EX-4.2



 







Exhibit
4.2





Confirmation of OTC Convertible Note Hedge




	 	 	 	 	 
	Date:

	 	March 2, 2007

	 
	 	 	 	 
	To:

	 	Mylan
Laboratories Inc. (“Counterparty”)

	 
	 	 	 	 
	From:

	 	Merrill Lynch
International (“MLI”)

	 
	 	 	 	 
	MLI Reference:

	 	0782710	 	 






Dear Sir / Madam:




     The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and
conditions of the above-referenced transaction entered into among Counterparty, MLI and Merrill
Lynch, Pierce, Fenner & Smith Incorporated (the “Agent” or “MLPFS”) on the Trade
Date specified below (the “Transaction”). This Confirmation constitutes a “Confirmation”
as referred to in the Agreement specified below.



     The definitions and provisions contained in the 2000 ISDA Definitions (the “Swap
Definitions”) and the 2002 ISDA Equity Derivatives Definitions (the “Equity
Definitions” and, together with the Swap Definitions, the “Definitions”), in each case
as published by the International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between the Swap Definitions and the Equity
Definitions, the Equity Definitions will govern, and in the event of any inconsistency between the
Definitions and this Confirmation, this Confirmation will govern. References herein to a
“Transaction” shall be deemed to be references to a “Share Option Transaction” for purposes of the
Equity Definitions and a “Swap Transaction” for the purposes of the Swap Definitions.



     This Confirmation evidences a complete binding agreement between you and us as to the terms of
the Transaction to which this Confirmation relates. This Confirmation (notwithstanding anything to
the contrary herein), shall be subject to, and form part of, an agreement in the 1992 form of the
ISDA Master Agreement (Multicurrency Cross Border) (the “Master Agreement” or
“Agreement”) as if we had executed an agreement in such form (but without any Schedule and
with elections specified in the “ISDA Master Agreement” Section of this Confirmation) on the Trade
Date. In the event of any inconsistency between the provisions of that agreement and this
Confirmation, this Confirmation will prevail for the purpose of this Transaction. The parties
hereby agree that the Transaction evidenced by this Confirmation shall be the only Transaction
subject to and governed by the Agreement.



     The parties acknowledge that this Confirmation is entered into on the date hereof with the
understanding that the provisions of the Indenture (as defined below) that are referred to herein
will conform to the descriptions thereof in the Prospectus Supplement dated March 1, 2007 and the
related Prospectus dated February 20, 2007 (collectively, the “Offer Document”) relating to the
Reference Notes (as defined below). The parties agree that in the event of any inconsistency
between the Indenture and Offer Document, the parties will amend this Confirmation in good faith to
preserve the intent of the parties.



     The terms of the particular Transaction to which this Confirmation relates are as follows:



General Terms:




	 	 	 
	Trade Date:

	 	March 1, 2007
	 
	 	 
	Effective Date:

	 	The date of issuance of the Reference Notes.






 









 






	 	 	 
	Option Style:

	 	Modified American, as described under “Settlement Terms” below.
	 
	 	 
	Option Type:

	 	Call
	 
	 	 
	Seller:

	 	MLI
	 
	 	 
	Buyer:

	 	Counterparty
	 
	 	 
	Shares:

	 	The shares of common stock, $0.50 par value, of Counterparty (Security Symbol:
	 

	 	“MYL”) or such other securities or property into which the Reference Notes are
convertible on the date of determination.
	 
	 	 
	Premium:

	 	 $63,000,000  
	 
	 	 
	Premium Payment Date:

	 	The date of issuance of the Reference Notes.
	 
	 	 
	Exchange:

	 	New York Stock Exchange
	 
	 	 
	Related Exchange(s):

	 	All Exchanges
	 
	 	 
	Reference Notes:

	 	Counterparty’s 1.25% Senior Convertible Notes due 2012.
	 
	 	 
	Applicable Portion:

	 	50%. For the avoidance of doubt, the Calculation Agent shall, as it deems
necessary, take into account the Applicable Portion in determining or calculating
any delivery or payment obligations hereunder, whether upon a Conversion Date (as
defined below) or otherwise.
	 
	 	 
	Note Indenture:

	 	The indenture, dated as of closing of the issuance of the Reference Notes,
between Counterparty and The Bank of New York, as trustee relating to the
Reference Notes, as the same may be amended, modified or supplemented, subject to
the condition contained in paragraph (1) under “Amendment Event; Additional
Termination Event”. Certain defined terms used herein have the meanings assigned
to them in the Note Indenture.
	 
	 	 
	Procedures for Exercise:
	 	 
	 
	 	 
	Potential Exercise Dates:

	 	Each Conversion Date.
	 
	 	 
	Conversion Date:

	 	Each “conversion date” for any Reference Note pursuant to the terms of the Note
Indenture (the principal amount of Reference Notes so converted, the “Conversion
Amount” with respect to such Conversion Date) occurring before the Expiration
Date.
	 
	 	 
	 

	 	If the Conversion Amount for any Conversion Date is less than the aggregate
principal amount of Reference Notes then outstanding, then the terms of this
Transaction shall continue to apply, subject to the terms and conditions set
forth herein, with respect to the remaining outstanding principal amount of the
Reference Notes.
	 
	 	 
	Expiration Period:

	 	The period from and excluding the Effective Date to and including the Expiration
Date.
	 
	 	 
	Expiration Date:

	 	The earliest of (i) the maturity date of the Reference Notes, (ii) the first day
on which none of such Reference Notes remain outstanding, whether by virtue of
conversion, issuer repurchase or otherwise and (iii) the occurrence of an






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	 	Additional Termination Event and designation of an Early Termination Date hereunder in
respect of the termination of the Transaction in whole but not in part.
	 
	 	 
	Exercise Notice:

	 	Notwithstanding anything to the contrary in the
Equity Definitions, in order to exercise any Options
hereunder, Buyer or the Trustee shall provide Seller
with written notice prior to 5:00 p.m. New York City
time on the Exchange Business Day prior to the first
Trading Day in the Conversion Reference Period (both
as defined in the Note Indenture) relating to the
Reference Notes converted on the relevant Conversion
Date of (i) the number of Reference Notes being
converted on the relevant Conversion Date, (ii) the
first Trading Day in the relevant Conversion
Reference Period for the Reference Notes and (iii)
if any, the applicable Cash Percentage (as defined
in the Note Indenture); provided that with respect
to Reference Notes converted during the period
beginning on December 15, 2011 and ending on the
third business day immediately preceding the
Maturity Date (as defined in the Note Indenture) of
the Reference Notes, the related Exercise Notice
shall be delivered prior to 5:00 p.m. New York City
time on the second business day immediately
preceding such Maturity Date (as defined in the Note
Indenture); and provided further that the delivery
by Buyer of an Exercise Notice after the Conversion
Reference Period has commenced but prior to the
close of business on the fifth Trading Day of such
Conversion Reference Period shall be effective, in
which case the Settlement Method shall be Net Share
Settlement but without regard to subsection (ii) of
the definition of Net Share Settlement and subject
to adjustments to the Net Share Settlement Amount as
specified below. Notwithstanding the foregoing, in
the event of delivery by Buyer of an Exercise Notice
after the commencement of the Conversion Reference
Period but prior to the close of business on the
fifth Trading Day of such Conversion Reference
Period, if Buyer notifies MLI of its desire for the
Settlement Method to be Net Cash Settlement, MLI
agrees to undertake commercially reasonable efforts
to modify the terms of the Transaction to enable a
Net Cash Settlement to be effected on commercially
reasonable terms.
	 
	 	 
	Seller’s Telephone Number

	 	
	and Telex and/or Facsimile


	 	
	Number and Contact Details


	 	
	for purpose of Giving Notice:


	 	Address: Merrill Lynch
International

Merrill Lynch Financial Centre

2 King Edward Street
London EC1A 1HQ
	 

	 	Attention: Manager, Fixed Income Settlements
	 

	 	Facsimile No.: +44 207 995 2004
	 

	 	Telephone No.: +44 207 995 3769
	 
	 	 
	Settlement Terms:
	 	 
	 
	 	 
	Settlement Method:

	 	Net Share Settlement or Net Cash Settlement
consistent with Buyer’s election with respect
to the Reference Notes converted on the
applicable Conversion Date, provided that Net
Share Settlement shall apply in the event
that Buyer elects to deliver any Shares in
connection with the applicable Conversion
Date; and provided further that it shall be a
condition for Buyer’s right to elect Net Cash
Settlement or settlement pursuant to clause
(ii) of Net Share Settlement that Buyer
deliver to MLI with the related Exercise
Notice a representation signed by Buyer that
Buyer has publicly disclosed all material
information necessary for Buyer to be able to
purchase or sell Shares in compliance with
applicable securities laws.






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	Settlement Date:

	 	Subject to the delivery of an Exercise Notice
to the Seller, the third (3rd)
Exchange Business Day following the final
Trading Day in the applicable Conversion
Reference Period in respect of the relevant
Conversion Date.
	 
	 	 
	Net Share Settlement:

	 	In lieu of the obligations set forth in
Sections 8.1 and 9.1 of the Equity
Definitions, Seller shall deliver to Buyer on
the related Settlement Date (i) a number of
Shares equal to the related Net Share
Settlement Amount, provided that in the event
that the number of Shares calculated
comprises any fractional Share, the number of
Shares to be delivered shall be rounded up or
down to the nearest integral number of Shares
and (ii) (x) an amount in cash equal to the
cash amount, if any, paid by Buyer in excess
of the principal amount of the applicable
Reference Notes for such Conversion Date
under the Note Indenture multiplied by (y)
the Applicable Portion, provided that the
delivery obligation set forth in clause (i)
and (ii) of this paragraph shall be
determined excluding any Shares or cash that
Counterparty is obligated to deliver to
holders of the applicable Reference Notes as
a result of any adjustments to the Conversion
Rate resulting from a discretionary
adjustment to the Conversion Rate by
Counterparty. The provisions of Sections
9.1(c), 9.8, 9.9, 9.10, 9.11 and 9.12 of the
Equity Definitions shall apply to any
delivery of Shares hereunder, provided that
the Representation and Agreement in Section
9.11 of the Equity Definitions shall be
modified by excluding any representations
therein relating to restrictions,
obligations, limitations or requirements
under applicable securities laws solely as a
result of the fact that Buyer is the issuer
of the Shares.
	 
	 	 
	Net Cash Settlement:

	 	In lieu of the obligations set forth in
Section 8.1 of the Equity Definitions, on the
Settlement Date Seller shall deliver to Buyer
an amount in cash equal to the related Net
Cash Settlement Amount.
	 
	 	 
	Net Share Settlement Amount:

	 	For each Conversion Date, the number of
Shares equal to the Shares delivered by Buyer
for such Conversion Date as required under
the Note Indenture multiplied by the
Applicable Portion, provided that if an
Exercise Notice with respect to such
Conversion Date has not been delivered to the
Seller prior to the first Trading Day of the
Conversion Reference Period applicable to
such Conversion Date, the Net Share
Settlement Amount for such Conversion Date
shall be adjusted by the Calculation Agent to
account for the consequences of the reduced
number of Trading Days from the delivery of
the Exercise Notice to the end of the
applicable Conversion Reference Period with
respect to such Conversion Date. No
reduction of the Net Share Settlement Amount
shall reduce the Net Share Settlement Amount
below zero.
	 
	 	 
	Net Cash Settlement Amount:

	 	For each Conversion Date, an amount equal to
the cash delivered by the Buyer in excess of
the principal amount of the applicable
Reference Notes for such Conversion Date as
required under the Note Indenture multiplied
by the Applicable Portion, provided that
such cash amount shall be determined
excluding any cash that Counterparty is
obligated to deliver to holders of the
applicable Reference Notes as a result of any
adjustments to the Conversion Rate resulting
from a discretionary adjustment to the
Conversion Rate by Counterparty.
	 
	 	 
	Adjustments:
	 	 
	 
	 	 
	Method of Adjustment:

	 	The terms of this Transaction shall be
adjusted by the Calculation Agent in a manner
consistent with adjustments of the Conversion
Rate of the Reference Notes as provided in
Section 4.06 of the Note Indenture; provided
further (without limitation of the provisions
set forth above under “Net Share Settlement”
and “Net Cash Settlement Amount”) that no
adjustment in respect






4









 






	 	 	 
	 

	 	of any Potential Adjustment Event or Extraordinary Event shall be made
hereunder as a result of any adjustments to the Conversion Rate resulting from
a discretionary adjustment to the Conversion Rate by Counterparty.
	 
	 	 
	Potential Adjustment Event:

	 	Notwithstanding Section 11.2(e) of the Equity
Definitions, a “Potential Adjustment Event”
means the occurrence of an event or condition
that would result in an adjustment of the
Conversion Rate of the Reference Notes
pursuant the Note Indenture.
	 
	 	 
	Extraordinary Events:
	 	 
	 
	 	 
	Merger Events:

	 	Notwithstanding Section 12.1(b) of the Equity
Definitions, a “Merger Event” means the
occurrence of any event or condition set forth
in Section 4.10(a) of the Note Indenture.






	 	 	 
	Consequences for Merger Events:
	 	 
	 
	 	 
	          Share-for-Share:

	 	The Transaction will be adjusted consistent with the Reference Notes as
provided in the Note Indenture.
	 
	 	 
	          Share-for-Other:

	 	The Transaction will be adjusted consistent with the Reference Notes as
provided in the Note Indenture.
	 
	 	 
	          Share-for-Combined:

	 	The Transaction will be adjusted consistent with the Reference Notes as
provided in the Note Indenture.
	 
	 	 
	Tender Offer:

	 	Applicable, entirely as set forth under
“Consequences of Tender Offers” below.
Notwithstanding Section 12.1(d) of the
Equity Definitions, a “Tender Offer” means
the occurrence of any event or condition
set forth in Section 4.06(e) of the Note
Indenture.
	 
	 	 
	Consequences of Tender Offers:

	 	The Transaction will be adjusted consistent
with the Reference Notes as provided in the
Note Indenture.
	 
	 	 
	Nationalization, Insolvency
and Delisting:

	 	
Cancellation and Payment (Calculation Agent
Determination), provided Buyer shall
determine whether payment shall be settled
in cash or Shares. In addition to the
provisions of Section 12.6(a)(iii) of the
Equity Definitions, it will also constitute
a Delisting if the Exchange is located in
the United States and the Shares are not
immediately re-listed, re-traded or
re-quoted on any of the New York Stock
Exchange, the American Stock Exchange or
the NASDAQ National Market System (or their
respective successors, including without
limitation the NASDAQ Global Market and
NASDAQ Global Select Market); if the Shares
are immediately re-listed, re-traded or
re-quoted on any such exchange or quotation
system, such exchange or quotation system
shall thereafter be deemed to be the
Exchange.
	 
	 	 
	Additional Disruption Events:
	 	 
	 
	 	 
	          Change in Law:

	 	Applicable
	 
	 	 
	          Failure to Deliver:

	 	Applicable. If there is inability in the market to deliver Shares due
to illiquidity on a day that would have been a Settlement Date, then the Settlement
Date shall be the first succeeding Exchange Business Day on which there is no such
inability to deliver, but in






5









 






	 	 	 
	 

	 	no such event shall the Settlement Date be later than the
date that is two (2) Exchange Business Days immediately
following what would have been the Settlement Date but for such inability to deliver.
	 
	          Insolvency Filing:

	 	Applicable
	 
	 	 
	          Hedging Disruption Event:

	 	Not Applicable
	 
	 	 
	          Increased Cost of Hedging:

	 	Not Applicable
	 
	 	 
	          Loss of Stock Borrow:

	 	Not Applicable
	 
	 	 
	          Increased Cost of Stock Borrow:

	 	Not Applicable
	 
	 	 
	          Hedging Party:

	 	Seller
	 
	 	 
	          Determining Party:

	 	Seller
	 
	 	 
	Non-Reliance:

	 	Applicable
	 
	 	 
	Agreements and Acknowledgments
Regarding Hedging Activities:

	 	
Applicable
	 
	 	 
	Additional Acknowledgments:

	 	Applicable






Additional Agreements, Representations and Covenants of Buyer, Etc.:





	1.	 	Buyer hereby represents and warrants to Seller, on each day from the Trade Date to and
including the earlier of (i) March 17, 2007 and (ii) the date by which Seller is able to
initially complete a hedge of its position relating to this Transaction, that:






	 	a.	 	it will effect (and cause any “affiliated purchaser” (as defined in Rule 10b-18
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) to effect) any purchases, direct or indirect (including by means of any
cash-settled or other derivative instrument), of Shares or any security convertible
into or exchangeable or exercisable for Shares solely through Merrill Lynch
International in a manner that would not cause any purchases by Seller of its hedge in
connection with this Transaction not to comply with applicable securities laws;
provided that this clause (a) shall not apply to any transactions in Shares effected
directly between Buyer and its employees pursuant to an employee share incentive or
benefit plan;
	 
	 	b.	 	it will not engage in, or be engaged in, any “distribution,” as such term is
defined in Regulation M promulgated under the Exchange Act, other than a distribution
meeting the requirements of the exceptions set forth in sections 101(b)(10) and
102(b)(7) of Regulation M (it being understood that Buyer makes no representation
pursuant to this clause in respect of any action or inaction taken by Seller or any
Underwriter of the Reference Notes); and
	 
	 	c.	 	Buyer has publicly disclosed all material information necessary for Buyer to be
able to purchase or sell Shares in compliance with applicable federal securities laws.






	2.	 	If Buyer would be obligated to pay cash (other than payment of the premium) to, or receive
cash from, Seller pursuant to the terms of this Agreement for any reason without having had
the right (other than pursuant to this paragraph (2)) to elect to deliver or receive Shares in
satisfaction of such payment obligation, then Buyer may elect (by giving notice to Seller no
later than 8 a.m. New York time on the Exchange Business Day immediately following the date of
occurrence of the event giving rise to such




6









 






	 	 	payment obligation) that such payment obligation shall be satisfied by the delivery of a
number of Shares (or, if the Shares have been converted into other securities or property in
connection with an Extraordinary Event, a number or amount of such other securities or
property as a holder of Shares would be entitled to receive upon the consummation or closing
of such Extraordinary Event) having a cash value equal to the amount of such payment
obligation (such number or amount of Shares or other securities or property to be delivered
to be determined by the Calculation Agent as the number of Shares or number or amount of
such other securities or property that could be purchased or sold, as applicable, by Seller
over a reasonable period of time for the cash equivalent of such payment obligation).
Settlement relating to any delivery of Shares or other securities or property pursuant to
this paragraph (2) shall occur within a reasonable period of time. Notwithstanding anything
herein or in the Agreement to the contrary, the aggregate number of Shares that Counterparty
may be required to deliver to MLI under this Transaction shall not exceed 12,263,103, as
adjusted by Calculation Agent to account for any subdivision, stock-split, stock
combination, reclassification or similar dilutive or anti-dilutive event with respect to the
Shares
	 
	3.	 	Notwithstanding any provision in the Note Indenture, this Confirmation or the Agreement to
the contrary, each of the “applicable Conversion Rate” (as such term is used in the Note
Indenture), the Net Share Settlement Amount, the Net Cash Settlement Amount and any other
amount computed hereunder by reference to the applicable Conversion Rate shall be determined
without regard to any discretionary adjustment to the Conversion Rate by Counterparty.
	 
	4.	 	Notwithstanding Section 6(e) of the Agreement or Sections 12.7 or 12.8 of the Equity
Definitions, if, with respect to the Transaction contemplated hereunder, (A) an Early
Termination Date with respect to any Event of Default or any Termination Event, (B) a Closing
Date with respect to an event described in Section 12.6 of the Equity Definitions, or (C) a
date as of which the Transaction is, or is deemed to have been, terminated or cancelled as a
result of an applicable Additional Disruption Event (any such date, the “Relevant Date”) shall
occur, then in lieu of any payments hereunder pursuant to Sections 6(d)(ii) and 6(e) of the
Agreement or Sections 12.7 or 12.8 of the Equity Definitions, as applicable, (if a calculation
under such sections would otherwise be required) the Calculation Agent shall determine the
number of Shares deliverable by MLI to Counterparty on the following basis and the following
provisions shall apply:






(i) such Relevant Date shall be the sole Exercise Date hereunder and Automatic Exercise
shall be applicable;




(ii) the Settlement Method shall be Net Share Settlement and the provisions set forth above
under “Net Share Settlement” shall apply (but without regard to subsection (ii) thereof, or
any right of the Counterparty to elect to deliver cash in lieu of Remaining Shares pursuant
to the Note Indenture, or any requirement of Counterparty to deliver an Exercise Notice) as
if a Conversion Date had occurred, the Conversion Amount were the aggregate principal amount
of the Reference Notes then outstanding, and the Remaining Shares were equal to (X) the
excess, if any, of (a) the VWAP Price on the Relevant Date multiplied by the applicable
Conversion Rate over (b) $1,000; divided by (Y) the VWAP Price on the Relevant Date;
provided that, if the Shares have been converted into other securities or property
in connection with an Extraordinary Event, Seller may deliver a number or amount of such
other securities or property as a holder of the number of Shares that would otherwise be
deliverable under this paragraph would be entitled to receive upon the consummation or
closing of such Extraordinary Event. “VWAP Price” means, on any date, the per Share
volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg
page MYL.N <equity> VAP (or any successor thereto) in respect of the period from 9:45
a.m. to 3:45 p.m. (New York City time) on such date (or if such volume-weighted average
price is unavailable, the market value of one Share (or, if applicable, the value per Share
of the consideration paid or delivered to holders of Shares at the time of an Extraordinary
Event) on such date, as determined by the Calculation Agent)[; provided that if the
scheduled weekday closing time of the Exchange for any such date is later than 4:00 p.m.
(without regard to after hours or any other trading outside of the regular trading session
hours) the VWAP Price shall be calculated for such Valuation Date from 9:45 a.m. until 15
minutes prior to such later closing time of the Exchange];




(iii) the Seller shall deliver an additional number of Shares equal to the product of (X)
the Applicable Portion, (Y) the number of Reference Notes each having principal value of
$1,000 then outstanding and (Z)



7









 







the applicable number of Shares (the “Scheduled Shares”) determined by reference to
the table attached as Annex A hereto based on the date on which such Relevant Date occurs
and the VWAP Price on such date;




(iv) with respect to the determination of Scheduled Shares, if the actual VWAP Price is
between two VWAP Price amounts in the table or the Relevant Date is between two Relevant
Dates in the table, the Scheduled Shares shall be determined by a straight-line
interpolation between the number of Scheduled Shares set forth for the next higher and next
lower VWAP Price amounts and the two nearest Relevant Dates, as applicable, based on a
365-day year; and




(v) with respect to any adjustment to the terms of the Transaction, the Calculation Agent,
shall correspondingly adjust the Scheduled Shares and/or the VWAP Prices (each as set forth
in the table in Annex A hereto) as of any date of such adjustments; provided, for the
avoidance of doubt, that any such adjustments shall be made consistently with the applicable
provisions of this Confirmation and the Equity Definitions.




(vi) the Settlement Date shall be the date that falls one Settlement Cycle following the
Relevant Date.




	5.	 	Counterparty is not, and after giving effect to the Transaction contemplated hereby, will not
be, an “investment company” as such term is defined in the Investment Company Act of 1940, as
amended.
	 
	6.	 	As of the Trade Date and each date on which a payment or delivery is made by Counterparty
hereunder, (i) the assets of Counterparty at their fair valuation exceed the liabilities of
Counterparty, including contingent liabilities; (ii) the capital of Counterparty is adequate
to conduct its business; and (iii) Counterparty has the ability to pay its debts and other
obligations as such obligations mature and does not intend to, or believe that it will, incur
debt or other obligations beyond its ability to pay as such obligations mature.
	 
	7.	 	The representations and warranties set forth in Section 1 of the Purchase Agreement (as
defined below) are hereby deemed to be repeated to MLI as if set forth herein.





Amendment Event; Additional Termination Event:





	1.	 	Amendment Event. Notwithstanding anything to the contrary herein, each Amendment Event (as
defined below), if any, shall be disregarded for the purposes of determining the obligations
of the parties hereunder, including the obligations of MLI to deliver Shares and/or cash.
Accordingly, references to the “Note Indenture” herein shall be deemed to exclude any
amendments to the Note Indenture that would have the effect of altering the obligations of the
parties hereunder.
	 
	 	 	“Amendment Event” means that the Counterparty, without the prior consent of
Seller, amends, modifies, supplements or obtains a waiver of (a) any term of the Note
Indenture or the Reference Notes relating to the principal amount, coupon, maturity or
repurchase obligation of the Counterparty, (b) any material term relating to conversion of
the Reference Notes (including changes to the conversion price, conversion settlement dates
or conversion conditions) or (c) any term that would require consent of the holders of 100%
of the principal amount of the Reference Notes to amend.




The occurrence of the following shall be an Additional Termination Event for purposes of this
Transaction:





	2.	 	Repayment Event. If a Repayment Event (as defined below) occurs, MLI shall have the right to
designate an Early Termination Date pursuant to Section 6(b) of the Agreement with respect to
this Transaction to the extent of the principal amount of Reference Notes that cease to be
outstanding as a result of such Repayment Event and, notwithstanding anything to the contrary
herein, no payments shall be required under this Agreement in connection with such Repayment
Event with respect to the principal amount of Reference Notes repurchased, repaid, exchanged
or cancelled in connection with such Repayment Event.
	 
	 	 	“Repayment Event” means that (a) any Reference Notes are repurchased (whether in
connection with or as a result of a change of control, howsoever defined, or for any other
reason other than as a result of or in




8









 






	 	 	connection with a conversion) by the Counterparty, (b) any Reference Notes are delivered to
the Counterparty in exchange for delivery of any property or assets of the Counterparty or
any of its subsidiaries (howsoever described), other than as a result of and in connection
with a Conversion Date, (c) any principal of any of the Reference Notes is repaid prior to
the Final Maturity Date (as defined in the Note Indenture) (whether following acceleration
of the Reference Notes or otherwise), provided that no payments of cash made in respect of
the conversion of a Reference Note shall be deemed a payment of principal under this clause
(c), (d) any Reference Notes are exchanged by or for the benefit of the holders thereof for
any other securities of the Counterparty or any of its Affiliates (or any other property, or
any combination thereof) pursuant to any exchange offer or similar transaction or (e) any of
the Reference Notes is surrendered by Counterparty to the trustee for cancellation, other
than registration of a transfer of such Reference Notes or as a result of and in connection
with a Conversion Date.




Staggered Settlement:



If Seller determines reasonably and in good faith that the number of Shares required to be
delivered to Buyer hereunder on any Settlement Date would exceed 8.0% of all outstanding Shares,
then Seller may, by notice to Buyer on or prior to such Settlement Date (a “Nominal Settlement
Date”), elect to deliver the Shares comprising the related Net Share Settlement Amount on two
or more dates (each, a “Staggered Settlement Date”) or at two or more times on the Nominal
Settlement Date as follows:





	1.	 	in such notice, Seller will specify to Buyer the related Staggered Settlement Dates (the
first of which will be such Nominal Settlement Date and the last of which will be no later
than twenty (20) Trading Days following such Nominal Settlement Date) or delivery times and
how it will allocate the Shares it is required to deliver hereunder among the Staggered
Settlement Dates or delivery times;






	2.	 	the aggregate number of Shares that Seller will deliver to Buyer hereunder on all such
Staggered Settlement Dates or delivery times will equal the number of Shares that Seller would
otherwise be required to deliver on such Nominal Settlement Date; and






	3.	 	the Net Share Settlement terms will apply on each Staggered Settlement Date, except that the
Shares comprising the Net Share Settlement Amount will be allocated among such Staggered
Settlement Dates or delivery times as specified by Seller in the notice referred to in clause
(1) above.




Notwithstanding anything herein to the contrary, solely in connection with a Staggered Settlement
Date, Seller shall be entitled to deliver Shares to Buyer from time to time prior to the date on
which Seller would be obligated to deliver them to Buyer pursuant to Net Share Settlement terms set
forth above, and Buyer agrees to credit all such early deliveries against Seller’s obligations
hereunder in the direct order in which such obligations arise. No such early delivery of Shares
will accelerate or otherwise affect any of Buyer’s obligations to Seller hereunder.



Disposition of Hedge Shares:



Seller shall conduct its hedging activities in connection with the Transaction in a manner that it
believes, based on its reasonable judgment, will not require Counterparty to register under the
Securities Act or any state securities laws the Shares (the “Hedge Shares”) acquired by
Seller for the purpose of hedging its obligations pursuant to the Transaction. In addition,
Counterparty hereby agrees that if, in the reasonable judgment of Seller based on advice of
counsel, the Hedge Shares cannot be sold in the U.S. public market by Seller without registration
under the Securities Act, Counterparty shall, at its election: (i) in order to allow Seller to sell
the Hedge Shares in a registered offering, use commercially reasonable efforts to make available to
Seller an effective registration statement under the Securities Act to cover the resale of such
Hedge Shares and (a) enter into an agreement, in form and substance satisfactory to Seller and
Counterparty, substantially in the form of an underwriting agreement for a registered offering, (b)
provide accountant’s “comfort” letters in customary form for registered offerings of equity
securities, (c) provide disclosure opinions of nationally recognized outside counsel to
Counterparty reasonably acceptable to Seller, (d) provide other customary opinions, certificates
and closing documents customary in form for registered offerings of equity securities and (e)
afford Seller a reasonable opportunity to conduct a “due diligence” investigation with respect to
Counterparty customary in scope for underwritten offerings of equity securities registered for
resale; provided, however, that if Seller, in its sole reasonable discretion, is not satisfied with
access to


9









 






due diligence materials, the results of its due diligence investigation, or the procedures and
documentation for the registered offering referred to above, then clause (ii) or (iii) of this
Section shall apply at the election of Counterparty; (ii) in order to allow Seller to sell the
Hedge Shares in a private placement, enter into a private placement agreement substantially similar
to private placement purchase agreements customary for private placements of equity securities by a
publicly reporting company (if Counterparty is a publicly reporting company at such time) to
institutional purchasers, in form and substance satisfactory to Seller and Counterparty, including
reasonable and customary representations, covenants, blue sky and other governmental filings and/or
registrations, indemnities to Seller, due diligence rights (for Seller or any designated buyer of
the Hedge Shares from Seller), opinions and certificates and such other documentation as is
customary for private placements agreements, all reasonably acceptable to Seller (in which case,
the Calculation Agent acting in a commercially reasonable manner shall make any adjustments to the
terms of the Transaction that it determines are necessary to reflect an appropriate discount from
the public market price of the Shares due to the lack of liquidity thereof); or (iii) purchase the
Hedge Shares from Seller at the VWAP Price on such Exchange Business Days, and in the amounts,
requested by Seller.




Repurchase Notices:



Counterparty shall, on any day on which Counterparty effects any repurchase of Shares, promptly
give Seller a written notice of such repurchase (a “Repurchase Notice”) on such day if
following such repurchase, the Notice Percentage as determined on such day is (i) greater than 6%
and (ii) greater by 0.5% than the Notice Percentage included in the immediately preceding
Repurchase Notice (or, in the case of the first such Repurchase Notice, greater than the Notice
Percentage as of the date hereof). In the event that Counterparty fails to provide Seller with a
Repurchase Notice on the day and in the manner specified in this section, then Counterparty agrees
to indemnify and hold harmless Seller, its affiliates and their respective directors, officers,
employees, agents and controlling persons (Seller and each such person being an “Indemnified
Party”) from and against any and all losses, claims, damages and liabilities (or actions in
respect thereof), joint or several, to which such Indemnified Party may become subject under
applicable securities laws, including without limitation, Section 16 of the Exchange Act, relating
to or arising out of such failure. If for any reason the foregoing indemnification is unavailable
to any Indemnified Party or insufficient to hold harmless any Indemnified Party, then Counterparty
shall contribute, to the maximum extent permitted by law, to the amount paid or payable by the
Indemnified Party as a result of such loss, claim, damage or liability. In addition, Counterparty
will reimburse any Indemnified Party for all reasonable and documented expenses (including
reasonable counsel fees and expenses) as they are incurred (after notice to Counterparty) in
connection with the investigation of, preparation for or defense or settlement of any pending or
threatened claim or any action, suit or proceeding arising therefrom, whether or not such
Indemnified Party is a party thereto and whether or not such claim, action, suit or proceeding is
initiated or brought by or on behalf of Counterparty. This indemnity shall survive the completion
of the Transaction contemplated by this Confirmation and any assignment and delegation of the
Transaction made pursuant to this Confirmation or the Agreement shall inure to the benefit of any
permitted assignee of Seller. Counterparty will not be liable under this Indemnity provision to
the extent that any loss, claim, damage, liability or expense is found in a final judgment by a
court to have resulted from MLI’s gross negligence or willful misconduct. The “Notice
Percentage” as of any day is the fraction, expressed as a percentage, (i) the numerator of
which is the product of (a) the Applicable Portion, (b) the number of outstanding Reference Notes
and (c) the number of Shares per Reference Note equal to the Conversion Rate (as defined in the
Note Indenture) and (ii) the denominator of which is the number of Shares outstanding on such day.



Conversion Rate Adjustment Notices:



Counterparty shall provide to MLI written notice (such notice, a “Conversion Rate Adjustment
Notice”) prior to consummating or otherwise executing or engaging in any transaction or event (a
“Conversion Rate Adjustment Event”) that would lead to an increase in the Conversion Rate (as such
term is defined in the Indenture), which Conversion Rate Adjustment Notice shall set forth the new,
adjusted Conversion Rate after giving effect to such Conversion Rate Adjustment Event (the “New
Conversion Rate”). Each Conversion Rate Adjustment Notice shall be delivered to MLI at or prior to
the deadline contained in Section 4.09 of the Indenture for the related notices under the
Indenture. In connection with the delivery of any Conversion Rate Adjustment Notice to MLI, (x)


10









 






Counterparty shall, concurrently with or prior to such delivery, publicly announce and disclose the
Conversion Rate Adjustment Event or (y) Counterparty shall, concurrently with such delivery,
represent and warrant that the information set forth in such Conversion Rate Adjustment Notice does
not constitute material non-public information with respect to Counterparty or the Shares.




	 	 	 
	Compliance with Securities Laws:

	 	Each party represents and agrees that,
in connection with this Transaction
and all related or contemporaneous
sales and purchases of Shares by
either party, Buyer, or in the case of
Seller, the person(s) that directly
influences the specific trading
decisions of Seller, has complied and
will comply with the applicable
provisions of the Securities Act of
1933, as amended (the “Securities
Act”), and the Exchange Act, and the
rules and regulations each thereunder,
including, without limitation, Rules
10b-5, 10b-18 and 13e and Regulation M
under the Exchange Act; provided that
each party shall be entitled to rely
conclusively on any information
communicated by the other party
concerning such other party’s market
activities.
	 
	 	 
	 

	 	Each party acknowledges that the offer
and sale of the Transaction to it is
intended to be exempt from
registration under the Securities Act
by virtue of Section 4(2) thereof.
Accordingly, Buyer represents and
warrants to Seller that (i) it has the
financial ability to bear the economic
risk of its investment in the
Transaction and is able to bear a
total loss of its investment, (ii) it
is an “accredited investor” as that
term is defined in Regulation D as
promulgated under the Securities Act
and (iii) the disposition of the
Transaction is restricted under this
Confirmation, the Securities Act and
state securities laws.
	 
	 	 
	 

	 	Buyer further represents:
	 
	 	 
	 

	 	(a) Buyer is not entering into this
Transaction to create actual or
apparent trading activity in the
Shares (or any security convertible
into or exchangeable for Shares) or to
raise or depress or otherwise
manipulate the price of the Shares (or
any security convertible into or
exchangeable for Shares);
	 
	 	 
	 

	 	(b) Buyer acknowledges that as of the
date hereof and without limiting the
generality of Section 13.1 of the
Equity Definitions, Seller is not
making any representations or
warranties with respect to the
treatment of the Transaction under
FASB Statements 149 or 150, EITF Issue
No. 00-19 (or any successor issue
statements) or under FASB’s
Liabilities & Equity Project.






	 	 	 	 	 
	Account Details:

	 	Account for payments
to Buyer:
	 	Huntington National Bank
	 

	 	 	 	ABA#:
	 

	 	 	 	A/C Name: Mylan Laboratories Inc.
	 

	 	 	 	A/C: 01411114335
	 
	 	 	 	 
	 

	 	Account for payment to Seller:
	 	Chase Manhattan Bank, New York
	 

	 	 	 	ABA#: 021-000-021
	 

	 	 	 	FAO: ML Equity Derivatives
	 

	 	 	 	A/C: 066213118
	 
	 	 	 	 
	 

	 	Accounts for deliveries of Shares:
	 	[to be advised by Buyer or Seller, as applicable]
	 
	 	 	 	 
	Bankruptcy Rights:	 	In the event of Buyer’s bankruptcy, Seller’s rights in connection with this Transaction shall not exceed
those rights held by common shareholders. For the avoidance of doubt, the parties acknowledge and agree
that Seller’s rights with respect to any other claim






11









 





	 	 	 
	 

	 	arising from this Transaction prior to Buyer’s bankruptcy shall remain in full
force and effect and shall not be otherwise abridged or modified in connection
herewith.
	 
	 	 
	Set-Off:

	 	Each party waives any and all rights it may have to
set-off, whether arising under any agreement,
applicable law or otherwise.
	 
	 	 
	Collateral:

	 	None.
	 
	 	 
	Transfer:

	 	Buyer shall have the right to assign its rights and
delegate its obligations hereunder with respect to
any portion of this Transaction, subject to Seller’s
consent, such consent not to be unreasonably
withheld; provided that such assignment or transfer
shall be subject to receipt by Seller of opinions and
documents reasonably satisfactory to Seller and
effected on terms reasonably satisfactory to the
Seller with respect to any legal and regulatory
requirements relevant to the Seller; provided further
that Buyer shall not be released from its obligation
to deliver any Exercise Notice or its obligations
pursuant to “Disposition of Hedge Shares”,
“Repurchase Notices” or “Conversion Rate Adjustment
Notices” above, and Buyer shall be responsible for
all reasonable costs and expenses, including
reasonable counsel fees, incurred by Seller in
connection with any such transfer or assignment. 


Seller may, with Buyer’s consent (such consent not to
be unreasonably withheld), transfer or assign all or
any part of its rights or obligations under this
Transaction to any third party, in order to transfer
or assign a sufficient portion of this Transaction to
reduce (i) Seller’s “beneficial ownership” (within
the meaning of Section 13 of the Exchange Act and
rules promulgated thereunder) to 7.5% of Buyer’s
outstanding Shares or less or (ii) the Notice
Percentage to 8.5% or less. If after Seller’s
commercially reasonable efforts, Seller is unable to
effect such a transfer or assignment on pricing terms
reasonably acceptable to Seller and within a time
period reasonably acceptable to Seller (including
without limitation where such inability of Seller is
due to Buyer’s withholding of consent to such
transfer or assignment), Seller may designate any
Exchange Business Day as an Early Termination Date
with respect to a portion (the “Terminated Portion”)
of this Transaction, such that (i) its “beneficial
ownership” following such partial termination will be
equal to or less than 7.5% or (ii) the Notice
Percentage following such partial termination will be
equal to or less than 8.5%. In the event that Seller
so designates an Early Termination Date with respect
to a portion of this Transaction, the provisions set
forth above under paragraph 4 of “Additional
Agreements, Representations and Covenants of Buyer,
Etc.” shall apply in lieu of Section 6(d)(ii) and
6(e) of the Agreement as if (i) an Early Termination
Date had been designated in respect of a Transaction
having terms identical to this Transaction but whose
Applicable Portion was equal to the product of the
Applicable Portion of this Transaction and the
Terminated Portion and (ii) such Transaction were the
only Terminated Transaction.
	 
	 	 
	 

	 	MLI may assign and delegate its rights and
obligations under this Transaction to any subsidiary
of ML & Co. (the “Assignee”) by notice specifying the
effective date of such transfer (“Transfer Effective
Date”) and including an (i) executed acceptance and
assumption by the Assignee of such rights and
obligations and (ii) evidence reasonably satisfactory
to Counterparty that such obligations of the Assignee
are guaranteed by ML & Co. to substantially the same
extent as MLI’s obligations under this Transaction;
provided that (i) Counterparty will not, as a result
of such transfer, be required to pay to the Assignee
an amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) of the Agreement (except in
respect of interest under Section 2(e), 6(d)(ii), or
6(e)) greater than the amount in respect of which
Counterparty would have been required to pay to MLI
in the absence of such transfer; and (ii) the
Assignee will not, as a result of such transfer, be
required to withhold or deduct on account of a Tax
under Section 2(d)(i) of the Agreement (except in
respect of interest under Section 2(e), 6(d)(ii), or
6(e)) an amount in excess of that which MLI would
have been required to withhold or deduct in the






12









 






	 	 	 
	 

	 	absence of such transfer, unless the Assignee would be required to make additional payments pursuant to Section 2(d)(i)(4) of the
Agreement corresponding to such excess. On the Transfer Effective Date, (a) MLI shall be released from all obligations and
liabilities arising under this Transaction; and (b) the assigned and delegated rights and obligations under this Transaction shall
cease to be a Transaction under the Agreement and shall be deemed to be a Transaction under an ISDA form of Master Agreement
(Multicurrency-Cross Border) and Schedule substantially in the form of the Agreement but amended to reflect the name of the Assignee
and the address for notices and any amended representations under Part 2 of the Agreement as may be specified in the notice of
transfer.
	 
	 	 
	 

	 	In circumstances in which the foregoing provisions relating to Seller’s right to transfer or assign its
rights or obligations under the Transaction are not applicable, Seller may transfer any of its rights or
delegate its obligations under this Transaction with the prior written consent of Buyer, which consent
shall not be unreasonably withheld.
	 
	 	 
	Right to Extend:

	 	Seller may delay any Settlement Date or any other date of delivery by Seller, with respect to some or all
of the Options hereunder, if Seller reasonably determines, in its discretion, that such extension is
reasonably necessary to enable Seller to effect purchases of Shares in connection with its hedging
activity or settlement activity hereunder in a manner that would, if Seller were Counterparty or an
affiliated purchaser of Counterparty, be in compliance with applicable legal and regulatory requirements.
	 
	 	 
	Regulation:

	 	Seller is regulated by The Securities and Futures Authority Limited.






Matters Relating to Agent:





	1.	 	MLPFS will be responsible for the operational aspects of the Transactions effected through
it, such as record keeping, reporting, and confirming Transactions to Buyer and Seller;






	2.	 	Unless Seller is a “major U.S. institutional investor,” as defined in Rule 15a-6 of the
Exchange Act, neither Buyer nor Seller will contact the other without the direct involvement
of MLPFS;






	3.	 	MLPFS’s sole role under this Agreement and with respect to any Transaction is as an agent of
Buyer and Seller on a disclosed basis and MLPFS shall have no responsibility or liability to
Buyer or Seller hereunder except for gross negligence or willful misconduct in the performance
of its duties as agent. MLPFS is authorized to act as agent for Buyer, but only to the extent
expressly required to satisfy the requirements of Rule 15a-6 under the Exchange Act in respect
of the Options described hereunder. MLPFS shall have no authority to act as agent for Buyer
generally or with respect to transactions or other matters governed by this Agreement, except
to the extent expressly required to satisfy the requirements of Rule 15a-6 or in accordance
with express instructions from Buyer.




ISDA Master Agreement:



With respect to the Agreement, Seller and Counterparty each agree as follows:



“Specified Entity” means in relation to Seller and in relation to Counterparty for purposes of this
Transaction: Not applicable.



The provisions of “Default under Specified Transaction” as set forth in Section 5(a)(v) of the
Agreement shall not apply to MLI or Counterparty.



The “Cross Default” provisions of Section 5(a)(vi) of the Agreement will not apply to
Seller and will not apply to Counterparty.




13









 







The “Credit Event Upon Merger” provisions of Section 5(b)(iv) of the Agreement will not
apply to Seller and Counterparty.



The “Automatic Early Termination” provision of Section 6(a) of the Agreement will not apply
to Seller or to Counterparty.



Payments on Early Termination. For the purpose of Section 6(e) of the Agreement: (i) Loss
shall apply; and (ii) the Second Method shall apply.



“Termination Currency” means USD.



Tax Representations.





	(a)	 	Payer Representations. For the purpose of Section 3(e) of the Agreement, each party
represents to the other party that it is not required by any applicable law, as modified by
the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to
make any deduction or withholding for or on account of any Tax from any payment (other than
interest under Section 2(e), 6(d)(ii), or 6(e) of the Agreement) to be made by it to the other
party under the Agreement. In making this representation, each party may rely on (i) the
accuracy of any representations made by the other party pursuant to Section 3(f) of the
Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of
the Agreement, and the accuracy and effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or 4(a)(iii) of the Agreement, and (iii) the satisfaction of the
agreement of the other party contained in Section 4(d) of the Agreement; provided that it will
not be a breach of this representation where reliance is placed on clause (ii) above and the
other party does not deliver a form or document under Section 4(a)(iii) of the Agreement by
reason of material prejudice to its legal or commercial position.






	(b)	 	Payee Representations. For the purpose of Section 3(f) of the Agreement, each party makes
the following representations to the other party:






	 	(i)	 	Seller represents that it is a corporation organized under the laws of England
and Wales.
	 
	 	(ii)	 	Counterparty represents that it is a corporation incorporated in Pennsylvania.




Delivery Requirements. For the purpose of Sections 4(a)(i) and (ii) of the
Agreement, each party agrees to deliver the following documents:




(a) Tax forms, documents or certificates to be delivered are:




	 	 	Each party agrees to complete (accurately and in a manner reasonably satisfactory to the
other party), execute, and deliver to the other party, United States Internal Revenue
Service Form W-9 or W-8 BEN, or any successor of such form(s): (i) before the first payment
date under this agreement; (ii) promptly upon reasonable demand by the other party; and
(iii) promptly upon learning that any such form(s) previously provided by the other party
has become obsolete or incorrect.
	 
	(b)	 	Other documents to be delivered:





	 	 	 	 	 	 	 
	 	 	 	 	 	 	Covered by
	Party Required to	 	 	 	 	 	Section 3(d)
	Deliver Document	 	Document Required to be Delivered	 	When Required	 	Representation
	Counterparty and
Seller

	 	Evidence of the authority and
true signatures of each official
or representative signing this
Confirmation
	 	Upon or before the

Effective Date
	 	Yes
	 
	 	 	 	 	 	 
	Counterparty

	 	Certified copy of the resolution
of the Board of Directors or
equivalent document authorizing
the execution and delivery of
this Confirmation and such other
certificates as Seller shall
reasonably request
	 	Upon or before the

Effective Date
	 	Yes






14









 






	 	 	 	 	 	 	 
	 	 	 	 	 	 	Covered by
	Party Required to	 	 	 	 	 	Section 3(d)
	Deliver Document	 	Document Required to be Delivered	 	When Required	 	Representation
	Counterparty

	 	An opinion of counsel, dated as
of the Effective Date and
reasonably acceptable to MLI in
form and substance, with respect
to the matters set forth in
Section 3(a) of the Agreement
	 	Upon or before the

Effective Date
	 	No
	 
	 	 	 	 	 	 
	Seller

	 	Guarantee of its Credit Support
Provider, substantially in the
form of Exhibit A attached
hereto, together with evidence
of the authority and true
signatures of the signatories,
if applicable
	 	Upon or before the

Effective Date
	 	Yes





Additional Notice Requirements. Counterparty hereby agrees to promptly deliver to Seller a copy of
all notices and other communications required or permitted to be given to the holders of any
Reference Notes pursuant to the terms of the Note Indenture on the dates so required or permitted
in the Note Indenture and all other notices given and other communications made by Counterparty in
respect of the Reference Notes to holders of any Reference Notes. Counterparty further covenants
to Seller that it shall promptly notify Seller of each Conversion Date, Amendment Event (including
in such notice a detailed description of any such amendment) and Repayment Event (identifying in
such notice the nature of such Repayment Event and the principal amount at maturity of Reference
Notes being paid).



Addresses
for Notices. For the purpose of Section 12(a) of the Agreement:



Address for notices or communications to Seller for all purposes:




	 	 	 	 	 
	 

	 	Address:
	 	Merrill Lynch International
	 

	 	 	 	Merrill Lynch Financial Centre
	 

	 	 	 	2 King Edward Street
	 

	 	 	 	London EC1A 1HQ
	 

	 	Attention:
	 	Manager, Fixed Income Settlements
	 

	 	Facsimile No.:
	 	44 207 995 2004
	 

	 	Telephone No.:
	 	44 207 995 3769





Additionally, a copy of all notices pursuant to Sections 5, 6, and 7 as
well as any changes to Counterparty’s address, telephone number or facsimile number should be sent
to:




	 	 	 	 	 
	 

	 	Address:
	 	GMI Counsel
	 

	 	 	 	Merrill Lynch World Headquarters
	 

	 	 	 	4 World Financial Center
	 

	 	 	 	New York, New York 10080
	 

	 	Attention:
	 	Global Equity Derivatives
	 

	 	Facsimile No.:
	 	(212) 449-6576
	 

	 	Telephone No.:
	 	(212) 449-6309






15









 







Address for notices or communications to Counterparty for all purposes:




	 	 	 	 	 
	 

	 	Address:
	 	1500 Corporate Drive, Canonsburg, PA 15317
	 

	 	Attention:
	 	Edward J. Borkowski
	 

	 	Telephone No.:
	 	724-514-1870
	 

	 	Facsimile No.:
	 	724-514-1871





Process Agent. For the purpose of Section 13(c) of the Agreement, Seller appoints as its Process Agent:




	 	 	 	 	 
	 

	 	Address:



Attention:
	 	Merrill Lynch, Pierce, Fenner & Smith Incorporated

222 Broadway, 16th Floor

New York, New York 10038

Litigation Department
	 
	 	 	Counterparty does not appoint a Process Agent.





Multibranch Party. For the purpose of Section 10(c) of the Agreement: Neither Seller nor
Counterparty is a Multibranch Party.



Calculation Agent. The Calculation Agent is Seller. Upon the request of either party, the
Calculation Agent (or, in the case of a determination made by a party (including a party acting as
Hedging Party or Determining Party), such party) shall, no later than the 5th Business
Day following such request, provide the parties with a statement showing, in reasonable detail, the
computations (including any relevant quotations) by which it has determined any amount payable or
deliverable under, or any adjustment to the terms of, this Transaction. All judgments,
determinations and calculations hereunder by the Calculation Agent or by a party hereto shall be
performed in good faith and in a commercially reasonable manner.



Credit Support Document.



Seller: Guarantee of ML & Co. in the form attached hereto as Exhibit A.



Counterparty: Not Applicable.



Credit Support Provider.



With respect to Seller: ML & Co.



With respect to Counterparty: Not Applicable.



Governing Law. This Confirmation will be governed by, and construed in accordance with, the laws
of the State of New York.



Waiver of Jury Trial. Each party waives, to the fullest extent permitted by applicable law, any
right it may have to a trial by jury in respect of any suit, action or proceeding relating to this
Transaction. Each party (i) certifies that no representative, agent or attorney of the other party
has represented, expressly or otherwise, that such other party would not, in the event of such a
suit, action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and
the other party have been induced to enter into this Transaction, as applicable, by, among other
things, the mutual waivers and certifications provided herein.



Netting of Payments. The provisions of Section 2(c) of the Agreement shall not be
applicable to this Transaction.



Basic Representations. Section 3(a) of the Agreement is hereby amended by the deletion of
“and” at the end of Section 3(a)(iv); the substitution of a semicolon for the period at the
end of Section 3(a)(v) and the addition of Sections 3(a)(vi), as follows:




16









 









Eligible Contract Participant; Line of Business. Each party agrees and represents
that it is an “eligible contract participant” as defined in Section 1a(12) of the
U.S. Commodity Exchange Act, as amended (“CEA”), this Agreement and the
Transaction thereunder are subject to individual negotiation by the parties and have
not been executed or traded on a “trading facility” as defined in Section 1a(33) of
the CEA, and it has entered into this Confirmation and this Transaction in
connection with its business or a line of business (including financial
intermediation), or the financing of its business.



Acknowledgements:





	(a)	 	The parties acknowledge and agree that there are no other representations, agreements or
other undertakings of the parties in relation to this Transaction, except as set forth in this
Confirmation.
	 
	(b)	 	The parties hereto intend for:






	 	(i)	 	Seller to be a “financial institution” as defined in Section 101 (22) of Title
11 of the United States Code (the “Bankruptcy Code”) and this Transaction to be
a “securities contract” as defined in Section 741(7) of the Bankruptcy Code and a “swap
agreement” as defined in Section 101 (53C) of the Bankruptcy Code, qualifying for the
protections of, among other sections, Section 362(b)(6), 362(b)(17), 546(e), 546(g),
555 and 560 of the Bankruptcy Code;
	 
	 	(ii)	 	a party’s right to liquidate this Transaction and to exercise any other
remedies upon the occurrence of any Event of Default under the Agreement with respect
to the other party to constitute a “contractual right” as defined in the Bankruptcy
Code;
	 
	 	(iii)	 	all payments for, under or in connection with this Transaction, all payments
for the Shares and the transfer of such Shares to constitute “settlement payments” as
defined in the Bankruptcy Code.




Amendment of Definition of Reference Market-Makers. The definition of “Reference Market-Makers” in
Section 14 is hereby amended by adding in clause (a) after the word “credit” and before the
word “and” the words “or to enter into transactions similar in nature to the Transaction.”



Consent to Recording. Each party consents to the recording of the telephone conversations of
trading and marketing personnel of the parties and their Affiliates in connection with this
Confirmation. To the extent that one party records telephone conversations (the “Recording
Party”) and the other party does not (the “Non-Recording Party”), the Recording Party
shall in the event of any dispute, make a complete and unedited copy of such party’s tape of the
entire day’s conversations with the Non-Recording Party’s personnel available to the Non-Recording
Party. The Recording Party’s tapes may be used by either party in any forum in which a dispute is
sought to be resolved and the Recording Party will retain tapes for a consistent period of time in
accordance with the Recording Party’s policy unless one party notifies the other that a particular
transaction is under review and warrants further retention.



Disclosure. Each party hereby acknowledges and agrees that Seller has authorized Counterparty to
disclose this Transaction and any related hedging transaction between the parties if and to the
extent that Counterparty reasonably determines (after consultation with Seller) that such
disclosure is required by law or by the rules of the New York Stock Exchange or any securities
exchange. Notwithstanding the foregoing, effective from the date of commencement of discussions
concerning the Transaction, Counterparty and each of its employees, representatives, or other
agents may disclose to any and all persons, without limitation of any kind, the tax treatment and
tax structure of the Transaction and all materials of any kind (including opinions or other tax
analyses) that are provided to Counterparty relating to such tax treatment and tax structure.



Severability. If any term, provision, covenant or condition of this Confirmation, or the
application thereof to any party or circumstance, shall be held to be invalid or unenforceable in
whole or in part for any reason, the remaining terms, provisions, covenants, and conditions hereof
shall continue in full force and effect as if this Confirmation had been executed with the invalid
or unenforceable provision eliminated, so long as this Confirmation as so modified


17









 






 continues to
express, without material change, the original intentions of the parties as to the subject matter
of this Confirmation and the deletion of such portion of this Confirmation will not substantially
impair the respective benefits or expectations of parties to this Agreement; provided,
however, that this severability provision shall not be applicable if any provision of
Section 2, 5, 6 or 13 of the Agreement (or any definition or
provision in Section 14 to
the extent that it relates to, or is used in or in connection with any such Section) shall be so
held to be invalid or unenforceable.



Affected Parties. For purposes of Section 6(e) of the Agreement, each party shall be
deemed to be an Affected Party in connection with Illegality and any Tax Event.



[Signatures follow on separate page]




18









 




Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the
copy of this Confirmation enclosed for that purpose and returning it to us.




	 	 	 	 	 
	 	Very truly yours,



MERRILL LYNCH INTERNATIONAL

 	 
	 	By:  	/s/ Authorized Signatory 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 


Confirmed as of the date first above written:



MYLAN LABORATORIES INC.




	 	 	 	 	 
	By:
	 	/s/ Edward J. Borkowski 	 	 
	 

	 	 

	 	 
	Name:
	 	Edward J. Borkowski 	 	 
	Title:
	 	Chief Financial Officer 	 	 





Acknowledged and agreed as to matters to the Agent:



MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

Solely in its capacity as Agent hereunder




	 	 	 	 	 
	By:
	 	/s/ Brian Carrole 	 	 
	Name:

	 	 

	 	 
	Title:
	 	 	 	 




OTC Convertible Note Hedge















 





EXHIBIT A




GUARANTEE OF MERRILL LYNCH & CO., INC.




     FOR VALUE RECEIVED, receipt of which is hereby acknowledged, MERRILL LYNCH & CO., INC., a
corporation duly organized and existing under the laws of the State of Delaware (“ML & Co.”),
hereby unconditionally guarantees to Mylan Laboratories Inc. (the “Company”), the due and punctual
payment of any and all amounts payable by Merrill Lynch International, a company organized under
the laws of England and Wales (“ML”), under the terms of the Confirmation of OTC Convertible Note
Hedge between the Company and ML (ML as Seller), dated as of March 1, 2007 (the “Confirmation”),
including, in case of default, interest on any amount due, when and as the same shall become due
and payable, whether on the scheduled payment dates, at maturity, upon declaration of termination
or otherwise, according to the terms thereof. In case of the failure of ML punctually to make any
such payment, ML & Co. hereby agrees to make such payment, or cause such payment to be made,
promptly upon demand made by the Company to ML & Co.; provided, however that delay by the Company
in giving such demand shall in no event affect ML & Co.’s obligations under this Guarantee. This
Guarantee shall remain in full force and effect or shall be reinstated (as the case may be) if at
any time any payment guaranteed hereunder, in whole or in part, is rescinded or must otherwise be
returned by the Company upon the insolvency, bankruptcy or reorganization of ML or otherwise, all
as though such payment had not been made.



     ML & Co. hereby agrees that its obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Confirmation; the absence of any action to
enforce the same; any waiver or consent by the Company concerning any provisions thereof; the
rendering of any judgment against ML or any action to enforce the same; or any other circumstances
that might otherwise constitute a legal or equitable discharge of a guarantor or a defense of a
guarantor. ML covenants that this guarantee will not be discharged except by complete payment of
the amounts payable under the Confirmation. This Guarantee shall continue to be effective if ML
merges or consolidates with or into another entity, loses its separate legal identity or ceases to
exist.



     ML & Co. hereby waives diligence; presentment; protest; notice of protest, acceleration, and
dishonor; filing of claims with a court in the event of insolvency or bankruptcy of ML; all demands
whatsoever, except as noted in the first paragraph hereof; and any right to require a proceeding
first against ML.



     ML & Co. hereby certifies and warrants that this Guarantee constitutes the valid obligation of
ML & Co. and complies with all applicable laws.



     This Guarantee shall be governed by, and construed in accordance with, the laws of the State
of New York.



     This Guarantee may be terminated at any time by notice by ML & Co. to the Company given in
accordance with the notice provisions of the Confirmation, effective upon receipt of such notice by
the Company or such later date as may be specified in such notice; provided, however, that this
Guarantee shall continue in full force and effect with respect to any obligation of ML under the
Confirmation arising before or after such termination.



     This Guarantee becomes effective concurrent with the effectiveness of the Confirmation,
according to its terms.



20









 





     IN WITNESS WHEREOF, ML & Co. has caused this Guarantee to be executed in its corporate name by
its duly authorized representative.



	 	 	 	 	 
	 	MERRILL LYNCH & CO., INC.

 	 
	 	By:  	/s/ Patricia Kropiewnicki 	 
	 	 	Name:  Patricia Kropiewnicki	 
	 	 	Title:  Designated Signatory
Date:  March 2, 2007	
 	 
	 



 Guarantee of OTC Convertible Note Hedge















 






Annex A




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Time Value per Bond Hedge - Net Additional Shares per Bond
	 	 	VWAP	 	1-Sep-	 	1-Mar-	 	1-Sep-	 	1-Mar-	 	1-Sep-	 	1-Mar-	 	1-Sep-	 	1-Mar-	 	1-Sep-	 	15-Mar-
	 	 	Price	 	07	 	08	 	08	 	09	 	09	 	10	 	10	 	11	 	11	 	12
	 
	 
	 	$	15.00	 	 	 	11.877	 	 	 	10.733	 	 	 	9.546	 	 	 	8.255	 	 	 	6.910	 	 	 	5.439	 	 	 	3.901	 	 	 	2.247	 	 	 	0.674	 	 	 	0.000	 
	 
	 	$	19.50	 	 	 	15.999	 	 	 	14.879	 	 	 	13.702	 	 	 	12.399	 	 	 	11.012	 	 	 	9.441	 	 	 	7.709	 	 	 	5.650	 	 	 	3.153	 	 	 	0.000	 
	 
	 	$	22.43	 	 	 	18.279	 	 	 	17.211	 	 	 	16.086	 	 	 	14.838	 	 	 	13.504	 	 	 	11.985	 	 	 	10.297	 	 	 	8.257	 	 	 	5.693	 	 	 	0.000	 
	 
	 	$	22.50	 	 	 	18.185	 	 	 	17.118	 	 	 	15.995	 	 	 	14.749	 	 	 	13.417	 	 	 	11.900	 	 	 	10.214	 	 	 	8.176	 	 	 	5.615	 	 	 	0.000	 
	 
	 	$	25.00	 	 	 	15.461	 	 	 	14.448	 	 	 	13.382	 	 	 	12.199	 	 	 	10.937	 	 	 	9.500	 	 	 	7.907	 	 	 	5.989	 	 	 	3.613	 	 	 	0.000	 
	 
	 	$	27.50	 	 	 	13.365	 	 	 	12.409	 	 	 	11.404	 	 	 	10.290	 	 	 	9.107	 	 	 	7.764	 	 	 	6.288	 	 	 	4.534	 	 	 	2.440	 	 	 	0.000	 
	 
	 	$	28.50	 	 	 	12.660	 	 	 	11.726	 	 	 	10.746	 	 	 	9.661	 	 	 	8.509	 	 	 	7.207	 	 	 	5.779	 	 	 	4.095	 	 	 	2.122	 	 	 	0.000	 
	 
	 	$	30.00	 	 	 	11.717	 	 	 	10.817	 	 	 	9.873	 	 	 	8.830	 	 	 	7.727	 	 	 	6.484	 	 	 	5.131	 	 	 	3.553	 	 	 	1.759	 	 	 	0.000	 
	 
	 	$	31.20	 	 	 	11.049	 	 	 	10.175	 	 	 	9.259	 	 	 	8.250	 	 	 	7.185	 	 	 	5.989	 	 	 	4.694	 	 	 	3.200	 	 	 	1.542	 	 	 	0.000	 
	 
	 	$	35.00	 	 	 	9.324	 	 	 	8.528	 	 	 	7.699	 	 	 	6.790	 	 	 	5.840	 	 	 	4.784	 	 	 	3.665	 	 	 	2.413	 	 	 	1.122	 	 	 	0.000	 
	 
	 	$	40.00	 	 	 	7.695	 	 	 	6.991	 	 	 	6.262	 	 	 	5.470	 	 	 	4.652	 	 	 	3.757	 	 	 	2.831	 	 	 	1.834	 	 	 	0.871	 	 	 	0.000	 
	 
	 	$	45.00	 	 	 	6.531	 	 	 	5.905	 	 	 	5.262	 	 	 	4.567	 	 	 	3.859	 	 	 	3.094	 	 	 	2.320	 	 	 	1.506	 	 	 	0.743	 	 	 	0.000	 
	 
	 	$	55.00	 	 	 	5.003	 	 	 	4.498	 	 	 	3.986	 	 	 	3.439	 	 	 	2.893	 	 	 	2.314	 	 	 	1.744	 	 	 	1.156	 	 	 	0.598	 	 	 	0.000	 
	 
	 	$	65.00	 	 	 	4.056	 	 	 	3.639	 	 	 	3.219	 	 	 	2.775	 	 	 	2.336	 	 	 	1.876	 	 	 	1.427	 	 	 	0.962	 	 	 	0.505	 	 	 	0.000	 
	 
	 	$	75.00	 	 	 	3.417	 	 	 	3.064	 	 	 	2.710	 	 	 	2.338	 	 	 	1.973	 	 	 	1.592	 	 	 	1.220	 	 	 	0.829	 	 	 	0.438	 	 	 	0.000	 
	 
	 	$	85.00	 	 	 	2.958	 	 	 	2.652	 	 	 	2.348	 	 	 	2.029	 	 	 	1.717	 	 	 	1.390	 	 	 	1.070	 	 	 	0.731	 	 	 	0.386	 	 	 	0.000	 
	 
	 	$	92.50	 	 	 	2.690	 	 	 	2.413	 	 	 	2.137	 	 	 	1.849	 	 	 	1.567	 	 	 	1.272	 	 	 	0.981	 	 	 	0.671	 	 	 	0.355	 	 	 	0.000	 
	 
	 	$	100.00	 	 	 	2.468	 	 	 	2.215	 	 	 	1.963	 	 	 	1.700	 	 	 	1.443	 	 	 	1.173	 	 	 	0.907	 	 	 	0.621	 	 	 	0.328	 	 	 	0.000	 






  Guarantee of OTC Convertible Note Hedge