Share-Based Incentive Plan

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

In February 2014, Mylan’s Compensation Committee and the independent members of the Board of Directors adopted the One-Time Special Performance-Based Five-Year Realizable Value Incentive Program (the “2014 Program”) under the 2003 Plan. Under the 2014 Program, certain key employees received a one-time, performance-based incentive award (the “Awards”) either in the form of a grant of SAR or PSU. The initial Awards were granted in February 2014 and contain a five-year cliff-vesting feature based on the achievement of various performance targets, external market conditions and the employee’s continued services. Additional Awards were granted in 2016 and are subject to the same performance conditions as the Awards granted in February 2014 and with a service vesting condition of between two and six years. The market condition was met on June 10, 2015 and is therefore no longer applicable to any of the Awards.

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



	Number of Shares Under Stock Awards		Weighted Average Exercise Price per Share
Outstanding at December 31, 2013	13,563,881		$	22.05
Granted	6,226,185		52.37
Exercised	(2,720,048	)	20.25
Forfeited	(862,241	)	38.28
Outstanding at December 31, 2014	16,207,777		$	33.21
Granted	937,873		54.92
Exercised	(5,092,660	)	22.48
Forfeited	(220,491	)	46.36
Converted	(4,100,000	)	53.33
Outstanding at December 31, 2015	7,732,499		$	31.85
Granted	876,397		45.51
Exercised	(612,477	)	23.13
Forfeited	(296,978	)	50.70
Outstanding at December 31, 2016	7,699,441		$	33.38
Vested and expected to vest at December 31, 2016	7,405,805		$	32.80
Exercisable at December 31, 2016	5,672,524		$	28.10

As of December 31, 2016, stock awards outstanding, stock awards vested and expected to vest, and stock awards exercisable had average remaining contractual terms of 5.8 years, 5.7 years and 4.8 years, respectively. Also at December 31, 2016, stock awards outstanding, stock awards vested and expected to vest and stock awards exercisable had aggregate intrinsic values of $74.0 million, $73.9 million and $73.2 million, respectively. During the year ended December 31, 2015, the Company recorded additional share-based compensation expense of approximately $21.8 million related to the accelerated vesting of equity awards as a result of the EPD Transaction.

A summary of the status of the Company’s nonvested restricted ordinary shares and restricted stock unit awards, including PSUs (collectively, “restricted stock awards”) as of December 31, 2016 and the changes during the year ended December 31, 2016 are presented below:



	Number of Restricted Stock Awards		Weighted Average Grant-Date Fair Value Per Share
Nonvested at December 31, 2015	4,474,436		$	40.70
Granted	2,660,186		45.05
Released	(1,088,088	)	41.96
Forfeited	(378,704	)	42.76
Nonvested at December 31, 2016	5,667,830		$	42.46

Of the 2,660,186 restricted stock awards granted during the year ended December 31, 2016, 1,368,088 vest ratably in five years or less and are not subject to market or performance conditions. Of the remaining restricted stock awards granted, 525,221 are subject to market conditions and will cliff vest in three years or less, 64,819 are subject to performance conditions and will cliff vest in less than three years and 110,756 are not subject to market or performance conditions and will cliff vest in three years or less. The remaining 543,442 restricted stock awards were granted under the 2014 Program and are subject to the performance condition and will cliff vest over various periods between two and six years. An additional 47,860 PSUs were granted and released as a result of exceeding certain performance targets during the year.

As of December 31, 2016, the Company had $144.5 million of total unrecognized compensation expense, net of estimated forfeitures, related to all of its stock-based awards, which will be recognized over the remaining weighted average vesting period of 2.3 years. The total intrinsic value of stock-based awards exercised and restricted stock awards released during the years ended December 31, 2016 and 2015 was $60.7 million and $260.1 million, respectively.

2003 Plan

With respect to options granted under the Company’s 2003 Plan, the fair value of each option grant was estimated at the date of grant using the Black-Scholes option pricing model. Black-Scholes utilizes assumptions related to volatility, the risk-free interest rate, the dividend yield and employee exercise behavior. Expected volatilities utilized in the model are based mainly on the implied volatility of the Company’s stock price and other factors. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The model incorporates exercise and post-vesting forfeiture assumptions based on an analysis of historical data. The expected lives of the grants are derived from historical and other factors.

The assumptions used for options granted under the 2003 Plan are as follows:



	Year Ended December 31,
	2016	2015	2014
Volatility	38.1%	33.7%	31.6%
Risk-free interest rate	1.4%	1.7%	1.9%
Expected term (years)	6.3	6.3	6.3
Forfeiture rate	5.5%	5.5%	5.5%
Weighted average grant date fair value per option	$17.90	$20.18	$17.44

2014 Program

Under the 2014 Program, approximately 4.4 million SARs and 1.5 million PSUs were granted in February 2014. The fair value of the Awards was determined using a Monte Carlo simulation as both the SARs and PSUs contain the same performance and market conditions. The Monte Carlo simulation involves a series of random trials that result in different future stock price paths over the contractual life of the SAR or PSU based on appropriate probability distributions. Conditions are imposed on each Monte Carlo simulation to determine the extent to which the performance conditions would have been met, and therefore the extent to which the Awards would have vested, for the particular stock price path. The market condition was met on June 10, 2015. In determining the fair value of the performance-based SARs and PSUs, the Company considered the achievement of the market condition in determining the estimated fair value. The Restricted Ordinary Shares and PSUs remain subject to the achievement of the performance condition and the employee’s continued service. Subsequent to the initial grant under the 2014 Program, approximately 300,000 awards have been forfeited.

On June 10, 2015, 4.1 million shares of the Company’s performance-based SARs were converted into 1.1 million restricted ordinary shares (the “Restricted Ordinary Shares”) pursuant to the terms of the 2014 Program. In addition, the maximum number of the Company’s PSUs granted in February 2014 under the 2014 Program that could vest was fixed at 1.4 million units. Each SAR or PSU is equal to one ordinary share with the maximum value of each Award upon vesting subject to varying limitations.

The assumptions used under the Monte Carlo simulation for awards granted under the 2014 Program in February 2014 are as follows:



	Year Ended December 31,
	2014
Volatility	31.6%
Risk-free interest rate	1.9%
Expected term (years)	6.3
Forfeiture rate	5.5%
Weighted average grant date fair value per SAR	$9.43
Weighted average grant date fair value per PSU	$34.58