<PAGE>
As filed with the Securities and Exchange Commission on April 9, 1999
Registration No. 333-71809
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
Amendment No. 1
To
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-----------------
GLOBAL PHARMACEUTICAL CORPORATION
(Name of small business issuer as specified in its charter)
Delaware 2834 65-0403311
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
Castor & Kensington Avenues
Philadelphia, PA 19124-5694
(215) 289-2220
(Address, including zip code, and telephone
number, including area code, of
principal executive offices)
BARRY R. EDWARDS
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
(212) 318-3000
---------------
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>
SUBJECT TO COMPLETION, DATED APRIL 9, 1999
PROSPECTUS
GLOBAL PHARMACEUTICAL CORPORATION
623,254 Shares
Common Stock
The selling stockholders of Global Pharmaceutical Corporation are offering
for sale up to 623,254 shares of our common stock. These shares of common stock
were issued to the selling stockholders upon the conversion of shares of our
Series B Convertible Preferred Stock owned by the selling stockholders. The
Series B Preferred Stock was issued to the selling stockholders on December 1,
1997. The number of shares of our common stock which the selling stockholders
received upon conversion was based on our common stock price and certain
antidilution provisions applicable to the Series B Preferred Stock. We have
previously filed registration statement no. 333-44217 to register 1,818,182 of
the shares of common stock which the selling stockholders received upon
conversion of their Series B Preferred Stock. The names and certain information
concerning the selling stockholders can be found on page 12 of this prospectus.
The selling stockholders 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 April 7, 1999, the closing sale price of our common stock was $3.5625
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 2 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 , 1999
The information in this prospectus is not complete and may be changed. The
selling stockholders 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
Page
Risk Factors...................................................................2
We Have a Limited Supply of Cash and Cash Equivalents to Operate
Our Business...............................................................2
We are Dependent on Additional Financing to Expand Our Business and the
Committed Additional Financing may not Occur...............................2
Additional Financings May Result in Dilution to Our Existing Stockholders....2
The Manufacture of Generic Drugs May Require the Expenditure of Capital
Years in Advance of a Return on Capital....................................2
We Have Experienced Operating Losses in the Past, and the Highly Regulated
Nature of Our Business Makes Future Profitability Uncertain................2
The FDA May Not Approve our Future Products..................................3
Lack of Experience in Producing New Products and Formulations................3
FDA Authorities Can Stop the Manufacture and Sale of Products Previously
Approved...................................................................4
We Must Comply with an Outstanding Court Order Governing Manufacture
of our Products............................................................4
Government Regulation Could Adversely Affect Us..............................4
Compliance with Environmental Laws May Cause Uncertain Expenditures
in the Future..............................................................5
Generic Drug Makers are Most Profitable When They are the Only Producer
of a Generic Drug, and We Do Not Know if We Will be the Sole Maker of
Any Generic Drug Product...................................................5
We Face a High Level of Competition in the Generic Drug Industry from
Competitors Who Often Have Greater Resources Than Us.......................5
Our Revenues and Profitability Have Fluctuated and Could Fluctuate
Significantly in the Future................................................6
We are Dependent on a Small Number of Products...............................6
We are Dependent on a Small Number of Distributors and Suppliers.............6
We Do Not Have any Arrangements Regarding our Products with any
Independent Distributors or Wholesalers....................................7
Rights of Certain Current and Future Shareholders to Purchase Additional
Shares of Common Stock May Dilute the Future Value of the Common Stock.....7
We Have Substantial Amounts of Debt to Repay.................................7
Generic Drug Makers Face an Inherent Risk of Product Liability Litigation
and the Adequacy of Insurance Coverage for that Risk.......................8
We have Exposure Under DES - Related Product Liability Claims................8
We are Dependent on Key Officers and Qualified Scientific and Technical
Employees..................................................................8
Our Chief Executive Officer Has No Experience as a Chief Executive
Officer....................................................................9
Control of Our Company is Concentrated Among Significant Stockholders........9
Our Business is Dependent on Preserving the Confidentiality of
Proprietary Information....................................................9
We May Have Difficulty Obtaining Licenses in the Future......................9
Failure to Obtain Year 2000 Compliance May Have Adverse Effects on Us........9
We Have and May in the Future Issue Additional Preferred Stock..............10
We Do Not Pay Any Dividends and May Not Pay Any Dividends in the Future.....10
Our Stock Price Has Fluctuated and Could Fluctuate Significantly............10
Where You Can Find More Information...........................................11
Use of Proceeds...............................................................11
Selling Stockholders..........................................................12
Plan of Distribution..........................................................14
Legal Matters.................................................................15
Experts.......................................................................15
i
<PAGE>
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 deciding whether to invest 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, and elsewhere in this prospectus.
We Have a Limited Supply of Cash and Cash Equivalents to Operate Our Business
As of March 3, 1999, we had approximately $3,593,000 of unrestricted cash
and cash equivalents. We estimate that these funds are sufficient for
approximately twelve months of operations (from March 3, 1999) at our current
expenditure levels.
We are Dependent on Additional Financing to Expand Our Business and the
Committed Additional Financing may not Occur
We need additional financing for the expected expansion of our research and
product development activities and sales and marketing capabilities and for
general corporate purposes. Without additional funds, our business will be
materially and adversely affected. On March 2, 1999, we received $3,000,000 in
financing in exchange for shares of our preferred stock. The agreement signed
requires the investors to purchase an additional $2,000,000 of preferred stock
prior to June 30, 1999, if all the listed conditions are met. These conditions
include our stockholders authorizing sufficient additional stock which we can
issue and our not having any material adverse change in our assets, results of
operations or prospects. We cannot be sure all the listed conditions will be
satisfied, and that we will receive the additional funds.
Additional Financings May Result in Dilution to Our Existing Stockholders
If we issue additional capital stock to raise money, the ownership by
existing stockholders will be diluted.
The Manufacture of Generic Drugs May Require the Expenditure of Capital Years in
Advance of a Return on Capital
The development of a new generic drug product, including its formulation,
testing and FDA approval, generally takes approximately three or more years;
development activities typically 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.
We Have Experienced Operating Losses in the Past, and the Highly Regulated
Nature of Our Business Makes Future Profitability Uncertain
We do not know whether or when we will successfully implement our business
plan or that our business will ever be profitable. We have generated minimal
revenues to date and have experienced operating losses since our inception. As
of December 31, 1998, our accumulated deficit was $22,591,000. As of December
31, 1998, we also had outstanding indebtedness in an aggregate principal amount
of $2,932,000 at interest rates ranging from 2% to 9% annually. Operating our
business requires, among other things, FDA approval of our products based on our
drug applications and negotiation of satisfactory raw material supply contracts
with FDA-approved sources. To remain operational, we must also:
-2-
<PAGE>
o Properly receive, warehouse and store raw materials and supplies;
o Maintain work in progress in compliance with regulatory requirements
and properly store finished goods;
o Properly manufacture various formulations, dosages and configurations
of a potentially broad product line;
o Meet strict security requirements for virtually every activity
undertaken at the plant;
o Maintain appropriate laboratory, quality control and quality assurance
practices and procedures; and
o Comply with the many complex governmental regulations that deal with
virtually every aspect of our proposed business activities.
Operating our business successfully also will depend, in part, on a variety
of factors outside of our control, including:
o Changes in raw material supplies and suppliers;
o Changes in governmental programs and requirements;
o Changes in physician or consumer preferences; and
o Changes in FDA and similar regulatory requirements.
The FDA May Not Approve our Future Products
The testing, manufacturing and marketing of our products generally are
subject to extensive regulation and approvals by numerous government authorities
in the United States and other countries. We may not receive FDA approvals for
additional products on a timely basis, or at all. Any delay in our obtaining or
any failure to obtain these approvals would adversely affect our ability to
generate product revenue. Also, the process of seeking FDA approvals can be
costly, time consuming, and subject to unanticipated and significant delays.
Lack of Experience in Producing New Products and Formulations
Our ability to effectively produce new products and dosage forms will be
materially affected by our ability to master new and different production
techniques and to receive all required governmental approvals. Our inability to
effectively do this will have a material adverse effect on our financial
condition and results of operations. We do not have the level of experience or
staff to produce new products and formulations that some of our competitors
have.
-3-
<PAGE>
FDA Authorities Can Stop the Manufacture and Sale of Products Previously
Approved
The FDA can revoke approvals of previously approved drug products for
cause, request recalls of products, and obtain injunctions to close
manufacturing plants in response to violations. We do not know whether these
events will occur or whether we will obtain the required marketing approvals.
The occurrence of any of these events could adversely effect us in a material
way.
We Must Comply with an Outstanding Court Order Governing Manufacture of our
Products
On May 25, 1993, the United States District Court for the Eastern District
of Pennsylvania issued an order against Richlyn Laboratories, Inc. that, among
other things, permanently enjoined Richlyn from selling any drug manufactured,
processed, packed or labeled at its Philadelphia facility unless it met certain
stipulated conditions. When we acquired the facilities and drug applications of
Richlyn, we became subject to the conditions in that court order. The order
requires, in part, that FDA find that products manufactured, processed and
packed at the Richlyn facility conform with FDA regulations concerning current
Good Manufacturing Practices before the products can be marketed.
Although we were informed in January 1998 that product by product
inspection and prior authorization was no longer required in order for us to
manufacture and sell products, we cannot give any assurance that the FDA will
not reverse or reconsider its position and again require product by product
inspection and prior authorization. Any reversal or reconsideration by FDA will
adversely affect our product introduction plans and results of operations.
The order against Richlyn also requires 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 current good manufacturing practices. This
person must examine all drug products manufactured, processed, packed and held
at our facility and certify in writing to the FDA our compliance with related
current good manufacturing practices. We have contracted with a local consultant
to conduct this compliance review. We may not be able to maintain compliance
with current good manufacturing practices.
Government Regulation Could Adversely Affect Us
The rate and cost of FDA approval and other federal and state legislative
or regulatory developments may adversely affect our product introduction plans
and results of operations. As a pharmaceutical manufacturer, we are subject to
extensive federal, state and local regulation. Noncompliance with applicable
requirements can result in fines, recalls, seizure of products, suspension of
production, refusal of the government to enter into supply contracts or to
approve drug applications, and criminal prosecution. We cannot predict the
extent to which we may be affected by legislative and other regulatory actions
and developments concerning our operations, 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.
-4-
<PAGE>
Compliance with Environmental Laws May Cause Uncertain Expenditures in the
Future
We cannot accurately predict the outcome or timing of future expenditures
that we may be required to pay in order to comply with comprehensive federal,
state and local environmental laws and regulations. We must comply with
environmental laws which govern, among other things, all emissions, waste water
discharge and solid and hazardous waste disposal, and the remediation of
contamination associated with generation, handling and disposal activities. We
are subject periodically to environmental compliance reviews by various
regulatory offices. Environmental laws have changed in recent years and we may
become subject to stricter environmental standards in the future and face larger
capital expenditures in order to comply with environmental laws. Future
developments, administrative actions or liabilities relating to environmental
matters may have a material adverse effect on our financial condition or results
of operations.
Generic Drug Makers are Most Profitable When They are the Only Producer of a
Generic Drug, and We Do Not Know if We Will be the Sole Maker of Any Generic
Drug Product
The first generic drug manufacturers receiving FDA approval for generic
equivalents of related brand name products usually capture significant market
share and extract greater profits from the branded product than later arriving
manufacturers. The development of a new generic drug product, including its
formulation, testing and FDA approval, generally takes approximately three or
more years. Consequently, we may select drugs for development several years in
advance of their anticipated entry to market, and cannot know what the market or
level of competition will be for that particular product when we begin selling
the product. Our profitability, if any, will depend, in part, on:
o Our ability to develop and rapidly introduce new products;
o The timing of FDA approvals of our products; and
o The number and timing of FDA approvals for competing products.
In addition, by introducing generic versions of their own branded products
prior to the expiration of the patents for those drugs, brand name drug
companies have attempted to prevent generic drug manufacturers from producing
certain products. Brand name companies have also attempted to prevent competing
generic drug products from being treated as equivalent to their brand name
products. We expect efforts of this type to continue.
We Face a High Level of Competition in the Generic Drug Industry from
Competitors Who Often Have Greater Resources Than Us
The generic drug industry is highly competitive. Our competitors are both
generic drug manufacturers and brand name drug companies. Many of our
competitors have greater financial and other resources than us, and can spend
significantly more than we can in research, marketing and product development.
Relatively large research and development expenditures enable a
-5-
<PAGE>
company to support many FDA applications simultaneously. This improves the
likelihood that these greater resourced companies will be among the first to
obtain approval of at least some generic drugs. In addition, the generic drug
industry is currently undergoing a consolidation which may exacerbate this
situation.
Our Revenues and Profitability Have Fluctuated and Could Fluctuate Significantly
in the Future
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:
o The timing of FDA reapprovals we receive;
o The timing of process validation for particular generic drug products;
o The timing of any significant initial shipments of newly approved
drugs; and
o Competition from other generic drug manufacturers that receive FDA
approvals for competing products.
We cannot predict whether our business will be seasonal in nature. Products
that we manufacture and distribute pertaining to seasonal ailments such as
allergies or colds may experience seasonal patterns in sales and profitability.
The potential seasonality of our business may have a material adverse effect on
us.
We are Dependent on a Small Number of Products
Our long-term success is dependent, among other factors, on our ability to
offer and sell a broad line of products. 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. As a
result, if we misjudge the market for or are delayed in the production of a
particular product, our business can be materially adversely affected.
We are Dependent on a Small Number of Distributors and Suppliers
The FDA requires specification of raw material suppliers in applications
for approval of drug products. If raw materials were unavailable from a
specified supplier, FDA approval of a new supplier could delay the manufacture
of the drug involved. In addition, some materials used in our products are
currently available from only one or a limited number of suppliers. Further, a
significant portion of our raw materials may be available only from foreign
sources. Foreign sources can be subject to the special risks of doing business
abroad, including:
o Greater possibility for disruption due to transportation or
communication problems;
-6-
<PAGE>
o The relative instability of foreign governments and economies;
o Interim price volatility based on labor unrest or materials or
equipment shortages; and
o Uncertainty regarding recourse to a dependable legal system for the
enforcement of contracts and other rights.
The delay or unavailability of raw materials can materially adversely
affect us.
We Do Not Have any Arrangements Regarding our Products with any Independent
Distributors or Wholesalers
Our ability to establish markets for our proposed products is expected to
be substantially dependent on the efforts of independent distributors and
wholesalers. We cannot give any assurances that we will enter into any
arrangements with independent distributors or wholesalers on terms favorable to
us, if at all.
Rights of Certain Current and Future Shareholders to Purchase Additional Shares
of Common Stock May Dilute the Future Value of the Common Stock
As of March 15, 1999, there were outstanding a total of 39,000 shares of
our convertible preferred stock. These shares presently are convertible, at any
time at the option of their holders, into an aggregate of 1,950,000 shares of
our common stock. On March 2, 1999, we received $3,000,000 in financing in
exchange for shares of our preferred stock, which is now outstanding. The
agreement signed requires the investors to purchase an additional $2,000,000 of
preferred stock prior to June 30, 1999, if certain conditions are met. These
additional shares of preferred stock will be convertible, at any time at the
option of their holders, into an aggregate of 1,000,000 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 discussed earlier under the Risk Factor captioned "We are
Dependent on Additional Financing to Expand Our Business," we will need
additional money to fund our operations. The agreement under which we expect to
obtain this additionally needed financing provides for our issuing additional
shares of our preferred stock. The agreed upon price for these additional shares
of stock may be at prices which are below the then trading market price for our
common stock.
As of March 15, 1999, we also had issued warrants to purchase 1,065,000
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 (up to a total of
700,000 shares of common stock). The exercise price for these warrants may be at
prices below the then trading market price for our common stock.
We Have Substantial Amounts of Debt to Repay
We may not have or be able to maintain adequate capital at any given time
or from time to time in the future. As of December 31, 1998, we had outstanding
approximately $2,932,000 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 in December 2000 and an
additional $804,000 is owed to General Electric Credit Corporation under our
revolving credit facility. The facility expires in July 2001. Additionally, as
of December 31, 1998, we had a stockholders' deficit of approximately
$22,591,000. We also cannot give any assurance that additional capital or
waivers relating to defaulted loans, if needed by us, will be available to us.
In this regard, you should also review the "We Are Dependent on Additional
Financing to Expand Our Business" risk factor earlier in this Section.
-7-
<PAGE>
Generic Drug Makers Face an Inherent Risk of Product Liability Litigation and
the Adequacy of Insurance Coverage for that Risk
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. Any claims brought against us, whether
fully covered by insurance or not, could have a material adverse effect upon us.
We have Exposure Under DES - Related Product Liability Claims
When we acquired the business of Richlyn Laboratories, we also assumed its
liabilities in connection with Diethyl Stilbestrol, commonly known as 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 the drug
during their pregnancy. There have been numerous claims brought against drug
manufacturers relating to DES and, since 1987, Richlyn Laboratories' insurers
have paid approximately $136,000 on their behalf and our behalf to settle
approximately 143 DES-related suits. No other legal actions have been brought
or, to our knowledge, threatened against Richlyn Laboratories or us in
connection with DES-related claims. We do not expect to be held liable for
DES-related claims other than claims based on products manufactured by Richlyn
Laboratories. Claims settlements to date have been based on market share and
Richlyn Laboratories' share of the DES market during the relevant periods is
believed by us to have been substantially less than 1%.
We are Dependent on Key Officers and Qualified Scientific and Technical
Employees
As a small company with only 64 employees, 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. 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. Loss of the services
of, or failure to recruit, key scientific and technical personnel would be
significantly detrimental to our product development programs.
-8-
<PAGE>
Our Chief Executive Officer Has No Experience as a Chief Executive Officer
Barry R. Edwards is our President and Chief Executive Officer. Mr. Edwards,
who was recently named Chief Executive Officer of our Company, has no experience
as a chief executive officer.
Control of Our Company is Concentrated Among Significant Stockholders
As of March 15, 1999, our present directors, executive officers and their
respective affiliates and related entities beneficially owned approximately
48.4% of our common stock and common stock equivalents. These stockholders can
exercise significant influence over all matters requiring stockholder approval,
including the election of directors and the approval of significant corporate
transactions. This concentration of ownership may also potentially delay or
prevent a change in control of our company. In this regard, you should also
review the "Rights of Certain Current and Future Shareholders to Purchase
Additional Shares of Common Stock May Dilute the Future Value of the Common
Stock" and "We Have and May in the Future Issue Additional Preferred Stock" risk
factors in other parts of this Section, and the "Selling Stockholders" Section
later in this Prospectus.
Our Business is Dependent on Preserving the Confidentiality of Proprietary
Information
We rely on trade secrets and proprietary know-how that we seek to protect,
in part, through confidentiality agreements. We have 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 May Have Difficulty Obtaining Licenses in the Future
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 need or want 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.
Failure to Obtain Year 2000 Compliance May Have Adverse Effects on Us
Our software vendors have advised us 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 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
-9-
<PAGE>
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.
We Have and May in the Future Issue Additional 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. We presently have outstanding 9,000 shares of "Series C
Convertible Preferred Stock" and 30,000 shares of "Series D Convertible
Preferred Stock" and have agreed to issue an additional 20,000 shares of Series
D Preferred Stock. Preferred stockholders could adversely affect the rights of
holders of common stock by:
o Exercising voting, redemption and conversion rights to the detriment
of the holders of common stock;
o Receiving preferences over the holders of common stock regarding
assets or surplus funds in the event of our dissolution or
liquidation;
o Delaying, deferring or preventing a change in control of our company;
o Discouraging bids for our common stock at a premium over the market
price of the common stock; and
o Otherwise adversely affecting the market price of the common stock.
In this regard, you should also review the "Control of Our Company is
Concentrated Among Significant Stockholders" risk factor earlier in this
Section.
We Do Not Pay Any Dividends and May Not Pay Any Dividends in the Future
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.
Our Stock Price Has Fluctuated and Could Fluctuate Significantly
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:
o Announcements of technological innovations or new commercial products
by us or our competitors;
o Government regulation;
o Patent or proprietary rights developments;
o Public concern as to the safety or other implications of
biopharmaceutical products; and
o Market conditions in general.
-10-
<PAGE>
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 have filed a registration statement on Form S-3 with the SEC covering
the shares of common stock being offered by means of this prospectus. We are
allowed to "incorporate 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, until the selling stockholders sell all the shares:
1. Our annual report on Form 10-KSB for the year ended December 31, 1998;
2. Our proxy statement dated April 12, 1999; and
3. 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.
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 stockholders 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.
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 do not have 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.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of our common
stock by the selling stockholders.
-11-
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth information as of March 15, 1999 except as
otherwise noted, with respect to the number of shares of common stock
beneficially owned by each of the selling stockholders. The selling stockholders
who, as of March 15, 1999, beneficially owned more than one percent of the
outstanding common stock (assuming conversion of the Series B Preferred Stock
held by them) are M. Kingdon Offshore N.V. (20%), Kingdon Associates, L.P. (8%),
Kingdon Partners, L.P. (8%), Udi Toledano (5%), Small Cap Value Portfolio (19%),
Max L. Mendelsohn (4%) and Gary Escandon (3%).
The selling stockholders of Global Pharmaceutical Corporation are offering
for sale up to 623,254 shares of our common stock. These shares of common stock
have been issued to the selling stockholders upon the conversion of shares of
our Series B Convertible Preferred Stock owned by the selling stockholders. The
Series B Preferred Stock was issued to the selling stockholders on December 1,
1997. As disclosed in footnote 2 to the "Selling Stockholders" table on page 17
of registration statement no. 333-44217, the number of shares of our common
stock which the selling stockholders received upon conversion depended upon our
common stock price and certain antidilution provisions applicable to the Series
B Preferred Stock. Using the original $2.75 conversion price, we initially
registered 1,818,182 shares of our common stock which could be issued upon the
conversion of the outstanding shares of Series B Preferred Stock (registration
statement no. 333-44217). Because of the antidilution provisions of the Series B
Preferred Stock, the conversion price fell in some cases to $2.00 per share, and
required the issuance of the additional 623,254 shares of our common stock
registered on this registration statement. The number of shares beneficially
owned includes shares issuable within 60 days upon exercise of outstanding
options and warrants and upon conversion of the Series B Preferred Stock.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Shares of Common
Number of Shares Stock Beneficially Owned
of Common stock After the Completion of this
Number of Shares Number of Shares Registered on Other offering and the Offering of
of Common Stock of Common Stock Selling Stockholder Shares on Registration
Selling Stockholder Beneficially Owned Registered Herein Registration Statements Statement Number 333-44217
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
M. Kingdon Offshore N.V. 1,129,412 256,685 872,727 0
- ------------------------------------------------------------------------------------------------------------------------------------
Kingdon Associates, L.P. 376,470 85,561 290,909 0
- ------------------------------------------------------------------------------------------------------------------------------------
Kingdon Partners, L.P. 376,471 85,562 290,909 0
- ------------------------------------------------------------------------------------------------------------------------------------
Udi Toledano (Director) (1) 240,925 3,409 34,091 228,425
- ------------------------------------------------------------------------------------------------------------------------------------
Max. L. Mendelsohn 165,766 682 7,818 163,266
(Director)
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Value 1,435,253 3,387 709,754 1,422,413
Portfolio (of Bear Stearns
Asset Management)
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Escandon 123,227 6,819 43,181 98,227
(Director)(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Arnold S. Penner Foundation 49,383 13,020 36,363 0
- ------------------------------------------------------------------------------------------------------------------------------------
Futurtec, L.P. 50,000 13,637 36,363 0
- ------------------------------------------------------------------------------------------------------------------------------------
Hollywell Investments Pty. 21,000 13,500 7,500 0
Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Matthew J. Morahan 15,750 9,000 36,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald J. DelMauro 23,571 5,571 18,000 0
- ------------------------------------------------------------------------------------------------------------------------------------
Philip Chapman 12,346 3,255 9,091 0
(Director)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
David Purvis 11,905 2,814 9,091 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-12-
<PAGE>
- ------------------
(1) Includes 68,568 shares of common stock owned by Mr. Toledano's wife and
22,529 shares of common stock owned by a trust for the benefit of minor
children of Mr. Toledano, all of which shares Mr. Toldeano disclaims
beneficial ownership.
(2) Includes 7,500 shares of common stock owned by Alvaro P. Escandon Inc.
Money Purchase Pension Plan dated 12/1/80, with respect to which Mr.
Escandon disclaims beneficial ownership.
(3) Does not include 575,350 shares of common stock held by the Frederick R.
Adler Intangible Asset Management Trust, of which Susan R. Chapman, spouse
of Philip R. Chapman, is trustee. Also does not include 50,000 shares of
common stock held by Longview Partners, L.P., of which Susan R. Chapman is
the General Partner. Mr. Chapman disclaims beneficial ownership of all of
these shares.
-13-
<PAGE>
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the selling
stockholders. We will pay all costs, expenses and fees in connection with this
registration, except that the selling stockholders 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 stockholders. When we refer
to the "selling stockholders" in this prospectus, that term includes donees and
pledgees selling shares of common stock under this prospectus which were
received from the selling stockholders.
The selling stockholders may sell their shares at various times in one or
more of the following transactions:
o on the Nasdaq SmallCap Market (or any other exchange on which the
shares may be listed);
o in the over-the-counter market;
o in negotiated transactions other than on such exchange;
o by pledge to secure debts and other obligations;
o in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions, in covering previously established
short positions and in settlement of other transactions in
standardized or over-the-counter options; or
o in a combination of any of the above transactions.
The selling stockholders may sell their shares at market prices prevailing
at the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices. The selling stockholders may sell shares
directly or may use broker-dealers to sell their shares. The broker-dealers will
either receive discounts or commissions from the selling stockholders, or they
will receive commissions from purchasers of shares. This compensation may be in
excess of customary commission.
The selling stockholders may also sell all or a portion of their shares
under Rule 144 under the Securities Act of 1933, or may pledge shares as
collateral for margin accounts. These shares could then further be resold
pursuant to the terms of such accounts.
Under certain circumstances, the selling stockholders and any
broker-dealers that participate in the distribution might be deemed to be
"underwriters" within the meaning of the Securities Act and any commission
received by them and any profit on the resale of the shares of common stock as
principal might be deemed to be underwriting discounts and commissions under the
Securities Act. The selling stockholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
shares against certain liabilities, including liabilities arising under the
Securities Act. Liabilities under the federal securities laws cannot be waived.
Because the selling stockholders may be deemed to be "underwriters" under
the Securities Act, the selling stockholders will be subject to prospectus
delivery requirements under the Securities Act. Furthermore, in the event of a
"distribution" of their shares, the selling stockholders, 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 stockholders that
the anti-manipulative provisions of Regulation M promulgated under the Exchange
Act may apply to their sales in the market.
-14-
<PAGE>
If we are notified by the selling stockholders 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, we will file a supplement to
this prospectus, if required, under Rule 424(b) under the Securities Act,
disclosing the following:
o the names of the selling stockholders and of the participating
broker-dealer(s);
o the number of shares involved;
o the price at which such shares were sold;
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
o that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus; and
o other facts material to the transaction.
In addition, if we are notified by the selling stockholders that a donee or
pledgee intends to sell more than 500 shares, we will file a supplement to this
prospectus.
The selling stockholders 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 December 31,
1998, beneficially owned 136,495 shares of our common stock (owned by 1520
Partners, Ltd.) and warrants to purchase 17,500 shares of common stock at an
exercise price of $8.50 per share. 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. The Frederick R. Adler Intangible Asset
Management Trust, of which Mr. Adler is a beneficiary, and Susan R. Chapman,
spouse of Philip R. Chapman, a director of the Company, is trustee, owns 575,350
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, 1998, 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.
-15-
<PAGE>
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.
-16-
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the Company's estimates (other than 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.............................................. $ 401
Legal fees and expenses........................................... $ 5,000
Accounting fees and expenses...................................... $ 5,000
Miscellaneous expenses............................................ $ 1,599
Total:......................................................... $12,000
None of these expenses are being paid by the selling stockholders.
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.
II-1
<PAGE>
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. (6)
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. (6)
3.8 Certificate of Designations of Series D Convertible Preferred Stock
of the Company.
3.9 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.
3.10 Certificate of Amendment to Certificate of the Designations, Powers,
Preferences and Rights of the Series C 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. (previously filed).
23.1 Consent of PricewaterhouseCoopers LLP.
24.1 Power of Attorney (previously filed).
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).
(6) 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. 333-69395).
II-2
<PAGE>
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.
II-3
<PAGE>
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 amendment to
the 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 8th day of April, 1999.
GLOBAL PHARMACEUTICAL
CORPORATION
By: /s/ BARRY R. EDWARDS
----------------------------------
Barry R. Edwards
Chief Executive Officer
and Director
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/ BARRY R. EDWARDS Chief Executive Officer and April 8, 1999
---------------------- Director (Principal
(Barry R. Edwards) Executive Officer)
/s/ CORNEL C. SPIEGLER Chief Financial Officer, April 8, 1999
---------------------- Vice President--Administration
(Cornel C. Spiegler) (Principal Financial and
Accounting Officer)
Director
----------------------
(Philip R. Chapman)
* Director April 8, 1999
----------------------
(Gary Escandon)
* Director April 8, 1999
----------------------
(Thomas Finnegan)
Director
----------------------
(George F. Keane)
* Director April 8, 1999
----------------------
(Michael Markbreiter)
* Director April 8, 1999
----------------------
(Max L. Mendelsohn)
* Director April 8, 1999
----------------------
(John W. Rowe)
* Director April 8, 1999
----------------------
(Udi Toledano)
* = By: /s/ Cornel C. Spiegler
-----------------------
Cornel C. Spiegler
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
Exhibit Description of Document
Number -----------------------
-------
3.1 Restated Certificate of Incorporation of the Company. (1)
3.2 By-laws of the Company. (1)
3.3 Certificate of the Designations, Powers, Preferences and Rights of
the Series A Convertible Preferred Stock of the Company. (3)
3.4 Certificate of the Designations, Powers, Preferences and Rights of
the Series B Convertible Preferred Stock of the Company. (4)
3.5 Certificate of Amendment to Certificate of the Designations,
Powers, Preferences and Rights of the Series A Convertible
Preferred Stock.(5)
3.6 Certificate of the Designations, Powers, Preferences and Rights of the
Series C Convertible Preferred Stock of the Company. (6)
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. (6)
3.8 Certificate of Designations of Series D Convertible Preferred Stock
of the Company.
3.9 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.
3.10 Certificate of Amendment to Certificate of the Designations, Powers,
Preferences and Rights of the Series C 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. (previously filed).
23.1 Consent of PricewaterhouseCoopers LLP.
24.1 Power of Attorney (previously filed).
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).
(6) 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. 333-69395).
<PAGE>
GLOBAL PHARMACEUTICAL CORPORATION
CERTIFICATE OF DESIGNATIONS
OF
SERIES D CONVERTIBLE PREFERRED STOCK
------------------------------------
Pursuant to Section 151(g) of the Delaware General Corporation Law
The undersigned officer hereby certifies that:
A. He is the duly elected and acting officer of GLOBAL PHARMACEUTICAL
CORPORATION, a Delaware corporation (the "Corporation").
B. On February 24, 1999, the Board of Directors of the Corporation duly
adopted resolutions in order to designate the Series D Preferred Stock (as set
forth in the resolution below).
C. The resolution contained herein has not been modified, altered or
amended and is presently in full force and effect.
RESOLVED, that pursuant to the authority expressly vested in the Board of
Directors of the Corporation by Article 4 of the Certificate of Incorporation of
the Corporation, the Board of Directors hereby fixes and determines the voting
rights, designations, preferences, qualifications, privileges, limitations,
restrictions, options, conversion rights and other special or relative rights of
the foregoing series of the preferred stock, par value $.01 per share, which
shall be designated as Series D Convertible Preferred Stock (the "Series D
Preferred Stock").
1. Designation. Fifty thousand (50,000) shares of preferred stock, par
value $.01 per share, of the Corporation are hereby constituted as a series of
the preferred stock designated as "Series D Convertible Preferred Stock."
2. Dividends.
(a) Dividends on Series D Preferred Stock. In the event that the
Corporation shall at any time or from time to time declare, order, pay or make a
dividend or other distribution (whether in cash, securities, rights to purchase
securities or other property) on its Common Stock, the holders of shares of the
Series D Preferred Stock shall be entitled to receive from the Corporation, with
respect to each share of Series D Preferred Stock held, a dividend or
-1-
<PAGE>
distribution that is the same dividend or distribution that would be received by
a holder of the number of shares of Common Stock into which such share of Series
D Preferred Stock is convertible pursuant to the provisions of Section 5 hereof
on the record date for such dividend or distribution (except in the case of the
payment of a stock dividend in shares of its Common Stock if a holder of shares
of Series D Preferred Stock shall have given notice to the Corporation (within
five (5) business days after such holder's receipt of the Corporation's notice
regarding the stock dividend) of its election to have the Conversion Price of
its shares adjusted in accordance with Section 5(d)(i) hereof). Any such
dividend or distribution shall be declared, ordered, paid or made on the Series
D Preferred Stock at the same time such dividend or distribution is declared,
ordered, paid or made on the Common Stock. Dividends, if declared, on shares of
the Series D Preferred Stock shall accrue and be cumulative from the payment
date of such dividend on such shares.
(b) Limitation on Dividends, Repurchases and Redemptions. So long as
any shares of Series D Preferred Stock shall be outstanding, the Corporation
shall not declare or pay or set apart for payment any dividends or make any
other distributions on any Junior Securities, whether in cash, securities,
rights to purchase securities or other property (other than dividends or
distributions payable in shares of the class or series upon which such dividends
or distributions are declared or paid), nor shall the Corporation purchase,
redeem or otherwise acquire for any consideration or make payment on account of
the purchase, redemption or other retirement of any Parity Securities or Junior
Securities, nor shall any monies be paid or made available for a sinking fund
for the purchase or redemption of any Parity Securities or Junior Securities,
unless with respect to all of the foregoing all dividends or other distributions
to which the holders of Series D Preferred Stock shall have been entitled,
pursuant to Section 2(a) hereof, shall have been paid or declared and a sum of
money has been set apart for the full payment thereof.
(c) Pro Rata Payments. In the event that full dividends are not paid
or made available to the holders of all outstanding shares of Series D Preferred
Stock and of any Parity Securities (after the payment in full of the
preferential amount to be paid to the holders of Senior Securities) and funds
available for payment of dividends shall be insufficient to permit payment in
full to holders of all such stock of the full preferential amounts to which they
are then entitled, then the entire amount available for payment of dividends
(after the payment in full of the preferential amount to be paid to the holders
of Senior Securities) shall be distributed ratably among all such holders of
Series D Preferred Stock and of any Parity Securities in proportion to the full
amount to which they would otherwise be respectively entitled.
3. Preference on Liquidation.
(a) Liquidation Preference for Series D Preferred Stock. In the event
that the Corporation shall liquidate, dissolve or wind up, whether voluntarily
or involuntarily, no distribution shall be made to the holders of shares of
Common Stock or other Junior Securities (and no monies shall be set apart for
such purpose) unless prior thereto, the holders of shares of Series D Preferred
Stock shall have received an amount per share equal to the greater of (i) the
sum of (x) the Liquidation Value, plus (y) all declared but unpaid dividends
thereon through the date of
-2-
<PAGE>
distribution, (ii) ratable distributions determined with respect to the holders
of Series D Preferred Stock and Common Stock on the basis of the number of
shares of Common Stock into which such Series D Preferred Stock could be
converted pursuant to the provisions of Section 5 hereof immediately prior to
such distribution and (iii) the Payment Amount, on a per share basis (the
greater of (i), (ii) and (iii) above is herein referred to as the "Series D
Liquidation Preference"). The "Liquidation Value" means $100 per share with
respect to the Series D Preferred Stock.
(b) Pro Rata Payments. If, upon any such liquidation, dissolution or
other winding up of the affairs of the Corporation, the assets of the
Corporation shall be insufficient to permit the payment in full of the Series D
Liquidation Preference for each share of Series D Preferred Stock then
outstanding and the full liquidating payments on all Parity Securities (in all
instances, after the payment in full of the preferential amount to be paid to
the holders of Senior Securities), then the assets of the Corporation remaining
shall be ratably distributed among the holders of Series D Preferred Stock and
of any Parity Securities in proportion to the full amounts to which they would
otherwise be respectively entitled if all amounts thereon were paid in full.
(c) Sale Not a Liquidation. Neither the voluntary sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of the
Corporation nor the consolidation, merger or other business combination of the
Corporation with or into one or more corporations shall be deemed to be a
liquidation, dissolution or winding-up, voluntary or involuntary, of the
Corporation.
(d) Notice of Liquidation. Written notice of any liquidation,
dissolution or winding up of the Corporation, stating the payment date or dates
when and the place or places where amounts distributable in such circumstances
shall be payable, shall be given by first class mail, postage prepaid, not less
than thirty (30) days prior to any payment date specified therein, to the
holders of record of the Series D Preferred Stock at their respective addresses
as shall appear on the records of the Corporation.
4. Voting.
(a) General. In addition to any voting rights provided in the
Corporation's Certificate of Incorporation or by law, the Series D Preferred
Stock shall vote together with the Common Stock as a single class on all actions
to be voted on by the stockholders of the Corporation. Each share of Series D
Preferred Stock shall entitle the holder thereof to such number of votes per
share on each such action as shall equal the number of shares of Common Stock
into which each share of Series D Preferred Stock is then convertible. The
holders of Series D Preferred Stock shall be entitled to notice of any
stockholder's meeting in accordance with the By-Laws of the Corporation.
(b) Board of Directors. The Corporation shall not, without the written
consent or affirmative vote of the holders representing at least a majority of
the shares of Series D Preferred Stock then outstanding, given in writing or by
vote at a meeting, consenting or voting (as
-3-
<PAGE>
the case may be) separately as a class, increase the maximum number of directors
constituting the Board of Directors to a number in excess of nine (9).
(c) Election of Directors. So long as either (i) the Fleming Holders
own at least 50% of the outstanding shares of Series D Preferred Stock or (ii)
any Transferee owns at least 50% of the outstanding shares of Series D Preferred
Stock and the Corporation consented to such Transferee (which consent shall not
be unreasonably withheld), the holders of Series D Preferred Stock, consenting
or voting (as the case may be) as a separate class, shall be entitled, but not
required, to elect up to three (3) directors of the Corporation. So long as
either (i) the Fleming Holders own at least 37.5% of the outstanding shares of
Series D Preferred Stock or (ii) any Transferee owns at least 37.5% of the
outstanding shares of Series D Preferred Stock and the Corporation consented to
such Transferee (which consent shall not be unreasonably withheld), the holders
of Series D Preferred Stock, consenting or voting (as the case may be) as a
separate class, shall be entitled, but not required, to elect up to two (2)
directors of the Corporation. So long as either (i) the Fleming Holders own at
least 25% of the outstanding shares of Series D Preferred Stock or (ii) any
Transferee owns at least 25% of the outstanding shares of Series D Preferred
Stock and the Corporation consented to such Transferee (which consent shall not
be unreasonably withheld), the holders of Series D Preferred Stock, consenting
or voting (as the case may be) as a separate class, shall be entitled, but not
required, to elect one (1) director of the Corporation. A director or the
directors elected in accordance with this Section 4 are referred to as a
"Preferred Director" or the "Preferred Directors."
Holders of at least a majority of the outstanding shares of Series D
Preferred Stock shall exercise the right to elect a Preferred Director by
written notice to the Corporation, whereupon the Corporation shall call a
meeting of the holders of the Series D Preferred Stock to elect a Preferred
Director. Thereafter, the holders of Series D Preferred Stock, consenting or
voting as a class (as the case may be), shall be entitled to elect a Preferred
Director at any meeting (or in a written consent in lieu thereof) held for the
purpose of electing directors until such time as holders of at least a majority
of the outstanding shares of Series D Preferred Stock shall notify the
Corporation in writing that they no longer wish to exercise their right to elect
a Preferred Director.
At any meeting (or in a written consent in lieu thereof) held for the
purpose of electing directors, (i) the presence in person or by proxy (or the
written consent) of the holders representing a majority of the shares of Series
D Preferred Stock then outstanding shall constitute a quorum of such class for
the election of a Preferred Director; and (ii) the absence of the presence in
person or by proxy (or written consent) of the holders representing a majority
of the shares of Common Stock then outstanding shall not affect the right of a
quorum of holders of Series D Preferred Stock to elect a Preferred Director. Any
Preferred Director may be removed with or without cause by, and shall not be
removed except by, the holders representing a majority of the shares of Series D
Preferred Stock then outstanding, present in person or by proxy and voting at a
meeting of stockholders, or of the holders of Series D Preferred Stock called
for that purpose, or by written consent signed by the holders representing a
majority of the shares of Series D Preferred Stock then outstanding.
-4-
<PAGE>
A vacancy in the directorship to be held by a Preferred Director shall be
filled only by vote or written consent of the holders of the Series D Preferred
Stock as provided above. Unless otherwise required by the laws of the State of
Delaware, any holder or holders of at least a majority of the outstanding shares
of Series D Preferred Stock shall have the right to call a meeting of the
holders of Series D Preferred Stock of the Corporation for the purpose of
electing a Preferred Director and filling vacancies of Preferred Directors.
5. Conversion. The holders of shares of Series D Preferred Stock shall have
the right to convert all or a portion of such shares into fully paid and
nonassessable shares of Common Stock or any capital stock or other securities
into which such Common Stock shall have been changed or any capital stock or
other securities resulting from a reclassification thereof as follows:
(a) Right to Convert. Subject to and upon compliance with the
provisions of this Section 5, a holder of shares of Series D Preferred Stock
shall have the right, at the option of such holder, at any time, to convert any
or all of such shares into the number of fully paid and nonassessable shares of
Common Stock (calculated as to each conversion rounded down to the nearest
1/100th of a share) obtained by dividing the aggregate Liquidation Value of the
shares to be converted, plus all declared but unpaid dividends thereon through
the date of conversion (unless the holder of shares of Series D Preferred Stock
being so converted shall have elected to receive any such dividends in respect
of the shares being converted subsequent to conversion), by the Conversion Price
and by surrender of such shares, such surrender to be made in the manner
provided in paragraph (b) of this Section 5. The Common Stock issuable upon
conversion of the shares of Series D Preferred Stock, when such Common Stock
shall be issued in accordance with the terms hereof, are hereby declared to be
and shall be duly authorized, validly issued, fully paid and nonassessable
Common Stock held by the holders thereof.
(b) Mechanics of Conversion. Each holder of Series D Preferred Stock
that desires to convert the same into shares of Common Stock shall surrender the
certificate or certificates therefor, duly endorsed, at the principal office of
the Corporation or of any transfer agent for the Series D Preferred Stock or
Common Stock, accompanied by written notice to the Corporation that such holder
elects to convert the same and stating therein the number of shares of Series D
Preferred Stock being converted and whether all declared and unpaid dividends in
respect of such shares shall be included in the calculation set forth in Section
5(a) hereof, and setting forth the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued if such name
or names shall be different than that of such holder. Thereupon, the Corporation
shall issue and deliver at such office on not later than the fifth Business Day
thereafter (unless such conversion is in connection with an underwritten public
offering of Common Stock, in which event concurrently with such conversion) to
such holder or on such holder's written order, (i) a certificate or certificates
for the number of validly issued, fully paid and nonassessable full shares of
Common Stock to which such holder is entitled and (ii) if less than the full
number of shares of Series D Preferred Stock evidenced by the surrendered
certificate or certificates are being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares converted.
-5-
<PAGE>
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date of such surrender of the shares to be
converted (except that if such conversion is in connection with an underwritten
public offering of Common Stock, then such conversion shall be deemed to have
been effected upon such surrender) so that the rights of the holder thereof as
to the shares being converted shall cease at such time except for the right to
receive shares of Common Stock and if the holder of the shares being so
converted shall have elected to receive dividends subsequent to such conversion,
all accrued and unpaid dividends in accordance herewith, and the person entitled
to receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Common Stock at
such time.
(c) Conditional Conversion. Notwithstanding any other provision
hereof, if conversion of any shares of Series D Preferred Stock is to be made in
connection with a public offering of Common Stock or any transaction described
in Section 5(d)(vii) hereof, the conversion of any shares of Series D Preferred
Stock may, at the election of the holder thereof, be conditioned upon the
consummation of the public offering or such transaction, in which case such
conversion shall not be deemed to be effective until the consummation of such
public offering or transaction.
(d) Adjustment of the Conversion Price. The Conversion Price shall be
adjusted from time to time as follows:
(i) Adjustment for Stock Splits and Combinations. If the
Corporation at any time or from time to time after the Issue Date,
pays a stock dividend in shares of its Common Stock, issues any
convertible debt securities, effects a subdivision of the outstanding
Common Stock, combines the outstanding shares of Common Stock, issues
by reclassification of shares of its Common Stock any shares of
capital stock of the Corporation, makes a distribution of any of its
assets (other than cash dividends payable out of earnings or retained
earnings in the ordinary course of business) then, in each such case,
the Conversion Price in effect immediately prior to such event shall
be adjusted so that each holder of shares of Series D Preferred Stock
shall have the right to convert its shares of Series D Preferred Stock
into the number of shares of Common Stock which it would have owned
after the event had such shares of Series D Preferred Stock been
converted immediately before the happening of such event. Any
adjustment under this Section 5(d)(i) shall become effective
retroactively immediately after the record date in the case of a
dividend and distribution and shall become effective immediately after
the effective date in the case of a issuance, subdivision, combination
or reclassification. If the Corporation pays a stock dividend in
shares of its Common Stock and the holders of the Series D Preferred
Stock received such stock dividend pursuant to Section 2(a) hereof,
the Conversion Price shall not be adjusted for such stock dividend
under this Section 5(d)(i).
(ii) Issuance of Additional Shares of Stock. If the
Corporation shall (except as hereinafter provided) issue or sell
Additional Shares of Stock for an aggregate amount of consideration
exceeding one million dollars ($1,000,000) in exchange for
consideration in
-6-
<PAGE>
an amount per Additional Share of Stock less than the Conversion Price
in effect immediately prior to such issuance or sale of Additional
Shares of Stock, then the Conversion Price as to the Common Stock into
which the Series D Preferred Stock is convertible immediately prior to
such adjustment shall be adjusted:
(A) In the event that such issue or sale occurs at
any time during the period from the Issue Date up to and
including the date which is eighteen (18) months after the
Issue Date, to equal the consideration paid per Additional
Share of Stock; and
(B) In the event that such issue or sale occurs at
any time after the date which is eighteen (18) months after
the Issue Date, to equal the price determined by multiplying
the Conversion Price by a fraction, of which:
(x) the numerator shall be (1) the
number of shares of Common Stock
outstanding immediately prior to such
issuance or sale of Additional Shares of
Stock plus (2) the number of shares of
Common Stock which the aggregate amount
of consideration, if any, received by
the Corporation for the total number of
such Additional Shares of Stock so
issued or sold would purchase at the
greater of (I) the Market Price per
share of the Common Stock in effect
immediately prior to such issuance or
sale of Additional Shares of Stock or
(II) the Conversion Price in effect
immediately prior to such issuance or
sale of Additional Shares of Stock, and
(y) the denominator shall be the
number of shares of Common Stock
outstanding immediately after such
issuance or sale of Additional Shares of
Stock; provided, however, that such
adjustment shall be made only if the
Conversion Price determined from such
adjustment shall be less than the
Conversion Price in effect immediately
prior to the issuance of such Additional
Shares of Stock.
The provisions of this Section 5(d)(ii) shall not apply to any issuance
of Additional Shares of Common Stock for which an adjustment is provided under
Section 5(d)(i) or which are dividends or distributions received by the holders
of the Series D Preferred Stock pursuant to Section 2(a) hereof.
-7-
<PAGE>
(iii) (A) Issuance of Warrants or Other Rights. If at any
time (i) the Corporation shall in any manner (whether directly or by
assumption in a merger in which the Corporation is the surviving
corporation) issue or sell any warrants or other rights to subscribe
for or purchase any Additional Shares of Stock or any Convertible
Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the consideration
(computed in accordance with Section 5(d)(vi)(A) hereof) received for
such warrants or other rights or such Convertible Securities shall be
less than the Conversion Price in effect immediately prior to the time
of such issue or sale, then the Conversion Price shall be adjusted as
provided in Section 5(d)(ii). No further adjustments of the Conversion
Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such warrants or other
rights or upon the actual issue of such Common Stock upon such
conversion or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. If at any
time the Corporation shall in any manner (whether directly or
by assumption in a merger in which the Corporation is the
surviving corporation) issue or sell, any Convertible
Securities, whether or not the rights to convert thereunder
are immediately exercisable, and the consideration (computed
in accordance with Section 5(d)(vi)(A) hereof) received for
such Convertible Securities shall be less than the Conversion
Price in effect immediately prior to the time of such issue or
sale, then the Conversion Price shall be adjusted as provided
in Section 5(d)(ii). No adjustment of the Conversion Price
shall be made under this Section 5(d)(iii)(B) upon the
issuance of any Convertible Securities which are issued
pursuant to the exercise of any warrants or other subscription
or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants
or other rights pursuant to Section 5(d)(iii)(A). No further
adjustments of the Conversion Price shall be made upon the
actual issue of such Common Stock upon conversion of such
Convertible Securities and, if any issue or sale of such
Convertible Securities is made upon exercise of any warrant or
other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the Conversion
Price have been or are to be made pursuant to other provisions
of this Section 5(d), no further adjustments of the Conversion
Price shall be made by reason of such issue or sale.
(iv) Superseding Adjustments. If, at any time after any
adjustment of the Conversion Price at which the Series D Preferred
Stock is convertible shall have been made pursuant to Section
5(d)(iii) as a result of any issuance of warrants, rights or
Convertible Securities,
-8-
<PAGE>
(A) such warrants or rights, or the right of
conversion or exchange in such other Convertible Securities,
shall expire, and all or a portion of such warrants or rights,
or the right of conversion or exchange with respect to all or
a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, or
(B) the consideration per share for which shares of
Stock are issuable pursuant to such warrants or rights, or the
terms of such other Convertible Securities, shall be increased
solely by virtue of provisions therein contained for an
automatic increase in such consideration per share upon the
occurrence of a specified date or event,
then such previous adjustment shall be rescinded and annulled and the Additional
Shares of Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(C) treating the number of Additional Shares of Stock
or other property, if any, theretofore actually issued or
issuable pursuant to the previous exercise of any such
warrants or rights or any such right of conversion or
exchange, as having been issued on the date or dates of any
such exercise and for the consideration actually received and
receivable therefor, and
(D) treating any such warrants or rights or any such
other Convertible Securities which then remain outstanding as
having been granted or issued immediately after the time of
such increase of the consideration per share for which shares
of Stock or other property are issuable under such warrants or
rights or other Convertible Securities;
whereupon a new adjustment of the Conversion Price at which the Series D
Preferred Stock is convertible shall be made, which new adjustment shall
supersede the previous adjustment so rescinded and annulled.
(v) Antidilution Adjustments Under Other Securities. Without
limiting any other rights available hereunder to the holders of the
Series D Preferred Stock, if there is an antidilution adjustment (i)
under any Convertible Securities other than the Series D Preferred
Stock, whether issued prior to or after the Issue Date, or (ii) under
any rights, options or warrants to purchase Additional Shares of Stock,
whether issued prior to or after the Issue Date which, in either case,
results in a reduction in the exercise or purchase price with respect
to such security or rights or results in an increase in the number of
Additional Shares of Stock obtainable under such Convertible Security,
right, option or warrant, then an
-9-
<PAGE>
adjustment shall be made to the Conversion Price hereunder. Any such
adjustment pursuant to this Section 5(d)(v) shall be whichever of the
following results in a lower Conversion Price: (A) a reduction in the
Conversion Price equal to the percentage reduction in such exercise or
purchase price with respect to such Convertible Security, right, option
or warrant or (B) a reduction in the Conversion Price which will result
in the same percentage increase in the number of shares of Common Stock
available hereunder as the percentage increase in the number of
Additional Shares of Stock available under such Convertible Security,
right, option or warrant. Any such adjustment under this Section
5(d)(v) shall only be made if it would result in a lower Conversion
Price than that which would be determined pursuant to any other
antidilution adjustment otherwise required hereunder as a result of the
event or circumstance which triggered the adjustment to such
Convertible Security, right, option or warrant, and if an adjustment is
made pursuant to this Section 5(d)(v), such other antidilution
adjustment otherwise required hereunder shall not be made as a result
of such event or circumstance.
(vi) Other Provisions Applicable to Adjustments under this
Section. The following provisions shall be applicable to making
adjustments to the shares of Common Stock into which the Series D
Preferred Stock is convertible and the Conversion Price at which the
Series D Preferred Stock is convertible provided for in this Section
5(d):
(A) Computation of Consideration. To the extent that
any Additional Shares of Stock or any Convertible Securities
or any warrants or other rights to subscribe for or purchase
any Additional Shares of Stock or any Convertible Securities
shall be issued for cash consideration, the consideration
received by the Corporation therefor shall be the amount of
the cash received by the Corporation therefor, or, if such
Additional Shares of Stock or Convertible Securities are
offered by the Corporation for subscription, the subscription
price, or, if such Additional Shares of Stock or Convertible
Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public
offering price (subtracting (i) in any case, any amounts paid
or receivable for accrued interest or accrued dividends, (ii)
in the case of any public offering, any compensation,
discounts or expenses paid or incurred by the Corporation for
and in the underwriting of, or otherwise in connection with,
the issuance thereof, and (iii) in the case of any transaction
other than a public offering, any compensation, discounts or
expenses paid or incurred by the Corporation for and in the
underwriting of, or otherwise in connection with, the issuance
thereof; provided that, in the case of clause (iii), such
amount is in excess of eight percent (8%) of the aggregate
costs of such transactions, and then only to the extent of
such excess). To the extent that such issuance shall be for a
consideration other than cash, then except as herein otherwise
expressly provided, the amount of such consideration shall be
deemed to be the fair value of such consideration at the time
of such issuance as determined in good faith by the Board of
-10-
<PAGE>
Directors of the Corporation. In case any Additional Shares of
Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase such Additional Shares of
Stock or Convertible Securities shall be issued in connection
with any merger in which the Corporation issues any
securities, the amount of consideration therefor shall be
deemed to be the fair value, as determined in good faith by
the Board of Directors of the Corporation, of such portion of
the assets and business of the nonsurviving corporation as
such Board in good faith shall determine to be attributable to
such Additional Shares of Stock, Convertible Securities,
warrants or other rights, as the case may be. The
consideration for any Additional Shares of Stock issuable
pursuant to any warrants or other rights to subscribe for or
purchase the same shall be the consideration received by the
Corporation for issuing such warrants or other rights plus the
additional consideration payable to the Corporation upon
exercise of such warrants or other rights. The consideration
for any Additional Shares of Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration
received by the Corporation for issuing warrants or other
rights to subscribe for or purchase such Convertible
Securities, plus the consideration paid or payable to the
Corporation in respect of the subscription for or purchase of
such Convertible Securities, plus the additional
consideration, if any, payable to the Corporation upon the
exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time of
any Additional Shares of Stock or Convertible Securities in
payment or satisfaction of any dividends upon any class of
stock other than Common Stock, the Corporation shall be deemed
to have received for such Additional Shares of Stock or
Convertible Securities a consideration equal to the amount of
such dividend so paid or satisfied.
(B) When Adjustments to Be Made. The adjustments
required by this Section 5(d) shall be made whenever and as
often as any event requiring an adjustment shall occur, except
that any adjustment of the Conversion Price that would
otherwise be required may be postponed (except in the case of
a subdivision or combination of shares of the Common Stock, as
provided for in Section 5(d)(i)) up to, but not beyond the
date of exercise if such adjustment either by itself or with
other adjustments not previously made amount to a change in
the Conversion Price of less than $.05. Any adjustment
representing a change of less than such minimum amount (except
as aforesaid) which is postponed shall be carried forward and
made as soon as such adjustment, together with other
adjustments required by this Section 5(d) and not previously
made, would result in a minimum adjustment or on the date of
conversion. For the purpose of any adjustment, any event shall
be deemed to have occurred at the close of business on the
date of its occurrence.
-11-
<PAGE>
(C) Fractional Interests. In computing adjustments
under this Section 5(d), fractional interests in the Common
Stock shall be taken into account to the nearest 1/100th of a
share.
(D) Challenge to Good Faith Determination. Whenever
the Board of Directors of the Corporation shall be required to
make a determination in good faith of the fair value of any
item under this Section 5(d), such determination may be
challenged in good faith by a holder of Series D Preferred
Stock and any dispute shall be resolved by an investment
banking firm of recognized national standing jointly selected
by the Corporation and such holder. The fees of such
investment banker shall be borne by such holder if the
Corporation's calculation is determined to be between 95% and
105% of the calculation of such banker.
(vii) Reorganization, Reclassification, Merger or
Consolidation. If the Corporation shall at any time reorganize or
reclassify the outstanding shares of Common Stock (other than a change
in par value, or from no par value to par value, or from par value to
no par value, or as a result of a subdivision or combination) or
consolidate with or merge into another corporation (where the
Corporation is not the continuing corporation after such merger or
consolidation), the holders of Series D Preferred Stock shall
thereafter be entitled to receive upon conversion of the Series D
Preferred Stock in whole or in part, the same kind and number of shares
of stock and other securities, cash or other property (and upon the
same terms and with the same rights) as would have been distributed to
a holder upon such reorganization, reclassification, consolidation or
merger had such holder converted its Series D Preferred Stock
immediately prior to such reorganization, reclassification,
consolidation or merger (subject to subsequent adjustments under
Section 5(d) hereof). The Conversion Price upon such conversion shall
be the Conversion Price that would otherwise be in effect pursuant to
the terms hereof. Notwithstanding anything herein to the contrary, the
Corporation will not effect any such reorganization, reclassification,
merger or consolidation unless prior to the consummation thereof, the
corporation which may be required to deliver any stock, securities or
other assets upon the conversion of the Series D Preferred Stock shall
agree by an instrument in writing to deliver such stock, cash,
securities or other assets to the holders of the Series D Preferred
Stock. A sale, transfer or lease of all or substantially all of the
assets of the Corporation to another person shall be deemed a
reorganization, reclassification, consolidation or merger for the
foregoing purposes.
(viii) Exceptions to Adjustment of Conversion Price. Anything
herein to the contrary notwithstanding, the Corporation shall not make
any adjustment of the Conversion Price in the case of the issuance of
shares of Common Stock to holders of the Series D Preferred Stock upon
conversion of all or any portion of their shares of Series D Preferred
Stock.
-12-
<PAGE>
(ix) Chief Financial Officer's Opinion. Upon each adjustment
of the Conversion Price, and in the event of any change in the rights
of a holder of Series D Preferred Stock by reason of other events
herein set forth, then and in each such case, the Corporation will
promptly obtain a certificate of the chief financial officer of the
Corporation, stating the adjusted Conversion Price, or specifying the
other shares of the Common Stock, securities or assets and the amount
thereof receivable as a result of such change in rights, and setting
forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. The Corporation will promptly mail a
copy of such certificate to the holders of Series D Preferred Stock. If
a holder disagrees with such calculation, the Corporation agrees to
obtain within thirty (30) business days an opinion of a firm of
independent certified public accountants selected by the Corporation's
Board of Directors and acceptable to such holder to review such
calculation and the opinion of such firm of independent certified
public accountants shall be final and binding on the parties and shall
be conclusive evidence of the correctness of the computation with
respect to any such adjustment of the Conversion Price.
(x) Corporation to Prevent Dilution. In case at any time or
from time to time conditions arise by reason of action taken by the
Corporation, which in the good faith opinion of its Board of Directors
or a majority of the holders of the Series D Preferred Stock are not
adequately covered by the provisions of this Section 5(d), and which
might materially and adversely affect the exercise rights of the
holders of the Series D Preferred Stock, the Board of Directors of the
Corporation shall appoint such firm of independent certified public
accountants acceptable to a majority of the holders of the Series D
Preferred Stock, which shall give their opinion upon the adjustment, if
any, on a basis consistent with the standards established in the other
provisions of this Section 5(d), necessary with respect to the
Conversion Price, so as to preserve, without dilution (other than as
specifically contemplated by the Certificate of Incorporation), the
exercise rights of the holders of the Series D Preferred Stock. Upon
receipt of such opinion, the Board of Directors of the Corporation
shall forthwith make the adjustments described therein.
(e) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
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 hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of Section 5 hereof 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 D Preferred Stock against impairment.
(f) No Fractional Shares Adjustments. No fractional shares shall be
issued upon conversion of the Series D Preferred Stock. If more than one share
of the Series D Preferred Stock is to be converted at one time by the same
stockholder, the number of full shares issuable upon such conversion shall be
computed on the basis of the aggregate amount of the shares to be converted.
Instead of any fractional shares of Common Stock which would otherwise be
-13-
<PAGE>
issuable upon conversion of any shares of Series D Preferred Stock, the
Corporation will pay a cash adjustment in respect of such fractional interest in
an amount equal to the same fraction of the Market Price per share of Common
Stock at the close of business on the day of conversion which such fractional
share of Series D Preferred Stock would be convertible into on such date.
(g) Shares to be Reserved.
(i) Subject to clause (ii) of this Section 5(g), the
Corporation shall at all times reserve and keep available, out of its
authorized and unissued stock, solely for the purpose of effecting the
conversion of the Series D Preferred Stock, such number of shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Series D Preferred Stock from time to time
outstanding. The Corporation shall from time to time, in accordance
with the laws of the State of Delaware, increase the authorized number
of shares of Common Stock if at any time the number of shares of
authorized but unissued Common Stock shall be insufficient to permit
the conversion in full of the Series D Preferred Stock.
(ii) The provisions of this Section 5(g) shall not apply to
the extent that such shares reservation is contingent upon the
authorization of additional shares at the Stockholders' Meeting (the
"Stockholders' Meeting") described in the Stock and Warrant Purchase
Agreement and provided that after such Shareholders' Meeting such
shares shall be reserved in accordance with this Section 5(g).
(h) Taxes and Charges. The Corporation will pay any and all issue or
other taxes that may be payable in respect of any issuance or delivery of shares
of Common Stock on conversion of the Series D Preferred Stock. The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issuance or delivery of Common Stock in a name
other than that of the Series D Preferred Stock, and no such issuance or
delivery shall be made unless and until the Person requesting such issuance has
paid to the Corporation the amount of such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(i) Accrued Dividends. Upon conversion of any shares of Series D
Preferred Stock, the holder thereof shall be entitled to receive any accrued but
unpaid dividends in respect of the shares of Series D Preferred Stock so
converted to the date of such conversion.
(j) Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any shares of Series D Preferred Stock or
of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series D Preferred Stock in any manner which interferes with the
timely conversion of such shares of Series D Preferred Stock.
-14-
<PAGE>
6. Redemption
(a) Redemption Price. Any redemption of the Series D Preferred Stock
pursuant to Section 6(b) shall be at a price per share equal to the Liquidation
Value plus all declared but unpaid dividends thereon through the redemption date
(the "Mandatory Redemption Price"). Any redemption of the Series D Preferred
Stock pursuant to Section 6(d) shall be at a price per share equal to the Series
D Liquidation Preference, except that, for purposes of calculation of the
redemption price under this Section 6(a), clause (ii) of the definition of
Series D Liquidation Preference in Section 3(a) hereof shall provide for the
amount per share such holders would have received if such holders had converted
their shares of Series D Preferred Stock into shares of Common Stock immediately
prior to the Fundamental Change (the "Optional Redemption Price"). The Mandatory
Redemption Price shall be paid, at the election of the Corporation, in cash or
shares of Common Stock which have been registered under a registration statement
under the Securities Act of 1933, as amended, which registration statement is
effective, provided, that, for purposes of calculating the number of shares of
Common Stock to be received by each holder of Series D Preferred Stock, each
such share of Common Stock shall be valued at 10% less than the Market Price.
(b) Mandatory Redemption. Subject to Section 6(a) hereof, the
Corporation shall redeem all of the then outstanding shares of Series D
Preferred Stock at the Mandatory Redemption Price on March 31, 2004.
(c) Procedures for Redemption. In the event the Corporation shall
redeem shares of Series D Preferred Stock pursuant to Section 6(b), the
Corporation shall give written notice of such redemption by first class mail,
postage prepaid, mailed not less than thirty (30) nor more than ninety (90) days
prior to the redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on the stock records of
the Corporation. Each such notice shall state: (i) the redemption date; (ii) the
number of shares of Series D Preferred Stock to be redeemed; (iii) the Mandatory
Redemption Price or Optional Redemption Price, as the case may be; (iv) the
place or places where certificates for such shares are to be surrendered for
payment of the Mandatory Redemption Price or Optional Redemption Price, as the
case may be; (v) that payment will be made upon presentation and surrender of
such Series D Preferred Stock; (vi) the then current Conversion Price and the
date on which the right to convert such shares of Series D Preferred Stock will
expire; (vii) that dividends on the shares to be redeemed shall cease to accrue
following such redemption date; (viii) that such redemption is mandatory, if
pursuant to Section 6(b) and (ix) that dividends, if any, accrued to and
including the date fixed for redemption will be paid as specified in such
notice. Notice having been mailed as aforesaid, from and after the redemption
date, unless the Corporation shall be in default in the payment of the Mandatory
Redemption Price or Optional Redemption Price, as the case may be (including any
accrued and unpaid dividends to (and including) the date fixed for redemption),
(A) dividends on the shares of the Series D Preferred Stock so called for
redemption shall cease to accrue, (B) such shares shall be deemed no longer
outstanding and (C) all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation (i) any moneys
payable upon redemption without interest
-15-
<PAGE>
thereon and (ii) any shares of Series D Preferred Stock and Common Stock
pursuant to Section 6(a) hereof) shall cease.
Upon surrender in accordance with such notice of the certificates for
any such shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the applicable Mandatory Redemption
Price.
Notwithstanding the foregoing, if notice of redemption has been given
pursuant to this Section 6 and any holder of shares of Series D Preferred Stock
shall, prior to the close of business on the third (3rd) Business Day preceding
the redemption date, give written notice to the Corporation pursuant to Section
5(b) hereof of the conversion of any or all of the shares to be redeemed held by
such holder (accompanied by a certificate or certificates for such shares, duly
endorsed or assigned to the Corporation), then the conversion of such shares to
be redeemed shall become effective as provided in Section 5 hereof.
(d) Redemption at Option of Holder Upon a Fundamental Change. Subject
to Section 6(a) hereof, if a Fundamental Change occurs, each holder of Series D
Preferred Stock shall have the right, at the holder's option, to require the
Corporation to repurchase all of such holder's Series D Preferred Stock, or any
portion thereof, on the date (the "Repurchase Date") selected by the Corporation
that is not less than ten (10) nor more than twenty (20) days after the Final
Surrender Date, at a price per share equal to the Optional Redemption Price. The
Corporation agrees that it will not complete any Fundamental Change unless
proper provision has been made to satisfy its obligations under this Section
6(d).
(e) Notice of Fundamental Change. Within thirty (30) days after the
occurrence of a Fundamental Change, the Corporation shall mail to all holders of
record of the Series D Preferred Stock a notice in the manner and containing the
information set out in Section 6(c), except that, for purposes of this Section
6(e), such notice shall also describe the occurrence of such Fundamental Change
and of the repurchase right arising as a result thereof. To exercise the
repurchase right, a holder of Series D Preferred Stock must surrender, on or
before the date which is, subject to any contrary requirements of applicable
law, thirty (30) days after the date of mailing of the notice from the
Corporation (the "Final Surrender Date"), the certificates representing the
Series D Preferred Stock with respect to which the right is being exercised,
duly endorsed for transfer to the Corporation, together with a written notice of
election.
(f) Election Irrevocable. An election by a holder of Series D
Preferred Stock to have the Corporation repurchase shares of Series D Preferred
Stock pursuant to Section 6(d) shall become irrevocable at the close of business
on the relevant Repurchase Date.
7. Shares to be Retired. Any share of Series D Preferred Stock converted,
redeemed, repurchased or otherwise acquired by the Corporation shall be retired
and cancelled and shall upon cancellation be restored to the status of
authorized but unissued shares of preferred stock,
-16-
<PAGE>
subject to reissuance by the Board of Directors as shares of preferred stock of
one or more other series but not as shares of Series D Preferred Stock.
8. Preemptive Rights.
(a) Except (i) for issuances of pro rata dividends to all holders of
Common Stock, (ii) stock issued to employees, officers or directors in
connection with management options or incentive plans approved by the Board of
Directors, (iii) stock issued in connection with any merger, acquisition or
business combination, (iv) stock issued for consideration amounting to less than
$500,000 in any single transaction where the purchase price is not less than the
then applicable Conversion Price, provided that the aggregate amount of all such
transactions shall not exceed $1,000,000 or (v) stock issued in connection with
any joint venture, partnership or limited liability company, or other entities
with which the Corporation has a business relationship, the holders of the
Series D Preferred Stock, in order to enable such holders to maintain their
fully diluted percentage ownership of the Corporation, shall have preemptive
rights, as hereinafter set forth, to purchase any capital stock, including any
warrants or securities convertible into capital stock, of the Corporation
hereafter issued by the Corporation so that a holder of the Series D Preferred
Stock shall hereafter be entitled to acquire a percentage of capital stock which
is hereafter issued equal to the same percentage of the issued and outstanding
Common Stock of the Corporation as is held (directly or obtainable upon
conversion of the Series D Preferred Stock) by such holder of Series D Preferred
Stock immediately prior to the date on which the capital stock is to be issued
on a fully diluted basis. As used herein, "issue" (and variations thereof)
includes sales and transfers by the Corporation of treasury shares. From the
date hereof until the fifth anniversary hereof, the total number of shares
issuable under clause (v) of this Section 8(a) shall not exceed 200,000.
(b) The Corporation shall, before issuing any additional capital stock
(other than the exceptions referred to in Section 8(a) hereof), give written
notice thereof to the holders of the Series D Preferred Stock. Such notice shall
specify what type of instrument the Corporation intends to issue and the
consideration which the Corporation intends to receive therefor. For a period of
twenty (20) days following receipt by the holders of the Series D Preferred
Stock of such notice, the Corporation shall be deemed to have irrevocably
offered to sell to the holders of the Series D Preferred Stock a sufficient
number of shares of such capital stock so that the holders of the Series D
Preferred Stock, if such holders elects to acquire such shares as hereinafter
set forth, shall be capable of acquiring the same percentage of such shares as
the percentage of Common Stock beneficially owned (directly or obtainable upon
conversion of the Series D Preferred Stock) by such holders immediately prior to
the proposed issuance on a fully diluted basis. In the event any such offer is
accepted, in whole or in part, by the holders of the Series D Preferred Stock,
the Corporation shall sell such shares to holders of the Series D Preferred
Stock for the consideration and on the precise terms set forth in the
Corporation's notice (given under the first two sentences of this paragraph). In
the event that one or more holders of the Series D Preferred Stock elects not
to, or fails to, exercise its rights under this Section within the twenty (20)
day period, then the Corporation may issue the remaining shares of capital stock
to third persons but only for the same consideration set forth in the
Corporation's notice (given under the first two sentences of this paragraph) and
no
-17-
<PAGE>
later than ninety (90) days after the expiration of such twenty day period. The
closing for such transaction shall take place as proposed by the Corporation
with respect to the shares of capital stock proposed to be issued, at which
closing the Corporation shall deliver certificates for the shares of capital
stock in the respective names of the holders of the Series D Preferred Stock
against receipt of the consideration therefor.
(c) Notwithstanding any other provision hereof, the preemptive rights
granted to holders of Series D Preferred Stock by this Section 8 shall terminate
(i) with respect to a share of Series D Preferred Stock upon the conversion or
redemption of such share of Series D Preferred Stock in accordance with the
provisions hereof and (ii) with respect to all shares of the Series D Preferred
Stock, in the event that the Fleming Holders cease to hold at least 50% of the
Series D Preferred Stock.
9. Call
(a) Call at the Corporation's Option. Subject to the other provisions
of this Section 9, on any date beginning after the Issue Date, the Corporation
shall have the right to purchase all (but not less than all) outstanding shares
of Series D Preferred Stock (the "Call"), provided, however, that (i) the Market
Price of a share of Common Stock is equal to, or greater than, an amount equal
to 500% of the then applicable Conversion Price and (ii) the Common Stock has
traded, on the principal market for the Common Stock, with an average daily
volume in excess of 50,000 shares for a period of 30 consecutive days ending on
the day immediately prior to the Call Date (as hereinafter defined). Any
purchase of the Series D Preferred Stock pursuant to this Section 9(a) shall be
at a price per share of Series D Preferred Stock equal to the Mandatory
Redemption Price.
(b) Procedures for Call at the Corporation's Option. The Corporation's
right to Call the Series D Preferred Stock pursuant to Section 9(a) shall be
conditioned upon the Corporation giving notice (the "Call Notice"), by first
class mail, postage prepaid, of the exercise of the Call to the holders of the
Series D Preferred Stock not less than twenty five (25) days prior to the date
of the exercise of the Call (the "Call Date"). Each Call Notice shall state: (i)
the Call Date; (ii) the Mandatory Redemption Price; (iii) the place or places
where certificates for such shares are to be surrendered for payment of the
Mandatory Redemption Price; (iv) that payment will be made upon presentation and
surrender of such Series A Preferred Stock; (v) the then current Conversion
Price and the date on which the right to convert such shares of Series A
Preferred Stock will expire; (vi) that dividends on the shares to be purchased
shall cease to accrue following such Call Date; (vii) that such Call is
mandatory; and (viii) that dividends, if any, accrued to and including the Call
Date will be paid as specified in such notice. Notice having been mailed as
aforesaid, from and after the Call Date, unless the Corporation shall be in
default in the payment of the Mandatory Redemption Price (including any accrued
and unpaid dividends to (and including) the Call Date), (A) dividends on the
shares of the Series D Preferred Stock shall cease to accrue, (B) such shares
shall be deemed no longer outstanding and (C) all rights of the holders thereof
as stockholders of the Corporation (except the right to receive from the
Corporation (i) any moneys payable upon exercise
-18-
<PAGE>
of the Call without interest thereon and (ii) any shares of Common Stock
pursuant to Section 5 hereof) shall cease.
Upon surrender in accordance with the Call Notice of the certificates
for any such shares so purchased (properly endorsed or assigned for transfer, if
the Board of Directors shall so require and the Call Notice shall so state),
such shares shall be purchased by the Corporation at the applicable Mandatory
Redemption Price.
Notwithstanding the foregoing, if the Call Notice has been given
pursuant to this Section 9 and any holder of shares of Series D Preferred Stock
shall, prior to the close of business on the twentieth (20th) day after receipt
of such Call Notice, give written notice to the Corporation pursuant to Section
5(b) hereof of the conversion of any or all of the shares to be purchased held
by such holder (accompanied by a certificate or certificates for such shares,
duly endorsed or assigned to the Corporation), then (i) the conversion of such
shares to be purchased shall become effective as provided in Section 5 hereof
and (ii) the Corporation's right to Call such shares to be purchased shall
terminate.
10. Definitions. As used herein, the following terms shall have the
respective meanings set forth below:
"Additional Shares of Stock" means all shares of Common Stock
issued by the Corporation after the Issue Date, other than (a) (i)
Common Stock to be issued upon conversion of the Series D Preferred
Stock, (ii) Common Stock to be issued upon conversion of the Series A
Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock, (iii) Common Stock to be issued upon exercise of the
Warrants, (iv) Common Stock to be issued upon the exercise of currently
outstanding warrants listed on Schedule 6 to the Stock and Warrant
Purchase Agreements, other than the Warrants, and (v) up to 750,000
shares of Common Stock to be issued pursuant to the 1995 Stock
Incentive Plan, and (b) from the date hereof until the fifth
anniversary hereof, up to 500,000 shares in addition to the shares
described in clause (a) hereof, provided that any change in the number
of shares of Common Stock issuable upon exercise of the existing
options, rights (including conversion rights) and warrants due to any
amendment or modification of the terms thereof (but not as a result of
the application of the current antidilution provisions thereof), or the
exchange of any such option, right or warrant for any other option,
right, warrant or security exercisable for or convertible into Common
Stock, shall be included in the calculation of the 500,000 shares
described in this clause (b).
"Affiliate", when used with respect to any Person, means (i)
if such Person is a corporation, any officer or director thereof (other
than a director elected pursuant to Section 4 hereof) and any Person
which is, directly or indirectly, the beneficial owner (by itself or as
part of any group) of more than five percent (5%) of any class of any
equity security (within the meaning of the Securities Exchange Act of
1934,
-19-
<PAGE>
as amended) thereof, and, if such beneficial owner is a partnership,
any general partner thereof, or if such beneficial owner is a
corporation, any Person controlling, controlled by or under common
control with such beneficial owner, or any officer or director of such
beneficial owner or of any corporation occupying any such control
relationship, (ii) if such Person is a partnership, any general or
limited partner thereof, and (iii) any other Person which, directly or
indirectly, controls or is co ntrolled by or is under common control
with such Person. For purposes of this definition, "control" (including
the correlative terms "controlling", "controlled by" and "under common
control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Business Day" means any day that is not a Saturday, a Sunday
or any day on which banks in the State of New York are authorized or
obligated to close.
"Call" shall have the meaning set forth in Section 9(a).
"Call Date" shall have the meaning set forth in Section 9(b).
"Call Notice" shall have the meaning set forth in Section
9(b).
"Common Stock" means the Corporation's Common Stock, par
value $.01 per share, and shall also include any common stock of the
Corporation hereafter authorized and any capital stock of the
Corporation of any other class hereafter authorized which is not
preferred as to dividends or assets over any other class of capital
stock of the Corporation or which has ordinary voting power for the
election of directors of the Corporation.
"Conversion Price" means the Conversion Price per share of
Common Stock into which the Series D Preferred Stock is convertible, as
such Conversion Price may be adjusted pursuant to Section 5 hereof. The
initial Conversion Price will be $2.00; provided that in the event that
the Second Closing under the Stock and Warrant Purchase Agreements does
not occur on or before June 30, 1999, then the Initial Conversion Price
at which the Series D Preferred Stock is convertible shall be reduced
to $1.20.
"Convertible Securities" means evidences of indebtedness,
shares of preferred stock or other securities which are convertible
into or exchangeable, with or without payment of additional
consideration in cash or property, for Additional Shares of Stock,
either immediately or upon the occurrence of a specified date or a
specified event, other than the Series D Preferred Stock.
-20-
<PAGE>
"Designated Entity" means (i) as long as any shares of Series
D Preferred Stock are held by any Fleming Holder, Fleming Capital
Management, 320 Park Avenue, NY, NY 10022, Attention: Robert L. Burr
and David J. Edwards and (ii) if no shares of Series D Preferred Stock
are held by a Fleming Holder, the entity designated by the Transferee
who holds the largest number of such shares (in which case such
Transferee shall provide notice to the Corporation of such entity in
accordance with Section 5(d) hereof).
"Final Surrender Date" shall have the meaning set forth in
Section 6(e).
"Fleming Funds" means Fleming US Discovery Fund III, L.P. and
Fleming US Discovery Offshore Fund III, L.P.
"Fleming Holders" means (i) the Fleming Funds and (ii) any
Affiliate, officer or employee of an Affiliate or investment fund
managed by an Affiliate of the Fleming Funds to which the Fleming Funds
may transfer record and/or beneficial ownership of any shares of Series
D Preferred Stock (the "Shares") or any shares of Common Stock obtained
or obtainable upon conversion of the Shares (the "Conversion Shares").
The transferor and the transferee shall notify the Company in writing
as to the transferee's status as a Fleming Holder in accordance with
this definition, and shall notify the Company if such transferee ceases
to be a Fleming Holder. The Conversion Shares shall include any capital
stock or other securities into which Conversion Shares are changed and
any capital stock or other securities resulting from or comprising a
reclassification, combination or subdivision of, or a stock dividend
on, any Conversion Shares.
"Fundamental Change" means any of the following events:
(i) the sale (or functional equivalent of a sale) of all or
substantially all of the assets of the Corporation;
(ii) any event (A) which results in the registration of the
Corporation's Common Stock under the Securities Exchange Act of 1934,
as amended, to be no longer required; (B) requiring the Corporation to
make a filing under Section 13(e) of the Securities Exchange Act of
1934, as amended; (C) reducing substantially or eliminating the public
market for shares of Common Stock of the Corporation; or (D) causing a
delisting of the Corporation's Common Stock from the Nasdaq Stock
Market;
(iii) any consolidation of the Corporation with, or merger of
the Corporation into, any other person, any merger of another person
into the Corporation or any other business combination
-21-
<PAGE>
involving the Corporation which results in the holders of the
Corporation's stock immediately prior to giving effect to such
transaction owning shares of capital stock of the surviving corporation
in such transaction representing (x) fifty percent (50%) or less of the
total voting power of all shares of capital stock of such surviving
corporation entitled to vote generally in the election of directors or
(y) fifty percent (50%) or less of the total value of all capital stock
of such surviving corporation; or
(iv) the commencement by the Corporation of a voluntary case
under the Federal bankruptcy laws or any other applicable Federal or
state bankruptcy, insolvency or similar law; the consent by the
Corporation to the entry of an order for relief in an involuntary case
under such law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official)
of the Corporation or of any substantial part of its property; any
assignment by the Corporation for the benefit of its creditors; any
admission by the Corporation in writing of its inability to pay its
debts generally as they become due; the entry of a decree or order for
relief in respect of the Corporation by a court having jurisdiction in
the premises in an involuntary case under Federal bankruptcy laws or
any other applicable Federal or state bankruptcy, insolvency or similar
law appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and on account of any such event the
Corporation shall liquidate, dissolve or wind up; or the liquidation,
dissolution or winding up of the Corporation under any other
circumstances.
"Issue Date" means, as to any share of Series D Preferred
Stock, the date of original issuance thereof by the Corporation.
"Junior Securities" mean the Common Stock and any other class
of capital stock or series of preferred stock existing on the date
hereof, including the Series A Convertible Preferred Stock and the
Series B Convertible Preferred Stock, or hereafter created by the
Corporation which does not expressly provide that it ranks senior to or
pari passu with the Series D Preferred Stock as to dividends, other
distributions, liquidation preference or otherwise.
"Liquidation Value" shall have the meaning set forth in
Section 3(a).
-22-
<PAGE>
"Mandatory Redemption Price" shall have the meaning set forth
in Section 6(a).
"Market Price" means, as to any security on the date of
determination thereof, the average of the closing prices of such
security's sales on all principal United States securities exchanges on
which such security may at the time be listed, or, if there shall have
been no sales on any such exchange on any day, the last trading price
of such security on such day, or if such there is no such price, the
average of the bid and asked prices at the end of such day, on the
Nasdaq Stock Market, in each such case averaged for a period of twenty
(20) consecutive Business Days prior to the day when the Market Price
is being determined (except that, for purposes of the calculation of
the Market Price under clause (i) of the first proviso in Section 9(a),
such prices will be averaged for a period of thirty (30) consecutive
days prior to the day when the Market Price is being determined under
Section 9(a)); provided that if such security is listed on any United
States securities exchange the term "Business Days" as used in this
sentence means business days on which such exchange is open for
trading. Notwithstanding the foregoing, with respect to the issuance of
any security by the Corporation in an underwritten public offering, the
Market Price shall be the per share purchase price paid by the
underwriters. If at any time such security is not listed on any
exchange or the Nasdaq Stock Market, the Market Price shall be deemed
to be the fair value thereof determined by an investment banking firm
of nationally recognized standing selected by the Board of Directors of
the Corporation and acceptable to holders of a majority of the Series D
Preferred Stock, as of the most recent practicable date when the
determination is to be made, taking into account the value of the
Corporation as a going concern, and without taking into account any
lack of liquidity of such security or any discount for a minority
interest.
"Market Value" means the amount obtained by multiplying the
Market Price by the number of securities issued.
"Maximum Ownership" shall have the meaning set forth in
Section 6(a) hereof.
"Optional Redemption Price" shall have the meaning set forth
in Section 6(a).
"Parity Securities" mean any class of capital stock or series
of preferred stock existing on the date hereof or hereafter created by
the Corporation with the prior written consent of the Fleming Holders,
which expressly provides that it ranks pari passu with the Series D
Preferred Stock as to dividends, other distributions, liquidation
preference or otherwise.
"Payment Amount" means such amount as is necessary to cause
the net present value to equal zero as of any date of all Cash Inflows
and all Cash Outflows
-23-
<PAGE>
(each as defined below) with respect to the Series D Preferred Stock
being repurchased pursuant to Section 6 or held on the date of the
distribution pursuant to Section 3, as the case may be, when calculated
with an annual interest rate (compounded annually) equal to twelve
percent (12%). "Cash Inflows" as used herein means all cash payments,
including the Payment Amount, received by the holders of the Series D
Preferred Stock as a dividend or distribution with respect to, or as
consideration for the sale of, such Series D Preferred Stock (whether
such payments are received from the Corporation or any other Person).
"Cash Outflows" as used herein means the sum of all cash payments made
by the holders of the Series D Preferred Stock to the Corporation to
acquire such Series D Preferred Stock. (For the avoidance of doubt,
Cash Inflows and Cash Outflows with respect to any Series D Preferred
Stock not included in the Series D Preferred Stock being repurchased
pursuant to Section 6 hereof as part of the transaction for which the
Payment Amount is then being calculated shall not be included in the
Cash Inflows and Cash Outflows used to make such calculation (for
purposes of Section 6 only), and only the Cash Inflows and Cash
Outflows with respect to the Series D Preferred Stock which are then
being repurchased pursuant to Section 6 hereof in the transaction for
which the Payment Amount is then being calculated shall be used in the
Cash Inflows and Cash Outflows used to make such calculation (for
purposes of Section 6 only).)
"Person or "person" shall mean an individual, partnership,
corporation, trust, unincorporated organization, joint venture,
government or agency, political subdivision thereof, or any other
entity of any kind.
"Preferred Director" or "Preferred Directors" shall have the
meaning set forth in Section 4(c).
"Repurchase Date" shall have the meaning set forth in Section
6(d).
"Second Closing" shall have the meaning set forth in the
Stock and Warrant Purchase Agreements.
"Senior Securities" mean any class of capital stock or series
of preferred stock existing on the date hereof, including the Series C
Convertible Preferred Stock, or hereafter created by the Corporation
with the prior written consent of the Fleming Holders, which expressly
provides that it ranks senior to the Series D Preferred Stock as to
dividends, other distributions, liquidation preference or otherwise.
"Series A Convertible Preferred Stock" means the
Corporation's Series A Convertible Preferred Stock, par value $.01 per
share.
"Series B Convertible Preferred Stock" means the
Corporation's Series B Convertible Preferred Stock, par value $.01 per
share.
-24-
<PAGE>
"Series C Convertible Preferred Stock" means the
Corporation's Series C Convertible Preferred Stock, par value $.01 per
share.
"Series D Liquidation Preference" shall have the meaning set
forth in Section 3(a).
"Series D Preferred Stock" shall have the meaning set forth
in the resolution paragraph in the preamble.
"Stock and Warrant Purchase Agreements" mean each of the two
Stock and Warrant Purchase Agreements dated as of the date hereof
between the Corporation and the purchaser listed on the signature page
of each such Agreement.
"Stockholders' Meeting" shall have the meaning set forth in
Section 5(g).
"Transferees" shall mean any transferee (except for a Fleming
Holder) of Shares or Conversion Shares (as such terms are defined
within the definition of "Fleming Holders") from a Fleming Holder.
Transferees shall not include a transferee of Shares or Conversion
Shares sold in either a public offering pursuant to a registration
statement under the Securities Act of 1933, as amended (the "Securities
Act"), or pursuant to Rule 144 under the Securities Act.
"Warrants" shall mean Warrants to purchase the aggregate of
up to the number of shares of Common Stock equal to 25% of the number
of shares of Common Stock obtainable upon conversion of the Series D
Preferred Stock issued pursuant to the Stock and Warrant Purchase
Agreements, dated the date hereof, which rights and privileges are more
fully set forth in the Stock and Warrant Purchase Agreements and the
Warrant Certificates attached as Exhibit A-2 thereto.
11. Notices. (a) Except as may otherwise be provided for herein, all
notices referred to herein shall be in writing, and all notices hereunder shall
be deemed to have been given (i) upon receipt, in the case of a notice of
conversion given to the Corporation as contemplated in Section 5(b) hereof or in
the case of a notice of redemption at the holder's option given to the
Corporation as contemplated in Section 6(d) hereof, or (ii) in all other cases,
upon the earlier of (x) receipt of such notice, (y) three Business Days after
the mailing of such notice if sent by registered mail (unless first-class mail
shall be specifically permitted for such notice under the terms hereof) or (z)
the Business Day following sending such notice by overnight courier, in any case
with postage or delivery charges prepaid, addressed: if to the Corporation, to
its offices at Castor & Kensington Avenues, Philadelphia, PA 19124-5694,
Attention: President, or to an agent of the Corporation designated as permitted
by the Certificate of Incorporation, or, if to any holder of the Series D
Preferred Stock, to such holder at the address of such holder of the Series D
Preferred Stock as listed in the stock record books of the Corporation, or to
such other address as the Corporation or holder, as the case may be, shall have
designated by notice similarly given.
-25-
<PAGE>
(b) The consent (or agreement as described in Section
5(d)(viii) hereof) of the Fleming Holders shall be deemed obtained if any of the
following conditions are satisfied:
(i) the Fleming Funds are the only holders of Series D
Preferred Stock and the Designated Entity shall have obtained the
consent of each Fleming Fund and shall have given notice to the
Corporation to such effect in accordance with Section 10(a) hereof;
(ii) the Fleming Funds are not the only holders of Series D
Preferred Stock and the Designated Entity shall have obtained the
consent of a majority of the outstanding shares of Series D Preferred
Stock held by all Fleming Holders, and shall have given notice to the
Corporation to such effect in accordance with Section 10(a) hereof; or
(iii) no shares of Series D Preferred Stock are held by a
Fleming Holder and the Designated Entity shall have obtained the
consent of a majority of the outstanding shares of Series D Preferred
Stock held by all Transferees, and shall have given notice to the
Corporation to such effect in accordance with Section 10(a) hereof.
-26-
<PAGE>
IN WITNESS WHEREOF, Global Pharmaceutical Corporation has caused this
Certificate of Designations to be signed by its Chief Executive Officer and
attested to by its Secretary, all as of the 26th day of February, 1999.
GLOBAL PHARMACEUTICAL CORPORATION
By: /s/ Barry R. Edwards
----------------------------------------
Name: Barry R. Edwards
Title: President and Chief Executive Officer
Attest:
By: /s/ Cornel C. Spiegler
------------------------
Name: Cornel C. Spiegler
Title: Secretary
[Signature page to Certificate of Designations
of the Series D Convertible Preferred Stock]
-27-
<PAGE>
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
<PAGE>
share, of the Corporation dated November 10, 1998 and filed November 12, 1998
(the "Series A Certificate of Designations") and (ii) a Certificate of Amendment
to the Certificate of the Designations, Powers, Preferences and Rights of the
Series B Convertible Preferred Stock, $.01 par value per share, of the
Corporation dated November 10, 1998 and filed November 12, 1998 (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 of the
General Corporation Law of the State of Delaware.
THIRD: That at a meeting of the Board of Directors of the
Corporation held on February 24, 1999, 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") and Series D Convertible Preferred Stock,
$.01 par value (the "Series D Preferred Stock") (whose liquidation rights shall
both be superior to those of the Preferred
-2-
<PAGE>
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
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 and Series D Preferred Stock, whose liquidation rights shall
both 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 Series D
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 Series D 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, the Series D 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, Series D 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
and Series D 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
-3-
<PAGE>
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 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) or (iv) up to
$5,000,000 of Series D Preferred Stock issued and sold to financial investors
(including any shares of Common Stock issued upon the conversion) or (v) shares
of Common Stock issuable upon exercise of the warrants to purchase Common Stock
issued to the holders of the Series D Preferred Stock. 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.
-4-
<PAGE>
(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
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
-5-
<PAGE>
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
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
-6-
<PAGE>
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.
(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 and Series D 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.
-7-
<PAGE>
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 and Series D Preferred Stock to have their
shares of Series C Preferred Stock and Series D Preferred Stock redeemed, if so
requested, prior to the redemption of any shares of 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
-8-
<PAGE>
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 and Series D Preferred Stock to have their shares of Series C
Preferred Stock and Series D 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
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.
-9-
<PAGE>
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 February 25, 1999, 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.
-10-
<PAGE>
IN WITNESS WHEREOF, Global Pharmaceutical Corporation has
caused this Certificate of Amendment to the Certificates of Designations to be
executed and attested this 25th day of February, 1999.
Attest: Global Pharmaceutical Corporation
By: /s/ Cornel C. Spiegler By: /s/ Barry R. Edwards
- --------------------------- ----------------------------------
Name: Cornel C. Spiegler Name: Barry R. Edwards
- --------------------------- ----------------------------------
Title: Secretary Title: Chief Executive Officer
- --------------------------- ----------------------------------
-11-
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
SERIES C CONVERTIBLE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE), AS AMENDED,
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 pursuant to such authority expressly vested in
the Board of Directors of the Corporation, said Board of Directors duly adopted
a Certificate of the Designations, Powers, Preferences and Rights of the Series
C Convertible Preferred Stock, $.01 par value per share (the "Series C
Certificate of Designations") which was dated and filed November 12, 1998 with
the Secretary of State of the State of Delaware pursuant to Section 151(g) of
the General Corporation Law of the State of Delaware.
THIRD: That at a meeting the Board of Directors of the
Corporation held February 24, 1999, a resolution was duly adopted amending and
restating the Series C Certificate of Designations, as described in the
resolution set forth below:
<PAGE>
RESOLVED, that this Board of Directors, pursuant to authority
expressly vested in it by the provisions of the Certificate of Incorporation of
the Corporation, hereby authorizes the issue from time to time of a series of
Preferred Stock of the Corporation (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 (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 C Convertible
Preferred Stock of the Corporation):
Section 1. Number of Shares and Designation. Nine thousand
(9,000) 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 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"), Series D convertible Preferred Stock (the "Series D 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, Series D 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,
-2-
<PAGE>
Series C Preferred Stock, Series D 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 insuf ficient 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.
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
-3-
<PAGE>
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 or (iii) up to $5,000,000
of Series D Preferred Stock issued and sold to financial investors (including
any shares of Common Stock issued upon the conversion thereof) or (iv) shares of
Common Stock issuable upon exercise of the warrants to purchase Common Stock
issued to the holders of Series D Preferred Stock. 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.
(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
-4-
<PAGE>
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
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.
-5-
<PAGE>
(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
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
-6-
<PAGE>
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
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
-7-
<PAGE>
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.
(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
-8-
<PAGE>
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 affir mative 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
reissued as part of a new series of Preferred Stock subject to the conditions
and restrictions on
-9-
<PAGE>
issuance set forth herein, in the Certificate of Incorporation, or in any other
Certificate of Designations creating a series of Preferred Stock or any similar
stock or as otherwise required by law.
FOURTH: That this amendment of the Certificate of Designations
was authorized by the holder of the Corporation's Series C Preferred Stock, by
written consent dated as of February 25, 1999, in accordance with Section 228 of
the General Corporation Law of the State of Delaware.
FIFTH: That this amendment of the Certificate of Designations
was duly adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
-10-
<PAGE>
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 25th day of
February, 1999.
Attest: Global Pharmaceutical Corporation
By: /s/ Cornel C. Spiegler By: /s/ Barry R. Edwards
------------------------ -----------------------------
Name: Cornel C. Spiegler Name: Barry R. Edwards
---------------------- ---------------------------
Title: Secretary Title: Chief Executive Officer
--------------------- --------------------------
-11-
<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
March 2, 1999 appearing on page F-2 of Global Pharmaceutical Corporation's
Annual Report on Form 10-KSB for the year ended December 31, 1998. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Philadelphia, PA
April 8, 1999
