<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB/A
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1996
------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
------------- ------------
Commission file number 33-99310-NY
-------------
Global Pharmaceutical Corporation
--------------------------------------------
(Name of small business issuer in its charter)
Delaware 65-0403311
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Castor & Kensington Aves., Philadelphia, PA 19124-5694
------------------------------------------------------
(Address of principal executive officers) (Zip Code)
Issuer's telephone number (215) 289-2220
----------------
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None None
- --------------------- ----------------------
- --------------------- ----------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value per share
--------------------------------------
(Title of class)
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
--- ---
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year. 0
---
The aggregate market value of voting stock held by non-affiliates of
the registrant as of March 25, 1997 (based on the closing price for such shares
on March 25, 1997 as reported by NASDAQ and the assumption for this computation
only that all directors and executive officers of the registrant are affiliates)
was $27,430,120.
------------
As of March 25, 1997, the number of shares outstanding of each of the
issuer's classes of common equity was 4,286,871 shares of common stock, ($.01
par value per share).
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Max L. Mendelsohn(1)(3)............................. 63 President, Chief Executive Officer and a
Director
Cornel C. Spiegler................................... 53 Chief Financial Officer and Vice
President--Administration
Joseph A. Storella, Jr............................... 55 Vice President--Operations
Marc M. Feinberg..................................... 47 Vice President--Quality Assurance and
Regulatory Affairs
Pieter J. Groenewoud................................. 42 Vice President--Product Development
Mitchell Goldberg.................................... 45 Vice President--Sales and Marketing
Seymour Hyden, M.D................................... 63 Vice President--Scientific and Technical
Affairs
Frederick R. Adler(2)(3)(4)......................... 72 Director
Philip R. Chapman(1)(2)............................. 35 Director
Gary Escandon(2)(3)(4).............................. 49 Director
George F. Keane(2)(3)(4)............................ 67 Director
John W. Rowe, M.D.(2) (5)........................... 52 Director
Udi Toledano(1)(2).................................. 46 Director
Richard Weiner...................................... 56 Director
</TABLE>
- ------------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Member of the Stock Option Committee.
(5) Chairman of the Scientific Advisory Board
Max L. Mendelsohn has been President and Chief Executive Officer of the
Company since September 1995 and a director of the Company since December 1993.
From 1970 to 1990, Mr. Mendelsohn was President and Chief Executive Officer of
Barre-National, Inc., a manufacturer of liquid pharmaceutical products. From
1991 to 1995, Mr. Mendelsohn served as Vice President of Business Development of
Pharmakinetics Laboratories, Inc., a provider of clinical and analytical
services to United States and Canadian pharmaceutical companies. Mr. Mendelsohn
has been a director of the Generic Pharmaceutical Industry Association since
1987 and has served as Secretary-Treasurer of that organization since March
1997.
Cornel C. Spiegler has been Chief Financial Officer and Vice
President--Administration of the Company since September 1995. From 1989 to
1995, Mr. Spiegler was Chief Financial Officer and Senior Vice President of
United Research Laboratories, Inc. and Mutual Pharmaceutical Company, Inc.,
companies engaged in the generic pharmaceutical industry. From 1973 to 1989, Mr.
Spiegler held a number of financial and operational management functions,
including Vice President and Controller of Fischer and Porter, Inc., a
manufacturer of process control equipment. From 1970 to 1973, Mr. Spiegler was
employed by the accounting firm of Arthur Andersen and Co. Mr. Spiegler is a
certified public accountant.
2
<PAGE>
Joseph A. Storella, Jr. has been Vice President--Operations since May
1996. From 1986 to 1996, Mr. Storella served as General Manager of Chelsea
Laboratories, Inc., formerly a division of Rugby-Darby Group Companies which, in
1993 was purchased by Marion Merrell Dow and subsequently purchased by The
Hoechst Company. From 1977 to 1986, Mr. Storella served as Vice
President--Operations of Analytab Products, Inc., a division of Ayerst
Laboratories. From 1966 to 1977, Mr. Storella held a number of operational
management positions for Ayerst Laboratories.
Marc M. Feinberg has been Vice President--Quality Assurance and
Regulatory Affairs since October 1996. Prior to joining the Company, from 1995
to 1996, Mr. Feinberg served as Vice President--Quality Assurance and Regulatory
Affairs for the JWS Delavau Company, a contract manufacturer and packager of
nutritional and over-the-counter products. From 1989 to 1995, Mr. Feinberg held
the position of Vice President--Quality Assurance for Packaging Coordinators,
Inc., a contract packager for the pharmaceutical industry. From 1985 to 1989,
Mr. Feinberg served as Manager, Quality Assurance for ICI Pharmaceuticals Group.
From 1972 to 1985, Mr. Feinberg served as Senior Drug Investigator for the U.S.
Food and Drug Administration.
Pieter J. Groenewoud has been Vice President--Product Development since
May 1996, and from October 1995 to May 1996, served as Chief Operating Officer
of the Company. From 1992 to 1995, Mr. Groenewoud served as General Manager of
Vintage Pharmaceutical Inc., a manufacturer of generic drug pharmaceutical
products. From 1990 to 1992, Mr. Groenewoud was Project Manager for Pennex
Products Company Inc., a generic drug company. From 1988 to 1990, Mr. Groenewoud
was Vice President of Quality Control at Medicopharma Inc., a manufacturer of
pharmaceutical products, and formerly held the position of Vice President of
Operations from 1986 to 1988.
Mitchell Goldberg has been Vice President--Sales and Marketing since
March 1997. From October 1996 until March 1997, Mr. Goldberg served as Vice
President--Sales and Marketing for Ethex Corporation, a generic manufacturing
company. From 1985 to October 1996, Mr. Goldberg held a number of sales and
marketing management positions with Schein Pharmaceutical, Inc., a major generic
pharmaceutical company. From 1980 to 1985, Mr. Goldberg served in sales
positions for Pharmavite Corporation, a nutritional supplement manufacturer.
Dr. Seymour Hyden has been Vice President--Scientific and Technical
Affairs since March 1997. From November 1993 to March 1997, Dr. Hyden was the
Vice President--Product Development of Chelsea Laboratories. From October 1992
to November 1993, Dr. Hyden was first the Vice President - Business Development
for Interchem Corporation and then the Vice President - Technical Services for
Block Drug Co., Inc. From March 1985 to October 1992, Dr. Hyden was Executive
Vice President - Technical Affairs for Vitarine Pharmaceuticals, Inc. Prior to
joining Vitarine Pharmaceuticals, Inc. Dr. Hyden served in a number of executive
and management positions in the technical and scientific areas with companies
engaged in the branded and generic pharmaceutical field. Dr. Hyden is the
Chairman of the Science Committee of the Generic Pharmaceutical Industry
Association and has a Ph.D. in Organic Chemistry from New York University.
Frederick R. Adler has been a director of the Company since April 1995,
and also served as a director of the Company from December 1993 through February
1995. Mr. Adler is Managing Director of Adler & Company, a venture capital
management firm he organized in 1968, and a general partner of its related
investment funds. Since January 1, 1997, Mr. Adler has been of counsel to the
law firm of Fulbright & Jaworski L.L.P. From January 1991 to December 1996, Mr.
Adler was a retired senior partner of Fulbright & Jaworski and for more than
five years prior thereto was a senior partner in that firm. Mr. Adler is also
Chairman of the Executive Committee and a director of Data General Corporation,
a computer company; Chairman and a director of Shells Seafood Restaurants, Inc.,
a restaurant company; a director of Prime Cellular, Inc., a wireless
communications company; a director of USA Detergents, Inc., a household products
company; and a director of various private companies. From 1977 until 1995, Mr.
Adler served as a trustee of the Teachers' Insurance & Annuity Association. The
Company retained Fulbright & Jaworski L.L.P. during 1996 to provide legal
services to the Company.
3
<PAGE>
Philip R. Chapman has been a director of the Company since April 1995.
Mr. Chapman has been a principal in Adler & Company, a venture capital
management firm, since 1991 and became a General Partner in 1995. Mr. Chapman is
the son-in-law of Frederick R. Adler, a director of the Company. Prior to
joining Adler & Company, Mr. Chapman was a senior consultant with Booz Allen &
Hamilton International, a management consulting company based in London. Mr.
Chapman is a director of Integrated Packaging Assembly Corp., a semi-conductor
packaging company, as well as a number of private companies. Mr. Chapman served
as Executive Vice President and President of the Company during a portion of
1995.
Gary Escandon has been a director of the Company since April 1995. Mr.
Escandon is President of Alvaro P. Escandon Inc., a domestic and international
supplier of home furnishing textile piece goods that he organized in 1978, and
from 1991 to 1995, Mr. Escandon was President of Refreshment Service Corp. From
1974 to 1978, Mr. Escandon served as Director of Sales Promotion at The Mennen
Company, a manufacturer of health and beauty aids. From 1972 to 1974, Mr.
Escandon served as Sales Promotion Coordinator at Bristol-Myers Company. Mr.
Escandon has served on the Board of Trustees of Muhlenberg College since 1993.
George F. Keane has been a director of the Company since December 1995.
Mr. Keane was the founding Chief Executive Officer of the Common Fund and served
in that capacity from 1971 to 1993 and as President Emeritors and Senior
Investment Advisor until June 1996. As a non-profit organization, the Common
Fund invests funds on behalf of a consortium of educational institutions and
currently has approximately $17 billion under management. Since 1988, Mr. Keane
has been the President of Endowment Advisers, Inc., a registered investment
advisor, and he is currently President Emeritus and Senior Investment Advisor of
Endowment Advisers, Inc. Mr. Keane has served as Chairman of the Board of Trigen
Energy, since July 1994. Mr. Keane also serves on several other boards,
including as a director and Chairman of the Investment Committee of the United
Negro College Fund since 1982; a director of RCB Trust Company since 1991; a
director of the Bramwell Funds, Inc., a registered investment company, since
August 1994; a director of Universal Stainless & Alloy Products, Inc., a
manufacturer of specialty steel products, since 1994; a director of the National
Association of College and University Business Officers since 1993; a director
of the School, College and University Underwriters Ltd., Bermuda since 1986; a
director of the United Educators Risk Retention Group since 1989; a member of
the Investment Advisory Committee for New York State Common Retirement Fund
since 1982; a trustee of the Nicholas-Applegate Investment Trust, a registered
investment company, since January 1993; a trustee of Fairfield University since
1993; and a trustee of Endowment Realty Investors, Inc., a real estate
investment trust, since January 1988.
John W. Rowe, M.D. has been a director of the Company since September
1995. Dr. Rowe is President and Chief Executive Officer of The Mount Sinai
School of Medicine and The Mount Sinai Medical Center in New York City, where he
also serves as a Professor of Medicine and of Geriatrics and Adult Development.
Before joining Mount Sinai in 1988, Dr. Rowe was Professor of Medicine and the
founding Director of the Division on Aging at Harvard Medical School and Chief
of Gerontology at Beth Israel Hospital. He has authored over 200 scientific
publications, most of them concerning the basic biology and physiology of the
aging process, as well as several textbooks on geriatric medicine. Since 1985,
Dr. Rowe has been a director of the MacArthur Foundation Research Network on
Successful Aging. From 1987 to 1993, Dr. Rowe served on the Board of Governors
of the American Board of Internal Medicine. Since 1989, Dr. Rowe has been a
member of the Institute of Medicine of the National Academy of Sciences and
Chair, Council on Biomedical Research and Development of the New York Academy of
Medicine. Dr. Rowe has been a participant and a member of numerous medical
committees and advisory panels and is the recipient of many awards and honors
within the medical community.
Udi Toledano has been a director of the Company since April 1995. Mr.
Toledano has been the President of Andromeda Enterprises, Inc., a private
investment company, since December 1993 and Chairman of the Board of Alyn
Corporation, a manufacturer of advanced materials, since January 1997. Since May
1996, Mr. Toledano has served as a director of HumaScan Inc., a manufacturer of
medical devices. Mr. Toledano was the President of CR Capital Inc., a private
investment company, from 1983 to December 1993. Mr. Toledano has been a director
of Universal Stainless & Alloy Products, Inc., a manufacturer of specialty steel
products since July 1994, and a director of Pudgie's Chicken, Inc., a national
fast food chain, since January 1993.
Richard Weiner has been a director of the Company since March 1997. Mr.
Wiener has been a partner of Stern, Wiener & Levy LLP, a New York City law firm
since 1980 and since 1980, he has served as Secretary and a director of Barclay
Optical Companies, a franchise of Cohen Fashion Optical.
4
<PAGE>
All directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Executive officers are
elected by the Board of Directors to hold office for such term as may be
prescribed by the Board of Directors.
Committees
The Board of Directors of the Company has an Executive Committee, Audit
Committee, Compensation Committee and Stock Option Committee. During the fiscal
year ended December 31, 1996, each director in office during such fiscal year
attended not less than 75% of the aggregate number of meetings of the Board of
Directors and of meetings of the committee of the Board on which he served,
except that Mr. Adler did not attend the sole meeting of the Audit Committee.
The Board of Directors held three meetings during the fiscal year ended December
31, 1996.
The Executive Committee, established in September 1995, currently
consists of Messrs. Mendelsohn, Chapman and Toledano. The Executive Committee
has all the powers of the Company's Board of Directors except that it is not
authorized to amend the Company's Certificate of Incorporation, declare any
dividends or issue shares of the capital stock of the Company. The Executive
Committee met five times during the fiscal year ended December 31, 1996, with
all members of the Committee in attendance.
The Audit Committee, established in October 1995, currently consists of
Mr. Toledano, as Chairman, and Messrs. Adler, Chapman, Escandon and Keane and
Dr. Rowe. The Audit Committee reviews with the Company's independent accountants
the scope and timing of their audit services, any other services they are asked
to perform, the report of independent accountants on the Company's financial
statements following completion of their audit and the Company's policies and
procedures with respect to internal accounting and financial controls. In
addition, the Audit Committee makes an annual recommendation to the Board of
Directors concerning the appointment of independent accountants for the ensuing
year. The Audit Committee met one time during the fiscal year ended December 31,
1996 with all members of the Committee in attendance except for Mr. Adler.
The Compensation Committee, established in October 1995, currently
consists of Mr. Escandon, as Chairman, and Messrs. Adler, Keane and Mendelsohn.
The Compensation Committee reviews the compensation and benefits of all officers
of the Company and makes recommendations to the Board of Directors, reviews
general policy matters relating to compensation and benefits of employees of the
Company. Prior to the formation of the Stock Option Committee in March 1997, the
Compensation Committee also administered the 1995 Stock Incentive Plan (the
"1995 Plan"). The Compensation Committee met three times during the fiscal year
ended December 31, 1996 with all members of the Committee in attendance.
The Stock Option Committee, established in March 1997, currently
consists of Mr. Escandon, as Chairman, and Messrs. Adler and Keane. The
Committee reviews the stock option benefits of all officers of the Company and
other participants in the plan and makes recommendations to the Board of
Directors, reviews general policy matters relating to stock options proposed to
be granted to employees of the Company and administers the 1995 Plan. The Stock
Option Committee has not held a meeting to date.
In March 1997, the Board of Directors authorized the formation of the
Scientific Advisory Board to be chaired by Dr. Rowe. See "Certain Transactions."
Section 16(a) Beneficial Ownership Reporting Compliance
To the Company's knowledge, the Company's directors, officers and
beneficial owners of ten percent or more of the Company's Common Stock are in
compliance with the reporting requirements of Section 16(a) under the Securities
Exchange Act of 1934, as amended except for a late filing of a Form 3 by Richard
N. Wiener.
Item 10. Executive Compensation
The following table summarizes the compensation earned by or paid to
the Company's current President and Chief Executive Officer and the Company's
two most highly compensated executive officers for 1995 and 1996. None of the
persons listed on the table were employees of the Company in 1994. No other
person received in excess of $100,000 of compensation from the Company during
1996.
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
---------------------------------------------- ------------
Name and Principal Position Year Salary ($) Bonus ($) Other Annual
- --------------------------- ---- ---------- --------- ------------ Options
Compensation($) (#)
--------------- ------
<S> <C> <C> <C> <C> <C>
Max L. Mendelsohn, President and 1996 $150,001(1) -- 23,368(2) --
Chief Executive Officer (1) 1995 $ 50,193(3) -- -- 65,000
Cornel C. Spiegler, Chief Financial 1996 $131,144 -- -- --
Officer and Vice 1995 $ 31,250 $25,000(4) -- 36,000
President--Administration
Pieter J. Groenewoud, Vice 1996 $107,827 -- -- --
President--Product Development 1995 $ 21,808 -- -- 25,000
</TABLE>
- -----------------------
(1) The salary excludes $28,558 that was earned by Mr. Mendelsohn in 1995 and
paid to him in 1996.
(2) Represents life insurance and long-term disability insurance along with
gross-up tax payments with respect to such insurance payments in the amount
of $17,895 for 1996 and $5,473 paid in 1996 for life insurance and related
gross-up tax payments paid for premiums in 1997.
(3) Mr. Mendelsohn has served as President and Chief Executive Officer of the
Company since September 1995. The salary includes $28,558 that was earned by
Mr. Mendelsohn in 1995 and paid to him in 1996.
(4) Bonus earned in 1995 and paid in 1996.
The following table sets forth information with respect to unexercised
stock options held at December 31, 1996 by the persons named in the Summary
Compensation Table. There were no exercises of options to purchase the Common
Stock by such individuals during the fiscal year ended December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options Held at in-the-Money Options at
Fiscal Year End(#) Fiscal Year End($)(1)
------------------------- ------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Max L. Mendelsohn............ 28,889 36,111 0 0
Cornel C. Spiegler........... 15,000 21,000 0 0
Pieter J. Groenewoud......... 10,417 25,583 0 0
</TABLE>
(1) Computed based on the difference between the closing bid price per share of
the Common Stock of $6.75 on December 31, 1996 and the exercise price.
Employment Agreements
Max L. Mendelsohn, Pieter J. Groenewoud and Cornel C. Spiegler have
entered into three-year employment agreements with the Company for the position
of President and Chief Executive Officer; Vice President, Product Development;
and Chief Financial Officer and Vice President--Administration; respectively.
Mr. Mendelsohn's, Mr. Groenewoud's and Mr. Spiegler's employment agreements
provide for a base annual salary of $150,000, $90,000 and $125,000,
respectively, which may be increased annually at the discretion of the Board of
Directors, as well as stock options and a customary benefits package. Under Mr.
Mendelsohn's employment agreement, he may be eligible for a performance-based
bonus equal to $30,000 which amount was not earned in 1996.
6
<PAGE>
At the Company's option, the term of each of Messrs. Mendelsohn's,
Groenewoud's and Spiegler's employment agreement may be extended for one
additional year. The employment agreements of Messrs. Mendelsohn, Groenewoud and
Spiegler prohibit them from (i) competing with the Company for one year
following termination of employment with the Company and (ii) disclosing
confidential information or trade secrets in any unauthorized manner. If one of
those employees is discharged without cause (as defined in such employee's
agreement), the Company shall continue to pay such employee at his then current
salary for the longer of six months or the remainder of the agreed upon
employment period.
In connection with his employment agreement, the Company granted Mr.
Mendelsohn an option to purchase 12,500 shares of Common Stock at $5.75 per
share and granted to him in December 1995 an additional option to purchase
52,500 shares of Common Stock at $8.50 per share. The options vest in equal
monthly installments on the last day of each month occurring in the 36-month
period beginning September 1, 1995, subject to Mr. Mendelsohn's continued
employment. The options will become fully vested if Mr. Mendelsohn's employment
is terminated under certain circumstances, including a termination by the
Company without cause.
In December 1995, in connection with his employment agreement, the
Company granted Mr. Groenewoud an option to purchase 25,000 shares of Common
Stock at $8.50 per share. One-third of the option vested on October 1, 1996 and
the remaining two-thirds vests in monthly installments over the 24-month period
beginning on October 1, 1996, in each case based on Mr. Groenewoud's continued
employment during that time.
In connection with his employment agreement, in December 1995 the
Company granted Mr. Spiegler an option to purchase 36,000 shares of Common Stock
at $8.50 per share. One-third of the option vested on September 27, 1996 and the
remaining two-thirds vests in monthly installments over the 24-month period
beginning on September 27, 1996, in each case based on Mr. Spiegler's continued
employment during that time.
At various times during 1996 and 1997, Joseph Storella, Marc Feinberg,
Mitchell Goldberg and Seymour Hyden entered into three-year employment
agreements with the Company for the position of Vice President-Operations; Vice
President-Quality Assurance and Regulatory Affairs; Vice President-Sales and
Marketing; and Vice President-Scientific and Technical Affairs; respectively.
Messrs. Storella's, Feinberg's and Goldberg's and Dr. Hyden's employment
agreements provide for a base annual salary of $130,000, $130,000, $110,000 and
$130,000, respectively, which may be increased annually at the discretion of the
Board of Directors, as well as stock options and a customary benefits package.
Under Mr. Goldberg's employment agreement, he received a sign-on bonus of
$10,000. In addition, he may be eligible for certain performance-based bonuses
in 1997 in the amount of $5,000 per quarter in the event that the Company
reaches certain projected sales goals, which amount shall be proportionally
increased in the event that such goals are exceeded and $10,000 per quarter in
1998 in the event that such projections are met.
The term of each of Messrs. Storella's, Feinberg's and Goldberg's and
Dr. Hyden's employment agreement may be extended. The employment agreements of
Messrs. Storella, Feinberg and Goldberg and Dr. Hyden prohibit them from (i)
competing with the Company for one year following termination of employment with
the Company and (ii) disclosing confidential information or trade secrets in any
unauthorized manner. If Mr. Goldberg is discharged without cause (as defined in
his agreement), the Company shall continue to pay Mr. Goldberg his then current
salary for the lesser of six months or the remainder of the agreed upon
employment period. If Messrs. Storella or Feinberg or Dr. Hyden is discharged
without cause (as defined in such employee's agreement), the Company shall
continue to pay such employee his then current salary for a period of six
months.
In 1996, in connection with his employment agreement, the Company
granted Mr. Storella an option to purchase 36,000 shares of Common Stock at
$9.13 per share. One-third of the option vests on May 20, 1997 and the remaining
two-thirds vests in monthly installments over the 24-month period beginning on
May 20, 1997, in each case based on Mr. Storella's continued employment during
that time.
In 1996, in connection with his employment agreement, the Company
granted Mr. Feinberg an option to purchase 36,000 shares of Common Stock at
$8.38 per share. One-third of the option vests on October 14, 1997 and the
remaining two-thirds vests in monthly installments over the 24-month period
beginning on October 14, 1997, in each case based on Mr. Feinberg's continued
employment during that time.
7
<PAGE>
In 1997, in connection with his employment agreement, the Company
granted Mr. Goldberg an option to purchase 36,000 shares of Common Stock at
$8.50 per share. One-third of the option vests on March 17, 1998 and the
remaining two-thirds vests in monthly installments over the 24-month period
beginning on March 17, 1998, in each case based on Mr. Goldberg's continued
employment during that time.
In 1997, in connection with his employment agreement, the Company
granted Dr. Hyden an option to purchase 36,000 shares of Common Stock at $8.25
per share. One-third of the option vests on March 31, 1998 and the remaining
two-thirds vests in monthly installments over the 24-month period beginning on
March 31, 1998, in each case based on Dr. Hyden's continued employment during
that time.
Compensation of Directors
Members of the Board of Directors of the Company received no annual
remuneration for acting in that capacity during the fiscal year ended December
31, 1996. The Company's non-employee directors were paid $500 (plus reasonable
expenses) for each attended meeting of the Board of Directors or committee
thereof. Pursuant to the terms of the 1995 Plan, in June 1996 each of Keane and
Dr. Rowe were granted options to purchase 10,000 shares of Common Stock at an
exercise price of $10.50. The 1995 Plan was amended in March 1997 to provide
that each person who is elected as a director at any time other then at an
annual meeting of Stockholders shall be entitled to receive options to purchase
10,000 shares of Common Stock on the date of such election in lieu of the
Director Options to be granted after the Company's next annual meeting. In
accordance with such amendment, Mr. Weiner received options to purchase 10,000
shares of Common Stock at an exercise price of $8.50.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of April 28, 1997 (except as
otherwise noted in the footnotes) regarding the beneficial ownership of the
Company's Common Stock of: (i) each person known by the Company to own
beneficially more than five percent of the outstanding Common Stock; (ii) each
director; (iii) each executive officer named in the Summary Compensation Table
(see "Executive Compensation"); and (iv) all directors and executive officers of
the Company as a group. Except as otherwise specified, the named beneficial
owner has the sole voting and investment power over the shares listed.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership of Percentage of
Name and Address of Beneficial Owner Common Stock Common Stock
------------------------------------ ------------ ------------
<S> <C> <C>
Frederick R. Adler(1)............................ 625,300 14.5 %
1520 South Ocean Boulevard
Palm Beach, FL 33480
Philip R. Chapman(2)............................. 0 *
c/o Adler & Company
100 First Stamford Place
Stamford, CT 06902
Gary R. Dubin(3)................................. 527,876 12.3 %
4748 Tivoli Avenue
Sarasota, FL 34235
Gary Escandon(4)................................. 68,227(4) 1.6 %
c/o Alvaro P. Escandon, Inc.
17 Prospect Street
Highlands, NJ 07732
George F. Keane(5)............................... 20,001 *
c/o The Common Fund
450 Post Road East
Westport, CT 06881
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Max L. Mendelsohn(6)............................. 125,988 2.9 %
c/o Global Pharmaceutical Corporation
Castor and Kensington Avenues
Philadelphia, PA 19124
Merck KGaA(7).................................... 250,000 5.7 %
Frankfurter Strasse 250
D-64239
Darmstadt, Germany
John W. Rowe, M.D.(8)............................ 20,001 *
c/o Mount Sinai Medical Center
1 Gustave L. Levy Place
New York, NY 10029
Udi Toledano(9).................................. 198,425 4.6 %
545 Madison Avenue
Suite 800
New York, NY 10022
Richard Wiener................................... 0 *
Stern, Wiener & Levy
950 Third Avenue
New York, NY 10022
Cornel Spiegler(10).............................. 31,019 *
c/o Global Pharmaceutical Corporation
Castor and Kensington Avenues
Philadelphia, PA 19124
Pieter Groenewoud(11)............................ 17,602 *
c/o Global Pharmaceutical Corporation
Castor and Kensington Avenues
Philadelphia, PA 19124
All directors and executive officers as a group (10 1,106,563 24.9 %
persons)(1)(2)(4)(5)(6)(8)(9)
(10)(11).........................................
</TABLE>
- -------------------------------
* Less than one percent.
(1) Includes 136,495 shares of Common Stock held by 1520 Partners,
Ltd., a limited partnership of which Mr. Adler is the general partner.
Mr. Adler may be deemed to be the beneficial owner of the shares of
Common Stock held by 1520 Partners, Ltd., with respect to which shares
Mr. Adler disclaims beneficial ownership. Also includes a warrant to
purchase 17,500 shares of Common Stock which may be exercised within 60
days.
(2) Does not include 50,000 shares of Common Stock owned by a limited
partnership of which Mr. Chapman's wife is the sole general partner.
(3) Includes 137,489 shares of Common Stock owned by the Dubin Family
Trust for the benefit of Mr. Dubin's wife and grandchildren, with
respect to which Mr. Dubin disclaims beneficial ownership.
(4) Includes 7,500 shares of Common Stock owned by the Alvaro P.
Escandon Inc. Money Purchase Pension Plan dated 12/1/80, with respect
to which Mr. Escandon disclaims beneficial ownership. Also includes a
warrant to purchase 3,500 shares of Common Stock which may be exercised
within 60 days.
(5) Consists of options immediately exercisable for 16,667 shares of
Common Stock and options to purchase 3,334 Shares of Common Stock
exercisable within 60 days.
9
<PAGE>
(6) Includes options to purchase 39,722 shares of Common Stock and a
warrant to purchase 3,500 shares of Common Stock which may be exercised
within 60 days.
(7) Includes 100,000 shares of Common Stock currently exercisable
pursuant to common stock purchase warrants but excludes a currently
indeterminate number of shares of Common Stock underlying another
series of common stock purchase warrants (the "Merck B Warrants")
issued to Merck KGaA. The actual number of shares contingently issuable
under the Merck B Warrants are to be based upon future gross profit of
the Company arising from (i) an agreement between a subsidiary of Merck
KGaA and the Company and (ii) other products mutually agreed to by the
Company and Merck KGaA, but in no event in excess of 700,000 shares.
(8) Consists of options immediately exercisable for 16,667 shares of
Common Stock and options to purchase 3,334 shares of Common Stock
exercisable within 60 days.
(9) Includes 68,568 shares of Common Stock owned by Mr. Toledano's wife
and 22,529 shares of Common Stock owned by a trust for the benefit of
minor children, all of which shares Mr. Toledano disclaims beneficial
ownership. Also includes warrants to purchase 14,000 shares of Common
Stock exercisable within 60 days.
(10) Includes options to purchase 21,000 shares and a warrant to
purchase 3,500 shares of Common Stock which may be exercised within 60
days.
(11) Includes options to purchase 14,583 shares of Common Stock which
may be exercised within 60 days.
Item 12. Certain Relationships and Related Transactions
Merck KGaA Relationship
The Company has entered into agreements with Merck KGaA, a German
corporation and a stockholder of the Company, and two of its indirect
subsidiaries, Genpharm, Inc. ("Genpharm") and Dey Laboratories, Inc. ("Dey"),
concerning the Company's serving as a secondary site manufacturer for a minimum
of 30% of Genpharm's United States requirements of Ranitidine, the generic
version of the brand name drug Zantac, and the distribution of certain of the
Company's generic products through Dey. Merck KGaA owns 150,000 shares of Common
Stock of the Company, holds warrants to acquire 100,000 shares and has the right
to acquire warrants to purchase additional shares. See "Beneficial Ownership of
Common Stock by Certain Stockholders and Management."
In January 1997, the Company entered into an amendment to the Genpharm
Agreement (the "Amendment"), pursuant to which the Company will package a
minimum of 30% of Genpharm's United States Ranitidine 1 production requirements
based on a five-year cost-plus and percentage of profits compensation
arrangement following Genpharm's receipt of the requisite FDA Ranitidine
approvals. In addition to the manufacture and distribution of Ranitidine, the
Genpharm Agreement provides the Company with the opportunity to develop products
with the assistance of Merck KGaA that are marketed outside the U.S.
The Company paid legal fees in the amount of $5,789 to Stern, Wiener
and Levy during 1996 in connection with the amendment to the Genpharm Agreement.
Richard Wiener, a director of the Company, is a partner at Stern, Wiener & Levy.
Scientific Advisory Board
In March 1997, the Board of Directors authorized the formation of a
Scientific Advisory Board to be chaired by Dr. Rowe. As Chairman, Dr. Rowe will
receive an initial stipend of $30,000 along with options to purchase 15,000
shares of Common Stock having an exercise price equal to the fair market value
on the date of the grant. Dr. Rowe will also receive an annual grant of options
to purchase 5,000 shares of Common Stock as well as option to purchase 1,000
shares of Common Stock for each meeting attended, with a maximum of four
meetings per year. Each other member of the Scientific Advisory Board will
receive options to purchase 2,000 shares of Common Stock on the date of joining
the board, a stipend of $1,000 per meeting and a grant of options to purchase
750 shares of Common Stock for each meeting attended, with a maximum of four
meetings per year.
10
<PAGE>
Item 13. Exhibits, Lists and Reports on Form 8-K
a) Exhibits
Exhibit
Number Description of Document
------ -----------------------
2.1 Agreement and Plan of Merger among the Company, Management
Stockholders and Toledex Acquisition Corporation, dated as of
April 6, 1995. (1)
2.2 Certification of Merger between Toledex Acquisition
Corporation and the Company, dated April 6, 1995. (1)
3.1 Restated Certificate of Incorporation of the Company. (1)
3.2 By-laws of the Company. (1)
4.1 Specimen Certificate of the Company's Common Stock, par value
$.01 per share. (1)
4.2 Form of Representative's Warrant Agreement between the Company
and the Representative, including form of Representative's
Warrant Certificate. (1)
10.1 Employment Agreement of Pieter Groenewoud, dated as of October
1, 1995. (1)
10.2 Employment Agreement of Cornel C. Spiegler, dated as of
September 27, 1995. (1)
10.3 Employment Agreement of Max L. Mendelsohn, dated as of
September 1, 1995. (1)
10.4 Consulting Agreement between the Company and Andromeda
Enterprises, Inc., dated as of April 6, 1995. (1)
10.5 Consulting Agreement between the Company and Gary R. Dubin,
dated as of August 9, 1995. (1)
10.6 The Company's 1995 Stock Incentive Plan. (1)
10.7 Distribution Agreement by and between The Care Buying Alliance
and the Company, dated as of October 19, 1995. (1)
10.8 Exclusive Supply Agreement between Dey Laboratories LP and the
Company, dated November 1, 1995. (1)
10.9 Form of Amended Agreement between the Company and Merck
Kommanditgesellschaft auf Aktien regarding the issuance of
Common Stock Purchase Warrants, dated as of November , 1995.
(1)
10.10 Form of Amended Manufacturing Agreement between the Company
and Genpharm, Inc., dated as of November , 1995. (1)
10.11 Loan Agreement between the Company, the Toledano Group, the
Dubin Group, and Frederick R. Adler, dated as of April 6,
1995, including forms of Promissory Notes. (1)
10.12 First Amendment to Loan Agreement, dated November 3, 1995. (1)
10.13 Secured Party Consent and Agreement, among the Company, Adjo,
Inc., Sidney Weinberg and Gertrude Weinberg, dated as of April
6, 1995. (1)
11
<PAGE>
10.14 $50,000 Loan Agreement between American Generics, Inc. and the
Company, dated January 20, 1995. (1)
10.15 Unsecured $70,000 Promissory Note from Global Pharmaceutical
Corporation, a Florida corporation ("GPC Florida"), to Tony
Tabatznik, dated March 1, 1995. (1)
10.16 Stockholders' Agreement among the Company and its existing
stockholders, dated as of April 6, 1995. (1)
10.17 Form of First Amendment to Stockholders' Agreement, dated as
of November 3, 1995. (1)
10.18 Acquisition Agreement between PIDC-Financing Corporation and
GPC Florida, dated September 17, 1993. (1)
10.19 Security Agreement by and between the Company and PIDC Local
Development Corporation, dated October 15, 1993, with related
Note and Commitment, and Waiver and Consent dated November 13,
1995. (1)
10.20 Promissory Note from GPC Florida in favor of Richlyn
Laboratories, Inc. in the amount of $583,654.44, dated as of
August 18, 1993. (1)
10.21 Loan Agreement by and between PIDC Financing Corporation and
the Pennsylvania Industrial Development Authority ("PIDA") for
a loan in a principal amount not to exceed $1,026,000, dated
April 18, 1994, with Waiver and Consent dated November 13,
1995. (1)
10.22 Open-End Mortgage between PIDC Financing Corporation and PIDA
dated April 18, 1994. (1)
10.23 Mortgage and Financing Statement Subordination Agreement by
and among PIDC Financing Corporation, Sidney Weinberg and
Gertrude Weinberg, GPC Florida and the PIDA, dated as of April
18, 1994. (1)
10.24 Mortgage and Financing Statement Subordination Agreement by
and among PIDC Financing Corporation, Richlyn Laboratories,
Inc., GPC Florida and the PIDA, dated as of April 18, 1994.
(1)
10.25 Assignment of Installment Sale Agreement by and among PIDC
Financing Corporation, PIDA and GPC Florida, dated April 18,
1994. (1)
10.26 Installment Sale Agreement by and between PIDC Financing
Corporation and GPC Florida dated April 18, 1994. (1)
10.27 PIDC Financing Corporation Note to the PIDA, dated April 18,
1994. (1)
10.28 Secured $500,000 Note from the Company to PIDC Local
Development Corporation. (1)
10.29 Consent, Subordination and Assumption Agreement by and among
GPC Florida, PIDC Financing Corporation and PIDA, dated April
18, 1994. (1)
10.30 Toledano Group Agreement by and among Udi Toledano, the
Toledano Group and the Toledano Family, dated as of April 6,
1995. (1)
10.31 Dubin Loan Group Agreement by and among Gary R. Dubin and the
Dubin Loan Group, dated as of April 6, 1995. (1)
10.32 Restated and Amended Asset Purchase Agreement by and among GPC
Florida,
12
<PAGE>
and Richlyn Laboratories, Inc. and Sidney and Gertrude
Weinberg, dated June 18, 1993. (1)
10.33 Waiver Agreement by and among the Company, Adjo, Inc.,
formerly known as Richlyn Laboratories, Inc., Richard R.
Weinberg and various members of the Weinberg family, dated as
of November 7, 1995. (1)
10.34 Forms of Loan Agreements by and between the Company and each
of Udi Toledano, Frederick R. Adler, Gary Escandon, Max L.
Mendelsohn and Cornel C. Spiegler, dated November 23, 1995.
(1)
10.35 Employment Agreement of Gabriel Lebovic, dated as of December
1, 1995. (1)
10.36 Letter Agreement, dated December 14, 1993, between Moty Hermon
and Frederick R. Adler. (1)
10.37 Form of Escrow Agreement by and among the Company, the
Representative and Continental Stock Transfer and Trust
Company. (1)
10.38 Supply and Marketing Agreement by and between the Company and
Caraco Supply and Pharmaceutical Laboratories Ltd. dated
September 20, 1996. (2)
10.39 Employment agreement by and between the Company and Marc M.
Feinberg dated September 30, 1996. (2)
10.40 Technical Collaboration Agreement by and between the Company
and Genpharm Inc. dated January 8, 1997. (3)
10.41 Employment agreement by and between the Company and Dr.
Seymour Hyden dated February 7, 1997. (3)
10.42 Employment agreement by and between the Company and Mitchell
Goldberg dated March 13, 1997. (3)
10.43 Employment agreement by and between the Company and Joseph
Storella dated May 1, 1996.
10.44 Revised employment agreement by and between the Company and
Pieter Groenewoud dated May 10, 1996.
11.1 Statement Regarding Computation of Earnings Per Share. (1)
23.1 Consent of Price Waterhouse LLP. (1)
27 Financial Data Schedule (3)
99.1 Court Order issued May 25, 1993 by the United States District
Court for the Eastern District of Pennsylvania against Richlyn
Laboratories, Inc. (1)
(1) Previously filed with the Commission as Exhibits to, and incorporated
herein by reference from, the Registrant's Registration Statement on
Form SB-2 (File No. 33-99310-NY)
(2) Previously filed with the Commission as Exhibits to, and incorporated
herein by referenced from, the Registrant's Quarterly Report on Form 10-QSB
for the quarterly
(3) Previously filed with the Commission as Exhibits to, and incorporated
herein by reference from the Registrants Annual Report on Form 10-KSB for
the year 1996.
b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the
year ended December 31, 1996.
13
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GLOBAL PHARMACEUTICAL CORPORATION
By /s/ Max L. Mendelsohn
--------------------------------------------------------
Max L. Mendelsohn, President and Chief Executive Officer
Date April 29, 1997
--------------
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of May 1, 1996 by and between GLOBAL PHARMACEUTICAL
CORPORATION, a Delaware corporation (hereinafter referred to as the
"Corporation"), and JOSEPH STORELLA (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 an the terms provided in this Agreement from
May 20, 1996 (the "Effective Date"), until the date the employment 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:
<PAGE>
(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) perform such duties consistent with the offices described in
subsection (iii) below as the Corporation may from time to time assign to him;
and
(c) serve as the Vice President-Operations, reporting solely to the
Corporation's Chief Executive Officer and Board of Directors.
B. During the term of employment, the Corporation will not cause
Executive to be physically relocated outside of the Philadelphia, PA
metropolitan area without his prior written consent, which consent will not
unreasonably be withheld.
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.
2
<PAGE>
ARTICLE IV.
Term; Termination
A. Unless terminated sooner as hereinafter provided, the initial term
of employment of 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
3
<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 4.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 the Corporation shall, subject to the Executive's compliance with
Section 5 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 Section V. of this Agreement;
4
<PAGE>
(b) material breach of any other provision of this Agreement by
Executive (other than any such breach resulting from Executive's incapacity due
to physical or mental illness), if that breach is not 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 my 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 5 hereof, pay
Executive (i) within fifteen (15) days after the termination date, all accrued
5
<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
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 and reasonably acceptable to Executive.
ARTICLE V.
Covenants
A. While Executive is employed hereunder by the Corporation, he shall
not, without the prior written consent of
6
<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 sha11 be entitled to disclose the terms of this Agreement
to potential employers of Executive after the expiration of the term of
employment 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
7
<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 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 for
any reasons, Executive shall not, for a period of two (2) years from such
termination solicit any employee of the Corporation to leave such employ to
enter the employ of Executive or of any corporation or enterprise with which
Executive is then associated or solicit any customers 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 shall not render any services, directly or
indirectly, as an
8
<PAGE>
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 in which the Corporation or
any of its affiliates is engaged at any time during the Restricted Period (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 Section V. The provisions contained in this Section
V. as to the time periods, scope of activities, persons or entities affected,
and territories restricted shall be deemed divisible so that, if any provision
contained in this Section 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 lawfully permitted.
9
<PAGE>
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 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 May 20, 1997, and (ii) the remaining
two-thirds of the Award shall vest in increments of one-twenty fourth per month
for the following twenty four (24) months.
B. The option shall be granted pursuant to, and shall be subject to
the terms of the stock option plan adopted by the Corporation.
10
<PAGE>
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. 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
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,
11
<PAGE>
from time to time upon presentation by Executive of any itemized account of
such expenditures in accordance with the Corporation's policies.
D. The Corporation shall pay the reasonable lodging costs of the
Executive in the Philadelphia, PA metropolitan area for a period not to exceed
four (4) months at a mutually agreed upon location and the reasonable
transportation costs of the Executive between Charlotte, NC and Philadelphia,
PA until the Executive makes a permanent move to the Philadelphia, PA
metropolitan area. Such a permanent move shall occur within a reasonable time
from the date hereof.
E. The Corporation shall reimburse Executive up to $12,000 for expenses
incurred pursuant to the Executive's permanent move to the Philadelphia, PA
metropolitan area. These expenses must be supported by the appropriate
documentation and may include expenses such as moving, title closing and real
property taxes due and owing upon the title closing.
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,
12
<PAGE>
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 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.
13
<PAGE>
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/ Joseph Storella
----------------------------------
Joseph Storella
14
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of May 10, 1996 by and between GLOBAL PHARMACEUTICAL
CORPORATION, a Delaware corporation (hereinafter referred to as the
"Corporation"), and PIETER GROENEWOUD (hereinafter referred to as "Executive").
WHEREAS, the Corporation and the Executive are parties to that certain
Employment Agreement, dated October 1, 1995 (the "Prior Agreement"); and
WHEREAS, the Corporation and the Executive mutually desire to terminate
the Prior Agreement, and replace such agreement with this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and 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
May 20, 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
<PAGE>
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:
(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) perform such duties consistent with the offices described in
subsection (c) below as the Corporation may from time to time assign to him; and
(c) serve as the Vice President-Product Development reporting to
the Corporation's Vice President-Operations, Chief Executive Officer and Board
of Directors.
B. During the term of employment, the Corporation will not cause
Executive to be physically relocated outside of the Philadelphia, PA
metropolitan area without his prior written consent, which consent will not
unreasonably be withheld.
ARTICLE III
Compensation
A. The Corporation will compensate Executive for the duties performed
by him hereunder by payment of a salary (the
<PAGE>
"Salary") at the rate of $90,000 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.
ARTICLE IV.
Term; Termination
A. Unless terminated sooner as hereinafter provided, the initial term
of employment of 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 periods, 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
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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" as defined below at any time and without prior 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 or
pursuant to Article IV.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 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;
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(b) material breach of any other provision of this Agreement by
Executive (other than any such breach resulting from Executive's incapacity due
to physical or mental illness), if that breach is not 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 for other than "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
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Executive's compliance with Article V hereof, pay Executive (i) within fifteen
(15) days after the termination date, all accrued 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
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 herein, 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, reasonably 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
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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 up to 2% of the outstanding 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 after the expiration of the term of employment 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
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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 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 customers of the Corporation to terminate its relationship with the
Corporation.
F. During the one-year period following Executive's termination of
employment by Executive for other than Good Reason or by the Corporation for
Cause (the "Restricted Period") (or
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following the expiration of this Agreement), Executive 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 in which the Corporation or any of its affiliates is engaged at
any time during the Restricted Period (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 restricted 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
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modified so as to be valid and enforceable to the full extent lawfully
permitted.
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. Pursuant to Section 7.1.2 of Article VII of the Prior Agreement, the
Corporation has granted to Executive an option to purchase 50,000 shares of the
Corporation's common stock at a price per share equal to $8.50 (the "Prior
Award"). It is agreed that the number of shares of common stock which may be
purchased upon the exercise of the Prior Award shall be reduced to 25,000
shares, with the option for the remaining 25,000 shares being cancelled. In
accordance with the terms of the Prior Award, such remaining option shall
continue to vest, for so long as the Executive shall remain in the employ of the
Corporation, in accordance with the following schedule: (i) one-third (1/3) of
the remaining option shall vest on October 1, 1996
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and (ii) the remaining two-thirds (2/3) of the remaining option shall vest in
increments of one-twenty fourths (1/24) per month for the 24 months following
October 1, 1996.
B. The remaining portion of the Prior Award shall continue to be
subject to the terms of the stock option plan adopted by the Corporation.
C. The option to purchase 25,000 shares of the Corporation's common
stock provided for in Section 7.1.1 of Article VII of the Prior Agreement
shall be terminated effective immediately, and shall no longer be exercisable,
in whole or in part.
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. 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.
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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
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.
D. The Corporation shall pay the reasonable lodging costs of the
Executive in the Philadelphia, PA metropolitan area at a mutually agreed upon
location and the reasonable transportation costs of the Executive between
Charlotte, NC and Philadelphia, PA until the Executive makes a permanent move to
the Philadelphia, PA metropolitan area. Such a permanent move shall occur within
a reasonable time from the date hereof but in no event later than July 31, 1996.
E. The Corporation shall reimburse Executive up to $12,000 for expenses
incurred pursuant to the Executive's permanent move to the Philadelphia, PA
metropolitan area. These
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expenses must be supported by the appropriate documentation and may include
expenses such as moving, title closing and real property taxes due and owing
upon the title closing.
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 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.
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ARTICLE XI.
Entire Agreement
The Executive and Corporation hereby agree that, effective upon the
execution of this Agreement, and notwithstanding any provision in the Prior
Agreement to the contrary, the Prior Agreement shall be null and void in all
respects, and that this Agreement shall supersede in its entirety the Prior
Agreement, except as specifically provided in Art1cle VII hereof.
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
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Max L. Mendelsohn, President & CEO
/s/ Pieter Groenewoud
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Pieter Groenewoud
