold on an
exclusive basis are known in the industry as proprietary or branded products. Generic drugs are
therapeutically equivalent to their brand name counterparts and are generally sold at prices
significantly less than branded products. Accordingly, generics provide a safe, effective and cost
efficient alternative to users of these products.
The Company manufactures substantially all of its oral dose products in either its Mylan
Pharmaceuticals subsidiary's Morgantown, West Virginia facility or its subsidiary Mylan Inc.'s
facility in Caguas, Puerto Rico. To facilitate timely delivery of products to customers in all fifty
states the Company operates distribution centers in Greensboro, North Carolina and Reno,
Nevada.
Due to the non-exclusive nature of generic products, the generic industry is comprised of
numerous competitors including manufacturers who market their products under their own name,
distributors who market products manufactured by others and brand name companies, who in
recent years market their products under both the brand name and as the generic substitute. This
diversity provides significant price competition within the generic pharmaceutical industry which
generally results in decreasing prices of generic products over time to those who supply such
products to the retail market.
Over the past year, the Company has entered into strategic alliances with several branded
pharmaceutical companies. These alliances through distribution and licensing agreements
provide the Company with additional products to further broaden the Company's product line.
The Company continues to examine other alliances as a way to grow and react in the rapidly
changing health care arena.
In June 1989 the Company acquired a 50% interest in Somerset Pharmaceuticals, Inc.
("Somerset"). Pursuant to a license agreement with a Hungarian pharmaceutical company,
Somerset has exclusive marketing rights to the product Eldepryl(R) in the United States and
certain other countries. Commercial shipments of the product by Somerset commenced in late
August 1989.
Under the Orphan Drug Act, Somerset has exclusivity relating to marketing the chemical
compound Eldepryl(R) for use as a treatment for late stage Parkinson's disease through June
1996.
Under the Waxman Hatch Act, Somerset had exclusivity for all uses of the chemical compound
through June 1994. Somerset is actively involved in research projects regarding additional uses
of this and other chemical compounds.
In October 1991, a wholly-owned subsidiary of the Company merged with Dow Hickam
Pharmaceuticals, Inc. ("Hickam"), an established branded pharmaceutical company located in
Sugar Land, Texas. Hickam currently manufactures and/or markets specialty pharmaceutical
products and devices used principally as wound care treatments through its nation-wide sales
force.
On February 25, 1993 the Company acquired substantially all of the net assets of Bertek,
Inc. ("Bertek"). Bertek, headquartered in St. Albans, Vermont is a manufacturer of transdermal
drug delivery systems and also has operations in laminating, coatings and label manufacturing.
In addition Bertek provides components, using internally developed technology for transdermal
patches marketed by other companies. Bertek is actively involved in development projects to
provide new transdermal products.
Products
The information on the Company's product line set forth on pages 17 and 25 of the
Annual Report to Shareholders for the year ended March 31, 1995 is incorporated herein by
reference. All pharmaceutical products presently manufactured by the Company have been
previously developed and marketed by other firms with the exception of Maxzide(R) ,
Maxzide(R) -25MG and Cystagon TM .
The Company is required to secure and maintain approval from the U.S. Food and Drug
Administration ("FDA") for the products and dosage forms which it manufactures. The number
of products and dosage forms for which the Company is an approved manufacturer has expanded
in recent years. See "New Product Approvals".
During fiscal 1995, 1994 and 1993 approximately $30,533,000, $21,648,000 and
$13,524,000 respectively, were expensed by the Company for the development of formulations
and procedures for products which it desires to produce, use or sell. The Company's research and
development efforts are conducted primarily to qualify the Company to manufacture ethical
pharmaceuticals under FDA standards and approval.
New Product Approvals
During fiscal 1995, five approvals were received from the FDA. Subsequent to fiscal
1995 one approval was received from the FDA. The Company presently has requests for
approval pending before the FDA representing 19 products of varying strengths. In addition the
Company has two Investigational New Drug applications filed with the FDA for new innovator
compounds.
Customers and Markets
The Company sells its products to proprietary and ethical pharmaceutical wholesalers and
distributors, drug store chains, drug manufacturers and public and governmental agencies. Sales
to one customer, McKesson Health & Drug Company, represented 12% of net sales in 1993. No
single customer represented more than 10% of net sales in 1995 or 1994.
A majority of the Company's products are marketed to food and drug store chains and to
pharmaceutical distributors and wholesalers, who in turn market to retailers, managed care
entities, hospitals and government agencies. Certain other products are marketed to institutional
accounts who in turn obtain the products from pharmaceutical distributors and wholesalers. The
Company's sales activities involve limited public promotion of its products. Approximately 126
employees of the Company are engaged full-time in selling products and servicing customers.
Competition
The Company sells to various markets and classes of customers. With respect to each of
the various products it sells, the Company believes it is subject to active competition from
numerous firms. The four primary means of competition are services, quality of products,
approval for manufacture by the FDA and price. The competition experienced by the Company
varies among the markets and classes of customers. The Company has experienced additional
competition from brand-name competitors who have entered the generic pharmaceutical industry
through the creation of generic subsidiaries, purchasing generic companies or by licensing their
products prior to or as their product's patents expire.
Product Liability
Product liability suits by consumers represent a continuing risk to firms in the
pharmaceutical industry. The Company strives to minimize such risks by stringent quality
control procedures. Although the Company carries insurance, it believes that no reasonable
amount of insurance can fully protect it against all such risks because of the potential liability
inherent in the business of producing pharmaceuticals for human consumption.
Raw Materials
The chemical ingredients and other materials and supplies used in the Company's
pharmaceutical manufacturing operations are generally available and purchased from many
different foreign and domestic suppliers. However, some products may have only one source
approved by the FDA for certain pharmaceutical ingredients used in their manufacturing process.
If this material was no longer available, qualifying a new supplier could delay the manufacturing
of such products. During fiscal 1995 there was a limited supply of raw materials to all generic
manufacturers of cimetidine. This product had a significant contribution to the Company's net
sales and gross profit during fiscal 1995.
With regards to foreign suppliers, recent and pending regulatory action may make
obtaining raw materials prior to patent expiration increasingly difficult. This could delay the
Company's ability to develop, manufacture and obtain FDA approval to market certain new
products.
Regulation
The Company's operations are subject to regulation under the Federal Food, Drug and
Cosmetic Act, pursuant to which government standards as to "good manufacturing practice",
product content, purity, labeling, effectiveness and recordkeeping (among other things) must be
observed. In this regard, the FDA has extensive regulatory powers over the activities of
pharmaceutical manufacturers.
The Company is also subject to inspection and regulation under other federal and state
legislation relating to drugs, narcotics and alcohol. Many of its suppliers and customers, as well
as the drug industry in general, are subject to the same or similar governmental regulations.
In October 1990 Congress passed the Medicaid Prudent Pharmaceutical Purchasing Act
of 1990. Under the Act, the Company is required to pay a rebate to each state predicated on the
number of prescriptions for the Company's products reimbursed by the states under Medicaid.
The Act was effective January 1, 1991.
The President signed into law the Uruguay Round Agreements Act ("URAA") in
December 1994. URAA which took effect on June 8, 1995 implemented the General Agreement
of Tariffs and Trade ("GATT"). One change in US law required by GATT is the amendment of
patent law to reflect a patent term of 20 years from the date of filing the application instead of the
current term of 17 years from the date of issuance. URAA extended the requirement by allowing
the application of this provision to all patents in force on June 8, 1995.
Congress recognized the potential harm in this requirement and provided that a potential
competitor who has already made a "substantial investment" in a competing product could make,
use and sell its product after the expiration of the original patent period provided that they pay
the patentee "equitable remuneration" through the extended patent period. However, the FDA
has taken the position that it cannot approve an Abbreviated New Drug Application ("ANDA"),
which certifies the date of patent expiration, until the expiration of the extended patent period.
This could delay the launch of future products but has no effect on products presently marketed
and sold by the Company.
The Company and other generic drug manufacturers have approached Congress in an
attempt to secure passage of legislation which would allow the FDA to approve applications on
the passage of the original expiration date. In addition, Mylan has filed suit, as a co-plaintiff,
against Bristol Myers Squibb seeking declaratory judgement with respect to these issues in the
marketing of captopril.
It is impossible for the Company to predict the extent to which its operations will be
affected under the regulations discussed above or any new regulations which may be adopted by
regulatory agencies.
Employees
The Company employs approximately 1310 persons, approximately 570 of whom serve
in clerical, sales and management capacities. The remainder are engaged in production and
maintenance activities.
The production and maintenance employees at the Company's manufacturing facilities in
Morgantown, West Virginia, are represented by the Oil, Chemical and Atomic Workers
International Union (AFL-CIO) and its Local Union 8-957 under a contract which expires April
5, 1998.
Backlog
At March 31, 1995, the uncompleted portions of the Company's backlog of orders was
approximately $20,979,000 as compared to approximately $12,543,000 at March 31, 1994.
Because of the relatively short lead time required in filling orders for its products, the Company
does not believe these interim backlog amounts bear a significant relation to sales or income for
any full twelve-month period.
ITEM 2. Properties
The Company operates from various facilities in the United States and Puerto Rico
having an aggregate of approximately 1,057,000 square feet.
Mylan Pharmaceuticals owns production, warehouse, laboratory and office facilities in
four buildings in Morgantown, West Virginia containing approximately 500,000 square feet.
Mylan Pharmaceuticals operates two distribution centers, one in Greensboro, North Carolina
containing approximately 64,000 square feet which it owns and one in Reno, Nevada containing
approximately 25,000 square feet under a lease expiring in 1996. Currently under construction in
Morgantown, West Virginia is a 150,000 square foot research and development facility.
Mylan Inc. owns a production and office facility in Caguas, Puerto Rico containing
approximately 115,000 square feet and a production facility in Cidra, Puerto Rico containing
approximately 32,000 square feet.
Dow Hickam Pharmaceuticals, Inc. owns production, warehouse and office facilities in
two buildings in Sugar Land, Texas containing approximately 70,000 square feet. Hickam also
operates a filling and packaging facility in Sugar Land, Texas containing approximately 15,000
square feet under a lease expiring in 1996.
Bertek owns production, warehouse, laboratory and office facilities in five buildings in
Swanton and St. Albans, Vermont containing approximately 159,000 square feet. Bertek also
operates a coating and extrusion facility in St. Albans containing approximately 71,000 square
feet under a lease expiring in 2015.
The Company's production equipment includes that equipment necessary to produce and
package tablet, capsule, aerosol, transdermal and powder dosage forms. The Company maintains
six analytical testing laboratories for quality control.
The Company's facilities are operated primarily on a two shift basis. Properties and
equipment are well maintained and adequate for present operations.
The Company's corporate offices, containing approximately 5,800 square feet, are located
at 130 Seventh Street, 1030 Century Building, Pittsburgh, Pennsylvania, and are occupied under
a lease expiring in 1996.
ITEM 3. Legal Proceedings
On November 20, 1990 the Company filed a complaint against American Cyanamid
Company ("Cyanamid"). Cyanamid, through its Lederle Laboratories Division is the exclusive
distributor of the Mylan products Maxzide(R) and Maxzide(R) -25MG pursuant to a March,
1984
agreement. The complaint alleged that Cyanamid underpaid the Company based on the terms of
the agreement and that Cyanamid had not met certain obligations under the agreement with
regard to marketing of the products. The Company sought general relief in the form of
compensatory and punitive damages and also sought certain trademark rights to Maxzide(R) and
Maxzide(R) -25MG currently owned by Cyanamid.
On May 30, 1991 Cyanamid filed an Answer and Counterclaim to the complaint filed by
the Company on November 20, 1990. The counterclaim included allegations of fraudulent
inducement and breach of contract regarding the March 1984 Maxzide contract and allegations
of defamation by the Company's former Chairman individually and as an officer of the
Company. Cyanamid sought dismissal of the Company's complaint and compensatory and
punitive damages. The suit was tried in Federal Court for the Northern District of West Virginia.
During 1994 the jury in the Company's lawsuit against Cyanamid ruled in favor of
Cyanamid on the Company's complaint and in favor of the Company on Cyanamid's
counterclaims and the judge dismissed the defamation counterclaim. Both parties appealed and
the Court of Appeals for the Fourth Circuit affirmed the jury's action in all respects. The judge's
decision to dismiss the defamation counterclaim however has been reversed and the case has
been remanded to the lower court for the resolution of this one remaining issue. The Company
and the Estate of the former Chairman have each filed a rit of certiorari with the U.S. Supreme
Court with respect to the reinstatement of the defamation counterclaim. Subsequently, this case
has been transferred to the U.S. District Court for the District of New Jersey.
On November 24, 1992, Marion Merrell Dow Inc. ("MMD") and Tanabe Seiyaku Co.
LTD ("Tanabe") filed suit in Federal District Court for the Western District of Pennsylvania
against the Company, its wholly-owned subsidiary Mylan Pharmaceuticals Inc., and another
company claiming infringement of Tanabe's patent for the manufacture of diltiazem. MMD and
Tanabe seek permanent injunctive relief and treble damages to compensate for the alleged
infringement and costs of suits. Shortly thereafter MMD and Tanabe filed a complaint with the
International Trade Commission ("ITC"), setting forth the same allegations. On motion by the
plaintiff the District Court action was stayed pending the outcome of the ITC proceedings. In
May 1995, the Administrative Law Judge for the ITC ruled in favor of the Company on all
counts. The ruling was appealed by MMD and Tanabe and in June 1995 the Commission upheld
the ruling in Mylan's favor. This case remains subject to appeal by MMD and Tanabe.
On September 7, 1994, Upsher-Smith Laboratories filed suit in Minnesota State Court
against the Company and its wholly-owned subsidiary Mylan Pharmaceuticals Inc. The suit
alleges breach of contract, breach of implied contract, detrimental reliance and promissory
estoppel with respect to the sale and distribution of cimetidine. The Company believes this
lawsuit is without merit and intends to vigorously defend its position.
While it is not feasible to predict the ultimate outcome of such proceedings it is the
opinion of management that the outcome of these suits will have no material adverse effect on
the Company's operation, financial position, or liquidity.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of the Company's executive officers are as follows:
Milan Puskar 60 Chairman, Chief Executive Officer and
President
Dana G. Barnett 54 Executive Vice President
Louis J. DeBone 49 Vice President-Operations
Roger L. Foster 48 Vice President-General Counsel
Roderick P. Jackson 55 Senior Vice President
Joseph J. Krivulka 43 Vice President
Dr. John P. O'Donnell 49 Vice President-Research and
Quality Control
Patricia Sunseri 55 Vice President-Investor and
Public Relations
C.B. Todd 61 Senior Vice President
Robert W. Smiley 73 Secretary
Mr. Puskar was employed by the manufacturing subsidiary of the Company from 1961 to
1972 and served in various positions including: Secretary-Treasurer, Executive Vice President
and member of the Board of Directors. In addition, he has served as a partner in several
pharmaceutical firms in foreign countries. Mr. Puskar has served as President of the Company
since 1976 and as Chairman and Chief Executive Officer since November of 1993.
Mr. Barnett has been a Vice President of the Company since 1974. His principal
occupation since 1966 has been in various management positions with the manufacturing
subsidiary of the Company. His responsibilities have covered production, quality control and
product development. He became Senior Vice President in 1978 and Executive Vice President in
1987. Since June of 1991, he also serves as President and Chief Executive Officer of Somerset
Pharmaceuticals, Inc., a joint venture subsidiary of the Company.
Mr. DeBone has been employed by the Company since September, 1987. Prior to
assuming his present position in November, 1991 as Vice President-Operations he served as Vice
President-Quality Control. He was previously employed with the Company from March, 1976
until June, 1986 and served as Director of Manufacturing.
Mr. Foster has been employed by the Company since May, 1984. Prior to assuming his
present position in June, 1995 as Vice President-General Counsel he served as Director of Legal
Services and as Director of Governmental Affairs.
Mr. Jackson has been employed by the Company since April, 1986. Prior to assuming
his present position in October, 1992 as Senior Vice President he served as Vice
President-Marketing and Sales.
Mr. Krivulka has been employed by the Company since March, 1990. Prior to assuming
his present position in April, 1992 as Vice President he served as Assistant to the President.
Since April of 1993, he also serves as President of Bertek, Inc., a subsidiary of the Company.
From 1989 to 1990 he was employed by Janssen Pharmaceutica, a division of Johnson &
Johnson, as Executive Director of Business Unit Management.
Dr. John O'Donnell has been employed by the Company since 1983. Prior to assuming
his present position in November, 1991 as Vice President-Research and Quality Control, he
served as Vice President-Research and Product Development and as Director of Chemistry and
Product Development.
Mrs. Sunseri has been employed by the Company since 1984. Prior to assuming her
present position in October, 1989 as Vice President-Investor & Public Relations, she served as
Director of Investor Relations.
Mr. Todd has been employed by the Company since 1970. Prior to assuming his present
position in October, 1987 as Senior Vice President, Mr. Todd served as Vice President-Quality
Control. He also serves as President of Mylan Pharmaceuticals Inc., a subsidiary of the
Company.
Mr. Smiley has been Secretary of the Company for approximately twenty years and on
December 12, 1975, he was elected to the Board of Directors. His principal occupation is and for
approximately forty-one years has been an attorney-at-law in Pittsburgh, Pennsylvania. He was a
partner in the law firm of Smiley, McGinty and Steger, general counsel to the Company. On
October 1, 1992 Mr. Smiley joined the law firm of Doepken Keevican Weiss & Medved
Professional Corporation.
There is no family relationship between any of the above executive officers. Officers of
the Company serve at the pleasure of the Board of Directors.
PART II
ITEM 5. Market for Registrant's Common Equity and
Related Stockholder Matters
The information required by item 5 is hereby incorporated by reference to pp. 36 and 52
of the accompanying Annual Report to Shareholders for the year ended March 31, 1995.
ITEM 6. Selected Financial Data
The information required by item 6 is hereby incorporated by reference to p. 36 of the
accompanying Annual Report to Shareholders for the year ended March 31, 1995.
ITEM 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations
The information required by item 7 is hereby incorporated by reference to pp. 37-39 of
the accompanying Annual Report to Shareholders for the year ended March 31, 1995.
ITEM 8. Financial Statements and Supplementary Data
The information required by item 8 is hereby incorporated by reference to pp. 40-52 of
the accompanying Annual Report to Shareholders for the year ended March 31, 1995.
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information as to directors required by item 10 is hereby incorporated by reference to
pp. 1-3 of the Company's 1995 Proxy Statement. Information concerning executive officers is
provided in Part I of this report under the caption "Executive Officers of the Registrant".
ITEM 11. Executive Compensation
The information required by item 11 is hereby incorporated by reference to pp. 3-13 of
the Company's 1995 Proxy Statement.
ITEM 12. Security Ownership of Certain
Beneficial Owners and Management
The information required by item 12 is hereby incorporated by reference to p. 13 of the
Company's 1995 Proxy Statement.
ITEM 13. Certain Relationships and Related Transactions
Not applicable.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. List of Financial Statements
Page
Number
INCLUDED IN ANNUAL REPORT TO SHAREHOLDERS:
Consolidated Balance Sheets . . . . . . . . . . . . . . 40-41
Consolidated Statements of Earnings . . . . . . . . . . 42
Consolidated Statements of Shareholders' Equity . . . . 43
Consolidated Statements of Cash Flows . . . . . . . . . 44-45
Notes to Consolidated Financial Statements. . . . . . . 46-51
Independent Auditors' Report. . . . . . . . . . . . . . 52
2. Financial Statement Schedules
The information required by this item is incorporated herein by reference
to Exhibit 99. All other schedules have been omitted because they are
not required.
3. Exhibits
(3)(a) Amended and Restated Articles of Incorporation of the registrant,
filed as Exhibit (3)(a) to Form 10-Q for quarter ended June 30,
1992 and incorporated herein by reference.
(b) By-laws of the registrant, as amended to date, filed as Exhibit 3(b)
to Form 10-Q for the quarter ended June 30, 1992 and incorporated herein by
reference.
(10)(a) 1986 Incentive Stock Option Plan, as amended to date, filed as Exhibit 10(b)
to Form 10-K for fiscal year ended March 31, 1993 and incorporated herein
by reference.
(b) "Salary Continuation Plan" with Milan Puskar, Dana G. Barnett and C.B.
Todd each dated as of January 27, 1995 and filed herewith.
RETIREMENT BENEFIT AGREEMENT
This Retirement Benefit Agreement (the "Agreement") is entered into on this 27th day of
January, 1995 (the "Effective Date") by and between:
Mylan Laboratories Inc.,
a Pennsylvania Corporation,
with offices located at
781 Chestnut Ridge Road,
Morgantown, WV 26505
(hereinafter referred to as
"Mylan" or "Company").
and
Milan Puskar,
an employee of Mylan
who resides at
Lakeview Resort,
Route 8, Box 88-A
Morgantown WV 26505,
(hereinafter referred to as
"Employee or "Puskar").
WHEREAS the Company and Employee, in recognition of Employee's long and valuable
contribution to the success of the Company, entered into a Salary Continuation Agreement on April
1, 1990; and
WHEREAS Employee continues to perform valuable services for the Company; and
WHEREAS in recognition of his continuing service to Mylan, the Company wishes to
provide Employee with financial assistance with respect to certain Contingencies, in addition to
that provided for in said April 1, 1990 Agreement; and
WHEREAS the Company and Employee wish to RESCIND, and to REPLACE said
Salary Continuation Agreement with this Agreement;
WITNESSETH THEREFORE that in consideration of the additional benefits provided for
hereunder, the premises and covenants set forth herein, and other good and valuable consideration,
the sufficiency of which is hereby acknowledged, the Company and Employee, intending to be
legally bound, agree as follows:
I. DEFINITIONS
Whenever used in the Agreement the following terms shall be defined as follows:
(a) "Advisor" or "Advisors" shall mean with respect to Employee any person including
lawyers, accountants, estate planners and others, with whom he may wish to review and discuss
the matters set forth herein.
(b) "Agreement" shall mean this Retirement Benefit Agreement which is entered into
on the 27th day of January, 1995.
(c) "At-Will" shall mean with respect to the period of Puskar's employment with Mylan,
that the Company is under no obligation to continue to employ Puskar for any period of time, and
can terminate his employment at any time without notice, subject to certain statutory and regulatory
requirements; and that Employee is under no obligation to remain employed by the Company, and
can terminate his employment with Mylan at any time, without notice.
(d) "Contingency" shall mean Retirement or death.
(e) "Mylan" or "Company" shall mean Mylan Laboratories Inc., its subsidiaries and
affiliates.
(f) "Net Present Value" ("NPV") shall mean the present value at any given time of the
entire benefit to be paid, discounted at seven percent (7%) per annum.
(g) "Party" or "Parties" shall mean the Company or Employee, or both the Company
and Employee depending upon which term is required by the context in which it is used.
(h) "Retire" or "Retirement" shall mean the day and date on which Puskar's employment
with the Company is terminated by either Party for any reason other than death of the Employee.
(i) "Successor" shall mean any person, partnership, limited partnership, joint-venture,
corporation, trust or any other entity or organization who, subsequent to the Effective Date, comes
into possession of or acquires, either directly or indirectly, all or substantially all of the Company's
business, assets or voting stock, or the right to direct the business activities and practices of the
Company.
II. RESCISSION OF PRIOR AGREEMENT
The Salary Continuation Agreement entered into by the Parties on April 1, 1990 and any
and all other agreements, express or implied, which may have been entered into by them prior to
the execution of this Agreement, including by way of example and not of limitation,
any agreement which addresses or is related to salary continuation, deferred compensation,
employment, or similar matters (excluding agreements related to stock options) are hereby
RESCINDED by the mutual consent of the Parties hereto upon execution of this Agreement.
THEREFORE THE PARTIES ACKNOWLEDGE THAT ANY RIGHTS AND
OBLIGATIONS SET FORTH IN ANY SUCH AGREEMENT, WHETHER
EXPRESS OR IMPLIED, ARE FOREVER WAIVED, NULL AND VOID, AND
UNENFORCEABLE AT LAW OR IN EQUITY.
III. RETIREMENT
3.1 Upon his Retirement from the Company, and if he is eligible to receive payments as
provided for elsewhere herein, Employee shall receive an annual retirement benefit equal to the
amount set forth below.
3.2 Should Employee Retire after the Effective Date but on or before March 31, 1996 he
shall receive two hundred fifty thousand dollars ($250,000.00) each year for fifteen (15) years.
3.3 Should Employee Retire after March 31, 1996 he shall receive three hundred thousand
dollars ($300,000.00) each year for fifteen (15) years.
3.4 The Company shall pay each of the fifteen (15) annual payments due hereunder in
twelve (12) equal or substantially equal installments. The first of any such payments shall be made
on the first day of the month following the month in which Employee Retires, and each subsequent
payment shall be made on the first day of each successive month until Mylan's obligations with
respect to such payments have been satisfied.
3.5 However, upon the written request of the Employee, Mylan may pay to Employee
the NPV of any amount, or of the balance of any such amount, to which he is entitled hereunder
in a lump-sum payment. Said payment shall be paid within thirty (30) days of the date of
Employee's request for such payment.
IV. AWARD OF ADDITIONAL RETIREMENT BENEFITS
4.1 The Company may increase the retirement benefit to which Employee is entitled
under Article III. Any such increases shall be subject to the following conditions:
(a) the maximum benefit to which Employee is entitled under Article III shall not exceed
five hundred thousand dollars ($500,000.00) per year for fifteen (15) years;
(b) no increases shall be granted earlier than April 1, 1996 or later than April 1, 2000;
(c) any increase shall be expensed for accounting purposes at the time it is granted;
(d) the Company's obligation to pay the increased benefit to Employee, if and when such
increases are awarded, shall be subject to all the terms and conditions set forth herein; and
(e) the inclusion herein of any increase in Employee's retirement benefit shall become
effective upon Employee's receipt of a notice from the Company informing him of the additional
benefit.
V. CAPACITY TO PERFORM DUTIES
5.1 Should Employee become unable to perform the material and substantial duties of his
position the Company shall pay to Employee five hundred thousand dollars ($500,000.00) each
year for fifteen (15) years in equal or substantially equal payments. However, upon the written
request of the Employee, Mylan may pay to Employee the NPV of any amount, or of the balance
of any such amount, to which he is entitled hereunder in a lump-sum payment. Said payment shall
be paid within thirty (30) days of the date of Employee's request for such payment.
5.2 The certification of a licensed physician as to Employee's inability to perform the
material and substantial duties of his position shall be conclusive with respect to his status, and the
Company agrees to be unequivocally bound by any such certification.
5.3 If the Employee receives the benefit described in 5.1 on an annual basis, and
during the period in which he receives benefits Employee dies, his beneficiary shall be entitled to
the balance, if any, as if Employee had taken payments pursuant to Article III, or as Article III may
be amended by Article IV. The beneficiary shall receive the payment provided for in either 3.2
or 3.3 or as 3.3 may be amended by Article IV, for fifteen (15) years, less the number of years
during which Employee received payments pursuant to 5.1.
VI. DEATH BENEFIT
6.1 If the Employee dies prior to his Retirement, and while employed by Mylan, the
Company shall pay to his beneficiary the sum of one million six hundred thousand dollars
($1,600,000.00) within thirty (30) days of Employee's death.
6.2 In addition to the benefits set forth in 6.1, the Company shall maintain for
Employee's benefit during his employment with the Company life insurance policies in the
aggregate amount of one million six hundred forty five thousand dollars ($1,645,000.00).
6.3 If the Employee's death occurs after Retirement, but before having received the
entire benefit provided for under Article III (or as Article III may be amended by Article IV) or
Article V, the balance of the fifteen (15) payments due thereunder shall be paid to Employee's
beneficiary in a lump-sum payment equal to the NPV of the remaining payments due.
VII. SUCCESSORSHIP
This Agreement in its entirety shall be binding upon and enforceable against the Company
and its Successors.
VIII. NO DUPLICATION OF PAYMENTS
Notwithstanding anything to the contrary which may be set forth elsewhere herein, under
no circumstances is Employee or his beneficiary entitled to take benefits under more than any one
article included in this Agreement, except in so far as Article III may be amended by Article IV.
IX. EMPLOYEE CONDUCT WITH RESPECT TO COMPETITORS
9.1 Employee agrees that he will not, without the prior written consent of the Company,
directly or indirectly, whether as an employee, officer, director, independent contractor, consultant,
stockholder, partner or otherwise, engage in or assist others to engage in or have any interest in any
business which competes with the Company in any geographic area in which the Company markets
or has marketed its products during the year preceding termination of Puskar's employment for the
greater of:
(a) the period during which Employee receives monthly payments under this Agreement;
or
(b) five (5) years following his receipt of a lump-sum payment hereunder.
9.2 Notwithstanding anything to the contrary set forth elsewhere herein, stock ownership
in a competing business shall not be a breach of this Agreement, provided such stock is traded on
a national exchange.
9.3 The Parties agree and acknowledge that the time, scope and geographic area and other
provisions of this Agreement have been specifically negotiated by the Parties, and Employee
specifically hereby agrees that such time, scope and geographic area and other provisions are
reasonable under these circumstances. Employee further agrees that if, despite the express
agreement of the Parties to this Agreement, a court should hold any portion of this Agreement
unenforceable for any reason, the maximum restrictions of time, scope and geographic area
reasonable under the circumstances, as determined by the court, will be substituted for the
restrictions herein which such court may find to be unreasonable or unenforceable.
9.4 The Parties acknowledge that the breach of 9.1 will be such that the Company will
not have an adequate remedy at law because the rights of the Company under this Agreement are
of a specialized and unique character, and that immediate and irreparable damage will result to the
Company if Employee breaches his obligations under 9.1. The Company may, in addition to any
other remedies and damages available, seek an injunction in the courts of the State of West Virginia
and the United States District Court for the Northern District of West Virginia to restrain any such
breach. Employee represents and warrants that his expertise and capabilities are such that his
obligations under 9.1 will not prevent him from earning a living.
X. CONSULTING SERVICES
10.1 During the ten (10) year period beginning on the day following Employee's
Retirement he shall, at the request of the Company, act in the capacity of a consultant for the
Company, performing such services as may be consistent with those performed by him during his
employment. These services may be designated by the President of the Company, or his authorized
representative, and shall be reasonable in scope, duration and frequency.
10.2 The Company shall pay the Employee for such consulting services an hourly rate
to be determined by the Parties at such time, but not less than two hundred fifty dollars ($250.00)
per hour, payable monthly.
10.3 In addition to the foregoing, the Company shall reimburse the Employee monthly
for any and all out-of-pocket expenses incurred by the Employee directly for the benefit of the
business of the Company.
XI. ELIGIBILITY FOR PAYMENT
11.1 Any and all payments due hereunder, may be denied if not already begun, or
terminated if they have begun, if in the Company's sole judgment Employee is either not eligible
for such payments, or once such payments have begun is found to be or found to have been
ineligible.
11.2 Employee shall not be eligible for any payments hereunder if the Company, in its
sole discretion, finds that during or subsequent to his employment with the Company he:
(a) breaches, or has breached any term, provision or obligation enumerated herein;
(b) committed any act by commission or omission which materially and substantially
adversely affects the Company's business or reputation; or
(c) is convicted of any violation of the Federal Food, Drug and Cosmetic Act, or the
violation of any other statute relevant to the Company's business.
11.3 Should Employee be paid any benefits hereunder and thereafter be found ineligible,
or to have been ineligible, he must return to the Company that portion of the benefit paid to him
for the period of his ineligibility.
XII. RIGHT TO CONFER
12.1 Employee shall have the right, but not the obligation to:
(a) Confer with any Advisor of his choice prior to signing the Agreement; and
(b) Provide his Advisors with a true and complete copy of the Agreement, and
any other pertinent documents which may be of assistance to his Advisors.
12.2 Should Employee decline the right to confer with his Advisors prior to executing
this Agreement he shall execute an acknowledgement of same which shall then be incorporated
herein by reference. (See Exhibit A)
XIII. NO PROMISE OF CONTINUED EMPLOYMENT
13.1 Employee acknowledges his employment with the Company is AT-WILL.
13.2 Nothing set forth herein shall constitute or be construed as a contract of employment
except in so far as provided for under 13.1 hereof.
XIV. RESTRICTION OF ALIENABILITY
Benefits payable to the Employee or beneficiary shall not be subject to assignment, transfer,
attachment, execution, garnishment, sequestration, or any other seizure under any legal or equitable
process, whether on account of the Employee's or beneficiary's act or by operation of the law.
XV. CONTRACT ADMINISTRATOR
The Director of Taxation and Accounting of the Company, or other officer of Mylan
designated by the Executive Committee of the Company is hereby named the Contract
Administrator for purposes of assuring compliance with the terms and conditions set forth herein.
XVI. MODIFICATION
Except as provided for in Articles IV and IX, this Agreement may not be changed, amended
or otherwise modified other than by a written statement; Provided, such statement is signed by both
Parties, expresses their intent to change the Agreement, and specifically describes such changes.
XVII. HEADINGS
Except when referenced in the body of this Agreement article headings are set forth herein
for the purpose of convenience only. Such headings shall not be considered or otherwise referred
to when any question or issue arises with respect to the application or interpretation of any term
or condition set forth herein.
XVIII. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which is to be
considered an original, and taken together as one and the same document.
XIX. GOVERNING LAW
Any an all actions between the Parties regarding the interpretation or application of any
term or provision set forth herein shall be governed by and interpreted in accordance with the
substantive laws, and not the law of conflicts, of the State of West Virginia. The Company and
Employee each do hereby respectively consent and agree that the courts of the State of West
Virginia shall have jurisdiction, and venue shall properly lie with the courts of the State of West
Virginia, with respect to any and all actions brought hereunder.
XX. SINGULAR OR PLURAL
The singular form of any noun or pronoun shall include the plural when the context in
which such word is used is such that it is apparent the singular is intended to include the plural and
vice versa.
XXI. ASSIGNMENT
The Agreement may not be assigned by either Party, without the written authorization of
the other Party. A Successor shall not be considered an assignee for purposes of this Article.
XXII. ENTIRE AGREEMENT
The terms and conditions set forth herein contain the entire agreement between the
Company and Employee, and supersede any and all prior agreements or understandings (whether
express or implied) between the Parties with respect to the matters set forth herein.
XXIII. SURVIVAL
Articles I, II, IX, X, XI, XIX and XXIII shall survive any expiration or termination of this
Agreement.
XXIV. TERM
The term of this Agreement shall begin on the Effective Date and shall end on the date on which
Mylan makes the last payment to which it is obligated hereunder.
IN WITNESS of their agreement to the terms and conditions set forth herein the Company
and Employee have caused the following signatures to be affixed hereto:
MYLAN LABORATORIES INC. MILAN PUSKAR
BY:________________________ BY:________________________
TITLE:_____________________ DATE:______________________
DATE:______________________
EXHIBIT A
ACKNOWLEDGEMENT
I, Milan Puskar, hereby acknowledge and understand that I have been given the opportunity
to review and discuss the terms of the Agreement with an Advisor of my choice prior to signing
the Agreement. I have decided that it is not necessary for me to discuss this matter with an
Advisor, and therefore I decline the opportunity to do so.
No one has discouraged me or otherwise attempted to influence me with regard to my
decision to decline the opportunity to discuss this matter with my Advisors. My refusal of this
offer is entirely my own and is made without any reservation or conditions whatsoever.
WITNESSED BY:
__________________ DATE:_________ BY:__________________ DATE:________
__________________ DATE:_________
RETIREMENT BENEFIT AGREEMENT
This Retirement Benefit Agreement (the "Agreement") is entered into on this 27th day of
January, 1995 (the "Effective Date") by and between:
Mylan Laboratories Inc.,
a Pennsylvania Corporation,
with offices located at
781 Chestnut Ridge Road,
Morgantown, WV 26505
(hereinafter referred to as
"Mylan" or "Company").
and
Dana G. Barnett,
an employee of Mylan
who resides at
923 Anchorage Road,
Tampa, FL 33602
(hereinafter referred to as
"Employee or "Barnett").
WHEREAS the Company and Employee, in recognition of Employee's long and valuable
contribution to the success of the Company, entered into a Salary Continuation Agreement on April
1, 1990; and
WHEREAS Employee continues to perform valuable services for the Company; and
WHEREAS in recognition of his continuing service to Mylan, the Company wishes to
provide Employee with financial assistance with respect to certain Contingencies, in addition to
that provided for in said April 1, 1990 Agreement; and
WHEREAS the Company and Employee wish to RESCIND, and to REPLACE said
Salary Continuation Agreement with this Agreement;
WITNESSETH THEREFORE that in consideration of the additional benefits provided for
hereunder, the premises and covenants set forth herein, and other good and valuable consideration,
the sufficiency of which is hereby acknowledged, the Company and Employee, intending to be
legally bound, agree as follows:
I. DEFINITIONS
Whenever used in the Agreement the following terms shall be defined as follows:
(a) "Advisor" or "Advisors" shall mean with respect to Employee any person including
lawyers, accountants, estate planners and others, with whom he may wish to review and discuss
the matters set forth herein.
(b) "Agreement" shall mean this Retirement Benefit Agreement which is entered into
on the 27th day of January, 1995.
(c) "At-Will" shall mean with respect to the period of Barnett's employment with
Mylan, that the Company is under no obligation to continue to employ Barnett for any period of
time, and can terminate his employment at any time without notice, subject to certain statutory and
regulatory requirements; and that Employee is under no obligation to remain employed by the
Company, and can terminate his employment with Mylan at any time, without notice.
(d) "Contingency" shall mean Retirement or death.
(e) "Mylan" or "Company" shall mean Mylan Laboratories Inc., its subsidiaries and
affiliates.
(f) "Net Present Value" ("NPV") shall mean the present value at any given time of the
entire benefit to be paid, discounted at seven percent (7%) per annum.
(g) "Party" or "Parties" shall mean the Company or Employee, or both the Company
and Employee depending upon which term is required by the context in which it is used.
(h) "Retire" or "Retirement" shall mean the day and date on which Barnett's
employment with the Company is terminated by either Party for any reason other than death of the
Employee.
(i) "Successor" shall be mean any person, partnership, limited partnership, joint-venture, corporation,
trust or any other entity or organization who, subsequent to the Effective
Date, comes into possession of or acquires, either directly or indirectly, all or substantially all of
the Company's business, assets or voting stock, or the right to direct the business activities and
practices of the Company.
II. RESCISSION OF PRIOR AGREEMENT
The Salary Continuation Agreement entered into by the Parties on April 1, 1990 and any
and all other agreements, express or implied, which may have been entered into by them prior to
the execution of this Agreement, including by way of example and not of limitation, any agreement
which addresses or is related to salary continuation, deferred compensation, employment, or similar
matters (excluding agreements related to stock options) are hereby RESCINDED by the mutual
consent of the Parties hereto upon execution of this Agreement.
THEREFORE THE PARTIES ACKNOWLEDGE THAT ANY RIGHTS AND
OBLIGATIONS SET FORTH IN ANY SUCH AGREEMENT, WHETHER
EXPRESS OR IMPLIED, ARE FOREVER WAIVED, NULL AND VOID, AND
UNENFORCEABLE AT LAW OR IN EQUITY.
III. RETIREMENT
3.1 Upon his Retirement from the Company, and if he is eligible to receive payments as
provided for elsewhere herein, Employee shall receive an annual retirement benefit equal to the
amount set forth below.
3.2 Should Employee Retire after the Effective Date but on or before March 31, 1996 he
shall receive one hundred fifty thousand dollars ($150,000.00) each year for fifteen (15) years.
3.3 Should Employee Retire after March 31, 1996 he shall receive one hundred eighty
thousand dollars ($180,000.00) each year for fifteen (15) years.
3.4 The Company shall pay each of the fifteen (15) annual payments due hereunder in
twelve (12) equal or substantially equal installments. The first of any such payments shall be made
on the first day of the month following the month in which Employee Retires, and each subsequent
payment shall be made on the first day of each successive month until Mylan's obligations with
respect to such payments have been satisfied.
3.5 However, upon the written request of the Employee, Mylan may pay to Employee
the NPV of any amount, or of the balance of any such amount, to which he is entitled hereunder
in a lump-sum payment. Said payment shall be paid within thirty (30) days of the date of
Employee's request for such payment.
IV. AWARD OF ADDITIONAL RETIREMENT BENEFITS
4.1 The Company may increase the retirement benefit to which Employee is entitled
under Article III. Any such increases shall be subject to the following conditions:
(a) the maximum benefit to which Employee is entitled under Article III shall not exceed
three hundred thousand dollars ($300,000.00) per year for fifteen (15) years;
(b) no increases shall be granted earlier than April 1, 1996 or later than April 1, 2000;
(c) any increase shall be expensed for accounting purposes at the time it is granted;
(d) the Company's obligation to pay the increased benefit to Employee, if and when such
increases are awarded shall be subject to all the terms and conditions set forth herein; and
(e) the inclusion herein of any increase in Employee's retirement benefit shall become
effective upon Employee's receipt of a notice from the Company informing him of the additional
benefit.
V. CAPACITY TO PERFORM DUTIES
5.1 Should Employee become unable to perform the material and substantial duties of his
position the Company shall pay to Employee three hundred thousand dollars ($300,000.00) each
year for fifteen (15) years in equal or substantially equal payments. However, upon the written
request of the Employee, Mylan may pay to Employee the NPV of any amount, or of the balance
of any such amount, to which he is entitled to hereunder in a lump-sum payment. Said payment
shall be paid within thirty (30) days of the date of Employee's request for such payment.
5.2 The certification of a licensed physician as to Employee's inability to perform the
material and substantial duties of his position shall be conclusive with respect to his status, and the
Company agrees to be unequivocally bound by any such certification.
5.3 If the Employee receives the benefit described in 5.1 on an annual basis, and
during the period in which he receives benefits Employee dies, his beneficiary shall be entitled to
the balance, if any, as if Employee had taken payments pursuant to Article III, or as Article III may
be amended by Article IV. The beneficiary shall receive the payment provided for in either 3.2
or 3.3 or as 3.3 may be amended by Article IV, for fifteen (15) years, less the number of years
during which Employee received payments pursuant to 5.1.
VI. DEATH BENEFIT
6.1 The Company shall maintain for Employee's benefit during his employment with
the Company life insurance policies in the aggregate amount of one million five hundred thousand
dollars ($1,500,000.00).
6.2 If the Employee's death occurs after Retirement, but before having received the
entire benefit provided for under Article III (or as Article III may be amended by Article IV) or
Article V, the balance of the fifteen (15) payments due thereunder shall be paid to Employee's
beneficiary in a lump-sum payment equal to the NPV of the remaining payments due.
VII. SUCCESSORSHIP
This Agreement in its entirety shall be binding upon and enforceable against the Company
and its Successors.
VIII. NO DUPLICATION OF PAYMENTS
Notwithstanding anything to the contrary which may be set forth elsewhere herein, under
no circumstances is Employee or his beneficiary entitled to take benefits under more than any one
article included in this Agreement, except in so far as Article III may be amended by Article IV.
IX. EMPLOYEE CONDUCT WITH RESPECT TO COMPETITORS
9.1 Employee agrees that he will not, without the prior written consent of the Company,
directly or indirectly, whether as an employee, officer, director, independent contractor, consultant,
stockholder, partner or otherwise, engage in or assist others to engage in or have any interest in any
business which competes with the Company in any geographic area in which the Company markets
or has marketed its products during the year preceding termination of Barnett's employment for the
greater of:
(a) the period during which Employee receives monthly payments under this Agreement;
or
(b) five (5) years following his receipt of a lump-sum payment hereunder.
9.2 Notwithstanding anything to the contrary set forth elsewhere herein, stock ownership
in a competing business shall not be a breach of this Agreement, provided such stock is traded on
a national exchange.
9.3 The Parties agree and acknowledge that the time, scope and geographic area and other
provisions of this Agreement have been specifically negotiated by the Parties, and Employee
specifically hereby agrees that such time, scope and geographic area and other provisions are
reasonable under these circumstances. Employee further agrees that if, despite the express
agreement of the Parties to this Agreement, a court should hold any portion of this Agreement
unenforceable for any reason, the maximum restrictions of time, scope and geographic area
reasonable under the circumstances, as determined by the court, will be substituted for the
restrictions herein which such court may find to be unreasonable or unenforceable.
9.4 The Parties acknowledge that the breach of 9.1 will be such that the Company will
not have an adequate remedy at law because the rights of the Company under this Agreement are
of a specialized and unique character, and that immediate and irreparable damage will result to the
Company if Employee breaches his obligations under 9.1. The Company may, in addition to any
other remedies and damages available, seek an injunction in the courts of the State of West Virginia
and the United States District Court for the Northern District of West Virginia to restrain any such
breach. Employee represents and warrants that his expertise and capabilities are such that his
obligations under 9.1 will not prevent him from earning a living.
X. CONSULTING SERVICES
10.1 During the ten (10) year period beginning on the day following Employee's
Retirement he shall, at the request of the Company, act in the capacity of a consultant for the
Company, performing such services as may be consistent with those performed by him during his
employment. These services may be designated by the President of the Company, or his authorized
representative, and shall be reasonable in scope duration and frequency.
10.2 The Company shall pay the Employee for such consulting services an hourly rate
to be determined by the Parties at such time, but not less than one hundred fifty dollars ($150.00)
per hour, payable monthly.
10.3 In addition to the foregoing, the Company shall reimburse the Employee monthly
for any and all out-of-pocket expenses incurred by the Employee directly for the benefit of the
business of the Company.
XI. ELIGIBILITY FOR PAYMENT
11.1 Any and all payments due hereunder, may be denied if not already begun, or
terminated if they have begun, if in the Company's sole judgment Employee is either not eligible
for such payments, or once such payments have begun is found to be or found to have been
ineligible.
11.2 Employee shall not be eligible for any payments hereunder if the Company, in its
sole discretion, finds that during or subsequent to his employment with the Company he:
(a) breaches, or has breached any term, provision or obligation enumerated herein;
(b) committed any act by commission or omission which materially and substantially
adversely affects the Company's business or reputation; or
(c) is convicted of any violation of the Federal Food, Drug and Cosmetic Act, or the
violation of any other statute relevant to the Company's business.
11.3 Should Employee be paid any benefits hereunder and thereafter be found ineligible,
or to have been ineligible, he must return to the Company that portion of the benefit paid to him
for the period of his ineligibility.
XII. RIGHT TO CONFER
12.1 Employee shall have the right, but not the obligation to:
(a) Confer with any Advisor of his choice prior to signing the Agreement; and
(b) Provide his Advisors with a true and complete copy of the Agreement, and
any other pertinent documents which may be of assistance to his Advisors.
12.2 Should Employee decline the right to confer with his Advisors prior to executing
this Agreement he shall execute an acknowledgement of same which shall then be incorporated
herein by reference. (See Exhibit A)
XIII. NO PROMISE OF CONTINUED EMPLOYMENT
13.1 Employee acknowledges his employment with the Company is AT-WILL.
13.2 Nothing set forth herein shall constitute or be construed as a contract of employment
except in so far as provided for under 13.1 hereof.
XIV. RESTRICTION OF ALIENABILITY
Benefits payable to the Employee or beneficiary shall not be subject to assignment, transfer,
attachment, execution, garnishment, sequestration, or any other seizure under any legal or equitable
process, whether on account of the Employee's or beneficiary's act or by operation of the law.
XV. CONTRACT ADMINISTRATOR
The Director of Taxation and Accounting of the Company, or other officer of Mylan
designated by the Executive Committee of the Company is hereby named the Contract
Administrator for purposes of assuring compliance with the terms and conditions set forth herein.
XVI. MODIFICATION
Except as provided for in Articles IV and IX, this Agreement may not be changed, amended
or otherwise modified other than by a written statement; Provided, such statement is signed by both
Parties, expresses their intent to change the Agreement, and specifically describes such changes.
XVII. HEADINGS
Except when referenced in the body of this Agreement article headings are set forth herein
for the purpose of convenience only. Such headings shall not be considered or otherwise referred
to when any question or issue arises with respect to the application or interpretation of any term
or condition set forth herein.
XVIII. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which is to be
considered an original, and taken together as one and the same document.
XIX. GOVERNING LAW
Any an all actions between the Parties regarding the interpretation or application of any
term or provision set forth herein shall be governed by and interpreted in accordance with the
substantive laws, and not the law of conflicts, of the State of West Virginia. The Company and
Employee each do hereby respectively consent and agree that the courts of the State of West
Virginia shall have jurisdiction, and venue shall properly lie with the courts of the State of West
Virginia, with respect to any and all actions brought hereunder.
XX. SINGULAR OR PLURAL
The singular form of any noun or pronoun shall include the plural when the context in
which such word is used is such that it is apparent the singular is intended to include the plural and
vice versa.
XXI. ASSIGNMENT
The Agreement may not be assigned by either Party, without the written authorization of
the other Party. A Successor shall not be considered an assignee for purposes of this Article.
XXII. ENTIRE AGREEMENT
The terms and conditions set forth herein contain the entire agreement between the
Company and Employee, and supersede any and all prior agreements or understandings (whether
express or implied) between the Parties with respect to the matters set forth herein.
XXIII. SURVIVAL
Articles I, II, IX, X, XI, XIX and XXIII shall survive any expiration or termination of this
Agreement.
XXIV. TERM
The term of this Agreement shall begin on the Effective Date and shall end on the date on which
Mylan makes the last payment to which it is obligated hereunder.
IN WITNESS of their agreement to the terms and conditions set forth herein the Company
and Employee have caused the following signatures to be affixed hereto:
MYLAN LABORATORIES INC. DANA G. BARNETT
BY:________________________ BY:________________________
TITLE:_____________________ DATE:______________________
DATE:______________________
EXHIBIT A
ACKNOWLEDGEMENT
I, Dana G. Barnett, hereby acknowledge and understand that I have been given the
opportunity to review and discuss the terms of the Agreement with an Advisor of my choice prior
to signing the Agreement. I have decided that it is not necessary for me to discuss this matter with
an Advisor, and therefore I decline the opportunity to do so.
No one has discouraged me or otherwise attempted to influence me with regard to my
decision to decline the opportunity to discuss this matter with my Advisors. My refusal of this
offer is entirely my own and is made without any reservation or conditions whatsoever.
WITNESSED BY:
__________________ DATE:_________ BY:__________________ DATE:________
__________________ DATE:_________
RETIREMENT BENEFIT AGREEMENT
This Retirement Benefit Agreement (the "Agreement") is entered into on this 27th day of
January, 1995 (the "Effective Date") by and between:
Mylan Laboratories Inc.,
a Pennsylvania Corporation,
with offices located at
781 Chestnut Ridge Road,
Morgantown, WV 26505
(hereinafter referred to as
"Mylan" or "Company").
and
Clarence B. Todd,
an employee of Mylan
who resides at
38 Lakeview Drive,
Morgantown, WV 26505
(hereinafter referred to as
"Employee or "Todd").
WHEREAS the Company and Employee, in recognition of Employee's long and valuable
contribution to the success of the Company, entered into a Salary Continuation Agreement on April
1, 1990; and
WHEREAS Employee continues to perform valuable services for the Company; and
WHEREAS in recognition of his continuing service to Mylan, the Company wishes to
provide Employee with financial assistance with respect to certain Contingencies, in addition to
that provided for in said April 1, 1990 Agreement; and
WHEREAS the Company and Employee wish to RESCIND, and to REPLACE said
Salary Continuation Agreement with this Agreement;
WITNESSETH THEREFORE that in consideration of the additional benefits provided for
hereunder, the premises and covenants set forth herein, and other good and valuable consideration,
the sufficiency of which is hereby acknowledged, the Company and Employee, intending to be
legally bound, agree as follows:
I. DEFINITIONS
Whenever used in the Agreement the following terms shall be defined as follows:
(a) "Advisor" or "Advisors" shall mean with respect to Employee any person including
lawyers, accountants, estate planners and others, with whom he may wish to review and discuss
the matters set forth herein.
(b) "Agreement" shall mean this Retirement Benefit Agreement which is entered into
on the 27th day of January, 1995.
(c) "At-Will" shall mean with respect to the period of Todd's employment with Mylan,
that the Company is under no obligation to continue to employ Todd for any period of time, and
can terminate his employment at any time without notice, subject to certain statutory and regulatory
requirements; and that Employee is under no obligation to remain employed by the Company, and
can terminate his employment with Mylan at any time, without notice.
(d) "Contingency" shall mean Retirement or death.
(e) "Mylan" or "Company" shall mean Mylan Laboratories Inc., its subsidiaries and
affiliates.
(f) "Net Present Value" ("NPV") shall mean the present value at any given time of the
entire benefit to be paid, discounted at seven percent (7%) per annum.
(g) "Party" or "Parties" shall mean the Company or Employee, or both the Company
and Employee depending upon which term is required by the context in which it is used.
(h) "Retire" or "Retirement" shall mean the day and date on which Todd's employment
with the Company is terminated by either Party for any reason other than death of the Employee.
(i) "Successor" shall mean any person, partnership, limited partnership, joint-venture,
corporation, trust or any other entity or organization who, subsequent to the Effective Date, comes
into possession of or acquires, either directly or indirectly, all or substantially all of the Company's
business, assets or voting stock, or the right to direct the business activities and practices of the
Company.
II. RESCISSION OF PRIOR AGREEMENT
The Salary Continuation Agreement entered into by the Parties on April 1, 1990 and any
and all other agreements, express or implied, which may have been entered into by them prior to
the execution of this Agreement, including by way of example and not of limitation, any agreement
which addresses or is related to salary continuation, deferred compensation, employment, or similar
matters (excluding agreements related to stock options) are hereby RESCINDED by the mutual
consent of the Parties hereto upon execution of this Agreement.
THEREFORE THE PARTIES ACKNOWLEDGE THAT ANY RIGHTS AND
OBLIGATIONS SET FORTH IN ANY SUCH AGREEMENT, WHETHER
EXPRESS OR IMPLIED, ARE FOREVER WAIVED, NULL AND VOID, AND
UNENFORCEABLE AT LAW OR IN EQUITY.
III. RETIREMENT
3.1 Upon his Retirement from the Company, and if he is eligible to receive payments as
provided for elsewhere herein, Employee shall receive an annual retirement benefit equal to the
amount set forth below.
3.2 Should Employee Retire after the Effective Date but on or before March 31, 1996 he
shall receive one hundred fifty thousand dollars ($150,000.00) each year for fifteen (15) years.
3.3 Should Employee Retire after March 31, 1996 he shall receive one hundred eighty
thousand dollars ($180,000.00) each year for fifteen (15) years.
3.4 The Company shall pay each of the fifteen (15) annual payments due hereunder in
twelve (12) equal or substantially equal installments. The first of any such payments shall be made
on the first day of the month following the month in which Employee Retires, and each subsequent
payment shall be made on the first day of each successive month until Mylan's obligations with
respect to such payments have been satisfied.
3.5 However, upon the written request of the Employee, Mylan may pay to Employee
the NPV of any amount, or of the balance of any such amount, to which he is entitled hereunder
in a lump-sum payment. Said payment shall be paid within thirty (30) days of the date of
Employee's request for such payment.
IV. AWARD OF ADDITIONAL RETIREMENT BENEFITS
4.1 The Company may increase the retirement benefit to which Employee is entitled
under Article III. Any such increases shall be subject to the following conditions:
(a) the maximum benefit to which Employee is entitled under Article III shall not exceed
three hundred thousand dollars ($300,000.00) per year for fifteen (15) years;
(b) no increases shall be granted earlier than April 1, 1996 or later than April 1, 2000;
(c) any increase shall be expensed for accounting purposes at the time it is granted;
(d) the Company's obligation to pay the increased benefit to Employee, if and when such
increases are awarded shall be subject to all the terms and conditions set forth herein; and
(e) the inclusion herein of any increase in Employee's retirement benefit shall become
effective upon Employee's receipt of a notice from the Company informing him of the additional
benefit.
V. CAPACITY TO PERFORM DUTIES
5.1 Should Employee become unable to perform the material and substantial duties of his
position the Company shall pay to Employee three hundred thousand dollars ($300,000.00) each
year for fifteen (15) years in equal or substantially equal payments. However, upon the written
request of the Employee, Mylan may pay to Employee the NPV of any amount, or of the balance
of any such amount, to which he is entitled to hereunder in a lump-sum payment. Said payment
shall be paid within thirty (30) days of the date of Employee's request for such payment.
5.2 The certification of a licensed physician as to Employee's inability to perform the
material and substantial duties of his position shall be conclusive with respect to his status, and the
Company agrees to be unequivocally bound by any such certification.
5.3 If the Employee receives the benefit described in 5.1 on an annual basis, and
during the period in which he receives benefits Employee dies, his beneficiary shall be entitled to
the balance, if any, as if Employee had taken payments pursuant to Article III, or as Article III may
be amended by Article IV. The beneficiary shall receive the payment provided for in either 3.2
or 3.3 or as 3.3 may be amended by Article IV, for fifteen (15) years, less the number of years
during which Employee received payments pursuant to 5.1.
VI. DEATH BENEFIT
6.1 The Company shall maintain for Employee's benefit during his employment with
the Company life insurance policies in the aggregate amount of one million five hundred thousand
dollars ($1,500,000.00).
6.2 If the Employee's death occurs after Retirement, but before having received the
entire benefit provided for under Article III (or as Article III may be amended by Article IV) or
Article V, the balance of the fifteen (15) payments due thereunder shall be paid to Employee's
beneficiary in a lump-sum payment equal to the NPV of the remaining payments due.
VII. SUCCESSORSHIP
This Agreement in its entirety shall be binding upon and enforceable against the Company
and its Successors.
VIII. NO DUPLICATION OF PAYMENTS
Notwithstanding anything to the contrary which may be set forth elsewhere herein, under
no circumstances is Employee or his beneficiary entitled to take benefits under more than any one
article included in this Agreement, except in so far as Article III may be amended by Article IV.
IX. EMPLOYEE CONDUCT WITH RESPECT TO COMPETITORS
9.1 Employee agrees that he will not, without the prior written consent of the Company,
directly or indirectly, whether as an employee, officer, director, independent contractor, consultant,
stockholder, partner or otherwise, engage in or assist others to engage in or have any interest in any
business which competes with the Company in any geographic area in which the Company markets
or has marketed its products during the year preceding termination of Todd's employment for the
greater of:
(a) the period during which Employee receives monthly payments under this Agreement;
or
(b) five (5) years following his receipt of a lump-sum payment hereunder.
9.2 Notwithstanding anything to the contrary set forth elsewhere herein, stock ownership
in a competing business shall not be a breach of this Agreement, provided such stock is traded on
a national exchange.
9.3 The Parties agree and acknowledge that the time, scope and geographic area and other
provisions of this Agreement have been specifically negotiated by the Parties, and Employee
specifically hereby agrees that such time, scope and geographic area and other provisions are
reasonable under these circumstances. Employee further agrees that if, despite the express
agreement of the Parties to this Agreement, a court should hold any portion of this Agreement
unenforceable for any reason, the maximum restrictions of time, scope and geographic area
reasonable under the circumstances, as determined by the court, will be substituted for the
restrictions herein which such court may find to be unreasonable or unenforceable.
9.4 The Parties acknowledge that the breach of 9.1 will be such that the Company will
not have an adequate remedy at law because the rights of the Company under this Agreement are
of a specialized and unique character, and that immediate and irreparable damage will result to the
Company if Employee breaches his obligations under 9.1. The Company may, in addition to any
other remedies and damages available, seek an injunction in the courts of the State of West Virginia
and the United States District Court for the Northern District of West Virginia to restrain any such
breach. Employee represents and warrants that his expertise and capabilities are such that his
obligations under 9.1 will not prevent him from earning a living.
X. CONSULTING SERVICES
10.1 During the ten (10) year period beginning on the day following Employee's
Retirement he shall, at the request of the Company, act in the capacity of a consultant for the
Company, performing such services as may be consistent with those performed by him during his
employment. These services may be designated by the President of the Company, or his authorized
representative, and shall be reasonable in scope duration and frequency.
10.2 The Company shall pay the Employee for such consulting services an hourly rate
to be determined by the Parties at such time, but not less than one hundred fifty dollars ($150.00)
per hour, payable monthly.
10.3 In addition to the foregoing, the Company shall reimburse the Employee monthly
for any and all out-of-pocket expenses incurred by the Employee directly for the benefit of the
business of the Company.
XI. ELIGIBILITY FOR PAYMENT
11.1 Any and all payments due hereunder, may be denied if not already begun, or
terminated if they have begun, if in the Company's sole judgment Employee is either not eligible
for such payments, or once such payments have begun is found to be or found to have been
ineligible.
11.2 Employee shall not be eligible for any payments hereunder if the Company, in its
sole discretion, finds that during or subsequent to his employment with the Company he:
(a) breaches, or has breached any term, provision or obligation enumerated herein;
(b) committed any act by commission or omission which materially and substantially
adversely affects the Company's business or reputation; or
(c) is convicted of any violation of the Federal Food, Drug and Cosmetic Act, or the
violation of any other statute relevant to the Company's business.
11.3 Should Employee be paid any benefits hereunder and thereafter be found ineligible,
or to have been ineligible, he must return to the Company that portion of the benefit paid to him
for the period of his ineligibility.
XII. RIGHT TO CONFER
12.1 Employee shall have the right, but not the obligation to:
(a) Confer with any Advisor of his choice prior to signing the Agreement; and
(b) Provide his Advisors with a true and complete copy of the Agreement, and
any other pertinent documents which may be of assistance to his Advisors.
12.2 Should Employee decline the right to confer with his Advisors prior to executing
this Agreement he shall execute an acknowledgement of same which shall then be incorporated
herein by reference. (See Exhibit A)
XIII. NO PROMISE OF CONTINUED EMPLOYMENT
13.1 Employee acknowledges his employment with the Company is AT-WILL.
13.2 Nothing set forth herein shall constitute or be construed as a contract of employment
except in so far as provided for under 13.1 hereof.
XIV. RESTRICTION OF ALIENABILITY
Benefits payable to the Employee or beneficiary shall not be subject to assignment, transfer,
attachment, execution, garnishment, sequestration, or any other seizure under any legal or equitable
process, whether on account of the Employee's or beneficiary's act or by operation of the law.
XV. CONTRACT ADMINISTRATOR
The Director of Taxation and Accounting of the Company, or other officer of Mylan
designated by the Executive Committee of the Company is hereby named the Contract
Administrator for purposes of assuring compliance with the terms and conditions set forth herein.
XVI. MODIFICATION
Except as provided for in Articles IV and IX, this Agreement may not be changed, amended
or otherwise modified other than by a written statement; Provided, such statement is signed by both
Parties, expresses their intent to change the Agreement, and specifically describes such changes.
XVII. HEADINGS
Except when referenced in the body of this Agreement article headings are set forth herein
for the purpose of convenience only. Such headings shall not be considered or otherwise referred
to when any question or issue arises with respect to the application or interpretation of any term
or condition set forth herein.
XVIII. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which is to be
considered an original, and taken together as one and the same document.
XIX. GOVERNING LAW
Any an all actions between the Parties regarding the interpretation or application of any
term or provision set forth herein shall be governed by and interpreted in accordance with the
substantive laws, and not the law of conflicts, of the State of West Virginia. The Company and
Employee each do hereby respectively consent and agree that the courts of the State of West
Virginia shall have jurisdiction, and venue shall properly lie with the courts of the State of West
Virginia, with respect to any and all actions brought hereunder.
XX. SINGULAR OR PLURAL
The singular form of any noun or pronoun shall include the plural when the context in
which such word is used is such that it is apparent the singular is intended to include the plural and
vice versa.
XXI. ASSIGNMENT
The Agreement may not be assigned by either Party, without the written authorization of
the other Party. A Successor shall not be considered an assignee for purposes of this Article.
XXII. ENTIRE AGREEMENT
The terms and conditions set forth herein contain the entire agreement between the
Company and Employee, and supersede any and all prior agreements or understandings (whether
express or implied) between the Parties with respect to the matters set forth herein.
XXIII. SURVIVAL
Articles I, II, IX, X, XI, XIX and XXIII shall survive any expiration or termination of this
Agreement.
XXIV. TERM
The term of this Agreement shall begin on the Effective Date and shall end on the date on which
Mylan makes the last payment to which it is obligated hereunder.
IN WITNESS of their agreement to the terms and conditions set forth herein the Company
and Employee have caused the following signatures to be affixed hereto:
MYLAN LABORATORIES INC. CLARENCE B. TODD
BY:________________________ BY:________________________
TITLE:_____________________ DATE:______________________
DATE:______________________
EXHIBIT A
ACKNOWLEDGEMENT
I, Clarence B. Todd, hereby acknowledge and understand that I have been given the
opportunity to review and discuss the terms of the Agreement with an Advisor of my choice prior
to signing the Agreement. I have decided that it is not necessary for me to discuss this matter with
an Advisor, and therefore I decline the opportunity to do so.
No one has discouraged me or otherwise attempted to influence me with regard to my
decision to decline the opportunity to discuss this matter with my Advisors. My refusal of this
offer is entirely my own and is made without any reservation or conditions whatsoever.
WITNESSED BY:
__________________ DATE:_________ BY:__________________ DATE:________
__________________ DATE:_________
(c) "Salary Continuation Plan" with Roderick P. Jackson and
Louis J. DeBone each dated March 14, 1995 and filed
herewith.
RETIREMENT BENEFIT AGREEMENT
This Retirement Benefit Agreement (the "Agreement") is entered into on this 14th day of
March, 1995 (the "Effective Date") by and between:
Mylan Laboratories Inc.,
a Pennsylvania Corporation,
with offices located at
781 Chestnut Ridge Road,
Morgantown, WV 26505
(hereinafter referred to as
"Mylan" or "Company").
and
Roderick P. Jackson,
an employee of Mylan
who resides at
1456 Lakeland Avenue,
Morgantown, WV 26505
(hereinafter referred to as
"Employee" or "Jackson").
WHEREAS the Company and Employee, in recognition of Employee 's long and valuable
contribution to the success of the Company, entered into a Salary Continuation Agreement on April
1, 1989; and
WHEREAS Employee continues to perform valuable services for the Company; and
WHEREAS in recognition of his continuing service to Mylan, the Company wishes to
provide Employee with financial assistance with respect to certain Contingencies, in addition to
that provided for in said April 1, 1989 Agreement; and
WHEREAS the Company and Employee wish to RESCIND, and to REPLACE said
Salary Continuation Agreement with this Agreement;
WITNESSETH THEREFORE that in consideration of the additional benefits provided for
hereunder, the premises and covenants set forth herein, and other good and valuable consideration,
the sufficiency of which is hereby acknowledged, the Company and Employee, intending to be
legally bound, agree as follows:
I. DEFINITIONS
Whenever used in the Agreement the following terms shall be defined as follows:
(a) "Advisor" or "Advisors" shall mean with respect to Employee any person including
lawyers, accountants, estate planners and others, with whom he may wish to review and discuss
the matters set forth herein.
(b) "Agreement" shall mean this Retirement Benefit Agreement which is entered into
on the 14th day of March, 1995.
(c) "At-Will" shall mean with respect to the period of Jackson's employment with
Mylan, that the Company is under no obligation to continue to employ Jackson for any period of
time, and can terminate his employment at any time without notice, subject to certain statutory and
regulatory requirements; and that Employee is under no obligation to remain employed by the
Company, and can terminate his employment with Mylan at any time, without notice.
(d) "Change of Control" shall mean:
(1) The acquisition (other than from the Company) by any person, entity or
"group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act"), excluding, for this purpose, the Company or its subsidiaries, or any
employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of
voting securities of the Company (within the meaning of Rule 13d-3 promulgated under the
Exchange Act), or legal ownership of 20% or more of either the then outstanding shares of
common stock or the combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(2) Individuals who, as of the date hereof, constitute the Board (as of the date
hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent to the date hereof whose election, or
nomination for election, by the Company's shareholders was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a member of the Incumbent
Board; or
(3) Approval by the shareholders of the Company of a reorganization, merger,
consolidation, or other action with respect to which persons who were the shareholders of the
Company immediately prior to such reorganization, merger or consolidation, or other action do not,
immediately thereafter, own more than 50% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or consolidated company's then
outstanding voting securities, or of the sale of all or substantially all of the assets of the Company.
(e) "Contingency" shall mean Retirement or death.
(f) "Mylan" or "Company" shall mean Mylan Laboratories Inc., its subsidiaries and
affiliates.
(g) "Net Present Value" ("NPV") shall mean the present value at any given time of the
benefit to be paid, discounted at seven percent (7%) per annum.
(h) "Party" or "Parties" shall mean the Company or Employee, or both the Company
and Employee depending upon which term is required by the context in which it is used.
(i) "Retire" or "Retirement" shall mean the day and date on which Jackson's
employment with the Company is terminated by either Party for any reason other than death of the
Employee.
(j) "Successor" shall mean any person, partnership, limited partnership, joint-venture,
corporation, trust or any other entity or organization who, subsequent to the Effective Date, comes
into possession of or acquires, either directly or indirectly, all or substantially all of the Company's
business, assets or voting stock, or the right to direct the business activities and practices of the
Company.
B
II. RESCISSION OF PRIOR AGREEMENT
The Salary Continuation Agreement entered into by the Parties on April 1, 1989 and any
and all other agreements, express or implied, which may have been entered into by them prior to
the execution of this Agreement, including by way of example and not of limitation, any agreement
which addresses or is related to salary continuation, deferred compensation, employment, or similar
matters (excluding agreements related to stock options) are hereby RESCINDED by the mutual
consent of the Parties hereto upon execution of this Agreement.
THEREFORE THE PARTIES ACKNOWLEDGE THAT ANY RIGHTS AND
OBLIGATIONS SET FORTH IN ANY SUCH AGREEMENT, WHETHER
EXPRESS OR IMPLIED, ARE FOREVER WAIVED, NULL AND VOID, AND
UNENFORCEABLE AT LAW OR IN EQUITY.
III. RETIREMENT
3.1 Upon his Retirement from the Company, and if he is eligible to receive payments as
provided for elsewhere herein, Employee shall receive an annual retirement benefit equal to the
amount set forth below.
3.2 Should Employee Retire after the Effective Date but on or before March 31, 1996 he
shall receive thirty six thousand dollars ($36,000.00) each year for ten (10) years.
3.3 Should Employee Retire after March 31, 1996 but on or before March 31, 1997 he shall
receive seventy thousand dollars ($70,000.00) each year for ten (10) years.
3.4 Should Employee Retire after March 31, 1997 but on or before March 31, 1998 he
shall receive eighty thousand dollars ($80,000.00) each year for ten (10) years.
3.5 Should Employee Retire after March 31, 1998 but on or before March 31, 1999 he
shall receive ninety thousand dollars ($90,000.00) each year for ten (10) years.
3.6 Should Employee Retire after March 31, 1999 he shall receive one hundred
thousand dollars ($100,000.00) each year for ten (10) years.
3.7 Should Employee become unable to perform the material and substantial duties of
his position prior to March 31, 1999, he shall receive, pursuant to 4.1, one hundred thousand
dollars ($100,000.00) each year for ten (10) years in lieu of any benefit specified in Sections 3.2
through 3.6 hereof.
3.8 The Company shall pay the amount due hereunder in equal or substantially equal
monthly installments. The first of any such payments shall be made on the first day of the month
following the month in which Employee Retires, and each subsequent payment shall be made on
the first day of each successive month until Mylan's obligations with respect to such payments have
been satisfied.
3.9 However, upon the written request of the Employee, Mylan may pay to Employee
the NPV of any amount, or of the balance of any such amount, to which he is entitled hereunder
in a lump-sum payment. If the Company grants the request for a lump sum payment, said payment
shall be paid within thirty (30) days of the date of Employee's request.
IV. CAPACITY TO PERFORM DUTIES
4.1 The certification of a licensed physician selected by the Company as to Employee's
inability to perform the material and substantial duties of his position shall be conclusive with
respect to his status regarding the application of 3.7 hereof.
V. DEATH BENEFIT
5.1 The Company shall maintain for Employee's benefit during his employment with
the Company life insurance policies in the aggregate amount of one million two hundred fifty
thousand dollars ($1,250,000.00).
5.2 If the Employee's death occurs after Retirement, but before having received the
entire benefit provided for under Article III hereof, the balance of the payments due thereunder
shall be paid to Employee's beneficiary in a lump-sum payment equal to the NPV of the remaining
payments.
VI. EFFECT OF CHANGE OF CONTROL
6.1 Upon a Change of Control Jackson shall receive, in lieu of the annual payments
provided for under Article III, the NPV of One Hundred Thousand Dollars ($100,000.00) per year
for ten (10) years; provided Jackson is employed by the Company at or immediately prior to the
Change of Control.
6.2 If a Change of Control occurs after his retirement, but before having received the
entire benefit provided for under Article III hereof, the balance of the payments due thereunder
shall be paid to Employee in a lump-sum payment equal to the NPV of the remaining payments.
VII. SUCCESSORSHIP
This Agreement in its entirety shall be binding upon and enforceable against the Company
and its Successors.
VIII. NO DUPLICATION OF PAYMENTS
Notwithstanding anything to the contrary which may be set forth elsewhere herein, under
no circumstances is Employee or his beneficiary entitled to take benefits under more than any one
article included in this Agreement.
IX. EMPLOYEE CONDUCT WITH RESPECT TO COMPETITORS
9.1 Employee agrees that he will not, without the prior written consent of the Company,
directly or indirectly, whether as an employee, officer, director, independent contractor, consultant,
stockholder, partner or otherwise, engage in or assist others to engage
in or have any interest in any business which competes with the Company in any geographic area
in which the Company markets or has marketed its products during the year preceding termination
of Jackson's employment for the greater of:
(a) the period during which Employee receives monthly payments under this Agreement;
or
(b) three (3) years following his receipt of a lump-sum payment hereunder.
9.2 Notwithstanding anything to the contrary set forth elsewhere herein, stock ownership
in a competing business shall not be a breach of this Agreement, provided such stock is traded on
a national exchange.
9.3 The Parties agree and acknowledge that the time, scope and geographic area and other
provisions of this Agreement have been specifically negotiated by the Parties, and Employee
specifically hereby agrees that such time, scope and geographic area and other provisions are
reasonable under these circumstances. Employee further agrees that if, despite
the express agreement of the Parties to this Agreement, a court should hold any portion of this
Agreement unenforceable for any reason, the maximum restrictions of time, scope and geographic
area reasonable under the circumstances, as determined by the court, will be substituted for the
restrictions herein which such court may find to be unreasonable or unenforceable.
9.4 The Parties acknowledge that the breach of 10.1 will be such that the Company will
not have an adequate remedy at law because the rights of the Company under this Agreement are
of a specialized and unique character, and that immediate and irreparable damage will result to the
Company if Employee breaches his obligations under 10.1. The Company may, in addition to
any other remedies and damages available, seek an injunction in the courts of the State of West
Virginia and the United States District Court for the Northern District of West Virginia to restrain
any such breach. Employee represents and warrants that his expertise and capabilities are such that
his obligations under 10.1 will not prevent him from earning a living.
X. CONSULTING SERVICES
10.1 During the five (5) year period beginning on the day following Employee's
Retirement he shall, at the request of the Company, act in the capacity of a consultant for the
Company, performing such services as may be consistent with those performed by him during his
Employee's employment. These services may be designated by the President of the
Company, or his authorized representative, and shall be reasonable in scope duration and
frequency.
[B
10.2 The Company shall pay the Employee for such consulting services an hourly rate
to be determined by the Parties at such time, but not less than one hundred fifty dollars ($150.00)
per hour, payable monthly.
10.3 In addition to the foregoing, the Company shall reimburse the Employee monthly
for any and all out-of-pocket expenses incurred by the Employee directly for the benefit of the
business of the Company.
XI. ELIGIBILITY FOR PAYMENT
11.1 Any and all payments due hereunder, may be denied if not already begun, or
terminated if they have begun, if in the Company's sole judgment Employee is either not eligible
for such payments, or once such payments have begun is found to be or found to have been
ineligible.
11.2 Employee shall not be eligible for any payments hereunder if the Company, in its
sole discretion, finds that during or subsequent to his employment with the Company he:
(a) breaches, or has breached any term, provision or obligation enumerated herein;
(b) committed any act by commission or omission which materially and substantially
adversely affects the Company's business or reputation; or
(c) is convicted of any violation of the Federal Food, Drug and Cosmetic Act, or the
violation of any other statute of material relevance to the Company's business.
11.3 Should Employee be paid any benefits hereunder and thereafter be found ineligible,
or to have been ineligible, he must return to the Company that portion of the benefit paid to him
for the period of his ineligibility.
XII. RIGHT TO CONFER
12.1 Employee shall have the right, but not the obligation to:
(a) Confer with any Advisor of his choice prior to signing the Agreement; and
(b) Provide his Advisors with a true and complete copy of the Agreement, and
any other pertinent documents which may be of assistance to his Advisors.
12.2 Should Employee decline the right to confer with his Advisors prior to executing
this Agreement he shall execute an acknowledgement of same which shall then be incorporated
herein by reference. (See Exhibit A)
XIII. NO PROMISE OF CONTINUED EMPLOYMENT
13.1 Employee acknowledges his employment with the Company is AT-WILL.
13.2 Nothing set forth herein shall constitute or be construed as a contract of employment
except in so far as provided for under 13.1 hereof.
XIV. RESTRICTION OF ALIENABILITY
Benefits payable to the Employee or beneficiary shall not be subject to assignment, transfer,
attachment, execution, garnishment, sequestration, or any other seizure under any legal or equitable
process, whether on account of the Employee's or beneficiary's act or by operation of the law.
XV. CONTRACT ADMINISTRATOR
The Director of Taxation and Accounting of the Company, or other officer of Mylan
designated by the Executive Committee of the Company is hereby named the Contract
Administrator for purposes of assuring compliance with the terms and conditions set forth herein.
XVI. MODIFICATION
This Agreement may not be changed, amended or otherwise modified other than by a
written statement; Provided, such statement is signed by both Parties, expresses their intent to
change the Agreement, and specifically describes such changes.
XVII. HEADINGS
Except when referenced in the body of this Agreement article headings are set forth herein
for the purpose of convenience only. Such headings shall not be considered or otherwise referred
to when any question or issue arises with respect to the application or interpretation of any term
or condition set forth herein.
XVIII. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which is to be
considered an original, and taken together as one and the same document.
XIX. GOVERNING LAW
Any an all actions between the Parties regarding the interpretation or application of any
term or provision set forth herein shall be governed by and interpreted in accordance with the
substantive laws, and not the law of conflicts, of the State of West Virginia. The Company and
Employee each do hereby respectively consent and agree that the courts of the State of West
Virginia shall have jurisdiction, and venue shall properly lie with the courts of the State of West
Virginia, with respect to any and all actions brought hereunder.
XX. SINGULAR OR PLURAL
The singular form of any noun or pronoun shall include the plural when the context in
which such word is used is such that it is apparent the singular is intended to include the plural and
vice versa.
XXI. ASSIGNMENT
The Agreement may not be assigned by either Party, without the written authorization of
the other Party. A Successor shall not be considered an assignee for purposes of this Article.
XXII. ENTIRE AGREEMENT
The terms and conditions set forth herein contain the entire agreement between the
Company and Employee, and supersede any and all prior agreements or understandings (whether
express or implied) between the Parties with respect to the matters set forth herein.
XXIII. SURVIVAL
Articles I, II, IX, X, XI, XIX, and XXIII shall survive any expiration or termination of this
Agreement.
XXIV. TERM
The term of this Agreement shall begin on the Effective Date and shall end on the date on
which Mylan makes the last payment to which it is obligated hereunder.
XXV. AWARD OF ADDITIONAL RETIREMENT BENEFITS
25.1 The Company may increase the retirement benefit to which Employee is entitled
under Article III. Any such increases shall be subject to the following conditions:
(a) the maximum benefit to which Employee is entitled under Article III shall not
exceed one hundred fifty thousand dollars ($150,000.00) per year for ten (10) years;
(b) no increases shall be granted earlier than April 1, 2000;
(c) any increase shall be expensed for accounting purposes at the time it is granted;
(d) the Company's obligation to pay the increased benefit to Employee, if and when
such increases are awarded shall be subject to all the terms and conditions set forth herein; and
(e) the inclusion herein of any increase in Employee's retirement benefit shall become
effective upon Employee's receipt of a notice from the Company informing him of the additional
benefit.
IN WITNESS of their agreement to the terms and conditions set forth herein the Company
and Employee have caused the following signatures to be affixed hereto:
MYLAN LABORATORIES INC. RODERICK P. JACKSON
BY:________________________ BY:________________________
TITLE:_____________________ DATE:______________________
DATE:______________________
EXHIBIT A
ACKNOWLEDGEMENT
I, Roderick P. Jackson, hereby acknowledge and understand that I have been given the
opportunity to review and discuss the terms of the Agreement with an Advisor of my choice prior
to signing the Agreement. I have decided that it is not necessary for me to discuss this matter with
an Advisor, and therefore I decline the opportunity to do so.
No one has discouraged me or otherwise attempted to influence me with regard to my
decision to decline the opportunity to discuss this matter with my Advisors. My refusal of this
offer is entirely my own and is made without any reservation or conditions whatsoever.
WITNESSED BY:
__________________ DATE:_________ BY:__________________ DATE:________
__________________ DATE:_________
RETIREMENT BENEFIT AGREEMENT
This Retirement Benefit Agreement (the "Agreement") is entered into on this 14th day of
March, 1995 (the "Effective Date") by and between:
Mylan Laboratories Inc.,
a Pennsylvania Corporation,
with offices located at
781 Chestnut Ridge Road,
Morgantown, WV 26505
(hereinafter referred to as
"Mylan" or "Company").
and
Louis J. DeBone,
an employee of Mylan
who resides at
4 Poplar Woods Drive,
Morgantown, WV 26505
(hereinafter referred to as
"Employee" or "DeBone").
WHEREAS the Company and Employee, in recognition of Employee 's long and valuable
contribution to the success of the Company, entered into a Salary Continuation Agreement on April
1, 1989; and
WHEREAS Employee continues to perform valuable services for the Company; and
WHEREAS in recognition of his continuing service to Mylan, the Company wishes to
provide Employee with financial assistance with respect to certain Contingencies, in addition to
that provided for in said April 1, 1989 Agreement; and
WHEREAS the Company and Employee wish to RESCIND, and to REPLACE said
Salary Continuation Agreement with this Agreement;
WITNESSETH THEREFORE that in consideration of the additional benefits provided for
hereunder, the premises and covenants set forth herein, and other good and valuable consideration,
the sufficiency of which is hereby acknowledged, the Company and Employee, intending to be
legally bound, agree as follows:
I. DEFINITIONS
Whenever used in the Agreement the following terms shall be defined as follows:
(a) "Advisor" or "Advisors" shall mean with respect to Employee any person including
lawyers, accountants, estate planners and others, with whom he may wish to review and discuss
the matters set forth herein.
(b) "Agreement" shall mean this Retirement Benefit Agreement which is entered into
on the 14th day of March, 1995.
(c) "At-Will" shall mean with respect to the period of DeBone's employment with
Mylan, that the Company is under no obligation to continue to employ DeBone for any period of
time, and can terminate his employment at any time without notice, subject to certain statutory and
regulatory requirements; and that Employee is under no obligation to remain employed by the
Company, and can terminate his employment with Mylan at any time, without notice.
(d) "Change of Control" shall mean:
(1) The acquisition (other than from the Company) by any person, entity or
"group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act"), excluding, for this purpose, the Company or its subsidiaries, or any
employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of
voting securities of the Company (within the meaning of Rule 13d-3 promulgated under the
Exchange Act), or legal ownership of 20% or more of either the then outstanding shares of
common stock or the combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(2) Individuals who, as of the date hereof, constitute the Board (as of the date
hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent to the date hereof whose election, or
nomination for election, by the Company's shareholders was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a member of the Incumbent
Board; or
(3) Approval by the shareholders of the Company of a reorganization, merger,
consolidation, or other action with respect to which persons who were the shareholders of the
Company immediately prior to such reorganization, merger or consolidation, or other action do not,
immediately thereafter, own more than 50% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or consolidated company's then
outstanding voting securities, or of the sale of all or substantially all of the assets of the Company.
(e) "Contingency" shall mean Retirement or death.
(f) "Mylan" or "Company" shall mean Mylan Laboratories Inc., its subsidiaries and
affiliates.
(g) "Net Present Value" ("NPV") shall mean the present value at any given time of the
benefit to be paid, discounted at seven percent (7%) per annum.
(h) "Party" or "Parties" shall mean the Company or Employee, or both the Company
and Employee depending upon which term is required by the context in which it is used.
(i) "Retire" or "Retirement" shall mean the day and date on which DeBone's
employment with the Company is terminated by either Party for any reason other than death of the
Employee.
(j) "Successor" shall mean any person, partnership, limited partnership, joint-venture,
corporation, trust or any other entity or organization who, subsequent to the Effective Date, comes
into possession of or acquires, either directly or indirectly, all or substantially all of the Company's
business, assets or voting stock, or the right to direct the business activities and practices of the
Company.
B
II. RESCISSION OF PRIOR AGREEMENT
The Salary Continuation Agreement entered into by the Parties on April 1, 1989 and any
and all other agreements, express or implied, which may have been entered into by them prior to
the execution of this Agreement, including by way of example and not of limitation, any agreement
which addresses or is related to salary continuation, deferred compensation, employment, or similar
matters (excluding agreements related to stock options) are hereby RESCINDED by the mutual
consent of the Parties hereto upon execution of this Agreement.
THEREFORE THE PARTIES ACKNOWLEDGE THAT ANY RIGHTS AND
OBLIGATIONS SET FORTH IN ANY SUCH AGREEMENT, WHETHER
EXPRESS OR IMPLIED, ARE FOREVER WAIVED, NULL AND VOID, AND
UNENFORCEABLE AT LAW OR IN EQUITY.
III. RETIREMENT
3.1 Upon his Retirement from the Company, and if he is eligible to receive payments as
provided for elsewhere herein, Employee shall receive an annual retirement benefit equal to the
amount set forth below.
3.2 Should Employee Retire after the Effective Date but on or before March 31, 1996 he
shall receive thirty six thousand dollars ($36,000.00) each year for ten (10) years.
3.3 Should Employee Retire after March 31, 1996 but on or before March 31, 1997 he shall
receive seventy thousand dollars ($70,000.00) each year for ten (10) years.
3.4 Should Employee Retire after March 31, 1997 but on or before March 31, 1998 he
shall receive eighty thousand dollars ($80,000.00) each year for ten (10) years.
3.5 Should Employee Retire after March 31, 1998 but on or before March 31, 1999 he
shall receive ninety thousand dollars ($90,000.00) each year for ten (10) years.
3.6 Should Employee Retire after March 31, 1999 he shall receive one hundred
thousand dollars ($100,000.00) each year for ten (10) years.
3.7 Should Employee become unable to perform the material and substantial duties of
his position prior to March 31, 1999, he shall receive, pursuant to 4.1, one hundred thousand
dollars ($100,000.00) each year for ten (10) years in lieu of any benefit specified in Sections 3.2
through 3.6 hereof.
3.8 The Company shall pay the amount due hereunder in equal or substantially equal
monthly installments. The first of any such payments shall be made on the first day of the month
following the month in which Employee Retires, and each subsequent payment shall be made on
the first day of each successive month until Mylan's obligations with respect to such payments have
been satisfied.
3.9 However, upon the written request of the Employee, Mylan may pay to Employee
the NPV of any amount, or of the balance of any such amount, to which he is entitled hereunder
in a lump-sum payment. If the Company grants the request for a lump sum payment, said payment
shall be paid within thirty (30) days of the date of Employee's request.
IV. CAPACITY TO PERFORM DUTIES
4.1 The certification of a licensed physician selected by the Company as to Employee's
inability to perform the material and substantial duties of his position shall be conclusive with
respect to his status regarding the application of 3.7 hereof.
V. DEATH BENEFIT
5.1 The Company shall maintain for Employee's benefit during his employment with
the Company life insurance policies in the aggregate amount of one million two hundred fifty
thousand dollars ($1,250,000.00).
5.2 If the Employee's death occurs after Retirement, but before having received the
entire benefit provided for under Article III hereof, the balance of the payments due thereunder
shall be paid to Employee's beneficiary in a lump-sum payment equal to the NPV of the remaining
payments.
VI. EFFECT OF CHANGE OF CONTROL
6.1 Upon a Change of Control DeBone shall receive, in lieu of the annual payments
provided for under Article III, the NPV of One Hundred Thousand Dollars ($100,000.00) per year
for ten (10) years; provided DeBone is employed by the Company at or immediately prior to the
Change of Control.
6.2 If a Change of Control occurs after his retirement, but before having received the
entire benefit provided for under Article III hereof, the balance of the payments due thereunder
shall be paid to Employee in a lump-sum payment equal to the NPV of the remaining payments.
VII. SUCCESSORSHIP
This Agreement in its entirety shall be binding upon and enforceable against the Company
and its Successors.
VIII. NO DUPLICATION OF PAYMENTS
Notwithstanding anything to the contrary which may be set forth elsewhere herein, under
no circumstances is Employee or his beneficiary entitled to take benefits under more than any one
article included in this Agreement.
IX. EMPLOYEE CONDUCT WITH RESPECT TO COMPETITORS
9.1 Employee agrees that he will not, without the prior written consent of the Company,
directly or indirectly, whether as an employee, officer, director, independent contractor, consultant,
stockholder, partner or otherwise, engage in or assist others to engage
in or have any interest in any business which competes with the Company in any geographic area
in which the Company markets or has marketed its products during the year preceding termination
of DeBone's employment for the greater of:
(a) the period during which Employee receives monthly payments under this Agreement;
or
(b) three (3) years following his receipt of a lump-sum payment hereunder.
9.2 Notwithstanding anything to the contrary set forth elsewhere herein, stock ownership
in a competing business shall not be a breach of this Agreement, provided such stock is traded on
a national exchange.
9.3 The Parties agree and acknowledge that the time, scope and geographic area and other
provisions of this Agreement have been specifically negotiated by the Parties, and Employee
specifically hereby agrees that such time, scope and geographic area and other provisions are
reasonable under these circumstances. Employee further agrees that if, despite
the express agreement of the Parties to this Agreement, a court should hold any portion of this
Agreement unenforceable for any reason, the maximum restrictions of time, scope and geographic
area reasonable under the circumstances, as determined by the court, will be substituted for the
restrictions herein which such court may find to be unreasonable or unenforceable.
9.4 The Parties acknowledge that the breach of 10.1 will be such that the Company will
not have an adequate remedy at law because the rights of the Company under this Agreement are
of a specialized and unique character, and that immediate and irreparable damage will result to the
Company if Employee breaches his obligations under 10.1. The Company may, in addition to
any other remedies and damages available, seek an injunction in the courts of the State of West
Virginia and the United States District Court for the Northern District of West Virginia to restrain
any such breach. Employee represents and warrants that his expertise and capabilities are such that
his obligations under 10.1 will not prevent him from earning a living.
X. CONSULTING SERVICES
10.1 During the five (5) year period beginning on the day following Employee's
Retirement he shall, at the request of the Company, act in the capacity of a consultant for the
Company, performing such services as may be consistent with those performed by him during his
Employee's employment. These services may be designated by the President of the
Company, or his authorized representative, and shall be reasonable in scope duration and
frequency.
[B
10.2 The Company shall pay the Employee for such consulting services an hourly rate
to be determined by the Parties at such time, but not less than one hundred fifty dollars ($150.00)
per hour, payable monthly.
10.3 In addition to the foregoing, the Company shall reimburse the Employee monthly
for any and all out-of-pocket expenses incurred by the Employee directly for the benefit of the
business of the Company.
XI. ELIGIBILITY FOR PAYMENT
11.1 Any and all payments due hereunder, may be denied if not already begun, or
terminated if they have begun, if in the Company's sole judgment Employee is either not eligible
for such payments, or once such payments have begun is found to be or found to have been
ineligible.
11.2 Employee shall not be eligible for any payments hereunder if the Company, in its
sole discretion, finds that during or subsequent to his employment with the Company he:
(a) breaches, or has breached any term, provision or obligation enumerated herein;
(b) committed any act by commission or omission which materially and substantially
adversely affects the Company's business or reputation; or
(c) is convicted of any violation of the Federal Food, Drug and Cosmetic Act, or the
violation of any other statute of material relevance to the Company's business.
11.3 Should Employee be paid any benefits hereunder and thereafter be found ineligible,
or to have been ineligible, he must return to the Company that portion of the benefit paid to him
for the period of his ineligibility.
XII. RIGHT TO CONFER
12.1 Employee shall have the right, but not the obligation to:
(a) Confer with any Advisor of his choice prior to signing the Agreement; and
(b) Provide his Advisors with a true and complete copy of the Agreement, and
any other pertinent documents which may be of assistance to his Advisors.
12.2 Should Employee decline the right to confer with his Advisors prior to executing
this Agreement he shall execute an acknowledgement of same which shall then be incorporated
herein by reference. (See Exhibit A)
XIII. NO PROMISE OF CONTINUED EMPLOYMENT
13.1 Employee acknowledges his employment with the Company is AT-WILL.
13.2 Nothing set forth herein shall constitute or be construed as a contract of employment
except in so far as provided for under 13.1 hereof.
XIV. RESTRICTION OF ALIENABILITY
Benefits payable to the Employee or beneficiary shall not be subject to assignment, transfer,
attachment, execution, garnishment, sequestration, or any other seizure under any legal or equitable
process, whether on account of the Employee's or beneficiary's act or by operation of the law.
XV. CONTRACT ADMINISTRATOR
The Director of Taxation and Accounting of the Company, or other officer of Mylan
designated by the Executive Committee of the Company is hereby named the Contract
Administrator for purposes of assuring compliance with the terms and conditions set forth herein.
XVI. MODIFICATION
This Agreement may not be changed, amended or otherwise modified other than by a
written statement; Provided, such statement is signed by both Parties, expresses their intent to
change the Agreement, and specifically describes such changes.
XVII. HEADINGS
Except when referenced in the body of this Agreement article headings are set forth herein
for the purpose of convenience only. Such headings shall not be considered or otherwise referred
to when any question or issue arises with respect to the application or interpretation of any term
or condition set forth herein.
XVIII. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which is to be
considered an original, and taken together as one and the same document.
XIX. GOVERNING LAW
Any an all actions between the Parties regarding the interpretation or application of any
term or provision set forth herein shall be governed by and interpreted in accordance with the
substantive laws, and not the law of conflicts, of the State of West Virginia. The Company and
Employee each do hereby respectively consent and agree that the courts of the State of West
Virginia shall have jurisdiction, and venue shall properly lie with the courts of the State of West
Virginia, with respect to any and all actions brought hereunder.
XX. SINGULAR OR PLURAL
The singular form of any noun or pronoun shall include the plural when the context in
which such word is used is such that it is apparent the singular is intended to include the plural and
vice versa.
XXI. ASSIGNMENT
The Agreement may not be assigned by either Party, without the written authorization of
the other Party. A Successor shall not be considered an assignee for purposes of this Article.
XXII. ENTIRE AGREEMENT
The terms and conditions set forth herein contain the entire agreement between the
Company and Employee, and supersede any and all prior agreements or understandings (whether
express or implied) between the Parties with respect to the matters set forth herein.
XXIII. SURVIVAL
Articles I, II, IX, X, XI, XIX, and XXIII shall survive any expiration or termination of this
Agreement.
XXIV. TERM
The term of this Agreement shall begin on the Effective Date and shall end on the date on
which Mylan makes the last payment to which it is obligated hereunder.
IN WITNESS of their agreement to the terms and conditions set forth herein the Company
and Employee have caused the following signatures to be affixed hereto:
MYLAN LABORATORIES INC. LOUIS J. DEBONE
BY:________________________ BY:________________________
TITLE:_____________________ DATE:______________________
DATE:______________________
EXHIBIT A
ACKNOWLEDGEMENT
I, Louis J. DeBone, hereby acknowledge and understand that I have been given the
opportunity to review and discuss the terms of the Agreement with an Advisor of my choice prior
to signing the Agreement. I have decided that it is not necessary for me to discuss this matter with
an Advisor, and therefore I decline the opportunity to do so.
No one has discouraged me or otherwise attempted to influence me with regard to my
decision to decline the opportunity to discuss this matter with my Advisors. My refusal of this
offer is entirely my own and is made without any reservation or conditions whatsoever.
WITNESSED BY:
__________________ DATE:_________ BY:__________________ DATE:________
__________________ DATE:_________
(d) Employment contract with Milan Puskar dated April 28, 1983, as amended
to date, filed as Exhibit 10(e) to Form 10-K for fiscal year ended March 31,
1993 and incorporated herein by reference.
(e) Split Dollar Life Insurance Arrangement with McKnight Irrevocable Trust
filed as Exhibit 10(g) to Form 10-K for fiscal year ended March 31, 1994
and incorporated herein by reference.
(f) 1992 Nonemployee Director Stock Option Plan filed as Exhibit 10(g) to
Form 10-K for fiscal year ended March 31, 1993 and incorporated herein by
reference.
(g) "Service Benefit Agreement" with Laurence S. DeLynn, John C. Gaisford,
M.D., Richard A. Graciano and Robert W. Smiley, Esq. each dated
January 27, 1995 and filed herewith.
SERVICE BENEFIT AGREEMENT
This Service Benefit Agreement (the "Agreement") is entered into on this 27th day of
January, 1995 (the "Effective Date") by and between:
Mylan Laboratories Inc.,
a Pennsylvania Corporation,
with offices located at
781 Chestnut Ridge Road,
Morgantown, WV 26505
(hereinafter referred to as
"Mylan" or "Company").
and
Laurence S. DeLynn,
a Director of Mylan
who resides at
113 Maple Avenue,
Morgantown, WV 26505
(hereinafter referred to as
"Director or "DeLynn").
WHEREAS Director has and continues to perform valuable services for the Company; and
WHEREAS in recognition of Director's past and continuing service to Mylan, the Company
wishes to provide him with financial assistance with respect to certain Contingencies;
WITNESSETH THEREFORE that in consideration of the benefits to be provided
hereunder, the premises and covenants set forth herein, and other good and valuable consideration,
the sufficiency of which is hereby acknowledged, the Company and Director, intending to be
legally bound, agree as follows:
I. DEFINITIONS
Whenever used in the Agreement the following terms shall be defined as follows:
(a) "Advisor" or "Advisors" shall mean with respect to Director any person including
lawyers, accountants, estate planners and others, with whom he may wish to review and discuss
the matters set forth herein.
(b) "Agreement" shall mean this Service Benefit Agreement which is entered into on
the 27th day of January, 1995.
(c) "Contingency" shall mean retirement or death.
(d) "Mylan" or "Company" shall mean Mylan Laboratories Inc., its subsidiaries and
affiliates.
(e) "Net Present Value" ("NPV") shall mean the present value at any given time of the
entire benefit to be paid, discounted at seven percent (7%) per annum.
(f) "Party" or "Parties" shall mean the Company or Director, or both the Company and
Director depending upon which term is required by the context in which it is used.
(g) "Successor" shall mean any person, partnership, limited partnership, joint-venture,
corporation, trust or any other entity or organization who, subsequent to the Effective Date, comes
into possession of or acquires, either directly or indirectly, all or substantially all of the Company's
business, assets or voting stock, or the right to direct the business activities and practices of the
Company.
(h) "Termination of Service" shall mean the day and date on which Director's service
to the Company is terminated by either Party for any reason other than death of the Director.
II. TERMINATION OF SERVICE
2.1 Upon his Termination of Service to the Company, and if he is eligible to receive
payments as provided for elsewhere herein, Director shall receive an annual benefit equal to the
amount set forth below.
2.2 Should Director cease to serve as a director of Mylan after the Effective Date he shall
receive eighteen thousand dollars ($18,000.00) each year for ten (10) years.
2.3 The Company shall pay each of the ten (10) annual payments due hereunder in
twelve (12) equal or substantially equal installments. The first of any such payments shall be made
on the first day of the month following the month in which Director ceases to serve as a director
of Mylan, and each subsequent payment shall be made on the first day of each successive month
until Mylan's obligations with respect to such payments have been satisfied.
2.4 However, upon the written request of the Director, Mylan may pay to him the NPV
of any amount, or of the balance of any such amount, to which he is entitled hereunder in a lump-sum payment.
Said payment shall be paid within thirty (30) days of the date of Director's request
for such payment.
III. DEATH BENEFIT
3.1 If the Director's death occurs prior to his Termination of Service his beneficiary
shall receive, in a lump-sum payment, the NPV of the benefit to which Director was entitled under
2.2 hereof.
3.2 If Director's death occurs after Termination of Service his beneficiary shall receive,
in a lump-sum payment, the NPV of the remaining benefits to which Director was entitled under
2.2 hereof at the time of his death.
IV. SUCCESSORSHIP
This Agreement in its entirety shall be binding upon and enforceable against the Company
and its Successors.
V. NO DUPLICATION OF PAYMENTS
Notwithstanding anything to the contrary which may be set forth elsewhere herein, under
no circumstances is Director or his beneficiary entitled to take benefits under more than any one
article included in this Agreement.
VI. ELIGIBILITY FOR PAYMENT
6.1 Any and all payments due hereunder, may be denied if not already begun, or
terminated if they have begun, if in the Company's sole judgment Director is either not eligible for
such payments, or once such payments have begun is found to be or found to have been ineligible.
6.2 Director shall not be eligible for any payments hereunder if the Company, in its sole
discretion, finds that during or subsequent to his service to the Company he:
(a) breaches, or has breached any term, provision or obligation enumerated herein;
(b) committed any act by commission or omission which materially and substantially
adversely affects the Company's business or reputation; or
(c) is convicted of any violation of the Federal Food, Drug and Cosmetic Act, or the
violation of any other statute relevant to the Company's business.
6.3 Should Director be paid any benefits hereunder and thereafter be found ineligible,
or to have been ineligible, he must return to the Company that portion of the benefit paid to him
for the period of his ineligibility.
VII. RIGHT TO CONFER
7.1 Director shall have the right, but not the obligation to:
(a) Confer with any Advisor of his choice prior to signing the Agreement; and
(b) Provide his Advisors with a true and complete copy of the Agreement, and
any other pertinent documents which may be of assistance to his Advisors.
7.2 Should Director decline the right to confer with his Advisors prior to executing this
Agreement he shall execute an acknowledgement of same which shall then be incorporated herein
by reference. (See Exhibit A)
VIII. CONTRACT ADMINISTRATOR
The Director of Taxation and Accounting of the Company, or other officer of Mylan
designated by the Executive Committee of the Company is hereby named the Contract
Administrator for purposes of assuring compliance with the terms and conditions set forth herein.
IX. MODIFICATION
This Agreement may not be changed, amended or otherwise modified other than by a
written statement; Provided, such statement is signed by both Parties, expresses their intent to
change the Agreement, and specifically describes such changes.
X. HEADINGS
Except when referenced in the body of this Agreement article headings are set forth herein
for the purpose of convenience only. Such headings shall not be considered or otherwise referred
to when any question or issue arises with respect to the application or interpretation of any term
or condition set forth herein.
XI. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which is to be
considered an original, and taken together as one and the same document.
XII. GOVERNING LAW
Any an all actions between the Parties regarding the interpretation or application of any
term or provision set forth herein shall be governed by and interpreted in accordance with the
substantive laws, and not the law of conflicts, of the Commonwealth of Pennsylvania. The
Company and Director each do hereby respectively consent and agree that the courts of the
Commonwealth of Pennsylvania shall have jurisdiction, and venue shall properly lie with the
courts of the Commonwealth of Pennsylvania, with respect to any and all actions brought
hereunder.
XIII. SINGULAR OR PLURAL
The singular form of any noun or pronoun shall include the plural when the context in
which such word is used is such that it is apparent the singular is intended to include the plural and
vice versa.
XIV. ASSIGNMENT
The Agreement may not be assigned by either Party, without the written authorization of
the other Party. A Successor shall not be considered an assignee for purposes of this Article.
XV. ENTIRE AGREEMENT
The terms and conditions set forth herein contain the entire agreement between the
Company and Director, and supersede any and all prior agreements or understandings (whether
express or implied) between the Parties with respect to the matters set forth herein.
XVI. SURVIVAL
Articles I, VI, XII and XVI shall survive any expiration or termination of this Agreement.
XVII. TERM
The term of this Agreement shall begin on the Effective Date and shall end on the date on which
Mylan makes the last payment to which it is obligated hereunder.
IN WITNESS of their agreement to the terms and conditions set forth herein the Company
and Director have caused the following signatures to be affixed hereto:
MYLAN LABORATORIES INC. LAURENCE S. DELYNN
BY:________________________ BY:________________________
TITLE:_____________________ DATE:______________________
DATE:______________________
EXHIBIT A
ACKNOWLEDGEMENT
I, Laurence S. DeLynn, hereby acknowledge and understand that I have been given the
opportunity to review and discuss the terms of the Agreement with an Advisor of my choice prior
to signing the Agreement. I have decided that it is not necessary for me to discuss this matter with
an Advisor, and therefore I decline the opportunity to do so.
No one has discouraged me or otherwise attempted to influence me with regard to my
decision to decline the opportunity to discuss this matter with my Advisors. My refusal of this
offer is entirely my own and is made without any reservation or conditions whatsoever.
WITNESSED BY:
__________________ DATE:_________ BY:__________________ DATE:________
__________________ DATE:_________
SERVICE BENEFIT AGREEMENT
This Service Benefit Agreement (the "Agreement") is entered into on this 27th day of
January, 1995 (the "Effective Date") by and between:
Mylan Laboratories Inc.,
a Pennsylvania Corporation,
with offices located at
781 Chestnut Ridge Road,
Morgantown, WV 26505
(hereinafter referred to as
"Mylan" or "Company").
and
John C. Gaisford, M.D.,
a Director of Mylan
who resides at
910 Waldhiem Road West,
Pittsburgh, PA 15215
(hereinafter referred to as
"Director or "Gaisford").
WHEREAS Director has and continues to perform valuable services for the Company; and
WHEREAS in recognition of his past and continuing service to Mylan, the Company
wishes to provide him with financial assistance with respect to certain Contingencies;
WITNESSETH THEREFORE that in consideration of the benefits to be provided
hereunder, the premises and covenants set forth herein, and other good and valuable consideration,
the sufficiency of which is hereby acknowledged, the Company and Director, intending to be
legally bound, agree as follows:
I. DEFINITIONS
Whenever used in the Agreement the following terms shall be defined as follows:
(a) "Advisor" or "Advisors" shall mean with respect to Director any person including
lawyers, accountants, estate planners and others, with whom he may wish to review and discuss
the matters set forth herein.
(b) "Agreement" shall mean this Service Benefit Agreement which is entered into on
the 27th day of January, 1995.
(c) "Contingency" shall mean retirement or death.
(d) "Mylan" or "Company" shall mean Mylan Laboratories Inc., its subsidiaries and
affiliates.
(e) "Net Present Value" ("NPV") shall mean the present value at any given time of the
entire benefit to be paid, discounted at seven percent (7%) per annum.
(f) "Party" or "Parties" shall mean the Company or Director, or both the Company and
Director depending upon which term is required by the context in which it is used.
(g) "Successor" shall mean any person, partnership, limited partnership, joint-venture,
corporation, trust or any other entity or organization who, subsequent to the Effective Date, comes
into possession of or acquires, either directly or indirectly, all or substantially all of the Company's
business, assets or voting stock, or the right to direct the business activities and practices of the
Company.
(h) "Termination of Service" shall mean the day and date on which Director's service
to the Company is terminated by either Party for any reason other than death of the Director.
II. TERMINATION OF SERVICE
2.1 Upon his Termination of Service to the Company, and if he is eligible to receive
payments as provided for elsewhere herein, Director shall receive an annual benefit equal to the
amount set forth below.
2.2 Should Director cease to serve as a director of Mylan after the Effective Date he shall
receive six thousand dollars ($6,000.00) each year for ten (10) years.
2.3 The Company shall pay each of the ten (10) annual payments due hereunder in
twelve (12) equal or substantially equal installments. The first of any such payments shall be made
on the first day of the month following the month in which Director ceases to serve as a director
of Mylan, and each subsequent payment shall be made on the first day of each successive month
until Mylan's obligations with respect to such payments have been satisfied.
2.4 However, upon the written request of the Director, Mylan may pay to him the NPV
of any amount, or of the balance of any such amount, to which he is entitled hereunder in a lump-sum payment.
Said payment shall be paid within thirty (30) days of the date of Director's request
for such payment.
III. AWARD OF ADDITIONAL RETIREMENT BENEFITS
3.1 The Company may increase the retirement benefit to which Director is entitled
under Article II. Any such increases shall be subject to the following conditions:
(a) the maximum benefit to which Director is entitled under Article II shall not exceed
eighteen thousand dollars ($18,000.00) per year for ten (10) years;
(b) no increases shall be granted earlier than April 1, 1996;
(c) any increase shall be expensed for accounting purposes at the time it is granted;
(d) the Company's obligation to pay the increased benefit to Director, if and when such
increases are awarded shall be subject to all the terms and conditions set forth herein; and
(e) the inclusion herein of any increase in Director's retirement benefit shall become
effective upon Director's receipt of a notice from the Company informing him of the additional
benefit.
IV. DEATH BENEFIT
4.1 If the Director's death occurs prior to his Termination of Service his beneficiary
shall receive, in a lump-sum payment, the NPV of the benefit to which Director was entitled under
2.2 hereof.
4.2 If Director's death occurs after Termination of Service his beneficiary shall receive,
in a lump-sum payment, the NPV of the remaining benefits to which Director was entitled under
2.2 hereof at the time of his death.
V. SUCCESSORSHIP
This Agreement in its entirety shall be binding upon and enforceable against the Company
and its Successors.
VI. NO DUPLICATION OF PAYMENTS
Notwithstanding anything to the contrary which may be set forth elsewhere herein, under
no circumstances is Director or his beneficiary entitled to take benefits under more than any one
article included in this Agreement.
VII. ELIGIBILITY FOR PAYMENT
7.1 Any and all payments due hereunder, may be denied if not already begun, or
terminated if they have begun, if in the Company's sole judgment Director is either not eligible for
such payments, or once such payments have begun is found to be or found to have been ineligible.
7.2 Director shall not be eligible for any payments hereunder if the Company, in its sole
discretion, finds that during or subsequent to his service to the Company he:
(a) breaches, or has breached any term, provision or obligation enumerated herein;
(b) committed any act by commission or omission which materially and substantially
adversely affects the Company's business or reputation; or
(c) is convicted of any violation of the Federal Food, Drug and Cosmetic Act, or the
violation of any other statute relevant to the Company's business.
7.3 Should Director be paid any benefits hereunder and thereafter be found ineligible,
or to have been ineligible, he must return to the Company that portion of the benefit paid to him
for the period of his ineligibility.
VIII. RIGHT TO CONFER
8.1 Director shall have the right, but not the obligation to:
(a) Confer with any Advisor of his choice prior to signing the Agreement; and
(b) Provide his Advisors with a true and complete copy of the Agreement, and
any other pertinent documents which may be of assistance to his Advisors.
8.2 Should Director decline the right to confer with his Advisors prior to executing this
Agreement he shall execute an acknowledgement of same which shall then be incorporated herein
by reference. (See Exhibit A)
IX. CONTRACT ADMINISTRATOR
The Director of Taxation and Accounting of the Company, or other officer of Mylan
designated by the Executive Committee of the Company is hereby named the Contract
Administrator for purposes of assuring compliance with the terms and conditions set forth herein.
X. MODIFICATION
This Agreement may not be changed, amended or otherwise modified other than by a
written statement; Provided, such statement is signed by both Parties, expresses their intent to
change the Agreement, and specifically describes such changes.
XI. HEADINGS
Except when referenced in the body of this Agreement article headings are set forth herein
for the purpose of convenience only. Such headings shall not be considered or otherwise referred
to when any question or issue arises with respect to the application or interpretation of any term
or condition set forth herein.
XII. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which is to be
considered an original, and taken together as one and the same document.
XIII. GOVERNING LAW
Any an all actions between the Parties regarding the interpretation or application of any
term or provision set forth herein shall be governed by and interpreted in accordance with the
substantive laws, and not the law of conflicts, of the Commonwealth of Pennsylvania. The
Company and Director each do hereby respectively consent and agree that the courts of the
Commonwealth of Pennsylvania shall have jurisdiction, and venue shall properly lie with the
courts of the Commonwealth of Pennsylvania, with respect to any and all actions brought
hereunder.
XIV. SINGULAR OR PLURAL
The singular form of any noun or pronoun shall include the plural when the context in
which such word is used is such that it is apparent the singular is intended to include the plural and
vice versa.
XV. ASSIGNMENT
The Agreement may not be assigned by either Party, without the written authorization of
the other Party. A Successor shall not be considered an assignee for purposes of this Article.
XVI. ENTIRE AGREEMENT
The terms and conditions set forth herein contain the entire agreement between the
Company and Director, and supersede any and all prior agreements or understandings (whether
express or implied) between the Parties with respect to the matters set forth herein.
XVII. SURVIVAL
Articles I, VII, XIII and XVII shall survive any expiration or termination of this Agreement.
XVIII. TERM
The term of this Agreement shall begin on the Effective Date and shall end on the date on which
Mylan makes the last payment to which it is obligated hereunder.
IN WITNESS of their agreement to the terms and conditions set forth herein the Company
and Director have caused the following signatures to be affixed hereto:
MYLAN LABORATORIES INC. JOHN C. GAISFORD, M.D.
BY:________________________ BY:________________________
TITLE:_____________________ DATE:______________________
DATE:______________________
EXHIBIT A
ACKNOWLEDGEMENT
I, John C. Gaisford, M.D., hereby acknowledge and understand that I have been given the
opportunity to review and discuss the terms of the Agreement with an Advisor of my choice prior
to signing the Agreement. I have decided that it is not necessary for me to discuss this matter with
an Advisor, and therefore I decline the opportunity to do so.
No one has discouraged me or otherwise attempted to influence me with regard to my
decision to decline the opportunity to discuss this matter with my Advisors. My refusal of this
offer is entirely my own and is made without any reservation or conditions whatsoever.
WITNESSED BY:
__________________ DATE:_________ BY:__________________ DATE:________
__________________ DATE:_________
SERVICE BENEFIT AGREEMENT
This Service Benefit Agreement (the "Agreement") is entered into on this 27th day of
January, 1995 (the "Effective Date") by and between:
Mylan Laboratories Inc.,
a Pennsylvania Corporation,
with offices located at
781 Chestnut Ridge Road,
Morgantown, WV 26505
(hereinafter referred to as
"Mylan" or "Company").
and
Richard A. Graciano,
a Director of Mylan
who resides at
3302 Scathelock Road,
Pittsburgh, PA 15235
(hereinafter referred to as
"Director or "Graciano").
WHEREAS Director has and continues to perform valuable services for the Company; and
WHEREAS in recognition of Director's past and continuing service to Mylan, the Company
wishes to provide him with financial assistance with respect to certain Contingencies;
WITNESSETH THEREFORE that in consideration of the benefits to be provided
hereunder, the premises and covenants set forth herein, and other good and valuable consideration,
the sufficiency of which is hereby acknowledged, the Company and Director, intending to be
legally bound, agree as follows:
I. DEFINITIONS
Whenever used in the Agreement the following terms shall be defined as follows:
(a) "Advisor" or "Advisors" shall mean with respect to Director any person including
lawyers, accountants, estate planners and others, with whom he may wish to review and discuss
the matters set forth herein.
(b) "Agreement" shall mean this Service Benefit Agreement which is entered into on
the 27th day of January, 1995.
(c) "Contingency" shall mean retirement or death.
(d) "Mylan" or "Company" shall mean Mylan Laboratories Inc., its subsidiaries and
affiliates.
(e) "Net Present Value" ("NPV") shall mean the present value at any given time of the
entire benefit to be paid, discounted at seven percent (7%) per annum.
(f) "Party" or "Parties" shall mean the Company or Director, or both the Company and
Director depending upon which term is required by the context in which it is used.
(g) "Successor" shall mean any person, partnership, limited partnership, joint-venture,
corporation, trust or any other entity or organization who, subsequent to the Effective Date, comes
into possession of or acquires, either directly or indirectly, all or substantially all of the Company's
business, assets or voting stock, or the right to direct the business activities and practices of the
Company.
(h) "Termination of Service" shall mean the day and date on which Director's service
to the Company is terminated by either Party for any reason other than death of the Director.
II. TERMINATION OF SERVICE
2.1 Upon his Termination of Service to the Company, and if he is eligible to receive
payments as provided for elsewhere herein, Director shall receive an annual benefit equal to the
amount set forth below.
2.2 Should Director cease to serve as a director of Mylan after the Effective Date he shall
receive eighteen thousand dollars ($18,000.00) each year for ten (10) years.
2.3 The Company shall pay each of the ten (10) annual payments due hereunder in
twelve (12) equal or substantially equal installments. The first of any such payments shall be made
on the first day of the month following the month in which Director ceases to serve as a director
of Mylan, and each subsequent payment shall be made on the first day of each successive month
until Mylan's obligations with respect to such payments have been satisfied.
2.4 However, upon the written request of the Director, Mylan may pay to him the NPV
of any amount, or of the balance of any such amount, to which he is entitled hereunder in a lump-sum payment.
Said payment shall be paid within thirty (30) days of the date of Director's request
for such payment.
III. DEATH BENEFIT
3.1 If the Director's death occurs prior to his Termination of Service his beneficiary
shall receive, in a lump-sum payment, the NPV of the benefit to which Director was entitled under
2.2 hereof.
3.2 If Director's death occurs after Termination of Service his beneficiary shall receive,
in a lump-sum payment, the NPV of the remaining benefits to which Director was entitled under
2.2 hereof at the time of his death.
IV. SUCCESSORSHIP
This Agreement in its entirety shall be binding upon and enforceable against the Company
and its Successors.
V. NO DUPLICATION OF PAYMENTS
Notwithstanding anything to the contrary which may be set forth elsewhere herein, under
no circumstances is Director or his beneficiary entitled to take benefits under more than any one
article included in this Agreement.
VI. ELIGIBILITY FOR PAYMENT
6.1 Any and all payments due hereunder, may be denied if not already begun, or
terminated if they have begun, if in the Company's sole judgment Director is either not eligible for
such payments, or once such payments have begun is found to be or found to have been ineligible.
6.2 Director shall not be eligible for any payments hereunder if the Company, in its sole
discretion, finds that during or subsequent to his service to the Company he:
(a) breaches, or has breached any term, provision or obligation enumerated herein;
(b) committed any act by commission or omission which materially and substantially
adversely affects the Company's business or reputation; or
(c) is convicted of any violation of the Federal Food, Drug and Cosmetic Act, or the
violation of any other statute relevant to the Company's business.
6.3 Should Director be paid any benefits hereunder and thereafter be found ineligible,
or to have been ineligible, he must return to the Company that portion of the benefit paid to him
for the period of his ineligibility.
VII. RIGHT TO CONFER
7.1 Director shall have the right, but not the obligation to:
(a) Confer with any Advisor of his choice prior to signing the Agreement; and
(b) Provide his Advisors with a true and complete copy of the Agreement, and
any other pertinent documents which may be of assistance to his Advisors.
7.2 Should Director decline the right to confer with his Advisors prior to executing this
Agreement he shall execute an acknowledgement of same which shall then be incorporated herein
by reference. (See Exhibit A)
VIII. CONTRACT ADMINISTRATOR
The Director of Taxation and Accounting of the Company, or other officer of Mylan
designated by the Executive Committee of the Company is hereby named the Contract
Administrator for purposes of assuring compliance with the terms and conditions set forth herein.
IX. MODIFICATION
This Agreement may not be changed, amended or otherwise modified other than by a
written statement; Provided, such statement is signed by both Parties, expresses their intent to
change the Agreement, and specifically describes such changes.
X. HEADINGS
Except when referenced in the body of this Agreement article headings are set forth herein
for the purpose of convenience only. Such headings shall not be considered or otherwise referred
to when any question or issue arises with respect to the application or interpretation of any term
or condition set forth herein.
XI. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which is to be
considered an original, and taken together as one and the same document.
XII. GOVERNING LAW
Any an all actions between the Parties regarding the interpretation or application of any
term or provision set forth herein shall be governed by and interpreted in accordance with the
substantive laws, and not the law of conflicts, of the Commonwealth of Pennsylvania. The
Company and Director each do hereby respectively consent and agree that the courts of the
Commonwealth of Pennsylvania shall have jurisdiction, and venue shall properly lie with the
courts of the Commonwealth of Pennsylvania, with respect to any and all actions brought
hereunder.
XIII. SINGULAR OR PLURAL
The singular form of any noun or pronoun shall include the plural when the context in
which such word is used is such that it is apparent the singular is intended to include the plural and
vice versa.
XIV. ASSIGNMENT
The Agreement may not be assigned by either Party, without the written authorization of
the other Party. A Successor shall not be considered an assignee for purposes of this Article.
XV. ENTIRE AGREEMENT
The terms and conditions set forth herein contain the entire agreement between the
Company and Director, and supersede any and all prior agreements or understandings (whether
express or implied) between the Parties with respect to the matters set forth herein.
XVI. SURVIVAL
Articles I, VI, XII and XVI shall survive any expiration or termination of this Agreement.
XVII. TERM
The term of this Agreement shall begin on the Effective Date and shall end on the date on which
Mylan makes the last payment to which it is obligated hereunder.
IN WITNESS of their agreement to the terms and conditions set forth herein the Company
and Director have caused the following signatures to be affixed hereto:
MYLAN LABORATORIES INC. RICHARD A. GRACIANO
BY:________________________ BY:________________________
TITLE:_____________________ DATE:______________________
DATE:______________________
EXHIBIT A
ACKNOWLEDGEMENT
I, Richard A. Graciano, hereby acknowledge and understand that I have been given the
opportunity to review and discuss the terms of the Agreement with an Advisor of my choice prior
to signing the Agreement. I have decided that it is not necessary for me to discuss this matter with
an Advisor, and therefore I decline the opportunity to do so.
No one has discouraged me or otherwise attempted to influence me with regard to my
decision to decline the opportunity to discuss this matter with my Advisors. My refusal of this
offer is entirely my own and is made without any reservation or conditions whatsoever.
WITNESSED BY:
__________________ DATE:_________ BY:__________________ DATE:________
__________________ DATE:_________
SERVICE BENEFIT AGREEMENT
This Service Benefit Agreement (the "Agreement") is entered into on this 27th day of
January, 1995 (the "Effective Date") by and between:
Mylan Laboratories Inc.,
a Pennsylvania Corporation,
with offices located at
781 Chestnut Ridge Road,
Morgantown, WV 26505
(hereinafter referred to as
"Mylan" or "Company").
and
Robert W. Smiley, Esq.,
a Director of Mylan
who resides at
526 Sangree Road,
Pittsburgh, PA 15237
(hereinafter referred to as
"Director or "Smiley").
WHEREAS Director has and continues to perform valuable services for the Company; and
WHEREAS in recognition of Director's past and continuing service to Mylan, the Company
wishes to provide him with financial assistance with respect to certain Contingencies;
WITNESSETH THEREFORE that in consideration of the benefits to be provided
hereunder, the premises and covenants set forth herein, and other good and valuable consideration,
the sufficiency of which is hereby acknowledged, the Company and Director, intending to be
legally bound, agree as follows:
I. DEFINITIONS
Whenever used in the Agreement the following terms shall be defined as follows:
(a) "Advisor" or "Advisors" shall mean with respect to Director any person including
lawyers, accountants, estate planners and others, with whom he may wish to review and discuss
the matters set forth herein.
(b) "Agreement" shall mean this Service Benefit Agreement which is entered into on
the 27th day of January, 1995.
(c) "Contingency" shall mean retirement or death.
(d) "Mylan" or "Company" shall mean Mylan Laboratories Inc., its subsidiaries and
affiliates.
(e) "Net Present Value" ("NPV") shall mean the present value at any given time of the
entire benefit to be paid, discounted at seven percent (7%) per annum.
(f) "Party" or "Parties" shall mean the Company or Director, or both the Company and
Director depending upon which term is required by the context in which it is used.
(g) "Successor" shall mean any person, partnership, limited partnership, joint-venture,
corporation, trust or any other entity or organization who, subsequent to the Effective Date, comes
into possession of or acquires, either directly or indirectly, all or substantially all of the Company's
business, assets or voting stock, or the right to direct the business activities and practices of the
Company.
(h) "Termination of Service" shall mean the day and date on which Director's service
to the Company is terminated by either Party for any reason other than death of the Director.
II. TERMINATION OF SERVICE
2.1 Upon his Termination of Service to the Company, and if he is eligible to receive
payments as provided for elsewhere herein, Director shall receive an annual benefit equal to the
amount set forth below.
2.2 Should Director cease to serve as a director of Mylan after the Effective Date he shall
receive eighteen thousand dollars ($18,000.00) each year for ten (10) years.
2.3 The Company shall pay each of the ten (10) annual payments due hereunder in
twelve (12) equal or substantially equal installments. The first of any such payments shall be made
on the first day of the month following the month in which Director ceases to serve as a director
of Mylan, and each subsequent payment shall be made on the first day of each successive month
until Mylan's obligations with respect to such payments have been satisfied.
2.4 However, upon the written request of the Director, Mylan may pay to him the NPV
of any amount, or of the balance of any such amount, to which he is entitled hereunder in a lump-sum payment.
Said payment shall be paid within thirty (30) days of the date of Director's request
for such payment.
III. DEATH BENEFIT
3.1 If the Director's death occurs prior to his Termination of Service his beneficiary
shall receive, in a lump-sum payment, the NPV of the benefit to which Director was entitled under
2.2 hereof.
3.2 If Director's death occurs after Termination of Service his beneficiary shall receive,
in a lump-sum payment, the NPV of the remaining benefits to which Director was entitled under
2.2 hereof at the time of his death.
IV. SUCCESSORSHIP
This Agreement in its entirety shall be binding upon and enforceable against the Company
and its Successors.
V. NO DUPLICATION OF PAYMENTS
Notwithstanding anything to the contrary which may be set forth elsewhere herein, under
no circumstances is Director or his beneficiary entitled to take benefits under more than any one
article included in this Agreement.
VI. ELIGIBILITY FOR PAYMENT
6.1 Any and all payments due hereunder, may be denied if not already begun, or
terminated if they have begun, if in the Company's sole judgment Director is either not eligible for
such payments, or once such payments have begun is found to be or found to have been ineligible.
6.2 Director shall not be eligible for any payments hereunder if the Company, in its sole
discretion, finds that during or subsequent to his service to the Company he:
(a) breaches, or has breached any term, provision or obligation enumerated herein;
(b) committed any act by commission or omission which materially and substantially
adversely affects the Company's business or reputation; or
(c) is convicted of any violation of the Federal Food, Drug and Cosmetic Act, or the
violation of any other statute relevant to the Company's business.
6.3 Should Director be paid any benefits hereunder and thereafter be found ineligible,
or to have been ineligible, he must return to the Company that portion of the benefit paid to him
for the period of his ineligibility.
VII. RIGHT TO CONFER
7.1 Director shall have the right, but not the obligation to:
(a) Confer with any Advisor of his choice prior to signing the Agreement; and
(b) Provide his Advisors with a true and complete copy of the Agreement, and
any other pertinent documents which may be of assistance to his Advisors.
7.2 Should Director decline the right to confer with his Advisors prior to executing this
Agreement he shall execute an acknowledgement of same which shall then be incorporated herein
by reference. (See Exhibit A)
VIII. CONTRACT ADMINISTRATOR
The Director of Taxation and Accounting of the Company, or other officer of Mylan
designated by the Executive Committee of the Company is hereby named the Contract
Administrator for purposes of assuring compliance with the terms and conditions set forth herein.
IX. MODIFICATION
This Agreement may not be changed, amended or otherwise modified other than by a
written statement; Provided, such statement is signed by both Parties, expresses their intent to
change the Agreement, and specifically describes such changes.
X. HEADINGS
Except when referenced in the body of this Agreement article headings are set forth herein
for the purpose of convenience only. Such headings shall not be considered or otherwise referred
to when any question or issue arises with respect to the application or interpretation of any term
or condition set forth herein.
XI. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which is to be
considered an original, and taken together as one and the same document.
XII. GOVERNING LAW
Any an all actions between the Parties regarding the interpretation or application of any
term or provision set forth herein shall be governed by and interpreted in accordance with the
substantive laws, and not the law of conflicts, of the Commonwealth of Pennsylvania. The
Company and Director each do hereby respectively consent and agree that the courts of the
Commonwealth of Pennsylvania shall have jurisdiction, and venue shall properly lie with the
courts of the Commonwealth of Pennsylvania, with respect to any and all actions brought
hereunder.
XIII. SINGULAR OR PLURAL
The singular form of any noun or pronoun shall include the plural when the context in
which such word is used is such that it is apparent the singular is intended to include the plural and
vice versa.
XIV. ASSIGNMENT
The Agreement may not be assigned by either Party, without the written authorization of
the other Party. A Successor shall not be considered an assignee for purposes of this Article.
XV. ENTIRE AGREEMENT
The terms and conditions set forth herein contain the entire agreement between the
Company and Director, and supersede any and all prior agreements or understandings (whether
express or implied) between the Parties with respect to the matters set forth herein.
XVI. SURVIVAL
Articles I, VI, XII and XVI shall survive any expiration or termination of this Agreement.
XVII. TERM
The term of this Agreement shall begin on the Effective Date and shall end on the date on which
Mylan makes the last payment to which it is obligated hereunder.
IN WITNESS of their agreement to the terms and conditions set forth herein the Company
and Director have caused the following signatures to be affixed hereto:
MYLAN LABORATORIES INC. ROBERT W. SMILEY, ESQ.
BY:________________________ BY:________________________
TITLE:_____________________ DATE:______________________
DATE:______________________
EXHIBIT A
ACKNOWLEDGEMENT
I, Robert W. Smiley, hereby acknowledge and understand that I have been given the
opportunity to review and discuss the terms of the Agreement with an Advisor of my choice prior
to signing the Agreement. I have decided that it is not necessary for me to discuss this matter with
an Advisor, and therefore I decline the opportunity to do so.
No one has discouraged me or otherwise attempted to influence me with regard to my
decision to decline the opportunity to discuss this matter with my Advisors. My refusal of this
offer is entirely my own and is made without any reservation or conditions whatsoever.
WITNESSED BY:
__________________ DATE:_________ BY:__________________ DATE:________
__________________ DATE:_________
(13) Fiscal 1995 Annual Report to the Shareholders (only those
portions which are incorporated in this Report by reference
are being filed herewith).
Mylan Laboratories Inc. 1995 Annual Report
Mylan Laboratories Inc.
1030 Century Building
130 Seventh Street
Pittsburgh, Pennsylvania 15222
Description of Business
Mylan Laboratories Inc.
and its subsidiaries are engaged primarily in manufacturing a variety of
pharmaceutical products in finished tablet, capsule and powder dosage forms.
TABLE OF CONTENTS
About the Cover 1
Letter to Shareholders' 2
Company History 4
Mylan Laboratories Incorporated 8
Mylan Pharmaceuticals Incorporated 14
Mylan Incorporated 18
Dow Hickam Pharmaceuticals Incorporated 22
Bertek Incorporated 26
Somerset Pharmaceuticals, Incorporated 30
Financial Highlights 34
Selected Financial Data 36
Management's Discussion 37
Consolidated Balance Sheets 40
Consolidated Statements of Earnings 42
Consolidated Statements of Shareholders' Equity 43
Consolidated Statements of Cash Flows 44
Notes to Consolidated Financial Statements 46
Independent Auditors' Report 52
Market Prices 52
Mylan Product Guide 53
Shareholder Information Inside Back Cover
Directors and Officers Inside Back Cover
About The Cover This beautiful child is Natalie . . . and Natalie has Cystinosis! In a world of
breakthrough chemical therapies, we often assume that the drugs we need will be there when we
need them. Yet, for Natalie and roughly 400 other children worldwide who suffer from a rare
genetic disorder known as Cystinosis, the availability of lifesaving medicines was, until recently,
something that could never be taken for granted. In patients with Nephropathic Cystinosis, the
protein called cystine accumulates in the body's tissues, forming crystalline deposits which
disrupt cell functions with devastating results. Invariably, Cystinosis leads to a progressive
decline in renal functions and . . . ultimately . . . to the development of end-stage renal failure by
the close of the first decade of life. In the early 1970's, researchers discovered that drug therapy
employing the chemical cysteamine could dramatically reduce or halt the accumulation of
cystine in living cells. Yet, while limited quantities of cysteamine were available throughout the
clinical research of pioneering physicians Dr. Jess Thoene of the University of Michigan, Dr.
Jerry Schneider of the University of California at San Diego and Dr. William Gahl of the
National Institutes of Health . . . efforts by pharmaceutical companies to develop an approved
form of cysteamine were unsuccessful. Cysteamine was subsequently designated an orphan drug
as defined under the Orphan Drug Act of 1983. Then, in August of 1992, Mylan assumed
responsibility for developing the drug. In less than a year, Mylan's research team succeeded in
creating a capsule form of cysteamine which represented a significant improvement over the
investigational liquid. In August of 1993, Mylan submitted an orphan drug application to the
FDA, and was awarded a new drug approval in August of 1994. The new product, called
Cystagon(TM), will be marketed worldwide through a number of specialized agents. Natalie and her
sister, Alexandra, enjoy playing together, laughing together and sharing childhood secrets. Now
they can look forward to growing up together, laughing together and sharing adulthood secrets.
With the introduction of Cystagon(TM), Mylan is helping to transform the children of Cystinosis
into "the children of hope"!
To Our Shareholders
As we look back over the past twelve months and review its challenges and
accomplishments, we are proud to report that fiscal 1995 has been a great year!
Our record sales and earnings are the result of a family of dedicated employees going the
extra step to make sure a quality product is ready to ship when our customers need it.
We had five approvals from the FDA this past fiscal year, increasing our product line to
79 different compounds covering 23 therapeutic categories.
23 ANDA's (generic drugs) are presently submitted to the food and drug administration
for approval with over 40 more in various stages of product development. We have several
innovator compounds in our pipeline including two IND's (Investigational New Drugs) in
progress this year, with at least two more to be filed.
During this past year, we have announced more product alliances with Eli Lilly and
Company as well as an alliance with Roche. These are for products that extend our line of
generics. We have also signed licensing agreements for additional products for our Dow Hickam
Wound Care Division, and we are continually looking at additional licensing agreements and
strategic alliances to continue our success and growth.
Our year was a record in more than just revenues... our annual shareholders meeting in
June was attended by approximately 1,139 investors! We were a bit overwhelmed but extremely
pleased to meet and greet everyone. An increase of the Quarterly Dividend was announced at the
meeting, raising the annual total to twenty cents per share from sixteen cents. Then in December,
we announced a special one time dividend of ten cents per share in addition to the Quarterly five
cents, so, the January 13th payment was for a total of fifteen cents per share. Mylan has
distributed $22,208,000 in cash dividends this year. Also, shareholders equity has grown from
$379,969,000 to $482,728,000.
We are proud of the growth Mylan has experienced over this past year and thank each
and every one of our employees for their hard work and dedication in helping us to accomplish
this record year and in maintaining our position of leadership in the industry.
But we do not rest on last years' laurels. As hard as we work at being the best, we work
harder at planning for the future.
I want to personally assure you that the entire Mylan Team is dedicated to the continued
growth and prosperity of this company!
Most sincerely,
Milan Puskar
Chairman, C.E.O. and President
Company History
Mylan began in 1961 as a privately owned company founded by our Chairman, C.E.O. and
President, Milan Puskar, and an associate in White Sulphur Springs, West Virginia. Initially the
company did not manufacture product, but operated as a distributor' buying finished goods and
reselling to pharmacies, doctors, and etc.
In 1963 Mylan relocated to Princeton, West Virginia and then in 1965 to its present
location in Morgantown. The company began manufacturing vitamins in 1965, and in 1966
received approval to start manufacturing Penicillin G tablets. In July 1968 production was
expanded to include Tetracycline after receiving FDA approval.
It was at this point that Mylan became recognized in the industry as a very competent
manufacturer of quality products and in 1969 Parke-Davis was the first major drug company to
purchase finished goods from Mylan. The company continued to expand its list of approved
products with the addition of Erythromycin in 1971 and Ampicillin in 1973, and its list of major
drug companies purchasing product under private label continued to increase.
But Mylan's growth was not limited to product line and customers, for on February 15,
1973 the first shares of stock were traded on the Over-the-Counter Market, and Mylan became a
public' company.
Under the expert guidance of the present management team, which took over May 13,
1976, the company experienced unbelievable growth and soon became eligible to be traded on
the National-Over-the-Counter (NASDAQ) Market. The marriage' of Mylan and NASDAQ
was a phenomenal combination. The rapidly growing generic manufacturer rewarded its
shareholders with six stock splits in the short time span from July, 1979 through February, 1985,
gaining the title of "The Nation's Largest Independent Drug Manufacturer". With 24 million
shares of stock trading in the marketplace, management felt continued growth could only happen
through a broader and more liquid yet closely regulated market. On April 14, 1986 Mylan
became a member of the Big Board - THE NEW YORK STOCK EXCHANGE - and its new
symbol became MYL.
Once again management's decision proved to be a wise one and with the new stable
growth enjoyed on NYSE shareholders were rewarded with the seventh stock split in eight years.
On August 1, 1986 a three-for-two stock dividend was forwarded to all Mylan investors and the
company's outstanding shares grew to 36 million.
In 1984 Mylan introduced its first proprietary product - MAXZIDE(R), an antihypertensive
drug that competes successfully with Smith Kline Beecham's Dyazide(R), one of the most
widely prescribed drugs in the United States. In May of 1988, after three years of clinical testing,
Mylan received approval on half strength Maxzide(R), known as Maxzide(R)-25MG. This
product further strengthens Mylan's position in the mild to moderate hypertensive market. Both
of these Maxzide(R) products were licensed to Lederle Laboratories Division of American
Cyanamid for distribution.
In 1989 a second manufacturing facility was opened in Caguas, Puerto Rico totaling
approximately 60,000 square feet. In the fall of 1993 the size of the Caguas facility was doubled
and shortly thereafter a second facility was purchased in the town of Cidra, Puerto Rico.
As the company continued to grow, management could foresee the need for a distribution
center to be able to ship product promptly, and in June of 1988 opened a 24,000 square foot
facility in Greensboro, North Carolina. That proved to be so successful that the company opened
a second facility in Reno, Nevada in June of 1991.
These are two of the reasons Mylan is known for having the fastest shipping record
throughout the pharmaceutical industry.
With the opening of the Greensboro facility in June of 1988, Mylan became the only
independent drug manufacturer with its own distribution center for servicing wholesale and chain
drug accounts, regardless of their size.
In November of 1988 Mylan announced the joint-venture purchase of Somerset
Pharmaceuticals with another generic company. Somerset is a small research company who was
working on a drug for the treatment of Parkinson's disease. The product, Eldepryl(R), was
approved by the Food and Drug Administration in June of 1989 and was launched in
mid-September. It is an extremely effective drug widely recognized by physicians and is adding
nicely to the Mylan bottom line.
In May of 1989, Mylan's then Chairman and C.E.O. Roy McKnight testified before the
House Oversight and Investigations Committee on behalf of the company regarding
improprieties at the FDA uncovered by Mylan's investigative work. This prompted an all out
investigation of the generic drug industry and exposed cheating, payoffs and fraud. Overall the
industry was shaken, but one thing remains solid . . . the honesty and integrity of Mylan! For
thirty-four years the company has had one creed - we either do it right or we don't do it at all.
At the annual shareholders meeting in June of 1991 Mylan announced the signing of a
definitive agreement and plan of merger with Dow B. Hickam of Sugar Land, Texas. They are an
established high quality branded pharmaceutical company with a highly skilled, aggressive
marketing force . . . A necessary element in Mylan's strategic plan to become a fully integrated
pharmaceutical company. The merger was completed on October 30, 1991.
One June 25, 1992 at the annual shareholders meeting, Mylan announced still another
stock split . . . its eighth in thirteen years. This two for one split became effective August 1, 1992.
Another strategic step was taken in January of 1993 when Mylan announced that it had
reached a definitive agreement to acquire the assets of Bertek, Inc. headquartered in St. Albans,
Vermont.
Bertek is an important manufacturer and innovator of state-of-the-art transdermal drug
delivery systems. They also have substantial operations in laminating and label manufacturing.
The acquisition was completed February 25, 1993.
Mylan's code of ethics has positioned it as a leader in the pharmaceutical industry with a
record of solid growth in a very unpredictable market.
The other secret' to Mylan's success is its family' of employees whose dedication to
their work and pride in the company have been the backbone of this remarkable story. From
maintenance to management it has been a blend of ideas, hard work and mutual respect, and
continues to be the key to Mylan's ongoing success and growth.
Mylan Laboratories Incorporated
Fiscal 1995 has been an exciting year for Mylan Laboratories and its family of companies.
We have reached new financial highs . . . sales have increased to a record $396,120,000
and our net earnings have climbed to a record $120,869,000.
When most people think of Mylan, they automatically think "generics". That's only
natural since Mylan Pharmaceuticals is the nation's largest manufacturer of generic prescription
drugs. But in reality the Mylan formula for success is multifaceted. We are innovators in the
development of generic and brand-name health care products as well as in manufacturing,
marketing and distribution. We have achieved synergy through acquisitions, mergers and
alliances with other health care companies reflecting a diversity of products.
For the last three decades, Mylan has built its business and its reputation on the
manufacture of affordable, bio-equivalent substitutes for brand-name prescription drugs. Yet,
while generics remain the vital focus of Mylan operations, they are only one facet of a new, more
dynamic and integrated Mylan.
Mylan has implemented a series of strategic initiatives designed to broaden its presence
in related health care businesses, in ways that would effectively leverage the company's core
strengths . . . while establishing Mylan in a position of competitive leadership.
We have grown in order to better meet the emerging needs of health care markets and in
the process, we have evolved from a small distributor . . . into a fully-integrated health care
company that presently ranks among America's top 1,000 growth businesses.
In addition to our headquarters in Pittsburgh, Pennsylvania the Mylan family of
companies consists of a 335,000 square foot manufacturing plant and office complex in
Morgantown, West Virginia; two production plants in Caguas and Cidra, Puerto Rico;
manufacturing, packaging and office facilities at both our Hickam wound care division in Sugar
Land, Texas and our Bertek division in St. Albans and Swanton, Vermont, which produces
transdermal patches as well as forms and labels.
Mylan's manufacturing operations are supported by a pair of state-of-the-art distribution
terminals located in Greensboro, North Carolina and Sparks, Nevada. Strategic placement of
these ultramodern terminals, combined with on-line order entry and processing capabilities,
allows Mylan to ship orders anywhere in North America with turnaround time of as little as one
day.
Research and development has always been and always will be vital to Mylan's success,
providing a stream of new products which fuels our growth. Dr. John O'Donnell, Vice President
of Research and Quality Control oversees an extremely aggressive corporate research program
wherein all divisions are pursuing projects in their particular field of expertise.
Combined, these capabilities comprise the Mylan family of health care services, helping
Mylan to break away from its generics only' image and break through to a larger universe of
health care customers and markets.
Today, Mylan's MYL symbol trades proudly on the New York Stock Exchange . . . a
visible sign of the company's exceptional performance and growth.
Forbes Magazine regards Mylan as one of the best small companies in America and ranks
us number 88 out of 200 in their November 7, 1994 issue. Financial World chooses us as one of
America's 50 best Mid-Cap companies in their June, 1994 listing and in their January 31, 1995
issue, we are named among their Market Cap 500 which ranks the largest U.S. Corporations in
terms of market value as of December 30, 1994.
Executive Report Magazine has favored us with inclusion in two of their issues this year
touting us as one of the top 10 Growth Companies as well as one of the top 10 in Revenue
increases. We are most grateful for their recognition as well as the recognition by Fortune
Magazine in their March issue as one of the favored stocks on Wall Street.
Our shareholders are extremely important to the Mylan family, so we were particularly
pleased when Better Investing' magazine, a publication of the National Association of Investors
Corporation, named us as one of the most popular stocks in their listing of the top 100 for 1995.
We are also very proud of the honor bestowed upon us by the Chain Drug Store Industry .
. . they have voted Mylan as the "Supplier of the Decade" and rewarded us with the coveted REX
award . . . truly a great commendation.
Cardinal Health and Smith Drug have each rewarded our year's efforts by voting us
Vendor of the Year' and Amerisource has voted us their Manufacturing Partner of the Year'.
Gold Circle has elected Mylan as an official member of the Gold Circle Club, and the NWDA
has chosen us as the runner up for their Diana Award..the second year in a row we have been
recognized by this fine group.
Excellence is its own reward . . . but it is also very rewarding to be acknowledged by your
peers . . . and we at Mylan are very grateful for the honors.
Mylan's evolution from a single location small generic manufacturing facility into a
multi location fully integrated, financially strong industry leader has not been just luck' . . .
rather it is the reward of careful planning by a management team with the foresight to look into
the future and plan for the changes that were bound to occur, and the wisdom and courage to take
advantage of those opportunities without compromising their integrity . . . it takes loyal,
dedicated employees who work hard and take pride in their accomplishments . . . and a board of
directors who are knowledgeable, honest and supportive.
Our board is comprised of intelligent, skilled and accomplished men who realize the
gravity of their responsibility and are dedicated to the common good of this company, its
employees and its shareholders. These principles have been the primary basis for all of their
directives, and we thank them for their input and guidance.
It has been a year of change and challenge in the industry . . . there has been chaos . . . but
chaos creates opportunity. Mylan has met the challenge and taken advantage of the opportunities
that were presented . . . we have enjoyed a period of growth . . . and we continue to build for the
future as we move forward.
The entire Mylan team . . . from maintenance to management . . . is dedicated to the
integrity and hard work necessary to continue the growth and prosperity of this company.
We look forward to the new year!
Captions p.9
With its blend of quality generic and innovator products, Mylan has grown into a fully integrated
pharmaceutical firm, ranking among America's top 1,000 growth companies.
Roderick P. Jackson -
Senior Vice President
Business Development: L to R Front: Heather Kirby, Dr. Tom Clark, Robert Lombardi; L to R
Back: Bruce Battini, Rod Jackson, Lynn Cayton
Captions p.10
Dr. Tom Clark - Medical Director
Dr. John P. O'Donnell -
Vice President
Research and Quality Control
Captions p11
Mylan's recognition in major publications continues
Captions p.12
Mylan received numerous awards of excellence throughout the year including the coveted Rex
Award for Supplier of the Decade.
Mylan Laboratories Corporate Staff
Seated L. to R. JoAnne Carrozza, Sally Stone, Patricia Sunseri - Vice President Investor and
Public Relations; Standing L. to R. Brad Zukowski, Kristine Hartman King, Patti Ventura, Vicki
Sidell
Captions p. 13
Board of Directors Mylan Laboratories Inc.: L to R Front: Milan Puskar, Dana G. Barnett; L to R
Back: Richard A. Graciano, John C. Gaisford, M.D., C. B. Todd, Robert W. Smiley, Esq.,
Laurence S. DeLynn
Mylan Pharmaceuticals Incorporated
At Mylan Pharmaceuticals, the generic arm of the corporate family, the question has never been
how to achieve excellence, but how to maintain it and move beyond it.
In our modern 335,000 square foot manufacturing facility in Morgantown, West Virginia,
that commitment is both visible and growing.
We pride ourselves on having state-of-the-art equipment which we continually update . . .
and all of the products manufactured here are made on the same equipment . . . they are
developed with that in mind. That's what makes us so efficient and cost effective.
One of the things that keeps Mylan unique in its quality manufacturing is that we have
three simple processes . . . basically, a blend mill process, a dry granulation process and a wet
granulation process. We apply these simple processes to over 70 products which makes it very
simple for product-to-product change-overs, simple for training new employees, very simple for
record documentation and very simple for tracking quality control procedures.
Our plant is home to one of the most demanding quality assurance programs in the
industry . . . a program that combines highly evolved quality control processes with a battery of
high-technology safeguards.
Mylan also maintains a center of excellence for research in Morgantown . . . a center of
excellence in several different areas: analytical chemistry, dosage form development,
pharmacokinetics, regulatory affairs and clinical investigation. The benefit is that, strategically,
we can move more quickly and efficiently to bring products to market.
While new technology is a crucial part of Morgantown's long term strategy, Mylan is
also aggressively developing the critical mass' of scientific and technical talent that will be
required as the company moves ahead into a new century of manufacturing and product
leadership.
Our on-site R & D staff includes more than 80 full-time degreed biologists, chemists and
pharmacologists . . . including 30 staff researchers of Master's Degree or Ph. D. caliber.
At present we have 23 ANDA's submitted to the FDA for approval, and we have more
than 40 other generic products in various stages of development.
We also have several innovator compounds in our pipeline including two IND's in
progress with at least two more to be filed.
We have introduced eleven products to our line in Fiscal 1995: Gemfibrozil tablets,
Bumetanide, Cefaclor, Cephalexin, Cimetidine, Flurbiprofen, Glipizide, Naproxen Sodium,
Propoxyphene HCL, Propoxyphene Compound and Tolmetin Sodium 600 mg.
Six of these products are approvals obtained from the Food and Drug Administration, the
other five are the result of our alliances with Eli Lilly and Roche.
Presently we are exploring more opportunities for co-promotion of other products in
various therapeutic categories. These actions and relationships will continue to broaden our
product portfolio and enhance our strong distribution network.
More than 5 billion tablets and capsules have been produced in this facility during fiscal
1995.
According to the February IMS National Prescription Audit, we have moved to second
place among all pharmaceutical companies in the number of prescriptions dispensed . . . and we
continue to gain market share.
Availability of raw material to meet production demands can be as important as the
approval, especially when launching a new product. Mylan's purchasing group works very
closely with product development to ensure that there will be an ample supply for development,
and once the approval is received, for production. Many times, their expertise in acquiring the
raw material has given Mylan the competitive edge.
In fact, it is that dedication by all of our employees in every department that has helped
Mylan Pharmaceuticals become the leading independent generic drug manufacturer. It is that
same employee strength and conviction that projects the brightest of futures for Mylan!
MYLAN PHARMACEUTICALS INC. GENERIC PRODUCT LINE
Generic Name Trade Name
Analgesics
Indomethacin Indocin(R)
** Propoxyphene HCL Darvon(R)
** PropoxypheneCompound Darvon 65(R)
Propoxyphene HCL &Acetaminophen Wygesic(R)
Propoxyphene Napsylate &
Darvocet-Acetaminophen N-100(R)
Antiangina Atenolol Tenormin(R)
Nadolol Corgard(R)
Nitroglycerin Transdermal System (Patch) Nitro Bid(R)
Verapamil HCL Isoptin(R)
Antianxiety
Alprazolam Xanax(R)
Diazepam Valium(R)
Lorazepam Ativan(R)
Perphenazine &
Amitriptyline HCL Triavil(R)
Antibiotics
Amoxicillin Amoxil(R)
Ampicillin Polycillin(R)
** Cefaclor Ceclor(R)
** Cephalexin Keflex(R)
Doxycycline Hycate Vibramycin(R)
Erythromycin
Ethylsuccinate E.E.S.(R)
Erythromycin Erythrocin
Stearate Stearate(R)
Penicillin V Potassium V-cillin-K(R)
Tetracycline HCL Achromycin(R)
Antidepressant
Amitriptyline HCL Elavil(R)
Chlordiazepoxide &
Amitriptyline Limbitrol(R)
Doxepin HCL Adapin(R)
Sinequan(R)
Maprotiline HCL Ludiomil(R)
Nortriptyline Pamelor(R)
Antidiabetic
Chlorpropamide Diabinese(R)
* Glipizide Glucotrol(R)
Tolazamide Tolinase(R)
Tolbutamide Orinase(R)
Antidiarrheal
Diphenoxylate HCL &
Atropine Sulfate Lomotil(R)
Loperamide HCL Imodium(R)
Antigout
Allopurinol Zyloprim(R)
Antihistamine
Cyproheptadine Periactin(R)
ANTIHYPERLIPIDEMIC
* Gemfibrozil Lopid(R)
Antihypertensive
Amiloride HCL &
Hydrochlorothiazide Moduretic(R)
Clonidine HCL Catapres(R)
Clonidine HCL &
Chlorthalidone Combipres(R)
Methyldopa Aldomet(R)
Methyldopa &
Hydrochlorothiazide Aldoril(R)
Metoprolol Lopressor(R)
Prazosin HCL Minipres(R)
Propranolol Inderal(R)
Propranolol HCL &
Hydrochlorothiazide Inderide(R)
Anti-Inflammatory
Fenoprofen Nalfon(R)
* Flurbiprofen Ansaid(R)
Ibuprofen Motrin(R)
Rufen(R)
Meclofenamate Meclomen(R)
Naproxen Naprosyn(R)
* Naproxen Sodium Anaprox(R)
Piroxicam Feldene(R)
Sulindac Clinoril(R)
Tolmetin Sodium Tolectin(R)
* Tolmetin Sodium Tolectin(R) 600
Antineoplastic
Methotrexate Methotrexate(R)
Rheumatrex(R)
Antipsychotic
Fluphenazine HCL Prolixin(R)
Haloperidol Haldol(R)
Thioridazine HCL Mellaril(R)
Thiothixene Navane(R)
Anxiolytic
Clorazepate Dipotassium Tranxene(R)
Beta Blocker
Atenolol and Chlorthalidone Tenoretic(R)
Pindolol Visken(R)
Timolol Maleate Blocadren(R)
Bronchial Dilator
Albuterol Sulfate Proventil(R)
Calcium ChannelBlocker
Diltiazem HCL Cardizem(R)
Diuretics
** Bumetanide Bumex(R)
Chlorothiazide Diuril(R)
Chlorthalidone Hygroton(R)
Furosemide Lasix(R)
Methyclothiazide Enduron(R)
Reserpine &
Chlorothiazide Diupres(R)
Spironolactone Aldactone(R)
Spironolactone &
Hydrochlorothiazide Aldactazide(R)
Hypnotic Agent
Flurazepam Dalmane(R)
Temazepam Restoril(R)
H2 Antagonist
Cimetidine Tagamet(R)
Muscle Relaxant
Cyclobenzaprine HCL Flexeril(R)
Uricosuric
Probenecid Benemid(R)
Captions p. 15
Left: Sonny Todd - President, Mylan Pharmaceuticals
Center: High Speed Tableting Machine
Bottom Right: Mylan Pharmaceuticals Plant, Morgantown, West Virginia
Louis J.DeBone - Executive Vice President, Mylan Pharmaceuticals
Morgantown, West Virginia
Captions, p. 16
Mylan maintains a center of excellence for research in Morgantown
Richard F. Stupar - Vice President, Purchasing
Mylan Incorporated
Mylan broke ground for its first manufacturing facility in Caguas, Puerto Rico on October 8,
1986, and less than one year later, that 60,000 square foot plant was completed and ready for
production.
The success of this operation has been so outstanding that we have doubled the size of the
Caguas facility and purchased a second plant in the town of Cidra.
Puerto Rico is only about a third the size of the state of Vermont, yet it is home to one of
the greatest concentrations of pharmaceutical manufacturing capabilities in the world.
Overall, the island boasts more than 70 individual manufacturing and processing plants,
representing nearly every major pharmaceutical company in the world.
The majority of manufacturers have established plants in Puerto Rico to take advantage
of the island's exceptional work force and favorable tax structure. But Mylan is doing more than
merely taking advantage of a good thing.
With its fully equipped facilities at Caguas and Cidra, Mylan has seized the initiative to
push manufacturing technology to the limit, and create a new standard of excellence for quality
and integrity in pharmaceutical production.
At the Caguas plant, our state-of-the-art manufacturing facilities produce a wide range of
Mylan generics, as well as Somerset's proprietary anti-Parkinson's drug Eldepryl(R). Since it
became operational in 1987, the Caguas facility has achieved an excellent record for both product
approval and regulatory compliance.
At its nearby Cidra facility, Mylan has created highly advanced capabilities for handling
pharmaceutical products with special handling and manufacturing safety requirements. These
capabilities permit Mylan to manufacture Cidra's principal product, Methotrexate.
The unique demands of these products - including expert application of specialized
manufacturing equipment, strict adherence to rigid procedures, and constant use of sophisticated
protective gear - create daily challenges which must be met and overcome.
But Cidra's dedicated staff has proven equal to the task.
With enormous energy and commitment, they are facing the immediate challenge of
satisfying market demand for Mylan products today . . . and laying the foundation for Mylan's
entry into significant new market segments tomorrow.
Carlos Machin, President and General Manager of Mylan's Puerto Rico operations
commented: "The philosophy of Mylan is quality and integrity . . . the entire Mylan family is
built around this, and Puerto Rico is no exception. Our employees are extremely proud of the
quality we turn out, of our relationship with the community and with Puerto Rico. We have been
a landmark in Puerto Rico, not only for the level of production . . . but for quality and integrity.
We are extremely proud to be part of the Mylan family."
p.19 Captions
Left: Mylan Inc. Facility Caguas, Puerto Rico Lower Left: Mylan Inc. facility Cidra, Puerto Rico
Top Right: Carlos Machin President and General Manager of Puerto Rico Operations
Constant surveillance assures continued high quality
Caguas,
Puerto Rico
p. 20 Captions
Francisco Torres - Production Manager, Cidra Plant
A wide range of Mylan's generic products are manufactured at the Caguas Plant
Facing the challenge of meeting market demand
p. 21 Captions
The Cidra plant features special handling and manufacturing capabilities
Dow Hickam Pharmaceuticals Incorporated
Dow Hickam Pharmaceuticals Inc. of Sugar Land, Texas was acquired by Mylan Laboratories
Inc. in October 1991 and has become a vital part of a corporation well positioned to take
advantage of the ever changing health care industry. This acquisition was another step by Mylan
in their commitment to customers, shareholders, and employees to aggressively continue their
evolution into a fully integrated pharmaceutical company. Hickam's history and dedication to
quality and service make it a perfect fit with Mylan.
Dow Hickam specializes in the manufacturing and marketing of specialty pharmaceutical
products and medical devices for use in hospitals, nursing homes, and home health care.
Dow Hickam's wound and burn care products are promoted and sold by its 80 person
sales force. With this sizable presence, Hickam is able to reach the nation's 42 most populated
states, covering 97 percent of the hospital and nursing home patients in the United States.
The Company recently increased its number of sales regions from seven to nine to
support its expanding product line and growth into the managed care market place. The
additional coverage gives Hickam the opportunity to grow the sales force when additional
products are acquired or developed and will enable Hickam field managers to form stronger
relationships with corporate accounts, national and regional buying groups, and managed care
companies.
Hickam continues to evolve within the health care market place by acquiring and adding
new items to its existing product line and by strengthening its position in the managed care
market. During fiscal 1995 the Company successfully completed its launch of Flexzan(R), a
highly conformable, polyurethane foam dressing, and in fiscal 1995 Hickam will be adding
Flexfilm (TM),
an ultra-thin, highly flexible film dressing, to its line. Both of these products are the result of a
license and supply agreement with Polymedica Industries, Inc. for the exclusive U.S. sales and
marketing rights.
In December 1994 another exclusive licensing agreement was signed with Smith &
Nephew Ltd. for the rights to manufacture, market, and sell a topical anesthetic. The product is
currently in development at Hickam and will be manufactured in their Sugar Land facilities.
These new products complement the Company's current line and meet its strategic
objective of acquiring unique and innovative products to meet its customers' needs.
In addition to expanding its product line, the Company continues to grow within the
managed care market place. In September of 1994 the "Mylan Managed Health Care Program"
was launched. The Hickam sales force promotes this program to its institutional pharmacy
customers.
The Mylan family of companies is in a unique and quite envious position. Few companies
have the strength of the Mylan line of quality generic products, coupled with the manpower of
Hickam's national sales force and the Bertek line of pharmaceutical labels and forms.
This union of Mylan/ Hickam/Bertek is extremely effective in providing quality products
and services from one source and truly makes Mylan a standout' in America's health care
industry.
DOW HICKAM PHARMACEUTICALS INC. PRODUCT LINE
GRANULEX(R)
A topical aerosol spray used
for management of Stage I-IV
pressure ulcers.
PRODERM(R)
A non-prescription topical aerosol spray used for management of Stage I and II Pressure ulcers.
UNIFIBER(R)
A tasteless, non-gelling dietary fiber supplement.
QUICK!(R)
A topical cleanser for urine or fecal incontinence.
SORBSAN(R)
A highly absorbent calcium alginate wound dressing used in the management of exuding
wounds.
FLEXZAN(R)
An ultra-thin, highly conformable, semi-occlusive polyurethane foam adhesive wound dressing.
FLEXFILM(TM)
An ultra-thin, highly flexible film wound dressing.
SULFAMYLON(R) CREAM
A topical antibacterial cream used in the treatment of burn wounds.
BIOBRANE(R)
An adherent biosynthetic temporary wound dressing used in the management of burn wound and
donor sites.
p. 22 Captions
Left: Dow Hickam Headquarters, Sugar Land, Texas
Right: William W. Richardson President Dow Hickam Pharmaceuticals, Inc.
David W. Satter Executive Vice President and Chief Financial Officer, Dow Hickam
Pharmaceuticals Inc.
Hickam Sales Managers
Hickam's Sales Regions
Bertek Incorporated
Bertek Incorporated, headquartered in St. Albans and Swanton Vermont, is a leading
manufacturer in transdermal drug delivery systems technology, with coating, laminating,
extrusion and labeling operations.
In February 1993, the company was acquired by Mylan Laboratories Inc. The acquisition
provides Mylan with five patents for patch and drug delivery technology, wound care, and other
related products to enhance the generic and branded divisions of Mylan. Bertek also provides
Mylan with the third component of the "Mylan Managed Health Care Program," their innovative
specialty and computer, generated forms and labels.
The health care industry is becoming increasingly complex every day. Health care
reform, patient counseling, and patient outcomes all increase the amount of patient information
to track and keep on file, placing greater demands on providers for accountability. Bertek
technology helps simplify the complex with their pressure sensitive label systems. The
development of the "Mylan Managed Health Care Program," enables Bertek to provide Managed
Health Care with individualized specialty forms and labels combined with the complete line of
Mylan generics and the national sales force of Dow Hickam Pharmaceuticals to better compete in
todays ever changing health care arenas.
As a leader in the manufacturing of thin gauge plastic cards, Bertek's client base includes
Blue Cross and Blue Shield, and numerous staff model HMO's. Bertek also offers a perfect fit as
the complete supplier for computer generated labels and package inserts to Mylan's generic and
proprietary pharmaceutical divisions.
Bertek has state of the art technology for producing extruding, coating and laminated
pharmaceutical products into transdermal delivery of drugs to patients. These patented patches
are also used for wound care. Transdermal osmotic absorption has become a significant advance
in drug delivery systems, transdermal drug delivery increases patient compliance and reduces the
risk of mismedicating, and in many products reduces side effects. Each day, new methods and
applications for transdermal therapeutic systems evolve, and Bertek has helped pioneer that
growth. By combining their extensive R&D and pharmacology capabilities with comprehensive
GMP manufacturing, including clean room coating and laminating of the finished patch and all
its components, Bertek is the complete source from the initial concept through final
manufacturing.
Bertek currently provides components using internally developed technology for
transdermal patches marketed by other companies under contract. Mylan is actively involved in
research and development projects using Bertek technology to provide new products for
marketing by its subsidiaries, including, but not limited to, developing generic patches, new
chemical entities, line extensions of existing drugs and collaborating with Somerset
Pharmaceuticals to develop an Eldepryl(R) patch.
The strategic fit of Bertek and Mylan will enable Mylan to be in the fore front of the ever
changing health care market in 1995 and beyond.
Bertek INC. PRODUCT LINE
Transdermal Drug Delivery Systems
Bertek's Medical Products Division, a leader in Transdermal Drug Delivery Systems, represents
a unique integration of R & D and the manufacturing know-how and full integration of
production facilities to make raw materials and finished patches.
Wound Care Products
Bertek now stands as an established leader in the design, development and manufacture of both
critical component materials and custom-designed products for use in wound management.
The MEDIFILM(R) SERIES of extruded, controlled high moisture vapor permeable films offers
a complete range of design flexibility for use in wound and I.V. site dressings, ulcer dressings,
burn dressings, surgical drape and ostomy barrier applications.
Health Care Products and Materials
Surgical Incise Drape
Prolonged surgical procedures require the use of securely adhered incise drape films with a high
degree of breathability to eliminate the possibility of perspiration-induced channeling and
contamination of the wound site.
Films & Laminates for Ostomy Care & Skin Barriers
Bertek has developed a family of soft, conformable urethane and copolyester skin barrier films
specifically for ostomy care.
GMP Converting and Labeling
As a printer of pharmaceutical labels, Bertek has established full capabilities for designing labels
from typesetting to finished artwork by our in-house design team.
p. 27 captions
Left: Joseph J. Krivulka - President
Center: Pouching trials
Right: Label inspection
John Campbell - Vice President Pharmaceutical Manufacturing
Patch Die Cutting
p. 28 Captions
Inspecting package inserts
p. 29 Captions
Bertek is an innovator in the design and manufacture of forms and labels
Somerset Pharmaceuticals, Incorporated
Mylan's participation in Somerset began in 1988 when Mylan agreed to purchase fifty percent of
the shares of Somerset. In June 1989 Somerset received FDA approval to market Eldepryl(R) as
an Orphan Drug for the treatment of Parkinson's disease. More than 75,000 Parkinsonian
patients are currently receiving the benefits of Eldepryl(R).
Sales of Eldepryl(R) have increased each year since market introduction to a level of
$125,000,000 in calendar year 1994. Net profits have increased each year and have generally
tracked increases in sales particularly if adjustments are made for the significant increases in
resources dedicated to research and development efforts.
In late 1991 Somerset realigned its business goals to include expanded efforts in research
and development. As such, Somerset is pursuing line extensions of Eldepryl(R) as well as other
related and unrelated new products to complement the sales of Eldepryl(R) which retains its
market exclusively through June 5, 1996. To this end, Somerset has allocated resources
equivalent to approximately ten percent of the net sales to fund these research efforts.
As a part of its expanded research and development efforts, Somerset located its Research
and Development facility in Tampa in a 24,000 square feet laboratory building which is equipped
with the latest in research and development equipment including: state-of-the-art analytical
equipment such as an LC-MS-MS (liquid chromatograph, dual mass spectrophotometer), and
high tech processing equipment such as a Glatt Fluidized Bed Granulator.
Personnel, equipment and facilities are in place at the Tampa location which allow
Somerset to add orally administered product line extensions for Eldepryl(R), to pursue a patented
Selegline Transdermal System (STS), and to develop an osteoporosis drug product for which
Somerset has an exclusive license for the U.S. and Canadian markets. Additional development
capabilities in Somerset's laboratory include the design, formulation and production of pilot
quantities of liquids, tablets, capsules, ointments and creams. As such, Somerset has directed its
development efforts toward expanding its product lines by pursuing drug delivery systems in the
above named delivery systems.
Phase II clinical trials are in process assessing the Selegline Transdermal System (STS).
Potential therapeutics uses of particular interest to Somerset for the STS include Alzheimers
disease, clinical depression, attention deficit hyperactivity disorder and Parkinson disease.
An Investigational New Drug Application (IND) has been submitted for the osteoporotic
agent and clinical trials designed to confirm the safety and efficacy of the osteoporotic agent are
under way in Europe. The osteoporotic agent is specifically identified as an osteoclast inhibitor
of the non-bisphosphonates class. This osteoporotic agent is currently marketed in Hungary,
Italy, Japan, and Argentina by our licensor.
On the marketing front, Somerset is committed not only to providing pharmacological
agents for the treatment of Parkinson's disease and other disease states, but to educating
physicians and patients about how to get the most from their medications. As part of a
comprehensive patient education program Somerset and its Eldepryl(R) co-marketing partner,
Sandoz, launched two innovating programs in 1995.
In conjunction with the American Parkinson's Disease Association (APDA), Somerset is
sponsoring the first ever national patient satellite conference to be held on June 14, 1995. Hosted
in New York and featuring three internationally renowned movement disorder experts, the
program will be beamed live to six other cities which will have local expert speakers to provide
commentary and answer questions.
Also in 1995, an Eldepryl(R) VIP (Value in Persistency) program will be initiated. This
program will provide educational videos and booklets on Parkinson's Disease and the various
medications used to treat this disorder. The program also provides tips for daily living, exercise
and coupons for valuable discounts.
Success with the above research, development, and marketing efforts will allow Somerset
to continue to contribute to Mylan's future.
p. 31 Captions
Left: Somerset's R&D Facility
Center: Somerset Corporate Office
Right: Dana G. Barnett President
Dr. Cheryl Blume - Vice President
p. 32 Captions
Somerset's State-of-the-Art Analytical Equipment
Somerset Administrative Staff
P. 33 Captions
Mylan Manufactures Somerset's Eldepryl(R) in Puerto Rico
Somerset's High Tech Processing Equipment
Financial Highlights
March 31 1995 1994
Net Sales $ 396,120,000 $ 251,773,000
Net Earnings $ 120,869,000 $ 73,067,000
Earnings Per Share $ 1.52 $ .93
Working Capital $ 275,032,000 $ 191,647,000
Current Ratio 5.9 to 1 11.7 to 1
Total Assets $ 546,201,000 $ 403,325,000
Shareholders' Equity $ 482,728,000 $ 379,969,000
Book Value Per Share $ 6.09 $ 4.81
Financial Highlights (BAR GRAPH)
Net Earnings Fiscal year
(In millions)
33.0 1991
40.1 1992
70.6 1993
73.1 1994
120.9 1995
Shareholders' Equity (BAR GRAPH)
(In millions) Fiscal year
167.5 1991
203.5 1992
296.0 1993
380.0 1994
482.7 1995
Net Sales (BAR GRAPH)
(In millions)
104.5 1991
131.9 1992
212.0 1993
251.8 1994
396.1 1995
Selected Financial Data
Year ended March 31 1995 1994 1993 1992 1991 1990 1989
Net Sales $ 396,120 $ 251,773 $ 211,964 $ 131,936 $ 104,524 $ 107,435 $ 99,558
Net Earnings $ 120,869 $ 73,067 $ 70,621 $ 40,114 $ 32,952 $ 26,573 $ 19,265
Earnings Per Share $ 1.52 $ .93 $ .92 $ .52 $ .43 $ .35 $ .25
Shares Used In Computation 79,309 78,949 77,101 76,484 76,368 76,226 76,140
At year end
Working Capital $ 275,032 $ 191,647 $ 154,000 $ 102,105 $ 81,571 $ 65,393 $ 73,022
Total Assets $ 546,201 $ 403,325 $ 351,105 $ 226,720 $ 186,955 $ 156,911 $ 131,246
Long-Term Obligations $ 7,122 $ 4,609 $ 5,125 $ 3,600 $ 3,398 $ 2,705 $ 3,946
Shareholders' Equity $ 482,728 $ 379,969 $ 295,972 $ 203,452 $ 167,531 $ 141,262 $ 117,945
Book Value Per Share $ 6.09 $ 4.81 $ 3.84 $ 2.66 $ 2.19 $ 1.85 $ 1.55
Numbers in thousands except per share amounts.
From June of 1985 through June of 1990 the Company paid a semi-annual cash dividend of $.05
per share per year. From June of 1990 through July of 1992 the Company had a quarterly
dividend program totaling $.10 per share per year. From October of 1992 to July of 1993 the
Company had a quarterly dividend program totaling $.12 per share per year. From October of
1993 to July of 1994 the Company had a quarterly dividend program totaling $.16 per share per
year. Since October of 1994 the Company has a quarterly dividend program totaling $.20 per
share per year. In addition the Company paid a special cash dividend of $.10 per share in January
of 1995.
The above Financial data gives retroactive effect to the October 30, 1991 business combination of
Mylan Laboratories Inc. and Dow B. Hickam, Inc. and the two-for-one stock split effective
August 1, 1992.
Management's Discussion and Analysis of Results
Of Operations and Financial Position
Overview
By any measure fiscal 1995 was a rewarding year for the Company and our shareholders. Years
of commitment to Mylan's standards of quality manufacturing, customer service and product
development all contributed to the significant growth in net sales and net earnings.
The Company's premier position in the generic industry provided a platform for unprecedented
success in new product launches in fiscal 1995, including five products developed internally and
five products licensed from brand name manufacturers. Additionally the strength of the
Company's distribution capabilities was a key factor in the establishment of an arrangement with
a subsidiary of Eli Lilly and Company relating to cefaclor. While the Company recognized
revenue on a fee for services basis and not to the extent of actual sales to customers, this
arrangement provides a significant enhancement to the Mylan product line.
The extraordinary growth in sales and gross profits has enabled the Company to accelerate and
expand our investment into new product development and solidify our infrastructure. During
fiscal 1995 the Company broke ground on a 150,000 square foot research and development
facility. Scheduled for completion in late 1995, this state-of-the-art facility will not only enhance
our product development effort, but will also provide for expansion of our manufacturing and
administrative facilities. These steps will help the Company to meet the many challenges which
lie ahead in the constantly changing pharmaceutical industry.
Mylan shareholders realized significant rewards from the Company's financial results in fiscal
1995. The Company declared dividends of just over $23 million during the year, a 94% increase
over the previous year and the market price for the Company's common stock appreciated
significantly.
Results of Operations
Net Sales and Gross Margin
The following table outlines net sales, gross margins and the corresponding increase over the
previous year.
(dollars in millions)
Year Ended Net Sales Gross Margin Gross Margin as
March 31, Dollars Change Dollars Change % of Net Sales
1995 $ 396.1 57% $ 226.5 80% 57%
1994 $ 251.8 19% $ 126.1 3% 50%
1993 $ 212.0 61% $ 122.6 97% 58%
The changes in net sales, gross margins and gross margin as a % of net sales are indicative of the
highly competitive nature of the generic pharmaceutical industry and the Company's history of
obtaining new product approvals. Generic products generally yield higher gross margins as a
percent of sales in the short term period after introduction, and are subject to, sometimes severe,
pricing deterioration as other competitors enter the market.
The Company added eleven products to our generic line in fiscal 1995, eight in 1994, four in
1993 and five in 1992. Of the eleven products added in fiscal 1995, three, cimetidine, glipizide
and flurbiprofen had minimal competition and thus provided
significant sales and gross profit dollars. The Company experienced increased price competition
on these products during the fourth quarter and expects continued competition throughout fiscal
1996.
In addition to new generic products the changes in sales and gross margins from 1993 to 1994
were affected by sales from Bertek (acquired in February 1993) which generally provides lower
gross margin rates.
Due to the competitive nature of the generic pharmaceutical industry, net sales and gross margin
percentages recognized in fiscal 1995 are not necessarily indicative of the results to be expected
in future periods.
Research and Development
Research and Development expenses were $30,533,000 compared to $21,648,000 in 1994 and
$13,524,000 in 1993. These amounts represent approximately 8% of corresponding net sales in
1995, 9% in 1994 and 6% in 1993. Fiscal 1994 and 1995 expenditures include amounts for
transdermal delivery system development in addition to increased expenditures for ongoing
research and development of both innovative and generic products. The Company continues its
commitment to new and increased product development.
Selling and Administrative
Selling and Administrative expenses were $58,035,000 in fiscal 1995 compared to $49,173,000
in fiscal 1994 and $36,714,000 in fiscal 1993, which represents approximately 15%, 20% and
17% of corresponding net sales. The fiscal 1994 and 1995 amounts include approximately
$3,143,000 each year in amortization of intangible assets associated with the Bertek acquisition.
In 1994, $3,229,000 was expensed resulting from the death of Mr. McKnight the former
Chairman and Chief Executive Officer of the Company. Other changes from 1994 to 1995 and
from 1993 to 1994 are attributable in large part to compensation and related expenses,
selling/marketing expenses associated with new products including sales commissions and legal
and professional fees associated with the various court actions to which the Company has been
involved.
Equity in Earnings of Somerset
Somerset's contribution to the Company's pretax earnings
(in thousands) and net earnings per share are as follows:
1995 1994 1993
Net Net Net
Quarter Pretax Earnings Pretax Earnings Pretax Earnings
Ended Earnings Per Share Earnings Per Share Earnings Per Share
6/30 $ 5,348 $ .06 $ 5,682 $ .06 $ 4,309 $ .05
9/30 6,141 .07 5,727 .07 5,101 .06
12/31 8,330 .09 6,841 .08 6,120 .07
3/31 5,587 .06 5,346 .06 5,606 .06
Fiscal Year $25,406 $ .28 $ 23,596 $ .27 $ 21,136 $ .24
Under the Orphan Drug Act, Somerset has exclusivity relating to marketing the chemical
compound Eldepryl(R) for use as a treatment for late stage Parkinson's disease through June of
1996. Under the Waxman Hatch Act, Somerset had exclusivity for all uses of the chemical
compound through June of 1994. Somerset is actively involved in research projects regarding
additional uses of this chemical compound, and other potential products.
Other Income
Other income for the year ended March 31, 1995 was $7,958,000 compared to $8,148,000 in
1994 and $3,879,000 in 1993. The 1994 amount includes $3,375,000 in legal settlements. Other
changes are indicative of market fluctuations effecting the yields on investments, and changes in
assets available for investment.
Income Taxes
The effective tax rates for 1995, 1994 and 1993 were 29%, 16% and 27% respectively. The 1994
effective tax rate was reduced by 5% as a result of recording the cumulative effects of changes in
financial reporting requirements and changes in the federal tax code.
The Company recognized tax credits which reduced the effective tax rates by approximately 5%
in 1995, 8% in 1994 and 2% in 1993. The tax credits result principally from operations in Puerto
Rico and also from credits for increasing research and development activities. Changes in the
Federal Tax Code enacted in 1993 reduced tax credits otherwise available for operating in Puerto
Rico by 40% in fiscal 1995 with additional 5% reductions in the next four fiscal years. In
addition recent tax rulings may reduce the amount of credit otherwise available to the Company
for research and development activities.
Liquidity and Capital Resources
The Company's balance sheet remains strong with total assets increasing by 35% to
$546,201,000 at March 31, 1995. Working capital of $275,032,000 represents 57% of net worth
at March 31, 1995 versus $191,647,000 or 50% of net worth at March 31, 1994. The ratio of
current assets to current liabilities was 5.9 to 1 at March 31, 1995 versus 11.7 to 1 at March 31,
1994.
Cash flows from operating activities increased significantly from fiscal 1994 to 1995 due
principally to the higher level of net earnings and also to the timing of collections of accounts
receivable and payment of income taxes.
The Company invested $17,485,000 in 1995 and $20,164,000 in 1994 for facilities expansion,
including relocation of our Greensboro distribution center, and expansion and renovation
of facilities in Puerto Rico and Vermont. During fiscal 1994, the Company also acquired aircraft
which were previously leased on
a flight by flight basis. All capital expenditures during fiscal years 1995 and 1994 were made
with the general funds of the Company without incurring bank financing. As of March 31, 1995
the Company has commitments for future capital expenditures of approximately $10,828,000,
including the construction of a 150,000 square foot research and development facility in
Morgantown, WV.
In addition to investing in property, plant and equipment, the Company has invested considerable
amounts over the past two years into marketable securities, principally tax exempt instruments.
Increases in intangible and other assets includes equity investments and payments for long-term
licenses to entities with which the Company is jointly developing new products.
Payments of long-term obligations in 1994 represents a final settlement with the estate of Roy
McKnight in connection with Mr. McKnight's salary continuation agreement. Prior year
payments were for obligations assumed in the business combination of Bertek in 1993.
The Company paid cash dividends of $.28 per share in 1995 totaling $22,208,0000 compared to
$.14 per share in 1994 which totaled $11,026,000.
Consolidated Balance Sheets
March 31 1995 1994
Assets
Current Assets
Cash and cash equivalents $ 127,280,000 $ 75,526,000
Marketable securities 52,575,000 12,925,000
Accounts receivable - net 58,343,000 55,430,000
Inventories 78,205,000 57,996,000
Prepaid income taxes - 1,265,000
Deferred income tax benefit 10,545,000 2,082,000
Other current assets 4,435,000 4,349,000
Total Current Assets 331,383,000 209,573,000
Property, Plant and Equipment-net of accumulated depreciation 92,299,000 82,514,000
Deferred income tax benefit, non-current 1,043,000 -
Marketable Securities, Non-Current 21,958,000 12,125,000
Intangible Assets-Net of accumulated amortization 28,518,000 33,228,000
Other Assets 48,945,000 48,122,000
Investment In and Advances to Somerset 22,055,000 17,763,000
Total Assets $ 546,201,000 $ 403,325,000
See notes to consolidated Financial statements.
Consolidated Balance Sheets
March 31 1995 1995
Liabilities and Shareholders' Equity
Current Liabilities
Trade accounts payable $ 10,466,000 $ 6,699,000
Income taxes payable 24,019,000 -
Other current liabilities 17,890,000 8,056,000
Cash dividend payable 3,976,000 3,171,000
Total Current Liabilities 56,351,000 17,926,000
Long-Term Obligations 7,122,000 4,609,000
Deferred Income Tax Liability - 821,000
Shareholders' Equity
Preferred stock, par value $.50 per share, authorized 5,000,000 shares,
issued and outstanding - none - -
Common stock, par value $.50 per share, authorized 300,000,000 shares,
issued 79,972,248 shares at March 31, 1995
and 79,697,295 shares at March 31, 1994 39,986,000 39,849,000
Additional paid-in capital 57,577,000 54,272,000
Retained earnings 386,212,000 288,357,000
Unrealized gain on investments 1,374,000 -
485,149,000 382,478,000
Less treasury stock at cost - 476,523 shares at March 31, 1995
and 495,864 shares at March 31, 1994 2,421,000 2,509,000
Net Worth 482,728,000 379,969,000
Total Liabilities and Shareholders' Equity $ 546,201,000 $ 403,325,000
Consolidated Statements of Earnings
Year ended March 31 1995 1994 1993
Net Sales $ 396,120,000 $ 251,773,000 $ 211,964,000
Cost and Expenses
Cost of Sales 169,590,000 125,631,000 89,400,000
Research and Development 30,533,000 21,648,000 13,524,000
Selling and Administrative 58,035,000 49,173,000 36,714,000
258,158,000 196,452,000 139,638,000
Equity in Earnings of Somerset 25,406,000 23,596,000 21,136,000
Other Income 7,958,000 8,148,000 3,879,000
Earnings Before income Taxes 171,326,000 87,065,000 97,341,000
Income Taxes 50,457,000 13,998,000 26,720,000
Net Earnings $ 120,869,000 $ 73,067,000 $ 70,621,000
Earnings Per Share $ 1.52 $ .93 $ .92
Weighted Average Common Shares 79,309,000 78,949,000 77,101,000
See notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity
Common Stock Common Stock Additional Retained Unrealized Gain
Shares Amount Paid-In Capital Earnings on Investments
April 1, 1992 38,631,373 $ 19,317,000 $ 7,699,000 $ 176,789,000 $ -
Stock options exercised 713,857 357,000 12,732,000 - -
Cash dividend $.115 per share - - - (8,902,000) -
Stock split (2 for 1) 38,654,343 19,327,000 (7,958,000) (11,369,000) -
Bertek acquisition 615,880 308,000 17,393,000 - -
Net earnings - - - 70,621,000 -
March 31, 1993 78,615,453 $ 39,309,000 $ 29,866,000 $ 227,139,000 $ -
Stock options exercised 347,747 173,000 4,447,000 - -
Cash dividend $.15 per share - - - (11,849,000) -
Bertek acquisition 734,095 367,000 19,959,000 - -
Net earnings - - - 73,067,000 -
March 31, 1994 79,697,295 $ 39,849,000 $ 54,272,000 $288,357,000 $ -
Stock options exercised 274,953 137,000 3,305,000 - -
Cash dividend $.29 per share - - - (23,014,000) -
Net earnings - - - 120,869,000 -
Change in unrealized gain on investments - - - - 1,374,000
March 31, 1995 79,972,248 $ 39,986,000 $ 57,577,000 $386,212,000 $ 1,374,000
See notes to consolidated Financial statements.
Consolidated Statements of Cash Flows
Year ended March 31 1995 1994 1993
Cash flows from operating activities
Net earnings $ 120,869,000 $ 73,067,000 $ 70,621,000
Adjustments to reconcile net earnings to net cash provided from operating activities:
Depreciation and amortization 12,700,000 11,154,000 5,089,000
Deferred income tax benefit (10,427,000) (656,000) (888,000)
Equity in earnings of Somerset (25,406,000) (23,596,000) (21,136,000)
Cash received from Somerset 21,114,000 20,676,000 19,966,000
Other noncash expenses 13,252,000 4,192,000 3,758,000
Changes in operating assets and liabilities:
Accounts receivable (14,240,000) (23,485,000) (9,073,000)
Inventories (19,590,000) (12,002,000) (9,825,000)
Trade accounts payable 3,410,000 207,000 1,911,000
Income taxes payable 25,060,000 (11,111,000) 6,263,000
Other operating assets and liabilities 9,789,000 (2,813,000) 1,651,000
Net cash provided from operating activities 136,531,000 35,633,000 68,337,000
Cash Flows from Investing Activities
Additions to property, plant and equipment (17,485,000) (20,164,000) (12,294,000)
Increase in intangible and other assets (8,238,000) (15,147,000) (10,833,000)
Purchase of marketable securities (58,491,000) (12,925,000) -
Proceeds from sales and maturities
of marketable securities 25,482,000 4,800,000 -
Acquisition-net of cash acquired (6,432,000) - -
Net cash used in investing activities (65,164,000) (43,436,000) (23,127,000)
See notes to consolidated Financial statements.
Consolidated Statements of Cash Flows
Year ended March 31 1995 1994 1993
Cash flows from Financing activities
Payments on long-term obligations $ (451,000) $ (4,320,000) $ (8,373,000)
Cash dividend paid (22,208,000) (11,026,000) (8,476,000)
Payments on acquisition obligation - (977,000) -
Proceeds from exercise of stock options 3,046,000 1,406,000 9,561,000
Net cash used in financing activities (19,613,000) (14,917,000) (7,288,000)
Net Increase (Decrease) in Cash and Cash Equivalents 51,754,000 (22,720,000) 37,922,000
Cash and Cash Equivalents-Beginning of Year 75,526,000 98,246,000 60,324,000
Cash and Cash Equivalents-End of Year $ 127,280,000 $ 75,526,000 $ 98,246,000
For purposes of presentation in the statements of cash flows, cash, overnight deposits, certificates
of deposit, money market funds and marketable securities with original maturities of less than
three months have been classified as cash and cash equivalents. The carrying value of these items
approximates fair value.
Cash payments for interest were $25,000 in 1995, $30,000 in 1994 and $64,000 in 1993. Cash
payments for income taxes were $35,822,000 in 1995, $27,055,000 in 1994 and $21,345,000 in
1993.
During fiscal 1993 the Company acquired substantially all of the assets of Bertek, Inc. (Bertek)
(see note B) for approximately $39,112,000 and assumed liabilities of approximately
$10,090,000. During the years ended March 31, 1994 and 1993 $20,326,000 and $17,701,000 of
the purchase price was satisfied through the issuance of the Company's common stock.
At the closing of this transaction, the Company repaid with cash approximately $8,293,000 in
long-term debt obligations assumed.
During fiscal 1993 the Company declared a 2 for 1 stock split effected in the form of a stock
dividend (see note M).
Certain stock option transactions result in a reduction of income taxes payable and a
corresponding increase in additional paid-in capital. The amounts for the years ended March 31,
1995, 1994 and 1993 were $396,000, $1,040,000 and $3,528,000 respectively.
During fiscal 1995 and 1994 the Company received and recorded into treasury stock 659 and
75,658 shares of common stock valued at $14,000 and $ 2,174,000 respectively in consideration
for the exercise of stock options.
Notes to Consolidated Financial Statements
A. Summary of Significant Accounting Policies
1. Principles of Consolidation
The consolidated financial statements include the accounts of Mylan Laboratories Inc. (the
Company) and its wholly-owned subsidiaries. All intercompany accounts and transactions have
been eliminated in consolidation. The Company's principal line
of business is the manufacturing and distribution of pharmaceutical products. The Company had
sales to one customer which represented 12% of net sales in 1993.
2. Marketable Securities
Effective April 1, 1994, the Company adopted Statement of Financial Accounting Standards No.
115 (SFAS No. 115), "Accounting for Certain Investments in Debt and Equity Securities."
Under
this Statement, the Company's investments classified as "available for sale" are recorded at
current market value with offsetting adjustments to shareholders' equity, net of income taxes. At
March 31, 1994, investments were stated at the lower of aggregate cost or market. The adoption
of SFAS No. 115 did not have a material impact on the financial position of the Company.
3. Accounts Receivable and Revenue Recognition
The Company recognizes revenue from product sales upon shipment to customers. Provisions for
discounts, rebates, returns and other adjustments are provided for in the same period as the
related sales are recorded. Accounts receivable are presented net of such provisions which
amounted to $14,777,000 at March 31, 1995 and $3,449,000 at March 31, 1994.
4. Inventories
Inventories are stated at the lower of cost (principally, first-in, first-out) or market.
5. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided in amounts sufficient
to relate cost of depreciable assets to operations over the estimated service lives, principally on a
straight-line basis.
6. Research and Development
Research and development expenses are charged to operations
as incurred.
7. Income Taxes
Deferred income taxes reflect the tax consequences on future years of events that have already
been recognized by the Company in the financial statements or tax returns. Prior to April 1, 1993
deferred income taxes were provided for the difference between income and expense recognition
for financial reporting purposes and income tax purposes.
8. Earnings Per Share
Earnings per share of common stock are based on the weighted average number of shares
outstanding during each year. The effect on earnings per share, resulting from the assumed
exercise of outstanding stock options, is not material.
9. Reclassification
Certain prior year amounts have been reclassified to conform to the 1995 presentation.
B. Business Combinations
American Triumvirate Insurance Company
On December 21, 1994 the Company acquired the 50% interest in American Triumvirate
Insurance Company (ATIC) that it did not previously own. ATIC is a captive insurance company
located in Burlington, Vermont. The business combination has been accounted for under the
purchase method of accounting. The Company paid $8,166,000 which equaled 50% of the net
book value of ATIC as of December 31, 1994.
Bertek
On February 25, 1993 a wholly-owned subsidiary of the Company acquired substantially all of
the net assets of Bertek, Inc. (Bertek). Bertek, headquartered in St. Albans, Vermont, is a
manufacturer
of transdermal drug delivery systems and also has operations in laminating and label
manufacturing. The business combination has been accounted for under the purchase method of
accounting. Goodwill of approximately $2,686,000 resulting from the acquisition is being
amortized on a straight-line basis over a 20 year period.
C. Inventories
Inventories consist of the following components: (in thousands)
March 31, 1995 1994
Raw materials $ 29,795 $ 26,138
Work in process 17,539 14,978
Finished goods 30,871 16,880
$ 78,205 $ 57,996
D. Property, Plant and Equipment
Property, plant and equipment consist of the following components:
(in thousands)
March 31, 1995 1994
Land and land improvements $ 5,767 $ 5,088
Buildings and improvements 48,674 41,705
Machinery and equipment 69,626 59,178
Construction in progress 8,532 9,143
132,599 115,114
Less accumulated depreciation 40,300 32,600
$ 92,299 $ 82,514
E. Investment in and Advances to Somerset
The Company owns 50% of all the outstanding common stock of Somerset Pharmaceuticals Inc.
(Somerset) and uses the equity method of accounting for its investment.
Equity in Earnings of Somerset includes the Company's 50% portion of Somerset's net earnings
and expense for amortization of intangible assets resulting from the acquisition of Somerset.
Such intangible assets are amortized over a 15 year period. Amortization expense amounted to
$924,000 in 1995, 1994 and 1993. Additionally, the Company's charges to Somerset for
management services and product development activities are included in Equity in Earnings of
Somerset. These charges have been recorded by Somerset as a reduction of its net earnings.
Condensed unaudited balance sheet information of Somerset is as follows: (in thousands)
March 31, 1995 1994 1993
Current assets $ 40,539 $ 27,931 $ 30,409
Non-current assets 6,854 6,043 2,760
Current liabilities 19,110 14,918 20,675
Payable to owners 1,328 1,002 1,796
Other liabilities 475 642 808
Condensed unaudited income statement information of Somerset is as follows: (in thousands)
Year ended March 31, 1995 1994 1993
Net sales $ 125,975 $ 111,970 $ 108,518
Cost and expenses 60,270 50,465 49,872
Income taxes 21,485 19,547 21,789
Net earnings $ 44,220 $ 41,958 $ 36,857
The above information represents 100% of Somerset's operations of which the Company has a
50% interest.
Under the Orphan Drug Act, Somerset has exclusivity relating to marketing the chemical
compound Eldepryl(R) for use as a treatment for late stage Parkinson's disease through June of
1996.
F. Marketable Securities
Effective April 1, 1994 the Company adopted Statement of Financial Accounting Standards No.
115 (SFAS No. 115), "Accounting for Certain Investments in Debt and Equity Securities". Prior
years' financial statements have not been restated to apply the provisions of SFAS No. 115.
This Standard changes the manner in which certain investments are valued and affects the way in
which unrealized gains and losses are recognized for financial reporting purposes. The Company
has classified its portfolio of marketable securities as "available for sale". Such securities are
recorded at market value with unrealized gains and losses being recognized as a separate
component of shareholders' equity, net of income taxes.
The amortized cost and estimated market values at March 31, 1995 are as follows: (in thousands)
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Debt securities:
U.S. Government obligations $ 17,083 $ 262 $ 22 $ 17,323
Municipal obligations 33,047 95 10 33,132
Corporate bonds 3,090 69 75 3,084
Certificates of deposit 15,804 - - 15,804
Total debt securities 69,024 426 107 69,343
Equity securities 3,400 1,868 78 5,190
Maturities of debt securities at market value are as follows: (in thousands)
Due in one year or less $ 47,384
Due after one year through five years 16,553
Due after five years 5,406
Total $ 69,343
Proceeds from sales of marketable securities were $5,068,000 during 1995. Gross gains of
$14,000 and gross losses of $142,000 were realized on those sales during 1995. The cost of
investments sold is determined by the specific identification method.
G. Intangible Assets
Intangible assets are stated net of accumulated amortization of $13,874,000 and $8,874,000 at
March 31, 1995 and 1994 respectively. Amortization is provided for on a straight-line basis over
periods ranging from 14 to 17 years for patents and technology and 2 to 20 years for other
intangible assets.
Values assigned to patents and technology at March 31, 1995 and 1994, were
$20,945,000 and $22,324,000 respectively. The remaining amounts consist principally of values
assigned to licenses, agreements and goodwill.
H. Other Assets
Other assets consist of the following components: (in thousands)
March 31, 1995 1994
Pooled asset funds $ 14,587 $ 13,758
Cash surrender value 16,377 16,254
Captive insurance company - 7,712
Other investments 17,981 10,398
$ 48,945 $ 48,122
Pooled asset funds are carried at the lower of cost or market and include the Company's interest
in various funds which invest in common and preferred stocks, bonds, and money market funds.
Earnings on these investments included under the caption "Other Income" amounted to $829,000
in 1995, $402,000 in 1994 and ($645,000) in 1993. At March 31, 1995 and 1994 the carrying
amounts of these investments approximated fair value.
Cash surrender value represents insurance policies on
certain officers and key employees and the value of a split dollar life insurance arrangement with
the estate of the former Chairman and Chief Executive Officer of the Company (see note P).
Other investments are comprised principally of equity investments in non-publically traded
entities. Such investments are accounted for under the cost method.
Prior to December 21, 1994 the Company's interest in a captive insurance company was
accounted for using the equity method of accounting (see note B). Earnings from this investment
included under the caption "Other Income" amounted to $454,000 in 1995 prior to acquisition,
$937,000 in 1994 and $940,000 in 1993.
I. Other Current Liabilities
Other current liabilities includes payroll and employee benefit
plan accruals which amounted to $6,103,000 at March 31, 1995 and $5,388,000 at March 31,
1994, accruals for Medicaid reimbursements of $3,640,000 at March 31, 1995 and $1,479,000 at
March 31, 1994 and deferred revenue related to a distribution agreement (see note K) of
$3,500,000 at March 31, 1995.
J. Long-Term Obligations
Long-term obligations represent accruals for post-retirement compensation pursuant to
agreements with certain key employees and directors. Under these agreements, benefits are to be
paid over periods of 10 to 15 years commencing at retirement.
K. Distribution Agreement
On October 10, 1994 the Company entered into a distribution agreement with STC
Pharmaceuticals, Inc. (STC), a wholly owned subsidiary of Eli Lilly and Company (Lilly). Under
the terms of the agreement the Company is distributing a generic form of Lilly's oral antibiotic
Ceclor(R) on behalf of STC. The Company is being paid a fixed monthly fee for distributing the
product. Upon certain events, as defined in the agreement, the fixed monthly fee will convert to a
variable amount predicated upon STC's net sales of the product. Revenues and gross profits
resulting from this agreement did not have a material impact on operations.
L. Income Taxes
Income taxes consist of the following components: (in thousands)
Year ended March 31, 1995 1994 1993
Federal
Current $ 48,851 $ 11,888 $ 25,325
Deferred (8,111) 61 (888)
40,740 11,949 24,437
State
Current 12,033 2,766 2,283
Deferred (2,316) (717) -
9,717 2,049 2,283
Income taxes $ 50,457 $ 13,998 $ 26,720
Pre-tax earnings $ 171,326 $ 87,065 $ 97,341
Effective tax rate 29.5% 16.1% 27.4%
Effective April 1, 1993 the Company adopted Statement of Financial Accounting Standards No.
109 (SFAS No. 109), "Accounting for Income Taxes". The prior year's financial statements have
not been restated to apply the provisions of SFAS No. 109. The cumulative effect of adopting
this Standard resulted in an increase in net earnings of $1,124,000 or $.01 per share in the 1994
Consolidated Statement of Earnings. There was no cash flow impact.
This Standard requires an asset and liability approach to accounting for income taxes. Deferred
income tax assets and liabilities reflect the future tax consequences of events that have already
been recognized in the financial statements or tax returns. Changes in enacted tax rates or laws
will result in adjustments to the recorded tax asset or liabilities in the period that the tax law is
enacted.
Temporary differences and carryforwards which give rise to the deferred income tax assets and
liabilities are as follows:
(in thousands)
March 31, 1995 1994
Deferred Tax Assets:
Employee benefits $ 2,758 $ 1,745
Deferred revenue 1,881 868
Asset allowances 5,785 1,279
Inventory 5,378 829
Investments 634 1,022
Total Deferred Tax Assets 16,436 5,743
Deferred Tax Liabilities:
Property 2,642 3,379
Investments 2,206 1,103
Total Deferred Tax Liabilities 4,848 4,482
Deferred Tax Assets - Net $ 11,588 $ 1,261
Classification in the Consolidated Balance Sheet:
Deferred Income Tax Benefit - Current $ 10,545 $ 2,082
Deferred Income Tax Benefit - Non-Current 1,043 -
Deferred Income Tax Liability - Non-Current - (821)
Deferred Tax Assets - Net $ 11,588 $ 1,261
A reconciliation of the statutory tax rate to the effective tax rate is as follows:
Year Ended March 31, 1995 1994 1993
Statutory tax rate 35.0% 35.0% 34.0%
State income taxes-net 4.2% 1.7% 1.5%
Tax exempt earnings-
primarily dividend exclusion (4.8%) (7.7%) (5.9%)
Tax credits (4.9%) (7.6%) (2.2%)
SFAS 109 - (1.3%) -
Changes in tax code - (3.7%) -
Other items - (0.3%) -
Effective tax rate 29.5% 16.1% 27.4%
Tax credits result principally from operations in Puerto Rico.
In August of 1993, President Clinton signed into law the Omnibus Budget Reconciliation Act of
1993 ("the Act"). The Act has several provisions which affect the Company's income
tax expense including a change in the Federal corporate tax rate and significant changes relating
to tax credits for operations in Puerto Rico. As a direct result of the changes in the tax code, the
Company reassessed its position on the filing alternatives available under the tax code. Based on
the new tax code provisions, the Company made a decision which resulted in a reduction of
income tax expense of $3,225,000. This amount represents management's estimate of the
cumulative effect of this change.
M. Common Stock
During fiscal year 1993 the company declared a 2 for 1 stock split effected in the form of a stock
dividend. The par value of the new shares issued totaled $19,327,000 and has been transferred
from additional paid-in capital and retained earnings to the common stock account. Per share
amounts and stock options have been adjusted for the stock split.
On April 7, 1993, the shareholders of the Company approved an increase in the number of shares
of common stock authorized to 300,000,000.
N. Stock Option Plans
On December 1, 1986 the Board of Directors adopted the "Mylan Laboratories Inc. 1986
Incentive Stock Option Plan" ("the Plan") which was approved by the shareholders on June 24,
1987. A total of 6,000,000 shares of the Company's common stock are reserved for issuance
upon exercise of stock options. Options, which may be granted at not less than fair market value
on the date of the grant may be excercised within ten years from the date of grant. As of March
31, 1995 options for 3,040,300 shares have been granted pursuant to the Plan.
On June 23, 1992 the Board of Directors adopted the "1992 Nonemployee Director Stock Option
Plan" (the "Directors' Plan") subject to shareholder approval, which was obtained on April 7,
1993. A total of 400,000 shares of the Company's common stock are reserved for issuance upon
exercise of stock options which may be granted at not less than fair market value on the date of
grant. Shares are granted, based on a formula as described in the Directors' Plan, upon the
nonemployee director's initial and subsequent election to the Board of Directors. Options may be
exercised within ten years from the date of grant. As of March 31, 1995, 170,000 shares have
been granted pursuant to the Directors' Plan.
As of March 31, 1995 options for 1,212,299 shares are
exercisable under all plans at option prices ranging from $4.24 to $28.125 per share.
A summary of the activity resulting from all plans adjusted for the stock split is as follows:
Number of shares Option price
under option per share
Outstanding
April 1, 1992 1,120,504 $ 4.125-16.00
Options granted 1,778,000 18.00
Options exercised (713,857) 4.125-18.00
Options cancelled or surrendered (64,398) 4.75-16.00
Outstanding
March 31, 1993 2,120,249 $ 4.125-18.00
Options granted 6,000 26.125-28.125
Options exercised (347,747) 4.125-18.00
Options cancelled or surrendered (6,875) 16.00
Outstanding
March 31, 1994 1,771,627 $ 4.24-28.125
Options granted 296,000 15.875-22.00
Options exercised (274,953) 4.125-18.00
Options cancelled or surrendered (22,000) 7.25-18.00
Outstanding
March 31, 1995 1,770,674 $ 4.24-28.125
O. Profit Sharing and 401(K) Plans
The Company has a noncontributory trusteed profit sharing plan covering essentially all
employees who are not covered by 401(k) plans, a 401(k) plan covering essentially all Hickam
employees, a profit sharing plan with a 401(k) provision covering all employees of Bertek and a
401(k) plan covering all employees of the bargaining unit.
Contributions to the profit sharing plan and the Bertek plan are made at the discretion of the
Board of Directors. Contributions to the Hickam plan are based upon a formula matching the
employees salary deferral. Contributions to the bargaining unit plan are based upon the union
agreement. Total contributions to all plans for the years ended March 31, 1995, 1994 and 1993
were $3,060,000, $2,300,000 and $1,860,000 respectively.
P. Related Party Transactions
Pursuant to a salary continuation agreement between Mr. McKnight, former Chairman and Chief
Executive Officer, and the Company, a one time payment of $4,306,000 was made on March 31,
1994 of which $2,861,000 was expensed during 1994. The Company also purchased aircraft,
which it previously leased on a flight by flight basis, from the estate of Mr. McKnight for
$5,900,000. In addition, the Company will continue to fund life insurance
premiums pursuant to a split-dollar life insurance agreement whereby the Company has rights to
the cash surrender value of the insurance policies.
Q. Legal Matters
The Company is involved in various legal proceedings that are considered normal to its business.
While it is not feasible to predict the ultimate outcome of such proceedings it is the opinion of
management that the outcome will have no material adverse effect on the Company's operations
or financial position.
During fiscal 1994 the Company settled certain legal matters relating to the Company's suit filed
under the Federal Antitrust Laws and the Racketeer Influence and Corrupt Organization Act
(RICO), for approximately $3,375,000. Additionally during fiscal 1994 the jury in the
Company's lawsuit against American Cyanamid ruled in favor of Cyanamid on the company's
claims and in favor of the Company on Cyanamid's counterclaims. No money damages were
awarded to either party. The U.S. Court of Appeals for the Fourth Circuit upheld the jury verdicts
on all claims.
Independent Auditors' Report
Board of Directors and Shareholders
Mylan Laboratories Inc.
Pittsburgh, Pennsylvania
We have audited the accompanying consolidated balance sheets of Mylan Laboratories Inc. and
subsidiaries as of March 31, 1995 and 1994, and the related consolidated statements of earnings,
shareholders' equity, and cash flows for each of the three years in the period ended March 31,
1995, appearing on pages 40 through 51. These fiancial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of Mylan Laboratories Inc. and subsidiaries as of March 31, 1995
and 1994, and the results of their operations and their cash flows for each of the three years in the
period ended March 31, 1995, in conformity with generally accepted accounting principles.
Pittsburgh, Pennsylvania
April 28, 1995
Market Prices
Fiscal 1995 High Low
First Quarter 23 155/8
Second Quarter 273/8 201/2
Third Quarter 297/8 241/2
Fourth Quarter 333/4 243/4
Fiscal 1994 High Low
First Quarter 30 3/4 23 5/8
Second Quarter 30 3/8 19 5/8
Third Quarter 33 1/4 23 1/2
Fourth Quarter 25 1/8 15 7/8
New York Stock Exchange Symbol: MYL
On April 30, 1995 the Company had approximately 85,213 shareholders.
Quarterly Financial Data
(Amounts in thousands,
except per share amounts)
1st Quarter 1995 1994
Net sales $ 85,146 $ 58,507
Gross profit 52,150 29,952
Net earnings 27,130 16,108
Earnings per share .34 .21
2nd Quarter
Net sales $ 96,013 $ 57,756
Gross profit 55,791 27,848
Net earnings 28,658 17,442
Earnings per share .36 .22
3rd Quarter
Net sales $ 104,271 $ 66,436
Gross profit 57,569 34,271
Net earnings 31,839 22,123
Earnings per share .40 .28
4th Quarter
Net sales $ 110,690 $ 69,074
Gross profit 61,020 34,071
Net earnings 33,242 17,394
Earnings per share .42 .22
Year $ 396,120 $251,773
Gross profit 226,530 126,142
Net earnings 120,869 73,067
Earnings per share 1.52 .93
Design: John Brady Design Consultants Inc., Pittsburgh, Pennsylvania
Notice of Annual Meeting
The annual meeting of shareholders of the Company will be held on Wednesday, June 28, 1995
at 10:30 AM at the Lakeview Resort & Conference Center, Morgantown, West Virginia. A
formal notice together with a proxy statement and form of proxy will be mailed to shareholders
entitled to vote in advance of the meeting.
Shareholder Information
A copy of the Mylan Laboratories Inc. Annual Report to the Securities and Exchange
Commission on Form 10-K is available to shareholders on request. For a copy of Form 10-K,
please write to:
Mylan Laboratories Inc.
1030 Century Building
130 Seventh Street
Pittsburgh, Pennsylvania 15222
Shareholder Contact
Patricia Sunseri
(412) 232-0100
Directors
Milan Puskar
Chairman of the Board,
C.E.O. and President
of the Company
Dana G. Barnett
Executive Vice President
of the Company
Laurence S. DeLynn
Retail Consultant
Morgantown, West Virginia
John C. Gaisford, M.D.
Director of Burn Research
West Penn Hospital
Pittsburgh, Pennsylvania
Richard A. Graciano
Associate/Partner
Graciano Enterprises
Pittsburgh, Pennsylvania
Robert W. Smiley, Esq.
Doepken, Keevican,
Weiss & Medved
Attorneys-At-Law
Pittsburgh, Pennsylvania
C. B. Todd
Senior Vice President
of the Company
Officers
Milan Puskar
Chairman, C.E.O. and President
Dana G. Barnett
Executive Vice President
Louis J. DeBone
Vice President-Operations
Roderick P. Jackson
Senior Vice President
Joseph J. Krivulka
Vice President
Dr. John P. O'Donnell
Vice President-
Research and Quality Control
Robert W. Smiley, Esq.
Secretary
Patricia Sunseri
Vice President-
Investor and Public Relations
C. B. Todd
Senior Vice President
Corporate Directory
Mylan Laboratories Inc.
1030 Century Building
130 Seventh Street
Pittsburgh, Pennsylvania 15222
(412) 232-0100
Registrar and Transfer Agent
American Stock Transfer Co.
New York, New York
Certified Public Accountants
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
Financial Consultants
PDA Associates, Inc.
Ironia, NJ
Securities Traded
New York Stock Exchange
Mylan Laboratories Inc.
Common Stock
Symbol: MYL
(21) Subsidiaries of the registrant, filed herewith.
(23) Consents of Independent Auditors', filed herewith.
EXHIBIT 23
Independent Auditors' Consent
We consent to the incorporation by reference in Registration Statements No. 33-65916 and
No. 33-65918 of Mylan Laboratories Inc. on Form S-8 of our report dated April 28, 1995,
incorporated by reference in this Annual Report on Form 10-K of Mylan Laboratories Inc. for the
year ended March 31, 1995.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 16,1995
Independent Auditors' Consent
We consent to the incorporation by reference in Registration Statements No. 33-65916 and No.
33-65918 of Mylan Laboratories Inc. on Form S-8 of our report dated February 3, 1995 relating
to the consolidated financial statements of Somerset Pharmaceuticals, Inc. and subsidiaries for
the three years in the period ended December 31,1994, included in the Annual Report on Form
10-K of Mylan Laboratories Inc. for the year ended March 31,1995.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 16, 1995
(27) Financial Data Schedule, filed herewith.
(99) Consolidated financial statements of Somerset Pharmaceuticals, Inc. for
Years ended December 31, 1994, 1993 and 1992, filed herewith.
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
Consolidated Financial Statements for the
Years Ended December 31, 1994, 1993 and 1992, and
Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Somerset Pharmaceuticals, Inc.:
We have audited the accompanying consolidated balance sheets of Somerset Pharmaceuticals,
Inc. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements
of income, stockholders' equity, and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the
financial position of Somerset Pharmaceuticals, Inc. and subsidiaries as of December 31, 1994
and 1993, and the results of their operations and their cash flows for each of the three years in the
period ended December 31, 1994 in conformity with generally accepted accounting principles.
February 3, 1995
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
ASSETS 1994 1993
CURRENT ASSETS:
Cash and cash equivalents $17,529,000 $10,281,000
Investment securities 3,338,000 3,470,000
Accounts receivable (net of allowance for doubtful
accounts of $100,000) 20,653,000 16,095,000
Inventories 5,293,000 3,820,000
Prepaid expenses and other current assets 1,957,000 1,582,000
Total current assets 48,770,000 35,248,000
PROPERTY AND EQUIPMENT - Net 4,266,000 2,762,000
INTANGIBLE ASSETS - Net 1,644,000 1,987,000
OTHER ASSETS 470,000 1,416,000
$55,150,000 $41,413,000
Liabilities and Stock holder's Equity 1994 1993
Current Liabilities:
Accounts payable $ 292,000 $ 205,000
Note payable - 253,000
Accrued marketing costs 11,000,000 9,100,000
Royalty payable 5,850,000 4,780,000
Other accrued expenses 2,833,000 2,070,000
Accrued research and development 1,901,000 2,046,000
Income taxes payable 5,017,000 2,900,000
Amounts due to related paries 2,318,000 2,063,000
Total current liabilities 29,211,000 23,417,000
Deferred revenue 292,000 458,000
Stockholder's Equity:
Common stock, $.01 par value; 13,719
shares authorized, 11,297 shared issued - -
Retained earnings 26,099,000 17,990,000
Less treasury stock, 644 shares at cost (452,000) (452,000)
Total stockholder's equity 25,647,000 17,538,000
$55,150,000 $41,413,000
See notes to consolidated financial statements.
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,1994, 1993 AND 1992
1994 1993 1992
NET SALES $124,566,000 $118,998,000 $104,071,000
COSTS AND EXPENSES:
Cost of sales 16,399,000 13,991,000 12,552,000
Marketing 23,457,000 25,826,000 23,415,000
Research and development 10,424,000 9,134,000 5,580,000
Administrative 9,845,000 8,005,000 6,736,000
60,125,000 56,956,000 48,283,000
64,441,000 62,042,000 55,788,000
OTHER INCOME 568,000 1,131,000 1,017,000
INCOME BEFORE INCOME TAXES 65,009,000 63,173,000
56,805,000
PROVISION FOR INCOME TAXES 20,900,000 21,408,000
20,736,000
NET INCOME $ 44,109,000 $ 41,765,000 $ 36,069,000
See notes to consolidated financial statements.
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Common Stock Treasury Stock Retained Stockholders'
Shares Amount Shares Amount Earnings Equity
BALANCE, DECEMBER 31, 1991 11,297 $ - 644 $ (452,000) $ 7,900,000
$ 7,448,000
Accretion of the carrying value of the
redeemable preferred stock - - - - (122,000) (122,000)
Dividends - - - - (41,207,000) (41,207,000)
Net income - - - - 36,069,000 36,069,000
BALANCE, DECEMBER 31, 1992 11,297 - 644 (452,000) 2,640,000
2,188,000
Accretion of the carrying value of the
redeemable preferred stock - - - - (15,000) (15,000)
Dividends - - - - (26,400,000) (26,400,000)
Net income - - - - 41,765,000 41,765,000
BALANCE, DECEMBER 31, 1993 11,297 - 644 (452,000) 17,990,000
17,538,000
Dividends - - - - (36,000,000) (36,000,000)
Net income - - - - 44,109,000 44,109,000
BALANCE, DECEMBER 31, 1994 11,297 $ - 644 $ (452,000) $ 26,099,000
$ 25,647,000
See notes to consolidated financial statements.
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTIONS>
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $44,109,000 $41,765,000 $36,069,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 587,000 285,000 229,000
Deferred tax expense (benefit) 862,000 (800,000) 20,000
Deferred revenue (166,000) (167,000) (166,000)
Changes in operating assets and liabilities:
Accounts receivable (4,558,000) (1,872,000) (3,989,000)
Inventories (1,473,000) (1,578,000) 614,000
Prepaid expenses and other current assets (375,000) 352,000 (249,000)
Accounts payable 87,000 (227,000) (1,121,000)
Royalty payable 1,070,000 190,000 901,000
Accrued marketing costs 1,900,000 1,386,000 2,074,000
Accrued research and development (145,000) 981,000 -
Other accrued expenses 763,000 201,000 1,338,000
Income taxes payable 2,117,000 570,000 (177,000)
Amounts due to related parties 255,000 278,000 542,000
Net cash provided by operating activities 45,033,000 41,364,000 36,085,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in investment securities 132,000 2,006,000 (1,685,000)
Purchase of property and equipment (1,898,000) (2,690,000) (127,000)
Decrease (increase) in other assets 234,000 (268,000) 23,000
Net cash used in investing activities (1,532,000) (952,000) (1,789,000)
(Continued)
SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of preferred stock $ - $ (1,149,000) $ (1,149,000)
Dividends paid on preferred stock - (176,000) (85,000)
Dividends paid on common stock (36,000,000) (35,200,000)
(36,300,000)
Net (decrease) increase in note payable (253,000) 253,000 -
Net cash used in financing activities (36,253,000) (36,272,000)
(37,534,000)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 7,248,000 4,140,000
(3,238,000)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 10,281,000 6,141,000
9,379,000
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 17,529,000 $ 10,281,000 $ 6,141,000
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 7,000 $ 5,000 $ -
Income taxes $ 17,683,000 $ 21,259,000 $ 20,992,000
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
During 1992, the Company recorded $8,800,000 of dividends payable on common
stock which had not been paid as of the end of that year.
See notes to consolidated financial statements.
1. PRINCIPLES OF CONSOLIDATION AND OPERATIONS
The consolidated financial statements include the accounts of Somerset Pharmaceuticals,
Inc. (the Company) and its wholly owned subsidiaries, Somerset Pharmaceuticals Holding
Company and Somerset Caribe, Inc. The Company is jointly owned by Mylan Laboratories, Inc.
and Circa Pharmaceuticals, Inc., with each owning 50% of all the outstanding common stock of
the Company. All significant intercompany accounts and transactions have been eliminated in
consolidation. The Company, incorporated in February 1986, is engaged in the development,
testing and marketing of drugs to be used in the treatment of various human disorders.
Currently, the Company manufactures, markets and sells Eldepryl, which is used as a treatment
for Parkinson's Disease.
The Company is party to an exclusive 14-year agreement (through November 22, 2003)
with Chinoin Pharmaceutical Company (Chinoin) of Budapest, Hungary under which Eldepryl
and other new potential drugs resulting from Chinoin research are made available for licensing
by the Company. The license agreement requires the Company to pay royalties equal to 7% of
net sales of Eldepryl including sub-license revenues. The Company incurred royalty expense of
approximately $9,983,000, $8,383,000 and $8,105,000 for the years ended December 31, 1994,
1993 and 1992, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Cash and Cash Equivalents - The Company generally considers debt instruments
purchased with a maturity of three months or less to be cash equivalents.
b. Investment Securities - Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." The effect of adopting SFAS No. 115 on the Company's financial
statements was not material. During the current year, gross proceeds from sales and maturities of
investments approximated $797,000 and $750,000, respectively, and realized gains or losses
were not material. At December 31, 1994, the investment securities were available for sale, and
there were no material unrealized gains or losses.
At December 31, 1993, investment securities included both debt and equity instruments
which were valued at the lower of cost or market with cost approximating market.
c. Inventories - Inventory is stated at the lower of cost or market, with cost determined on a
first-in, first-out basis.
d. Property and Equipment - Property and equipment are stated at cost. Depreciation is
provided over the estimated useful lives of the assets by the straight-line method. Estimated
useful lives are five to seven years for machinery and equipment and thirty-five years for the
building.
e. Intangible Assets - Intangible assets are amortized on a straight-line basis over 14 years.
f. Research and Development - Research and development costs are expensed as incurred.
3. INVENTORY
Inventory consists of the following at December 31:
1994 1993
Raw material $ 4,686,000 $ 2,864,000
Work in process 375,000 470,000
Finished goods 232,000 486,000
Total $ 5,293,000 $ 3,820,000
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
1994 1993
Land $ 300,000 $ 300,000
Building 2,067,000 1,638,000
Machinery and equipment 2,410,000 963,000
Furniture and fixtures 87,000 65,000
4,864,000 2,966,000
Less accumulated depreciation (598,000) (204,000)
Property and equipment - net $ 4,266,000 $ 2,762,000
5. SUB-LICENSE OF RIGHTS
On February 9, 1988, the Company granted a sub-license to its exclusive right and license
to use its technology to Draxis Health Inc. (formerly Deprenyl Research Limited) to
commercialize certain drugs in Canada for 15 years. The Company receives a royalty of 11% of
Draxis Health Inc.'s net sales over the license period.
Royalty income, less related royalty expense to Chinoin, included in other income for the
years ended December 31, 1994, 1993 and 1992 was approximately $199,000, $357,000 and
$414,000, respectively.
6. INTANGIBLE ASSETS
Intangible assets primarily represent the cost of a modification to the terms of the Chinoin
Agreement, less accumulated amortization of $1,061,000 and $868,000 at December 31, 1994
and 1993, respectively.
7. CO-PROMOTIONAL AGREEMENT
Effective October 1, 1990, the Company entered into an agreement with Sandoz
Pharmaceuticals Corporation (Sandoz) to co-promote the product Eldepryl. Under the terms of
the agreement, the Company is required to make certain payments to Sandoz in the event sales of
Eldepryl exceed certain predefined minimums. The agreement requires Sandoz, among other
things, to expend, at a minimum, a predetermined amount for advertising during each year of the
agreement. Once the predetermined levels of sales are exceeded, the Company is required to pay
Sandoz for advertising expenditures made on behalf of the Company. After Sandoz's advertising
expenses are reimbursed, any additional amounts are shared by Sandoz and the Company based
upon the terms of the agreement. During 1994, 1993 and 1992, the Company expensed
approximately $22,360,000, $24,260,000 and $22,321,000, respectively, pursuant to the
agreement. Additionally, certain co-promotional fees paid by Sandoz at the commencement of
the agreement are being recognized ratably by the Company during the term of the agreement
(six years), and certain costs associated with the procurement, negotiation and execution of the
agreement by the owners of the Company are being incurred by the Company in approximately
the same amount.
In December 1994, the Company amended its co-promotional agreement with Sandoz.
The amended agreement eliminated certain residual period payments to Sandoz, shortened the
term to March 31, 1996, eliminated certain sales force detail requirements and requires certain
payments to be made to the Company if a predetermined level of sales is not achieved.
8. NOTE PAYABLE
On June 30, 1993, the Company entered into a one-year $1,500,000 line of credit
agreement with a bank in conjunction with the renovation of the Company's research facility.
Interest on amounts drawn on the line of credit was payable monthly at the bank's prime rate (6%
at December 31, 1993) less 0.25%. Pursuant to the agreement, all borrowings under this line of
credit were paid off in 1994.
9. REDEEMABLE PREFERRED STOCK
The Class A and B redeemable preferred stock were fully redeemed during 1993.
The Class A stock, ($.10 par value, 1,950 shares authorized and 488 shares outstanding at
December 31, 1992) was carried at redemption value plus undeclared dividends.
The Class B stock ($.10 par value, 2,850 shares authorized and issued and 661 shares
outstanding at December 31, 1992) was convertible into common stock based on a conversion
price set by the Board of Directors and subject to adjustment from time to time.
10. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes" effective January 1, 1993. As permitted by SFAS No. 109,
prior-year financial statements have not been restated to reflect the change in accounting method.
The cumulative effect of adopting SFAS No. 109 on the Company's financial statements was not
material.
The income tax provision consists of the following for the years ended
December 31:
1994 1993 1992
Current tax expense:
Federal $ 15,025,000 $ 17,938,000 $ 18,540,000
State 4,899,000 4,124,000 2,050,000
Foreign 114,000 146,000 126,000
20,038,000 22,208,000 20,716,000
Deferred tax expense (benefit):
Federal 754,000 (700,000) 20,000
State 108,000 (100,000) -
862,000 (800,000) 20,000
Total provision for income taxes $ 20,900,000 $ 21,408,000 $ 20,736,000
Deferred income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. The tax effects of significant items comprising the Company's deferred
taxes (which are included in "Other Assets" in the balance sheet) as of December 31, 1994 are as
follows:
Deferred tax assets:
Deferred revenue $ 110,000
Deferred compensation 228,000
Chargeback allowance 152,000
Other 42,000
532,000
Deferred tax liabilities:
Excess of tax amortization over reporting amortization 165,000
Net deferred tax assets $ 367,000
The statutory federal income tax rate is reconciled to the effective tax
rate as follows for the years ended December 31:
1994 1993 1992
Tax at statutory rate 35.0% 35.0% 34.0%
State income tax (net of federal benefit) 3.5 4.1 2.4
Tax credits (9.9) (7.2) (.2)
Tollgate tax 3.9 2.0 -
Other (.4) - .3
Effective tax rate 32.1% 33.9% 36.5%
Tax credits result principally from operations in Puerto Rico.
11. RELATED PARTY TRANSACTIONS
The Company incurs expenses for ongoing management services and over a six
year period for specific services related to the procurement, negotiation and
execution of the co-promotion agreement by the owners of the Company. The
Company also incurs other expenses from one or both of its owners as
detailed below for the years ended December 31:
1994 1993 1992
Management fees $ 6,228,000 $ 5,950,000 $ 5,204,000
Research and development 1,020,000 835,000 239,000
Inventory handling and distribution fees 650,000 750,000 331,000
Rent - equipment and facilities 1,065,000 647,000 -
Product liability insurance 618,000 675,000 675,000
During 1993, the Company purchased $696,000 of equipment from one of its owners.
At December 31, 1994 and 1993 the balance of amounts due to related parties represents
rent, research and development, distribution and management fees payable to the owners of the
Company.
12. SIGNIFICANT CUSTOMERS
The Company had sales to certain customers which individually exceeded 10% of net
sales. Three customers represented 57% of net sales for the year ended December 31, 1994 and
two customers represented 45% and 41% of net sales for the years ended December 31, 1993 and
1992, respectively.
13. COMMITMENTS
As of December 31, 1994, the Company is committed to fund approximately $5,160,000
for various research and development studies through 1995.
14. EMPLOYEE BENEFIT PLANS
The Company has a defined contribution profit sharing plan covering substantially all
employees. Contributions are made at the discretion of the Board of Directors. Additionally,
during 1994, the Company initiated a deferred compensation plan for select key employees.
Contributions are based on profitability levels for the year. During 1994, 1993 and 1992, the
Company recorded expense of $755,000, $100,000 and $-0- for these plans, respectively.
* * * * * *
(b) Reports on Form 8-K
The Company was not required to file a report on Form 8-K during the
quarter ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: June 16, 1995 MYLAN LABORATORIES INC.
by /s/ Milan Puskar
Milan Puskar
Chairman, Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Milan Puskar June 16,1995 /s/ Dana G. Barnett June 16,1995 June 16,
1995
Milan Puskar Dana G. Barnett
Chairman, Chief Executive Officer and Executive Vice President and Director
President
/s/ Laurence S. DeLynn June 16, 1995 /s/ Robert W. Smiley June 16,1995
Laurence S. DeLynn Robert W. Smiley
Director Secretary and Director
/s/ Richard A. Graciano June 16, 1995 /s/ John C. Gaisford M.D. June 16, 1995
Richard a. Graciano John C. Gaisford, M.D.
Director Director
/s/ C.B. Todd June 16,1995 /s/ Frank A. DeGeorge June 16, 1995
C.B. Todd Frank A. DeGeorge
Senior Vice President and Director Director of Corporate Finance as
Chief Accounting Officer
EXHIBIT 22
Subsidiaries
Name State of Incorporation
Milan Holding, Inc. Delaware
Mylan Inc. Delaware
Mylan Pharmaceuticals Inc. West Virginia
Dow Hickam Pharmaceuticals, Inc. Texas
Bertek, Inc. West Virginia
American Triumvirate Insurance Company Vermont