<PAGE>
As filed with the Securities and Exchange Commission on January 13, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-----------------
GLOBAL PHARMACEUTICAL CORPORATION
(Name of small business issuer as specified in its charter)
Delaware 2834 65-0403311
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
Castor & Kensington Avenues
Philadelphia, PA 19124-5694
(215) 289-2220
(Address, including zip code, and telephone
number, including area code, of
principal executive offices)
MAX L. MENDELSOHN
President and Chief Executive Officer
GLOBAL PHARMACEUTICAL CORPORATION
CASTOR & KENSINGTON AVENUES
PHILADELPHIA, PA 19124-5694
(215) 289-2220
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
---------------
Copies of all communications, including all communications sent to
the agent for service, should be sent to:
SHELDON G. NUSSBAUM, ESQ.
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
---------------
Approximate date of proposed sale to the public: From time to time
after the effective date of this Registration Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended, other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. |_|
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. |_| ________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| _____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Proposed Proposed Maximum
Title of Shares Amount Maximum Aggregate Amount of
to be Registered to be Registered Aggregate Price Offering Price Registration Fee
Per Unit
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 1,818,182 $2.875(1) $5,227,273.25 $1,542.04
par value per share
===================================================================================================================================
</TABLE>
(1) The price is estimated in accordance with Rule 457(g) under the
Securities Act of 1933, as amended, solely for the purpose of calculating
the registration fee and is $2.875, the average of the high and low
prices of Global Pharmaceutical Corporation Common Shares as reported on
The Nasdaq SmallCap Stock Market on January 12, 1998.
--------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 13, 1998
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
GLOBAL PHARMACEUTICAL CORPORATION
1,818,182 Shares
Common Stock
This Prospectus relates to the resale of shares of Common Stock, $.01
par value per share (the "Common Stock"), of Global Pharmaceutical Corporation
(the "Company" or "Global") from time to time for the account of the Selling
Stockholders (the "Selling Stockholders"). The Common Stock registered hereby
is issuable upon the conversion of Series B Convertible Preferred Stock (the
"Series B Preferred") owned by the Selling Stockholders. The Series B
Preferred was issued by the Company in connection with the private placement
of 50,000 shares of Series B Preferred for an aggregate consideration to
the Company of $5 million (the "Series B Private Placement"). See
"Description of Securities." The Company will not receive any of the proceeds
from the sale of the Common Stock by the Selling Stockholders. See "Use of
Proceeds."
The distribution of the Common Stock by the Selling Stockholders may
be effected from time to time in one or more transactions (which may involve
block transactions) in the over-the-counter market (including the Nasdaq
SmallCap Market) or any exchange on which the Common Stock may then be listed,
in negotiated transactions, through the writing of options on shares (whether
such options are listed on an options exchange or otherwise), or a combination
of such methods of sale, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Selling Stockholders may effect such transactions by selling shares to or
through broker-dealers, and such broker-dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from the
Selling Stockholders and/or purchasers of shares for whom they may act as
agent (which compensation may be in excess of customary commissions). The
Selling Stockholders may also sell the shares of Common Stock pursuant to Rule
144 promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), or may pledge shares as collateral for margin accounts and such shares
could be resold pursuant to the terms of such accounts. The Selling
Stockholders and any broker-dealers that act in connection with the sale of
Common Stock might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act and any commissions received by them and
any profit on the resale of the shares might be deemed to be underwriting
discounts or commissions under the Securities Act. The Selling Stockholders
may agree to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the Common Stock against certain liabilities,
including liabilities arising under the Securities Act.
The Company's Common Stock trades on the Nasdaq SmallCap Market under
the symbol "GLPC." On January 12, 1998, the closing sale price of the Common
Stock was $2.875 per share.
All expenses of the registration of securities covered by this
Prospectus are to be borne by the Company, except that the Selling
Stockholders will pay any underwriting discounts, selling commissions, and
fees and the expenses, if any, of counsel or other advisers to the Selling
Stockholders.
---------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" LOCATED ON PAGE 4.
---------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------
The date of this Prospectus is ____________, 1998
<PAGE>
No person has been authorized to give any information or to make any
representation in connection with this offering other than those contained in
this Prospectus or a supplement to this Prospectus, and, if given or made,
such other information or representations must not be relied upon as having
been authorized by the Company or any other person. Neither this Prospectus
nor any supplement to this Prospectus constitutes an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it relates or an offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus or a supplement to this
Prospectus nor any sale made hereunder or thereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or thereof or that the
information contained herein or therein is correct as of any time subsequent
to its date.
TABLE OF CONTENTS
Page
Available Information........................................................ 2
Information Incorporated by Reference........................................ 3
Risk Factors................................................................. 4
Use of Proceeds.............................................................. 12
The Company...................................................................13
Selling Stockholders......................................................... 17
Description of Securities.................................................... 19
Plan of Distribution......................................................... 21
Legal Matters................................................................ 22
Experts .................................................................... 22
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Proxy
statements, reports and other information concerning the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison
Street, Chicago, Illinois 60661, and copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and its public reference facilities in New York, New
York and Chicago, Illinois, at prescribed rates. Copies of such information
may also be inspected at the reading room of the library of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006. This Prospectus does not contain all of the information set forth in
the Registration Statement of which this Prospectus is a part and exhibits
thereto which the Company has filed with the Commission under the Securities
Act and to which reference is hereby made. The Commission maintains a World
Wide Web site on the Internet at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding the Company
and other registrants that file electronically with the Commission.
This Prospectus constitutes a part of a Registration Statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as
the "Registration Statement") filed by the Company with the Commission under
the Securities Act. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock, reference is
hereby made to the Registration Statement. Statements contained herein
concerning the provisions of any contract, agreement or other document are not
necessarily complete, and in each instance reference is made to the copy of
such contract, agreement or other document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference. Copies of the
Registration Statement together with exhibits may be
-2-
<PAGE>
inspected at the offices of the Commission as indicated above without charge
and copies thereof may be obtained therefrom upon payment of a prescribed fee.
Private Securities Litigation Reform Act Safe Harbor Statement. This
Prospectus (including the documents incorporated by reference herein) contains
certain forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995) and information relating to Global
that are based on the beliefs of the management of Global, as well as
assumptions made by and information currently available to the management of
Global. When used in this Prospectus, the words "estimate," "project,"
"believe," "anticipate," "intend," "expect" and similar expressions are
intended to identify forward-looking statements. Such statements reflect the
current views of Global with respect to future events and are subject to risks
and uncertainties that could cause actual results to differ materially from
those contemplated in such forward-looking statements, including those
discussed under "Risk Factors." Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. Global does not undertake any obligation to publicly release any
revisions to these forward looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed with the Commission by the Company
(File No. 0-27354) pursuant to the Exchange Act are incorporated by reference
into this Prospectus:
(i) The Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1996.
(ii) The Company's Quarterly Reports on Form 10-QSB for the
quarters ended March 31, 1997, June 30, 1997 and September
30, 1997.
(iii) The Company's Proxy Statement dated May 16, 1997.
All documents and reports subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of the offering of the securities
offered hereby shall be deemed incorporated by reference into this Prospectus
and to be a part hereof from the date of the filing of such documents or
reports. The information relating to the Company in this Prospectus should be
read together with the information in the documents incorporated by reference.
Any statement contained in a document incorporated by reference
herein, unless otherwise indicated therein, speaks as of the date of the
document. Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for all purposes to the
extent that a statement contained in this Prospectus modifies or replaces such
statement.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon request, a copy of any or all of the documents
described above, other than exhibits to such documents, unless such exhibits
are specifically incorporated by reference into such documents. Requests
should be addressed to: Global Pharmaceutical Corporation, Castor & Kensington
Avenues, Philadelphia, PA 19124-5694, Attention: President (Tel. No. (215)
289-2220). The Company furnishes its stockholders with an annual report
containing audited financial statements. In addition, the Company may furnish
such other reports as may be authorized, from time to time, by the Board of
Directors.
-3-
<PAGE>
RISK FACTORS
An investment in the Common Stock offered by this Prospectus involves a
high degree of risk. Prospective investors should consider carefully the
following risk factors, as well as the other information set forth in this
Prospectus, in connection with an investment in the Common Stock offered by this
Prospectus. This Prospectus contains forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from the results discussed in the forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in "Risk Factors," as well as those discussed elsewhere in
this Prospectus.
Additional Financing Requirements; Independent Auditors' Report With Explanatory
Paragraph
As of December 14, 1997, the Company had $5,052,000 of unrestricted cash
and cash equivalents on hand, which is estimated to be sufficient for
approximately twelve months of operations at current expenditure levels. The
Company has raised $5 million in connection with the Series B Private Placement
and $1,335,000 in connection with a private placement of its Series A
Convertible Preferred Stock (the "Series A Preferred") in August and September
1997 (the "Series A Private Placement" and, together with the Series B Private
Placement, the "Private Placements"). The Company believes that its existing and
anticipated capital resources, interest earned thereon and estimated anticipated
revenues from operations, will enable it to fund its planned operations through
December 31, 1998. The Company has expended substantial funds in connection with
the renovation of its plant, processing equipment and product development. The
Company also expects that it will incur additional expenditures to develop its
manufacturing, sales and marketing capabilities. If the Company should require
additional funds for these purposes, it will seek to raise them through
subsequent equity or debt financings, collaborative arrangements with corporate
partners or through other sources. No assurance can be given that additional
funds will be available to the Company to finance its development on acceptable
terms, if at all. Additional financings may result in dilution to existing
stockholders. If funds are needed but are not available in adequate amounts from
additional financing sources or from operations, the Company's business will be
materially and adversely affected. In addition, due in part to delays related to
the Company's efforts to obtain necessary certifications from the United States
Food and Drug Administration ("FDA") to commence its operations and the
requirement of additional financing, the independent auditors' report with
respect to the Company's December 31, 1996 Financial Statements contains an
explanatory paragraph that states that the Company's failure to obtain such
certification and the requirement of additional financing raises substantial
doubt about the Company's ability to continue as a going concern.
No Assurance of FDA Approval of Future Products Requiring ANDA Submission
The preclinical and clinical testing, manufacturing and marketing of
products requiring approval based on Abbreviated New Drug Applications
("ANDAs") are subject to extensive regulation by numerous government
authorities in the United States and other countries, including, but not limited
to, FDA. FDA approval of the Company's products that fall into this category
ordinarily will be required before such products may be marketed in the United
States. In order to obtain FDA approval of a product, the Company must, among
other things, demonstrate to the satisfaction of FDA that the product is safe
and effective for its intended uses and that the Company is capable of
manufacturing the product with procedures that conform to FDA's current Good
Manufacturing Practices ("cGMPs") regulations, which must be followed at all
times. The approval process requires submission of an application that, in the
case of a generic drug, includes data showing the Company's product is
bioequivalent to, and therefore is interchangeable with, the FDA-approved brand
product. The process of seeking FDA approvals can be costly, time consuming, and
subject to unanticipated and significant delays. The Company is presently in
various stages of product development with respect to several new products
requiring ANDA approval, and expects to submit applications to FDA seeking
approvals for these products. There can be no assurance, however, that ANDA
approvals for additional products will be granted to the Company on a timely
basis, or at all. Any delay in obtaining or any failure to obtain such approvals
would adversely affect the Company's ability to introduce and market products
and to generate product
-4-
<PAGE>
revenue. At the same time, FDA also has the authority to revoke approvals of
previously approved drug products for cause, to request recalls of products
and to obtain injunctions to close manufacturing plants in response to
violations. Similarly, marketing approval by a foreign governmental authority
is typically required before such products may be marketed in a particular
foreign country. There can be no assurance that any of these enumerated items
will not occur.
Operating Losses; Future Profitability Uncertain
Since inception in 1993, the Company has been engaged in a substantial
renovation program in order to modernize its 113,000 square foot manufacturing
facility located in Philadelphia, Pennsylvania (the "Facility") and obtain FDA
certification for its proposed plant operations. The Company has generated no
revenues to date and has experienced operating losses since inception. As of
September 30, 1997, the Company's accumulated deficit was $16,103,000.
Additionally, as of September 30, 1997, the Company had outstanding indebtedness
in an aggregate principal amount of $2,322,000 at interest rates ranging from 2%
to 5% annually. The Company's ability to operate its business requires, among
other things, FDA approval of the Company's products based on its ANDAs, New
Drug Applications ("NDAs") and New Animal Drug Applications ("NADAs"), including
stability and other testing of those products and their related manufacturing
processes; and negotiation of satisfactory raw material supply contracts with
FDA-approved sources. To remain operational, the Company will also be required
to arrange for the proper receipt, warehousing and storage of raw materials and
supplies; maintain work in progress in compliance with regulatory requirements
and properly store finished goods; properly manufacture various formulations,
dosages and configurations of a line comprised potentially of many products;
meet strict security requirements for virtually every activity undertaken at the
plant; maintain appropriate laboratory, quality control and quality assurance
practices and procedures; and comply with the many complex governmental
regulations that deal with virtually every aspect of the Company's proposed
business activities. There can be no assurance that the Company will be able to
produce to current regulatory standards all or any portion of the 54 ANDA, NDA
and NADA formulations and the more than 100 other formulations it acquired from
Richlyn Laboratories, Inc. ("Richlyn"). In addition, there can be no assurance
regarding whether or when the Company will successfully implement its business
plan or that its business will ever be profitable. The Company's ability to
operate its business successfully will depend, in part, on a variety of factors,
many of which are outside the Company's control, including: competition, changes
in raw material supplies and suppliers, changes in governmental programs and
requirements or in physician or consumer preferences, changes in FDA and similar
regulatory requirements, and plant and equipment repair and maintenance
requirements.
Government Regulation; Compliance with Applicable Court Order
All pharmaceutical manufacturers, including the Company, are subject
to extensive federal, state and local regulation and the Company cannot
predict the extent to which it may be affected by legislative and other
regulatory actions and developments concerning various aspects of its
operations as well as its products, the health care field generally,
environmental matters and plant zoning. In addition, acts of foreign
governments may affect the price or availability of raw materials needed for
the development or manufacture of generic drugs.
On May 25, 1993, the United States District Court for the Eastern
District of Pennsylvania issued an order against Richlyn that, among other
things, permanently enjoined
-5-
<PAGE>
Richlyn from introducing into commerce any drug manufactured, processed, packed
or labeled at its Philadelphia facility unless it met certain stipulated
conditions (the "Richlyn Order"). The Company, having acquired the facilities
and drug applications of Richlyn, became subject to the conditions in the
Richlyn Order. The Richlyn Order requires, in part, that FDA find that products
manufactured, processed and packed at the Richlyn facility conform with
regulations that require compliance with cGMPs before they may be marketed.
FDA's cGMPs regulations establish quality assurance and qualification criteria
for the facilities, equipment, procedures and personnel used to manufacture,
process, and package drug products. Among other critical requirements is the
obligation to demonstrate that the processes used to manufacture, test and
package products have been challenged during all critical stages in at least
three consecutively produced batches and shown to consistently yield product
meeting established specifications; this replicate testing is referred to as
"process validation." FDA has authorized distribution of two products following
inspections that verified process validation. The Richlyn Order also requires
that the Company hire and retain a person, subject to FDA approval, who, by
reason of training and expertise, is qualified to inspect the Company's drug
manufacturing facilities to determine that its methods, facilities and controls
are operated and administered by the Company in compliance with cGMPs. The
Richlyn Order also requires that the person so retained both will inspect the
Company's manufacturing facilities and its manner of operating them and will
certify to FDA in writing the Company's compliance with related cGMPs and will
examine all drug products manufactured, processed, packed and held at the
Company's facility and will certify in writing to FDA the Company's compliance
with related cGMPs. The Company has retained an independent consultant to serve
in respect of the Richlyn Order. There can be no assurance that the Company will
receive all of the requisite FDA product approvals in a timely manner, if at
all.
In 1988, investigations began into alleged wrongdoings by a number of
generic drug companies other than Richlyn in connection with FDA's drug
approval process. Subsequently, the number of ANDA approvals issued per year
by FDA decreased dramatically. The time required to obtain ANDA approvals also
increased to an average of approximately 36 months. Although the time required
to obtain ANDAs has decreased recently, the approval process became and has
remained more rigorous and costly than in the past. The Company is and will
remain in part dependent on new approvals over time to bring new products to
market and there can be no assurance that the rate and cost of FDA approval
and other federal and state legislative or regulatory developments will not
adversely affect the Company's product introduction plans and its results of
operations.
In addition, the Company's business plan includes the development of
products in dosage forms not previously offered by Richlyn. The Company's
ability to compete effectively with respect to any of these additional forms
will be materially affected by the Company's ability to master the new and
different production techniques related to them and the receipt of all
required governmental approvals.
Environmental Matters
As an enterprise engaged in the pharmaceutical manufacturing
business, the Company is and will remain subject to comprehensive federal,
state and local environmental laws and regulations ("Environmental Laws")
governing, among other things, air emissions, waste water discharge and solid
and hazardous waste disposal. The Company believes its current facilities are
in compliance in all material respects with applicable Environmental Laws.
Environmental Laws have changed in recent years, however, and the Company may
become subject to increasingly stringent environmental standards in the
future. While the Company anticipates that from time to time it will incur
capital expenditures in connection with environmental
-6-
<PAGE>
matters, it is impossible currently to predict the outcome or timing of future
expenditures that may be required in connection with Environmental Law
compliance. There can be no assurance that additional future developments,
administrative actions or liabilities relating to environmental matters will
not have a material adverse effect on the Company's financial condition or
results of operations in the future.
Product Cycles
Revenue and gross profit derived from generic drug products tend to
follow a pattern based upon regulatory and competitive factors unique to the
generic drug industry. As patents for brand name products and any related
market exclusivity periods mandated by statute expire, the first generic
manufacturers to receive FDA approval for generic equivalents of related brand
name products usually capture significant market share from the branded
product at higher margins than other, later arriving generic drug
manufacturers. As the development of a new generic drug product, including its
formulation, testing and FDA approval, generally currently takes approximately
three or more years, development activities may begin several years in advance
of the patent expiration date of the brand name drug equivalent. Consequently,
the Company may select drugs for development several years in advance of their
anticipated entry to market. That program potentially will require that
considerable capital be devoted to activities that do not concurrently provide
an immediate return. In addition, because of the required advance selection of
drugs for development, there can be no assurance as to the market for or
competition in that product at the time of its commenced sales by the Company.
Furthermore, as other generic drug manufacturers subsequently receive FDA
approval on competing products, prices and revenues typically decline. While a
number of the ANDAs that were acquired by the Company from Richlyn currently
have little or no generic competition, there can be no assurance that other
companies will not receive FDA approval and begin selling competitive
products. The Company's profitability, if any, will be dependent, in part, on
(i) the Company's ability to develop and rapidly introduce new products, (ii)
the timing of FDA approval of the Company's products and (iii) the number and
timing of FDA approval for competing products. There can be no assurance that
the Company will be able to effectively compete in the generic drug industry
based upon the foregoing factors.
Competition
The generic drug industry is highly competitive. Many of the
Company's competitors, including divisions and subsidiaries of large brand
name pharmaceutical companies that market generic drugs, have significantly
greater financial and other resources than the Company and, therefore, are
able to expend more than the Company in areas such as research, marketing and
product development. Although a company with greater resources will not
necessarily receive FDA approval for a particular generic drug before its
smaller competitors, relatively large research and development expenditures
enable a company to support many FDA applications simultaneously, thereby
improving the likelihood of it being among the first to obtain approval of at
least some generic drugs. New drugs, future developments in alternative drug
delivery technologies or other therapeutic techniques may provide therapeutic
or cost advantages to competing products. There can be no assurance that
developments by others will not render the Company's products or technologies
noncompetitive or obsolete.
Brand name drug companies have attempted to prevent generic drug
manufacturers from producing certain products and to prevent competing generic
drug products from being treated as equivalent to their brand name products.
The Company expects efforts of that type to continue. Increasingly, brand name
drug companies have introduced generic versions of their own branded products
prior to the expiration of the patents for those drugs, which may
-7-
<PAGE>
result in achieving a greater market share for products produced by those
companies following expiration of the applicable patents. Additionally, the
General Agreement on Trade and Tariffs has increased from 17 years after
patent grant to approximately 20 years after patent filing the patent
protection afforded many brand name drugs, thereby in some instances delaying
the first time at which equivalent generic products can be offered by generic
drug producers such as the Company and also enhancing the possibility that the
brand name manufacturers will develop their own equivalent generic products.
The generic drug industry is currently undergoing a consolidation and
that trend may continue. Consequently, the Company may be faced with stronger
competitors with greater financial and other resources in the future. While
the Company may need to combine with other generic drug companies to meet
increased competition or for other reasons, it has no current plans to do so
and there can be no assurance that it will be able to do so or, if it does,
that the terms of any combination will be favorable to the Company's
stockholders.
Expected Fluctuations in Results of Operations
The Company cannot currently predict whether its business will be
seasonal in nature, but to the extent that it manufactures and distributes
products that pertain to seasonal ailments such as allergies or colds, the
Company may experience seasonal patterns in its sales and profitability. There
can be no assurance that the potential seasonality of the Company's business
will not have a material adverse effect on the Company. The Company's revenues
and profitability may vary significantly from fiscal quarter to fiscal quarter
as well as in comparison to the corresponding fiscal quarter of the preceding
year. Variations of those types may result from, among other factors, the
timing of FDA reapprovals received by the Company, the timing of process
validation for particular generic drug products, the timing of any significant
initial shipments of newly approved drugs and competition from other generic
drug manufacturers that receive FDA approvals for competing products.
Dependence on a Small Number of Distributors, Products and Suppliers; Near-Term
Dependence on a Small Number of Products
The Company's ability to establish markets for its proposed products
will be substantially dependent on the efforts of independent distributors and
wholesalers. Presently, the Company has distribution agreements with two
distribution organizations. Those agreements are subject, among other things,
to the Company's receipt of the requisite FDA approvals to manufacture and
sell the products in question.
Typically in the generic drug industry, unless a product is protected
by a significant barrier to the entry of competing products (for example, it is
difficult to develop due to its complex structure) or dominance in a niche
market that is less likely to be attractive to larger potential competitors,
profit margins generally diminish over time as competitors enter the market with
equivalent, or even superior, replacement products. The Company believes its
long-term success will be dependent, among other factors, on its ability to
offer and sell a broad line of products, thereby reducing the likelihood that
the Company could be materially adversely affected by diminishing profit margins
or loss of market share as any of its proposed generic products comes under
increasing competitive pressure. Having now received FDA certification and
approval of its manufacturing facility and first two ANDA products, the Company
intends to introduce products on a selected basis, with between 12 and 15
generic drugs planned for introduction during the next 12 months. Consequently,
the Company will be dependent, particularly in the near term, upon a relatively
small number of products to generate revenues.
-8-
<PAGE>
Some materials used in the Company's products are currently available
from only one or a limited number of suppliers. Because FDA requires
specification of raw material suppliers in applications for approval of drug
products, if raw materials from a specified supplier were to become
unavailable, the required FDA approval of a new supplier could cause a
significant delay in the manufacture of the drug involved. Although the
Company expects to specify more than one raw materials supplier with respect
to each FDA application where that is possible, some materials are currently
available only from one or a limited number of suppliers, as a result of which
the Company would be subject to the special risks that are associated with
limited sources of supply. Further, a significant portion of the Company's raw
materials may be available only from foreign sources and it is expected that
the current trend in the generic drug industry towards increasing dependence
on foreign sources of raw materials will continue in the foreseeable future.
Any curtailment in the availability of raw materials could be accompanied by
production or other delays as well as increased raw materials costs, with
consequent adverse effects on the Company's business and results of
operations. Furthermore, as any source of raw materials, whether domestic or
foreign, would require FDA approval, any delays in obtaining FDA approval
could also have a material adverse effect on the Company's business and
results of operations. Additionally, foreign sources can be subject to the
special risks of doing business abroad, which include greater possibility for
disruption due to transportation or communication problems, the relative
instability of foreign governments and economies, interim price volatility
based on labor unrest or materials or equipment shortages and uncertainty
regarding recourse to a dependable legal system for the enforcement of
contracts and other rights.
Potential Additional Dilution
In contemplation of the Genpharm Agreement (as hereinafter defined),
the Company, on November 8, 1995, sold to Merck KGaA 150,000 shares of Common
Stock for $300,000 (which amount was advanced to the Company on October 26,
1995), as well as the Merck A Warrants to purchase 100,000 shares of common
stock at an exercise price of $2.00 per share. Simultaneously, the Company sold
to Merck KGaA the Merck B Warrants, which are exercisable for 40,000 shares of
common stock for each aggregate $1,000,000 in gross profit (as defined in the
Genpharm Agreement), if any, earned by the Company in connection with its sale
to Genpharm of Ranitidine (as hereinafter defined) and any other mutually agreed
upon products, up to a total of 700,000 shares of common stock. The per share
exercise price for each of the shares underlying the Merck B Warrants is the IPO
offering price of $8.50 per share. If the Company generates in excess of
$17,500,000 in gross profits (as defined in a warrant agreement between the
Company and Merck KGaA, which has the same definition of gross profit as is set
forth in the Genpharm Agreement) from the sale in the United States of
Ranitidine and any other mutually agreed upon products, Merck KGaA will own and
have the right to acquire, in the aggregate, in excess of 20% of the shares of
Common Stock outstanding as of December 1, 1997 (assuming no conversion of the
Series A Preferred or the Series B Preferred). Merck KGaA has certain
registration rights with respect to the shares of common stock it owns and has
the right to acquire pursuant to the Merck Warrants. The Merck Warrants are
likely to be exercised only at a time when the exercise price is below the
market price of the common stock, at which time the Company could issue shares
and raise additional funds on terms superior to those of the Merck Warrants. In
addition, the Company has raised $6.3 million in connection with the Private
Placements, the shares of which Preferred Stock are convertible into shares of
the Company's Common Stock, and may raise additional funds, possibly through
subsequent equity financings. Moreover, in connection with the offering of the
Series B Preferred, the Company has issued to Berger Enterprises, Inc. warrants
to purchase up to 50,000 shares of Common Stock at an exercise price of $4.00
per share. See "-- Additional Financing Requirements" and "Description of
Securities."
Effects of Substantial Debt
As of September 30, 1997, the Company had outstanding approximately
$2,322,000 of indebtedness, of which $406,000 principal amount, bearing
interest at the rate of 3.75% annually and due in the year 2000, is owed to
the Philadelphia Industrial Development
-9-
<PAGE>
Corporation ("PIDC") and $836,000 principal amount, bearing interest at the rate
of 2% annually and due in the year 2009, is owed to the Pennsylvania Industrial
Development Authority ("PIDA"). Additionally, at that same date, the Company had
a stockholders' deficit of approximately $16,103,000. There can be no assurance
that the Company will have or maintain adequate capital at any given time or
from time to time in the future or not be in default under any of its loan
agreements and there is no assurance that additional capital or waivers in
respect of defaulted loans, if needed by the Company, will be available to it.
Product Liability Litigation and Adequacy of Insurance Coverage
The design, development and manufacture of the Company's products
involve an inherent risk of product liability claims and associated adverse
publicity. Insurance coverage is expensive, difficult to obtain and may not be
available in the future on acceptable terms or at all. Although the Company
currently maintains liability insurance for all its products, there can be no
assurance that the coverage limits of the Company's insurance policies will be
adequate. A claim brought against the Company, whether fully covered by
insurance or not, could have a material adverse effect upon the Company. In
addition, the Company has assumed the liabilities of Richlyn in connection with
Diethyl Stilbestrol ("DES"), which was manufactured by Richlyn and many other
drug manufacturers during the late 1950's and early 1960's. DES was prescribed
to pregnant women during that period and has been alleged to cause birth
defects, in particular an increased risk of uterine cancer and sterility of
female children whose mothers took DES during their pregnancy. There have been
numerous claims brought against drug manufacturers in connection with DES and,
since 1987, Richlyn's insurers have paid approximately $117,000 on Richlyn's and
the Company's behalf to settle approximately 130 DES-related suits. No other
legal actions have been brought or, to the Company's best knowledge, threatened
against Richlyn or the Company in connection with DES-related claims. Since the
Company believes that all DES-related legal actions are directed towards
individual manufacturers and have not been embodied in a class action, the
Company does not expect to be held liable for DES-related claims other than
claims based on products manufactured by Richlyn. As a result, the Company
believes it is not subject to bankruptcy or other risks that might affect the
collectibility of DES-related claims to which other manufacturers may be or
become subject. While Richlyn's insurers have in the past defended DES claims
against Richlyn and paid settlements in connection therewith, those insurers
have reserved the right to discontinue at any time the defense of claims and the
payment of any settlements. Accordingly, although the insurers have defended all
actions and paid all claims in connection therewith, there can be no assurance
that they will defend actions or pay claims in the future. Further, there can be
no assurance that, if those insurers fail or refuse to pay any claims, the
Company will have recourse against the insurers or the Company will not be
exposed to the risk of substantial monetary judgments. Claims settlements to
date have been based on market share and Richlyn's share of the DES market
during the relevant periods is believed by the Company to have been
substantially less than 1%.
Attraction and Retention of Key Personnel
The success of the Company's present and future operations will
depend to a great extent on the collective experience, abilities and continued
service of certain executive officers, including Max L. Mendelsohn, the
Company's President and Chief Executive Officer, Marc M. Feinberg, the
Company's Vice President-Quality and Regulatory Affairs,
-10-
<PAGE>
Mitchell Goldberg, the Company's Vice President-Sales and Marketing, Pieter J.
Groenewoud, the Company's Vice President-Product Development, Seymour Hyden,
Ph.D., the Company's Vice President-Scientific and Technical Affairs, Cornel C.
Spiegler, the Company's Chief Financial Officer and Vice
President-Administration, and Joseph A. Storella, the Company's Vice
President-Operations. All of those persons joined the Company as executive
officers and the loss of the services of any of them could have a material
adverse effect on the Company. Because of the specialized scientific nature of
its business, Global is also highly dependent upon its ability to continue to
attract and retain qualified scientific and technical personnel. There is
intense competition for qualified personnel in the areas of the Company's
activities, and there can be no assurance that Global will be able to continue
to attract and retain the qualified personnel necessary for the development of
its business. Loss of the services of, or failure to recruit, key scientific and
technical personnel would be significantly detrimental to the Company's product
development programs.
Control of the Company by Significant Stockholders
Upon completion of the closings of the Private Placements, the
Company's present directors, executive officers and their respective affiliates
and related entities beneficially owned approximately 40% of the Company's
common stock and common stock equivalents. As a result, these stockholders will
be able to exercise significant influence over all matters requiring stockholder
approval, including the election of directors and the approval of significant
corporate transactions. These stockholders may also participate further in
subsequent equity financings, although they have made no commitment to do so.
The concentration of ownership may also have the effect of delaying or
preventing a change in control of the Company. See also "--Potential Additional
Dilution" and "--Actual and Potential Issuance of Preferred Stock."
No Patents; Protection of Proprietary Rights
The Company owns no patents and believes that patent protection is
not, and likely will not be, an important factor in determining whether it
will be successful in the generic drug field. The Company's success in that
field will, however, depend in part on its ability to preserve its trade
secrets. The Company relies on trade secrets and proprietary know-how that it
seeks to protect, in part, through confidentiality agreements. In that regard,
the Company has obtained confidentiality agreements from each of its officers
and those of its supervising personnel who have access to sensitive
information, and intends to obtain similar agreements from any other employee
who has such access. There can be no assurance that these agreements will not
be breached, that the Company will have adequate remedies for any breach, or
that the Company's trade secrets will not otherwise become known or be
independently developed by competitors.
The Company currently has no licenses other than its secondary site
packaging arrangement with Genpharm and two licensing agreements with Eurand
America. See "The Company." The Company may in the future be required or may
desire to obtain other licenses to develop, manufacture and market
commercially viable products. There can be no assurance that licenses will be
obtainable on commercially reasonable terms, if at all, or that any licensed
patents or proprietary rights will be valid and enforceable. Although the
Company is not aware of any claim against it of patent infringement, the
Company's ability to commercialize its products will depend on not infringing
the patents of others. Litigation concerning patents and proprietary
technologies can be protracted and expensive.
Actual and Potential Issuance of Preferred Stock
The Company's Board of Directors has the authority to issue up to
2,000,000 shares of Preferred Stock and to determine the price, rights,
preferences and privileges of those shares
-11-
<PAGE>
without any further vote or action by the stockholders. Of these shares, the
Company has issued 13,350 shares of Series A Preferred and 50,000 shares of
Series B Preferred. The Series B Preferred and the Series A Preferred have, and
the Board of Directors may authorize and issue other series of Preferred Stock
with, among other things, voting, redemption and conversion rights that could
adversely affect the voting power or other rights of the holders of Common
Stock. Moreover, holders of the Series B Preferred and the Series A Preferred
are entitled to a preference over the holders of Common Stock with regard to the
assets or surplus funds of the Company in the event of its dissolution or
liquidation. The issuance of the Series B Preferred and the Series A Preferred
and the potential issuance of other shares of Preferred Stock may also have the
effect of delaying, deferring or preventing a change in control of the Company,
may discourage bids for the Common Stock at a premium over the market price of
the Common Stock and may adversely affect the market price of the Common Stock.
See "--Control of the Company by Significant Stockholders" and "Description of
Securities--Preferred Stock."
Absence of Dividends
The Company has never paid any cash dividends on its stock and does not
expect to pay any cash dividends on its stock in the foreseeable future.
However, see "Description of Securities--Preferred Stock" for noncash Preferred
Stock dividends recognized by the Company.
Volatility of Share Price
The market prices for securities of biopharmaceutical companies in
general, and of the Company in particular, have been volatile. Factors such as
announcements of technological innovations or new commercial products by the
Company or its competitors, government regulation, patent or proprietary rights
developments, public concern as to the safety or other implications of
biopharmaceutical products and market conditions in general may have a
significant impact on the market price of the Company's Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares
of Common Stock by the Selling Stockholders.
-12-
<PAGE>
THE COMPANY
When used in this discussion, the words "believes," "anticipates,"
"expects" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties
which could cause actual results to differ materially from those projected.
The Company's business and results of operations are affected by a
wide variety of factors that could materially and adversely affect the Company
and its actual results, including, but not limited to, the ability to obtain
governmental approvals, the impact of competitive products and pricing,
product demand and market acceptance, new product development, reliance on key
strategic alliances, availability of raw materials and the regulatory
environment. As a result of these and other factors, the Company may
experience material fluctuations in future operating results on a quarterly or
annual basis (including, to the extent appropriate governmental approvals are
not obtained, the inability to manufacture and sell products), which could
materially and adversely affect its business, financial condition, operating
results, and stock price. An investment in the Company involves various risks,
including those referred to above and those which are detailed from
time to time in the Company's other filings with the Securities and Exchange
Commission.
These forward-looking statements speak only as of the date hereof.
The Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Global Pharmaceutical Corporation is engaged principally in the
manufacture and sale of solid oral generic prescription and over-the-counter
drugs. The Company currently owns 54 previously manufactured and marketed ANDAs,
NDAs and NADAs, more than 100 previously manufactured and marketed prescription
and OTC formulations not subject to ANDA approval by FDA, and the Facility. Each
ANDA, NDA and NADA represents the government's permission to manufacture a
specific drug product pursuant to specified processes at a specified location.
These assets were purchased from Richlyn, which commenced business in 1947 but
ceased operations as a generic drug manufacturer and distributor in 1992 for
failure to comply with FDA regulations pertaining to cGMPs.
The Company's strategic policy is to develop a broad product line
composed of solid oral (tablets and capsules) prescription and
over-the-counter generic drugs, various products that require isolation during
their production, narcotic and other drug products that are heavily regulated
by the United States Drug Enforcement Agency ("DEA") and dietary supplements.
The Company also intends to seek to develop or license certain brand name
pharmaceutical products. Although most of the Company's products are expected
to be dedicated to the treatment of humans, some products may also be for the
treatment of animals.
Many of the generic drugs the Company will initially produce as well
as those planned for future production are targeted at niche markets
characterized by few, if any, generic competitors. Over the next eighteen
months, the Company plans to introduce fifteen to nineteen generic drugs,
including several ANDA products. The Company believes that of the over 150
generic drug formulations owned by the Company, currently approximately 20
products would have no domestic generic competition and another 16 would have
only one generic competitor. The Company also plans to manufacture and sell
drugs that are regulated by DEA such as narcotics, barbiturates and certain
tranquilizers, as well as certain products
-13-
<PAGE>
that require isolated manufacturing facilities, which the Company has provided
by refurbishing and equipping a part of its existing facility.
In addition, the Company intends to expand its line of generic
products through a combination of a research and development program that is
expected to result in new products owned by the Company as well as the
licensing of additional products owned by others. Generally, it is important
that a new generic product be approved by FDA for marketing by, or shortly
after, the patent expiration date of the equivalent brand name drug (plus any
legislatively-granted extensions) in order to gain significant market share at
attractive profit margins. As more generic products compete in the same
market, which customarily occurs increasingly over time following the brand
name product's patent expiration date (and extensions, if any), unit prices
and profit margins decrease. As the development of a new generic drug product,
including its formulation, testing and FDA approval, generally currently takes
approximately three or more years, development activities may begin several
years in advance of the patent expiration date of the brand name drug
equivalent. Consequently, the Company may select drugs for development several
years in advance of their anticipated entry to market. That program
potentially will require that considerable capital be devoted to activities
that do not concurrently provide an immediate return.
Status of FDA Approval
Among Global's assets are 54 approved applications acquired from
Richlyn. In order to distribute these products, the Company must demonstrate the
validity of its manufacturing processes. This effort entails the manufacture and
testing of multiple batches under highly exacting standards. On July 11, 1997,
the Company was notified that, following an inspection, FDA had determined that
Global's Tetracycline Hydrochloride 250 mg capsules had been validated; upon the
subsequent determination by FDA that sufficient data were available to assign an
expiration date to the product's label, the Company began shipping the product
in September 1997. In addition, on December 12, 1997, the Company was notified
that, following an inspection, FDA had determined that Global's Tetracycline
Hydrochloride 500 mg capsules had been validated; upon the subsequent
determination by FDA that sufficient data were available to assign an expiration
date to the product's label, the Company began shipping the product in December
1997.
The Company has recently notified the FDA it intends to perform process
validation on additional products for which it will seek FDA inspection and
approval for marketing within the next two months.
Strategic Relationship
In addition to the strategy of building upon its base of previously
FDA-approved generic niche market drugs, the Company intends to enter larger,
more competitive generic markets at such times as it believes it can effectively
compete in those markets. Positioning itself to effectuate this strategy, in
January 1997 the Company entered into an agreement (the "Genpharm Agreement")
with Genpharm, Inc. ("Genpharm"), a Canadian corporation and an indirect
subsidiary of Merck KGaA, a German corporation, pursuant to which the Company
will package or be compensated for a minimum of 30% of Genpharm's United States
Ranitidine Form I ("Ranitidine") 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. Ranitidine is the
generic equivalent of Glaxo Wellcome plc's ("Glaxo") patented prescription drug
Zantac(R). Genpharm filed an ANDA with FDA for Ranitidine in 1995, and has the
requisite formulation, procedures and raw material sources to produce
Ranitidine. On August 27, 1997, Genpharm received ANDA approval for Ranitidine
from FDA. Genpharm is currently shipping Ranitidine into the U.S. market.
-14-
<PAGE>
In addition to the packaging of Ranitidine, the Genpharm Agreement
provides the Company with the opportunity to develop products that are
marketed outside the U.S. with the assistance of Merck KGaA. Two products with
total U.S. annual sales of over $150 million, including limited generic
competition, have already been selected. Development is currently under way
with respect to these two products, with ANDAs anticipated to be filed by the
Company by the first quarter of 1998.
Marketing and Distribution Alliances/Eurand Licensing Agreements
The Company's products are expected to be marketed and sold
domestically directly and through independent distributors and wholesalers as
well as manufacturer's representatives, primarily to independent pharmacies,
retail chains and institutions, including managed health care organizations,
hospitals and governmental agencies. The Company anticipates that, as its
operations eventually reach regular, recurring status, a significant portion
of its sales will be to independent distributors and other wholesalers.
The Company currently has the following agreements with independent
distribution organizations:
o In September 1995, the Company entered into an agreement with The
Care Buying Alliance ("Care"), an association of eleven independent
distributors, pursuant to which Care's member organizations have
agreed to distribute mutually agreed upon specified volumes of
selected Company products at prices that equal the most favorable
price at which the same product is sold by the Company to any similar
account. Additionally, the Company and Care have agreed to pay
jointly certain amounts for nationally advertising those products.
The Company's agreement with Care is effective for three years
following the delivery of the Company's first selected product to a
Care member. The eleven Care distributors have estimated combined
sales of approximately $500 million per year.
o In May 1997, the Company entered into an agreement, through December
31, 1997, with PREMIER ("PREMIER"), an association of 15 independent
distributors, pursuant to which PREMIER's member organizations have
agreed to distribute Global's products at mutually agreed-upon terms.
This agreement can be renewed annually, and the Company is currently in
the process of evaluating whether it will be renewed. The 15 PREMIER
distributors have combined sales of approximately $250 million per
year.
In addition, in August 1997 the Company signed two exclusive ten-year
licensing agreements with Eurand America ("Eurand") (a unit of American Home
Products), an international drug company that specializes in oral drug
delivery. One agreement provides for Eurand to supply the Company with a
specified dosage of Pancrelipase, a pancreatic enzyme used primarily by cystic
fibrosis patients to aid in digestion, for the generic market. The second
agreement provides for Eurand to develop and manufacture for Global, on an
exclusive
-15-
<PAGE>
basis, several Pancrelipase products using a new Eurand technology, and grants
to the Company an exclusive ten-year license to market and sell the products
in the United States.
1997 Private Placements
In August and September 1997, the Company completed the Series A
Private Placement, consisting of 13,350 shares of the Series A Preferred for an
aggregate consideration to the Company of $1,335,000. On December 1, 1997, the
Company completed the Series B Private Placement, consisting of 50,000 shares of
the Series B Preferred for an aggregate consideration to the Company of
$5,000,000. See "Description of Securities--Preferred Stock."
The Company was founded in Philadelphia, Pennsylvania in April, 1993.
The Company's principal executive offices are at Castor and Kensington
Avenues, Philadelphia, Pennsylvania 19124, and its telephone number is (215)
289-2220.
-16-
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth information as of December 15, 1997
except as otherwise noted, with respect to the number of shares of Common Stock
beneficially owned by each of the Selling Stockholders. The Selling Stockholders
who, as of December 15, 1997, beneficially owned more than one percent of the
outstanding Common Stock (assuming conversion of the Series B Preferred held by
them) are in M. Kingdon Offshore N.V. (16.9%), Kingdon Associates, L.P. (6.4%),
Kingdon Partners, L.P. (6.4%), Udi Toledano (5.0%), Small Cap Value Portfolio
(4.3%) Max L. Mendelsohn (3.3%) and Gary Escandon (2.4%).
<TABLE>
<CAPTION>
============================================================================================================================
Number of
Number of Shares of
Shares of Common Stock
Number of Shares Common Stock Beneficially
of Common Stock Registered Owned After the
Selling Stockholder Beneficially Owned(1) Herein(2) Offering(3)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
M. Kingdon Offshore N.V. 872,727 872,727 0
- ----------------------------------------------------------------------------------------------------------------------------
Kingdon Associates, L.P. 290,909 290,909 0
- ----------------------------------------------------------------------------------------------------------------------------
Kingdon Partners, L.P. 290,909 290,909 0
- ----------------------------------------------------------------------------------------------------------------------------
Udi Toledano 225,697 9,091 216,606(5)
(Director)(4)
- ----------------------------------------------------------------------------------------------------------------------------
Max L. Mendelsohn 146,614 1,818 144,796(5)
(President & Chief
Executive
Officer/Director)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
(1) Includes shares issuable upon the exercise of stock options and
warrants that are exercisable within 60 days, and shares issuable upon
conversion of the Series B Preferred.
(2) In general, at the option of the holder, each share of Series B
Preferred is convertible at any time into such number of fully paid and
nonassessable shares of the Company's Common Stock as is determined
by dividing the liquidation preference (initially set at $100.00 per
share of Series B Preferred) by the lower of (a) $2.75 per share
(subject to adjustment pursuant to the terms of the stock purchase
agreement under which the shares were purchased) or (b) the average
closing price of the Common Stock for the five trading days
immediately preceding the day on which the holder elects to convert
the shares of Series B Preferred, subject in all cases to adjustment
for stock dividends, stock splits and other similar recapitalization
events (but in no event less than $2.00 per share). For purposes of
this registration, a divisor of $2.75 per share has been assumed. See
"Description of Securities -- Preferred Stock."
(3) Assumes the sale of all shares registered herein.
(4) 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 of Mr. Toledano, all of which shares Mr. Toledano
disclaims beneficial ownership.
-17-
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Edelson Technology 126,000 126,000 0
Partners III, L.P.
- ----------------------------------------------------------------------------------------------------------------------------
Small Cap Value 191,271 9,453 181,818(5)
Portfolio (of Bear
Stearns Asset
Management)
- ----------------------------------------------------------------------------------------------------------------------------
Gary Escandon 104,589 18,181 86,408(5)
(Director)(6)
- ----------------------------------------------------------------------------------------------------------------------------
Arnold S. Penner Foundation 36,363 36,363 0
- ----------------------------------------------------------------------------------------------------------------------------
Futurtec, L.P. 36,363 36,363 0
- ----------------------------------------------------------------------------------------------------------------------------
Hollywell Investments 36,000 36,000 0
Pty. Ltd.
- ----------------------------------------------------------------------------------------------------------------------------
Matthew J. Morahan 36,000 36,000 0
- ----------------------------------------------------------------------------------------------------------------------------
Ronald J. DelMauro 18,000 18,000 0
- ----------------------------------------------------------------------------------------------------------------------------
Philip Chapman 9,091 9,091 0
(Director)
- ----------------------------------------------------------------------------------------------------------------------------
Mario Gurrieri 9,091 9,091 0
- ----------------------------------------------------------------------------------------------------------------------------
Edward Mutch 9,091 9,091 0
- ----------------------------------------------------------------------------------------------------------------------------
David Purvis 9,091 9,091 0
============================================================================================================================
</TABLE>
- --------
(5) Includes shares of Series A Preferred, as to which a Registration
Statement (File No. 333-35569) has been declared effective.
(6) Includes 7,500 shares of Common Stock owned by Alvaro P. Escandon
Inc. Money Purchase Pension Plan dated 12/1/80, with respect to which
Mr. Escandon disclaims beneficial ownership.
-18-
<PAGE>
DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 12,000,000 shares,
consisting of 10,000,000 shares of Common Stock, $.01 par value, and 2,000,000
shares of Preferred Stock, $.01 par value, of which 60,000 shares have been
designated Series A Preferred and 50,000 shares have been designated Series B
Preferred.
As of December 1, 1997, there were 4,286,871 shares of Common Stock
outstanding, which were held of record by approximately 67 stockholders, 13,350
shares of Series A Preferred authorized and outstanding, which were held of
record by fourteen stockholders, and 50,000 shares of Series B Preferred
authorized and outstanding, which were held of record by seventeen stockholders.
Common Stock
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Holders of Common
Stock are not entitled to cumulative voting rights. Holders of Common Stock are
entitled to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities and any preferential rights to payment that holders of Series A
Preferred and Series B Preferred may have. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock. All the outstanding shares of Common Stock are validly issued,
fully paid and nonassessable.
Preferred Stock
Shares of Preferred Stock may be issued in one or more series and the
Board of Directors of the Company has the power to fix for each such series
such voting powers, full or limited, and such designations, preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof as the Board of Directors
shall deem appropriate, without any further vote or action by the stockholders
of the Company.
Preferred Stock could be issued by the Board of Directors with voting
and conversion rights that could adversely affect the voting power of the
holders of the Common Stock. In addition, because the terms of the Preferred
Stock may be fixed by the Board of Directors of the Company without
stockholder action, the Preferred Stock could be issued quickly with terms
calculated to defeat or delay a proposed takeover of the Company, or to make
the removal of the management of the Company more difficult. Under certain
circumstances, this would have the effect of decreasing the market price of
the Common Stock.
The Company's Board of Directors has authorized for issuance and sale,
and designated, 60,000 shares of Preferred Stock as Series A Preferred and
50,000 shares of Preferred Stock as Series B Preferred, with all shares of
Preferred Stock priced at $100 per share. In August and September 1997, the
Company completed the Series A Private Placement to certain accredited investors
of 13,350 shares of the Series A Preferred for an aggregate purchase price of
$1,335,000. On December 1, 1997, the Company completed the Series B Private
Placement to certain accredited investors of 50,000 shares of the Series B
Preferred for an aggregate purchase price of $5,000,000. The proceeds of the
Private Placements are expected to be used for working capital. The rights and
preferences of the Series A Preferred and the Series B Preferred are as follows:
Conversion: At the option of each holder, each share of Series A
Preferred and Series B Preferred is convertible at any time after the date of
the issuance of such share into such number of fully paid and nonassessable
shares of the Company's Common Stock as is determined by dividing the
Liquidation Value (as hereinafter defined) by the Conversion Price, which, in
general, is the lower of (a) $2.75 per share for the Series A Preferred and the
Series B Preferred (each price subject to adjustment) or (b) the average closing
sale price (or if such price
-19-
<PAGE>
is expressed as a bid and ask price, the closing bid price) of the Common Stock
for the five trading days immediately preceding the day on which the holder
elects to convert the shares of Series A Preferred or Series B Preferred, but in
no event less than $2.00 per share, subject in all cases to adjustment for stock
dividends, stock splits and other similar recapitalization events.
Notwithstanding the foregoing, in the event that the Company, within eighteen
months from the initial closing of either Private Placement, issues and sells
not less than an aggregate of $1 million of additional shares of Common Stock
(or securities convertible into Common Stock) other than Excluded Stock (as
defined in the Certificates of Designations for the Series A Preferred and the
Series B Preferred) to financial investors (whether individual or institutional)
for a consideration per share of Common Stock of less than $2.75, then and in
such event, the Conversion Price in effect with respect to the Series A
Preferred and the Series B Preferred will be reduced, concurrently with such
issue, to a price (calculated to the nearest cent) equal to the consideration
per share for which these additional shares are issued and sold. In addition, if
the Registration Statement of which this Prospectus is a part has not been
declared effective by the Securities and Exchange Commission for up to 30 days
beyond the 90th day after the initial closing, then the base price for computing
the Conversion Price for the Series B Preferred shall be reduced from $2.75 per
share to $2.40 per share; and if the Registration Statement of which this
Prospectus is a part has not been declared effective for up to between 31 and 60
additional days, then such base price shall be reduced from $2.40 per share to
$2.00 per share. The difference between the $2.75 per share Conversion Price, if
applicable, and the market value of the Common Stock on the date of the closing
of the sale of Preferred Stock will be accounted for as a Preferred Stock
dividend on the date that the Preferred Stock was issued. The Company will
recognize the dividend on the Preferred Stock in the quarter within which the
Preferred Stock was issued. In the third and fourth quarters of 1997, the
Company recognized Preferred Stock dividends of $274,125 and $2,272,727,
respectively.
Voting Rights: Except as required by Delaware law, holders of the
shares of Series A Preferred and Series B Preferred vote on an as-converted
basis, as a single class with all other stockholders of the Company, on all
matters voted on by the stockholders of the Company. In addition, the
affirmative vote or written consent of not less than a majority of the
outstanding shares of the Series A Preferred or the Series B Preferred will be
required to (a) amend or repeal any provision of, or add any provision to, the
Company's Certificate of Incorporation or By-Laws if such action would alter or
change the preferences, rights, privileges or powers of, or the restrictions
provided for the benefit of, the Series A Preferred or the Series B Preferred,
respectively; (b) reclassify any Common Stock into shares having any preference
or priority as to assets superior to or on a parity with any such preference or
priority of the Series A Preferred or the Series B Preferred, respectively; or
(c) create or issue any securities of the Company which have equity features and
which rank on a parity with or senior to the Series A Preferred or the Series B
Preferred, respectively, upon liquidation or other distribution of assets.
Liquidation Preference: Each share of Series A Preferred and Series B
Preferred is entitled to a liquidation preference equal to $100.00 per share
(the "Liquidation Value") before any distributions to holders of Common Stock or
any class of preferred stock ranking junior to the Series A Preferred or the
Series B Preferred.
Redemption Rights: The Company, upon written notice given not less than
twenty (20) nor more than ninety (90) days prior to the date fixed for
redemption, shall have the option to redeem all or any part of the outstanding
shares of the Series A Preferred or the Series B Preferred by paying the
Liquidation Value for each share, provided that the closing sale price (or if
such price is expressed as a bid and ask price, the closing bid price) of the
Common Stock is ten dollars ($10.00) or more per share for a consecutive twenty
(20)-day trading period ending not more than ten days prior to the date of the
redemption notice. Each holder of shares of Series A Preferred or Series B
Preferred shall be entitled to redeem any or all of such holder's shares of
Series A Preferred or Series B Preferred in the event that the Company breaches
or fails to comply with its obligations under the respective Certificates of
Designations or the Stock Purchase Agreements for the Series A Preferred or the
Series B Preferred, to the extent that the breach or failure is material to or
has a material adverse effect on the Company, and is not cured within thirty
(30) days after notice is given to the Company.
-20-
<PAGE>
Warrants
Merck KGaA owns 150,000 shares of Global's Common Stock and warrants
currently exercisable for another 100,000 shares of Common Stock, or an
aggregate of approximately 5.70% of the total outstanding Common Stock (as of
July 31, 1997) of the Company (on a fully diluted basis) assuming exercise of
the warrants.
Merck KGaA also has the right to acquire warrants to purchase
additional shares of Common Stock at the IPO price of $8.50 per share. These
warrants are exercisable for 40,000 shares of Common Stock for each aggregate
$1,000,000 in gross profit (as defined in the Genpharm Agreement), if any,
earned by the Company in connection with its revenues generated from
Ranitidine and any other products mutually agreed to by the Company and Merck
KGaA, up to a total of 700,000 shares of Common Stock.
In addition, the Company issued to certain of its officers and
directors warrants to purchase an aggregate of 42,000 shares of Common Stock at
an exercise price of $8.50. The Warrants expire on December 19, 2000. Moreover,
in connection with the offering of the Series B Preferred, the Company has
issued to Bergen Enterprises, Inc. warrants to purchase up to 50,000 shares of
Common Stock at an exercise price of $4.00 per share.
Registration Rights
In connection with the Company's Private Placements, the Company
executed a Series A Convertible Preferred Stock Purchase Agreement and a Series
B Convertible Preferred Stock Purchase Agreement (the "Purchase Agreements")
which contained provisions pertaining to registration rights. The Purchase
Agreements provide that the Company is obligated to prepare and file, promptly
following the Initial Closing Date (as defined in the Purchase Agreements), a
registration statement under the Securities Act to permit resales of the shares
of Common Stock issuable upon the conversion of the Series A Preferred and the
Series B Preferred in the public trading market. The Company is obligated to use
its best efforts to cause the registration statement to become effective as soon
as practicable after such filing and keep the registration statement effective
until the earlier of (i) the redemption by the Company of all the Series A
Preferred or the Series B Preferred, as the case may be, and (ii) the sale of
all the Registrable Securities (as defined in the Purchase Agreements); but in
no event later than the earlier to occur of (i) one year after the conversion of
all shares of the Series A Preferred Stock or the Series B Preferred, as the
case may be, or (ii) July 1, 2000. The Company will bear the expense of the
registration of the shares, except any underwriting discounts and commissions.
The Registration Statement of which this Prospectus is a part satisfies the
Company's obligations under the Purchase Agreement for the Series B Preferred
and the demand registration rights.
PLAN OF DISTRIBUTION
The distribution of the shares of Common Stock by the Selling
Stockholders may be effected from time to time in one or more transactions
(which may involve block transactions) in the over-the-counter market or on
NASDAQ (or any exchange on which the Common Stock may then be listed) in
negotiated transactions, through the writing of options (whether such options
are listed on an options exchange or otherwise), or a combination of such
methods of sale, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling shares to or through
broker-dealers, and such broker-dealer may receive compensation in the
-21-
<PAGE>
form of underwriting discounts, concessions or commissions from the Selling
Stockholders and/or purchasers of shares for whom they may act as agent (which
compensation may be in excess of customary commissions). The Selling
Stockholders may also sell such shares pursuant to Rule 144 promulgated under
the Securities Act, or may pledge shares as collateral for margin accounts and
such shares could be resold pursuant to the terms of such accounts. The
Selling Stockholders and any broker-dealers that act in connection with the
sale of the Common Stock might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of the shares of Common Stock as principal
might be deemed to be underwriting discounts and commissions under the
Securities Act. The Selling Stockholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of
the shares against certain liabilities, including liabilities arising under
the Securities Act.
Because the Selling Stockholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, the Selling
Stockholders will be subject to prospectus delivery requirements under the
Securities Act. Furthermore, in the event of a "distribution" of the shares,
such Selling Stockholders, any selling broker or dealer and any "affiliated
purchasers" may be subject to Regulation M under the Exchange Act, which
prohibits, with certain exceptions, any such person from bidding for or
purchasing any security which is the subject of such distribution until his
participation in that distribution is completed. In addition, Regulation M
prohibits any "stabilizing bid" or "stabilizing purchase" for the purpose of
pegging, fixing or stabilizing the price of Common Stock in connection with this
offering.
In order to comply with certain state securities laws, if applicable,
the Common Stock will not be sold in a particular state unless such securities
have been registered or qualified for sale in such state or any exemption from
registration or qualification is available and complied with.
The Company will not receive any of the proceeds from the sale of
Common Stock by the Selling Stockholders.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Fulbright & Jaworski L.L.P., New
York, New York. Frederick A. Adler, who is of counsel to the firm, is a director
of the Company and, as of November 30, 1997, beneficially owned 482,432 shares
of its Common Stock (including shares owned by 1520 Partners, Ltd.) and 5,000
shares of its Preferred Stock. The Adler Family Foundation, Inc., of which Mr.
Adler, Catherine G. Adler, the wife of Mr. Adler, and William Bush, a partner of
Fulbright & Jaworski L.L.P., serve as trustees and officers, owns 242,868 shares
of Common Stock.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-KSB for the year ended December 31, 1996, have
been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
-22-
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the Company's estimates (other than
the SEC registration fee) of the expenses in connection with the issuance and
distribution of the shares of Common Stock being registered:
SEC registration fee.............................................. $ 1,542.04
Legal fees and expenses........................................... $15,000.00
Accounting fees and expenses...................................... $ 5,000.00
Miscellaneous expenses............................................ $ 5,000.00
Total:......................................................... $26,542.04
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL")
empowers a Delaware corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation
or enterprise. A corporation may, in advance of the final disposition of any
civil, criminal, administrative or investigative action, suit or proceeding,
pay the expenses (including attorneys' fees) incurred by any officer,
director, employee or agent in defending such action, provided that the
director or officer undertake to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation. A
corporation may indemnify such person against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation to procure a judgment in its
favor under the same conditions, except that no indemnification is permitted
without judicial approval if the officer or director is adjudged to be liable
to the corporation. Where an officer or director is successful on the merits
or otherwise in the defense of any action referred to above, the corporation
must indemnify him against the expenses (including attorneys' fees) which he
actually and reasonably incurred in connection therewith. The indemnification
provided is not deemed to be exclusive of any other rights to which an officer
or director may be entitled under any corporation's by-law, agreement, vote or
otherwise.
In accordance with Section 145 of the DGCL, Section TWELFTH of the
Company's Certificate of Incorporation (the "Certificate") provides that the
Company shall indemnify each person who is or was a director, officer,
employee or agent of the Company (including the heirs, executors,
administrators or estate of such person) or is or was serving at the request
of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, to the
fullest extent permitted. The indemnification provided by the Certificate
shall not be deemed exclusive of any other rights to which any of those
seeking indemnification or advancement of expenses may be entitled under any
by-law,
II-1
<PAGE>
agreement, vote of shareholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person. Expenses (including
attorneys' fees) incurred in defending a civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Company in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the indemnified person to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Company. Section ELEVENTH of the Certificate provides that
a director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the DGCL, or (iv) for any transaction from which the
director derived an improper personal benefit. The By-laws of the Company
provide that, to the fullest extent permitted by applicable law, the Company
shall indemnify any person who is a party or otherwise involved in any
proceeding by reason of the fact that such person is or was a director or
officer of the Company or was serving at the request of the Company.
Item 16. Exhibits.
Exhibit Description of Document
Number -----------------------
-------
3.1 Restated Certificate of Incorporation of the Company. (1)
3.2 By-laws of the Company. (1)
3.3 Certificate of the Designations, Powers, Preferences and Rights of
the Series A Convertible Preferred Stock of the Company. (3)
3.4 Certificate of the Designations, Powers, Preferences and Rights of
the Series B Convertible Preferred Stock of the Company. (4)
3.5 Certificate of Amendment to Certificate of the Designations,
Powers, Preferences and Rights of the Series A Convertible
Preferred Stock.
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)
5.1 Opinion of Fulbright & Jaworski L.L.P.
23.1 Consent of Price Waterhouse LLP.
24.1 Power of Attorney (included on signature page).
27 Financial Data Schedule. (2)
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 reference from, the Registrant's Annual Report on Form
10-KSB for the year 1996.
(3) Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference from, the Registrant's Registration
Statement on Form S-3 (File No. 333-35569).
(4) Previously filed with the Commission as an Exhibit to, and incorporated
herein by reference from, the Registrant's Registration Statement on
Form S-8 (File No. 333-41595).
II-2
<PAGE>
Item 17. Undertakings.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as amended,
the Registrant hereby certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has authorized this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, in the City of Philadelphia and State of Pennsylvania on the 13th
day of January 1998.
GLOBAL PHARMACEUTICAL
CORPORATION
By: /s/ MAX L. MENDELSOHN
----------------------------------
Max L. Mendelsohn
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Max L. Mendelshohn and Cornel C.
Spiegler, or either of them, his true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent,
and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
/s/ MAX L. MENDELSOHN President and Chief Executive January 13, 1998
- --------------------- Officer and Director (Principal
(Max L. Mendelsohn) Executive Officer)
/s/ CORNEL C. SPIEGLER Chief Financial Officer, January 13, 1998
- ---------------------- Vice President--Administration
(Cornel C. Spiegler) (Principal Financial and
Accounting Officer)
/s/ FREDERICK R. ADLER Director January 13, 1998
- ----------------------
(Frederick R. Adler)
/s/ PHILIP R. CHAPMAN Director January 13, 1998
- ---------------------
(Philip R. Chapman)
/s/ GARY ESCANDON Director January 13, 1998
- -------------------
(Gary Escandon)
/s/ GEORGE F. KEANE Director January 13, 1998
- -------------------
(George F. Keane)
/s/ MICHAEL MARKBREITER Director January 13, 1998
- -------------------
(Michael Markbreiter)
/s/ JOHN W. ROWE Director January 13, 1998
- ----------------
(John W. Rowe)
/s/ UDI TOLEDANO Director January 13, 1998
- ----------------
(Udi Toledano)
/s/ RICHARD N. WIENER Director January 13, 1998
- ---------------------
(Richard N. Wiener)
II-4
<PAGE>
EXHIBIT INDEX
Exhibit Description of Document
Number -----------------------
-------
3.1 Restated Certificate of Incorporation of the Company. (1)
3.2 By-laws of the Company. (1)
3.3 Certificate of the Designations, Powers, Preferences and Rights of
the Series A Convertible Preferred Stock of the Company. (3)
3.4 Certificate of the Designations, Powers, Preferences and Rights of
the Series B Convertible Preferred Stock of the Company. (4)
3.5 Certificate of Amendment to Certificate of the Designations,
Powers, Preferences and Rights of the Series A Convertible
Preferred Stock.
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)
5.1 Opinion of Fulbright & Jaworski L.L.P.
23.1 Consent of Price Waterhouse LLP.
24.1 Power of Attorney (included on signature page).
27 Financial Data Schedule. (2)
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 reference from, the Registrant's Annual Report on Form
10-KSB for the year 1996.
(3) Previously filed with the Commission as an Exhibit to, and
incorporated herein by reference from, the Registrant's Registration
Statement on Form S-3 (File No. 333-35569).
(4) Previously filed with the Commission as an Exhibit to, and incorporated
herein by reference from, the Registrant's Registration Statement on
Form S-8 (File No. 333-41595).
<PAGE>
EXHIBIT 3.5
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
SERIES A CONVERTIBLE PREFERRED STOCK
(Par Value $.01 Per Share)
of
GLOBAL PHARMACEUTICAL CORPORATION
--------------------
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
--------------------
The undersigned duly authorized officers of Global
Pharmaceutical Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"),
DO HEREBY CERTIFY:
FIRST: That Article 4 of the Corporation's Restated
Certificate of Incorporation provides that the Corporation is authorized to
issue 2,000,000 shares of preferred stock, $.01 par value per share, in any
number of series, with such designations, rights and preferences as may be
determined from time to time by the Board of Directors.
SECOND: That a Certificate of the Designations, Powers,
Preferences and Rights of the Series A Convertible Preferred Stock, $.01 par
value per share, of the Corporation dated August 12, 1997 (the "Certificate of
Designations") was filed with the Secretary of State of the State of Delaware
pursuant to Section 151(g) of the General Corporation Law of the State of
Delaware.
THIRD: That pursuant to a Unanimous Written Consent of the
Board of Directors of the Corporation dated as of December 15, 1997, adopted
pursuant to Section 141(f) of the General Corporation Law of the State of
Delaware, a resolution was duly adopted amending and restating the Certificate
of Designations, as described in the resolution set forth below:
<PAGE>
RESOLVED, that this Board of Directors, pursuant to authority
expressly vested in it by the provisions of the Certificate of Incorporation of
the Corporation, hereby authorizes the issue from time to time of a series of
Preferred Stock of the Corporation and hereby fixes the designations,
preferences and the relative, participating, optional or other rights, and the
qualifications, limitations or restrictions thereof, in addition to those set
forth in said Certificate of Incorporation, to be in their entirety as follows
(which authorization and fixing of such designations, preferences, rights,
qualifications, limitations and restrictions shall amend and replace in their
entirety any and all of such items previously fixed with respect to the Series A
Convertible Preferred Stock by this Board of Directors):
Section 1. Number of Shares and Designation. Sixty thousand
(60,000) shares of the preferred stock, $.01 par value, of the Corporation are
hereby constituted as a series of preferred stock of the Corporation designated
as "Series A Convertible Preferred Stock" (the "Series A Preferred Stock").
Section 2. Liquidation Rights. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of each share of Series A Preferred Stock outstanding
on the date of such liquidation, dissolution or winding up of the affairs of the
Corporation shall be entitled to receive, prior to and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock of the Corporation, par value $.01 per share (the
"Common Stock"), or any other class of Preferred Stock of the Corporation,
except for the Corporation's Series B Convertible Preferred Stock (the "Series B
Preferred Stock"), whose liquidation rights shall be pari passu with those of
the Series A Preferred Stock, by reason of their ownership thereof, an amount
equal to one hundred dollars ($100.00) per share (the "Liquidation Value") of
each share of Series A Preferred Stock held by the holders (subject to
adjustment for stock splits, combinations, reclassifications or similar events
affecting such shares).
All of the preferential amounts to be paid to the holders of
the Series A Preferred Stock under this Section 2 shall be paid or set apart for
payment before the payment or setting apart for payment of any amount for, or
the distribution of any assets of the Corporation to, the holders of the Common
Stock or any other class of Preferred Stock (except for the Series B Preferred
Stock, whose liquidation rights shall be pari passu with those of the Series A
Preferred Stock) in connection with such liquidation, dissolution or winding up.
After the payment or the setting apart for payment to the holders of the Series
A Preferred Stock of the preferential amounts so payable to them and the
preferential amounts payable to any other classes of Preferred Stock, the
holders of the Series A Preferred Stock, together with the holders of the Series
B Preferred Stock, shall be entitled to receive, pro rata with the Common Stock,
as if the Series A Preferred Stock and the Series B Preferred Stock are
converted into the number of shares of Common Stock into which the Series A
Preferred Stock and the Series B Preferred Stock are then convertible pursuant
to Section 4(a), all remaining assets of the Corporation. If the assets or
surplus funds to be distributed to the holders of the Series A Preferred Stock
and the Series B Preferred Stock are
-2-
<PAGE>
insufficient to permit the payment to such holders of their full preferential
amount, the assets and surplus funds legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred Stock and the
Series B Preferred Stock in proportion to the full preferential amount each such
holder is otherwise entitled to receive.
Section 3. Merger, Consolidation, Sale of Assets. Any merger
or consolidation of the Corporation with or into another corporation in which
the Corporation shall not survive, or the sale or transfer of all or
substantially all of the assets of the Corporation to another entity, or a
merger or consolidation in which the Corporation is the survivor but its Common
Stock is exchanged for stock, securities or property of another entity shall be
treated as a liquidation, dissolution or winding up of the Corporation and shall
entitle the holder of Series A Preferred Stock to receive at the closing, in
cash, securities or other property, amounts as specified in Section 2.
Section 4. Conversion into Common Stock. The holder of any
shares of the Series A Preferred Stock shall have conversion rights as follows
(the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock
shall be convertible, without the payment of any additional consideration by the
holder thereof and at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any transfer
agent for the Series A Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the
Liquidation Value by the Conversion Price, determined as hereinafter provided,
with respect to such shares. The Conversion Price shall be the lower of (a)
$2.75 per share (subject to adjustment pursuant to Section 7.2 of that certain
Series A Convertible Preferred Stock Purchase Agreement, dated August 12, 1997
(the "Purchase Agreement"), by and among the Corporation and the Purchasers
named therein) or (b) the average closing sale price (or if such price is
expressed as a bid and ask price, the closing bid price) of the Common Stock for
the five trading days immediately preceding the day on which the holder elects
to convert the Series A Preferred Stock; provided, however, that in no event
shall the Conversion Price be less than $2.00 per share. Notwithstanding the
foregoing, in the event that the Corporation, within eighteen months from the
Initial Closing (as such term is defined in the Purchase Agreement), issues and
sells not less than an aggregate of $1 million of additional shares of Common
Stock (or securities convertible into Common Stock) other than Excluded Stock
(as hereinafter defined) to financial investors (whether individual or
institutional) for a consideration per share of Common Stock of less than $2.75,
then and in such event, the Conversion Price in effect with respect to the
Series A Preferred Stock shall be reduced, concurrently with such issue, to a
price (calculated to the nearest cent) equal to the consideration per share for
which such additional shares are issued and sold. As used in this Section 4(a),
"Excluded Stock" shall mean (i) shares of Common Stock (or securities
convertible into Common Stock) or options for the purchase of Common Stock
issued, sold or granted by the Corporation to any of its employees, directors or
consultants pursuant to a bona fide employee stock
-3-
<PAGE>
purchase, option or similar benefit plan or incentive program or other
compensation arrangement approved by the Board of Directors of the Corporation
or (ii) shares of Common Stock (or securities convertible into Common Stock)
issued, sold or granted to joint venturers, partnering entities or other
companies with which the Corporation has a relationship involving or pertaining
to product development, or the manufacturing, development, marketing or
repackaging of products or any analogous relationship. The Conversion Price at
which shares of Common Stock shall be deliverable upon conversion of Series A
Preferred Stock without the payment of any additional consideration by the
holder thereof, shall be subject to adjustment, in order to adjust the number of
shares of Common Stock into which the Series A Preferred Stock is convertible,
as provided in this Section 4.
(b) Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of the Series A Preferred Stock. In lieu
of any fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then fair
market value of the Common Stock as determined by the Board of Directors in good
faith. Before any holder of Series A Preferred Stock shall be entitled to
receive certificates representing shares of Common Stock issuable upon
conversion of the Series A Preferred Stock, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Series A Preferred Stock, and shall
give written notice to the Corporation at such office in the manner specified in
the Purchase Agreement (which notice shall be irrevocable once tendered) that
such holder elects to convert the same, and shall state therein such holder's
name or the name or names of such holder's nominees in which such holder wishes
the certificate or certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable after receipt of the certificate(s)
representing Series A Preferred Stock, issue and deliver at such office to such
holder of Series A Preferred Stock, or to such holder's nominee or nominees, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid, together with cash in lieu of any
fraction of a share, and a certificate or certificates for such shares of Series
A Preferred Stock as were represented by the certificates surrendered and not
converted. Conversions pursuant to Section 4(a) shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Series A Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date.
(c) Adjustment to Conversion Price for Stock Splits,
Combinations, Dividends and Distributions.
(i) Stock Splits and Combinations. In the event the
Corporation shall at any time or from time to time effect a
subdivision of the outstanding Common Stock, the Conversion
Price then in effect immediately before that subdivision shall
be proportionately decreased, and, conversely, in the event
the Corporation shall at any time or from
-4-
<PAGE>
time to time combine the outstanding shares of Common Stock,
the Conversion Price then in effect immediately before the
combination shall be proportionately increased. Any adjustment
pursuant to this Section 4(c)(i) shall become effective at the
close of business on the date the subdivision or combination
becomes effective.
(ii) Dividends and Distributions of Common Stock. In the
event the Corporation at any time or from time to time shall
make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common
Stock, then and in each such event the Conversion Price then
in effect shall be decreased as of the time of such issuance
or, in the event such a record date shall have been fixed, as
of the close of business on such record date, by multiplying
the Conversion Price then in effect by a fraction:
(x) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the
close of business on such record date, and
(y) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the
close of business on such record date plus the number of
shares of Common Stock issuable in payment of such
dividend or distribution;
provided, however, if such record date shall have been fixed
and such dividend is not fully paid or if such distribution is
not fully made on the date fixed therefor, the Conversion
Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Conversion
Price shall be adjusted pursuant to this Section 4(c)(ii) as
of the time of actual payment of such dividends or
distributions.
(iii) Other Dividends and Distributions. In the event the
Corporation at any time or from time to time shall make or
issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other
distribution payable in securities of the Corporation other
than shares of Common Stock, then and in each such event
provision shall be made so that the holders of the Series A
Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Corporation that
they would have received had their Series A Preferred Stock
been converted into Common Stock on the date of such event and
had thereafter, during the period from the date of such event
to and including the conversion date, retained such securities
-5-
<PAGE>
receivable by them as aforesaid during such period giving
application to all adjustments called for during such period
under this Section 4 with respect to the rights of holders of
the Series A Preferred Stock.
(d) Adjustment for Reclassification, Exchange or Substitution.
If the Common Stock issuable upon the conversion of the Series A Preferred Stock
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for in Section 4(c), or a reorganization, merger, consolidation or sale
of assets provided for in Section 3, then and in each such event the holder of
each share of Series A Preferred Stock shall have the right thereafter to
convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
or other change, by holders of the number of shares of Common Stock into which
such shares of Series A Preferred Stock might have been converted immediately
prior to such reorganization, reclassification, or change, all subject to
further adjustment as provided in this Section 4.
(e) No Impairment. The Corporation shall not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed under this Section 4 by the
Corporation but shall at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the conversion rights of the
holders of the Series A Preferred Stock that by its terms is convertible against
impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price of the Series A Preferred
Stock pursuant to this Section 4, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of the Series A Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of such Series A Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) the Conversion Price at the time in
effect, and (iii) the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon the conversion of the
Series A Preferred Stock.
(g) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, the Corporation shall mail to each
holder of Series A Preferred Stock, at
-6-
<PAGE>
least ten (10) days prior to the date specified herein, a notice specifying the
date on which any such record is to be taken for the purpose of such dividend or
distribution.
(h) Common Stock Reserved. The Corporation shall reserve and
keep available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of the Series A Preferred Stock. If the Conversion Price of the
Series A Preferred Stock is at any time less than the par value of the Common
Stock, the Corporation shall cause to be taken such action (whether by lowering
the par value of the Common Stock, by converting the Common Stock from par value
to no par value, or otherwise) as will permit the conversion of the Series A
Preferred Stock without any additional payment by the holder thereof and the
issuance of the Common Stock, which Common Stock, upon issuance, will be fully
paid and nonassessable.
Section 5. Redemption.
(a) Redemption at the Option of the Corporation. The
Corporation, at the option of the Board of Directors, may, at any time and from
time to time upon written notice (which notice shall specify the date and place
of redemption and the number of shares and the certificate numbers thereof which
are to be redeemed) given not less than twenty (20) nor more than ninety (90)
days prior to the date fixed for redemption, redeem all or any part of the
outstanding shares of the Series A Preferred Stock by paying therefor in cash
the Liquidation Value for each share, provided that the closing sale price (or
if such price is expressed as a bid and ask price, the closing bid price) of the
Common Stock for a consecutive twenty (20)-day trading period ending not more
than ten (10) days prior to the date of such notice is ten dollars ($10.00) or
more. At least two business days prior to the redemption date specified in such
notice, each holder of the Series A Preferred Stock may give the Corporation
written instructions with respect to the application of funds legally available
for redemption of such holder's shares of the Series A Preferred Stock.
(b) Redemption at the Option of the Holder. In the event that
the Corporation breaches or fails to comply with its obligations under this
Certificate of Designations or the Purchase Agreement, which breach or failure
is material or has a material adverse effect on the business or prospects of the
Corporation, and such breach or failure of compliance continues for a period of
thirty (30) days after notice thereof has been given to the Corporation, then
each holder of shares of the Series A Preferred Stock shall be entitled to
compel the Corporation to redeem any or all of such holder's shares of the
Series A Preferred Stock; provided that such redeeming holder shall have given
written notice thereof to the Corporation at least forty-five (45) days prior to
the requested date of redemption. Such notice shall state the number of shares
of the Series A Preferred Stock to be redeemed. On or after the redemption date,
as specified in such notice, the holder requesting redemption shall surrender
such holder's certificate for the number of shares to be redeemed as stated in
the notice to the Corporation. On such redemption date, to the extent the
Corporation shall have funds legally available therefor, the Corporation shall
redeem the shares of the Series A
-7-
<PAGE>
Preferred Stock requested to be redeemed at the Liquidation Value. To the extent
there are insufficient funds legally available for redemption of all shares of
the Series A Preferred Stock and the Series B Preferred Stock, if any, requested
to be redeemed, legally available funds shall be applied to each holder's shares
of the Series A Preferred Stock pro rata in accordance with the number of shares
requested to be redeemed by each holder of shares of the Series A Preferred
Stock and the Series B Preferred Stock, if any, and each holder's shares shall
be redeemed in accordance with the instructions received from such holder or, if
no instructions are received from a holder, such holder's shares of the Series A
Preferred Stock shall be redeemed pro rata in accordance with the number of
shares of the Series A Preferred Stock and the Series B Preferred Stock, if any,
held by such holder. As soon as practicable, the Corporation shall give written
notice to each holder of shares of the Series A Preferred Stock redeemed or to
be redeemed indicating the number of shares redeemed or to be redeemed and the
certificate numbers thereof. If less than all of the shares of the Series A
Preferred Stock requested to be redeemed are redeemed, all unredeemed shares
shall remain outstanding and shall be entitled to all the rights and preferences
of outstanding shares of the Series A Preferred Stock hereunder. In case less
than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without cost to
the holder thereof.
(c) Legally Available Funds. For the purpose of determining
whether funds are legally available for redemption of shares of the Series A
Preferred Stock as provided herein, the Corporation shall value its assets at
the highest amount permissible under applicable law. If on any redemption date
funds of the Corporation legally available therefor shall be insufficient to
redeem all the shares of the Series A Preferred Stock and the Series B Preferred
Stock required to be redeemed as provided herein, funds to the extent legally
available shall be used for such purpose and the Corporation shall apply such
funds to each holder's shares of the Series A Preferred Stock pro rata according
to the number of shares held by each holder of the Series A Preferred Stock and
the Series B Preferred Stock, and each holder's shares shall be redeemed in
accordance with the instructions received from such holder or, if no
instructions are received from a holder, such holder's shares of the Series A
Preferred Stock shall be redeemed pro rata in accordance with the number of
shares of the Series A Preferred Stock and the Series B Preferred Stock held by
such holder.
(d) Failure to Redeem. In the event the Corporation fails to
redeem any shares of the Series A Preferred Stock pursuant to Section 5(a)
because it does not have funds legally available for such redemption, the shares
for which redemption is required but which are not redeemed shall remain
outstanding, and shall be entitled to all the rights and preferences of
outstanding shares of the Series A Preferred Stock hereunder. In such event, the
Corporation shall use its best efforts to effect the required redemption and the
Corporation's redemption obligation shall be discharged as soon as the
Corporation is able to discharge such obligation.
(e) Termination of Conversion. In the event the Corporation
has mailed written notice of redemption to the holders of record of shares of
the Series A Preferred
-8-
<PAGE>
Stock in accordance with the terms of Section 5(a) hereof, the holder's right to
convert such shares called for redemption shall cease at the close of business
on the redemption date, unless the Corporation defaults in the payment of the
redemption price.
Section 6. Voting Rights. In addition to the voting rights
required by the laws of the State of Delaware and by Section 7, the holders of
shares of Series A Preferred Stock shall vote, as a single class with all other
stockholders of the Corporation, on all matters voted on by the stockholders of
the Corporation, with each such holder of Series A Preferred Stock entitled to
the number of votes equal to the number of shares of Common Stock into which
such holder's shares would then be convertible. Except as set forth herein or in
the Purchase Agreement, or as otherwise provided by law, holders of Series A
Preferred Stock shall have no special voting rights and their consent shall not
be required for taking any corporate action.
Section 7. Covenants. So long as any of the shares of Series A
Preferred Stock authorized hereby shall be outstanding, the Corporation shall
not, without first obtaining the affirmative vote or written consent of not less
than a majority of such outstanding shares of Series A Preferred Stock:
(a) amend or repeal any provision of, or add any
provision to, the Corporation's Certificate of Incorporation or By-laws
if such action would alter or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit
of, the Series A Preferred Stock;
(b) reclassify any Common Stock into shares having
any preference or priority as to assets superior to or on a parity with
any such preference or priority of the Series A Preferred Stock; or
(c) create or issue any securities of the Corporation
which have equity features and which rank on a parity with or senior to
the Series A Preferred Stock upon liquidation or other distribution of
assets.
Section 8. Status of Converted or Reacquired Stock. Any shares
of Series A Preferred Stock purchased, redeemed or otherwise acquired by the
Corporation in any manner whatsoever, and any shares of Series A Preferred Stock
converted pursuant to Section 4 hereof shall be retired and cancelled promptly
after the acquisition or conversion thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock subject to the conditions
and restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Certificate of Designations creating a series of
Preferred Stock or any similar stock or as otherwise required by law.
FOURTH: That this amendment of the Certificate of Designations
was authorized by the holders of a majority of the outstanding shares of the
Corporation's
-9-
<PAGE>
Series A Preferred Stock, by written consents dated as of November 25, 1997, in
accordance with Section 228 of the General Corporation Law of the State of
Delaware.
FIFTH: That thereafter, written notice of the foregoing action
was given in accordance with Section 228 of the General Corporation Law of the
State of Delaware to those holders of Series A Preferred Stock who have not
consented in writing to the foregoing action.
SIXTH: That said amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Global Pharmaceutical Corporation has
caused this Certificate of Amendment to the Certificate of Designations to be
executed and attested this 9th day of January, 1998.
Attest: Global Pharmaceutical Corporation
By: /s/ Cornel C. Spiegler By: /s/ Max L. Mendelsohn
------------------------ ----------------------------------
Name: Cornel C. Spiegler Name: Max L. Mendelsohn
------------------------ ----------------------------------
Title: Secretary Title: President/Chief Executive Officer
------------------------ ----------------------------------
-10-
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF FULBRIGHT & JAWORSKI L.L.P.]
January 13, 1998
Global Pharmaceutical Corporation
Castor & Kensington Avenues
Philadelphia, PA 19124-5694
Dear Sirs:
We refer to the Registration Statement on Form S-3 (the "Registration
Statement"), filed by Global Pharmaceutical Corporation (the "Company") on
behalf of certain selling stockholders with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), relating
to 1,818,182 shares of the Company's Common Stock, $.01 par value (the
"Shares"), issuable upon conversion of the Company's Series B Convertible
Preferred Stock, $.01 par value (the "Series B Preferred").
As counsel for the Company, we have examined such corporate records,
documents and such questions of law as we have considered necessary or
appropriate for the purposes of this opinion and, upon the basis of such
examination, advise you that in our opinion the Shares issuable upon the
conversion of the Series B Preferred have been duly and validly authorized
and, subsequent to the conversion of the Series B Preferred, will be legally
issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm under the caption "Legal
Matters" in the prospectus contained therein and elsewhere in the Registration
Statement and prospectus. This consent is not to be construed as an admission
that we are a party whose consent is required to be filed with the
Registration Statement under the provisions of the Act.
Very truly yours,
/s/ Fulbright & Jaworski L.L.P.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
April 11, 1997 appearing on page F-2 of Global Pharmaceutical Corporation's
Annual Report on Form 10-KSB for the year ended December 31, 1996. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
Philadelphia, PA
January 13, 1998
