-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KoErl7xpaVBJxa/1wrYR7TsvxAYOGQECT4CG4/EVrkmiuYw8tz2/mUlzK95X4v+e 9a+jWqvE38qD1lvG3BgX3g== 0000947871-08-000334.txt : 20080609 0000947871-08-000334.hdr.sgml : 20080609 20080530165230 ACCESSION NUMBER: 0000947871-08-000334 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20070703 DATE AS OF CHANGE: 20080609 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TARO PHARMACEUTICAL INDUSTRIES LTD CENTRAL INDEX KEY: 0000906338 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-49231 FILM NUMBER: 08871294 BUSINESS ADDRESS: STREET 1: 14 HAKTOR ST CITY: HAIFA BAY STATE: L3 ZIP: 26110 BUSINESS PHONE: 9143459001 MAIL ADDRESS: STREET 1: THREE SKYLINE DR CITY: HAWTHORNE STATE: NY ZIP: 10532 FORMER COMPANY: FORMER CONFORMED NAME: TARO VIT INDUSTRIES LTD /ISRAEL/ DATE OF NAME CHANGE: 19930601 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SUN PHARMACEUTICAL INDUSTRIES LTD CENTRAL INDEX KEY: 0001197089 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: SPARC AKOTA ROAD CITY: VADODARA STATE: K7 ZIP: 390020 BUSINESS PHONE: 01191228212128 SC 13D 1 ss39016_sc13d.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

TARO PHARMACEUTICAL INDUSTRIES LTD.

(Name of Issuer)

ORDINARY SHARES, PAR VALUE NIS 0.0001 PER SHARE

(Title of Class of Securities)

M8737E108

(CUSIP Number)

Mr. Sudhir V. Valia, Acme Plaza, Andheri Kurla Road, Andheri (East), Mumbai 400 059., India

(Name, Address and Telephone Number of Person Authorized

to Receive Notices and Communications)

May 18, 2007

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because § 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g) check the following box o.

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See § 240.13d-7(b) for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

SCHEDULE 13D

CUSIP No. M8737E108

Page 2 of 20 Pages

1	NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) SUN PHARMACEUTICAL INDUSTRIES LTD.
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS (See Instructions) PF
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION The State of India
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 13,575,000^*
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 13,575,000
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 13,575,000

_________________________

^* Includes 3,770,833 Ordinary Shares acquired by Alkaloida Chemical Company Exclusive Group Ltd. (“Alkaloida”), an indirect subsidiary of Sun Pharmaceutical Industries Ltd. (“Sun”), on May 21, 2007 and 3,016,667 Ordinary Shares acquired by Alkaloida on May 30, 2007 pursuant to the share purchase agreement dated May 18, 2007 (“Purchase Agreement”), between Alkaloida and the Issuer, which entitled Alkaloida to acquire a total of 7,500,000 Ordinary Shares. This amount also includes 7,500,000 Ordinary Shares which Sun, under certain circumstances, has the right to acquire pursuant to a warrant (the “Warrant”) issued to Sun by the Issuer on May 18, 2007.

CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

31.39%^**

TYPE OF REPORTING PERSON (See Instructions)

_________________________

^** Based on 36,453,118 Ordinary Shares outstanding as of June 7, 2007 as reported by the Issuer in its Proxy Statement filed on Form 6-K on June 11, 2007 and an additional 6,787,500 Ordinary Shares issuable upon exercise of the Warrant.

SCHEDULE 13D

CUSIP No. M8737E108

Page 4 of 20 Pages

1	NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) SUN PHARMA GLOBAL INC. (BVI)
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS (See Instructions) AF
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)				o
6	CITIZENSHIP OR PLACE OF ORGANIZATION The Republic of Hungary
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 6,787,500^*
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 6,787,500
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 6,787,500
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions)			o

_________________________
^* Includes 3,770,833 Ordinary Shares acquired by Alkaloida on May 21, 2007 and 3,016,667 Ordinary Shares acquired by Alkaloida on May 30, 2007 pursuant to the Purchase Agreement which entitled Alkaloida to acquire a total of 7,500,000 Ordinary Shares.

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

18.61%^**

TYPE OF REPORTING PERSON (See Instructions)

_________________________

^** Based on 36,453,118 Ordinary Shares outstanding as of June 7, 2007 as reported by the Issuer in its Proxy Statement filed on Form 6-K on June 11, 2007.

SCHEDULE 13D

CUSIP No. M8737E108

Page 6 of 20 Pages

1	NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) ALKALOIDA CHEMICAL COMPANY EXCLUSIVE GROUP LTD
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS (See Instructions) AF
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)				o
6	CITIZENSHIP OR PLACE OF ORGANIZATION British Virgin Islands
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER 6,787,500^*
		8	SHARED VOTING POWER 0
		9	SOLE DISPOSITIVE POWER 6,787,500
		10	SHARED DISPOSITIVE POWER 0
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 6,787,500
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions)			o

_________________________

^* Includes 3,770,833 Ordinary Shares acquired by Alkaloida, a direct subsidiary of Sun Pharma Global, Inc. (BVI) which is a direct wholly-owned subsidiary of Sun, on May 21, 2007 and 3,016,667 Ordinary Shares acquired by Alkaloida on May 30, 2007 pursuant to the Purchase Agreement which entitled Alkaloida to acquire a total of 7,500,000 Ordinary Shares.

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

18.61%^**

TYPE OF REPORTING PERSON (See Instructions)

_________________________

^** Based on 36,453,118 Ordinary Shares outstanding as of June 7, 2007 as reported by the Issuer in its Proxy Statement filed on Form 6-K on June 11, 2007.

EXPLANATORY NOTE

This Schedule 13D for SUN PHARMACEUTICAL INDUSTRIES LTD (the "Filer"), TARO PHARMACEUTICAL INDUSTRIES LTD (the "Issuer") is being refiled to correct the SC 13D filing made on July 3, 2007. The initial erroneous SC 13D filing was made for TARO PHARMACEUTICAL INDUSTRIES LTD as (the Filer) and SUN PHARMACEUTICAL INDUSTRIES LTD as (the Issuer). Please note that no substantive changes have been made to the SC 13D as the error was an inversion of the Filer's and the Issuer's CIK and CCC numbers on the Submission Header page of the filing.

Item 1.

Security and Issuer.

This Statement on Schedule 13D (this “Statement”) relates to the Ordinary Shares, par value NIS .0001 per share (the “Ordinary Shares”), of Taro Pharmaceutical Industries Ltd. an Israeli corporation (the “Issuer”), whose principal executive offices are located at Italy House, Euro Park, Yakum 60972, Israel.

Item 2.

Identity and Background.

(a) - (c). This Statement is being filed on behalf of Sun Pharmaceutical Industries Ltd. (“Sun”), Sun Pharma Global, Inc. (BVI) (“Sun Pharma”) and Alkaloida Chemical Company Exclusive Group Ltd. (“Alkaloida”) (collectively, the “Reporting Persons” and each a “Reporting Person”).

Sun is a company organized under the laws of the State of India. Sun Pharma is a company organized in the British Virgin Islands and is a direct wholly-owned subsidiary of Sun. Alkaloida is company organized in the Republic of Hungary and is 99.99% owned by Sun Pharma. Sun and its subsidiaries operate as an international, integrated, specialty pharmaceutical company.

The principal business address of each Reporting Person is:

Reporting Person	Principal Business Address

Sun Pharmaceutical Industries Ltd.	17/B, Mahal Industrial Estate, Mahakali Caves Road, Andeheri (East), Mumbai 400 093, India.

Sun Pharma Global, Inc. (BVI)	International Trust Building, P. O. Box 659, Road Town, Tortola, British Virgin Islands

Alkaloida Chemical Company Exclusive Group Ltd.	Kabay János u. 29, H-4440 Tiszavasvari, Hungary.

(d) - (e) During the last five years, none of the Reporting Persons or any other person identified in response to this Item 2, including those persons listed at Schedule A, was convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

During the last five years, to the best of the Reporting Persons’ knowledge, none of the Reporting Persons’ directors or executive officers and none of the persons listed at Schedule A (a) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

Item 3.

Source and Amount of Funds or Other Considerations.

6,787,500 of the Ordinary Shares beneficially owned by the Reporting Persons were directly acquired by Alkaloida as described in Item 4 below with available cash on hand. An additional 6,787,500 of the Ordinary Shares beneficially owned by Sun are shares issuable upon exercise of the Warrant as described in Item 4 below.

Item 4.

Purpose of Transaction.

On May 18, 2007, Alkaloida, Aditya Acquisition Company Ltd. an Israeli company (“Merger Sub”) established for the purposes of the merger and a wholly-owned subsidiary of Alkaloida, and Taro Pharmaceutical Industries Ltd. (the “Issuer”) entered into a definitive merger agreement (the “Merger Agreement”) whereby Merger Sub will merge with and into the Issuer and each Ordinary Share of the Issuer outstanding immediately prior to the effective time of the merger will automatically be converted into and represent solely the right to receive $7.75 in cash, without interest and less any applicable withholding tax. Upon the closing of the transactions contemplated by the Merger Agreement, the Issuer will become a wholly-owned subsidiary of Alkaloida.

In connection with the Merger Agreement, Taro Development Corporation (“TDC”), holder of approximately 2.3 million Ordinary Shares, Barrie Levitt and Daniel Moros entered into a merger agreement with Sun Development Corporation I (“US Merger Sub”), a wholly-owned subsidiary of Sun Pharmaceutical Industries, Inc., under which US Merger Sub will merge with and into TDC (the “TDC Merger Agreement”). At the closing of the TDC Merger Agreement, which is conditioned upon the consummation of the transactions contemplated by the Merger Agreement, US Merger Sub will merge with and into TDC. Shareholders of TDC will receive consideration for their TDC shares in the aggregate amount equivalent to $7.75 for each Ordinary Share held by TDC, the same per share consideration as the Issuer’s shareholders will receive pursuant to the Merger Agreement.

In connection with the Merger Agreement, Barrie Levitt, M.D. (Director and Chairman of the Board of Directors of the Issuer), Daniel Moros, M.D. (Director and Vice-Chairman of the Board of Directors of the Issuer), Tal Levitt (Director and Secretary of the Issuer), and certain entities under their control entered into voting agreements with Alkaloida whereby they have agreed to vote all of their Ordinary Shares and certain other shares of the Issuer in favor of the approval and adoption of the Merger Agreement and against any competing transaction.

In connection with the TDC Agreement, Barrie Levitt, M.D., Daniel Moros, M.D., Tal Levitt and Jacob Levitt (collectively, the “TDC Shareholders”) entered into a voting agreement with a subsidiary of Sun whereby the TDC Shareholders agreed to vote all of their TDC ordinary shares in favor of the approval and adoption of the TDC Agreement and against any competing transaction.

Furthermore, in connection with the transactions described above, TDC, Barrie Levitt, M.D., Daniel Moros, M.D. and Tal Levitt granted Alkaloida and its affiliates an option (the “Option Agreement”), exercisable for 30 days after termination of the Merger Agreement, or in the event that the Merger Agreement is terminated as a result of an unsolicited third-party acquisition proposal, for 30 days after the definitive acquisition agreement with respect to such third-party acquisition proposal has been terminated, to acquire all securities owned by them for $7.75 per share, including all Ordinary Shares owned by them, provided that Alkaloida and its affiliates commence a tender offer to purchase any and all shares owned by the Issuer’s shareholders at $7.75 per share. In the event that Alkaloida and its affiliates elect to exercise the options under the Option Agreement, Barrie Levitt, M.D., Tal Levitt, Daniel Moros, M.D. and Jacob Levitt agree to vote all securities of TDC beneficially owned by them in favor of the transactions contemplated by the Option Agreement.

Prior to entering into the agreements referred to above, the Issuer advised Sun that they had substantial liquidity issues and that the Issuer would not enter into any of the above contemplated transactions unless Sun or its affiliates provided interim funding to help the Issuer meet its short-term debt obligations. To facilitate the above transactions and in order to provide interim funding to the Issuer in order to meet certain of its short-term debt obligations, Alkaloida and the Issuer entered into a share purchase agreement (the “Purchase Agreement”) on May 18, 2007 pursuant to which Alkaloida agreed to acquire a total of 7,500,000 Ordinary Shares at a price per share of $6.00 for a total purchase price of $45 million. In connection with the Purchase Agreement, Issuer entered into a registration rights agreement, dated May 18, 2007 pursuant to which Issuer agreed to grant certain customary registration rights for Issuer’s shares held by Sun and its affiliates.

On May 10, 2007 and May 19, 2007, Franklin Advisers, Inc. and Templeton Asset Management Ltd. (collectively, “Templeton”), the beneficial owners of approximately 9% of the Ordinary Shares as of such dates, initiated certain court proceedings in Israel regarding the Issuer. As part of such court proceedings, the Issuer and Alkaloida decreased the interim funding pursuant to the Purchase Agreement by 9.5%, from $45 million to $40.725 million. As a result of the court proceedings, Alkaloida acquired 3,770,833 of Ordinary Shares for a total purchase price of $22,624,998 on May 21, 2007 and thereafter acquired an additional 3,016,667 of Ordinary Shares for a total purchase price of $18,100,002 on May 21, 2007.

As of the date of this filing Alkaloida had purchased 6,787,500 Ordinary Shares for a total consideration for $40.725 million. Furthermore, in connection with the above transactions, the Issuer issued to Sun a 3-year warrant to purchase an additional 7,500,000 Ordinary Shares (which, as of the date of this filing, there are 6,787,500 Ordinary Shares underlying such warrant), at an exercise price of $6.00 per share.

If the transactions contemplated by the Merger Agreement are not consummated, Sun and its affiliates will assess all of its options with respect to the Ordinary Shares it beneficially owns depending on all of the facts available to Sun at such time.

Item 5.

Interest in Securities of the Issuer.

The responses of the Reporting Persons to Rows (11) through (13) of the cover pages of this Statement are incorporated herein by reference.

Except as disclosed in this Item 5(a), none of the Reporting Persons nor, to the best of their knowledge, any of the persons listed on Schedule A to this Statement beneficially owns any Ordinary Shares or has the right to acquire any Ordinary Shares.

(a) The responses of the Reporting Persons to (i) Rows (7) through (10) of the cover pages of this Statement on Schedule 13D and (ii) Item 5(a) hereof are incorporated herein by reference.

Except as disclosed in this Item 5(b), none of the Reporting Persons nor, to the best of their knowledge, any of the persons listed on Schedule A to this Statement presently has the power to vote or to direct the vote or to dispose or direct the disposition of any of the Ordinary Shares which they may be deemed to beneficially own.

(b) Except as disclosed in this Statement, none of the Reporting Persons nor, to the best of their knowledge, any of the persons listed on Schedule A to this Statement has effected any transaction in the Shares during the past 60 days or since the most recent filing on Schedule 13D (§ 240.13d-191), whichever is less.

(c) To the best knowledge of the Reporting Persons, no other person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Ordinary Shares beneficially owned by the Reporting Persons.

Item 6.

Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

Except as described above or elsewhere in this Statement or incorporated by reference in this Statement, there are no other contracts, arrangements, understandings or relationships (legal or otherwise) between any of the Reporting Persons or, to the best of their knowledge, any of the persons named in Schedule A to this Statement or between any of the Reporting Persons and any other person or, to the best of their knowledge, any person named in Schedule A to this Statement and any other person with respect to any securities of the Issuer, including, but not limited to, transfer or voting of any securities, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or losses, or the giving or withholding of proxies.

Item 7.

Materials to be Filed as Exhibits.

Exhibit No.	Description
99.1	Share Purchase Agreement, dated May 18, 2007, between Taro Pharmaceutical Industries Ltd. and Alkaloida Chemical Company Exclusive Group Ltd.

99.2	Warrant, dated May 18, 2007, issued by Taro Pharmaceutical Industries Ltd. to Sun Pharmaceutical Industries Ltd.

99.3	Registration Rights Agreement, dated May 18, 2007, between Taro Pharmaceutical Industries Ltd. and Alkaloida Chemical Company Exclusive Group Ltd.

99.4	Agreement of Merger, dated May 18, 2007, by and among Alkaloida Chemical Company Exclusive Group Ltd. Aditya Acquisition Company Ltd. and Taro Pharmaceutical Industries Ltd.

99.5	Form of Voting Agreement with respect to the Merger Agreement.

99.6	Agreement and Plan of Merger, dated May 18, 2007, by and among Sun Pharmaceutical Industries Ltd. Sun Development Corporation I, The Taro Development Corporation, Barrie Levitt and Daniel Moros.

99.7	Form of Voting Agreement with respect to the TDC Merger Agreement.

99.8	Option Letter Agreement, dated May 18, 2007, from The Taro Development Corporation, Barrie Levitt, Tal Levitt, Daniel Moros and Jacob Levitt, to Alkaloida Chemical Company Exclusive Group Ltd.

99.9	Joint Filing Agreement

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated:

July 2, 2007

SUN PHARMACEUTICAL INDUSTRIES

LTD.

/s/ Dilip S. Shanghvi

Signature

Mr. Dilip S. Shanghvi
Chairman & Managing Director

Name/Title

SUN PHARMA GLOBAL, INC. (BVI).

/s/ Sunil Gandhi

Signature

Mr. Sunil Gandhi
Director

Name/Title

ALKALOIDA CHEMICAL COMPANY
EXCLUSIVE GROUP LIMITED.

/s/ Harin Mehta

Signature

Mr. Harin Mehta
Director

Name/Title

SCHEDULE A

ADDITIONAL INFORMATION CONCERNING THE REPORTING PERSONS

SUN PHARMACEUTICAL INDUSTRIES LTD.

Name of Directors of Reporting Persons	Principal Address¹	Principal Occupation²	Citizenship
Dilip S. Shanghvi³	Sun Pharmaceutical Industries Ltd.	Chairman of the Board and Managing Director	Indian

Sudhir V. Valia	Sun Pharmaceutical Industries Ltd. Acme Plaza, Andheri Kurla Road, Andheri (East), Mumbai – 400 059. India.	Director	Indian
Sailesh T. Desai	Sun Pharmaceutical Industries Ltd. 402, 4th Floor, R. K. Centre, Fatehgunj Main Road, Baroda – 390 002. India.	Director	Indian
S. Mohanchand Dadha	Pharmaceutical Industries Ltd. 10, Jeypore Nagar, Chennai - 600 086. India.	Director	Indian
Hasmukh S. Shah	Sun Pharmaceutical Industries Ltd. 402, 4^th Floor, R. K. Centre, Fatehgunj Main Road, Baroda – 390 002. India.	Director	Indian
Keki Minu Mistry	HDFC Limited Ramon House, 5th Floor, H. T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai – 400 020. India	Director	Indian

_________________________

¹ Unless otherwise indicated the Principal Address of each person is the Principal Address of Sun Pharmaceutical Industries Ltd. 17/B, Mahal Industrial Estate, Mahakali Caves Road, Andeheri (East), Mumbai 400 093, India.

² Unless otherwise indicated the Principal Occupation of each person is employment by Sun Pharmaceutical Industries Ltd.

³ As of the April 19, 2007, Dilip Shanghvi holds 23,397,048 Equity Shares of Sun Pharmaceutical Industries Ltd.

Name of Directors of Reporting Persons	Principal Address¹	Principal Occupation²	Citizenship
Ashwin S. Dani	Asian Paints (India) Ltd. 6-A, Shanti Nagar, Santacruz (East), Mumbai – 400055. India.	Director	Indian

Name of Executive Officers of Reporting Persons	Principal Address²	Principal Occupation³	Citizenship
Vipul Doshi	Sun Pharmaceutical Industries Ltd. SPARC, Tandalja, Vadodara-390 020, Gujarat, India	Sr. Vice President (Quality)	Indian
Rakesh Mehta	Sun Pharmaceutical Industries Ltd. Acme Plaza, Andheri Kurla Road, Andheri (E) Mumbai – 400 059 Maharashtra, India	Sr. Vice President, (International Marketing)	Indian
Abhay Gandhi	Sun Pharmaceutical Industries Ltd. Acme Plaza, Andheri Kurla Road, Andheri (E) Mumbai – 400 059, Maharashtra, India	Sr. Vice President, (International Marketing)	Indian
T. K. Roy	Sun Pharmaceutical Industries Ltd. Acme Plaza, Andheri Kurla Road, Andheri (E) Mumbai – 400 059, Maharashtra, India	Sr. Vice President (Marketing)	Indian
Lokesh Sibal	Sun Pharmaceutical Industries Ltd. Acme Plaza, Andheri Kurla Road, Andheri (E) Mumbai – 400 059, Maharashtra, India	Vice President (Marketing & Sales)	Indian
Sharda Crishna	Sun Pharmaceutical Industries Ltd. Acme Plaza, Andheri Kurla Road, Andheri (E) Mumbai – 400 059, Maharashtra, India	Vice President (Marketing)	Indian

Name of Executive Officers of Reporting Persons	Principal Address²	Principal Occupation³	Citizenship
Kirti Ganorkar	Sun Pharmaceutical Industries Ltd. 17/B, Mahal Industrial Estate, Mahakali Caves Road, Andheri (East), Mumbai 400 093 India	Vice President (Business Development)	Indian
Harin P. Mehta	A/603,Rashmi Avenue, Thakur Complex, Kandivli, Mumbai, India.	Senior Vice President-Operations Hungary	Indian
Sampad Bhattacharya	Sun Pharmaceutical Industries Ltd. Halol, Gujarat	Vice President- Operations	Indian
A. H. Khan	Sun Pharmaceutical Industries Ltd. Acme Plaza, Andheri Kurla Road, Andheri (E) Mumbai – 400 059 Maharashtra, India	Sr. General Manager (Human Resources )	Indian
D. R. Desai	Sun Pharmaceutical Industries Ltd. 17/B, Mahal Industrial Estate, Mahakali Caves Road, Andheri (East), Mumbai 400 093 India	Sr. General Manager (Accounts)	Indian
Kamlesh H. Shah	Sun Pharmaceutical Industries Ltd. Acme Plaza, Andheri Kurla Road, Andheri (E) Mumbai – 400 059 Maharashtra, India	Deputy General Manager (Accounts) & Company Secretary	Indian
Ashok I. Bhuta	Sun Pharmaceutical Industries Ltd. 17/B, Mahal Industrial Estate, Mahakali Caves Road, Andheri (East), Mumbai 400 093 India	Deputy General Manager (Legal & Secretarial) & Compliance Officer	Indian
Dr. Ratnesh Shrivastava	Sun Pharmaceutical Industries Ltd. 17/B, Mahal Industrial Estate, Mahakali Caves Road, Andheri (East), Mumbai 400 093. India.	Vice President-Intellectual Property Cell	Indian

Name of Executive Officers of Reporting Persons	Principal Address²	Principal Occupation³	Citizenship
Uday V. Baldota	Sun Pharmaceutical Industries Ltd. 17/B, Mahal Industrial Estate, Mahakali Caves Road, Andheri (East), Mumbai 400 093. India.	Vice President-Investor Relations	Indian

SUN PHARMA GLOBAL INC. (BVI)

Name of Directors of Reporting Persons	Principal Address	Principal Occupation⁴	Citizenship
Dilip S. Shanghvi	Sun Pharmaceutical Industries Ltd. 17/B, Mahal Industrial Estate, Mahakali Caves Road, Andheri (East), Mumbai 400 093. India.	Director	Indian
Sudhir V. Valia	Sun Pharmaceutical Industries Ltd. Acme Plaza, Andheri Kurla Road, Andheri (East), Mumbai 400 059. India.	Director	Indian
Sunil Gandhi	SuGandhManagement, Consultancy, 704, Al Tawihidi Building, 2, Mankhool Road, Near Ramda Hotel, Bur-Dubai, P. O. Box 12850. Dubai, U. A. E.	Director and Financial Consultant	Indian
Surendra Joshi	P.O. Box 696, Muttrah, Post Code No. 114, Sultanate of Oman.	Director and Tax Consultant	Indian
Rajendra Purshotam Ashar	P.O. Box 526, Muttrah, Post Code No. 131, Ai Hamriya, Sultanate of Oman.	Managing Director	Indian

_________________________

⁴ Unless otherwise indicated the Principal Occupation of each person is employment by Sun Pharma Global Inc. (BVI)

Name of Executive Officers of Reporting Persons

Principal Address⁴

Principal
Occupation⁵

Citizenship

Ms. Hellen De Kloet

Sun Pharma Global Inc. P.O Box 12850, Dubai, U.A.E

President, Europe

Dutch

Dr. Juliette Omtzigt

Sun Pharma Global Inc. P.O Box 12850, Dubai, U.A.E

General Manager -Regulatory Affairs, Europe

Netherlands

ALKALOIDA CHEMICAL COMPANY EXCLUSIVE GROUP LTD.

Name of Directors of Reporting Persons	Principal Address⁵	Principal Occupation⁶	Citizenship
Harin Mehta	A/603,Rashmi Avenue, Thakur Complex ,Kandivli, Mumbai,India	Director	Indian
Jayesh Shah	29714 Orion Court, Farminston Hills, Michigan. U.S.A.	Director	Indian
Katalin Szilágyi	4440 Tiszavasvári, Kelp Ilona u. 3.	Director QA & QC Director	Hungarian
Sudhir V. Valia	Acme Plaza, Andheri Kurla Road, Andheri (East), Mumbai 400 059	Director	Indian

Name of Executive Officers of Reporting Persons	Principal Address⁶	Principal Occupation⁷	Citizenship
Gyula Sotkó	Alkaloida Chemical Company Exclusive Group Ltd.	Purchasing & Logistics Manager	Hungarian
Katalin Szilágyi	Alkaloida Chemical Company Exclusive Group Ltd.	Quality Assurance & Quality Control Director	Hungarian
Dr. József Simon	Alkaloida Chemical Company Exclusive Group Ltd.	Chief Legal Advisor	Hungarian
Zoltán Nagy	Alkaloida Chemical Company Exclusive Group Ltd.	Human Resources Manager	Hungarian

_________________________

⁵ Unless otherwise indicated the Principal Address of each person is the Principal Office of Alkaloida Chemical Company Exclusive Group Ltd. Kabay János u. 29, H-4440 Tiszavasvari, The Republic of Hungary.

⁶ Unless otherwise indicated the Principal Occupation of each person is employment by Alkaloida Chemical Company Exclusive Group Ltd.

Tibor Horváth	4026 Debrecen, Hatvan u. 1/C.III/3. The Republic of Hungary.	Poppy System Manager	Hungarian
Zoltán László	Alkaloida Chemical Company Exclusive Group Ltd.	Technical Supply Manager	Hungarian
Ferenc Vicsai	Alkaloida Chemical Company Exclusive Group Ltd.	Controlling Manager	Hungarian
János Weninger	1213 Budapest, Szárcsa u. 6. The Republic of Hungary.	Export Manager	Hungarian
Tamás Udvari	1092 Budapest, Ráday u. 16. I/22. The Republic of Hungary.	Finance Manager	Hungarian

EXHIBIT INDEX

Exhibit No.	Description
99.1	Share Purchase Agreement, dated May 18, 2007, between Taro Pharmaceutical Industries Ltd. and Alkaloida Chemical Company Exclusive Group Ltd.

99.2	Warrant, dated May 18, 2007, issued by Taro Pharmaceutical Industries Ltd. to Sun Pharmaceutical Industries Ltd.

99.3	Registration Rights Agreement, dated May 18, 2007, between Taro Pharmaceutical Industries Ltd. and Alkaloida Chemical Company Exclusive Group Ltd.

99.4	Agreement of Merger, dated May 18, 2007, by and among Alkaloida Chemical Company Exclusive Group Ltd. Aditya Acquisition Company Ltd. and Taro Pharmaceutical Industries Ltd.

99.5	Form of Voting Agreement with respect to the Merger Agreement.

99.6	Agreement and Plan of Merger, dated May 18, 2007, by and among Sun Pharmaceutical Industries Ltd. Sun Development Corporation I, The Taro Development Corporation, Barrie Levitt and Daniel Moros.

99.7	Form of Voting Agreement with respect to the TDC Merger Agreement.

99.8	Option Letter Agreement, dated May 18, 2007, from The Taro Development Corporation, Barrie Levitt, Tal Levitt, Daniel Moros and Jacob Levitt, to Alkaloida Chemical Company Exclusive Group Ltd.

99.9	Joint Filing Agreement

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Schedule 99.1

SHARE PURCHASE AGREEMENT

THIS SHARE PURCHASE AGREEMENT (this “Agreement”), is made as of the 18th day of May, 2007, by and among Taro Pharmaceutical Industries Ltd., a company organized under the laws of the State of Israel (the “Company”) and Alkaloida Chemical Company Exclusive Group Ltd. (the “Purchaser”).

W I T N E S S E T H:

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company to raise additional capital by means of the issuance of 7,500,000 (7.5 Million) of the Company’s Ordinary Shares nominal value NIS 0.0001 (the “Shares”), at a price per Share of US$6.00 (the “Price Per Share”), for a total investment amount of US$45,000,000 (45 Million Dollars); and

WHEREAS, the Purchaser is willing to invest in the Company an amount of US$45,000,000 (45 Million Dollars) by purchasing the Shares, all pursuant to the terms and conditions more fully set forth in this Agreement.

WHEREAS, concurrently with the execution of this Agreement the Company will grant the Purchaser the right to acquire 7,500,000 (7.5 Million) Shares pursuant to the Warrant attached hereto at Exhibit A.

WHEREAS, concurrently with the execution of this Agreement the Company and Purchaser shall execute the Registration Rights Agreement attached hereto at Exhibit B.

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereby agree as follows:

1.	Issue and Purchase of Shares. Subject to the terms and conditions hereof, the Company shall issue and allot to the Purchaser, and the Purchaser shall purchase from the Company, the Shares at the Price Per Share.

2.	Closing of Issue and Purchase of Shares.

2.1

Closing. The purchase of 4,166,667 of the Shares (the “Closing Shares”) by the Purchaser, the issue and allotment of the Closing Shares by the Company, and the registration of the Closing Shares in the name of the Purchaser in the register of shareholders of the Company, shall take place at a closing (the “Closing”) to be held concurrently with the execution date of this Agreement, or such other date and time as the Company and the Purchaser shall mutually agree.

2.2

Transactions at the Closing. At the Closing, the following transactions shall occur, which transactions shall be deemed to take place simultaneously and no transaction shall be deemed to have been completed or any document delivered until all such transactions have been completed and all required documents delivered:

2.2.1

The Company shall deliver to the Purchaser the following documents:

(a)

True and correct copies of resolutions of the Board (i) authorizing the execution, performance and delivery of this Agreement, and (ii) issuing and allotting the Closing Shares to the Purchaser at the Closing against payment of US$25,000,000 (the “Closing Purchase Price”) therefore;

(b)

A certificate duly executed by an executive officer of the Company, dated as of the date of the Closing, in the form attached hereto as Schedule 2.2.1(b);

Schedule 99.1

(c)

An executed copy of the Warrant attached hereto at Exhibit A; and

(d)

An executed copy of the Registration Rights Agreement attached hereto at Exhibit B.

2.2.2

The Company shall register the allotment of the Closing Shares to the Purchaser in the register of shareholders of the Company and issue a share certificate covering the Closing Shares in the name of the Purchaser.

2.2.3

The Purchaser shall cause the transfer to the Company of the Closing Purchase Price for the Closing Shares being issued to it by wire transfer or such other form of payment as is mutually agreed by the Company and the Purchaser.

2.3

Deferred Closing. The purchase of 3,333,333 of the Shares (the “Deferred Shares”) by the Purchaser, the issue and allotment of the Deferred Shares by the Company, and the registration of the Deferred Shares in the name of the Purchaser in the register of shareholders of the Company, shall take place at a deferred closing (the “Deferred Closing”) to be held on or prior to May 25, 2007 or such other date and time as the Company and the Purchaser shall mutually agree. Purchaser shall notify the Company of the intended Deferred Closing date 1 business day prior to such date.

2.4

Transactions at the Deferred Closing. At the Deferred Closing, the following transactions shall occur, which transactions shall be deemed to take place simultaneously and no transaction shall be deemed to have been completed or any document delivered until all such transactions have been completed and all required documents delivered:

2.4.1

The Company shall deliver to the Purchaser the following documents:

(a)

True and correct copies of resolutions of the Board issuing and allotting the Deferred Shares to the Purchaser at the Deferred Closing against payment of US$20,000,000 (the “Deferred Purchase Price”) therefore; and

(b)

A certificate duly executed by an executive officer of the Company, dated as of the date of the Deferred Closing, in the form attached hereto as Schedule 2.4.1(b);

2.4.2

The Company shall register the allotment of the Deferred Shares to the Purchaser in the register of shareholders of the Company and issue a share certificate covering the Deferred Shares in the name of the Purchaser.

2.4.3

The Purchaser shall cause the transfer to the Company of the Deferred Purchase Price for the Deferred Shares being issued to it by wire transfer or such other form of payment as is mutually agreed by the Company and the Purchaser.

3.	Representations and Warranties of the Company. Notwithstanding anything herein contained to the contrary, the Company hereby represents and warrants to the Purchaser, and acknowledges that the Purchaser is entering into this Agreement in reliance thereon, as follows:

3.1

Organization and Standing.

3.1.1

The Company is duly organized and validly existing under the laws of the State of Israel and has all necessary power and authority to: (i) conduct its business in the manner in which its business is currently being conducted; (ii) own and use its assets in the manner in which its assets are currently owned and used; and (iii) perform its obligations under all contracts by which it is bound, except, in the case of clauses (i) through (iii) of this sentence, as would not have and would not reasonably be expected to have or result in a Material Adverse Effect.

Schedule 99.1

3.1.2

The Company has delivered or made available to the Purchaser complete and correct copies of its Articles of Association and Memorandum of Association and the Company is not in material violation of any provision of its Articles of Association and Memorandum of Association.

3.1.3

The Company is qualified to do business as a foreign corporation, and except as provided in Schedule 3.1.3, is in good standing, under the laws of all jurisdictions where the nature of its business requires such qualification except where the failure to be so qualified or in good standing would not have and would not reasonably be expected to have or result in a Material Adverse Effect

3.2

Authority. The Company has full corporate power and authority to enter into, execute and deliver this Agreement, bind itself hereunder, comply with its obligations hereunder and consummate the transactions hereunder; the entering into and the execution, delivery and performance by the Company of this Agreement and the transactions contemplated hereunder have been duly approved and authorized by all the required corporate actions, and this Agreement constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms.

3.3

No Conflict. The execution, delivery and performance of this Agreement by the Company does not conflict with, give rise to, or result in, any breach or default of any terms of any provision of law, or regulation, agreement, obligation, commitment, ruling, judgment or order to which the Company is, or will have become, a party or by which the Company is or will have become, bound, including under the Company’s Articles of Association or Memorandum of Association, except as would not have and would not reasonably be expected to have or result in a Material Adverse Effect.

3.4

Required Consents. Except as set forth on Schedule 3.4, no approval, permit, authorization or consent from, nor any filing with, any Person, entity or authority, is required by the Company, for the execution, delivery and performance by it of this Agreement and the issuance of the Shares.

3.5

Capitalization. As of the date of this Agreement, the authorized share capital of the Company consists of: (i) 200,000,000 Ordinary Shares nominal value NIS 0.0001 per share, of which 29,665,618 Ordinary Shares have been issued and were outstanding as of the date of this Agreement; and (ii) 2,600 Founder Shares nominal value NIS 0.0001 per share, all of which have been issued and outstanding, and all of which are owned beneficially and of record by Morley and Company, Inc. As of April 30, 2007: (i) 1,244,429 Ordinary Shares were subject to issuance pursuant to Options granted and outstanding under the Option Plans. Except as set forth above and in Schedule 3.5, as of the date of this Agreement, no securities of the Company of any kind whatsoever have been issued to any person or entity, and no person or entity has any agreement, option, right (including conversion rights, preemptive rights and rights of first refusal) or warrant for the subscription, allotment, issue or purchase of any of the Company’s shares or other securities of the Company, nor does the Company a party to any undertaking of any kind, towards any person or entity, regarding any shares or other securities of the Company.

3.6

Valid Issuance of Shares. The Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of any preemptive rights, restrictions on transfer, liens, claims, encumbrances or third party rights of any kind (other than restrictions on transfer under applicable state and federal securities laws and liens or encumbrances created by or imposed by the Purchaser), will have the rights, preferences, privileges, and restrictions set forth in the Articles of Association of the Company, and will be duly registered in the name of the Purchaser in the Company’s register of shareholders. Assuming the accuracy of the representations of the Purchaser in Section 4 below, the Shares will be issued in compliance with all applicable federal and state securities laws.

Schedule 99.1

3.7

Litigation. Except as set forth on Schedule 3.7, there is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or to the Company’s knowledge, currently threatened in writing that questions the validity of the transactions contemplated under this Agreement or the right of the Company to enter into this Agreement or to consummate the transactions contemplated by this Agreement.

3.8

2005 20-F; Financial Statements. (a) The Company has made available to Purchaser accurate and complete copies of the Company’s Annual Report on Form 20-F for the year ended December 31, 2005 (the “2005 20-F”). As of the time it was filed with or furnished to the Securities and Exchange Commission (the “SEC”): (i) the 2005 20-F complied as to form in all material respects with the applicable requirements of the Securities Act of 1933, as amended or the Exchange Act of 1934, as amended (as the case may be); and (ii) the 2005 20-F did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(b)

The audited consolidated financial statements (including any related notes) attached to the 2005 20-F: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered (except as may be indicated therein or in the notes to such financial statements); and (iii) fairly present, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of operations and cash flows of the Company and its consolidated Subsidiaries for the periods covered thereby.

(c)

Except as set forth in Schedule 3.8 (c), the unaudited consolidated financial statements as of, and for the year ended December 31, 2006 (including any related notes) previously made available to Purchaser and the unaudited consolidated financial statements (including any related notes) as of, and for the three-month period ended March 31, 2007 previously made available to Purchaser: (i) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered (except as may be indicated therein or in the notes to such financial statements); and (ii) fairly present, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of operations and cash flows of the Company and its consolidated Subsidiaries for the periods covered thereby (subject to normal and recurring year end adjustments which would not have had, and would not have, individually or in the aggregate, a Material Adverse Effect).

(d)

Except as and to the extent set forth on the consolidated balance sheet of the Company and the consolidated Subsidiaries as at March 31, 2007 including the notes thereto, the Company has no material liability, claim or obligation of any nature (whether accrued, absolute, contingent or otherwise).

3.9

Absence of Certain Changes or Events. Since March 31, 2007, except as set forth in Schedule 3.9, or as expressly contemplated by this Agreement (a) the Company has conducted its business only in the ordinary course and in a manner consistent with past practice and (b) there has not been any Material Adverse Effect.

4.	Representations and Warranties of the Purchaser. Notwithstanding anything herein contained to the contrary, the Purchaser hereby represents and warrants, with respect to itself only, to the Company as follows and acknowledges that the Company is entering into this Agreement in reliance thereon:

4.1

Enforceability. This Agreement and the agreements to be executed by the Purchaser under this Agreement, when executed and delivered by the Purchaser, will constitute the valid, binding and enforceable obligations of the Purchaser enforceable against the Purchaser in accordance with its terms.

Schedule 99.1

4.2

Authorization. The execution, delivery and performance of the obligations of the Purchaser hereunder have been duly authorized by all necessary corporate action.

4.3

Experience. The Purchaser can bear the economic risks of the investment in the Shares (including the complete loss thereof) and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of this investment in the Shares. The Purchaser has been afforded the opportunity to ask questions of officers or other representatives of the Company concerning the business of the Company, and it has reviewed and inspected all of the data and information provided to it by the Company in connection with this Agreement. The Purchaser is buying the Shares only for investment, for its own account, and without any present intention to sell or distribute the Shares. It is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act. It understands that the Shares to be purchased hereby have not been, and will not be, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein.

4.4

No Conflict. The execution, delivery and performance of this Agreement by the Purchaser does not conflict with, give rise to, or result in, any breach or default of any terms of any provision of law, or regulation, agreement, obligation, commitment, ruling, judgment or order to which the Purchaser is, or will have become, a party or by which the Purchaser is or will have become, bound, including under the Purchaser’s Articles of Association.

Conditions of Closing of the Purchaser. The obligations of the Purchaser to purchase the Closing Shares are subject to the fulfillment at or before the Closing of the following conditions precedent, any one or more of which may be waived in whole or in part by the Purchaser, which waiver shall be at the sole discretion of the Purchaser:

5.1

Representations and Warranties. The representations and warranties made by the Company in this Agreement shall have been true and correct when made, and shall be true and correct in all material respects as of the Closing as if made on the date of the Closing.

5.2

Covenants. All covenants, agreements, and conditions contained in this Agreement to be performed or complied with by the Company prior to the Closing shall have been performed or complied with by the Company.

5.3

Consents, etc. The Company shall have secured all permits, consents and authorizations that shall be necessary or required lawfully to consummate this Agreement and to issue the Closing Shares to the Purchaser at the Closing.

5.4

Proceedings and Documents. Purchaser shall have received all counterpart originals or certified or other copies of all corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions satisfactory in substance and form to the Purchaser.

5.5

Warrant. The Company shall have executed the Warrant attached hereto at Exhibit A in favor of the Purchaser.

5.6

Registration Rights Agreement. The Company shall have executed the Registration Rights Agreement attached hereto at Exhibit B.

Conditions of Deferred Closing of the Purchaser. The obligations of the Purchaser to purchase the Deferred Shares are subject to the fulfillment at or before the Deferred Closing of the following conditions precedent, any one or more of which may be waived in whole or in part by the Purchaser, which waiver shall be at the sole discretion of the Purchaser:

Schedule 99.1

6.1

6.2

Covenants. All covenants, agreements, and conditions contained in this Agreement to be performed or complied with by the Company prior to the Deferred Closing shall have been performed or complied with by the Company.

6.3

6.4

Conditions of Closing of the Company. The Company’s obligations to sell and issue the Closing Shares at the Closing are subject to the fulfillment at or before the Closing of the conditions that (a) all covenants, agreements and conditions contained in this Agreement to be performed, or complied with, by the Purchaser prior to the Closing shall have been performed or complied with by the Purchaser prior to or at the Closing, and (b) the representations and warranties made by the Purchaser in this Agreement shall have been true and correct when made, and shall be true and correct as of the date of the Closing, which conditions may be waived in whole or in part by the Company, and which waiver shall be at the sole discretion of the Company.

Conditions of Deferred Closing of the Company. The Company’s obligations to sell and issue the Deferred Shares at the Deferred Closing are subject to the fulfillment at or before the Deferred Closing of the conditions that (a) all covenants, agreements and conditions contained in this Agreement to be performed, or complied with, by the Purchaser prior to the Deferred Closing shall have been performed or complied with by the Purchaser prior to or at the Deferred Closing, and (b) the representations and warranties made by the Purchaser in this Agreement shall have been true and correct when made, and shall be true and correct as of the date of the Deferred Closing, which conditions may be waived in whole or in part by the Company, and which waiver shall be at the sole discretion of the Company.

9.	Affirmative Covenants.

Use of Proceeds. The Company will use the proceeds of the issuance and sale of the Shares for the repayment of debt and to provide general working capital.

10.	Definitions And Interpretation.

“Affiliate” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power (i) to vote ten percent (10%) or more of the Securities having ordinary voting power for the election of directors of such Person, or (ii) to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

“GAAP” means generally accepted accounting principles in the United States.

“Governmental Authority” means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government.

Schedule 99.1

“Material Adverse Effect” means any effect, change, event, occurrence, state of fact, condition, change, development or circumstance that, individually or in the aggregate, has, or would reasonably be expected to have, a material adverse effect on: (i) the assets, liabilities, business, condition (financial or otherwise), operations or results of operations of the Company taken as a whole; (ii) the ability of the Company to fully and timely perform its payment and other material obligations; or (iii) the material rights, remedies and benefits available to, or conferred upon, the Purchaser under this Agreement.

“Options” means options to purchase Ordinary Shares from the Company (whether granted by the Company pursuant to the Option Plans, assumed by the Company or otherwise).

“Option Plans” means (a) the Company’ 1991 Stock Incentive Plan; and (b) the Company’ 1999 Stock Incentive Plan.

“Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities.

“Share Capital” means any and all shares, interests, participations or other equivalents (however designated) of Share Capital of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing.

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than fifty percent (50%) of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; provided, in determining the percentage of ownership interests of any Person controlled by another Person, no ownership interest in the nature of a “qualifying share” of the former Person shall be deemed to be outstanding.

11.	Miscellaneous

11.1

Further Assurances. Each of the parties hereto shall perform such further acts and execute such further documents as may reasonably be necessary to carry out and give full effect to the provisions of this Agreement and the intentions of the parties as reflected thereby.

11.2

Notices, etc. Any notice, declaration or other communication required or authorized to be given by any party under this Agreement to any other party shall be in writing and shall be personally delivered, sent by facsimile transmission or electronic mail (with a copy by registered mail in either case) or dispatched by courier addressed to the other party at the address stated herein or such other address as shall be specified by the parties hereto by notice in accordance with the provisions of this Section 11.2. Any notice shall operate and be deemed to have been served, if personally delivered or sent by fax (with the receipt certified by the dispatching fax) on the next following business day, and if by courier, on the fifth following business day.

11.3

Governing Law. The governing law of this Agreement shall be the substantive law of the State of Israel, without giving effect to rules of conflicts of laws. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any New York state or federal court sitting in The City of New York.

11.4

Successors and Assigns; Assignment. Except as otherwise expressly limited herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto. None of the rights, privileges, or obligations set forth in, arising under, or created by this Agreement may be assigned or

Schedule 99.1

transferred without the prior consent in writing of each party to this Agreement, with the exception of assignments and transfers from the Purchaser to any other entity which controls, is controlled by or is under common control with, the Purchaser.

11.5

Entire Agreement; Amendment and Waiver. This Agreement and the schedules hereto constitute the full and entire understanding and agreement between the parties with regard to the subject matters hereof and thereof. Any term of this Agreement may be amended and the observance of any term hereof may be waived (either prospectively or retroactively and either generally or in a particular instance) only with the written consent of the Company and the Purchaser.

11.6

Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party upon any breach or default under this Agreement, shall be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent, or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any of the parties, shall be cumulative and not alternative.

11.7

Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Agreement and the remainder of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however, that in such event this Agreement shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction.

11.8

Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and enforceable against the parties actually executing such counterpart, and all of which together shall constitute one and the same instrument.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

Schedule 99.1

[SIGNATURE PAGE OF SHARE PURCHASE AGREEMENT]

IN WITNESS WHEREOF the parties have signed this Agreement as of the date first hereinabove set forth.

TARO PHARMACEUTICAL INDUSTRIES LTD.


By:	/s/ Tal Levitt
Name:	Tal Levitt
Title:	Secretary


ALKALOIDA CHEMICAL COMPANY EXCLUSIVE GROUP LTD.


By:	/s/ Sudhir Valia
Name:	Sudhir Valia
Title:	Director

Exhibit A

Warrant

[See Schedule 99.2]

Exhibit B

Registration Rights Agreement

[See Schedule 99.3]

EX-99.2 5 ex99-2.htm

Schedule 99.2

WARRANT

Ordinary Shares Warrant

Date of Issuance: May 18, 2007

Warrant No. 1

Taro Pharmaceutical Industries Ltd.

Warrant Certificate

Taro Pharmaceutical Industries Ltd., a company organized under the laws of the State of Israel (the “Company”), for value received, hereby certifies that Sun Pharmaceutical Industries, Ltd. (“Purchaser”), together with any permitted transferee (the “Holder”), is entitled, subject to the terms of this Warrant (the “Warrant” represented by a “Warrant Certificate”) as set forth below, to purchase from the Company, during the Exercise Period (as defined in Section 1(a)), 7,500,000 shares (the “Warrant Shares”) of ordinary shares of the Company, par value NIS 0.0001 per share (the “Ordinary Shares”) at a price per share equal to the Exercise Price (as defined in Section 1(c)). The number of Warrant Shares and the Exercise Price are subject to adjustment from time to time as hereinafter provided.

The Warrant is issued under and in accordance with that certain Purchase Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”) made and entered into as of May 18, 2007, by and among the Company and the Purchaser. Terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement.

Section 1. Exercise.

(a) Subject to the terms hereof, the Holder shall have the right, which may be exercised at any time and from time to time during the period (the “Exercise Period”) commencing as of the date hereof and continuing until 5:00 p.m., New York City time, on the third anniversary of the date hereof (the “Expiration Date”), to purchase from the Company the number of fully paid and nonassessable Warrant Shares which the Holder may at the time be entitled to receive on exercise of the Warrant and payment of the Exercise Price then in effect for such Warrant Shares. Notwithstanding the foregoing, if in the written opinion of counsel to the Company reasonably acceptable to the Holder approval of any Governmental Authority is required before the Company may issue Warrant Shares upon the exercise of the Warrant, the Company may defer the issuance of such Warrant Shares until such time as approval of such Governmental Authority is obtained or is no longer required. The Company shall promptly notify the Holder in writing of any event which requires it to suspend exercise of the Warrant pursuant to the preceding sentence and the Company shall use its reasonable best efforts to do all things necessary to obtain the approval of any such Governmental Authority in order to terminate any such suspension, as promptly as reasonably practicable. To the extent the Warrant is not exercised prior to the Expiration Date, it shall become void and all rights hereunder shall cease as of such time.

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(b) Procedures; Limitations on Exercise.

(i) The Warrant may be exercised, in whole or in part, at the election of the Holder, upon surrender at the principal office of the Company of the certificate or certificates evidencing the Warrant with the form of election to purchase attached as Exhibit A duly completed and signed (“Purchase Form”), and upon payment to the Company of the Exercise Price, as it may be adjusted as herein provided, for the number of Warrant Shares in respect of which the Warrant is then exercised. Payment of the aggregate Exercise Price shall be made by wire transfer of immediately available funds to such account as the Company may specify.

(ii) Subject to the provisions of Section 3 hereof, upon surrender of the Warrant and payment of the Exercise Price, the Company shall issue and cause to be immediately delivered a certificate or certificates for the number of Warrant Shares issuable upon the exercise of the Warrant together with cash as provided in Section 9. Such certificate or certificates shall be deemed to have been issued and the Holder shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of the Warrant Certificate and payment of the Exercise Price.

(iii) In the event that this Warrant is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the Expiration Date, a new certificate evidencing the remaining Warrant or Warrants will be promptly issued, and the Company shall countersign and deliver the required new Warrant Certificate or Warrant Certificates. When surrendered upon exercise of the Warrant, this Warrant Certificate shall be cancelled and disposed of by the Company.

(c) Exercise Price. The “Exercise Price” on any date means the price of $6.00 per share. The Exercise Price shall be subject to adjustment as provided in Section 8.

Section 2. Transfer and Exchange of Warrants.

(a) Subject to the foregoing and the limitations of Section 3 hereof, the Company shall from time to time register the transfer of the Warrant upon the records to be maintained by it for that purpose, upon surrender of this Warrant Certificate duly endorsed or accompanied (if so required by it) by a written instrument or instruments of transfer in form satisfactory to it, duly executed by the registered Holder or by the duly appointed legal representative thereof or by a duly authorized attorney. Subject to the terms hereof, this Certificate may be exchanged for another certificate or certificates entitling the Holder to purchase a like aggregate number of Warrant Shares as the Certificate surrendered then entitles the Holder to purchase. A Holder desiring to exchange this Certificate shall make such request in writing delivered to the Company, and shall surrender, duly endorsed or accompanied (if so required by the Company) by a written instrument or instruments of transfer in form satisfactory to the Company, this Warrant Certificate to be so exchanged.

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(b) Upon registration of transfer, the Company shall issue to the transferees and countersign a new Warrant Certificate or Certificates and deliver by certified mail such new Warrant Certificate or Certificates to the persons entitled thereto. No service charge shall be made for any exchange or registration of transfer of Warrant Certificates, but the Company may require payment of a sum sufficient to cover any stamp or other tax or other governmental charge that is imposed in connection with any such exchange or registration of transfer.

Section 3. Registration of Transfers and Exchanges. When Warrants represented by this Certificate are presented to the Company with a request to register the transfer of the Warrants, or to exchange such Warrants for an equal number of Warrants, the Company shall register the transfer or make the exchange as requested if the requirements set forth in Section 2 and the following requirements are satisfied:

(a) the Certificate shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company, duly executed by the Holder or his attorney duly authorized in writing; and

(b) in the event that the Purchaser requests a transfer of Warrants, the transferee is an Affiliate of Purchaser.

Section 4. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer of any Warrant Certificates in a name other than that of the registered holder of a Warrant Certificate, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

Section 5. Mutilated or Missing Warrant Certificate. In case this Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company will issue and countersign, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of a certificate of the Holder stating that such loss, theft or destruction of the Warrant Certificate has occurred.

Section 6. Reservation of Warrant Shares.

(a) The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Ordinary Shares or its authorized and issued Ordinary Shares held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of the Warrant, the maximum number of Ordinary Shares which may then be deliverable upon the exercise of the Warrant.

(b) The Company or, if appointed, the transfer agent for the Ordinary Shares (the “Transfer Agent”) and every subsequent transfer agent for any shares of the Company’s capital stock issuable upon the exercise of the Warrant will be irrevocably authorized and

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directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Warrant Certificate on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company’s capital stock issuable upon the exercise of the Warrant. The Company will supply such Transfer Agent with duly executed certificates for such purposes and will provide or otherwise make available any cash which may be payable as provided in Section 9. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto transmitted to each holder pursuant to Section 10 hereof.

(c) The Company covenants that all Warrant Shares which may be issued upon exercise of the Warrant in accordance with the terms of the Warrant Certificate will, upon payment of the Exercise Price therefor and issuance, be validly authorized and issued, fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issuance thereof. The Company will take no action to increase the par value of the Ordinary Shares to an amount in excess of the Exercise Price, and the Company will not enter into any agreements inconsistent with the rights of the Holder hereunder. The Company will use its reasonable best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations hereunder. The Company shall not take any action reasonably within its control, including the hiring of a broker to solicit exercises, which would render unavailable an exemption from registration under the Securities Act which might otherwise be available with respect to the issuance of Warrant Shares upon exercise of the Warrant.

Section 7. Obtaining Stock Exchange Listings. The Company will from time to time take all action which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of the Warrant, will be listed on the principal securities exchanges and markets within the United States of America on which other Ordinary Shares are then listed.

Section 8. Adjustment of Number of Warrant Shares Issuable and Exercise Price. The number of Ordinary Shares issuable upon the exercise of the Warrant (the “Exercise Rate”) and the Exercise Price are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 8.

(a) Adjustment for Change in Capital Stock. If the Company (i) pays a dividend or makes a distribution on its Ordinary Shares in shares of its Ordinary Shares; (ii) subdivides its outstanding Ordinary Shares into a greater number of shares; (iii) combines its outstanding Ordinary Shares into a smaller number of shares; or (iv) issues, by reclassification of its Ordinary Shares, any shares of its capital stock; then and in each such case the Exercise Rate in effect immediately prior to such action shall be adjusted so that the holder of any Warrant thereafter exercised shall be entitled to receive, upon exercise of the Warrant, the number of Ordinary Shares or other securities of the Company which such holder would have owned immediately following such action if the Warrant had been exercised immediately prior to such action. Any adjustment hereunder shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. Such adjustment shall be made successively

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whenever any event listed above shall occur. If after an adjustment, the Holder upon exercise of the Warrant may receive shares of two or more classes or series of capital stock of the Company, the Board of Directors of the Company, in consultation with the Holders, shall determine the allocation of the adjusted Exercise Price and Exercise Rate between the classes or series of capital stock. After such allocation, the Exercise Price and Exercise Rate of each class or series of capital stock shall thereafter be subject to adjustment on terms comparable to those applicable to the Ordinary Shares in this Section 8.

(b) Adjustment for Certain Issuances of Ordinary Shares. If the Company shall, at any time or from time to time while any Ordinary Shares are outstanding, issue or sell any Ordinary Shares or any right or warrant to purchase, acquire or subscribe for Ordinary Shares (including a right or warrant with respect to any security convertible into or exchangeable for Ordinary Shares) generally to holders of its Ordinary Shares (including by way of a reclassification of shares or a recapitalization of the Company), for a consideration payable on the date of such issuance or sale less than the Trading Price of the Ordinary Shares on the date of such issuance or sale, then and in each such case, the Exercise Rate shall be adjusted by multiplying such Exercise Rate by a fraction, the numerator of which shall be the sum of (i) the Trading Price per share of Ordinary Shares on the first Business Day after the date of the public announcement of the actual terms (including the price terms) of such issuance or sale multiplied by the number of Ordinary Shares outstanding immediately prior to such issuance or sale plus (ii) the aggregate Fair Market Value of the consideration to be received by the Company in connection with the issuance or sale of Ordinary Shares or the rights or warrants, as the case may be, plus the aggregate consideration to be received on exercise of the right to purchase the Ordinary Shares underlying such rights or warrants, and the denominator of which shall be the Trading Price per share of Ordinary Shares on the Business Day immediately preceding the public announcement of the actual terms (including the price terms) of such issuance or sale multiplied by the aggregate number of Ordinary Shares (A) outstanding immediately prior to such issuance or sale plus (B) underlying such rights or warrants at the time of such issuance. For the purposes of the preceding sentence, the aggregate consideration receivable by the Company in connection with the issuance or sale of any such right or warrant shall be deemed to be equal to the sum of the aggregate offering price (before deduction of reasonable underwriting discounts or commissions and expenses) of all such rights or warrants. If such rights or warrants expire unexercised, the adjustment provided in this Section 8 (b) shall be recomputed without the inclusion of the aggregate consideration that would have been received by the Company on the exercise of any such right or warrant.

(c) Adjustment for Distributions. If the Company distributes to all holders of its Ordinary Shares (i) any securities of the Company or rights, options or warrants to purchase or subscribe for securities of the Company, (ii) any evidences of indebtedness of the Company or any other person, or (iii) any cash dividend, the Exercise Rate shall be adjusted in accordance with the formula:

E’ = E x M

---------

M - F

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where:

E’	=	the adjusted Exercise Rate.
E	=	the current Exercise Rate on the record date mentioned below.
M	=	the Trading Price per share of Ordinary Shares on the record date mentioned below.
F	=	the fair market value on the record date mentioned below of the indebtedness, assets (including the cash dividend), rights, options or warrants distributable with respect to one share of Ordinary Shares.

The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. Notwithstanding the foregoing provisions of this Section 8(c), an event which would otherwise give rise to an adjustment pursuant to this Section 8(c) shall not give rise to such an adjustment if the Company includes the Holder in such distribution pro rata to the number of Ordinary Shares issued and outstanding after giving effect to the Warrant Shares as if they were issued and outstanding.

(d) Adjustment of Exercise Price. Whenever the number of Warrant Shares purchasable upon the exercise of the Warrant is adjusted, as herein provided, the Exercise Price per Warrant Share payable upon exercise of the Warrant shall be adjusted (calculated to the nearest $.0001) so that it shall equal the price determined by multiplying the Exercise Price immediately prior to such adjustment by a fraction, the numerator of which shall be the aggregate number of Warrant Shares purchasable upon the exercise of the Warrant immediately prior to such adjustment, and the denominator of which shall be the aggregate number of Warrant Shares so purchasable immediately thereafter.

(e) Definitions.

The “Closing Price” on any date shall mean the last sale price for the Ordinary Shares or, in case no such sale takes place on such date, the average of the closing bid and asked prices, for the Ordinary Shares in either case as reported in the principal consolidated transaction reporting system with respect to the principal securities exchange on which the Ordinary Shares is listed or admitted to trading or, if the Ordinary Shares is not listed or admitted to trading on any securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the principal automated quotation system that may then be in use or, if the Ordinary Shares is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Ordinary Shares selected by the Board of Directors of the Company or, in the event that no trading price is available for the Ordinary Shares, the Fair Market Value of the Ordinary Shares.

“Trading Price” on any date means, with respect to the Ordinary Shares, the Closing Price for the Ordinary Shares on such date.

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“Fair Market Value” of any consideration other than cash or of any securities or in the case of the Ordinary Shares shall mean the amount which a willing buyer would pay to a willing seller in an arm’s length transaction as determined by an independent investment banking or appraisal firm experienced in the valuation of such securities or property selected in good faith by the Board of Directors of the Company or a committee thereof.

(f) When De Minimis Adjustment May Be Deferred. No adjustment in the Exercise Rate need be made unless the adjustment would require an increase or decrease of at least 1.0% in the Exercise Rate. Notwithstanding the foregoing, any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment, provided that no such adjustment shall be deferred beyond the date on which a Warrant is exercised. All calculations under this Section 8 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be.

(g) When No Adjustment Required. If an adjustment is made upon the establishment of a record date for a distribution subject to subsections (a), (b) or (c) hereof and such distribution is subsequently cancelled, the Exercise Rate then in effect shall be readjusted, effective as of the date when the Board of Directors determines to cancel such distribution, to that which would have been in effect if such record date had not been fixed.

(h) Notice of Adjustment. Whenever the Exercise Rate or Exercise Price is adjusted, the Company shall provide the notices required by Section 10 hereof.

(i) When Issuance or Payment May Be Deferred. In any case in which this Section 8 shall require that an adjustment in the Exercise Rate be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the Holder of any Warrant exercised after such record date the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise on the basis of the Exercise Rate prior to such adjustment, and (ii) paying to such Holder any amount in cash in lieu of a fractional share pursuant to Section 9; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing such Holder’s right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment.

(j) Reorganizations. In the event of any capital reorganization or reclassification of outstanding Ordinary Shares (other than in the cases referred to in Section 8(a) hereof), or in case of any merger, consolidation or other corporate combination of the Company with or into another corporation (other than a merger or consolidation in which the Company is the continuing corporation and which does not result in any reclassification of the outstanding Ordinary Shares into shares of stock or other securities or property), or in case of any sale, lease, exchange or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety (each of the foregoing being referred to as a “Reorganization”), there shall thereafter be deliverable upon exercise of the Warrants (in lieu of the number of Ordinary Shares theretofore deliverable) the number of shares of stock or other securities or property to which a holder of the number of Ordinary Shares that would otherwise have been deliverable upon the exercise of the Warrants would have been entitled upon such Reorganization if the

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Warrants had been exercised in full immediately prior to such Reorganization. In case of any Reorganization, appropriate adjustment, as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a duly adopted resolution certified by the Company’s Secretary or Assistant Secretary, shall be made in the application of the provisions herein set forth with respect to the rights and interests of the Holder so that the provisions set forth herein shall thereafter be applicable, as nearly as possible, in relation to any shares or other property thereafter deliverable upon exercise of the Warrants. The Company shall not effect any such Reorganization unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such Reorganization or the corporation purchasing or leasing such assets or other appropriate corporation or entity shall expressly assume the obligation to deliver to the Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to purchase, and all other obligations and liabilities under the Warrant. The foregoing provisions of this Section 8(j) shall apply to successive Reorganization transactions. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 8, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be.

(k) Form of Warrants. Irrespective of any adjustments in the number or kind of shares purchasable upon the exercise of the Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in this Warrant as initially issued.

(l) Miscellaneous. For purposes of this Section 8 the term “Ordinary Shares” shall mean (i) the shares of stock designated as the Ordinary Shares, par value NIS 0.0001 per share, of the Company as of the date of this Warrant, and (ii) shares of any other class or series of stock resulting from successive changes or reclassification of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. In the event that at any time, as a result of an adjustment made pursuant to this Section 8, the Holder shall become entitled to purchase any securities of the Company other than, or in addition to, Ordinary Shares, thereafter the number or amount of such other securities so purchasable upon exercise of the Warrants shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Section 8 and the provisions of Sections 1, 4, 6 and 9 with respect to the Warrant Shares or the Ordinary Shares shall apply on like terms to any such other securities.

(n) Certain Events. If any change in the outstanding Ordinary Shares of the Company or any other event occurs as to which the provisions of this Section 8 are not strictly applicable or, if strictly applicable, would not fairly protect the purchase rights of the Holder in accordance with such provisions, then the Board of Directors of the Company shall make such adjustments to the Exercise Rate, the Exercise Price or the application of such provisions as may be necessary to protect such purchase rights as aforesaid and to assure that the Holder, upon exercise for the same aggregate Exercise Price, shall receive the total number, class and kind of shares as it would have owned had the Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment.

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Section 9. Fractional Interests. The Company shall not be required to issue fractional Warrant Shares on the exercise of the Warrant. If more than one Warrant Certificate shall be presented for exercise in full at the same time by the same Holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 9, be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the Trading Price on the trading day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction. The Company will not, by amendment of its organizational documents or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant.

Section 10. Adjustment Notices and Other Notices to Holder.

(a) Upon any adjustment pursuant to Section 8 hereof, the Company shall promptly and properly complete such adjustment in accordance with the terms of the Warrant and give prompt written notice of such adjustment to the Holder at its address appearing on the records of the Company within ten days after such adjustment, by first class mail, postage prepaid, and shall deliver to the Holder a certificate of the Chief Financial Officer of the Company, accompanied by the report thereon by a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants for the Company), setting forth in reasonable detail (i) the number of Warrant Shares purchasable upon the exercise of the Warrant and the Exercise Price of the Warrant after such adjustment(s), (ii) a statement of the facts requiring such adjustment(s) and (iii) the computation by which such adjustment(s) was made. Where appropriate, such notice may be given in advance and included as a part of the notice required under the other provisions of this Section 10.

(b) In case:

(i) the Company proposes to take any action that would require an adjustment to the Exercise Rate or the Exercise Price pursuant to Section 8 hereof; or

(ii) of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale, lease, exchange, conveyance or transfer of the properties and assets of the Company substantially as an entirety, or of any reclassification or change of Ordinary Shares issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for Ordinary Shares; or

(iii) of the voluntary or involuntary dissolution, liquidation or winding up of the Company;

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then the Company shall, at its expense, give prompt written notice to the Holder at its address appearing on the records of the Company, at least 20 days (or 10 days in any case specified in clause (a) above) prior to the applicable record date hereinafter specified, or the date of the event in the case of events for which there is no record date, by first-class mail, postage prepaid, stating (i) the date as of which the holders of record of Ordinary Shares to be entitled to receive any such rights, options, warrants or distribution are to be determined, or (ii) the initial expiration date set forth in any tender offer or exchange offer for Ordinary Shares, or (iii) the date on which any such consolidation, reorganization, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or be consummated, and the date as of which it is expected that holders of record of Ordinary Shares shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure by the Company to give such notice or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action.

(c) The Company shall give prompt written notice to the Holder of any determination to make a distribution or dividend to the holders of its Ordinary Shares of any assets (including cash), debt securities, preferred stock, or any rights or warrants to purchase debt securities, preferred stock, assets or other securities (other than Ordinary Shares, or rights, options, or warrants to purchase Ordinary Shares) of the Company, which notice shall state the nature and amount of such planned dividend or distribution and the record date therefor, such written notice to be delivered at least 20 days prior to such record date therefor.

(d) Nothing contained in this Warrant Certificate shall be construed as conferring upon the Holder the right to vote or to consent or to receive notice as shareholders in respect of the meetings of shareholders or the election of Directors of the Company or any other matter, or any rights whatsoever as shareholders of the Company.

Section 11. Notices to the Company. Any notice or demand to be given or made by the Holder to or on the Company shall be sufficiently given or made when received at the office of the Company expressly designated by the Company as its office for purposes of this Certificate, as follows:

c/o Taro Pharmaceuticals U.S.A., Inc.

3 Skyline Drive

Hawthorne, NY 10532

Attention: Barrie Levitt

Facsimile: (914) 345-9719 and (914) 345-9825

with a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP

4 Times Square

New York, N.Y. 10036

Attn: Jeffrey W. Tindell

Facsimile: (917) 777-3380

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and an additional copy (which shall not constitute notice) to:

Yigal Arnon & Co.

1 Azrieli Center

The Round Building

Tel-Aviv 67021

Israel

Attn: David Schapiro

Facsimile: +972-(3)-607-7724

Section 12. Supplements and Amendments. The Warrant may not be supplemented or amended without the written approval of both the Holder and the Company.

Section 13. Successors. All the covenants and provisions of this Certificate by or for the benefit of the Company or the Holder shall bind and inure to the benefit of their respective successors and assigns hereunder.

Section 14. Termination. This Warrant Certificate and the Warrants represented hereby shall terminate on the Expiration Date. Notwithstanding the foregoing, this Certificate will terminate on any earlier date if all Warrants have been exercised pursuant hereto.

Section 15. Governing Law. This Warrant Certificate shall be deemed to be a contract made under the laws of the State of New York.

Section 16. Benefits of This Certificate. Nothing in this Certificate shall be construed to give to any person or corporation other than the Company and the registered Holder any legal or equitable right, remedy or claim hereunder; but this Certificate shall be for the sole and exclusive benefit of the Company and the registered Holder.

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IN WITNESS WHEREOF, Taro Pharmaceutical Industries Ltd. has caused this Warrant Certificate to be duly executed by the undersigned.

Dated: May 18, 2007

TARO PHARMACEUTICAL INDUSTRIES LTD.

By: /s/ Tal Levitt

Name: Tal Levitt

Title: Secretary

EXHIBIT A

Form of Election to Purchase

(To Be Executed upon Exercise of Warrant)

The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to purchase _____ Ordinary Shares and herewith tenders payment for such shares to the order of [_____] in the amount of $________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of ______________, whose address is __________ and that such shares be delivered to _________ whose address is ______________. If said number of shares is less than all of the Ordinary Shares purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of _____________, whose address is ________, and that such Warrant Certificate be delivered to ___________, whose address is ________________.

In exercising this Warrant, the undersigned hereby confirms and acknowledges that the Ordinary Shares to be issued upon exercise thereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such Ordinary Shares except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any applicable state securities laws.

Signature:

Date:

Signature Guaranteed:

EX-99.3 6 ex99-3.htm

Schedule 99.3

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT, dated as of May 18, 2007 (this “Agreement”), by and among Taro Pharmaceutical Industries Ltd., a company organized under the laws of the State of Israel (the “Company”) and Alkaloida Chemical Company Exclusive Group Ltd. (the “Investor”).

WHEREAS, the Company and the Investor entered into that certain Purchase Agreement, dated as of May 18, 2007 (as such agreement may be amended, modified, supplemented or restated from time to time, the “Purchase Agreement”), pursuant to which the Investor agreed to purchase 7,500,000 Ordinary Shares at a purchase price of $6.00 per share (the “Transaction”);

WHEREAS, as an integral part of the Transaction, the Holders (as defined below) will receive the Warrant of the Company that are exchangeable or exercisable for, Ordinary Shares;

WHEREAS, the Company has agreed to provide the Holders certain registration rights with respect to such securities, and any Ordinary Shares held by the Holders, under the Securities Act; and

WHEREAS, the execution and delivery of this Agreement by the parties hereto is a condition to the commencement of the Transaction pursuant to the Purchase Agreement.

NOW, THEREFORE, in consideration of the mutual premises and covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

1. Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meaning ascribed to such terms in the Purchase Agreement. For purposes of this Agreement, the following terms have the following meanings:

“control” (including its correlative meanings, “controlled by” or “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise.

“Holders” means each of the Investor that from time to time owns Registrable Securities and each Affiliate of Sun Pharmaceutical Industries Ltd. who agree to be bound by the provisions of this Agreement in accordance with Section 11(e).

“NASDAQ” means National Association of Securities Dealers Automated Quotation System.

“Ordinary Shares” means the ordinary shares, nominal value NIS 0.0001 per share, of the Company.

“Prospectus” means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and all other amendments and supplements to such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus.

“Public Offering” means an underwritten sale of equity securities by the Company or a Holder pursuant to an effective registration statement under the Securities Act.

“Registrable Securities” means (A) all Ordinary Shares held from time to time by the Holders and (B) all Ordinary Shares issued or issuable upon exercise of the Warrant; provided, however, that Registrable Securities shall cease to be Registrable Securities when a Registration Statement covering such Registrable Securities has been declared effective by the SEC under the Securities Act and such Registrable Securities have been disposed of pursuant to such effective Registration Statement. For purposes of this Agreement, Registrable Securities shall also include any Ordinary Shares that may be received by the Holders (x) as a result of a stock dividend, stock distribution or stock split of Registrable Securities or (y) on account of Registrable Securities in a merger, consolidation, combination, reclassification, recapitalization or similar transaction involving the Company.

“Registration Statement” means any registration statement of the Company under the Securities Act that covers any of the Registrable Securities, Ordinary Shares or other securities that would be convertible into, or exchangeable or exercisable for, Ordinary Shares pursuant to the provisions of this Agreement, including in the Prospectus, any preliminary prospectus, all amendments and supplements to such registration statement (including post-effective amendments), all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“Underwritten Offering” shall mean a distribution, registered pursuant to the Securities Act, in which securities of the Company are sold to the public through one or more underwriters.

2. Effective Time. This Agreement shall become effective as of the date hereof.

Demand Registration.

(a) Requests for Registration by Holders. Subject to the terms and conditions of this Agreement, at any time and from time to time after the consummation of a Public Offering, the Holders shall have the right, by delivering the Company a written notice (a “Demand Notice”), to require the Company to register Registrable Securities under the Securities Act covering all or part of the Holders’ Registrable Securities (which specifies the intended method or methods of disposition thereof) (a “Demand Registration”), and after receipt of a Demand Notice, the Company shall use its reasonable best efforts to effect a registration of

Registrable Securities under the Securities Act; provided, that the Holders shall not make in the aggregate more than two (2) Demand Registrations under this Agreement; provided, further, that: (i) no such Demand Registration may be required unless the Holders requesting such Demand Registration provide to the Company a certificate (the “Authorizing Certificate”) seeking to include Registrable Securities in such Demand Registration with an aggregate market value not less than $5,000,000 (calculated based on the closing sale price of such securities on the principal securities exchange where such securities are listed on the trading day immediately preceding the date of the Demand Notice) as of the date the Demand Notice is given, and (ii) no Demand Notice may be given prior to ninety (90) days after the effective date of the immediately preceding Demand Registration or, if later, the date on which a registration pursuant to this Section 3 is terminated in its entirety prior to the effective date of the applicable Registration Statement. The Authorizing Certificate shall set forth (A) the name of the Holder signing such Authorizing Certificate and (B) the intended methods of disposition of the Registrable Securities. The Holders shall be permitted to withdraw in good faith all or a part of the Registrable Securities from a Demand Registration at any time prior to the effective date of such Demand Registration, in which event the Company shall promptly amend the related Registration Statement.

(b) Filing and Effectiveness. The Company shall file a Registration Statement relating to any Demand Registration as promptly as practicable, but in any event no later than thirty (30) days after receipt of a Demand Notice, with the SEC and use its reasonable best efforts to cause such Registration Statement to be declared effective as soon as practicable thereafter and to remain effective for a period of time reasonably required for the disposition of the Registrable Securities covered by such Registration Statement. If any Demand Registration is requested to be effected as a shelf registration pursuant to Rule 415 under the Securities Act by the Holders demanding such Demand Registration and if the Company is eligible to do so pursuant to Rule 415 under the Securities Act, the Company shall keep the Registration Statement filed in respect thereof effective for a period of six (6) months from the date on which the SEC declares such Registration Statement effective or such shorter period that will terminate when all Registrable Securities covered by such Registration Statement have been sold pursuant to such Registration Statement if the Company is eligible to do so pursuant to Rule 415 under the Securities Act.

(c) Priority on Demand Registration. If the Demand Notice includes a request for an Underwritten Offering and the managing underwriter or underwriters of such Underwritten Offering, selected by the Holders pursuant to Section 8, to which such Demand Registration relates advise the Holders initiating the Demand Registration pursuant to Section 3(a) in writing that the total amount of Registrable Securities that the Holders intend to include in such Demand Registration is in the aggregate such as to materially and adversely affect the success of such offering, then the number of Registrable Securities to be included in such Demand Registration shall be reduced and there shall be included in such Underwritten Offering the number of Registrable Securities that, in the opinion of such managing underwriter or underwriters, can be sold without materially and adversely affecting the success of such Underwritten Offering (the “Maximum Number of Securities”).

(d) Postponement of Demand Registration. The Company shall be entitled to postpone the filing period of any Demand Registration or suspend the effectiveness of any

Registration Statement for a reasonable period of time not in excess of forty-five (45) calendar days if the Company determines, in the good faith exercise of the business judgment of the Board, that such registration and offering could materially interfere with a bona fide business or financing transaction of the Company or would require disclosure of information, the premature disclosure of which could materially and adversely affect the Company; provided, that the Company shall not invoke this right more than twice in any twelve (12)-month period; and provided, further, that the Company shall not register any of its securities during such postponement or suspension period. In the event that the Company determines to postpone the filing of, or suspend the effectiveness of, a Registration Statement, it shall promptly (i) furnish to all Holders a certificate signed by the Company’s chief executive officer or chief financial officer stating that the decision to postpone or suspend was made by the Board in accordance with this Section 3(d) and (ii) notify the Holders in writing when the events or circumstances permitting such postponement or suspension have ended.

Piggy-Back Registration.

(a) Right to Piggyback. If the Company proposes to file a Registration Statement, whether or not for its own account, under the Securities Act on any form for the registration of Ordinary Shares or other securities that would be convertible into, or exchangeable or exercisable for, Ordinary Shares (a “Piggy-Back Registration”), it shall give written notice to the Holders at least twenty (20) Business Days prior to the initial filing with the SEC of such piggy-back Registration Statement, which notice shall set forth the intended method of disposition of the securities proposed to be registered by the Company in the Piggy-Back Registration. The notice referred to in the preceding sentence shall offer the Holders the opportunity to register such amount of Registrable Securities as the Holders may request. The Holders desiring to have Registrable Securities registered under this Section 4 (a) (a “Participating Piggy-Back Holder”) shall advise the Company in writing within ten (10) Business Days after the date of receipt of the aforementioned notice from the Company, setting forth the amount of such Registrable Securities for which registration is requested. Subject to the limitations set forth in Section 4(b), the Company shall thereupon include in such Piggyback Registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein, and shall use its reasonable best efforts to effect registration of such Registrable Securities under the Securities Act. The Participating Piggy-Back Holders shall be permitted to withdraw all or part of the Registrable Securities from a Piggyback Registration at any time prior to the effective date of such Piggyback Registration.

(b) Priority on Piggyback Registrations. If the Piggy-Back Registration relates to an Underwritten Offering and the managing underwriter or underwriters of such Underwritten Offering, selected by the Holders pursuant to Section 8, to which such Piggy-Back Registration relates advise the Participating Piggy-Back Holders in writing that the total amount of Registrable Securities that such Participating Piggy-Back Holders intend to include in the Piggy-Back Registration in addition to any other securities the Company intends to register would be greater than the total number of securities which can be sold in such Underwritten Offering without having a material adverse affect on the success of such Underwritten Offering, the Company shall include in such Piggy-Back Registration (i) first, 100% of the Ordinary Shares or other securities that would be convertible into, or exchangeable or exercisable for, Ordinary Shares the Company proposes to sell, and (ii) second, to the extent of the number of

Registrable Securities requested to be included in such registration which, with the advice of such managing underwriter or underwriters, can be sold without having the adverse effect referred to above, the number of Registrable Securities which the Participating Piggy-Back Holders have requested to be included in such registration.

5. Registration Procedures. In connection with the Company’s registration obligations pursuant to Sections 3 and 4, the Company shall use its reasonable best efforts to effect such registrations to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof and pursuant thereto, the Company shall as expeditiously as possible, and in each case to the extent applicable (it being understood that the obligations of the Company in clauses (a), (b), (d), (e), (h), (j), (k), (m), (n) and (p) of this Section 5 shall be subject to Section 3(d)):

(a) prepare and file with the SEC a Registration Statement or Registration Statements on any appropriate form under the Securities Act available for the sale of the Registrable Securities by the holders thereof in accordance with the intended method or methods of distribution thereof, and cause each such Registration Statement to become effective and remain effective as provided herein; provided, however, that the Company agrees that, at the request of the Holders exercising a demand registration right under Section 3, at such time as the Company becomes a “well-known seasoned issuer,” as such term is defined in Rule 405 under the Securities Act, the Company will register an offering pursuant to Section 3 on an “automatic shelf registration statement,” as such term is defined in Rule 405 under the Securities Act, and provided, further, however, that before filing a Registration Statement or Prospectus or any amendments or supplements thereto (including documents that would be incorporated or deemed to be incorporated therein by reference) the Company shall furnish to the Holders holding Registrable Securities covered by such Registration Statement, not more than one counsel chosen by the Holders holding a majority of the Registrable Securities being registered (“Special Counsel”) and the managing underwriter or underwriters, if any, copies of all such documents proposed to be filed, which documents shall be subject to the review of the Holders, such Special Counsel and such underwriter or underwriters, and the Company shall not file any such Registration Statement or amendment thereto or any Prospectus or any supplement thereto (excluding such documents that, upon filing, will be incorporated or deemed to be incorporated by reference therein) to which the Holders or the managing underwriter or underwriters, if any, could reasonably conclude to be potentially misleading, omit a material fact or fail to comply with rules or common practice of the SEC or the securities industry; and the Company shall not be deemed to have used its reasonable best efforts to keep a Registration Statement effective during the applicable period if it voluntarily takes any action that would result in the Holders of such Registrable Securities not being able to sell such Registrable Securities during that period, unless such action is required under applicable law or otherwise undertaken by the Company in good faith and for valid business reasons (not including avoidance of the Company’s obligations hereunder), including the acquisition or divestiture of assets;

(b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective for the applicable periods specified in Section 3; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the

Securities Act; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented;

(c) notify the Holders and the managing underwriter or underwriters, if any, promptly, and (if requested by any such Person) confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the SEC or any other federal or state governmental authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information or the receipt by the Company of any comment letter from the SEC with respect to a Registration Statement or related Prospectus, (iii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if at any time the representations and warranties of the Company contained in any agreement contemplated by Section 5(m) (including any underwriting agreement) cease to be true and correct in any material respect, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (vi) of the occurrence of any event that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in a Registration Statement, Prospectus or any such document so that, in the case of the Registration Statement, it shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and, in the case of the Prospectus, it shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate;

(d) use every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest possible moment;

(e) if requested by the Holders or the managing underwriter or underwriters, if any, (i) promptly incorporate in a Prospectus supplement or post-effective amendment such information as the Holders or the managing underwriter or underwriters, if any, reasonably conclude, based on the advice of their counsel, must be included therein as may be required by applicable law and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment; provided, however, that the Company shall not be required to take any actions under this Section 5(e) that are not, in the opinion of counsel for the Company, in compliance with applicable law;

(f) furnish to the selling Holders and each managing underwriter, if any, without charge, at least one conformed copy of the Registration Statement and any post-effective amendment thereto, including financial statements (but excluding schedules, all documents incorporated or deemed incorporated therein by reference and all exhibits, unless requested in writing by such Holders or underwriter);

(g) deliver to the selling Holders and each managing underwriter, if any, without charge as many copies of the Prospectus or Prospectuses relating to such Registrable Securities (including each preliminary prospectus) and any amendment or supplement thereto as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Company hereby consents to the use of such Prospectus or each amendment or supplement thereto by the selling Holders and the managing underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto;

(h) prior to any public offering of Registrable Securities, register or qualify or cooperate with the selling Holders, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions within the United States as any seller or underwriter reasonably requests in writing; use all reasonable efforts to keep such registration or qualification (or exemption therefrom) effective during the period the applicable Registration Statement is required to be kept effective and do any and all other acts or things necessary or advisable to enable the disposition in each such jurisdiction of the Registrable Securities covered by the applicable Registration Statement; provided, however, that the Company shall not be required to (i) qualify to do business in any jurisdiction where it is not then so required to be qualified or (ii) take any action that would subject it to taxation or service of process in any such jurisdiction where it is not then so subject;

(i) cooperate with the selling Holders and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters, if any, shall request at least two (2) Business Days prior to the closing of any sale of Registrable Securities to the underwriters;

(j) upon the occurrence of any event contemplated by Section 5(c)(vi) or 5(c)(vii), prepare a supplement or post-effective amendment to each Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such Prospectus shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

(k) if requested by the Holders or the managing underwriter or underwriters, if any, use its reasonable best efforts to cause all Registrable Securities covered by such Registration Statement to be (i) listed on each securities exchange, if any, on which securities

issued by the Company of the same class are then listed or, if no such securities issued by the Company are then so listed, on the New York Stock Exchange or another national securities exchange if the securities qualify to be so listed or (ii) authorized to be quoted on the NASDAQ or the National Market System of NASDAQ, if the securities qualify to be so quoted;

(l) if needed, engage an appropriate transfer agent and provide the transfer agent with printed certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company and provide a CUSIP number for the Registrable Securities;

(m) enter into such customary agreements (including, in the event of an Underwritten Offering, an underwriting agreement in form, scope and substance as is customary in underwritten offerings) and take all such other commercially reasonable and customary actions in connection therewith (including those reasonably requested by the Holders holding a majority of the Registrable Securities being sold or, in the event of an Underwritten Offering, those reasonably requested by the managing underwriter or underwriters) in order to facilitate the disposition of such Registrable Securities and in such connection, and where an underwriting agreement is entered into in connection with an underwritten registration, (i) make such representations and warranties to the underwriters with respect to the businesses of the Company and its Subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference therein, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested; (ii) in the case of an Underwritten Offering, obtain opinions of counsel to the Company and updates thereof, which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriter or underwriters, if any, and if such Registrable Securities are not being sold through an Underwritten Offering, then to the Holders of Registrable Securities requesting registration, addressed to each of the underwriters or the Holders of Registrable Securities, as applicable, covering the matters customarily covered in opinions requested in offerings and such other matters as may be reasonably requested by such underwriters or Holders, as applicable; (iii) in the case of an Underwritten Offering, use reasonable efforts to obtain “comfort” letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other certified public accountants of any Subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data is, or is required to be, included in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in “comfort” letters in connection with underwritten offerings; and (iv) deliver such documents and certificates as may be reasonably requested by the managing underwriter or underwriters, if any, to evidence the continued validity of the representations and warranties of the Company and its Subsidiaries made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in the underwriting agreement entered into by the Company. The foregoing actions shall be taken in connection with each closing under such underwriting agreement as and to the extent required thereunder;

(n) upon three (3) Business Days’ notice, make available for reasonable inspection during normal business hours by a representative of the Holders holding Registrable Securities being sold, any underwriter participating in any disposition of Registrable Securities, and any attorney or accountant retained by the selling Holders or underwriter, all financial and

other records, pertinent corporate documents and properties of the Company and its Subsidiaries, and cause the officers, directors and employees of the Company and its Subsidiaries to supply all information reasonably requested by any such representative, underwriter, attorney or accountant in connection with such Registration Statement; provided, however, that any records, information or documents that are designated by the Company in writing as confidential at the time of delivery of such records, information or documents shall be kept confidential by such Persons unless (i) such records, information or documents are in the public domain or otherwise publicly available, (ii) disclosure of such records, information or documents is required by any Governmental Authority or Order or is necessary to respond to inquiries of any Governmental Authority, or (iii) disclosure of such records, information or documents, in the reasonable opinion of counsel to such Person, is otherwise required by law (including, without limitation, pursuant to the requirements of the Securities Act);

(o) comply with all applicable rules and regulations of the SEC and make generally available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 calendar days after the end of any 12 month period (or 90 calendar days after the end of any 12-month period if such period is a fiscal year), subject to any applicable extension pursuant to Rule 12b-25 of the Exchange Act, (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or best efforts underwritten offering, or (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company, after the effective date of a Registration Statement, which statement shall cover such 12-month period; and

(p) In connection with any Underwritten Offering, cause appropriate members of management to be available for meetings with prospective purchasers of Registrable Securities and prepare and present to potential investors customary “road show” material, in each case in accordance with the recommendations of the underwriters and in all respects in a manner consistent with other new issuances of securities in an offering of a similar size to such offering of Registrable Securities.

The Company may require the selling Holders of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding the distribution of such Registrable Securities as the Company may, from time to time, reasonably request in writing, and the Company may exclude from such registration the Registrable Securities of the Holders, if they unreasonably fail to furnish such information within a reasonable time after receiving such request. The Company may require the selling Holders of Registrable Securities (i) to agree to sell such Registrable Securities on the basis reasonably provided in any underwriting agreements entered into in connection with such offering pursuant to Section 5(m) and (ii) to complete and execute all questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreements and other documents required under the terms of such underwriting agreements.

The Holders shall be deemed to have agreed by virtue of its acquisition of Registrable Securities that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in Section 3(d) or 5(c) (other than 5(c)(i)) (a “Suspension Notice”), the Holders shall forthwith discontinue (“Black-Out”) disposition of such Registrable

Securities covered by such Registration Statement or Prospectus until the Holders’ receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(j), or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and the Holders have received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus. Except as expressly provided herein, there shall be no limitation with regard to the number of Suspension Notices that the Company is entitled to give hereunder; provided, however, that in no event shall the aggregate number of days the Holders are subject to Black-Out during any period of 12 consecutive months exceed 90 days.

Expenses.

All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not any of the Registration Statements become effective. Such fees and expenses shall include, without limitation, (i) all registration and filing fees (including fees and expenses for compliance with securities or “blue sky” laws), (ii) printing expenses (including expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing a reasonable number of Prospectuses if the printing of such Prospectuses is requested by the Holders holding a majority of the Registrable Securities included in any Registration Statement), (iii) messenger, telephone and delivery expenses incurred by the Company, (iv) fees and disbursements of counsel for the Company incurred by the Company, (v) fees and disbursements of all independent certified public accountants referred to in Section 5(m)(iii) (including the expenses of any special audit and “comfort” letter required by or incident to such performance) incurred by the Company, (vi) Securities Act liability insurance, if any, (vii) fees and expenses of Special Counsel retained by the Holders in connection with the registration and sale of their Registrable Securities not in excess of $50,000 per single registration, and (viii) fees and expenses of the Company and the underwriters relating to “road show” investor presentations. In addition, the Company shall pay internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange on which securities of the same class issued by the Company are then listed and the fees and expenses of any Person, including special experts, retained by the Company. In no event, however, shall the Company be responsible for any underwriting discount or selling commission with respect to any sale of Registrable Securities pursuant to this Agreement, and the Holders shall be responsible on a pro rata basis for any taxes of any kind (including transfer taxes) with respect to any disposition, sale or transfer of Registrable Securities and for any legal, accounting and other expenses incurred by them in connection with any Registration Statement.

Indemnification and Contribution.

(a) Indemnification by the Company. The Company shall, without limitation as to time, indemnify and hold harmless, to the fullest extent permitted by law, each Holder holding Registrable Securities registered pursuant to this Agreement, the officers, directors and agents and employees of each of them, each Person who controls such a Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers,

directors, agents and employees of any such controlling Person, from and against all losses, claims, damages, liabilities, costs (including the costs of investigation and attorneys’ fees) and expenses, in each case joint or several (collectively, “Losses”), as incurred, arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus or form of Prospectus or in any amendment or supplement thereto or in any preliminary prospectus or in any “free writing prospectus,” as such term is defined in Rule 405 under the Securities Act, utilized in connection with any related offering, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar and to the extent as the same are based upon information furnished in writing to the Company by such Holder for use therein.

(b) Indemnification by Holders. In connection with any Registration Statement in which the Holders are participating, the Holders shall furnish to the Company in writing such information as the Company reasonably requests for use in connection with any Registration Statement, Prospectus or preliminary prospectus and shall severally and not jointly indemnify, to the fullest extent permitted by law, the Company, its directors and officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, from and against all Losses arising out of or based upon any untrue statement of a material fact contained in any Registration Statement, Prospectus or preliminary prospectus, or in any “free writing prospectus,” as such term is defined in Rule 405 under the Securities Act, utilized in connection with any related offering, or arising out of or based upon any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company for use in such Registration Statement, Prospectus or preliminary prospectus or in any “free writing prospectus” and was relied upon by the Company in the preparation of such Registration Statement, Prospectus or preliminary prospectus. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the proceeds (net of payment of all expenses) received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

(c) Conduct of Indemnification Proceedings. If any Person shall become entitled to indemnification hereunder (an “Indemnified Party”), it shall give prompt notice to the party from which such indemnification is sought (the “Indemnifying Party”) of any claim or of the commencement of any action or proceeding with respect to which such Indemnified Party seeks indemnification or contribution pursuant hereto; provided, however, that the failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party from any obligation or liability except to the extent that such Indemnifying Party has been prejudiced materially by such failure. All reasonable fees and expenses (including any reasonable fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the Indemnified Party (provided appropriate documentation for such expenses is also submitted with such notice), as incurred, within five (5) calendar days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder). The Indemnifying Party shall not consent to entry of any judgment or enter into any settlement or otherwise seek to terminate any action or

proceeding in which any Indemnified Party is or could be a party and as to which indemnification or contribution could be sought by such Indemnified Party under this Section 7, unless such judgment, settlement or other termination includes as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release, in form and substance reasonably satisfactory to the Indemnified Party, from all liability in respect of such claim or litigation for which such Indemnified Party would be entitled to indemnification hereunder. In the case of parties indemnified pursuant to Section 7(a) above, counsel to the Indemnified Parties shall be selected by the Holder or Holders which are the Indemnified Party and, in the case of parties indemnified pursuant to Section 7(b) above, counsel to the Indemnified Parties shall be selected by the Company. Notwithstanding the foregoing sentence, in case any such action is brought against any Indemnified Party, and such Indemnified Party notifies the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to participate therein and, to the extent it may wish and if the Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnified Party pursuant to Section 7(a) or 7(b), as applicable, jointly with any other Indemnifying Party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party. Notwithstanding the election of the Indemnifying Party to assume the defense of such litigation or proceeding, such Indemnified Party shall have the right to employ separate counsel and to participate in the defense of such litigation or proceeding, and the Indemnifying Party shall bear the reasonable fees, costs and expenses of such separate counsel and shall pay such fees, costs and expenses at least quarterly (provided that with respect to any single litigation or proceeding or with respect to several litigations or proceedings involving substantially similar legal claims, such Indemnifying Party shall not be required to bear the fees, costs and expenses of more than one such counsel) if (i) in the reasonable judgment of such Indemnified Party the use of counsel chosen by such Indemnifying Party to represent such Indemnified Party would present such counsel with a conflict of interest, (ii) the defendants in, or targets of, any such litigation or proceeding include both an Indemnifying Party and an Indemnified Party, and such Indemnified Party shall have reasonably concluded that there may be legal defenses available to it or to other Indemnified Parties which are different from or additional to those available to such Indemnifying Party (in which case such Indemnifying Party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), (iii) such Indemnifying Party shall not have employed counsel satisfactory to such Indemnifying Party, in the exercise of such Indemnified Party’s reasonable judgment, to represent such Indemnified Party within a reasonable time after notice of the institution of such litigation or proceeding or (iv) any Indemnifying Party shall authorize in writing such Indemnified Party to employ separate counsel at the expense of such Indemnifying Party.

(d) Contribution. If the indemnification provided for in this Section 7 is unavailable to an Indemnified Party under Section 7(a) or 7(b) in respect of any Losses or is insufficient to hold such Indemnified Party harmless, then each applicable Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall, severally but not jointly, contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party or Indemnifying Parties, on the one hand, and such Indemnified Party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party or Indemnifying Parties, on the one hand, and such Indemnified Party, on the other hand, shall be determined by reference to, among

other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or related to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include any legal or other fees or expenses incurred by such party in connection with any action or proceeding.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 7(d), an Indemnifying Party that is a selling Holder shall not be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities sold by such Indemnifying Party and distributed to the public were offered to the public exceeds the amount of any damages that such Indemnifying Party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

The indemnity, contribution and expense reimbursement obligations of the Company hereunder shall be in addition to any liability the Company may otherwise have hereunder or otherwise. The provisions of this Section 7 shall survive the sale of the Registrable Securities pursuant to a Registration Statement, notwithstanding any permitted transfer of the Registrable Securities by any Holder thereof or any termination of this Agreement.

8. Selection of Managing Underwriters. If any of the Registrable Securities included in any Demand Registration are to be sold in an Underwritten Offering, the Holders included in the Demand Notice may select an investment banker or investment bankers and a manager or managers to manage the Underwritten Offering; provided that such investment banker or bankers are reasonably acceptable to the Company. If any Piggyback Registration is an Underwritten Offering, the Company shall have the exclusive right to select an investment banker or investment bankers and a manager or managers to administer the offering. The Company agrees that, in connection with any Underwritten Offering hereunder, it shall undertake to offer customary indemnification to the participating underwriters.

9. Limitations on Registration of Other Securities; Representation. From and after the date hereof, the Company shall not, without the prior written consent of the Holders, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder to have any registration rights the terms of which, when taken as a whole, are as favorable as or more favorable than the registration rights granted to the Holders hereunder unless the Company shall also give such rights to the Holders hereunder.

10. No Inconsistent Agreements. The Company shall not hereafter enter into any agreement with respect to its securities that is inconsistent with or adversely affects, in any material respects, the rights granted to the Holders in this Agreement.

11.

Miscellaneous.

(a) Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement were not performed in accordance with the terms hereof and that the parties and the Holders shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.

(b) Amendments and Waivers. This Agreement may be amended or modified only if such amendment or modification is in writing and signed by the Company and the Holders of 75% of the Registrable Securities on an as-converted basis. Any waiver of any provisions hereof shall be valid if set forth in an instrument in writing signed by the waiving party or parties to be bound thereby. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce any provision hereof in accordance with its terms.

(c) Notices. All notices, requests, consents and other communications hereunder to any party hereto shall be deemed to be sufficient if contained in a written instrument delivered in person, by telecopy, by overnight courier or by first class registered or certified mail (return receipt requested, postage prepaid) to such party at the address set forth below (or at such other address or to the attention of such other Person as shall be specified by such party in a notice given in accordance with this Section 11(c)) and to any Holder at such address as indicated by the Company’s records (or at such address or to the attention of such other Person as shall be specified by such Holder in a notice given in accordance with this Section 11(c)):

If to any Holder:

c/o Sun Pharmaceutical Industries Ltd.

17/B, Mahal Industrial Estate,

Mahakali Caves Road,

Andheri (East), Mumbai 400 093 India

Facsimile: (91-22) 6645 5685

with a copy (which shall not constitute notice) to:

Shearman & Sterling LLP

599 Lexington Avenue

New York, N.Y. 10022

Attn: Peter D. Lyons

Facsimile: (212) 848-7666

and an additional copy (which shall not constitute notice) to:

Naschitz, Brandes & Co.

5 Tuval Street

Tel-Aviv 67897

Israel

Attn: Aaron M. Lampert

Facsimile: +972-(3)-623-5051

if to the Company:

c/o Taro Pharmaceuticals U.S.A., Inc.

3 Skyline Drive

Hawthorne, NY 10532

Attention: Barrie Levitt

Facsimile: (914) 345-9719

and (914) 346-9825

with a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP

4 Times Square

New York, N.Y. 10036

Attn: Jeffrey W. Tindell

Facsimile: (917) 777-3380

and an additional copy (which shall not constitute notice) to:

Yigal Arnon & Co.

1 Azrieli Center

The Round Building

Tel-Aviv 67021

Israel

Attn: David Schapiro

Facsimile: +972-(3)-607-7724

All such notices, requests, consents and other communications shall be deemed to have been given hereunder when received.

(d) Merger or Consolidation of the Company. If the Company is a party to any merger or consolidation pursuant to which the Registrable Securities are converted into, or exchanged or exercised for, securities or the right to receive securities of any other Person (“Conversion Securities”), the issuer of such Conversion Securities shall assume (in a writing delivered to all Holders) all obligations of the Company hereunder. The Company shall not effect any merger or consolidation described in the immediately preceding sentence unless the issuer of the Conversion Securities complies with this Section 11(d).

(e) Successors and Assigns; Third Party Beneficiaries; Assignment. Subject to the terms and conditions of this Agreement, any transferee of all or a portion of the Registrable

Securities owned from time to time by the Investor shall become a Holder hereunder. This Agreement shall inure solely to the benefit of and be solely enforceable by the Company, the Investor and the Holders and their respective successors and permitted assignees.

(f) Headings. The headings and subheadings in this Agreement are included for convenience and identification only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof.

(g) Governing Law; Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any New York state or federal court sitting in the Borough of Manhattan of The City of New York. The parties hereto hereby (a) submit to the exclusive jurisdiction of any state or federal court sitting in the Borough of Manhattan of The City of New York for the purpose of any action or proceeding arising out of or relating to this Agreement brought by any party hereto, and (b) irrevocably waive, and agree not to assert by way of motion, defense, or otherwise, in any such action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the action or proceeding is brought in an inconvenient forum, that the venue of the action or proceeding is improper, or that this Agreement or the transactions contemplated hereby may not be enforced in or by any of the above-named courts.

(h) Waiver of Jury Trial. Each of the parties hereto hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury with respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement or the Transaction. Each of the parties hereto (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce that foregoing waiver and (b) acknowledges that it and the other hereto have been induced to enter into this Agreement and the Transaction, as applicable, by, among other things, the mutual waivers and certifications in this Section 11(h).

(i) Severability. Whenever possible, each term and provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. If any term or provision hereof is invalid, illegal or incapable of being enforced by law or public policy, all other terms and provisions hereof shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

(j) Entire Agreement. This Agreement, the other Transaction Agreements and the other writings referred to herein or therein or delivered pursuant hereto or thereto which form a part hereof or thereof contain the entire agreement and understanding among the parties hereto with respect to the subject matter hereof or thereof and supersedes and preempts any prior

understandings, agreements or representations by or among the parties, written or oral, with respect to the subject matter hereof or thereof.

(k) Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

[Signatures appears on next page]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

TARO PHARMACEUTICAL INDUSTRIES LTD.



By:	/s/ Tal Levitt
	Name:	Tal Levitt
	Title:	Secretary

ALKALOIDA CHEMICAL COMPANY EXCLUSIVE GROUP LTD.



By:	/s/ Sudhir Valia
	Name:	Sudhir Valia
	Title:	Director

EX-99.4 7 ex99-4.htm

Schedule 99.4

AGREEMENT OF MERGER

This Agreement of Merger is made and entered into as of May 18, 2007 by and among Alkaloida Chemical Company Exclusive Group Ltd., (“Parent”), Aditya Acquisition Company Ltd., an Israeli company under the control of Parent (“Merger Sub”), and Taro Pharmaceutical Industries Ltd., an Israeli company (the “Company”). Certain capitalized terms used in this Agreement are defined at Exhibit A hereto.

Recitals

A. Parent, Merger Sub and the Company intend to effect a merger of Merger Sub with and into the Company in accordance with this Agreement and the applicable provisions of the Companies Law (the “Merger”). Upon consummation of the Merger, Merger Sub will cease to exist, and the Company will become a direct wholly-owned subsidiary of Parent.

B. The board of directors of Merger Sub has determined that, considering the financial position of the merging companies, no reasonable concern exists that the Surviving Company (as defined in Section 1.1) will be unable to fulfill the obligations of Merger Sub to its creditors, and the respective boards of directors of Parent and Merger Sub have (i) determined that the Merger is advisable and fair and in the best interests of their respective companies and shareholders and (ii) approved this Agreement, the Merger and the Contemplated Transactions.

C. The board of directors of the Company has (i) determined that the Merger is advisable and fair and in the best interests of the Company and its shareholders, (ii) determined that, considering the financial position of the merging companies, no reasonable concern exists that the Surviving Company will be unable to fulfill the obligations of the Company to its creditors, (iii) approved this Agreement, the Merger and the Contemplated Transactions and (iv) recommended the approval and adoption of this Agreement, the Merger and any other Required Approval Transactions by the shareholders of the Company.

D. In order to induce Parent to enter into this Agreement and cause the Merger to be consummated, concurrently with the execution and delivery of this Agreement, the shareholders of the Company identified at Exhibit B hereto are executing Shareholder Undertakings (the “Shareholder Undertakings”) in favor of Parent and granting irrevocable proxies to a mutually-agreed-upon proxyholder, pursuant to which such shareholders are undertaking certain obligations (including, but not limited to, the obligation not to sell, transfer, assign, pledge or encumber any of the Company Ordinary Shares or Company Founder Shares) and irrevocably directing the proxyholder to vote all securities of the Company beneficially owned by them in favor of the approval of this Agreement, the Merger and any other Required Approval Transactions.

E. Concurrently with the execution and delivery of this Agreement, Parent will enter into an agreement for the acquisition of all of the outstanding share capital of Taro Development Corporation (“TDC”) prior to the Effective Time (the “TDC Agreement”).

Agreement

The parties to this Agreement, intending to be legally bound, agree as follows:

SECTION 1. Description of Transaction.

1.1 Merger of Merger Sub into the Company. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, and in accordance with Sections 314 and 327 of the Companies Law, Merger Sub (as the target company (HaYa’ad)) shall be merged with and into the Company (as the absorbing company (HaChevrat HaKoletet)), and the separate existence of Merger Sub shall cease. The Company will continue as the surviving corporation in the Merger (the “Surviving Company”).

1.2 Effect of the Merger. The Merger shall have the effects set forth in this Agreement and in the applicable provisions of the Companies Law. Pursuant to the Merger, the Surviving Company will succeed to and

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assume all of the rights, properties and obligations of Merger Sub and the Company in accordance with the Companies Law. Following the Merger, the Surviving Company shall: (a) be governed by the laws of the State of Israel; and (b) maintain a registered office in the State of Israel.

1.3 Closing; Effective Time. The closing of the Merger and the consummation of those transactions contemplated by this Agreement that are to be consummated at the time of the Merger (the “Closing”) shall take place at Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York 10022, or such other place as the parties shall agree, on a date to be designated by Parent and the Company (the “Closing Date”), which shall be no later than the third business day after the satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in Sections 6 and 7 (other than those conditions which by their nature are to be satisfied at the Closing). On the Closing Date, the Company shall notify the Companies Registrar of the State of Israel (the “Companies Registrar”) that the conditions set forth in Sections 6 and 7 have been satisfied or waived. The Merger shall become effective upon the issuance of the Certificate of Merger in accordance with the Companies Law (the time the Merger becomes effective being the “Effective Time”).

1.4 Articles of Association; Memorandum of Association; Directors. Unless otherwise determined by Parent prior to the Effective Time:

(a) the Articles of Association of the Surviving Company shall be the same as the Articles of Association of Merger Sub in effect at the Effective Time until thereafter amended in accordance with the Companies Law and such Articles of Association;

(b) the Memorandum of Association of the Surviving Company shall be the same as the Memorandum of Association of the Company in effect at the Effective Time until thereafter amended in accordance with the Companies Law and such Memorandum of Association; and

(c) the directors of the Surviving Company immediately after the Effective Time shall be the respective individuals who are directors of Merger Sub immediately prior to the Effective Time and the officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Company, in each case until their respective successors are duly elected or appointed or until the earlier of their death, resignation or removal.

1.5 Effect on Share Capital.

(a) At the Effective Time, by virtue of, and simultaneously with, the Merger and without any further action on the part of Parent, Merger Sub, the Company or any shareholder of Parent, Merger Sub or the Company:

(i) any Company Ordinary Shares held by the Company (or held by the Company as dormant shares (Menayot Redumot)) immediately prior to the Effective Time shall be canceled and shall cease to exist, and no consideration shall be delivered in exchange therefore; and, notwithstanding anything contrary contained in this Agreement any Company Ordinary Shares, Company Founder Shares or any other shares of stock of the Company held by TDC, Morley and Company, Inc. (“Morley”) or any wholly-owned Subsidiary of the Company shall not be cancelled or surrendered in the Merger and shall continue to remain outstanding;

(ii) except as provided in clause “(i)” above, and subject to Section 1.5(b), each Company Ordinary Share and each Company Founder Share outstanding immediately prior to the Effective Time shall be transferred to Parent and shall be registered in the name of Parent in the shareholders register of the Surviving Company in consideration for the right to receive US$7.75 in cash, without any interest thereon (the “Merger Consideration”);

(iii) all Company Options shall be treated in accordance with Section 5.5 hereof; and

(iv) each ordinary share, par value NIS 0.01 per share, of Merger Sub outstanding immediately prior to the Effective Time shall be canceled and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(b) If, during the period commencing on the date of this Agreement and ending at the Effective Time, the outstanding Company Ordinary Shares and/or Company Founder Shares are changed into a different number or class of shares by reason of any stock split, division or subdivision of shares, stock dividend, issuance of bonus

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shares, reverse stock split, consolidation of shares, reclassification, recapitalization or other similar transaction, or if a stock dividend is declared by the Company during such period, or a record date with respect to any such event shall occur during such period, then the Merger Consideration shall be adjusted to the extent appropriate.

(c) If any Company Ordinary Shares or Company Founder Shares outstanding immediately prior to the Effective Time are unvested or are subject to a repurchase option, risk of forfeiture or other condition under any applicable restricted stock purchase agreement or other Contract with the Company or under which the Company has any rights, then the Merger Consideration payable in exchange for such Company Ordinary Shares or Company Founder Shares, as applicable, will also be unvested and subject to the same repurchase option, risk of forfeiture or other condition and need not be paid until such time as such repurchase option, risk of forfeiture or other conditions lapses or otherwise terminates. Prior to the Effective Time, the Company shall ensure that, from and after the Effective Time, Parent is entitled to exercise any such repurchase option or other right set forth in any such restricted stock purchase agreement or other Contract.

1.6 Closing of the Company’s Transfer Books. At the Effective Time: (a) all Company Ordinary Shares outstanding immediately prior to the Effective Time shall automatically be transferred to Parent, and all holders of certificates representing Company Ordinary Shares that were outstanding immediately prior to the Effective Time shall cease to have any rights as shareholders of the Company, other than the right of the holders of Company Ordinary Shares to receive the Merger Consideration set forth herein; (b) all Company Founder Shares outstanding immediately prior to the Effective Time shall automatically be transferred to Parent, and all holders of certificates representing Company Founder Shares that were outstanding immediately prior to the Effective Time shall cease to have any rights as shareholders of the Company, other than the right of the holders of Company Founder Shares to receive the Merger Consideration set forth herein; and (c) the share transfer books of the Company shall be closed with respect to all Company Ordinary Shares and Company Founder Shares outstanding immediately prior to the Effective Time. No further transfer of any Company Ordinary Shares or Company Founder Shares shall be made on such share transfer books after the Effective Time. If, after the Effective Time, a valid certificate previously representing any Company Ordinary Shares or any Company Founder Shares outstanding immediately prior to the Effective Time (a “Company Share Certificate”) is presented to the Paying Agent (as defined in Section 1.7) or to the Surviving Company or Parent, such Company Share Certificate shall be canceled and shall be exchanged as provided in Section 1.7.

1.7 Exchange of Certificates.

(a) On or prior to the Closing Date, Parent shall select a reputable bank or trust company reasonably acceptable to the Company to act as the paying agent in connection with the Merger (the “Paying Agent”). As of the Effective Time, Parent shall have deposited with the Paying Agent, in trust for the benefit of the Persons who were registered holders of Company Ordinary Shares and Company Founder Shares immediately prior to the Effective Time, cash in an amount equal to the aggregate consideration payable pursuant to Section 1.5(a)(ii). The cash amount so deposited with the Paying Agent is referred to as the “Payment Fund.”

(b) As soon as reasonably practicable following the Effective Time, the Company will provide to the Paying Agent a list of the registered holders of Company Ordinary Shares and Company Founder Shares at the Effective Time and the Paying Agent will mail to such registered holders: (i) a letter of transmittal in customary form and containing such provisions as Parent may reasonably specify and that the Company may reasonably approve prior to the Effective Time (including a provision confirming that delivery of Company Share Certificates shall be effected, and risk of loss and title to Company Share Certificates shall pass, only upon delivery of such Company Share Certificates to the Paying Agent); and (ii) instructions for use in effecting the surrender of Company Share Certificates in exchange for the Merger Consideration pursuant to such letter of transmittal. Upon surrender of a Company Share Certificate to the Paying Agent in exchange for the Merger Consideration, together with a duly executed letter of transmittal and such other customary documents as may be reasonably required by the Paying Agent or Parent: (A) the holder of such Company Share Certificate shall be entitled to receive in exchange therefor the Merger Consideration multiplied by the number of Company Ordinary Shares or Company Founder Shares, as applicable, formerly represented by the Company Share Certificate; and (B) the Company Share Certificate so surrendered shall be canceled. If any cash is to be paid to a Person other than the Person in whose name the Company Share Certificate surrendered is registered, it shall be a condition of such payment that the Company

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Share Certificate so surrendered shall be properly endorsed (with such signature guarantees as may be required by the letter of transmittal) or otherwise in proper form for transfer, and that the Person requesting payment shall: (1) pay to the Paying Agent any transfer or other Taxes required by reason of such payment to a Person other than the registered holder of the Company Share Certificate surrendered; or (2) establish to the satisfaction of Parent that such Tax has been paid or is not required to be paid. The exchange procedures shall comply with such procedures as may be required by the Israeli Tax Rulings (as defined in Section 5.3(b)), if obtained, and shall permit Parent (after consultation with the Company) to require holders of Company Ordinary Shares to provide any information as is reasonably needed to comply with the Israeli Tax Rulings. Until surrendered as contemplated by this Section 1.7(b), each Company Share Certificate shall be deemed, from and after the Effective Time, to represent only the right to receive cash in an amount equal to the Merger Consideration multiplied by the number of Company Ordinary Shares or Company Founder Shares, as applicable, represented by such Company Share Certificate, without interest thereon. If any Company Share Certificate shall have been lost, stolen or destroyed, Parent may, in its reasonable discretion and as a condition precedent to the delivery of any Merger Consideration, require the owner of such lost, stolen or destroyed Company Share Certificate to provide an appropriate affidavit and to deliver a bond in such sum as Parent may reasonably direct, as indemnity against any claim that may be made against the Paying Agent, Parent, the Surviving Company or any affiliated party with respect to such Company Share Certificate.

(c) Any portion of the Payment Fund that remains undistributed to holders of Company Share Certificates as of the date 180 days after the Closing Date shall be delivered by the Paying Agent to Parent upon demand, and any holders of Company Share Certificates who have not theretofore surrendered their Company Share Certificates in accordance with this Section 1.7 shall thereafter look only to Parent for satisfaction of their claims for Merger Consideration, without any interest thereon.

(d) Each of the Paying Agent, Parent and the Surviving Company shall be entitled to deduct and withhold from any consideration payable pursuant to this Agreement to any holder or former holder of Company Ordinary Shares, Company Founder Shares or Company Options such amounts as Parent reasonably determines is required to be deducted or withheld therefrom or in connection therewith under the Code, under the Israeli Income Tax Ordinance New Version, 1961, as amended, or under any provision of U.S. state or local or non-U.S. Tax law or under any other applicable Legal Requirement, provided that, with respect to any withholding under Israeli Legal Requirements, the Paying Agent, Parent and the Surviving Company shall act in accordance with the Israeli Tax Rulings, if obtained. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.

(e) None of the Paying Agent, Parent or the Surviving Company shall be liable to any holder or former holder of Company Ordinary Shares, Company Founder Shares or to any other Person with respect to any Merger Consideration delivered to any public official pursuant to any applicable abandoned property law, escheat law or similar Legal Requirement.

1.8 Further Action. If, at any time after the Effective Time, any further action is determined by Parent or the Surviving Company to be necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Company with full right, title and possession of and to all rights and property of Merger Sub and the Company, the officers and directors of the Surviving Company and Parent shall be fully authorized (in the name of Merger Sub, in the name of the Company and otherwise) to take such action.

SECTION 2. Representations and Warranties of the Company

For the purposes of this Section 2, the term “Acquired Corporations” shall mean the Company and the Company Subsidiaries (as defined below).

The Company represents and warrants to Parent and Merger Sub as follows (it being understood that each representation and warranty contained in this Section 2 is subject to: (a) the exceptions and disclosures set forth in the part or subpart of the Company Disclosure Schedule corresponding to the particular Section or subsection in this Section 2 in which such representation and warranty appears; (b) any exceptions or disclosures explicitly cross-referenced in such part or subpart of the Company Disclosure Schedule by reference to another part or subpart of the Company Disclosure Schedule; and (c) any exception or disclosure set forth in any other part or subpart of the

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Company Disclosure Schedule to the extent it is reasonably apparent from the wording of such exception or disclosure that such exception or disclosure is intended to qualify such representation and warranty):

2.1 Subsidiaries; Due Organization; Qualification to do Business.

(a) The Company has no Subsidiaries, except for the Entities set forth in Part 2.1(a) of the Company Disclosure Schedule (collectively, the “Company Subsidiaries”) and the jurisdiction of incorporation of each Company Subsidiary is set forth in Part 2.1(a) of the Company Disclosure Schedule; and except as set forth in Part 2.1(a) of the Company Disclosure Schedule, neither the Company nor any of the Company Subsidiaries owns, directly or indirectly, any share capital of, or any equity interest or similar interest in, or any interest convertible into or exchangeable for any equity interest or similar interest of any nature in, any other Entity, other than the Company Subsidiaries. Except as set forth in Part 2.1(a) of the Company Disclosure Schedule, all of the Company Subsidiaries are wholly-owned subsidiaries of the Company. None of the Acquired Corporations has agreed or is obligated to make, or is bound by any Contract under which it may become obligated to make, any material future investment in or material capital contribution to any other Entity.

(b) Except as set forth in Part 2.1(b) of the Company Disclosure Schedule, each of the Acquired Corporations is a corporation duly organized and validly existing and, in jurisdictions that recognize the concept, is in good standing under the laws of the jurisdiction of its incorporation and has all necessary power and authority to: (i) conduct its business in the manner in which its business is currently being conducted; (ii) own, lease, operate and use its properties and assets in the manner in which its properties and assets are currently owned, leased, operated and used; and (iii) perform its obligations under all Contracts by which it is bound, except, in the case of clauses “(i)” through “(iii)” of this sentence, as would not have and would not reasonably be expected to have or result in a Company Material Adverse Effect.

(c) Each of the Acquired Corporations (in jurisdictions that recognize the following concepts) is qualified or licensed to do business as a foreign corporation, and is in good standing, under the laws of all jurisdictions where the character of the properties and assets owned, leased or operated by it or where the nature of its business requires such qualification, except where the failure to be so qualified or in good standing would not have and would not reasonably be expected to have or result in a Company Material Adverse Effect.

2.2 Articles of Association and Memorandum of Association. The Company has heretofore made available to Parent a complete and correct copy of the Articles of Association and the Memorandum of Association or equivalent organizational documents, each as amended to date, of the Company and each Company Subsidiary listed at Part 2.2 of the Company Disclosure Schedule. Such Articles of Association, Memorandum of Association or equivalent organizational documents are in full force and effect. Neither the Company nor any Company Subsidiary is in violation of any of the provisions of its Articles of Association, Memorandum of Association or equivalent organizational documents.

2.3 Capitalization; Rights to Acquire Stock.

(a) As of the date of this Agreement, the authorized share capital of the Company consists of: (i) 200,000,000 Company Ordinary Shares, of which as of May 18, 2007 29,665,618 Company Ordinary Shares are issued and outstanding; and (ii) 2,600 Company Founder Shares, all of which are issued and outstanding. As of April 30, 2007, 1,244,429 Company Ordinary Shares were subject to issuance pursuant to Company Options granted and outstanding under the Company Option Plans.

(b) All of the issued and outstanding share capital of the Company has been duly authorized and validly issued, and are fully paid and nonassessable. None of the outstanding share capital of the Company is entitled or subject to any preemptive right, right of participation, right of maintenance or any similar right and the outstanding share capital of the Company is free and clear of any Encumbrances (other than restrictions on transfer imposed by applicable securities laws). None of the outstanding share capital of the Company is subject to any right of first refusal in favor of any of the Acquired Corporations or any Company Affiliate. Except as set forth in Part 2.3(b) of the Company Disclosure Schedule, there is no Company Contract relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or from granting any option or similar right with respect to), any share capital of the Company. None of the Acquired Corporations is under any

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obligation, or is bound by any Contract pursuant to which it may become obligated, to repurchase, redeem or otherwise acquire any outstanding share capital of the Company or other securities.

(c) As of April 30, 2007: (A) 279,266 Company Ordinary Shares are reserved for future issuance pursuant to the Company’s 2000 Employee Stock Purchase Plan (the “Company ESPP”); and (B) 734,350 Company Ordinary Shares are reserved for future issuance pursuant to stock options not yet granted under the Company Option Plans. Part 2.3(c) of the Company Disclosure Schedule sets forth the following information with respect to each Company Option, in each case that was outstanding as of April 30, 2007: (1) the particular Company Option Plan (if any) pursuant to which such Company Option was granted; (2) the employee name; (3) the number of Company Ordinary Shares subject to such Company Option; (4) the exercise price of such Company Option; (5) the date on which such Company Option was granted; (6) the applicable vesting schedule, and the extent to which such Company Option is vested and exercisable; (7) the date on which such Company Option expires; (8) whether such Company Option is: (x) an “incentive stock option” (as defined in the Code) or a non-qualified stock option; or (y) with respect to Company Options granted to Israeli tax payers, whether such Company Option was granted under the following sections of the Israeli Income Tax Ordinance: Section 3(i); Section 102 (prior to January 1, 2003); or Section 102 (on or after January 1, 2003, and in such event pursuant to which subsection of Section 102); and (9) whether the vesting of such Company Option would be accelerated, in whole or in part, as a result of the Merger or any of the other Contemplated Transactions, alone or in combination with any termination of employment or other event. The Company has made available to Parent accurate and complete copies of: (x) each Company Option Plan; (y) the Company ESPP; and (z) the forms of all stock option agreements evidencing options to purchase stock of any of the Company.

(d) Except as set forth in Section 2.3(c) or in Part 2.3(c) of the Company Disclosure Schedule, as of the date of this Agreement, there is no: (i) outstanding subscription, option, call, warrant or right or agreement or commitments or arrangements of any character (whether or not currently exercisable) to acquire any share capital or other securities of any of the Acquired Corporations; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any share capital or other securities of any of the Acquired Corporations; (iii) shareholder rights plan (or similar plan commonly referred to as a “poison pill”) or Contract under which any of the Acquired Corporations is or may become obligated to sell or otherwise issue any share capital or any other securities.

(e) All of the outstanding share capital of each of the Company’s Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and free of preemptive rights and, except as set forth in Part 2.1(a) of the Company Disclosure Schedule are owned beneficially and of record by the Company, free and clear of any Encumbrances (other than restrictions on transfer imposed by applicable securities laws).

2.4 2005 20-F; Financial Statements.

(a) The Company has made available to Parent accurate and complete copies of the Company’s Annual Report on Form 20-F for the year ended December 31, 2005 (the “2005 20-F”). As of the time it was filed with or furnished to the SEC: (i) the 2005 20-F complied as to form in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be); and (ii) the 2005 20-F did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(b) The audited consolidated financial statements (including any related notes) attached to the 2005 20-F: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered (except as may be indicated therein or in the notes to such financial statements); and (iii) fairly present, in all material respects, the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of operations and cash flows of the Company and its consolidated subsidiaries for the periods covered thereby.

(c) Except as set forth in Part 2.4(c) of the Company Disclosure Schedule, the unaudited consolidated financial statements as of, and for the year ended December 31, 2006 (including any related notes) previously made available to Parent and the unaudited consolidated financial statements (including any related notes) as of, and for

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the three-month period ended March 31, 2007 previously made available to Parent: (i) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered (except as may be indicated therein or in the notes to such financial statements); and (ii) fairly present, in all material respects, the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of operations and cash flows of the Company and its consolidated subsidiaries for the periods covered thereby (subject to normal and recurring year end adjustments which would not have had, and would not have, individually or in the aggregate, a Company Material Adverse Effect).

(d) Except as and to the extent set forth on the consolidated balance sheet of the Company and the consolidated Subsidiaries as at March 31, 2007 including the notes thereto, no Acquired Corporation has any material liability, claim or obligation of any nature (whether accrued, absolute, contingent or otherwise).

(e) The Company has made available to Parent complete and correct copies of all amendments and modifications that have not been filed by the Company with the SEC to all agreements, documents and other instruments that previously had been filed by the Company with the SEC and are currently in effect.

(f) The Company has made available to Parent all comment letters received by the Company from the SEC or the staff thereof since January 1, 2004 and all responses to such comment letters filed by or on behalf of the Company.

(g) Except as specifically disclosed in the 2005 20-F and on Part 2.4(g) of the Company Disclosure Schedule, the Company has maintained disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange Act, and such controls and procedures are effective to ensure that all material information concerning the Acquired Corporations is made known on a timely basis to the individuals responsible for the preparation of the Company’s SEC filings and other public disclosure documents. The Company has made available to Parent, complete and correct copies of, all written descriptions of, and all policies, manuals and other documents promulgating, such disclosure controls and procedures. As used in this Section 2.4, the term “file” shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.

(h) Except as specifically disclosed in the 2005 20-F and on Part 2.4(h) of the Company Disclosure Schedule, the Company has maintained and will continue to maintain a standard system of accounting established and administered in accordance with GAAP and the Acquired Corporations maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has made available to Parent complete and correct copies of, all written descriptions of, and all policies, manuals and other documents promulgating, such internal accounting controls.

(i) Except as specifically disclosed in the 2005 20-F: (i) since January 1, 2004, none of the Acquired Corporations, or to the Knowledge of the Company, any director, officer, employee, auditor, accountant or representative of the Acquired Corporations, has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of any Acquired Corporation or their respective internal accounting controls, including any complaint, allegation, assertion or claim that any Acquired Corporation has engaged in questionable accounting or auditing practices; (ii) no attorney representing any Acquired Corporation, whether or not employed by any Acquired Corporation, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company’s board of directors or any committee thereof or to any director or officer of the Company and (iii) since January 1, 2004, there have been no internal investigations regarding accounting or revenue recognition discussed with, reviewed by or initiated at the direction of the chief executive officer, chief financial officer, general counsel, the Company’s board of directors or any committee thereof.

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2.5 Tax Matters.

(a) Except as set forth in Part 2.5(a) of the Company Disclosure Schedule, each of the Tax Returns required to be filed by or on behalf of the respective Acquired Corporations with any Governmental Body with respect to any taxable period ending on or before the Effective Date (the “Acquired Corporation Returns”): (i) has been or will be filed on or before the applicable due date (including any valid extensions of such due date obtained in the ordinary course of business); (ii) has been, or will be when filed, prepared in all material respects in compliance with all applicable Legal Requirements; and (iii) any such Acquired Corporation Returns are true, correct and complete in all material respects. All amounts shown on the Acquired Corporation Returns and all other material amounts of Taxes owed by the Acquired Corporations have been or will be timely paid on or before the Effective Date. All material amounts of Tax required to be withheld by the Acquired Corporations have been or will be timely withheld or timely paid over to the appropriate Government Body in compliance with all applicable Legal Requirements. The Acquired Corporations have made provision for the full amount of any Tax liability that is not yet due and payable for all taxable periods, or portions thereof, ending on or before the Effective Date. No written claim has been made by any Governmental Body in a jurisdiction where any of the Acquired Corporations do not file Tax Returns that the relevant Acquired Corporation is or may be subject to taxation by that jurisdiction.

(b) No deficiency for any material amount of Tax has been asserted or assessed or reassessed by any Governmental Body against an Acquired Corporation (or, to the Knowledge of the Company, has been threatened or proposed), except for deficiencies which have been satisfied by payment, settled or been withdrawn. There are no liens for Taxes other than for Taxes not yet due and payable on the assets of the Acquired Corporations.

(c) Except as set forth in Part 2.5(c) of the Company Disclosure Schedule, there are no pending or, to the Knowledge of the Company, threatened audits, examinations, investigations or other proceedings in respect of Taxes of the Acquired Corporations (including for these purposes pending or threatened audits, examinations, investigations or other proceedings by the Investment Center of the Israeli Ministry of Industry, Trade & Labor (the “Investment Center”) with respect to the Company’s facilities’ status as “Approved Enterprises” under Israel’s Law for the Encouragement of Capital Investment, 1959). Except as set forth in Part 2.5(c) of the Company Disclosure Schedule, none of the Acquired Corporations has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency and there are no outstanding requests in respect of the foregoing.

(d) None of the Acquired Corporations has any liability for the Taxes of any Person (i) as a result of being a member of a consolidated, affiliated, combined, unitary or other group or being included in a Tax Return, in each case, that includes a Person other than an Acquired Corporation, (ii) as a transferee or successor, or (iii) pursuant to an agreement relating to the allocating or sharing of, or an indemnification obligation with respect to, Taxes (except for customary agreements to indemnify lenders or security holders in respect of Taxes). None of the Acquired Corporations is a party to or bound by any agreement, arrangement or practice with a Governmental Body (including any advance pricing agreement or closing agreement).

(e) All sales and license transactions among the Acquired Corporations, Company Affiliates or Company Associates have been conducted on arm’s length terms and comply with applicable transfer pricing laws and rules in all material respects.

(f) No Acquired Corporation has constituted either a “distributing corporation” or a “controlled corporation” within the meaning of Section 355(a)(1)(A) of the Code (or any similar provision under U.S. state or local or non-U.S. Tax law).

(g) No Acquired Corporation will be required to include material amounts in income, or exclude material items of deduction, in a taxable period beginning after the Effective Time as a result of (i) a change in method of accounting occurring prior to the Effective Time, (ii) an installment sale or open transaction arising in a taxable period ending on or before the Effective Time, (iii) deferred gains (intercompany or otherwise) arising prior to the Effective Time, (iv) any prepaid amount received on or prior to the Effective Time, or (v) any agreement with a Governmental Body executed on or prior to the Effective Time.

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(h) No Acquired Corporation has participated in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(1) (or any similar provision under U.S. state or local or non-U.S. Tax law).

(i) There are no limits on the use of any net operating losses of the Acquired Corporations (other than expiration periods and any limits that result from the transactions contemplated by this Agreement).

(j) To the Company’s Knowledge, it qualifies as an Industrial Company according to the meaning of that term in the Israeli Law for the Encouragement of Industry (Taxes), 1969, and, to the Company’s Knowledge, the consummation of the Merger will not have any adverse effect on such qualification as an Industrial Company.

2.6 Employee and Labor Matters; Benefit Plans.

(a) Except as set forth in Part 2.6(a) of the Company Disclosure Schedule, as of the date of this Agreement, none of the Acquired Corporations is a party to, or has a duty to bargain for, any collective bargaining agreement or other Contract with a labor organization or employees’ committee representing any of its employees (excluding such collective agreements and extension orders that apply to members of the Industrialist Union and/or all employers in the Israeli market) and there are no labor organizations or employees’ committee representing, purporting to represent or, to the Knowledge of the Company, seeking to represent any employees of any of the Acquired Corporations. Except as set forth in Part 2.6(a) of the Company Disclosure Schedule, the Acquired Corporations are currently in compliance with all applicable laws relating to the employment of labor, including those related to wages, hours and/or the payment and/or withholding of taxes and/or other sums. The Acquired Corporations are not a party to, or otherwise bound by, any consent decree with, or citation by, any governmental authority relating to employees or employment practices and there is no charge or proceeding with respect to a violation of any occupational safety or health standards that has been asserted or is now pending or threatened with respect to any Company Associate. There is no charge of discrimination in employment or employment practices, for any reason, including, without limitation, age, gender, race, religion or other legally protected category, which has been asserted or is now pending or threatened before the United States Equal Employment Opportunity Commission, or any other governmental authority in any jurisdiction in which the Acquired Corporations have employed or currently employs any Company Associate.

(b) The Company has provided to parent an accurate and complete copy of each Company Employee Plan, forms of Company Employee Agreements and an accurate and complete list, by country, of employees of the Acquired Corporations as of April 30, 2007, including information as to tenure and salary. None of the Acquired Corporations intends, and none of the Acquired Corporations has committed, to establish or enter into any new Company Employee Plan or Company Employee Agreement, or to modify any Company Employee Plan or Company Employee Agreement (except to conform or seek the approval of any such Company Employee Plan or Company Employee Agreement to satisfy applicable Legal Requirements). The Company has provided a true and correct copy of each Company Employee Plan.

(c) Each of the Acquired Corporations and Company Affiliates has performed in all material respects all obligations required to be performed by it under each Company Employee Plan, and each Company Employee Plan has been established and maintained in all material respects in accordance with its terms and with all applicable provisions of ERISA, the Code and other Legal Requirements. All contributions, premiums or payments required to be made with respect to any Company Employee Plan and each Company Employee Agreement have been made or accrued on or before their due dates. Except as set forth in Part 2.6(c) of the Company Disclosure Schedule, none of the Company Employee Plans and the Company Employee Agreements provides for the payment of separation, severance, termination or similar-type benefits to any person or obligates the Acquired Corporations or any successors thereto to pay separation, severance, termination or similar-type benefits solely or partially as a result of any transaction contemplated by this Agreement or as a result of a “change in control”, within the meaning of such term under Section 280G of the Code. Except as set forth in Part 2.6(c) of the Company Disclosure Schedule, none of the Plans provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of the Acquired Corporations.

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(d) With respect to each Company Employee Plan that is not subject to United States Law (a “Non-U.S. Benefit Plan”):

(i) all employer and employee contributions to each Non-U.S. Benefit Plan required by Law or by the terms of such Non-U.S. Benefit Plan have been made or, if applicable, accrued in accordance with normal accounting practices;

(ii) with respect to Employees of the Acquired Corporations who reside or work in Israel, which shall be construed to include consultants, sales agents and other independent contractors who would be deemed to be employees for purposes of Israeli labor laws (“Israeli Employees”), the Acquired Corporations’ obligations to provide statutory severance pay to Israeli employees pursuant to the Severance Pay Law, 5723-1963 have been satisfied or have been fully funded by contributions to appropriate insurance funds or accrued on the Company’s financial statements; and with respect to Employees of the Acquired Corporations other than Israeli Employees, the fair market value of the assets of each funded Non-U.S. Benefit Plan, the liability of each insurer for any Non-U.S. Benefit Plan funded through insurance or the book reserve established for any Non-U.S. Benefit Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations, as of the date of this Agreement, with respect to all current and former participants in such plan according to the actuarial assumptions and valuations most recently used to determine employer contributions to such Non-U.S. Benefit Plan and no transaction contemplated by this Agreement shall cause such assets or insurance obligations to be less than such benefit obligations; and

(iii) each Non-U.S. Benefit Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities.

2.7 Intellectual Property Matters.

(a) Part 2.7(a) of the Company Disclosure Schedule sets forth a true and complete list of all (i) Registered Owned Intellectual Property, (ii) unregistered trademarks and service marks included in the Owned Intellectual Property, and (iii) other Owned Intellectual Property material to the Acquired Corporations.

(b) Each of the Acquired Corporations has sufficient rights to use the Acquired Corporation IP, all of which rights shall survive unchanged the consummation of the Contemplated Transactions. The Acquired Corporation IP includes all Intellectual Property used or held for use in connection with the operation of the business of each Acquired Corporation, and there are no other items of Intellectual Property that are material to or necessary for the operation of the business of each Acquired Corporation or for the continued operation of the business of each Acquired Corporation immediately after the Closing in substantially the same manner as operated prior to the Closing.

(c) The Acquired Corporation IP is (i) valid, subsisting and enforceable, and (ii) not subject to any outstanding order, judgment, injunction, decree, ruling or agreement adversely affecting any of the Acquired Corporations’ use thereof or rights thereto, or that would impair the validity or enforceability thereof. The Registered Owned Intellectual Property is currently in compliance with any and all formal legal requirements necessary to record and perfect each of the Acquired Corporations’ interest therein and the chain of title thereof. Except as set forth in Part 2.7(c) of the Company Disclosure Schedule, there is no action or claim pending, asserted or threatened (i) against any of the Acquired Corporations concerning any product or the ownership, validity, registerability, enforceability or use of, or licensed right to use, any Intellectual Property, or (ii) contesting or challenging the ownership, validity, registerability or enforceability of, or the Acquired Corporations’ or the Company Affiliates’ right to use, any Acquired Corporation IP.

(d) To the knowledge of the Company, the operation of the business of each Acquired Corporation and the use of the Acquired Corporation IP in connection therewith does not, and has not in the last seven (7) years, infringed, misappropriated or otherwise violated or conflicted with the Intellectual Property rights of any other Person. Except as disclosed in Part 2.7(d) of the Company Disclosure Schedule, there is no action or claim pending, asserted or threatened against any of the Acquired Corporations concerning any of the foregoing, nor has any of the Acquired Corporations received any notification that a license under any other Person’s Intellectual Property is or may be required. To the Knowledge of the Company, no Person is engaging, or has engaged in the last seven (7) years, in any activity that infringes, misappropriates or otherwise violates or conflicts with any Acquired Corporation IP.

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(e) Consummation of the Contemplated Transactions will not result in (i) the grant of any license under or creation of any lien on any Acquired Corporation IP or any Intellectual Property that is owned by or licensed to Parent or any of its affiliates prior to the Closing, (ii) Parent or any of its affiliates being bound by, or subject to, any non-compete obligation, covenant not to sue, or other restriction on the operation or scope of its business, or (iii) Parent or any of its affiliates, or any of the Acquired Corporations, being obligated to pay any royalties, honoraria, fees or other payments to any Person in excess of those payable by the Company or any other Acquired Corporations prior to the Closing.

(f) Except as set forth in Part 2.7(f) of the Company Disclosure Schedule, no university, military, educational institution, research center, Governmental Body, or other organization (each, a “R&D Sponsor”) has sponsored research and development conducted in connection with the businesses of any of the Acquired Corporations, or has any claim of right to, ownership of or other lien on any Acquired Corporation IP. No research and development conducted in connection with the businesses of any of the Acquired Corporations was performed by a graduate student or employee of any R&D Sponsor. None of the Acquired Corporations have participated in any standards-setting activities or joined any standards setting or similar organization that would affect the proprietary nature of any Acquired Corporation IP or restrict the ability of any of the Acquired Corporations to enforce, license or exclude others from using any Acquired Corporation IP.

(g) No employee, independent contractor, or agent of the Acquired Corporations is in default or breach of any term of any employment agreement, non-disclosure agreement, assignment of invention agreement or similar agreement relating to the protection, ownership, development, use or transfer of Acquired Corporation IP or, to the Knowledge of the Company, any other Intellectual Property and the Acquired Corporations, in the ordinary course, enter into such agreements with its employees, independent contractors and agents. To the extent that any Intellectual Property has been conceived, developed or created for the Acquired Corporations by any other Person, the applicable Acquired Corporation, has executed valid and enforceable written agreements with such Person with respect thereto transferring to such Acquired Corporation the entire and unencumbered right, title and interest therein and thereto by operation of law or by valid written assignment.

2.8 Legal Proceedings; Orders.

(a) Except as set forth in Part 2.8(a) of the Company Disclosure Schedule: (i) there are no pending material Legal Proceedings; and (ii) to the Knowledge of the Company: (A) no Governmental Body has threatened to commence any material Legal Proceeding; and (B) no other Person has threatened in writing to commence any material Legal Proceeding: (1) that involves: (A) any of the Acquired Corporations or any of the properties or assets of any Acquired Corporation; (B) any securities of any of the Acquired Corporations; or (C) any alleged action or omission on the part of any director or officer of any Acquired Corporation in his or her capacity as such; or (2) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Merger or any of the other Contemplated Transactions (the Legal Proceedings identified in Part 2.8(a) of the Company Disclosure Schedule being referred to as the “Specified Proceedings”).

(b) There is no Order to which any of the Acquired Corporations, or any of the assets or properties owned, leased or used by any of the Acquired Corporations, is subject, except as would not have and would not reasonably be expected to have or result in a Company Material Adverse Effect. To the Knowledge of the Company, no executive officer or other key employee of any of the Acquired Corporations is subject to any Order that prohibits such executive officer or other key employee from engaging in or continuing any conduct, activity or practice relating to the business of any of the Acquired Corporations as it is currently conducted, except as would not have and would not reasonably be expected to have or result in a Company Material Adverse Effect.

(c) The Company has not, pursuant to or within the meaning of Title 11, U.S. Code, or any similar United States federal or state law for the relief of debtors or any similar non-U.S. law, (i) commenced a voluntary case, (ii) consented to the entry of an order for relief against it in an involuntary case, (iii) consented to the appointment of a receiver, trustee, assignee, liquidator or similar official, (iv) made a general assignment for the benefit of its creditors or (v) admitted in writing that it is generally unable to pay its debts as they become due.

2.9 Authority; Binding Nature of Agreement. The Company has the corporate right, power and authority to enter into, to deliver and to perform its obligations under this Agreement, to consummate the Merger

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and the other Contemplated Transactions. The board of directors of the Company (at a meeting duly called and held) as of the date of this Agreement has: (a) determined that the Merger is fair to, and in the best interests of, the Company and its shareholders; (b) determined that considering the financial position of the Company and Merger Sub no reasonable concern exists that the Surviving Company will be unable to fulfill the obligations of the Company to its creditors; (c) authorized and approved the execution, delivery and performance of this Agreement by the Company and approved this Agreement, the Merger and the other Contemplated Transactions; and (d) recommended the approval of this Agreement, the Merger and the other Required Approval Transactions by the holders of Company Ordinary Shares and Company Founder Shares and directed that this Agreement, the Merger and the other Required Approval Transactions be submitted for consideration by the Company’s shareholders at the Company Shareholders’ Meetings (as defined in Section 5.2(b)). No other corporate proceedings on the part of the Company (without limiting the generality of the foregoing, no vote or approval of any class or series of share capital or any other securities of the Company or the Company’s Subsidiaries, are necessary to authorize or permit the consummation of this Agreement, the Merger and the other Contemplated Transactions. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery of this Agreement by Parent and Merger Sub, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to: (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

2.10 Vote Required. Assuming neither Parent nor Merger Sub, nor any Person holding 25% or more of the shares or “means of control” (as such term is defined in the Companies Law) of Parent or Merger Sub own or hold any Company Ordinary Shares or Company Founder Shares, the: (i) affirmative vote of a 75% majority of the voting power of the Company present and voting on such resolution at a meeting of the shareholders convened to approve the Merger, including at least one-third of the shares other than the shares held by the controlling shareholders of the Company (unless the total number of shares voting against the Merger does not exceed 1% of the total voting power of the Company) ; (ii) affirmative vote of a 75% majority of a meeting of the holders of the Company Ordinary Shares; and (iii) affirmative vote of a 75% majority of a meeting of the holders of the Company Founder Shares; is the only vote of the holders of any securities of the Company necessary to approve the Merger (the “Required Company Shareholder Vote”). The quorum required for the Company Shareholders’ Meetings is three or more shareholders who hold at least one third of the total number of votes in the Company.

2.11 Non-Contravention; Consents. Assuming compliance with (and receipt of all required approvals under) the applicable provisions of the Companies Law, the HSR Act, any non-U.S. Antitrust Law (as defined in Section 5.4), and receipt of the approvals listed in Part 2.11 of the Company Disclosure Schedule, neither (1) the execution or delivery of this Agreement by the Company, nor (2) the consummation of the Merger or any of the other Contemplated Transactions, will or would reasonably be expected to, directly or indirectly (with or without notice or lapse of time):

(a) contravene, conflict with or result in a violation of: (i) any of the provisions of the Articles of Association and Memorandum of Association of the Company or the charter or other organizational documents of any of the other Acquired Corporations; or (ii) any resolution adopted by the shareholders, the board of directors or any committee of the board of directors of any of the Acquired Corporations; or (iii) any Legal Requirement;

(b) contravene, conflict with or result in a violation or breach of, or result in a default under, any provision of any Company Contract that constitutes a Significant Contract, or give any Person the right to: (i) declare a default or exercise any remedy under any Company Contract that constitutes a Significant Contract; (ii) accelerate the maturity or performance of any Company Contract that constitutes a Significant Contract; or (iii) cancel, terminate or modify any right, benefit, obligation or other term of any Company Contract that constitutes a Significant Contract; or

(c) impact the effectiveness of any Significant Contract or result in any obligation of the Company or any other Acquired Corporation to pay any penalty, fee, make-whole amount or other similar amount or result in any other adverse consequence pursuant to any Significant Contract.

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2.12 Permits; Compliance.

(a) Except as set forth in Part 2.12 of the Company Disclosure Schedule, each Acquired Company is in possession of all Government Authorizations necessary for each of the Acquired Corporations to own, lease and operate its properties or to carry on its business as it is now being conducted (the “Permits”), including all Permits under the Federal Food, Drug and Cosmetic Act of 1938, as amended (including the rules and regulations promulgated thereunder, the “FDCA”) and any comparable non-U.S law and the regulations of the Federal Food and Drug Administration (the “FDA”) promulgated under the FDCA and any comparable non-U.S. Governmental Bodies, necessary for each of the Acquired Corporations to carry on its business and operations as currently conducted, except where the failure to have, or the suspension or cancellation of, any of the Permits would not, individually or in the aggregate, have a Company Material Adverse Effect. No suspension or cancellation of any of the Permits is pending or, to the Knowledge of the Company, threatened, except where the failure to have, or the suspension or cancellation of, any of the Permits would not, individually or in the aggregate, have a Company Material Adverse Effect. Except as set forth in Part 2.12(a) of the Company Disclosure Schedule, no Acquired Corporation is in conflict with, or in default, breach or violation of any Legal Requirement by which any property or asset of any Acquired Corporation is bound or affected, except for any such conflicts, defaults, breaches, or violations that would not, individually or in the aggregate, have a Company Material Adverse Effect.

(b) Each Acquired Corporation is, and since January 1, 2004 each Acquired Corporation has been, in compliance in all material respects with all Legal Requirements applicable to the Acquired Corporations or by which any of its properties are bound, including Legal Requirements of the FDA and any comparable non-U.S Governmental Body except as set forth in Part 2.12(b) of the Company Disclosure Schedule and except as would not, individually or in the aggregate, have a Company Material Adverse Effect.

2.13 Absence of Certain Changes or Events. Since March 31, 2007, except as set forth in Part 2.13 of the Company Disclosure Schedule, or as expressly contemplated by this Agreement (a) the Acquired Corporations have conducted their businesses only in the ordinary course and in a manner consistent with past practice, (b) there has not been any Company Material Adverse Effect, and (c) none of the Acquired Corporations has taken any action that, if taken after the date of this Agreement, would constitute a breach of any of the covenants set forth in Section 4.2.

2.14 Significant Contracts. (a) Subsections (i) through (xii) of Part 2.14(a) of the Company Disclosure Schedule list the following types of contracts and agreements to which the Acquired Corporations are a party (such contracts and agreements as are required to be set forth in Part 2.14(a) of the Company Disclosure Schedule being the “Significant Contracts”):

(i) each “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) with respect to each Acquired Corporation;

(ii) each contract and agreement which involved in the 12 month period preceding the date of this Agreement or is likely to involve in the 12 month period following the date of this Agreement consideration of more than $3,500,000, in the aggregate, over the remaining term of such contract or agreement;

(iii) all joint venture contracts, partnership arrangements or other agreements outside the ordinary course of business involving a sharing of profits, losses, costs or liabilities by each Acquired Corporation with any third party;

(iv) all material contracts involving the payment of royalties or other amounts calculated based upon the revenues or income of each Acquired Corporation or income or revenues related to any product of each Acquired Corporation to which any Acquired Corporation is a party;

(v) all contracts and agreements evidencing material Indebtedness;

(vi) all contracts and agreements with any Governmental Body to which each Acquired Corporation is a party;

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(vii) all contracts and agreements that limit, or purport to limit, the ability of any Acquired Corporation to compete in any line of business or with any person or entity or in any geographic area or during any period of time, in any material respect;

(viii) all contracts and agreements providing for benefits under any Company Employee Plan or material Company Employee Agreement;

(ix) all material Acquired Corporation IP Contracts;

(x) all insurance policies summarized pursuant to Section 2.17(a);

(xi) all contracts with customers required to be listed in Part 2.18 of the Company Disclosure Schedule; and

(xii) all other contracts and agreements, whether or not made in the ordinary course of business, which are material to the Acquired Corporations taken as a whole, or the conduct of their respective businesses, or the absence of which would, individually or in the aggregate, have a Company Material Adverse Effect.

(b) Except as would not, individually or in the aggregate, have a Company Material Adverse Effect and except as set forth in Part 2.14(b) of the Company Disclosure Schedule, (i) each Significant Contract is a legal, valid and binding agreement, and none of the Significant Contracts is in default by its terms or has been canceled by the other party; (ii) to the Knowledge of the Company, no other party is in breach or violation of, or default under, any Significant Contract; and (iii) the Company and the Company Subsidiaries have not received any claim of default under any such agreement. The Company has furnished or made available to Parent complete and accurate copies of all Significant Contracts, including any amendments thereto.

2.15 Real Property; Title to Assets.

(a) Part 2.15(a) of the Company Disclosure Schedule lists each parcel of real property currently owned by the Acquired Corporations. Except as set forth in Part 2.14(a) of the Company Disclosure Schedule, each parcel of real property owned by the Acquired Corporations (i) is owned free and clear of all mortgages, pledges, liens, security interests, conditional and installment sale agreements, encumbrances, charges or other claims of third parties of any kind, including, without limitation, any easement, right of way or other encumbrance to title, or any option, right of first refusal, right of first offer or other requirement to sell, assign or otherwise divest (collectively, “Liens”), other than (A) Liens for current taxes and assessments not yet past due, (B) inchoate mechanics’ and materialmen’s Liens for construction in progress, (C) workmen’s, repairmen’s, warehousemen’s and carriers’ Liens arising in the ordinary course of business of the Acquired Corporations consistent with past practice, and (D) all matters of record, Liens and other imperfections of title and encumbrances that would not, individually or in the aggregate, have a Company Material Adverse Effect, and (ii) is neither subject to any Governmental Body decree or Order to be sold nor is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the Knowledge of the Company, has any such condemnation, expropriation or taking been proposed.

(b) Part 2.15(b) of the Company Disclosure Schedule lists each parcel of real property currently leased or subleased by the Acquired Corporations, with the name of the lessor and the date of the lease, sublease, assignment of the lease, any guaranty given or leasing commissions payable by the Acquired Corporations in connection therewith and each amendment to any of the foregoing (collectively, the “Lease Documents”). True, correct and complete copies of all Lease Documents have been made available to Parent. All such current leases and subleases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing material default or event of default (or event which, with notice or lapse of time, or both, would constitute a default) by the Acquired Corporations or, to the Knowledge of the Company, by the other party to such lease or sublease, or person in the chain of title to such leased premises except where such default would not, individually or in the aggregate, have or reasonably be expected to have a Company Material Adverse Effect.

(c) Each of the Acquired Corporations has good and valid title to, or, in the case of leased properties and assets, valid leasehold or subleasehold interests in, all of its properties and assets, tangible and intangible, real,

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personal and mixed, used or held for use in its business, free and clear of any Liens, except for such imperfections of title, if any, that do not materially interfere with the present value of the subject property.

2.16 Environmental Matters. Except as described in Part 2.16 of the Company Disclosure Schedule, (a) none of the Acquired Corporations has, for the past five years, violated or is in violation of any Environmental Law; (b) none of the properties currently or, to the Knowledge of the Company, formerly, owned, leased, used or operated by the Acquired Corporations (including, without limitation, soils and surface and ground waters) are contaminated with any Hazardous Substance and no Hazardous Substances have been released on any such property; (c) none of the Acquired Corporations is actually, potentially or allegedly liable for any costs to address actual or alleged Hazardous Substances at any third party or other off-site location; (d) none of the Acquired Corporations is actually, potentially or allegedly liable under any Environmental Law (including, without limitation, pending or threatened liens); (e) each of the Acquired Corporations has all permits, licenses and other authorizations required under any Environmental Law (“Environmental Permits”); (f) each of the Acquired Corporations is in compliance with its Environmental Permits; (g) there are no claims or Legal Proceedings pending, or to the Knowledge of the Company, threatened in writing, against the Acquired Corporations or any formerly owned or operated properties, or against the Company, and there are no facts or circumstances that would reasonably be expected to result in a Legal Proceeding against the Company or the Acquired Corporations; and (h) neither the execution of this Agreement nor the consummation of the Merger or the other Contemplated Transactions will require any investigation, remediation or other action with respect to Hazardous Substances, or any notice to or consent of Governmental Body or third parties, pursuant to any applicable Environmental Law or Environmental Permit.

2.17 Insurance.

(a) Summaries of all material insurance policies maintained by the Acquired Corporations at any time during the past three years have been provided to Parent. Each summary sets forth all the material terms and conditions of each such insurance policy and is true, accurate and correct in all material respects.

(b) Except as set forth in Part 2.17(b) of the Company Disclosure Schedule, with respect to each such insurance policy: (i) the policy is legal, valid, binding and enforceable in accordance with its terms and, except for policies that have expired under their terms in the ordinary course, is in full force and effect; (ii) none of the Acquired Corporations is in breach or default (including any such breach or default with respect to the payment of premiums or the giving of notice), and no event has occurred which, with notice or the lapse of time or both, would constitute such a breach or default, or permit termination or modification, under the policy; and (iii) to the Knowledge of the Company, no insurer on the policy has been declared insolvent or placed in receivership, conservatorship or liquidation.

(c) Except as set forth in Part 2.17(c) of the Company Disclosure Schedule, at no time subsequent to January 1, 2004 have the Acquired Corporations (i) been denied any insurance or indemnity bond coverage which it has requested, (ii) made any material reduction in the scope or amount of its insurance coverage, or (iii) received notice from any of its insurance carriers that any insurance premiums will be subject to increase in an amount materially disproportionate to the amount of the increases with respect thereto (or with respect to similar insurance) in prior years or that any insurance coverage will not be available in the future substantially on the same terms as are now in effect.

2.18 Customers. Part 2.18 of the Company Disclosure Schedule sets forth a true and complete list of the customers of the Acquired Corporations which accounted for at least 85% of the consolidated revenues of the Acquired Corporations during the 12 month period preceding the date of this Agreement. As of the date of this Agreement, none of the customers listed in Part 2.18 of the Company Disclosure Schedule of the Acquired Corporations, (i) has cancelled or otherwise terminated any contract with the Acquired Corporations prior to the expiration of the contract term or (ii) to the Knowledge of the Company, has threatened, or indicated its intention, to cancel or otherwise terminate its relationship with the Acquired Corporations or to reduce substantially its purchase from or sale to the Acquired Corporations of any products, equipment, goods or services. None of the Acquired Corporations has (x) breached, in any material respect, any agreement with or (y) to the Knowledge of the Company, engaged in any fraudulent conduct with respect to, any such customer or supplier of the Acquired Corporations.

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2.19 Indebtedness of the Acquired Corporations. Part 2.19 of the Company Disclosure Schedule sets forth all amounts outstanding under any Indebtedness of the Acquired Corporations, including any outstanding principal and interest thereunder accrued as of the date of this Agreement and any prepayment penalties, fees, make-whole amounts and other similar amounts payable with respect to such Indebtedness.

2.20 Interested Party Transactions. Except as set forth at part 2.20 of the Company Disclosure Schedule, since March 31, 2007, no director or officer of the Company or any person beneficially owning five percent or more, in the aggregate, of the Company Ordinary Shares or Company Founder Shares, has or has had, directly or indirectly, (i) an economic interest in any Person that has furnished or sold, or furnishes or sells, services or products that any Acquired Corporation furnishes or sells, or proposes to furnish or sell; (ii) an economic interest in any person that purchases from or sells or furnishes to, the Acquired Corporations, any goods or services; (iii) a beneficial interest in any contract or agreement disclosed in Part 2.14(a) of the Company Disclosure Schedule; or (iv) any contractual or other arrangement with the Acquired Corporations; provided, however, that ownership of no more than one percent (1%) of the outstanding voting stock of a publicly traded corporation shall not be deemed an “economic interest in any person” for purposes of this Section 2.20. The Acquired Corporations have not, since March 31, 2007, (i) extended or maintained credit, arranged for the extension of credit or renewed an extension of credit in the form of a personal loan to or for any director or executive officer (or equivalent thereof) of the Company, or (ii) materially modified any term of any such extension or maintenance of credit.

2.21 Grants, Incentives and Subsidies. The Company has made available to Parent, prior to the date hereof, correct copies of all documents evidencing all pending, outstanding and granted grants, incentives, exemptions and subsidies from the Government of the State of Israel or any agency thereof, or from any other Governmental Entity, granted to any of the Acquired Corporations, including the grant of Approved Enterprise Status from the Investment Center and grants from the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade & Labor (“OCS”) (collectively, “Grants”) and of all letters of approval, certificates of completion, and supplements and amendments thereto, granted to the Company, and all material correspondence related thereto. Except as set forth in Part 2.21 of the Company Disclosure Schedule, the Acquired Corporations are in compliance, in all material respects, with the terms and conditions of all Grants which have been approved and has duly fulfilled, in all material respects, all the undertakings required thereby. Assuming compliance by Parent with any undertakings it may give with respect to the Grants that have been approved, the Company is not aware of any event or other set of circumstances which would reasonably be expected to lead to the revocation or material modification of any of the Grants that have been approved.

2.22 Fairness Opinion. The Company’s board of directors has received the opinion of Merrill Lynch and Co. Inc., financial advisors to the Company, dated May 18, 2007, that, as of the date of its opinion, the Merger Consideration to be received by the holders of Company Ordinary Shares (other than TDC, Morley, the Company or any wholly-owned Subsidiary of the Company) in the Merger is fair, from a financial point of view, to such holders of Company Ordinary Shares.

2.23 Financial Advisor. Except for The Blackstone Group and Merrill Lynch and Co. Inc., no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Merger or any of the other Contemplated Transactions based upon arrangements made by or on behalf of any of the Acquired Corporations. The Company has furnished to Parent accurate and complete copies of all agreements under which any such fees, commissions or other amounts have been paid or may become payable and all indemnification and other agreements related to the engagement of The Blackstone Group and Merrill Lynch and Co. Inc.

2.24 No Other Representations or Warranties. Except as set forth expressly herein, the Company is not making any representation or warranty, expressed or implied, of any nature whatsoever with respect to the Company or any of the Company’s Subsidiaries, and the Company hereby disclaims any such representation or warranty, whether by the Company, any of the Company’s Subsidiaries or any of their Representatives or any other Person, with respect to the execution and delivery of this Agreement or the consummation of the Merger and the Contemplated Transactions, notwithstanding the delivery or disclosure to Parent or any of its Representatives or any other Person of any documentation or other information by the Company, any of the Company’s Subsidiaries or any of their respective Representatives or any other Person with respect to any one or more of the foregoing. Except as

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set forth expressly herein, the condition of the assets of the Acquisition Corporations shall be “as is”, “where is” and with “all faults”.

SECTION 3. Representations and Warranties of Parent and Merger Sub

Each of Parent and Merger Sub, jointly and severally, represents and warrants to the Company as follows:

3.1 Due Organization; Etc. Parent is a corporation duly incorporated, validly existing and in good standing under the laws of India. Merger Sub is a company duly incorporated and validly existing under the laws of the State of Israel. Immediately prior to the Effective Time, Parent will own, directly or indirectly, of record and beneficially all outstanding shares of Merger Sub.

3.2 Authority; Noncontravention.

(a) Subject to obtaining the vote of Parent or an affiliate of Parent, as the case may be, as the sole shareholder of Merger Sub with respect to the Merger, each of Parent and Merger Sub has the corporate right, power and authority to enter into and to perform its respective obligations under this Agreement. The execution, delivery and performance by Parent and Merger Sub of this Agreement have been duly authorized by all necessary action on the part of Parent and Merger Sub and their respective boards of directors. The board of directors of Merger Sub has determined: (a) that the Merger is fair to, and in the best interests of, Merger Sub and its shareholders, and that, considering the financial position of the Company and Merger Sub, no reasonable concern exists that the Surviving Corporation will be unable to fulfill the obligations of Merger Sub to its creditors; and (b) to recommend that Parent, as the sole shareholder of Merger Sub, approve this Agreement, the Merger and the other Required Approval Transactions.

(b) Except: (i) disclosure required under applicable Legal Requirements; (ii) as may be required by the HSR Act, any non-U.S. Antitrust Law or the Companies Law; and (iii) as would not have a material adverse effect on Parent’s ability to consummate the Merger, no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Body is required by or with respect to Parent or Merger Sub in connection with the execution and delivery of this Agreement or the consummation of the Contemplated Transactions.

3.3 Binding Nature of Agreement. This Agreement has been duly and validly executed and delivered by Parent and Merger Sub and, assuming the due authorization, execution and delivery of this Agreement by the Company, constitutes the legal, valid and binding obligation of Parent and Merger Sub, enforceable against them in accordance with its terms, subject to: (a) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (b) rules of law governing specific performance, injunctive relief and other equitable remedies.

3.4 No Vote Required. No vote of the holders of Parent Common Stock is required to authorize the Merger.

3.5 Financing. As of the date of this Agreement, Parent has sufficient cash, available lines of credit or other sources of readily available funds to enable it to pay all amounts required to be paid as Merger Consideration in the Merger.

3.6 Stock Ownership. As of the date of this Agreement, neither Parent nor Merger Sub beneficially owns any Company Ordinary Shares or Company Founder Shares.

3.7 Disclosure. None of the information with respect to Parent and Merger Sub to be supplied by or on behalf of Parent to the Company specifically for inclusion in the Proxy Statement will, at the time the Proxy Statement is mailed to the shareholders of the Company or at the time of the Company Shareholders’ Meetings (or any adjournment or postponement thereof), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading.

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SECTION 4. Certain Covenants of the Company

4.1 Access and Investigation. During the period commencing on the date of this Agreement and ending as of the earlier of the Effective Time and the valid termination of this Agreement (the “Pre-Closing Period”), the Company shall, at reasonable times and upon reasonable notice, cause the respective Representatives of the Acquired Corporations to: (a) provide Parent and Parent’s Representatives with reasonable access, during normal business hours, to the Acquired Corporations’ Representatives, personnel and assets and to all existing books, records, Tax Returns, work papers and other documents and information relating to the Acquired Corporations and to conduct environmental site assessments or other investigations related to Hazardous Substances or Environmental Law; and (b) provide Parent and Parent’s Representatives with such copies of the existing books, records, Tax Returns, work papers and other documents and information relating to the Acquired Corporations as Parent may reasonably request (in each case subject to such non-disclosure as may be necessary to avoid waiver of legal privileges). During the Pre-Closing Period, the Company shall, and the Company shall cause the Representatives of each of the Acquired Corporations to, permit Parent’s senior officers to meet, upon reasonable notice and during normal business hours, with the officers of the Acquired Corporations to discuss such matters as Parent may reasonably request, including, but not limited to, matters which Parent may deem necessary or appropriate in order to enable Parent, after the Closing, to satisfy its obligations under the Sarbanes-Oxley Act and the rules and regulations relating thereto.

4.2 Operation of the Company’s Business.

(a) During the Pre-Closing Period: (i) the Company shall ensure that each of the Acquired Corporations conducts its business and operations in the ordinary course and in accordance with past practices; (ii) the Company shall use commercially reasonable efforts to ensure that each of the Acquired Corporations preserves intact its current business organization, keeps available the services of its current executive officers and other employees and maintains its relations and goodwill with all suppliers, customers, landlords, creditors, licensors, licensees, employees and other Persons having business relationships with the respective Acquired Corporations and with all Governmental Bodies; (iii) to comply in all material respects with all Legal Requirements and the requirements of all Significant Contracts; and (iv) the Company shall promptly notify Parent of: (A) any claim asserted by any Governmental Body; (B) any claim asserted in writing by any Person other than a Governmental Body; (C) any Legal Proceeding commenced; or (D) any Legal Proceeding, to the Knowledge of the Company, threatened in writing, in the case of clauses “(A)” through “(D)” against, relating to, involving or otherwise affecting any of the Acquired Corporations.

(b) During the Pre-Closing Period, the Company shall not (without the prior written consent of Parent), and the Company shall ensure that each of the other Acquired Corporations does not (without the prior written consent of Parent):

(i) declare, accrue, set aside or pay any dividend or make any other distribution in respect of any share capital, or repurchase, redeem or otherwise reacquire any share capital or other securities, other than to repurchase, in full compliance with applicable Legal Requirements, restricted Company Ordinary Shares held by an employee upon the termination of such employee’s employment;

(ii) sell, issue, grant, pledge or encumber or authorize the sale, issuance or grant, pledge or encumbrance of: (A) any share capital or other security of any Acquired Corporation; (B) any option, call, warrant or right to acquire any share capital or other security of any Acquired Corporation; or (C) any instrument convertible into or exchangeable for any share capital or other security of any Acquired Corporation (except that the Company may issue Company Ordinary Shares upon the valid exercise of Company Options outstanding as of the date of this Agreement);

(iii) amend or waive any of its rights under, or accelerate the vesting under, any provision of any of the Company Option Plans or any provision of any agreement evidencing any outstanding stock option or any restricted stock purchase agreement, or otherwise modify any of the terms of any outstanding option, warrant or other security or any related Contract, except as required by applicable Legal Requirements;

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(iv) amend or permit the adoption of any amendment to the Company’s Articles of Association or Memorandum of Association or the charter or other organizational documents of the other Acquired Corporations;

(v) (A) acquire any equity interest or other interest in any other Entity; (B) form any Subsidiary; or (C) subject to Section 8.1(i) effect or become a party to any merger, consolidation, plan of arrangement, share exchange, business combination, amalgamation, recapitalization, reclassification of shares, stock split, reverse stock split, issuance of bonus shares, division or subdivision of shares, consolidation of shares or similar transaction;

(vi) make any capital expenditure greater than $100,000 individually or greater than $500,000 in the aggregate;

(vii) (A) except as set forth in Part 4.2(b)(vii) of the Company Disclosure Schedule, enter into or become bound by, or permit any of the assets owned or used by it to become bound by, any Contract that, if entered into prior to the date hereof, would be a Significant Contract; or (B) amend in any material respect or terminate, or waive any material right or remedy under, any Company Contract that constitutes a Significant Contract;

(viii) acquire, lease or license any right or other asset from any other Person or sell or otherwise dispose of, or lease or license, any right or other asset to any other Person;

(ix) (A) abandon, disclaim, dedicate to the public, sell, assign or grant any security interest in, to or under any Acquired Corporation IP or Acquired Corporation IP Contract, including failing to perform or cause to be performed all applicable filings, recordings and other acts, or to pay or cause to be paid all required fees and Taxes, to maintain and protect its interest in the Acquired Corporation IP and Acquired Corporation IP Contracts, (B) grant to any third party any license with respect to any Acquired Corporation IP, except in the ordinary course of business, (C) develop, create or invent any Intellectual Property jointly with any third party, (D) disclose any confidential information or confidential Acquired Corporation IP to any Person, other than employees of the Company or any other Acquired Corporation that are subject to a confidentiality or non-disclosure covenant protecting against further disclosure thereof, or (E) fail to notify Parent promptly of any infringement, misappropriation or other violation of or conflict with any Acquired Corporation IP of which the Company or any other Acquired Corporation becomes aware and to consult with Parent regarding the actions (if any) to take to protect such Acquired Corporation IP;

(x) make any pledge of any of its material assets or permit any of its material assets to become subject to any Encumbrances;

(xi) lend money to any Person (other than routine travel and business expense advances made to directors or officers or other employees in the ordinary course of business), or incur or guarantee any Indebtedness;

(xii) establish, adopt, enter into or amend any Company Employee Plan or Company Employee Agreement, distribute any employee handbook to the Company’s employees in Israel, pay any bonus or make any profit-sharing or similar payment to, or increase the amount of the wages, salary, commissions, fringe benefits or other compensation (including equity-based compensation, whether payable in stock, cash or other property) or remuneration payable to, any of its directors or any of its officers or other employees (except that the Company: (A) may provide routine salary increases to non-officer employees in the ordinary course of business and in accordance with past practices in connection with the Company’s customary employee review process; (B) may amend the Company Employee Plans to the extent required by applicable law; (C) may make customary bonus payments and profit sharing payments consistent with past practices in accordance with bonus and profit sharing plans existing on the date of this Agreement); and (D) may grant the bonuses set forth in Part 4.2(b)(xii) of the Company Disclosure Schedule);

(xiii) other than as required by concurrent changes in GAAP or SEC rules and regulations, change any of its methods of accounting or accounting practices in any respect;

(xiv) make, change or revoke any material Tax election or make any change in any method of Tax accounting, request any Tax pre-ruling (other than the Israeli Tax Rulings), request any material Tax ruling or apply for any additional incentives under the Israeli Investment Encouragement Law, settle or compromise any

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material Tax liability, file any amended Tax Return involving a material amount of additional Taxes, enter into any closing agreement relating to a material amount of Taxes, or waive or extend the statute of limitations in respect of Taxes;

(xv) commence any Legal Proceeding, except with respect to routine collection matters in the ordinary course of business and consistent with past practices;

(xvi) settle any Legal Proceeding (including the Specified Proceedings) or other material claim or settle any Legal Proceeding with respect to the Contemplated Transactions;

(xvii) fail to make in a timely manner any filings with the SEC required under the Securities Act or the Exchange Act or the rules and regulations promulgated thereunder; or

(xviii) agree or commit to take any of the actions described in clauses “(i)” through “(xvii)” of this Section 4.2(b).

(c) During the Pre-Closing Period, the Company shall promptly notify Parent in writing of the discovery by the Company of any event, condition, fact or circumstance that occurred or existed on or prior to the date of this Agreement and that caused or constitutes a material inaccuracy in any representation or warranty made by the Company in this Agreement.

(d) As promptly as practicable following the date hereof, Parent and the Company shall establish a joint integration committee task force (the “Integration Committee”). The Integration Committee shall meet on a regular basis and shall develop a work-plan with respect to analyzing integration issues and assessing resolution of such issues, provided, however, that the participation of any officer or employee of the Acquired Corporations on the Integration Committee shall not unreasonably interfere with the conduct of the business of the Acquired Corporations. In connection therewith, each of Parent and the Company shall, at all times, cause the Integration Committee to abide by applicable Legal Requirements, including, but not limited to, applicable antitrust and competition laws. Parent and the Company shall not implement any integration measures and shall continue to operate their businesses separately and as competitors prior to the Closing.

(e) During the Pre-Closing Period, the Acquired Corporations shall (i) prepare and file all Tax Returns (the “Post-Signing Returns”) required to be filed by their respective due dates, (ii) timely pay all Taxes shown to be due and payable on such Post-Signing Returns, and (iii) promptly notify Parent of any notice of any suit, claim, action, investigation, audit or proceeding in respect of any Tax matters (or any significant developments with respect to ongoing suits, claims, actions, investigations, audits or proceedings in respect of such Tax matters).

4.3 No Solicitation.

(a) During the Pre-Closing Period, the Company shall not, directly or indirectly, and the Company shall ensure that the Company Subsidiaries and the respective Representatives of the Acquired Corporations do not, directly or indirectly:

(i) solicit, initiate, induce, knowingly facilitate or knowingly encourage or take any other action to knowingly facilitate or knowingly encourage the making, submission or announcement of any Acquisition Proposal or Acquisition Inquiry;

(ii) furnish any nonpublic information regarding any of the Acquired Corporations to any Person in connection with or in response to an Acquisition Proposal or Acquisition Inquiry;

(iii) enter into, engage, maintain or continue in discussions or negotiations with any Person with respect to any Acquisition Proposal or Acquisition Inquiry;

(iv) except in accordance with Section 8.1(i), agree to, approve, endorse or recommend any Acquisition Proposal or Acquisition Inquiry;

(v) except in accordance with Section 8.1(i), enter into any letter of intent or similar document or any Contract contemplating or otherwise relating to any Acquisition Transaction; or

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(vi) authorize or permit any of the officers, directors or employees of any Acquired Corporation, or any investment banker, financial advisor, attorney, accountant or other representative retained by any Acquired Corporation to take any of the actions described in clauses (i) through (v) of this Section 4.3(a).

provided, however, that prior to the approval of this Agreement by the Required Company Shareholder Vote, this Section 4.3(a) shall not prohibit the Company from furnishing nonpublic information regarding the Acquired Corporations to, or entering into discussions or negotiations with, any Person in response to an Acquisition Proposal submitted to the Company by such Person (and not withdrawn) that the Company’s Board of Directors believes is reasonably likely to result in a Superior Offer by such Person (and not be withdrawn) if: (A) neither the Company nor any Representative of any of the Acquired Corporations shall have breached any of the provisions set forth in this Section 4.3; (B) the board of directors of the Company concludes, after having taken into account the advice of its outside legal counsel, that such action is required in order for the board of directors of the Company to comply with its fiduciary obligations to the Company’s shareholders under applicable law; (C) prior to furnishing any such nonpublic information to such Person, the Company gives Parent written notice of the identity of such Person and of the Company’s intention to furnish nonpublic information to, or enter into discussions or negotiations with, such Person, and the Company receives from such Person an executed confidentiality agreement containing provisions (including nondisclosure provisions, use restrictions, non-solicitation provisions and “standstill” provisions) at least as favorable to the Company as the provisions of the Confidentiality Agreement as in effect immediately prior to the execution of this Agreement; and (D) prior to furnishing any such nonpublic information to such Person, the Company furnishes such nonpublic information to Parent (to the extent such nonpublic information has not been previously furnished by the Company to Parent).

(b) If any Acquisition Proposal or Acquisition Inquiry is made or submitted by any Person during the Pre-Closing Period, then the Company shall as promptly as practicable after receipt of such Acquisition Proposal or Acquisition Inquiry advise Parent of such Acquisition Proposal or Acquisition Inquiry (including the identity of the Person making or submitting such Acquisition Proposal or Acquisition Inquiry, and the terms thereof, together with a copy of any written materials provided to the Company by such Person). The Company shall keep Parent informed with respect to: (i) the status of any such Acquisition Proposal or Acquisition Inquiry; and (ii) the status and terms of any modification or proposed modification thereto. Furthermore, the Company shall provide Parent with five business days prior notice (or such less prior notice as is provided to the members of the Company’s board of directors) of any meeting of the Company’s board of directors at which the board of directors of the Company is reasonably expected to consider any Acquisition Proposal or Acquisition Inquiry.

(c) On the date hereof, the Company shall immediately cease and cause to be terminated any existing discussions with any Person that relate to any Acquisition Proposal or Acquisition Inquiry.

(d) The Company agrees not to release or permit the release of any Person from, or to waive or permit the waiver of any provision of, any confidentiality, non-solicitation, no hire, “standstill” or similar Contract to which any of the Acquired Corporations is a party or under which any of the Acquired Corporations has any rights, and will cause each such agreement to be enforced to the extent requested by Parent.

4.4 Intellectual Property. At the request of Parent, the Company shall take all reasonable actions necessary to execute and file any documentation that may be required to create and perfect the Company’s interest in its Intellectual Property.

SECTION 5. Additional Covenants of the Parties

5.1 Proxy Statement.

(a) As promptly as practicable after the date of this Agreement, the Company shall prepare the Proxy Statement which shall be in form and substance reasonably satisfactory to Parent. The Company shall: (i) cause the Proxy Statement to comply with Legal Requirements applicable to it; (ii) provide Parent with a reasonable opportunity to review and comment on drafts of the Proxy Statement, and include in the Proxy Statement all changes reasonably proposed by Parent; (iii) cause the Proxy Statement to be mailed to the Company’s shareholders as promptly as practicable following the date of this Agreement; and (iv) promptly cause the Proxy Statement to be filed with the SEC on Form 6-K.

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(b) If any event relating to any of the Acquired Corporations occurs, or if the Company becomes aware of any information, that should be disclosed in an amendment or supplement to the Proxy Statement, then the Company shall promptly inform Parent of such event or information and shall, in accordance with the procedures set forth in Section 5.1(a), (i) if appropriate, cause such amendment or supplement to be mailed to the shareholders of the Company, and (ii) prepare and file with the SEC such amendment or supplement as soon thereafter as is reasonably practicable.

5.2 Merger Proposal; Company Shareholder Meetings.

(a) Promptly after the execution and delivery of this Agreement: (i) each of the Company and Merger Sub shall cause a merger proposal (in the Hebrew language) in form reasonably agreed upon by the parties (the “Merger Proposal”) to be executed in accordance with Section 316 of the Companies Law, and (ii) each of the Company and Merger Sub shall deliver the Merger Proposal to the Companies Registrar in accordance with Section 317(a) of the Companies Law. The Company shall cause a copy of the Merger Proposal to be delivered to each of its secured creditors, if any, no later than three days after the date on which the Merger Proposal is delivered to the Companies Registrar, and shall promptly inform its non-secured creditors of the Merger Proposal and its contents in accordance with Section 318 of the Companies Law and the regulations promulgated thereunder. Promptly after the Company complies with the preceding sentence, the Company and Merger Sub shall inform the Companies Registrar, in accordance with Section 317(b) of the Companies Law, that notice was given to their creditors under Section 318 of the Companies Law and the regulations promulgated thereunder.

(b) The Company shall take all action necessary under all applicable Legal Requirements to call (promptly after the execution and delivery of this Agreement), give notice of and hold: (i) a meeting of the holders of Company Ordinary Shares and Company Founder Shares; (ii) a class meeting of the holders of the Company Ordinary Shares, and (iii) a class meeting of the holders of Company Founder Shares; to vote on the approval of this Agreement, the Merger and the other Required Approval Transactions (the “Company Shareholders’ Meetings”). Subject to the notice requirements of the Companies Law and the Articles of Association of the Company, the Company Shareholders’ Meetings shall be held (on a date selected by the Company in consultation with Parent) as promptly as practicable after the date of this Agreement. The Company shall ensure that all proxies solicited in connection with the Company Shareholders’ Meetings are solicited in compliance with all applicable Legal Requirements. Within three days after the approval of the Merger by the shareholders of the Company, if it has been approved, the Company shall deliver to the Companies Registrar its shareholder approval notice in accordance with Section 317(b) of the Companies Law informing the Companies Registrar that the Merger was approved by the shareholders of the Company at the Company Shareholders’ Meetings.

(c) Subject to Section 5.2(d), the Proxy Statement shall include a statement to the effect that the board of directors of the Company recommends that the Company’s shareholders vote to approve this Agreement, the Merger and the other Required Approval Transactions at the Company Shareholders’ Meetings and none of the Company’s board of directors or any committee thereof shall withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or Merger Sub, the approval or recommendation by the Company’s board of directors or any committee thereof of this Agreement, the Merger or any other Required Approval Transaction.

(d) Subject to Section 5.2(e), the Company shall use its best efforts to solicit from holders of Company Ordinary Shares and Company Founder Shares proxies in favor of the approval of the Merger and the other Contemplated Transactions. The Company shall call, notice, convene, hold, conduct and solicit all proxies in connection with meetings of holders of Company Ordinary Shares and Company Founder Shares in compliance with all applicable Legal Requirements, including the Companies Law, the Company’s Memorandum and Articles of Association, and the rules of NASDAQ. The Company may adjourn or postpone the meetings of holders of Company Ordinary Shares and Company Founder Shares (i) if and to the extent necessary to provide any necessary supplement or amendment to the Proxy Statement to the holders of Company Ordinary Shares and Company Founder Shares in advance of a vote on this Agreement, the Merger and the other Contemplated Transactions; or (ii) if, as of the time for which a meeting of holders of Company Ordinary Shares and Company Founder Shares is originally scheduled (as set forth in the Proxy Statement), there are insufficient holders of Company Ordinary Shares and Company Founder Shares represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the respective meeting. Subject to Section 8.1(i), the Company’s obligation to call, give

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notice of, convene and hold the respective meetings of holders of Company Ordinary Shares and Company Founder Shares in accordance with this Section 5.2(d) shall not be limited or otherwise affected by the commencement, disclosure, announcement or submission to the Company of any Acquisition Proposal.

(e) Notwithstanding anything to the contrary contained in Section 5.2(c), at any time prior to the approval of this Agreement by the Required Company Shareholder Vote, the Company Board Recommendation may be withdrawn or modified in a manner adverse to Parent if: (i) the Company shall have provided to Parent, at least five business days prior to each meeting of the Company’s board of directors at which such board of directors considers the possibility of withdrawing the Company Board Recommendation or modifying the Company Board Recommendation in a manner adverse to Parent, written notice of such meeting together with reasonably detailed information regarding the circumstances giving rise to the consideration of such possibility; (ii) the Company’s board of directors determines that the Company has received a Superior Offer that has not been withdrawn; and (iii) the Company’s board of directors determines, after taking into account the advice of the Company’s outside legal counsel, that the withdrawal or modification of the Company Board Recommendation is required in order for the Company’s board of directors to comply with its fiduciary obligations to the Company’s shareholders under applicable law. The Company shall notify Parent promptly (and in any event within two hours) of: (A) any withdrawal of or modification to the Company Board Recommendation; and (B) the circumstances and details surrounding such withdrawal or modification.

5.3 Israeli Regulatory Matters.

(a) Each party to this Agreement shall use its commercially reasonable efforts to deliver and file, as promptly as practicable after the date of this Agreement, each notice, report or other document required to be delivered by such party to or filed by such party with any Israeli Governmental Body with respect to the Merger. Without limiting the generality of the foregoing, the Company shall use commercially reasonable efforts to obtain, as promptly as practicable after the date of this Agreement, the approvals listed in Part 2.11 of the Company Disclosure Schedule. Each of the Company and Parent shall cause their respective Israeli counsel and tax advisers to coordinate all activities and to cooperate with each other, including by providing each an opportunity to comment on all applications to Israeli Governmental Bodies, with respect to the preparation and filing of such notices or applications for approval and the preparation of any written or oral submissions that may be necessary, proper or advisable to obtain such Consents.

(b) As soon as reasonably practicable after the execution of this Agreement, the Company shall cause the Company’s Israeli counsel and accountants to prepare and file with the Israeli Income Tax Commissioner an application for a ruling that either: (A) exempts Parent, the Paying Agent and the Surviving Company from any obligation to withhold Israeli Tax at source from any consideration payable or otherwise deliverable pursuant to this Agreement as part of the Merger Consideration or clarifying that no such obligation exists; or (B) clearly instructs Parent, the Paying Agent or the Surviving Company how such withholding at source is to be executed, and in particular, with respect to the classes or categories of holders or former holders of Company Ordinary Shares, Company Founder Shares or Company Options from which Tax is to be withheld (if any), the rate or rates of withholding to be applied (the “Israeli Tax Rulings”). Each of the Company and Parent shall cause their respective Israeli counsel to coordinate all activities, and to cooperate with each other, with respect to the preparation and filing of such application and in the preparation of any written or oral submissions that may be necessary, proper or advisable to obtain the Israeli Tax Rulings. Subject to the terms and conditions hereof, the Company shall use commercially reasonable efforts to promptly take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under any applicable Legal Requirement to obtain the Israeli Tax Rulings as promptly as practicable.

(c) Each party to this Agreement shall: (i) give the other parties prompt notice of the commencement of any Legal Proceeding by or before any Israeli Governmental Body with respect to the Merger; (ii) keep the other parties informed as to the status of any such Legal Proceeding; and (iii) promptly inform the other parties of any communication with the Investment Center, the Companies Registrar or any other Israeli Governmental Body regarding the Merger or any of the other Contemplated Transactions. The parties to this Agreement shall consult and cooperate with one another, and will consider in good faith the views of one another, in connection with any

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analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal made or submitted in connection with any Israeli Legal Proceeding or Consent of any Israeli Governmental Body relating to the Merger.

5.4 Other Regulatory Approvals.

(a) In addition to the obligations pursuant to Section 5.3, each party to this Agreement shall use commercially reasonable efforts to file, as promptly as reasonably practicable after the date of this Agreement, all notices, reports and other documents required to be filed by such party with any Governmental Body with respect to the Merger and the other Contemplated Transactions, and to submit promptly any additional information requested by any such Governmental Body. Without limiting the generality of the foregoing, the Company and Parent shall, as promptly as reasonably practicable after the date of this Agreement, prepare and file any notifications required under the HSR Act and under any other Legal Requirement that is designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade (collectively, “Antitrust Laws”) and thereafter make any other required submissions under any Antitrust Laws. The Company and Parent shall use commercially reasonable efforts to (a) respond as promptly as reasonably practicable to: (i) any inquiries or requests received from the U.S. Federal Trade Commission or the U.S. Department of Justice for additional information or documentation; and (ii) any inquiries or requests received from any state attorney general, non-U.S. antitrust authority or other Governmental Body in connection with antitrust or related matters; (b) obtain any necessary approvals, and obtain the termination of any waiting periods, under any Antitrust Laws that apply to the Contemplated Transactions.

(b) Each party to this Agreement shall promptly notify the other party of any oral or written communication it receives from any Governmental Body relating to the matters that are the subject of this Agreement, permit the other party to review in advance any substantive communication proposed to be made by such party to any Governmental Body and provide the other party with copies of all correspondence, filings or other communications between them or any of their Representatives, on the one hand, and any Governmental Body or members of its staff, on the other hand, and as necessary to address reasonable privilege or confidentiality concerns, or as necessary to comply with contractual arrangements, including any existing confidentiality or non-disclosure agreements. No party to this Agreement shall agree to participate in any meeting or discussion with any Governmental Body in respect of any such filings, investigation or other inquiry unless it consults with the other party in advance and, to the extent permitted by such Governmental Body, gives the other party the opportunity to attend and participate at such meeting. Subject to the Confidentiality Agreement, the parties to this Agreement will coordinate and cooperate fully with each other in exchanging such information and providing such assistance as the other party may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods under the HSR Act and any Antitrust Law in any relevant non-U.S. jurisdiction.

5.5 Stock Options and Company ESPP.

(a) At the Effective Time, each Company Option that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested, shall be cancelled and each holder of such an option shall receive a cash payment as promptly as practicable following the Effective Time in respect of each such option in an amount equal to the amount, if any, by which the Merger Consideration exceeds the exercise price of the Company Option, less all applicable tax withholding. The Company shall take all necessary action to effectuate the foregoing, including, without limitation, obtaining the consent of the option holders.

(b) Prior to the Effective Time, the Company shall take all action that may be necessary to: (i) cause any outstanding offering period under the Company ESPP to be terminated as of the last business day prior to the date on which the Merger becomes effective (the last business day prior to the date on which the Merger becomes effective being referred to as the “Designated Date”); (ii) make any pro-rata adjustments that may be necessary to reflect the shortened offering period, but otherwise treat such shortened offering period as a fully effective and completed offering period for all purposes under the Company ESPP; (iii) cause the exercise as of the Designated Date of each outstanding purchase right under the Company ESPP; and (iv) provide that no further offering period or purchase period shall commence under the Company ESPP after the Designated Date; provided, however, that the actions described in clauses “(i)” through “(iv)” of this sentence shall be conditioned upon the consummation of the Merger. On the Designated Date, the Company shall apply the funds credited as of such date under the Company ESPP within each participant’s payroll withholding account to the purchase of whole Company Ordinary Shares in

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accordance with the terms of the Company ESPP. Immediately prior to and effective as of the Effective Time (and subject to the consummation of the Merger), the Company shall terminate the Company ESPP.

5.6 Employee Benefits.

(a) Parent agrees that, subject to any necessary transition period and subject to any applicable plan provisions, contractual requirements or Legal Requirements: (i) all employees of the Acquired Corporations who continue employment with Parent, the Surviving Company or any Subsidiary of the Surviving Company after the Effective Time (“Continuing Employees”) shall be eligible to participate in Parent’s health, vacation and 401(k) plans, to substantially the same extent as similarly situated employees of Parent; and (ii) for the sole purpose of determining a Continuing Employee’s eligibility to participate in such plans (but not for purposes of benefit accrual), such Continuing Employee shall receive credit under such plans for his or her years of continuous service with the Acquired Corporations prior to the Effective Time, provided that such crediting of service shall not result in the duplication of benefits. With respect to any welfare benefit plans maintained by Parent for the benefit of Continuing Employees located in the United States, Parent shall, subject to any necessary transition period and subject to any applicable plan provisions, contractual requirements or Legal Requirements: (A) cause to be waived, as required by applicable Legal Requirements, any eligibility requirements or pre-existing condition limitations; and (B) give effect, in determining any deductible maximum out of pocket limitations, to amounts paid by such Continuing Employees with respect to substantially similar plans maintained by any Acquired Corporation during the plan year in which the Effective Time occurs.

(b) Nothing in this Section 5.6 or elsewhere in this Agreement shall be construed to create a right of any Company Associate to employment with Parent, the Surviving Company or any other Subsidiary of Parent. Except for Indemnified Persons (as defined in Section 5.7(a)) to the extent of their respective rights pursuant to Section 5.7, no Company Associate, Continuing Employee nor any other Person, shall be deemed to be a third party beneficiary of this Agreement.

(c) If requested by Parent at least seven business days prior to the Effective Time, the Company shall take (or cause to be taken) all actions pursuant to resolutions of the board of directors of the applicable Acquired Corporation necessary or appropriate to terminate, effective no later than the day prior to the date on which the Merger becomes effective, any Company Employee Plan that contains a cash or deferred arrangement intended to qualify under Section 401(k) of the Code (an “Acquired Corporation 401(k) Plan”). If the Company is required to terminate any Acquired Corporation 401(k) Plan, then the Company shall provide to Parent prior to the Effective Time written evidence of the adoption by the board of directors of the applicable Acquired Corporation of resolutions authorizing the termination of such Acquired Corporation 401(k) Plan.

(d) To the extent any employee notification or consultation requirements are imposed by applicable Legal Requirements with respect to any of the Contemplated Transactions, the Company shall cooperate with Parent to comply with such requirements prior to the Effective Time.

5.7 Indemnification of Officers and Directors.

(a) All rights to indemnification by any Acquired Corporation existing in favor of those Persons who are or were directors and/or officers of any Acquired Corporation as of or prior to the date of this Agreement (the “Indemnified Persons”) for their acts and omissions as directors and/or officers of any Acquired Corporation occurring prior to the Effective Time pursuant to those indemnification agreements listed at Part 2.14(i) and Part 2.20 of the Company Disclosure Schedule and the Articles of Association of the Acquired Corporations (the “Indemnification Documents”), shall survive the Merger and be observed by the Surviving Company to the fullest extent available under the Indemnification Documents and applicable law for a period of seven years from the date on which the Merger becomes effective, and Parent shall cause the Surviving Company to so observe such rights (including, to the extent necessary, by providing funds to ensure such observance).

(b) From the Effective Time until the seventh anniversary of the date on which the Merger becomes effective, the Surviving Company shall use commercially reasonable efforts to maintain in effect, for the benefit of those Indemnified Persons who are currently insured under the directors’ and officers’ liability insurance maintained by the Company as of the date of this Agreement in the form delivered by the Company to Parent prior to the date of this Agreement (the “Existing D&O Policy”) with respect to their acts and omissions as directors and officers of

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any Acquired Corporation occurring prior to the Effective Time, the Existing D&O Policy; provided, however, that the Surviving Company may substitute for the Existing D&O Policy a policy or policies of comparable coverage and in no event shall the Surviving Company be required to expand pursuant to this Section 5.7(b) more than an amount per year equal to 225% of current annual premiums paid by the Company for such insurance (which premiums the Company represents and warrants to be $2,800,000 in the aggregate). The provisions of this Section 5.7(b) shall be deemed to have been satisfied if prepaid policies have been obtained prior to the Effective Time for purposes of this Section 5.7(b), which policies provide such directors and officers with coverage comparable to the coverage provided by the Existing D&O Policy for an aggregate period of seven years following the Effective Time (and the Company may, if it obtains the prior written consent of Parent, obtain such a prepaid policy prior to the Effective Time). If such prepaid policies have been obtained prior to the Effective Time, Parent shall not cancel such policies.

(c) The obligations under this Section 5.7 shall not be terminated or modified in such a manner as to adversely affect any Indemnified Person without the consent of such affected Indemnified Person (it being expressly agreed that the Indemnified Persons shall be third party beneficiaries of this Section 5.7), and in the event that Parent consolidates or merges with any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or merger, then Parent shall make proper provision so that the continuing or surviving corporation or entity shall assume the obligations set forth in this Section 5.7.

5.8 Additional Agreements. Parent and the Company shall use commercially reasonable efforts to take, or cause to be taken, all actions necessary to consummate the Merger and make effective the other Contemplated Transactions. Without limiting the generality of the foregoing, each party to this Agreement: (i) shall make all filings (if any) and give all notices (if any) required to be made and given by such party in connection with the Merger and the other Contemplated Transactions; (ii) shall use commercially reasonable efforts to obtain each Consent (if any) required to be obtained (pursuant to any applicable Legal Requirement or Contract, or otherwise) by such party in connection with the Merger or any of the other Contemplated Transactions; and (iii) shall use commercially reasonable efforts to lift any restraint, injunction or other legal bar to the Merger ; provided that neither Merger Sub nor Parent will be required to take any action, including entering into any consent decree, hold separate orders or other arrangements, that (A) requires the divestiture of any assets of any of Merger Sub, Parent, the Company or any of their respective subsidiaries or (B) limits Parent’s freedom of action with respect to, or its ability to retain, the Company and the Company Subsidiaries or any portion thereof or any of Parent’s or its affiliates’ other assets or businesses.

5.9 Disclosure. Parent and the Company shall consult with each other before issuing any press release or otherwise making any public statement, and the Company shall consult with Parent and consider the views and comments of Parent before any of the Acquired Corporations or any of their Representatives sends any emails or other documents to the Company Associates generally or otherwise communicates with the Company Associates generally, with respect to the Merger or any of the other Contemplated Transactions.

5.10 Resignation of Directors. The Company shall use commercially reasonable efforts to obtain and deliver to Parent at or prior to the Closing the resignation of each director of each of the Acquired Corporations other than the Company.

5.11 Approval of Sole Shareholder of Merger Sub; Notification to Registrar of Companies. Immediately following the approval of the Merger by the shareholders of the Company, Parent shall cause the sole shareholder of Merger Sub to approve the Merger as the sole shareholder of Merger Sub. No later than three days after the approval of this Agreement, the Merger and the other Required Approval Transactions by Parent, as the sole shareholder of Merger Sub, Merger Sub shall (in accordance with Section 317(b) of the Companies Law and the regulations thereunder) inform the Companies Registrar of such approval. In accordance with the customary practice of the Companies Registrar, Merger Sub shall request that the Companies Registrar declare the Merger effective and issue the Certificate of Merger upon such date as Merger Sub shall advise the Companies Registrar, which date shall be the first business day immediately following the Closing. For the avoidance of doubt, and notwithstanding any provision of this Agreement to the contrary, it is the intention of the parties that the Merger shall be declared effective and the Certificate of Merger shall be issued as soon as possible after the Closing shall have taken place, but not before the Closing shall have taken place.

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5.12 Subsequent Financial Statements. The Company shall, if practicable, consult with Parent prior to making publicly available its financial results for any period after the date of the financial statements presented in the 2005 20-F and prior to the filing of any report or document with the SEC after the date of this Agreement, it being understood that Parent shall have no liability by reason of such consultation.

5.13 Transfer of Assets. Prior to the Effective Time, the Company shall, and shall procure that the applicable Company Subsidiaries, enter into one or more agreements to effect the transfer of such assets as shall be specified by Parent (the “Transfers”) to Parent or to one or more Subsidiaries or other affiliates of Parent, as directed by Parent in its sole discretion, such Transfers to be conditioned upon the occurrence of the Effective Time. In connection with the Transfers, the Company and Parent shall work cooperatively and use commercially reasonable efforts to prepare prior to the Effective Time all documentation required and do such other acts and things as are required to give effect to the Transfers in accordance with the terms hereof and Parent shall be entitled to review and provide input to all documentation relating to the Transfers prior to the Effective Time.

5.14 Payment of Debt Amount. At the Closing, Parent shall provide sufficient funds to allow for the repayment by or on behalf of the Acquired Corporations, to the extent required or requested by the holders of the Indebtedness set forth on Part 2.19 of the Company Disclosure Schedule, those amounts due and owing on such Indebtedness.

5.15 Company’s Israeli Facilities. Parent currently has no plans to divest the Company’s Israeli facilities; Parent will maintain the current production level at those facilities and file for new products at those facilities for two years.

SECTION 6. Conditions Precedent to Obligations of Parent and Merger Sub

The obligations of Parent and Merger Sub to cause the Merger to be effected and otherwise cause the transactions contemplated by this Agreement to be consummated are subject to the satisfaction, at or prior to the Closing, of each of the following conditions:

6.1 Accuracy of Representations.

Each of the representations and warranties of the Company set forth in Section 2 shall have been true and accurate in all material respects as of the date of this Agreement and shall be true and accurate in all material respects as of the Closing Date as if made on and as of the Closing Date.

6.2 Performance of Covenants. All of the covenants and obligations in this Agreement that the Company is required to comply with or to perform at or prior to the Closing shall have been complied with and performed in all material respects.

6.3 Antitrust Approvals.

(a) Any waiting period (and any extension of such period) under the HSR Act applicable to the transactions contemplated by this Agreement shall have expired or shall have been terminated and any material filings or approvals under any Antitrust Law in any relevant non-U.S. jurisdiction that are required to be made or obtained prior to Closing shall have been made or obtained, as applicable.

(b) The parties shall have obtained approval of the Merger from the Israeli Commissioner of Restrictive Trade Practices, if required.

6.4 Other Approvals. Any waiting period applicable to the Merger under the Companies Law shall have expired or terminated, and Parent and the Company shall have obtained the approvals listed in Part 2.11 of the Company Disclosure Schedule, and such approvals shall not contain any conditions that are not to the satisfaction of Parent in its sole discretion.

6.5 Shareholder Approval. This Agreement, the Merger and the other Contemplated Transactions shall have been duly approved by the Required Company Shareholder Vote.

6.6 Certificate. Parent shall have received a certificate executed by the Chief Executive Officer of the Company confirming that the conditions set forth in Sections, 6.1, 6.2, 6.3, 6.4, 6.5 and 6.7 have been duly satisfied.

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6.7 No Company Material Adverse Effect. Since the date of this Agreement, there shall not have occurred and be continuing any Company Material Adverse Effect, and no event shall have occurred or circumstance shall exist that, in combination with any other events or circumstances, would reasonably be expected to have or result in a Company Material Adverse Effect.

6.8 No Restraints. No temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Merger shall have been issued by any court of competent jurisdiction or other Governmental Body and remain in effect and; there shall not be any Legal Requirement enacted or deemed applicable to the Merger that (a) makes the consummation of the Merger illegal (b) prohibits or limits in any material respect the ability of Parent or any affiliate of Parent to vote, transfer, receive dividends with respect to or otherwise exercise ownership rights with respect to the share capital of the Surviving Company; (c) materially and adversely affects the right or ability of Parent, any affiliate of Parent or any of the Acquired Corporations to own any of the material assets or operate the business of any of the Acquired Corporations; (d) compels any of the Acquired Corporations, Parent or any Subsidiary of Parent to dispose of or hold separate any material assets or business as a result of the Merger or any of the other transactions contemplated by this Agreement; or (e) imposes any criminal sanctions or liability on any of the Acquired Corporations.

6.9 No Governmental Litigation. There shall not be pending or threatened any Legal Proceeding in which a Governmental Body is or is threatened to become a party or a participant: (a) challenging or seeking to restrain, prohibit, rescind or unwind the consummation of the Merger or any of the Contemplated Transactions; (b) relating to the Merger or any of the Contemplated Transactions and seeking to obtain from Parent or any of its Subsidiaries or any of the Acquired Corporations any damages or other relief that could reasonably be expected to be material to Parent or the Acquired Corporations; (c) seeking to prohibit or limit in any material respect the ability of Parent or any affiliate of Parent to vote, transfer, receive dividends with respect to or otherwise exercise ownership rights with respect to the share capital of the Surviving Company; (d) that could materially and adversely affect the right or ability of Parent, any affiliate of Parent or any of the Acquired Corporations to own any of the material assets or operate the business of any of the Acquired Corporations; (e) seeking to compel any of the Acquired Corporations, Parent or any Subsidiary of Parent to dispose of or hold separate any material assets or business as a result of the Merger or any of the other transactions contemplated by this Agreement; or (f) seeking to impose (or that, if adversely determined, could reasonably be expected to result in the imposition of) any criminal sanctions or liability on any of the Acquired Corporations. For purposes of this Section 6.9, a Governmental Body shall not be deemed to be a “party” or “participant” in a Legal Proceeding if the Legal Proceeding involves only non-governmental parties and the exclusive role played by such Governmental Body in such Legal Proceeding is that of court or judge.

6.10 The Transfers. The Company shall have performed all of its obligations pursuant to Section 5.13 and each of the Acquired Corporations party to an agreement entered into to effect the Transfers pursuant to Section 5.13 shall have performed its obligations under each of such agreements.

6.11 Existing D&O Policy. No action shall have been taken (a) to deny or limit coverage available to the Acquired Corporations under the Existing D&O Policy in connection with any Losses (as defined in the Existing D&O Policy) of the Acquired Corporations resulting from the causes of action set forth in the complaint titled “Loretta Zwickel v. Taro Pharmaceutical Industries Ltd, et al (S.D.N.Y. Civil Action No. 04-CV-5969 (RMB)”, as amended from time to time or (b) to rescind the Existing D&O Policy on any basis including any representations, statements, declarations, omissions or any other complaints of any nature made in connection with the application for the Existing D&O Policy.

SECTION 7. Conditions Precedent to Obligation of the Company

The obligation of the Company to effect the Merger and otherwise consummate the transactions contemplated by this Agreement is subject to the satisfaction, at or prior to the Closing, of the following conditions:

7.1 Accuracy of Representations. The representations and warranties of Parent and Merger Sub contained in Section 3 shall have been true and accurate in all material respects as of the date of this Agreement and shall be true and accurate in all material respects as of the Closing Date as if made on and as of the Closing Date

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(except for any such representations and warranties made as of a specific date, which shall have been true and accurate in all material respects as of such date).

7.2 Performance of Covenants. All of the covenants and obligations in this Agreement that Parent and Merger Sub are required to comply with or to perform at or prior to the Closing shall have been complied with and performed in all material respects.

7.3 Shareholder Approval. This Agreement, the Merger and the other Contemplated Transactions shall have been duly approved by the Required Company Shareholder Vote, and any waiting period applicable to the Merger under the Companies Law shall have expired or terminated.

7.4 Certificate. The Company shall have received a certificate executed by an executive officer of Parent confirming that the conditions set forth in Sections 7.1 and 7.2 have been duly satisfied.

7.5 Antitrust Approvals.

(b) The parties shall have obtained approval of the Merger from the Israeli Commissioner of Restrictive Trade Practices, if required.

7.6 No Restraints. No temporary restraining order, preliminary or permanent injunction or other Order against the Company preventing the consummation of the Merger by the Company under U.S. or Israeli law shall have been issued by any U.S. or Israeli court of competent jurisdiction and remain in effect, and there shall not be any U.S. or Israeli Legal Requirement enacted or deemed applicable to the Merger that makes the consummation of the Merger by the Company illegal under U.S. or Israeli law.

SECTION 8. Termination

8.1 Termination. This Agreement may be terminated prior to the Effective Time (whether before or after approval of the Merger by the Required Company Shareholder Vote):

(a) by mutual written consent of Parent and the Company;

(b) by either Parent or the Company if the Merger shall not have been consummated by December 31, 2007; provided, however, that a party shall not be permitted to terminate this Agreement pursuant to this Section 8.1(b) if the failure to consummate the Merger by such date is a result of a failure on the part of such party to perform any covenant or obligation in this Agreement required to be performed by such party at or prior to the Effective Time;

(c) by Parent if a court of competent jurisdiction or other Governmental Body shall have issued a final and nonappealable Order or shall have taken any other final and nonappealable action, having the effect of permanently restraining, enjoining or otherwise prohibiting the consummation of the Merger;

(d) by the Company if a U.S., Canadian or Israeli court of competent jurisdiction or other U.S., Canadian or Israeli Governmental Body shall have issued a final and nonappealable Order against the Company, or shall have taken any other final and nonappealable action directed at the Company, having the effect of permanently restraining, enjoining or otherwise prohibiting the consummation of the Merger by the Company under U.S., Canadian or Israeli law;

(e) by either Parent or the Company if: (i) the Company Shareholders’ Meetings (including any adjournments and postponements thereof) shall have been held and completed and the Company’s shareholders shall have taken a final vote on a proposal to approve this Agreement, the Merger and the other Required Approval Transactions; and (ii) this Agreement, the Merger and the other Required Approval Transactions shall not have been approved at the Company Shareholders’ Meetings (and shall not have been approved at any adjournment or postponement thereof) by the Required Company Shareholder Vote;

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(f) by Parent (at any time prior to the approval of this Agreement by the Required Company Shareholder Vote) if a Triggering Event shall have occurred;

(g) by Parent if: (i) any of the representations and warranties provided by the Company in Section 2 shall have been inaccurate as of the date of this Agreement or shall have become inaccurate as of a date subsequent to the date of this Agreement (as if made on such subsequent date), such that the condition set forth in Section 6.1 would not be satisfied; or (ii) any of the Company’s covenants or obligations contained in this Agreement shall have been breached such that the condition set forth in Section 6.1 would not be satisfied; provided, however, that if a breach of a covenant or obligation by the Company is curable by the Company, then Parent may not terminate this Agreement under this Section 8.1(g) on account of such inaccuracy or breach unless such inaccuracy or breach shall remain uncured for a period of 30 days commencing on the date the Company receives notice of such inaccuracy or breach from Parent;

(h) by the Company if: (i) any of Parent’s representations and warranties shall be inaccurate as of the date of this Agreement or shall have become inaccurate as of a date subsequent to the date of this Agreement (as if made on such subsequent date) such that the condition set forth in Section 7.1 would not be satisfied; or (ii) any of Parent’s covenants or obligations contained in this Agreement shall have been breached such that the condition set forth in Section 7.2 would not be satisfied; provided, however, that if an inaccuracy in any of Parent’s representations and warranties or a breach of a covenant or obligation by Parent is curable by Parent, then the Company may not terminate this Agreement under this Section 8.1(h) on account of such inaccuracy or breach unless such inaccuracy or breach shall remain uncured for a period of 30 days commencing on the date Parent receives notice of such inaccuracy or breach from Company; or

(i) by the Company (at any time prior to the approval of this Agreement by the Required Company Shareholder Vote), in order to accept a Superior Offer and enter into the Specified Definitive Acquisition Agreement (as defined below) relating to such Superior Offer, if: (i) there shall not have been any material breach of any material obligations contained in Section 4.3; (ii) the board of directors of the Company, after satisfying all of the requirements set forth in Section 5.2(d) in connection with such Superior Offer, shall have authorized the Company to enter into a binding, written, definitive acquisition agreement providing for the consummation of the transaction contemplated by such Superior Offer (the “Specified Definitive Acquisition Agreement”); (iii) the Company shall have delivered to Parent a written notice (that includes a copy of the Specified Definitive Acquisition Agreement as an attachment) containing the Company’s representation and warranty that: (A) the board of directors of the Company has authorized the execution and delivery of the Specified Definitive Acquisition Agreement on behalf of the Company and the termination of this Agreement pursuant to this Section 8.1(i); and (B) the Company intends to enter into the Specified Definitive Acquisition Agreement contemporaneously with the termination of this Agreement pursuant to this Section 8.1(i); (iv) a period of at least five business days shall have elapsed since the receipt by Parent of such notice, and the Company shall have made its Representatives available during such period for the purpose of engaging in negotiations with Parent regarding a possible amendment to this Agreement or a possible alternative transaction on terms more favorable to the Company’s shareholders than the terms of the Merger and the Contemplated Transactions; (v) the Company shall have promptly advised Parent of any modification proposed to be made to the Specified Definitive Acquisition Agreement by the other party thereto; (vi) any written proposal by Parent to amend this Agreement or enter into an alternative transaction shall have been considered by the board of directors of the Company, and such board of directors shall have determined that the terms of the proposed amended agreement of merger (or other alternative transaction) are not as favorable to the Company’s shareholders, as the terms of the transaction contemplated by the Specified Definitive Acquisition Agreement, as it may have been modified to make such terms more favorable to the Company’s shareholders; (vii) the Company shall have paid to Parent the fee required to be paid to Parent pursuant to Section 8.3(b); and (viii) on the date five business days after Parent receives the written notice referred to in clause “(iii)” of this Section 8.1(i), the Company shall have executed and delivered to the other party thereto the Specified Definitive Acquisition Agreement (as it may have been modified to make it more favorable to the Company), and the Specified Definitive Acquisition Agreement (as it may have been so modified) shall have thereupon become fully binding and effective (it being understood that if the Company validly terminates this Agreement pursuant to this Section 8.1(i) by satisfying all of the conditions set forth in clauses “(i)” through

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“(viii)” of this Section 8.1(i), then the termination of this Agreement shall be deemed to occur contemporaneously with the execution and delivery of the Specified Acquisition Agreement by the Company).

8.2 Effect of Termination. In the event of the termination of this Agreement as provided in Section 8.1, this Agreement shall be of no further force or effect; provided, however, that: (a) this Section 8.2, Section 8.3 and Section 9 shall survive the termination of this Agreement and shall remain in full force and effect; (b) the Confidentiality Agreement shall survive the termination of this Agreement and shall remain in full force and effect in accordance with its terms.

8.3 Expenses; Termination Fees.

(a) Except as set forth in this Section 8.3, all fees and expenses incurred in connection with this Agreement and the Contemplated Transactions shall be paid by the party incurring such expenses, whether or not the Merger is consummated; provided, however, that Parent and the Company shall share equally all fees and expenses, other than attorneys’ fees, incurred in connection with the filing by the parties hereto of the premerger notification and report forms relating to the Merger under the HSR Act and the filing of any notice or other document under any applicable non-U.S. Antitrust Law.

(b) If this Agreement is terminated by: (i) the Company pursuant to Section 8.1(i); or (ii) Parent pursuant to Section 8.1(f); or (iii) Parent or the Company pursuant to Section 8.1(e) and, in the case of Section 8.1 (e) only, prior to the time of the failure to so approve this Agreement, the Merger or the other Required Approval Transactions, an Acquisition Transaction with respect to the Company shall have been publicly announced; then the Company shall pay to Parent a nonrefundable fee in the amount of $15.5 million in cash.

(c) If the Company fails promptly to pay when due any amount payable by the Company under this Section 8.3, then: (i) the Company shall reimburse Parent for all costs and expenses (including fees and disbursements of counsel) incurred in connection with the collection of such overdue amount and the enforcement by Parent of its rights under this Section 8.3; and (ii) the Company shall pay to Parent interest on such overdue amount (for the period commencing as of the date such overdue amount was originally required to be paid through the date such overdue amount is actually paid to Parent in full) at a rate per annum equal to LIBOR plus 3%.

SECTION 9. Miscellaneous Provisions

9.1 Amendment. This Agreement may be amended with the approval of the respective boards of directors of the Company, Parent and Merger Sub at any time (whether before or after the approval of this Agreement by the shareholders of the Company); provided, however, that after approval of this Agreement by the Company’s shareholders, no amendment shall be made which by law requires further approval of the shareholders of the Company without the further approval of such shareholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

9.2 Extension; Waiver.

(a) Subject to Sections 9.2(b) and 9.2(c), at any time prior to the Effective Time, any party hereto may, subject to applicable law: (i) extend the time for the performance of any of the obligations or other acts of the other parties to this Agreement; (ii) waive any inaccuracy in or breach of any representation, warranty, covenant or obligation of the other party in this Agreement or in any document delivered pursuant to this Agreement; and (iii) waive compliance with any covenant, obligation or condition for the benefit of such party contained in this Agreement.

(b) No failure on the part of any party to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any party in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.

(c) No party shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such party; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

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9.3 No Survival of Representations and Warranties. None of the representations and warranties contained in this Agreement or in any certificate delivered pursuant to this Agreement shall survive after the Effective Time.

9.4 Entire Agreement; Counterparts; Exchanges by Facsimile or Electronic Delivery. This Agreement, the other agreements and exhibits referred to herein and the Company Disclosure Schedule constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among or between any of the parties with respect to the subject matter hereof and thereof; provided, however, that: the Confidentiality Agreement shall not be superseded and shall remain in full force and effect in accordance with their terms. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. The exchange of a fully executed Agreement (in counterparts or otherwise) by facsimile or by electronic delivery in .pdf format shall be sufficient to bind the parties to the terms and conditions of this Agreement.

9.5 Applicable Law; Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Israel, disregarding the provisions concerning internal conflict of laws. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any New York state or federal court sitting in The City of New York.

9.6 Attorneys’ Fees. In any action at law or suit in equity to enforce this Agreement or the rights of any of the parties hereunder, the prevailing party in such action or suit shall be entitled to receive a reasonable sum for its attorneys’ fees and all other reasonable costs and expenses incurred in such action or suit.

9.7 Assignability; No Third Party Rights. This Agreement shall be binding upon, and shall be enforceable by and inure solely to the benefit of, the parties hereto and their respective successors and assigns (except as expressly provided in Section 5.7(c)); provided, however, that (a) the rights and obligations of each of Parent and Merger Sub under this Agreement may be assigned or delegated by Parent or Merger Sub, as the case may be, to any affiliate of Sun Pharmaceutical Industries Ltd. without the consent of the Company or of any other Person, provided that such assignment shall not materially adversely affect the rights and interests of the holders of Company Ordinary Shares and of Company Founder Shares, and in the event of any such assignment and/or delegation, all references in this Agreement to Parent or Merger Sub, as the case may be, shall be deemed to instead refer to such affiliate; and (b) other than as permitted by Section 9.7(a) of this Agreement, neither this Agreement nor any party’s rights or obligations hereunder may be assigned or delegated by such party without the prior written consent of the other parties, and any attempted assignment or delegation of this Agreement or any of such rights or obligations by any party without the prior written consent of the other parties shall be void and of no effect. Except as specifically provided in Section 5.7, nothing in this Agreement, express or implied, is intended to or shall confer upon any Person (other than the parties hereto) any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

9.8 Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given or made as follows: (a) if sent by registered mail return receipt requested, upon receipt; (b) if sent designated for overnight delivery by an internationally recognized overnight air courier (such as DHL or Federal Express), three business days after delivery to such courier; (c) if sent by facsimile transmission before 5:00 p.m. in New York, when transmitted and receipt is confirmed; and (d) if otherwise actually personally delivered, when delivered, provided that such notices, requests, demands and other communications are delivered to the address set forth below, or to such other address as any party shall provide by like notice to the other parties to this Agreement:

if to Parent or Merger Sub:

c/o Sun Pharmaceutical Industries Ltd.

17/B, Mahal Industrial Estate,

Mahakali Caves Road,

Andheri (East), Mumbai 400 093 India

Facsimile: (91-22) 6645 5685

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with a copy (which shall not constitute notice) to:

Shearman & Sterling LLP

599 Lexington Avenue

New York, N.Y. 10022

Attn: Peter D. Lyons

Facsimile: (212) 848-7666

and an additional copy (which shall not constitute notice) to:

Naschitz, Brandes & Co.

5 Tuval Street

Tel-Aviv 67897

Israel

Attn: Aaron M. Lampert

Facsimile: +972-(3)-623-5051

if to the Company:

c/o Taro Pharmaceuticals U.S.A., Inc.

3 Skyline Drive

Hawthorne, NY 10532

Attention: Barrie Levitt

Facsimile: (914) 345-9719

and (914) 345-9825

with a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP

4 Times Square

New York, N.Y. 10036

Attn: Jeffrey W. Tindell

Facsimile: (917) 777-3380

and an additional copy (which shall not constitute notice) to:

Yigal Arnon & Co.

1 Azrieli Center

The Round Building

Tel-Aviv 67021

Israel

Attn: David Schapiro

Facsimile: +972-(3)-607-7724

9.9 Cooperation. The Company agrees to cooperate fully with Parent and to execute and deliver such further documents, certificates, agreements and instruments and to take such other actions as may be reasonably requested by Parent to evidence or reflect the Contemplated Transactions and to carry out the intent and purposes of this Agreement.

9.10 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions of this Agreement or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If a final judgment of a court of competent jurisdiction declares that any term or provision of this Agreement is invalid or unenforceable, the parties hereto agree that the court making such determination shall have the power to limit such term or provision, to delete specific words or phrases or to replace such term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be valid and enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to replace such

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invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term or provision.

9.11 Construction.

(a) For purposes of this Agreement, whenever the context requires: the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include masculine and feminine genders.

(b) The parties hereto agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.

(c) As used in this Agreement, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”

(d) Except as otherwise indicated, all references in this Agreement to “Sections,” “Exhibits” and “Schedules” are intended to refer to Sections of this Agreement and Exhibits or Schedules to this Agreement.

(e) The bold-faced headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

(f) All references to “$” or “dollars” in this Agreement shall mean U.S. dollars. All references to “NIS” in this Agreement shall mean New Israeli Shekels. All references to “business days” shall mean days on which banks are open for business in New York and in the State of Israel.

[Remainder of page intentionally left blank]

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In Witness Whereof, the parties have caused this Agreement to be executed as of the date first above written.

Taro Pharmaceutical Industries Ltd


	By:	/s/ Tal Levitt

Name: Tal Levitt


	Title: Secretary

Alkaloida Chemical Company Exclusive Group Ltd.


	By:	/s/ Sudhir Valia

Name: Sudhir Valia


	Title: Director

Aditya Acquisition Company Ltd.


	By:	/s/ Sudhir Valia

Name: Sudhir Valia


	Title: Director

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Exhibit A

Certain Definitions

For purposes of the Agreement (including this Exhibit A):

Acquired Corporations. “Acquired Corporations” shall mean: (a) the Company; (b) each of the Company’s Subsidiaries; and (c) any other Entity that has been merged with or into, or that is a predecessor to, any of the Entities identified in clauses “(a)” or “(b)” above.

Acquired Corporation IP. “Acquired Corporation IP” shall mean the Owned Intellectual Property and the Licensed Intellectual Property.

Acquired Corporation IP Contracts. “Acquired Corporation IP Contracts” shall mean any and all Contracts concerning Intellectual Property to which each Acquired Corporation is a party or beneficiary or by which any Acquired Corporation, or any of its properties or assets, may be bound, including all (a) licenses of Intellectual Property by any Acquired Corporation to any third party, (b) licenses of Intellectual Property by any third party to any Acquired Corporation, (c) Contracts between any Acquired Corporation and any third party relating to the transfer, development, maintenance or use of Intellectual Property, and (d) consents, settlements, decrees, orders, injunctions, judgments or rulings governing the use, validity or enforceability of Intellectual Property.

Acquisition Inquiry. “Acquisition Inquiry” shall mean an inquiry, indication of interest or request for nonpublic information (other than an inquiry, indication of interest or request for nonpublic information made or submitted by Parent) that would reasonably be expected to lead to an Acquisition Proposal.

Acquisition Proposal. “Acquisition Proposal” shall mean any offer or proposal including, without limitation, any offer or proposal to the shareholders of the Acquired Corporations (other than an offer or proposal made or submitted by Parent) contemplating or otherwise relating to any Acquisition Transaction.

Acquisition Transaction. “Acquisition Transaction” shall mean any transaction or series of related transactions (other than the Contemplated Transactions) involving:

(a) any merger, exchange, consolidation, business combination, plan of arrangement, issuance of securities, acquisition of securities, reorganization, recapitalization, takeover offer, tender offer, exchange offer or other similar transaction: (i) in which any of the Acquired Corporations is involved; (ii) in which a Person or “group” (as defined in the Exchange Act and the rules promulgated thereunder) of Persons directly or indirectly acquires, if consummated, beneficial or record ownership of securities representing more than 15% of the outstanding securities of any class of voting securities of any of the Acquired Corporations; or (iii) in which any of the Acquired Corporations issues securities representing more than 15% of the outstanding securities of any class of voting securities of any of the Acquired Corporations;

(b) any sale, lease, exchange, transfer, license, acquisition or disposition of any business or businesses or assets that constitute or account for 15% or more of the consolidated net revenues, consolidated net income or consolidated assets of the Acquired Corporations; or

(c) any liquidation or dissolution of any of the Acquired Corporations.

Agreement. “Agreement” shall mean the Agreement of Merger to which this Exhibit A is attached, as it may be amended from time to time.

Code. “Code” shall mean the United States Internal Revenue Code of 1986, as amended.

Companies Law. “Companies Law” shall mean the Israeli Companies Law- 5759-1999, as amended, and all rules and regulations promulgated thereunder.

Company Affiliate. “Company Affiliate” shall mean any Person under common control with any of the Acquired Corporations within the meaning of Section 414(b), Section 414(c), Section 414(m) or Section 414(o) of the Code, and the regulations issued thereunder.

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Company Associate. “Company Associate” shall mean any current or former officer or other employee, or current or former independent contractor, consultant or director, of or to any of the Acquired Corporations or any Company Affiliate.

Company Contract. “Company Contract” shall mean any Contract: (a) to which any of the Acquired Corporations is a party; (b) by which any of the Acquired Corporations or any property or asset of any of the Acquired Corporations is or may become bound or under which any of the Acquired Corporations has, or may become subject to, any obligation; or (c) under which any of the Acquired Corporations has or may acquire any right or interest.

Company Disclosure Schedule. “Company Disclosure Schedule” shall mean the Company Disclosure Schedule that has been prepared by the Company in accordance with Section 2 of the Agreement and that has been delivered by the Company to Parent on the date of the Agreement.

Company Employee Agreement. “Company Employee Agreement” shall mean any management, employment, severance, retention, transaction bonus, change in control, consulting, relocation, repatriation or expatriation agreement or other similar Contract between: (a) any of the Acquired Corporations or any Company Affiliate; and (b) any Company Associate, other than any such Contract that is terminable “at will” without any obligation on the part of any Acquired Corporation or any Company Affiliate to make any severance, termination, change in control or similar payment or to provide any benefit, other than severance payments required to be made by any Acquired Corporation under applicable non-U.S. law.

Company Employee Plan. “Company Employee Plan” shall mean any plan, program, policy, practice or Contract providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits, retirement benefits or other benefits or remuneration of any kind, whether or not in writing and whether or not funded, including each “employee benefit plan,” within the meaning of Section 3(3) of ERISA (whether or not ERISA is applicable to such plan): (a) that is or has been maintained or contributed to, or required to be maintained or contributed to, by any of the Acquired Corporations or any Company Affiliate for the benefit of any Company Associate; or (b) with respect to which any of the Acquired Corporations or any Company Affiliate has or may incur or become subject to any liability or obligation; provided, however, that a Company Employee Agreement shall not be considered a Company Employee Plan.

Company Founder Shares. “Company Founder Shares” shall mean the founder shares, nominal value NIS 0.0001 per share, of the Company

Company Material Adverse Effect. “Company Material Adverse Effect” shall mean any effect, change, event or circumstance (each, an “Effect”) that, considered together with all other Effects, has a material adverse effect on: (a) the business, financial condition, operations or results of operations of the Acquired Corporations taken as a whole; or (b) the ability of the Company to consummate the Merger or any of the other Contemplated Transactions or to perform any of its covenants or obligations under the Agreement; excluding any Effect resulting from the existence or announcement of this Agreement and the transactions contemplated hereby.

Company Option Plans. “Company Option Plans” shall mean: (a) the Company’s 1991 Stock Incentive Plan; and (b) the Company’s 1999 Stock Incentive Plan.

Company Options. “Company Options” shall mean options to purchase Company Ordinary Shares from the Company (whether granted by the Company pursuant to the Company Option Plans, assumed by the Company or otherwise).

Company Ordinary Shares. “Company Ordinary Shares” shall mean the ordinary shares, nominal value NIS 0.0001 per share, of the Company.

Confidentiality Agreement. “Confidentiality Agreement” shall mean that certain Confidentiality Agreement dated as of February 16, 2007, between Company and Parent.

Consent. “Consent” shall mean any approval, consent, ratification, permission, waiver or authorization (including any Governmental Authorization).

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Contemplated Transactions. “Contemplated Transactions” shall mean the Merger and the other transactions contemplated by the Agreement and the Shareholder Undertakings to be entered into by certain shareholders of the Company in favor of Parent in connection with the Merger.

Contract. “Contract” shall mean any written, oral or other agreement, contract, subcontract, lease, understanding, instrument, note, indenture, bond, loan, conditional sale contract, mortgage, franchise, option, warranty, purchase or sale order, license, sublicense, insurance policy, benefit plan or legally binding commitment or undertaking of any nature.

Encumbrance. “Encumbrance” shall mean any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, adverse claim, interference, option, right of first refusal, preemptive right or restriction of any nature (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset).

Entity. “Entity” shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any company limited by shares, limited liability company or joint stock company), firm, society or other enterprise, association, organization or entity.

Environmental Laws. “Environmental Laws” shall mean any United States federal, state or local or non United States laws relating to (i) releases or threatened releases of Hazardous Substances or materials containing Hazardous Substances; (ii) the manufacture, handling, transport, use, treatment, storage or disposal of Hazardous Substances or materials containing Hazardous Substances; or (iii) pollution or protection of the environment, health, safety or natural resources.

ERISA. “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

GAAP. “GAAP” shall mean generally accepted accounting principles in the United States.

Governmental Authorization. “Governmental Authorization” shall mean any: (a) permit, license, certificate, franchise, permission, variance, clearance, registration, qualification or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement; or (b) right under any Contract with any Governmental Body.

Governmental Body. “Governmental Body” shall mean any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) U.S. federal, state, local or municipal, non-U.S. or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, ministry, fund, foundation, center, organization, unit, body or Entity and any court or other tribunal); or (d) self-regulatory organization (including the NASDAQ National Market).

Hazardous Substances. “Hazardous Substances” shall mean (i) those substances defined in or regulated under the following United States federal statutes and their state counterparts, as each may be amended from time to time, and all regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum products, including crude oil and any fractions thereof; (iii) natural gas, synthetic gas, and any mixtures thereof; (iv) polychlorinated biphenyls, asbestos, mold and radon; (v) any other contaminant; and (vi) any substance, material or waste regulated by any Governmental Body pursuant to any Environmental Law.

HSR Act. “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

Indebtedness. “Indebtedness” shall mean, without duplication, with respect to any Person (a) all indebtedness for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), whether

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or not evidenced by a writing, (b) any other indebtedness that is evidenced by a note, bond, debenture, draft or similar instrument, (c) all obligations under financing or capital leases, (d) all obligations in respect of acceptances issued or created, (e) notes payable and drafts accepted representing extensions of credit, (f) all liabilities secured by any Encumbrance on any property (other than any mechanics’, carriers’, workers’, repairers’ and similar Encumbrances arising or incurred in the ordinary course of business), (f) letters of credit and any other agreements relating to the borrowing of money or extension of credit and (g) any guarantee of any of the foregoing obligations.

Intellectual Property. “Intellectual Property” shall mean, in any and all jurisdictions throughout the world, all (a) inventions and discoveries (whether or not patentable or reduced to practice), patents, patent applications, invention disclosures, industrial designs, mask works and statutory invention registrations, (b) trademarks, service marks, domain names, uniform resource locators, trade dress, slogans, logos, symbols, trade names, brand names and other identifiers of source or goodwill, including registrations and applications for registration thereof and including the goodwill symbolized thereby or associated therewith (collectively, “Trademarks”), (c) published and unpublished works of authorship, whether copyrightable or not (including software), copyrights therein and thereto, registrations, applications, renewals and extensions therefor, and any and all rights associated therewith, (d) confidential and proprietary information, including trade secrets, know-how and invention rights, (e) rights of privacy and publicity, and (f) any and all other proprietary rights.

Knowledge. “Knowledge” shall mean, with respect to any particular matter, the actual knowledge, after due inquiry, of the executive officers, the general counsel and the Chairman of the board of directors of the Company regarding such matter.

Legal Proceeding. “Legal Proceeding” shall mean any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Body or any arbitrator or arbitration panel.

Legal Requirement. “Legal Requirement” shall mean any U.S. federal, state, local or municipal, non-U.S. or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, order, award, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body (or under the authority of the NASD or The NASDAQ Stock Market or The Pink Sheets Electronic Quotation Service, as applicable).

LIBOR “LIBOR” shall mean the rate for deposits in U.S. Dollars which appears on the Reuters Screen LIBOR01 Page as of 11:00 a.m., London time, on any given business day in London.

Licensed Intellectual Property. “Licensed Intellectual Property” shall mean any and all Intellectual Property that each Acquired Corporation is licensed or otherwise permitted by other Persons to use pursuant to the Acquired Corporation IP Contracts.

Order. “Order” shall mean any order, writ, injunction, judgment or decree.

Owned Intellectual Property. “Owned Intellectual Property” shall mean any and all Intellectual Property owned by the Acquired Corporations.

Parent Common Stock. “Parent Common Stock” shall mean the Common Stock, par value US$0.01 per share, of Parent.

Person. “Person” shall mean any individual, Entity or Governmental Body.

Proxy Statement. “Proxy Statement” shall mean the proxy statement to be sent to the Company’s shareholders in connection with the Company Shareholders’ Meetings.

Registered. “Registered” means issued by, registered with, renewed by or the subject of a pending application before any Governmental Body or Internet domain name registrar.

Representatives. “Representatives” shall mean directors, officers, other employees, agents, attorneys, accountants, advisors and other representatives.

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Required Approval Transactions. “Required Approval Transactions” shall mean the Contemplated Transactions that require approval by the shareholders of the Company under applicable Legal Requirements.

Sarbanes-Oxley Act. “Sarbanes-Oxley Act” shall mean the Sarbanes-Oxley Act of 2002, as it may be amended from time to time.

SEC. “SEC” shall mean the United States Securities and Exchange Commission.

Securities Act. “Securities Act” shall mean the Securities Act of 1933, as amended.

Subsidiary. An Entity shall be deemed to be a “Subsidiary” of another Person if such Person directly or indirectly owns or purports to own, beneficially or of record: (a) an amount of voting securities of or other interests in such Entity that is sufficient to enable such Person to elect at least a majority of the members of such Entity’s board of directors or other governing body; or (b) at least 50% of the outstanding equity, voting or financial interests in such Entity.

Superior Offer. “Superior Offer” shall mean an unsolicited bona fide written offer by a third party (i) to purchase, in exchange for consideration consisting exclusively of cash or equity securities traded publicly in the U.S. (or a combination of cash and equity securities traded publicly in the U.S.), all of the outstanding Company Ordinary Shares and Company Founder Shares, pursuant to a tender or exchange offer, a merger, a consolidation, a recapitalization or otherwise, or (ii) for a merger, sale, consolidation or other business transaction resulting in an acquisition, transfer, disposition, issuance or license of at least 15% of the assets or any class of share capital of the Company or the Company Subsidiaries; that: (a) was not obtained or made as a direct or indirect result of a breach of any provision of the Agreement, the Shareholder Undertakings or the Confidentiality Agreement; (b) is not subject to a financing contingency; and (c) is determined by the board of directors of the Company to be more favorable to the Company’s shareholders than the Merger.

Tax. “Tax” shall mean (i) any and all taxes (including any income tax, franchise tax, capital gains tax, gross receipts tax, value-added tax, surtax, estimated tax, unemployment tax, national health insurance tax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business tax, profits tax, alternative minimum tax, environmental tax, capital stock tax, severance tax, occupation tax, windfall profits tax, social security tax, disability tax, withholding tax or payroll tax), levy, impost, assessment, reassessment, tariff, duty (including any customs duty), deficiency or fee, and any similar charge of any kind and any related charge or amount (including any fine, penalty, interest or inflation linkage), imposed, assessed, reassessed or collected by or under the authority of any Governmental Body; (ii) any liability for the payment of any amount of the type described in clause (i) as a result of (A) transferee or successor liability, being or having been before the Effective Time a member of a consolidated, affiliated, combined, unitary or other group or included in a Tax Return with another Person, or otherwise under operation of law, or (B) being party to any sharing, allocation, indemnification or similar agreement.

Tax Return. “Tax Return” shall mean any return (including any information return), report, statement, declaration, estimate, schedule, notice, notification, form, election, certificate or other document or information, and any amendment or supplement to any of the foregoing, filed with or submitted to, or required to be filed with or submitted to, any Governmental Body or other Person relating to any Taxes.

Triggering Event. A “Triggering Event” shall be deemed to have occurred if: (a) the board of directors of the Company shall have failed to recommend that the Company’s shareholders vote to approve the Agreement, or shall have withdrawn the Company Board Recommendation; (b) the Company shall have failed to include in the Proxy Statement the Company Board Recommendation or a statement to the effect that the board of directors of the Company has determined and believes that the Merger is fair to and in the best interests of the Company’s shareholders; (c) the board of directors of the Company shall have approved, endorsed or recommended any Acquisition Proposal other than the Merger and the Contemplated Transactions; (d) the Company shall have intentionally breached its obligations under Section 4.3; or (e) a tender or exchange offer relating to securities of the Company shall have been commenced and the Company shall not have sent to its securityholders, or filed with the SEC, within 10 business days after the commencement of such tender or exchange offer, a statement disclosing that the Company recommends rejection of such tender or exchange offer.

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Exhibit B

1. Barrie Levitt

2. Daniel Moros

3. Tal Levitt

4. Morley and Company, Inc.

5. Taro Development Corporation

EX-99.5 8 ex99-5.htm

Schedule 99.5

FORM OF VOTING AGREEMENT

VOTING AGREEMENT, dated as of May 18, 2007 (this “Agreement”), between ALKALOIDA CHEMICAL COMPANY EXCLUSIVE GROUP LTD. (the “Parent”), and , (the “Shareholder”).

WHEREAS, concurrently herewith, the Parent, Aditya Acquisition Company Ltd., an Israeli company and a wholly owned subsidiary of Parent (the “Merger Sub”), and Taro Pharmaceutical Industries Ltd., an Israeli company (the “Company”) are entering into an Agreement of Merger (the “Merger Agreement”; capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Merger Agreement), pursuant to which Merger Sub will merge with and into the Company in accordance with the Merger Agreement and the applicable provisions of the Companies Law. Upon consummation of the Merger, the Merger Sub will cease to exist, and the Company will become a wholly-owned subsidiary of the Parent;

WHEREAS, the Shareholder beneficially owns Company Ordinary Shares (such Company Ordinary Shares collectively, the “Owned Shares” and, together with any shares of Company Ordinary Shares or Company Founder Shares of which Shareholder acquires beneficial ownership after the date hereof and prior to the termination hereof, whether by purchase or upon exercise of options, warrants, conversion of other convertible securities or otherwise collectively, the “Covered Shares”);

WHEREAS, the Shareholder acknowledges that the Parent is entering into the Merger Agreement in reliance on the representations, warranties, covenants and other agreements of the Shareholder set forth in this Agreement and would not enter into the Merger Agreement if the Shareholder did not enter into this Agreement.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereby agree as follows:

1. Agreement to Vote.

(a) Prior to any termination of this Agreement, the Shareholder hereby agrees that it shall, and shall cause any other holder of record of any Covered Shares to, at any meeting of the shareholders of Company (whether annual or special and whether or not an adjourned or postponed meeting), however called, and to the fullest extent permitted by law (i) when a meeting is held, appear at such meeting or otherwise cause the Covered Shares to be counted as present thereat for the purpose of establishing a quorum, and (ii) vote (or caused to be voted) in person or by proxy all Covered Shares (A) in favor of the Merger and the other Contemplated Transactions and (B) against any proposal, action or transaction involving Company or any of its Subsidiaries, which proposal, action or transaction would impede, frustrate, prevent or delay the consummation of the Merger or the other transactions contemplated by the Merger Agreement or this Agreement.

(b) THE SHAREHOLDER HEREBY GRANTS TO, AND APPOINTS, THE PARENT, EACH OFFICER OF THE PARENT, AND ANY OTHER DESIGNEE OF THE PARENT, EACH OF THEM INDIVIDUALLY, THE SHAREHOLDER’S IRREVOCABLE (UNTIL THE TERMINATION DATE, AS DEFINED BELOW) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE THE COVERED SHARES AS INDICATED IN CLAUSE (a) OF THIS SECTION 1. THE SHAREHOLDER INTENDS THIS PROXY TO BE IRREVOCABLE (UNTIL THE TERMINATION DATE, AS DEFINED BELOW) AND COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY THE SHAREHOLDER WITH RESPECT TO THE COVERED SHARES (THE SHAREHOLDER REPRESENTS TO THE COMPANY THAT ANY SUCH PROXY IS NOT IRREVOCABLE).

(c) Except as set forth in clause (a) of this Section 1, the Shareholder shall not be restricted from voting in favor of, against or abstaining with respect to any matter presented to the shareholders of the Company.

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(d) If for any reason the proxy granted herein is not irrevocable, then, if instructed by the Parent in writing, the Shareholder agrees to vote (or cause to be voted) the Covered Shares in a manner consistent with clause (a) of this Section 1.

2. Termination. This Agreement shall terminate upon the earliest of (a) the Effective Time, (b) the termination of the Merger Agreement in accordance with its terms, and (c) written notice of termination of this Agreement by the Parent to the Shareholder, such earliest date being referred to herein as the “Termination Date”; provided, however, that the provisions set forth in Section 11 to 18 shall survive the termination of this Agreement; provided, further, however, that termination of this Agreement shall not prevent any party hereunder from seeking any remedies (at law or in equity) against any other party hereto for such party’s breach of any of the terms of this Agreement prior to termination.

3. Representations and Warranties.

(a) Representations and Warranties of the Parent. The Parent hereby represents and warrants to the Shareholder as follows:

(i) Organization and Authority. The Parent is a corporation duly incorporated, validly existing and in good standing under the laws of The Republic of Hungary and has all necessary corporate power and authority to enter into, execute and deliver this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Parent, the performance by the Parent of its obligations hereunder and the consummation by the Parent of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of the Parent. This Agreement has been duly executed and delivered by the Parent, and, assuming due authorization, execution and delivery by the other parties hereto, this Agreement is a legal, valid and binding obligation of the Parent, enforceable against it in accordance with its terms.

(ii) Consents; No Conflicts. The execution, delivery and performance by the Parent of this Agreement do not and will not (A) require any consent, approval, authorization or other order of, action by, filing with, or notification to, any Governmental Entity, (B) violate, conflict with or result in the breach of any provision of the certificate of incorporation or bylaws (or similar organizational documents) of the Parent, (C) conflict with or violate any Law or Order applicable to the Parent or its assets, properties or businesses or (D) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Parent is a party, except, in the case of clauses (C) and (D), as would not materially and adversely affect the ability of the Parent to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement.

(b) Representations and Warranties of the Shareholder. The Shareholder hereby represents and warrants to the Parent as follows:

(i) Ownership of Securities. As of the date of this Agreement, (A) the Shareholder is the record and beneficial owner of, and has sole voting power and sole power of disposition with respect to, the Owned Shares, free and clear of Liens, proxies, powers of attorney, voting trusts or agreements (other than any Lien or proxy created by this Agreement or pursuant to any pledge in existence as of the date hereof, none of which would affect the ability of the Shareholder to carry out the Shareholder’s obligations under, and to consummate the transactions contemplated by, this Agreement), and (B) the Shareholder beneficially owns Company Ordinary Shares. As of the date of this Agreement, Schedule I is true and correct in all respects with respect to those Persons listed under . As used in this Agreement, the terms “beneficial owner”, “beneficial ownership”, “beneficially owns” or “owns beneficially”, with respect to any securities, refer to the beneficial ownership of such securities as determined under Rule 13d-3(a) of the Exchange Act.

(ii) Organization and Authority. The Shareholder is a corporation duly formed, validly existing and in good standing under the laws of the jurisdiction of its formation and has all necessary power and authority to enter into, execute and deliver this Agreement, to carry out its obligations hereunder and to consummate the

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transactions contemplated hereby, and the execution and delivery of this Agreement by the Shareholder, the performance by it of its obligations hereunder and the consummation by it of the transactions contemplated hereby have been duly authorized by all requisite action on the part of the Shareholder. This Agreement has been duly executed and delivered by the Shareholder, and, assuming due authorization, execution and delivery by the other parties hereto, this Agreement is a legal, valid and binding obligation of the Shareholder, enforceable against the Shareholder in accordance with its terms.

(iii) Consents; No Conflicts. The execution, delivery and performance by the Shareholder of this Agreement do not and will not (A) require any consent, approval, authorization or other order of, action by, filing with, or notification to, any Governmental Entity or violate, conflict with or result in the breach of any provision of the organizational documents of the Shareholder, (B) conflict with or violate any Law or Order applicable to the Shareholder or the Shareholder’s assets, properties or businesses or (C) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Shareholder is a party.

4. Restriction on Transfer, Proxies. The Shareholder hereby agrees, while this Agreement is in effect, not to (a) except as set forth in Section 8 hereof or pursuant to pledges in existence as of the date hereof (none of which would affect the ability of the Shareholder to carry out the Shareholder’s obligations under, and to consummate the transactions contemplated by, this Agreement), sell, transfer, pledge, encumber, assign or otherwise dispose of, or enter into any Contract, option or other arrangement or understanding with respect to the sale, transfer, pledge, encumbrance, assignment or other disposition of, any of the Covered Shares, (b) grant any proxies or powers of attorney, deposit any Covered Shares into a voting trust or enter into a voting agreement with respect to any Covered Shares or (c) take any action that would make any representation or warranty of the Shareholder contained herein untrue or incorrect or have the effect of preventing or disabling the Shareholder from performing its obligations under this Agreement.

5. No Solicitation. During the Pre-Closing Period, the Shareholder shall not, directly or indirectly, and the Shareholder shall ensure that no Subsidiary or the Representatives of the Shareholder do not, directly or indirectly:

(ii) furnish any nonpublic information regarding any of the Acquired Corporations to any Person in connection with or in response to an Acquisition Proposal or Acquisition Inquiry;

provided, however, that nothing in this Section 5 shall prevent the Shareholder, in his, her or its capacity as a director or executive officer of the Company from engaging in any activity permitted pursuant to Section 4.3(a) of the Merger Agreement. Each Shareholder shall, and shall direct or cause his, her or its representatives and agents to, immediately cease and cause to be terminated any discussions or negotiations with any parties that may be ongoing with respect to any Acquisition Proposal. Each Shareholder shall promptly advise Parent orally and in writing of (a) any Acquisition Proposal or any request for information with respect to any Acquisition Proposal, the material terms and conditions of such Acquisition Proposal or request and the identity of the person making such Acquisition Proposal or request and (b) any changes in any such Acquisition Proposal or request.

6. Further Assurances. From time to time, at the other party’s request and without further consideration, each party hereto shall take such reasonable further action as may reasonably be necessary or desirable to consummate and make effective the transactions contemplated by this Agreement.

7. Fiduciary Duties. Notwithstanding anything in this Agreement to the contrary: (a) the Shareholder makes no agreement or understanding herein in any capacity other than in his capacity as a record holder and beneficial owner of Covered Shares and (b) nothing herein shall be construed to limit or affect any action or inaction by the Shareholder acting in his capacity as a director or officer of Company in a manner consistent with the Merger Agreement.

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8. Permitted Transfers. Notwithstanding anything in this Agreement to the contrary, the Shareholder may transfer any or all of the Covered Shares, in accordance with provisions of applicable Law, to his spouse, ancestors, descendants or any trust controlled by the Shareholder for any of their benefit; provided, however, that, prior to and as a condition to the effectiveness of such transfer, (a) the Parent shall have consented in writing to any such transfer of the Covered Shares, such consent not to be unreasonably withheld and (b) each Person to which any of such Covered Shares or any interest in any of such Covered Shares is or may be transferred shall have executed and delivered to the Parent a counterpart of this Agreement pursuant to which such Person shall be bound by all of the terms and provisions of this Agreement, and shall have agreed in writing with the Parent to hold such Covered Shares or interest in such Covered Shares subject to all of the terms and provisions of this Agreement.

9. No Control. Nothing contained in this Agreement shall give the Parent the right to control or direct Company or Company’s operations prior to the consummation of the Merger.

10. Amendment. This Agreement may not be amended except by an instrument in writing signed by both of the parties hereto.

11. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11):


	(a)	if to the Shareholder:

c/o Taro Pharmaceuticals U.S.A., Inc.

3 Skyline Drive

Hawthorne, NY 10532

Attention: Barrie Levitt

Facsimile: (914) 345-9719 and (914) 345-9825

with a copy (which shall not constitute notice) to:


		Skadden, Arps, Slate, Meagher & Flom LLP

4 Times Square

New York, N.Y. 10036

Attn: Jeffrey W. Tindell

Facsimile: (917) 777-3380


	(b)	if to the Parent:

c/o Sun Pharmaceutical Industries Ltd.

17/B, Mahal Industrial Estate,

Mahakali Caves Road,

Andheri (East), Mumbai 400 093 India

Facsimile: (91-22) 6645 5685

with a copy (which shall not constitute notice) to:


		Shearman & Sterling LLP

599 Lexington Avenue

New York, N.Y. 10022

Attn: Peter D. Lyons

Facsimile: (212) 848-7666

and an additional copy (which shall not constitute notice) to:


		Naschitz, Brandes & Co.

5 Tuval Street

Tel-Aviv 67897

Israel

Attn: Aaron M. Lampert

Facsimile: +972-(3)-623-5051

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12. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

13. Entire Agreement; Assignment. This Agreement (together with the Merger Agreement to the extent referred to herein) (a) constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between the parties hereto with respect to the subject matter hereof, and (b) shall not be assigned by operation of law or otherwise without the prior written consent of the other party hereto; provided, however, that the Parent may assign this Agreement to any affiliate of Sun Pharmaceutical Industries Ltd. without the consent of the Shareholder or of any other Person.

14. Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement were not performed in accordance with the terms hereof and that the parties hereto shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.

15. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Israel, disregarding the provisions concerning internal conflict of laws. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any New York state or federal court sitting in The City of New York.

16. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 16.

17. Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

18. Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

SHAREHOLDER


	By:

Name:

Title:

PARENT


	By:

Name:

Title:

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EX-99.6 9 ex99-6.htm

Schedule 99.6

AGREEMENT AND PLAN OF MERGER

by and among

SUN PHARMACEUTICAL INDUSTRIES, INC.,

SUN DEVELOPMENT CORPORATION I,

THE TARO DEVELOPMENT CORPORATION,

BARRIE LEVITT,

and

DAN MOROS

Dated as of May 18, 2007


			Page

ARTICLE I
DEFINITIONS
	SECTION 1.01.	Certain Defined Terms	5
	SECTION 1.02.	Interpretation and Rules of Construction	6

ARTICLE II
THE MERGER
	SECTION 2.01.	The Merger	7
	SECTION 2.02.	The Closing	7
	SECTION 2.03.	Effective Time	7
	SECTION 2.04.	The Charter and Bylaws	7
	SECTION 2.05.	Directors of the Surviving Corporation	7
	SECTION 2.06.	Officers of the Surviving Corporation	7
	SECTION 2.07.	Effect on Merger Sub Stock	7
	SECTION 2.08.	Effect on Company Stock	8
	SECTION 2.09.	Surrender of Certificates	8
	SECTION 2.10.	Dissenting Shares	9
	SECTION 2.11.	Withholding Tax	9

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, MOROS AND LEVITT
	SECTION 3.01.	Subsidiaries; Due Organization; Qualification to do Business	9
	SECTION 3.02.	Authority; Stockholder Approval; Noncontravention; Binding Nature of Agreement	10
	SECTION 3.03.	Capitalization	10
	SECTION 3.04.	No Conflict	11
	SECTION 3.05.	Governmental Consents and Approvals	11
	SECTION 3.06.	Absence of Liabilities	11
	SECTION 3.07.	Conduct of Business	11
	SECTION 3.08.	Compliance with Laws	11
	SECTION 3.09.	Assets	11
	SECTION 3.10.	Tax Matters	11

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
	SECTION 4.01.	Due Organization; Etc.	12
	SECTION 4.02.	Authority; Noncontravention	12
	SECTION 4.03.	Binding Nature of Agreement	12
	SECTION 4.04.	No Conflict	12
	SECTION 4.05.	Governmental Consents and Approvals	12


			Page

ARTICLE V
ADDITIONAL AGREEMENTS
	SECTION 5.01.	Regulatory and Other Authorizations; Notices and Consents	13
	SECTION 5.02.	No Solicitation or Negotiation	13
	SECTION 5.03.	Further Action	13
	SECTION 5.04.	Company Stockholders Meeting	13
	SECTION 5.05.	Transfer of Class B Common Stock	13
	SECTION 5.06.	Operation of the Company’s Business	13

ARTICLE VI
CONDITIONS TO CLOSING
	SECTION 6.01.	Conditions to Obligations of the Company	14
	SECTION 6.02.	Conditions to Obligations of Parent and Merger Sub	15

ARTICLE VII

ARTICLE VIII
INDEMNIFICATION
	SECTION 8.01.	Survival of Representations and Warranties	16
	SECTION 8.02.	Indemnification by Levitt and Moros	16

ARTICLE IX
TERMINATION
	SECTION 9.01.	Termination	16
	SECTION 9.02.	Effect of Termination	16

ARTICLE X
GENERAL PROVISIONS
	SECTION 10.01.	Expenses	16
	SECTION 10.02.	Notices	17
	SECTION 10.03.	Public Announcements	18
	SECTION 10.04.	Severability	18
	SECTION 10.05.	Entire Agreement	18
	SECTION 10.06.	Assignment	18
	SECTION 10.07.	Amendment	18
	SECTION 10.08.	Waiver	18
	SECTION 10.09.	No Third Party Beneficiaries	18
	SECTION 10.10.	Specific Performance	18
	SECTION 10.11.	Governing Law	19
	SECTION 10.12.	Waiver of Jury Trial	19
	SECTION 10.13.	Currency	19
	SECTION 10.14.	Counterparts	19

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this “Agreement”) is made and entered into as of May 18, 2007, by and among SUN PHARMACEUTICAL INDUSTRIES, INC., a Michigan corporation (“Parent”), SUN DEVELOPMENT CORPORATION I, a New York corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), THE TARO DEVELOPMENT CORPORATION, a New York corporation (the “Company”), BARRIE LEVITT (“Levitt”) and DANIEL MOROS (“Moros”).

RECITALS

A. Parent, Merger Sub and the Company intend to effect a merger of Merger Sub with and into the Company in accordance with this Agreement and the applicable provisions of the NYBCL (as defined herein) (the “Merger”). Upon consummation of the Merger, Merger Sub will cease to exist, and the Company will become a direct wholly owned subsidiary of Parent.

B. The board of directors of the Company have (i) determined that this Agreement, the Merger and the other transactions contemplated hereby are fair to, and in the best interests of, the Company and its stockholders; (ii) approved and adopted this Agreement, the Merger and the other transactions contemplated hereby; and (iii) determined to submit this Agreement, the Merger and transactions contemplated hereby to its stockholders and to recommend that the stockholders of the Company approve this Agreement, the Merger and the other transactions contemplated hereby.

C. The board of directors of each of Parent and Merger Sub has approved and adopted this Agreement, the Merger and the other transactions contemplated hereby, and the board of directors of Merger Sub has determined (i) that this Agreement, the Merger and other transactions contemplated hereby are fair to, and in the best interests of, Merger Sub and its stockholder and (ii) to submit this Agreement, the Merger and transactions contemplated hereby to its sole stockholder and to recommend that the sole stockholder of Merger Sub vote to approve this Agreement, the Merger and the other transactions contemplated hereby.

D. Parent as sole stockholder of Merger Sub has executed a written consent pursuant to which it has approved and adopted this Agreement, the Merger and the transactions contemplated hereby.

E. Concurrently with the execution and delivery of this Agreement, Alkaloida Chemical Company Exclusive Group Limited (“Taro Parent”), Aditya Acquisition Company Ltd, an Israeli company under the control of Parent (“Taro Merger Sub”), and Taro Pharmaceutical Industries Ltd., an Israeli company (the “Target”) have entered into an agreement (the “Taro Merger Agreement”), pursuant to which Taro Merger Sub will be merged with and into the Target in accordance with the Taro Merger Agreement and the applicable provisions of Israeli Companies Law (the “Taro Merger”). Upon consummation of the Taro Merger, Taro Merger Sub will cease to exist, and the Target will become a direct wholly-owned subsidiary of Taro Parent.

F. In order to induce Parent to enter into this Agreement and cause the Merger to be consummated, concurrently with the execution and delivery of this Agreement, the shareholders of the Company identified at Exhibit A hereto are executing Shareholder Undertakings (the “Shareholder Undertakings”) in favor of Parent and granting irrevocable proxies to a mutually-agreed-upon proxyholder, pursuant to which such shareholders are undertaking certain obligations (including, but not limited to, the obligation not to sell, transfer, assign, pledge or encumber any of the Common Stock or Preferred Stock) and irrevocably directing the proxyholder to vote all securities of the Company beneficially owned by them in favor of the approval of this Agreement and the Merger.

G. The Company, Parent and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe certain conditions to the Merger, as set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, and intending to be legally bound, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. Certain Defined Terms. For purposes of this Agreement:

“Action” means any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority.

“Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

“Assets” means the assets and properties of the Company and the Subsidiaries.

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in The City of New York.

“Code” means the Internal Revenue Code of 1986.

“Contract” means any written, oral or other agreement, contract, subcontract, lease, understanding, instrument, note, indenture, bond, loan, conditional sale contract, mortgage, franchise, option, warranty, purchase or sale order, license, sublicense, insurance policy, benefit plan or legally binding commitment or undertaking of any nature

“control” (including the terms “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by contract, credit arrangement or otherwise.

“Entity” means any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any company limited by shares, limited liability company or joint stock company), firm, society or other enterprise, association, organization or entity.

“Governmental Authority” means any federal, national, supranational, state, provincial, local, or similar government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“Knowledge” means, with respect to any particular matter, the actual knowledge, after due inquiry, of Levitt or Moros regarding such matter.

“Law” means any federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).

“Legal Requirement” means any U.S. federal, state, local or municipal, non-U.S. or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, order, award, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority.

“Liabilities” means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including those arising under any Law,

Action or Governmental Order and those arising under any contract, agreement, arrangement, commitment or undertaking.

“Liens” means mortgages, pledges, liens, security interests, conditional and installment sale agreements, encumbrances, charges or other claims of third parties of any kind, including, without limitation, any easement, right of way or other encumbrance to title, or any option, right of first refusal, right of first offer or other requirement to sell, assign or otherwise divest.

“Person” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

“Tax Return” shall mean any return (including any information return), report, statement, declaration, estimate, schedule, notice, notification, form, election, certificate or other document or information, and any amendment or supplement to any of the foregoing, filed with or submitted to, or required to be filed with or submitted to, any government or taxing authority or other Person relating to any Taxes.

“Taxes” means any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any government or taxing authority, including taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation, or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes; license, registration and documentation fees; and customs’ duties, tariffs, and similar charges.

SECTION 1.02. Interpretation and Rules of Construction. In this Agreement, except to the extent otherwise provided or that the context otherwise requires:

(a) when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated;

(b) the and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

(c) whenever the words “include”, “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;

(d) the words “hereof”, “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

(e) all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein;

(f) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

(g) any Law defined or referred to herein or in any agreement or instrument that is referred to herein means such Law or statute as from time to time amended, modified or supplemented, including by succession of comparable successor Laws;

(h)

references to a Person are also to its successors and permitted assigns; and

(i)

the use of “or” is not intended to be exclusive unless expressly indicated otherwise.

ARTICLE II

THE MERGER

SECTION 2.01. The Merger. Subject to the terms and conditions of this Agreement, at the Effective Time (as defined in Section 2.03), Merger Sub shall be merged with and into the Company in accordance with this Agreement, and the separate corporate existence of Merger Sub shall thereupon cease. The Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the “Surviving Corporation”) and will be a wholly owned subsidiary of Parent. The Merger shall have the effects specified in the Business Corporation Law of the State of New York (the “NYBCL”). At its election Parent may change the entity that survives in the Merger to provide for a merger of the Company with and into Merger Sub.

SECTION 2.02. The Closing. Subject to the terms and conditions of this Agreement, the closing of the Merger (the “Closing”) shall take place at the offices of Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York 10022, or such other place as the parties shall agree, at 10:00 a.m., local time, on the first Business Day immediately following the day on which the last to be fulfilled or waived of the conditions set forth in Articles 5 and 6 shall be fulfilled or waived in accordance herewith (other than conditions which by their nature are to be satisfied at Closing) or at such other time, date or place as the parties may agree in writing. The date on which the Closing occurs is hereinafter referred to as the “Closing Date.”

SECTION 2.03. Effective Time. If all the conditions set forth in Section 6 shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated, the parties hereto shall cause a Certificate of Merger meeting the requirements of Section 904 of the NYBCL to be properly executed and filed in accordance with such Section on the Closing Date. The Merger shall become effective at the time of filing of the Certificate of Merger with the Secretary of State of the State of New York in accordance with the NYBCL or at such later time which the parties hereto shall have agreed upon and designated in such filings as the effective time of the Merger (the “Effective Time”).

SECTION 2.04. The Charter and Bylaws.

(a) The Certificate of Incorporation of Merger Sub as in effect immediately prior to the Effective Time (with Article First thereof amended to read in its entirety as follows: “The name of the corporation is: The Taro Development Corporation”) shall be the Certificate of Incorporation of the Surviving Corporation as of the Effective Time until duly amended as provided therein or by applicable law.

(b) The Bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation as of the Effective Time, until thereafter amended as provided therein or by applicable law.

SECTION 2.05. Directors of the Surviving Corporation. The directors of the Surviving Corporation immediately after the Effective Time shall be directors of Merger Sub immediately prior to the transactions contemplated hereby, each to hold office from the Effective Time in accordance with the Certificate of Incorporation and By-Laws of the Surviving Corporation and until his or her successor is duly elected and qualified.

SECTION 2.06. Officers of the Surviving Corporation. The officers of the Surviving Corporation immediately after the Effective Time shall be officers of Merger Sub immediately prior to the transactions contemplated hereby, each to hold office from the Effective Time in accordance with the Certificate of Incorporation and By-Laws of the Surviving Corporation and until his or her successor is duly appointed and qualified.

SECTION 2.07. Effect on Merger Sub Stock. At the Effective Time, by virtue of, and simultaneously with, the Merger and without any further action on the part of Parent, Merger Sub, the Company, or any stockholder of the Company each share of Merger Sub Common Stock outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation.

SECTION 2.08. Effect on Company Stock. At the Effective Time, by virtue of, and simultaneously with, the Merger and without any further action on the part of Parent, Merger Sub, the Company, or any stockholder of the Company:

(a) All shares of Common Stock and Preferred Stock (each as defined herein) held by the Company or Morley and Company, Inc. (“Morley and Company”) immediately prior to the Effective Time shall be canceled and shall cease to exist, and no consideration shall be delivered in exchange therefor;

(b) Each issued and outstanding share of Common Stock held by the stockholders of the Company immediately prior to the Effective Time (other than Dissenting Shares (as hereafter defined)) shall be canceled and converted automatically into and represent the right to receive $638.908 per share, in cash without any interest thereon; and

(c) Each issued and outstanding share of Preferred Stock held by the stockholders of the Company immediately prior to the Effective Time shall be canceled and converted automatically into and represent the right to receive $638.908 per share, in cash without any interest thereon (the amount of cash referred to in clause (b) and (c) per share being the “Per Share Merger Consideration”).

SECTION 2.09. Surrender of Certificates.

(a) All shares of Common Stock and Preferred Stock that have been converted pursuant to Section 2.08 shall be cancelled automatically and shall cease to exist, and the holders of any certificates that immediately prior to the Effective Time represented those shares (“Certificates”) shall cease to have any rights with respect to each of those shares, other than the right to receive the Per Share Merger Consideration in accordance with the terms and provisions hereof, upon surrender of their Certificates or affidavit in accordance with this Section 2.09.

(b) If any of the Per Share Merger Consideration is to be paid to a Person or Entity other than the Person or Entity in whose name the surrendered Certificate is registered, then the Per Share Merger Consideration may be paid to such a transferee so long as (A) the surrendered Certificate is accompanied by all documents required to evidence and effect that transfer and (B) the Person or Entity requesting such payment (1) pays any applicable transfer Taxes or (2) establishes to the satisfaction of Parent that any such Taxes have already been paid or are not applicable.

(c) At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of the shares of Common Stock or Preferred Stock that were outstanding immediately prior to the Effective Time.

(d) None of the Paying Agent, Parent or the Surviving Corporation shall be liable to any holder of Certificates for any amount properly paid to a public official under any applicable abandoned property, escheat or similar Legal Requirements.

(e) Prior to the Effective Time, Parent shall enter into a paying agent agreement (the “Paying Agent Agreement”) with a third party paying agent (the “Paying Agent”) and at the Effective Time, Parent shall provide funds to the Paying Agent in an amount equal to product of (i) the Per Share Merger Consideration and (ii) the number of shares of Common Stock and Preferred Stock outstanding as of the Closing Date. Such funds provided to the Paying Agent are referred to as the “Payment Fund.”

(f) At or prior to the Effective Time, the Company will mail or will cause to be mailed to each holder of Certificates, a letter of transmittal (the “Letter of Transmittal”) which shall specify that delivery shall be effected, and risk of loss and title to any certificate shall pass only upon proper delivery of the Certificates (or the affidavit contemplated by subsection (g)), together with such Letter of Transmittal properly completed and duly executed, to the Paying Agent and instructions for use in surrendering such Certificates and receiving the Per Share Merger Consideration, if any, in respect of the Common Stock or Preferred Stock evidenced thereby. Upon the surrender of each such Certificate (or the affidavit contemplated by subsection (g)) and a properly completed and executed Letter of Transmittal, the Paying Agent shall pay the holder of such Certificate (out of the Payment Fund) an amount equal to the product of (i) the Per Share Merger Consideration and (ii) the number of shares delivered to the Paying Agent by such stockholder (or the number of shares covered by the affidavit contemplated by subsection (g)) in consideration therefor, and such Certificate(s) shall forthwith be cancelled. Until so surrendered, each such

Certificate (other than Certificates representing Dissenting Shares, as described below) shall represent solely the right to receive the Per Share Merger Consideration, if any, relating thereto. No interest shall accrue or be paid on any amount payable upon surrender of Certificates. Any amounts paid upon or following the surrender of any Certificate shall be deemed to have been paid in full satisfaction of all rights pertaining to that Certificate and the shares of Common Stock and/or Preferred Stock formerly represented by it.

(g) If any Certificate is lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and the posting by such Person of a bond in the form reasonably required by Parent or the Paying Agent as indemnity against any claim that may be made against Parent or the Paying Agent on account of the alleged loss, theft or destruction of such Certificate, the Paying Agent shall pay the applicable Per Share Merger Consideration to such Person in exchange for such affidavit in respect of such lost, stolen or destroyed Certificate.

SECTION 2.10. Dissenting Shares. If and to the extent that any holder of Common Stock is entitled to appraisal rights that have not been effectively waived, then notwithstanding anything in this Agreement to the contrary, each share of Common Stock that is issued and outstanding immediately prior to the Effective Time and that is held by a stockholder who has properly exercised and perfected appraisal rights under Section 623 of the NYBCL (each, a “Dissenting Share”) shall not be converted into or exchangeable for the right to receive the Per Share Merger Consideration, but shall be entitled to receive such consideration as shall be determined pursuant to Section 623 of the NYBCL; provided, however, that if such holder shall have failed to perfect or shall have effectively withdrawn or lost its right to appraisal and payment under the NYBCL, each share of Common Stock of such holder shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the Per Share Merger Consideration, without any interest thereon, in accordance with Section 2.08, and such shares shall no longer be Dissenting Shares.

SECTION 2.11. Withholding Tax. Each of the Paying Agent, Parent and the Surviving Corporation shall be entitled to deduct and withhold from any consideration payable pursuant to this Agreement to any holder or former holder of Common Stock or Preferred Stock such amounts as Parent reasonably determines is required to be deducted or withheld therefrom or in connection therewith under the Code, the Israeli Income Tax Ordinance New Version, 1961, as amended, any provision of state, local or non U.S. Tax law or under any other applicable Legal Requirement. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the person to whom such amounts would otherwise have been paid.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

OF THE COMPANY, MOROS AND LEVITT

The Company, Moros and Levitt, jointly and severally, hereby represent and warrant to Parent that:

SECTION 3.01. Subsidiaries; Due Organization; Qualification to do Business.

(a) The Company has no subsidiaries, except Morley and Company (collectively, the “Subsidiaries”); and neither the Company nor any of the Company’s Subsidiaries owns any share capital of, or any equity interest of any nature in, any other Entity, other than the Subsidiaries, 2,333,971 Ordinary Shares of Taro Pharmaceutical Industries Ltd., an Israeli company (“Taro”), 2,600 Founder Shares of Taro and 5 Class A Shares of Taro Pharmaceuticals USA, Inc., a New York corporation (“Taro USA”). None of the Company or its Subsidiaries has agreed or is obligated to make, or is bound by any Contract under which it may become obligated to make, any future investment in or capital contribution to any other Entity. The Company and its Subsidiaries are corporations duly organized and validly existing and are in good standing under the laws of the jurisdiction of their incorporation and have all necessary power and authority to: (i) conduct their business in the manner in which their business is currently being conducted; and (ii) own their assets in the manner in which their assets are currently owned.

(b) The Company has delivered or made available to Parent or Merger Sub complete and correct copies of the organizational documents of each of the Company and Morley and Company, as amended and in effect on the date

hereof. None of the Company or its Subsidiaries is in violation of any material provision of its organizational documents.

SECTION 3.02. Authority; Stockholder Approval; Noncontravention; Binding Nature of Agreement.

(a) The Company has the corporate right, power and authority to enter into and to perform its obligations under this Agreement and each of Levitt and Moros have the right, power and authority to enter into and to perform their respective obligations under this Agreement. The execution, delivery and performance by the Company of this Agreement have been duly authorized by all necessary corporate or stockholder action, other than the Company Stockholder Approval (as defined below), on the part of the Company. The board of directors of the Company has determined: (a) that the Merger is fair to, and in the best interests of, the Company and its stockholders; and (b) to recommend that the stockholders of the Company adopt this Agreement and the Merger.

(b) No vote or approval of any stockholder of the Company or Morley and Company, is necessary in order to approve the execution, delivery or performance of this Agreement or the transactions contemplated hereby, other than approval of two-thirds (2/3) of the holders of Common Stock of the Company of this Agreement, the Merger and the transactions contemplated hereby (the “Company Stockholder Approval”).

(c) Except for compliance with (and receipt of all required approvals under) the HSR Act, any non U.S. Antitrust Law, the Companies Law as may be required, and as would not have a material adverse effect on Parent and Merger Sub’s ability to consummate the Merger, no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority is required by or with respect to the Company in connection with the execution and delivery of this Agreement by the Company or the consummation of the transactions contemplated hereby by the Company or performance by the Company, Levitt or Moros of their obligations hereunder.

(d) This Agreement has been duly and validly executed and delivered by the Company, Levitt and Moros and, assuming the due authorization, execution and delivery of this Agreement by the Parent and Merger Sub, constitutes the legal, valid and binding obligation of the Company, Levitt and Moros, enforceable against them in accordance with its terms, subject to: (a) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (b) rules of law governing specific performance, injunctive relief and other equitable remedies.

SECTION 3.03. Capitalization.

(a) The authorized capital stock of the Company consists of 15,000 shares of Common Stock, par value $10.00 (the “Common Stock”), 7,959.90 of which are issued and outstanding, and 45,000 shares of Preferred Stock, par value $10.00 (the “Preferred Stock”), 20,351.30 of which shares are issued and outstanding. Schedule 3.03(a) sets forth a true and complete list of the stockholders of the Company and, opposite the name of each stockholder, the number of shares of all outstanding Common Stock and Preferred Stock owned by such stockholder. There are no options, warrants, conversion privileges, subscription or purchase rights or other rights outstanding to purchase or otherwise acquire (i) any authorized but unissued, unauthorized or treasury shares of the Company’s capital stock, or (ii) any other securities of the Company and there are no commitments, contracts, agreements, arrangements or understandings by the Company to issue any shares of the Company’s capital stock or other securities of the Company. All of the issued and outstanding shares of Common Stock and Preferred Stock are duly authorized, validly issued, fully paid and non-assessable, and were issued in compliance with the registration and qualification requirements of all applicable federal, state and foreign securities laws and general corporate laws.

(b) The authorized capital stock of Morley and Company consists of 1,000 shares of Class A Common Stock par value $0.01 (the “Class A Common Stock”), all of which shares of Class A Common Stock are issued and outstanding, and 5 shares of Class B Common Stock, par value $0.01 (the “Class B Common Stock”), 3 of which shares of Class B Common Stock are issued and outstanding. Schedule 3.03(b) sets forth a true and complete list of the stockholders of Morley and Company and, opposite the name of each stockholder, the number of shares of all outstanding Class A Common Stock and Class B Common Stock owned by such stockholder. There are no options, warrants, conversion privileges, subscription or purchase rights or other rights outstanding to purchase or otherwise acquire (i) any authorized but unissued, unauthorized or treasury shares of Morley and Company’s capital stock, or (ii) any other securities of Morley and Company and there are no commitments, contracts, agreements, arrangements or understandings by Morley and Company to issue any shares of Morley and Company’s capital stock or other

securities of Morley and Company. All of the issued and outstanding shares of Class A Common Stock and Class B Common Stock are duly authorized, validly issued, fully paid and non-assessable, and were issued in compliance with the registration and qualification requirements of all applicable federal, state and foreign securities laws and general corporate laws.

SECTION 3.04. No Conflict. The execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby will not result in a violation of, or default under, any instrument, judgment, order, writ, decree or contract or to which the Company, Levitt or Moros is a party, or an event that results in the creation of any lien upon any of the assets of the Company. None of the Common Stock or Preferred Stock is subject to any right of first refusal, right of co-sale, preemptive rights or other comparable obligations or restrictions to which Levitt, Moros, members of their immediate family or the Company is a party, other than (i) the rights of first offer and preemptive rights set forth in the Agreement by and among Jacob Levitt, David Sommer, Nathan Moros and Daniel Liptzen, dated as of February 19, 1952 (the “Stockholders Agreement”) and (ii) preemptive rights in accordance with the NYBCL, and none of the rights described in clause (i) or (ii) hereof become applicable or are triggered as a result of the Merger and which terminate upon the consummation of the Merger. Following the consummation of the Merger none of the rights described in clause (i) hereof shall apply to any of the share capital of the Surviving Corporation.

SECTION 3.05. Governmental Consents and Approvals. Other than as set forth in this Agreement, the execution, delivery and performance of this Agreement by the Company do not and will not require any consent, approval, authorization or other order of, action by, filing with or notification to, any Governmental Authority.

SECTION 3.06. Absence of Liabilities. The Company has no Liabilities.

SECTION 3.07 Conduct of Business. Other than holding the Class A Common Stock, the Ordinary Shares of Taro and the Class A Shares of Taro USA each referred to in Section 3.01(a) and the maintenance of its corporate existence and related activities, the Company has no business activities.

SECTION 3.08. Compliance with Laws. The Company and the Subsidiaries have each conducted and continue to conduct the Company’s business in material accordance with all Laws and Governmental Orders applicable to the Company or Morley and Company or the assets of Company and Morley and Company as set forth in Section 3.09, and neither the Company nor Morley and Company is in material violation of any such Law or Governmental Order.

SECTION 3.09. Assets. The Company owns (i) 2,333,971 Ordinary Shares, (ii) 5 Class A Shares of Taro USA, and (iii) all shares of Class A Common Stock of Morley and Company, in each case free and clear of any and all Liens. The Company will own as of the Effective Time, all shares of Class B Common Stock of Morley and Company free and clear of any and all Liens. Morley and Company owns all of the Founder Shares, free and clear of any and all Liens. Other than as set forth in this Section 3.09 and cash on hand, the Company does not own any other assets of any kind whatsoever.

SECTION 3.10. Tax Matters. (a) All Tax Returns required to be filed by or on behalf of the Company and Morley and Company have been timely filed and are true, correct and complete in all material respects. All amounts shown on such Tax Returns and all other material amounts of Taxes owed by the Company and Morley and Company have been timely paid. No written claim has been made by any Governmental Authority in a jurisdiction where the Company or Morley and Company does not file Tax Returns that the Company or Morley and Company is or may be subject to taxation by that jurisdiction.

(b) No deficiency for any material amount of Tax has been asserted or assessed by any Governmental Authority against the Company or Morley and Company (or, to the Knowledge of Levitt and Moros, has been threatened or proposed), except for deficiencies which have been satisfied by payment, settled or been withdrawn.

(c) There are no pending or, to the Knowledge of Levitt and Moros, threatened audits, examinations, investigations or other proceedings in respect of Taxes of the Company or Morley and Company. Neither the Company nor Morley and Company has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency and there are no outstanding requests in respect of the foregoing.

(d) Neither the Company nor Morley and Company has any liability for the Taxes of any Person (i) as a result of being a member of a consolidated, affiliated, combined, unitary or other group or being included in a Tax Return, (ii) as a transferee or successor, or (iii) pursuant to an agreement relating to the allocating or sharing of, or an indemnification obligation with respect to, Taxes (except for customary agreements to indemnify lenders or security holders in respect of Taxes).

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

As an inducement to the Company, Levitt and Moros to enter into this Agreement, Parent hereby represents and warrants:

SECTION 4.01. Due Organization; Etc. Parent is a company duly organized and validly existing under the laws of the State of Michigan. Merger Sub is a company duly incorporated and validly existing under the laws of the State of New York. Immediately prior to the Effective Time, Parent will own, directly or indirectly, of record and beneficially all outstanding shares of Merger Sub.

SECTION 4.02. Authority; Noncontravention.

(a) Each of Parent and Merger Sub has the corporate right, power and authority to enter into and to perform its respective obligations under this Agreement. The execution, delivery and performance by Parent and Merger Sub of this Agreement have been duly authorized by all necessary corporate or stockholder action on the part of Parent and Merger Sub. The board of directors of Merger Sub has determined: (a) that the Merger is fair to, and in the best interests of, Merger Sub and its stockholders; and (b) to recommend that Parent, as the sole stockholder of Merger Sub, approve this Agreement and the Merger.

(b) Except for compliance with (and receipt of all required approvals under) the HSR Act, any non U.S. Antitrust Law, the Companies Law as may be required, and as would not have a material adverse effect on Parent’s or Merger Sub’s ability to consummate the Merger, no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority is required by or with respect to Parent or Merger Sub in connection with the execution and delivery of this Agreement by Parent and Merger Sub or the consummation of the transactions contemplated hereby by Parent and Merger Sub.

SECTION 4.03. Binding Nature of Agreement. This Agreement has been duly and validly executed and delivered by Parent and Merger Sub and, assuming the due authorization, execution and delivery of this Agreement by the Company, Levitt and Moros, constitutes the legal, valid and binding obligation of Parent and Merger Sub, enforceable against them in accordance with its terms, subject to: (a) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (b) rules of law governing specific performance, injunctive relief and other equitable remedies.

SECTION 4.04. No Conflict. The execution, delivery and performance by Parent and Merger Sub of this Agreement do not and will not (a) violate, conflict with or result in the breach of any provision of the Certificate of Incorporation or By-laws, or similar organizational document, of Parent and Merger Sub, (b) conflict with or violate any Law or Governmental Order applicable to Parent and Merger Sub, or (c) conflict with, or result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which Parent or Merger Sub is a party, which would adversely affect the ability of Parent or Merger Sub to carry out its obligations under, and to consummate the transactions contemplated by this Agreement.

SECTION 4.05. Governmental Consents and Approvals. The execution, delivery and performance by Parent and Merger Sub of this Agreement do not and will not require any consent, approval, authorization or other order of, action by, filing with, or notification to any Governmental Authority, except as described in a writing given to the Company by Parent and Merger Sub on the date of this Agreement.

ARTICLE V

ADDITIONAL AGREEMENTS

SECTION 5.01. Regulatory and Other Authorizations; Notices and Consents. The parties hereto shall use their reasonable best efforts to obtain (or cause the Company and the Subsidiaries to obtain) all authorizations, consents, orders and approvals of all Governmental Authorities and officials that may be or become necessary for its execution and delivery of, and the performance of its obligations pursuant to this Agreement and will cooperate fully with the other party in promptly seeking to obtain all such authorizations, consents, orders and approvals.

SECTION 5.02. No Solicitation or Negotiation. The Company agrees that between the date of this Agreement and the earlier of (a) the Closing and (b) the termination of this Agreement, neither the Company nor any of its respective Affiliates, officers, directors, representatives or agents will (i) solicit, initiate, consider, encourage or accept any other proposals or offers from any Person (A) relating to any acquisition or purchase of all or any portion of the capital stock of the Company or Morley and Company or (B) to enter into any merger, consolidation, business combination, recapitalization, reorganization or other extraordinary business transaction involving or otherwise relating to the Company or Morley and Company or (ii) participate in any discussions, conversations, negotiations and other communications regarding, or furnish to any other Person any information with respect to, or otherwise cooperate in any way with, assist or participate in, or facilitate or encourage any effort or attempt by any other Person to seek to do any of the foregoing. The Company immediately shall cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Persons conducted heretofore with respect to any of the foregoing. The Company shall notify Parent promptly if any such proposal or offer, or any inquiry or other contact with any Person with respect thereto, is made and shall, in any such notice to Parent, indicate in reasonable detail the identity of the Person making such proposal, offer, inquiry or contact and the terms and conditions of such proposal, offer, inquiry or other contact. The Company agrees not to, and to cause the Company and Morley and Company not to, without the prior written consent of Parent, release any Person from, or waive any provision of, any confidentiality or standstill agreement to which the Company or Morley and Company is a party.

SECTION 5.03. Further Action. Each of the parties hereto shall use all reasonable efforts to take, or cause to be taken, all appropriate action, do or cause to be done all things necessary, proper or advisable under applicable Law, and to execute and deliver such documents and other papers, as may be required to carry out the provisions of this Agreement and consummate and make effective the transactions contemplated hereby and thereby.

SECTION 5.04. Company Stockholders Meeting. The Company shall take all action necessary under all applicable Legal Requirements to call (promptly after the execution and delivery of this Agreement), give notice of and hold a meeting of the stockholders of the Company to vote on the approval of this Agreement, the Merger and the transactions contemplated hereby and the Company shall deliver to the stockholders of the Company all necessary written materials and disclosure in accordance with applicable Legal Requirements.

SECTION 5.05. Transfer of Class B Common Stock. At or prior to the Effective Time, Levitt shall transfer or otherwise surrender to the Company all of his interest in the Class B Common Stock for no consideration and Levitt shall cease to be a shareholder of Morley and Company. As a result of the consummation of transfer contemplated in this Section 5.05, Morley and Company shall become a wholly-owned subsidiary of the Company.

SECTION 5.06. Operation of the Company’s Business.

(a) Prior to the Effective Time, the Company shall not (without the prior written consent of Parent) and the Company shall ensure that Morley and Company does not (without the prior written consent of Parent):

(i)

conduct any business or operations;

(ii) directly or indirectly (A)(x) acquire by merging or consolidating with, by purchasing a substantial portion of the assets of, by making an investment in or capital contribution to, or by any other manner, any person or division, business or equity interest of any person or (y) acquire or lease any assets, rights or properties; (B) form any subsidiary; or (C) effect or become a party to any merger, consolidation, plan of arrangement, share exchange, business combination, amalgamation, recapitalization, reclassification of

shares, stock split, reverse stock split, issuance of bonus shares, division or subdivision of shares, consolidation of shares or similar transaction;

(iii) license any right or other asset from any other person or sell or otherwise dispose of, assign or lease or license, any right or other asset to any other person;

(iv) sell, transfer, convey, assign, encumber or make any pledge of any of its assets or permit any of its assets to become subject to any Liens or incur, guarantee or assume any indebtedness;

(v) (A) declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of its capital stock, (B) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (C) purchase, redeem or otherwise acquire any shares of its capital stock or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; provided, however, that at any time prior to the Closing the Company may declare and pay cash dividends to its stockholders in respect of all or a portion of the Company’s cash on hand, and it is understood by the parties hereto that the Company intends to declare and pay such cash dividends;

(vi) sell, issue, grant, pledge or otherwise encumber or subject to any Lien or authorize the sale, issuance or grant of: (A) any share capital or other security; (B) any option, call, warrant or right to acquire any share capital or other security; (C) any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock based performance units; or (D) any instrument convertible into or exchangeable for any share capital or other security;

(vii) amend or permit the adoption of any amendment to its Certificate of Incorporation or Bylaws or the charter or other organizational documents of its Subsidiaries;

(viii) make, change or revoke any material Tax election or make any change in any method of Tax accounting, settle or compromise any material Tax liability, file any amended Tax Return involving a material amount of additional Taxes, enter into any closing agreement relating to a material amount of Taxes, or waive or extend the statute of limitations in respect of Taxes; or

(ix)

authorize any of, or commit, resolve, propose or agree to take any of, the foregoing actions.

(b) Prior to the Effective Time, the Company and Morley and Company shall (i) prepare and file all Tax Returns (the “Post-Signing Returns”) required to be filed by their respective due dates, (ii) timely pay all Taxes shown to be due and payable on such Post-Signing Returns, and (iii) promptly notify Parent of any notice of any suit, claim, action, investigation, audit or proceeding in respect of any Tax matters (or any significant developments with respect to ongoing suits, claims, actions, investigations, audits or proceedings in respect of such Tax matters).

ARTICLE VI

CONDITIONS TO CLOSING

SECTION 6.01. Conditions to Obligations of the Company. The obligations of the Company to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

(a) No Restraints. No statute, rule, regulation, executive order, decree, ruling, temporary restraining order or preliminary or permanent injunction of any Governmental Authority or issued by any court of competent jurisdiction having jurisdiction which prohibits, restrains, renders illegal or enjoins consummation of the Merger shall be in effect.

(b)

Company Stockholders Approval. The Company Stockholders Approval shall have been obtained.

(c) Closing of the Taro Merger Agreement. The consummation of the Taro Merger pursuant to the Taro Merger Agreement and those transactions contemplated by the Taro Merger Agreement.

SECTION 6.02. Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

(b)

Company Stockholders Approval. The Company Stockholders Approval shall have been obtained.

(c) Closing of the Taro Merger Agreement. The consummation of the Taro Merger pursuant to the Taro Merger Agreement and those transactions contemplated by the Taro Merger Agreement.

(d) Treasury Regulation Certificate. A certificate from the Company that complies with Treasury Regulation Sections 1.1445-2(c)(3) and 1.897-2(h), dated no more than 30 days prior to the Closing Date and executed by a responsible corporate officer of the Company, to the effect that no interest in the Company is a “United States real property interest” (as defined in Section 897(c)(1) of the Code).

ARTICLE VII

TAX MATTERS

SECTION 7.01. Tax Returns. (a) Levitt and Moros shall prepare and file, or cuase to be prepared and filed, in a timely manner all Tax Returns relating to the Company or Morley and Company for any taxable period ending on or prior to the Closing Date, and Parent shall do the same for any taxable period that begins on or before, and ends after, the Closing Date. Any such Tax Returns shall be prepared in a manner consistent with past practices employed (except as otherwise required by applicable Tax Law. In the case of any such Tax Return, the preparing party shall provide the non-preparing party with a copy of such completed Tax Return, at least 30 Business Days prior to the due date for the filing of such Tax Return (and prior to the filing of such Tax Return), and, in the case of a Tax Return prepared by Parent, a statement certifying the amount of Tax shown on such Tax Return that is allocable to Levitt and Moros pursuant to Section 7.01(b). The preparing party shall consider any reasonable comments submitted by the non-preparing party in writing at least 10 Business Days prior to the filing of such Tax Return. Levitt and Moros shall pay to Parent at least 10 Business Days before the due date of the applicable Tax Return required to be filed by Parent, for which an amount of Tax is allocable to Levitt and Moros pursuant to Section 7.01(b).

(b) For purposes of preparing and filing Tax Returns and the indemnification obligations of Moros and Levitt under Article VIII, in the case of a taxable period beginning on or before, and ending after, the Closing Date, Taxes shall be allocated as follows: (A) in the case of income Taxes, sales Taxes, employment Taxes and other Taxes that are readily apportionable based on an actual or deemed closing of the books, the portion of any such Tax that is allocable to the portion of the taxable period ending on the Closing Date shall be deemed to be equal to the amount that would be payable if the taxable year ended on the Closing Date, and (ii) in the case of property and other Taxes that are imposed on a periodic basis, the portion of any such Tax that is allocable to the portion of the taxable period ending on the Closing Date shall be equal to the amount of such Tax for the entire period multiplied by a fraction, the numerator of which is the number of days in such portion of the taxable period and the denominator of which is the number of days in the entire taxable period.

SECTION 7.02. Cooperation. Levitt and Moros and Parent shall reasonably cooperate, in preparing and filing all Tax Returns and in resolving all disputes and audits with respect to all taxable periods or relating to Taxes, including maintaining and making available to each other any records necessary in connection with Taxes of the Company and Morley and Company.

SECTION 7.03. Tax Sharing Agreements. On the Closing Date, all Tax sharing agreements and arrangements between (a) the Company or Morley and Company, on the one hand, and (b) Target and its Affiliates or any stockholder of the Company or Morley and Company, on the other hand, shall be terminated and have no further effect.

SECTION 7.04. Transfer Taxes. All sales, use, value added, transfer, stamp, stock transfer, real property transfer or gains and similar Taxes that become payable in connection with the transactions contemplated by this Agreement shall be borne equally by Levitt and Moros, on the one hand, and Parent, on the other hand.

ARTICLE VIII

INDEMNIFICATION

SECTION 8.01. Survival of Representations and Warranties. (a) The representations and warranties of the Company contained in this Agreement shall survive the Closing until the second anniversary of the Closing; provided that the representations and warranties of the Company relating to Taxes and the indemnification obligations of Levitt and Moros pursuant to Section 8.02(d) shall survive and the until the expiration of the applicable statutory period of limitations plus sixty days. Neither the period of survival nor the liability of Levitt or Moros with respect to the Company’s representations and warranties shall be reduced by any investigation made at any time by or on behalf of Parent. If written notice of a claim has been given prior to the expiration of the applicable representations and warranties by Parent, then the relevant representations and warranties shall survive as to such claim, until such claim has been finally resolved.

(b) The representations and warranties of Parent contained in this Agreement shall survive until the fifth anniversary of the Closing.

SECTION 8.02. Indemnification by Levitt and Moros. Parent and its Affiliates, officers, directors, employees, agents, successors and assigns (each a “Parent Indemnified Party”) shall be indemnified and held harmless by Levitt and Moros, jointly and severally, for and against any and all Liabilities, losses, diminution in value, damages, claims, costs and expenses, interest, awards, judgments and penalties (including attorneys’ and consultants’ fees and expenses) actually suffered or incurred by them (including any Action brought or otherwise initiated by any of them) (hereinafter a “Loss”), arising out of or resulting from:

(a)

the breach of any representation or warranty made by Company contained in this Agreement;

(b)

the breach of any covenant or agreement by the Company contained in this Agreement;

(c) any and all Losses suffered or incurred by Parent by reason of or in connection with any claim or cause of action of any third party to the extent arising out of any action, inaction, event, condition, liability or obligation of the Company or Morley and Company occurring or existing prior to the Closing; and

(d) Taxes payable by the Company or Morley and Company for taxable periods (or portions thereof) ending on or prior to the Closing Date (including any liability for Taxes pursuant to Treasury Regulation § 1.1502-6 or any similar provision of state, local or foreign Law or regulation).

ARTICLE IX

TERMINATION

SECTION 9.01. Termination. This Agreement shall automatically terminate upon the termination of the Taro Merger Agreement in accordance with its terms.

SECTION 9.02. Effect of Termination. In the event of termination of this Agreement as provided in Section 9.01, this Agreement shall forthwith become void and there shall be no liability on the part of either party hereto except (a) as set forth in Article X (other than Section 10.03) and (b) that nothing herein shall relieve either party from liability for any breach of this Agreement.

ARTICLE X

GENERAL PROVISIONS

SECTION 10.01. Expenses. Except as otherwise specified in this Agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this

Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred. The Company and the Subsidiaries will not incur any out-of-pocket expenses in connection with this Agreement.

SECTION 10.02. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, by facsimile, by email or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties hereto at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.02):

(a)

if to the Company, Moros or Levitt:

c/o Taro Pharmaceuticals U.S.A., Inc.

3 Skyline Drive

Hawthorne, NY 10532

Attention: Barrie Levitt

Facsimile: (914) 345-9719 and (914) 345-9825

with a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP

4 Times Square

New York, N.Y. 10036

Attn: Jeffrey W. Tindell

Facsimile: (917) 777-3380

and an additional copy (which shall not constitute notice) to:

Yigal Arnon & Co.

1 Azrieli Center

The Round Building

Tel-Aviv 67021

Israel

Attn: David Schapiro

Facsimile: +972-(3)-607-7724

(b)

if to Parent or Merger Sub:

c/o Sun Pharmaceutical Industries Ltd.

17/B, Mahal Industrial Estate,

Mahakali Caves Road,

Andheri (East), Mumbai 400 093 India

Facsimile: (91-22) 6645 5685

with a copy (which shall not constitute notice) to:

Shearman & Sterling LLP

599 Lexington Avenue

New York, N.Y. 10022

Attn: Peter D. Lyons

Facsimile: (212) 848-7666

and an additional copy (which shall not constitute notice) to:

Naschitz, Brandes & Co.

5 Tuval Street

Tel-Aviv 67897

Israel

Attn: Aaron M. Lampert

Facsimile: +972-(3)-623-5051

SECTION 10.03. Public Announcements. Neither party hereto shall make, or cause to be made, any press release or public announcement in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the other party, and the parties hereto shall cooperate as to the timing and contents of any such press release, public announcement or communication.

SECTION 10.04. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

SECTION 10.05. Entire Agreement. This Agreement constituted the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between the parties hereto with respect to the subject matter hereof and thereof.

SECTION 10.06. Assignment. This Agreement may not be assigned by operation of law or otherwise without the express written consent of the Company and Parent (which consent may be granted or withheld in the sole discretion of the Company or Parent) and any such assignment or attempted assignment without such consent shall be void; provided, however, that Parent may assign this Agreement or any of its rights and obligations hereunder to one or more Affiliates of Sun Pharmaceutical Industries, Ltd. without the consent of the Company.

SECTION 10.07. Amendment. This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, all of the parties hereto or (b) by a waiver in accordance with Section 10.08.

SECTION 10.08. Waiver. Either party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered by the other party pursuant hereto, or (c) waive compliance with any of the agreements of the other party or conditions to such party’s obligations contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement. The failure of either party hereto to assert any of its rights hereunder shall not constitute a waiver of any of such rights. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

SECTION 10.09. No Third Party Beneficiaries. Except for the provisions of Article VIII relating to indemnified parties, this Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person, including any union or any employee or former employee of the Company, any legal or equitable right, benefit or remedy of any nature whatsoever, including any rights of employment for any specified period, under or by reason of this Agreement.

SECTION 10.10. Specific Performance. The Company acknowledges and agrees that Parent would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any breach of this Agreement by the Company could not be adequately compensated in all cases by

monetary damages alone. Accordingly, in addition to any other right or remedy to which Parent may be entitled, at law or in equity, it shall be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.

SECTION 10.11. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. All Actions arising out of or relating to this Agreement shall be heard and determined exclusively in any New York federal court sitting in the Borough of Manhattan of The City of New York, provided, however, that if such federal court does not have jurisdiction over such Action, such Action shall be heard and determined exclusively in any New York state court sitting in the Borough of Manhattan of The City of New York. Consistent with the preceding sentence, the parties hereto hereby (a) submit to the exclusive jurisdiction of any federal or state court sitting in the Borough of Manhattan of The City of New York for the purpose of any Action arising out of or relating to this Agreement brought by any party hereto and (b) irrevocably waive, and agree not to assert by way of motion, defense, or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the abovnamed courts, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement or the transactions contemplated by this Agreement may not be enforced in or by any of the abovnamed courts.

SECTION 10.12. Waiver of Jury Trial. Each of the parties hereto hereby waives to the fullest extent permitted by applicable Law any right it may have to a trial by jury with respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement or the transactions contemplated by this Agreement. Each of the parties hereto hereby (a) certifies that no representative, agent or attorney of the other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it has been induced to enter into this Agreement and the transactions contemplated by this Agreement, as applicable, by, among other things, the mutual waivers and certifications in this Section 10.12.

SECTION 10.13. Currency. Unless otherwise specified in this Agreement, all references to currency, monetary values and dollars set forth herein shall mean United States (U.S.) dollars and all payments hereunder shall be made in United States dollars.

SECTION 10.14. Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.

IN WITNESS WHEREOF, parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

THE TARO DEVELOPMENT CORPORATION


	By:	/s/ Barrie Levitt

Name: Barrie Levitt


	Title:	President

SUN PHARMACEUTICAL INDUSTRIES, INC.


	By:	/s/ Sudhir Valia

Name: Sudhir Valia


	Title:	Director

SUN DEVELOPMENT CORPORATION I


	By:	/s/ Sudhir Valia

Name: Sudhir Valia


	Title:	Director

BARRIE LEVITT


	By:	/s/ Barrie Levitt

DANIEL MOROS


	By:	/s/ Daniel Moros

EX-99.7 10 ex99-7.htm

Schedule 99.7

FORM OF VOTING AGREEMENT

VOTING AGREEMENT, dated as of May 18, 2007 (this “Agreement”), between SUN PHARMACEUTICAL INDUSTRIES, INC., a Michigan corporation, (the “Parent”), and [_____________][a [____________ corporation] (the “Shareholder”).

WHEREAS, concurrently herewith, the Parent, Aditya Acquisition Company Ltd., an Israeli company and a wholly owned subsidiary of Parent (the “Merger Sub”), and The Taro Development Corporation, an Israeli company (the “Taro”) are entering into an Agreement of Merger (the “Taro Merger Agreement”), pursuant to which Merger Sub will merge with and into the Company (the “Taro Merger”) in accordance with the Taro Merger Agreement and the applicable provisions of Israeli Companies Law. Upon consummation of such merger, the Merger Sub will cease to exist, and the Company will become a wholly-owned subsidiary of the Parent;

WHEREAS, concurrently herewith, the Parent, Sun Development Corporation I, a New York corporation (“TDC Merger Sub”), Taro Development Corporation, a New York corporation (“Company”), Barrie Levitt (“Levitt”) and Daniel Moros (“Moros”) are entering into an Agreement of Merger (the “Merger Agreement”), pursuant to which TDC Merger Sub will merge with and into the Company (the “Merger”) in accordance with the Merger Agreement and the applicable provisions of Business Corporation Law of the State of New York. Upon consummation of the Merger, the TDC Merger Sub will cease to exist, and the TDC Merger Sub will become a wholly-owned subsidiary of the Parent. Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Merger Agreement;

WHEREAS, the Shareholder beneficially owns [________] shares of Common Stock and [________] shares of Preferred Stock] (such Common Stock and Preferred Stock collectively, the “Owned Shares” and, together with any shares of Common Stock [or Preferred Stock] of which Shareholder acquires beneficial ownership after the date hereof and prior to the termination hereof, whether by purchase or upon exercise of options, warrants, conversion of other convertible securities or otherwise collectively, the “Covered Shares”);

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereby agree as follows:

1. Agreement to Vote.

establishing a quorum, and (ii) vote (or caused to be voted) in person or by proxy all Covered Shares (A) in favor of the Merger and the other transactions contemplated by the Merger Agreement and (B) against any proposal, action or transaction involving Company or Morley and Company, which proposal, action or transaction would impede, frustrate, prevent or delay the consummation of the Merger or the other transactions contemplated by the Merger Agreement or this Agreement.

2. Termination. This Agreement shall terminate upon the earliest of (a) the Effective Time, (b) the termination of the Merger Agreement in accordance with its terms, and (c) written notice of termination of this Agreement by the Parent to the Shareholder, such earliest date being referred to herein as the “Termination Date”; provided, however, that the provisions set forth in Section 11 to 18 shall survive the termination of this Agreement; provided, further, however, that termination of this Agreement shall not prevent any party hereunder from seeking any remedies (at law or in equity) against any other party hereto for such party's breach of any of the terms of this Agreement prior to termination.

3. Representations and Warranties.

(a) Representations and Warranties of the Parent. The Parent hereby represents and warrants to the Shareholder as follows:

(i) Organization and Authority. The Parent is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Michigan and has all necessary corporate power and authority to enter into, execute and deliver this Agreement, to carry out its obligations hereunder and to consummate the

-2-

transactions contemplated hereby. The execution and delivery of this Agreement by the Parent, the performance by the Parent of its obligations hereunder and the consummation by the Parent of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of the Parent. This Agreement has been duly executed and delivered by the Parent, and, assuming due authorization, execution and delivery by the other parties hereto, this Agreement is a legal, valid and binding obligation of the Parent, enforceable against it in accordance with its terms.

(ii) Consents; No Conflicts. The execution, delivery and performance by the Parent of this Agreement do not and will not (A) require any consent, approval, authorization or other order of, action by, filing with, or notification to, any Governmental Authority, (B) violate, conflict with or result in the breach of any provision of the certificate of incorporation or bylaws (or similar organizational documents) of the Parent, (C) conflict with or violate any Law or order, writ, injunction, judgment or decree applicable to the Parent or its assets, properties or businesses or (D) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Parent is a party, except, in the case of clauses (C) and (D), as would not materially and adversely affect the ability of the Parent to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement.

(b) Representations and Warranties of the Shareholder. The Shareholder hereby represents and warrants to the Parent as follows:

(i) Ownership of Securities. As of the date of this Agreement, (A) the Shareholder is the record and beneficial owner of, and has sole voting power and sole power of disposition with respect to, the Owned Shares, free and clear of Liens, proxies, powers of attorney, voting trusts or agreements (other than any Lien or proxy created by this Agreement or pursuant to any pledge in existence as of the date hereof, none of which would affect the ability of the Shareholder to carry out the Shareholder’s obligations under, and to consummate the transactions contemplated by, this Agreement), and (B) the Shareholder beneficially owns [________] Common Stock [[________] Preferred Stock] [and [________] Common Stock [[________] Preferred Stock] issuable upon the exercise of currently exercisable stock options]. As of the date of this Agreement, Schedule I is true and correct in all respects with respect to those Persons listed under [NAME OF SHAREHOLDER]. As used in this Agreement, the terms “beneficial owner”, “beneficial ownership”, “beneficially owns” or “owns beneficially”, with respect to any securities, refer to the beneficial ownership of such securities as determined under Rule 13d-3(a) of the Exchange Act.

(ii) Organization and Authority. [The Shareholder is a [corporation] duly formed, validly existing and in good standing under the laws of the jurisdiction of its formation and has all necessary power and authority to enter into, execute and deliver this Agreement, to carry out its obligations hereunder and to consummate the transactions

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contemplated hereby, and the execution and delivery of this Agreement by the Shareholder, the performance by it of its obligations hereunder and the consummation by it of the transactions contemplated hereby have been duly authorized by all requisite action on the part of the Shareholder.] [The Shareholder has all necessary power and capacity to enter into, execute and deliver this Agreement, to carry out his obligations hereunder and to consummate the transactions contemplated hereby.] This Agreement has been duly executed and delivered by the Shareholder, and, assuming due authorization, execution and delivery by the other parties hereto, this Agreement is a legal, valid and binding obligation of the Shareholder, enforceable against the Shareholder in accordance with its terms. [If the Shareholder is married, and any of the Covered Shares constitute community property or otherwise need spousal or other approval for this Agreement to be legal, valid and binding, this Agreement has been duly authorized, executed and delivered by, and constitutes the legal, valid and binding obligation of, Shareholder's spouse, enforceable in accordance with its terms.]

(iii) Consents; No Conflicts. The execution, delivery and performance by the Shareholder of this Agreement do not and will not (A) require any consent, approval, authorization or other order of, action by, filing with, or notification to, any Governmental Authority [or violate, conflict with or result in the breach of any provision of the organizational documents of the Shareholder], (B) conflict with or violate any Law or order, writ, injunction, judgment or decree applicable to the Shareholder or the Shareholder’s assets, properties or businesses or (C) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Shareholder is a party.

5. No Solicitation. Prior to the Closing, the Shareholder shall not, directly or indirectly [and the Shareholder shall ensure that no Subsidiary or the Representatives of the Shareholder do not, directly or indirectly]:

(i) solicit, initiate, consider, encourage or accept any other proposals or offers from any Person (A) relating to any acquisition or purchase of all or any portion of the

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capital stock of the Company or Morley and Company or (B) to enter into any merger, consolidation, business combination, recapitalization, reorganization or other extraordinary business transaction involving or otherwise relating to the Company or Morley and Company; or

(ii) participate in any discussions, conversations, negotiations and other communications regarding, or furnish to any other Person any information with respect to, or otherwise cooperate in any way with, assist or participate in, or facilitate or encourage any effort or attempt by any other Person to seek to do any of the foregoing;

provided, however, that nothing in this Section 5 shall prevent the Shareholder, in his, her or its capacity as a director or executive officer of the Company from engaging in any activity permitted pursuant to Section 5.02 of the Merger Agreement. Each Shareholder shall, and shall direct or cause his, her or its representatives and agents to, immediately cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Persons conducted heretofore with respect to any of the foregoing. The Company shall notify Parent promptly if any such proposal or offer, or any inquiry or other contact with any Person with respect thereto, is made and shall, in any such notice to Parent, indicate in reasonable detail the identity of the Person making such proposal, offer, inquiry or contact and the terms and conditions of such proposal, offer, inquiry or other contact. The Company agrees not to, and to cause the Company and Morley and Company not to, without the prior written consent of Parent, release any Person from, or waive any provision of, any confidentiality or standstill agreement to which the Company or Morley and Company is a party.

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Covered Shares or interest in such Covered Shares subject to all of the terms and provisions of this Agreement.

9. No Control. Nothing contained in this Agreement shall give the Parent the right to control or direct Company or Company’s operations prior to the consummation of the Merger.

10. Amendment. This Agreement may not be amended except by an instrument in writing signed by both of the parties hereto.

(a) if to the Shareholder:

c/o Taro Pharmaceuticals U.S.A., Inc.

3 Skyline Drive

Hawthorne, NY 10532

Attention: Barrie Levitt

Facsimile: (914) 345-9719 and (914) 345-9825

with a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom LLP

4 Times Square

New York, N.Y. 10036

Attn: Jeffrey W. Tindell

Facsimile: (917) 777-3380

(b) if to the Parent:

c/o Sun Pharmaceutical Industries Ltd.

17/B, Mahal Industrial Estate,

Mahakali Caves Road,

Andheri (East), Mumbai 400 093 India

Facsimile: (91-22) 6645 5685

with a copy (which shall not constitute notice) to:

Shearman & Sterling LLP

599 Lexington Avenue

New York, N.Y. 10022

Attn: Peter D. Lyons

Facsimile: (212) 848-7666

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and an additional copy (which shall not constitute notice) to:

Naschitz, Brandes & Co.

5 Tuval Street

Tel-Aviv 67897

Israel

Attn: Aaron M. Lampert

Facsimile: +972-(3)-623-5051

15. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, disregarding the provisions concerning internal conflict of laws. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any New York state or federal court sitting in The City of New York.

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NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 16.

17. Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

SHAREHOLDER

By:

Name:

Title:

PARENT

By:

Name:

Title:

Schedule I

[NAME OF SHAREHOLDER]

Name	Number of Shares	Signatories
[NAME OF SHAREHOLDER] - Direct
[NAME OF SHAREHOLDER] - Exercisable options
[NAME OF AFFILIATE]

Total:

Company Shares Outstanding:
Percentage Ownership:	%

EX-99.8 11 ex99-8.htm

Schedule 99.8

To:

Alkaloida Chemical Company Exclusive Group Ltd.

4440 Tiszavasvari

Kabat Janos u 29

Hungary

Date: May 18, 2007

OPTION LETTER AGREEMENT

Re: Share Purchase Agreement

Reference is made to the Share Purchase Agreement (the “SPA”), dated May 18, 2007 (the “SPA”), between Taro Pharmaceutical Industries Ltd. (the “Company”) and Alkaloida Chemical Company Exclusive Group Ltd. (the “Purchaser”). Capitalized terms not defined herein shall have the same meanings set forth in the SPA.

1. The Options. (a) Taro Development Corporation (“TDC”) hereby grants the Purchaser (the “Option Holder”) the option to acquire TDC pursuant to a merger whereby a new wholly-owned subsidiary of the Option Holder would merge into TDC (the “TDC Option”) for a total merger, consideration of U.S.$18,088,275, (b) Barrie Levitt, Tal Levitt and Dan Moros (the “Grantors”) hereby grant to the Option Holder the option to acquire 2,405,925 Ordinary Shares held by the Grantors at a purchase price of U.S.$7.75 per Ordinary Share (the “Ordinary Share Option”) and (c) Barrie Levitt grants the Option Holder an option to acquire all Class B Common Stock of Morley and Company, Inc. held by Barrie Levitt for no consideration (the “Morley Option” and together with the TDC Option and the Ordinary Share Option, the “Options”), in each case upon the terms and conditions herein.

2. Exercise of the Options. Each of the Options referred to above may be exercised by the Option Holders at any time during the Option Exercise Period (as defined below) if the agreement of merger (the “Merger Agreement”) entered into by Purchaser, the Company and the other parties named therein dated the date hereof terminates for any reason other than pursuant to Section 8.01(h) of the Merger Agreement, except that if the Merger Agreement is terminated pursuant to Section 8.1(i) of the Merger Agreement, then the Option will not be exercisable unless the transaction contemplated by the Specified Definitive Acquisition Agreement (as defined in the Merger Agreement) is not consummated. If the Option Holder elects to exercise any Option in accordance with the terms herein, it must exercise all of the Options.

3. Option Exercise Period. The Options may be exercised by the Option Holder within 30 days after termination of the Merger Agreement as described in paragraph 2 above, except that if the Merger Agreement is terminated pursuant to Section 8.1(i) of the Merger Agreement, then the Options may only be exercised within 30 days after the termination of the Specified Definitive Acquisition Agreement (the “Option Exercise Period”).

4. Tender Offer. In the event the Option Holder elects to exercise the Options in accordance with the terms herein, the Option Holder will promptly thereafter commence a tender offer (the “Tender Offer”) to acquire any Ordinary Shares, other than those acquired pursuant to the Ordinary Share Option, at a purchase price of U.S.$7.75 per share. The transactions contemplated by the Options will be consummated contemporaneously with the expiration of the Tender Offer. The Tender Offer shall expire not later than 25 business days after its commencement and, if any condition to the Tender Offer is not satisfied or waived, the Options provided for herein shall immediately terminate; provided, however, that the Tender Offer period may be extended as permitted by applicable law or in order to obtain any Governmental Authority approval necessary to consummate the transactions contemplated by the Options or the Tender Offer.

5. Shareholder Undertakings. In the event the Option Holder elects to exercise the Options in accordance with the terms herein, the Grantors and Jacob Levitt shall vote all securities of TDC beneficially owned by them in favor of the approval of the transactions contemplated by the TDC Option.

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6. Representations of TDC and the Grantors. (a) TDC has the corporate right, power and authority to enter into and to perform its obligations under this letter agreement and each of the Grantors and Jacob Levitt have the right, power and authority to enter into and to perform their respective obligations under this letter agreement. The execution, delivery and performance by TDC of this Agreement have been duly authorized by all necessary corporate action on the part of TDC.

(b) This letter agreement has been duly and validly executed and delivered by TDC, the Grantors and Jacob Levitt and constitutes the legal, valid and binding obligation of TDC, the Grantors and Jacob Levitt enforceable against them in accordance with its terms, subject to: (a) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (b) rules of law governing specific performance, injunctive relief and other equitable remedies.

7. Governmental Authority Approvals. If in the written opinion of counsel to TDC reasonably acceptable to the Option Holder, approval of any Governmental Authority is required in order to consummate the transactions contemplated by the Options, such transactions may be deferred until such time as approval of such Governmental Authority is obtained or is no longer required. Furthermore, TDC and the Grantors will use their reasonable best efforts to obtain any Governmental Authority approvals required to permit the Option Holder to consummate the transactions contemplated by the Options as promptly as reasonably practicable following the exercise of the Options by the Option Holder.

8. Covenants. (a) TDC agrees that, until the expiration of the Option Exercise Period, it shall not make or solicit any transfer or sale of, or create, incur or assume any encumbrance or lien with respect to, any share capital of TDC, any Ordinary Shares held by TDC, any Class A Common Stock of Morley and Company, Inc. held by TDC or any other TDC assets.

(b) The Grantors and Jacob Levitt agree that, until the expiration of the Option Exercise Period, none of them shall make or solicit any transfer or sale of, or create, incur or assume any encumbrance or lien with respect to, any of the Ordinary Shares subject to the Ordinary Shares Option or any capital stock of TDC held by them.

(c) Barrie Levitt agrees that, until the expiration of the Option Exercise Period, he shall not make or solicit any transfer or sale of, or create, incur or assume any encumbrance or lien with respect to, any of the Class B Common Stock of Morley and Company, Inc. held by him.

9. Assignment. The Option Holder may assign this letter agreement or any of its rights and obligations hereunder to one or more of Affiliates of Sun Pharmaceutical Industries Ltd. without the consent of TDC, the Grantors and Jacob Levitt.

10. Governing Law. The governing law of this letter agreement shall be the substantive law of the State of New York, without giving effect to rules of conflicts of laws. All actions and proceedings arising out of or relating to this letter agreement shall be heard and determined exclusively in any New York state or federal court sitting in The City of New York.

[Signatures on following page]

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Sincerely,

TARO DEVELOPMENT CORPORATION


By:	/s/ Barrie Levitt

Name: Barrie Levitt

Title: President

BARRIE LEVITT


By:	/s/ Barrie Levitt

TAL LEVITT


By:	/s/ Tal Levitt

DAN MOROS


By:	/s/ Dan Moros

JACOB LEVITT


By:	/s/ Jacob Levitt

ACCEPTED AND AGREED:

ALKALOIDA CHEMICAL COMPANY EXCLUSIVE GROUP LTD.


By:	/s/ Sudhir Valia

Name: Sudhir Valia

Title: Director

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EX-99.9 12 ex99-9.htm

Schedule 99.9

Agreement of Joint Filing

The undersigned hereby agree that the Statement on Schedule 13D, dated July 2, 2007 (“Statement”), with respect to the Ordinary Shares par value NIS 0.0001 per share, of Taro Pharmaceutical Industries Ltd. is, and any amendments thereto executed by each of us shall be, filed on behalf of each of us pursuant to and in accordance with the provisions of Rule 13d 1(k)(1) under the Securities and Exchange Act of 1934, as amended, and that this Agreement shall be included as an Exhibit to the Schedule 13D and each such amendment. Each of the undersigned agrees to be responsible for the timely filing of the Schedule 13D and any amendments thereto, and for the completeness and accuracy of the information concerning itself contained therein. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the 2 day of July, 2007.

SUN PHARMACEUTICAL INDUSTRIES
LTD.

/s/ Dilip S. Shanghvi

Signature

Mr. Dilip S. Shanghvi
Chairman & Managing Director

Name/Title

SUN PHARMA GLOBAL, INC. (BVI).

/s/ Sunil Gandhi

Signature

Mr. Sunil Gandhi
Director

Name/Title

ALKALOIDA CHEMICAL COMPANY
EXCLUSIVE GROUP LIMITED.

/s/ Harin Mehta

Signature

Mr. Harin Mehta
Director

Name/Title

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