SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No.)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
ELITE PHARMACEUTICALS, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing:
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1
[ELITE PHARMACEUTICALS LETTERHEAD]
February ____, 2005
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Elite Pharmaceuticals, Inc. (the "Company") to be held at 10:00 a.m., Monday,
March 22, 2005, at the offices of Reitler Brown & Rosenblatt LLC, 800 Third
Avenue, 21st Floor, New York, NY 10022.
This year you will be asked to consider the election of directors and
proposals (i) to approve the amendment of the Company's Stock Option Plan, (ii)
ratify the issuance of Common Stock Purchase Warrants to a consultant and
amendment of stock options of a former officer, and (ii) ratification of the
appointment of Miller, Ellin & Co., LLP as the Company's independent auditor.
The matters are explained more fully in the attached proxy statement, which you
are encouraged to read.
The Board of Directors recommends that you elect the directors
nominated by the Board and approve the proposals and urges you to return your
signed proxy card, or cards, at your earliest convenience, whether or not you
plan to attend the annual meeting in the accompanying business reply envelope so
that your shares will be represented at the annual meeting. This will not limit
your right to vote in person or attend the meeting.
Thank you for your continued interest in and support of your Company.
Very truly yours,
Bernard Berk
President and Chief Executive Officer
2
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
ELITE PHARMACEUTICALS, INC.
March 22, 2005
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Elite
Pharmaceuticals, Inc. (the "Company", "Elite", "us" or "we") will be held at the
offices of Reitler Brown & Rosenblatt LLC, 800 Third Avenue, 21st Floor, New
York, New York 10022, on March 22, 2005 at 10:00 a.m., to consider and act upon
the following:
1. The election of four directors to serve for a period of one year and
thereafter until their successors shall have been duly elected and shall
have qualified.
2. A proposal to approve the amendment of the Company's Stock Option Plan.
3. A proposal to ratify (a) the amendment of options previously granted to the
former President of the Company and (b) the grant to an independent
consultant of warrants to purchase 50,000 shares of Common Stock.
4. A proposal to ratify the appointment by the Board of Directors of Miller
Ellin & Co. LLP as auditor of the Company's financial statements for the
year ending March 31, 2005.
5. The transaction of such other business as may properly come before the
meeting or any adjournment thereof that were not known a reasonable time
before the solicitation.
The Board of Directors has fixed the close of business on February 15, 2005 as
the date for determining the stockholders of record entitled to receive notice
of, and to vote at, the Annual Meeting.
By Order of the Board of Directors
/s/ Mark I. Gittelman
Mark I. Gittelman
Secretary
Northvale, New Jersey
February __, 2005
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ELITE PHARMACEUTICALS, INC.
165 LUDLOW AVENUE
NORTHVALE, NEW JERSEY 07647
PROXY STATEMENT
Annual Meeting of Stockholders
To Be Held March 22, 2005
INTRODUCTION
This proxy statement is being furnished to stockholders of Elite
Pharmaceuticals, Inc. (the "Company", "Elite", "us" or "we") in connection with
a solicitation by the Board of Directors of the Company of proxies to be voted
at the Annual Meeting of Stockholders to be held at the offices of Reitler Brown
& Rosenblatt LLC, 800 Third Avenue, 21st Floor, New York, New York 10022. on
Tuesday, March 22, 2005, at 10:00 a.m. and any adjournments or postponements
thereof. At the meeting, the Board of Directors will propose that the Company's
stockholders elect four nominees, to the Board of Directors of the Company to
serve until the next annual meeting of stockholders to be held and until their
successors are elected and qualified, and proposals to (i) approve an amendment
to the Company's Stock Option Plan to increase the shares subject to the Plan
from 1,500,000 to 4,000,000, (ii) ratify an amendment of outstanding options
granted to the former President of the Company and the grant of warrants to an
independent consultant to purchase 50,000 shares of Common Stock, and (iii)
ratify the appointment by the Board of Directors of Miller Ellin & Co. LLP as
the Company's independent auditors for the year ending March 31, 2005, and (iv)
vote on such other matters as may lawfully come before the meeting.
STOCKHOLDERS ENTITLED TO VOTE
Only holders of record of the Company's common stock, par value $.01 per share
(the "Common Stock") and Series A Preferred Stock, par value $.01 per share (the
"Preferred Shares"), at the close of business on February 15, 2005 (the record
date fixed by the Board of Directors) will be entitled to receive notice of, and
to vote at, the Annual Meeting and at any adjournments or postponements thereof.
At the close of business on the record date, there were 15,649,014 shares of
Common Stock and 185,870 Preferred Shares outstanding and entitled to vote at
the Annual Meeting. Each share of Common Stock is entitled to one vote and each
Preferred Share is entitled to ten votes, with the holders of Common Stock and
Preferred Shares voting as one class for the election of directors and the
proposals, except that the Preferred Shares will be entitled to elect as a class
one director.
VOTING; REVOCATION OF PROXY; QUORUM AND VOTE REQUIRED
A form of proxy is enclosed for use at the Annual Meeting. Each proxy may be
revoked at any time before it is exercised by giving written notice to the
Secretary of the Annual Meeting, by submitting a duly executed, later-dated
proxy, or by attending the Annual Meeting and voting at the meeting. Attendance
at the Annual Meeting is not by itself sufficient to revoke your proxy. All
shares represented by valid proxies pursuant to this solicitation (and not
revoked before they are exercised) will be voted as specified in the form of
proxy. If the proxy is signed but no specification is given otherwise the shares
will be voted FOR the Board's nominees for election to the Board of Directors
and FOR each of the proposals referred to above.
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A majority of the shares outstanding on the record date, calculating for this
purpose each Preferred Share as ten shares, will constitute a quorum for
purposes of the Annual Meeting. For purposes of determining the votes cast with
respect to any matter presented for consideration at the Annual Meeting, only
those votes cast "for" or "against" are included. Abstentions and broker
non-votes are counted for the purpose of determining whether a quorum is present
at the Annual Meeting. A broker "non-vote" occurs when a nominee holding shares
of Common Stock for a beneficial owner does not vote on a particular proposal
because the nominee does not have discretionary voting power with respect to
that item and has not received instructions from the beneficial owner.
Accordingly, since the election of directors will be effected by a plurality
vote, abstentions and broker non-votes will not affect the outcome of the
election of directors. Since approval of each of the proposals with respect to
the amendment of the Company's Stock Option Plan, ratification of the amendment
of options and grant of warrants, and ratification of the appointment of the
independent auditors, requires the affirmative vote of a majority of the shares
cast in person or by proxy on the proposal, abstentions will have the same
effect as negative votes but broker non-votes will not affect the outcome.
Any stockholder who executes and delivers a proxy may revoke it at any time
before it is voted by delivering a written notice of such revocation to the
Secretary of the Company at the address of the Company set forth in this proxy
statement, by submitting a properly executed proxy bearing a later date, or by
appearing at the Annual Meeting and requesting the return of the proxy or by
voting in person. In accordance with applicable rules, boxes and designated
spaces are provided on the proxy card for stockholders to mark if they wish
either to vote for or withhold authority on the election of any of the Directors
and to vote for, against or abstain on each of the other proposals.
Stockholders vote at the Annual Meeting by casting ballots (in person or by
proxy) which are tabulated by a person who is appointed by the Board of
Directors before the Annual Meeting to serve as inspector of election at the
Annual Meeting and who has executed and verified an oath of office.
It is anticipated that this proxy statement, the enclosed proxy card and the
Annual Report to Stockholders for the year ended March 31, 2004 will be mailed
to the Company's stockholders on or about February [___], 2005.
COSTS AND METHOD OF SOLICITATION
Solicitation of proxies may be made by directors and officers of the Company by
mail, telephone, facsimile transmission or other electronic media and in person
for which they will receive no additional compensation. We will not solicit
proxies via the Internet, such as Internet chat rooms and/or posting on
websites. Solicitation of proxies may be made by directors, officers and regular
employees of Elite. The entire cost of soliciting proxies will be borne by the
Company. Upon request, the Company will reimburse the reasonable fees and
expenses of banks, brokers, custodians, nominees and fiduciaries for forwarding
proxy materials to, and obtaining authority to execute proxies from, beneficial
owners for whose accounts they hold shares of Common Stock.
PRINCIPAL OFFICE
The Company's principal office is located at 165 Ludlow Avenue, Northvale, New
Jersey 07647, and its telephone number is (201) 750-2646.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership, as of February 15, 2005, of shares of Common Stock and of
Preferred Shares of each stockholder of the Company known to the Company, based
upon such person's representations or publicly available filings, to own
beneficially more than 5% of the voting securities as of that date. Each
Preferred Share is entitled to ten votes. The Preferred Shares were issued in a
private placement effected by the Company in October 2004.
As used in the table below and elsewhere in this proxy statement, the term
beneficial ownership with respect to a security consists of sole or shared
voting power, including the power to vote or direct the vote, and/or sole or
shared investment power, including the power to dispose or direct the
disposition, with respect to the security through any contract, arrangement,
understanding, relationship, or otherwise, including a right to acquire such
power(s) during the next 60 days following the record date. Except as otherwise
indicated, the stockholder listed in the table have sole voting and investment
powers with respect to the shares indicated. Unless otherwise noted, beneficial
ownership consists of sole ownership, voting, and investment power with respect
to all Common Stock or Preferred Shares shown as beneficially owned by them.
Name and Address of Beneficial Owner Voting Shares Beneficially Owned *
------------------------------------ ----------------------------------
Jerome Belson 969,000 (1) 5.6%
495 Broadway
New York, New York 10012
-----------------
* Each Preferred Share is entitled to ten votes and votes with the shares of
Common Stock as one class, except that the Preferred Shares are also entitled to
elect one Director.
(1) Based on information provided by Mr. Belson for inclusion in the
Company's Prospectus dated December 28, 2004. Includes (i) 281,000
shares issuable upon exercise of warrants, (ii) 53,900 shares held by
Maxine Belson, wife of Jerome Belson, (iii) 63,300 shares held by other
members of his family, and (iv) 50,000 shares held by the Jerome Belson
Foundation.
ELECTION OF DIRECTORS
BOARD OF DIRECTORS' NOMINEES
The holders of Elite's Preferred Shares will elect one director and the holders
of Common Stock and Preferred Shares voting as one class will elect three
directors at the Annual Meeting, each of whom will be elected for a one-year
term. Unless a stockholder either indicates "withhold authority" on his proxy
card or indicates on his proxy that his shares should not be voted for certain
nominees, it is intended that the persons named in the proxy will vote for the
election of the persons named in the table below to serve until the next annual
meeting of stockholders and thereafter until their successors shall have been
duly elected and shall have qualified. Discretionary authority is also solicited
to vote for the election of a substitute for any of said nominees who, for any
reason presently unknown, cannot be or refuses to be a candidate for election.
The Company's by-laws provide that the Board of Directors will consist of not
less than three nor more than ten members, the actual number of directors to be
determined by the Board from time to time. The Board of Directors has set the
number of directors of the Board as of the Annual
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Meeting at four. On January 24, 2005, Mr. John A. Moore resigned as a Director
and Mr. Edward Neugeboren was elected a Director. Messrs. Harmon Aronson and
Eric L. Sichel, each of whom is currently a Director, have not been nominated
for reelection as Directors.
The nominees of the Board were selected by a Nominating Committee consisting of
Messrs. Neugeboren, Sichel and Aronson, all of whom at the time of their
selection were independent directors. In selecting each of the nominees for the
four directors to be elected at the Meeting the Committee identified and
evaluated the current Directors and their commitment to the policy of the
Company and each individual's qualifications and availability. The Committee
believes that a nominee for director of the Company should have an appropriate
level of sophistication, knowledge and understanding of the Company and the
industry, stockholder relations and finance and accounting for publicly held
companies. The Committee also considered the need to select a nominee who had
the appropriate experience and financial background who could qualify as an
"audit committee financial expert" within the meaning of the rules under the
Securities Exchange Act of 1934 and of the American Stock Exchange. The Company
did not engage any third party to assist in the process of identifying or
evaluating candidates. No candidate for nominee was put forward by stockholders,
other than Mr. Neugeboren who was the designee of Indigo Securities LLC, the
Placement Agent in the private placement of the Preferred Shares, as provided in
the Certificate of Designation for the Preferred Shares. The Company currently
does not have a process for considering candidates put forward by stockholders
other than those who are directors of the Company and the nominee proposed by
the holders of Preferred Shares.
The table below sets forth the names and ages, as of February 15, 2005, of each
of the nominees, and the period during which each such person has served on the
Board of Directors of the Company. Each of the nominees for director has agreed
to serve if elected and has consented to being named in this Proxy Statement.
NAME AND BUSINESS ADDRESS AGE DIRECTOR SINCE
Bernard Berk 56 2004
c/o Elite Pharmaceuticals Inc.,
165 Ludlow Avenue,
Northvale, NJ 07647
Edward Neugeboren* 36 2005
282 New Norwalk Road,
New Canaan, CT 06840
Mr. Barry Dash, Ph. D 73 --
168 Wood Road
Englewood Cliffs, NJ 07632
Melvin M. Van Woert, M.D. 74 --
Mount Sinai Medical Center
P.O. Box 1137
One Gustave L. Levy Place
New York, NY 10029-6576
* Mr.Neugeboren is the nominee for the Director to be elected by the
Preferred Shareholders
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The principal occupations and employment of each such person during the past
five years is set forth below. In each instance in which dates are not provided
in connection with a nominee's business experience, such nominee has held the
position indicated for at least the past five years.
Bernard Berk was appointed the Chief Executive Officer of the Company in June
2003 and a Director in February 2004. Mr. Berk has been the President and Chief
Executive Officer of Michael Andrews Corporation, a pharmaceutical management
consultant firm, since 1996. From 1994 until 1996, Mr. Berk was President and
Chief Executive Officer of Nale Pharmaceutical Corporation. From 1989 until
1994, Mr. Berk was Senior Vice President of Sales, Marketing and Business
Development of Par Pharmaceuticals, Inc. Mr. Berk holds a B.S. from New York
University.
Mr. Edward Neugeboren has been a Managing Partner of IndiGo Ventures LLC, an
investment-banking firm based in New York since January 2003. From May 2001 to
January 2004, Mr. Neugeboren was a managing partner of Third Ridge Capital
Management, LLC, a U.S. equity hedge fund. He was from October 2000 to April
2001 the Chief Administrative Officer of Soceron, an emerging Silicon Alley
based media software company and from 1988 to 2000 the Chief Administrative
Officer and director of Equity Research Operations at Lehman Brothers. He was
deputy director of Equity Research at UBS Warburg, formerly Warburg, Dillon
Read, from 1996 to 1998 and director of Equity Research Operations from 1995 to
1996. Mr. Neugeboren began his career in 1992 as an equity research analyst
covering the specialty pharmaceuticals industry, constituting generic drugs and
drug delivery, at Dillon Read & Co., Kidder, Peabody & Co. and Furman Selz, Inc.
Mr. Neugeboren is a Director of KineMed, Inc. a platform based drug development
and advanced medical diagnostics company based in San Francisco, California.
Dr. Barry Dash has been since 1995 President and Managing Member of Dash
Associates, L.L.C., an independent consultant to the pharmaceutical and health
and beauty aid industries. From 1983 to 1996 he was employed by American Home
Products Corporation, its Whitehall-Robins Healthcare Division initially as Vice
President of Scientific Affairs, then Senior Vice President of Scientific
Affairs and then Senior Vice President of Advanced Technologies during which
time he personally supervised six separate departments: Medical and Clinical
Affairs, Regulatory Affairs, Technical Affairs, Research and Development,
Analytical R&D and Quality Management/Q.C. He had previously been employed by
the Whitehall Robins Healthcare Division from 1960 to 1976, during which time he
served as Director of Product Development Research, Assistant Vice President of
Product Development and Vice President of Scientific Affairs. Dr. Dash had been
employed by J.B. Williams Company (Nabisco Brands, Inc.) from 1978 to1982,
during which time he helped introduce more than 14 national and test market
brands. From 1976 to1978 he was Vice President, Director of Laboratories of the
Consumer Products Division of American Can Company. He is a director of
GeoPharma, Inc. Dr. Dash holds a Ph.D. from the University of Florida and M.S.
and B.S. degrees from Columbia University at which he was Assistant Professor at
the College of Pharmaceutical Sciences from 1956 to 1960. He is a member of the
American Pharmaceutical Association, The American Association for the
Advancement of Science and the Society of Cosmetic Chemist.
Dr. Melvin Van Woert, a neurologist, has been, since 1974, a member of the staff
of Mount Sinai Medical Center where he has been a Professor of the Department of
Neurology and Pharmacology at Mount Sinai School of Medicine since 1978. Dr. Van
Woert had been a consultant for Neuropharmacological Drug Products to the Food
and Drug Administration from 1974 to 1980; Associate Editor for Journal of the
Neurological Sciences; Member of the Editorial Board of Journal of Clinical
Neurphamacology; and Medical Director of National Organization for Rare
Disorders for which he received in 1993 the Humanitarian Award. His other awards
include the
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U.S. Public Health Service Award for Exceptional Achievement in Orphan Products
Development and the National Myoclonus Foundation Award. He has authored and
co-authored more than 150 articles appearing in pharmacological, medical and
other professional journals or publications.
There is no family relationship between the persons nominated or chosen by the
Company to become directors.
LEGAL PROCEEDINGS
In April 2004, the Company and Dr. Atul Mehta, it's former President and Chief
Executive Officer, settled an action instituted by Dr. Mehta for alleged breach
of his employment contract. Pursuant to the settlement agreement as amended, the
Company paid Dr. Mehta $400,000 and agreed to pay certain of his benefits for a
two year period and made an $100,000 nonrefundable deposit to be applied to the
exercise price of a short term option he granted to the Company (which later
expired unexercised by the Company) to purchase the 1,362,200 shares of Common
Stock of the Company owned by him and his affiliates. Dr. Mehta agreed to the
relinquishment of any rights to the Company's intellectual properties. He agreed
to the reduction of his options to a balance of 770,000 shares and the Company
agreed to extend the expiration dates of the options to June 30, 2005 and to
modify the exercise prices of the options. (See "Proposal to Ratify the Grant
and Amendment of Warrants and Options" for an October 18, 2004 amendment of the
options). Dr. Mehta also agreed to certain non-disclosure and non-competition
covenants.
BOARD MEETINGS
The Board of Directors of the Company had nine meetings and acted by unanimous
written consent on other occasions during the fiscal year ended March 31, 2004.
No incumbent director attended fewer than 75% of the aggregate of the meetings
of the Board and its Audit Committee during that year.
COMMITTEES
The Board of Directors has an Audit Committee and a Nominating Committee. The
Board has no other standing committees. The members of the Nominating Committee
and the Audit Committee are Edward Neugeboren (who succeeded John Moore on
January 24, 2005), Harmon Aronson and Eric L. Sichel. The Audit Committee had
one meeting during the fiscal year ended March 31, 2004. The Company's Board of
Directors has adopted a written charter for the Audit Committee, a copy of which
was included as an appendix to the Company's proxy statement sent to
stockholders in connection with the annual meeting of stockholders held October
11, 2001.
The Company deems the members of its Audit Committee to be independent as
independence is defined in Section 121(A) of the American Stock Exchange Listing
Standards, as amended effective December 1, 2003. Both Mr. Sichel and Mr.
Neugeboren qualify as audit committee financial experts.
Audit Committee Report: The following is the Audit Committee Report made by all
its members. The Audit Committee reviewed and discussed the audited financial
statements with management. The Audit Committee discussed with the independent
auditors of the Company the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU 380), as modified or
supplemented. The Audit Committee received the written disclosures and the
letter from the independent accountants required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit
9
Committees), as modified or supplemented. The Audit Committee discussed with the
independent accountant the independent accountant's independence. Based upon the
foregoing review and discussions, the Audit Committee recommended to the Board
of Directors of the Company that the audited financial statements of the Company
be included in the Company's Annual Report on Form 10-K for the last fiscal year
ended March 31, 2004 as filed with the Commission.
The Nominating Committee is authorized to select the nominees of the Board of
Directors for election as directors. The nominees for election as Directors were
selected by the Committee and approved by the Board of Directors.
COMPENSATION OF DIRECTORS
Each non-affiliated director receives $2,000 as compensation for each meeting of
the Board of Directors attended.
The Company paid Mr. John A. Moore $46,875 for the period January 1, 2004
through May 12, 2004, the date of his resignation as Chairman, for his services
as Chairman of the Board based on the substantial duties the Board has assigned
to him, principally to assist the Chief Executive Officer in the management of
the Company's operations, and the time required to perform such duties.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE FOUR
NOMINEES OF THE BOARD OF DIRECTORS DESCRIBED ABOVE.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the knowledge of the Company, there was no person who, at any time during the
fiscal year ended March 31, 2004, was a director, officer, beneficial owner of
more than 10% of any class of equity securities of the Company registered
pursuant to Section 12 of the Securities Exchange Act of 1934, who failed to
file on a timely basis the reports required by Section 16(a) of the Securities
Exchange Act of 1934 during the fiscal year ended March 31, 2004.
EXECUTIVE OFFICERS
Our executive officers are Bernard Berk and Mark I. Gittelman.
Bernard Berk, age 56, was appointed Chief Executive Officer in June
2003 and a director in February 2004. See "Election of Directors - Board of
Directors' Nominees" for his business background.
The Company entered into a three-year employment agreement effective
July 23, 2003 with Mr. Berk providing for (i) his full time employment as Chief
Executive Officer at an annual base salary of $200,000, (ii) the grant to him of
options which vest immediately to purchase 300,000 shares of Common Stock at a
price of $2.01 per share, the closing share price on the American Stock Exchange
on the date of grant and (iii) the grant of options to purchase an additional
300,000 shares at the $2.01 per share to vest on consummation of a "strategic
transaction" while he is employed as Chief Executive Officer. The consummation
of such transaction will result in the increase of his base annual salary to
$310,140 effective with the consummation. A strategic transaction is defined as
any one of the following transactions provided
10
that the net value of the consideration to the Company or its stockholders
determined in good faith by the Board of Directors is at least $10,000,000: (i)
the sale of all or substantially all of the assets of the Company, (ii) a merger
or consolidation or business combination, or (iii) the sale by the Company of
debt or equity securities.
Either party upon notice may terminate Mr. Berk's employment except
that a termination by the Company without cause or because of his permanent
disability or a termination by him for cause will result in severance pay in the
form of the continuation of his base salary for the balance of the term or two
years, whichever is longer, less in the event of termination for permanent
disability the amount of payments under a disability insurance policy maintained
by the Company. The Company is also to continue to pay during the foregoing
period the premiums for life and disability insurance policies. Furthermore, in
the event that Mr. Berk terminates his employment following a "change of
control" event he is to receive, payable in 24 monthly installments, an amount
which will depend on the fair value of the consideration determined in good
faith by the Board of Directors received by the Company or stockholders from the
"change of control" event less related expenses ("Net Fair Value") -- $500,000
if the Net Fair Value is $10 million or less; the greater of $500,000 or twice
his then base annual salary, if the Net Fair Value is greater than $10,000,000
but not more than $20 million, or $1,000,000 if the Net Fair Value is greater
than $20,000,000. A "change of control" event is (i) a merger or consolidation
in which securities possessing more than 50% of the voting power is issued to
persons other than the holders of voting securities of the Company immediately
prior to the event, (ii) the sale, transfer or disposition of all or
substantially all the assets of the Company, or (iii) the sale by the Company of
securities to a third party.
The agreement contains Mr. Berk's non-competition covenant for a period
of one year from termination.
Mark I. Gittelman, age 45, CPA, the Chief Financial Officer, Secretary
and Treasurer of the Company, is the President of Gittelman & Co., P.C., an
accounting firm in Clifton, New Jersey. Prior to forming Gittelman & Co., P.C.
in 1984, he worked as a certified public accountant with the international
accounting firm of KPMG Peat Marwick, LLP. Mr. Gittelman holds a B.S. in
accounting from New York University and a Masters of Science in Taxation from
Farleigh Dickinson University. He is a Certified Public Accountant licensed in
New Jersey and New York, and is a member of the American Institute of Certified
Public Accountants ("AICPA"), and the New Jersey State and New York States
Societies of CPAs. Other than Elite Labs, no company with which Mr. Gittelman
was affiliated in the past was a parent, subsidiary or other affiliate of the
Company.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth the annual and long-term compensation for
services in all capacities to the Company for the three years ended March 31,
2004, awarded or paid to, or earned by Bernard Berk, our President and Chief
Executive Officer since June 2003 and our former President and Chief Executive
Officer, Dr. Atul M. Mehta. Dr. Mehta resigned as an employee and as a director
of Elite as of June 3, 2003. No other executive officer of the Company received
compensation exceeding $100,000 during those periods.
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SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------- ---------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------------------------------------- ---------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Fiscal Salary Bonus Other Restricted Securities LTIP All Other
Principal Year(1) ------ ----- Annual Stock Underlying Payouts Compensa-
Position ------- Compensa- Awards Options ------- tion
-------- tion(3) ------ ------- ----
-------
---------------- ------------ ------------ ---------- -------------- --------------- -------------- ---------- ---------------
Bernard Berk, 2003-04 $166,667 -- -- -- 300,000(4) -- --
President and
Chief
Executive
Officer
---------------- ------------ ------------ ---------- -------------- --------------- -------------- ---------- ---------------
Atul M. Mehta, 2003-04 $ 53,684 -- $ 3,040 -- --(5) -- --
Ph.D. 2002-03 $330,140 -- $ 3,040 -- -- -- --
former 2001-02 $272,855 -- $83,856 -- 50,000(6) -- --
President and
Chief
executive
Officer(2)
---------------- ------------ ------------ ---------- -------------- --------------- -------------- ---------- ---------------
(1) The Company's fiscal year begins on April 1 and ends on March 31.
The information is provided for each fiscal year beginning April 1.
(2) Dr. Mehta resigned as an employee and as a director of the Company
as of June 3, 2003.
(3) Other Annual Compensation represents use of a company car, premiums
paid by the Company for life insurance on Dr. Mehta's life for the benefit of
his wife and the purchase price of $80,856 for options acquired from Dr. Mehta.
(4) Does not include 300,000 options, which are exercisable only upon
occurrence of a "strategic transaction.
(5) See "Legal Proceedings" and "Proposal to Ratify the Grant and
Amendment of Warrants and Options" for April 2004 and October 2004 revisions of
options granted to him prior to April 1, 2001.
(6) By action on February 21, 2002, our Board of Directors corrected a
clerical error in options for 425,000 shares of our common stock granted to Dr.
Mehta. This correction did not result in any additional shares being subject to
options held by Dr. Mehta, any change in the exercise price or a change in any
other material terms.
OPTION GRANTS TO AND EXERCISED BY EXECUTIVE OFFICERS IN LAST FISCAL YEAR
Options granted to executive officers of the Company named in the Summary
Compensation Table during the fiscal year ended March 31, 2004 were as follows:
12
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZED VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
Name SHARES OPTIONS GRANTED EXERCISE EXPIRATION STOCK PRICE APPRECIATION
UNDERLYING TO EMPLOYEES IN PRICE DATE FOR OPTION TERM
OPTIONS FISCAL YEAR ----- ---- ---------------
GRANTED -----------
-------
5% 10%
-- ---
Bernard Berk 300,000(1) 41.4% $2.01 6/2/13 $982,223 $1,564,027
Atul M. Mehta(2) -- -- -- -- -- --
(1) Does not include options to purchase 300,000 shares at $2.01 per share,
which are exercisable only upon occurrence of a "strategic transaction". See
"Executive Officers".
(2) See "Legal Proceedings" and "Proposal to Ratify the Grant and Amendment of
Warrants and Options" for amendment of exercise prices and extension of
expiration dates of options to purchase 670,000 shares granted to him prior to
year ended March 31, 2002 while he was an executive officer.
No options were exercised by executive officers during the fiscal year
ended March 31, 2004.
SHARES VALUE NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
NAME EXERCISED REALIZED UNEXERCISED OPTIONS AT YEAR-END OPTIONS AT YEAR-END (1)
---- --------- -------- ------------------------------- -----------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Atul M. -0- -0- 270,000(3) -0- $0(3) --
Mehta (2) -0- -0- 100,000 -0- $0 --
-0- -0- 100,000 -0- $48,000 --
-0- -0- 100,000 -0- $98,000 --
-0- -0- 100,000 -0- $148,000 --
-0- -0- 100,000 -0- $198,000 --
Bernard
Berk (4) -0- -0- 300,000 300,000 $291,000 $291,000
(1) The dollar values are calculated by determining the difference between $2.98
per share, the fair market value of the common stock at March 31, 2004, and the
exercise price of the respective options.
(2) Dr. Mehta resigned as an officer/employee and director as of June 3, 2003.
(3) See "Proposal to Ratify the Grant and Amendment of Warrants and Options" for
October 21, 2004 amendment of these options terminating 100,000 options and
reducing the exercise price of 170,000 options to $2.34 per share.
(3) Mr. Berk entered the employ of the Company in June 2003.
13
OPTIONS AND WARRANTS
To comply with the rules of the American Stock Exchange (the "Amex") the
following amendments by our Board of Directors of the provisions of outstanding
options and warrants issued to officers, directors or employees of, or
consultants to, the Company were submitted to our stockholders for approval at
their meeting held on June 22, 2004 and were approved at the meeting.
On June 6, 2003 our Board of Directors reduced the exercise price of options to
purchase 30,000 shares of the Company's Common Stock granted on January 31, 2003
to each of the following persons, each of whom was then a Director: Messrs.
Harmon Aronson, Richard A. Brown, John P. deNeufville, John A. Moore, Donald S.
Pearson and Eric L. Sichel from $6.50 to $2.21 per share, which was 110% of the
closing per share sale price of the Common Stock on the American Stock Exchange
on the date of the amendment. These options vest as follows: 10,000 shares on
December 12, 2003, 10,000 shares on December 12, 2004 and 10,000 shares on
December 12, 2005. The options expire at the earlier to occur of: (1) January
31, 2013 or (2) the date one year after the optionee ceases to be a director of
or a consultant or advisor of the Company. On February 6, 2004, the Board of
Directors authorized a further amendment to all the options held by Messrs.
Brown (30,000 shares), deNeufville (55,000 shares) and Pearson (90,000 shares)
to extend their expiration date to a date two years following the June 22, 2004
Annual Meeting. On March 8, 2004 our Board of Directors amended those options
held by then Directors, which contained an exercise price greater than $2.21 to
reduce their exercise price to $2.21 per share.
Name Shares Subject Date of Original Expiration
---- To Amended Options Grant Exercise Price Date
------------------ ----- -------------- ----
Donald Pearson 30,000 7/1/99 $6.00 6/22/06
30,000 1/2/01 $6.50 6/22/06
Harmon Aronson 30,000 7/1/99 $6.00 9/1/09
30,000 1/2/01 $6.50 1/1/11
Eric Sichel 30,000 8/2/01 $10.00 8/2/11
On May 12, 2004 our Board of Director also authorized an amendment to the
expiration dates of options to purchase 330,000 shares held by Mr. Moore, of
which 30,000 options granted in January 2003 and exercisable at $2.21 have an
expiration date of January 13, 20133 and 300,000 options granted in June 2003
and exercisable at $2.01 per share have an expiration date of June 13, 2013.
Similar to the above amendment of the options held by Messrs Pearson, Aronson
and Sichel, the options will terminate on the earlier of their current
expiration date or a date two years after Mr. Moore ceases to be a director of
the Company.
On March 8, 2004, the Board of Directors confirmed the reduction to $2.21 per
share of the $3.31 per share exercise price of options of purchase 30,000 shares
granted on June 13, 2003 to each of three employees. Such options vest in three
equal annual installments commencing with the date of grant.
On February 6, 2004 the Board of Directors authorized the extension of the
expiration date from June 30, 2004 to November 30, 2005 of the outstanding Class
B Warrants to purchase an aggregate of 681,002 shares of our Common Stock at a
price of $5.00 per share. The Class B Warrants were originally issued as part of
units of shares of Common Stock and Class B Warrants in a private placement to a
group of investors. Included among the holders of the Class B Warrants is
Richard A. Brown, a Director at the time, who holds, along with his son and an
affiliated trust, an aggregate
14
of 156,250 Class B Warrants and Bridge Ventures Inc., a consultant to the
Company since December, 2003, which holds 25,000 Class B Warrants.
The Board of Directors authorized the foregoing amendments for the purposes of
hopefully generating additional funds through the exercise of the options or
warrants, and restoring a principal purpose or purposes of the original grants
of the options or warrants to officers, directors and employees, namely a
reasonable opportunity for the holder to acquire or increase a proprietary
interest in the Company and to restore a meaningful form of noncash
compensation.
The stockholders also approved the revision of options previously granted to Dr.
Atul Mehta pursuant to a settlement of a litigation with him as referred to
under "Legal Proceedings". The revision provides for the extension of the
expiration dates to June 13, 2005 of options previously issued to Dr. Mehta to
purchase 770,000 shares of Common Stock, including options with respect to
70,000 shares which had previously expired. The number and exercise prices are
as follows:
Number of Options Exercise Price
----------------- --------------
270,000* $10.00
100,000 3.00
100,000 2.50
100,000 2.00
100,000 1.50
100,000 1.00
---------
* Includes the 70,000 which had expired. See "Proposal to Ratify the Grant and
Amendment of Warrants and Options" for reduction of these options by 100,000 and
of the exercise price of the 170,000 balance to $2.34 per share.
SECURITY OWNERSHIP OF OUR DIRECTORS, NOMINEES
AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding beneficial
ownership of our Common Stock and Preferred Shares as of February 15, 2005 by
(i) each director, nominee for director, and executive officer named under the
Executive Officer Compensation Table and (iii) all executive officers and
directors as a group. On such date, we had 15,649,014 shares of Common Stock and
185,870 Preferred Shares outstanding. Shares not outstanding but deemed
beneficially owned by virtue of the right of any individual to acquire shares
within 60 days are treated as outstanding only when determining the amount and
percentage of common stock and of Preferred Stock owned by such individual. Each
person has sole voting and investment power with respect to the shares shown,
except as noted. Unless otherwise indicated, the address of the person named is
c/o Elite Pharmaceuticals, Inc., 165 Ludlow Avenue, Northvale, New Jersey 07647.
15
Name and Address Common Stock Preferred Shares
---------------- ------------ ----------------
Amount % ** Amount %
------ - ------ -
Bernard Berk, Director and Chief Executive -- --
Officer* 765,300 (1) 4.1
Edward Neugeboren* 188,094 (2) 1.1 2,032.5 1.1
Barry Dash* -- -- -- --
Melvin Van Woert* -- --
Eric L. Sichel 60,000 (3) * -- -- --
411 Highview Road
Englewood, NJ 07631
Harmon Aronson 70,000 (4) * -- -- --
26 Monterey Drive
Wayne, NJ 07470
Dr. Atul Mehta 670,000 (5) 4.1 -- --
c/o Katten Muchin Zavis Rosenman
575 Madison Avenue
New York, NY 10022
All Directors and Officers as a group (6) 1,105,625 (6) 6.0 2,032.5 1.0
* See "Election of Directors - Board of Directors Nominees" for his address
** Represents percentage of shares of Common Stock and Preferred Shares voting
as one class with each Preferred Share entitled to ten votes.
(1) Includes options to purchase 630,000 shares of Common Stock of which options
to purchase 300,000 shares are not exercisable until occurrence of a "strategic
event". See "Executive Officers"
(2) Includes 20,325 shares issuable upon conversion of the 2,032.5 Preferred
Shares and 147,363 issuable upon exercise of outstanding warrants; but does not
include 20,325 shares issuable upon conversion of 2,032.5 Preferred Shares and
20,325 shares issuable upon exercise of warrants owned by his father.
(3) Represents options to purchase 40,000 shares and 20,000 shares of Common
Stock owned as co-tenant with Dana Cernea.
(4) Represents shares of Common Stock issuable upon exercise of options.
(5) Represents shares of Common Stock issuable upon exercise of options.
(6) Includes options and warrants to purchase an aggregate of 940,000 shares and
20,325 shares issuable upon conversion of Preferred Shares.
Except as otherwise set forth, information on the stock ownership of
each person was provided to the Company by such person.
Other than the Stock Option Plan, the Company does not have any
compensation plans or arrangements benefiting employees or non-employees under
which equity securities of the Company are authorized for issuance in exchange
for consideration in the form of goods or services. See "Proposal to Amend Stock
Option Plan".
The Company is informed and believes that as of January 31, 2005, Cede
& Co. held [_____]shares of the Company's common stock as nominee for Depository
Trust Company, 55
16
Water Street, New York, New York 10004. It is our understanding that Cede & Co.
and Depository Trust Company both disclaim any beneficial ownership therein and
that such shares are held for the account of numerous other persons, no one of
whom is believed to beneficially own five percent or more of the common stock of
the Company.
COMPARATIVE STOCKHOLDER RETURN
The graph which follows compares the yearly percentage change in the
Company's cumulative total stockholder return on its common stock with the
cumulative total stockholder return of (1) all United States companies traded on
the American Stock Exchange (where the Company's common stock is now traded) and
(2) 51 companies traded on the American Stock Exchange which carry the Standard
Industrial Classification (SIC) code 283 (Pharmaceuticals). The graph was
prepared by the Center for Research in Security Prices at the University of
Chicago Graduate School of Business, Chicago, IL.
The Common Stock of the Company was traded on the NASDAQ
over-the-counter bulletin board from July 23, 1998 until February 24, 2000. The
Common Stock of the Company began trading on the American Stock Exchange on
February 24, 2000. The Company's fiscal year ends on March 31.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
ELITE PHARMACEUTICALS, INC.
Produced on 02/4/2004 including data to 03/31/2004
[THE FOLLOWING DATA APPEARED AS A LINE CHART IN THE PRINTED MATERIAL]
-------------------------------------------------------------------
Legend
Symbol Crsp Total Returns Index For: 03/2000 03/2001 03/2002 03/2003 03/2004
------ ----------------------------- ------- ------- ------- ------- -------
[Box] Elite Pharmaceuticals, Inc. 83.2 41.1 57.9 11.4 22.2
[Star] AMEX Stock Market (US Companies) 104.9 82.9 84.0 66.3 94.6
[Triangle] AMEX Stocks (SIC 2830-2839 US 81.9 48.0 33.8 18.8 37.4
Companies) Drugs
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 2/24/2000.
-------------------------------------------------------------------
Prepared by CRSP (www.crsp.uchicago.edu), Center for Research in Security
Prices, Graduate School of Business, The University of Chicago. Used with
permission.
17
ITEM 2. PROPOSAL TO AMEND STOCK OPTION PLAN
The Board of Directors in January 2005 approved, subject to
stockholders approval, an amendment to the Company's Stock Option Plan (the
"Plan") to increase the number of shares subject to the Plan from 1,500,000 to
4,000,000 shares. The Plan was approved by stockholders on June 22, 2004 as
proposed by the Board of Directors. The Plan authorizes the grant of options to
employees and directors of the Company or its subsidiaries and individuals
performing consulting services to the Company or a subsidiary.
As of February 15, 2005, there were outstanding options to purchase
2,377,050 shares, of which options to purchase 402,000 shares of Common Stock
were granted under the Plan; no options granted under the Plan have been
exercised.
Pursuant to the Plan, the Board on June 22, 2004 granted options to
purchase 220,900 shares of Common Stock at $2.34 per share options under the
Plan to current employees who held options with exercise prices higher than the
options to be granted; with the optionees surrendering the options containing
the higher exercise price. No options granted prior to the stockholder approval
in substitution of previously granted options was made to any officer or
director of the Company.
To the extent any of the options granted or to be granted under the
Plan expire or terminate without being exercised they may be subject to future
grants under the Plan.
The following table sets forth information regarding options previously
granted by the Company (exclusive of warrants previously sold along with shares
of Common Stock in private placements by the Company) and options, included in
the foregoing, granted under the Plan to each of the Company's executive
officers named under the Executive Officer Compensation Table under "Executive
Compensation", all current executive officers as a group, all current directors
who are not executive officers as a group and all employees other than executive
officers as a group:
Number of Number of Options
Stock Options Granted Under the
Name and Position Previously Granted* Plan*
----------------- ------------------- -----
Atul Mehta, former President and Chief Executive
Officer (1)................................................ 670,000(1) --
Bernard Berk .............................................. 630,000(2) 30,000
Executive Officer Group (2 persons)........................ 640,000 30,000
Non-Executive Directors Group (4 persons).................. 270,000 90,000
Non-Executive Officer Employee Group(13 persons)........... 403,050 282,000
------------------------
* Given effect to the cancellation of options upon the grant of a like number of
options granted under the Plan.
(1) See "Proposal to Ratify the Grant and Amendment of Warrants and
Options"
(2) The options include 300,000 options which may not be exercised
prior to the occurrence of a "strategic event". See "Executive Officers".
The Plan may not be amended to increase the maximum number of shares
which may be granted under the Plan (except under the anti-dilution provisions
contained therein) or to change the class of persons to whom options may be
granted without the affirmative vote of holders of the Company's Common Stock.
18
The Company believes that an increase to 4,000,000 shares in the number
authorized under the Plan is desirable in view of the recent private placement
of the Company's Preferred Shares and Common Stock Purchase Warrants resulting
in the increase by 10,826,091 shares of Common Stock issued upon conversion and
reserved for issuance upon conversion of the Preferred Shares and exercise of
the warrants of which 3,326,980 share were issued upon conversion of 332,698
Preferred Shares. In attracting or retaining employees, management personnel and
consultants, the options representing a portion of the equity of the Company has
diminished importance if it represents a decreased portion of the voting equity
of the Company. Accordingly, the Company believes the amendment will enhance its
efforts to attract and retain individuals with good ability to service the
Company, motivate their efforts and serve the business interests of the Company,
while reducing the cash payments which the Company would otherwise be required
to make to accomplish such purposes.
The last reported sale price of the Company's Common Stock (symbol ELI)
on the American Stock Exchange on February 18, 2005, was 4.30 per share. The
proceeds received by us upon the exercise of the stock options granted under the
Plan will be used for general corporate purposes.
FINANCIAL STATEMENT TREATMENT OF OPTIONS
Currently, the Company expenses the fair value of equity-based awards, such as
stock options and warrants, granted or modified after April 1, 2002 in
accordance with accounting principles generally accepted in the United States of
America. Modifications such as lowering the exercise prices or extending the
expiration dates could result in material additions to the Company's non-cash
expenses.
OPTIONS AUTHORIZED
The Plan permits the Company to grant both incentive stock options
("Incentive Stock Options" or "ISOs") within the meaning of Section 422 of the
Code, and other options which do not qualify as Incentive Stock Options (the
"Non-Qualified Options").
Unless earlier terminated by the Board of Directors, the Plan (but not
outstanding options) terminates on March 1, 2014, after which no further awards
may be granted under the Plan. The Plan is administered by the full Board of
Directors or, at the Board's discretion, by a committee of the Board consisting
of at least two persons who are "disinterested persons" defined under Rule
16b-2(c)(ii) under the Securities Exchange Act of 1934, as amended (the
"Committee"). As of February 15,2005, the Board has not appointed a Committee.
Recipients of options under the Plan ("Optionees") are selected by the
Board or the Committee. The Board or Committee determines the terms of each
option grant including (1) the purchase price of shares subject to options, (2)
the dates on which options become exercisable and (3) the expiration date of
each option (which may not exceed ten years from the date of grant). The minimum
per share purchase price of options granted under the Plan for Incentive Stock
Options is the fair market value (as defined in the Plan) or for Nonqualified
Options is 85% of Fair Market Value of one share of the Common Stock on the date
the option is granted.
Optionees have no voting, dividend or other rights as stockholders with
respect to shares of Common Stock covered by options prior to becoming the
holders of record of such shares. The purchase price upon the exercise of
options may be paid in cash, by certified bank or cashier's
19
check, by tendering stock held by the Optionee, as well as by cashless exercise
either through the surrender of other shares subject to the option or through a
broker. The total number of shares of Common Stock available under the Plan, and
the number of shares and per share exercise price under outstanding options will
be appropriately adjusted in the event of any reorganization, merger or
recapitalization of the Company or similar corporate event.
The Board of Directors may at any time terminate the Plan or from time
to time make such modifications or amendments to the Plan as it may deem
advisable and the Board or Committee may adjust, reduce, cancel and regrant an
unexercised option if the fair market value declines below the exercise price
except as may be required by any national stock exchange or national market
association on which the Common Stock is then listed. In no event may the Board,
without the approval of stockholders, amend the Plan to increase the maximum
number of shares of Common Stock for which options may be granted under the Plan
or change the class of persons eligible to receive options under the Plan.
Subject to limitations set forth in the Plan, the terms of option
agreements will be determined by the Board or Committee, and need not be uniform
among Optionees.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief discussion of
the Federal income tax consequences of transactions under the Plan. This
discussion is not intended to be exhaustive and does not describe state or local
tax consequences.
INCENTIVE OPTIONS
No taxable income is realized by the Optionee upon the grant or
exercise of an Incentive Option, except as noted below with respect to the
alternative minimum tax. If Common Stock is issued to an Optionee pursuant to
the exercise of an Incentive Option, and if no disqualifying disposition of such
shares is made by such Optionee within two years after the date of grant or
within one year after the transfer of such shares to such Optionee, then (1)
upon sale of such shares, any amount realized in excess of the option price will
be taxed to such Optionee as a long-term capital gain and any loss sustained
will be a long-term capital loss, and (2) no deduction will be allowed to the
Optionee's employer for Federal income tax purposes.
Except as noted below for corporate "insiders," if the Common Stock
acquired upon the exercise of an Incentive Option is disposed of prior to the
expiration of either holding period described above, generally (1) the Optionee
will realize ordinary income in the year of disposition in an amount equal to
the excess (if any) of the fair market value of such shares at exercise (or, if
less, the amount realized on the disposition of such shares) over the option
price paid for such shares and (2) the Optionee's employer will be entitled to
deduct such amount for Federal income tax purposes if the amount represents an
ordinary and necessary business expense. Any further gain (or loss) realized by
the Optionee will be taxed as short-term or long-term capital gain (or loss), as
the case may be, and will not result in any deduction by the employer.
Subject to certain exceptions for disability or death, if an Incentive
Option is exercised more than three months following termination of employment,
the exercise of the Option will generally be taxed as the exercise of a
Non-qualified Option.
For purposes of determining whether an Optionee is subject to any
alternative minimum tax liability, an Optionee who exercises an Incentive Option
generally would be required to increase his or her alternative minimum taxable
income, and compute the tax basis in the stock so acquired, in the same manner
as if the Optionee had exercised a Non-qualified Option. Each
20
Optionee is potentially subject to the alternative minimum tax. In substance, a
taxpayer is required to pay the higher of his/her alternative minimum tax
liability or his/her "regular" income tax liability. As a result, a taxpayer has
to determine his potential liability under the alternative minimum tax.
NON-QUALIFIED OPTIONS
Except as noted below for corporate "insiders," with respect to
Non-qualified Options: (1) no income is realized by the Optionee at the time the
Option is granted, except for options which vest immediately if granted at an
exercise price less than fair market value; (2) generally, at exercise, ordinary
income is realized by the Optionee in an amount equal to the difference between
the option price paid for the shares and the fair market value of the shares, if
unrestricted, on the date of exercise, and the Optionee's employer is generally
entitled to a tax deduction in the same amount subject to applicable tax
withholding requirements; and (3) at sale, appreciation (or depreciation) after
the date of exercise is treated as either short-term or long-term capital gain
(or loss) depending on how long the shares have been held.
As a result of a recent ruling by the IRS, if a granted Non-qualified
option contains an exercise price below fair market value on the date of grant,
the Optionee will realize on the first date the option is exercisable ordinary
income in an amount equal to the difference between the exercise price and the
fair market value on the date of grant.
SPECIAL RULES APPLICABLE TO CORPORATE INSIDERS
As a result of the rules under Section 16(b) of the Exchange Act,
"insiders" (as defined in the Securities Exchange Act of 1934), depending upon
the particular exemption from the provisions of Section 16(b) utilized, may not
receive the same tax treatment as set forth above with respect to the grant
and/or exercise of options. Generally, insiders will not be subject to taxation
until the expiration of any period during which they are subject to the
liability provisions of Section 16(b) with respect to any particular option.
Insiders should check with their own tax advisers to ascertain the appropriate
tax treatment for any particular option.
BENEFITS. Inasmuch as awards to all participants under the Plan will be
granted at the sole discretion of the Board or Committee, such benefits under
the Plan are not determinable. Compensation paid and other benefits granted in
respect of the fiscal year ended March 31, 2003 to the named executive officer
are set forth in the Summary Compensation Table.
VOTE REQUIRED; RECOMMENDATION. Approval of the adoption of the Plan
will require the affirmative vote of the holders of a majority of the shares of
the Common Stock of the Company present, in person or by proxy, at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE THEIR SHARES
FOR THE PROPOSAL TO AMEND THE STOCK OPTION PLAN.
ITEM 3. PROPOSAL TO RATIFY THE GRANT AND AMENDMENT OF
WARRANTS AND OPTIONS
The American Stock Exchange (the "Amex") requires stockholder approval
of material amendments to certain stock option plans or other equity
compensation arrangements.
21
(A) At the last Annual Meeting of Stockholders the Stockholders approved
the amendment of stock options held by Dr. Atul Mehta, our former President,
Chief Executive Officer and Director, which were amended pursuant to a
settlement of a litigation instituted by Dr. Mehta for alleged breach of an
employment contract. As approved, the options granted to Dr. Mehta were revised
as set forth under " Executive Compensation - Options and Warrants". On October
18, 2004, the Company and Dr. Mehta agreed to a further revision of his options
to purchase 770,000 shares providing for the termination of options to purchase
100,000 shares, the extension of the expiration date of the remaining 670,000
options to December 21, 2007 and the revision of the $10.00 exercise price of
the 170,000 options from $10.00 to $2.34 per share. Giving effect to the
amendment, the number of options all of which expire December 31, 2007, and
their exercise prices are as follows:
Number of Options Exercise Price
----------------- --------------
100,000 $3.00
170,000 2.34
200,000 2.00
100,000 1.50
100,000 1.00
(B) In July 2004 the Company granted Mr. Jason Lyons a common stock purchase
warrant, to purchase 50,000 shares of Common Stock at a price of $3.00 per
share, on or prior to July 20,2007 in consideration for his agreement to render
consultant services.
The Company believes that revision of Dr. Mehta options and the grant
of the Warrants to Mr. Lyons in lieu of additionally cash payments were in the
best interest of the Company and its shareholders. Ratification of the amendment
of Dr. Mehta options and the grant of the warrants to Mr. Lyons requires the
affirmative vote of a majority of the shares voting in person or by proxy on the
proposal. Abstentions would have the effect of a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE PROPOSAL TO RATIFY THE GRANT AND AMENDMENT OF WARRANTS
AND OPTIONS
ITEM 4. PROPOSAL TO RATIFY APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors, subject to stockholders approval, appointed
Miller, Ellin & Co., LLP ("Miller Ellin") as independent auditors of the Company
for its financial statements for the fiscal year ending March 31, 2005. Miller
Ellin has audited the consolidated financial statements of the Company since
1997. A representative of that firm is expected to be present at the Annual
Meeting, and will have an opportunity to make a statement to the stockholders
and will be available to respond to appropriate questions. The ratification of
the appointment will require the affirmative vote of the holders of a majority
of the outstanding shares of Common Stock present in person or represented by
proxy at the Annual Meeting and entitled to vote. Abstentions will be included
in determining the number of shares of Common Stock present or represented and
entitled to vote for purposes of approval and will have the effect of votes
"against" the proposal.
22
Stockholder ratification of the appointment is not required by the
Company's Certificate of Incorporation or By-laws or otherwise. If the
stockholders fail to ratify the appointment, the Board of Directors will
reconsider whether to retain that firm. Even if the appointment is ratified, the
Board of Directors in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if the Board of
Directors determines that such a change would be in the best interests of the
Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF MILLER, ELLIN & CO., LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 2005.
AUDITOR FEES
The following is a description of the fees paid by the Company to
Miller Ellin during the fiscal year ended March 31, 2004:
Audit Fees: The Company paid fees of $233,991 to Miller Ellin in
connection with its audit of the Company's financial statements for the fiscal
year ended March 31, 2004, and its review of the Company's interim financial
statements included in the Company's Quarterly Reports on Form 10-Q during the
fiscal year ended March 31, 2004, and preparation of the corporate tax returns.
Financial Information Systems Design and Implementation Fees: The
Company did not engage Miller Ellin during the year to provide advice to the
Company regarding financial information systems design and implementation.
Other fees: The Company did not pay any fee to Miller Ellin to perform
non-audit services during the year.
OTHER MATTERS
We are not aware of any matters to be presented at the Annual Meeting
other than those described in this proxy statement. However, if other matters
which are not known a reasonable time before the solicitation should come before
the Annual Meeting, it is intended that the holders of proxies solicited hereby
will vote on such matters in their discretion.
A COPY OF THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED
MARCH 31, 2004, INCLUDING FINANCIAL STATEMENTS, ACCOMPANIES THIS PROXY
STATEMENT. THE ANNUAL REPORT IS NOT TO BE REGARDED AS PROXY SOLICITING MATERIAL
OR AS A COMMUNICATION BY MEANS OF WHICH ANY SOLICITATION IS TO BE MADE.
STOCKHOLDER PROPOSALS
Any proposal intended to be presented by a stockholder at the next
Annual Meeting of Stockholders must be received by the Company at the address
specified below no later than the close of business on October 20, 2005 in order
for such proposal to be eligible for inclusion in the Company's proxy statement
and form of proxy for the 2005 Annual Meeting. Any proposal should be addressed
to Mark I. Gittelman, Secretary, Elite Pharmaceuticals, Inc., 165 Ludlow Avenue,
Northvale, New Jersey 07647 and should be sent by certified mail, return receipt
requested.
23
WHERE YOU CAN FIND MORE INFORMATION
The Company files reports, proxy statements and other information with
the SEC under the Securities Exchange Act of 1934, as amended. The SEC maintains
an Internet world wide web site that provides access, without charge, to
reports, proxy statements and other information about issuers, like Elite, who
file electronically with the SEC. The address of that site is
http://www.sec.gov.
You also may obtain copies of these materials by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. These materials
are also available from the SEC in person at any one of its public reference
rooms. Please call the SEC at l-800-SEC-0330 for further information on its
public reference rooms. You may read and copy this information at the following
location of the SEC:
Public Reference Room
450 Fifth Street, N.W.
Washington, D.C. 20549
You can also obtain, without charge, reports, proxy statements and
other information, including without limitation, any information we may
incorporate by reference herein, about the Company, by contacting: Elite
Pharmaceuticals, Inc., 165 Ludlow Avenue, Northvale, New Jersey 07647, Attn:
Corporate Secretary, telephone: (201) 750-2646, facsimile: (201) 750-2755.
February 18, 2005 By Order of the Board of Directors
Mark I. Gittelman, Secretary
24
ELITE PHARMACEUTICALS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MARCH 22, 2005
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Bernard Berk and Mark I. Gittelman, and
each of them, with full power of substitution, to vote, as a holder of the
Common Stock, par value $0.01 per share ("Common Stock"), or of Series A
Preferred Stock, par value $.01 per share ("Preferred Shares") of Elite
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), all the shares of
Common Stock and Preferred Shares which the undersigned is entitled to vote,
through the execution of a proxy with respect to the 2004 Annual Meeting of
Stockholders of the Company (the "Annual Meeting"), to be held at the offices of
Reitler Brown & Rosenblatt LLC, 800 Third Avenue, 21st Floor, New York, New York
10022, on March 22, 2005 at 10:00 a.m. Eastern time, and any and all
adjournments or postponements thereof, and authorizes and instructs said proxies
to vote in the manner directed below.
THE BOARD OF DIRECTORS RECOMMENDS THE VOTE FOR THE ELECTION OF THE
NOMINEES FOR DIRECTORS NAMED BELOW AND PROPOSALS 2, 3(A) AND (B) AND 4.
1. Election of Directors: Bernard Berk, Edward Neugeboren*, Barry Dash
and Melvin Van Woert
FOR all Nominees [ ] WITHHOLD for all Nominees [ ]
* To be elected by holders of Preferred Shares only
If you do not wish your shares voted FOR a nominee, draw a line through that
person's name above.
2. Proposal to approve the amendment of the Company's Stock Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to ratify the amendment of options and grant of warrants described
in the proxy statement.
A. Amendment of the Options
FOR [ ] AGAINST [ ] ABSTAIN [ ]
B. Grant of Warrants
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Proposal to ratify the appointment of the independent auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before such meeting or adjournment or postponement
thereof.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE, PLEASE VOTE,
SIGN AND DATE ON REVERSE SIDE AND RETURN PROMPTLY.
BACK OF CARD
PROPERLY EXECUTED AND RETURNED PROXY CARDS WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO INSTRUCTIONS TO THE
CONTRARY ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF EACH OF THE
NAMED NOMINEES AS DIRECTORS AND PROPOSALS 2, 3A AND 3B AND 4 AS DESCRIBED ON THE
REVERSE SIDE OF THIS CARD.
Your may revoke this proxy at any time before it is voted by (i) filing a
revocation with the Secretary of the Company, (ii) submitting a duly executed
proxy bearing a later date or time than the date or time of the proxy being
revoked; or (iii) attending the Annual Meeting and voting in person. A
stockholder's attendance at the Annual Meeting will not by itself revoke a proxy
given by the stockholder.
(Please sign exactly as the
name appears below. Joint
owners should each sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign with
full corporate name by
president or other authorized
officer. If a partnership,
please sign in the partnership
name by authorized person.)
Dated:
--------------------- -----------------------------------------
Signature
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PLEASE COMPLETE, SIGN, DATE
AND RETURN THE PROXY CARD
PROMPTLY USING THE
ENCLOSED ENVELOPE.
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Signature, if held by joint owners