10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2007
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission file number 1-9114

MYLAN LABORATORIES INC.

(Exact name of registrant as specified in its charter)

Pennsylvania	25-1211621
(State of incorporation)	(I.R.S. Employer Identification No.)

1500 Corporate Drive

Canonsburg, Pennsylvania 15317

(Address of principal executive offices)

(Zip Code)

(724) 514-1800

(Registrant’s telephone number, including area code)

Indicate by check mark 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 twelve 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 þ     NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer þ     Accelerated Filer o     Non-Accelerated Filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o     NO þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class of	Outstanding at
Common Stock	August 3, 2007
$0.50 par value	248,801,646

MYLAN LABORATORIES INC. AND SUBSIDIARIES

FORM 10-Q
For the Quarterly Period Ended
June 30, 2007

INDEX

		Page
		Number
PART I. FINANCIAL INFORMATION
Item 1:	Financial Statements
	Condensed Consolidated Statements of Earnings — Three Months Ended June 30, 2007 and 2006		3
	Condensed Consolidated Balance Sheets — June 30, 2007 and March 31, 2007		4
	Condensed Consolidated Statements of Cash Flows — Three Months Ended June 30, 2007 and 2006		5
	Notes to Condensed Consolidated Financial Statements		6
Item 2:	Management’s Discussion and Analysis of Results of Operations and Financial Condition		25
Item 3:	Quantitative and Qualitative Disclosures About Market Risk		28
Item 4:	Controls and Procedures		30
PART II. OTHER INFORMATION
Item 1:	Legal Proceedings		30
Item 1A:	Risk Factors		32
Item 5:	Other Information		45
Item 6:	Exhibits		46
SIGNATURES			47
EX-10.2
EX-31.1
EX-31.2
EX-32

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MYLAN LABORATORIES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(Unaudited; in thousands, except per share amounts)

Three Months Ended June 30,	2007			2006
Revenues:
Net revenues	$	542,709		$	348,789
Other revenues		3,612			7,351
Total revenues		546,321			356,140
Cost of sales		249,613			167,940
Gross profit		296,708			188,200
Operating expenses:
Research and development		31,720			21,225
Selling, general and administrative		76,914			49,826
Total operating expenses		108,634			71,051
Earnings from operations		188,074			117,149
Interest expense		22,919			10,359
Other (expense) income, net		(36,358	)		9,584
Earnings before income taxes and minority interest		128,797			116,374
Provision for income taxes		49,207			40,787
Earnings before minority interest		79,590			75,587
Minority interest		(137	)		—
Net earnings	$	79,727		$	75,587
Earnings per common share:
Basic	$	0.32		$	0.36
Diluted	$	0.32		$	0.35
Weighted average common shares outstanding:
Basic		248,477			209,955
Diluted		251,604			214,791
Cash dividend declared per common share	$	0.06		$	0.06

See Notes to Condensed Consolidated Financial Statements

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MYLAN LABORATORIES INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited; in thousands, except share and per share amounts)

	June 30,		March 31,
	2007		2007
ASSETS
Current assets:
Cash and cash equivalents	$	1,315,557	$	1,252,365
Marketable securities		174,885		174,207
Accounts receivable, net		401,071		350,294
Inventories		432,348		429,111
Deferred income tax benefit		161,874		145,343
Prepaid expenses and other current assets		136,289		60,724
Total current assets		2,622,024		2,412,044
Property, plant and equipment, net		707,064		686,739
Intangible assets, net		343,808		352,780
Goodwill		610,248		612,742
Deferred income tax benefit		46,002		45,779
Other assets		146,375		143,783
Total assets	$	4,475,521	$	4,253,867
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Current liabilities:
Trade accounts payable	$	146,811	$	160,286
Short-term borrowings		107,315		108,259
Income taxes payable		91,558		78,387
Current portion of long-term obligations		130,756		124,782
Cash dividends payable		14,923		14,902
Other current liabilities		337,604		213,919
Total current liabilities		828,967		700,535
Deferred revenue		102,995		90,673
Long-term debt		1,656,064		1,654,932
Other long-term obligations		40,467		29,760
Deferred income tax liability		85,382		85,900
Total liabilities		2,713,875		2,561,800
Minority interest		36,667		43,207
Shareholders’ equity
Preferred stock — par value $0.50 per share		—		—
Shares authorized: 5,000,000 Shares issued: none
Common stock — par value $0.50 per share		169,856		169,681
Shares authorized: 600,000,000 at June 30, 2007 and March 31, 2007 Shares issued: 339,712,852 at June 30, 2007 and 339,361,201 at March 31, 2007
Additional paid-in capital		976,444		962,746
Retained earnings		2,156,667		2,103,282
Accumulated other comprehensive earnings		10,286		1,544
		3,313,253		3,237,253
Less:
Treasury stock — at cost
Shares: 90,963,658 at June 30, 2007 and 90,948,957 at March 31, 2007		1,588,274		1,588,393
Total shareholders’ equity		1,724,979		1,648,860
Total liabilities and shareholders’ equity	$	4,475,521	$	4,253,867

See Notes to Condensed Consolidated Financial Statements

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MYLAN LABORATORIES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited; in thousands)

Three Months Ended June 30,	2007			2006
Cash flows from operating activities:
Net earnings	$	79,727		$	75,587
Adjustments to reconcile net earnings to net cash provided from operating activities:
Depreciation and amortization		26,868			11,787
Stock-based compensation expense		4,569			6,806
Minority interest		(137	)		—
Net income from equity method investees		(2,281	)		(5,038	)
Change in estimated sales allowances		(14,090	)		15,738
Deferred income tax benefit		(11,662	)		(15,346	)
Other non-cash items		5,932			(624	)
Receipts from litigation settlements, net		1,998			2,000
Loss on foreign currency option contract		57,468			—
Cash received from Somerset		—			5,740
Changes in operating assets and liabilities:
Accounts receivable		(35,494	)		(41,925	)
Inventories		2,632			(10,747	)
Trade accounts payable		(39,637	)		(8,094	)
Income taxes		(2,947	)		49,204
Deferred revenue		12,372			(1,793	)
Other operating assets and liabilities, net		(767	)		9,594
Net cash provided by operating activities		84,551			92,889
Cash flows from investing activities:
Capital expenditures		(27,869	)		(27,717	)
Purchase of marketable securities		(86,270	)		(192,053	)
Proceeds from sale of marketable securities		83,202			144,680
Other items, net		(306	)		(159	)
Net cash used in investing activities		(31,243	)		(75,249	)
Cash flows from financing activities:
Cash dividends paid		(14,902	)		(12,605	)
Excess tax benefit from stock-based compensation		2,082			700
Proceeds from exercise of stock options		6,081			6,301
Change in outstanding checks in excess of cash in disbursement accounts		18,008			(7,605	)
Change in short-term borrowings, net		(3,824	)
Other items, net		(1,572	)		(632	)
Net cash provided by (used in) financing activities		5,873			(13,841	)
Effect on cash of changes in exchange rates		4,011			—
Net increase in cash and cash equivalents		63,192			3,799
Cash and cash equivalents — beginning of period	$	1,252,365		$	150,124
Cash and cash equivalents — end of period	$	1,315,557		$	153,923

See Notes to Condensed Consolidated Financial Statements

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MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited; in thousands, except share and per share amounts)

1.   General

In the opinion of management, the accompanying unaudited condensed consolidated financial statements (“interim financial statements”) of Mylan Laboratories Inc. and subsidiaries (“Mylan” or “the Company”) were prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q; therefore, as permitted under these rules, certain footnotes and other financial information included in audited financial statements were condensed or omitted. The interim financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the interim results of operations, financial position and cash flows for the periods presented.

These interim financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2007.

The interim results of operations and interim cash flows for the three months ended June 30, 2007 are not necessarily indicative of the results to be expected for the full fiscal year or any other future period.

Certain prior year amounts were reclassified to conform to the current year presentation. Such reclassifications had no impact on reported net earnings, earnings per share or shareholders’ equity.

2.   Revenue Recognition and Accounts Receivable

Revenue is recognized for product sales upon shipment when title and risk of loss transfer to the Company’s customers and when provisions for estimates, including discounts, rebates, price adjustments, returns, chargebacks and other promotional programs are reasonably determinable. No revisions were made to the methodology used in determining these provisions during the three month period ended June 30, 2007.

As a result of significant uncertainties surrounding the pricing and market conditions with respect to a product launched by the Company in late March 2007, the Company is not able to reasonably estimate the amount of potential price adjustments. Therefore, revenues on shipments of this product are currently being deferred until the resolution of such uncertainties. Such uncertainties are resolved upon our customers’ sale of this product. As a result, the Company is recognizing revenue at this time only upon our customers’ sale of this product.

Accounts receivable are presented net of allowances relating to these provisions. Such allowances were $392,602 and $404,687 as of June 30, 2007 and March 31, 2007, respectively. Other current liabilities include $49,868 and $51,873 at June 30, 2007, and March 31, 2007, for certain rebates and other adjustments that are payable to indirect customers.

3.   Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements, (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. The statement is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of adopting SFAS No. 157 on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, (“SFAS No. 159”), providing companies with an option to report selected financial assets and liabilities at fair value. This statement is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of adopting SFAS No. 159 on its consolidated financial statements.

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MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

4.   Pending Acquisition

On May 12, 2007, Mylan and Merck KGaA announced the signing of a definitive agreement under which Mylan will acquire Merck’s generics business (“Merck Generics”) for €4,900,000 (approximately $6,700,000) in an all-cash transaction. Management believes that the combination of Mylan and Merck Generics will create a vertically and horizontally integrated generics and specialty pharmaceuticals leader with a diversified revenue base and a global footprint, and also believes the combined company will be among the top tier of global generic companies, with a significant presence in the top five global generics markets. The transaction remains subject to regulatory review in the United States and certain other customary closing conditions and is expected to close in the second half of calendar 2007. In connection with the pending transaction, Mylan has obtained fully committed financing from Merrill Lynch, Citigroup, Goldman Sachs, and J.P. Morgan.

In conjunction with this planned transaction, the Company entered into a deal-contingent foreign currency option contract in order to mitigate the risk of foreign currency exposure related to the pending Euro denominated transaction. The contract is contingent upon the closing of this acquisition and the premium of approximately $121,900 will be paid only upon such closing.

The Company accounts for this instrument under the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”). This instrument does not qualify for hedge accounting treatment under SFAS No. 133 and therefore is required to be adjusted to fair value with the change in the fair value of the instrument recorded in current earnings. The Company recorded a non-cash, unrealized loss of $57,468 in the three month period ended June 30, 2007 related to this deal-contingent foreign currency option contract. This amount is included as other (expense) income, net, in the Condensed Consolidated Statement of Earnings. The fair value of this contract at June 30, 2007 is included in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheet.

5.   Stock-Based Incentive Plan

Mylan’s shareholders approved the Mylan Laboratories Inc. 2003 Long-Term Incentive Plan on July 25, 2003, and approved certain amendments on July 28, 2006 (as amended, the “2003 Plan”). Under the 2003 Plan, 22,500,000 shares of common stock are reserved for issuance to key employees, consultants, independent contractors and non-employee directors of Mylan through a variety of incentive awards, including: stock options, stock appreciation rights, restricted shares and units, performance awards, other stock-based awards and short-term cash awards. Awards are granted at the fair value of the shares underlying the options at the date of the grant, generally become exercisable over periods ranging from three to four years, and generally expire in ten years.

Upon approval of the 2003 Plan, the Mylan Laboratories Inc. 1997 Incentive Stock Option Plan (the “1997 Plan”) was frozen, and no further grants of stock options will be made under that plan. However, there are stock options outstanding from the 1997 Plan, expired plans and other plans assumed through acquisitions.

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MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

The following table summarizes stock option activity:

				Weighted
				Average
	Number of Shares			Exercise Price
	Under Option			per Share
Outstanding at March 31, 2007		17,647,728		$	16.17
Options granted		101,000			19.95
Options exercised		(351,651	)		14.49
Options forfeited		(124,202	)		16.78
Outstanding at June 30, 2007		17,272,875		$	16.22
Vested and expected to vest at June 30, 2007		16,976,874		$	16.18
Options exercisable at June 30, 2007		11,537,656		$	15.04

As of June 30, 2007, options outstanding, options vested and expected to vest, and options exercisable had average remaining contractual terms of 5.97 years, 5.93 years and 5.05 years, respectively. Also at June 30, 2007, options outstanding, options vested and expected to vest and options exercisable had aggregate intrinsic values of $44,487, $44,352 and $41,961, respectively.

A summary of the status of the Company’s nonvested restricted stock and restricted stock unit awards as of June 30, 2007 and the changes during the three month period ended June 30, 2007, is presented below:

	Number of			Weighted Average
Restricted	Restricted			Grant-Date
Stock Awards	Stock Awards			Fair Value per Share
Nonvested at March 31, 2007		211,316		$	23.10
Granted		—			—
Released		—			—
Forfeited		(14,700	)		23.27
Nonvested at June 30, 2007		196,616		$	23.09

As of June 30, 2007, the Company had $17,466 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 period of 1.2 years. The total intrinsic value of stock-based awards exercised during the quarter ended June 30, 2007 was $696. The total fair value of all shares vested during the quarter ended June 30, 2007 was $3,988.

Subsequent to June 30, 2007, the Company granted approximately 4,200,000 options and restricted stock units. Compensation expense to be recognized in future periods related to this grant will be approximately $34,000.

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MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

6.   Balance Sheet Components

Selected balance sheet components consist of the following:

	June 30,		March 31,
	2007		2007
	(In thousands)
Inventories:
Raw materials	$	153,393	$	148,109
Work in process		93,052		95,655
Finished goods		185,903		185,347
	$	432,348	$	429,111
Property, plant and equipment:
Land and improvements	$	30,418	$	29,850
Buildings and improvements		337,661		297,505
Machinery and equipment		520,963		471,990
Construction in progress		88,648		141,301
		977,690		940,646
Less accumulated depreciation		270,626		253,907
	$	707,064	$	686,739
Other current liabilities:
Payroll and employee benefit plan accruals	$	40,261	$	47,282
Accrued rebates		49,868		51,873
Royalties		11,959		15,215
Deferred revenue		20,482		17,675
Accrued interest		14,945		4,575
Legal and professional		39,750		40,095
Foreign currency option contract		121,874		—
Other		38,465		37,204
Total	$	337,604	$	213,919

7.   Earnings per Common Share

Basic earnings per common share is computed by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed by dividing net earnings by the weighted average number of common shares outstanding during the period adjusted for the dilutive effect of stock options and restricted stock outstanding. The effect of dilutive stock options on the weighted average number of common shares outstanding was 3,127,000 and 4,836,000 for the three months ended June 30, 2007 and 2006.

Stock options or restricted stock units representing 1,982,000 and 1,511,000 shares of common stock were outstanding as of June 30, 2007 and 2006, but were not included in the computation of diluted earnings per share for the three months then ended because to do so would have been anti-dilutive.

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MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

8.   Goodwill and Intangible Assets

A rollforward of goodwill from March 31, 2007 to June 30, 2007 is as follows:

	Total
	(In thousands)
Goodwill balance at March 31, 2007	$	612,742
Additions		610
Foreign currency translation and other		(3,104	)
Goodwill balance at June 30, 2007	$	610,248

Intangible assets consist of the following components:

	Weighted
	Average Life		Original		Accumulated		Net Book
	(Years)		Cost		Amortization		Value
	(In thousands)
June 30, 2007
Amortized intangible assets:
Patents and technologies		20	$	118,926	$	62,482	$	56,444
Product rights and licenses		8		370,052		96,491		273,561
Other		14		21,626		8,606		13,020
			$	510,604	$	167,579		343,025
Intangible assets no longer subject to amortization:
Trademarks								783
							$	343,808
March 31, 2007
Amortized intangible assets:
Patents and technologies		20	$	118,927	$	61,000	$	57,927
Product rights and licenses		8		367,805		86,349		281,456
Other		14		20,821		8,207		12,614
			$	507,553	$	155,556		351,997
Intangible assets no longer subject to amortization:
Trademarks								783
							$	352,780

Amortization expense for the three months ended June 30, 2007 and 2006 was $11,949 and $3,370 and is expected to be $43,864, $46,434, $43,740, $43,294, and $37,404 for fiscal years 2008 through 2012, respectively.

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MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

9.   Long-Term Debt

A summary of long-term debt is as follows:

	June 30,		March 31,
	2007		2007
	(In thousands)
Senior Notes(A)	$	500,000	$	500,000
Credit facilities(B)		450,000		450,000
Senior convertible notes(C)		600,000		600,000
Matrix facility loans(D)		233,468		226,362
	$	1,783,468	$	1,776,362
Less: Current portion		127,404		121,430
Total long-term debt	$	1,656,064	$	1,654,932

(A)	On July 21, 2005, the Company issued $500,000 in Senior Notes, which consisted of $150,000 of Senior Notes due August 15, 2010, and bearing interest at 53/4% per annum (the “2010 Restricted Notes”) and $350,000 of Senior Notes due August 15, 2015, and bearing interest at 63/8% per annum (the “2015 Restricted Notes”, and collectively the “Restricted Notes”). The Restricted Notes were exchanged on January 14, 2006, in accordance with a registration rights agreement in a transaction consummated on January 19, 2006. The form and terms of the registered notes (the “Notes”) are identical in all material respects to the original notes. Interest is payable semiannually on February 15 and August 15 and commenced on February 15, 2006.
	Prior to maturity, the Company may, under certain circumstances, redeem the Notes in whole or in part at prices specified in the bond indenture governing the Notes. Upon a change of control (as defined in the indenture governing the Notes) of the Company, each holder of the Notes may require the Company to purchase all or a portion of such holder’s Notes at 101% of the principal amount of such Notes, plus accrued and unpaid interest.
	The Notes are senior unsecured obligations of the Company and rank junior to all of the Company’s secured obligations. The Notes are guaranteed jointly and severally on a full and unconditional senior unsecured basis by all of the Company’s wholly-owned domestic subsidiaries except a captive insurance company.
	The Notes indenture contains covenants that, among other things, limit the ability of the Company to (a) incur additional secured indebtedness, (b) make investments or other restricted payments, (c) pay dividends on, redeem or repurchase the Company’s capital stock, (d) engage in sale-leaseback transactions and (e) consolidate, merge or transfer all or substantially all of its assets. Certain of the covenants contained in the indenture will no longer be applicable or will be less restrictive if the Company achieves investment grade ratings as outlined in the indenture.
(B)	On July 21, 2005, the Company entered into a $500,000 senior secured credit facility (the “Credit Facility”). The Credit Facility consisted of a $225,000 five-year revolving credit facility and a $275,000 five-year term loan (the “Term Loan”).
	On July 24, 2006, the Company completed the refinancing of its existing Credit Facility by entering into a credit agreement for a five-year $700,000 senior unsecured revolving credit facility (the “2006 Credit Facility”). At the Company’s discretion, the 2006 Credit Facility was expandable to $1,000,000. Borrowings totaling $187,000 were made under the 2006 Credit Facility and, along with existing cash, were used to repay the Term Loan. Additional net borrowings of $263,000 were made under the 2006 Credit Facility in order to finance the acquisition of Matrix. The spread over LIBOR for borrowings is adjusted based upon the Company’s total leverage ratio as discussed below. The Company’s obligations under the 2006 Credit Facility

11

MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

are guaranteed on a senior unsecured basis by all of the Company’s direct and indirect domestic subsidiaries, except a captive insurance company.

The 2006 Credit Facility includes covenants that (a) require the Company to maintain a minimum interest coverage ratio and a maximum total leverage ratio, (b) place limitations on the Company’s subsidiaries’ ability to incur debt, (c) place limitations on the Company’s and the Company’s subsidiaries’ ability to grant liens, carry out mergers, consolidations and sales of all or substantially all of its assets and (d) place limitations on the Company’s and the Company’s subsidiaries’ ability to pay dividends or make other restricted payments. The 2006 Credit Facility contains customary events of default, including nonpayment, misrepresentation, breach of covenants and bankruptcy.

On March 26, 2007, Mylan and its wholly-owned indirect subsidiary Euro Mylan B.V. (“Euro Mylan”) entered into a credit agreement (the “Credit Agreement”), effective March 26, 2007 (the “Closing Date”), with a syndicate of bank lenders for a $750,000 senior unsecured credit facility including (i) a multicurrency revolving credit facility (the “Revolving Credit Facility”) in an aggregate amount of up to a U.S. dollar equivalent of $300,000 due July 24, 2011, and (ii) a term loan agreement (the “Term Loan Agreement”) denominated in U.S. dollars to the Company in an aggregate amount of $450,000 due December 26, 2011 (collectively, the “2007 Credit Facility”).

On the Closing Date, the Company borrowed $450,000 under the Term Loan Agreement and used the proceeds to repay the revolving loans outstanding under the Company’s existing 2006 Credit Facility. The Company intends to use the Revolving Credit Facility for working capital and general corporate purposes, including expansion of its global operations.

The 2007 Credit Facility also provides that the entire principal amount of the Revolving Credit Facility may be borrowed by the Company or Euro Mylan in Euros or other foreign currencies that are agreed to by the Company and the Administrative Agent. At the request of the Company, but subject to obtaining commitments from the lenders or new lenders and the other terms and conditions specified in the Credit Agreement, the Company may elect to increase the commitments under the 2007 Credit Facility up to an aggregate amount not to exceed $850,000. At June 30, 2007 and March 31, 2007, the Company had outstanding letters of credit of $13,117.

At the Company’s option, loans under the 2007 Credit Facility will bear interest either at a rate equal to LIBOR plus an effective applicable margin or at a base rate, which is defined as the higher of the rate announced publicly by the Administrative Agent, from time to time, as its prime rate or 0.5% above the federal funds rate. The effective applicable margin will fluctuate with in a range of 0.40% to 1.00%, based on the Company’s total leverage ratio. In addition, the Company is required to pay a facility fee on the average daily amount of the commitments (whether used or unused) of the Revolving Credit Facility at a rate, which ranges from 0.10% to 0.25%, based on the Company’s total leverage ratio. The interest rate in effect on the outstanding borrowings under the Term Loan Agreement at June 30, 2007 and March 31, 2007 was 6.07% and 6.20%, respectively. At June 30, 2007, the Company had a total of $1,000,000 available under the 2006 and 2007 Credit Facilities.

The Company’s and Euro Mylan’s obligations under the 2007 Credit Facility are guaranteed on a senior unsecured basis by all of the Company’s direct and indirect domestic subsidiaries, except a captive insurance company. Euro Mylan’s obligations are also guaranteed by the Company.

The 2007 Credit Facility includes covenants similar to those of the 2006 Credit Facility. The 2007 Credit Facility contains customary events of default, including nonpayment, misrepresentation, breach of covenants and bankruptcy.

In addition, on March 26, 2007 the Company entered into an amendment (the “Amendment”) to the 2006 Credit Agreement to modify the interest rates to conform to the effective interest rates applicable to the Credit Agreement and to make certain other changes conforming the 2006 Credit Facility to the 2007 Credit Facility.

12

MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

(C)	On March 1, 2007, Mylan entered into a purchase agreement relating to the sale by the Company of $600,000 aggregate principal amount of the Company’s 1.25% Senior Convertible Notes due 2012 (the “Convertible Notes”). The Convertible Notes bear interest at a rate of 1.25% per year, accruing from March 7, 2007. Interest is payable semiannually in arrears on March 15 and September 15 of each year, beginning September 15, 2007. The Convertible Notes will mature on March 15, 2012, subject to earlier repurchase or conversion. Holders may convert their notes subject to certain conversion provisions determined by, among others, the market price of the Company’s common stock and the trading price of the Convertible Notes. The Convertible Notes have an initial conversion rate of 44.5931 shares of common stock per $1,000 principal amount (equivalent to an initial conversion price of approximately $22.43 per share), subject to adjustment, with the principal amount payable in cash and the remainder in cash or stock at the option of the Company.
	On March 1, 2007, concurrently with the sale of the Convertible Notes, Mylan entered into a convertible note hedge transaction, comprised of a purchased call option, and two warrant transactions with each of Merrill Lynch International, an affiliate of Merrill Lynch, and JPMorgan Chase Bank, National Association, London Branch, an affiliate of JPMorgan, each of which we refer to as a counterparty. The net cost of the transactions was approximately $80,600. The purchased call options will cover approximately 26,755,853 shares of our common stock, subject to anti-dilution adjustments substantially similar to the anti-dilution adjustments for the Convertible Notes, which under most circumstances represents the maximum number of shares that underlie the Convertible Notes. Concurrently with entering into the purchased call options, we entered into warrant transactions with the counterparties. Pursuant to the warrant transactions, we will sell to the counterparties warrants to purchase in the aggregate approximately 26,755,853 shares of our common stock, subject to customary anti-dilution adjustments. The warrants may not be exercised prior to the maturity of the Convertible Notes, subject to certain limited exceptions.
	The purchased call options are expected to reduce the potential dilution upon conversion of the Convertible Notes in the event that the market value per share of our common stock at the time of exercise is greater than approximately $22.43, which corresponds to the initial conversion price of the Convertible Notes. The sold warrants have an exercise price that is 60.0% higher than the price per share of $19.50 at which we offered our common stock in a concurrent equity offering. If the market price per share of our common stock at the time of conversion of any Convertible Notes is above the strike price of the purchased call options, the purchased call options will, in most cases, entitle us to receive from the counterparties in the aggregate the same number of shares of our common stock as we would be required to issue to the holder of the converted Convertible Notes. Additionally, if the market price of our common stock at the time of exercise of the sold warrants exceeds the strike price of the sold warrants, we will owe the counterparties an aggregate of approximately 26,755,853 shares of our common stock. The purchased call options and sold warrants may be settled for cash at our election.
	The purchased call options and sold warrants are separate transactions entered into by the Company with the counterparties, are not part of the terms of the Convertible Notes, and will not affect the holders’ rights under the Convertible Notes. Holders of the Convertible Notes will not have any rights with respect to the purchased call options or the sold warrants. The purchased call options and sold warrants meet the definition of derivatives under SFAS No. 133 (as amended by SFAS No. 138 and SFAS No. 149). However, because these instruments have been determined to be indexed to the Company’s own stock (in accordance with the guidance of Emerging Issues Task Force (“EITF”) Issue No. 01-6, The Meaning of Indexed to a Company’s Own Stock) and have been recorded in stockholders’ equity in the Company’s Condensed Consolidated Balance Sheet (as determined under EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock) the instruments are exempted out of the scope of SFAS No. 133 and are not subject to the mark to market provisions of that standard.
(D)	Matrix’s borrowings consist primarily of two Facilities (“Facility A” and “Facility B”) both of which are denominated in Euros. Matrix’s effective interest rate for these loans is Euro Interbank Offered Rate (Euribor) plus 110 basis points for Facility A of €82,500, or 5.19% and 4.96% at June 30, 2007 and March 31, 2007,

13

MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

respectively, and Euribor plus 129 basis points for Facility B of €82,500, or 5.24% and 5.15% at June 30, 2007 and March 31, 2007, respectively. Facility A was due in July 2007 and Facility B is payable over three years in semi-annual installments beginning in October 2007. These loans are collateralized by the pledge of certain of Matrix subsidiaries’ shares and by a Matrix corporate guarantee to ABN Amro Bank NV. These loans also require Matrix and certain of its subsidiaries to comply with certain covenants, under which the approval of the lenders is required for certain transactions which include incurring additional indebtedness or guarantees; declaration of payment of dividends; entering into acquisitions or mergers, joint ventures, consolidations or sales of Matrix assets; and entering into new lines of business. The covenants also prescribe certain maximum ratios of debt to earnings or equity ratios and minimum levels of interest and debt service coverage ratios. Subsequent to June 30, 2007, Facility A was repaid.

All financing fees associated with the Company’s borrowings are being amortized over the life of the related debt. The total unamortized amounts of $25,227 and $26,801 are included in other assets in the Condensed Consolidated Balance Sheets at June 30, 2007 and March 31, 2007.

At June 30, 2007, and March 31, 2007, the fair value of the Convertible Notes was approximately $581,400 and $640,400, respectively, and the carrying values of the Notes, the Term Loan Facility, and on Matrix’s term loan borrowings approximated fair value.

Certain of the Company’s debt agreements contain certain cross-default provisions.

10.   Comprehensive Earnings

Comprehensive earnings consists of the following:

Three Months Ended June 30,	2007						2006
(In thousands)
Net earnings				$	79,727					$	75,587
Other comprehensive earnings (loss), net of tax:
Foreign currency translation adjustments					9,934						—
Change in unrecognized losses and prior service cost related to post-retirement plans					170						—
Unrealized gains on securities
Net unrealized gain on marketable securities		(1,602	)					(898	)
Less: Reclassification for losses included in net earnings		240			(1,362	)		735			(163	)
Other comprehensive earnings (loss), net of tax:				$	8,742					$	(163	)
Comprehensive earnings, net of tax				$	88,469					$	75,424

Accumulated other comprehensive earnings, as reflected on the balance sheet, is comprised of the following:

	June 30,			March 31,
	2007			2007
	(In thousands)
Net unrealized gain in market securities	$	188		$	1,550
Change in unrecognized losses and prior service cost related to post-retirement plans		(1,102	)		(1,272	)
Foreign currency translation adjustments		11,200			1,266
Accumulated other comprehensive income	$	10,286		$	1,544

14

MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

11.   Income Taxes

The Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement 109 (“FIN 48”) effective April 1, 2007. FIN 48 clarifies the accounting for uncertain tax positions. This Interpretation provides that the tax effects from an uncertain tax position be recognized in the Company’s financial statements, only if the position is more likely than not of being sustained upon audit, based on the technical merits of the position. As a result of the implementation of FIN 48, the Company recognized a $16,400 increase in its existing liability for unrecognized tax benefits, with a corresponding decrease to the April 1, 2007 retained earnings of $11,400 and an increase to deferred tax assets of $5,000.

As of April 1, 2007, after the implementation of FIN 48, the Company’s liability for unrecognized tax benefits was $42,900, excluding liabilities for interest and penalties. If the Company were to recognize these benefits, the effective tax rate would reflect a favorable net impact of $33,000. In addition, at April 1, 2007, liabilities for accrued interest and penalties relating to the unrecognized tax benefits totaled $6,300. As of June 30, 2007, the Company’s Condensed Consolidated Balance Sheet reflects a liability for unrecognized tax benefits of $43,900, excluding liabilities for interest and penalties. Accrued interest and penalties included in the Condensed Consolidated Balance Sheet were $6,500 as of June 30, 2007.

The Company recognizes interest and penalties associated with uncertain tax positions as a component of income tax expense in the Condensed Consolidated Statement of Earnings.

It is anticipated that the amount of unrecognized tax benefits will change in the next 12 months; however, these changes are not expected to have a significant impact on the results of operations, cash flows or the financial position of the Company.

The tax years 2005 through 2007 remain open to examination by the Internal Revenue Service. The major state taxing jurisdictions applicable to the Company remain open from 2004 through 2007.

12.   Segment Information

The Company has two reportable segments, the “Mylan Segment” and the “Matrix Segment”. The Mylan Segment primarily develops, manufactures, sells and distributes generic or branded generic pharmaceutical products in tablet, capsule or transdermal patch form, while the Matrix Segment engages mainly in the manufacture and sale of active pharmaceutical ingredients “APIs” and the distribution of branded generic products. Additionally, certain general and administrative expenses, as well as litigation settlements, and non-operating income and expenses are reported in Corporate/Other.

The Company’s chief operating decision maker evaluates the performance of its reportable segments based on net revenues and segment earnings from operations. Items below the earnings from operations line of the Condensed Consolidated Statements of Earnings are not presented by segment, since they are excluded from the measure of segment profitability reviewed by the Company’s chief operating decision maker. The Company does not report depreciation expense, total assets and capital expenditures by segment as such information is not used by the chief operating decision maker.

The accounting policies of the segments are the same as those described in the “Summary of Significant Accounting Policies” included in our Annual Report on Form 10-K. Intersegment revenues are accounted for at current market values.

15

MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

The table below presents segment information for the three months ended June 30, 2007 and 2006 and provides a reconciliation of segment information to total consolidated information. For the Mylan and Matrix Segments, segment earnings from operations (“Segment profitability (loss)”) represents segment gross profit less direct research and development expenses and direct selling, general and administrative expenses.

	Mylan		Matrix
Three Months Ended June 30, 2007	Segment		Segment			Corporate/Other(1)			Consolidated
	(In thousands)
Intersegment revenues	$	—	$	9,169		$	(9,169	)	$	—
Third-party net revenues		451,406		91,303			—			542,709
Segment profitability (loss)		251,310		(17,283	)		(45,953	)		188,074

	Mylan		Matrix
Three Months Ended June 30, 2006	Segment		Segment		Corporate/Other(1)			Consolidated
	(In thousands)
Intersegment revenues	$	—	$	—	$	—		$	—
Third-party net revenues		348,789		—		—			348,789
Segment profitability (loss)		155,298		—		(38,149	)		117,149

(1) Includes corporate overhead, intercompany eliminations and charges not directly attributable to segments.

13.   Contingencies

While it is not possible to determine with any degree of certainty the ultimate outcome of the following legal proceedings, the Company believes that it has meritorious defenses with respect to the claims asserted against it and intends to vigorously defend its position. An adverse outcome in any of these proceedings could have a material adverse effect on the Company’s financial position and results of operations.

Omeprazole

In fiscal 2001, Mylan Pharmaceuticals Inc. (“MPI”), a wholly-owned subsidiary of Mylan Laboratories Inc. (“Mylan Labs”), filed an Abbreviated New Drug Application (“ANDA”) seeking approval from the U.S. Food and Drug Administration (“FDA”) to manufacture, market and sell omeprazole delayed-release capsules and made Paragraph IV certifications to several patents owned by AstraZeneca PLC (“AstraZeneca”) that were listed in the FDA’s “Orange Book.” On September 8, 2000, AstraZeneca filed suit against MPI and Mylan Labs in the U.S. District Court for the Southern District of New York alleging infringement of several of AstraZeneca’s patents. On May 29, 2003, the FDA approved MPI’s ANDA for the 10 mg and 20 mg strengths of omeprazole delayed-release capsules, and, on August 4, 2003, Mylan Labs announced that MPI had commenced the sale of omeprazole 10 mg and 20 mg delayed-release capsules. AstraZeneca then amended the pending lawsuit to assert claims against Mylan Labs and MPI and filed a separate lawsuit against MPI’s supplier, Esteve Quimica S.A. (“Esteve”), for unspecified money damages and a finding of willful infringement, which could result in treble damages, injunctive relief, attorneys’ fees, costs of litigation and such further relief as the court deems just and proper. MPI has certain indemnity obligations to Esteve in connection with this litigation. MPI, Esteve and the other generic manufacturers who are co-defendants in the case filed motions for summary judgment of non-infringement and patent invalidity. On January 12, 2006, those motions were denied. On May 31, 2007, the district court ruled in Mylan’s and Esteve’s favor by finding that the asserted patents were not infringed by Mylan’s/Esteve’s products. On July 18, 2007, AstraZeneca appealed the decision to the United States Court of Appeals for the Federal Circuit.

Lorazepam and Clorazepate

On June 1, 2005, a jury verdict was rendered against Mylan Labs and MPI in the U.S. District Court for the District of Columbia (“D.C.”) in the amount of approximately $12,000 which has been accrued for by the Company.

16

MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

The jury found Mylan willfully violated Massachusetts, Minnesota and Illinois state antitrust laws in connection with API supply agreements entered into between the Company and its API supplier and broker for two drugs, lorazepam and clorazepate, in 1997, and subsequent price increases on these drugs in 1998. The case was brought by four health insurers who opted out of earlier class action settlements agreed to by the Company in 2001 and represents the last remaining claims relating to Mylan’s 1998 price increases for lorazepam and clorazepate. In post-trial filings, the plaintiffs have requested that the verdict be trebled. Plaintiffs are also seeking an award of attorneys’ fees, litigation costs and interest on the judgment in unspecified amounts. In total, the plaintiffs have moved for judgments that could result in a liability of approximately $69,000 for Mylan (not including the request for attorney’s fees and costs). The Company filed a motion for judgment as a matter of law, a motion for a new trial, a motion to dismiss two of the insurers and a motion to reduce the verdict. On December 20, 2006, the Company’s motion for judgment as a matter of law and motion for a new trial were denied. A hearing on the pending post-trial motions took place on February 28, 2007. The Company intends to appeal to the U.S. Court of Appeals for the D.C. Circuit.

Pricing and Medicaid Litigation

On June 26, 2003, MPI and UDL Laboratories Inc. (“UDL”), a subsidiary of Mylan Labs, received requests from the U.S. House of Representatives Energy and Commerce Committee (the “Committee”) seeking information about certain products sold by MPI and UDL in connection with the Committee’s investigation into pharmaceutical reimbursement and rebates under Medicaid. MPI and UDL cooperated with this inquiry and provided information in response to the Committee’s requests in 2003. Several states’ attorneys general (“AG”) have also sent letters to MPI, UDL and Mylan Bertek, demanding that those companies retain documents relating to Medicaid reimbursement and rebate calculations pending the outcome of unspecified investigations by those AGs into such matters. In addition, in July 2004, Mylan Labs received subpoenas from the AGs of California and Florida in connection with civil investigations purportedly related to price reporting and marketing practices regarding various drugs. As noted below, both California and Florida subsequently filed suits against Mylan, and the Company believes any further requests for information and disclosures will be made as part of that litigation.

Beginning in September 2003, Mylan Labs, MPI and/or UDL, together with many other pharmaceutical companies, have been named in a series of civil lawsuits filed by state AGs and municipal bodies within the state of New York alleging generally that the defendants defrauded the state Medicaid systems by allegedly reporting “Average Wholesale Prices” (“AWP”) and/or “Wholesale Acquisition Costs” that exceeded the actual selling price of the defendants’ prescription drugs. To date, Mylan Labs, MPI and/or UDL have been named as defendants in substantially similar civil lawsuits filed by the AGs of Alabama, Alaska, California, Florida, Hawaii, Idaho, Illinois, Kentucky, Massachusetts, Mississippi, Missouri, South Carolina, Texas and Wisconsin and also by the city of New York and approximately 40 counties across New York State. Several of these cases have been transferred to the AWP multi-district litigation proceedings pending in the U.S. District Court for the District of Massachusetts for pretrial proceedings. Others of these cases will likely be litigated in the state courts in which they were filed. Each of the cases seeks an unspecified amount in money damages, civil penalties and/or treble damages, counsel fees and costs, and injunctive relief. In each of these matters, with the exception of Florida, Idaho, South Carolina AG and Texas actions and the actions brought by various counties in New York, excluding the actions brought by Erie, Oswego and Schenectady counties, Mylan Labs, MPI and/or UDL have answered the respective complaints denying liability. Mylan Labs and its subsidiaries intend to defend each of these actions vigorously.

In addition by letter dated January 12, 2005, MPI was notified by the U.S. Department of Justice of an investigation concerning MPI’s calculations of Medicaid drug rebates. MPI is cooperating fully with the government’s investigation.

17

MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

Modafinil Antitrust Litigation and FTC Inquiry

Beginning in April 2006, Mylan Labs, along with four other drug manufacturers, has been named in a series of civil lawsuits filed in the Eastern District of Pennsylvania by a variety of plaintiffs purportedly representing direct and indirect purchasers of the drug modafinil and one action brought by Apotex, Inc., a manufacturer of generic drugs seeking approval to market a generic modafinil product. These actions allege violations of federal and state laws in connection with the defendants’ settlement of patent litigation relating to modafinil. These actions are in their preliminary stages, and motions to dismiss each action are pending. Mylan Labs intends to defend each of these actions vigorously. In addition, by letter dated July 11, 2006, Mylan was notified by the U.S. Federal Trade Commission (“FTC”) of an investigation relating to the settlement of the modafinil patent litigation. In its letter, the FTC requested certain information from Mylan Labs, MPI and Mylan Technologies Inc. pertaining to the patent litigation and the settlement thereof. On March 29, 2007, the FTC issued a subpoena, and on April 26, 2007, the FTC issued a civil investigative demand to Mylan Labs requesting additional information from the Company relating to the investigation. Mylan is cooperating fully with the government’s investigation and its outstanding requests for information.

Other Litigation

The Company is involved in various other legal proceedings that are considered normal to its business. While it is not feasible to predict the ultimate outcome of such other proceedings, the Company believes that the ultimate outcome of such other proceedings will not have a material adverse effect on its financial position or results of operations.

14.   Guarantor Financial Statements

Each of the Company’s wholly-owned domestic subsidiaries, except a captive insurance company, has guaranteed, on a full, unconditional and joint and several basis, the Company’s performance under the Notes (collectively, “the Guarantor Subsidiaries”). Matrix is not a guarantor of the Notes. There are certain restrictions under the Notes indenture on the ability of the Company and the Guarantor Subsidiaries to receive or distribute funds in the form of cash dividends, loans or advances. The following combined financial data provides information regarding the financial position, results of operations and cash flows of the Guarantor Subsidiaries (condensed consolidating financial data). Separate financial statements and other disclosures concerning the Guarantor Subsidiaries are not presented because management has determined that such information would not be material to the holders of the debt.

18

MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

GUARANTOR SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

							Non-			Consolidating and
				Guarantor			Guarantor			Eliminating
June 30, 2007	Mylan Labs			Subs			Subs			Entries			Consolidated
(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	1,228,533		$	2,959		$	77,444		$	6,621		$	1,315,557
Marketable securities		144,419			—			30,466			—			174,885
Accounts receivable, net		9,972			315,887			87,433			(12,221	)		401,071
Inventories		—			331,429			103,047			(2,128	)		432,348
Deferred income tax benefits		27,425			132,325			2,124			—			161,874
Prepaid and other current assets		125,858			13,193			49,367			(52,129	)		136,289
Total current assets		1,536,207			795,793			349,881			(59,857	)		2,622,024
Intercompany receivables, net		(452,148	)		1,062,013			(776,842	)		166,977			—
Property, plant and equipment, net		77,680			459,716			169,668			—			707,064
Intangible assets, net		—			86,073			257,735			—			343,808
Goodwill		—			102,578			507,670			—			610,248
Deferred income tax benefit		44,851			569			582			—			46,002
Other assets		68,153			9,203			69,019			—			146,375
Investments in subsidiaries		2,164,976			—			—			(2,164,976	)		—
Total assets	$	3,439,719		$	2,515,945		$	577,713		$	(2,057,856	)	$	4,475,521
Liabilities and Shareholders’ Equity
Current liabilities:
Liabilities
Trade accounts payable	$	788		$	41,061		$	105,563		$	(601	)	$	146,811
Short-term borrowings		—			—			107,315			—		$	107,315
Income taxes payable		(34,749	)		124,156			3,907			(1,756	)		91,558
Current portion of long-term obligations		3,352			—			127,404			—			130,756
Cash dividends payable		14,923			—			—			—			14,923
Other current liabilities		190,265			107,395			91,443			(51,499	)		337,604
Total current liabilities		174,579			272,612			435,632			(53,856	)		828,967
Deferred revenue		—			102,995			—			—			102,995
Long-term debt		1,550,000			—			106,064			—			1,656,064
Deferred income tax liability		(16,232	)		(988	)		102,602			—			85,382
Other long-term obligations		18,238			4,600			18,092			(463	)		40,467
Total liabilities		1,726,585			379,219			662,390			(54,319	)		2,713,875
Minority interest		—			—			37,454			(787	)		36,667
Shareholders’ equity
Preferred stock		—			—			—			—			—
Common stock		169,856			7,493			210			(7,703	)		169,856
Additional paid-in capital		975,565			600,176			10,596			(609,893	)		976,444
Retained earnings		2,156,667			1,529,047			(143,893	)		(1,385,154	)		2,156,667
Accumulated other comprehensive earnings		(680	)		10			10,956			—			10,286
		3,301,408			2,136,726			(122,131	)		(2,002,750	)		3,313,253
Less:
Treasury stock at cost		(1,588,274	)		—			—			—			(1,588,274	)
Total shareholders’ equity		1,713,134			2,136,726			(122,131	)		(2,002,750	)		1,724,979
Total liabilities and shareholders’ equity	$	3,439,719		$	2,515,945		$	577,713		$	(2,057,856	)	$	4,475,521

19

MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

GUARANTOR SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

						Non-			Consolidating
				Guarantor		Guarantor			and Eliminating
March 31, 2007	Mylan Labs			Subs		Subs			Entries			Consolidated
(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	1,146,380		$	21,689	$	84,312		$	(16	)	$	1,252,365
Marketable securities		143,220			—		30,987			—			174,207
Accounts receivable, net		10,708			262,024		79,712			(2,150	)		350,294
Inventories		—			324,767		108,096			(3,752	)		429,111
Other current assets		5,400			158,488		47,129			(4,950	)		206,067
Total current assets		1,305,708			766,968		350,236			(10,868	)		2,412,044
Intercompany receivables, net		(390,417	)		1,009,683		(776,231	)		156,965			—
Property, plant and equipment, net		16,741			510,853		159,145			—			686,739
Intangible assets, net		—			89,321		263,459			—			352,780
Goodwill		—			102,579		510,163			—			612,742
Other assets		162,480			12,191		64,891			(50,000	)		189,562
Investments in subsidiaries		2,007,547			—		—			(2,007,547	)		—
Total assets	$	3,102,059		$	2,491,595	$	571,663		$	(1,911,450	)	$	4,253,867
Liabilities and Shareholders’ Equity
Current liabilities:
Trade accounts payable	$	302		$	56,617	$	105,532		$	(2,165	)	$	160,286
Income taxes payable		(177,857	)		252,404		5,464			(1,624	)		78,387
Current portion of long-term obligations		3,352			—		121,430			—			124,782
Cash dividends payable		14,902			—		—			—			14,902
Other current liabilities		61,312			114,255		148,295			(1,684	)		322,178
Total current liabilities		(97,989	)		423,276		380,721			(5,473	)		700,535
Deferred revenue		—			90,673		—			—			90,673
Long-term debt		1,550,000			—		104,932			—			1,654,932
Other long-term obligations		2,700			1,309		161,651			(50,000	)		115,660
Minority interest		—			—		44,469			(1,262	)		43,207
Shareholders’ equity
Preferred stock		—			—		—			—			—
Common stock		169,681			7,494		210			(7,704	)		169,681
Additional paid-in capital		962,415			593,831		10,048			(603,548	)		962,746
Retained earnings		2,103,282			1,375,003		(131,540	)		(1,243,463	)		2,103,282
Accumulated other comprehensive earnings		363			9		1,172			—			1,544
		3,235,741			1,976,337		(120,110	)		(1,854,715	)		3,237,253
Less:
Treasury stock at cost		(1,588,393	)		—		—			—			(1,588,393	)
Total shareholders’ equity		1,647,348			1,976,337		(120,110	)		(1,854,715	)		1,648,860
Total liabilities and shareholders’ equity	$	3,102,059		$	2,491,595	$	571,663		$	(1,911,450	)	$	4,253,867

20

MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

GUARANTOR SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS

							Non-			Consolidating
	Mylan			Guarantor			Guarantor			and Eliminating
Three Months Ended June 30, 2007	Labs			Subs			Subs			Entries			Consolidated
(In thousands)
Revenues:
Net revenues	$	—		$	451,406		$	100,472		$	(9,169	)	$	542,709
Other revenues		—			3,612			—			—			3,612
Total revenues		—			455,018			100,472			(9,169	)		546,321
Cost of sales		—			167,783			84,091			(2,261	)		249,613
Gross profit		—			287,235			16,381			(6,908	)		296,708
Operating expenses:
Research and development		2,555			27,412			8,273			(6,520	)		31,720
Selling, general & administrative		37,994			22,048			16,872			—			76,914
Total operating expenses		40,549			49,460			25,145			(6,520	)		108,634
(Loss) earnings from operations		(40,549	)		237,775			(8,764	)		(388	)		188,074
Interest expense		17,926			—			4,993			—			22,919
Other (expense) income, net		(41,995	)		674			3,525			(843	)		(38,639	)
(Loss) earnings before income taxes, minority interest and equity in earnings of subsidiaries		(100,470	)		238,449			(10,232	)		(1,231	)		126,516
Provision for income taxes		(1,059	)		50,136			262			(132	)		49,207
(Loss) earnings before minority interest and equity in earnings of subsidiaries		(99,411	)		188,313			(10,494	)		(1,099	)		77,309
Minority interest		—			—			(137	)		—			(137	)
(Loss) earnings before equity in earnings of subsidaries		(99,411	)		188,313			(10,357	)		(1,099	)		77,446
Equity in earnings of subsidaries		179,138			(9,644	)		1,131			(168,344	)		2,281
Net earnings (loss)	$	79,727		$	178,669		$	(9,226	)	$	(169,443	)	$	79,727

21

MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

GUARANTOR SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS

						Non-			Consolidating
	Mylan			Guarantor		Guarantor			and Eliminating
Three Months Ended June 30, 2006	Labs			Subs		Subs			Entries			Consolidated
(In thousands)
Revenues:
Net revenues	$	—		$	348,789	$	—		$	—		$	348,789
Other revenues		—			7,351		—			—			7,351
Total revenues		—			356,140		—			—			356,140
Cost of sales		—			168,813		—			(873	)		167,940
Gross profit		—			187,327		—			873			188,200
Operating expenses:
Research and development		2,591			18,634		—			—			21,225
Selling, general & administrative		29,665			19,646		515			—			49,826
Total operating expenses		32,256			38,280		515			—			71,051
(Loss) earnings from operations		(32,256	)		149,047		(515	)		873			117,149
Interest expense		10,359			—		—			—			10,359
Other income, net		3,934			256		1,229			(873	)		4,546
(Loss) earnings before income taxes and equity in earnings of subsidiaries		(38,681	)		149,303		714			—			111,336
Provision for income taxes		5,368			35,169		250			—			40,787
(Loss) earnings before equity in earnings of subsidaries		(44,049	)		114,134		464			—			70,549
Equity in earnings of subsidaries		119,636			5,038		—			(119,636	)		5,038
Net earnings	$	75,587		$	119,172	$	464		$	(119,636	)	$	75,587

22

MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

GUARANTOR SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

							Non-
				Guarantor			Guarantor
Three Months Ended June 30, 2007	Mylan Labs			Subs			Subs			Eliminating			Consolidated
(In thousands)
Cash flows (used in) provided by operations:	$	(35,376	)	$	105,657		$	7,633		$	6,637		$	84,551
Cash flows from investing activities:
Capital expenditures		(3,566	)		(17,740	)		(6,563	)		—			(27,869	)
Purchase of marketable securities		(71,241	)		—			(15,029	)		—			(86,270	)
Proceeds from sale of marketable securities		68,708			—			14,494			—			83,202
Other items, net		—			(693	)		387			—			(306	)
Net cash used in investing activities		(6,099	)		(18,433	)		(6,711	)		—			(31,243	)
Cash flows from financing activities:
Cash dividends paid		(14,902	)		—			—			—			(14,902	)
Excess tax benefit from stock-based compensation		2,082			—			—			—			2,082
Proceeds from exercise of stock options		5,094			—			987			—			6,081
Change in outstanding checks in excess of cash in disbursement accounts		—			18,008			—			—			18,008
Change in short-term borrowings, net		—			—			(3,824	)		—			(3,824	)
Other items, net		—			—			(1,572	)		—			(1,572	)
Transfer from (to) affiliates		131,354			(123,962	)		(7,392	)		—			—
Net cash provided by (used in) financing activities		123,628			(105,954	)		(11,801	)		—			5,873
Effect on cash of changes in exchange rates		—			—			4,011			—			4,011
Net increase (decrease) in cash and cash equivalents		82,153			(18,730	)		(6,868	)		6,637			63,192
Cash and cash equivalents — beginning of period		1,146,380			21,689			84,312			(16	)		1,252,365
Cash and cash equivalents — end of period	$	1,228,533		$	2,959		$	77,444		$	6,621		$	1,315,557

23

MYLAN LABORATORIES INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

GUARANTOR SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

							Non-
				Guarantor			Guarantor
Three Months Ended June 30, 2006	Mylan Labs			Subs			Subs			Eliminating			Consolidated
(In thousands)
Cash flows (used in) provided by operations:	$	(39,004	)	$	138,127		$	1,371		$	(7,605	)	$	92,889
Cash flows from investing activities:
Capital expenditures		(2,064	)		(25,653	)		—			—			(27,717	)
Purchase of marketable securities		—			(178,436	)		(13,617	)		—			(192,053	)
Proceeds from sale of marketable securities		—			134,422			10,258			—			144,680
Other items, net		—			(159	)		—			—			(159	)
Net cash used in investing activities		(2,064	)		(69,826	)		(3,359	)		—			(75,249	)
Cash flows from financing activities:
Cash dividends paid		(12,605	)		—			—			—			(12,605	)
Payment of financing fees		(632	)		—			—			—			(632	)
Excess tax benefit from stock-based compensation		700			—			—			—			700
Proceeds from exercise of stock options		6,301			—			—			—			6,301
Change in outstanding checks in excess of cash in disbursement accounts		—			(7,605	)		—			—			(7,605	)
Transfer from (to) affiliates		52,836			(52,836	)		—			—			—
Other items, net		—			—			—			—			—
Net cash provided by (used in) financing activities		46,600			(60,441	)		—			—			(13,841	)
Net increase (decrease) in cash and cash equivalents		5,532			7,860			(1,988	)		(7,605	)		3,799
Cash and cash equivalents — beginning of period		4,911			128,191			9,417			7,605			150,124
Cash and cash equivalents — end of period	$	10,443		$	136,051		$	7,429		$	—		$	153,923

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ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following discussion and analysis addresses material changes in the results of operations and financial condition of Mylan Laboratories Inc. and Subsidiaries (“the Company”, “Mylan” or “we”) for the periods presented. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements, the related Notes to Consolidated Financial Statements and Management’s Discussion and Analysis of Results of Operations and Financial Condition included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2007, the unaudited interim Condensed Consolidated Financial Statements and related Notes included in Item 1 of this Report on Form 10-Q (“Form 10-Q”) and the Company’s other SEC filings and public disclosures.

This Form 10-Q may contain “forward-looking statements”. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, statements about the Company’s market opportunities, strategies, competition and expected activities and expenditures, and at times may be identified by the use of words such as “may”, “will”, “could”, “should”, “would”, “project”, “believe”, “anticipate”, “expect”, “plan”, “estimate”, “forecast”, “potential”, “intend”, “continue” and variations of these words or comparable words. Forward-looking statements inherently involve risks and uncertainties. Accordingly, actual results may differ materially from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the risks described below under “Risk Factors” in Part II, Item 1A. The Company undertakes no obligation to update any forward-looking statements for revisions or changes after the date of this Form 10-Q.

Overview

Mylan’s financial results for the three months ended June 30, 2007, included total revenues of $546.3 million, net earnings of $79.7 million and earnings per diluted share of $0.32. Comparatively, the three months ended June 30, 2006, included total revenues of $356.1 million, net earnings of $75.6 million and earnings per diluted share of $0.35. This represents an increase of 53% in total revenues and 5% in net earnings and a decrease of 9% in earnings per diluted share when compared to the same prior year period. Since the first quarter of fiscal 2007, Mylan issued 26.2 million shares of its common stock in an equity offering in March 2007, and sold approximately 8.1 million shares to certain selling shareholders of Matrix Laboratories Limited (“Matrix”) in the acquisition, which was completed during the Company’s fourth quarter of fiscal 2007.

Included in diluted earnings per share for the first quarter of fiscal 2008 was a charge of $0.15 per diluted share with respect to a deal-contingent foreign currency option contract entered into with respect to the pending acquisition of Merck KGaA’s generic business (“Merck Generics”). On May 12, 2007, Mylan and Merck KGaA announced the signing of a definitive agreement under which Mylan, subject to regulatory review in the United States and other customary closing conditions, will acquire Merck Generics for €4.9 billion (approximately $6.7 billion) in an all-cash transaction. In conjunction with the Merck Generics transaction, Mylan entered into a deal-contingent foreign currency option contract in order to mitigate the risk of foreign currency exposure. The contract is contingent upon the closing of this acquisition, and the premium of approximately $121.9 million will be paid only upon such closing. The Company accounts for this instrument under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”) (“SFAS No. 133”). This instrument does not qualify for hedge accounting treatment under SFAS No. 133 and, therefore, is adjusted to fair value at each reporting date with the change in the fair value of the instrument recorded in earnings.

With the addition of Matrix, Mylan now reports as two reportable segments, the “Mylan Segment” and the “Matrix Segment”. Additionally, certain general and administrative expenses, as well as litigation settlements, and non-operating income and expenses are reported in Corporate/Other. In accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS No. 131”), information for earlier periods has been recast.

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The Mylan Segment had total revenues of $455.0 million for the quarter ended June 30, 2007, and the Matrix Segment had total revenues of $91.3 million. A more detailed discussion of the Company’s financial results can be found below in the section titled “Results of Operations”.

Results of Operations

Quarter Ended June 30, 2007, Compared to Quarter Ended June 30, 2006

Revenues and Gross Profit

Total revenues for the current quarter increased 53% or $190.2 million to $546.3 million compared to $356.1 million in the first quarter of fiscal 2007. Mylan Segment total revenues were $455.0 million, and Matrix Segment total revenues were $91.3 million.

For the Mylan Segment, net revenues for the current quarter increased by $102.6 million or 29% compared to the three months ended June 30, 2006, primarily as a result of the contribution from new products, partially offset by lower volume on existing products as a result of product mix. Pricing was relatively stable compared to the prior year.

New products in the first quarter of fiscal 2008 contributed net revenues of $124.7 million. Amlodipine accounted for $84.0 million of new product revenue, with oxybutynin and several other recent product launches comprising the remainder. Mylan launched amlodipine in the latter part of its fiscal 2007 fourth quarter. However, because of significant uncertainties surrounding the Food and Drug Administration’s approval of additional amlodipine abbreviated new drug applications (“ANDAs”) we were unable to reasonably estimate the amount of potential price adjustments that would occur as a result of the additional approvals. As a result, revenues on shipments of amlodipine are deferred until such uncertainties were resolved. Such uncertainties are resolved upon our customers’ sale of this product. There are currently 15 competitors with approved ANDAs to sell amlodipine, and the market dynamics continue to change. As such, these uncertainties continue to exist and Mylan continues to defer the recognition of amlodipine revenue until the uncertainties are resolved.

Fentanyl, which continues to be the only ANDA-approved, AB-rated generic alternative to Duragesic^® on the market, accounted for approximately 16% of Mylan Segment net revenues for the three months ended June 30, 2007. For the Mylan Segment, total doses shipped increased from the same prior year period by approximately 4% to 3.6 billion doses on a year over year basis.

Net revenues for the Matrix Segment were $100.5 million, of which $91.3 million represented third-party sales. Approximately 65% of the Matrix Segment’s third-party net revenues comes from the sale of API and intermediates and approximately 25% mainly from the distribution of branded generic products in Europe. Intersegment revenue was derived from API sales to the Mylan Segment primarily in conjunction with the launch of amlodipine which is a vertically integrated product, as well as revenue earned through intersegment product development agreements.

Consolidated gross profit increased 58% or $108.5 million to $296.7 million from $188.2 million, and gross margins increased to 54.3% from 52.8%. Included in gross profit for the first quarter of fiscal 2008 were purchase accounting related items of approximately $14.9 million, which consisted of incremental amortization related to the intangible assets and the amortization of the inventory step-up associated with the Matrix acquisition. Excluding such items, consolidated gross margins were 57.0%.

For the Mylan Segment, gross profit was $289.2 million compared to $188.2 million, while gross margins increased to 63.6% from 52.8%. A significant portion of gross profit, as well as the increase in gross margins, was comprised of new products, including amlodipine and fentanyl. Fentanyl contributes margins well in excess of most other products in our portfolio, excluding new products. Absent any changes to market dynamics or significant new competition for fentanyl, the Company expects the product to continue to be a significant contributor to sales and gross profit. Products generally contribute most significantly to gross margin at the time of their launch and even more so in periods of market exclusivity. As is typical in the generic industry, the entrance into the market of other generic competition generally has a negative impact on the volume and pricing of the affected products.

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Operating Expenses

Consolidated research and development (“R&D”) expense for the current quarter was $31.7 million compared to $21.2 million for the same period in the prior year, which represents an increase of $10.5 million or 49%. Matrix Segment R&D expense was $8.3 million for the three months ended June 30, 2007. Excluding Matrix, R&D expense increased by $2.2 million or 10%. The Mylan Segment had R&D expense of $20.9 million for the current quarter compared to $18.6 million for the same period in the prior year. This increase is primarily the result of a higher number of clinical studies in fiscal 2008 compared to the prior year.

Selling, general and administrative (“SG&A”) expense for the current quarter was $76.9 million compared to $49.8 million for the same period in the prior year, an increase of $27.0 million or 54%. The Matrix Segment accounted for a majority of the increase, with SG&A expense of $16.5 million. The remainder of the increase was primarily the result of higher Corporate/Other SG&A which increased $7.8M or 22% to $43.4 million from $35.6 million. The increase to Corporate/Other SG&A is due to numerous factors including higher payroll and payroll related costs, increased depreciation expense and increased consulting costs.

Interest Expense

Interest expense for the three months ended June 30, 2007 totaled $22.9 million compared to $10.4 million for the same period of the prior year. The increase is the result of additional debt incurred after June 30, 2006, in order to fund a portion of the Matrix acquisition as well as debt assumed in the Matrix acquisition and the issuance of the Convertible Notes in March of 2007. Included in interest expense is a commitment fee on the Revolving Credit Facility and the amortization of financing fees.

Other (Expense) Income, net

Other (expense) income, net was $36.4 million of expense in the first quarter of fiscal 2008 compared to $9.6 million of income in the same prior year period. The decrease is primarily the result of a non-cash mark to market unrealized loss of $57.5 million recorded in the first quarter of fiscal 2008 on a deal-contingent foreign currency option contract entered into with respect to the pending acquisition of Merck Generics. The purpose of this foreign currency option contract is to mitigate any exchange rate risk. In accordance with SFAS No. 133, this derivative instrument is marked to market each period with any change in the fair value reported in current earnings.

Partially offsetting this charge within other (expense) income, net is interest income and income related to Mylan’s equity method investees. During the quarter ended June 30, 2007, the Company recorded income from its equity method investees of $2.3 million compared to $5.0 million in the same prior year period. During the quarter ended June 30, 2006, Mylan received a cash payment from Somerset Pharmaceuticals, Inc. (“Somerset”), of which we own a 50% equity interest, of approximately $5.5 million. The amount in excess of the carrying value of our investment in Somerset, approximately $5.0 million, was recorded as equity income.

Income Tax Expense

The company’s effective tax rate increased in the current quarter to 38.2% from 35.0% in the same period of the prior year. This increase is due primarily to the impact of losses in certain entities for which the Company could not recognize a tax benefit, which is expected to diminish over time.

Liquidity and Capital Resources

Cash flows from operating activities were $84.6 million for the three months ended June 30, 2007, resulting from net income and non-cash add-backs (including the mark to market loss on the foreign currency option contract), partially offset by the deferred tax benefit and changes in working capital items. In total, working capital as of June 30, 2007 was $1.8 billion compared to $1.7 billion at March 31, 2007. The most significant working capital items affecting cash were accounts receivable, which increased as a result of higher overall sales, including revenue recognized on amlodipine, and accounts payable which decreased as a result of the timing of payments.

Cash used in investing activities for the three months ended June 30, 2007, was $31.2 million. Of the Company’s $4.5 billion of total assets at June 30, 2007, $1.5 billion was held in cash, cash equivalents and

27

marketable securities. Investments in marketable securities consist primarily of a variety of high credit quality debt securities, including U.S. government, state and local government and corporate obligations. These investments are highly liquid and available for working capital needs. As these instruments mature, the funds are generally reinvested in instruments with similar characteristics.

Cash provided by financing activities was $5.9 million for the three months ended June 30, 2007, consisting primarily of proceeds from the exercise of stock options of $6.1 million and an $18.0 million change in the amount of outstanding checks in excess of cash in our primary disbursement accounts. The Company utilizes a cash management system under which uncleared checks in excess of the cash balance in the bank account at the end of the reporting period are shown as a book cash overdraft. The Company transfers cash on an as-needed basis to fund clearing checks. The Company does not incur any financing charges with respect to this arrangement.

Partially offsetting these cash inflows were $14.9 million of cash dividends paid during the quarter. However, as announced on May 12, 2007, in conjunction with the contemplated acquisition of Merck Generics, the Company is suspending the dividend on its common stock.

On May 12, 2007, Mylan and Merck KGaA announced the signing of a definitive agreement under which Mylan, subject to regulatory review in the United States and other customary closing conditions, will acquire Merck’s Generics for €4.9 billion (approximately $6.7 billion) in an all-cash transaction. Mylan has obtained fully committed financing from Merrill Lynch, Citigroup, J.P. Morgan, and Goldman Sachs.

In conjunction with the Merck Generics transaction, the Company entered into a deal-contingent foreign currency option contract in order to mitigate the risk of foreign currency exposure. The contract is contingent upon the closing of this acquisition, and the premium of approximately $121.9 million will be paid only upon such closing.

The Company is involved in various legal proceedings that are considered normal to its business (see Note 13) to the Condensed Consolidated Financial Statements. While it is not feasible to predict the outcome of such proceedings, an adverse outcome in any of these proceedings could materially affect the Company’s financial position and results of operations.

The Company is actively pursuing, and is currently involved in, joint projects related to the development, distribution and marketing of both generic and brand products. Many of these arrangements provide for payments by the Company upon the attainment of specified milestones. While these arrangements help to reduce the financial risk for unsuccessful projects, fulfillment of specified milestones or the occurrence of other obligations may result in fluctuations in cash flows.

The Company is continuously evaluating the potential acquisition of products, as well as companies, as a strategic part of its future growth. Consequently, the Company may utilize current cash reserves or incur additional indebtedness to finance any such acquisitions, which could impact future liquidity.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosure about fair value measurements. The statement is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of adopting SFAS 157 on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”), providing companies with an option to report selected financial assets and liabilities at fair value. This statement is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of adopting SFAS 159 on its consolidated financial statements.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to market risk primarily from changes in the market values of investments in its marketable debt securities, interest rate risk from changes in interest rates associated with its long-term debt and foreign currency exchange rate risk as a result of its pending acquisition of Merck Generics.

28

Marketable Debt Securities

In addition to marketable debt and equity securities, investments are made in overnight deposits, money market funds and marketable securities with maturities of less than three months. These instruments are classified as cash equivalents for financial reporting purposes and have minimal or no interest rate risk due to their short-term nature.

The following table summarizes the investments in marketable debt and equity securities which subject the Company to market risk at June 30, 2007 and March 31, 2007:

	June 30, 2007		March 31, 2007
Marketable debt securities	$	172,440	$	171,548
Marketable equity securities		2,445		2,659
	$	174,885	$	174,207

The primary objectives for the marketable debt securities investment portfolio are liquidity and safety of principal. Investments are made to achieve the highest rate of return while retaining principal. Our investment policy limits investments to certain types of instruments issued by institutions and government agencies with investment-grade credit ratings. At June 30, 2007, the Company had invested $172.4 million in marketable debt securities, of which $22.2 million will mature within one year and $150.2 million will mature after one year. The short duration to maturity creates minimal exposure to fluctuations in market values for investments that will mature within one year. However, a significant change in current interest rates could affect the market value of the remaining $150.2 million of marketable debt securities that mature after one year. A 5% change in the market value of the marketable debt securities that mature after one year would result in a $7.5 million change in marketable debt securities.

Long-Term Debt

On July 21, 2005, the Company issued $500.0 million in Senior Notes with fixed interest rates (which were exchanged for registered notes, as described previously) and, on July 24, 2006, entered into a five-year $700.0 million senior unsecured revolving credit facility (the “2006 Credit Facility”). On March 26, 2007, Mylan and its wholly-owned indirect subsidiary Euro Mylan B.V. (“Euro Mylan”) entered into a credit agreement with a syndicate of bank lenders for a $750.0 million senior unsecured credit facility (the “2007 Credit Facility”), including (i) a multicurrency revolving credit facility (the “Revolving Credit Facility”) in an aggregate amount of up to a U.S. Dollar equivalent of $300.0 million due July 24, 2011, and (ii) a term loan facility (the “Term Loan Facility”) denominated in U.S. Dollars in aggregate amount of up to $450.0 million due December 26, 2011. The Company borrowed $450.0 million under the Term Loan Facility and used the proceeds to repay the revolving loans outstanding under the Company’s existing 2006 Credit Facility. The interest rate in effect at June 30, 2007 on the outstanding borrowings under the Term Loan Facility was 6.07%.

On March 1, 2007, Mylan entered into a Purchase Agreement (the “Convertible Notes Purchase Agreement”) relating to the sale by the Company of $600.0 million aggregate principal amount of the Company’s 1.25% Senior Convertible Notes due 2012 (the “Convertible Notes”). The Convertible Notes bear interest at a rate of 1.25% per year, accruing from March 7, 2007. Interest is payable semiannually in arrears on March 15 and September 15 of each year, beginning September 15, 2007. The Convertible Notes will mature on March 15, 2012, subject to earlier repurchase or conversion. The Convertible Notes have an initial conversion rate of 44.5931 shares of common stock per $1,000 principal amount (equivalent to an initial conversion price of approximately $22.43 per share), subject to adjustment.

Matrix’s long-term debt included two term loan borrowings both of which are denominated in Euros. Matrix’s effective interest rate for these loans is Euro Interbank Offered Rate (Euribor) plus 110 basis points for the first facility (“Facility A”) of €82.50 million and Euribor plus 129 basis points for the second facility (“Facility B”) of €82.50 million for the period ended June 30, 2007. Subsequent to June 30, 2007, Facility A was repaid.

Generally, the fair market value of fixed interest rate debt will decrease as interest rates rise and increase as interest rates fall. As of June 30, 2007, the fair value of our Convertible Notes was approximately $581.4 million.

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The carrying value of our Senior Notes, our Term Loan facility, and Matrix’s term loan borrowings approximated fair value. A 10% change in interest rates on the variable rate debt would result in a change in interest expense of approximately $3.9 million per year.

Deal-Contingent Foreign Currency Option Contract

In conjunction with the Merck Generics transaction, the Company entered into a deal-contingent foreign currency option contract in order to mitigate the risk of foreign currency exposure related to the Euro denominated purchase price. The contract is contingent upon the closing of this acquisition, and the premium of approximately $121.9 million will be paid only upon such closing. The value of the foreign currency option contract fluctuates depending on the value of the U.S. dollar compared to the Euro. On June 30, 2007, the mark to market value of this foreign currency option contract resulted in a loss of $57.5 million.

ITEM 4.   CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of June 30, 2007. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective. During the three months ended June 30, 2007, the Company began utilizing SAP enterprise resource planning (“ERP”) system at Mylan Pharmaceuticals Inc. and its corporate offices. No other changes in the Company’s internal control over financial reporting occurred during the fiscal quarter ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

While it is not possible to determine with any degree of certainty the ultimate outcome of the following legal proceedings, the Company believes that it has meritorious defenses with respect to the claims asserted against it and intends to vigorously defend its position. An adverse outcome in any of these proceedings could have a material adverse effect on the Company’s financial position and results of operations.

Omeprazole

In fiscal 2001, Mylan Pharmaceuticals Inc. (“MPI”), a wholly-owned subsidiary of Mylan Labs, filed an Abbreviated New Drug Application (“ANDA”) seeking approval from the FDA to manufacture, market and sell omeprazole delayed-release capsules and made Paragraph IV certifications to several patents owned by AstraZeneca PLC (“AstraZeneca”) that were listed in the U.S. Food and Drug Administration’s (“FDA”) “Orange Book.” On September 8, 2000, AstraZeneca filed suit against MPI and Mylan Labs in the U.S. District Court for the Southern District of New York alleging infringement of several of AstraZeneca’s patents. On May 29, 2003, the FDA approved MPI’s ANDA for the 10 mg and 20 mg strengths of omeprazole delayed-release capsules, and, on August 4, 2003, Mylan Labs announced that MPI had commenced the sale of omeprazole 10 mg and 20 mg delayed-release capsules. AstraZeneca then amended the pending lawsuit to assert claims against Mylan Labs and MPI and filed a separate lawsuit against MPI’s supplier, Esteve Quimica S.A. (“Esteve”), for unspecified money damages and a finding of willful infringement, which could result in treble damages, injunctive relief, attorneys’ fees, costs of litigation and such further relief as the court deems just and proper. MPI has certain indemnity obligations to Esteve in connection with this litigation. MPI, Esteve and the other generic manufacturers who are co-defendants in the case filed motions for summary judgment of non-infringement and patent invalidity. On January 12, 2006, those motions were denied. On May 31, 2007, the district court ruled in Mylan’s and Esteve’s favor by finding that the asserted patents were not infringed by Mylan’s/Esteve’s products. On July 18, 2007, Astra appealed the decision to the United States Court of Appeals for the Federal Circuit.

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Lorazepam and Clorazepate

On June 1, 2005, a jury verdict was rendered against Mylan Labs and MPI in the U.S. District Court for the District of Columbia (“D.C.”) in the amount of approximately $12.0 million which has been accrued for by the Company. The jury found Mylan willfully violated Massachusetts, Minnesota and Illinois state antitrust laws in connection with Active Pharmaceutical Ingredient (“API”) supply agreements entered into between the Company and its API supplier and broker for two drugs, lorazepam and clorazepate, in 1997, and subsequent price increases on these drugs in 1998. The case was brought by four health insurers that opted out of earlier class action settlements agreed to by the Company in 2001 and represents the last remaining claims relating to Mylan’s 1998 price increases for lorazepam and clorazepate. In post-trial filings, the plaintiffs have requested that the verdict be trebled. Plaintiffs are also seeking an award of attorneys’ fees, litigation costs and interest on the judgment in unspecified amounts. In total, the plaintiffs have moved for judgments that could result in a liability of approximately $69 million for Mylan (not including the request for attorney’s fees and costs). The Company filed a motion for judgment as a matter of law, a motion for a new trial, a motion to dismiss two of the insurers and a motion to reduce the verdict. On December 20, 2006, the Company’s motion for judgment as a matter of law and motion for a new trial were denied. A hearing on the pending post-trial motions took place on February 28, 2007. The Company intends to appeal to the U.S. Court of Appeals for the D.C. Circuit.

Pricing and Medicaid Litigation

On June 26, 2003, MPI and UDL Laboratories Inc. (“UDL”), a subsidiary of Mylan Labs, received requests from the U.S. House of Representatives Energy and Commerce Committee (the “Committee”) seeking information about certain products sold by MPI and UDL in connection with the Committee’s investigation into pharmaceutical reimbursement and rebates under Medicaid. MPI and UDL cooperated with this inquiry and provided information in response to the Committee’s requests in 2003. Several states’ attorneys general (“AG”) have also sent letters to MPI, UDL and Mylan Bertek, demanding that those companies retain documents relating to Medicaid reimbursement and rebate calculations pending the outcome of unspecified investigations by those AGs into such matters. In addition, in July 2004, Mylan Labs received subpoenas from the AGs of California and Florida in connection with civil investigations purportedly related to price reporting and marketing practices regarding various drugs. As noted below, both California and Florida subsequently filed suits against Mylan, and the Company believes any further requests for information and disclosures will be made as part of that litigation.

Beginning in September 2003, Mylan Labs, MPI and/or UDL, together with many other pharmaceutical companies, have been named in a series of civil lawsuits filed by state AGs and municipal bodies within the state of New York alleging generally that the defendants defrauded the state Medicaid systems by allegedly reporting “Average Wholesale Prices” (“AWP”) and/or “Wholesale Acquisition Costs” that exceeded the actual selling price of the defendants’ prescription drugs. To date, Mylan Labs, MPI and/or UDL have been named as defendants in substantially similar civil lawsuits filed by the AGs of Alabama, Alaska, California, Florida, Hawaii, Idaho, Illinois, Kentucky, Massachusetts, Mississippi, Missouri, South Carolina, Texas and Wisconsin and also by the city of New York and approximately 40 counties across New York State. Several of these cases have been transferred to the AWP multi-district litigation proceedings pending in the U.S. District Court for the District of Massachusetts for pretrial proceedings. Others of these cases will likely be litigated in the state courts in which they were filed. Each of the cases seeks an unspecified amount in money damages, civil penalties and/or treble damages, counsel fees and costs, and injunctive relief. In each of these matters, with the exception of the Florida, Idaho, South Carolina AG and Texas actions and the actions brought by various counties in New York, excluding the actions brought by Erie, Oswego and Schenectady counties, Mylan Labs, MPI and/or UDL have answered the respective complaints denying liability. Mylan Labs and its subsidiaries intend to defend each of these actions vigorously.

In addition, by letter dated January 12, 2005, MPI was notified by the U.S. Department of Justice of an investigation concerning MPI’s calculations of Medicaid drug rebates. MPI is cooperating fully with the government’s investigation.

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Modafinil Antitrust Litigation and FTC Inquiry

Beginning in April 2006, Mylan Labs, along with four other drug manufacturers, has been named in a series of civil lawsuits filed in the Eastern District of Pennsylvania by a variety of plaintiffs purportedly representing direct and indirect purchasers of the drug modafinil and one action brought by Apotex, Inc., a manufacturer of generic drugs seeking approval to market a generic modafinil product. These actions allege violations of federal and state laws in connection with the defendants’ settlement of patent litigation relating to modafinil. These actions are in their preliminary stages, and motions to dismiss each action are pending. Mylan Labs intends to defend each of these actions vigorously. In addition, by letter dated July 11, 2006, Mylan was notified by the U.S. Federal Trade Commission (“FTC”) of an investigation relating to the settlement of the modafinil patent litigation. In its letter, the FTC requested certain information from Mylan Labs, MPI and Mylan Technologies Inc. pertaining to the patent litigation and the settlement thereof. On March 29, 2007, the FTC issued a subpoena, and on April 26, 2007, the FTC issued a civil investigative demand to Mylan Labs requesting additional information from the Company relating to the investigation. Mylan is cooperating fully with the government’s investigation and its outstanding requests for information.

Other Litigation

The Company is involved in various other legal proceedings that are considered normal to its business. While it is not feasible to predict the ultimate outcome of such other proceedings, the Company believes that the ultimate outcome of such other proceedings will not have a material adverse effect on its financial position or results of operations.

ITEM 1A.  Risk Factors

The following risk factors could have a material adverse effect on our business, financial position or results of operations and could cause the market value of our common stock to decline. These risk factors may not include all of the important factors that could affect our business or our industry or that could cause our future financial results to differ materially from historic or expected results or cause the market price of our common stock to fluctuate or decline.

OUR FUTURE REVENUE GROWTH AND PROFITABILITY ARE DEPENDENT UPON OUR ABILITY TO DEVELOP AND/OR LICENSE, OR OTHERWISE ACQUIRE, AND INTRODUCE NEW PRODUCTS ON A TIMELY BASIS IN RELATION TO OUR COMPETITORS’ PRODUCT INTRODUCTIONS. OUR FAILURE TO DO SO SUCCESSFULLY COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

Our future revenues and profitability will depend, to a significant extent, upon our ability to successfully develop and/or license, or otherwise acquire and commercialize new generic and patent or statutorily protected (usually brand) pharmaceutical products in a timely manner. Product development is inherently risky, especially for new drugs for which safety and efficacy have not been established, and the market is not yet proven. Likewise, product licensing involves inherent risks including uncertainties due to matters that may affect the achievement of milestones, as well as the possibility of contractual disagreements with regard to terms such as license scope or termination rights. The development and commercialization process, particularly with regard to new drugs, also requires substantial time, effort and financial resources. We, or a partner, may not be successful in commercializing any of the products that we are developing or licensing (including, without limitation, nebivolol) on a timely basis, if at all, which could adversely affect our product introduction plans, financial position and results of operations and could cause the market value of our common stock to decline.

FDA approval is required before any prescription drug product, including generic drug products, can be marketed. The process of obtaining FDA approval to manufacture and market new and generic pharmaceutical products is rigorous, time consuming, costly and largely unpredictable. We, or a partner, may be unable to obtain requisite FDA approvals on a timely basis for new generic or brand products that we may develop, license or otherwise acquire. Also, for products pending approval, we may obtain raw materials or produce batches of

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inventory to be used in efficacy and bioequivalence testing, as well as in anticipation of the product’s launch. In the event that FDA approval is denied or delayed, we could be exposed to the risk of this inventory becoming obsolete. The timing and cost of obtaining FDA approvals could adversely affect our product introduction plans, financial position and results of operations and could cause the market value of our common stock to decline.

The ANDA approval process often results in the FDA granting final approval to a number of ANDAs for a given product at the time a patent claim for a corresponding brand product or other market exclusivity expires. This often forces us to face immediate competition when we introduce a generic product into the market. Additionally, ANDA approvals often continue to be granted for a given product subsequent to the initial launch of the generic product. These circumstances generally result in significantly lower prices, as well as reduced margins, for generic products compared to brand products. New generic market entrants generally cause continued price and margin erosion over the generic product life cycle.

The Waxman-Hatch Act provides for a period of 180 days of generic marketing exclusivity for each ANDA applicant that is first to file an ANDA containing a certification of invalidity, non-infringement or unenforceability related to a patent listed with respect to a reference drug product, commonly referred to as a Paragraph IV certification. During this exclusivity period, which under certain circumstances may be required to be shared with other applicable ANDA sponsors with Paragraph IV certifications, the FDA cannot grant final approval to other ANDA sponsors holding applications for the same generic equivalent. If an ANDA containing a Paragraph IV certification is successful and the applicant is awarded exclusivity, it generally results in higher market share, net revenues and gross margin for that applicant. Even if we obtain FDA approval for our generic drug products, if we are not the first ANDA applicant to challenge a listed patent for such a product, we may lose significant advantages to a competitor that filed its ANDA containing such a challenge. The same would be true in situations where we are required to share our exclusivity period with other ANDA sponsors with Paragraph IV certifications. Such situations could have a material adverse effect on our ability to market that product profitably and on our financial position and results of operations, and the market value of our common stock could decline.

OUR ACQUISITION OF A CONTROLLING INTEREST IN MATRIX LABORATORIES AND OUR PLANS FOR FURTHER GLOBAL EXPANSION WITH THE ACQUISITION OF MERCK GENERICS EXPOSE THE COMPANY TO ADDITIONAL RISKS WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

With our recently completed acquisition of Matrix and our planned acquisition of Merck Generics, Mylan’s operations extend or will extend to numerous countries outside the U.S. Operating globally exposes us to certain additional risks including, but not limited to:

•  compliance with a variety of national and local laws of countries in which we do business, including restrictions on the import and export of certain intermediates, drugs and technologies, and the risk that our competitors may have more experience with operations in such countries or with international operations generally;

•  difficulties integrating new facilities in different countries into our existing operations, as well as integrating employees that we hire in different countries into our existing corporate culture;

•  failing to fully achieve identified financial and operating synergies;

•  fluctuations in exchange rates for transactions conducted in currencies other than the U.S. dollar;

•  adverse changes in the economies in which we operate as a result of a slowdown in overall growth, a change in government or economic liberalization policies, or financial instability in other countries who influence the economies in which we operate, particularly emerging markets;

•  wage increases or rising inflation in other countries in which we operate or will operate;

•  natural disasters, including drought, floods and earthquakes in other countries in which we operate or will operate; and

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•  communal disturbances, terrorist attacks, riots or regional hostilities in other countries in which we operate or will operate.

Certain of the above factors could have a material adverse effect on our business, financial position and results of operations and could cause a decline in the market value of our common stock.

OUR PLANNED ACQUISITION OF MERCK GENERICS SPECIFICALLY AND OUR ACQUISITION STRATEGY GENERALLY, INVOLVE A NUMBER OF INHERENT RISKS. THESE RISKS COULD CAUSE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

We continually seek to expand our product line through complementary or strategic acquisitions of other companies, products and assets, and through joint ventures, licensing agreements or other arrangements. On May 12, 2007, we signed a definitive agreement to acquire Merck Generics. This transaction and any acquisitions, joint ventures and other business combinations involve various inherent risks, such as:

•  diversion of management’s attention from our ongoing business;

•  the failure to assess accurately the values, strengths, weaknesses, contingent and other liabilities, regulatory compliance and potential profitability of acquisition or other transaction candidates;

•  the potential loss of key personnel or customers of an acquired business;

•  failing to successfully manage acquired businesses or increase our cash flow from their operations;

•  failing to successfully integrate the operations and personnel of the acquired businesses with our ongoing business, and our resulting inability to achieve identified financial and operating synergies anticipated to result from an acquisition or other transaction;

•  unanticipated changes in business and economic conditions affecting an acquisition or other transaction;

•  incurring substantial additional indebtedness, assuming liabilities and incurring significant additional capital expenditures, transaction and operating expenses and non-recurring acquisition-related charges;

•  potentially experiencing an adverse impact on our earnings from acquired in-process research and development and the write-off or amortization of acquired goodwill and other intangible assets;

•  acquiring businesses or entering new markets with which we are not familiar; and

•  international acquisitions, and other transactions, could also be affected by export controls, exchange rate fluctuations, domestic and foreign political conditions and the deterioration in domestic and foreign economic conditions.

We may be unable to realize synergies or other benefits expected to result from acquisitions, joint ventures and other transactions or investments we may undertake, or be unable to generate additional revenue to offset any unanticipated inability to realize these expected synergies or benefits. Realization of the anticipated benefits of acquisitions or other transactions could take longer than expected, and implementation difficulties, unforeseen expenses, complications and delays, market factors and the deterioration in domestic and global economic conditions could alter the anticipated benefits of any such transactions. These factors could impair our growth and ability to compete, require us to focus resources on integration of operations rather than other profitable areas, otherwise cause a material adverse effect on our business, financial position and results of operations and could cause a decline in the market value of our common stock.

In addition, we may compete for certain acquisition targets with companies having greater financial resources than us or other advantages over us that may prevent us from acquiring a target.

We plan to finance the acquisition of Merck Generics through significant new indebtedness, cash on hand, cash provided by operating activities, and borrowings under our credit facilities, which will reduce our cash available for other purposes, including the repayment of indebtedness.

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WE ARE SUBJECT TO THE U.S. FOREIGN CORRUPT PRACTICES ACT AND SIMILAR WORLDWIDE ANTI-BRIBERY LAWS, WHICH IMPOSE RESTRICTIONS AND MAY CARRY SUBSTANTIAL PENALTIES. ANY VIOLATIONS OF THESE LAWS, OR ALLEGATIONS OF SUCH VIOLATIONS, COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

The U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws, which often carry substantial penalties. We operate in jurisdictions that have experienced governmental corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with certain local customs and practices. We cannot assure you that our internal control policies and procedures always will protect us from reckless or other inappropriate acts committed by our affiliates, employees or agents. Violations of these laws, or allegations of such violations, could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

WE HAVE GROWN, AND CONTINUE TO GROW, AT A VERY RAPID PACE. OUR INABILITY TO PROPERLY MANAGE OR SUPPORT THE GROWTH MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

We have grown very rapidly over the past few years and anticipate continuing our rapid expansion including the planned acquisition of Merck Generics, extending our processes, systems and people. We expect to make significant investments in additional personnel, systems and internal control processes to help manage the growing company. Attracting, retaining and motivating key employees in various departments and locations to support our growth are critical to our business, and competition for these people can be intense. If we are unable to hire and retain qualified employees and if we do not continue to invest in systems and processes to manage and support our rapid growth, there may be a material adverse effect on our business, financial position and results of operations, and the market value of our common stock to decline.

OUR APPROVED PRODUCTS MAY NOT ACHIEVE EXPECTED LEVELS OF MARKET ACCEPTANCE, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR PROFITABILITY, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

Even if we are able to obtain regulatory approvals for our new pharmaceutical products, generic or brand, the success of those products is dependent upon market acceptance. Levels of market acceptance for our new products could be impacted by several factors, including:

•  the availability of alternative products from our competitors;

•  the price of our products relative to that of our competitors;

•  the timing of our market entry;

•  the ability to market our products effectively to the retail level; and

•  the acceptance of our products by government and private formularies.

Some of these factors are not within our control. Our new products may not achieve expected levels of market acceptance. Additionally, continuing studies of the proper utilization, safety and efficacy of pharmaceutical products are being conducted by the industry, government agencies and others. Such studies, which increasingly employ sophisticated methods and techniques, can call into question the utilization, safety and efficacy of previously marketed products. For example, on July 15, 2005, the FDA issued a Public Health Advisory regarding the safe use of transdermal fentanyl patches, a product we currently market, the loss of revenues of which could have a significant impact on our business. In some cases, studies have resulted, and may in the future result, in the

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discontinuance of product marketing or other risk management programs such as the need for a patient registry. These situations, should they occur, could have a material adverse effect on our profitability, financial position and results of operations, and the market value of our common stock could decline.

A RELATIVELY SMALL GROUP OF PRODUCTS MAY REPRESENT A SIGNIFICANT PORTION OF OUR NET REVENUES, GROSS PROFIT OR NET EARNINGS FROM TIME TO TIME. IF THE VOLUME OR PRICING OF ANY OF THESE PRODUCTS DECLINES, IT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

Sales of a limited number of our products often represent a significant portion of our net revenues, gross profit and net earnings. If the volume or pricing of our largest selling products declines in the future, our business, financial position and results of operations could be materially adversely affected, and the market value of our common stock could decline.

WE FACE VIGOROUS COMPETITION FROM OTHER PHARMACEUTICAL MANUFACTURERS THAT THREATENS THE COMMERCIAL ACCEPTANCE AND PRICING OF OUR PRODUCTS, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

Our competitors may be able to develop products and processes competitive with or superior to our own for many reasons, including that they may have:

•  proprietary processes or delivery systems;

•  larger research and development and marketing staffs;

•  larger production capabilities in a particular therapeutic area;

•  more experience in preclinical testing and human clinical trials;

•  more products; or

•  more experience in developing new drugs and financial resources, particularly with regard to brand manufacturers.

Any of these factors and others could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

BECAUSE THE PHARMACEUTICAL INDUSTRY IS HEAVILY REGULATED, WE FACE SIGNIFICANT COSTS AND UNCERTAINTIES ASSOCIATED WITH OUR EFFORTS TO COMPLY WITH APPLICABLE REGULATIONS. SHOULD WE FAIL TO COMPLY WE COULD EXPERIENCE MATERIAL ADVERSE EFFECTS ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS, AND THE MARKET VALUE OF OUR COMMON STOCK COULD DECLINE.

The pharmaceutical industry is subject to regulation by various governmental authorities. For instance, we must comply with FDA requirements with respect to the manufacture, labeling, sale, distribution, marketing, advertising, promotion and development of pharmaceutical products. Failure to comply with FDA and other governmental regulations can result in fines, disgorgement, unanticipated compliance expenditures, recall or seizure of products, total or partial suspension of production and/or distribution, suspension of the FDA’s review of NDAs or ANDAs, enforcement actions, injunctions and criminal prosecution. Under certain circumstances, the FDA also has the authority to revoke previously granted drug approvals. Although we have internal regulatory compliance programs and policies and have had a favorable compliance history, there is no guarantee that these programs, as currently designed, will meet regulatory agency standards in the future. Additionally, despite our efforts at compliance, there is no guarantee that we may not be deemed to be deficient in some manner in the future. If we were deemed to be deficient in any significant way, our business, financial position and results of operations could be materially affected and the market value of our common stock could decline.

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In addition to the new drug approval process, the FDA also regulates the facilities and operational procedures that we use to manufacture our products. We must register our facilities with the FDA. All products manufactured in those facilities must be made in a manner consistent with current good manufacturing practices (“cGMP”). Compliance with cGMP regulations requires substantial expenditures of time, money and effort in such areas as production and quality control to ensure full technical compliance. The FDA periodically inspects our manufacturing facilities for compliance. FDA approval to manufacture a drug is site-specific. Failure to comply with cGMP regulations at one of our manufacturing facilities could result in an enforcement action brought by the FDA which could include withholding the approval of NDAs, ANDAs or other product applications of that facility. If the FDA were to require one of our manufacturing facilities to cease or limit production, our business could be adversely affected. Delay and cost in obtaining FDA approval to manufacture at a different facility also could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

We are subject, as are generally all manufacturers, to various federal, state and local laws regulating working conditions, as well as environmental protection laws and regulations, including those governing the discharge of materials into the environment. Although we have not incurred significant costs associated with complying with environmental provisions in the past, if changes to such environmental laws and regulations are made in the future that require significant changes in our operations or if we engage in the development and manufacturing of new products requiring new or different environmental controls, we may be required to expend significant funds. Such changes could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

OUR REPORTING AND PAYMENT OBLIGATIONS UNDER THE MEDICAID REBATE PROGRAM AND OTHER GOVERNMENTAL PURCHASING AND REBATE PROGRAMS ARE COMPLEX AND MAY INVOLVE SUBJECTIVE DECISIONS. ANY DETERMINATION OF FAILURE TO COMPLY WITH THOSE OBLIGATIONS COULD SUBJECT US TO PENALTIES AND SANCTIONS WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS, AND THE MARKET VALUE OF OUR COMMON STOCK COULD DECLINE.

The regulations regarding reporting and payment obligations with respect to Medicaid reimbursement and rebates and other governmental programs are complex, and as discussed elsewhere in this Form 10-Q, we and other pharmaceutical companies are defendants in a number of suits filed by state attorneys general and have been notified of an investigation by the U.S. Department of Justice with respect to Medicaid reimbursement and rebates. Because our processes for these calculations and the judgments involved in making these calculations involve, and will continue to involve, subjective decisions and complex methodologies, these calculations are subject to the risk of errors. In addition, they are subject to review and challenge by the applicable governmental agencies, and it is possible that such reviews could result in material changes.

In addition, as also disclosed in this Form 10-Q, a number of state and federal government agencies are conducting investigations of manufacturers’ reporting practices with respect to Average Wholesale Prices (“AWP”), in which they have suggested that reporting of inflated AWP has led to excessive payments for prescription drugs. We and numerous other pharmaceutical companies have been named as defendants in various actions relating to pharmaceutical pricing issues and whether allegedly improper actions by pharmaceutical manufacturers led to excessive payments by Medicare and/or Medicaid.

Any governmental agencies that have commenced, or may commence, an investigation of the Company could impose, based on a claim of violation of fraud and false claims laws or otherwise, civil and/or criminal sanctions, including fines, penalties and possible exclusion from federal health care programs (including Medicaid and Medicare). Some of the applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity with regard to how to properly calculate and report payments-and even in the absence of any such ambiguity-a governmental authority may take a position contrary to a position we have taken, and may impose civil and/or criminal sanctions. Any such penalties or sanctions could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

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WE EXPEND A SIGNIFICANT AMOUNT OF RESOURCES ON RESEARCH AND DEVELOPMENT EFFORTS THAT MAY NOT LEAD TO SUCCESSFUL PRODUCT INTRODUCTIONS. FAILURE TO SUCCESSFULLY INTRODUCE PRODUCTS INTO THE MARKET COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS, AND THE MARKET VALUE OF OUR COMMON STOCK COULD DECLINE.

Much of our development effort is focused on technically difficult-to-formulate products and/or products that require advanced manufacturing technology. We conduct research and development primarily to enable us to manufacture and market FDA-approved pharmaceuticals in accordance with FDA regulations. Typically, research expenses related to the development of innovative compounds and the filing of NDAs are significantly greater than those expenses associated with ANDAs. As we continue to develop new products, our research expenses will likely increase. Because of the inherent risk associated with research and development efforts in our industry, particularly with respect to new drugs (including, without limitation, nebivolol), our, or a partner’s, research and development expenditures may not result in the successful introduction of FDA approved new pharmaceutical products. Also, after we submit an NDA or ANDA, the FDA may request that we conduct additional studies and as a result, we may be unable to reasonably determine the total research and development costs to develop a particular product. Finally, we cannot be certain that any investment made in developing products will be recovered, even if we are successful in commercialization. To the extent that we expend significant resources on research and development efforts and are not able, ultimately, to introduce successful new products as a result of those efforts, our business, financial position and results of operations may be materially adversely affected, and the market value of our common stock could decline.

A SIGNIFICANT PORTION OF OUR NET REVENUES ARE DERIVED FROM SALES TO A LIMITED NUMBER OF CUSTOMERS. ANY SIGNIFICANT REDUCTION OF BUSINESS WITH ANY OF THESE CUSTOMERS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS, AND THE MARKET VALUE OF OUR COMMON STOCK COULD DECLINE.

A significant portion of our net revenues are derived from sales to a limited number of customers. As such, a reduction in or loss of business with one customer, or if one customer were to experience difficulty in paying us on a timely basis, our business, financial position and results of operations could be materially adversely affected, and the market value of our common stock could decline.

THE USE OF LEGAL, REGULATORY AND LEGISLATIVE STRATEGIES BY COMPETITORS, BOTH BRAND AND GENERIC, INCLUDING “AUTHORIZED GENERICS” AND CITIZEN’S PETITIONS, AS WELL AS THE POTENTIAL IMPACT OF PROPOSED LEGISLATION, MAY INCREASE OUR COSTS ASSOCIATED WITH THE INTRODUCTION OR MARKETING OF OUR GENERIC PRODUCTS, COULD DELAY OR PREVENT SUCH INTRODUCTION AND/OR SIGNIFICANTLY REDUCE OUR PROFIT POTENTIAL. THESE FACTORS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

Our competitors, both brand and generic, often pursue strategies to prevent or delay competition from generic alternatives to brand products. These strategies include, but are not limited to:

•  entering into agreements whereby other generic companies will begin to market an “authorized generic”, a generic equivalent of a branded product, at the same time generic competition initially enters the market;

•  filing citizen’s petitions with the FDA, including timing the filings so as to thwart generic competition by causing delays of our product approvals;

•  seeking to establish regulatory and legal obstacles that would make it more difficult to demonstrate bioequivalence;

•  initiating legislative efforts in various states to limit the substitution of generic versions of brand pharmaceuticals;

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•  filing suits for patent infringement that automatically delay FDA approval of many generic products;

•  introducing “next-generation” products prior to the expiration of market exclusivity for the reference product, which often materially reduces the demand for the first generic product for which we seek FDA approval;

•  obtaining extensions of market exclusivity by conducting clinical trials of brand drugs in pediatric populations or by other potential methods as discussed below;

•  persuading the FDA to withdraw the approval of brand name drugs for which the patents are about to expire, thus allowing the brand name company to obtain new patented products serving as substitutes for the products withdrawn; and

•  seeking to obtain new patents on drugs for which patent protection is about to expire.

The Food and Drug Modernization Act of 1997 includes a pediatric exclusivity provision that may provide an additional six months of market exclusivity for indications of new or currently marketed drugs if certain agreed upon pediatric studies are completed by the applicant. Brand companies are utilizing this provision to extend periods of market exclusivity.

Some companies have lobbied Congress for amendments to the Waxman-Hatch legislation that would give them additional advantages over generic competitors. For example, although the term of a company’s drug patent can be extended to reflect a portion of the time an NDA is under regulatory review, some companies have proposed extending the patent term by a full year for each year spent in clinical trials rather than the one-half year that is currently permitted.

If proposals like these were to become effective, our entry into the market and our ability to generate revenues associated with new products may be delayed, reduced or eliminated, which could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

THE INDENTURE FOR OUR SENIOR NOTES, OUR CREDIT FACILITIES AND ANY ADDITIONAL INDEBTEDNESS WE INCUR IN THE FUTURE IMPOSE, OR MAY IMPOSE, SIGNIFICANT OPERATING AND FINANCIAL RESTRICTIONS, WHICH MAY PREVENT US FROM CAPITALIZING ON BUSINESS OPPORTUNITIES AND TAKING SOME ACTIONS. THESE FACTORS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

The indenture for our Senior Notes, our credit facilities and any additional indebtedness we incur in the future impose, or may impose, significant operating and financial restrictions on us. These restrictions limit the ability of us and our subsidiaries to, among other things, incur additional indebtedness at our subsidiaries, make investments, sell assets, incur certain liens, and enter into agreements restricting our subsidiaries’ ability to pay dividends, or merge or consolidate. In addition, our senior credit facility requires us to maintain specified financial ratios. We cannot assure you that these covenants will not adversely affect our ability to finance our future operations or capital needs or to pursue available business opportunities. A breach of any of these covenants or our inability to maintain the required financial ratios could result in a default under the related indebtedness. If a default occurs, the relevant lenders could elect to declare our indebtedness, together with accrued interest and other fees, to be immediately due and payable. These factors could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

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OUR ABILITY TO SERVICE OUR DEBT AND MEET OUR CASH REQUIREMENTS DEPENDS ON MANY FACTORS, SOME OF WHICH ARE BEYOND OUR CONTROL. THESE FACTORS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

Our ability to satisfy our obligations, including our Senior Notes, our credit facilities and any additional indebtedness we incur in the future will depend on our future operating performance and financial results, which will be subject, in part, to factors beyond our control, including interest rates and general economic, financial and business conditions. If we are unable to generate sufficient cash flow, we may be required to: refinance all or a portion of our debt, including the notes and our senior credit facility; obtain additional financing in the future for acquisitions, working capital, capital expenditures and general corporate or other purposes; redirect a substantial portion of our cash flow to debt service, which as a result, might not be available for our operations or other purposes; sell some of our assets or operations; reduce or delay capital expenditures; or revise or delay our operations or strategic plans. If we are required to take any of these actions, it could have a material adverse effect on our business, financial condition or results of operations. In addition, we cannot assure you that we would be able to take any of these actions, that these actions would enable us to continue to satisfy our capital requirements or that these actions would be permitted under the terms of our credit facilities and the indenture governing the notes. The leverage resulting from our notes offering, our credit facility and indebtedness we may incur in the future could have certain material adverse effects on us, including limiting our ability to obtain additional financing and reducing cash available for our operations and acquisitions. As a result, our ability to withstand competitive pressures may be decreased and, we may be more vulnerable to economic downturns, which in turn could reduce our flexibility in responding to changing business, regulatory and economic conditions. These factors could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

WE DEPEND ON THIRD-PARTY SUPPLIERS AND DISTRIBUTORS FOR THE RAW MATERIALS, PARTICULARLY THE CHEMICAL COMPOUND(S) COMPRISING THE ACTIVE PHARMACEUTICAL INGREDIENT, THAT WE USE TO MANUFACTURE OUR PRODUCTS, AS WELL AS CERTAIN FINISHED GOODS. A PROLONGED INTERRUPTION IN THE SUPPLY OF SUCH PRODUCTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS, AND THE MARKET VALUE OF OUR COMMON STOCK COULD DECLINE.

We typically purchase the active pharmaceutical ingredient (i.e. the chemical compounds that produce the desired therapeutic effect in our products) and other materials and supplies that we use in our manufacturing operations, as well as certain finished products, from many different foreign and domestic suppliers.

Additionally, we maintain safety stocks in our raw materials inventory, and in certain cases where we have listed only one supplier in our applications with the FDA, have received FDA approval to use alternative suppliers should the need arise. However, there is no guarantee that we will always have timely and sufficient access to a critical raw material or finished product. A prolonged interruption in the supply of a single-sourced raw material, including the active ingredient, or finished product could cause our financial position and results of operations to be materially adversely affected, and the market value of our common stock could decline. In addition, our manufacturing capabilities could be impacted by quality deficiencies in the products which our suppliers provide, which could have a material adverse effect on our business, financial position and results of operations, and the market value of our common stock could decline.

The Company utilizes controlled substances in certain of its current products and products in development and therefore must meet the requirements of the Controlled Substances Act of 1970 and the related regulations administered by the Drug Enforcement Administration (“DEA”). These regulations relate to the manufacture, shipment, storage, sale and use of controlled substances. The DEA limits the availability of the active ingredients used in certain of our current products and products in development and, as a result, our procurement quota of these active ingredients may not be sufficient to meet commercial demand or complete clinical trials. We must annually apply to the DEA for procurement quota in order to obtain these substances. Any delay or refusal by the DEA in

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establishing our procurement quota for controlled substances could delay or stop our clinical trials or product launches, or could cause trade inventory disruptions for those products that have already been launched, which could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

WE USE SEVERAL MANUFACTURING FACILITIES TO MANUFACTURE OUR PRODUCTS. HOWEVER, A SIGNIFICANT NUMBER OF OUR PRODUCTS ARE PRODUCED AT ONE LOCATION. PRODUCTION AT THIS FACILITY COULD BE INTERRUPTED, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

Although we have other facilities, we produce a significant number of our products at our largest manufacturing facility. A significant disruption at that facility, even on a short-term basis, could impair our ability to produce and ship products to the market on a timely basis, which could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

WE MAY EXPERIENCE DECLINES IN THE SALES VOLUME AND PRICES OF OUR PRODUCTS AS THE RESULT OF THE CONTINUING TREND TOWARD CONSOLIDATION OF CERTAIN CUSTOMER GROUPS, SUCH AS THE WHOLESALE DRUG DISTRIBUTION AND RETAIL PHARMACY INDUSTRIES, AS WELL AS THE EMERGENCE OF LARGE BUYING GROUPS. THE RESULT OF SUCH DEVELOPMENTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

We make a significant amount of our sales to a relatively small number of drug wholesalers and retail drug chains. These customers represent an essential part of the distribution chain of generic pharmaceutical products. Drug wholesalers and retail drug chains have undergone, and are continuing to undergo, significant consolidation. This consolidation may result in these groups gaining additional purchasing leverage and consequently increasing the product pricing pressures facing our business. Additionally, the emergence of large buying groups representing independent retail pharmacies and the prevalence and influence of managed care organizations and similar institutions potentially enable those groups to attempt to extract price discounts on our products. The result of these developments may have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL AND OTHER PROPRIETARY PROPERTY IN AN EFFECTIVE MANNER, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

Although our brand products may have patent protection, this may not prevent other companies from developing functionally equivalent products or from challenging the validity or enforceability of our patents. If any patents we use in our business are found or even alleged to be non-infringed, invalid or not enforceable, we could experience an adverse effect on our ability to commercially promote our patented products. We could be required to enforce our patent or other intellectual property rights through litigation, which can be protracted and involve significant expense and an inherently uncertain outcome. Any negative outcome could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

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OUR COMPETITORS INCLUDING BRAND COMPANIES OR OTHER THIRD PARTIES MAY ALLEGE THAT WE ARE INFRINGING THEIR INTELLECTUAL PROPERTY, FORCING US TO EXPEND SUBSTANTIAL RESOURCES IN RESULTING LITIGATION, THE OUTCOME OF WHICH IS UNCERTAIN. ANY UNFAVORABLE OUTCOME OF SUCH LITIGATION COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

Companies that produce brand pharmaceutical products routinely bring litigation against ANDA applicants that seek FDA approval to manufacture and market generic forms of their branded products. These companies allege patent infringement or other violations of intellectual property rights as the basis for filing suit against an ANDA applicant. Likewise, patent holders may bring patent infringement suits against companies that are currently marketing and selling their approved generic products. Litigation often involves significant expense and can delay or prevent introduction or sale of our generic products.

There may also be situations where the Company uses its business judgment and decides to market and sell products, notwithstanding the fact that allegations of patent infringement(s) have not been finally resolved by the courts. The risk involved in doing so can be substantial because the remedies available to the owner of a patent for infringement include, among other things, damages measured by the profits lost by the patent owner and not by the profits earned by the infringer. In the case of a willful infringement, the definition of which is subjective, such damages may be trebled. Moreover, because of the discount pricing typically involved with bioequivalent products, patented brand products generally realize a substantially higher profit margin than bioequivalent products. An adverse decision in a case such as this or in other similar litigation could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

WE MAY EXPERIENCE REDUCTIONS IN THE LEVELS OF REIMBURSEMENT FOR PHARMACEUTICAL PRODUCTS BY GOVERNMENTAL AUTHORITIES, HMOs OR OTHER THIRD-PARTY PAYERS. ANY SUCH REDUCTIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

Various governmental authorities and private health insurers and other organizations, such as HMOs, provide reimbursement to consumers for the cost of certain pharmaceutical products. Demand for our products depends in part on the extent to which such reimbursement is available. Third-party payers increasingly challenge the pricing of pharmaceutical products. This trend and other trends toward the growth of HMOs, managed health care and legislative health care reform create significant uncertainties regarding the future levels of reimbursement for pharmaceutical products. Further, any reimbursement may be reduced in the future, perhaps to the point that market demand for our products declines. Such a decline could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

LEGISLATIVE OR REGULATORY PROGRAMS THAT MAY INFLUENCE PRICES OF PRESCRIPTION DRUGS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

Current or future federal or state laws and regulations may influence the prices of drugs and, therefore, could adversely affect the prices that we receive for our products. Programs in existence in certain states seek to set prices of all drugs sold within those states through the regulation and administration of the sale of prescription drugs. Expansion of these programs, in particular, state Medicaid programs, or changes required in the way in which Medicaid rebates are calculated under such programs, could adversely affect the price we receive for our products and could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

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WE ARE INVOLVED IN VARIOUS LEGAL PROCEEDINGS AND CERTAIN GOVERNMENT INQUIRIES AND MAY EXPERIENCE UNFAVORABLE OUTCOMES OF SUCH PROCEEDINGS OR INQUIRIES, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

We are involved in various legal proceedings and certain government inquiries, including, but not limited to, patent infringement, product liability, breach of contract and claims involving Medicaid and Medicare reimbursements, some of which are described in our periodic reports and involve claims for, or the possibility of fines and penalties involving, substantial amounts of money or other relief. If any of these legal proceedings or inquiries were to result in an adverse outcome, the impact could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

With respect to product liability, the Company maintains commercial insurance to protect against and manage a portion of the risks involved in conducting its business. Although we carry insurance, we believe that no reasonable amount of insurance can fully protect against all such risks because of the potential liability inherent in the business of producing pharmaceuticals for human consumption. To the extent that a loss occurs, depending on the nature of the loss and the level of insurance coverage maintained, it could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

WE ENTER INTO VARIOUS AGREEMENTS IN THE NORMAL COURSE OF BUSINESS WHICH PERIODICALLY INCORPORATE PROVISIONS WHEREBY WE INDEMNIFY THE OTHER PARTY TO THE AGREEMENT. IN THE EVENT THAT WE WOULD HAVE TO PERFORM UNDER THESE INDEMNIFICATION PROVISIONS, IT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

In the normal course of business, we periodically enter into employment, legal settlement, and other agreements which incorporate indemnification provisions. We maintain insurance coverage which we believe will effectively mitigate our obligations under certain of these indemnification provisions. However, should our obligation under an indemnification provision exceed our coverage or should coverage be denied, our business, financial position and results of operations could be materially affected and the market value of our common stock could decline.

OUR FUTURE SUCCESS IS HIGHLY DEPENDENT ON OUR CONTINUED ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL. ANY FAILURE TO ATTRACT AND RETAIN KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

Because our success is largely dependent on the scientific nature of our business, it is imperative that we attract and retain qualified personnel in order to develop new products and compete effectively. If we fail to attract and retain key scientific, technical or management personnel, our business could be affected adversely. Additionally, while we have employment agreements with certain key employees in place, their employment for the duration of the agreement is not guaranteed. If we are unsuccessful in retaining all of our key employees, it could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

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RECENT DECISIONS BY THE FDA, CURRENT BRAND TACTICS AND OTHER FACTORS BEYOND OUR CONTROL HAVE PLACED OUR BUSINESS UNDER INCREASING PRESSURE, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

We believe that certain recent FDA rulings are contrary to multiple sections of the Federal Food, Drug, and Cosmetic Act and the Administrative Procedures Act, the FDA’s published regulations and the legal precedent on point. These decisions call into question the rules of engagement in our industry and have added a level of unpredictability that may materially adversely affect our business and the generic industry as a whole. While we continue to challenge these recent decisions as well as current brand tactics that undermine congressional intent, we cannot guarantee that we will prevail or predict when or if these matters will be rectified. If they are not, our business, financial position and results of operations could suffer and the market value of our common stock could decline.

WE HAVE BEGUN THE IMPLEMENTATION OF AN ENTERPRISE RESOURCE PLANNING SYSTEM. AS WITH ANY IMPLEMENTATION OF A SIGNIFICANT NEW SYSTEM, DIFFICULTIES ENCOUNTERED COULD RESULT IN BUSINESS INTERRUPTIONS, AND COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

We have begun the implementation of an enterprise resource planning (“ERP”) system to enhance operating efficiencies and provide more effective management of our business operations. Implementations of ERP systems and related software carry risks such as cost overruns, project delays and business interruptions and delays. If we experience a material business interruption as a result of our ERP implementation, it could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

CHANGING THE FISCAL YEAR END INVOLVES INCREMENTAL WORK AND COMPLEXITIES AND RESULTS IN THE ACCELERATION OF CERTAIN DEADLINES. FAILURE TO MEET THESE ACCELERATED DEADLINES AND/OR ISSUES RESULTING FROM THE ADDITIONAL WORK AND COMPLEXITIES COULD IMPACT OUR RESULTS OF OPERATIONS AND CAUSE OUR STOCK TO DECLINE.

The Company has announced its current plans to change its fiscal year end from March 31st to December 31st. While the Board of Directors has not yet acted to change the bylaws to effect this change, the planned approach, once implemented, would involve significant incremental work as well as certain complexities and expedited deadlines. Among them are the need to reconfigure certain internal processes and systems, the acceleration of effectiveness testing for certain Sarbanes-Oxley compliance measures for Mylan and its subsidiaries, and accelerated external audit timing and reporting, including the potential impact of the pending Merck Generics acquisition. Issues may arise as a result of these additional complexities or expedited deadlines or we may fail to meet compliance requirements within these accelerated deadlines which could adversely affect our financial position and results of operations and could cause the market value of our common stock to decline.

WE MUST MAINTAIN ADEQUATE INTERNAL CONTROLS AND BE ABLE, ON AN ANNUAL BASIS, TO PROVIDE AN ASSERTION AS TO THE EFFECTIVENESS OF SUCH CONTROLS. FAILURE TO MAINTAIN ADEQUATE INTERNAL CONTROLS OR TO IMPLEMENT NEW OR IMPROVED CONTROLS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE.

Effective internal controls are necessary for the Company to provide reasonable assurance with respect to its financial reports. We are spending a substantial amount of management time and resources to comply with changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley

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Act of 2002, new SEC regulations and the New York Stock Exchange rules. In particular, Section 404 of the Sarbanes-Oxley Act of 2002 requires management’s annual review and evaluation of our internal control over financial reporting and attestations as to the effectiveness of these controls by our independent registered public accounting firm. If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting. Additionally, internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. In addition, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that the control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. If the Company fails to maintain the adequacy of its internal controls, including any failure to implement required new or improved controls, this could have a material adverse effect on our business, financial position and results of operations, and the market value of our common stock could decline.

During fiscal year 2007 the Company acquired a controlling stake in Matrix. For purposes of Management’s evaluation of our internal control over financial reporting as of March 31, 2007 we elected to exclude Matrix from the scope of management’s assessment as permitted by guidance provided by the Securities and Exchange Commission (“SEC”). This acquired business will be included in management’s assessment of the effectiveness of the Company’s internal controls over financial reporting in fiscal year 2008. If the Company fails to implement and maintain adequate internal controls at Matrix, it could have a material adverse effect on our business, financial position and results of operations, and the market value of our common stock could decline.

THERE ARE INHERENT UNCERTAINTIES INVOLVED IN ESTIMATES, JUDGMENTS AND ASSUMPTIONS USED IN THE PREPARATION OF FINANCIAL STATEMENTS IN ACCORDANCE WITH GAAP. ANY FUTURE CHANGES IN ESTIMATES, JUDGMENTS AND ASSUMPTIONS USED OR NECESSARY REVISIONS TO PRIOR ESTIMATES, JUDGMENTS OR ASSUMPTIONS OR CHANGES IN ACCOUNTING STANDARDS COULD LEAD TO A RESTATEMENT OR REVISION TO PREVIOUSLY CONSOLIDATED FINANCIAL STATEMENTS WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL POSITION AND RESULTS OF OPERATIONS AND COULD CAUSE THE MARKET VALUE OF OUR COMMON STOCK TO DECLINE. IN ADDITION, WE ARE NOT PROVIDING ESTIMATED EPS GUIDANCE FOR FISCAL YEAR 2008 AND CAUTION THAT INVESTORS SHOULD NOT RELY ON ESTIMATES MADE BY OTHERS.

The consolidated and condensed consolidated financial statements included in the periodic reports we file with the SEC are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with GAAP involves making estimates, judgments and assumptions that affect reported amounts of assets (including intangible assets), liabilities, revenues, expenses (including acquired in process research and development) and income. Estimates, judgments and assumptions are inherently subject to change in the future and any necessary revisions to prior estimates, judgments or assumptions could lead to a restatement. Also, any new or revised accounting standards may require adjustments to previously issued financial statements. Any such changes could result in corresponding changes to the amounts of assets (including goodwill and other intangible assets), liabilities, revenues, expenses (including acquired in process research and development) and income. Any such changes could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

On February 1, 2007, we announced that for fiscal 2008 we will not be providing detailed earnings guidance. Any third-party estimates of our expected earnings per share have been and will be made without our participation or endorsement. Because these estimates may be inaccurate, we caution against reliance upon them in making an investment decision.

ITEM 5.   OTHER INFORMATION

None.

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ITEM 6.   EXHIBITS

3	.1	Amended and Restated Articles of Incorporation of the registrant, as amended to date, filed as Exhibit 3.1 to the Form 10-Q for the quarterly period ended June 30, 2003, and incorporated herein by reference.
3	.2	Bylaws of the registrant, as amended to date, filed as Exhibit 3.1 to the Report of Form 8-K filed on February 22, 2005, and incorporated herein by reference.
4	.1(a)	Rights Agreement dated as of August 22, 1996, between the registrant and American Stock Transfer & Trust Company, filed as Exhibit 4.1 to the Report on Form 8-K filed with the SEC on September 3, 1996, and incorporated herein by reference.
4	.1(b)	Amendment to Rights Agreement dated as of November 8, 1999, between the registrant and American Stock Transfer & Trust Company, filed as Exhibit 1 to Form 8-A/A filed with the SEC on March 31, 2000, and incorporated herein by reference.
4	.1(c)	Amendment No. 2 to Rights Agreement dated as of August 13, 2004, between the registrant and American Stock Transfer & Trust Company, filed as Exhibit 4.1 to the Report on Form 8-K filed with the SEC on August 16, 2004, and incorporated herein by reference.
4	.1(d)	Amendment No. 3 to Rights Agreement dated as of September 8, 2004, between the registrant and American Stock Transfer & Trust Company, filed as Exhibit 4.1 to the Report on Form 8-K filed with the SEC on September 9, 2004, and incorporated herein by reference.
4	.1(e)	Amendment No. 4 to Rights Agreement dated as of December 2, 2004, between the registrant and American Stock Transfer & Trust Company, filed as Exhibit 4.1 to the Report on Form 8-K filed with the SEC on December 3, 2004, and incorporated herein by reference.
4	.1(f)	Amendment No. 5 to Rights Agreement dated as of December 19, 2005, between the registrant and American Stock Transfer & Trust Company, filed as Exhibit 4.1 to the Report on Form 8-K filed with the SEC on December 19, 2005, and incorporated herein by reference.
4	.2	Indenture, dated as of July 21, 2005, between the registrant and The Bank of New York, as trustee, filed as Exhibit 4.1 to the Report on Form 8-K filed with the SEC on July 27, 2005, and incorporated herein by reference.
4	.3	Registration Rights Agreement, dated as of July 21, 2005, among the registrant, the Guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated, BNY Capital Markets, Inc., KeyBanc Capital Markets (a Division of McDonald Investments Inc.), PNC Capital Markets, Inc. and SunTrust Capital Markets, Inc., filed as Exhibit 4.2 to the Report on Form 8-K filed with the SEC on July 27, 2005, and incorporated herein by reference.
10	.1	Share Purchase Agreement dated May 12, 2007 by and among Merck Generics Holding GmbH, Merck Internationale Beteilgung GmbH, Merck KGaA and the registrant, filed with the Report on Form 8-K filed with the SEC on May 17, 2007, and incorporated herein by reference.
10	.2	Commitment Letter dated May 11, 2007, from Merrill Lynch Capital Corporation, Citigroup Global Markets, Inc., and Goldman Sachs Credit Partners, to the registrant.
31	.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31	.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report on Form 10-Q for the quarterly period ended June 30, 2007, to be signed on its behalf by the undersigned thereunto duly authorized.

Mylan Laboratories Inc.

(Registrant)

By:  /s/  Robert J. Coury

Robert J. Coury

Vice Chairman and Chief Executive Officer

August 7, 2007

/s/  Edward J. Borkowski

Edward J. Borkowski

Chief Financial Officer
(Principal financial officer)

August 7, 2007

/s/  Daniel C. Rizzo, Jr.

Daniel C. Rizzo, Jr.

Vice President and Corporate Controller
(Principal accounting officer)

August 7, 2007

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EXHIBIT INDEX

10	.2	Commitment Letter dated May 11, 2007, from Merrill Lynch Capital Corporation, Citigroup Global Markets, Inc., and Goldman Sachs Credit Partners, to the registrant.
31	.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31	.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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EX-10.2

Exhibit 10.2

MERRILL LYNCH CAPITAL CORPORATION	CITIGROUP GLOBAL MARKETS INC.
4 World Financial Center	388 Greenwich Street
250 Vesey Street	New York, New York 10013
New York, NY 10080

GOLDMAN SACHS CREDIT PARTNERS L.P.
85 Broad Street
New York, New York 10004

May 11, 2007

Mylan Laboratories Inc.
1500 Corporate Drive
Canonsburg, Pennsylvania 15317

Re: Project Genius — Credit Facilities Commitment Letter

Ladies and Gentlemen:

          Mylan Laboratories Inc., a Pennsylvania corporation (“you” or the “Company”), has advised Merrill Lynch Capital Corporation (“Merrill Lynch”), Citigroup (as defined below) and Goldman Sachs Credit Partners L.P. (“GSCP” and together with Merrill Lynch and Citigroup the “Commitment Parties” “we” or “us”) that you intend to enter into an acquisition agreement (the “Acquisition Agreement”) with the entities identified to us as Mastermind Generics Holdings GmbH, Mastermind S.A., Mastermind Internationale Beteiligungs GmbH and Mastermind (collectively referred to as the “Sellers”) pursuant to which, subject to the terms set forth in the Acquisition Agreement, you would acquire (the “Acquisition”) the business of Sellers previously identified to us and described in the Acquisition Agreement (the “Acquired Business”). For purposes of this Commitment Letter, “Citigroup” shall mean Citigroup Global Markets Inc. (“CGMI”), Citibank, N.A., Citicorp USA, Inc., Citicorp North America, Inc. and/or any of their affiliates as Citigroup shall determine to be appropriate to provide the services contemplated herein.

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          In addition, you have advised us that, on the closing date of the Acquisition (the “Closing Date”), you and your subsidiaries, and the Acquired Business, will repay all indebtedness and preferred stock outstanding prior to the Closing Date and terminate all commitments to make extensions of credit (the “Refinancing”) under your and their existing indebtedness (the “Existing Indebtedness”), other than the Company’s existing 1.25% Senior Convertible Notes due 2012, the existing indebtedness of Matrix Laboratories Inc., indebtedness of the Acquired Business that is outstanding on the Closing Date (“Acquired Business Indebtedness”) and intercompany and other indebtedness reasonably acceptable to the Commitment Parties (collectively, the “Indebtedness to Remain Outstanding”).

          You have advised us that the consideration for the Acquisition and the funds for the Refinancing and to pay related fees and expenses will be provided from the following sources: (a) approximately $1,000,000,000 of cash on hand of the Company; (b) not less than $2,850,000,000 in gross cash proceeds from either, or a combination of, (A) the issuance (each, a “Notes Offering” and together, the “Notes Offerings”) by the Company of (i) up to $2,100,000,000 aggregate principal amount of unsecured senior notes (the “Senior Notes”) due not earlier than eight years from the date of issuance having no scheduled principal payments prior to maturity and (ii) up to $750,000,000 aggregate principal amount of unsecured senior convertible notes (the “Convertible Notes” and, together with the Senior Notes, the “Notes”) due not earlier than eight years from the date of issuance having no scheduled principal payments prior to maturity or (B) the drawdown under an unsecured senior interim loan (the “Interim Loan”) in an amount up to $2,850,000,000 which would be anticipated to be refinanced with a combination of debt securities substantially similar to the Notes (the “Take-out Securities”), with the amount of the Interim Loan to be determined by the amount, if any, that $2,850,000,000 exceeds the aggregate principal amount of the Notes issued on the Closing Date; and (c) borrowings under new senior secured first lien credit facilities in the US dollar equivalent amount of $4,850,000,000 (the “Senior Credit Facilities”; the Senior Credit Facilities and the Interim Loan are collectively referred to as the “Credit Facilities”).

          The Acquisition, the Notes Offerings (if consummated), the Refinancing, the entering into and borrowings under the Credit Facilities by the parties herein described and the other transactions contemplated hereby entered into and consummated in connection with the Acquisition are herein referred to as the “Transactions.”

          You have requested that each Commitment Party commit to provide a portion of the Credit Facilities in order to finance the Transactions and to pay certain related fees and expenses.

          Accordingly, subject to the terms and conditions set forth below, each Commitment Party hereby severally agrees with you as follows:

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          1. Commitment. Upon the terms and subject to the conditions set forth or referred to herein, in the Fee Letter (the “Fee Letter”) dated the date hereof and delivered to you, the Senior Credit Facilities Summary of Terms and Conditions attached hereto (and incorporated by reference herein) as Exhibit A (the “Senior Term Sheet”) and the Interim Loan Summary of Terms and Conditions attached hereto (and incorporated by reference herein) as Exhibit B (the “Interim Loan Term Sheet” and, together with the Senior Term Sheet, the “Term Sheets”), (i) Merrill Lynch hereby severally commits to provide to the Company (x) 60% of the aggregate amount of each of the Senior Credit Facilities and (y) 59.34% of the Interim Loan, (ii) Citigroup hereby severally commits to provide to the Company (x) 30% of the aggregate amount of each of the Senior Credit Facilities and (y) 24.74% of the Interim Loan and (iii) GSCP hereby severally commits to provide to the Company (x) 10% of the aggregate amount of each of the Senior Credit Facilities and (y) 15.92% of the Interim Loan. The commitments of each of the Commitment Parties hereunder is subject to the negotiation, execution and delivery of definitive documentation for the Credit Facilities (the “Credit Documents”) reflecting the terms and conditions set forth in the Term Sheets and in the Fee Letter. To the extent that a Notes Offering is consummated prior to the Closing Date, the commitments of each Commitment Party hereunder shall be reduced on the date of consummation thereof on a pro rata basis in an aggregate amount equal to the aggregate gross proceeds from the Notes covered thereby, first, in respect of the Interim Loan and second, in respect of the Senior Credit Facilities (in amounts among the tranches thereof as mutually agreed by the Arrangers (as defined below) and the Company).

          2. Syndication. We reserve the right and intend, prior to or after the execution of the Credit Documents, to syndicate all or a portion of our commitments to one or more financial institutions reasonably acceptable to the Company (together with the Commitment Parties, the “Lenders”). Merrill Lynch and Citigroup shall serve as the sole and exclusive joint lead arrangers (the “Arrangers”) and bookrunners for the Credit Facilities (with Merrill Lynch’s name receiving “top left” placement on any marketing materials relating to the Credit Facilities). The Arrangers (or their affiliates) will manage all aspects of the syndication (in consultation with you), including decisions as to the selection of potential Lenders reasonably acceptable to you to be approached and when they will be approached, when their commitments will be accepted, which Lenders will participate and the final allocations of the commitments among the Lenders, and the Arrangers will exclusively perform all functions and exercise all authority as customarily performed and exercised in such capacities, including selecting counsel for the Lenders and negotiating the Credit Documents. Any agent or arranger titles (including co-agents) awarded to other Lenders will be determined by the Arrangers and be reasonably acceptable to you and shall not entail any role with respect to the matters referred to in this paragraph without the prior consent of the Arrangers and you. You agree that no Lender will receive compensation outside the terms contained herein and in the Fee Letter in order to obtain its commitment to participate in the Credit Facilities unless you and we shall otherwise agree. Each of the Commitment Parties

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acknowledges and agrees that its commitment is not conditioned upon a successful syndication.

          You understand that we intend to commence the separate syndication of each of the Credit Facilities promptly in syndications to be managed by the Arrangers, and you agree actively to assist us in achieving a timely syndication that is satisfactory to us. The syndication efforts will be accomplished by a variety of means, including direct contact during the syndication between senior management, advisors and affiliates of the Company on the one hand, and the proposed Lenders on the other hand, and the Company hosting, with the Arrangers, at least one meeting with prospective Lenders at such times and places as the Arrangers may reasonably request. You agree to use your commercially reasonable efforts to cause senior management, advisors and affiliates of the Acquired Business to be available for any such meeting or contact. You agree to, upon our request, (a) provide and use your commercially reasonable efforts to cause the Acquired Business and your and its advisors to provide, to us all information reasonably requested by us to successfully complete the syndication, including the information and projections (including updated projections) contemplated hereby, (b) assist and use your commercially reasonable efforts to cause your advisors to assist, and use your commercially reasonable efforts to have the Acquired Business assist, us in the preparation of a Confidential Information Memorandum and other marketing materials relating to the Credit Facilities (to be completed not later than 20 business days prior to the Closing Date to the extent reasonably practicable) which is in form and substance reasonably satisfactory to the Arrangers and suitable for use in a customary syndication of bank financing with all financial statements (both audited and unaudited, which shall be prepared in accordance with applicable Securities and Exchange Commission requirements), information and projections relating to the Company, the Acquired Business and their respective subsidiaries as deemed reasonably necessary to be included therein by the Arrangers, and to use commercially reasonable efforts to make available representatives of the Company and the Acquired Business for meetings with prospective Lenders, (c) use commercially reasonable efforts to obtain, at your expense, public ratings of each of the Credit Facilities and the Notes from Moody’s Investors Service (“Moody’s”) and Standard & Poor’s Ratings Group (“S&P”) and to participate actively in the process of securing such ratings and (d) use commercially reasonable efforts to provide to the Investment Banks (not later than 20 business days prior to the Closing Date to the extent reasonably practicable) a printed preliminary Rule 144A confidential offering memorandum relating to the issuance of the Notes, which contains all financial statements and other data to be included therein (including all audited financial statements and all unaudited financial statements (each of which shall be prepared in accordance with applicable Securities and Exchange Commission requirements and shall have undergone a SAS 100 (or equivalent) review) and all appropriate pro forma financial statements prepared in accordance with, or reconciled to, generally accepted accounting principles in the United States and prepared in accordance with Regulation S-X under the Securities Act of 1933, as amended, and substantially all other data (including selected financial data) that the Securities and Exchange Commission would

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require in a registered offering of the Notes except as may otherwise be agreed by the Investment Banks (and you will use commercially reasonable efforts to provide the Investment Banks not less than 20 business days to market the Notes prior to the Closing Date)). Notwithstanding the foregoing, (x) provision of the foregoing within such timeframes or prior to the Closing Date shall not be a condition to the Commitment Parties’ commitments hereunder and (y) your obligations with respect to the delivery of financial statements, and data derived therefrom, of the Acquired Business shall be limited to your using commercially reasonable efforts to facilitate the preparation by the Sellers of such financial statements and data. You also agree to use your commercially reasonable efforts to ensure that our syndication efforts benefit materially from the Acquired Business’s and your (and your affiliates’) existing lending relationships. To ensure an orderly and effective syndication of each Facility, you agree that, until the earlier of (i) termination of the syndication (as determined by the Arrangers) and (ii) the Closing Date, you will ensure that, other than such financing as has been disclosed to the Arrangers prior to the date hereof, no competing issue of debt securities, commercial bank facilities or other debt facilities of the Company or any of its subsidiaries is announced, offered, placed or arranged, without the prior written consent of the Arrangers (which consent shall be withheld only if the Arrangers reasonably determine that such announcement, offering, placement or arrangement would be reasonably likely to have a detrimental effect upon the syndication of the Credit Facilities or the marketing of the Notes).

          3. Fees. As consideration for our commitment hereunder and our agreement to arrange, manage, structure and syndicate the Credit Facilities, as applicable, you agree to pay to us the fees as set forth in the Fee Letter.

          4. Conditions. Each Commitment Party’s commitment hereunder is subject to the conditions set forth in the Term Sheets and in Annex I to this Commitment Letter. For purposes of this Commitment Letter and the Term Sheets, the “subsidiaries” of the Company shall, unless otherwise indicated, be deemed to include those that will become subsidiaries of the Company in connection with the Transactions. There shall be no conditions to each Commitment Party’s commitment hereunder except those set forth in the Term Sheets and in Annex I to this Commitment Letter.

          5. Information and Investigations. You hereby represent and covenant that (a) all information and data concerning the Company or its subsidiaries or affiliates (excluding financial projections and projected industry data) that have been or will be made available by you or any of your subsidiaries or affiliates, representatives or advisors to us or any Lender (whether prior to or on or after the date hereof) in connection with the Transactions or filed with the Securities and Exchange Commission and, to your knowledge, any such information and data provided concerning the Sellers or their subsidiaries, affiliates, representatives or advisors that have been or will be made available by you or the Sellers or any of your or their respective subsidiaries or affiliates, representatives or advisors to us or

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any Lender (the “Information”), does not and will not, taken as a whole, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such statements are made, (b) all financial projections and projected industry data concerning the Company and its subsidiaries and the transactions contemplated hereby (the “Projections”) that have been made or will be prepared by or on behalf of you or any of your subsidiaries or officers (or by your representatives or advisors on your behalf) and that have been or will be made available to us or any Lender in connection with the transactions contemplated hereby have been and will be prepared in good faith based upon assumptions believed by you to be reasonable at the time provided. If you become aware that the foregoing representation is incorrect in any material respect, you agree to use commercially reasonable efforts to supplement the Information and the Projections from time to time until the Closing Date so that the representation and covenant in the preceding sentence remain correct in all material respects. In syndicating the Credit Facilities we will be entitled to use and rely primarily on the Information and the Projections without responsibility for independent check or verification thereof.

          You hereby acknowledge that (a) the Arrangers will make available Information and Projections to the proposed syndicate of Lenders by posting such Information and Projections on IntraLinks, SyndTrak Online or similar electronic means and (b) certain of the Lenders may be “public side” Lenders (i.e. Lenders that do not wish to receive material non-public information with respect to the Company, its subsidiaries or its securities) (each, a “Public Lender”). You agree to assist us in preparing an additional version of the Confidential Information Memorandum to be used by Public Lenders that does not contain any material non-public information. It is understood that in connection with your assistance described above, authorization letters will be included in any Confidential Information Memorandum that authorize the distribution of the Confidential Information Memorandum to prospective Lenders, containing a representation to the Arrangers that the public-side version does not include material non-public information about the Company, its subsidiaries or its securities. You agree to identify that portion of the Information that may be distributed to the Public Lenders as “PUBLIC”. You acknowledge and agree that the following documents may be distributed to Public Lenders (unless you promptly notify us otherwise): (a) drafts and final definitive documentation with respect to the Credit Facilities; (b) administrative materials prepared by the Agents for prospective Lenders (such as a lender meeting invitation, allocations and funding and closing memoranda); and (c) notification of changes in the terms of the Credit Facilities.

          6. Indemnification. You agree (i) to indemnify and hold harmless each Commitment Party and each of the other Lenders and their respective officers, directors, employees, affiliates, agents and controlling persons (each Commitment Party and each such other person being an “Indemnified Party”) from and against any and all losses, claims, damages, liabilities and related reasonable out-of-pocket costs and expenses, joint or several,

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to which any Indemnified Party becomes subject under any applicable law, or otherwise, in each case, related to or arising out of or in connection with this Commitment Letter, the Fee Letter, the Term Sheets, the Credit Facilities, the loans under the Credit Facilities, the use of proceeds of any such loan, any of the Transactions or any related transaction and the performance by any Indemnified Party of the services contemplated hereby and will reimburse each Indemnified Party for any and all reasonable out-of-pocket expenses (including reasonable fees and expenses of a single counsel; provided that reasonable fees and expenses of additional counsel shall be reimbursed in the event of conflict or a need for local and/or regulatory counsel) promptly following written demand in connection with the investigation of, preparation for or defense of, or appearance as a witness in, any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party and whether or not such claim, action or proceeding is initiated or brought by or on behalf of the Sellers, your or their security holders or affiliates or other persons (other than you) and whether or not any of the Transactions are consummated or this Commitment Letter is terminated, except to the extent determined by a final judgment of a court of competent jurisdiction to have resulted from the bad faith, gross negligence or willful misconduct of such Indemnified Party or its officers, directors, employees, affiliates, agents or controlling persons and (ii) not to assert any claim against any Indemnified Party for consequential, indirect, special, punitive or exemplary damages on any theory of liability in connection in any way with the Transactions or this Commitment Letter. No Indemnified Party shall be liable to you for any damages arising from the unauthorized use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with the Credit Documents or the transactions contemplated hereby or thereby, except to the extent determined by a final judgment of a court of competent jurisdiction to have resulted from the bad faith, gross negligence or willful misconduct of such Indemnified Party or its officers, directors, employees, affiliates, agents or controlling persons.

          You agree that, without our prior written consent (not to be unreasonably withheld), neither you nor any of your subsidiaries will settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding in respect of which indemnification has been or could be sought under the indemnification provisions hereof (if an Indemnified Party is an actual or potential party to such claim, action or proceeding), unless such settlement, compromise or consent (i) includes an unconditional written release in form and substance reasonably satisfactory to the Indemnified Parties of each Indemnified Party from all liability arising out of such claim, action or proceeding and (ii) does not include any statement as to or an admission of fault, culpability or failure to act by or on behalf of any Indemnified Party.

          7. Expenses. In the event you execute a definitive Acquisition Agreement with the Sellers, except as otherwise contemplated in the Engagement Letter, you agree to reimburse us and our affiliates for our and their reasonable out-of-pocket expenses on the

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Closing Date or, if the Closing Date does not occur, within 15 days after the termination of our commitments hereunder (including, without limitation, all reasonable due diligence investigation expenses, Syndtrak or IntraLinks expenses, fees of consultants engaged with your consent (not to be unreasonably withheld), syndication expenses (including printing, distribution, and bank meetings), appraisal and valuation fees and expenses, travel expenses, duplication fees and expenses, search fees and the reasonable fees, disbursements and other charges of a single counsel (provided that the reasonable fees, disbursements and other charges of additional counsel shall be reimbursed in the event of a need for local and/or regulatory counsel) and any sales, use or similar taxes (and any additions to such taxes) related to any of the foregoing) incurred in connection with the negotiation, preparation, execution and delivery, waiver by the Commitment Parties or modification requested by the Company, collection and enforcement of this Commitment Letter, the Term Sheets, the Fee Letter and the Credit Documents in connection therewith and whether or not such fees and expenses are incurred before or after the date hereof or any loan documentation is entered into or the Transactions are consummated or any extensions of credit are made under the Credit Facilities or this Commitment Letter is terminated or expires. We agree, that upon request but not more frequently than monthly, we will provide estimates of expenses incurred subject to this Section 7.

          8. Confidentiality. This Commitment Letter, the Term Sheets, the contents of any of the foregoing and our and/or our affiliates’ activities pursuant hereto or thereto are confidential and shall not be disclosed by or on behalf of you or any of your affiliates to any person without our prior written consent, except that you may disclose (i) this Commitment Letter, the Term Sheets and the Fee Letter to your affiliates and your and their respective officers, directors, employees, accountants, attorneys and advisors on a confidential need-to-know basis, (ii) this Commitment Letter, the Term Sheets and a redacted version of the Fee Letter (with fees and other information reasonably requested by us omitted) on a confidential basis to the Sellers and their officers, directors, employees, accountants, attorneys and advisors in connection with the Transactions, (iii) this Commitment Letter, the Term Sheets and the Fee Letter to the extent required in any Securities and Exchange Commission and other regulatory filings, (iv) this Commitment Letter, the Term Sheets and the Fee Letter upon the request of any regulatory authority having jurisdiction over you, (v) this Commitment Letter and the Term Sheets to rating agencies and (vi) this Commitment Letter, the Term Sheets and the Fee Letter, to the extent required by applicable law, compulsory legal process or rules of any securities exchange; provided, however, that in the event of any such compulsory legal process you agree to give us prompt notice thereof (to the extent permitted thereby). Except as set forth below, you agree that you will permit us to review and approve (such approval not to be unreasonably withheld or delayed) any reference to any of us or any of our affiliates in connection with the Credit Facilities or the transactions contemplated hereby contained in any press release or similar public disclosure prior to public release.

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          Each Commitment Party agrees on behalf of itself and each of their affiliates to use all non-public information provided to it or them by or on behalf of the Company, it subsidiaries or the Acquired Business solely for the purpose of providing the services which are the subject of this letter agreement and to treat confidentially such information in accordance with its or their customary practices. Notwithstanding the foregoing, you further agree that we and our affiliates may share information concerning you and your affiliates among ourselves solely in connection with the performance of our services hereunder and the evaluation and consummation of the transactions contemplated hereby; provided, however, that nothing herein shall prevent any Commitment Party or its affiliates from disclosing any such information (i) subject to confidentiality agreements reasonably satisfactory to you, to Lenders, potential lenders or participants in connection with the syndication of the Credit Facilities, (ii) on a confidential basis, to any rating agency, (iii) pursuant to the order of any court or administrative agency or in any pending legal or administrative proceeding (including to establish a due diligence defense) or as otherwise required by applicable law or compulsory legal process; provided, however, that in the event of any such compulsory legal process the applicable Commitment Party agrees to give you prompt notice thereof (to the extent permitted thereby), (iv) upon the request or demand of any regulatory authority having jurisdiction over such Commitment Party or any of its affiliates, (v) to the extent that such information was or becomes publicly available other than by reason of disclosure by any Commitment Party or any of its affiliates in violation of this agreement or was or becomes available to such Commitment Party or any of its affiliates from a source which is not known by such Commitment Party to be subject to a confidentiality obligation to you (including information that is independently developed by any Commitment Party) or (vi) on a confidential basis, to the affiliates of such Commitment Party and its and their respective employees, legal counsel, independent auditors and other experts or agents who need to know such information in connection with the Transactions or any other services provided by such Commitment Party or any of its affiliates to you and your subsidiaries and affiliates; provided such persons have agreed to maintain the confidentiality of such information.

          9. Termination. Each Commitment Party’s commitment hereunder shall terminate in its entirety (A) on the date that is 270 days after the date the Acquisition Agreement is notarized or (B) on the date of execution and delivery of the Credit Documents by the Company and the Lenders. Notwithstanding the foregoing, the provisions of Sections 2, 6, 7, 8, 10 and 11 hereof shall survive any termination pursuant to this Section 9; provided, however, that such provisions hereof relating to indemnity and the payment of expenses shall be superseded by the provisions of the Credit Documents upon the effectiveness thereof.

          10. Assignment; No Fiduciary Duty, etc. This Commitment Letter and our commitment hereunder shall not be assignable by any party hereto without the prior written consent of the other parties hereto, and any attempted assignment shall be void and of no effect; provided, however, that nothing contained in this Section 10 shall prohibit any of us (in our sole discretion) from performing any of our duties hereunder through any of our

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respective affiliates, and you will owe any related duties (including those set forth in Section 2 above) to any such affiliate; provided, further, that no such assignment shall release any of us from our respective obligations to perform such duties and to fund our respective commitments hereunder until such time as the Credit Facilities are funded by the related assignee in accordance with the terms hereof. This Commitment Letter is solely for the benefit of the parties hereto and does not confer any benefits upon, or create any rights in favor of, any other person.

          In connection with all aspects of each transaction contemplated by this Commitment Letter, you acknowledge and agree, and acknowledge your affiliates’ understanding, that (i) each transaction contemplated by this Commitment Letter is an arm’s-length commercial transaction, between the Company, on the one hand, and the Commitment Parties, on the other hand, (ii) in connection with each such transaction and the process leading thereto each Commitment Party will act solely as a principal and not as agent or fiduciary of the Company or any of its stockholders, affiliates, creditors, employees or any other party, (iii) no Commitment Party will assume an advisory or fiduciary responsibility in favor of the Company or any of its affiliates with respect to any of the transactions contemplated hereby or the process leading thereto (irrespective of whether any Commitment Party has advised or is currently advising the Company on other matters) and no Commitment Party will have any obligation to the Company or any of its affiliates with respect to the transactions contemplated in this Commitment Letter except the obligations expressly set forth herein, (iv) each Commitment Party may be engaged in a broad range of transactions that involve interests that differ from those of the Company and its affiliates, and (v) no Commitment Party has provided or will provide and legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby and the Company has consulted and will consult its own legal, accounting, regulatory, and tax advisors to the extent it deems appropriate. The matters set forth in this Commitment Letter reflect an arm’s-length commercial transaction between you, on the one hand, and the Commitment Parties, on the other hand. You agree not to assert any claims that you may have against any Commitment Party based on any breach or alleged breach of fiduciary duty.

          11. Governing Law; Waiver of Jury Trial. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York. Each of the parties hereto waives all right to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or otherwise) related to or arising out of any of the Transactions or the other transactions contemplated hereby, or the performance by us or any of our affiliates of the services contemplated hereby.

          12. Amendments; Counterparts; etc. No amendment or waiver of any provision hereof or of the Term Sheets shall be effective unless in writing and signed by the parties hereto and then only in the specific instance and for the specific purpose for which given. This Commitment Letter, the Term Sheets and the Fee Letter are the only agreements

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between the parties hereto with respect to the matters contemplated hereby and thereby and set forth the entire understanding of the parties with respect thereto. This Commitment Letter may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart by telecopier shall be effective as delivery of a manually executed counterpart.

          13. Patriot Act. We hereby notify you that pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “Patriot Act”), the Lenders may be required to obtain, verify and record information that identifies each borrower and the other obligors under the Credit Facilities, which information includes the name, address and tax identification number and other information regarding them that will allow such Lender to identify them in accordance with the Patriot Act. This notice is given in accordance with the requirements of the Patriot Act and is effective as to the Lenders.

          14. Public Announcements; Notices. Without your consent (not to be unreasonably withheld), we may not publicly announce the capacities in which we or our affiliates have acted hereunder (except for public announcements required by applicable law or compulsory legal process; provided, however, that in the event of any such compulsory legal process we agree to give you prompt notice thereof (to the extent permitted thereby)). Any notice given pursuant hereto shall be mailed or hand delivered in writing, if to (i) you, at your address set forth on page one hereof, Attention: Edward J. Borkowski, Chief Financial Officer, with a copy to Mark I. Greene, Esq., at Cravath Swaine & Moore LLP, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019; and (ii) the Commitment Parties, (x) Merrill Lynch, at World Financial Center, North Tower, 250 Vesey Street, New York, New York 10080, Attention: Sarang Gadkari, (y) Citigroup, at 388 Greenwich Street, New York, New York 10013, Attention: John Peruzzi and (z) GSCP, 85 Broad Street, New York, New York 10004, Attention: Christina Minnis, in each case, with a copy to Jonathan Schaffzin, Esq., at Cahill Gordon & Reindel llp, 80 Pine Street, New York, New York 10005.

          Please confirm that the foregoing correctly sets forth our agreement of the terms hereof and the Fee Letter by signing and returning to the Commitment Parties the duplicate copy of this letter and the Fee Letter enclosed herewith. Unless we receive your executed duplicate copies hereof and thereof by 5:00 p.m., New York City time, on June 15, 2007, our commitment hereunder will expire at such time.

(Signature Page Follows)

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          We are pleased to have this opportunity and we look forward to working with you on this transaction.

Very truly yours,
MERRILL LYNCH CAPITAL CORPORATION
By:
	Name:
	Title:
CITIGROUP GLOBAL MARKETS INC.
By:
	Name:
	Title:
GOLDMAN SACHS CREDIT PARTNERS L.P.
By:
	Name:
	Title:

Accepted and agreed to as of
the date first written above:

MYLAN LABORATORIES INC.

By:
	Name: Title:

Annex I

Project Genius
Summary of Additional Conditions Precedent

          Each Commitment Party’s commitment in respect of the Credit Facilities and the initial borrowing under each of the Credit Facilities shall be subject to the following conditions precedent:

          1. The Acquisition shall be consummated substantially concurrently with the initial funding of the Facilities in all material respects in accordance with the terms of the Acquisition Agreement without waiver or amendment of any material provisions thereof (other than such waivers or amendments as are not, taken as a whole, materially adverse to the Lenders) unless consented to by the Arrangers, which consent shall not be unreasonably withheld, conditioned or delayed.

          2. With respect to (A) the Senior Credit Facilities, simultaneously with the making of the initial loans thereunder, the Notes Offerings and/or drawdowns of the Interim Loan shall be consummated for gross proceeds of not less than $2,850,000,000, on terms and conditions and pursuant to documentation consistent in all material respects with the Commitment Letter and (B) the Interim Loan, the Company shall have entered into the Senior Credit Facilities with Merrill Lynch providing for a commitments in the US dollar equivalent of $4,850,000,000 under the Senior Credit Facilities, on terms and conditions and pursuant to documentation consistent in all material respects with the Commitment Letter.

          3. The Company shall have executed and delivered the Engagement Letter with one or more investment banks (the “Investment Banks”) reasonably acceptable to the Commitment Parties.

          4. The Company and its subsidiaries shall have outstanding no indebtedness or preferred stock (or direct or indirect guarantee or other credit support in respect thereof) other than the Loans, the Notes or the Interim Loan and the Indebtedness to Remain Outstanding (and the Credit Facilities shall provide that, to the extent any Acquired Business Indebtedness that constitutes Financial Debt (as defined in the Acquisition Agreement) is to remain outstanding following the Closing Date, the Company shall, in an aggregate amount equal to the aggregate principal amount of such Acquired Business Indebtedness to remain outstanding, (i) reduce the aggregate principal amount of the Interim Loan borrowed on the Closing Date and/or (ii) within 60 days following the Closing Date, prepay such Acquired Business Indebtedness or a portion of the Interim Loan); provided, however, that if any Acquired Business Indebtedness that constitutes Financial Debt (as defined in the Acquisition Agreement) to remain outstanding following the Closing Date is secured indebtedness, the Arrangers shall have the right to require that any such reduction or prepayment shall reduce the Term Loan Facilities rather than the Interim Loan.

          5. The delivery, on or prior to the Closing Date, of a certificate on behalf of the Company from the chief financial officer of the Company with respect to the solvency (on a consolidated basis) of the Company and its subsidiaries, taken as a whole, immediately after the consummation of the Transactions to occur on the Closing Date.

          6. The Credit Documents shall have been executed and delivered by each Credit Party in form and substance reasonably acceptable to the Commitment Parties. The Administrative Agent shall have received reasonably satisfactory borrowing certificates and other customary closing certificates and opinions and the Commitment Parties shall have received all documentation and other information which the Commitment Parties are required to obtain under the PATRIOT Act and with respect to any foreign borrowers under the Credit Facilities, similar “know your customer” requirements applicable under the laws of the jurisdiction of such foreign borrowers. Except as set forth below, all representations and warranties of the Company and its subsidiaries set forth in the Credit Documents shall be true and correct in all material respects (other than any representations and warranties qualified by materiality standards), no bankruptcy default or bankruptcy event of default under the Credit Documents shall have occurred and be continuing and the Administrative Agent, for the benefit of the applicable secured parties under the Credit Documents, shall have a valid security interests in the assets or equity interests, as the case may be, described under “—Security” in the Senior Term Sheet. Notwithstanding anything in the Commitment Letter, the Term Sheets, the Fee Letter, the Credit Documents or any other letter agreement or other undertaking concerning the financing of the transactions contemplated hereby to the contrary, (i) the only representations relating to the Company, the Acquired Business, their subsidiaries and their businesses the making of which shall be a condition to availability of the Credit Facilities on the Closing Date shall be (A) such of the representations relating to the Acquired Business in the Acquisition Agreement as are material to the interests of the Lenders, but only to the extent that the Company has the right to terminate its obligations under the Acquisition Agreement as a result of a breach of such representations in the Acquisition Agreement and (B) the Specified Representations (as defined below) and (ii) the terms of the Credit Documents shall be in a form such that they do not impair availability of the Credit Facilities on the Closing Date if the conditions set forth herein and in the Term Sheets are satisfied (it being understood that, to the extent any guarantee or collateral referred to in the Term Sheets under “Guarantors” and “Security” is not provided on the Closing Date (other than the pledge and perfection of assets with respect to which a lien may be perfected by delivery (for stock of domestic subsidiaries only) of stock certificates or the filing of financing statements under the Uniform Commercial Code) after the Company’s use of commercially reasonable efforts to do so (including as a result of the need to complete any “white wash” procedures prior to providing such guarantees or collateral), the delivery of such guarantee and/or collateral shall not constitute a condition precedent to the availability of the Credit Facilities on the Closing Date but shall be required to be delivered after the Closing Date pursuant to arrangements to be mutually agreed). For purposes hereof, “Specified Representations” means the representations and warranties of the Company and its subsidiaries set forth in the Term Sheets relating to due authorization of the Credit Documents, corporate power and authority and the enforceability of the Credit Documents, in each case as they relate to the entering into

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and performance of the Credit Documents, Federal Reserve margin regulations and the Investment Company Act.

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CONFIDENTIAL EXHIBIT A

SENIOR CREDIT FACILITIES

SUMMARY OF TERMS AND CONDITIONS ^a

Borrower:	With respect to the US Term Loan Facility and the Revolving Facility, Mylan Laboratories Inc. (“US Borrower”). With respect to the Euro Term Loan, a European subsidiary of the US Borrower to be mutually agreed (the “Euro Borrower” and, together with the US Borrower, the “Borrowers”). If requested by the US Borrower, one or more additional borrowers (including non-U.S. borrowers) may be added on terms and conditions to be mutually agreed between the US Borrower and the Lead Arrangers.
Joint Lead Arrangers and Bookrunners:	Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. (the “Lead Arrangers”).
Administrative Agent:	A financial institution to be agreed by the US Borrower and Merrill Lynch (the “Administrative Agent”).
Syndication Agent:	Merrill Lynch Capital Corporation (or one of its affiliates).
Lenders:	Merrill Lynch Capital Corporation (or one of its affiliates), Citigroup, Goldman Sachs Credit Partners L.P. and a syndicate of financial institutions (the “Lenders”) arranged by the Lead Arrangers and reasonably acceptable to the US Borrower.

^a Capitalized terms used herein and not defined shall have the meanings assigned to such terms in the attached Credit Facilities Commitment Letter (the “Commitment Letter”).

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Credit Facilities: Senior secured credit facilities (the “Credit Facilities”) in an aggregate principal amount of up to $4,850.0 million, such Credit Facilities comprising:

(A) Term Loan Facilities. Term loan facilities in an aggregate principal amount equal to the U.S. dollar equivalent of $4,100.0 million (the “Term Loan Facilities”) divided between (i) a senior secured tranche A term loan of $500.0 million in US Dollars (the “US Tranche A Term Loan Facility”), (ii) a senior secured tranche B term loan of $2,000.0 million in US Dollars (the “US Tranche B Term Loan Facility” and together with the US Tranche A Term Loan Facility, the “US Term Loan Facilities”) and (iii) a senior secured tranche B term loan in the U.S. dollar equivalent of $1,600.0 million in Euros (the “Euro Term Loan Facility” and together with the US Term Loan Facilities, the “Term Loan Facilities”).

(B) Revolving Facility. A revolving credit facility in an aggregate principal amount of $750.0 million in US Dollars (the “Revolving Facility”). Loans under the Revolving Facility are herein referred to as “Revolving Loans”; the Term Loans and the Revolving Loans are herein referred to collectively as “Loans”. An amount to be agreed shall be available to a European subsidiary of US Borrower under the Revolving Facility in Euros, Pounds Sterling and other currencies to be agreed, in which such case such amount shall be guaranteed by the Euro Guarantors on the same basis as the Euro Guarantees. An amount to be agreed of the Revolving Facility will be available as a letter of credit subfacility and as a swing line subfacility.

Incremental Facility: The US Borrower shall be entitled to incur additional term loan commitments or increases in the amount of the commitments under the Revolving Facility (the “Incremental Commitments”) in an aggregate principal amount of up to $500,000,000 from Lenders or other financial institutions designated by the US Borrower and

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reasonably acceptable to the Administrative Agent; provided that (i) no event of default or default exists or would exist after giving effect thereto, (ii) after giving effect to the borrowing in full under such Incremental Commitments, the US Borrower would be in pro forma compliance as of the most recently ended fiscal quarter for which financial statements are available with the financial covenant described under “—Financial Covenant” (as such covenant is in effect on the Closing Date and whether or not such covenant has been amended or waived), (iii) any Incremental Commitments that are revolving commitments shall be of the same class as the commitments under the Revolving Facility in effect on the Closing Date, (iv) the maturity date of any term loans pursuant to any Incremental Commitments shall be no earlier than the maturity date of the US Tranche B Term Loan Facility, (iv) the average life to maturity of any term loans pursuant to any Incremental Commitments shall be no shorter than the average life to maturity of the loans under the US Tranche B Term Loan Facility, (vi) in the case of term loans under any Incremental Commitments, the other terms and documentation in respect thereof, to the extent not materially consistent with the US Tranche B Term Loan Facility shall otherwise be reasonably satisfactory to the Administrative Agent. No existing Lender shall have any obligation to provide any Incremental Commitments.

Documentation:

Usual for facilities and transactions of this type and reasonably acceptable to Borrowers and the Lead Arrangers. The documentation for the Credit Facilities will include, among others, a credit agreement (based on the existing credit agreement of the US Borrower with modifications contemplated hereby and other modifications to be reasonably agreed for comparable financing transactions) (the “Credit Agreement”), guarantees and, to the extent required under “—Security” below, appropriate pledge, security interest, mortgage and other collateral documents (collectively, the “Credit Documents”). The US Borrower and the US Guarantors (as defined below under “Guarantors”) are herein referred to as the “US Credit Parties” and individually referred to as a “US Credit Party”.

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	The Euro Borrower and the Euro Guarantors (as defined below under “—Guarantors”) are herein referred to as the “Euro Credit Parties” and individually referred to as a “Euro Credit Party”. The US Credit Parties and Euro Credit Parties are collectively referred to herein as the “Credit Parties” and individually referred to herein as a “Credit Party”.
Transactions:	As described in the Commitment Letter.
Availability/Purpose:	(A) Term Loan Facilities. The Term Loan Facilities will be available in single drawing on the Closing Date to finance the Acquisition and the Refinancing and to pay related fees and expenses. Loans under the Term Loan Facilities that are repaid or prepaid may not be reborrowed.
	(B) Revolving Facility. The Revolving Facility will be available for working capital and general corporate purposes, including permitted acquisitions, on a fully revolving basis, subject to the terms and conditions set forth in the Credit Documents, in the form of revolving loans, swing line loans and letters of credit on and after the Closing Date until the date that is 6 years after the Closing Date (the “R/C Maturity Date”).
Guarantors:	Each of US Borrower’s direct and indirect wholly owned domestic subsidiaries existing on the Closing Date or thereafter created or acquired (subject to exceptions that may be agreed upon with respect to immaterial subsidiaries and excluding American Triumvirate Insurance Company and any domestic subsidiary that (i) serves solely as a holding company for foreign subsidiaries and (ii) has not incurred any third party indebtedness (other than guarantees of indebtedness of its subsidiaries) (any such subsidiary, a “Foreign Holding Company”)) shall unconditionally guarantee, on a joint and several basis, all obligations of the US Borrower and the Euro Borrower under the Credit Facilities and under each interest rate protection agreement and cash management arrangement entered into with a person that is or was a Lender or an affiliate of a Lender at the time such agreement or

[SENIOR CREDIT FACILITIES]

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arrangement was entered into (“US Guarantors”, with their guarantees referred to herein as “US Guarantees”). Additionally, the US Borrower, each Foreign Holding Company and each of the Euro Borrower’s direct and indirect wholly owned subsidiaries formed under the laws of the jurisdiction of organization of the Euro Borrower and such other jurisdictions as may be mutually agreed, existing on the Closing Date or thereafter created or acquired (subject to exceptions that may be agreed upon with respect to immaterial subsidiaries), shall unconditionally guarantee, on a joint and several basis, all obligations of the Euro Borrower under the Credit Facilities (the “Euro Guarantors”, with their guarantees referred to as the “Euro Guarantees” and, together with the US Guarantees, the “Guarantees”), except to the extent a guaranty thereby could reasonably be expected to result in adverse tax consequences, is prohibited or limited by law, including financial assistance rules (subject to compliance with whitewash procedures), would result in a breach of the fiduciary duties of the directors of such subsidiary, could reasonably be expected to result in personal or criminal liability of any director or where the cost of complying with legal requirements to obtain such guarantee are, in the reasonable determination of the Lead Arrangers (in consultation with the US Borrower), excessive in relation to the value to be afforded thereby. Each US Guarantor and Euro Guarantor is herein referred to as a “Guarantor” and its guarantee is referred to herein as a “Guarantee”. The US Guarantors and Euro Guarantors are herein referred to collectively as the “Guarantors”.

Security:

The Credit Facilities, the US Guarantees, and cash management arrangements and the obligations of the US Borrower under each interest rate protection agreement entered into with a person that is or was a Lender or any affiliate of a Lender at the time such arrangement or agreement was entered into will be secured by (A) a perfected lien on, and pledge of, all of the capital stock of each of the direct subsidiaries of the US Credit Parties existing on the Closing Date or thereafter created or acquired (such pledge, to the extent securing any

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obligations in respect of the US Facilities, to be limited to 65% of the outstanding voting stock of (x) any “controlled foreign corporation” as defined in Section 956 of the Internal Revenue Code and (y) any Foreign Holding Company) and, (B) a perfected lien on, and security interest in, all of the tangible and intangible properties and assets (including all contract rights, material owned real property interests, patents, trademarks, trade names, equipment and proceeds of the foregoing) of each US Credit Party (collectively, the “US Collateral”). Additionally, the Euro Credit Facilities and the Euro Guarantees will be secured by (A) a perfected lien on, and pledge of, all of the capital stock of each of the direct subsidiaries of the Euro Credit Parties existing on the Closing Date or thereafter created or acquired and, (B) a perfected lien on, and security interest in, all of the tangible and intangible properties and assets (including all contract rights, material owned real property interests, patents, trademarks, trade names, equipment and proceeds of the foregoing) of each Euro Credit Party (collectively, the “Euro Collateral” and, together with the US Collateral, the “Collateral”). Notwithstanding the foregoing, the Euro Collateral will not include assets to the extent the granting of security over such assets is prohibited or limited by law, including financial assistance rules (subject to compliance with whitewash procedures), would result in a breach of the fiduciary duties of the directors of the applicable Euro Credit Party or could reasonably be expected to result in personal or criminal liability of any director. All such security interests will, to the extent required as provided above, be created pursuant to documentation reasonably satisfactory in all respects to the Lead Arrangers.

Notwithstanding anything to the contrary contained herein, the US Collateral and the Euro Collateral shall exclude the following: (i) all leasehold interests (to the extent that mortgages would be required), (ii) motor vehicles and other assets subject to certificates of title, letter of credit rights and commercial tort claims (except for certain commercial tort claims subject to the requirements of the creation and perfection of security interests covenant on after-acquired

[SENIOR CREDIT FACILITIES]

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	property), (iii) pledges and security interests prohibited or (to the extent) limited by law and certain agreements (including capital leases, purchase money indebtedness and licenses) (other than prohibitions overridden by the UCC), (iv) assets requiring perfection through control agreements, (v) assets to the extent the granting of security over such assets could reasonably be expected to result in adverse tax consequences as determined by the US Borrower, and (vi) those properties and assets as to which the Lead Arrangers reasonably determine that the costs of obtaining such security interest or perfection thereof are excessive in relation to the practical benefit to the Lenders of the security interest to be afforded thereby (it being understood that none of the foregoing shall be subject to any other liens or security interests, except for certain customary exceptions to be agreed upon).
Termination of Commitments:	The commitments in respect of the Credit Facilities (including pursuant to the Commitment Letter) will terminate in their entirety on the date that is 270 days after the date the Acquisition Agreement is notarized if the initial funding under the Credit Facilities does not occur on or prior to such date.
Final Maturity:	(A) US Tranche A Term Loan Facility. The US Tranche A Term Loan Facility will mature on the sixth anniversary of the Closing Date.
	(B) US Tranche B Term Loan Facility. The US Tranche A Term Loan Facility will mature on the seventh anniversary of the Closing Date.
	(C) Euro Term Facility. The Euro Term Loan Facility will mature on the seventh anniversary of the Closing Date.
	(B) Revolving Facility. The Revolving Facility will mature on the R/C Maturity Date.

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Amortization Schedule:	(A) US Tranche A Credit Facility
	The US Tranche A Term Loan will amortize in quarterly installments in aggregate amounts for each year following the Closing Date in amounts to be mutually agreed.
	(B) US Tranche B Credit Facility
	The US Tranche B Credit Facility will amortize at a rate of 1.00% per annum on a quarterly basis (beginning with the first full fiscal quarter after the Closing Date) for the first six years and three quarters, respectively, after the Closing Date with the balance paid in full at maturity.
	(C) Euro Tranche B Credit Facility
	The Euro Tranche B Credit Facility will amortize at a rate of 1.00% per annum on a quarterly basis (beginning with the first full fiscal quarter after the Closing Date) for the first six years and three quarters, respectively, after the Closing Date with the balance paid in full at maturity.
Letters of Credit:	Letters of credit under the Revolving Facility (“Letters of Credit”) will be issued by a Lender to be agreed by the Lead Arrangers and the US Borrower (in such capacity, the “L/C Lender”). The issuance of all Letters of Credit shall be subject to the customary procedures of the L/C Lender.
	No Letter of Credit shall, without the consent of the L/C Lender, have an expiration date after the earlier of (a) one year after the date of issuance and (b) the date that is five business days to the R/C Maturity Date, provided that any Letter of Credit with a one-year tenor may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (b) above).
	Drawings under any Letter of Credit shall be reimbursed by the Borrower (whether from its own funds or with the proceeds of the Revolving Facility) following receipt of notice of such drawing and any unreimbursed drawing shall be deemed a request for a Revolving Loan in the amount of

[SENIOR CREDIT FACILITIES]

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	such drawing. To the extent the Borrower does not so reimburse the L/C Lender, the Lenders under the Revolving Facility shall be irrevocably and unconditionally obligated to reimburse the L/C Lender on a pro rata basis.
Letter of Credit Fees:	Letter of Credit fees will be payable for the account of the Revolving Facility Lenders on the daily average undrawn face amount of each Letter of Credit at a rate per annum equal to the applicable margin for Revolving Loans that are LIBOR rate loans in effect at such time, which fees shall be paid quarterly in arrears. In addition, an issuing fee on the face amount of each Letter of Credit in an amount per annum to be agreed shall be payable to the L/C Lender for its own account, which fee shall also be payable quarterly in arrears.
Interest Rates and Fees:	Interest rates and fees in connection with the Credit Facilities will be as specified on Annex I attached hereto.
Default Rate:	Overdue principal, interest and other amounts shall bear interest at a rate per annum equal to 2% in excess of the applicable interest rate (including applicable margin).
Mandatory Prepayments/Reductions in Commitments:	The Term Loan Facilities will be required to be prepaid on a pro rata basis with (a) commencing with the first full fiscal year following the Closing Date, an amount equal to (i) 50% of annual Excess Cash Flow (to be defined in a mutually satisfactory manner but to be based on free cash flow, adjusted to take into account, among other things, debt service, certain prepayments of debt, capital expenditures and permitted investments in a manner to be agreed), minus (ii) optional Term Loan prepayments (and Revolving Facility prepayments accompanied by permanent reductions in the Revolving Facility) during such fiscal year, provided that the foregoing percentage shall be reduced to (x) 25% upon achievement of a Leverage Ratio to be agreed and (y) zero upon achievement of a Leverage Ratio to be agreed, (b) 100% of the net cash proceeds (including condemnation and insurance proceeds) of asset sales and other asset dispositions outside of the

[SENIOR CREDIT FACILITIES]

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ordinary course by the US Borrower or any of its subsidiaries (subject to baskets and exceptions to be agreed upon, including, without limitation, an exception for the sale of assets, including inventory, or property in the ordinary course of business, and subject to full rights of reinvestment within 12 months of receipt of net proceeds, provided that if such amounts are committed to be reinvested within such 12 month period, such reinvestment period shall extend for an additional 6 months); provided that no such prepayment shall be required if the US Borrower has a Leverage Ratio below a level to be agreed, and (c) 100% of the net cash proceeds of the issuance or incurrence of debt by the US Borrower or any of its subsidiaries (subject to baskets and exceptions to be agreed upon), including an exception for debt permitted by the Credit Facilities other than debt, if any, which can only be incurred to the extent the proceeds thereof are applied to prepay the Credit Facilities). The Credit Agreement will contain customary provisions designed to reduce the adverse tax consequences resulting from the repatriation of cash of foreign subsidiaries in connection with mandatory prepayments.

Each such mandatory prepayment will be applied to the scheduled amortization payments of the Term Loan Facilities in forward order for the unpaid quarterly amounts due in the next 24 months after such prepayment and thereafter ratably to the remaining scheduled amortization payments under each of the Term Loan Facilities.

Any Lender may elect not to accept any mandatory prepayments (each, a “Declining Lender”). Any prepayment amount declined by a Declining Lender (to the extent not accepted by other Lenders), subject to any prepayment requirements of the Notes and/or the Interim Loan, may be retained by the Borrowers.

Revolving Loans will be immediately prepaid to the extent that the aggregate extensions of credit under the Revolving Facility exceed the commitments then in effect under the Revolving Facility. To the extent that the amount to be

[SENIOR CREDIT FACILITIES]

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	applied to the repayment of the Revolving Loans exceeds the amount thereof then outstanding, Borrower shall cash collateralize outstanding Letters of Credit.
Voluntary Prepayments/Reductions in Commitments:	(A) Term Loan Facilities. Loans under any of the Term Loan Facilities may be prepaid at any time in whole or in part at the option of the US Borrower, in a minimum principal amount and in multiples to be agreed upon, without premium or penalty (except, in the case of LIBOR borrowings, breakage costs (excluding any interest margin) related to prepayments not made on the last day of the relevant interest period). Voluntary prepayments of Loans under the Term Loan Facilities will be applied as directed by the US Borrower.
	(B) Revolving Facility. The unutilized portion of the commitments under the Revolving Facility may be reduced and loans under the Revolving Facility may be repaid at any time, in each case, at the option of the US Borrower, in a minimum principal amount and in multiples to be agreed upon, without premium or penalty (except, in the case of LIBOR borrowings, breakage costs (excluding any interest margin) related to prepayments not made on the last day of the relevant interest period).
Conditions to Effectiveness and to Initial Loans:	The effectiveness of the credit agreement and the making of the initial loans under the Credit Facilities shall be subject to the conditions precedent set forth on Annex I to the Commitment Letter.
Conditions to All Extensions of Credit:	Each extension of credit under the Credit Facilities (other than extensions on the Closing Date) will be subject to the following conditions, subject to the Clean-up Period (as defined below):
	(i) absence of any continuing Default or Event of Default (to be defined), and (ii) continued accuracy of representations and warranties in all material respects (which materiality exception will not apply to

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	representations and warranties qualified by materiality standards).
Representations and Warranties:	Customary for facilities similar to the Credit Facilities (and applying to the US Borrower and its subsidiaries) to consist of the following representations and warranties: organization; powers; subsidiaries; authorization; enforceability; governmental approvals; no conflicts; financial statements and financial condition; no material adverse change; properties; litigation and environmental matters; labor matters; solvency of the US Borrower and its subsidiaries, taken as a whole, on the Closing Date; intellectual property; compliance with laws and agreements; disclosure; margin regulations; and investment company status.
Affirmative Covenants:	The definitive documentation for the Credit Facilities shall contain the following affirmative covenants (in each case applicable to the US Borrower and its subsidiaries, as appropriate and subject to customary materiality thresholds and exceptions to be mutually agreed): financial statements of the US Borrower and other information; notices of material events; existence; conduct of business; payment of obligations; maintenance of properties; insurance; books and records; inspection rights; compliance with laws; compliance with agreements; use of proceeds and letters of credit; subsidiary guarantees; additional collateral; and further assurances.
Negative Covenants:	The definitive documentation for the Credit Facilities shall contain the following negative covenants (applying to the US Borrower and its subsidiaries, as applicable) (all such covenants to be subject to customary baskets and exceptions to be agreed upon): limitation on indebtedness (exceptions to include an incurrence-based debt basket based on compliance with a financial ratio); limitation on liens; limitation on restricted payments; limitation on investments; limitation on prepayments of specified indebtedness (with exceptions to be agreed); limitations on transactions with affiliates; limitation on changes in fiscal year; limitation on restrictions on distributions from

[SENIOR CREDIT FACILITIES]

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	subsidiaries; and limitation on mergers and certain asset sales.
Financial Covenant:	For the benefit of Lenders under the Revolving Facility, the Revolving Facility will require that at any time following the end of the first full fiscal quarter after the Closing Date any loans and/or letters of credit in an aggregate amount of at least $100,000,000 are outstanding under the Revolving Facility, the Borrower shall maintain a maximum ratio of total debt to trailing four quarter adjusted EBITDA to be agreed. The financial covenant contemplated above will be tested on a quarterly basis when loans and/or letters of credit in an aggregate amount of at least $100,000,000 are outstanding under the Revolving Facility (and on a pro forma basis as of the end of the prior fiscal quarter for any extension of credit under the Revolving Facility which would result in at least $100,000,000 outstanding under the Revolving Facility to the extent such financial covenant was not applicable as of the end of the most recently ended quarter prior to such credit extension) and will apply to Borrower and its subsidiaries on a consolidated basis.
Events of Default:	The definitive documentation for the Credit Facilities shall contain the following events of default (in each case applicable to the US Borrower and its subsidiaries, subject to materiality thresholds, baskets, exceptions and customary grace periods to be agreed upon): nonpayment of principal, interest or fees; material inaccuracy of representations and warranties; violation of covenants (subject, in the case of affirmative covenants, to a grace period of 30 days after notice by the Administrative Agent and subject to a grace period to be agreed with respect to the Term Loan Facilities in the case of a default under the financial covenant described above); cross-default to other indebtedness in an amount to be agreed; bankruptcy events; unsatisfied judgment; invalidity or repudiation of any guarantees or security document with respect to a material portion of the collateral; certain ERISA events; and change of control.

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Clean-up Period:	During the period expiring 90 days following the Closing Date (the “Clean-up Period”), any matter or circumstance that exists in respect of the Acquired Business and its subsidiaries (collectively, the “Target Group”) that would otherwise constitute a breach of a representation or warranty or covenant or constitute a default or event of default under the definitive documentation for the Credit Facilities and which:
	(A) is capable of being cured within the Clean-up Period (and, if any Borrower or any member of the Target Group is aware of the relevant circumstances at the time, reasonable efforts are being used to cure the same);
	(B) has not been procured or approved by the US Borrower;
	(C) does not constitute a bankruptcy default or bankruptcy event of default; and
	(D) has not resulted in a Material Adverse Change (as defined in the Credit Agreement);
	shall be deemed not to give rise to such a breach and will not operate as a failure of a condition to the availability of borrowings under the Credit Facilities (and notwithstanding the occurrence of such matter or circumstance, the Lenders shall be required to make extensions of credit available to the Borrowers if all other conditions precedent to such extensions of credit have been satisfied or waived in accordance with the definitive documentation for the Credit Facilities) unless it continues to exist on the date that is 90 days following the Closing Date; provided that if any such matters or circumstances are continuing at the end of such period, there shall be a breach of the applicable representation or warranty or covenant or default or event of default, as the case may be.
Yield Protection and Increased Costs:	Customary provisions (i) protecting the Lenders against increased costs or loss of yield resulting from changes in

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	reserve, capital adequacy and other requirements of law and from the imposition of or changes in withholding or other taxes (subject in each case to limitations on time periods for claims and a right of the Borrowers to replace any Lender making such a claim) and (ii) indemnifying the Lenders for breakage costs (excluding interest margin) in connection with, among other things, prepayment of LIBOR Rate borrowing other than on the last day of an interest period.
Assignments and Participations:	Each assignment (unless to another Lender or its affiliates shall be in a minimum amount of the US dollar equivalent of $1,000,000 (or, in the case of an assignment under the Revolving Facility, $5,000,000) (unless the US Borrower and the Administrative Agent otherwise consent or unless the assigning Lender’s exposure is thereby reduced to $0). Assignments (which may be non-pro rata among loans and commitments) of the Loans or commitments shall require the US Borrower’s and the Administrative Agent’s consent (such consents not to be unreasonably withheld, delayed or conditioned), except that (i) no such consent of the US Borrower or the Administrative Agent need be obtained to effect an assignment to any Lender (or its affiliates or approved funds) except with respect to the consent of the Administrative Agent for assignments under the Revolving Credit Facility and (ii) no consent by the US Borrower will be required if a payment or bankruptcy event of default has occurred and is continuing. Participations shall be permitted without restriction. Voting rights and benefits of participants will be subject to customary limitations.
Amendments:	Lenders having a majority of the outstanding credit exposure and available commitments (the “Required Lenders”), subject to amendments of certain customary provisions of the Credit Documents requiring the consent of Lenders having a greater share (or all) of the outstanding credit exposure and available commitments (it being understood that any required approval for purposes of releasing less than all or substantially all of the Guarantors or the Collateral will only require the consent of the Required Lenders). Any amendment or waiver of the

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	financial covenant described above shall only require the consent of lenders with a majority of the commitments under the Revolving Facility.
	The Credit Facilities shall contain customary provisions permitting the Borrowers to replace non-consenting Lenders in connection with amendments and waivers requiring the consent of all Lenders or of all Lenders directly affected thereby so long as Lenders holding more than 50% of the aggregate amount of the loans and commitments under the Credit Facilities shall have consented thereto.
Expenses and Indemnification:	In addition to those reasonable out-of-pocket expenses reimbursable under the Commitment Letter, all reasonable out-of-pocket expenses of the Lead Arrangers and the Administrative Agent (and the Lenders for enforcement costs and documentary taxes) associated with the preparation, execution and delivery of any waiver or modification (whether or not effective) requested by the US Borrower of, and the enforcement (as against the Credit Parties) of, any Credit Document (including reasonable fees, disbursements and other charges of a single counsel for the Administrative Agent; provided that reasonable fees, disbursements and other charges of additional counsel shall be reimbursed in the event of a need for local and/or regulatory counsel) are to be paid by the Credit Parties.
	The Credit Parties will indemnify each of the Lead Arrangers, the Administrative Agent and the other Lenders and hold them harmless from and against all liabilities and related reasonable out-of-pocket costs and expenses (including reasonable fees, disbursements and other charges of a single counsel; provided that additional counsel may be retained in the event of conflict or a need for local counsel) arising out of or relating to any litigation or other proceeding (regardless of whether the Lead Arrangers, the Administrative Agent or any such other Lender is a party thereto) that relate to the Transactions or any transactions related thereto, except to the extent determined by a final judgment of a court of competent

[SENIOR CREDIT FACILITIES]

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	jurisdiction to have resulted from the bad faith, gross negligence or willful misconduct of such person or its officers, directors, employees, affiliates, agents or controlling persons.
Governing Law and Forum:	New York.
Waiver of Jury Trial:	All parties to the Credit Documents will waive the right to trial by jury.
Special Counsel for Lead Arrangers:	Cahill Gordon & Reindel llp (including local counsel as selected by the Lead Arrangers).

[SENIOR CREDIT FACILITIES]

ANNEX I

Interest Rates and Fees:	Interest on the loans under the Credit Facilities will accrue at a rate based on, except in the case of loans under the Euro Term Loan Facility, the ABR plus the Applicable Margin or, except in the case of swingline loans, LIBOR plus the Applicable Margin. The “Applicable Margin” shall mean (i) if the US Borrower shall have delivered the Required Target Financials and the Credit Facilities shall have received ratings from Moody’s and S&P, and the US Borrower’s corporate credit rating is at least B1 from Moody’s and B+ from S&P (x) 2.00% in the case of LIBOR loans and (y) 1.00% in the case of ABR loans, (ii) if the US Borrower shall have delivered the Required Target Financials and the Credit Facilities shall have received ratings from Moody’s and S&P, and clause (i) does not apply but the US Borrower’s corporate credit rating is at least B2 from Moody’s and B from S&P (x) 2.25% in the case of LIBOR loans and (y) 1.25% in the case of ABR loans and (iii) if neither clause (i) nor clause (ii) applies, 2.75% in the case of LIBOR loans and (y) 1.75% in the case of ABR loans; provided, that, from and after the date of delivery of (x) financial statements of the US Borrower for the first full fiscal quarter ending after the Closing Date and (y) all audited and unaudited financial statements of the Acquired Business that the US Borrower is required to file with the SEC pursuant to Item 9.01 of Form 8-K (the “Required Target Financials”), Applicable Margins under the Revolving Facility and the US Tranche A Term Loan Facility will be based on a grid to be negotiated based on the US Borrower’s total leverage ratio.
	“ABR” means the higher of (i) the corporate base rate of interest announced by the Administrative Agent from time to time, changing effective on the date of announcement of said corporate base rate changes, and (ii) the Federal Funds Rate plus 0.50% per annum. The corporate base rate is not necessarily the lowest rate charged by the Administrative Agent to its customers.
	“LIBOR” means the rate determined by the Administrative Agent to be available to the Lenders in the London

[SENIOR CREDIT FACILITIES]

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interbank market for deposits in the applicable currency in the amount of, and for a maturity corresponding to, the amount of the applicable LIBOR loan (as such rate appears on, in the case of dollars, page 3750 of the Dow Jones Market Service and, in the case of Euro, page 248 of the Telerate screen (or any successor screen)), as adjusted for maximum statutory reserves and mandatory costs.

Borrower may select interest periods of one, two, three or six months for LIBOR borrowings (or, if agreed to by all applicable Lenders, nine or twelve months). Interest will be payable in arrears (i) in the case of ABR loans, at the end of each quarter and (ii) in the case of LIBOR loans, at the end of each interest period and, in the case of any interest period longer than three months, no less frequently than every three months. Interest on all borrowings shall be calculated on the basis of the actual number of days elapsed over (x) in the case of LIBOR loans, a 360-day year, and (y) in the case of ABR loans, a 365- or 366-day year, as the case may be.

Commitment fees accrue on the undrawn amount of the Revolving Facility (without giving effect to any swingline loans), commencing on the Closing Date. The commitment fee in respect of the Revolving Facility will be 0.50% per annum; provided, that, from and after the date of delivery of (x) financial statements of the US Borrower for the first full fiscal quarter ending after the Closing Date and (y) the Required Target Financials, commitment fees under the Revolving Facility will be based on a grid to be negotiated based on the US Borrower’s total leverage ratio.

All commitment fees will be payable in arrears at the end of each quarter and upon any termination of any commitment, in each case for the actual number of days elapsed over a 360-day year.

[SENIOR CREDIT FACILITIES]

CONFIDENTIAL EXHIBIT B

INTERIM LOAN

SUMMARY OF TERMS AND CONDITIONS^*

Borrower:	Mylan Laboratories, Inc. (“Borrower”).
Joint Lead Arrangers:	Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. (the “Lead Arrangers”).
Administrative Agent:	A Lender or other financial institution to be agreed between the Borrower and Merrill Lynch (the “Administrative Agent”).
Lenders:	Merrill Lynch Capital Corporation (or one of its affiliates), Citigroup, GSCP and a syndicate of financial institutions (the “Lenders”) arranged by the Lead Arrangers and reasonably acceptable to Borrower.
Interim Loan:	Senior Interim Loan (the “Interim Loan”).
Principal Amount:	$2,850.0 million.
Documentation:	Usual for facilities and transactions of this type and reasonably acceptable to Borrower and the Lead Arrangers. The documentation for the Interim Loan will include, among others, a credit agreement (the “Interim Loan Agreement”), guarantees and other appropriate documents (collectively, the “Interim Loan Documents”), which shall be reasonably consistent with the documentation for the Senior Credit Facilities, except as to economic terms, provisions pertaining to security and other provisions relating to terms which are different as contemplated herein.
Transactions:	As described in the Commitment Letter.

^* Capitalized terms used herein and not defined shall have the meanings assigned to such terms in the attached Credit Facilities Commitment Letter (the “Commitment Letter”).

[INTERIM LOAN]

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Use of Proceeds:	Together with proceeds derived from the Senior Credit Facilities, to finance the Acquisition and the Refinancing and to pay the fees and expenses related to the Transactions.
Termination of Commitments:	The commitment in respect of the Interim Loan (including pursuant to the Commitment Letter) will automatically and permanently terminate on the date that is 270 days after the date the Acquisition Agreement is notarized. In addition, the commitments in respect of the Interim Loan will automatically and permanently terminate on the date of the consummation of the Acquisition to the extent not drawn down on such date.
Maturity:	The Interim Loan will mature on the date (the “Initial Maturity Date”) that is twelve months after the initial funding date (the “Funding”). Upon the satisfaction of the terms and conditions described under “Exchange Feature; Rollover Securities and Rollover Loans”, the Interim Loan will be exchanged for, at the option of each Lender, either (i) unsecured senior debt securities (“Rollover Securities”), evidenced by an indenture in a form attached to the Interim Loan Agreement and maturing on the ninth anniversary of the Initial Maturity Date, or (ii) unsecured senior loans maturing on the ninth anniversary of the Initial Maturity Date (the “Rollover Loans”), evidenced by the Interim Loan Agreement.
Interest Rate:	(A) Interim Loan. The Interim Loan will bear interest at a rate per annum expressed as a basis point spread over 3 month LIBOR:

From the	To the
Beginning	End of
of Month	Month	Spread
1	6	450 bps
7	9	500 bps
10	12	550 bps

Notwithstanding the foregoing, in no event will the interest rate (without giving effect to default interest) be greater than 11.25% per annum (the “Interest Cap”).

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	To the extent that LIBOR cannot be determined or any Lender is unable to maintain a LIBOR loan, the Interim Loan shall bear interest at a rate per annum equal to the higher of (x) the Federal Funds Rate plus 0.50% per annum or (y) the Prime Rate (as determined by the Administrative Agent), plus in each case the spread as indicated above (minus 100 bps).
	(B) Rollover Securities and Rollover Loans. The Rollover Loans and Rollover Securities (other than Fixed Rate Rollover Securities) will bear interest at a rate equal to the Initial Rate (as defined below) plus the Exchange Spread (as defined below). Notwithstanding the foregoing, the interest rate per annum payable on the Rollover Loans and any Rollover Securities shall not exceed the Interest Cap set forth above with respect to the Interim Loan.
	“Exchange Spread” means 0 basis points during the three-month period commencing on the Initial Maturity Date and shall increase by 50 basis points at the beginning of each subsequent three-month period.
	“Initial Rate” shall be determined on the Initial Maturity Date and shall equal the interest rate borne by the Interim Loan on the day immediately preceding the Initial Maturity Date plus 50 basis points.
Default Rate:	All overdue amounts shall bear interest at a rate per annum equal to 2% in excess of the applicable interest rate (including applicable margin).
Interest Payment Dates:	(A) Interim Loan. Quarterly, in arrears.
	(B) Rollover Securities and Rollover Loans. Quarterly, in arrears (or semi-annually in arrears in the case of Fixed Rate Rollover Securities).
Security:	None (including in respect of the Rollover Securities and Rollover Loans).
Guarantee:	The Interim Loan will be guaranteed on an unsecured senior basis by each US subsidiary of Borrower that guarantees the Senior Credit Facilities. Each guarantee of the

[INTERIM LOAN]

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	Interim Loan shall be automatically released upon release of the corresponding guarantee under the Senior Credit Facilities.
Ranking:	The Interim Loan (and the Rollover Securities and Rollover Loans) will be an unsecured senior obligation of Borrower ranking pari passu with other senior indebtedness of Borrower.
Optional Prepayment:	The Interim Loan (and Rollover Loans) will be prepayable at par at any time at Borrower’s option, in whole or in part, plus accrued and unpaid interest. Breakage costs (excluding interest margin), if any, will be paid by Borrower.
Mandatory Prepayment:	To the extent not prohibited by the Senior Credit Facilities, upon the receipt by Borrower or any of its subsidiaries of the net cash proceeds from (i) the issuance of any debt (other than under the Senior Credit Facilities and subject to exceptions and baskets to be negotiated); (ii) any sale for cash of capital stock or any securities convertible into or exchangeable for capital stock or any warrants, rights or options to acquire capital stock (subject to baskets and exceptions to be agreed upon, including, without limitation, an exception for the sale of equity in connection with incentive compensation plans and issuances in connection with acquisitions); and (iii) insurance proceeds or asset sales and other asset dispositions (to the extent such proceeds are not applied to the Senior Credit Facilities and subject to baskets and exceptions to be agreed upon, including, without limitation, an exception for the sale of assets, including inventory, or property in the ordinary course of business, and subject to full rights of reinvestment within 12 months of receipt of net proceeds, provided that if such amounts are committed to be reinvested within such 12 month period, such reinvestment period shall extend for an additional 6 months), Borrower will prepay the Interim Loan in an amount equal to such net proceeds at par, together with accrued interest thereon. Breakage costs (excluding interest margin), if any, will be paid by Borrower.

[INTERIM LOAN]

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Change of Control:	Upon the occurrence of a Change of Control (to be defined), Borrower will be required to offer to prepay the entire aggregate principal amount of the Interim Loan or Rollover Securities and Rollover Loans, as the case may be, in cash for a purchase price equal to 100% of the principal amount thereof (101% in the case of Fixed Rate Rollover Securities), plus accrued and unpaid interest.
Exchange Feature; Rollover Securities and Rollover Loans:	On the Initial Maturity Date, unless Borrower is in bankruptcy, each Lender (and participant) shall have its interest in the Interim Loan automatically exchanged for, at the option of each Lender, either Rollover Securities or Rollover Loans, and each Lender may at any time exchange its Rollover Loans for Rollover Securities. The Rollover Securities (including the Fixed Rate Rollover Securities) and the Rollover Loans will be (i) mandatorily redeemable or repayable (as applicable) from proceeds of certain asset sales on the basis applicable to the Interim Loan, except that, in lieu of mandatory prepayments, Borrower shall be required to make mandatory offers to purchase such Rollover Securities or Rollover Loans and (ii) optionally redeemable or repayable (as applicable) at par plus accrued and unpaid interest, subject to the provisions relating to Fixed Rate Rollover Securities. All mandatory offers to repurchase shall be made pro rata between the Rollover Securities (including Fixed Rate Rollover Securities) and the Rollover Loans, and all optional redemptions and repayments shall be made pro rata between the Rollover Securities (other than Fixed Rate Rollover Securities) and the Rollover Loans and shall be accompanied by either (x) a pro rata redemption of Fixed Rate Rollover Securities at the premium then applicable thereto or (y) a pro rata offer to repurchase Fixed Rate Rollover Securities.
	The Rollover Securities will contain customary defeasance provisions.
	Breakage costs (excluding interest margin), if any, will be paid by Borrower (except in the case of Fixed Rate Rollover Securities).

[INTERIM LOAN]

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	No Rollover Securities will be issued until the Borrower receives requests to issue at least an aggregate of $75.0 million of Rollover Securities.
	The Rollover Securities (including any Fixed Rate Rollover Securities) will be evidenced by an indenture in form for qualification under the Trust Indenture Act and will otherwise contain provisions customary for public debt securities, but shall in no event be more restrictive than those contained in the preliminary offering memorandum or private placement memorandum used to market the Senior Notes prior to the Closing Date, and the Rollover Loans will be evidenced by the Interim Loan Agreement. The holders of the Rollover Securities will be entitled to exchange offer and other registration rights to permit resale by the holders of Rollover Securities without restriction under applicable securities laws no less favorable to holders than those customarily applicable to an offering pursuant to Rule 144A.
Fixed Rate Rollover Securities:	Each holder of Rollover Loans or Rollover Securities shall have the right, upon a sale to a third party to fix the interest rate on such Rollover Security or to exchange such Rollover Loan for a fixed rate Rollover Security (each a “Fixed Rate Rollover Security”) at a rate not higher than the then applicable rate of interest.
	No Fixed Rate Rollover Securities will be issued until the Borrower receives requests to issue at least an aggregate of $75.0 million of Fixed Rate Rollover Securities.
	Each Fixed Rate Rollover Security will be non-callable for five years from the Closing Date (subject to 35% clawback provisions with the proceeds of customary equity offerings at par plus accrued interest plus a premium equal to the coupon) and will be callable thereafter at par plus accrued interest plus a premium equal to one-half the coupon in effect on the date of sale of the Fixed Rate Rollover Securities, which premium shall decline ratably on each anniversary of the Initial Maturity Date to zero two years before the maturity of the Fixed Rate Rollover Securities; provided, however, that any Fixed Rate Rollover Securi-

[INTERIM LOAN]

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	ties will be callable prior to such fifth anniversary at a redemption price equal to par plus accrued interest plus a make whole premium calculated on the basis of a discount rate equal to the then Treasury Rate plus one-half of one percent (0.50%).
Conditions to Effectiveness and to Interim Loan:	As set forth on Annex I to the Commitment Letter.
Representations and Warranties:	The definitive documentation shall contain such representations and warranties as are substantially similar to those set forth in the Senior Term Sheet, with modifications and additions as are usual and customary for bridge financings.
Affirmative Covenants:	The definitive documentation shall contain such affirmative covenants as are substantially similar to those set forth in the Senior Term Sheet (excluding the covenants pertaining to security), with modifications and additions as are usual and customary for bridge financings.
	Upon issuance of the Rollover Securities and the Rollover Loans, the affirmative covenants shall conform to affirmative covenants customary in a high-yield indenture, but shall in no event be more restrictive than those contained in the preliminary offering memorandum or private placement memorandum used to market the Senior Notes prior to the Closing Date.
Negative Covenants:	The definitive documentation shall contain such negative covenants as are substantially similar to those set forth in the Senior Term Sheet (excluding the covenants pertaining to security), with modifications and additions as are usual and customary for bridge financings.
	Upon issuance of the Rollover Securities and the Rollover Loans, the negative covenants shall conform to negative covenants customary in a high-yield indenture, but shall in no event be more restrictive than those contained in the preliminary offering memorandum or private placement memorandum used to market the Senior Notes prior to the Closing Date.

[INTERIM LOAN]

-8-

Financial Covenants:	None.
Events of Default:	The definitive documentation shall contain such events of default as are customary for facilities similar to the Interim Loan and reasonably consistent with those in the Senior Credit Facilities. Upon issuance of the Rollover Securities and the Rollover Loans, the events of default shall conform to events of default customary in a high-yield indenture, but shall in no event be more restrictive than those contained in the preliminary offering memorandum or private placement memorandum used to market the Senior Notes prior to the Closing Date.
Clean-up Period:	Same as for Senior Credit Facilities.
Refinancing of Interim Loan:	Borrower shall use commercially reasonable efforts to (i) cooperate with the investment banks party to the Engagement Letter (the “Take-out Banks”) and provide the Take-out Banks with information reasonably required by the Take-out Banks in connection with the offering of debt securities (the “Debt Offering”) or other means of refinancing the Interim Loan and the Rollover Securities and the Rollover Loans, (ii) assist the Take-out Banks in connection with the marketing of the Take-out Securities (including promptly providing to the Take-out Banks any information reasonably requested to effect the issue and sale of the Take-out Securities and making available senior management of Borrower for investor meetings), (iii) cooperate with the Take-out Banks in the timely preparation of any registration statement or private placement memorandum relating to the Debt Offering and other marketing materials to be used in connection with the syndication of the Interim Loan.
Yield Protection and Increased Costs:	For the Interim Loan, as are usual for facilities and transactions of this type and as are substantially similar to the provisions set forth in the Senior Term Sheet. For the Rollover Securities and the Rollover Loans, none.

[INTERIM LOAN]

-9-

Required Lenders:	Lenders having a majority of the outstanding credit exposure (the “Required Lenders”), subject to certain customary provisions of the Interim Loan Documents requiring the consent of Lenders having a greater share (or all) of the outstanding credit exposure (it being understood that any required approval for purposes of releasing less than all or substantially all of the Guarantors shall only require the consent of the Required Lenders).
	The definitive documentation for the Interim Loan and the Rollover Loan shall contain customary provisions permitting the Borrower to replace non-consenting Lenders in connection with amendments and waivers requiring the consent of all Lenders or of all Lenders directly affected thereby so long as Lenders holding more than 50% of the outstanding credit exposure have consented thereto.
Assignments and Participations:	Each assignment (unless to another Lender or its affiliates) shall be in a minimum amount of $1.0 million (unless Borrower and the Administrative Agent otherwise consent or unless the assigning Lender’s exposure is thereby reduced to zero). Prior to the first anniversary of the Closing Date, assignments shall be subject to the consent of each of the Borrower and the Lead Arrangers to the extent that any such assignment would cause Lenders on the Closing Date to hold less than 50.1% of the outstanding credit exposure (such consent not to be unreasonably withheld, delayed or conditioned, provided that Borrower’s consent will not be required if a payment or bankruptcy event of default has occurred and is continuing). Following the first anniversary of the Closing Date, assignments shall be permitted with the consent of the Administrative Agent. Participations shall be permitted without restriction. Voting rights and benefits of participants will be subject to customary limitations.
Expenses and Indemnification:	In addition to those reasonable out-of-pocket expenses reimbursable under the Commitment Letter, all reasonable out-of-pocket expenses of the Lead Arrangers and the Administrative Agent (and the Lenders for enforcement costs and documentary taxes) associated with the preparation, execution and delivery of any waiver or modification

[INTERIM LOAN]

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	(whether or not effective) requested by the Borrower of, and the enforcement of, any Interim Loan Document (including reasonable fees, disbursements and other charges of a single counsel, provided that reasonable fees, disbursements and other charges of additional counsel may be reimbursed in the event of a need for local and/or regulatory counsel) are to be paid by the Borrower.
	Borrower will indemnify each of the Lead Arrangers, the Administrative Agent and the other Lenders and hold them harmless from and against all liabilities and related reasonable out-of-pocket costs and expenses (including reasonable fees, disbursements and other charges of a single counsel, provided that reasonable fees, disbursements and other charges of additional counsel may be reimbursed in the event of a conflict or a need for local and/or regulatory counsel) and liabilities arising out of or relating to any litigation or other proceeding (regardless of whether the Lead Arrangers, the Administrative Agent or any such other Lender is a party thereto) that relates to the Transactions or any transactions related thereto, except to the extent determined by a final judgment of a court of competent jurisdiction to have resulted from the bad faith, gross negligence or willful misconduct of such person or its officers, directors, employees, affiliates, agents or controlling persons.
Governing Law and Forum:	New York.
Waiver of Jury Trial:	All parties to the Interim Loan Documents waive right to trial by jury.
Special Counsel for Lead Arrangers:	Cahill Gordon & Reindel llp(and such appropriate local counsel as may be selected by the Lead Arrangers).

[INTERIM LOAN]

EX-31.1

Exhibit 31.1

Certification of CEO Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert J. Coury, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Mylan Laboratories Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period[s] presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Robert J. Coury

Robert J. Coury

Chief Executive Officer

Date: August 7, 2007

EX-31.2

Exhibit 31.2

Certification of CFO Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Edward J. Borkowski, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Mylan Laboratories Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period[s] presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Edward J. Borkowski

Edward J. Borkowski

Chief Financial Officer

Date: August 7, 2007

EX-32

EXHIBIT 32

CERTIFICATION of CEO and CFO PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Mylan Laboratories Inc. (the “Company”) for the period ended June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Robert J. Coury

Robert J. Coury

Chief Executive Officer

Date: August 7, 2007

/s/  Edward J. Borkowski

Edward J. Borkowski

Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished in accordance with Securities and Exchange Commission Release No. 34-47551 and shall not be considered filed as part of the Form 10-Q.