Taro Pharmaceutical Industries (Taro) has filed a lawsuit against Sun Pharmaceutical Industries and certain of its affiliates (collectively, 'Sun') in the United States District Court for the Southern District of New York. Taro alleges in its complaint violations of the Williams Act, 15 USC Sections 78n(d) and (e); and unlawful use and disclosure of Taro's proprietary and confidential business information in violation of a non-disclosure agreement.

Taro stated that Sun has failed to disclose to Taro shareholders material information such as the recent action by the US Food and Drug Administration (FDA) against Caraco Laboratories, Inc, Sun's majority owned US subsidiary (Caraco) in which the FDA seized $20 million in products, effectively closing down manufacturing operations of Caraco; the fact that the FDA action apparently grew out of a long pattern of failure to comply with regulatory requirements governing the manufacture of drugs at Caraco under Sun's controlling hand; the impact these events and other serious lapses of operational diligence and corporate governance would have on Taro, its operations, business and its shareholders if Sun were to gain control of Taro; the harm that Sun has inflicted on Caraco's minority public shareholders in order to advantage Sun and Sun's shareholders; suits filed by shareholders of Caraco alleging violations of securities law and failure to disclose material facts; and recent disclosures by Caraco of the resignation of a Caraco outside independent director over serious 'corporate governance' issues at Caraco.

Taro also alleges that Sun misappropriated confidential information about Taro gathered as part of the proposed merger transaction. Taro alleges that Sun illegally used such confidential information to disrupt and harm Taro's customer relationships and undermine Taro's revenues.

Since June 2008, Sun has continued a tender offer at below market price for Taro's shares, despite the opposition of Taro's Board of Directors. Sun announced its hostile tender offer after a proposed merger agreement between Sun and Taro resulted in opposition by Taro shareholders and failed to gain their approval. That merger agreement was subsequently terminated by the company pursuant to the terms of the merger agreement.

With respect to the tender offer, the complaint details how Sun has failed to disclose material information regarding, among other things, the above cited significant FDA warnings and actions regarding operations at Caraco, Sun's majority owned subsidiary, which accounts for a significant portion of their global revenue and which is their largest US facility and base of US operations. Specifically, the Taro suit alleges that Sun's tender offer violates the Williams Act by failing to disclose such matters.

In addition, Taro alleges in its complaint that Sun and its affiliates have misappropriated and misused confidential information of Taro which Sun obtained under a 2007 written Confidentiality Agreement providing that all such information would be used solely to evaluate a proposed transaction among the parties or their affiliates.

As remedy, Taro seeks, among other things, to enjoin use of Sun's improper tender offer materials as well as damages and injunctive relief. The filing of the present complaint is in addition to ongoing pending litigation involving Taro, Sun and others in Israel and New York State courts.