<PAGE>
As filed with the Securities and Exchange Commission on December 21, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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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
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. |x|
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 Offering Price Offering Price Registration Fee
Per Unit
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 450,000 $ --(1) $900,000 $251
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 $2.00, which represents the conversion price
of the Series C Convertible Preferred Stock.
--------------------------------
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 DECEMBER 21, 1998
PROSPECTUS
GLOBAL PHARMACEUTICAL CORPORATION
450,000 Shares
Common Stock
A stockholder of Global Pharmaceutical Corporation is offering for sale up
to 450,000 shares of our common stock. These shares of common stock will be
issued to the selling stockholder upon its conversion of shares of our Series C
Convertible Preferred Stock owned by the selling stockholder. The name and
certain information concerning the selling stockholder can be found on page 13
of this Prospectus. The selling stockholder may offer these shares from time to
time through ordinary brokerage transactions, in negotiated transactions or
otherwise, at market prices prevailing at the time of sale or at negotiated or
other prices. We will not receive any part of the proceeds from these sales.
Our common stock trades on the Nasdaq SmallCap Market under the symbol
"GLPC." On December 18, 1998, the closing sale price of our common stock was
$1.5625 per share.
Our principal executive offices are located at Global Pharmaceutical
Corporation, Castor & Kensington Avenues, Philadelphia, Pennsylvania 19124 and
our telephone number is (215) 289-2220.
--------------------------------
Your are urged to carefully read the "Risk Factors" section beginning on
page 4 of this Prospectus, which describes specific risks and certain other
information associated with an investment in our company that should be
considered before you make your investment decision.
--------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy of this Prospectus. Any representation to the contrary is a criminal
offense.
The date of this Prospectus is , 1998
The information in this Prospectus is not complete and may be changed. The
selling stockholder may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
Prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
<PAGE>
TABLE OF CONTENTS
Where You Can Find More Information.......................................... 3
Risk Factors................................................................. 4
Additional Financing Requirements.......................................... 4
Operating Losses; Future Profitability Uncertain........................... 5
No Assurance of FDA Approval of Future Products Requiring ANDA Submission.. 5
Compliance With Appliance Court Order...................................... 6
Government Regulations..................................................... 6
Environmental Matters...................................................... 6
Product Cycles............................................................. 7
Competition................................................................ 7
Expected Fluctuations in Results of Operations............................. 8
Dependence on a Small Number of Products................................... 8
Potential Additional Dilution.............................................. 9
Effects of Substantial Debt................................................ 9
Product Liability Litigation and Adequacy of Insurance Coverage ........... 10
Attraction and Retention of Key Personnel.................................. 10
Control of the Company by Significant Stockholders........................ 11
No Patents; Protection of Proprietary Rights.............................. 11
Risks Associated with Year 2000........................................... 11
Actual and Potential Issuance of Preferred Stock.......................... 12
Absence of Dividends...................................................... 12
Volatility of Share Price................................................. 12
Use of Proceeds.............................................................. 12
Selling Stockholders......................................................... 13
Plan of Distribution......................................................... 14
Legal Matters................................................................ 15
Experts .................................................................... 15
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may inspect and
copy any document we file at the SEC's Public Reference Room at 450 Fifth
Street, N.W. Washington, D.C. 20549 or at the SEC's other public reference
facilities in New York, New York, or Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from the SEC's web site on the Internet
at http:\\www.sec.gov. This web site contains reports, proxy and information
statements and other information regarding our company and other registrants
that file electronically with the SEC.
We are allowed to "incorproate by reference" the information contained in
documents we file with the SEC, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this Prospectus, and later
information that we file with the SEC will automatically update and supersede
this information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, until the selling stockholder
sells all the shares:
1. Our Annual Report on Form 10-KSB for the year ended December 31, 1997;
2. Our Quarterly Reports on Form 10-QSB for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998;
3. Our Proxy Statement dated April 6, 1998; and
4. The description of our common stock contained in our Registration
Statement on Form 8-A filed on December 8, 1995, as amended on
December 14, 1995 and as amended on December 5, 1997.
You may request a copy of these filings, at no cost, by writing or
telephoning our Secretary at Global Pharmaceutical Corporation, Castor &
Kensington Avenues, Philadelphia, Pennsylvania 19124, telephone number (215)
289-2220.
This Prospectus is part of a registration statement we filed with the SEC
(Registration No. 333_____). You should rely on the information incorporated by
reference or provided in this Prospectus or any supplement. We have not
authorized anyone else to provide you with different information. The selling
stockholder will not make an offer of these shares in any state where the offer
is not permitted. You should not assume that the information in this Prospectus
or any supplement is accurate as of any date other than the date on the front of
those documents.
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<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus (including the documents incorporated by reference in
this Prospectus) contains certain "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995 and information relating to us
that are based on the beliefs of our management, as well as assumptions made by
and information currently available to our management. 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 our current views with respect to future
events. These statements are subject to risks and uncertainties that could cause
actual results to differ materially from those contemplated in the
forward-looking statements. Many of these risks are discussed under the "Risk
Factors" Section of this Prospectus immediately following. You are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date of this Prospectus. We are not undertaking any obligation to
publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date of this Prospectus or to reflect the
occurrence of unanticipated events.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should consider carefully the following risk factors, as well as the other
information included in this Prospectus, in connection with an investment in our
common stock. This Prospectus contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to these differences include, but are not limited to, those discussed
in this "Risk Factors" Section, as well as those discussed elsewhere in this
Prospectus.
Additional Financing Requirements
As of November 30, 1998, we had approximately $1,363,000 of
unrestricted cash and cash equivalents. This includes the $900,000 we raised in
the private placement of Series C preferred stock referred to later on in this
Prospectus under the heading "Selling Stockholder." We estimate that this
available cash and cash equivalents is sufficient for approximately six months
of operations (from November 30, 1998) at our current expenditure levels. With
the increase in our operations, we will require additional financing to fund the
expected expansion of our research and product development activities and sales
and marketing capabilities and for general corporate purposes. We expect to seek
to raise these additional funds through subsequent equity or debt financings,
collaborative arrangements with corporate partners or through other sources. We
cannot give any assurance that additional funds will be available to us to
finance our expenses and development on acceptable terms, if at all. Additional
financings may result in dilution to our existing stockholders. If the funds we
need are not available in adequate amounts from additional financing sources or
from operations, our business will be materially and adversely affected.
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Operating Losses; Future Profitability Uncertain
Since our inception in 1993, we have been engaged in a substantial
renovation program in order to modernize our 113,000 square foot manufacturing
facility located in Philadelphia, Pennsylvania (the "Facility") and obtain
certification and approval for our proposed plant operations from the United
States Food and Drug Administration ("FDA"). This approval was received in July
1997. We have generated minimal revenues to date and have experienced operating
losses since our inception. As of September 30, 1998, our accumulated deficit
was $21,239,000. As of September 30, 1998, we also had outstanding indebtedness
in an aggregate principal amount of $2,874,000 at interest rates ranging from 2%
to 9% annually. Our ability to operate our business requires, among other
things, FDA approval of our products based on our Abbreviated New Drug
Applications ("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, we
must also, among other things:
* 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 our proposed business activities.
We cannot give any assurance that we 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 which we acquired from
Richlyn Laboratories, Inc. ("Richlyn"). Our ability to operate our business
successfully also will depend, in part, on a variety of factors outside of our
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. We cannot give any assurance
regarding whether or when we will successfully implement our business plan or
that our business will ever be profitable.
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 ANDAs are subject to extensive regulation
by numerous government authorities in the United States and other countries,
including FDA. FDA approval of our products that fall into this category
ordinarily will be required before we can market these products in the United
States. In order to obtain FDA approval of a product, we must, among other
things, demonstrate to the satisfaction of FDA that the product is safe and
effective for its intended uses and that we are capable of manufacturing the
product with procedures that at all times conform to FDA's current Good
Manufacturing Practices ("cGMPs") regulations. The approval process requires
submission of an application that, in the case of a generic drug, includes data
showing that our 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.
We are presently in various stages of product development with respect to
several new products requiring ANDA approval, and expect to submit applications
to FDA seeking approvals for these products. We cannot give any assurance,
however, that we will be granted ANDA approvals for additional products on a
timely basis, or at all. Any delay in obtaining or any failure to obtain these
approvals would adversely affect our ability to introduce and market products
and to generate product revenue. You should also review the risk factor
"Government Regulation" for additional information related to ANDAs.
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.
We cannot give any assurance that any of these enumerated items will not occur
or that any such marketing approvals will be obtained.
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<PAGE>
Compliance with Applicable Court Order
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 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"). When we acquired the
facilities and drug applications of Richlyn, we 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." Since we commenced operations, until recently, FDA
routinely inspected and required approval of the work necessary for our initial
product introductions. In January 1998, FDA informed us that product by product
inspection and prior authorization was no longer required in order for us to
manufacture and sell products. Through November 30, 1998, we have introduced and
are marketing an additional twelve products since then. We cannot give any
assurance that FDA will not reverse or reconsider its position and again require
product by product inspection and prior authorization. Any such reverals or
reconsideration will adversely affect our product introduction plans and results
of operations.
The Richlyn Order also requires, in general, that we hire and retain a
person, subject to FDA approval, who is qualified to inspect our drug
manufacturing facilities to determine that our methods, facilities and controls
are operated and administered in compliance with cGMPs. The Richlyn Order also
requires that this person inspect our manufacturing facilities and our manner of
operating them and certify to FDA in writing our compliance with related cGMPs.
This person is also required to examine all drug products manufactured,
processed, packed and held at our facility and certify in writing to FDA our
compliance with related cGMPs. We have retained an independent consultant to
serve in this capacity in respect of the Richlyn Order. We cannot give any
assurance that we will receive all of the requisite FDA approvals for future
ANDA products in a timely manner, if at all.
Government Regulation
In addition to the Richlyn Order, all pharmaceutical manufacturers,
including us, are subject to extensive federal, state and local regulation. We
cannot predict the extent to which we may be affected by legislative and other
regulatory actions and developments concerning various aspects of our operations
as well as our 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.
Also, 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. We are and will remain in
part dependent on new approvals over time to bring new products to market. We
cannot give any assurance that the rate and cost of FDA approval and other
federal and state legislative or regulatory developments will not adversely
affect our product introduction plans and results of operations.
In addition, our business plan includes the development of products in
dosage forms not previously offered by Richlyn. Our ability to compete
effectively with respect to any of these additional forms will be materially
affected by our 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, we
are 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. We believe our current facilities are in compliance in all material
respects with applicable Environmental Laws. Environmental Laws have changed in
recent years, however, and we may become subject to increasingly stringent
environmental standards in the future. While we anticipate from time to time
incurring capital expenditures in connection with environmental
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<PAGE>
matters, we cannot currently predict with any accuracy the outcome or timing of
future expenditures that may be required in connection with Environmental Law
compliance. We cannot give any assurance that additional future developments,
administrative actions or liabilities relating to environmental matters will not
have a material adverse effect on our 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, we may select
drugs for development several years in advance of their anticipated entry to
market. This 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, we
cannot give any assurance as to what the market or level of competition will be
for that particular product at the time we commence sales of the product.
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 we acquired from Richlyn currently have little or no
generic competition, we cannot give any assurance that other companies will not
receive FDA approval and begin selling competitive products. Our profitability,
if any, will be dependent, in part, on:
* our ability to develop and rapidly introduce new products;
* the timing of FDA approvals of our products; and
* the number and timing of FDA approvals for competing products.
We cannot give any assurance that we will be able to effectively compete in the
generic drug industry based upon these factors.
Competition
The generic drug industry is highly competitive. Many of our competitors,
including divisions and subsidiaries of large brand name pharmaceutical
companies that market generic drugs, have significantly greater financial and
other resources than us. As a result, many of our competitors are able to spend
significantly more than we can 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. This improves the
likelihood that any such greater resourced companies will be 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. We cannot give any
assurance that developments by others will not render our present or future
planned products or technologies noncompetitive or obsolete.
In addition, 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. We expect efforts of this 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. This may
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<PAGE>
result in these companies achieving a greater market share for products produced
by them 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. In some instances this change will delay the
first time at which equivalent generic products can be offered by generic drug
producers such as us and will also enhance 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, we may be faced with stronger competitors
with greater financial and other resources in the future. While we may need to
combine with other generic drug companies to meet increased competition or for
other reasons, we have no current plans to do so. We cannot give any assurance
that we will be able to combine with another company at a time when we desire to
do so or, if we do combine with another company, that the terms of any
combination will be favorable to our stockholders.
Expected Fluctuations in Results of Operations
We cannot currently predict whether our business will be seasonal in
nature. To the extent that we manufacture and distribute products that pertain
to seasonal ailments such as allergies or colds, we may experience seasonal
patterns in our sales and profitability. We cannot give any assurance that the
potential seasonality of our business will not have a material adverse effect on
us. Our 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 us; 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
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. We believe our long-term
success is dependent, among other factors, on our ability to offer and sell a
broad line of products. This should reduce the likelihood that we could be
materially adversely affected by diminishing profit margins or loss of market
share as any of our proposed generic products comes under increasing competitive
pressure. We intend to introduce products on a selected basis. Consequently, we
will be dependent, particularly in the near term, upon a relatively small number
of products to generate revenues.
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<PAGE>
Some materials used in our 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 we expect 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, we are subject to the special risks that are associated
with limited sources of supply. Further, a significant portion of our raw
materials may be available only from foreign sources. We also expect 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 our business and results of operations. Also, 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 our business and results of operations. Foreign sources also
can be subject to the special risks of doing business abroad, including:
* 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.
In addition, our ability to establish markets for our proposed products
is expected to be substantially dependent on the efforts of independent
distributors and wholesalers. We presently do not have any arrangements
regarding our products with any independent distributors or wholesalers, and we
cannot give any assurances that an arrangement will be entered into on terms
favourable to us, if at all.
Potential Additional Dilution
As of the date of this Prospectus, there are outstanding a total of
66,445 shares of our Convertible Preferred Stock, These shares presently are
convertible, at any time at the option of their holders, into an aggregate of
3,322,500 shares of our common stock. The shares of preferred stock also have
certain anti-dilution protections, which could make them convertible into
additional shares of common stock. In addition, as was discussed earlier under
the Risk Factor captioned "Additional Financing Requirements", we will need
additional money to fund our operations. The terms under which we will obtain
(if at all) this additionally needed financing have not been determined,
although it is likely to include our issuing additional shares of our stock. It
may also require us to issue shares of stock at prices which are below the then
trading market price for our common stock.
As of the date of this Prospectus, we also have issued warrants to
purchase 587,000 shares of our common stock at exercise prices ranging from
$1.75 to $13.175 per share of common stock. In addition, under our arrangement
with Merck KGaA, a German company, we issued warrants which are exercisable for
40,000 shares of our common stock for each aggregate $1 million in gross profit,
if any, earned by us under our agreement with a subsidiary of Merck KGaA in
connection with sales of ranitidine and other mutually agreed upon products, up
to a total of 700,000 shares of common stock. The exercise price for these
warrants issued to Merck KGaA is $8.50 per share of common stock. All warrants
issued by us are likely to be exercised only at times when the exercise price is
below the market price for our common stock, at which time we could possibly
issue shares and raise additional funds on terms superior to those contained in
the warrants.
Effects of Substantial Debt
As of September 30, 1998, we had outstanding approximately $2,874,000
of indebtedness, bearing interest at rates ranging from 2% to 9% annually. Of
this indebtedness, $406,000 principal amount is due to the Philadelphia
Industrial Development Corporation ("PIDC") in December 2000 and an additional
$706,000 is owed to General Electric Credit Corporation ("GECC") under our
revolving credit facility with GECC. The facility expires in July 2001.
Additionally, as of September 30, 1998, we had a stockholders' deficit of
approximately $21,239,000. We cannot give any assurance that we 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 our loan agreements. We also cannot give any
assurance that additional capital or waivers in respect of defaulted loans, if
needed by us, will be available to us. In this regard, you should also review
the "Additional Financing Requirements" risk factor earlier in this Section.
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Product Liability Litigation and Adequacy of Insurance Coverage
The design, development and manufacture of our 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 we currently maintain
liability insurance for all our products, there can be no assurance that the
coverage limits of our insurance policies will be adequate. A claim brought
against us, whether fully covered by insurance or not, could have a material
adverse effect upon us. In addition, we have 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
$128,000 on Richlyn's and our behalf to settle approximately 138 DES-related
suits. No other legal actions have been brought or, to our knowledge, threatened
against Richlyn or us in connection with DES-related claims. We believe that all
DES-related legal actions are directed towards individual manufacturers and have
not been embodied in a class action. As a result, we do not expect to be held
liable for DES-related claims other than claims based on products manufactured
by Richlyn. While Richlyn's insurers have in the past defended DES claims
against Richlyn and paid settlements relating to these claims, those insurers
have reserved the right to discontinue at any time the defense of claims and the
payment of any settlements. Accordingly, we cannot give any assurance that the
insurers will defend these actions or pay related claims in the future. Further,
we cannot give any assurance that, if those insurers fail or refuse to pay any
claims, we will have recourse against the insurers or we 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 us to have been substantially less than 1%.
Attraction and Retention of Key Personnel
The success of our present and future operations will depend to a great
extent on the collective experience, abilities and continued service of certain
of our executive officers, including Max L. Mendelsohn, our Chief Executive
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Officer, and Barry R. Edwards, our President. If we lose the services of any of
these executive officers, it could have a material adverse effect on us. Because
of the specialized scientific nature of our business, we are also highly
dependent upon our ability to continue to attract and retain qualified
scientific and technical personnel. There is intense competition for qualified
personnel in the areas of our activities, and we cannot give any assurance that
we will be able to continue to attract and retain the qualified personnel
necessary for the development of our business. Loss of the services of, or
failure to recruit, key scientific and technical personnel would be
significantly detrimental to our product development programs.
Control of the Company by Significant Stockholders
As of November 30, 1998, our present directors, executive officers and
their respective affiliates and related entities beneficially owned
approximately 41% of our 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 our company. In addition, as of
the date of this Prospectus, the selling stockholder beneficially owns
approximately 22% of the outstanding shares of our common stock. In this regard,
you should also review the "Potential Additional Dilution" and "Actual and
Potential Issuance of Preferred Stock" risk factors in other parts of this
Section, and the "Selling Stockholder" Section later in this Prospectus.
No Patents; Protection of Proprietary Rights
We do not own any patents and believe that patent protection is not, and
likely will not be, an important factor in determining whether we will be
successful in the generic drug field. Our success in that field will depend,
however, in part on our ability to preserve our trade secrets. We rely on trade
secrets and proprietary know-how that we seek to protect, in part, through
confidentiality agreements. In that regard, we obtained confidentiality
agreements from each of our officers and those of our supervising personnel who
have access to sensitive information. We intend 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 we will have adequate remedies for
any breach, or that our trade secrets will not otherwise become known or be
independently developed by competitors.
We currently have no licenses other than our secondary site packaging
arrangement with Genpharm and two licensing agreements with Eurand America (a
unit of American Home Products). We may in the future be required or may desire
to obtain other licenses to develop, manufacture and market commercially viable
products. We cannot give any 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 we are not aware of
any claim against us of patent infringement, our ability to commercialize our
products will depend on not infringing the patents of others. Litigation
concerning patents and proprietary technologies can be protracted and expensive.
Risks Associated with Year 2000
Our computer system and programs were designed in recent years.
Concerns related to the Year 2000 issue were addressed at the time we decided to
purchase these items. We have been advised by our software vendors that all
databases used by our current systems are Year 2000 compliant. We are also in
the process of addressing the Year 2000 issues with customers, suppliers,
service providers and other constituents. We will review the information
received in response to these inquiries and will determine the need and extent
of contingency planning. At this time, we do not believe that the Year 2000
issue indicates a material event or uncertainty and that the cost of addressing
the Year 2000 issue is material to our business, operations or financial
condition. However, achieving Year 2000 compliance is dependent on many factors,
some of which are not completely within our control. We cannot give any
assurance that we have correctly identified or will be able to identify all
aspects of our business that are subject to Year 2000 problems or of our
customers or suppliers that affect our business. We also cannot give any
assurance that our software vendors are correct in their assertions that the
software is year 2000 compliant, or that our estimate of the costs of systems
preparation for Year 2000 compliance will prove ultimately to be accurate.
Should either our internal systems or internal systems of one or more of our
significant suppliers or customers fail to achieve Year 2000 compliance, or our
estimate of the costs of becoming Year 2000 compliant prove to be materially
inaccurate, our business and results of operations could be adversely affected.
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Actual and Potential Issuance of Preferred Stock
Our Board of Directors has the authority to issue up to 2,000,000 shares
of our preferred stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the
stockholders. Of these shares, we have already issued 13,350 shares of "Series A
Convertible Preferred Stock", 50,000 shares of "Series B Convertible Preferred
Stock" and 9,000 shares of "Series C Convertible Preferred Stock." Each of the
Series A, Series B and Series C preferred stock have, and the Board of Directors
may authorize and issue other series of preferred stock which have, among other
things, voting, redemption and conversion rights that could adversely affect the
voting power or other rights of the holders of common stock. In addition,
holders of the Series A, Series B and Series C preferred stock are entitled to a
preference over the holders of common stock with regard to our assets or surplus
funds in the event of our dissolution or liquidation. The issuance of the
existing preferred stock 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 our company, may discourage bids for our common stock at a premium
over the market price of the common stock and may adversely affect the market
price of the common stock. In this regard, you should also review the "Control
of the Company by Significant Stockholders" risk factor earlier in this Section.
Absence of Dividends
We have never paid any cash dividends on our common stock and do not
expect to pay any cash dividends on our common stock in the foreseeable future.
Volatility of Share Price
The market prices for securities of biopharmaceutical companies in
general, and of our company in particular, have been volatile. The following
factors, among others, may have a significant impact on the market price of our
common stock:
* announcements of technological innovations or new commercial products
by us or our 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.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of our
common stock by the selling stockholder.
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SELLING STOCKHOLDER
This Prospectus relates to the resale of 450,000 shares of our common
stock for the account of Small Cap Value Portfolio (of Bear Stearns Asset
Management), the selling stockholder. These 450,000 shares of common stock can
be acquired by the selling stockholder upon its conversion of the 9,000 shares
of Series C preferred stock owned by it. The selling stockholder acquired the
shares of Series C preferred stock from us in November 1998 in a private
placement, for an aggregate purchase price of $900,000.
As of the date of this Prospectus, Small Cap Value Portfolio owns 267,045
shares of our common stock and warrants to purchase up to an additional 225,000
shares of our common stock, 5,000 shares of our Series A preferred stock, 260
shares of our Series B preferred stock, and 9,000 shares of our Series C
preferred stock. These shares of preferred stock, in total, are currently
convertible into an aggregate of 713,000 shares of our common stock. The selling
stockholder therefore beneficially owns 1,205,045 shares of our common stock,
representing the beneficial ownership of approximately 22% of the outstanding
shares of common stock (assuming no other shares of preferred stock are
converted by their holders into shares of common stock or warrants to purchase
shares of common stock are exercised by their holders). If all 450,000 shares of
common stock being re-offered under this Prospectus are sold by the selling
stockholder, the selling stockholder will beneficially own an aggregate of
approximately 755,045 shares of common stock, representing the beneficial
ownership of approximately 15% of the outstanding shares of common stock
(assuming no other shares of preferred stock are converted by their holders into
shares of common stock or warrants to purchase shares of common stock are
exercised by their holders).
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PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the selling
stockholder. All costs, expenses and fees in connection with the registration of
the shares offered by this Prospectus will be borne by us, except that the
selling stockholder will pay underwriting discounts and selling commissions, if
any. We will not receive any of the proceeds from the sale of the shares by the
selling stockholder. When we refer to the "selling stockholder" in this
Prospectus, that term is meant to include donees and pledgees selling shares of
common stock under this Prospectus which were received from Small Cap Value
Portfolio, the initial selling stockholder.
The selling stockholder may sell its shares of common stock 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 these 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 these prevailing market prices or at negotiated
prices. The selling stockholder may sell shares directly to purchasers or to or
through broker-dealers, which may act as agents or principals. Such
broker-dealer may receive compensation in the form of underwriting discounts,
concessions or commissions from the selling stockholder and/or purchasers of
shares for whom the broker-dealers may act as agent or to whom they sell as
principal, or both (which compensation may be in excess of customary
commissions). The selling stockholder may also sell all or a portion of its
shares pursuant to Rule 144 promulgated under the Securities Act or 1933, or may
pledge shares as collateral for margin accounts. These shares could then further
be resold pursuant to the terms of such accounts. The selling stockholder 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 stockholder 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. Liabilities under the
federal securities laws cannot be waived.
Because the selling stockholder may be deemed to be an "underwriter"
within the meaning of Section 2(11) of the Securities Act, the selling
stockholder will be subject to prospectus delivery requirements under the
Securities Act. Furthermore, in the event of a "distribution" of its shares, the
selling stockholder, any selling broker or dealer and any "affiliated
purchasers" may be subject to Rule 10b-6 under the Exchange Act or 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 such person's participation in that distribution is
completed. In addition, Rule 10b-7 under the Exchange Act or Regulation M
prohibits any "stabilizing bid" or "stabilizing purchase" for the purpose of
pegging, fixing or stabilizing the price of the common stock in connection with
this offering. We have informed the selling stockholder that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to its sales in the market.
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Upon our being notified by the selling stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
Prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of the selling stockholder and of the
participating broker-dealer(s), (ii) the, number of shares involved, (iii) the
price at which such shares were sold, (iv) the commissions paid or discounts or
concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this Prospectus and (vi) other facts
material to the transaction. In addition, upon our being notified by the selling
stockholder that a donee or pledgee intends to sell more than 500 shares, a
supplement to this Prospectus will be filed.
The selling stockholder may be entitled under agreements entered into
with us to indemnification from us against liabilities under the Securities Act.
In order to comply with certain state securities laws, if applicable,
these shares of common stock will not be sold in a particular state unless they
have been registered or qualified for sale in that state or any exemption from
registration or qualification is available and complied with.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered by
this Prospectus will be passed upon for us by Fulbright & Jaworski L.L.P., New
York, New York. Frederick R. Adler, who is of counsel to the firm, as of
November 30, 1998, beneficially owned 464,930 shares of our common stock
(including shares owned by 1520 Partners, Ltd.), warrants to purchase 17,500
shares of common stock at an exercise price of $8.50 per share and 5,000 shares
of our preferred stock (convertible, as of November 30, 1998, into 250,000
shares of common stock). In addition, 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
138,668 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, 1997, have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our corporation is organized under the laws of the State of Delaware.
Section 145 of the Delaware General Corporation Law (the "DGCL"), in general,
empowers a Delaware corporation to indemnify any person who was or is a party or
is threatened to be made a party to any lawsuit or proceeding (other than an
action by or in the right of that corporation) due to the fact that such person
is or was a director, officer, employee or agent of that corporation, or is or
was serving at the request of that corporation as a director, officer, employee
or agent of another corporation or entity. A corporation is also allowed, in
advance of the final disposition of a lawsuit or proceeding, to pay the expenses
(including attorneys' fees) incurred by any officer, director, employee or agent
in defending the action, as long as the person undertakes to repay this amount
if it is ultimately determined that he or she is not entitled to be indemnified
by the corporation. In addition, Delaware law allows a corporation to indemnify
these persons against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by any of them in
connection with the lawsuit or proceeding if (a) he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and (b) with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful.
A Delaware corporation also can indemnify its 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 judicial approval is needed to
indemnify any officer or director who 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 such action, the corporation must indemnify him
or her against the expenses (including attorneys' fees) which he or she actually
and reasonably incurred in connection with this action. The indemnification
provided by Delaware law is not deemed to be exclusive of any other rights to
which an officer or director may be entitled under any corporation's own
organizational documents, agreements or otherwise.
As permitted by Section 145 of the DGCL, Section TWELFTH of our
Certificate of Incorporation (our "Certificate") provides that we will indemnify
each person who is or was our director, officer, employee or agent (including
the heirs, executors, administrators or estate of these individuals) or is or
was serving at our request as a director, officer, employee or agent of another
entity, to the fullest extent that the law permits. This indemnification is
exclusive of any other rights to which any of these individuals otherwise may be
entitled. The indemnification also continues after a person ceases to be a
director, officer, employee or agent of our company and inures to the benefit of
the heirs, executors and administrators of these individuals. Expenses
(including attorneys' fees) incurred in defending any lawsuit or proceeding are
also paid by us in advance of the final disposition of these lawsuits or
proceedings after we receive an undertaking from the indemnified person to repay
this amount if it is ultimately determined that he or she is not entitled to be
indemnified by us. Section ELEVENTH of our Certificate further provides that our
directors are not personally liable to us or our stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of his or her duty of loyalty to us or our 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 (which deals with
unlawful dividends or stock purchases or redemptions), or (iv) for any
transaction from which he or she derived an improper personal benefit. Our
By-laws also provide that, to the fullest extent permitted by law, we will
indemnify any person who is a party or otherwise involved in any proceeding
because of the fact that he or she is or was a director or officer of our
company or was serving at our request.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to any of these foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
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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 of
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.............................................. $ 251.00
Legal fees and expenses........................................... $20,000.00
Accounting fees and expenses...................................... $ 5,000.00
Miscellaneous expenses............................................ $ 4,749.00
Total:......................................................... $30,000.00
None of these expenses are being paid by the selling stockholder.
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 undertakes to
repay such amount if it shall ultimately be determined that he or she 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 or she acted in good faith
and in a manner he or she 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 or her 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 or her against the expenses (including attorneys' fees) which he
or she 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, 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 or she 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.
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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.(5)
3.6 Certificate of the Designations, Powers, Preferences and Rights of the
Series C Convertible Preferred Stock of the Company.
3.7 Certificate of Amendment to Certificate of the Designations, Powers,
Preferences and Rights of the Series A Convertible Preferred Stock and
to Certificate of the Designations, Powers, Preferences and Rights of
the Series B Convertible Preferred Stock of the Company.
4.1 Specimen Certificate of the Company's Common Stock, par value
$.01 per share. (1)
5.1 Opinion of Fulbright & Jaworski L.L.P.
23.1 Consent of PricewaterhouseCoopers 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)
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(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 1997.
(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).
(5) 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. 333-44217).
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Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15
above, or otherwise, the registrant 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. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective by the Securities and Exchange Commission.
(2) For the purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Philadelphia and State of Pennsylvania on the 18th
day of December 1998.
GLOBAL PHARMACEUTICAL
CORPORATION
By: /s/ MAX L. MENDELSOHN
----------------------------------
Max L. Mendelsohn
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 Chief Executive Officer and December 18, 1998
- ----------------------- Director (Principal
(Max L. Mendelsohn) Executive Officer)
/s/ CORNEL C. SPIEGLER Chief Financial Officer, December 18, 1998
- ----------------------- Vice President--Administration
(Cornel C. Spiegler) (Principal Financial and
Accounting Officer)
/s/ PHILIP R. CHAPMAN Director December 18, 1998
- -----------------------
(Philip R. Chapman)
/s/ GARY ESCANDON Director December 18, 1998
- -----------------------
(Gary Escandon)
/s/ GEORGE F. KEANE Director December 18, 1998
- -----------------------
(George F. Keane)
/s/ MICHAEL MARKBREITER Director December 18, 1998
- -----------------------
(Michael Markbreiter)
/s/ JOHN W. ROWE Director December 18, 1998
- -----------------------
(John W. Rowe)
/s/ UDI TOLEDANO Director December 18, 1998
- -----------------------
(Udi Toledano)
II-4
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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.(5)
3.6 Certificate of the Designations, Powers, Preferences and Rights of the
Series C Convertible Preferred Stock of the Company.
3.7 Certificate of Amendment to Certificate of the Designations, Powers,
Preferences and Rights of the Series A Convertible Preferred Stock and
to Certificate of the Designations, Powers, Preferences and Rights of
the Series B Convertible Preferred Stock of the Company.
4.1 Specimen Certificate of the Company's Common Stock, par value
$.01 per share. (1)
5.1 Opinion of Fulbright & Jaworski L.L.P.
23.1 Consent of PricewaterhouseCoopers 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 1997.
(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).
(5) 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. 333-44217).
<PAGE>
Exhibit 3.6
CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
SERIES C CONVERTIBLE PREFERRED STOCK
(Par Value $.01 Per Share)
of
GLOBAL PHARMACEUTICAL CORPORATION
--------------------
Pursuant to Section 151 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 pursuant to such authority expressly vested in
the Board of Directors of the Corporation, said Board of Directors duly adopted
the resolution set forth below, providing for the designation and issuance of
nine thousand (9,000) shares of Series C Convertible Preferred Stock, $.01 par
value per share:
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 (which series shall be in addition to any
other series of preferred stock of the Corporation otherwise authorized) 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:
Section 1. Number of Shares and Designation. Nine thousand
(9,000) shares of the preferred stock, $.01 par value, of the Corporation are
<PAGE>
hereby constituted as a series of preferred stock of the Corporation designated
as "Series C Convertible Preferred Stock" (the "Series C 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 C 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, 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 C
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 C 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 or series of 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 C Preferred Stock of the preferential
amounts so payable to them and the preferential amounts payable to any other
classes or series of Preferred Stock, the holders of the Series C Preferred
Stock, together with the holders of the Corporation's Series A Convertible
Preferred Stock, $.01 par value share (the "Series A Preferred Stock"), Series B
Convertible Preferred Stock, $.01 par value per share (the "Series B Preferred
Stock"), and any such other class or series of Preferred Stock to the extent so
designated, shall be entitled to receive, pro rata with the Common Stock, as if
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and any such other applicable class or series of Preferred Stock are converted
into the number of shares of Common Stock into which the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and other such class
or series of Preferred Stock, respectively, are then convertible pursuant to the
Certificate of Incorporation of the Corporation and the applicable Certificate
of Designations, Powers, Preferences and Rights of such Series of Preferred
Stock (as amended, to the extent applicable), all remaining assets of the
Corporation. If the assets or surplus funds to be distributed to the holders of
the Series C Preferred Stock are 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 C 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 C Preferred Stock to receive at the closing, in
cash, securities or other property, amounts as specified in Section 2.
2
<PAGE>
Section 4. Conversion into Common Stock. The holder of any
shares of the Series C Preferred Stock shall have conversion rights as follows
(the "Conversion Rights"):
(a) Right to Convert. Each share of Series C 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 C 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 (i)
$2.00 per share (subject to adjustment pursuant to Section 7.2 of that certain
Series C Convertible Preferred Stock Purchase Agreement, dated November 12, 1998
(the "Purchase Agreement"), by and among the Corporation and the Purchasers
named therein) or (ii) 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 C Preferred Stock (the "Trading Average"); provided,
however, that in no event shall the Conversion Price be less than $0.75 per
share; provided further, however, that in the event the $2.00 Conversion Price
per share is adjusted pursuant to application of the provisions of Section 7.2
of the Purchase Agreement, the Conversion Price computed pursuant to subsection
4(a)(ii) above shall be equal to (x) 90% of the Trading Average, but not less
than $0.675 per share, in the event a 30 Day Delay (as such term is defined in
the Purchase Agreement) has occurred, and (y) 80% of the Trading Average, but
not less than $0.60 per share, in the event a 60 Day Delay (as such term is
defined in the Purchase Agreement) has occurred. 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 $2.00,
then and in such event, the Conversion Price in effect with respect to the
Series C 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 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 C 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 C Preferred Stock is convertible, as provided in this
Section 4.
3
<PAGE>
(b) Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of the Series C 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 C Preferred Stock shall be entitled to
receive certificates representing shares of Common Stock issuable upon
conversion of the Series C 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 C 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, unless
otherwise agreed to in writing by the Corporation) 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 C
Preferred Stock, issue and deliver at such office to such holder of Series C
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 C 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 C
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 as of
the close of business 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 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
4
<PAGE>
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 C
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 C 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
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 C Preferred Stock.
(d) Adjustment for Reclassification, Exchange or Substitution.
If the Common Stock issuable upon the conversion of the Series C 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 C 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 C 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
5
<PAGE>
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 C 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 C 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 C 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 C 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 C 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 C Preferred Stock, at 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 C Preferred Stock, and all other shares of all classes
or series of Preferred Stock which are then convertible into Common Stock. If
the Conversion Price of the Series C 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 C 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 C 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
6
<PAGE>
than ten (10) days prior to the date of such notice is seven dollars ($7.00) or
more. At least two business days prior to the redemption date specified in such
notice, each holder of the Series C 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 C 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 C Preferred Stock shall be entitled to
compel the Corporation to redeem any or all of such holder's shares of the
Series C 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 C 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 C 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 Series C Preferred Stock requested to
be redeemed, legally available funds shall be applied to each holder's shares of
Series C Preferred Stock pro rata in accordance with the number of shares
requested to be redeemed by each holder of shares of Series C 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 Series C Preferred Stock shall be redeemed pro rata in
accordance with the number of shares of Series C Preferred Stock held by such
holder. As soon as practicable, the Corporation shall give written notice to
each holder of shares of Series C 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 Series C 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 Series C 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 Series C
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 C 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
Series C Preferred Stock pro rata according to the number of shares held by each
holder of Series C 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 Series C
Preferred Stock shall be redeemed pro rata in accordance with the number of
shares of Series C Preferred Stock held by such holder.
7
<PAGE>
(d) Failure to Redeem. In the event the Corporation fails to
redeem any shares of Series C 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 C 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 C Preferred 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 C 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 C 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 C
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 C
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 C 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 C 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 C 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 C Preferred Stock upon liquidation or other distribution of
assets.
Section 8. Status of Converted or Reacquired Stock. Any shares
of Series C Preferred Stock purchased, redeemed or otherwise acquired by the
Corporation in any manner whatsoever, and any shares of Series C Preferred Stock
converted pursuant to Section 4 hereof shall be retired and canceled 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
8
<PAGE>
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.
THIRD: That said determination of the designation, preferences
and the relative, participating, optional or other rights, and qualifications,
limitations or restrictions thereof, relating to said Series C Convertible
Preferred Stock, was duly made by the Board of Directors pursuant to the
provisions of the Certificate of Incorporation of the Corporation, as amended,
and in accordance with the provisions of Section 151 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, Global Pharmaceutical Corporation has
caused this Certificate of the Designations, Powers, Preferences and Rights of
the Series C Convertible Preferred Stock (Par Value $.01 Per Share) of Global
Pharmaceutical Corporation to be executed and attested this 10th day of
November, 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: Chief Executive Officer
9
<PAGE>
Exhibit 3.7
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
SERIES A CONVERTIBLE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE), AS AMENDED,
and
TO
CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
SERIES B 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 (i) a Certificate of Amendment to Certificate of
the Designations, Powers, Preferences and Rights of the Series A Convertible
Preferred Stock, $.01 par value per share, of the Corporation dated January 9,
1998 and filed January 13, 1998 (the "Series A Certificate of Designations") and
(ii) a Certificate of the Designations, Powers, Preferences and Rights of the
<PAGE>
Series B Convertible Preferred Stock, $.01 par value per share, of the
Corporation dated and filed November 26, 1997 (the "Series B Certificate of
Designations"; and together with the Series A Certificate of Designations, the
"Certificates of Designations" ), were filed with the Secretary of State of the
State of Delaware pursuant to Section 242 and 151(g), respectively, 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 October 30, 1998, 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 Certificates
of Designations, as described in the resolution set forth below:
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 two series of
Preferred Stock of the Corporation (which two series shall be in addition to any
other series of preferred stock of the Corporation otherwise authorized) and
hereby fixes the designations, preferences and the relative, participating,
optional or other rights, and the qualifications, limitations or restrictions of
each such series, 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 by this Board of Directors with respect to the Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock of the
Corporation):
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") and
fifty thousand (50,000) 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 B Convertible Preferred Stock" (the "Series B
Preferred Stock"). The Series A Preferred Stock and Series B Preferred Stock are
sometimes collectively referred to in this Certificate of Amendment as the
"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 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 C Convertible Preferred Stock, $.01 par
value (the "Series C Preferred Stock") (whose liquidation rights shall be
superior to those of the 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 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 Preferred Stock under this Section 2 shall be paid or set apart for payment
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<PAGE>
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 or series of preferred stock (except for the Series C
Preferred Stock, whose liquidation rights shall be superior to those of the
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
C Preferred Stock and of the Preferred Stock of the respective preferential
amounts so payable to them and the preferential amounts payable to any other
classes of preferred stock, the holders of the Preferred Stock, together with
the holders of the Series C Preferred Stock and any such other class or series
of preferred stock to the extent so designated, shall be entitled to receive,
pro rata with the Common Stock, as if the Preferred Stock, the Series C
Preferred Stock and any such other applicable class or series of preferred stock
are converted into the number of shares of Common Stock into which the Preferred
Stock, Series C Preferred Stock and other such series or class of preferred
stock, respectively, are then convertible pursuant to the Certificate of
Incorporation of the Corporation and the applicable Certificate of Designations,
Powers, Preferences and Rights of such series of preferred stock (as amended, if
applicable), all remaining assets of the Corporation. If the assets or surplus
funds to be distributed to the holders of the Preferred Stock are insufficient
to permit the payment to such holders of their full preferential amount (in all
instances after the payment in full of the preferential amounts to be paid to
the holders of the Series C Preferred Stock), the assets and surplus funds
legally available for distribution shall be distributed ratably among the
holders of the 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 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 Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert. Each share of 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 such series of 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 (i), in the case of Series A Preferred
Stock, pursuant to Section 7.2 of that certain Series A Convertible Preferred
Stock Purchase Agreement, dated August 12, 1997 (the "Series A Purchase
Agreement"), by and among the Corporation and the Purchasers named therein and
(ii), in the case of Series B Preferred Stock, pursuant to Section 7.2 of that
certain Series B Convertible Preferred Stock Purchase Agreement, dated December
1, 1997 (the "Series B Purchase Agreement"; and collectively with the Series A
Purchase Agreement, the "Purchase Agreements"), by and among the Corporation and
the Purchasers named therein) or (b) the average closing sale price (or if such
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<PAGE>
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 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 on or before June 1, 1999, the Corporation,
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 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; provided, however, in no
event shall the Conversion Price be reduced below $2.00 per share. 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 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 or (iii) up to $900,000 of Series C Preferred Stock
issued and sold to financial investors (including any shares of Common Stock
issued upon the conversion thereof). The Conversion Price at which shares of
Common Stock shall be deliverable upon conversion of 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 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 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 Preferred Stock shall be entitled to receive
certificates representing shares of Common Stock issuable upon conversion of the
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 such series of Preferred Stock, and shall give written notice to the
Corporation at such office in the manner specified in the applicable Purchase
Agreement (which notice shall be irrevocable once tendered, unless otherwise
agreed to in writing by the Corporation) 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 Preferred Stock,
issue and deliver at such office to such holder of 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 or Series B Preferred
Stock, as applicable, 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 Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon conversion shall be
4
<PAGE>
treated for all purposes as the record holder or holders of such shares of
Common Stock as of the close of business 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 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 Preferred Stock
shall receive upon conversion thereof, in addition to the
5
<PAGE>
number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation that they would have
received had their 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 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 Preferred Stock.
(d) Adjustment for Reclassification, Exchange or Substitution.
If the Common Stock issuable upon the conversion of the 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 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
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 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 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 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 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 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 Preferred Stock, at 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.
6
<PAGE>
(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 Preferred Stock, and all other classes or series of preferred
stock (including the Series C Preferred Stock) which are then convertible into
Common Stock. If the Conversion Price of any series of 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 such series of 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 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 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 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 (i) this
Certificate of Amendment of Certificates of Designations or (ii) the Series A
Purchase Agreement (as to holders of Series A Preferred Stock) or the Series B
Purchase Agreement (as to holders of Series B Preferred Stock), 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 Series A Preferred Stock or Series B
Preferred Stock, as applicable, shall be entitled to compel the Corporation to
redeem any or all of such holder's shares of Series A Preferred Stock or Series
B Preferred Stock, as the case may be; 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 Series A Preferred Stock and/or Series B 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 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 Preferred
Stock requested to be redeemed, subject to the prior and superior right of the
holders of Series C Preferred Stock to have their shares of Series C Preferred
Stock redeemed, if so requested, prior to the redemption of any shares of
7
<PAGE>
Preferred Stock, legally available funds shall be applied to each holder's
shares of Preferred Stock pro rata in accordance with the number of shares
requested to be redeemed by each holder of shares of 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 Preferred Stock shall be redeemed pro rata in accordance with
the number of shares of Preferred Stock held by such holder. As soon as
practicable, the Corporation shall give written notice to each holder of shares
of 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 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 such applicable series of
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 of such series of Preferred Stock 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 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 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 Preferred Stock pro rata
according to the number of shares held by each holder of 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 Preferred Stock shall be redeemed pro rata in accordance
with the number of shares of Preferred Stock held by such holder (in all
instances, subject to the prior and superior right of the holders of Series C
Preferred Stock to have their shares of Series C Preferred Stock redeemed, if so
requested, prior to the redemption of any shares of Preferred Stock).
(d) Failure to Redeem. In the event the Corporation fails to
redeem any shares of 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
such respective series of 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
Preferred 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 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 Preferred Stock entitled to the number
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<PAGE>
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 Series A
Purchase Agreement or Series B Purchase Agreement, as applicable, or as
otherwise provided by law, holders of 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 or Series B Preferred Stock (as applicable) 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 or Series B Preferred Stock, as
the case may be:
(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 or Series B Preferred Stock,
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 Stock or
Series B Preferred Stock, respectively; 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 or Series B Preferred Stock, respectively,
upon liquidation or other distribution of assets.
Section 8. Status of Converted or Reacquired Stock. Any shares
of Preferred Stock purchased, redeemed or otherwise acquired by the Corporation
in any manner whatsoever, and any shares of Preferred Stock converted pursuant
to Section 4 hereof shall be retired and canceled 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 Certificates of
Designations was authorized by the holders of a majority of the outstanding
shares of the Corporation's Series A Preferred Stock and Series B Preferred
Stock, by written consents dated as of October 30, 1998, 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 and Series B
Preferred Stock who have not consented in writing to the foregoing action.
SIXTH: That this amendment of the Certificates of Designations
was duly adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
9
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IN WITNESS WHEREOF, Global Pharmaceutical Corporation has
caused this Certificate of Amendment to the Certificates of Designations to be
executed and attested this 10th day of November, 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: Chief Executive Officer
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EXHIBIT 5.1
[LETTERHEAD OF FULBRIGHT & JAWORSKI L.L.P.]
December 18, 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 a certain selling stockholder with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), relating
to 450,000 shares of the Company's Common Stock, $.01 par value (the
"Shares"), issuable upon conversion of the Company's Series C Convertible
Preferred Stock, $.01 par value (the "Series C 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 C Preferred have been duly and validly authorized
and, subsequent to the conversion of the Series C 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
February 9, 1998 appearing on page F-2 of Global Pharmaceutical Corporation's
Annual Report on Form 10-KSB for the year ended December 31, 1997. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Philadelphia, PA
December 18, 1998
