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PDK LABS INC.
_________ ___, 2000
To Our Shareholders:
I am writing to you in my capacity as both a private investor in PDK
Labs Inc. (referred to as "PDK") and the chief executive officer and president
of PDK. In my capacity as CEO, I am cordially inviting you to attend a Special
Meeting of shareholders (referred to as the "Special Meeting") of PDK to be held
on __________ __, 2000 at 10:00 a.m., local time, at _________________. The
purpose of the Special Meeting is to consider and vote upon a Merger (referred
to as the "Merger") that, if approved and subsequently completed, will result in
our public shareholders receiving $5.00 in cash, without interest, for each
share of Common Stock of PDK (referred to as the "Common Stock") and $8.00 in
cash (plus accrued and unpaid dividends) for each share of Preferred Stock of
PDK (referred to as the "Preferred Stock") held by them. PDK will then become a
privately-owned company. If approved by the shareholders, the Merger would be
accomplished under an Agreement and Plan of Merger (referred to as the "Merger
Agreement") that provides for PDK Acquisition Corp., a newly formed New York
corporation (referred to as "PDK Acquisition"), to merge with and into PDK. PDK
would be the surviving corporation in the Merger.
In my capacity as a private investor, I organized a group of PDK's
management including Karine Hollander, Raveendra Nandigam, and myself, (the
"Management Group") who collectively own all of the equity interest in PDK
Acquisition. Immediately prior to the completion of the Merger, the Management
Group will contribute cash or arrange for financing and contribute an aggregate
672,500 shares of Common Stock (representing approximately 29% of the
outstanding shares of Common Stock) owned by the Management Group to PDK
Acquisition.
A Special Committee of PDK's Board of directors (referred to as the
"Special Committee"), consisting of Ira Helman, was organized to investigate,
consider, negotiate and evaluate the Management Group's proposal and potential
alternative transactions available to PDK. The Special Committee recommended to
the PDK board of directors (the "Board") that the Merger be approved. In
connection with its evaluation of the fairness to our public shareholders of the
Merger and other available transactions, the Special Committee engaged JWGenesis
Capital Markets, Inc. ("JWGenesis") to act as its financial advisor. JWGenesis
has rendered its written opinion that, as of August 3, 2000, based upon and
subject to the assumptions, limitations and qualifications included in its
opinion, the cash Merger consideration of $5.00 per share of Common Stock and
$8.00 per share (plus accrued and unpaid dividends) of Preferred Stock to be
received in the Merger is fair from a financial point of view to our public
shareholders.
JWGenesis' written opinion, dated August 3, 2000, is attached as
Appendix C to the accompanying proxy statement and you should read it carefully.
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The Special Committee and the other members of the Board believe that
the terms of the Merger are fair to, and in the best interests of, the public
shareholders and unanimously recommend that the shareholders approve the Merger.
Since Karine Hollander and I have a personal conflict of interest in
recommending this Merger to you, we abstained from voting at the Board meeting
at which this recommendation was made.
The affirmative vote of holders of at least 66 2/3% of the outstanding
shares of Common Stock entitled to vote at the Special Meeting is required to
approve the Merger. The Management Group holds 672,500 shares of Common Stock
and has the right to vote an additional 100,000 shares of Common Stock, which in
the aggregate represents approximately 33.3% of the outstanding shares of Common
Stock. The Management Group intends to vote these shares in favor of the Merger.
The holders of the Preferred Stock are not entitled to vote at the Special
Meeting. Accordingly, if holders of 774,172 shares, which represents
approximately 33.3 % of the outstanding shares of Common Stock, also vote in
favor of the Merger, the Merger will be approved.
The accompanying proxy statement provides you with a summary of the
proposed Merger and additional information about the parties involved and their
interests. Please give all this information your careful attention. Whether or
not you plan to attend, it is important that your shares of Common Stock are
represented at the Special Meeting. A FAILURE TO VOTE WILL EFFECTIVELY COUNT AS
A VOTE AGAINST THE MERGER. Accordingly, please promptly complete, sign and date
the enclosed proxy and return it in the envelope provided.
/s/ Reginald Spinello
Reginald Spinello
President and Chief Executive Officer
