<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-27354
-------
Global Pharmaceutical Corporation
---------------------------------
(Name of small business issuer in its charter)
Delaware 65-0403311
- - ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Castor & Kensington Aves., Philadelphia, PA 19124-5694
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (215) 289-2220
--------------
Not Applicable
-----------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report.)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes _X_ No ___
As of October 15, 1996, the number of shares outstanding of
the issuer's class of common equity was 4,286,871 shares of common stock ($0.01
par value).
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
GLOBAL PHARMACEUTICAL CORPORATION
(a development stage company)
BALANCE SHEET
(dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 5,974 $ 9,518
Due from related party........................................ -- 2
Interest receivable .......................................... 16 --
Prepaid expenses.............................................. 59 28
------------- ---------------
Total current assets..................................... 6,049 9,548
Property, plant and equipment, net................................. 3,640 2,105
Intangible assets ................................................. 1,177 1,177
Deferred financing costs, net...................................... 37 25
------------- ---------------
$ 10,903 $ 12,855
============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................. $ 416 $ 459
Accrued expenses.............................................. 245 810
Current portion of long-term debt............................. 182 182
------------- ---------------
Total current liabilities................................ 843 1,451
Long-term debt..................................................... 1,127 1,280
------------- ---------------
$ 1,970 $ 2,731
============= ===============
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 2,000,000 authorized,
none issued................................................ -- --
Common stock, $.01 par value, 10,000,000 authorized and
4,286,871 and 4,039,392 shares issued and outstanding,
respectively .............................................. 43 40
Additional paid-in capital.................................... 19,407 17,575
Deficit accumulated during the development stage.............. (10,517) (7,491)
------------- ---------------
Total stockholders' equity .............................. 8,933 10,124
------------- ---------------
$ 10,903 $ 12,855
============= ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
GLOBAL PHARMACEUTICAL CORPORATION
(a development stage company)
STATEMENT OF OPERATIONS
(dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended April 20, 1993
------------------ ----------------- (inception) to
September 30, September 30, September 30,
------------- ------------- -------------
1996 1995 1996 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
General and administrative ..... $ 1,409 $ 803 $ 3,481 $ 1,636 $ 9,508
Debt conversion expense ........ -- 47 -- 47 47
Loss on sale of common
stock and warrants ....... -- -- -- -- 938
Loss on sale of marketable
securities ............... -- -- -- -- 50
Interest (income) expense ...... (82) 73 (282) 197 147
Other (income) ................. (15) -- (173) -- (173)
---------- ---------- ---------- ------------- ---------
Net profit (loss) .............. $ (1,312) $ (923) $ (3,026) $ (1,880) $ (10,517)
========== ========== ========== ============= =========
Net profit (loss) per share .... $ (.31) $ (.38) $ (.71) $ (.78)
========== ========== ========== =============
Weighted average common
shares outstanding ...... 4,286,871 2,433,388 4,264,291 2,338,561
========== ========== ========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
GLOBAL PHARMACEUTICAL CORPORATION
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(dollars and shares in thousands)
<TABLE>
<CAPTION>
Deficit
Common stock accumulated Total
-------------------- Additional during the stockholders'
Number of Par paid-in development equity
shares value capital stage (deficit)
--------- ----- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Issuance of common stock and common stock warrants:
Inception (April 20, 1993) and stock and
warrants issued for purchase of Richlyn
facility (August 18, 1993)..................... 1,217 $ 12 $ 42 $ -- $ 54
September 30, 1993 private placement.............. 177 2 498 -- 500
December 15, 1993 sale of stock and warrants...... 356 4 996 -- 1,000
Stock issued for services rendered................ 27 -- 75 -- 75
Warrants issued for services rendered............. -- -- 3 -- 3
Exercise of warrants.............................. 71 -- 250 -- 250
Net loss............................................... -- -- -- (1,040) (1,040)
----- ------- -------- --------- -------
Balances at December 31, 1993 ....................... 1,848 18 1,864 (1,040) 842
Common stock:
September 1, 1994 private placement............. 84 1 479 -- 480
Stock issued for services rendered.............. 10 -- 50 -- 50
Net loss............................................. -- -- -- (1,988) (1,988)
----- ------- -------- --------- -------
Balances at December 31, 1994........................ 1,942 19 2,393 (3,028) (616)
Issuance of common stock:
Conversion of stockholder loans ................ 297 4 2,473 -- 2,477
Stock and warrants issued to Merck KA........... 150 1 299 -- 300
Sale of stock to Merck KA....................... -- -- 938 -- 938
Initial public offering ........................ 1,650 16 11,472 -- 11,488
Net loss -- -- -- (4,463) (4,463)
----- ------- -------- --------- -------
Balances at December 31, 1995........................ 4,039 40 17,575 (7,491) 10,124
Issuance of common stock ............................ 247 3 1,832 -- 1,835
Net loss ............................................ -- -- -- (3,026) (3,026)
----- ------- -------- --------- -------
Balances at September 30, 1996 4,286 $ 43 $ 19,407 $ (10,517) $ 8,933
===== ======= ======== ========= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
GLOBAL PHARMACEUTICAL CORPORATION
(a development stage company)
STATEMENT OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
April 20,
Nine Months Ended 1993
September 30, (inception)
----------------- to September 30
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................................. $ (3,026) $ (1,880) $ (10,517)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization......................... 186 146 558
Expenses paid through issuance of common stock and
warrants ........................................... -- -- 128
Sale of common stock and warrants .................... -- -- 938
Loss on debt conversion............................... -- 47 47
Loss on sale of marketable securities................. -- -- 50
Change in assets and liabilities:
Decrease due from/to related party............... 2 (16) --
(Increase) decrease in prepaid expenses and
other assets................................... (60) 8 (84)
Decrease in note receivable from stockholders.... -- 135 264
Increase (decrease) in accounts payable and
accrued expenses .............................. (607) 42 24
------------ ---------- ----------
Net cash used for operating activities....... (3,505) (1,518) (8,592)
------------ ---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment................ (1,721) (183) (3,196)
Purchases and sales of marketable securities.............. -- -- (50)
------------ ---------- ----------
Net cash used for investing activities....... (1,721) (183) (3,246)
------------ ---------- ----------
Cash flows from financing activities:
Long-term debt:
Borrowings............................................ -- 70 1,596
Payments.............................................. (153) (84) (335)
Payment of financing costs............................ -- (17) (30)
Long-term debt, related party:
Borrowings ........................................... -- 1,815 2,755
Payments.............................................. -- (47) (1,777)
Issuance of common stock and warrants:
September 30, 1993 private placement.................. -- -- 500
December 15, 1993 sale of stock and warrants ......... -- -- 1,000
September 1, 1994 private placement................... -- -- 480
November 8, 1995 stock and warrants issued to Merck KA -- -- 300
December 19, 1995 initial public offering ............ -- -- 11,488
January 29, 1996 sale of common stock................. 1,835 -- 1,835
------------ ---------- ----------
Net cash provided by financing activities.... 1,682 1,737 17,812
------------ ---------- ----------
Net increase (decrease) in cash and cash equivalents........... (3,544) 36 5,974
Cash and cash equivalents, beginning of period................. 9,518 1 --
------------ ---------- ----------
Cash and cash equivalents, end of period....................... $ 5,974 $ 37 $ 5,974
============ ========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 30 $ 155 $ 387
============ ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
GLOBAL PHARMACEUTICAL CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
Nine Months Ended
September 30, 1996 and September 30, 1995
Note 1: The financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations; however, the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Company's latest annual report on Form 10-KSB.
The results of operations for the nine months ended September 30, 1996, are not
necessarily indicative of the results of operations expected for the year ending
December 31, 1996.
In the opinion of management, the information contained in this report
reflects all adjustments necessary, which are of a normal recurring nature, to
present fairly the results for the interim periods presented.
Note 2: On January 29, 1996, the underwriter, Keane Securities Co.,
Inc. exercised its over-allotment option and the Company sold 247,500 shares of
common stock for net proceeds of $1,835,000.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The Company has generated no revenues to date and, from inception until
September 30, 1996, the Company accumulated a deficit of $10,517,000.
Since its inception, the Company has devoted substantially all of its
efforts to improving and renovating its manufacturing plant, equipment and
certain related assets (the "Facility"), establishing policies and procedures to
bring the Facility into compliance with Current Good Manufacturing Practices,
and obtaining all government approvals necessary to begin operating the
Facility. The Facility is not currently operating; however, the Company believes
it will receive necessary approvals in order to begin selling one or more
generic products in 1996, although there can be no assurance such approvals will
be obtained. Accordingly, the Company is considered a development stage company
as defined in Financial Accounting Standards No. 7.
In September 1996, FDA approved independent consultants certified the
manufacturing facility for final Food and Drug Administration ("FDA") site
review.
6
<PAGE>
The Company's net loss for the third quarter ended September 30, 1996
was $1,312,000 as compared to $923,000 in the same period in 1995.
General and administrative expenses were $1,409,000 in the third
quarter ended September 30, 1996 as compared to $803,000 during the same period
in 1995 due primarily to increased payroll costs, professional and consulting
fees, utilities, repairs, materials and insurance expenses.
Interest income (net of interest expense of $10,000) was $82,000 for
the quarter ended September 30, 1996, as compared to interest expense of $73,000
during the quarter ended September 30, 1995, primarily as result of the
investment of the initial public offering ("IPO") proceeds into highly rated
money market funds, U.S. Government securities, treasury bills and short-term
commercial paper.
The Company's net loss for the nine months ended September 30, 1996 was
$3,026,000 as compared to $1,880,000 in the same period in 1995.
General and administrative expenses were $3,481,000 for the nine months
ended September 30, 1996 as compared to $1,636,000 during the same period in
1995 due primarily to increased payroll costs, professional and consulting fees,
utilities, repairs, materials and insurance expenses.
Interest income (net of interest expense of $30,000) was $282,000 for
the nine months ended September 30, 1996, as compared to interest expense of
$197,000 during the nine months ended September 30, 1995, primarily as result of
the investment of the IPO proceeds into highly rated money market funds, U.S.
government securities, treasury bills and short-term commercial paper.
Other income of $173,000 generated during the nine months ended
September 30, 1996 was due primarily to a renegotiation of previously recognized
legal expenses.
Liquidity and Capital Resources
Following the completion of the IPO on December 19, 1995, the
underwriter exercised its over-allotment option and, on January 29, 1996, the
Company sold 247,500 shares of Common Stock for net proceeds to the Company of
$1,835,000.
In June 1996, the Company received approval for a $1,000,000 loan with
Pennsylvania Industrial Development Authority at 3.75% annually fixed for 15
years, which proceeds will be used for certain capital projects planned for the
balance of 1996 and 1997.
In August 1996, the Company received approval for a $350,000 loan with
Delaware River Port Authority at 5.00% annually fixed for 10 years, which
proceeds will be used for certain capital projects planned for the balance of
1996.
7
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings: None Applicable.
Item 2. Changes in securities: None Applicable
Item 3. Defaults Upon Senior Securities: None Applicable
Item 4. Submission of Matters to a Vote of Security Holders: None Applicable
Item 5. Other Information: None Applicable
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
10. Material Contracts:
10.1 Supply and Marketing Agreement between Caraco
Pharmaceutical Laboratories Ltd. and Global
Pharmaceutical Corporation dated September 20, 1996.
10.2 Employment agreement between Global Pharmaceutical
Corporation and Marc Feinberg dated September 30,
1996.
27. Financial Data Schedule
(b) Reports on Form 8-K None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLOBAL PHARMACEUTICAL CORPORATION
By: /s/ MAX L. MENDELSOHN
--------------------------
President and Chief Executive Officer (Principal Executive
Officer)
By: /s/ CORNEL C. SPIEGLER
--------------------------
Chief Financial Officer, (Principal Financial
Vice President--Administration and Accounting
Officer)
8
<PAGE>
SUPPLY AND MARKETING AGREEMENT
BETWEEN CARACO PHARMACEUTICAL LABORATORIES, LTD.
AND GLOBAL PHARMACEUTICAL CORPORATION
In consideration for the purchasing and marketing of products provided
by GLOBAL PHARMACEUTICAL CORPORATION, or any of its subsidiaries, affiliated
companies, privies, or successors (herein called GLOBAL) by CARACO
PHARMACEUTICAL LABORATORIES, LTD. (herein called CARACO), IT IS HEREBY AGREED AS
FOLLOWS:
1. CARACO will purchase, market and sell GLOBAL's products as follows:
A. For a two (2) year period, to be automatically renewed on a
year basis. Products to include, but are not limited, to those
items listed as Exhibit A.
B. CARACO will have no further responsibility to GLOBAL other
than the purchasing, marketing and selling of GLOBAL products
listed on Exhibit A.
C. GLOBAL shall sell to CARACO under the CARACO label agreed upon
products at prices that provide CARACO five to fifteen percent
(5-15%) gross profit on sales to agreed upon customers as
listed on Exhibit B, in return for CARACO's selling, marketing
and other services.
D. CARACO agrees that GLOBAL shall be its exclusive source
inclusive of Caraco manufacturing itself of those products
listed on Exhibit A or those that are added in the future as
Addendums to A as products that CARACO agrees to purchase,
market and sell. This Paragraph (1.D) of this document shall
survive five years after the agreement is terminated for any
product which Global decides not to sell through Caraco.
E. CARACO agrees that it will use its best efforts to provide
GLOBAL with market information on those products listed on
Exhibit A including that required to be supplied by McKesson
to CARACO as part of agreements between McKesson and CARACO.
2. GLOBAL and its successors in business hereby guarantee that each
article delivered by "GLOBAL":
(A) Is not adulterated or misbranded within the meaning of the
Federal Food, Drug and Cosmetic Act, the Food Additive
Amendment of 1958 thereto, and the color Additives Amendment
of 1960 thereto, as amended from time to time.
(B) Is not an article which may not be introduced into interstate
commerce under the provisions of Sections 404, 409, 505, or
706 of said Act, as amended from time to time.
9
<PAGE>
(C) Is not adulterated or misbranded within the meaning of any
applicable provision of any state statute, or municipal
ordinance, which provision is substantially similar to any
provision of the aforesaid Federal Acts, as amended from time
to time, or any State Pharmacy Act(s) as amended from time to
time.
(D) If it has a drug component, whether prescription or of a
non-prescription over-the-counter nature it may lawfully be
shipped in interstate commerce and will have a minimum
expiration of 20 months when supplied.
(E) Conforms to all written specifications including ingredients
and amounts thereof.
3. GLOBAL will obtain and provide upon written request to CARACO a
certified analysis for each active ingredient (incipient) used in the
manufacture of product.
4. (A) GLOBAL agrees to indemnify and save CARACO and its officers,
directors, and employees harmless from and against all claims, demands,
actions and causes of action which are hereafter made or brought by any
person for the recovery of damages (including property damage) or other
relief for the injury, illness and/or death of any person which is
caused or alleged to have been caused by the handling or use of any
article shipped or delivered by GLOBAL to CARACO including, but without
limitation, any judgment rendered in any such action in connection
therewith provided only that the claims, etc., are attributable to
actions of, lack thereof or procedures, processes and actions of and/or
under the control of GLOBAL.
(B) CARACO agrees to indemnify and save GLOBAL and its officers,
directors, and employees harmless from and against all claims, demands,
actions and causes of action which are hereafter made or brought by any
person for the recovery of damages (including property damage) or other
relief for the injury, illness and/or death of any person which is
caused or alleged to have been caused by the handling, packaging or use
of any article shipped or delivered by GLOBAL to CARACO including, but
without limitation, any judgment rendered in any such action in
connection therewith provided only that the claims, etc., are
attributable to actions of, lack thereof or procedures, processes and
actions of and/or under the control of CARACO.
5. (A) GLOBAL agrees to purchase and maintain in full force a products
liability insurance policy providing for a minimum of $1,000,000.00
coverage limits per claim, naming CARACO as an additional insured or a
named insured under a broad form vendors endorsement and shall require
its insurer to deliver a vendors endorsement providing the same.
Further, GLOBAL agrees to notify CARACO at least 30 days in advance of
termination of such coverage. An appropriate certificate evidencing
such coverage will be provided to CARACO prior to commencing business
with CARACO and promptly upon each renewal or replacement of coverage.
10
<PAGE>
(B) CARACO agrees to purchase and maintain in full force a products
liability insurance policy specifically covering any mishandling or
misrepresentations relative to GLOBAL's products and providing for a
minimum of $1,000,000.00 coverage limits per claim, naming GLOBAL as an
additional insured or a named insured under a broad form vendors
endorsement and shall require its insurer to deliver a vendors
endorsement providing the same. Further, CARACO agrees to notify GLOBAL
at least 30 days in advance of termination of such coverage. An
appropriate certificate evidencing such coverage will be provided to
GLOBAL prior to commencing business with CARACO and promptly upon each
renewal or replacement of coverage.
6. (A) Termination of this Agreement shall not terminate the obligation
imposed upon GLOBAL on account of product or service supplied to
CARACO, by GLOBAL, prior to the termination date of this agreement all
of CARACO's rights related to such goods and/or services shall survive
termination of this Agreement.
(B) Termination of this Agreement shall not terminate the obligation
imposed upon CARACO on account of product or service supplied to
GLOBAL, by CARACO, prior to the termination date of this agreement all
of GLOBAL's rights related to such goods and/or services shall survive
termination of this Agreement.
7. This Agreement shall be governed by the laws of the State of
Pennsylvania, both as to interpretation and performance.
8. Customers who are to receive CARACO label and be invoiced and shipped
by CARACO to include, but are not limited, to those items listed as
Exhibit C.
11
<PAGE>
9. This is a continuing guaranty subject to revocation only upon the
receipt by CARACO of advance written notice thereof at least 90 days in
advance of the proposed effective cancellation date: notice being
mailed by registered letter to the President of CARACO at its
principal place of business.
GLOBAL PHARMACEUTICAL CORPORATION
By: /s/ Max L. Mendelsohn
----------------------------------
Max L. Mendelsohn
Title: President and CEO
-------------------------------
Philadelphia Pennsylvania, 19124
City State Zip Code
Dated: September 20, 1996
CARACO PHARMACEUTICAL
LABORATORIES, LTD.
By: /s/ William R. Hurd
----------------------------------
William R. Hurd
Title: President/COO
-------------------------------
President:
Detroit Michigan 48202
City State Zip Code
Dated 9/20/96
-----------
12
<PAGE>
Exhibit A
PRODUCTS include, but are not limited, to those items listed for the
SUPPLY AND MARKETING AGREEMENT
BETWEEN CARACO PHARMACEUTICAL LABORATORIES, LTD.
AND GLOBAL PHARMACEUTICAL CORPORATION
13
<PAGE>
<TABLE>
<S> <C>
Aminophylline Tablets 100 & 200 mg. Methocarbamol Tablets 500 & 750 mg.
Aspirin with Codeine Tablets 15 & 30 mg. Methylphenobarbital Tablets
Azosulfisoxazole Tablets Methylprednisolone Tablets 4, 8 & 16 mg.
Bellatrate Tablets Methyltestosterone Tablets sublingual 10 mg.
Brompheniramine with Pseudoephedrine Tablets Morphine Sulfate Capsules
Chlordiazepoxide Capsules 5, 10 & 25 mg. Morphine Sulfate Tablets
Chlordiazepoxide with Clindinium Capsules Oxycodone Tablets
2.5-5 mg. Pancrealipase Minitabs #1
Chloroquine Phosphate Tablets 250 mg. Pancrealipase Sphere Prolongsules
Codeine Sulfate Tablets Pancrealipase Prolongtabs
Colchicine 1/100 gr. Tablets Phenobarbital Tablets 15. 30 & 90 mg.
Colchicine with Probenecid Tablets Phenylpropanolamine/CPM Prolongsules
Cortisone Acetate Tablets 25 mg. Piperazine Citrate Tablets 250 mg.
Dehydrocholic Acid Tablets 375 mg. Prednisolone Tablets 5 mg.
Dexamethasone Tablets 0.25, 0.5, 0.75, 1.0, 1.5, 4.0 Prednisone Tablets 1, 2.5, 5, 10 & 20 mg.
and 6.0 mg. Promethazine Tablets 12.5, 25, & 50 mg.
Digoxin Tablets 0.125, 0.25 & 0.5 mg. Propantheline Tablets 15 mg.
Diphenhydramine Capsules 25 & 50 mg. Propylthiouracil Tablets 50 mg.
Ephedrine Sulfate Capsules 3/8 & 3/4 gr. Pyridiate Tablets 95, 100 & 200 mg.
Guiafenesin and Pseudoephedrine Tablets #1 Quinidine Sulfate Tablets 200 & 300 mg.
Guiafenesin and Pseudoephedrine Tablets #2 Quinine Sulfate Capsules 325 mg.
Guiafenesin and Pseudoephedrine Tablets #3 Ranitadine Tablets 75, 150 & 300 mg.
Guiafenesin and Pseudoephedrine Capsules #1 Rauwolfia Serpentina 50 mg. with
Guiafenesin and Pseudoephedrine Capsules #2 Hydrochlorothiazide 25 mg. Tablets
Hydrochlorthiazide Tablets 25, 50 & 100 mg. Reserpine Tablets 0.1 & 0.25 mg.
Hydrocortisone Tablets 20 mg. Sodium Potassium Aminobenzoate Tablets
Hyoscyamine Tablets 0.125 mg oral Sodium Potassium Aminobenzoate Capsules
Hyoscyamine Tablets 0.125 mg sublingual Sulfadiazine Tablets 0.5 gm
Hyoscyamine Prolongsules 0.375 mg oral Tetracycline Capsules 100, 250 & 500 mg.
Hytakerol Softgel Capsules Thyroid Tablets 30, 60,120, & 180 mg.
Hytakerol Tablets Triamcinolone Tablets 4 mg.
Levothyroxine Sodium Tabs 25, 50, 75, 88, 100, Trichlormethiazide Tablets 4 mg.
112, 125, 137, 150, 175, 200, 300 mcg. Trimethobenzamide Capsules
Meclizine Chewable Tablets 25 mg. Tripelenamine Tablets 50 mg.
Meclizine MLT 12.5 & 25 mg. Triple Sulfa Tablets
Meperidine Tablets Urised Tablets
Meperidine and Promethazine Capsules Vitamin A Capsules soluble 50,000 units
Meprobamate Tablets 200 & 400 mg. Vitamin D Capsules 50,000 units
Methenamine Mandelate 0.5 & 1.0 gm.
</TABLE>
14
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of September 30, 1996 by and between GLOBAL
PHARMACEUTICAL CORPORATION, a Delaware corporation (hereinafter referred to as
the "Corporation"), and MARC M. FEINBERG (hereinafter referred to as
"Executive").
In consideration of the mutual promises set forth herein the parties
hereto agree as follows:
ARTICLE I.
Term of Employment
A. Upon the terms and subject to the conditions set forth herein, the
Corporation will employ Executive on the terms provided in this Agreement from
October 14, 1996 (the 'Effective Date"), until the date the employment of
Executive shall terminate pursuant to Article IV or Article V. (The period
during which Executive is employed hereunder is referred to herein as the "term
of employment.") Executive will work for the Corporation during the term of
employment in accordance with, and subject to the terms and conditions of, this
Agreement.
ARTICLE II.
Duties
A. During the term of employment Executive will:
15
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(a) use his best efforts to promote the interests of the
Corporation and devote his full time and efforts to its business and affairs;
(b) serve as the Vice President-Quality and Regulatory Affairs
reporting solely to the Corporation's Chief Executive Officer and Board of
Directors, and
(c) perform such duties consistent with the office of Vice
President-Quality and Regulatory Affairs as the Corporation may from time to
time assign to him.
ARTICLE III
Compensation
A. The Corporation will compensate Executive for the duties performed
by him hereunder by payment of a salary (the "Salary") at the rate of $130,000
per annum. The salary shall be payable in equal installments, which the
Corporation shall pay at semi-monthly intervals or, at the Corporation's
election, more frequently, and shall be subject to such payroll deductions as
are required by law. The salary paid to the Executive will be reviewed annually
by the Board of Directors in conjunction with the recommendation of the
President, and may be increased at the discretion of the Company's Board of
Directors or Compensation Committee, which shall take into account the
performance of the Executive, the productivity of the Company and other factors
which it deems relevant.
16
<PAGE>
ARTICLE IV.
Term; Termination
A. Unless terminated sooner as hereinafter provided, the
initial term of employment at Executive under this Agreement shall be for a
period of three (3) years from the Effective Date hereof (the "Initial Term").
The term of employment of Executive shall continue thereafter for an additional
one year period commencing on the third anniversary of the Effective Date,
unless either party has notified the other no later than three (3) months
prior to that third anniversary that he or it does not wish to continue the
term of employment of Executive under this Agreement or unless Executive's
employment is terminated sooner as hereinafter provided. Thereafter, Executive's
term of employment under this Agreement shall continue for additional one (1)
year period, unless either party has notified the other no later than three (3)
months prior to the end of any of those additional one (1) year periods that he
or it does not wish to continue Executive's term of employment under this
Agreement or unless Executive's term of employment is terminated sooner as
hereinafter provided.
B. The Corporation may terminate the employment of Executive
hereunder (i) for Cause at any time and without prior
17
<PAGE>
notice or (ii) for any other reason on two (2) weeks notice in writing to
Executive.
1. If the Corporation terminates Executive's employment for
Cause (as defined below) or pursuant to Section 4I.D hereof then the Corporation
shall, within fifteen (15) days after the termination date, pay Executive all
accrued and unpaid Salary and benefits (including accrued but unused vacation
time) through the termination date.
2. If the Corporation terminates Executive's employment other
than for Cause, then in lieu of any other payments otherwise required hereunder,
the Corporation shall, subject to the Executive's compliance with Article V
hereof, pay Executive, as liquidated damages and not as a penalty, (a) within 15
days after the termination date, all accrued and unpaid Salary and benefits
(including accrued but unused vacation time) through the termination date and
(b) continued Salary and benefits during the six-month period following the
termination date.
3. The phrase "Cause" means any of the following:
(a) breach by Executive of Article V of this Agreement;
(b) material breach of any other provision of this Agreement by
Executive (other than any such breach resulting
18
<PAGE>
from Executive's incapacity due to physical or mental illness), if that breach
is not remedied or the remedy commences and is diligently continued until
actually remedied within 30 days after written notice to Executive describing
the acts alleged to constitute Cause;
(C) any act of fraud, misappropriation, embezzlement or similar willful
and malicious conduct by Executive against the Corporation; or
(d) indictment of Executive for a felony or any conviction of, or
guilty plea by Executive to, a crime involving moral turpitude if that crime of
moral turpitude tends or would reasonably tend to bring the Corporation into
disrepute.
C. Executive may terminate his employment hereunder at any time for any
reason on two (2) weeks written notice in writing to the Corporation.
1. If Executive terminates his employment without "Good
Reason" (as defined below), then the Corporation shall, within fifteen (15) days
after the termination date, pay Executive all accrued and unpaid Salary and
benefits (including accrued but unused vacation time) through the termination
date.
2. If Executive terminates his employment with 'Good Reason",
then the Corporation shall, subject to Executive's compliance with Section V
hereof, pay Executive (i) within fifteen (15) days after the termination date,
all accrued
19
<PAGE>
and unpaid Salary and benefits (including accrued but unused vacation time)
through the termination date and (ii) continued Salary and benefits during the
six-month period following the termination date.
3. The phrase "Good Reason" means a material breach of this
Agreement or the intentional disregard or violation of the Food, Drug and
Cosmetic Act as amended in any material respect (other than thru the actions of
the Executive) by the Corporation which has not been cured within thirty (30)
days after written notice thereof from the Executive.
D. If Executive dies or becomes incapacitated, his employment hereunder
shall terminate on the date of his death or incapacitation, as the case may be.
For purposes hereof, the term "incapacitated" shall mean such mental or physical
illness as shall render Executive incapable of substantially performing his
duties hereunder on a regular basis at the Company's offices for a period of
three (3) consecutive months or for a period of six (6) months in any
twelve-month period, all as determined by a physician or psychiatrist, as the
case may be, selected by the Company.
ARTICLE V.
Covenants
A. While Executive is employed hereunder by the Corporation, he shall
not, without the prior written consent of
20
<PAGE>
the Corporation, engage, directly or indirectly, in any other trade, business or
employment, or have any interest, direct or indirect, in any other business,
firm or corporation; provided however, that he may continue to own or may
hereafter acquire any securities of any class of any publicly-owned company as
well as passive investments in privately held entities which are not engaged in
the pharmaceutical business.
B. Executive shall treat as confidential and keep secret the affairs of
the Corporation (including specifically the terms and conditions of this
Agreement) and shall not at any time during the term of employment or
thereafter, without the prior written consent of the Corporation, or unless
required by law, divulge, furnish or make known or accessible to, or use for the
benefit of, anyone other than the Corporation and its subsidiaries and
affiliates any information of a confidential nature related in any way to the
business of the Corporation or its subsidiaries or affiliates or their clients.
Executive shall be entitled to disclose the terms of this Agreement to potential
employers of Executive and to lending institutions from whom Executive seeks to
borrow.
C. All records, papers and documents kept or made by Executive relating
to the business of the Corporation or its
21
<PAGE>
subsidiaries or affiliates or their clients shall be and remain the property of
the Corporation.
D. All articles invented by Executive, processes discovered by him,
trademarks, designs, advertising copy and art work, display and promotion
materials and, in general everything of value conceived or created by him
pertaining to the business of the Corporation or any of its subsidiaries or
affiliates during the term of employment, and any and all rights of every nature
whatever relating thereto, shall immediately become the property of the
Corporation, and Executive shall assign, transfer and deliver all patents,
copyrights, royalties, designs and copy, and any and all interests and rights
whatever thereto and thereunder to the Corporation, without further
compensation, upon notice to him from the Corporation.
E. Following the termination of Executive's employment hereunder
(including the expiration of this Agreement) for any reason, Executive shall
not, for a period of two (2) years from such termination solicit any employee of
the Corporation to leave such employ or to enter the employ of Executive or of
any corporation or enterprise with which Executive is then associated or solicit
any customer of the Corporation to terminate its relationship with the
Corporation.
F. During the one-year period following Executive's termination of
employment by Executive without Good Reason or by the Corporation for Cause (the
Restricted Period"), Executive
22
<PAGE>
shall not render any services, directly or indirectly, as an employee, officer,
consultant or in any other capacity, to any individual, firm, corporation or
partnership engaged in the generic pharmaceutical business, or any other
activities competitive with any activities actively engaged in by the Executive
during his employment by the Corporation (such activities being herein called
the 'Corporation's Business'). During the Restricted Period, Executive shall
not, without the prior written consent of the Corporation, hold an equity
interest in any firm, partnership or corporation which competes with the
Corporation's Business, except that beneficial ownership by Executive (including
ownership by any one or more members of his immediate family and any entity
under his direct or indirect control) of less than five (5%) percent of the
outstanding shares of capital stock of any corporation which may be engaged in
any of the same lines of business as the Corporation's Business, if such stock
is listed on a national securities exchange or publicly traded in
over-the-counter market, shall not constitute a breach of the covenants
contained in this Article V. The provisions contained in this Article V as to
the time periods, scope of activities, persons or entities affected, and
territories shall be deemed divisible so that, if any provision contained in
this Article V is determined to be invalid or unenforceable, such provisions
shall be deemed modified so as to be valid and enforceable to the full extent
23
<PAGE>
lawfully permitted.
G. During the term of this agreement, the Corporation shall
maintain a D & O policy providing such coverage for the Directors and Officers
of the Corporation as the Corporation's Board of Directors shall reasonably
determine.
ARTICLE VI.
Bonuses
A. The Board of Directors of the Corporation will consider, and nothing
herein shall preclude the Corporation's Board of Directors from, awarding
Executive bonuses based on performance as they may, at any time or from time to
time determine.
ARTICLE VII.
Stock Award
A. The Corporation will grant to Executive an option to purchase 36,000
shares of the Corporation's common stock at a price per share equal to the fair
market value of the Corporation's common stock (the "Award") on the date the
Compensation Committee of the Board of Directors grants this Award, which so
long as Executive remains in the continuous employ of the Corporation on a given
vesting date, shall vest in Executive in accordance with the following schedule:
(i) one-third of the Award shall vest on October 14, 1997, and (ii) the
remaining two-thirds of the Award shall vest in increments of
24
<PAGE>
one-twenty fourth per month for the twenty four (24) months then following.
B. The option shall be granted pursuant to, and shall be subject to the
terms of the stock option plan adopted by the Corporation.
ARTICLE VIII.
Other Employment Benefits
A. The Corporation shall provide Executive with medical and
hospitalization insurance coverage and retirement plans which in each case are
no less favorable to Executive than those plans provided to the Corporation's
senior executive officers generally (it being understood that to the extent the
plans provide coverage for dependents of employees, Executive shall be entitled
to such coverage for his dependents under the same terms as senior executives
generally). The Corporation shall also provide Executive with life insurance
coverage having a death benefit payable to a beneficiary selected by Executive
equal to $250,000 and disability insurance which provides salary replacement
benefits, not to exceed $250,000 in the aggregate, in the event Executive
becomes incapacitated.
B. During the term of employment, Executive shall be entitled to three
weeks of paid vacation each year and to participate in or receive benefits under
any other employee benefit plan, arrangement or perquisite made available by the
25
<PAGE>
Corporation now or in the future to its senior executive officers generally,
subject to and on a basis consistent with the terms, conditions and overall
administration of such plans, arrangement and perquisites.
C. The Corporation shall reimburse Executive for all reasonable
expenses for promoting the business of the Corporation, including expenses for
travel and similar items, from time to time upon presentation by Executive of
any itemized account of such expenditures in accordance with the Corporation's
policies.
ARTICLE IX.
Key Man Insurance
A. The Corporation may, in its sole and absolute discretion, at any
time after the date hereof, apply for and procure as owner for its own benefit
life insurance on Executive, in such amount and in such form or forms as the
Corporation may determine. Executive shall, at the Corporation's request,
subject to such medical examinations, supply such information and execute such
documents as may be required by the insurance company or companies to whom the
Corporation has applied for such insurance.
ARTICLE X.
Assignment
A. This Agreement shall be binding upon and shall
26
<PAGE>
inure to the benefit of the successors and assigns of the Corporation. Neither
this Agreement nor any rights hereunder shall be assignable by Executive and any
such purported assignment by him shall be void.
ARTICLE XI.
Entire Agreement
A. This Agreement constitutes the entire understanding between the
Corporation and Executive concerning his employment by the Corporation or any of
its subsidiaries and supersedes any and all previous agreements between
Executive and the Corporation or any of its subsidiaries concerning such
employment. This Agreement may not be changed orally.
ARTICLE XII.
Applicable Law
A. The Agreement shall be governed by and construed in accordance with
the laws of the State of Pennsylvania.
GLOBAL PHARMACEUTICAL CORPORATION
By: /s/ Max L. Mendelsohn
------------------------------------
Max L. Mendelsohn, President & CEO
/s/ Marc M. Feinberg
------------------------------------
Marc M. Feinberg
27
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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