UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
(Amendment No.__)*
GLOBAL PHARMACEUTICAL CORPORATION
----------------------------------------------------
(Name of Issuer)
Common Stock, $.01 PAR VALUE
----------------------------------------------------
(Title of Class of Securities)
378922 10 8
----------------------------------------------------
(CUSIP Number)
Larry A. Kimmel
Robert Fleming, Inc.
320 Park Avenue, 11th Floor
New York, NY 10022
(212) 508-3610
----------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 2, 1999
----------------------------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|.
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
- ----------
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE>
CUSIP No. 378922 10 8 SCHEDULE 13D Page 2 of 15 Pages
- --------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
FLEMING US DISCOVERY FUND III, L.P.
- --------------------------------------------------------------------------------
2 Check the Appropriate Box If a Member of a Group
a. |X|
b. |_|
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds
WC
- --------------------------------------------------------------------------------
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of
Shares 1,616,000 shares of Common Stock
Beneficially --------------------------------------------------------
Owned By 8 Shared Voting Power
Each
Reporting 259,000 shares of Common Stock
Person --------------------------------------------------------
With 9 Sole Dispositive Power
1,616,000 shares of Common Stock
--------------------------------------------------------
10 Shared Dispositive Power
259,000 shares of Common Stock
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,875,000 shares of Common Stock
- --------------------------------------------------------------------------------
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares |_|
- --------------------------------------------------------------------------------
13 Percent of Class Represented By Amount in Row (11)
22.2%
- --------------------------------------------------------------------------------
14 Type of Reporting Person
PN
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SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 378922 10 8 SCHEDULE 13D Page 3 of 15 Pages
- --------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
FLEMING US DISCOVERY OFFSHORE FUND III, L.P.
- --------------------------------------------------------------------------------
2 Check the Appropriate Box If a Member of a Group
a. |X|
b. |_|
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds
WC
- --------------------------------------------------------------------------------
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Bermuda
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of
Shares 259,000 shares of Common Stock
Beneficially --------------------------------------------------------
Owned By 8 Shared Voting Power
Each
Reporting 1,616,000 shares of Common Stock
Person --------------------------------------------------------
With 9 Sole Dispositive Power
259,000 shares of Common Stock
--------------------------------------------------------
10 Shared Dispositive Power
1,616,000 shares of Common Stock
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,875,000 shares of Common Stock
- --------------------------------------------------------------------------------
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares |_|
- --------------------------------------------------------------------------------
13 Percent of Class Represented By Amount in Row (11)
22.2%
- --------------------------------------------------------------------------------
14 Type of Reporting Person
PN
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SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 378922 10 8 SCHEDULE 13D Page 4 of 15 Pages
- --------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
FLEMING US DISCOVERY PARTNERS, L.P.
- --------------------------------------------------------------------------------
2 Check the Appropriate Box If a Member of a Group
a. |X|
b. |_|
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds
AF
- --------------------------------------------------------------------------------
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of
Shares 0 shares of Common Stock
Beneficially --------------------------------------------------------
Owned By 8 Shared Voting Power
Each
Reporting 1,875,000 shares of Common Stock
Person --------------------------------------------------------
With 9 Sole Dispositive Power
0 shares of Common Stock
--------------------------------------------------------
10 Shared Dispositive Power
1,875,000 shares of Common Stock
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,875,000 shares of Common Stock
- --------------------------------------------------------------------------------
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares |_|
- --------------------------------------------------------------------------------
13 Percent of Class Represented By Amount in Row (11)
22.2%
- --------------------------------------------------------------------------------
14 Type of Reporting Person
PN
- --------------------------------------------------------------------------------
SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 378922 10 8 SCHEDULE 13D Page 5 of 15 Pages
- --------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
FLEMING US DISCOVERY, LLC
- --------------------------------------------------------------------------------
2 Check the Appropriate Box If a Member of a Group
a. |_|
b. |_|
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds
AF
- --------------------------------------------------------------------------------
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of
Shares 1,875,000 shares of Common Stock
Beneficially --------------------------------------------------------
Owned By 8 Shared Voting Power
Each
Reporting 1,875,000 shares of Common Stock
Person --------------------------------------------------------
With 9 Sole Dispositive Power
1,875,000 shares of Common Stock
--------------------------------------------------------
10 Shared Dispositive Power
1,875,000 shares of Common Stock
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,875,000 shares of Common Stock
- --------------------------------------------------------------------------------
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares |_|
- --------------------------------------------------------------------------------
13 Percent of Class Represented By Amount in Row (11)
22.2%
- --------------------------------------------------------------------------------
14 Type of Reporting Person
OO
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SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 378922 10 8 SCHEDULE 13D Page 6 of 15 Pages
- --------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
ROBERT FLEMING, INC.
- --------------------------------------------------------------------------------
2 Check the Appropriate Box If a Member of a Group
a. |_|
b. |_|
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds
AF
- --------------------------------------------------------------------------------
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of
Shares 0 shares of Common Stock
Beneficially --------------------------------------------------------
Owned By 8 Shared Voting Power
Each
Reporting 0 shares of Common Stock
Person --------------------------------------------------------
With 9 Sole Dispositive Power
0 shares of Common Stock
--------------------------------------------------------
10 Shared Dispositive Power
0 shares of Common Stock
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,875,000 shares of Common Stock
- --------------------------------------------------------------------------------
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares |_|
- --------------------------------------------------------------------------------
13 Percent of Class Represented By Amount in Row (11)
22.2%
- --------------------------------------------------------------------------------
14 Type of Reporting Person
IA, CO
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SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 378922 10 8 SCHEDULE 13D Page 7 of 15 Pages
- --------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
ROBERT FLEMING HOLDINGS, LTD.
- --------------------------------------------------------------------------------
2 Check the Appropriate Box If a Member of a Group
a. |_|
b. |_|
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds
AF
- --------------------------------------------------------------------------------
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
United Kingdom
- --------------------------------------------------------------------------------
7 Sole Voting Power
Number of
Shares 0 shares of Common Stock
Beneficially --------------------------------------------------------
Owned By 8 Shared Voting Power
Each
Reporting 0 shares of Common Stock
Person --------------------------------------------------------
With 9 Sole Dispositive Power
0 shares of Common Stock
--------------------------------------------------------
10 Shared Dispositive Power
0 shares of Common Stock
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by Each Reporting Person
1,875,000 shares of Common Stock
- --------------------------------------------------------------------------------
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares |_|
- --------------------------------------------------------------------------------
13 Percent of Class Represented By Amount in Row (11)
22.2%
- --------------------------------------------------------------------------------
14 Type of Reporting Person
HC, CO
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SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
STATEMENT PURSUANT TO RULE 13d-1
OF THE
GENERAL RULES AND REGULATIONS
UNDER THE
SECURITIES EXCHANGE ACT OR 1934, AS AMENDED
================================================================================
Responses to each item below are incorporated by reference into each other
item, as applicable.
Item 1. Security and Issuer.
This Statement on Schedule 13D relates to Common Stock, par value $0.01
per share ("Common Stock"), of Global Pharmaceutical Corporation, a Delaware
corporation ("Issuer"). The address of the Issuer's principal executive offices
is Castor & Kensington Avenues, Philadelphia, Pennsylvania 19124.
Item 2. Identity and Background.
This statement is being filed pursuant to a Joint Filing Agreement
(attached as Exhibit 1 and incorporated herein by reference) by (i) Fleming US
Discovery Fund III, L.P. ("US Fund"), (ii) Fleming US Discovery Offshore Fund
III, L.P. ("Offshore Fund"), (iii) Fleming US Discovery Partners, L.P.,
("Fleming Partners"), the general partner of the US Fund and a general partner
of the Offshore Fund, (iv) Fleming US Discovery, LLC ("Discovery"), the general
partner of Fleming Partners, (v) Robert Fleming, Inc. ("RFI"), investment
adviser to the US Fund and Offshore Fund (collectively, the "Funds"), and (vi)
Robert Fleming Holdings, Ltd. ("RFH"), the parent of RFI (sometimes collectively
referred to as the "Reporting Persons").
The information required by this Item for each of the Reporting Persons is
set forth in Appendix 1 hereto. The information required by this Item for each
officer, director, and partner and each controlling person, if any, of certain
Reporting Persons is set forth in Appendix 2 hereto.
The Offshore Fund has two general partners, Fleming Partners and Fleming
(Bermuda) Discovery III Limited ("Fleming Bermuda"). Fleming Bermuda is a
company organized in Bermuda. Its principal business and office address is c/o
Bank of Bermuda, Ltd., 6 Front St., Hamilton HM 11, Bermuda. Its principal
business is to serve as a general partner of the Offshore Fund.
During the last five years prior to the date of this filing, none of the
Reporting Persons or persons identified in Appendix 1 or Appendix 2 has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction ending in a judgment, decree or
Page 8 of 15 Pages
<PAGE>
final order enjoining future violations or prohibiting or mandating the
activities subject to, federal or state securities laws or finding a violation
with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
On March 2, 1999, the US Fund entered into the Stock and Warrant Purchase
Agreement, dated as of March 2, 1999, between the Issuer and the US Fund
(attached hereto as Exhibit 4 and incorporated herein by reference), to
purchase, for a total purchase price of $2,585,600 (x) 25,856 shares of Series D
Convertible Preferred Stock, $0.01 par value per share ("Series D Preferred
Stock"), and (y) warrants ("US Fund Warrants") (pursuant to the Warrant
Certificate issued by the Issuer to US Fund attached hereto as Exhibit 8 and
incorporated herein by reference), to purchase up to 323,200 shares of Common
Stock, of the Issuer. The Series D Preferred Stock is convertible into 1,292,800
shares of Common Stock. The US Fund purchased the Series D Preferred Stock and
the US Fund Warrants, which were acquired by the US Fund at the closing on March
2, 1999, with its working capital. No part of the purchase price was or will be
represented by funds or other consideration borrowed or otherwise obtained for
the purpose of acquiring, holding, trading or voting the Common Stock.
On March 2, 1999, the Offshore Fund entered into the Stock and Warrant
Purchase Agreement, dated as of March 2, 1999, between the Issuer and the
Offshore Fund, to purchase, for a total purchase price of $414,000, (x) 4,144
shares of Series D Preferred Stock and (y) warrants ("Offshore Fund Warrants")
(pursuant to the Warrant Certificate issued by the Issuer to Offshore Fund), to
purchase up to 51,800 shares of Common Stock (the US Fund Warrants and the
Offshore Fund Warrants collectively referred to herein as the "Warrants"), of
the Issuer. The Series D Preferred Stock is convertible into 207,200 shares of
Common Stock. The Offshore Fund purchased the Series D Preferred Stock and the
Offshore Fund Warrants, which were acquired by the Offshore Fund at closing on
March 2, 1999, with its working capital. No part of the purchase price was or
will be represented by funds or other consideration borrowed or otherwise
obtained for the purpose of acquiring, holding, trading or voting the Common
Stock.
Item 4. Purpose of Transaction.
a) The Series D Preferred Stock and the Warrants deemed to be beneficially owned
by the Reporting Persons were acquired for, and are being held for, investment
purposes. The Funds may dispose of or acquire securities of the Issuer,
including Common Stock, depending upon the position of the market, the Issuer
and other factors.
Except as set forth above, none of the Reporting Persons nor, to the best
of their knowledge, any person listed in Appendix I hereto, has any plans or
proposals which relate to or would result in any other acquisition by any person
of additional securities of the Issuer, or the disposition of securities of the
Issuer.
b) None of the Reporting Persons nor, to the best of their knowledge, any person
listed in Appendix I hereto, has any plans or proposals which relate to or would
result in an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries.
Page 9 of 15 Pages
<PAGE>
c) None of the Reporting Persons nor, to the best of their knowledge, any person
listed in Appendix I hereto, has any plans or proposals which relate to or would
result in a sale or transfer of a material amount of assets of the Issuer or any
of its subsidiaries.
d) Pursuant to the Issuer's Certificate of Designations for the Series D
Convertible Preferred Stock (attached hereto as Exhibit 5 and incorporated
herein by reference), so long as either (i) the Funds, any Affiliate, officer or
employee of an Affiliate or investment fund managed by an Affiliate of the Funds
to which the Funds may transfer record or beneficial ownership of any shares of
Series D Preferred Stock or any shares of Common Stock obtained or obtainable
upon conversion of any shares of Series D Preferred Stock ("Fleming Holder") own
at least 50% of the outstanding shares of Series D Preferred Stock or (ii) any
transferee (except for a Fleming Holder) of any shares of Series D Preferred
Stock or any shares of Common Stock obtained or obtainable upon conversion of
any shares of Series D Preferred Stock ("Transferee") owns at least 50% of the
outstanding shares of Series D Preferred Stock and the Issuer 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 Issuer. 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 Issuer 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 Issuer. 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 Issuer 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 Issuer.
Except as set forth above, none of the Reporting Persons nor, to the best
of their knowledge, any person listed in Appendix I hereto, has any plans or
proposals which relate to or would result in any other changes in the board of
directors or management of the Issuer, or which relate to or would result in:
(e) any material change in the present capitalization or divided policy of the
Issuer; (f) any other material change in the Issuer's business or corporate
structure; (g) changes in the Issuer's charter, By-Laws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Issuer by any person; (h) causing a class of securities of the
Issuer to be delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association; (i) a class of equity securities of the Issuer
becoming eligible for termination of registration pursuant to Section 12(g)(4)
of the Exchange Act; or (j) any action similar to any of those enumerated above.
The Reporting Persons retain the right to change their investment intent,
to propose one or more possible transactions to the Issuer's board, to acquire
additional shares of preferred stock or common stock from time to time or to
sell or otherwise dispose of all or part of the Series D Preferred Stock
beneficially owned by them (or any shares of Common Stock into which such Series
D Preferred Stock are converted) or to sell or otherwise dispose of all or part
of the Warrants beneficially owned by them (or any Shares of Common Stock into
which such Warrants are exercised) in any manner permitted by law. In the event
of a material
Page 10 of 15 Pages
<PAGE>
change in the present plans or intentions of the Reporting Persons, the
Reporting Persons will amend this Schedule 13D to reflect such change.
Item 5. Interest in Securities of the Issuer.
(a) On March 2, 1999, the US Fund purchased 25,856 shares of Series D Preferred
Stock ("US Fund Preferred Stock"). The US Fund Preferred Stock is currently
convertible into 1,292,800 shares of Common Stock ("US Fund Conversion Shares"),
subject to certain antidilution provisions. On March 2, 1999, the US Fund
purchased Warrants exercisable at $4.00 per share, subject to certain
antidilution provisions, for up to 323,200 shares of Common Stock ("US Fund
Warrant Shares").
On March 2, 1999, the Offshore Fund purchased 4,144 shares of Series D
Preferred Stock ("Offshore Fund Preferred Stock"). The Offshore Fund Preferred
Stock is currently convertible into 207,200 shares of Common Stock ("Offshore
Fund Conversion Shares"), subject to certain antidilution provisions. On March
2, 1999, the Offshore Fund purchased warrants exercisable at $4.00 per share,
subject to certain antidilution provisions, for up to 51,800 shares of Common
Stock ("Offshore Fund Warrant Shares").
Because of their relationship as affiliated entities, both Funds may be
deemed to beneficially own the US Fund Conversion Shares, the US Fund Warrant
Shares, the Offshore Fund Conversion Shares and the Offshore Fund Warrant
Shares. As the general partner of both Funds, Fleming Partners may be deemed to
beneficially own the US Fund Conversion Shares, the US Fund Warrant Shares, the
Offshore Fund Conversion Shares and the Offshore Fund Warrant Shares. As the
general partner of Fleming Partners, Discovery may be deemed to beneficially own
the US Fund Conversion Shares, the US Fund Warrant Shares, the Offshore Fund
Conversion Shares and the Offshore Fund Warrant Shares. As investment adviser to
the Funds, controlling member of Discovery and the sole limited partner of
Fleming Partners, RFI may be deemed to beneficially own the US Fund Conversion
Shares, the US Fund Warrant Shares, the Offshore Fund Conversion Shares and the
Offshore Fund Warrant Shares. RFH is the indirect 80% owner of RFI. Thus, as the
indirect parent of RFI, RFH may be deemed to beneficially own the US Fund
Conversion Shares, the US Fund Warrant Shares, the Offshore Fund Conversion
Shares and the Offshore Fund Warrant Shares.
Pursuant to the Offshore Fund's Limited Partnership Agreement (attached
hereto as Exhibit 2 and incorporated herein by reference), Fleming Bermuda, one
of the Offshore Fund's general partners, is responsible for the Offshore Fund's
administrative, secretarial and related management activities. Fleming Bermuda
has no authority over or responsibility for the investment management of the
Offshore Fund.
As of March 2, 1999, each of the Funds, each of Fleming Partners,
Discovery, RFI and RFH may be deemed to have owned beneficially 22.2% of the
outstanding Common Stock, on an aggregated basis, which percentage is calculated
based upon (i) 6,588,450 shares of Common Stock reported outstanding by the
Issuer to the Reporting Persons as of February 11, 1999, (ii) the number of
shares of Common Stock (1,500,000) issuable upon conversion of the US Fund
Preferred Stock and Offshore Fund Preferred Stock and (iii) the number of shares
of Common Stock (375,000) issuable upon exercise of the Warrants.
Page 11 of 15 Pages
<PAGE>
The percentage is calculated by dividing 1,875,000 (which is the sum of
1,500,000 and 375,000) by 8,463,450 (which is the sum of 1,500,000, 375,000 and
6,588,450).
(b) The information required by this paragraph is reflected on Lines 7-10 of
each Reporting Person's cover page, incorporated herein by reference. The
information required by Items 2 of this Schedule for Fleming US Discovery
Investment Trust and Fleming US Discovery Fund is set forth in Appendix 1 and
Appendix 2 hereto.
(c) None of the Reporting Persons has effected any transactions in the Common
Stock during the last 60 days.
(d) No other person is known to have the right to receive or the power to direct
the receipt of dividends from, or any proceeds from the sale of, the shares of
Common Stock beneficially owned by any of the Reporting Persons.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to
the Securities of the Issuer.
The Funds acquired their respective shares of Series D Preferred Stock
pursuant to the Stock and Warrant Purchase Agreements, dated as of March 2,
1999, and executed by the Funds and the Issuer.
The Funds acquired their respective Warrants pursuant to their respective
Warrant Certificates, dated March 2, 1999, and executed by the Issuer. The
Warrant Certificates contain certain antidilution provisions.
A Stockholders' Agreement, dated as of March 2, 1999 (attached hereto as
Exhibit 6 and incorporated herein by reference), was entered into by the Issuer,
Barry R. Edwards and each of the Funds. The Stockholders' Agreement provides
that in the event Barry R. Edwards ("Edwards") proposes to transfer his shares
("Transferor Shares") to any Person ("Buyer"), as a condition to such Transfer,
Edwards shall cause the Buyer to offer to purchase from each Fund up to that
number of Series D Preferred Stock and Common Stock owned by any Fleming Holder
or any Transferee ("Investor Shares") representing the same percentage of all
Investor Shares owned by it as the Transferor Shares are of all Edwards Shares,
subject to certain exceptions. These "Tag-Along" rights are more fully set forth
in Section 1 of the Stockholders' Agreement.
Pursuant to the Registration Rights Agreement, dated March 2, 1999
(attached hereto as Exhibit 7 and incorporated herein by reference), the Issuer
has granted to the Fleming Holders and their permitted transferees certain
demand and "piggyback" registration rights with respect to the shares of Common
Stock (including Common Stock issuable upon the conversion of Series D Preferred
Stock) held by such stockholders.
Page 12 of 15 Pages
<PAGE>
Pursuant to the Certificate of Designations of the Series D Preferred
Stock, filed with the Secretary of State of Delaware on February 26, 1999
(attached hereto as Exhibit 5 and incorporated herein by reference), the Fleming
Holders currently are entitled to one vote per share of Common Stock into which
each share of Series D Preferred Stock is convertible. The Fleming Holders are
entitled to receive dividends in an amount equal to the equivalent per share
dividend declared on the Common Stock, when and as declared by the Board of
Directors. In addition, under the Certificate of Designations of the Series D
Preferred Stock, the Fleming Holders are entitled to elect certain members of
the Issuer's Board of Directors, as more fully set forth in Item 5 herein and
Section 4(c) of the Certificate of Designations of the Series D Preferred Stock.
In the Limited Partnership Agreements of the US Fund and the Offshore
Fund, each dated as of September 27, 1996 (attached hereto as Exhibits 3 and 2,
and incorporated herein by reference), the Funds and their respective limited
partners agreed that (i) all investment opportunities would be apportioned
between the Funds in proportion to the relative amounts of capital committed to
each Fund and (ii) the Funds would sell or otherwise dispose of their
investments at substantially the same time, on substantially the same terms, in
amounts proportionate to the relative size of their investments.
The foregoing response to this Item 6 is qualified in its entirety by
reference to the Stock and Warrant Purchase Agreements, the Stockholders'
Agreement, the Certificate of Designations, the Registration Rights Agreement
and the Warrant Certificates.
Except as set forth in this Item 6 and Items 3, 4 and 5 of this statement,
there are no contracts, arrangements, understandings or relationships among the
persons named in Item 2 or between such persons and any other person with
respect to any securities of the Issuer.
Page 13 of 15 Pages
<PAGE>
Item 7. Material to be Filed as Exhibits.
Exhibit 1 - Joint Filing Agreement.
Exhibit 2 - Limited Partnership Agreement of Fleming Discovery Offshore
Fund III, L.P. (incorporated by reference to Exhibit 3 to
the Schedule 13D of Robert Fleming, Inc. with respect to
the securities of Anicom, Inc. filed on July 29, 1997).
Exhibit 3 - Limited Partnership Agreement of Fleming US Discovery Fund
III, L.P. (incorporated by reference to Exhibit 6 to the
Schedule 13D of Robert Fleming, Inc. with respect to the
securities of Anicom, Inc. filed on July 29, 1997).
Exhibit 4 - Stock and Warrant Purchase Agreement, dated as of March 2,
1999, between Global Pharmaceutical Corporation and Fleming
US Discovery Fund III, L.P.
Exhibit 5 - Certificate of Designations of Series D Convertible
Preferred Stock of Global Pharmaceutical Corporation filed
with the Secretary of State of Delaware on February 26,
1999.
Exhibit 6 - Stockholders' Agreement, dated as of March 2, 1999, among
Global Pharmaceutical Corporation, Barry R. Edwards,
Fleming US Discovery Fund III, L.P. and Fleming US
Discovery Offshore Fund III, L.P.
Exhibit 7 - Registration Rights Agreement, dated as of March 2, 1999
among Global Pharmaceutical Corporation, Fleming US
Discovery Fund III, L.P. and Fleming US Discovery Offshore
Fund III, L.P.
Exhibit 8 - Warrant Certificate, dated March 2, 1999, between Global
Pharmaceutical Corporation and Fleming US Discovery Fund
III, L.P.
Exhibit 9 - Press Release issued by the Issuer on March 3, 1999
(incorporated by reference to the same document included as
Exhibit 99 to Form 8-K filed by the Issuer on March 5,
1999, under SEC File No. 0-27354).
Appendix 1- Address, Organization and Principal Business of Each
Reporting Person Required by Item 2
Appendix 2- Information About Each Reporting Person Required by Item 2
Page 14 of 15 Pages
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.*
March 12, 1999
FLEMING US DISCOVERY FUND III, L.P.
By: Fleming US Discovery Partners, L.P.,
its general partner
By: Fleming US Discovery, LLC, its
general partner
By: /s/ Robert L. Burr
------------------------------
Robert L. Burr, Director
FLEMING US DISCOVERY OFFSHORE FUND III, L.P.
By: Fleming US Discovery Partners, L.P.,
its general partner
By: Fleming US Discovery, LLC, its
general partner
By: /s/ Robert L. Burr
--------------------------
Robert L. Burr, Director
FLEMING US DISCOVERY PARTNERS, L.P.
By: Fleming US Discovery, LLC, its
general partner
By: /s/ Robert L. Burr
----------------------------------
Robert L. Burr, Director
FLEMING US DISCOVERY, LLC
By: /s/ Robert L. Burr
----------------------------------
Robert L. Burr, Director
ROBERT FLEMING, INC.
By: /s/ Robert L. Burr
----------------------------------
Robert L. Burr, Director
ROBERT FLEMING HOLDINGS, LTD.
By: /s/ Arthur A. Levy
----------------------------------
Arthur A. Levy, Director
Page 15 of 15 Pages
Exhibit 1
JOINT FILING AGREEMENT
Pursuant to and in accordance with Rule 13d-1(k)(1) under the Securities
Exchange Act of 1934, the undersigned hereby agree to jointly file the Schedule
13D dated March 12, 1999 and any amendments thereto with respect to the
beneficial ownership by each of the undersigned of shares of common stock of
Global Pharmaceutical Corporation. Such joint filings may be executed by one or
more of us on behalf of each of the undersigned.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
Executed this day of March 12, 1999.
FLEMING US DISCOVERY FUND III, L.P.
By: Fleming US Discovery Partners, L.P.,
its general partner
By: Fleming US Discovery, LLC, its
general partner
By: /s/ Robert L. Burr
------------------------------
Robert L. Burr, Director
FLEMING US DISCOVERY OFFSHORE FUND III, L.P.
By: Fleming US Discovery Partners, L.P.,
its general partner
By: Fleming US Discovery, LLC, its
general partner
By: /s/ Robert L. Burr
--------------------------
Robert L. Burr, Director
FLEMING US DISCOVERY PARTNERS, L.P.
By: Fleming US Discovery, LLC, its
general partner
By: /s/ Robert L. Burr
----------------------------------
Robert L. Burr, Director
FLEMING US DISCOVERY, LLC
By: /s/ Robert L. Burr
----------------------------------
Robert L. Burr, Director
<PAGE>
Exhibit 1
ROBERT FLEMING, INC.
By: /s/ Robert L. Burr
----------------------------------
Robert L. Burr, Director
ROBERT FLEMING HOLDINGS, LTD.
By: /s/ Arthur A. Levy
----------------------------------
Arthur A. Levy, Director
<PAGE>
APPENDIX 1
ADDRESS, ORGANIZATION AND PRINCIPAL BUSINESS OF EACH REPORTING PERSON
REQUIRED BY ITEM 2 AND OTHER PERSONS REQUIRED BY ITEM 5
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS PLACE OF
REPORTING PERSON AND OFFICE ADDRESS ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C>
Fleming US Discovery Fund 320 Park Avenue, 11th Delaware limited partnership to invest in securities with a
III, L.P. Floor view to long-term capital
("US Fund") New York, NY 10022 appreciation
Fleming US Discovery c/o Bank of Bermuda, Ltd, Bermuda limited partnership to invest in securities with a
Offshore Fund III, L.P. 6 Front St view to long-term capital
("Offshore Fund," with US Hamilton HM 11 Bermuda appreciation
Funds the "Funds")
Fleming US Discovery 320 Park Avenue, Delaware limited partnership to act as the general partner
Partners, L.P. 11th Floor of the Funds
("Fleming Partners") New York, NY 10022
Fleming US Discovery, LLC 320 Park Avenue, Delaware limited liability to act as the sole general
11th Floor company partner of Fleming Partners
New York, NY 10022
Robert Fleming, Inc. 320 Park Avenue, Delaware corporation a registered investment
11th Floor adviser and broker-dealer
New York, NY 10022
Robert Fleming Holdings, 25 Copthall Avenue United Kingdom company to provide international
Ltd. London EC2B 7PQ, investment banking, asset
England management and securities
brokerage services to its
clients
</TABLE>
OTHER
Fleming US Discovery 25 Copthall Avenue
Investment Trust London EC2B 7PQ,
England
Fleming US Discovery 320 Park Avenue,
Fund 11th Floor
New York, NY 10022
<PAGE>
Appendix 2
INFORMATION ABOUT REPORTING PERSONS
REQUIRED BY ITEM 2
MANAGERS AND COMMITTEES OF FLEMING US DISCOVERY, LLC
MANAGERS
Robert Fleming, Inc.
Robert L. Burr
Christopher M.V. Jones*
Eytan M. Shapiro*
Timothy R.V. Parton*
EXECUTIVE COMMITTEE
Arthur A. Levy
Iain O.S. Saunders
Jonathan K.L. Simon
Robert L. Burr
Christopher M.V. Jones
INVESTMENT COMMITTEE
Robert L. Burr
Christopher M.V. Jones
Eytan M. Shapiro
Timothy R.V. Parton
* Eytan M. Shapiro, Christopher M.V. Jones and Timothy R.V. Parton are United
Kingdom citizens. Robert L. Burr is a United States citizen. Their business
address is 320 Park Avenue, 11th Floor, New York, New York 10022. The
citizenship and business address, for each of the remaining persons listed above
is contained in "Executive Officers and Directors of Robert Fleming, Inc."
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS OF ROBERT FLEMING, INC.
Name: Lord Robin Renwick
Citizenship: United Kingdom
Business Address: Robert Fleming & Co.
25 Copthall Avenue
London EC2R-7DR, England
Title: Chairman of the Board
Name: Arthur A. Levy
Citizenship: United States
Business Address: Robert Fleming, Inc.
320 Park Avenue
New York, NY 10022
Title: President, Vice Chairman and Director
Name: Christopher M.V. Jones
Citizenship: United Kingdom
Business Address: Robert Fleming, Inc.
320 Park Avenue
New York, NY 10022
Title: Director
Name: Larry A. Kimmel
Citizenship: United States
Business Address: Robert Fleming,Inc.
320 Park Avenue
New York, NY 10022
Title: Vice President and Director of Compliance
Name: Iain O.S. Saunders
Citizenship: United Kingdom
Business Address: Robert Fleming & Co.
25 Copthall Avenue
London EC2R-7DR, England
Title: Director
Name: Jonathan K.L. Simon
Citizenship: United Kingdom
Business Address: Robert Fleming, Inc.
320 Park Avenue
New York, NY 10022
Title: Director
<PAGE>
Name: Andrea M. Whitmore
Citizenship: United Kingdom
Business Address: Robert Fleming, Inc.
320 Park Avenue
New York, NY 10022
Title: Chief Financial Officer and Vice President
Name: Mark Mattheys
Citizenship: United States
Business Address: Robert Fleming, Inc.
320 Park Avenue
New York, NY 10022
Director and Chief Operating Officer
Title:
Name: Charlie Bridge
Citizenship: United States
Business Address: Robert Fleming, Inc.
320 Park Avenue
New York, NY 10022
Title: Director
Name: Eduardo Canet
Citizenship: United States
Business Address: Robert Fleming, Inc.
320 Park Avenue
New York, NY 10022
Title: Director
<PAGE>
OFFICERS AND DIRECTORS OF ROBERT FLEMING HOLDINGS, LTD.
BOARD OF DIRECTORS* CITIZENSHIP
John Manser CBE United Kingdom
Chairman
William Garrett United Kingdom
Group Chief Executive
Phillip Wichelow United Kingdom
Iain O.S. Saunders United Kingdom
John Emly United Kingdom
Paul Bateman United Kingdom
Tom Hughes-Hallett United Kingdom
Michael Baines United Kingdom
David Boardman United Kingdom
Robin Fleming United Kingdom
Ken Inglis United Kingdom
Arthur A. Levy United States
Bernard Taylor United Kingdom
Sir Robin Renwick KCMG United Kingdom
John Archibald United Kingdom
Peter Barton United Kingdom
Ian Hannam United Kingdom
*With the exception of Arthur A. Levy, the business address for each of the
above persons is 25 Copthall Avenue, London EC2R- 77DR, England. The titles
below the first four names refer to officer titles.
Exhibit 4
The Stock and Warrant Purchase Agreement, dated as of March 2, 1999, between
Global Pharmaceutical Corporation and Fleming US Discovery Offshore Fund III,
L.P., is substantially identical to the agreement attached hereto (Stock and
Warrant Purchase Agreement, dated as of March 2, 1999, between Global
Pharmaceutical Corporation and Fleming US Discovery Fund III, L.P.) except that
the parties to the former agreement are Global Pharmaceutical Corporation and
Fleming US Discovery Offshore Fund III, L.P., and the parties to the latter
agreement are Global Pharmaceutical Corporation and Fleming US Discovery Fund
III, L.P.
<PAGE>
================================================================================
STOCK AND WARRANT PURCHASE AGREEMENT
dated
March 2, 1999
between
GLOBAL PHARMACEUTICAL CORPORATION
and
FLEMING US DISCOVERY FUND III, L.P.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK AND WARRANTS..............1
SECTION 2. CLOSING........................................................2
SECTION 3. DEFINITIONS....................................................3
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................15
4.1. Corporate Existence, Power and Authority......................15
4.2. Capital Stock.................................................16
4.3. Subsidiaries..................................................18
4.4. Business......................................................18
4.5. No Defaults or Conflicts......................................18
4.6. Disclosure Materials; Other Information.......................19
4.7. Litigation....................................................20
4.8. Taxes.........................................................20
4.9. ERISA.........................................................21
4.10. Legal Compliance..............................................22
4.11. Outstanding Securities........................................23
4.12. Permits, Licenses and Approvals; Intellectual Property
and Other Rights..............................................23
4.13. Key Employees.................................................23
4.14. Properties....................................................24
4.15. Suppliers and Customers.......................................24
4.16. Environmental Compliance......................................24
4.18. Offering of Shares and Warrants...............................25
4.19. SEC Reports...................................................25
4.20. Indebtedness..................................................26
4.21. Use of Proceeds...............................................26
4.22. Other Names...................................................27
4.23. Brokers.......................................................27
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...............27
5.1. Corporate Power and Authority.................................27
5.2. Investment Intent.............................................27
5.3. Brokers.......................................................28
1
<PAGE>
Page
----
SECTION 6. RESTRICTIONS ON TRANSFER......................................28
SECTION 7. INFORMATION AS TO THE COMPANY.................................28
7.1. Financial Information.........................................28
7.2. Communication with Accountants................................31
7.3. Inspection....................................................31
7.4. Notices.......................................................31
7.5. Confidentiality Agreement.....................................32
SECTION 8. AFFIRMATIVE COVENANTS.........................................33
8.1. Maintenance of Existence, Properties and Franchises;
Compliance with Law; Taxes; Insurance.........................33
8.2. Office for Payment, Exchange and Registration;
Location of Office; Notice of Change of Name or Office........34
8.3. Fiscal Year...................................................34
8.4. Environmental Matters.........................................34
8.5. Reservation of Shares.........................................35
8.6. Stockholders' Meeting.........................................36
8.7. Securities Exchange Act Registration..........................36
8.8. Delivery of Information for Rule 144A Transactions............36
8.9. Senior Securities.............................................37
8.10. Shelf Registration............................................37
8.11. Further Assurances............................................37
SECTION 9. NEGATIVE COVENANTS............................................37
9.1. No Dilution or Impairment; No Changes in Capital Stock........38
9.2. Indebtedness..................................................39
9.3. Consolidation, Merger and Sale................................39
9.4. No Change in Business.........................................39
9.5. Restricted Payments; Investments..............................39
9.6. Sale of Substantial Portion of Assets.........................40
9.7. Affiliate Loans and Guaranties................................40
9.8. Transactions with Affiliates..................................41
9.9. Liens.........................................................41
9.10. Private Placement Status......................................41
9.11. Maintenance of Public Market..................................41
9.12. Actions Prior to Any Closing Date.............................42
2
<PAGE>
Page
----
SECTION 10. CONDITIONS TO PURCHASER'S OBLIGATIONS.........................42
10.1. Certificate of Designations; Stockholders' Agreement;
Registration Rights Agreement.................................42
10.2. Certificates for Shares and Warrants..........................43
10.3. Stockholders' Meeting.........................................43
10.4. Senior Status.................................................43
10.5. Accuracy of Representations and Warranties....................43
10.6. Compliance with Agreements....................................44
10.7. Officers' Certificates........................................44
10.8. Proceedings...................................................44
10.9. Legality; Governmental and Other Authorization................44
10.10. No Material Adverse Change....................................44
10.11. Opinion of Counsel............................................45
10.12. Additional Purchases of Shares and Warrants...................45
10.13. Acceptance of Agent for Service of Process....................45
10.14. Other Documents and Opinions..................................45
SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS...........45
SECTION 12. SPECIFIC PERFORMANCE..........................................46
SECTION 13. EXPENSES......................................................46
SECTION 14. DIRECT PAYMENTS...............................................48
SECTION 15. AMENDMENTS AND WAIVERS........................................48
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED
SHARES; REPLACEMENT...........................................49
SECTION 17. NOTICES.......................................................50
SECTION 18. MISCELLANEOUS.................................................50
3
<PAGE>
Schedule 1 Purchasers; Number of Shares; Number of Warrants
Schedule 2 Indebtedness
Schedule 3 Investments
Schedule 4 Disclosure Material
Schedule 5 Liens
Schedule 6 Capital Stock
EXHIBIT A-1 Certificate of Designations
EXHIBIT A-2 Form of Warrant Certificates
EXHIBIT B Disclosure Schedule
EXHIBIT C Stockholders' Agreement
EXHIBIT D Registration Rights Agreement
EXHIBIT E Opinion of Counsel for the Company
EXHIBIT F Confidentiality Agreement
4
<PAGE>
STOCK AND WARRANT PURCHASE AGREEMENT
This STOCK AND WARRANT PURCHASE AGREEMENT is dated as of March 2,
1999 between Global Pharmaceutical Corporation, a Delaware corporation (the
"Company"), and the Purchaser listed on the signature page of this Agreement
(the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Company desires to issue and sell to the Purchaser, and
the Purchaser desires to purchase from the Company, shares of the Company's
Series D Convertible Preferred Stock, par value $.01 per share (the "Series D
Convertible Preferred Stock"), and Warrants to purchase shares of the Company's
Common Stock, par value $.01 per share (the "Common Stock"), all upon the terms
and provisions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK AND WARRANTS
(a) The Company agrees to sell to the Purchaser and, subject to the
terms and conditions hereof and in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, the
Purchaser agrees to purchase from the Company at one or more of the Closings
provided for in Section 2 hereof, the number of shares of Series D Convertible
Preferred Stock and the number of Warrants, each to purchase one share of Common
Stock of the Company, set forth opposite the Purchaser's name on Schedule 1
hereto. The shares of Series D Convertible Preferred Stock being acquired under
this Agreement and by the other Purchaser under the other Stock and Warrant
Purchase Agreement (as hereinafter defined) are collectively referred to herein
as the "Shares", containing rights and privileges as more fully set forth in the
Certificate of Designations of the Company in the form attached hereto as
Exhibit A- 1 (the "Certificate of Designations"). As used herein, "Warrants"
means 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 Shares. The Warrants contain rights and privileges as more
fully set forth in the Warrant Certificates of the Company in the form attached
hereto as Exhibit A-2 (the "Warrant Certificates").
(b) The aggregate purchase price to be paid to the Company by the
Purchaser for the Shares and Warrants to be purchased by the Purchaser pursuant
to this Agreement shall be
<PAGE>
the amount set forth opposite the Purchaser's name on Schedule 1 hereto. No
further payment shall be required from the Purchaser for the Shares and
Warrants. The parties further acknowledge and agree that the Shares do not
constitute "preferred stock" as that term is used in Section 305(b)(4) of the
Code and Treasury Regulation ss. 1.305-5(a) and agree not to take any position
inconsistent with the characterization of the Shares as common stock for
purposes of Section 305 of the Code on any Tax Return or before any Taxing
Authority.
(c) The Shares and Warrants are being sold to the purchasers listed
on Schedule 1 hereto (the "Purchasers") pursuant to this Agreement and the other
Series D Convertible Preferred Stock and Warrant Purchase Agreement (both of
such agreements collectively, as from time to time assigned, supplemented or
amended or as the terms thereof may be waived, the "Stock and Warrant Purchase
Agreements"). Both Stock and Warrant Purchase Agreements shall be dated the date
hereof and shall be identical except as to the identities of the respective
Purchasers. The sale of Shares and Warrants to each Purchaser under each Stock
and Warrant Purchase Agreement is to be a separate sale, and no Purchaser shall
have any liability under any Stock and Warrant Purchase Agreement other than the
Stock and Warrant Purchase Agreement to which it is a party.
(d) The Company will use the proceeds from the sale of the Shares
and Warrants, together with other funds it will receive on each Closing Date to
repay debt, to fund future development opportunities and for working capital and
general corporate purposes.
SECTION 2. CLOSINGS
(a) Subject to the terms and conditions hereof, the closing of the
purchase and sale of the Shares and Warrants to be purchased by the Purchaser
and the other Purchasers will take place at the offices of Morgan, Lewis &
Bockius LLP, 101 Park Avenue, New York, New York at 10:00 A.M., New York City
time, (i) on March 2, 1999, or such other time and date as shall be mutually
agreed to by the Company and the Purchaser (the "First Closing") (such time and
date are herein referred to as the "First Closing Date"), and (ii) on the date
which is within five business days of the Company's 1999 annual meeting of
stockholders (the "Stockholders' Meeting") or such other time and date as shall
be mutually agreed to by the Company and the Purchaser, but in any event no
later than June 30, 1999; provided that at such Stockholders' Meeting the
appropriate corporate action has been taken to authorize sufficient additional
shares of Common Stock to permit conversion in full of the Series D Convertible
Preferred Stock into shares of Common Stock and to permit exercise in full of
all Warrants issued on such date (the "Second Closing") (such time and date are
herein referred to as the "Second Closing Date"). The First Closing and the
Second Closing are called individually a "Closing" and collectively the
"Closings"; the First Closing Date and the Second Closing Date are called
individually a "Closing Date" and collectively, the "Closing Dates." The sale
and purchase of Shares and Warrants by the Fleming Funds pursuant to the Stock
and Warrant Purchase Agreements between each of the Fleming Funds and the
Company shall be consummated concurrently, (a) for
2
<PAGE>
an aggregate purchase price of $3,000,000 on the First Closing Date and (b) for
an aggregate purchase price of $2,000,000 on the Second Closing Date.
(b) Subject to the terms and conditions hereof, at each Closing (i)
the Company will deliver to the Purchaser (x) a certificate registered in the
Purchaser's name (or the name of its nominee, if any, as specified on Schedule 1
hereto) evidencing the number of Shares set forth opposite the Purchaser's name
on Schedule 1 and (y) a Warrant Certificate registered in the Purchaser's name
(or the name of its nominee, if any, as specified on Schedule 1 hereto)
evidencing a number of Warrants equal to the number set forth opposite the
Purchaser's name on Schedule 1, and (ii) upon the Purchaser's receipt thereof,
the Purchaser will deliver to the Company a certified or official bank check (or
wire transfer) in an amount equal to the aggregate purchase price (as specified
in Section 1(b) hereof) for the Shares and Warrants to be purchased by the
Purchaser payable to the order of the Company in federal or other immediately
available funds.
SECTION 3. DEFINITIONS
(a) For purposes of this Agreement, the following definitions shall
apply (such definitions to be equally applicable to both the singular and plural
forms of the terms defined):
"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(c) of the Certificate of
Designations) 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) 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
controlled 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. The holding of Shares (or of Conversion Shares obtained upon
conversion of Shares) or Warrants (or of Warrant Shares issuable upon the
exercise of the Warrants), and the rights under any Stock and Warrant
Purchase Agreement or under the Certificate of Designations, Warrant
Certificates, the
3
<PAGE>
Stockholders' Agreement or the Registration Rights Agreement (or the
exercise of any such rights, including, without limitation, nominating a
director to the Board (or Board committee) of the Company and or sending
an observer to Board (or Board committee) meetings of the Company), shall
not cause a Purchaser to be deemed to be an "Affiliate" of the Company.
"Agreement" means this Stock and Warrant Purchase Agreement
(together with exhibits and schedules) as from time to time assigned,
supplemented or amended or as the terms hereof may be waived.
"Benefit Plan" means any Plan, existing at any Closing, established
or to which contributions have at any time been made by the Company, or
any predecessor of any of the foregoing, or under which any employee,
former employee or director of the Company or any beneficiary thereof is
covered, is eligible for coverage or has benefit rights.
"Board" or "Board of Directors" means with respect to any Person
which is a corporation, a business trust or other entity, the board of
directors or other group, however, designated, which is charged with legal
responsibility for the management of such Person, or any committee of such
board of directors or group, however designated, which is authorized to
exercise the power of such board or group in respect of the matter in
question.
"Business Day" means any day other than a Saturday, Sunday or any
day on which banks in the location of the office of the Company provided
for in Section 17 hereof are authorized or obligated to close.
"Capitalized Leases" means any lease to which the Company is party
as lessee, or by which it is bound, under which it leases any property
(real, personal or mixed) from any lessor other than the Company, and
which either is required to be capitalized in accordance with generally
accepted accounting principles consistently applied, or, even if not so
required to be capitalized, shall have (or have had), at the time first
entered into, an initial term of greater than three (3) years (including
leases of shorter duration which are or were extendible to a total term
greater than three (3) years at the option of the lessor). The value of
Capitalized Leases, as of the time of any determination thereof, shall
mean the sum of the then present values, determined as hereinafter
provided, of future obligations of lessees under then existing Capitalized
Leases. To compute the value of any Capitalized Lease, the following
methods shall be used, as applicable:
(i) values of leases required to be capitalized in accordance with
generally accepted accounting principles shall be computed in
accordance with such principles; and
4
<PAGE>
(ii) values of other leases (and values of contracts or other items
which this Agreement provides are to be valued as if they were
Capitalized Leases) shall be computed by discounting, to the
date of determination, at an assumed interest rate of eight
percent (8%) per annum, the minimum amount of future rental
payments that will be due under the related documentation,
including rental payments that may be due during extensions
which are at the other party's option, but excluding any
amounts in respect of insurance on, taxes on and/or
maintenance of the properties subject to such leases (provided
that such amounts are owed and paid only to the extent
actually incurred).
"Certificate of Designations" has the meaning set forth in Section
1(a) hereof.
"Closing" or "Closings" have the meanings set forth in Section 2(a)
hereof.
"Closing Date" or "Closing Dates" have the meanings set forth in
Section 2(a) hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and interpretations thereunder.
"Commission" means the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering
the Securities Act or the Securities Exchange Act.
"Common Stock" means the Company's Common Stock, par value $.01 per
share, and shall also include any common stock of the Company hereafter
authorized and any capital stock of the Company of any other class
hereafter authorized which is not preferred as to dividends or assets over
any other class of capital stock of the Company or which has ordinary
voting power for the election of directors of the Company; provided that
Common Stock shall not include the Series A Convertible Preferred Stock,
the Series B Convertible Preferred Stock, the Series C Convertible
Preferred Stock or the Series D Convertible Preferred Stock.
"Company" means Global Pharmaceutical Corporation, a Delaware
corporation, its successors and assigns.
"Confidentiality Agreement" has the meaning set forth in Section 7.5
hereof.
"Consolidated" or "consolidated", when used with reference to any
financial term in this Agreement, means the aggregate for the Company of
the amounts signified by
5
<PAGE>
such term for all such Persons, with intercompany items eliminated, and,
with respect to net worth, after eliminating the portion of net worth
properly attributable to minority interests, if any, in the capital of any
such Person (other than in the capital of the Company) and otherwise as
determined in accordance with generally accepted accounting principles
consistently applied (except as otherwise expressly provided herein).
"Conversion Share" or "Conversion Shares" means the shares of the
Company's Common Stock obtained or obtainable upon conversion of Shares
and shall also 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. In the
event that any Conversion Shares are sold either in a public offering
pursuant to a registration statement under the Securities Act or pursuant
to a Rule 144 Transaction, then the transferees of such Conversion Shares
shall not be entitled to any benefits under this Agreement with respect to
such Conversion Shares and such Conversion Shares shall no longer be
considered to be "Conversion Shares" for purposes of any consent or waiver
provision of this Agreement.
"Disclosure Material" has the meaning specified in Section 4.6(a)
hereof.
"Environmental Laws" means all federal, state, local, foreign, civil
and criminal laws, statutes, ordinances, orders, codes, Environmental
Permits, rules, policies, and regulations and common law relating to the
protection of the environment and human health or relating to the
handling, use, generation, treatment, storage, transportation or disposal
of Hazardous Materials, including but not limited to the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. ss. 6901 et seq.; the
Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.; the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. ss. 9601 et seq.; the Federal Water Pollution Control Act,
33 U.S.C. ss. 1251 et seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq.;
the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et seq.;
The Occupational Safety and Health Act, 29 U.S.C. ss. 651; the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. ss. 136y et seq.; and
the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq., all as may be
amended or superseded from time to time.
"Environmental Lien" has the meaning set forth in Section 4.16
hereof.
"Environmental Permits" means all permits, licenses, approvals,
authorizations or consents required by any Governmental Authority under
any applicable Environmental Law and includes any and all orders, consent
orders or binding agreements issued or entered into by a Governmental
Authority under any applicable Environmental Law.
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"ERISA" means Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each "person" (as defined in Section 3(9) of
ERISA) which is under "common control" with the Company (within the
meaning of Section 414(b), (c), (m) or (o) of the Code).
"First Closing" has the meaning set forth in Section 2(a) hereof.
"First Closing Date" has the meaning set forth in Section 2(a)
hereof.
"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, (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 the Shares, the Conversion Shares,
the Warrants or the Warrant Shares and (iii) any transferee of Shares,
Conversion Shares, Warrants or Warrant Shares from a Fleming Holder other
than a transferee of Shares, Conversion Shares, Warrants or Warrant Shares
sold in either a public offering pursuant to a registration statement
under the Securities Act or pursuant to a Rule 144 Transaction, except
that for purposes of Section 9 hereof, such transferee shall be a Fleming
Holder only if such transferee is reasonably acceptable to the Company.
"Governmental Authority" means any federal, state, or local
governmental agency or authority (including regulatory authority) having
jurisdiction over the Company or any of its respective assets or
businesses.
"Guaranty" means (i) any guaranty or endorsement of the payment or
performance of, or any contingent obligation in respect of, any
indebtedness or other obligation of any other Person, (ii) any other
arrangement whereby credit is extended to one obligor (directly or
indirectly) on the basis of any promise or undertaking of another Person
(a) to pay the indebtedness of such obligor, (b) to purchase an obligation
owed by such obligor, (c) to purchase or lease assets (or to provide
funds, goods or services) under circumstances that would enable such
obligor to discharge one or more of its obligations or (d) to maintain the
capital, working capital, solvency or general financial condition of such
obligor, in each case whether or not such arrangement is disclosed in the
balance sheet of such other Person or is referred to in a footnote thereto
and (iii) any liability as a general partner of a partnership in respect
of indebtedness or other obligations of such partnership; provided,
however, that the term "Guaranty" shall not include
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(1) endorsements for collection or deposit in the ordinary course of
business, (2) any guaranty of indebtedness of the Company by a subsidiary
of the Company or (3) obligations of the Company which would constitute
Guaranties solely by virtue of the continuing liability of a Person which
has sold assets subject to liabilities for the liabilities which were
assumed by the Person acquiring the assets, unless such liability is
required to be carried on the consolidated balance sheet of the Company.
The amount of any Guaranty and the amount of indebtedness resulting from
such Guaranty shall be the maximum amount of the guarantor's potential
obligation in respect of such Guaranty.
"Hazardous Materials" means any petroleum, petroleum hydrocarbons,
petroleum waste or petroleum products, underground storage tanks, asbestos
or asbestos-containing materials, pesticides, lead and lead-containing
materials, urea formaldehyde insulation and polychlorinated biphenyls
(PCBs), ionizing and non-ionizing radiation including radon and
electromagnetic frequency radiation; and any chemicals, materials,
substances or wastes in any amount or concentration which are now or
hereafter "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants" or words of similar import, under
any applicable Environmental Law.
"Indebtedness" of any Person means, without duplication, as of any
date as of which the amount thereof is to be determined, (i) all
obligations of such Person to repay money borrowed (including, without
limitation, all notes payable and drafts accepted representing extensions
of credit, all obligations under letters of credit, all obligations
evidenced by bonds, debentures, notes or other similar instruments and all
obligations upon which interest charges are customarily paid), (ii) all
Capitalized Leases in respect of which such Person is liable as lessee or
as the guarantor of the lessee, (iii) all monetary obligations which are
secured by any Lien existing on property owned by such Person whether or
not the obligations secured thereby have been incurred or assumed by such
Person, (iv) all conditional sales contracts and similar title retention
debt instruments under which such Person is obligated to make payments,
(v) all Guaranties by such Person and (vi) all contractual obligations
(whether absolute or contingent) of such Person to repurchase goods sold
and distributed. "Indebtedness" shall not include, however, any unfunded
obligations in any employee pension benefit plan (as defined in ERISA) of
the Company.
"Initial Shelf Registration" has the meaning set forth in Section
8.10 hereof.
"Investment" means, with respect to any Person, (i) any loan,
advance or extension of credit by such Person to, and any contributions to
the capital of, any other Person, (ii) any Guaranty by such Person, (iii)
any interest in any capital stock, equity interest or other securities of
any other Person, (iv) any transfer or sale of property of
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such Person to any other Person other than upon full payment, in cash or
other consideration, of not less than the agreed sale price bargained on
an arms-length basis and (v) any commitment or option to make an
Investment if, in the case of an option, the consideration therefor
exceeds $10,000, and any of the foregoing under clauses (i) through (v)
shall be considered an Investment whether such Investment is acquired by
purchase, exchange, merger or any other method; provided, that the term
"Investment" (1) shall not include an Investment in the Company, (2) shall
not include current trade and customer accounts receivable and allowances,
provided they relate to goods furnished in the ordinary course of business
and are given in accordance with the customary practices of the Company,
(3) shall not include temporary investments of excess cash of the Company
in any of the following: (A) investment grade obligations maturing within
one year of their issuance which as to principal and interest constitute
direct obligations of, or obligations guaranteed by, the United States of
America, (B) negotiable certificates of deposit of banks or trust
companies which are organized under the laws of the United States of
America or any state thereof and which have capital and surplus of at
least $500,000,000, (C) commercial paper which is rated not less than
prime-one or A-1 or their equivalents by Moody's Investor Service, Inc. or
Standard & Poor's Corporation or their successors, (D) any repurchase
agreement secured by any one or more of the foregoing and (E) money market
funds primarily investing in any of the foregoing securities and sponsored
by or affiliated with nationally recognized brokerage or investment
advisory firms, and (4) shall not include Investments of the Company
existing on the date hereof and disclosed on Schedule 3 hereto.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, or preference, priority or other
security interest of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same effect as any of the
foregoing, any assignment or other conveyance of any right to receive
income and any assignment of receivables with recourse against the
assignor), any filing of a financing statement as debtor under the Uniform
Commercial Code or any similar statute and any agreement to give or make
any of the foregoing; provided that the term "Lien" shall not include
Permitted Liens.
"Outside Directors" means those directors on the Company's Board of
Directors at any time who are not otherwise Affiliates of or employed by
the Company.
"Outstanding" or "outstanding" means (a) when used with reference to
the Shares, the Conversion Shares, the Warrants or the Warrant Shares as
of a particular time, all Shares, Conversion Shares, Warrants or Warrant
Shares theretofore duly issued except (i) Shares, Conversion Shares,
Warrants and Warrant Shares theretofore reported as lost, stolen,
mutilated or destroyed or surrendered for transfer, exchange or
replacement, in respect of which new or
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replacement Shares, Conversion Shares, Warrants or Warrant Shares have
been issued by the Company, (ii) Shares, Conversion Shares, Warrants and
Warrant Shares theretofore cancelled by the Company and (iii) Shares,
Conversion Shares, Warrants and Warrant Shares registered in the name of,
as well as Shares, Warrants and Warrant Shares owned beneficially by, the
Company, or any of its Affiliates. For purposes of the preceding sentence,
in no event shall "Affiliates" include (x) the persons which are
identified as "Purchasers" on Schedule 1 hereto or (y) any Affiliates of
any such persons.
"Pension Plan" means any "employee pension benefit plan" as defined
in Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes, governmental charges
or levies not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established
in accordance with GAAP, (ii) any imperfections of title, easements,
rights of way or similar Liens, zoning laws or land use restrictions as
normally exist with respect to property similar in character to the
property affected thereby and which individually or in the aggregate with
other such Liens, zoning laws or land use restrictions do not materially
impair the value or marketability of the property subject to such Liens,
zoning laws or land use restrictions or interfere with the use of such
property in the conduct of the business of the Company and which do not
secure obligations for money borrowed, (iii) Liens imposed by any law,
such as mechanic's, materialman's, landlord's, warehouseman's and
carrier's Liens, securing obligations incurred in the ordinary course of
business which are not yet overdue or which are being diligently contested
in good faith by appropriate proceedings and, with respect to such
obligations which are being contested, for which the Company has set aside
adequate reserves, if appropriate, and (iv) any Lien resulting from
purchase by the Company of goods in the ordinary course of business as to
which Liens are not filed of record.
"Person" or "person" means an individual, corporation, partnership,
firm, association, joint venture, trust, unincorporated organization,
government, governmental body, agency, political subdivision or other
entity.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave
of absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, accident, disability, workmen's compensation or
other insurance, severance, separation or other employee benefit plan,
practice, policy or arrangement of any kind, whether written or oral, or
whether for the benefit of a single individual or more than one individual
including, but not limited to, any "employee benefit plan" within the
meaning of Section 3(3) of ERISA.
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"Preferred Stock" means any class of the capital stock of a
corporation (whether or not convertible into any other class of such
capital stock) which has any right, whether absolute or contingent, to
receive dividends or other distributions of the assets of such corporation
(including, without limitation, amounts payable in the event of the
voluntary or involuntary liquidation, dissolution or winding-up of such
corporation), which right is superior to the rights of another class of
the capital stock of such corporation. "Preferred Stock" includes, without
limitation, the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible Preferred Stock and
the Series D Convertible Preferred Stock.
"Purchaser" means the person who accepts and agrees to the terms
hereof as indicated by such person's signature (as "the undersigned
Purchaser") on the execution page of this Agreement, together with its
successors and assigns.
"Purchasers" has the meaning set forth in Section 1(c) hereof,
together with their respective successors and assigns.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the First Closing Date, among the Company and each
of the Purchasers.
"Restricted Payment" means (i) every payment in connection with the
redemption, purchase, retirement or other acquisition by or on behalf of
the Company of any shares of the Company's capital stock (as defined
below), whether or not owned by the Company, (ii) any prepayments or
repayments made on Indebtedness of the Company, (iii) every payment to or
on behalf of any Affiliate of the Company on account of or with respect to
any lease arrangements, and (iv) every payment by or on behalf of the
Company (whether as repayment or prepayment of principal or as interest or
otherwise) on or with respect to (A) any obligation to repay money
borrowed owing to any Affiliate of the Company or (B) any obligation, to
any Person, of any Affiliate of the Company or to any other holder of
shares of the Company's capital stock (as defined below), which obligation
is assumed, or is the subject of a Guaranty, by the Company; provided,
however, (a) that the restrictions of the foregoing clause (i) shall not
apply to (A) any payment in respect of capital stock of the Company to the
extent payable in shares of the capital stock of the Company, (B) any
redemption of the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock or the Series C Convertible Preferred Stock in
accordance with Section 5(a) of their respective Certificate of
Designations as in effect on the date hereof, (C) any redemption of the
Series D Preferred Stock or (D) any redemption or repurchase pursuant to
the 1995 Stock Incentive Plan as in effect on the date hereof, (b) that
the restrictions of the foregoing clause (ii) shall not apply to any
regularly
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scheduled prepayment or repayment of Indebtedness, provided that such
Indebtedness being prepaid or repaid is not at the time of such prepayment
or repayment or at any prior time thereto owing to an Affiliate of the
Company, and (c) that none of the foregoing clauses shall apply to any
payments, distributions or other transfers or actions on or with respect
to the Shares or the Conversion Shares or to the Purchasers (or holders of
Shares or the Conversion Shares) under the Stock and Warrant Purchase
Agreements. For purposes of this definition, "capital stock" shall also
include warrants and other rights and options to acquire shares of capital
stock (whether upon exercise, conversion, exchange or otherwise).
"Rule 144" means (i) Rule 144 under the Securities Act as such Rule
is in effect from time to time and (ii) any successor rule, regulation or
law, as in effect from time to time.
"Rule 144A" means (i) Rule 144A under the Securities Act as such
Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144 Transaction" means a transfer of Conversion Shares (A)
complying with Rule 144 as such Rule is in effect on the date of such
transfer (but not including a sale other than pursuant to "brokers'
transactions" as defined in clauses (1) and (2) of paragraph (g) of such
Rule as in effect on the date hereof) and (B) occurring at a time when
Conversion Shares are registered pursuant to Section 12 of the Securities
Exchange Act.
"SEC Reports" has the meaning set forth in Section 4.19 hereof.
"Second Closing" has the meaning set forth in Section 2(a) hereof.
"Second Closing Date" has the meaning set forth in Section 2(a)
hereof.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules, regulations and interpretations thereunder.
"Series A Convertible Preferred Stock" means the Company's Series A
Convertible Preferred Stock, par value $.01 per share.
"Series B Convertible Preferred Stock" means the Company's Series B
Convertible Preferred Stock, par value $.01 per share.
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"Series C Convertible Preferred Stock" means the Company's Series C
Convertible Preferred Stock, par value $.01 per share.
"Series D Convertible Preferred Stock" means the Company's Series D
Convertible Preferred Stock, par value $.01 per share, which will have the
rights, powers and privileges on such Closing Date as more fully set forth
in the Certificate of Designations.
"Shares" has the meaning set forth in Section 1(a) hereof. In the
event that any Shares are sold either in a public offering pursuant to a
registration statement under Section 5 of the Securities Act or pursuant
to a Rule 144 Transaction, then the transferees of such Shares shall not
be entitled to any benefits under this Agreement with respect to such
Shares and such Shares shall no longer be considered to be "Shares" for
purposes of any consent or waiver provision of this Agreement.
"Shelf Registration" has the meaning set forth in Section 8.10
hereof.
"Stock and Warrant Purchase Agreements" has the meaning set forth in
Section 1(c) hereof.
"Stockholders' Agreement" means the Stockholders' Agreement, dated
as of the First Closing Date, among the Company, the Purchasers and
certain other stockholders of the Company.
"Stockholders' Meeting" has the meaning set forth in Section 2(a)
hereof.
"Subsequent Shelf Registration" has the meaning set forth in Section
8.10 hereof.
"Subsidiary", with respect to any Person, means any corporation,
association or other entity of which more than 50% of the total voting
power of shares of stock or other equity interests (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is, at the time as of which any determination
is being made, owned or controlled, directly or indirectly, by such Person
or one or more of its Subsidiaries, or both. The term "Subsidiary" or
"Subsidiaries" when used herein without reference to any particular
Person, means a Subsidiary or Subsidiaries of the Company.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any
nature whatsoever, whether
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disputed or not, together with any interest, penalties, additions to tax
or additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular
Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction, or any foreign jurisdiction, having or purporting to
exercise jurisdiction with respect to any Tax.
"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.
"Warrant Certificates" has the meaning set forth in Section 1(a)
hereof.
"Warrants" has the meaning set forth in Section 1(a) hereof.
"Warrant Share" or "Warrant Shares" means the shares of the
Company's Common Stock obtained or obtainable upon the exercise of Warrants and
shall also include any capital stock or other securities into which Warrant
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 Warrant Shares. In the event that any Warrant Shares are sold
either in a public offering pursuant to a registration statement under the
Securities Act or pursuant to a Rule 144 Transaction, then the transferees of
such Warrant Shares shall not be entitled to any benefits under this Agreement
with respect to such Warrant Shares and such Warrant Shares shall no longer be
considered to be "Warrant Shares" for purposes of any consent or waiver
provision of this Agreement.
(b) For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Section or other subdivision;
(ii) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles consistently applied (except as otherwise provided
herein);
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(iii) all computations provided for herein, if any, shall be
made in accordance with generally accepted accounting principles
consistently applied (except as otherwise provided herein);
(iv) any uses of the masculine, feminine or neuter gender
shall also be deemed to include any other gender, as appropriate;
(v) all references herein to actions by the Company, such as
"create", "sell", "transfer", "dispose of", etc., mean such action whether
voluntary or involuntary, by operation of law or otherwise;
(vi) the exhibits and schedules to this Agreement shall be
deemed a part of this Agreement;
(vii) each of the representations and warranties of the
Company contained in Section 4 hereof is separate and is not limited,
qualified or modified by the existence, wording or satisfaction of any
other representation or warranty of the Company in Section 4 or otherwise;
(viii) each of the covenants of the Company contained in
Sections 7, 8 and 9 hereof or otherwise contained in any Stock and Warrant
Purchase Agreement, the Certificate of Designations, the Warrant
Certificates, the Stockholders' Agreement or the Registration Rights
Agreement is separate and is not limited or satisfied by the existence,
wording or satisfaction of any other covenant of the Company in Section 7,
8 or 9 or otherwise; and
(ix) all references herein (in covenants or otherwise) to any
action(s) which are to be taken (or which are prohibited from being taken)
by any Person or the Company shall apply to such Person or the Company, as
the case may be, whether such action is taken directly or indirectly.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows as
of the date hereof and as of any Closing Date, except as set forth in the
Disclosure Schedule attached hereto as Exhibit B:
4.1. Corporate Existence, Power and Authority.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation. The
Company is duly qualified, licensed and authorized to do business and is in good
standing in each jurisdiction in which it
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owns or leases any property or in which the conduct of its business requires it
to so qualify or be so licensed, except for such jurisdictions where the failure
to so qualify or be so licensed would not have a material adverse effect on the
Company's assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects.
(b) No proceeding has been commenced looking toward the dissolution
or merger of the Company or the amendment of its certificate of incorporation
(other than the Certificate of Designations). The Company is not in violation in
any respect of its certificate of incorporation or by-laws.
(c) The Company has all requisite power, authority (corporate and
other) and legal right to own or to hold under lease and to operate the
properties it owns or holds and to conduct its business as now being conducted.
(d) The Company has all requisite power, authority (corporate and
other) and legal right to execute, deliver, enter into, consummate the
transactions contemplated by and perform its obligations under (i) the Stock and
Warrant Purchase Agreements, including, without limitation, the issuance by the
Company of the Shares and the Conversion Shares as contemplated herein and
therein and in the Certificate of Designations and the issuance by the Company
of the Warrants and Warrant Shares as contemplated herein and therein and in the
Warrant Certificates (subject to the proper filing with the Secretary of State
of the State of Delaware of (I) the Certificate of Designations for the Series D
Preferred Stock, and (II) amendments to the respective Certificate of
Designations for each of the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock and the Series C Convertible Preferred Stock), (ii)
the Stockholders' Agreement and (iii) the Registration Rights Agreement. The
execution, delivery and performance of the Stock and Warrant Purchase
Agreements, the Stockholders' Agreement and the Registration Rights Agreement by
the Company (including, without limitation, the issuance by the Company of the
Shares and the Conversion Shares as contemplated herein and therein and in the
Certificate of Designations and the issuance by the Company of the Warrants and
Warrant Shares as contemplated herein and therein and in the Warrant
Certificates) have been duly authorized by all required corporate and other
actions; provided that the Second Closing is contingent upon the due
authorization by corporate and other actions of sufficient additional shares of
Common Stock to permit conversion in full of the Series D Convertible Preferred
Stock into shares of Common Stock at the Shareholders' Meeting. The Company has
duly executed and delivered the Stock and Warrant Purchase Agreements, the
Stockholders' Agreement and the Registration Rights Agreement. The Stock and
Warrant Purchase Agreements, the Stockholders' Agreement and the Registration
Rights Agreement constitute the legal, valid and binding obligations of the
Company enforceable in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to the rights of creditors generally.
4.2. Capital Stock.
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(a) Schedule 6(a) hereto correctly and completely lists (i) the
authorized capital stock of the Company (Common Stock and Preferred Stock), (ii)
the number of designated shares of Preferred Stock in each Series or Class after
giving effect to the Certificate of Designations and (iii) on January 31, 1999,
after giving effect to the issuance of Shares contemplated by the Stock and
Warrant Purchase Agreements, the number of shares outstanding in each Series or
Class. Other than the conversion of certain shares of the Series A Convertible
Preferred Stock, the Series B Convertible Preferred Stock and the Series C
Convertible Preferred Stock, there have been no material issuances of shares
since January 31, 1999. All of such outstanding shares are, or on such Closing
Date will be, duly authorized, validly issued and outstanding, fully paid and
non-assessable. The shares of the Company's Common Stock issuable upon
conversion of the Series D Convertible Preferred Stock will be, when issued in
accordance with the terms of the Series D Convertible Preferred Stock, duly
authorized, validly issued, fully paid and non-assessable. Except as provided in
the Certificate of Designations, none of the shares of the Company's capital
stock which will be outstanding at each Closing (i) were or will be subject to
preemptive rights when issued or (ii) provide the holders thereof with any
preemptive rights with respect to any issuances of capital stock.
(b) Schedule 6(b) hereto correctly and completely lists the number
and purpose for which such shares of the Company's Common Stock are reserved for
issuance by the Company.
(c) Except as referred to in Section 4.2(b), there are no
outstanding options, warrants, subscriptions, rights, convertible securities or
other agreements or plans under which the Company may become obligated to issue,
sell or transfer shares of its capital stock or other securities.
(d) Except for the registration rights contained in the Registration
Rights Agreement, there are and will be no outstanding registration rights with
respect to any capital stock of the Company, which (in either case) will be
outstanding on such Closing Date, or any capital stock referred to in Section
4.2(b) or 4.2(c).
(e) There are no voting agreements, voting trusts, proxies or other
agreements or understandings with respect to the voting of any capital stock of
the Company of which the Company is a party, except as provided herein, in the
Stockholders' Agreement and the Certificate of Designations.
(f) There are no anti-dilution protections or other adjustment
provisions in existence with respect to any capital stock of the Company or any
capital stock referred to in Section 4.2(b) or 4.2(c) or in the last sentence of
Section 4.3(b) below.
(g) The Certificate of Designations has been duly adopted by the
Company and is fully effective as an amendment to the Company's certificate of
incorporation. The Shares have all of the rights, priorities and terms set forth
in the Certificate of Designations.
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(h) The Warrant Certificates have been duly adopted by the Company,
and the Warrants will have all of the rights and privileges set forth in the
Warrant Certificates.
(i) To the knowledge of the Company, those persons who own, directly
or indirectly, more than 5% (calculated in accordance with Rule 13d-3 of the
Securities Exchange Act) of the Company's outstanding Common Stock are as
follows: Frederick R. Adler, Bear Stearns Asset Management Inc., Kingdon Capital
Management Corporation, M. Kingdon Offshore N.V.
4.3. Subsidiaries.
The Company has no Subsidiaries. The Company has no Investments in
any other Person.
4.4. Business.
The Company is engaged primarily in the business of the manufacture
and sale of liquid and solid oral generic prescription and over-the-counter
drugs. The Company neither currently engages in, nor has any intention of
engaging in, any other business.
4.5. No Defaults or Conflicts.
(a) The Company is not in violation or default in any material
respect (and is not in default in any respect regarding any Indebtedness) under
any indenture, agreement or instrument to which it is a party or by which it or
its properties may be bound. The Company is not in default in any material
respect under any material order, writ, injunction, judgment or decree of any
court or other governmental authority or arbitrator(s).
(b) The execution, delivery and performance by the Company of the
Stock and Warrant Purchase Agreements, the Stockholders' Agreement and the
Registration Rights Agreement and any of the transactions contemplated hereby or
thereby (including, without limitation, the issuance of the Shares and the
Conversion Shares as contemplated herein and therein and in the Certificate of
Designations, the adoption of the Certificate of Designations as an amendment to
the Company's certificate of incorporation and the issuance by the Company of
the Warrants and Warrant Shares as contemplated herein and therein and in the
Warrant Certificates) do not and will not (i) violate or conflict with, with or
without the giving of notice or the passage of time or both, any provision of
(A) the respective certificates of incorporation or by-laws of the Company, (B)
any law, rule, regulation or order of any federal, state, county, municipal or
other governmental authority, (C) any judgment, writ, injunction, decree, award
or other action of any court or governmental authority or arbitrator(s), or (D)
any agreement, indenture or other instrument applicable to the Company or any of
its respective properties, (ii) result in the creation of any Lien upon any of
the Company's properties, assets or revenues,
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except as provided in the Certificate of Designations of the Series D
Convertible Preferred Stock, (iii) require the consent, waiver, approval, order
or authorization of, or declaration, registration, qualification or filing with,
any Person (whether or not a governmental authority and including, without
limitation, any shareholder approval) (other than the vote at the Stockholders'
Meeting regarding authorized stock and other than approvals which have been
obtained prior to the Closing Date), or (iv) cause antidilution clauses of any
outstanding securities to become operative or give rise to any preemptive
rights. No provision referred to in Sections (A) and (C) of the preceding clause
(i) materially adversely affects the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis or the ability of the Company to perform
its obligations under the Stock and Warrant Purchase Agreements, the Certificate
of Designations, the Warrant Certificates, the Stockholders' Agreement, the
Registration Rights Agreement or any of the transactions contemplated hereby or
thereby.
4.6. Disclosure Materials; Other Information.
(a) The Company has previously furnished to the Purchaser the
materials described on Schedule 4 hereto (the "Disclosure Material"). The
audited and unaudited financial statements referred to or contained in the
materials referred to on Schedule 4 fairly present the consolidated financial
condition of the Company as of the respective dates thereof and the consolidated
results of the operations of the Company for such periods and have been prepared
in accordance with generally accepted accounting principles consistently
applied, except that any such unaudited statements may omit notes and may be
subject to year-end adjustment.
(b) Since September 30, 1998, except as disclosed in the unaudited
financial statements for December 31, 1998 provided to the Purchaser, (i) the
business of the Company has been conducted in the ordinary course and (ii) there
has been no material adverse change in the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis. As of such Closing Date and as
of the date hereof, there are no material liabilities of the Company which would
be required to be provided for in a consolidated balance sheet of the Company as
of either such date prepared in accordance with generally accepted accounting
principles consistently applied, other than liabilities provided for in the
financial statements referred to in Section 4.6(a). Since September 30, 1998, no
amount or property has directly or indirectly been declared, ordered, paid, made
or set aside for any Restricted Payment nor has any such action been agreed to.
(c) There are no material liabilities, contingent or otherwise, of
the Company that have not been disclosed in the financial statements referred to
in Section 4.6(a) or otherwise disclosed in the Disclosure Material.
(d) The financial projections included in the Disclosure Material
conform with the internal operating forecasts of the Company and were based on
reasonable assumptions when made and have been prepared in good faith.
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(e) There is no fact known to the Company which is not in the
Disclosure Material and which materially and adversely affects, or in the future
would be reasonably likely (as far as the Company currently can reasonably
foresee) to materially and adversely affect, the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis.
4.7. Litigation.
There is no action, suit, proceeding, investigation or claim pending
or, to the knowledge of the Company, threatened in law, equity or otherwise
before any court, administrative agency or arbitrator which (i) questions the
validity of the Stock and Warrant Purchase Agreements, the Certificate of
Designations, the Warrant Certificates, the Stockholders' Agreement, the
Registration Rights Agreement, the Shares, the Conversion Shares, the Warrants
or the Warrant Shares or any action taken or to be taken pursuant hereto or
thereto, (ii) might adversely affect the right, title or interest of any
Purchaser to the Shares, the Conversion Shares, the Warrants or the Warrant
Shares or (iii) might result in a material adverse change in the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis.
4.8. Taxes.
The Company has duly and timely filed all Tax Returns required to be
filed by it, and each such Tax Return correctly and completely reflects the Tax
liability and all other information required to be reported thereon. The Company
has paid or caused to be paid all Taxes (whether or not reflected on such Tax
Returns) that are due and payable. The provision for Taxes due by the Company in
the most recent financial statement included in the Disclosure Material is
sufficient for all unpaid Taxes, being current Taxes not yet due and payable, of
the Company, as of the end of the period covered by such financial statement,
and as of such Closing Date, such provision, as adjusted for the passage of time
through such Closing Date, will be sufficient for the then-accrued and unpaid
Taxes not yet due and payable of the Company. No Tax Returns of the Company have
ever been audited by any Taxing Authority, there is no dispute concerning any
Tax liability of the Company either threatened, claimed or raised by any Taxing
Authority, and the Company does not expect any Taxing Authority to assess
additional Taxes against or in respect of it for any past period. The Company
has withheld and paid, or, if not yet due for payment, set aside in accounts for
such purposes, all Taxes required to have been withheld in connection with
amounts paid or owing to any employee, creditor, independent contractor or other
third party. Other than stamp taxes, the Company has no liability for Taxes of
any Person other than the Company (i) as a transferee or successor, (ii) by
contract, or (iii) otherwise. There are no applicable Taxes payable by the
Company in connection with the execution and delivery of the Stock and Warrant
Purchase Agreements, the Stockholders' Agreement or the Registration Rights
Agreement or the issuance by the Company of the Shares, the Conversion Shares,
the Warrants or the Warrant Shares.
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4.9. ERISA.
(a) All Benefit Plans are listed in Exhibit B, and copies of all
documentation relating to such Benefit Plans have been delivered to or made
available for review by Purchasers (including copies of written Benefit Plans,
written descriptions of oral Benefit Plans, summary plan descriptions, trust
agreements, the three most recent annual returns, employee communications, and
IRS determination letters).
(b) Each Benefit Plan has at all times been maintained and
administered in all material respects in accordance with its terms and with the
requirements of all applicable law, including ERISA and the Code, and each
Benefit Plan intended to qualify under section 401(a) of the Code has at all
times since its adoption been so qualified, and each trust which forms a part of
any such plan has at all times since its adoption been tax-exempt under section
501(a) of the Code.
(c) No Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code, and the "amount of unfunded benefit liabilities" within the meaning of
section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit
Plan subject to Title IV of ERISA.
(d) No "reportable event" (within the meaning of section 4043 of
ERISA) has occurred with respect to any Benefit Plan or any Plan maintained by
an ERISA Affiliate since the effective date of said section 4043 for which
notice is not waived under the regulations issued pursuant to said Section 4043.
(e) No Benefit Plan is a multiemployer plan within the meaning of
section 3(37) of ERISA.
(f) No direct, contingent or secondary liability has been incurred
or is expected to be incurred by the Company under Title IV of ERISA to any
party with respect to any Benefit Plan, or with respect to any other Plan
presently or heretofore maintained or contributed to by any ERISA Affiliate.
(g) Neither the Company nor any ERISA Affiliate has incurred any
liability for any tax imposed under section 4971 through 4980B of the Code or
civil liability under section 502(i) or (l) of ERISA.
(h) No benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement.
(i) No Benefit Plan provides health or death benefit coverage beyond
the termination of an employee's employment, except as required by Part 6 of
Subtitle B of Title I of
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ERISA or section 4980B of the Code or any State laws requiring continuation of
benefits coverage following termination of employment.
(j) No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities and any other claim
which could reasonably be expected to result in a material liability or expense
to the Company) has been brought or, to the knowledge of the Company, threatened
against or with respect to any Benefit Plan and there are no facts or
circumstances known to the Company that could reasonably be expected to give
rise to any such suit, action or other litigation.
(k) All contributions to Benefit Plans that were required to be made
under such Benefit Plans have been made, and all benefits accrued under any
unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved
in accordance with generally accepted accounting principles, all of which
accruals under unfunded Benefit Plans are as disclosed in Exhibit B, and the
Company has performed all material obligations required to be performed under
all Benefit Plans.
(l) The execution, delivery and performance of the Stock and Warrant
Purchase Agreements, the Stockholders' Agreement and the Registration Rights
Agreement and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the offer, issue and sale by the
Company, and the purchase by the Purchaser of the Shares, the Conversion Shares,
the Warrants and the Warrant Shares) will not involve any "prohibited
transaction" within the meaning of ERISA or the Code with respect to any Benefit
Plan.
4.10. Legal Compliance.
(a) The Company's manufacturing, distribution and marketing
practices are in compliance in all material respects with all applicable laws,
rules, regulations, orders, licenses, judgments, writs, injunctions, decrees or
demands, including, without limitation, laws and regulations administered by the
Food and Drug Administration ("FDA") and the Drug Enforcement Administration
("DEA").
(b) The Company possesses all material Food and Drug Administration
new drug applications, abbreviated new drug applications, and new animal drug
applications as are necessary for the conduct of its business as now being
conducted, a list of such which will be provided to the Purchaser upon the
Purchaser's request.
(c) Other than the May 25, 1993 "Richlyn Order," there are no
adverse orders, judgments, writs, injunctions, decrees, or demands of any court
or administrative body, domestic or foreign, or of any governmental agency or
instrumentality, domestic or foreign, outstanding against the Company.
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(d) The Company has not and will not use the services of any person
debarred under the provisions of the Generic Drug Enforcement Act of 1992, 21
U.S.C. ss. 335(a)(b). None of the Company's officers or employees has been
convicted of a felony under federal law for conduct relating to the development,
approval or regulation of any product subject to the Federal Food, Drug, and
Cosmetic Act or the Controlled Substances Act.
4.11. Outstanding Securities.
All securities (as defined in the Securities Act) of the Company
have been offered, issued, sold and delivered in compliance with, or pursuant to
exemptions from, all applicable federal and state laws, and the rules and
regulations of federal and state regulatory bodies governing the offering,
issuance, sale and delivery of securities.
4.12. Permits, Licenses and Approvals; Intellectual Property and
Other Rights.
The Company owns or possesses and holds free from material conflicts
with the rights of others all franchises, licenses, permits, consents, approvals
and other authority (governmental or otherwise), patents, patent rights,
trademarks, trademark rights, trade names, trade name rights and copyrights
(each of which patent, trademark or copyright is listed on Exhibit B hereto),
and all rights and privileges with respect to any of the foregoing, as are
necessary for the conduct of its business as now being conducted and as
currently proposed to be conducted; provided that, no such representation is
made with respect to government franchises, licenses, permits, consents,
approvals or other authority which may be required with respect to the Company's
business as proposed to be conducted. The Company is not in default in any
material respect under any of such franchises, licenses, permits, consents,
approvals or other authority. The rights of (and use by) the Company with
respect to such or any other patents, patent rights, trademarks, trademark
rights, trade names, trade name rights or copyrights do not conflict with or
infringe any rights of others in a manner which might materially and adversely
affect the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company on a
consolidated basis, and no such claim of conflict or infringement has been
asserted by any Person.
4.13. Key Employees.
The Company has good relationships with its employees and has not
had and does not expect any substantial labor problems. The Company has no
knowledge as to any intentions of any key employee or any group of employees to
leave the employ of the Company. The employees of the Company are not and have
never been represented by any labor union, and no collective bargaining
agreement is binding and in force against the Company or currently being
negotiated by the Company.
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4.14. Properties.
Other than the Permitted Liens, the Company has good and marketable
title to its real property, all of which is disclosed on Exhibit B hereto, and
good and marketable title to each of its other properties other than leased
properties. Certain real property used by the Company in the conduct of their
respective businesses is held under lease (as identified on Exhibit B hereto),
and the Company is not aware of any pending or threatened claim or action by any
lessor of any such property to terminate any such lease. All such leases are
valid and in full force and effect, and none of such leases is in default. None
of the properties owned or leased by the Company is subject to any Liens which
could materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis.
4.15. Suppliers and Customers.
(a) The Company has adequate sources of supply for its business as
currently conducted and as proposed to be conducted. The Company has good
relationships with all of its material sources of supply of goods and services
and does not anticipate any material problem with any such material sources of
supply.
(b) The Company has no knowledge that the customer base of the
Company might materially decrease.
4.16. Environmental Compliance.
(a) There is no Hazardous Material on, about, under or in, any
property, real or personal, in which the Company has any interest in an amount
or concentration which could constitute a violation that would result in a
liability in excess of $5,000 or otherwise result in a liability in excess of
$5,000 to the Company under any applicable Environmental Law.
(b) There is no (and has not been any) off-site use, handling,
storage or disposal or on-site use, handling, storage or disposal of Hazardous
Material at or from any locations currently or formerly owned, leased, operated
or occupied by the Company as a result of which use, handling, storage or
disposal there would exist a risk that the Company could incur a material
liability or obligation under any applicable Environmental Law.
(c) The Company has not received any verbal or written notice,
citation, subpoena, summons, complaint or other correspondence or communication
from any person with respect to the presence of any non-indigenous Hazardous
Material upon, into, beneath, or emanating from or affecting any of the real
property (including improvements) currently or formerly owned or occupied by the
Company that could result in a liability to the Company in excess of $5,000.
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(d) There has been no intentional or unintentional, gradual or
sudden, release, disposal or discharge by the Company or, to the Company's
knowledge, by others, upon, into or beneath the real property (including
improvements) currently or formerly owned or occupied by the Company that has
caused or is causing soil or groundwater contamination which, under applicable
Environmental Laws could require investigation or remediation or could otherwise
create a material liability or obligation on the part of the Company.
(e) The Company is in material compliance with all applicable
Environmental Laws and the terms and conditions of all Environmental Permits.
(f) To the best knowledge of the Company after reasonable inquiry,
there are no Liens arising under or pursuant to any Environmental Law
("Environmental Liens") relating to any real property (including improvements
thereon) currently owned by the Company.
(g) There are no (i) underground storage tanks, (ii) polychlorinated
biphenyl containing equipment or (iii) asbestos-containing materials at any site
currently owned, operated or leased by the Company, except in compliance with
all applicable Environmental Laws.
4.17. No Burdensome Agreements.
To the best of the knowledge of the Company, other than this
Agreement and the related documents, the Company is not a party to any contract
or agreement with any Affiliate of the Company, the terms of which are less
favorable to the Company than those which might have been obtained, at the time
such contract or agreement was entered into, from a person who was not such an
Affiliate.
4.18. Offering of Shares and Warrants.
None of the Company, any agent or any other person acting on its
behalf, directly or indirectly, (i) offered any of the Shares, the Warrants or
any similar security of the Company (A) by any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities
Act) or (B) for sale to or solicited offers to buy any thereof from, or
otherwise approached or negotiated with respect thereto with, any person other
than the Purchasers and not more than twenty-four (24) other institutional
investors each of which the Company reasonably believed was an "accredited
investor" within the meaning of Regulation D under the Securities Act or (ii)
has done or caused to be done (or has omitted to do or to cause to be done) any
act which act (or which omission) would result in bringing the issuance or sale
of the Shares within the provisions of Section 5 of the Securities Act or the
filing, notification or reporting provisions of any state securities laws.
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4.19. SEC Reports.
The Company has filed all proxy statements, reports and other
documents required to be filed by it under the Securities Exchange Act. The
Company has furnished the Purchaser with copies of (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 1997, (ii) its Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1998, June 30, 1998 and
September 30, 1998 and (iii) its Proxy Statement dated April 6, 1998
(collectively, the "SEC Reports"). Each SEC Report was in substantial compliance
with the requirements of its respective form and none of the SEC Reports, nor
the financial statements (and the notes thereto) included in the SEC Reports, as
of their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
4.20. Indebtedness.
Schedule 2 hereto sets forth (i) the amount of all Indebtedness of
the Company outstanding as of January 31, 1999 (and there is no additional
material amount of Indebtedness of the Company outstanding other than that
listed as of January 31, 1999 or as set forth in Schedule B), (ii) any Lien with
respect to such Indebtedness and (iii) a description of each instrument or
agreement governing such Indebtedness. The Company has made available to the
Purchaser a complete and correct copy of each such instrument or agreement
(including all amendments, supplements or modifications thereto). No material
default exists with respect to or under any such Indebtedness or any instrument
or agreement relating thereto and no event or circumstance exists with respect
thereto that (with notice or the lapse of time or both) could give rise to such
a default.
4.21. Use of Proceeds.
The Company will use the proceeds realized from the sale of the
Shares and the Warrants to repay debt, to fund future development opportunities
and for working capital and general corporate purposes. No portion of such
proceeds will be used for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying, within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, as amended from time to time,
any "margin stock" as defined in said Regulation U, or any "margin stock" as
defined in Regulation G of the Board of Governors of the Federal Reserve System,
as amended from time to time, or for the purpose of purchasing, carrying or
trading in securities within the meaning of Regulation T of the Board of
Governors of the Federal Reserve System, as amended from time to time, or for
the purpose of reducing or retiring any indebtedness which both (i) was
originally incurred to purchase any such margin stock or other securities and
(ii) was directly or indirectly secured by such margin stock or other
securities. None of the assets of the Company includes any such "margin stock."
The Company has no present intention of acquiring any such "margin stock."
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4.22. Other Names.
The businesses previously or presently conducted by the Company has
not been conducted under any corporate, trade or fictitious name.
4.23. Brokers.
No broker, finder or investment banker or other party is entitled to
any brokerage, finder's or other similar fee or commission in connection with
any Stock and Warrant Purchase Agreement, the Stockholders' Agreement, the
Registration Rights Agreement, the Warrant Certificates or the Certificate of
Designations or any of the transactions contemplated hereby or thereby, based
upon arrangements made by or on behalf of the Company or any of its Affiliates.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
5.1. Corporate Power and Authority.
The Purchaser has all requisite power, authority and legal right to
execute, deliver, enter into, consummate the transactions contemplated by and
perform its obligations under this Agreement, the Stockholders' Agreement and
the Registration Rights Agreement. The execution, delivery and performance of
this Agreement, the Stockholders' Agreement and the Registration Rights
Agreement by the Purchaser have been duly authorized by all required corporate
and other actions. The Purchaser has duly executed and delivered this Agreement,
the Stockholders' Agreement and the Registration Rights Agreement, and this
Agreement, the Stockholders' Agreement and the Registration Rights Agreement
constitute the legal, valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to the rights of creditors generally.
5.2. Investment Intent.
The Purchaser is capable of evaluating the risk of its investment in
the Shares and Warrants being purchased by it and is able to bear the economic
risk of such investment. The Purchaser is purchasing the Shares and the Warrants
to be purchased by it for its own account for investment and not with a present
view to any distribution thereof in violation of applicable securities laws;
provided, however, that the Purchaser may transfer record and/or beneficial
ownership of the Shares, the Conversion Shares, the Warrants or the Warrant
Shares to one or more Affiliates, officers or employees of Affiliates or
investment funds managed by Affiliates of the Purchaser, in all cases in
compliance with federal securities laws. It is understood that the
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disposition of the Purchaser's property shall at all times be within the
Purchaser's control. If the Purchaser should in the future decide to dispose of
any of its Shares, Conversion Shares, Warrants or Warrant Shares, it is
understood that it may do so only in compliance with the Securities Act,
applicable securities laws and this Agreement. The Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
5.3. Brokers.
Except as disclosed on Exhibit B hereto, no broker, finder or
investment banker or other party is entitled to any brokerage, finder's or other
similar fee or commission in connection with any Stock and Warrant Purchase
Agreement, the Stockholders' Agreement, the Registration Rights Agreement, the
Warrant Certificates or the Certificate of Designations or any of the
transactions contemplated hereby or thereby, based upon arrangements made by or
on behalf of the Purchaser or any of its Affiliates.
SECTION 6. RESTRICTIONS ON TRANSFER
The Purchaser agrees that it will not sell or otherwise dispose of
any Shares, Conversion Shares, Warrants or Warrant Shares unless such Shares,
Conversion Shares, Warrants or Warrant Shares have been registered under the
Securities Act and, to the extent required, under any applicable state
securities laws, or pursuant to an applicable exemption from such registration
requirements. The Company may endorse on all Share certificates or Warrant
Certificates a legend stating or referring to such transfer restrictions;
provided, that no such legend shall be endorsed on any Share certificates or
Warrant Certificates which, when issued, are no longer subject to the
restrictions of this Section 6.
SECTION 7. INFORMATION AS TO THE COMPANY
The Company covenants and agrees as follows:
7.1. Financial Information.
(a) The Company will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in accordance with generally accepted accounting
principles consistently applied.
(b) So long as any of the Shares remain outstanding, the Company
will deliver to (I) the Fleming Funds and (II) each Transferee, provided that
each such Transferee holds not less than an aggregate of 5000 Shares, the
following:
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(i) as soon as practicable but not later than five (5)
Business Days after their issuance, and in any event within ninety (90) days
after the close of each fiscal year of the Company, (A) a consolidated balance
sheet of the Company as of the end of such fiscal year and (B) consolidated
statements of operations, stockholders' equity and cash flows of the Company for
such fiscal year, in each case setting forth in comparative form the
corresponding figures for the preceding fiscal year, all such balance sheets and
statements to be in reasonable detail and certified without qualification by
Price Waterhouse Coopers LLC or any "Big Five" independent public accounting
firm selected by the Company, and such statements shall be accompanied by a
management analysis of any material differences between the results for such
fiscal year and the corresponding figures for the preceding year; the Company's
Annual Report on Form 10-KSB shall satisfy such requirement provided that it is
in compliance with all applicable requirements of the SEC and is certified by a
"Big Five" accounting firm;
(ii) as soon as practicable, copies (A) of all financial
statements, proxy material or reports sent to the Company's stockholders, (B) of
any public press releases and (C) of all reports or registration statements
filed with the Commission pursuant to the Securities Act or the Securities
Exchange Act;
(iii) as soon as practicable and in any event within
forty-five (45) days after the close of each of the first three (3) fiscal
quarters of the Company, (A) a consolidated balance sheet of the Company as of
the end of such fiscal quarter, (B) consolidated statements of operations,
stockholders' equity and cash flows of the Company for the portion of the fiscal
year ended with the end of such quarter, in each case in reasonable detail,
certified by the Chief Financial Officer, Chief Executive Officer or the
President of the Company and setting forth in comparative form the corresponding
figures for the comparable period one year prior thereto (subject to normal
year-end adjustments), together with a management analysis of any material
differences between such results and the corresponding figures for such prior
period and (C) a certificate of the Chief Financial Officer, Chief Executive
Officer or the President certifying the Company's compliance with the covenants
contained in Section 9 of this Agreement; the Company's Quarterly Report on Form
10-QSB shall satisfy such requirement provided that it is in compliance with all
applicable requirements of the SEC;
(iv) as soon as practicable and without duplication of any of
the above items, any other materials furnished to the Company's Board of
Directors or to holders of the Company's capital stock or Indebtedness,
including, without limitation, any compliance certificates furnished in respect
of such Indebtedness; and
(v) as soon as practicable, such other information as may
reasonably be requested by (I) the Fleming Funds or (II) any Transferee,
provided that such Transferee holds not less than an aggregate of 5000 Shares.
(c) The Company will deliver to each member of the Company's Board
of Directors and each observer to the Company's Board of Directors appointed
pursuant to
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Section 3(a) of the Stockholders' Agreement, as soon as practicable (and in the
case of (iii), prior to the end of each fiscal year) and without duplication of
any of the items listed below, the following:
(i) copies of any annual, special or interim audit reports or
management or comment letters with respect to the Company or their operations
submitted to the Company by independent public accountants;
(ii) copies of summary financial information prepared on a
quarterly basis regarding the Company on a consolidated basis as presented to
the Board and any other summary financial information otherwise prepared;
(iii) copies of the annual budget and business plan for the
next fiscal year;
(iv) copies of all formal communications, from time to time,
to directors of the Company (including without limitation all information
furnished to such directors in connection with such communications), and copies
of minutes of meetings of the Board of Directors (and of any executive
committees thereof) of the Company;
(v) notice of default under any material agreement, contract
or other instrument to which the Company is a party or by which it is bound;
(vi) notice of any action or proceeding which has been
commenced or threatened against the Company and which, if adversely determined,
would have, individually or in the aggregate, a material adverse effect on the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis; and
(vii) copies of all filings made with the Commission.
(d) All such financial statements referred to in this Section 7.1
shall be prepared in accordance with generally accepted accounting principles
consistently applied (except for any change in accounting principles specified
in the accompanying certificate, in the financial statements themselves or
required by GAAP, and except that any interim financial statements may omit
notes and may be subject to normal year-end adjustments).
(e) Without limiting the foregoing provisions of this Section 7.1,
the Company agrees that, if requested in writing by any holder of Shares, it
will not deliver to such holder (until otherwise instructed by such holder) (x)
any non-public information or non-public materials regarding the Company
(whether described in this Section 7.1 or otherwise) and (y) any information
(whether or not included in clause (x)) which such holder specifies that it does
not want to receive. The Company shall comply with any such request with respect
to each such
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Purchaser and any subsequent holders of Shares acquired directly or indirectly
(through one or more transfers) from such Purchaser, until instructed otherwise
by the then holder of such Shares.
7.2. Communication with Accountants.
The Company hereby authorizes the Purchaser to communicate directly
with the independent certified public accountants for the Company and authorizes
such accountants to disclose to the Purchaser any and all financial statements
and any other information of any kind that they may have with respect to the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company. The Company
shall deliver a letter addressed to such accountants instructing them to comply
with the provisions of this Section 7.2.
7.3. Inspection.
The Company will permit (I) the Fleming Funds, (II) any Transferee,
provided that such Transferee holds not less than an aggregate of 5000 Shares
and (III) any authorized representative of the Fleming Funds or such Transferee,
to visit and inspect any of the properties of the Company, to examine their
respective books and records and to discuss with their officers their books and
records and the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company, all
at such reasonable times, all on reasonable notice and as often as may be
reasonably requested.
7.4. Notices.
The Company will give notice to all holders of Shares promptly after
it learns (other than by notice from all of such holders) of the existence of
any of the following:
(a) any default under any Indebtedness (or under any indenture,
mortgage or other agreement relating to any Indebtedness) which Indebtedness is
in an aggregate principal amount exceeding $250,000 (or the equivalent thereof
in other currencies) in respect of which the Company is liable;
(b) any action or proceeding which has been commenced or threatened
against the Company and which, if adversely determined, would have, individually
or in the aggregate, a material adverse effect on the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis or the ability of
the Company to perform its obligations under the Stock and Warrant Purchase
Agreements, the Stockholders' Agreement, the Registration Rights Agreement, the
Warrant Certificates or the Certificate of Designations;
(c) any dispute which may exist between the Company and any
governmental regulatory body which, in the reasonable opinion of the Company is
reasonably likely to,
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individually or in the aggregate, materially adversely affect the normal
business operations of the Company or the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis or the ability of the Company
to perform its obligations under the Stock and Warrant Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement, the Warrant
Certificates or the Certificate of Designations; and
(d) if any (i) "reportable event" (as such term is described in
Section 4043(c) of ERISA) has occurred; or (ii) "accumulated funding deficiency"
(within the meaning of Section 412(a) of the Code) has been incurred with
respect to a Pension Plan maintained or contributed to (or required to be
maintained or contributed to) by the Company or any ERISA Affiliate that is
subject to the funding requirements of ERISA and the Code or that an application
may be or has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including any required installment
payments) or an extension of any amortization period under Section 412 of the
Code, in each case with respect to such a Pension Plan; or (iii) Pension Plan
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate has been terminated, reorganized, petitioned
or declared insolvent under Title IV of ERISA; or (iv) Pension Plan maintained
or contributed to (or required to be maintained or contributed to) by the
Company or any ERISA Affiliate has an unfunded current liability giving rise to
a lien under ERISA or the Code; or (v) proceeding has been instituted pursuant
to Section 515 of ERISA to collect a delinquent contribution to a Pension Plan
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate; or (vi) of the Company or its ERISA
Affiliates will or may incur any liability (including any contingent or
secondary liability) to or on account of the termination or withdrawal from a
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate; or (vii) "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) in connection with an "employee benefit plan" (as defined in Section
3(3) of ERISA), maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate.
Such notice (i) with respect to (a), shall specify the nature and period of
existence of any such default and what the Company proposes to do with respect
thereto and (ii) with respect to (b), (c) or (d), shall specify the nature of
any such matter referred to in such clause, what action the Company proposes to
take with respect thereto and what action any other relevant Person is taking or
proposes to take with respect thereto.
7.5. Confidentiality Agreement.
The Company's obligation to provide any non-public information under
this Section 7 or otherwise to any person other than members of its Board of
Directors shall be subject to prior execution of a confidentiality agreement
between the Company and the recipient
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of such information as more fully set forth in the form attached hereto as
Exhibit F (the "Confidentiality Agreement").
SECTION 8. AFFIRMATIVE COVENANTS
The Company covenants and agrees as follows:
8.1. Maintenance of Existence, Properties and Franchises; Compliance
with Law; Taxes; Insurance.
The Company will:
(a) maintain its corporate existence, rights and other franchises in
full force and effect;
(b) maintain its tangible assets in good repair, working order and
condition so far as necessary or advantageous to the proper carrying on of its
businesses;
(c) comply with all applicable laws and with all applicable orders,
rules, rulings, certificates, licenses, regulations, demands, judgments, writs,
injunctions and decrees, provided, that such compliance shall not be necessary
so long as (i) the applicability or validity of any such law, order, rule,
ruling, certificate, license, regulation, demand, judgment, writ, injunction or
decree shall be contested in good faith by appropriate proceedings and (ii)
failure to so comply will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
(d) pay promptly when due all Taxes imposed upon its properties,
assets or income and all claims or indebtedness (including, without limitation,
vendor's, workmen's and like claims) which might become a lien upon such
properties or assets; provided, that payment of any such Tax shall not be
necessary so long as (i) the applicability or validity thereof shall be
contested in good faith by appropriate proceedings and a reserve, if
appropriate, shall have been established with respect thereto and (ii) failure
to make such payment will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(e) keep adequately insured, by financially sound and reputable
insurers of nationally recognized stature, all its properties of a character
customarily insured by entities similarly situated, against loss or damage of
the kinds and in amounts customarily insured against by such entities and with
such deductibles or coinsurance as is customary.
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8.2. Office for Payment, Exchange and Registration; Location of
Office; Notice of Change of Name or Office.
(a) So long as any of the Shares or the Warrants is outstanding, the
Company will maintain an office or agency where Shares or Warrants may be
presented for redemption, exchange, conversion, exercise or registration of
transfer as provided in this Agreement. Such office or agency initially shall be
the office of the Company specified in Section 17 hereof, subject to Section
8.2(b).
(b) The Company shall give each holder of Shares or Warrants at
least twenty (20) days' prior written notice of any change in (i) the name of
the Company as then in effect or (ii) the location of the office of the Company
required to be maintained under this Section 8.2.
8.3. Fiscal Year.
The fiscal year of the Company for tax, accounting and any other
purposes shall end on December 31 of each calendar year.
8.4. Environmental Matters.
(a) The Company and shall keep and maintain any property either
owned leased, operated or occupied by the Company free and clear of any
Environmental Liens, and the Company shall keep all such property free of
Hazardous Material contamination and in compliance with all applicable
Environmental Laws and the terms and conditions of any Environmental Permits;
provided, however, that the Company shall have the right at its cost and
expense, and acting in good faith, to contest, object or appeal by appropriate
legal proceeding the validity of any Environmental Lien. The contest, objection
or appeal with respect to the validity of an Environmental Lien shall suspend
the Company's obligation to eliminate such Environmental Lien under this
paragraph pending a final determination by appropriate administrative or
judicial authority of the legality, enforceability or status of such
Environmental Lien, provided that the following conditions are satisfied: (i)
contemporaneously with the commencement of such proceedings, the Company shall
give written notice thereof to each holder of Shares, Conversion Shares,
Warrants or Warrant Shares; and (ii) if under applicable law any real property
or improvements thereon are subject to sale or forfeiture for failure to satisfy
the Environmental Lien prior to a final determination of the legal proceedings,
the Company must successfully move to stay such sale, forfeiture or foreclosure
pending final determination of the Company's action; and (iii) the Company must,
if requested, furnish to the holders of Shares, Conversion Shares, Warrants or
Warrant Shares a good and sufficient bond, surety, letter of credit or other
security satisfactory to such holders equal to the amount (including any
interest and penalty) secured by the Environmental Lien.
(b) The Company will, by administrative or judicial process, enforce
the obligations of any other Person who is potentially liable for damages,
contribution or other relief
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in connection with any violation of Environmental Laws, including, but not
limited to, asbestos abatement, Hazardous Material remediation or off-site or
on-site disposal.
(c) The Company will defend, indemnify and hold harmless each
current, former and future holder of Shares, Conversion Shares, Warrants or
Warrant Shares, its employees, officers, directors, stockholders, partners,
financial and legal representatives and assigns, from and against any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits
and claims, joint or several, and any costs, disbursements and expenses
(including attorneys' fees and expenses and costs of investigation) of whatever
kind or nature, known or unknown, contingent or otherwise asserted against,
imposed on, or sustained by, them, arising out of or in any way related to (i)
the presence, disposal, release, removal, discharge, storage or transportation
by the Company on behalf of any predecessors thereof of any Hazardous Material
upon, into, from or affecting any real property (including improvements)
currently or formerly owned, leased, operated or occupied by the Company; (ii)
any judicial or administrative action, suit or proceeding, actual or threatened,
relating to Hazardous Material upon, in, from or affecting any real property
(including improvements) currently or formerly owned, leased, operated or
occupied by the Company for which the Company could be liable; (iii) any
violation of any Environmental Law, by the Company or any of their agents,
tenants, subtenants or invitees; (iv) the imposition of any Environmental Lien
for the recovery of costs expended in the investigation, study or remediation of
any environmental liability of (or asserted against) the Company; and (v) any
liability arising out of or related to the off-site shipment, disposal,
treatment, handling or disposal of Hazardous Materials. This Section 8.4(c) and
Section 8.4(d) shall survive any payment, conversion or transfer of Shares or
Warrants and any termination of this Agreement.
(d) To the extent that the Company is strictly liable without regard
to fault under any environmental law, regulation or ordinance, the Company's
obligations to the holders of Shares, Conversion Shares, Warrants or Warrant
Shares under any of the indemnification provisions of the Stock and Warrant
Purchase Agreements shall likewise be strict without regard to fault with
respect to the violation of any environmental law, regulation or ordinance which
results in any liability to any of the indemnified persons referred to in
Section 8.4(c).
8.5. Reservation of Shares.
There have been reserved, and the Company shall at all times keep
reserved, free from preemptive rights, out of its authorized Common Stock a
number of shares of Common Stock sufficient to provide for the exercise of the
conversion rights provided in Section 5 of the Certificate of Designations and
the exercise of the Warrants pursuant to Section 1 of the Warrant Certificates;
except to the extent that such shares reservation is contingent upon the
authorization of additional shares at the Shareholders' Meeting described in
Section 8.6 hereof and provided that after such Shareholders' Meeting such
shares shall be reserved in accordance with this Section 8.5.
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8.6. Stockholders' Meeting.
Prior to the Second Closing the Company shall cause there to be a
Stockholders' Meeting and cause the appropriate corporate action to be taken to
authorize sufficient additional shares of Common Stock to permit conversion in
full of the Series D Convertible Preferred Stock. The Company shall use its best
efforts to have the principal shareholders of the Company vote their shares in
favor of increasing the additional shares of Common Stock to permit conversion
in full of the Series D Convertible Preferred Stock. The Company shall mail all
proxy materials for such Shareholders' Meeting, and file all such proxy
materials with the Commission, on or before April 15, 1999 and shall hold such
Shareholders' Meeting no later than May 31, 1999. In the event that the Second
Closing does not take place before June 30, 1999, and the conversion price of
the Shares subsequently is reduced as provided in the Certificate of
Designations, the Company shall use its best efforts to authorize sufficient
additional shares of Common Stock to permit conversion in full of the Series D
Convertible Preferred Stock and shall not use any such additional shares of
authorized Common Stock for any other purpose.
8.7. Securities Exchange Act Registration.
(a) The Company will maintain effective a registration statement
(containing such information and documents as the Commission shall specify and
otherwise complying with the Securities Exchange Act), under Section 12(b) or
Section 12(g), whichever is applicable, of the Securities Exchange Act, with
respect to the Common Stock of the Company, and the Company will file on time
such information, documents and reports as the Commission may require or
prescribe for companies whose stock has been registered pursuant to such Section
12(b) or Section 12(g), whichever is applicable.
(b) The Company will, upon the request of any holder of Shares or
Warrants, make whatever other filings with the Commission, or otherwise make
generally available to the public such financial and other information, as any
such holder may deem reasonably necessary or desirable in order to enable such
holder to be permitted to sell Shares or Warrants pursuant to the provisions of
Rule 144.
8.8. Delivery of Information for Rule 144A Transactions.
If a holder of Shares or Warrants proposes to transfer any such
Shares or Warrants pursuant to Rule 144A under the Securities Act (as in effect
from time to time), the Company agrees to provide (upon the request of such
holder or the prospective transferee) to such holder and (if requested) to the
prospective transferee any financial or other information concerning the Company
which is required to be delivered by such holder to any transferee of such
Shares or Warrants pursuant to such Rule 144A, subject to confidentiality
provisions, if applicable.
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8.9. Senior Securities.
The Company shall maintain the senior status of the Series D
Convertible Preferred Stock such that it shall rank senior in all respects,
including the payment on limitation and redemption, to all other equity
securities of the Company, including the Series A Convertible Preferred Stock
and the Series B Convertible Preferred Stock, except that the Series C
Convertible Preferred Stock shall rank senior to the Series D Convertible
Preferred Stock.
8.10. Shelf Registration.
On or before July 1, 1999, the Company shall prepare and file with
the SEC a registration statement for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf
Registration") registering the resale from time to time by the Investors of all
the Registrable Securities (the "Initial Shelf Registration"). The registration
statement shall be on Form S-3 or another appropriate form permitting
registration of such Registrable Securities for resale by the Investors. If the
Initial Shelf Registration or any Subsequent Shelf Registration ceases to be
effective for any reason at any time, the Company shall use its best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall within thirty (30) days of such cessation of
effectiveness amend the Shelf Registration in a manner reasonably expected to
obtain the withdrawal of the order suspending the effectiveness thereof, or to
promptly file an additional Shelf Registration covering all the Registrable
Securities (a "Subsequent Shelf Registration").
8.11. Further Assurances.
The Company will from time to time, upon the request of the Fleming
Holders, promptly and duly execute and deliver any and all such further
instruments and documents as the Fleming Holders may reasonably deem necessary
or desirable to obtain the full benefits of (i) the obligations of the Company
under this Agreement and (ii) the other rights and powers herein granted. Upon
the instructions from time to time of (I) the Fleming Funds or (II) any
Transferee, provided that such Transferee holds not less than an aggregate of
5000 Shares, the Company shall execute and cause to be filed any document or
filing presented to the Company in proper form for signing or filing, in each
case as the Fleming Funds or such Transferee may reasonably deem necessary or
desirable in light of the Company's obligations under this Agreement, and the
Company shall pay or cause to be paid any filing or other fees in connection
therewith.
SECTION 9. NEGATIVE COVENANTS
The Company covenants and agrees that without the prior written
consent of the holders of more than 50% of outstanding Shares:
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9.1. No Dilution or Impairment; No Changes in Capital Stock.
The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, 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 of the
Stock and Warrant Purchase Agreements, the Certificate of Designations, the
Warrant Certificates, the Registration Rights Agreement or the Stockholders'
Agreement. The Company will at all times in good faith assist in the carrying
out of all such terms, and in the taking of all such action, as may be necessary
or appropriate in order to protect the rights of the holders of Shares and
Warrants (as such rights are set forth in the Stock and Warrant Purchase
Agreements, the Warrant Certificates, the Certificate of Designations, the
Registration Rights Agreement and the Stockholders' Agreement) against dilution
or other impairment. Without limiting the generality of the foregoing, the
Company (a) will not issue any shares or class or series of equity or
equity-linked security, which is senior to, or pari passu with, the Series D
Convertible Preferred Stock as to dividend payments or amounts payable in the
event of liquidation or winding up of the Company; except that the Series C
Convertible Preferred Stock shall be senior to the Series D Convertible
Preferred Stock, (b) will not enter into any agreement or instrument which would
restrict or otherwise materially adversely affect the ability of the Company to
perform its obligations under the Stock and Warrant Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement, the Warrant
Certificates or the Certificate of Designations, (c) will not amend its
certificate of incorporation or by-laws in any manner which would impair or
reduce the rights of the Preferred Stock, including, without limitation, an
amendment which would alter or change the powers, privileges or preferences of
the holders of the Series D Convertible Preferred Stock (including, without
limitation, changing the Certificate of Designations after any Shares have been
called for redemption), (d) except as otherwise provided in the Certificate of
Designations or the Warrant Certificates or in accordance with Section 5(a) of
the respective Certificate of Designations of each of the Series A Convertible
Preferred Stock, the Series B Convertible Preferred Stock or the Series C
Convertible Preferred Stock, as in effect on the date hereof, will not redeem,
repurchase or otherwise acquire any shares of capital stock of the Company or
any other rights or options to subscribe for or purchase any capital stock of
the Company or any other securities convertible into or exchangeable for capital
stock of the Company, (e) will not permit the par value or the determined or
stated value of any shares of Common Stock receivable upon the conversion of the
Shares or exercise of the Warrants to exceed the amount payable therefor upon
such conversion, (f) will take all such action as may be necessary or
appropriate in order that the Company may at all times validly and legally issue
duly authorized, fully paid and nonassessable shares of the Common Stock free
from all taxes, Liens and charges with respect to the issue thereof, upon the
conversion of the Shares or exercise of the Warrants from time to time
outstanding, (g) will not take any action which results in any adjustment of the
current conversion price under the Certificate of Designations or the current
exercise price under the Warrant Certificates if the total number of shares of
the Common Stock (or other securities) issuable after the action upon the
conversion of all of the then outstanding Shares or the exercise of all of the
then outstanding Warrants would exceed the total number of shares of Common
Stock (or other securities) then
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authorized by the Company's certificate of incorporation and available for the
purpose of issuance upon such conversion or exercise, (h) will not have any
authorized Common Stock (and will not issue any Common Stock) other than its
existing authorized Common Stock, $.01 par value per share, and (i) will not
amend its certificate of incorporation to change any terms of its Common Stock.
9.2. Indebtedness.
So long as the Fleming Holders hold at least 50% of the aggregate
number of shares of the Series D Convertible Preferred Stock purchased pursuant
to the Stock and Warrant Purchase Agreements, the Company will not (i) incur
Indebtedness, excluding any Indebtedness set forth on Schedule 2 hereto, in
excess of $10 million in aggregate principal amount; or (ii) enter into any
agreement, amendment or modification with respect to any Indebtedness, which
agreement, amendment or modification under clause (ii) restricts or prohibits
(or was intended primarily to restrict or prohibit) the Company from making any
payments under, or otherwise performing under the Stock and Warrant Purchase
Agreements.
9.3. Consolidation, Merger and Sale.
So long as the Fleming Holders hold at least 50% of the aggregate
number of shares of the Series D Convertible Preferred Stock purchased pursuant
to the Stock and Warrant Purchase Agreements, the Company will not (or will not
agree to): (a) wind up, liquidate or dissolve its affairs, (b) sell, lease,
transfer or otherwise dispose of all or substantially all of its assets to any
other Person for a period ending one (1) year after the First Closing Date; or
(c) effect a merger or consolidation if the Company is not the surviving
corporation from such merger or consolidation for a period ending one (1) year
after the First Closing Date.
9.4. No Change in Business.
The Company will not change substantially the character of its
business as conducted on each Closing Date as represented in Section 4.4 hereof
and described in the Disclosure Material.
9.5. Restricted Payments; Investments.
The Company will not declare or make or permit to be declared or
made:
(a) any Restricted Payment; or
(b) any Investment.
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9.6. Sale of Substantial Portion of Assets.
For a period ending one (1) year after the First Closing Date, the
Company will not sell, transfer, lease or otherwise dispose of any assets to any
Person (other than to the Company and other than assets consisting of inventory
being disposed of in the ordinary course of business and other than assets which
are, contemporaneously with such disposition (or within ninety (90) days
thereafter), being replaced with other substantially similar (or improved)
assets which are used by the Company for substantially the same purpose as the
assets being replaced) to the extent the aggregate assets so sold, transferred,
leased or disposed of:
(x) during the twelve (12) month period ending on such sale,
transfer, lease or disposition (i) had an aggregate book value equal
to ten percent (10%) or more of the aggregate book value of the
consolidated total assets of the Company at the end of the most
recent fiscal quarter preceding such sale, transfer, lease or
disposition or (ii) accounted for ten percent (10%) or more of the
consolidated revenues of the Company as shown on the consolidated
income statement of the Company for the most recent fiscal quarter
or the then preceding fiscal year; or
(y) during the period from such Closing Date through such
sale, transfer, lease or disposition (i) had an aggregate book value
equal to ten percent (10%) or more of the aggregate book value of
the consolidated total assets of the Company at the end of the most
recent fiscal quarter preceding such sale, transfer, lease or
disposition or (ii) accounted for ten percent (10%) or more of the
consolidated revenues of the Company over the Company's fiscal
periods beginning after such Closing Date and ending at the end of
the most recent fiscal quarter as shown on the consolidated income
statements of the Company for such periods.
9.7. Affiliate Loans and Guaranties.
The Company may not incur or permit to exist any of the following:
(a) any obligation of the Company to repay money borrowed owing to
(i) any Affiliate of the Company or (ii) any other holder of shares of the
capital stock of the Company; or
(b) any obligation, to any Person, which obligation is assumed or
guaranteed by the Company and which is an obligation of (i) any Affiliate of the
Company or (ii) any other holder of shares of the capital stock of the Company
(excluding, in the case of this clause (b), any obligation of the Company which
is not owed to an Affiliate of the Company or to an Affiliate or to any other
holder of shares of the capital stock of the Company).
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This Section 9.7 shall not apply to (1) any obligations under the Stock and
Warrant Purchase Agreements or with respect to the Shares or Warrants, (2) any
loans, advances or Guarantees referred to in clause (1) of the proviso to the
definition of "Investment" contained in Section 3 hereof or (3) Indebtedness
identified on Schedule 2 hereto.
9.8. Transactions with Affiliates.
The Company will not directly or indirectly, enter into any
transaction or agreement (including, without limitation, the purchase, sale,
distribution, lease or exchange of any property or the rendering of any service)
with any Affiliate of the Company, unless such transaction or agreement (a) is
approved by a majority of the Outside Directors on the Board of Directors, and
(b) is on terms that are no less favorable to the Company, as the case may be,
than those which might be obtained at the time of such transaction from a Person
who is not such an Affiliate; provided, however, that this Section 9.8 shall not
limit, or be applicable to, (i) employment arrangements with (and general salary
and benefits compensation for) any individual who is a full-time employee of the
Company if such arrangements are approved by a majority of the Outside Directors
on the Board of Directors; and (ii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
and (iii) existing arrangements as disclosed on the Disclosure Schedule.
9.9. Liens.
The Company will not create or permit to exist, to create or suffer
to exist, any Lien upon or with respect to any of its assets or income, other
than Permitted Liens and existing liens set forth on Schedule 5 hereto.
9.10. Private Placement Status.
Neither the Company nor any agent nor other Person acting on the
Company's behalf will do or cause to be done (or will omit to do or to cause to
be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares, the Conversion Shares, the Warrants or the
Warrant Shares within the provisions of Section 5 of the Securities Act or the
filing, notification or reporting requirements of any state securities law
(other than in accordance with a registration and qualification of Conversion
Shares or Warrant Shares pursuant to the Registration Rights Agreement).
9.11. Maintenance of Public Market.
The Company will not proceed with a program of acquisition of its
Common Stock, initiate a corporate reorganization or recapitalization or
undertake a consolidation or merger or authorize, consent to or take any action
which would have the effect of:
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(a) removing the Company from registration with the Commission under
the Securities Exchange Act with respect to the Company's Common Stock;
(b) requiring the Company to make a filing under Section 13(e) of
the Securities Exchange Act;
(c) reducing substantially or eliminating the public market for
shares of Common Stock of the Company;
(d) causing a delisting of the Company's Common Stock as a Small Cap
Market Security on the NASDAQ Stock Market (unless such stock is delisted as a
result of being listed on a national securities exchange); or
(e) if any shares of the Company's Common Stock are at any time
listed on a national exchange, causing a delisting of such stock from such
exchange.
9.12. Actions Prior to Any Closing Date.
From the date hereof through any Closing Date, the Company will not,
(a) issue or agree to issue any capital stock or any securities exercisable for,
or convertible or exchangeable into, capital stock or (b) purchase, redeem or
otherwise acquire any of its capital stock; provided, however, that this Section
9.12 shall not limit, or be applicable to, (i) the transactions contemplated by
the Stock and Warrant Purchase Agreements, including any issuance of capital
stock in connection with the transactions contemplated by Sections 9.1 and 9.11
hereof, (ii) grants of options or issuances of Common Stock to officers,
directors or employees of the Company pursuant to the current terms of the
Company's 1995 Stock Incentive Plan and (iii) the conversion of the Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock or the exercise of existing warrants.
SECTION 10. CONDITIONS TO PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase Shares and Warrants hereunder
is subject to satisfaction of the following conditions at any Closing (any of
which may be waived by the Purchaser); provided that (A) Section 10.3 shall
apply only to the Second Closing and (B) Section 10.12 is a condition to the
obligations to consummate the transaction provided for herein of each of (I) the
Purchaser and (II) the Company:
10.1. Certificate of Designations; Stockholders' Agreement;
Registration Rights Agreement.
(a) The certificate of incorporation of the Company shall have been
duly amended by the filing of the Certificate of Designations in the form of
Exhibit A-1 hereto.
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(b) The Company, the Purchasers and certain other stockholders of
the Company named therein shall have entered into a Stockholders' Agreement
substantially in the form of Exhibit C hereto.
(c) The Company shall have entered into a Registration Rights
Agreement with the Purchasers substantially in the form of Exhibit D hereto.
10.2. Certificates for Shares and Warrants.
The Purchaser shall concurrently receive the certificates for Shares
and Warrants contemplated by Section 2(b) hereof.
10.3. Stockholders' Meeting.
The Company shall have held its Stockholders' Meeting, and at such
Stockholders' Meeting taken the appropriate corporate and other actions to
authorize sufficient additional shares of Common Stock to permit conversion in
full of the Series D Convertible Preferred Stock into Shares of Common Stock.
10.4. Senior Status.
The Company shall have taken all of the necessary actions, including
the amendment of the appropriate existing agreements, so that, except as
provided in this Section 10.4, the Series D Convertible Preferred Stock shall
rank senior in all respects, including the payment on limitation and redemption,
to all other equity securities of the Company, including the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock, except
that the Series C Convertible Preferred Stock shall rank senior to the Series D
Convertible Preferred Stock.
10.5. Accuracy of Representations and Warranties.
The representations and warranties of the Company contained in the
Stock and Warrant Purchase Agreement herein or in any certificate or document
delivered pursuant hereto shall be (i) correct and complete on and as of the
First Closing Date with the same effect as though made on and as of such Closing
Date (after giving effect to the transactions contemplated by this Agreement)
and (ii) correct and complete in all material respects on and as of the Second
Closing Date with the same effect as though made on and as of such Closing Date
(after giving effect to the transactions contemplated by this Agreement);
provided that Sections 4.1, 4.3, 4.4, 4.5, 4.7, 4.10, 4.11, 4.12, 4.16, 4.18,
4.19, 4.21, 4.22 and 4.23 shall be correct and complete in all respects and
shall not be qualified by materiality, unless specifically qualified therein.
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<PAGE>
10.6. Compliance with Agreements.
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in the Stock
and Warrant Purchase Agreements and any other document contemplated hereby or
thereby which are required to be performed or complied with by the Company on or
before such Closing Date.
10.7. Officers' Certificates.
The Purchaser shall have received a certificate dated such Closing
Date and signed by the President or Chief Executive Officer and by the Secretary
or the Treasurer of the Company, to the effect that the conditions of Sections
10.5, 10.6, 10.9 (second sentence only) and 10.10 have been satisfied.
10.8. Proceedings.
All corporate and other proceedings in connection with the
transactions contemplated by the Stock and Warrant Purchase Agreements, and all
documents incident thereto, shall be in form and substance satisfactory to the
Purchaser and its counsel, and the Purchaser shall have received all such
originals or certified or other copies of such documents as the Purchaser or its
counsel may reasonably request.
10.9. Legality; Governmental and Other Authorization.
The purchase of and payment for the Shares and the Warrants shall
not be prohibited by any law or governmental order, rule, ruling, regulation,
release, interpretation or opinion applicable to the Purchaser and shall not
subject the Purchaser to any penalty, tax, liability or other onerous condition.
Any necessary consents, approvals, licenses, permits, orders and authorizations
of, and any filings, registrations or qualifications with, any governmental or
administrative agency or other Person, with respect to the transactions
contemplated by the Stock and Warrant Purchase Agreements shall have been
obtained or made and shall be in full force and effect. The Company shall have
delivered to the Purchaser, upon its reasonable request setting forth what is
required, factual certificates or other evidence, in form and substance
satisfactory to the Purchaser and its counsel, to enable the Purchaser to
establish compliance with this condition.
10.10. No Material Adverse Change.
There shall have been no material adverse change in the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis
since September 30, 1998, except that its cash position as of January 31, 1999
is $1,105,000.
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10.11. Opinion of Counsel.
The Purchaser shall have received an opinion, dated such Closing
Date and addressed to the Purchasers, of Fulbright & Jaworski L.L.P., counsel
for the Company, which opinion shall be in form and substance satisfactory to
the Purchaser and its counsel and shall be to the effect set forth in Exhibit E
hereto.
10.12. Additional Purchases of Shares and Warrants.
The sale and purchase of Shares and Warrants by the Fleming Funds
pursuant to the Stock and Warrant Purchase Agreements between each of the
Fleming Funds and the Company shall be consummated concurrently, (a) for an
aggregate purchase price of $3,000,000 on the First Closing Date and (b) for an
aggregate purchase price of $2,000,000 on the Second Closing Date.
10.13. Acceptance of Agent for Service of Process.
CSC, The United States Corporation Company shall have accepted its
appointment as the Company's agent in New York to receive service of process
pursuant to Section 18(i) hereof.
10.14. Other Documents and Opinions.
The Purchaser shall have received such other documents and opinions,
in form and substance reasonably satisfactory to the Purchaser and its counsel,
relating to matters incident to the transactions contemplated hereby as the
Purchaser may reasonably request.
SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations, warranties, covenants and agreements of the
Company and the Purchaser contained in this Agreement, the Stockholders'
Agreement, the Registration Rights Agreement or in any document or certificate
delivered pursuant hereto or thereto or in connection herewith shall survive for
a period of two (2) years from the First Closing Date, and shall continue in
effect following, the execution and delivery of the Stock and Warrant Purchase
Agreements, the Stockholders' Agreement, the Registration Rights Agreement, the
closings hereunder and thereunder, any investigation at any time made by the
Purchaser or on its behalf or by any other Person, the issuance, sale and
delivery of the Shares or the Warrants, any disposition thereof and any payment,
conversion or cancellation of the Shares; provided that Section 9 shall
terminate upon conversion of all of the Shares (or as earlier provided therein).
All statements contained in any certificate or other document delivered by or on
behalf of the Company pursuant hereto shall constitute representations and
warranties by the Company hereunder.
45
<PAGE>
(b) The Company agrees to indemnify and hold the Purchaser harmless
from and against and will pay to the Purchaser the full amount of any loss,
damage, liability or expense (including amounts paid in settlement and
reasonable attorneys' fees and expenses) to the Purchaser resulting either
directly or indirectly from any breach of the representations, warranties,
covenants or agreements of the Company contained in any Stock and Warrant
Purchase Agreement, or in the Stockholders' Agreement, the Registration Rights
Agreement or any other document or certificate delivered pursuant hereto or
thereto or in connection herewith or therewith.
SECTION 12. SPECIFIC PERFORMANCE
The parties agree that irreparable damage will result in the event
that this Agreement is not specifically enforced, and the parties agree that any
damages available at law for a breach of this Agreement would not be an adequate
remedy. Therefore, the provisions hereof and the obligations of the parties
hereunder shall be enforceable in a court of equity, or other tribunal with
jurisdiction, by a decree of specific performance, and appropriate injunctive
relief may be applied for and granted in connection therewith. Such remedies and
all other remedies provided for in this Agreement shall, however, be cumulative
and not exclusive and shall be in addition to any other remedies which a party
may have under this Agreement or otherwise.
SECTION 13. EXPENSES
(a) Whether or not the transactions herein contemplated are
consummated, the Company shall pay (i) the costs, fees and expenses of the
Company and its counsel in connection with the Stock and Warrant Purchase
Agreements, the Certificate of Designations, the Warrant Certificates, the
Stockholders' Agreement and the Registration Rights Agreement, other related
documentation and the issuance of the Shares, the Conversion Shares, the
Warrants and the Warrant Shares and the furnishing of all opinions by counsel
for the Company, (ii) the costs, fees and expenses of Morgan, Lewis & Bockius
LLP in connection with the Stock and Warrant Purchase Agreements, the
Certificate of Designations, the Warrant Certificates, the Stockholders'
Agreement and the Registration Rights Agreement, other related documentation and
the tran sactions contemplated hereby and thereby (whether or not a Closing
occurs hereunder) and if the First Closing occurs the Company will make such
payment on the First Closing Date (with respect to costs, fees and expenses
incurred prior to such date) and on the Second Closing Date (with respect to the
remainder of such costs, fees and expenses if such Second Closing occurs));
provided, however, that (x) such fees and expenses shall not exceed $80,000
without the approval of the Company and (y) in the event that the First Closing
does not occur (other than as a result of a breach by the Company of its
obligations to the Fleming Holders), the Company shall pay 50% of such fees and
expenses upon the termination of negotiations between the Company and the
Fleming Holders, (iii) the fees and expenses of counsel to the Purchasers in
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<PAGE>
connection with any amendments to or modifications or waivers of any provisions
of the Stock and Warrant Purchase Agreements, the Certificate of Designations,
the Warrant Certificates, the Stockholders' Agreement or the Registration Rights
Agreement, other related documentation or in connection with any other
agreements between the Purchasers and the Company and (iv) the fees and expenses
(including attorneys' fees and expenses) of any holder of Shares, Conversion
Shares, Warrants or Warrant Shares in enforcing its rights against the Company
if the Company defaults in its obligations hereunder, under the Certificate of
Designations, the Warrant Certificates, the Stockholders' Agreement or the
Registration Rights Agreement.
(b) In addition to all other sums due hereunder or provided for in
this Agreement, the Company shall pay to the Purchaser or its agents,
respectively, an amount sufficient to indemnify such persons (net of any Taxes
on any indemnity payments) against all reasonable costs and expenses (including
reasonable attorneys' fees and expenses and reasonable costs of investigation)
and damages and liabilities incurred by the Purchaser or its agents pursuant to
any investigation or proceeding against any or all of the Company, the
Purchasers, or their agents, arising out of or in connection with the Stock and
Warrant Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, or purchase of the Shares or the Warrants (or any transaction
contemplated hereby or thereby or any other document or instrument executed
herewith or therewith or pursuant hereto or thereto), whether or not the
transactions contemplated by this Agreement are consummated, which investigation
or proceeding requires the participation of the Purchaser or its agents or is
commenced or filed against the Purchaser or its agents because of the Stock and
Warrant Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, the purchase of the Shares or the Warrants or any of the
transactions contemplated hereby or thereby (or any other document or instrument
executed herewith or therewith or pursuant hereto or thereto), other than any
investigation or proceeding in which it is finally determined that there was (i)
gross negligence or willful misconduct on the part of the Purchaser or its
agents, (ii) a material breach by Purchaser of any of its representations or
warranties contained herein, (iii) a material breach by Purchaser of any
provision of the Confidentiality Agreement or any other confidentiality
agreement between the Company and the Purchaser, in any case, which was not
taken by them in reliance upon any of the Company's representations, warranties,
covenants or agreements in the Stock and Warrant Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or in any other
documents or instruments contemplated hereby or thereby or executed herewith or
therewith or pursuant hereto or thereto. The Company shall assume the defense,
and shall have its counsel represent the Purchaser and such agents, in
connection with investigating, defending or preparing to defend any such action,
suit, claim or proceeding (including any inquiry or investigation); provided,
however, that the Purchaser, or any such agent, shall have the right (without
releasing the Company from any of its obligations hereunder) to employ its own
counsel and either to direct its own defense or to participate in the Company's
defense, but the fees and expenses of such counsel shall be at the expense of
such person unless (i) the employment of such counsel shall have been authorized
in writing by the Company in connection with such defense, (ii) the Company
shall not have provided its counsel to take charge of such defense or (iii)
there may be defenses available to the Purchaser, or such agent of
47
<PAGE>
the Purchaser which are different from or additional to those available to the
Company, then in any of such events referred to in clauses (i), (ii) or (iii)
such counsel fees and expenses (but only for one counsel for the Purchaser and
its agents) shall be borne by the Company. Any settlement of any such action,
suit, claim or proceeding shall require the consent of both the Company and such
indemnified person (neither of which shall unreasonably withhold its consent).
(c) The Company agrees to pay, or to cause to be paid, all
documentary, stamp and other similar Taxes, other than transfer taxes payable
upon the transfer by the Purchaser of Shares to a Transferee, levied under the
laws of the United States of America, any state or local Taxing Authority
thereof or therein or any other applicable jurisdiction in connection with the
issuance and sale of the Shares or Warrants and the execution and delivery of
the Stock and Warrant Purchase Agreements, the Stockholders' Agreement, the
Registration Rights Agreement and any other documents or instruments
contemplated hereby or thereby and any modification of the Certificate of
Designations, the Warrant Certificates, the Stockholders' Agreement, the
Registration Rights Agreement or the Stock and Warrant Purchase Agreements or
any such other documents or instruments and will hold the Purchaser harmless
without limitation as to time against any and all liabilities with respect to
all such Taxes.
(d) The obligations of the Company under this Section 13 shall
survive any Closing hereunder and any termination of the Stock and Warrant
Purchase Agreements.
SECTION 14. DIRECT PAYMENTS
As long as the Purchaser or any institutional holder which is a
direct or indirect transferee (as a result of one or more transfers) from the
Purchaser shall be the holder of any Shares or Warrants, the Company will make
all redemption payments, liquidation payments and other distributions by wire
transfer to the Purchaser's or such other holder's (or its nominee's) account at
any bank or trust company, notwithstanding any contrary provision herein or in
the Company's certificate of incorporation with respect to the place of payment.
The Purchaser has provided an address on Schedule 1 hereto for payments by wire
transfer, and such address may be changed for the Purchaser or any subsequent
holder by notice to the Company. All such payments shall be made in U.S. dollars
and in federal or other immediately available funds.
SECTION 15. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended,
waived, modified or terminated only with the written consent of the holders of
more than 50% of outstanding Shares; provided, however, that no such amendment,
waiver, modification or termination shall change this Section 15(a) without the
written consent of the holders of all the Shares, Conversion Shares, the
Warrants and the Warrant Shares then outstanding.
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<PAGE>
(b) Promptly after obtaining the written consent of the holders as
herein provided, the Company shall transmit a copy of any amendment, waiver,
modification or termination which has been adopted to all holders of Shares,
Conversions Shares, Warrants and Warrant Shares then outstanding, but failure to
transmit copies shall not in any way affect the validity of any such amendment,
waiver, modification or termination.
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT
(a) Subject to Section 6 hereof, at any time at the request of any
holder of Shares or Warrants to the Company at its address provided under
Section 17 hereof, the Company at its expense (except for any transfer tax
arising out of the exchange) will issue and deliver to or upon the order of the
holder in exchange therefor a new certificate or certificates in such amount or
amounts as such holder may request in the aggregate representing the number of
Shares or Warrants represented by such surrendered certificates, and registered
in the name of such holder or as such holder may direct.
(b) Any Share certificate which is converted into Conversion Shares
in whole or in part shall be cancelled by the Company, and no new Share
certificates shall be issued in lieu of any Shares which have been converted
into Conversion Shares. The Company shall issue a new certificate with respect
to any Shares which were not converted into Conversion Shares and were
represented by a certificate which was converted in part. Any Warrant underlying
a Warrant Certificate which is exercised in whole or in part shall be cancelled
by the Company, and no new Warrant Certificate shall be issued in lieu of any
Warrants which have been exercised. The Company shall issue a new certificate
with respect to any Warrants which were not exercised and were represented by a
certificate which was exercised in part.
(c) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of any Share certificate or any Warrant
Certificate and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory to the Company (if
requested by the Company and unsecured in the case of the Purchaser or another
similar institutional holder), or in the case of any such mutilation, upon
surrender of such Share certificate or Warrant certificate, as the case may be,
(which surrendered Share certificate or Warrant Certificate, as the case may be,
shall be cancelled by the Company), the Company will issue a new Share
certificate, or Warrant Certificate, as the case may be, of like tenor in lieu
of such lost, stolen, destroyed or mutilated Share certificate or Warrant
Certificate, as the case may be, as if the lost, stolen, destroyed or mutilated
Share certificate or Warrant Certificate, as the case may be, were then
surrendered for exchange.
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<PAGE>
SECTION 17. NOTICES
All notices, requests, demands, consents and other communications
hereunder shall be in writing and shall be delivered by hand or shall be sent by
telex or telecopy (confirmed by registered, certified or overnight mail or
courier, postage and delivery charges prepaid), (i) if to the Company, to Global
Pharmaceutical Corporation, Castor & Kensington Avenues, Philadelphia, PA
19124-5694, Attention: President, with a copy to Fulbright & Jaworski L.L.P.,
666 Fifth Avenue, New York, NY 10103-3198, Attention: Sheldon G. Nussbaum, Esq.
or (ii) if to the Purchaser, at the address indicated on Schedule 1 hereto, with
a copy to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178-0060,
Attention: David W. Pollak, Esq., or at such other address as a party may from
time to time designate as its address in writing to the other party to this
Agreement. Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such notice is
delivered or, if sent by telex or telecopier, when received.
SECTION 18. MISCELLANEOUS
(a) The Stock and Warrant Purchase Agreements, the Stockholders'
Agreement, the Registration Rights Agreement and, upon any closing hereunder,
the Certificate of Designations and the Warrant Certificates, together with any
further agreements entered into by the Purchaser and the Company at any closing
hereunder, contain the entire agreement between the Purchaser and the Company,
and supersede any prior oral or written agreements, commitments, terms or
understandings, regarding the subject matter hereof.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(c) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, whether so
expressed or not; provided, that (a) the Company may not assign any of its
rights, duties or obligations under this Agreement, except with the Purchaser's
written consent, and (b) the Purchaser may assign any of its rights, duties or
obligations under this Agreement to a purchaser of its Shares, provided that
such purchaser is reasonably acceptable to the Company.
(d) In addition to any assignment by operation of law, the Purchaser
may assign, in whole or in part, any or all of its rights (and/or obligations)
under this Agreement to any permitted transferee of any or all of its Shares,
Conversion Shares, Warrants or Warrant
50
<PAGE>
Shares, and (unless such assignment expressly provides otherwise) any such
assignment shall not diminish the rights the Purchaser would otherwise have
under this Agreement or with respect to any remaining Shares, Conversion Shares,
Warrants or Warrant Shares held by the Purchaser.
(e) No course of dealing and no delay on the part of any party
hereto in exercising any right, power, or remedy conferred by this Agreement
shall operate as a waiver thereof or otherwise prejudice such party's rights,
powers and remedies. No single or partial exercise of any right, power or remedy
conferred by this Agreement shall preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
(f) The headings and captions in this Agreement are for convenience
of reference only and shall not define, limit or otherwise affect any of the
terms or provisions hereof.
(g) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York (other than any conflict of laws rule
which might result in the application of the laws of any other jurisdiction).
(h) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument,
and all signatures need not appear on any one counterpart.
(i) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT, SUBJECT TO THE PURCHASER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT, THE CERTIFICATE OF DESIGNATIONS, THE
WARRANT CERTIFICATES, THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS
AGREEMENT, THE SHARES OR THE CONVERSION SHARES MAY BE LITIGATED IN SUCH COURTS.
THE COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE
CERTIFICATE OF DESIGNATIONS, THE WARRANT CERTIFICATES, THE STOCKHOLDERS'
AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE CONVERSION
SHARES. THE COMPANY DESIGNATES AND APPOINTS CSC, THE UNITED STATES CORPORATION
COMPANY, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE COMPANY AND
WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT, TO RECEIVE ON ITS
BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED BY THE
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<PAGE>
COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH
PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE COMPANY AT THE
ADDRESS OF THE COMPANY PROVIDED HEREUNDER EXCEPT THAT UNLESS OTHERWISE PROVIDED
BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY
OF SERVICE OF PROCESS. AS AN ALTERNATIVE TO SERVICE OF PROCESS ON SUCH AGENT
(WHETHER OR NOT ANY SUCH AGENT HAS BEEN APPOINTED), THE COMPANY HEREBY AGREES
THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE AND SERVICE OF
PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE PURCHASER TO BRING
PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS AGAINST THE COMPANY IN THE COURTS OF
ANY OTHER JURISDICTION.
(j) THE COMPANY AND THE PURCHASER HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT, THE CERTIFICATE OF DESIGNATIONS, THE WARRANT CERTIFICATES,
THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR
THE CONVERSION SHARES, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT
MATTER OF THIS TRANSACTION. THE COMPANY AND THE PURCHASER ALSO WAIVE ANY BOND OR
SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED
OF THE PURCHASER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF
ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THE COMPANY AND THE PURCHASER FURTHER WARRANT AND REPRESENT
THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS
OF) THIS AGREEMENT, THE CERTIFICATE OF DESIGNATIONS, THE WARRANT CERTIFICATES,
THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR
THE CONVERSION SHARES. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
GLOBAL PHARMACEUTICAL CORPORATION
By /s/ Barry R. Edwards
-----------------------------------
Name: Barry R. Edwards
Title: President
Accepted and Agreed to as of the
date first above written by the
undersigned Purchaser:
FLEMING US DISCOVERY FUND III, L.P.
By: FLEMING US DISCOVERY PARTNERS, L.P.,
its general partner
By: FLEMING US DISCOVERY FUND, LLC, its
general partner
By: /s/ Robert L. Burr
--------------------------------
Robert L. Burr, member
<PAGE>
Schedule 1
to the Stock and Warrant
Purchase Agreement
<TABLE>
<CAPTION>
Number at Number at Aggregate Aggregate
First Second Purchase Purchase
Closing Closing Price at Price at
Name of ------- ------- First Second
Purchaser Shares Warrants Shares Warrants Closing Closing
--------- ------ -------- ------ -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Fleming US Discovery
Fund III, L.P. 25,856 323,200 17,237 215,462 $2,585,600 $1,723,700
Fleming US Discovery
Offshore Fund III, L.P. 4,144 51,800 2,763 34,538 $ 414,400 $ 276,300
(a) address for communications:
Fleming Capital Management
320 Park Avenue
New York, NY 10022
Attention: Robert L. Burr
David J. Edwards
(b) address for payments by
wire transfer:
Fleming US Discovery Fund III, L.P. Fleming US Discovery Offshore Fund III, L.P.
Chase Manhattan Bank Citibank, N.A.
ABA # 021000021 ABA # 021000089 / Chips UID# 0008 / Swift Code - CITIUS33
A/C # 10921671 A/C: The Bank of Bermuda Limited, Hamilton, Bermuda
A/C: Robert Fleming Inc. Chips UID# 005584
A/C # 400-470551 Swift Code: BBDA BM HM
A/C: Fleming US Discovery Fund III, L.P. A/C: Fleming US Discovery Offshore Fund III, L.P.
A/C # 0246769
</TABLE>
Exhibit 5
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
<PAGE>
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 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
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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 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
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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 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
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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.
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
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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.
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
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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 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.
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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.
(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,
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(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 adjustment shall be made to the Conversion Price hereunder. Any such
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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 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
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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.
(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.
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(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.
(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
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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
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
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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.
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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
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(i) any moneys payable upon redemption without interest 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
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preferred stock, 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
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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 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
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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 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).
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"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, 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
controlled 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.
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"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.
"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
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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 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.
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"Liquidation Value" shall have the meaning set forth in
Section 3(a).
"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
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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 (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
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<PAGE>
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.
"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
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<PAGE>
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.
(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-
Exhibit 6
STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT is dated as of March 2, 1999, among
Global Pharmaceutical Corporation, a Delaware corporation (the "Company"), Barry
R. Edwards ("Edwards"), Fleming US Discovery Fund III, L.P. and Fleming US
Discovery Offshore Fund III, L.P. (collectively, the "Fleming Funds"). The
Fleming Funds, any Fleming Holder and any Transferee are collectively referred
to herein as the "Investor Group" and, individually, an "Investor."
W I T N E S S E T H:
WHEREAS, pursuant to the terms of the Stock and Warrant Purchase
Agreements, dated as of March 2, 1999, between the Company and each of the
Fleming Funds (the "Stock and Warrant Purchase Agreements"), the Fleming Funds
have purchased 50,000 shares of the Company's Series D Convertible Preferred
Stock, par value $.01 per share (the "Series D Preferred Stock");
WHEREAS, Edwards beneficially owns less than one percent (1%) of the
outstanding shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock") (such shares, along with any shares of Common Stock or other
equity securities of the Company that Edwards may subsequently acquire, the
"Edwards Shares");
WHEREAS, it is a condition precedent to the Company's and the
Fleming Funds' respective obligations to consummate the transactions
contemplated by the Stock and Warrant Purchase Agreements that the parties
hereto shall have entered into this Agreement; and
WHEREAS, each of Edwards, the Company and the Fleming Funds desires
to enter into this Agreement to regulate certain aspects of their relationship;
<PAGE>
NOW, THEREFORE, in consideration of the arguments and mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. Rights of Inclusion (Tag-Along Rights).
(a) In the event Edwards proposes to Transfer any Edwards Shares
(the "Transferor Shares") to any Person (the "Buyer"), as a condition to such
Transfer, Edwards shall cause the Buyer to offer (the "Inclusion Offer") to
purchase from each Investor, at each such Investor's option, up to that number
of Investor Shares determined in accordance with Section 1(b) on the same terms
and conditions as are applicable to the Transferor Shares (including any
consideration to be received by Edwards in the form of bonuses, consulting fees,
noncompetition payments, pursuant to employment arrangements or similar
arrangements), except that each Investor shall not be required to provide any
representation, warranty or other undertaking other than with respect to its
ownership of, and authority to Transfer, the Investor Shares owned by it free of
any liens or encumbrances. Edwards shall provide prompt written notice to each
Investor (the "Inclusion Notice") setting forth all the terms and conditions of
the Inclusion Offer, and each Investor may accept the Inclusion Offer in whole
or in part by providing a written notice of acceptance with respect to Investor
Shares owned by it to Edwards within twenty (20) days of delivery of the
Inclusion Notice to it (the "Acceptance Notice").
(b) Each Investor shall have the right to sell, pursuant to the
Inclusion Offer, Investor Shares representing the same percentage of all
Investor Shares owned by it as the Transferor Shares are of all Edwards Shares
(such percentage shall be calculated on the basis that all shares of Series D
Preferred Stock owned by each Investor have been converted into shares of Common
Stock at the current conversion price per share under Section 5 of the
Certificate of Designations); provided, however, that if no Investor elects to
exercise such right, Edwards shall nonetheless be entitled to Transfer all or
any portion of the Transferor Shares described in the Inclusion Notice. In the
event the number of Investor Shares for which the Investor Group elects to
exercise such right, along with the Transferor Shares and any other shares of
the Company to be sold by other stockholders pursuant to any similar rights
granted to such other stockholders, exceed the number of shares which the Buyer
is willing to purchase, the number of shares to be Transferred to the Buyer by
each transferor shall be reduced so that each transferor is entitled to Transfer
the same percentage of its shares included in its Acceptance Notice as each
other transferor. If an Investor elects to exercise such right, such Investor
may, in its sole discretion, determine the composition of the Investor Shares
(i.e., the number of the shares of Series D Preferred Stock and Common Stock to
be included in the Investor Shares) to be Transferred by it to the Buyer
pursuant to the Inclusion Offer. In the event that any Investor chooses to
include any shares of Series D Preferred Stock in the Investor Shares to be
Transferred by it to the Buyer pursuant to the Inclusion Offer, any such
Investor shall, prior to or simultaneously with such Transfer, convert such
shares of Series D Preferred Stock into shares of Common Stock so that each
Investor Transfers only Common Stock to the Buyer.
2
<PAGE>
(c) Edwards shall have ninety (90) days, commencing on the date of
the Inclusion Notice, in which to Transfer, on behalf of himself and the
Investor Group up to the number of shares covered by the Inclusion Offer
(including the Transferor Shares) to the Buyer. The terms of such Transfer,
including, without limitation, price and form of consideration, shall be as set
forth in the Inclusion Notice. If at the end of such ninety (90) day period
Edwards has not completed the Transfer of the Transferor Shares and the Investor
Shares (if any) proposed to be Transferred, Edwards may not proceed with such
Transfer or any other Transfer without first giving a new Inclusion Notice
pursuant to the provisions of this Section 1.
(d) If Edwards is able to complete the Transfer of the Transferor
Shares and the Investor Shares (if any) proposed to be Transferred within such
ninety (90) day period, at the closing thereof, each Investor shall deliver to
the Buyer a certificate or certificates representing the Investor Shares owned
by it to be Transferred pursuant to the Inclusion Offer, free and clear of all
liens and encumbrances, and the Buyer shall pay to each such Investor the
purchase price for the Investor Shares so Transferred pursuant to this Section 1
and shall furnish such other evidence of the completion of such Transfer and the
terms thereof as may be reasonably requested by the Investor Group.
(e) The provisions of this Section 1 shall not apply to any Transfer
or proposed Transfer by Edwards of Edwards Shares which represents twelve and
one-half percent (12.5%) or less of the Edwards Shares held by Edwards on the
date of such Transfer if such Transfer or proposed Transfer by Edwards of
Edwards Shares, together with all other Transfers by Edwards of Edwards Shares
on or prior to the date of such Transfer, represent thirty percent (30%) or less
of the Edwards Shares held by Edwards on the date hereof, with Edwards Shares
held by Edwards on the date of such Transfer to be appropriately adjusted to
reflect any stock split, stock dividend, recapitalization or similar event;
provided, however, that each Transfer of Edwards Shares that takes place within
one year of any other Transfer to the same Person or any Affiliate of such
Person shall be aggregated for purposes of such twelve and one-half percent
(12.5%) threshold. In the event that Edwards desires to exercise an option to
purchase shares of Common Stock of the Company, then Edwards may Transfer
Edwards Shares to the extent necessary to obtain the funds to exercise such
option and such Transfer shall not be included in the calculation of the
percentages in this Section 1(e); provided that such option must expire within
ninety (90) days of such Transfer.
(f) The provisions of this Section 1 shall only apply to Edwards so
long as Edwards is the Chief Executive Officer or an executive officer of the
Company.
2. Board Observer Rights; Committees.
(a) The Company agrees with the Fleming Funds that so long as any
shares of Series D Preferred Stock are outstanding, the Fleming Holders (or if
no shares of Series D Preferred Stock are held by a Fleming Holder, any
Transferee consented to by the Company
3
<PAGE>
(which consent shall not be unreasonably withheld) (the "Permitted
Transferee")), shall have the right to have up to three (3) representatives (the
"Fleming Observer" or "Fleming Observers") (subject to the provisions of Section
2(b) herein) attend and participate in meetings of the Company's Board of
Directors, or any committee thereof, and the Company shall permit any Fleming
Observer to attend and participate in all such meetings as an observer. A
Fleming Observer shall not have the right to vote on any matter presented to the
Board or any committee thereof. The Company shall give all Fleming Observers
written notice of each meeting of the Board of Directors or any committee
thereof and all written materials and other information given to the Company's
directors and committee members in the same manner and at the same time such
notices, materials and other information are given to the directors and
committee members. The Company shall reimburse any Fleming Observer for travel
and other expenses in connection with such meetings to the same extent that the
Company reimburses its directors and committee members. If the Board of
Directors or any committee thereof proposes to take any action by written
consent in lieu of a meeting, the Company shall give written notice thereof to
all Fleming Observers prior to the effective date of such consent describing the
nature and substance of such action.
(b) During such time that the holders of the Series D Preferred
Stock have elected at least one director to the Company's Board of Directors (or
have waived their right to so elect such director) pursuant to Section 4 of the
Company's Certificate of Designations with respect to the Series D Preferred
Stock (the "Investor Director"), the number of Fleming Observers that the
Fleming Holders or the Permitted Transferee, as the case may be, shall be able
to exercise their rights as provided in Section 2(a) shall be modified such that
(x) in the event there is one (1) Investor Director, the Fleming Holders or the
Permitted Transferee, as the case may be, shall have the right to have up to (2)
Fleming Observers, (y) in the event there are two (2) Investor Directors, the
Fleming Holders or the Permitted Transferee, as the case may be, shall have the
right to have (1) Fleming Observer and (z) in the event there are three (3)
Investor Directors, the Fleming Holders or the Permitted Transferee, as the case
may be, shall not have the right to have any Fleming Observer.
(c) So long as any shares of Series D Preferred Stock are
outstanding, the Company and Edwards acknowledge that the parties to this
Agreement desire that one Investor Director be appointed to the Executive,
Compensation, Stock Option and Audit Committees of the Company's Board of
Directors and at each time the Company's Board of Directors appoints committee
members, agree to use their best efforts and take any other action necessary or
appropriate to ensure such appointment; provided, however, that the agreements
of this paragraph (c) shall terminate with respect to an Investor Director upon
the Fleming Holders' or the Permitted Transferee's delivery of a written notice
to the Company and Edwards to the effect that such Investor Director need not be
appointed to the aforesaid committees.
4
<PAGE>
3. Definitions.
As used herein, the following terms shall have the respective
meanings set forth below:
"Acceptance Notice" shall have the meaning set forth in Section 1(a)
hereof.
"Affiliate" shall have the meaning given it in Section 3 of the
Stock and Warrant Purchase Agreements.
"Board" or "Board of Directors" shall have the meaning given it in
Section 3 of the Stock and Warrant Purchase Agreements.
"Buyer" shall have the meaning set forth in Section 1(a) hereof.
"Capital Stock" means the Common Stock (including, without
limitation, any Common Stock issuable upon conversion of the Series D Preferred
Stock or upon exercise of the Warrants), Series D Preferred Stock and any other
class of equity security which the Company may issue and any securities or other
rights convertible, exchangeable or exercisable for or into any Capital Stock.
"Certificate of Designations" shall have the meaning given it in
Section 1(a) of the Stock and Warrant Purchase Agreements.
"Common Stock" shall have the meaning set forth in the second
WHEREAS clause hereof.
"Company" shall have the meaning set forth in the first paragraph
hereof.
"Edwards" shall have the meaning set forth in the first paragraph
hereof.
"Edwards Shares" shall have the meaning set forth in the second
WHEREAS clause hereof.
"Fleming Funds" shall have the meaning set forth in the first
paragraph hereof.
"Fleming Holders" shall have the meaning given it in Section 3 of
the Stock and Warrant Purchase Agreements.
"Fleming Observer" shall have the meaning set forth in Section 2(a)
hereof.
"Fully Diluted Basis" means, with respect to the calculation of the
number of shares of Capital Stock, as of each date of determination thereof, (i)
all shares of Capital Stock
5
<PAGE>
outstanding at the time of determination and (ii) all shares of Capital Stock
issuable upon the exchange, exercise or conversion of any security or other
right (other than any Capital Stock) then outstanding which is exchangeable,
exercisable or convertible into Capital Stock.
"Inclusion Notice" shall have the meaning set forth in Section 1(a)
hereof.
"Inclusion Offer" shall have the meaning set forth in Section 1(a)
hereof.
"Investor" shall have the meaning set forth in the first paragraph
hereof.
"Investor Director" shall have the meaning set forth in Section 2(b)
hereof.
"Investor Group" shall have the meaning set forth in the first
paragraph hereof.
"Investor Shares" means all Series D Preferred Stock and Common
Stock owned by the Investor Group.
"Permitted Transferee" shall have the meaning set forth in Section
2(a) hereof.
"Person" means an individual, corporation, partnership, firm,
association, joint venture, trust, unincorporated organization, governmental
body, agency, political subdivision or other entity.
"Pro Rata" means with respect to a stockholder, in proportion to the
number of shares of Capital Stock on a Fully Diluted Basis owned by such
stockholder.
"Series D Preferred Stock" shall have the meaning set forth in the
first WHEREAS clause hereof.
"Stock and Warrant Purchase Agreements" shall have the meaning set
forth in the first WHEREAS clause hereof.
"Transfer" means, with respect to any security, any direct or
indirect sale, transfer, assignment, hypothecation, pledge or any other
disposition of such security or any interest therein.
"Transferee" shall have the meaning given it in Section 3 of the
Stock and Warrant Purchase Agreements.
"Transferor Shares" shall have the meaning set forth in Section 1(a)
hereof.
"Warrants" shall have the meaning set forth in Section 1 of the
Stock and Warrant Purchase Agreements.
6
<PAGE>
4. Miscellaneous.
(a) In the event of a breach by any party to this Agreement of its
obligations under this Agreement, any party injured by such breach, in addition
to being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The parties agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties that the remedy at law,
including monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense in any action for specific
performance that a remedy at law would be adequate is waived.
(b) Except as otherwise provided herein, no modification, amendment
or waiver of any provision of this Agreement will be effective against any party
hereto unless such modification, amendment or waiver is approved in writing by
all parties hereto. The failure of any party to enforce any of the provisions of
this Agreement will in no way be construed as a waiver of such provisions and
will not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
(c) All covenants and agreements in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
(d) All notices, requests and other communications hereunder must be
in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or sent by nationally recognized
overnight courier service to the parties at the following addresses or facsimile
numbers:
(i) If to an Investor, to:
the address indicated on Schedule 1 to the Stock and Warrant
Purchase Agreements.
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Facsimile No.: (212) 309-6273
Attn: David W. Pollak, Esq.
7
<PAGE>
(ii) If to the Company, to:
Global Pharmaceutical Corporation
Castor & Kensington Avenues
Philadelphia, PA 19124-5694
Facsimile No.: (215) 289-5932
Attn: President
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue, 31st Floor
New York, NY 10103-3198
Facsimile No.: (212) 752-5958
Attn: Sheldon G. Nussbaum, Esq.
(iii) If to Edwards, to:
Barry R. Edwards
Global Pharmaceutical Corporation
Castor & Kensington Avenues
Philadelphia, PA 19124-5694
Facsimile No.: (215) 289-5932
All such notices, requests and other communications will (x) if
delivered personally to the address as provided in this Section 4(d), be deemed
given upon delivery, (y) if delivered by facsimile transmission to the facsimile
number as provided in this Section 4(d), be deemed given upon receipt and (z) if
delivered by nationally recognized overnight courier service in the manner
described above to the address as provided in this Section 4(d), be deemed given
on the business day following the day it was sent (in each case regardless of
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this Section
4(d)). Any party from time to time may change its address, facsimile number or
other information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
(e) The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
(f) If any provision of this Agreement is held to be illegal,
invalid or unenforceable, and if the rights or obligations of any party hereto
under this Agreement will not be materially and adversely affected thereby, (i)
such provision will be fully severable, (ii) this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (iii) the remaining provisions of this Agreement will
remain
8
<PAGE>
in full force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provi sion as similar
in terms to such illegal, invalid or unenforceable provision as may be possible.
(g) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to a contract executed and
performed in such State without giving effect to the conflicts of laws
principles thereof.
(h) This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
[remainder of page intentionally left blank]
9
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Stockholders' Agreement as of the date first written above.
GLOBAL PHARMACEUTICAL CORPORATION
By: /s/ Barry R. Edwards
--------------------------------------------
Name: Barry R. Edwards
Title: President and Chief Executive Officer
With respect to the obligations contained in
Sections 1, 2(c), 3 and 4 hereof only:
/s/ Barry R. Edwards
------------------------------------------------
Barry R. Edwards
FLEMING US DISCOVERY FUND III, L.P.
By: FLEMING US DISCOVERY
PARTNERS, L.P.,
its general partner
By: FLEMING US DISCOVERY, LLC,
its general partner
By: /s/ Robert L. Burr
------------------------------------
Robert L. Burr, member
FLEMING US DISCOVERY OFFSHORE FUND III, L.P.
By: FLEMING US DISCOVERY
PARTNERS, L.P.,
its general partner
By: FLEMING US DISCOVERY, LLC,
its general partner
By: Robert L. Burr
------------------------------------
Robert L. Burr, member
[Signature page to Stockholders' Agreement]
Exhibit 7
================================================================================
REGISTRATION RIGHTS AGREEMENT
dated
March 2, 1999
among
Global Pharmaceutical Corporation,
Fleming US Discovery Fund III, L.P.,
and
Fleming US Discovery Offshore Fund III, L.P.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I......................................................................1
DEMAND REGISTRATIONS...................................................1
1.1 Requests for Registration..............................1
1.2 Limitations on Demand Registrations....................2
1.3 Effective Registration Statement.......................3
1.4 Priority on Demand Registrations.......................3
1.5 Selection of Underwriters..............................3
1.6 Other Registration Rights..............................3
ARTICLE II.....................................................................4
OTHER REGISTRATIONS....................................................4
2.1 Right to Piggyback.....................................4
2.2 Priority on Primary Registrations......................4
2.3 Priority on Secondary Registrations....................4
2.4 Other Registrations....................................5
ARTICLE III....................................................................6
REGISTRATION PROCEDURES................................................6
ARTICLE IV....................................................................10
REGISTRATION EXPENSES.................................................10
4.1 Company's Fees and Expenses...........................10
4.2 Fees of Counsel to Holders............................10
ARTICLE V.....................................................................10
UNDERWRITTEN OFFERINGS................................................10
5.1 Demand Underwritten Offerings.........................10
5.2 Incidental Underwritten Offerings.....................11
ARTICLE VI....................................................................11
INDEMNIFICATION.......................................................11
6.1 Indemnification by the Company........................11
6.2 Indemnification by Holders............................12
6.3 Indemnification Procedures............................13
6.4 Indemnification of Underwriters.......................14
6.5 Contribution..........................................14
6.6 Timing of Indemnification Payments....................15
<PAGE>
Page
----
ARTICLE VII...................................................................15
RULE 144..............................................................15
ARTICLE VIII..................................................................16
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS...........................16
ARTICLE IX....................................................................16
MERGERS, ETC..........................................................16
ARTICLE X.....................................................................16
DEFINITIONS...........................................................16
ARTICLE XI....................................................................18
MISCELLANEOUS.........................................................18
11.1 No Inconsistent Agreements............................18
11.2 Adjustments Affecting Registrable Securities..........18
11.3 Remedies..............................................18
11.4 Amendments and Waivers................................19
11.5 Successors and Assigns................................19
11.6 Notices...............................................19
11.7 Headings..............................................21
11.8 Gender................................................21
11.9 Invalid Provisions....................................21
11.10 Governing Law.........................................21
11.11 Counterparts..........................................21
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is dated as of March 2, 1999,
among Global Pharmaceutical Corporation, a Delaware corporation (the "Company"),
Fleming US Discovery Fund III, L.P. and Fleming US Discovery Offshore Fund III,
L.P. (collectively, the "Fleming Funds"). The Fleming Funds, any Fleming Holder
and any Transferee are collectively referred to herein as the "Investors" and,
individually, an "Investor." Capitalized terms used and not otherwise defined
herein have the respective meanings ascribed thereto in Article X.
W I T N E S S E T H:
WHEREAS, simultaneously herewith, the Fleming Funds have purchased
an aggregate of 50,000 shares of Series D Preferred Stock pursuant to the terms
of the Stock and Warrant Purchase Agreements;
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Stock and Warrant Purchase Agreements that the Company and
the Fleming Funds enter into this Agreement whereby the Company shall grant, and
the Investors shall obtain, the rights relating to the registration of the
Registrable Securities under the Securities Act, as set forth in this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEMAND REGISTRATIONS
1.1 Requests for Registration. (a) Subject to Section 1.2, at any
time and from time to time on or after the date hereof, the Fleming Holders may
request registration under the Securities Act of all or part of their
Registrable Securities on Form S-1 or any similar long-form registration
("Long-Form Demand Registrations"). Thereafter, the Company will use its best
efforts to promptly effect the registration of such Registrable Securities under
the Securities Act on the form requested by the holder or holders making such
registration request. All registrations requested pursuant to this Section 1.1
are referred to herein as "Demand Registrations." Upon receipt of a request for
a Demand Registration, the Company will give prompt written notice (in any event
within three (3) Business Days after its receipt of such request) of the request
for a Demand Registration to all holders of Registrable Securities not
<PAGE>
making such request and will include in such Demand Registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within ten (10) days after the receipt of the Company's
notice. The holders of the Registrable Securities making any such registration
request may, at any time prior to the effective date of the registration
statement relating to any Demand Registration, revoke such Demand Registration
request by providing written notice to the Company.
(b) On or before July 1, 1999, the Company shall prepare and file
with the SEC a registration statement for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf
Registration") registering the resale from time to time by the Investors of all
the Registrable Securities (the "Initial Shelf Registration"). The registration
statement shall be on Form S-3 or another appropriate form permitting
registration of such Registrable Securities for resale by the Investors. If the
Initial Shelf Registration or any Subsequent Shelf Registration ceases to be
effective for any reason at any time, the Company shall use its best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall within thirty (30) days of such cessation of
effectiveness amend the Shelf Registration in a manner reasonably expected to
obtain the withdrawal of the order suspending the effectiveness thereof, or to
promptly file an additional Shelf Registration covering all the Registrable
Securities (a "Subsequent Shelf Registration").
1.2 Limitations on Demand Registrations. (a) The holders of the
Registrable Securities shall be entitled to (i) one (1) Long-Form Demand
Registration and (ii) any number of Shelf Registrations.
(b) The Company shall be entitled to postpone for a reasonable
period of time not to exceed forty-five (45) days the declaration of
effectiveness by the Securities and Exchange Commission (the "SEC") of any
Long-Form Registration otherwise required to be prepared and filed by it if, at
the time it receives a Demand Registration request for a Long-Form Registration
or at any time during the process of registration, prior to being declared
effective by the SEC, the Board of Directors of the Company determines, in its
reasonable good faith judgment, that such registration would materially
interfere with a business or financial transaction of substantial importance to
the Company (other than an underwritten public offering of its securities),
including, without limitation, any such transaction involving a material
acquisition, consolidation, merger or corporate reorganization then pending or
proposed by its Board of Directors involving the Company, and the Company
promptly gives the holders of the Registrable Securities written notice of such
determination, containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay; provided, however,
that the Company shall not be entitled to postpone filing a registration
statement in response to a Demand Registration for the twelve (12) months
following the expiration of such forty-five day period. In the event the
effectiveness of any registration statement is postponed pursuant to this
paragraph, the holder or holders of the Registrable Securities making a
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registration request shall have the right to withdraw such Demand Registration
request by giving written notice to the Company within thirty (30) days after
receipt of the notice of postponement (and, in the event of such withdrawal, the
right of the holders of the Registrable Securities to such Demand Registration
shall be reinstated).
1.3 Effective Registration Statement. (a) A Demand Registration
requested pursuant to Section 1.1 of this Agreement shall not be deemed to have
been effected (i) unless a registration statement with respect thereto has
become effective, (ii) if after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason, and the
Registrable Securities covered thereby have not been sold, or (iii) if the
conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied by
reason of (x) a failure by or inability of the Company to satisfy any thereof,
or (y) the occurrence of an event outside the control of the holders of
Registrable Securities.
(b) A Demand Registration requested pursuant to Section 1.1(a) of
this Agreement shall not be deemed to have been effected if holders of
Registrable Securities are not able to register and sell at least 66-2/3% of the
amount of Registrable Securities requested to be included in such registration;
provided that in no case shall holders of Registrable Securities be permitted to
utilize the provisions of this Section 1.3(b) on more than one occasion.
1.4 Priority on Demand Registrations. The Company will not include
in any Demand Registration any securities which are not Registrable Securities
without the written consent of the Fleming Holders. If other securities are
permitted to be included in a Demand Registration which is an underwritten
offering and the managing underwriters advise the Company in writing that in
their opinion the number of Registrable Securities exceeds the number of
Registrable Securities which can be sold in such offering within a price range
acceptable to the Fleming Holders, the Company will include in such registration
prior to the inclusion of any securities which are not Registrable Securities
the number of Registrable Securities requested to be included which in the
opinion of such underwriters can be sold, pro rata among the respective holders
on the basis of the amount of Registrable Securities requested to be offered
thereby.
1.5 Selection of Underwriters. The Fleming Holders will have the
right to select the underwriters and the managing underwriters to administer a
Demand Registration and such underwriters and managing underwriters shall be
reasonably acceptable to the Company.
1.6 Other Registration Rights. Except as otherwise provided in this
Agreement, the Company may grant to any Person the right to request the Company
to register any equity securities of the Company, or any securities convertible,
exchangeable or exercisable for or into such securities ("Other Securities");
provided, however, that all such registration
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rights shall be subordinate in all respects to the registration rights held by
the holders of the Registrable Securities.
ARTICLE II
OTHER REGISTRATIONS
2.1 Right to Piggyback. Whenever the Company proposes to register
any of its securities under the Securities Act (other than pursuant to a Demand
Registration), and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
will give prompt written notice (in any event within three (3) Business Days
after its receipt of notice of any exercise of other demand registration rights)
to all holders of Registrable Securities of its intention to effect such a
registration and will include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within ten (10) days after the receipt of the Company's notice.
2.2 Priority on Primary Registrations. If a Piggyback Registration
is an underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering, the Company will include in such
registration (i) first, the securities the Company proposes to sell, (ii)
second, (I) the Registrable Securities, (II) up to 165,000 shares of Common
Stock issuable upon the exercise of warrants held by employees or officers or
former employees or officers of Keane Securities (the "Keane Securities") and
(III) up to 225,000 shares of Common Stock issuable upon the exercise of
warrants held by Bear Stearns Small Cap Value Portfolio (the "Bear Stearns
Securities"), requested to be included in such registration, provided, that if
the managing underwriters in good faith determine that a lower number of
securities should be included, then the Company shall be required to include in
the underwriting only that lower number of securities, and the holders of
Registrable Securities, Keane Securities and Bear Stearns Securities who have
requested registration shall participate in the underwriting pro rata based upon
their total ownership, on a fully diluted basis, of any such securities
requested to be included in such registration and (iii) third, other securities
requested to be included in such registration.
2.3 Priority on Secondary Registrations. (a) Subject to paragraph
(b) of this Section 2.3, if a Piggyback Registration is an underwritten
secondary registration on behalf of holders of the Company's securities, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering, the Company will include in such
registration (i) first, the securities requested to be included therein by the
holders requesting such registration, (ii) second, the Registrable Securities,
the Keane Securities and the Bear Stearns Securities requested to be included in
such registration, provided, that if the managing
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underwriters in good faith determine that a lower number of securities should be
included, then the Company shall be required to include in the underwriting only
that lower number of securities, and the holders of Registrable Securities,
Keane Securities and Bear Stearns Securities who have requested registration
shall participate in the underwriting pro rata based upon their total ownership,
on a fully diluted basis, of any such securities requested to be included in
such registration and (iii) third, other securities requested to be included in
such registration.
(b) If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company's securities, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration (i) first, the securities requested to be included therein by the
holders requesting such registration and the Registrable Securities, Keane
Securities and Bear Stearns Securities requested to be included in such
registration, provided, that if the managing underwriters in good faith
determine that a lower number of securities should be included, then the Company
shall be required to include in the underwriting only that lower number of
securities, and the holders requesting such registration, the holders of
Registrable Securities, Keane Securities and Bear Stearns Securities who
requested to be included in such registration shall participate in the
underwriting pro rata based upon their total ownership, on a fully diluted
basis, of any such securities requested to be included in such registration and
(ii) second, other securities requested to be included in such registration
pursuant to piggyback rights. The Company hereby agrees that whenever it grants
piggyback rights to any holder of its securities such holder's piggyback rights
will be expressly subordinated to the piggyback rights granted to the holders of
the Registrable Securities under this Article II.
2.4 Other Registrations. If the Company has previously filed a
registration statement for a Long-Form Demand Registration with respect to
Registrable Securities pursuant to Article I of this Agreement or pursuant to
this Article II, and if such previous registration has not been withdrawn or
abandoned, the Company will not file or cause to be effected any other
registration of any of its equity securities or securities convertible,
exchangeable or exercisable for or into its equity securities under the
Securities Act (except on Form S-4 or S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities other
than the holders of the Registrable Securities, until a period of at least six
(6) months elapsed from the effective date of such previous registration.
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ARTICLE III
REGISTRATION PROCEDURES
Whenever the holders of Registrable Securities have requested that
any Registrable Securities be registered pursuant to this Agreement, the Company
will use its best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto the Company will as expeditiously as possible or,
in the case of clause (q) below, will not:
(a) promptly prepare and file with the SEC a registration statement
with respect to such Registrable Securities (such registration statement to
include all information which the holders of the Registrable Securities to be
registered thereby shall reasonably request) and use its best efforts to
promptly cause such registration statement to become effective, provided that at
least five days before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will (i) furnish to counsel
selected by the Fleming Holders, copies of all such documents proposed to be
filed, and the Company shall not , in the case of a Demand Registration, file
any such documents to which such counsel shall have reasonably objected on the
grounds that such document does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations thereunder,
and (ii) notify each holder of Registrable Securities covered by such
registration statement of (x) any request by the SEC to amend such registration
statement or amend or supplement any prospectus or (y) any stop order issued or
threatened by the SEC, and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered;
(b) (i) promptly prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary (A) in the case of a Long-Form Demand
Registration, to keep such registration statement effective for a period of not
less than 180 days (except that such 180-day period shall be (I) shortened to
the extent that all shares are sold thereunder, or (II) extended (x) by the
length of any period that a stop order or similar proceeding is in effect which
prohibits the distribution of the Registrable Securities, and (y) by the number
of days during the period from and including the date on which each seller of
Registrable Securities shall have received a notice delivered pursuant to clause
(f) below until the date when such seller shall have received a copy of the
supplemented or amended prospectus contemplated by clause (f) below), and (B) in
the case of a Shelf Registration, keep such registration statement continually
effective, (ii) comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) as soon as reasonably possible furnish to each seller of
Registrable Securities, without charge, such number of conformed copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement
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(including each preliminary prospectus and prospectus supplement and, in each
case, including all exhibits) and such other documents as such seller may
reasonably request, all in conformity with the requirements of the Securities
Act, in order to facilitate the disposition of the Registrable Securities owned
by such seller;
(d) use its best efforts promptly to register or qualify the Shares
under such other securities or blue sky laws of such jurisdictions as any seller
thereof shall reasonably request, to keep such registration or qualification in
effect for so long as such registration statement remains in effect and to do
any and all other acts and things which may be reasonably necessary or advisable
to enable such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller, provided, however, that the Company
will not be required to (i) qualify generally to do business as a foreign
corporation in any jurisdiction where it would not otherwise be required to
qualify but for this clause (d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(e) in the case of a Long-Form Demand Registration or a Piggyback
Registration to which the Fleming Holders are a party, furnish to each seller of
Registrable Securities a signed copy, addressed to such seller (and the
underwriters, if any) of an opinion of counsel for the Company or special
counsel to the selling stockholders, dated the effective date of such
registration statement (and, if such registration statement includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form and substance to
counsel selected by the Fleming Holders, covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) as are customarily covered in opinions of issuer's counsel delivered to
the underwriters in underwritten public offerings, and such other legal matters
as the seller (or the underwriters, if any) may reasonably request;
(f) promptly notify each seller of Registrable Securities, at a time
when a prospectus relating to the Shares is required to be delivered under the
Securities Act, of the Company's becoming aware that the prospectus included in
such registration statement, as then in effect, contains an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances under which they were made, and, at the request of any such
seller, promptly prepare and furnish such seller a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which they
were made;
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<PAGE>
(g) cause all of the Shares to be listed on each securities exchange
on which similar securities issued by the Company are then listed or, if there
shall then be no such listing, to be accepted for quotation as a Small Cap
Security on The NASDAQ Stock Market;
(h) provide a transfer agent and registrar for all of the Shares not
later than the effective date of such registration statement;
(i) enter into such customary arrangements and take all such other
actions as the Fleming Holders or the underwriters, if any, reasonably request
in order to expedite or facilitate the disposition of the Shares;
(j) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement, in each case
pursuant to confidentiality agreements, as appropriate;
(k) cause the Company's officers to make presentations to potential
purchasers of the Shares, as reasonably requested by any seller of Registrable
Securities or any underwriter participating in any disposition pursuant to such
registration statement in connection with one (1) Long-Form Demand Registration;
(l) subject to other provisions hereof, use its best efforts to
cause the Shares to be registered with or approved by such other governmental
agencies or authorities or self-regulatory organizations as may be necessary to
enable the sellers thereof to consummate the disposition of the Shares;
(m) in connection with a Long-Form Demand Registration or Piggyback
Registration (if any other participant in such Piggyback Registration receives a
"comfort" letter as described herein), use its best efforts to obtain a
"comfort" letter, dated the effective date of such registration statement (and,
if such registration includes an underwritten offering, dated the date of the
closing under the underwriting agreement), signed by the independent public
accountants who have certified the Company's financial statements, addressed to
each seller, and to the underwriters, if any, covering substantially the same
matters with respect to such registration statement (and the prospectus included
therein) and with respect to events subsequent to the date of such financial
statements, as are customarily covered in accountants' letters delivered to the
underwriters in underwritten public offerings of securities and such other
financial matters as such seller (or the underwriters, if any) may reasonably
request;
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(n) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make available to its security holders, in
each case as soon as practicable, an earnings statement covering a period of at
least twelve months, beginning after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act;
(o) permit any holder of Registrable Securities, which holder, in
the sole judgment exercised in good faith of such holder, might be deemed to be
a controlling person of the Company (within the meaning of the Securities Act or
the Exchange Act), to participate in the preparation of any registration
statement covering such holder's Registrable Securities and to include therein
material, furnished to the Company in writing, which in the reasonable judgment
of such holder should be included and which is reasonably acceptable to the
Company;
(p) use every reasonable effort to obtain the lifting at the
earliest possible time of any stop order suspending the effectiveness of any
registration statement or of any order preventing or suspending the use of any
preliminary prospectus;
(q) at any time file or make any amendment to a registration
statement, or any amendment of or supplement to a prospectus (including
amendments of the documents incorporated by reference into the prospectus), of
which each seller of Registrable Securities or the managing underwriters shall
not have previously been advised and furnished a copy or to which the sellers of
Registrable Securities, the managing underwriters, or counsel for such sellers
or for the underwriters shall reasonably object; and
(r) make such representations and warranties (subject to appropriate
disclosure schedule exceptions) to sellers of Registrable Securities and the
underwriters, if any, in form, substance and scope as are customarily made by
issuers to underwriters and selling holders, as the case may be, in underwritten
public offerings of substantially the same type.
Notwithstanding anything herein to the contrary, the Fleming Holders shall cease
selling shares under a registration statement if the Company, upon the advice of
counsel to the Company, which counsel shall confirm such advice to the Fleming
Holders, determines that a registration statement requires an amendment or
supplement and has requested in writing that such holder cease to sell under
such registration statement, provided that any relevant time period contained in
this Agreement shall be tolled until such time as the Fleming Holders shall
receive notice in writing from the Company showing that such holder may continue
to sell under such registration statement.
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ARTICLE IV
REGISTRATION EXPENSES
4.1 Company's Fees and Expenses. All expenses incident to the
Company's performance of or compliance with this Agreement, including without
limitation, all registration and filing fees, fees and expenses incident to the
Company's or the Investors' performance of or compliance with a Shelf
Registration pursuant to this Agreement and to the Stock and Warrant Purchase
Agreements (whether or not any of the registration statements become effective),
fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, fees and expenses for listing or
quoting the Shares on each securities exchange or The NASDAQ Stock Market on
which similar securities issued by the Company are then listed or quoted, and
fees and disbursements of counsel for the Company, any transfer agent and all
independent certified public accountants, underwriters (excluding discounts and
selling commissions) and other Persons retained by the Company in connection
with any Demand Registration or any Piggyback Registration (all such expenses
being herein called "Registration Expenses"), will be paid by the Company.
4.2 Fees of Counsel to Holders. In connection with any Demand
Registration or any Shelf Registration hereunder), the Company will reimburse
the holders of Registrable Securities covered by such registration for the
reasonable fees and disbursements of one counsel chosen by the Fleming Holders.
In connection with any Piggyback Registration, the holders of Registrable
Securities covered by such registration shall pay for the fees of their own
counsel, if applicable, but such holders shall not be obligated to pay any
portion of the fees of counsel acting on behalf of any other holder or all
holders of securities included in such registration.
ARTICLE V
UNDERWRITTEN OFFERINGS
5.1 Demand Underwritten Offerings. If requested by the underwriters
for any underwritten offerings of Registrable Securities pursuant to a Demand
Registration, the Company will enter into an underwriting agreement with such
underwriters for such offering, such agreement to be reasonably satisfactory in
substance and form to the Fleming Holders and the underwriters, and to contain
such representations and warranties by the Company and such other terms as are
generally included in agreements of this type, including, without limitation,
indemnities customarily included in such agreements. The holders of Registrable
Securities to be distributed by such underwriters may be parties to such
underwriting agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement
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be conditions precedent to the obligations of such holders of Registrable
Securities. The Company shall cooperate with any such holder of Registrable
Securities in order to limit any representations or warranties to, or agreements
with, the Company or the underwriters to be made by such holder only to those
representations, warranties or agreements regarding such holder, such holder's
Registrable Securities and such holder's intended method of distribution and any
other representation required by law.
5.2 Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Article II of this Agreement and such securities are to be
distributed by or through one or more underwriters, the Company will, if
requested by any holder of Registrable Securities as provided in Article II of
this Agreement, arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such holder, subject to the limitations set
forth in Article II hereof, among the securities to be distributed by such
underwriters. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters, and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. The Company shall cooperate with any such
holder of Registrable Securities in order to limit any representations or
warranties to, or agreements with, the Company or the underwriters to be made by
such holder only to those representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution and any other representation required by law.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Company. The Company agrees to indemnify
and hold harmless, to the extent permitted by law, each of the holders of any
Registrable Securities covered by any registration statement prepared pursuant
to this Agreement, each other Person, if any, who controls such holder within
the meaning of the Securities Act or the Exchange Act, and each of their
respective directors, general partners and officers, as follows:
(i) against any and all loss, liability, claim, damage and
expense arising out of or based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration
statement (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or in any preliminary
prospectus or prospectus (or any amendment or supplement thereto) or
the omission or alleged omission therefrom of a material fact
required
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to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and
expense to the extent of the aggregate amount paid in settlement of
any litigation, investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission or any such alleged
untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense incurred by them in
connection with investigating, preparing or defending against any
litigation, investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon
any such untrue statement or omission or any such alleged untrue
statement or omission, to the extent that any such expense is not
paid under clause (i) or (ii) above;
provided, that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any holder expressly for use in the preparation of any registration statement
(or any amendment or supplement thereto), including all documents incorporated
therein by reference, or in any preliminary prospectus or prospectus (or any
amendment or supplement thereto); and provided further, that the Company will
not be liable to any holder under the indemnity agreement in this Section 6.1,
with respect to any preliminary prospectus or the final prospectus or the final
prospectus as amended or supplemented, as the case may be, to the extent that
any such loss, liability, claim, damage or expense of such controlling Person or
holder results from the fact that such holder sold Registrable Securities to a
Person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the final prospectus or of the final
prospectus as then amended or supplemented, whichever is most recent, if the
Company has previously and timely furnished copies thereof to such holder and
provided further, that the Company will not be liable to any holder under the
indemnity agreement in this Section 6.1, with respect to a sale by such holder
after such time as the Company, upon the written advice of counsel to the
Company, a copy of which shall be provided to the Fleming Holders, provides
notice that a registration statement requires an amendment or supplement and has
requested in writing that such holder cease to sell under such registration
statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such holder or any such director,
officer, general partner, or other controlling person and shall survive the
transfer of such securities by such seller.
6.2 Indemnification by Holders. In connection with any registration
statement in which a holder of Registrable Securities is participating, each
such holder agrees to
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indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 6.1 of this Agreement), to the extent permitted by law, the
Company and its directors, officers and controlling Persons, and their
respective directors, officers and general partners, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such holder, specifically stating that it is for use in the preparation of such
registration statement, preliminary, final or summary prospectus or amendment or
supplement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company, or such holder, as the
case may be, or any of their respective directors, officers, controlling Persons
or general partners and shall survive the transfer of such securities by such
holder. The obligations of each holder of Registrable Securities pursuant to
this Section 6.2 are to be several and not joint; provided, that, with respect
to each claim pursuant to this Section 6.2, each such holder's maximum liability
under this Section shall be limited to an amount equal to the net proceeds
actually received by such holder (after deducting any underwriting discount and
expenses) from the sale of Registrable Securities being sold pursuant to such
registration statement or prospectus by such holder.
6.3 Indemnification Procedures. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding involving a claim referred to in Section 6.1 or Section 6.2 of
this Agreement, such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under Section 6.1 or Section 6.2 of this Agreement except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified,
to the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof, unless a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, in which case the
indemnifying party shall not be liable for the fees and expenses of (i) more
than one counsel for all holders of Registrable Securities, selected by the
Fleming Holders, or (ii) more than one counsel for the Company in connection
with any one action or separate but similar or related actions. An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
will not be obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless a conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim, in which event the
indemnifying party shall be
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obligated to pay the fees and expenses of such additional counsel or counsels.
The indemnifying party will not, without the prior written consent of each
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not such indemnified
party or any Person who controls such indemnified party is a party to such
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of such indemnified party from all
liability arising out of such claim, action, suit or proceeding. Notwithstanding
anything to the contrary set forth herein, and without limiting any of the
rights set forth above, in any event any party will have the right to retain, at
its own expense, counsel with respect to the defense of a claim.
6.4 Indemnification of Underwriters. The Company and each holder of
Registrable Securities requesting registration shall provide for the foregoing
indemnity in any underwriting agreement with respect to any required
registration or other qualification of securities under any Federal or state law
or regulation of any governmental authority other than the Securities Act.
6.5 Contribution. If the indemnification provided for in Sections
6.1 and 6.2 of this Agreement is unavailable or insufficient to hold harmless an
indemnified party under such Sections, then each indemnifying party shall
contribute to the amount paid or payable to such indemnified party as a result
of the losses, claims, damages or liabilities referred to in Section 6.1 or
Section 6.2 of this Agreement in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand, and the
indemnified party on the other, in connection with statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations, including, without limitation, the
relative benefits received by each party from the offering of the securities
covered by such registration statement, the parties' relative knowledge and
access to information concerning the matter with respect to which the claim was
asserted and the opportunity to correct and prevent any statement or omission.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statements or omission. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section 6.5
were to be determined by pro rata or per capita allocation (even if the
underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the first sentence of this Section 6.5. The amount paid to an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this Section 6.5 shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim (which shall be
limited as provided in Section 6.3 of this Agreement if the indemnifying party
has assumed the defense of any such action in accordance with the provisions
thereof)
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which is the subject of this Section 6.5. Promptly after receipt by an
indemnified party under this Section 6.5 of notice of the commencement of any
action against such party in respect of which a claim for contribution may be
made against an indemnifying party under this Section 6.5, such indemnified
party shall notify the indemnifying party in writing of the commencement thereof
if the notice specified in Section 6.3 of this Agreement has not been given with
respect to such action; provided, that the omission to so notify the
indemnifying party shall not relieve the indemnifying party from any liability
which it may otherwise have to any indemnified party under this Section 6.5,
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. The Company and each holder of Registrable Securities
agrees with each other and the underwriters of the Registrable Securities, if
requested by such underwriters, that (i) the underwriters' portion of such
contribution shall not exceed the underwriting discount and (ii) the amount of
such contribution shall not exceed an amount equal to the net proceeds actually
received by such indemnifying party from the sale of Registrable Securities in
the offering to which the losses, liabilities, claims, damages or expenses of
the indemnified parties relate. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
6.6 Timing of Indemnification Payments. The indemnification required
by this Article VI shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
ARTICLE VII
RULE 144
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder (or, if the Company is not required to
file such reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information), and it will take such
further action as any holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such holder to sell
shares of Registrable Securities without registration under the Securities Act
within the limitation of the exemption provided by (i) Rule 144 or Rule 144A
under the Securities Act, as such Rules may be amended from time to time, or
(ii) any similar rule or regulation hereafter adopted by the SEC. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
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ARTICLE VIII
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Person may participate in any underwritten registration hereunder
unless such Person (i) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements and
consistent with the provisions of this Agreement.
ARTICLE IX
MERGERS, ETC.
The Company shall not, directly or indirectly, enter into any
merger, consolidation, or reorganization in which the Company shall not be the
surviving corporation unless the proposed surviving corporation shall, prior to
such merger, consolidation, or reorganization, agree in writing to assume the
obligations of the Company under this Agreement, and for that purpose references
hereunder to "Registrable Securities" shall be deemed to be references to the
securities that the Investors or the holders of Registrable Securities would be
entitled to receive in exchange for Registrable Securities under any such
merger, consolidation, or reorganization.
ARTICLE X
DEFINITIONS
As used in this Agreement, the following defined terms shall have
the meanings set forth below:
"Business Day" means a day other than Saturday, Sunday or any day on
which banks in the State of New York are authorized or obligated to close.
"Common Stock" means the Company's Common Stock, par value $.01 per
share.
"Demand Registrations" shall have the meaning set forth in Section
1.1(a) hereof.
"Designated Entity" means (i) as long as any Registrable Securities
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
Registrable Securities are held by any Fleming Holder, the entity designated by
the Transferee who holds the largest number of
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Registrable Securities (in which case such Transferee shall provide notice to
the Company of such entity in accordance with Section 11.6(a) hereof).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fleming Funds" shall have the meaning set forth in the first
paragraph hereof.
"Fleming Holders" shall have the meaning given it in Section 3 of
the Stock and Warrant Purchase Agreements.
"Initial Shelf Registration" shall have the meaning set forth in
Section 1.1(b) hereof.
"Investor" or "Investors" shall have the meaning set forth in the
first paragraph hereof.
"Long-Form Demand Registrations" shall have the meaning set forth in
Section 1.1(a) hereof.
"Other Securities" shall have the meaning set forth in Section 1.6
hereof.
"Person" means any individual, corporation, partnership,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Registrable Securities" means (i) any shares of Common Stock issued
or issuable upon conversion of the Series D Preferred Stock or exercise of the
Warrants purchased by the Investors pursuant to the Stock and Warrant Purchase
Agreements and (ii) any securities issued or issuable with respect to the Common
Stock referred to in clause (i) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise. As to any particular Registrable
Securities, such securities will cease to be Registrable Securities when they
have (x) been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them or (y) been transferred
pursuant to Rule 144 (or any similar rule then in force) under the Securities
Act.
"SEC" shall have the meaning set forth in Section 1.2 hereof.
"Securities Act" means the Securities Act of 1933, as amended.
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"Series D Preferred Stock" means the Company's Series D Convertible
Preferred Stock, par value $.01 per share, which Series D Preferred Stock is
convertible into shares of Common Stock.
"Shares" means the shares of Registrable Securities registered on
the registration statement filed with the SEC in connection with any Demand
Registration or any Piggyback Registration.
"Shelf Registration" shall have the meaning set forth in Section
1.1(b) hereof.
"Stock and Warrant Purchase Agreements" means, collectively, the
separate Stock and Warrant Purchase Agreements, dated as of March 2, 1999,
between the Company and each of the Fleming Funds.
"Subsequent Shelf Registration" shall have the meaning set forth in
Section 1.1(b) hereof.
"Transferees" shall have the meaning given it in Section 3 of the
Stock and Warrant Purchase Agreements.
"Warrants" shall mean Warrants to purchase shares of Common Stock as
more fully set forth in the Stock and Warrant Purchase Agreements.
ARTICLE XI
MISCELLANEOUS
11.1 No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement.
11.2 Adjustments Affecting Registrable Securities. The Company will
not effect or permit to occur any combination, subdivision or reclassification
of any of its securities which would adversely affect the ability of the holders
of Registrable Securities to include Registrable Securities in a registration
undertaken pursuant to this Agreement or which, to the extent within its
control, would adversely affect the marketability of such Registrable Securities
in any such registration (including, without limitation, effecting a stock split
or a combination of shares).
11.3 Remedies. In the event of a breach by any party to this
Agreement of its obligations under this Agreement, any party injured by such
breach, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
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performance of its rights under this Agreement. The parties agree that the
provisions of this Agreement shall be specifically enforceable, it being agreed
by the parties that the remedy at law, including monetary damages, for breach of
any such provision will be inadequate compensation for any loss and that any
defense in any action for specific performance that a remedy at law would be
adequate is waived.
11.4 Amendments and Waivers. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement will be
effective against the Company or any holder of Registrable Securities, unless
such modification, amendment or waiver is approved in writing by the Company and
the Fleming Holders. The failure of any party to enforce any of the provisions
of this Agreement will in no way be construed as a waiver of such provisions and
will not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
11.5 Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of the
Investors or the holders of Registrable Securities are also for the benefit of,
and enforceable by, any subsequent holder of Registrable Securities.
11.6 Notices. (a) Subject to Section 11.6(b) hereof, all notices,
requests and other communications hereunder must be in writing and will be
deemed to have been duly given only if delivered personally or by facsimile
transmission or sent by nationally recognized overnight courier service to the
parties at the following addresses or facsimile numbers:
(i) If to an Investor or a holder of Registrable Securities, to:
Fleming Capital Management
320 Park Avenue
NY, NY 10022
Facsimile No.: 212-508-3928
Attn: Robert L. Burr
David J. Edwards
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Facsimile No.: (212) 309-6273
Attn: David W. Pollak, Esq.
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(ii) If to the Company, to:
Global Pharmaceutical Corporation
Castor & Kensington Avenues
Philadelphia, PA 19124-5694
Facsimile No.: (215) 289-5932
Attn: Barry R. Edwards
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue, 31st Floor
New York, NY 10103-3198
Facsimile No.: (212) 752-5958
Attn: Sheldon G. Nussbaum, Esq.
All such notices, requests and other communications will (x) if delivered
personally to the address as provided in this Section 11.6(a), be deemed given
upon delivery, (y) if delivered by facsimile transmission to the facsimile
number as provided in this Section 11.6(a), be deemed given upon receipt and (z)
if delivered by nationally recognized overnight courier service in the manner
described above to the address as provided in this Section 11.6(a), be deemed
given on the Business Day following the day it was sent (in each case regardless
of whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this Section
11.6(a)). Any party may from time to time change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
(b) So long as any Fleming Holder holds any Registrable Securities,
all notices and other communications hereunder shall be deemed given to all
holders of the Registrable Securities when given to the Designated Entity in
accordance with Section 11.6(a) hereof. The consent, selection, request,
acceptance, choice, approval and other similar terms used in this Agreement
(collectively, the "Consent") 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 the Registrable Securities and the Designated Entity shall have
obtained the Consent of each Fleming Fund and shall have given notice to the
Company to such effect in accordance with Section 11.6(a) hereof; (ii) the
Fleming Funds are not the only holders of the Registrable Securities and the
Designated Entity shall have obtained the Consent of the holders of a majority
of the Registrable Securities held by all Fleming Holders, and shall have given
notice to the Company to such effect in accordance with Section 11.6(a) hereof;
or (iii) no Registrable Securities are held by a Fleming Holder and the
Designated Entity shall have obtained the Consent of the holders of a majority
of the Registrable Securities held by the Transferees, and
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shall have given notice to the Company to such effect in accordance with Section
11.6(a) hereof; provided, however, that if the Consent relates to a particular
Demand Registration or Piggyback Registration or otherwise only involves or
affects certain holders of the Registrable Securities, only the Registrable
Securities of the holders so participating in such registration or so involved
or affected shall be included in the Consent required by clause (iii) of this
paragraph.
11.7 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
11.8 Gender. Whenever the pronouns "he" or "his" are used herein
they shall also be deemed to mean "she" or "hers" or "it" or "its" whenever
applicable. Words in the singular shall be read and construed as though in the
plural and words in the plural shall be construed as though in the singular in
all cases where they would so apply.
11.9 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable, and if the rights or obligations of any
party hereto under this Agreement will not be materially and adversely affected
thereby, (i) such provision will be fully severable, (ii) this Agreement will be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, (iii) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid or unenforceable provision or by its severance herefrom and
(iv) in lieu of such illegal, invalid or unenforceable provision, there will be
added automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
11.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to a
contract executed and performed in such State without giving effect to the
conflicts of laws principles thereof.
11.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
GLOBAL PHARMACEUTICAL CORPORATION
By: /s/ Barry R. Edwards
--------------------------------------------
Name: Barry R. Edwards
Title: President and Chief Executive Officer
FLEMING US DISCOVERY FUND III, L.P.
By: FLEMING US DISCOVERY
PARTNERS, L.P.,
its general partner
By: FLEMING US DISCOVERY, LLC,
its general partner
By: /s/ Robert L. Burr
------------------------------------
Robert L. Burr, member
FLEMING US DISCOVERY OFFSHORE FUND III, L.P.
By: FLEMING US DISCOVERY
PARTNERS, L.P.,
its general partner
By: FLEMING US DISCOVERY, LLC,
its general partner
By: /s/ Robert L. Burr
------------------------------------
Robert L. Burr, member
[Signature page to Registration Rights Agreement]
Exhibit 8
The Warrant Certificate, dated March 2, 1999, between Global Pharmaceutical
Corporation and Fleming US Discovery Offshore Fund III, L.P., is substantially
identical to the Warrant Certificate attached hereto (Warrant Certificate, dated
March 2, 1999, between Global Pharmaceutical Corporation and Fleming US
Discovery Fund III, L.P.) except that the former Warrant Certificate entitles
Fleming US Discovery Offshore Fund III, L.P. to purchase up to 51,800 shares of
the Common Stock of Global Pharmaceutical Corporation, and the latter Warrant
Certificate entitles Fleming US Discovery Fund III, L.P. to purchase up to
323,200 shares of the Common Stock of Global Pharmaceutical Corporation.
<PAGE>
WARRANT CERTIFICATE
NEITHER THE WARRANT REPRESENTED BY THIS CERTIFICATE NOR THE COMMON STOCK
ISSUABLE UPON THE EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND NEITHER MAY BE
SOLD OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER SUCH ACT AND ANY
APPLICABLE STATE SECURITIES LAW UNLESS AN EXEMPTION FROM REGISTRATION IS THEN
AVAILABLE.
WARRANT TO PURCHASE COMMON STOCK
OF
GLOBAL PHARMACEUTICAL CORPORATION
Initial Issuance Date: March 2, 1999
No. 1
This is to certify that, FOR VALUE RECEIVED, the registered holder
hereof, FLEMING US DISCOVERY FUND III, L.P. (together with any successors and
assigns hereunder, the "Holder" or the "Holders"), is entitled to purchase,
subject to the provisions of this Warrant Certificate, from GLOBAL
PHARMACEUTICAL CORPORATION, a Delaware corporation (the "Company"), up to
323,200 shares (as such number may be adjusted in accordance with Section 5
hereof) of the Company's Common Stock, par value $0.01 per share (such class of
stock, together with any capital stock of the Company into which such class of
stock shall be converted, being referred to herein as "Common Stock"), at $4.00
per share (as such number may be adjusted in accordance with Section 5 hereof)
(the "Exercise Price"). The number of shares of Common Stock to be received upon
the exercise of this Warrant and the Exercise Price shall be adjusted from time
to time as hereinafter set forth. The shares of Common Stock or other securities
or property deliverable upon such exercise, as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares."
<PAGE>
This Warrant Certificate is one of the Warrant Certificates (the
"Warrants", which term includes all Warrants issued in substitution therefor)
originally issued in connection with the issue and sale by the Company of 50,000
shares of the Company's Series D Convertible Preferred Stock, par value $.01 per
share (the "Series D Preferred Stock"). Pursuant to the Stock and Warrant
Purchase Agreements, dated as of March 2, 1999 (the "Purchase Agreements"),
between the Company and each of the Fleming Funds (the "Purchasers"), the
Warrants and the Series D Preferred Stock shall be issued (i) on March 2, 1999
(the "First Closing") and (ii) on the date which is within five business days of
the Company's 1999 annual meeting of stockholders (the "Stockholders' Meeting")
or such other time and date as shall be mutually agreed to by the Company and
the Purchaser, but in any event no later than June 30, 1999; provided that at
such Stockholders' Meeting the appropriate corporate action has been taken to
authorize sufficient additional shares of Common Stock to permit conversion in
full of the Series D Convertible Preferred Stock into shares of Common Stock and
to permit exercise in full of all Warrants issued on such date (the "Second
Closing"). The Warrants originally so issued evidence rights to purchase an
aggregate of up to 625,000 Warrant Shares at the Exercise Price of which (i)
rights to purchase an aggregate of up to 375,000 Warrant Shares shall be issued
at the First Closing, and (ii) rights to purchase an aggregate of up to 250,000
Warrant Shares at the Second Closing. The Purchase Agreement under which this
Warrant was originally issued is herein referred to as the "Purchase Agreement."
This Warrant is subject to the provisions, and is entitled to the benefits, of
the Purchase Agreement. Capitalized terms used but not otherwise defined herein
shall have the meanings assigned to such terms in the Purchase Agreement.
This Warrant Certificate shall not be valid and may not be
transferred or exercised unless countersigned by the Company.
1. Exercise of Warrant.
1.1. Manner of Exercise. (a) This Warrant may be exercised by the
Holder, in whole or in part, at any time or from time to time through and
including March 31, 2004 (the "Expiration Date") during normal business hours on
any Business Day (as defined in the Purchase Agreement) by surrender of this
Warrant, duly countersigned by the Company, together with the form of
subscription duly executed by such Holder in substantially the form attached as
Annex A hereto, to the Company at its office designated pursuant to Section 8.2
of the Purchase Agreement (or, if such exercise is in connection with an
underwritten public offering of Warrant Shares subject to this Warrant, at the
location at which the underwriting agreement requires that such Warrant Shares
be delivered).
(b) Payment of the Exercise Price for the Warrant Shares shall be
made at the principal offices of the Company, (i) by certified or bank check or
wire transfer payable to the order of the Company, in any case, in an amount
equal to (x) the number of Warrant Shares specified in such form of
subscription, multiplied by (y) the then current Exercise Price or (ii) in
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the manner provided in Section 1.6 hereof. The Holder shall thereupon be
entitled to receive the number of Warrant Shares specified in such form of
subscription (plus cash in lieu of any fractional share as provided in Section
1.3 hereof).
1.2. Effective Date. Each exercise of this Warrant pursuant to
Section 1.1 hereof shall be deemed to have been effected immediately prior to
the close of business on the Business Day on which this Warrant is surrendered
to the Company as provided in Section 1.1 hereof unless a later time is
specified in writing by the Holder surrendering such Warrant (except that if
such exercise is in connection with an underwritten public offering of Warrant
Shares subject to this Warrant, then such exercise shall be deemed to have been
effected upon such surrender of this Warrant unless a later time is specified in
writing by the Holder surrendering such Warrant). On each such day that an
exercise of this Warrant is deemed effected, the person or persons in whose name
or names any certificate or certificates for Warrant Shares are issuable upon
such exercise (as provided in Section 1.3 hereof) shall be deemed to have become
the Holder or Holders of record thereof.
1.3. Warrant Share Certificates, Cash for Fractional Warrant Shares
and Reissuance of Warrants. As promptly as practicable after the exercise of
this Warrant, in whole or in part, and in any event within five (5) Business
Days thereafter (unless such exercise shall be in connection with a public
offering of Warrant Shares subject to this Warrant, in which event concurrently
with such exercise), the Company at its expense (including the payment by it of
any applicable issue, stamp or other taxes) will cause to be issued in the name
of and delivered to the Holder or, subject to Section 6 of the Purchase
Agreement, as the Holder may direct:
(i) a certificate or certificates for the number of Warrant Shares
to which the Holder shall be entitled upon such exercise plus, in lieu of
any fractional share to which the Holder would otherwise be entitled, cash
in an amount equal to the same fraction of the Market Price (as defined in
Section 5.7(F) hereof) per Warrant Share on the Business Day next
preceding the date of such exercise; and
(ii) in case such exercise is in part only, a new Warrant or
Warrants, substantially identical hereto, representing the rights formerly
represented by this Warrant which have not expired or been exercised.
1.4. Acknowledgment of Obligation. The Company will, at the time of
or at any time after each exercise of this Warrant, upon the request of the
Holder hereof or of any Warrant Shares issued upon such exercise, acknowledge in
writing its continuing obligation to afford to such Holder all rights
(including, without limitation, any rights to registration of any such Warrant
Shares pursuant to the Registration Rights Agreement (as defined in the Purchase
Agreement)) to which such Holder shall continue to be entitled under this
Warrant, the Purchase Agreement and the Registration Rights Agreement; provided,
that if any such Holder shall fail to make any such request, the failure shall
not affect the continuing obligation of the Company to afford such rights to
such Holder.
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1.5. Conditional Exercise. Notwithstanding any other provision
hereof, if any exercise of any portion of this Warrant is to be made in
connection with a public offering of Warrant Shares or any transaction described
in Section 5.8 hereof, the exercise of any portion of this Warrant may, at the
election of the Holder, be conditioned upon the consummation of the public
offering or such transaction, in which case such exercise shall not be deemed to
be effective until the consummation of such public offering or transaction.
1.6. Conversion of Warrant. In addition to and without limiting the
rights of the Holder under the terms of this Warrant, the Holder shall have the
option, but not the obligation, to convert this Warrant, or any portion hereof
(the "Conversion Right"), into Warrant Shares as provided in this Section 1.6 at
any time on or prior to the Expiration Date. Upon exercise of the Conversion
Right with respect to a particular number of shares subject to this Warrant (the
"Converted Warrant Shares"), the Company shall deliver to the Holder (without
payment by the Holder of any Exercise Price or any cash or other consideration)
that number of Warrant Shares equal to the quotient obtained by dividing (i) the
value of this Warrant (or the specified portion hereof) on the effective date of
the exercise of the Conversion Right, as provided in Section 1.2 hereof (the
"Conversion Date"), which value shall be determined by subtracting (x) the
aggregate exercise price of the Converted Warrant Shares immediately prior to
the exercise of the Conversion Right from (y) the aggregate Market Price
(determined as provided in Section 5.7(F) hereof) of such Converted Warrant
Shares on the Conversion Date by (ii) the Market Price of one Warrant Share on
the Conversion Date.
Section 2. Reservation of Shares.
The Company shall at all times after the date hereof and until the
Expiration Date reserve and keep available, out of its authorized and unissued
stock, solely for the purpose of effecting the issuance and delivery upon
exercise of this Warrant, the number of Warrant Shares as shall be required for
issuance and delivery upon exercise in full of this Warrant. The Company 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 exercise in full of this Warrant.
Section 3. Transfer, Exchange, Assignment or Loss of Warrant.
3.1. Transfer. This Warrant may be assigned in whole or in part or
transferred in whole or in part; subject, however, to compliance with the
provisions of the Act and the rules and regulations promulgated thereunder.
3.2. Procedure for Assignment or Transfer. This Warrant shall be
transferable only on the books of the Company maintained at Company's principal
office upon delivery of this Warrant together with the form of assignment, in
substantially the form attached as Annex B
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hereto, duly completed and signed by the Holder or by its duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer in form acceptable to the Company. The
Company may, in its discretion, require, as a condition to any transfer of
Warrants, a signature guarantee by a participant in a recognized signature
guarantee medallion program in the United States. Upon any registration of
transfer, the Company shall deliver a new Warrant Certificate or Certificates of
like tenor and evidencing in the aggregate a like number of Warrants to the
person entitled thereto in exchange for this Certificate, subject to the
limitations provided herein, without any charge except for any tax or other
governmental charge imposed in connection therewith. This Warrant may be divided
or combined with other Warrants which carry the same rights upon presentation
thereof at the principal office of the Company together with a written notice
signed by the holder thereof, specifying the names and denominations in which
new Warrants are to be issued.
3.3. Loss, Theft, Destruction or Mutilation. Upon receipt by the
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification to the Company or (in the case of
mutilation) presentation of this Warrant for surrender and cancellation, the
Company will execute and deliver a new Certificate of like tenor in lieu thereof
and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become
void.
Section 4. Warrant Certificate Holder Not Deemed a Stockholder.
The Holders shall not, solely because of holding this Warrant, be
entitled to vote, receive dividends or be deemed the holder of Common Stock or
any other securities of the Company which may at any time be issuable on the
exercise of the Warrant for any purpose whatsoever, nor shall anything contained
herein be construed to confer upon the Holders, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matters submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value or change of
stock to no par value, consolidation, merger, conveyance or otherwise), or to
receive notice of meetings or other actions affecting stockholders, or to
receive dividend or subscription rights, or otherwise, until this Warrant shall
have been exercised in accordance with the provisions hereof.
Section 5. Anti-Dilution.
The number of Warrant Shares for which this Warrant is exercisable
and/or the Exercise Price at which such Warrant Shares may be purchased upon
exercise of this Warrant shall be subject to adjustment from time to time as set
forth in this Section 5. The Company shall give the Holders notice of any event
described below which requires an adjustment pursuant to this Section 5 at the
time of such event.
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5.1. Adjustment for Stock Splits and Combinations. If the Company at
any time or from time to time after the date hereof, 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 Company, 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, (A) the Warrant
Shares for which this Warrant is exercisable immediately after the occurrence of
any such event shall be adjusted to equal the number of shares of Common Stock
which a record holder of the same number of shares of Common Stock for which
this Warrant is exercisable immediately prior to the occurrence of such event
would own or be entitled to receive after the happening of such event, and (B)
the Exercise Price shall be adjusted to equal (x) the Exercise Price multiplied
by the Warrant Shares for which this Warrant is exercisable immediately prior to
the adjustment divided by (y) the Warrant Shares for which this Warrant is
exercisable immediately after such adjustment. Any adjustment under this Section
5.1 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.
5.2. Issuance of Additional Shares of Stock. If the Company shall
(except as hereinafter provided) issue or sell Additional Shares of Stock
("Additional Shares of Stock") for an aggregate amount of consideration
exceeding one million dollars ($1,000,000) in exchange for consideration in an
amount per Additional Share of Stock less than the Conversion Price (as defined
in the Purchase Agreement) in effect immediately prior to such issuance or sale
of Additional Shares of Stock, then the Exercise Price as to the Common Stock
into which this Warrant is exercisable immediately prior to such adjustment
shall be adjusted by multiplying the Exercise Price by a fraction, of which:
(A) the numerator shall be (x) the number of shares of Common
Stock outstanding immediately prior to such issuance or sale of
Additional Shares of Stock plus (y) the number of shares of Common
Stock which the aggregate amount of consideration, if any, received
by the Company 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 Exercise Price in effect immediately prior to such issuance or
sale of Additional Shares of Stock, and
(B) 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 Exercise Price determined from such
adjustment shall be less than the Exercise Price in effect
immediately prior to the issuance of such Additional Shares of
Stock.
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The provisions of this Section 5.2 shall not apply to any issuance of Additional
Shares of Stock for which an adjustment is provided under Section 5.1. The
following shall not be deemed to be issuances of Additional Shares of Stock
under this Section 5.2: (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).
5.3. (A) Issuance of Warrants or Other Rights. If at any time (i)
the Company shall in any manner (whether directly or by assumption in a merger
in which the Company 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 (as defined in the Certificate of Designations of the
Series D Convertible Preferred Stock), whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the consideration, computed
in accordance with section 5.7(A), received for such warrants or other rights or
such Convertible Securities shall be less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then the Exercise Price
shall be adjusted as provided in Section 5.2. No further adjustments of the
Exercise 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 Company
shall in any manner (whether directly or by assumption in a merger in
which the Company 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 5.7(A), received for such Convertible Securities shall be
less than the Exercise Price in effect immediately prior to the time of
such issue or sale, then the Exercise Price shall be adjusted as provided
in Section 5.2. No adjustment of the Exercise Price shall be made under
this Section 5.3(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 5.3(A). No further adjustments of the Exercise Price shall be made
upon the actual issue of such Common Stock upon conversion of such
Convertible Securities and, if any issue or sale
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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 Exercise Price have been or are to
be made pursuant to other provisions of this Section 5, no further
adjustments of the Exercise Price shall be made by reason of such issue or
sale.
5.4. Decrease in Conversion Price of Series D Preferred Stock. If,
at any time, there is a decrease in the Conversion Price of the Series D
Preferred Stock under the Certificate of Designation of the Series D Convertible
Preferred Stock such that there is a new Conversion Price (the "Decreased
Conversion Price"), then (A) the Exercise Price as to the Common Stock into
which this Warrant is exercisable immediately prior to such decrease in
Conversion Price shall be adjusted by multiplying the Exercise Price by a
fraction, of which (x) the numerator shall be the Decreased Conversion Price and
(y) the denominator shall be the Conversion Price as to the Common Stock into
which the Series D Preferred Stock is exercisable immediately prior to such
decrease in Conversion Price and (B) the Warrant Shares for which this Warrant
is exercisable immediately after the occurrence of such decrease in the
Conversion Price shall be adjusted by multiplying the number of Warrant Shares
for which this Warrant is exercisable immediately prior to the occurrence of
such decrease in Conversion Price by a fraction, of which (x) the numerator
shall be the Conversion Price as to the Common Stock into which the Series D
Preferred Stock is exercisable immediately prior to such decrease in Conversion
Price and (y) the denominator shall be the Decreased Conversion Price. The
provisions of this Section 5.4 shall not apply to any decrease in Conversion
Price for which an adjustment is provided under Section 5.1, 5.2 or 5.3 hereof.
5.5. Superseding Adjustments. If, at any time after any adjustment
of the Exercise Price at which the Warrant is exercisable shall have been made
pursuant to Section 5.3 as a result of any issuance of warrants, rights or
Convertible Securities,
(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 Common
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
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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 Common Stock or other
property are issuable under such warrants or rights or other
Convertible Securities;
whereupon a new adjustment of the Exercise Price at which the Warrant is
exercisable shall be made, which new adjustment shall supersede the
previous adjustment so rescinded and annulled.
5.6. Antidilution Adjustments Under Other Securities. Without
limiting any other rights available hereunder to the Holders, 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 date hereof, or
(ii) under any rights, options or warrants to purchase Additional Shares of
Stock, whether issued prior to or after the date hereof 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 adjustment shall be made to the Exercise Price hereunder. Any such
adjustment pursuant to this Section 5.6 shall be whichever of the following
results in a lower Exercise Price: (A) a reduction in the Exercise 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
Exercise 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 5.6 shall only
be made if it would result in a lower Exercise 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 5.6, such other antidilution
adjustment otherwise required hereunder shall not be made as a result of such
event or circumstance.
5.7. Other Provisions Applicable to Adjustments under this Section.
The following provisions shall be applicable to making adjustments of the
Warrant Shares for which
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this Warrant is exercisable and the Exercise Price at which such Warrant Shares
may be purchased upon exercise of this Warrant provided for in this Section 5:
(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 Company
therefor shall be the amount of the cash received by the Company
therefor, or, if such Additional Shares of Stock or Convertible
Securities are offered by the Company 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 Company 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 Company
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 Directors of the Company. 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 Company 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 Company, 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 Company
for issuing such warrants or other rights plus the additional
consideration payable to the Company 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 Company for issuing
warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to
the Company in respect of the subscription for or purchase of such
Convertible Securities, plus the additional
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consideration, if any, payable to the Company 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
Company 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 shall be made whenever and as often as any event
requiring an adjustment shall occur, except that any adjustment of
the Exercise 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 5.1) 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
Exercise Price of less than 1% of the shares of Common Stock for
which this Warrant is exercisable immediately prior to the making of
such adjustment. 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 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.
(C) Conversion or Transfer of Series D Preferred Stock. If, at
any time, the Holder converts any shares of Series D Preferred Stock
into Conversion Shares (as defined in the Purchase Agreements) or
transfers any shares of Series D Preferred Stock in accordance with
the Purchase Agreements, then the number of shares in this Warrant
subject to the anti-dilution provisions pursuant to this Section 5,
shall be adjusted by multiplying the number of shares in this
Warrant subject to the anti-dilution provisions pursuant to this
Section 5 immediately prior to such conversion or transfer by a
fraction, of which (x) the numerator shall be the number of Shares
that continue to be held by the Holder immediately after such
conversion or transfer, as the case may be, and (y) the denominator
shall be the total number of shares of Series D Preferred Stock held
by such Holder, immediately prior to such conversion or transfer, as
the case may be.
(D) Fractional Interests. In computing adjustments under this
Section 5, fractional interests in the Common Stock shall be taken
into account to the nearest 1/100th of a share.
(E) Challenge to Good Faith Determination. Whenever the Board
of Directors of the Company shall be required to make a
determination in good faith
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of the fair value of any item under this Section 5, such
determination may be challenged in good faith by a Holder and any
dispute shall be resolved by an investment banking firm of
recognized national standing jointly selected by the Company and
such Holder. The fees of such investment banker shall be borne by
such holder if the Company's calculation is determined to be between
95% and 105% of the calculation of such banker.
(F) Determination of Market Price. "Market Price" means, as to
any security on the date of determination thereof, 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 in Section 1.6, such prices will be averaged for a
period of ten (10) consecutive Business Days prior to the day when
the Market Price is being determined under Section 1.6); 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 Company 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 Company and acceptable to holders of a majority
of the Warrants, as of the most recent practicable date when the
determination is to be made, taking into account the value of the
Company as a going concern, and without taking into account any lack
of liquidity of such security or any discount for a minority
interest.
(G) Escrow of Property. If the Company shall take a record of
the holders of its Stock for the purpose of entitling them to
receive any distribution of any kind of property whatsoever, but
prior to the payment of such distribution the Holder exercises this
Warrant, upon payment of the Exercise Price, such property shall be
held in escrow for the Holder by the Company to be issued to the
Holder upon the occurrence of such distribution and to the extent
such distribution actually takes place. Notwithstanding any other
provision to the contrary herein, if the distribution for which such
record was taken fails to occur or is rescinded, then such escrowed
property shall be returned to the Company.
(H) Meaning of "Issuance". References in this Agreement to
"issuances" of stock by the Company include issuances by the Company
of previously unissued shares and issuances or other transfers by
the Company of treasury stock.
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5.8. Reorganization, Reclassification, Merger or Consolidation. If
the Company 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 Company is not the continuing corporation after
such merger or consolidation), the Holders shall thereafter be entitled to
receive upon conversion of the Warrant 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 this
Section 5). 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 Company 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 Warrants. A sale, transfer or lease of all or
substantially all of the assets of the Company to another person shall be
deemed a reorganization, reclassification, consolidation or merger for the
foregoing purposes.
5.9. Exceptions to Adjustment of Exercise Price. Anything herein to
the contrary notwithstanding, the Company shall not make any adjustment of
the Exercise Price in the case of the issuance of shares of Common Stock
to holders of the Warrants upon exercise of all or any portion of their
Warrants.
5.10. Chief Financial Officer's Opinion. Upon each adjustment of the
Exercise Price and upon each change in the Warrant Shares issuable upon
the exercise of this Warrant, and in the event of any change in the rights
of a Holder by reason of other events herein set forth, then and in each
such case, the Company will promptly obtain a certificate of the chief
financial officer of the Company, stating the adjusted Exercise Price and
the new Warrant Shares so issuable, 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 Company will promptly mail a copy of such certificate to the
Holders. If a Holder disagrees with such calculation, the Company agrees
to obtain within thirty (30) business days an opinion of a firm of
independent certified public accountants selected by the Company'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
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adjustment of the Exercise Price and any such change in the number of
Warrant Shares so issuable.
5.11. Company to Prevent Dilution. In case at any time or from time
to time conditions arise by reason of action taken by the Company, which
in the good faith opinion of its Board of Directors or a majority of the
Holders are not adequately covered by the provisions of this Section 5,
and which might materially and adversely affect the exercise rights of the
Holders, the Board of Directors of the Company shall appoint such firm of
independent certified public accountants acceptable to a majority of the
Holders, 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, necessary with respect to the Exercise Price, so as to
preserve, without dilution (other than as specifically contemplated by
this Warrant), the exercise rights of the Holders. Upon receipt of such
opinion, the Board of Directors of the Company shall forthwith make the
adjustments described therein.
5.12. No Impairment. The Company 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
Company, 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 Warrants against impairment.
Section 6. Character of Shares of Stock.
All shares of the Common Stock issuable upon the exercise of this
Warrant shall, when issued to a Holder, be duly authorized, validly issued,
fully paid and nonassessable, free and clear of any lien or encumbrance and
without any preemptive rights.
Section 7. Notice to Holder.
So long as this Warrant shall be outstanding, (i) if the Company
shall pay any dividend or make any distribution upon the Common Stock, (ii) if
the Company shall offer to the holders of Common Stock, for subscription or
purchase by them, any shares of any class of stock of the Company or any other
rights or (iii) if there shall be any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company, voluntary or
involuntary dissolution, liquidation or winding up of the Company, then in any
such event, the Company shall cause to be mailed by certified mail to each
Holder, at least 30 days prior to the relevant date of the event described
above, a notice containing a brief description of the proposed action and
stating the date or expected date
14
<PAGE>
on which a record is to be taken for the purpose of such dividend, distribution
or rights, or the date or expected date such reclassification, reorganization,
consolidation, merger, conveyance, lease or transfer, dissolution, liquidation
or winding up shall take place or be voted upon by holders of the Common Stock
of record, and the date or expected date as of which the holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon any such event.
Section 8. Disposition of Warrant Shares.
The stock certificates of the Company that will evidence the Warrant
Shares or any other security issued or issuable upon exercise of this Warrant
will be imprinted with a legend in substantially the following form:
The securities represented by this Certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), or any
applicable state securities laws and may not be sold or otherwise
transferred (whether or not for consideration) unless registered under the
Act and any applicable state securities laws unless an exemption from
registration is then available.
Except as provided in the Registration Rights Agreement, the Company does not
agree to register any of the Warrant Shares for distribution in accordance with
the provisions of the Act or any applicable state securities laws, and the
Company has not agreed to comply with any exemption from registration under the
Act or any applicable state securities laws for the resale of the Warrant
Shares. Hence, it is the understanding of the Holder that by virtue of the
provisions of certain rules respecting "restricted securities" promulgated by
the Securities and Exchange Commission, the Warrant Shares may be required to be
held indefinitely, unless and until registered under the Act and any applicable
state securities laws unless an exemption from such registration is available,
in which case the Holders may still be limited as to the number of Warrant
Shares that may be sold.
Section 9. Governing Law.
This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts executed and to be performed wholly
within such state without regard to any conflicts of laws principles.
Section 10. Notice.
Any notice, demand, document or other communication given or
delivered hereunder shall be in writing, and may be (i) personally delivered,
(ii) given or made by United States registered or certified mail, return receipt
requested, postage prepaid, or (iii) given or made by overnight courier or
express mail for delivery the next Business Day, delivery charges prepaid,
addressed as follows:
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If to the Company: Global Pharmaceutical Corporation
Castor & Kensington Avenues
Philadelphia, PA 19124-5694
Facsimile No.: (215) 289-5932
Attention: President
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue, 31st Floor
New York, NY 10103-3198
Facsimile No.: (212)752-5958
Attention: Sheldon G. Nussbaum, Esq.
If to the Holder: c/o Fleming Capital Management
320 Park Avenue
11th Floor
New York, New York 10022
Attention: Robert L. Burr
David J. Edwards
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: David W. Pollak, Esq.
The Company and the Holder shall each have the right to designate a different
address for itself by notice similarly given. All such notices, demands,
documents or other communication will be deemed to be delivered (i) upon
receipt, if personally delivered, (ii) on the third full Business Day following
the day of mailing, if sent by United States registered or certified mail and
(iii) on the Business Day following the date it was sent, if sent by overnight
courier or express mail for delivery the next Business Day.
Section 11. Remedies.
The Company stipulates that the remedies at law of the Holder in the
event of any default or threatened default by the Company in the performance of
or compliance with any of the terms of this Warrant are not and will not be
adequate, and that such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise, in addition to any
other remedies which may be available at law or in equity.
16
<PAGE>
Section 12. Company Will Avoid Certain Actions.
The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, issue or sale of securities or otherwise, avoid or take any action which
would have the effect of avoiding the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in carrying out all of the provisions of this Warrant
Certificate and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder of this Warrant
Certificate against dilution or other impairment, and in particular, will not
cause the par value of any share of Common Stock to be or become greater than
the then effective Exercise Price.
Section 13. Company Will Not Close Books.
The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Common Stock issued or issuable
upon the exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant.
Section 14. Successors and Assigns.
This Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of the Holders hereof. The provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant and shall
be enforceable by any such Holder.
Section 15. Amendment.
This Warrant Certificate may be modified or amended and any
provision hereof may be waived by a writing executed by the Company and holders
of Warrants representing a majority of the Warrant Shares obtainable upon
exercise of the Warrants.
Section 16. Headings.
Section headings in this Warrant are for reference only and shall
not affect the meaning or construction of any of the provisions hereof.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.
GLOBAL PHARMACEUTICAL CORPORATION
By: /s/ Barry R. Edwards
--------------------------------------------
Name: Barry R. Edwards
Title: President and Chief Executive Officer
[Signature page to Warrant Certificate]
<PAGE>
ANNEX A
FORM OF SUBSCRIPTION
(To be executed only upon exercise of the Warrant
in whole or in part)
To Global Pharmaceutical Corporation
The undersigned registered holder of the accompanying Warrant hereby
irrevocably exercises such Warrant or portion thereof for, and purchases
thereunder, _______(1)/ Warrant Shares (as defined in such Warrant) and herewith
[makes payment therefor of $_______] [or] [makes payment therefor by conversion
of _______ Warrant Shares represented by such Warrant pursuant to Section 1.6 of
such Warrant]. The undersigned requests that the certificates for such Warrant
Shares be issued in the name of, and delivered to, ____________________________,
whose address is ____________________________________________.
Dated:
Name of Warrant Holder: _______________________________________________
(Name must conform in all respects to name of
holder as specified on the face of the Warrant)
_______________________________________________
(Street Address)
_______________________________________________
(City) (State) (Zip Code)
- --------
(1)/ Insert the number of Warrant Shares as to which this Warrant is being
exercised. In the case of a partial exercise, a new Warrant or Warrants
will be issued and delivered, representing the unexercised portion of this
Warrant, to the holder surrendering the same.
<PAGE>
ANNEX B
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns and
transfers unto ____________________________ [Name] of _____________ [Address]
the right represented by the within Warrant to purchase ________ shares of
Common Stock of Global Pharmaceutical Corporation to which the within Warrant
relates, and appoints ____________________ Attorney to transfer such right on
the books of Global Pharmaceutical Corporation with full power of substitution
in the premises.
Dated:________
_______________________________________________
(Name must conform to name of holder as
specified on the face of the Warrant)
_______________________________________________
(Street Address)
_______________________________________________
(City) (State) (Zip Code)
Signed in the presence of:
_______________________________
