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Elite Pharmaceuticals, Inc.
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THE ELITE VALUE COMMITTEE
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THE ELITE VALUE COMMITTEE
575 Lexington Avenue
New York, New York 10022
Tel (212) 572-0763
Fax (212) 572-0760
September 25, 2002
Dear Fellow Elite Stockholder:
My name is Harris Freedman. I write to you on behalf of The Elite
Value Committee (the "Committee"), which is comprised of me, Sharon Will and
Michael H. Freedman. We beneficially own approximately 8.6% of Elite
Pharmaceuticals, Inc. ("Elite") outstanding common stock and we seek your vote
and consent in favor of our election to the Board of Directors of Elite. We
thank the many stockholders who have already mailed the Committee's consent card
for your strong support.
As a group, we do not seek permanent company positions. If elected,
we intend to hire management support to work alongside Dr. Atul Mehta, Elite's
President, CEO and Chairman. We are prepared to add new directors with industry
experience at the earliest possible opportunity, although we have not identified
any persons at this date. We bring over 30 years of business experience in the
public markets to bear in instituting our goals. We believe that the current
Board has limited business experience in these areas, and that Elite has
suffered as a result.
The Committee nominees are seeking to enhance stockholder value by
appointing a professional management team. The overall goals of the nominees and
this professional management team will be to (a) enter into a productive
investment banking agreement with a nationally recognized investment banking
firm, (b) review and consummate material business agreements, such as licensing
and marketing agreements, and (c) extend the expiration date of the outstanding
Class A warrants.
September 25, 2002
Page 2
The Board has recently delivered to you several letters and a
consent revocation statement. We will not waste precious resources in responding
to the many venomous, self-serving statements contained in those materials. We
call your attention to several points:
o What's good for the goose is apparently not good for the
gander. According to Elite's public filings, in December 2000,
the Board extended the expiration date of 425,000 options held
by Dr. Mehta for an additional five years. Why were Dr. Mehta's
options extended, while warrants held by Elite's loyal
investors are not? To make matters worse, Dr. Mehta's options
were "in the money." When the Board extended the options on
December 15, 2000, the stock closed at $7.50, while the
exercise price was $7.00. Had Dr. Mehta been forced to
exercise, the Company would have received $2.975 million in
proceeds. We question the wisdom and fairness of directors who
extend an employee's "in the money" warrants, while refusing to
extend "out of the money" warrants for public warrantholders.
o Elite's public filings illustrate a second board decision that
has favored Dr. Mehta. The Board purchased 20,214 common stock
options from Dr. Mehta in January 2001 for $83,896. The
exercise price of these options was $2.00 per share. By buying
the options directly from Dr. Mehta, Elite lost the right to
receive $40,428 in cash on their exercise, plus it incurred a
cost of $83,896 to buy shares from Dr. Mehta. According to SEC
records, Dr. Mehta has never filed a Form 4 reporting this
transaction, even though Elite's Form 10-K reported that all
such forms had been filed. Does Dr. Mehta have something to
hide?
September 25, 2002
Page 3
o Extension of the expiration date of the Class A warrants will
result in a non-cash charge to Elite's financial statements.
This charge will not reduce Elite's cash balance and, we
believe, is irrelevant when weighed against potential future
proceeds, approximately $9,000,000, from the exercise of the
warrants. Elite continually misrepresents this point in its
materials, suggesting that the "charge" will deplete Elite's
assets. Why not extend the expiration date of the warrants and
obtain potentially $9,000,000 in proceeds, if the Company's
cash will not be depleted?
o In fiscal 2002, the Board granted Dr. Mehta a $30,000 year-end
bonus in fiscal 2002. Elite has not explained what, if any,
performance objectives Dr. Mehta achieved to receive this
bonus. Considering Elite's declining stock price, Dr. Mehta's
$272,855 salary, as well as his five-year contract, we question
the wisdom of granting any bonus. If our nominees are elected,
they will ensure that any bonus is tied to performance.
Shortly after we began this process, Elite instituted costly
litigation against the Committee's nominees. We believe Elite's suit is without
merit and is merely a tactical device to deny the Committee its rights as
stockholders to participate in corporate governance. Although our resources are
limited as compared to Elite's, we will not be silenced. If you think Elite is
wasting your money, speak up and tell them so.
The Committee nominees represent your interests. Our financial stake
in Elite can only improve if performance improves and the financial community
becomes aware of Elite's potential. While Elite management is spending your
September 25, 2002
Page 4
money in an attempt to maintain control, we are spending our own money in order
to implement a new course for Elite that, we believe, will enhance its value for
all stockholders.
WE INVESTED IN ELITE TO MAKE A PROFIT. WE PRESUME YOU DID AS WELL.
WE STRONGLY RECOMMEND THAT YOU VOTE FOR THE COMMITTEE NOMINEES BY SIGNING,
DATING AND RETURNING THE ENCLOSED WHITE CONSENT CARD TO BEST PROTECT YOUR
INTEREST AS AN ELITE STOCKHOLDER.
Vote the WHITE consent card AND RETURN IT BY OCTOBER 2, 2002, even
if you have already voted a previous WHITE consent card. Do not return any
consent revocation card sent to you by management. If you have already sent
management's blue consent revocation card to the Elite Board, you may revoke
that consent revocation card by signing, dating and returning the enclosed WHITE
consent card. The latest dated consent card is the only one that counts.
If you have any questions or require any assistance with your vote
please contact me, or Sharon Will at the address and phone numbers below.
Thank you for your support,
/s/ Harris Freedman
Harris Freedman
On behalf of The Elite Value Committee
HARRIS FREEDMAN OR SHARON WILL
575 LEXINGTON AVENUE 9 PROSPECT HILL ROAD EXT.
NEW YORK, NY 10022 PINE PLAINS, NY 12567
TEL. (212) 572-0763 TEL. (518) 398-7830
FAX (212) 572-0760 FAX (518) 398-6369