U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. 0-26389
CYBEAR, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3936988
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5000 Blue Lake Drive, Suite 200
Boca Raton, Florida 33431
------------------------------- -------------------
(Address of principal (Zip Code)
executive offices
(561) 999-3500
----------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
Indicate by check mark whether the Registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers in response to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The number of shares outstanding of the Registrant's Common Stock was 17,772,537
(as of March 13, 2000).
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $43,907,247 (as of March 13, 2000).
DOCUMENTS INCORPORATED BY REFERENCE
None
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As used in this Report, the terms "we," "us," "our," the "Company" and "Cybear"
mean Cybear, Inc. and its subsidiaries (unless the context indicates a different
meaning).
FORWARD-LOOKING STATEMENTS
Cybear cautions readers that some of the information in this report
contains forward-looking statements within the meaning of the federal securities
laws. For this purpose, any statements contained in this report that are not
statements of historical fact may be deemed to be forward-looking statements.
Forward-looking statements typically are identified by use of terms like "may,"
"will," "expect," "anticipate," "estimate", "believe", "intend", "could",
"would" and similar words, although some forward-looking statements are
expressed differently. You should be aware that Cybear's actual results could
differ materially from those contained in the forward-looking statements due to
a number of factors, including our limited operating history and substantial
operating losses, feasibility of developing commercially profitable Internet
healthcare services, availability of capital resources, ability to effectively
compete, economic conditions, unanticipated difficulties in product development,
ability to continue product development, ability to gain market acceptance and
market share, ability to manage growth, Internet security risks and uncertainty
relating to the evolution of the Internet as a medium for commerce, dependence
on the capacity, reliability and security of our network infrastructure,
dependence on third party content providers, dependence on our key personnel,
ability to protect our intellectual property and the impact of future government
regulation on our business. You should also consider carefully the risks
described in this Report or detailed from time to time in our filings with the
Securities and Exchange Commission (the "SEC").
PART I
ITEM 1. BUSINESS
OVERVIEW
Cybear Inc., a Delaware corporation, was incorporated on February 5,
1997. Cybear is an information technology company using the Internet to improve
the efficiency of administrative and communications tasks of managing patient
care while addressing the healthcare industry's critical need for secure and
reliable transmission of information. An Internet Service Provider ("ISP") and
Application Services provider ("ASP") for the healthcare industry, Cybear uses
or intends to use its own secure private network to provide access to the
Internet, email and productivity applications available on a transaction or
subscription basis to physicians, physician organizations, pharmacies and
hospitals. Some of its online applications include or will include business
tools for hospital messaging, lab orders and results, streamlined purchasing,
prescription writing, claims processing, eligibility verification, formulary
compliance, credentialing, web site creation and physician-patient
communications via the Internet.
In March 1999, Cybear introduced its first product, its Physician
Practice Portal ("dr.cybear"), which addresses the communications and
operational needs of physicians and other healthcare providers. The Physician
Practice Portal is an Internet portal site that provides a combination of
healthcare content, practice management tools, the entry point to a
communications network and ongoing access to further products and services.
Dr.cybear is marketed to physicians, physician organizations, hospitals, managed
care organizations and integrated delivery networks throughout the United
States. In the three months ended June 30, 1999, Cybear emerged from the
development stage for financial reporting purposes.
In June 1999, the Company completed a public offering of 3,450,000
shares of its common stock, raising approximately $50.8 million in net proceeds.
In September 1999, the Company acquired Telegraph Consulting Corporation
("Telegraph"), the programming, networking and interactive design division of
Telegraph New Technology, Inc. The purchase price of approximately $4.1 million
included $1.2 million in cash, the issuance of 320,000 shares of Cybear
unregistered common stock valued at approximately $2.8 million and the
assumption of approximately $136,000 of Telegraph's debt. The
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acquisition was recorded using the purchase method of accounting. As of December
31, 1999, Cybear was approximately 73% owned by Andrx Corporation ("Andrx").
In September 1999, we entered into an arrangement with Andrx pursuant
to which prescription vaccines and injectables and other items distributed by
Andrx can be ordered through Cybear's Physician Practice Portal.
In December 1999, Cybear received from Andrx a tracking stock
recapitalization plan offer which would give Andrx shareholders the ability to
distinguish their investments in Andrx and Cybear. In March 2000, Andrx and
Cybear announced that they executed a definitive agreement with respect to the
previously announced tracking stock recapitalization plan. This plan, which was
recommended to the Cybear Board of Directors by its Special Committee and
approved by the boards of both Cybear and Andrx will create a new class of Andrx
common stock to separately track the performance of Cybear ("Cybear Group
Common"). The plan will be submitted to Andrx and Cybear shareholders for
approval later this year.
Cybear has incurred net operating losses and negative cash flows from
operating activities since its inception. As of December 31, 1999, Cybear had an
accumulated deficit of approximately $14.8 million. In addition, Cybear intends
to continue to invest heavily in product development, network operations,
customer support, sales and marketing and administrative areas. As a result,
Cybear expects to continue to incur substantial operating losses for the
foreseeable future, and may never achieve or sustain profitability.
In March 2000, Cybear signed a one-year agreement, subject to
additional one-year periods renewals by mutual agreement, with Novartis
Pharmaceuticals Corporation ("Novartis") pursuant to which Cybear will provide
secure on-line connectivity and communications solution through its dr.cybear
product to an initial group of 5,000 Novartis-selected physicians for monthly
subscription fees commencing one month after such physicians are registered.
Novartis has committed to register 5,000 physicians by the end of the year 2000.
In March 2000, we entered into two separate agreements with AHT
Corporation whereby (i) we were granted a license to use certain computer
software applications which we believe will enable users of dr.cybear and other
Cybear websites to access and use a prescription writing and transmission
service and a laboratory ordering process; and (ii) we have agreed to develop,
with the assistance of AHT, an electronic prescription writing device. Both
agreements provide, among other things, for a sharing of revenues between AHT
and Cybear in the event revenues are generated from the sales of products and/or
services related to the two agreements. Contemporaneously with the execution of
these agreements, we purchased from AHT a 10% Senior Secured Convertible Note
due March 31, 2001 in the amount of $4.0 million, which is convertible, at our
option, into shares of AHT Common Stock. In addition and in connection with the
entering into of the two agreements, we received a warrant to purchase 300,000
shares of AHT Common Stock.
Over the next year, we intend to supplement our core dr.cybear product
by continuing to improve its functionality and by introducing our Pharmacist
Portal Product ("rx.cybear"). The Company's Pharmacist Portal Product will
provide physicians the ability to write prescriptions and prescription refills
in the context of patient medical histories and payer clinical rules. As a
result, we expect our product to provide physicians and pharmacies with the
necessary tools to help reduce potentially harmful drug interactions, lessen the
number of telephone calls from payers and pharmacies, improve patient
satisfaction and ultimately improve patient care. Pharmacies may also benefit
through reduced administrative costs due to the correction and clarification of
prescriptions before being submitted for dispensing.
We also intend to implement additional functionality to our dr.cybear
product such as the communication of laboratory results. This service will
enable physicians to order and view the results of diagnostic tests from
participating clinical laboratories. We also intend to provide through our
dr.cybear product medical messaging services that may include discharge
summaries and nursing notes from hospitals, prescription and laboratory
information, transcription information, as well as other pertinent patient
medical records to allow physicians "real time" access to such information. We
also intend to offer healthcare providers the ability to verify patient
eligibility and coverage and process medical claims through our dr.cybear
product.
CORPORATE INFORMATION
Our executive offices are located at 5000 Blue Lake Drive, Suite 200,
Boca Raton, Florida 33431. Our telephone number is (561) 999-3500 and our web
site address is www.cybear.com. Information contained on our web site is not
part of this Report.
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HEALTHCARE COMMUNICATIONS AND INFORMATION TECHNOLOGY ISSUES
Participants in the healthcare industry are highly dependent upon
information. Information is generated by multiple sources, must be acted on at
various times by a variety of participants and forms the basis of quality care
and adequate reimbursement for services. With both the continued penetration of
managed care and reductions in government reimbursement, the need for accurate,
rapid and interactive information continues to increase. At the same time,
demand for real-time accurate clinical and administrative information among
healthcare network providers has increased.
Management believes that, notwithstanding the recognized need for
improved business-to-business communication, the healthcare industry has, to
date, underinvested in information technology. Instead, the exchange of complex
information currently depends on the inefficiencies inherent in mail, telephone
and fax communications. It is not unusual for patients to experience delays in
obtaining authorizations, in gaining access to specialists or in having
diagnostic or therapeutic procedures performed because of inefficient manual
methods of sharing information. Physicians find it increasingly difficult to
monitor the thousands of different medications covered by insurers, so
pharmacists interrupt patient care with requests to change or substitute
medications. It is common practice for physicians and their office staff to
telephonically verify a patient's eligibility and other items necessary to
render care. Manual methods of coding for healthcare reimbursement claims are
prone to human error. These inefficiencies are a daily part of healthcare and
reduce the profitability of healthcare providers and provider organizations.
The desired linkage of existing computer systems used by participants
in the healthcare industry has been hindered by a variety of factors, including
the sheer number of industry participants, the complexity of healthcare
transactions, the high cost of technology, limitations of existing information
systems, the incompatibility of the many existing operating platforms and the
continuing prevalence of computer systems that were not Y2K compliant.
We believe that the Internet is a transformational communications
technology that will be best suited to handle complex communications between
healthcare providers and payers. The Internet's open architecture, universal
accessibility and acceptance makes it a powerful communications medium
overcoming many of the limitations of legacy healthcare information access and
technology systems. Additionally, the Internet has gained wide acceptance in the
healthcare community as an information access and gathering tool, with
approximately 75% of U.S. physicians accessing the Internet regularly.
Consequently, the deployment of various applications, content and tools will
more readily be accepted by physicians and their office staffs.
THE CYBEAR SOLUTION
We developed dr.cybear to meet healthcare providers' need to improve
the accuracy and efficiency of communications with other providers, third party
payers and provider networks. In order to meet the demands of managed care, we
believe a system needs to quickly collect and deliver patient information at the
point of care, track physician activities and patterns, identify trends and
issues that affect the critical components of managed care such as quality,
cost, outcomes, variability and patient satisfaction and facilitate prospective
utilization review. We also believe that there will be a strong demand for
real-time clinical and practice management solutions that are easy to use,
secure and cost effective.
Our integrated suite of Internet-based products and services is
designed to improve the efficiency of day-to-day administrative and
communication tasks of the various participants in the healthcare industry,
including physicians, hospitals, networks and payers that must interact to
successfully manage patient care. These products may include applications,
information and data transfer capabilities designed by us to meet their
particular needs, and, through our ISP, allow for the creation of secure
intranets or custom private networks for members of these networks to
communicate and share private information. Access to our products is restricted
to registered users. Registered users must enter passwords to obtain access, and
the passwords are programmed to provide general access to product content and
applications
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and tiered-restricted access to member specific network communications. Our
Internet-based technology platform allows for efficient installation,
maintenance and customization using the user's existing computer system. Like
other Internet service providers, we use existing phone lines and the
telecommunications infrastructure. Registered users may also access dr.cybear
through other ISPs, even though Internet access through our ISP is already
included in their service.
CYBEAR'S COMPETITIVE ADVANTAGES
We believe our healthcare experience, our sales force, our
Internet-based technology platform, our in-house software development
capabilities and our business relationship with Andrx provide us with
significant competitive advantages that should permit Cybear to become an
Internet communications and applications provider for the healthcare community.
Our main strengths are:
/bullet/ We Have Healthcare Experience - Our chief executive officer is a
physician with experience practicing medicine, managing provider
networks and providing practice management services. Other members of
our senior management and Board of Directors have experience in
healthcare practice management and pharmaceutical industries. Our
development, marketing and support staff has in-depth knowledge of the
operations and specific needs of physicians and other key participants
in the healthcare industry. As a result, we believe we are able to
develop and deliver products that are useful and acceptable to our
users allowing us to build meaningful and lasting user relationships.
/bullet/ We Have Our Own Sales Force - We have an in-house sales and marketing
staff that has long-standing ties to key segments of the healthcare
industry, including physician practices, physician organizations and
pharmaceutical companies. We believe that these relationships will
allow us to rapidly expand our user base.
/bullet/ We Have an Internet-Based Technology Platform - We provide direct
Internet access to our registered users through our own ISP, unlike our
competitors who depend on others for Internet access. Being an ISP
allows us to provide a secure medium for transmission of sensitive
patient and transactional information in an easy to use, low cost, fast
and reliable manner. Our ISP platform also allows us to provide more
value to our users by providing general purpose Internet access at no
additional cost, web-hosting and the ability to develop private
intranets, which we believe will result in users being less likely to
switch to a competitor's product or service.
/bullet/ We Have Extensive In-House Software Development Capabilities - We have
an in-house software development team made up of over 30 programmers,
allowing us to provide easy to use, low cost tools for day-to-day
operational and management needs of medical practices and networks.
This allows us to create flexible Java and Cold Fusion language-based
applications to address the particular needs of different segments of
the healthcare industry. Our in-house development capability, together
with our server-based applications technology that allows us to send
updates to subscribers online, will allow us to make continuous
improvements to our products.
/bullet/ We Have a Business Relationship with Andrx - Andrx, our parent
corporation, provides us with telemarketing and product distribution
expertise. We have an arrangement with Andrx pursuant to which
prescription vaccines and injectables distributed by Andrx can be
ordered through our Physician Practice Portal.
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CYBEAR'S STRATEGY
Our strategy to become an Internet-based platform linking physicians
with other healthcare providers, third party payers and participants in the
healthcare industry is based upon several elements, including:
/bullet/ Building a Physician User Base - We are marketing dr.cybear to
physicians, their staff and physician organizations that have
ever-increasing and complex communications needs. In addition to
individual physicians, large physician organizations will either
subscribe to encourage their members to use dr.cybear. We expect
administrative staff, particularly office managers, schedulers and
billers will be regular users of many of the administrative tools of
dr.cybear.
/bullet/ Using Physician User Base to Obtain Additional Industry Users - By
developing a physician-centered user base, we believe that we will
attract non-physician users such as pharmacies, hospitals and
Independent Practice Associations ("IPA's") who will use our future
products to communicate and transact business with our dr.cybear
physician users. To this end, we are actively pursuing strategic
relationships with key healthcare, technology and content partners to
enable us to offer higher quality products and solutions to other
segments of the healthcare industry.
/bullet/ Using Connectivity to Retain Users - We believe that our ISP-related
ability to link physician organizations through custom, secure private
networks will improve communications and administrative efficiency. We
believe that once individual users are connected to and use a private
network, particularly members of large provider networks, they will
continue subscribing to our products and services instead of switching
to one of our competitor's services because if they switched, they
would not be able to communicate with members who are dr.cybear users.
/bullet/ Capitalizing on Multiple Revenue Sources - We intend to generate
revenues from multiple sources, including e-commerce, transaction fees
and subscription fees.
PRODUCTS
OUR TECHNOLOGY PLATFORM
Our Internet-based technology platform for our products includes an ISP
that serves only our users, and as a result improves security and reliability of
their Internet access, the use of Java and Cold Fusion language-based
programming to design our user applications, and a network operations center
with full system backups to provide reliability to our user base, all with the
capacity to meet our users' growing needs.
COMMON FEATURES OF OUR PRODUCTS
Each of our products will share the following common features tailored
to meet the needs of the targeted user:
<TABLE>
<CAPTION>
COMPONENT FEATURES
- ------------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Internet Service Provider /bullet/ Automatic configuration of the user's computer
/bullet/ Dial-in from any location in the U.S. through a network of
local numbers
/bullet/ Customizable front-end image that may include the name and
service mark of the user or the user's network
/bullet/ On-demand customer support
/bullet/ Access to our products as well as full general purpose
Internet access for use by our users
- ------------------------------------------------ ---------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
- ------------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Communications Services /bullet/ E-mail, private network capabilities and web hosting
services
/bullet/ Tiered multiple user groups for password secure restricted
access network communications with others in the relevant
healthcare delivery system, with the ability to control
access to information as desired
/bullet/ User group menus comprising larger groups or organizations
defined by a common interest or situation
- ------------------------------------------------ ---------------------------------------------------------------------
Content and Applications /bullet/ A portal entry point notifying users of new information
and product updates relevant to the particular user group
/bullet/ A template for users to design their own web site, search
engine/directory to find information on the Internet, and
online newsletter publisher, each customizable to the needs
of the user, and web site access and the ability to track the
number of visitors to a web site
/bullet/ Software applications tools to streamline day-to-day
healthcare administrative and operational tasks
/bullet/ Lifestyle information geared for the e-commerce needs of
healthcare professionals
- ------------------------------------------------ ---------------------------------------------------------------------
</TABLE>
DR.CYBEAR
Dr.cybear includes a broad range of practice management tools to assist
physicians and their office staff, increase physician productivity and enhance
potential reimbursement. Dr.cybear is designed to manage communications between
physicians and the various other segments of the healthcare industry that
interact with them. Cybear launched dr.cybear in March 1999.
The following highlights the dr.cybear practice, office and physician
tools:
PRACTICE TOOLS
<TABLE>
<CAPTION>
APPLICATION CONTENT BENEFIT
- ---------------------------------------- --------------------------------------- -------------------------------------
<S> <C> <C>
Managed Care Applications /bullet/ Contract Manager Helps manage differing insurance
/bullet/ Eligibility and Authorization contracts, checks a patient's
/bullet/ Capitation Evaluation insurance status, obtains referral
authorization and evaluates managed
care payments.
- ---------------------------------------- --------------------------------------- -------------------------------------
Care Management /bullet/ Patient Satisfaction Survey Patient services including
/bullet/ Patient Education satisfaction evaluation,
/bullet/ Patient Support educational handouts, online
/bullet/ Practice Benchmarks patients support links and
evaluation of practice by comparing
to standard norms.
- ---------------------------------------- --------------------------------------- -------------------------------------
Coding Management /bullet/ Coding Newsletter Updates and trains staff on coding
/bullet/ Medicare Training changes, simplifies billing with
/bullet/ ICD-9 Online online procedure and disease
listings.
- ---------------------------------------- --------------------------------------- -------------------------------------
Practice Compliance /bullet/ Compliance Newsletter Keeps practice abreast of
/bullet/ Legislative Update compliance issues and legislative
/bullet/ Legal Resources initiatives, alerts regarding fraud
/bullet/ Fraud and Abuse Alerts and abuse issues and assists in
evaluating health care attorney
qualifications.
- ---------------------------------------- --------------------------------------- -------------------------------------
</TABLE>
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OFFICE TOOLS
<TABLE>
<CAPTION>
APPLICATION CONTENT BENEFIT
- ---------------------------------------- --------------------------------------- -------------------------------------
<S> <C> <C>
Supply Replacement /bullet/ Injectables and Vaccines Online ordering of injectables,
/bullet/ Medical Supplies vaccines, medical, and office
/bullet/ Office Supplies supplies frees staff time and
ensures availability.
- ---------------------------------------- --------------------------------------- -------------------------------------
Staff Services /bullet/ Human Resources Helps track required human resource
/bullet/ Policy and Procedures documentation, contains staff
/bullet/ Office Training policies and procedures, online
/bullet/ Occupational Safety and training courses, and Occupational
Health Administration Safety and Health Administration
Regulatory compliance compliance evaluation and protocols.
/bullet/ Disaster Protocols
- ---------------------------------------- --------------------------------------- -------------------------------------
Infrastructure Support /bullet/ Office Forms Database Extensive repository of office
forms for all needs, both business
and clinical.
- ---------------------------------------- --------------------------------------- -------------------------------------
</TABLE>
PHYSICIAN TOOLS
<TABLE>
<CAPTION>
APPLICATION CONTENT BENEFIT
- ---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Continuing Education /bullet/ Continuing Medical Education Keeps physicians updated on their
/bullet/ Medical Library education, and allows patient,
/bullet/ Conference calendar disease and clinical research.
/bullet/ Clinical Studies
- ---------------------------------------- -------------------------------------- --------------------------------------
Prescription Management /bullet/ Managed Care Tracks the medications covered by
/bullet/ Food and Drug different insurance carriers, and
Administration Approvals minimizes changes and substitutions
/bullet/ Drug Formulary Prescription of patient medications.
Profiling
- ---------------------------------------- -------------------------------------- --------------------------------------
Certification Assistance /bullet/ Credentialing Database Updates physician's profile
/bullet/ Utilization Benchmarking regarding education, hospital
privileges, licensure, etc. Allows
comparison of patient management and
treatment to standard clinical
protocols and treatment regimes.
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
FUTURE PRODUCT
Cybear is developing additional functionality to its dr.cybear product
as well as an additional Internet-based product, rx.cybear, targeted to the
needs of pharmacies. The additional functionality to the dr.cybear product and
the rx.cybear product are based on our Internet-based technology platform, and
will add tools specially designed to meet the needs of the expected users.
Cybear anticipates that the additional functionality to the dr.cybear product
and the rx.cybear product will attract new users that will benefit from the
connectivity features to communicate among themselves and with physicians.
/bullet/ Additional functionality to our dr.cybear product will include:
/bullet/ Communication of laboratory results. This service will enable
physicians to order and view the results of diagnostic tests
from participating clinical laboratories.
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/bullet/ Medical messaging services which may include discharge
summaries and nursing notes from hospitals, prescription and
laboratory information, transcription information, as well as
other pertinent patient medical records to allow physicians
"real time" access to such information.
/bullet/ Enhanced patient eligibility and coverage verification.
/bullet/ Medical claims processing.
/bullet/ Rx.cybear will be targeted to the community pharmacies, a segment of
the healthcare delivery sector that is experiencing increased pressures
to reduce and control operational costs. Rx.cybear will also function
and provide benefits to the pharmacy chain market. Cybear believes
rx.cybear will have a direct bottom line cost to managing the
prescription benefit as well as the patient coordination between the
physician practice, the pharmacy and the patient. In addition to the
standard portal product, rx.cybear will offer applications that have
been developed by Cybear including:
/bullet/ Calculators that assist with managing the profitability of the
store, labor budgets, delivery costs, contract profitability,
profit and loss, and price increases.
/bullet/ Electronic integration of the Patient / Physician / Pharmacy
for Rx refills & renewals.
/bullet/ Ability to modify and change drug therapies during the refill
process.
/bullet/ E-commerce through the pharmacist's web page.
/bullet/ Access to numerous journals, regulatory information, formulary
listings and clinical study summaries.
MARKETING AND SALES
We sell our product primarily through two mechanisms: our in-house
sales force and our distribution partnerships. We have an in-house sales force
of individuals with healthcare backgrounds and relationships oriented to
building the physician user base. The sales force activity is complemented by
senior management in approaching other segments of the healthcare community,
including the pharmaceutical, medical device and supplies and ancillary service
providers. We believe both through direct sales and through distribution
partnerships, we will have more rapid product penetration and revenue
generation. We plan to continue recruiting additional sales and marketing staff.
To complement our sales strategy, we have a multifaceted marketing
approach that includes advertising, direct mailing, telemarketing, trade show
visibility and direct selling activity. Our marketing efforts take a business
partnership approach, with a focus on developing three main revenue bases:
e-commerce, transaction revenues and subscription revenues. We believe that
providing useful, easy to use and well supported products and services will
allow us to build our user base, and that building our user base will allow us
to generate e-commerce and transaction revenues.
CUSTOMER SERVICE AND SUPPORT
Cybear believes that effective customer service is essential to
attracting and retaining users and is acutely sensitive to the demands for
person-to-person responsiveness of the healthcare community. Cybear provides
ongoing telephone support in both technical computer hardware and healthcare
applications matters. This support is provided through its customer service and
help desk which are accessible by a toll-free call and are available from 8:00
a.m. to 8:00 p.m. eastern standard time Monday through Friday with after hours
support available via pager. Personnel are trained to both resolve technical
problems and to answer inquiries on product usage. Cybear also has trained
customer satisfaction associates to ensure proper use and customer satisfaction.
NETWORK OPERATIONS CENTER
Cybear's network operations center, or NOC, was designed to fully
integrate redundancy and scalability. We have installed redundant power
supplies, each with its own power cable, into every major switch or router in
our system so as to ensure that a disruption in the power supply or disconnected
power cable does not incapacitate the network. We can increase our capacity,
speed and fault tolerance
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without affecting or stopping existing services simply by connecting additional
equipment into our network. Upgrades are done to our equipment and software as
computer virus and other security advisories become available. We use the latest
in firewalls running dual design in the event one should fail. Cybear's external
connectivity is designed to be as redundant and self- repairing as its internal
network. We have connectivity, split across several routes and high speed
segments known as T3 lines, to several major telecommunication infrastructure
providers, including Bell South, Uunet, Sprint and Cable & Wireless, to provide
connections with the Internet. If any one or more of the providers or routers
becomes unavailable, the infrastructure itself will re-route traffic as
necessary to continue functioning without interruption.
Every network segment is split among redundant switches, and each
switch also is attached to the backbone through redundant connections, resulting
in an efficient self-healing network that can sense and repair itself as the
need arises. Our host routers and network segments, both internal and external,
are monitored 365 days a year through several systems, on and offsite, in order
to maintain site integrity. The NOC is located in Boca Raton, Florida.
COMPETITION
Cybear's competitors include online services or web sites targeted to
healthcare, general purpose ISPs, publishers and distributors of offline media,
healthcare information companies and large data processing and information
companies. Many of these competitors have substantial installed customer bases
in the healthcare industry and the ability to fund significant product
development and acquisition efforts. Cybear believes that the principal
competitive factors in its market include knowledge of user needs and client
service, system quality and product features, price and the effectiveness of
marketing and sales efforts. There can be no assurance that Cybear will be
competitive with respect to any individual factor or combination thereof.
To be competitive, Cybear must incorporate leading technologies,
enhance its existing services and content, develop new technologies that address
the increasingly sophisticated and various needs of healthcare professionals and
respond to technological advances and emerging industry standards and practices
on a timely and cost-effective basis. There can be no assurance that Cybear will
be successful in using new technologies effectively or adapting dr.cybear and
other products to user requirements or emerging industry standards. Any pricing
pressures, reduced margins or loss of market share resulting from Cybear's
failure to compete effectively would materially adversely affect Cybear's
business, financial condition and operating results.
Many of Cybear's current and potential competitors have greater
financial, technical and marketing resources to devote to the development,
promotion and sale of their services; longer operating histories; greater name
recognition; and larger user bases than Cybear and, therefore, may have a
greater ability to attract users. Many of these competitors may be able to
respond more quickly than Cybear to new or emerging technologies in the Internet
and the personal communications market and changes in Internet user requirements
and to devote greater resources than Cybear to the development, promotion and
sale of their services. In addition, Cybear does not have contractual rights to
prevent its business partners from entering into competing businesses or
directly competing with it.
GOVERNMENT REGULATION AND HEALTHCARE REFORM
The healthcare industry is subject to changing political, economic and
regulatory influences that may affect the procurement practices and operation of
healthcare organizations. Cybear's products are designed to function within the
structure of the healthcare financing and reimbursement system currently being
used in the United States. During the past several years, the healthcare
industry has been subject to an increase in governmental regulation of, among
other things, reimbursement rates.
Proposals to reform the U.S. healthcare system have been and will
continue to be considered by the U.S. Congress. These programs may contain
proposals to increase governmental involvement in healthcare and otherwise
change the operating environment for Cybear's potential customers. Healthcare
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organizations may react to these proposals and the uncertainty surrounding such
proposals by curtailing or deferring investments, including those for Cybear's
products. On the other hand, changes in the regulatory environment have in the
past increased and may continue to increase the needs of healthcare
organizations for cost-effective information management and thereby enhance the
marketability of Cybear's products and services. Cybear cannot predict with any
certainty what impact, if any, such proposals or healthcare reforms might have
on Cybear's results of operations, financial condition and business.
Cybear's products and services are not directly subject to governmental
regulations, although the proposed user base is subject to extensive and
frequently changing federal and state laws and regulations. However, with regard
to healthcare issues on the Internet, the recently enacted Health Insurance
Portability and Accountability Act of 1996, mandates the use of standard
transactions, standard identifiers, security and other provisions by the year
2002. It will be necessary for Cybear's platform and for the applications that
it provides to be in compliance with the proposed regulations. Congress is also
likely to consider legislation that would establish uniform, comprehensive
federal rules about an individual's right to access his own or someone else's
medical information. This legislation would likely define what is to be
considered "protected health information" and outline steps to ensure the
confidentiality of this information. The proposed Health Information
Modernization and Security Act would provide for establishing standards and
requirements for the electronic transmission of health information.
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may be
adopted in the future that address issues such as online content, user privacy,
pricing and characteristics and quality of products and services. For example,
although it was held unconstitutional, the Communications Decency Act of 1996
prohibited the transmission over the Internet of certain types of information
and content. In addition, several telecommunications carriers are seeking to
have telecommunications over the Internet regulated by the FCC in the same
manner as other telecommunications services. Because the growing popularity and
use of the Internet has burdened the existing telecommunications infrastructure
in many areas, local exchange carriers have petitioned the FCC to regulate ISPs
in a manner similar to long distance telephone carriers and to impose access
fees on the ISPs.
Internet user privacy has become an issue in the United States. Current
United States privacy law consists of a few disparate statutes directed at
specific industries that collect personal data, none of which specifically
covers the collection of personal information online. Cybear cannot guarantee
that the United States will not adopt legislation purporting to protect such
privacy. Any such legislation could affect the way in which Cybear is allowed to
conduct its business, especially those aspects that involve the collection or
use of personal information, and could have a material adverse effect on
Cybear's business, financial condition and operating results. Moreover, it may
take years to determine the extent to which existing laws governing issues such
as property ownership, libel, negligence and personal privacy are applicable to
the Internet.
With regard to copyright infringement liability, Congress recently
enacted the Online Copyright Infringement Liability Limitation Act as part of
the Digital Millennium Copyright Act which limits the copyright liability of
ISPs for certain transmissions through their systems. Through this law, an ISP
can avoid liability for copyright infringement with respect to the ISP's
transmitting, routing, linking, and storing materials through its service if the
materials are transmitted or stored by or at the direction of a person other
than the ISP through an automatic process without selection of the materials by
the ISP, the ISP does not select the recipients of the materials except as an
automatic response to the request of another person, the materials are not
accessible by unanticipated recipients, and the materials are transmitted
without modification of content.
The ISP must not have actual knowledge or information making it
apparent that materials on its system infringe, and must have procedures in
place to deal with allegations of infringement, including a designated person to
receive notifications of claimed infringement, a commitment to remove allegedly
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infringing material from the service upon receipt of credible notifications and
notification of the subscriber whose material is removed from the service.
While this law provides some protection, it will not apply in all
aspects where Cybear could face liability for copyright infringement as a result
of materials available on its ISP because Cybear may create or modify certain of
these materials, and therefore be outside of the safe harbor provided by this
law.
The tax treatment of the Internet and e-commerce is currently
unsettled. A number of proposals have been made at the federal, state and local
level and by certain foreign governments that could impose taxes on the sale of
goods and services and certain other Internet activities. A recently-passed law
places a temporary moratorium on certain types of taxation on Internet commerce.
Cybear cannot predict the effect of current attempts at taxing or regulating
commerce over the Internet. Any legislation that substantially impairs the
growth of e-commerce could have a material adverse effect on Cybear's business,
financial condition and operating results.
INTELLECTUAL PROPERTY
Cybear seeks to protect its proprietary information through
nondisclosure agreements with its employees. Cybear's policy is to have
employees enter into nondisclosure agreements containing provisions prohibiting
the disclosure of confidential information to anyone outside Cybear, requiring
disclosure to Cybear of any new ideas, developments, discoveries or inventions
conceived during employment, and requiring assignment to Cybear of proprietary
rights to such matters that are related to Cybear's business.
Cybear also relies on a combination of trade secrets, copyright and
trademark laws, contractual provisions and technical measures to protect its
rights in various methodologies, systems and products and knowledge bases.
Cybear believes that because of the rapid pace of technological change in the
EDI industry, trade secret and copyright protection are less significant than
factors such as the knowledge, ability, experience and integrity of Cybear's
employees, frequent product enhancements and the timeliness and quality of
support services.
We have a federal service mark registration for "Cybear". We have also
registered the domain names "dr.cybear.com" and "Cybear.com." Any infringement
or misappropriation of Cybear's intellectual property rights would disadvantage
Cybear in its efforts to retain and attract new customers in a highly
competitive market and could cause Cybear to lose revenues or incur substantial
litigation expense.
Although Cybear believes that its products do not infringe on the
intellectual property rights of others, there can be no assurance that such a
claim will not be asserted against Cybear in the future. If asserted, such a
claim could cause Cybear to lose revenues or incur substantial litigation
expense.
EMPLOYEES
As of March 8, 2000, Cybear had 100 full-time employees. None of such
employees is a member of a labor union and Cybear considers its relationship
with its employees to be good.
ITEM 2. PROPERTIES
Cybear currently leases 21,648 square feet of space in Boca Raton,
Florida housing its corporate headquarters and network systems. The lease
provides for annual rent of $270,600, excluding taxes, insurance, utilities and
common area maintenance charges. In September 1999, the Company amended its
lease to expand the leased premises by 16,420 square feet starting April 1,
2000. This will increase the annual base rent to $490,316 excluding taxes,
insurance, utilities and common area maintenance charges starting on April 1,
2000. In addition, the lease term was extended to March 31, 2007. Cybear
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has adequate insurance for the premises. Management believes that this office
space will be adequate for Cybear's needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
From time to time, Cybear may be involved in litigation relating to
claims arising out of its operations in the normal course of business. Cybear is
not currently a party to any legal proceeding or aware of any other claim, the
adverse outcome of which, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on Cybear's business, operating
results and financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the Company's fiscal year ended December 31, 1999.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
Our common stock has been listed for trading on the Nasdaq National
Market under the symbol "CYBA" since June 18, 1999. From January 28, 1999 to
June 17, 1999, our common stock was traded on the OTC Bulletin Board under the
symbol "CYBR". The following table sets forth, for the calendar quarters
indicated, the range of high and low bid prices per share of common stock as
reported by the OTC Bulletin Board for the period from January 28, 1999 to June
17, 1999 and the range of high and low sales prices per share of common stock as
reported by the Nasdaq National Market for the period from June 18, 1999 to
December 31, 1999. Quotations from the OTC Bulletin Board were over-the-market
quotations and, accordingly, reflected inter-dealer prices, without retail
mark-up, mark-down or commission and may have not represented actual
transactions. Because only 269,400 shares were freely tradable at that time,
there was a limited public market for our common stock and the prices might not
have reflected the true value of our common stock:
1999 HIGH LOW
- ----------- ------- ------
First Quarter (Commencing January 28, 1999) $ 53.00 $ 3.25
Second Quarter 41.00 13.88
Third Quarter 23.25 5.88
Fourth Quarter 10.00 5.47
HOLDERS
As of March 7, 2000, there were approximately 51 registered holders of
record of Cybear's common stock. Cybear believes the number of beneficial owners
of its common stock is approximately 3,139.
DIVIDENDS
Cybear has not paid dividends on its common stock and does not intend
to pay dividends for the foreseeable future. Cybear intends to retain any
earnings, to finance the development and expansion of its business.
ITEM 6. SELECTED FINANCIAL DATA
This section presents selected historical financial data of Cybear. You
should read this selected financial data together with "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
this Report as well as Cybear's Consolidated Financial Statements and related
notes contained in Item 8 of this Report. The selected data in this section is
not intended to replace the Consolidated Financial Statements.
Cybear derived the statement of operations data and balanced sheet data
from the audited consolidated financial statements contained in Item 8 of this
Report. Those financial statements were audited by Arthur Andersen LLP,
independent certified public accountants.
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STATEMENT OF OPERATIONS DATA*:
<TABLE>
<CAPTION>
YEARS ENDED FOR THE PERIOD FROM
DECEMBER 31, FEBRUARY 5, 1997
----------------------------- (INCEPTION) TO
1999 1998 DECEMBER 31, 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 269,707 $ -- $ 95,927
Operating expenses:
Network operations and operations
support 2,867,047 643,309 --
Product development 3,058,207 1,716,454 894,027
Sales and marketing 4,908,939 482,418 --
General and administrative 2,543,952 1,189,122 666,873
Depreciation and amortization 1,555,613 139,268 65,376
------------ ------------ ------------
Total operating expenses 14,933,758 4,170,571 1,626,276
------------ ------------ ------------
Loss from operations (14,664,051) (4,170,571) (1,530,349)
Other income (expense):
Interest expense on due to Andrx
Corporation (216,182) (210,441) (28,220)
Interest income 1,282,379 -- --
------------ ------------ ------------
Loss before income taxes (13,597,854) (4,381,012) (1,558,569)
Income tax benefit 2,824,069 1,900,000 --
------------ ------------ ------------
Net loss $(10,773,785) $ (2,481,012) $ (1,558,569)
============ ============ ============
Basic and diluted net loss per share $ (0.70) $ (0.19) $ (0.12)
============ ============ ============
Basic and diluted weighted average shares
of common stock outstanding 15,470,009 13,030,999 12,768,303
============ ============ ============
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash, cash equivalents and investments available-for-sale $37,993,628 $ 3,983 $ 1,000
Working capital (deficit) 39,389,776 (3,235,200) (1,378,412)
Total assets 53,068,029 3,331,951 395,456
Total liabilities 3,090,680 3,799,568 1,410,119
Total shareholders' equity (deficit) 49,977,349 (467,617) (1,014,663)
</TABLE>
*Certain prior year amounts have been reclassified to conform to the current
year presentation.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDITION AND RESULTS OF
OPERATIONS
INTRODUCTION
Cybear Inc., a Delaware corporation, was incorporated on February 5,
1997. Cybear is an information technology company using the Internet to improve
the efficiency of administrative and communications tasks of managing patient
care. Cybear provides access to the Internet and the Cybear product line through
its own ISP system, delivering productivity applications to health care
providers and health information to consumers.
In March 1999, Cybear introduced its first product, its Physician
Practice Portal, which addresses the communications and operational needs of
physicians. Cybear's future products will provide Internet-based productivity
software applications and communication networks for other constituents of the
healthcare community. In the three months ended June 30, 1999, Cybear emerged
from the development stage for financial reporting purposes.
In June 1999, the Company completed a public offering of 3,450,000
shares of its common stock, raising approximately $50.8 million in net proceeds.
In September 1999, the Company acquired Telegraph Consulting Corporation
("Telegraph"), the programming, networking and interactive design division of
Telegraph New Technology, Inc. The purchase price of approximately $4.1 million
included $1.2 million in cash, the issuance of 320,000 shares of Cybear
unregistered common stock valued at approximately $2.8 million and the
assumption of approximately $136,000 of Telegraph's debt. The acquisition was
recorded using the purchase method of accounting. As of December 31, 1999,
Cybear was approximately 73% owned by Andrx.
In December 1999, Cybear received from Andrx a tracking stock
recapitalization plan offer which would give Andrx shareholders the ability to
distinguish their investments in Andrx and Cybear. In March 2000, Andrx and
Cybear entered into a definitive agreement with respect to the previously
announced tracking stock recapitalization plan. This plan, which was recommended
to the Cybear Board of Directors by its Special Committee and approved by the
Boards of both Cybear and Andrx, will create a new class of Andrx common stock
to separately track the performance of Cybear ("Cybear Group Common"). The plan
will be submitted to Andrx and Cybear shareholders for approval later this year.
Pursuant to an Agreement and Plan of Merger and Reorganization (the
"Agreement"), Andrx will acquire all of the publicly traded shares of common
stock of Cybear in a tax-free "roll-up" merger. Public shareholders currently
own approximately 5.4 million shares (assuming the exercise by Edward E.
Goldman, M.D., Cybear's chief executive officer, of a warrant to acquire 525,000
shares of Cybear's common stock currently owned by Andrx), or 30.5%, of the
common shares of Cybear, and those shareholders will receive one share of Cybear
Group Common for every Cybear share they currently own. In the recapitalization,
the number of Cybear shares held by Andrx will be reduced from 12.4 million
shares to 10.3 million shares so as to provide the equivalent of a 20% increase
in shares held by the non-Andrx shareholders of Cybear. As a result, the
non-Andrx shareholders of Cybear will own approximately 34.5% of the Cybear
Group Common following the closing of the transaction. Pursuant to the
Agreement, each Andrx common share will be converted into (i) one share of Andrx
Group Common and (ii) approximately .1622 shares of Cybear Group Common, after
giving effect to Andrx' pending two-for-one stock split (in the form of a stock
dividend) announced on March 1, 2000. Upon completion of the recapitalization,
(i) Cybear will be a wholly owned subsidiary of Andrx with 100% of its value
publicly traded in the form of Cybear Group Common; (ii) current Cybear
shareholders will own approximately 34.5% of the Cybear Group Common; and (iii)
current Andrx shareholders will own 100% of the Andrx Group Common and
approximately 65.5% of the Cybear Group Common.
Andrx and Cybear will be filing a preliminary joint proxy statement and
a registration statement with respect to the proposed transaction with the SEC,
which is subject to review by the SEC. In addition to shareholder approval, the
transaction will be subject to various Federal and state regulatory approvals
and, accordingly, no assurance can be given that this transaction will be
consummated.
In connection with the tracking stock recapitalization plan, the
Company estimates it will incur merger costs of up to approximately $1.5 million
if the tracking stock recapitalization plan is consummated. These costs will be
charged to expense as incurred. No assurance can be given that this transaction
will be consummated.
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Cybear has incurred net operating losses and negative cash flows from
operating activities since its inception. As of December 31, 1999, Cybear had an
accumulated deficit of approximately $14.8 million. In addition, Cybear intends
to continue to invest heavily in product development, network operations,
customer support, sales and marketing and administrative areas. As a result,
Cybear expects to continue to incur substantial operating losses for the
foreseeable future, and may never achieve or sustain profitability.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 ("1999") AS COMPARED TO YEAR ENDED DECEMBER 31,
1998 ("1998").
Cybear had $269,707 in revenues for 1999 and had no revenues for 1998.
Revenue for 1999 includes subscriptions to the Company's Physician Practice
Portal product, as well as revenues from web site development and maintenance
and e-commerce revenues (see Note 2 to the accompanying consolidated financial
statements). Cybear does not expect that revenues derived from Web site
development and maintenance to be material in the year ending December 31, 2000.
Network operations and operations support costs were $2.9 million in
1999 compared to $643,309 in 1998. Network operations and operations support
costs consist primarily of personnel and related costs associated with operating
the network operations center and providing customer support, telecommunications
costs and maintenance expense on computer hardware and software. The increase in
network operations and operations support costs for 1999 related to the
establishment of the network operations center and the development of the
operations support infrastructure.
Product development costs were $3.1 million in 1999 compared to $1.7
million in 1998. Product development costs include payroll, benefits and other
expenses of employees involved in the creation, design and development of
Cybear's products, outside consultant fees and content fees. The increase in the
product development costs for 1999 reflects the progress and expansion of
Cybear's development activities.
Sales and marketing expenses were $4.9 million in 1999 compared to
$482,418 in 1998. Sales and marketing expenses consist primarily of salaries and
personnel related costs, consulting and advertising fees and costs of developing
and distributing promotional material. The increase in sales and marketing
expenses for 1999 related primarily to the establishment of the selling and
marketing infrastructure, an increase in consulting and advertising fees, the
development and distribution of promotional material and costs incurred for
trade shows.
General and administrative expenses were $2.5 million in 1999 compared
to $1.2 million in 1998. General and administrative expenses consist primarily
of salaries and personnel related expenses for executives and administrative
functions, housing expenses and professional fees. The increase in general and
administrative expenses for 1999 related to the expansion of the administrative
infrastructure.
Depreciation and amortization expense was $1.6 million in 1999 compared
to $139,268 in 1998. Depreciation and amortization expense consists primarily of
the depreciation and amortization of property and equipment, amortization of
goodwill and amortization of capitalized product development costs. The increase
in depreciation and amortization for 1999 resulted primarily from Cybear's
purchases of computer hardware and software used in its network operations
center and the development of its products, leasehold improvements to the rented
space housing its corporate headquarters and network operations center. In
addition, Cybear began amortizing capitalized product development costs as it
released its first products in 1999 and began amortizing the goodwill arising
from the acquisition of Telegraph.
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<PAGE>
Interest expense was $216,182 in 1999 compared to $210,441 in 1998.
Interest expense represented interest on Due to Andrx under the credit agreement
between the two companies to fund Cybear's operations. Upon completion of the
public offering in June 1999, Andrx converted its advances due from Cybear, net
of the reimbursement for income tax attributes, to Cybear's capital in exchange
for 465,387 shares of Cybear common stock at the public offering price of $16.00
per share.
Cybear had interest income of $1.3 million in 1999 and had no interest
income in 1998. The interest income resulted primarily from the investments of
the net proceeds generated from the public offering in money market funds and
interest bearing investment grade securities.
Cybear's taxable results through the completion of the public offering
in June 1999 were included in the consolidated income tax return of Andrx since
Andrx owned at least 80% of the common stock of Cybear. Cybear and Andrx have a
tax allocation agreement pursuant to which Federal income tax liabilities or
benefits are allocated to Cybear as if Cybear had filed a separate income tax
return when Cybear's taxable results are included in the consolidated income tax
return of Andrx. Upon completion of the public offering in June 1999, Andrx's
ownership in Cybear was reduced below 80%. Consequently, Cybear thereafter files
its income tax returns separately.
For the period from June 23, 1999 (date of completion of the public
offering) to December 31, 1999, Cybear generated a net operating loss
carryforward of approximately $10 million which is available to offset future
earnings. As of December 31, 1999, Cybear has net deferred tax assets of
approximately $4.0 million attributable primarily to the net operating loss
carryforward of approximately $10 million generated from June 23, 1999 to
December 31, 1999. Under the provisions of SFAS No. 109, "Accounting for Income
Taxes", Cybear has provided a valuation allowance to reserve against 100% of its
net deferred tax assets due to its history of net losses. For the period from
January 1, 1999 to June 22, 1999 and for 1998, Cybear recorded $2.8 million and
$1.9 million, respectively, in income tax benefits. The income tax benefits
reflect the reimbursement from Andrx for the utilization of Cybear's income tax
attributes pursuant to the tax allocation agreement.
1998 AS COMPARED TO PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO DECEMBER 31,
1997 ("1997").
Cybear had no revenues for 1998 as it was in the development stage.
Revenues were $95,927 in 1997 and consisted of software development services
rendered to Andrx.
Network operations and operations support costs were $643,309 in 1998.
Cybear had no network operations and operations support costs in 1997. The
increase in network operations and operations support costs for 1998 related to
the establishment of the network operations center and the development of the
operations support infrastructure.
Product development costs were $1.7 million in 1998 compared to
$894,027 in 1997. The increase in the product development costs for 1998
reflected the progress and expansion of Cybear's development activities.
Sales and marketing expenses were $482,418 in 1998. Cybear had no sales
and marketing expenses in 1997. The increase in sales and marketing expenses for
1998 related to the development of the sales and marketing infrastructure.
General and administrative expenses were $1.2 million in 1998 compared
to $666,873 in 1997. The increase in general and administrative expenses for
1998 related to the expansion of the administrative infrastructure.
Depreciation and amortization expense was $139,268 in 1998 compared to
$65,376 in 1997. The increase in depreciation and amortization for 1998 resulted
primarily from the Company's purchases of computer hardware and software used in
the establishment of its network operations center and the development of its
products.
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<PAGE>
Interest expense was $210,441 in 1998 compared to $28,220 in 1997.
Interest expense represented interest on advances from Andrx under the Credit
Agreement between the two companies to fund Cybear's operations. At December 31,
1998, the net advances including interest amounted to approximately $5.4
million.
Cybear recorded a tax benefit of $1.9 million in 1998 reflecting the
reimbursement from Andrx for the utilization of Cybear's income tax attributes
pursuant to the tax allocation agreement. In 1997, the Company did not record
any income tax provision or benefit as Andrx could not utilize Cybear's tax
attributes. As of December 31, 1998, Cybear had net deferred tax assets of
approximately $342,000 attributable primarily to a net operating loss
carryforward in the amount of approximately $800,000 which was available to
offset future earnings. Under the provisions of SFAS No. 109, Cybear had
provided a valuation allowance to reserve against 100% of its net deferred tax
assets given its history of net losses.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, Cybear had $38.0 million in cash, cash
equivalents and investments available-for-sale and $39.4 million of working
capital.
Net cash used in operating activities was $9.7 million in 1999 compared
to $1.4 million in 1998 and $1.4 million in 1997. The increase in net cash used
in operating activities in 1999, as compared to 1998 is primarily due to Cybear
incurring a net loss of $10.8 million in 1999 as compared to a net loss of $2.5
million in 1998, an increase in other assets of $1.3 million in 1999 as compared
to a decrease of $11,730 in 1998 offset by depreciation and amortization expense
of $1.6 million in 1999, as compared to $139,268 in 1998. The increase in other
assets results primarily from recording a long term receivable of $600,000 from
a medical organization and advance payments made to an operator of web sites
(see Note 10 to the accompanying consolidated financial statements).
In 1999, net cash used in operating activities was primarily
attributable to Cybear's loss from operations, the interest receivable from the
Company's investments available-for-sale and an increase in other assets, offset
by the depreciation and amortization expense and an increase in accounts
payable. In 1998 and 1997, the net cash used in operating activities was
primarily attributed to Cybear's loss from operations offset by increases in
accounts payable.
Net cash used in investing activities was $34.2 million in 1999, $2.7
million in 1998 and $400,535 in 1997. In 1999, Cybear made net purchases of
$26.2 million in investments available-for-sale, purchased a $3.0 million
one-year convertible promissory note from HIE, Inc., and used $1.2 million in
net cash for the acquisition of Telegraph. Cybear also purchased $2.2 million in
property and equipment consisting mainly of computer hardware and software used
in its network operations center and the development of its products, leasehold
improvements to the rented space housing its corporate headquarters and network
operations center and furniture for its corporate headquarters. Cybear also
purchased $1.6 million in software licenses and capitalized $140,304 in product
development costs. In 1998, Cybear purchased $2.3 million of property and
equipment consisting mainly of computer hardware and software used in its
network operations center and in its product development activities, and
leasehold improvements to the rented space housing its corporate headquarters
and network operations center. In addition, Cybear capitalized $358,000 in
product development costs. In 1997, Cybear invested $240,535 in capital
expenditures consisting mainly of computer hardware and software used in the
development of its products. In addition, Cybear purchased a software license
for $160,000.
Net cash provided by financing activities was $55.9 million in 1999,
$4.1 million in 1998 and $1.8 million in 1997. In 1999, net cash provided by
financing activities consisted mainly of $50.8 million in net proceeds generated
from the public offering of 3,450,000 shares of common stock of the Company and
$5.1 million of advances from Andrx to fund Cybear's operations, net of the
reimbursement from Andrx for the utilization of Cybear's income tax attributes
pursuant to the tax allocation agreement. In 1998, net cash provided by
financing activities consisted of advances from Andrx to fund Cybear's
operations, net of the reimbursement from Andrx for the utilization of Cybear's
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income tax attributes pursuant to the tax allocation agreement. In 1997, net
cash provided by financing activities consisted of advances from Andrx to fund
Cybear's operations and proceeds from issuance of Cybear's stock.
From time to time, Cybear may be involved in litigation relating to
claims arising out of its operations in the normal course of business. Cybear is
not currently a party to any legal proceeding or aware of any other claim, the
adverse outcome of which, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on Cybear's business, operating
results and financial condition.
Cybear anticipates that its cash requirements will continue to increase
as it continues to expend substantial resources to build its infrastructure,
develop its products and establish its sales and marketing, network operations,
customer support and administrative organizations. Cybear currently anticipates
that its available cash resources will be sufficient to meet its presently
anticipated working capital and capital expenditure requirements for the next
twelve months.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133, as
amended, establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133, as amended, requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.
SFAS No. 133, as amended, is effective for fiscal years beginning after
June 15, 2000. A company may also implement the provisions of SFAS No. 133, as
amended, as of the beginning of any fiscal quarter after issuance. SFAS No. 133,
as amended, cannot be applied retroactively. SFAS No. 133, as amended, must be
applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 (and, at the Company's election, before January
1, 1998). The Company will adopt the provisions of SFAS No. 133 beginning
January 1, 2001, as required. Adoption of the provisions of this standard is not
expected to have a material effect on the Company's consolidated results of
operations and financial condition.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's exposure to market rate risk for changes in interest
rates relates primarily to its investments available-for-sale portfolio. The
Company has not entered into derivative financial instruments in its investments
available-for-sale portfolio. The Company's investments available-for-sale
portfolio consists of fixed rate debt instruments of the U.S. Government and its
agencies, and of high-quality corporate issuers. The Company has established
guidelines, which were approved by its board of directors, relative to
diversification and maturities of its investments available-for-sale portfolio
that are designed to limit the amount of credit exposure to any one issuer and
help ensure safety and liquidity. Investments in fixed rate interest earning
instruments carries a degree of interest rate risk. Fixed rate securities may
have their fair market value adversely impacted due to a rise in interest rates.
Due in part to these factors, the Company's future investment income may fall
short of expectations due to changes in interest rates or the Company may suffer
losses in principal if forced to sell securities which have declined in market
value due to changes in interest rates. Although changes in interest rates may
affect the fair value of the investments available-for-sale portfolio and cause
unrealized gains or losses, such gains or losses would not be realized unless
the investments are sold.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CYBEAR, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS OF
CYBEAR, INC. AND SUBSIDIARIES:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-3
Consolidated Statements of Operations for the years ended December 31, 1999 and 1998
and for the period from February 5, 1997 (inception) to December 31, 1997 F-4
Consolidated Statements of Shareholders' Equity (Deficit) for the years ended
December 31, 1999 and 1998 and for the period from February 5, 1997
(inception) to December 31, 1997 F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1999 and
1998 and for the period from February 5, 1997 (inception) to December 31, 1997 F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Cybear, Inc.:
We have audited the accompanying consolidated balance sheets of Cybear,
Inc. (a Delaware corporation and 73% owned subsidiary of Andrx Corporation as of
December 31, 1999) and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of operations, shareholders' equity (deficit)
and cash flows for the years ended December 31, 1999 and 1998 and for the period
from February 5, 1997 (inception) to December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Cybear, Inc. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years ended December 31, 1999 and 1998
and for the period from February 5, 1997 (inception) to December 31, 1997, in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
February 10, 2000 (except for
the tracking stock recapitalization
plan discussed in Note 14, as to
which the date is March 24, 2000).
F-2
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,921,731 $ 3,983
Investments available-for-sale 26,071,897 --
Investment interest receivable 740,037 --
Accounts receivable, net of allowance of $3,000 104,742 --
Convertible note receivable from HIE, Inc. 3,000,000 --
Receivable from Blue Lake Ltd. -- 366,000
Prepaid expenses and other current assets 642,049 194,385
------------ ------------
Total current assets 42,480,456 564,368
Property and equipment, net 3,523,395 2,406,629
Product development costs, net 332,752 358,000
Software licenses 1,603,000 --
Goodwill, net 3,818,844 --
Other assets 1,309,582 2,954
------------ ------------
Total assets $ 53,068,029 $ 3,331,951
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 2,758,330 $ 1,153,059
Accrued liabilities 332,350 301,782
Due to Andrx Corporation -- 2,344,727
------------ ------------
Total current liabilities 3,090,680 3,799,568
------------ ------------
Commitments and contingencies (Notes 10 and 14)
Shareholders' equity (deficit):
Preferred stock, $.01 par value; 2,000,000 shares authorized,
none issued and outstanding as of December 31, 1999 and 1998 -- --
Common stock, $.001 par value; 25,000,000 shares
authorized, 17,653,662 and 13,269,400 shares issued and
outstanding as of December 31, 1999 and 1998, respectively 17,654 13,269
Additional paid-in capital 64,873,031 3,558,695
Accumulated deficit (14,813,366) (4,039,581)
Accumulated other comprehensive loss (99,970) --
------------ ------------
Total shareholders' equity (deficit) 49,977,349 (467,617)
------------ ------------
Total liabilities and shareholders' equity (deficit) $ 53,068,029 $ 3,331,951
============ ============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated balance sheets.
F-3
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED FOR THE PERIOD FROM
DECEMBER 31, FEBRUARY 5, 1997
----------------------------- (INCEPTION) TO
1999 1998 DECEMBER 31, 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 269,707 $ -- $ 95,927
Operating expenses:
Network operations
and operations support 2,867,047 643,309 --
Product development 3,058,207 1,716,454 894,027
Sales and marketing 4,908,939 482,418 --
General and administrative 2,543,952 1,189,122 666,873
Depreciation and amortization 1,555,613 139,268 65,376
------------ ------------ ------------
Total operating expenses 14,933,758 4,170,571 1,626,276
------------ ------------ ------------
Loss from operations (14,664,051) (4,170,571) (1,530,349)
Other income (expense):
Interest expense on due to
Andrx Corporation (216,182) (210,441) (28,220)
Interest income 1,282,379 -- --
------------ ------------ ------------
Loss before income taxes (13,597,854) (4,381,012) (1,558,569)
Income tax benefit 2,824,069 1,900,000 --
------------ ------------ ------------
Net loss $(10,773,785) $ (2,481,012) $ (1,558,569)
============ ============ ============
Basic and diluted net loss
per share $ (0.70) $ (0.19) $ (0.12)
============ ============ ============
Basic and diluted weighted
average shares of common
stock outstanding 15,470,009 13,030,999 12,768,303
============ ============ ============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated statements.
F-4
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL OTHER
------------------- --------------------- PAID-IN ACCUMULATED COMPREHENSIVE COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT LOSS LOSS
-------- --------- ---------- --------- ------------ ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FEBRUARY 5, 1997 (INCEPTION) -- $ -- -- $ -- $ -- $ -- $ --
Issuance of shares of common
stock to Andrx Corporation
as promoter -- -- 12,870,000 12,870 487,130 -- --
Issuance of shares of
convertible preferred stock 130,000 130 -- -- 29,870 -- --
Shares of common stock issued
in connection with
conversion of shares of
convertible preferred
stock (130,000) (130) 130,000 130 -- -- --
Options granted to
non-employees -- -- -- -- 13,906 -- --
Net loss and comprehensive
loss -- -- -- -- -- (1,558,569) -- $ (1,558,569)
-------- --------- ---------- --------- ------------ ------------ --------- ============
BALANCE, DECEMBER 31, 1997 -- -- 13,000,000 13,000 530,906 (1,558,569) --
Shares of common stock issued
in connection with merger
with 1997 Corp. -- -- 269,400 269 (269) -- --
Conversion of due to Andrx
Corporation upon
consummation of
merger with 1997 Corp. -- -- -- -- 3,012,452 -- --
Options granted to
non-employees -- -- -- -- 15,606 -- --
Net loss and comprehensive
loss -- -- -- -- -- (2,481,012) -- $ (2,481,012)
-------- --------- ---------- --------- ------------ ------------ --------- ============
BALANCE, DECEMBER 31, 1998 -- -- 13,269,400 13,269 3,558,695 (4,039,581) --
Shares of common stock issued
in connection with public
offering -- -- 3,450,000 3,450 50,774,716 -- --
Conversion of due to Andrx
Corporation upon completion
of public offering -- -- 465,387 466 7,445,726 -- --
Shares of common stock issued
in connection with the
acquisition of Telegraph
Consulting Corporation -- -- 320,000 320 2,770,680 -- --
Shares of common stock issued
in connection with exercise
of stock options -- -- 148,875 149 168,852 -- --
Options granted to non-employees -- -- -- -- 154,362 -- --
Unrealized loss on investments
available-for-sale -- -- -- -- -- -- (99,970) $ (99,970)
Net loss -- -- -- -- -- (10,773,785) -- (10,773,785)
------------
Comprehensive loss $(10,873,755)
-------- --------- ---------- --------- ------------ ------------ --------- ============
BALANCE, DECEMBER 31, 1999 -- $ -- 17,653,662 $ 17,654 $ 64,873,031 $(14,813,366) $ (99,970)
======== ========= ========== ========= ============ ============ =========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated statements.
F-5
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
YEARS ENDED DECEMBER 31, FEBRUARY 5, 1997
----------------------------- (INCEPTION) TO
1999 1998 DECEMBER 31, 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(10,773,785) $ (2,481,012) $ (1,558,569)
Adjustments to reconcile net loss to net cash used in
operating activities -
Depreciation and amortization 1,555,613 139,268 65,376
Other non-cash charges 35,508 159,897 --
Changes in operating assets and liabilities:
Investment interest receivable (740,037) -- --
Accounts receivable (45,994) -- --
Receivable from Blue Lake Ltd. 366,000 (366,000) --
Prepaid expenses and other current assets (447,664) (163,678) (30,707)
Other assets (1,306,628) 11,730 (14,684)
Accounts payable 1,577,012 1,088,246 64,813
Accrued liabilities 30,568 225,249 76,533
------------ ------------ ------------
Net cash used in operating activities (9,749,407) (1,386,300) (1,397,238)
------------ ------------ ------------
Cash flows from investing activities:
Purchases of investments available-for-sale, net (26,171,867) -- --
Convertible note receivable from HIE, Inc. (3,000,000) -- --
Purchases of property and equipment (2,154,165) (2,341,123) (240,535)
Product development costs (140,304) (358,000) --
Purchase of software licenses (1,603,000) -- (160,000)
Acquisition of Telegraph Consulting Corporation (1,181,244) -- --
Proceeds from sale of property and equipment 5,450 -- --
------------ ------------ ------------
Net cash used in investing activities (34,245,130) (2,699,123) (400,535)
------------ ------------ ------------
Cash flows from financing activities:
Advances from Andrx Corporation, net of Andrx's utilization
of Cybear's income tax attributes 5,101,465 4,088,406 1,268,773
Repayment of bank loan (136,347) -- --
Net proceeds from public share offering 50,778,166 -- --
Proceeds from exercises of stock options 169,001 -- --
Proceeds from promissory note issued for purchase of
convertible preferred stock -- -- 30,000
Net proceeds from issuance of shares of common stock -- -- 500,000
------------ ------------ ------------
Net cash provided by financing activities 55,912,285 4,088,406 1,798,773
------------ ------------ ------------
Net increase in cash and cash equivalents 11,917,748 2,983 1,000
Cash and cash equivalents, beginning of period 3,983 1,000 --
------------ ------------ ------------
Cash and cash equivalents, end of period $ 11,921,731 $ 3,983 $ 1,000
============ ============ ============
Supplemental disclosure of non-cash activities:
Conversion of due to Andrx Corporation into shares of common stock $ 7,446,192 $ -- $ --
============ ============ ============
Conversion of due to Andrx Corporation into additional paid-in capital $ -- $ 3,012,452 $ --
============ ============ ============
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated statements.
F-6
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(1) GENERAL
Cybear Inc. ("Cybear" or the "Company"), a Delaware corporation, was
incorporated on February 5, 1997. As of December 31, 1999, Cybear was a 73%
owned subsidiary of Andrx Corporation ("Andrx"). Cybear is an information
technology company using the Internet to improve the efficiency of
administrative and communications tasks of managing patient care. Cybear
provides access to the Internet and the Cybear product line through its own
Internet Service Provider ("ISP") system, delivering productivity applications
to health care providers and health information to consumers.
RECAPITALIZATION
On November 20, 1998, Cybear, Inc. ("Cybear, Inc. (FL)"), a Florida
corporation, merged with 1997 Corp. (the "Merger") pursuant to a Merger
Agreement and Plan of Reorganization, dated July 15, 1998 ("the Merger
Agreement"). 1997 Corp. was a "blank check" company that had a registration
statement on file with the Securities and Exchange Commission ("SEC") to seek a
business combination with an operating entity. Upon consummation of the Merger,
Cybear, Inc. (FL) became a wholly owned subsidiary of 1997 Corp. and 1997 Corp.
changed its name to Cybear, Inc. 1997 Corp. (now called Cybear, Inc.) remains
the continuing registrant for SEC reporting purposes. The Merger was intended to
be a tax-free reorganization for federal income tax purposes and was treated as
a recapitalization of Cybear, Inc. (FL) for accounting and financial reporting
purposes. The result of the Merger was that the holders of Cybear, Inc. (FL)'s
common stock prior to the Merger owned 13,000,000 shares of Cybear, Inc.'s
common stock and the 1997 Corp.'s original shareholders owned 269,400 shares of
Cybear, Inc.'s common stock immediately following the Merger.
REGISTRATION STATEMENT
In June 1999, the Company completed the public offering of 3,450,000
shares of its common stock, raising approximately $50.8 million in net proceeds.
ACQUISITION
On September 17, 1999, the Company acquired Telegraph Consulting
Corporation ("Telegraph"), the programming, networking and interactive design
division of Telegraph New Technology, Inc. The purchase price of approximately
$4.1 million included $1.2 million in cash, the issuance of 320,000 shares of
Cybear unregistered common stock valued at approximately $2.8 million and the
assumption of approximately $136,000 of Telegraph's debt. The acquisition was
recorded using the purchase method of accounting. The excess of the purchase
price over the fair value of the net assets acquired represents goodwill of
approximately $3.9 million. The goodwill is being amortized on a straight-line
basis over its estimated useful life of 10 years. The amortization of the
goodwill totaled $114,729 in 1999. The following summarizes the acquisition:
Cash used for acquisition $ 1,181,244
Common stock issued 2,771,000
Debt assumed 136,347
------------
Purchase price 4,088,591
Working capital acquired (30,489)
Property and equipment acquired (124,529)
------------
Goodwill $ 3,933,573
============
F-7
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
The results of Telegraph have been included in the accompanying
consolidated financial statements since the acquisition date. The following
unaudited pro forma information presents the consolidated results of operations
of Cybear and Telegraph as if the acquisition had occurred at the beginning of
each period presented:
YEARS ENDED
DECEMBER 31,
-----------------------------
1999 1998
------------ ------------
Revenues $ 1,111,782 $ 1,146,000
============ ============
Net loss $(11,216,390) $ (2,875,681)
============ ============
Basic and diluted net loss per share $ (0.71) $ (0.22)
============ ============
Such pro forma information has been prepared for comparative purposes
only and is not necessarily indicative of what the consolidated results of
operations of Cybear and Telegraph would have been had the acquisition occurred
at the beginning of the periods presented, nor is it necessarily indicative of
the consolidated results of Cybear and Telegraph subsequent to the acquisition.
PROPOSED TRACKING STOCK RECAPITALIZATION PLAN
In December 1999, Cybear received from Andrx a tracking stock
recapitalization plan offer which would give Andrx shareholders the ability to
distinguish their investments in Andrx and Cybear. The plan would create a new
class of Andrx common stock to separately track the performance of Cybear
("Cybear Group Common"). Pursuant to an Agreement and Plan of Merger and
Reorganization (the "Agreement"), Andrx would acquire all of the publicly traded
shares of common stock of Cybear in a tax-free "roll-up" merger. Under the
Agreement, the public shareholders of Cybear, who owned approximately 27% of the
common stock of Cybear as of December 31, 1999, would exchange such shares for
Cybear Group Common shares at terms, including the exchange ratio for such
shares, to be negotiated between Cybear and Andrx. The Andrx common stock would
be converted into shares of Andrx Group Common and shares of Cybear Group
Common. Upon completion of the recapitalization, Cybear would be a wholly owned
subsidiary of Andrx with 100% of its value publicly trading in the form of
Cybear Group Common. The Agreement would be subject to various conditions,
including approval by Cybear's Board of Directors and the shareholders of Andrx
and Cybear and, accordingly, no assurance can be given that this proposed merger
will be consummated.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of Cybear, Inc. and its subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-8
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
CASH AND CASH EQUIVALENTS
All highly liquid investments with an original maturity of three months
or less are considered cash equivalents.
INVESTMENTS AVAILABLE-FOR-SALE
The Company utilizes the provisions of Financial Accounting Standards
Board ("FASB") Statement on Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". SFAS No. 115
requires that marketable equity securities and all debt securities be classified
into three categories: (i) held to maturity securities, (ii) trading securities,
or (iii) available-for-sale securities. The Company classifies its investment as
available-for-sale and, accordingly, the investments are carried at market value
and any unrealized gain or loss is reported as a separate component of
shareholders' equity. The cost related to investments available-for-sale is
determined utilizing the specific identification method.
PROPERTY AND EQUIPMENT, NET
Property and equipment is recorded at cost less accumulated
depreciation or amortization. Depreciation or amortization is provided using the
straight-line method over the following estimated useful lives:
Computer hardware and software 3 years
Furniture and fixtures 5 years
Leasehold improvements Lesser of useful life or term of lease
Major renewals and betterments are capitalized, while maintenance and
repairs are expensed as incurred.
PRODUCT DEVELOPMENT COSTS, NET
The Company capitalizes costs incurred for the production of computer
software used in the sale of its services subsequent to the establishment of
technological feasibility. Capitalized costs include direct labor and
payroll-related costs for software produced by the Company and fees charged by
third parties to produce software for the Company. Once technological
feasibility has been established, such costs are capitalized until the software
has completed beta testing and is generally available. Product development costs
are amortized, on a product-by-product basis, using the straight-line method
over a maximum of five years or the expected life of the product, whichever is
less. Quarterly, the Company reviews and expenses the unamortized cost of any
major feature of products identified as being impaired or being redesigned. The
Company also reviews recoverability of the total unamortized cost of all
products in relation to estimated revenues and, when necessary, makes an
appropriate adjustment to net realizable value.
F-9
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
SOFTWARE LICENSES
In December 1999, Cybear entered into a perpetual non-transferable and
non-exclusive license agreement with HIE, Inc. ("HIE") to use certain of their
software applications as a means to offer an Application Service Provider
through Cybear's network operations center. Cybear has agreed to pay HIE $1.6
million for such software application licenses. As of December 31, 1999, Cybear
had paid $600,000 of such amount and the remaining $1 million is included in
accounts payable on the accompanying consolidated balance sheet. Once these
software applications are placed in service, they will be transferred to
property and equipment and will be amortized using the straight-line method over
an estimated useful life of three years.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company utilizes the provisions of SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
which requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. To determine a loss, if any, to be recognized, the book
value of the asset would be compared to the market value or expected
undiscounted future cash flow value.
REVENUE RECOGNITION
Revenues for the year ended December 31, 1999 include subscriptions to
the Company's Physician Practice Portal product, web site development and
maintenance services and e-commerce. Revenues for the period from February 5,
1997 (inception) to December 31, 1997 represent software development services
rendered to Andrx. Subscription, web site development and maintenance and
software development revenues are earned when the Company's services are
provided. E-commerce revenues are earned when the products are shipped. Cybear
has entered into certain agreements with medical organizations (see Note 10) to
provide the Company's subscription services to the organizations' members in
exchange for various consulting services. Certain of these agreements result in
a net cash outflow. Subscription services earned under agreements resulting in
net cash outflows are recorded as a reduction of the amounts expensed for the
consulting services received.
Revenues recorded in the years ended December 31, 1999 and 1998 and
in the period from February 5, 1997 (inception) to December 31, 1997 consist of
the following:
FOR THE PERIOD FROM
YEARS ENDED FEBRUARY 5, 1997
DECEMBER 31, (INCEPTION) TO
-------------------- DECEMBER 31,
1999 1998 1997
-------- -------- --------
Subscription $ 86,898 $ -- $ --
Web site development and maintenance 102,167 -- --
E-commerce 80,642 -- --
Software development services to Andrx -- -- 95,927
-------- -------- --------
$269,707 $ -- $ 95,927
======== ======== ========
Subscription revenues for the year ended December 31, 1999 include
$56,908 from a medical organization. Starting in the fourth quarter of 1999,
subscription services to this organization are being provided for non-cash
consideration and, accordingly, revenue is not being recorded.
F-10
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
Subscription revenues for the year ended December 31, 1999 include
$19,311 from Andrx (see Note 11). In the year ended December 31, 1999, Cybear
provided subscriptions to its Physician Practice Portal product to certain
customers of Andrx at the standard monthly rate of $24.95 per subscriber. Andrx
paid for such subscription services on behalf of its customers. Starting in the
fourth quarter of 1999, these subscription services are being provided for
non-cash consideration and, accordingly, revenue is not being recorded.
E-commerce revenues for the year ended December 31, 1999 represent
revenues earned from an arrangement between Cybear and Andrx to sell products to
physicians on orders placed through Cybear's Physician Practice Portal product
(see Note 11).
STOCK-BASED COMPENSATION
Under the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation", companies can either measure the compensation cost of equity
instruments issued to employees under employee compensation plans using a fair
value based method, or can continue to recognize compensation cost using the
intrinsic value method under the provisions of Accounting Principles Board
Opinion ("APB") No. 25. However, if the provisions of APB No. 25 are applied,
pro forma disclosures of net income or loss and earnings or loss per share must
be presented in the financial statements as if the fair value method had been
applied. For the years ended December 31, 1999 and 1998, and for the period from
February 5, 1997 (inception) to December 31, 1997, the Company recognized
compensation costs for options granted to non-employees under the provisions of
APB No. 25, and the Company has provided the expanded disclosure required by
SFAS No. 123 (see Note 13).
INCOME TAXES
The Company accounts for income taxes pursuant to SFAS No. 109,
"Accounting for Income Taxes". The provisions of SFAS No. 109 require, among
other things, recognition of future tax benefits measured at enacted rates
attributable to the deductible temporary differences between the financial
reporting and income tax bases of assets and liabilities and to tax net
operating loss carryforwards to the extent that the realization of said benefits
is "more likely than not".
NET LOSS PER SHARE
The Company calculates its basic and diluted net loss per share
pursuant to SFAS No. 128, "Earnings Per Share". For the years ended December 31,
1999 and 1998, and for the period from February 5, 1997 (inception) to December
31, 1997, basic and diluted net loss per share is based on the weighted average
number of shares of common stock outstanding. Since the effect of common stock
equivalents was antidilutive, all such equivalents were excluded in the
computation of diluted net loss per share. Common equivalent shares consist of
the incremental common shares issuable upon exercise of stock options and
warrants using the treasury stock method. There were 1,647,408 and 985,083
options and warrants outstanding at December 31, 1999 and 1998, respectively,
that could potentially dilute earnings per share in the future.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As of December 31, 1999 and 1998, the carrying amounts of cash and cash
equivalents, investments available-for-sale, investment interest receivable,
accounts receivable, the convertible note receivable from HIE, Inc., the
receivable from Blue Lake Ltd., accounts payable and accrued liabilities
approximate fair value due to their short term maturity and/or market rates of
interest.
F-11
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject Cybear to credit risk
consist primarily of the Company's investments available-for-sale and the
convertible note receivable from HIE, Inc.
Cybear invests in U.S. Treasury and government agency securities, and
debt instruments of corporations with investment grade credit ratings. Cybear
has established guidelines relative to diversification and maturities that are
designed to help ensure safety and liquidity.
Cybear has limited the amount of its credit risk exposure related to
the convertible note receivable from HIE, Inc. (the "Note"). At its option,
Cybear may convert the Note into shares of common stock of HIE at a conversion
price of $3.19 per share. As of December 31, 1999, the closing sale price of
HIE's common stock was $3.38. If Cybear does not convert the Note and HIE fails
to pay the outstanding principal balance of the Note, Cybear will receive a
royalty free license to sub-license to its customers the software applications
purchased from HIE (see Note 4).
COMPREHENSIVE LOSS
The Company adopted the provision of SFAS No. 130, "Reporting
Comprehensive Income", in the year ended December 31, 1998, as required. SFAS
No. 130 establishes standards for reporting and presentation of comprehensive
income or loss and its components in financial statements. The Company has
included the required disclosure of this statement in the accompanying
consolidated statements of shareholders' equity (deficit) for the years ended
December 31, 1999 and 1998, and for the period from February 5, 1997 (inception)
to December 31, 1997.
BUSINESS SEGMENTS
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", establishes standards for reporting information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company has
adopted the provisions of SFAS No. 131 in the year ended December 31, 1998, as
required. Currently, the Company does not believe it has any separately
reportable business segments or other disclosure information required by the
Statement.
DERIVATIVES
In June 1998, the FASB issued SFAS No. 133, as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133, as
amended, establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133, as amended, requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.
F-12
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
SFAS No. 133, as amended, is effective for fiscal years beginning after
June 15, 2000. A company may also implement the provisions of SFAS No. 133, as
amended, as of the beginning of any fiscal quarter after issuance. SFAS No. 133,
as amended, cannot be applied retroactively. SFAS No. 133, as amended, must be
applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 (and, at the Company's election, before January
1, 1998). The Company will adopt the provisions of SFAS No. 133 beginning
January 1, 2001, as required. Adoption of the provisions of this standard is not
expected to have a material effect on the Company's consolidated results of
operations and financial condition.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the
current year presentation.
(3) INVESTMENTS AVAILABLE-FOR-SALE
Investments available-for-sale consist of the following as of December
31, 1999:
GROSS
AMORTIZED UNREALIZED MARKET
COST LOSSES VALUE
------------ ------------ ------------
U.S. government agencies $ 16,008,769 $ (91,489) $ 15,917,280
Corporate bonds 10,163,098 (8,481) 10,154,617
------------ ------------ ------------
$ 26,171,867 $ (99,970) $ 26,071,897
============ ============ ============
(4) CONVERTIBLE NOTE RECEIVABLE FROM HIE, INC.
In December 1999, Cybear entered into a software license agreement with
HIE (see Note 2). In connection with the agreement, upon receipt of $3,000,000
from Cybear, HIE issued to Cybear a one-year convertible promissory note in the
amount of $3,000,000 bearing interest at the rate of 7.8%. At its option, on the
maturity date, Cybear may convert the Note into shares of common stock of HIE at
a conversion price of $3.19 per share. The Company has recorded the Note at
cost. As of December 31, 1999, the closing sale price of HIE's common stock was
$3.38. In addition, HIE granted Cybear a warrant (the "Warrant") to purchase
47,022 shares of its common stock. The Warrant has an exercise price of $3.19
per share and expires five years from the grant date. Using the Black-Scholes
pricing model, the Company has recorded to other assets the Warrant at its fair
market value of $100,000. The resulting deferred income of $100,000 was recorded
to accounts payable and is being amortized to interest income over the term of
the Note.
(5) RECEIVABLE FROM BLUE LAKE LTD.
In September 1998, Cybear entered into a lease agreement with Blue Lake
Ltd. ("Blue Lake") to house its corporate headquarters and network systems. As
part of the lease agreement, Blue Lake agreed to pay Cybear a portion ("Landlord
Contribution") of the total costs incurred by the Company to improve the rented
space prior to its occupancy. As of December 31, 1998, Cybear had recorded a
receivable of $366,000 from Blue Lake for such Landlord Contribution. The
Company collected the receivable in 1999.
F-13
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(6) PROPERTY AND EQUIPMENT, NET
Property and equipment are summarized as follows:
DECEMBER 31,
---------------------------
1999 1998
----------- -----------
Computer hardware and software $ 3,243,477 $ 1,806,831
Furniture and fixtures 703,933 241,911
Leasehold improvements 831,469 532,916
----------- -----------
4,778,879 2,581,658
Less: accumulated depreciation and amortization (1,255,484) (175,029)
----------- -----------
Property and equipment, net $ 3,523,395 $ 2,406,629
=========== ===========
(7) PRODUCT DEVELOPMENT COSTS, NET
Capitalized product development costs consist of the following:
1999 1998
--------- ---------
Balance, beginning of year $ 358,000 $ --
Costs capitalized 140,304 358,000
Costs amortized (165,552) --
--------- ---------
Balance, end of year $ 332,752 $ 358,000
========= =========
The accumulated amortization of capitalized product development costs
totaled $97,896 at December 31, 1999. There was no accumulated amortization of
capitalized product development costs at December 31, 1998. The Company did not
record any amortization of its capitalized product development costs in the year
ended December 31, 1998 as it had not yet released any products.
(8) ACCRUED LIABILITIES
Accrued liabilities consist of the following:
DECEMBER 31,
--------------------
1999 1998
-------- --------
Payroll and employee benefits $233,455 $116,782
Litigation settlement charge -- 125,000
Other 98,895 60,000
-------- --------
$332,350 $301,782
======== ========
(9) INCOME TAXES
Cybear's taxable results through the completion of the public offering
in June 1999 (see Note 1) were included in the consolidated income tax return of
Andrx since Andrx owned at least 80% of the common stock of Cybear. Cybear and
Andrx have a tax allocation agreement pursuant to which Federal income tax
liabilities or benefits are allocated to Cybear as if Cybear had filed a
separate income tax return when Cybear's taxable results are included in the
consolidated income tax return of Andrx. Upon completion of the public offering
in June 1999, Andrx's ownership in Cybear was reduced below 80%. Consequently,
Cybear thereafter files its income tax returns separately.
F-14
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
For the period from June 23, 1999 (date of completion of the public
offering) to December 31, 1999, Cybear generated a net operating loss
carryforward of approximately $10 million which is available to offset future
earnings. As of December 31, 1999, Cybear has net deferred tax assets of
approximately $4.0 million attributable primarily to the net operating loss
carryforward of approximately $10 million generated from June 23, 1999 to
December 31, 1999. Under the provisions of SFAS No. 109, "Accounting for Income
Taxes", Cybear has provided a valuation allowance to reserve against 100% of its
net deferred tax assets due to its history of net losses. For the period from
January 1, 1999 to June 22, 1999 and for the year ended December 31, 1998,
Cybear recorded $2,824,069 and $1,900,000, respectively, in income tax benefits.
The income tax benefits reflect the reimbursement from Andrx for the utilization
of Cybear's income tax attributes pursuant to the tax allocation agreement. For
the period from February 5, 1997 (inception) to December 31, 1997, Cybear did
not record any income tax provision or benefit as Andrx could not utilize
Cybear's income tax attributes.
The components of the income tax benefits are summarized as follows:
FOR THE PERIOD FROM
FEBRUARY 5, 1997
DECEMBER 31, (INCEPTION) TO
------------------------ DECEMBER 31,
1999 1998 1997
---------- ---------- ------------
Current $2,824,069 $1,900,000 $ --
Deferred -- -- --
---------- ---------- ------------
Total $2,824,069 $1,900,000 $ --
========== ========== ============
Deferred income taxes represent the tax effect of the difference
between the financial reporting and tax bases of assets and liabilities. The
major components of deferred tax assets and liabilities are as follows:
DECEMBER 31,
---------------------------
1999 1998
----------- -----------
Net operating loss carryforward $ 3,928,709 $ 324,989
Book over (under) tax depreciation 44,507 (7,525)
Software development costs (128,442) --
Other, net 111,883 24,704
----------- -----------
3,956,657 342,168
Valuation allowance (3,956,657) (342,168)
----------- -----------
Net $ -- $ --
=========== ===========
The following table indicates the activity in the valuation allowance:
1999 1998
----------- -----------
Beginning balance January 1 $ (342,168) $ (523,723)
Generated (6,438,558) (1,718,445)
Utilized by Andrx 2,824,069 1,900,000
----------- -----------
Ending Balance December 31 $(3,956,657) $ (342,168)
=========== ===========
As of December 31, 1999, the Company has a net operating loss
carryforward of approximately $10 million which is available to offset future
earnings. Under the provisions of SFAS No. 109, the Company has provided a
valuation allowance to reserve against 100% of its net deferred tax assets given
the Company's history of net losses. Included in Cybear's deferred tax asset for
its net operating loss carryforward is a benefit of approximately $1.0 million
related to the exercise of non-qualified stock options. If and when this benefit
is utilized, it will be recorded as an increase to additional paid-in capital
rather than a reduction of the income tax provision. Net operating loss
carryforwards are subject to review and possible adjustments by the Internal
Revenue Service and may be limited in the event of certain cumulative changes in
the ownership interest of significant shareholders over a three-year period in
excess of 50%.
F-15
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(10) COMMITMENTS
EMPLOYMENT CONTRACTS
The Company has entered into employment contracts with certain
officers, the terms of which expire at various dates through September 2003.
Such agreements provide for annual base salary, stock options, severance
packages and in some instances, signing and/or incentive bonuses or deferred
compensation.
Future commitments under employment agreements at December 31, 1999 are
as follows:
2000 $ 710,000
2001 612,000
2002 612,000
2003 390,000
------------
$ 2,324,000
============
PRODUCT LIABILITY
Software products such as those to be offered by the Company frequently
contain undetected errors or failures when first introduced or as new versions
are released. Testing of the Company's products is particularly challenging
because it is difficult to simulate the wide variety of computing environments
in which the Company's potential customers may deploy these products. There can
be no assurance that defects, errors or difficulties will not cause delays in
product introductions, result in increased costs and diversion of development
resources, require design modifications or decrease market acceptance or
customer satisfaction with the Company's products. In addition, there can be no
assurance that, despite testing by the Company and by potential customers,
errors will not be found after commencement of commercial introduction,
resulting in loss of or delay in market acceptance, which could have a material
adverse effect upon the Company's business, operating results and financial
condition.
OPERATING LEASES
The Company leases office space, telephone lines and various equipment
under operating leases. The following schedule summarizes future minimum lease
payments required under non-cancelable operating leases with terms greater than
one year, as of December 31, 1999:
2000 $ 1,156,000
2001 1,185,000
2002 748,000
2003 750,000
2004 767,000
Thereafter 1,792,000
------------
$ 6,398,000
============
Rent expense for the years ended December 31, 1999 and 1998 amounted to
$1,137,000 and $145,000, respectively, and $130,000 for the period from February
5, 1997 (inception) to December 31, 1997.
F-16
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
OTHER
Cybear has entered into certain agreements with medical organizations
to provide the Company's subscription services to the organizations' members in
exchange for various consulting services. Certain of these agreements result in
a net cash outflow. Subscription services earned under agreements resulting in
net cash outflows are recorded as a reduction of the amounts expensed for the
consulting services received. In addition, under some of these agreements,
Cybear has issued to one medical organization options to purchase 100,000 shares
of its common stock and to another organization a warrant to purchase 75,000
shares of its common stock. The warrant and 70,000 of these options are
exercisable upon the medical organizations achieving certain paid subscriptions
objectives among their membership. The other 30,000 options are exercisable at
the earlier of achieving certain paid subscriptions objectives or a specified
date. Also, under some of these agreements, Cybear has agreed to pay rebates
based on the organizations achieving certain paid subscriptions objectives or
share revenues generated from the organizations' subscribers or from
advertising. As of December 31, 1999, Cybear has a remaining obligation to pay
$800,000 in 2000 for consulting services under these agreements and has recorded
$600,000 to other assets representing subscription services to be paid by one
medical organization in 2001. These subscription services are currently being
recorded as a reduction of the amounts expensed for consulting services when
earned.
In June 1999, the Company entered into a 25-month agreement with an
operator of web sites and other online and interactive services. Under the terms
of the agreement, beginning on September 1, 1999, Cybear is providing
healthcare-related content for health channels that the operator is including on
its web sites. Additionally, the Company's products are advertised on the
operator's web sites. The Company is paying a fee of $3,625,000 in monthly
installments during the term of the agreement in exchange for an Internet portal
box on the operator's health channels and for advertising services the operator
is providing to the Company. These monthly installments are recorded to other
assets and are being expensed at a monthly rate of $164,773 beginning in
September 1999 over the remaining term of this agreement. For the year ended
December 31, 1999, Cybear made payments of $1,015,000 under this agreement and
has expensed $659,000.
(11) RELATED PARTY TRANSACTIONS
In September 1999, the Company provided subscriptions to its Physician
Practice Portal product to certain customers of Andrx at the standard monthly
rate of $24.95 per subscriber. Andrx paid for such subscription services on
behalf of its customers. Revenues generated from such services were $19,311 for
the year ended December 31, 1999. Starting in the fourth quarter of 1999, these
subscription services are being provided for non-cash consideration and,
accordingly, revenue is not being recorded.
Beginning in September 1999, Cybear entered into an arrangement with
Andrx for the sale of products to physician offices on orders placed through
Cybear's Physician Practice Portal product. Andrx charges Cybear at its cost for
the products sold. Andrx also charges Cybear for services that include the
purchasing, warehousing and distribution of the products to the physician
offices. Management believes that the amounts incurred for these services
approximate fair market value. For the year ended December 31, 1999, Cybear
recorded product sales of $80,642 and cost of sales of $77,435 under such
arrangement. In addition, in the year ended December 31, 1999, Andrx charged
Cybear $8,064 for the services it provided.
F-17
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
The Company and Andrx have a corporate services agreement whereby Andrx
provides the Company with various services of its management. For the years
ended December 31, 1999 and 1998 and for the period from February 5, 1997
(inception) to December 31, 1997, the Company incurred amounts for these
services based upon mutually agreed upon allocation methods. Management believes
that the amounts incurred for these services approximate fair market value.
Costs for such services were $120,000 for each of the years ended December 31,
1999 and 1998, respectively, and $110,000 for the period from February 5, 1997
(inception) to December 31, 1997.
Due to Andrx in the accompanying balance sheet as of December 31, 1998,
represented advances from Andrx to fund the Company's operations and the related
accrued interest. Such advances bore interest at prime plus 1/2%. On November
20, 1998, upon consummation of the merger with 1997 Corp. (see Note 1), the then
outstanding Due to Andrx of $3,012,452 was converted into additional paid-in
capital to the Company. Upon completion of the public offering in June 1999 (see
Note 1), Andrx converted its advances due from Cybear, net of the reimbursement
for income tax attributes, to Cybear's capital in exchange of 465,387 shares of
Cybear common stock at the public offering price of $16.00 per share. For the
years ended December 31, 1999 and 1998, Cybear recorded $216,182 and $210,441,
respectively, in interest expense on the Due to Andrx. For the period from
February 5, 1997 (inception) to December 31, 1997, Cybear recorded $28,220 in
interest expense on the Due to Andrx.
In November, 1998, the Company entered into a sublease with Strategy
Business and Technology Solutions, LLC, a company owned by the chairman of the
Company, for 4,000 square feet of office space in Ridgefield Park, New Jersey to
house its business development and sales activities. The lease provided for
$120,000 and $5,000 in annual base rent and electricity, respectively, and had a
five-year term commencing on November 1, 1998. In November 1999, the Company
terminated the lease and incurred an early termination penalty of $95,000. In
addition, for the years ended December 31, 1999 and 1998, the Company recorded
$111,332 and $20,834, respectively, in rent expense relative to this lease.
From February 5, 1997 (inception) to December 31, 1997, the Company
provided Andrx with software development services. The Company charged Andrx
based on mutually agreed upon allocation methods. Software development services
charged to Andrx were $95,927 for the period from February 5, 1997 (inception)
to December 31, 1997. The Company did not provide Andrx with software
development services for the years ended December 31, 1999 and 1998.
(12) SHAREHOLDERS' EQUITY
In February 1997, the Company issued 130,000 shares of convertible
preferred stock for a promissory note of $30,000. In the period from February 5,
1997 (inception) to December 31, 1997, the promissory note was paid in full and
the 130,000 shares of preferred stock were converted into 130,000 shares of
common stock.
In November 1998, the Company merged with 1997 Corp., a "blank check"
company that had a registration statement on file with the SEC to seek a
business combination with an operating entity (see Note 1). As a result of the
merger, the 1997 Corp.'s original shareholders were issued 269,400 shares of
Cybear, Inc.'s common stock. In addition, upon consummation of the merger with
1997 Corp., the then outstanding Due to Andrx of $3,012,452 was converted into
additional paid-in capital of the Company.
In June 1999, the Company completed the public offering of 3,450,000
shares of its common stock, raising approximately $50.8 million in net proceeds.
Upon completion of the public offering, Andrx converted its advances due from
Cybear, net of the reimbursement for income tax attributes, into Cybear's
capital in exchange for 465,387 shares of Cybear common stock at the public
offering price of $16.00 per share.
F-18
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
In September 1999, the Company acquired Telegraph Consulting
Corporation (see Note 1). The purchase price included the issuance of 320,000
shares of Cybear unregistered common stock valued at approximately $2.8 million.
(13) STOCK INCENTIVE PLAN
The Company has reserved 1,800,000 shares of its common stock for
issuance under its 1997 Stock Option Plan (the "Plan"). Under the Plan,
incentive and nonqualified stock options are available to directors, officers,
employees or consultants to the Company. The terms of each option agreement are
determined by the Company's Board of Directors or its compensation committee
(the "Committee"). The terms for, and exercise price at which any stock option
may be awarded is to be determined by the Committee. Options granted under the
Plan must be exercised within ten years of the date of grant, unless a shorter
period is designated at the time of grant. In July 1999, the Company's Board of
Directors approved an amendment to the Company's Plan increasing the number of
shares issuable under the Plan by 1,200,000 to 3,000,000 subject to approval by
the stockholders of Cybear.
The Company accounts for options granted to employees under the Plan in
accordance with the provisions of APB No. 25. Each stock option has an exercise
price equal to the market price on the date of grant and, accordingly, no
compensation expense has been recorded for any stock option grants to employees.
On rare occasions, the Company may issue an insignificant amount of equity
instruments to non-employees. Stock options issued to non-employees for the
years ended December 31, 1999 and 1998 and for the period from February 5, 1997
(inception) to December 31, 1997 were accounted for based on the fair value of
the consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable, as required by SFAS No. 123. In instances
where the fair value or the goods or services received is not reliably
measurable, the measure is based upon the fair value of the equity instruments
issued, and such value is amortized over the period for which services are
provided. The fair value of equity instruments issued to non-employees are
valued using the Black Scholes option pricing model.
A summary of the Plan's activity is as follows:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
---------------------------------------------- ----------------------
NUMBER OF
SHARES EXERCISE PRICE PER SHARE WEIGHTED AVG.
UNDER -------------------------------- EXERCISE
OPTION LOW HIGH WTD. AVG. SHARES PRICE
--------- -------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
February 5, 1997 (inception) --
Granted 350,000 $ 1.00 $ 1.00 $ 1.00
---------
December 31, 1997 350,000 1.00 1.00 1.00 -- $ --
Granted 705,083 2.00 3.00 2.81
Forfeited (70,000) 1.00 1.00 1.00
---------
December 31, 1998 985,083 1.00 3.00 2.30 70,000 1.00
Granted 919,950 3.00 16.25 12.63
Exercised (148,875) 1.00 3.00 1.14
Forfeited (183,750) 1.00 16.00 4.32
---------
December 31, 1999 1,572,408 $ 1.00 $ 16.25 $ 8.22 430,675 $ 9.29
=========
</TABLE>
F-19
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT EXERCISABLE OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------ --------------------------------
WEIGHTED AVG.
REMAINING LIFE WEIGHTED AVG. WEIGHTED AVG.
RANGE OF EXERCISE PRICES SHARES (YEARS) EXERCISE PRICE SHARES EXERCISE PRICE
- -------------------------------- ------------- ------------------ ------------------ ------------ -----------------
<S> <C> <C> <C> <C> <C>
$ 1.00 - $ 2.00 155,125 7.6 $ 1.36 20,500 $ 1.51
$ 3.00 - $ 3.00 602,833 8.8 3.00 175,175 3.00
$ 6.50 - $13.25 327,700 9.6 9.51 35,000 6.98
$16.00 - $16.25 486,750 9.5 16.01 200,000 16.00
---------- -------
$ 1.00 - $16.25 1,572,408 9.0 $ 8.22 430,675 $ 9.29
========== =======
</TABLE>
The range of weighted average fair value per share as of the grant date
was $2.54 to $13.79 and $1.50 to $2.23 for stock options granted during the
years ended December 31, 1999 and 1998, respectively, and $0.70 for stock
options granted during the period from February 5, 1997 (inception) to December
31, 1997. The fair market value of an option was estimated using the
Black-Scholes option pricing model with the following assumptions:
FOR THE PERIOD FROM
YEARS ENDED DECEMBER 31, FEBRUARY 5, 1997
------------------------ (INCEPTION) TO
1999 1998 DECEMBER 31, 1997
------------ ---------- -------------------
Risk-free interest rate 5.6% 4.8% 5.3%
Average life of options (years) 5.2 4.5 6.0
Average volatility 110% 85% 75%
Dividend yield - - -
The following table summarizes the pro forma consolidated results of
operations of the Company as though the provision of the fair value based
accounting method of SFAS No. 123 had been used in accounting for stock options:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
YEARS ENDED DECEMBER 31, FEBRUARY 5, 1997
-------------------------- (INCEPTION) TO
1999 1998 DECEMBER 31, 1997
------------ ----------- ------------
<S> <C> <C> <C> <C>
Basic and diluted net loss As reported $(10,773,785) $(2,481,012) $ (1,558,569)
Pro forma $(15,228,401) $(2,570,414) $ (1,590,717)
Basic and diluted net loss per share As reported $ (0.70) $ (0.19) $ (0.12)
Pro forma $ (0.98) $ (0.20) $ (0.12)
</TABLE>
(14) SUBSEQUENT EVENTS
AGREEMENTS
In January 2000, Cybear entered into a thirty-month subscription
agreement with a provider of Internet-based electronic data interchange ("EDI")
transactions and information solutions. Cybear agreed to pre-purchase $300,000
of annual subscriptions and to pay certain transaction fees to enable its
subscribers access to services provided by this third party. This provider of
EDI transactions agreed to pay Cybear monthly fees for its customers subscribing
to Cybear's Physician Practice Portal product.
F-20
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
In January 2000, Cybear entered into a perpetual non-transferable and
non-exclusive license agreement with a third party to use their software as a
means to gain access to electronic patient records. Cybear has agreed to pay
$2.5 million for such software application license. Cybear also entered into a
five-year agreement with this third party. Under that agreement, Cybear has
agreed to pay certain commissions, including the issuance of up to $7.5 million
of its common stock based on its average closing price for 180 days, if certain
targets of paid subscriptions to Cybear's ISP are achieved by customers using
the third party's software application. In addition, Cybear and the third party
have agreed to share transaction fees derived from the usage of the software
applications by Cybear's customers.
TRACKING STOCK RECAPITALIZATION PLAN
In March 2000, Andrx and Cybear entered into a definitive agreement
with respect to the previously announced tracking stock recapitalization plan.
This plan, which was recommended to the Cybear Board of Directors by its Special
Committee and approved by the Boards of both Cybear and Andrx, will create a new
class of Andrx common stock to separately track the performance of Cybear. The
plan will be submitted to Andrx and Cybear shareholders for approval later this
year.
Pursuant to the Agreement, Andrx will acquire all of the publicly
traded shares of common stock of Cybear in a tax-free "roll-up" merger. Public
shareholders currently own approximately 5.4 million shares (assuming the
exercise by Edward E. Goldman, M.D., Cybear's Chief Executive Officer, of a
warrant to acquire 525,000 shares of common stock of Cybear currently owned by
Andrx), or 30.5%, of the common shares of Cybear, and those shareholders will
receive one share of Cybear Group Common for every Cybear share they currently
own. In the recapitalization, the number of Cybear shares held by Andrx will be
reduced from 12.4 million shares to 10.3 million shares so as to provide the
equivalent of a 20% increase in shares held by the non-Andrx shareholders of
Cybear. As a result, the non-Andrx shareholders of Cybear will own approximately
34.5% of the Cybear Group Common following the closing of the transaction.
Pursuant to the Agreement, each Andrx common share will be converted into (i)
one share of Andrx Group Common and (ii) approximately .1622 shares of Cybear
Group Common, after giving effect to Andrx' pending two-for-one stock split (in
the form of a stock dividend) announced on March 1, 2000. Upon completion of the
recapitalization, (i) Cybear will be a wholly owned subsidiary of Andrx with
100% of its value publicly traded in the form of Cybear Group Common; (ii)
current Cybear shareholders will own approximately 34.5% of the Cybear Group
Common; and (iii) current Andrx shareholders will own 100% of the Andrx Group
Common and approximately 65.5% of the Cybear Group Common.
Andrx and Cybear will be filing a preliminary joint proxy statement and
a registration statement with respect to the proposed transaction with the SEC,
which is subject to review by the SEC. In addition to shareholders approval, the
transaction will be subject to various Federal and state regulatory approvals
and, accordingly, no assurance can be given that this transaction will be
consummated.
In connection with the tracking stock recapitalization plan, the
Company estimates it will incur merger costs of up to approximately $1.5 million
if the tracking stock recapitalization plan is consummated. These costs will be
charged to expense as incurred. No assurance can be given that this transaction
will be consummated.
F-21
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on
accounting or financial disclosure matters.
21
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and officers of Cybear are set forth below. All directors and
officers hold office for one year or until their successors have been elected
and qualified. Vacancies in the existing board are filled by majority vote of
the remaining directors.
<TABLE>
<CAPTION>
NAME AGE POSITION (S) HELD
- ---- --- -----------------
<S> <C> <C>
John H. Klein (1) 54 Chairman and Director
Edward E. Goldman, M.D.(1,3) 55 Chief Executive Officer and Director
Timothy E. Nolan (2) 44 President, Chief Operating Officer and Director
Jack S. Greenman 52 Executive Vice-President and Chief Financial Officer
Eric D. Moskow, M.D. (1) 41 Executive Vice-President-Market Development and Director
Scott Lodin (3) 44 Secretary and Director
Alan P. Cohen (1) 45 Director
Angelo C. Malahias (2) 38 Director
Melvin Sharoky, M.D. (3) 49 Director
Philip P. Gerbino, Ph.D. (2,4) 53 Director
Martin Reid Stoller, Ph.D. (3) 44 Director
</TABLE>
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
(4) Member of Special Committee of Independent Directors
JOHN H. KLEIN has been the chairman and a director of Cybear since
September 1, 1998. Mr. Klein has been a director of Hackensack University
Medical Center in New Jersey since 1997, and became a director of Sunbeam
Corporation in February 1999. Mr. Klein was the chief executive officer,
chairman of the board and a director of MIM Corporation, a publicly traded
pharmacy management company, from May 1996 to May 1998. From 1989 to 1994, Mr.
Klein served as president, chief executive officer, a director and a member of
the executive committee of the board of directors of Zenith Laboratories, Inc.,
a manufacturer of multi-source generic pharmaceutical drugs, which was acquired
by IVAX Corporation, a major multi-source generic pharmaceutical manufacturer
and marketer. From January 1995 to January 1996, Mr. Klein was a member of the
executive committee of IVAX and was president of IVAX's North American
Multi-Source Pharmaceutical Group.
EDWARD E. GOLDMAN, M.D. has been the chief executive officer and a director
of Cybear since September 1, 1998. From September 1, 1998 until March 12, 2000,
Dr. Goldman also served as president of Cybear. From 1985 until he joined
Cybear, he had served as a founding partner and executive officer of PhyMatrix
Corporation ("PhyMatrix"), a publicly traded physician practice management
company, where he was executive vice president of physician development and
chief medical officer. From 1983 to 1994, he served as chairman of Pal-Med
Health Services, a multi-divisional healthcare company engaged in practice
management, risk contracting and the operation of imaging centers, ambulatory
surgeries and ancillary service facilities.
TIMOTHY E. NOLAN has been Cybear's president and chief operating officer
since March 2000 and a director of Cybear since June 1999. He was employed by
Aetna U.S. Healthcare from 1985 to March 2000, most recently as senior vice
president of Aetna U.S. Healthcare in charge of the field organization.
22
<PAGE>
JACK S. GREENMAN, has been the executive vice president and chief financial
officer of Cybear since June 1999. From November 1998 to June 1999, he had
served as executive vice president and chief financial officer of FPA Medical
Management, Inc. ("FPA"), a publicly traded physician practice management
company whose plan of reorganization was confirmed by the U.S. Bankruptcy Court
for the District of Delaware on May 26, 1999. From May 1998 to November 1998 he
served as an executive vice president with FPA. From June 1993 to May 1998 he
served as senior vice president and chief financial officer with Sterling
Healthcare Group, Inc., a publicly traded physician practice company specialized
in the management of hospital emergency departments. Sterling merged with FPA in
October 1996. Mr. Greenman is a member of the American and Florida Institute of
Certified Public Accountants.
ERIC D. MOSKOW, M.D. has been a director of Cybear since June 1999 and the
executive vice president-market development of Cybear since February 2000. Since
September 1996 he has been a director of Innovative Clinical Solutions, Ltd.
("ICSL") and was the executive vice president of strategic planning of ICSL from
September 1996 to February 2000. He founded Physician's Choice Management, LLC
in 1995 and served as its executive vice president from 1995 to 1996. Prior to
establishing Physician's Choice, he served as medical director for Mediplex of
Ridgefield from 1994 to 1996 and as associate medical director for U.S.
Healthcare, a health maintenance organization, in Connecticut from 1988 to 1992.
Dr. Moskow is board-certified in internal medicine and served as president of
the Family Medical Associates of Ridgefield for nine years.
SCOTT LODIN has been secretary and a director of Cybear since February 5,
1997. He joined Andrx in 1994 and is its vice president, general counsel and
secretary. Prior to joining Andrx, Mr. Lodin was special counsel to Hughes,
Hubbard & Reed and a predecessor law firm in Miami, Florida, where he practiced
primarily in the areas of corporate and commercial law for over 13 years.
ALAN P. COHEN was the chairman and a director of Cybear from February 5,
1997 to August 31, 1998, when he resigned as chairman upon John Klein's assuming
such position. He remains a director of Cybear. Mr. Cohen has been the chairman
of the board, chief executive officer and a director of Andrx since he founded
Andrx in August 1992.
ANGELO C. MALAHIAS has been a director of Cybear since April 1999. Mr.
Malahias has been vice president and chief financial officer of Andrx since
January 1996. From January 1995 to January 1996, Mr. Malahias was vice president
and chief financial officer of Circa Pharmaceuticals, Inc., where he also served
as corporate controller from July 1994 to January 1995. From 1983 to July 1994
he was employed by KPMG LLP. Mr. Malahias is a certified public accountant.
MELVIN SHAROKY, M.D. has been a director of Cybear since April 1999. Dr.
Sharoky has been a director of Andrx since November 1995 and joined Andrx as
executive director on March 1, 1999. Dr. Sharoky is also president of Somerset
Pharmaceuticals Inc., 50% owned by Watson Pharmaceuticals, Inc., a significant
shareholder of Andrx. Dr. Sharoky was a director of Watson from July 1995 to May
1998. From July 1995 through January 1998, Dr. Sharoky was president of Watson.
From February 1993 through January 1998, Dr. Sharoky served as the president and
chief executive officer of Circa Pharmaceuticals. From November 1995 to May
1998, Dr. Sharoky served on Andrx' board of directors as the designee of Watson.
PHILIP P. GERBINO, Ph.D. has been a director of Cybear since June 1999. Dr.
Gerbino is the Linwood F. Tice professor of pharmacy and has been president of
the University of the Sciences in Philadelphia and its predecessor, the
Philadelphia College of Pharmacy, since 1995. Prior to being named president of
the College, he served as dean of the school of pharmacy and vice president for
academic affairs for one year. He is a national leader in the pharmacy
profession having served as president of the American Pharmaceutical Association
in 1990 and president of the AphA Academy of Pharmacy Practice from 1986-87.
23
<PAGE>
MARTIN REID STOLLER, PH.D. has been a director of Cybear since June 1999.
Since 1987, Dr. Stoller has been a Clinical Full Professor of Organization
Behavior at the Kellogg School of Management of Northwestern University. Dr.
Stoller also served as president and chief executive officer of Plextel
Telecommunications from August 1994 through January 1997. Plextel
Telecommunications was an artificial intelligence and pattern recognition
software development company. Dr. Stoller led Plextel's growth from 3 to 100
employees in less than three years. Plextel was sold to Cendant Corporation in a
$53 million transaction and is now known as Spark Technologies, Inc.
From August 1998 through her resignation in February 2000, Debra S. Richman
served as the Company's executive vice president-business development.
From June 1999 through her resignation in December 1999, Betsy Atkins served as
a member of the board of directors of Cybear.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers, directors and holders of more than
10% of the Company's Registered Common Stock, to file reports of ownership and
changes in ownership with the Commission. Such persons are required to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or oral or written representations from certain reporting persons that no Forms
5 were required for those persons, the Company believes that, with respect to
1999, all filing requirements applicable to its executive officers, directors
and greater than 10% beneficial owners were complied with.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information about the compensation
received during 1999, 1998 and 1997 by the Company's Chief Executive Officer and
by each of the other most highly compensated executive officers of the Company
whose aggregate direct compensation exceeded $100,000 (the "Named Executive
Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION -----------
----------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (#)
- --------------------------- ---- -------- -------- ----------- -------
<S> <C> <C> <C> <C>
Edward E. Goldman, M.D. (1) 1999 $250,000 $ -- $ 1,416(2) --
CEO 1998 $ 72,115 $ -- $ 288(2) 650,000(3)
1997 $ -- $ -- $ -- --
Debra S. Richman (4) 1999 $203,077 $ -- $ 5,578(2) --
Executive Vice President- 1998 $ 68,462 $ -- $ 1,106(2) 100,000
Business Development 1997 $ -- $ -- $ -- --
</TABLE>
(1) Dr. Edward Goldman, M.D. served as President until March 2000.
(2) Represents group term life insurance benefits and also includes an
automobile allowance for Ms. Debra Richman.
(3) Pursuant to his employment agreement, (i) in exchange for the payment
by Dr. Edward Goldman of $50,000, Dr. Edward Goldman received from
Andrx a warrant to purchase through April 30, 2006,
24
<PAGE>
650,000 shares of Cybear common stock at its then market price of $3.00
per share (the "Goldman Warrant"), of which Dr. Edward Goldman has
purchased 125,000 shares of Cybear common stock as of March 20, 2000,
and (ii) Dr. Edward Goldman received options to acquire 40,000 shares
(after giving effect to a 2:1 stock split of Andrx common stock) of
common stock of Andrx having an exercise price per share of $18.50, the
fair market value of Andrx common stock at the close of business on the
date of grant, of which Dr. Edward Goldman has exercised options to
acquire 8,500 shares of common stock of Andrx as of March 20, 2000 (see
employment and severance agreements).
(4) Ms. Debra Richman resigned from the Company in February 2000.
OPTION GRANTS TABLE
The Company did not grant any stock options to the Named Executive
Officers during 1999.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table indicates the number of shares acquired and value
realized from the exercise of options and the total number and value of
exercisable and unexercisable stock options held by each of the Named Executive
Officers listed as of December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED ON VALUE -------------------------------- ---------------------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE (1) UNEXERCISABLE (1)
------------- ---------- -------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Edward E. Goldman, M.D. (2, 3) -- -- -- -- $ -- $ --
Debra S. Richman (4) -- -- 37,500 62,500 $ 142,969 $ 238,281
</TABLE>
(1) Based on a fair market value of $6.8125 at December 31, 1999
(2) Dr. Edward Goldman, M.D. served as President until March 2000.
(3) On October 1, 1999, Dr. Goldman acquired 125,000 shares of Cybear
common stock pursuant to the exercise of a portion of the Goldman
Warrant. On that date, the closing sales price of Cybear common stock
was $8.375.
(4) Ms. Richman resigned from the Company in February 2000. In connection
with her resignation, options to purchase 37,500 shares of common stock
of the Company accelerated and became vested (see employment and
severance agreements).
COMPENSATION OF DIRECTORS
In June 1999, each non-employee director of the Company was granted
stock options under the Company's stock option plan to purchase 25,000 shares of
Common Stock. These options vested immediately, were granted at fair market
value on the date of the grant ($16.00 per share) and expire ten years from the
date of the grant. In addition, the Compensation and Audit committee chairmen
are entitled to receive $1,000 and each committee member is entitled to receive
$500 per meeting attended, at their option. Through March 23, 2000, the Company
paid to Dr. Philip P. Gerbino $40,000 in consideration for Dr. Gerbino's
services on the Special Committee of the Independent Directors of Cybear.
25
<PAGE>
EMPLOYMENT AND SEVERANCE AGREEMENTS
Cybear has entered into a five-year employment agreement with Edward
Goldman, M.D. pursuant to which he serves as Cybear's Chief Executive Officer
effective as of September 15, 1998. The agreement provides for an annual salary
of $250,000 during the first two years and $300,000 for the remaining three
years. The agreement may be renewed for additional two-year periods upon the
agreement of the parties.
The agreement also provides that Dr. Goldman will continue to receive
his salary until the expiration of the term of the employment agreement if his
employment is terminated by the Company for any reason other than death,
disability or "good cause" or by Dr. Goldman by reason of a material breach of
the agreement by Cybear. In the event of such a termination, Dr. Goldman is
entitled to receive full compensation to which he would otherwise be entitled
under the agreement as if he had not so terminated his employment and was
continuing to serve as an employee thereunder for the full term of the
agreement, payable in a single lump sum distribution in cash or in equivalent
marketable securities of Andrx on the date of such termination.
In the event Dr. Goldman's employment with Cybear is terminated within
six months following a "Change in Control" of Cybear, then Cybear is obligated
to pay him on the date of such termination a single lump sum distribution equal
to his salary for the remaining term of the agreement. Notwithstanding the
foregoing, Dr. Goldman's employment will not be deemed terminated if, in lieu of
his position with Cybear, Andrx or any other entity owned or controlled by Andrx
offers him a replacement position, where he will perform similar executive
duties and will receive a compensation package at least equal to the one set
forth in the agreement; provided, however, that he is not required to be
appointed as president and chief executive of any entity, but rather that he
shall continue to perform employment duties generally performed by senior
management personnel of an entity in the healthcare industry.
In recognition of the potential value of Dr. Goldman to Cybear and to
induce him to forego other employment opportunities, (i) in exchange for the
payment by Dr. Edward Goldman of $50,000, Dr. Edward Goldman received from Andrx
a warrant to purchase 650,000 shares of Cybear common stock at its then market
price of $3.00 per share, of which Dr. Edward Goldman has purchased 125,000
shares of Cybear common stock as of March 20, 2000, and (ii) Dr. Edward Goldman
received options to acquire 40,000 shares (after giving effect to a 2:1 stock
split of Andrx common stock) of common stock of Andrx having an exercise price
per share of $18.50, the fair market value of Andrx common stock at the close of
business on the date of grant, of which Dr. Edward Goldman has exercised options
to acquire 8,500 shares of common stock of Andrx as of March 20, 2000.
The stock to be issued pursuant to the exercise of Dr. Goldman's
warrant includes piggyback registration rights. The warrant is exercisable from
April 30, 1999 to April 30, 2006, subject to contractual obligations with Andrx.
In August 1998, Cybear entered into an employment agreement with Debra
Richman pursuant to which Ms. Richman served as Cybear's executive vice
president-business development. The agreement provided for a two-year term
ending August 2000, a base salary of $160,000 and $80,000 in deferred
compensation payable in eight $10,000 quarterly installments. Ms. Richman was
also granted options to purchase 100,000 shares of Cybear's common stock at its
then market price of $3.00 per share under Cybear's stock option plan. On the
first anniversary of the agreement, 37,500 options vested and became
exercisable. In February 2000, Ms. Richman resigned from Cybear and entered into
a severance arrangement with Cybear pursuant to which (i) Cybear agreed to pay
to Ms. Richman her base salary through May 2000 and (ii) unvested options to
purchase 37,500 shares of Cybear's common stock previously granted to Ms.
Richman became vested and exercisable as provided for in her employment
agrement.
26
<PAGE>
In June 1999, Cybear entered into an employment agreement with Jack
Greenman, its executive vice president and chief financial officer. The
agreement provides for a four-year initial term of employment. Mr. Greenman's
salary is $175,000 per year, with a non-discretionary bonus of $25,000 on his
first three anniversaries of employment, and an additional $25,000 bonus upon
agreement to terms for his continued employment after the initial four-year
term. He is also eligible to receive discretionary bonuses and he receives a car
allowance. Mr. Greenman was also granted options to purchase 100,000 shares of
Cybear's common stock at its then market price of $16.00 per share with 40%
vesting on the first anniversary of employment and 20% vesting on each of the
three subsequent anniversaries.
In the event that prior to the expiration of the initial four-year
term, Mr. Greenman terminates his employment or Cybear terminates his employment
for good cause as defined in the agreement, Cybear's sole obligation is to pay
Mr. Greenman's salary and other accrued entitlements up to the date of
termination. If Cybear terminates Mr. Greenman's employment prior to the
expiration of the initial term for other than good cause as defined in the
agreement or within six months after a change in control of Cybear, Mr. Greenman
is entitled to severance compensation consisting of at least twelve months of
his base salary and the immediate vesting of stock options that would have
vested in the next 12 months.
In March 2000, Cybear entered into an employment agreement with Timothy
E. Nolan, its president and chief operating officer. The agreement provides for
a four-year term of employment. Mr. Nolan's salary is $400,000 per year, with a
discretionary yearly bonus of $150,000 and a car allowance of $7,200 per year.
Mr. Nolan was also granted options to purchase 300,000 shares of Cybear's common
stock (waiving any conversion premium that may result from the closing of the
tracking stock transaction with Andrx) and 75,000 shares of Andrx's common stock
at market price with 20% vesting at grant date and the balance vesting equally
over four years on the anniversaries of employment. He is also eligible to
receive deferred compensation, payable within 30 days after the four-year term
of employment, of $700,000 minus the "additional value". The additional value is
defined as the cumulative amount Mr. Nolan received or is entitled to receive as
a result of his employment by the Company excluding the above noted salary and
bonus and increases thereof and benefits.
In the event Mr. Nolan's employment with Cybear is terminated within
one year following a "Change in Control" of Cybear, then Mr. Nolan is entitled
to severance compensation consisting of $500,000 and the immediate vesting of
all unvested Cybear and Andrx stock options. Notwithstanding the foregoing, Mr.
Nolan's employment will not be deemed terminated if, in lieu of his position
with Cybear, Andrx or any other entity owned or controlled by Andrx offers him
an executive position for at least the same pay and benefits.
Mr. Nolan has been a director of the Company since June 1999 and as
such, he was granted options to acquire 25,000 shares of Cybear's common stock
in June 1999.
Cybear has been negotiating an employment agreement with Dr. Eric D.
Moskow, M.D., who recently became its executive vice president-market
development. Following are what are expected to be the material terms. There can
be no assurance that such terms will not be modified prior to execution. The
agreement provides for a three-year initial term of employment. Dr. Moskow's
salary is $250,000 per year and he receives a car allowance. Mr. Moskow was also
granted options to purchase 85,000 shares of Cybear's common stock at market
price with 20% vesting immediately and the remaining vesting equally over three
years on the anniversaries of employment. If Cybear terminates Mr. Moskow's
employment prior to the expiration of the initial term for other than good cause
as defined in the agreement, Mr. Moscow is entitled to severance compensation
consisting of at least twelve months of his base salary and the immediate
vesting of stock options that would have vested in the next 12 months. If Cybear
terminates Mr. Moscow's employment prior to the expiration of the initial term
within six months after a change in control of Cybear, Mr. Moscow is entitled to
severance compensation consisting of at least twelve months of his base salary
and the immediate vesting of all unvested stock options.
Dr. Moskow has been a director of the Company since June 1999. From
June 1999 to February 2000, he also served as an advisor to the executive
committee of the board of directors. As such, Dr. Moskow was granted options to
purchase 100,000 shares of Cybear's common stock in 1999.
27
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is presently comprised of Scott Lodin,
Melvin Sharoky and Martin Stoller with Dr. Edward E. Goldman as a non-voting
member. Mr. Lodin currently serves as the Secretary of the Company and Dr.
Goldman currently serves as the Chief Executive Officer of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In evaluating the reasonableness of compensation paid to the Company's
executive officers, the Compensation Committee takes into account, among other
factors, how compensation compares to compensation paid by competing companies,
individual contributions and the Company's performance. Base salary is
determined based upon individual performance, competitive compensation trends
and a review of salaries for like jobs at similar companies. It is the Company's
policy that the compensation of executive officers also be based, in part, on
the grant of stock options as an incentive to enhance the Company's performance.
Stock options are granted based upon a review of such executive's
responsibilities and relative position in the Company, such executive's overall
job performance and such executive's existing stock option position.
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Company's Common Stock since June 18, 1999, the first day of significant trading
of the Company's Common Stock, with the cumulative total shareholder return on
the Nasdaq Stock Market (U.S.) Index and the Hambrecht and Quist Healthcare
Information Services Index over the same period (assuming the investment of $100
in the Company's Common Stock and in the two other indices, and reinvestment of
all dividends). Past financial performance should not be considered to be a
reliable indicator of future performance, and investors should not use
historical trends to anticipate results or trends in future periods.
[GRAPH OMITTED]
28
<PAGE>
* Assumes that $100 was invested on June 18, 1999 in the Company's
Common Stock, in the Hambrecht and Quist Healthcare Information Services Index,
or the Nasdaq Stock Market Index, and that all dividends are reinvested.
<TABLE>
<CAPTION>
JUNE 18, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cybear, Inc. $ 100.00 $ 84.79 $ 50.76 $ 41.45
Nasdaq Stock Market (U.S.) Index 100.00 104.62 107.01 154.43
Hambrecht & Quist Healthcare Information Services Index 100.00 99.15 72.33 82.94
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock of the Company as of March 13, 2000, by
each person owning more than 5% of such common shares and, the directors and the
Named Executive Officers, and by all officers and directors, as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER (1), (2) BENEFICIALLY OWNED OUTSTANDING
- --------------------------------------------------------------- ------------------------------------ -------------------
<S> <C> <C>
Andrx Corporation 12,877,054 (5) 72.5%
Alan P. Cohen 12,905,554 (3),(4) 72.5%
John H. Klein 444,444 (6) 2.5%
Edward E. Goldman, M.D. 650,500 (7) 3.7%
Timothy E. Nolan 85,000 (8) *
Eric D. Moskow, M.D. 67,000 (9) *
Scott Lodin 12,903,554 (3),(4),(10) 72.5%
Angelo C. Malahias 12,902,554 (3),(4) 72.5%
Melvin Sharoky, M.D. 12,913,454 (3),(4) 72.6%
Philip. P. Gerbino 25,000 (4) *
Martin Reid Stoller, Ph.D. 26,300 (4) *
Debra S. Richman - (11) *
All Directors and Officers as a Group (11 persons) 13,767,698 (12) 75.7%
</TABLE>
* Less than 1%
(1) Except as indicated, the address of each person named in the table is
c/o Cybear, Inc. 5000 Blue Lake Dr. suite 200, Boca Raton, Florida
33431.
(2) Except as otherwise indicated, the persons named in this table have
sole voting and investment power with respect to all shares of common
stock listed, which include shares of common stock that such persons
have the right to acquire a beneficial interest within 60 days from the
date of this Report.
29
<PAGE>
(3) Includes shares owned indirectly by Andrx Corporation. and 525,000
shares of common stock deemed to be beneficially owned by Edward E.
Goldman, M.D.
(4) Includes 25,000 shares of common stock issuable upon the exercise of
stock options.
(5) Includes 525,000 shares of common stock deemed to be beneficially owned
by Edward E. Goldman, M.D.
(6) Includes 111,111 shares of common stock issuable upon the exercise of
stock options.
(7) Includes 525,000 shares of common stock issuable upon the exercise of a
warrant issued to Dr. Goldman by Andrx exercisable beginning on April
30, 1999 having an exercise price of $3.00 per share.
(8) Represents 85,000 shares of common stock issuable upon the exercise of
stock options.
(9) Represents 67,000 shares of common stock issuable upon the exercise of
stock options.
(10) Includes 1,000 shares of common stock held by Mr. Lodin as custodian
for his minor children.
(11) Ms. Richman resigned from the Company in February 2000.
(12) Includes the shares of common stock described in notes (4) through (7),
and (10); 413,111 shares of common stock issuable upon the exercise of
the stock options described in notes (4), (6), and (8) through (10) and
500 shares of common stock held by Jack S. Greenman, the Company's
executive vice president and chief financial officer.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since Cybear's inception, Andrx and Cybear have operated pursuant to a
corporate services agreement pursuant to which Andrx provides certain legal,
financial and administrative services to Cybear in exchange for $120,000 per
annum. In addition, Andrx and Cybear have operated pursuant to a tax allocation
agreement pursuant to which Cybear will be responsible for its tax liability as
if it had filed a separate income tax return when its taxable results are
included in the consolidated income tax return of Andrx. The Company recorded a
tax benefit of $2,824,000 for the year ended December 31, 1999 reflecting the
reimbursement from Andrx for the utilization of Cybear's income tax attributes
pursuant to the tax allocation agreement.
In January 1999, Andrx sold to John Klein, the Chairman of the Company,
100,000 shares of Cybear common stock at its then market price of $3.00 per
share for $300,000.
In November, 1998, the Company entered into a five year sublease
agreement with Strategy Business and Technology Solutions, LLC (the "Lessor"), a
company owned by the chairman of the Company, whereby the Company leased
approximately 4,000 square feet of office space to house its business
development and sales activities. The Company agreed to pay the Lessor $10,000
and $417 per month in base rent and electricity, respectively. In November 1999,
the Company terminated the lease and incurred an early termination penalty of
$95,000. In addition, for the year ended December 31, 1999, the Company recorded
$111,332 in rent expense relative to this lease.
In May 1999, Cybear entered into a five-year renewable consulting
agreement with Innovative Clinical Solutions, Ltd. ("ICSL"). Dr. Eric Moskow,
M.D., a director of the Company and also the Company's Executive
Vice-President-Market Development is a director of ICSL and was the Executive
Vice-President of Strategic Planning of ICSL from September 1996 to February,
2000. The Company agreed to pay ICSL a $1 million consulting fee. ICSL will make
reasonable good faith efforts to cause healthcare professionals employed by or
any medical practice managed by or affiliated with ICSL to subscribe to Cybear's
Physician Practice Portal product, to market Cybear's Physician Practice Portal
product to others, and to present Cybear with potential advertisers. ICSL also
agreed to pay Cybear $600,000 representing 24 subscription months for the first
1,000 subscribers obtained from ICSL. In addition, Cybear and ICSL will share
revenues generated from subscribers and advertisers provided by ICSL.
30
<PAGE>
In December 1999, Cybear received from Andrx a tracking stock
recapitalization plan offer which would give Andrx shareholders the ability to
distinguish their investment in Andrx and Cybear. The plan would create a new
class of Andrx stock to separately track the performance of Cybear ("Cybear
Group Common").
In March 2000, Andrx and Cybear announced that they executed a
definitive agreement with respect to the previously announced tracking stock
recapitalization plan. This plan was recommended to the Cybear Board of
Directors by its Special Committee and approved by the Boards of both Cybear and
Andrx. The plan will be submitted to Andrx and Cybear shareholders for approval
later this year.
Pursuant to the Agreement, Andrx will acquire all of the publicly
traded shares of common stock of Cybear in a tax-free "roll-up" merger. Public
shareholders currently own approximately 5.4 million shares (assuming the
exercise by Edward E. Goldman, M.D., Cybear's chief executive officer, of a
warrant to acquire 525,000 shares of common stock of Cybear currently owned by
Andrx), or 30.5%, of the common shares of Cybear, and those shareholders will
receive one share of Cybear Group Common for every Cybear share they currently
own. In the recapitalization, the number of Cybear shares held by Andrx will be
reduced from 12.4 million shares to 10.3 million shares so as to provide the
equivalent of a 20% increase in shares held by the non-Andrx shareholders of
Cybear. As a result, the non-Andrx shareholders of Cybear will own approximately
34.5% of the Cybear Group Common following the closing of the transaction.
Pursuant to the Agreement, each Andrx common share will be converted into (i)
one share of Andrx Group Common and (ii) approximately .1622 shares of Cybear
Group Common, after giving effect to Andrx' pending two-for-one stock split (in
the form of a stock dividend) announced on March 1, 2000. Upon completion of the
recapitalization, (i) Cybear will be a wholly owned subsidiary of Andrx with
100% of its value publicly traded in the form of Cybear Group Common; (ii)
current Cybear shareholders will own approximately 34.5% of the Cybear Group
Common; and (iii) current Andrx shareholders will own 100% of the Andrx Group
Common and approximately 65.5% of the Cybear Group Common.
Andrx and Cybear will be filing a preliminary joint proxy statement and
a registration statement with respect to the proposed transaction with the SEC,
which is subject to review by the SEC. In addition to shareholders approval, the
transaction will be subject to various Federal and state regulatory approvals
and, accordingly, no assurance can be given that this proposed transaction will
be consummated.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) DOCUMENTS FILED AS PART OF THIS REPORT
(1) CONSOLIDATED FINANCIAL STATEMENTS Reference is made to the Index to
Financial Statements included in Part II, Item 8 of this Report.
(2) FINANCIAL STATEMENT SCHEDULES All other schedules for which
provision is made in applicable regulations of the Commission are omitted
because they are not applicable or the required information is in the
Consolidated Financial Statements or notes thereto.
(3) EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.0 Merger Agreement and Plan of Reorganization dated as of July 15,
1998 among 1997 Corp., Cybear, Inc. and Cybear Capital Corp.*
2.1 Agreement and Plan of Merger dated as of September 17, 1999 among
Cybear, Inc., TN Acquisition Corporation, telegraph New
Technology, Inc. and Telegraph Consulting Corporation.*
2.2 Agreement and Plan of Merger and Reorganization dated March 23,
2000 by and among Andrx Corporation, Cybear Inc., New Andrx
Corporation, Andrx Acquisition Corp., and Cybear Acquisition
Corp.(1)
3.1 Registrant's Certificate of Incorporation, as amended.*
3.2 Registrant's Bylaws.*
31
<PAGE>
3.3 Certificate of Ownership and Merger of Cybear, Inc. (FL) with and
into the Registrant*
4.1 Specimen common stock certificate*
10.1 Stock Option Plan*
10.2+ Form of Employment Agreement between Edward Goldman and the
Registrant.*
10.3+ Form of Employment Agreement between Debra Richman and the
Registrant.*
10.4 Form of Indemnification Agreement between the Registrant and each
of its directors and executive officers.*
10.5 Corporate Services Agreement between the Registrant and Andrx
Corporation.*
10.6 Credit Agreement between Andrx Corporation and the Registrant.*
10.7 Tax Allocation Agreement between the Registrant and Andrx
Corporation.*
10.8 Letter Agreement between the Registrant and Andrx Corporation.*
10.9 Lease Agreement relating to premises located at 5000 Blue Lake Dr
suite 200, Boca Raton, Florida.*
10.10 Lease Agreement relating to premises located 105 Challenger Rd,
Ridgefield Park, New Jersey.*
10.11 Agreement between the Registrant and Cox Interactive Media, Inc.*
10.12+ Letter of Employment between the Registrant and Jack Greenman.*
10.13 First Amendment to Lease Agreement relating to premises located
at 5000 Blue Lake Dr suite 200, Boca Raton, Florida.(1)
10.14 Second Amendment to Lease Agreement relating to premises located
at 5000 Blue Lake Dr suite 200, Boca Raton, Florida.(1)
10.15+ Letter of Employment between the Registrant and Timothy E.
Nolan(1)
16 Letter from Feldman Sherb Ehrlich & Co., P.C. (formerly Feldman
Radin & Co., P.C.)*
21 Subsidiaries of the Registrant(1)
23.1 Consent of Arthur Andersen LLP.(1)
27.1 Financial Data Schedule.(1)
* Previously filed.
+ Agreement between registrant and Executive Officer
(1) Filed herewith
32
<PAGE>
(B) REPORTS ON FORM 8-K
A Current Report on Form 8-K/A was filed on November 22, 1999 reporting
the financial statements of Telegraph Consulting Corporation and the Company's
pro forma financial statements. The Report was an amendment to the Report on
Form 8-K filed on September 29, 1999 reporting under Item 2 "Acquisition or
Disposition of Assets" regarding the Company's acquisition of Telegraph
Consulting Corporation.
(C) ITEM 601 EXHIBITS
The exhibits required by Item 601 of Regulation S-K are set forth in
(A)(3) above.
(D) FINANCIAL STATEMENT SCHEDULES
The financial statement schedules required by Regulation S-K are set
forth in (A)(2) above.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CYBEAR, INC.
BY:/s/ EDWARD E. GOLDMAN
------------------------------------
Edward E. Goldman, M.D.
Chief Executive Officer and Director
BY: /s/ JACK S. GREENMAN
------------------------------------
Jack S. Greenman
Executive Vice President and Chief
Financial Officer
Date: March 28, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ JOHN H. KLEIN Chairman and Director March 28, 2000
- ------------------------------
John H. Klein
/s/ EDWARD E. GOLDMAN Chief Executive Officer and Director March 28, 2000
- ------------------------------ (Principal Executive Officer)
Edward E. Goldman, M.D.
/s/ TIMOTHY E. NOLAN President, Chief Operating Officer and Director March 28, 2000
- ------------------------------
Timothy E. Nolan
/s/JACK S. GREENMAN Executive Vice President and Chief Financial March 28, 2000
- ------------------------------ Officer (Principal Financial and Accounting Officer)
Jack S. Greenman
/s/ERIC D. MOSKOW Executive Vice President - Market March 28, 2000
- ------------------------------ Development and Director
Eric D. Moskow, M.D.
/s/ SCOTT LODIN Secretary and Director March 28, 2000
- ------------------------------
Scott Lodin
/s/ ALAN P. COHEN Director March 28, 2000
- ------------------------------
Alan P. Cohen
/s/ ANGELO C. MALAHIAS Director March 28, 2000
- ------------------------------
Angelo C. Malahias
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ MELVIN SHAROKY Director March 28, 2000
- ------------------------------
Melvin Sharoky, M.D.
/s/ PHILIP P. GERBINO Director March 28, 2000
- ------------------------------
Philip P. Gerbino, Ph.D.
/s/ MARTIN REID STOLLER Director March 28, 2000
- ------------------------------
Martin Reid Stoller, PhD
</TABLE>
35
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.2 Agreement and Plan of Merger and Reorganization dated March 23,
2000 by and among Andrx Corporation, Cybear Inc., New Andrx
Corporation, Andrx Acquisition Corp., and Cybear Acquisition
Corp.
10.13 First Amendment to Lease Agreement relating to premises located
at 5000 Blue Lake Dr suite 200, Boca Raton, Florida.
10.14 Second Amendment to Lease Agreement relating to premises located
at 5000 Blue Lake Dr suite 200, Boca Raton, Florida.
10.15+ Letter of Employment between the Registrant and Timothy E. Nolan
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
+ Agreement between registrant and Executive Officer
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
ANDRX CORPORATION,
CYBEAR, INC.
NEW ANDRX CORPORATION,
ANDRX ACQUISITION CORP., AND
CYBEAR ACQUISITION CORP.
March __, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Definitions.............................................................................................2
2. Basic Transaction.......................................................................................6
(a) The Mergers....................................................................................6
(b) Filing of Plan of Merger, Effective Time.......................................................7
(c) Effect of Merger...............................................................................7
(i) General........................................................................................7
(ii) Articles of Incorporation......................................................................7
(iii) Bylaws.........................................................................................7
(iv) Directors......................................................................................8
(v) Officers.......................................................................................8
(d) The Closing....................................................................................8
(e) Intentionally Omitted..........................................................................9
(f) Conversion of Andrx and Cybear Capital Stock...................................................9
(g) Cancellation of Treasury Stock.................................................................9
(h) Unvested Andrx Common Stock and Cybear Common Stock...........................................10
(i) Capital Stock of Merger Subs..................................................................10
(j) Fractional Shares.............................................................................10
(k) Existing New Andrx Capital Stock..............................................................11
(l) Exchange Agent................................................................................11
(m) New Andrx to Provide Stock....................................................................11
(n) Exchange Procedures...........................................................................11
(o) Dividends, Etc................................................................................12
(p) Lost, Stolen or Destroyed Certificates........................................................13
(q) Tax Consequences..............................................................................13
3. Representations and Warranties of Cybear...............................................................13
(a) Organization, Qualification, and Corporate Power..............................................13
(b) Capitalization................................................................................13
(c) Authorization of Transaction..................................................................14
(d) Noncontravention..............................................................................14
(e) Filings with the SEC..........................................................................14
(f) Financial Statements..........................................................................14
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
(g) Events Subsequent to Most Recent Cybear Fiscal Period End.....................................15
(h) Undisclosed Liabilities.......................................................................15
(i) Brokers' Fees.................................................................................15
(j) Disclosure....................................................................................15
(k) Litigation....................................................................................15
(l) Opinion of Financial Advisor..................................................................16
(m) Waiver of Change in Control Provisions........................................................16
4. Representations and Warranties of Andrx................................................................16
(a) Organization of Andrx and Subsidiary Corp.....................................................16
(b) Capitalization................................................................................16
(c) Authorization of Transaction..................................................................16
(d) Noncontravention..............................................................................17
(e) Filings with the SEC..........................................................................17
(f) Financial Statements..........................................................................17
(g) Events Subsequent to Most Recent Andrx Fiscal Period End......................................17
(h) Undisclosed Liabilities.......................................................................18
(i) Brokers' Fees.................................................................................18
(j) Disclosure....................................................................................18
(k) Litigation....................................................................................18
5. Representations and Warranties of New Andrx and Merger Subs............................................18
(a) Organization of New Andrx and Merger Subs.....................................................18
(b) Capitalization................................................................................19
(c) Authorization of Transaction..................................................................19
(d) Noncontravention..............................................................................19
(e) Undisclosed Liabilities.......................................................................19
(f) Brokers' Fees.................................................................................20
(g) Disclosure....................................................................................20
(h) Litigation....................................................................................20
6. Covenants..............................................................................................20
(a) General.......................................................................................20
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
(b) Notices and Consents..........................................................................20
(c) Regulatory Matters and Approvals..............................................................20
(i) Securities Act, Securities Exchange Act, and State Securities Laws...................20
(ii) Approvals............................................................................21
(iii) S-4 Registration Statement and Joint Proxy Statement.................................21
(iv) Cybear Stockholder Meeting...........................................................22
(v) Andrx Stockholder Meeting............................................................22
(vi) HSR and other Filings; Reasonable Efforts............................................22
(d) Operation of Business.........................................................................23
(e) Full Access...................................................................................23
(f) Notice of Developments........................................................................24
(g) Insurance and Indemnification.................................................................24
(h) Expenses......................................................................................24
(i) Assumption of Andrx Option Plan and Cybear Option Plan; Form S-8; Employee Plans..............25
(j) Certain Tax Matters...........................................................................25
(i) Return Filing; Information Sharing Until the Closing Date............................25
(ii) Certain Tax Opinions.................................................................26
(k) No Solicitation...............................................................................27
(l) Voting Agreements.............................................................................28
7. Conditions to Obligation to Close......................................................................28
(a) Conditions to Obligation of New Andrx, Andrx and Merger Subs..................................28
(b) Conditions to Obligation of Cybear............................................................29
8. Termination............................................................................................31
(a) Termination of Agreement......................................................................31
(b) Effect of Termination.........................................................................32
9. Miscellaneous..........................................................................................32
(a) Survival......................................................................................32
(b) Press Releases and Public Announcements.......................................................32
(c) No Third Party Beneficiaries..................................................................32
</TABLE>
-iii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
(d) Entire Agreement..............................................................................32
(e) Succession and Assignment.....................................................................32
(f) Counterparts..................................................................................32
(g) Headings......................................................................................33
(h) Notices.......................................................................................33
(i) Governing Law.................................................................................34
(j) Amendments and Waivers........................................................................34
(k) Severability..................................................................................34
(l) Expenses......................................................................................34
(m) Construction..................................................................................34
(n) Incorporation of Exhibits and Schedules.......................................................35
EXHIBIT A -- PLAN OF MERGER.................................................................................1
EXHIBIT B-1 -- NEW ANDRX AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION......................................................................2
EXHIBIT B-2 -- NEW ANDRX BYLAWS.................................................................................3
EXHIBIT C -- TAX SHARING AGREEMENT..........................................................................4
EXHIBIT D -- CYBEAR TRACKING COMMON STOCK POLICIES...........................................................5
</TABLE>
-iv-
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement") is
made and entered into as of March ____, 2000, by and among Andrx Corporation, a
Florida corporation ("Andrx"), Cybear, Inc., a Delaware corporation ("Cybear"),
New Andrx Corporation, a Delaware corporation ("New Andrx"), Andrx Acquisition
Corp., a Florida corporation and wholly owned subsidiary of New Andrx ("Andrx
Merger Sub"), and Cybear Acquisition Corp., a Florida corporation and wholly
owned subsidiary of New Andrx ("Cybear Merger Sub") (together, Andrx Merger Sub
and Cybear Merger Sub are collectively referred to herein as "Merger Subs").
Andrx, Cybear, New Andrx and the Merger Subs are individually referred to as a
"Party" and collectively referred to herein as the "Parties."
R E C I T A L S
A. The Board of Directors of Andrx has unanimously (i) determined that it
is advisable and fair to, and in the best interests of, Andrx and its
stockholders that, upon the terms and subject to the conditions of this
Agreement, Andrx Merger Sub merge with and into Andrx, with Andrx being the
surviving corporation (the "Andrx Merger"), (ii) approved this Agreement, the
Andrx Merger and the other transactions contemplated hereby and (iii)
recommended the approval of this Agreement and the Andrx Merger by the
stockholders of Andrx.
B. The Board of Directors of Cybear, based upon a recommendation of a
Special Committee (the "Special Committee") consisting of one disinterested
director, has (i) determined that it is advisable and fair to, and in the best
interests of, Cybear and its stockholders that, upon the terms and subject to
the conditions of this Agreement, Cybear Merger Sub merge with and into Cybear,
with Cybear being the surviving corporation (the "Cybear Merger"), (ii) approved
this Agreement, the Cybear Merger and the other transactions contemplated hereby
and (iii) recommended the approval of this Agreement and the Cybear Merger by
the stockholders of Cybear. The Andrx Merger and the Cybear Merger are
collectively referred to herein as the "Mergers."
C. The Board of Directors of New Andrx has (i) determined that the Mergers
are advisable and in the best interests of New Andrx and its stockholders and
(ii) approved this Agreement, the Mergers and the other transactions
contemplated hereby.
D. Pursuant to the Mergers, among other things, the outstanding shares of
Common Stock, par value $.001 per share ("Andrx Common Stock"), of Andrx shall
be converted into the right to receive the consideration set forth herein and
the outstanding shares of Common Stock, par value $.001 per share ("Cybear
Common Stock"), of Cybear shall be converted into the right to receive the
consideration set forth herein.
E. The Parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Andrx Merger to qualify as a
"reorganization" under the provisions of Section 368(a)(1)(A) and 368(a)(2)(E)
of the Code and the exchange of shares pursuant to the Cybear Merger to qualify
as a tax-free exchange under Section 351(a) of the Code.
1
<PAGE>
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"Action" has the meaning set forth in Section 6(g) below.
"Andrx Acquisition Corp." has the meaning set forth in preface above.
"Andrx Articles of Incorporation" has the meaning set forth in Section
2(c)(ii).
"Andrx Capital Stock" means all shares of Andrx Common Stock and all shares
of any other capital stock of Andrx.
"Andrx Closing Tax Opinion" has the meaning set forth in Section 7(a)(xi)
below.
"Andrx Common Stock" has the meaning set forth in the preface above.
"Andrx Exchange Ratio" has the meaning set forth in Section 2(f)(i).
"Andrx Initial Tax Opinion" has the meaning set forth in Section 6(j)(ii)
below.
"Andrx Material Adverse Effect" has the meaning set forth in Section 4(a)
below.
"Andrx Merger" means set forth in the preface above.
"Andrx Merger Sub" has the meaning set forth in the preface above.
"Andrx Merger Sub Common Stock" has the meaning set forth in Section 2(i)
below.
"Andrx Option Plan" means the Andrx Stock Incentive Plan.
"Andrx Options" means all unexpired and unexercised issued and outstanding
options, warrants and other rights to acquire or receive Andrx Capital Stock
(whether or not vested or exercisable).
"Andrx Public Reports" has the meaning set forth in Section 4(e) below.
"Andrx Stockholders Meeting" has the meaning set forth in Section 6(c)(v)
below.
"Andrx Surviving Corporation" has the meaning set forth in Section 2(a)
below.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
2
<PAGE>
"Certificates" has the meaning set forth in 2(n) below.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d) below.
"Closing Tax Certificates" has the meaning set forth in 6(j)(ii) below.
"Code" has the meaning set forth in the preface above.
"Confidential Information" means any information concerning the businesses
and affairs of a Person that is not already generally available to the public.
"Cybear" has the meaning set forth in the preface above.
"Cybear Articles of Incorporation" has the meaning set forth in Section
2(c)(ii).
"Cybear Capital Stock" means all shares of Cybear Common Stock and all
shares of any other capital stock of Cybear.
"Cybear Closing Tax Opinion" has the meaning set forth in Section
7(b)(viii) below.
"Cybear Common Stock" has the meaning set forth in the preface above.
"Cybear Initial Tax Opinion" has the meaning set forth in Section 6(j)(ii)
below.
"Cybear Material Adverse Effect" has the meaning set forth in Section 3(a)
below.
"Cybear Merger" has the meaning set forth in the preface above.
"Cybear Merger Sub" has the meaning set forth in the preface above.
"Cybear Merger Sub Common Stock" has the meaning set forth in Section
2(i)(ii) below.
"Cybear Option Plan" means Cybear's 1997 Stock Option Plan.
"Cybear Options" means all unexpired and unexercised issued and outstanding
options, warrants and other rights to acquire or receive Cybear Capital Stock
(whether or not vested or exercisable).
"Cybear Public Reports" has the meaning set forth in Section 3(e) below.
"Cybear Stockholder" means any Person who or which holds any Cybear Capital
Stock.
"Cybear Stockholders Meeting" has the meaning set forth in Section 6(c)(iv)
below.
3
<PAGE>
"Cybear Surviving Corporation" has the meaning set forth in Section 2(a)
below.
"Cybear Tracking Common Stock" means the Andrx Corporation - Cybear Group
Common Stock, par value $.001 per share, of New Andrx, a class of New Andrx
Capital Stock that will have the terms and features set forth in the New Andrx
Certificate of Incorporation.
"Cybear Tracking Option" has the meaning set forth in Section 2(f)(iii)
below.
"DGCL" means the General Corporation Law of the State of Delaware, as
amended.
"DOJ" means the Antitrust Division of the United States Department of
Justice.
"Disclosure Schedule" has the meaning set forth in Section 3 below.
"Effective Time" has the meaning set forth in Section 2(b) below.
"Employees" has the meaning set forth in Section 6(i) below.
"Exchange Agent" has the meaning set forth in Section 2(l) below.
"FBCA" means the Business Corporation Act of the State of Florida, as
amended.
"FTC" means the United States Federal Trade Commission.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"HSR Act" has the meaning set forth in Section 3(d) below.
"IRS" means the Internal Revenue Service.
"Indemnified Party" has the meaning set forth in Section 6(g) below.
"Initial Tax Certificate" has the meaning set forth in Section 6(j)(ii).
"Joint Proxy Statement" has the meaning set forth in Section 6(c)(i) below.
"Knowledge" means actual knowledge after reasonable investigation.
"Mergers" has the meaning set forth in the preface above.
"Merger Subs" has the meaning set forth in the preface above.
"Most Recent Andrx Fiscal Period End" has the meaning set forth in 4(f)(ii)
below.
4
<PAGE>
"Most Recent Cybear Fiscal Period End" has the meaning set forth in Section
3(f)(ii) below.
"New Andrx" has the meaning set forth in the preface above.
"New Andrx Certificate of Incorporation" has the meaning set forth in
Section 2(c)(ii) below.
"New Andrx Capital Stock" means all shares of New Andrx Common Stock,
Cybear Tracking Common Stock and all shares of any other capital stock of New
Andrx.
"New Andrx Common Stock" means the Andrx Corporation - Andrx Common Stock,
par value $.001 per share, of New Andrx, a class of New Andrx Capital Stock that
will have the terms and features set forth in the New Andrx Certificate of
Incorporation.
"New Andrx Material Adverse Effect" has the meaning set forth in Section
5(a) below.
"New Andrx Option" has the meaning set forth in Section 2(f)(iii).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Plan of Merger" has the meaning set forth in Section 2(a) below.
"Required Andrx Stockholder Vote" means the affirmative vote in favor of
this Agreement and the Andrx Merger by the holders of a majority of the Andrx
Capital Stock outstanding.
"Required Cybear Stockholder Vote" means the affirmative vote in favor of
this Agreement and the Cybear Merger by the holders of a majority of the Cybear
Capital Stock outstanding; provided that the holders of a majority of the Cybear
Capital Stock outstanding, other than Andrx or its Subsidiaries, have not voted
against this Agreement and the Cybear Merger.
"S-4 Registration Statement" has the meaning set forth in Section 6(c)(i)
below.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
5
<PAGE>
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, OTHER THAN (a) mechanic's, materialmen's, landlord's
and similar liens, (b) liens for taxes not yet due and payable or for taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"SG Cowen" has the meaning set forth in Section 3(l) below.
"Special Committee" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Superior Proposal" has the meaning set forth in Section 6(k) below.
"Surviving Corporations" has the meaning set forth in Section 2(a) below.
"Takeover Proposal" means any offer or proposal for, or any written
indication of interest in, a merger or other business combination involving
Cybear or any of its Subsidiaries or the acquisition of ten percent (10%) or
more of the outstanding Cybear Capital Stock, or a significant portion of the
assets of, or any of its Subsidiaries, other than the transactions contemplated
by this Agreement.
"Third Party Expenses" has the meaning set forth in Section 6(h) below.
2. BASIC TRANSACTION.
(a) THE MERGERS. Subject to the terms and conditions of this Agreement
and the applicable provisions of the FBCA and the DGCL, at the Effective Time
the plan of merger (the "Plan of Merger") in the form of and as set forth in
this Agreement (or such other instrument setting forth the plan of merger as set
forth in this Section 2), (i) Andrx Merger Sub shall be merged with and into
Andrx, the separate corporate existence of Andrx Merger Sub shall cease and
Andrx shall continue as the surviving corporation, and (ii) Cybear Merger Sub
shall be merged with and into Cybear, the separate corporate existence of Cybear
Merger Sub shall cease and Cybear shall continue as the surviving corporation.
Andrx, as the surviving corporation after the Andrx Merger, is hereinafter
sometimes referred to as the "Andrx Surviving Corporation," Cybear as the
surviving corporation after the Cybear Merger is hereinafter sometimes referred
to as the "Cybear Surviving Corporation," and Andrx Surviving Corporation and
Cybear Surviving Corporation are sometimes hereinafter collectively referred to
as the "Surviving Corporations." As a result of the Mergers, Andrx and Cybear
shall become wholly owned, direct subsidiaries of New Andrx. The effects and
consequences of the Mergers shall be as set forth in Section 2(c) below.
6
<PAGE>
(b) FILING OF PLAN OF MERGER, EFFECTIVE TIME. In connection with the
Closing, the Parties hereto shall cause the Mergers to be consummated by filing
the Plan of Merger with the Secretary of State of the State of Florida, in
accordance with the relevant provisions of the FBCA and by filing the Plan of
Merger with the Secretary of State of the State of Delaware, in accordance with
the relevant provisions of the DGCL. The Mergers shall become effective at the
time and date on which the Plan of Merger has been duly filed with the Secretary
of State of Florida and the Secretary of State of Delaware or such time and date
as agreed upon by the Parties and specified in the Plan of Merger, being
hereinafter referred to as the "Effective Time."
(c) EFFECT OF MERGER.
(i) GENERAL. At the Effective Time, the effect of the Mergers
shall be as provided in this Agreement, the Plan of Merger and the applicable
provisions of the FBCA and DGCL. Without limiting the generality of the
foregoing, and subject to the foregoing, at the Effective Time, (A) all the
property, rights, privileges, powers and franchises of Andrx and Andrx Merger
Sub shall vest in the Andrx Surviving Corporation, and all debts, liabilities
and duties of Andrx and Andrx Merger Sub shall become the debts, liabilities and
duties of the Andrx Surviving Corporation, and (B) all the property, rights,
privileges, powers and franchises of Cybear and Cybear Merger Sub shall vest in
the Cybear Surviving Corporation, and all debts, liabilities and duties of
Cybear and Cybear Merger Sub shall become the debts, liabilities and duties of
the Cybear Surviving Corporation.
(ii) ARTICLES OF INCORPORATION.
(A) The Articles of Incorporation (the "Andrx Articles of
Incorporation") of Andrx Merger Sub, at the Effective Time, shall be the
Articles of Incorporation of the Andrx Surviving Corporation.
(B) The Articles of Incorporation (the "Cybear Articles
of Incorporation") of Cybear Merger Sub, at the Effective Time, shall be the
Articles of Incorporation of the Cybear Surviving Corporation.
(C) The Amended and Restated Certificate of Incorporation
of New Andrx, substantially as set forth as Exhibit B-1 hereto (the "New Andrx
Certificate of Incorporation"), shall be the Certificate of Incorporation of New
Andrx, provided that at the Effective Time the name of the corporation shall be
"Andrx Corporation."
(iii) BYLAWS.
(A) The Bylaws of Andrx Merger Sub, at the Effective
Time, shall be the Bylaws of the Andrx Surviving Corporation until thereafter
amended as provided by law and such Bylaws.
(B) The Bylaws of Cybear Merger Sub, at the Effective
Time, shall be the Bylaws of the Cybear Surviving Corporation until thereafter
amended as provided by law and such Bylaws.
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(C) The Bylaws of New Andrx shall be substantially as
set forth in Exhibit B-2 hereto.
(iv) DIRECTORS.
(A) The directors of Andrx Merger Sub immediately
prior to the Effective Time shall be the directors of the Andrx Surviving
Corporation as of the Effective Time and until their successors are duly
appointed or elected in accordance with applicable law, or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
Articles of Incorporation and Bylaws.
(B) The directors of Cybear Merger Sub immediately
prior to the Effective Time shall be the directors of Cybear Surviving
Corporation as of the Effective Time and until their successors are duly
appointed or elected in accordance with applicable law, or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
Articles of Incorporation and Bylaws.
(C) The directors of New Andrx shall be the existing
directors of Andrx and the director nominee designated by Cybear as set forth
in Section 7(b)(x).
(v) OFFICERS.
(A) The officers of the Andrx Merger Sub at the
Effective Time shall be the officers of the Andrx Surviving Corporation
immediately prior to the Effective Time until their successors are duly
appointed or elected in accordance with applicable law, or until their earlier
death, resignation or removal in accordance with the Andrx Surviving
Corporation's Articles of Incorporation and Bylaws.
(B) The officers of Cybear Merger Sub at the
Effective Time shall be the officers of the Cybear Surviving Corporation
immediately prior to the Effective Time until their successors are duly
appointed or elected in accordance with applicable law, or until their earlier
death, resignation or removal in accordance with the Cybear Surviving
Corporation's Articles of Incorporation and Bylaws.
(C) The officers of New Andrx shall be the existing
officers of Andrx until their successors are duly appointed or elected in
accordance with applicable law, or until their earlier death, resignation or
removal in accordance with the New Andrx Certificate of Incorporation and
Bylaws.
(d) THE CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of Broad and Cassel, 201 South Biscayne
Boulevard, Suite 3000, Miami, Florida 33131, at 10:00 a.m. on (a) the next
business day after the last to be fulfilled or waived of the conditions set
forth in Section 7 shall be fulfilled or waived in accordance herewith (other
than conditions which by their nature are to be satisfied at the Closing, but
subject to such conditions) or (b) at such other time, date or place as Cybear
and New Andrx may agree in writing. The date on which the Closing occurs is
referred to herein as the "Closing Date."
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(e) INTENTIONALLY OMITTED.
(f) CONVERSION OF ANDRX AND CYBEAR CAPITAL STOCK.
(i) Each share of Andrx Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Andrx Common
Stock to be canceled pursuant to Section 2(g)) will be canceled and extinguished
and be converted automatically into the right to receive (A) one share of New
Andrx Common Stock and (B) a fraction (the "Andrx Exchange Ratio") of a share of
Cybear Tracking Common Stock equal to 10,293,378 divided by the number of shares
of Andrx Common Stock outstanding immediately prior to the Effective Date, upon
surrender of the certificate representing such share of Andrx Common Stock in
the manner provided in Section 2(n) (or, in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit and, if required, bond in
the manner provided in Section 2(p)). It is the intention of the Parties that
the holders of Cybear Common Stock other than Andrx, which holders currently own
approximately 30.5% of the outstanding Cybear Capital Stock as of the date
hereof, will as a result of the Mergers, own in the aggregate approximately
34.5% of the Cybear Tracking Common Stock assuming full exercise of the warrant
to purchase Cybear Common Stock held by Dr. Edward E. Goldman.
(ii) Each share of Cybear Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Cybear Common
Stock owned by Andrx or its Subsidiaries or shares of Cybear Common Stock to be
canceled pursuant to Section 2(g)) will be canceled and extinguished and be
converted automatically into the right to receive one share of Cybear Tracking
Common Stock upon surrender of the certificate representing such share of Cybear
Common Stock in the manner provided in Section 2(n) (or, in the case of a lost,
stolen or destroyed certificate, upon delivery of an affidavit and, if required,
bond in the manner provided in Section 2(p)).
(iii) At the Effective Time, each outstanding Cybear Option shall
be assumed by New Andrx in such manner that it is converted into an option to
purchase .8842 shares of Cybear Tracking Common Stock for each share of Cybear
Common Stock subject to the Cybear Option (each a "Cybear Tracking Option"). At
the Effective Time, each outstanding Andrx Option shall be assumed by New Andrx
and converted into an option to purchase one share of New Andrx Common Stock
(each a "New Andrx Option") and a Cybear Tracking Option to purchase Cybear
Tracking Common Stock equal to the number of shares of Andrx Common Stock
subject to the Andrx Option multiplied by the Andrx Exchange Ratio. The exercise
price for the New Andrx Option shall be equal to the exercise price on the
existing Andrx Option less the product of the Andrx Exchange Ratio and the price
of the Cybear Common Stock on the Closing Date subject to potential adjustment
to conform with the Emerging Issues Task Force 99-9. The exercise price for the
Cybear Tracking Options issued to holders of the Andrx Options shall be equal to
the price of the Cybear Common Stock at the Closing Date. It is the intention of
the Parties that, to the extent that any such Andrx Option or Cybear Option
constituted an "incentive stock option" (within the meaning of Section 422 of
the Code) immediately prior to the Effective Time, the New Andrx Option or
Cybear Tracking Option continue to qualify as an incentive stock option to the
maximum extent permitted by Section 422 of the Code, and that the assumption of
the New Andrx Option or Cybear Options provided by this Section 2(f)(iii)
satisfy the conditions of Section 424(a) of the Code.
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(g) CANCELLATION OF TREASURY STOCK. Each share of Andrx Common Stock
that is owned by Andrx as treasury stock immediately prior to the Effective Time
shall be canceled and extinguished without any conversion thereof. Each share of
Cybear Common Stock that is owned by Cybear as treasury stock immediately prior
to the Effective Time shall be canceled and extinguished without any conversion
thereof.
(h) UNVESTED ANDRX COMMON STOCK AND CYBEAR COMMON STOCK. If any shares
of Andrx Common Stock or Cybear Common Stock outstanding immediately prior to
the Effective Time are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement, or other agreement with Andrx or Cybear or under which Andrx or
Cybear has any rights, then (unless such condition terminates by virtue of the
Merger pursuant to the express term of such agreement) the shares of New Andrx
Common Stock issued in exchange for such shares of Andrx Common Stock or Cybear
Common Stock will also be unvested and subject to the same repurchase option,
risk of forfeiture or other condition, and the certificates representing such
shares of New Andrx Common Stock may accordingly be marked with appropriate
legends. Andrx and Cybear shall take all action that may be necessary to ensure
that, from and after the Effective Time, New Andrx is entitled to exercise any
such repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
(i) CAPITAL STOCK OF MERGER SUBS.
(i) At the Effective Time, each share of Common Stock, par value
$.01 per share, of Andrx Merger Sub ("Andrx Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of Common
Stock, par value $.01 per share, of the Andrx Surviving Corporation, and the
Andrx Surviving Corporation shall become a wholly owned subsidiary of New Andrx.
Each stock certificate of Andrx Merger Sub evidencing ownership of any such
shares shall continue to evidence ownership of such shares of capital stock of
the Andrx Surviving Corporation.
(ii) At the Effective Time, each share of Common Stock, par value
$.01 per share, of Cybear Merger Sub ("Cybear Merger Sub Common Stock") issued
and outstanding immediately prior to the Effective Time shall be converted into
and exchanged for one validly issued, fully paid and nonassessable share of
Common Stock, par value $.01 per share, of the Cybear Surviving Corporation, and
the Cybear Surviving Corporation shall become a wholly owned subsidiary of New
Andrx. Each stock certificate of Cybear Merger Sub evidencing ownership of any
such shares shall continue to evidence ownership of such share of capital stock
of the Cybear Surviving Corporation.
(j) FRACTIONAL SHARES. No fraction of a share will be issued to the
Shareholders of Andrx in the Andrx Merger. Instead, the fractional share
interests of Cybear Tracking Common Stock will be aggregated into whole shares
of Cybear Tracking Common Stock (provided that after such aggregation, the
remaining fractional share of Cybear Tracking, if any, shall be rounded up to
the next whole share) and sold on the open market by the Exchange Agent. The net
proceeds from the sale will be distributed by the Exchange Agent to the
stockholders entitled to receive such fractional share interests from New Andrx
in an amount of
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cash (rounded to the nearest whole cent) equal to the product of such fraction,
multiplied by the last sale price for a share of Cybear Common Stock as quoted
on The Nasdaq National Market on the last full trading day prior to the
Effective Time (less any commissions or expenses paid).
(k) EXISTING NEW ANDRX CAPITAL STOCK. At the Effective Time, any shares
of common stock, par value $.01 per share, of New Andrx issued and outstanding
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(l) EXCHANGE AGENT. New Andrx shall appoint a reputable institution
reasonably acceptable to New Andrx and Cybear to serve as exchange agent (the
"Exchange Agent") in the Merger.
(m) NEW ANDRX TO PROVIDE STOCK. Promptly after the Effective Time, New
Andrx shall make available to the Exchange Agent for exchange in accordance with
this Section 2 the shares of New Andrx Common Stock and Cybear Tracking Common
Stock issuable pursuant to Section 2 in exchange for all of the outstanding
shares of the Andrx Common Stock and Cybear Common Stock immediately prior to
the Effective Time.
(n) EXCHANGE PROCEDURES. Promptly after the Effective Time, New Andrx
shall cause the Exchange Agent to mail to each holder of record (as of the
Effective Time) of a certificate or certificates (the "Certificates"), which
immediately prior to the Effective Time represented outstanding shares of Andrx
Capital Stock or Cybear Capital Stock, as applicable, whose shares were
converted into shares of New Andrx Common Stock and/or Cybear Tracking Common
Stock pursuant to Section 2(f) and any dividends or other distributions pursuant
to Section 2(o), (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall contain
such other provisions as New Andrx may reasonably specify) and (ii) instructions
for use in effecting the surrender of Certificates in exchange for certificates
representing shares of New Andrx Capital Stock and/or Cybear Tracking Common
Stock, as applicable, and any dividends or other distributions pursuant to
Section 2(o). Upon surrender of the Certificates for cancellation to the
Exchange Agent, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, the holders of
such Certificates shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of New Andrx Common Stock and/or Cybear
Tracking Common Stock, as applicable, into which their shares of Andrx Capital
Stock or Cybear Capital Stock were converted, as applicable, at the Effective
Time and any dividends or distributions payable pursuant to Section 2(o), and
payment in lieu of fractional shares which the holder has the right to receive
pursuant to Section 2(j) and the Certificates so surrendered shall forthwith be
canceled. Until so surrendered, outstanding Certificates will be deemed from and
after the Effective Time, for all corporate purposes, subject to Section 2(o) as
to the payment of dividends, to evidence the ownership of the number of full
shares of New Andrx Common Stock and/or Cybear Tracking Common Stock into which
such shares of Andrx Capital Stock or Cybear Capital Stock, as applicable, shall
have been so converted and any dividends or distributions payable pursuant to
Section 2(o). If any portion of the New Andrx Common Stock and/or Cybear
Tracking Common Stock (and any dividends or distributions thereon), otherwise
payable hereunder to any person, is to be issued or paid to a person other than
the person in whose name the Certificate is registered,
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it shall be a condition to such issuance or payment that the Certificate so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such issuance or payment shall pay to
the Exchange Agent any transfer or other taxes required as a result of such
issuance or payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not payable.
(o) DIVIDENDS, ETC.
(i) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared after the Effective Time on the Andrx
Common Stock or Cybear Tracking Common Stock shall be paid with respect to any
shares of Andrx Capital Stock or Cybear Capital Stock, as applicable,
represented by a Certificate until such Certificate is surrendered for exchange
as provided herein. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
Andrx Common Stock or Cybear Tracking Common Stock certificates issued in
exchange therefor, without interest, (A) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of Andrx
Common Stock or Cybear Tracking Common Stock and not paid, less the amount of
any withholding taxes which may be required thereon and (B) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such shares of Andrx Common Stock or Cybear
Tracking Common Stock, less the amount of any withholding taxes which may be
required thereon.
(ii) All shares of the Andrx Common Stock or Cybear Tracking Common
Stock issued upon surrender of Certificates in accordance with this Section 2
shall be deemed to be in full satisfaction of all rights pertaining to the
shares of Andrx Capital Stock or Cybear Capital Stock represented thereby, and
from and after the Effective Time, there shall be no transfers on the stock
transfer books of Andrx or Cybear of the shares of Andrx Capital Stock or Cybear
Capital Stock, respectively. If, after the Effective Time, certificates
representing any such shares are presented to the Andrx Surviving Corporation,
or the Cybear Surviving Corporation, they shall be canceled and exchanged for
certificates for the consideration, if any, deliverable in respect thereof
pursuant to this Agreement in accordance with the procedures set forth in this
Section 2.
(iii) Upon demand by New Andrx, the Exchange Agent shall deliver to
New Andrx any portion of the New Andrx Common Stock or Cybear Tracking Common
Stock made available to the Exchange Agent pursuant to Section 2(n) hereof, and
cash in lieu of fractional shares thereof, that remains undistributed to holders
of Andrx Capital Stock or Cybear Capital Stock one year after the Effective
Time. Holders of Certificates who have not complied with this Section 2 prior to
such demand shall thereafter look only to New Andrx for payment of any claim to
such New Andrx Common Stock or Cybear Tracking Common Stock and dividends or
distributions, if any, in respect thereof.
(iv) Each of Andrx Surviving Corporation, Cybear Surviving
Corporation and New Andrx shall be entitled to deduct and withhold from the
Andrx Common
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<PAGE>
Stock or Cybear Tracking Common Stock (and any dividends or distributions
thereon), otherwise payable hereunder, to any person such amounts as it is
required to deduct and withhold with respect to making of such payment under any
provision of federal, state, local or foreign income tax law. To the extent that
the Andrx Surviving Corporation, Cybear Surviving Corporation or New Andrx so
withholds those amounts, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of Andrx Capital Stock or
Cybear Capital Stock in respect of which such deduction and withholding was made
by the Andrx Surviving Corporation, Cybear Surviving Corporation or New Andrx,
as the case may be.
(p) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event that any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by New Andrx, the posting by such person of
a bond in such reasonable amount as New Andrx may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the applicable merger consideration and unpaid dividend and
distributions on shares of Andrx Common Stock or Cybear Tracking Common Stock
deliverable in respect thereof pursuant to this Agreement.
(q) TAX CONSEQUENCES. It is intended by the parties hereto that the
Andrx Merger shall constitute a reorganization within the meaning of Section
368(a)(1)(A) and (a)(2)(E) of the Code. The parties hereto adopt this Agreement
as a "plan of reorganization" within the meaning of Section 1.368-2(g) and
1.368-3(a) of the United States Income Tax Regulations. It is intended by the
parties hereto that the exchange of shares pursuant to the Cybear Merger shall
constitute a tax-free exchange pursuant to Section 351(a) of the Code.
3. REPRESENTATIONS AND WARRANTIES OF CYBEAR. Cybear represents and warrants
to Andrx, New Andrx and Merger Subs that the statements contained in this
Section 3 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 3), except as disclosed in or contemplated by the Cybear Public Reports
or as set forth on the disclosure schedule accompanying this Agreement and
initialed by the Parties (the "Disclosure Schedule"). The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 3.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of Cybear
and its Subsidiaries is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation. Each of
Cybear and its Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a material
adverse effect on the business, operations, results of operations, assets,
liabilities or financial condition of Cybear and its Subsidiaries taken as a
whole or on the ability of the Parties to consummate the transactions
contemplated by this Agreement (a "Cybear Material Adverse Effect"). Each of
Cybear and its Subsidiaries has full corporate power and authority to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it.
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<PAGE>
(b) CAPITALIZATION. The entire authorized capital stock of Cybear
consists of 25,000,000 shares of Cybear Common Stock, of which 17,772,537 shares
of Cybear Common Stock are issued and outstanding, and 2,000,000 shares of
preferred stock, par value $.01 per share, none of which is issued and
outstanding. All of the issued and outstanding shares of Cybear Common Stock
have been duly authorized and are validly issued, fully paid, and nonassessable.
There are no outstanding or authorized purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that could
require Cybear to issue, sell, or otherwise cause to become outstanding any of
its capital stock.
(c) AUTHORIZATION OF TRANSACTION. Cybear has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder; PROVIDED, HOWEVER, that
Cybear cannot consummate the Cybear Merger unless and until it receives the
Required Cybear Stockholder Vote. This Agreement constitutes the valid and
legally binding obligation of Cybear, enforceable in accordance with its terms
and conditions.
(d) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of Cybear and its Subsidiaries is
subject or any provision of the charter or bylaws of any of Cybear and its
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument or other arrangement to which
any of Cybear and its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets), except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, or failure to
give notice would not have a Cybear Material Adverse Effect. Other than in
connection with the provisions of the DGCL, the Securities Exchange Act, the
Securities Act, and the state securities laws, and the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), none of Cybear
and its Subsidiaries are required to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
(e) FILINGS WITH THE SEC. Cybear has made all filings with the SEC that
it has been required to make under the Securities Act and the Securities
Exchange Act (collectively, the "Cybear Public Reports"). Each of the Cybear
Public Reports has complied in all material respects with the Securities Act and
the Securities Exchange Act in effect as of their respective dates. None of the
Cybear Public Reports, as of their respective dates, contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. Cybear has delivered to Andrx a correct
and complete copy of each Cybear Public Report (together with all exhibits and
schedules thereto and as amended to date).
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<PAGE>
(f) FINANCIAL STATEMENTS.
(i) The audited financial statements included in Cybear's Annual
Report on Form 10-K for the year ended December 31, 1998 (including the related
notes and schedules) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of Cybear and its Subsidiaries as of the indicated dates and
the results of operations of Cybear and its Subsidiaries for the indicated
periods, are correct and complete in all material respects, and are consistent
with the books and records of Cybear and its Subsidiaries.
(ii) The unaudited financial statements included in Cybear's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (the
"Most Recent Cybear Fiscal Period End"), as of the date thereof, comply in all
material respects with the Securities Exchange Act and the rules and regulations
of the SEC promulgated thereunder, present fairly the results of operations of
Cybear and its Subsidiaries for the periods covered, and are correct and
complete in all material respects.
(g) EVENTS SUBSEQUENT TO MOST RECENT CYBEAR FISCAL PERIOD END. Since
the Most Recent Fiscal Period End, there has not been any change which would
have a Cybear Material Adverse Effect.
(h) UNDISCLOSED LIABILITIES. Neither Cybear nor any of its Subsidiaries
has any obligations or liabilities (contingent or otherwise) except obligations
and liabilities (i) that are fully accrued or provided for in all material
respects in the consolidated balance sheet of Cybear as of the Most Recent
Cybear Fiscal Period End in accordance with GAAP, or disclosed in the notes
therein in accordance with GAAP or (ii) that were incurred after the Most Recent
Cybear Fiscal Period End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law). All material agreements currently in effect, including all material
agreements, arrangements or understandings with directors and officers of
Cybear, are filed as Exhibits to Cybear Public Reports.
(i) BROKERS' FEES. None of Cybear or its Subsidiaries has any liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which New
Andrx or Andrx could become liable or obligated except for fees to be paid to SG
Cowen Securities Corporation.
(j) DISCLOSURE. The S-4 Registration Statement and the Joint Proxy
Statement will comply with the Securities Exchange Act in all material respects.
The S-4 Registration Statement and the Joint Proxy Statement will not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they will be made, not misleading; PROVIDED, HOWEVER,
that Cybear makes no representation or warranty with respect to any information
that New Andrx or Andrx will supply specifically for use in the S-4 Registration
Statement and the Joint Proxy Statement. None of the information that Cybear
will supply specifically for use in the S-4 Registration Statement or the Joint
Proxy Statement will contain any untrue statement of a
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<PAGE>
material fact or omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they will
be made, not misleading.
(k) LITIGATION. Cybear is not (i) subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) a party to or, to
the Knowledge of any directors or executive officers of Cybear, threatened to be
made a party to, any action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator which would have
a Cybear Material Adverse Effect.
(l) OPINION OF FINANCIAL ADVISOR. Cybear has received the opinion of SG
Cowen Securities Corporation ("SG Cowen") to the effect that, as of the date
hereof, the consideration to be received by the stockholders of Cybear in the
Cybear Merger is fair to such holders from a financial point of view and a
complete and correct signed copy of such opinion has been, or promptly upon
receipt thereof, will be delivered to Cybear.
(m) WAIVER OF CHANGE IN CONTROL PROVISIONS. The officers of Cybear and
its Subsidiaries have agreed that for purposes of their employment agreements,
the entering of this Agreement or the consummation of the Mergers shall not be
deemed to be a "Change in Control" as such term is defined in their employment
agreements.
4. REPRESENTATIONS AND WARRANTIES OF ANDRX. Andrx hereby represents and
warrants to Cybear that the statements contained in this Section 4 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4), except as
disclosed in or contemplated by the Andrx Public Reports or as set forth in the
Disclosure Schedule. The Disclosure Schedule will be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Section
4.
(a) ORGANIZATION OF ANDRX AND SUBSIDIARY CORP. Andrx is a corporation
duly organized and validly existing under the laws of the jurisdiction of its
incorporation. Andrx is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a material
adverse effect on the business, operations, results of operations, assets,
liabilities or financial condition of Andrx taken as a whole or on the ability
of the Parties to consummate the transactions contemplated by this Agreement (an
"Andrx Material Adverse Effect"). Andrx has full corporate power and authority
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it.
(b) CAPITALIZATION. The entire authorized capital stock of the Andrx
consists of 50,000,000 shares of Andrx Common Stock, of which 31,737,192 shares
of Andrx Common Stock are issued and outstanding (without giving effect to a two
for one stock split in the form of a stock dividend declared on February 29,
2000), and 1,000,000 shares of preferred stock, par value $.001 per share, none
of which are issued and outstanding. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require Andrx to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
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<PAGE>
(c) AUTHORIZATION OF TRANSACTION. Andrx has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder; provided, however, that
Andrx cannot consummate the Andrx Merger unless and until it receives the
Required Andrx Shareholder Vote. This Agreement constitutes the valid and
legally binding obligation of Andrx, enforceable in accordance with its terms
and conditions.
(d) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Andrx is subject or any provision of the
charter or bylaws of Andrx or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which Andrx is a party or by which it is bound or to which any of its assets
is subject, except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, or failure to give notice would not
have an Andrx Material Adverse Effect. Other than in connection with the
provisions of the DGCL, FBCA, the Securities Exchange Act, the Securities Act,
and the state securities laws and the HSR Act, Andrx is not required to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
(e) FILINGS WITH THE SEC. Andrx has made all filings with the SEC that
it has been required to make under the Securities Act and the Securities
Exchange Act (collectively, the "Andrx Public Reports"). Each of the Andrx
Public Reports has complied in all material respects with the Securities Act and
the Securities Exchange Act in effect as of their respective dates. None of the
Andrx Public Reports, as of their respective dates, contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(f) FINANCIAL STATEMENTS.
(i) The audited financial statements included in Andrx' Annual
Report on Form 10-K for the fiscal year ended December 31, 1998 (including the
related notes and schedules) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby, present fairly the
financial condition of Andrx and its Subsidiaries as of the indicated dates and
the results of operations of Andrx and its Subsidiaries for the indicated
periods, are correct and complete in all material respects, and are consistent
with the books and records of Andrx and its Subsidiaries.
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<PAGE>
(ii) The unaudited financial statements included in Andrx'
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (the
"Most Recent Andrx Fiscal Period End"), as of the date thereof, complies in all
material respects with the Securities Exchange Act and the rules and regulations
of the SEC promulgated thereunder, present fairly the results of operations of
Andrx and its Subsidiaries for the periods covered, and is correct and complete
in a material respects.
(g) EVENTS SUBSEQUENT TO MOST RECENT ANDRX FISCAL PERIOD END. Since the
Most Recent Andrx Fiscal Period End, there has not been any change which would
have an Andrx Material Adverse Effect.
(h) UNDISCLOSED LIABILITIES. Andrx does not have any obligations or
liabilities (contingent or otherwise) except obligations and liabilities (i)
that are fully accrued or provided for in all material respects in the
consolidated balance sheet of Andrx as of the Most Recent Andrx Fiscal Period
End in accordance with GAAP, or disclosed in the notes therein in accordance
with GAAP or (ii) that were incurred after the Most Recent Andrx Fiscal Period
End in the Ordinary Course of Business (none of which results from, arises out
of, relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law). All material
agreements currently in effect, including all agreements, arrangements or
understandings with directors and officers of Andrx are filed as Exhibits to the
Andrx Public Reports.
(i) BROKERS' FEES. Andrx does not have any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any of Cybear and its
Subsidiaries could become liable or obligated except for fees to be paid to
Credit Suisse First Boston Corporation.
(j) DISCLOSURE. The S-4 Registration Statement and the Joint Proxy
Statement will comply with the Securities Act and the Securities Exchange Act in
all material respects. The S-4 Registration Statement and the Joint Proxy
Statement will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they will be made, not misleading,
PROVIDED, HOWEVER, that Andrx makes no representation or warranty with respect
to any information that Cybear will supply specifically for use in the S-4
Registration Statement and the Joint Proxy Statement. None of the information
that Andrx will supply specifically for use in the S-4 Registration Statement or
the Joint Proxy Statement will contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they will be made, not
misleading.
(k) LITIGATION. Andrx is not (i) subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) a party to or, to the
Knowledge of any directors or executive officers of Andrx, threatened to be made
a party to, any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator which would have
an Andrx Material Adverse Effect.
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5. REPRESENTATIONS AND WARRANTIES OF NEW ANDRX AND MERGER SUBS. Each of New
Andrx and the Merger Subs hereby, jointly and severally, represent and warrant
to Cybear that the statements contained in this Section 5 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 5), except as
set forth in the Disclosure Schedule. The Disclosure Schedule will be arranged
in paragraphs corresponding to the numbered and lettered paragraphs contained in
this Section 5.
(a) ORGANIZATION OF NEW ANDRX AND MERGER SUBS. Each of New Andrx and
the Merger Subs is a corporation duly organized and validly existing under the
laws of the jurisdiction of its incorporation. Each of New Andrx and the Merger
Subs is duly authorized to conduct business and is in good standing under the
laws of each jurisdiction where such qualification is required, except where the
lack of such qualification would not have a material adverse effect on the
business, operations, results of operations, assets, liabilities or financial
condition of New Andrx and the Merger Subs taken as a whole or on the ability of
the Parties to consummate the transactions contemplated by this Agreement (a
"New Andrx Material Adverse Effect"). Each of New Andrx and the Merger Subs has
full corporate power and authority to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it.
(b) CAPITALIZATION. The authorized capital stock of New Andrx at the
Effective Time is as set forth in Exhibit B-1. All of the New Andrx Common Stock
and Cybear Tracking Common Stock to be issued in the Mergers has been duly
authorized and, upon consummation of the Mergers, will be validly issued, fully
paid, and nonassessable. Except as contemplated by this Agreement, there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require New Andrx to issue, sell, or otherwise cause to become
outstanding any of its capital stock.
(c) AUTHORIZATION OF TRANSACTION. Each of New Andrx and the Merger Subs
has full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of New Andrx
and the Merger Subs, enforceable in accordance with its terms and conditions.
(d) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which New Andrx is subject or any provision of
the charter or bylaws of New Andrx or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which New Andrx is a party or by which it is bound or to which any of its
assets is subject, except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, or failure to give notice
would not have a New Andrx Material Adverse Effect. Other than in connection
with the provisions of the DGCL, FBCA, the Securities Exchange Act, the
Securities Act, and the state securities laws and the HSR
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Act, New Andrx is not required to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement.
(e) UNDISCLOSED LIABILITIES. Neither New Andrx nor the Merger Subs has
any obligations or liabilities (contingent or otherwise) except obligations and
liabilities of any nature other than those incurred or to be incurred in
connection with the Merger and the transactions related thereto and/or
contemplated pursuant hereto and which have not had and are not reasonably
likely to have a New Andrx Material Adverse Effect.
(f) BROKERS' FEES. New Andrx has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any of Cybear and its
Subsidiaries could become liable or obligated.
(g) DISCLOSURE. The S-4 Registration Statement and the Joint Proxy
Statement will comply with the Securities Act and the Securities Exchange Act in
all material respects. The S-4 Registration Statement and the Joint Proxy
Statement will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they will be made, not misleading,
PROVIDED, HOWEVER, that New Andrx makes no representation or warranty with
respect to any information that Cybear will supply specifically for use in the
S-4 Registration Statement and the Joint Proxy Statement. None of the
information that New Andrx will supply specifically for use in the S-4
Registration Statement or the Joint Proxy Statement will contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in the light of the circumstances under
which they will be made, not misleading.
(h) LITIGATION. Neither New Andrx nor the Merger Subs is (i) subject to
any outstanding injunction, judgment, order, decree, ruling, or charge or (ii) a
party to or, to the Knowledge of any directors or executive officers of New
Andrx or the Merger Subs, threatened to be made a party to, any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
6. COVENANTS. The Parties agree as follows with respect to the period from
and after the execution of this Agreement through the earlier of Closing or
termination of this Agreement.
(a) GENERAL. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable in order
to consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 7 below).
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(b) NOTICES AND CONSENTS. The Parties will give any notices (and will
cause each of its Subsidiaries to give any notices) to third parties, and will
use their reasonable best efforts to obtain (and will cause each of their
Subsidiaries to use their reasonable best efforts to obtain) any required third
party consents, or those reasonably requested by the other Party in connection
with the matters referred to herein.
(c) REGULATORY MATTERS AND APPROVALS. Each of the Parties will (and
Cybear will cause each of its Subsidiaries to) give any notices to, make any
filings with, and use its reasonable best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Section 3(d), Section 4(d) and Section 5(c)
above. Without limiting the generality of the foregoing:
(i) SECURITIES ACT, SECURITIES EXCHANGE ACT, AND STATE SECURITIES
LAWS. As soon as practicable after the execution of this Agreement, New Andrx
and Andrx shall, with the assistance and cooperation of Cybear, prepare and
cause to be filed with the SEC a joint proxy statement (the "Joint Proxy
Statement") and a S-4 Registration Statement (the "S-4 Registration Statement").
Each of New Andrx, Andrx and Cybear shall use all reasonable efforts to cause
the S-4 Registration Statement and the Joint Proxy Statement to comply with
applicable law and the rules and regulations promulgated by the SEC and all
other applicable federal and state securities law requirements, to respond
promptly to any comments of the SEC or its staff and to have the S-4
Registration Statement declared effective under the Securities Act as promptly
as practicable after it is filed with the SEC. New Andrx, Andrx and Cybear shall
use all reasonable efforts to cause the Joint Proxy Statement to be mailed to
their respective stockholders as promptly as practicable after the S-4
Registration Statement is declared effective under the Securities Act. Each of
New Andrx, Andrx or Cybear hereto shall promptly furnish to the other party all
information concerning itself, its stockholders and its affiliates that may be
required or reasonably requested in connection with any action contemplated by
this Section 6(c). If any event relating to New Andrx, Andrx or Cybear occurs,
or if New Andrx, Andrx or Cybear becomes aware of any information, that should
be disclosed in an amendment or supplement to the S-4 Registration Statement or
the Joint Proxy Statement, then New Andrx, Andrx or Cybear, as applicable, shall
inform the other thereof and shall cooperate with each other in filing such
amendment or supplement with the SEC and, if appropriate, in mailing such
amendment or supplement to the stockholders of Andrx and Cybear. Each of New
Andrx, Andrx and Cybear will notify the other promptly upon the receipt of any
comments from the SEC or its staff or any other government officials and of any
request by the SEC or its staff or any other government officials for amendments
or supplements to the S-4 Registration Statement or the Joint Proxy Statement or
for additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the S-4 Registration Statement, the Joint Proxy Statement
or the Merger. The Joint Proxy Statement shall include (A) the recommendations
of the Board of Directors of Cybear and the Special Committee in favor of this
Agreement, the Merger and the transactions contemplated hereby; and (B) the
recommendation of the Board of Directors of Andrx in favor of approval of this
Agreement, the Merger, and the transactions contemplated hereby. Neither New
Andrx, Andrx nor Cybear shall take any action inconsistent with such
recommendation.
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<PAGE>
(ii) APPROVALS. Prior to the Effective Time, New Andrx shall use
reasonable efforts to obtain all regulatory or other approvals needed to ensure
that the New Andrx Common Stock and Cybear Tracking Common Stock to be issued in
the Merger: (A) will be registered or qualified under the securities law of
every jurisdiction of the United States in which any registered holder of Andrx
Common Stock or Cybear Common Stock, who is receiving shares of registered New
Andrx Common Stock and/or Cybear Tracking Common Stock has an address of record
or be exempt from such registration and (B) will be approved for quotation at
the Effective Time on the Nasdaq National Market; provided, however, that New
Andrx shall not, pursuant to the foregoing, be required (i) to qualify to do
business as a foreign corporation in any jurisdiction in which it is not now
qualified or (ii) to file a general consent to service of process in any
jurisdiction with respect to matters unrelated to the issuance of the New Andrx
Common Stock or Cybear Tracking Common Stock pursuant hereto.
(iii) S-4 REGISTRATION STATEMENT AND JOINT PROXY STATEMENT. Each
of the Parties (in respect of the information respectively supplied by it)
agrees that: (A) none of the information to be supplied by it or its affiliates
for inclusion in the S-4 Registration Statement will, at the time the S-4
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading; (B) none
of the information to be supplied by it or its affiliates for inclusion in the
Joint Proxy Statement will, at the time Cybear's Proxy Statement is mailed to
the stockholders of Cybear or as of the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading and (iii) as to
matters respecting it, the Joint Proxy Statement and the S-4 Registration
Statement will comply as to form in all material respects with the provisions of
the Securities Act and the Securities Exchange Act, as applicable, and the rules
and regulations promulgated by the SEC thereunder, except that no covenant,
representation or warranty is made by Cybear with respect to statements made or
incorporated by reference therein based on information supplied by New Andrx or
Andrx for inclusion or incorporation by reference therein and no covenant,
representation or warranty is made by New Andrx or Andrx with respect to
statements made or incorporated by reference therein based on information
supplied by Cybear for inclusion or incorporation by reference therein.
(iv) CYBEAR STOCKHOLDER MEETING. Cybear shall promptly after the
date hereof take all action necessary in accordance with applicable law and its
Amended and Restated Certificate of Incorporation and Bylaws to hold and convene
a meeting of Cybear's stockholders (the "Cybear Stockholders Meeting") as soon
as practicable following the date the S-4 Registration Statement is declared
effective by the SEC. Except as required by the SEC or applicable court order
and except as may be required in order to amend or supplement the S-4
Registration Statement or Joint Proxy Statement, Cybear shall not postpone or
adjourn (other than for the absence of a quorum) the Cybear Stockholders Meeting
without the consent of Andrx. Cybear shall take all other action necessary or
advisable to secure the Required Cybear Stockholder Vote.
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<PAGE>
(v) ANDRX STOCKHOLDER MEETING. Andrx shall promptly after the date
hereof take all action necessary in accordance with applicable law and its
Second Amended and Restated Articles of Incorporation and Bylaws to hold and
convene a meeting of Andrx' stockholders (the "Andrx Stockholders Meeting") as
soon as practicable following the date the S-4 Registration Statement is
declared effective by the SEC. Except as required by the SEC or applicable court
order, Andrx shall not postpone or adjourn (other than for the absence of a
quorum) Andrx Stockholders Meeting without the consent of Cybear. Andrx shall
take all other action necessary or advisable to secure the Required Andrx
Stockholder Vote.
(vi) HSR AND OTHER FILINGS; REASONABLE EFFORTS. As soon as may be
reasonably practicable, the Parties shall file with the FTC and the DOJ
Notification and Report Forms relating to the transactions contemplated herein
as required by the HSR Act, as well as comparable pre-merger notification forms
required by the merger notification or control laws and regulations of any
applicable jurisdiction, as agreed to by the Parties. The Parties shall promptly
(A) supply the other with any information which may be required in order to
effectuate such filings and (B) supply any additional competition or merger
control authorities of any other jurisdiction and which the parties may
reasonably deem appropriate.
(d) OPERATION OF BUSINESS. Cybear will not (and will not cause or
permit any of its Subsidiaries to) engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business without the
prior written consent of New Andrx and Andrx. Without limiting the generality of
the foregoing:
(i) none of Cybear and its Subsidiaries will authorize or effect
any change in its charter or bylaws;
(ii) none of Cybear and its Subsidiaries will grant any options,
warrants, or other rights to purchase or obtain any of its capital stock or
issue, sell, or otherwise dispose of any of its capital stock (except upon the
conversion or exercise of options, warrants, and other rights currently
outstanding);
(iii) none of Cybear and its Subsidiaries will declare, set aside,
or pay any dividend or distribution with respect to the Cybear Capital Stock
(whether in cash or in kind), or split, combine, reclassify, redeem, repurchase,
or otherwise acquire, directly or indirectly, Cybear Capital Stock;
(iv) none of Cybear and its Subsidiaries will issue any note, bond,
or other debt security or create, incur, assume, or guarantee any indebtedness
for borrowed money or capitalized lease obligation outside the Ordinary Course
of Business;
(v) none of Cybear and its Subsidiaries will impose any Security
Interest upon any of its assets outside the Ordinary Course of Business;
(vi) none of Cybear and its Subsidiaries will make any capital
investment in, make any loan to, or acquire the securities or assets of any
other Person outside the Ordinary Course of Business;
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<PAGE>
(vii) none of Cybear and its Subsidiaries will make any change in
employment terms for any of its directors or executive officers, or enter into
any other arrangement or agreement with directors or executive officers, and
none of Cybear and its Subsidiaries will make any change in employment terms for
any of its employees outside the Ordinary Course of Business;
(viii) none of Cybear and its Subsidiaries will sell or transfer
to any Person any material rights to Cybear's intellectual property, purchase
any material right to intellectual property or enter into any material license
agreement with any Person with respect to Cybear's intellectual property outside
the Ordinary Course of Business; and
(ix) none of Cybear and its Subsidiaries will commit to any of
the foregoing.
(e) FULL ACCESS. Cybear will (and will cause each of its Subsidiaries
to) permit representatives of New Andrx and Andrx to have full access to all
premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to each of Cybear and its
Subsidiaries. New Andrx and Andrx will (and will cause each of its employees and
agents to) treat and hold as such any Confidential Information it receives from
any of Cybear and its Subsidiaries in the course of the reviews contemplated by
this Section 6(e), will not use any of the Confidential Information except in
connection with this Agreement, and, if this Agreement is terminated for any
reason whatsoever, agrees to return to Cybear all tangible embodiments (and all
copies) thereof which are in its possession. The provisions of this Section 6(e)
relating to the Confidential Information will survive any termination of this
Agreement.
(f) NOTICE OF DEVELOPMENTS. Each Party will give prompt written notice
to the other of any material adverse development causing a breach of any of its
own representations and warranties in Section 3, Section 4 and Section 5 above.
No disclosure by any Party pursuant to this Section 6(f), however, shall be
deemed to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(g) INSURANCE AND INDEMNIFICATION.
For a period of six years after the Effective Time, New Andrx shall
indemnify, defend and hold harmless to the fullest extent permitted under
applicable law each person who is now or has been an officer, director,
employee, trustee or agent of Andrx or Cybear (or any subsidiary or division
thereof), including, without limitation, each person controlling any of the
foregoing persons (individually, an "Indemnified Party" and collectively, the
"Indemnified Parties,") against all losses, claims, damages, liabilities, costs
or expenses (including reasonable attorneys' fees), judgments, fines, penalties
and amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation arising out of or pertaining to acts or omissions,
or alleged acts or omissions, by them in their capacities as such, whether
commenced, asserted or claimed before or after the Effective Time. In the event
of any such claim, action, suit, proceeding or investigation (an "Action"), (A)
New Andrx shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Party, which counsel shall be reasonably acceptable to New Andrx in
advance of the final disposition of any such Action to the full extent and under
all circumstances permitted by applicable law as in effect on the date hereof,
upon
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<PAGE>
receipt of any undertaking required by applicable law, and (B) New Andrx
will cooperate in the defense of any such matter; provided, however, that New
Andrx shall not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withhold) and provided,
further, that New Andrx shall not be obligated pursuant to this Section to pay
the fees and disbursements of more than one counsel for all Indemnified Parties
in any single Action, except to the extent that, in the opinion of counsel for
the Indemnified Parties, two or more of such Indemnified Parties have
conflicting interests in the outcome of such action. New Andrx may obtain
directors' and officers' liability insurance covering its obligations under this
Section.
(h) EXPENSES. Except as set forth in Section 8, whether or not the
Merger is consummated, all fees and expenses incurred in connection with the
Merger, including, without limitation, all legal, accounting, financial
advisory, consulting and all other fees and expenses of third parties ("Third
Party Expenses") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party incurring
such fees and expenses; provided, however, that Andrx and Cybear shall share
equally in all fees and expenses, other than Third Party Expenses, incurred in
relation to the filing and printing of the S-4 Registration Statement and the
Joint Proxy Statement (including any preliminary materials related thereto).
(i) ASSUMPTION OF ANDRX OPTION PLAN AND CYBEAR OPTION PLAN; FORM S-8;
EMPLOYEE PLANS.
(i) At the Effective Time, New Andrx shall assume all outstanding
Andrx Options and Cybear Options under the Andrx Option Plan (and shall assume
the Andrx Option Plan) and Cybear Option Plan (and shall assume the Cybear
Option Plan), respectively, and agrees to file promptly after the Closing, a
registration statement on Form S-8 covering the shares of New Andrx Common Stock
and Cybear Tracking Common Stock issuable pursuant to outstanding Andrx Options
and Cybear Options granted under the Andrx Option Plan and Cybear Option Plan,
respectively. Andrx and Cybear shall cooperate with and assist New Andrx in the
preparation of such registration statement.
(ii) Following the Effective Time, New Andrx shall cause each
"employee benefit plan" (as defined in section 3(3) of ERISA) maintained by New
Andrx or affiliates of New Andrx that covers or will cover employees of Andrx or
Cybear or their Subsidiaries who are active at the Effective Time (the
"Employees") to recognize all service, for purposes of eligibility and vesting
of benefits (but not for benefit accrual purposes), that is credited to
Employees for Subsidiaries as of the Effective Time. Following the Effective
Time, New Andrx shall cause each "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) covering Employees (A) to reduce each eligible employee's
(and their eligible dependents') annual deductible limits under such plans for
the plan year in which the Effective Time occurs to the extent the comparable
benefit plans covering the Employees immediately prior to the Effective Time and
(B) to waive any pre-existing condition limitations or exclusions that do not
apply to Employees immediately prior to the Effective Time.
(iii) Prior to the Effective Time, the Boards of Directors of
Andrx and Cybear shall take such actions, including obtaining all necessary
individual consents, as shall
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<PAGE>
ensure that the Andrx Options (and the Andrx Option Plan) and the Cybear Options
(and the Cybear Option Plan) may be assumed by New Andrx in accordance with
Section 2 hereof and will not have their vesting accelerated as a result of the
consummation of the Merger and the transactions contemplated hereby.
(j) CERTAIN TAX MATTERS.
(i) RETURN FILING; INFORMATION SHARING UNTIL THE CLOSING DATE:
(A) Andrx and Cybear shall prepare and file, or cause to be
prepared and filed, with the appropriate governmental authority all federal tax
returns and all material state, local and foreign tax returns required to be
filed (with extensions) by or with respect to Andrx and the Andrx Subsidiaries
and Cybear and the Cybear Subsidiaries, respectively, on or prior to the Closing
Date;
(B) Andrx and Cybear agree that it will, and will cause its
affiliates to, make available all such information, employees and records of or
relating to Andrx and the Andrx Subsidiaries and Cybear and the Cybear
Subsidiaries, respectively, as New Andrx may request with respect to matters
relating to Taxes (including, without limitation, the right to make copies of
such information and records) and will cooperate with respect to all matters
relating to Taxes (including, without limitation, the filing of tax returns, the
filing of an amended tax return, audits, and proceedings); and
(C) If any of Andrx and the Andrx Subsidiaries and Cybear or
any Cybear Subsidiary or affiliate thereof receives any written notice from any
Tax authority proposing any audit or adjustment to any Tax relating to Andrx or
any Andrx Subsidiaries or Cybear or any Cybear Subsidiary or affiliates thereof,
or such Cybear Subsidiary or affiliates shall give prompt written notice thereof
to Andrx, which notice shall describe in detail each proposed adjustment.
(ii) CERTAIN TAX OPINIONS.
(A) New Andrx and Andrx, jointly and severally, each
represent, warrant and covenant that they have received an opinion of Arthur
Andersen LLP issued for the sole reliance of New Andrx and Andrx, in form and
substance satisfactory to New Andrx and Andrx, that the Andrx Merger, if
consummated in accordance with this Agreement, should qualify as a
reorganization within the meaning of Code Section 368(a) as in effect as of the
date hereof (the "Andrx Initial Tax Opinion") and that the exchange of shares
pursuant to the Cybear Merger should qualify for tax-free treatment pursuant to
Section 351(a).
(B) Cybear represents, warrants and covenants that it has
received an opinion of Arthur Andersen LLP (the "Cybear Initial Tax Opinion"),
issued for the sole reliance of Cybear, in form and substance satisfactory to
Cybear, that the exchange of shares pursuant to the Cybear Merger, if
consummated in accordance with this Agreement and in connection with the Andrx
Merger should qualify as a tax-free exchange within the meaning of Code Section
351(a) as in effect as of the date hereof.
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<PAGE>
(C) New Andrx, Andrx and Cybear shall cooperate in causing
the Andrx Merger to qualify as a tax-free reorganization under Code Section
368(a) and shall treat the Andrx Merger as such a reorganization in which no
other property or money (within the meaning of Code Section 356) is received by
Andrx stockholders for all Tax purposes, including the reporting of the Andrx
Merger as qualifying as such a reorganization on all relevant federal, state,
local and foreign tax returns. New Andrx, Andrx and Cybear shall cooperate in
causing the exchange of shares pursuant to the Cybear Merger to qualify as a
tax-free exchange under Code Section 351(a) and shall treat the exchange as one
in which no other property or money (within the meaning of Code Section 351(b)
is received by the Cybear stockholders for all Tax purposes, including the
reporting of the Cybear Merger as qualifying as a tax-free Section 351(a)
exchange on all relevant federal, state, local and foreign tax returns. New
Andrx, Andrx and Cybear covenant and agree to (and to cause any affiliate or
successor to their assets or business to) vigorously and in good faith defend
all challenges to the tax-free status of the Mergers.
(iii) TAX COVENANTS. New Andrx, Andrx and Cybear covenant to each
other that none of New Andrx, Andrx, Cybear or any of their respective
subsidiaries has taken (or will take) any action inconsistent with the
qualification of the Andrx Merger as a tax-free reorganization under Code
Section 368(a) (or has failed, or will fail to take, any action necessary for
the Andrx Merger to so qualify), including, without limitation, any action
inconsistent with any representation, warranty, or covenant made or to be made
in connection with opinions to be delivered pursuant to Sections 6(a) or 6(b)
hereof. New Andrx, Andrx and Cybear covenant to each other that none of New
Andrx, Andrx, Cybear or any of their respective subsidiaries has taken (or will
take) any action inconsistent with the qualification of the Cybear Merger
qualifying as a tax-free, share-for-share exchange pursuant to Code Section
351(a) (or has failed, or will fail to take, any action necessary for the Cybear
Merger to so qualify), including, without limitation, any action inconsistent
with any representation, warranty, or covenant made or to be made in connection
with opinions to be delivered pursuant to Sections 6(a) or 6(b) hereof. In
addition, New Andrx, Andrx and Cybear each agree that in the event such party
becomes aware of any such fact or circumstance that is reasonably likely to
prevent either the Andrx Merger or the Cybear Merger from qualifying for
tax-free treatment described herein, it will promptly notify the other party in
writing.
(k) NO SOLICITATION. Cybear and its Subsidiaries and the officers,
directors, employees, agents, representatives and advisors of Cybear and its
Subsidiaries (collectively, the "Representatives") will not, directly or
indirectly, (i) take any action to solicit, initiate, encourage (including by
way of furnishing information) or take any other action designed to facilitate
or agree to any Takeover Proposal or (ii) subject to the next three sentences,
engage in negotiations with, or disclose any nonpublic information relating to
Cybear or its Subsidiaries to, or afford access to the properties, books or
records of Cybear or any of its Subsidiaries to, any person that has advised
Cybear that it may be considering making, or that has made, a Takeover Proposal,
or whose efforts to formulate a Takeover Proposal would be assisted thereby;
provided, nothing herein shall prohibit Cybear's Board of Directors from taking
and disclosing to its stockholders a position with respect to an unsolicited
tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under the Securities
Exchange Act. Notwithstanding the immediately preceding sentence, if an
unsolicited Takeover Proposal shall be received by the Board of Directors of
Cybear, then, to the extent the Board of Directors of Cybear believes in good
faith (after receiving written advice from its financial advisor) that such
Takeover Proposal is reasonably
27
<PAGE>
capable of being consummated and would, if consummated, result in a transaction
more favorable to Cybear's Stockholders from a financial point of view than the
transaction contemplated by this Agreement (any such more favorable Takeover
Proposal being referred to in this Agreement as a "Superior Proposal") and the
Board of Directors of Cybear determines in good faith that it is necessary for
the Board of Directors of Cybear to further entertain and consider the Superior
Proposal in order to comply with its fiduciary duties to stockholders under
applicable law, Cybear and its Representatives may furnish information to the
party making such Superior Proposal and engage in negotiations with such party,
and such actions shall not be considered a breach of this Section 6(k) or any
other provisions of this Agreement; provided that in each such event Cybear
notified Andrx of such determination by Cybear's Board of Directors and has
delivered to the other party a true and complete copy of the Superior Proposal
(or summary of any oral proposal) received from such third party and all
documents containing or referring to non-public information of Cybear that are
supplied to such third party. Further, Cybear shall provide such non-public
information pursuant to a restrictive nondisclosure agreement. In addition,
Cybear shall not agree to or endorse, and shall not permit any of its officers,
directors, employees or other representatives to agree to or endorse, any
Takeover Proposal or withdraw its recommendation of this Agreement and the
Cybear Merger unless the Board of Directors of Cybear believes in good faith
(after receiving written advice from its financial advisors) that such action is
required in order for the Board of Directors to comply with its fiduciary duties
to stockholders under applicable law, Cybear has provided Andrx at least ten
business days prior notice thereof and within such ten business days Cybear has
not received a proposal from Andrx superior in value to the Superior Proposal as
determined by Cybear's Board of Directors acting in good faith consistent with
complying with its fiduciary duties to stockholders under applicable law, and
Cybear has terminated this Agreement pursuant to Section 8(a). Cybear will
promptly (and in any event within 24 hours) notify the other party after receipt
of any Takeover Proposal or any notice that any person is considering making a
Takeover Proposal or any request for non-public information relating to Cybear
or any of its subsidiaries or for access to the properties, books or records of
Cybear or any of its subsidiaries by any person that has advised Cybear that it
may be considering making, or that has made, a Takeover Proposal, or whose
efforts to formulate a Takeover Proposal would be assisted thereby (such notice
to include the identity of such person or persons), and will keep Andrx fully
informed of the status and details of any such Takeover Proposal notice, request
or any correspondence or communications related thereto and shall provide the
other party with a true and complete copy of such Takeover Proposal notice or
request or correspondence or communications related thereto, if it is in
writing, or a complete written summary thereof, if it is not in writing. Cybear
shall immediately cease and cause to be terminated any discussion or
negotiations with any persons conducted that may have existed with respect to a
Takeover Proposal prior to the execution of this Agreement.
(l) VOTING AGREEMENTS. Cybear shall use best efforts to obtain as
promptly as practicable (but in any event not later than March 25, 2000) for the
benefit of New Andrx, an agreement from Dr. Edward E. Goldman and John Klein
whereby they agree to vote in favor of this Agreement and the Cybear Merger. New
Andrx shall use best efforts to obtain as promptly as practicable (but in any
event not later than March 25, 2000) for the benefit of Cybear, an agreement
from Alan P. Cohen, Chih-Ming J. Chen and Elliot F. Hahn whereby they agree to
vote in favor of this Agreement and the Andrx Merger.
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<PAGE>
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF NEW ANDRX, ANDRX AND MERGER SUBS. The
obligation of New Andrx, Andrx and the Merger Subs to consummate the
transactions to be performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
(i) this Agreement and the Cybear Merger shall have received the
Required Cybear Stockholder Vote;
(ii) Cybear and its Subsidiaries shall have procured all of the
third party consents specified in Section 6(b) above;
(iii) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as of the
Closing Date;
(iv) Cybear shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(v) no court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or arbitrator shall have enacted,
issued, promulgated, enforced or entered any injunction, judgment, order,
decree, ruling, or charge which would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, (C)
affect adversely the right of the Cybear Surviving Corporation to own the former
assets, to operate the former businesses, and to control the former Subsidiaries
of Cybear, or (D) affect adversely the right of any of the former Subsidiaries
of Cybear to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
(vi) Cybear shall have delivered to New Andrx a certificate signed
by Dr. Edward E. Goldman and Jack Greenman to the effect that each of the
conditions specified above in Section 7(a)(i)-(v) is satisfied in all respects;
(vii) the S-4 Registration Statement shall have become effective
under the Securities Act;
(viii) the New Andrx Common Stock and Cybear Tracking Common Stock
that will be issued in the Mergers shall have been approved for listing on the
Nasdaq National Market, subject to official notice of issuance;
(ix) This Agreement and the Andrx Merger shall have received the
Required Andrx Stockholder Vote;
(x) Andrx shall have received from Arthur Andersen LLP an opinion
(the "Andrx Closing Tax Opinion") to the effect that the Andrx Merger should
constitute a tax-free reorganization pursuant to Code Section 368(a)(1)(A)
addressed to Cybear and Andrx, and dated the Closing Date;
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<PAGE>
(xi) New Andrx and Cybear shall have entered into the Tax Sharing
Agreement attached hereto as Exhibit C (the "Tax Sharing Agreement"); and
(xii) all actions to be taken by Cybear in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to New
Andrx.
New Andrx, Andrx and the Merger Subs may waive any condition specified
in this Section 6(a) if it executes a writing so stating at or prior to the
Closing, except where such condition may not be waived as a matter of law.
(b) CONDITIONS TO OBLIGATION OF CYBEAR. The obligation of Cybear to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the S-4 Registration Statement shall have become effective
under the Securities Act;
(ii) This Agreement and the Andrx Merger shall have received the
Required Andrx Stockholder Vote;
(iii) the New Andrx Common Stock and Cybear Tracking Common Stock
that will be issued in the Merger shall have been approved for listing on the
Nasdaq National Market, subject to official notice of issuance;
(iv) the representations and warranties set forth in Section 4 and
above shall be true and correct in all material respects at and as of the
Closing Date;
(v) New Andrx, Andrx and the Merger Subs shall each have performed
and compiled with all of its covenants hereunder in all material respects
through the Closing;
(vi) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the Andrx Surviving
Corporation, or the Cybear Surviving Corporation to own the former assets, to
operate the former businesses, and to control the former Subsidiaries of Cybear,
or (D) affect adversely the right of any of the former Subsidiaries of Cybear to
own its assets and to operate its businesses (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(vii) each of New Andrx and Andrx shall have delivered to Cybear a
certificate to the effect that each of the conditions specified above in Section
7(b)(i)-(vi) is satisfied in all respects;
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<PAGE>
(viii) this Agreement and the Cybear Merger shall have received the
Required Cybear Stockholder Vote;
(ix) Cybear shall have received from Arthur Andersen LLP an opinion
(the "Cybear Closing Tax Opinion") to the effect that the exchange of shares
pursuant to the Cybear Merger should constitute a tax-free exchange pursuant to
Code Section 351(a), addressed to Cybear and New Andrx, and dated the Closing
Date; and
(x) New Andrx and Cybear shall have entered into the Tax Sharing
Agreement;
(xi) The Board of Directors of New Andrx shall, among others,
consist of one person appointed by Cybear reasonably acceptable to Andrx upon
consummation of the Mergers;
(xii) New Andrx shall have adopted the Cybear Tracking Common Stock
Policies in substantially the form attached hereto as Exhibit D.
(xiii) all actions to be taken by New Andrx in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
Cybear.
Cybear may waive any condition specified in this Section 7(b) if it
executes a writing so stating at or prior to the Closing, except where such
condition may not be waived as a matter of law.
8. TERMINATION.
(a) TERMINATION OF AGREEMENT. Either of the Parties may terminate this
Agreement with the prior authorization of its board of directors (whether before
or after stockholder approval) as provided below:
(i) the Parties may terminate this Agreement by mutual written
consent at any time prior to the Effective Time;
(ii) New Andrx and Andrx may terminate this Agreement by giving
written notice to Cybear at any time prior to the Effective Time (A) in the
event Cybear has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Andrx has notified Cybear
of the breach, and the breach has continued without cure for a period of 30 days
after the notice of breach, or (B) if the Closing shall not have occurred on or
before December 31, 2000, by reason of the failure of any condition precedent
under Section 7(a) hereof (unless the failure results primarily from New Andrx
breaching any representation, warranty, or covenant contained in this
Agreement);
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<PAGE>
(iii) Cybear may terminate this Agreement by giving written notice
to New Andrx and Andrx at any time prior to the Effective Time (A) in the event
Andrx has breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, Cybear has notified Andrx of the
breach, and the breach has continued without cure for a period of 30 days after
the notice of breach, or (B) if the Closing shall not have occurred on or before
December 31, 2000, by reason of the failure of any condition precedent under
Section 7(b) hereof (unless the failure results primarily from Cybear breaching
any representation, warranty, or covenant contained in this Agreement);
(iv) Cybear may terminate this Agreement by giving written notice
to Andrx at any time after the Cybear Stockholders Meeting in the event this
Agreement and the Cybear Merger fail to receive the Required Cybear Stockholder
Vote;
(v) New Andrx and Andrx may terminate this Agreement by giving
written notice to Cybear at any time after the New Andrx Stockholders Meeting in
the event the Andrx Merger fails to receive the Required New Andrx Stockholder
Vote;
(vi) Cybear may terminate this Agreement if an unsolicited Takeover
Proposal shall have occurred, and in connection therewith, Cybear's Board of
Directors in compliance with the procedures set forth in Section 6(k) determines
in good faith that such Takeover Proposal is a Superior Proposal and that it is
required by its fiduciary duty to accept such Takeover Proposal and advises
Andrx thereof; and
(vii) by either New Andrx or Andrx, if (a) there shall be a final
nonappealable order of a federal or state court restraining or prohibiting the
consummation of the Merger, or (b) there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any governmental authority, that would make the
consummation of the Merger illegal.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 8(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); PROVIDED, HOWEVER, that
the confidentiality provisions contained in Section 6(e) above shall survive any
such termination.
9. MISCELLANEOUS.
(a) SURVIVAL. None of the representations, warranties, and covenants of
the Parties (other than the provisions in Section 2 above concerning issuance of
the New Andrx Common Stock and Cybear Tracking Common Stock, the provisions in
Section 6(g) above concerning insurance and indemnification and the provisions
in Section 6 concerning post-closing covenants) will survive the Effective Time.
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party; PROVIDED,
HOWEVER, that any Party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party
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<PAGE>
will use its best efforts to advise the other Party and its counsel at least one
day prior to making the disclosure).
(c) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns; PROVIDED, HOWEVER, that (i) the provisions in
Section 2 above concerning issuance of the New Andrx Shares are intended for the
benefit of the Cybear Stockholders, (ii) the provisions in Section 6(g) above
concerning indemnification are intended for the benefit of the individuals
specified therein and their respective legal representatives, and (iii) the
provisions in Section 6(i) above concerning certain post-closing covenants for
the benefit of the holders of Andrx Options and Cybear Options are intended for
the holders thereof.
(d) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
(e) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
IF TO CYBEAR:
Edward E. Goldman, M.D.
Cybear, Inc.
5000 Blue Lake Drive
Boca Raton, FL 33431
Telephone: (561)
Facsimile: (561)
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<PAGE>
COPY TO:
Charles Rennert, Esq.
Berman Wolfe Rennert Vogel & Mandler, P.A.
100 Southeast Second Street
Miami, Florida 33131
Telephone: (305) 577-4177
Facsimile: (305) 373-6036
IF TO ANDRX OR NEW ANDRX:
Alan P. Cohen
Andrx Corporation
4001 Southwest 47th Avenue
Ft. Lauderdale, FL 33314
Telephone: (954)
Facsimile: (954)
COPY TO:
Dale S. Bergman, Esq.
Broad and Cassel
Suite 3000
201 South Biscayne Blvd.
Miami, FL 33131
Telephone: (305) 373-9400
Facsimile: (305) 3739493
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth.
(i) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
(j) AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; PROVIDED, HOWEVER,
that any amendment effected subsequent to stockholder approval will be subject
to the restrictions contained in the DGCL. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing
34
<PAGE>
and signed by both of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) EXPENSES. Each of the Parties and their respective stockholders
will bear its or their own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
(n) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
THIS SECTION INTENTIONALLY LEFT BLANK
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
ANDRX CORPORATION, a Florida corporation
By:
--------------------------------------------------
Alan P. Cohen, Co-Chairman and CEO
NEW ANDRX CORPORATION, a Delaware
corporation
By:
--------------------------------------------------
Alan P. Cohen, Co-Chairman and CEO
ANDRX ACQUISITION CORP., a Florida corporation
By:
--------------------------------------------------
Alan P. Cohen, President
CYBEAR ACQUISITION CORP., a Florida corporation
By:
--------------------------------------------------
Alan P. Cohen, President
CYBEAR, INC., a Delaware corporation
By:
--------------------------------------------------
Dr. Edward E. Goldman, CEO
36
<PAGE>
EXHIBIT A --
PLAN OF MERGER
<PAGE>
EXHIBIT B-1 --
NEW ANDRX AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
<PAGE>
EXHIBIT B-2 --
NEW ANDRX BYLAWS
<PAGE>
EXHIBIT C --
TAX SHARING AGREEMENT
<PAGE>
EXHIBIT D --
CYBEAR TRACKING COMMON STOCK POLICIES
EXHIBIT 10.13
FIRST AMENDMENT TO BLUE LAKE CORPORATE CENTER
STANDARD LEASE BETWEEN BLUE LAKE, LTD. AND CYBEAR, INC.
THIS FIRST AMENDMENT TO LEASE (this "Amendment") is made by and between
BLUE LAKE, LTD. (the "Landlord") and CYBEAR, INC. (FL), successor by merger to
Cybear, Inc. (the "Tenant") as of this 4th day of February, 1999.
WITNESSETH:
WHEREAS, Landlord and Tenant are bound under that certain Blue Lake
Corporate Center Standard Lease dated September 14, 1998 (the "Lease") regarding
certain leased premises (the "Existing Premises") described in the Lease, being
located in Blue Lake Corporate Center, Boca Raton, Florida; and
WHEREAS, Tenant desires to increase the area of the Existing Premises
to that more particularly described on EXHIBIT "A-REVISED" hereto (the "Enlarged
Premises"), and, which thereby will result in a decrease in the size of the
Expansion Premises described in the Lease ("Existing Expansion Premises") as
more particularly described in EXHIBIT "A-1-REVISED" hereto ("Reduced Expansion
Premises") and Landlord has agreed to lease the Enlarged Premises to Tenant and
to decrease the area of the Existing Expansion Premises to the Reduced Expansion
Premises, subject to and on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the sum of TEN and NO/100 DOLLARS
($10.00) paid by Tenant to Landlord, the mutual promises contained herein, and
other good and valuable considerations, the receipt and adequacy of which are
hereby acknowledged, Landlord and Tenant do hereby agree as follows:
1. RECITALS. The foregoing recitals are true and correct and are hereby
incorporated by this reference as if set forth in their entirety.
2. DEFINED TERMS. Terms in this Amendment shall have the same meaning
as ascribed to said terms in the Lease, unless otherwise provided in this
Amendment. As hereby amended, the Lease and this Amendment shall hereinafter be
referred to as the "Lease".
3. ENLARGED PREMISES. Attached hereto as Exhibit "A-REVISED" is a floor
plan of the Enlarged Premises. Exhibit "A" of the Lease is hereby replaced with
EXHIBIT "A-REVISED" as attached hereto and made a part hereof which the parties
hereto stipulate contains 21,648 square feet of Net Rentable Area based on
18,824 usable square feet and a fifteen (15%) percent add-on factor. The term,
"Premises" shall be deemed to be, and shall be defined as, the Enlarged
Premises. Attached hereto as EXHIBIT "A-1-REVISED" is a floor plan of the
Reduced Expansion Premises. Exhibit "A-1" of the Lease is hereby replaced with
EXHIBIT "A-1-REVISED" attached hereto and made a part hereof, which the parties
stipulate contains 16,420 square feet of Net Rentable Area, based on 14,278
usable square feet and a fifteen (15%) percent add-on factor. Landlord and
Tenant
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<PAGE>
agree that the foregoing calculation shall be dispositive of the actual Net
Rentable Area and that no further measurement shall be made of the Premises
pursuant to Section 1 of the BLI Rider to the Lease. The Rentable Area of the
Premises includes restrooms, electrical and mechanical rooms over which the
Tenant is herein granted exclusive control and dominion which are themselves
deemed part of the Premises, except that Landlord shall maintain such restrooms,
electrical and mechanical rooms which are shared among tenants.
4. TENANT'S SHARE. Tenant's Share (as set forth in Paragraph 3 of the
BLI Rider and as defined in the Lease) for the Enlarged Premises shall be
increased to 1.22%.
5. BASE RENT. Section 3 of the BLI Rider to the Lease is hereby
replaced with the following;
BASE RENT: TENANT AGREES TO PAY TO LANDLORD AS RENT FOR THE PREMISES,
IN ADVANCE WITHOUT DEMAND, DEDUCTION OR SET OFF (EXCEPT AS OTHERWISE
MAY BE SPECIFICALLY PROVIDED IN THE LEASE), FROM AND AFTER THE RENT
COMMENCEMENT DATE AND THROUGHOUT THE TERM, THE ANNUAL BASE RENT IN THE
AMOUNTS AS INDICATED IN THE FOLLOWING SCHEDULE OF BASE RENT IN EQUAL
MONTHLY INSTALLMENTS, PLUS APPLICABLE SALES TAX.
SCHEDULE OF BASE RENT
-------------------------------------------------------
PERIOD PER SQUARE ANNUAL BASE MONTHLY BASE
FOOT RENT RENT
-------------------------------------------------------
Months 1-12: $12.50 $270,600.00 $22,550.00
-------------------------------------------------------
Months 13-24: $12.88 $278,826.24 $23,235 52
-------------------------------------------------------
Months 25-36: $13 27 $287,268.96 $23,939.08
-------------------------------------------------------
Months 37-48: $13.67 $295,928.16 $24,660.68
-------------------------------------------------------
Months 49-60: $14.08 $304,803.84 $25.400.32
-------------------------------------------------------
EACH MONTHLY INSTALLMENT IN ACCORDANCE WITH THE ABOVE SCHEDULE SHALL BE
DUE AND PAYABLE ON OR BEFORE THE FIRST DAY OF EACH CALENDAR MONTH
SUCCEEDING THE RENT COMMENCEMENT DATE, EXCEPT THAT THE RENTAL PAYMENT
FOR ANY FRACTIONAL CALENDAR MONTH COMMENCING ON THE RENT COMMENCEMENT
DATE OF THE LEASE SHALL BE PRORATED.
6. DEMISING OF PREMISES. The Landlord is not and shall not be
responsible for the design or construction of any Tenant Improvements (other
than for any Landlord's Contribution as defined and as may be provided in the
Lease) or for the demising of the Premises, other than for the construction of a
temporary wall, as depicted on EXHIBIT "B" attached hereto and designated as
"Temporary
2
<PAGE>
Demising Wall", which shall be installed at Landlord's expense. However, the
Tenant further acknowledges that if Tenant does not exercise its Right of First
Refusal pursuant to PARAGRAPH 1.B of the Lease, the Reduced Expansion Premises
or portions thereof may be leased to third party(ies) or used for common areas,
and in such event, a corridor will be required to be constructed between the
Reduced Expansion Premises and the stairs as depicted on EXHIBIT "B" attached
hereto ("Corridor") for the purpose of fire egress in accordance with applicable
codes, standards, ordinances and laws. The Tenant acknowledges and agrees that
it shall be responsible for removing from the area of the Corridor all of
Tenant's improvements, personal property, equipment, furnishings and fixtures.
Tenant shall pay for all actual reasonable costs and fees associated with (i)
the demolition, removal and relocation of the improvements located in the
Corridor including, but not limited to, ceilings, HVAC, life-safety, lighting,
alarms, electrical, plumbing and other mechanical systems; and (ii) the cost of
designing, permitting and constructing the Corridor, including but not limited
to the fire-rated wall, and the installation of ceilings, HVAC, lighting,
alarms, life-safety, electrical, plumbing and other mechanical systems serving
the Corridor ("Corridor Expenses"). The Landlord shall prepare an estimate of
the Corridor Expenses prior to commencing work on the Corridor, and within ten
(10) days from receipt of Landlord's estimate, Tenant shall deposit with
Landlord the amount shown therein. After completion of all work associated with
the Corridor, the Landlord shall notify the Tenant of actual Corridor Expenses.
If the actual Corridor Expenses are less than the amount deposited by Tenant
with the Landlord, the Landlord shall refund the excess amount so deposited
within fifteen (15) days and if the actual Corridor Expenses are greater than
the amount so deposited, the Tenant shall pay such costs and fees within fifteen
(15) days from receipt of Landlord's notice.
7. TENANT IMPROVEMENTS. Tenant shall complete or cause the completion
of improvements to the Enlarged Premises in accordance with the Work Letter
Agreement to the Lease. The Landlord's Contribution shall apply to the Enlarged
Premises on the same basis as provided in the Work Letter Agreement to the
Premises.
8. SUPPLEMENTAL AIR CONDITIONING. Landlord agrees that Tenant, at its
sole cost and expense, may install a backup emergency supplemental air
conditioning system for the Enlarged Premises (the "Backup AC") on the roof of
the Building. Should Tenant elect to install a Backup AC on the roof of the
Building, Tenant agrees to install the Backup AC in accordance with all
applicable codes and laws and sound engineering and construction practices.
Tenant further agrees to use any specified architect, engineer, roofing
contractor or other general contractor reasonably required by Landlord to design
and install the Backup AC so as avoid any compromise to the roof structure or
membrane, or to other elements of the Building. The architectural and
engineering plans and specifications for the Backup AC and any required
Alterations to the Building in connection therewith shall be subject to the
Landlord's approval as an Alteration under this Lease. Tenant covenants and
agrees that the Backup AC shall only be use for emergency backup use in the
event of the cessation of air conditioning provided by the Landlord or the
Utility Manager pursuant to the terms of the Lease, and the Tenant shall not use
the Backup AC in lieu of the air conditioning services provided by the Landlord
or the Utility Manager pursuant to Section 8.A.(3)of the Lease. The Tenant shall
be responsible to maintain, repair and replace the roof in the area of the
Backup AC and any supporting or related roofing systems, such maintenance,
repair and replacement, subject to the Landlord's prior
3
<PAGE>
written approval. If the Tenant fails to promptly, and as and when appropriate
or necessary, maintain, repair or replace the roof and supporting and related
systems, the Landlord may perform such maintenance, repair or replacement, and
such shall be charged to the Tenant as Additional Rent.
9. TENANT STIPULATIONS. Tenant acknowledges that, as a result of a
merger, it is the tenant under the Lease, has assumed all of Cybear, Inc.'s
obligations, liabilities and responsibilities under the Lease, and hereby
stipulates, agrees and affirms that there are no other assignees, sublessees or
transferees of the Lease, or any part thereof, or any person or firm occupying
or having the right in the future to occupy the Existing Premises, or any part
thereof, except as has been approved in writing by Landlord. As of the date
hereof, Landlord and Tenant are not aware of the occurrence of any event of
default under the Lease by either Landlord or Tenant.
10. RATIFICATION. Except as herein specifically amended, the terms of
the Lease are incorporated herein by reference as if fully set forth herein and
shall apply to and bind the Enlarged Premises. In the event of any conflict or
ambiguity between this Amendment and the Lease, this Amendment shall pre-empt
and control. The parties hereby ratify and confirm their rights and obligations
under the Lease as modified by this Amendment. Landlord and Tenant each
represent and warrant to the other that (i) the execution and delivery of the
Amendment has been fully authorized by all necessary corporate action, and (ii)
this Amendment is valid, binding and legally enforceable in accordance with its
terms.
11. BROKERS. Each party represents and warrants that it has not dealt
with any agent or broker in connection with this transaction except for Blue
Lake Realty, Inc. and the agents or brokers specifically set forth in the BLI
Rider to the Lease whose commissions shall be paid by Landlord pursuant to
separate agreement. If either party's representation and warranty proves to be
untrue, such party will indemnify the other party against all resulting
liabilities, costs, expenses, claims, demands and causes of action, including
reasonable attorneys' fees and costs through all appellate actions and
proceedings, if any. The foregoing will survive the end of the Lease Term.
IN WITNESS WHEREOF, Landlord and Tenant have signed this Amendment as
of this 4th day of February, 1999.
WITNESSES: "TENANT"
/s/ Michael W. Carbrey CYBEAR, INC. (FL), a Florida corporation
- ------------------------------------
By: /s/ Todd A. Macleod
- ------------------------------------ -------------------------------------
Name: Todd A. Macleod
-----------------------------------
Title: EVP, Operations
----------------------------------
4
<PAGE>
WITNESSES: "LANDLORD"
/s/ Eileen Heemskerk BLUE LAKE, LTD., a Florida limited
- ------------------------------------ partnership
- ------------------------------------ By: Blue Lake, Inc., a Florida
corporation, its general partner
By: /s/ Michael D. Masanoff, EVP
-------------------------------------
Authorized Agent
5
<PAGE>
REVISED EXHIBIT A
ENLARGED PREMISES
[GRAPHIC OMITTED]
6
<PAGE>
REVISED EXHIBIT A-1
REDUCED EXPANSION PREMISES
[GRAPHIC OMITTED]
7
<PAGE>
EXHIBIT B
DEMISING CORRIDOR / TEMPORARY WALL
[GRAPHIC OMITTED]
8
EXHIBIT 10.14
SECOND AMENDMENT TO BLUE LAKE CORPORATE CENTER
STANDARD LEASE BETWEEN BLUE LAKE, LTD. AND CYBEAR, INC.
THIS SECOND AMENDMENT TO LEASE (this "Second AMENDMENT") is made by and
between BLUE LAKE, LTD. (the "LANDLORD") and CYBEAR, INC. (FL), successor by
merger to CYBEAR, INC, (the "TENANT") as of this 3rd day of September, 1999.
W I T N E S S E T H:
WHEREAS, Landlord and Tenant are bound under that certain Blue Lake
Corporate Center Standard Lease, dated September 14, 1998 (the "ORIGINAL LEASE")
as amended by the First Amendment thereto, dated February 4, 1999 ("FIRST
AMENDMENT") regarding certain leased premises (the "EXISTING PREMISES")
described in the Original Lease and the First Amendment (collectively, the
"LEASE"), being located in Blue Lake Corporate Center, Boca Raton, Florida; and
WHEREAS, Tenant desires to lease the Reduced Expansion Premises (as
defined in the First Amendment) and Landlord has agreed to lease the Reduced
Expansion Premises to Tenant, subject to and on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the sum of TEN and NO/100 DOLLARS
($10.00) paid by Tenant to Landlord, the mutual promises contained herein, and
other good and valuable considerations, the receipt and adequacy of which are
hereby acknowledged, Landlord and Tenant do hereby agree as follows:
1. RECITALS. The foregoing recitals are true and correct and are hereby
incorporated by this reference as if set forth in their entirety.
2. DEFINED TERMS. Terms in this Amendment shall have the same meaning
as ascribed to said terms in the Lease, unless otherwise provided in this Second
Amendment. As hereby amended, the Lease and this Second Amendment shall
hereinafter be referred to as the "Lease".
3. EXPANDED PREMISES. Exhibit "A" of the Lease, as replaced with
EXHIBIT "A-REVISED", pursuant to the First Amendment, shall be modified to add
thereto EXHIBIT "A-1-REVISED" as attached to the First Amendment. The term
"Premises" shall be deemed to be, and shall be defined as, the Enlarged
Premises, together with the Reduced Expansion Premises. The parties stipulate
that the Reduced Expansion Premises contains 16,420 square feet of Net Rentable
Area, based on 14,278 usable square feet and a fifteen (15%) percent add-on
factor and that the Premises as amended hereby contains a total of 38,068 square
feet of Net Rentable Area based on 33,102 usable square feet and a fifteen (15%)
percent add-on factor. Landlord and
<PAGE>
Tenant agree that the foregoing calculation shall be dispositive of the actual
Net Rentable Area and that no further measurement shall be made of the Premises
pursuant to Section 1 of the BLI Rider to the Lease. The Rentable Area of the
Premises includes restrooms, electrical and mechanical rooms over which the
Tenant is herein granted exclusive control and dominion which are themselves
deemed part of the premises, except that Landlord shall maintain such electrical
and mechanical rooms. As a result of the amendments set forth herein, the Right
of First Refusal contained in Paragraph 1.B of the Original Lease is no longer
applicable and is deemed deleted.
4. TENANT'S SHARE. Tenant's Share (as set forth in Paragraph 3 of the
BLI Rider and as defined in the Lease) for the Premises shall be increased to
2.15%.
5. RENT COMMENCEMENT DATE WITH RESPECT TO REDUCED EXPANSION PREMISES.
With respect to the Reduced Expansion Premises, the Rent Commencement Date shall
be April 1, 2000.
5. EXTENSION OF LEASE TERM. With respect to the Premises (as expanded
hereby) Lease Term shall be extended so that the Lease Term will expire on March
31st, 2007.
6. BASE RENT. Section 3 of the BLI Rider to the Lease is hereby
replaced with the following:
BASE RENT: TENANT AGREES TO PAY TO LANDLORD AS RENT FOR THE PREMISES,
IN ADVANCE WITHOUT DEMAND, DEDUCTION OR SET OFF (EXCEPT AS OTHERWISE
MAY BE SPECIFICALLY PROVIDED IN THE LEASE), FROM AND AFTER THE RENT
COMMENCEMENT DATE AND THROUGHOUT THE TERM, THE ANNUAL BASE RENT IN THE
AMOUNTS AS INDICATED IN THE FOLLOWING SCHEDULE OF BASE RENT IN EQUAL
MONTHLY INSTALLMENTS, PLUS APPLICABLE SALES TAX.
SCHEDULE OF BASE RENT
---------------------
-----------------------------------------------------
PERIOD PER SQUARE ANNUAL BASE MONTHLY BASE
FOOT RENT RENT
-----------------------------------------------------
01/01/99 - $12.50 $270,600.00 $22,550.00
12/31/99
-----------------------------------------------------
01/01/0O - $12.88 $278,826.00 $23,235.52
03/31/00 based on 21,648 sq. feet
-----------------------------------------------------
-2-
<PAGE>
-----------------------------------------------------
04/01/00 - $12.88 $490,315.84 $40,859.65
12/31/00 based on 38,068 sq. feet
-----------------------------------------------------
01/01/01 - $13.27 $505,162.36 $42,096.86
12/31/01 based on 38,068 sq. feet
-----------------------------------------------------
01/01/02 - $13.67 $520,389.56 $43,365.80
12/31/O2 based on 38,068 sq. feet
-----------------------------------------------------
01/01/03 - $14.08 $535,997.44 $44,666.45
12/31/03 based on 38,068 sq. feet
-----------------------------------------------------
01/01/04 - $14.50 $551,986.00 $45,998.83
12/31/04 based on 38,068 sq. feet
-----------------------------------------------------
01/01/05 - $14.94 $568,735.92 $47,394.66
12/31/05 based on 38,068 sq. feet
-----------------------------------------------------
01/01/06 - $15.39 $585,866.52 $48,822.21
12/31/06 based on 38,068 sq. feet
-----------------------------------------------------
01/01/07 - $15.85 $603,377.80 $50,281.48
03/31/07 based on 38,068 sq. feet
-----------------------------------------------------
EACH MONTHLY INSTALLMENT IN ACCORDANCE WITH THE ABOVE SCHEDULE SHALL BE
DUE AND PAYABLE ON OR BEFORE THE FIRST DAY OF EACH CALENDAR MONTH
SUCCEEDING THE RENT COMMENCEMENT DATE, EXCEPT THAT THE RENTAL PAYMENT
FOR ANY FRACTIONAL CALENDAR MONTH COMMENCING ON THE RENT COMMENCEMENT
DATE OF THE LEASE SHALL BE PRORATED.
7. DEMISING OF REDUCED EXPANSION PREMISES. The Landlord is not and
shall not be responsible for the design or construction of any Tenant
Improvements (other than for a Landlord's Contribution of $214,170.00, which
shall replace any Landlord's Contribution provided in the Lease other than the
demolition of existing improvements in the Reduced Expansion Premises, which
shall be accomplished by Landlord, at its expense, within sixty (60) days from
receipt of the Landlord-Approved Tenant Construction Plans, pursuant to a
demolition plan approved by Tenant.
8. TENANT IMPROVEMENTS. Tenant shall complete or cause the completion
of improvements to the Reduced Expansion Premises in accordance with the Work
Letter Agreement to the Lease. The Landlord's Contribution shall apply to the
Reduced Expansion Premises on the same basis as provided in the Work Letter
Agreement to the Premises.
-3-
<PAGE>
9. PARKING SPACES. In addition to Tenant's right to use the parking
facility as described in Paragraph 7 of the Original Lease, Landlord shall
assign for Tenant's exclusive use during the term of the Lease, the six (6)
parking spaces depicted on EXHIBIT "L" attached hereto and made part hereof.
Landlord reserves the right to reconfigure and to reasonably relocate the
aforementioned Tenant's spaces from time to time; however, Landlord agrees that
the same number of parking spaces will remain in the same vicinity. Tenant
agrees that Landlord will have no liability on account of any loss or damage to
any vehicle, except as otherwise expressly provided in this Lease nor will the
Landlord be responsible for patrolling said spaces. There shall be no rental
payable by Tenant for the use of the assigned spaces. The assigned spaces will
be marked by Landlord, at its expenses, to read "Reserved-Cybear, Inc., (FL)" or
such other designation(s) of Tenant as desired by Tenant. Landlord is not
responsible for patrolling the assigned spaces as described above.
10. RATIFICATION. Except as herein specifically amended, the terms of
the Lease are incorporated herein by reference as if fully set forth herein and
shall apply to and bind the Reduced Expansion Premises. In the event of any
conflict or ambiguity between this Second Amendment and the Lease, this Second
Amendment shall preempt and control. The parties hereby ratify and confirm their
rights and obligations under the Lease as modified by this Second Amendment.
Landlord and Tenant each represent and warrant to the other that (i) the
execution and delivery of the Second Amendment has been fully authorized by all
necessary corporate action, and (ii) this Second Amendment is valid, binding and
legally enforceable in accordance with its terms.
11. BROKERS. Each party represents and warrants that it has not dealt
with any agent or broker in connection with this transaction except for Blue
Lake Realty, Inc. and the agents or brokers specifically set forth in the BLI
Rider to the Lease whose commissions shall be paid by Landlord pursuant to
separate agreement. If either party's representation and warranty proves to be
untrue, such party will indemnify the other party against all resulting
liabilities, costs, expenses, claims, demands and causes of action, including
reasonable attorneys' fees and costs through all appellate actions and
proceedings, if any. The foregoing will survive the end of the Lease Term.
IN WITNESS WHEREOF, Landlord and Tenant have signed this Amendment as
of this 3rd day of September, 1999.
WITNESSES: "LANDLORD"
BLUE LAKE, LTD., a Florida limited
partnership
-4-
<PAGE>
By: BLUE LAKE, INC., a Florida
corporation, its General Partner
By: /s/ Michael D. Masanoff, EVP
--------------------------------
Print Name: /s/ Charlotte A. Keller Name: Michael D. Masanoff, EVP
------------------------- ---------------------------
Authorized Agent
Print Name: /s/ E.R. Raybody
-------------------------
(Corporate Seal)
"TENANT"
CYBEAR INC. (FL), a Florida corporation
By: /s/ Jack S. Greenman
-----------------------------------
Print Name: /s/ Charlotte A. Keller Name: Jack S. Greenman
------------------------- --------------------------
Print Name: /s/ E.R. Rayboy Title: EVP
-------------------------- -------------------------
(Corporate Seal)
-5-
<PAGE>
REVISED EXHIBIT "A-1"
REDUCED EXPANSION PREMISES
[GRAPHIC OMITTED]
-6-
<PAGE>
EXHIBIT C
PARKING
[GRAPHIC OMITTED]
-7-
EXHIBIT 10.15
February 15, 2000
Mr. Tim Nolan
17 Greenbriar Circle
Newtown, PA 18940
Dear Tim:
I am very pleased to offer you a position at Cybear, Inc. ("Cybear"), an
affiliate of Andrx Corporation ("Andrx" and collectively with Cybear, the
"Company"), upon the following terms:
<TABLE>
<S> <C> <C>
(1) Position: President and Chief Operating Officer of Cybear
(2) Reporting to: Alan P. Cohen, Co-Chairman & Chief Executive Officer of Andrx
(3) Annual Salary: $400,000
(4) Bonus: $150,000 per annum target, at the discretion of the Andrx Chief Executive
Officer
(5) Stock Options: Options to acquire 300,000 shares of Cybear stock (with you waiving any
conversion premium that may result from the closing of the tracker stock
transaction) and 75,000 shares of Andrx common stock, at exercise price as of
date of grant by Compensation Committees of Board of Directors of Andrx and
Cybear, with 20% of said options vesting immediately and the balance vesting
in equal increments on the 1st, 2nd, 3rd and 4th anniversary of the date you
assume your position.
(6) Termination: In the event (i) your employment with the Company or any successor entity is
terminated at any time without "cause" or (ii) during the one year period
after a "change of control" of Cybear you voluntarily terminate your
employment for "good reason", then you shall be entitled to (i) $500,000
payable within thirty (30) days of your termination of employment, and (ii)
the immediate vesting of all of the unvested foregoing Cybear and Andrx stock
options.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
For the foregoing purposes, (i) a change in control shall be deemed to have
occurred if there occurs a "change of control" as defined in the rules
promulgated under the Securities Exchange Act of 1934 (the Act); when any
person or group as that term is defined in the Act, becomes beneficial owner
directly or indirectly of securities of forty percent (40%) or more in voting
power or a majority of the Board of Directors has changed within two years
after the acquisition took place; provided, however, (i) the acquisition of
Cybear stock by Andrx as part of the tracking stock transaction shall not be
deemed a change of control; (ii) "cause" shall mean (x) the commission of a
criminal act by you; (y) gross negligence, gross malfeasance or gross
misconduct by you in the performance of your job; (z) a material breach by you
of your Confidentiality and Non-Competition Agreement; and (iii) "good reason"
shall mean any decrease in your compensation or value of benefits without
"cause"; any change in your job responsibilities or reporting requirements
without "cause"; or any change in your work location that is outside of a fifty
(50) mile radius of your work location at the time of the change in control,
and you are not offered an executive position at Andrx for at least the same
pay and benefits.
(7) Deferred Pay: We understand that you will be leaving an executive position that presently
offers you a larger annual salary and greater bonus potential than we are.
Accordingly, within 30 days of the "determination date", the Company will
provide you with a total deferred cash compensation payment of $700,000 minus
the "additional value". For this purpose, (i) "determination date" shall mean
the earlier of (x) the end of your fourth anniversary of employment by the
Company, or (y) at the time of your separation, if you are terminated without
cause from the Company or you leave for good reason, as those terms are
defined above, and (ii) "additional value" shall mean the cumulative amount
you received or are then entitled to receive as a result of your employment by
the Company, excluding the above noted salary and bonus and increases thereof
and the benefits specified below.
(8) Benefits: You will receive all benefits comparable to the executive employees of Andrx,
including without limitation, the following: 401(k) plan, group medical,
dental and life insurance plans, medical insurance plan (beginning the first
day of the month after you join us) and certain other benefits. Benefits also
include the reimbursement of reasonable properly authorized expenses incurred
in connection with the performance of duties.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(9) Car Allowance: $7,200 per annum.
(10) Relocation: Cybear shall reimburse your reasonable relocation expenses.
</TABLE>
You have explained and represented to me that you believe that
your employment by Cybear and the performance of your duties will not violate
the terms of any non-compete or other agreements to which you are a party. In
the event, however, your duties or expected duties with Cybear would violate the
non-compete or other obligations that you have, Andrx agrees to employ you in an
alternative executive position with Andrx, subject to the same compensation
terms and benefits as those set forth above. Moreover, as your position will
give you access to information which Andrx keeps confidential, your execution of
the attached Confidentiality and Non-Competition Agreement will be a condition
of your employment.
I am sure that you will find the environment at the Company
both stimulating and rewarding and we look forward to your joining us. Should
you have any questions, please feel free to call me.
Please signify your acceptance of this offer by signing a copy
of this letter where indicated below and returning that copy to me by either fax
(at 954-792-1034) or by mail as soon as possible.
Sincerely,
/s/ ALAN P. COHEN
--------------------------------------
Alan P. Cohen
Co-Chairman & Chief Executive Officer
AGREED TO AND ACCEPTED ON
THIS ____ DAY OF FEBRUARY, 2000
/s/ TIMOTHY E. NOLAN
- ---------------------------------
Timothy E. Nolan
cc: Scott Lodin
EXHIBIT 21.1
Subsidiaries of the Registrant
Telegraph Consulting Corporation
Cybearclub LLC.
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K into the Company's
previously filed Form S-8 Registration Statement No.333-84291.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
March 27, 2000.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 11,921,731
<SECURITIES> 26,071,897
<RECEIVABLES> 107,742
<ALLOWANCES> (3,000)
<INVENTORY> 0
<CURRENT-ASSETS> 42,480,456
<PP&E> 4,778,879
<DEPRECIATION> (1,255,484)
<TOTAL-ASSETS> 53,068,029
<CURRENT-LIABILITIES> 3,090,680
<BONDS> 0
0
0
<COMMON> 17,654
<OTHER-SE> 49,959,695
<TOTAL-LIABILITY-AND-EQUITY> 53,068,029
<SALES> 0
<TOTAL-REVENUES> 269,707
<CGS> 0
<TOTAL-COSTS> 14,933,758
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 216,182
<INCOME-PRETAX> (13,597,854)
<INCOME-TAX> 2,824,069
<INCOME-CONTINUING> (10,773,785)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,773,785)
<EPS-BASIC> (0.70)
<EPS-DILUTED> (0.70)
</TABLE>
