NOTICE OF PENDENCY OF CLASS ACTION, PROPOSED SETTLEMENT OF SHAREHOLDER LITIGATION AND SETTLEMENT FAIRNESS HEARING

Transcription

1 NOTICE OF PENDENCY OF CLASS ACTION, PROPOSED SETTLEMENT OF SHAREHOLDER LITIGATION AND SETTLEMENT FAIRNESS HEARING If You Were a DUSA Pharmaceuticals, Inc. Shareholder Who Was Entitled to Tender Your Shares as Part of the Merger with Caraco Acquisition Corporation A Class Action Settlement May Affect Your Rights Please read this notice (this Notice ) carefully. This Notice is about a proposed settlement of a lawsuit and contains important information. Your rights will be affected by the proposed settlement described in this Notice. What is the purpose of this Notice? The purpose of this Notice is to inform you of a proposed settlement (the Settlement ) of a class action lawsuit in the Superior Court of New Jersey, Chancery Division, Mercer County (the Court ). The class action lawsuit is about the merger between DUSA Pharmaceuticals, Inc. ( DUSA or the Company ) and Caraco Acquisition Corporation ( Caraco ) for $8 cash per share that was announced on November 8, 2012 (the Merger ) and was closed on December 20, 2012 (the Action ). The Settlement is on behalf of all shareholders of DUSA between November 8, 2012 and December 20, 2012, except for the Defendants (as defined below) and their affiliates. These shareholders are called the Class. If you are a member of the Class, this Notice will inform you of how, if you so choose, you may appear in the lawsuit or object to the Settlement. The following recitation does not constitute findings of the Court and should not be understood as an expression of any opinion of the Court as to the merits of any claims or defenses by any of the parties. It is based on statements of the parties and is sent for the sole purpose of informing you of the existence of the Action and of a hearing on the Settlement so that you may make appropriate decisions as to steps you may, or may not, wish to take in relation to the Action or the Settlement. What is the Lawsuit about? Plaintiffs Carl Bello, Kenneth A. Stein, Elizabeth Hagan, Harpal Dharna, and Edward Bourne (together, the Plaintiffs ) each filed lawsuits in the Court about the Merger between DUSA and Caraco. Plaintiffs sued DUSA and members of the DUSA Board of Directors (Robert F. Doman, Jay M. Haft, David M. Bartash, Alfred Altomari, Paul J. Hondros, Alexander W. Casdin, and Magnus Moliteus) (the Board or Board of Directors ), and Caraco. The people and companies sued in the lawsuits are called the Defendants. The lawsuits are called: Stein v. DUSA Pharmaceuticals. Inc., et al., Docket No. C-97-12; Hagan v. DUSA Pharmaceuticals, Inc., et al., Docket No. C-96-12; Dharna v. DUSA Pharmaceuticals, Inc., et al., Docket No. C-98-12; Bello v. Doman, et al., Docket No. C (formerly Docket No. MER- L ); Bourne v. DUSA Pharmaceuticals, Inc., et al., Docket No. C (together, the Lawsuits ). 1 The Lawsuits claimed that DUSA did not properly negotiate on behalf of its shareholders to get the best price for the Company in connection with the Merger. The Lawsuits also claimed that the document DUSA filed about the Merger with the U.S. Securities and Exchange Commission (the SEC ), called the Solicitation/Recommendation Statement on Schedule 14D-9 (the 14D-9 ), did not provide enough information to shareholders to allow them to make an informed decision about whether or not to tender their shares to Caraco. Specifically, the Lawsuits alleged that the 14D-9 left out important information about the process of selling the Company and the financial information the Company relied upon in agreeing to the Merger including information relating to the analysis performed by Leerink Swann LLC ( Leerink ), DUSA s financial advisor in relation to the Merger. The Lawsuits claimed this information was material to shareholders and needed to be disclosed. At all times the Defendants denied - and continue to deny - that they committed or aided or abetted in the commission of any unlawful or wrongful act alleged in the Lawsuits, and maintain that they diligently and scrupulously complied with their fiduciary duties, as well as their duties under the federal securities laws, including the disclosure set forth in the 14D-9. The Defendants agreed to quickly provide over 30,000 pages of non-public information to the Plaintiffs in connection with the Lawsuits. After reviewing these non-public documents, the Plaintiffs also asked in-person questions to a number of parties in what is called a deposition to learn more about the Merger. The Plaintiffs deposed DUSA s CEO, Robert Doman, DUSA s Chairman of the Board of Directors, Jay Haft, and Leerink Managing Director, Daniel Lepanto. Through these documents and depositions the Plaintiffs learned essential information about the claims in the Lawsuits. The Plaintiffs also hired their own financial expert to assist in analyzing the public and non-public information to determine the fairness of the Merger price of $8 cash per share. The Plaintiffs then filed a motion to stop the Merger, called a motion for temporary restraints. The Defendants filed an opposition to the Plaintiffs motion for temporary restraints. The Court did not rule on these motions. 1 An action was also commenced in the Superior Court Department of the Trial Court, Suffolk County, Massachusetts captioned Jakubovic v. Altomari, et al., Index No (the Boston Action ). The Boston Action will also be dismissed with prejudice as part of the settlement of the Lawsuit.

2 With all of the public and non-public information, as well as analysis from its expert, the Plaintiffs were able to make an informed decision about settling the Lawsuits with the Defendants. As a result, the lawyers for the Plaintiffs and Defendants negotiated the Settlement to provide additional information to shareholders. The Plaintiffs and the Defendants agreed to the Settlement terms that provided DUSA shareholders with additional information in the form of an amendment to the 14D-9 on December 13, The amendment provided additional information about the process undertaken in negotiating the Merger and the analysis of the fairness of the price. After the Plaintiffs and the Defendants agreed to a Memorandum of Understanding that provided a description of the Settlement, they later agreed to a more detailed document called a Stipulation that described all the rights of the parties in the Settlement. The Stipulation described the steps that were taken in the Lawsuits, the terms of the Settlement and the legal claims that the Plaintiffs and the Class have agreed to release in exchange for the Settlement. Why did the Parties agree to settle the Lawsuits? The Plaintiffs decided to agree to the Settlement because, after they reviewed the non-public documents, deposed the witnesses and met with their experts, they determined that proving damages after the Merger would be difficult because of the terms of the Company s charter and the advice that the Plaintiffs received from their experts. The Plaintiffs also believed it was more likely that the Court would leave the decision of whether to tender their shares to the Company s shareholders. After consideration of the strengths and weaknesses of their claims, the lawyers for the Plaintiffs determined that the Settlement providing shareholders with additional information (as explained below) is, in their opinion, fair, reasonable, adequate, and in the best interests of the Plaintiffs and the Class because it empowered the DUSA shareholders to make a fully informed decision on whether or not to tender their shares. The Defendants denied, and continue to deny, that they committed or aided or abetted in the commission of any unlawful or wrongful act alleged in the Lawsuits and maintained, and continue to maintain, that they diligently and scrupulously complied with their fiduciary duties, as well as their duties under the federal securities laws. The Defendants are entering into the Settlement solely because the Settlement will eliminate the burden, expense and risk of litigation. What are the terms of the Settlement? The Settlement requires DUSA to provide more information to shareholders about the Merger. Specifically, the Defendants agreed to provide, and did provide, additional information to shareholders in an amendment to the 14D-9, which was filed with the SEC on December 13, 2012, and is available at: The additional information included the following: Revised disclosure regarding the background of the merger process (new/changed text underlined,*** indicates sections where no changes were made): As part of the ongoing evaluation of the Company s business, the Board of Directors and senior management periodically review and assess different strategic alternatives in order to enhance shareholder value and the Company s financial position. As part of this process, from time to time, the Board considers and discusses with members of senior management different strategic opportunities, including potential business acquisitions, licensing opportunities and business combinations. Also, in the ordinary course of business, senior management engages in business development discussions with potential targets. In addition, in connection with the clinical development and formulation development of a next generation Levulan product, the Board and members of senior management discuss strategic direction in the event that these activities were either successful or unsuccessful. The following five members of DUSA s management team (or a subset thereof) were present at the various meetings, presentations or discussions with potential partners: Robert F. Doman, President and Chief Executive Officer; William F. O Dell, Executive Vice President, Sales & Marketing; Richard C. Christopher, Vice President, Finance and Chief Financial Officer; Mark C. Carota, Vice President, Operations; and Scott L. Lundahl, Vice-President, Regulatory Affairs and Intellectual Property. On February 14, 2012, representatives of Leerink met with members of management of the Company during which Leerink presented various potential acquisition targets and strategic partners. In total Leerink presented twentyeight (28) potential acquisition targets and target products and thirty (30) potential strategic partners. Leerink selected the 30 potential strategic partners based on a number of factors including, but not limited to, strategic fit, capital resources, acquisition history and stated interest in dermatology. On October 4, 2012, representatives of Leerink held a telephone conference with management of Sun Pharma and informed management of Sun Pharma that, in accordance with Sun Pharma s request for additional time, the October 5, 2012 deadline was being extended for one week until October 12, 2012 and that Sun Pharma should work toward revising the merger agreement with the additional time. 2

3 On November 5, 2012, Leerink at the direction of the Board provided Sun Pharma with a counter proposal to Sun Pharma s final offer initially submitted on October 12, 2012 to increase the share purchase price to $8.35 per share. Revised disclosure of Leerink s Selected Publicly Traded Companies Analysis (new/changed text underlined): The corporations and multiples that Leerink reviewed were the following: Company Enterprise 2012E Value/Revenue 2013E 2014E Enterprise Value/EBITDA 2012E 2013E 2014E Allergan, Inc. 4.7x 4.4x 4.1x 13.5x 12.2x 10.9x Valeant Pharmaceuticals International, Inc Actelion Ltd Cubist Pharmaceuticals, Inc Auxilium Pharmaceuticals, Inc NM 20.7 InterMune, Inc. NM NM NM NM Optimer Pharmaceuticals, Inc NM NM NM Cadence Pharmaceuticals, Inc NM NM 17.4 Obagi Medical Products, Inc Revised disclosure of Leerink s Selected Transactions Analysis (new/changed text underlined): Leerink analyzed certain publicly available information relating to 13 selected transactions announced in the pharmaceuticals industry since October The transactions Leerink reviewed were the following, referred to herein as the Selected Transactions. Target Acquiror Date Announced Premium to Stock Price: 1-Day Prior Transaction Value as a Multiple of: Revenue EBITDA LTM NTM LTM NTM Medicis Valeant 09/03/ % 3.5x 3.1x 15.3x 9.0x Fougera Pharmaceuticals Novartis 05/02/2012 NA 3.6 NA 8.8 NA Gateway Pharmaceuticals Medicis 11/18/2011 NA NA NA Elidel (Novartis) Meda 04/07/2011 NA 3.5 NA NA NA Q-Med Galderma 12/13/ % BioForm Medical Merz 01/04/ % NM NM Peplin LEO Pharma 09/03/ % NM NM NM NM Dow Pharma Valeant 12/10/2008 NA NA NA CORIA Laboratories Valeant 09/17/2008 NA NA NA Barrier Therapeutics Stiefel Laboratories 06/23/ % NM NM CollaGenex Pharmaceuticals Galderma 02/26/ % NM NM Bradley Pharmaceuticals Nycomed 10/30/ % Dermatology Product Lines (Shire) Almirall 10/08/2007 NA 4.0 NA NA NA 3

4 Revised disclosure of Management Projections (new/changed text underlined): Statement of Operations (NON-GAAP) In $ Millions PDT Drug Revenue $ PDT Device Revenue TOTAL REVENUES TOTAL COST OF PRODUCT SALES MARGIN $ Margin % 85% 86% 87% 88% 89% 89% 89% 89% Operating Costs Sales and Marketing $ Research and Development BASDI 2.1 Next Generation Levulan Formulation NA NA NA General and Administrative TOTAL OPERATING COSTS $ Income/(Loss) from Operations $ Other Income, Net $ Income/(Loss) from Continuing Operations $ NET INCOME/(LOSS) $ Free Cash Flow $ Will there be a Court hearing? The Court will hold a hearing to decide if the Settlement will be approved. The Settlement hearing (the Settlement Hearing ) will be held on October 4, 2013, at 10:00 a.m. in the Mercer County Courthouse, 175 South Broad Street, Trenton, New Jersey 08650, Courtroom 3A. The Court will decide: (a) if certification of the Class should be made final; (b) if the Settlement should be approved as fair, reasonable, adequate and in the best interests of the Class; (c) if an Order and Final Judgment should be entered pursuant to the Stipulation; (d) if any application for an award of attorneys fees and expenses should be granted; and (e) any such other matters as the Court may deem appropriate. The Court reserves the right to change the date of the Settlement Hearing without further notice to the Class. What are my legal rights? As a member of the Class you can either do nothing or object to the Settlement if you disagree with any part of it. You can also hire your own lawyer, at your own cost, if you choose. If you want to object to the Settlement or any request for an award of attorneys fees and expenses, you may appear in person or by your attorney at the Settlement Hearing and present evidence or arguments against the Settlement. If you choose to appear you must first submit a statement of your objection to the Court ten (10) business days before the Settlement Hearing. Specifically, you or your attorney must file with the Court and serve the lawyers listed below the following information: (a) a written notice of your intention to appear; (b) a statement of your objections to any matters before the Court; and (c) the grounds for your objections and the reasons that you want to appear and be heard, documentation evidencing membership in the Class, as well as all documents or writings you want the Court to consider. Such filings shall be filed with the Clerk of the Superior Court of New Jersey in Mercer County and served by e- filing, hand delivery or overnight mail on the following counsel: 4

5 GARDY & NOTIS, LLP Jennifer Sarnelli 560 Sylvan Avenue, Suite 3085 Englewood Cliffs, New Jersey Counsel for Plaintiffs FLASTER GREENBERG PC Jeffrey A. Cohen Commerce Center, 1810 Chapel Ave. West Cherry Hill, NJ Counsel for Caraco Defendants REED SMITH LLP Daniel Mateo Princeton Forrestal Village 136 Main Street Princeton, New Jersey Counsel for DUSA Defendants If you do not object to the Settlement in the manner described above you waive the right to object (including any right of appeal) and will be forever barred from raising such objection in this or any other action or proceeding. Any member of the Class who does not object to the Settlement or the request for an award of attorneys fees and expenses (described below) or to any other matter stated above need not do anything. Will this Settlement end the lawsuit? If the Court determines that the Settlement is fair, reasonable, adequate, and in the best interests of the Class, the parties to the Lawsuit will ask the Court to enter an Order and Final Judgment, which will, among other things: a. approve the Settlement as fair, reasonable, adequate and in the best interests of the Class and direct consummation of the Settlement in accordance with its terms and conditions; b. permanently certify the Class as a non-opt out class pursuant to New Jersey Court Rule 4.32 and designate the Plaintiffs; in the Lawsuits as the class representatives with the counsel for Plaintiffs as class counsel; c. determine that the requirements of the rules of the Court and due process have been satisfied in connection with this Notice; d. dismiss the Lawsuits with prejudice on the merits and grant the releases more fully described below; e. permanently bar and enjoin the Plaintiffs and all members of the Class from instituting, commencing or prosecuting any of the Released Claims (as defined below) against any of the Released Parties (as defined below); and f. award attorneys fees and expenses to the counsel for Plaintiffs. What am I giving up as part of the Settlement? As part of the Settlement, the Plaintiffs and the Class agree to release certain claims against the Defendants. That means the members of the Class cannot sue the Defendants for the claims that were made in the Lawsuits ever again, even if new facts are later discovered about these claims. The specific release language as stated in the Stipulation is as follows: The Plaintiffs agree that, pending final determination of whether the Settlement provided for herein should be approved, the Plaintiffs are barred and enjoined from commencing, prosecuting, instigating, or in any way participating in the commencement or prosecution of any action asserting any Released Claims (as defined below), either directly, representatively, derivatively, or in any other capacity, against any of the Released Parties. The Plaintiffs in the Actions hereby consent to the full and complete discharge, dismissal with prejudice on the merits, settlement, and release of, and a permanent injunction barring, all known and unknown claims of every nature and description whatsoever, whether or not concealed or hidden, against the Defendants, Sun Pharma Global FZE, Sun Pharmaceutical Industries, Limited, Caraco Pharmaceutical Laboratories, Ltd., and each of their respective predecessors, successors, parents, subsidiaries, affiliates, agents, spouses and marital communities (including, without limitation, any investment bankers, accountants, insurers, reinsurers or attorneys and any past, present or future officers, directors and employees of the Defendants) (collectively, the Released Parties ) that have been or could have been asserted by Plaintiffs or any member of the Class, including class, individual or other claims, in state or federal court, based upon, arising from, or related to the claims or allegations in the Actions, including, but not limited to, claims or allegations based upon, arising from, or related to the proposed acquisition of DUSA by Caraco, as described above (the Proposed Acquisition ), the adequacy of the consideration paid or to be paid to the DUSA shareholders in connection with the Proposed Acquisition, the Defendants consideration of the Proposed Acquisition, and the adequacy of any disclosures or public filings (including the supplemental disclosures made in Exhibits A and B related to the Proposed Acquisition (collectively, the Released Claims ), provided, however, that the Released Claims shall not include any claims to enforce the Settlement. The Defendants and the Released Parties release the Plaintiffs, the Plaintiffs counsel, the Plaintiffs financial advisors and experts and the members of the Class from and of all known and unknown claims of every nature and description, based upon, arising from, or related to the institution, prosecution, settlement or resolution of the Actions, provided, however, that the Defendants and Released Parties shall retain the right to enforce the terms of the Stipulation. 5

6 The Released Parties who are not parties to the Settlement or the Stipulation are intended to be third-party beneficiaries of the Settlement and Stipulation for purposes of enforcing the release of the Released Claims. Each member of the Class covenants not to sue, and is barred from suing, any Defendant or other Released Person for any Released Claim. How will the Plaintiffs counsel be paid? If the Court approves the Settlement, counsel for Plaintiffs will ask the Court for an award of attorneys fees and expenses (the Fee Application ), in an amount not to exceed $420,000. Defendants have agreed not to oppose the Fee Application. Any fees and expenses awarded by the Court will be paid by the Defendants; you will not be responsible for any of the fees and expenses to the Plaintiffs Counsel. The Fee Application or any fee award may be considered separately from the Settlement and the Settlement is not contingent on the Fee Application. Any award to the Plaintiffs Counsel of attorneys fees and expenses by the Court will be in addition to the Settlement and will not reduce or in any way affect the benefits of the Settlement. What should I do if I was a beneficial owner of DUSA stock? Brokerage firms, banks and/or other persons or entities who held shares of the common stock of DUSA, that were eligible to be tendered as part of the Merger, for the benefit of others are requested to promptly send this Notice to all of their respective beneficial owners. If additional copies of the Notice are needed for forwarding to such beneficial owners, any requests for such copies may be made to DUSA Pharmaceuticals, Inc. Shareholders Litigation, c/o GCG, P.O. Box 10013, Dublin, OH Where can I get more information? The description of the Lawsuits and the Settlement in this Notice is only a summary. More detailed information about the Lawsuit and the Settlement is available in the documents that have been filed with the Court. PLEASE DO NOT WRITE OR CALL THE COURT. Questions or comments about the Settlement may be directed to Plaintiffs counsel as follows: GARDY & NOTIS, LLP Jennifer Sarnelli 560 Sylvan Avenue Englewood Cliffs, New Jersey AS ORDERED BY THE SUPERIOR COURT OF NEW JERSEY, CHANCERY DIVISION, MERCER COUNTY 6